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 March 31, 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 May 15, 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 Sheets 1
Condensed Statements of Operations 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
Item 2 .Managements 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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PAPERCLIP SOFTWARE, INC.
CONDENSED BALANCE SHEETS - MARCH 31, 2000 (Unaudited)
March 31,
2000
ASSETS ------------
Cash and cash equivalents $358,335
Accounts receivable (net of
allowance for doubtful accounts
of $30,000) 163,781
Prepaid expenses 17,017
------------
Total current assets 539,133
------------
Equipment, furniture and fixtures:
Computer and office equipment 429,999
Furniture and fixtures 204,858
------------
634,857
Less- Accumulated depreciation (560,777)
------------
74,080
------------
Other assets 20,000
------------
Total assets $633,213
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses $1,100,320
Due to ASI 3,060,818
Accounts payable- related party 365,000
Deferred revenue 114,000
Notes payable 129,691
------------
Total current liabilities 4,769,829
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 (20,687,352)
------------
Stockholders' equity (deficit) (4,136,616)
------------
Total liabilities and
stockholders' equity (deficit) $633,213
============
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PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
THREE MONTHS ENDED MARCH 31,
2000 1999
------------ ------------
NET SALES $ 308,725 $ 272,968
------------ ------------
OPERATING EXPENSES:
Salaries and related benefits 184,029 169,776
Research and development expenses 143,849 90,670
Selling expenses 70,715 92,713
General and administrative expenses 77,616 58,085
------------ ------------
Total operating expenses 476,209 411,244
------------ ------------
Loss from operations (167,484) (138,276)
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 3,315 175
Interest expense (54,000) (53,900)
------------ ------------
(50,685) (53,725)
------------ ------------
Net loss $ (218,169) $ (192,001)
============ ============
LOSS PER COMMON SHARE $ (0.03) $ (0.02)
============ ============
WEIGHTED AVERAGE NUMBER COMMON
SHARES OUTSTANDING 8,121,521 8,103,965
============ ============
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<PAGE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
UNAUDITED
THREE MONTHS ENDED MARCH 31,
2000 1999
------------ ------------
OPERATING ACTIVITIES:
Net loss $ (218,169) (192,001)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation 9,200 26,700
Decrease (Increase) in accounts receivable (27,123) 56,593
Decrease (Increase) in prepaid
expenses and other current assets (17,017) (6,667)
Increase (Decrease) in accounts payable,
and accrued expenses 238 (166,601)
Increase in due to ASI 50,000 50,000
(Decrease) in accounts payable - related party (30,000) 30,000
Increase in deferred revenues 13,000
------------ ------------
Net cash used in operating activities (219,871) (201,976)
------------ ------------
INVESTING ACTIVITIES -- Purchases of
equipment, furniture and fixtures (2,417) (5,213)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of stock in
exchange for Stock Options and cash 2,000
------------ ------------
Net cash provided by financing activities 0 2,000
------------ ------------
Net increase (decrease) in cash (222,288) (205,189)
CASH, beginning of period 580,623 217,129
------------ ------------
CASH, end of period $ 358,335 $ 11,940
============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid 0 0
============ ============
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<PAGE>
PAPERCLIP SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 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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<PAGE>
PAPERCLIP SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Three Months Ended March 31, 2000 Compared with Three Months
Ended March 31, 1999
Net sales of PaperClip Software, Inc. (the "Company") increased by
$35,757 or 13% to $308,725 for the three months ended March 31, 2000 from
$272,968 for the three months ended March 31, 1999. The increase was due to
revenues received in connection with special one-time development services
performed by the Company for a customer.
Salaries and related benefits increased by $14,253 or 8% to $184,029 for the
three months ended March 31, 2000 from $169,776 for the three months ended March
31, 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 increased by $53,179 or 59% to $143,849
for the three months ended March 31, 2000 from $90,670 for the three months
ended March 31, 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 decreased by $21,998 or 24% to $70,715 for the three months
ended March 31, 2000 from $92,713 for the three months ended March 31, 1999. The
decrease was due to a decrease in the amount of royalties the Company was
required to pay for its products which resulted from the Company's shift to
marketing and selling products that require lower or no royalties to be paid to
third parties.
General and administrative expenses increased by $19,531 or 34% to $77,616
for the three months ended March 31, 2000 from $58,085 for the three months
ended March 31, 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 $3,040 to $(50,685) for the three months
ended March 31, 2000 from $(53,725) for the three months ended March 31, 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 1999.
Net loss from operations increased by $26,168 or 14% to $218,169 for the
three months ended March 31, 2000 from $192,001 for the three months ended March
31, 1999. The incease 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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<PAGE>
Liquidity and Capital Resources
March 31, 2000 Compared with December 31, 1999
For the three months ended March 31, 2000 the Company incurred a net loss of
$218,169. As of March 31, 2000, the Company had an accumulated deficit of
$20,687,352. The Company continues to incur operating losses. The Company had
negative working capital of $4,019,310 and $4,230,696 as of December 31, 1999
and March 31, 2000, respectively. The increase in negative working capital of
$211,386 was due to the net loss for the three months ended March 31, 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 March 31,
2000, the Company had aggregate liabilities in excess of $4.8 million,
approximately $3.0 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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<PAGE>
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 on March 1, 2000 a report
on Form 8-K, which related to the Company's
change of independent public accountants.
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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: May 15, 2000
-8-
<PAGE>
Paperclip Software, Inc.
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 10
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 358,335
<SECURITIES> 0
<RECEIVABLES> 193,781
<ALLOWANCES> 30,000
<INVENTORY> 0
<CURRENT-ASSETS> 539,133
<PP&E> 634,857
<DEPRECIATION> 560,777
<TOTAL-ASSETS> 633,213
<CURRENT-LIABILITIES> 4,769,829
<BONDS> 0
0
0
<COMMON> 81,215
<OTHER-SE> 16,469,521
<TOTAL-LIABILITY-AND-EQUITY> 633,213
<SALES> 308,725
<TOTAL-REVENUES> 308,725
<CGS> 0
<TOTAL-COSTS> 476,209
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,000
<INCOME-PRETAX> (218,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (218,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (218,169)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
