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, 1997
( )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.)
270 Drumlin Circle, Concord, Ontario, Canada L4K 3E2
(Address of Principal Executive Offices)
(416) 929-6565
(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 September 30, 1997, the issuer had 15,790,445 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)
ASSETS
Assets
September 30, 1997 December 31, 1996
------------------ -----------------
Bank short term deposits $ 0 $154,702
Accounts Receivable 543,980 69,162
Share subscription receivable 0 202,500
Inventories (Note 1 and 5) 214,316 286,593
Miscellaneous Receivables 25,074 19,915
------- --------
$783,370 $732,872
Capital Assets (Notes 1 and 4) 44,413 49,000
------ ------
Total Assets $827,783 $781,872
======== ========
LIABILITIES
Current Liabilities
Bank Indebtedness $ 61,696 $ 0
Accounts payable 406,736 68,989
Other payables 2,560 0
Loan Payable 240,664 395,000
------- -------
Total Liabilities 711,656 463,989
------- -------
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STOCKHOLDERS' EQUITY
Share Capital (Note 6)
Authorized 30,000,000 shares of common stock,
$.0001 par value
(Issued and outstanding stock
15,790,445 as of September 30, 1997;
14,123,769 as of December 31, 1996) 2,207,770 1,753,270
Retained Earnings (Deficit) (656,256) (1,435,387)
Total Stockholders' Equity 116,127 317,883
-------- --------
Total Liabilities & Stockholders' Equity $827,783 $781,872
======== ========
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PARADIGM ADVANCED TECHNOLOGIES, INC.
STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
For the Three For the Three For the Nine From Inception on
Months Ended Months Ended Months Ended January 12, 1996 through
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------------
Sales (Note 1 and 3) $ 12,858 $ 0 $533,967 0
Cost of Sales
Inventory -
Beginning of Period 214,316 354,562 314,316 0
Purchases 8,488 3,276 32,719 357,838
----- ----- ------ -------
Inventory -
end of period 222,804 357,838 347,035 357,838
------- ------- ------- -------
Total Cost of Sales 8,488 0 132,719 0
------ -- ------- --
Gross Profit $ 4,300 $ 0 401,248 0
======= == ======= ==
Expenses
Selling, General
and Admin. $277,791 $372,452 $953,289 $963,822
Research and
Development 9,568 9,200 96,503 19,200
Depreciation 2,571 449 7,712 2,634
------- ---- ------- --------
$ 289,930 $ 382,101 $1,057,504 $985,656
--------- --------- ---------- --------
Net earnings (loss)
for the period $ (285,630) $ (382,101) $ (656,256) $ (985,656)
=========== =========== ========== ============
Earnings per Share ($0.0182) ($0.0298) ($0.0439) ($0.1037)
Average Common Shares
Outstanding During
Period 15,685,445 12,820,842 14,957,107 9,505,170
</TABLE>
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CASH FLOW
(UNAUDITED)
For the Nine From Inception on
Months Ended January 12, 1996 through
September 30, 1997 September 30, 1996
Cash provided by (used in) operations
Net gain (loss) for the period $(656,256) $(985,656)
Items not requiring an outlay of cash:
Depreciation of fixed assets 7,712 2,634
Net changes in non-cash working
capital items related to operations
Inventory 72,277 (357,838)
Accounts Receivable (474,818) 0
Miscellaneous Receivable (5,157) (26,781)
Subscriber Receivable 202,500 0
Accounts Payable 340,308 25,343
Loan Payable (154,336) 0
--------- --
$(667,770) $(1,342,298)
Cash provided by financing activities
Proceeds of Common Stock Insurance 454,500 1,393,645
Cash used in investing activities
Acquisition of fixed assets (3,126) (25,936)
Net increase (decrease) in cash
for the period (216,396) 25,411
Cash - beginning of period 154,700 0
Cash - end of period (61,696) 25,411
Net Change $ (216,396) $ 25,411
========= =======
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.,
STATEMENT OF DEFICIT
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
1997 1996 1997 1996
-------------- -------------
Deficit - Beginning
of the period ($1,806,013) ($603,555) ($1,435,387) $ 0
Net Profit/(Deficit):
Current Period ($ 285,630) ($382,101) ($ 656,256) ($985,656)
Deficit - end of period ($2,091,643) ($985,656) ($2,091,643) ($985,656)
<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 September 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 Company's audited financial statements for
the year ended December 31, 1996 contained in the Company's Annual Report
on Form 10-KSB. The results for the three months and nine months ended
September 30, 1997 are not necessarily 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 corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
<PAGE>
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.
