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, 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)
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 December 28, 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
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.
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. The agreement allowed for
additional payments to be made to the owners of SKC based on performance
of SKC. Consequently as of April 1 1999, 89,286 shares of common
stock and $50,000 were issued to the former owners of K&C.
As of April 1, 1999 all the owners of the series D Preferred Stock
elected to convert their entire holdings into an aggregate of
850,000 shares of the Company's Common Stock
2. Results of Operations
The Company's gross revenue from its continuing operations increased 125%
from $488,324 for the quarter ended June 30, 1998 to $1,102,719 for the
quarter ended June 30, 1999 due to the increase in customers.
The Company's operating expenses decreased 2% from $383,924 to $373,806
for the quarter ended June 30, 1999 compared to the quarter ended
June 31, 1998.
The components of the operating expenses are as follows:
General and administrative costs decreased 5% from $314,947 for the
quarter ending June 30, 1998 to $298,140 for the quarter ending June
30, 1999.
Professional fees increased 13% from $20,950 for the quarter ending
June 30, 1998 to $22,598 for the quarter ending June 30, 1999.
There were no marketing costs for the quarter ended June 30, 1999
compared to $3,142 for the quarter ended June 30, 1998.
Occupancy costs decreased by 2% from $39,016 for the quarter ending
June 30, 1998 to $38,317 for the quarter ending June 30, 1999.
Amortization of goodwill increased from $2,674 for the quarter ending
June 30, 1998 to $3,500 for the quarter ending June 30, 1999 due to
the adjustment in purchase price for K&C.
Depreciation and amortization increased from $2,674 for the quarter ending
June 30, 1998 to $11,250 for the quarter ending June 30, 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. 33-92988NY). 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 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 $ 5,677
Accounts receivable 533,904 669,079
Prepaid expenses and other current assets 37,039 70,213
--------- ---------
Total current assets 910,469 744,969
Property and equipment, less accumulated depreciation
and amortization 134,830 136,182
Goodwill net of accumulated depreciation 196,275 273,132
Note receivable from Officer 123,975 123,975
Security Deposit 21,000 21,000
---------- ----------
$1,386,549 $1,299,258
========== ==========
Liabilities and Shareholders' Equity
Current:
Notes payable $ 80,000 $ 64,215
Accounts payable and accrued expenses 924,516 1,136,445
Deferred revenue 372,192 24,180
---------- ----------
Total current liabilities $1,376,708 $1,224,840
---------- ----------
Notes payable - 40,000
Notes payable - officers - 50,000
---------- ----------
Total liabilities $1,376,708 $1,314,840
---------- ----------
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 38,460
Additional paid-in capital 9,244,709 9,266,473
Deficit (9,263,935) (9,320,516)
---------- -----------
Total Shareholders' equity 9,791 (15,583)
---------- -----------
$1,386,549 $1,299,257
========== ===========
</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, 1998 June 30, 1999
(unaudited) (unaudited)
Revenues:
Consulting design $ 488,324 $ 1,102,719
313,205 786,174
------- ----------
175,119 316,545
Expenses:
General and administrative 314,947 298,141
Professional fees 20,950 22,598
Marketing 3,195 -
Occupancy 39,016 38,317
Goodwill 2,674 3,500
Depreciation and amortization 3,142 11,250
------- ----------
383,924 373,806
------- ----------
Loss from operations (208,805) (57,261)
Other income (expense):
Interest income 369 1,615
Interest expense (1,244) (903)
------- ----------
( 875) 711
--------- ----------
Net loss $(209,680) $(56,550)
========== ==========
Per share data
Net loss per share $ (.08) $ (.02)
Weighted average common
shares outstanding 2,701,729 3,846,029
</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 $(209,680) $ (56,550)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,927 14,750
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (138,885) (135,175)
Notes payable - (15,785)
Other assets (128,177) (33,174)
Increase (decrease) in:
Accounts payable
and accrued expenses 270,309 211,929
Prepayments 120,000 -
Deferred rent - (348,012)
---------- --------
Total adjustments 126,174 (307,526)
---------- --------
Net cash provided by (used in)
operating activities (83,506) (364,076)
---------- ---------
Cash flows from investing activities:
Acquisition of property and equiment - (12,602)
Acquisition of business net of cash (157,729) (80,357)
---------- ---------
Net cash used in investing
activities: (157,729) (92,959)
---------- ---------
Cash flows from financing activities:
Issue of common stock 50,002 31,157
Proceeds of notes payable 30,000 40,000
Proceeds of note payable-officers 26,217 50,000
---------- -------
Net cash used in financing
activities 106,219 121,157
---------- -------
Net increase (decrease) in cash
and cash equivalents (135,016) (333,819)
Cash and cash equivalents,
beginning of period 211,079 339,526
--------- --------
Cash and cash equivalents,
end of period $ 76,079 $ 5,677
========== ==========
</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, 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: December 28, 1999 /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) 3,846,029
6/30/98 (end of Quarter) 3,846,029
----------
Weighted Average 3,846,029
__________
Net Loss (56,550)
__________
Loss/share (0.02)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 5,677
<SECURITIES> 0
<RECEIVABLES> 669,079
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 744,969
<PP&E> 136,182
<DEPRECIATION> 14,750
<TOTAL-ASSETS> 1,299,258
<CURRENT-LIABILITIES> 1,224,840
<BONDS> 0
0
50
<COMMON> 38,460
<OTHER-SE> 296,572
<TOTAL-LIABILITY-AND-EQUITY> 1,299,257
<SALES> 0
<TOTAL-REVENUES> 1,102,719
<CGS> 786,174
<TOTAL-COSTS> 316,545
<OTHER-EXPENSES> 373,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (903)
<INCOME-PRETAX> (56,550)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,550)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
