-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AbeDAAquSb4o0XGQSt0eO0yTCZDdFhn4rAjWCK+VNeszPbWBc2HPcPqDfPR0t7X6 BEuk35RL/PRSfs+dZngXyw== 0001012709-02-000788.txt : 20020523 0001012709-02-000788.hdr.sgml : 20020523 20020523135350 ACCESSION NUMBER: 0001012709-02-000788 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MULTI SOLUTIONS INC CENTRAL INDEX KEY: 0000723733 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 222418056 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12162 FILM NUMBER: 02660836 BUSINESS ADDRESS: STREET 1: 4262 US ROUTE 1 STREET 2: SUITE 2 CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852 BUSINESS PHONE: 9083299200 MAIL ADDRESS: STREET 1: 4262 US HIGHWAY 1 STREET 2: SUITE 2 CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852-1905 10KSB 1 x10ksb-502.txt MULTI SOLUTIONS, INC. 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, 2002 OR [ ] TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-12162 --------- MULTI SOLUTIONS, INC ---------------------------------------------- (Name of Small business issuer in its charter) New Jersey 22-2418056 ---------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3535 Quakerbridge Road, Hamilton, New Jersey 08619 ---------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number (609) 631-7401 --------------------- Securities registered pursuant to Section 12(b) of the Act: None ------------ Securities registered pursuant to Section 12(g) of the Act: Common Stock ------------ Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act, during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.[X] The Issuer's consolidated revenues for the fiscal year ended January 31, 2002 were: $290,823. The aggregate market value of the voting stock held by non-affiliates (1) of the registrant based on the average of the closing ask ($.055) and ($.045) bid price of such stock, as of May 15, 2002 is $735,073 based upon $.05 multiplied by the 14,701,454 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 January 31, 2002, is 21,096,969 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 SOLUTIONS, INC. Form 10-KSB Year Ended January 31, 2002 Table of Contents ----------------- Page ---- PART I.........................................................................3 ITEM 1. BUSINESS.............................................................3 ITEM 2. PROPERTIES..........................................................10 ITEM 3. LEGAL PROCEEDINGS...................................................10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................10 PART II.......................................................................11 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................................................11 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................................12 ITEM 7. FINANCIAL STATEMENTS................................................14 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES...........................................14 PART III......................................................................15 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...................15 ITEM 10. EXECUTIVE COMPENSATION..............................................17 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......19 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................20 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................20 SIGNATURES....................................................................22 SUPPLEMENTAL INFORMATION 23 FINANCIAL STATEMENTS F1 2 PART I ------ ITEM 1. DESCRIPTION OF BUSINESS. ------------------------ GENERAL - ------- During our fiscal year ended January 31, 2002, we: o supported, our subsidiary, Multi Soft, Inc; and o supported our subsidiary, FreeTrek., Inc., to market a new software-based tool and promotion program for tapping into the marketing communications potential of the internet - FreeTrek is offering major marketers the opportunity to communicate one-to-one with carefully defined private networks of their most valuable customers. The operations of Multi Soft, FreeTrek and NetCast are discussed below. MULTI SOFT, INC. ---------------- We incorporated Multi Soft in January 1985 as a wholly owned subsidiary. As of the date of this report, we own approximately 51.3% of Multi Soft. Multi Soft produces, markets and maintains the following products: o COMRAD, which stands for Component Object Model Rapid Application Development, for 32 bit Windows 95, 98, 2000 and NT; o The Windows Communications LibraryTM, commonly referred to as WCL, for Windows 3x, 95, 98 and NT; and o INFRONT for DOS. See the discussion below under "Multi Soft's Product Line" for more details on these products. Multi Soft's 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 all are supported by the Multi Soft product line: 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. 3 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 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 streamlined and optimized production application. Message-based access to the mainframe is supported by WCL's WCL/Enterprise Server Option, commonly referred to as WCL/ESO. 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. MULTI SOFT'S PRODUCT LINE - ------------------------- Multi Soft's Product line consists of three product sets: 1. COMRAD for 32 bit Windows 95, 98, 2000 and NT; 2. The WCL product set for Windows 3x, 95, 98, 2000 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, that 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 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 4 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. Multi Soft also has a 32-bit version of its 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 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; 5 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. KEY SERVICES PROVIDED BY MULTI SOFT - ----------------------------------- 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. Multi Soft also offers 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 Multi Soft's staff. In the past, Multi Soft has provided technical consulting services on a contract basis to our subsidiary, NetCast, and it currently is providing technical consulting services on a contract basis to our subsidiary, FreeTrek. Multi Soft hopes to provide such services to unaffiliated companies as well. CLIENTS - ------- Multi Soft's past and current client base spans over 40,000 users throughout approximately 125 Fortune 500 companies. Customers that have licensed Multi Soft's products include*: 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, - --------------- * We cannot confirm which of these clients is actively using Multi Soft's products. 