UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-KSB

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

                   For the fiscal year ended December 31, 2003


                        Commission File Number 000-26598

                            PAPERCLIP SOFTWARE, INC.
             (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: N/A

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

                  Common Stock, Par Value $.01
                     (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  X      No











<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,  2003 was
$1,569,843.  As of March 3, 2004, the aggregate market value of the voting stock
held by  non-affiliates  of the  registrant  was $631,500  (based on the closing
price of the OTC Bulletin  Board on March 3, 2004).  As of March 3, 2004,  there
were 8,196,521 shares of the registrant's common stock outstanding.

Documents Incorporated by Reference: None. Transitional Small
Business  Disclosure  Format  (check  one):  Yes  ___ No X



     Certain information included in this Annual Report may be deemed to include
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended,  that involve risk and uncertainty,  such as information relating to
the  acceptance  and sale of the Company's  products,  the Company's  ability to
successfully  market  and  distribute  its  products,   product  development  or
enhancements,  the Company's  ability to generate  sufficient cash flow from the
sale of its products and its tax losses to meet the Company's cash  requirements
and to pay its  liabilities  when due,  the  Company's  ability to  protect  its
proprietary  property  and the  Company's  ability  to  attract  and  retain key
employees.  In addition,  certain statements may involve risk and uncertainty if
they are  preceded  by,  followed  by,  or that  include  the  words  "intends,"
"estimates," "believes," "expects," "anticipates," "should," "could," or similar
expressions,  and other statements  contained herein regarding  matters that are
not historical facts.

Although we believe that our expectations  are based on reasonable  assumptions,
we can give no  assurance  that our  expectations  will be  achieved.  We do not
undertake   any   obligation   to  release   publicly  any   revisions  to  such
forward-looking  statements to reflect  events or  circumstances  after the date
hereof or to reflect the occurrence of unanticipated events.













<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,  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 is the successor by merger, in March 1992, to the original company which
had been incorporated in New Jersey in October 1991.



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 Company's 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  developed  and  markets  a line  of  software  consisting  of
Professional,  Workgroup and 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 relates to 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 developed its WebServer(TM)  Product, which is an add-on to the
Systems. This product provides full security for documents stored on a PaperClip
System,  enables  users to make the  documents  available  to anyone  with a Web
Browser and makes 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 has developed the next  generation of the NOSS product, which has  been
deployed on the Microsoft  Windows NT server  platform.  The Company markets the
Systems and associated products  domestically (i) through a mass distributor,  Z
Source,  which sells to a value added  reseller  ("VAR")  channel that currently
consists of  approximately 20 resellers and (ii) directly through such VARs. The
Company markets its products internationally through approximately 3 VARs.




                                          -1-


<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 marketing 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 give users the added flexibility of
exchanging, accessing and managing stored documents via the Internet.

     The Company  derives all of its revenues  from the licensing or sale of the
Systems and associated  products and services.  The Company's principal products
are the Professional, Workgroup and Enterprise Editions, as well as the Internet
Express and  eXpressLink  products.

                                          -2-



<PAGE>


    There can be no assurance  that the  Company's  products will achieve
broader market  acceptance  or result in significant revenue  to the  Company.


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  (collectively  "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.



                                          -3-


<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 millions of Documents while
maintaining  a high level of  performance.  The  Professional  Edition  works in
conjunction  with SQL database  products from  Microsoft  and Sybase.


Workgroup Edition

      Workgroup   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.

Enterprise Edition

     Enterprise  Edition provides all the features of the Workgroup  Edition and
provides for Wide Area Network operation using a client/server architecture. The
significant  difference  provided  to users by the  Enterprise  Edition  are the
improved  performance  in  networks  with more than 20 users and the  ability to
manage a greater number of folders and documents. To operate Enterprise Edition,
the user is  required  to obtain a  license,  which is  readily  available  from
various third parties,  for the desired SQL server.  The  Enterprise  Edition is
suited to large departmental and enterprise installations. The Company presently
offers its  Enterprise  Edition to work in  conjunction  with SQL  Servers  from
Microsoft, Sybase and Oracle.


Capture Product Line - DECS

     DECS (Document EDI Capture Suite) is a set of  applications  with which end
users and business  applications  will  collect  electronic  documents  and / or
Electronic Data Interchange  (EDI) into an Electronic  Document Exchange ("EDX")
V2.0 Package for  transmission  to an IDM solution or EDI  application  or both.
DECS provides the tools for collecting scanned images,  documents printed to the
DECS Print  Driver,  file import,  keyed and file captured EDI. This data can be
transformed, packaged and transported to the recipient for further processing as
an EDX V2.0 Package.  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 Internet Express
("IE"), eXpressLink ("XL"), the Systems and/or any EDX compliant solution.



                                          -4-



<PAGE>
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 by viewing through
the PaperClip  system.  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.

The Noss Product Line

     NOSS is the  subsystem  for optical  storage and jukebox  management.  When
combined  with the  Workgroup and  Enterprise  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.


Internet Product Line - Webserver

     WebServer(TM)  is an add-on  to the  Systems.  The  product  provides  full
security for  documents  stored on a PaperClip  System and enables users to make
documents  available  to anyone  with a Web Browser  and to make  available  the
user's  document  repository  to  both  Internet  and  private  intranet  users.
WebServer  allows  users  across the World Wide Web to  retrieve  documents  and
conduct simple workflow tasks from their thin client browser.

Internet Express

     Internet Express is an extranet designed to exchange  electronic  documents
as an  Application  Service  Provider  ("ASP").  The Company will derive revenue
based on the movement of EDX packages  across the  Internet.  IE has expanded to
four delivery options, IE Client,  Secure Email, Secure Hosting, and Secure Fax.
Service traffic for the year increased from 30,000  transactions in 2002 to over
100,000 transactions in 2003.

Clipit Toolkit

     ClipIt is a new approach for legacy application  integration with any other
application(s).  ClipIt's  greatest  demand  is  found  in the new  thin  client
services.  By integrating ClipIt within thin client  applications,  users simply
hit a "Hot Key" to quickly view important  records and documents across the Web.
ClipIt is a Tool-kit  designed  to leverage  PaperClip's  award  winning  Visual
Context Processor (Clipping)  technology allowing developers and integrators the
ability to program ClipIt within their application or script within browsers.


                                          -5-


<PAGE>

PaperClip BarCode

     PaperClip  developed  and  released a BarCode  recognition  solution  where
bar-coded documents are automatically received and filed. The solutions includes
the ability to create  bar-coded  cover  sheets and a server  engine  capable of
reading the same.  Documents can be scanned or faxed directly to the recognition
engine.


Expresslink Communications

     PaperClip's  eXpressLink  (XL) is an electronic  document  package exchange
solution  designed to interconnect  dissimilar  Electronic  Document  Management
solutions  whereby  they can  exchange  documents  similar  to  electronic  data
interchange (EDI). Designed to transport electronic document packages across the
corporate  Intranet  or  Internet  providing   interoperability,   security  and
tracking. Utilizing the public standard Electronic Document eXchange version 2.0
for packaging electronic documents, any EDX V2.0 compliant system can connect to
the XL Server seamlessly with no programming.  A Company can now connect company
workflow and  integrate  dissimilar  document  management  solutions to business
partners and branch offices attached to the corporate  Intranet or Internet.  XL
significantly reduces document processing costs.  Standards driven, XL cuts cost
and reduces time to process.

     eXpressLink   is   designed   to  exchange   electronic   documents   among
organizations  that are members of the same private  intranet and connect to IE.
The Company  provides XL as a product,  not a service.  This product expands the
user's  communications  options while  maintaining  a consistent  interface to a
user's document management solution.

Objectives, Internal Sales Force And Risks

     Management's  marketing  objectives for the Systems and the Company's other
products are as follows:  (i) develop  strategic  relationships  with  prominent
software  organizations;  (ii)  introduce  the Systems and the  Company's  other
products 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 Workgroup and Enterprise
Editions.  Consequently,  the  Company  provides  technical  support  along with
on-going  communication  to its VARs.  Marketing  assistance  includes  hot line
access,  mailings of product and technical updates, joint cooperative marketing,
site visits and seminars.

     The  Company  has a 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.

                                          -6-


<PAGE>
Value Added Reseller Network

     To date, revenue sources are approximately evenly divided between VAR sales
and internal services. The Company currently has approximately 23 VARs, of which
approximately 20 VARs are in the United States and approximately 3 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 1 employee.

Customers And Sales

     The Company had net sales of  $1,569,843  in 2003 and  $1,443,797  in 2002.
Lumtron, an OEM, and ImageTek, a VAR, accounted for 19% and 12%,respectively, of
the  Company's  sales in 2003.  ImageTek  and  BISYS,  a direct  customer,  each
accounted for 16% of the Company's sales in 2002. In 2003, the Company commenced
a lawsuit against  IMAGETek in the Superior Court of the State of New Jersey for
payment of delinquent accounts receivable  approximating  $145,000.  The Company
has been  working  with  IMAGETek  to resolve  the issues and has not  proceeded
further with the suit. As of March  19,2004  ImageTEk has reduced its payable to
Paperclip by approximately  $50,000.  The Company has set up what it believes is
an adequate bad debt reserve to cover this accounts receivable.  Three customers
represented  94% of accounts  receivable at December 31, 2003, and two customers
represented  48% of accounts  receivable at December 31, 2002.  Significant  new
customers added in 2003 are E-Trade Financial  Corporation,  Travelers Insurance
Company and Leader One Mortgage,  although none of these customers represent 10%
of the revenues of the Company.

Customer Support And Service

     The Company presently  provides telephone support to its VARs and OEMs. The
majority of the Company's  service and support  activities  involve responses to
customer inquiries  regarding use of the Workgroup,  Enterprise 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, when  necessary,  outside  consultants.  PaperClip  expended
approximately  $283,000  and $288,000 on research  and  development  in 2003 and
2002, 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.
                                          -7-

<PAGE>
Production

     The Company has produced a set of master CD's and  documentation for all of
its  products.  The  Company  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  commercially
reasonable).


