Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1996
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 : 0-26336
________________________New Paradigm Software Corp._________________________
(Exact name of Registrant as specified in its charter)
____________New York___________ _______________13-3725764___________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
335 Madison Avenue
__________________________New York, New York 10017__________________________
(Address of principal executive offices)
_________(212) 557-0933________
(Registrant's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the registrant (1) has 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 ___
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
_______________Class__________________ __Outstanding as of February 10, 1995__
Common Stock, par value $.01 per share 2,446,729
Transitional Small Business Format (Check one): Yes___ No _X_
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Financial statements are included herein following Part II, Item 6. These
statements are unaudited, but reflect all adjustments that, in the opinion
of management, are necessary to provide a fair statement of the results for
the periods covered. All such adjustments are of a normal recurring nature
except where stated.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
New Paradigm Software Corp. (the "Company") is engaged in the development,
marketing, licensing and support of its COPERNICUS(TM) software for large-
scale computer users. Most large organizations have many different computer
systems. The need to pass information among those often incompatible
systems is growing rapidly. Passing information among disparate computer
systems is called "systems integration." COPERNICUS automates systems
integration by converting data entered into or generated by one program or
system into the form needed by another program or system. The Company
believes that its customers can achieve systems integration using
COPERNICUS in a more timely and cost effective way than the traditional
approach of writing custom software on a case-by-case basis. An
application for a United States patent on COPERNICUS is pending.
The Company was formed in July 1993 and the results of operations for the
period from July 20, 1993 (inception) to June 30, 1995 reflect start-up
costs and the costs of developing and commercializing the Company's
software.
The Company has also established two subsidiaries, New Paradigm Commerce,
Inc. ("NPC") (formerly New Paradigm Golden Link), which provides electronic
data interchange ("EDI") services (the conveying of business documents
electronically), and New Paradigm Inter-Link, Inc., which was created to
research and develop commercial applications for the Internet.
The Company's revenues consist of license fees for the Company's COPERNICUS
software, maintenance fees and COPERNICUS pilot project fees. The Company's
NPC subsidiary charges fees primarily on a per transaction basis.
The Company's revenues and profitability may vary significantly both in the
case of consecutive quarters and in the case of a quarter compared to the
corresponding quarter of the preceding year. Such variations may result
from, among other factors, lengthy pilot testing for COPERNICUS and any
other New Paradigm application that the Company might develop, timing of
new product and service introductions by the Company and its competitors,
changes in levels of the Company's operating expenditures, including the
Company's expenditures on research and development, the size and timing of
customer orders, the amount and timing of royalty payments and license fees
by licensees, as well as consulting, training and maintenance fees,
increased competition, reduced prices, the effect of currency exchange rate
fluctuations, delays in the development of new products, the costs
associated with the introduction of new products and the general state of
national and global economies. The Company expects to derive substantially
all of its revenues from royalties and license fees, and consulting,
training and maintenance fees. Accordingly, the Company's revenues will
vary with the demand for its products and services. In addition, the
Company expects that it typically will require significant advance payments
from customers upon establishing a new licensing arrangement. The New
Paradigm Commerce subsidiary's current customers are principally involved
in selling goods to the retail industry. All changes that could affect the
retail industry would strongly affect this subsidiary's revenues.
Accordingly, the timing of receipt of payments and the recognition of
revenues in a given period could result in significant periodic
fluctuations in liquidity and financial results. As a result of such
factors, the Company's revenues and profitability for any particular
quarter are not necessarily indicative of any future results. Fluctuations
in quarterly results may also result in volatility in the price of the
Company's securities.
Based on the Company's current plan of operations it is anticipated that the
remaining net proceeds from the IPO and the Company's expected operating
revenues will provide sufficient working capital until late 1996. The
Company will need additional financing prior to late 1996 and thereafter if
demand for COPERNICUS is sufficiently great to require expansion at a faster
rate than anticipated, or if research and development expenditures or the
extent of service and customer support that the company is required to
provide are greater than expected or other opportunites arise which require
significant investment. Additionally, the Company may require significant
additional financing to complete any acquisition. If financing is required,
such financing may be raised through additional equity offerings, joint
ventures or other collaborative relationships, borrowings and other sources.
There can be no assurance that additional financing will be available or, if
it is available, that it will be available on acceptable terms. If adequate
funds are not available to satisfy either short or long-term requirements,
the Company may be required to limit its operations significantly and may
be unable to carry out its plan of operation.
Comparison of fiscal quarters
1. Changes in Financial Condition
As of July 1, 1995 the Company recognized the technological feasibility of
its COPERNICUS product. According to FASB# 86 the Company is therefore
required to capitalize its COPERNICUS development costs incurred since that
date.
