SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1997 Commission File No. 33-3133
New Jersey 22-2588030
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
MULTI SOFT, INC
(Name of Small business issuer in its charter)
4262 US Route 1, Monmouth Junction, New Jersey 08852
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 329-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act, during the past 12 months (or for
such shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.[X]
Issuer revenue for the fiscal year: $1,065,135
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average ask ($ 3/8) and ($ 1/4) bid price of such stock,
as of April 30, 1997 is $1,453,831 based upon $.3125 multiplied by the 4,652,259
Shares of Registrant's Common Stock held by non-affiliates.
The number of shares outstanding of each of the registrant's classes of common
stock, as of April 30, 1997, is 11,766,239 shares, all of one class of $.001 par
value Common Stock.
(1) Affiliates for purposes of this item refers to those persons who, during the
preceding 3 months, were officers, directors and/or owners of 5% or more of the
Company's outstanding stock.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes___ No_X_
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MULTI SOFT, INC.
Form 10-KSB
Year Ended January 31, 1997
Table of Contents
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Page
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PART I ................................................................ 3
Item 1. Business ..................................................... 3
Item 2. Properties ................................................... 8
Item 3. Legal Proceedings ............................................ 8
Item 4. Submission of Matters to a Vote of Security Holders .......... 8
PART II ............................................................... 9
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ................................. 9
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 10
Item 7. Financial Statements ......................................... 12
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures ...................... 12
PART III .............................................................. 13
Item 9. Directors, Executive Officers, Promoters and Control Persons;
compliance with Section 16(a) of the Exchange Act ............ 13
Item 10. Executive Compensation ....................................... 14
Item 11. Security Ownership of Certain Beneficial Owners and Management 17
Item 12. Certain Relationships and Related Transactions ............... 18
PART IV ............................................................... 20
Item 13. Exhibits and Reports on Form 8-K ............................. 20
Signatures ............................................................ 22
Financial Statements .................................................. F1
Exhibits .............................................................. E1
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PART I
Item 1. Business.
General
Multi Soft, Inc. (the "Company" or "Multi Soft") was incorporated in
January 1985 as a wholly owned subsidiary of Multi Solutions, Inc. ("MSI") and,
as of the date hereof, is a 55.40% owned subsidiary of MSI. The Company engages
in the production, marketing and maintenance of communications front-ending,
client-server and cooperative processing technologies called The Windows
Communications Library(TM) (WCL(TM)) for Windows and INFRONT and QuickFRONT For
DOS.
The Technology
The Multi Soft product line consists of tools for the development of
client-server applications using the mainframe as the Enterprise Server. There
are four key elements to the real world development, delivery and production
maintenance of these applications, and all are supported by the Multi Soft
product line. These include screen-based access to mainframe data and processes;
message-based access to mainframe data and processes; integration of
screen-based and message-based access to the mainframe in the same application;
and control and distribution management.
Screen-based access to Mainframe Data and Processes (which includes
front-ending) allows the user to enhance existing mainframe applications through
the integration of client technologies such as GUIs (graphical user interfaces),
imaging and local data, without changing any mainframe code. This allows
companies to leverage their PC capabilities to streamline user processes and for
presenting mainframe data to users in a way that is intuitive, easy to use and
productive. Screen-based access to the mainframe is supported by WCL, QuickFRONT
and INFRONT.
Message-based access to Mainframe Data and Processes allows companies to
create client-server applications, where the PC is used for the client portion
of the application (i.e., all user interaction, dialogue flow and access to
local data) and the mainframe is used for the server portion of the application
(i.e., management of database interaction, data integrity and security). In this
architecture, only data and messages are passed between the PC and host, which
results in a streamlined and optimized production application. Message-based
access to the mainframe is supported by WCL's WCL/Enterprise Server Option
("WCL/ESO"), and by INFRONT's and QuickFRONT's Host Processing Option ("HPO").
Integrity Control and Distribution Management allows companies to use the
mainframe system to centrally manage the integrity of the work station logic and
distribute new version releases. In production client-server applications it is
important to ensure that the programs, files and data residing on the PC are
correct before the user starts the application. When changes are made to the
work station logic, the host can also be used to manage the distribution of
these changes. Integrity control and distribution management is supported by
WCL's WCL/Software Distribution Option ("WCL/SDO") and by INFRONT's and
QuickFRONT's Software Distribution Facility ("SDF").
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The Multi Soft Product Line
The Multi Soft Product line consists of two product sets: the WCL product
set and the INFRONT/QuickFRONT product set. The WCL product set is an open
environment that runs under Windows and includes WCL, WCL/ESO and WCL/SDO. The
INFRONT and QuickFRONT product set is an integrated environment that runs under
DOS and Windows. It includes INFRONT, QuickFRONT, HPO and SDF.
WCL is a toolkit and a set of DLLs (Dynamic Linked Libraries) that work in
conjunction with Windows 3270 emulation products to provide easy integration of
data and processing between PC/LANs (local area networks) and the mainframe.
Because WCL is open, any of the standard Windows development tools such as
PowerBuilder, Visual Basic, and C++, can be used with WCL to create the client
application. It supports the development of GUI front-ends, client-server
applications that use the mainframe as a server and integrity control and
distribution management. The WCL toolkit provides an automated development
environment that includes, among other things, a screen capture mechanism, a
screen maintenance and a screen matching facility. In addition, it provides code
generation to remove the complexity and development effort associated with
building GUI front-end applications.
DynaGUI is a new product introduced this year and is an automted sub
product of WCL which can be sold as a stand-alone application tool. DynaGUI
(Dynamic Graphical User Interface generation) is a fully automatic runtime
utility which dynamically converts 3270 or 5250 legacy emulation screens into
Windows GUI screens, with absolutely no programming or maintenance. It uses
advanced pattern recognition to interpret host attributes and automatically
converts them into Windows controls. And, it allows a non-programmer to quickly
and easily add screen & field-level help in minutes.
WCL/ESO is the host component to WCL and provides a message-based transport
layer between client PC/LANs and the mainframe. The client application is
created using any of the standard Windows tools and products, and the server
application is created using a standard language, such as COBOL. Any mainframe
file structure or database, such as VSAM, DB2, or IMS, can be accessed using
WCL/ESO through CICS (an IBM mainframe operating environment). Client-server
applications developed using WCL/ESO have the added advantage of using a
company's existing mainframe skills and infrastructure, including security, data
integrity, backup and recovery and disaster recovery.
WCL/SDO is a WCL/ESO application created for the centralized control and
management of application code, data and software for distributed client-server
applications. It allows companies to control, audit and distribute from central
host-based master libraries to distributed PCs. These PCs can be clients and/or
servers. WCL/SDO is used as a verification mechanism to ensure all files, and
appropriate versions of files are present on a PC or in a host library. It will
automatically update the PC or Host with correct versions of files if any are
found to be missing or invalid. This facility is important for the successful
production management of large-scale distributed applications.
QuickFRONT is a powerful, but easy to use, tool which offers the ability to
rapidly improve existing mainframe applications by creating new PC-based
interfaces for them. This can be accomplished without programming, without
training, without any significant learning curve and without any changes to the
mainframe code. If the user needs special functions that are not generated
automatically through QuickFRONT's dialogues, the user also has access to a
powerful 4GL (fourth generation language) called CPL/1. QuickFRONT is designed
to give the user the maximum benefit from front-ending with maximum investment
from both a development resource and software expenditure standpoint.
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INFRONT is a comprehensive and integrated development environment for
building PC front-ends and client-server applications with the mainframe. The
development environment includes: an intelligent forms subsystem with screen
capture, screen painting, editing and validation assignment facilities, data
dictionary; a 4GL; an intelligent editor with language templates and reusable
code library; a PC-resident database, including database maintenance facilities
such as sorting and reorganizing; sophisticated debugging facilities, including
a source-level language debugger, and other utilities such as code libraries and
forms libraries.
