<PAGE>


                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  Form 10-KSB

(Mark One)
 X        Annual report under Section 13 or 15(d) of the Securities Exchange
---       Act of 1934.  For the fiscal year ended December 31, 1999

                    OR

___       Transition report under Section 13 or 15(d) of the Securities Exchange
          Act of  1934 for the transition period from __________ to __________.

                       Commission File Number:  0-28836


                     PARADIGM ADVANCED TECHNOLOGIES, INC.
                (Name of Small Business Issuer in Its Charter)

                Delaware                                 33-0692466
    (State or Other Jurisdiction of                    (IRS Employer
     Incorporation or Organization)                 Identification No.)
       1 Concorde Gate, Suite 201
            Toronto, Ontario
             Canada M3C 3N6                               M3C 3N6
(Address of Principal Executive Offices)                 (Zip Code)

      Registrant's telephone number, including area code:  (416) 447-3235

       Securities Registered Pursuant to Section 12(b) of the Act: None

          Securities Registered Pursuant to Section 12(g) of the Act:

                                                Name of Each Exchange
      Title of Each Class:                      on which Registered:
      -------------------                       -------------------
     Common Stock, par value                            None
        $0.0001 per share


     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

     Yes  X    No ___
         ___

<PAGE>

     Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X]

     The issuer had no revenues for its most recent fiscal year.

     As of April 10, 2000, the aggregate market values of the registrant's
common stock held by non-affiliates of the registrant (based upon the per share
closing price of $2.38 on April 10, 2000, and for the purpose of this
calculation only, the assumption that all of the registrant's directors and
executive officers are affiliates) was approximately $120,516,125.

     As of April 10, 2000, there were 52,637,027 shares of the registrant's
common stock outstanding.



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                                    PART I

ITEM 1. Description of Business

     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."

Summary

     Paradigm Advanced 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.

     The Company is the exclusive licensing agent for a patent 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 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 unit that transmits its position to a
base station through existing 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 has designed and deployed more than 100
large-scale telecom and datacom networks in several countries. The aggregate
purchase prices of these companies consisted of (1) $300,000, (2) 5,000,000
common shares and (3) an option to acquire an additional 4,166,666 common
shares, which option is fully vested and exercisable for a three-year period.

     Prior to the acquisition of PowerLOC, the Company had been developing the
"R-2" product for personal tracking as well as for vehicular tracking purposes.
During 1999, the Company's efforts to develop the R-2 were limited by the
Company's lack of capital resources. The "R-2" was too large and expensive for
the consumer market and required additional research and development to make the
product marketable. The miniature mobile-location GPS unit owned by PowerLOC
represents a superior personal tracking device to the Company's "R-2". As a
result of the PowerLOC acquisition, the Company has discontinued development of
the "R-2".

     The Company had no revenues in 1999.

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Background

     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. GPS is a system of 27 orbiting Navstar satellites established and
funded by the U.S. Government. On April 27, 1995, 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.

     GPS positioning is based on 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
intentional or inadvertent signal interference or Selective Availability ("SA").
Selective Availability, which is the largest component of GPS distortion, is
controlled by the U.S. Department of Defense and is a currently activated,
intentional system-wide degradation of stand-alone GPS accuracy from
approximately 25 to 100 meters. Selective Availability may be implemented by the
U.S. Department of Defense in order to deny hostile forces the highly accurate
position, time and velocity information supplied by GPS. In certain military
applications, classified devices are utilized to decode the SA degradation and
return accuracies to their original levels.

     The Company uses client-server system architecture and proprietary
mathematical algorithms to minimize traditional line-of-sight limitations on
reception of GPS signals 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 or 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's primary objective is to become a leader in the Internet-
enabled location commerce (L-commerce) industry. The key steps in achieving
these objectives are as follows:


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     .    License other parties using the process covered by the patent;
     .    Develop PowerLOC product line, identify target markets for PowerLOC
          products and explore new product opportunities; and
     .    Pursue alliances with business partners.

Patent and Licensing Rights

     Paradigm was the first company to be licensed under a patent 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 positioning
system and timing and computing circuits to provide location information
signals. The hand held unit also includes a modem and transmitter to a cellular
telephone network which is connected to the base unit computational system and
display. The location of an individual or object can thus be determined at the
remote station through the use of the cellular telephone network. The 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 patent was increased from four to six. The patent has been
issued in the United States and Australia and upheld in the U.S. The patent is
pending in Canada and Japan.

     Paradigm has entered into an agency agreement with the patent holder as the
exclusive worldwide licensing agent for the patent. The Company expects to
generate revenues by licensing companies who are using or plan to use the
process covered by the patent. The Company is currently negotiating with a
number of prospective licensees.

PowerLOC Products

     The Company has completed the initial development of its core MML(TM)
technology and has produced and tested a series of battery operated prototypes
which implements its GPS, communications and mapping software which is the
foundation of the iPL.client software which is described below. The MML module
consists of a miniature mobile-location GPS unit that transmits its position to
a base station through existing PCS, pager or cellular phone wireless networks.

