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 September 30, 1999
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)
630 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)
Former address: 733 Third Avenue, New York, NY 10017
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 December 29, 1999
Common Stock, par value $.01 per share 3,921,029
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 Operation
Comparison of fiscal quarters
General
New Paradigm Software Corp. (the "Company") was organized in July 1993 and
commenced operations in November 1993. The Company completed its initial
public offering in August 1995. Since the sale of its computer software
business in 1997, the Company has repositioned itself as an Internet
company. The Company has concentrated on partnering with advertising agencies
as they have relationships with target customers. As an Internet company,
the Company has developed several proprietary Internet software products,
which are instrumental for clients to build and maintain an effective and
efficient web site. The Company intends to develop separate businesses based
on these Internet products as resources permit.
The Company is engaged in the Internet business through its wholly owned
subsidiary New Paradigm Inter-Link, Inc.("NPIL"). The Company intends to
continue to market its Internet capabilities by acquiring and by forming
alliances with selected advertising agencies who have established strategic
relationships with their clients. NPIL began operations in December 1995,
and provides Internet services to corporations and other organizations.
Advertising agencies that arepartners of NPIL include; SKC Advertising ( a
fully owned subsidiary of the Company) Biderman Kelly Krimstein & Partners,
Moscato Marsh, Earle Palmer Brown New York and Solay Keller Advertising.
Clients include Novartis, Motorola, New York University, Parent time 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 to create Internet applications including a Web site. 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.
Website Services
NPIL provides organizations with the ability to utilize the Company's
expertise in creating a Web site. 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 then providing Web server
hosting services independently from a customer's own internal network to
ensure security. NPIL specializes in providing custom facilities to enable
a customer's presence on the Internet to be constantly evolving and
interesting without adding to their existing workload. For example, the
site for the Association of the Bar of the City of New York is remotely
updated by association staff. A small software program ("applet") created
by NPIL staff in Java - a common computer programming language for the
Internet - allows customers to utilize information in the format in
which it was created under existing word processor programs such as
Microsoft Word to automatically update their Web site from their own offices.
No translations or transitions are required - the customer's staff member
simply uses the common "cut and paste" technique utilized within many
programs to move the required document into the NPIL applet. Typical revenues
for building web sites has increased from $20,000 - $30,000 to approximately
$60,000 - $100,000 with continuing revenues for maintenance and changes. The
Company has created more than 20 Web sites for customers of this service to
date.
Examples of web sites created by New Paradigm include:
Novartis - for its "Program" product: www.programpet.com
Association of the Bar of the City of New York: www.abcny.org
NewYork University for its School of Continuing Studies: www.scps.nyu.edu
Novartis - for its "Sentinel" product: www.petprotect.com
Josephthal & Co - corporate Website: www.josephthal.com
Novartis - site for its "Clomicalm" product: www.clomicalm.com
The Company is marketing its services primarily through indirect sales to
advertising agencies. One staff member is engaged full time in direct activity.
The sales through advertising agencies result from an integrated media campaign
where the Internet portion is subcontracted to NPIL. In addition, the Company
believes that clients of any advertising agencies that it may acquire in the
future are likely prospects for the Company's Internet related services.
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.
1. Changes in Financial Condition
As of July 1, 1999, the Company acquired certain assets and assumed
certain liabilities of Sutton & Partners, Inc., ("SP") a Connecticut-
based full-service advertising agency, through its wholly owned
subsidiary New Paradigm Acquisition Co II, a wholly owned subsidiary
of the Company. 50,000 common shares of the Company were issued to the
former owners of SP.
The acquisition of assets generated goodwill of $84,237 which is being
written-off over 15 years.
2. Results of Operations
Six Months Ended September 30, 1999
The Company's revenue from its continuing operations increased 100%
from $1,160,883 for the six months ended September 30, 1998 to $2,319,683
for the six months ended September 30, 1999 due to the increase in
customers for both advertising and internet related business.
The Company's operating expenses increased 11% from $761,713 to $848,526
for the six months ended September 30, 1999 compared to the six months
ended September 30, 1998. This was primarily due to the increase in the
average number of employees.
