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 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended January 31, 1998 Commission File No. 33-3133
New Jersey 22-2588030
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
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 (732) 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: $901,450
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average ask ($ 0.22) and ($ 0.18) bid price of such
stock, as of April 21, 1998 is $989,717 based upon $.20 multiplied by the
4,948,586 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 21, 1998, is 11,780,306 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_
<PAGE>
MULTI SOFT, INC.
Form 10-KSB
Year Ended January 31, 1998
Table of Contents
Page
----
PART I........................................................................3
Item 1. Business.............................................................3
Item 2. Properties...........................................................9
Item 3. Legal Proceedings....................................................9
Item 4. Submission of Matters to a Vote of Security Holders..................9
PART II......................................................................10
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.................................................10
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................11
Item 7. Financial Statements................................................13
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures.............................13
PART III.....................................................................14
Item 9. Directors, Executive Officers, Promoters and Control
Persons; compliance with Section 16(a) of the Exchange Act..........14
Item 10. Executive Compensation..............................................15
Item 11. Security Ownership of Certain Beneficial Owners and Management......18
Item 12. Certain Relationships and Related Transactions......................19
PART IV......................................................................21
Item 13. Exhibits and Reports on Form 8-K....................................21
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/COM(TM), is a new component based development tool slated for
production release in July 1998. It takes advantage of Microsoft's COM/DCOM
technology and will generate both components and complete applications, not just
applications as currently done by WCL. WCL/COM will allow you to build client
server applications today and use the same code for your Internet/Intranet
applications tomorrow. The components generated by WCL/COM that interface with
the mainframe can be used both by Visual Basic and the your Internet browsers,
on individual workstations or Windows NT servers, depending on the needs of your
application. Persistence and security are achieved through the use of
Microsoft's Internet Information Server ( IIS) and Active Server Pages (ASP).
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. Multi Soft, Inc. also has a 32 bit version
of it's WCL product for Windows 95 and Windows/NT.
DynaGUI is an automated 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.
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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.
Key Services
Multi Soft offers 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, fax, e-mail and
Internet support 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 $258,584 in 1998 and $344,588 in 1997.
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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
ToolkitTM for Windows in the United States, Puerto Rico, the Asian Pacific
Region, Europe, the Middle East, Africa and Canada. IMS Client Server ToolkitTM
facilitates the generation of client application which run with IMS Client
ServerTM 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. As of the date of this filing, the above
contract remains effective.
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. 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, 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 received monthly maintenance
for the above contract. During fiscal 1998, Multi Soft did not receive monthly
maintenance fees from this contact.
Employees
The Company has eleven 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 $75% of
NetCast. Multi Soft provides services and office space to NetCast at cost for
which it has billed approximately $155,251 through January 31, 1998. Multi
Solutions has guaranteed NetCast's debt to Multi Soft. 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, no assurance can
be made 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 and $5,200 during the fifth 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 $33,000 remain unpaid at January 31, 1998. In March 1998,
approximately $21,000 of the unpaid amount was paid in connection with a
settlement agreement leaving approximately $12,000 unpaid.
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, 1998.
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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 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
Period - Fiscal Year 1998 High Low
--------------------------------------------- ----------------- --------------
First Quarter ending April 30, 1997 .24 .10
Second Quarter ending July 31, 1997 .225 .10
Third Quarter ending October 31, 1997 .215 .15625
Fourth Quarter ending January 31, 1998 .15 .07
(b) Holders -- There were approximately 239 holders of record of the
Company's Common Stock and 15 holders of record of the Company's Common Stock
Purchase Warrants as of March 5, 1998 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.
Issuance of Unregistered Securities
Number
Name Date of Securities Issued
- ---- ---- --------------------
Multi Solutions 1/16/96 1,500,000
Michael Zindler 5/6/96 25,000
Markowitz & Zindler 5/6/96 100,000
John Lowy 4/2/96 77,260
Linda Dorrian 5/16/96 20,000
Lorraine Hartley 5/16/96 10,000
Larry Levine 12/15/97 50,000
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Fiscal Year Ended January 31, 1998 Compared to Fiscal Year Ended January 31,
1997
Revenues for the fiscal year ended January 31, 1998 were $901,450 as
compared to $1,065,135 in fiscal year 1997, a decrease of $163,685 (15%). This
decrease is primarily due to a 32% decrease in revenues from license fees from
$356,494 to $243,146, much of which came 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 1998, Multi Soft's two principal sources of revenues were license
fees and maintenance fees which represented approximately 98.5% ($888,411) and
98.1% ($1,045,186) percent of revenues in fiscal 1997.