2. Results of Operations
The Company's revenue increased 15% from $71,952 for the quarter ended
June 30, 1995 to $82,942 for the quarter ended June 30, 1996 due to
increased maintenance fees and the increase in customers and activity of NPC.
The Company's operating expenses rose 62% from $647,559 for the quarter
ended June 30, 1995 to $1,048,600 for the quarter ended June 30, 1996. The
increase was primarily due to an increase in the number of employees.
The components of the operating expenses are as follows:
Professional fees decreased 49% from $151,269 for the quarter ended June
30, 1995 to $77,730 for the quarter ended June 30, 1996. The higher
professional fees for the quarter ended June 30, 1995 were due to legal
fees incurred in preparation for its initial public offering.
General and administrative costs increased 175% from $206,778 for the
quarter ended June 30, 1995 to $569,303 for the quarter ended June 30,
1996. This was primarily due to an increase in staff. The Company had 16
employees on June 30, 1995 and 36 on June 30, 1996.
Marketing costs rose 175% from $113,014 for the quarter ended June 30, 1995
to $311,233 for the quarter ended June 30, 1996. This was primarily due to
the increase in personnel in the sales and marketing area from 2 on June
30, 1995 to 7 on June 30, 1996, costs relating to an advertising campaign
in trade magazines and and increase in the amount of marketing materials
being produced and distributed.
Research and development costs in respect of COPERNICUS are no longer
expensed by the Company. According to FASB# 86, "Accounting for Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed", the Company
believes it is now required to capitalize its COPERNICUS research and
development expenses. Capitalized software expenses consist principally of
salaries and certain other expenses related to development and modifications
of COPERNICUS capitalized in accordance with the provisions of FASB# 86.
Amortization of capitalized software costs is provided at the greater of
the ratio of current product revenue to the total of current and
anticipated product revenue or on a straight-line basis over the estimated
economic life of the software, which is not more than five years. $81,250
was capitalized during the quarter ended June 30, 1996.
Occupancy costs fell 37% from $65,711 for the quarter ended June 30, 1995
to $41,273 for the quarter ended June 30, 1996. This was due to the
Company securing a lease with more favorable terms for its New York
offices.
The Company currently requires all of its overseas customers to pay in US
dollars and the vast majority of its expenses are in US dollars. The
Company does not presently engage in any hedging activities with respect to
foreign currency exchange rate risks.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this quarterly report on Form 10-QSB:
Exhibit 11. Statement re: computation of per share earnings (losses).
(b) The following reports have been filed on Form 8-K since March 31, 1996.
1) June 21, 1996, New Paradigm Announces $500,000 Enterprise license for
Delta Airlines through Transquest.
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Balance Sheets
<TABLE>
June 30,
-----------------------------
1995 1996
(unaudited) (unaudited)
------------- -------------
<S> <C> <C>
Assets
Current:
Cash and cash equivalents $ 73,952 $ 947,918
Accounts receivable 169,810 167,596
Receivable from related party - 50,000
Other receivables and prepayments - 148,644
-----------------------------
Total current assets 243,762 1,314,158
Property and equipment, less accumulated depreciation and
amortization 181,596 344,889
Deferred registration and financing costs, less accumulated
amortization 832,417 -
Investment in restricted common stock at market value - 185,543
Other assets, less accumulated amortization 82,171 402,571
-----------------------------
$ 1,339,946 $ 2,247,161
_____________________________
Liabilities and Shareholders' Equity (Capital Deficit)
Current:
Accounts payable and accrued expenses $ 1,018,351 $ 247,893
Deferred revenue 72,442 72,375
Short term bank loans 100,000 -
Due to shareholder 139,860 -
-----------------------------
Total current liabilities 1,330,653 320,268
Long-term debt:
Promissory notes (net of unamortized discount of $218,489 and
none) at discounted amount (face value of $1,532,500 and none) 1,577,752 -
-----------------------------
Total liabilities 2,908,405 320,268
-----------------------------
Shareholders' equity (capital deficit):
Preferred stock, $.01 par value - shares authorized 10,000,000:
Series A shares authorized, 1,000,000 and none; issued and
outstanding 28,000 and none 280 -
Series B shares authorized 2,000,000 and none; issued and
outstanding 1,212,500 and none 13,125 -
Common stock, $.01 par value - shares authorized 50,000,000;
issued and outstanding 693,323 and 2,446,729 6,946 24,467
Additional paid-in capital 1,857,371 9,149,652
Unrealized loss on investment in restricted common stock - (164,457)
Deficit accumulated during the development stage (3,446,181) (7,082,769)
