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, 1996
( ) Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________________ to
____________________
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.)
5140 Yonge Street, Suite 1525, North York, Ontario, Canada M2N 6L7
(Address of Principal Executive Offices)
(416) 222-9629
(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 x No __________
As of November 13, 1996, the issuer had 13,008,343 shares of its common
stock issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes x No __________
Page 1 of 10 Pages
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
ASSETS
Assets
Bank short term deposits $ 25,411
Share subscription receivable 25,000
Inventories (Note 1a) 357,838
Prepaid expenses and deposit 26,781
435,030
Capital Assets (Notes 1b & 3) 23,302
Total Assets 458,332
LIABILITIES
Current Liabilities
Accounts payable $ 25,344
SHAREHOLDERS' EQUITY
Share Capital (Note 4)
Authorized 30,000,000 common shares, $.0001 par value
Issued and outstanding
13,008,343 common shares 1,300
Additional paid in capital 1,417,345
Deficit (985,657)
432,988
$ 458,332
Page 2 of 10 Pages
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF DEFICIT
FOR THE PERIOD FROM THE DATE OF INCORPORATION
JANUARY 12, 1996 TO SEPTEMBER 30, 1996
(UNAUDITED)
Balance, beginning of period $ - 0 -
Net Loss 985,656
Balance, end of period $985,656
Page 3 of 10 Pages
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF SHARE CAPITAL
JANUARY 12, 1996 TO SEPTEMBER 30, 1996
(UNAUDITED)
ADDITIONAL TOTAL
PAR PAID-UP PAID-UP
SHARES VALUE CAPITAL CAPITAL
Issuance of common shares to 6,000,000 $600 $55,545 $56,145
purchase all of the shares
and liabilities of Paradigm
Advanced Technologies Joint
Venture
Issuance of common shares in 3,000,000 $300 $299,700 $300,000
February, 1996 in connection
with a private placement
Issuance of common shares in 2,450,000 $245 $612,255 $612,500
February, March and April
1996 in connection with a
private placement offering
Issuance of common shares in 350,000 $35 $87,465 $87,500
May, 1996 in connection with
a private placement offering
Issuance of common shares in 833,340 $83 $249,917 $250,000
June, 1996 in connection with
a private placement offering
(1)
Issuance of common shares in
July, August and September,
1996 in connection with a 375,003 $37 $112,463 $112,500
private placement offering (1) 13,008,343 $1,300 $1,417,375 $1,418,645
1) In connection with these offerings, warrants to purchase 1,208,343
common shares at $0.30 per share were issued.
Page 4 of 10 Pages
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF INCOME
JANUARY 12, 1996 TO SEPTEMBER 30, 1996
(UNAUDITED)
From
For the Three Inception on
Months Ended January 12,
September 20, 1996, through
1996 September 30,
(Unaudited) 1996
(Unaudited)
Sales $ - 0 - $ - 0 -
Cost of Sales $ - 0 - $ - 0 -
Purchases 3,276 357,838
Inventory - end of period 3,276 357,838
- 0 - - 0 -
Expenses
Consulting fees $166,004 $ 513,896
Legal and professional 77,129 129,102
Salaries and benefits 37,232 89,966
Office and general 38,301 62,661
Travel and entertainment 53,040 163,222
Occupancy costs 9,946 24,175
Depreciation 449 2,634
382,101 985,656
Net loss for the period $(382,101) $ (985,656)
Page 5 of 10 Pages
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CASH FLOW
JANUARY 12, 1996 TO SEPTEMBER 30, 1996
(UNAUDITED)
Cash provided by (used in) operations
Net loss for the period $ (985,656)
Items not requiring an outlay of cash:
Depreciation of fixed assets 2,634
Net changes in non-cash working capital items
related to operations -0-
Inventory (357,838)
Accounts payable 25,343
Sundry assets (26,781)
(1,342,298)
Cash provided by financing activities
Proceeds of common share issuance 1,393,645
Cash used in investing activities
Acquisition of fixed assets (25,936)
Net increase in cash for the period 25,411
Cash - beginning of period -0-
Cash - end of the period $ 25,411
Page 6 of 10 Pages
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PARADIGM ADVANCED TECHNOLOGIES, INC.
NOTES TO INTERIM STATEMENT
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) 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, 1996.
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.
The results reflected for the nine month period ended September 30,
1996 are not necessarily indicative of the results for the entire
fiscal year ending December 31, 1996.
b) INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) and net realizable value.
c) CAPITAL ASSETS
Capital assets are recorded at cost less accumulated depreciation.
