UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly period ended March 31, 1996
Commission file number 0-26598
PaperClip Imaging Software, Inc.
Deleware 22-3137907
(State of incorp) (IRS ID #)
Three University Plaza
Hackensack, NJ 07601
(201)487-3503
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 [ ]
AS OF MAY 9, 1996
COMMON STOCK, $.01 PAR VALUE 3,843,544
REDEEMABLE CLASS A WARRANTS 1,799,750
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PAPERCLIP IMAGING SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
UNAUDITED
<CAPTION>
1996 1995
<S> <C> <C>
NET SALES $488,030 $298,244
OPERATING EXPENSES:
Salaries and related benefits 363,192 306,335
Research and development expenses 633,225 308,953
Selling expenses 193,819 213,611
General and administrative expenses 245,066 246,258
Total operating expenses 1,435,302 1,075,157
Loss from operations (947,272) (776,913)
OTHER INCOME (EXPENSE):
Interest income 41,658 122
Interest expense (1,672) (3,090)
39,986 (2,968)
Net loss ($907,286) ($779,881)
LOSS PER COMMON SHARE ($0.25) ($0.38)
WEIGHTED AVERAGE NUMBER COMMON
SHARES OUTSTANDING 3,625,467 2,032,597
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PAPERCLIP IMAGING SOFTWARE, INC.
CONDENSED BALANCE SHEETS -- MARCH 31, 1996 and DECEMBER 31, 1995
UNAUDITED
<CAPTION>
Mar 31, Dec 31,
1996 1995
<S> <C> <C>
ASSETS
CASH and CASH EQUIVALENTS $2,860,339 $3,661,009
ACCOUNTS RECEIVABLE (net of allowance for
doubtful accounts of $40,000 at March 31, 1996
and December 31, 1995) 322,157 267,024
PREPAID EXPENSES AND OTHER CURRENT ASSETS 15,275 2,767
Total current assets 3,197,771 3,930,800
EQUIPMENT, FURNITURE AND FIXTURES
Computer and office equipment 586,182 549,569
Furniture and fixtures 204,858 201,474
791,040 751,043
Less- Accumulated depreciation (299,004) (263,352)
492,036 487,691
OTHER ASSETS 45,642 48,466
Total assets $3,735,449 $4,466,957
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $508,454 $565,936
DEFERRED REVENUE 80,079 58,400
CURRENT PORTION OF CAPITALIZED LEASE 49,807 49,807
Total current liabilities 638,340 674,143
CAPITAL LEASE, NET OF CURRENT PORTION 38,280 49,442
STOCKHOLDERS' EQUITY
Common stock, authorized 15,000,000 shares;
$.01 par value: issued and outstanding
3,698,746 at Mar 31, 1996 and
3,599,750 at Dec 31, 1995 36,989 35,998
Additional paid-in capital 15,975,291 15,753,539
Accumulated deficit (12,953,451) (12,046,165)
3,058,829 3,743,372
Total liabilities and stockholders' equity $3,735,449 $4,466,957
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PAPERCLIP IMAGING SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
UNAUDITED
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($907,286) ($779,881)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation 35,652 20,191
Decrease (increase) in accounts receivable (55,133) (34,950)
(Increase) in prepaid expenses and other
current assets (12,508) 0
Decrease (increase) in other assets 2,824 49
Increase (decrease) in accounts payable, acc (35,803) 530230
expenses and deferred revenue
Net cash used in operating activities (972,254) (264,361)
INVESTING ACTIVITIES -- Purchases of equipment,
furniture and fixtures, net of capital lease (39,997) (18,479)
FINANCING ACTIVITIES:
Proceeds from issuance of stock upon exercise
of Bridge Warrants 222,743 0
Proceeds from borrowings from stockholders 0 50,000
Proceeds from common stock subscriptions recei 0 100,000
Payments on capitalized leases (11,162) 0
Net cash provided by financing activities 211,581 150,000
Net (decrease) increase in cash (800,670) (132,840)
CASH, beginning of year 3,661,009 134,359
CASH, end of year $2,860,339 $1,519
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid $1,672 $0
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PAPERCLIP IMAGING SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
31-Mar-96
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information, the
instructions to Form 10-QSB and item 310 (b) of Regulation
SB. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair
presentation have been included. For further information,
refer to the Financial Statements and footnotes thereto
included in the Company's Registration Statement and
Prospectus and Form 10-KSB (for the year ended December 31,
1995) as filed with the Securities and Exchange Commission.
