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 December 31, 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)
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 14, 2000
Common Stock, par value $.01 per share 4,185,015
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.
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
New York 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. 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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
1. Changes in Financial Condition
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 client acceptance of completed work,
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 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. 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
February 10, 2000 additional issuance of equity security could cause
significant dilution to purchasers of Common Stock.
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
Nine Months Ended December 31, 1999
The Company's revenue from its continuing operations increased 112% from
$1,867,129 for the nine months ended December 31, 1998 to $3,962,111 for the
nine months ended December 31, 1999 partly due to increased business
resulting from new plans and partly due to the timing of certain clients'
advertising expenditures and a heavy concentration of production work for
certain of the group's largest clients.
The Company's operating expenses increased 35% from $1,057,067 for the nine
months ended December 31, 1998 to $1,431,979 for the nine months
ended December 31, 1999. This increase is primarily due to increased activity
by the Company.
The components of the operating expenses are as follows:
* General and administrative costs increased 28% from $870,707 for the nine
months ending December 31, 1998 to $1,117,669 for the nine months ending
December 31, 1999. This was mainly due to due to increased activity by the
Company.
* Professional fees increased 363% from $28,875 for the nine months ending
December 31, 1998 to $133,747 for the nine months ending December 31, 1999.
The higher professional fees for the nine months ended December 31, 1999 were
due to accounting and consulting fees related to the preparation and filing
of the Company's annual report on Form 10-KSB for the year ended March 31,
1999 and quarterly reports on Form 10-QSB for the quarters ended June 30 and
September 30, 1999.
* There were no marketing costs for the nine months ended December 31, 1999
compared to $4,060 for the nine months ended December 31, 1998.
* Occupancy costs decreased by 2% from $120,193 for the nine months ending
December 31, 1998 to $118,204 for the nine months ending December 31, 1999.
* Amortization of goodwill increased from $8,022 for the nine months ending
December 31, 1998 to $14,632 for the six months ending December 31, 1999 due
to the adjustment in purchase price of K&C.
* Depreciation and amortization increased from $23,064 for the nine months
ending December 31, 1998 to $47,727 for the nine months ending December 31,
1999 due to the purchase of additional equipment.
Quarter Ended December 31, 1999
The Company's revenue from its continuing operations increased 133% from
$706,246 for the quarter ended December 31, 1998 to $1,642,428 for the
quarter ended December 31, 1999 due to the timing of certain clients'
advertising expenditures and due to a heavy concentration of product work for
certain of the group's largest clients. Management believes that revenues
and operating expenses for the quarter ended December 31, 1999 were
abnormally high for those reasons and expects both revenues and operating
expenses tobe significantly lower in the quarter ending March 31, 2000.
The Company's operating expenses increased 98% from $295,354 for the quarter
ended December 31, 1999 to $583,453 for the quarter ended December 31, 1998.
This increase is primarily due to increased activity by the Company.
The components of the operating expenses are as follows:
* General and administrative costs increased 73% from $241,167 for the
quarter ending December 31, 1998 to $417,264 for the quarter ending December
31, 1999. This was mainly due to the increase in staff.
* Professional fees went from $0 for the quarter ending December 31, 1998 to
$96,115 for the quarter ending December 31, 1999. The higher professional
fees for the nine months ended December 31, 1999 were due to accounting and
consulting fees related to the preparation and filing of the Company's annual
report on Form 10-KSB for the year ended March 31, 1999 and quarterly
reports on Form 10-QSB for the quarters ended June 30 and September 30, 1999.
* There were no marketing costs for the quarter ended December 31, 1999
compared to $2,146 for the quarter ended December 31, 1998.
* Occupancy costs decreased by 9% from $41,255 for the quarter ending
December 31, 1998 to $37,631 for the quarter ending December 31, 1999.
* Amortization of goodwill increased 185% from $2,674 for the quarter ending
December 31, 1998 to $24,811 for the quarter ending December 31, 1999 due to
the adjustment in purchase price for K&C.
* Depreciation and amortization increased 206% from $8,112 for the quarter
ending December 31, 1998 to $24,811 for the quarter ending December 31, 1999
due to the purchase of additional equipment.
