SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1999 Commission File No. 0-15976
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New Jersey 22-2588030
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
MULTI SOFT, INC.
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(Name of Small business issuer in its charter)
4262 US Route 1, Monmouth Junction, New Jersey 08852
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 329-9200
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Common Stock
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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: $805,655
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average ask ($ 0.22) and ($ 0.18) bid price of such
stock, as of April 21, 1999 is $1,140,551 based upon $.20 multiplied by the
5,702,753 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, 1999, is 13,509,473 shares, all of one class of $.001 par
value Common 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, 1999
Table of Contents
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Page
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PART I.........................................................................3
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ITEM 1. BUSINESS..............................................................3
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ITEM 2. PROPERTIES............................................................5
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ITEM 3. LEGAL PROCEEDINGS.....................................................6
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................6
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PART II........................................................................6
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATEDSTOCKHOLDER MATTERS..6
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS...................................7
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ITEM 7. FINANCIAL STATEMENTS..................................................9
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
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AND FINANCIAL DISCLOSURES.............................................9
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PART III.......................................................................9
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ITEM 10. EXECUTIVE COMPENSATION...............................................10
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......12
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................13
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PART IV.......................................................................13
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................13
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SIGNATURES....................................................................15
FINANCIAL STATEMENTS F1
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PART I
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Item 1. Business
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General
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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 52% 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 LibraryTM (WCL(TM)) for Windows 3x and 95, INFRONT for DOS and a
new product COMRAD (Component Object Model Rapid Application Development) for 32
bit Windows 95, 98, and NT.
The Technology
- --------------
The Multi Soft product line consists of tools for the development of
client-server, front-ending, and Internet based applications using a mainframe
or an Internet server. There are four key elements to the real world
development, delivery and production maintenance of these applications; and they
are all are supported by the Multi Soft product line. These include screen-based
access to mainframe data and processes; message-based access to mainframe and
server 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 Internet and 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 a host is supported by all of Multi
Soft's products.
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").
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").
The Multi Soft Product Line
- ---------------------------
The Multi Soft Product line consists of three product sets: the new product
COMRAD (Component Object Model Rapid Application Development) for 32 bit Windows
95, 98, and NT, the WCL product set and the INFRONT product. The WCL product set
runs under Windows 3x and 95 and includes WCL, WCL/ESO and WCL/SDO. The INFRONT
product is an integrated environment that runs under DOS and Windows.
COMRAD is a new component-based development tool released 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. COMRAD will allow you to build client server applications today and use the
same code for your Internet/Intranet applications tomorrow. The components
generated by COMRAD 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.
Be-
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cause 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.
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.
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.
Key Services
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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.
Clients
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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.
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Distributors and VARs
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To supplement its domestic sales and marketing efforts, Multi Soft uses
international distributors and VARs on a non-exclusive basis.
IBM
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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 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 As of January 31, 1999 the contract with IBM
was extended for one year and IBM is paying Multi Soft monthly maintenance.
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".
Employees
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The Company has eight full time employees, including two officers, one
support personnel, four technical and engineering personnel plus several
independent consultants, which work for the company on an as needed basis.
Competition
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The Company operates in a business composed of strong competitors, many of
which 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.
NetCast, Inc.
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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 $234,592 through January 31, 1999. During the
fiscal year ending January 31, 1999 Charles J. Lombardo devoted a substantial
amount of his time to NetCast activities. Multi Soft charged NetCast for this
time. Multi Solutions has guaranteed NetCast's debt to Multi Soft. The Board of
Directors consists of two officers, Charles Lombardo and Miriam Jarney. No
assurance can be made that NetCast will obtain the funding necessary to complete
its software and bring it to the marketplace.
Item 2. Properties
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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
$5,200 per year. The Company is responsible for all utilities.
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Item 3. Legal Proceedings
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The Company is not presently a party to any material litigation; however,
certain federal, state taxes, interest and penalties aggregating approximately
$17,000 remain unpaid at January 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders in the last quarter
of the Company's fiscal year ended January 31, 1999.
PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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(a) Market Information -- The Company's Common Stock and the Common Stock
Purchase Warrants (for one share of Common Stock) are traded 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 have not traded and hence not
priced.
