<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
SEPTEMBER 11, 2000
REGISTRATION NO. _____________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------------
PARADIGM ADVANCED TECHNOLOGIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 7381 0001009781
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
EDUARDO GUENDELMAN CHIEF EXECUTIVE OFFICER
25 LEEK CRESCENT PARADIGM ADVANCED TECHNOLOGIES, INC.
RICHMOND HILL, ONT L4B 4B3
(905) 707-2158
(NAME, ADDRESS AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICER)
EDUARDO GUENDELMAN, CHIEF EXECUTIVE OFFICER
25 LEEK CRESCENT PARADIGM ADVANCED TECHNOLOGIES, INC.
RICHMOND HILL, ONT L4B 4B3
(905) 707-2158
(NAME, ADDRESS AND TELEPHONE NUMBER,
OF AGENT FOR SERVICE)
COPIES TO:
GEOFFREY T. CHALMERS, ESQ. AARON S. GRUBNER, ESQ.
33 BROAD STREET MINDEN, GROSS, GRAFSTEIN & GREENSTEIN
SUITE 1100 111 RICHMOND STREET W, SUITE 600
BOSTON, MA 02109 TORONTO, ONT, CANADA M5H2H5
TELEPHONE: (617) 523-1960 TELEPHONE: (416) 362-3711
FACSIMILE: (617) 227-3709 FACSIMILE: (416) 864-1099
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective. If
this Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
<PAGE>
2
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434 check
the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Proposed Maximum Amount
Title of Each Class of Securities Amount Offering Price Per Aggregate of
To Be Registered Share(1) Offering Price Fee(2)
================ ======= ================ ======
<S> <C> <C> <C> <C>
Common Stock 40,000,000 $3.00 $120,000,000 $31,680
</TABLE>
(1) This registration statement covers (i) 11,201,651 shares offered from time
to time by the Company and (ii) 28,798,349 shares which may be offered from time
to time by Selling Shareholders. See "Selling Shareholders" in the Prospectus.
In accordance with Rule 416 and Rule 457 of the Rules of the Commission under
the Securities Act of 1933 this registration statement also converts and
indeterminate number of shares to be issued by the Company in compliance with
anti-dilution and similar adjustment provisions covering shares of common stock
issued or to be issued by the Company pursuant to options, warrants, conversion
or similar agreements
(2) Based on the last sales price of the Company's Common Stock as quoted on the
NASD OTC Bulletin Board on September 8, 2000, as estimated solely for the
purpose of calculating the registration fee in accordance with Rule 457 under
the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
3
September 11, 2000
PARADIGM ADVANCED TECHNOLOGIES, INC.
UP TO 40,000,000 SHARES OF COMMON STOCK
This Prospectus covers an offering from time to time of up to 40,000,000 shares
of Common Stock, par value $.0001 per share ( the "Shares" ), of Paradigm
Advanced Technologies, Inc, a Delaware corporation ("Paradigm " or the
"Company"). The Company's Common Stock is quoted on the NASD OTC Bulletin Board
under the symbol "PRAV." On September 8, 2000 , the last reported sale price of
the Company's Common Stock was $3.00 per share.
Up to 28,798,349 of the Shares are being sold by the Selling Shareholders listed
in the Selling Stockholders table beginning on Page 32. This includes Shares
currently outstanding plus Shares obtainable by Selling Shareholders on the
conversion of convertible securities or the exercise of warrants or options. The
balance of 11,201,651 Shares is offered by the Company. Certain Selling
Shareholders listing an aggregate of 10,236,290 Shares for sale have agreed to
refrain from offering their Shares until 90 days after the date of
this Prospectus. Otherwise, Selling Shareholders may sell their Shares at any
time at any price, directly or through one or more broker dealers, who may
receive compensation through commissions, discounts or concessions. The Selling
Shareholders and such broker dealers may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 and any such commissions, discounts or
concessions may be deemed to be underwriting compensation. The Company will not
receive any proceeds from the sale of the Shares by Selling Shareholders except
for proceeds received from the exercise of warrants and options. See The
Offering. Selling Shareholders and Plan of Distribution.
See Risk Factors beginning on Page 14 for a discussion of certain factors that
should be considered before investing.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
The Date of this Prospectus is September 11, 2000
<PAGE>
4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the Debentures thereto, appearing elsewhere in this Prospectus. All
references to "Paradigm" refer to Paradigm Advanced Technologies, Inc. and its
subsidiaries.
Paradigm Advanced Technologies, Inc. (the "Company") is a technology development
company incorporated in Delaware on January 12, 1996. The Company has certain
rights to proprietary technology in location based electronic commerce ("L-
commerce"). The Company provides complete location based commerce solutions
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.
The Company has a threefold strategy: (1) developing, securing and acquiring
related intellectual property, (2) developing L-commerce products and solutions
and (3) acquiring companies with complementary technology and businesses.
The Company holds the rights of a patent (the "PLU Patent") that covers the
apparatus and method of transmitting satellite position system signals
(including GPS and other satellite-based navigation systems) over a cellular
network to a base unit. The system provides latitude, longitude information
remotely to the base unit display. See PLU Patent.
The PLU Patent is a process patent for a system which includes the design for a
small hand held receiver for signals from a GPS satellite and timing and
computing circuits to provide location information signals. The hand held unit
also includes a transmitter to a cellular telephone network, 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 was formerly the exclusive licensing agent for the PLU patent, but
on September 6, 2000 announced that it had acquired the rights to the PLU
Patent, previously held by Eastern Investments, LLC. The Company licenses
companies operating under the PLU system and announced the signing of its first
license in April, 2000 and another licensing agreement in June 2000. As a result
of the acquisition of the rights to the patent, the Company plans to increase
its licensing activities.
On March 28, 2000 the Company acquired all the outstanding shares of PowerLOC
Technologies, Inc.(www.powerloc.com), a research and development company with
proprietary technology in wireless communications and GPS (the "PowerLOC
technology). PowerLOC has built a novel L-commerce system architecture (L-BIZ
(TM)) and a family of low-cost wireless devices. Along with this acquisition
came all the shares of PowerPoint Micro Systems, Inc (www.powerpoint-inc.com),
since 1992 engaged in worldwide systems integration projects. 4,475,000 shares
of Common stock issued in the PowerLOC/PowerPoint acquisition are being offered
pursuant to this Prospectus. See Selling Shareholders.
The PowerLOC system is designed to provide miniature, inexpensive portable
locator devices ("Mobiles") which connect to base tracking units ("Trackers").
The PowerLOC GPS is designed to locate targets with accuracy and to provide
detailed information about the Mobile user through the Internet almost
instantaneously.
On April 25, 2000 the Company announced a strategic alliance with Compugen
Systems Ltd. of Richmond Hill, Ontario (www.compugen.com). Compugen is Canada's
third largest systems integration company with annual sales exceeding $270
million and over 500 employees in 8 offices across the country. Under the
arrangement, Compugen provides the Company with office, as well as with
technical, sales, administration and marketing support services. As part of this
alliance, Compugen formed a new division: Compugen Mobile Solutions which became
PowerLOC's first authorized Location Service Provider, being granted a non-
exclusive marketing and distribution right for certain products and marketing
segments as well as for certain geographical territories. See Properties and
Certain Transactions.
The Company does not own and currently does not have any intentions to acquire a
manufacturing or assembly plant or any significant equipment, as the Company
plans to subcontract its manufacturing activities. The Company has hired a
qualified team of hardware, firmware, and DSP engineers as well as a team of
qualified and experienced software programmers who are jointly participating in
the research and development efforts of the company. As well, the company hired
a sales and marketing team consisting of seasoned professionals experience in
the wireless industry. 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 complementary technologies.
The Company has recorded no revenues from its operations over the past 2 years.
The Company expects to develop revenues from licensing and from the sale of its
GPS tracking solutions in the near future.
<PAGE>
5
FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking statements and information
relating to the Company 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. When used in this Prospectus, words such as
"anticipate," "believe," "estimate," "expect," "intend," "should" and similar
expressions, as they relate to the Company or its management, identify forward-
looking statements. Such statements reflect the current views of the Company
with respect to future events and are subject to certain risks, uncertainties
and assumptions relating to the operations, results of operations, liquidity and
growth strategy of the Company, including competitive factors and pricing
pressures, changes in legal and regulatory requirements, interest rate
fluctuations, and general economic conditions, as well as other factors
described in this Prospectus. Should one or more of the risks materialize, or
should underlying assumptions prove incorrect, actual results or outcomes may
vary materially from those described herein as anticipated, believed, estimated,
expected or intended.
THE OFFERING
The Offering is composed of shares of Common Stock offered from time to time by
the Company in connection with a recent financing ( see Interim Financing below
) and shares offered by certain Selling Shareholders. The offering price for the
Shares of Common Stock offered pursuant to this Prospectus is the average sales
price for the Common Stock on the OTCBB for the trading day immediately
preceding the date of offer. There can be no assurance that the prices at which
the Common Stock will trade in the public market following a particular offer
will not be lower than the price at which offered.
Offered by the Company 11,201,651
Offered By Selling Shareholders(1) 28,798,349
----------
Total 40,000,000
Outstanding July 31, 2000 59,857,816
----------
To be outstanding after the Offering(2) 85,810,467
<PAGE>
6
Use of Proceeds See "Use of Proceeds"
OTCBB Symbol PRAV
(1) Includes (a) 14,047,349 shares already issued and (b) an estimated
14,751,000 shares to be issued pursuant to conversion, option, warrant and other
rights to which the Company is committed. See Selling Shareholders. (3) Assuming
all shares offered hereby are sold. Excludes (a) 37,255,000 shares of Common
Stock subject to stock options issued to employees with an exercise price
averaging $.05 per share and (b) 17,892,500 warrants with an exercise price
averaging $.40 per share.
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of its Common Stock will
be $35,132,272 assuming all the securities to be issued by the Company pursuant
to this Prospectus are sold. See Dilution. The following table demonstrates the
intended application of the proceeds available from this Offering.
Intended Use Offering Percent
Research and Development 20%
Working Capital 60%
Acquisitions 20%
---
Total 100%
The Company believes that the proceeds of this Offering together with the
interim financing and funds generated from operations will meet the Company's
anticipated funding needs at least for the next twelve months.
THE COMMON STOCK
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. The following
table sets forth the
<PAGE>
7
range of high and low closing representative bid prices for the Company's Common
Stock for each quarterly period indicated (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, 1998. High Bid Low Bid
-------- -------
First Quarter....................... $0.172 $0.047
Second Quarter...................... $0.078 $0.031
Third Quarter....................... $0.188 $0.047
Fourth Quarter...................... $0.141 $0.047
Fiscal Year Ended December 31, 1999 $0.094 $0.047
First Quarter....................... $0.063 $0.031
Second Quarter...................... $0.063 $0.031
Third Quarter....................... $0.078 $0.016
Fourth Quarter......................
Current Fiscal Year $4.375 $0.030
First Quarter....................... $3.490 $1.410
Second Quarter......................
As of July 31, 2000, there were 135 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 the 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 had Convertible Promissory Notes in the amount of $145,000
outstanding as of June 30, 2000. The Notes are convertible into Common Stock at
rates of $.02-$.05 per share. $25,000 of the Notes was due and payable on
December 31, 1999 and is the subject of a dispute. The balance of $120,000 is
payable this year.
THE COMPANY
Paradigm Advanced Technologies, Inc. (the "Company") is a technology development
company incorporated in Delaware on January 12, 1996 formed to capitalize on the
demand for digital image and interactive global positioning system ("GPS")
tracking technology in North America, South America, Europe and Asia. The
Company' prime focus is the development of wireless-location enabling
technologies and services.
The Company's principal executive offices are located at 25 Leek Crescent,
Richmond Hill, Ontario, Canada L4B4B3. Its telephone number is (905) 707-2172.
The Company's website is www.powerloc.com.
------------------------------------------
Until September 6, 2000, the Company acted under an Agency Agreement dated June
10, 1998 whereby the Company became the exclusive licensing agent for a patent
covering wireless portable locating units (the "PLU Patent"), US Patent No.
5,043,736. The PLU Patent covers the apparatus and method of transmitting
satellite positioning system signals (such as GPS and any other satellite based
navigation network) over a cellular network to a base unit. The PLU Patent,
valid until the year 2011, was re-examined in 1994 (Re- examination Certificate
No. B1 5,043,736). Under this Agency Agreement, as amended, the Company has paid
a total of $95,000 in cash and issued a total of 1,536,290 shares of its Common
Stock and 650,000 stock options to the principal, Eastern Investments, LLC. Of
these shares and options, 1,736,290 shares and options are being sold pursuant
to this Prospectus. See Selling Shareholders.
On September 6, 2000 the Company acquired the exclusive license to the PLU
Patent, previously owned by Eastern Investments, LLC. Under the agreement as
modified the Company acquired the license in exchange for 4,000,000 shares of
Common Stock subject to a lock-up agreement. An additional 4,200,000 shares of
Common Stock were issued to Eastern Investments, LLC at a price of $2.05 per
share. The latter shares will be held in a trust account and Eastern
Investments, LLC will pay for these shares as and when they are sold. 6,200,000
common shares including the shares held in trust are being sold pursuant to this
Prospectus. See Selling Shareholders. According to the lock-up agreement,
Eastern Investments, LLC will be allowed to sell up to 300,000 shares per month
during the period ending September 6, 2001.
<PAGE>
8
On March 28, 2000 the Company acquired all the outstanding shares of PowerLOC
Technologies, Inc.(www.powerloc.com), a research and development company with a
novel L-commerce system architecture (L-BIZ (TM)) and a family of low-cost
wireless devices. Along with this acquisition came all the shares of PowerPoint
Micro Systems, Inc (www.powerpoint-inc.com), since 1992 engaged in worldwide
systems integration projects. The Company issued 3,650,000 shares of Common
Stock and 1,350,000 exchangeable share options in connection with the
acquisition of which 4,475,000 shares and options are being sold pursuant to
this Prospectus. See Selling Shareholders.
The Company plans to enter into a strategic alliance with Pangea Petroleum
Corporation ("Pangea"), whereby the companies will create a joint venture ("JV")
to be owned 50% by the Company and 50% by Pangea. The intent of this alliance is
to establish an "incubator" facility for new technologies. As part of this
arrangement, the Company expects at a closing scheduled for on or before
October, 2000 to issue to the JV 7,500,000 shares of Common Stock and 12,500,000
warrants, all of which will be restricted securities not sold pursuant to this
Prospectus. As consideration for these securities Pangea will (1) issue a
warrant covering 12.5 million shares of Pangea common stock to the JV, (2)
provide consulting and public relations services to the Company and (3) transfer
to the JV its interests in WorldLink USA, a development stage company wholly
owned by Pangea that owns video streaming technology and a library of concerts
for broadcast over the Internet. Jacob International, an affiliate of Pangea,
has a relationship with the Company pursuant to which it receives fees,
including common shares, for certain management consulting services relating to
corporate financing activities. See Certain Transactions.
