SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-12162 MULTI SOLUTIONS, INC (Exact name of small business issuer as specified in its charter) NEW JERSEY 22-2418056 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4262 US Route 1, Monmouth Junction, New Jersey 08852 (Address of principal executive offices) Issuer's telephone number, including area code: (732) 329-9200 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 _____ Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at October 31, 1997 ----------------------- -------------------------------- Common Stock, par value 18,266,898 $.001 per share PART I. FINANCIAL INFORMATION Item 1. Financial Statements The accompanying consolidated financial statements are unaudited for the interim periods, but include all adjustments (consisting only of normal recurring accruals) which management considers necessary for the fair presentation of results for the nine months ended October 31, 1997. The financial statements are presented on a consolidated basis, with Multi Soft, Inc a 55.4% owned subsidiary and NetCast, Inc a 75% owned subsidiary. Moreover, these financial statements do not purport to contain complete disclosure in conformity with generally accepted accounting principles and should be read in conjunction with the Company's audited financial statements at, and for the fiscal year ended, January 31, 1997. The results reflected for the three and nine months ended October 31, 1997 are not necessarily indicative of the results for the entire fiscal year. MULTI SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS October 31, January 31, 1997 1997 (Unaudited) ----------- ----------- ASSETS CURRENT ASSETS Cash $ 48,150 $ 13,575 Accounts receivable (net of allowance of $26,854 and $6,854 respectively) 85,487 18,571 Prepaid expenses and other current assets 38,486 13,532 ----------- ----------- 172,123 45,678 FURNITURE AND EQUIPMENT Research and development equipment 62,611 14,603 Office furniture and other equipment 24,468 22,476 ----------- ----------- 87,079 37,079 Less: Accumulated Depreciation (13,499) (9,119) ----------- ----------- 73,580 27,960 Capitalized Organizational costs 2,415 2,415 Less: Accumulated Amortization (363) ----------- ----------- 2,052 OTHER ASSETS Capitalized software development costs 2,059,726 1,852,822 Less accumulated amortization (1,351,844) (1,110,741) ----------- ----------- 707,882 742,081 Intangibles 200 200 $ 955,837 $ 818,334 =========== =========== MULTI SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS October 31, January 31, 1997 1997 (Unaudited) ----------- ----------- LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Loan payable to bank $ 20,976 $ 25,497 Note Payable 12,026 15,504 Accrued payroll 51,656 -- Payroll and other taxes payable 28,050 38,070 Accounts Payable 179,057 164,902 Accrued officer compensation 212,221 103,349 Deferred Revenues 123,624 168,411 ----------- ----------- 627,610 515,733 Deferred compensation due officer/shareholders 631,605 631,605 STOCKHOLDERS' DEFICIENCY Common stock,$.001 par value authorized 40,000,000 issued and outstanding: 18,266,898 and 18,016,898 respectivley 18,267 18,017 Additional paid-in capital net of deferred compensation, 8,643,184 8,592,434 Minority interest 63,358 87,092 Accumulated deficit (9,028,187) (9,026,547) ----------- ----------- (303,378) (329,004) $ 955,837 $ 818,334 =========== =========== MULTI SOLUTIONS, INC CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended Three Months Ended October 31, October 31, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ REVENUES License fees $ 162,409 $ 328,693 $ 77,495 $ 74,627 Maintenance fees 525,781 487,491 151,448 175,107 Consulting and other fees 83,629 48,204 33,784 30,446 ------------ ------------ ------------ ------------ Total revenues 771,819 864,388 262,727 280,180 EXPENSES Software development and technical support 236,670 256,866 80,123 85,622 Selling and administrative 540,843 627,173 168,700 214,079 ------------ ------------ ------------ ------------ Total expenses 777,513 884,039 248,823 299,701 ------------ ------------ ------------ ------------ Inome (Loss) from operations (5,694) (19,651) 13,904 (19,521) OTHER EXPENSE Interest Expense (1,923) (7,119) (632) (2,313) Total other expense (7,119) (2,313) NET INCOME (LOSS) $ (7,617) $ (26,770) $ 13,272 $ (21,834) ============ ============ ============ ============ Weighted average shares outstanding 18,072,451 17,844,398 18,266,898 17,844,398 ============ ============ ============ ============ Loss per share NIL NIL NIL NIL ============ ============ ============ ============ MULTI -SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended