U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[ X ] Annual report under Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the fiscal year
ended December 31, 1997
OR
[ ] Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition
period from __________ to __________.
Commission File Number: 0-28836
PARADIGM ADVANCED TECHNOLOGIES, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 33-0692466
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1 Concorde Gate, Suite 201
Toronto, Ontario
Canada M3C 3N6 M3C 3N6
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(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (416) 447-3235
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class: on which Registered:
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Common Stock, par value None
$0.0001 per share
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 [ ]
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Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB[ ].
The issuer's revenues for its most recent fiscal year were $47,468.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of October 23, 1998, is $1,988,732.
The number of shares outstanding of the Registrant's Common Stock, as of
October 23, 1998 was 29,796,662 shares of Common Stock.
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PART I
ITEM 1. Description of Business
Paradigm Advanced Technologies, Inc. (the "Company") is a development
stage incorporated in Delaware on January 12, 1996 that was formed to capitalize
on the need for digital image and interactive GPS tracking technology in North
America and abroad. The Company develops, markets, and distributes
software-based digital video surveillance and GPS tracking systems that can be
used for security or other purposes. The Company's products currently include
VideoBank, a software-based video surveillance system that permits the user to
store video images on a computer disk drive rather than on conventional
videotape, and VideoBank Remote, a similar software-based video surveillance
system that permits the transmission of video images using ordinary telephone
lines rather than coaxial or proprietary transmission lines. In addition the
Company has GPS tracking technology for personal tracking as well as for
vehicular tracking purposes. The Company believes that these products represent
improvements over existing video surveillance and GPS technology, not only in
terms of ease of use of the products, but also in terms of the products'
capabilities for recalling and manipulating video data, the ability to upgrade
the systems without needing to replace hardware components, and the products'
general independence from particular or proprietary hardware components. There
are essentially three sources of revenue for the company which include the sale
of GPS products, Licensing users of the GPS/CELLULAR technology under "the
patent", and the sale of VideoBank products. On its date of incorporation, the
Company acquired all of the right, title and interest in a security and
surveillance products business established by Paradigm Advanced Technologies
Joint Venture (the "Joint Venture"). The Joint Venture was dissolved on the same
day.
The specific GPS and digital image products presently being developed are
as follows:
"R-2" is a vehicle or personal security device that enables instant
transmission of a location to a central monitoring station or personal
computer via the Internet. A person's position can be tracked on a panic
or alarm initiated transmission, accurate to within 2-5 meters, instantly
available at the monitoring station through the use of GPS satellites. The
system is also designed as a management tool that can archive the
whereabouts of a vehicle or individual on an ongoing basis;
"VideoBank DVR" is a fully integrated software program, which will record,
store and playback full motion, high-resolution color images in the same
fashion as a time-lapse VCR (videocassette recorder for security
applications). The software will allow for remote viewing of video images
stored in the VideoBank, as well as for the transmission of images over
various types of communication mediums such as, standard telephone lines,
ISDN, Cellular, T1, ADSL, and Satellite.
The market for security products in general is very strong and is not
periodic or cyclical in its growth patterns. Growth has averaged over 8% for the
past 10 years. However, the GPS market has experienced enormous growth. In 1996
the overall GPS market was a $2 billion dollar industry. U.S. manufacturers own
approximately 75% of the worldwide market share. The market size has almost
quadrupled from 1993 when it stood at $510 million. Sales of GPS receivers are
expected to reach $9.6 billion by the year 2000. The market for GPS over
cellular is estimated at $8.5 billion by the year 2005.
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Demand is very strong and the VideoBank and GPS line of products are
expected to be one of the first digital recording and transmission devices with
GPS tracking capabilities to reach this fertile market. Recent breakthroughs,
involving the introduction of "Wavelet" compression algorithms allowing for
significantly faster transfer speeds, and proprietary correcting algorithms,
will springboard the company into vertical markets that until now were not
technologically viable. The ability to tap pent-up demand will allow for instant
market penetration.
The company has key strategic relationships with highly skilled
engineering firms. The research and development carried out by these firms is a
key strategy to gain and maintain market share. To stay ahead of the game,
improved video compression techniques and increased functionality will continue
to be developed. Our software engineering contractors are comprised of some of
the leading experts in video compression algorithms and microprocessor based
technology.
Distributor Agreement
Until recently, manufacturing of the Company's VideoBank product line was
outsourced to Alpha Systems Lab, Inc. ("ASL") pursuant to a Distributor
Agreement. Under this Distributor Agreement, ASL was responsible for producing
the VideoBank and VideoBank Remote products, and the Company had the exclusive
right to purchase and distribute these products in Canada and the non-exclusive
right to purchase and distribute them worldwide.
The distribution rights granted under the Distributor Agreement were to
expire in November, 2005, although that agreement provided for early termination
in certain events. ASL notified the Company on October 4, 1996 that ASL had
terminated the Distributor Agreement as a result of certain nonperformance by
the Company. The Company permitted this termination to occur because, although
ASL had been the Company's sole supplier of products: (1) the Company plans to
meet its long-term product needs through internal production of new versions of
the VideoBank products that the Company currently is developing and testing; (2)
the Company believes that it has adequate inventory to meet expected customer
demand for VideoBank products in the near future; and (3) the Company expects
that it will have the ability to obtain additional product from ASL if necessary
in the near term, although at higher prices. Consequently the Company believes
that the termination of the Distributor Agreement will not have a material
adverse effect on the Company's business or results of operations. The Company
anticipates that its new versions of VideoBank products will be ready for market
in the second quarter of 1997 and that they will offer improved functionality,
better compatibility with the Windows-based graphical user interface
environment, and the ability to work with a variety of video capture cards made
by different manufacturers rather than solely with one proprietary card.
