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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
COMMISSION FILE NUMBER 0-30414
ALR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0225807
(State of other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
1201 Cornwall Avenue
Suite 203
Bellingham, Washington 98225
(Address of principal executive offices)
(360) 650-9100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 30, 2000: 21,078,446
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALR TECHNOLOGIES INC.
Consolidated Balance Sheets
($ United States)
September 30, 2000 and December 31, 1999
2000
(Unaudited) 1999
ASSETS
Current assets:
Cash $ 23,219 $ 7,261
Accounts receivable - 192,419
Inventories - 106,644
Prepaid expenses,
deposits and advances 295,584 61,858
------------ ------------
318,803 368,182
Fixed assets, net of
accumulated depreciation 10,147 26,714
------------ ------------
$ 328,950 $ 394,896
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank loan $ - $ 381,071
Accounts payable and
accrued liabilities 409,041 509,715
Promissory notes payable (note 4) 500,000 -
Current portion of long term debt
(note 5) - 290,953
------------ ------------
909,041 1,181,739
Long term debt (note 5) 800,000 13,613
Shareholders' equity (deficit)
Capital stock (note 6) 21,078 32,078
Additional paid in capital 1,118,581 1,245,759
Deficit (2,555,913) (2,100,570)
Accumulated other comprehensive income
Cumulative translation adjustment 36,163 22,277
------------ ------------
(1,380,091) (800,456)
Subsequent events (note 7)
------------ ------------
$ 328,950 $ 394,896
============ ============
See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Consolidated Statements of Loss
($ United States)
Three month and nine month periods ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
Sales $ - $ 197,911 $ 182,006 $ 252,823
Cost of sales - 105,202 111,994 146,964
---------- ---------- ---------- ----------
- 92,709 70,012 105,859
Expenses:
Amortization 911 7,280 4,184 8,537
Development costs 11,010 8,103 51,738 9,244
Foreign exchange loss
(gain) 582 (3) 4,470 (3,148)
Interest 17,607 3,534 48,681 12,565
Professional fees 33,082 29,335 77,487 296,155
Rent 8,594 10,354 37,076 24,955
Selling, general and
administrative 56,310 74,394 132,371 173,612
Wages and benefits 115,582 63,805 332,171 201,523
---------- ---------- ---------- ----------
243,678 196,802 688,178 723,443
---------- ---------- ---------- ----------
Loss from operations 243,678 104,093 618,166 617,584
---------- ---------- ---------- ----------
Other income (expense):
Gain on sale of
subsidiaries 167,038 - 167,038 -
Loss on disposal of
capital assets - - (4,214) -
---------- ---------- ---------- ----------
Net loss for
the period $ (76,640) $ (104,493) $ (455,342) $ (617,584)
---------- ---------- ---------- ----------
Net loss per share $ (0.01) $ (0.01) $ (0.02) $ (0.02)
---------- ---------- ---------- ----------
Weighted average
shares outstanding 21,078,446 32,078,446 22,363,118 30,251,743
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See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
($ United States)
Nine month periods ended September 30, 2000 and 1999
(Unaudited)
Nine Months Ended September 30
2000 1999
Cash flows from operating activities (note 8):
Cash received from customers $ 373,376 $ 258,225
Cash paid to suppliers and employees (639,174) (716,535)
Interest paid (48,681) (12,565)
---------- ----------
Net cash used by operating activities (314,479) (470,875)
Cash flows from financing activities:
Loan proceeds 850,000 -
Repayment of bank loan (373,853) -
Repayment of long term debt (9,809) (201,389)
Shares issued for cash - 921,006
Shares issued for net cash assets
on acquisition (209,682)
Shares acquired for cash (note 6 (c)) (138,178) -
Increase in cash on disposition
of subsidiaries (note 3) 2,809 -
---------- ----------
Net cash provided by
financing activities 330,969 509,935
Cash flows from investing activities:
Purchase of capital assets (1,338) (11,442)
---------- ----------
Net cash used in investing activities (1,338) (11,442)
Impact of exchange rate changes
on cash balances 806 (8,619)
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Increase in cash during the period 15,958 18,999
Cash, beginning of period 7,261 33,642
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Cash, end of period $ 23,219 $ 52,641
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Non-cash financing and investing activities (note 9)
See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
1. Basis of presentation
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America on a going concern basis which presumes the realization of assets
and the discharge of liabilities in the normal course of operations in
the foreseeable future.
