<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period _______ from to _______.
0-30414
Commission file number
ALR TECHNOLOGIES, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
State of Nevada 88-0225807
(State or other jurisdiction (I.R.S. Employer of Incorporation or
Organization) or Identification Number)
15496 Bel-Red Road
Suite 310
Redmond, Washington 98052-5507
(Address of Principal Executive Offices)
(425) 376-2578
(Issuer's Telephone Number, including Area Code)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date: Common, $.001 par
value per share: 21,078,446 outstanding as of March 31, 2000
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ x ]
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALR TECHNOLOGIES INC.
Consolidated Balance Sheets
($ United States)
March 31, 2000 and December 31, 1999
2000
(Unaudited) 1999
Assets
Current assets:
Cash $ 24,138 $ 7,261
Accounts receivable, net of
allowance of $6,688
(December 31, 1999 - $6,735) 162,563 192,419
Inventories - 106,644
Prepaid expenses, deposits
and advances 6,877 61,858
------------ ------------
193,578 368,182
Fixed assets, net of accumulated
depreciation 16,713 26,714
------------ ------------
$ 210,291 $ 394,896
============ ============
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Bank loan $ 189,198 $ 381,071
Accounts payable and accrued
liabilities 584,159 509,715
Promissory note payable (note 3) 250,000 -
Current portion of long
term debt (note 4) 275,118 290,953
------------ ------------
1,298,475 1,181,739
Long term debt (note 4) 10,320 13,613
Shareholders' equity (deficit)
Capital stock (note 5) 21,078 32,078
Additional paid in capital 1,118,581 1,245,759
Deficit (2,265,305) (2,100,570)
Accumulated other comprehensive
income Cumulative translation
adjustment 27,142 22,277
------------ ------------
(1,098,504) (800,456)
Subsequent event (note 6) ------------ ------------
$ 210,291 $ 394,896
============ ============
See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Consolidated Statements of Loss
($ United States)
Three month periods ended March 31, 2000 and 1999
(Unaudited)
2000 1999
------------ -----------
Sales $ 152,103 $ 38,040
Cost of sales 106,622 28,711
------------ -----------
45,481 9,329
Expenses:
Depreciation 1,638 1,329
Development costs 15,196 455
Foreign exchange loss (gain) 2,979 (5,770)
Interest 11,426 3,447
Professional fees 36,660 305,258
Rent 14,818 5,770
Selling, general and administrative 34,092 19,111
Wages and benefits 92,304 55,009
------------ -----------
209,113 384,609
------------ -----------
Loss from operations 163,632 375,280
Other expense:
Loss on disposal of capital assets (1,103) -
------------ -----------
Net loss for the period $ (164,735) $ (375,280)
------------ -----------
Net loss per share $ (0.01) $ (0.01)
------------ -----------
Weighted average shares outstanding 24,946,578 33,346,091
============ ===========
See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
($ United States)
Three month periods ended March 31, 2000 and 1999
(Unaudited)
2000 1999
---------- ----------
Cash flows from operating activities
(note 7):
Cash received from customers $ 181,959 $ 39,408
Cash paid to suppliers and employees (66,602) (420,397)
Interest paid (11,426) (3,447)
---------- ----------
Net cash provided (used) by
operating activities 103,931 (384,436)
Cash flows from financing activities:
Loan proceeds 250,000 -
Repayment of bank loan (189,290) -
Repayment of long term debt (9,809) (117,357)
Shares issued for cash - 694,286
Shares acquired for cash (138,178) -
---------- ----------
Net cash provided (used) by
financing activities (87,277) 576,929
Cash flows from investing activities:
Purchase of capital assets - (1,130)
---------- ----------
Net cash used in investing activities (1,130)
Foreign currency translation adjustment 223 (41,634)
---------- ----------
Increase (decrease) in cash
during the period 16,877 149,729
Cash, beginning of period 7,261 33,642
---------- ----------
Cash, end of period $ 24,138 $ 183,371
========== ==========
Non-cash financing and investing activities (note 8)
See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
Three month periods ended March 31, 2000 and 1999
(Unaudited)
1. Basis of presentation
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United
States of America on a going concern basis which presumes the
realization of assets and the discharge of liabilities in the normal
course of operations in the foreseeable future.