October 31, ----------------------- 1997 1996 --------- --------- Cash flows from operating activities Net loss $ (7,617) $ (26,770) Adjustments to reconcile net Income (loss) to net cash provided by operating activities Depreciation and amortization 245,846 258,443 Changes in assets and liabilities (Increase) decrease in accounts receivable (66,916) 14,705 Increase in prepaid expenses and other current assets (24,954) (3,500) Increase (decrease) in accrued payroll 51,656 (30,285) (Decrease) in payroll and other taxes payable (10,020) (24,592) Decrease in Note Payable (3,479) Increase (decrease) in accounts payable and accrued expenses 14,155 (27,669) (Decrease) increase in accrued officer compensation 108,872 24,946 Increase in Deferred Compensation -- 18,750 Increase (decrease) in deferred revenues (44,787) (105,753) Increase (decrease) in long term deferred revenues -- (8,022) --------- --------- Net cash provided by operating activities 262,756 90,253 Cash flows from investing activities Capitalized Research & Developement (50,000) (220,304) Capitalized software development costs (206,904) (270,400) --------- --------- Net cash used in investing activities (256,904) (490,704) Cash flows from financing activities Net repayments under loan and line of credit ageements (4,521) (11,840) Decrease in Minority interest (17,756) 350,954 Issuance of Common Stock 51,000 3,750 --------- --------- Net cash provided by (used ) In financing activities 28,723 342,864 NET INCREASE (DECREASE) IN CASH 34,575 (57,587) Cash at beginning of year 13,575 89,575 Cash at end of year $ 48,150 $ 31,988 ========= ========= Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Nine and three months ended October 31, 1997 compared to nine and three months ended October 31, 1996 Revenues of $771,819 for the current nine months of fiscal year 1997 decreased $92,569 or 10.7% compared with the comparable period of the prior year. Revenues of $262,727 for the three month period ending October 31, 1997 increased $17,453 compared with the comparable period of the prior year. The decrease in revenues for the current nine month period is attributable to advance royalty payments from a major customer that occured in the prior period and did not reoccur in the current period. Operating expenses as a percent of revenues for the nine month period was 101% compared with 102% for the comparable nine month period. Operating expense as a percent of revenues for the current three month period was 95% compared with 107% for the prior year. The decrease in operating expenses as a percent of revenues over the current three months was primarily attributable to a curtailment of legal, accounting and outside consulting fees. Operating loss, before other income expense of $5,694 for the current nine month period decreased $13,957 compared with the comparable period of the prior year. For the current three month period operating income, before other expense increased $33,425. For the current nine month period, a net loss of $7,617 was incurred compared with a net loss of $26,770 a decrease of $19,153. For the current three month period a net income of $13,272 compared with net loss from the prior period of $21,834 represents an increase of $35,106. Multi Solutions issued 75,000 shares of common stock to certain parties in lieu of indebtedness in the amount of $3,750. On August 18, 1997, Multi Solutions sold 250,000 shares of its common stock to investors, all of whom were accredited investors within the meaning of Rule 501 of Regulation D, for $50,000. Based upon the limited nature of the offering and the accredited status of the offerees, the offering qualifies for an exemption from registration under section 4(2) of the Securities Act of 1933, as amended. Major Customers In the first nine months of 1997, IBM accounted for 26.5% of total revenues. In the first nine months of 1996, IBM accounted for 29.5% of total revenues. Liquidity and Capital Resources At October 31, 1997, the Company had a negative working capital position of $455,487 and has been experiencing cash flow problems. The cash flow deficiency derives from certain outstanding receivable that remain uncollected coupled with normal fluctuations in sales. Management of the company has taken various steps to correct this situation. Overhead costs have been cut drastically as a result of staff reductions and curtailment of all outside marketing and advertising costs. In addition, senior staff salaries were reduced and executive officers' salaries were partly deferred. Secondly ,the company's 55.4% owned subsidiary, Multi Soft Inc. broadened its product base into