The Company's ability to continue as a going concern is dependent upon
its ability to obtain financing to repay its current obligations and its
ability to achieve profitable operations. The outcome of these matters
cannot be predicted at this time.
The consolidated financial statements do not give effect to any
adjustments which could be necessary should the Company be unable to
continue as a going concern and, therefore, be required to realize its
assets and discharge its liabilities in other than the normal course of
business and at amounts differing from those reflected in the
consolidated financial statements.
Management plans to obtain financing through short-term borrowings and
through the sale of warrants (see note 6 (d)).
2. Significant accounting policies
(a) General
The information included in the accompanying consolidated interim
financial statements is unaudited and should be read in conjunction with
the annual audited financial statements and notes thereto contained in
the Company's Report on Form 10-KSB for the fiscal year ended December
31, 1999. In the opinion of management, all adjustments, consisting
solely of normal recurring accruals, necessary for fair presentation of
the results for the interim periods presented have been reflected herein.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the entire
fiscal year.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
(Unaudited)
2. Significant accounting policies (continued):
(b) Basis of consolidation
The consolidated financial statements include the accounts of ALR
Technologies Inc. ("ALR Tech") and its wholly-owned subsidiaries, A
Little Reminder (ALR) Inc. ("ALR Inc.") and Timely Devices Inc. All
significant intercompany balances and transactions have been eliminated
on consolidation.
Effective April 30, 1999, the Company acquired 99.96% of the issued
outstanding Class A common shares of ALR Inc. through an exchange of
shares. As ALR Inc. shareholders obtained control of ALR Tech through
the exchange of their Class A common shares for common shares of ALR
Tech, the acquisition of ALR Inc. has been accounted for in these
consolidated financial statements as a reverse acquisition.
Consequently, the consolidated statements of loss and cash flows reflect
the results of operations and cash flows of ALR Inc. for the period to
the acquisition date of April 30, 1999 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.
On July 31, 2000, the Company sold its wholly-owned subsidiaries, A
Little Reminder (ALR) Inc. and Timely Devices Inc. for proceeds of $1.
The consolidated statements of loss and cash flows for the periods ended
September 30, 2000 reflect the results of operations and cash flows of
the subsidiaries until July 31, 2000.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
(Unaudited)
3. Sale of subsidiaries
On July 31, 2000, the Company sold its shares in its subsidiary, A Little
Reminder (ALR) Inc. for $1. A Little Reminder (ALR) Inc. was an inactive
company and its assets consisted primarily of its ownership of 100% of
the issued and outstanding shares of Timely Devices Inc. ("TDI") and a
note receivable from the Company in the amount of $450,000. Management
had previously closed the Edmonton manufacturing operation and office of
TDI and the Company will contract out the manufacturing of future orders
to independent manufacturers.
The disposition details are as follows:
Net assets:
Cash $ (2,809)
Prepaid expenses, deposits and advances 10,599
Promissory note from ALR Tech 450,000
Fixed assets, net 1,716
Accounts payable and accrued liabilities (336,194)
Long term debt (290,349)
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(167,037)
Sale proceeds 1
----------
Gain on sale of subsidiaries $ 167,038
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The consolidated financial statements for the nine month period ended
September 30, 2000 reflect the following amounts for these subsidiaries:
Sales $ 182,006
Cost of sales $ 111,994
Expenses $ 45,133
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
(Unaudited)
4. Promissory notes payable
A promissory note in the amount of $450,000 is payable to a relative of
a Director of the Company, bears interest at US bank prime rate plus one
percent and is due November 30, 2000. A second promissory note in the
amount of $50,000 is payable to an Officer of the Company, bears interest
at US bank prime rate plus one percent and is due November 30, 2000.
