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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
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FORM 10-SB/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) and (g) of the Securities Exchange Act of 1934
ALR TECHNOLOGIES INC.
(Name of Small Business Issuer in its charter)
STATE OF NEVADA 88-0225807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15446 Bel-Red Road
Suite 310
Redmond, Washington 98052-5507
(Address of Principal Executive Offices, including zip code)
Issuer's telephone number, including area code: (425) 376-2578
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background
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.
Prior to April 1998, the Company was inactive. In April 1998, the
Company changed its business purpose to marketing and assemble a
pharmaceutical compliance device which was owned by A Little Reminder
(ALR) Inc. ("ALR").
On October 21, 1998, the Company entered into an agreement with
ALR whereby the Company would have the non-exclusive right to
distribute certain products of ALR described below.
In April 1999, the Company acquired 99.9% (36,533,130) of the
issued and outstanding Class A shares of common stock of ALR in
exchange for 36,553,130 shares of the Company's common stock thereby
making ALR a subsidiary corporation of the Company. ALR also has
outstanding 124,695 shares of Class B common stock, none of which is
owned by the Company.
ALR was incorporated pursuant to the Company Act of British
Columbia on May 24, 1996. ALR continued its jurisdiction under the
laws of Canada on September 23, 1996 and to the state of Wyoming on
July 31, 1998. ALR owns one subsidiary corporation, Timely Devices,
Inc. ("TDI"). TDI was founded in Edmonton, Alberta, Canada on July 27,
1994. ALR owns all of the total outstanding shares of TDI. TDI has
only one class of common stock outstanding.
In December 1998, the common shares of the Company began trading
on the Bulletin Board operated by the National Association of
Securities Dealers Inc. under the symbol "MBET." Subsequently the
symbol was changed to "ALRT."
The Company has no history of operations and has not earned any
revenues. TDI, its wholly owned subsidiary corporation has been in
operation and earned revenues for the last three years. The Company
currently has limited funds available for its continued operation. The
Company believes that unless it obtains additional capital through
loans or the sale of securities, it may have to cease operations at the
end of three months.
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Products
The Company currently, through its subsidiary corporation,
TDI, manufactures two products: the Reminder and the Program Station.
A description of the products; the retail price of the products; and
how the products differ from the two programming methods outlined in
"Product Research." The ALRT Medication Reminder(TM) (the "Reminder")
which is approximately 1" x 2" x 1/4" in size, is small enough to be
extremely mobile, yet reliable and effective in reminding patients to
take medications in a timely manner. Based upon programming by the
pharmacist or health care professional, the Reminder admits a sound in
order to alert a patient that it is time for his medication.
The Reminder is programmed by the pharmacist or health care
professional by using a programming station (the "Program Station").
The Program Station is approximately 4" x 5" x 1" and fits conveniently
on the pharmacist's counter. The Reminder is inserted into to the
Program Station. The pharmacist enters the information schedule into
the Program Station and the same is transmitted through the Program
Station to the Reminder. Thereafter, the Reminder will alert the
patient when it is time for medication. The Reminder and the Program
Station are sold separately.
The Company's suggested retail price for the Reminder is
$19.95. A retailer is not bound by any agreement to sell that Reminder
for $19.95, but may sell the Reminder to the public at any price it
desires.
Benefits of a Reminder System
The Company believes that a reminder system benefits
patients by alerting them to take medication at a prescribed time
thereby improving the effectiveness of the medication and reducing
medication non-compliance. Medication non-compliance often results
in further treatment complications which can become more expensive than
simple medication therapy.
In addition, where required doses of medication are missed by a
patient, bacteria become tolerant to the unconcentrated dosage which
can result in the medication becoming ineffective for the patient.
Further, by not taking the prescribed medication at the prescribed
times, bacteria develop resistance to certain prescription drugs and
often the overall efficacy of the drug is lost. In these cases, the
health of the patient is jeopardized and pharmaceutical drug
manufacturers ("Pharmas") must develop a new drug at an increased
expense in order to address that resistance. Hence medication
compliance creates a healthier customer.
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Marketing Strategy
The Company currently has not targeted any particular market. The
Company's operations are limited to the North American geographical
area.
The Company intends to target Pharmas located in the United States
and Canada because North America is the largest single pharma market in
the world. The Company believes that by targeting Pharmas, the Pharmas
will insist upon the Company's products being recommended or included
with a prescriptive medicine. The Company also anticipates directing
its marketing efforts toward the Health Maintenance Organizations
("HMOs") which are constantly looking for ways to cut medical expenses.
The Company currently does not advertise its products through any
medium. The Company currently promotes its products via word of mouth
through its officers, directors and employees. The Company has created
a website for approximately $10,000 and does not anticipate doing
webcommerce at this time or make any further substantial expenditures
in connection therewith. The Company does not have any link
arrangements with other websites or any time-ins with any search
engines.
^ On the 4th day of June, 1999, the Company entered into an
exclusive Distribution Agreement with Technilab Pharma ("TP") to market
its products in Canada. The term of the agreement is for a period of
twelve months commencing June 4, 1999. The agreement is subject to
three successive twelve month renewals, unless either party terminates
the agreement upon sixty days notice to the other party. The agreement
calls for a minimum initial order of CDN$650,000, which TP has paid
CDN$277,000 and minimum annual orders thereafter of CDN$750,000.
All sales of the Company's products in Canada will be made by TP. The
Company believes that TP's failure to sell at least CD$750,000 in
products will have an adverse effect on the Company's operations.
TP and its officers and directors are not related in any manner to the
Company and any of its officers and directors.
Manufacturing
There are a number of contract manufacturers located in the United
States, Mexico, and Canada that will be able to manufacture the
Company's Reminder and Program Station. The Company issues purchase
orders for work to be completed as required. There are no ongoing or
exclusive manufacturing agreements entered into with any of said
contract manufacturers.
The raw materials which are used to manufacture the Company's
products are readily available from the other sources and consist of
electronic components and casings.
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The Reminder and Program Stations are manufactured by Electronics
Manufacturing Group, Inc. ("EMG") in Calgary, Alberta, Canada on a
purchase order basis. Assembly, testing, and packaging is completed by
ALR in Edmonton, Alberta, Canada. The Reminder and Program Stations are
shipped from the Company's office located in Edmonton, Alberta, Canada.
Patents and Licenses
The Company through ALR and TDI own the following patents and
proprietary rights:
1. Patent to the Reminder and Program System registered in the
United States in February 1997 (Patent No. 5,602,802) and pending
registration in Canada in October 1996 (No. A12,131,783).
2. Registered trademark "A Little Reminder," registration number
TMA 489,443.
The Company intends to register trademarks for TDI, ALRT, ALRT
Medication Reminder and ALR in the United States and Canada. While the
Company intends to register the foregoing trademarks, there is no
assurance that the trademarks will ever be registered or if registered
will protect the Company's rights thereunder.
Product Research
The Company is currently engaging in product research and
development to simplify the programming of the Reminder. The new
methods of programming the Reminder are "Serial" and "On-Screen" and
are outlined below:
The Company spent $6,105 on product research and development in
the six month fiscal period ended December 31, 1998 and $35,202 and
$35,492 in the fiscal years ended June 30, 1998 and June 30, 1997,
respectively. The Company plans to spend $100,000 on product research
and development in the next fiscal year.
The Company intends to complete the development of the serial
method programming in the first quarter of 2000 and believes that this
method will be available to customers in the second half of 2000. The
Company intends to complete the on-screen programming method in the
second quarter of 2000 and believes that this product will be available
to customers in 2001. While the Company believes the foregoing events
will occur as described above, there is no assurance that the time
table for the programming methods will be available as indicated.
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Serial Programming
This method of programming the Reminder makes use of software
running on a personal computer to send the alarm times through the
computer's serial port to a simplified programmer.
The serial programmer requires fewer components than the
stand-alone programmer and can therefore be manufactured at
significantly lower cost.
The programmers can be installed in pharmacies at much lower cost.
This will allow the Company more flexibility in providing incentives to
expand the base of installed programmers. Software-driven programming
is faster and more convenient in higher volumes than stand-alone
programming.
On-Screen Programming
This method of programming makes use of software running on a
personal computer to send the alarm times to the Reminder through the
computer screen. This method is completely software-driven and requires
no separate hardware or programmer. Onscreen programming is currently
under development.
This will be the least expensive method since no hardware beyond
the pharmacist's personal computer is involved. The only costs are the
up-front software development costs to the Company.
This method will be made available over the Internet. The task of
programming a Reminder can then be accomplished instantly, anywhere, by
anyone authorized to do so by the Company.
Competition
The Company competes with other corporations that produce
medication compliance devices, some of whom have greater financial,
marketing and other resources than the Company.
The principal methods of competition are patient information
strategies and compliance packaging. The Company believes that the
approximate number of competitors are six, but the Company does not
have any information to estimate its share of the market. The
competing medication devices are information pamphlets, compliance
packaging, and other forms of devices. The devices include clocks,
labels, organization systems and pagers.
The Company is not aware of larger companies with greater
resources that have established web sites to sell medication compliance
devices.
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Employees
The Company presently employs five persons, two of whom are
officers of the Company. The Company intends to hire additional
employees on an as-needed basis.
Offices
The Company's corporate offices are located at 15446 Bel-Red Road,
Suite 310, Redmond, Washington 98052-5507, telephone (425) 376-2578.
The Company leases 1,000 square feet of office space from Group Health
Cooperative pursuant to a written lease. The term of the lease is two
years and the monthly rental payment is $1,690.00. The lease commenced
on March 15, 1999 and will expire on March 31, 2001.
ALR leases offices located at 650 Georgia Street, Suite 2000,
Vancouver, British Columbia V6B 4N8, telephone (604) 685-0992. ALR
leases 1,077 square feet of office space from Grosvenor International
Canada Limited on a month to month basis. The monthly rental is
CDN$1,605.
TDI leases office space located at 18161 102 Avenue, Edmonton,
Alberta, Canada, telephone (780) 448-0510. TDI leases 2,350 square feet
of space from York Realty, Inc. pursuant to a written lease. The term
of the lease is sixty (60) months and the monthly rental payment is
US$1,460.00. The lease commenced on June 1, 1998 and will expire on
May 31, 2003.
Public Relations
The Company handles investor relations internally with costs that
do not exceed $3,000 per month.
Risks Associated with the Year 2000
The Year 2000 issue is the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations,
including among others, temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has reviewed ALR's information technology and non-
information technology to identify and Year 2000 problems and found
them to be Year 2000 compliant. The Company has also communicated with
its vendors that supply raw materials for the manufacture of the
Company's products and communicated with the Company's manufactures to
determine if they are Year 2000 compliant. In the course of the
investigation, the Company has not encountered any material Year 2000
deficiencies with the third party vendors and manufacturers.
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To date, the Company has not incurred any material costs directly
associated with ALR's compliance efforts, except compensation expense
associated with ALR's salaried employees who have devoted sometime to
ALR's assessment and remediation efforts.
The Company may not have identified and corrected all Year 2000
problems. Year 2000 problems may involve significant time and expense
and unremediated problems could materially adversely affect ALR's
business, financial condition and operating results. Neither the
Company nor ALR have contingency plans to address risks associated with
unremediated Year 2000 problems.
Future planned acquisitions will most likely involve hardware and
software which is relatively new and therefore management does not
anticipate that it will incur significant operating expenses or be
required to invest heavily in computer systems improvements to be Year
2000 compliant. As the Company makes arrangements with significant
hardware and software suppliers, the Company intends to determine the
extent to which the Company's systems may be vulnerable should those
third parties fail to address and correct their own Year 2000 issues
and take measures to reduce the Company's exposure, such as, finding
alternative suppliers or requiring the suppliers to correct Year 2000
compliance issues prior to the Company acquiring the product. The
Company anticipates that this will be an ongoing process. There can be
no assurances that the systems of suppliers or other companies on which
the Company may rely on will be converted in a timely manner and will
not have a materially adverse effect on the Company's systems. The
Company believes that it is taking the steps necessary regarding Year
2000 compliance issues with respect to matters within its control.
However, no assurance can be given that the Company's systems will be
made Year 2000 compliant in a timely manner or that the Year 2000
problem will not have a material adverse effect on the Company's
business, financial condition and results of operations.
Risk Factors.
1. Limited History of Operations and Reliance on Expertise of
Certain Persons. The Company has no history of operations. The
management of the Company and the growth of the Company's business
depends on certain key individuals who may not be easily replaced if
they should leave the Company.
2. Market Acceptance. The Company's success and growth will
depend upon the Company's ability to market its existing products. The
Company's success may depend in part upon the market's acceptance of,
and the Company's ability to deliver and support its products. See
"Business - Products."
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3. Liquidity; Need for Additional Financing. The Company
believes that it will need additional cash during the next twelve
months. Assuming the Company has no sales and is unable to sell any
securities, the Company believes that it can continue operations for a
period of three months. If the Company is unable to generate a
positive cash flow before its cash is depleted , it will be required to
curtail operations substantially, and seek additional capital. There
is no assurance that the Company will be able to obtain additional
capital if required, if capital is available, or to obtain it on terms
favorable to the Company. The Company is currently suffering from a
lack of liquidity that it believes will impair its short-term marketing
and sales efforts and adversely affect its results for the current
quarter and until additional cash is received. The Company is
planning to offer 6,000,000 shares of common stock at an offering price
of $0.25 per share pursuant to Reg. 506 of the Securities Act of 1933.
