SecProbe.io

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                                       PAPERCLIP SOFTWARE, INC.
                                          611 ROUTE 46 WEST
                                      HASBROUCK HEIGHTS, NJ 07604

                                                               August 2, 2005

VIA EDGAR
Mr. Stephen Krikorian, Branch Chief
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549

Re:      PaperClip Software, Inc. (the 'Company')
         Form 10-KSB for the Fiscal Year Ended December 31, 2004
         Form 10-QSB for the Fiscal Quarter Ended March 31, 2005
         File No. 000-26598

Dear Mr. Krikorian:

     Set  forth  below  are  our  responses  to the  comments  (the  "Comments")
contained  in  the  letter  of the  staff  (the  "Staff")  of  the  Division  of
Corporation Finance of the Securities and Exchange Commission (the "Commission")
dated June 28, 2005 to Mr.  William Weiss of the Company (the "Comment  Letter")
with respect to the  above-referenced  filings. The numbered responses set forth
below  correspond to the paragraphs of the Comment  Letter,  which bear the same
numbers.

Annual Report on Form 10-KSB for the Year Ended December 31, 2004

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

Statement Regarding Critical Accounting Policies

     1.  As  indicated  in Note 2 to the  financial  statements,  management  is
required to make estimates and assumptions  that affect the reported  amounts of
assets and liabilities and the reported  amounts of revenues and expenses during
the reporting  period.  Further,  due to the  materiality  and  possibility of a
change in the near term, as addressed in SOP 94-6, paragraphs 13(a) and (b), the
Company  determined  that  disclosure of the  significant  estimates  referenced
therein was appropriate.

     In determining  which,  if any, of the significant  estimates  described in
Note 2 to the financial statements also required specific disclosure in the MD&A
discussion  as  "critical  accounting   estimates,"  management  considered  the
criteria for such disclosure as set forth in SEC Release  33-8350  Sections I.E.
and V.  Management  determined  that the nature of the estimates were such that,
while they were required to be disclosed in Note 2 to the  financial  statements
pursuant to SOP 94-6, they did not involve  material" levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility
of such matters to change" so as to require  additional  disclosure  as critical
accounting estimates.

Item 8A. Controls and Procedures, page 18

     2. Although the Form 10-KSB  indicates  that the evaluation of controls and
procedures  was  performed  as of a date within 90 days prior to the date of the
filing of the report,  such  evaluation was in fact performed as of December 31,
2004.  This was an error in the Form  10-KSB  and will be  corrected  in  future
filings.

Item 10. Executive Compensation

1995 Stock Option Plan, page 26

     3. The 1995 Stock Plan allows an  Optionee,  subject to the approval of the
Plan's  administering  committee (which currently consists of the Company's full
Board of Directors),  to pay the exercise  price  pursuant to a  broker-assisted
cashless exercise program established by the Committee. Although the Plan allows
the above,  the Company  never  established  such a program or allowed  cashless
exercises.  Because this program has not been  activated,  a broker has not been
identified.  As there have been no cashless  exercises  effected,  including  no
cashless  exercises  effected  through a broker  that is a related  party of the
Company, the Company has not been required to consider the criteria in paragraph
244 of EITF 00-23.

Statements of Operations, page 3

     4. The salaries and related  benefits line item currently  reflected in the
statement of  operations  reflect such  expenses that relate to both the selling
and general and  administrative  functions.  All salaries  and related  benefits
related  to  research  and  development   were  included  on  the  research  and
development  expenses line item. The salaries and related  benefits  relating to
the selling  and  general  and  administrative  functions  were  presented  on a
separate line item because of the materiality of such expenses.

     However,  after  a  review  of the  Staff's  comment,  in  future  filings,
including quarterly filings, salaries and related benefits will be included with
the appropriate  categories for the current and previous periods.  Additionally,
disclosure within the footnotes will be considered to clarify total salaries and
related expenses.

Note 2-Summary of Significant Accounting Policies

Revenue Recognition, page 6

     Comments 5-8 will be addressed  individually;  however,  the following is a
brief description of the Company's typical sales process.

     Sales created by the Company are through Value Added Resellers ("VARs") and
end  users.  Such  sales  are  generally  driven  by the  immediate  need of the
customers.  Normally,  VARs  do not  establish  an  inventory  of the  Company's
products, but rather order such products "just in time" to meet the needs of the
customers of the VARs.  Sales of each component are either billed  separately or
broken out, by item, on each invoice.

     Further,  the Company has established  multiple interacting criteria before
determining  when  revenue  should be  recognized.  Each  criterion  is analyzed
individually and in connection with the other criteria.