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. 33-92988
e 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 December 31, 1999
-------------- -------------
Assets (unaudited)
Current:
Cash and cash equivalents $339,526 $ 11,908
Accounts receivable 533,904 363,819
Work in progress - 676,319
Prepaid expenses and other current assets 37,039 31,631
--------- ---------
Total current assets 910,469 1,083,677
Property and equipment, less accumulated depreciation
and amortization 134,830 156,484
Goodwill net of accumulated depreciation 196,275 344,833
Note receivable from Officer 123,975 123,975
Security Deposit 21,000 21,000
---------- ----------
$1,386,549 $1,729,969
========== ==========
Liabilities and Shareholders' Equity
Current:
Notes payable $ 80,000 $ 124,799
Accounts payable and accrued expenses 924,516 794,097
Deferred revenue 372,192 717,446
---------- ----------
Total current liabilities $1,376,708 $1,636,342
---------- ----------
Notes payable - 40,000
Notes payable - officers - 46,000
---------- ----------
Total liabilities $1,376,708 $1,722,342
---------- ----------
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
3,845,729 29,017 38,457
Additional paid-in capital 9,244,709 9,339,883
Deficit (9,263,935) (9,370,713)
---------- -----------
Total Shareholders' equity 9,791 7,627
---------- -----------
$1,386,549 $1,729,969
========== ===========
</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 Nine months Nine months
ended ended ended ended
December December December December
31, 1998 31, 1999 31, 1998 31, 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Advertising and Internet
Services $ 706,747 $1,642,428 $1,867,129 $3,962,111
Cost of goods 390,410 1,070,448 1,114,285 2,634,844
--------- ---------- ----------- ----------
315,836 571,980 752,844 1,327,267
--------- ---------- ----------- ----------
Expenses:
General and administrative 241,167 471,264 870,707 1,117,669
Professional fees - 96,115 28,875 133,747
Marketing 2,146 - 6,206 -
Occupancy 41,255 37,631 120,193 118,204
Goodwill 2,674 7,632 8,022 14,632
Depreciation and
amortization 8,112 24,811 23,064 47,727
--------- ------- ---------- ---------
295,354 583,453 1,057,067 1,431,979
--------- ------- ---------- ---------
Profit (loss) from
operations 20,482 (11,473) (304,223) (104,712)
Other income (expense):
Interest income - (429) 2,079 1,615
Interest expense (276) (1,116) (2,570) (3,681)
--------- --------- ------- -------
(276) (1,545) (491) (2,066)
Net profit (loss) from
continuing operations 20,206 (13,018) (304,714) (106,778)
Loss from early repayment -
of loan receivable - - (60,139) -
--------- ------- ------- ----------
Net Profit (loss) $ 20,206 $ (13,018) $(364,853) $ (106,778)
========= ========= ========= ==========
Net loss per share from
continuing operations $ (.01) $ (0.00) $ (.11) $ (0.03)
Loss from early repayment
of loan receivable - - (0.02) (0.00)
--------- ------- ------- -------
Net income (loss) per share $ (.01) $ (0.00) $ .14 $ (0.03)
========= ======= ======= =======
Weighted average common
shares outstanding 2,701,729 3,869,776 2,701,729 3,543,372
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
<TABLE>
<S> <C> <C>
Nine months Nine months
ended ended
December December
31, 1998 31, 1999
(unaudited) (unaudited)
Cash flows from operating activities:
Net income (loss) $ (364,853) $ (106,778
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and amortization 14,196 22,916
Changes in assets and liabilities:
Decrease (Increase) in:
Accounts receivable (311,442) 170,085
Other assets (68,990) (670,911)
Increase (decrease) in:
Accounts payable and accrued
expenses 495,900 259,634
----------- -----------
Total adjustments 99,664 (218,276)
----------- -----------
Net cash used in operating
activities (265,189) (325,054)
---------- -----------
Cash flows from investing activities:
Purchases of property and equipment - 44,570
Loss from Camelot Stock -
Goodwill (152,381) (148,558)
Software (28,744)
---------- -----------
Net cash used in investing
activities: (181,125) (193,128)
Cash flows from financing activities:
Issue of shares for assets 50,002 104,564
Increase in notesre ceivable
from officers (3,420)
Decrease in notes receivable 247,439
Increase in notes payable 28,200 86,000
----------- -----------
Net cash from financing activities 322,221 190,564
----------- -----------
Net increase (decrease) in cash and
cash equivalents (124,093) (327,618)
----------- -----------
Cash and cash equivalents,
beginning of period 211,095 339,526
----------- -----------
Cash and cash equivalents, end of
period $ 87,002 11,906
----------- -----------
</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 quarters ended June 30, 1999 and September 30,
1999 together with the accompanying notes included in the Company's
10-KSB for the fiscal year ended March 31, 1999. 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: February 14, 2000 /s/ Mark Blundell
Mark Blundell
President & Chief Financial Officer
EXHIBIT 11
COMPUTATION OF NET LOSS PER SHARE
Weighted Average # of shares
Description
---------------------------------------------------------------------
10/1/99 (beginning of Quarter) 3,806,729
12/31/99 (end of Quarter) 4,185,015
----------
Weighted Average 3,869,776
__________
Net Loss (13,018)
__________
Profit/share 0.00
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000933733
<NAME> NEW PARADIGM SOFTWARE CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 11,908
<SECURITIES> 0
<RECEIVABLES> 363,819
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,083,677
<PP&E> 296,678
<DEPRECIATION> 238,938
<TOTAL-ASSETS> 1,729,969
<CURRENT-LIABILITIES> 1,636,342
<BONDS> 86,000
0
0
<COMMON> 38,457
<OTHER-SE> (31,583)
<TOTAL-LIABILITY-AND-EQUITY> 1,729,969
<SALES> 1,642,428
<TOTAL-REVENUES> 1,642,428
<CGS> 1,070,448
<TOTAL-COSTS> 1,070,448
<OTHER-EXPENSES> 583,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,545
<INCOME-PRETAX> (13,018)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,018)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
