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, 2004


                        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.  [X ]

     The  issuer's  revenue  for the fiscal  year ended  December  31,  2004 was
$1,420,637. As of March 17, 2005, the aggregate market value of the voting stock
held by  non-affiliates  of the  registrant  was $394,700  (based on the closing
price of the OTC Bulletin Board on March 17, 2005). As of March 17, 2005,  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 to meet the  Company's  cash  requirements  and to pay its
liabilities  when due, the Company's  ability to raise additional  capital,  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>
     The Company has begun  marketing a new  document  management  and work flow
product  which  has  been  customized  for the  mortgage  broker  industry.  The
Company's  sales  from this  product  in 2004 were  approximately  $25,000.  The
product  is  available  in either a client  server  model and  installed  at the
customer  site,  or in an ASP model and hosted by  PaperClip.  The client server
product is named Mortgage Assistant (MA) and the hosted product is named Virtual
Loan Folder.  The Company  believes  that this product may represent a promising
opportunity  for its business,  although there are  competitors in this business
and there can be no assurance that the Company can generate  meaningful revenues
from this product.

     The Company has also begun marketing its  PaperClip32  product in ASP model
hosted by  PaperClip.  The  product  is named  Virtual  Client  Folder.  To date
interest in this  service  has been shown by the life  insurance  industry.  The
Company believes that this product may represent a promising opportunity for its
business  although  there is at least one  competitor in this business and there
can be no assurance that the company can generate  meaningful revenues from this
product.

    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  (IE) 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 by 50% compared to 2003.

Clipit Toolkit

     ClipIt is designed to facilitate  the  integration  of legacy  applications
with  other  applications.  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.

Mortgage Assistant

     Mortgage  Assistant (MA) is PaperClip's  workflow  application  designed to
manage  users,  stages,  products,   documents,  alerts  and  reports.  Mortgage
Assistant manages document requirements and performs workflow features including
rendezvous,   sign-offs,   process  reports,   notification  alerts,   data-feed
integration  and  process  audits.  Mortgage  Assistant  is an add-on  module to
PaperClip32.

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.

       Training and technical support of VARs is a
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.
                                         -6-
<PAGE>
     The Company has a sales force of four persons.  The Company directs selling
efforts directly to the mortgage broker industry and life insurance brokers. The
Company has one sales person focusing on each of those markets. One sales person
deals  directly  with VARSs.  While the  Company  attempts  to  encourage  VARs,
distributors and other resellers to focus on the Company's products,  management
is aware that VARs,  distributors and other resellers also represent other lines
of  products,  some of  which  may be,  or are,  competitive  with  those of the
Company.  Accordingly,  the VARs,  OEMs,  distributors  and other  resellers may
choose to give higher  priority to  products  of other  publishers,  which would
decrease potential sales by the Company.

Value Added Reseller Network

     To date, 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  $1,420,637  in 2004 and  $1,569,843  2003.
Lumtron, an OEM, and ImageTek,  a VAR,Bisys and NISC accounted for 10%, 11%,11%,
and  10%%,respectively,  of the  Company's  sales in 2004.  ImageTek and Lumtron
accounted for 12% and 19% of the Company's  sales in 2003. In 2004,  the Company
commenced a lawsuit  against  Lumtron in the Superior  Court of the State of New
Jersey for payment of delinquent accounts receivable  approximating $50,000. The
Company has set up what it believes  is an  adequate  bad debt  reserve to cover
this dispute.  The lawsuit against ImageTek that began in 2003 has been resolved
satisfactorily.  Imagetek paid off all of its old balances due. Three  customers
(Companion,  ImageTek,  and Lumtron)  represented 58% of accounts  receivable at
December 31, 2004. Three customers Etrade,  ImageTek,  and Lumtron)  represented
94% of accounts receivable at December 31, 2003.

Customer Support And Service
     The Company presently  provides  telephone support to its VARs and OEMs and
customers  it deals with  directly.  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  $421,800  and $283,000 on research  and  development  in 2004 and
2003, respectively.
                                     -7-

<PAGE>
     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.

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  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.  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. In addition,  there can be no 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.  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 the mortgage  broker industry  PaperClip  competes with a
number  of  companies,  such as Atone ,  Advectis,  SwiftView  Inc.  and Del Mar
Database.

     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 21, 2005, the Company's  full-time staff of seventeen employees
includes  seven  employees  engaged in  development  and systems  testing,  four
engaged in sales,  two in  marketing  and  technical  support,  one in  Business
Services  and three  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.


Capital Raising Initiatives

     On October 29, 2004, the Company engaged Sloan Securities  Corp.  (together
with its affiliates,  "Sloan") to provide financial advisory services, which may
include  assistance in seeking to raise additional  capital.  In connection with
such engagement, the Company issued warrants to Sloan to purchase 500,000 shares
of the  Company's  Common  Stock at an  exercise  price of $.10 per  share.  The
Warrants  vest  as to  425,000  shares  on the  date of  issuance  and as to the
remaining 75,000 shares at such time that a financing is consummated in which at
least 1,400,000 shares of common stock or common stock equivalents are issued.

     Since the  engagement  of Sloan as  described  above,  the Company has been
seeking to raise  additional  capital through the issuance of debt and/or equity
securities.  As of  December  31,  2004,  the  Company  has not  issued any such
securities.
















                                          -11-






<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 2004,  the  Company  commenced  a lawsuit  against  Lumtron,  one of the
largest  customers  of the Company,  in the  Superior  Court of the State of New
Jersey for payment of delinquent accounts receivable  approximating $50,000. The
Company has set up what it believes  is an  adequate  bad debt  reserve to cover
this dispute.  The lawsuit against ImageTek that began in 2003 has been resolved
satisfactorily. Imagetek paid off all of its old balances due.



     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 2004.

                                     PART II

     ITEM 5. Market For Common Equity,  Related Stockholder  Matters,  and Small
Business Issuer Purchases of Equity Securities.

                    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

2004              High     Low
First             0.10     0.04
Second            0.18     0.09
Third             0.12     0.06
Fourth            0.14     0.07

     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.


                                          -12-


<PAGE>

     The Company's securities are presently traded on the OTC Bulletin Board. As
of December  31,  2004,  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.







                                           -13-











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

RESULTS OF OPERATIONS

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

     Net sales  decreased  by $149,206 or 10% to  $1,420,637  for the year ended
December 31, 2004 from  $1,569,843  for the year ended  December  31, 2003.  The
decrease  was due to a decrease  in  revenues  from its OEM  licenses  which was
partially  offset by an increase in revenues from  customers  upgrading to newer
versions of the Company's products.


     Salaries  and related  benefits  decreased by $55,725 or 6% to $836,705 for
the year ended  December 31, 2004 from $892,430 for the year ended  December 31,
2003.  The decrease was due to an decrease in salaries of sales,  and  marketing
personnel.


     Research and development  expenses increased by $139,066 or 49% to $421,797
for the year ended  December 31, 2004 from $282,731 for the year ended  December
31, 2003. The increase was due to a increase in salaries related to research and
development.

     Selling expenses increased by $90,775 or 79% to $205,243 for the year ended
December  31, 2004 from  $114,468  for the year ended  December  31,  2003.  The
increases  resulted  from an  increase  in  expenses  for trade shows and public
relations, partially offset by a decrease in travel expenses.

     General and administrative  expenses increased by $21,951 or 10% to
 $236,109 for the year ended  December 31, 2004 from $214,158
 for the year ended  December
31, 2003.  The increase was due to an increase in  professional  fees  partially
offset by a decrease in telephone expense.


     Other income  decreased by $395,310 to $21,267 for the year ended  December
31, 2004 from  $416,577 for the year ended  December 31, 2003.  The decrease was
primarily  due to the  inclusion  in 2003 of the  following  gains which did not
recur in  2004:  a gain  from  extinguishment  of  accounts  payable  due to the
expiration of the statute of limitations on $278,767 in accounts payable owed by
the  Company,  a gain  from  the  extinguishment  of a note  payable  to  Access
Solutions  International,  Inc. as described  below, and a gain from the sale of
tax credits in 2003.

                                        -14-

<PAGE>
     Provision for income taxes decreased by $28,900,  because the Company had a
loss in 2004 whereas it had income in 2003.

     Net income  decreased by $711,683 to $(257,950) for the year ended December
31, 2004 from  $453,733 for the year ended  December 31, 2003.  The decrease was
primarily  due to a decrease in sales,  an increase in salaries for research and
development and  professional  fees, and a decrease in other income as described
above.


LIQUIDITY AND CAPITAL RESOURCES
     For the year ended  December 31, 2004, the Company's net loss was $257,950.
For the year ended December 31, 2003, the Company's  operations  resulted in net
income of  $453,733.  As of December 31,  2004,  the Company had an  accumulated
deficit of $20,762,481.  The Company reported an operating loss of approximately
$279,200  during  fiscal  year  2004.  Although  the  Company's   management  is
forecasting for 2005 continued negative trends for sales,  operating income, net
income and cash flows,  the Company is expanding its sales and  development  and
support  efforts in the mortgage arena. It is expending funds this year with the
anticipation that it will lead to enhanced revenue in the future. Net cash (used
for)provided  by operating  activities  was  $(46,602) and $40,800 for the years
ended  December 31, 2004 and December  31,  2003,  respectively.  As of December
31,2004, the Company had a working capital deficit of $(454,674),  with $535,562
in current assets and $990,236 in current liabilities.  As of December 31, 2003,
the  Company  had a working  capital  deficit of  $(273,092),  with  $632,257 in
current assets and $905,349 in current liabilities.


     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.

                                                     -15-

<PAGE>
     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,  2004,  the  Company  had  aggregate  liabilities
approximately $1.8 million.  Such amount of aggregate  liabilities  includes (i)
$418,00 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) $442,145 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
$804,000  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, 2006.


     At December  31,  2004,  the Company had net Federal  operating  loss carry
forwards ("NOL") of approximately  $20,000,000 for financial reporting purposes,
which are due to expire from 2007 through 2024.  Due to losses  sustained by the
Company for both financial and tax reporting through 2004, 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  $6,140,000
against the  potential tax deferred tax asset of  $6,140,000.  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.

