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, 2000
Commission file number 0-26598
PAPERCLIP SOFTWARE, INC.
(Exact name of Small Business Issuer as specified in Its Charter)
DELAWARE
(State of incorporation)
22-3137907
(IRS Employer ID number)
646 Route 46 West
HASBROUCK HEIGHTS , NJ 07604
(Address of principal executive offices) (Zip Code)
(201)329-6300
(Registrant's telephone number)
Check whether the issuer (1)filed all reports required to
be filed by Section 13 or 15(d) of 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 No X.
(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 August 10, 2000
Common Stock, $.01 par value 8,121,521
Redeemable Class A Warrants 3,599,500
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
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PAPERCLIP SOFTWARE, INC.
INDEX
Page #
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet 1
Condensed Statements of Operations 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 5
Part II Other Information
Item 6. Exhibits and reports on Form 8-K 7
Signatures 8
Exhibit index 9
Exhibit 27, Article 5 Financial Data Schedule 10
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<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED BALANCE SHEET -
June 30, 2000(unaudited)
<CAPTION>
June 30,
2000
-------------
<C> <S>
ASSETS
Cash and cash equivalents $ 181,670
Accounts receivable (net of
allowance for doubtful accounts
of $30,000) 213,005
Prepaid expenses 6,667
-------------
Total current assets 401,342
-------------
Equipment, furniture and fixtures:
Computer and office equipment 436,114
Furniture and fixtures 204,858
-------------
640,972
Less- Accumulated depreciation (569,977)
-------------
70,995
-------------
Other assets 20,000
-------------
Total assets $ 492,337
=============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses $ 1,108,324
Due to ASI 3,110,818
Accounts payable- related party 395,000
Deferred revenue 206,000
Notes payable 129,691
-------------
Total current liabilities 4,949,833
Notes payable
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, authorized 30,000,000
shares; $.01 par value; issued and
outstanding 8,121,521 shares 81,215
Additional paid-in capital 16,469,521
Accumulated deficit (21,008,232)
-------------
Stockholders' equity (deficit) (4,457,496)
-------------
Total liabilities and
stockholders' equity (deficit) $ 492,337
=============
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<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS SIX MONTHS ENDED
JUNE 30, 2000 AND JUNE 30, 1999
UNAUDITED
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2000 1999 2000 1999
---------- ------------- ----------- --------------
<C> <S> <S> <S> <S>
NET SALES $ 291,232 $ 350,227 $ 599,957 $ 623,195
---------- ------------- ----------- --------------
OPERATING EXPENSES:
Salaries and related benefits 261,178 167,343 445,207 337,119
Research and development expenses 96,816 105,923 240,665 196,593
Selling expenses 92,291 18,829 163,006 111,542
General and administrative expenses 109,984 58,277 187,600 116,361
---------- ------------- ----------- --------------
Total operating expenses 560,269 350,372 1,036,478 761,615
---------- ------------- ----------- --------------
Loss from operations (269,037) (145) (436,521) (138,420)
---------- ------------- ----------- --------------
OTHER INCOME (EXPENSE):
Interest income 1,957 5,272 174
Interest expense (53,800) (53,900) (107,800) (107,800)
---------- ------------- ----------- --------------
(51,843) (53,900) (102,528) (107,626)
---------- ------------- ----------- --------------
Net loss $ (320,880) $ (54,045) $ (539,049)$ (246,046)
========== ============= =========== ==============
LOSS PER COMMON SHARE $ (0.04) $ (0.01) $ (0.07)$ (0.03)
========== ============= =========== ==============
WEIGHTED AVERAGE NUMBER COMMON
SHARES OUTSTANDING 8,121,521 8,121,521 8,121,521 8,112,792
========== ============= =========== ==============
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<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
UNAUDITED
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 1999
------------- -----------
<C> <S> <S>
OPERATING ACTIVITIES:
Net loss $ (539,049) $ (246,046)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation 18,400 53,400
Decrease (Increase) in accounts receivable (76,347) (38,486)
Decrease (Increase) in prepaid
expenses and other current assets (6,667)
Increase (Decrease) in accounts payable,
and accrued expenses 8,242 (142,980)
Increase in deferred revenues 105,000
------------- -----------
Net cash used in operating activities (490,421) (374,112)
------------- -----------
INVESTING ACTIVITIES -- Purchases of
equipment, furniture and fixtures (8,532) (6,498)
------------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of stock in
exchange for Stock Options and cash 2,000
Increase in Loan Payable ASI 100,000 100,000
Proceeds from borrowings 100,000
------------- -----------
Net cash provided by financing activities 100,000 202,000
------------- -----------
Net increase (decrease) in cash (398,953) (178,610)
CASH, beginning of period 580,623 217,129
------------- -----------
CASH, end of period $ 181,670 $ 38,519
============= ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid $ 0 $ 0
============= ===========
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PAPERCLIP SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
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 Form 10-KSB (for the year ended December 31,
1999) as filed with the Securities and Exchange Commission.