The Company's ability to continue as a going concern is dependent upon
its ability to obtain financing to repay its current obligations and
its ability to achieve profitable operations. The outcome of these
matters cannot be predicted at this time.
The consolidated 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
consolidated financial statements.
Management plans to obtain financing through short-term borrowings and
through the exercise of warrants (see note 6). Management plans to
realize sufficient sales in future years to achieve profitable
operations.
2. Significant accounting policies
(a) General
The information included in the accompanying consolidated 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, 1999. In the opinion of management, all
adjustments, consisting of normal recurring accruals, 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.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
Three month periods ended March 31, 2000 and 1999
(Unaudited)
2. Significant accounting policies (continued):
(b) Basis of consolidation
The consolidated financial statements include the accounts of the ALR
Technologies Inc. ("ALR Tech") and its wholly-owned subsidiaries, A
Little Reminder (ALR) Inc. ("ALR Inc.") and Timely Devices Inc. All
significant intercompany balances and transactions have been eliminated
on consolidation.
Effective April 30, 1999, the Company acquired 99.96% of the issued
outstanding Class A common shares of ALR Inc. through an exchange of
shares. As ALR Inc. shareholders obtained control of ALR Tech through
the exchange of their Class A common shares for common shares of ALR
Tech, the acquisition of ALR Inc. has been accounted for in these
consolidated financial statements as a reverse acquisition.
Consequently, the consolidated statements of loss and cash flows
reflect solely the results of operations and cash flows of ALR Inc. for
the three month period ended March 31, 1999. The consolidated
statements of loss and cash flows for quarters ended June 30, 1999 and
September 30, 1999 will reflect the results of operations and cash
flows of ALR Inc., combined with those of its legal parent, ALR Tech
from acquisition on April 30, 1999, in accordance with generally
accepted accounting principles for reverse acquisitions.
The 0.04% non-controlling interest of ALR Inc. is not material and,
therefore, has not been presented in the consolidated financial
statements.
3. Promissory note payable
The promissory note is payable to a relative of a Director of the
Company, bears interest at US bank prime rate plus one percent and is
due June 30, 2000.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
Three month periods ended March 31, 2000 and 1999
(Unaudited)
4. Long term debt
At March 31, 2000, scheduled payments of $223,518 were overdue. The
Company has not received any waivers from creditors for the late
payments on these debts. Legal claims have been filed to demand
payment of certain of the outstanding balances owing totaling $197,600
at March 31, 2000.
5. Capital stock
a) Authorized:
75,000,000 common shares with a par value of $0.001 per share.
b) Issued and outstanding:
Additional
Number of Capital Paid in
Shares Stock Capital
Balance, December 31, 1999 32,078,446 $ 32,078 $ 1,245,759
Common shares acquired and
cancelled (note 3(c)) (6,000,000) (6,000) (69,370)
---------- -------- -----------
26,078,446 26,078 1,176,389
---------- -------- -----------
Common shares acquired for
cancellation (note 3(c)) (5,000,000) (5,000) (57,808)
---------- -------- -----------
21,078,446 $ 21,078 $ 1,118,58
========== ======== ===========
c) Common shares acquired for cancellation
On February 2, 2000, the Company closed a settlement agreement with a
Director, a company controlled by that Director and several other
parties, pursuant to which the Company acquired 11,000,000 of its own
common shares for cancellation. Total consideration paid pursuant to
this agreement was $137,178. As a result of this transaction, the
number of issued and outstanding shares of the Company will be reduced
to 21,078,446 common shares.
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<PAGE> 8
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
Three month periods ended March 31, 2000 and 1999
(Unaudited)
6. Subsequent event
On April 11, 2000, the Company agreed to issue 11 million warrants at
an exercise price of $0.25 to various parties including related
parties. 4,000,000 of the warrants will expire on September 30, 2000
and 7,000,000 warrants will expire on May 31, 2005.