Manufacturing and Engineering Agreements
Engineering and manufacturing of the Company's VideoBank software is being
supplied by Enhanced Video Systems based in Vancouver, British Colombia which
will provide the VideoBank software with great improvement in compression
techniques, enhancing the products performance significantly. The Company
anticipates that its new versions of VideoBank with the new compression
algorithm will be ready for market in the first quarter of 1999 and that they
will offer improved functionality, better compatibility with the Windows-based
graphical user interface environment, and the ability to work with a variety of
video capture cards made by different manufacturers rather than solely with one
proprietary card.
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The GPS product line is currently being engineered and manufactured by
Adastra, Inc. based in Montreal, Quebec pursuant to a subcontracting Agreement.
The products are now ready for beta testing and it is anticipated that
production units will be available by the first quarter of 1999.
VideoBank and VideoBank Remote
VideoBank is a software-based video surveillance system. This system
differs from conventional, hardware-based video surveillance systems, which rely
upon video cassette recorders (VCRs), in that the VideoBank system digitally
records images, and stores them in and retrieves them from a computer's memory
instead of a video cassette tape. This system eliminates many of the problems
associated with operating a VCR-based security system, such as storage and
preservation of video cassette tapes and the possibility of mechanical failures
and breakdowns of the VCR or other components of the system. It also introduces
a measure of efficiency in installing improvements to the system, because
improvements can be made simply by implementing upgrades to the software,
instead of having to purchase and install new hardware components. At the same
time, although additional image storage capacity can be added simply by
augmenting the computer's memory, the software-based video surveillance system
has the drawback of being highly dependent on low-cost, high-capacity removable
data storage media. Based upon current trends in computer hardware pricing,
however, the Company believes that such low-cost, removable data storage media
(including, for example, optical data disks) will continue to become more widely
available in the future.
VideoBank Remote is a predominantly software-based system that allows
images captured by VideoBank to be transmitted digitally over conventional
telephone lines. The Company will market and distribute the software component
of this system. Like VideoBank, VideoBank Remote operates on a conventional
personal computer and modem. Its software is also designed to be user-friendly,
employing an icon-driven, Windows-based graphical user interface. By
transmitting over telephone lines, it obviates the need to link camera sites to
the remote observation post by installing coaxial cables. Advances in computer
technology have made possible VideoBank Remote and its advances over existing
telephone transmission technology in terms of clarity of image, transmission
time, and cost of transmission. VideoBank Remote has demonstrably the best image
per transmission time of any existing telephone-based system, primarily because
both the VideoBank and VideoBank Remote systems can accept images of any
resolution quality that the video camera itself is capable of producing, and do
not impose any limit on the maximum resolution of the image as do many
competitive products such as Telesite and TVX.
Although VideoBank and VideoBank Remote utilize computer hardware and
other physical equipment, these systems are referred to herein as
"software-based" systems because neither product requires the use of proprietary
hardware. Instead, both products can operate on any computer hardware that meets
the minimum system specifications: as noted above, the specification calls for a
conventional personal computer with at least a 486-class central processing
unit. Therefore, these systems can be sold either as a software package to be
installed upon any computer system that meets the system specifications or as a
"turn-key" hardware-software system. In contrast, to the Company's knowledge,
most of its competitors in the marketplace for video surveillance security
systems offer systems that are based on proprietary hardware or equipment. See
"The Company--Competition."
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The VideoBank and VideoBank Remote systems are Windows-based and offer an
icon-driven user interface. When installed on a computer that has 850 megabytes
(MB) of available internal hard disk drive storage space, VideoBank is capable
of recording at least 24 hours of data at the rate of one high resolution color
frame per second. In addition, if there is an alarm condition, the system is
capable of recording 15 frames per second for a limited time span of
approximately 16 minutes. This capacity is sufficient to provide
high-resolution, multiple-frame motion video of several alarm conditions, each
having duration of two or three minutes. In addition, the ability to transmit
video images over a telephone line, rather than via coaxial or other specialized
closed-circuit cable, makes the VideoBank Remote system easier to use and less
expensive than traditional remote surveillance systems. In addition,
improvements and upgrades to the VideoBank system can be made by implementing
upgrades to the software itself, rather than upgrading the equipment itself.
These software upgrades permit the addition of new functions such as Video
Transmission, Image Downloading, Multi-Plexing and Video Motion Sensing.
New Versions of Products
The Company is engaged in the development of new versions of the VideoBank
and VideoBank Remote software-based video surveillance systems, and currently
expects to have its first such product available for marketing and sale during
the first quarter of 1999. The Company presently expects that such products will
have most of the same capabilities and features as the VideoBank and VideoBank
Remote Version 1 products currently have, as well as additional features and
improved functionality, better compatibility with the Windows-based graphical
user interface environment, and the ability to work with a variety of video
capture cards made by different manufacturers.
Competition
The VideoBank system is referred to as a "software based" system because
the product does not require the use of proprietary hardware. In contrast, to
the Company's knowledge, most of its competitors in the marketplace for video
surveillance security offer products that are based on proprietary hardware or
equipment. There are approximately 20 companies that manufacture video
transmission systems for security applications. Though some competitors may have
developed software products for use in video security and surveillance products,
the existing competitive products are primarily hardware based. For example,
Hymatom Industries of France has developed Memocom, a proprietary hardware
system that records black and white images. In addition, Dedicated Micros, an
English company, has developed a hardware solution that allows for the recording
of video to a computer disk.
To the Company's knowledge, none of its competitors have developed a
software-based product with the capabilities of VideoBank. The Company also
believes that it can offer its products for substantially lower prices than
those of its competitors because of the system's non-proprietary hardware
specification and the availability of the bundled hardware/software system
incorporating equipment that the Company or the user can purchase at a volume
discount.
