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Proc-Type: 2001,MIC-CLEAR
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UNITED STATES Commission file number 000-30414 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 last 90 days. YES x NO ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, non-accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 76,078,446 as of November 14, 2008. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS See accompanying Notes to Interim Consolidated Financial Statements See accompanying Notes to Interim Consolidated Financial Statements See accompanying Notes to Interim Consolidated Financial Statements See accompanying Notes to Interim Consolidated Financial Statements ALR TECHNOLOGIES INC. ALR TECHNOLOGIES, INC. (the "Company") was incorporated under the laws of the State of Nevada on March 24, 1987 as Mo Betta Corp. On December 28, 1998, the Company changed its name from Mo Betta Corp. to ALR Technologies Inc. The Company has developed a line of medication compliance reminder devices and compliance monitoring systems that will assist people with taking their medications and treatments on time and allow for heath care professionals to remotely monitor and intervene as necessary if a person is noncompliant. In April 2008, the Company incorporated a wholly owned subsidiary in Canada and its activities have been included in the Companys consolidated financial statements. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis which presumes the realization of assets and the discharge of liabilities and commitments in the normal course of operations for the foreseeable future. The Company's ability to continue as a going concern is dependent upon the continued financial support of its creditors and its ability to obtain financing to repay its current obligations and fund working capital and its ability to achieve profitable operations. All of the Company's debt financing is either due on demand or is overdue and now due on demand. The Company will seek to obtain creditors' consents to delay repayment of these outstanding promissory notes payable until it is able to replace this financing with funds generated by operations, replacement debt or from equity financings through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Management plans to obtain financing through the issuance of shares on the exercise of options and warrants and throu
gh future common share private placements. Management hopes to realize sufficient sales in future periods to achieve profitable operations. The resolution of the going concern issue is dependent upon the realization of management's plans. There can be no assurance provided that the Company will be able to raise sufficient debt or equity capital, from the sources described above, on satisfactory terms. If management is unsuccessful in obtaining financing or in achieving profitable operations, the Company will be required to cease operations. The outcome of these matters cannot be predicted at this time. The financial statements do not give effect to any adjustments which could be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts differing from those reflected in the financial statements. 2. Significant accounting policies The information included in the accompanying interim financial statements is unaudited and should be read in conjunction with the annual audited financial statements and notes thereto contained in the Company's Report on Form 10-KSB for the fiscal year ended December 31, 2007. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire fiscal year. F-5 ALR TECHNOLOGIES INC. a) Stock-based compensation: Prior to January 1, 2006, the Company applied APB Opinion No. 25 in accounting for its stock options issued to directors and employees. Effective January 1, 2006, the Company applies FASB No. 123R in accounting all its stock options issued. b) Basic and diluted net loss per common share Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share is calculated by dividing the net loss by the sum of the weighted average number of common shares outstanding and the dilutive common equivalent shares outstanding during the year. Common equivalent shares consist of the shares issuable upon exercise of stock options and warrants calculated using the treasury stock method. Common equivalent shares are not included in the calculation of the weighted average number of shares outstanding for diluted net loss per common share when the effect would be anti-dilutive. Statement of Financial Accounting Standards No. 128: Earnings per Share ("SFAS 128") replaces the presentation of primary earnings per share ("EPS") with a presentation of both basic and diluted EPS for all entities with complex capital structures including a reconciliation of each numerator and denominator. Basic EPS excludes dilutive securities and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if dilutive securities were converted into common stock and is computed similarly to fully-diluted EPS pursuant to previous accounting pronouncements. SFAS 128 applies equally to loss per share presentations. c) Principles of consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, ALRTech Health Systems Inc. (incorporated in British Columbia, Canada). All significant inter-company balances and transactions have been eliminated. 