<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended 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
------------------------------
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>
<TABLE>
<CAPTION>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS AS AT
JUNE 30 JUNE 30
2000 1999
---- ----
(unaudited)
ASSETS
<S> <C> <C>
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 3) 16,251,683 168,299
------------- ----------
Total Assets $ 17,055,577 $ 694,658
============= ==========
LIABILITIES
Current Liabilities
Accounts payable $ 737,550 $ 565,750
Loans payable (note 4) 348,856 541,179
------------- ----------
Total Liabilities 1,086,406 1,106,929
------------- ----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share Capital (notes 5 and 6) 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 7,359,736 195,908
Additional paid in capital 934,399 804,912
Deficit (6,764,358) (5,168,709)
------------- ----------
Total Shareholders' Equity (Deficiency) 15,969,171 (412,271)
------------- ----------
Total Liabilities and Shareholders' Equity $ 17,055,577 $ 694,658
============= ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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 544,761 81,775 816,500 228,504
Depreciation and amortization 13,429 838 26,770 1,676
Interest expense 50,750 92,078 227,013 114,396
----------------------------------- ----------------------------------
Total Operating Expenses 608,940 174,691 1,070,283 344,576
----------------------------------- ----------------------------------
Loss for the period $ (605,111) $ (174,691) $ (1,066,454) $ (344,576)
==================================== ==================================
Loss per Share $ (0.01) $ (0.01) $ (0.02) $ (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.
- 3 -
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
For the six months ended
June 30,
2000 1999
---- ----
(unaudited) (unaudited)
Cash flows from operating activities
<S> <C> <C>
Loss for the period $ (1,066,454) $ (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 -
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.
- 4 -
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<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>
Common stock
Balance, beginning of period $ 14,308,394 $ 3,755,618 $ 3,765,618 $ 3,755,618
Exercise of stock options 112,000 - 1,334,496 -
Issued for cash - - 440,000 -
Debentures redeemed 6,000 - 248,260 -
Issued for acquisition of PowerLOC - - 8,600,000 -
Issued for acquisition of patent license - - 29,000 -
Issued for other consideration 13,000 - 22,020 -
----------------------------------- ------------------------------------
Balance, end of period 14,439,394 3,755,618 14,439,394 3,755,618
----------------------------------- ------------------------------------
Common share purchase options
Balance, beginning of period 7,359,736 - - -
Adjustments (note 9) - 195,908 195,908 195,908
Issued on acquisition of PowerLOC - - 7,166,665 -
Issued for acquisition of patent license - - 19,500 -
Exercise of stock options - - (22,337) -
----------------------------------- ------------------------------------
Balance, end of period 7,359,736 195,908 7,359,736 195,908
----------------------------------- ------------------------------------
Additional paid in capital
Balance, beginning of period 934,399 - - -
Adjustments (note 9) - 804,912 832,399 619,452
Additions - - 102,000 185,460
----------------------------------- ------------------------------------
Balance, end of period 934,399 804,912 934,399 804,912
----------------------------------- ------------------------------------
Deficit
Balance, beginning of period (5,196,929) (4,584,241) (4,898,243) (4,426,924)
Adjustments (note 9) (962,318) (409,777) (799,661) (397,209)
Loss for the period (605,111) (174,691) (1,066,454) (344,576)
----------------------------------- ------------------------------------
Balance, end of period (6,764,358) (5,168,709) (6,764,358) (5,168,709)
----------------------------------- ------------------------------------
Total Shareholders' equity $ 15,969,171 $ (412,271) $ 15,969,171 $ (412,271)
=================================== ====================================
</TABLE>
- 5 -
<PAGE>
Paradigm Advanced Technologies, Inc.
Notes To Consolidated Financial Statements
(unaudited)
Note 1. BASIS OF PRESENTATION
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
1. 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.
2. Principles of Consolidation
The Company's consolidated financial statements include the assets,
liabilities and results of operations of subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
3. Going Concern
The Company has incurred losses since its incorporation in 1996. The
Corporation 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 $1,700,000 through the
exercising of stock options and warrants and through the issuance of
common shares for cash.
- 6 -
<PAGE>
4. 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.
5. 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
Patent Agency Rights - 33 1/3% - straight line method
Technology - 33 1/3% - straight line method
6. Financial Instruments
The carrying amount of cash and cash equivalents, miscellaneous
receivables, accounts payable and loans payable approximates fair value
at the period end.
7. Foreign Currency Translation
Foreign currency denominated monetary items are translated into U.S.
dollars at the exchange rate in effect at year end. Transactions in
foreign currencies are translated at the rate prevailing at the date of
the transactions. Any resulting gains or losses are included in income.
8. 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.
9. 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
- 7 -
<PAGE>
returns. Tax law and rate changes are reflected in income in the
period such changes are enacted.
10. Stock-based compensation plan
The Company measures compensation expense for its stock-based
compensation plan using the intrinsic value method and provides pro
forma disclosures of net income and loss per common share as if the
fair value based method had been applied in measuring compensation
expense.
Note 3. CAPITAL ASSETS
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Furniture, Fixtures and Computers $ 40,802 $ 25,561
Patent Agency Rights 155,270 155,075
Technology (a) 16,096,396 0
------------ ---------
16,292,468 180,636
Less: Accumulated Depreciation 40,785 12,337
------------ ---------
$ 16,251,683 $ 168,299
============ =========
(a) The technology was acquired on the acquisition of PowerLOC Technologies, Inc. (Note 6).