GPS "R2" Vehicle Safety System
The R2 vehicle safety system has been designed to provide real-time
warning and recording of an automotive and/or driver unsafe condition along with
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location, real-time recovery and two-way communication capabilities for a wide
variety of applications. All the relevant date, together with position, time,
date and real time velocity may be either automatically transmitted to one or
more control centers located at various selected geographical locations, or
stored in memory for eventual download and replay. Multiple control centers can
be connected in a network with full information exchange capability.
Precision in establishing position is obtained utilizing the information
provided by the Navstar GPS (Global Positioning System) satellite system and a
proprietary signal-processing algorithm to further enhance the precision.
GPS provides world-wide coverage; it delivers latitude, longitude. The GPS
system falls under the regulatory arm of the US military, the Department of
Defense, and for national security purposes, the signal is purposely degraded to
within 100 meters accuracy. To counter that problem, an error correcting
algorithm developed by Paradigm's contractors improves GPS accuracy levels to
within +2 to + 5 meters.
Geofencing
The R2 can be programmed to operate within a certain perimeter or
pre-programmed route. This will allow a user to report by exception for
pre-determined alert criteria. For example an armored vehicle can have a set
route. If the vehicle would be re-routed for any reason, the unit would report
back its exact location.
The R2 vehicle safety system CPU (central processing unit) processes the
information provided by the sensors, provides an alert signal for unsafe
conditions and transmits the relevant information to either a monitoring station
or to a storage unit for later review. Using the R2 safety system hardware and
software components, a virtually unlimited number of vehicles and individuals
can be tracked simultaneously.
Each remote unit is serialized with a unique identity code that is
transmitted at the beginning of each message to provide the monitoring station
the information to distinguish one mobile unit from another.
Optional Features
R2 pilot projects, which are expected to be underway by the end of
November 1998, are designed to be full featured, with the ability to carry out
numerous tasks. This will help the companies testing the units to decide which
features and functions are really necessary for their applications. The
following outlines some of these features:
Driver Display
A driver display unit will be able to provide the operator with feedback
about any unsafe condition on a LCD display with an audio and visual warning.
The driver display provides a warning to the driver for each of the following
conditions:
a) Excessive speed ("Speed");
b) Excessive safety distance ("Safety Distance");
c) Faulty brakes ("Brake Fail");
d) Excessive temperature ("Overtemperature")'
e) Seat-belts ("Seat Belts"); and
f) Off route ("Route Error")
The fixed, in-vehicle units can be equipped with a battery as an option
for backup and a belt clip mounting cradle is available for a portable unit to
allow personal use as well.
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Paradigm will also market communications server and graphic
workstation/commercial software to consumer, industrial and governmental users.
The R2 vehicle safety system product line currently provides the following
additional applications:
Vehicle Theft Protection. Upon receipt of an alarm from a vehicle installed with
the system, the monitoring station receives a signal that automatically displays
the precise position and identification of the vehicle. This data is displayed
on a computer-generated map of the area which is used by the monitoring
personnel to advise the police, or the appropriate authority, of the exact
vehicle position, direction of travel and approximate speed.
Personal Security. The R2 vehicle safety system incorporates a driver accessible
panic button, which allows the driver to discreetly communicate an emergency
message to the monitoring station in the event of a crisis. As a result,
assistance can be summoned in a short period of time. The display mapping
software allows the presentation of all the unsafe conditions superimposed on
street or rural road maps, as appropriate. If the monitoring station receives an
unsafe condition report, the position of the user is displayed on the relevant
map. If the appropriate map is not currently displayed, a new window will be
opened showing the correct map with the new user centered in the map window. If
the user moves, the map display will automatically pan so that the user is
always visible in the map window. In the event of an emergency, the monitoring
station operator can access an unsafe condition and pop-up a window which
displays from the database all of the information relation to that vehicle. The
monitoring station operator can zoom in and out on the map to display more or
less detail. In addition, the map window can be resized to show more or less
area at the same detail level. Print and/or fast fax capabilities are provided.
Medical Emergency. The R2 vehicle safety system has the ability to report a
drivers physical emergencies to the monitoring service so that immediate help
can be sent to the driver of the vehicle.
Roadside Assistance. Less dramatic but equally important is the ability of
summoning roadside assistance in the event of a mechanical breakdown.
Competing Products. Paradigm has reviewed published reports concerning competing
products developed by companies such as Ford Motor Company, Rockwell
International, ATX Research, Prince-Sky Tel AutoLink and General Motors. It
appears from data collected on these products, that the systems are larger, less
flexible and more expensive than Paradigm's products. Paradigm monitors the
competitive products on a regular basis and is continuously being updated.
Personal Tracking - Portable Unit
The R2 vehicle safety system is a system that has been designed with a
powerful communications platform. This platform has the ability to monitor over
120 features, which will be available to consumers, industrial and governmental
users on a custom basis. The add-on service area will provide the greatest
potential for growth of the R2 vehicle safety system's product lines because it
can be configured to the need of the user. The add-on services are covered in an
appendix. As an example of these services, the R2 vehicle safety system has the
platform to support a medical patient cardiovascular monitor for biomedical
analysis.
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There is a vast market potentially available for this product. Between 2
and 3 million Americans have heart conditions, and 400,000 new cases are
diagnosed each year. Heart failure causes more than 38,000 deaths a year and is
a contributing factor in another 225,000 deaths. The death rate attributed to
heart failure has doubled since 1968, in contrast to a greater than 50 percent
decrease in coronary disease mortality during the same period. More people are
living longer. People aged 65 and older represent the fastest growing segment of
the population, and the risk of heart failure increases with age.