3. Inventories The Company's inventories consists of product parts and finished goods inventories. The Company has expended significant efforts introducing its Human Prescription Reminders ("Med Reminders") to disease management companies, home care companies, pharmaceutical manufacturers, health management organizations, pharmacy benefits managers and certain clinics treating specific disease conditions. Sales to September 30, 2008 have not been sufficient for the Company to realize its investment in these inventories. Management plans to recover its investment in inventories through sales via the channels indicated above and through international markets. As of September 30, 2008, management had recorded a provision of $243,275 (December 31, 2007 - $243,275) in respect of its Med Reminder inventory. Further information on this provision is included in the notes to the Company's December 31, 2007 financial statements. The alternate use of this inventory is limited and, accordingly, if management is not successful in its plans, further write-downs to its investment in inventories may be required in the near term. The outcome of this matter cannot be predicted at this time. 4. Prepaid expenses and deposits The Company's prepaid expenses includes $38,000 prepaid commission expenses. F-6 ALR TECHNOLOGIES INC. During the year ended December 31, 2007, the Company received a total of $75,000 from a non-related party in exchange for promissory notes payable. The promissory note is due on demand with interest at 1.0% per month and is unsecured. As further consideration, 300,000 options exercisable into common shares of the Company at an exercise price of $0.25 per share until May 31, 2017 were issued. During the nine months ended September 30, 2008, the Company entered into an agreement with a non-related party whereby the Company received a total $450,000 over a four-month period starting from March 2008 in exchange for promissory notes payable. The promissory note is due for repayment on September 30, 2009 with interest at 1.0% per month and is unsecured. As further consideration, 1,800,000 options exercisable into common shares of the Company at an exercise price of $0.25 per share until March 31, 2013 were issued. The stock-based compensation arising from this stock option has been estimated to be $104,534 and amortized as interest expenses over the loan period. As of September 30, 2008, the unamortized interest was $67,200. During the nine months ended September 30, 2008, a relative of a director repaid $68,000 to a loan holder and assumed the loan with the same terms at the rate of 1% per month repayable at demand without security. As further consideration, 272,000 options exercisable into common shares of the Company at an exercise price of $0.25 per share until September 29, 2013 were issued. During the nine month period ended September 30, 2008, a promissory note repayable in Canadian dollars to a director decreased by $10,352 due to favorable exchange rate changes with the United States dollars. F-7 ALR TECHNOLOGIES INC. a) Authorized share capital: 350,000,000 common shares with a par value of $0.001 per share b) Stock options: The Company accounts for its employee stock-based compensation arrangements in accordance with provisions of SFAS No. 123R Share Based Payments. During the nine months ended September 30, 2008, the Company granted 5,922,000 options. Of the total granted, 3,000,000 were granted with vesting conditions based on certain performance target. 2,072,000 options were granted and vested immediately in consideration of providing $518,000 loan to the Company. Compensation cost related to these options, being the fair value of the options, has been estimated to be $113,420 of which $46,220 has been charged to interest expense and $67,200 has been classified as deferred interest expenses. The balance of the 850,000 stock options were granted for services and vested immediately. Compensation costs related to these options, being the fair value of the options, have been estimated to be $143,791 and has been charged to product development costs. The weighted average per share fair value of these options issued in the period was $0.13. The fair value of the options was determined using
the Black Scholes option pricing model, using the expected life of the options of 5 years, volatility factors of 188%, risk-free interest rates of 2.76% and no assumed dividend rate. The Company apply Nil forfeiture rate in calculating stock based compensation expenses. A summary of stock option activity is as follows: The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options, based on the $0.04 closing stock price of the Companys common stock on the NASDAQ over the counter market on September 30, 2008, which would have been received by the option holders had all option holders exercised their options as of that date. As of September 30, 2008, none of the stock options outstanding was in-the-money. ALR TECHNOLOGIES INC. On May 17, 2007, the Company agreed to offer the certain optionees holding a total of 110,540,463 stock options to extend the expiry dates of the pertinent stock option agreements to May 17, 2017 subject to formal acceptance by optionees returning executed stock option agreements and extension agreements to the Company on or before August 31, 2007. However, the Company has decided to delay this offer until a later date when the Company has more financial resources. Unvested options at September 30, 2008 consist of 27,525,000 options which will vest based on achieving certain sales and performance targets, including 19,250,000 to three directors and 250,000 to a relative of a director of the Company. Of the total unvested options, 2,000,000 were granted on February 15, 2000. Compensation cost related to the 25,525,000 unvested options granted between 2004 to 2008, which value is estimated to be $1,955,214 will be recorded in the period in which the sales or performance targets are achieved or probable of being achieved. 