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
For the fiscal year ended January 31, 2001
OR
[ ] TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-15976
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MULTI SOFT, INC
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(Name of Small business issuer in its charter)
New Jersey 22-2588030
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4262 US Route 1, Monmouth Junction, New Jersey 08852
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (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.[ ]
The Issuer's revenues for the fiscal year ended January 31, 2001 were $708,674
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average of the closing ask ($.065) and ($.05) bid price
of such stock, as of May 11, 2001 is $362,165, based upon ($.0575) multiplied by
the 6,298,522 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 May 11, 2001, is 13,709,477 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]
MULTI SOFT, INC.
Form 10-KSB
Year Ended January 31, 2001
Table of Contents
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Page
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PART I.........................................................................1
ITEM 1. BUSINESS..............................................................1
ITEM 2. PROPERTIES............................................................6
ITEM 3. LEGAL PROCEEDINGS.....................................................6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................6
PART II........................................................................7
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................................7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................8
ITEM 7. FINANCIAL STATEMENTS.................................................10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES............................................11
PART III......................................................................11
ITEM 10. EXECUTIVE COMPENSATION...............................................12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......15
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................15
PART IV.......................................................................16
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................16
SIGNATURES....................................................................17
SUPPLEMENTAL INFORMATION 18
FINANCIAL STATEMENTS F1
PART I
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Item 1. Business
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General
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We were incorporated in January 1985 as a wholly owned subsidiary of Multi
Solutions, Inc. As of the date of this report, we are a 51.3% owned subsidiary
of Multi Solutions.
We produce, market and maintain three communications front-ending,
client-server and cooperative processing technologies called:
o COMRAD, which stands for Component Object Model Rapid Application
Development, for 32 bit Windows 95, 98, and NT;
o The Windows Communications Library TM, commonly referred to as WCL,
for Windows 3x, 95, 98 and NT; and
o INFRONT for DOS.
See the discussion below under "Our Product Line" for more details on these
products.
OUR TECHNOLOGY
--------------
Our 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 our product line supports them
all:
o screen-based access to mainframe data and processes;
o message-based access to mainframe and server data and processes;
o integration of screen-based and message-based access to the mainframe
in the same application; and
o 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 our
products.
MESSAGE-BASED ACCESS TO MAINFRAME DATA AND PROCESSES allows companies to
create client-server applications, where they use the PC for the client portion
of the application, which includes all user interaction, dialogue flow and
access to local data, and they use the mainframe for the server portion of the
application, which includes managing database interaction, data integrity and
security). In this architecture, only data and messages are passed between the
PC and host. This results in a
1
streamlined and optimized production application. WCL's WCL/Enterprise Server
Option, commonly referred to as WCL/ESO, supports message-based access to the
mainframe.
INTEGRITY CONTROL AND DISTRIBUTION MANAGEMENT allows companies to use their
mainframe system as a central location to manage the integrity of the
workstation 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 workstation logic, the host also can be used to
manage the distribution of these changes. WCL's WCL/Software Distribution
Option, commonly referred to as WCL/SDO, supports integrity control and
distribution management.
OUR PRODUCT LINE
----------------
Our Product line consists of three product sets:
1. COMRAD for 32 bit Windows 95, 98, and NT;
2. The WCL product set for Windows 3x, 95, 98 and NT; and
3. INFRONT for DOS and Windows 3x and 95.
COMRAD
COMRAD is a component-based development tool released in July 1998. It
takes advantage of Microsoft's COM/DCOM (common object model/distributed common
object model) technology and it generates both components and complete
applications, not just applications as currently done by WCL. COMRAD allows you
to build client server applications today and use the same code for your
Internet/Intranet applications tomorrow. COMRAD generated components that
interface with the mainframe can be used both by Visual Basic and your Internet
browsers, on individual workstations or Windows NT servers, depending on the
needs of your application. Microsoft's Internet Information Server and Active
Server Pages provide persistence and security.
WCL
WCL is a toolkit and a set of dynamic linked libraries, commonly referred
to as DLLs, which work in conjunction with Windows 3270 emulation products to
provide easy integration of data and processing between local area networks,
commonly referred to as PC/LANs, and the mainframe. Any of the standard Windows
development tools such as PowerBuilder, Visual Basic, and C++, can be used with
WCL to create the client application because WCL is an open architecture. WCL
supports the development of GUI front-ends -- client-server applications that
use the mainframe as a server and for integrity control and distribution
management. The WCL toolkit provides an automated development environment that
includes, among other things:
o a screen capture mechanism,
o screen maintenance and
o a screen matching facility.
In addition, it provides code generation to remove the complexity and
development effort associated with building GUI front-end applications. We also
have a 32-bit version of our WCL product for Windows 95 and Windows NT.
2
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 an IBM mainframe operating environment called CICS.