The need for portability and the capability of supporting biomedical
communication will make the R2 personal system's platform a powerful tool in
saving lives.
GPS Patent and Licensing Rights
Paradigm plans to be the first company to be licensed under a unique
broad-based patent, which covers transmission of GPS coordinates via any
cellular network. The patent which has been issued and upheld in the United
States and Australia is pending in Canada and Japan. The patent is very
significant since over 50 companies are currently using the technology covered
under the patent.
Paradigm has also entered into a joint venture with the patent holder as
the exclusive worldwide licensing agent for the patent. Revenues will be
generated by licensing existing companies presently infringing on the patent as
well as those who are just entering the market.
Regulatory Matters
To the Company's knowledge, there are no existing or probable government
regulations that will have an effect upon the Company's business. Although
end-users of surveillance equipment in Canada, and elsewhere, are required to
give notice of the use of such equipment, there are no known absolute
prohibitions either on the ownership or the use of surveillance equipment. The
Company knows of no existing or probable government regulations that either do
or may affect the Company's right to distribute, sell, manufacture, or otherwise
deal with digital video surveillance security systems.
Employees
There was only one full time employee, David Kerzner, at December 31,
1997. David Kerzner was paid a consulting fee. In addition to David Kerzner,
there were two consultants at December 31, 1997, who were providing
administrative and financial services to the Company. None of the Company's
employees is represented by a labor union or is subject to a collective
bargaining agreement. The Company has a positive relationship with its
employees.
Major Suppliers and Customers
The Company's major supplier is ADASTRA Technology, Inc., located in
Montreal, Canada. The Company does not have any major customers.
Research and Development
A significant amount of time and effort was placed on research and
development at the Company's inception and such effort has continued throughout
its existence.
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ITEM 2. Description of Properties
The Company's executive offices are located in 1,200 square feet of office
space in Toronto, Ontario, Canada, which is leased by the Company on a monthly
basis at a rental rate of $2000 (Canadian). The Company maintained an office in
California pursuant to a lease which expired in February 1998. The leased space
was used for technical support, distribution and marketing measured 1,560 square
feet and the monthly rental rate was $1,482. The Company abandoned the lease
when it closed the California office in September 1997. The Company also rented
approximately 1000 square feet of office space in North York, Ontario on a
monthly basis. The monthly rate for the office space and office services was
$1,391. The Company vacated the North York office in November 1997. The Company
believes that its facilities are adequate for its needs and that alternative or
additional space will be available as required.
ITEM 3. Legal Proceedings
As of December 31, 1997, the Company is not currently engaged in any legal
proceedings and is not aware of any pending or threatened litigation that could
have a material adverse effect on the Company's business, financial condition or
results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
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PART II
Item 5. Market For Common Equity and Related Stockholder Matters
On April 12, 1996, the Common Stock of the Company was approved for trading
on the NASDAQ-OTC Electronic Bulletin Board under the symbol "PRAV." Prior to
that date, there was no public market for the Company's Common Stock. From the
time of listing through December 31, 1997, the high bid price was $0.7500 and
the low bid price was $0.0545. The following table sets forth the range of high
and low closing representative bid prices for the Company's Common Stock from
April 12, 1996 through December 31, 1997 (as reported by NASDAQ), which
represent inter-dealer prices, without retail mark-up, mark-down or commission
and may not reflect actual transactions:
Fiscal Year Ended December 31, 1996 High Bid Low Bid
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Second Quarter Ended June 30, 1996
(from April 12, 1996) $0.1845 $0.1562
Third Quarter Ended September 30, 1996 $0.2915 $0.1710
Fourth Quarter Ended December 31, 1996 $0.4375 $0.125
Fiscal Year Ended December 31, 1997
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First Quarter Ended March 31, 1997 $0.375 $0.125
Second Quarter Ended June 30, 1997 $0.25 $0.0625
Third Quarter Ended September 30, 1997 $0.40625 $0.125
Fourth Quarter Ended December 31, 1997 $0.22 $0.11
As of October 23, 1998, there were 56 holders of record of the Company's
Common Stock. The Company has never declared or paid a cash dividend on its
capital stock and does not expect to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business. Any dividends declared in the future will be at
the discretion of the Board of Directors and subject to restrictions that may be
imposed by the Company's lenders.
The Company has undertaken the following unregistered sales of its Common
Stock. On January 12, 1996, the Company issued 6,000,000 unregistered shares of
its Common Stock to the participants in the Paradigm Advanced Technologies Joint
Venture (the "Joint Venture") in exchange for all of the right, title and
interest in the security and surveillance products business established by the
Joint Venture. Certain of the Company's directors and officers were participants
in the Joint Venture and as a result received shares of the Common Stock of the
Company in the transaction. The Company's Chief Executive Officer, Jack Y. L.
Lee received 1,875,000 shares (including 500,000 shares in trust), and the
Company's President, David Kerzner received 2,337,500 shares. In addition, Lisa
Kerzner, the wife of director Jacob Kerzner, received 412,500 shares of Common
Stock in the transaction. Lastly, Sarah Casse, a holder of more than 5% of the
Company's issued and outstanding Common Stock, received 1,375,000 shares of
Common Stock in the transaction.
All of the following sales were exempt from registration pursuant to
Sections 3(b) and 4(2) of the Securities Act of 1933 (the "1933 Act") and
Regulation D promulgated by the Securities Exchange Commission (the "SEC")
thereunder. None of the following unregistered sales involved underwriters, and
there were no underwriting discounts or commissions.