7. Contingency Accounts payable and accrued liabilities as of September 30, 2008 includes $180,666 (December 31, 2007 -$180,666) of amounts owing to a supplier, which the Company is in the process of disputing. The outcome of this matter cannot be determined at this time. The gain on settlement of the account payable, if any, will be recorded in the period that an agreement with the supplier is reached and the amount becomes determinable. 8. Related party transactions Related party transactions for the nine months ended September 30, 2008 and 2007 included the following: F-10 -11- ALR TECHNOLOGIES INC. 8. Related party transactions (continued) All transactions with related parties were incurred in the normal course of operations and measured at the exchange amount, which is the amount of considerations established and agreed upon by the transacting parties. Interest on promissory notes payable to related parties, management compensation and compensation paid to a relative of a director have been recorded at the exchange amount, which is the amount agreed to by the parties. Options granted to related parties have been recorded at their estimated fair value as disclosed note 6(b). F-11 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements The following information must be read in conjunction with the unaudited Financial Statements and Notes thereto included in Item 1 of this Quarterly Report and the audited Consolidated Financial Statements and Notes thereto and Management's Discussion and Analysis or Plan of Operations contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2007. Except for the description of historical facts contained herein, the Form 10Q contains certain forward-looking statements concerning future applications of the Company's technologies and the Company's proposed services and future prospects, that involve risk and uncertainties, including the possibility that the Company will: (i) be unable to commercialize services based on its technology, (ii) ever achieve profitable operations, or (iii) not receive additional financing as required to support future operations, as detailed herein and
from time to time in the Company's future filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Critical Accounting Policies The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results may differ from these estimates under different assumptions or conditions. We believe the accounting polices that are most critical to our financial condition and results of operations and involve management's judgment and/or evaluation of inherent uncertain factors are as follows: Basis of Presentation. The financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If the Company were not to continue as a going concern, it would likely not be able to realize on its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements. As described in note 1 to the interim financial statements, at September 30, 2008, there are certain conditions that exist which raise substantial doubt about the validity of this assumption. The Company's ability to continue as a going concern is dependent upon continued financial support of its creditors and its ability to obtain financing to repay its current
obligations and fund working capital and its ability to achieve profitable operations. The Company will seek to obtain creditors consent to delay repayment of its outstanding promissory notes payable until it is able to replace this financing with funds generated from operations, replacement debt or from equity financing through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Management plans to obtain financing through the issuance of additional debt, the issuance of shares on the exercise of options and warrants and through future common share private placements. Management hopes to realize sufficient sales in future years to achieve profitable operations. Failure to achieve management's plans may result in the Company curtailing operations or writing assets and liabilities down to liquidation values, or both. -13- Prepaid expenses and deposits. Prepaid expenses and deposits primarily consists of prepaid commission expenses for market development purposes. Inventories. Inventories are recorded at the lower of cost, determined on a weighted average cost basis, and net realizable value. Net realizable value reflects the current estimated net selling price or value in use of the item in inventory in a non-forced sale. The Company assesses the need for inventory write-downs based on its assessment of the estimated net realizable value using assumptions about future demand and market conditions. When the results of these assumptions differ from the Company's projections, an additional inventory write-down may be required. Revenue recognition. The Company recognizes sales revenue at the time of delivery when title has transferred to the customer, persuasive evidence of an arrangement exists, the fee is fixed and determinable and the sales proceeds are collectible. Provisions are recorded for product returns based on historical experience. Sales revenue, in transactions for which the Company does not have sufficient historical experience, is recognized when the return privilege period has expired. Changes in sales terms could materially impact the extent and timing of revenue recognition. Stock-Based Compensation. The Company follows the provisions of SFAS 123(R), Share-Based Payment. