UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-KSB

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999


                        Commission File Number 000-26598

                            PAPERCLIP SOFTWARE, INC.
             (Exact name of small business issuer in its charter)

                                    Delaware
              (State or other jurisdiction of incorporation or organization)

                                                    22-3137907
                      (I.R.S. Employer Identification No.)

                                611 Route 46 West
                       Hasbrouck Heights, New Jersey        07604
               (Address of principal executive offices)   (Zip Code)

                                  (201) 329-6300
                      (Issuer's  telephone number)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class: None               Name of exchange on which registered

Securities registered pursuant to Section 12 (g) of the Act:

             Common Stock, Par Value $.01; Class A Purchase Warrants
                                (Title of Each Class)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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


<PAGE>

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenue for the fiscal year ended December 31, 1998 was $1,145,219.

As of March 6, 2000,  the  aggregate  market  value of the voting  stock held by
non-affiliates  of the  registrant  (based on the OTC Bulletin Board closing bid
price on March 6,  2000)  was  $2,761,317.  As of  March  6,  2000,  there  were
8,121,521 shares of the registrant's common stock outstanding.

Documents Incorporated by Reference: None.

Transitional Small Business Disclosure Format (check one):   Yes ___   No     X



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                                           2






<PAGE>

                                     PART I

Item 1.  Description of Business.

INTRODUCTION

         PaperClip Software,  Inc. formerly known as PaperClip Imaging Software,
Inc.  (the  "Company"  or  "PaperClip"),  a Delaware  corporation  (which is the
successor  by merger,  in March 1992,  to the  original  company  which had been
incorporated  in New Jersey in October 1991),  is engaged in the development and
distribution  of computer  software for  document  management  and  transport of
electronic  document  packages across the public Internet or a private  intranet
with interoperability, security and tracking capabilities.

RECENT DEVELOPMENTS

         During  October  1996,  the Company  entered into an  agreement  with a
software  developer which provided for the  rescheduling of payments owed by the
Company to the developer.  The Company paid $150,000 upon signing such agreement
and agreed to pay an additional amount aggregating  approximately  $200,000 (the
"Remaining Amount") in three monthly installments commencing January 1, 1997. On
January 29, 1997, the Company paid the remaining amount from the proceeds of the
Access Loan (as defined herein).

         In  December  1996,  the  Company   borrowed  an  aggregate  amount  of
$129,690.74 from nine of its stockholders  (the  "Stockholder  Creditors").  The
loan was evidenced by Convertible  Promissory  Notes ("Notes") issued to each of
the nine  stockholders for their respective loan amounts.  The Notes: (i) have a
three  (3)  year  maturity,  (ii)  have  a 12%  interest  rate,  and  (iii)  are
convertible  into common  stock of the Company at a rate of $0.30 per share (the
"Stockholder Notes"). To date the Stockholders Notes have not been repaid.

         In January  1997,  the Company  entered  into a  non-binding  Letter of
Intent  (the  "Letter of  Intent")  with Access  Solutions  International,  Inc.
("Access")  pursuant to which the  Company  and Access  agreed to use their best
efforts  to  negotiate  a  transaction  involving  the  purchase  by  Access  of
substantially all of the assets of the Company.  Access also agreed, pursuant to
the Letter of Intent,  to provide  the  Company  with a one year  bridge loan of
$300,000 (the "Access  Loan") in exchange for a promissory  note, at an interest
rate of 12% per  annum,  convertible  into  shares of Common  Stock (as  defined
herein). The proceeds of the Access Loan were used as operating capital.

         On November 12, 1997,  the Company and Access entered into a definitive
Merger Agreement (the "Merger  Agreement") which provided that the Company would
merge with and into a newly formed wholly owed subsidiary of Access.  The merger
consideration  to be paid to the Company was  1,544,438  of the common  stock of
Access  plus an  equivalent  number  of Class B  Warrants.  Concurrent  with the
execution  of the Merger  Agreement,  the Company and Access also entered into a
Management  Agreement pursuant to which Access assumed control of the day to day
operations of the Company and advanced funds to the Company  pending the closing
of the  transactions  contemplated  by the  Merger  Agreement  (the  "Management
Agreement").
                                       3





<PAGE>

         In August 1998,  Access  terminated the Merger  Agreement in accordance
with its terms due to the failure by Access to satisfy the  financing  condition
contained in the Merger  Agreement.  The Management  Agreement was terminated in
October  1998.  The  Company is  currently  conducting  discussions  with Access
regarding  exchanging all but $300,000 of the approximately $3.0 million owed to
Access by the  Company for equity of the  Company  and the  resolution  of other
potential  disputes  between  the  Company and  Access.  These  discussions  are
preliminary and there can be no assurance that the Company will be successful in
resolving any potential disputes with Access.

         Since August  1998,  the Company has been  exploring  options to obtain
sources  of  funding,  including  a proposal  made by  certain of the  Company's
employees  who  agreed to receive a  reduction,  or no,  salary for a  specified
period of time in  exchange  for equity in the  Company.  Some of the  Company's
employees have agreed to defer payment of their salary  temporarily or to forego
a portion of their  salary in exchange for equity in the Company to be issued in
the future. There can be no assurance that such arrangements will continue to be
acceptable to the Company's employees.

         On March  11,  1997,  the  Company  was  informed  by  Nasdaq  that its
securities  were deleted from The Nasdaq  SmallCap  Market due to the  Company's
failure  to  comply  with  minimum  asset  and  capital   surplus   requirements
established by Nasdaq. The Company's common stock, $.01 par value per share (the
"Common  Stock"),  and Class A Common Stock Purchase  Warrants are now quoted on
the OTC Bulletin Board.  The Company has been informed that after March 8, 2000,
its securities will no longer be eligible to be traded on the OTC Bulletin Board
unless it complies  with certain  reporting  requirements.  While the Company is
currently  completing a certified audit and anticipates meeting the requirements
for  listing  on the OTC  Bulletin  Board,  there can be no  assurance  that the
Company will be able to meet such reporting  requirements and remain eligible to
have its securities traded on the OTC Bulletin Board.

         Since  the  termination  of the  Merger  Agreement  and the  Management
Agreement, the Company had no sources of capital other than revenues from sales.
The Company did not have the funds necessary to pay for the audits of its
statements or file reports required under the Securities  Exchange Act of 1934,
as amended (the "Exchange  Act"), and operated on a subsistence  basis. The
number of employees of the Company decreased from 31 in 1997 to 13 in 1999, and
had dropped to a low of 11 in 1998.

         In October  1998,  BISYS  Insurance  Services  ("BISYS"),  the nation's
largest  independent  distributor of life insurance,  had selected the Company's
Systems (as defined  herein) as its enterprise  document  management and imaging
solution.  BISYS will use more than 450  installed  end users of the  Systems to
reduce the tremendous amounts of paper-based  documents  processed daily, and to
further automate and enhance their entire business process.  In July 1999, BISYS
began  transmitting  documents  to Midland  Insurance  utilizing  the  Company's
Internet Express product. In January 2000, First Colony Insurance, a division of
GE, and CNA Insurance began receiving documents from BISYS.

         The Company is in the process of negotiating a contract with
D. Michael Bridges to join the Company as President of the Company.  Since
August 1998, Mr. Bridges has been acting as a consultant to the Company.

                                           4



<PAGE>

         In 1999,  the Company  applied for a Technology  Tax  Certificate  with
State of New Jersey  Economic  Development  Authority.  The program  allowed the
Company to sell its New Jersey  tax  losses to a New Jersey  company  that could
utilize the losses. The Company received approximately $625,000 in December 1999
from  selling a portion of its  losses.  The  receipt of such funds  allowed the
Company to have its financial statements audited on a current basis and begin to
comply with its  reporting  requirements  under the  Exchange  Act.  The Company
intends to file in 2000 to sell  additional  tax  losses of up to  approximately
$10.0 million which will result in net proceeds to the Company of  approximately
$800,000.  There can be no  assurance  if or when the Company  will receive such
amount.  In addition,  there can be no  assurance  that the Company will receive
sufficient  funds  to pay  its  creditors,  file  required  documents  with  the
Securities Exchange Commission and maintain its existence.

ABOUT THE COMPANY

         The Company's  systems  allow users of personal  computers and personal
computer networks to scan, file,  retrieve,  display,  print and route documents
and other software  objects (such as word  processing  files,  spreadsheets  and
electronic mail), while continuing to use their existing  application  software.
The systems can be integrated  with many  personal  computer  applications  with
little or no programming  and can file and retrieve  documents  without the time
consuming  step of  manually  labeling or indexing  each  document,  or manually
searching for documents.

         The Company has developed and markets a line of software  consisting of
Professional,  Network and SQL Enterprise Editions (the "Systems").  The Company
also markets  PaperClip COLD,  which captures batch file  information  before it
goes to paper and allows expeditious access,  retrieval, full text searching and
printing of COLD documents. "COLD" refers to Computer Output to Laser Disk which
are  documents  that are  archived in large  volumes of  formatted  data streams
directly to optical media.  Instead of printing large paper reports or producing
microfilm or microfiche, data is stored on optical disks.

         The Company is currently  completing  development of its  WebServer(TM)
Product,  which is an add-on to the Systems.  This new product has been designed
to provide full security for documents stored on a PaperClip  System,  to enable
users to make the documents available to anyone with a Web Browser and to make a
user's document repository accessible via the Internet or a private intranet.

         In November 1995,  PaperClip  acquired,  from Cheyenne  Software,  Inc.
("Cheyenne"),  the NOSS (Network  Optical  Storage  System)  product  line.  The
Company offers NOSS as part of its systems as well as a stand-alone product. The
Company is developing the next generation of the NOSS product.  NOSS for NT will
be deployed on the Microsoft  Windows NT server platform and provide several new
enhancements.

         The Company  markets the Systems and associated  products  domestically
(i) through mass distributors,  including Law Cypress Distributing  Company, New
Wave and Z Source  who  sell to a value  added  reseller  ("VAR")  channel  that
currently  consists of approximately 50 resellers and (ii) directly through such
VARs. The Company markets its products  internationally through approximately 10
VARs.


                                           5


<PAGE>
INDUSTRY BACKGROUND

         Many  businesses  must manage,  exchange and process  large  amounts of
information in their day to day activities.  Traditional data processing systems
have  automated the creation and  processing  of data and text,  but they do not
provide a means for storing and  retrieving  documents  that must be retained in
their original form and used in conjunction with the data.

         The  greatest  difficulty  in dealing  with paper  documents is filing,
storing and retrieving them conveniently and cost-effectively.  In the course of
performing  these  tasks  manually,  critical  documents  can  be  inadvertently
misfiled,  physically  damaged,  or lost. Manual handling is inefficient because
documents  can only be used by one  person  at a time and are also  inaccessible
during the time required to transport  them within the  organization.  Moreover,
significant time and resources are often spent storing and locating documents in
large filing  systems.  With the public  acceptance of document  management and,
more  importantly,  the imaged  document  as an  original  document,  exchanging
electronic documents is a market opportunity.

         The  procedural  steps  involved in processing  incoming  documents may
include  sorting  documents  as they are  received,  indexing  them  for  future
reference, routing them from one employee to the next, entering information from
these  documents  into  computer  systems,  collecting  different  documents for
appropriate action, creating letters and forms of response and queuing documents
for  subsequent  filing.  In  order to  improve  the  efficiency  of the flow of
documents,  manage  information,  and improve office  productivity  and response
times,  many companies may seek to automate their paper and electronic  document
management procedures.

         Technological  developments  in recent years have made possible the low
cost capture, storage,  retrieval and processing of paper documents as digitized
images. In particular, the application of optical disk technology, which permits
digitized  document  images to be stored with  densities many times greater than
magnetic storage media,  has enabled the development of cost effective  computer
systems for document management.