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Person or Class Total Cash
Date, Title of of Persons Number of Price or
Securities Sold to Whom Sold Shares Consideration
- --------------- --------------- --------- --------------
January 12, 1996; Paradigm 6,000,000 Assets and
Common Stock Advanced liabilities
Technologies valued at
Joint Venture $56,145
February, 1996; Common Private 3,000,000 $300,000
Stock Placement
Investors
February, March, April Private 2,800,000 $700,000
and May, 1996; Common Placement
Stock Investors
June through November, Private 2,158,351 $647,500
1996; Common Stock Placement
Investors
November, 1996; Common PTI Financial 165,418 $49,625
Stock Corp.
March 12, 1997, Common PTI Financial 1,316,676 $395,000
Stock Corp.
September 19, 1997, Private 210,000 $52,500
Common Stock Placement
Investors
December 19, 1997, Private 300,000 $7,910
Common Stock Placement
Investors
Note: The PTI issue on
March 12, 1997 was
conversion of a loan.
Item 6. Management's Discussion and Analysis or 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.
Liquidity and Capital Resources
The Company had no cash on hand at December 31, 1997. 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 is a development stage company with a limited history of
operations. It was incorporated on January 12, 1996. The Company's efforts
during its first twenty-four 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
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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.
Three Months Ended December 31, 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 December 31, 1997 was ($486,499) which
compares with $55,689 for the three months ended December 31, 1996. The negative
sales for the fourth quarter of 1997 resulted from the reversal of the one time
barter sale of $450,000 and other sales which proved to be irrecoverable.
Gross profit for the three months ended December 31, 1997 reflects the
write-off of all inventories on hand. As result of the closing of the office in
California and changes in technology as well as the low sales level, management
decided to write off these inventories as they were considered to have no
realizable value.
Selling, General and Administrative Expenses for the three months ended
December 31, 1997 were $155,775 as compared to $413,206 for the three months
ended December 31, 1996. 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 for the three months ended December 31, 1997 was $855,959
compared to $457,537 for the three months ended December 31, 1996. The losses
are mainly attributable to the write off of irrecoverable receivables and
inventories in the fourth quarter of 1997 and product development and start-up
expenses incurred in the corresponding period for the prior year.
Year Ended December 31, 1997
During the year ended December 31, 1997, the Company's sales totaled
$47,468 as compared to $55,689 for the year ended December 31, 1996. Most of the
sales are attributable to sale of VideoBank and individual hardware items. As a
result of a shortage of funds, the Company closed its office in California in
September 1997 and significantly reduced all its operations.
The Company recorded a gross loss of $306,470 for the year ended December
31, 1997 as compared to gross profit of $7,806 for the year ended December 31,
1996. The gross loss is due to the write off of all inventories as they were
considered to have no realizable value.
The Company had a net loss of $1,512,215 for the year ended December 31,
1997 as compared to a loss of $1,435,387 for the year ended December 31, 1996.
The losses are attributable to the write off of irrecoverable receivables and
inventories in the fourth quarter of 1997 and product development, start-up
-13-
<PAGE>
expenses and marketing expenses incurred in 1996 and the first nine months of
1997. It is anticipated, however, that there will be a steady decline in losses
in future quarters.
Subsequent Events
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 that represented all the parties in the above transaction and that
acted as 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 wrote off its investment in the above companies in March 1998,
as there were insufficient funds to finance their operations, and the value of
the investment had materially declined.
Item 7. Financial Statements
The financial statements of the Company, including the notes thereto,
together with the report of independent certified public accountants thereon,
are presented beginning at page F-I.
Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
The directors and executive officers of the Company are listed on the
following table. There are no other promoters or control persons:
Name Age Position, Term in Office
---- --- -------------------------
Jack Y. L. Lee 47 Chief Executive Officer,
Secretary-Treasurer, and
Director (all positions
January 12, 1996, to December
29, 1997)
David Kerzner 36 President and Director (both
positions January 12, 1996, to
present)
Jacob Kerzner 38 Director (January 12, 1996, to
present)
-14-
<PAGE>
The following is a brief description of the professional experience and
background of the directors and executive officers of the Company.
Jack Y. L. Lee: resigned as CEO, CFO and Secretary on December 29, 1997.
Mr. Lee has served as the Chief Executive Officer, Treasury-Secretary and a
director of the Company since its founding. Between 1987 and January 12, 1996,
Mr. Lee served as President and as a syndicator for Syndicate Management Inc.,
which specializes in the syndication of real estate and other investments. In
1974, Mr. Lee qualified as a Charted Accountant while employed at Clarkson,
Gordon, & Co., a major independent accounting firm which has subsequently merged
into the accounting firm of Ernst & Young LLP.
David Kerzner: Mr. Kerzner has served as the President and a director of
the Company since its founding and will take over as CEO in January 1998 from
Mr. Jack Lee who resigned on December 29, 1997. From 1990 to 1994, Mr. Kerzner
was employed by ISTI Corporation/Intertec Security, most recently as President
of ISTI Corporation and as the Marketing Manager of, and as a consultant to,
Intertec Security. From 1987 to 1992, Mr. Kerzner was the owner and operator of
Interactive Security Systems Inc., a full service electronic security company.
Jacob Kerzner: Mr. Kerzner has served as the a director of the Company
since its founding. Mr. Kerzner currently serves as the President and Chief
Executive Officer of Nightingale Healthcare Inc., a privately-owned hospital and
nursing home staffing company founded by Mr. Kerzner in 1986. Mr. Kerzner is the
brother of David Kerzner.
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than ten percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely on review of the copies of such reports furnished to the
Company during or with respect to fiscal 1997, or written representations that
no Forms 5s were required, the Company believes that during the fiscal year
ended December 31, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with.
