U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 2001
---------------
[_] Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from ____________________ to ____________________
Commission File Number: 028836
------------------------------
Paradigm Advanced Technologies, Inc.
------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 33-0692466
---------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
30 Leek Crescent, Suite 103, Richmond Hill, Ontario L4B 4N4 Canada
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(Address of Principal Executive Offices)
(905) 764-3701
--------------
(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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
-------- ---------
As of May 9, 2001 the issuer had 88,701,746 shares of its common stock
issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes No X
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
----
ITEM 1. Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 1 - 2
Consolidated Statements of Operations for the three months ended
March 31, 2001 and 2000 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 4 - 5
Consolidated Statements of Stockholders' Equity for the three months ended
March 31, 2001 and years ended December 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7 - 21
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 25
SIGNATURES
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 1 - 2
Consolidated Statements of Operations for the three months ended
March 31, 2001 and 2000 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 4 - 5
Consolidated Statements of Stockholders' Equity for the three months ended
March 31, 2001 and years ended December 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7 - 21
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
March 31, December 31,
2001 2000
(audited)
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 675,831 1,453,858
Miscellaneous receivables 334,180 85,322
Prepaids and deposits 180,430 251,451
Inventory 281,737 91,296
--------- ---------
TOTAL CURRENT ASSETS 1,472,178 1,881,926
CAPITAL ASSETS (note 4) 298,001 167,095
INTELLECTUAL PROPERTY (note 5) 13,896,914 14,240,400
INVESTMENTS (note 9) 613,550 613,550
--------- ---------
16,280,643 16,902,971
========== ==========
1
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
March 31, December 31,
2001 2000
(audited)
$ $
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 1,908,720 1,741,015
Loans payable (note 6) 368,192 671,653
---------- ----------
2,276,912 2,412,668
---------- ----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK (note 8)
Share Capital
Authorized
100,000,000 Common Stock at $0.0001 par value
Issued and outstanding stock
85,390,496 as of March 31, 2001 8,538 --
77,973,829 as of December 31, 2000 -- 7,797
Additional paid-in capital 72,868,302 66,316,298
Cumulative other comprehensive income (note 13) 139,530 15,461
DEFICIT (59,012,639) (51,849,253)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 14,003,731 14,490,303
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 16,280,643 16,902,971
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
2
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
Cumulative For the three For the three
since months ended months ended
inception March 31, 2001 March 31, 2000
$ $ $
REVENUE
Sales 192,709 45,705 -
Royalties 40,000 15,000 -
Interest 61,844 7,350 -
----------- ---------- -----------
294,553 68,055 -
----------- ---------- -----------
OPERATING EXPENSES
Cost of sales 475,045 35,199 -
Research and development 20,465,629 4,828,391 14,836,666
Selling, general and administration 33,772,857 1,154,019 271,740
Interest 2,523,060 823,017 13,604
Amortization 1,140,601 390,815 13,341
Write-off investment in subsidiary 930,000 - -
----------- ---------- -----------
TOTAL OPERATING EXPENSES 59,307,192 7,231,441 15,135,351
----------- ---------- -----------
LOSS BEFORE INCOME TAXES (59,012,639) (7,163,386) (15,135,351)
Income taxes (note 15) - - -
----------- ---------- -----------
NET LOSS (59,012,639) (7,163,386) (15,135,351)
=========== ========== ===========
Loss per share (0.09) (0.44)
========== ===========
Weighted average common shares outstanding during period 81,845,218 34,660,258
========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
3
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
Cumulative For the three For the three
since months ended months ended
inception March 31, March 31,
2001 2000
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period (59,012,639) (7,163,386) (15,135,351)
Items not requiring an outlay of cash
Amortization of capital assets 1,140,601 390,815 13,341
Research and development included
in acquisitions 18,589,428 4,712,762 14,836,666
Options issued to consultants 24,675,162 73,000 -
Options issued to employees with
strike price below market price 1,754,650 - -
Common stock and options issued in
payment of expenses 180,578 - -
Conversion feature on settlement of loans 351,520 - -
Fair value of cashless warrants granted 393,966 - -
Amortization of conversion feature on
debentures 1,453,858 680,000 -
Patent license fee 29,000 - -
Common stock issued on acquisition
of patent license 19,500 - 19,500
Exercise of stock options & warrants (22,337) - -
Increase in warrants regarding prior
period adjustments 160,541 - -
Write-off of investment in subsidiary 930,000 - -
Patent license write-off 129,393 - -
Capital assets written off 31,059 - -
Net changes in non-cash working
capital items related to operations
Miscellaneous receivables (119,577) (33,600) (11,725)
Inventory (83,084) 9,092 -
Prepaids and deposits (340,273) 66,587 -
Accounts payable 2,009,201 260,960 (138,175)
----------- ---------- -----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES (7,729,453) (1,003,770) (415,744)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans payable 1,277,504 (250,000) (200,923)
Proceeds of common stock issuance 8,300,163 473,500 1,920,439
----------- ---------- -----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES 9,577,667 223,500 1,719,516
----------- ---------- -----------
4
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
Cumulative For the three For the three
since months ended months ended
inception March 31, March 31,
2001 2000
$ $ $
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (332,836) (95,235) (300,000)
Acquisition of intellectual property (30,937) - -
Acquisition of equity investment (16,050) - -
Acquisition of subsidiary (930,000) - -
---------- ------- --------
NET CASH FLOWS FROM INVESTING
ACTIVITIES (1,309,823) (95,235) (300,000)
---------- ------- --------
Effect of foreign currency exchange
rate changes 137,440 97,478 -
-------- ------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS FOR THE PERIOD 675,831 (778,027) 1,003,772
==========
Cash and cash equivalents - beginning of period 1,453,858 65
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD 675,831 1,003,837
======= =========
Cash and cash equivalents are comprised as follows:
Cash 534,775 603,837
Short-term investments 141,056 400,000
------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD 675,831 1,003,837
======= =========
INCOME TAXES PAID - -
======= =========
INTEREST PAID - -
======= =========
Note: See note 12 for supplemental information
The accompanying notes are an integral part of these consolidated financial statements.