     5. Sales can include elements, such as license,  support,  installation and
training.  Revenues  for  software  sales are  recognized  upon  delivery of the
software and the  satisfaction of the other criteria set forth in paragraph 8 of
SOP 97-2. As indicated in Note 2, management has determined,  in the case of the
Company's  products,  any installation and training support provided incident to
software delivery not to be significant.  However, all contractual support (i.e.
support billed  separately and for a specified  time) is deferred and recognized
over the term of such support agreement.

     Generally,  the Company's  sales of its products and services are billed to
customers on various  invoices or on a single invoice,  in either case detailing
each element and the price  thereof to the  customer.  Pricing of the  Company's
products and services are  relatively  standard  among the  Company's  different
customers,  and the Company has experience in selling such elements  separately,
enabling the Company to value each element independently.  Accordingly, multiple
element arrangements that would require management to estimate the allocation of
one global sales price to each element do not exist. The Company has the ability
to determine the vendor  specific  objective  evidence  (VSOE) of fair value for
each element in accordance  with paragraph 10 of SOP 97-2.  Although  management
had  determined  that,  in  light  of the  foregoing,  the  existing  disclosure
adequately described the accounting policies for each element, in future filings
the Company will enhance its disclosure regarding such accounting policies.

     6. As  addressed  above,  post  delivery  obligations  which could  include
installation  and training have been  determined not to be  significant.  If the
agreements  did  include  such  obligations  and these  obligations  were deemed
significant,  then revenue recognition would be deferred until the services have
been adequately performed.

     7. The Company's delivery and payment  arrangements do not contain extended
payment  terms as defined in paragraph  27 of SOP 97-2.  The  Company's  payment
terms are generally net 30 days.

     8. As detailed above,  agreements with distributors and resellers are on an
immediate as needed basis. Generally, sales to resellers are symmetrical in that
they have been presold by the  reseller to the  reseller's  customers,  and thus
receipts  of payments  for orders  placed by  resellers  are not  contingent  on
factors such as the reseller's  success in distributing  individual units of the
product or the  reseller's  capitalization.  Further,  the Company has not had a
practice of refunds, nor has it had agreements that include characteristics such
as credits, contingent payments, price reductions or rebates. Accordingly, after
consideration  of the factors  enumerated in SOP 97-2  paragraph 30, the Company
typically  determines  that the  fixed or  determinable  fee and  collectibility
criteria for revenue recognition are met upon delivery of software to resellers.

Note 5-Debt, page 10

     9. The extinguishment of a portion of accounts payable in fiscal years 2003
and 2004  resulted  from the  passage of time and the  effect of the  statute of
limitations.  The  provision  of the  statute  of  limitations  that  applies to
contracts,  which  would  govern  payables  to vendors  for  services  rendered,
provides  that an action  based  upon a  contractual  obligation  or  liability,
express or implied, must be commenced within six years. Thus, the enforcement of
any  claims  by  such  affected  vendors  would  be  barred  by the  statute  of
limitations.  In making the  determination  that  enforcement  was barred by the
statute of limitations, the Company received advice of counsel. Accordingly, the
Company  determined  that it was legally  released from such  obligations by the
respective  creditors  by  operation  of law,  and  that it was  required  under
generally accepted  accounting  principles to reverse such old accounts payable.
In coming to such determination, the Company considered SFAS 140 paragraph 16 as
well as SFAS 5 (Accounting for Contingencies).  Under SFAS 5, if the probability
that a future  event  will not  confirm a loss is  remote,  then no  accrual  is
required or permitted.  In this case,  where the  enforcement of the obligations
was  barred  by the  statute  of  limitations,  the  probability  of a loss  was
certainly remote.  The applicability of SFAS 140 paragraph 16b and SFAS 5 to the
foregoing  fact  pattern  was  also  specifically  reviewed  with  the  American
Institute of Certified Public  Accountants  prior to the  extinguishment of such
portion of accounts payable.

     Pursuant to the request contained in the Comment Letter, the Company hereby
acknowledges the following:

     a.  The  Company  is  responsible  for the  adequacy  and  accuracy  of the
disclosure in this filing

     b. Staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission  from taking any action with respect to the filing;
and

     c. The Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under federal  securities  laws of the
United States.

We hope the above satisfactorily responds to your comments.

                                                     Very truly yours,
                                                     /s/ William Weiss
                                                     William Weiss,
                                                     Chief Executive Officer and
                                                     Principal Financial Officer

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