Product Protection

     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 previously  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. Both of those  registrations  were allowed to expire because they
were  for  forms  of the  mark no  longer  in use.  The  Company  was  issued  a
Certificate of  Registration  for the Trademark  Paperclip on November 20, 2001.
Although to the best of  Company's  knowledge no other person or entity owns any
U.S.  registered  trademark for the mark "PaperClip" in connection with software
or  imaging  products,  there  is a  registration  filed  by a third  party  for
"Technology  As Easy  To Use As A  PaperClip"(tm)  for  consulting  on  computer
hardware,  software  and  systems  in the  fields  of  sales  automation,  order
processing,  voicemail, paging, dictation,  transcription and telecommunications
and  off-site  employee  programs  and  businesses.  While the Company  does not
believe there is any likelihood of confusion  raised by the use of such mark, if
such  confusion  were  alleged,  the Company  would rely on its prior common law
rights.  If any  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 costs as a result thereof.

     The Company owns registrations for the trademark PAPERCLIP IMAGING SOFTWARE
& DESIGN in Canada,  but does not now own  registrations  or pending
applications for trademark  registration in other countries in which the Systems
and the Company's other products are sold.





                                          -8-


<PAGE>
     The  Company   distributes  its  products  under  signed  software  license
agreements,  which  grant  customers  perpetual  licenses  to use,  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.

     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, Merant
AccuSoft  Corporation,  and  Snowbound  Software and may require  licenses  from
Pegasus Imaging Corporation and Sybase Inc.






                                          -9-


<PAGE>
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,  Hyland  Software,   Optika  Imaging  Systems
Incorporated,  OTG (a  division of EMC) and  LaserFiche  Document  Imaging.  The
Company  also  competes  with more  expensive  turnkey  solutions  such as those
produced by FileNet Corp.  and IBM  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 are 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.  Significant email based competitors United
Parcel  Service and Pitney Bowes  departed the market during 2002,  stating that
the market  requires  industry  customization  to be truly effective and that is
beyond their scope. In the life insurance  industry,  one competitor has emerged
utilizing a central  repository  for document  exchange.  Intellisys  provides a
central repository and sells retrieval and communications with selected carriers
as their service. It contracts with the smaller brokers where outsourcing to the
broker  makes more sense.  PaperClip's  document  management  customers  are the
larger volume brokers. Intellisys is an Internet Express customer.

     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.

                                          -10-




<PAGE>
Employees

     As of March 4, 2004, the Company's full-time staff of 14 employees includes
6 employees  engaged in  development  and systems  testing,  4 engaged in sales,
marketing  and  technical  support,  1 in  Business  Services  and 3 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   intends  to  utilize   consultants   to  supplement  its  systems
development, sales and marketing efforts, when necessary.

     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.



















                                          -11-





<PAGE>

Recent Developments

     In November  2000,  the Company and Access  Solutions  International,  Inc.
("Access")  entered  into a Series A Preferred  Stock  Purchase  Agreement  (the
"Purchase  Agreement")  pursuant to which the Company issued 3,649,543 shares of
the Company's  Series A Convertible  Preferred  Stock,  $.01 par value per share
(the  "Series A  Preferred  Stock"),  to Access as  payment in full of an amount
equal to  $2,305,506  which  represented  advances made to the Company by Access
pursuant to a prior  management  agreement plus accrued  interest of $384,786 on
such  advances.  The  shares  of Series A  Preferred  Stock  were  issued at the
equivalent  price of $0.71 per share.  Each share of Series A Preferred Stock is
convertible into one share of the Company's common stock,  subject to adjustment
and  anti-dilution  protection upon certain events.  In addition,  in connection
with the Purchase  Agreement,  the Company and Access entered into an Agreement,
dated as of November 1, 2000, pursuant to which, among other things, the Company
agreed to issue a new Promissory Note (the "New Note") in the amount of $405,530
in exchange for the cancellation of a promissory note in the principal amount of
$300,000  issued to Access by the  Company on January  29, 1997 (the "Old Note")
and Access and the Company  agreed to release  each other from  certain  claims.
Pursuant  to the New Note  issued to Access in  November  2000,  the Company was
required to repay the $405,530  principal amount over a 36-month  period.  There
was no interest on the New Note  unless the Company did not pay  principal  when
due.

     On March 20,  2003,  Access  sold the Series A  Preferred  Stock to William
Weiss,  the  Company's  Chief  Executive  Officer  ("Weiss") for an aggregate of
$106,986.29. In addition, on March 20, 2003, the Company and Access entered into
an agreement  (the "Note  Repayment  Agreement"),  pursuant to which the Company
paid Access an amount equal to $101,382.48 as payment in full of all obligations
arising  under  the New Note.  The  remaining  principal  amount on the New Note
immediately  prior to its  satisfaction  was  $135,176.64.  Pursuant to the Note
Repayment   Agreement,   the  parties  also  terminated  that  certain  Security
Agreement,  dated as of January 29, 1997 (the "Security  Agreement"),  which had
secured the  payments  of all  amounts  due under the New Note,  and the parties
released each other from certain claims, including claims under the New Note and
the Security Agreement.



                                          -12-

<PAGE>
     In June 2000, the Company entered the residential  mortgage  industry.  The
Company's  solutions have been  successful in the broker  business and secondary
market.  The  Company  at the end of fiscal  year  2002  released  its  mortgage
customization  module called Mortgage  Information  Profile Process (MIPP). This
module  reflects  current  mortgage  standards,  best  practices  and  leverages
electronic document exchange.

     In June 2002, the Company  expanded the delivery means of Internet  Express
to include secure email, secure hosting and secure fax. These service extensions
have resulted in meeting our customers'  needs while expanding our revenue base.
Secure  email has been well  received,  filling a void left when  United  Parcel
Service (UPS) exited the email delivery  market in September 2002. The Company's
communication solutions support over a million documents per month currently.

     In September 2002, the Company joined Anoto, Inc. as a development  partner
applying  Anoto   functionality   to  the  document   management   industry  and
specifically to life insurance and mortgage vertical  applications.  The Company
during November 2002 launched several  initiatives  targeting the Life Insurance
ACORD  Unified Part One  Application  and the Mortgage  MISMO's  SmartDoc  XHTML
standards.  In addition, The Company has recently passed several security audits
from customers concerning HIPAA compliance as a trusted entity.

     In 1999,  2000,  2001,  2002 and 2003, the Company applied for a Technology
Tax Certificate with the 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
$351,000 in 2000, $223,000 in 2001, $191,000 in 2002, and $127,000 in 2003, from
selling a portion of its losses.  As of the end of 2003 the Company has sold all
its New Jersey tax  losses,  and no further  funds will be  available  from this
source.  As a result,  the Company's sole source of capital will be through cash
flow generated by operations or from sales of equity in the future. There can be
no assurance that the Company will have  sufficient  funds to pay its creditors,
file required documents with the Securities and Exchange Commission and maintain
its operations.




                                          -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  2,700  square  feet.  The Company  occupies  these
premises  pursuant to a lease,  the term of which  expires on November 30, 2005.
The fixed  rent is  approximately  $4,500  per month  plus  utilities,  plus its
proportionate share of any increase in operating costs.

ITEM 3.  Legal Proceedings.

     In 2003, the Company  commenced a lawsuit against  IMAGETek in the Superior
Court of the State of New Jersey for payment of delinquent  accounts  receivable
approximating  $145,000.  The Company has been working with  IMAGETek to resolve
the issues and has not  proceeded  further  with the suit.  As of March  19,2004
ImageTEk  has reduced its payable to  Paperclip by  approximately  $50,000.  The
Company  believes  that its bad debt reserve is adequate to cover this  accounts
receivable.

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

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

     No matters were  submitted to a vote of security  holders during 2003.

                                     PART II

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

                    Common
                     Stock


2003              High      Low
First             0.09     0.05
Second            0.08     0.05
Third             0.07     0.05
Fourth            0.08     0.02

2002              High     Low
First             0.05     0.02
Second            0.19     0.03
Third             0.07     0.02
Fourth            0.07     0.03

     The above  prices  per share  were the bid prices  during  such  periods as
reported by Bloomberg News Service for OTC market  quotations.  Such  quotations
reflect  interdealer prices without retail mark-up,  mark-down or commission and
may not necessarily represent actual transactions.


                                          -14-





<PAGE>

     The Company's securities are presently traded on the OTC Bulletin Board. As
of December  31,  2003,  there were  approximately  700 holders of record of the
Company's  shares of Common Stock. 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.  In  addition,  the  Company's  Series A
Preferred Stock  Certificate of Designation  restricts the declaration,  payment
and  setting  aside of any  dividends  without the consent of the holders of the
Requisite  Percentage  (as  defined in such  Certificate)  of Series A Preferred
Stock.







                                           -15-


























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

RESULTS OF OPERATIONS

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

     Net sales of Paperclip  increased by $126,046 or 9% to  $1,569,843  for the
year ended  December 31, 2003 from  $1,443,797  for the year ended  December 31,
2002.  The increase was due to an increase in sales of the  Company's  Workgroup
and  Enterprise  Editions,  partially  offset by a  decrease  in  revenues  from
customers upgrading to newer versions of the Company's products.

     Salaries and related  benefits  increased by $98,144 or 12% to $892,430 for
the year ended  December 31, 2003 from $794,286 for the year ended  December 31,
2002.  The increase was due to an increase in salaries to sales,  marketing  and
administrative personnel and the addition of one administrative employee.

     Research and development expenses decreased by $5,604 or 2% to $282,731 for
the year ended  December 31, 2003 from $288,335 for the year ended  December 31,
2002.  The  decrease  was due to a decrease in  purchase  of  computer  software
related to research and development.

     Selling expenses decreased by $21,397 or 16% to $114,468 for the year ended
December  31, 2003 from  $135,865  for the year ended  December  31,  2002.  The
decrease resulted from a decrease in advertising expenses partially offset by an
increase in travel expenses.

     General and administrative  expenses increased by $17,711 or 9% to $214,158
for the year ended  December 31, 2003 from $196,447 for the year ended  December
31, 2002.  The increase was due to an increase in  professional  fees  partially
offset by a decrease in depreciation expense.