Item 10. Executive Compensation
Summary Compensation Table
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the registrant's four most highly compensated
executive officers other than the Chief Executive Officer, whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended December 31,
1997:
-15-
<PAGE>
Shares
Annual of Common
compensation Stock
Name and ------------ Underlying
principal position Year Salary Bonus options/SARS
- ------------------ ---- ------ ----- ------------
Jack Y. L. Lee 1997 $66,600 $0 0
Chief Executive 1996 $66,000 $0 1,875,000
Officer and
Secretary-Treasurer of
the Company
David Kerzner 1997 $100,000 $0 0
President 1996 $ 75,000 $0 3,187,500
Note: Jack Lee
resigned as CEO, CFO
and Secretary on
December 29, 1997
Directors' Compensation
The Company's policy is not to pay compensation to directors who are also
employees of the Company for their service as directors. Non-employee directors
do not presently receive compensation for their service as directors either. The
Company will, however, reimburse directors a fixed amount for out-of-pocket
expenses incurred for attendance at meetings.
Employment Contracts
In February 1996, the Company entered into a ten-year consulting
agreement, with David Kerzner, President of the Company. The consulting
agreement provided for a fee of $75,000 in 1997, but Mr. Kerzner was due
$100,000 total. The additional $25,000 was accrued at the end of 1997,
therefore, the total consulting fee payable to Mr. Kerzner for 1997 was
$100,000. Mr. Kerzner was paid a consulting fee and was not on the Company
payroll. The consulting agreements may be terminated early by the Company in the
event of the resignation, death or disability or other incapacity of Mr.
Kerzner, as the case may be. The consulting agreements also contain provisions
regarding confidentiality of information, ownership of inventions and patents,
non-competition and non-solicitation. Mr. Kerzner is eligible to receive a bonus
upon the approval of the Company's board of directors.
The Company entered into an employment agreement with Mr. Jack Lee in
February 1996, which was a consulting agreement in terms of which Mr. Lee was to
be paid an annual fee of $66,600. Mr. Lee resigned as CEO, Secretary-Treasurer
and director of the Company on December 29, 1997, There are no fees payable to
Mr. Lee for any period subsequent to the date of his resignation.
The Company entered into a consulting agreement dated January 12, 1996
with Sarah Casse. Ms. Casse serves as a marketing, business, and technological
consultant to the Company. The agreement grants Ms. Casse the option to purchase
up to 1,875,000 shares of the common stock of the Company as compensation for
her services at the price of $0.05 per share.
-16-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the beneficial
ownership of the outstanding Common Stock of the Company by each director,
executive officer, all five percent (5%) stockholders of the Company and all
directors and officers as a group:
Amount and
Name and Address of Nature of
Name and Address of Beneficial Percent
Beneficial Owner Owner (1) of Class (2)
- ------------------------- ---------- ------------
Jack Y. L. Lee
28 Old Park Lane 3,416,668(3) 18.88%
Richmond Hill, Ontario L4B 2L4
David Kerzner, President
and CEO 3,525,000(4) 18.24%
663 Glencairn Avenue
Toronto, Ontario M6B 1Z8
Jacob Kerzner, Director
148 Faywood Blvd. 562,500 (5) 3.37%
Downsview, Ontario M3H 2W7
Sarah Casse
63 Otter Crescent 3,350,000(6) 18.60%
North York Ontario M5N 2W7
Mendel Raksin
338 Crown Street 3,333,360(7) 18.72%
New York, NY 11225
All directors and
executive officers as a 7,504,168 34.35%
group (3 persons):
- -----------------------
(1) Under Securities and Exchange Commission rules, beneficial ownership
includes any shares as to which an individual has sole or shared voting power or
investment power. Unless otherwise indicated, the Company believes that all
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock beneficially owned by them. A person is also deemed
to be the beneficial owner of securities that can be acquired by such person
within 60 days from the date hereof upon the exercise of warrants or options.
Each beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person and which are exercisable
within 60 days from the date hereof have been exercised.
(2) Based on 16,140,445 shares of Common Stock issued and outstanding as of
December 31, 1997.
(3) Includes 1,958,334 shares of Common Stock issuable upon the exercise of
presently exercisable stock options.
(4) Includes 3,187,500 shares of Common Stock issuable upon the exercise of
presently exercisable stock options.
(5) Includes 562,500 shares of Common Stock issuable upon the exercise of
presently exercisable stock options.
(6) Includes 1,875,000 shares of Common Stock issuable upon the exercise of
presently exercisable stock options.
(7) Includes 1,666,680 shares of Common Stock issuable upon the exercise of
presently exercisable stock options.
-17-
<PAGE>
Item 12. Certain Relationships and Related Transactions
On January 12, 1996, the Company issued 6,000,000 unregistered shares of
its Common Stock to the participants in the Paradigm Advanced Technologies Joint
Venture (the "Joint Venture") in exchange for all of the right, title and
interest in the security and surveillance products business established by the
Joint Venture. Certain of the Company's directors and officers were participants
in the Joint Venture and as a result received shares of the Common Stock of the
Company in the transaction. The Company's Chief Executive Officer, Jack Y. L.
Lee received 1,875,000 shares (including 500,000 shares in trust), and the
Company's President, David Kerzner received 2,337,500 shares. In addition, Lisa
Kerzner, the wife of director Jacob Kerzner, received 412,500 shares of Common
Stock in the transaction. Lastly, Sarah Casse, a holder of more than 5% of the
Company's issued and outstanding Common Stock, received 1,375,000 shares of
Common Stock in the transaction.
In December 29, 1997, Mr. Jack Y. L. Lee resigned as Chief Executive
Officer of the Company and was replaced by Mr. David Kerzner who was President.
The Company has entered into a Consulting Agreement with David Kerzner under
which he receives an annual salary of $100,000.