NOTE B -- LOSS PER SHARE
The loss per share amounts in the statement of operations
have been computed in accordance with a Staff Accounting
Bulletin (SAB) of the Securities and Exchange Commission.
According to the SAB, common stock and common stock warrants
issued are to be treated as common stock equivalents
outstanding for all periods presented if such common stock
was issued or such common stock warrants may be exercised,
at a price substantially below the public offering price.
As a consequence of the Company's offering of 1,799,750
shares of its common stock at $5.00 per share in an initial
public offering, its warrants issued to the Bridge Note
holders, entitling the holders thereof to acquire an
aggregate of 430,000 shares of the Company's common stock at
an exercise price of $2.25,have been treated as common stock
equivalents at March 31, 1995. Accordingly, the number of
such shares actually issued and issuable upon the exercise
of such common stock warrants, reduced by the number of
shares that could be repurchased from the proceeds, have
been added to the number of shares of common stock
outstanding for March 31, 1995. The unexercised Bridge
Warrants have not been treated as common stock equivalents
at March 31, 1996 as their inclusion would be antidilutive.
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PAPERCLIP IMAGING SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended March 31, 1996 Compared with Three Months
Ended March 31, 1995
Net sales for the three months ended March 31, 1996
increased by 63.6% over the three months ended March 31,
1995 (from $298,244 to $488,030) due to greater acceptance
of the new Windows Network and SQL Editions, a Maintenance
Program which guaranteed updated versions to end users, the
introduction of a COLD product (computer output to laser
disk), the initiation of a Business Services Department, and
sales from the recently acquired NOSS product line. None of
such increase was a result of increases in prices.
Salaries and related benefits increased in such period by
18.6% (from $306,335 to $363,192) due to the addition of
administrative personnel.
Research and development expenses increased by 105.0% (from
$308,953 to $633,225) due to increased internal staffing
(approximately $118,000) to complete Version 4.0 and
initiate Version 5.0, computer software, supplies and
support (approximately $39,000) for the increased staff and
utilization of external consultants (NCC & DCL)
(approximately $167,000) to continue the development of
Internet and Workflow Products.
Selling expenses decreased by 9.3% (from $213,611 to
$193,818) primarily due to decreased royalties
(approximately $46,000) resulting from the Company's
acquisition of the NOSS product line in the fourth quarter
of 1995, decreased printed material expenditures
(approximately $41,000), increased professional fees
(approximately $46,000) and increased expenditures on
exhibitions and seminars (approximately $32,000).
General and administrative expenses were relatively
unchanged.
The net loss from operations for the three months ended
March 31, 1996 increased by 21.9% over the three months
ended March 31, 1995 (from $776,913 to $947,272) primarily
due to the increase in research and development expenses
offset by the increase in sales.
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Liquidity and Capital Resources
March 31, 1996 Compared with December 31, 1995
For the three months ended March 31, 1996 the Company
incurred a net loss of $907,286. As of March 31, 1996, the
Company had an accumulated deficit of $12,953,451. The
Company continues to incur operating losses. The Company had
positive working capital of $3,256,657 and $2,559,431 as of
December 31, 1995 and March 31, 1996, respectively. For the
three month period ended March 31, 1996 the Company received
proceeds of approximately $222,743 from the exercise of
approximately 98,996 Bridge Warrants for Common Stock.
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
The Company has not filed any reports on
Form 8-K for the three months ended March 31, 1996.
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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.
PAPERCLIP IMAGING SOFTWARE, INC.
BY /s/ William Weiss
William Weiss, Chief Executive Officer and
Principal Financial Officer
DATE: MAY 15, 1996