6 IN-HOUSE MARKETING AND SALES - ---------------------------- Charles Lombardo and Miriam Jarney, two of our officers and directors, are responsible for sales and marketing of Multi Soft's products and services. At present, in-house sales are generally made through telemarketing. If Multi Soft obtains additional funds from operations or otherwise, it plans to further market its products and services through advertisements in trade publications and targeted mailings. No assurance can be given that Multi Soft will have sufficient funds to increase its in-house sales and marketing activities. DISTRIBUTORS AND VARS - --------------------- Multi Soft uses international distributors and VARs on a non-exclusive basis to supplement its domestic sales and marketing efforts. FREETREK. INC. We formed FreeTrek.Com, Inc. under the laws of the state of New Jersey in April 1999. At present, we own approximately 45.8% of FreeTrek's issued and outstanding shares of common stock. At January 31, 2002, we owned approximately 53.1%. The balance is held by private investors who provided services and cash to fund the initial software development and other start-up activities. FreeTrek is a business to business to consumer affinity group service company, commonly referred to as a B2B2C affinity group service company, that recently commenced marketing its products and services to businesses, referred to as sponsors, that want to create an Internet community of their current and future customers. We refer 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. We have not made any sales to date. We formed FreeTrek to: o market a promotional program to institutions and associations pursuant to which they can provide their clients and members with free internet access while defraying the cost of providing such service with advertising; and o create a carefully defined database of internet users from this promotional program that will be attractive to major advertisers. We plan to take advantage of companies, institutions and associations, which already have users/customers connected to the Internet or have a strategic need for their users/customers to be so connected. We believe that many banks, brokerage houses, large retailers, publishers and financial institutions, to name some, have a long-term strategic interest in conducting on-line commerce in order to reduce transaction costs. In addition, many professional associations such as medical or legal associations may have a significant interest in offering their members on-line services. 7 DEFINITIONS: 1. VIRTUAL PRIVATE COMMUNITY - A Virtual Private Community is a community of members who have a commonality of interests. It: |_| is identified, created and managed by a commercially motivated community builder, a sponsor; |_| is defined by the nature of the common interests of the members; |_| focuses on member interests; and |_| it integrates content and communication. 2. SPONSOR - A sponsor is a company, institution, or association with a tactical and strategic need to create a VPC and which pays or plans to pay the Internet ISP cost for the members of its VPC. 3. FREETREK.COM(TM) PROGRAM - The FreeTrek.Com(TM) Program is an Affinity Group "Opt-in Permission Marketing" serviCE offered to sponsors that want to create a VPC. The FreeTrek.Com Program, is a complete turnkey service for a sponsor which creates and maintains the sponsor's VPC on the Internet. Sponsors consisting of interested companies, institutions and associations offer or might offer Internet service to their clients as a premium/incentive to increase their business with their existing client base or attract new clients. Sponsors do this for both tactical, to open up new accounts, and strategic, to lower transaction costs, reasons. FreeTrek plans to help mitigate this cost by offering these sponsors an advertising profit sharing program. Each sponsor's clients will get free Internet access. The access will contain advertising. Advertising profits will be shares by the sponsor and FreeTrek. Assuming sufficient advertising revenues, the sponsor may recover the entire Internet fee paid, in addition to a profit as part of its advertising profit sharing program with FreeTrek. As the number of sponsor networks increase, FreeTrek will be creating and expanding a database of national Internet users with demographics which, in turn, should increase the amount that it can charge advertisers. 4. FREETREK PORTAL - The FreeTrek Portal consists of two main components: |_| the commercial space, which is 60 pixels high by 468 pixels wide, and |_| the sponsor's logo space, which is 60 pixels high by 100 pixels wide. FreeTrek can make this portal any size the sponsor wishes, but for purposes of this trial program it is assume that our standard Portal shall be used. There are approximately 72 pixels to the inch. During the fiscal year ended January 31, 2000, FreeTrek raised approximately $621,000 in gross proceeds in a private offering of its securities. During the fiscal year ended January 31, 2001, FreeTrek raised approximately $325,000 in cash and approximately $212,500 in marketable securities from private offerings of its securities. During the fiscal year ended January 31, 2002, FreeTrek raised approximately $25,000 in a private offering of its securities. FreeTrek is using these proceeds to continue to develop and to market its products and services. 8 NETCAST, INC. ------------- Our 75% subsidiary, NetCast, Inc., was created in 1996 to develop new Internet technologies to create a series of products and businesses that would extend the power of advertising on the Internet. Multi Soft provided services and office space to NetCast at cost for which it has billed approximately $240,000 through January 31, 2000, of which $78,000 was incurred during the fiscal year ended January 31, 1999. Multi Soft charged NetCast for this time. We have guaranteed NetCast's debt to Multi Soft. In January 2000, we decided to discontinue any further operations of NetCast. As a result, a loss of ($87,462) has been reflected in our consolidated financial statements for the fiscal year ended January 31, 2000 as a loss from discontinued operations. During the year ended January 31, 2002, Multi Soft recorded a valuation allowance of $200,000 against this debt. For more detail, please see our audited consolidated financial statements at the end of this report and the discussion contained in Part II. Item 6. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Employees - --------- We are essentially a holding company. Accordingly, we have two employees, our executive officers: Charles J. Lombardo and Miriam Jarney. Multi Soft's employees devote such time as is necessary to our business. Multi Soft has four full time employees, including two officers and two support personnel. Multi Soft previously had four technical and engineering personnel, who have been laid off due to our current financial situation. We also have several independent consultants, which work for us on an as needed basis. At this time, FreeTrek has two employees, our executive officers: Charles J. Lombardo and Miriam Jarney. Multi Soft's employees devote such time as is necessary to Freetrek's business. Competition - ----------- Multi Soft 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 Multi Soft. In addition, many competitors have more extensive facilities than those which now or in the foreseeable future will become available to Multi Soft. Multi Soft competes directly with computer manufacturers, large computer service companies and independent software suppliers. Multi Soft believes that hundreds of firms that manufacture software applications products are significant competitors, and Multi Soft is one of the smaller entities in the field. FreeTrek competes with other firms and entities that provide marketing and advertising to companies, institutions and associations that want to retain and/or increase their client or