5
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
Common Stock
------------ Additional
Shares Amount Paid-In Capital Deficit
------ ------ --------------- -------
Balance at December 31, 1998 29,796,662 $ 2,980 $ 4,780,945 $ (4,824,132)
Loss for the year (873,771)
Debentures redeemed 200,000 20 9,980
------------- ------------- --------------- ---------------
Balance at December 31, 1999 29,996,662 3,000 4,790,925 (5,697,903)
Loss for the year (46,151,350)
Exercise of stock options and
warrants 15,419,592 1,542 2,423,617
Issued for cash 3,961,090 396 1,235,490
Debentures redeemed 8,141,250 814 442,511
Issued on acquisition of
PowerLoc 3,650,000 365 13,876,301
Issued on acquisition of
patent license 100,000 10 48,490
Issued for other consideration 2,305,235 230 180,353
Patent acquisition 8,700,000 870 19,782,630
Issued for WorldLink USA LLP 3,700,000 370 429,130
Loan converted to stock 2,000,000 200 499,800
Options issued to consultants 24,383,917
Options issued for patent rights 4,350,000
Options issued to employees 1,754,650
Subscriptions receivable (9,240,000)
Conversion feature on loans &
debentures 396,518
Fair value of warrants
exercised 393,966
Common stock payable 568,000
------------- ------------- --------------- ---------------
Balance at December 31, 2000 77,973,829 7,797 66,316,298 (51,849,253)
Loss for the period (7,163,386)
Exercise of stock options and
warrants 350,000 35 17,465
Issued for cash 1,122,121 112 455,888
Issued on acquisition of Naftel assets 3,000,000 300 4,999,700
Loan converted to stock 1,415,256 141 47,735
Subscriptions receivable 619,546 62 218,778
Issued for other consideration 909,744 91 132,438
Warrant feature on Debentures 680,000
------------- ------------- --------------- ---------------
Balance at March 31, 2001 85,390,496 $ 8,538 $ 72,868,302 $ (59,012,639)
=============== ============= =============== ================
6
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
1. BUSINESS OVERVIEW
Paradigm Advanced Technologies, Inc. ( the "Company") is a
technology development company incorporated in Delaware on January
12, 1996. The Company owns the licensing rights to a broad based
patent that covers the process by which satellite location signals
are transmitted over a cellular network to a base unit. The Company
is developing a complete location based commerce solution, using a
proprietary system architecture that includes mobile units that
integrate global positioning system (GPS) receivers along with
wireless cellular transceivers, as well as tracking servers. The
Company is also developing navigation and mapping technologies which
compress detailed street maps on devices with limited onboard
memory.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Use of estimates
These consolidated financial statement have been prepared in
accordance with generally accepted accounting principles in the
United Stated of America. Because a precise determination of assets
and liabilities, and correspondingly revenues and expenses, depends
on future events, the preparation of consolidated financial
statements for any period necessarily involves the use of estimates
and assumptions. Actual amounts may differ from these estimates.
These consolidated financial statements have, in management's
opinion, been properly prepared within reasonable limits of
materiality and within the framework of the accounting policies
summarized below.
b) Principles of Consolidation
The Company's consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated.
Consolidation commenced with the effective dates of acquisition of
the operations of the wholly owned subsidiaries and these
consolidated financial statements include the financial results of
the wholly owned subsidiaries to March 31, 2001.
c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances with banks and
short-term investments with original maturities of less than three
months.
d) Capital assets
Capital Assets are recorded at cost less accumulated depreciation.
Amortization is provided using the following annual rates:
Furniture and Fixture - 20% - declining balance method
Computer Equipment - 30% - declining balance method
Computer software - 50% - straight-line method
Leasehold improvements - over the initial term of the lease
7
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
e) Intellectual Property
Intellectual properties are recorded at cost less accumulated
amortization. Amortization is provided over their estimated useful
lives:
Patent Rights - 10 years - straight-line method
f) Investments
The Company has a 50% non-controlling investment in a non-publicly
traded company, which is accounted for using the equity method of
accounting. Under the equity method, the pro-rata share of the
investee's earnings since acquisition is recorded as income and
added to the carrying value of the investment shown on the balance
sheet. Dividends received are considered as a return of capital and
are accordingly deducted from the carrying value of the investment.
