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, 2000
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.
Outstanding as of August 10, 2000 Common Stock, par value $.01 per share
4,644,297
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.
The Company is engaged in the following businesses:
- Internet research and development of commercial applications 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.
- Advertising through its wholly owned subsidiary New Paradigm Advertising,
Inc. ("NPA"). NPA began operation in April 1998 by acquiring certain assets and
assuming certain liabilities of (1) Kapelus & Cipriano, Inc. a Westchester, New
York-based full-service advertising agency trading as Schoen, Kapelus & Cipriano
("SKC") and (2) Sutton & Partners, Inc. ("S&P"), a Greenwich, Connecticut based
advertising agency. The S&P transaction took place on July 1, 1999.
- Public relations through its wholly owned subsidiary GMG Public Relations,
Inc. ("GMG"). GMG began operation in January 2000 by acquiring certain assets
and assuming certain liabilities of a company then named GMG Public Relations,
Inc. The Company acquired the right to re-name its own subsidiary GMG Public
Relations, Inc. in this transaction.
The Company intends to continue to market its Internet capabilities by acquiring
and by forming alliances with selected advertising agencies and other marketing
communications businesses that have established strategic relationships with
their clients. Advertising agencies that are partners with the Company include
the following:
- Biderman Kelly Krimstein & Partners
- Moscato Marsh
- Earle Palmer Brown New York
- Solay Keller Advertising
Clients of the Company through these partnerships include
- Novartis Animal Health (USA)
- Motorola
- New York University School for Continuing and Professional Studies
- ParentTime (a Time Inc. subsidiary)
NPIL provides organizations with the ability to utilize the Company's expertise
to devise strategies for the Internet and to create Internet applications
including 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. NPIL also services a number of clients
directly, rather than through an agency. This area of the Company's activity has
recently expanded significantly. Direct clients include:
- Guinness Bass Import Company, (a Diageo plc, subsidiary)
- National Multiple Sclerosis Society
- Association of the Bar of the City of New York
The Company intends to further develop this business by launching new products
and services connected with the Internet, and to continue to grow the underlying
advertising business. NPA has been successful in adding new clients in the past
twelve months. Management believes this is due to the added Internet component
it can now offer to potential NPA clients. NPA clients include:
- Travelodge
- Scottish Tourist Board
- Beth Abraham Health Services
- Long Bay Beach
- Peter Deilmann EuropAmerica Cruises
- Focus Vision
The Company intends to develop its business by leveraging its ability to provide
Internet expertise and applications to creatively meet the needs of its
advertising and public relations clients, and by supplying public relations and
advertising service to its Internet and advertising clients. Already some GMG
clients, such as Beth Abraham Health Services, have begun to use NPA and NPIL
for advertising and Internet services.
COMPARISON OF FISCAL QUARTERS
The Company's gross revenue from its continuing operations increased 61% from
$1,126,044 for the quarter ended June 30, 1999 to $1,807,524 for the quarter
ended June 30, 2000 due to the Company's success in securing new accounts and
more business from existing clients.
The Company's operating expenses increased 33% from $454,429 for the quarter
ended June 30, 1999 to $604,819 for the quarter ended June 30, 2000 primarily
due to the additional staffing required to the Company's increased business.
The components of the operating expenses are as follows:
- General and administrative costs increased 49% from $354,241 for the
quarter ending June 30, 1999 to $527,866 for the quarter ending June 30, 2000.
- Professional fees decreased 57% from $39,491 for the quarter ending June
30, 1999 to $17,115 for the quarter ending June 30, 2000.
- Occupancy costs increased by 3% from $38,317 for the quarter ending June
30, 1999 to $39,533 for the quarter ending June 30, 2000.
- Amortization of goodwill increased 111% from $3,500 for the quarter ending
June 30, 1999 to $7,380 for the quarter ending June 30, 2000 due to the
adjustment in purchase price for K&C and to the goodwill associated with the S&P
acquisition.
- Depreciation and amortization decreased 32% from $18,880 for the quarter
ending June 30, 1999 to $12,295 for the quarter ending June 30, 2000.
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.
