U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 1997
( )Transition report under Section 13 or 15(d) of the
Exchange Act
For the transition period from __________________ to
__________________
Commission File Number: 0-28836
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 August 13, 1997, the issuer had 15,690,445 shares of its common
stock, $0.0001 par value, issued and outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM BALANCE SHEET
ASSETS
(unaudited)
CURRENT June 30, 1997 December 31, 1996
------------- -----------------
Bank short term deposits ($ 59,056) $154,702
Accounts Receivable 544,079 69,162
Share subscription receivable -0- 202,500
Inventories (Notes 1 and 5) 209,696 286,593
Miscellaneous Receivables 21,239 19,915
--------- ---------
$715,958 $732,872
CAPITAL ASSETS (Notes 1 and 4) 46,984 49,000
--------- ---------
TOTAL ASSETS $762,942 $781,872
========= =========
LIABILITIES
CURRENT
Accounts payable $195,271 $68,989
Loan payable 215,823 395,000
Other payables 2,590 -0-
--------- -------
TOTAL LIABILITIES $413,684 $463,989
========= ========
<PAGE>
STOCKHOLDERS' EQUITY
SHARE CAPITAL (NOTE 6)
Authorized 30,000,000 shares ofcommon stock,
$.0001 par value
Issued and outstanding stock
15,580,445 as of June 30, 1997 2,155,270
14,123,769 as of December 31, 1996 1,753,270
DEFICIT - PRIOR YEAR. (1,435,386)
RETAINED EARNINGS (DEFICIT) ( 370,626) (1,435,387)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY $349,258 $317,883
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 762,942 $781,872
========= ============
F-2
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF INCOME
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30 Ended June 30
--------------------- -----------------------
1997 1996 1997 1996
---- ---- ---- -----
SALES (Notes 1 and 3) $ 9,710 -0- $ 521,179 $ -0-
COST OF SALES
Inventory - Beginning
of Period $209,696 $349,275 309,696 -0-
Purchases 2,140 5,287 24,231 354,562
Inventory - end
of period 209,696 354,562 209,696 354,562
-------- -------- ------- -------
Total Cost of Sales 2,140 - 0 - 124,231 - 0 -
------ ------- ------- -------
GROSS PROFIT $ 7,570 - 0 - $396,948 $- 0 -
======= ======= ======== =====
EXPENSES
Selling, General and
Administrative $349,211 $287,016 $675,498 $591,370
Research and
Development 67,131 9,000 86,935 10,000
Depreciation 2,574 1,936 5,141 2,185
$418,916 $297,952 $767,574 $603,555
NET EARNINGS (LOSS)
FOR THE PERIOD $(411,346) $(297,952) $(370,626) $(603,555)
========= ========= ========= =========
EARNINGS PER SHARE $(0.0265) $(0.0272) $(0.0250) $(0.0624)
========= ========= ========= =========
Average common shares
outstanding during
period 15,510,445 10,976,000 14,852,107 9,678,000
F-3
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CASH FLOW
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30 Ended June 30
------------------ -----------------------
1997 1996 1997 1996
---- ---- ---- ----
CASH PROVIDED BY
(USED IN) OPERATIONS
Net gain (loss) for
the period $(411,346) $(297,952) $(370,626) $(603,555)
Items not requiring
an outlay of cash:
Depreciation of
fixed assets 2,574 1,936 5,141 2,185
Net changes in
non-cash working
capital items related
to operations
Inventory (19,195) (5,287) 76,897 (354,562)
Accounts Receivable (9,062) - 0 - (474,917) -0-
Miscellaneous Receivable 2,440 (13,792) (1,324) (16,418)
Subscriber Receivable 54,000 202,500 202,500 -0-
Accounts payable 72,469 (10,838) 128,872 26,190
Loan payable 215,823 - 0 - 215,823 -0-
-------- -------- ------- ---------
$(92,297) $(325,933) $(217,634) $(946,160)
CASH PROVIDED BY
FINANCING ACTIVITIES
Proceeds of Common Stock
Insurance 7,000 665,000 7,000 1,306,145
CASH USED IN INVESTING
ACTIVITIES
Acquisition of fixed
assets (69) (16,875) (3,124) (21,853)
------ -------- ------- --------
NET INCREASE (DECREASE)
IN CASH FOR THE PERIOD $(85,366) $(322,192) $(213,758) $(338,132)
Cash - beginning of
period 26,310 15,940 154,702 -0-
Cash - end of the
period (59,056) 338,132 (59,056) $338,132
-------- -------- -------- --------
NET CHANGE $(85,366) $322,192 $(213,758) $338,132
======== ======== ========= ========
F-4
<PAGE>
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 June 30, 1997.