         The Systems have been designed to provide  users of personal  computers
and computer networks the ability to exchange,  file, retrieve and process large
volumes of documents  quickly,  efficiently and at a low cost. The  enhancements
developed for the Systems have been designed to allow users to quickly implement
workflow technology in their existing  environments  without the need for costly
programming.  The  Company's  Internet  products  should  give  users  the added
flexibility  of  exchanging,  accessing  and managing  stored  documents via the
Internet.



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<PAGE>

THE PRODUCTS

         The Company  derives all of its revenues  from the licensing or sale of
the Systems and associated products and services.

         The Company is currently  developing 4 new products,  Internet Express,
Intranet  Express,  WebServer and DECS (Document / EDI Capture  Suite),  and the
further  enhancements  of, and  additions  to, its existing  products.  Internet
Express  ("IE") is an extranet  designed to exchange  electronic  document as an
Application  Service Provider ("ASP").  The Company will derive revenue based on
the  movement  of  Electronic  Document  Exchange  ("EDX")  packages  across the
Internet.  Intranet Express ("IA") is designed to exchange electronic  documents
among  organizations that are members of the same private intranet.  The Company
will provide IA as a product,  not a service.  WebServer will allow users across
the World Wide Web to retrieve  documents and conduct simple  workflow task from
their thin client browser.  DECS is a remote  electronic  document EDX packaging
system that provides scanning,  printing, filing and Electronic Data Interchange
("EDI") capture producing capabilities, and creates EDX Packages for IE, IA, the
Systems and / or any EDX compliant solution.

         There can be no assurance that the products and enhancements  currently
being  tested,  developed  or  explored  by the  Company  will be  completed  or
introduced  within  the  anticipated  timeframes,  that  they  will  perform  as
anticipated,  achieve market acceptance or result in revenue to the Company. The
inability to further enhance  successfully the Company's existing products or to
develop  new  products  may have a  material  adverse  effect  on the  Company's
operations and profitability.

THE SYSTEMS

         The Systems  allow users of personal  computers  and personal  computer
networks to scan, file, retrieve,  display,  print and route documents and other
software objects ("Documents"),  such as word processing files, spreadsheets and
electronic  mail.  The Systems can be  integrated  with many  personal  computer
applications  with little or no programming and can file and retrieve  Documents
without the time consuming step of manually  labeling or indexing each Document.
The Systems  range from single  user,  stand-alone  products to  enterprise-wide
document management solutions.

         Electronic  "file  folders" of Documents can be accessed at any time by
the user with only one key stroke  combination.  Minimal  training is  required.
Moreover,  all Documents  previously  attached to an electronic  file folder are
accessible as soon as each of the Systems is activated.  If a Document is not so
attached, it can be located by searching a Document list or by entering exact or
partial  identifying  information  into  the  folder's  index  fields.  Multiple
Documents can be viewed simultaneously in any of the Systems.

         Images  displayed  through  any of the Systems  are  facsimiles  of the
Documents that have been scanned, and the Systems allow Documents to be scrolled
through  (i.e.,  moved on a display  screen to search for a  particular  line or
section),  enlarged,  reduced,  and  rotated.  The  Systems  also  allow  stored
Documents to be reproduced through a locally connected laser printer, or through
shared laser print servers on a network.


                                           7


<PAGE>

PROFESSIONAL EDITION

         The Professional  Edition allows users to create "folders" of Documents
and attach or "clip" them to their existing application software. The additional
features available include the ability to scan, index, retrieve, display, print,
fax, import and export  Documents.  Storage of Documents is on multiple forms of
media, and, in addition,  enables the user to store Documents on a large variety
of optical  disk and  "jukebox"  storage  devices.  A "jukebox"  is a mechanical
device which allows for  multiple  optical disk  platters or tapes to be managed
and  accessed by  software.  This allows the storage of  thousands  of Documents
while maintaining a high level of performance.  The user also has the ability to
convert scanned Documents by optical character  recognition to a variety of word
processing formats, and to store such Documents.  The  DocumentLink(TM)  feature
allows the user to find both the folder and the scanned image of such a Document
from within a word processing program.

NETWORK EDITION

         Network Edition provides users with all of the features of Professional
Edition,  and allows users to perform all of the  functions at the same time, as
well as to route  Documents  and  folders to other  users on a network.  It also
supports a shared network fax capability,  allowing the user to send faxes from,
and store faxes in, folders.

SQL EDITION

         SQL  Edition  provides  all the  features  of the  Network  Edition and
provides for Wide Area Network operation using a client/server architecture. The
significant  differences  provided to users by the SQL Edition are the increased
integrity  of the  database  (i.e.,  if there is a hardware or software  failure
which  corrupts the database,  SQL Edition will  facilitate the recovery of such
records as they existed prior to their corruption) and the improved  performance
in  networks  with more than 20  users.  To  operate  SQL  Edition,  the user is
required to obtain a license,  which is readily  available  from  various  third
parties,  for the  desired  SQL  server.  The SQL  Edition  is  suited  to large
departmental  and  enterprise  installations  because of its inherent  security,
transaction  logging  capability and database  integrity.  The Company presently
offers its SQL Edition to work in conjunction  with SQL Servers from  Microsoft,
Oracle and Centura.

THE COLD PRODUCT

         PaperClip COLD captures formatted print data streams.  Once the data is
captured by the PaperClip COLD Extract Engine, it is automatically imported into
the user's  PaperClip  System and made available to the users through a familiar
interface.  Users can access folders  containing  COLD data by simply pressing a
designated  key from the  applications  that they  choose.  They can also access
folders of diverse information through PaperClip's intuitive file cabinet/folder
interface.  PaperClip COLD can print to any standard Windows printers or fax and
can display documents on conventional  80-column  monitors in 132 column format.
To further facilitate the retrieval and review of COLD documents, PaperClip COLD
supports full text searching of COLD  documents and forms  overlay,  and can add
colored lines to the display to simulate green bar paper viewing.

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<PAGE>

THE NOSS PRODUCT LINE

         NOSS is the subsystem for optical storage and jukebox management.  When
combined with the Network and SQL Editions,  it provides a powerful  system that
manages a range of mass storage devices.

         The acquisition of the NOSS product line (a portion of which is subject
to an exclusive, royalty free, perpetual license from Cheyenne) allows PaperClip
to fully take  advantage of NOSS's  high-end  functionality  to further  develop
powerful  document imaging  solutions for  client/server  network  environments.
PaperClip  is also  making  NOSS  available  as a  separate  product  for  VARs,
integrators,  and distributors to develop  applications based on network optical
storage.

THE WEBCLIP PRODUCT

         The WebClip product has been eliminated from the Company's product line
due to lack of sales.

THE WORK FLOW PRODUCT

         While the Work Flow product has been substantially completed for the 32
bit platform,  based on current projections,  no further development of the Work
Flow Product is anticipated.

INTERNET PRODUCT LINE - WEBSERVER

         The Company is completing development of its WebServer(TM), which is an
add-on to the  Systems.  The new  product  is being  designed  to  provide  full
security for documents stored on a PaperClip System, to enable users to make the
documents  available  to anyone  with a Web Browser  and to make  available  the
user's document repository to both Internet and private intranet users.

MARKETING

OBJECTIVES, INTERNAL SALES FORCE AND RISKS

         Management's  marketing  objectives for the Systems are as follows: (i)
develop strategic  relationships  with prominent  software  organizations;  (ii)
introduce   the  Systems  to  customers   through   VARs,   original   equipment
manufacturers  ("OEMs"),  distributors and other  distribution  networks;  (iii)
create brand name  recognition  of its products by  advertising  in  appropriate
trade  magazines  and  publications,  and  by  attending  and  participating  in
exhibitions,  shows and seminars,  engaging in public relations  campaigns,  and
conducting  its own  seminars  and direct mail  campaigns;  and (iv) support the
sales efforts of its resellers through sales tools and training.

         Marketing  assistance,  training  and  technical  support  of VARs is a
critical  component of the Company's efforts with respect to its Network and SQL
Editions. Consequently, the Company is expending approximately $25,000 per month
to maintain a group of five marketing, training, and technical support employees
dedicated to providing  on-going  communication  with, and support to, its VARs.
Marketing assistance includes hot line access, mailings of product and technical
updates, joint cooperative marketing, site visits and seminars.

                                           9


<PAGE>
         The Company has a field sales force of four persons.  While  management
will attempt to encourage VARs, distributors and other resellers to focus on the
Company's  products,  management  is aware  that  VARs,  distributors  and other
resellers also represent other lines of products,  some of which may be, or are,
competitive with those of the Company. Accordingly, the VARs, OEMs, distributors
and other  resellers  may choose to give  higher  priority  to products of other
publishers, which would decrease potential sales by the Company.

VALUE ADDED RESELLER NETWORK

         To date, the most significant  portion of the Company's sales have been
made through VARs.  The Company  currently has  approximately  60 VARs, of which
approximately 50 VARs are in the United States and approximately 10 are abroad.

BUSINESS SERVICES

         The Company's  Business  Services  Department  sells  directly to major
accounts  that want to work on a direct basis with the  Company.  It also offers
users of its products and VARs,  post-contract support,  consulting services and
assistance in the form of training,  product  education  and technical  support,
when requested.  The Business Services Department  currently consists of one (1)
employee.

CUSTOMERS AND SALES

         The Company had net sales of $1,505,972 in 1997, $1,538,795 in 1998 and
$1,145,219  for 1999.  Law Cypress  accounted for 21% of the Company's  sales in
1999.  Sales to two major  customers  for the year ended  December 31, 1998 were
approximately  23% and 14%.  Sales to two  major  customers  for the year  ended
December 31, 1997 were approximately 13% and 11%.

CUSTOMER SUPPORT AND SERVICE

         The  Company  presently  provides  telephone  support to its VARs.  The
majority of the Company's  service and support  activities  involve responses to
customer inquiries regarding use of the Network, SQL and Professional  Editions,
which are provided by telephone  support  directly from the Company's  technical
support center.

PRODUCT DEVELOPMENT

         At present the Company's  systems are being  developed by a combination
of in house  staff and outside  consultants.  PaperClip  expended  approximately
$351,200,  546,300 and $1,266,500 on research and  development in 1999, 1998 and
1997, respectively.

         Existing  and future  competing  products  that may be offered at lower
prices, or that may have superior technological and performance characteristics,
could adversely affect sales of the Systems and/or other products offered by the
Company. Management expects that growing demand for efficient and cost-effective
solutions  for  document  management  and  imaging  will  continue  to drive the
developments  of new  technologies  that  may be  more  sophisticated  than  the
Company's products and that the Company's ability to continue to compete depends
upon its ability to continue to enhance  successfully its existing  products and
to develop  new  products  that meet the  changing  needs of  end-users.  If the
Company is unable to  successfully  enhance its existing  products or to develop
new products,  it may have a material adverse effect on the Company's operations
and profitability.
                                          10

<PAGE>
PRODUCTION

         The Company has  produced a set of master  CD'S and  documentation  for
each System, duplicates the CD'S and assembles and ships the Systems at and from
its  headquarters.  The Company has also engaged  various sources to produce and
assemble the product and documentation  (including  packaging for the Systems on
terms management believes are comically reasonable).