HPO (Host Processing Option) is the host component to QuickFRONT and
INFRONT that supports the development of client-server applications using the
mainframe as a server. HPO is also used to incrementally migrate legacy systems
into a client-server architecture. It uses a message-based protocol for
peer-to-peer interaction between PC/LANs and host systems. HPO delivers the
capabilities of APPC and LU6.2 (communications protocols) over the user's
existing LU2 and asynchronous networks without requiring any upgrades. HPO
allows the user to offload 60% to 80% of an application's logic to the client,
thereby reducing the mainframe to the role of a server.
SDF (Software Distribution Facility) is a client-server application based
on HPO. It is a utility for the centralized, host-based management of work
station integrity and the automated distribution of updates and new versions of
PC software, files and data. With SDF a master production library of all PC
programs, files and data is stored on the host. As a user logs on to the system,
SDF can automatically check to see if the programs, files and data on the work
station are correct according to the master library on the host. If they are not
correct, SDF will automatically download the correct versions before the
application is started. If they are correct, the application proceeds
immediately.
New Product
In addition to DynaGUI, the Company has recently released a 32-bit version
of its WCL product for Windows 95 and Windows/NT.
Key Services
Multi Soft offers a wide array of training and consulting services designed
to help its new customers get a fast start in client\server development and to
help existing customers with additional resources to facilitate successful
production application roll-outs.
Training Services include basic and advanced product training, as well as
courses such as "Design and Development Methodologies," which covers the major
issues companies need to understand for successfully developing applications
running on distributed platforms.
Consulting Services range from human factors design and project management
to assisting licensees with application development and/or the development of
complete applications.
Technical Support Services include a telephone hotline staffed by
knowledgeable personnel trained and experienced with the Multi Soft product
line. An online bulletin board system is also used to augment hotline and fax
support to customers. The amortization of software over the last two years were
$344,588 in 1997 and $369,548 in 1996.
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Clients
Multi Soft's past and current client base spans over 40,000 users
throughout approximately 125 Fortune 500 companies. Customers that have licensed
Multi Soft's products include: American Cyanamid, Bell Atlantic, ITT Hartford,
Honda, Con Edison, Hoescht, American International Group, Ciba Geigy, Comdisco,
EDS, Exxon, General Electric, Hilton, Lever Brothers, Teachers Insurance,
Chicago Northwestern and US West Business.
In-House Marketing and Sales
In addition to their management responsibilities, Charles Lombardo and
Miriam Jarney also are active in sales. At present, in-house sales are generally
made through telemarketing. If the Company obtains additional funds from
operations or otherwise, it plans to further market its products through
advertisements in trade publications and targeted mailings. No assurance can be
given that the Company will have sufficient funds to increase its in-house sales
and marketing activities.
Distributors
To supplement its domestic sales and marketing efforts, Multi Soft has
built an international distribution network. Business arrangements have been
established with software distributors in European markets and Australia. These
organizations include: Ferntree Computer Services (Australia), SEE Software
Engineering (Switzerland) and Software Engineering (Holland, Germany, UK).
Strategic Alliances
Multi Soft has established strategic relationships with complementary
hardware and software vendors. Most notable among these are the relationships
with IBM (see "IBM" below) and Computer Data Systems, Inc. ("CDSI"). CDSI, a
supplier of financial systems and consulting services to the government market
place, licenses Multi Soft products into it existing customer base and to new
clients.
IBM
In October 1993, the Company entered into a Software Licensing Agreement
("SLA") and other ancillary agreements with IBM Corporation ("IBM") providing
IBM with certain exclusive marketing rights for the Company's flagship product,
WCL (runtime version) with IBM IMS Extensions. This IBM EXTENDED VERSION of
Multi Soft's WCL is named IMS Client Server(TM) for Windows. Specifically
modified for use with IBM mainframe systems, IMS Client Server(TM) for Windows
provides remote presentation support for IMS.
The IBM agreement, effective for a term of seven years with automatic
renewals for two more one year periods, provides for the payment of percentage
royalties and unit royalties as specified in the agreement. The Agreement is
terminable by IBM upon 90 days notice. The Company has been receiving monthly
maintenance for the above agreement.
Multi Soft and IBM also have entered into International Marketing
Agreements to market Multi Soft's WCL Toolkit under the name IMS Client Server
Toolkit(TM) for Windows in the United States, Puerto Rico, the Asian Pacific
Region, Europe, the Middle East, Africa and Canada. IMS Client Server
Toolkit(TM) facilitates the generation of client application which run with IMS
Client Server(TM) for Windows.
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In addition, in September 1994, Multi Soft entered into an International
Software Licensing Agreement with IBM's Personal Communications 3270 division
("P-Comm"). This agreement allows IBM to logo and market a P-Comm specific
version of both the Toolkit and Runtime of Multi Soft's WCL. Pursuant to this
agreement, the Company will receive a minimum of $75,000 per quarter over a two
year period representing minimum advances against royalties. This IBM agreement
is effective for a term of two years and is renewable by IBM for two more one
year periods. The Agreement is terminable by the Company or IBM upon 90 days
notice in the event of a default by the other party. As of November 1996, the
contract with IBM was extended for two more years and IBM is paying the Company
monthly maintenance and royalties.
Management believes, but cannot assure, that these marketing and
distribution agreements will provide Multi Soft with a significant presence in
the marketplace, enhance the visibility and credibility of Multi Soft, and
result in increased sales of Multi Soft's products by Multi Soft and its
existing distributors. Management expects that, as the IBM relationship matures,
significant revenues will be generated by IBM and Multi Soft's product sales
base will continue to expand. In addition, management expects that, as the
products sales base expands, so will the subsequent maintenance and support
revenue.
Since fiscal 1994, IBM has represented a significant percentage of Multi Soft's
revenues See "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Bellcore
In 1995 Multi Soft, Inc. entered a joint development and marketing
agreement with Bellcore to develop and market a Sun Solaris Unix version of its
WCL product. The agreement provides that Bellcore pay Multi Soft for developing
an extension of its WCL product to the Sun Solaris Unix environment. Also, it
provides for a joint marketing agreement in which both companies will share
marketing royalties. During fiscal 1997 Multi Soft had been receiving monthly
maintenance for the above contract.
Employees
The Company has twelve employees and consultants, including two officers,
three support personnel, four technical and engineering personnel, and three
administrative/secretarial personnel.
Competition
The Company operates in a business composed of strong competitors, many of
whom have substantially greater resources, are better established, and have a
longer history of operations than the Company. In addition, many competitors
have more extensive facilities than those which now or in the foreseeable future
will become available to the Company.
The Company competes directly with computer manufacturers, large computer
service companies and independent software suppliers. The Company believes that
hundreds of firms that manufacture software applications products are
significant competitors, and the Company is one of the smaller entities in the
field.
The Company's products provide front-ending, client-server and cooperative
processing technologies which the Company believes represent a significant
advance over other products being marketed.
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NetCast, Inc. is a subsidiary company of Multi Solutions and was
incorporated in April of 1996. It is in the business of developing new Internet
technologies to create a series of products and businesses that will extend the
power of advertising on the Internet. Multi Solutions currently owns $76.1% of
NetCast. Multi Soft provides services and office space to NetCast at cost for
which it has billed approximately $55,000. The Board of Directors consists of
two officers, Charles Lombardo and Miriam Jarney. NetCast is in the process of
raising private funding for its operations. However, we can make no assurance it
will obtain the funding necessary to bring its software to the marketplace.
Item 2. Properties.