Bid Prices
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Period - Fiscal Year 1998 High Low
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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
Period - Fiscal Year 1999 High Low
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First Quarter ending April 30, 1998 .21 .06
Second Quarter ending July 31, 1998 .175 .10
Third Quarter ending October 31, 1998 .10 .05
Fourth Quarter ending January 31, 1999 .05 .13
(b) Holders -- There were approximately 258 holders of record of the
Company's Common Stock and 48 holders of record of the Company's Common Stock
Purchase Warrants as of March 5, 1999 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).
(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.
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Issuance of Unregistered Securities
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Name Date Number
of Securities Issued
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HES Gift Trust (A) 3/15/98 100,000
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John Lowy (A) 3/15/98 12,500
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Charles Lombardo (A) 3/15/98 75,000
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Miriam Jarney (A) 3/15/98 100,000
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Joseph Poulshock (B) 4/27/98 16,667
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Howard Mendelson (B) 10/30/98 100,000
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Patricia McMahon (B) 10/30/98 100,000
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Sharon Jones (B) 10/30/98 10,000
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Elaine Bine (B) 10/30/98 15,000
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Harry Wingard (B) 10/30/98 25,000
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Miriam Jarney (A) 10/30/98 200,000
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Charles Lombardo (A) 10/30/98 200,000
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Loretta Messina (B) 10/30/98 25,000
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Bernard Deutsch (A) 10/30/98 50,000
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Jerome Feldmen (A) 10/30/98 50,000
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HES Gift Trust (A) 10/30/98 150,000
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Multi Solutions (A) 12/01/98 500,000
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(A) For services rendered
(B) Grant under the Companies Stock Grant Program
Item 6. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Results of Operations
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Fiscal Year Ended January 31, 1999 Compared to Fiscal Year Ended January 31,
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1998
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Revenues for the fiscal year ended January 31, 1999 were $805,655 as
compared to $901,450 in fiscal year 1998, a decrease of $95,795 (10.6%). This
decrease is primarily due to a decrease in revenues from maintenance fees from
$645,265 to $524,948, much of which came from the Company's largest customer.
The increase in license fees is primarily due to the increase in royalty
payments to the Company from IBM.
In fiscal 1999, Multi Soft's two principal sources of revenues were license
fees and maintenance fees which represented approximately 99.1% ($798,708) and
98.6% ($888,411) of revenues in fiscal 1998.
Management believes that the decrease in maintenance fees during the fiscal
year ended January 31, 1999 is due to the non-renewal of maintenance contracts
by customers.
Operating expenses decreased 11.7% from fiscal 1998 ($893,064) to fiscal
1999 ($788,777) primarily as a result of lower selling and administrative costs
offset by an increase in software development costs. The decrease in selling and
administrative costs is principally due to lower levels of salaries and related
costs.
Other income increased from $90,035 in fiscal 1998 to $134,873 in fiscal
1999. Consulting, rent revenue and administrative fees charged to NetCast are
included in the other income section in the amounts of $78,000 and $75,750 in
1999 and 1998, respectively.
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As a result of all of the foregoing, Multi Soft's net income in fiscal 1999
of $151,751 increased compared to its net income in 1998 of $98,421.
Major Customers
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In fiscal 1999, IBM accounted for 25% of total revenues. In fiscal 1998 IBM
accounted for 29% of total revenues.
Liquidity and Capital Resources
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At January 31, 1999, the Company had a working capital deficiency of
$(292,092) 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 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:
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Descriptions January 31, 1999 January 31, 1998
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Working capital (deficiency) ($292,092) ($369,345)
Current ratios .43:1 .22:1
Dividend Policy
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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.
Year 2000
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Many computer systems may 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. The client
development tools, such as VB, PB, and VC++ handles this. Therefore, these
development tools, not WCL, must address Year 2000 issues.
In addition, The Company's INFRONT products have built in support for Year
2000. Any date functions in use within an INFRONT 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, the SETUPSL command
can be used to handle the Year 2000.
Effect of Inflation
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Management believes that inflation has not had a material effect on its
operations for the periods presented.
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CAUTIONARY STATEMENT
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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" 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 cash flow
problems.
Item 7. Financial Statements
--------------------
The following financial statements are attached to this report and 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, 1999
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Balance Sheets - January 31, 1999 and 1998 F2, F3
Statements of Operations for Each of the Two Years in the
Period Ended January 31, 1999 F4
Statements of Changes in Stockholders' Equity (Deficiency) for
Each of the Two Years in the Period Ended January 31, 1999 F5
Statements of Cash Flows for Each of the Two Years in the
Period Ended January 31, 1999 F6
Notes to Financial Statements F7-F15
Schedules
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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
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Financial Disclosures.