PRODUCT PROTECTION

         The Company will reply on a combination of copyright,  trade secret and
trademark laws and license  agreements to protect its proprietary  rights in its
technology.  The Company  obtained from the U.S.  Patent and Trademark  Office a
registered  trademark  for  PAPERCLIP  SOFTWARE  AND  DESIGN in August  1993 and
obtained a registered  trademark  for PAPERCLIP  IMAGING  SOFTWARE AND DESIGN in
February  1993.  Although  no other  person or entity  owns any U.S.  registered
trademark  for the mark  "PaperClip"  in  connection  with  software  or imaging
products, there was a prior U.S. registration for use of the "PaperClip" mark in
connection with pre-recorded word processor  programs.  This latter registration
was  automatically  canceled on April 2, 1992 by the U.S.  Patent and  Trademark
Office because of the  registrant's  failure to file (as required by statute) an
affidavit,  during  the  year  commencing  with  the  fifth  anniversary  of the
registration,  stating that the mark was still in use. However,  the user of the
canceled  registration  might, at some future time, assert an infringement claim
in the U.S. based on alleged common law rights. If such a claim is asserted, the
Company  may be forced to expend  significant  effort,  time and funds to defend
against it. If the Company is not successful in defending  against such a claim,
the Company  would be  required  to adopt a different  name and would incur as a
result thereof.

         The Company  relies on a  combination  of  copyright,  trade secret and
trademark laws and license  agreements to protect its proprietary  rights in its
technology.  The Company  obtained from the U.S.  Patent and Trademark  Office a
registered  trademark  for  PAPERCLIP  SOFTWARE  AND  DESIGN in August  1993 and
obtained a registered  trademark  for PAPERCLIP  IMAGING  SOFTWARE AND DESIGN in
February 1993.

         The  Company  also has  registered  trademarks  for  PAPERCLIP  IMAGING
SOFTWARE & DESIGN in the United Kingdom,  Germany and Canada,  but has not filed
applications for trademark  registration in other countries in which the Systems
are sold.
         The Company  distributes  its products  under signed  software  license
agreements,  which grant customers  perpetual licenses to, rather than ownership
of,  the  Company's   products  and  which  contain   restrictions  on  copying,
disclosure, reverse engineering and transferability.  The source code for all of
the  Company's  products is protected  as a trade  secret and as an  unpublished
copyrighted  work.  In  addition,  the Company has  entered  into  nondisclosure
agreements with its employees. There can be no assurance that the steps taken by
the  Company in this  regard  will be  adequate  to deter  misappropriations  or
independent third-party development of its technology.

         The Company has no patents on its proprietary  software  technology and
existing copyright laws afford only limited practical  protection.  In addition,
the laws of some  foreign  countries  do not protect the  Company's  proprietary
rights in its products and technology to the same extent as U.S. laws.

                                           11

<PAGE>
         Although management  believes that the Company's  products,  trademarks
and other proprietary  rights do not infringe on any existing  proprietary right
of  others,  there  can be no  assurance  that  third  parties  will not  assert
infringement claims in the future.

COMPONENTS PROVIDED BY OTHERS

         The Systems  require  licenses,  which the Company has  obtained,  from
Input Software, Inso Corporation,  Merant AccuSoft Corporation, Sybase Inc., and
Snowbound Software.


COMPETITION

         The document management software market is intensely competitive. Buyer
preferences  can  shift  quickly,   and  rapid  changes  in  technology  provide
opportunities  for new entrants into the market.  Management is not aware of any
product  line which  offers all of the  features  and  functions of the Systems.
However, a number of software companies offer products which compete with one or
more of the functions of the Systems.

         There are numerous companies that sell either stand-alone,  network and
Web based systems with which the Company competes. Competition for the Company's
products include, among others, KeyFile Corporation,  Westbrook Technologies,  a
division  of  Intelligent  Optics  Co.,  Optika  Imaging  Systems  Incorporated,
LaserData,  Inc.,  Minolta  Corporation,  Network Imaging  Corporation,  Genesys
Information Systems Corporation and Hitachi. The Company also competes with more
expensive turnkey solutions such as those produced by FileNet Corp. ("FileNet"),
IBM  Corporation  ("IBM"),   Wang  Laboratories,   Inc.  ("Wang")  and  ViewStar
Corporation.  Many of  these  companies  have  greater  financial  strength  and
resources than the Company, and there can be no assurance that these competitors
will not modify  their  existing  systems,  develop  new  products or systems or
acquire other competitors of the Company to better compete with the Systems. Nor
can there by any  assurance  that new  companies  will not introduce new systems
with better features and functions than the Systems.  There a few competitors in
the electronic document exchange market. This is a new extension of the Internet
services  collectively  known as the  Business to Business  Electronic  Commerce
(B2B/ec).  Current  competition  is focused on  electronic  mail  (Email)  based
exchange  solutions,  which is different  from the  methodology  the Company has
adopted. Email based competitors include United Parcel Service and Pitney Bowes.
In the life insurance  industry,  one competitor has emerged utilizing a central
repository for document exchange.

         In addition to computer  software for document  management and imaging,
there is also a diverse  range of  alternative  types of tools and  methods  for
storing and retrieving documents,  including microfilm,  microfiche and computer
output microfilm and microfiche machines. Moreover,  management expects that the
growing  demand  for  efficient  and   cost-effective   solutions  for  document
management  and computer  imaging will continue to drive the  development of new
technologies that may be more sophisticated and cost-effective than the Systems.
Many existing and potential  competitors have  considerably  greater  financial,
technological, marketing and personnel resources than the Company.

         Management  believes  that the  principal  competitive  factors  in the
market for the  Company's  products  include  product  performance,  technology,
quality of customer support,  availability of training and consulting  services,
price,  sales  and  marketing   strength,   corporate   reputation  and  ongoing
responsiveness to user needs.
                                          12
<PAGE>
EMPLOYEES

         As a result of limited  resources,  the Company decreased its full time
staff from 31 in 1997 to 13 in 1999. At present,  the Company's  full-time staff
of 13 includes 4 engaged in development and systems testing, 6 engaged in sales,
marketing  and  technical  support,  1 in  Business  Services  and 2 engaged  in
administration.  The Company has no  collective  bargaining  agreements,  and no
employee  is  represented  by a labor  union.  The  Company has never had a work
stoppage and considers its  relationship  with its employees to be satisfactory.
The  Company  utilizes  a  number  of  consultants  to  supplement  its  systems
development, sales and marketing.

         The Company's success depends to a significant  extent upon a number of
key management and technical  employees.  The loss of services of one or several
of these key  employees  could have a material  adverse  effect on the  Company.
Management  believes that the future  success of the Company will also depend in
large  part upon the  Company's  ability to attract  and retain  highly  skilled
technical, managerial and marketing personnel. Competition for such personnel in
the software industry is intense.

YEAR 2000 COMPLIANCE

         All of the Company's products and systems are Year 2000 compliant.









                                           13


























<PAGE>
ITEM 2.  Description of Property.

         The Company's principal  administrative,  sales and marketing,  product
development and support facilities are located in Hasbrouck Heights, New Jersey,
and  comprise  approximately  7,000  square  feet.  The Company  occupies  these
premises pursuant to a sublease, the term of which expires on November 30, 2000.
The fixed rent is approximately $7,000 per month plus utilities.

ITEM 3.  Legal Proceedings.

         The Company is not a party to any pending legal proceedings.

ITEM 4.  Submission Of Matters To A Vote Of Security Holders.

         The Company held a  stockholders  meeting on February 17, 1998 at which
the  proposed  merger  with  Access  was  approved  by the  requisite  number of
stockholders  entitled to vote thereon.  The Merger  Agreement was terminated on
August 25, 1998.





                                     PART II

ITEM 5.  Market For Common Equity And Related Stockholder Matters.

                  Common                    Class A
                     Stock                           Warrants

1997              High     Low                       High     Low
First             0.69     0.05                      0.22     0.06
Second            0.31     0.09                      0.06     0.03
Third             0.21     0.09                      0.03     0.01
Fourth            0.20     0.05                      0.01     0.001

1998
First             0.12     0.06                      0.01     0.001
Second            0.27     0.05                      0.08     0.001
Third             0.13     0.02                      0.005    0.001
Fourth            0.05     0.01                      0.001    0.001

1999
First             0.34     0.01                      0.02     0.001
Second            0.25     0.11                      0.01     0.005
Third             0.16     0.12                      0.02     0.01
Fourth            0.12     0.08                      0.02     0.01

2/23/00           0.26     0.09                      0.01     0.005


                                           14







<PAGE>

         On March  11,  1997,  the  Company  was  informed  by  Nasdaq  that its
securities  were deleted from the Nasdaq  SmallCap  Market due to the  Company's
failure  to  comply  with  minimum  asset  and  capital   surplus   requirements
established by Nasdaq. The Company's  securities are presently traded on the OTC
Bulletin Board.

         As of February 23, 2000 there were  approximately 769 holders of record
of the Company's shares of Common Stock.

         On February  23,  2000,  the closing bid and asked prices of the Common
Stock were .22 and .31,  respectively,  and the closing bid and asked  prices of
the Class A Warrants  were .005 and .01  respectively,  as  reported  on the OTC
Bulletin Board. OTC market quotations reflect  interdealer prices without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions.

         The Company has not paid cash dividends since its organization and does
not  anticipate  the  declaration  or  the  payment  of  cash  dividends  in the
foreseeable future.



































                                           15



<PAGE>

ITEM 6.  Management's Discussion and Analysis or Plan
               of Operation

RESULTS OF OPERATIONS

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

         Net sales  decreased  by  $393,576  or 26% to  $1,145,219  in 1999 from
$1,538,795 in 1998, due to lower  promotional  expenses by the Company resulting
from the Company's financial constraints.

         Salaries and related  benefits  decreased by $90,856 or 11% to $733,681
in 1999 from $824,537 in 1998, due to additional termination of employees.

         Research  and  development  expenses  decreased  by  $195,179 or 36% to
$351,171  in 1999  from  $546,350  in 1998,  due to  additional  termination  of
employees.

         Selling expenses  decreased by $279,543 or 56% to $220,725 in 1999 from
$500,268 in 1998, due to a reduction in promotional  expenses resulting from the
financial constraints of the Company.

         General and  administrative  expenses  decreased  by $111,909 or 32% to
$238,712 in 1999 from $350,621 in 1998, due to a reduction in professional  fees
and other management expenses incurred in 1998, primarily incurred in connection
with the Merger Agreement.

         Interest  expense and  financing  costs  increased  by $10,376 or 5% to
$215,500 in 1999 from $205,124 in 1998, due to accrual of interest  expense as a
result of cash advances by Access to the Company in 1997 and 1998.

         Net income  increased  by $896,568 to $8,740 in 1999 from a net loss of
$887,828 in 1998,  due to lower payroll  costs,  and gain on the sale of its New
Jersey  net  operating  losses.  Due to a change in the laws of the State of New
Jersey, the Company was able to realize in 1999 a gain $623,135 from the sale of
some of its cumulative net operating losses for New Jersey income tax purposes.



Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

         Net sales was  approximately  the same in 1998 as in 1997,  showing  an
increase by $32,823 or 2% to $1,538,795 in 1998 from $1,505,972 in 1997.

         Salaries and related benefits  decreased by $616,617 or 43% to $824,537
in 1998 from $1,441,154 in 1997, due to the  termination of employees  resulting
from  the  financial  constraints  of the  Company  and the  termination  of the
Management Agreement with Access.

         Research  and  development  expenses  decreased  by  $720,180 or 57% to
$546,350 in 1998 from  $1,266,530 in 1997,  due to the  termination of employees
resulting from the financial constraints of the Company.

         Selling expenses  decreased by $192,831 or 28% to $500,268 in 1998 from
$693,099  in 1997,  due to lower  promotional  efforts by the Company due to the
financial constraints of the Company.


                                          16
<PAGE>

         General and  administrative  expenses  decreased  by $425,121 or 55% to
$350,621 in 1998 from $775,742 in 1997, due to a reduction in professional  fees
that resulted from the termination of the Merger Agreement with Access.

         Interest  income  decreased  by $3,886  to $277 in 1998 from  $4,163 in
1997,  due to a reduction in  investments  resulting  from the  Company's use of
funds.