The Company subleases approximately 3,300 square feet of office space at
4262 US Route 1, Monmouth Junction, New Jersey 08852 from C&S Consulting, Inc.,
a company owned by the Company's Chairman and his wife. C&S Consulting, Inc.
leases the space from an unaffiliated party. The lease commenced on December 1,
1993 and is terminable at any time on three months notice. Monthly rent is
$3,750 during the first year, $4,250 during the second year, $4,750 during the
third year and $4,950 during the fourth year. The Company is responsible for all
utilities.
Item 3. Legal Proceedings.
The Company is not presently a party to any material litigation; however,
the Company was a party in the following matters:
Taxes
Certain federal, state taxes, interest, and penalties aggregating
approximately $38,000 remain unpaid at January 31, 1997.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of Security Holders in the last quarter
of the Company's fiscal year ended January 31, 1997.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
(a) Market Information -- The Company's Common Stock and the Common Stock
Purchase Warrants (for one share of Common Stock) are traded is in the
over-the-counter market, and are quoted on The OTC Bulletin Board (symbol:
"MSOF").
The following tables set forth the range of high and low bid prices for the
Company's Common Stock on a quarterly basis for the past two fiscal years as
reported by the National Quotation Bureau (which reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not necessarily
represent actual transactions). The Warrants are unpriced.
Bid Prices
----------
Period - Fiscal Year 1996 High Low
---------------------------------------------------------
First Quarter ending April 30, 1995 1/4 1/8
Second Quarter ending July 31, 1995 3/8 3/16
Third Quarter ending October 31, 1995 .29 1/8
Fourth Quarter ending January 31, 1996 9/32 1/8
Period - Fiscal Year 1997 High Low
---------------------------------------------------------
First Quarter ending April 30, 1996 .66 .56
Second Quarter ending July 31, 1996 .53 .41
Third Quarter ending October 31, 1996 .32 .28
Fourth Quarter ending January 31, 1997 .26 .21
(b) Holders -- There were approximately 160 holders of record of the
Company's Common Stock and 16 holders of record of the Company's Common Stock
Purchase Warrants as of May 8, 1996 inclusive of those brokerage firms and/or
clearing houses holding the Company's securities for their clientele (with each
such brokerage house and/or clearing house being considered as one holder).
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(c) Dividends -- The Company has not paid or declared any dividends upon
its Common Stock since its inception and, by reason of its present financial
status and its contemplated financial requirements, does not contemplate or
anticipate paying any dividends upon its Common Stock in the foreseeable future.
Sales of unregistered securities
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Name Date Number
of Securities Issued
- --------------------------------------------------------------------------------
Multi Solutions 1/16/96 1,500,000
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Michael Zindler 5/6/96 25,000
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Markowitz & Zindler 5/6/96 100,000
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John Lowy 4/2/96 77,260
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Linda Dorrian 5/16/96 20,000
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Lorraine Hartley 5/16/96 10,000
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Larry Levine 12/15/97 50,000
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Fiscal Year Ended January 31, 1997 Compared to Fiscal Year Ended January 31,
1996
Revenues for the fiscal year ended January 31, 1997 were $1,065,.135 as
compared to $1,399,180 in fiscal year 1996, an decrease of $334,045 (24%). This
decrease is primarily due to a 56% decrease in revenues from license fees from
$812,069 to $356,494, much of which come from the company's largest customer.
The decrease in license fees is primarily due to the decrease in royalty
payments to the company from IBM.
In fiscal 1997, Multi Soft's two principal sources of revenues were license
fees and maintenance fees which represented approximately 34% ($356,494) and 65%
($688,692) percent of revenues in fiscal 1997.
Management believes that the growth in maintenance fees during the year
ended January 31, 1997 is due to an increase in requests from customers for
product updates, technical assistance and support and contracts with IBM which
requires $10,000 per month in maintenance fees. Also, since November 1996, the
minimum maintenance has been $25,000 per month from IBM.
Operating expenses decreased 25% from fiscal 1996 ($1,399,476) to fiscal
1997 ($1,051,821) primarily as a result of a 31% decrease in selling and
administrative costs. The decrease in software development costs is principally
due to a decrease in the base of capitalized development costs.
Other income (expenses) changed from $49,249 in fiscal 1996 to $71,244 in
fiscal 1997. Also, settlements of accounts payable is included as other income
in the amount of $54,782 in 1996. Consulting and rent revenue are included in
the other income section in the amount of $55,349 in 1997.
As a result of all of the foregoing, Multi Soft's income in fiscal 1997 of
$84,558 increased compared to its income in 1996 $48,953.
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Major Customers
In fiscal 1997, IBM accounted for 29% of total revenues. In fiscal 1996 IBM
accounted for 42% of total revenues.
Liquidity and Capital Resources
At January 31, 1997, the Company had a working capital deficiency of
$(369,345) and has experienced cash flow problems.
Management of Multi Soft has taken various steps to correct this situation.
Overhead costs have been cut drastically as a result of staff reductions and
curtailment of all outside marketing and advertising costs. In addition, senior
staff salaries were reduced and executive officers' salaries were partly
deferred. Secondly, Multi Soft broadened its product base into the Windows,
Windows 95 and Windows/NT environment and has made its Windows based products
easier to learn and use.
In addition, in September 1994, Multi Soft entered into an International
Software Licensing Agreement with IBM's Personal Communications 3270 division
("P-Comm"). This agreement allows IBM to logo and market a P-Comm specific
version of both the Toolkit and Runtime of Multi Soft's WCL(TM). Pursuant to
this agreement, the Company will receive a minimum of $75,000 per quarter over a
two year period representing minimum advances against royalties (see "Item 1.
Business - (IBM"). Contract was renewed as of November 1996 in which the Company
will receive minimum maintenance and royalties.
It is Multi Soft's intent to remain a technology provider and search out
multiple distribution channels, rather than to try and grow via an expensive
direct sales force. This allows the focus to stay on technology, with a low
overhead cost for each distribution channel used. However, if the Company
obtains additional funds from operations or otherwise, it plans to expand
in-house marketing activities by advertising in trade publications and by
conducting targeted mailing. (See "Item 1. Business - In-House Marketing and
Sales").
Dividend Policy
The Company has not declared or paid any dividends on its common stock
since its inception and does not anticipate the declaration or payment of cash
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors. Therefore,
there can be no assurance that dividends of any kind will ever be paid.
Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
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Cautionary Statement
This Form 10-KSB contains certain forward-looking statements regarding,
among other things, the anticipated financial and operating results of the
Company. For this purpose, forward-looking statements are any statements
contained herein that are not statements of historical fact and include, but are
not limited to, those preceded by or that include the words, "believes," "
expects," "anticipated," or similar expressions. In connection with the safe
harbor provisions of the Private Securities Litigation Reform act of 1995, the
Company is including this cautionary statement identifying important factors
that could cause the Company's actual results to differ materially from those
projected in forward looking statements made by, or on behalf of, the Company.
These factors, many of which are beyond the control of the Company and include
the Companies's ability to, (i) continue as a going concern, (ii) continue to
receive royalties from its existing licensing and consulting arrangements, (iii)
develop additional marketable software and technology , (iv) compete with
larger, better capitalized competitors, and (v) reverse ongoing liquidity and
cast flow problems.
Item 7. Financial Statements.
The following financial statements have been prepared in accordance with
the requirements of Item 310(a) of Regulation S-B.
MULTI SOFT, INC.
