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 September 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 November 14, 2000
Preferred Stock, Series A 3,649,543
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 - September 30, 2000(unaudited)
<CAPTION>
September 30,
2000
------------
<S> <C>
ASSETS
Cash and cash equivalents $ 84,522
Accounts receivable (net of
allowance for doubtful accounts
of $30,000) 261,881
------------
Total current assets 346,403
------------
Equipment, furniture and fixtures:
Computer and office equipment 436,114
Furniture and fixtures 204,858
------------
640,972
Less- Accumulated depreciation (579,177)
------------
61,795
------------
Other assets 20,000
------------
Total assets $ 428,198
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses $ 1,049,339
Due to ASI 3,160,818
Accounts payable- related party 425,000
Deferred revenue 221,000
Notes payable 129,691
------------
Total current liabilities 4,985,848
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 (21,108,386)
------------
Stockholders' equity (deficit) (4,557,650)
------------
Total liabilities and
stockholders' equity (deficit) $ 428,198
============
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<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
UNAUDITED
<CAPTION>
THREE MONTHS ENDED NINE MONTHD ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
NET SALES $ 319,342 $ 381,044 $ 919,299 $ 1,004,239
------------ ------------ ------------ --------------
OPERATING EXPENSES:
Salaries and related benefits 225,971 170,170 671,178 507,289
Research and development expenses 62,955 79,607 303,620 276,200
Selling expenses 3,597 53,854 166,603 165,396
General and administrative expenses 73,073 60,981 260,673 177,342
------------ ------------ ------------ --------------
Total operating expenses 365,596 364,612 1,402,074 1,126,227
------------ ------------ ------------ --------------
Income (loss) from operations (46,254) 16,432 (482,775) (121,988)
------------ ------------ ------------ --------------
OTHER INCOME (EXPENSE):
Interest income 5,272 174
Interest expense (53,900) (53,800) (161,700) (161,600)
------------ ------------ ------------ --------------
(53,900) (53,800) (156,428) (161,426)
------------ ------------ ------------ --------------
Net loss $ (100,154) $ (37,368) $ (639,203) (283,414)
============ ============ ============ ==============
LOSS PER COMMON SHARE $ (0.01) $ (0.00) $ (0.08) $ (0.03)
============ ============ ============ ==============
WEIGHTED AVERAGE NUMBER COMMON $
SHARES OUTSTANDING 8,121,521 8,121,521 8,121,521 8,121,521
============ ============ ============ ==============
</TABLE>
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<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
UNAUDITED
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
------------ ------------
<C> <S> <S>
OPERATING ACTIVITIES:
Net loss $ (639,203)$ (283,414)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation 27,600 80,100
Decrease (Increase) in accounts receivable (125,223) 4,147
Increase (Decrease) in accounts payable,
and accrued expenses (50,743) (139,442)
Increase in deferred revenues 120,000
------------ ------------
Net cash used in operating activities (667,569) (338,609)
------------ ------------
INVESTING ACTIVITIES -- Purchases of
equipment, furniture and fixtures (8,532) (17,140)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of stock in
exchange for Stock Options and cash 2,000
Increase in loan payable ASI 150,000 150,000
Increase in accounts payable- related party 30,000 25,000
------------ ------------
Net cash provided by financing activities 180,000 177,000
------------ ------------
Net increase (decrease) in cash (496,101) (178,749)
CASH, beginning of period 580,623 217,129
------------ ------------
CASH, end of period $ 84,522 $ 38,380
============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid $ 0 $ 0
============ ============
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PAPERCLIP SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
September 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.
NOTE C -- SUBSEQUENT EVENTS
Pursuant to a Stock Purchase Agreement (the "Purchase Agreement")
dated as of November 2, 2000 between the Company and Access Solutions
International, Inc. ("Access"), the Company issued 3,649,543 shares of
the Company's Series A Convertible Preferred Stock, $.01 par value per
share (the "Series A Preferred Stock"), to Access as payment in full
of an amount equal to $2,305,506 which represented advances made to
the Company by Access pursuant to a Management Agreement dated as of
November 12, 1997 between the Company and Access plus accrued interest
of $384,786 on such advances. Pursuant to the Purchase Agreement,
Access also agreed to waive unpaid management fees in the amount of
$300,000 owed to Access by the Company. Each share of Series A
Preferred Stock is convertible for 1 share of the Company's common
stock, subject to adjustment and anti-dilution protection upon certain
events. In addition, in connection with the Purchase Agreement, the
Company and Access entered into an Agreement, dated as of November 12,
2000, pursuant to which, among other things, the Company agreed to
issue a new Promissory Note (the "New Note") in the amount of $405,530
in exchange for the cancellation of the promissory note in the
principal amount of $300,000 issued to Access by the Company on
January 29, 1997. Pursuant to the New Note issued to Access on
November 2, 2000, the Company must repay the $405,530 principal amount
over a 36-month period. There is no interest on the New Note unless
the Company does not pay principal when due.
