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 September 30, 1999
( ) 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.)
1 Concorde Gate, Suite 201, Toronto, Ontario, M3C 3N6, CANADA
-------------------------------------------------------------
(Address of Principal Executive Offices)
(416) 447-3235
--------------
(Issuer's Telephone Number, Including Area Code)
N/A
---
(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_______ No____X_____
As of February 10, 2000 the issuer had 29,796,662 shares of its common
stock issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes_______ No____X_____
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM BALANCE SHEET
(UNAUDITED)
(Unaudited)
SEP 30,1999 DEC 31,1998
ASSETS
Current
Cash at Bank and in trust $5,133 $12,856
Miscellaneous Receivables $1,342 $1,302
Prepaids and Deposits (Note 3) $168,426 $155,075
--------------- ----------------
$174,901 $169,223
Long Term:
Capital Assets (Note1, Note4) $12,386 $11,185
=============== ================
Total Assets $187,287 $180,418
=============== ================
LIABILITIES
Current:
Accounts payable $639,107 $460,409
Loan payable $552,179 $391,315
--------------- ----------------
Total Liabilities $1,191,286 $851,724
--------------- ----------------
SHAREHOLDERS' EQUITY
Share Capital (Note 6, Note 7)
Authorized 100,000,000 Common Stock $3,755,618 $3,755,618
at $0.0001 par value
Issued and outstanding stock
29,762,662 as of Sep 30, 1999
29,762,662 as of Dec 31, 1998
Deficit ($4,759,617) ($4,426,924)
--------------- ----------------
Total Shareholders' Equity ($1,003,999) ($671,306)
--------------- ----------------
Total Liabilities & Shareholder's Equity $187,287 $180,418
============= ==============
-2-
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF INCOME
For the Three months For the Nine months
Ended September 30 Ended September 30
---------------------------------------------------------------------------
1999 1998 1999 1998
---- ---- ----- ----
REVENUE
Sales Revenue $0 $23,465 $0 $23,465
-----------------------------------------------------------------------------
Cost of Sales
-----------------------------------------------------------------------------
Cost of Sales $0 $0 $0 $0
-----------------------------------------------------------------------------
Gross Profit $0 $23,465 $0 $23,465
-----------------------------------------------------------------------------
Operating Expenses
Selling, General and Administration $66,800 $83,524 $293,264 $243,060
Research & Development $0 $0 $2,040 $0
Interest Expense $12,825 $5,300 $34,875 $15,250
Depreciation and amortization $838 $699 $2,514 $2,097
Write-off Investment in Subsidiary (Note 7) $0 $0 $0 $930,000
-- --- --- --------
Total Expenses $80,463 $89,523 $332,693 $1,190,407
-------- ------- -------- ----------
Net Profit / (Loss) for the period ($80,463) ($66,058) ($332,693) ($1,166,942)
Earnings per Share (0.0027) (0.0023) (0.0112) (0.0500)
======================================================================
Average common shares 29,796,662 29,139,619 29,796,662 23,346,816
outstanding during period
-3-
PARADIGM ADVANCED TECHNOLOGIES, INC.