Management believes that the decrease in maintenance fees during the year
ended January 31, 1998 is due to the cancellation of maintenance contracts with
customers. Also, since November 1996, the minimum maintenance has been $15,000
per month from IBM.
Operating expenses decreased 15.1% from fiscal 1997 ($1,051,821) to fiscal
1998 ($893,064) primarily as a result of a 25% decrease in software development
costs. The decrease in software development costs is principally due to
development of a product that was capitalized during the fiscal year but
remained unamortized because the product is not ready for sale.
Other income (expenses) changed from $71,244 in fiscal 1997 to $90,035 in
fiscal 1998. Consulting, rent revenue and administrative fees are included in
the other income section in the amount of $75,750 in 1998.
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As a result of all of the foregoing, Multi Soft's net income in fiscal 1998
of $98,421 increased compared to its income in 1997 $84,558.
Major Customers
In fiscal 1998, IBM accounted for 29% of total revenues. In fiscal 1997 IBM
accounted for 29% of total revenues.
Liquidity and Capital Resources
At January 31, 1998, the Company had a working capital deficiency of
$(376,763) and has experienced cash flow problems.
Management of Multi Soft continues to take 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.
It is Multi Soft's intent to remain a technology provider and search out
multiple distribution channels, with increasing emphasis on the use of the
Internet for marketing, 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").
Working Capital and Current Ratios:
Descriptions January 31, 1998 January 31, 1997
------------------------------------------------------------------------------
Working capital (deficiency) ($376,763) ($369,345)
Current ratios .22:1 .097:1
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.
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Year 2000
Many companies systems experience problems handling dates beyond the year
1999. The Company's products are not directly impacted by this problem.
In particular, Year 2000 issues are transparent to WCL. WCL simply transports
data between the 3270/5250 presentation space and the client application. WCL
does no formatting of any data, including dates. This is handled by the client
development tool, such as VB, PB, and VC++. Therefore, Year 2000 issues must be
addressed by these development tools, not WCL.
In addition, The Company's INFRONT and QuickFRONT products have built in support
for Year 2000. Any date functions in use within an INFRONT or QuickFRONT
application that use 4 positions for the year will automatically handle Year
2000 with no changes.
For date functions that use 2 positions for the year, SETUPSL command can be
used to handle the Year 2000.
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Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
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 Company'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, 1998
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Balance Sheets - January 31, 1998 and 1997 F2, F3
Statements of Operations for Each of the Two Years in the
Period Ended January 31, 1998 F4
Statements of Changes in Stockholders' Equity (Deficiency)
for Each of the Two Years in the Period Ended January 31, 1998 F5
Statements of Cash Flows for Each of the Two Years in the Period Ended
January 31, 1998 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
- ---- ----------------
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 55, 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 57, 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.
-15-
<PAGE>
LARRY SPATZ, age 54, 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 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, 1998.
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 $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------- ------------------------------------------------------
Annual Compensation Long Term Compensation
- ------------------------------------------------------------------- ------------------------------------------------------
Awards Payouts
-------------------------- -------------------------
Name & Other Annual Restricted All Other
Principle Fiscal Compensation Stock Award LTIP Compensation
Position Year Salary ($) Bonus ($) ($) ($) Options SARs Payouts ($) ($)
- -------- ---- ---------- --------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles J. 1998 (A)$ 60,000 $0 (C)$40,393 $0 $0 $0 $0
Lombardo CEO 1997 $100,000 $0 $20,000 $0 $0 $0 $0
1996 $104,505 $0 (C)$36,750 $0 $0 $0 $0
1995 $104,505 $0 $0 $0 $0 $0 $0
1994 $103,470 $0 $0 $0 $0 $0 $0
Miriam Jarney 1998 (B)$ 60,000
Exec. V.P. 1997 $100,000 $0 $0 $0 $0 $0 $0
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
</TABLE>
(A) Accrued and unpaid to Charles J. Lombardo
$19,167 for 1998 and $60,548 for prior year
(B) Accrued and unpaid to Miriam Jarney
$10,000 for 1998 and $43,342 for prior year
(C) Consulting fees
-16-
<PAGE>
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
- ------------------------------- -------------------- ---------------------------------- ----------------- ---------------
Name Options/SARs Percent of Total Options/SARs Exercise or Expiration
Granted Granted to Employees in Fiscal Base Price Date
Year ($/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.