FINANCIAL STATEMENTS
FISCAL YEAR ENDED January 31, 1997
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Balance Sheets - January 31, 1997 and 1996 F2, F3
Statements of Operations for Each of the Two Years
in the Period Ended January 31, 1996 F4
Statements of Changes in Stockholders' Equity (Deficiency)
for Each of the Two Years in the Period Ended January 31, 1997 F5
Statements of Cash Flows for Each of the
Two Years in the Period Ended January 31, 1997 F6
Notes to Financial Statements F7 - F15
Schedules
All schedules of the Company have been omitted because they are
inapplicable or not required, or the information is included elsewhere in the
financial statements or notes thereto.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Name Position(s) Held
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Charles J. Lombardo Chairman of the Board of Directors,
Chief Executive Officer,
Chief Financial Officer and Treasurer
Miriam G. Jarney Executive Vice President, Secretary and Director
Larry Spatz Director
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
A summary of the business experience for each officer and director of the
Company is as follows:
CHARLES J. LOMBARDO, age 54, has been the Company's Chairman of the Board
of Directors since January 1985 and has been the Company's Chief Executive
Officer, Chief Financial Officer and Treasurer since December 1988. He has been
MSI's Chief Executive Officer and Secretary-Treasurer since August 1982. From
1972 to 1993, Mr. Lombardo also served as the President of Petro-Art, Ltd., an
inactive publicly owned company and its wholly owned subsidiary JCT Enterprises,
Inc. Mr. Lombardo was President of Hopewell Graphic Industries from 1969 through
1971 and from 1967 to 1969 was associated with Keystone Computer Associates as a
staff member in the Physics Section of the Systems Analysis Department. From
1965 to 1967, Mr. Lombardo served as a scientist in the Plasma Physics
Department of Raytheon Space and Information Systems Division. Mr. Lombardo has
a Bachelor of Science degree in Physics from Worcester Polytechnic Institute
(1964), a Master of Science degree in Physics from Northeastern University
(1966) and has continued studies toward a Ph.D. in Theoretical Physics. Mr.
Lombardo is a Member of the American Physical Society, The American Mathematical
Society, The Society for Industrial and Applied Mathematics, The American
Association of Physics Teachers, and the Philosophy of Science Association.
MIRIAM G. JARNEY, age 56, has been a Director of the Company since January
1985, Executive Vice President of the Company since 1986 and Secretary of the
Company since December 1988. She has been Executive Vice President and a
Director of MSI since January 1982. From 1973 to February 1982, Ms. Jarney was a
marketing representative for National CSS, Inc., a computer services company
that has since been acquired by Dun & Cst, Inc. From 1972 through 1973, Ms.
Jarney was associated with Mathematica, Inc., which originated a Data Base
Management System called RAMIS, for which National CSS has exclusive marketing
rights. Ms. Jarney has also worked as a computer systems analyst for Western
Electric Company and Exxon Corporation. She graduated from the Hebrew University
in Jerusalem with a degree in Economics and Statistics and has a Master's degree
in Computer Science from Stevens Institute of Technology. In February 1982, Ms.
Jarney started her own company, Dedicated Systems, Inc., for the purpose of
packaging computer software for the microprocessor market, which company is
inactive.
LARRY SPATZ, age 53, as been a director of the Company since May 12, 1986,
and a director of Multi Solutions since July 14, 1989. He has been Chief
Executive Officer and Chairman of the Board of
-13-
<PAGE>
Heartthrob Enterprises, Inc., a restaurant and night club management and
development company since September 1985. From 1982 to 1984, Mr. Spatz was
President of Universal Petroleum, Inc. From 1979 to 1982, he was Vice President
and a director of Mercantile Trading Company. Mr. Spatz is also a director of
Centrex Communications Systems, Inc. and Ultramed, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, based solely on a review of such materials as
are required by the Securities and Exchange Commission, no officer, director or
beneficial holder of more than ten percent of the Company's issued and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange Commission any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended January 31, 1996.
Item 10. Executive Compensation.
The following table shows all the cash compensation paid or to be paid by
the Company or its parent, as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the Chief Executive Officer and
Executive Vice President (collectively, "Principal Officers") for such period in
all capacities in which they served. No other Executive Officer received total
annual salary and bonus in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------- ------------------------------------------------------------
Annual Compensation Long Term Compensation
- ---------------------------------------------------------------------- ------------------------------------------------------------
Awards Payouts
- ---------------------------------------------------------------------- ------------------------------------------------------------
Name & Fiscal Salary ($) Bonus Other Annual Restricted Options SARs LTIP All Other
Principle Year ($) Compensation Stock Award Payouts Compensation
Position ($) ($) ($) ($)
- ---------------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles J. 1997 (A) $100,000 $0 (C) $20,000 $0 $0 $0 $0
Lombardo CEO 1996 $104,505 $0 $0 $0 $0 $0 $0
1995 $104,505 $0 (C) $36,750 $0 $0 $0 $0
1994 $103,470 $0 $0 $0 $0 $0 $0
1993 $117,862 $0 $43,937 $0 $0 $0 $0
- ---------------------------------------------------------------------- ------------------------------------------------------------
- ---------------------------------------------------------------------- ------------------------------------------------------------
Miriam Jarney 1997 (B) $100,000 $0 $0 $0 $0 $0 $0
Exec. V.P. 1996 $98,491 $0 $0 $0 $0 $0 $0
1995 $98,491 $0 $0 $0 $0 $0 $0
1994 $98,559 $0 $0 $0 $0 $0 $0
1993 $107,247 $0 $4,991 $0 $0 $0 $0
- ---------------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
(A) Accrued and unpaid to Charles J. Lombardo $80,007
(B) Accrued and unpaid to Miriam Jarney $63,342
(C) Consulting fees
-14-
<PAGE>
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
- ------------------------------- -------------------- ---------------------------------- ----------------- ---------------
Name Options/SARs Percent of Total Options/SARs Exercise or Expiration
Granted Granted to Employees in Fiscal Base Price Date
Year ($/Sh)
- ------------------------------- -------------------- ---------------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Charles J. Lombardo -0- - - -
- ------------------------------- -------------------- ---------------------------------- ----------------- ---------------
Miriam Jarney -0- - - -
- ------------------------------- -------------------- ---------------------------------- ----------------- ---------------
</TABLE>
The following table sets forth information with respect to the Principal
Officers concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
- ------------------------------- ---------------- ------------------------- ------------------------ ---------------------
Number of Securities Value of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired on Options/SARs at Options/SARs at
Name Exercise (#) Value Realized ($) FY-End (#) FY-End ($)
- ------------------------------- ---------------- ------------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
Charles J. Lombardo -0- -0- -0- -0-
- ------------------------------- ---------------- ------------------------- ------------------------ ---------------------
Miriam Jarney -0- -0- -0- -0-
- ------------------------------- ---------------- ------------------------- ------------------------ ---------------------
</TABLE>
- ----------
*
Directors' Compensation
Directors are not compensated for acting in their capacity as Directors.
Directors are reimbursed for their accountable expenses incurred in attending
meetings and conducting their duties.
Employment Agreements
On July 14, 1989, the Company entered into a five-year employment agreement
with its Chairman of the Board and Chief Executive Officer, Charles J. Lombardo,
which may be renewed for successive periods unless terminated by the Company on
twelve months notice or by Mr. Lombardo on six months notice. Mr. Lombardo is
the Chairman of the Board, Chief Executive Officer, Chief Financial Officer and
Treasurer of the Company. The agreement contains non-disclosure provisions and a
one year restrictive covenant preventing Mr. Lombardo from becoming employed by
a similar company in any state or country in which the Company does business, or
engaging in a competitive business for his own account. Mr. Lombardo is entitled
to annual salary increases of at least 10%, plus additional annual compensation
equal to 2% of the Company's after tax profits. The employment agreement has
been renewed for an additional year on an annual basis.
Mr. Lombardo also receives a salary from MSI of $25,000 per year. Through
the end of MSI's fiscal year ended January 31, 1994, MSI owed Mr. Lombardo
$98,946 in accrued salary. In July 1994, MSI
-15-
<PAGE>
authorized the issuance of 549,700 shares of its Common Stock to Mr. Lombardo in
lieu of the foregoing accrued salary.
