SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
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)
733 Third 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 August 14, 1998
Common Stock, par value $.01 per share 2,701,729
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
General
The Company is engaged in the Internet business through its
wholly owned subsidiary New Paradigm Inter-Link, Inc.("NPIL").
NPIL began operations in December 1995, and provides Internet
services to corporations and other organizations. Clients
include Novartis, the National Multiple Sclerosis Society and
the Association of the Bar of the City of New York. NPIL
provides organizations with the ability to utilize the
Company's expertise to devise strategies for the Internet,
and, where appropriate, to create Web sites. This expertise
includes: assembling an appropriate team of independent design
consultants and, if necessary, programmers; designing the site
from both technical and aesthetic perspectives; implementing
the design; and providing Web server hosting services
independently from a customer's own internal network to
ensure security.
A typical site currently brings in initial revenues of
approximately $20,000 - $30,000 on completion, with
continuing revenues for maintenance and changes throughout
the year of approximately $1,000- $3,000. The Company
believes that the growing complexity and sophistication of
Web sites will lead to a significant increase in these per-
site fees.
Examples of Web sites created by New Paradigm include:
Novartis - site for its "Program" product: www.programpet.com
Association of the Bar of the City of New York: www.abcny.org
Nuway Corporation: corporate Website: www.nuwaycorp.com
Smolin Lupin, accountants: corporate Website:
www.cpasmolinlupin.com
Novartis - site for its "Sentinel" product: www.petprotect.com
Josephthal & Co - corporate Website: www.josephthal.com
National Multiple Sclerosis Society - general website:
www.nmss.org
Proballfan: NFL football site written by fans: www.proballfan.com
The Company intends to market its Internet capabilities
through the strategic relationships which advertising
agencies have with their clients both by acquiring and by
forming business alliances with selected advertising agencies.
On April 1, 1998, the Company acquired certain assets and
assumed certain liabilities of Kapelus & Cipriano, Inc.,
("K&C") a Westchester-based full-service advertising
agency, through its wholly owned subsidiary New Paradigm
Acquisition I Co. Inc. ("NPAC"). NPAC was then renamed
SKC Advertising, Inc. ("SKC"). The Company intends to
further develop this business by launching new products and
services connected with the Internet.
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, timing of new product
and service introductions by the Company and its competitors, changes
in levels of the Company's operating expenditures, the size and timing
of customer orders, revenue received from the royalty from VIE, as
well as consulting, and training, increased competition, reduced
prices, the effect of currency exchange rate fluctuations, delays in
the development of new services or products, the costs associated with
the introduction of new products and services and the general state of
national and global economies. 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
Securities.
The Company will need additional financing prior to March 1999 and
thereafter if demand for the Company's products or services 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 opportunities arise which
require significant investment, or if revenues are significantly lower
than expected. 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, including offerings of preferred stock, 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
capital requirements, the Company may be required to limit its
operations significantly and may be unable to carry out its plan of
operation.
The Company intends to seek to raise additional capital by the
issuance of further equity securities. Preliminary negotiations are
currently underway with investment bankers to this end. However, there
can be no assurances that any such financing will be available or, if
it is available, that it will be available on acceptable terms. If
additional funds are raised through the issuance of equity securities,
the percentage ownership of the then current shareholders of the
Company will be reduced and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Common
Stock. Unless the market price of the Company's Common Stock increases
significantly over its market price on August 14, 1998 additional
issuances of equity security could cause significant dilution to
purchasers of Common Stock.
Comparison of fiscal quarters
1. Changes in Financial Condition
As of April 1, 1998, the Company acquired certain assets and
assumed certain liabilities of Kapelus & Cipriano, Inc.,
("K&C") a Westchester-based full-service advertising agency,
through its wholly owned subsidiary SKC. 250,000 common
shares were issued to the former owners of K&C.
The acquisition of assets generated goodwill of $160,403 which
is being written-off over 15 years. The acquistion also included
prepayments from customer ($120,000) of SKC which are included as a
liability, as work is performed these prepayments will be included
as revenue.
2. Results of Operations
The Company's revenue from its continuing operations increased 1,405%
from $32,450 for the quarter ended June 30, 1997 to $488,324 for the
quarter ended June 30, 1998 due to the increase in customers and
activity of SKC.
The Company's operating expenses increased 78% from $215,975 to $383,924
for the quarter ended June 30, 1998 compared to the quarter ended
June 31, 1997. This was primarily due to the increase in the
average number of employees that the Company employed through SKC.
The components of the operating expenses are as follows:
General and administrative costs increased 176% from $114,106 for the
quarter ending June 30, 1997 to $314,947 for the quarter ending June
30, 1998. This was mainly due to the increase in staff from SKC.
Professional fees decreased 25% from $28,077 for the quarter ending
June 30, 1997 to $20,950 for the quarter ending June 30, 1998. The
lower professional fees for the quarter ended June 30, 1998 were due
to reduced legal activity by the Company.
Marketing costs increase marginally from $2,447 for the quarter ended
June 30, 1997 to $3,142 for the quarter ended June 30, 1998.
Occupancy costs decreased by 33% from $58,667 for the quarter ending
June 30, 1997 to $39,016 for the quarter ending June 30, 1998. This
was due to a major decrease in rent on the Company's New York offices
which was partially offset additional premises for SKC.
The Company currently requires 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.