     As described above under "Business--Capital Raising Initiatives" in Item 1,
the Company is seeking,  with the assistance of a financial  advisor  engaged by
the Company in October  2004,  to raise  capital  through  the  issuance of debt
and/or equity  securities.  There can no assurance that the Company will be able
to raise sufficient capital on terms reasonably satisfactory to it or at all.


     For  2005,  the  Company   anticipates  that  it  will  need  approximately
$2,000,000 in order to fund its operations.  The Company's  management  believes
that, assuming it meets its 2005 forecast, it will have sufficient cash from the
sale of its  products  and  investments  from outside  investors  (assuming  the
Company  raises  approximately  $500,000 in capital in 2005 from  investors)  to
enable it to meet its anticipated cash requirements through the end of the year.
The Company's  ability to meet its forecast is subject to broader  acceptance of
its  product  lines,  its ability to raise  capital,  its ability to continue to
realize revenues from its largest customers,  product  performance,  competitive
forces,  sales efforts of resellers,  the absence of unanticipated  expenses and
other factors identified herein. There can be no assurance that the Company will
generate  enough cash from the sale of its products or the raising of additional
capital 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.
                                      -16-
<PAGE>
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."
                                          -17-
<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.





                                          -18-




<PAGE>


PART III

ITEM 9.  Directors and Executive Officers, of the Registrant

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              61           Chief Executive Officer; Treasurer;
                                        Director

D. Michael Bridges         50           President, Director

Michael Suleski            44           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.


                                -19-





<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. During 2004 the Company revamped its Advisory Board to reflect the
direction  that the  Company was taking in  focusing  on the  mortgage  and life
insurance industries.  To that end the Company replaced the three members of the
advisory board with three others.  See "Option Plan for Consultants" below for a
description  of stock options  available for issuance to members of the Advisory
Board. The current Advisory Board members are as follows:

     A.W. Pickel,  III, CMC, president of Leader Mortgage Company, is the former
president of the  National  Association  of Mortgage  Brokers.  Leader  Mortgage
Company is based in Lenexa, Kansas, with a branch office in St. Louis, Missouri.
Leader has been in business since 1992,  primarily in the Midwest.  A.W. Pickel,
III as a mortgage  brokerage,  founded  leader.  Over time  Leader has grown and
evolved into a regional  mortgage  banker.  Leader offers  in-house  processing,
underwriting  and closing.  Leader Mortgage is a full service  mortgage  lender,
approved to provide conventional as well as government loans.

     Mr.  Nachmany  is the  Chief  Operating  Officer  of  International  Object
Technology (IOT). Prior to joining  International Object Technology Mr. Nachmany
was the President and CEO of bCompliant, Inc., a company he established in order
to conduct the collection,  review,  validation,  and approval of electronic and
paper  transaction  documents  for the  mortgage  industry in an  efficient  and
convenient fashion regardless of the number of participants and their geographic
dispersion.  From 1990 to 1997, Mr.  Nachmany was the President and CEO of Image
Integration  Corp.  From  1985-1990,  Mr.  Nachmany  acted  as the CEO of  Image
Communication  Systems,  a company which was responsible for the development and
support of a joint venture between  McDonnell  Douglas  Computer Systems Company
and the Bell & Howell Company,  in the Computer Aided Retrieval (CAR) market for
the banking industry.

                                        -20-
<PAGE>
     Merrill Bent has more than thirty  years of  leadership  experience  in the
Life Insurance  industry.  He has most recently served as Senior Vice President,
life  insurance  operations  for BISYS,  a leading  outsourcer  of Insurance and
Banking solutions, and Executive Vice President of operations and technology for
Underwriters  Service Agency, a leader in the Brokerage Life Insurance business.
He has  also  recently  served  on  the  Board  of  Directors  of  the  National
Association of  Independent  Life  Brokerage  Agencies(NAILBA)  and chaired that
organizations' Technology Committee. He has previously held management positions
with life insurance carriers and within the banking community.

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.

Audit Committee Financial Expert

     The Board of Directors has  determined  that William  Weiss,  the Company's
Chief  Executive  Officer,  is the Board's "audit  committee  financial  expert"
within the meaning of Item 401(e)(2) of Regulation S-B.

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, 2004, there was
compliance  with all such  filing  requirements.

Code of Ethics
     The Company has adopted a code of ethics (the  "Code")  that applies to our
directors,  officers and employees.  The Code is designed to deter wrongdoing on
the part of such  persons  and to  promote:  (1)  honest  and  ethical  business
conduct,  including  the ethical  handling of actual or  apparent  conflicts  of
interest  between  personal  and  provisional  relationships,  (2)  full,  fair,
accurate,  timely and understandable disclosure in reports and documents that we
file with, or submit to the SEC and in other public  communications  made by us,
(3) compliance with applicable governmental laws, rules and regulations, (4) the
prompt internal  reporting of violations of the Code to an appropriate person or
persons  identified  in the Code,  and (5)  accountability  for adherence to the
Code. The Code is designed to foster the highest standards of ethics and conduct
in all of  our  business  relationships.  The  Code  will  be  available  on the
Company's  website,  www.paperclip.com,  and copies will be mailed upon  written
request to Secretary,  611 U.S. Route 46 West, Hasbrouck Heights, NJ 07604 or by
calling (201)  329-6300.  The Company  intends to disclose any  amendments to or
waivers of the Code on behalf of its Chief  Executive  Officer,  Chief Financial
Officer,  and persons performing similar functions on the Company's website,  at
www.paperclip.com,  promptly  following the date of such amendment or waiver. To
date, there are no such amendments.
                                                     -21-
<PAGE>
ITEM 10.  Executive Compensation.

     The Summary  Compensation  Table below sets forth  compensation paid by the
Company for the last three fiscal years ended December 31, 2004 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 2004.
<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     2004      120,000   0           0                 0                0               N/A        N/A
                  2003      120,000   0           0                 0                0               N/A        N/A
CEO (1)(2)        2002      120,000   0           0                 0                0               N/A        N/A
--------------------------------------------------------------------------------------------------------------------------
Michael Suleski   2004      105,000   0           0                 0                0               N/A        N/A
                  2003      105,000   0           0                 0                0               N/A        N/A
Vice President    2002      105,000   0           0                 0                0               N/A        N/A
Engineering (1)
--------------------------------------------------------------------------------------------------------------------------
D Michael Bridges 2004      107,800   0           0                 0                0               N/A        N/A
                  2003      107,800   0           0                 0                0               N/A        N/A
President         2002      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,  2004,  $803,711  is owed to William  Weiss for past
salaries accrued but not paid.
                                                         -22-

<PAGE>
Option/SAR Grants

     During  the fiscal  year ended  December  31,  2004,  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 2004 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 2004
                  AND OPTION/SAR VALUES AT DECEMBER 31, 2004
<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 provided
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, 2004, options
to acquire  3,969,222 of shares of Common Stock had been granted  under the 1995
Stock Plan.  At such date,  689,872 of options had expired,  95,508  options had
been exercised and 3,183,842 of options were outstanding.

Option Plan for Consultants

     In February  2004,  the Board of Directors  of the Company  adopted a stock
incentive  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 400,000 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.  In December
2004 the Company paid $1,665 to Michael  Sinneck to purchase 83,333 options that
he had vested. During 2004 the Company granted a total of 525,000 options to the
new Advisory Board members and/or consultants of the Company,  at prices ranging
from $.07 to $.10 per share,  and 266,667  options had expired under their terms
due to the  departure of previous  Advisory  Board  members  during 2004.  As of
December 31, 2004, 175,000 options were outstanding.

Long-Term Incentive Plan

     The  Company  did not grant  any  awards to  executive  officers  under any
long-term incentive plan during fiscal year 2004.
                                            -26-
<PAGE>
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.

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management And
                  Related Stockholder Matters.

     The following  table sets forth, as of March 21, 2005, 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, 2004,  about
the  Company's  1993 Stock Option Plan,  1995 Stock Option Plan,  and 2004 Stock
Incentive  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                 3,204,025(1)                                .34                 720,650(2)
plans approved by
security holders


Equity compensation
plans not approved by
security holders                      175,000 (3)                                                   425,000(4)

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

     Total                          3,379,025                                                      1,145,650
===================       ===================================     ======================== ==================================
</TABLE>


     (1) Represents  3,183,842 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 720,650 shares of Common Stock available for future issuance
under the 1995 Stock Option Plan.

      (3) Represents 175,000 shares of Common Stock issuable upon the exercise
of outstanding  options  granted under the 2004 Stock Incentive Plan.

     (4) Represents 425,000 shares of Common Stock available for future issuance
under the 2004 Stock Incentive Plan.
                                         -28-



<PAGE>

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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 Mr. Weiss has assigned payment
of the compensation to another company he is affiliated  with.  During 2004, Mr.
Weiss    received  approximately  $26,400  of past  due
compensation. At December 31, 2004, the Company had accrued $803,711 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, 2006.






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     2004 Stock Incentive Plan
10.4     Form of End User License. (1)
10.5    (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)
10.6    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)
10.7    Security  Agreement,  dated January 29, 1997, by and between Access
        Solutions  International,  Inc. and PaperClip Software, Inc. (2)
10.8    Agreement  dated as of November 1, 2000 between  Access  Solutions
        International,  Inc.  and  PaperClip Software, Inc.(3)
10.9    Series A Preferred  Stock  Purchase  Agreement  dated as of November 1,
        2000  between  Access  Solutions International, Inc. and PaperClip
        Software, Inc. (3)
10.10    Registration  Rights  Agreement  dated as of November 1, 2000 between
        Access Solutions International, Inc. and PaperClip Software, Inc. (3)
10.11   Employment  Agreement  dated as of January 1, 2000  between  Paperclip
        Software,  Inc.  and D.  Michael Bridges. (3)
10.12   Agreement,  dated March 20, 2003,  by and between  Access  Solutions
        International,  Inc. and PaperClip Software, Inc.(4)
10.13   Agreement, dated December 31, 2004 , by and between PaperClip Software,
        Inc. and William Weiss

14.   Code of Ethics

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.

                                                          -30-


<PAGE>
(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.                    -31-
<PAGE>
ITEM 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Sobel & Co., LLC ("Sobel")  has been  selected as the  Company's  principal
independent  auditors  for  fiscal  2005.  Sobel  was  the  Company's  principal
accountant for the fiscal year ended December 31, 2004.