The Company monitors this investment for impairment and makes
appropriate reductions in carrying values when appropriate.
g) Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable, accounts payable and loans payable approximates fair
value at the period end.
h) Foreign Currency Translation
Wholly-owned subsidiaries of the Company maintain their books and
records in Canadian dollars and New Israeli Shekels. Foreign
currency transactions are reflected using the temporal method. Under
this method, all monetary items are translated into local funds
at the rate of exchange prevailing at balance sheet date.
Non-monetary items are translated at historical rates. Income and
expenses are translated at the rate in effect on the transaction
dates. Transaction gains and losses are included in the
determination of earnings for the year.
The translation of the consolidated financial statements of these
wholly-owned subsidiaries from their respective foreign currencies
into United States dollars is performed for the convenience of the
reader. Balance sheet accounts are translated using closing exchange
rates in effect at the balance sheet date and income and expense
accounts are translated using an average exchange rate prevailing
during each reporting period. No representation is made that the
foreign amounts could have been or could be realized at the
conversion rates. Adjustments resulting from the translation are
included in cumulative other comprehensive income in stockholders'
equity.
8
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
i) Loss per Share
The Company has adopted Financial Accounting Standards No.
128,"Earnings per Share" ("FAS 128"). FAS 128 requires presentation
of basic and diluted earnings or loss per share. The Company has
potentially dilutive shares, however, because the Company has a
loss, the potentially dilutive shares are deemed anti-dilutive and
only the basic loss per share is presented. Loss per share is
computed by dividing net income by the weighted average number of
shares outstanding during the period.
j) Income taxes
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for the future
tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred income
taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant
temporary differences between the tax and financial statement bases
of assets and liabilities.
Current income tax expense (recovery) is the amount of income taxes
expected to be payable (recoverable) for the current year. A
deferred tax asset and/or liability is computed for both the
expected future impact of differences between the financial
statement and tax bases of assets and liabilities and for the
expected future tax benefit to be derived from tax losses. Valuation
allowances are established when necessary to reduce deferred tax
asset to the amount expected to be "more likely than not" realized
in future returns. Tax law and rate changes are reflected in income
in the period such changes are enacted.
k) Stock-based compensation plan
In December 1995, SFAS No. 123, Accounting for Stock-Based
Compensation was issued. It introduces the use of a fair value-based
method of accounting for stock-based compensation. It encourages,
but does not require, companies to recognize stock-based
compensation expenses to employees based on the new fair value
accounting rules. Companies that choose not to adopt the new rules
will continue to apply the existing accounting rules continued in
Accounting Principles Board Opinion No. 25, Accounting for stock
issued to employees. However, SFAS No. 123 requires companies that
choose not to adopt the new fair value accounting rules to disclose
pro forma net income and earnings per share under the new method.
The Company has adopted the disclosure provisions of SFAS No. 123.
l) Research and Development
Research and development costs, other than capital expenditures but
including acquired research and development costs, are charged
against income in the period incurred.
9
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
m) Revenue recognition
Sales are recognized upon delivery of goods and passage of title to
customers. Licence fees are recognized as income over the terms of
the licenses.
n) Comprehensive income
The Company has adopted SFAS No. 130 Reporting Comprehensive Income.
This standard requires companies to disclose comprehensive income in
their consolidated financial statements. In addition to items
included in net income, comprehensive income includes items
currently charged or credited directly to stockholders' equity, such
as foreign currency translation adjustments.
o) Government assistance
Government assistance towards research and development expenditures
is received as grants from National Research Council Canada,
Industrial Research Assistance Program and in the form of investment
tax credits. All assistance is credited against the related
expenditures, when received.
p) Inventory
Inventories of parts are valued at the lower of cost (first-in,
first-out basis) or market.
Finished goods are valued at the lower of cost or market. Cost is
calculated using selling price less normal gross margin.
q) Long-Lived assets
The Company has adopted the provisions of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. SFAS No. 121 requires that long-lived assets to be
held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Management used its best
estimate of the undiscounted cash flows to evaluate the carrying
amount and have determined that no impairment has occurred.