         Interest  expense and  financing  costs  increased by $79,425 or 63% to
$205,124 in 1998 from $125,699 in 1997,  due to additional  interest  accrued on
the advances by Access Solutions.

         Net loss  decreased  by  $1,904,261  or 68% to  $887,828  in 1998  from
$2,792,089  in  1997,  due to the  termination  of  employees,  lower  promotion
expenses and the termination of the Management Agreement with Access Solutions.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

         Net sales  decreased  by  $462,778  or 24% to  $1,505,972  in 1997 from
$1,968,750  in 1996,  due to lower  demand  in 1997.  Net sales  were  adversely
affected by a decrease in marketing  efforts,  which resulted from the Company's
financial  constraints.  None of such  decrease  was a result of a  decrease  in
prices.

         Salaries  and  related  benefits  was  approximately  the same for both
years,showing an increase by $49,429 or 4% to $1,441,154 in 1997 from $1,391,725
in 1996.

         Research and  development  expenses  decreased by  $1,799,865 or 59% to
$1,266,530 in 1997 from  $3,066,395 in 1996,  due to the  completion of Internet
products,  the  cessation of work on the workflow  products,  and the  Company's
financial constraints.

         Selling expenses  decreased by $754,494 or 52% to $693,099 in 1997 from
$1,447,593 in 1996, due to a lower marketing effort and lower promotion expenses
resulting from the Company's financial constraints.

         General and  administrative  expenses  decreased  by $129,395 or 14% to
$775,742 in 1997 from $905,137 in 1996, due to an increase in professional  fees
related to the potential merger with Access Solutions, which increase was offset
by a reduction in recruiting fees.

         Interest income  decreased by $91,657 to $4,163 in 1997 from $95,820 in
1996, due to the loss of interest income on investments  that the Company had in
1996, which investments were used to fund operations.

         Interest expense  increased by $120,138 to $125,699 in 1997 from $5,561
in 1996, due to accrued  interest  payable to Access for the advances it made to
fund the Company's operations.

         Net loss  decreased by  $1,959,752  or 41% to  $2,792,089  in 1997 from
$4,751,841 in 1996, due to a decrease in research and  development and marketing
efforts in light of the Company's financial constraints.

                                           17



<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

         For the year ended December 31, 1999, the Company's operations resulted
in net income of $8,740.  However,  for the years ended December 31, 1996,  1997
and 1998,  the  Company  incurred  net  losses  of  $4,751,841,  $2,792,089  and
$887,828,  respectively. As of December 31, 1999, the Company had an accumulated
deficit  of  $20,469,183  and a working  capital  deficit of  $4,019,310.  As of
December 31, 1998, the Company had a working capital deficit of $3,939,398.  For
the year  ended  December  31,  1997,  the  Company's  negative  cash flows from
operations were $92,710,  while in 1998 and 1999 the Company had a positive cash
flow of $160,999 and $381,074, respectively.  However, these positive cash flows
resulted from the nonpayment of interest expense to Access. As a result of these
factors,  as well as the uncertain  conditions  the Company faces  regarding the
delinquency of accounts payable and loans payable, the report of the independent
public accountants  contains explanatory language as to the Company's ability to
continue as a going concern.

         At December 31, 1999, the Company had net Federal  operating loss carry
forwards ("NOL") of $19,669,721 for financial reporting purposes.  Due to losses
sustained by the Company for both  financial  and tax  reporting  through  1999,
management was unable to determine that  realization of the tax asset related to
the NOL was more  likely  than not and,  thus,  has  provided  a full  valuation
allowance.  As a  result  of the  Offering,  the  Company's  NOL  that  would be
available to offset future income may be subject to annual limitations. However,
due to a  provision  under  the laws of the  State of New  Jersey,  the  Company
realized in 1999  $623,135 from the sale of some of its New Jersey net operating
losses.  The Company intends to file in 2000 to sell additional tax losses of up
to approximately $10.0 million which would result in net proceeds to the Company
of approximately $800,000. There can be no assurance if or when the Company will
receive  such amount.  In the Company is unable to realize such tax credits,  it
may have a material adverse effect on the Company.

         In January  1997,  the Company  entered  into a  non-binding  Letter of
Intent  (the  "Letter of  Intent")  with Access  Solutions  International,  Inc.
("Access")  pursuant to which the  Company  and Access  agreed to use their best
efforts  to  negotiate  a  transaction  involving  the  purchase  by  Access  of
substantially all of the assets of the Company.  Access also agreed, pursuant to
the Letter of Intent,  to provide  the  Company  with a one year  bridge loan of
$300,000 (the "Access Loan") in exchange for a promissory note  convertible into
shares of Common Stock (as defined herein).

         On November 12, 1997,  the Company and Access entered into a definitive
Merger Agreement (the "Merger  Agreement") which provided that the Company would
merge with and into a newly formed wholly owed subsidiary of Access.  Concurrent
with the execution of the Merger Agreement,  the Company and Access also entered
into a Management  Agreement pursuant to which Access assumed control of the day
to day operations of the Company and advanced  funds to the Company  pending the
closing of the transactions contemplated by the Merger Agreement.

         In August 1988,  Access  terminated the Merger  Agreement in accordance
with its terms due to the failure by Access to satisfy the  financing  condition
contained  in  the  Merger  Agreement.   The  Company  is  currently  conducting
discussions   with  Access   regarding   exchanging  all  but  $300,000  of  the
approximately  $3.0  million  owed to Access for equity of the  Company  and the
resolution of other  potential  disputes  between the Company and Access.  These
discussions  are preliminary and there can be no assurance that the Company will
be successful in resolving any potential disputes with Access.
                                           18
<PAGE>

         Since August  1998,  the Company has been  exploring  options to obtain
sources  of  funding,  including  a proposal  made by  certain of the  Company's
employees  who  agreed to receive a  reduction,  or no,  salary for a  specified
period of time in  exchange  for equity in the  Company.  Some of the  Company's
employees have agreed to defer payment of their salary  temporarily or to forego
a portion of their  salary in exchange for equity in the Company to be issued in
the future. There can be no assurance that such arrangements will continue to be
acceptable to the Company's employees.

         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 February 29,
2000,  the  Company  had  aggregate  liabilities  in  excess  of  $4.7  million,
approximately $3.0 million of which is owed to 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.


ITEM 7.  Financial Statements.

         The Financial Statements can be found following Part IV of this Report.




                                           19
























<PAGE>

ITEM 8.  Changes In And Disagreements With Accountants On Accounting And
         Financial Disclosure.



(1)       Previous independent accountant

         On  March  1,  2000,  the  Company   dismissed   Arthur   Andersen  LLP
("Andersen") as the Company's  independent public  accountants.  The decision to
dismiss was approved by the Board of Directors of the Company (the "Board").

         Andersen's  report on the financial  statements of the Company for each
of the previously  audited  financial  statements for December 31, 1996 and 1995
did not contain  any  adverse  opinion or  disclaimer  of  opinion,  and was not
qualified or modified as to uncertainty, audit scope or accounting principle.

         In connection  with the audits by Andersen of the  Company's  financial
statements for 1996 and 1995, there were no  disagreements  with Andersen on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  or  procedure,  which  disagreements,  if not  resolved  to the
satisfaction  of Andersen,  would have caused  Andersen to make reference to the
subject  matter of the  disagreements  in connection  with its audit report with
respect to  financial  statements  of the  Company  for 1996 and 1995.  The term
"disagreement"  is  utilized in  accordance  with  Instruction  4 to Item 304 of
Regulation S-K.

         During the two most recent fiscal  years,  and the  subsequent  interim
period through February 29, 2000 there were no "reportable events", as that term
is defined in Item 304 (a)(1)(v) of Regulation S-K.


(1)       New independent accountant

         The Company has selected Sobel & Co., LLC as the Company's  independent
public accountants. The decision to change auditors was approved by the Board.

         During the three most recent  fiscal years and the  subsequent  interim
period  through  February 29, 2000,  neither the Company nor anyone on behalf of
the Company consulted regarding either the application of accounting  principles
to a specified  transaction,  either completed or proposed, or the type of audit
opinion that might be rendered on the financial statements of the Company or any
matter that was either the subject of a disagreement, within the meaning of Item
304(a)(1)(iv)  of  Regulation  S-K,  or any  reportable  event,  as that term is
defined in Item 304 (a)(1)(v) of Regulation S-K.

                                           20












<PAGE>


PART III

ITEM 9.  Directors, Executive Officers, Promoters and Control
               Persons; Compliance with Section 16(a) of the Exchange Act

Executive Officers and Directors

         The directors and executive  officers of the Company as of February 24,
2000 are as follows:

Name                       Age          Position

William Weiss              56           Chief Executive Officer; Treasurer;
                                        Director

Michael Suleski            38           Vice President, Engineering; Secretary;
                                        Director


         WILLIAM  WEISS,  a founder of the  Company,  has been  Chief  Executive
Officer and a director of the Company since its formation in October 1991. Since
January 1980, Mr. Weiss has also been an executive  officer (and President since
November  1988) and a director of Medical  Registry  Services,  Inc., a computer
software  company  which  sells and  services a  computerized  system for cancer
record  keeping in hospitals.  Mr. Weiss devotes  approximately  10-15 hours per
week to the Company and  approximately  40-50 hours per week to Medical Registry
Services,  Inc. From April 1974 to December  1979,  Mr. Weiss was Executive Vice
President  of Numerax,  Inc.,  a public  company  specializing  on  computerized
freight billing and payment.  From December 1969 to March 1974, Mr. Weiss served
as an Executive Vice President of a division of Automatic Data Processing, Inc.,
the  purchaser  of MSM,  Inc.,  a company he founded  which  provided a computer
service for the investment advisory industry. Mr. Weiss received a B.S. from the
Wharton  School of the University of  Pennsylvania  and a J.D. from New York Law
School.

         MICHAEL  SULESKI,  a founder of the Company,  has been Vice  President,
Engineering  of the Company since August 1992,  and its Director of Research and
Development  from its  inception in October  1991 to August 1992.  He has been a
director of the Company since May 1995,  and Secretary of the Company since July
1995.  From July 1991 through October 1991, Mr. Suleski worked with a founder to
develop the DOS Network  Edition and helped found the  Company.  From April 1989
through  July  1991,  he was a  Senior  Engineer  with  Synercon  Corp.,  a firm
specializing in computer based solutions for the medical profession.  From April
1988  to  March  1989,  Mr.  Suleski  was a  software  engineer  with  Henderson
Industries,  a developer  and  manufacturer  of  commercial  industrial  control
systems and military electronics.  From July 1986 to March 1988, Mr. Suleski was
employed as software  engineer with  Singer/Kerfott,  a defense  contractor  for
guidance  and  navigation  systems.  He received a B.S.  and a M.S.  degree from
Fairleigh Dickenson University College of Science and Engineering.

         The  Company's   directors  are  elected  at  the  annual   meeting  of
stockholders  and hold office until the next annual meeting of the  stockholders
or until their successors are elected and qualified. Directors are not currently
compensated or reimbursed for expenses incurred by them in connection with their
services as directors, except for travel to Board of Directors meetings.

                                           21
<PAGE>

         There  are no  family  relationships  among  any of  the  directors  or
officers.

         The  Company's  officers are chosen by the Board of Directors and serve
at the  pleasure  of the Board.  The loss of the  services of any one of William
Weiss or Michael Suleski could have a material adverse effect on the Company.