Global Positioning Systems (GPS)
Precise determination of locations both on and above the earth's surface is a
fundamental requirement in many applications. For example, position data is used
for navigation on land, sea and air, and for tracking vehicles, cargo and
individuals. The communications industry is now able to provide accurate data
through one or more global positioning systems (GPS). The US GPS is a system of
27 orbiting Navstar satellites established and funded by the U.S. Government. On
April 27, 1995, the US GPS was declared by the U.S. Air Force Space Command to
have achieved full operational capability. GPS can complement or replace many
other forms of electronic navigation and position data systems. GPS offers major
advantages over prior technologies in terms of ease of use, precision, and
accuracy, with worldwide coverage. A typical GPS uses a triangulation technique
that precisely measures distances from three or more Navstar satellites. The
satellites continuously transmit precisely timed radio signals using extremely
accurate atomic clocks. A GPS receiver calculates distances from the satellites
in view by determining the travel time of a signal from the satellite to the
receiver. The receiver then triangulates its position using its known distance
from various satellites. Under normal circumstances, a current stand-alone GPS
receiver is able to calculate its position at any point on earth, in the earth's
atmosphere, or in lower earth orbit, to within 100 meters, 24 hours a day. When
a GPS receiver is coupled with a reference receiver with known precise position,
accuracies of less than ten centimeters are possible.
The usefulness of GPS is dependent upon the locations of the receiver and the
GPS satellites that are above the horizon at any given time. The current
deployment of 27 satellites permits three-dimensional worldwide coverage 24
hours a day. However, reception of GPS signals typically requires line-of-sight
visibility between the Navstar satellites and the receiver, which can be blocked
by buildings, hills and dense foliage. Generally, optimal signal reception
requires that each satellite be above the horizon, and the receiver have a line
of sight to at least three satellites in order to determine its location in two
dimensions--latitude and longitude. The accuracy of GPS may also be limited by
distortion of GPS signals from ionospheric and other atmospheric conditions, and
until lately was distorted by signal interference or Selective Availability
("SA"). Selective Availability, which was until lately the largest component of
GPS distortion, was controlled by the U.S. Department of Defense and was
activated, for intentional system-wide degradation of stand-alone GPS accuracy
from approximately 25 to 100 meters. The U.S. government announced in 2000 that
Selective Availability would be discontinued.
The Company's GPS uses client-server system architecture and proprietary
mathematical algorithms to minimize traditional line-of-sight limitations on
reception of Navstar signals. The company does this by increasing system
sensitivity and computation accuracy and minimizing the effect of certain
factors which cause location errors.
The Company believes that the market for GPS technology is poised for
significant growth. The FCC has required wireless carriers to implement
emergency 911 service. Phase I of the FCC's E911 rules requires that a dialable
number accompany each 911 call, which allows the Public Safety Answering Point
(PSAP) dispatcher to call back if the call is disconnected or to obtain
additional information. It also gives the dispatcher the location at the cell
site that received the call as a rough indication of the caller's location.
Phase II of the FCC's wireless 911 rules allows the dispatcher to know more
precisely where the caller is located, a capability called Automatic Location
Identification ( ALI) . These rules, subject to certain conditions, are
scheduled to be phased in between October 1, 2001 and December 31, 2004. The
Company believes that these rules are likely to increase demand for its GPS
technology.
Business Strategy
The Company now has the capability to build an encompassing L-business
technology and to develop the products to use it. The Company plans to do this
<PAGE>
9
by 1) developing, securing and acquiring related intellectual property, (2)
developing L-commerce products and solutions and (3) acquiring companies.
The key steps in achieving these objectives are as follows:
License other parties using the process covered by the PLU Patent; Develop
the system architecture and the PowerLOC product line; Identify target
markets for PowerLOC products; Explore new product opportunities; and Pursue
alliances with business partners.
In furtherance of these objectives, the Company's PowerLOC division is currently
developing a series of small, low cost, battery operated wireless appliances
that includes a GPS and a wireless transceiver which is used as a tracking
product for certain vertical markets such as:
Vehicle Location Devices, Health Care ( e.g. Alzheimer's patients )
Transportation and Supply Chain Logistics, Asset Management, Pet and Animal
Location, Telematics
The PLU Patent.
--------------
The PLU Patent (US Patent # 5,043,736) was granted in 1991 and reexamined in
1994 (Reexamination Certificate # B1 5,043,736). As a result of the
reexamination, the number of claims covered by the PLU Patent was increased from
four to six. The PLU Patent has been issued in the United States and Australia
and upheld in the U.S. The PLU Patent is pending in Canada and Japan.
The PLU patent covers a global positioning system especially adapted for use by
an individual or object that includes a portable remote unit and a base
information display unit. The portable remote unit includes a radio frequency
(RF) receiver circuit for use with a satellite navigation system, a digital
signal processor for analyzing coded signals, a cellular phone modem circuits
for transmitting encoded signals to the base unit and a time of day clock. The
base unit includes a computational system for decoding position data and a
visual display device for presenting remote and map coordinates. The location of
an individual or object can thus be determined at the remote station through the
use of the cellular telephone network.
In commenting on the prior art the PLU patent states:
"The units described in the prior art are complex in operation and do not
utilize available cellular telephone technology. The present invention overcomes
problems of the prior art by providing a non-complex portable hand-held unit
that has cross country capability and versatility for use as a regular cellular
telephone in conjunction with a precise navigational locating system that can be
conveniently and easily carried for transmission and display of position
information at a base location."
License to Eastern Investments, LLC. ("Eastern")
------------------------------------------------
The PLU Patent, along with complementary Australian, pending Canadian and
pending Japanese applications, is owned by BI Incorporated ( BI), a Colorado
corporation. On June 22, 1998 BI licensed the PLU patent rights to Eastern . The
license is for the term of the PLU Patent and other patents and grants an
exclusive irrevocable worldwide license, with rights to sublicense, to
manufacture, use, market and sell all apparatus, products, processes, methods
and services that are covered by the claims of the PLU Patent except all uses in
connection with criminal justice, penal systems, behavioral correction, parole,
pretrial confinement or court ordered uses, including locating, monitoring and
tracking persons, vehicles and property. The license is nonexclusive for any
product, process or service used by a police agency to track police personnel
and vehicles and property used by police personnel.
Agency Agreement.
----------------
Under the June 10, 1998 Agency Agreement, which has now become terminated as
Paradigm acquired the PLU Patent Rights from Eastern, , the Company had an
exclusive world wide agency agreement with Eastern. Under the Agreement the
Company received as an agency fee a percentage of license revenues obtained
from the licenses it signs. The Company has so far obtained two licenses. Under
the Agency Agreement the Company has paid Eastern $95,000 in cash and issued
1,536,290 shares of its Common Stock 650,000 stock options, of which 1,736,290
Common Stock and options are required to be registered for sale to the public
and are included for sale under this Prospectus. See Selling Shareholders. .
With the acquisition of the Rights to the PLU Patent by Paradigm from Eastern on
September 6, 2000, the Agency Rights have been terminated.
Acquisition
-----------
On September 6, 2000 the Company announced that it had acquired the exclusive
license from the current license holder Eastern Investments, LLC
<PAGE>
10
for 4,000,000 shares of its Common Stock. An additional 4,200,000 shares
were sold to Eastern at a share price of $2.05 per share. The latter shares are
being held in a trust account and will be paid for upon the sale of the common
shares. 6,200,000 of the common shares including the shares held in trust, are
included for sale pursuant to this Prospectus. See Selling Shareholders.
PowerLOC Acquisition
--------------------
On March 29, 2000, the Company completed the acquisition of PowerLOC
Technologies, Inc. ("PowerLOC") and Power Point Micro Systems Inc. ("Power
Point"). PowerLOC is a research and development company that has developed a
low-cost, miniature mobile-location GPS that transmits position to a base
station through existing personal communication system(PCS), pager or cellular
phone wireless networks. Power Point is an international telecommunications
consulting firm specializing in wireless and wireline, voice and data systems
integration. Since its incorporation in 1992, and, in partnership with leading
carriers and network equipment manufacturers, Power Point designed and deployed
numerous telecom and datacom networks in several countries.
On July 6, 2000 PowerLOC signed a development and product sale agreement with
ItrackPets, Inc.(iTP), an Oregon corporation, to produce and sell pet tracking
units utilizing the PowerLOC technology. PowerLOC is to provide iTP prototype
Mobile units plus a Tracker and web portal. Once these are completed and
accepted by iTP, a first order for 10,000 units is expected be placed by iTP.
iTP has initially deposited $100,000 under the contract and the development
process is now under way.
The PowerLOC Division is developing a GPS based on proprietary 3-tier
architecture. This consists of (1) wireless portable mobile devices ("Mobiles")
(2) a location service provider (LSP) server or L-tracker ("Tracker") and (3)
client geographic information system (GIS) software.
The Company has licensed its integrated L-commerce architecture (also referred
to as location business technology or L-BIZtm), its wireless portable mobile
devices, trackers and components of the same to original equipment manufacturers
(OEM) which may include cellular telephones, pagers and personal digital
assistant manufacturers. In the mobile units, the GPS equipment will collect
data from several satellites, and will use it to calculate its exact position,
altitude and velocity of each particular Mobile. This data will then be
transmitted from the wireless network to the Tracker which will in turn send the
exact location and status of each Mobile to the provider's dispatching centers
or monitoring stations via the Internet.
Mobiles.
---------
The following Mobile models are currently under development:
VLD-101 - a vehicle location device (vehicle location and repossession)
VLD-103 - fleet management and tracking device
PLD-101 - personal location device for the health care industry
ALD-101 - animal tracking device
These "first generation" products will be approximately 3 1/2" x 2 1/2" x 1",
including battery and antenna. The Mobiles will include three components: (1)
GPS module, (2) Transceiver module, (3) Battery. The GPS module will include
a chip-set whose main functions are to execute systems and network management
and control functions; receive GPS data to compute the exact location; and
format the data and to interface with the wireless transceiver module.
Tracker
-------
The Tracker is a carrier grade server, which in most cases will be located at
the location service provider's (LSP's) site, that is connected to one or more
wireless networks and to the Internet,. The tracker will receive and process
data from up to 50,000 Mobiles, simultaneously. Clients will access data from
the tracker, through the Internet. The Trackers under development are modular
and scalable computer servers or server farms, which are based on an open
architecture Their main features include:
A central manager that handles all operational and configurable management
functions;
An advanced database engine that can track and report on up to 50,000 mobile
in each server;
A map server which can deploy the appropriate local map for the area where
the mobile is located;
A billing server that can export billing records to the provider's own
systems and provide customer access to billing records;
A short text-messaging server (SMS) for messaging and mail features;
<PAGE>
11
A mobile communications manager which controls activation and data flow to
and from mobiles; and
A client communications manager which handles communications between the
client and the Tracker, encrypted for security and provides data compression
to enhance performance.
The Tracker's architecture is designed for multi-tasking. It can control
multiple kinds of devices and users, both VLD and PLD and can be customized
to integrate with the provider's own systems. The Company believes that its
products and software solutions are ideally suited to serve the expanding
market for wireless mobile GPS devices.
Client Software.
---------------
The client software, is the business application that runs at the client's site,
to locate and track the asset, vehicle, person or animal carrying the mobile
units. The software will be used, for example, by a taxi or truck fleet
dispatcher, the pet owner and others. The Company will sell, distribute and
support the client software through the worldwide web. Potential customers will
be able to download the software and maps. The software will be a proprietary
application designed to interface with mapping/GIS software to provide specific
location data transmitted by a Mobile or other GPS tracking device.
Features include:
Audible alarms and warnings triggered by location changes;
Seamless integration with scheduling programs such as MS-Exchange(TM), MS-
Outlook(TM), ACT(TM);
Navigation planning Tracking history
Research Projects
-----------------
Before being acquired by Paradigm, on March 28, 2000, Power Point had applied
for, and secured its first research and development grant from the Industrial
Research Assistance Program (IRAP) of the National Research Council of Canada
(NRC). As a result of the success of this first project, Power Point applied for
and obtained a second grant. Both research and development projects were related
to the development of a proprietary GPS wireless appliance and a complete system
solution.
After the acquisition of Power Point, PowerLOC applied for, and obtained two
additional grants from the NRC/IRAP. The first research and development project,
related to wireless network technologies, was successfully completed as on June,
2000. A second research and development project is underway.
Licensing and Sales Program
---------------------------
The Company expects to generate revenues by licensing companies who are using or
plan to use the process covered by the PLU Patent. The Company is currently
negotiating with a number of prospective licensees. In April, 2000 it signed its
first license.
As one of the priorities the Company intends to license key wireless networks or
carriers to become location service providers ("Providers") on a regional or
vertical application basis. Through use of this technology the licensee
Providers can provide local marketing solutions through their own web portals
dedicated specifically to those solutions. Each new licensee Provider will
purchase its own Tracker together with a supply of Mobiles and client software.
Additional Modules and software may also be sold via retail and other outlets.
The Company will obtain revenues from licensing the system plus sales of
Trackers, Mobiles and software.
The Company through its PowerLOC subsidiary has announced a number of contracts
over the past 2 months:
On July 6, 2000 PowerLOC signed a development and product sale agreement
with ItrackPets, Inc.(iTP), of Point Roberts, WA., to produce and sell pet
tracking units utilizing the PowerLOC technology. iTP will offer pet owners a
solution to track a lost pet using satellite surveillance, wireless
communication, the Internet and a pet collar. The technology will not only
notify the pet owner of their pet escaping its pre-set boundaries by immediately
calling the owner's cell phone or pager, but it will also enable the owner to
log onto the Internet and instantly discover the lost pet's location, leading to
a swift rescue. PowerLOC is to provide iTP prototype Mobile units plus a Tracker
and web portal. Once these are completed and accepted by iTP, a first order for
10,000 units is expected be placed by iTP. iTP has initially deposited $100,000
under the contract and the development process is now under way.
<PAGE>
12
On August 14, 2000 the Company announced it has executed a purchase and
licensing agreement with Global Location Systems, Inc. (GLSI) of Los Angeles,
CA. PowerLOC will provide GLSI its L-Biz (TM) advanced location technology
solutions and products for GLSI and its dealers in the transport and mobile
equipment markets. According the to the terms of this agreement, PowerLOC
expects to ship to GLSI (US)$2.75 million worth of equipment and services during
Q4/2000. This initial order is part of a five-year agreement, in which PowerLOC
will provide products, technology and services which will assist GLSI in its
goal of becoming the leading Location Service Provider (LSP), specializing in
the automotive and transportation dealership network. As part of this agreement,
Paradigm will sell and license its turnkey, (L-Biz (TM)) location-based solution
to GLSI. This includes PowerLOC's customized vehicle locating devices and its
TR101 Tracker, or LSP Server offering mapping, wireless network access, Internet
connectivity and security, billing and other functions.