Item 13. Exhibits List and Reports on Form 8-K
(a) Index to Financial Statements
Report of Independent Auditors
Financial Statements
Balance Sheets - December 31, 1997
Statement of Income for the year ended December 31, 1997
(from inception) and the year ended December 31, 1996
Statement of Changes in Shareholder's Equity for the Year
Ended December 31, 1997
Statement of Deficit for the Year Ended December 31, 1997
Statements of Cash Flows for the year ended December 31, 1997
Notes to Financial Statements
Exhibits
3.1* Certificate of Incorporation of the Company.
3.2* By-Laws of the Company.
4.1* Stock Option Plan.
10.1* Distributor Agreement with Alpha Systems Lab, Inc.,
dated November 29, 1995, together with Amending
Agreement, dated January 24, 1996.
10.2* Consulting Agreement with Jack Y. L. Lee, dated
February 1, 1996.
10.3* Consulting Agreement with David Kerzner, dated February 1, 1996.
10.4* Consulting Agreement with Industry Marketing Service,
dated January 1, 1996.
10.5* Agreement with Sarah Casse, dated January 12, 1996.
-18-
<PAGE>
24 Power of Attorney (included in the signature page to
this report).
27 Financial Data Schedule.
- ---------------
* Previously filed with the SEC as Exhibits to, and incorporated herein by
reference from, the Company's Registration Statement on Form 10-SB, as
amended, filed with the SEC on August 1, 1996.
(b) No reports on Form 8-K were filed during the fiscal year 1997.
-19-
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors . . . . . . . . . . . F-2
Balance Sheet at December 31, 1996 and 1997 . . . . F-3
Statement of Income for year ended December 31, 1997 . . F-4
Statement of Deficit for the year ended December 31, 1997 F-5
Statement of Cash Flow for the year ended December 31, 1997. . . F-6
Statement of Changes in Shareholders Equity for the Year Ended
December 31, 1997 . . . . . . . . . . . . . . . . . . . . F-7
Notes to Financial Statements. . . . . . . . . . . . . . . . . F-8
F-1
<PAGE>
BROMBERG & ASSOCIATE 1177 Finch Avenue West Suite 21
- ---------------------------- Downsview, Ontario M3J 2E9
CHARTERED ACCOUNTANTS Office: (416) 663-1974
Fax: (416) 630-1345
AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
PARADIGM ADVANCED TECHNOLOGIES, INC.
We have audited the balance sheet of Paradigm Advanced Technologies, Inc.
as at December 31, 1997 and the statements of income, deficit, changes in
shareholders' equity and changes in financial position for the period then
ended. These audited financial statements are the responsibility of the
corporation's management. Our responsibility is to express an opinion on the
audited financial statements based on our audit.
We conducted our audit in accordance with Generally Accepted Auditing
Standards. These standards require that we plan and perform an audit to obtain
reasonable assurance whether the audited financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the audited financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation.
In our opinion, these audited financial statements presents fairly, in all
material respects, the financial position of the Corporation as at December 31,
1997 and the results of its operations and the changes in its financial position
for the period then ended in accordance with generally accepted accounting
principles.
/s/ BROMBERG & ASSOCIATE
CHARTERED ACCOUNTANTS
DOWNSVIEW, ONTARIO
August 14, 1998
F-2
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheet as at
December 31, 1997 December 31, 1996
----------------- -----------------
ASSETS
CURRENT ASSETS
Bank $0 $154,702
Accounts Receivable $0 $69,162
Share Subscription
Receivable $0 $202,500
Inventories $0 $286,593
MiscellaneousReceivable $35,515 $19,915
------- -------
$35,515 $732,872
LONG TERM:
Capital Assets (Notes 1, 3) $13,982 $49,000
------- -------
TOTAL ASSETS $49,497 $781,872
======= ========
LIABILITIES
CURRENT
Bank Indebtedness $139 $0
Accounts Payable $422,008 $68,989
Loans Payable (Note 4) $356,772 $395,000
-------- --------
TOTAL LIABILITIES $778,919 $463,989
-------- --------
SHAREHOLDERS' EQUITY
Share Capital (Note 5)
Authorized 30,000,000 Common
Stock at $0.0001 par
value per share
Issued and outstanding:
16,140,445 as of
December 31, 1997
14,123,769 as of
December 31, 1996 $2,218,180 $1,753,270
Deficit ($2,947,602) ($1,435,387)
---------- ----------
Total Shareholders' Equity ($729,422) $317,883
Total Liabilities & --------- --------
Shareholders' Equity $49,497 $781,872
======= ========
F-3
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Income
For the Year Ended December 31, 1997
1997 1996
---- ----
REVENUES
Sales Revenue (Note 1) $47,468 $55,689
------- -------
Cost of Sales
Inventory - Beginning
of Period $354,762 $0
Purchases ($824) $402,645
------ --------
$353,938 $402,645
Inventory
- End of Period $0 $354,762
-- --------
Cost Of Sales $353,938 $47,883
-------- -------
Gross Profit/(Loss) ($306,470) $7,806
---------- ------
OPERATING EXPENSES:
Selling, General &
Administrative $1,109,064 $1,377,028
Research & Development $48,909 $55,188
Depreciation and
Amortization $4,213 $10,977
Interest Expense $12,500 $0
Capital Assets Written $31,059 $0
Off ------- --
TOTAL EXPENSES $1,205,745 $1,443,193
---------- ----------
NET (LOSS) FOR THE
PERIOD ($1,512,215) ($1,435,387)
========== ==========
Earnings Per Share (0.10) (0.15)
====== ======
Average common shares
outstanding during 15,355,914 9,505,170
period ========== =========
F-4
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF DEFICIT
For the Year Ended December 31, 1997
1997 1996
---- ----
Deficit - Beginning of
the Period ($1,435,387) $0
Net Loss - Current Period ($1,512,215) ($1,435,387)
------------ ------------
Deficit - End of Period ($2,947,602) ($1,435,387)
============ ============
F-5
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOW
For the Year Ended December 31, 1997
1997 1996