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. The Company took into consideration guidance under SFAS 123(R) and SEC Staff Accounting Bulletin No. 107 (SAB 107) when reviewing and updating assumptions. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of our shares using daily price observations over an observation period of five years. The risk-free rate is based on the U.S. treasury rate in effect at the time of grant for periods similar to the expect
ed option life. Due to the Companys history with respect to forfeitures of incentive stock options, the estimate of expired or cancelled options included in the above option valuation was zero. Valuation of Long-lived Assets The Company assesses the potential impairment of long-lived tangible and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Changes in the operating strategy can significantly reduce the estimated useful life of such assets. Results of Operations Management is focusing the majority of its efforts on introducing and marketing the HealthEConnect health management platform and its diabetes management system to the healthcare industry. A health services company based in Georgia has been signed on and has successfully gained customer commitments to implement the HealthEConnect diabetes management system. Corporations that are self-insured are being targeted due to the potential benefits they can achieve with the ALRT HealthEConnect and CHC system. Expected results are better health outcome with their employees and dependents along with lower cost of care for these targeted individuals with diabetes. The Company is first targeting customers located in United States and in Canada. Pilot programs have been established in each and with pilot outcome results now becoming available, extensive selling activities are being planned for 4th Quarter 2008. Sales revenue was $1,988 in the quarter ended September 30, 2008 as compared to $1,526 in the quarter ended September 30, 2007. The increase in sales was $462 due to seasonal fluctuation. -14- For the nine months ended September 30, 2008, sales revenue was $10,926 as compared to $137,096 for the same nine month period last year. The decrease in sales was mainly due to the Company's fine-tuning of the HealthEConnect healthcare management software platform and the need for detailed coordination of software protocols from the various diagnostic equipment such as glucometers necessary for remote monitoring through the ALRT HealthEConnect. The Company has also waited for pilot program results prior to rollout of extensive sales activities. Development costs were $46,500 for the quarter ended September 30, 2008 as compared with $21,568 for the quarter ended September 30, 2007. Development costs incurred during the third quarter of 2008 related to the allocation of additional programming resources required for the development of the ALRT500 LCD (Liquid Crystal Display) Med Reminders and the ALRT Interactive Response System (AIRS). For the nine months ended September 30, 2008, development costs were $283,836 as compared to $174,657 for the same nine month period last year. Development costs incurred during the nine months of 2008 related to the allocation of additional programming resources required for the development of the ALRT500 LCD (Liquid Crystal Display) Med Reminders and the ALRT Interactive Response System (AIRS). Development costs for the nine months ended September 30, 2008 and 2007 include $143,791 and $87,229, respectively, of stock-based compensation recognized in the period. Interest expense was $203,992 for the quarter ended September 30, 2008 as compared with $169,852 for the quarter ended September 30, 2007. The amount for the current quarter included $8,886 relating to options issued in exchange for $68,000 loan received during the period from May to September 2008, which loan was without terms of repayment. For the nine months ended September 30, 2008, interest expense was $557,704 as compared to $517,903 for the same nine month period last year. The amount for the current period included $113,420 relating to options issued in exchange for $518,000 loan received during the period from March to September 2008, which loan $450,000 was due for repayment on September 30, 2009 and the balance was without terms of repayment. The Company continues to rely on debt financing and extensions on debt obligations. Professional fees were $16,522 for the quarter ended September 30, 2008 as compared with $15,020 for the quarter ended September 30, 2007. Fees were slightly higher due to accounting and audit services obtained in the