NOTE B -- LOSS PER SHARE
Basic and diluted net loss per share was computed based on the
weighted average number of shares of common stock outstanding
during the period.
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PAPERCLIP SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Three Months and Six Months Ended June 30, 2000 Compared with Three Months and
Six Months June 30, 1999
Net sales of PaperClip Software, Inc. (the "Company") decreased by
$58,995 or 16.84% to $291,232 for the three months ended June 30, 2000 from
$350,227 for the three months ended June 30, 1999 and decreased by $23,238 or
3.73% to $599,957 for the six months ended June 30, 2000 from $623,195 for the
six months ended June 30, 1999. The decrease was due to lower revenues received
from the sale of Paperclip products offset by an increase in revenues in
connection with special one-time development services performed by the Company
for a customer.
Salaries and related benefits increased by $93,835 or 56.07% to $261,178
for the three months ended June 30, 2000 from $167,343 for the three months
ended June 30, 1999 and increased by $108,088 or 32.06% to $ 445,207 for the six
months ended June 30, 2000 from $337,119 for the six months ended June 30, 1999.
The increase was due to an increase in personnel and from the commencement of a
new marketing campaign for the Company's new product line.
Research and development expenses decreased by $9,107 or 8.6% to $96,816
for the three months ended June 30, 2000 from $105,923 for the three months
ended June 30, 1999 and increased by $44,072 or 22.42% to $ 240,665 for the six
months ended June 30, 2000 from $196,593 for the six months ended June 30, 1999.
The increase was due to an increase in personnel and more extensive use of
outside consultants related to the Company's new products.
Selling expenses increased by $73,462 or 390.15% to $92,291 for the
three months ended June 30, 2000 from $18,829 for the three months ended June
30, 1999 and increased by $51,464 or 46.14% to $163,006 for the six months ended
June 30, 2000 from $111,542 for the six months ended June 30, 1999. The increase
was due to an increase in advertising for the Company's new product line.
General and administrative expenses increased by $51,707 or 88.73% to
$109,984 for the three months ended June 30, 2000 from $58,277 for the three
months ended June 30, 1999 and increased by $71,239 or 61.22% to $ 187,600 for
the six months ended June 30, 2000 from $116,361 for the six months ended June
30, 1999. The increase was due to professional fees related to the
audit of the Company's financial statements for the three years ended
December 31, 1999.
Other income(expense) increased by $2,057 to ($51,843) for the three months
ended June 30, 2000 from ($53,900) for the three months ended June 30, 1999 and
increased by $ 5,098 or 4.74% to ($102,528)for the six months ended June 30,
2000 from ($107,626) for the six months ended June 30, 1999. The change was due
to an increase in interest income relating to investments of funds received from
the sale of some of the Company's cumulative net operating losses for New
Jersey income tax purposes in 2000.
Net loss from operations increased by $266,835 or 493.73% to $320,880 for
the three months ended June 30, 2000 from $54,045 for the three months ended
June 30, 1999 and increased by $293,003 or 119.08% to ($539,049) for the six
months ended June 30, 2000 from $246,046 for the six months ended June 30, 1999.
The increase was due to an increase in expenses relating to the development and
marketing of the Company's new product, Internet Express.
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Liquidity and Capital Resources
June 30, 2000 Compared with December 31, 1999
For the three months and the six months ended June 30, 2000 the Company
incurred a net loss of $320,880 And $539,049 respectively. As of June 30, 2000,
the Company had an accumulated deficit of $21,008,232. The Company continues to
incur operating losses. The Company had negative working capital of $4,019,310
and $4,548,491 as of December 31, 1999 and June 30, 2000, respectively. The
increase in negative working capital of $529,181 was due to the net loss for
the three months and six months ended June 30, 2000.
Presently, the Company funds working capital from revenues it receives
from the sale of its products and the sale of its tax losses. As of June 30,
2000, the Company had aggregate liabilities in excess of $4.9 million,
approximately $3 million of which is owed to Access Solutions International,
Inc. ("Access"). The Company does not have sufficient working capital to
satisfy such liabilities. While the Company has been successful to date in
negotiating arrangements with its creditors for the long-term payment of its
liabilities, and is currently negotiating the potential equitization of the
amount owed to Access, there can be no assurance that such arrangements will
continue or that the Company will enter into an agreement with Access regarding
the amounts owed to it. In addition, there can be no assurance that the
Company's creditors will not institute an action for the repayment of such
amounts and if such action is taken against the Company, that the Company would
be able to satisfy such amounts. In the event such action is brought against the
Company, it would have a material adverse effect on the Company.
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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 filed no reports on Form 8-K
during the three months ended June 30, 2000.
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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 SOFTWARE, INC.
BY /s/ William Weiss
William Weiss, Chief Executive
Officer and Principal
Financial Officer
Date: August 14, 2000
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Paperclip Software, Inc.
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 10
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