On August 1, 1989, the Company entered into a five-year employment
agreement with Miriam Jarney, Executive Vice-President and a Director of both
the Company and MSI, which may be renewed for additional periods, unless
terminated by the Company on twelve months notice or Ms. Jarney on six months
notice. Ms. Jarney is entitled to annual salary increases of at least 10%, plus
additional annual compensation equal to 1.5% of the Company's after tax profits.
The agreement also contains non-disclosure provisions and a one year restrictive
covenant preventing Ms. Jarney from becoming employed by a similar company in
any state or country in which the Company does business, or engaging in any
competitive business for her own account. The employment agreement has been
renewed for an additional year on an annual basis.
During fiscal 1995 and fiscal 1996, Mr. Lombardo and Ms. Jarney accrued a
portion of their salaries. See financials. The balance due between both officers
as of January 31, 1996 is $689,952 including deferred increases of $586,605.
-16-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners -- The persons listed
in the chart below are known to the Company to be the beneficial owners of more
than 5% of the 11,766,239 Shares of the Company's outstanding Common Stock,
$.001 par value, as of April 30, 1997.
(b) Security Ownership of Management -- The number and percentage of Shares
of Common Stock of the Company owned of record and beneficially by each officer
and director of the Company and by all officers and directors of the Company as
a group are set forth on the chart below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- ----------------------------- -----------------------------
Name and Address of Beneficial Owner Amount and Nature of Percent of Class
Beneficial
Ownership
- ---------------------------------------------------------------- ----------------------------- -----------------------------
<S> <C> <C>
MSI(1) 6,526,722 55.40%
4262 US Route 1, Monmouth Junction, NJ 08852
- ---------------------------------------------------------------- ----------------------------- -----------------------------
Charles J. Lombardo 6,688,387(1) 58.2%
Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, & Treasurer
1511 Laurie Lane, Yardley, PA 19067
- ---------------------------------------------------------------- ----------------------------- -----------------------------
Miriam G. Jarney 6,670,055(1) 58.1%
Executive Vice President, Secretary, Director
21 Doering Way, Cranford, NJ 07106
- ---------------------------------------------------------------- ----------------------------- -----------------------------
Larry Spatz 6,526,722(1)(2) 56.8%
Director
Suite 332, 401 East Illinois St., Chicago, IL 60611
- ---------------------------------------------------------------- ----------------------------- -----------------------------
All Executive Officers and Directors as a group (3 persons) 6,831,720(1) 59.5%
- ---------------------------------------------------------------- ----------------------------- -----------------------------
</TABLE>
* Except as indicated below in the footnotes, each person has sole voting and
dispositive power over the Shares indicated. All numbers have been revised
to give retroactively effect to the one-for-three reverse stock split which
occured on January 31, 1996.
(1) Messrs. Lombardo and Spatz and Ms. Jarney are also officers and/or
directors of MSI. Therefore, together with the other directors of MSI, they
share the voting power of the Company shares owned by MSI, and the shares
owned by MSI have been deemed to be owned by the officers and directors of
the Company. The shares listed as owned by Charles J. Lombardo, Miriam
Jarney and Larry Spatz include the 6,526,722 shares owned by MSI.
(2) Excludes shares owned beneficially by a family trust of which Mr. Spatz'
wife is one of the beneficiaries. Mr. Spatz has confirmed to the Company
that neither he nor his wife has any voting or dispositive power with
regard to the shares owned by the trust.
-17-
<PAGE>
Item 12. Certain Relationships and Related Transactions.
The Company has a demand loan with a commercial bank. Borrowings are
collateralized by the Company's accounts receivable and bear interest at the
bank's prime rate plus 2% (10.75% at January 31, 1997). The Company was in
default on this loan. The Company obtained a forbearance from the bank in
November 1993 requiring an initial $20,000 payment and monthly payments of
$1,500 of principal and interest and the personal guarantee of the Company's
Chairman. As of March 1, 1997, the Company is in compliance with the terms of
the forbearance agreement and owes approximately $25,497. During 1997 and 1996,
the maximum amount of borrowings outstanding were $41,000 and $53,729,
respectively.
In June 1993, the Company conducted a private placement of the Company's
common stock for a total of 268,671 shares at $.03 per share, in connection with
the private placement by Multi Solutions, Inc. ("MSI") of $260,000 in
convertible 8% promissory notes (the "Notes"). MSI used $210,000 of the net
proceeds from the Notes to purchase an additional 700,000 shares of the Company.
The principal and interest due under the Notes, pursuant to the terms of the
Notes, have been converted into restricted shares of the Company's common stock
at the rate of $.30 per share (936,450 shares in the aggregate). The holders of
the Notes and the 268,671 shares have exercised their right to demand
registration of these shares and accordingly, on March 17, 1995 a registration
statement on Form SB-2 was filed with the Securities and Exchange Commission to
register these shares and certain other shares.
In January and March 1994, the Company issued an aggregate of 254,500
shares at $.03 per share to the individuals who converted their MSI notes into
Company shares and 254,500 shares to MSI for $.03 per share.
In consideration of MSI incurring the risk of potentially having to pay off
the Notes if the Noteholders had not elected to convert their Notes into the
Company's shares, and in consideration for MSI's purchase of a bulk of
restricted Company shares with the proceeds of the Note offering at or slightly
above the market value of the Company's freely tradeable shares (i.e., well
above the actual value of such shares given the size of the purchase, the
restriction on transfer and the extreme liquidity problems of the Company at
that time), the Company issued an additional 283,334 shares of its restricted
common stock to MSI.
Although there is no written agreement between MSI and the Company granting
MSI preemptive rights with regard to MSI's majority ownership of Company common
stock, in practice, MSI has and plans to continue to acquire sufficient shares
of the Company's common stock to assure its majority ownership in the Company.
In January 1996, Multi Soft issued 1,500,000 shares of its common stock to Multi
Solutions. The transaction was valued at $.22 per share ($330,000) for which
Multi Solutions was to issue a note.
In connection with this transaction, Multi Soft paid for the acquisition of
1,000,000 each Multi Solutions common shares (valued at $0.08 per share) to the
chairman and vice president by allowing the indebtedness of Multi Solutions to
Multi Soft to be reduced by $160,000 which thereby reduced the debt of Multi
Soft to the two officers by the same amount.
After completion of this series of transactions, the net debt due to Multi Soft
in connection with the common stock sale was reduced to $170,000.
-18-
<PAGE>
Through the end of MSI's fiscal year ending January 31, 1994, MSI owed Mr.
Lombardo $98,946 in accrued salary. In July 1994, MSI authorized the issuance of
549,700 shares of its Common Stock to Mr. Lombardo in lieu of the foregoing
accrued salary. During fiscal 1996, the company issued 1,000,000 shares to each
Charles Lombardo and Miriam Jarney, such transaction being effected to pay
accrued salary of Multi Soft and reducing debts of Multi Solutions to Multi
Soft. The balance due between both officers as of January 31, 1997 is $729,954
including deferred increases of $586,605.
The Company subleases its office space from C&S Consulting, Inc., a company
owned by the Company's Chairman and his wife (see "Item 2. Properties").
-19-
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
Exhibits
- --------
3.a Certificate of Incorporation and Certificate of Correction of the
Company (1)
3.b By-Laws of the Company (1)
10.a Employment Agreement with Charles J. Lombardo (6)**
10.b Employment Agreement with Miriam G. Jarney (6)**
10.c Facility sublease (8) 10.d IBM Agreement executed October 1993*(8)
10.e IBM Agreement executed August 1994*(8)
10.f IBM Amendment executed May 15, 1995 (P)
10.g Copy of MSI's Non-Qualified Stock Option Plan, Stock Grant Program and
Employee Incentive Stock Option Plan (3)
10.h Amendments to MSI's Non-Qualified Stock Option and Stock Grant Program
(4)
16. The required letters from the former accountant(2)(5)(7)
27. Financial Data Schedules (electronic form only)
* Certain information contained in these exhibits has been omitted and filed
separately with the Commission.