quarter. For the nine months ended September 30, 2008, professional fees were $52,312 as compared to $54,228 for the same nine month period last year. Fees were lower primarily due to lesser accounting and audit services obtained in the period. The selling, general and administrative expenses were $205,918 for the quarter ended September 30, 2008 as compared to $144,649 for the quarter ended September 30, 2007. The increase relates primarily to sample costs incurred during the current quarter. For the nine months ended September 30, 2008, selling, general and administrative expenses were $489,297 as compared to $495,856 for the same nine month period last year. The decrease relates primarily to lower investor relations activities during the current period. -15- Net loss of $478,707 for the quarter ended September 30, 2008 increased from a loss of $377,847 for the same quarter in 2007 mainly due to increase in interest, product development costs, and selling, general and administration expenses. The largest component of this decrease was the selling, general and administration expenses. For the nine months ended September 30, 2008, net loss was $1,403,243 as compared to $1,190,019 for the same nine month period last year. The largest component of this increase was the stock-based compensation relating to product development and loan activities. Liquidity and Capital Resources Cash Balances and Working Capital As of September 30, 2008, the Company's cash balance was $22,670 compared to $2,973 as of December 31, 2007. As of September 30 2008, the Company had a working capital deficiency of $11,985,973 as compared to a working capital deficiency of $10,773,657 as of December 31, 2007. Short and Long Term Liquidity As of September 30, 2008, the Company does not have the current financial resources and committed financing to enable it to meet its overheads, purchase commitments and debt obligations over the next 12 months. All of the Company's debt financing is either due on demand or has a maturity date of less than one year. The Company will seek to obtain creditors' consents to delay repayment of these loans until it is able to replace these financings with funds generated by operations, replacement debt or from equity financings through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Failure to obtain either replacement financing or creditor consent to delay the repayment of existing financing could result in the Company having to curtail operations. Cash Provided by (Used in) Operating Activities Cash used by the Company in operating activities during the quarter was $94,001 in comparison with $556 generated during the same quarter last year. The increase was mainly due to increased payments to suppliers during the current quarter. For the nine months ended September 30, 2008, cash used in operating activities was $448,303 in comparison with $81,849 for the same nine month period in 2007. The increase was mainly due to lower cash received from the customers during the current period and increased payments to suppliers. Cash Proceeds from Financing Activities During the quarter ended September 30, 2008, the Company received $18,000 loan from a relative of a director as compared to $Nil in the nine-month period of 2007. -16- During the nine months ended September 30, 2008, the Company received a total of $518,000 loan from a non-related party plus $68,000 from a relative of a director as compared to $75,000 in the nine-month period of 2007 from a relative of a director. The Company repaid $50,000 loan to a non-related party during the period. Off Balance Sheet Arrangement The Company has no off balance sheet financing arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that is material to investors. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. ITEM 4. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of the Companys management, including the principal executive officer and principal financial officer, as of the end of the period covered by this report, the Company conducted an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). The Companys disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in the Companys reports to Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to ALR Technologies Inc., including the Companys consolidated subsidiaries, and was made known to th
em by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, the Companys principal executive officer and principal financial officer concluded that, as of the period covered by this report, the Companys disclosure controls and procedures are effective at these reasonable assurance levels. Changes in Internal Controls over Financial Reporting In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Companys internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. -17- PART II ITEM 1A. RISK FACTORS -18- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 13th day of November, 2008. ALR TECHNOLOGIES INC. -19- EXHIBIT INDEX
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2008
ALR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
3350 Riverwood Parkway, Suite 1900
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code.)
(678) 881-0002
(telephone number, including area code)
Large Accelerated Filer
¨
Accelerated Filer
¨
Non-accelerated Filer
¨
Smaller Reporting Company
x
ALR TECHNOLOGIES INC.
