D. MICHAEL BRIDGES - PAPERCLIP SOFTWARE - (PCLP)
CEO Interview - published 11/13/00

DOCUMENT # LAD605

D. MICHAEL BRIDGES is President of PaperClip. He rejoined PaperClip this January after 18 months of consulting for the company. Mr. Bridges has served as Vice President of Marketing & Sales and Director of Corporate Services since joining the company in February 1995. Corporate Services provides direct sales, integration services and support for the Fortune 1000 market. Mr. Bridges was Executive Vice President and co-Founder of CMF Design System, a custom software and systems integration firm, from May 1988. From July 1983 to May 1988, Mr. Bridges was an integration consultant to Mr. Summers, Director of Dynamic and Systems, EBASCO concerned with migration of real-time computing to distributed infrastructures. Mr. Bridges received a BSc from Rowan University and served as a Captain in the United States Marine Corps.

Sector: Application Software

TWST: Could you begin by giving us a brief summary of PaperClip Software, Inc.?

Mr. Bridges: PaperClip Software was founded in 1991 as a document management software company. In September 1995 the company went public with the ticker symbol PCLP. The proceeds from the IPO enabled continuing development of the software product line and expansion of our marketing and sales force. Currently PaperClip focuses on solving the problems of managing physical paper and its transformation into the e-commerce sector. We have produced a suite of Windows applications focused on document management, with a secured document delivery service over the Internet known as Internet Express. PaperClip provides both products and services. We recently launched our ASP service for companies that would prefer us to host the infrastructure and facilities-manage their transactions. Customers like Sovereign Bank use the ASP service to manage the sale of mortgages in the secondary mortgage market. In September 2000 we formed a strategic partnership with Iron Mountain, a billion-dollar NYSE company, the world’s largest archivist. This relationship enables Iron Mountain to market PaperClip’s Internet-based document exchange product suite. They will host the service and integrate it into their new digital archive service. We believe the Iron Mountain relationship will greatly benefit both organizations for numerous reasons and look forward to jointly marketing our products and services to Iron Mountain’s over 120,000 customers.

TWST: Tell us a bit about your involvement. What brought you to PaperClip, and what do you see as the major challenge?

Mr. Bridges: My involvement with PaperClip Software started back in 1992, when as a VAR (value-added reseller) I became familiar with the company and its products. I was so intrigued with the technology and ease of use of the product that I became their first reseller and installed PaperClip’s products across many industries and applications. In 1994 PaperClip asked me to join the company and head up a professional services division selling directly to end users. In 1996 I was promoted to Vice President of Sales, managing the VAR community and professional services. Today PaperClip sells products through a network of integrators or VARs and through strategic partnerships. We have 50 domestic resellers as well as 10 international resellers. We also market directly to the insurance and mortgage banking industries. In 1997 I was promoted to Vice President of Marketing and Sales, to help define the market direction for the company and its future role in the emerging Internet world. In January 2000, I became the President of the company.

TWST: What do you see as the target client base today, and how might that base be changing or evolving?

Mr. Bridges: PaperClip’s products are horizontal and therefore are installed throughout almost every industry. We have seen great success when our VARs focus on a targeted community. For example, PaperClip is installed in 23 out of 24 county governments in the State of Idaho. Law enforcement and transportation are also major opportunities for us. On a direct sales effort, we’ve focused on several industries, such as life insurance, property and casualty insurance, and mortgage banking. We targeted these three industries because they are paper-intensive industries. Working with their technology and standards organizations, we helped define the industry standard known as EDX, electronic document exchange. To date that standard has been adopted by life industry, specifically NAILBA. NAILBA is the National Association of Independent Life Brokerage Agencies, which represents companies that process about 12 million life insurance applications annually. We will continue to expand our presence in the insurance broker community to provide solutions for paperless exchange with their trading partners. Today we transmit over 50,000 pages, monthly, throughout the insurance industry, and that number continues to increase every month. Within the mortgage industry, we have seen the adaptation of our technologies and products as BPO (business process outsourcer) services. The mortgage customer is different from the insurance customer due to varied document requirements. Our ASP service has over 500,000 pages and that continues to grow every month. Recently we announced a relationship with Assurnet, an ASP service out of Washington, DC with about 30,000 subscribers. They will host PaperClip products for their and our customers desiring outsourced document management services. I feel every company could use PaperClip.

TWST: When you look at your goals and strategies over the next 12 to 24 months, can you distill those into an agenda for this company? What specific accomplishments in that time period would equal success for your company?