     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, 2004 and
December 31, 2003:
<TABLE>
<CAPTION>
                                  Percentage of                        Percentage of
                                    2004 Fees                            2003 Fees
Fee Category          Fiscal 2004  Approved by the  Fiscal 2003 Fees   Approved by the
                          Fees        Board                                 Board
-------------        ------------ ----------------  ----------------   ---------------
<S>                   <C>            <C>              <C>                    <C>

Audit Fees              $27,600         100%             $21,000               100%
Audit-Related Fees          -                               -
Tax Fees                    -                               -
All Other Fees              -                               -
                      ---------                         ---------
Total Fees              $27,600                         $21,000
                      =========                         =========
</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.
                                     -32-


<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 30, 2005


     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 30, 2005
                          Officer (Principal Executive,
                          Financial and Accounting Officer)

/s/ D. Michael Bridges    Director, President             March 30, 2005
D. Michael Bridges

/s/ Michael Suleski
Michael Suleski           Director, Vice President,       March 30, 2005
                          Engineering and Secretary
















                                       -33-




<PAGE>










                             PAPERCLIP SOFTWARE, INC.

                             FINANCIAL STATEMENTS

                            DECEMBER 31, 2004 AND 2003
































<PAGE>
PAPERCLIP SOFTWARE, INC.

DECEMBER 31, 2004 AND 2003



TABLE OF CONTENTS


                                                             Page

Independent Auditors' Report                                    1


Financial Statements:

    Balance Sheet                                               2


    Statements of Income For The Years Ended
       December 31, 2004 And 2003                               3


    Statements of Changes in Stockholders' Deficiency
       For The Years Ended December 31, 2004 And 2003           4

     Statements of Cash Flows For The Years Ended
       December 31, 2004 And 2003                               5


Notes to Financial Statements                                   6








<PAGE>



Report of Independent Registered Public Accounting Firm




To the Board of Directors
PaperClip Software, Inc.

     We have audited the accompanying balance sheet of PaperClip Software,  Inc.
(a Delaware  corporation)  (the  "Company")  as of  December  31, 2004 , and the
related statements of operations,  change in stockholders' deficiency,  and cash
flows for each of the years ended  December 31, 2004 and 2003.  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 the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   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, 2004, and the results of its  operations and its cash flows for
the years  ended  December  31, 2004 and 2003,  in  conformity  with  accounting
principles generally accepted in the United States of America.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial  statements,  the  Company  has a  significant  loss from  operations;
current  liabilities  exceed  current  assets by  approximately  $36,000  (after
adjusting for  approximately  $418,000 of deferred  revenues,  a non-cash item);
deficiencies in working capital and net worth.  These factors raise  substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans  regarding  those  matters are also  described in Note 3. These  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

                                                   /s/ Sobel & Co., LLC
                                                   Certified Public Accountants
March 25, 2005
Livingston, New Jersey

<PAGE>
PAPERCLIP SOFTWARE, INC.
BALANCE SHEET
DECEMBER 31, 2004

                                                         December 31,
                                                             2004
ASSETS                                                   -------------
  CURRENT ASSETS:
    Cash and cash equivalents                         $       374,931
    Accounts receivable (net of
      allowance for doubtful accounts
      of $95,000)                                             160,631
                                                         -------------
      Total Current Assets                                    535,562
                                                         -------------
  EQUIPMENT, FURNITURE AND FIXTURES:
    Computer and office equipment                              76,978
    Furniture and fixtures                                    210,914
    Leasehold improvements                                     12,000
                                                         -------------
                                                              299,892
    Less- Accumulated depreciation                            272,710
                                                         -------------
      Equipment, Furniture, and Fixtures, Net                  27,182
                                                         -------------
  OTHER ASSETS                                                 13,500
  DEFERRED OFFERING COSTS                                      24,000
                                                         -------------
Total assets                                          $       600,244
                                                         =============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
  CURRENT LIABILITIES:
    Accounts payable and accrued expenses             $       428,645
    Taxes payable                                              13,500
    Deferred revenue                                          418,400
    Notes payable - current                                   129,691
                                                         -------------
      Total Current Liabilities                               990,236

    Accrued compensation-related party                        803,711


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                                 19,450,318
Accumulated deficit                                       (20,762,481)
                                                         -------------
  Total Stockholders' Deficiency                           (1,193,703)
                                                         -------------
Total liabilities and
  stockholders' deficiency                            $       600,244
                                                         =============
     See report of independent  registered  public  accounting firm and notes to
financial statements
                                -2-
<PAGE>




PAPERCLIP SOFTWADRAFT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                                                 2004         2003
                                                         -------------  -----------
<S>                                                      <C>            <C>
NET SALES                                             $     1,420,637 $  1,569,843
                                                         -------------  -----------

OPERATING EXPENSES:
Salaries and related benefits                                 836,705      892,430
Research and development expenses                             421,797      282,731
Selling expenses                                              205,243      114,468
General and administrative expenses                           236,109      214,158
                                                         -------------  -----------
     Total operating expenses                               1,699,854    1,503,787
                                                         -------------  -----------

(Loss)income  from operations                                (279,217)      66,056
                                                         -------------  -----------

OTHER INCOME (EXPENSE):
Extinguishment of debt (net of expenses)                       -            26,394
Extinguishment of accounts payable                             36,127      278,767
Interest expense                                              (15,600)     (15,600)
Income from sale of tax credits                                  -         127,016
Interest income                                                   740         -
                                                         -------------  -----------
      Total other income (expense), net                        21,267      416,577
                                                         -------------  -----------

NET (LOSS) INCOME   BEFORE PROVISION FOR INCOME TAXES        (257,950)     482,633

PROVISION FOR INCOME TAXES                                       -         (28,900)
                                                         -------------  -----------

NET (LOSS) INCOME                                     $      (257,950)$    453,733
                                                         =============  ===========

(LOSS) INCOME  PER COMMON SHARE
  Basic                                               $         (0.03)$       0.06
                                                         =============  ===========
  Fully diluted                                       $         (0.03)$       0.03
                                                         =============  ===========

WEIGHTED AVERAGE NUMBER COMMON
SHARES OUTSTANDING
  Basic                                                     8,196,521    8,196,521
                                                         =============  ===========
  Fully diluted                                            15,600,089   15,000,089
                                                         =============  ===========
</TABLE>
     See report of independent  registered  public  accounting firm and notes to
financial statements
                                     -3-


<PAGE>
PAPERCLIP SOFTWARE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

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

Deferred offering costs                                                          24,000                   24,000
NET LOSS, 2004                                                                              (257,950)   (257,950)
                                    -----------------------------------------------------------------------------

BALANCE, December 31, 2004           3,649,543  $36,495  8,196,521  $81,965 $19,450,318 ($20,762,481)($1,193,703)
                                    =============================================================================

</TABLE>


     See report of independent  registered  public  accounting firm and notes to
financial statements
                                     -4-




<PAGE>

PAPERCLIP SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                                 2004         2003
                                                         -------------  -----------
<S>                                                      <C>            <C>
OPERATING ACTIVITIES:
Net (loss) income                                          $ (257,950)   $ 453,733
Adjustments to reconcile net income to
net cash provided by (used for)  in operating activities-
Depreciation                                                    7,843        5,741
Extinguishment of debt                                                     (33,794)
Extinguishment of accounts payable                            (36,127)    (278,767)
Decrease  in accounts receivable                              107,018       12,938
Decrease (Increase) in tax deferred asset                      11,600      (11,600)
Increase (decrease) in:
  Accounts payable and accrued expenses                        (9,836)     (34,901)
  Accrued interest on convertible note                         15,600       15,600
  Increase in accrued compensation - related party            93,592       45,119
  Taxes payable                                               (27,000)      28,600
  Deferred revenue                                            142,250     (116,750)
                                                         -------------  -----------
Net cash  provided by operating activities                     46,990       85,919
                                                         -------------  -----------
INVESTING ACTIVITIES -- Purchases of
  equipment, furniture and fixtures                           (25,067)            -
                                                         -------------  -----------
FINANCING ACTIVITIES:
  Principal payments on note payable - ASI                         -      (101,383)
                                                         -------------  -----------
Net cash (used for) financing activities                           -      (101,383)
                                                         -------------  -----------

Net increase (decrease) in cash and cash equivalents           21,923      (15,464)

Cash and cash equivalents, beginning of year                  353,008      368,472
                                                         -------------  -----------
Cash and cash equivalents, end of year                $       374,931 $    353,008
                                                         =============  ===========

</TABLE>


     See report of independent  registered  public  accounting firm and notes to
financial statements
                                         -5-












<page>
PAPERCLIP SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003

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.

Reclassification:

     Certain  reclassifications  have been made to the 2003 financial statements
to conform to the 2004 financial statement presentation.
                                                              -6-

<PAGE>
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.

     Significant  estimates  have been made by  management  in  several  areas,
including    the    allowance    for   bad   debts    (See   Note    7)and   the
recognition/realization  of  deferred  revenues.  Actual  results  could  differ
materially from these estimates,  making it reasonably possible that a change in
these estimates could occur in the near term.


Advertising:
     Advertising  costs are expensed as incurred,  and amounted to approximately
$32,000 in 2004 and $ 9,000 in 2003.

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

Accounts Receivable:

     The Company  carries its accounts  receivable at cost less an allowance for
doubtful  accounts.  On a periodic  basis,  the Company  evaluates  its accounts
receivable and adjusts the allowance for doubtful  accounts,  based on a history
of past write-offs and collections and current credit conditions.

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 as 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.

     Deferred Offering Costs:  Expenditures incurred in conjunction with debt or
equity capital issuances are deferred as other assets. Such costs will be offset
against equity proceeds, amortized over the life of the debt, or expensed if the
transaction is not completed.

                                                                       -7-

<PAGE>
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 (Loss) 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.
2004 fully  diluted loss per share does not reflect the  conversion  of Series A
Preferred   Stock  or  common   stock   equivalents   as  the  result  would  be
anti-dilutive.

     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 $421,797 and $282,731 for
the years ended December 31, 2004 and 2003, respectively.

Recent Accounting Pronouncements:

     The Financial  Accounting  Standards  Board ("FASB") has issued several new
standards   during  2004.  In  December  2004,  the  FASB  issued  SFAS  123(R),
"Share-Based  Payment,"  which  revises SFAS 123,  "Accounting  for  Stock-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  SFAS 123(R)  requires  fair value  recognition  of stock option
grants in the income  statement  as an expense  and is  effective  for the first
annual reporting period that begins after June 15, 2005. This  pronouncement may
have a material impact on the Company's operating results. The Company is in the
process  of  evaluating  the  impact  of  this  pronouncement  on its  financial
statements.