** Management contracts or compensatory plan or arrangement required to be
filed as an exhibit.
(1) Previously filed as an Exhibit to the Company's Registration Statement on
Form S-1, SEC File No. 33-3133, filed with the Commission on February 4,
1986, and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Company's Form 8-K dated March 15,
1994, as filed with the Commission on or about March 21, 1994, and
incorporated herein by reference.
(3) Previously filed as an Exhibit to MSI's Form 10-K for the fiscal year ended
January 31, 1984 as filed with the Commission on or about May 15, 1984, and
incorporated herein by reference.
(4) Previously filed as part of the MSI's proxy materials for the Annual
Meeting of Stockholders held on July 9, 1985, as filed with the Commission
on or about May 24, 1985, and incorporated herein by reference.
(5) Previously filed as an Exhibit to the Company's Form 8-K dated July 9, 1993
as filed with the Commission on or about July 12, 1993, and incorporated
herein by reference.
(6) Previously filed as an Exhibit to the Company's Form 10-K for the fiscal
year ended January 31, 1990 as filed with the Commission on or about April
29, 1990, under SEC File No. 33-3133-NY, and incorporated herein by
reference.
(7) Previously filed as an Exhibit to the Company's Form 8-K dated April 25,
1995 as filed with the Commission on or about April 25, 1995, and
incorporated herein by reference.
-20-
<PAGE>
(8) Previously filed as an Exhibit to the Company's Registration Statement on
Form SB-2, SEC File No. 33-87460, filed with the Commission on March 15,
1995, and incorporated herein by reference.
Reports of Form 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended January 31, 1997.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MULTI SOFT, INC.
Dated: May 10, 1997 By: ________________________________
Charles J. Lombardo,
Chief Executive Officer,
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
May 10, 1997
- ----------------------
Charles J. Lombardo Chairman of the Board of Directors,
Chief Executive Officer,
Financial Officer, and Treasurer
May 10, 1997
- -----------------------
Miriam Jarney Executive Vice President, Secretary,
and Director
May 10, 1997
- ------------------------
Larry Spatz Director
-22-
<PAGE>
Stewart W. Robinson
Certified Public Accountant
462 Seventh Avenue, Suite 1600
New York, NY 10018
Tel: (212)279-8430
Fax: (212) 629-7052
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Multi Soft, Inc.
I have audited the accompanying balance sheets of Multi Soft, Inc. ( a New
Jersey corporation and 55.4% owned subsidiary of Multi Solutions, Inc.) as of
January 31, 1997 and 1996 and the related statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Multi Soft, Inc. as of January 31,
1997 and 1996 and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficiency, raising substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note A. The financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.
STEWART W. ROBINSON
New York, New York
May 5, 1997
F1
<PAGE>
MULTI SOFT, INC.
a 55.40% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31 ,1997 and 1996
1997 1996
----------- -----------
ASSETS
CURRENT ASSETS
Cash $9,148 $88,015
Accounts Receivable (net of allowance
of $6,854 and $32,880 respectively) 16,961 100,428
Prepaid expenses and other current assets 13,532 13,532
----------- -----------
39,641 201,975
FURNITURE AND EQUIPMENT
Research and Development Equipment 7,953 259,907
Office furniture and other equipment 17,818 10,053
----------- -----------
25,771 269,960
Less: Accumulated Depreciation (9,119) (266,066)
----------- -----------
16,652 3,894
OTHER ASSETS
Capitalized software development costs 1,722,303 1,980,130
Less accumulated amortization (1,110,741) (1,256,153)
----------- -----------
611,562 723,977
Due from Solutions 422,951 408,762
Due from NetCast 55,335
----------- -----------
$1,146,141 $1,338,608
=========== ===========
See notes to financial statements
F2
<PAGE>
MULTI SOFT, INC.
a 55.40% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31, 1997 and 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' 1997 1996 As Restated
----------- -----------
<S> <C> <C>
DEFICIENCY
CURRENT LIABILITIES
Loan payable to bank $25,497 $41,099
Note Payable 15,504
Accrued payroll -- 30,285
Payroll and other taxes payable 38,072 74,993
Accounts Payable, Accrued expenses and
other Current Liabilities 58,155 173,652
Accrued officer compensation 103,347 110,016
Deferred Revenues 168,411 309,792
----------- -----------
408,986 739,837
Deferred compensation due officer /shareholders 586,605 586,605
Deferred Revenues - net of current portion -- 8,022
STOCKHOLDERS' DEFICIENCY
Common stock, authorized 30,000,000 shares
$.001 par value, issued and outstanding
11,780,306 (1997) and 11,483,979 (1996) 11,780 11,498
Additional paid-in capital, net of deferred
compensation $14,813 (1997) and $234 (1996) 5,923,868 5,862,302
Accumulated deficit (5,785,098) (5,869,656)
----------- -----------
150,550 4,144
COMMITMENTS AND CONTINGENCIES --NOTE F
SOFTWARE LICENSING AGREEMENT --NOTE I
$1,146,141 $1,338,608
=========== ===========
</TABLE>
See notes to financial statements
F3
<PAGE>
MULTI SOFT, INC
a 55.40% owned subsidiary of Multi Solutions, Inc.
STATEMENTS OF OPERATIONS
Years ended January 31, 1997 and 1996
1997 1996
------------ ------------
REVENUES
License fees $356,494 $812,069
Maintenance fees 688,692 545,977
Consulting and Other fees 19,949 41,134
------------ ------------
Total revenues 1,065,135 1,399,180
EXPENSES
Software development and technical support 344,588 369,548
Selling and administrative 707,233 1,029,928
------------ ------------
Total expenses 1,051,821 1,399,476
------------ ------------
Income (Loss) from operations 13,314 (296)
OTHER INCOME (EXPENSE)
Other Revenues 79,102 54,782
Interest Expense (7,858) (5,533)
------------ ------------
Total other income 71,244 49,249
Net Income $84,558 $48,953
============ ============
Weighted average shares outstanding 11,592,343 10,109,000
============ ============
Income per share a a
============ ============
(a) less then $.01 per share
See notes to financial statements
F4
<PAGE>
MULTI SOFT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIENCY Years ended January 31, 1997
and 1996
<TABLE>
<CAPTION>
Total Total
Common Stock paid in Deferred Accumulated stockholders
Shares Amount capital Compensation deficit deficiency
<S> <C> <C> <C> <C> <C> <C>
Balance as of February 1, 1995 9,983,979 9,998 5,534,397 (595) (5,918,608) (374,808)
Issuance of resticted common stock 1,500,000 1,500 328,138 329,638
Amortization of deferred compensation 361 361
Net Income 48,952 48,953
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 1996 11,498,046 11,498 5,862,535 (233) (5,869,656) 4,144
Issuance of resticted common stock 282,260 282 75,516 (16,020) 59,778
Amortization of deferred compensation 2,070 2,070
Net Income 84,558 84,558
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 1997 11,780,306 11,780 5,938,051 (14,183) (5,785,098) 150,550
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements
F5
<PAGE>
MULTI SOFT, INC.