Depreciation is provided using the declining balance basis at the
following annual rate:
Furniture and fixtures - 20%
d) METHOD OF ACCOUNTING
i) The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
ii)There are not any material differences in the determination of net
loss and per share calculations between Canadian and U.S. generally
accepted accounting principles.
Page 7 of 10 Pages
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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 book and tax
purposes.
3. CAPITAL ASSETS
Accumulated Net
Cost Depreciation Book-value
Furniture and
fixtures $25,936 $2,634 $23,302
4. STOCK OPTIONS
As at June 30, 1996, 6,000,000 common shares are reserved for issuance
to directors, officers and employees under the Company's stock option
plan. All options are exercisable at price of $0.05 and the expiration
date of the options is January 12, 2001.
5. ACQUISITION
On January 12, 1996, the Company acquired 100% of the assets and
liabilities of Paradigm Advanced Technologies Joint Venture for $65,145
by the issuance of 6,000,000 common shares. The Company recorded the
acquisition using the purchase method.
Page 8 of 10 Pages
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Item 2. Management's Discussion and Analysis of Plan of Operation
In connection with its organization, Paradigm Advanced Technologies,
Inc. (the "Company") the Company acquired a security and surveillance
products business established by the Paradigm Advanced Technologies Joint
Venture, including the purchase and distribution rights pursuant to a
contract with Alpha Systems Lab, Inc. During the succeeding months, the
Company raised approximately $1,000,000 in capital through two private
placements completed in accordance with Rule 504 promulgated under the
Securities Act of 1933, as amended (the "Act"). It is currently conducting
an additional private placement in accordance with Regulation D of the Act,
in which it intends to raise a minimum of $275,000 and a maximum of
$1,375,000 in capital. Management expects that this will satisfy the
Company's cash requirements for the first nine months after its organization,
taking into account the Company's accumulated deficit at September 30, 1996,
of $985,657. However, management estimates that the total amount of "seed
capital" required in order to proceed with current operations and to bring
the Company's own product to market will be $2,500,000, including
approximately $600,000 for research and development, approximately $900,000
for advertising, marketing and promotional efforts, and approximately
$1,000,000 for working capital, and anticipates that the Company will need to
raise additional capital during its first twelve months. It anticipates
doing so through an offering or offerings of shares of its common stock.
The Company's initial efforts for its first twelve months will center
on the marketing and distribution of its two principle products VideoBank and
VideoBank-Remote. During the first three months, the Company seeks to
solidify its manufacturer's representative network by entering into sales
representation contracts, and will begin the process of creating its
advertising and promotional materials and customer database, and undertake a
public relations campaign. It will also concentrate on generating initial
revenues from existing relationships with businesses which are already
familiar with the Company's products and have expressed a willingness to
buy. After the first three months, the Company will concentrate on
consolidating its distribution networks, cementing its client relationships,
and establishing an image and brand-name recognition for the Company in the
marketplace in which it competes.
During its first twelve months, the Company hopes to expand its
marketing and distribution relationships by entering into distribution or
sales representation agreements with manufacturers and developers of
software-based video surveillance systems. This would diversify the
suppliers of products that the Company markets and distributes. With respect
to the Company's advertising and marketing arrangements, the Company
currently has relationships with Industry Marketing Service, a marketing
consulting company located in Tempe, Arizona, and with Adler & Schinkel, an
advertising agency based in Phoenix, Arizona, and is currently negotiating
the details of an engagement of a public relations firm. The Company
currently plans to continue to use its existing marketing and distribution
methods, but also is reviewing and evaluating these methods in order to
determine whether better or more efficient practices may be available. The
Company ultimately intends to market its own proprietary software-based video
surveillance products and has recently completed the development of its first
product, a software-based video surveillance system involving an enhanced
frame density, a more powerful search engine driven by proprietary
algorithms, and a more user-friendly interface.
The Company does not currently have any intentions to acquire a plant
or any significant equipment. The Company's warehouse and production
facility requirements are minimal because the Company's products consist
simply of software stored on three or four floppy disks and boxed with a user
manual. To the extent that the Company sells integrated or bundled
hardware-software systems, the integrator or hardware manufacturer installs
the Company's software and then "drop-ships" the system directly to the
customer. The Company may increase the number of its employees as it
continues to grow and further solidifies and consolidates its distribution
networks.
Page 9 of 10 Pages
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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: November 14, 1996
By: /s/ Jack Y. L. Lee
Jack Y. L. Lee
Chief Executive Officer and
Chief Financial Officer
By: /s/ David Kerzner
David Kerzner
President
Page 10 of 10 Pages
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