Interim Consolidated Balance Sheets
($ United States)
September 30
December 31
2008
2007
(Unaudited)
(Audited)
Assets
Current assets:
Cash
$
22,670
$
2,973
Accounts receivable, net of allowance of $5,863
2,248
4,221
(December 31, 2007 - $2,530)
Inventories, net of reserves (note 3)
20,303
78,922
Prepaid expenses and deposits (note 4)
40,128
-
85,349
86,116
Equipment, net of accumulated depreciation
3,564
4,480
Deferred interest expenses (note 5)
67,200
-
$
156,113
$
90,596
Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued liabilities
$
1,045,141
$
1,119,545
Payroll payable
17,497
18,458
Interest payable (note 5 and 8)
2,444,210
1,942,463
Advances payable (note 8)
2,160,249
1,832,729
Promissory notes payable (notes 5 and 8)
6,404,225
5,946,578
12,071,322
10,859,773
Commitments and contingency (notes 5 and 7)
Shareholders' deficiency
Capital stock (note 6)
350,000,000 common shares with a par
value of $0.001 per share authorized
76,078,446 issued
(December 31, 2007 - 76,078,446)
76,078
76,078
Additional paid-in capital
13,208,446
12,951,235
Accumulated deficit
(25,199,733
)
(23,796,490
)
(11,915,209
)
(10,769,177
)
$
156,113
$
90,596
F-1
-2-
ALR TECHNOLOGIES INC.
Interim Consolidated Statement of Loss and Deficit
($ United States)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30
September 30
2008
2007
2008
2007
Revenue
Sales
$
1,988
$
1,526
$
10,926
$
137,096
Cost of sales
90
589
1,141
16,783
1,898
937
9,785
120,313
Expenses
Depreciation
306
425
916
1,275
Development costs
46,500
21,568
283,836
174,657
Foreign exchange (gain) loss
(6,805
)
16,199
(11,782
)
35,951
Interest
203,992
169,852
557,704
517,903
Professional fees
16,522
15,020
52,312
54,228
Rent
14,172
11,071
40,745
30,462
Selling, general and administration
205,918
144,649
489,297
495,856
480,605
378,784
1,413,028
1,310,332
Net loss
(478,707
)
(377,847
)
(1,403,243
)
(1,190,019
)
Accumulated deficit, beginning of period
(24,721,026
)
(23,029,156
)
(23,796,490
)
(22,216,984
)
Accumulated deficit, end of period
$
(25,199,733
)
$
(23,407,003
)
$
(25,199,733
)
$
(23,407,003
)
Loss per share, basic and diluted
$
(0.01
)
$
-
$
(0.02
)
$
(0.02
)
Weighted average shares outstanding,
- basic and diluted
76,078,446
76,078,446
76,078,446
76,078,446
F-2
-3-
ALR TECHNOLOGIES INC.
Interim Consolidated Statement of Shareholders' Deficiency and Comprehensive Loss
($ United States)
Nine Months Ended September 30, 2008 (Unaudited) and Year Ended December 31, 2007
Accumulated
Capital Stock
Additional
Other
Total
Number
Paid in
Accumulated
Comprehensive
Shareholders'
of Shares
Amount
Capital
Deficit
Income
Deficiency
Balance, December 31, 2006
76,078,446
$
76,078
$
12,851,548
$
(22,216,984
)
$
37,164
$
(9,252,194
)
Stock-based compensation
99,687
99,687
Write-off accumulated other
comprehensive income
-
-
-
-
(37,164
)
(37,164
)
Net loss
-
-
-
(1,579,506
)
-
(1,579,506
)
Balance, December 31, 2007
76,078,446
76,078
12,951,235
(23,796,490
)
-
(10,769,177
)
Stock-based compensation
257,511
257,511
Net loss
-
-
-
(1,403,243
)
-
(1,403,243
)
Balance, September 30, 2008
76,078,446
$
76,078
$
13,208,446
$
(25,199,733
)
$
-
$
(11,915,209
)
F-3
-4-
ALR TECHNOLOGIES INC.