NOTE 3-Going Concern:

     The  accompanying  financial  statements  have been  prepared  assuming the
Company is a going concern,  which  assumption  contemplates  the realization of
assets and  satisfaction  of liabilities  in the normal course of business.  The
Company has suffered a loss from operations,  current liabilities exceed current
assets by approximately  $36,000 (after adjusting for approximately  $418,000 of
deferred revenues,  a non-cash item), and lacks sufficient liquidity to continue
its operations.  Management's 2005 forecast indicates  continued negative trends
for sales, operating income, net income, and cash flows.

     These  factors  raise  substantial  doubt  about the  Company's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments  related to the  recoverability and classification of recorded asset
amounts or the amount of liabilities  that might be necessary should the Company
be unable to continue in existence.
                                       -8-
<PAGE>
     Continuation  of the Company as a going concern is dependant upon achieving
profitable  operations and  additional  funding.  Management's  plans to achieve
profitability  include  developing new products,  obtaining new  customers,  and
increasing  sales  to  existing  customers.   Management  is  seeking  to  raise
additional  capital through equity issuance,  debt financing,  or other types of
financing. (See Note 17). However, there is no assurance that sufficient capital
will be raised.

NOTE 4  -  INCOME TAXES:

     For tax return  purposes,  the Company has the following net operating loss
carry forwards as of December 31, 2004 and 2003 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
        $  161,000       December 31, 2004      December 31, 2024
     The  Company  also  has tax  credits  related  to  research  activities  of
approximately $349,000 for Federal  purposes at December 31, 2004.

     As stated in Note 13, 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  available through
2003.

     The  Company's  total  deferred  tax  liabilities,  deferred tax assets and
valuation allowance consists of the following at December 31:
                                         2004                 2003
                                   --------------------------------------
Total deferred tax liabilities     $      -              $     -
Total deferred tax assets             6,140,000             6,060,000
Total valuation allowance             6,140,400             6,048,400
                                   -------------------------------------
Current deferred tax asset        $       -              $     11,600
                                  ======================================
 A reconciliation of the statutory tax rates are as follows:
                                          Year Ended December 31,
                                         2004                 2003
                                   --------------------------------------
Statutory rate                           (34%)                (34%)
State income tax                          (6%)                   6%
                                   --------------      ---------------
Changes is reduction allowance           (40%)                (28%)
                                   --------------      ---------------
Benefit for income tax                     0%                   0%
                                   --------------      ---------------
                                             9

<page>
NOTE 5  -  DEBT:
Note payable, convertible into common stock at $.30
per share,  12% interest,  matured  December 31, 1999,
and as of December 31, 2004, 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, 2004 and 2003,  the Company  wrote down
its accounts  payable by $36,127 and $278,767,  respectively,  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 6  -  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 approximated fair value at the time.


NOTE 7  -  COMMITMENTS AND CONTINGENCIES:



     In 2004, 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  $50,000.  The  Company has set up what it believes is an adequate
bad debt reserve to cover this dispute.  A lawsuit against a major customer that
began in 2003 has been resolved satisfactorily. The customer paid off all of its
old balances due.
                                            10

<PAGE>
NOTE 8  -  LEASES:

     The Company leases its office space under a non-cancelable operating lease.
which expires in 2005.  Rent expense was  approximately  $51,000 and $55,000 for
the years ended December 31, 2004 and 2003, respectively.

     Future minimum  rental payment  required under this lease are as follows:

                           Year Ended December 31,
                                2005
                             ---------
                               $47,250
                             ---------
                               $47,250
                             =========


NOTE 9  -  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 10  -  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 11  -  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 four major  customers  for the year ended  December  31, 2004 were
approximately  41%. Sales to two major customers for the year ended December 31,
2003 was approximately 31%.

     Three customers make up 58% and 65% of accounts  receivable at December 31,
2004 and 2003, respectively.


                                   11



<page>

NOTE 12  -  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
                                    2004     Price      2003     Price
                                 ---------------------------------------
Outstanding, beginning of year      20,183   $2.60      20,183    $2.60
Granted                               -        -          -         -
Exercised                             -        -          -         -
Cancelled, settled or expired         -        -          -         -
                                 ---------------------------------------
Outstanding, end of year            20,183   $2.60      20,183    $2.60
                                 =======================================

     As of December  31,  2004,  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
                                2004      Price        2003    Price
                           ----------------------------------------------
Outstanding, beginning of
year                         3,133,842  $.06-2.50    3,138,342  $.06-2.50
Granted                        150,000  $.05-$.07      150,000     .06
Exercised                        -          -             -         -
Cancelled or expired           (100,000)     $.25     (154,500) $.25-1.50
                           ----------------------------------------------
Outstanding, end of year     3,183,842  $.05-2.50    3,133,842  $.06-2.50
                           ==============================================
                                    12

<page>

     In February  2004,  the Board of Directors  of the Company  adopted a stock
incentive 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 2004, the Board awarded options
for an aggregate of 525,000 shares to the members of the Board of Advisors under
the 2004 Stock Plan at an exercise  price of $.07 to $.10 per share,  the market
price of the Common Stock on the date of grant. Such options are not included in
the tables above.

     Stock option  transactions for the 2004 Stock Option Plan are summarized as
follows:
                           Year Ended
                          December 31,   Exercise
                                2004      Price
-----------------------------------------------------
Granted                        525,000   $.07-$.10
Exercised                        -            -
Cancelled or expired          (350,000)     $.07
                           -------------------------
Outstanding, end of year       175,000    $.07-.10
                           =========================
SFAS 123 disclosure:
     During the year ended December 31, 2004, the Board of Directors  authorized
the  issuance  of options to purchase  150,000 and 525,000  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 190%; 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,  2004 and 2003 would have
been as follows:
                                                2004                2003
Net (loss)income as reported                    $(257,950)        $453,733
Required adjustment to net (loss) income          (10,500)         (14,000)
                                                 ---------      -----------
Net (loss) income-pro forma                     $(268,450)        $439,733
                                                 =========      ===========
                                             Basic         Fully diluted
Loss per common share - as reported 2004      $(.03)         $(.03)
                                           ==========      =========
Loss per common share - pro forma   2004      $(.03)         $(.03)
                                           ==========      =========
Income per common share - as reported 2003     $.06           $.03
                                           ==========      =========
Income per common share - pro forma   2003     $.05           $.03
                                           ==========      =========
                                      13
<PAGE>
NOTE 13  -  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 ,respectively,  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 2004 and 2003.  This
resulted in a net $28,900  provision  for income  taxes for 2003.


NOTE 14  -  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 2004, Mr.
Weiss  received  $26,400 of past due  compensation.  At December 31,  2004,  the
Company has accrued  $803,711 in deferred  compensation  to Mr. Weiss,  which is
recorded as accrued compensation - 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, 2006.

     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 15  -  ROYALTIES:

     During  2004 and 2003,  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, 2004,  all amounts
outstanding  in  regards  to  these   agreements   have  been  included  in  the
accompanying  financial  statements.  For the years ended  December 31, 2004 and
2003,  the Company  recognized a charge of $1,752 and  $7,760,  respectively, in
connection with these royalties.

                                                              14
<PAGE>
NOTE 16  -  EXPORT SALES:

     Export sales were  approximately  2% and 1% of the Company's net sales for
the years ended December 2004 and 2003, respectively. The foreign countries that
the  Company  primarily  deals with are    Italy, Nigeria  and  various  other
 countries.


NOTE 17  -  SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

                                             2004           2003
                                   ------------------------------------

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

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

Non cash issuance of warrants
For services                              $24,000          $    -
                                   ====================================

Note 18 - Fair Value of Financial Instruments:

     SFAS No.107"  Disclosure  About the Fair Value of  Financial  Instruments",
requires disclosure of fair value information about financial  instruments.  The
carrying  amounts reported in the balance sheet for cash,  accounts  receivable,
accounts  payable and accrued  expenses  approximate fair value because of their
short term  nature.  The  carrying  amounts of notes  payable and long term debt
approximates  fair value because those  financial  instruments  bear interest at
rates that  approximate  current market rates for loans with similar  maturities
and credit  quality.  None of these  financial  instruments are held for trading
purposes.


Note 19- Investment Banking Agreement:

     On October 29, 2004,  the Company  signed an investment  banking  agreement
with Sloan  Securities  Corp.  ("Sloan") to raise  capital for the  Company.  In
connection  with  such  engagement,  the  Company  issued  warrants  to Sloan to
purchase  500,000  shares of the Company's  Common Stock at an exercise price of
$.10 per share.  The Warrants vest as to 425,000  shares on the date of issuance
and as to the  remaining  75,000  shares  at  such  time  that  a  financing  is
consummated in which at least  1,400,000  shares of common stock or common stock
equivalents are issued. The Company recorded the 425,000 warrants on the balance
sheet as deferred offering costs at a value of $24,000.


                                             15



<PAGE>
Exhibit 10.3
                                             PAPERCLIP SOFTWARE, INC.
                                               STOCK INCENTIVE PLAN


Section 1 Purpose of the Plan


     The purpose of the  Paperclip  Software,  Inc.  Stock  Incentive  Plan (the
"Plan") is to further the interests of Paperclip Software,  Inc. (the "Company")
and its  stockholders  by (a)  attracting  and  retaining the services of highly
qualified  individuals to act as members of the Board of Advisors of the Company
or consultants to the Company,  (b) motivating  such  individuals to make a time
commitment and consistent high quality  contributions to the successful  conduct
of the Company's business and (c) aligning such individuals' financial interests
with those of the Company's stockholders.