Limitation of Liability and Indemnification Matters

         The  Company's   Certificate  of  Incorporation:   (i)  eliminates  the
liability of the  directors  of the Company for monetary  damages to the fullest
extent permitted by Delaware law: and (ii) authorizes the Company  indemnify its
officers and  directors  to the fullest  extent  permitted by Delaware  Law. The
By-Laws of the Company provide broad  indemnification for officers and directors
against  expenses  (including  legal  fees,  judgements,   and  Company-approved
settlements)  incurred in  connection  with any civil or  criminal  act in which
arises  from the  performance  of duties  for the  Company.  The  By-Laws of the
Company  also  provided  that the Company  will  indemnify  such  persons to the
fullest  extent  permitted  by law. The  indemnification  provide by the By-Laws
applies to any action  taken by the  indemnitee  while  serving as an officer or
director of the  Company,  any of its  subsidiaries  (non  presently)  or at the
Company's request as a director, officer, employee or agent of any of the above,
whether occurring before or after the date of the employment. The By-Laws of the
Company do not provide  indemnification  for any acts or omissions  from which a
director may nor relieve of liability  under the  Delaware  General  Corporation
Law.

         In  so  far  as  indemnification  for  liabilities  arising  under  the
Securities  Act of 1933,  as amended (the "Act") may be permitted to  directors,
officers,   or  persons  controlling  the  Company  pursuant  to  the  foregoing
provisions,  the Company has been informed that in the opinion of the Securities
and  Exchange  Commission  such  indemnification  is  against  public  policy as
expressed in the Act and is therefore unenforceable.

Compliance with Section 16

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires  certain  persons,  including  the  Company's  directors  and executive
officers,  to file reports with the Securities and Exchange Commission regarding
beneficial  ownership of equity  securities of the Company.  William Weiss filed
one late report  covering the  acquisition of options by Mr. Weiss in 1998. Each
of William  Weiss,  Sol  Rosenberg and Michael  Suleski  failed to file a report
covering the respective  acquisitions  of options in 1997, 1998 and 1999 by each
of them.





                                           22







<PAGE>

ITEM 10.  Executive Compensation.

         The Summary  Compensation  Table below sets forth  compensation paid by
the Company for the last three  fiscal  years  ended  December  31, 1999 for all
services  in all  capacities  for its Chief  Executive  Officer  and each of its
principal  executive  officers  whose  total  annual  salary and bonus  exceeded
$100,000:
<TABLE>
<CAPTION>

                           Summary Compensation Table
--------------------------------------------------------------------------------------------------------------------------
                             Annual Compensation                                Long Term Compensation
--------------------------------------------------------------------------------------------------------------------------
                                                                                    Securities
                                                  Other           Restricted       Underlying    LTIP
    Name and                          Bonus       Annual       Underlying Stock  Options/SARs (#)Payouts    All Other
    Position      Year    Salary ($)    ($)    Compensation       Awards ($)                        ($)    Compensation
--------------------------------------------------------------------------------------------------------------------------
<S>               <C>       <C>          <C>         <C>               <C>          <C>             <C>        <C>
William Weiss     1999      120,000(1)   0           0                 0            81,000(2)       N/A         N/A
CEO(3)            1998      120,000(1)   0           0                 0            81,000(2)       N/A         N/A
                  1997      120,000(1)   0           0                 0            77,721(2)       N/A         N/A

--------------------------------------------------------------------------------------------------------------------------
Sol Rosenberg     1998       50,000(4)   0           0                 0            81,000(2)       N/A         N/A
(4)               1997      120,000(4)   0           0                 0            81,000(2)       N/A         N/A
President                                                                           77,721(2)       N/A         N/A
CEO
--------------------------------------------------------------------------------------------------------------------------
Michael Suleski   1999      100,000(1)   0           0                 0            81,000(2)       N/A         N/A
Vice President    1998      100,000(1)   0           0                 0            81,000(2)       N/A         N/A
Engineering       1997      100,000(1)   0           0                 0            77,721(2)       N/A         N/A
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company  presently  has no  employment  contract  with William  Weiss or
Michael  Suleski.  (2) Granted  pursuant to an automatic  grant provision in the
1995 Stock Plan (as  defined  herein) for  services  rendered as a member of the
Board in the prior year. (3)As of February 29, 2000, $345,000 is owed to William
Weiss for past salaries
   accrued but not paid.
(4)Mr. Rosenberg's employment with the Company was terminated in April 1997.
   Mr. Rosenberg resigned as a member of the Board  in February 2000.  The
   Company paid Mr. Rosenberg $120,000 as severance pay through 1998 and
   continued to pay on his behalf premiums on disability insurance for a year
   after termination.


                                           23








<PAGE>

Option/SAR Grants

         Shown below is  information  regarding  stock option  grants during the
fiscal year ended December 31, 1999 to the Company's Chief Executive Officer and
each of its principal executive officers:
<TABLE>
<CAPTION>

                      Option/SAR Grants in Last Fiscal Year

-------------------- ------------------------------------------------------------- -------------------------------
                                                                                       Potential Realizable
                                                                                         Value at Assumed
                                                                                       Annual Rates of Stock
                                                                                      Appreciation for Option
                                                   Individual Grants                                Term (1)

-------------------- ------------- -------------- --------------- ---------------- --------------- ---------------
                      Number of
                     Securities     % of Total
                     Underlying      Options/
                       Options/    SARs Granted
                        SARs       to Employees
                     Granted (#)      in 1999     Exercise Price  Expiration Date
       Name                                                                            5%($)           10%($)
       ----                                                                            -----           ------
-------------------- ------------- -------------- --------------- ---------------- --------------- ---------------
<S>                   <C>              <C>            <C>           <C>                 <C>             <C>

William Weiss         81,000(2)        33.3%          $0.03          3/1/2005           $120            $240
Chief Executive
Officer
-------------------- ------------- -------------- --------------- ---------------- --------------- ---------------
Sol Rosenberg         81,000(2)        33.3%          $0.03          3/1/2005           $120            $240
President (3)
-------------------- ------------- -------------- --------------- ---------------- --------------- ---------------
Michael Suleski       81,000(2)        33.3%          $0.03          3/1/2005           $120            $240
Vice President
Engineering
-------------------- ------------- -------------- --------------- ---------------- --------------- ---------------
</TABLE>


(1)      The potential  realizable values represent future  opportunity and have
         not been reduced to present value in 1999 dollars.  The dollar  amounts
         included  in these  columns are the result of  calculations  at assumed
         rates set by the  Securities and Exchange  Commission for  illustration
         purposes,  and these  rates are not  intended  to be a forecast  of the
         Common  Stock price and are not  necessarily  indicative  of the values
         that may be realized by the named executive officer.
(2) Granted  pursuant to an automatic grant provision in the 1995 Stock Plan (3)
Mr. Rosenberg's employment with the Company was terminated in April
         1997. Mr. Rosenberg resigned as a member of the Board in February 2000.


                                           24


<PAGE>

Aggregated Option/SAR Exercises in fiscal year 1999 and fiscal year end Option/
SAR Values

         Shown below is information  regarding  options/SARs that were exercised
during fiscal year 1999 by the Company's Chief Executive Officer and each of its
principal executive officers and the value of unexercised options/SARs:


<TABLE>
<CAPTION>

----------------------- ---------------------- ----------------- --------------------------- ---------------------
                                                                                                  Value of
                                                                                                 Unexercised
                                                                  Unexercised Options at        In-the-Money
                                                                      fiscal year end        Options Exercisable/
                         Shares Acquired On         Value               Exercisable/          Unexercisable ($)
                         -------------------        -----               ------------          -----------------
         Name               Exercise (#)         Realized ($)      Unexercisable (#) (1)
         ----               ------------         ------------      ---------------------
----------------------- ---------------------- ----------------- --------------------------- ---------------------
<S>                               <C>                 <C>                <C>                        <C>

William Weiss                     0                   0                  289,721/0                   0/0
Sol Rosenberg (2)                 0                   0                  289,721/0                   0/0
Michael Suleski                   0                   0                  279,129/0                   0/0

</TABLE>



(1)      The Company does not have a stock appreciation  rights ("SAR") plan and
         does not have any SARs outstanding.
(2)      Mr. Rosenberg's employment with the Company was terminated in
         April,1997.  Mr. Rosenberg  resigned as a member of the Board in
         February 2000.


         The Company presently has no employment contracts with William Weiss or
Michael Suleski. The Company does not have any pension, profit sharing, or bonus
plan except that it has  established  a 1993 Option  Stock Plan and a 1995 Stock
Option Plan, each of which is described below.

1993 Stock Option Plan

         In March  1993,  the Company  adopted  its 1993 Stock  Option Plan (the
"1993 Stock Plan")  covering  68,912 shares of Common  Stock,  pursuant to which
employees  (other than  directors) of the Company were eligible to receive stock
options. The 1993 Stock Plan, which expires on February 1, 2003, is administered
by the Board of Directors.  The selection of participants,  allotment of shares,
determination  of price and other conditions of the purchase of the options were
determined by the Board of Directors. Stock options granted under the 1993 Stock
Plan are exercisable for a period of up to ten years from the date of the grant.
As of December 31, 1999,  all of the options  under the 1993 Stock Plan had been
granted.  At  such  date,  48,729  options  had  expired,  20,183  options  were
outstanding and none had been exercised.

                                         25
<PAGE>

1995 Stock Option Plan

         In May 1995,  the Company  adopted a 1995 Stock Option Plan,  which was
amended in 1996 (the "1995 Stock Plan") covering 500,000 shares of Common Stock,
pursuant to which  officers,  directors and employees of the Company and certain
other persons  conferring  benefit upon the Company would be eligible to receive
stock  options.  The 1995  Stock  Plan,  which  expires  on March  1,  2005,  is
administered by the Board of Directors. The selection of participants, allotment
of  shares,  determination  of price and other  conditions  of  purchase  of the
options will be  determined by the Board of  Directors.  Stock  options  granted
under the 1995 Stock Plan are  exercisable  for a period of up to ten years from
the date of the grant.  The 1995 Stock Plan also  provides for annual  automatic
grants of stock options to directors who are employees of the Company ("Employee
Directors")  and directors  who are not employees of the Company  ("Non-Employee
Directors").  Each Employee Director who is a member of the Board on December 31
of a year  during the term of the 1995 Stock Plan shall be  eligible  to receive
non-qualified  options to receive 1% of the outstanding Common Stock on the date
of  grant  on the  first  business  day  following  the end of the year and each
Non-Employee  Director  who is a member  of the Board on  December  31 of a year
during  the  term  of  the  1995  Stock  Plan  shall  be   eligible  to  receive
non-qualified  options  to  receive  one  fourth  of one  percent  (1/4%) of the
outstanding  Common  Stock  on the  date of  grant  on the  first  business  day
following  the end of the year.  As of  December  31,  1999,  options to acquire
1,273,022  shares of Common Stock had been granted under the 1995 Stock Plan. At
such date,  215,351  options had expired,  95,508 options had been exercised and
962,163 options were outstanding.

Executive Compensation

         The  Board  determines  the  compensation  of the  Company's  executive
officers, each of whom did not receive increases in their salaries, nor a bonus,
in 1999.



                                           26






















<PAGE>

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management.

         The  following  table sets forth,  as of February  24, 2000  (except as
otherwise  set forth in the  footnotes),  the  number of shares of Common  Stock
beneficially owned by each director,  by the directors and executive officers of
the  Company as a group and by each  holder of at least  five  percent of Common
Stock  known to the  Company  and the  respective  percentage  ownership  of the
outstanding Common Stock held by each such holder and group:


Name and Address                            Number            Percentage
of Beneficial Owner                                  of Shares (1)     of Class
--------------------------------------------         -------------     --------

William Weiss   (2)(3)                                  563,104           6.93%
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ 07604

Michael Suleski (2)(4)                                  315,144           3.78%
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ 07604

James W. Giddens, solely in                           1,252,840           15.5%
his capacity as trustee for the
liquidation of the business of
A.R. Baron & Co., Inc.
P.O. Box 359
Bowling Green Station
New York, NY 10274  (5)

A11 Officers and Directors
as a group (2 persons)                                  879,048           10.7%


(1) Unless otherwise  indicated below, all shares are owned  beneficially and of
record.