Client-server applications developed using WCL/ESO have the added advantage of
using a company's existing mainframe skills and infrastructure, including:
o security,
o data integrity,
o backup and
o recovery and disaster recovery.
WCL/SDO is a WCL/ESO application created to centralize control and manage
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 that 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
INFRONT is a comprehensive and integrated development environment for
building PC front-ends and client-server applications with the mainframe. The
development environment includes:
o an intelligent forms subsystem with
o screen capture,
o screen painting,
o editing and validation assignment facilities and
o a data dictionary;
o a fourth generation language, commonly referred to as 4GL;
o an intelligent editor with language templates and reusable code
library;
o a PC-resident database, including database maintenance facilities such
as sorting and reorganizing;
o sophisticated debugging facilities, including a source-level language
debugger; and
o other utilities such as code libraries and forms libraries.
3
KEY SERVICES PROVIDED BY US
---------------------------
We offer training and consulting services designed to help our 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. We also offer contract technical consulting services.
TRAINING SERVICES include basic and advanced product training, as well as
courses such as "Design and Development Methodologies," which cover 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
Multi Soft's product line.
CONTRACT TECHNICAL CONSULTING SERVICES include services related to the
technical expertise of our staff. In the past, we have provided technical
consulting services on a contract basis to our affiliate, NetCast, and we
currently are providing technical consulting services on a contract basis to our
affiliate, FreeTrek, Inc. We hope to provide such services to unaffiliated
companies as well.
CLIENTS
Our past and current client base spans over 40,000 users throughout
approximately 125 Fortune 500 companies. Customers that have licensed our
products include*:
o American Cyanamid, o EDS,
o Bell Atlantic, o Exxon,
o ITT Hartford, o General Electric,
o Honda, o Hilton,
o Con Edison, o Lever Brothers,
o Hoechst, o Teachers Insurance,
o American International Group, o Chicago Northwestern and
o Ciba Geigy, o US West Business.
o Comdisco,
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* We cannot confirm which of these clients is actively using our products.
IN-HOUSE MARKETING AND SALES
Charles Lombardo and Miriam Jarney, two of our officers and directors, are
responsible for sales and marketing of our products and services. At present,
in-house sales are generally made through telemarketing. If we obtain additional
funds from operations or otherwise, we plan to further market our products and
services through advertisements in trade publications and targeted mailings. No
assurance can be given that we will have sufficient funds to increase our
in-house sales and marketing activities.
4
DISTRIBUTORS AND VARS
---------------------
Multi Soft uses international distributors and VARs on a non-exclusive
basis to supplement its domestic sales and marketing efforts.
IBM
In September 1994, we entered into an international software licensing
agreement with IBM's Personal Communications 3270 division. This agreement
allows IBM to logo and market a P-Comm specific version of certain of our
products. This IBM agreement was effective for a term of two years and was
renewable by IBM for two more one-year periods. The Agreement was terminable by
IBM or us 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
paid us monthly maintenance and royalties through December 1998. On January 31,
1999, the contract with IBM was extended for one year and IBM paid us monthly
maintenance through December 1999. The contract was not extended beyond this
one-year period. As of the date of this report, IBM has not renewed the
contract.
Since fiscal 1994, IBM has represented a significant percentage of our
revenues. The loss of revenues from IBM will have a materially adverse effect on
our financial condition. However, we have offset the loss of revenues from IBM
with revenues generated from our affiliate, FreeTrek, for work related to the
prior and ongoing development, maintenance and enhancement of FreeTrek's
products. For more details about the effect of the loss of IBM as a customer,
see the discussion in Part II. Item 6. "Management's Discussion and Analysis of
Financial Condition and Results of Operations." For more details about the
business of FreeTrek, see the discussion below under the caption "FreeTrek,
Inc."
Employees
---------
We have eight full time employees, including two officers, one support
personnel, four technical and engineering personnel plus several independent
consultants, which work for us on an as needed basis. From time to time our
officers and employees devote time to our parent, Multi Solutions, and Multi
Solution's other subsidiaries.
Competition
-----------
We operate 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 we do. In addition, many competitors have more
extensive facilities than those which now or in the foreseeable future will
become available to us.
We compete directly with computer manufacturers, large computer service
companies and independent software suppliers. We believe that hundreds of firms
that manufacture software applications products are significant competitors, and
we are one of the smaller entities in the field.
NetCast, Inc.
-------------
NetCast, Inc. is a subsidiary of Multi Solutions and was incorporated in April
of 1996 to develop new Internet technologies to create a series of products and
businesses that would extend the power of advertising on the Internet. We
provided services and office space to NetCast at cost for which we have
5
billed approximately $240,000 through January 31, 2000. We charged NetCast for
this time. Multi Solutions has guaranteed NetCast's debt to us. In January 2000,
Multi Solutions decided to discontinue any further operations of NetCast.