-----------------------------
Total shareholders' equity (capital deficit) (1,568,459) 1,926,893
-----------------------------
$ 1,339,946 $ 2,247,161
_____________________________
See accompanying notes to consolidated financial statements
</TABLE>
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Statements of Operations
Three months Three months
ended ended
June 30, 1995 June 30, 1996
--------------- ---------------
(unaudited) (unaudited)
Revenues:
Software fees, royalties and licensing
fees $ 35,000 $ -
Consulting, maintenance and other fees 36,952 82,942
--------------- ---------------
71,952 82,942
--------------- ---------------
Expenses:
General and administrative 206,778 569,303
Professional fees 151,269 77,730
Marketing 113,014 311,233
Research and development 94,600 -
Occupancy 65,711 41,273
Depreciation and amortization 16,187 49,061
--------------- ---------------
647,559 1,048,600
--------------- ---------------
Loss from operations (575,607) (785,658)
--------------- ---------------
Other income (expense):
Interest income 4,935 17,079
Interest expense (45,522) -
Amortization of debt discount
and deferred financing costs (256,038) -
--------------- ---------------
(296,625) 17,079
--------------- ---------------
Net loss $(872,232) $(948,579)
--------------- ---------------
Net loss per share $ (.73) $ (.39)
--------------- ---------------
Weighted average common shares outstanding 1,190,134 2,446,729
_______________ _______________
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
Three months Three months
ended ended
June 30, 1995 June 30, 1996
----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (872,232) $ (948,578)
----------------- -----------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 16,187 49,061
Amortization of debt discount and deferred financing costs 256,038 -
Noncash interest expense 45,522 -
Changes in assets and liabilities:
Increase in:
Accounts receivable (140,291) (59,533)
Other receivables and prepayments - (40,083)
Increase (decrease) in:
Accounts payable and accrued expenses 653,673 27,552
Deferred revenue 72,442 54,875
----------------- ------------------
Total adjustments 903,571 31,872
----------------- ------------------
Net cash provided by (used in) operating activities 31,339 (916,706)
----------------- ------------------
Cash flows from investing activities:
Purchases of property and equipment (52,288) (19,297)
COPERNICUS development costs - (81,250)
Patents, trademarks and organization costs (3,271) (52,300)
----------------- ------------------
Net cash used in investing activities: (55,559) (152,847)
----------------- ------------------
Cash flows from financing activities:
Proceeds from private placements 89,000 -
Borrowings from shareholder 71,909 -
Proceeds from bank loan 100,000 -
Registration and financing costs (557,030) -
----------------- ------------------
Net cash used in financing activities (296,121) -
----------------- ------------------
Net increase (decrease) in cash and cash equivalents (320,341) (1,069,554)
Cash and cash equivalents, beginning of period 394,293 2,017,472
----------------- ------------------
Cash and cash equivalents, end of period $ 73,952 $ 947,918
_________________ __________________
See accompanying notes to consolidated financial statements
</TABLE>
Note 1 -
The accompanying financial statements should be read in conjunction with
the Company's financial statements for the fiscal year ended March 31,
1996, together with the accompanying notes included in the Company's 10-KSB
for the fiscal year ended March 31, 1996. In the opinion of management, the
interim statements reflect all adjustments which are necessary for a fair
statement of the results of the interim periods presented. The interim
results are not necessarily indicative of the results for the full year.
SIGNATURES
Pursuant to the requirements 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.
NEW PARADIGM SOFTWARE CORP.
(Registrant)
Date: September 18, 1996 _/s/ John Brann________________
John Brann
Vice President of Technology & Secretary
EXHIBIT 11
COMPUTATION OF NET LOSS PER SHARE
Weighted Average # of shares
Description
-------------------------------------------------------------------
4/1/96 (beginning of Quarter) 2,446,729
6/30/96 (end of Quarter) 2,446,729
---------
Weighted Average 2,446,729
_________
Net Loss (948,579)
_________
Loss/share (0.39)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 947,918
<SECURITIES> 185,543
<RECEIVABLES> 217,596
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,314,158
<PP&E> 344,889
<DEPRECIATION> 49,061
<TOTAL-ASSETS> 2,247,161
<CURRENT-LIABILITIES> 320,268
<BONDS> 0
0
0
<COMMON> 24,467
<OTHER-SE> 2,082,426
<TOTAL-LIABILITY-AND-EQUITY> 2,247,161
<SALES> 0
<TOTAL-REVENUES> 82,942
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,048,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (948,578)
<INCOME-TAX> 0
<INCOME-CONTINUING> (948,578)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (948,578)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
