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, 1998
( )Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________________ to _________________
Commission File Number: 028836
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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 X No____
As of May 12, 1998, the issuer had 21,661,662 shares of its common stock
issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes X No _____
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM BALANCE SHEET
(UNAUDITED)
(Unaudited)
MAR 31,1998 DEC 31,1997
ASSETS
Current
Cash at Bank and in trust $22,347 $0
Miscellaneous Receivables $34,516 $35,515
------------------------- ------------
$56,863 $35,515
Long Term
Capital Assets (Note 1, Note 4) $13,283 $13,982
======================== ============
Total Assets $70,146 $49,497
======================== ============
LIABILITIES
Current
Bank Indebtedness $0 $139
Accounts payable $430,253 $422,008
Loans payable (Note 5) $350,206 $356,772
------------------------- ------------
Total Liabilities $780,459 $778,919
------------------------- ------------
SHAREHOLDERS' EQUITY
Share Capital (Notes 6,7 & 8)
Authorized 30,000,000 $3,236,727 $2,218,180
Common Stock at $0.0001
par value
Issued and outstanding stock
20,717,662 as of Mar 31, 1998
16,140,445 as of Dec 31, 1997
Deficit ($3,947,040) ($2,947,602)
------------------------- ------------
------------------------- ------------
Total Shareholders' Equity ($710,313) ($729,422)
------------------------- ------------
==================== ============
Total Liabilities & $70,146 $49,497
Shareholders' Equity
==================== ============
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<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.
INTERIM STATEMENT OF INCOME
(Unaudited)
For the Three Months For the Three
Ended March 31, 1998 Months Ended March 31, 1997
--------------------- ---------------------------
REVENUE
Sales Revenue (Note 1, Note 3) $0 $511,469
------------------------- ------------
Cost of Sales
Inventory -Beginning of Period $0 $354,762
Purchases $0 $22,091
---------------------- ------------
$0 $376,853
Inventory-End of Period $0 $254,762
--------------------- ------------
Cost of Sales $0 $122,091
--------------------- ------------
Gross Profit $0 $389,378
------------------------- ------------
Operating Expenses
Selling, General and $63,789 $326,287
Administration
Research & Development $0 $19,804
Interest Expense $4,950 $0
Depreciation and amortization $699 $2,567
------------------------ ------------
Total Expenses $69,438 $348,658
------------------------ ------------
Net Profit / (Loss) ($69,438) $40,720
for the period
Write off of Investment in $930,000 $0
Subsidiary
Net Profit / (Loss)after ($999,438) $40,720
extraordinary item
============ ============
Earnings per Share - before (0.00) 0.00
extraordinary item
========= ===========
Earnings per Share - after (0.06) 0.00
extraordinary item
========= ============
Average common shares
outstanding during period 18,148,375 14,401,734
-3-
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.
STATEMENT OF DEFICIT
For the Three Months For the Three
Ended March 31, 1998 Months Ended March 31, 1997
-------------------- ---------------------------
Deficit - Beginning ($2,947,602) ($1,435,386)
of the period
Net Profit / (Deficit) ($999,438) $40,720
- Current Period
===================== ============
Deficit - end of period ($3,947,040) ($1,394,666)
===================== ============
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<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.
INTERIM STATEMENT OF CASH FLOW
For the Three For the Three
Months Ended Months Ended March
March 31, 1998 31, 1997
--------------- --------
Cash provided by (used in)
operations
Net gain (loss) for
the period $(999,4387) $40,720
Items not requiring an
outlay of cash:
Amortization of
fixed assets 699 2,567
Write-off of
Investment in Subsidiary 930,000 0
Net changes in non-cash working
capital items related to
operations
Inventory 0 96,092
Accounts Receivable 0 (465,855)
Miscellaneous Receivable 999 (3,764)
Share Subscriber Receivable 0 148,500
Accounts Payable 8,245 56,403
Loans Payable (6,566) 0
------------------------ -----------
TOTAL CASH FLOW USED IN ($66,061) ($125,337)
OPERATIONS
Cash From Financing
Activities
Proceeds of Common Stock
Issuance 1,018,547 0
Less Write Off of
Subsidiary (930,000) 0
---------------- ------------
TOTAL CASH FROM FINANCING 88,547 0
ACTIVITIES
Cash Used In Investing
Activities
Acquisition of 0 (3,055)
fixed assets
----------------- -------------
NET INCREASE (DECREASE) IN
CASH FOR THE PERIOD $22,486 ($128,392)
Cash - beginning of
the period ($139) $154,702
=================== ============
Cash - end of
the period $22,347 $26,310
=================== ============
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<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.
NOTES TO INTERIM STATEMENT FOR THE PERIOD ENDED MARCH 31, 1998
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 March 31, 1998.