<PAGE>
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company filed suit against New Era of Networks, Inc, ("Neon") and Vie
Systems, Inc. ("Vie") in the United States District Court for the Southern
District of New York, claiming more than $1,000,000 in damages, $10,000,000 in
punitive damages and the rescision of the sale of certain intellectual property
rights and patents to Vie on the Copernicus(R) product. The Company claims that
substantial royalty payments are due. The Court dismissed the Company's claim
for rescision and part of the Company's claim for punitive damages. Discovery
is proceeding on the claim for damages and the claim for punitive damages, to
the extent that it was not dismissed. Management believes that its claims
have substantial merit but that proceedings may take considerable time.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibit is filed with this quarterly report on Form 10-QSB:
Exhibit 27. Financial Data Schedule
(b) The following reports have been filed on Form 8-K since June 30, 2000:
None
<PAGE>
<TABLE>
<CAPTION>
NEW PARADIGM SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,2000 June 30,2000
ASSETS (unaudited)
--------------- -------------
Current
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . $ 288,467 $ 10,314
Accounts receivable . . . . . . . . . . . . . . 1,157,808 570,622
Prepaid expenses and other current assets . . . 18,176 231,983
Total current assets . . . . . . . . 1,464,451 812,919
Property and equipment, less accumulated
depreciation and amortization. . . . . . . . . . . . 178,933 169,206
Notes receivable from Officers/Shareholders . . . . . 131,414 178,864
Goodwill net of accumulated depreciation. . . . . . . 403,129 395,749
Security Deposit. . . . . . . . . . . . . . . . . . . 21,000 26,162
$ 2,198,927 $ 1,582,900
LIABILITY AND SHAREHOLDERS EQUITY
Current
Accounts payable and accrued expenses . . . . . $ 1,748,914 $ 1,232,595
Notes payable . . . . . . . . . . . . . . . . . 95,000 116,915
Deferred revenue. . . . . . . . . . . . . . . . 363,319 209,183
Total current liabilities . . . . . . . $ 2,207,233 $ 1,558,693
Commitments and contingencies
Redeemable Series D preferred stock - authorized
and outstanding - 50 shares, at redemption value. . . - -
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 4,624,297
46,243 46,243
Additional paid-in capital. . . . . . . . . . . . . . 9,637,962 9,637,962
Deficit . . . . . . . . . . . . . . . . . . . . . . . (9,692,511) (9,659,998)
Total Shareholders' equity (deficiency) . (8,306) 24,207
$ 2,198,927 $ 1,582,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW PARADIGM SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
June 30,1999
(Note 2) June 30,2000
(unaudited) (unaudited)
-------------------- --------------------
REVENUES
<S> <C> <C>
Advertising and Internet consulting design. $ 1,126,044 $ 1,807,524
Cost of goods . . . . . . . . . . . . . . 767,170 1,165,231
358,874 642,293
EXPENSES:
General and administrative. . . . . . . . 354,241 527,866
Professional fees . . . . . . . . . . . . 39,491 17,115
Occupancy . . . . . . . . . . . . . . . . 38,317 39,533
Amortization of goodwill. . . . . . . . . . 3,500 7,380
Depreciation and amortization . . . . . . 18,880 12,925
$ 454,429 $ 604,819
PROFIT (LOSS) FROM OPERATIONS . . . . . . . (95,555) 37,474
OTHER INCOME (EXPENSE)
Interest and other income . . . . . . . . 1,615 2,710
Interest expense. . . . . . . . . . . . . (904) (2,558)
Tax expense . . . . . . . . . . . . . . . (4,227) (5,114)
$ (3,516) $ (4,961)
Net profit (loss). . . . . . . . . $ (99,071) $ 32,513
PER SHARE DATA
Net profit (loss) per share. . . . . . . (0.04) 0.01
Weighted average common shares
Outstanding . . . . . . . . . . . . . . . 2,701,729 4,624,297
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW PARADIGM SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Three months ended
June 30,1999
(Note 2) June 30,2000
(unaudited) (unaudited)
-------------------- --------------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net profit (loss) . . . . . . . . . . . . . $ (99,071) $ 32,513
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization . . . . . 22,380 20,305
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable. . . . . . . . (179,549) 521,550
Other assets . . . . . . . . . . . (16,943) 195,621
Notes receivable . . . . . . . . . 21,000 (47,450)
Increase (decrease) in:
Accounts payable and accrued expenses. 210,539 (516,318)
Prepayments . . . . . . . . . . . -
Deferred revenue. . . . . . . . . (348,012) (154,136)
Total adjustments . . . . . . (256,699) (307,526)
-------------------- -----------------
Net cash provided by (used in)
operating activities. . . . . . . . . . (355,770) (364,076)
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of property & equipment. . . 55,522 (11,562)
Acquisition of business, net of cash . . (169,481) -
Net cash used in investing activities: . . (113,959) (11,562)
-------------------- ----------------
CASH FLOW FROM FINANCING ACTIVITIES:
Issue of common stock . . . . . . . . . . 53,707 -
Proceeds of notes payable . . . . . . . . -
Proceeds of notes payable-officers. . . . 74,215 21,915
Net cash used in financing activities. . . 127,922 21,915
-------------------- ------------------
Net decrease in cash and cash equivalents . (341,807) (278,152)
Cash and cash equivalents beginning
of period. . . . . . . . . . . . . . . . . 339,526 288,467
Cash and cash equivalents, end of period. . $ (2,281) $ 10,314
</TABLE>
<PAGE>
Note 1 -
The accompanying financial statements should be read in conjunction with the
Company's financial statements for the fiscal year ended March 31, 2000,
together with the accompanying notes included in the Company's 10-KSB for the
fiscal year ended March 31, 2000. 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.
Note 2
The comparative income statement and cash flow statement for the quarter ended
June 30, 1999 contained herein make reference to re-stated results disclosed in
the Company's annual report on Form 10-KSB for the year ended March 31, 2000, as
amended, Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations, and un-audited footnote 13 to the financial statements.
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, 2000 /s/ Mark Blundell________________________
Mark Blundell
President & Chief Financial Officer