The components of the operating expenses are as follows:
General and administrative costs increased 11% from $629,540 for the
six months ending September 30, 1998 to $700,405 for the six months
ending September 30, 1999. This was mainly due to the increase in staff.
Professional fees increased 30% from $28,875 for the six months ending
September 30, 1998 to $37,632 for the six months ending September 30,
1999. The higher professional fees for the six months ended
September 30, 1999 were due to increased activity by the Company.
There were no marketing costs for the six months ended September 30, 1999
compared to $4,060 for the six months ended September 30, 1998.
Occupancy costs increased by 2% from $78,938 for the six months ending
September 30, 1998 to $80,573 for the six months ending September 30, 1999.
Amortization of goodwill increased from $5,348 for the six months ending
September 30, 1998 to $7,000 for the six months ending September 30, 1999
due to the adjustment in purchase price for K&C.
Depreciation and amortization increased from $14,952 for the six months
ending September 30, 1998 to $22,916 for the six months ending
September 30, 1999 due to the purchase of additional equipment.
Quarter Ended September 30, 1999
The Company's revenue from its continuing operations increased 81%
from $672,559 for the quarter ended September 30, 1998 to $1,216,964 for
the quarter ended September 30, 1999 due to the increase in customers
for both advertising and internet related business.
The Company's operating expenses increased 26% from $377,789 to $474,718
for the quarter ended September 30, 1999 compared to the quarter ended
September 31, 1998. This was primarily due to the increase in the
average number of employees that the Company employed.
The components of the operating expenses are as follows:
General and administrative costs increased 28% from $314,593 for the
quarter ending September 30, 1998 to $402,264 for the quarter ending
September 30, 1999. This was mainly due to the increase in staff.
Professional fees increased 80% from $7,925 for the quarter ending
September 30, 1998 to $15,033 for the quarter ending September 30, 1999.
The higher professional fees for the quarter ended September 30, 1999
were due to increased activity by the Company.
There were no marketing costs for the quarter ended September 30, 1999
compared to $865 for the quarter ended September 30, 1998.
Occupancy costs increased by 6% from $39,922 for the quarter ending
September 30, 1998 to $42,255 for the quarter ending September 30, 1999.
Amortization of goodwill increased from $2,674 for the quarter ending
September 30, 1998 to $3,500 for the quarter ending September 30, 1999
due to the adjustment in purchase price for K&C.
Depreciation and amortization increased from $11,810 for the quarter
ending September 30, 1998 to $11,666 for the quarter ending
September 30, 1999.
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
September 30, 1999:
None
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
March 31, 1999 June 30, 1999
-------------- -------------
Assets (unaudited)
Current:
Cash and cash equivalents $339,526 $ 85,588
Accounts receivable 533,904 342,869
Work in progress - 270,000
Prepaid expenses and other current assets 37,039 81,917
--------- ---------
Total current assets 910,469 780,374
Property and equipment, less accumulated depreciation
and amortization 134,830 164,424
Goodwill net of accumulated depreciation 196,275 352,465
Note receivable from Officer 123,975 123,975
Security Deposit 21,000 21,000
---------- ----------
$1,386,549 $1,442,238
========== ==========
Liabilities and Shareholders' Equity
Current:
Notes payable $ 80,000 $ 124,951
Accounts payable and accrued expenses 924,516 743,171
Deferred revenue 372,192 467,916
---------- ----------
Total current liabilities $1,376,708 $1,336,038
---------- ----------
Notes payable - 40,000
Notes payable - officers - 50,000
---------- ----------
Total liabilities $1,376,708 $1,426,038
---------- ----------
Commitments and contingencies
Redeemable Series D preferred stock - authorized and
outstanding - 50 shares, at redemption value 50 -
------- ---------
Shareholders' Equity :
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 2,901,729
and 3,846,029 29,017 38,210
Additional paid-in capital 9,244,709 9,334,685
Deficit (9,263,935) (9,357,695)
---------- -----------
Total Shareholders' equity 9,791 16,200
---------- -----------
$1,386,549 $1,442,238
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Statements of Operations