On August 22, 2000 the Company announced that it had executed a purchase
and exclusive licensing agreement with Special Circuits, Inc. ("SCI")
(www.specialcircuits.com) of Atlanta, GA, an electronics contract manufacturer,
to become a location service provider (LSP) offering PowerLOC's L-Biz(TM)
wireless GPS location products and Internet-based service technology to targeted
markets in the Southeastern United States. Delivery of the initial committed
order is scheduled to commence in the fourth quarter of this year, and has a
value (US)$1.7 million. The initial order represents only a small part of SCI's
long term commitment for products and technology. The five-year license and
marketing agreement provides SCI with cost effective location-based and tracking
technology, which will allow them to provide these services to a range of
transportation and personal applications markets in Georgia, Alabama, Florida,
North Carolina, South Carolina, Louisiana and Mississippi. As part of the
agreement, PowerLOC will build and brand for SCI mobile location tracking
devices that utilize PowerLOC's L-Biz(TM) GPS navigation data and wireless
technology. The devices will be targeted to the transportation and fleet markets
and also the medical/health care industry.
On August 26, 2000 the Company announced that it has executed a purchase
and licensing agreement with Guardian Location Corp. of Chesapeake, VA.
Guardian will license a specialized version of PowerLOC's L-Biz advanced
location technology and will purchase its mobile devices. The system will be
used to provide a new generation of financial asset recovery services to leading
financial institutions that provide consumer and business loans and leases
secured by mobile assets. The initial part of this agreement is valued at
(US)$1.7 million. Guardian will deliver the solution through its network of over
30 distributors across the United States. Each distributor has established
major clients in the financial services industry for asset recovery and Guardian
has several major institutions eager to test and deploy this technology.
According to the terms of the agreement, PowerLOC will begin delivery of the
VLD-R1 mobile tracking devices to Guardian during Q4/00 and additional product
in volume during the subsequent four years. Guardian, with its relationship with
lenders, manufacturers, new and used car dealers and auto specialty shops is
poised to provide a new solution for vehicle anti-theft.
Business Combinations, Dispositions and Strategic Alliances
-----------------------------------------------------------
The Company regularly considers the acquisition or development of new businesses
and reviews the prospects of its existing businesses to determine whether any
should be modified, or otherwise discontinued. The Company also considers and
actively pursues strategic alliances with potential business partners.
The Company has entered into a number of alliances include the following:
On April 25, 2000 the Company announced a strategic alliance with Compugen
Systems Ltd. of Richmond Hill, Ontario (www.compugen.com). Compugen is Canada's
third largest systems integration company with annual sales exceeding $270
million and over 500 employees in 8 offices across the country. Under the
arrangement, Compugen provides the Company with office, as well as with
technical, sales, administration and marketing support services. As part of this
alliance, Compugen formed a new division: Compugen Mobile Solutions which became
PowerLOC's first authorized Location Service Provider, being granted a non-
exclusive marketing and distribution right for certain products and marketing
segments as well as for certain geographical territories. See Properties and
Certain Transactions.
On July 26, 2000 the Company through the PowerLOC division, announced that
it had engaged The Next Market of Detroit, MI to identify opportunities in the
automotive, aerospace and consumer markets and to develop and execute marketing
and distribution strategies. The Next Market provides services to businesses
launching new products, brands and technologies, seeking to develop new markets
and expand their product offerings. The Next Market's principals have
significant experience in the automotive and consumer electronics businesses as
well as with in-vehicle-services
The Market
----------
<PAGE>
13
The Company believes, that a large market exists in North America alone for
L-commerce in general and for portable GPS locating devices in particular. Major
segments include:
Personal portable devices for medical patients, children and family members
Transportation service locators (busses, taxis)
Service industry locators (repair and delivery vehicles - UPS for example)
Vehicle ID - stolen vehicle recovery, repossession, emergency locator device
Hazardous monitoring (mobile gas and other dangerous containers)
Animal and pet tracking I
inventory and supply management (location, security).
The Company is targeting the following major segments and developing the
products and systems to service them:
Vehicle Locating Device (VLD) Prospects.
----------------------------------------
Based on news and industry reports the Company believes that there were over 1.2
million vehicles stolen in 1999 in North America and that over 1 million
vehicles were repossessed. The Company hopes to interest major vehicle
manufacturers in the Company's vehicle locating device VLD solutions as a means
of reducing vehicle theft and making repossession easier.
Personal Locating Device (PLD) Prospects.
----------------------------------------
The Company envisions a security or utilization need for its PLD solutions.
Individuals could acquire an iPL.mobile unit plus software at a retail or mail
order source, load the software and ID information into their personal or office
computer and log onto the website portal of the service provider to activate the
device.
Animal PLDs.
-----------
A similar market exists for animal PLDs, on a more miniaturized basis.
Competition
-----------
The market for GPS-based VLD and PLD is relatively new. Most of the companies in
this market of any size have been in the vehicle tracking market with relatively
large, cumbersome and expensive devices and systems.
There are four main categories of industry competitors:
Automatic Vehicle Location (AVL) solutions providers serving commercial
vehicle fleets.
General AVL products and solutions providers for the non-commercial market.
General GPS/radio device integration companies.
New entries from mass-market cell phone manufacturers, mostly designed to
utilize E911.
The solutions developed by the AVL technology providers such as @road,
Fleetboss, Teletrac and others have been primarily based on a "two tier"
architecture. This requires a dedicated server containing mapping, GPS and
management software at the customer's control center. The customer pays retail
level service fees for network access. The products and services are generally
expensive and complex to install and maintain. Even the largest provider,
Qualcomm Omnitrax, is believed by the Company to have only 320,000 trucks
equipped out of the tens of millions on the road.
Other AVL providers take a "do it yourself" approach by providing the basic
devices for AVL applications plus devices used by integrators, but have no
unified systems management solution.
The newer entries in the VLD business are the automotive companies with their
own built-in solutions. These include companies such as OnStar, a division of
General Motors Corporation, @Track Communications, Inc. (a.k.a. HighwayMaster
Communications, Inc.), ATX Technologies Inc., Trimble Navigation Limited,
Rockwell International, and Qualcomm, Inc. In certain instances these companies
provide additional services to the motorists, such as roadside and emergency
operator assistance. Most of the current products use GPS receivers which are
relatively large, heavy and require a significant amount of power. Some of these
are susceptible to variances in the signal levels and do not perform well when
there is no line of sight to the GPS satellites.
<PAGE>
14
Due to the relatively high cost of installation and servicing, these devices are
today primarily in use in "high end" vehicles. This has, in turn, sparked a
demand for small, mobile "retrofit" devices that can communicate via the
Internet.
One of the Company's competitors has developed a system that is similar to the
PowerLOC products and a process that is similar to the process covered by the
PLU Patent. A system solution PLU Patent by Snaptrack, a company which was
recently purchased by Qualcomm, consists of a distributed processing concept
that uses a base station to communicate with the mobile GPS in order to generate
a location readout.
Regulatory Matters
------------------
As an equipment and systems supplier the Company is not directly regulated. To
Company's knowledge, there are no existing or probable government regulations
that will directly affect the Company's business. Many of the Company's LSP
customers are subject to regulation by national, state and local communications,
public utility and other licensing and regulatory authorities, as are the
carriers with whom the LSPs interconnect. Many of the regulations have to do
with the configuration, signal strength of equipment and systems in use. To the
extent needed by LSP customers and other users, the Company is able to configure
its equipment and systems so as to be compliant with the regulatory
requirements.
Employees
---------
The Company has hired sales executives, program and product managers, and a
chief technical officer as well as a research and development team consisting of
several experts in hardware, digital signal processor, micro-processor embedded
systems, radio frequency and software design. The company had twenty full time
employees at August 31, 2000 who were providing research and development,
technical, sales and administrative 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.
Properties
----------
The Company's executive offices are located in over 3000 square feet of office
Space at 25 Leek Crescent, Richmond Hill, Ontario, Canada, which is sub-leased
by the Company from Compugen Systems Ltd. on a monthly basis at an agreed upon
rental rate. On April 25, 2000 the Company announced a strategic alliance with
Compugen Systems Ltd. of Richmond Hill, Ontario to distribute and license the
PowerLOC products. See below under "Certain Transactions."
The Company is currently hiring new employees and plans to move to larger office
space in the near future. The Company plans on subcontracting manufacturing and
parts of its development and believes that it will be able to find suitable
facilities when required. The Company is in the process of obtaining protection
for the PowerLOC technology through patent applications and related filings.
RISK FACTORS
In addition to the other information contained in this Prospectus, the following
risk factors should be carefully considered in evaluating the Company and its
business before purchasing shares of Common Stock offered hereby. Each of the
following factors may have a material adverse effect on the Company's
operations, financial results, financial condition, liquidity, market valuation
or market liquidity in future periods.
Development Stage Company
-------------------------
The Company is a development stage company without any operating history upon
which an investor can evaluate its business and prospects. Investors must
consider the risks and uncertainties frequently encountered by early stage
companies like the Company in a new and evolving market, such as GPS tracking
and L-commerce. If the Company is unsuccessful in addressing these risks and
uncertainties, the Company's business will be seriously harmed.
The Company began operations in 1996 and has experienced losses from operations
since inception. The Company anticipates that it will incur a net loss in the
year 2000. The Company will continue to incur substantial costs related to its
continued growth. There can be no assurance that the Company will achieve
targeted levels of growth or profitability in the future. See Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Dependence on Intellectual Property Rights
------------------------------------------
The Company's success is partly dependent on its intellectual property rights.
Effective protection may not be available for these rights. There can be no
assurance that the PLU Patent will provide adequate protection for the
underlying technology or that the license will permit the Company to fully
execute its plans to develop that technology. In addition, there have been no
applications to protect PowerLOC's technology. While the Company does plan to
make such applications there is no assurance that they will be
<PAGE>
15
granted or that the cost and timing of such applications will not prove to be
too costly for the Company or delay their effectiveness if they are ever
granted.
Any inability to adequately protect its rights under the PLU Patent and
PowerLOC's technology could seriously harm the Company's business. In addition,
litigation may be necessary in the future to enforce the Company's intellectual
property rights. Such litigation, whether successful or unsuccessful, could
result in substantial costs and diversions of resources, either of which could
negatively affect the Company's business.
The Company has a limited number of products in development. Developing
additional products requires a substantial investment of time and money.
Therefore, the Company does not expect to be in a position to sell additional
products in the foreseeable future. As a result, the Company's success is
largely dependent on generating licensing revenue and successfully completing
development of, and marketing the PowerLOC products. If the Company is not
successful in generating licensing revenue or in marketing the PowerLOC
products, the Company's business will be seriously harmed.
Limited Capital Resources
-------------------------
The Company has experienced recurring losses from operations since its inception
and has limited resources. The Company has historically relied upon equity and
debt financings to fund its operations because its internally generated cash
flows from operations have historically been, and continue to be, insufficient
for its cash needs. Because of its limited resources, the viability of the
Company is dependent upon its ability to quickly raise sufficient capital to
meet its cash requirements. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. However,
the accompanying Independent Auditors' Report states that the Company has
incurred significant losses in the past and continues to have negative working
capital and that these conditions can cause doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company is in the process of attempting to raise additional capital through
interim financing. See Interim Financing above. Since commencing these efforts
in February 2000, the Company has managed to raise over $ 4,000,000. There is no
assurance that the Company will be successful in obtaining the funds it needs to
continue.
Potential Reduction in Research and Development
-----------------------------------------------
The Company may be required to delay, reduce or eliminate some or all of our
research and development activities or sales and marketing efforts if we fail to
obtain additional funding that may be required to satisfy our future capital
expenditure needs.
The Company plans to continue to spend substantial funds to continue its
research and development activities and to expand sales and marketing efforts.
Future liquidity and capital requirements will depend upon numerous factors,
including actions relating to the cost and timing of research and development
and sales and marketing activities, the extent to which PowerLOC products gain
market acceptance and competitive developments. Any additional required
financing may not be available on satisfactory terms, if at all. If the Company
is unable to obtain financing, it may be required to delay, reduce or eliminate
some or all of its research and development activities or sales and marketing
efforts.
Integration of Acquisitions and Alliances
-----------------------------------------
A material element of the Company's growth strategy is to expand its existing
business through strategic acquisitions. While the Company continuously
evaluates opportunities to make strategic acquisitions, it has no present
commitments or agreements with respect to any material acquisitions. There can
be no assurance that the Company will be able to identify and acquire such
companies or that it will be able to successfully integrate the operations of
any company it acquires. Further, any acquisition may initially have an adverse
effect upon the Company's results while the acquired business is adapting to the
Company's management and operating practices. There can be no assurance that the
Company's personnel, systems, procedures, and controls will be adequate to
support the Company's growth. In addition, there can be no assurance that the
Company will be able to establish, maintain or increase profitability of an
entity once it has been acquired. There can be no assurance that the Company
will be able to obtain adequate financing for any acquisition, or that, if
available, such financing will be on terms acceptable to the Company. See "The
Company."
The Company may be unsuccessful in integrating acquired products and businesses.
The Company is continuously evaluating alliances and external investments in
technologies related to its business, and has already entered into certain
strategic alliances and has formed strategic partnerships with GPS related
technology companies. Acquisitions of companies, divisions of companies, or
products and alliances and strategic investments entail numerous risks,
including:
. the potential inability to successfully integrate acquired operations and
products or to realize anticipated synergies, economies of scale, or other
value;
<PAGE>
16
. diversion of management's attention;
. loss of key employees of acquired operations; and
. inability to recover strategic investments in development stage entities.
Any such problems could seriously harm the Company's business. No assurances can
be given that the Company will not incur problems from current or future
alliances, acquisitions, or investments. Furthermore, there can be no assurance
that the Company will realize value from any such strategic alliances,
acquisitions, or investments.
The joint venture that would be formed as a result of the Pangea alliance is
expected to compete in the Internet broadcasting business. This business
involves rapidly changing technology and the Company's management team has
limited experience in the Internet broadcasting field. The anticipated benefits
of the Pangea arrangement may not materialize.
Highly Competitive Business
---------------------------
The Company believes that competition in the telecommunications industry in
general, and in the new and existing markets served by the Company in
particular, is intense and likely to increase substantially. The Company's
ability to compete successfully in the future will depend on several factors,
including:
. the cost effectiveness, quality, price, service and market acceptance of the
Company's products;
. its response to the entry of new competitors or the introduction of new
products by the Company's competitors;
. its ability to keep pace with changing technology and customer requirements;
. the timely development or acquisition of new or enhanced products; and
. the timing of new product introductions by the Company or its competitors.
The Company believes that its primary competitors are OnStar, a division of
General Motors Corporation, @Track Communications, Inc. (a.k.a. HighwayMaster
Communications, Inc.), ATX Technologies Inc. and Trimble Navigation Limited.
