<PAGE>
Document is copied.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Amendment No. 1)
(Mark One)
(X) Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2000
---------------
( ) Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________________ to ____________________
Commission File Number: 028836
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Paradigm Advanced Technologies, Inc.
------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 33-0692466
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
25 Leek Crescent, Richmond Hill, Ontario. L4B 4B3 CANADA
--------------------------------------------------------
(Address of Principal Executive Offices)
(905) 707-2158
--------------
(Issuer's Telephone Number, Including Area Code)
-------------------------------------------------------------------
(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 July 24, 2000 the issuer had 59,857,816 shares of its common stock
issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS AS AT
JUNE 30 JUNE 30
2000 1999
(unaudited) (unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 643,366 $ 561
Miscellaneous receivables 32,289 1,342
Prepaids and deposits 128,239 524,456
------------ ------------
Total Current Assets 803,894 526,359
Capital Assets (note 4) 155,287 168,299
------------ ------------
Total Assets $ 959,181 $ 694,658
============ ============
LIABILITIES
Current Liabilities
Accounts payable $ 737,550 $ 565,750
Loans payable (note 5) 348,856 541,179
------------ ------------
Total Liabilities 1,086,406 1,106,929
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share Capital (notes 6 and 7) 14,439,394 3,755,618
Authorized: 100,000,000 Common Stock at
$0.0001 par value
Issued and outstanding stock:
54,193,361 as of June 30, 2000
29,996,662 as of December 31, 1999
Common share purchase options 6,109,737 195,908
Additional paid in capital 1,226,799 804,912
<PAGE>
Deficit (21,903,155) (5,168,709)
------------ ------------
Total Shareholders' (Deficiency) (127,225) (412,271)
------------ ------------
Total Liabilities and Shareholders' Equity $ 959,181 $ 694,658
============ ============
The accompanying notes are an integral part of these Financial Statements.
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue
Interest $ 3,829 $ -- $ 3,829 $ --
------------ ------------ ------------ ------------
Operating Expenses
Selling, general and administration 743,656 80,691 1,025,126 226,464
Research and development 103,236 1,084 14,930,171 2,040
Depreciation and amortization 13,429 838 26,770 1,676
Interest expense 50,750 92,078 227,013 114,396
------------ ------------ ------------ ------------
Total Operating Expenses 911,071 174,691 16,209,080 344,576
------------ ------------ ------------ ------------
Loss for the period $ (907,242) $ (174,691) $(16,205,251) $ (344,576)
============ ============ ============ ============
Loss per Share $ (0.02) $ (0.01) $ (0.37) $ (0.01)
============ ============ ============ ============
Average common shares
outstanding during period 53,127,438 29,796,662 43,939,822 29,796,662
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<S> <C>
For the six months ended
June 30,
2000 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities
Loss for the period $(16,205,251) $ (344,576)
Items not requiring an outlay of cash
Amortization of capital assets 26,770 1,676
Amortization of debt discount to interest expense 202,408 92,346
Common share purchase options 19,500 --
Research and development included in
PowerLOC acquisition 14,846,397 --
Options issued to employees with strike price below market price 292,400 --
Net changes in non-cash working capital items related to operations
Miscellaneous receivables (25,968) (40)
Prepaids and deposits -- (13,191)
Accounts payable (30,959) 105,341
------------ ------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (874,703) (158,444)
------------ ------------
Cash flows from financing activities
Loan payable -- 149,864
Proceeds of common stock issuance 1,847,791 --
------------ ------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,847,791 149,864
------------ ------------
Cash flows from investing activities
Acquisition of capital assets (329,787) (3,715)
------------ ------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (329,787) (3,715)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS FOR THE PERIOD 643,301 (12,295)
Cash and cash equivalents - Beginning of the period 65 12,856
------------ ------------
Cash and cash equivalents - End of the period $ 643,366 $ 561
============ ============
Cash and cash equivalents are comprised as follows:
Cash $ 243,777 $ 561
Short-term investments 399,589 --