     The PowerLOC system prototype locates targets with accuracy for providing
detailed information about the user through the Internet almost instantaneously.
In tests, this level of performance was duplicated even when closed inside a car
glove compartment. The tests also demonstrated the power management features
which allow for an effective battery operated system. PowerLOC's system solution
consist of three components:

     .    iPL.mobile - the portable unit based on PowerLOC's MML technology,
     .    iPL.tracker - a carrier grade server that acts as network controller,
          GPS location server, Internet gateway and billing system, and
     .    iPL.client - a client's software-only solution that includes a fully-
          featured geographical information software (GIS) engine.

iPL.mobile

          PowerLoc uses GPS to pinpoint the location of the vehicle, appliance
or person carrying the iPL mobile device. The Company is developing a personal
locator which will be the size of a pager device which can be used for people
who require continuous location monitoring. Personal locators will be modular,
and 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:

                                       5
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     .    execute systems and network management and control functions;
     .    receive GPS data, and to compute the exact location; and
     .    format the data and to interface with the wireless transceiver module.

     The Company intends to license its GPS module to manufacturers of cellular
telephones, pagers and personal digital assistants. iPL.mobile's GPS electronics
equipment will collect data from several satellites, and will use it to
calculate its exact position, altitude and velocity. This data will then be
transmitted from the wireless network to the iPL.tracker, a proprietary server
which will process raw data received from up to 50,000 iPL.mobile units and will
send the exact location and status of these mobile units to its dispatching
centers or monitoring stations via the Internet.

iPL.client

     iPL.client will be a proprietary application that will be used in
connection with mapping/GIS software to provide specific location information
which will be transmittted by iPL.mobile or other GPS tracking devices.

Features of iPL.client will 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; and
     .    Tracking history.

iPL.client software will be marketed and supported through the worldwide web.
Potential customers will be able to download the software and maps using
e-commerce tools.

iPL.tracker

     The tracker will be the system's main server. iPL.tracker will be sold to
and installed at the wireless carrier site or, alternatively, at the site of the
location service provider. iPL.tracker software will be designed to operate in
any reliable, carrier grade, mid-range or server computer system. iPL.tracker's
main tasks include:

     .    Computing the exact location of each mobile unit;
     .    Tracking up to 50,000 mobile units simultaneously;
     .    Managing the network; and
     .    Creating billing records.

Suspended Products

     During 1999, the Company decided to focus its development efforts on GPS
and licensing the patent. As a result, the Company's video surveillance business
was suspended. This business consists primarily of the VideoBank video
surveillance software as well as the third party distribution of the Satcom IV
system.

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.


                                       6
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     In January 2000, the Company announced that it had signed a letter of
intent to enter into a strategic alliance with Pangea Petroleum Corporation. As
part of this arrangement, the Company expects to issue to Pangea or its
affiliates 7.5 million common shares and warrants covering an undetermined
amount of shares in a newly created class of Paradigm stock. As consideration
for these securities Pangea or its affiliates will (1) issue a warrant covering
12.5 million shares of Pangea common stock to the Company, (2) provide
consulting and public relations services to the Company and (3) transfer to the
Company a 50% interest in WorldLink USA, which is a development stage company
wholly owned by Pangea that owns video streaming technology and a library of
concerts previously 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.

     During March 2000, the Company acquired all the outstanding capital stock
of PowerLOC Technologies Inc., which is a GPS technology company based in
Ontario, Canada. In connection with this business combination, the Company also
acquired the telecommunications consulting business of Power Point Microsystems
Inc. The aggregate purchase prices of these companies consisted of (1) $300,000,
(2) 5,000,000 common shares and (3) an option to acquire an additional 4,166,666
common shares, which option is fully vested and exercisable for a three-year
period. The business combination will be accounted for using the purchase method
of accounting.

     The Company sold 1280884 Ontario Inc. and its wholly owned subsidiary North
York Leasing Inc. in June 1998 to an unrelated party for a nominal sum. The
Company acquired all the shares of these companies in February 1998 at a cost of
$930,000 plus an obligation to issue additional shares depending upon the
Company's stock price. The Company has filed suit against the law firm that
represented all of the parties in this transaction. See "Legal Proceedings."
Under the terms of the purchase agreement, the purchaser and the secured
creditors of 1280884 Ontario Inc. and North York Leasing Inc. granted the
Company a full release from all of its commitments concerning 1280884 Ontario
Inc. and North York Leasing Inc. The Company wrote off its investment in 1280884
Ontario Inc. and North York Leasing Inc. at the end of March 1998.

Manufacturing and Engineering Relationships

     The Company is currently interviewing engineering and manufacturing firms
for its PowerLOC products. The Company acquired the MML technology from
PowerLOC. The Company has entered into an agreement with HunterPro S.A, an
engineering firm based in South America, to provide ongoing development and
support of the MML technology.