membership base. Most of its competitors have substantially greater resources, are better established, and have a longer history of operations than FreeTrek. In addition, many competitors have more extensive facilities than those which now or in the foreseeable future will become available to FreeTrek. We believe that FreeTrek's ability to compete primarily will depend upon the effectiveness of its products and services 9 to retain and increase client and membership base compared to the effectiveness of the services provided by its competitors. ITEM 2. DESCRIPTION OF PROPERTIES ------------------------- We previously used Multi Soft's facilities, at no charge, consisting of approximately 3,300 square feet of office space at 4262 US Route 1, Monmouth Junction, New Jersey 08852, which Multi Soft leases 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 was terminable at any time on three months notice. Monthly rent was increased from $5,200 to $5,600 beginning in November 1999. Multi Soft was responsible for all utilities. Multi Soft terminated this lease in January 2002. In February 2002, Multi Soft entered into an office lease for a two-year term through February 14, 2004. The lease requires monthly payments of $2,000 through January 2003 and $2,125 from February 2003 through January 2004. Multi Soft has deposited $6,000 as security with the landlord. ITEM 3. LEGAL PROCEEDINGS ----------------- We are not presently a party to any material litigation. However, We and Multi Soft have been, from time to time, parties to legal actions arising in the normal course of our business. In the opinion of management, the disposition of these actions will not have a material effect on our financial position or results of operations taken as a whole. Tax Liens - --------- Certain 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 during the last quarter of our fiscal year ended January 31, 2002. 10 PART II ------- ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. --------------------------------------------------------- (a) Market Information -- Our Common Stock is traded in the over-the- counter market, and is quoted on The OTC Bulletin Board (symbol: "MULT"). The following tables set forth the range of high and low closing bid prices for the our Common Stock on a quarterly basis for the past two fiscal years and the first quarter of fiscal 2003 as reported by 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 ---------- Period - Fiscal Year 2001 High Low --------------------------------------------------------------------------- First Quarter ending April 30, 2000 .2.75 .48 Second Quarter ending July 31, 2000 .79 .45 Third Quarter ending October 31, 2000 .85 .25 Fourth Quarter ending January 31, 2001 .44 .10 Period - Fiscal Year 2002 High Low --------------------------------------------------------------------------- First Quarter ending April 30, 2001 .30 .12 Second Quarter ending July 31, 2001 .17 .12 Third Quarter ending October 31, 2001 .20 .085 Fourth Quarter ending January 31, 2002 .11 .055 Period - Fiscal Year 2003 High Low --------------------------------------------------------------------------- First Quarter ending April 30, 2002 .065 .0475 (b) Holders -- There were approximately 767 holders of record of our common stock, as of May 15, 2002, 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. 11 Issuances of Common Stock - ------------------------- We did not issue any securities during the last quarter of the year ended January 31, 2002 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 ---------------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Results of Operations - --------------------- Fiscal Year Ended January 31, 2002 Compared to Fiscal Year Ended January 31, - -------------------------------------------------------------------------------- 2001 - ---- We generated revenues for the fiscal year ended January 31, 2002 of $290,823 compared to revenues of $285,641 in fiscal year 2001.The revenues during these periods were generated by our subsidiary, Multi Soft. We believe that the increase of $5,182, or approximately 2%, was due primarily to a increase in Multi Soft's maintenance fees, offset in part by an decrease in license fees and a decrease in consulting fees. License fee revenue decreased $41,680 or approximately 48.6%, maintenance fees increased $80,752, or approximately 59%. Consulting and other fees decreased $33,890 or approximately 54%. Multi Soft's two traditional principal sources of revenues were license fees and maintenance fees which represented approximately 90% or $262,238 of revenues in fiscal 2002 and 78.2% or $223,211 of revenues in fiscal 2001. We believe that the overall decrease in licensing fees was due primarily to Multi Soft's inability to fund the completion of a version upgrade of COMRAD. We believe that the increase in maintenance fees was due to renewal of maintenance contracts by customers. We believe that the decrease in consulting and other fees was due to the general downturn in the economy combined with the terrorist attacks of September 11, 2001. Our operating expenses were $850,146 in the fiscal year ended January 31, 2002 compared to $1,042,359 in the fiscal year ended January 31, 2001, a decrease of $192,213 or 18.4%. We believe that the decrease was the result of lower levels of software development costs related to both consulting and new product development as well as lower selling and administrative costs charged to operations as a result of our cost cutting program for the fiscal year ended January 31, 2002. The decrease in costs was offset by a provision for valuation write-down of software development costs of $210,000. We had other income of $69,541 in the fiscal year ended January 31, 2002 compared to other income of $156,891 in the fiscal year ended January 31, 2001, a decrease of $87,350 or 55.7%. We believe that the decrease in other income during the fiscal year ended January 31, 2002 was primarily due to losses sustained on sales of investment securities and the minority share of consolidated subsidiary's loss during the fiscal year ended January 31, 2002 compared to fiscal 2001. As a result of all the foregoing, we incurred a net loss in the fiscal year ended January 31, 2002 of $489,782 compared to a net loss of $599,827 for the fiscal year ended January 31, 2001, a decrease in net loss of $60,045. 