SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 0-26598
PAPERCLIP IMAGING SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation)
22-3137907
(IRS Employer ID number)
THREE UNIVERSITY PLAZA
HACKENSACK, NJ 07601
(Address of principal executive offices) (Zip Code)
(201)487-3503
(Registrant's telephone number)
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 preceeding 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 [ ].
(Applicable only to Corporate Issuers)
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable
date.
Class July 31, 1996
Common Stock, $.01 par value 7,721,346
Redeemable Class A Warrants 3,599,500
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PAPERCLIP IMAGING SOFTWARE, INC.
CONDENSED BALANCE SHEETS -- JUNE 30, 1996 and DECEMBER 31, 1995
UNAUDITED
<CAPTION>
Jun 30, Dec 31,
1996 1995
<S> <C> <C>
ASSETS
CASH and CASH EQUIVALENTS $1,929,799 $3,661,009
ACCOUNTS RECEIVABLE (net of allowance
for doubtful accounts of $40,000 at June 30, 1996
and December 31, 1995) 374,050 267,024
PREPAID EXPENSES AND OTHER CURRENT ASSETS 24,450 2,767
Total current assets 2,328,299 3,930,800
EQUIPMENT, FURNITURE AND FIXTURES
Computer and office equipment 653,772 549,569
Furniture and fixtures 204,858 201,474
858,630 751,043
Less- Accumulated depreciation (339,106) (263,352)
519,524 487,691
OTHER ASSETS 48,100 48,466
Total assets $2,895,923 $4,466,957
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $602,317 $565,936
DEFERRED REVENUE 81,326 58,400
CURRENT PORTION OF CAPITALIZED LEASE 49,807 49,807
Total current liabilities 733,450 674,143
CAPITAL LEASE, NET OF CURRENT PORTION 26,922 49,442
STOCKHOLDERS' EQUITY
Common stock, authorized 15,000,000 shares;
$.01 par value: issued and outstanding
7,721,346 at Jun30, 1996 and
7,199,500 at Dec 31, 1995 77,213 71,995
Additional paid-in capital 16,362,404 15,753,539
Accumulated deficit (14,304,066) (12,046,165)
Total stockholders equity 2,135,551 3,743,372
Total liabilities and stockholders' equity $2,895,923 $4,466,957
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PAPERCLIP IMAGING SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
UNAUDITED
<CAPTION>
Three Months Ended Six Months Ended
30 Jun 96 30 Jun 95 30 Jun 96 30 Jun 95
<S> <C> <C> <C> <C>
NET SALES $495,545 $316,011 $983,575 $614,255
OPERATING EXPENSES:
Salaries and related benefits 389,789 332,614 752,981 638,949
Research and development exp 830,828 348,541 1,464,053 657,494
Selling expenses 402,771 355,783 596,590 569,394
General and admin exp 247,623 169,486 492,689 380,744
Total operating expenses 1,871,011 1,206,424 3,306,313 2,246,581
Loss from operations (1,375,466) (890,413) (2,322,738) (1,632,326)
OTHER INCOME (EXPENSE):
Interest income 41,658 5,479 67,983 5,601
Interest expense (1,672) (56,127) (3,147) (59,217)
Financing costs 0 (182,150) 0 (217,150)
Total other income(exp) 39,986 (232,798) 64,836 (270,766)
Net loss (1,335,480) (1,123,211) (2,257,902) (1,903,092)
LOSS PER COMMON SHARE ($0.18) ($0.28) ($0.30) ($0.47)
WEIGHTED AVERAGE NUMBER COMMON
SHARES OUTSTANDING 7,620,692 4,073,000 7,435,815 4,069,118
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<TABLE>
PAPERCLIP IMAGING SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
UNAUDITED
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($2,257,902) ($1,903,092)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation 75,852 50,274
Decrease (increase) in accounts receivable (107,026) (28,286)
(Increase) in prepaid expenses and other
current assets (21,683) (128,800)
Decrease (increase) in other assets 366 (45,500)
Increase (decrease) in accounts payable, accrue 59,307 201,626
expenses and deferred revenue
Net cash used in operating activities (2,251,086) (1,853,778)
INVESTING ACTIVITIES -- Purchases of equipment,
furniture and fixtures, net of capital lease (107,587) (252,402)
FINANCING ACTIVITIES:
Proceeds from borrowings from bridge notes payable 0 2,365,000
Proceeds from issuance of stock in exchange
for Bridge Warrants and cash 616,456 0
Proceeds from issuance of stock in exchange
for Stock Options and cash 33,624 0
Proceeds from borrowings on capitalized lease-net 0 121,006
Payment of notes payable to stockholders 0 (5,000)
Proceeds from common stock subscriptions receivab 0 100,000
Payment of deferred financing costs 0 (132,036)
Payments on capitalized leases (22,520) 0
Net cash provided by financing activities 627,560 2,448,970
Net (decrease) increase in cash (1,713,113) 342,790
CASH, beginning of year 3,661,009 134,359
CASH, end of year $1,929,896 $477,149
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid $3,147 $59,217
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PAPERCLIP IMAGING SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
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 June 30, 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 June 30, 1995. The unexercised Bridge
Warrants have not been treated as common stock equivalents
at June 30, 1996 as their inclusion would be antidilutive.