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PAPERCLIP SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Three Months and Nine Months Ended September 30, 2000 Compared with Three
Months and Nine Months Ended September 30, 1999
Net sales of PaperClip Software, Inc. (the "Company") decreased by
$61,702 or 16% to $319,342 for the three months ended September 30, 2000 from
$381,044 for the three months ended September 30, 1999 and decreased by $84,940
or 8% to $919,299 for the nine months ended September 30, 2000 from $1,004,239
for the nine months ended September 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 the licensing of its new product, Internet Express.
Salaries and related benefits increased by $55,801 or 33% to $225,971 for
the three months ended September 30, 2000 from $170,170 for the three months
ended September 30, 1999 and increased by $163,889 or 32% to $ 671,178 for the
nine months ended September 30, 2000 from $507,289 for the nine months ended
September 30, 1999. The increase was due to an increase in sales personnel
related to the commencement of a new marketing campaign for the Company's new
product line.
Research and development expenses decreased by $16,652 or 21% to $62,955
for the three months ended September 30, 2000 from $79,607 for the three months
ended September 30, 1999 and increased by $27,420 or 10% to $ 303,620 for the
nine months ended September 30, 2000 from $276,200 for the nine months ended
September 30, 1999. The decrease for the three months ended September 30, 2000
was due to a reduction of outside consultants related to the Company's new
product, while such consultants were used in the first six months of 2000,
resulting in an overall increase for the nine months ended September 30, 2000.
Selling expenses decreased by $50,257 or 93% to $3,597 for the
three months ended September 30, 2000 from $53,854 for the three months ended
September 30, 1999 and increased by $1,207 or 1% to $166,603 for the nine
months ended September 30, 2000 from $165,396 for the nine months ended
September 30, 1999. The decrease for the three months ended September 30, 2000
was due to renegotiations in amounts payable for royalties. The increase for the
nine months was due to an increase in advertising for the Company's new product
line, offset by the renegotiating amounts payable for royalties.
General and administrative expenses increased by $12,092 or 20% to $73,073
for the three months ended September 30, 2000 from $60,981 for the three months
ended September 30, 1999 and increased by $83,331 or 47% to $ 260,673 for the
nine months ended September 30, 2000 from $177,342 for the nine months ended
September 30, 1999. The increase was due to professional fees related to the
negotiations of an agreement with Access Solutions International, Inc. and the
audit of the Company's financial statements for the three years ended
December 31, 1999.
Other income (expense) increased by $100 to ($53,900) for the three months
ended September 30, 2000 from ($53,800) for the three months ended September
30, 1999 and increased by $ 4,998 or 3% to ($156,428) for the nine months ended
September 30, 2000 from ($161,426) for the nine months ended September 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.
-5
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Liquidity and Capital Resources
September 30, 2000 Compared with December 31, 1999
Net loss from operations increased by $62,786 or 168% to ($100,154) for the
three months ended September 30, 2000 from ($37,368) for the three months ended
September 30, 1999 and increased by $355,789 or 126% to ($639,203) for the nine
months ended September 30, 2000 from ($283,414) for the nine months ended
September 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.
For the three months and the nine months ended September 30, 2000 the
Company incurred a net loss of $100,154 and $639,203 respectively. As
of September 30, 2000, the Company had an accumulated deficit of
$21,108,386. The Company continues to incur operating losses. The
Company had negative working capital of $4,019,310 and $4,639,445 as of
December 31, 1999 and September 30, 2000, respectively. The increase in
negative working capital of $620,135 was due to the net loss for the
three months and Nine months ended September 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
September 30, 2000, the Company had aggregate liabilities in excess of
$4.9 million, approximately $3 million of which was owed to Access
Solutions International, Inc. ("Access"). On November 2, 2000 the
Company concluded an agreement with Access to convert $2,305,506 of
amounts due to Access by the Company into 3,649,543 shares of Series A
Preferred Stock. The agreement also includes Access' waiver of
$300,000 of management fees owed to ASI by the Company. Additionally,
the Company and Access entered into an Agreement, dated as of November
12, 2000, pursuant to which, among other things, the Company agreed to
issue a new Promissory Note (the "New Note") in the amount of $405,530
in exchange for the cancellation of the promissory note in the
principal amount of $300,000 issued to Access by the Company on
January 29, 1997. Pursuant to the New Note issued to Access on
November 2, 2000, the Company must repay the $405,530 principal amount
over a 36-month period. There is no interest on the New Note unless
the Company does not pay principal when due. The completion of this
agreement reduces the Company outstanding debt by more than 85% and
results in the reduction of the Company's annual interest payments by
approximately $220,000. Although the above improves the Company's
liquidity, the Company still does not have sufficient working capital
to satisfy its remainder liabilities. While the Company has been
successful to date in negotiating arrangements with its creditors
for the long-term payment of its liabilities, there can be no
assurance that such arrangements will continue. 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 September 30, 2000.
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<PAGE>
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: November 14, 2000
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Paperclip Software, Inc.
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 10
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