10
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
r) Concentration of Credit Risks
The Company's receivables are unsecured and are generally due in 90
days. Currently, the Company's customers are primarily purchasers of
location devices. The Company's receivables do not represent
significant concentrations of credit risks as at December 31, 2000
due to their immateriality.
s) Recent Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." In June 1999, the FASB issued Statement No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133." In June
2000, the FASB issued Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment
of FASB Statement No. 133." SFAS No. 133, as amended, establishes
accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS No. 133 requires that
changes in the derivative instrument's fair value be recognized
currently in earnings unless specific cash flow hedge accounting
criteria are met, in which case the change is recognized in Other
Comprehensive Income. Special accounting for qualifying fair value
hedges allows a derivative instrument's gains and losses to offset
related changes in fair value of the hedged item in the income
statement, to the extent effective. To qualify for cash flow or fair
value hedge accounting, SFAS No. 133 requires that a company must
formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133, as
amended, is effective for fiscal years beginning after June 15,
2000. SFAS No. 133 cannot be applied retroactively. The adoption of
this standard would not have a material impact on the Company's
financial position, results of operations and cash flows.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition
in Financial Statements. SAB 101 provides guidance on applying
generally accepted accounting principles to revenue recognition
issues in financial statements. The company adopted SAB 101 as
required by December 31, 2000 and the adoption did not have a
material impact on the company's financial position, results of
operations or cash flows.
In September 2000, the FASB issued SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. This statement is effective for transfers and servicing
of financial assets and extinguishment of liabilities occurring
after March 31, 2001. SFAS No. 140 also includes provisions that
require additional disclosures in the financial statements for
fiscal years ending after December 15, 2000. This statement is not
expected to have a material impact on the company's financial
position, results of operations or cash flows.
11
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
3. GOING CONCERN
The Company is in its development stage and has not yet earned any
significant revenues. Consequently, the Company has incurred losses
since its incorporation in 1996. The Company has funded its
operations to date through the issuance of shares and debt.
The Company plans to continue its efforts to acquire equity partners,
to make private placements, and to seek both private and government
funding for its projects. In the period January 1, 2000 to December
31, 2000, the Company raised approximately $4,061,000 through the
exercising of stock options and warrants and through the issuance of
common shares for cash.
4. CAPITAL ASSETS
March 31, December 31,
2001 2000
$ $
Furniture, fixtures and computers 347,874 199,639
Less: accumulated amortization (49,873) (32,544)
---------- ----------
298,001 167,095
========== ==========
5. INTELLECTUAL PROPERTY
March 31, December 31,
2001 2000
$ $
Patent Rights 14,954,437 14,924,437
Less: accumulated amortization 1,057,523 684,037
---------- ----------
13,896,914 14,240,400
========== ==========
Patent Rights - During the year ended December 31, 2000 the Company
issued 4,500,000 common shares, valued at $10,543,500 to acquire the
licensing rights to US Patent # 5043736. The patent is for a broad
based process patent, which covers the apparatus and method of
transmitting position information from satellite navigational signals
(such as GPS) over cellular systems to a base unit and displays the
location of a person or object, so equipped.
12
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
5. INTELLECTUAL PROPERTY (cont'd)
The vendor was also issued 4,200,000 common shares subject to an
escrow agreement which the Company has recorded as a subscription
receivable. The vendor may, at any time after July 16, 2001, require
the escrow agent to sell the shares, and remit to the Company from
the proceeds at a price per share of $2.20, up to July 16, 2002, and
that amount plus $0.20 per share per year, thereafter.
The Company also issued 3,000,000 options for common shares for
services rendered in acquiring the licensing rights to the patent.
The fair value of the options granted was estimated at $4,350,000 on
the date of grant using the Black-Scholes pricing model using the
following assumptions:
Risk-free interest rate 6.7%
Dividend yield 0%
Expected life 4 years
Stock price volatility 100%
As the agreements terminated the previously owned agency rights to
license the use of the patent, the net book value of the patent
agency agreement was written off in the year ended December 31, 2000,
resulting in a charge to earnings of $129,393.
During the year ended December 31, 2001, as part of the acquisition
of the assets of NaftEl (note 9), the company acquired six patents to
which it allocated a value of $30,000.
6. LOANS PAYABLE
Loans payable include loans amounting to $143,192 (December 31, 2000
- $196,653) which are payable on demand and are secured by a pledge
over all the assets of the Company, with interest at a rate of prime
plus 4%.
A loan of $225,000 (December 31, 2000 - $475,000) is secured by a
pledge over all the assets of the Company with interest at a rate of
10%. The loan is repayable, with accrued interest, on July 31, 2001.
The lender has the option to convert the balance of the loan at any
time into common stock at a price of $1.00 per share.
7. RELATED PARTY TRANSACTIONS
Of the loans payable in note 6, $241,287 at March 31, 2001 was owing
to directors of the Company or a company with which they are
affiliated. Accounts payable and accrued liabilities at March 31,
2001 includes $71,886 of interest accrued on these loans and interest
expense for the three months ended March 31, 2001 includes interest
of $10,376 accrued for related party loans.