Competition

     There are numerous companies offering location technologies, products and
services. Most of these companies focus on the vehicle market. These include
companies such as OnStar, a division of General Motors Corporation, @Track
Communications, Inc. (fka 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.
The Company is focusing on the personal tracking market where a smaller unit is
required.

     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 patent. A system solution 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

     To the Company's knowledge, there are no existing or probable government
regulations that will have an effect upon the Company's business.


                                       7
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Employees

     The Company had 4 full time employees at December 31, 1999. In addition to
David Kerzner, there were three employees at December 31, 1999, who were
providing research and development 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.

Major Suppliers and Customers

     HunterPro S.A. of Uruguay is the Company's major supplier. The Company does
not have any major customers.

ITEM 2.  Description of Properties

     The Company's executive offices are located in 1,200 square feet of office
space in Toronto, Ontario, Canada, which is leased by the Company on a monthly
basis at a rental rate of $1,000 (Canadian).  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
believes that it will be able to find suitable facilities when required.


ITEM 3. 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 instituted legal action against the legal
firm who represented all the parties in the above transaction and who is the
escrow agent for the above shares and is claiming that these shares be canceled
and that damages be paid to the Company. In February and March 2000, the Company
obtained a release from certain vendors of these companies who held 3,255,999
Common Shares. These vendors agreed to waive their rights to receive any
additional shares in connection with this transaction. No provision has been
made in the financial statements for the issuance of any additional shares to
the vendors who own 464,001 Common Shares and who have not yet agreed to a
release.

     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.


ITEM 4.  Submission of Matters to a Vote of Security Holders

None.

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                                    PART II

Item 5.  Market For Common Equity and Related Stockholder Matters

     On April 12, 1996, the common stock of the Company was approved for trading
on the NASDAQ-OTC Electronic Bulletin Board under the symbol "PRAV." Prior to
that date, there was no public market for the Company's Common Stock. The
following table sets forth the 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
   First Quarter................................      $0.094      $0.047
   Second Quarter...............................      $0.063      $0.031
   Third Quarter................................      $0.063      $0.031
   Fourth Quarter...............................      $0.078      $0.016

     As of April 10, 2000, there were 116 holders of record of the Company's
common stock. The Company has never declared or paid a cash dividend on its
capital stock and does not expect to pay cash dividends on its common stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business. Any dividends declared in the future will be at
the discretion of the Board of Directors and subject to restrictions that may be
imposed by the Company's lenders.

     During 1999, the Company issued convertible debentures having an aggregate
principal amount of $166,000 to eight parties. These debentures were sold
pursuant to an exemption from registration under the Securities Act of 1933. The
debentures pay interest at the rate of 12.5% per annum and are convertible into
common shares at the price of $.05 per share.

Item 6.  Management's Discussion and Analysis of Plan of Operation

     The discussion below contains certain forward-looking statements (as such
term is defined in Section 21E of the Securities Exchange Act of 1934) that are
based on the beliefs of the Company's management, as well as assumptions made
by, and information currently available to, the Company's management. The
Company's results, performance and achievements in 2000 and beyond could differ
materially from those expressed in, or implied by, any such forward-looking
statements. See "Cautionary Note Regarding Forward-Looking Statements."

Liquidity and Capital Resources

     The Company had cash on hand of $65 at December 31, 1999. Subsequent to the
year end, the Company raised in excess of $1,500,000 through the price paid to
exercise stock options and warrants and through the issuance of common shares.
As of April 10, 2000, the Company had approximately $800,000 cash on hand. 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, although there can be no assurance that
such 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.


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Plan of Operation

     The Company is the exclusive licensing agent for a broad based patent which
covers an invention comprising a portable locating unit useful both as a
cellular telephone and portable global positioning system that provides latitude
and longitude information remotely to a base unit display. The system includes a
small hand held receiver that receives signals from a satellite GPS and timing
and computing circuits to provide location information signals. The hand held
unit also includes a modem and transmitter to a cellular telephone network which
is connected to the base unit computational system and display. The location of
an individual or object can thus be determined at the remote station through the
use of the cellular telephone network. The Company plans to license parties
using this process and expects to earn licensing revenue from these agreements.
The Company announced the signing of its first licensee in April 2000. 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 to hire a public relations
and advertising firm.

     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.

Research and Development

     A significant amount of time and effort was placed on research and
development since the Company's inception. The Company uses contractors and
third party companies to continue its research and development activities. The
Company plans to hire a number of engineers for its PowerLOC subsidiary, who
will be responsible for part of the development and who will supervise the work
done by the contractors and third party engineers.

              CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

     This Form 10-KSB 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-KSB, 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." Except as
required by the federal securities law, the Company does not undertake any
obligation to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this Form 10-KSB or for any
other reason.