Many of the Company's competitors or potential competitors are more established
than the Company and have greater financial, manufacturing, technical and
marketing resources. Furthermore, the Company expects its competitors to
continually improve their design and manufacturing capabilities and to
introduce new products and services with enhanced performance characteristics
and/or lower prices. This competitive environment could result in significant
price reductions or the loss of orders from potential customers which could
seriously harm the Company's business.
Dependence on Key Personnel
---------------------------
The Company's success is largely dependent on the skills, experience and
performance of certain key members of its management, including particularly the
Company's Chief Executive Officer and President of Paradigm. The loss of the
services of any key employee could have a material adverse effect on the
Company's business, financial condition, results of operations and cash flows.
The Company has entered into employment contracts with Mr. David Kerzner, Mr.
Eduardo Guendelman and Mr. Selwyn Wener, but the Company has not entered into
employment agreements with any of its other employees. Such employment
agreements are terminable only upon death, disability or for cause, including
resignation. Upon termination for any reason other than disability or for cause,
the executive is entitled to severance pay. The Company's future success and
plans for growth also depend on its ability to attract, train and retain skilled
personnel in all areas of its business. See "Management."
Adverse Effects of Large Stock Issuances
----------------------------------------
As of June 30, 2000, the Company has 54,193,361 outstanding shares of common
stock, 27,196,000 outstanding options and 17,568,500 outstanding warrants.
Except for (1) 25,351,266 shares of common stock (including 13,786,290 shares
held by affiliates), and (2) all of the outstanding options and warrants, all of
these securities are freely tradable. The holders of a majority of the remaining
securities will be entitled to have the resale of their shares registered under
the Securities Act of 1933, and such shares are expected to become freely
tradable during the latter months of 2000. The Company's Common Stock price is
vulnerable to potential sales by these shareholders of substantial amounts of
Common Stock in the public market.
The arrangement with Pangea and World Link USA will dilute the ownership of the
Company's existing stockholders. Based on the common shares outstanding as of
June 30, 2000, the Company expects to issue over 12% of its common shares to the
Pangea Joint Venture. In connection with this arrangement, the Company also
expects to issue warrants to the Pangea Joint Venture for the
<PAGE>
17
purchase of the Company's Common Stock. This arrangement will dilute the
percentage ownership held by the Company's stockholders when compared to such
ownership prior to the arrangement.
No predictions can be made of the effect, if any, that the sale or availability
for sale of additional shares of Common Stock will have on the market price of
the Common Stock. Nevertheless, sales of substantial amounts of such shares in
the public market, or the perception that such sales could occur, could
materially and adversely affect the market price of the Common Stock and could
impair the Company's future ability to raise capital through an offering of its
equity securities.
Over-the-Counter Market; Penny Stock Trading Rules
--------------------------------------------------
The Common Stock is traded in the over-the-counter market and may be subject to
the "penny stock" trading rules. The over-the-counter market is characterized as
volatile in that securities traded in such market are subject to substantial and
sudden price increases and decreases and at times price (bid and asked)
information for such securities may not be available. In addition, when there is
a limited number of market makers (a dealer holding itself out as ready to buy
and sell the securities on a regular basis), there is a risk that the dealer or
group of dealers may control the market in the security and set prices that are
not based on competitive forces and the available offered price may be
substantially below the quoted bid price.
The "penny stock" trading rules impose additional duties and responsibilities
upon broker-dealers and salespersons effecting purchase and sale transactions in
such equity securities of the Company, including determination of the
purchaser's investment suitability, delivery of certain information and
disclosures to the purchaser, and receipt of a specific purchase agreement from
the purchaser prior to effecting the purchase transaction. Compliance with the
"penny stock" trading rules affect or will affect the ability to resell the
Common Stock by a holder principally because of the additional duties and
responsibilities imposed upon the broker-dealers and salespersons recommending
and effecting sale and purchase transactions in such securities. In addition,
many broker dealers will not effect transactions in penny stocks, except on an
unsolicited basis, in order to avoid compliance with the "penny stock" trading
rules. Consequently, the "penny stock" trading rules may materially limit or
restrict the number of potential purchasers of the Common Stock and the ability
of a holder to resell the Company's equity securities. See "Selling."
Lack of Dividends
-----------------
The Company does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future. The Company intends to retain profits, if any, to fund
growth and expansion. See "Dividend Policy."
Dilution
--------
The principal shareholders of the Company have acquired Common Stock at a cost
per share that is significantly less than that at which the Company intends to
sell the Common Stock in this Offering. Therefore, an investment in the Common
Stock offered hereby will result in the investors experiencing immediate and
substantial dilution in net tangible book value. See "Dilution."
DIVIDEND POLICY
The Company has no current plans to pay any future cash dividends on the Common
Stock. Instead, the Company intends to retain all earnings, to support the
Company's operations and future growth. The payment of any future dividends on
the Common Stock will be determined by the Board of Directors based upon the
Company's earnings, financial condition and cash requirements, possible
restrictions in future financing agreements, if any, business conditions and
such other factors deemed relevant.
DILUTION
As of June 30, 2000, the net tangible book value of the Company was ($256,000)
or ($0.005) per share of Common Stock based on 54,193,361 shares then
outstanding. Net tangible book value per share of the Company is the amount of
its tangible assets less its total liabilities, divided by the number of shares
of Common Stock outstanding.
Of the 40,000,000 shares offered by the Company hereunder, 14,047,349 are
already issued and to be sold by Selling Shareholders. The balance of
25,952,651may be issued for an aggregate estimated consideration of $43,145,578
(net of $100,000 of offering expenses) or $.1.66 per share. After giving effect
to these sales and the application of the net proceeds therefrom, the pro forma
net tangible book value per share would increase, representing an immediate
increase in net tangible book value to current holders of Common Stock, and an
immediate dilution to new investors, as illustrated in the following table.
Assumed Net Proceeds per share............................ $ 1.66
Net tangible book value per share before this Offering.... ($0.005)
Increase per share attributable to new investors.......... $ 0.54
--------
<PAGE>
18
Adjusted net tangible book value per share after this
Offering................................................. $ 0.54
--------
Dilution per share to new investors...................... $ 1.12
========
The following table summarizes, as of June 30, 2000, the number of shares of
Common Stock purchased from the Company, the total consideration paid, and the
average price per share paid by the existing shareholders and the number of
shares of Common Stock purchased from the Company and the total consideration
paid by the new investors purchasing shares of Common Stock in this Offering,
after deduction of the selling discounts and commissions and offering expenses
payable by the Company:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders... 54,193,361 68% ($256,000) 0 % ($0.005)
New Shareholders........ 25,952,651 32% $43,145,578 100.0% $ 1.66
---------- --- ----------- ----- --------
Total................... 80,146,012 100% $42,889,578 100% $ 0.54
========== === =========== ===== ========
</TABLE>
<PAGE>
19
CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Loans Payable $ 349 $ 349
----------- -----------
SHAREHOLDER'S EQUITY:
Share Capital
Authorized: 100,000,000 Common Stock at $0.0001 par value
Issued and outstanding stock:
54,193,361 as of June 30, 2000 14,439 49,471
Common Share Purchase Options 7,360 7,360
Additional Paid in Capital 934 934
Deficit (6,764) (6,764)
----------- -----------
Total Shareholders' Equity 15,969 51,001
----------- -----------
Total Capitalization $ 16,318 $ 51,350
=========== ===========
</TABLE>
<PAGE>
20
SUMMARY HISTORICAL AND PRO-FORMA FINANCIAL INFORMATION OF THE COMPANY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------- -------------------------
ACTUAL ACTUAL PRO FORMA ACTUAL ACTUAL
1998 1999 2000 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
Sales Revenue $ 24 $ - $ - $ - $ -
-------------------------------------------------------------------------
Operating Expenses
Selling, General and Administration 549 420 816 229 816
Depreciation and Amortization 3 3 27 2 27
Interest Expense 145 450 223 114 223
Write off of Investment in Subsidiary (Note 7) 930 - -
-------------------------------------------------------------------------
Total Expenses 1,627 873 1,066 345 1,066
-------------------------------------------------------------------------
Loss for the period (1,603) (873) (1,066) (345) (1,066)
=========================================================================
Loss per Share $ (0.06) $ (0.03) $ (0.02) $ (0.01) $ (0.02)
=========================================================================
<CAPTION>
DECEMBER 31, 1999 JUNE 30,2000
----------------- ------------
(DOLLARS IN THOUSANDS)
ACTUAL PRO FORMA ACTUAL
------ --------- ------
<S> <C> <C> <C>
Cash and Cash Equivalents $ - $ - $ 643
Total Current Assets 255 255 804
Intangible Assets 155 16,242 16,226
Total Indebtedness 553 873 349
Total Shareholders' Equity (904) 14,863 15,969
</TABLE>
<PAGE>
21
Paradigm Advanced Technologies, Inc.
Introduction To Unaudited Pro Forma
Consolidated Financial Statements
On March 29, 2000 Paradigm Advanced Technologies, Inc. ("Paradigm") consummated
an agreement where it acquired 100% of the issued and outstanding shares of
common stock of Power Point Micro Systems Inc. ("Power Point") and PowerLOC
Technologies, Inc. ("PowerLOC") in exchange for $300,000 cash, 5,000,000 common
stock (or approximately 10.6% of Paradigm's outstanding common shares),
4,166,666 stock options and $20,000 for expenses incurred on acquisition.
Paradigm and PowerLOC use December 31st for their fiscal year ends. Power Point
used November 30th, for its fiscal year end. The accompanying unaudited pro
forma consolidated balance sheet combines the historical unaudited balance
sheets of Paradigm, Power Point and PowerLOC as of December 31, 1999 as if the
acquisition of the 100% interest in Power Point and PowerLOC had been
consummated on that date. The accompanying unaudited pro forma consolidated
statement of operations for the year ended December 31, 1999 combines the
historical audited consolidated statement of operations of Paradigm and Power
Point and PowerLOC as if the acquisition had been consummated on January 1,
1999. The accompanying unaudited pro forma consolidated statement of operations
for the six months ended June 30, 2000 combines the historical unaudited
consolidated statement of operations of Paradigm, PowerLOC and Power Point for
the six months ended June 30, 2000 as if the acquisition of Power Point and
PowerLOC had been consummated as of January 1, 1999.
The accompanying unaudited pro forma consolidated financial statements are based
on the assumptions and adjustments described in the accompanying notes which
management believes are reasonable. The unaudited pro forma consolidated
financial statements do not purport to represent what the consolidated financial
position and results of operations actually would have been if the acquisitions
referred to above had occurred as of the dates indicated instead of actual dates
of consummation or what the financial position and results of operations would
be for future periods. The unaudited pro forma consolidated financial statements
and the accompanying notes should be read in conjunction with the audited and
unaudited historical financial statements of Power Point and PowerLOC included
elsewhere herein and the audited and unaudited financial statements of Paradigm
included in its annual report on Form 10-KSB for the year ended December 31,
1999 and its quarterly report on Form 10-QSB for the six months ended June 30,
2000, previously filed with the Securities and Exchange Commission, which are
incorporated herein by reference.
<PAGE>
22
PARADIGM ADVANCED TECHNOLOGIES INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Paradigm Historical
Pro Forma Pro Forma -------------------------------------------------
Consolidated Adjustment Paradigm PowerLOC Power Point
-------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Miscellaneous Receivables $ 6,321 $ - $ 6,321 $ - $ -
Prepaids and deposits 248,843 - 248,843 - -
-------------- ------------ ------------- ------------- ---------------
Total Current Assets 255,164 - 255,164 - -
Capital Assets 161,805 - 161,805 - -
Technology 16,086,665 16,086,665 (a) - - -
-------------- ------------ ------------- ------------- ---------------
Total Assets $ 16,503,634 $ 16,086,665 $ 416,969 $ - $ -
============== ============ ============= ============= ===============
Liabilities
Current Liabilities
Bank indebtedness $ 319,935 $ 320,000 (a) $ (65) $ - $ -
Accounts payable 768,509 - 768,509 - -
Loans Payable 552,504 - 552,504 - -
-------------- ------------ ------------- ------------- ---------------
Total Liabilities $ 1,640,948 $ 320,000 $ 1,320,948 $ - $ -
-------------- ------------ ------------- ------------- ---------------
Shareholders Equity
Common Stock $ 12,365,618 $ 8,600,000 (a) $ 3,765,618 $ - $ -
Common Share Purchase Options 7,362,573 7,166,665 (a) 195,908 - -
Additional paid in capital 832,399 832,399
Deficit (5,697,904) - (5,697,904) - -
-------------- ------------ ------------- ------------- ---------------
Total Shareholders' Equity 14,862,686 15,766,665 (903,979) - -
-------------- ------------ ------------- ------------- ---------------
Total Liabilities & Shareholders' Equity $ 16,503,634 $ 16,086,665 $ 416,969 $ - $ -
============== ============ ============= ============= ===============
</TABLE>
PARADIGM ADVANCED TECHNOLOGIES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Paradigm Historical
Pro Forma Pro Forma -------------------------------------------------
Consolidated Adjustment Paradigm PowerLOC Power Point
-------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenue $ - $ - $ - $ - $ -
-------------- ------------ ------------- ------------- ---------------
Expenses
Selling, General & Administrative 419,944 - 419,944 - -
Interest expense 450,476 - 450,476 - -
Depreciation and amortization 3,351 - 3,351 - -
-------------- ------------ ------------- ------------- ---------------
Total expenses 873,771 - 873,771 - -
-------------- ------------ ------------- ------------- ---------------
Net (loss) income for the year $ (873,771) $ - $ (873,771) $ - $ -
============== ============ ============= ============= ===============
</TABLE>
PARADIGM ADVANCED TECHNOLOGIES INC.
PRO FORMA INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Paradigm Historical
ProForma Pro Forma -------------------------------------------------
Consolidated Adjustment Paradigm PowerLOC Power Point
-------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenue $ - $ - $ - $ - $ -
-------------- ------------ ------------- ------------- ---------------
Expenses
Selling, General & Administrative 816,500 - 816,500 - -
Interest expense 223,184 - 223,184 - -
Depreciation and amortization 26,770 - 26,770 - -
-------------- ------------ ------------- ------------- ---------------
Total expenses 1,066,454 - 1,066,454 - -
-------------- ------------ ------------- ------------- ---------------
Net (loss) income for the period $ (1,066,454) $ - $ (1,066,454) $ - $ -
============== ============ ============= ============= ===============
</TABLE>
<PAGE>
23
Paradigm Advanced Technologies Inc.
Notes to Unaudited Pro Forma
Consolidated Financial Statements
Purchase of Power Point and PowerLoc by Paradigm
Information with respect to the cost incurred by Paradigm to acquire Power Point
and PowerLoc on March 29, 2000 and the expected allocation of such estimated
costs in accordance with the purchase method of accounting 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 20,000
------------
Total cost to be allocated $ 16,086,665
============
</TABLE>
The cost of the technology acquired is not being amortized as the products that
are being developed based on it are not yet commercially available.