FreeTrek, Inc.
--------------
FreeTrek, Inc. (formerly FreeTrek.com, Inc.) is a majority owned subsidiary
of Multi Solutions that was incorporated under the laws of the state of New
Jersey in April 1999. FreeTrek is a business to business to consumer affinity
group service company, commonly referred to as a B2B2C affinity group service
company, that markets its products and services to businesses, referred to as
sponsors, that want to create an Internet community of their current and future
customers. FreeTrek refers to this as a virtual private community or VPC.
FreeTrek's program is a complete turnkey service for a sponsor, which creates
and maintains the sponsor's VPC on the Internet. FreeTrek has not made any sales
to date.
We provided services and office space to FreeTrek at cost for which we have
billed approximately $106,000 and $193,000 for the year ended January 31, 2001
and 2000, respectively. Since FreeTrek's incorporation, Charles J. Lombardo, our
chairman, chief executive officer, chief financial officer and treasurer, has
devoted and will continue to devote a substantial amount of his time to FreeTrek
activities. We charge FreeTrek for this time.
Item 2. Description of Properties
-------------------------
We sublease 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 our 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 was increased from
$5,200 to $5,600 beginning in November 1999. We are responsible for all
utilities.
Item 3. Legal Proceedings
-----------------
We are not presently a party to any material litigation; however, certain
federal, state taxes, interest and penalties aggregating approximately $13,000
remain unpaid at January 31, 2001.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of our security holders in the last
quarter of our fiscal year ended January 31, 2001.
6
PART II
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Item 5. Market for Common Equity and Related Stockholder Matters.
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(a) Market Information -- Our 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 closing bid prices for
our common stock on a quarterly basis for the past two fiscal years as reported
by the Pink Sheets LLC (which reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions).
Bid Prices
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Period - Fiscal Year 2000 High Low
---------------------------------------------------------------------------
First Quarter ending April 30, 1999 .16 .07
Second Quarter ending July 31, 1999 .105 .06
Third Quarter ending October 31, 1999 .10 .06
Fourth Quarter ending January 31, 2000 .875 .06
Period - Fiscal Year 2001 High Low
---------------------------------------------------------------------------
First Quarter ending April 30, 2000 .94 .25
Second Quarter ending July 31, 2000 .36 .15
Third Quarter ending October 31, 2000 .44 .125
Fourth Quarter ending January 31, 2001 .16 .03
(b) Holders -- There were approximately 244 holders of record of the our
common stock as of May 9, 2001 inclusive of those brokerage firms and/or
clearing houses holding our securities for their clientele (with each such
brokerage house and/or clearing house being considered as one holder).
(c) Dividends -- We have not paid or declared any dividends upon our common
stock since inception and, by reason of our present financial status and our
contemplated financial requirements, we do not contemplate or anticipate paying
any dividends upon our common stock in the foreseeable future.
7
Issuance of Unregistered Securities
-----------------------------------
We did not issue any securities during the last quarter of the year ended
January 31, 2001 and all prior issuances during that fiscal year were reported
in our quarterly reports on form 10-QSB.
Item 6. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
---------------------
Results of Operations
---------------------
Fiscal Year Ended January 31, 2001 Compared to Fiscal Year Ended January 31,
--------------------------------------------------------------------------------
2000
----
We generated revenues for the fiscal year ended January 31, 2001 of
$708,674 compared to revenues of $822,162 in fiscal year 2000. We believe that
the decrease of $113,488, or approximately 13.8%, was due primarily to a
decrease in our license and maintenance fees offset in part by increases in
consulting fees, primarily to our affiliate, Freetrek. Com. License fee revenue
decreased $91,356, or approximately 51.6%, and maintenance fees decreased
$307,524, or approximately 69.1%. Consulting and other fees, primarily from our
affiliate, Freetrek increased $285,392, or approximately 142.7%.
Please note that we have included income derived from consulting and
administrative charges to our affiliate Freetrek in the amount of $423,033 in
revenues for the fiscal year ended January 31, 2001. Previously this income was
reported as other income in the Statement of Operations. We have restated our
Statement of Operations for the fiscal year ended January 31, 2000 to reflect
this change. As a result of this restatement, income derived from consulting and
administrative charges to Freetrek in the amount of $193,000 are included in
revenues for the fiscal year ended January 31, 2000.
Our principal sources of revenues were maintenance fees and consulting fees
which represented approximately 87.9% or $622,931 of revenues for the fiscal
year ended January 31, 2001. Maintenance fees and consulting fees represented
approximately 78.5% or $645,063 for the fiscal year ended January 31, 2000.
We believe that the overall decrease in licensing fees was due primarily to
a reduction in software sales. We believe that the decrease in maintenance fees
was due to the non-renewal of older maintenance contracts by customers. We
believe that the increase in consulting and other fees was due to charges for
consulting and administrative fees to our affiliate Freetrek. See the discussion
below under "Major Customers."