12 Liquidity and Capital Resources - ------------------------------- At January 31, 2002, we had a working capital deficiency of ($590,935) and continue to experience cash flow problems. In fiscal year 2001, we received proceeds from a private placement of our common stock and the exercise of an option issued in conjunction with the private placement. In addition our subsidiary, Freetrek, received proceeds from a private placement of its shares. Working Capital and Current Ratios were: - ---------------------------------------- Descriptions January 31, 2002 January 31, 2001 --------------------------------------------------------------------------- Working capital (deficiency) ($590,935) ($121,670) Current ratios .08:1 .73:1 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 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: o Multi Soft's ability to: o continue to receive royalties from its 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; 13 o FreeTrek's ability to: o support ongoing development and future product enhancements along with requisite testing; o raise sufficient additional funds if needed; o enlist and sustain a sufficient number of sponsors; o sell and sustain sales of a significant amount of advertising; o and operate profitably. ITEM 7. FINANCIAL STATEMENTS -------------------- The following financial statements are attached to the end of this report and have been prepared in accordance with the requirements of Item 310(a) of Regulation S-B. MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEAR ENDED January 31, 2002 INDEX Page # ------ Report of Independent Certified Public Accountants F1 Consolidated Balance Sheets - January 31, 2002 and 2001 F2 Consolidated Statements of Operations for Each of the Two Years in the Period Ended January 31, 2002 F4 Consolidated Statements of Changes in Stockholders' Deficiency for Each of the Two Years in the Period Ended January 31, 2002 F5 Consolidated Statements of Cash Flows for Each of the Two Years in the Period Ended January 31, 2002 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. Our accounting firm is Kahn Boyd Levychin, LLP, which is the successor to Stewart W. Robinson, CPA effective with the January 2002 merger of the two accounting firms. 14 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 George Mansur Jr. Director James J. Kaput, Ph.D. 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 59, has been our Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer and Treasurer since August 1982. He has been Multi Soft's Chief Executive Officer, Chief Financial Officer and Treasurer since January 1985. 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 61, has been our Executive Vice President and Secretary and a member of our Board of Directors since January 1982. She has been Executive Vice President, Secretary and a Director of Multi Soft since January 1985. 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 15 with a degree in Economics and Statistics and has a Master's degree in Computer Science from Stevens Institute of Technology. LARRY SPATZ, age 59, has been a member of our Board of Directors since July 1989, and a director of Multi Soft since May 1986. 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. GEORGE MANSUR, JR., age 72, has been a member of our Board of Directors since March 1982. Since March, 1984, Mr. Mansur also has been Chairman of ALG Corp. and Chairman of Auto Loan Guarantee Company, as well as President of National Benefit Services Corp. and Executive Vice President of Benefit Services Group, Ltd. Since January 1981, Mr. Mansur has been an officer of Petro-Art Ltd., an inactive publicly owned New Jersey corporation. From 1971 to 1976, he was President of Benefit Communications, Corp. From 1977 to 1978, he was marketing director of Commercial Credit Corp., and in 1979 and 1980, he was an officer of Coronet Graphics, Ltd. and Agri Parogram, Ltd. Mr. Mansur is a Charter Member of the International Association of Financial Planners. DR. JAMES J. KAPUT, age 60, has been a member of our Board of Directors since July 1989. He has been a Professor of Mathematics at Southern Massachusetts University since 1968. Since 1986, he also has been a Research Associate at Harvard University. Dr. Kaput received a B.S. Degree in Mathematics from Worcester Polytechnic Institute in 1964 and a Ph.D. in Mathematics from Clark University in 1968. 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, 2002. 16 ITEM 10. EXECUTIVE COMPENSATION. ----------------------- The following table shows all the cash compensation paid or to be paid by us and Multi Soft, as well as certain other compensation paid or accrued, during the fiscal years indicated, to our Chief Executive Officer and Executive Vice President (collectively, "Principal Officers") for such period in all capacities in which they served. No other Executive Officer received total annual salary and bonus in excess of $100,000. SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------- ANNUAL COMPENSATION LONG TERM COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------- AWARDS PAYOUTS - ----------------------------------------------------------------------------------------------------------------------------- NAME & FISCAL SALARY ($) BONUS ($) OTHER ANNUAL RESTRICTED OPTIONS SARS LTIP ALL OTHER PRINCIPLE YEAR COMPENSATION STOCK AWARD PAYOUTS ($) COMPENSATION POSITION ($) ($) ($) - ----------------------------------------------------------------------------------------------------------------------------- CHARLES J. 2002 $33,333 $0 $0 $0 $0 $0 $0 LOMBARDO CEO 2001 $50,000 $0 (A) $4,167 $0 $0 $0 $0 2000 $54,167 $0 (A) $16,700 $0 $0 $0 $0 - ----------------------------------------------------------------------------------------------------------------------------- MIRIAM JARNEY 2002 $33,333 $0 $0 $0 $0 $0 $0 EXEC. V.P. 2001 $54,167 $0 $0 $0 $0 $0 $0 2000 $54,167 $0 $0 $0 $0 $0 $0 - -----------------------------------------------------------------------------------------------------------------------------
(A) Consulting fees The following table sets forth information with respect to the Principal Officers concerning the grants of options and Stock Appreciation Rights ("SAR") during the past fiscal year: OPTION/SAR GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------------------------- NAME OPTIONS/SARS PERCENT OF TOTAL OPTIONS/SARS EXERCISE OR BASE EXPIRATION GRANTED GRANTED TO EMPLOYEES IN FISCAL YEAR PRICE ($/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: 17 AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED SHARES UNEXERCISED IN-THE-MONEY ACQUIRED ON VALUE REALIZED ($) OPTIONS/SARS AT OPTIONS/SARS AT NAME EXERCISE (#) FY-END (#) FY-END ($) - --------------------------------------------------------------------------------------------------------------------- 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. Directors are reimbursed for their accountable expenses incurred in attending meetings and conducting their duties. Employment Agreements - --------------------- On July 14, 1989, Multi Soft entered into a five-year employment agreement with its Chairman of the Board and Chief Executive Officer, Charles J. Lombardo, which is automatically renewed for successive periods unless terminated by Multi Soft 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 Multi Soft 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 Multi Soft'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. In November 1999, we issued 250,000 shares to Mr. Lombardo in lieu of past accrued salary of Multi Soft. Mr. Lombardo also is entitled to a salary from us of $25,000 per year, which he has agreed to forego since fiscal 1997. On August 1, 1989, Multi Soft entered into a five-year employment agreement with Miriam Jarney, Executive Vice-President and a Director of both Multi Soft and Multi Solutions. This agreement is automatically renewed for additional periods, unless terminated by Multi Soft 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 Multi Soft '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 Multi Soft does business, or engaging in any competitive business for her own account. In January of 1996, we issued 1,000,000 shares of our common stock to Mrs. Jarney in lieu of accrued salary of Multi Soft. In November 1999, we issued 250,000 shares to Ms. Jarney in lieu of past accrued salary of Multi Soft. 18 Through fiscal 1997, Mr. Lombardo and Ms. Jarney accrued a portion of their Multi Soft salaries. The balance due between both officers as of January 31, 2000, on a consolidated basis, is $792,797 including deferred increases of $586,605. Since fiscal 1999, Mr. Lombardo and Ms. Jarney have relinquished that portion of their annual compensation that was owed but not paid for fiscal 1998 through fiscal 2000. 