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PAPERCLIP IMAGING SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three and Six Months Ended June 30, 1996 Compared with Three and Six Months
Ended June 30, 1995
Net sales for the three months ended June 30, 1996
increased by 56% over the three months ended June 30,
1995 (from $316,011 to $495,545) and net sales for the six months
ended June 30, 1996 increased by 60% over the six months ended
June 30, 1995 (from $614,255 to $983,575) 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 for the three months ended
June 30, 1996 over the three months ended June 30, 1995
by 17% (from $332,614 to $389,789) and by 18% (from $638,949 to $752,981)
for the six months ended June 30, 1996 compared to the six months
ended June 30, 1995 due to the addition of administrative personnel.
Research and development expenses increased for the three months ended
June 30, 1996 by 138% (from $348,541 to $830,828) compared to the three
months ended June 30, 1995 and by 123% (from $657,494 to $1,464,053) for
the six months ended June 30, 1996 compared to the six months ended June 30,
1995 due to increased internal staffing to complete Version 4.0 and
initiate development of Version 5.0of the Company's products, computer
software, supplies and support for the increased staff and utilization of
external consultants to continue the development of Internet and
Workflow Products.
Selling expenses increased for the three months ended
June 30, 1996 compared to the three months ended June 30, 1995
by 13% (from $355,783 to $402,771) and by 5% (from $569,394 to $596,590)
for the six months ended June 30, 1996 compared to the six months ended
June 30, 1995 primarily due to increased consulting fees and increased
expenditures on exhibitions and seminars.
General and administrative expenses increased for the three months ended
June 30, 1996 by 46% (from $169,486 to $247,623) compared to the three
months ended June 30, 1995 and by 29% (from $380,744 to $492,689) for the
six months ended June 30, 1996 compared to the six months ended June 30, 1995
primarily due to increased professional fees and increased recruiting fees.
The net loss from operations for the three months ended June 30, 1996
compared to the three months ended June 30, 1995 increased by 54% (from
$890,413 to $1,370,962) and by 42% for the six months ended June 30, 1996 over
the six months ended June 30, 1995 (from $1,632,326 to $2,318,234) primarily
due to the increase in research and development expenses partially offset by
theincrease in sales.
Liquidity and Capital Resources
June 30, 1996 Compared with December 31, 1995
For the six months ended June 30, 1996 the Company
incurred a net loss of $2,257,902. As of June 30, 1996, the
Company had an accumulated deficit of $14,304,066. The
Company continues to incur operating losses. The Company had
positive working capital of $3,256,657 and $1,637,581 as of
December 31, 1995 and June 30, 1996, respectively. For the
six month period ended June 30, 1996 the Company received
proceeds of approximately $616,456 from the exercise of
Bridge Warrants for Common Stock and $33,624 from the
exercise of stock options for common stock.
The Company anticipates existing working capital will be
sufficient to fund its operations at least through the end of the
year. The Company is exploring a variety of options to raise
additional capital, although there can be no assurance that
the Company will be successful.
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the three months ended
June 30, 1996.
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SIGNATURE
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: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,929,799
<SECURITIES> 0
<RECEIVABLES> 414,050
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,329,299
<PP&E> 858,630
<DEPRECIATION> 339,106
<TOTAL-ASSETS> 2,895,923
<CURRENT-LIABILITIES> 733,450
<BONDS> 0
0
0
<COMMON> 77,213
<OTHER-SE> 16,362,404
<TOTAL-LIABILITY-AND-EQUITY> 2,895,923
<SALES> 983,575
<TOTAL-REVENUES> 983,575
<CGS> 0
<TOTAL-COSTS> 3,306,313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,147
<INCOME-PRETAX> (2,257,902)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,257,902)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,257,902)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