----------------------
None
PART III
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
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Compliance with Section 16(a) of the Exchange Act
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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
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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 56, has been the Company's Chairman of the Board
of Directors, Chief Executive Officer, Chief Financial Officer and Treasurer
since January 1985. He has been MSI's Chief Executive Officer and 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 58, has been a Director, Executive Vice President and
Secretary of the Company since January 1985. She has been Executive Vice
President, Secretary 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 56, 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, 1999.
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 $100,000.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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ANNUAL COMPENSATION LONG TERM COMPENSATION
- ---------------------------------------------------------------- ---------------------------------------------------------
AWARDS PAYOUTS
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NAME & FISCAL SALARY ($) BONUS OTHER ANNUAL RESTRICTED OPTIONS LTIP ALL OTHER
PRINCIPLE YEAR ($) COMPENSATION STOCK SARS PAYOUTS COMPENSA-
POSITION ($) AWARD ($) ($) TION ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHARLES J. 1999 (A) $12,500 $0 (C) $34,550 $0 $0 $0 $0
LOMBARDO CEO 1998 (A) $60,000 $0 (D) $40,393 $0 $0 $0 $0
1997 $100,000 $0 $20,000 $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------------
MIRIAM JARNEY 1999 (B) $25,000 $0 (E) $16,000 $0 $0 $0 $0
EXEC. VP 1998 (B) $60,000 $0 $0 $0 $0 $0 $0
1997 $100,000 $0 $0 $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Accrued and unpaid to Charles J. Lombardo $0 for 1999 and $19,167 for prior
year
(B) Accrued and unpaid to Miriam Jarney $0 for 1999 and $10,000 for prior year
(C) Consisting of $19,950 in consulting fees and the Companies common stock
valued at $14,600
(D) Consulting fees
(E) The Companies common stock valued at $16,000
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME OPTIONS/SARS PERCENT OF TOTAL EXERCISE OR BASE EXPIRATION DATE
GRANTED OPTIONS/SARS GRANTED PRICE ($/SH)
YEAR TO EMPLOYEES IN FISCAL
- -----------------------------------------------------------------------------------------------------------
<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 UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
ACQUIRED ON REALIZED ($) OPTIONS/SARS AT SARS AT
NAME EXERCISE (#) FY-END (#) FY-END ($)
- -------------------------------------------------------------------------------------------------------------
<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.
-11-
<PAGE>
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 is which is automatically 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. Under Mr. Lombardo's contract he may assign any part of his salary to a
third party as a consulting fee.
Mr. Lombardo also is entitled to a salary from MSI of $25,000 per year,
which he agreed to forego since fiscal 1997.
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 is automatically 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.
During fiscal 1998, Mr. Lombardo and Ms. Jarney accrued a portion of their
salaries. In fiscal 1999 Mr. Lombardo and Mrs. Jarney did not accrue any portion
of their salaries. The balance due between both officers as of January 31, 1999
is $739,662 including deferred increases of $586,605.
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) 7,026,722 52%
4262 US ROUTE 1, MONMOUTH JUNCTION, NJ 08852
- ----------------------------------------------------------------------------------------------------
CHARLES J. LOMBARDO 7,463,387(1) 55%
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER, & TREASURER
1511 LAURIE LANE, YARDLEY, PA 19067
- ----------------------------------------------------------------------------------------------------
MIRIAM G. JARNEY 7,370,055(1) 54%
EXECUTIVE VICE PRESIDENT, SECRETARY, DIRECTOR
21 DOERING WAY, CRANFORD, NJ 07106
- ----------------------------------------------------------------------------------------------------
LARRY SPATZ 7,026,722(1)(2) 52%
DIRECTOR
SUITE 332, 401 EAST ILLINOIS ST., CHICAGO, IL 60611
- ----------------------------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS AND DIRECTORS
AS A GROUP (3 PERSONS) 7,806,720(1) 57%
- ----------------------------------------------------------------------------------------------------
</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.