Section 2 Definitions


     For purposes of the Plan, the following terms shall be defined as set forth
below:


(a)      "Award" means any Option granted to a Participant under the Plan.
(b)      "Award Agreement" means the written  agreement,  instrument or document
evidencing an Award.
(c)      "Board" means the Board of Directors of the Company.
(d)      "Code" means the Internal Revenue Code of 1986, as amended from time to
          time.
(e)      "Committee"  means the committee  consisting of at least two members of
          the Board,  appointed  by the Board for this  purpose and serving at
          the Board's pleasure, or the entire Board of Directors.
(f)       Fair Market Value means, with respect to Stock or other property,  the
fair market value of such Stock or other property  determined by such methods or
procedures  as shall be  established  from time to time by the Committee in good
faith and in accordance with applicable law. Unless otherwise  determined by the
Committee,  the Fair Market Value of Stock shall mean the closing price of Stock
on the relevant  Valuation  Date as reported on the OTC bulletin board or market
on which the Stock is primarily  traded,  or if no Closing Price is available on
such  Valuation  Date,  then the  Fair  Market  Value  of Stock is the  average,
weighted  inversely by the number of trading  days from the  relevant  Valuation
Date,  of the  mean of the bid and ask  sales  prices  of the  Stock on the next
preceding  date and the next  succeeding  date on which  such  closing  price is
available as reported on the OTC bulletin board or market on which the Stock is
primarily traded.
(g)      "Option" means a right to purchase Stock at a specified price during
          specified time periods.
(h)      "Participant" means any member of the Board of Advisors or consultant
          to the Company.
(i)      "Plan" means Paperclip Software, Inc. Stock Incentive Plan.
(j)      "Stock" means the common stock, $ 0.01 par value, of the Company.
(k)      "Valuation Date" means the date as of which the value of Stock or other
          property, as applicable, is determined.
Section 3 Administration of the Plan


     (a) The Committee.  The Plan shall be  administered  by the Committee.  Any
action of the Committee in administering the Plan shall be final, conclusive and
binding on all persons,  including the  Participants,  the Company,  any persons
claiming  rights  from  or  through  Participants  and the  stockholders  of the
Company.


     (b) The  Committee's  Authority.  Subject to the provisions of the Plan set
forth below, the Committee shall have full and final authority in its discretion
(1) to select the Participants who will receive Awards pursuant to the Plan; (2)
to determine the type or types of Awards to be granted to each Participant;  (3)
to determine the number of shares of Stock to which an Award relates,  the terms
and conditions of any Award granted under the Plan  (including,  but not limited
to,  restrictions as to  transferability,  vesting and  forfeiture,  time(s) for
exercise of an Award and waivers or accelerations thereof, based in each case on
such  considerations  as the Committee shall determine) and all other matters to
be determined in connection  with an Award;  (4) to determine  whether,  to what
extent,  and under what  circumstances (a) the exercise price of an Award may be
paid, in cash,  Stock,  other Awards or other  property,  or (b) an Award may be
canceled,  forfeited  or  surrendered;  (5) to  determine  whether,  and to what
extent, any of the terms and conditions of an Award will be affected by a change
in  control of the  Company,  and to  determine  the  circumstance(s)  that will
constitute a change in control of the Company;  (6) to  interpret  the Plan,  to
correct any defect,  supply any omission or reconcile any  inconsistency  in the
Plan,  and to adopt,  amend and rescind  such rules and  regulations  as, in its
opinion, may be advisable in the administration of the Plan; and (7) to make all
other   determinations   as  it  may  deem   necessary  or  advisable   for  the
administration of the Plan.


     (c)  Responsible  Officer.  The  Committee  may designate an officer of the
Company to maintain all Plan  records,  and may authorize the officer to prepare
and deliver Award  Agreements  and stock  certificates  to the  Participants  on
behalf of the Company.
     (d) Expenses of the Plan. The expenses of  administering  the Plan shall be
borne by the Company.

Section 4
Shares Subject to the Plan


     (a)  Aggregate  Limit on  Shares.  Subject to the  provisions  of Section 8
hereof,  the  aggregate  number of  shares of Stock  available  for  payment  or
issuance  under the  Awards  granted  under the Plan  shall not  exceed  600,000
shares,  and such number of shares of Stock shall be reserved by the Company for
payment or issuance under the Plan. The shares of Stock paid or issued under the
Plan may be authorized and unissued  shares or shares held by the Company in its
treasury.


     (b)  Application of Limit.  No Award may be granted if the number of shares
to which  such  Award  relates,  when  added to the  number  of  shares of Stock
previously paid or issued under the Plan and the number of shares of Stock which
may  subsequently be paid or issued pursuant to other  outstanding,  unexercised
Awards,  exceeds the number of shares of Stock available for payment or issuance
pursuant to the Plan. If any shares of Stock subject to an Award are  forfeited,
or if any Award is paid or settled in cash or otherwise terminates or is settled
for any reason whatsoever  without an actual  distribution of shares of Stock to
the  Participant,  the  shares of Stock  subject to such  Award  shall  again be
available for Awards under the Plan; provided,  however,  that the Committee may
adopt  procedures  for the  counting  of shares  relating to any Award to ensure
appropriate counting,  avoid double counting, and provide for adjustments in any
case in which the number of shares actually  distributed differs from the number
of shares  previously  counted in connection  with such Award.  If a Participant
tenders shares of Stock (either  actually,  by attestation or otherwise),  which
shares the Participant  acquired through the Plan, to pay all or any part of the
exercise price on any Option,  or if any shares of Stock payable with respect to
any Award are  retained  by the  Company in  satisfaction  of the  Participant's
obligation  for taxes,  the number of shares so tendered or retained shall again
be available for Awards under the Plan.
Section 5 Awards


     (a) Grant of  Award.  The  Committee  shall,  from  time to time,  select a
Participant or Participants to receive an Award under the Plan. Awards under the
Plan shall be granted in the form of an Option.


     (b) Award Agreement and the Terms of an Award.  The terms and conditions of
an Award shall be set forth in an Award Agreement for such Award.  The Committee
shall determine the form of each Award  Agreement.  Any Award Agreement shall be
executed by the  Participant  and the Company.  The terms and  conditions of any
Award shall be consistent  with the  provisions  of Section 6. In addition,  the
Committee  may impose on any Award,  or the exercise  thereof,  such  additional
terms and conditions,  not inconsistent  with the provisions of the Plan, as the
Committee shall determine, including terms requiring forfeiture of Awards in the
event of the  termination of the business  relationship  with the Company by the
Participant  or the  cessation  of a  Participant's  position as a member of the
Board of Advisors or  consultant;  it is provided,  however,  that the Committee
shall  retain  full power to  accelerate  or waive any such  additional  term or
condition as it may have previously imposed.


     (c) Payment under an Award. Any payment or issuance under an Award shall be
made by the Company.


Section 6 Terms and Conditions of Awards.


     (a) In  General.  The  following  terms and  conditions  shall apply to the
Awards granted to a Participant under the Plan:


     (1) The exercise  price of any Option shall be  determined by the Committee
at the time the Option is  granted,  but such  price  shall not be less than the
Fair  Market  Value of the  shares  covered  thereby  at the time the  Option is
granted.  The  exercise  price shall be set forth in the Award  Agreement,  and,
subject to Sections 8 and 9(b), may not be changed after the Award Agreement has
been executed by the Participant and the Company.


     (2) The terms of any Option  shall  include  (a) an offer by the Company to
sell shares of Stock to the Participant at the exercise  price,  (b) the maximum
number of shares of Stock which may be purchased under the Option,  (c) the time
or times at which the Option may be exercised  in whole or in part,  (d) whether
the  exercise  price for the Option shall be paid in cash,  by the  surrender of
shares of Stock at Fair  Market  Value,  or by any  combination  of cash and the
surrender of shares of Stock,  including,  without  limitation,  cash, shares of
Stock,  other Awards,  or other property  (including notes or other  contractual
obligations of the Participant to make payment on a deferred basis), and (e) the
means or methods of payment for the shares of Stock,  including by "attestation"
and  through  "cashless  exercise"  arrangements,  to the  extent  permitted  by
applicable law. The Committee shall determine the terms described in (b) through
(f) above.  The terms of the  Option  shall  provide  that the Option may not be
assigned or  transferred  by the  Participant  other than by will or the laws of
descent and  distribution,  and that the Option shall be exercisable  during the
lifetime of the Participant only by the Participant himself or herself.

Section 7 Other Provisions Relating to Awards.


     (a) Exchange and Buy Out Provisions.  Notwithstanding any term or condition
of an Award,  the Committee  may, at any time,  offer to exchange or buy out any
previously  granted Award for a payment in cash,  Stock,  other Award(s),  other
property,  or  any  combination  of the  foregoing,  based  on  such  terms  and
conditions as the Committee  shall determine and communicate to a Participant at
the time that such offer is made.


     (b) Form of  Payment.  Subject to the terms of the Plan and any  applicable
Award Agreement,  payments or transfers to be made by the Company upon the grant
or  exercise  of an  Award  may be made in such  forms  as the  Committee  shall
determine,  including,  without limitation, cash, shares of Stock, other Awards,
or other  property,  and may be made in a single  payment or  transfer,  or on a
deferred basis.  The Committee may,  whether at the time of grant or at any time
thereafter  prior to payment or  settlement,  require a Participant  to defer or
permit  (subject  to any  conditions  as the  Committee  may  from  time to time
establish) a Participant  to elect to defer receipt of all or any portion of any
payment  of  cash  or  shares  of  Stock  that  would  otherwise  be due to such
Participant  in payment or settlement of an Award under the Plan. The Committee,
in its  discretion,  may  accelerate  any payment or  transfer  upon a change of
control as defined by the Committee.  The Committee may also  authorize  payment
upon the  exercise  of an  Option by net  issuance  or other  cashless  exercise
methods.
     (c) Loan Provisions.  With the consent of the Committee, and subject at all
times to laws and  regulations  and  other  binding  obligations  or  provisions
applicable  to the Company,  the Company may make,  guarantee,  or arrange for a
loan or loans to a Participant with respect to the exercise of any Option by the
Participant,  or other payment by the  Participant in connection with any Award,
including the payment by a Participant  of any or all federal,  state,  or local
income  or other  taxes  due in  connection  with  any  Award.  Subject  to such
limitations, the Committee shall have full authority to decide whether to make a
loan or loans  hereunder and to determine the amount,  terms,  and provisions of
any such loan or loans,  including  but not limited to the  interest  rate to be
charged in respect of any such loan or loans,  whether  the loan or loans are to
be with or without recourse against the borrower, the terms on which the loan or
loans are to be repaid and the conditions, if any, under which the loan or loans
may be  forgiven.  Any Stock  purchasable  under an  Option  may be  pledged  as
security for a loan that is to be used to pay such Option.
     (d) Term of Award. The term of each Award shall, except as provided herein,
be for such period as may be determined  by the  Committee;  provided,  however,
that in no event  shall the term of any Award  exceed a period of 10 years  from
the date on which such Award is granted.
     (e)  Fractional  Shares.  The  Company  will not be  required  to issue any
fractional  shares of Stock pursuant to any Award.  The Committee  shall provide
for the payment or the settlement of fractional shares in cash.

