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, 1998
( )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 November 13, 1998, the issuer had 29,852,662 shares of its common
stock issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes _____ No __X__
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM BALANCE SHEET
(UNAUDITED)
(Unaudited)
SEP 30,1998 DEC 31,1997
ASSETS
Current
Cash at Bank and in trust $36,551 $0
Miscellaneous Receivables $24,196 $35,515
Prepaids and deposits $155,331 $0
------- -------
$216,078 $35,515
Long Term
Capital Assets (Note 1, Note 4) $11,885 $13,982
------- -------
Total Assets $227,963 $49,497
======== =======
LIABILITIES
Current
Bank Indebtedness $0 $139
Accounts payable $410,889 $422,008
Loans payable (Note 5) $331,315 $356,772
-------- --------
Total Liabilities $742,204 $778,919
======== ========
SHAREHOLDERS' EQUITY
Share Capital (Notes 6,7 & 8)
Authorized 30,000,000 Common $3,600,303 $2,218,180
Stock at $0.0001 par value
Issued and outstanding stock
29,852,662 as of Sep 31, 1998
16,140,445 as of Dec 31, 1997
Deficit ($4,114,544) ($2,947,602)
----------- ------------
Total Shareholders' Equity ($514,241) ($729,422)
----------- ---------
Total Liabilities & $227,963 $49,497
Shareholders' Equity =========== ========
-2-
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF INCOME
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
-----------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
REVENUE
Sales Revenue (Note 1, $23,465 $12,858 $23,465 $533,967
Note 3) -----------------------------------------------
Cost of Sales
Inventory-Beginning of Period $0 $214,316 $0 $314,316
Purchases $0 $8,558 $0 $32,719
-----------------------------------------------
$0 $222,874 $0 $347,035
Inventory-End of Period $0 $214,316 $0 $214,316
-----------------------------------------------
Cost of Sales $0 $8,558 $0 $132,719
Gross Profit $23,465 $4,300 $23,465 $401,248
-----------------------------------------------
Operating Expenses
Selling, General and $83,524 $277,791 $243,060 $953,289
Administration
Research & Development $0 $9,568 $0 $96,503
Interest Expense $5,300 $0 $15,250 $0
Depreciation and amortization $699 $2,571 $2,097 $7,712
-----------------------------------------------
Total Expenses $89,523 $289,930 $260,407 $1,057,504
-----------------------------------------------
Net Profit/(Loss) for the ($66,058) ($285,630) ($236,942) ($656,256)
Period
Write off of investment $0 $0 $930,000 $0
in Subsidiary -----------------------------------------------
Net Profit/(Loss) after
extraordinary item ($66,058) ($285,630) $1,166,942 ($656,256)
===============================================
Earnings per Share - before
extraordinary item (0.0023) (0.0182) (0.0101) (0.0439)
===============================================
Earnings per Share - after
extraordinary item (0.0023) (0.0182) (0.0500) (0.0439)
===============================================
Average common shares
outstanding during period 29,139,619 15,685,445 23,346,816 14,957,107
-3-
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
STATEMENT OF DEFICIT
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
----------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
Deficit - Beginning of ($4,048,486)($1,806,012) ($2,947,602) ($1,435,386)
Period
Net Profit/(Deficit) -
Current Period ($66,058) ($285,630) ($1,166,942) ($656,256)
-------------------------------------------------
Deficit - end of period ($4,114,544)($2,091,642)($4,114,544) ($2,091,642)
=================================================
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<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CASH FLOW
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
1998 1997 1998 1997
---- ---- ---- ----
Cash provided by (used
in)Operations
Net Gain (loss) for the
period $ ($66,058) $(285,630) $(1,166,942) $(656,256)
Items not requiring an
outlay of cash
Amortization of fixed
assets 699 2,571 2,097 7,712
Write-off of Investment
Subsidiary 0 0 930,000 0
Net changes in non-cash
working capital items
related to operations:
Inventory 0 (4,620) 0 72,277
Accounts Receivable 0 99 0 (474,818)
Miscellaneous Receivable 9,729 (3,833) 11,319 (5,157)
Prepaids and Deposits (155,331) 0 (155,331) 0
Share Subscriber 0 0 0 202,500
Receivable
Accounts Payable (52,463) 211,436 (11,119) 340,308
Loans Payable (15,000) (370,161) (25,457) (154,336)
------------------------------------------------
TOTAL CASH FLOW USED
IN OPERATIONS ($278,424) ($450,138) ($415,433) ($667,770)
Cash From Financing Activities
Proceeds of Common
Stock Issue 205,000 447,500 1,382,123 454,500
Less Write-off of
Subsidiary 0 0 (930,000) 0
------------------------------------------------
TOTAL CASH FROM
FINANCING ACTIVITIES 205,000 447,500 452,123 454,500
Cash Used in Investing
Activities
Acquisition of fixed 0 (2) 0 (3,126)
assets
------------------------------------------------
NET INCREASE (DECREASE)
IN CASH FOR THE PERIOD ($73,424) ($2,640) $36,690 ($216,396)
Cash - beginning of the
period $109,975 ($59,056) ($139) $154,700
------------------------------------------------
Cash - end of the period $36,551 ($61,696) $36,551 ($61,696)
================================================
-5-
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
NOTES TO INTERIM STATEMENT
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNT 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, 1998.