------------ ------------
Cash and cash equivalents - End of the period $ 643,366 $ 561
============ ============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<PAGE>
<TABLE>
<CAPTION>
For the six months ended
June 30,
2000 1999
(unaudited) (unaudited)
<S> <C> <C>
Common stock
Balance, beginning of period $ 3,765,618 $ 3,755,618
Exercise of stock options 1,334,496 -
Issued for cash 440,000 -
Debentures redeemed 248,260 -
Issued for acquisition of PowerLOC 8,600,000 -
Issued for acquisition of patent license 29,000 -
Issued for other consideration 22,020 -
------------ ------------
Balance, end of period 14,439,394 3,755,618
------------ ------------
Common share purchase options
Balance, beginning of period - -
Adjustments (note 9) 195,908 195,908
Issued on acquisition of PowerLOC 5,916,666 -
Issued for acquisition of patent license 19,500 -
Exercise of stock options (22,337) -
------------ ------------
Balance, end of period 6,109,737 195,908
------------ ------------
Additional paid in capital
Balance, beginning of period - -
Adjustments (note 9) 832,399 619,452
Options issued to employees with
strike price below market price 292,400 -
Additions 102,000 185,460
------------ ------------
Balance, end of period 1,226,799 804,912
------------ ------------
Deficit
Balance, beginning of period (4,898,243) (4,426,924)
Adjustments (note 9) (799,661) (397,209)
Loss for the period (16,205,251) (344,576)
------------ ------------
Balance, end of period (21,903,155) (5,168,709)
------------ ------------
Total Shareholders' (Deficiency) $ (127,225) $ (412,271)
============ ============
</TABLE>
Paradigm Advanced Technologies, Inc.
Notes To Consolidated Financial Statements
(unaudited)
Note 1. BUSINESS OVERVIEW
a) Paradigm Advanced Technologies, Inc. (the "Company") is a technology
development
<PAGE>
company incorporated in Delaware on January 12, 1996. The Company owns the
licensing rights to a broad based patent that covers the process by which
satellite location signals are transmitted over a cellular network to a
base unit. The Company is developing, through its PowerLOC subsidiary, a
complete location based commerce solution, using a proprietary system
architecture that includes mobile units that integrate global positioning
system (GPS) receivers along with wireless cellular transceivers, as well
as tracking servers.
b) The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six month periods ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended December
31, 2000. The unaudited consolidated condensed financial statements should
be read in conjunction with the consolidated financial statements and the
footnotes thereto, included in the company's annual report on form 10-K for
the year ended December 31, 1999.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Use of estimates
These consolidated financial statements have been prepared in accordance
with accounting principles in the United States. Because a precise
determination of assets and liabilities depends on future events, the
preparation of financial statements for any period necessarily involves the
use of estimates and approximation. Actual amounts may differ from these
estimates. These financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the accounting policies summarized below.
b) Principles of Consolidation
The Company's consolidated financial statements include the assets,
liabilities and results of operations of subsidiaries. All significant
inter-company accounts and transactions have been eliminated.
c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances with banks and short-
term investments with original maturities of less than three months.
d) Capital assets
Capital Assets are recorded at cost less accumulated depreciation.
Depreciation is provided using the following annual rates:
Computer Equipment - 30% - declining balance method
Furniture and Fixtures - 20% - declining balance method
e) Intellectual Property
Intellectual properties are recorded at cost less accumulated amortization.
Amortization is provided over their estimated useful lives:
Patent Rights - 10 years - straight-line method
License rights - 3 years - straight-line method
<PAGE>
f) Financial Instruments
The carrying amount of cash and cash equivalents, miscellaneous
receivables, accounts payable and loans payable approximates fair value at
the period end.
g) Foreign Currency Translation
A subsidiary of the Company maintains its books and records in Canadian
dollars. Foreign currency transactions are reflected using the temporal
method. Under this method, all monetary items are translated into Canadian
funds at the rate of exchange prevailing at balance sheet date.