-17-
<PAGE>
Mr. Lombardo also is entitled to a salary from MSI of $25,000 per year,
which he agreed to forego for fiscal 1997, 1998. 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 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 1997 and fiscal 1998, Mr. Lombardo and Ms. Jarney accrued a
portion of their salaries. The balance due between both officers as of January
31, 1998 is $739,662 including deferred increases of $586,605.
-18-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Management -- The number and percentage of Shares of
Common Stock of the Company owned of record and beneficially by each owner of 5%
or more of the common stock, 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
occurred 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.
-19-
<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 February 11, 1998, the Company paid off the existing loan by
incurring a new loan. As a result, the loan is no longer in default. As of March
1, 1998, the Company is in compliance with the terms of the new loan and owes
approximately $16,338. During 1998 and 1997, the maximum amount of borrowings
outstanding were $25,497 and $41,000, respectively.
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 Multi Solutions 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 Multi Solutions
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 tradable
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 Multi Solutions.
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.
-20-
<PAGE>
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 for accrued salaries between both officers as of January 31, 1998 is
$739,662 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").
-21-
<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)
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.
-22-
<PAGE>
(7) 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, 1998.
-23-
<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: April 29, 1998 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
- ---------- ----- ----
April 29, 1998
- -------------------
Charles J. Lombardo Chairman of the Board of Directors, Chief
Executive Officer, Financial Officer, and
Treasurer
April 29, 1998
- -------------------
Miriam Jarney Executive Vice President, Secretary, and
Director
April 29, 1998
- -------------------
Larry Spatz Director
-24-
<PAGE>
Albinder Altman & Block, LLP
Certified Public Accountants
462 Seventh Avenue, Suite 1600
New York, NY 10018
Tel: (212) 279-8430
Fax: (212) 279-8459
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Multi Soft, Inc.
We 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, 1998 and 1997 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. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Multi Soft, Inc. as of January
31, 1998 and 1997 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.
Albinder Altman & Block, LLP
New York, New York
April 22, 1998
F-1
<PAGE>
MULTI SOFT, INC.
a 55.40% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31 ,1998 and 1997
1998 1997
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 29,093 $ 9,148
Accounts Receivable (net of allowance
of $29,086 and $6,854 respectively) 57,025 16,961
Prepaid expenses and other current assets 20,799 13,532
----------- -----------
106,917 39,641
FURNITURE AND EQUIPMENT
Research and Development Equipment 8,869 7,953
Office furniture and other equipment 13,824 17,818
----------- -----------
22,693 25,771
Less: Accumulated Depreciation (8,688) (9,119)
----------- -----------
14,005 16,652
OTHER ASSETS
Capitalized software development costs 1,568,794 1,722,303
Less accumulated amortization (939,942) (1,110,741)
----------- -----------
628,852 611,562
Due from Solutions 422,239 422,951
Due from NetCast 155,251 55,335
----------- -----------
$ 1,327,264 $ 1,146,141
=========== ===========
F-2
<PAGE>
MULTI SOFT, INC.