-12-
<PAGE>
(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 7,026,722 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.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
As of January 31, 1999 the Company had 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% (9% at January 31, 1999). The
loan agreement provides for monthly payments of $1,500 of principal and interest
and the personal guarantee of the Company's Chairman. As of March 31, 1999, the
loan was paid off and Multi Soft is no longer indebted to this bank. During 1999
and 1998, the maximum amount of borrowings outstanding were $16,338 and $25,497,
respectively.
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.
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").
PART IV
-------
Item 13. Exhibits, Lists 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 (4)**
10.b Employment Agreement with Miriam G. Jarney (4)**
10.c Facility sublease (5)
10.d IBM Agreement executed October 1993*(5)
10.e IBM Agreement executed August 1994*(5)
10.f IBM Amendment executed May 15, 1995 (5)
10.g Copy of MSI's Non-Qualified Stock Option Plan, Stock Grant Program and
Employee Incentive Stock Option Plan ** (2)
10.h Amendments to MSI's Non-Qualified Stock Option and Stock Grant Program
** (3)
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 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.
(3) 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.
-13-
<PAGE>
(4) 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.
(5) 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.
-14-
<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 15, 1999 By: /s/ Charles J. Lombardo
------------------------
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
/S/ Charles J. Lombardo May 15, 1999
- ----------------------------
Charles J. Lombardo Chairman of the Board of Directors,
Chief Executive Officer, Financial
Officer, and Treasurer
/S/ Miriam Jarney May 15, 1999
- ----------------------------
Miriam Jarney Executive Vice President, Secretary,
and Director
/S/ Larry Spatz May 15, 1999
- ----------------------------
Larry Spatz Director
-15-
<PAGE>
STEWART W. ROBINSON
CERTIFIED PUBLIC ACCOUNTANT
67 WALL STREET - 5TH FLOOR
NEW YORK, NY 10005
TEL: 212-843-4100
FAX: 212-785-9414
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors
MULTI SOFT, INC.
I have audited the accompanying balance sheets of MULTI SOFT, INC. (a New Jersey
corporation and 52% owned subsidiary of Multi Solutions, Inc.) as of January 31,
1999 and 1998 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 our 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 our 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,
1999 and 1998 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 24, 1999
F1
<PAGE>
MULTI SOFT, INC.
52% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31 ,1999 and 1998
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 18,134 $ 29,093
Accounts Receivable (net of allowance
of $43,783 and $29,086 respectively) 130,656 57,025
Prepaid expenses and other current assets 13,385 20,799
----------- -----------
162,175 106,917
FURNITURE AND EQUIPMENT
Research and Development Equipment 8,868 8,869
Office furniture and other equipment 13,824 13,824
----------- -----------
22,692 22,693
Less: Accumulated Depreciation (12,250) (8,688)
----------- -----------
10,442 14,005
OTHER ASSETS
Capitalized software development costs 1,460,178 1,568,794
Less accumulated amortization (809,915) (939,942)
----------- -----------
650,263 628,852
Due from Solutions 448,039 422,239
Due from NetCast 234,592 155,251
----------- -----------
$ 1,505,511 $ 1,327,264
=========== ===========
F2
<PAGE>
MULTI SOFT, INC.
52 % owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' 1999 1998
----------- -----------
DEFICIENCY
CURRENT LIABILITIES
Loan payable to bank $ 796 $ 16,338
Note Payable 6,565 11,339
Accrued payroll -- 20,080
Payroll and other taxes payable 19,480 32,755
Accounts Payable, Accrued expenses and
other Current Liabilities 86,720 58,291
Accrued officer compensation 153,057 153,057
Deferred Revenues 187,648 191,820
----------- -----------
454,266 483,680
Deferred compensation due officer /shareholders 586,605 586,605
STOCKHOLDERS' DEFICIENCY
Common stock, authorized 30,000,000 shares
$.001 par value, issued and outstanding
13,509,473 (1999) and 11,780,306 (1998) 13,509 11,780
Additional paid-in capital, net of deferred
compensation $41,365 (1999) and $5,941 (1998) 5,986,055 5,931,876
Accumulated deficit (5,534,926) (5,686,677)
----------- -----------
464,639 256,979
$ 1,505,511 $ 1,327,264
=========== ===========
F3
<PAGE>
MULTI SOFT, INC
52% owned subsidiary of Multi Solutions, Inc.