     Other income  increased by $241,011 to $416,577 for the year ended December
31, 2003 from  $175,566 for the year ended  December 31, 2002.  The increase was
primarily  due to a reduction of accounts  payable due to the  expiration of the
statute of limitations on $278,767 in accounts payable owed by the Company,  and
by a gain  due to the  extinguishment  of a note  payable  to  Access  Solutions
International, Inc. as described below, offset by a decrease in amounts realized
from the sale of tax credits in 2003 as compared to 2002.

     Provision for income taxes  increased by $17,000,  because the Company used
up all its  prior New  Jersey  net  operating  loss  carryforwards,  offset by a
deferred tax asset of $11,600 .

     Net income  increased by $261,203 to $453,733  for the year ended  December
31, 2003 from  $192,530 for the year ended  December 31, 2002.  The increase was
primarily due to an increase in sales, the reduction of accounts payable and the
gain resulting from the extinguishment of debt, which was partially offset by an
increase in salaries and professional fees.



                                       -16-


<page>
LIQUIDITY AND CAPITAL RESOURCES
     For the year  ended  December  31,  2003,  the  Company's  net  income  was
$453,733.  For the year  ended  December  31,  2002,  the  Company's  operations
resulted in net income of $192,530.  As of December 31, 2003, the Company had an
accumulated  deficit of  $20,504,531.  Although the Company  reported  operating
income  of  approximately   $66,000  during  fiscal  year  2003,  the  Company's
management  is  forecasting  for  2004  continued  positive  trends  for  sales,
operating  income,  net income and cash flows.  Net cash  provided by  operating
activities  was $40,800 and $138,867  for the years ended  December 31, 2003 and
December 31, 2002,  respectively.  The Company's ability to meet its forecast is
subject to broader  acceptance of its product lines,  its ability to continue to
realize  revenues  from  its  two  largest   customers,   product   performance,
competitive  forces,  sales efforts of resellers,  the absence of  unanticipated
expenses and other factors identified herein.

     On  March  20,  2003,  the  Company  and  Access  Solutions  International,
Inc.("Access")  entered  into an  agreement  (the "Note  Repayment  Agreement"),
pursuant to which the  Company  paid Access an amount  equal to  $101,382.48  as
payment in full of all obligations  arising under a note dated as of November 1,
2000 (the "Note").  The remaining principal amount on the Note immediately prior
to its satisfaction was $135,176.64.  Pursuant to the Note Repayment  Agreement,
the parties also terminated that certain Security Agreement, dated as of January
29, 1997 (the  "Security  Agreement"),  which had  secured  the  payments of all
amounts due under the Note,  and the parties  released  each other from  certain
claims, including claims under the Note and the Security Agreement. In addition,
on March 20,  2003,  Access  sold  3,649,543  shares of the  Company's  Series A
Preferred  Stock,  par value $0.01 per share,  to William  Weiss,  the Company's
Chief Executive  Officer , for an aggregate of $106,986.29  which was paid using
Mr. Weiss's personal funds. Such  consideration  represents a discount to market
which takes into  account  the fact that the shares of Series A Preferred  Stock
are restricted  securities and are not freely  tradeable.  On December 31, 2003,
Mr. Weiss sold an aggregate of 1,115,674 of such shares to certain  employees of
the Company,  including Michael Bridges, the Company's President, and to certain
other investors for a purchase price per share equal to his cost per share.

     Presently, the Company funds working capital from revenues it receives from
the sale of its  products.  Over the preceding  five fiscal  years,  the Company
received  an  aggregate  of  approximately  $1,500,000  from the sale of its tax
losses,  but does not anticipate any additional  proceeds from such sales in the
future. As of December 31, 2003, the Company had aggregate liabilities in excess
of $1.6 million.  Such amount of aggregate  liabilities includes (i) $276,150 in
annual support  contracts,  which are recorded as deferred  revenue,  a non-cash
item, for accounting purposes and reclassified,  on a pro rata basis to sales as
such contracts  expire and income is earned,  (ii) $459,008 in accounts  payable
and accrued expenses, and (iii) $129,691 in notes payable which were issued more
than six years ago. Such liabilities also include loans  payable-related  party,
which relates to deferred compensation of approximately  $710,000 payable to Mr.
Weiss. Mr. Weiss has entered into a written  agreement with the Company in which
he agreed not to demand payment of his deferred compensation until subsequent to
April 1, 2005.


                                            -17-

<page>



     At December  31,  2003,  the Company had net Federal  operating  loss carry
forwards ("NOL") of approximately  $19,740,000 for financial reporting purposes.
Due to losses  sustained  by the Company for both  financial  and tax  reporting
through 2002,  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
valuation  allowance of $6,048,400  against the potential tax deferred tax asset
of $6,060,000. 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 $623,135, $ 351,335,  $223,000,
$191,000 and $127,000 in 1999, 2000, 2001, 2002 and 2003 respectively,  from the
sale of its New Jersey net operating  losses and research tax credits.  As noted
above, no additional proceeds are anticipated from such sales in the future.

     For  2004,  the  Company   anticipates  that  it  will  need  approximately
$1,600,000 in order to fund its operations . The Company's  management  believes
that cash from the sale of its products  will enable it to meet its  anticipated
cash  requirements for the next 12 months.  Management's  belief is based on the
2004 forecast,  which indicates  continued positive trends for sales,  operating
income,  net income and cash flows.  There can be no assurance  that the Company
will generate  enough cash from the sale of its products to meet its anticipated
cash  requirements  for the next 12 months.  If the  Company  does not  generate
enough cash to meet its  requirements  for the next 12 months,  the Company will
not have  sufficient  working  capital to satisfy its  liabilities,  develop new
products or implement its marketing and sales initiatives, which may result in a
loss of sales and would have a material adverse effect on the Company.


Statement Regarding Critical Accounting Policies

     The financial  statements  of the Company are prepared in  accordance  with
accounting  principles  generally  accepted in the United States of America that
require  the Company to make  estimates  and  assumptions.  The  Securities  and
Exchange   Commission  ("SEC")  has  recently  issued  disclosure  guidance  for
"critical accounting  policies." The SEC defines critical accounting policies as
those that require  application of management's  most  difficult,  subjective or
complex  judgments  that are  inherently  uncertain and may change in subsequent
periods.

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  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.   Notwithstanding  the  foregoing,  the  Company  believes  that  the
Company's  operations  are of such a nature that  management  is not required to
make  estimates  and  assumptions  about  highly  uncertain  matters  such  that
differences in such estimates would have a material  impact on the  presentation
of the Company's financial  statements.  Accordingly,  the Company believes that
none of its  significant  accounting  policies  (see  Note 2 in the Notes to the
Financial   Statements)   require  additional   disclosure  as  being  "critical
accounting policies."
                                          -18-

<page>

ITEM 7.  Financial Statements.

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





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

           None

ITEM 8A    CONTROLS AND PROCEDURES.

     The Chief Executive  Officer/Principal Financial Officer of the Company has
concluded, based on his evaluation as of a date within 90 days prior to the date
of the  filing  of this  Report,  that the  Company's  disclosure  controls  and
procedures are effective to ensure that information  required to be disclosed by
the Company in the reports  filed or submitted by it under the Exchange  Act, is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's rules and forms,  and include  controls and procedures  designed to
ensure that information  required to be disclosed by the Company in such reports
is accumulated and communicated to the Company's management, including the Chief
Executive  Officer/Principal  Financial Officer,  as appropriate to allow timely
decisions regarding required disclosure.

     There were no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect these controls subsequent to the
date of such evaluation.





                                          -19-



<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 March 1, 2004 are
as follows:
Name                       Age          Position

William Weiss              60           Chief Executive Officer; Treasurer;
                                        Director

D. Michael Bridges         49           President, Director

Michael Suleski            43           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.  From January
1980 until  March 31, 2003 Mr.  Weiss had also been an  executive  officer  (and
President 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  40 hours per week to the  Company.  Mr. Weiss
received a B.S. from the Wharton School of the University of Pennsylvania  and a
J.D. from New York Law School.

     D. MICHAEL BRIDGES,  President,  rejoined the Company in March,  2000 after
providing consulting services to the Company from August 1998 to March 2000. Mr.
Bridges served as the Company's Vice President of Marketing & Sales and Director
of Corporate  Services from February 1995 to August 1998. Mr. Bridges received a
B.S. from Rowan  University  and served as a Captain in the United States Marine
Corps.

     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. He received a B.S. and a M.S. degree from Fairleigh  Dickenson  University
College of Science and Engineering.


                                -20-




<PAGE>


     The  Company's  directors  were  elected  at the  last  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.

     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,
D. Michael  Bridges or Michael  Suleski could have a material  adverse effect on
the Company.

Board of Advisors

     In January  2004,  the  Company  formed an  Advisory  Board  consisting  of
distinguished  professionals  and  entrepreneurs  who will provide  guidance and
advice to the Company and serve as a sounding board for the management team. The
Advisory Board members will share experiences with colleagues and voice opinions
on the  technologies  transforming  electronic  document  management and its end
communications.  The  Company  believes  that the input of its Board of Advisors
will   influence  the   development   of  new  products  and  improve   existing
technologies. The current Advisory Board members are as follows:

     MICHAEL  SINNECK most  recently  served as  Corporate  Vice  President  for
Worldwide  Services of  Microsoft.  Prior to working at Microsoft,  Mr.  Sinneck
worked for 34 years in all aspects of  information  technology  development  and
management,  with a focus on  services,  recently as vice  president of business
operations at IBM Global Services Americas.  In previous positions,  Mr. Sinneck
was responsible for developing and deploying  service line concepts for improved
systems integration and application development across 14 industries.

     DAVID  MATTHEWS  Mr.  Matthews' recently  served as President & COO of RBC
Mortgage,  Chicago,  IL. Mr. Matthews  served as President of Ultraprise,  a B2B
company focused on the financial services  secondary markets.  Mr. Matthews also
held senior vice president and CIO positions for Chase Mortgage, Chase Manhattan
Bank and Chemical Residential Mortgage Corporation, Chemical Bank.

     KEVIN A. VOLPE has more than 18 years of hands-on  leadership and direction
for  corporate  and business  development,  identifying  partner  companies  and
negotiating  major  contracts.  He  has  been  a key  member  of  the  executive
management  team  and  business  strategist  for a  significant  public  company
responsible for worldwide client support, financial management, consultation and
implementation for information technologies.