This 10-QSB contains statements relating to future results of the
Company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties,
including but not limited to those described in the Company's Post-
Effective Amendment No. 2 on form S-3 to the Registration Statement on
Form SB-2 (registration no. 33-92988NY). Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company does not undertake any
obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
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 June 29,
1998:
None
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
March 31, 1998 June 30, 1998
-------------- -------------
Assets (unaudited)
Current:
Cash and cash equivalents $202,030 $ 67,014
Restricted cash 9,065 9,065
Accounts receivable 45,993 184,878
Notes receivable, current portion 105,432 105,432
Other receivables and prepayments 12,500 140,677
--------- ---------
Total current assets 375,020 507,066
Property and equipment, less accumulated depreciation
and amortization 127,506 124,579
Goodwill - 157,729
Note receivable from Officer/Shareholder 117,135 117,135
Note receivable, long-term 142,007 112,007
-------- ----------
$761,668 $1,018,516
======== ==========
Liabilities and Shareholders' Equity
Current:
Loan payable $ 30,000 $ 56,217
Accounts payable and accrued expenses (Note 3) 248,351 518,660
Prepayments - 120,000
------- ---------
Total current liabilities 278,351 694,877
------- ---------
Commitments and contingencies (Note 6)
Redeemable Series D preferred stock - authorized and
outstanding - 50 shares, at redemption value (Note 7 (a)) 50 50
------- ---------
Shareholders' Equity (Notes 7 and 9):
Preferred stock, $.01 par value - shares
authorized 10,000,000:
Series A shares authorized-1,000,000; none issued
and outstanding - -
Series B shares authorized 2,000,000; none issued
and outstanding - -
Series C shares authorized 800,000; none issued
and outstanding - -
Common stock, $.01 par value - shares authorized
50,000,000; issued and outstanding 2,451,729
and 2,701,729 24,517 27,017
Additional paid-in capital 9,150,209 9,197,711
Deficit (8,691,459) (8,901,139)
---------- -----------
Total Shareholders' equity 483,267 323,589
---------- -----------
$761,668 $1,018,516
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Statements of Operations
<TABLE>
<S> <C> <C>
Three months Three months
ended ended
June 30, 1997 June 30, 1998
(unaudited) (unaudited)
Revenues:
Consulting design $ 32,450 $ 488,324
313,205
------- ----------
32,450 175,119
Expenses:
General and administrative 114,106 314,947
Professional fees 28,077 20,950
Marketing 2,447 3,195
Occupancy 58,667 39,016
Depreciation and amortization 12,678 3,142
------- ----------
215,975 383,924
------- ----------
Loss from operations (183,525) (208,805)
Other income (expense):
Interest income - 369
Interest expense - (1,244)
------- ----------
- ( 875)
Net loss from
continuing operations $ (183,525) $ (209,680)
Net loss from
discontinued operations $ (17,554) -
Gain from sale of
EDI division 200,998
-------- ----------
Net loss $ (81) $ (209,680)
Net loss per share from
continuing operations $ (.07) $ (.08)
Net loss per share from
discontinued operations (.01)
Profit per share from
sale of EDI division .08
------ ----------
Net loss per share $ (0.00) $ (.08)
Weighted average common
shares outstanding 2,451,729 2,701,729
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
<TABLE>
<S> <C> <C>
Three months Three months
ended ended
June 30, 1997 June 30, 1998
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (81) (209,680)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 42,317 2,927
Changes in assets and liabilities:
Increase in:
Accounts receivable 17,893 (138,885)
Gain on sale of assets (200,999) -
Other assets 96,588 (128,177)
Increase (decrease) in:
Accounts payable
and accrued expenses (100,970) 270,309
Prepayments - 120,000
Deferred rent 5,049 -
---------- --------
Total adjustments (140,122) 126,174
---------- --------
Net cash provided by (used in)
operating activities (140,203) (83,506)
---------- ---------
Cash flows from investing activities:
Issue of Shares for assets - 50,002
Sale of EDI Assets 115,373 -
Goodwill - (157,729)
---------- ---------
Net cash used in investing
activities: 115,373 (107,727)
---------- ---------
Cash flows from financing activities:
Note Receivable from sale of EDI (294,812)
Decrease in Notes Receivable - 30,000
Increase in Note Payable 63,500 27,217
---------- -------
Net cash used in financing
activities (231,312) 56,217
---------- -------
Net increase (decrease) in cash
and cash equivalents (254,142) (135,016)
---------- ---------
Cash and cash equivalents,
beginning of period 328,168 211,079
--------- --------
Cash and cash equivalents,
end of period $ 72,026 $ 76,079
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
Note 1 -
The accompanying financial statements should be read in conjunction
with the Company's financial statements for the fiscal year ended
March 31, 1998, together with the accompanying notes included in the
Company's 10-KSB for the fiscal year ended March 31, 1997. 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: August 14, 1998 /s/ Mark Blundell________________________
Mark Blundell
President & Chief Financial Officer
EXHIBIT 11
COMPUTATION OF NET LOSS PER SHARE
Weighted Average # of shares
Description
---------------------------------------------------------------------
4/1/98 (beginning of Quarter) 2,701,729
6/30/98 (end of Quarter) 2,701,729
----------
Weighted Average 2,701,729
__________
Net Loss (209,680)
__________
Loss/share (0.08)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 76,026
<SECURITIES> 0
<RECEIVABLES> 184,878
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 507,066
<PP&E> 124,579
<DEPRECIATION> 3,142
<TOTAL-ASSETS> 1,018,516
<CURRENT-LIABILITIES> 694,877
<BONDS> 0
0
50
<COMMON> 27,017
<OTHER-SE> 296,572
<TOTAL-LIABILITY-AND-EQUITY> 1,018,516
<SALES> 0
<TOTAL-REVENUES> 488,324
<CGS> 313,205
<TOTAL-COSTS> 175,205
<OTHER-EXPENSES> 383,924
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (875)
<INCOME-PRETAX> (209,680)
<INCOME-TAX> 0
<INCOME-CONTINUING> (209,680)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (209,680)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