STATEMENTS OF CASH FLOWS
Years ended January 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net Income $84,558 $48,953
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 347,548 371,921
Common stock issued to Solutions 160,000
Changes in assets and liabilities
Due to / from Multi Solutions (69,524) (151,851)
Accounts receivable 83,467 (4,630)
Prepaid expenses and other current assets -- 3,778
Accrued payroll (30,285) (906)
Note Payable 15,504
Payroll and other taxes payable (36,921) (3,614)
Accounts payable and accrued expenses (115,497) (129,586)
Accrued officer compensation (6,669) (42,234)
Deferred officer compensation -- 239,892
Deferred revenues (141,380) 20,401
Long term deferred revenues (8,022) (192,864)
--------- ---------
Net cash provided by operating activities 122,779 319,260
Cash flows from investing activities
Capital expenditures (15,718) --
Capitalized software development costs (232,173) (366,615)
--------- ---------
Net cash used in investing activities (247,891) (366,615)
Cash flows from financing activities
Net repayments under loan and line of credit ageements (15,602) (12,630)
Loan from officer -- (22,000)
Restricted Common stock issued to Solutions -- 170,000
Issuance of capital stock 61,847 --
--------- ---------
Net cash provided by financing activities 46,245 135,370
--------- ---------
NET INCREASE (DECREASE) IN CASH (78,867) 88,015
Cash at beginning of year 88,015 --
--------- ---------
Cash at end of year $9,148 $88,015
========= =========
</TABLE>
F6
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Multi Soft, Inc. (the Company) was incorporated on January 29, 1985 under
the laws of the State of New Jersey. At January 31, 1997, the Company was
55.40% owned by Multi Solutions, Inc. The Company is principally involved
in the design, production and delivery of computer applications development
software for sale to large corporate customers throughout the United States
and overseas.
The Company's financial statements have been presented on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The liquidity of the Company
has been adversely affected in recent years by significant losses from
operations. The Company earned net income of $84,558 in 1997 and earned an
income of $48,953 in 1996. In addition, at January 31, 1997, the Company's
current liabilities exceeded current assets by $369,345 and total assets
exceeded total liabilities by $150,550.
The Company intends to aggressively market its new products, control
operating costs and broaden its product base through enhancements of
products for use by non-technical computer personnel.
The Company believes that these measures will provide sufficient liquidity
for it to continue as a going concern in its present form. Accordingly, the
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount
and classification of liabilities or any other adjustments that might be
necessary should the Company be unable to continue as a going concern in
its present form.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets which
range from three to seven years.
Depreciation expense was $2,960 and $2,372 for the years ended January 31,
1997 and 1996.
2. Capitalization of Computer Software
Capitalized software development costs relating to products for which
technological feasibility has been established qualify for capitalization
under Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed."
Research and development costs associated with the creation of computer
software prior to reaching technological feasibility are expensed as
incurred, except for related computer equipment expenditures such as
personal computers and other hardware components, which are capitalized and
depreciated over their useful lives if the equipment is deemed to have
alternative future use.
F7
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Capitalized software development costs are amortized to operations when the
product is available for general release to customers. Amortization is
calculated using (a) the ratio of current gross revenues for the product to
the total of current and anticipated gross revenues for the product or (b)
the straight-line method over the remaining useful life of the product,
whichever is greater.
The Company is amortizing, over a sixty month period, the capitalized
software costs for its Windows-based products. The period is based on sales
forecasts for the seven year agreement with IBM which began in October
1993. The Company's Windows products are compatible with Windows 95 and
further modifications are continually made specifically for 32 bit
environments (Windows 95 or Windows NT). Unamortized costs relating to
Windows products as of January 31, 1997 and 1996 are $609,062 and $723,978,
respectively.
The unamortized capitalized software costs relating to the two DOS products
are being amortized over the one year remaining life as of January 31,
1997. The unamortized costs relating to DOS products at January 31, 1997
and 1996 are $2,440 and $4,878, respectively.
Amortization expense for 1997 and 1996, for all products, was $344,588 and
$369,548 respectively.
3. Revenue Recognition
In accordance with Statement of Position 91-1, "Software Revenue
Recognition" (SOP 91-1), the Company's policy is to recognize license and
maintenance fees which earned and consulting fee income when services are
rendered. License fees are recognized upon shipment of the software while
maintenance fees are recorded over the period covered by the related
contract. Consulting is performed on a time and material basis.
4. Deferred Compensation
Deferred compensation arising from the issuance of stock grants is
amortized over the term of the related grant or employment agreements (one
to five years). The amount of compensation attributable to stock grants is
determined by the market price of the Company's stock on the date of grant.
5. Income Per Share
Income per share is computed using the weighted average number of common
shares outstanding during the period.
6. Income Taxes
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) NO. 109, "Accounting for Income
Taxes," which significantly changed the accounting for deferred income
taxes. The standard provides for a liability approach under which deferred
income taxes are provided for based upon enacted tax laws and rates
applicable to the periods in which the taxes become payable. The Company
adopted the new standard for the year ended January 31, 1994.
F8
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
7. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE C - LOAN PAYABLE
1. Demand Loan - Bank
The Company has a demand loan payable to a commercial bank ($25,497 and
$41,099 at January 31, 1997 and 1996 respectively). Borrowings are
collateralized by the Company's accounts receivable and bear interest at
the bank's prime rate plus 2% (10.5% and 10.75% at January 31, 1997 and
1996 respectively). The loan is currently in default. The Company obtained
a forbearance from the bank in November 1993 requiring a $20,000 payment
upon execution, monthly payments of $1,500 principal and interest and the
personal guarantee of the Company's chairman. As of January 31, 1997, the
Company is in compliance with the terms of the forbearance agreement.
During 1997 and 1996, the maximum amount of borrowings outstanding was
$41,099 and $53,729 respectively, the average borrowings were $33,248 and
$47,819, respectively, and the weighted average interest rates were 11.0%
and 9.5%, respectively.
2. Note Payable
In June 1996, $18,700 due to a vendor was converted to a note payable at
the rate of $597 per month for 36 months with interest at 9%.
NOTE D - INCOME TAXES
As a result of losses incurred in recent years, the Company has net
operating loss carry forwards available to offset future federal taxable
income of approximately $5.6 million. These losses expire at various dates
through 2011. Therefore, there is no provision for income taxes.
The Company adopted, effective February 1, 1993, SFAS No. 109, "Accounting
for Income Taxes." Under the liability method specified by SFAS No 109,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when these
differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities. The principal types of differences
between assets and liabilities for financial statement and tax return
purposes are capitalized software development costs, deferred compensation,
deferred income and allowance for uncollectible accounts.
F9
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
The deferred method, used in years prior to 1993, required the Company to
provide for deferred tax expense based on certain items of income and
expense which were reported in different years in the financial statements
and the tax returns as measured by the tax rate in effect for the year the
difference occurred.
Deferred tax (liabilities) assets consist of the following at January 31:
1997 1996
---- ----
Capitalized software $ (242,000) $ (289,000)
Allowance for bad debts 3,000 15,000
Deferred compensation 234,000 234,000
Deferred revenue - royalties 92,000 127,000
Loss carry forwards 2,220,000 2,237,000
----------- -----------
Gross deferred tax assets 2,307,000 2,324,000
Deferred tax assets valuation allowance 2,307,000 2,324,000
----------- -----------
$ -0- $ -0-
=========== ===========
NOTE E - STOCKHOLDERS' EQUITY
1. Stock Transactions
The expiration date of the Company's 714,012 outstanding warrants has been
extended to December 1, 1997.
F10
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
NOTE E - STOCKHOLDERS' EQUITY - Continued
In January 1996, the Company issued 1,500,000 shares of common stock to
Multi Solutions, Inc. The transaction was valued at $.22 per share
($330,000) for which Multi Solutions issued note.
In connection with this transaction, the company paid for the acquisition
of 1,000,000 shares each of Multi Solutions common stock (valued at $0.08
per share) by the chairman and vice president by allowing the indebtedness
of Multi Solutions to the company to be reduced by $160,000 which thereby
reduced the debt of the company to the two officers by the same amount.
After completion of this series of transactions, the net debt due from
Multi Solutions in connection with the common stock sale was reduced to
$170,000.
2. Prior Period Adjustment
During the year ended January 31, 1996 the Company discovered an error in
accounts payable originating in the fiscal year ended January 31, 1994.
This error has no effect on operations for the year ended January 31, 1996.