Our operating expenses were $910,473 for the fiscal year ended January 31,
2001 compared to $729,377 for the fiscal year ended January 31, 2000, an
increase of $181,096, or approximately 24.8%. We believe that the increase was
primarily due to costs associated with consulting services provided to our
affiliate Freetrek as well as higher selling and administrative costs charged to
operations for the fiscal year ended January 31, 2001.
As a result of all of the foregoing, we incurred a net loss for the fiscal
year ended January 31, 2001 of $201,799 compared to our net income of $93,981
for the fiscal year ended January 31, 2000, a decline of $295,780.
8
Major Customers
---------------
In Fiscal 2001, no individual customer accounted for a significant portion of
revenues. In fiscal 2000, IBM accounted for 14% of our total revenues prior to
restatement of revenues from consulting and administrative charges to our
affiliate, Freetrek. After restatement, IBM accounted for 10.7% of revenues. IBM
extended its contract with us through December 31, 1999; however, IBM has not
renewed the contract. The loss of revenues from IBM will have a materially
adverse effect on our financial condition. We have offset the loss of revenues
from IBM with revenues generated from our affiliate, FreeTrek, for work related
to the prior and ongoing development, maintenance and enhancement of FreeTrek's
products. However, FreeTrek is a development stage company and, although it is
marketing its products and services, it has yet to make its first sale. Fees
paid by FreeTrek have come from the proceeds of private placements of FreeTrek's
securities and of Multi Solutions' securities. If FreeTrek is unable to generate
substantial revenues or continue to raise funds, revenues received by us from
FreeTrek most likely will decrease and eventually cease. For more details about
our contract with IBM, see the discussion in Part I. Item 1. "Description of
Business."
Liquidity and Capital Resources
-------------------------------
At January 31, 2001, we had a working capital deficiency of ($215,932) and
we continue to experience cash flow problems.
We have taken various steps to correct this situation, including:
o extending our product line to operate within the Internet environment;
o performing work for our affiliate, FreeTrek, related to the prior and
ongoing development, maintenance and enhancement of FreeTrek's
products; and
o performing contract consulting services for others.
We intend to remain a technology provider of products and services 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 we obtain
additional funds from operations or otherwise, we plan to expand in-house
marketing activities by advertising in trade publications and by conducting
targeted mailing. For more details, see "Part I. Item 1. Description of Business
- In-House Marketing and Sales."
Working Capital and Current Ratios:
-----------------------------------
Descriptions January 31, 2001 January 31, 2000
---------------------------------------------------------------------------
Working capital (deficiency) ($215,932) ($175,162)
Current ratios 0.38:1 0.53:1
Dividend Policy
---------------
We have not declared or paid any dividends on our common stock since
inception and we do not anticipate that we will be declaring or paying cash
dividends in the foreseeable future. We intend to
9
retain earnings, if any, to finance the development and expansion of our
business. Future dividend policy will be subject to the discretion of our Board
of Directors and will be contingent upon future earnings, if any, our financial
condition, capital requirements, general business conditions and other factors.
Therefore, we cannot assure that dividends of any kind will ever be paid.
Effect of Inflation
-------------------
We believe that inflation has not had a material effect on our operations
for the periods presented.
CAUTIONARY STATEMENT
--------------------
This annual report on form 10-KSB contains certain forward-looking
statements regarding, among other things, our anticipated financial and
operating results and those of our subsidiaries. For this purpose,
forward-looking statements are any statements contained in this report 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, we are including this cautionary
statement identifying important factors that could cause our or our
subsidiaries' actual results to differ materially from those projected in
forward looking statements made by, or on behalf of, us. These factors, many of
which are beyond our control or the control of our subsidiaries, include our
ability to:
o continue to receive royalties from our existing licensing and
consulting arrangements,
o develop additional marketable software and technology,
o compete with larger, better capitalized competitors, and
o 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, 2001
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Balance Sheets - January 31, 2001 and 2000 F2
Statements of Operations for Each of the Two Years in the
Period Ended January 31, 2001 F4
Statements of Changes in Stockholders' Deficiency for Each of the Two
Years in the Period Ended January 31, 2001 F5
10
Statements of Cash Flows for Each of the Two Years in the Period Ended
January 31, 2001 F6
Notes to Financial Statements F7
Schedules
---------
All schedules 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.
----------------------
There have been no changes in, or disagreements with our independent
accountants with respect to accounting and/or financial disclosure, during the
past two fiscal years.
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
Our directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Our 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 of our officers and directors
is as follows:
CHARLES J. LOMBARDO, age 58, has been our Chairman of the Board of
Directors, Chief Executive Officer, Chief Financial Officer and Treasurer since
January 1985. He has been Multi Solution'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
11
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 60, has been our Executive Vice President and
Secretary and a member of our Board of Directors since January 1985. She has
been Executive Vice President, Secretary and a Director of Multi Solutions 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.