STATEMENT OF DEFICIT
For the Three months For the Nine months
Ended September 30 Ended September 30
---------------------------------------------------------------
1999 1998 1999 1998
---- ---- ----- ----
Deficit - Beginning of the period ($4,679,154) ($4,048,486) ($4,426,924) ($2,947,602)
Net Profit / (Deficit) - Current Period ($80,463) ($66,058) ($332,693) ($1,166,942)
---------------------------------------------------------------
Deficit - end of period ($4,759,617) ($4,114,544) ($4,759,617) ($4,114,544)
===============================================================
-4-
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CASH FLOW
For the Three months For the Nine months
Ended September 30 Ended September 30
---------------------------------------------------------------
1999 1998 1999 1998
---- ---- ----- ----
Cash provided by (used in) operations
Net gain (loss) for the period $ (80,463) $ (66,058) $ (332,693) $ (1,166,942)
Items not requiring an outlay of cash:
Amortization of fixed assets 838 699 2,514 2,097
Write-off of Investment in Subsidiary (Note 7) 0 0 0 930,000
Net changes in non-cash working capital items
related to operations
Miscellaneous Receivable 0 9,729 (40) 11,319
Prepaids and Deposits (160) (155,331) (13,351) (155,331)
Accounts Payable 73,357 (52,463) 178,698 (11,119)
Loans Payable 11,000 (15,000) 160,864 (25,457)
----------------------------------------------------------------
TOTAL CASH FLOW USED IN OPERATIONS $4,572 ($278,424) ($4,008) ($415,433)
Cash From Financing Activities
Proceeds of Common Stock Issuance 0 205,000 0 1,382,123
---------------------------------------------------------------
TOTAL CASH FROM FINANCING ACTIVITIES $0 $205,000 $0 $1,382,123
Cash Used In Investing Activities
Acquisition of fixed assets 0 0 (3,715) 0
Write-off of Investment in Subsidiary 0 0 0 (930,000)
---------------------------------------------------------------
TOTAL CASH USED IN INVESTING ACTIVITIES $0 $0 ($3,715) ($930,000)
NET INCREASE (DECREASE) IN CASH
FOR THE PERIOD $4,572 ($73,424) ($7,723) $36,690
Cash - beginning of the period $561 $109,975 12,856 ($139)
---------------------------------------------------------------
Cash - end of the period $5,133 $36,551 $5,133 $36,551
---------------------------------------------------------------
-5-
Paradigm Advanced Technologies, Inc.
Notes To Interim Statement
For the Period Ended September 30, 1999
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENTS
The accompanying condensed financial statements are not audited for the interim
period, but include all adjustments (consisting of only normal recurring
accruals) which management considers necessary for the fair representation of
results at September 30, 1999.
These financial statements do not purport to contain complete disclosures in
conformity with generally accepted accounting principles and should be read in
conjunction with the audited financial statements of Paradigm Advanced
Technologies, Inc. (the "Company") for the year ended December 31, 1998
contained in the Company's Annual Report on Form 10-KSB. The results for the
nine months ended September 30, 1999 are not necessarily indications of the
results for the fiscal year ending December 31, 1999.
The Company is a development stage company formed on January 12, 1996 and does
not purport to contain complete disclosures in conformity with generally
accepted accounting principles.
GOING CONCERN
The Corporation has incurred losses since its incorporation in 1996. The
Corporation has funded its operations to date through the issue of shares and
debt.
The Corporation plans to continue its efforts to acquire equity partners, to
make private placements, and to seek both private and government funding for its
projects. The Corporation believes that it will be successful in its financing
activities and that sufficient funding will be raised to finance the
Corporations activities until the Corporation attains profitability.
CAPITAL ASSETS
Capital Assets are recorded at cost less accumulated depreciation. Depreciation
is provided using the Declining Balance basis at the following annual rate.
Computer Equipment - 30% Furniture and Fixtures - 20%.
METHOD OF ACCOUNTING
The Corporation maintains its books and prepares its financial statements using
the accrual basis of accounting.
-6-
There are no material differences in the determination of Net Earnings and per
share calculations between Canadian and U.S GAAP.
Paradigm Advanced Technologies, Inc.
Notes To Interim Statement
For the Period Ended September 30, 1999
Note 2. INCORPORATION
The Company was incorporated on January 12, 1996 in the state of Delaware and
has elected a December 31 fiscal year end for accounting and tax purposes.
Note 3. PREPAIDS AND DEPOSITS
Prepaids and Deposits include the amounts paid for the exclusive agency rights
to a GPS patent. The cost of the agency rights will be amortized over the term
of the agency agreement, which is due to commence in the later part of 1999.