Non-monetary items are translated at historical rates. Income and expenses
are translated at the rate in effect on the transaction dates. Transaction
gains and losses are included in the determination of earnings for the
year.
The translation of the financial statements of this wholly-owned subsidiary
from Canadian dollars into United States dollars is performed for the
convenience of the reader. Balance sheet accounts are translated using
closing exchange rates in effect at the balance sheet date and income and
expense accounts are translated using an average exchange rate prevailing
during each reporting period. No representation is made that the Canadian
dollar amounts could have been or could be realized at the conversion
rates. Adjustments resulting from the translation are included in the
accumulated other comprehensive loss in stockholders' equity.
h) Loss per Share
The Company has adopted Financial Accounting Standards No. 128, "Earnings
per Share" ("FAS 128"). FAS 128 requires presentation of basic and diluted
earnings or loss per share. The Company has potentially dilutive shares,
however, because the Company has a loss, the potentially dilutive shares
are deemed anti-dilutive and only the basic loss per share is presented.
Loss per share is computed by dividing net income by the weighted average
number of shares outstanding during the period.
i) Income taxes
Current income tax expense (recovery) is the amount of income taxes
expected to be payable (recoverable) for the current year. A deferred tax
asset and/or liability is computed for both the expected future impact of
differences between the financial statement and tax bases of asset and
liabilities and for the expected future tax benefit to be derived from tax
losses. Valuation allowances are established when necessary to reduce
deferred tax asset to the amount expected to be "more likely than not"
realized in future returns. Tax law and rate changes are reflected in
income in the period such changes are enacted.
j) Stock-based compensation plan
In December 1995, SFAS No. 123, Accounting for Stock-Based Compensation was
issued. It introduces the use of a fair value-based method of accounting
for stock-based compensation. It encourages, but does not require,
companies to recognize stock-based compensation expenses to employees based
on the new fair value accounting rules. Companies that choose not to adopt
the new rules will continue to apply the existing accounting rules
continued in Accounting Principles Board Opinion No. 25, Accounting for
stock issued to employees. However, SFAS No. 123 requires companies that
choose not to adopt the new fair value accounting rules to disclose pro
forma net income and earnings per share under the new method. The Company
has adopted the disclosure provisions of SFAS No. 123.
k) Research and Development
Research and development costs, other than capital expenditures but
including acquired research and development costs, are charged against
income in the period incurred.
l) Revenue recognition
Sales are recognized upon delivery of goods and passage of title to
customers.
<PAGE>
Licence fees are recognized as income over the terms of the licences.
Note 3. GOING CONCERN
The Company is in its development stage and has not yet earned any
significant revenues. Consequently, the Company has incurred losses
since its incorporation in 1996. The Company has funded its operations
to date through the issuance of shares and debt.
The Company plans to continue its efforts to acquire equity partners, to
make private placements, and to seek both private and government funding
for its projects. In the period January 1, 2000 to June 30, 2000, the
Company raised approximately $1,800,000 through the exercising of stock
options and warrants and through the issuance of common shares for cash.
Note 4. CAPITAL ASSETS
June 30, 2000 June 30, 1999
Furniture, Fixtures and Computers $ 40,802 $ 25,561
Patent Agency Rights 155,270 155,075
------- -------
196,072 180,636
Less: Accumulated Depreciation 40,785 12,337
-------- --------
$155,287 $168,299
======== ========
Note 5. LOANS PAYABLE
a) Loans payable include loans amounting to $197,855 (1999 - $243,842) are
payable on demand and 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%. Of theses loans, $68,193 at June 30, 2000 was owing to directors of the
Company.
b) Convertible promissory notes of $151,000 (1999 - $205,000) are convertible
into common shares at rates of $0.02 - $0.05 per share (1999 - $0.05 per
share). $25,000 of these notes were due and payable on December 31, 1999
and are the subject of the dispute in note 8. The remaining $126,000 at
June 30, 2000, are due and payable in 2000. Interest is payable on these
convertible promissory notes at a rate of 12.5% per annum.