As of the date hereof, the Company has not prepared an offering
memorandum, offered or sold any securities. ^ See "Financial
Statements."
4. Technology Risk. The Company and its competitors utilize
different applications of known technology. Should a competitor
develop a technological breakthrough that cannot be adapted to the
Company's systems or develop a more effective application of existing
technology, the Company's products would be at risk of becoming
obsolete.
5. Competition. Some of the Company's competitors have
substantially greater financial, technical and marketing resources than
the Company. In addition, the Company's products compete indirectly
with numerous other products. The Company competes with clocks,
pagers, labels and information systems, all of which, indirectly,
reminder a person to take his medication. As the markets for the
Company's products expand, the Company expects that additional
competition will emerge and that existing competitors may commit more
resources to those markets.
6. Product Defects. In the event any of the Company's products
prove defective, the Company may be required to redesign or recall
products. While the Company has not had a recall to date, a redesign
or recall could cause the Company to incur significant expenses,
disrupt sales and adversely affect the reputation of the Company and
its products, any one or a combination of which could have a material
adverse affect on the Company's financial performance.
7. Product Reliability ^. The Company's products have not been
in service for a sufficient time to determine their reliability. The
Company has not conducted any independent tests of its products.
Failure of a substantial number of the Company's products would result
in severe damage to the Company's reputation and a large warranty
expense for the Company.
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8. Patents and Trademarks. The Company and ALR presently hold
certain patents and trademarks and are attempting to expand their
patent and trademark protection. While the Company believes that
patent rights are important and protect the Company's proprietary
rights in the patented technologies, there can be no assurance that any
future patent application will ultimately mature as an issued patent,
or that any present or future patents of the Company will prove valid
or provide meaningful protection from competitors. See "Business -
Patents and Trademarks."
9. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its officers and directors. See "Business" and "Management."
10. Issuance of Additional Shares. Approximately 42,921,554
shares of Common Stock or 57.23% of the 75,000,000 authorized shares of
Common Stock of the Company are unissued. The Board of Directors has
the power to issue such shares, subject to shareholder approval, in
some instances. Although the Company presently has no commitments,
contracts or intentions to issue any additional shares to other
persons, other than in the exercise of options and warrants, the
Company may in the future attempt to issue shares to acquire products,
equipment or properties, or for other corporate purposes. Any
additional issuance by the Company, from its authorized but unissued
shares, would have the effect of diluting the interest of existing
shareholders. See "Description of Securities."
11. Indemnification of Officers and Directors for Securities
Liabilities. The Company's Bylaws provide that the Company will
indemnify any Director, Officer, agent and/or employee as to those
liabilities and on those terms and conditions as are specified in laws
of the state of Nevada. Further, the Company may purchase and maintain
insurance on behalf of any such persons whether or not the corporation
would have the power to indemnify such person against the liability
insured against. The foregoing could result in substantial
expenditures by the Company and prevent any recovery from such
Officers, Directors, agents and employees for losses incurred by the
Company as a result of their actions. Further, the Company has been
advised that in the opinion of the Securities and Exchange Commission,
indemnification is against public policy as expressed in the Securities
Act of 1933, as amended, and is, therefore, unenforceable.
12. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors. See "Description of the
Securities."
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13. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. See "Dividend Policy."
14. Impact of Year 2000 Issue. The Company has reviewed its
internal computer systems and products and their capability of
recognizing the year 2000 and years thereafter. The Company expects
that any costs relating to ensuring such systems to be year 2000
compliant will not be material to the financial condition or results of
operations of the Company.
15. Penny Stock - Additional Sales Practice Requirements.
The Company's common stock is covered by a Securities and Exchange
Commission rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than
established customers and accredited investors, generally institutions
with assets in excess of $5,000,000 or individuals with net worth in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000
jointly with their spouse. For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the
purchaser and transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell our securities and
also may affect the ability of purchasers of our stock to sell their
shares in the secondary market.
Forward Looking Statements
Except for the description of historical facts contained herein,
this Form 10-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
risks 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's Discussion and Analysis
or Plan of Operations" 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has been largely inactive since its incorporation and
hence has not yet received revenues from operations, profitability or
break-even cash flow. See "Item 7. Certain Relationships And Related
Transactions."
The Company has inadequate cash to maintain operations during the
next twelve months. In order to meet its cash requirements the Company
will have to raise additional capital through the sale of securities or
loans. As of the date hereof, the Company has issued 250,000 shares of
common stock for cash proceeds of $125,000 and has made a
non-transferable rights offering to certain shareholders allowing the
holder to acquire one share of common stock for cash proceeds of $0.50
per share. Under the rights offering 253,816 shares were issued in
consideration of $126,908 Other than the foregoing, and as disclosed in
this Form 10-SB, the Company has not made sales of additional
securities and there is no assurance that it will be able to raise
additional capital through the sale of securities in the future.
In November 1999, a subsidiary of the Company borrowed CDN$550,000
from the Bank of Montreal. This loan is for a term of six months with
interest payable at prime plus two percent. The Company has not
initiated any other negotiations for loans to the Company and there is
no assurance that the Company will be able to raise additional capital
in the future through loans. In the event that the Company is unable
to raise additional capital, it may have to suspend or cease
operations.
Though the Company's subsidiary TDI initiated sales through a
distribution contract with Novopharm Quebec in December 1996,
substantive sales were not commenced until the fourth quarter of 1997.
^
The Company is continuing to develop product enhancements that
will provide significant savings to production costs and increase
market penetration. The product enhancements consist of programming
alternatives and new features such as new casting designs. The Company
is also experimenting with changing the beeping patterns to cover a
range of frequencies to accommodate the needs of the hearing impaired.
The Company does not intend to purchase a plant or significant
equipment.
The Company will hire employees on an as needed basis. The
Company expects to hire additional employees during the next six
months, however the Company cannot at this time determine the number of
employees it will be hiring.
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The Company expects to earn revenues in the fourth quarter of
1999. There is no assurance, however, that the Company will earn said
revenues.
RESULTS OF OPERATIONS - JULY 1, 1997 THROUGH SEPTEMBER 30, 1999.
While the Company has been in the development stage as defined in
Statement of Financial Accounting Standards No. 7 and has lacked
operating results since its incorporation, its main subsidiary, ALR has
had operating results since July 1, 1996. The following is an analysis
of those results.
The Company did not have sufficient sales for the 1997 and 1998
fiscal years to cover overhead and realize the lowest production costs.
In the latter part of 1998 and early 1999 the costs of ALRT's
acquisition of ALR put further strain on the Company's capital
resources. In June 1999, the Company entered into a new distribution
agreement with TP to sell its product in Canada and sales were down
while that transaction was occurring. The Company is now recording
sales in the fourth quarter of 1999 from the new distribution
agreement.
For the Period January 1, 1999 through September 30, 1999
Sales for the period were $252,823 and cost of goods sold were
$146,964. This resulted in a gross margin of $105,859 or 41.8%. Sales
are reduced from the September 30, 1998 results of $316,042 due to the
change in distribution in 1999 from Novapharm to Technilab. After the
acquisition in early 1999, the Company changed its Canadian
distribution and the positive impact of that change did not start
materializing until the fourth quarter of 1999.
The Selling, general and administrative expenses were $106,384 for
the nine months ended September 30, 1999 as compared to $107,011 for
the same period ending September 30, 1998. Theses costs are higher than
the twelve month period ended June 30, 1998 of $83,716 due to opening
a new head office in Redmond Washington and incurring additional staff
expenses.
The Company incurred Professional fees of $126,682 and Consulting
fees of $169,473 for the nine months ending September 30, 1999 as
compared to $86,483 for the same period ending September 30, 1998. The
increase in fees is comprised primarily of legal and accounting
expenses incurred in the acquisition of ALR by ALRT and ALRT becoming
a public company.
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Wages and Benefits expenses increased to $169,677 for the nine
months ending September 30, 1999 from $70,193 for the comparable nine
month period ending September 30, 1998, due to hiring new staff. The
Company hired a new Chairman and Vice President of Technology. The
Chairman has since been terminated but may be replaced in 2000. The
Company also plans additional staff in 2000 as sales increase.
A net loss of $617,584 was realized for the period as compared to
a net loss of $274,952 in 1998. The increased losses were due to the
professional fees incurred in the acquisition of ALR by ALRT,
consulting fees paid for corporate development and new staff hired. The
Company expects professional and consulting fees to reduce in the
future and the salaries are now lower due to the termination of the
Chairman, Mike Best, although a new Chief Executive Officer may be
hired in 2000. The Company has sold additional product in the fourth
quarter of 1999 and expects higher sales revenue in the near future
which will help offset the fixed costs associated with operating the
Company. There is no assurance, however, that the Company will
increase its sales revenue in the near future.
Inventory increased to $314,679 at September 30, 1999 from
$266,975 on December 31, 1998 as a result of the orders anticipated in
the new Technilab distribution agreement. Inventory levels will decline
as a result of sales in the fourth quarter of as product is shipped to
Technilab.
Prepaid expenses increased to $43,232 on September 30, 1999 from
$1,021 on December 31, 1998 as a result of an advance to a Vice
President (Lorne Drever) of $40,146.
Accounts payable increased to $424,561 on September 30, 1999 from
$372,775 on December 31, 1998 as a result of the new inventory
purchased and accrual of professional fees. The payables are
anticipated to be reduced by December 31, 1999 from the proceeds of
sales to Technilab.
For the Period July 1, 1998 through December 31, 1998
Sales for the six month period ended December 31, 1998 were
$218,208 as compared to $409,870 for the previous twelve months ended
June 30, 1998. Production costs remained high due to the small volumes
and the Company lost $256,322 as compared to $248,556 for the year
ended June 30, 1998. ALR sold over 20,000 units of product at an
average price of $10.80 per unit. Because production levels are
inadequate to receive substantial discounts for quantity purchase of
parts and supplies, Costs of Goods Sold was 73% of Revenues, resulting
in a gross margin of 27%. The Company anticipates as sales increase,
the costs of goods sold as a percentage of revenues will be
substantially reduced due to economies of scale form larger production
runs. Selling, general and administrative costs increased to $79,780
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for the six month period compared to The annual expenses of $83,716 in
1997 due to opening a new Head Office in Redmond Washington and hiring
additional staff. Professional fees increased to $130,427 from $42,392
the year prior due to the costs that ALRT incurred in becoming a public
company.
For the Period July 1, 1997 through June 30, 1998
Sales were $409,870 and costs of goods sold $297,024 resulting in
a gross profit of $112,846. Sales increased three fold over results
from the year ended June 30, 1997 due in large part to a more reliable
product and an emphasis by ALR's main customer to increase product
sales during this period.
Expenses were $339,556 for the period. Professional fees and
other costs of combination for the two businesses were substantially
absent relative to costs associated with same during six month period
ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES.
The Company has issued 32,078,446 shares of its Common Stock to
shareholders of ALR, officers, directors and others. The Company has
no operating history and no material assets other than the assets of
ALR.
Cash Balances
At September 30, 1999, the Company's cash balance was $52,641,
compared to $7,464 at September 30, 1998. At December 31, 1998, the
Company's cash balance was $33,642, at June 30, 1998 the cash balance
was $35,935 and at June 30, 1997, the Company had a bank overdraft of
$22,604.
Short and Long Term Liquidity
With respect to the Company's short-term liquidity, the Company's
"current ratio" (current assets divided by current liabilities) as of
September 30, 1999 was 0.59 compared to 0.69 as of September 30, 1998.
The Company's current ratio as of December 31, 1998 was 0.47 compared
to 0.76 as of June 30, 1998 and 0.58 as of June 30, 1997. The greater
the current ratio, the greater the short-term liquidity of the Company.
The Company's short term liquidity has declined due to a lack
of sales. The Company intends to raise additional capital through the
sale of common stock to fund operations until sale levels increase.
There is no assurance that the Company will be able to raise any
capital through the sale of common stock.
<PAGE> 16
With respect to the Company's long-term liquidity, the Company
will continue to depend almost exclusively on equity financing through
private placements and warrant and option exercises until such time, if
ever, that the Company's sales increase to a level sufficient to
support the Company's overheads.
Cash Used in Operating Activities
Cash used by the Company in operating activities during the nine
months ended September 30, 1999 totaled $470,875, compared to $401,990
for the nine months ended September 30, 1998. The Company incurred a
net loss of $617,584 in the nine months ended September 30, 1999,
compared to a net loss of $274,952 for the nine months ended September
30, 1998. Cash used by the Company in operating activities during the
six month period ended December 31, 1998 totaled $207,627. The Company
incurred a net loss during this period of $256,322. Cash used in
operating activities during fiscal years ended June 30, 1998 and 1997
totaled $282,186 and $157,775, respectively, including net losses of
$248,556 and $257,517, respectively.
Cash Proceeds from Financing Activities
During the nine months ended September 30, 1999, the Company
raised net cash proceeds from equity financing in the amount of
$921,006, compared to $442,922 for the nine months ended September 30,
1998. During the six month period ended December 31, 1998, the Company
raised net cash proceeds from equity financing in the amount of $95,219
compared to the twelve months ended June 30, 1998 where net cash
proceeds were $489,141. In the fiscal year ended June 30, 1997, there
were no equity financings.