Pro Forma Adjustments to the Unaudited Consolidated Balance Sheet as of December
31, 1999
(a) To record the cost of the technology acquired on acquisition
<PAGE>
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
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."
<PAGE>
25
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.
Year Ended December 31, 1999
The Company recorded no revenues for the year ended December 31, 1999 and
$23,465 sales for the year ended December 31, 1998. The 1998 sale represents a
one-time sale of a portion of the VideoBank software that the Company was no
longer using. The Company concentrated its energies on patent and license
negotiations during the year ended December 31, 1999 and also explored new
initiatives in the video surveillance software business. The Company efforts
were considerably hampered by a lack of funds to finance these activities.
The Company recorded a gross profit of $23,465 for the year ended December
31, 1998 as there were no costs expensed for the 1998 sale as all expenses
incurred on the software had been written off in prior years.
Selling, General and Administrative Expenses for the year ended December
31, 1999 were $419,944 as compared to $549,141 for the year ended December 31,
1998. The higher expenses in 1998 are due to compensation expenses recorded for
the issue of stock options to consultants of the company.
The Company had a net loss of $873,771 for the year ended December 31, 1999
as compared to a loss of $1,603,842 for the year ended December 31, 1998. The
loss for the 1998 fiscal year includes the non-cash write off of the investment
in 1280884 Ontario Inc. of $930,000.
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
over $1,000,000 in August and September through the issuance of common shares
and the price paid to exercise stock options and warrants. The Company expects
to raise additional funds in September and October through additional debt
financing , the exercising of stock options and warrants and the issuance of
common shares. Upon registration, the Company
<PAGE>
26
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 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. On September 6, 2000, The Company announced that it had acquired all
the rights to US Patent # 5,043,736, currently owned by Eastern Investments,
LLC, in exchange for 4,000,000 shares of Common Stock. The company also issued
an additional 4,200,000 common shares at a share price of $2.05 per share. The
latter shares will be placed in a trust account and Eastern Investments, LLC
will pay the Company as and when these shares are sold. 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 announced 4 sales and licensing contracts in July
and August 2000 and expects to start earning revenue from these contracts in the
fourth quarter. 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 SB-2 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 SB2, 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 SB-2 or for any other
reason.
MANAGEMENT
The executive officers, directors and key employees of the Company upon
completion of the Offering and their respective ages and positions are as
follows:
Name Age Position
---- --- --------
<PAGE>
27
David Kerzner 39 Chairman and Director
Eduardo Guendelman 48 President, Chief Executive Officer and Director
Selwyn Wener 50 Chief Financial Officer
Malcolm Robbins 57 Executive Vice President, PowerLOC
James Gillen 54 Chief Technology Officer, PowerLOC
David Ghermezian 28 Director
In July 2000, Mr. Jacob Kerzner resigned as a director and Mr. Eduardo
Guendelman was appointed as a director to replace him..
The following is a brief description of the professional experience and
background of the directors and executive officers of the Company.
David Kerzner, Chairman. Mr. Kerzner has served as the President and a director
of the Company since its founding in 1996. He became CEO in December 1997 and
Chairman in July, 2000. From 1990 to 1994, Mr. Kerzner was employed by ISTI
Corporation/Intertec Security, Inc. 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
based in Toronto.
Eduardo Guendelman, President and CEO. Mr. Guendelman became President and CEO
of the Company in July, 2000, subsequent to the acquisition of PowerLOC
Technologies Inc. and Power Point Microsystems Inc. which he founded and of
which he became President in 1992. Prior to Power Point Mr. Guendelman served
from 1994 to 1997 as President and CEO of TelePower International Inc, a
computer telephony integration (CTI) telecommunications firm, From 1988 to 1994,
Mr. Guendelman was President and COO of Computer Junction Limited, an Ontario
systems provider for local and wide area network connectivity solutions to
Fortune 500 and Fortune 1000 companies in Canada. From 1986 to 1988 Mr.
Guendelman served as Executive Vice President to Lexicom International, Inc., a
high-tech division of Magna International, an auto parts manufacturer with
annual sales exceeding $10 billion. From 1984 to 1986 Mr. Guendelman was Chief
Technology Officer of Sesame Systems, Ltd. an Israeli R&D company that he co-
founded. Sesame Systems developed and patented speech recognition, voice
verification and voice compression technology. From 1974 to 1983 Mr. Guendelman
was in the Israeli Air Force, achieving the rank of Major in 1979. Mr.
Guendelman holds a BSC in electrical engineering from Technion, the Israel
Institute of Technology.
Selwyn Wener, Executive Vice President and Chief Financial Officer: Mr. Wener
became Chief Financial Officer of Paradigm on February 1, 1998. From 1997 to
1998 Mr. Wener has been a Principal of S&L Associates, a financial services and
investor relations consulting firm. From 1994 to 1997 Mr. Wener was the Chief
Financial Officer for SoftQuad International Inc., Toronto Ontario a public
software development company, and from 1989 to 1993 Chief Financial Officer and
General Manager for Legacy Storage Systems Inc., a Markham, Ontario based
computer disk storage manufacturer and distributor. Mr. Wener has a Chartered
Accountant (CA) certification from South Africa where from 1977 to 1983 he was a
partner in Gross Hendler and Abrams, a medium sized firm of chartered
accountants. Mr. Wener holds a degree in Commerce from the University of Cape
Town.
Malcom Robins, Executive Vice President and Director of Marketing and Sales,
PowerLOC. Mr. Robins became Executive Vice President and Director of Marketing
and Sales on July 24, 2000. Since April 28, 2000 he has also been Director of
Strategic Marketing Sales of PowerLOC Technologies Inc. and from 1998 to 2000 he
was President and General Manager of Mandatek Marketing, Inc., Toronto, Ontario
a channel sales organization for North American technology suppliers to the
telecommunications and computer industries. From 1996 to 1998 he was Business
Development Manager and Manager, Corporate Market Development for Clearnet
Communications, Inc., of Toronto, Ontario a cellular telephone carrier, where he
was involved in the development and marketing of their first cellular telephone.
From 1992 to 1996 he was Director of Franchising and Director of
telecommunications Technology for the MicroAge and Compucentre networks of
Hartco Enterprises, Montreal, Quebec, a leading Canadian computer franchiser.
Mr. Robins prior experience includes management positions with Sharp Electronics
Corporation (1988-1991), Zenith Data Systems (1983-1988) and Andor Systems, Inc.
(1982-1983).
James Gillen, Chief Technology Officer, PowerLOC. Mr. Gillen became CTO of
PowerLOC Technologies Inc. on June 26, 2000. In 2000 he was CTO for Ottawa-based
ThinWeb Technologies, Inc., a developer of innovative applications for fast
online database access, mobile and wireless devices. From 1999 to 2000 he was
Manager, Technical Architecture of Bell Mobility, Mississauga, Ontario. From
1996 to 1997 he was a Managing Consultant for Bell Sygma, Inc. of Toronto,
Ontario. From 1997 to 1999 he was VP Business Development of Minacom
International, Inc. of Montreal, Quebec. From 1993 to 1996 he was Chief
Technical Architect of Rydex Industries Corporation of Richmond, British
Columbia. He has a bachelors degree from Bowdoin College, Maine.
<PAGE>
28
David Ghermezian, Director. David Ghermezian oversees much of the Triple Five
Group of Las Vegas, NV real estate activities in the northwestern and
southwestern United States. Triple Five owns substantial shopping malls and has
extensive investments in commercial and residential developments. Mr. Ghermezian
has directed Triple Five's diversification efforts into venture capital and
technology, and has recently been named a member partner in Selby Venture
Partners II, a Silicon Valley based fund that invests in start-up technology
companies. Mr. Ghermezian sits on the Boards for Nevada-based Bank of Commerce,
Vancouver-based People's Trust, and 7 Crowns listed on the Canadian Venture
Exchange.
Management and Other Committees
A Management Committee consisting of the Company's Chairman, David Kerzner, the
Company's President and CEO, Eduardo Guendelman, the CFO Selwyn Wener and
Compugen's President and CEO, Harry Zarek oversees the business operations.
The Board of Directors functions as the Compensation Committee. The Compensation
Committee recommends to the Board of Directors the compensation of officers and
key employees for the Company and the granting of stock options.
EXECUTIVE COMPENSATION
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, 1999.
Shares of
Common
Annual Compensation
------------------- Stock
Name and Underlying
principal position Year Salary Bonus options/SARS
-------------------- ---- ------------------- ----- ------------
David Kerzner 1999 $100,000 $0 7,000,000
Chairman
1998 $ 75,000 $0 0
1997 $100,000 $0 0
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
will receive compensation of $10,000 per annum for their service as directors.
The Company will, reimburse directors 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, Chairman of the Company. The consulting agreement provides for a
fee of $100,000 per year. The consulting agreement 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 agreement also
contains provisions regarding confidentiality of information, ownership of
inventions and patents, non-competition and non-solicitation. On July 25, 2000,
the board of directors agreed that it would issue Mr. Kerzner an additional
1,000,000 stock options per quarter at $1.42 per share, to an aggregated maximum
of 4,000,000 stock options, subject to the Company meeting certain business
targets. Mr. Kerzner is eligible to receive a bonus upon the approval of the
Company's board of directors.
In March 2000, the Company entered into a five-year consulting agreement with
Eduardo Guendelman, President and Chief Executive Officer of the Company. The
consulting agreement provides for a fee of $120,000 per year and an annual bonus
of $80,000. The consulting agreement may be terminated early by the Company in
the event of the resignation, death or disability or other incapacity of Mr.
Guendelman, as the case may be. The consulting agreement also contains
provisions regarding confidentiality of information, ownership of inventions and
patents, non-competition and non-solicitation. On July 25, 2000 Mr. Guendelman
was granted an additional 10,000,000 stock options at a price of $1.42 per
share.
In September 1999, the Company entered into a five-year consulting agreement
with Selwyn Wener, Chief Financial Officer of the Company. The consulting
agreement provides for a fee of $100,000 per year. The consulting agreement may
be terminated early by the Company in the event of the resignation, death or
disability or other incapacity of Mr. Wener, as the case may be. The consulting
agreement also contains provisions regarding confidentiality of information,
ownership of inventions and patents, non-competition
<PAGE>
29
and non-solicitation. Mr. Wener is eligible to receive a bonus upon the approval
of the Company's board of directors.
Options to Executives and Employees
In 1996 the Company adopted a Stock Option Plan with an authorization to issue
options for the purchase of up to 10,000,000 shares of Company Common Stock
Pursuant to the Plan and under separate compensation arrangements the following
options have been issued:
<TABLE>
<CAPTION>
Issued Exercised
Name Amount Date Price Date Price Balance
Officers and Directors
------------------------
<S> <C> <C> <C> <C> <C> <C>
David Kerzner(1) 3,187,500 1996 $ 0.05 3,187,500
7,000,000 1999 $ 0.25 7,000,000
Selwyn Wener 1,000,000 1998 $ 0.05 1,000,000
4,000,000 1999 $ 0.05 4,000,000
Eduardo Guendelman 416,667 2000 $ 0.05 416,667
10,000,000 2000 $ 1.40 10,000,000
Jacob Kerzner 562,500 1996 $ 0.05 562,500
All Officers and
Directors as a
Group (5 persons) 26,166,667 26,166,667
---------- ----------
Other Employees 11,623,333 1996-00 $ 0.01-4.00 1998-00 $0.01-4.00 11,623,333
---------- ----------
Totals 37,790,000 37,790,000
</TABLE>
(1) The Company is obligated to issue 2,187,500 shares to David Kerzner in
replacement of an equal number of shares surrendered by him to the Company
in 1997.
Limitation on Liability and Indemnification
The Company's Articles of Incorporation limit the liability of directors of the
Company to the Company or its shareholders to the fullest extent permitted by
Delaware Business Corporation Act (the "TBCA").
The Company's Bylaws provide that the Company shall indemnify each of its
directors and officers to the maximum extent allowed by the TBCA. The TBCA
permits such indemnification, so long as such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company. Such indemnification may be made only upon a
determination by the Board of Directors that such indemnification is proper in
the circumstances because the person to be indemnified has met the applicable
standard of conduct to permit indemnification under the law. The Company is also
permitted to advance to such persons payment for their expenses incurred in
defending a proceeding to which indemnification might apply, provided the
recipient provides an undertaking agreeing to repay all such advanced amounts if
it is ultimately determined that he is not entitled to be indemnified.
The Company has entered into Indemnification Agreements with each officer and
director in which the Company agrees to indemnify such persons to the fullest
extent allowed by the TBCA and defines the procedures for paying indemnity costs
and expenses, including advance payments thereof.
As of the date hereof, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted, and the Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
Insofar as indemnification for liabilities arising from the Act may be permitted
to directors, officers, and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
The Company believes that all of the transactions set forth below, which were
approved by the full Board of Directors of the
<PAGE>
30
Company, which included independent directors, were made on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties. All future transactions, including loans, between the Company and its
officers, directors, principal shareholders and affiliates, will be approved by
a majority of the Board of Directors, including a majority of the independent
and disinterested outside directors who will have access at the Company's
expense to the Company's or independent legal counsel, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
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 Chairman, 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.
On April 25 , 2000 the Company announced a strategic alliance with Compugen
Systems Ltd. (www.compugen.com), an Ontario corporation which leases
the_Richmond Hill, Ontario premises in which the Company's office are located.
Compugen was founded in 1981 by Harry Zarek who is presently serving as
President and CEO. Mr. Zarek acquired the exchangeable rights to 1,350,000
common shares of the Company's Common Stock on March 28, 2000 in connection with
the acquisition of PowerLOC. As part of this alliance Compugen formed a new
division: Compugen Mobile Solutions which will negotiate with PowerLOC exclusive
and non-exclusive marketing and distribution rights for certain products and/or
marketing segments as well as for certain geographic territories. See Properties
and Certain Transactions.
Compugen has for over 19 years been providing information technology solutions
and services to medium and large size corporations. Compugen has close
relationships with key venders, including Microsoft, Compaq, Hewlett Packard and
IBM. Compugen is Canada's third largest systems integration company with annual
sales exceeding $270 million and more than 500 employees in 8 offices across
Canada. Compugen has received for three years running the award as Canada's 50
Best Managed Private Companies and the Microsoft Award for operational
excellence in Canada for 1999. Compugen is a founding member of GlobalServe
Computer Services Limited, a global network of large systems integrators formed
to support corporations that have global Information Technology requirements.