Section 8 Adjustments upon Changes in Capitalization, Mergers or Similar Events


     In the event that the Committee  shall  determine that any stock  dividend,
recapitalization,  forward  split  or  reverse  split,  reorganization,  merger,
consolidation,  spin-off,  combination,  repurchase or share exchange,  or other
similar corporate  transaction or event,  affects the Stock or the book value of
the Company such that an adjustment is appropriate in order to prevent  dilution
or  enlargement  of the  rights  of any  Participant  under an  Award,  then the
Committee  shall, in such manner as it may deem equitable,  adjust any or all of
(i) the  number  and kind of shares of Stock  which  may  thereafter  be paid or
issued in  connection  with Awards,  (ii) the number and kind of shares of Stock
payable or issuable in respect of outstanding Awards, (iii) the aggregate number
and kind of shares of Stock  available  under  the Plan,  and (iv) the  exercise
price,  grant  price,  or  purchase  price  relating  to any Award or, if deemed
appropriate,  make  provision for a cash payment with respect to an  outstanding
Award.  In the case of a merger in which holders of the Stock are receiving cash
for their  Stock,  the  Committee  may make  provision  for a cash  payment with
respect to any outstanding  Award in an amount equal to the positive spread,  if
any,  between  the  exercise  price of the Award and the cash price per share of
Stock paid in the merger.


Section 9 Changes to the Plan and Awards


     (a) Changes to the Plan by the Board.  The Board may,  at any time,  amend,
alter, suspend,  discontinue, or terminate the Plan or the Committee's authority
to grant Awards under the Plan without the consent of the Company's stockholders
or  Participants,  except  that  any  such  amendment,  alteration,  suspension,
discontinuation,  or  termination  shall  be  subject  to  the  approval  of the
Company's stockholders, if and by the time that such approval is required by any
federal  or state  law or  regulation  or the  rules of any  stock  exchange  or
automated  quotation system on which the Stock may then be listed or quoted. The
Board may, in its  discretion,  determine to submit any other such change to the
Plan to the Company's stockholders for their approval. It is provided,  however,
that  without  the  consent of an  affected  Participant,  in no event  shall an
amendment, alteration, suspension,  discontinuation, or termination of the Plan,
or any other change to the Plan,  materially and adversely  affect the rights of
such Participant under any outstanding Award and the related Award Agreement.


     (b) Changes to an Award by the Committee. The Committee may take "Committee
Action", as defined below,  either (1) in view of the Committee's  assessment of
the Company's  strategy,  performance  of comparable  companies or other similar
circumstance,  (2) in recognition by the Committee of an unusual or nonrecurring
event (other than an event  described in Section 8) affecting the Company or (3)
in response by the Committee to any change in applicable  laws,  regulations  or
accounting principles. For these purposes "Committee Action" means any action by
the  Committee  to (i) make any  adjustment  in the terms and  conditions  of an
Award, (ii) waive any conditions or rights under an Award or (iii) amend, alter,
suspend,  discontinue or terminate any  outstanding  Award and the related Award
Agreement. It is provided, however, that no Committee Action with respect to any
Award may materially and adversely affect the rights of a Participant under such
Award without such Participant's consent.

Section 10 General Provisions


     (a) Indemnification.  No member of the Committee shall be personally liable
for any action or determination made with respect to the Plan, except for his or
her own willful  misconduct or as expressly  provided by statute.  Any member of
the Committee shall be entitled to  indemnification  and reimbursement  from the
Company  for any  liability  asserted  against  him or her  arising  out of,  or
relating  to,  any such  action  or  determination.  In the  performance  of its
functions  under  the  Plan,  the  Committee  shall  be  entitled  to rely  upon
information and advice furnished by the Company's officers, accountants, counsel
and any  other  party  the  Committee  deems  necessary,  and no  member  of the
Committee shall be liable for any action taken or not taken in reliance upon any
such information and advice.


     (b) No Rights to Awards;  No Stockholder  Rights. No Participant shall have
any claim to be granted any Award under the Plan, and there is no obligation for
uniformity  of  treatment  of  Participants.   No  Award  shall  confer  on  any
Participant  any of the  rights  of a  stockholder  of the  Company,  except  as
expressly set forth in the Award Agreement relating to such Award.
     (c) No Right to Award or Continuation of Services. Neither the Plan nor any
action taken  hereunder  shall be construed as requiring the Company to continue
the  services  of any  member of the Board of  Advisors  or  consultant  for any
period.  Nothing  in the Plan shall  confer  upon any  Participant  the right to
remain as a member of the Board of  Advisors or as a  consultant  to the Company
for any period of time, or at any particular rate of retainer or other fee.
     (d) Taxes.  The  Company is  authorized  to  withhold  from any  payment or
issuance relating to an Award under the Plan, including an issuance in shares of
Stock,  amounts for  withholding  of taxes and the payment of other taxes due in
connection  with such payment or issuance  under the Award,  to require  payment
from the  Participant,  and to take such other action as the  Committee may deem
advisable to enable the Company and the  Participant to satisfy all  obligations
for the withholding of taxes, and the payment of any other taxes, and to satisfy
any other tax  obligations  relating to any Award.  This authority shall include
authority  to  withhold  and sell shares of Stock or other  property  that would
otherwise  be paid or issued  to a  Participant  under an Award,  and to use the
proceeds of such sale to satisfy any withholding or tax obligations.
     (e) Limits on  Transferability;  Beneficiaries.  No Award or other right or
interest of a  Participant  under the Plan (1) shall be pledged,  encumbered  or
hypothecated  to, or in favor  of, or be  subject  to any  lien,  obligation  or
liability of such  Participant to, any party,  except to the Company as provided
herein,  (2) may be assigned or  transferred by the  Participant,  other than by
will or the laws of descent and distribution, or (3) shall be exercisable during
the lifetime of the  Participant by any person other than the Participant or, if
permitted by law, his or her guardian or legal  representative.  Notwithstanding
the  foregoing,  the Committee  may, in its  discretion,  provide that Awards or
other  rights  or  interests  of  a  Participant  granted  under  the  Plan  are
transferable,   without  consideration,   to  immediate  family  members  (i.e.,
children,  grandchildren or spouse), to trusts for the benefit of such immediate
family  members and to  partnerships  in which such family  members are the only
partners.  The Committee may attach to such  transferability  feature such terms
and conditions as it deems  advisable.  In addition,  a Participant  may, in the
manner  established  by the Committee,  designate a beneficiary  (which may be a
person or a trust) to exercise the rights of the Participant, and to receive any
distribution,  with  respect to any Award upon the death of the  Participant.  A
beneficiary,  guardian, legal representative or other person claiming any rights
under the Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award Agreement  applicable to such  Participant,
except  as  otherwise  determined  by  the  Committee,  and  to  any  additional
restrictions deemed necessary or appropriate by the Committee.
     (f)  Securities  Law  Requirements.  No Award  granted  hereunder  shall be
exercisable if the Company shall at any time determine that (1) the listing upon
any  securities  exchange,  registration  or  qualification  under  any state or
federal law of any Stock otherwise  deliverable  upon such exercise,  or (2) the
consent or approval of any regulatory  body or the  satisfaction  of withholding
tax or other withholding liabilities,  is necessary or appropriate in connection
with such exercise. In any of the events referred to in clause (1) or clause (2)
above,  the  exercisability  of such Awards shall be suspended  and shall not be
effective   unless   and  until   such   withholding,   listing,   registration,
qualifications  or approval  shall have been  effected  or obtained  free of any
conditions not acceptable to the Company in its sole discretion, notwithstanding
any  termination of any Award or any portion of any Award during the period when
exercisability has been suspended.  The Committee may require, as a condition to
the right to exercise any Award,  that the Company receive from the Participant,
at the time any such Award is exercised,  vests or any  applicable  restrictions
lapse, representations,  warranties and agreements to the effect that any shares
of Stock paid or issued  under the Award are being  purchased or acquired by the
Participant  for  investment  only and without any present  intention to sell or
otherwise  distribute such shares and that the  Participant  will not dispose of
such shares in  transactions  which,  in the opinion of counsel to the  Company,
would violate the registration provisions of the Securities Act of 1933, as then
amended,  and the rules and regulations  thereunder.  The certificates issued to
evidence  such  shares  shall  bear   appropriate   legends   summarizing   such
restrictions on the disposition thereof.


     (g)  Discretion.  In  exercising,  or declining  to exercise,  any grant of
authority or  discretion  hereunder,  the  Committee may consider or ignore such
factors  or  circumstances  and may  accord  such  weight  to such  factors  and
circumstances as the Committee alone and in its sole judgment deems  appropriate
and without regard to the effect such exercise,  or declining to exercise,  such
grant of authority or discretion would have upon the affected  Participant,  any
other  Participant,  the Company,  any  stockholder  of the Company or any other
person.


     (h)   Construction  of  Plan.  Words  used  in  the  Plan,  other  than  as
specifically defined in the Plan, shall have the meaning their context dictates.
If,  however,  a situation  arises in which an undefined  word in the Plan has a
different meaning in legal usage than that in common usage, and it is unclear to
the Committee  which is proper under the  circumstances,  the ambiguity shall be
resolved in favor of the meaning of common usage. Words used in the plural shall
be read as the  singular,  and words used in the  singular  shall be read as the
plural, where applicable and wherever the context of the Plan dictates.
     (i) Unfunded Plan. Unless otherwise  determined by the Committee,  the Plan
shall be unfunded  and shall not create (or be construed to create) a trust or a
separate fund or funds. The Plan shall not establish any fiduciary  relationship
between the  Company  and any  Participant  or other  person.  To the extent any
Participant  holds any rights by virtue of an Award granted under the Plan, such
rights shall constitute  general unsecured  liabilities of the Company and shall
not confer upon any participant  any right,  title, or interest in any assets of
the Company. Any amount that may become payable or issuable by the Company under
an Award represents only an unfunded,  unsecured  promise by the Company to make
such  payment or  issuance in the future and does not give any  Participant  any
greater rights than those of an unsecured general creditor of the Company.
     (j)  Successor and Assigns.  The Plan and any  applicable  Award  Agreement
entered into under the Plan shall be binding on all  successors and assigns of a
Participant,  including,  without limitation, the estate of such Participant and
the  executor,  administrator  or trustee of such  estate,  or any  receiver  or
trustee in bankruptcy or representative of the Participant's creditors.
     (k) Governing Law. The Plan and all Award Agreements entered into under the
Plan shall be construed in accordance with and governed by the laws of the state
of Delaware.
     (l) Effective Date. The Plan shall become effective as of the date on which
it is adopted by the Board.
     (m)  Termination.  Notwithstanding  any other  provision of the Plan to the
contrary, the Plan shall terminate upon the earlier of (1) the date specified in
a resolution by the Company  terminating  the Plan,  in accordance  with Section
9(a), or (2) ten years from the Effective Date.