(2)          William Weiss and Michael Suleski are founders of the Company.

(3)      Includes (a) 924 shares of Common Stock  issuable  upon the exercise of
         924  warrants  obtained  in a private  placement,  (b)  289,721  shares
         currently  exercisable  under the 1995 Stock Option Plan, and (c) 9,000
         shares issuable upon the exercise of 9,000 Class A Warrants.

(4)      Includes  15,408  shares of Common Stock  issuable upon the exercise of
         options  currently  exercisable  under the 1993 Stock Plan and  263,721
         shares currently exercisable under the 1995 Stock Option Plan.

(5)      Includes   362,800   shares  of  Common  Stock   underlying   currently
         exercisable  redeemable Class A Purchase  Warrants of the Company.  The
         information set forth in the table and the preceding  sentence James W.
         Giddens,  as trustee,  was obtained from Amendment No. 1 to a Statement
         on Schedule  13D,  dated June 4, 1999,  filed with the  Securities  and
         Exchange Commission.

                                            27
<PAGE>




Item. 12. Certain Relationships and Related Transactions.

         Not Applicable

                                     PART IV

Item 13.  Exhibits, Financial Statements and Report on Form 8-K.

                                          28














































<PAGE>
(a)       Exhibits:

3.1      Certificate of Incorporation of Registrant, as amended.(1)
3.2      By-Laws of Registrant, as amended. (1)
3.3      Registrant's Authorization to do Business in New Jersey. (1)
3.5      Form of Common Stock Certificate. (1)
4.2      Class A Warrant Agreement (including form of Class A Warrant) among the
         Registrant, A.R. Baron & Co.,
         Inc.  ("Baron") and American  Stock  Transfer & Trust  Company.(1)  4.3
         Stock  Purchase  Option,  dated  September  27, 1995,  granted to
         Baron.(1)  4.4 Warrant Purchase Option, dated September 27, 1995,
         granted to Baron.(1)4.5 Form of Investor Purchaser Agreement, dated as
         of April 5, 1995, by and between the Registrant and the Investors
         identified in the Schedule of Investors  attached  thereto,  and
         amendment  thereto,  dated March 29, 1995. (1)
4.6      Form of  Bridge  Note  issued  on  April  5,  1995,  to  each  Investor
         identified on the Schedule of Investors ncluded with Exhibit 4.5. (1)
4.7      Form of Bridge Warrant dated April 5, 1995, given to each Investor
         identified on the Schedule of Investors included with Exhibit 4.5. (1)
10.1     1993 Stock Option Plan. (1)
10.2     1995 Stock Option Plan, as amended (2)
10.3     License Agreement with Pixel Translations, Inc., dated May 16, 1995.(1)
10.4     Distributor Agreement with Law Cypress Distributing  Company,  dated as
         of March 18,1993  (incorporated  by reference from Exhibit 10.16 of the
         Registrant's Form 10-KSB for the fiscal year ended December 31, 1995).
         (2)
10.5     Form of End User License. (1)
10.6     Merger and Acquisition Agreement between the Registrant and Baron,
         dated September 27, 1995. (1)
10.7     Consulting Agreement with Stephen Kornfeld, dated as of January 1, 1996
         (incorporated by reference from Exhibit 10.27 of the Registrant's  Form
         10-KSB for the fiscal year ended December 31, 1995).
10.8     (a) Reschedule Agreement with NCC Export Systems 1995 LTD ("NCC"),
         dated as of October 21, 1996 (incorporated by reference from Exhibit 10
         of the Registrant's Form 10-QSB for the quarter ended September 30,
         1996). (b) Receipt of full payment and termination of the Reschedule
         Agreement from NCC, dated January 29 , 1997. (2)
10.9     License Agreement with Cheyenne Software, Inc., dated November 10, 1995
         (incorporated  by reference from Exhibit  10.12(c) of the  Registrant's
         Form 10-KSB for the fiscal year ended December 31, 1995).
10.10    (a) Letter of Intent with Access Solutions International, Inc. ("Access
         Solutions"),  dated January 2, 1997,  (b) Letter  Agreement with Access
         Solutions,  amending the Letter of Intent,  dated January 31, 1997, (c)
         Letter Agreement with Access Solutions,  amending the Letter of Intent,
         dated  February 28, 1997, (d) Letter  Agreement with Access  Solutions,
         amending the Letter of Intent,  dated March 31, 1997,  (e)  Convertible
         Promissory  note issued by the  Registrant to Access  Solutions,  dated
         January 29, 1997, (f) Security  Agreement with Access Solutions,  dated
         January  29, 1997 and (g)  Registration  Rights  Agreement  with Access
         Solutions, dated January 29, 1997. (2)
10.11    Employment  Termination  Agreement and release  between the Company and
         Sol  Rosenberg,  dated as of June 18, 1997  (incorporated  by reference
         from Exhibit  99.1 of the  Registrant's  Form 10-QSB for the  quarterly
         period ended June 30, 1997).

                                           29



<PAGE>
10.12    Agreement  and Plan of Merger among the Company,  Access  Solutions and
         PaperClip Acquisitions,  dated as of November 12, 1997 (incorporated by
         reference  from  Exhibit  2 of the  Registrant's  Form  10-QSB  for the
         quarterly period ended September 30, 1997).
10.13    Tenth  Amendment  to  Agreement  and Plan of Merger  among the Company,
         Access Solutions and PaperClip Acquisitions, dated as of April 22, 1998
         (incorporated by reference from Exhibit 10.28 of the Registrant's  Form
         8-K filed with the Securities and Commission on June 5, 1998).
10.14    Second  Amendment to the Management  Agreement  between the Company and
         Access Solutions dated as of April 22, 1998  (incorporated by reference
         from  Exhibit  10.29  of the  Registrant's  Form  8-K  filed  with  the
         Securities and Commission on June 5, 1998).
10.15    Tenth Amendment to Convertible  Promissory Note between the Company and
         Access Solutions dated as of April 22, 1998  (incorporated by reference
         from  Exhibit  10.30  of the  Registrant's  Form  8-K  filed  with  the
         Securities and Commission on June 5, 1998).
---------------------





(1)      Incorporated by reference from the Registrant's  Registration Statement
         on Form SB-2 (File No.
         33-92768NY).
(2)      Incorporated  by reference  from the  Registrant's  Form 10-KSB for the
         fiscal year ended December 31, 1997 (File No. 000-26598).


                                          30





























<PAGE>




















                             PAPERCLIP SOFTWARE, INC.

                               FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997


































<PAGE>








PAPERCLIP SOFTWARE, INC.

DECEMBER 31, 1999, 1998 AND 1997



CONTENTS


                                                                     Page

Independent Auditors' Report........................................   1

Financial Statements:

    Balance Sheets..................................................   2

    Statements of Operations........................................   3

    Statements of Changes in Stockholders' Deficiency...............   4

    Statements of Cash Flows........................................   5

Notes to Financial Statements...................................... 6-13



























<PAGE>







INDEPENDENT AUDITORS' REPORT



To the Board of Directors
PaperClip Software, Inc.


We have audited the accompanying  balance sheets of PaperClip Software,  Inc. (a
Delaware  corporation)  as of December 31, 1999,  1998 and 1997, and the related
statements of operations,  changes in stockholders'  deficiency,  and cash flows
for each of the three  years then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of PaperClip Software,  Inc. as of
December 31, 1999, 1998 and 1997, and the results of its operations and its cash
flows for each of the three  years then  ended,  in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 8 to the
financial statements,  the Company has suffered significant negative cash flows,
has  incurred  significant  losses  from  operations  since  inception  and  has
substantial  negative  working  capital  and  net  worth.  These  factors  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans  regarding those matters are also described in Note 8. These
financial  statements do not include any  adjustment  that might result from the
outcome of this uncertainty.



                                            /s/ Sobel & Co., LLC
                                            Certified Public Accountants

Livingston, NJ
March 3, 2000





<PAGE>


PAPERCLIP SOFTWARE, INC.
BALANCE SHEETS                                                             2
==============================================================================

The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>


                                                                                    December 31,
                                                                     1999               1998               1997
                                                               ------------------ ------------------ ------------------
<S>                                                                    <C>                <C>                 <C>
ASSETS
  CURRENT ASSETS:
    Cash and cash equivalents                                          $580,623           $217,129            $81,789
    Accounts receivable, net of allowance
      for doubtful accounts of $30,000
      in 1999, 1998 and 1997                                            136,658            182,844            195,497
                                                               ------------------ ------------------ ------------------
         Total Current Assets                                           717,281            399,973            277,286
                                                               ------------------ ------------------ ------------------

  EQUIPMENT, FURNITURE AND FIXTURES:
    Computer and office equipment                                       427,582            408,002            386,597
    Furniture and fixtures                                              204,858            204,858            204,858
                                                               ------------------ ------------------ ------------------
                                                                        632,440            612,860            591,455
    Less: accumulated depreciation                                     (551,577)          (492,851)          (385,941)
                                                               ------------------ ------------------ ------------------
         Equipment, Furniture and Fixtures, Net                          80,863            120,009            205,514
                                                               ------------------ ------------------ ------------------

  OTHER ASSETS                                                           20,000             19,893             51,475
                                                               ------------------ ------------------ ------------------

                                                                       $818,144           $539,875           $534,275
                                                               ================== ================== ==================

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

  CURRENT LIABILITIES:
    Accounts payable and accrued expenses                            $1,100,082         $1,244,649         $1,198,541
    Due to ASI                                                        3,010,818          2,804,722          2,068,596
    Accounts payable - related party                                    395,000            290,000            180,000
    Deferred revenue                                                    101,000                  -              6,321
    Current portion of capitalized lease
      obligations                                                             -                  -              4,254
    Notes payable                                                       129,691                  -                  -
                                                               ------------------ ------------------ ------------------
         Total Current Liabilities                                    4,736,591          4,339,371          3,457,712

  NOTES PAYABLE                                                               -            129,691            129,691
                                                               ------------------ ------------------ ------------------
         Total Liabilities                                            4,736,591          4,469,062          3,587,403
                                                               ------------------ ------------------ ------------------

  COMMITMENTS AND CONTINGENCIES

  STOCKHOLDERS' DEFICIENCY:
    Common stock-authorized 30,000,000 shares;
      $.01 par value; issued and outstanding
      8,121,521, 8,101,521 and 8,101,521 shares
      in 1999, 1998 and 1997, respectively                               81,215             81,015             81,015
    Additional paid-in capital                                       16,469,521         16,467,721         16,455,952
    Accumulated deficit                                             (20,469,183)       (20,477,923)       (19,590,095)
                                                               ------------------ ------------------ ------------------
         Total Stockholders' Deficiency                              (3,918,447)        (3,929,187)        (3,053,128)
                                                               ------------------ ------------------ ------------------

                                                                       $818,144           $539,875           $534,275
                                                               ================== ================== ==================

</TABLE>

<PAGE>


PAPERCLIP SOFTWARE, INC.
STATEMENTS OF OPERATIONS                                                   3
==============================================================================
The accompanying notes are an integral part of these financial statements.