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, 1997
contained in the Company's Annual Report on Form 10-KSB. The results for the
three months ended March 31, 1998 are not necessarily indications of the results
for the fiscal year ending December 31, 1998.
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) CAPITAL ASSETS
Capital assets are recorded at cost less accumulated depreciation.
Depreciation is calculated using the declining balance basis at the following
rate:
Furniture and fixtures - 20%
c) METHOD OF ACCOUNTING
i) The Company maintains its books and prepares its financial statements on
the accrual basis of accounting.
ii) There are material differences in the determination of net loss and per
share calculations between Canadian and U.S. generally accepted accounting
principles.
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%. This sale was reversed in the fourth quarter of
1997.
-6-
<PAGE>
4. CAPITAL ASSETS
Accumulated
Cost Depreciation Net Book
1998 1998 Value 1998
---- ------------ -----------
Furniture $21,847 -$8,564 $13,283
and Fixtures
5. LOANS PAYABLE
Loans payable include loans amounting to $258,842 which are secured by a
pledge of all the assets of the Company. Interest is payable on these loans at a
rate of prime plus 4%.
6. SHARE CAPITAL
On February 19, 1998, the Company issued 3,720,000 shares to the vendors of
North York Leasing Limited and HOJ Franchise Systems Ltd. - see Note 8.
During the First Quarter of 1998, Options at a price of $0.01 to $0.125 per
Share were exercised resulting in the issuance of 852,217 Common Shares.
7. 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 March 31, 1998 are as follows:
Year
Granted Expiry Price Range No. of
Date Shares
1996 Jan-01 $0.05 7,583,334
1997 Nov-00 $0.12 45,000
1997 Nov-00 $0.125 125,000
1997 Oct-00 $0.15 40,000
1997 Nov-00 $0.20 50,000
1997 Dec-00 $0.25-$0.40 300,000
1998 Mar-01 $0.05-$0.10 2,350,000
===========
TOTAL STOCK OPTIONS OUTSTANDING 10,493,334
===========
b) As at March 31,1998, 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 three years from the date of issue.
-7-
<PAGE>
8. 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 Limited. 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 a 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 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 control, there is no
assurance that they will be realized, and actual results may vary significantly
from those shown.
Three Months Ended March 31, 1998
The Company is a development stage company with a limited history of
operations. It was incorporated on January 12, 1996.
The Company recorded no revenues for the quarter ended March 31, 1998 as
compared to sales of $511,469 for the three months ended March 31, 1997. Most of
the sales for the prior year arose from a one time barter sale which was
reversed at the end of 1997.
Selling, General and Administrative Expenses for the three months ended
March 31, 1998 were $63,789 as compared to $326,287 for the three months ended
March 31, 1997. This decrease is due to the closing of the California office in
September 1997 and a reduction in staff due to the outsourcing of research and
development activities.
-8-
<PAGE>
The net loss before extraordinary items for the three months ended March
31, 1998 was $69,438 compared to a profit of $40,720 for the three months ended
March 31, 1997. The loss for 1998 is due to the lack of revenue as the Company
was not able to sell any products during this period and, accordingly, was
unable to recover any of its expenses.
Liquidity and Capital Resources
The Company had cash on hand of $22,347 at March 31, 1998. In order to
finance future operations, the Company needs to raise additional funds through
the issuance of additional shares and debt. The Company raised $247,123 during
the first 6 months of 1998 through the issuance of additional shares.
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 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 a
public relations campaign, and will continue to work on all of these activities.
The Company currently plans to continue using 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 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, the sale of new products and 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 Limited. 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
-9-
<PAGE>
Company's shares is less than 25 cents, so that the total consideration is the
equivalent of $930,000. The Company has instituted a 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.
The company disposed of the above investments in June 1998 and received no
value for the sales. The Company accordingly wrote off its investment in these
companies in the first quarter of 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 fild during the quarter for which this report
is filed.
-10-
<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: October 6, 1998
By: /s/ David Kerzner
-----------------
David Kerzner
President and CEO
By: /s/ Selwyn Wener
------------------
Selwyn Wener
Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1998
<CASH> 22,347
<SECURITIES> 0
<RECEIVABLES> 34,516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,863
<PP&E> 21,847
<DEPRECIATION> (8,564)
<TOTAL-ASSETS> 70,146
<CURRENT-LIABILITIES> 780,459
<BONDS> 0
0
0
<COMMON> 3,236,727
<OTHER-SE> (3,947,040)
<TOTAL-LIABILITY-AND-EQUITY> 70,146
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 64,488
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,950
<INCOME-PRETAX> (69,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69,438)
<DISCONTINUED> 0
<EXTRAORDINARY> (930,000)
<CHANGES> 0
<NET-INCOME> (999,438)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