<PAGE>
Exhibit 10.12
          Agreement, dated December 31, 2004, by and between
             PaperClip Software, Inc. and William Weiss


                               WILLIAM WEISS

                                                           December 31, 2004
PaperClip Software, Inc.
611 Route 46 West
Hasbrouck Heights, NJ  07604

     Reference is hereby made to the  $803,711 in "accrued  compensation-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, 2004.  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, 2006.



                                                     Sincerely,

                                                     /s/ William Weiss
                                                     William Weiss

<PAGE>
Exhibit 14

                                             PAPERCLIP SOFTWARE, INC.


                                                  CODE OF ETHICS


                                                 TABLE OF CONTENTS





     I.INTRODUCTION AND OVERVIEW1


     II.BUSINESS CONDUCT1


     III.CONFLICT OF INTEREST2


     IV.COMPLIANCE WITH LAWS AND REGULATIONS


     V.DISCLOSURE AND COMMUNICATIONS5


     VI.IMPLEMENTATION AND ENFORCEMENT6


     VII.WAIVERS AND AMENDMENTS7


     VIII.GENERAL7






Section I.       INTRODUCTION AND OVERVIEW


     The  reputation  of PaperClip  Software,  Inc.  (the  "Company") as a fair,
reputable  and  honest  organization  can  only  be  maintained  if  all  of its
employees,  officers and directors adhere to high moral and ethical standards in
conducting the Company's  business.  Establishing  and maintaining the trust and
confidence of all stakeholders, including employees, the Board of Directors (the
"Board"), existing or potential stockholders,  creditors,  customers, suppliers,
vendors and governmental agencies, is of paramount importance to the Company. In
order to do so, the Company has adopted  this Code of Ethics (the  "Code").  The
purpose  of this  Code  is to  document  and  govern  the  basic  standards  and
principles  that the Company has adopted to promote honest and ethical  business
conduct by and among its directors,  officers and  employees,  and to reasonably
deter wrongdoing and inappropriate or illegal acts.

Section II.       BUSINESS CONDUCT


     The Company's directors, officers and employees shall conduct themselves in
a fair, ethical,  legal and honest manner. In conducting the Company's business,
trust and integrity  must be a cornerstone  in all of the business  dealings and
relationships these individuals establish with stockholders, customers, vendors,
competitors,  governmental  officials,  communities,  the media and the  general
public, as well as each other.

     The Company's directors, officers and employees shall not engage in conduct
or activity that could raise questions as to the Company's honesty or reputation
or  otherwise  cause  embarrassment  to the Company or its  stakeholders.  There
should be careful observance of laws and regulations, as well as high regard for
appropriate standards of conduct and personal integrity.

     While it is impracticable  to describe every improper act or practice,  the
Company deems the following standards of conduct to be particularly important.

Use of Company Assets

     The Company's  directors,  officers and employees are  responsible  for the
proper and efficient use of the Company's physical resources and properties,  as
well as its proprietary information. The Company's offices, equipment,  supplies
and other  resources may not be used for personal use or activities that are not
related to the employment or  responsibilities  of its  directors,  officers and
employees,  except for any activities  that have been approved in advance by the
supervisor  of such  individual or if it is a material use, any request for such
approval should be directed to the Chief Executive Officer ("CEO").

Competition and Fair Dealing

     The Company will compete  fairly and  honestly,  and will seek  competitive
advantage  through  superior  performance and not unethical or illegal  business
practices.  Each  director,  officer and employee will respect the rights of and
deal fairly with the Company's customers, suppliers, competitors and each other.
No director,  officer or employee shall take unfair  advantage of anyone through
manipulation, concealment, abuse of privileged information, misrepresentation of
material facts or any other unfair-dealing  practices.  No director,  officer or
employee  will  knowingly  make  false  or  defamatory  public  remarks  about a
competitor or  improperly,  unethically or illegally  obtain or use  proprietary
information,   intellectual   property  or  trade   secrets  of  a   competitor,
collaborator or any other third party.

Confidentiality

     Employees,  officers and  directors  must maintain the  confidentiality  of
information  entrusted  to them by the  Company or its  customers,  except  when
disclosure is  authorized by the Company's  legal counsel or required by laws or
regulations. Whenever possible, directors, officers and employees should consult
with the Company's legal counsel if they believe they have a legal obligation to
disclose  confidential   information.   Confidential  information  includes  all
non-public  information  that might be of use to competitors,  or harmful to the
Company or its customers, if disclosed.  The obligation to preserve confidential
information continues even after employment ends.

Payments to or from Customers or Vendors


     No effort may be made, directly or indirectly,  to improperly influence any
customer, supplier or vendor of the Company. A director, officer or employee may
not accept or provide a gift, favor or entertainment to a customer,  vendor,  or
other person or organization  in connection  with the Company's  business unless
all of the following criteria are met: (i) it is reasonable and not excessive in
relation to customary industry practices;  (ii) it cannot, in the circumstances,
be reasonably construed as a bribe, payoff or kickback;  (iii) public disclosure
of it would not  embarrass  the Company;  (iv) the item is  consistent  with the
normal and accepted  business  ethics of the industry and country in which it is
provided;  (v) it does not violate the laws of the United  States or the country
in  which  it is  provided;  and  (vi)  it is not in the  form  of  cash or cash
equivalents, other than cash bonuses to employees or consultants.

Political Contributions and Payments to Government Officials or Employees


     No  corporate  funds,  merchandise  or  service  may be paid or  furnished,
directly or indirectly, to a political party, committee, organization, political
candidate or incumbent,  government official or government  employee,  except if
legally  permissible  and  approved in advance in  writing.  Any  assistance  or
entertainment  provided to any  government  official or office should never,  in
form or substance,  compromise the Company's  arm's-length business relationship
with the government agency or official  involved.  Any request for such approval
should be directed to the CEO.

Section III.       CONFLICT OF INTEREST


     The Company's  directors,  officers and employees  have an obligation to be
loyal to the best  interests  of the Company  and,  therefore,  should avoid any
actions or affiliations  that may involve,  or appear to involve,  a conflict of
interest with the Company. Directors, officers and employees should not have any
financial  or  other  business   relationship   with  suppliers,   customers  or
competitors  that could  reasonably  be  expected  to impair,  or even appear to
impair, their independence or cloud any judgment they may need to make on behalf
of  the  Company.  Employees,  officers  and  directors  should  not  engage  in
activities that compete with the Company.  If an officer or employee is aware of
a possible  or actual  conflict  of  interest  concerning  himself or herself or
another officer or employee,  or is concerned that one might develop,  he or she
should  bring the  matter to the CEO.  If a director  is aware of a possible  or
actual conflict of interest regarding himself or herself or another director, or
concerned  that one might  develop,  he or she should discuss it with the entire
Board.

Actions Counter to the Company's Best Interests


     A director,  officer or employee may not divert a business opportunity that
could  reasonably  be expected to be of interest or benefit to the Company,  for
his or her own personal benefit. If an officer or employee becomes aware of such
a business  opportunity  through the use of corporate  property,  information or
position,  he or she should  disclose the matter and the  relevant  facts to the
CEO. If a director becomes aware of such a business  opportunity through the use
of corporate  property,  information or position,  he or she should disclose the
matter and the  relevant  facts to the entire  Board for  consideration.  If the
Company  makes  a  determination  that  it is not  interested  in  pursuing  the
disclosed opportunity and has no reasonable objections, the director, officer or
employee may then pursue the opportunity for his or her own benefit.

Other Employment


     Except for  intermittent  activities on behalf of recognized and legitimate
not-for-profit  or charitable  organizations,  an officer (other than an officer
who works without compensation) or employee may not engage in employment outside
the Company without the Company's approval. Any request for such approval should
be directed to the CEO.

Outside Directorship and Investments


     A director,  officer, or employee may not serve as a director of, or have a
business or material financial interest in, any organization  competing with the
Company or engaged in current or  prospective  dealings with the Company (i.e. a
competitor, customer, vendor, landlord or tenant) without prior written approval
by the Company.  In the case of an officer or employee,  such matters  should be
disclosed to the CEO for consideration,  and in the case of a director, any such
approvals need to be made by the entire Board.  For purposes of this issue,  the
business and  financial  interests of  immediate  family  members of a director,
officer  or  employee  shall  be  considered  the  financial  interests  of such
director,  officer or employee.  The Company will presume that ownership of less
than five percent (5%) of a company's  securities  does not represent a material
financial interest and therefore need not be disclosed or approved in advance.

Government Service


     Although a director's,  officer's or employee's individual participation in
routine  political or community  activities or service in  government  positions
outside  of  the  Company's  normal  business  hours  is not  discouraged,  such
activities or service could potentially give rise to a conflict of interest. Any
officer or employee  wishing to be a candidate  for any public  office,  whether
elective or appointive,  must obtain the Company's prior written  approval.  Any
request for such approval should be directed to the CEO. Any director seeking to
become a  candidate  for or  appointed  to a  political  office must obtain such
approval  from the entire  Board.  A  director,  officer or  employee  holding a
government  office or position  should abstain or recuse him or herself from any
vote or decision that  involves,  or could  potentially be perceived to involve,
the Company's interest or otherwise appear as a conflict of interest.