<TABLE>
<S> <C> <C> <C> <C>
Three months Three months Six Months Six months
ended September ended September ended September ended September
30, 1998 30, 1999 30, 1998 30, 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Advertizing,internet services 627,287 1,216,964 1,160,883 2,319,683
Cost of Goods 410,670 776,163 737,875 1,564,396
------- --------- --------- ---------
261,889 440,801 437,008 755,287
Expenses:
General and administrative 314,593 402,264 629,540 700,405
Professional fees 7,925 15,033 28,875 37,632
Marketing 865 - 4,060 -
Occupancy 39,922 42,255 78,938 80,573
Goodwill 2,674 3,500 5,348 7,000
Depreciation and amortization 11,810 11,666 14,952 22,916
------- ------- ------- -------
377,789 474,718 761,713 848,526
------- ------- ------- -------
Loss from operations (115,900) (33,917) (324,705) (93,239)
Other income (expense):
Interest income 1,710 492 2,079 2,044
Interest expense (1,050) (1,662) (2,294) (2,565)
------- ------ ------ -------
660 (1,233) (215) (521)
Net loss from continuing
operations (115,240) (34,444) (324,920) (93,760)
Net loss from early repayment
of loan receivable (60,139) - (60,139) -
------- -------- ---------- ------
Net income (loss) (175,379) (34,444) (385,059) (93,760)
------- -------- ---------- ------
Net loss per share from
continuing operations $ (0.04) $ (.01) $ (0.12) $ (.02)
Net loss per share from
discontinued operations (0.02) - (0.02) -
------- ------ ------ ------
Net income (loss) per share (0.06) (.01) (0.14) (.02)
Weighted average common shares
outstanding 2,701,729 3,921,029 2,701,729 3,883,529
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Statement of Cashflow
<TABLE>
<S> <C> <C>
Six months Six months
ended September ended September
30, 1998 30, 1999
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income (loss) $ (385,059) $ (97,760)
Adjustments to reconcile net
income (loss) to net cash used in
operating activities:
Depreciation and amortization 14,623 29,916
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (399,584) 191,035
Work in progress - (270,000)
Other assets (141,556) (44,878)
Increase (decrease) in:
Accounts payable and accrued
expenses 456,604 (181,345)
Prepayments 120,000 -
Deferred revenue - 95,724
--------- -----------
Total adjustments 50,087 (134,597)
--------- -----------
Net cash used in operating activities (344,972) (228,357)
Cash flows from investing activities:
Acquisition of property and equipment - (52,510)
Goodwill (155,055) (163,191)
--------- -----------
Net cash used in investing activities: (105,053) (215,701)
Cash flows from financing activities:
Issue of common stock 50,002 100,119
Increase in Notes receivable from officers (3,420) -
Proceeds of notes receivable 247,439 -
Proceeds of notes payable 28,849 40,000
Proceeds of notes payable-officers - 50,000
--------- -----------
Net cash from financing activities 272,868 190,119
--------- -----------
Net increase (decrease) in cash
and cash equivalents (167,157) (253,939)
Cash and cash equivalents,
beginning of period 211,095 339,526
--------- -----------
Cash and cash equivalents, end of period $ 43,938 $ 85,587
========= ===========
</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, 1999 and the quarter ended June 30, 1999 together with the
accompanying notes included in the Company's 10-KSB for the fiscal
year ended March 31, 1999 and the Company's 10-QSB for the quarter
ended September 30, 1998. 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: December 29, 1998
/s/ Mark Blundell_____________________
Mark Blundell
President & Chief Financial Officer
EXHIBIT 11
COMPUTATION OF NET LOSS PER SHARE
Weighted Average # of shares
Description
---------------------------------------------------------------------
7/1/98 (beginning of Quarter) 3,921,029
9/30/98 (end of Quarter) 3,921,029
----------
Weighted Average 3,921,029
__________
Net Loss (34,797)
__________
Loss/share (0.01)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 85,588
<SECURITIES> 0
<RECEIVABLES> 342,869
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 780,374
<PP&E> 164,424
<DEPRECIATION> 11,666
<TOTAL-ASSETS> 1,442,238
<CURRENT-LIABILITIES> 1,336,038
<BONDS> 0
0
0
<COMMON> 39,210
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,442,238
<SALES> 0
<TOTAL-REVENUES> 1,216,964
<CGS> 775,467
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 474,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,662)
<INCOME-PRETAX> (34,444)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,444)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