7. Reconciliation of net loss for the period to net cash provided
(used) by operating activities
2000 1999
Net loss for the period $ (164,735) $ (375,280)
Adjustments to reconcile net loss
for the period to net cash provided
(used) by operating activities
Depreciation 1,638 1,329
Loss on disposal of capital assets 1,103 -
Decrease in accounts receivable 29,856 1,174
Decrease in inventories 106,644 54,633
Decrease (increase) in prepaid
expenses, deposits & advances 54,981 (131,914)
Increase in accounts payable 74,444 65,622
---------- ----------
Net cash provided (used) by
operating activities $ 103,931 $ (384,436)
========== ==========
8. Non-cash financing and investing activities
During the period ended March 31, 2000, the Company transferred a
leased automobile with a net book value of $8,342 to a former
shareholder in consideration for the assumption by the shareholder of
the related debt in the amount of $7,239.
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<PAGE> 9
Forward Looking Statements
The following information must be read in conjunction with the
unaudited Consolidated 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 10K-SB for the year ended December 31, 1999. Except for the
description of historical facts contained herein, the Form 10Q-SB
contains certain forward-looking statements concerning future
applications of the technologies to be acquired by the Company 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 under "Item 2, Management Discussion and Analysis" 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 which could cause actual results to differ materially
from those described in the forward-looking statements.
Item 2. Management Discussion and Analysis
Overview
ALR Technologies Inc., is in the business of manufacturing and
marketing a medical reminder compliance device.
During the quarter, the Company's subsidiary, Timely Devices Inc.
("TDI"), completed and shipped the final 25,000 units of the 75,000
unit first year's purchase commitment from its Canadian distributor,
Technilab Pharma ("TP"). As TP has no further purchase commitments in
the first year (ending June 30, 2000) of the Distributorship Agreement
and there were no other significant orders, management decided to close
the Edmonton manufacturing operation and office of TDI in order to
reduce monthly overheads. The manufacturing of future orders will be
contracted out to electronics manufacturers. The Company has continued
to develop its new line of medication compliance devices.
Results of Operations
Sales
During the three month period ended March 31, 2000, sales were
$152,103, an increase of nearly 300% from the same period in 1999 when
sales were $38,040. This sales increase is primarily the result of the
shipment of the final third of TP's first year purchase commitment
under the Distributorship Agreement.
Gross Profit
The Company's gross profit on sales was $45,481 (30%) for the
three months ended March 31, 2000 as compared to $9,329 (25%) for the
same period in the prior year. The increased gross profit is primarily
attributable to the increased sales volume in 2000.
<PAGE> 10
Development Costs
Development costs increased to $15,196 from $455 in the prior
period as the Company increased its expenditures of the development of
the animal healthcare reminder and Generation 5 of the reminder
compliance device for the human market.
Foreign Exchange (Gain) Loss
To date, the Company's operations have been substantially
conducted in Canadian dollars. The foreign exchange loss resulting
fluctuations in the value of the Canadian dollar relative to the US
dollar was $2,979 in the first quarter of 2000 as compared with a gain
of $5,770 in the first quarter of 1999.
Interest
Costs to service the Company's debt rose in the first quarter of
2000 as compared to the same period in 1999 as the Company had an
increase in the overall level of debt financing due to an additional
bank loan and promissory note issued.
Professional Fees
Professional fees dropped to $36,660 for the three months ended
March 31, 2000 from $305,258 for the three months ended March 31, 1999.
Cost were substantially higher in the prior year due to costs related
to the reverse takeover which was completed in April 1999.
Rent
Rent increased to $14,818 for the three months ended March 31,
2000 from $5,770 in 1999 as the Company had additional leases for
offices in Redmond, Washington and Vancouver, BC.
Selling, general and administrative
Costs for selling, general and administrative increased to $34,092
for the three months ended March 31, 2000 versus $19,111 for the three
months ended March 31, 1999. This increase was due to increased
telephone and office costs from the company's three locations and from
an increase in travel expenditures.