</TABLE>
Note 4. 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 7. 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 5. STOCK OPTIONS AND WARRANTS
<TABLE>
<CAPTION>
Options outstanding Number Range Weighted average
------------------- ----- ----- exercise price
--------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 22,303,201 $0.01 - 0.40 $ 0.05
Granted during the period 6,451,666 $0.20 - 3.00 0.77
Exercised during the period (1,564,867) $0.05 - 0.20 0.06
---------- ------------ ------
Balance, June 30, 2000 27,190,000 $0.01 - 1.00 $ 0.22
========== ============ ======
</TABLE>
- 8 -
<PAGE>
The following warrants were outstanding at March 31, 2000:
Expiry date Price range No. of Options
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
==========
Note 6. POWERLOC ACQUISITION
On March 29, 2000, the Company completed the acquisition of 100% of Power Point
Micro Systems Inc. and PowerLOC Technologies, Inc, ("PowerLOC") both of which
are based in Toronto, Ontario. 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. Management has determined that there are alternative
future uses for the technology. 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 5,000,000 common shares @ market value of $1.72 8,600,000
Issuance of 4,166,666 options for common shares @ market value of $1.72 7,166,665
Costs incurred 26,211
------
Allocated to Technology $ 16,092,876
============
</TABLE>
The fair value of the options granted was estimated on the date of grant using
the Black-Scholes pricing model using the following assumptions:
Risk-free interest rate 6.7%
Dividend yield 0%
Expected life 3 years
Stock price volatility 406%
- 9 -
<PAGE>
Note 7. 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 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 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 obtained a release from all the vendors
of these companies, whereby these vendors have agreed to waive their rights to
receive any additional shares in connection with the transaction. The Company
has instituted legal action against the legal firm who represented all the
parties in the above transaction and is claiming that damages be paid to the
Company.
In March 2000, the Company was named as the defendant in a lawsuit
brought by Luigi Brun in Canada. The complaint seeks specific performance and
monetary damages arising out of a dispute relating to an alleged obligation to
issue common shares. The Company believes this claim is without merit and
intends to vigorously defend the lawsuit. It is not possible at this time to
predict the outcome of the lawsuit, including whether the Company will be forced
to issue common shares or to estimate the amount or range of potential loss, if
any.
In March 2000, the Company was named as the defendant in a lawsuit
brought by Pines International, Inc. in Canada. The complaint seeks specific
performance and monetary damages arising out of a dispute relating to an alleged
obligation to issue common shares. The Company believes this claim is without
merit and intends to vigorously defend the lawsuit. It is not possible at this
time to predict the outcome of the lawsuit, including whether the Company will
be forced to issue common shares or to estimate the amount or range of potential
loss, if any.
In April 2000, the Company was named as the defendant in a lawsuit
brought by Barrett Evans in the United States District Court, Central District
of California. The complaint seeks specific performance, monetary damages and
injunctive relief arising out of a dispute relating to the terms of a
convertible promissory note. The Company believes this claim is without merit
and intends to vigorously defend the lawsuit. It is not possible at this time to
predict the outcome of the lawsuit, including whether the Company will be forced
to issue common shares or to estimate the amount or range of potential loss, if
any.
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 seeks specific performance, monetary damages and
injunctive relief arising out of a dispute relating to an alleged financing
agreement. The Company believes this claim is without merit and intends to
vigorously defend the lawsuit. It is not possible at this time to predict the
outcome of the lawsuit, including whether the Company will be forced to issue
common shares or to estimate the amount or range of potential loss, if any.
Note 8. ADJUSTMENTS
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%
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:
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, 1999 June 30, 1999
<S> <C> <C>
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
Additional paid in capital 804,912
Deficit (489,555)
----------------
Total shareholders' equity (deficiency) $ 511,265
================
</TABLE>
- 10 -
<PAGE>
Note 9. SUBSEQUENT EVENTS
In July 2000, the Company negotiated and closed a secured loan for $1,000,000.
The loan is payable on January 31, 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 4 (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 $544,761 as compared to $81,775 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.
- 11 -
<PAGE>
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 $605,111 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
relating to the PowerLOC business, higher professional fees and the amortization
of the patent agency agreement.
Six Months Ended June 30, 2000
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 third
and fourth quarters of the current fiscal year.
Selling, General and Administration Expenses for the six months ended June 30,
2000 were $816,500 as compared to $228,504 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 28, 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 net loss for the six months ended June 30, 2000 amounted to $1,066,454 as
compared to a loss of $344,576 for the six months ended June 30, 1999. The
higher loss is due to the increased selling, general and administration expenses
relating to the PowerLOC business, higher professional fees 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 and expects to close additional debt financing of $2,000,000 in August
2000. The Company is also negotiating an equity line, whereby it will be able to
issue future registered common stock on an as-needed basis, although there can
be no assurance that the planned financing will be available when needed or, if
available, on terms that are favorable to the Company and its stockholders. 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
- 12 -
<PAGE>
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 4,900,000 shares of Common Stock and 4,200,000 stock options. The Company
expects to close this transaction in August 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
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
- 13 -
<PAGE>
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
Exhibit No. Description of Exhibit
----------- ----------------------
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.
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<PAGE>
SIGNATURES
In accordance with the Exchange Act, the registrant caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Paradigm Advanced Technologies, Inc.
Date: August 2, 2000
By: /s/ David Kerzner
---------------------------
David Kerzner
Chairman
By: /s/ Selwyn Wener
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Selwyn Wener
Chief Financial Officer
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