STATEMENTS OF OPERATIONS
Years ended January 31, 1999 and 1998
1999 1998
------------ ------------
REVENUES
License fees $ 273,760 $ 243,146
Maintenance fees 524,948 645,265
Consulting and Other fees 6,947 13,039
------------ ------------
Total revenues 805,655 901,450
EXPENSES
Software development and technical support 241,383 258,584
Selling and administrative 547,394 634,480
------------ ------------
Total expenses 788,777 893,064
------------ ------------
Income from operations 16,878 8,386
OTHER INCOME (EXPENSE)
Other Revenues 144,391 90,839
Interest Expense (9,518) (804)
------------ ------------
Total other income 134,873 90,035
Net Income $ 151,751 $ 98,421
============ ============
Weighted average shares outstanding 12,068,722 11,780,306
============ ============
Income per share $ 0.01 $ 0.01
============ ============
F4
<PAGE>
<TABLE>
<CAPTION>
MULTI SOFT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Years ended January 31, 1999 and 1998 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, 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
Issuance of resticted common stock 1,729,167 1,729 89,370 (53,833) 37,266
Amortization of deferred compensation 18,643 18,643
Net Income 151,751 151,751
------------ ------------ ------------ ------------ ------------ ------------
Balance at January 31, 1999 13,509,473 $ 13,509 $ 6,027,421 $ (41,365) $ (5,534,926) $ 464,639
============ ============ ============ ============ ============ ============
</TABLE>
F5
<PAGE>
MULTI SOFT, INC.
52 % owned subsidiary of Multi Solutions, Inc.
STATEMENTS OF CASH FLOWS
Years ended January 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
Cash flows from operating activities
<S> <C> <C>
Net Income $ 151,751 $ 98,421
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 243,356 262,147
Changes in assets and liabilities
Due to / from Multi Solutions (25,800) 713
Due to/ from NetCast (79,341) (99,916)
Accounts receivable (73,631) (40,064)
Prepaid expenses and other current assets 7,416 (7,267)
Accrued payroll (20,080) 20,080
Note Payable (4,774) (4,165)
Payroll and other taxes payable (13,275) (5,317)
Accounts payable and accrued expenses 28,429 136
Accrued officer compensation -- 49,709
Deferred revenues (4,172) 23,409
--------- ---------
Net cash provided by operating activities 209,879 297,886
Cash flows from investing activities
Capital expenditures -- (916)
Capitalized software development costs (261,205) (275,874)
--------- ---------
Net cash used in investing activities (261,205) (276,790)
Cash flows from financing activities
Net repayments under loan and line of credit ageements (15,542) (9,159)
Amortization of stock grants 18,643 8,008
Issuance of capital stock 37,266 --
--------- ---------
Net cash provided (used) by financing activities 40,367 (1,151)
--------- ---------
NET INCREASE (DECREASE) IN CASH (10,959) 19,945
Cash at beginning of year 29,093 9,148
--------- ---------
Cash at end of year $ 18,134 $ 29,093
========= =========
</TABLE>
F6
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 and 1998
NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Multi Soft, Inc. "Company" was incorporated on January 29, 1985 under the
laws of the State of New Jersey. At January 31, 1999, the Company was 52.
0% 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 $151,751 in 1999 and $98,421
in 1998. In addition, at January 31, 1999, the Company's current
liabilities exceeded current assets by $292,092 and total assets exceeded
total liabilities by $464,639.
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 for each of the years ended January 31,
1999 and 1998 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.
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, 1999 and 1998 are $650,263 and $628,852
respectively.
F7
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 and 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
As of January 31, 1998, there no longer is 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 1999 and 1998, for all products, was $241,383 and
$258,584 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.
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 ($796 and
$16,338 at January 31, 1999 and 1998 respectively). Borrowings are
collateralized by the Company's accounts receivable and bear interest at
the bank's prime rate plus 2% (9.75% at January 31, 1999) As of March 31,
1999 the Company is in compliance with the terms of the agreement and the
balance has been paid in full.
During 1999 and 1998, the maximum amount of borrowings outstanding was
$16,338 and $25,497 respectively, the average borrowings were $8,567 and
$20,918, respectively, and the weighted average interest rates were 10.1%.
F8
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 and 1998
NOTE C - LOAN PAYABLE - Continued
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 $4.5 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.