Note 4. CAPITAL ASSETS
COST ACCUMULATED NET BOOK NET BOOK VALUE
DEPRECIATION VALUE 1998
1999 1999 1999
FURNITURE
AND FIXTURES $25,561 $13,175 $12,386 $11,185
Note 5. LOANS PAYABLE
Loans payable include:
a) Loans amounting to $243,842, which are secured by a pledge over all the
assets of the Company. Interest is payable on these secured loans at a rate of
prime plus 4%. b) Convertible promissory notes of $216,000 which are due and
payable on December 31, 1999 and are convertible into common shares at a rate of
$0.05 per share. I Note 6. STOCK OPTIONS AND WARRANTS
a) Options to purchase Common Shares have been issued under the Company's stock
option plan to directors, officers, employees and consultants of the Company.
Options outstanding at September 30, 1999, are as follows:
Year Granted Expiry Date Price Range No. of Shares
1996 Jan 2001 $0.05 7,583,334
1997 Nov 2000 $0.12 45,000
-7-
1997 Nov 2000 $0.125 125,000
1997 Oct 2000 $0.15 40,000
Paradigm Advanced Technologies, Inc.
Notes To Interim Statement
For the Period Ended September 30, 1999
1997 Nov 2000 $0.20 50.000
1997 Dec 2000 $0.25-$0.40 300,000
1998 Mar 2001 $0.05-$0.10 2,350,000
1999 Feb 2002 $0.05 11,575,000
TOTAL STOCK OPTIONS OUTSTANDING 22,068,334
==========
b) As at June 30, 1999, 3,607,111 warrants were issued, exercisable at a price
of $0.30 per share for each warrant owned. These warrants are exercisable over a
3-year period and expire in March 2000. An additional 10,407,000 warrants were
issued in 1998 and 1999, exercisable at prices of $0.10-$0.25 per share for each
warrant owned. These warrants are exercisable over a three-year period and
expire in 2001 to 2002.
Note 7. PURCHASE OF 1280884 ONTARIO INC.
In February 1998, the Company acquired all the shares of 1280884 Ontario Inc.
and its wholly owned subsidiary North York Leasing Inc. The Company issued
3,720,000 Common Shares to the vendors of these companies at a price of 25 cents
per share representing a cost of $930,000 and is required to issue additional
shares to these vendors if during any one consecutive 60 day trading period
between April 1998 and February 1999, the average closing price of the Company's
shares is less than 25 cents, so that the total consideration is the equivalent
of $930,000. The Company has instituted legal action against the legal firm that
represented all the parties in the above transaction and acted as the escrow
agent for the above shares and is claiming that these shares be canceled and
that damages be paid to the Company. No provision has been made for the issue of
any additional shares to the vendors of these companies.
The Company disposed of its investment in the above companies in June 1998.
Item 2. Management's Discussion and Analysis of Plan of Operation
Results of Operations
The following discussion contains forward-looking statements and
projections. Because these forward-looking statements and projections are based
on a number of assumptions and are subject to significant uncertainties and
contingencies, many of which are beyond the Company's
-8-
control, there is no assurance that they will be realized, and actual results
may vary significantly from those shown.
Three Months Ended September 30, 1999
The Company is a development stage company with a limited history of
operations. It was incorporated on January 12, 1996.
Sales for the quarter ended September 30, 1998 comprised the sale of a
portion of the VideoBank software rights to a third party. The Company recorded
no sales for the quarter ended September 30, 1999 as the Company did not have
the financial resources to complete the development of its VideoBank and GPS
products and focussed its attention on the patent and license negotiations.
Selling, General and Administrative Expenses for the three months ended
September 30, 1999 were $66,800 as compared to $83,524 for the three months
ended September 30, 1998. The Company continued to reduce operating costs during
the quarter.
The net loss for the three months ended September 30, 1999 was $80,463
compared to $66,058 for the three months ended September 30, 1998. Although
total expenses for the three months ended September 30, 1998 were higher, the
company was able to record a lower loss due to the VideoBank sale. There were no
costs expensed for the sale, as all expenses incurred on the software had been
written off in prior years.
Nine Months Ended September 30, 1999
The Company recorded no sales for the nine months ended September 30, 1999
and $23,465 sales for the nine months ended September 30, 1998. The 1998 sale
represents a one-time sale of a portion of the VideoBank software that the
Company was no longer using. The Company concentrated its energies on patent and
license negotiations during the nine months ended September 30, 1999 and also
explored a number of new initiatives in the video surveillance software
business.