Interim Statement of Cash Flows
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited )
Three Months Ended
Nine Months Ended
September 30
September 30
2008
2007
2008
2007
Cash flows from operating activities:
Cash received from customers
$
10,568
$
3,068
$
12,899
$
140,576
Cash paid to suppliers and employees
(101,299
)
(2,361
)
(451,465
)
(219,290
)
Interest paid
(3,270
)
(151
)
(9,737
)
(3,135
)
Net cash provided by (used in) operating
activities
(94,001
)
556
(448,303
)
(81,849
)
Cash flows from financing activities:
Promissory notes payable
18,000
-
518,000
75,000
Repayment of promissory notes payable
-
-
(50,000
)
-
Net cash provided by financing activities
18,000
-
468,000
75,000
Increase (decrease) in cash during the period
(76,001
)
556
19,697
(6,849
)
Cash, beginning of period
98,671
1,012
2,973
8,417
Cash, end of period
$
22,670
$
1,568
$
22,670
$
1,568
Non-cash operating activities:
Stock-based compensation
Interest
$
25,686
$
-
$
46,220
$
12,458
Product development
-
-
143,791
47,391
Selling, general and administration
-
-
-
39,838
$
25,686
$
-
$
190,011
$
99,687
F-4
-5-
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
1. Basis of presentation
- -6-
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
-7-
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
5. Promissory notes payable
September 30
December 31
2008
2007
(Unaudited)
(Audited)
Interest payable to:
Relatives of directors
$
1,169,509
$
897,968
Companies controlled by directors
5,790
5,790
Directors
78,572
71,729
Non-related parties
1,190,339
966,976
$
2,444,210
$
1,942,463
-8-
ALR TECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
September 30
December 31
2008
2007
(Unaudited)
(Audited)
Promissory notes payable to relatives of directors:
Promissory notes payable to a relative of a director, secured by a general security
agreement bearing interest at the rate of 1% per month, due on demand
$
1,978,000
$
1,910,000
Promissory notes payable to a relative of a director, secured by a general security
agreement bearing interest at the rate of 1.25% per month, due on demand
251,347
251,347
Promissory notes payable to relatives of a director, secured by a general security
agreement bearing interest at the U.S. bank prime rate plus 1%, due on demand
500,000
500,000
Promissory notes payable, unsecured, from relatives of a director, bearing interest
at 0.625% per month, with $50,000 repayable on October 5, 2004 and $60,000
repayable on July 28, 2006, which did not occur; currently due on demand with
The same interest rate
110,000
110,000
Promissory notes payable, unsecured, from relatives of a director, bearing interest
at 1% per month, due on demand
295,000
295,000
3,134,347
3,066,347
Promissory notes payable to directors:
Promissory note payable to a director, unsecured, bearing interest at 1% per
month, due on demand (Cdn $151,000)
142,466
152,819
142,466
152,819
Promissory notes payable to unrelated parties:
Promissory notes payable, unsecured, bearing interest at 1% per month, with
$50,000 repayable on December 31, 2004, which did not occur; currently all due
on demand with the same interest rate
2,136,500
2,186,500
Promissory notes payable, unsecured, bearing interest at 0.625% per month, with
$40,000 repayable on December 31, 2004, which did not occur; currently all due
on demand with the same interest rate
40,000
40,000
Promissory notes payable, secured by a guarantee from a director and relative of a
director, bearing interest at 1% per month, with $200,000 repayable on July 31,
2003, which did not occur; currently all due on demand
230,000
230,000
Promissory note payable, unsecured, non-interest bearing, repayable on July 17,
270,912
270,912
2005, which did not occur; currently due on demand
Promissory note payable, unsecured, bearing interest at 1% per month, repayable on
September 30, 2009
450,000
-
3,127,412
2,727,412
Total current promissory notes payable
$
6,404,225
$
5,946,578
F-8
-9-