                                      -21-


<PAGE>
Limitation of Liability and Indemnification Matters

    Insofar as indemnification for liabilities arising under the Securities Act
of 1933,  as  amended,  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 Exchange Act requires certain  persons,  including the
Company's directors and executive  officers,  and beneficial owners of more than
10% of the Company's equity securities,  to file reports with the Securities and
Exchange Commission  regarding  beneficial ownership of equity securities of the
Company.  Based on material provided to the Company by such directors,  officers
and beneficial owners of more than 10% of the Company's equity  securities,  the
Company  believes that during the fiscal year ended December 31, 2003, there was
compliance  with all such  filing  requirements,  except  for Mr.  Weiss and Mr.
Bridges  who  inadvertently  neglected  to file Form 4's to reflect  the sale of
shares  of  Series A  Preferred  Stock  by Mr.  Weiss  to  certain  individuals,
including Mr. Bridges. Such forms were subsequently filed on March 26, 2004.

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, 2003 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.  The
Board determines the compensation of the Company's executive  officers,  none of
whom  received increases in their salaries, or a bonus, in 2003.
<TABLE>
<CAPTION>

                           Summary Compensation Table
--------------------------------------------------------------------------------------------------------------------------
                             Annual Compensation                                Long Term Compensation
--------------------------------------------------------------------------------------------------------------------------
                                                                                    Securities
                                                  Other           Restricted       Underlying    LTIP
Name and Other                         Bonus      Annual            Stock         Options/SARs (#)Payouts    All
 Position         Year    Salary ($)    ($)    Compensation       Awards ($)                        ($)
Compensation
--------------------------------------------------------------------------------------------------------------------------
<S>               <C>       <C>      <C>         <C>               <C>              <C>             <C>        <C>
William Weiss     2003      120,000   0           0                 0                0               N/A         N/A
                  2002      120,000   0           0                 0                0               N/A         N/A
CEO (1)(2)        2001      120,000   0           0                 0                0               N/A         N/A

--------------------------------------------------------------------------------------------------------------------------
Michael Suleski   2003      105,000   0           0                 0                0               N/A         N/A
                  2002      105,000   0           0                 0                0               N/A         N/A
Vice President    2001      105,000   0           0                 0                0  (2)          N/A         N/A
Engineering (1)
--------------------------------------------------------------------------------------------------------------------------

D Michael Bridges 2003      107,800   0           0                 0                0               N/A         N/A
                  2002      107,800   0           0                 0                0               N/A         N/A
President         2001      107,800   0           0                 0                0               N/A         N/A

--------------------------------------------------------------------------------------------------------------------------
</TABLE>
     (1) The Company presently has no employment  contract with William Weiss or
Michael  Suleski.

     (2)As of December  31,  2003,  $710,119  is owed to William  Weiss for past
salaries accrued but not paid.
                                  -22-


<PAGE>

Option/SAR Grants

     During  the fiscal  year ended  December  31,  2003,  there were no options
granted to either the Company's Chief Executive  Officer or any of its principal
officers.

     The table below indicates that no options/SARs were exercised during fiscal
year 2003 by the  Company's  Chief  Executive  Officer and each of its principal
executive officers and shows the value of their unexercised options/SARs.

               AGGREGATED  OPTION/SAR  EXERCISES IN FISCAL YEAR 2003
                  AND OPTION/SAR VALUES AT DECEMBER 31, 2003


<TABLE>
<CAPTION>


                                                                                                Value of Unexercised
                                                                      Number of Securities      In-the-Money
                                                                      Underlying                Options/
                                                                      Unexercised Options/SARs  SARs at
                                                                      at FY-end                 FY-End
                          Shares Acquired On         Value            Exercisable/              Exercisable/
    Name               Exercise (#)         Realized ($)              Unexercisable (#) (1)     Unexercisable($)
----------------------- ---------------------- ---------------------- --------------------------- ---------------------
<S>                               <C>                 <C>                <C>                        <C>

William Weiss                     0                   0                  770,921/0                  0/0
D. Michael Bridges                0                   0                  409,000/0                  0/0
Michael Suleski                   0                   0                  744,921/0                  0/0

</TABLE>


     (1) The Company does not have a stock appreciation  rights ("SAR") plan and
does not have any SARs outstanding.

     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.












                                          -23-










<PAGE>

     The Company entered into an Employment Agreement with David Michael Bridges
effective as of January 1, 2000 (the  "Employment  Agreement").  The  Employment
Agreement provides that Mr. Bridges will serve as the Company's President and as
a member of the Company's Board of Directors, subject to stockholder vote, for a
term of three  years,  subject  to  automatic  one  year  extensions  and  early
termination,  at an initial base salary of $107,800. The  Employment  Agreement
provides  that Mr.  Bridges  shall not  compete  with the Company in the product
lines under  development  by the Company or use or disclose any trade secrets of
the  Company  during the term of the  Employment  Agreement.  In  addition,  the
Employment  Agreement  provides that Mr. Bridges shall not solicit  employees of
the Company or induce any employee to terminate his or her relationship with the
Company  during the term and for a period of 24 months after  termination of the
Employment Agreement unless the Company terminates Mr. Bridges without cause (as
defined in the  Employment  Agreement),  the  Company  fails to satisfy  certain
conditions or if William Weiss or Michael  Suleski shall leave the employment of
the Company other than by reason of death or disability.  Mr. Bridges may not be
terminated  prior to the end of the term  except  with cause (as  defined in the
Employment  Agreement) and Mr.  Bridges may terminate the  Employment  Agreement
prior to the end of the term by  giving  the  Company  at least 90 days  written
notice. In the event that there is a transfer of control, defined as 50%, of the
Company within 6 months of the termination of Mr. Bridges,  Mr. Bridges shall be
entitled to his base salary,  vacation and other  benefits for the  remainder of
the  term  of the  Employment  Agreement  and any  difference  in  value  of the
Company's  capital stock owned by Mr. Bridges at the time of his termination and
the value of such stock after  transfer of control as valued in accordance  with
the terms of the Employment  Agreement.  The Employment  Agreement also provides
for the grant of options to  purchase  400,000  shares of the  Company's  common
stock.  Mr.  Bridges is also entitled to  indemnification  to the fullest extent
permitted  under New Jersey law. In the event that Mr.  Bridges'  employment  is
terminated  without  cause prior to the end of the term or any  extension of the
term or because of a disability (as defined in the Employment Agreement),  he is
entitled  to receive his base salary for 6 months,  at his then  current  annual
rate paid in a lump sum within 10 days of termination, plus a payment for unused
vacation.   The  Employment   Agreement  also  provides  that  Mr.  Bridges  may
independently  develop  intellectual  property  outside of his regular  hours of
employment  with the Company and maintain  full  ownership of such  intellectual
property but provides for the  Company's  use of certain  intellectual  property
owned by Mr. Bridges.  The Employment Agreement restricts Mr. Bridges from using
certain  intellectual  property  owned by him to compete with the Company during
the term of the Employment Agreement.

                                       -24-




<PAGE>
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 expired on February 1, 2003. The expiration of the plan does
not void  outstanding  options for shares which still have part of their 10 year
term remaining.

1995 Stock Option Plan

     The 1995 Stock Plan,  approved by  shareholders  of the Company in May 1995
and amended in 1996 and 2000,  provides for  incentive and  non-qualified  stock
options to purchase the  Company's  common stock to be issued to key  employees,
directors,  former  directors,  consultants and other persons who have conferred
substantial  benefit upon the  Company,  in order to attract and retain such key
personnel and  executives  with the ability to achieve the corporate  objectives
necessary to increase shareholder value. Such incentives encourage the holder of
stock  options  to  manage  the  Company's  business  in the best  interests  of
shareholders by creating an identity of interest with the shareholders.

     The 1995 Stock Plan provides that the aggregate  number of shares of common
stock for which options may be granted  thereunder  is 4,000,000  shares and the
maximum  number of shares  underlying  stock options which may be granted to any
person under the 1995 Stock Plan is 500,000 shares per year. The 1995 Stock Plan
provides  that  it  shall  be  administered  by a  committee  (the  "Committee")
consisting of either the full Board of Directors or at least two directors, each
of whom is an "outside director" as that term is defined for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended. Until there are members
of the Board of Directors who qualify as "outside  directors," the full Board of
Directors will administer the 1995 Stock Plan.

     The Committee has the full power and  authority,  subject to the provisions
of the 1995 Stock Plan, to designate  participants,  grant options and determine
the terms of all options.  The terms of specific  options granted under the 1995
Stock Plan are determined by the Committee.  The per share exercise price of the
common  stock  subject to an option may not be less than 100% of the fair market
value of the  common  stock on the date of grant,  unless,  with  respect  to an
option that is not an incentive stock option,  the Board of Directors approves a
lower  percentage  with  respect  to such  option.  However,  in the  case of an
incentive  stock option granted to a holder of shares  representing at least 10%
of the total combined voting power of all classes of stock of the Company or the
parent or a  subsidiary  thereof (a  "Substantial  Shareholder"),  the per share
exercise  price may not be less than 110% of the fair market value of the common
stock on the  date of  grant.  The  term of each  option  is  determined  by the
Committee,  but no option may be  exercisable  after ten years have elapsed from
the date upon which the option is granted. However, if an incentive stock option
is granted to a Substantial Shareholder,  the term of such option may not exceed
five years.