LARRY SPATZ, age 58, as been a member of our Board of Directors 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 nightclub 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 our knowledge, based solely on a review of such materials as are required by
the Securities and Exchange Commission, none of our officers, directors or
beneficial holders of more than ten percent of our issued and outstanding shares
of Common Stock has 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,
2001, except that Miriam Jarney failed to timely file a Form 5 with regard to
the gifting of shares to her daughter.
Item 10. Executive Compensation
----------------------
The following table shows all the cash compensation paid or to be paid by
us or our 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 $100,000.
12
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------------------ ---------------------------------------------------
AWARDS PAYOUTS
------------------------------------------------------------ ----------------------- -----------------------
NAME & FISCAL SALARY ($) BONUS OTHER ANNUAL RESTRICTED OPTIONS LTIP ALL OTHER
PRINCIPLE YEAR ($) COMPENSATION STOCK AWARD SARS PAYOUTS COMPENSATION
POSITION ($) ($) ($) ($)
------------------------------------------------------------------------------------------------------------------
CHARLES J. 2001 $50,000 $0 (B) $ 4,167 $0 $0 $0 $0
LOMBARDO CEO 2000 $54,167 $0 (B) $16,700 $0 $0 $0 $0
1999 $12,500 $0 (A) $34,550 $0 $0 $0 $0
------------------------------------------------------------------------------------------------------------------
MIRIAM JARNEY 2001 $54,167 $0 $0 $0 $0 $0 $0
EXEC. VP 2000 $54,167 $0 $0 $0 $0 $0 $0
1999 $25,000 $0 (C) $16,000 $0 $0 $0 $0
------------------------------------------------------------------------------------------------------------------
(A) Consisting of $19,950 in consulting fees and common stock valued at
$14,600.
(B) Consulting fees.
(C) Common stock valued at $16,000.
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------------------------------
NAME OPTIONS/SARS PERCENT OF TOTAL OPTIONS/SARS EXERCISE OR BASE EXPIRATION
GRANTED GRANTED TO EMPLOYEES IN FISCAL YEAR PRICE ($/SH) DATE
----------------------------------------------------------------------------------------------------------
CHARLES J. LOMBARDO -0- - - -
----------------------------------------------------------------------------------------------------------
MIRIAM JARNEY -0- - - -
----------------------------------------------------------------------------------------------------------
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:
13
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
-----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS/SARS AT OPTIONS/SARS
NAME EXERCISE (#) ($) FY-END (#) AT FY-END ($)
-----------------------------------------------------------------------------------------------------------
CHARLES J. LOMBARDO -0- -0- -0- -0-
-----------------------------------------------------------------------------------------------------------
MIRIAM JARNEY -0- -0- -0- -0-
-----------------------------------------------------------------------------------------------------------
Directors' Compensation
-----------------------
Our directors are not compensated for acting in their capacity as
directors. Our directors are reimbursed for their accountable expenses incurred
in attending meetings and conducting their duties.
Employment Agreements
---------------------
On July 14, 1989, we entered into a five-year employment agreement with our
Chairman of the Board and Chief Executive Officer, Charles J. Lombardo, which is
which is automatically renewed for successive periods unless terminated by us on
twelve months notice or by Mr. Lombardo on six months notice. Mr. Lombardo is
our Chairman of the Board, Chief Executive Officer, Chief Financial Officer and
Treasurer. 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 we do 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 our 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 Multi Solutions of $25,000
per year, which he has agreed to forego since fiscal 1997.
On August 1, 1989, we entered into a five-year employment agreement with
Miriam Jarney, Executive Vice-President and a Director of both Multi Soft and
Multi Solutions, which is automatically renewed for additional periods, unless
terminated by us 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 our 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 we do 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. The balance due between both officers as of January 31, 2001 is
$729,647 including deferred increases of $586,605.
14
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT -- The number and percentage of shares of our
common stock owned of record and beneficially by each owner of 5% or more of our
common stock, each of our officers and directors and by all of our officers and
directors as a group are set forth on the chart below.