                                      10
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                                 RISK FACTORS

     The Company has limited capital resources making its ability to continue
operations uncertain; independent auditors' report contains uncertainty
paragraph

     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 raise substantial 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 faces risks associated with dependence on intellectual property
rights

     The Company's success is dependent to a significant degree on its
intellectual property rights. Effective protection may not be available for
these rights. Accordingly, although there can be no assurance that the patent
will provide adequate protection for the process covered by the patent or that
the license will permit the Company to fully execute its business plan.

     Any inability to adequately protect its rights under the patent 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 arrangement with Pangea and World Link USA will dilute the ownership of
the Company's existing stockholders and the anticipated benefits of the
arrangement may not materialize.

     Based on the common shares outstanding as of April 10, 2000, the Company
expects to issue approximately 12% of its common shares to Pangea. In connection
with this arrangement, the Company also expects to issue warrants to Pangea and
World Link USA which may be convertible into common shares of the Company. This
arrangement will dilute the percentage ownership held by the Company's
stockholders when compared to such ownership prior to the arrangement.

      The joint venture that would be formed as a result of this arrangement
would 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.

     The Company is a development stage company without any operating history

     The Company is a development stage company. Accordingly, we do not have any
operating history upon which you can evaluate our business and prospects. You
must consider the risks and uncertainties frequently encountered by early stage,
single-product technology companies like ours in a new and evolving market, such
as GPS tracking technology. If we are unsuccessful in addressing these risks and
uncertainties, our business will be seriously harmed.

     The PowerLOC suite of products and licensing fees will be the Company's
primary source of revenue

     The Company has a limited number of products in development. Developing
additional products would require 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.

     The Company has incurred losses and may not be profitable in the future

     Since inception in January 1996, the Company has incurred net losses from
research and development and operating costs. At December 31, 1999, the Company
had an accumulated deficit of approximately $4.9 million. The Company expects to
continue to incur significant research and development costs. In addition, as
the PowerLOC products approach marketability, the Company expects to
significantly increase its sales and marketing and general and administrative
expenses. The Company's business strategies may not be successful and the
Company may not be profitable in any future period. If the Company does become
profitable, it is not certain that such performance could be sustained or
increased on a quarterly or annual basis.

     The market in which the Company competes is highly competitive

     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;


                                      11
<PAGE>

     .    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. (fka 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.

     We 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

     We plan to continue to spend substantial funds to continue our research and
development activities and to expand our sales and marketing efforts. Our 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 our PowerLOC products gain market
acceptance and competitive developments. Any additional required financing may
not be available on satisfactory terms, if at all. If we are unable to obtain
financing, we may be required to delay, reduce or eliminate some or all of our
research and development activities or sales and marketing efforts.

     The loss of, or interruption of supply from, key vendors could limit our
ability to develop and distribute the PowerLOC products

     Upon the selection of manufacturing partners, the Company will be
substantially dependent upon a limited number of suppliers for the manufacture
of its PowerLOC products. The dependence upon these suppliers will subject the
Company to risks associated with an interruption of supply if the Company is not
able to find alternative sources on a timely basis. There can be no assurance
that any delay, disruptions, or quality problems resulting from the use of such
suppliers will not have a significantly negative effect on the Company's
business.

     Future sales of our common stock in the public market could cause our stock
price to fall

     If our shareholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. As of April 10,
2000, the Company has 52,637,027 outstanding shares of common stock, 27,171,674
outstanding options and 19,739,000 outstanding warrants. Except for (1)
27,160,932 shares of common stock (including 2,000,000 shares held by
affiliates), and (2) all of the outstanding options and warrants, all of these
securities are freely tradeable. 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
tradeable during the third quarter of this year.

                                      12
<PAGE>

     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;
     .    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.

Item 7.  Financial Statements

     The financial statements of the Company, including the notes thereto,
together with the report of independent certified public accountants thereon,
are presented beginning at page F-1.

Item 8.  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

                                   PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

     The directors and executive officers of the Company are listed on the
following table. There are no other promoters or control persons.

    Name               Age                     Position
    ----               ---                     --------
David Kerzner          39            Chief Executive Officer, President,
                                     Secretary-Treasurer, and Director
Selwyn Wener           49            Chief Financial Officer
Jacob Kerzner          42            Director


     The following is a brief description of the professional experience and
background of the directors and executive officers of the Company.

     David Kerzner: Mr. Kerzner has served as the President and a director of
the Company since its founding and took over as CEO in December 1997 from Mr.
Jack Lee who resigned on December 29, 1997. From 1990 to 1994, Mr. Kerzner was
employed by ISTI Corporation/Intertec Security, most recently as President of
ISTI Corporation and as the


                                      13
<PAGE>

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.