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 (1) BENEFICIAL OWNERSHIP - ---------------------------------------------------------------------------------------------------- CHARLES J. LOMBARDO 4,389,272 (2) 20.8% CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, & TREASURER 1511 LAURIE LANE, YARDLEY, PA 19067 - ---------------------------------------------------------------------------------------------------- MIRIAM G. JARNEY 1,989,100 (3) 9.4% EXECUTIVE VICE PRESIDENT, SECRETARY, DIRECTOR 21 DOERING WAY, CRANFORD, NJ 07106 - ---------------------------------------------------------------------------------------------------- LARRY SPATZ 0 (4) 0.0% DIRECTOR 3175 COMMERCIAL AVE., SUITE 222 NORTHBROOK, IL 60062 - ---------------------------------------------------------------------------------------------------- JAMES J. KAPUT, PHD. 10,000 ** DIRECTOR 473 CHASE ROAD, N. DARTMOUTH, MA 02747 - ---------------------------------------------------------------------------------------------------- GEORGE E. MANSUR, JR. 7,143 ** DIRECTOR 1413 STATE RD., PHOENIXVILLE, PA 19460 - ---------------------------------------------------------------------------------------------------- ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (5 PERSONS) 6,395,515 (4) 30.3% - ----------------------------------------------------------------------------------------------------
** Less than one percent. (1) Based upon 21,096,969 shares of common stock outstanding on May 15, 2002. (2) Includes shares held by Mr. Lombardo's wife and shares owned jointly with his wife. (3) Includes 19,100 shares owned by Ms. Jarney's husband. (4) Excludes shares owned beneficially by a family trust of which Mr. Spatz' 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. 19 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- Although there is no written agreement between us and Multi Soft granting us preemptive rights with regard to our majority ownership of Multi Soft common stock, in practice, we have and plan to continue to acquire sufficient shares of Multi Soft's common stock to assure our majority ownership in Multi Soft. Multi Soft subleased its 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". ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. --------------------------------- Exhibits - -------- 3.a Certificate of Incorporation (1) 3.b By-Laws (1) 4.a Specimen Common Stock (1) 10.a Our Employment Agreement with Charles J. Lombardo (5) 10.b Multi Soft Employment Agreement with Charles J. Lombardo (5) 10.c Multi Soft Employment Agreement with Miriam G. Jarney(5) 10.d Copy of Non-Qualified Stock Option Plan, Stock Grant Program and Employee Incentive Stock Option Plan (3) 10.g Amendments to Non-Qualified Stock Option and Stock Grant Program (4) 21. List of Subsidiaries (6) - ------------------------- 1. Previously filed as an Exhibit to our Form S-18 Registration Statement, File No. 2-85710-NY filed with the Commission on July 14, 1983, and incorporated herein by reference. 2. Previously filed as an Exhibit to our Form 10-K for the fiscal year ended January 31, 1993 as filed with the Commission on or about Nov. 18, 1993, and incorporated herein by reference. 3. Previously filed as part of our 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 Registration Statement on Form S-1, SEC File No. 33-3133, filed with the Commission on February 4, 1986, and incorporated herein by reference. 5. Previously filed as an Exhibit to Multi Soft'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. 20 6. Previously filed as an Exhibit to our Form 10-KSB for the fiscal year ended January 31, 2000 as filed with the Commission on or about May 15, 2000, under SEC File No. 0-12162, 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, 2002. 21 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 SOLUTIONS, INC. Dated: May 16, 2002 By: /s/ Charles J. Lombardo -------------------------------- Charles J. Lombardo, Chief Executive Officer, Chief Financial Officer and Secretary-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 16, 2002 - -------------------------------- Charles J. Lombardo Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer and Secretary- Treasurer May 16, 2002 /S/ Miriam Jarney - -------------------------------- Miriam Jarney Executive Vice President, and Director /S/ Larry Spatz May 16, 2002 - -------------------------------- Larry Spatz Director /S/ James Kaput, PhD. May 16, 2002 - -------------------------------- James Kaput, PhD. Director /S/ George E. Mansur, Jr. May 16, 2002 - -------------------------------- George E. Mansur, Jr. Director 22 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. 23 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- To the Board of Directors MULTI SOLUTIONS, INC. We have audited the accompanying balance sheets of MULTI SOLUTIONS, INC. AND SUBSIDIARIES as of January 31, 2002 and 2001 and the related statements of operations, changes in stockholders' deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MULTI SOLUTIONS, INC. AND SUBSIDIARIES as of January 31, 2002 and 2001 and the results of its operations and its cash flows for the years then ended, in conformity in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company and its subsidiaries will continue as going concerns. As discussed in Note A to the financial statements, the Company and its subsidiaries suffered losses from operations and have working capital deficiencies, raising substantial doubt about their ability to continue as going concerns. Management's plans in regard to these matters are also described in Note A. The consolidated 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. KAHN BOYD LEVYCHIN, LLP New York, New York May 3, 2002 -F1- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31, 2002 and 2001
2002 2001 ------------ ------------ ASSETS CURRENT ASSETS Cash $ 3,511 $ 22,846 Accounts Receivable (net of allowance for doubtful accounts of $46,219 and $49,212 for 2002 and 2001 respectively) 22,991 111,099 Prepaid expenses and other current assets 23,824 22,641 Marketable securities 168,000 ------------ ------------ Total current assets 50,326 324,586 PROPERTY AND EQUIPMENT Research and Development Equipment & Software 24,982 24,982 Office furniture and other equipment 89,225 84,590 ------------ ------------ 114,207 109,572 Less: accumulated depreciation (64,102) (45,172) ------------ ------------ Total property and equipment, net 50,105 64,400 OTHER ASSETS Capitalized software development costs, net of valuation allowance of $210,000 in 2002 2,040,915 1,959,008 Less: accumulated amortization (1,047,052) (892,588) ------------ ------------ 993,863 1,066,420 Other intangibles - net 3,872 5,214 ------------ ------------ Total other assets 997,735 1,071,634 ------------ ------------ Total assets $ 1,098,166 $ 1,460,620 ============ ============
See notes to financial statements -F2- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31, 2002 and 2001