Note 6. STOCK OPTIONS AND WARRANTS
Options outstanding Number Range Weighted average
exercise price
Balance, December 31, 1999 22,303,201 $0.01 - 0.40 $ 0.05
Granted during the period 16,451,666 $0.20 - 3.00 1.02
Exercised during the period (1,564,867) $0.05 - 0.20 0.06
---------- ------------ --------
Balance, June 30, 2000 37,190,000 $0.01 - 3.00 $ 0.54
========== ============ ========
<PAGE>
Options outstanding include 1,350,000 Exchangeable Shares which arise out of the
acquisition of PowerLOC (note 7).
The following warrants were outstanding at June 30, 2000:
Expiry date Price range No. of Warrants
2000 $0.50 370,000
2001 $0.05 - 0.25 5,700,000
2003 $0.02 - 0.25 10,925,000
2004 $0.125 453,500
2005 $2.75 120,000
----------
TOTAL WARRANTS OUTSTANDING 17,568,500
==========
Employee Stock Option Plan
The consolidated financial statements include a compensation charge of $292,400
(1999: nil) for the six months ended June 30, 2000 and $292,400 (1999: nil) for
the three months ended June 30, 2000 resulting from employee stock options
issued at a value below market value at the grant dates.
Note 7. POWERLOC ACQUISITION
On March 29, 2000, the Company completed the acquisition of 100% of Power Point
Micro Systems Inc. and PowerLOC Technologies Inc (a Bahamas company),
("PowerLOC"). The acquisition has been accounted for using the purchase method.
PowerLOC Technologies Inc. is a research and development company that has
developed a low-cost, miniature mobile-location GPS unit that transmits its
position to a base station through existing PCS, pager or cellular phone
wireless networks. Power Point Micro Systems Inc. is an international
telecommunications consulting firm specializing in wireless and wireline, voice
and data systems integration. Consideration was as follows:
<TABLE>
<S> <C>
Cash $ 300,000
Issuance of 3,650,000 common shares @ market value of $1.72 6,278,000
Issuance of 1,350,000 exchangeable shares @ market value of $1.72 2,322,000
Issuance of 4,166,666 options for common shares @ market value of $1.42 5,916,666
Costs incurred 29,731
------------
$ 14,846,397
============
</TABLE>
The definitions of beneficial ownership and the number of shares outstanding
apply to shares of common stock and exchangeable shares as though they were the
same security.
The purchase price was allocated to research and development expenses in terms
of FAS 2 (Accounting for Research and Development Costs).
PowerLOC Technologies Inc. (Bahamas) remains the owner of the location
technology acquired in the transaction and any improvements. Another subsidiary
of Paradigm, PowerLOC Technologies Inc. (an Ontario corporation) is currently
marketing and enhancing the technology under license from PowerLOC.
The shares of the acquired companies have been pledged as security for the
performance of the Company under the terms of the agreement.
The fair value of the options granted was estimated on the date of grant using
the Black-Scholes pricing model using the following assumptions:
<PAGE>
Risk-free interest rate 6.7%
Dividend yield 0%
Expected life 3 years
Stock price volatility 100%
Subsequent to the quarter-end, a loan of $320,000 to the vendor of PowerLOC has
been advanced pursuant to the acquisition agreement and treated as a reduction
of paid in capital. The Company committed to register and make freely tradable
25% of the 5,000,000 common shares issued in connection with the transaction in
each of the following four quarters. The Company further agreed that if at the
end of each quarter, the number of Paradigm shares made free trading have an
aggregate value of less than $500,000, the Company shall issue to the vendor
additional shares, or the equivalent amount as shall be necessary so that the
aggregate value of free trading shares becoming unrestricted in such quarter for
the benefit of the vendor shall not be less than $500,000. The remaining
commitment is for the Company to advance up to an additional $1,680,000 over a
period of one year after closing, to the extent that the shares made freely
trading in each quarter do not exceed a market value of $500,000. The amounts
advanced will be repaid to the Company upon shares becoming freely trading,
provided that such shares have a market value that exceeds the committed amount.