     Selwyn Wener:  Mr. Wener was appointed Executive Vice President and Chief
Financial Officer of Paradigm on February 1, 1998. Mr. Wener has been the
Principal of S&L Associates, a financial services and investor relations
consulting firm since 1997. Mr. Wener was the Chief Financial Officer for
SoftQuad International Inc., a public development company, from 1994 to 1997 and
Chief Financial Officer and General Manager for Legacy Storage Systems Inc., a
computer disk storage manufacturer and distributor from 1989 to 1993. Mr. Wener
has a Chartered Accountant (CA) certification from South Africa where he was a
partner in a medium sized firm of chartered accountants.


    Jacob Kerzner:  Mr. Kerzner has served as a director of the Company since
its inception. Mr. Kerzner currently serves as the President and Chief Executive
Officer of Nightingale Healthcare Inc., a privately owned hospital and nursing
home staffing company founded by Mr. Kerzner in 1986. Mr. Kerzner is the brother
of David Kerzner.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than ten percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file.

     Based solely on review of the copies of such reports furnished to the
Company during or with respect to fiscal 1999, or written representations that
no Forms 5s were required, the Company believes that during the fiscal year
ended December 31, 1999, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with.

Item 10.  Executive Compensation

Summary Compensation Table

     The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the registrant's four most highly compensated
executive officers other than the Chief Executive Officer, whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended December 31,
1999.

<TABLE>
<CAPTION>
                                                                     Shares of
                                                                       Common
                                       Annual Compensation             Stock
Name and                           ---------------------------       Underlying
principal position                 Year      Salary      Bonus      options/SARS
------------------                 ----      ------      -----      ------------
<S>                                <C>      <C>          <C>          <C>
David Kerzner                      1999     $100,000       $0       7,000,000
President
                                   1998     $ 75,000       $0       0

                                   1997     $100,000       $0       0
</TABLE>



Directors' Compensation

     The Company's policy is not to pay compensation to directors who are also
employees of the Company for their service as directors. Non-employee directors
do not presently receive compensation for their service as directors either.


                                      14
<PAGE>

The Company will, however, reimburse directors a fixed amount for out-of-pocket
expenses incurred for attendance at meetings.

Employment Contracts

     In February 1996, the Company entered into a ten-year consulting agreement,
with David Kerzner, President of the Company. The consulting agreement 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. Mr. Kerzner is
eligible to receive a bonus upon the approval of the Company's board of
directors.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The following table provides information concerning beneficial ownership of
the Company's Common Stock as of April 10, 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 52,637,027 shares of Common Stock outstanding as of April 10, 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 or
exercisable within 60 days after April 10, 2000 by the directors and chief
executive officer 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 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.


                                      15
<PAGE>

<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, President and CEO                 13,187,500            20.3%      12,187,500

Jacob Kerzner, Director                           2,562,500             4.7%       1,562,500

Selwyn Wener, Chief Financial Officer             5,000,000             8.7%       5,000,000

Jack Y. L. Lee                                    3,416,668             6.3%       1,675,000
    28 Old Park Lane
    Richmond Hill, Ontario L4B 2L4

Sarah Casse                                       3,350,000             6.0%       1,875,000

C-Saw Investments                                 8,800,000            15.5%       4,250,000
    80 Broad Street, 26th Floor
    New York, NY 11125

Rachelle Heller                                   4,983,336             9.1%       2,300,000
    333 Wilson Avenue
    Suite 400, Toronto, Ontario M3H 1T2

Watson & Associates                               5,775,000            10.5%       2,625,000
    6A-49 The Donway West
    Suite 1122, Toronto, Ontario M3C 2E8

All directors and executive officers as a
group (3 persons)                                20,750,000            29.1%      18,750,000
</TABLE>


Item 12.  Certain Relationships and Related Transactions

     On January 12, 1996, the Company issued 6,000,000 unregistered shares of
its Common Stock to the participants in the Paradigm Advanced Technologies Joint
Venture (the "Joint Venture") in exchange for all of the right, title and
interest in the security and surveillance products business established by the
Joint Venture. Certain of the Company's directors and officers were participants
in the Joint Venture and as a result received shares of the Common Stock of the
Company in the transaction. The Company's Chief Executive Officer,
Jack Y. L. Lee received 1,875,000 shares (including 500,000 shares in trust),
and the Company's President, David Kerzner received 2,337,500 shares. In
addition, Lisa Kerzner, the wife of director Jacob Kerzner, received 412,500
shares of Common Stock in the transaction. Lastly, Sarah Casse, a holder of more
than 5% of the Company's issued and outstanding Common Stock, received 1,375,000
shares of Common Stock in the transaction.

     In September 1999, the Company granted to Selwyn Wener, the Chief Financial
Officer of the Company, an option to acquire 4,000,000 common shares at an
exercise price of $0.05. The option vested immediately and is exercisable over a
three-year period.