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 Paradigm Advanced
Technologies, Inc. (the "Company") for the year ended December 31, 1996
contained in the Company's Annual Report on Form 10-KSB. The results for the
three months ended June 30, 1997 are not neccessarily indications of the results
for the fiscal year ending December 31, 1997.
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.
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 Company maintains its books and prepares its financial
statements on the accrual basis of accounting.
ii)There are no material differences in the determination of net loss and
per share calculations between Canadian and U.S. generally
accepted accounting principles.
F-5
<PAGE>
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. REVENUE
In the first quarter of 1997, the Company recorded a sale of software on
the basis of a barter agreement with Primary Response in Toronto for
$450,000 inclusive of a discount of 10%.
4. CAPITAL ASSETS
Accumulated Net
Cost Depreciation Book-value
----- ------------ ----------
Furniture and
fixtures $63,103 $16,119 $46,984
5. INVENTORY
The inventory consists of computer security equipment.
6. SHARE CAPITAL
On March 12, 1997, the Loan Payable to PTI Financial Corp. for a total of
$395,000 was converted to 1,316,667 Common Shares at a rate of $0.30 per
share along with warrants at a rate of $0.30 per share.
During the second quarter of 1997, options at a price of $0.05 per Share
were exercised resulting in the issuance of 140,000 shares of Common
Stock.
STOCK OPTIONS AND WARRANTS
As at March 31, 1997, 8,344,084 shares of the Company Common Stock are
reserved for issuance to directors, officers, employees and consultants under
the Company's stock option plan. The exercise price is $0.05 and the expiry
dates of the options for 344,084 and 8,000,000 shares of Common Stock reserved
are March 12, 2000 and January 12, 2001, respectively. As at March 31, 1997,
3,607,111 warrants were issued, exercisable at $0.30 per share, and not
exercisable for six months from the date of issue, and are due three years from
the date of issue.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations for the
Three Months Ended June 30, 1997
- ---------------------------------
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 control, there is no
assurance that they will be realized, and actual results may vary significantly
from those shown.
The Company is a development stage company with a limited history of
operations. It was incorporated on January 12, 1996.
Revenue for the three months ended June 30, 1997 was $9,710, slightly
higher than the three months ended June 30, 1996, but significantly below first
quarter of 1997. The sales for the current quarter were lower due to delays in
the introduction of new products.
As mentioned in note 3 to the Interim Financial Statements herein, at the
end of March 31, 1997, first quarter sales were mainly attributed to a "one
time" sale under a barter agreement.
Gross profit for the three months ended June 30, 1997 reflects the
profitability of products in start-up.
Selling, General and Administrative Expenses for the three months ended
June 30, 1997, increased to $349,211 from $287,016 for the three months ended
June 30, 1996. Research and Development Expenses increased to $67,131 from
$9,000 for the same period last year. These increases are consistent with
the Company's plans to bring new products into market.
The net loss of $411,346 for the three months ended June 30, 1997 is
attributable to product development and start-up expenses.
Liquidity and Capital Resources
- -------------------------------
The Company does not believe that product sales alone will be sufficient
to fund the Company's operations in fiscal 1997.
During the second quarter of 1997, the Company raised $215,823 in
additional financing. The Company is currently engaged in raising additional
cash through the sale of securities.
<PAGE>
The Company's efforts during its first eighteen months have centered and
will continue to center on the development, marketing and distribution of its
two principal products, VideoBank and VideoBank-Remote. The Company has worked
on developing and solidifying its manufacturer's representative network by
entering into distribution or sales representation agreements with manufacturers
and developers of software-based video surveillance systems, developing its
advertising and promotional materials and customer database, and planning of a
public relations campaign, and will continue to work on all of these activities.
The Company currently has relationships with High Road Communications, a public
relations company located in Toronto, Canada, and with Adler & Schinkel, an
advertising agency based in Phoenix, Arizona. 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 also will continue 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 will continue to concentrate particularly 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.
The Company does not currently have any intention 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 foregoing factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
assets carrying amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
<PAGE>
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: August 14, 1997
By: /s/ Jack Y. L. Lee
Jack Y. L. Lee
Chief Executive Officer and
Chief Financial Officer
By: /s/ Jack Y. L. Lee
Jack Y. L. Lee
Chief Executive Officer and
Chief Financial Officer
By: /s/ David Kerzner
David Kerzner
President