On July 31, 2000 the Company entered into a strategic alliance with Pangea
Petroleum Corporation ("Pangea"), whereby the companies will create a joint
venture ("JV") to be owned 50% by the Company and 50% by Pangea. As part of this
arrangement, the Company expects at a closing scheduled for September, 2000 to
issue to the JV 7,500,000 shares of Common Stock and 12,500,000 warrants, all of
which will be restricted securities not sold pursuant to this Prospectus. As
consideration for these securities Pangea will (1) issue a warrant covering 12.5
million shares of Pangea common stock to the JV, (2) provide consulting and
public relations services to the Company and (3) transfer to the JV its
interests in WorldLink USA, which is a development stage company wholly owned by
Pangea that owns video streaming technology and a library of concerts to be
broadcast over the Internet. Jacob International, an affiliate of Pangea, has a
relationship with the Company pursuant to which it receives fees, including
Common Stock, for certain management consulting services relating to corporate
financing activities. Jacob International, Inc. has no affiliation with Jacob
Kerzner, brother of David Kerzner and a former director of the Company.
PRINCIPAL STOCKHOLDERS
The following table provides information concerning beneficial ownership of the
Company's Common Stock as of June 30, 2000 for:
. each person or group that the Company knows own more than 5% of the
outstanding common stock;
. the chief executive officer;
. each of the Company's directors; and
. all of the Company's directors and executive officers as a group.
The following table lists the applicable percentage of beneficial ownership
based on 59,857,816 shares of Common Stock outstanding as of July 31, 2000.
Beneficial ownership is determined in accordance with rules of the Securities
and Exchange Commission, and generally includes voting power and/or
investment with respect to the securities held. The fourth column shows
separately shares of common stock subject to options currently exercisable by
the directors and officers individually and all directors and executive
officers as a group. These shares are included in the first column of the
table below. Shares of common stock which may be acquired by exercise of
stock options are deemed outstanding for purposes of computing the percentage
beneficially owned by
<PAGE>
31
the persons holding such options but are not deemed outstanding for purposes
of computing the percentage beneficially owned by any other person. Except as
otherwise noted, the persons or entities named have sole voting and
investment power with respect to all shares shown as beneficially owned by
them.
<TABLE>
<CAPTION>
Amount and Nature of Percent Shares Subject
Name and Address of Beneficial Owner Beneficial Owner of Class to Options
----------------------------------- ----------------- --------- --------------
<S> <C> <C> <C>
David Kerzner, Chairman 13,187,500 22.0% 12,187,500
Eduardo Guendelman, President 10,916,667 18.2% 10,416,667
Selwyn Wener, Chief Financial Officer 5,000,000 8.4% 5,000,000
David Ghermezian, Director 4,450,000 7.4% 2,000,000
Sarah Casse 3,350,000 5.6% 1,875,000
C-Saw Investments 8,800,000 14.7% 4,250,000
Donovan Intertrade Limited 4,600,000 7.7% 2,300,000
Watson & Associates 5,775,000 9.6% 2,625,000
Eastern Investments, LLC 9,936,290 16.6% 650,000
All directors and executive officers as a
group (4 persons) 33,554,167 56.1% 29,604,167
</TABLE>
DESCRIPTION OF COMMON STOCK
The following summary of the Company's Common Stock is qualified in its entirety
by reference to the Company's Articles of Incorporation and its Bylaws, each of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Paradigm has authorized 100,000,000 shares of Common
Stock, par value $0.01 per share. The Company plans to increase its authorized
capital to 250,000,000 shares in the near future.
Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. All
shares of Common Stock have equal voting rights on the basis of one vote per
share on all matters to be voted upon by shareholders. Cumulative voting for the
election of directors is not permitted, so that the holders of a majority of
shares outstanding have the power to elect the entire Board of Directors. Shares
of Paradigm Common Stock have no preemptive, conversion, sinking fund or
redemption provisions and are not liable for assessment. Each share of Paradigm
Common Stock is entitled to share proportionately in any assets available for
distribution upon liquidation of Paradigm.
The Transfer Agent and Registrar for the Company's Common Stock is
Intercontinental Transfer Agency and Registrar, Inc. Boulder City, Nevada.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding close to
86,000,000 shares of Common Stock. In addition, the Company has reserved over
37,000,000 shares for issuance upon exercise of options granted to employees and
17,150,000 shares for the exercise of warrants, all of which are immediately
exercisable. Of the shares to be outstanding after the Offering, 96,032,500
shares will be freely tradable without restrictions or registration under the
Act, except that any shares purchased by "affiliates" of the Company, as that
term is defined in Rule 144 ("Rule 144") under the Act ("Affiliates"), may
generally be sold only within the limitations of Rule 144 described below. Sales
of these securities in the open market, or the availability of such shares for
sale, could adversely affect the trading price of the Common Stock.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned Restricted Shares for at least
one year following the later of the date of the acquisition of such shares from
the issuer or an affiliate of the issuer would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of: (i)
1% of the
<PAGE>
32
number of shares of Common Stock then outstanding or (ii) the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and the availability of current public information about the
Company. Rule 144 generally becomes available 90 days after the issuer has been
subject to the information reporting requirements of the Exchange Act. Under
Rule 144(k), a person who is not deemed to have been an affiliate of the Company
at any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years following the later of the
date of the acquisition of such shares from the issuer or an affiliate of the
issuer, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
PLAN OF DISTRIBUTION
The offering period will extend for a period of one year from the date of this
Prospectus, unless the Company agrees to extend the offering period for an
additional period of 180 days (such periods are collectively referred to as,
"the Selling Period"). Subscriptions for share. Sales of Common Stock, other
than pursuant to existing conversion rights, options, warrants or other rights.,
are subject to review and acceptance by the Company in its sole discretion.
Purchasers will receive stock certificates upon submission and acceptance of
conversion, warrant or option exercise documents, subscription agreements or
other appropriate documentation and payment for their shares. Subscriptions
maybe subject to short term "cooling off" rescission rights under certain state
laws.
The Common Stock sold by the Company will be sold directly to retail purchasers
at the offering price as described below. No commissions or other remuneration
will be paid by the Company in connection with the sale of the Common Stock.
The offering price for the Shares of Common Stock offered by the Company
pursuant to this Prospectus is the average sales price for the Common Stock on
the OTCBB for the trading day immediately preceding the date of offer. There can
be no assurance that the prices at which the Common Stock will trade in the
public market following a particular sale will not be lower than the price at
which offered .
SELLING SHAREHOLDERS
The following table sets forth information about the Selling Shareholders.
<TABLE>
<CAPTION>
Selling Shareholders
Amount and # of # of Shares Percent of Percent of Shares
Nature of Shares Beneficially Class (2) Class (2) Subject
Officers, Directors Beneficial to Owned Before After to
and 5% stockholders Ownership be Sold After Offering Offering Options
Offering
<S> <C> <C> <C> <C> <C> <C>
David Kerzner
Chairman
77 Dell Park Ave
Toronto, Ontario M6B 2T9 13,187,500 0 13,187,500 22.0% 22.0% 12,187,500
Eduardo Guendelman
President and CEO
40 Flamingo Road
Thornhill, Ontario (3) 10,916,667 0 10,916,667 18.2% 18.2% 10,416,667
Selwyn Wener
Executive VP and CFO
34 Braeburn Drive
Thornhill, Ontario L3T 4W6 5,000,000 0 5,000,000 8.4% 8.3% 5,000,000
David Ghermezian
Director
9510 West Sahara
Suite 200
Las Vegas, NV 89117 (4) 4,450,000 450,000 4,000,000 7.4% 6.7% 2,000,000
Jack Y.L. Lee
28 Old Park Lane
Richmond Hill, Ontario L4B 2L4 1,958,334 83,334 1,875,000 3.3% 3.1% 0
</TABLE>
<PAGE>
33
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sarah Casse
63 Otter Crescent
North York, Ontario M5N 2W7 3,350,000 0 3,350,000 5.6% 5.6% 1,875,000
C-Saw Investments
80 Broad Street, 26th Floor
New York NY 11225 8,800,000 0 8,800,000 14.7% 14.7% 4,250,000
Donovan Intertrade Limited
4936 Yonge Street #728
Toronto, Ontario M2N 6S3 4,600,000 4,600,000 0 7.7% 0.0% 2,300,000
Watson & Associates
6A-49 The Donway West
Suite 1122
Toronto, Ontario M3C 2E8 5,775,000 2,000,000 3,775,000 ?% ?% 1,625,000
Eastern Investments, LLC
P.O. Box 270734
West Hartford, CT 06127-0734 9,936,290 7,936,290 2,000,000 16.6% 3.3% 650,000
All directors and executive
officers as a group (4 persons) 33,554,167 450,000 33,104,167 56.1% 55.2% 29,604,167
Selling Shareholders
David Kerzner See Officers, Directors and 5%
shareholders above
Eduardo Guendelman See Officers, Directors and 5%
shareholders above
Selwyn Wener See Officers, Directors and 5%
shareholders above
Jacob Kerzner [MOVE DOWN ] See Officers, Directors and 5%
shareholders above
Triple Five Investments See Officers, Directors and 5%
shareholders above
Jack Y.L. Lee See Officers, Directors and 5%
shareholders above
C-Saw Investments See Officers, Directors and 5%
shareholders above
Rachelle Heller See Officers, Directors and 5%
shareholders above
Watson & Associates See Officers, Directors and 5%
shareholders above
Eastern Investments, LLC See Officers, Directors and 5%
shareholders above
Jacob Kerzner 1,562,500 1,562,500 0 2.6% 0.0% 1,562,500
Alysa Aberback 83,334 83,334 0 0.1% 0.0% 0
Shaynee Aberback 66,666 8,333 58,333 0.1% 0.1% 33,333
Andre Abitbol 83,334 83,334 0 0.1% 0.0% 0
Jacob Basser 6,666 6,666 0 0.0% 0.0% 0
Gordon Chester 250,000 250,000 0 0.4% 0.0% 0
Danton Enterprises Ltd 150,001 150,001 0 0.3% 0.0% 0
JAE Investments Ltd. 362,500 210,835 151,665 0.6% 0.3% 86,666
Seymour Konkol 250,000 250,000 0 0.4% 0.0% 0
Prosper Lugassy 83,334 83,334 0 0.1% 0.0% 0
Rofur Investments Ltd 41,667 41,667 0 0.1% 0.0% 0
Marvin Rosenfield 48,334 48,334 0 0.1% 0.0% 0
Mendel Rubinoff 33,334 33,334 0 0.1% 0.0% 0
</TABLE>
<PAGE>
34
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sharon Rosenbloom 150,000 150,000 0 0.3% 0.0% 150,000
Robert Schmutz in Trust 15,000 15,000 0 0.0% 0.0% 0
Kato Krauss 283,334 283,334 0 0.5% 0.0% 200,000
SIL Developments Limited 66,667 66,667 0 0.1% 0.0% 0
Mathis Weingarten 83,334 83,334 0 0.1% 0.0% 0
Moshe Lipszyc 845,117 553,450 291,667 1.4% 0.5% 166,667
Mendel Raksin 2,066,680 1,716,680 350,000 3.5% 0.6% 200,000
PF Impact Inc 70,000 70,000 0 0.1% 0.0% 0
Bill Kertes 181,251 181,251 0 0.3% 0.0% 0
Howard Goldfarb 83,334 83,334 0 0.1% 0.0% 0
Rachelle Heller 333,336 333,336 0 0.6% 0.0% 0
David Botnick In Trust 250,000 250,000 0 0.4% 0.0% 250,000
Richard Smith 250,000 250,000 0 0.4% 0.0% 250,000
Barry Lesser 125,000 125,000 0 0.2% 0.0% 0
Joshua Scheinfeld 160,000 160,000 0 0.3% 0.0% 120,000
Jacob International Inc. 672,250 672,250 0 1.1% 0.0% 0
Debra J. Gilbert 5,000 5,000 0 0.0% 0.0% 0
Reginald Haynes 5,000 5,000 0 0.0% 0.0% 0
Appleby Partners, Inc. 2,500,000 1,562,500 937,500 4.2% 1.6% 0
Richcliff Movie Industries Ltd 1,050,000 50,000 1,000,000 1.8% 1.7% 1,000,000
Christine Berardelli 500,000 312,500 187,500 0.8% 0.3% 0
David Wands 750,000 468,750 281,250 1.3% 0.5% 0
Ming Yeung 500,000 312,500 187,500 0.8% 0.3% 0
David Lennox 50,000 10,000 40,000 0.1% 0.1% 0
Timothy McCully 50,000 10,000 40,000 0.1% 0.1% 0
Michael Nathan 250,000 62,500 187,500 0.4% 0.3% 0
Lionel Schooler 50,000 10,000 40,000 0.1% 0.1% 0
James Kearney 200,000 50,000 150,000 0.3% 0.3% 0
Gayle Juntenen 200,000 50,000 150,000 0.3% 0.3% 0
Patrick Cluney 1,000,000 250,000 750,000 1.7% 1.3% 0
Hubert Wen 400,000 100,000 300,000 0.7% 0.5% 0
Howard Halpern 100,000 100,000 0 0.2% 0.0% 0
Congregation Barkei Tshivo of Dirov 200,000 25,000 175,000 0.3% 0.3% 100,000
Darak Investments Limited 133,334 16,667 116,667 0.2% 0.2% 66,667
David Lyndon Lekites 80,000 10,000 70,000 0.1% 0.1% 40,000
Walter G. Lekites III 70,000 8,750 61,250 0.1% 0.1% 35,000
Rochelle Gut 200,000 25,000 175,000 0.3% 0.3% 100,000
Paul Friedman 34,000 4,250 29,750 0.1% 0.0% 17,000
Harry Zarek, In Trust 2,475,000 2,475,000 0 4.1% 0.0% 2,475,000
Selling Shareholder Total: 28,798,349 48,157,000
</TABLE>
(1) Under SEC rules, beneficial ownership includes any shares as to which an
individual has sole or shared voting power or investment power. Unless otherwise
indicated, Paradigm 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 59,857,816 shares outstanding as of
<PAGE>
35
July 31, 2000.
(3) Includes 733,332 Common Shares and Exercisable stock options owned by Pnina
Guendelman, Eran Guendelman and the Guendelman Family Trust.
(4) Includes 4.450,000 Common shares and Exercisable stock options owned by
Triple Five Financial LLC.
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. These vendors have agreed to waive their rights to receive
any additional shares in connection with the transaction. The Company 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.
EXPERTS
The financial statements of the Company as of December 31, 1999, and for each of
the two years in the period ended December 31, 1999, included in this Prospectus
have been audited by Bromberg & Associate, independent accountants, as set forth
in their report therein included, and have been so included in reliance upon
such report being given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2, together with all
amendments, schedules and exhibits thereto, pursuant to the Securities Act with
respect to the securities offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
Exhibits thereto. The statements contained in this Prospectus as to the contents
of any contract or other document identified as exhibits in this
<PAGE>
36
Prospectus are not necessarily complete, and in each instance, reference is made
to a copy of such contract or document filed as an exhibit to the Registration
Statement, each statement being qualified in any and all respects by such
reference. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
exhibits which may be inspected without charge at the Commission's principal
office at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549.
The Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith the
Company files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, NW, Washington, D.C. 20549 and at its New York Regional Office,
Room 1300, 7 World Trade Center, New York, NY 10048 and at its Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at prescribed rates. The Company's
Registration Statement on Form SB-2 as well as any reports filed under the
Exchange Act can also be obtained electronically after the Company has filed
such documents with the Commission through a variety of databases, including
among others, the Commission's Electronic Data Gathering, Analysis and Retrieval
("EDGAR") program, Knight-Ridder Information, Inc., Federal Filings/Dow Jones
and Lexis/Nexis. Additionally, the Commission maintains a Website (at
http://www.sec.gov) that contains such information regarding the Company.
The Company intends to furnish its shareholders with annual reports containing
audited financial statements and such other reports as the Company deems
appropriate or as may be required by law.
Requests for information may be directed to Mr. Selwyn Wener, Chief Financial
Officer of the Company at 25 Leek Crescent, Richmond Hill, Ontario, Canada
L4B4B3 (telephone number (905) 707-2158). The Company's website is
www.powerloc.com.
------------------
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Independent Auditor's Report F-2
Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999 F-3
Consolidated Statements of Operations for the six month periods ended
June 30, 2000 and 1999 (unaudited) and for the years ended December 31, 1999 and 1998 F-4
Consolidated Statement of Shareholders' Equity for the two years in the
period ended December 31, 1999 and for the six month period ended June 30, 2000
(unaudited) F-5
Consolidated Statements of Cash Flows for the six month periods ended
June 30, 2000 and 1999 (unaudited) and for the years ended December 31, 1999 and 1998 F-6
Notes to the Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
Bromberg & Associate 1183 Finch Avenue West Suite 305
--------------
CHARTERED ACCOUNTANTS Downsview, Ontario M3J 2G2
Office: (416) 663-7521
Fax: (416) 663-1546
AUDITORS' REPORT
---------
TO THE SHAREHOLDERS OF
PARADIGM ADVANCED TECHNOLOGIES, INC.
We have audited the consolidated balance sheet of Paradigm Advanced
Technologies, Inc. as at December 31, 1998 and 1999 and the consolidated
statements of operations, shareholders' equity and cash flows for the years 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred significant losses for the past
two years and continues to have negative working capital. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
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,
1998 and 1999 and the results of its operations and the cash flows for the years
then ended in accordance with generally accepted accounting principles.
/s/ Bromberg & Associate
CHARTERED ACCOUNTANTS
DOWNSVIEW, ONTARIO
April 11, 2000
F-2
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS AS AT
JUNE 30 DECEMBER 31
2000 1999
---- ----
(unaudited)
(note 9) (note 9)
ASSETS
Current Assets
Cash and cash equivalents $ 643,366 $ 65
Miscellaneous receivables 32,289 6,321
Prepaids and deposits 128,239 248,843
------------ ------------
Total Current Assets 803,894 255,229
Capital Assets (note 3) 16,251,683 161,805
------------ ------------
Total Assets $ 17,055,577 $ 417,034
============ ============
LIABILITIES
Current Liabilities
Accounts payable $ 737,550 $ 768,509
Loans payable (note 4) 348,856 552,504
------------ ------------
Total Liabilities 1,086,406 1,321,013
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share Capital (notes 5 and 6) 14,439,394 3,765,618
Authorized: 30,000,000 Common
Stock at $0.0001 par value
The authorized common shares
were increased to 100,000,000
shares in February 1999
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 934,399 832,399
Deficit (6,764,358) (5,697,904)
------------ ------------
Total Shareholders' Equity (Deficiency) 15,969,171 (903,979)
------------ ------------
Total Liabilities and Shareholders' Equity $ 17,055,577 $ 417,034
============ ============
The accompanying notes are an integral part of these Financial Statements.
F-3
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the six months ended For the year ended
June 30 December 31,
2000 1999 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
(note 9) (note 9) (note 9) (note 9)
<S> <C> <C> <C> <C>
Revenue
Sales $ -- $ -- $ -- $ 23,465
------------ ------------ ------------ ------------
Operating Expenses
Selling, general and administration 816,500 228,504 419,944 549,141
Depreciation and amortization 26,770 1,676 3,351 2,796
Interest expense 223,184 114,396 450,476 145,370
Write off of investment in subsidiary (note 8) -- -- -- 930,000
------------ ------------ ------------ ------------
Total Operating Expenses 1,066,454 344,576 873,771 1,627,307
------------ ------------ ------------ ------------
Loss for the period $ (1,066,454) $ (344,576) $ (873,771) $ (1,603,842)
============ ============ ============ ============
Loss per Share $ (0.02) $ (0.01) $ (0.03) $ (0.06)
============ ============ ============ ============
Average common shares outstanding during period 43,939,822 29,796,662 29,797,183 24,986,646
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-4
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock
<TABLE>
<CAPTION>
Common
Share Total
Purchase Additional Shareholders'
Shares Amount Options Deficit paid in capital Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 16,140,445 $ 2,218,180 $ - $ (2,947,602) $ - $ (729,422)
Adjustment (note 9) 195,908 (272,689) 619,452 542,671
Loss for the period (1,603,842) (1,603,842)
Exercise of stock options 801,217 86,848 86,848
Issued for cash 5,855,000 297,590 297,590
Issued on acquisition of 1280884
Ontario Inc. 3,720,000 930,000 930,000
Issued for acquisition of patent
license 1,100,000 55,000 55,000
Issued for other consideration 2,180,000 168,000 168,000
------------------------------------------------------------------------------------------
Balance at December 31, 1998 29,796,662 3,755,618 195,908 (4,824,133) 619,452 (253,155)
Adjustment (note 9) 212,947 212,947
Loss for the period (873,771) (873,771)
Debentures redeemed 200,000 10,000 10,000
------------------------------------------------------------------------------------------
Balance at December 31, 1999 29,996,662 3,765,618 195,908 (5,697,904) 832,399 (903,979)
Adjustment (note 9) 102,000 102,000
Loss for the period (1,066,454) (1,066,454)
Exercise of stock options and
warrants 9,039,839 1,334,496 (22,337) 1,312,159
Issued for cash 6,001,290 440,000 440,000
Debentures redeemed 5,180,875 248,260 248,260
Issued on acquisition of PowerLOC 3,650,000 8,600,000 7,166,665 15,766,665
Issued on acquisition of patent
license 100,000 29,000 19,500 48,500
Issued for other consideration 224,695 22,020 22,020
------------------------------------------------------------------------------------------
Balance at June 30, 2000 54,193,361 $14,439,394 $7,359,736 $ (6,764,358) $ 934,399 $ 15,969,171
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-5
<PAGE>
PARADIGM ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
For the six months ended For the year ended
June 30 December 31,
2000 1999 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
(note 9) (note 9) (note 9) (note 9)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Loss for the period $(1,066,454) $ (344,576) $ (873,771) $(1,603,842)
Items not requiring an outlay of cash
Amortization of capital assets 26,770 1,676 3,351 2,796
Amortization of debt discount to interest expense 202,408 92,346 402,451 124,520
Common share purchase options 19,500 - - -
Net changes in non-cash working capital items related to operations
Miscellaneous receivables (25,968) (40) (5,019) 34,214
Prepaids and deposits - (13,191) (20,196) -
Accounts payable (30,959) 105,341 308,100 38,401
----------- ----------- ----------- -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES (874,703) (158,444) (185,084) (1,403,911)
----------- ----------- ----------- -----------
Cash flows from financing activities
Loan payable - 149,864 161,189 34,543
Proceeds of common stock issuance 1,847,791 - 10,000 1,537,438
----------- ----------- ----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,847,791 149,864 171,189 1,571,981
----------- ----------- ----------- -----------
Cash flows from investing activities
Acquisition of capital assets (329,787) (3,715) (3,714) (155,075)
Proceeds on sale of capital asset - - 4,818 -
----------- ----------- ----------- -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES (329,787) (3,715) 1,104 (155,075)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE PERIOD 643,301 (12,295) (12,791) 12,995
Cash and cash equivalents - Beginning of the period 65 12,856 12,856 (139)
----------- ----------- ----------- -----------
Cash and cash equivalents - End of the period $ 643,366 $ 561 $ 65 $ 12,856
=========== =========== =========== ===========
Cash and cash equivalents are comprised as follows:
Cash $ 243,777 $ 561 $ 65 $ 12,856
Short-term investments 399,589 - - -
----------- ----------- ----------- -----------
Cash and cash equivalents - End of the period $ 643,366 $ 561 $ 65 $ 12,856
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-6
<PAGE>
Paradigm Advanced Technologies, Inc.
Notes To Consolidated Financial Statements
Years Ended December 31, 1998 and 1999 and
six months ended June 30, 1999 and 2000 (unaudited)
Note 1. DESCRIPTION OF COMPANY
Paradigm Advance Technologies, Inc. (the "Company") is a development stage
company incorporated in Delaware on January 12, 1996 that was formed to
capitalize on the demand for digital image and interactive global
positioning system ("GPS") tracking technology in North America, South
America, Europe and Asia.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted 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
inter-company 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.
(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
<PAGE>
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 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.
(11) Unaudited Interim Financial Data
The unaudited financial statements for the periods ended June 30, 2000 and
1999 reflect adjustments, all of which are of a normal recurring nature,
and which are, in the opinion of management, necessary to a fair
presentation of the results for the interim periods presented and are not
necessarily indicative of full year results.
Note 3. CAPITAL ASSETS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
June 30, 2000 December 31, 1999
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Furniture, Fixtures and Computers $ 40,802 $ 20,744
--------------------------------------------------------------------------------------------------------------
Patent Agency Rights 155,270 155,075
--------------------------------------------------------------------------------------------------------------
Technology (a) 16,096,396 -
----------- --------
--------------------------------------------------------------------------------------------------------------
16,292,468 175,819
--------------------------------------------------------------------------------------------------------------
Less: Accumulated Depreciation 40,785 14,014
----------- --------
--------------------------------------------------------------------------------------------------------------
$16,251,683 $161,805
=========== ========
--------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The technology was acquired on the acquisition of PowerLOC
Technologies, Inc. (Note 6).
<PAGE>
Note 4. LOANS PAYABLE
Loans payable include:
a) Loans amounting to $243,842 at December 31, 1999 and $203,856 at June
30, 2000, 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 these loans, $121,268 at December 31,
1999 and $68,193 at June 30, 2000 was owing to directors of the
Company.
b) Convertible promissory notes of $256,325 at December 31, 1999 and
$145,000 at June 30, 2000, are convertible into common shares at rates
of $0.02 - $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 $231,325 at December 31, 1999 and $120,000 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. A portion of these
convertible promissory notes has been allocated to the intrinsic value
of the beneficial conversion feature and recognized as additional paid
in capital (note 9).
F-9
<PAGE>
Note 5. STOCK OPTIONS AND WARRANTS
a) Options
The Company's 1996 Stock Option Plan (the "Plan") was established to
provide an incentive to employees, directors and consultants of the Company
and its subsidiaries. The Plan is administered by a Committee which may use
its discretion when issuing Options with regard to purchase price, dates
exercisable and expiry date, subject to certain limitations stipulated in
the plan.
The weighted average characteristics of options outstanding as at June 30,
2000 are as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------------------- --------------------------------
Weighted Weighted Weighted
Average Average Average
Range of Number of Remaining Life Exercise Number of Exercise
Exercise price Shares in years Price Shares Price
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.01 - 0.05 19,633,334 1.67 $ 0.05 19,633,334 $ 0.05
$ 0.06 - 0.15 805,000 1.57 $ 0.07 805,000 $ 0.07
$ 0.16 - 0.25 1,203,333 2.55 $ 0.20 1,203,333 $ 0.20
$ 0.26 - 0.40 1,303,333 2.39 $ 0.40 1,303,333 $ 0.40
$ 0.41 - 1.00 3,310,000 2.74 $ 0.80 3,310,000 $ 0.80
$ 1.01 - 3.00 935,000 5.07 $ 1.74 -
--------------- ---------------- -------------- -------------------------------
27,190,000 1.99 $ 0.22 26,255,000 $ 0.17
--------------- ---------------- -------------- -------------------------------
</TABLE>
A summary of option activity since December 31, 1996 is shown below:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Options Outstanding Number Range Price
---------------------------------------------------------- ---------------------------------
<S> <C> <C> <C>
Balance, December 31, 1996 8,143,201 $ 0.05 $ 0.05
Granted during the year 961,217 $ 0.12 - $0.40 0.25
---------------- -------------- ---------------
Balance, December 31, 1997 9,104,418 $ 0.05 - $0.40 0.06
Granted during the year 2,350,000 $ 0.05 - $0.08 0.06
Exercised during the year (801,217) $ 0.05 - $0.18 0.11
---------------- -------------- ---------------
Balance, December 31, 1998 10,653,201 $ 0.05 - $0.40 0.06
Granted during the year 11,650,000 $ 0.01 - $0.05 0.05
---------------- -------------- ---------------
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 - $3.00 $ 0.22
================ ============== ===============
</TABLE>
The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, as all options have ben granted at exercise prices equal
to the fair market value as of the date of grant, no compensation cost has been
recognized under these plans accompanying consolidated financial statements. Had
compensation cost been determined consistent with statement 123, the Company's
Loss and Loss per common share would have been adjusted to the pro forma amounts
indicated below:
F-10
<PAGE>
<TABLE>
<CAPTION>
For the six months ended For the year ended
June 30, December 31,
---------------------------- ----------------------------
2000 1999 1999 1998
<S> <C> <C> <C> <C>
Loss for the period $ (1,066,454) $ (344,576) $ (873,771) $ (1,603,842)
Estimated stock-based compensation costs - - (553,780) (115,670)
------------ ------------ ------------ ------------
Proforma loss $ (1,066,454) $ (344,576) $ (1,427,551) $ (1,719,512)
------------ ------------ ------------ ------------
Proforma net (loss) per common share
Basic $ (0.02) $ (0.01) $ (0.05) $ (0.07)
------------ ------------ ------------ ------------
Weighted average number of shares
Basic 43,939,822 29,796,662 29,797,183 24,986,646
------------ ------------ ------------ ------------
</TABLE>
The weighted average fair value of options granted during the following periods
were calculated as follows using Black-Scholes option pricing model with the
following assumptions:
<TABLE>
<CAPTION>
For the six months ended For the year ended
June 30, December 31,
----------------- --------------------------------
2000 1999 1998
<S> <C> <C> <C>
Weighted average
Black-Scholes value of options $ 1.79 $ 0.05 $ 0.05
Assumptions:
Risk free interest rates 5.0% 4.5 - 5% 5.0%
Expected life in years 3 - 4 years 3 years 3.4 years
Expected dividend yield 0% 0% 0%
Volatility 143% - 396% 145% - 330% 159%-165%
</TABLE>
Employees, officers or directors were granted 935,000 (1999 - nil) options
during the six months ended June 30, 2000. Vesting does not commence until
fiscal 2001.
b) Warrants
The following warrants were outstanding at June 30, 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
============
F-11
<PAGE>
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 20,000
-----------
Allocated to Technology $16,086,665
===========
</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%
NOTE 7. INCOME TAXES
The following is a reconciliation from the expected statutory income tax
recovery to the Company's actual income tax recovery:
<TABLE>
<CAPTION>
For the six months ended For the year ended
-------------------------------------------------
June 30 June 30 December 31, December 31,
2000 1999 1999 1998
<S> <C> <C> <C> <C>
Expected income tax recovery at federal
statutory tax rate $(362,594) $(117,156) $(297,082) $(545,306)
Decrease in tax recovery resulting from:
Losses not tax effected 362,594 117,156 297,082 545,306
------------------------------------------------
Actual income tax expense recovery $ - $ - $ - $ -
------------------------------------------------
</TABLE>
The tax effect of significant temporary differences are as follows:
<TABLE>
<CAPTION>
June 30 December 31,
2000 1999
-----------------------
<S> <C> <C>
Assets
Income tax losses available for carryforward $1,710,333 $1,347,738
Book depreciation in excess of tax depreciation 860 897
-----------------------
$1,711,193 $1,348,635
Less valuation allowance 1,711,193 1,348,635
-----------------------
$ - $ -
-----------------------
</TABLE>
F-12
<PAGE>
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 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.