Item 13.  Exhibits, List and Reports on Form 8-K

     (a)  Index to Financial Statements
          Report of Independent Auditors
          Financial Statements
               Balance Sheets at December 31, 1998 and 1999
               Statement of Income for the years ended December 31, 1998 and
               1999


                                      16
<PAGE>

               Statements of Deficit for the years ended December 31, 1998 and
               1999
               Statements of Cash Flows for the years ended December 31, 1998
               and 1999
               Notes to Financial Statements

Exhibits

2.1*   Agreement dated as of February 18, 2000 between Paradigm Advanced
       Technologies, Inc., Watson & Associates International Corp., Eduardo
       Guendelman and Harry Zarek relating to the purchase of PowerLOC
       Technologies Inc. in Trust.

3.1*   Certificate of Incorporation of the Company.

3.2*   By-Laws of the Company.

3.3    Certificate of Amendment to Certificate of Incorporation.

4.1    Form of Subscription Agreement relating to January, February and March
       2000 private placements.

4.2    Form of Warrant relating to January, February and March 2000 private
       placements.

4.3    Form of Debenture relating to 1999 private placements.

10.1*  Consulting Agreement with David Kerzner, dated February 1, 1996.

10.2*  Paradigm Advanced Technologies, Inc. Stock Option Plan.

10.3   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   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   Consulting Agreement with Jacob International, Inc. dated as of March 7,
       2000.

23.1   Consent of Bromberg & Associate.

24.1   Power of Attorney (included in the signature page to this report).

27.1   Financial Data Schedule.

_______________

   *   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.

  **   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.

 ***   Previously filed with the SEC as Exhibits to, and incorporated herein by
       reference from, the Company's Registration Statement on Form SB-2, as
       amended, filed with the SEC on December 31, 1996, as amended.

  (b)  There were no Reports on Form 8-K filed during the last quarter of 1999.


                                      17
<PAGE>

                     Paradigm Advanced Technologies, Inc.
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>
Report of Independent Auditors....................................................... F-2
Balance Sheet at December 31, 1998 and 1999.......................................... F-3
Statements of Income for years ended December 31, 1998 and 1999...................... F-4
Statements of Deficit for the years ended December 31, 1998 and 1999................. F-5
Statements of Cash Flows for the years ended December 31, 1998 and 1999.............. F-6
Notes to Financial Statements........................................................ F-7
</TABLE>


                                      F-1
<PAGE>

 Bromberg & Associate                           1183 Finch Avenue West Suite 305
----------------------                                Downsview, Ontario M3J 2G2
CHARTERED ACCOUNTANTS                                     Office: (416) 663-7521
                                                            Fax:  (416) 663-1546



                               AUDITORS'  REPORT
                               -----------------

TO THE SHAREHOLDERS OF
PARADIGM ADVANCED TECHNOLOGIES, INC.


     We have audited the balance sheet of Paradigm Advanced Technologies, Inc.
as at December 31, 1998 and 1999 and the statements of income, deficit, changes
in 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 year
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.
                         (A Development Stage Company)
                             Balance Sheets as at

<TABLE>
<CAPTION>
                                         December 31, 1999     December 31, 1998
                                         -----------------     -----------------
<S>                                      <C>                   <C>
ASSETS

CURRENT ASSETS
     Bank                                  $         65          $     12,856
     Miscellaneous Receivable              $      6,321          $      1,302
     Prepaids and deposits (Note 3)        $    175,271          $    155,075
                                           ------------          ------------
                                           $    181,657          $    169,233

LONG-TERM ASSETS
Capital Assets (Notes 1, 4)                $      6,730          $     11,185
                                           ------------          ------------

TOTAL ASSETS                               $    188,387          $    180,418
                                           ============          ============


LIABILITIES

CURRENT LIABILITIES
     Accounts Payable                      $    768,509          $    460,409
     Loans Payable (Note 5)                $    552,504          $    391,315
                                           ------------          ------------

TOTAL LIABILITIES                          $  1,321,013          $    851,724
                                           ------------          ------------


SHAREHOLDERS' EQUITY
Share Capital (Notes 5, 7)
Authorized 100,000,000 Common
Stock at $0.0001 par value per share
The authorized Common Shares were
   increased to 100,000,000 Common
   Shares in February 1999
Issued and outstanding:
29,996,662 as of December 31, 1999
29,796,662 as of December 31, 1998         $  3,765,618          $  3,755,618
Deficit                                    $ (4,898,244)         $ (4,426,924)
                                           ------------          ------------
Total Shareholders' Equity                 $ (1,132,626)         $   (671,306)
                                           ------------          ------------
Total Liabilities & Shareholders'          $    188,387          $    180,418
   Equity                                  ============          ============
</TABLE>


                                      F-3
<PAGE>

                     PARADIGM ADVANCED TECHNOLOGIES, INC.
                         (A Development Stage Company)
                             Statements of Income

                       For the Years Ended December 31,


<TABLE>
<CAPTION>
                                                  1999             1998
                                                  ----             ----

<S>                                            <C>              <C>
REVENUES
Sales Revenue                                  $         0      $     23,465
Cost of Sales                                  $         0      $          0
                                               -----------      ------------
Gross Profit                                   $         0      $     23,465
                                               -----------      ------------