NOTE E - STOCKHOLDERS' EQUITY
1. Stock Transactions
------------------
The expiration date of the Company's 714,012 outstanding warrants has been
extended to June 1, 1999.
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.
In December 1998, the Company issued 500,000 shares of common stock to
Multi Solutions, Inc. The transaction was valued at $.05 per share
($25,000). The effect of this transaction was to reduce indebtedness owed
to Multi Solutions, from approximately $33,000 to $7,000.
2. Option and Stock Grant Program
------------------------------
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,
1999, an aggregate of 957,001 shares have been issued pursuant to the Plan.
F9
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 and 1998
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
Stock grants issued to employees 291,667
Stock grants as of January 31, 1999 957,001
--------
As of January 31, 1999, employees were not fully vested in 291,667 of the
aforementioned stock grants. Amortization of deferred compensation for the
stock grants to employees was $18,643 and $8,009 for the years ended
January 31, 1999 and 1998, respectively.
3. Shares Issued to Officers as Compensation
-----------------------------------------
During the fiscal year ended January 31, 1999, the Company issued 300,000
shares of common stock to Miriam Jarney valued at an aggregate of $16,000
and 275,000 shares to Charles J. Lombardo valued at an aggregate of
$14,600.
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 $5,200 per month. Rental
expense under the lease aggregated approximately $62,400 and $59,450 for
the years ended January 31, 1999 and 1998, respectively.
In June 1995 the Company entered into a three-year noncancelable operating
lease for a color laser copier with monthly payments of $500 plus tax and
per copy charges through May 1998.
Future minimum lease payments under the noncancelable equipment operating
leases are as follows:
F10
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 and 1998
NOTE F - COMMITMENTS AND CONTINGENCIES - Continued
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 2003.
Year Ending January 31 Laser Color Total
Copier Copier
---------------------- -------- ------- -------
2000 $4,380 $ 6,000 $10,380
2001 4,380 6,000 10,380
2002 4,380 3,000 7,380
2003 3,285 - 3,285
------- ------- -------
$16,425 $15,000 $31,425
2. Employment Agreements
---------------------
The Company has employment agreements with two officers which provide
aggregate minimum annual compensation of $200,000 through July 1999, and
which are automatically renewed annually.
These officers relinquished unpaid salaries for the years ending January
31, 1999 and 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.
Mr. Lombardo and Ms. Jarney have agreed to forego this additional
compensation as of fiscal 1997
3. Payroll Taxes
-------------
Certain state and federal taxes, interest, and penalties in aggregating
approximately $17,000 were unpaid at January 31, 1999.
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 1999, one customer accounted for 25% of total revenue. In fiscal
1998, one customer accounted for 29% of total revenue.
NOTE H - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for the years ended
January 31, 1999 and 1998 are as follows:
1999 1998
---- ----
Cash paid during the year for Interest $9,518 $2,304
F11
<PAGE>
NOTE I - SOFTWARE LICENSING AGREEMENTS
1. Software Licensing Agreements
-----------------------------
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, 1999 and 1998, the Company recognized as
income $0 and $8,022 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 maintenance 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 January 31, 1999, the contract with IBM was extended for one year and
IBM is paying monthly maintenance of $7,000.
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
current fiscal year. The balance due from Multi Solutions at January 31,
1999 and 1998 was $448,039 and $422,239, respectively.
The Company provides certain services and office space to NetCast, Inc., as
subsidiary of Multi Solutions. The balance due from NetCast, Inc., for such
services as of January 31, 1999 was $234,592. Multi Solutions has
guaranteed the debt of NetCast to the Company.
F12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 18,134
<SECURITIES> 0
<RECEIVABLES> 187,824
<ALLOWANCES> (43,783)
<INVENTORY> 0
<CURRENT-ASSETS> 162,175
<PP&E> 22,692
<DEPRECIATION> (12,250)
<TOTAL-ASSETS> 1,505,511
<CURRENT-LIABILITIES> 454,266
<BONDS> 0
<COMMON> 13,509
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,505,111
<SALES> 805,655
<TOTAL-REVENUES> 805,655
<CGS> 788,777
<TOTAL-COSTS> 788,777
<OTHER-EXPENSES> (144,391)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,518
<INCOME-PRETAX> 151,751
<INCOME-TAX> 0
<INCOME-CONTINUING> 151,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151,751
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
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