<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                     1999               1998               1997
                                                               ------------------ ------------------ ------------------
<S>                                                                 <C>                <C>                <C>


NET SALES                                                           $1,145,219         $1,538,795         $1,505,972
                                                               ------------------ ------------------ ------------------

OPERATING EXPENSES:
    Salaries and related benefits                                      733,681            824,537          1,441,154
    Research and development expenses                                  351,171            546,350          1,266,530
    Selling expenses                                                   220,725            500,268            693,099
    General and administrative expenses                                238,712            350,621            775,742
                                                               ------------------ ------------------ ------------------
         Total Operating Expenses                                    1,544,289          2,221,776          4,176,525
                                                               ------------------ ------------------ ------------------

LOSS FROM OPERATIONS                                                  (399,070)          (682,981)        (2,670,553)
                                                               ------------------ ------------------ ------------------

OTHER INCOME (EXPENSE):
    Interest income                                                        175                277              4,163
    Interest expense and financing costs                              (215,500)          (205,124)          (125,699)
    Income from sale of tax credits                                    623,135                  -                  -
                                                               ------------------ ------------------ ------------------
         Total Other Income (Expense), Net                             407,810           (204,847)          (121,536)
                                                               ------------------ ------------------ ------------------

NET INCOME (LOSS) BEFORE PROVISION
  FOR INCOME TAXES                                                       8,740           (887,828)        (2,792,089)

PROVISION FOR INCOME TAXES                                                   -                  -                  -
                                                               ------------------ ------------------ ------------------

NET INCOME (LOSS)                                                       $8,740          $(887,828)       $(2,792,089)
                                                               ================== ================== ==================

NET INCOME (LOSS) PER COMMON SHARE                                    Nil                   (.11)              (.35)
                                                               ================== ================== ==================

WEIGHTED AVERAGE NUMBER COMMON
  SHARES OUTSTANDING                                                 8,044,637          8,028,418          8,028,418
                                                               ================== ================== ==================


</TABLE>


<PAGE>


PAPERCLIP SOFTWARE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997                        4
===============================================================================
The accompanying notes are an integral part of these financial statements.

                                  Common Stock
<TABLE>
<CAPTION>
                                                                                                   Additional
                                                  Number                          Paid-in          Accumulated   Stockholders'
                                                 of Shares    Par Value           Capital            Deficit       Deficiency
                                               ------------- ------------ ------------------    --------------- ---------------
<S>                                             <C>           <C>              <C>                <C>                <C>

BALANCE, December 31, 1996                      7,722,188      $77,222          $16,362,395        $(16,798,006)     $(358,389)

Issuance of stock in lieu of cash compensation    333,333        3,333               48,750              -              52,083
Exercise of stock options                          46,000          460                2,620              -               3,080

Options granted at less than fair market value       -                -              42,187              -              42,187

NET LOSS, 1997                                                                                       (2,792,089)    (2,792,089)
                                               ----------    ------------ ------------------     --------------- --------------

BALANCE, December 31, 1997                      8,101,521       81,015           16,455,952         (19,590,095)    (3,053,128)

Options granted at less than fair market value      -              -                 11,769                 -           11,769

NET LOSS, 1998                                      -              -                    -              (887,828)      (887,828)
                                             -------------  ------------- ------------------ ------------------  --------------

BALANCE, December 31, 1998                      8,101,521       81,015           16,467,721         (20,477,923)    (3,929,187)


Exercise of stock options                          20,000          200                1,800                   -          2,000

NET INCOME, 1999                                    -              -                    -                 8,740          8,740
                                               ----------   ------------- ------------------ ------------------  --------------

BALANCE, December 31, 1999                      8,121,521      $81,215          $16,469,521        $(20,469,183)   $(3,918,447)
                                               ==========   ============= ================== ================== ===============

</TABLE>













<PAGE>


PAPERCLIP SOFTWARE, INC.
STATEMENTS OF CASH FLOWS                                                  5
===============================================================================
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                     1999               1998               1997
                                                               ------------------ ------------------ -----------------
<S>                                                                     <C>            <C>               <C>
CASH FLOWS PROVIDED BY (USED FOR):
  OPERATING ACTIVITIES:
    Net income (loss)                                                   $8,740          $(887,828)       $(2,792,089)
    Adjustments to reconcile net income (loss) to net
      cash provided by (used for) operating activities:
        Depreciation                                                    58,726            106,910            217,331
        Expense recognized for options granted at
            less than fair market value                                      -             11,769             42,187
        Stock issued in lieu of cash compensation                            -                  -             52,083
      (Increase) decrease in:
        Accounts receivable, net                                        46,186             12,653             80,030
        Prepaid expenses and other current assets                            -                  -             33,855
        Other assets                                                      (107)            31,582              1,807
      Increase (decrease) in:
        Accounts payable and accrued expenses                         (144,567)            46,108             73,235
        Due to ASI                                                     206,096            747,388          2,068,596
        Due to related party                                           105,000            110,000            180,000
        Deferred revenue                                               101,000             (6,321)          (736,126
                                                               ------------------ ------------------ -----------------
        Net Cash Provided by (Used for)
          Operating Activities                                         381,074            160,999            (92,710)
                                                               ------------------ ------------------ -----------------

  INVESTING ACTIVITIES:
    Purchases of equipment, furniture and
      fixtures                                                         (19,580)           (21,405)                 -
                                                               ------------------ ------------------ -----------------

  FINANCING ACTIVITIES:
    Proceeds from issuance of stock in exchange for
      stock options and cash                                             2,000                  -              3,080
    Payments on capitalized lease obligations                                -             (4,254)           (49,154)
                                                               ------------------ ------------------ -----------------
        Net Cash Provided by (Used for)
          Financing Activities                                           2,000             (4,254)           (46,074)
                                                               ------------------ ------------------ -----------------

INCREASE (DECREASE) IN CASH                                            363,494            135,340           (138,784)

CASH AND CASH EQUIVALENTS:

    Beginning of year                                                  217,129             81,789            220,573
                                                               ------------------ ------------------ -----------------

    End of year                                                       $580,623          $ 217,129       $     81,789
                                                               ================== ================== =================
</TABLE>
<PAGE>

PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                              6
===============================================================================
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================

-------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION:
--------------------------------------------------------------------------------

PaperClip  Software,  Inc. (formerly known as PaperClip Imaging Software,  Inc.)
(the  "Company"),  a Delaware  corporation,  is engaged in the  development  and
distribution  of computer  software for  document  management  and  transport of
electronic  document  packages across the public Internet or a private  Intranet
with interoperability, security and tracking capabilities. The Company's systems
allow users of personal  computer  networks to scan,  file,  retrieve,  display,
print and route  documents and other software  objects (such as word  processing
files, spreadsheets and electronic mail), while continuing to use their existing
application software.  The systems can be integrated with many personal computer
applications  with little or no programming and can file and retrieve  documents
without the time consuming step of manually labeling or indexing each document.

The Company sells its products  worldwide to value added  resellers and original
equipment  manufacturers of personal  computers and personal  computer  networks
utilized, on a corporate level.
--------------------------------------------------------------------------------
NOTE 2  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------------------------------------------------------

Basis of Accounting:
The Company's policy is to prepare its financial statements on the accrual basis
of accounting.

Revenue Recognition:
The Company  generates  revenues  from  licensing the rights to use its software
products directly to distributors,  resellers,  original equipment manufacturers
(OEM's), and end users.

Revenues from licenses are recognized upon shipment of the software if there are
no  significant  post  delivery  obligations,  if  collection is probable and if
payment is due within one year.  The Company  provides  telephone  support at no
additional  charge for periods not  exceeding one year.  The  estimated  cost of
providing such support is not significant. Revenues from consulting services are
recognized as services are performed.

The Company also offers post contract services,  which includes software version
upgrades  and  consulting  and training  services  related to  installation  and
implementation of the Company's product.  Revenues paid by the customer prior to
performance of post contract  services are deferred and recognized over the term
of the post contract service agreement, usually one year.

Use of Estimates:
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.
<PAGE>


PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                              7
===============================================================================
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================

--------------------------------------------------------------------------------
NOTE 2  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
--------------------------------------------------------------------------------

Advertising:
Advertising costs are expensed as incurred.

Cash and Cash Equivalents:
Cash and cash equivalents  consist  primarily of cash at banks and highly liquid
investments with maturities of three months or less.

Equipment, Furniture and Fixtures:
Equipment,   furniture  and  fixtures  are  stated  at  cost,  less  accumulated
depreciation.  Depreciation  expense is computed using the straight-line  method
over the  estimated  useful  lives of the assets  which range from five to seven
years.

Accounting for Stock-Based Compensation:
The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 123,
"Accounting  for  Stock-Based  Compensation"  (SFAS 123).  The  adoption of this
pronouncement had no impact on the Company's  financial  condition or results of
operations,  however, additional disclosures have been included in the financial
statements.

Federal Income Taxes:
The Financial  Accounting  Standards Board issued Statement No. 109, "Accounting
for Income Taxes" (SFAS 109), which provides for the recognition of deferred tax
assets, net of an applicable valuation allowance,  related to net operating loss
carryforwards and certain temporary differences.

Net Income (Loss) Per Common Share:
Net income (loss) per common share is computed  based upon the weighted  average
number of common  shares and common share  equivalents  outstanding  if dilutive
during each year.

















<PAGE>


PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                              8
===============================================================================
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================
NOTE 3  -  INCOME TAXES:
-------------------------------------------------------------------------------

For tax return purposes,  the Company has the following net operating loss carry
forwards as of December 31, 1999, 1998 and 1997 for Federal and State purposes:


      Federal  Net
     Operating Loss    Year Incurred                      Expiration Date
    ----------------- -----------------                 ----------------------

        $2,110,824    December 31, 1992                   December 31, 2007
        $2,790,034    December 31, 1993                   December 31, 2008
        $2,880,756    December 31, 1994                   December 31, 2009
        $3,648,749    December 31, 1995                   December 31, 2010
        $4,660,613    December 31, 1996                   December 31, 2011
        $2,707,112    December 31, 1997                   December 31, 2012
       $   880,373    December 31, 1998                   December 31, 2013


      State Net
    Operating Loss     Year Incurred                      Expiration Date
   ----------------- -------------------            -------------------------

        $2,159,599     December 31, 1995                   December 31, 2002
        $4,656,237     December 31, 1996                   December 31, 2003
        $2,704,336     December 31, 1997                   December 31, 2004
       $   879,754     December 31, 1998                   December 31, 2005

As stated in Note 11, the State of New Jersey is currently  allowing the sale of
state net  operating  losses and  research  tax  credits.  At this  time,  it is
undeterminable the duration of the program or the amounts that will be sold.

The Company also has tax credits  related to research  activities  of
approximately  $175,000,  $145,000 and  $117,000 at December  31, 1999,  1998,
and 1997, respectively.

The Company's total deferred tax liabilities,  deferred tax assets and valuation
allowance consists of the following at December 31:

                                    1999             1998           1997
                              ------------------------------------------------

Total deferred tax liabilities $     -             $    -       $     -

Deferred tax assets             5,900,000           5,900,000       5,600,000
Total valuation allowance       5,900,000           5,900,000       5,600,000
                               -----------------------------------------------

                               $    -             $     -            $      -
                               ===============================================

<PAGE>

PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                              9
===============================================================================
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================
NOTE 4 - DEBT:
-------------------------------------------------------------------------------

During 1996,  the Company issued  $129,691 of  Convertible  Notes (the Notes) to
certain  stockholders  of the Company.  The Notes bear interest at 12% per annum
and are  convertible  into common  stock at a rate of $.30 per share.  The Notes
matured in December 1999 and are callable at any time.

-------------------------------------------------------------------------------
NOTE 5  -  COMMITMENTS AND CONTINGENCIES:
--------------------------------------------------------------------------------

William Weiss, Chief Executive Officer and Sol Rosenberg, President entered into
an employment agreement with the Company for a term ending December 31, 1998. In
accordance with their respective contracts,  each of Messrs. Weiss and Rosenberg
is  entitled to $120,000  per annum.  Mr.  Weiss'  annual  compensation  will be
increased  to $150,000 per annum after the end of the first fiscal year in which
the Company is  profitable.  On April 15,  1997,  Mr.  Rosenberg's  contract was
terminated.  As per the contract he received $120,000  severance pay and had his
disability insurance maintained for one year.