                                          -25-



<PAGE>


     Upon the exercise of an option,  the option holder must pay the Company the
exercise  price plus the amount of the  required  federal and state  withholding
taxes,  if any. The 1995 Stock Plan allows an  optionee,  subject to approval of
the Committee, to pay the exercise price in shares of common stock, only if such
shares of common stock have been held by the optionee for the  requisite  period
necessary to avoid a charge to the Company's  earnings for  financial  reporting
purposes (and otherwise  meeting any other  requirements  to avoid such charge).
The 1995  Stock  Plan also  allows  an  Optionee,  subject  to  approval  of the
Committee,   to  pay  the   exercise   price   pursuant  to  a   broker-assisted
cashless-exercise  program  established by the Committee;  provided in each case
that such methods  avoid  "short-swing"  profits to the optionee  under  Section
16(b) of the Exchange Act.  Withholding taxes due upon such exercise may also be
satisfied pursuant to such broker-assisted  cashless-exercise  program. The 1995
Stock Plan limits the  availability of the alternative to pay the exercise price
pursuant to a broker-assisted cashless-exercise program so that such alternative
is not  available  with respect to incentive  stock  options  outstanding  as of
October 29, 1996. The 1995 Stock Plan permits limited  transferability  of stock
options primarily for estate planning purposes. As of December 31, 2003, options
to acquire  3,819,222  shares of Common  Stock had been  granted  under the 1995
Stock Plan. At such date,  589,872 options had expired,  95,508 options had been
exercised and 3,133,842 options were outstanding.

Option Plan for Consultants

     In February  2004,  the Board of Directors  of the Company  adopted a stock
option plan (the "2004 Stock Plan").  Only  consultants and members of the Board
of  Advisors  are  eligible  to  participate  in this plan.  The 2004 Stock Plan
provides that the  aggregate  number of shares of common stock for which options
may be granted  thereunder is 600,000 shares.  The 2004 Stock Plan provides that
it shall be administered by a committee (the  "Committee")  consisting of either
the full Board of Directors or a committee consisting of at least two directors.
The Committee has the full power and authority, subject to the provisions of the
2004 Stock Plan,  to designate  participants,  grant  options and  determine the
terms of all options. The terms of specific options granted under the 2004 Stock
Plan are determined by the Committee. The term of each option is also determined
by the Committee,  but no option may be exercisable after ten years have elapsed
from the date upon which the option is  granted.  In  February  2004,  the Board
awarded  five-year  options for an aggregate of 500,000 shares to the members of
the Board of Advisors under the 2004 Stock Plan at an exercise price of $.07 per
share, the market price of the Common Stock on the date of grant.



Long-Term Incentive Plan

     The  Company  did not grant  any  awards to  executive  officers  under any
long-term incentive plan during fiscal year 2003.


Compensation of Directors

     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.

                                           -26-


<PAGE>

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

     The following table sets forth, as of March 20,2004 the number of shares of
Common Stock and Series A Preferred 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 or the Series A Preferred Stock,
as the case may be, known to the Company and the respective percentage ownership
of the  outstanding  Common Stock and Series A Preferred Stock held by each such
holder and group:

<TABLE>
<CAPTION>

                                               Common  shares            Series  Preferred A shares
                                    ----------------------------------  --------------------------
Name and Address                            Number         Percentage     Number        Percentage
of Beneficial Owner                       of Shares (1)     of Class    of Shares         of Class
----------------------------------      ----------------  ------------  ----------------  ----------
<S>                                       <C>                <C>        <C>              <C>

William Weiss   (2)                       3,569,643(3)        31.04%   2,533,869          69.4%
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ 07604

Michael Suleski (2)                         780,936(4)         8.73%
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ 07604

D. Michael Bridges                          560,500(5)         6.40%    150,000            4.1%
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ 07604


A11 Officers and Directors
as a group (3 persons)                     4,911,079           38.35%  2,683,869          73.5%

</TABLE>
     (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) 770,921  shares of Common Stock issuable upon the exercise
of options  currently  exercisable  under the 1995 Stock  Option  Plan,  and (b)
2,533,869 shares of Common  Stock  issuable  upon the  conversion  of 2,533,869
shares of Series A Preferred Stock.

     (4) Includes  744,921  shares of Common Stock issuable upon the exercise of
options currently exercisable under the 1995 Stock Option Plan.

     (5) Includes  409,000  shares of Common Stock issuable upon the exercise of
options  currently  exercisable  under the 1995 Stock Option  Plan,  and 150,000
shares of Common Stock  issuable upon the conversion of 150,000 shares of Series
A Preferred Stock.

                                          -27-



<PAGE>


                        EQUITY COMPENSATION PLAN INFORMATION

     The following table provides  information,  as of December 31, 2003,  about
the  Company's  1993 Stock Option Plan and 1995 Stock Option Plan,  the material
features  of  which  are  described  in this  report  under  "Item  10-Executive
Compensation."  Although the 1993 Stock Option Plan expired in February 2003,the
options  with  unexercised  terms  remain  outstanding  under  such plan and are
included in the table below.

All  outstanding  awards  relate to the Company's common stock.

<TABLE>
<CAPTION>
                                Number of securities                                       Number of securities remaining
                                  to be issued upon                   Weighted-average     available for future issuance
                                      exercise of                     exercise price of    under equity compensation
                                outstanding options,                 outstanding options,  (excluding securities
                                warrants and rights                   warrants and rights  reflected in column (a))
                                       (a)                                  (b)                   (c)
-------------------     -----------------------------------     -------------------------- ----------------------------------
<S>                              <C>                                         <C>                                  <C>
Equity compensation                 3,158,525(1)                                $.38                 796,333(2)
plans approved by
security holders


Equity compensation
plans not approved by
security holders

-------------------       -----------------------------------     ------------------------ ----------------------------------

     Total                          3,158,525                                                         796,333
===================       ===================================     ======================== ==================================
</TABLE>


     (1) Represents  3,138,342 shares of Common Stock issuable upon the exercise
of outstanding  options  previously granted under the 1995 Stock Option Plan and
20,183 shares of Common Stock issuable upon the exercise of outstanding  options
previously  granted under the 1993 Stock Option Plan,  which expired February 1,
2003.
     (2) Represents 776,150 shares of Common Stock available for future issuance
under the 1995 Stock Option Plan and 20,183 shares of Common Stock available for
future  issuance  under the 1993 Stock Option Plan,  which  expired  February 1,
2003.









                                          -28-







<PAGE>

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     As described in this report under "Item  1-Description  of  Business-Recent
Developments,"  Weiss and Access entered into a Stock Purchase Agreement,  dated
as of March 20, 2003,  pursuant to which Weiss  purchased from Access  3,649,543
shares of Series A Preferred  Stock of the  Company,  par value $0.01 per share,
(the "Preferred Shares").  Weiss is the Chief Executive Officer and Treasurer of
the Company as well as a director and 10% beneficial  owner of the Company.  The
Preferred  Shares  are  convertible  into  shares of Common  Stock at a ratio of
one-to-one,  subject to certain customary anti-dilution adjustments as set forth
in the Certificate of Designations governing the Preferred Shares. Upon purchase
of the Preferred  Shares,  Weiss became a successor to Access under that certain
Registration Rights Agreement,  dated as of November 1, 2000, by and between the
Company and Access,  thereby conferring upon Weiss certain  registration  rights
relating to the shares of Common Stock issuable upon conversion of the Preferred
Shares.  The consideration for the Preferred Shares was $106,986.29 and was paid
using Weiss' personal funds. Such consideration  represents a discount to market
which  takes into  account  the fact that the  Preferred  Shares are  restricted
securities and are not freely tradeable.  On December 31, 2003 Mr. Weiss sold at
his cost 1,115,674  Preferred  Shares to certain  employees and investors in the
Company,  including  150,000 of such  shares to Mr.  Bridges,  President  of the
Company.  In addition,  Mr. Weiss receives  compensation of $10,000 per month as
part of an oral employment  arrangement.  However,  in lieu of receiving current
compensation  payments,  Mr.  Weiss has agreed to the  deferred  payment of such
compensation. During part of 2003 and all of 2002 Mr. Weiss has assigned payment
of the compensation to another company he is affiliated  with.  During 2003, Mr.
Weiss  and his  related  company  received  approximately  $75,000  of past  due
compensation. At December 31, 2003, the Company had accrued $710,119 in deferred
compensation to Mr. Weiss,  or his affiliated  company which is recorded as long
term notes payable - related party on the balance  sheet.  Mr. Weiss has entered
into a written  agreement  with the  Company  in which he  agreed  not to demand
payment of his deferred compensation until subsequent to April 1, 2005.






Item 13.  Exhibits List, and Reports on Form 8-K.


                                          -29-

















<PAGE>
(a)       Exhibits:

3.1      Certificate of Incorporation of Registrant, as amended.(1)
3.1(a)   Certificate of Amendment to Certificate of Incorporation.(3)
3.1(b)   Series A Preferred Stock Certificate of Designations.(3)
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)
4.1      Promissory Note issued on November 1, 2000 to Access Solutions
                  International, Inc.
10.1     1993 Stock Option Plan. (1)
10.2     1995 Stock Option Plan, as amended (2)
10.3     Form of End User License. (1)
10.4    (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)
10.5    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)
10.6    Security  Agreement,  dated January 29, 1997, by and between Access
        Solutions  International,  Inc. and PaperClip Software, Inc. (2)
10.7    Agreement  dated as of November 1, 2000 between  Access  Solutions
        International,  Inc.  and  PaperClip Software, Inc.(3)
10.8    Series A Preferred  Stock  Purchase  Agreement  dated as of November 1,
        2000  between  Access  Solutions International, Inc. and PaperClip
        Software, Inc. (3)
10.9    Registration  Rights  Agreement  dated as of November 1, 2000 between
        Access Solutions International, Inc. and PaperClip Software, Inc. (3)
10.10   Employment  Agreement  dated as of January 1, 2000  between  Paperclip
        Software,  Inc.  and D.  Michael Bridges. (3)
10.11   Agreement,  dated March 20, 2003,  by and between  Access  Solutions
        International,  Inc. and PaperClip Software, Inc.(4)
10.12   Agreement, dated December 31,2003 , by and between PaperClip Software,
        Inc. and William Weiss
23.1    Consent of Sobel & Co., LLC
31.1    Certification Pursuant to Rule 13a-14(a) Promulgated under the
        Securities Exchange Act of 1934.
32.1    Certification  pursuant  to 18  U.S.C.  Section  1350,  as  adopted
        pursuant  to  Section  906  of  the Sarbanes-Oxley Act of 2002.

---------------

(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).
(3)      Incorporated by reference from the Registrant's Form 10-KSB for the
         Fiscal year December 31, 2000 (File No. 000-26598)
(4)      Incorporated by reference from the Registrant's Form 10-KSB for the
           Fiscal year December 31, 2002 (File No. 000-26598)


(a)       Reports on Form 8-K.