---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES
Net gain (loss) for the
period ($1,512,215) ($1,435,387)
Items not requiring an
outlay of Cash:
Amortization of Fixed
Assets $4,213 $10,977
Capital Assets Written
Off $31,059 $0
Net Changes in non-cash
working capital items
related to operations:
Inventory $286,593 ($286,593)
Accounts Receivable $69,162 ($69,162)
Miscellaneous Receivable ($15,600) ($19,915)
Share Subscriber Receivable $202,500 ($202,500)
Accounts Payable $353,019 $68,989
-------- -------
Total Cash Flow Used in
Operations ($581,269) ($1,933,591)
======== ==========
CASH FROM FINANCING
ACTIVITIES
Loan Payable ($38,228) $395,000
Proceeds of Common Stock
Issuance $464,910 $1,753,270
-------- ----------
Net Cash Used in
Financing Activities $426,682 $2,148,270
======== ==========
CASH USED IN INVESTING
ACTIVITIES
Acquisition of Fixed Assets ($254) ($59,977)
------ ---------
Net Cash Used in
Investing Activities ($254) (59,977)
====== ========
NET INCREASE (DECREASE)
IN CASH FOR THE PERIOD ($154,841) $154,702
Cash - Beginning of period $154,702 $0
-------- --------
Cash/(Bank Indebtedness)
- End of period ($139) $154,702
===== ========
F-6
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the Year Ended December 31, 1997
Shares Par Value Additional
Paid-Up Capital
-------------------------------------------
Opening Balance - December 14,123,769 $1,412 $1,751,858
31, 1996
Issuance of Common Shares 1,316,676 $132 $394,868
on March 12, 1997 on the
Conversion of PTI Financial
Corp. Loan outstanding at a
rate of $0.30 per share
Issuance of Common Shares 140,000 $14 $6,986
on May 5, 1997 due to the
exercise of Stock Options
at $0.05 per share
Issuance of Common Shares 210,000 $21 $52,479
on September 19, 1997
through First Liberty Mutual
Issuance of Common Shares 50,000 $50 $2,450
on October 16, 1997 due to
the Exercise of Stock
Options at $0.05 per share
Issuance of Common Shares 300,000 $300 $7,610
on December 19, 1997 ------- ---- ------
Balance as at December 31, 16,140,445 $1,929 $2,216,251
1997 ========== ====== ==========
F-7
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a)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%.
b)METHOD OF ACCOUNTING
i) The Corporation maintains its books and prepares its financial
statements using the accrual basis of accounting.
ii) There are no material differences in the determination of Net
Earnings and per share calculations between Canadian and U.S GAAP.
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 accounting and tax
purposes.
3. CAPITAL ASSETS
Accumulated Net Book Net Book
Cost 1997 Depreciation Value 1997 Value 1996
--------- 1997 ---------- ----------
----
Furniture and
fixtures,
Dec. 31, 1997 $ 21,847 $ 7,865 $ 13,982 $49,000
4. LOANS PAYABLE
Loans payable include loans amounting to $258,842 which are secured by a
pledge over all the assets of the Company. Interest is payable on these
secured loans at a rate of prime plus 4%.
5. 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 December 31,1997 are as follows:
F-8
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
Year Granted Expiration Date Price Range No. of Shares
- ------------ --------------- ----------- -------------
1996 January 2001 $0.05 7,933,334
1997 November 2000 $0.12 45,000
1997 November 2000 $0.125 125,000
1997 October 2000 $0.15 40,000
1997 November 2000 $0.20 50,000
1997 December 2000 $0.25 100,000
1997 December 2000 $0.40 200,000
- ---------------------------------------------------------------
Total Stock
Options
Outstanding 8,493,334
---------
b) As at December 31, 1997, 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.
6. SUBSEQUENT EVENT
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 that
represented all the parties in the above transaction and that acted as
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 wrote off its investment in the above companies in March 1998,
as there were insufficient funds to finance their operations, and the
value of the investment had materially declined.
F-9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PARADIGM ADVANCED TECHNOLOGIES, INC.
By: /s/ David Kerzner
----------------------------------
David Kerzner
President, Chief Executive Officer
and Director
Each person whose signature appears below hereby constitutes and appoints
David Kerzner his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying all
that said attorney-in-fact and agent or his substitute or substitutes, or any of
them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Exchange Act, this Report has been
signed below by the following persons on behalf of the Company in the capacities
and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ David Kerzner President, Chief Executive November 4, 1998
- ----------------- Officer (Principal Executive
David Kerzner Officer) and Director
/s/ Selwyn Wener Chief Financial Officer November 4, 1998
- ---------------- (Principal Financial Officer)
Selwyn Wener
/s/ Jacob Kerzner Director November 4, 1998
- -----------------
Jacob Kerzner
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains Summary Financial Information Extracted from
Unaudited Financial Statements, December 31, 1997 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> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 35,515
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,515
<PP&E> 21,847
<DEPRECIATION> (7,865)
<TOTAL-ASSETS> 49,497
<CURRENT-LIABILITIES> 778,919
<BONDS> 0
0
0
<COMMON> 2,218,180
<OTHER-SE> (2,947,602)
<TOTAL-LIABILITY-AND-EQUITY> 49,497
<SALES> 47,468
<TOTAL-REVENUES> 47,468
<CGS> 353,938
<TOTAL-COSTS> 353,938
<OTHER-EXPENSES> 1,193,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,500
<INCOME-PRETAX> (1,512,215)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,512,215)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,512,215)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