Selling, General and Administrative Expenses for the nine months ended
September 30, 1999 were $293,264 as compared to $243,060 for the nine months
ended September 30, 1998. The Company incurred higher operating costs in the
first quarter due to increased consultants fees and patent costs, but was able
to reduce costs in the second and third quarters of the 1999 fiscal year.
The net loss for the nine months ended September 30, 1999 was $332,693
compared to $1,166,942 for the nine months ended September 30, 1998. The loss
for the nine months ended September 30, 1998 includes a charge of $930,000 being
the write-off of the investment in 1280884 Ontario Inc.- see below. Interest
expense increased from $15,250 for the nine months ended September 30, 1998 to
$34,875 for the nine months ended September 30, 1999 due to
-9-
interest accrued on the convertible promissory notes. The Company was able to
reduce operating expenses in the second and third quarters of the 1999 fiscal
year.
Liquidity and Capital Resources
As of September 30, 1999, the Company had cash on hand and in trust in the
amount of $5,133. In order to finance future operations, the Company needs to
raise additional funds through the issue of additional shares and debt.
Plan of Operation
The Company's efforts continue to center on the development and
distribution of its Global Positioning Satellite tracking devices and VideoBank
and VideoBank-Remote video surveillance products. The Company has entered into
an agreement to be the exclusive licensing agent for a broad based patent which
covers the process whereby GPS signals are transmitted over a cellular network
to a base unit. The Company plans to license parties using this process and
expects to earn licensing revenue from these agreements. The Company is working
on developing and solidifying its manufacturer's representative network by
entering into distribution and sales representation agreements with
manufacturers and developers of software-based video surveillance systems and
GPS tracking units. The Company is continually reviewing and evaluating its
marketing and distribution methods in order to determine whether better or more
efficient practices may be available. The Company continues to concentrate on
generating revenues from existing relationships with businesses that are already
familiar with the Company's products and have expressed a willingness to buy.
The Company is striving to consolidate its distribution networks, cement its
client relationships, and establish an image and brand-name recognition for the
Company in the marketplace in which it competes.
The Company does not currently have any intentions to acquire a plant or
any significant equipment as the Company's warehouse and production facility
requirements are minimal. The Company may increase the number of its employees
as it continues to grow and further solidifies and consolidates its distribution
networks.
The Company 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, patent licensing, the sale of new products and the assumption of
additional debt.
Purchase of 1280884 Ontario Inc.
In February 1998, the Company acquired all the shares of 1280884 Ontario
Inc. and its wholly owned subsidiary North York Leasing Inc. The Company issued
3,720,000 Common Shares to the vendors of these companies at a price of 25 cents
per share representing a cost of
-10-
$930,000 and is required to issue additional shares to these vendors if during
any one consecutive 60 day trading period between April 1998 and February 1999,
the average closing price of the Company's shares is less than 25 cents, so that
the total consideration is the equivalent of $930,000. The Company has
instituted legal action against the legal firm who represented all the parties
in the above transaction and who are the escrow agents for the above shares and
is claiming that these shares be canceled and that damages be paid to the
Company. No provision has been made in the financial statements for the issue of
any additional shares to the vendors of these companies.
The company sold the above companies in June 1998 to an unrelated party for a
nominal sum. Under the terms of the purchase agreement, the purchaser and the
secured creditors of 1280884 Ontario Inc. and North York Leasing Inc. granted
the Company a full release from all its commitments concerning 1280884 Ontario
Inc. and North York Leasing Inc. The Company wrote off its investment in 1280884
Ontario Inc. and North York Leasing Inc. at the end of March 1998.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
27 Financial Data Schedule
(b) Reports on form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
-11-
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: February ___, 2000
By: /s/ David Kerzner
----------------------------
David Kerzner
President and CEO
By: /s/ Selwyn Wener
----------------------------
Selwyn Wener
Chief Financial Officer
-12-