13
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
8. CAPITAL STOCK
The following table summarizes activity under the stock option plan:
Weighted
Number of average
Options Price per share exercise price
------------- --------------- --------------
- Options outstanding, December 31, 1998 9,803,201 $0.05 - $0.40 $0.06
- Options granted 13,235,000 $0.01 - $0.08 $0.05
------------- ---------------- --------------
Options outstanding, December 31, 1999 23,038,201 $0.01 - $0.40 $0.06
- Options granted 31,725,666 $0.05 - $12.50 $1.58
- Options expired (668,334) $0.05 - $3.00 $0.87
- Options exercised (5,613,867) $0.01 - $2.00 $0.06
------------- ---------------- --------------
Options outstanding, December 31, 2000 48,481,666 $0.05 - $12.50 $1.04
- Options granted 5,768,000 $0.66 - $1.30 $0.96
- Options expired (825,000) $1.50 - $4.00 $1.81
- Options exercised (350,000) $0.05 - $0.05 $0.05
------------- ---------------- --------------
Options outstanding, March 31, 2001 53,074,666 $0.05 - $12.50 $1.03
============= ================ ==============
Options outstanding do not include 1,248,750 Exchangeable Shares which
arise out of the acquisition of PowerLOC (note 9).
Under an agreement for consulting services the Company is committed to
issue an additional 7,000,000 options at exercise prices ranging from
$2.00 to $4.00 per share.
In February 2001, 2,000,000 shares were issued in payment of the loan
of $51,000 from a director and shareholder.
The following warrants were outstanding at March 31, 2001:
Number of
Expiry date Price range Warrants
----------- ----------- --------
2001 $0.10 - $0.25 5,500,000
2003 $0.04 - $2.50 8,778,667
2004 $1.00 1,500,000
2005 $0.75 - $2.75 381,667
2008 $1.00 - $9.00 10,000,000
2010 $1.00 12,500,000
----------
Total warrants outstanding 38,660,334
==========
14
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
8. CAPITAL STOCK (cont'd)
Employee Stock Option Plan
The 1996 stock option plan provides for the grant of incentive stock
options for the purchase of the Company's common stock to officers,
directors, employees and consultants of the Company or any subsidiary
corporation. The total number of shares which may be issued under the
plan is 10,000,000. A committee, appointed by the board of directors,
administers the plan. The committee sets the price at which the
option is granted, the dates on which it shall be exercisable and the
expiration date.
9. BUSINESS ACQUISITIONS
a) NaftEl acquisition
In February 2001 the Company entered into an asset purchase agreement
to purchase all of the assets of an Israeli company, NaftEl
Technologies Ltd. ("NaftEl"). NaftEl is engaged in the development,
manufacturing and marketing of interactive navigational and fleet
management devices, including, inter alia, a map compression format,
and owns certain intellectual property rights pertaining thereto. The
Company will account for the acquisition using the purchase method.
Consideration given was as follows:
Issuance of 3,000,000 common shares @ $1.66 $ 5,000,000
Costs incurred 50,000
---------------
$ 5,050,000
===============
The purchase price has been allocated as follows:
Capital assets $ 53,000
Inventory 204,238
Patents 30,000
Research and development expenses 4,762,762
---------------
$ 5,050,000
===============
Included in the assets acquired was software and technology for the
interactive navigational and fleet management devices, including,
inter alia, a map compression format and intellectual property rights
pertaining thereto. These development costs were allocated to
research and development expenses in terms of FAS 2 (Accounting for
Research and Development Costs).
15
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
9. BUSINESS ACQUISITIONS (cont'd)
The agreement provides for additional consideration as follows:
o When 3,000,000 common shares above, or part thereof,
become free trading or eligible for registration, should the
market value of those shares at that time not be at least
$1.66 each, up to a maximum of 2,000,000 additional common
shares will be issued in order to, when combined with the
3,000,000 common shares issued, bring the total market value
of the consideration to $5,000,000.
o 10,000,000 warrants for common shares are held in escrow
for the vendors and are subject to a vesting schedule, based
on the Company achieving specified progressive revenue
targets, ranging from $1,000,000 to $5,000,000, from the
commercialization of the purchased assets. The exercise
prices of the warrants range from $1 to $9, based on the
revenue targets achieved.
b) PowerLOC acquisition
On March 29, 2000, the Company completed the acquisition of 100%
of Power Point Micro Systems Inc. and PowerLOC Technologies
Inc.(a Bahamas company), ("PowerLOC"). The acquisition has been
accounted for using the purchase method. PowerLOC Technologies
Inc. is a research and development company that has developed a
low-cost, miniature mobile-location GPS unit that transmits its
position to a base station through existing PCS, pager or
cellular phone wireless networks. Power Point Micro Systems Inc.
is an international telecommunications consulting firm
specializing in wireless and wireline, voice and data systems
integration. Consideration was as follows:
Cash $ 300,000
Issuance of 3,650,000 common shares @ market value of $1.72 6,278,000
Issuance of 1,350,000 exchangeable shares @ market value of $1.72 2,322,000
Issuance of 4,166,666 options for common shares @ market value of $1.42 5,916,666
Costs incurred 29,731
---------------
$ 14,846,397
===============
The definitions of beneficial ownership and the number of shares
outstanding apply to shares of common stock and exchangeable
shares as though they were the same security.
The purchase price was allocated to research and development
expenses in terms of FAS 2 (Accounting for Research and
Development Costs).