2002 2001 ------------ ------------ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Accrued payroll $ 81,817 $ 14,783 Payroll and other taxes payable 28,589 18,497 Accounts Payable 226,788 119,920 Accrued officer compensation 178,668 187,842 Due to officer 52,847 Deferred Revenues 72,552 105,214 ------------ ------------ Total current liabilities 641,261 446,256 DEFERRED COMPENSATION DUE OFFICERS/SHAREHOLDERS 586,605 586,605 MINORITY INTEREST IN SUBSIDIARIES 633,992 714,364 COMMITMENTS AND CONTINGENCIES -- Note F STOCKHOLDERS' DEFICIENCY Common stock, authorized 40,000,000 shares $.001 par value, issued and outstanding 21,096,969 shares 21,098 21,098 Additional paid-in capital 9,232,227 9,219,532 Accumulated deficit (10,017,017) (9,527,235) ------------ ------------ Total stockholders' deficiency (763,692) (286,605) $ 1,098,166 $ 1,460,620 ============ ============
See notes to financial statements -F3- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended January 31, 2002 and 2001
2002 2001 ------------ ------------ REVENUES License fees $ 44,063 $ 85,743 Maintenance fees 218,220 137,468 Consulting and Other fees 28,540 62,430 ------------ ------------ Total revenues 290,823 285,641 EXPENSES Software development and technical support 178,139 189,648 Selling and administrative 462,007 852,711 Provision for valuation write-down of software development costs 210,000 -- ------------ ------------ Total expenses 850,146 1,042,359 ------------ ------------ (Loss) from operations (559,323) (756,718) OTHER INCOME (EXPENSE) Interest/capital gain income (expense) (35,830) 12,649 Minority share of consolidated subsidiary's loss 105,371 144,242 ------------ ------------ Total other income 69,541 156,891 Net (loss) $ (489,782) $ (599,827) ============ ============ Weighted average shares outstanding 20,779,754 20,779,754 ============ ============ Income (loss) per share ($ 0.02) ($ 0.03) ============ ============
See notes to financial statements -F4- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Years ended January 31, 2002 and 2001 Total Total Common Stock paid-in Accumulated Deferred stockholders Shares Amount capital deficit Compensation deficiency ------------ ---------- ------------ ------------ ---------- ------------ Balance at January 31, 2000 20,169,827 $ 20,170 $ 8,932,905 $ (8,927,408) $ (46,449) $ (20,782) Issuance of restricted common stock 70,000 70 180 -- 250 Issuance of common stock 857,142 857 299,143 300,000 Amortization of stock grants -- 33,754 33,754 Net loss (599,827) (599,827) ------------ ---------- ------------ ------------ ---------- ------------ Balance at January 31, 2001 21,096,969 $ 21,097 $ 9,232,228 $ (9,527,235) $ (12,695) $ (286,605) Amortization of stock grants 12,695 12,695 Net loss (489,782) (489,782) ------------ ---------- ------------ ------------ ---------- ------------ Balance at January 31, 2002 21,096,969 $ 21,097 $ 9,232,228 $(10,017,017) $ -- $ (763,692) ============ ========== ============ ============ ========== ============
SEE NOTES TO FINANCIAL STATEMENTS -F5- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended January 31, 2002 and 2001
2002 2001 ------------ ------------ Cash flows from operating activities Net loss $ (489,782) $ (599,827) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 174,736 198,812 Provision for valuation write-down of software development costs 210,000 -- Loss on sale of marketable securities 36,268 Changes in assets and liabilities Accounts receivable 88,108 29,386 Prepaid expenses and other current assets (1,183) 22,351 Accrued payroll 67,034 -- Payroll and other taxes payable 10,092 (551) Accounts payable and accrued expenses 106,868 24,228 Accrued officer compensation (9,174) (18,350) Due to officer 52,847 Deferred revenues (32,662) (22,318) ------------ ------------ Net cash provided by (used for) operating activities 213,152 (366,269) Cash flows from investing activities Capital expenditures (4,635) (22,716) Proceeds from sale of marketable securities 131,732 Write-off of unproductive fixed assets -- 50,000 Acquisition of marketable securities -- (168,000) Capitalized software development costs (291,907) (404,139) ------------ ------------ Net cash used in investing activities (164,810) (544,855) Cash flows from financing activities Minority interest and loss in excess of investments (80,372) 157,760 Amortization of stock grants 12,695 33,753 Subscription receivable -- 100,000 Issuance of capital stock -- 300,250 ------------ ------------ Net cash (used for) provided by financing activities (67,677) 591,763 ------------ ------------ NET (DECREASE) IN CASH (19,335) (319,361) Cash at beginning of year 22,846 342,207 ------------ ------------ Cash at end of year $ 3,511 $ 22,846 ============ ============
See notes to financial statements -F6- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2002 and 2001 NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Multi Solutions, Inc. the "Company" was incorporated under the laws of the State of New Jersey on July 26, 1982. The Company is presently a holding company for its ownership of its subsidiaries, Multi Soft, Inc. ("Multi Soft"), Freetrek., Inc. ("FreeTrek") and NetCast, Inc. ("NetCast"). As of January 31, 2002, the Company owns 51.3% of Multi Soft, 53.1% of FreeTrek and 75% of NetCast. The Company's consolidated 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 had a consolidated net loss of $489,782 in 2002 compared with a consolidated net loss of $599,827 in 2001. In addition, at January 31, 2002, the Company's current liabilities exceeded current assets by $590,935 and raising doubt that Multi-Soft will recover its investment in software development costs ($445,530) as of January 31, 2002 - see Note B. Multi Soft and FreeTrek intend to market their products, control operating costs and broaden their product base through enhancements of products. The Company believes that these measures will provide sufficient liquidity for it to continue as a going concern in its present form. Accordingly, the consolidated 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. Principles of Consolidation --------------------------- The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, Multi Soft, FreeTrek and NetCast. All significant intercompany balances and transactions have been eliminated in consolidation. 2. Property and Equipment ---------------------- Property 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 $18,930 and $17,657 for the years ended January 31, 2002 and 2001 respectively. 3. Capitalization of Computer Software Development Costs ----------------------------------------------------- Capitalized software development costs relating to products for which technological feasibility has been established qualify for capitalization under Statement of Financial Accounting Standards 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 that product or (b) the straight-line method over the remaining useful life of the product, whichever is greater. -F7- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2002 and 2001 Multi Soft is amortizing, over a sixty-month period, the capitalized software costs for its Windows-based products. The Company's software engineers are continually modifying and enhancing the existing software products and developing new versions. Unamortized costs relating to Windows products at January 31, 2002 and 2001 are $445,430 (net of valuation allowance of $210,000) and $619,901, respectively. FreeTrek is continuing to modify and improve its software and has capitalized $746,067 of software development costs and has not started amortization. Amortization will commence upon release of the software to customers. Amortization expense for all products at January 31, 2002 and 2001 was $154,464 and $179,812 respectively. 