Note 8. LEGAL PROCEEDINGS
In February 1998, the Company acquired all the shares of 1280884 Ontario Inc.
and its wholly owned subsidiary North York Leasing Inc. (the "Acquired
Companies"). The Company issued 3,720,000 Common Shares to the vendors of the
Acquired Companies at a price of 25 cents per share representing a cost of
$930,000 and was 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 was less than 25 cents, so
that the total consideration was the equivalent of $930,000. The Company has
instituted legal action against the legal firm who represented all the parties
in the above transaction and who was the escrow agents for the above shares and
is claiming that these shares be canceled and that damages be paid to the
Company. The Company has obtained a full release from the vendors, whereby they
agreed to waive their rights to receive any additional shares in connection with
this transaction.
In March 2000, the Company was named as the defendant in a lawsuit brought
by Luigi Brun in Canada. The complaint claimed 300,000 common shares and
additional monetary damages arising out of disputes relating to an alleged
obligation to issue common shares. Subsequent to the quarter, the Company issued
300,000 common shares in full settlement of this claim.
In March 2000, the Company was named as the defendant in a lawsuit brought
by Pines International, Inc. in Canada. The complaint claimed specific
performance and monetary damages arising out of a dispute relating to an alleged
financing agreement. Subsequent to the quarter, the Company obtained a full
release from the complaint, and did not issue any additional payments or shares.
In July 2000, the Company's subsidiary was named as one of the defendants
in a lawsuit brought by Murray Ruben, in the Province of Ontario, Canada. The
complaint claimed a percentage of the value of the PowerLOC acquisition and
other monetary damages and injunctive relief arising out of a dispute relating
to an alleged financing agreement. The Company issued 170,000 common shares and
$110,00 cash in full settlement of this claim.
Note 9. ADJUSTMENTS
<PAGE>
During the period the company made retroactive adjustments for the following:
a) Options granted to consultants in prior periods not previously recorded. The
value of the options granted at that time had been determined using the Black
Scholes model with the following assumptions:
Risk free interest rate 5%
Expected life in years 3 to 5 years
Expected dividend yield 0%
Volatility 170% to 180%
As a result of these adjustments, the following have been increased:
June 30,
2000
Share capital $ -
Common share purchase options 195,908
Deficit (195,908)
----------
Total shareholders' (deficiency) $ -
==========
b) Convertible debt issued in prior periods has been adjusted to comply with
Topic D-60, APB 14 and EITF 98-5. As a result, for convertible debt where the
exercise price is less than the market price at the date of issuance, a portion
of the proceeds from the sale has been allocated to the intrinsic value of the
beneficial conversion feature and recognized as additional paid-in capital. The
related discount has been amortized over the period from the date of issuance to
the security's first convertibility date. For convertible debt where the
exercise price is more than the market price at the date of issuance, no portion
of the proceeds is attributable to the conversion feature. For convertible debt
issued with detachable stock purchase warrants, the portion of the proceeds
allocable to the warrants is included as paid-in capital.
As a result of these adjustments, the following have been increased:
For the three For the six
months ended months ended
June 30, 1999 June 30, 1999
Interest expense $ 79,778 $ 92,346
Loss for the period $ 79,778 $ 92,346
June 30, 1999
Prepaid expenses $ 511,265
-------
Total assets $ 511,265
=======
Share capital $ -
Common share purchase options 195,908
<PAGE>
Additional paid in capital 804,912
Deficit (489,555)
-------
Total shareholders' (deficiency) $ 511,265
=======
Note 10. SUBSEQUENT EVENTS
In July 2000, the Company negotiated and closed a secured loan for $1,000,000.