16
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
9. BUSINESS ACQUISITIONS (cont'd)
PowerLOC Technologies Inc. (Bahamas) remains the owner of the
location technology acquired in the transaction and any
improvements. Another subsidiary of Paradigm, PowerLOC
Technologies Inc. (an Ontario corporation) is currently
marketing and enhancing the technology under license from
PowerLOC.
The shares of the acquired companies have been pledged as
security for the performance of the Company under the terms of
the agreement.
The fair value of the options granted was estimated on the date
of grant using the Black-Scholes pricing model using the
following assumptions:
Risk-free interest rate 6.7%
Dividend yield 0%
Expected life 3 years
Stock price volatility 100%
A loan of $640,000 to the vendor of PowerLOC has been advanced
pursuant to the acquisition agreement and treated as a reduction
of paid in capital. The repayment of this loan is contingent
upon future share price fluctuations of the 2,000,000 free
trading common shares issued as a result of the PowerLOC
acquisition and which is included in the 3,650,000 common shares
mentioned above.
c) WorldLink acquisition
The Company entered into an agreement ("the Agreement") with
Pangea Petroleum Corporation ("Pangea") to form a strategic
alliance. The primary activity of the joint venture will be to
act as an incubator in seeking out companies with technologies
in which WorldLink can make appropriate investments in new and
complimentary technologies. As part of the Agreement, the
Company and Pangea agreed as follows:
i) The Company acquired all of the Class B membership units of
WorldLink USA, L.L.C. ("WorldLink") for 7,500,000 common shares
and 12,500,000 warrants, issued to WorldLink. These units
represent 50% of the membership units of Worldlink. WorldLink is
a development stage company that owns or licenses video
streaming, a library of concerts and Audio Streaming Format
production.
ii) The Company has issued only 2,700,000 of the common shares and
has a commitment to issue the remaining 4,800,000 common shares
to WorldLink within five days of the approval of the Company's
shareholders to an increase in the authorized share capital of
the Company, but in no event later than April 30, 2001. The
value of the stock committed of $168,000 is recorded as common
stock payable.
17
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
9. BUSINESS ACQUISITIONS (cont'd)
iii) Pangea acquired all of the Class A Membership Units of WorldLink
in exchange for 12,500,000 warrants of Pangea, issued to
WorldLink. These units also represent 50% of the membership
units in Worldlink.
iv) The Company issued 1,000,000 common shares, valued at $35,000,
in payment of professional and consulting fees.
v) In the event of the liquidation of WorldLink, the Class A
membership units have a liquidation preference in and to the
Paradigm securities, and the Class B membership units have a
liquidation preference in and to the Pangea securities.
The acquisition has been accounted for using the purchase method. The
assets of Worldlink acquired and the consideration given by the
Company are summarized as follows:
a) Assets acquired (50% interest):
Equipment $ 1,000
Investments 612,550
---------------
$ 613,550
===============
b) Consideration given:
8,500,000 common shares $ 297,500
12,500,000 warrants 300,000
Costs incurred 16,050
---------------
$ 613,550
===============
The fair value of the options granted was estimated on the date of
grant using the Black-Scholes pricing model using the following
assumptions:
Risk-free interest rate 6.6%
Dividend yield 0%
Expected life 10 years
Stock price volatility 100%
18
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
10. LEGAL PROCEEDINGS
Legal proceedings have been threatened against the company by an
individual claiming an entitlement to 400,000 common shares for
services rendered. The Company believes that this claim is without
merit and intends to vigorously defend any such lawsuit should it be
filed against the Company. It is neither possible at this time to
predict the outcome of any lawsuit, including whether the Company
will be forced to issue common shares, or to estimate the amount or
range of potential loss, if any.
11. GOVERNMENT ASSISTANCE
Under an agreement with National Research Council Canada, Industrial
Research Assistance Program, a project was approved in 2000 for
Precommercialization Assistance of up to $314,000 for research and
development. This contribution will be repayable in the form of a
royalty of 1% of gross revenues for the year ending December 31,
2004, limited to a maximum of $471,000. If the full amount of the
assistance is not repaid at January 1, 2005 the royalty continues
until the earlier of full repayment, or for ten years.
No amounts have been accrued with regard to this project as the
conditions for repayment have not yet been met.