4. Revenue Recognition ------------------- In accordance with Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2), 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. 5. 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 the grant. 6. Loss Per Share -------------- Loss per share is computed using the weighted average number of common shares outstanding during the period. Common stock equivalents are anti-dilutive and, therefore, are not considered in the computation of loss per share. 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. 8. Income Taxes ------------ The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which significantly changes 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 9. Valuation of long-lived assets ------------------------------ The Company reviews long-lived assets held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has recorded provision for the impairment of long-lived assets at January 31, 2002 as follows: capitalized software development costs - $210,000. 10. Risks, uncertainties and certain concentrations of credit risk and ---------------------------------------------------------------------- economic dependency ------------------- The Company's future results of operations involve a number of significant risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, dependence on key personnel, dependence on a limited number of customers, ability to design new products and product obsolescence, ability to generate consistent sales, ability to finance research and development, government regulation, technological innovations and acceptance, competition, reliance on certain vendors, credit and other risks. -F8- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2002 and 2001 Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company maintains cash and cash equivalents in bank deposit and money market accounts in one bank, which, at times, may exceed federally insured limits or not be insured. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents. 11. Marketable Securities --------------------- Marketable securities are presented at market values, which was substantially equal to cost as of January 31, 2001. 12. New Accounting Pronouncements ----------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for Derivative Instruments. SFAS No. 133, as amended, is effective for fiscal years beginning after June 15, 2000. SFAS No. 133 established accounting and reporting standards for derivative instruments and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair market value. Under certain circumstances, a portion of the derivative's gain or loss is initially reported as a component of income when the transaction affects earnings. For a derivative not designated as a hedging instrument, the gain or loss is recognized in the period of change. We believe that the adoption of SFAS No. 133 will not have an impact on our financial position or results of operations. In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin 101, Revenue Recognition to provide guidance on the recognition, presentation, and disclosure of revenue in financial statements. Our policies on revenue recognition are consistent with this bulletin. In March 2000, the Financial Accounting Standards Board issued Financial Interpretation No. 44 (FIN 44), Accounting for Certain Transactions Involving Stock Compensations - and Interpretation of APB No. 25. FIN 44 clarifies the application of APB No. 25 for certain issues including: (a) the definition of an employee for purposes of applying APB No. 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the definition of the date of granting employee stock options, and (d) the accounting consequences of various modifications to the terms of a previously fixed stock option or award. FIN 44 became effective July 1, 2000, except for the provisions that relate to modifications that directly or indirectly reduce the exercise price of an award and the definition of an employee, which became effective after December 15, 1998. The adoption of FIN 44 had no material impact on the accompanying financial statements. On July 20, 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all business combinations completed after June 30, 2001. SFAS 142 is effective for fiscal years beginning after December 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. Major provisions of these Statements and their effective dates for the Company are as follows: - all business combinations initiated after June 30, 2001 must use the purchase method of accounting. The pooling of interest method of accounting is prohibited except for transactions initiated before July 1, 2001. - intangible assets acquired in a business combination must be recorded separately from goodwill if they arise from contractual or other legal rights or are separable from the acquired entity and can be sold, transferred, licensed, rented or exchanged, either individually or as part of a related contract, asset or liability - goodwill, as well as intangible assets with indefinite lives, acquired after June 30, 2001, will not be amortized. Effective January 1, 2002, all previously recognized goodwill and intangible assets with indefinite lives will no longer be subject to amortization. - effective January 1, 2002 goodwill and intangible assets with indefinite lives will be tested for impairment annually and whenever there is an impairment indicator - all acquired goodwill must be assigned to reporting units for purposes of impairment testing and segment reporting. Although it is still reviewing the provisions of these Statements, management's preliminary assessment is that these Statements will not have a material impact on the Company's financial position or results of operations. -F9- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2002 and 2001 NOTE C - INCOME TAXES As a result of losses incurred in recent years, the Company and its subsidiaries separately have net operating loss carry-forwards available to offset future federal taxable income of approximately $8.1 million. These losses expire at various dates through 2022 Because of the uncertainty in the Company's ability to utilize the net operating loss carryforwards, a full valuation allowance of approximately $2,754,000 has been provided on the deferred tax asset. Internal Revenue Code Section 382 places a limitation on the utilization of Federal net operating loss and other credit carryforwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percentage point change in ownership occurs. Accordingly, the actual utilization of the net operating loss carryforwards and other deferred tax assets for tax purposes may be limited annually under Code Section 382 to a percentage (about 5%) of the fair market value of the Company at the time of any such ownership change. The Company adopted, effective February 1, 1993, SFAS No. 109, "Accounting 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 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 revenues 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' DEFICIENCY SEE NOTE L - SUBSEQUENT EVENTS 1. Stock Transactions with Subsidiary and Officers ----------------------------------------------- In the past, the Company had entered into various transactions with Soft and officers of the Company, which adjusted intercompany 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. Stock and Option Compensation Plan ---------------------------------- In June 1993, the Company adopted an Employee, Consultant and Advisory Stock and Option Compensation Plan (the Plan). Pursuant to the terms of the Plan, an aggregate of up to 2,500,000 shares of common stock, $0.01 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. To date, an aggregate of 1,477,380 shares has been issued pursuant to the Plan. As of January 31, 2001, employees were not fully vested in 700,000 shares. Amortization of deferred compensation for the stock grants to employees was $0 and $33,754 for the years ended January 31, 2002 and 2001, respectively. 