a 55.40% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31, 1998 and 1997
1998 1997
----------- -----------
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
CURRENT LIABILITIES
Loan payable to bank $ 16,338 $ 25,497
Note Payable 11,339 15,504
Accrued payroll 20,080 --
Payroll and other taxes payable 32,755 38,072
Accounts Payable, Accrued expenses and
other Current Liabilities 58,291 58,155
Accrued officer compensation 153,057 103,347
Deferred Revenues 191,820 168,411
----------- -----------
483,680 408,986
Deferred compensation due officer /shareholders 586,605 586,605
----------- -----------
STOCKHOLDERS' DEFICIENCY
Common stock, authorized 30,000,000 shares
$.001 par value, issued and outstanding
11,780,306 (1998) and 11,780,306 (1997) 11,780 11,780
Additional paid-in capital, net of deferred
compensation $5,941 (1998) and $14,813 (1997) 5,931,876 5,923,868
Accumulated deficit (5,686,677) (5,785,098)
----------- -----------
256,979 150,550
$ 1,327,264 $ 1,146,141
=========== ===========
F-3
<PAGE>
MULTI SOFT, INC
a 55.40% owned subsidiary of Multi Solutions, Inc.
STATEMENTS OF OPERATIONS
Years ended January 31, 1998 and 1997
1998 1997
------------ ------------
REVENUES
License fees $ 243,146 $ 356,494
Maintenance fees 645,265 688,692
Consulting and Other fees 13,039 19,949
------------ ------------
Total revenues 901,450 1,065,135
EXPENSES
Software development and technical support 258,584 344,588
Selling and administrative 634,480 707,233
------------ ------------
Total expenses 893,064 1,051,821
------------ ------------
Income (Loss) from operations 8,386 13,314
OTHER INCOME (EXPENSE)
Other Revenues 90,839 79,102
Interest Expense (804) (7,858)
------------ ------------
Total other income 90,035 71,244
Net Income $ 98,421 $ 84,558
============ ============
Weighted average shares outstanding 11,780,306 11,592,343
============ ============
Income per share $ 0.01 $ 0.01
============ ============
(a) less then $.01 per share
F-4
<PAGE>
MULTI SOFT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIENCY
Years ended January 31, 1998 and 1997
<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 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
Issuance of resticted common stock -- -- -- --
Amortization of deferred compensation 8,008 8,008
Net Income 98,421 98,421
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 1998 11,780,306 11,780 5,938,051 (6,175) (5,686,677) 256,979
========== ========== ========== ========== ========== ==========
</TABLE>
F-5
<PAGE>
MULTI SOFT, INC.
STATEMENTS OF CASH FLOWS
Years ended January 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 98,421 $ 84,558
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 262,147 347,548
Common stock issued to Solutions
Changes in assets and liabilities
Due to / from Multi Solutions 712 (69,524)
Due to/ from NetCast (99,916)
Accounts receivable (40,064) 83,467
Prepaid expenses and other current assets (7,267) --
Accrued payroll 20,080 (30,285)
Note Payable (4,165) 15,504
Payroll and other taxes payable (5,317) (36,921)
Accounts payable and accrued expenses 136 (115,497)
Accrued officer compensation 49,709 (6,669)
Deferred revenues 23,409 (141,380)
Long term deferred revenues -- (8,022)
--------- ---------
Net cash provided by operating activities 297,885 122,779
Cash flows from investing activities
Capital expenditures (916) (15,718)
Capitalized software development costs (275,874) (232,173)
--------- ---------
Net cash used in investing activities (276,790) (247,891)
Cash flows from financing activities
Net repayments under loan and line of credit ageements (9,159) (15,602)
Issuance of capital stock 8,008 61,847
--------- ---------
Net cash provided by financing activities (1,151) 46,245
--------- ---------
NET INCREASE (DECREASE) IN CASH 19,944 (78,867)
Cash at beginning of year 9,148 88,015
--------- ---------
Cash at end of year $ 29,092 $ 9,148
========= =========
</TABLE>
F-6
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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, 1998, 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 $98,421 in 1998 and $84,558 in
1997. In addition, at January 31, 1998, the Company's current liabilities
exceeded current assets by $376,763 and total assets exceeded total
liabilities by $256,979.
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 $3,563 and $2,960 for the years ended January 31,
1998 and 1997 respectively.
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.
F-7
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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, 1998 and 1997 are $628,852 and $611,562
respectively.
As of January 31, 1998, there no longer are any unamortized capitalized
software costs relating to the two DOS products. The unamortized costs
relating to DOS products at January 31, 1997 were $2,440.