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
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 $18,690 $44,413
======= ======= =======
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 $.30 per share
along with warrants at a rate of $.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 Common Shares and the Third
Quarter of 1997 an additional 270,000 Common Shares were issued.
7. STOCK OPTIONS AND WARRANTS
As at September 30, 1997, 8,344,084 shares of the Company's 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, 200__, respectively. As at September
30, 1997, 3,607,111 warrants were issued, exercisable at $0.30 per share, and
not exercisable for six months from the date of issue, are due three years from
the date of issue, which is March 12, 1997.
<PAGE>
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 September 30, 1997
The Company is a development stage company with a limited history of
operations. It was incorporated on January 12, 1996.
Revenue for three months ended September 30, 1997 was $12,788 which
compares with no sales revenue for the three months ended September 30, 1996.
This increase is not the result of any particular product development activity.
Instead, it is merely reflective of a slight increase in demand of certain
individual hardware items.
Gross profit figures for the three months ended September 30, 1997
continue to reflect the profitability of products in start-up.
Selling, General and Administrative Expenses for the three months ended
September 30, 1997 were $277,791 as compared to $372,452 for the three months
ended September 30, 1996. This decrease is indicative of the Company's conscious
effort to reduce general expenses and certain staff. The reduction in staff is
attributable primarily to the outsourcing of research and development
activities.
The net loss for the three months ended September 30, 1997 was $285,630
compared to $382,101 for the three months ended September 30, 1996. The losses
are attributable to continued product development and start-up expenses.
Nine Months Ended September 30, 1997
During the nine months ended September 1997, the Company's sales totaled
$533,967, the majority of which were attributable to a one-time sale under a
barter agreement which took place during the first quarter 1997. As a result of
these increased sales, gross profits also increased to $401,248 year to date.
The Company had net losses of $656,256, however, this is an improvement over the
prior year during which the Company had net losses of $985,656. The losses are
attributable to continued product development and start-up expenses. It is
anticipated, however, that there will be a steady decline in losses in future
quarters.
<PAGE>
Liquidity and Capital Resources
The Company believes that the cash and cash equivalents on hand at
September 30, 1997 will be sufficient to sustain the Company's operations at
budgeted levels and its needs for liquidity through the fourth quarter of fiscal
1997 and into the first quarter of fiscal 1998.
The Company raised $25,000 by incurring additional debt. On September 5,
1997, the Company also sold 210,000 shares of common stock at a price of $.25
per share in a transaction exempt from distribution under Regulation D. First
Liberty Investment Group, Inc. acted as placement agent in the offering. First
Liberty received a fee of 10% of the proceeds of the offering, or $5,250 in the
aggregate.
Plan of Operation
The Company's efforts during its first twenty-one months have centered and
will 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 of a public relations campaign, and will
continue to work on all of these activities. 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 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.
Subsequent Events
On February 10, 1998, the Company acquired all of the issued and
outstanding capital stock of North York Leasing Limited ("NYLL") and all of the
<PAGE>
trade indebtedness of NYLL in exchange for 3,720,000 shares of the Company's
Common Stock. NYLL is a Canadian car leasing and rental company. The Company
also acquired the business of HOJ Franchise Systems Ltd. which is the franchisor
for a number of car rental and leasing franchises in Canada.
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.
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: April 1, 1998
By: /s/ David Kerzner
David Kerzner
President and CEO
By: /s/ Murray Reuben
Murray Reuben
Chief Financial Officer