--------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL
OWNERSHIP
--------------------------------------------------------------------------------------------------------
MULTI SOLUTIONS (1) 7,026,722 51.3%
4262 US ROUTE 1, MONMOUTH JUNCTION, NJ 08852
--------------------------------------------------------------------------------------------------------
CHARLES J. LOMBARDO 7,210,955(1) 52.6%
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER, & TREASURER
1511 LAURIE LANE, YARDLEY, PA 19067
--------------------------------------------------------------------------------------------------------
MIRIAM G. JARNEY 7,336,722(1) 53.5%
EXECUTIVE VICE PRESIDENT, SECRETARY, DIRECTOR
21 DOERING WAY, CRANFORD, NJ 07106
--------------------------------------------------------------------------------------------------------
LARRY SPATZ 7,026,722(1)(2) 51.3%
DIRECTOR
SUITE 332, 401 EAST ILLINOIS ST., CHICAGO, IL 60611
--------------------------------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (3 PERSONS) 7,410,955(1) 54.1%
--------------------------------------------------------------------------------------------------------
* 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 Multi Solutions. Therefore, together with the other directors
of Multi Solutions, they share the voting power of the Multi Soft shares
owned by Multi Solutions, and the shares owned by Multi Solutions have been
deemed to be owned by our officers and directors. The shares listed as
owned by Charles J. Lombardo, Miriam Jarney and Larry Spatz include the
7,026,722 shares owned by Multi Solutions.
(2) Excludes shares owned beneficially by a family trust of which Mr. Spatz's
wife is one of the beneficiaries. Mr. Spatz has confirmed to us 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
----------------------------------------------
Although there is no written agreement between Multi Solutions and us
granting Multi Solutions preemptive rights with regard to Multi Solutions'
majority ownership of our common stock, in practice, Multi Solutions has and
plans to continue to acquire sufficient shares of our common stock to assure its
continued majority ownership.
15
We sublease our office space from C&S Consulting, Inc., a company owned by
our Chairman and his wife. For more information, see "Part I. Item 2.
Description of Properties."
PART IV
-------
Item 13. Exhibits, Lists and Reports on Form 8-K.
---------------------------------------
Exhibits
--------
3.a Certificate of Incorporation and Certificate of Correction (1)
3.b By-Laws (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 Multi Solutions' Non-Qualified Stock Option Plan, Stock Grant Program
and Employee Incentive Stock Option Plan (2)
10.h Amendments to Multi Solutions' Non-Qualified Stock Option and Stock
Grant Program (3)
-------------------------
* Certain information contained in these exhibits has been omitted and filed
separately with the Commission.
(1) Previously filed as an Exhibit to our 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 Multi Solutions' 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 Multi Solutions' 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.
(4) Previously filed as an Exhibit to our 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 our 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, 2001.
16
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 11, 2001 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 11, 2001
--------------------------
Charles J. Lombardo Chairman of the Board of Directors,
Chief Executive Officer, Financial
Officer, and Treasurer
/S/ Miriam Jarney May 11, 2001
--------------------------
Miriam Jarney Executive Vice President, Secretary,
and Director
/S/ Larry Spatz May 11, 2001
--------------------------
Larry Spatz Director
17
SUPPLEMENTAL INFORMATION
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
Not Applicable.
18
STEWART W. ROBINSON
CERTIFIED PUBLIC ACCOUNTANT
70-09 AUSTIN STREET, SUITE 206
FOREST HILLS, NY 11375
TEL: 718 793-0500
FAX: 718 793-7529
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
-------------------------------------------------
To the Board of Directors
MULTI SOFT, INC.
I have audited the accompanying balance sheets of MULTI SOFT, INC. (a New Jersey
corporation and 51.3% owned subsidiary of Multi Solutions, Inc.) as of January
31, 2001 and 2000 and the related statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for 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,
2001 and 2000 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 suffered a loss from operations and has
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 amounts and classifications of liabilities that might result
should the Company be unable to continue as a going concern.
STEWART W. ROBINSON
New York, New York
April 25, 2001
- F1 -
MULTI SOFT, INC.
a 51.3% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31, 2001 and 2000
2001 2000
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ -- $ 13,205
Accounts Receivable (net of allowance
of $49,212 and $37,486 for 2001 and 2000 respectively) 110,224 139,610
Prepaid expenses and other current assets 21,675 44,991
------------ ------------
Total current assets 131,899 197,806
FURNITURE AND EQUIPMENT
Research and Development Equipment 8,868 8,868
Office furniture and other equipment 26,575 13,824
------------ ------------
35,443 22,692
Less: Accumulated Depreciation (19,999) (15,439)
------------ ------------
15,444 7,253
OTHER ASSETS
Capitalized software development costs 1,512,489 1,371,387
Less accumulated amortization (892,588) (712,776)
------------ ------------
619,901 658,611
Due from Solutions 335,559 448,039
Due from Freetrek 7,227
Due from NetCast -- Note H 234,592 234,592
------------ ------------
$ 1,344,622 $ 1,546,301
============ ============
See notes to financial statements
-F2-
MULTI SOFT, INC.