4. Private Placement ----------------- In January 2000, Noga Investments in Technologies, Ltd. signed a subscription agreement and completed the purchase of 571,429 shares of the Company's common stock for $200,000. In connection therewith, the Company issued a series of 6 options to acquire an aggregate of 857,142 shares at $.35 per share. As of May 9, 2000, all options have been exercised. The Company has received an aggregate of $500,000 from this series of transactions resulting in Noga owning approximately 7% of the outstanding shares. NOTE E - COMMITMENTS AND CONTINGENCIES 1. Leases ------ The Company was a subtenant (through January 31, 2002) in office space leased by an entity substantially owned by the Company's chairman and his wife. This lease was on a quarter-by-quarter term with a base rent of $5,600 per month. -F10- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2002 and 2001 Rental expense under the lease aggregated approximately $67,750 and $67,200 for the years ended January 31, 2002 and 2001 respectively. The Company is a party to equipment operating leases providing for aggregate minimum payments of $12,825 for 2003, and $9,540 for each year from 2004 through 2007. 2. Employment Agreements --------------------- Multi Soft 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, 2002 and 2001 as follows:
Year Ended January 31, Charles Lombardo Miriam Jarney Total Relinquished Salaries 2001 $150,000 $145,833 $295,833 2002 $133,333 $133,333 $266,666
In addition, the employment agreements entitle the two employees to 2% and 1.5% respectively, of each fiscal year's after tax profits of Multi Soft. 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 Multi Soft 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. 4. Litigation ---------- The Company and Multi Soft have been, from time to time, parties to legal actions arising in the normal course of their business. In the opinion of management, the disposition of these actions will not have a material effect on the financial position or results of operations of the Company taken as a whole. In May 1997, a lawsuit was commenced against NetCast by former consultants for approximately $113,000. The Company vigorously defended the lawsuit. During the fiscal year 2000 this lawsuit was found in favor of the plaintiff. Although NetCast is liable for the damages from this lawsuit, it has no assets and has discontinued operations. Consequently, no future income will be earned and NetCast will never have any assets. The Company is not liable for the debt of NetCast. Accordingly, no expense or liability for this award has been included in the consolidated financial statements. Multi Soft is a defendant in several legal actions arising in the normal course of business. The dispositions of these actions are not expected to have a material effect on the financial position or results of operations of the Company taken as a whole. Management believes that the financial statements include the full potential liabilities that may arise out of these actions. NOTE F - MAJOR CUSTOMERS In fiscal 2002 and 2001 no one customer accounted for a significant total of revenue. -F11- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2002 and 2001 NOTE G - SUPPLEMENTAL INFORMATION Supplemental disclosures of cash flow information for years ended January 31, 2002 and 2001 are as follows: 2002 2001 ---- ---- Cash paid during the year for interest $685 $225 Cash paid during the year for income taxes $0 $0 NOTE H - RELATED PARTY TRANSACTIONS Multi Soft, from time to time, pays incidental expenses of Solutions and allocates its share of certain expenses for which it charged Solutions $16,227 for 2002 and $24,622 for 2001. These items are charged to intercompany receivable. The Company received no payments during the last two fiscal years. The balance due from Multi Solutions was $351,926 and $335,559 at January 31, 2002 and 2001 respectively. Multi Soft 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, 2002 and 2001. NetCast has discontinued operations. Although payment of this debt is not expected from NetCast, Multi Solutions has guaranteed this debt to the Company. Multi Soft provides office space, consulting and administrative services to its affiliate, FreeTrek. Inc., a subsidiary of Solutions. Multi Soft billed FreeTrek of $340,860 ($258,720 in consulting fees and $82,140 in administrative charges in 2002. In 2001, Multi Soft billed FreeTrek $444,293 ($333,667 in consulting fees and $110,626 in administrative charges). Additionally, FreeTrek shared certain expenses with the Company aggregating $21,353 in 2002 and $9,307 in 2001. In connection with these billings, Multi Soft collected payments of $174,100 and $415,156 for the years ended January 31, 2002 and 2002 respectively. As of January 31, 2002 and 2001, the balance due from FreeTrek was $215,730 (of which $143,000 was collected through April 30, 2002) and $7,227 respectively. All of these amounts are eliminated in consolidation. (SEE NOTE L - SUBSEQUENT EVENTS.) NOTE K - NETCAST NetCast, Inc. is a subsidiary company and was incorporated in April of 1996. It was in the business of developing new Internet technologies to create a series of products and businesses that would extend the power of advertising on the Internet. The Company currently owns 75% of NetCast. The Board of Directors consists of two officers, Charles Lombardo and Miriam Jarney. In January 2000 the Board of Directors decided to discontinue any further operations of NetCast, Inc. with the result that a loss from discontinued operations in the amount of $87,462 is reflected in the statement of operations for the fiscal year ended January 31, 2000. NOTE L - SUBSEQUENT EVENTS In February 2002, Multi Soft entered into an office lease for a two-year term through February 14, 2004. The lease requires monthly payments of $2,000 through January 2003 and $2,125 from February 2003 through January 2004. Multi Soft has deposited $6,000 as security with the landlord. In April 2002, the Company issued options to acquire 1,800,000 shares of its common stock at $.05 per share in connection with a private placement of 2,373,333 shares of FreeTrek restricted common stock for gross proceeds of $178,000 to accredited investors in a private placement. -F12- -----END PRIVACY-ENHANCED MESSAGE-----