At this time the Company does not have the resources to meet all
of its obligations, but is implementing plans that will generate
sufficient cash flows over the next 12 months. The Company requires
approximately $25,000 per month to pay basic overhead and further
product development will only be undertaken if there is sufficient
capital available. Plans to improve liquidity include; 1) reduce
inventory by selling product to Technilab in the fourth quarter of
1999, 2) raise additional equity as required. and 3) generate new sales
^ of the Reminder and the Program Station. The Company cannot
continue operating beyond February 2000 without additional capital. If
the Company's efforts to obtain additional financing through private
placements and warrant and option exercises are unsuccessful, the
Company may have to cease operations. If the plans to reduce inventory
in the fourth quarter through sales to TP and the plans to generate new
sales by the second half of 2000 are unsuccessful, the Company may have
to cease operations. None of these events are certain and may
jeopardize the Company's ability to meet its obligations if they are not
completed.
<PAGE> 17
Negative working capital has had the effect on the Company of
preventing it from manufacturing products; undertaking product
development; and, marketing its products.
The Company has three loans outstanding that aggregate $237,996
that are past their due date. None of the lenders have called their
loans and the Company intends to renegotiate or repay the loans as
liquidity improves. There are no assurances, however, that none of the
lenders will commence legal action in the future.
ITEM 3. DESCRIPTION OF PROPERTIES
The Company does not currently own any real property. The
Company's corporate offices are located at 15446 Bel-Red Road, Suite
310, Redmond, Washington 98052-5507, telephone (425) 376-2578. The
Company leases 1,000 square feet of office space from Group Health
Cooperative pursuant to a written lease. The term of the lease is two
years and the monthly rental payment is $1,690.00. The lease commenced
on March 15, 1999 and will expire on March 31, 2001.
ALR leases offices located at 650 Georgia Street, Suite 2000,
Vancouver, British Columbia V6B 4N8, telephone (604) 685-0992. ALR
leases 1,077 square feet of office space from Grosvenor International
Canada Limited on a month-to-month basis. The monthly rental is
CDN$1,605.
TDI leases office space located at 18161 102 Avenue, Edmonton,
Alberta, Canada, telephone (780) 448-0510. TDI leases 2,350 square
feet of space from York Realty, Inc. pursuant to a written lease. The
term of the lease is sixty (60) months and the monthly rental payment
is CDN$1,460.00. The lease commenced on June 1, 1998 and will expire
on May 31, 2003.
The Company owns no other property. TDI owns inventory consisting
of Reminders and Program Stations and raw materials.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of December 2, 1999, the
beneficial shareholdings of persons or entities holding five percent or
more of the Company's common stock, each director individually, each
named executive officer and all directors and officers of the Company
as a group. Each person has sole voting and investment power with
respect to the shares of Common Stock shown, and all ownership is of
record and beneficial.
<PAGE> 18
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Owner Position of Class
<S> <C> <C> <C>
Sidney Chan 2,000,000[1] President and 6.23%
3062 S.W. Marine Drive a member of the
Vancouver, B.C. Board of Directors
Lorne Drever 850,000 Vice President and 2.65%
4503 154th Street Member of the
Edmonton, AB T6H 5K6 Board of Directors
Greg Rae 0 Vice President of 0.00%
258 E. 26th Ave. Technology and
Vancouver, B.C. Member of the
Canada V5V 2H3 Board of Directors
Kenneth Robulak 765,500[2] Member of the Board 2.39%
1384 23rd Street of Directors
West Vanouver, B.C.
All officers and 3,615,500 11.27%
directors as a group.
(4 persons)
</TABLE>
[1] 500,000 shares are held in the name of Sidney Chan, 500,000 shares
are held in the name of Knight's Financial Limited, and 1,000,000
shares are owned by Christine Kan, Mr. Chan's wife.
[2] 663,500 shares are held in the name of Kenneth Robulak and 102,000
shares are held in the name of his wife.
No arrangements exist which may result in a change in control of
the Company.
The Company has promised to give stock options if it adopts a
stock option plan to Michael Best, a former Chief Executive Officer of
the Company and to Mr. Norman R. van Roggen a former director of the
Company. Messrs. Best and van Roggen will receive options to purchase
up to 100,000 shares of common stock at an exercise price of $0.50 per
share. The options will expire in two years. The Company has promised
to prepare and file a Form S-8 registration statement with the
Securities and Exchange Commission registering the shares issuable
under the non-qualified stock option plan which include Messrs. Best
and van Roggen's shares. As of the date hereof, said Form S-8
registration statement has not been filed with the Commission and a
non-qualified option plan has not been adopted by the Company. The
Company has not granted any other stock options or stock appreciation
rights to any other individuals as of the date hereof.
<PAGE> 19
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The name, age and position held by each of the directors and
officers of the Company are as follows:
Name Age Position Held
Sidney Chan 49 President and member of the Board of
Directors
Lorne Drever 38 Vice President and member of the Board
of Directors
Greg Rae 35 Vice President - Technology and member
of the Board of Directors
Kenneth Robulak 51 Member of the Board of Directors
All directors have a term of office expiring at the next annual
general meeting of the Company, unless re-elected or earlier vacated in
accordance with the Bylaws of the Company. All officers have a term of
office lasting until their removal or replacement by the board of
directors.
Sidney Chan - President and a member of the Board of Directors of the
Company.
Since December 14, 1999, Mr. Chan has been the President and a
member of the Board of Directors of the Company. Since 1986, Mr. Chan
has been the President of Knight's Financial Limited, a company based
in Vancouver, British Columbia.
Lorne Drever - Vice President and member of the Board of Directors of
the Company and ALR.
Mr. Lorne Drever was appointed to the position of Vice President
and member of the Board of Directors of the Company and ALR on June 4,
1999. Mr. Drever founded TDI and has served as President of TDI since
1995. Prior to becoming President of TDI, Mr. Drever was engaged in
the business of consulting corporations with respect to streamlining
work flows and paper flows within inter-office and intra-office
systems. Prior to the foregoing, Mr. Drever was employed as a teacher.
Mr. Drever hold a Bachelor of Education degree and a Bachelor or
Physical Education degree from the University of Alberta.
<PAGE> 20
Greg Rae - Vice President of Technology and a member of the Board of
Directors of the Company and ALR.
Mr. Greg Rae has been Vice President of Technology and a member of
the Board of Directors of the Company and ALR since January 1999.
Since 1993, Mr. Rae has been a consultant and project manager of
Spearhead Systems located in Vancouver, British Colombia which is
engaged in the business of providing technology and automation
solutions for corporate clients.
Ken Robulak - member of the Board of Directors.
Since December 14, 1999, Mr. Robulak has been a member of the
Board of Directors. Since August 1997, Mr. Robulak has been the
President of Brisas Capital Corp., Vancouver, British Columbia. From
October 1995 to August 1997, Mr. Robulak was the Vice President of
Penfund Management Ltd., a Toronto company. From November 1984 to
October 1995, Mr. Robulak was an investment manager with Canada Trust.
John C. Baldwin resigned as the President and a member of the
Board of Directors of the Company and ALR on December 14, 1999. Mr.
Baldwin had no disagreements with the Company or ALR on any matter of
operation, polices or practices.
Promoters
Mr. Sidney Chan and his corporation, The Knight's Group of
Companies, are deemed to be promoters of the Company. Mr. Sidney Chan
and the Knight's Group of Companies are paid any out-of-pocket expenses
incurred by them in promoting the Company's stock and products.
ITEM 6. EXECUTIVE COMPENSATION
Directors and Officers of the Company, both past and present, have
received the following compensation:
<PAGE> 21
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities All
Name and Annual Stock Underlying LTIP Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sidney Chan 1998 0 0 0 0 0 0 0
President 1997 0 0 0 0 0 0 0
& Director 1996 0 0 0 0 0 0 0
John C.
Baldwin 1998 0 0 0 0 0 0 0
President &1997 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0
(Resigned)
Lorne
Drever 1998 43,902 0 0 0 0 0 0
CEO & 1997 24,390 0 0 0 0 0 0
Director 1996 18,293 0 0 0 0 0 0
Michael
Best 1998 0 0 0 0 0 0 0
CEO & 1997 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0
(resigned)
Robert
Eadie 1998 0 0 0 0 0 0 0
President 1997 0 0 0 0 0 0 0
& Director 1996 0 0 0 0 0 0 0
(resigned)
Gregory
Rae 1998 0 0 0 0 0 0 0
Vice 1997 0 0 0 0 0 0 0
President 1996 0 0 0 0 0 0 0
& Director
Kenneth
Robulak 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0
Norman van 1998 0 0 0 0 0 0 0
Roggen 1997 0 0 0 0 0 0 0
Director 1996 0 0 0 0 0 0 0
(resigned)
Michael 1998 0 0 0 0 0 0 0
Morrison 1997 0 0 0 0 0 0 0
President 1996 0 0 0 0 0 0 0
& Director
(resigned)
Rita
Dickson 1998 0 0 0 0 0 0 0
Secretary 1997 0 0 0 0 0 0 0
(resigned) 1996 0 0 0 0 0 0 0
</TABLE>
<PAGE> 22
The Company has not granted any stock options or stock
appreciation rights to its officers or directors other than those
granted to Messrs. Best and van Roggen.
On June 4, 1999, the Company entered into a termination agreement
with Michael Best, the Company's former Chief Executive Officer and
Chairman of the Board of Directors. Under the terms of the agreement
with Mr. Best, the Company paid Mr. Best the sum of $14,999.97.
Further, upon execution of the agreement the Company paid Mr. Best
$10,000 for expenses. Mr. Best was ^ promised 100,000 shares of
the Company's common stock at an exercise price of $0.50 per share if
such plan is adopted. The Company also agreed to register the Plan
and Mr. Best's options and underlying shares on a Form S-8 registration
statement. Mr. Best will receive a commission of $0.10 for each
Reminder and 3% for each Program Station sold to Ely Lilly through
December 31, 2000. Further, Mr. Best will receive $0.07 for each
Reminder and 2.1% for each Program Station sold to Planet RX, soma.com
and Drugstore.com through December 31, 2000. Finally, the Company will
indemnify Mr. Best against all claims made against him by anyone as a
result of his acts as Chief Executive Officer of the Company.
On June 4, 1999, the Company entered into termination agreement
with Norman van Roggen, a former member of the Board of Directors.
Under the terms of the agreement, Mr. van Roggen, was ^ promised
100,000 shares of the Company's common stock at an exercise price of
$0.50 per share if such plan is adopted. The Company also agreed
to register the Plan and Mr. van Roggen's options and underlying shares
on a Form S-8 registration statement. Finally, the Company will
indemnify Mr. van Roggen against all claims made against him by anyone
as a result of his acts as a Director of the Company.
The Company does not have a non-qualified incentive stock
option plan. In the future the Company intends to adopt such a plan to
satisfy its contractual commitments to Messrs. Best and van Roggan.
The Company does not have any long-term incentive plans and
accordingly no grants were made in the 1998 fiscal year.
There are no standard or other arrangements pursuant to which the
Company's directors were compensated in their capacity as such during
the 1998 fiscal year.
<PAGE> 23
There are no compensation arrangements for employment, termination
of employment or change-in-control between the Company and the Named
Executive Officers.
The Company intends to pay the following salaries to its officers
in 1999, subject to the Company generating sufficient revenues to pay
the same.
Sidney Chan $ 35,000
Lorne Drever $ 60,000
Gregory Rae $ 60,000
Kenneth Robulak $ 25,000
The Company anticipates generating revenues from the sale of
Reminder and the Programming Station in the fourth quarter of 1999.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1987, the Company issued 11,000 shares of common stock to
Michael Morrison, the Company's sole officer and director.
On March 6, 1996, Michael Morrison sold 500 of the aforementioned
shares of common stock to Mr. Mark Gavard.
On April 21, 1998, Michael Morrison sold 10,000 of the
aforementioned shares of common stock to Robert Eadie and resigned as
the Company's sole officer and director and Robert G. Eadie was
appointed sole director of the Company and Rita S. Dickson was
appointed Secretary of the Company.
On October 22, 1998, the Company executed a distribution agreement
with ALR wherein the Company acquired a non-exclusive right to
distribute and market the Reminder and the Program Station.
On April 30, 1999, the Company completed the acquisition of 99.9%
of the outstanding Class A shares of common stock of A Little Reminder
(ALR) Ltd.
On June 13, 1998, ALR loaned TDI $100,000 as evidence by
promissory note of the same date. The interest rate on the loan is 1%
above the prime rate charged commercial customers for unsecured
commercial loans by The Royal Bank of Canada, Vancouver Branch. The
loan was due and payable on July 15, 1998, but remains unpaid as of the
date hereof.
<PAGE> 24
On February 17, 1999, 706166 Alberta Ltd., 745797 Alberta Ltd.,
Dean Drever and Sandra Ross entered into a lock-up agreement (the
"Lock-Up Agreement") wherein said shareholders agreed not to dispose of
an aggregate of 8,000,000 Class A common shares of ALR's common stock.
The Lock-Up Agreement further provides that upon certain conditions
being met, said shareholders will submit for cancellation an aggregate
of 6,000,000 shares of the Company's common stock. The terms of the
lock-up agreement have been met and the 6,000,000 shares have been
returned to the Company.
A voluntary pooling agreement, dated July 27, 1998, (the "Pooling
Agreement") initially among two shareholders of the ALR, being 706166
Alberta Ltd. and 745797 Alberta Ltd., Russell & DuMoulin (the
"Trustee"), and all shareholders who subsequently agreed to be bound by
the terms of the Pooling Agreement (collectively the "Pooled
Shareholders"), the Pooled Shareholders holding an aggregate of
20,000,000 Common Shares of ALR (the "Pooled Shares"), agreed to
deliver and have delivered the Pooled Shares to the Trustee.