During 1997, 1998 and 1999, the Company has been involved with various  lawsuits
regarding outstanding  delinquent liabilities incurred in the ordinary course of
business. As of the date of the financial  statements,  these lawsuits have been
settled for the amount of the  obligation  recorded  with various  terms.  These
amounts are recorded on the  accompanying  December 31, 1999 balance sheet.  The
payment terms of the settlement amounts are being met.

--------------------------------------------------------------------------------
NOTE 6 - LEASES:
-------------------------------------------------------------------------------

The Company  leases its office  space under a  non-cancelable  operating  lease.
Future minimum rental  payments  required under this lease are $80,000,  $73,333
and $116,444 for 1999,  1998 and 1997,  respectively.  In addition,  the Company
leases  office  furniture  and a  copier  under  two  capital  lease  agreements
requiring  principal  payments of $-0-,  $61,500  and $16,500 in 1999,  1998 and
1997, respectively. Rent expense was approximately $80,000, $73,333 and $116,444
for the years ended December 31, 1999, 1998 and 1997, respectively.

Future minimum rental payment required under these leases are as follows:

                  Year Ended
                  December 31,
                      2000                                           $85,839
                      2001                                            12,506
                      2002                                               -
                      2003                                               -
                      2004                                               -
                    Thereafter                                           -
                                                             ===================
                                                                     $98,345
                                                             ===================
<PAGE>


PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                              10
===============================================================================
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================

NOTE 7  -  DUE TO ASI:
--------------------------------------------------------------------------------

In January,  1997, the Company  signed a letter of intent with Access  Solutions
International, Inc. (ASI) for the sale of the Company's assets and assumption of
certain  liabilities  in exchange for ASI stock.  The  negotiations  of the sale
continued  through August 24, 1998 at which time ASI terminated all negotiations
of a merger.  During these negotiations,  ASI loaned the Company $300,000 at 12%
interest which is convertible  into common stock at $.25 per share at the option
of ASI. The Company also entered into a management  agreement with ASI for a fee
of  $50,000  per month up to  $300,000  and then $1 per month  thereafter.  This
agreement was  terminated  in October 1998. In addition,  ASI billed the Company
for various ordinary business expenses that the Company incurred and ASI paid on
the Company's  behalf.  All of these amounts,  including accrued interest on the
$300,000  note  have been  included  in due to ASI on the  accompanying  balance
sheet.


-------------------------------------------------------------------------------
NOTE 8  -  GOING CONCERN:
-------------------------------------------------------------------------------

As shown in the accompanying financial statements,  the Company has a history of
significant  operating losses and as of December 31, 1999,  current  liabilities
exceed current assets by $4,019,310 and total liabilities exceed total assets by
$3,918,447. These factors, as well as the uncertain conditions the Company faces
regarding  the   delinquency  of  accounts   payable  and  loans  payable  raise
substantial doubt about the Company's ability to continue as a going concern.

Management has developed new software called "Internet Express" and is currently
pursuing the  marketing of this  product.  The Company is also in the process of
developing a plan to reduce its  liabilities  through the issuance of stock.  As
discussed  in Note 11,  management  will  continue  to sell State net  operating
losses and  research  tax credits in order to provide  cash flow if the State of
New Jersey continues this program.  The financial  statements do not include any
adjustments  that might be  necessary  if the Company is unable to continue as a
going concern.


--------------------------------------------------------------------------------
NOTE 9  -  MAJOR CUSTOMERS:
--------------------------------------------------------------------------------

The  Company  sells  its  products   primarily  through  mass  distributors  and
approximately 60 independent Value Added Resellers  ("VARS").  The VARS sell and
install these  products at end user sites.  Sales to one major  customer for the
year ended December 31, 1999 was approximately 21%. Sales to two major customers
for the year ended  December 1998 were  approximately  23% and 14%. Sales to two
major customers for the year ended December 31, 1997 were 13% and 11%.


<PAGE>
PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                              11
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================
NOTE 10  -  OPTIONS AND WARRANTS:
The  Company  adopted  a stock  option  plan (the  "1993  Stock  Option  Plan"),
effective March 8, 1993, pursuant to which employees of the Company are eligible
to receive incentive stock options. The 1993 Stock Option Plan, which expires in
2003, is administered by the Board of Directors.  The selection of participants,
allotment of shares,  determination of price and other conditions of purchase of
options is determined by the Board of Directors.
Stock  option  transactions  for the 1993 Stock  Option Plan are  summarized  as
follows:
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                        Exercise                   Exercise                  Exercise
                                            1999         Price          1998         Price        1997        Price
                                         ------------ ------------- ------------- ------------ ----------- -------------
<S>                                         <C>          <C>           <C>           <C>          <C>        <C>
Outstanding, beginning of year              20,183       $2.60         32,417        $2.60        33,187     $2.60
Granted                                          -        -                 -         -                -      -
Exercised                                        -        -                 -         -                -      -
Canceled or expired                              -        -           (12,234)       $2.60          (770)    $2.60
                                         ------------ ------------- ------------- ------------ ----------- -------------
Outstanding, end of year                    20,183       $2.60         20,183        $2.60        32,417     $2.60
                                         ============ ============= ============= ============ =========== =============
</TABLE>
As of December 31,  1999,  all of the options  outstanding  under the 1993 Stock
Option Plan were exercisable at $2.60 per share.

1995 Stock Option Plan -
    In May 1995, the Company adopted a stock option plan (the "1995 Stock Option
    Plan"),  pursuant to which officers,  directors and employees of the Company
    and certain  other  persons  conferring  benefit  upon the  Company  will be
    eligible to receive stock options. The 1995 Stock Option Plan, which expires
    on March 1, 2005, is administered  by the Board of Directors.  The selection
    of participants,  allotment of shares,  determination of price,  vesting and
    other  conditions  of  purchase  of  options is  determined  by the Board of
    Directors. Stock options granted under the Plan are exercisable for a period
    of up to 10 years from the date of grant.
Stock  option  transactions  for the 1995 Stock  Option Plan are  summarized  as
follows:
<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                Exercise                     Exercise                      Exercise
                                    1999          Price          1998         Price           1997          Price
                                ------------- -------------- ------------- ------------- --------------- -------------
<S>                                 <C>       <C>               <C>        <C>             <C>           <C>
Outstanding, beginning
  of year                           738,563   $.10-2.50         620,780    $.10-2.50        467,434      $.05-2.50
Granted                             243,600        .03          243,000         .06         264,747        .41
Exercised                           (20,000)       .10                -        -            (46,000)       .005-.10
Canceled or expired                       -       -            (125,217)     .10-2.50       (65,401)       .10-2.50
                                ------------- -------------- ------------- ------------- --------------- -------------
Outstanding, end of year            962,163   $.03-2.50         738,563    $.06-2.50        620,780      $.10-2.50
                                ============= ============== ============= ============= =============== =============
</TABLE>
<PAGE>

PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                             12
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================

--------------------------------------------------------------------------------
NOTE 10  -  OPTIONS AND WARRANTS: (Continued)
--------------------------------------------------------------------------------

As of December 31, 1999, 962,163 options were exercisable at prices ranging from
$.03 to $2.50 per share.

Effective  January 1, 1996,  the  Company  adopted the  provisions  of SFAS 123,
"Accounting for stock-based  Compensation."  As permitted by the statement,  the
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method.  Had the fair value method of accounting been applied to
the Company's  stock option plans,  which requires  recognition of  compensation
cost ratably over the vesting period of the underlying equity  instruments,  the
net loss would have been increased by  approximately  $-0- with a $.01 per share
effect in 1999 and approximately  $42,000 with $.01 per share effect in 1998 and
$12,000 with a $.01 per share  effect in 1997.  This pro forma impact only takes
into account  options granted since January 1, 1995 and is likely to increase in
future years as additional  options are granted and  amortized  ratably over the
vesting period.  The average fair value of options granted during 1999, 1998 and
1997 was $.03, $.06 and $.41, respectively.

The fair value was estimated using the Black-Scholes  option-pricing model based
on the weighted average market price at grant date of $.03 in 1999, $.06 in 1998
and $.41 in 1997  and the  following  weighted  average  assumptions;  risk-free
interest rate of 5.0% in 1999,  1998 and 1997,  volatility of 75% for 1999, 1998
and 1997, and dividend yield of 0% for 1999, 1998 and 1997.


-------------------------------------------------------------------------------
NOTE 11  -  INCOME FROM SALE OF TAX CREDITS:
-------------------------------------------------------------------------------

In June  1999,  the  State  of New  Jersey  passed  legislature  allowing  small
businesses  to sell State of New  Jersey Net  Operating  Loss and  Research  Tax
credit  carryforwards to companies that could utilize the loss. For 1999, a pool
of $50 million was available to be shared by all companies eligible. The Company
was authorized to sell $9,231,633 of State net operating losses from 1992, 1993,
1994 and  1995.  The net  proceeds  to the  company  for the  sale of these  net
operating  losses were $623,135.  The Company has  approximately  $10,500,000 of
State losses available for future sale.

--------------------------------------------------------------------------------
NOTE 12  -  RELATED PARTY TRANSACTIONS:
-------------------------------------------------------------------------------

Mr. William Weiss, CEO of the Company receives compensation of $10,000 per month
as part of an employment  contract.  During 1999, 1998 and 1997, he has assigned
payment of the compensation to other companies he is affiliated with.

During 1997, the Company issued 333,333 shares of stock in lieu of  compensation
to a majority stockholder.


<PAGE>


================================================================================
PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS                                             13
DECEMBER 31, 1999, 1998 AND 1997
===============================================================================


NOTE 13 - ROYALTIES:
--------------------------------------------------------------------------------

During 1999, 1998 and 1997, the Company had licensing  agreements with 5 vendors
to  distribute  various  software  products.  At December 31, 1999,  all amounts
outstanding  in  regards  to  these   agreements   have  been  included  in  the
accompanying December 31, 1999 financial statements.


-------------------------------------------------------------------------------
NOTE 14  -  EXPORT SALES:
-------------------------------------------------------------------------------

Export sales were  approximately  8%, 9% and 16% of the  Company's net sales for
the years ended December 1999, 1998 and 1997, respectively.


-------------------------------------------------------------------------------
NOTE 15  -  SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
--------------------------------------------------------------------------------

                                    1999              1998               1997
                               ----------------- ------------------ ------------

Cash paid for interest          $    -           $     24             $1,700
                               ================= ================== ============















































































<PAGE>
(a)       Reports on Form 8-K.

         The Company  filed one report on Form 8-K during the period  covered by
this  report.  The report on Form 8-K was filed with respect to Item 5. The date
of such report on Form 8-K was August 25, 1998.

         The Company  also filed a report on Form 8-K on March 1, 2000  relating
to Item 9.



















































<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements of Section 13 or 15 (d) of the Securities
and Exchange Act of 1934,  the Registrant has caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                                  PAPERCLIP SOFTWARE, INC.


                                  By: /s/ William Weiss
                                  William Weiss, Chief Executive Officer


                                  Date: March 7,2000

         Pursuant to the  requirements of the Exchange Act, this Report has been
signed below by the  following  persons on behalf of the  Registrant  and in the
capacities and on the date indicated.

Signature                 Title                           Date

/s/ William Weiss
William Weiss             Director and Chief Executive    March 7, 2000
                          Officer (Principal Executive,
                          Financial and Accounting Officer)

/s/ Michael Suleski
Michael Suleski           Director, Vice President,       March 7, 2000
                          Engineering and Secretary