Mr. Bridges: We set several goals for 2001. The first is to double our revenues. The second is the addition of 35 new, revenue-producing VARs, and to expand our subscription base of customers for the Internet Express service to 200. Thirdly, we are seeking to secure three strategic partnership relationships. We have learned a significant amount about how customers want to use Internet and B2B applications since starting our Internet Express and ASP services 18 months ago. We continue to enhance the features within our products and feel we have a real head start on the competition. PaperClip Software, like many software companies, is transitioning to a recurring revenue model. Our exchange and ASP services are provided for a recurring monthly fee. We intend to market and expand these services by working with our strategic partners, VARs and our own direct sales force. A corporate priority is to secure adequate financing that will enable us to fund our marketing and sales effort over the next three years.

TWST: Is cash or capital limitations a consideration as you look at these opportunities?

Mr. Bridges: It is for all organizations, and certainly we are no different. PaperClip Software is challenged in securing enough capital to expand our marketing and sales effort. Our product development is complete and our customers have validated that. We need to focus on getting our message out. Many companies would find tremendous value in our solutions but are unaware of them. As we continue through 2000 to 2001, we are looking to expand our sales and marketing resources, thus enabling us to reach all our potential customers. I challenge our people daily to find 10 new customers to tell our story to. When we have the opportunity to tell our story, it usually results in a sale.

TWST: Give us a frank assessment of your top management team. At this point, do you feel that you have the bench strength and skill sets onboard to meet this calendar of opportunities?

Mr. Bridges: Certainly. PaperClip comprises a collection of entrepreneurs who would be stars in any company. The chemistry within PaperClip Software today is unique. In a small company everybody wears multiple hats and everybody has to perform, and this company has performed. Our Chairman, Bill Weiss, has had a long and very successful career in managing software companies and brings a vast amount of experience in the financial arena. He is a CPA. Mike Suleski, our VP of Engineering, co-founded PaperClip Software along with Bill. Mike designs and manages all of PaperClip’s software. Suzy Tuck, VP of Sales, brings significant sales experience and a proven track record. Suzy has been instrumental in shaping the market and forming strategic relationships. Our company’s uncompromising focus is sales. The latest person to join the PaperClip team is Ken Prillaman. He comes to us from Bisys Insurance Service, the largest life insurance broker in the US. Ken served as Executive Vice President at Bisys, in charge of the business operations. Ken will serve as Director of Insurance Marketplace and brings a wealth of knowledge and relationships with him. We are a diverse, talented and highly motivated group. In what other company would you find a Webmaster willing to be in charge of shipping?

TWST: How could the investment community better understand PaperClip? As you speak with potential investors, potential customers and analysts in the industry, what are the misperceptions that they have that you need to confront?

Mr. Bridges: PaperClip has endured two rather difficult challenges in its history, which has caused trepidation within the investment community. Shortly after going public in September 1995 our underwriter was closed by the SEC for securities irregularities. The second was an aborted merger attempt with Access Solution International (ASI). The association with AR Baron prevented us from securing additional financing from the public for the completion of our initial business plan. It is now over four years after the closure of AR Baron and PaperClip has never been implicated or investigated by the SEC for any wrongdoing. Management feels now that this episode is far behind us, the investment community should not see our prior association with AR Baron as relevant. The merger with ASI was not consummated due to ASI’s inability to secure the required financing necessary to execute the business plan. The failed merger resulted in leaving PaperClip a debt to ASI of approximately $3.2 million. The impact of this debt on the company’s balance sheet has been an obstacle in customers willing to move forward with us, and in securing new financing. Management has just completed negotiations with ASI for a restructuring plan that eliminates 85% of the debt and relieves the company of over $220,000 of yearly interest payments. With both of these issues behind us, we feel confident we will be able to secure additional financing to execute the business plan.

TWST: What is the summary statement that would convince an investor to buy in?

Mr. Bridges: E-commerce, the B2B process, is the greatest challenge for corporate America today. Fundamental to that process, is communications. If you cannot communicate, you cannot transact business. PaperClip enables companies, with the ability to communicate across the Internet in a straight-through processing model, decreasing cost and times of process by an order of magnitude. We are very excited that our customer base and strategic partners have validated our products and services, and we’re positioned to grow dramatically over the next three years.

TWST: Thank you. (DA)

D. MICHAEL BRIDGES
 President
 PaperClip Software, Inc.
 611 Route 46 West
 Hasbrouck Heights, NJ 07604
 (800) 329-3503 - Toll-free
 (201) 329-6300
 (201) 329-0613 - FAX
 www.paperclip.com
 e-mail: mbridges@paperclip.com

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