     The Company did not file any reports on Form 8-K during the period  covered
by this report.
                                          -30-

<PAGE>
ITEM 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Sobel & Co., LLC ("Sobel")  has been  selected as the  Company's  principal
independent  auditors  for  fiscal  2004.  Sobel  was  the  Company's  principal
accountant for the fiscal year ended December 31, 2003.

     The  following  is a summary of the fees billed to the Company by Sobel for
professional  services rendered for the fiscal years ended December 31, 2003 and
December 31, 2002:
<TABLE>
<CAPTION>
                                  Percentage of                        Percentage of
                                    2003 Fees                            2002 Fees
Fee Category          Fiscal 2003  Approved by the  Fiscal 2002 Fees   Approved by the
                          Fees        Board                                 Board
-------------        ------------ ----------------  ----------------   ---------------
<S>                   <C>            <C>              <C>                    <C>

Audit Fees              $21,000         100%             $20,388               100%
Audit-Related Fees          -                               -
Tax Fees                    -                               -
All Other Fees              -                               -
                      ---------                         ---------
Total Fees              $21,000                         $20,388
                      =========                         =========
</TABLE>
     Audit Fees. Consists of fees billed for professional  services rendered for
the audit of the Company's annual financial statements and review of the interim
financial  statements included in the Company's quarterly reports on Form 10-QSB
and related services.

     Audit-Related  Fees.  Consists  of fees  billed for  assurance  and related
services that are reasonably  related to the  performance of the audit or review
of the Company's financial statements and are not reported under "Audit Fees."

     Tax  Fees.  Consists  of fees  billed  for  professional  services  for tax
compliance, tax advice and tax planning.

     All Other  Fees.  Consists  of fees for  services  other than the  services
reported above.

     The Company does not have any independent  directors and therefore does not
have an audit committee. The full Board of Directors is performing the functions
of the audit  committee.  The Board of Director's  policy is to pre-approve  all
audit and permissible  non-audit services provided by the independent  auditors.
These services may include audit services,  audit-related services, tax services
and other services.  Pre-approval  is generally  provided for up to one year and
any  pre-approval  is  detailed  as to the  particular  service or  category  of
services and is generally subject to a specific budget. The independent auditors
and  management  are required to  periodically  report to the Board of Directors
regarding  the  extent of  services  provided  by the  independent  auditors  in
accordance with this  pre-approval,  and the fees for the services  performed to
date.  The Board of  Directors  may also  pre-approve  particular  services on a
case-by-case  basis.  As illustrated in the table set forth above,  the Board of
Directors  pre-approved each audit and non-audit service rendered to the Company
by its  independent  Auditors and no services were approved using the de minimus
exception afforded by Rule 2-01(c)(7)(i)(C) of Regulation S-X.
                                     -31-




<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 29, 2004


     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 29, 2004
                          Officer (Principal Executive,
                          Financial and Accounting Officer)

/s/ D Michael Bridges     Director, President             March 29, 2004
D Michael Bridges

/s/ Michael Suleski
Michael Suleski           Director, Vice President,       March 29, 2004
                          Engineering and Secretary
















                                        -32-








<PAGE>










                             PAPERCLIP SOFTWARE, INC.

                             FINANCIAL STATEMENTS

                            DECEMBER 31, 2003 AND 2002










































<PAGE>
PAPERCLIP SOFTWARE, INC.

DECEMBER 31, 2003 AND 2002



TABLE OF CONTENTS


                                                             Page

Independent Auditors' Report                                    1


Financial Statements:

    Balance Sheet                                               2


    Statements of Income For The Years Ended
       December 31, 2003 And 2002                               3


    Statements of Changes in Stockholders' Deficiency
       For The Years Ended December 31, 2003 And 2002           4

     Statements of Cash Flows For The Years Ended
       December 31, 2003 And 2002                               5


Notes to Financial Statements                                   6







<PAGE>
INDEPENDENT AUDITORS' REPORT




To the Board of Directors
PaperClip Software, Inc.

     We have audited the accompanying balance sheet of PaperClip Software,  Inc.
(a Delaware corporation) as of December 31, 2003 , and the related statements of
income,  changes in stockholders' deficiency, and cash flows for each of the
years ended  December  31, 2003 and 2002.  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  auditing  standards  generally
accepted in the United States of America.  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, 2003, and the results of its  operations and its cash flows for
the years  ended  December  31, 2003 and 2002,  in  conformity  with  accounting
principles generally accepted in the United States of America.

                                                   /s/ Sobel & Co., LLC
                                                   Certified Public Accountants
March 12, 2004
Livingston, New Jersey


<PAGE>
PAPERCLIP SOFTWARE, INC.
BALANCE SHEET
DECEMBER 31, 2003

                                                          December 31,
                                                              2003
ASSETS                                                   -------------
  CURRENT ASSETS:
    Cash and cash equivalents                         $       353,008
    Accounts receivable (net of
      allowance for doubtful accounts
      of $75,000)                                             267,649
    Deferred tax asset                                         11,600
                                                         -------------
      Total Current Assets                                    632,257
                                                         -------------
  EQUIPMENT, FURNITURE AND FIXTURES:
    Computer and office equipment                              57,967
    Furniture and fixtures                                    204,858
    Leasehold improvements                                     12,000
                                                         -------------
                                                              274,825
    Less- Accumulated depreciation                            264,867
                                                         -------------
      Equipment, Furniture, and Fixtures, Net                   9,958
                                                         -------------
  OTHER ASSETS                                                 13,500
                                                         -------------
Total assets                                          $       655,715
                                                         =============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
  CURRENT LIABILITIES:
    Accounts payable and accrued expenses             $       459,008
    Taxes payable                                              40,500
    Deferred revenue                                          276,150
    Notes payable - current                                   129,691
                                                         -------------
      Total Current Liabilities                               905,349
                                                         -------------
  LONG TERM LOAN PAYABLE:
    Loans payable related party                               710,119
                                                         -------------
STOCKHOLDERS' DEFICIENCY:
Convertible Series A, preferred stock, authorized
  10,000,000 shares;  $.01 par value; 3,649,543 shares
  issued and outstanding                                       36,495
Common stock, authorized 30,000,000
  shares; $.01 par value; issued and
  outstanding 8,196,521 shares                                 81,965
Additional paid-in capital                                 19,426,318
Accumulated deficit                                       (20,504,531)
                                                         -------------
  Total Stockholders' Deficiency                             (959,753)
                                                         -------------
Total liabilities and
  stockholders' deficiency                            $       655,715
                                                         =============
The accompanying notes are an integral part of these financial statements
                                -2-

<PAGE>
PAPERCLIP SOFTWARE, INC.
STATEMENTS OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 2003 AND 2002



<TABLE>
<CAPTION>
                                                    Year ended December 31,
                                                      2003           2002
                                                  ------------   ------------
<S>                                               <C>            <C>
NET SALES                                       $   1,569,843  $   1,443,797
                                                  ------------   ------------

OPERATING EXPENSES:
Salaries and related benefits                         892,430        794,286
Research and development expenses                     282,731        288,335
Selling expenses                                      114,468        135,865
General and administrative expenses                   214,158        196,447
                                                  ------------   ------------
     Total operating expenses                       1,503,787      1,414,933
                                                  ------------   ------------


   Income  from operations                             66,056         28,864
                                                  ------------   ------------

OTHER INCOME (EXPENSE):
Extinguishment of debt (net of expenses)               26,394           -
Extinguishment of accounts payable                    278,767           -
Interest expense                                      (15,600)       (15,500)
Income from sale of tax credits                       127,016        191,066
                                                  ------------   ------------
      Total other income (expense), net               416,577        175,566
                                                  ------------   ------------

NET INCOME  BEFORE PROVISION FOR INCOME TAXES         482,633        204,430

Provision for income taxes                            (28,900)       (11,900)
                                                  ------------   ------------

Net income                                      $     453,733    $   192,530
                                                  ============   ============

INCOME  PER COMMON SHARE-
   Basic                                       $       0.06   $        0.02
                                                  ============   ============
   Fully diluted                               $       0.04    $       0.02
                                                  ============   ============
   WEIGHTED AVERAGE NUMBER COMMON
   SHARES OUTSTANDING
   Basic                                           8,196,521      8,196,521
                                                  ============   ============
   Fully diluted                                  11,846,064     11,846,064
                                                  ============   ============


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

                                                   -3-






<PAGE>
PAPERCLIP SOFTWARE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS'DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
<TABLE>
<CAPTION>
                          Preferred Stock      Common Stock
                                                                   Additional  Accumulated   Stockholders'
                          Number of Par Value  Number of Par Value Paid-in     Deficit       Deficiency
                          Shares               Shares              Capital
                          ---------------------------------------------------------------------------------
<S>                       <C>       <C>        <C>       <C>       <C>         <C>           <C>
BALANCE, December 31,2001 3,649,543    $36,495 8,196,521   $81,965 $19,426,318  ($21,150,794)  ($1,606,016)


NET INCOME, 2002                                                                     192,530       192,530
                          ---------------------------------------------------------------------------------
BALANCE, December 31,2002 3,649,543     36,495 8,196,521    81,965  19,426,318   (20,958,264)   (1,413,486)


NET INCOME, 2003                                                                     453,733       453,733

                          ---------------------------------------------------------------------------------
BALANCE, December 31,2003 3,649,543    $36,495 8,196,521   $81,965 $19,426,318  ($20,504,531)    ($959,753)
                          =================================================================================
</TABLE>