These financial statements do not purport to contain 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, 1997 contained in the Company's Annual Report on Form 10-KSB. The
results for the six months ended September 30, 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 provided using the declining balance basis at the
following rate:
Furniture and fixtures - 20%
(c) METHOD OF ACCOUNTING
The Company maintains its books and prepares its financial statements on
the accrual basis of accounting.
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.
-6-
<PAGE>
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%. The Company was unable to recover
this amount and the sale was credited in the fourth quarter of the 1997
fiscal year.
4. CAPITAL ASSETS
Accumulated Net Book Net Book
Cost Depreciation Value Value
----
1998 1998 1998 1997
---- ---- ---- ----
Furniture and $21,847 -$9,962 $11,885 $13,982
Fixtures
5. LOANS PAYABLE
Loans payable include loans amounting to $243,842 which are secured by a
pledge over all the assets and 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 Inc. and HOJ Franchise Systems - see Note 8. On May
28, 1998 the Company issued 2,500,000 shares for net proceeds of $112,500.
On July 16, 1998 the Company issued 4,100,000 shares for net proceeds of
$205,000.
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. during the second quarter of 1998, Options at a price of $0.01 to
$0.10 per Share were exercised resulting in the issuance of 2,535,000
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:
-7-
<PAGE>
Year Granted Expiry Date Price Range No. of 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 in three years from the
date of issue.
8. PURCHASE OF 1280884 ONTARIO INC.
(a) 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 3,730,000 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 control, there is no
assurance that they will be realized, and actual results may vary significantly
from those shown.
-8-
<PAGE>
Three Months Ended September 30, 1998
The Company is a development stage company with a limited history of
operations. It was incorporated on January 12, 1996.
The Company's recorded sales of $23,465 for the quarter ended September
30, 1998 as compared to sales of $12,858 for the three months ended September
30, 1997. The sales for the quarter ended September 30, 1998 is comprised of the
sale of a part of the VideoBank software rights to a third party.
Selling, General and Administrative Expenses for the three months ended
September 30, 1998 were $83,524 as compared to $277,791 for the three months
ended September 30, 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.
The net loss before extraordinary items for the three months ended
September 30, 1998 was $66,058 compared to a loss of $285,630 for the three
months ended September 30, 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. The loss for the three
months ended September 30, 1998 was lower than the loss for the corresponding
period for the prior year due to the Company having lower operating costs as a
result of the closing of the California office in September 1997 and the
outsourcing of research and development activities.
Nine Months Ended September 30, 1998
The Company recorded revenue of $23,465 for the nine months ended
September 30, 1998 as compared to sales of $533,967 for the nine months ended
September 30, 1997. The Company's only revenue for the nine months ended
September 30, 1998 comprised the sale of a portion of the VideoBank software
rights to a third party. Most of the sales for the prior year arose from a one
time barter sale which was recorded in the first quarter of the 1997 fiscal
year. The Company was unable to recover the proceeds of this sale and credited
the sale in the fourth quarter of the 1997 fiscal year.
Selling, General and Administrative Expenses for the nine months ended
September 30, 1998 were $243,060 as compared to $83,524 for the nine months
ended September 30, 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.
The net loss before extraordinary items for the nine months ended
September 30, 1998 was $236,942 as compared to a loss of $656,256 for the nine
months ended September 30, 1997. The loss for 1998 is due to the lack of
revenue, as the Company was not able to recover most of its expenses.
-9-
<PAGE>
Liquidity and Capital Resources
The Company had cash on hand and in trust of $36,551 at September 30,
1998. 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 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.
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 the other parties in the above transaction and that was the escrow
agent for the above shares and is claiming that these shares be canceled and
that damages be paid to the Company.
-10-
<PAGE>
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-
<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: November 16, 1998
By: /s/ David Kerzner
--------------------------
David Kerzner
President and CEO
By: /s/ Selwyn Wener
--------------------------
Selwyn Wener
Chief Financial Officer
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 36,551
<SECURITIES> 0
<RECEIVABLES> 24,196
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 216,078
<PP&E> 21,847
<DEPRECIATION> (9,962)
<TOTAL-ASSETS> 227,963
<CURRENT-LIABILITIES> 742,204
<BONDS> 0
0
0
<COMMON> 3,600,303
<OTHER-SE> (514,241)
<TOTAL-LIABILITY-AND-EQUITY> 227,963
<SALES> 23,465
<TOTAL-REVENUES> 23,465
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 245,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,250
<INCOME-PRETAX> (236,942)
<INCOME-TAX> 0
<INCOME-CONTINUING> (236,942)
<DISCONTINUED> 0
<EXTRAORDINARY> (930,000)
<CHANGES> 0
<NET-INCOME> (1,166,942)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