a 51.3% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31, 2001 and 2000
LIABILITIES AND STOCKHOLDERS' 2001 2000
------------ ------------
EQUITY
CURRENT LIABILITIES
Accrued payroll $ 14,783 $ 14,783
Payroll and other taxes payable 18,497 19,048
Accounts Payable, Accrued expenses and
other Current Liabilities 66,295 50,215
Accrued officer compensation 143,042 161,390
Deferred Revenues 105,214 127,532
------------ ------------
Total current liabilities 347,831 372,968
DEFERRED COMPENSATION DUE OFFICERS/SHAREHOLDERS 586,605 586,605
COMMITMENTS AND CONTINGENCIES -- Note E
STOCKHOLDERS' EQUITY
Common stock, authorized 30,000,000 shares
$.001 par value, issued and outstanding
13,709,477 in 2001 and 2000 13,709 13,709
Additional paid-in capital, net of deferred
compensation $25,257 in 2000 6,039,221 6,013,964
Accumulated deficit (5,642,744) (5,440,945)
------------ ------------
410,186 586,728
$ 1,344,622 $ 1,546,301
============ ============
See notes to financial statements
-F3-
MULTI SOFT, INC
a 51.3% owned subsidiary of Multi Solutions, Inc.
STATEMENTS OF OPERATIONS
Years ended January 31, 2001 and 2000
(As Restated)
2001 2000
------------ ------------
REVENUES
License fees $ 85,743 $ 177,099
Maintenance fees 137,468 444,992
Consulting and Other fees 485,463 200,071
------------ ------------
Total revenues 708,674 822,162
EXPENSES
Software development and technical support 404,131 228,944
Selling and administrative 506,342 500,433
------------ ------------
Total expenses 910,473 729,377
------------ ------------
(Loss) Income from operations (201,799) 92,785
OTHER INCOME (EXPENSE)
Interest -- 1,196
------------ ------------
Total other income -- 1,196
Net (loss) income $ (201,799) $ 93,981
============ ============
Weighted average shares outstanding 13,709,477 13,542,806
============ ============
(Loss) income per share $ (0.02) (a)
============ ============
(a) less than $.01 per share
See notes to financial statements
-F4-
MULTI SOFT, INC.
a 51.3% owned subsidiary of Multi Solutions, Inc.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended January 31, 2001 and 2000
Common Stock Total Total
-------------------------- paid in Deferred Accumulated stockholders
Shares Amount capital Compensation deficit equity
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1999 13,509,477 $ 13,509 $ 6,027,421 ($ 41,365) ($5,534,926) $ 464,639
Issuance of restricted common stock 200,000 200 11,800 (12,000) --
Amortization of deferred compensation 28,108 28,108
Net Income 93,981 93,981
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1999 13,709,477 13,709 6,039,221 (25,257) (5,440,945) 586,728
Amortization of deferred compensation 25,257 25,257
Net Loss (201,799) (201,799)
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 2000 13,709,477 $ 13,709 $ 6,039,221 $ 0 ($5,642,744) $ 410,186
=========== =========== =========== =========== =========== ===========
See notes to financial statements
-F5-
MULTI -SOFT, INC.
a 51.3% owned subsidiary of Multi Solutions, Inc.
STATEMENTS OF CASH FLOWS
Years ended January 31, 2001 and 2000
2001 2000
---------- ----------
Cash flows from operating activities
Net Income $ (201,799) $ 93,981
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 184,373 230,362
Changes in assets and liabilities
Due to / from Multi Solutions 112,480 --
Due to/ from Freetrek (7,227)
Accounts receivable 29,386 (8,954)
Prepaid expenses and other current assets 23,316 (31,606)
Accrued payroll -- 14,783
Note Payable -- (6,565)
Payroll and other taxes payable (551) (432)
Accounts payable and accrued expenses 16,079 (36,508)
Accrued officer compensation (18,348) 8,333
Deferred revenues (22,318) (60,116)
---------- ----------
Net cash provided by operating activities 115,391 203,278
Cash flows from investing activities
Capital expenditures (12,751)
Capitalized software development costs (141,102) (235,520)
---------- ----------
Net cash used in investing activities (153,853) (235,520)
Cash flows from financing activities
Net repayments under loan and line of credit agreements -- (796)
Amortization of stock grants 25,257 28,109
---------- ----------
Net cash provided by financing activities 25,257 27,313
---------- ----------
NET (DECREASE) IN CASH (13,205) (4,929)
Cash at beginning of year 13,205 18,134
---------- ----------
Cash at end of year $ -- $ 13,205
========== ==========
See notes to financial statements
-F6-
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 2001 and 2000
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, 2001, the Company was 51.3
% owned by Multi Solutions, Inc. ("Solutions"). The Company is principally
involved in the design, production and delivery of computer applications
development software for sale primarily 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
was adversely affected in the past year by significant losses from
operations. As of January 31, 2001, the Company's current liabilities
exceeded current assets by $215,932 and a net loss of $201,799 was incurred
for the year then ended. Additionally, since January 31, 2001 (for the
quarter ended April 30, 2001), revenues from license fees and maintenance
contracts have declined approximately 55% from the quarter ended April 30.