The Pooling Agreement allowed for the transfer of the Pooling
Shares within the Pool. As at the date hereof, the Pooled Shareholders
have transferred a portion of their Pooled Shares to a number of
entities, none of whom beneficially owned, directly or indirectly, more
than 10% of the outstanding Common Shares of ALR. All of the
transferees of such Pooled Shares agreed to be bound by the terms and
conditions of the Pooling Agreement.
The provisions of the Pooling Agreement further provided that the
pooling agreement would apply to any shares or securities into which
the Pooled Shares may be converted, changed, reclassified, redivided,
redesignated, subdivided or consolidated of the ALR that may be
received by the registered holder of the Pooled Shares on a
reorganization, amalgamation, consolidation or merger, statutory or
otherwise. Consequently, ALR Pooled Shares were exchanged for shares
of common stock of the Company and are now subject to the terms of the
Pooling Agreement.
The Trustee was authorized to release any shares that may be the
subject of the Pooling Agreement to the registered holder of such
shares, pro rata, on the following basis:
a. 20% one year from April 30, 2000 (the "First Release");
b. 20% three (3) months following the First Release;
c. 20% six (6) months following the First Release;
d. 20% nine (9) months following the First Release; and
e. 20% twelve (12) months following the First Release.
<PAGE> 25
It is a condition of the Lock-Up Agreement that the Pooled
Shareholders shall have agreed to be bound by the terms of an amended
pooling agreement. The Pooled Shareholders have entered into an
amended pooling agreement dated February 17, 1999 (the "Amended Pooling
Agreement") substantially on the same terms and conditions as the
Pooling Agreement. The Amended Pooling Agreement provides for the
termination and replacement of the Pooling Agreement with the Amended
Pooling Agreement. The Amended Pooling Agreement further provides that
upon certain conditions occurring, the remaining 2,000,000 Offered
Shares to be held by the Principal Shareholders after such surrender
will be released by the Trustee, pro rata, on the following basis:
a. 20% on October 1, 1999; and
b. 20% on each of three (3), six (6), nine (9), and twelve (12)
months following October 31, 1999.
All other shares subject to the Amended Pooling Agreement will be
released from Pool in the manner provided for in the original Pooling
Agreement. The conditions have been met and the initial 20% of the
shares were released on October 1, 1999 and an additional 20% will be
released each quarter thereafter.
On June 4, 1999, Michael Best resigned as Chief Executive Officer
and a Director of the Company and Norman van Roggen resigned as a
Director of the Company.
On June 4, 1999, the Company entered into a termination agreement
with Michael Best, the Company's former Chief Executive Officer and
Chairman of the Board of Directors. Under the terms of the agreement
with Mr. Best, the Company has paid Mr. Best the sum of $14,999.97.
Further, upon execution of the agreement the Company paid Mr. Best
$10,000 for expenses. Mr. Best was promised 100,000 shares of the
Company's common stock at an exercise price of $0.50 per share if such
plan is adopted. The Company also agreed to register the Plan and
Mr. Best's options and underlying shares on a Form S-8 registration
statement. Mr. Best will receive a commission of $0.10 for each
Reminder and 3% for each Program Station sold to Ely Lilly through
December 31, 2000. Further, Mr. Best will receive $0.07 for each
Reminder and 2.1% for each Program Station sold to Planet RX, soma.com
and Drugstore.com through December 31, 2000. Finally, the Company will
indemnify Mr. Best against all claims made against him by anyone as a
result of his acts as Chief Executive Officer of the Company.
On June 4, 1999, the Company entered into termination agreement
with Norman van Roggen, a former member of the Board of Directors.
Under the terms of the agreement, Mr. van Roggen, was promised
100,000 shares of the Company's common stock at an exercise price of
$0.50 per share. The Company also agreed to register the Plan and
Mr. van Roggen's options and underlying shares on a Form S-8
registration statement. Finally, the Company will indemnify Mr. van
Roggen against all claims made against him by anyone as a result of his
acts as a Director of the Company.
<PAGE> 26
On September 20, 1999, the Company entered into an agreement to
acquire certain notes receivable with a face value of CDN$1,000,000
from two shareholders of the Company through the issuance of notes
payable in the amount of CDN$1,000,000. The notes receivable, which
are secured by a pledge of 5,000,000 shares of the Company, are in
default and the note holders are in the process of realizing on the
5,000,000 shares. The notes payable are due on December 31, 1999. The
notes payable are limited recourse as the Company has the option to
return the notes receivable to the vendor in full settlement of the
notes payable. Whether the notes payable will be paid or whether the
notes receivable will be returned to the vendor has not been determined
at this time.
ITEM 8. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company is
subject to or which are anticipated or threatened, other than as listed
below:
The Company's subsidiary corporation, TDI is a defendant in
a lawsuit captioned Sony of Canada, Ltd., Plaintiff, v. Timely
Devices, Inc., Defendant, Case No. 9903-16077 pending in the Court
of Queen's Bench of Alberta, Judicial District of Edmonton wherein
the plaintiff obtained a judgment against TDI in the amount of
CDN$47,697.43 on an open account on an open account as a
result of TDI's failure to pay for batteries it purchased from
Sony. The Company subsequently made a payment to reduce the
amount owing to CDN$24,213.72.
The Company and Sidney Chan and Knight's Financial Ltd.,
promoters of the Company are parties in a lawsuit captioned David
T.M. Chai, Helen Yee Wah Lee, and Margaret Chau-Ramos, Plaintiffs
v. ALR Technologies, Inc., Sidney Chan, Knight's Financial Ltd.,
et al., Defendants, Case No. C995320 pending in the Supreme Court
of British Columbia, wherein the plaintiffs allege that the
defendants breach a contract, committed negligent acts, and
breached their fiduciary duties to the plaintiffs. The plaintiffs
are seeking to recover approximately $141,000 actual damages, an
undisclosed amount of punitive damages, court costs and attorney's
fees. The litigation arose out of a loan to the Company by
one P.T. Koosa Tripatira (the "Lender"), an Indonesia corporation.
The amount of the loan was CDN$75,000. The Company acknowledges
owing said CDN$75,000 to the Lender. The plaintiffs, however,
contend that they are owed expenses of $20,025 related to the
loan. The Company denies the foregoing and intends to litigate
the issue.
<PAGE> 27
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the trading symbol "ALRT" The Company's shares did not
begin trading until December 21, 1998. Summary trading by quarter for
the 1999, 1998 and 1997 fiscal years are as follows:
[CAPTION]
<TABLE>
Fiscal Quarter High Bid [1] Low Bid [1]
<S> <C> <C>
1999
Third Quarter 0.72 0.18
Second Quarter 1.5625 0.35
First Quarter 2.375 0.6875
1998
Fourth Quarter 0.10 0.09
Third Quarter 0.00 0.00
Second Quarter 0.00 0.00
First Quarter 0.00 0.00
1997
Fourth Quarter 0.00 0.00
Third Quarter 0.00 0.00
Second Quarter 0.00 0.00
First Quarter 0.00 0.00
</TABLE>
[1] These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual
transactions.
At November 30, 1999, there were 32,078,446 common shares of the
Company issued and outstanding.
At May 17, 1999, there were 130 holders of record including common
shares held by brokerage clearing houses, depositories or otherwise in
unregistered form. The beneficial owners of such shares are not known
by the Company.
No cash dividends have been declared by the Company nor are any
intended to be declared. The Company is not subject to any legal
restrictions respecting the payment of dividends, except that they may
not be paid to render the Company insolvent. Dividend policy will be
based on the Company's cash resources and needs and it is anticipated
that all available cash will be needed for working capital.
From July 7, 1997 to April 7, 1998, the common stock of ALR traded
in a range of $0.15 to $1.55 per share on the Vancouver Stock Exchange.
The common shares were subsequently halted from trading on the
Vancouver Stock Exchange on April 7, 1998 pending a change of business
purpose. On July 27, 1998, ALR requested that ALR's common shares be
delisted from the Vancouver Stock Exchange.
<PAGE> 28
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The Company was incorporated in 1987. In the past three fiscal
years, the Company has issued the following unregistered securities for
the following consideration. There were no underwriters engaged and no
underwriting discounts or commissions paid. All issues were made
pursuant to exemptions from registration contained in Reg. 504 or
Section 4(2) of the 1933 Securities Act (the "Act").
In 1987, the Company issued 11,000 shares of Common Stock to
Michael Morrison. The shares were issued pursuant to Reg. 4(2) of the
Securities Act. Subsequently, Mr. Morrison sold 500 shares of the
aforementioned 11,000 shares to Mark Gavard and also sold 10,000 of the
foregoing shares to Robert Eadie, the Company's President and the
shares were split on a 1,000 for 1 basis. As a result, Robert Eadie
received the equivalent of 10,000,000 shares of common stock and
Messrs. Morrison and Gavard each held the equivalent of 500,000 shares
of common stock.
In November 1998, the Company completed the sale of 41,500 shares
of its common stock at $0.50 per share to 42 individuals in
consideration of $20,750. The foregoing shares were sold pursuant to
Reg. 504 of the Act and a Form D was filed with the Securities and
Exchange Commission on November 2, 1998.
On March 17, 1999, the Company sold 250,000 shares of common stock
at $0.50 per share to one individual in consideration of $125,000. The
foregoing shares were sold pursuant to Reg. 504 of the Act and a Form
D was filed with the Securities and Exchange Commission on November 2,
1998.
In April 1999, the Company acquired 99.9% of the issued and
outstanding Class A shares of common stock of A Little Reminder (ALR)
Ltd. In conjunction therewith, the Company issued 36,533,130 shares of
common stock. The total value of all assets carried on the balance
sheet of ALR on the date of the transaction was $240,729. No deduction
for depreciation or liabilities was made from value so carried on the
balance sheet. The foregoing shares were issued pursuant to Reg. 504
of the Act and a Form D was filed with the Commission on February 4,
1999.
In March 1999, the Company issued rights to U.S. holders of common
stock of the Company. The exercise price of the rights was $0.50 per
share. The rights could only be exercised by U.S. residents and the
rights expired on April 30, 1999. A total of 253,816 rights were
exercised in consideration of $126,908. The rights and underlying
shares were issued pursuant to Reg. 504 of the Act and a Form D was
filed with the Commission on February 19, 1999.
<PAGE> 29
ITEM 11. DESCRIPTION OF SECURITIES.
The Company's securities consist of common stock with a par value
of $0.001 per share. The Company's authorized capital is 75,000,000
common shares of which 32,078,446 common shares are issued and
outstanding. All of the Company's common stock, both issued and
unissued, is of the same class and ranks equally as to dividends,
voting powers and participation in the assets of the Company on a
winding-up or dissolution. No common shares have been issued subject
to call or assessment. Each common share is entitled to one vote with
respect to the election of directors and other matters. The shares of
common stock do not have cumulative voting rights. Therefore, the
holders of a majority of shares voting for the election of directors
can elect all the directors then standing for election, if they chose
to do so, and in such event the holders of the remaining shares will
not be able to elect any directors.
The common shares have no preemptive or conversion rights, and no
provisions for redemption, purchase for cancellation, surrender of
sinking fund or purchase fund. Provisions as to the creation or
modifications, amendments or variations of such rights or such
provisions are contained in the Private Corporations Act, Chapter 78,
Nevada Revised Statutes.
Neither the Articles of Incorporation nor the Bylaws of the
Company contain provisions which would delay, defer or prevent a change
in control of the Company.
The Company's transfer agent is Pacific Stock Transfer Company,
5844 Pecos Street, Suite D, Las Vegas, Nevada 89120, telephone (702)
361-3033, facsimile (702) 732-7890.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The constating documents of the Company provide that the Company
shall indemnify any director, officer, employee or agent of the Company
to the full extent permitted by the laws of the State of Nevada.
Chapter 78, rules 78.7502, 78.751 and 78.752 of the Nevada Revised
Statutes contain the provisions which, subject to certain restrictions,
in general provide for the Company's ability to indemnify, and thereby
limit the personal liability of, the directors and officers of the
Company against certain liabilities. Officers and directors of the
Company are indemnified generally against expenses, actually and
reasonably, incurred in connection with proceedings, whether civil or
criminal, provided that it is determined that they acted in good faith,
were not found guilty and, in any criminal matter, had reasonable cause
to believe their conduct was not unlawful.
<PAGE> 30
ITEM 13. FINANCIAL STATEMENTS.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
A Little Reminder (ALR) Inc.
We have audited the accompanying consolidated balance sheet of A Little
Reminder (ALR) Inc. as at December 31, 1998 and the related
consolidated statements of loss, shareholders' equity (deficit), and
cash flows for the six month period then ended. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the 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. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at
December 31, 1998 and the results of its operations and cash flows for
the six month period then ended in accordance with generally accepted
accounting principles.
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 suffered recurring losses
and negative cash flow from operations and has a net capital
deficiency, conditions that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regards to these
matters are also described in note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ KPMG LLP
Kelowna, Canada
March 29, 1999, except for note 11, as to which the date is April 12,
1999.
F-1
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
A Little Reminder (ALR) Inc.