Wages and benefits
Wages and benefits increased from $55,009 to $92,304 for the first
quarter of 2000 versus the same period in the prior year, primarily due
the addition of a Chief Financial Officer.
Loss on disposal of assets
During the quarter, the Company assigned its interest in a leased
automobile to a former Director. This resulted in a loss of disposal
of capital assets of $1,103.
<PAGE> 11
Liquidity and Capital Resources
As of March 31, 2000, the Company's principal sources of liquidity
included cash of $24,138 and accounts receivable of $162,563.
At March 31, 2000, the Company had a working capital deficiency of
$1,104,897, an increase of $291,340 from December 31, 1999.
During the three month period ended March 31, 2000 the Company
generated net cash of $103,931 from operations, primarily due to
receipt of payment on the second TP shipment.
In addition, the Company entered into a loan agreement with a
relative of a Director of the Company for a loan of $250,000 bearing
interest at prime plus one percent and with a maturity date of June 30,
2000. Proceeds from this loan were used in part to reacquire
11,000,000 shares of the Company for cancellation for a total purchase
price of $138,178.
The Company also repaid one-half of its Cdn $500,000 bank loan
through collection of its receivable from TP with respect to the second
shipment. Proceeds from the collection of the receivable from TP for
the third shipment will be allocated to the balance of this loan.
The Company also made three payments on its other bank debt to
reduce the outstanding balance by $9,809.
At this time the Company does not have the resources to meet all
of its obligations, but it is implementing plans in order to generate
sufficient cash flows over the next 12 months. Currently, the Company
requires $50,000 per month to pay basic overheads and further product
development will only be undertaken if there is sufficient capital
available. The Company plans to generate this cash flow in the short
term through additional debt and the exercise of warrants. The Company
also intends to complete the development of the animal healthcare
reminder and market this product in the second quarter. In the longer
term, to generate new revenues from the sale of the 5th generation
reminder. If the Company's efforts to obtain additional financing are
unsuccessful, the Company may have to cease operations.
The Company has three loans aggregating $223,518 that are past
their due date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company's subsidiary corporation, TDI, is a defendant in a
lawsuit captioned Alexander John Gurba, Plaintiff, and Timely Devices
Inc., Defendant, Case No. 0003-04752 pending in the Court of the
Queen's Bench of Alberta, Judicial District of Edmonton wherein the
plaintiff is seeking a judgment against TDI in the amount of
CDN$218,737.99 with respect to a loan agreement dated April 1, 1997
plus interest and costs of the action.
Item 2. Changes in Securities
None
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Item 3. Defaults Upon Senior Securities
During the quarter ended March 31, 2000, a subsidiary of the
Company, Timely Devices Inc., went into default on a loan payable, as
described above in "Item 1. Legal Proceedings."
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended March 31, 2000.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are attached hereto:
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on February 16, 2000.
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated this 15th day of May, 2000.
ALR Technologies Inc.
/s/ Sidney Chan
Sidney Chan,
Chief Executive Officer
/s/ Ken Robulak
Ken Robulak,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at March 31, 2000 (Unaudited) and
the Consolidated Statement of Income for the three months ended March 31, 2000
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 24,138
<SECURITIES> 0
<RECEIVABLES> 169,251
<ALLOWANCES> 6,688
<INVENTORY> 0
<CURRENT-ASSETS> 193,578
<PP&E> 28,163
<DEPRECIATION> 11,450
<TOTAL-ASSETS> 210,291
<CURRENT-LIABILITIES> 1,298,475
<BONDS> 0
0
0
<COMMON> 21,078
<OTHER-SE> (1,119,582)
<TOTAL-LIABILITY-AND-EQUITY> 210,291
<SALES> 152,103
<TOTAL-REVENUES> 152,103
<CGS> 106,622
<TOTAL-COSTS> 209,113
<OTHER-EXPENSES> 1,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,426
<INCOME-PRETAX> (164,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (164,735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,735)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