The loan is payable on January 30, 2001 and interest is payable at a rate of 10%
per annum. The loan is secured over the assets of the company, but is postponed
in favor of the existing prior charges as described in note 5 (a).
Item 2. Management's Discussion and Analysis of Plan of Operation
The discussion below contains certain forward-looking statements (as such
term is defined in Section 21E of the Securities Exchange Act of 1934) that are
based on the beliefs of the Company's management, as well as assumptions made
by, and information currently available to, the Company's management. The
Company's results, performance and achievements in 2000 and beyond could differ
materially from those expressed in, or implied by, any such forward-looking
statements. See "Cautionary Note Regarding Forward-Looking Statements."
Three Months Ended June 30, 2000
The Company recorded no sales for the three months ended June 30, 2000 and June
30, 1999. The Company expects to start earning licensing revenue from the patent
agency agreement in the third quarter of 2000. The Company expects to have its
PowerLOC products ready for distribution towards the end of the current fiscal
year.
Selling, General and Administration Expenses for the three months ended June 30,
2000 were $743,656 as compared to $80,691 for the three months ended June 30,
1999. The increase is due to the higher operating expenses resulting from the
acquisition of PowerLOC Technologies Inc., on March 29, 2000. The Company hired
technical, sales and administrative staff during the quarter ended June 30, 2000
and incurred incurred research and development costs, professional fees, travel
and consulting fees relating to the PowerLOC business. The Company also incurred
higher corporate professional fees and additional patent related costs.
The Company expects to increase its operating expenses substantially in the
future by hiring additional staff and incurring additional research and
development, selling, marketing and administrative costs. The Company also
expects to incur additional licensing costs as it increases its patent licensing
activities.
Depreciation and amortization charges for the quarter ended June 30, 2000 were
$13,429 as compared to $838 for the quarter ended June 30, 1999 due to the
amortization of the patent agency agreement.
The net loss for the three months ended June 30, 2000 amounted to $907,242 as
compared to a loss of $174,691 for the three months ended June 30, 1999. The
higher loss is due to the increased selling, general and administration
expenses, higher interest charges and the amortization of the patent agency
agreement.
Six Months Ended June 30, 2000
<PAGE>
The Company recorded no sales for the six months ended June 30, 2000 and June
30, 1999. The Company focussed its attention on the patent and license
negotiations and the development of the PowerLOC personal and vehicle tracking
products and expects to start earning revenue from these activities in the
fourth quarter of the current fiscal year.
Selling, General and Administration Expenses for the six months ended June 30,
2000 were $1,025,126 as compared to $226,464 for the six months ended June 30,
1999. The increase is due to the operating expenses resulting from the
acquisition of PowerLOC Technologies Inc., on March 29, 2000 and increased
corporate professional fees and patent related costs.
Depreciation and amortization charges for the six months ended June 30, 2000
were $26,770 as compared to $1,676 for the six months ended June 30, 1999 due to
the amortization of the patent agency agreement.
The loss for the 2000 period includes non-cash charges of $14,846,397 for the
expensing of the technology acquired on the acquisition of PowerLOC. The higher
loss is due to the increased selling, general and administration expenses,
higher interest charges and the amortization of the patent agency agreement.
Liquidity and Capital Resources
The Company had cash and cash equivalents on hand of $643,366 at June 30,
2000. The Company raised in excess of $1,700,000 cash during the first two
quarters , through the price paid to exercise stock options and warrants and
through the issuance of common shares. This amount was primarily the result of
private sales of common shares and the price paid in connection with the
exercise of warrants. 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 and the assumption of additional debt and
government funding. The Company raised $1,000,000 in July 2000 through debt
financing. The Company does not have any commitments for capital expenditures
and believes that its current cash balances will be sufficient to meet its
operating and development needs for at least the next six months. If the Company
has not obtained additional financing prior to that time it will need to delay
or eliminate some of its development activities.