We have audited the accompanying consolidated statements of loss,
shareholders' equity (deficit), and cash flows of A Little Reminder
(ALR) Inc. for the years ended June 30, 1998 and 1997. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the 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. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the results of its operations and cash flows
of the Company for the years ended June 30, 1998 and 1997 in accordance
with generally accepted accounting principles.
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 suffered recurring losses
and negative cash flow from operations and has a net capital
deficiency, conditions that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regards to these
matters are also described in note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ Mosbrey & Associates
Edmonton, Canada
February 19, 1999
Chartered Accountants
F-2
<PAGE> 32
A LITTLE REMINDER (ALR) INC.
Consolidated Balance Sheet
$ United States
[CAPTION]
<TABLE>
December 31,
1998
<S> <C>
ASSETS
Current assets:
Cash $ 33,642
Accounts receivable, net of allowance of $1,454 10,963
Income taxes recoverable 8,727
Inventories (note 4) 266,975
Prepaid expenses 1,021
-----------
321,328
Capital assets (note 5) 29,658
-----------
$ 350,986
===========
LIABILITIES AND SHAREHOLDERS' EQUITY (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 372,775
Demand loan (note 6) 48,914
Current portion of long term debt (note 7) 260,975
-----------
682,664
Long term debt (note 7) 136,081
Shareholders' equity (deficit):
Share capital (note 8) 422,143
Deficit (958,605)
Accumulated other comprehensive income 68,703
-----------
(467,759)
Related party transactions (note 9)
Commitment (note 10)
Subsequent events (note 11)
-----------
Year 2000 Issue (note 12) $ 350,986
===========
</TABLE>
See accompanying notes to consolidated financial statements
On behalf of the Board:
/s/ Grey Rae /s/ Lorne Drever
Director Director
F-3
<PAGE> 33
A LITTLE REMINDER (ALR) INC.
Consolidated Statement of Loss
$ United States
Six month period ended December 31, 1998 and years ended June 30, 1998
and 1997
<TABLE>
<CAPTION>
Six Months
Ended Year Ended Year Ended
12/31/98 06/30/98 06/30/97
<S> <C> <C> <C>
Sales $ 218,208 $ 409,870 $ 133,352
Cost of sales 159,350 297,024 114,031
----------- ----------- -----------
58,858 112,846 19,321
Expenses
Amortization 4,124 8,894 12,823
Development costs 6,105 35,202 35,492
Foreign exchange loss 13,149 - -
Interest on long term
debt 17,386 20,738 8,472
Professional fees 130,427 42,392 24,601
Rent 8,571 23,124 13,062
Selling, general and
administrative 79,780 83,716 62,721
Wages and benefits 55,638 125,490 122,002
------------ ------------ ------------
315,180 339,556 279,173
------------ ------------ ------------
Net loss before the
undernoted 256,322 226,710 259,852
Other income (expense):
(Loss) gain on disposal
of capital assets - (16,126) 2,335
Loss on write-off of
loan receivable - (5,720) -
------------ ------------ ------------
- (21,846) 2,335
------------ ------------ ------------
Net loss for the period $ 256,322 $ 248,556 $ 257,517
============ ============ ============
Loss per Class A share $ (0.01) $ (0.01) $ (0.01)
============ ============ ============
Weighted average Class
A shares outstanding 31,404,279 20,789,863 20,000,000
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 34
A LITTLE REMINDER (ALR) INC.
Consolidated Statement of Shareholders' Equity (Deficit)
$ United States
Six month period ended December 31, 1998 and years ended June 30, 1998
and 1997
<TABLE>
<CAPTION>
Total
Share Other Comprehensive Shareholders'
Capital Comprehensive Income Equity
(Note 8) Deficit Income (Loss) (Deficit)
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1996 $ 206,051 $ (196,210) $ - $ - $ 9,841
Net loss - (257,517) - (257,517) (257,517)
Foreign exchange
translation adjustment
(note 2(a)) - - 5,006 5,006 5,006
Comprehensive -----------
income (loss) (252,511)
---------- ---------- -------- ----------- ----------
Balance,
June 30, 1997 206,051 (453,727) 5,006 (242,670)
Net change in share
capital (note 8) 99,739 - - - 99,739
Net loss - (248,556) - (248,556) (248,556)
Foreign exchange
translation
adjustment
(note 2(a)) - - 36,341 36,341 36,341
Comprehensive income -----------
(loss) (212,215)
---------- ---------- --------- ----------- ----------
Balance,
June 30, 1998 305,790 (702,283) 41,347 (355,146)
Net change in
share capital
(note 8) 116,353 - - - 116,353
Net loss - (256,322) - (256,322) (256,322)
Foreign exchange
translation
adjustment
(note 2(a)) - - 27,356 27,356 27,356
Comprehensive income -----------
(loss) (228,966)
--------- ---------- ---------- ----------- ----------
Balance,
December 31,
1998 $ 422,143 $ (958,605) $ 68,703 $ (467,759)
========== ========= ========= =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 35
A LITTLE REMINDER (ALR) INC.
Consolidated Statement of Cash Flows
$ United States
Six month period ended December 31, 1998 and years ended June 30, 1998
and 1997
<TABLE>
<CAPTION>
Six Month
Year Ended Year Ended period ended
12/31/98 06/30/98 06/30/97
<S> <C> <C> <C>
Cash flows from operating activities (note 13):
Cash received from customers $ 221,547 $ 601,719 $ 170,489
Cash paid to suppliers and employees (419,744) (983,122) (383,175)
Interest paid on long term debt (9,430) (29,482) (115,959)
---------- ---------- ----------
Net cash used by operating activities (207,627) (282,186) (157,775)
Cash flows from financing activities:
Proceeds from long term debt 42,990 135,886 340,286
Repayment of long term debt (15,130) (96,598) (210,239)
Class A shares issued for net cash
assets on business combination 91,401 - -
Class A shares issued for cash 95,219 489,141 -
Class A shares acquired - (203,860) -
---------- ---------- ----------
Net cash provided by financing
activities 214,480 324,569 130,047
Cash flows from investing activities:
Purchase of capital assets (8,467) (8,990) (24,168)
Proceeds on disposal of capital assets - - 20,112
---------- ---------- ----------
Net cash used in investing activities (8,467) (8,990) (4,056)
Foreign currency translation adjustment (679) 25,146 5,565
---------- ---------- ----------
Increase (decrease) in cash (2,293) 58,539 (26,219)
Cash (bank overdraft),
beginning of period 35,935 (22,604) 3,615
---------- ---------- ----------
Cash (bank overdraft),
end of period $ 33,642 $ 35,935 $ (22,604)
========== ========== ==========
</TABLE>
The Company's non cash investing activities for all periods presented
consists solely of net assets acquired in the business combination
described in note 3.
See accompanying notes to consolidated financial statements
F-6
<PAGE> 36
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements
$ United States
December 31, 1998
A Little Reminder (ALR) Inc. was incorporated under the laws of British
Columbia on May 24, 1996 under the name 4052 Investments Ltd. On July
25, 1996, the name of the Company was changed to Tren Exploration Inc.
On September 23, 1996, the Company was continued under the federal laws
of Canada. On July 29, 1998, the Company's name was changed to A Little
Reminder (ALR) Inc.
The principal business activity of the Company includes the design,
marketing, and distribution of a medication compliance device called
the ALR system.
1. Basis of presentation:
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles 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.
These 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 the exercise of
outstanding warrants (see note 11 (c)) and expand its operations into
the United States through a business combination with a United States
public company (see note 11 (a)).
2. Significant accounting policies:
a) Translation of financial statements
For the all periods presented, A Little Reminder (ALR) Inc.
operated primarily in Canada, and its operations were conducted
primarily in Canadian currency. These statements are presented in
United States currency for the convenience of readers accustomed
to United States currency. The method of translation applied was
as follows:
i) Assets and liabilities are translated at the rate of exchange
in effect at the balance sheet date, being US $1.00 per
CDN$1.5333 (June 30, 1998 - US$1.00 per CDN$1.4716; June 30,
1997 - US$1.00 per CDN$1.3810).
F-7
<PAGE> 37
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
2. Significant accounting policies (continued):
a) Translation of financial statements (continued)
Revenues and expenses are translated at the average exchange rate
for the six month period ended December 31, 1998, being US$1.00
per CDN$1.5285 (year ended June 30, 1998 - US$1.00 per CDN$1.4216;
year ended June 30, 1997 - US$1.00 per CDN$1.3685).
i) The net adjustment arising from the translation is included
in accumulated other comprehensive income.
b) Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Timely Devices Inc.
("TDi"). All significant intercompany balances and transactions
have been eliminated on consolidation.
Effective July 27, 1998, Tren Exploration Inc. ("Tren") acquired
100% of the outstanding Class A common shares of A Little Reminder
(ALR) Inc. ("ALR (old)") through an exchange of shares. As ALR
(old) shareholders obtained control of Tren through the exchange
of their Class A common shares for Class A common shares of Tren,
the acquisition of ALR (old) has been accounted for in these
consolidated financial statements as a reverse acquisition.
Effective July 29, 1998, ALR (old) was wound up into Tren and, as
a result, Tren acquired 100% of the outstanding common shares of
TDi. Also on this date, Tren changed its name to A Little
Reminder (ALR) Inc. ("ALR (new)"). ALR (old) was not active for
the period from July 1, 1998 to July 27, 1998, the date of
acquisition. Consequently, the consolidated statements of loss,
shareholders' equity (deficit) and cash flows reflect the results
of operations and changes in financial position of TDi, for the
six month period ended December 31, 1998, combined with those of
its legal parent, Tren and subsequently ALR (new), from
acquisition on July 27, 1998, in accordance with generally
accepted accounting principles for reverse acquisitions.
In these notes to the consolidated financial statements, the
Company, prior to the business combination, is referred to as
"Tren", and after completion of the business combination, is
referred to as "ALR (new)".
c) Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-8
<PAGE> 38
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
2. Significant accounting policies (continued):
d) Financial instruments
The fair values of cash, accounts receivable, income taxes
recoverable and accounts payable and accrued liabilities
approximate their carrying values due to the relatively short
periods to maturity of these instruments. It is not possible to
arrive at a fair value for the demand loan as the maturity date is
not determinable.
The fair value of the Royal Bank of Canada loan, note payable and
grant repayable approximate their carrying value because they bear
interest at rates which are not significantly different from
current market rates. It is not practical to determine a fair
value for the promissory note payable and shareholders' loans due
to the nature of the amounts and the absence of a market for such
financial instruments. The fair value of the General Motors
Acceptance Corporation financing agreement is not materially
different from its carrying value. Fair value has been estimated
by discounting future principal and interest cash flows at the
current rate available for the same or similar instrument. The
maximum credit risk exposure for all financial assets is the
carrying value of the asset.
e) Inventories
Raw material inventory is stated at the lower of cost and
replacement cost. Finished goods inventory is stated at the lower
of cost and net realizable value. Cost for all inventories is
determined using a weighted average cost method.
f) Capital assets
Capital assets are stated at cost. Amortization is provided using
the declining balance method at the following annual rates:
Asset Rate
Automotive equipment 30%
Computer equipment 30%
Office equipment 20%
Production equipment 30%
g) Loss per Class A share
Loss per Class A share has been calculated using the weighted
average number of Class A shares issued and outstanding during the
period. The number of issued and outstanding Class A shares of
TDi at June 30, 1997 and 1996 reflect the equivalent amount of
Tren Class A shares issued in exchange for TDi Class A shares at
those dates. The full exercise of the warrants referred to in
note 8 (c) are anti-dilutive and consequently loss per Class A
share on a diluted basis has not been presented.
F-9
<PAGE> 39
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
3. Business combination:
Effective July 27, 1998, ALR (old) and Tren executed a business
combination agreement. Tren issued 22,437,500 Class A common shares to
the shareholders of ALR (old) in consideration for all of the issued
and outstanding Class A common shares of ALR (old) on the basis of
1.022 Class A common shares of Tren for every Class A common share of
ALR (old). As the former shareholders of ALR (old) obtained control of
Tren through the share exchange, this transaction has been accounted
for in these financial statements as a reverse acquisition and the
purchase method of accounting has been applied. Under reverse
acquisition accounting, ALR (old) is considered to have acquired Tren
with the results of Tren's operations included in the consolidated
financial statements from the date of acquisition. The acquisition has
been recorded at the net asset value of Tren at the date of
acquisition. The acquisition details are as follows:
Net assets
Cash $ 32,704
Advances to TDi 123,942
Accounts payable and accrued liabilities (74,294)
Demand loan (48,914)
---------
$ 33,438
---------
Consideration given for net assets acquired
22,437,500 Class A common shares issued $ 33,438
---------
As ALR (old) is deemed to be the continuing entity, share capital of
ALR (new) has been decreased by $1,804,343 (note 8 (b)) as a result of
accounting for this combination as a reverse takeover.
The consolidated statements of loss and deficit and cash flows reflect
the results of operations and changes in financial position of TDi, the
legal subsidiary, for the six month period ended December 31, 1998,
combined with those of ALR (new) (formerly Tren) the legal parent, from
July 27, 1998, being the effective date of the acquisition, to December
31, 1998.
Under reverse takeover accounting principles and the purchase method of
accounting, the results of operations of Tren are included in the
consolidated financial statements only from the effective date of the
acquisition.