The accompanying notes are an integral part of these   financial statements

                                    -4-



<PAGE>
PAPERCLIP SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR  ENDED DECEMBER 31, 2003 AND 2002
<TABLE>
<CAPTION>
                                             Year ended December 31,
                                                2003            2002
                                         ------------    ------------
<S>                                      <C>             <C>
OPERATING ACTIVITIES:
Net income                             $     453,733   $     192,530
Adjustments to reconcile net income to
   net cash provided by (used for)
   in operating activities-
Depreciation                                   5,741          20,051
Extinguishment of debt                       (33,794)           -
Extinguishment of accounts payable          (278,767)           -
Decrease (increase) in accounts
   receivable                                 12,938        (107,124)
(Increase)in deferred tax asset              (11,600)           -
Increase (decrease) in:
   Accounts payable and accrued expenses     (34,901)       (150,890)
   Accrued interest on convertible note       15,600          15,500
   Taxes payable                              28,600          11,900
   Deferred revenue                         (116,750)        156,900
                                         ------------    ------------
Net cash provided by  operating activities    40,800         138,867
                                         ------------    ------------
INVESTING ACTIVITIES -- Purchases of
   equipment, furniture and fixtures             -            (6,057)
                                         ------------    ------------
FINANCING ACTIVITIES:
  Principal payments on note payable-ASI    (101,383)       (135,175)
  Increase in loans payable to related party  45,119         105,000
                                         ------------    ------------
Net cash used for financing activities       (56,264)        (30,175)
                                         ------------    ------------


Net (decrease) increase in cash              (15,464)        102,635

CASH, beginning of period                    368,472         265,837
                                         ------------    ------------
CASH, end of period                    $     353,008   $     368,472
                                         ============    ============
</TABLE>
The accompanying notes are an integral part of these financial statements

                                          -5-



<page>
PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002

NOTE 1  -  ORGANIZATION:

     PaperClip  Software,  Inc.  (formerly known as PaperClip  Imaging Software,
Inc.),located in Hasbrouck Heights, NJ, (the "Company"), a Delaware corporation,
incorporated 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.  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 twenty  three  Value Added
Resellers ("VAR's") and original equipment  manufacturers  ("OEM's") 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, 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  accounting
principles  generally  accepted  in  the  United  States  of  America,  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.
                                          6

<page>
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 has elected to follow  Accounting  Principles Board Opinion No.
25,"Accounting for Stock Issued to Employees"(APB25).  If the option price under
the Stock  Option  plans  equals or exceeds the fair market  value of the common
shares on the date of the grant,  no compensation  cost is recognized  under the
provisions  of APB 25 for stock  options.  If the option  price  under the Stock
Option  Plans is less than the fair market value of the common stock on the date
of grant, compensation cost is recognized for the difference.

     The Company  adopted  only the  disclosure  part of  Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation" (SFAS
123 was amended by SFAS 148). 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 Company has adopted Statement of Financial  Accounting  Standards Board
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.

Income Per Common Share:
     Income per common  share-basic is computed based upon the weighted  average
number of common shares and common share equivalents  outstanding,  if dilutive,
during each year.

     Income per common  share-fully  diluted is computed based upon the weighted
average number of common shares, common share equivalents and Series A Preferred
Stock outstanding during each year.

Research and Development Costs:
     The costs  incurred in  establishing  the  technological  feasibility  of a
computer  software product that is to be sold,  leased or otherwise  marketed by
the Company is accounted for as Research & Development costs and expensed in the
period incurred. The amount charged against income was $282,731 and $288,335 for
the years ended December 31, 2003 and 2002, respectively.

Reclassification :
     Certain  reclassifications  have been made to the 2002 financial statements
to conform to the 2003 financial statement presentation.
                                         7




<page>
NOTE 3  -  INCOME TAXES:

     For tax return  purposes,  the Company has the following net operating loss
carry forwards as of December 31, 2003 and 2002 for Federal purposes:

             Federal
     Net Operating Loss    Year Incurred      Expiration Date

        $1,474,595       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, 2017
        $  880,373       December 31, 1998      December 31, 2018
        $   35,944       December 31, 1999      December 31, 2019
        $  633,601       December 31, 2000      December 31, 2020
        $   43,371       December 31, 2001      December 31, 2021

     The  Company  also  has tax  credits  related  to  research  activities  of
approximately $330,000 for Federal  purposes at December 31, 2003.

     As stated in Note 12, the State of New Jersey has  allowed in recent  years
the sale of state net operating losses and research tax credits. The Company has
sold all of its net operating losses and research tax credits.

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

                                         2003                 2002
                                   --------------------------------------
Total deferred tax liabilities     $      -              $     -
Total deferred tax assets             6,060,000             6,055,000
Total valuation allowance             6,048,400             6,055,000
                                   -------------------------------------
Current deferred tax asset        $      11,600          $     -
                                  ======================================


                                             8





<page>
NOTE 4  -  DEBT:
Note payable, convertible into common stock at $.30
per share,  12% interest,  matured  December 31, 1999,
and as of December 31, 2003, the note  remains in default.        $129,691
                                                                ============


     On March 20, 2003,  the Company and Access  Solutions  International,  Inc.
("ASI") entered into an agreement (the "Note Repayment Agreement"),  pursuant to
which the Company paid ASI an amount equal to  $101,382.48 as payment in full of
all obligations arising under a note payable.  The remaining principal amount on
the note  immediately  prior  to its  satisfaction  was  $135,177.  The  Company
accounted for this  transaction by recognizing a net gain on the  extinguishment
of debt in accordance with SFAS 145.  Pursuant to the Note Repayment  Agreement,
the parties also terminated that certain Security Agreement, dated as of January
29, 1997 (the  "Security  Agreement"),  which had  secured  the  payments of all
amounts due under the note,  and the parties  released  each other from  certain
claims, including claims under the note and the Security Agreement.

     During  the year  ended  December  31,  2003,  the  Company  wrote down its
accounts  payable by  $278,767,relating  to debts which were  incurred  over six
years ago, for which the statute of limitations  has expired and the vendors can
no longer institute a claim against the Company.  The write down was included in
the statement of income as extinguishment of accounts payable.

NOTE 5  -  PREFERRED STOCK:

     The  Company  has ten  million  shares of  preferred  stock  $.01 par Value
authorized.  The Company has designated Series A Preferred Stock, with 3,649,543
shares  constituting  such  Series.  Each share of Series A  Preferred  Stock is
convertible   into  one  share  of  common  stock  subject  to  adjustment   and
anti-dilution  protection upon certain events.  On November 2, 2000, the Company
issued 3,649,543 shares of preferred stock.

     On March 20,  2003,  ASI sold all  shares of  Series A  Preferred  Stock to
William Weiss, the Company's chief executive officer.  On December 31, 2003, Mr.
Weiss sold an aggregate of 1,115,674 of such shares to certain  employees of the
Company,  including  Michael Bridges,  the Company's  President,  and to certain
other  investors  for a  purchase  price per share  equal to his cost per share,
which approximates fair value at the time.



                                           9





<page>


NOTE 6  -  COMMITMENTS AND CONTINGENCIES:


     During 2002, the Company settled a copyright  infringement suit for $62,500
related to licensing  fees. This amount is included in sales on the statement of
operations.

     In 2003, the Company commenced a lawsuit against a customer in the Superior
Court of the State of New Jersey for payment of delinquent  accounts  receivable
approximating  $145,000.  The  Company  has been  working  with the  customer to
resolve the issues and has not proceeded further with the suit. As of the report
date,  the  customer  has paid the Company  approximately  $50,000  towards this
receivable.  The Company believes that its bad debt reserve is adequate to cover
this accounts receivable.

NOTE 7  -  LEASES:

     The Company leases its office space under a non-cancelable operating lease.
Rent expense was approximately  $56,200 and $51,600 for the years ended December
31, 2003 and 2002, respectively.

     Future minimum  rental payment  required under this lease are as follows:
Year Ended December 31,
--------------------------
    2004                     $ 54,000
    2005                       47,250
                             ---------
                             $101,250
                             =========

     The Company has two operating  leases for office  equipment.  Lease expense
amounts to approximately  $4,000 for the years ended December 31, 2003 and 2002,
respectively.  Future  minimum  lease  payments  under these  agreements  are as
follows:

   Year ended December 31,
   -----------------------

    2004                     $ 3,400
    2005                         637
                            ---------
                              $4,037
                            =========

                                         10












<page>


NOTE 8  -  EMPLOYMENT AGREEMENT:

     The Company has an employment agreement with Michael Bridges, the Company's
President who is also a member of the Board of  Directors,  subject to automatic
one-year  extensions and early  terminations  at a base salary of $107,800.  The
agreement  also provides for options to purchase  400,000 shares of common stock
at $0.25 per share with immediate vesting, which was subsequently granted at the
fair market value of the Company's  stock at the time of issuance which was $.25
per share. In addition, the agreement has specific clauses including not limited
to  covenants  not to compete  with  company's  product  line,  solicitation  of
employees of the Company upon termination and a severance package for six months
if there is a transfer of control of 50% or more.

NOTE 9  -  CONCENTRATION OF RISK:

     The Company  maintains its cash balances and certificates of deposit at one
financial  institution.  This  account is insured by the FDIC  (Federal  Deposit
Insurance  Corporation) up to $100,000. The Company routinely maintains balances
in excess of $100,000 in the ordinary course of business.


NOTE 10  -  MAJOR CUSTOMERS:

     The Company  sells its products  primarily  through mass  distributors  and
approximately  23 independent  VARS. The VARS sell and install these products at
end user sites.

     Sales to two major  customers  for the year ended  December  31,  2003 were
approximately  31%.  Sales to two major customer for the year ended December 31,
2002 was approximately 32%.

     Three and  two  customers  make up 94% and 48% of  accounts  receivable  at
December 31, 2003 and 2002, respectively.





                                    11




<page>


NOTE 11  -  STOCK OPTIONS:

1993 Stock Option Plan

     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,  expired on
February 1, 2003;  however,  the  expiration  of the plan does not void  options
which still have part of their terms  remaining.  Stock option  transactions for
the 1993 Stock Option Plan are summarized as follows:

                                         Year Ended December 31,
                                            Exercise             Exercise
                                    2003     Price      2002     Price
                                 ---------------------------------------
Outstanding, beginning of year      20,183   $2.60      20,183    $2.60
Granted                               -        -          -         -
Exercised                             -        -          -         -
Cancelled or expired                  -        -          -         -
                                 ---------------------------------------
Outstanding, end of year            20,183   $2.60      20,183    $2.60
                                 =======================================

     As of December  31,  2003,  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 option  transactions for the 1995 Stock Option Plan are summarized as
follows:


                                   Year Ended December 31,
                                         Exercise             Exercise
                                2003      Price        2002    Price
                           ----------------------------------------------
Outstanding, beginning of
year                         3,138,342  $.06-2.50    3,138,342  $.06-2.50
Granted                        150,000     $.06           -         -
Exercised                        -          -             -         -
Cancelled or expired           (154,500)$.25-$1.50        -         -
                           ----------------------------------------------
Outstanding, end of year     3,133,842  $.06-2.50    3,138,342  $.06-2.50
                           ==============================================


                                    12



<page>

SFAS 123 disclosure:
     During the year ended December 31, 2003, the Board of Directors  authorized
the issuance of options to purchase  150,000 shares at an average exercise price
of $.06 per share. The fair value of each option grant was estimated on the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
weighted-average  assumptions  used  for  grants:  expected  volatility  of 25%;
risk-free interest rate of 4%; and expected lives of 10 years.