Plan of Operation
The Company is the exclusive licensing agent for a broad based patent (US
Patent # 5,043,736) which covers an invention comprising a portable locating
unit useful both as a cellular telephone and portable global positioning system
that provides latitude and longitude information remotely to a base unit
display. The system includes a small hand held receiver that receives signals
from a satellite GPS and timing and computing circuits to provide location
information signals. The hand held unit also includes a modem and transmitter to
a cellular telephone network, which is connected to the base unit computational
system and display. The location of an individual or object can thus be
determined at the remote station through the use of the cellular telephone
network. The Company has entered into an agreement to acquire all the rights to
US Patent # 5,043,736, currently owned by Eastern Investments, LLC, in exchange
for 4,500,000 shares of Common Stock and 4,200,000 stock options. The Company
expects to close this transaction in September 2000. The Company plans to
license parties using this process and expects to earn licensing revenue from
these agreements. The Company has announced the signing of two licensees in the
second
<PAGE>
quarter of the 2000 fiscal year. As a result of the acquisition of PowerLOC
Technologies Inc. and the projected growth in wireless location services, the
Company is increasing its development activities relating to the miniature GPS
tracking device. The Company plans to negotiate distribution or sales
representation agreements with manufacturers and systems integrators to
distribute these products and in May 2000 announced a strategic alliance with
Compugen Systems Ltd. of Richmond Hill, Ontario to distribute and license the
PowerLOC products. The Company also announced the hiring of a public relations
firm at the end of the second quarter.
The Company does not currently have any intentions to acquire a plant or
any significant equipment, as the Company plans to subcontract its manufacturing
activities. The Company plans to hire additional technical, sales and
administrative employees prior to December 2000 and is also considering the
acquisition of companies or businesses with complimentary technologies.
Research and Development
A significant amount of time and effort was placed on research and
development at the Company's inception. The Company uses contractors and third
party companies to continue its research and development activities and has
hired a number of engineers for its PowerLOC subsidiary, who are responsible for
the development of the products and who supervise the work done by the
contractors and third party engineers. The Company plans to hire additional
engineers and is planning to increase its research and development activities in
order to develop a set of location tracking solutions for various applications.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements that reflect the
Company's current expectations about its future operating results, performance,
and opportunities that involve substantial risks and uncertainties. When used in
this Form 10-Q, the words "anticipate," "believe," "estimate," "plan," "intend,"
and "expect," and similar expressions, as they relate to the Company or its
management, are intended to identify such forward-looking statements. These
forward looking statements are based on information currently available to the
Company and are subject to a number of risks, uncertainties, and other factors
that could cause the Company's actual results, performance, prospects, and
opportunities to differ materially from those expressed in, or contribute to
such differences include, but are not limited to, limited capital resources,
lack of operating history, intellectual property rights, reliance on one product
line for revenue, and other factors discussed under "Risk Factors." In the
Company's Form 10-KSB which was filed on April 14, 2000. Except as required by
the federal securities law, the Company does not undertake any obligation to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this Form 10-Q or for any other
reason.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<PAGE>
Exhibit No. Description of Exhibit
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27 Financial Data Schedule
(b) Reports on form 8-K.
The Company filed Form 8-K on April 14, 2000 regarding the acquisition of
PowerLOC Technologies, Inc.
SIGNATURES
In accordance with the Exchange Act, the registrant caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Paradigm Advanced Technologies, Inc.
Date: August 2, 2000
By: /s/ David Kerzner
---------------------------
David Kerzner
Chairman
By: /s/ Selwyn Wener
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Selwyn Wener
Chief Financial Officer