F-10
<PAGE> 40
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
3. Business combination (continued):
The following table sets forth unaudited pro-forma statements of
operations data of the Company which reflects adjustments to the
consolidated financial statements to present the business combinations
of Tren, ALR (old) and TDi as if the combinations were effective July
1, 1996 and 1997:
12/31/98 06/30/98 06/30/97
(Unaudited) (Unaudited) (Unaudited)
Sales $ 218,208 $ 409,870 $ 133,352
----------- ----------- -----------
Net loss for the period $ 260,464 $ 1,562,862 $ 1,421,229
----------- ----------- -----------
Loss per Class A share $ (0.01) $ (0.08) $ (0.07)
----------- ----------- -----------
The pro-forma financial information does not necessarily reflect the
results of operations that would have occurred had Tren, ALR (old) and
TDi constituted a single entity during such periods.
4. Inventories:
Raw materials $ 260,065
Finished goods 6,910
---------
$ 266,975
=========
5. Capital assets:
Accumulated Net book
Cost amortization value
Automotive equipment $ 21,209 $ 9,981 $ 11,228
Computer equipment 7,620 4,840 2,780
Office equipment 10,440 1,716 8,724
Production equipment 10,129 3,203 6,926
-------- -------- --------
$ 49,398 $ 19,740 $ 29,658
-------- -------- --------
6. Demand loan:
The demand loan is payable to a former shareholder of the Company, is
unsecured, does not bear interest, and has no stated terms of
repayment.
F-11
<PAGE> 41
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
7. Long term debt:
Royal Bank of Canada loan $ 87,961
General Motors Acceptance Corporation, financing agreement
repayable in monthly instalments of $346 (CDN$530) including
interest at 10.90% per annum, due October 1, 2001; secured by
specific automotive equipment with a carrying value of $11,227
10,162
Note payable, unsecured, bearing interest at prime plus 1.5% and
due on January 31, 1999
138,403
Promissory note payable to a company owned by a former director,
unsecured, bearing interest at prime plus 1% per annum and due
July 15, 1998.
67,498
Grant repayable to the Province of Alberta, Canada, unsecured,
repayable at 5% of the Company's annual gross revenue and due on
January 30, 1999. Overdue payments bear interest at prime rate
plus 2% per annum. At December 31, 1998 $19,006 of payments were
overdue.
22,827
Shareholders' loans, unsecured, bearing no interest and with no
stated terms of repayment
70,205
---------
397,056
Current portion due within one year 260,975
---------
$ 136,081
=========
F-12
<PAGE> 42
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
7. Long term debt (continued):
The Royal Bank of Canada loan is repayable in monthly principal
instalments of $2,772 (CDN$4.250) on January 1, 1999 and increasing by
$65 (CDN$100) per month thereafter. The loan bears interest at the
Royal Bank prime rate plus 4.5% per annum and is secured by a general
security agreement, postponement of all shareholders' loans and personal
guarantees of the principal shareholders.
The aggregate maturities of long term debt, excluding shareholders'
loans, for each of the three years subsequent to December 31, 1998 are
as follows:
1999 - $260,975; 2000 - $45,947; 2001 - $19,929.
8. Share capital:
a) Authorized:
Unlimited number of Class A voting common shares without par
value.
Unlimited number of Class B voting common shares without par
value, non-participating, redeemable for $0.01 per share and
convertible into Class A shares for a period of two years
following the date the Company receives receipt for the filing of
a prospectus from any Security Commission in Canada at a
conversion price of $0.26 (CDN$0.40) per Class A share for the
first year and $0.30 (CDN$0.46) per Class A share for the second
year.
Unlimited number of Class C preferred shares, non-voting without
par value
b) Issued and outstanding:
12/31/98 06/30/98 06/30/97
Class A Shares (See below) $ 617,799 $ - $ -
Class A shares of ALR (old) - 509,650 -
Class A shares of Tdi - - 1
124,695 Class B shares 1 - -
Class D shares of Tdi - - 206,050
--------- --------- ---------
617,800 509,650 206,051
Treasury shares (6,000,000
Class A shares) (195,657) - -
Investment in Class A
shares of Tren - (203,860) -
--------- --------- ---------
$ 422,143 $ 305,790 $ 206,051
--------- --------- ---------
F-13
<PAGE> 43
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
8. Share capital (continued):
b) Issued and outstanding (continued):
The continuity of the Company's issued and outstanding Class A shares
is as follows:
Number of
shares Amount
TDi
Balance, June 30, 1997 and 1996 100 $ 1
Exchanged into ALR (old) Class A
shares at 200,000 Class A shares
for each TDi Class A share 19,999,900 -
---------- ---------
Class A shares of ALR (old) issued
to TDi shareholders, at time of
business combination on
November 21, 1997 20,000,000 $ 1
========== =========
ALR (old)
Balance, September 4, 1997 (date of
incorporation) - $ -
Issued for note receivable determined
to have no value and written off 450,000 -
Class A shares issued to acquire
Class A shares of TDi (above)
recorded at the carrying value
of ALR (old) net assets 20,000,000 1
---------- ---------
ALR (old) balance, November 21, 1997
after business combination with Tdi 20,450,000 1
Issued for cash at CDN $0.50 (US$0.33)
per share 1,500,000 489,141
---------- ---------
Balance, June 30, 1998 21,980,000 489,142
Exchanged into Tren Class A shares of
4 shares for each ALR (old) Class A
share not held in escrow and 1 Class
A share for each ALR (old) Class A
share held in escrow 487,500 -
---------- ---------
Class A shares of Tren issued to
ALR (old) shareholders at time of
business combination on July 27, 1998 22,437,500 $ 489,142
========== =========
F-14
<PAGE> 44
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
8. Share capital (continued):
b) Issued and outstanding (continued):
Number of
shares Amount
ALR (new)
Tren balance, June 30, 1998 10,253,180 $ 2,293,485
Reduction in the book value of Tren's
Class A share capital to that of
ALR (old) - (1,804,343)
---------- ------------
Tren balance, July 26, 1998, prior
business combination with ALR (old) 10,253,180 489,142
Class A shares of Tren issued to
acquire Class A shares of ALR (old)
(above), recorded at the carrying
value of Tren net assets 22,437,500 33,438
---------- ------------
Tren balance, July 27, 1998, after
business combination with ALR (old) 32,690,680 522,580
Issued on the exercise of warrants for
cash at $0.26 (CDN$0.40) per share 365,000 95,219
---------- ------------
ALR (new) balance, December 31, 1998 33,055,680 $ 617,799
========== ============
c) Warrants:
The Company has 6,487,000 (June 30, 1998 - nil) warrants
outstanding at December 31, 1998. Each warrant entitles the
holder to acquire one Class A share of the Company for $0.26
(CDN$0.40) per share. The warrants are non-transferable and non-
assignable and may only be exercised by the beneficial owner of
the warrants as of June 9, 1998. The warrants expire on January
29, 1999 (see note 11 (b)). The continuity of outstanding
warrants for the six month period ended December 31, 1998 is as
follows:
Number
Outstanding, June 30, 1998 -
Warrants outstanding, July 27, 1998, after
business combination 6,852,000
Warrants exercised in the period (365,000)
---------
Outstanding, December 31, 1998 6,487,000
---------
F-15
<PAGE> 45
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
9. Related party transactions:
During the six month period ended December 31, 1998, the Company had
selling, general and administrative expenses to directors and
affiliated companies in the amount of $14,733. At December 31, 1998,
the Company had a promissory note payable of $67,498 to a company owned
by a former director and loans from shareholders of $70,205. Terms of
amounts payable to the company owned by a former director and the loans
from shareholders are disclosed in note 7.
10. Commitment:
The Company rents premises and a vehicle under operating leases with
various expiry dates to May 31, 2003. The annual rent payable in each
of the next five years under these leases is as follows:
1999 - $19,244; 2000 - $11,449; 2001 - $11,449; 2002 - $11,449; 2003 -
$4,770.
11. Subsequent events:
a) Offer to acquire outstanding and issued Class A shares:
Subsequent to December 31, 1998 the Company's shareholders received
an offer to transfer their Class A shares to ALR Technologies Inc.
("ALRT"), a Company listed on the NASD OTCBB, in exchange for an
equal number of common shares of ALRT. Through the exchange of
shares, the Company's shareholders would obtain control of ALRT.
The offer is open for acceptance until April 30, 1999,
Under reverse takeover accounting principles and the purchase
method of accounting, the results of operations of ALRT will be
included in the consolidated financial statements only from the
effective date of the acquisition.
The following table sets forth unaudited pro-forma statements of
operations data of the Company which reflects adjustments to the
consolidated financial statements to present the business
combination with ALRT as if the combination was effective July 1,
1996 and 1997.
12/31/98 06/30/98 06/30/97
(Unaudited) (Unaudited) (Unaudited)
Sales $ 218,208 $ 409,870 $ 133,352
---------- ---------- ----------
Net loss for the period $ 276,897 $ 248,556 $ 257,517
---------- ---------- ----------
Loss per common share
of ALRT $ (0.01) $ (0.01) $ (0.01)
---------- ---------- ----------
The pro-forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company and ALRT
constituted a single entity during such periods.
F-16
<PAGE> 46
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
11. Subsequent events (continued):
b) Extension of warrant expiry date:
Subsequent to December 31, 1998 the expiry date of the outstanding
warrants was extended to April 30, 1999.
c) Exercise of warrants:
i) Subsequent to December 31, 1998, 3,491,000 warrants have been
exercised for total cash proceeds of $910,715.
12. Year 2000 Issue:
The Company is in the process of contacting critical suppliers and
customers whose computerized systems interface with the Company's
systems, regarding their plans and progress in addressing their Year
2000 Issues. The Company has received varying information from such
third parties on the state of compliance or expected compliance. The
Company has not developed a Year 2000 remediation plan and has not
developed a contingency plan in the event that any critical supplier or
customer is not compliant.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the
Company's operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 problem and the
uncertainty of the Year 2000 readiness of third party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the
Company's operations, liquidity or financial condition.
F-17a
<PAGE> 47
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
13. Reconciliation of net loss for the period to net cash used by
operating activities:
12/31/98 06/30/98 06/30/97
Net loss for the period $ (256,322) $ (248,556) $ (257,517)
Adjustments to reconcile
net loss for the period
to net cash used by
operating activities:
Amortization 4,124 8,894 12,823
Loss (gain) on disposal
of capital assets - 16,126 (2,335)
Loss on write-off of
loan receivable - 5,720 -
Interest accrued and
included in long term debt 5,942 - -
Allowance for doubtful
accounts 1,454 - -
Decrease in accounts
receivable 1,885 16,457 (1,886)
Increase in inventories (190,145) 6,811 (5,433)
Decrease in prepaid expenses 4,383 (4,425) 14
Increase in accounts payable
and accrued liabilities 221,052 (83,213) 96,559
----------- ---------- ----------
48,695 (33,630) 99,742
Net cash used by operating
activities $ (207,627) $ (282,186) $ (157,775)
=========== ========== ==========
F-17b
<PAGE> 48
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
14. Income taxes:
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are presented below:
Deferred tax assets (net):
Capital assets, principally due to difference
in tax and accounting amortization $ 1,996
Losses for income tax purposes carried forward 359,426
Share issue costs 104,328
Foreign exploration and development expenditures 531,870
----------
Gross deferred tax assets 997,620
Less valuation allowance (997,620)
Net deferred tax assets $ -
The valuation allowance at July 1, 1998 was $276,222. The net change
in the valuation allowance for the six month period ended December 31,
1998 was an increase of $721,398.
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. In the case of foreign
exploration and development expenditures, the ultimate realization of
the deferred tax asset is dependent upon the generation of taxable
resource property income. In order to fully realize the deferred tax
assets, the Company will need to generate future taxable income of
approximately $2,341,786 and $1,175,404, in order to realize deferred
tax assets other than the foreign exploration and development
expenditure deferred tax asset, prior to the expiration of the loss
carryforwards in 2002. The Company has yet to realize taxable income
in any preceding year of operations. Based on the history of tax
losses, management is unable to assert that it is more likely than not
that the Company will realize the benefits of these differences and, as
such, a valuation allowance equal to the gross deferred assets has been
assessed.
Subsequently, recognized tax benefits relating to the valuation
allowance for deferred tax assets as of December 31, 1998 will be
reported in the consolidated statement of loss and deficit, in the year
it is determined that it is more likely than not that they will be
realized.
F-18
<PAGE> 49
A LITTLE REMINDER (ALR) INC.
Notes to Consolidated Financial Statements (continued)
$ United States
December 31, 1998
15. Canadian generally accepted accounting principles reconciliation:
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") in the United
States. These principles, as applied to the Company's consolidated
financial statements, are not materially different than Canadian GAAP
16. Comparative figures:
Certain comparative figures have been reclassified to conform with the
financial statement presentation adopted in the current year.
F-19
<PAGE> 50
ALR TECHNOLOGIES INC.
Consolidated Balance Sheet ($ United States)
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and short term investments $ 52,641
Accounts receivable 5,533
Income taxes recoverable 9,103
Inventories 314,679
Prepaid expenses, deposits and advances 43,232
-----------
425,188
Capital assets, net of accumulated amortization 39,518
-----------
$ 464,706
===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 424,561
Demand loan 51,020
Current portion of long term debt 239,495
-----------
715,076
Long term debt 13,416
Shareholders' equity (deficit)
Capital stock 32,079
Additional paid in capital 1,260,101
Deficit (1,576,189)
Accumulated other comprehensive income 20,223
-----------
(263,786)
-----------
$ 464,706
===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 51
ALR TECHNOLOGIES INC.