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
6. Capital stock
Nine Months Ended September 30, 2008
Weighted
Weighted
Average
Average
Aggregate
Number of
Exercise
Lives
Intrinsic
Shares
Price
Remaining
Value
Outstanding, beginning of period
118,196,463
$
0.25
2.18
Nil
Granted
5,922,000
0.25
Nil
Expired
(2,510,000
)
0.25
Nil
Outstanding, end of period
121,608,463
$
0.25
1.61
Nil
Exercisable, end of period
94,083,463
$
0.25
1.62
Nil
F-9
- -10-
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
6. Capital stock (continued)
2008
2007
Product development costs
Directors and officers
$
45,000
$
45,000
Relatives of directors
-
6,998
Stock-based compensation in product development
Directors and officers
129,467
-
Relative of a director
-
12,450
Interest expense
Directors and officers
10,550
18,370
Relatives of directors
259,140
266,958
Company controlled by a director
-
4,818
Stock-based compensation in interest expense
Relatives of directors
8,886
-
Compensation
Directors and officers
239,850
239,850
Relatives of directors
27,000
27,000
$
719,893
$
621,444
Notes to Interim Consolidated Financial Statements
($ United States)
Nine Months Ended September 30, 2008 and 2007
(Unaudited)
9. Reconciliation of net loss to net cash used in operating activities
Three Months Ended
Nine Months Ended
September 30
September 30
2008
2007
2008
2007
Net loss for the period
$
(478,707
)
$
(377,847
)
$
(1,403,243
)
$
(1,190,019
)
Add items not affecting cash:
Depreciation
306
425
916
1,275
Foreign exchange on note payable
(5,777
)
9,564
(10,353
)
21,981
Stock-based compensation:
Product development
-
-
143,791
47,391
Interest
25,686
-
46,220
12,458
Selling, general and administration
-
-
-
39,838
Non-cash working capital items:
Receivable and advances
33,580
1,542
1,973
3,480
Inventories
79,593
(3,353
)
58,619
(15,656
)
Prepaid expenses
(37,828
)
-
(40,128
)
3,498
Accounts payable and accrued liabilities
289,146
395,822
753,902
1,019,502
Customer deposit
-
(25,597
)
-
(25,597
)
$
(94,001
)
$
556
$
(448,303
)
$
(81,849
)
-12-
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 6. EXHIBITS
The following Exhibits are attached hereto:
Exhibit No.
Description
31.1
Certification of Principal Executive and Principal Financial Officer pursuant Section 202
of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive and Chief Financial Officer pursuant Section 906 of the
Sarbanes-Oxley Act of 2002.
(Registrant)
BY: SIDNEY CHAN
Sidney Chan
President, Principal Executive Officer,
Principal Accounting Officer, Principal
Financial Officer, Secretary/Treasurer and a
member of the Board of Directors
Exhibit No.
Description
31.1
Certification of Principal Executive and Principal Financial Officer pursuant Section 202
of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive and Chief Financial Officer pursuant Section 906 of the
Sarbanes-Oxley Act of 2002.
-20-
Exhibit 31.1
SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, Sidney Chan, certify that:
1. |
I have reviewed this Form 10-Q for the period ending September 30, 2008 of ALR Technologies Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: | |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within this entity, particularly during the period in which this report is being prepared; | |
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and, | |
d. |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. | |
5. |
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | |
Date: | November 13, 2008 | SIDNEY CHAN |
Sidney Chan | ||
Principal Executive Officer and Principal Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ALR Technologies Inc. (the "Company") on Form 10-Q for the period ended September 30, 2008 as filed with the Securities and Exchange Commission on the date here of (the "report"), I, Sidney Chan, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated this 13th day of November, 2008.
SIDNEY CHAN |
Sidney Chan, Chief Executive Officer and |
Chief Financial Officer |