     Had  compensation  cost for the Company's stock option plan been recognized
based on the fair  value  at the  grant  date  for  awards  consistent  with the
provisions of SFAS No. 123, as amended by SFAS No. 148, the Company's net income
and  income per share for the year ended  December  31,  2003 would have been as
follows:

Net income as reported                         $453,733
Required adjustment to net income                (4,050)
                                               ---------
Net income-pro forma                           $449,683
                                               =========

                                             Basic         Fully diluted

Income per common share - as reported        $.06             $.04
                                           ==========      =========
Income per common share - pro forma          $.05             $.04
                                           ==========      =========




NOTE 12  -  INCOME FROM SALE OF TAX CREDITS:

     In June 1999,  the State of New Jersey passed  legislation  allowing  small
businesses  to sell State of New  Jersey Net  Operating  Loss and  Research  Tax
credit carryforwards to companies that could utilize the losses. The Company was
authorized  to sell in 2003 and  2002,  $1,876,600,and  $127,500  of  State  net
operating  losses  arising  during 1997 to 2001.  In  addition,  the Company was
allowed to sell in 2002,  $126,000 of research tax credits.  The net proceeds to
the  company  for the sale of these net  operating  losses  were  $127,016,  and
$191,066 in the years ending December 31, 2003, and 2002 ,  respectively.  As of
the end of 2003 the  Company  has  sold all its New  Jersey  tax  losses  and no
further funds will be coming from the sale of these net operating losses.

     The Company sold all of its New Jersey net operating losses  carryforwards.
As such,  there were none  available to be carried  over to 2002 and 2003.  This
resulted in a net $28,900 and $11,900  provision  for income  taxes for 2003 and
2002, respectively.
                                          13




<page>

NOTE 13  -  RELATED PARTY TRANSACTIONS:

     Mr. William Weiss, ("Weiss"),  Chief Executive Officer and Treasurer of the
Company,  receives  compensation  of  $10,000  per  month  as  part  of an  oral
employment arrangement.  In lieu of receiving current compensation payments, Mr.
Weiss has agreed to the deferred payment of such  compensation.  During 2002 and
for the first three months ended March 31, 2003, Mr. Weiss has assigned  payment
of the compensation to another company he is affiliated  with.  During 2003, Mr.
Weiss  and his  related  company  received  approximately  $75,000  of past  due
compensation. At December 31, 2003, the Company has accrued $710,119 in deferred
compensation  to Mr.  Weiss,  which is  recorded  as long term  loans  payable -
related  party on the  balance  sheet.  Mr.  Weiss  has  entered  into a written
agreement  with the  Company  in which he agreed  not to demand  payment  of his
deferred compensation until subsequent to April 1, 2005.

     As  described  above  in Note 5,  Weiss  and  Access  entered  into a Stock
Purchase  Agreement,  dated as of  March  20,  2003,  pursuant  to  which  Weiss
purchased  from  Access  3,649,543  shares  of  Series A  Preferred  Stock  (the
"Preferred Shares").  The Preferred Shares are convertible into shares of Common
Stock at a ratio of  one-to-one,  subject  to  certain  customary  anti-dilution
adjustments  as set  forth in the  Certificate  of  Designations  governing  the
Preferred Shares. The consideration for the Preferred Shares was $106,986.29 and
was paid using Weiss's personal funds. Such consideration  represents a discount
to market  which  takes  into  account  the fact that the  Preferred  Shares are
restricted securities and are not freely tradeable.

NOTE 14  -  ROYALTIES:

     During  2003 and 2002,  the  Company  had  licensing  agreements  with five
vendors to distribute various software products.  The agreements require royalty
payments to vendors  based on sales  volume.  At December 31, 2003,  all amounts
outstanding  in  regards  to  these   agreements   have  been  included  in  the
accompanying financial statements.


NOTE 15  -  EXPORT SALES:

     Export sales were  approximately  1% and 2% of the Company's net sales for
the years ended December 2003 and 2002, respectively. The foreign countries that
the  Company  primarily  deals with are  Indonesia,  Italy,  and  various  other
European countries.


NOTE 16  -  SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

                                             2003           2002
                                   ------------------------------------

  Cash paid for interest                 $    -           $    -
                                   ====================================



 Cash paid for state income taxes        $11,600          $    -
                                   ====================================

                                         14


<page>
Note 17- FUTURE OPERATIONS:

     As reflected in the accompanying financial statements,  current liabilities
exceed  current  assets by  approximately  $273,000 at December 31, 2003.  After
adjusting for  approximately  $276,000 of deferred  revenues,  a non-cash  item,
current assets exceed current liabilities by approximately $3,058.

     The  Company  has had  operating  income and  generated  cash  provided  by
operating   activities  for  the  past  two   consecutive   calendar  years  and
management's  2004  forecast  indicates  continued  positive  trends  for sales,
operating income,  net income and cash flows.  Additionally the Company may seek
to sell equity securities when cost effective and appropriate.

Note 18- SUBSEQUENT EVENT:

     In February  2004,  the Board of Directors  of the Company  adopted a stock
option plan(the "2004 Stock Plan"). Only consultants and members of the Board of
Advisors are eligible to  participate in this plan. The 2004 Stock Plan provides
that the  aggregate  number of shares of common  stock for which  options may be
granted  thereunder  is 600,000  shares.  In February,  2004,  the Board awarded
options  for an  aggregate  of  500,000  shares to the  members  of the Board of
Advisors under the 2004 Stock Plan at an exercise  price of $.07 per share,  the
market  price of the Common  Stock on the date of grant.  Such  options  are not
included in the tables above.


                             15

<PAGE>
Exhibit 10.12
          Agreement, dated December 31,2003 , by and between
             PaperClip Software, Inc. and William Weiss


                               WILLIAM WEISS

                                                           December 31, 2003
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ  07604

     Reference is hereby made to the $710,119 in "loans  payable-related  party"
recorded on the balance  sheet  appearing in the Annual Report on Form 10-KSB of
PaperClip  Software,  Inc. for the year ended  December 31, 2003.  Such payables
relate to deferred  compensation  for services  previously  performed by William
Weiss  ("Weiss")  as an officer of the Company  pursuant  to an oral  employment
arrangement and are payable to Weiss and/or his affiliated company. Weiss hereby
agrees that neither Weiss nor such  affiliated  company shall demand  payment of
such payables prior to April 1, 2005.



                                                     Sincerely,

                                                     /s/ William Weiss
                                                     William Weiss



<page>

Exhibit 23.1


                         CONSENT OF INDEPENDENT AUDITORS

     We consent to the incorporation by reference in the Registration  Statement
on Form S-8  (Registration  No.  333-04245)  of our report dated March 12, 2004,
with respect to the financial statements of PaperClip Software, Inc. included in
the Annual Report on Form 10-KSB of PaperClip Software,  Inc. for the year ended
December 31, 2003.

                                          /s/ Sobel & Co., LLC
                                          Certified Public Accountants
March 12, 2004
Livingston, New Jersey








































<PAGE>
Exhibit 31.1                CERTIFICATION
I, William Weiss, certify that:
     1. I have reviewed this annual report on Form 10-KSB of PaperClip Software,
Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information included in this report, fairly present in all material respects the
financial condition,  results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

     4. The  small  business  issuer's  other  certifying  officer(s)  and I are
responsible for establishing and maintaining  disclosure controls and procedures
(as  defined  in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  for the small
business issuer and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure  that  material  information  relating  to  the  small  business  issuer,
including its  consolidated  subsidiaries,  is made known to us by others within
those  entities,  particularly  during the period in which this  report is being
prepared;

(b) [Reserved];

     (c) Evaluated the effectiveness of the small business  issuer's  disclosure
controls and procedures and presented in this report our  conclusions  about the
effectiveness  of the disclosure  controls and procedures,  as of the end of the
period covered by this report based on such evaluation; and

     (d)  Disclosed  in this  report any change in the small  business  issuer's
internal  control  over  financial  reporting  that  occurred  during  the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially  affect, the small business issuer's internal
control over financial reporting; and

     5. The small  business  issuer's  other  certifying  officer(s)  and I have
disclosed,  based  on our  most  recent  evaluation  of  internal  control  over
financial  reporting,  to the small  business  issuer's  auditors  and the audit
committee  of the  small  business  issuer's  board  of  directors  (or  persons
performing the equivalent functions):

     (a) All significant  deficiencies and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely to  adversely  affect  the small  business  issuer's  ability  to record,
process, summarize and report financial information; and

     (b) Any fraud,  whether or not material,  that involves management or other
employees who have a significant  role in the small business  issuer's  internal
control over financial reporting.

Date:    March 29, 2004                  By: /s/ William Weiss
                                         William Weiss
                                         Chief Executive Officer
                                         Principal Financial Officer


<page>

Exhibit 32.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER OF
PAPERCLIP SOFTWARE, INC.

(Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code)

     The  undersigned,  William  Weiss,  Chief  Executive  Officer and Principal
Financial Officer of PaperClip Software, Inc. (the "Company"), certifies that:

  -  the Annual Report on Form 10-KSB of the Company for the year ended December
31, 2003 fully complies with the  requirements  of Section 13(a) or 15(d) of the
Securities  Exchange Act of 1934;

  - and the  information  contained in the Annual  Report on Form 10-KSB of the
Company for the year ended  December 31, 2003 fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.


March 29, 2004                                           By: /s/ William Weiss