Government assistance has been applied to reduce research and
development expense as follows:
For the three For the three
months ended months ended
March 31, 2001 March 31, 2000
$ $
Research and development 5,090,869 -
Government assistance 262,478 -
------------- -------------
4,828,391 -
============= =============
19
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-monetary transactions:
For the three For the three
months ended months ended
March 31, 2001 March 31, 2000
$ $
Shares issued for acquisitions 5,000,000 8,600,000
Options and warrants issued for acquisitions - 5,916,666
Shares issued for redemption of convertible debentures - 235,325
Exercise of stock options and warrants 17,500 -
Loan converted to stock 47,876 -
Subscriptions receivable 218,840 -
Stock issued for other consideration 59,529 -
13. COMPREHENSIVE LOSS
For the three For the three
months ended months ended
March 31, 2001 March 31, 2000
$ $
Net loss 7,163,386 15,135,351
Foreign currency translation adjustment (124,069) -
--------- ---------
7,039,317 15,135,351
========= =========
The components of cumulative other comprehensive income are as
follows:
Cumulative other comprehensive income - December 31, 1999 -
Foreign currency translation adjustments for the year ended
December 31, 2000 15,461
---------
Cumulative other comprehensive income - December 31, 2000 15,461
Foreign currency translation adjustments for the three months ended
March 31, 2001 124,069
---------
Cumulative other comprehensive income - March 31, 2001 139,530
=========
20
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
14. COMMITMENTS
The Company leases premises under an operating lease with a ten year
term. Rent expense during the three months ended March 31, 2001 was
$36,872 (1999 - $2,000). Minimum lease commitments under the lease at
March 31, 2001 were:
2001 $ 67,590
2002 85,691
2003 85,691
2004 85,691
2005 85,691
Thereafter 483,960
-------------
$ 894,314
=============
15. INCOME TAXES
The tax effect of significant temporary differences representing
deferred tax assets is as follows:
For the three For the three
months ended months ended
March 31, 2001 March 31, 2000
$ $
Deferred tax assets:
Operating loss carryforwards 3,366,000 1,768,000
Valuation allowance (3,366,000) (1,768,000)
---------- ----------
Net deferred tax assets - -
========== ==========
The Company has determined that realization is not more likely than not
and therefore a valuation allowance has been recorded against this
deferred income tax asset.
The Company's statutory and effective tax rate is 34%.
The Company has certain non-capital losses of $9,900,000 available,
which can be applied against future taxable income and which expire
from 2007 to 2021.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The discussion below contains certain forward-looking statements (as such term
is defined in Section 21E of the Securities Exchange Act of 1934) that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. The Company's
results, performance and achievements in 2001 and beyond could differ materially
from those expressed in, or implied by, any such forward-looking statements. See
"Cautionary Note Regarding Forward-Looking Statements."
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
The Company recorded licensing revenue of $15,000 for the three months ended
March 31, 2001, resulting from licensing agreements relating to the patent which
was signed in the second quarter of 2000. The Company recorded product sales of
$45,705 for the three months ended March 31, 2001 as a result of the shipping of
PowerLOC L-BIZ tm vehicle location products. The Company recorded no revenues
for the three months ended March 31, 2000. The Company expects to earn increased
revenues in the future as it increases its patent licensing activities and
accelerates the sale and licensing of its PowerLOC products. The Company also
expects to start earning revenues from the sale of the Destinator product, which
was announced in March 2001, following the acquisition of the assets of NaftEL
Technologies Ltd. ("NaftEL"), which were acquired in February 2001.
The Company earned interest revenue of $7,350 for the quarter ended March 31,
2001 and no interest revenue for the quarter ended March 31, 2000, due to the
investment of cash received from the issuance of common shares and debt
financing.
Selling, General and Administration Expenses for the three months ended March
31, 2001 were $1,154,019 as compared to $271,740 for the three months ended
March 31, 2000. Operating expenses increased as a result of the acquisition of
PowerLOC Technologies, Inc., on March 28, 2000 and the acquisition of the
business of NaftEL Technologies Ltd. ("NaftEL") in February 2001. The Company
also incurred higher corporate professional fees and patent related costs as it
significantly increased its patent licensing activities.
Research and Development Expenses for the quarter ended March 31, 2001 were
$4,828,391 as compared to $14,836,666 for the quarter ended March 31, 2000. The
expenses for the quarter ended March 31, 2001 includes a charge of $4,762,762
representing the cost of the NaftEL acquisition, which was allocated to research
and development expenses in February 2001, while the expenses for the quarter
ended March 31, 2000 includes a charge of $14,836,666 representing the cost of
the PowerLOC acquisition, which was allocated to research and development
expenses in March 2000. Research and Development Expenses before non-cash
expenses increased during the quarter ended March 31 2001 due to costs incurred
on the development of the PowerLOC and NaftEL products. The PowerLOC development
costs were partly offset by the contribution of $262,478 received from the
National Research Council Canada, Industrial Research Assistance Program.
Depreciation and amortization charges for the three months ended March 31, 2001
were $390,815 as compared to $13,341 for the three months ended March 31, 2000
due to the amortization of the patent licensing rights.
The net loss for the three months ended March 31, 2001 before non-cash charges
amounted to $1,379,809 as compared to a loss of $285,344 for the three months
ended March 31, 2000. The higher loss reflects the increased selling, general
and development expenses incurred as a result of the increase in the PowerLOC
and NaftEL activities as well as the increased patent related expenses. Net Loss
after non-cash charges amounted to $6,410,386 for the three months ended March
31, 2001 and $15,135,531 for the three months
22
ended March 31, 2000 due to the expensing of the NaftEL (2001) and PowerLOC
(2000) acquisitions and the amortization of the patent licensing rights.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents on hand of $675,831 at March 31, 2001.