Section IV.       COMPLIANCE WITH LAWS AND REGULATIONS


     All directors, officers and employees shall comply in all material respects
with all laws, rules and regulations  applicable in the country, state and local
jurisdictions  where the  Company's  business is conducted.  The laws  discussed
below are some of the laws that may have particular importance to the Company.

Foreign Corrupt Practices Act


     Among other  restrictions,  the Foreign Corrupt  Practices Act (the "FCPA")
prohibits  companies  from paying or  offering  to pay  anything of value to any
non-U.S. government official,  government employee, political party or political
candidate to obtain or retain  business or to  influence a person  working in an
official capacity. Violations of this act can result in significant penalties to
the Company and any individual involved.

Insider Trading


     United  States  and  foreign  securities  laws,  as well  as the  Company's
policies,  prohibit  officers,  affiliates and other "insiders" from trading the
Company's securities,  or those of other companies (for example, a vendor or the
subject of a possible  acquisition),  while that individual is in the possession
of material, non-public information regarding the Company or such other company.
These  "insider  trading"  laws also  prohibit  providing  material,  non-public
information to other  individuals who ultimately trade the security.  Because of
the severity of the  penalties  provided by law and the  potential for damage to
the  Company's  reputation  as a result  of such  unlawful  trading,  directors,
officers  and  employees  are expected to strictly  abide by the laws  described
above. In addition to Company sanctions, violation of "insider trading" laws may
result in serious  criminal  penalties for the  individual,  including fines and
imprisonment, if trading is found to involve a willful violation of the law.

Anti-Trust


     Federal and state  anti-trust  laws are based on the premise  that open and
fair  competition  in a free  marketplace  will lead to  appropriate  prices and
promote an efficient,  productive economy. These laws, while complex,  generally
prohibit the following general types of behavior or activities: (1) unreasonable
agreements  among  competitors  that fix  prices  or  otherwise  reduce or limit
competition;  (2) unreasonable agreements between buyers and sellers that impose
uncompetitive  restrictions  on either party;  (3) the  maintenance  of monopoly
power  through  anti-competitive  conduct  or the  attempt  to create a monopoly
through unreasonable conduct; and (4) charging competing buyers different prices
for the same product or group of products (i.e. price  discrimination).  Federal
and state  antitrust  laws  also  prohibit  mergers  and  acquisitions  that may
substantially  lessen competition.  Directors,  officers and employees shall not
knowingly act in a manner that would result in a breach of any anti-trust  laws.
The costs and  consequences of  investigation  or litigation in this area can be
significant.  Violation of any antitrust laws could expose a director,  officer,
or employee and the Company to criminal penalties.

Industry Regulations


     If the Company fails to comply with applicable regulatory requirements, the
Company  may be subject to a variety of  administrative  or  judicially  imposed
sanctions.  Directors,  officers  and  employees  are  expected  to comply  with
applicable laws, rules and regulations.

     If any officer or employee  has any  question  about the  applicability  of
these or other laws or regulations to any activities or contemplated  activities
by such person, he or she should discuss this matter with the CEO. If a director
has any question about the  applicability  of these or other laws or regulations
to any of their current or contemplated activities, he or she should discuss the
matter with the entire Board.

Section V.       DISCLOSURE AND COMMUNICATIONS


Public Reporting

     The Company and its  directors  and  officers  shall  provide  full,  fair,
accurate,  timely and  understandable  disclosure  in the reports and  documents
filed or submitted by the Company to the Securities and Exchange Commission (the
"SEC") and in other public communications made by the Company.

Accounting Procedures and Documentation


     All  transactions  shall be  properly  recorded  in a timely  manner in the
Company's   books  and  records.   No  director,   officer  or  employee   shall
intentionally or knowingly omit or  mischaracterize  any transaction in order to
disguise or hide its true  nature.  Further,  an officer or  employee  shall not
intentionally  falsify or incorrectly  record or report any transaction or entry
into the  Company's  books and records that will  knowingly  result in financial
statements and/or financial  statement balances that are not materially accurate
or otherwise not in conformance with generally  accepted  accounting  principles
("GAAP").  Finally,  officers  and  employees  must  comply  with the  system of
internal  controls  the  Company  has  established  that have been  designed  to
safeguard its assets and to ensure its financial statements conform to GAAP.

Communications with Analysts, the Media, Governmental Agencies and Others


     For  publicly-held  companies,  U.S.  securities  laws  require that public
dissemination  of  material,  non-public  information  be  made  in a  fair  and
non-discriminatory  manner so that all investors,  or potential investors,  have
the  opportunity  to  receive  such  information  at the  same  time.  Selective
disclosure,  or the disclosure of material,  non-public information to selective
audiences or individuals,  is prohibited  under U.S securities laws. In order to
avoid unintended selective  disclosure,  all inquiries from securities analysts,
investors, stockholders, investment bankers, etc. should be immediately directed
to the Company's CEO.

     In the event a  director,  officer or employee  receives an inquiry  from a
governmental or regulatory agency on matters outside his or her specific area of
responsibility,  such inquiries should be directed to the appropriate officer of
the Company,  or the CEO.  All  inquiries  from the media should be  immediately
directed to the Company's CEO.

Section VI.       IMPLEMENTATION AND ENFORCEMENT


Enforcement


     With respect to any non-accounting issues, complaints,  questions, concerns
or  suspicions  regarding  any conduct of which an officer or  employee  becomes
aware of that he or she  reasonably  believes may constitute a violation of this
Code  should be  promptly  reported  to the CEO,  who will hold such  reports in
confidence.  Depending  on the  nature of the issue  and the  related  facts and
circumstances,  the CEO may direct the matter to or otherwise involve the Board,
or the Company's  counsel,  as appropriate.  If a director  becomes aware of any
conduct that he or she  reasonably  believes may  constitute a violation of this
Code,  such director should promptly report such conduct to the entire Board. In
the event that an officer is also a director of the Company, that officer should
follow the guidelines provided by this Code as if he or she were a director.

     In the event that a director,  officer or employee or any other third-party
has a question, becomes aware of an issue or has a personal complaint,  question
or suspicion (1) regarding the Company's  accounting,  accounting  procedures or
accounting  personnel,  (2) related to an audit of the  Company or the  auditors
charged  with  handling the audits,  (3)  reporting  or  disclosure  of a matter
contained in the Company's financial records, financial reports or audit reports
or (4) regarding the internal  accounting  controls of the Company,  such person
should report their concern to the Board.

     The CEO shall  regularly  report to the Board all matters or issues arising
under this Code  (including  resolution  of such  matters  or  issues)  that are
brought to his or her attention.

     Suspected violations will be investigated under the supervision of the CEO,
as they deem appropriate upon  consultation  with the Board, if necessary.  Each
officer,  director  and  employee of the Company is expected to cooperate in the
investigation of reported or alleged violations.

     When practical and  appropriate  under the  circumstances,  and in order to
protect the privacy of the persons involved,  those individuals  investigating a
suspected  violation  will  attempt to keep  confidential  the  identity  of the
individual or individuals who reports a suspected  violation or who participates
in an investigation. There may be situations, however, when this information, or
the  identity of the  individuals  involved,  must be  disclosed  as part of the
investigation process.

     A  violation  of this Code may  result in  disciplinary  action,  including
removal from office or termination of employment.  Legal proceedings may also be
commenced, if necessary, to recover the amount of any improper expenditures, any
profits  realized  by the  offending  director,  officer  or  employee,  and any
financial harm sustained by the Company. In certain circumstances, violations of
this Code will be reported by the Company to the  applicable  authority  if such
violations likely violate state or federal criminal laws.

Non-Retaliation


     In order for this Code to be effective,  directors,  officers and employees
must feel free to bring  forth  their good faith  concerns  without  the fear of
retribution or retaliation  from the Company or any other  director,  officer or
employee.  The Company does not condone nor will it not tolerate any retaliation
against an individual  who lawfully and in good faith reports any  misconduct or
violations of this Code. Further, an employee who provides information regarding
any conduct the  employee  reasonably  believes  constitutes  a violation of the
securities laws or financial fraud statutes (1) to any  governmental  authority,
(2) by testimony or otherwise in any proceeding pending or about to be commenced
concerning such a violation or (3) to any person with supervisory authority over
the employee or authorized by the Company to investigate  such conduct,  may not
be discharged, demoted, discriminated or otherwise retaliated against based upon
the information they have provided.



Section VII.       waivers and amendments


     Any  request  for  a  waiver  of  any  provision  of  this  Code  shall  be
communicated  immediately  to the CEO or in the case where the waiver relates to
the CEO,  the  Board.  Any  waiver of this Code with  respect  to  directors  or
officers  may be made only by a  majority  of the  Board  and shall be  promptly
disclosed  (along with the  reason(s)  for the waiver) as required by law and by
any  applicable  regulations  of the SEC and any exchange on which the Company's
securities may be traded.

     This Code may be modified,  amended or supplemented  from time to time. Any
amendment of this Code shall be approved by a majority of the Board and shall be
promptly disclosed as required by law and any applicable  regulations of the SEC
and any exchange on which the Company's securities may be traded.

Section VIII.       GENERAL




     This Code is posted on the  Company's  web site and will be provided to all
of the Company's directors,  officers and employees.  Officers are encouraged to
explain and  discuss  this Code with  employees  to ensure  they  recognize  the
existence and understand the applicability of this Code.  Written  certification
of compliance  with this Code is required from the CEO, and the Chief  Financial
Officer and Chief Accounting Officer, if any, on an annual basis.

Adopted:          March 30, 2005


<page>
            ACKNOWLEDGMENT OF RECEIPT AND COMPLIANCE WITH THE CODE


     I hereby  certify that I have read and  understand  the  Company's  Code of
Ethics.  I  also  have  had  an  opportunity  to  review  any  questions  on the
interpretation of the policies described in this Code.




SIGNATURE       ___________________




PRINT NAME      ___________________




DATE            ___________________







<page>

Exhibit 23.1


                 CONSENT OF INDEPENDENT REGISITERED PUBLIC ACCOUNTING FIRM

     We consent to the incorporation by reference in the Registration  Statement
on Form S-8  (Registration  No.  333-04245)  of our report dated March 25, 2005,
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, 2004.

                                          /s/ Sobel & Co., LLC
                                          Certified Public Accountants
March 25, 2005
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 30, 2005                  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, 2004 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, 2004 fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.


March 30, 2005                                           By: /s/ William Weiss