2000, raising doubt that the Company will recover its investment in
software development costs ($619,901 as of January 31, 2001 - see note B).
The Company intends to market its products, control operating costs and
broaden its product base through enhancements of products. Additionally,
Solutions' subsidiary, FreeTrek, Inc. ("FreeTrek") provided additional
income and liquidity to support Solutions, which has enhanced Solutions'
ability to support the Company financially. The Company also provides
consulting and administrative services to FreeTrek, providing additional
income and cash flow to defray operating costs.
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 $4,560 and $3,187 for the years ended January 31,
2001 and 2000 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 60-month period, the capitalized software
costs for its Windows-based products. The Company's Windows products are
compatible with Windows 98, 2000 and NT. The Company's software
-F7-
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 2001 and 2000
engineers are continually modifying and enhancing the existing software
products and developing new versions. Un-amortized costs relating to
Windows products as of January 31, 2001 and 2000 are $619,901 and $658,611
respectively.
Amortization expense for 2001 and 2000, for all products, was $179,812 and
$228,944 respectively.
3. Revenue Recognition
-------------------
In accordance with Statement of Position 97-2, "Software Revenue
Recognition" (SOP 97-2), the Company recognizes 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 were
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 or loss 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.
-F8-
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 2001 and 2000
NOTE C - 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 $4.7 million. These losses expire at various dates
through 2021. Therefore, there is no provision for income taxes.
Under the liability method specified by SFAS No 109, "Accounting for Income
Taxes", 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. Due
to the aforementioned net operating loss carryovers, there are no deferred
or current tax expense, tax assets or tax liabilities.
NOTE D - STOCKHOLDERS' EQUITY
1. Stock Transactions
------------------
In the past, the Company had entered into various transactions with
Solutions, which adjusted inter-company debt through the issuance of common
stock of the respective companies. There have been no transactions of that
nature during the reporting period of these financial statements.
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. Through January
31, 2001, an aggregate of 1,000,000 shares had been issued pursuant to the
Plan.
-F9-
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 2001 and 2000
Amortization of deferred compensation for the stock grants to employees was
$26,257 and $28,108 for the years ended January 31, 2001 and 2000,
respectively.
NOTE E - 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, during
fiscal year 2000 the rental amount was increased to $5,600 per month.
Rental expense under the lease aggregated approximately $67,200 and $62,400
for the years ended January 31, 2001 and 2000 respectively.
The Company is a party to 2 equipment operating leases providing for the
following aggregate minimum payments:
Year Ending January 31 Laser Color Total
Copier Copier
---------------------- ---------- ---------- ----------
2001 $ 4,380 $ 6,000 $ 10,380
2002 4,380 3,000 7,380
2003 3,285 - 3,285
---------- ---------- ----------
$ 12,045 $ 9,000 $ 21,045
========== ========== ==========
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, Charles Lombardo and Miriam Jarney, have each relinquished
unpaid salaries for the years ended January 31, 2001 and 2000 as follows:
Year Ended January 31 Charles Miriam Total
Lombardo Jarney Relinquished
Salaries
--------------------- ---------- ---------- -------------
2001 $ 150,000 $ 145,833 $295,833
2000 $ 145,833 $ 145,833 $291,666
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 since fiscal 1997.
3. Payroll Taxes
-------------
A state taxing authority has asserted a claim against the Company in the
amount of approximately $36,000. Management believes that only a small
portion has merit and intends to vigorously contest the claim. The
financial statements include a reserve of $13,000 against this claim, which
management believes is substantially higher than the expected settlement
amount.
-F10-
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 2001 and 2000
4. Litigation
----------
The Company and its parent, Multi Solutions, Inc. have been from time to
time parties to legal actions arising in the normal 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 F - MAJOR CUSTOMERS
In fiscal 2001, no individual customer accounted for a significant portion
of revenues. In fiscal 2000, one customer accounted for 14% of total
revenues.
NOTE G - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for the years ended
January 31, 2001 and are as follows:
2001 2000
---- ----
Cash paid during the year for interest $0 $0
NOTE H - 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. Multi Soft received $112,480 in payments during
the current fiscal year. The balance due from Multi Solutions was $335,559
and $448,039 at January 31, 2001 and 2000 respectively.
The Company provided certain services and office space to NetCast, Inc., a
subsidiary of Multi Solutions. The balance due from NetCast, Inc., for such
services was $234,592 as of January 31, 2001 and 2000. NetCast has
discontinued operations. Although payment of this debt is not expected from
Net Cast, Multi Solutions has guaranteed this debt to the Company.
The Company provides office space, consulting and administrative services
to its affiliate, FreeTrek, Inc. a Subsidiary of Solutions. During the year
ended January 31, 2001, the Company received payments from FreeTrek of
$423,033 and $193,000 for the year ended January 31, 2000, and is included
in Revenues on the Statement of Operations.
-F11-