OPERATING EXPENSES:
Selling, General & Administrative              $   408,124      $    538,429
Research & Development                         $    11,820      $     10,712
Depreciation and Amortization                  $     3,351      $      2,796
Interest Expense                               $    48,025      $     20,850
Write-off Investment in Subsidiary (Note 7)    $         0      $    930,000
                                               -----------      ------------
TOTAL EXPENSES                                 $   471,320      $  1,502,787
                                               -----------      ------------
                                               ===========
                                               $  (471,320)     $ (1,479,322)
NET (LOSS) FOR THE YEAR                        ===========      ============

Earnings Per Share                                   (0.02)            (0.06)
                                               ===========      ============
Average common shares outstanding
   during year                                  29,797,183        24,986,646
                                               ===========      ============
</TABLE>


                                      F-4
<PAGE>

                     PARADIGM ADVANCED TECHNOLOGIES, INC.
                         (A Development Stage Company)
                             Statements of Deficit
                       For the Years Ended December 31,



<TABLE>
<CAPTION>
                                            1999               1998
                                            ----               ----
<S>                                     <C>                <C>
Deficit - Beginning of the Year         $(4,426,924)       $(2,947,602)
Net Loss - Current Year                 $  (471,320)       $(1,479,322)
                                        -----------        -----------
Deficit - End of Year                   $(4,898,244)       $(4,426,924)
                                        ===========        ===========
</TABLE>



                                      F-5
<PAGE>

                     PARADIGM ADVANCED TECHNOLOGIES, INC.
                         (A Development Stage Company)
                            Statements of Cash Flow
                       For the Years Ended December 31,

<TABLE>
<CAPTION>
                                                 1999              1998
                                                 ----              ----
<S>                                           <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net gain (loss) for the year                  $ (471,320)      $ (1,479,322)
Items not requiring an outlay of Cash:
   Amortization of Fixed Assets               $    3,351       $      2,796
   Write Off Investment in Subsidiary         $        0       $    930,000
Net Changes in non-cash working
   capital items related to operations:
   Miscellaneous Receivable                   $   (5,019)      $     34,214
   Prepaids and Deposits                      $  (20,196)      $   (155,075)
Accounts Payable                              $  308,100       $     38,401
                                              ----------       ------------
Total Cash Flow Used in Operations            $ (185,084)      $   (628,986)
                                              ==========       ============

CASH FROM FINANCING ACTIVITIES
Loan Payable                                  $  161,189       $     34,543
Proceeds of Common Stock Issuance             $   10,000       $  1,537,438
                                              ----------       ------------
Net Cash Used in Financing Activities         $  171,189       $  1,571,981
                                              ==========       ============

CASH USED IN INVESTING ACTIVITIES
Acquisition of Fixed Assets                   $   (3,714)      $          0
Sale of Fixed Asset                           $    4,818       $          0
Write-off of Subsidiary                       $        0       $    930,000
                                              ----------       ------------
Net Cash Used in Investing Activities         $    1,104       $   (930,000)
                                              ==========       ============
NET INCREASE (DECREASE) IN CASH FOR
THE YEAR                                      $  (12,791)      $     12,995

Cash - Beginning of year                      $   12,856       $       (139)
                                              ----------       ------------
CASH - END OF YEAR                            $       65       $     12,856
                                              ==========       ============
</TABLE>


                                      F-6
<PAGE>

                     PARADIGM ADVANCED TECHNOLOGIES, INC.
                         (A Development Stage Company)
                         Notes To Financial Statements

Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GOING CONCERN

The Corporation has incurred losses since its incorporation in 1996. The
Corporation has funded its operations to date through the issuance of shares and
debt.

The Corporation 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 March 31, 2000, the Corporation
raised over $1,500,000 through the exercising of stock options and warrants and
through the issue of common shares.  In addition, during the same period the
Corporation raised approximately $475,000 through sales of its common shares.

CAPITAL ASSETS

Capital Assets are recorded at cost less accumulated depreciation. Depreciation
is provided using the Declining Balance basis at the following annual rate.

Computer Equipment  - 30%.
Furniture and Fixtures - 20%.

METHOD OF ACCOUNTING

The Corporation maintains its books and prepares its financial statements using
the accrual basis of accounting.
There are no material differences in the determination of Net Earnings and per
share calculations between Canadian and U.S GAAP.

Note 2.  INCORPORATION

The Company was incorporated on January 12, 1996 in the state of Delaware and
has elected a December 31 fiscal year end for accounting and tax purposes.

Note 3. PREPAIDS AND DEPOSITS

Prepaids and Deposits include the amounts paid for the exclusive agency rights
to a GPS patent. The cost of the agency rights will be amortized over the term
of the agency agreement.