Consolidated Statement of Loss and Comprehensive Income (Loss) and
Deficit ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
Consolidated Statement of Loss and Comprehensive Income (Loss)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Sales $ 252,823 $ 316,042
Cost of sales 146,964 220,992
----------- ----------
105,859 95,050
Expenses:
Amortization 8,537 8,481
Consulting fees 169,473 -
Development costs 9,244 34,628
Foreign exchange (gain) loss (3,148) 17,769
Interest on long term debt 12,565 13,767
Investor relations 20,000 -
Market development 47,228 -
Professional fees 126,682 86,483
Rent 24,955 10,700
Selling, general and administrative 106,384 107,011
Wages and benefits 201,523 70,193
----------- ----------
723,443 349,032
----------- ----------
Net earnings (loss) before the
undernoted (617,584) (253,982)
Other expense:
Loss on disposal of capital assets - (15,596)
Loss on write-off of loan receivable - (5,374)
----------- ----------
- (20,970)
----------- ----------
Net loss for the period (617,584) (274,952)
Other comprehensive income (loss):
Foreign currency translation
adjustment (48,480) 43,976
----------- ----------
Comprehensive income (loss) $ (666,064) $ (230,976)
=========== ==========
Loss per share $ (0.02) $ (0.01)
=========== ==========
Weighted average number of shares
outstanding 30,251,743 32,364,711
=========== ==========
Consolidated Statement of Deficit:
Deficit, beginning of period $ (958,605) $ (510,677)
Net loss for the period (617,584) (274,952)
----------- ----------
Deficit, end of period $(1,576,189) $ (784,628)
=========== ==========
</TABLE>
=========== ==========
See accompanying notes to consolidated financial statements
2
<PAGE> 52
ALR TECHNOLOGIES INC.
Consolidated Statement of Cash Flows ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 258,225 $ 300,508
Cash paid to suppliers and employees (716,536) (688,731)
Interest paid on long term debt (12,565) (13,767)
----------- ----------
Net cash used by operating activities (470,875) (401,990)
Cash flows from financing activities:
Proceeds from long term debt - 104,493
Repayment of long term debt (201,389) (140,695)
Shares issued for cash 921,006 442,922
Shares issued for net cash assets
on acquisition (209,682) 156,836
Class A shares acquired - (195,925)
----------- ----------
Net cash provided by financing
activities 509,935 367,631
Cash flows from investing activities:
Purchase of capital assets (11,442) (13,917)
----------- ----------
Net cash used in investing activities (11,442) (13,917)
Foreign currency translation adjustment (8,619) 7,625
----------- ----------
Increase (decrease) in cash during
the period 18,999 (40,651)
Cash, beginning of period 33,642 33,187
=========== ==========
Cash, end of period $ 52,641 $ 7,464
=========== ==========
3-a
<PAGE> 53
ALR TECHNOLOGIES INC.
Consolidated Statement of Cash Flows ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
1999 1998
<S> <C> <C>
Reconciliation of net loss for
the period to net cash used by
operating activities
Net loss for the period $ (617,584) $ (274,952)
Adjustments to reconcile net loss
for the period to net cash used by
operating activities
Amortization 8,537 8,481
Loss on disposal of capital assets - 15,596
Loss on write-off of loan receivable - 5,374
Decrease (increase) in accounts
receivable 5,401 (15,534)
Decrease in income taxes recoverable - 1,095
Increase in inventories (36,207) (330,945)
Decrease in prepaids,
deposits & advances 189,970 64
Increase (decrease) in accounts
payable (20,992) 188,831
----------- ----------
Net cash used by operating activities $ (470,875) $ (401,990)
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3-b
<PAGE> 54
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
1. Basis of presentation
The financial statements are prepared in accordance with
accounting principles generally accepted in the United States for
interim financial reporting and pursuant to the instructions of
the United States Securities and Exchange Commission Regulation
S-B. While these financial statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for
fair presentation of the results of the interim period, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. For further information, refer to the financial
statements and footnotes thereto included in the Company's Form
10-SB dated December 9, 1999.
2. Significant accounting policy
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 deficit and cash flows reflect the results of operations
and changes in financial position of ALR Inc. for the six month
period ended June 30, 1998, 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. has not been
presented in the consolidated financial statements as the amount
is not material.
4
<PAGE> 55
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
3. Business combination
Effective April 30, 1999, ALR Tech and ALR Inc. executed a
business combination agreement. ALR Tech issued 36,533,130 common
shares to the shareholders of ALR Inc. in consideration for 99.96%
of the issued and outstanding Class A common shares of ALR Inc. on
the basis of one common share of ALR Tech for every Class A common
share of ALR Inc. As the former shareholders of ALR Inc. obtained
control of ALR Tech through the share exchange, this transaction
has been accounted for in these financial statements as a reverse
acquisition and the purchase method of accounting has been
applied. Under reverse acquisition accounting, ALR Inc. is
considered to have acquired ALR Tech with the results of ALR Tech's
operations included in the consolidated financial statements from
the date of acquisition. The acquisition has been recorded at the
net asset value of ALR Tech at the date of acquisition. The
acquisition details are as follows:
Net assets
Cash $ 43,469
Prepaid expenses 191,492
Capital assets 5,768
Accounts payable and accrued liabilities (56,726)
Advances from ALR Inc. (253,151)
---------
Consideration given for net assets acquired
36,533,130 common shares issued $ (69,148)
=========
As ALR Inc. is deemed to be the continuing entity, share capital
has been increased by $1,078,670 (note 4(b)) as a result of
accounting for this combination as a reverse takeover.
In conjunction with this business combination, 6,000,000 shares of
ALR Tech were returned for cancellation and the Company acquired
an additional 10,000,000 shares for $1,000 which were then
cancelled.
5
<PAGE> 56
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
3. Business combination (continued)
The consolidated statements of loss and deficit and cash flows
reflect the results of operations and changes in financial
position of ALR Inc, the legal subsidiary, for the six month
period ended June 30, 1999, combined with those of ALR Tech, the
legal parent, from April 30, 1999, being the effective date of the
acquisition, to June 30, 1999.
The following table sets forth the pro-forma consolidated
statement of operations data of the Company which reflects
adjustments to the consolidated financial statements to present
the business combination of ALR Tech and ALR Inc. as if the
combinations were effective January 1, 1998 and 1999:
September 30 September 30
1999 1998
(Unaudited) (Unaudited)
Sales $ 252,823 $ 316,042
---------- ----------
Net loss for the period $ (937,813) $ (306,527)
---------- ----------
Loss per share $ (0.03) $ (0.01)
========== ==========
The pro-forma financial information does not necessarily reflect
the results of operations that would have occurred had ALR Tech
and ALR Inc. constituted a single entity during such periods.
7
<PAGE> 57
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
4. Capital stock
a) Authorized:
The authorized capital stock of the Company consists of 75,000,000
common shares with a par value of $0.001 per share.
b) Issued and outstanding:
The continuity of the Company's issued and outstanding common
shares is as follows:
<TABLE>
<CAPTION>
Capital Stock Additional
Number of Paid in
Shares Amount Capital
<S> <C> <C> <C>
Balance, December 31, 1998 11,041,500 $ 11,042 $ 20,708
Issued for cash at $0.50
per share 503,816 504 251,404
----------- -------- -----------
11,545,316 11,546 272,112
Increase in book value of
ALR Tech's share capital
to that of ALR Inc. 36,532 1,042,138
----------- -------- -----------
Balance, April 30, 1999 prior
to business combination
with ALR Inc. 11,545,316 48,078 1,314,250
Shares issued to acquire
shares of ALR Inc.,
recorded at the carrying
value of ALR Tech's
net assets 36,533,130 (69,148)
Common shares acquired
and retired (16,000,000) (16,000) 15,000
----------- -------- -----------
Balance, September 30, 1999 32,078,446 $ 32,078 $ 1,260,102
=========== ======== ===========
</TABLE>
8
<PAGE> 57
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
c) Stock options
Pursuant to two separate termination agreements entered into with
the Company's former Chief Executive Officer and Chairman of the
Board of Directors and with another former member of the Board of
Directors, the Company is committed to grant options to purchase
a total of 200,000 shares of the Company's common stock at an
exercise price of $0.50 per share exercisable for two years. The
grants will be subject to the obtaining of any required regulatory
approvals and the filing of a Form 10-SB and Form S-8.
The Company accounts for stock-based compensation using the
intrinsic value based method whereby compensation cost is recorded
for the excess, if any, of the quoted market price of the common
share over the exercise price at the date granted for all common
stock options. As at September 30, 1999, no compensation costs
has been recorded for any period under this method.
5. Contingencies
a) On September 20, 1999, the Company entered into an agreement
to acquire certain notes receivable with a face value of Cdn.
$1,000,000 from two shareholders of the Company through the
issuance of notes payable in the amount of Cdn. $1,000,000.
The notes receivable, which are secured by a pledge of
5,000,000 shares of the Company, are in default and the notes
holders are in the process of realizing on the 5,000,000
shares. The notes payable are due on December 31, 1999. The
notes payable are limited recourse as the Company has the
option to return the notes receivable to the vendor in full
settlement of the notes payable. Whether the notes payable
will be paid or whether the notes receivable will be returned
to the vendor has not been determined at this time.
b) The Company's subsidiary corporation is defendent in a
lawsuit wherein the plaintiff obtained a judgement in the
amount of Cdn. $47,697.43 on an open account. The Company
subsequently made a payment to reduce the amount owing to
Cdn. $24,213.72 and has provided for the balance of the claim
of Cdn. $23,483.71 in accounts payable at September 30, 1999.
See Item 8, Legal Proceeds.
c) The Company is a party to a lawsuit wherein the plaintiffs
are seeking to recover approximately $141,000 actual damages,
an undisclosed amount of punitive damages, court costs and
attorney's fees. The portion of the claim related to the
Company is Cdn. $75,000 plus a recovery of expenses of
$20,025 plus interest and court costs. The Company has
provided for Cdn. $75,000 in the accounts at September 30,
1999.
<PAGE> 59
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements ($ United States)
Nine month periods ended September 30, 1999 and September 30, 1998
(Unaudited)
6. Related party transaction
Included in prepaid expenses, deposits and advances is an advance of
$40,146 to a Vice-President of the Company. The advance is due on
demand and does not bear interest.
10
<PAGE> 60
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On October 15, 1998, the accounting firm of Mowbrey and
Associates was dismissed by the Company as its independent accountant
effective for the period ended December 31, 1998. The Mowbrey and
Associates' report on the financial statements for either of the past
two years did not contain an adverse opinion or a disclaimer of
opinion, or was qualified or modified as to uncertainty, audit scope,
or accounting principles. The decision to change accountants was
recommended by the Audit Committee of the Company and approved by the
Board of Directors of the Company. During the Company's most two recent
fiscal years and any subsequent interim period preceding such
dismissal, there were no disagreements with Mowbrey and Associates on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
On October 15, 1998, the Company appointed the accounting firm of
KPMG LLP as its independent accountant effective for the fiscal period
ended December 31, 1998. The Company decided to change independent
accountants in order to retain a firm with offices in both Canada and
the United States.
The Company has provided the foregoing disclosure to Mowbrey and
Associates, now known as Mowbrey Gil. Mowbrey Gil concurs in the
foregoing and their response is included as "Exhibit 16.1" herein.
ITEM 15. INDEX TO FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
(b) Exhibits:
Exhibit
Number Description
3.1* Initial Articles of Incorporation.
3.2* Bylaws
3.3* Articles of Amendment to the Articles of Incorporation,
as filed.
3.4* Articles of Amendment to the Articles of Incorporation,
as filed.
16.1 Letter of Mowbrey and Associates.
27.1* Financial Data Schedule.
99.1* Distribution Agreement between the Company and ALR.
99.2* Pooling Agreement
99.3* Amended Pooling Agreement
99.4* Lock-Up Agreement
99.5* Termination Agreement with Michael Best.
99.6* Termination Agreement with Norman van Roggen.
99.7* Assignment Agreement.
99.8 Distributorship Agreement.
<PAGE> 61
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the Company has caused this signature page to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALR TECHNOLOGIES INC.
BY: /s/ Sidney Chan
Sidney Chan
Further each officer and director certifies that he has read this
Amendment No. to the foregoing Form 10-SB registration statement; knows
the contents thereof; and, warrants that the information contained
therein is true and correct and does not omit any material information
required be disclosed pursuant to the rules and regulations of the
Securities and Exchange Commission.
Name Title Date
/s/ Sidney Chan President and a member January 14, 2000
Sidney Chan Of the Board of Directors
______________________ Vice President and a January __, 2000
Lorne Drever Member of the Board
of Directors
/s/ Greg Rae Vice President - Technology January 14, 2000
Greg Rae and a member of the Board of
Directors
/s/ Kenneth Robulak Member of the Board of January 14, 2000
Kenneth Robulak of Directors
<PAGE> 62
EXHIBIT 16.1
[LETTERHEAD]
MOWBREY GIL
Chartered Accountants
January 11, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.
20549
Ladies and Gentlemen:
We were previously independent accountants for A Little Reminder
(ALR) Inc. (the "Company"). On October 15, 1998 we were
dismissed as the independent accountants of the Company effective
for the period ended December 31, 1998.
We have read the Company's statements included under Item 14 of
its Form 10-SB dated December 9, 1999 (attached) and we agree
with the Company's representations.