3. Option and Stock Grant Program
During fiscal 1992, the Company issued to an officer/director employee
stock purchase warrants to purchase 66,667 shares and 33,334 shares,
respectively, of its common stock at $0.27 per share. The exercise price
was in excess of the fair market value of the Company's common stock at the
date of issuance. The warrants are exercisable through June 1, 1996.
In June 1993, the Company adopted an Employee, Consultant and Advisor Stock
and Option Compensation Plan (the Plan). Pursuant to the terms of the Plan,
an aggregate of up to 1,000,000 shares of common stock, .001 par value per
share (the common stock), and/or options to purchase common stock may be
granted to persons who are, at the time of issuance or grant, employees or
officers of, or consultants or advisors to, the Company. At January 31,
1997 and 1996, an aggregate of 665,334 shares have been issued pursuant to
the Plan.
F11
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
The Company has issued stock grants as follows:
Stock grants as of January 31, 1992 427,500
Stock grants issued to employees 13,334
-------
Stock grants of January 31, 1993 440,834
Stock grants issued to employees 73,334
-------
Stock grants as of January 31, 1994 514,168
Stock grants issued to employees 71,166
-------
Stock grants as of January 31, 1995 585,334
Stock grants issued to employees 0
-------
Stock grants as of January 31, 1996 585,334
Stock grants issued to employees 80,000
-------
Stock grants as of January 31, 1997 665,334
-------
As of January 31, 1997, employees were not fully vested in 80,000 of the
aforementioned stock grants. Amortization of deferred compensation for the
stock grants to employees was $2,070 and $361 for the years ended January
31, 1997 and 1996, respectively.
4. Shares Issued to Officers as Compensation
In March 1994, the Company issued 66,666 to Miriam Jarney in lieu of
$18,000 salary. (Also see note E 1.)
F12
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
NOTE F - COMMITMENTS AND CONTINGENCIES
1. Leases
The Company is a subtenant in office space leased by an entity
substantially owned by the Company's chairman and his wife. This lease is
on a quarter-by-quarter term with a base rent of $4750 per month. Rental
expense under the lease aggregated approximately $57,200 and $52,000 for
the years ended January 31, 1997 and 1996, respectively.
In June 1995 the Company entered into a three year noncancelable operating
lease for a color laser copier with monthly payments of $606 plus tax and
per copy charges through May 1998.
Future minimum lease payments under the noncancelable equipment operating
lease is as follows:
Year Ending
January 31,
-----------
1998 7,000
1999 3,000
-------
$10,000
=======
2. Employment Agreements
The Company has employment agreements with two officers which provide
minimum annual compensation of $182,000 through July 1997.
In addition, the employment agreements entitle the two employees to 2% and
1.5% respectively, of each fiscal year's after tax profits of the Company.
3. Payroll Taxes
Certain state and federal taxes, interest, and penalties in aggregating
approximately $38,000 remain unpaid at January 31, 1997.
F13
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
4. Litigation
The Company and its parent, Multi Solutions, Inc. have been from time to
time parties to legal actions arising in the course of their business. The
disposition of these actions have not had a material effect on the
financial position or results of operations of the Company taken as a
whole.
NOTE G - MAJOR CUSTOMER
In fiscal 1997, one customer accounted for 29% of total revenue. In fiscal
1996, one customer accounted for 42% of total revenue.
NOTE H - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for the years ended
January 31, 1997 and 1996 are as follows:
1997 1996
---- ----
Cash paid during the year for Interest $7,858 $5,533
During the years ended January 31, 1997 and 1996, the Company exchanged
100,000 and 202,260 shares of the Company's common stock at fair market
value for legal and other services rendered to the Company valued at
$14,107 and $59,737.
NOTE I - SOFTWARE LICENSING AGREEMENTS
1. Software Licensing Agreements
On October 8, 1993, the Company entered into a Software Licensing Agreement
and other ancillary agreements with IBM Corporation (IBM) providing for
certain exclusive marketing rights for the Company's principal product:
WCL(TM) with IBM IMS Extensions. This is a software product specifically
modified for use with IBM's IMS mainframe systems.
The agreements, effective for a term of seven years with automatic renewals
for two additional one year periods, provide for the payment of percentage
royalties and unit royalties as specified in the agreement. IBM may
terminate the agreement after the first year upon 90 days notice. The
agreement further provides for minimum non-refundable royalty advances to
the Company aggregating $300,000 through April 1996.
The company has been receiving monthly maintenance from IBM regarding the
above license agreement.
The $300,000 royalty advance has been recorded as deferred revenue in
fiscal year 1994 and is being recognized as income over the 21 month period
of maintenance included in the agreement without additional fees.
F14
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1997 and 1996
Effective June 1, 1995 Multi Soft and IBM amended their Software License
Agreement number: STL93199 and its related worldwide marketing agreements,
such that, $150,000 dollars of the $300,000 advance amount deferred as of
January 31, 1994 shall, as of June 1, 1995 no longer be subject to offset
against royalties accrued. The net effect was to remove $150,000 from
deferred revenues and increase license fee revenues by $150,000.
For the years ended January 31, 1997 and 1996, the Company recognized as
income $42,864 and $192,866 of $300,000 advance respectively.
The contract with IBM's Network Software Division provides that Multi Soft
will receive prepaid royalties of $600,000 in quarterly installments over a
two year period. As a result, IBM receives non exclusive and non
transferable license to market certain Multi Soft products. The product is
marketed under IBM's logo as "Personal Communications Toolkit for Visual
Basic". During fiscal 1997 the company has been receiving maintenenace for
the above contract. In October 1996 agreement # R94564 was amended to
provide $15,000 in monthly payments to the company through October 1998.
2. Marketing Agreements with IBM
The Company entered into marketing agreements with IBM providing for the
marketing rights of the WCL software with IBM IMS Extensions in the United
States, Puerto Rico, the Asia Pacific Region, Europe, the Middle East and
Africa.
The agreements are for three year terms and provide for the payment of
percentage royalties as specified in the agreement.
3. Joint Development and Marketing Agreement with Bellcore
In 1995 Multi Soft, Inc. entered a joint development and marketing
agreement with Bellcore to develop and market a Sun Solaris Unix version of
its WCL product. The agreement provides that Bellcore pay Multi Soft for
developing an extension of its WCL product to the Sun Solaris Unix
environment. Additionally, Bellcore shall pay a specified monthly
maintenance fee for a period of one year. Also, it provides for a joint
marketing agreement in which both companies will share marketing royalties.
NOTE J - RELATED PARTY TRANSACTIONS
The Company, from time to time, pays incidental expenses of Multi Solutions
and allocates its share of certain expenses. These items are charged to
intercompany receivable and no payments have been received during the
fiscal year. The balance due from Multi Solutions at January 31, 1997 and
1996 was $422,951 and $408,962.
The Company provides certain services and office space to NetCast, Inc., as
subsidiary of Multi Solutions. The balance due from NetCast, Inc. at
January 31, 1997 was $55,335.
F15
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 9,148
<SECURITIES> 0
<RECEIVABLES> 23,815
<ALLOWANCES> (6,854)
<INVENTORY> 0
<CURRENT-ASSETS> 39,641
<PP&E> 25,771
<DEPRECIATION> (9,119)
<TOTAL-ASSETS> 1,146,141
<CURRENT-LIABILITIES> 408,986
<BONDS> 0
11,780
0
<COMMON> 0
<OTHER-SE> 138,770
<TOTAL-LIABILITY-AND-EQUITY> 1,146,141
<SALES> 1,065,135
<TOTAL-REVENUES> 1,065,135
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (79,102)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,858
<INCOME-PRETAX> 84,558
<INCOME-TAX> 0
<INCOME-CONTINUING> 84,558
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,558
<EPS-PRIMARY> 0
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