                                      F-7
<PAGE>

                      PARADIGM ADVANCED TECHNOLOGIES, INC.
                         (A Development Stage Company)
                         Notes To Financial Statements

Note 4.  CAPITAL ASSETS

                   COST         ACCUMULATED       NET BOOK      NET BOOK
                                DEPRECIATION      VALUE         VALUE
                   1999         1999              1999          1998
FURNITURE
AND FIXTURES       $20,744      $14,014           $6,730        $11,185

Note 5.  LOANS PAYABLE

Loans payable include:
a) Loans amounting to $243,842, which are secured by a pledge over all the
assets of the Company. Interest is payable on these secured loans at a rate of
prime plus 4%.

b) Convertible promissory notes of $256,325, 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. The remaining $231,325 are due and payable in 2000. Interest
is payable on these convertible promissory notes at a rate of 12.5% per annum.

Note 6.  STOCK OPTIONS AND WARRANTS

a) Options to purchase Common Shares have been issued under the Company's stock
option plan to directors, officers, employees and consultants of the Company.
Options outstanding at December 31,1999, are as follows:

Year Granted      Expiry Date      Price Range      No. of Shares
1996              Jan 2001         $      0.05       7,743,201
1997              Nov 2000         $      0.12          45,000
1997              Nov 2000         $     0.125         125,000
1997              Oct 2000         $      0.15          40,000
1997              Nov 2000         $      0.20          50.000
1997              Dec 2000         $0.25-$0.40         300,000
1998              Mar 2001         $0.05-$0.10       2,350,000
1999              Sep 2002         $0.05-$0.10      11,000,000
1999              Dec 2002         $      0.01         650,000
                                                    ----------


TOTAL STOCK OPTIONS OUTSTANDING                     22,303,201
                                                    ==========

b) As at December 31,1999  3,742,211 warrants were issued, exercisable at a
prices of $0.18 to $0.30 per share for each warrant owned. These warrants expire
in March 2000. An additional 420,000 warrants are exercisable at $0.50 per share
for each warrant owned and expire in September 2000. An additional 10,007,000
warrants were issued during 1998 and 1999, exercisable at prices of $0.10-$0.25
per share for each warrant owned. These warrants are exercisable over a three-
year period.


                                      F-8
<PAGE>

                      PARADIGM ADVANCED TECHNOLOGIES, INC.
                         (A Development Stage Company)
                         Notes To Financial Statements

Note 7.  PURCHASE OF 1280884 ONTARIO INC.

In February 1998, the Company acquired all the shares of 1280884 Ontario Inc.
and its wholly owned subsidiary North York Leasing Inc. The Company issued
3,720,000 Common Shares to the vendors of these companies at a price of 25 cents
per share representing a cost of $930,000 and is required to issue additional
shares to these vendors if during any one consecutive 60 day trading period
between April 1998 and February 1999, the average closing price of the Company's
shares is less than 25 cents, so that the total consideration is the equivalent
of $930,000. The Company has instituted legal action against the legal firm that
represented all the parties in the above transaction and acted as the escrow
agent for the above shares and is claiming that these shares be canceled and
that damages be paid to the Company. No provision has been made for the issue of
any additional shares to the vendors of these companies. In February and March
2000, the Company obtained a release from certain vendors of these companies,
who held 3,255,999 Common Shares. These vendors agreed to waive their rights to
receive additional shares based on the abovementioned formula. The Company
disposed of its investment in the above companies in June 1998.

Note 8. Subsequent Events

On March 29, 2000, the Company completed the acquisition of Power Point Micro
Systems Inc. and PowerLOC Technologies, Inc, both of which are based in Toronto,
Ontario. PowerLOC Technologies, Inc. is a research and development company that
has developed a low-cost, miniature mobile-location GPS unit that transmits its
position to a base station through existing PCS, pager or cellular phone
wireless networks. Power Point Micro Systems Inc. is an international
telecommunications consulting firm specializing in wireless and wireline, voice
and data systems integration. The acquisition was completed through the issue of
common shares and stock options as well as a cash payment.

                                      F-9
<PAGE>

                                  SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                   PARADIGM ADVANCED TECHNOLOGIES, INC.


                   By:   /s/  David Kerzner
                       -------------------------------------
                         David Kerzner
                         President, Chief Executive Officer
                         and Director

     Each person whose signature appears below hereby constitutes and appoints
David Kerzner his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying all
that said attorney-in-fact and agent or his substitute or substitutes, or any of
them, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Exchange Act, this Report has been
signed below by the following persons on behalf of the Company in the capacities
and on the date indicated.

Signature                Title                            Date
---------                -----                            ----


/s/  David Kerzner
----------------------   President, Chief Executive       April 14, 2000
David Kerzner            Officer (Principal Executive
                         Officer) and Director


/s/  Selwyn Wener
----------------------   Chief Financial Officer          April 14, 2000
Selwyn Wener             (Principal Financial Officer)


/s/  Jacob Kerzner
----------------------   Director                         April 14, 2000
Jacob Kerzner