Yours very truly,
MOWBREY GIL
Chartered Accountants and Consultants
/s/ Ward A. Goddard, CA
Parter
WAG/skb
Enclosure
2600 CN Tower, 10004 - 104 Avvenue, Edmonton, Alberta T5J 0K1 BUS
(780) 461-3800 FAX (780) 462-4536
<PAGE> 63
EXHIBIT 99.8
TIMELY DEVICES INC.
DISTRIBUTORSHIP AGREEMENT
This agreement dated the 4th Day of June , 1999.
Between:
Timely Devices Inc., a company incorporated under the laws of
the Province of Aberta, Canada. (herein the "Supplier")
and
Technilab Pharma, a company carrying on business in the Country
of Canada (herein the "Distributor")
WHEREAS:
A. The Supplier is the owner of certain technology permitting it to
create the ALR prescription reminder system and associated
products (the "System");
B. The Distributor wishes to acquire from the supplier the right to
sell the System;
C. The Supplier is willing to grant the Distributor the exclusive
right to sell the System, within the territory and upon the
terms and conditions set out herein.
NOW THEREFORE IN CONSIDERATION OF THE MUTUAL PRESENTS AND COVENANTS
CONTAINED HEREIN, THE PARTIES AGREE AS FOLLOWS:
1. Grant of Distribution Right
The Supplier grants to the Distributor the exclusive right to
sell the System within the geographical boundaries attached
hereto as Schedule "A" (the "Territory").
2. Products supplied by the Supplier
The Supplier agrees to supply to the Distributor with all of the
System, manufactured, sold, or distributed by the Supplier.
3. System Prices
A. The price of the System shall be FOB Edmonton, Alberta,
Canada. The Supplier shall be responsible for all
additional charges including postage, insurance, freight,
import taxes and duties incurred in the course of
delivering the Products to any location other than
Edmonton, Alberta, Canada.
<PAGE> 64
B. The System shall be supplied by the Supplier to the
Distributor at the Supplier's CDN Distributor price
"Schedule B".
C. The Supplier's CDN Distribution price, is subject to change
with 30 days notice.
4. Delivery
A. Delivery shall be prepaid by the Supplier to the
Distributor with a minimum order of CDN$2500.00. The method
of shipping and the carrier shall be at the sole
discretion of the Supplier.
B. Orders less than the CDN$2500.00 will be shipped as
specified by the Distributor. Freight charges will be
billed directly to the Distributor or the shipment will be
shipped "freight collector".
C. Orders placed by the Distributor can be dropped shipped to
another location at the request of the Distributor. All
costs incurred for these shipments will be billed to the
Distributor's account.
5. Delivery Schedule
A. Upon receipt of an order from the Distributor, the Supplier
shall immediately advise of the delivery schedule for the
System and unless the Distributor advises the Supplier
within two business days thereof to the contrary, it shall
be deemed to have agreed to the delivery schedule as
provided by the Supplier.
B. Back orders shall be billed at the price in effect when the
order was placed.
C. Shipping of back orders shall be billed according to the
terms of the originating order.
6. Term
The term (hereinafter the "Term") of this Agreement shall be twelve
(12) months commencing upon the signing of this agreement and one (3)
successive renewal for the term of twelve (12) months unless either
party terminates the Agreement upon 60 days prior notice.
7. Minimum Order
An initial order of not less than CDN$650.000.00 of the System shah
be placed by the Distributor upon execution of this agreement,
failing which this agreement shall be null and void.
<PAGE> 65
8. Minimum Annual Order
The Distributor shall place a minimum annual purchase (aggregate) of
not less than CDN$750,000.00 of the System no later than 181 days
after the date of this Agreement, failing which the Supplier may, at
its sole option, terminate this Agreement and award the Territory to
any other party without prejudice to its rights hereunder. All sales
in the Territory shall constitute credit toward the minimum annual
order.
9. Payment Terms
Payment terms for the minimum initial order of not less than
CDN$650,000.00 of the System shall be CDN$25,000 upon signature,
$75,000 at 1 September 1999 the balance shall be 25% down upon
purchase order and 75% upon delivery. Subsequent orders shall be
paid 25% down upon the purchase order and the balance paid upon
terms mutually agreed upon.
10. Assignment
The Distributor shall not have the right to assign, transfer,
sublicense, sublet or encumber all or part of its interest in
this agreement, or the rights granted to it, without the prior
written consent of the Supplier (which consent shall not be
arbitrarily or unreasonably withheld), provided that the
assignee covenants to observe and perform all provisions of this
agreement, mutatis mutandis, and further provided that such
assignment, transfer, sublicense, sublet or encumbrance shall in
no way discharge the Distributor from any of its obligations
hereunder including without limitation the obligation to the
minimum purchase requirement during the term of this agreement.
11. Marketing
For the purpose of facilitating the sale of the System:
A. the Supplier shall promptly make available to the
Distributor, at the Supplier's cost price, all promotional
materials, including without limitation posters, brochures,
product highlight sheets, and catalogues relating to
the System;
B. the Supplier shall authorize and grant the Distributor the
right and license to use the trade name or trade marks
associated with the System as set forth in "Schedule C"
hereto, the sole purpose of promoting the System; and
C. the Distributor shall display, utilize and promote in all
of its advertising or marketing initiatives the Supplier's
trade name and trade marks.
<PAGE> 66
D. the Supplier shall commit to an annual marketing budget of
up to 25% of the total purchases during each term of the
agreement, it shall be paid in accordance with cooperative
funding and shall require mutual consent by both parties.
Use of these funds shall remain the sole discretion of the
Supplier.
12. Supplier's Product Warranty and Servicing
A. The Supplier shall warrant all System for parts and labour
for a period of forty-five (45) days from the date of
purchase by the end user of the products from the
Distributor. The Programming Station shall have a lifetime
warranty under normal use. All servicing pursuant to this
provision shall be conducted at the Supplier's facility in
Edmonton, Alberta, Canada. The Distributor shall be
responsible for all shipping charges incurred in sending
the Products to the Supplier's facilities in Edmonton,
Alberta, Canada.
B. Except for the express warranties stated herein, the
Supplier disclaims all warranties for or related to the
System or their use, including without limitation all
implied warranties or merchantability or fitness. The
Supplier's liability shall in no circumstances exceed the
amounts paid by the Distributor for the unit of the System.
No claim for damages, including but not limited to special,
indirect or consequential loss arising out of or in
connection with the use or performance of the System shall
be chargeable to the Supplier, whether for loss of profit,
injury, or otherwise.
13. Right to Use Technology
The Supplier warrants to the Distributor that it is either the owner
of, or lawfully entitled to use, apply, alter, and modify the
technology utilized by or incorporated into the System, and that it
has the sole right to grant the within distribution rights free of
any restrictions, except as set out herein. The Supplier shall
indemnify the Distributor from any intellectual property claims in
the Territory.
14. Distributor to Cooperate
The Distributor covenants with the Supplier that it will not during
the term of this Agreement or any extensions thereof raise or cause
to be raised any questions concerning or any objection to the
validity of any claim of the Supplier to manufacture, sell or use the
technology, trademark, trade name, copyright, patent, literary,
artistic, dramatic, personal, private, civil, or property right or
the right to privacy, or any other right of any person, firm or
corporation, utilized by or incorporated into the Products on any
grounds whatsoever, and further agrees not to aid others in so doing.
<PAGE> 67
15. Invention and Innovation
Any invention or innovation relating to the System, or the use of the
System, protectable by patent, copyright or other legal proprietary
protection made or conceived during the term of this agreement
whether by the Supplier or the Distributor, or their respective
agents, servants and employees shall be the sole property of the
Supplier.
16. Confidentiality
The Distributor and the Supplier mutually acknowledge the proprietary
interest of each party to the information and materials which each
party is bound to disclose or otherwise make available to the other
party by virtue of this agreement. The Distributor and Supplier
mutually covenants to keep confidential and secret all information
and materials disclosed or otherwise made available pursuant to this
Agreement, except with the prior written consent of the Supplier. The
Distributor shall take all steps necessary and reasonable to maintain
the confidentially contemplated herein and shall ensure the
Supplier's interests herein are protected by the safeguarding of the
System and the information referred to herein.
18. Disruption in Supply
In the event that the Supplier is unable to supply the System due to
disruptions in shipping, acts of civil or military authorities,
strikes, lockouts, embargoes, acts of God, or any other factors
beyond the Supplier's control, then the minimum annual purchase
amount required of the Distributor shall abate proportionately for
such period of time during which supply is interrupted, and the
Supplier shall not be liable to the Distributor for any loss or
damages as a result of such interruption in supply.
19. Termination
This Agreement shall terminate at the discretion of the
non-defaulting party in the event of:
A. the bankruptcy of either party hereto; or
B. the winding up or liquidation of either party hereto; or
C. loss, by the Supplier, of the right to manufacture, sell or
use the patent or technology utilized by or incorporated
into the Products; or
D. the Distributor fails to make either the minimum initial
order or minimum annual order; or
E. the Distributor fails to make or abide by the payment terms
herein; or
<PAGE> 68
F. the Distributor sells or distributes the System outside the
Territory or resale outside the Territory.
The Distributor shall have the right to sell any remaining inventory
of the System or similarly, in the event that the Distributor loses
its right to sell the System because of a breach by the Supplier or
an infringement action against the Supplier, the Supplier shall
purchase back all units in the Distributor's inventory and all the
associated costs of shipping and handling.
20. Waiver of Rights
The failure of either party to require performance by the other party
of any provision herein shall not in any way affect the full right to
require such performance at any time thereafter. Nor shall a waiver
by either party of a breach of any provision hereof constitute a
waiver of the provision itself.
21. Notice
Any notice required to be served by the Supplier shall be deemed to
be served if delivered by prepaid courier, registered mail,
facsimile, and shall be deemed to have been received upon the actual
date of delivery if by courier, 72 hours following the posting if by
registered mail, or the time of confirmation of receipt if by
facsimile, to:
Timely Devices Inc.
PO Box 45011
Edmonton, Alberta, Canada
T6G 2Z6
Facsimile: (403) 448-0511
or
Mssers Bryan & Company
Attn. Kim Silverberg
2600 Manulife Place
10180 - 101 Street
Edmonton, Alberta, Canada
T5J 3Y2
Facsimile. (403) 428-6324
Technilab Pharma
17800, rue Lapointe
MIRABEL QUEBEC J7J 1P3
Mr. Jacques Boisvert
Facsimile: (514) 979-6350
23. Time is of the Essence
Time is of the essence in these presents.
<PAGE> 69
24. Law to Govern
This agreement shall be governed by the Laws of the Province of
Alberta, Canada.
25. Severability
Should any part of this agreement be declared void, voidablity or
otherwise unenforceable by any competent Court having jurisdiction
over the matter, the remaining provisions shall continue to remain in
full force and effect.
26. Inurement
This agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
27. Amendments and Alterations
This agreement may not be altered or amended except in writing
executed by both parties.
28. Entirety of Agreement
This agreement is the entire agreement between the parties, and there
are no representations, conditions understandings or agreements other
than those expressly set forth herein.
IN WITNESS WHEREOF the parties have duly executed this agreement as
of the day and year first written above by affixing their respective
corporate seals under the hands of their proper signing officers duly
authorized in that behalf.
Timely Devices Inc. Technilab Pharma
Per: /s/ illegible Per: /s/ illegible
SCHEDULE A
THE TERRITORY
1. The Territory as agreed to herein is the Country of;
Canada
2. In the event that there is a customer with outlets in more than
one Territory, it shall be deemed that the responsible
Distributor is that in whose Territory resides the head office
of the Customer.
<PAGE> 70
SCHEDULE B
THE PRICE LIST:
PART NUMBER DESCRIPTION DISTRIBUTOR PRICE RETAIL PRICE
10101 Programming $125.00 $195.00
Station
10102 ALARM 8.75 10.00
10103 Set Up Kit 30.00 40.00
10104 ALR(tm) 12.00 20.00
Custom label
10105 Patient Cards 7.50 10.00
(250)
10106 Tent Cards 10.00 15.00
(10)
10107 Desk Mat 2.50 3.75
10108 AC Adaptor 6.50 11.00
(12OV)
Prices are subject to change without notice. Prices are in CDN
Dollars, FOB Edmonton, Aberta, Canada,
Printed material in English & French only.
SCHEDULE C
TRADE NAME AND TRADE MARKS
A Little Reminder in Canada, ALR(tm) in United States.
Timely Devices Inc. trade name in Canada.
<PAGE> 71
TDI A Little Reminder
Timely Devices Inc. ALR
PURCHASE ORDER
June 4, 1999
Invoice: Technilab PO: Jacques Bolsvert Order: House
Shipped on: Via: Courier Back order: NO
Item Quantity Unit Price Total
Programming Station 750 $125.00 $ 93,750.00
ALR(tm) 75,000 $ 8.75 $656,250.00
Labels/Store Package 750 $ 30.00 $ 22,500.00
Shipping/Handling $ 10.00
Extra Clips 75,000 $ 0.05 $ 3,750.00
Subtotal $776,260.00
GST $ 54,338.20;
TOTAL $830,598.20
Terms: As per Section 9, Payment Terms, Distribution Agreement.
GST #898316278RT
Accepted on behalf of Technilab Pharma
______________________________________
18162 - 102 Avenue, Edmonton, AB T5S IS7
Phone (780) 448-0510 Fax (780) 448-0511