Amortization expense for 1998 and 1997, for all products, was $258,584 and
$344,588 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 when 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.
F-8
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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 ($16,338 and
$25,497 at January 31, 1998 and 1997 respectively). Borrowings are
collateralized by the Company's accounts receivable and bear interest at
the bank's prime rate plus 2% (10.5% at January 31, 1998 and 1997). 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
February 11, 1998, the company paid the existing loan by obtaining a new
loan, as a result, the the loan is no longer in default. As of the date of
this filing the Company is in compliance with the terms of the agreement.
During 1998 and 1997, the maximum amount of borrowings outstanding was
$25,497 and $41,099 respectively, the average borrowings were $20,918 and
$33,248, respectively, and the weighted average interest rates were 10.5%.
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.
F-9
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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:
1998 1997
---- ----
Capitalized software $ (248,000) $ (242,000)
Allowance for bad debts 11,000 3,000
Deferred compensation 234,000 234,000
Deferred revenue - royalties 77,000 92,000
Loss carry forwards 2,200,000 2,220,000
---------- ----------
Gross deferred tax assets 2,274,000 2,307,000
Deferred tax assets valuation allowance 2,274,000 2,307,000
---------- ----------
$ - 0 - $ - 0 -
========== ==========
NOTE E - STOCKHOLDERS' EQUITY
1. Stock Transactions
The expiration date of the Company's 714,012 outstanding warrants has been
extended to June 1, 1998.
F-10
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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 was to issue a 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 were 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,
1998, an aggregate of 665,334 shares have been issued pursuant to the Plan.
F-11
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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
Stock grants issued to employees 0
-------
Stock grants as of January 31, 1998 665,334
-------
As of January 31, 1998, employees were not fully vested in 80,000 of the
aforementioned stock grants. Amortization of deferred compensation for the
stock grants to employees was $8,009 and $2,070 for the years ended January
31, 1998 and 1997, 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.)
F-12
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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 $59,450 and $57,200 for
the years ended January 31, 1998 and 1997, 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,
-----------
1999 3,000
------
$3,000
======
In November 1997 the company entered into a 60 month operating lease for a
laser copier with monthly payments of $365 plus tax and copy charges
through October 2002.
Year Ending
January 31,
-----------
1999 $ 4,380
2000 4,380
2001 4,380
2002 4,380
-------
$17,520
=======
2. Employment Agreements
The Company has employment agreements with two officers which provide
aggregate minimum annual compensation of $200,000 through July 1998.
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 $33,000 remain unpaid at January 31, 1998. In March 1998,
approximately $21,000 of those taxes were paid in connection with a
settlement agreement, leaving approximately $12,000 unpaid.
F-13
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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 1998, one customer accounted for 29% of total revenue. In fiscal
1997, one customer accounted for 29% of total revenue.
NOTE H - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for the years ended
January 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Cash paid during the year for Interest $2,304 $7,858
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 was recognized as income over the 21 month period of
maintenance included in the agreement without additional fees.
F-14
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998 and 1997
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.
For the years ended January 31, 1998 and 1997, the Company recognized as
income $8,022 and $42,864 of $300,000 advance respectively. As of the date
of this filing, the entire $300,000 has been amortized to revenue.
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. As
of the date of this filing, the above contract remains in effect.
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.
During the fiscal year 1998, Multi Soft had no longer received any
maintenance from this contract.
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, 1998 and
1997 was $422,239 and $422,951.
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, 1998 was $155,251. Multi Solutions has guaranteed the debt of
NetCast to The Company.
F-15
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<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 29,093
<SECURITIES> 0
<RECEIVABLES> 86,112
<ALLOWANCES> 29,086
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<CURRENT-ASSETS> 106,917
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<DEPRECIATION> 8,688
<TOTAL-ASSETS> 1,327,264
<CURRENT-LIABILITIES> 483,680
<BONDS> 0
11,780
0
<COMMON> 0
<OTHER-SE> 256,979
<TOTAL-LIABILITY-AND-EQUITY> 1,327,264
<SALES> 243,146
<TOTAL-REVENUES> 901,450
<CGS> 0
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