The Company raised in excess of $470,000 cash during the quarter ended March 31
2001 and $4,000,000 cash during the year ended December 31, 2000, through the
price paid to exercise stock options and warrants and through the issuance of
common shares. The Company also raised $1,000,000 through debt financing in
2000. The Company has raised additional funds subsequent to the quarter end and
intends to raise additional funds on an as-needed basis to finance its future
activities through the issuance and sale of additional shares of stock and the
assumption of additional debt and government funding. The Company does not have
any commitments for capital expenditures and believes that its current cash
balances will be sufficient to meet its operating and development needs for at
least the next three months. If the Company has not obtained additional
financing prior to that time it will need to delay or eliminate some of its
development activities.
PLAN OF OPERATION
In September 2000, the Company acquired the licensing rights to a broad based
patent (US Patent # 5,043,736) which covers an invention comprising a portable
locating unit useful both as a cellular telephone and portable global
positioning system that provides latitude and longitude information remotely to
a base unit display. The system includes a small hand held receiver that
receives signals from a satellite GPS and timing and computing circuits to
provide location information signals. The hand held unit also includes a modem
and transmitter to a cellular telephone network, which is connected to the base
unit computational system and display. The location of an individual or object
can thus be determined at the remote station through the use of the cellular
telephone network. The Company acquired the rights to US Patent # 5,043,736
previously owned by Eastern Investments, LLC, in exchange for 4,500,000 shares
of Common Stock, and issued an additional 4,200,000 shares subject to an escrow
agreement whereby the vendor may, at any time after July 16, 2001, acquire them
from the Company at the following price per share: $2.20, up to July 16, 2002;
and that amount, plus $0.20 per year, thereafter. The Company plans to license
parties using this process and expects to earn licensing revenue from these
agreements. The Company announced the signing of two licensees in the second
quarter of the 2000 fiscal year and has increased its licensing activities, as a
result of the acquisition of the licensing rights. The Company acquired a 50%
interest in WorldLink USA L.L.C. and issued 2,700,000 common shares and
12,500,000 stock warrants to WorldLink USA L.L.C. and will issue an additional
4,800,000 common shares. WorldLink USA L.L.C. will seek investments in companies
with complementary and strategic technologies. The Company has announced a
number of agreements for the sale and licensing of its PowerLOC tracking
solutions during the third and forth quarters of the 2000 fiscal year and the
first quarter of the 2001 fiscal year and started shipping products by the end
of the 2000 fiscal year. The Company is increasing its development activities
relating to the vehicle and personal GPS tracking devices and plans to negotiate
additional distribution or sales representation agreements with location service
providers and systems integrators to distribute these products. On February 19,
2001, Paradigm announced that it had acquired all of the navigation technology
and intellectual property of NaftEL Technologies, Ltd. of Israel. NaftEL
develops and markets navigation system software, enabling detailed street maps
to be viewed on devices with limited on-board memory. This advanced technology
also provides graphic or voice commands on portable computers, hand held devices
and cellular phones to enable dynamic navigation for persons and vehicles.
Following this acquisition, the Company announced the launch of the Destinator
navigation product, which will allow for the compressing of detailed maps onto
the Compaq iPaq Pocket PC.
The Company does not currently have any intentions to acquire a plant or any
significant equipment, as the Company plans to subcontract its manufacturing
activities. The Company plans to hire additional technical, sales and
administrative employees in 2001 and is also considering the acquisition of
companies or businesses with complimentary technologies.
23
RESEARCH AND DEVELOPMENT
A significant amount of time and effort was placed on research and development
at the Company's inception. The Company has hired a number of software and
hardware engineers for its PowerLOC and NaftEL businesses and also uses
contractors and third party companies to continue its research and development
activities. The Company plans to hire additional engineers and is planning to
increase its research and development activities in order to develop a set of
location tracking and navigation solutions for various applications.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements that reflect the Company's
current expectations about its future operating results, performance, and
opportunities that involve substantial risks and uncertainties. When used in
this Form 10-Q, the words "anticipate," "believe," "estimate," "plan," "intend,"
and "expect," and similar expressions, as they relate to the Company or its
management, are intended to identify such forward-looking statements. These
forward looking statements are based on information currently available to the
Company and are subject to a number of risks, uncertainties, and other factors
that could cause the Company's actual results, performance, prospects, and
opportunities to differ materially from those expressed in, or contribute to
such differences include, but are not limited to, limited capital resources,
lack of operating history, intellectual property rights, reliance on one product
line for revenue, and other factors discussed under "Risk Factors." in the
Company's Form 10-KSB which was filed on April 2, 2001. Except as required by
the federal securities law, the Company does not undertake any obligation to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this Form 10-Q or for any other
reason.
24
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
none
(b) Reports on form 8-K.
The Company filed a report on Form 8-K on February 27, 2001 in
connection with the acquisition of the assets of NaftEL.
25
SIGNATURES
In accordance with the Exchange Act, the registrant caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Paradigm Advanced Technologies, Inc.
Date: May 14, 2001 By: /s/ Selwyn Wener
---------------------------
Selwyn Wener
Chief Financial Officer
26