the Windows environment and has made its Windows based products easier to learn and use. Multi Soft has entered into an International Software Licensing Agreement with IBM which grants IBM the non-exclusive rights and license to market an extended runtime version of Multi Soft's WCL product as an IBM logo product. This IBM EXTENDED VERSION of Multi Soft's WCL is named IMS Client ServerTM for Windows. It provides remote presentation support for IMS. Multi Soft and IBM also have entered into International Marketing Agreements to market Multi Soft's WCL Toolkit under the name IMS Client Server ToolkitTM for Windows in the United States, Puerto Rico, the Asian Pacific Region, Europe, the Middle East Africa and Canada. In addition, in September 1994, Multi Soft entered into an International Software Licensing Agreement with IBM's Personal Communications 3270 division ("P-Comm"). This agreement allows IBM to logo and market a P-Comm specific version of both the Toolkit and Runtime of Multi Soft's WCLTM. Pursuant to this agreement, the Company will receive a minimum maintenance of $15,000 per month plus royalties. In 1995 Multi Soft, Inc. entered a joint development and marketing agreement with Bellcore to develop and Market a Sun Solaris Unix version of its WCL product. The agreement provides that Bellcore pay Multi Soft for developing an extension of its WCL product for the Sun Solaris Unix environment. Also, it provides for a joint marketing agreement in which both companies will share marketing royalties. In 1997 Multi Soft, Inc. entered into a distribution agreement with Bellcore to distribute licensed software for use by Bellcore licensees as part of a Bellcore developed application called FEPS/TIRKS. The agreement provides for three years of Software Upgrade fees to ensure version compatibility and three years of maintenance and support. It is Multi Soft's intent to remain a technology provider and search out multiple distribution channels, rather than to try and grow via an expensive direct sales force. This allows the focus to stay on technology, with a low overhead cost for each distribution channel used. However, if the Company obtains additional funds from operations or otherwise, it plans to expand in-house marketing activities by advertising in trade publications and by conducting targeted mailing. Dividend Policy The Company has not declared or paid any dividends on its common stock since its inception and does not anticipate the declaration or payment of cash dividends in the foreseeable future. The Company intends to retain earnings, if any, to finance the development and expansion of its business. Future dividend policy will be subject to the discretion of the Board of Directors and will be contingent upon future earnings, if any, the Company's financial condition, capital requirements, general business conditions and other factors. Therefore, there can be no assurance that dividends of any kind will ever be paid. Effect of Inflation Management believes that inflation has not had a material effect on its operations for the periods presented. Cautionary Statement This Form 10-KSB contains certain forward-looking statements regarding , among other things, the anticipated financial and operating results of the company. For this purpose, forward-looking statements are any statements contained herein that are not statements of historical fact and include , but are not limited to, those preceded by or that include the words, "believes," "expects," "anticipated," or similar expressions. In connection with the safe harbor provisions of the Private Securities Litigation Reform act of 1995, the Company is including this cautionary statement identifying important factors that could cause the company's actual results to differ materially from those projected in forward looking statements made by, or on behalf of, the company. These factors, many of which are beyond the control of the company and include the Company's ability to, (I) continue as a going concern, (ii) continue to receive royalties from its existing licensing and consulting arrangements(iii) develop additional marketable software and technology, (iv) compete with larger, better capitalized competitors, and reverse ongoing liquidity and cash flow problems. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27. Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registration has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MULTI SOLUTIONS, INC. Dated: December 12, 1996 By: /s/ Charles J. Lombardo -------------------------------------------- Charles J. Lombardo, Chief Executive Officer, Chief Financial Officer and Treasurer