F-13
<PAGE>
NOTE 9. 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 six
months ended For the year ended
June 30 December 31
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Interest expense $ 202,408 $ 402,451 $ 124,520
Loss for the period $ 202,408 $ 402,451 $ 124,520
June 30 December 31
2000 1999
Prepaid expenses $ 128,239 $ 228,647
--------------------------
Total assets $ 128,239 $ 228,647
==========================
Common share purchase options $ 195,908 $ 195,908
Additional paid in capital 934,399 832,399
Deficit (1,002,068) (799,660)
----------- -----------
Total shareholders' equity (deficiency) $ 128,239 $ 228,647
=========== ===========
</TABLE>
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 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).
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2.02-1 of the Delaware Business Corporation Act permits (and the
Registrant's Certificate of Incorporation and Bylaws, which are incorporated by
reference herein, authorize) indemnification of directors and officers of the
Registrant and officers and directors of another corporation, partnership, joint
venture, trust, or other enterprise who serve at the request of the Registrant,
against expenses, including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonable incurred by such person in connection with
any action, suit or proceeding in which such person is a party by reason of such
person being or having been a director or officer of the Registrant or at the
request of the Registrant, if he conducted himself in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Registrant may not
indemnify an officer or a director with respect to any claim, issue or matter as
to which such officer or director shall have been adjudged to be liable to the
Registrant, unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. To the extent that an officer or director is successful on
the merits or otherwise in defense on the merits or otherwise in defense of any
action, suit or proceeding with respect to which such person is entitled to
indemnification, or in defense of any claim, issue or matter therein, such
person is entitled to be indemnified against expenses, including attorney's
fees, actually and reasonably incurred by him in connection therewith.
The circumstances under which indemnification is granted in an action brought on
behalf of the Registrant are generally the same as those set forth above;
however, expenses incurred by an officer or a director in defending a civil or
criminal action, suit or proceeding may be paid by the Registrant in advance of
final disposition upon receipt of an undertaking by or on behalf of such officer
or director to repay such amount if it is ultimately determined that such
officer or director is not entitled to indemnification by the Registrant. Such
procedures are set forth in a series of Indemnification Agreements between the
Registrant and each officer and director, as contained in Exhibit 10.11 of this
Registration Statement.
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of the
securities being registered, other than selling discounts and commissions are
set forth in the following table:
S.E.C. registration fees........................................ $31,680
* N.A.S.D. filing fees
* Standard & Poors standard Manual fees.
* State securities laws (Blue Sky) legal fees and expenses
* Printing and engraving expenses.
* Legal fees and expenses.
* Accounting fees and expenses
* Transfer agent's and registrar's fees and expenses
* Representative expense allowance
* Miscellaneous.
Total........................................................ $100,000
========
* To be filed by amendment. Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The Company has undertaken the following unregistered sales of its Common Stock.
All of the following sales were exempt from registration pursuant to Sections
3(b) or 4(2) of the 1933 Act including SEC Regulation D promulgated thereunder.
None of the following unregistered sales involved underwriters, and there were
no underwriting discounts or commissions.
In making the sales the Company relied on Sections 3 and 4(2) of the Securities
Act of 1933 for exemption from the registration requirements of such Act. Each
investor was furnished with information concerning the formation and operations
of the Registrant, and each had the opportunity to verify the information
supplied. Additionally, the Registrant obtained a representation from each of
the foregoing persons in connection with the purchase of the Common Stock of his
or her intent to acquire such Common Stock for the purpose of investment only,
and not with a view toward the subsequent distribution thereof, and as to the
investors' sophistication to analyze the risks and merits of the investment;
each of the certificates representing the Common Stock of the Registrant has
been stamped with a legend restricting transfer of the securities represented
thereby and the Registrant has issued stop transfer instructions to the Transfer
Agent for the Common Stock of the Company, concerning all certificates
representing the Common Stock issued in the above-described transactions.
<PAGE>
<TABLE>
<CAPTION>
Date, Title of Securities Person or Class of Persons to Number of Shares Cash Price or
Sold Whom Sold Consideration
---- --------- -------------
<S> <C> <C> <C>
January 12, 1996; Paradigm Advanced 6,000,000 Assets and Liabilities
Common Stock Technologies Joint Venture valued at $56,145
------------ ------------------------- -----------------
February 1996; Private Placement Investors 3,000,000 $ 300,000
Common Stock
------------
February through May 1996; Private Placement Investors 2,800,000 $ 700,000
Common Stock
------------
June through November 1996; Private Placement Investors 2,158,351 $ 647,500
Common Stock
------------
November 1996; PTI Financial Corp. 165,418 $ 49,625
Common Stock
------------
January 1997; Directors and Officers 7,583,334 Services rendered
Stock Options
-------------
March 1997; Private Investors 3,607,111 $1,082,133
Warrants
--------
March 1997; PTI Financial Corp. 136,676 Conversion of loan
Common Stock valued at $395,000
------------ ------------------
May 1997; Consultants 140,000 $7,000 (option exercise)
Common Stock
------------
September 1997; Private Placement Investors 210,000 $52,500
Common Stock
------------
October 1997; Consultants 50,000 Exercise of options
Common Stock valued at $2,500
------------ -------------------
October through December Consultants 560,000 Services rendered
1997;
Stock Options
-------------
December 1997; Private Placement Investors 300,000 $7,910
Common Stock
------------
January, February 1998; Consultants 857,217 $38,573 (option exercise)
Common Stock
------------
February 1998; Vendors of North York Leasing 3,720,000 $930,000
Common Stock
------------
March 1998; Consultants 2,350,000 Services rendered
Stock Options
-------------
April 1998; Private Placement Investors 500,000 $50,000
Common Stock
------------
April 1998; Consultant 500,000 $50,000
Common stock
------------
May 1998; Private Placement Investors 2,500,000 $125,000
Common Stock
------------
May, June 1998; Consultants 1,535,000 $51,697 (option exercise)
Common Stock
------------
July 1998; Private Placement Investors 3,000,000 $150,000
Common Stock
------------
July 1998; Eastern Investments, LLC 1,100,000 $55,000
Common Stock
------------
October 1999; Private Investor 200,000 Conversion of loan
Common Stock valued at $10,000
------------
February 2000; Eastern Investments, LLC 100,000 $29,000
Common Stock
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
February, March 2000; Private Placement Investors 5,665,000 $440,000
Common Stock
------------
February, March 2000; Consultants 140,695 Services rendered
--------------------
September, 2000 Eastern Investments LLC 8,200,000 Patent Acquisition
--------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stock Options
-------------
<S> <C> <C> <C>
February, March 2000; Private Investors 7,765,839 Exercise of warrants and
Common Stock options valued at
$1,200,159
----------
February, March 2000; Private Investors 3,005,875 Conversion of loans
Common Stock valued at $142,260
------------ ------------------
March 2000; David Kerzner 1,000,000 Conversion of loan
Common Stock valued at $50,000
------------ -----------------
March 2000; Jacob Kerzner 1,000,000 Conversion of loan
Common Stock valued at $50,000
------------ -----------------
March 2000; Eastern Investments, LLC 336,290 Additional shares issued
Common Stock under patent agency
agreement
---------
March 2000; Vendors of PowerLOC 3,650,000 $8,600,000
Common Stock Technologies Inc.
------------ -----------------
April, May 2000; Consultants 84,000 Services rendered
Common Stock
------------
April through June 2000; Private Investors 1,274,000 $131,000
Common Stock
------------
April through June 2000; Private Investors 175,000 Conversion of loans
Common Stock valued at $6,000
------------ ----------------
July, 2000 Consultants 45,455 Services rendered
========== =========== ====== =================
</TABLE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
1.1x Securities Purchase Agreement for $2,000,000 of 8% Convertible Debentures
1.2x Content Letter Agreement for 6,000,000 shares.
1.3x Form of Letter Agreement regarding restrictions on sale
2.1(1) Agreement dated as of February 18, 2000 between Paradigm Advanced
Technologies, Inc., Watson & Associates International Corp., Eduardo
Guendelman and Harry Zarek in Trust relating to the purchase of PowerLOC
Technologies Inc.
3.1(1) Certificate of Incorporation of the Company.
3.2(1) By-Laws of the Company.
3.3(1) Certificate of Amendment to Certificate of Incorporation.
<PAGE>
4.1(1) Form of Subscription Agreement relating to January, February and March
2000 private placements.
4.2(1) Form of Warrant relating to January, February and March 2000 private
placements.
4.3(1) Form of Debenture relating to 1999 private placements.
4.4(4) Specimen certificate for shares of Common Stock of the Company
4.5(1) Convertible Secured Promissory Note
4.6(4) Stock Option Plan
5.1x Opinion of Counsel as to Issuance of Securities
10.1(1) Consulting Agreement with David Kerzner, dated February 1, 1996.
10.2(1) Paradigm Advanced Technologies, Inc. Stock Option Plan.
10.3(1) Agency Agreement dated as of June 10, 1998 by and between Eastern
Investments, LLC and Paradigm Advanced Technologies, Inc. including
Amendments dated as of October 10, 1998, November 6, 1998, January 15,
1999, December 9, 1999 and February 9, 2000.
10.4(1) License Agreement dated as of June 10, 1998 by and between Eastern
Investments, LLC and Paradigm Advanced Technologies, Inc. including
Amendments dated as of October 10, 1998, November 6, 1998, January 15,
1999 and February 2, 2000.
10.5(1) Consulting Agreement with Jacob International, Inc. dated as of March
7, 2000.
10.6x Employment Agreement with Eduardo Guendelman
11.1x Statement regarding computation of earnings per share
15.1x Letter on unaudited interim financial information
23.1x Consent of Counsel, included in Exhibit 5.1
*23.2 Consent of Bromberg & Associate
*23.3 Consent of David Ghermezian regarding appointment as director.
<PAGE>
* 24.1 Power of Attorney, set forth on signature page
* Filed herewith
x to be filed by amendment
(1) Previously filed with the SEC as an Exhibit to, and incorporated herein by
reference from, the Company's Form 10KSB for the year ended December 31, 1999.
(2) Previously filed with the SEC as an Exhibit to, and incorporated herein by
reference from, the Company's Form 10QSB for the quarter ended March 31, 2000.
(3) Previously filed with the SEC as an Exhibit to, and incorporated herein by
reference from, the Company's Current Report on Form 8-K, filed with the SEC on
April 14, 2000.
(4) 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) FINANCIAL STATEMENT SCHEDULES
None.
Schedules not listed above have been omitted because they are not required, are
not applicable, or the information is included in the Financial Statements or
Notes thereto.
ITEM 28. UNDERTAKINGS
(a) Rule 415 Offering.
The undersigned Registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(ii) (ii) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (iii) To reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) To include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) Rule 430A.
The Registrant hereby undertakes that it will (i) for determining any liability
under the Securities Act, treat the information omitted from the form of
prospectus filed as a part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant under Rule
424(b)(1), or (4) or 497(h) under the Securities Act as a part of this
Registration Statement as of the time the Commission declared it effective, and
(ii) for determining any liability under the Securities Act, treat each post-
effective amendment that contains a form of prospectus as a new registration
statement for the securities offered in the registration statement, and that
offering of the securities at that time as the initial bona fide offering of
those securities.
(d) Certificates. The Registrant will provide to the Selling Agents certificates
in such denominations and
<PAGE>
registered in such names as required by the Selling Agents to permit prompt
delivery to each purchaser.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada on September 11,
2000.
Paradigm Advanced Technologies, Inc.
By: /s/ Eduardo Guendelman
--------------------------
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and officers of
Paradigm advanced Technologies, Inc., a Delaware corporation, which is filing a
Registration Statement on Form SB-2 with the Securities and Exchange Commission,
Washington, D.C. 20549 under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), hereby constitute and appoint Eduardo
Guendelman, David Kerzner and Selwyn Wener and each of them, the individual's
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for the person and in his or her name, place and stead, in
any and all capacities, to sign such Registration Statement and any or all
amendments, including post-effective amendments, to the Registration Statement,
including a Prospectus or an amended Prospectus therein and any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and all other documents in connection
therewith to be filed with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact as agents or any of them, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C> <C>
/s/ David Kerzner Chairman and Director September 11 ____, 2000
---------------------- -----------------------
/s/ Eduardo Guendelman President and September 11 ____, 2000
---------------------- Director (Principal -----------------------
Executive Officer)
/s/ Selwyn Wener Chief Financial September 11 ____, 2000
---------------------- Officer (Principal -----------------------
Financial and
Accounting Officer)
* /s/ David Ghermezian Director September 11 ____, 2000
---------------------- -----------------------
* By /s/ Selwyn Wener Attorney-in-Fact September 11 ____, 2000
-------------------- --------------------- -----------------------
</TABLE>
<PAGE>
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ David Kerzner Chairman and Director September 11, 2000
---------------------- ------------------
/s/ Eduardo Guendelman President and September 11, 2000
---------------------- Director (Principal ------------------
Executive Officer)
/s/ Selwyn Wener Chief Financial September 11, 2000
---------------------- Officer (Principal ------------------
Financial and
Accounting Officer)
* /s/ David Ghermezian Director September 11, 2000
---------------------- ------------------
* By /s/ Selwyn Wener Attorney-in-Fact September 11, 2000
---------------------- ---------------- ------------------