5. Long term debt
A promissory note in the amount of $350,000 is payable to an Officer of
the Company, bears interest at 1% per month and is due August 31, 2002.
The Company has also committed to grant options to purchase 350,000
common shares at $0.25 per share, expiring December 31, 2005, in
consideration for the loan (see note 6 (e)).
A second promissory note due to a former subsidiary in the amount of
$450,000 does not bear interest and is due July 17, 2005.
6. Capital stock
a) Authorized:
75,000,000 common shares with a par value of $0.001 per share.
b) Issued and outstanding:
Additional
Number of Capital Paid in
Shares Stock Capital
Balance, December 31, 1999 32,078,446 $ 32,078 $ 1,245,759
Common shares acquired and
cancelled (note 6(c)) (6,000,000) (6,000) (69,370)
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26,078,446 26,078 1,176,389
Common shares acquired for
cancellation (note 6(c)) (5,000,000) (5,000) (57,808)
---------- -------- -----------
Balance, September 30, 2000 21,078,446 $ 21,078 $ 1,118,581
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
(Unaudited)
6. Capital stock (cont.)
c) Common shares acquired for cancellation
On February 2, 2000, the Company closed a settlement agreement with a
Director, a company controlled by that Director and several other
parties, pursuant to which the Company acquired 11,000,000 of its own
common shares for cancellation. Total consideration paid pursuant to
this agreement was $138,178.
d) Warrants
The Company agreed to issue 7 million warrants at an exercise price of
$0.25 to various parties including related parties. These warrants will
expire on May 31, 2005.
The Company has also agreed to sell up to 4 million warrants at $0.25 per
warrant with a December 31, 2000 closing date. The 4 million warrants
are exercisable into common shares at $0.001 per share. These warrants
will expire thirty days from the effective date of a registration
statement filed with the United States Securities Exchange Commission
registering the warrants and share of common stock underlying the
warrants.
e) Options
The Company is committed to issuing up to 5,350,000 stock options at an
exercise price of $0.25 per share. The options will expire at various
dates in the year ending December 31, 2005.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
(Unaudited)
7. Subsequent events
Subsequent to the quarter end, the Company borrowed an additional $50,000
from a relative of a Director of the Company. This loan bears interest at
US bank prime rate plus one percent and is due November 30, 2000.
The Company also borrowed $200,000 from an unrelated individual. This
loan bears interest at 1% per month and is due November 30, 2000. The
Company has also committed to grant options to purchase 200,000 common
shares at $0.25 per share, expiring December 31, 2005, in consideration
for the loan.
The Directors of the Company increased the authorized number of warrants
exercisable at $0.25 per warrant from 7 million to 9.5 million.
The Directors of the Company increased the number of warrants available
for sale at $0.25 per warrant from a maximum of 4 million to a maximum of
7 million.
8. Reconciliation of net loss for the period to net cash used by
operating activities
Nine Months Ended September 30
2000 1999
Net loss for the period $ (455,342) $ (617,584)
Adjustments to reconcile net loss for
the period to net cash provided (used)
by operating activities
Depreciation 4,184 8,537
Gain on sale of subsidiaries (167,038) -
Loss on disposal of capital assets 4,214 -
Decrease in accounts receivable 192,419 5,402
Decrease (increase) in inventories 106,644 (36,207)
Decrease (increase) in prepaid expenses,
deposits & advances (235,080) 189,971
Increase (decrease) in accounts payable 235,520 (20,994)
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Net cash used by operating activities $ (314,479) $ (470,875)
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
September 30, 2000
(Unaudited)
9. Non-cash financing and investing activities
On July 31, 2000, the Company sold its wholly-owned subsidiaries A Little
Reminder (ALR) Inc. and Timely Devices Inc. As a result of this
transaction, prepaid, expenses, deposits and advances decreased by
$1,354, fixed assets, net, decreased by $1,716, accounts payable and
accrued liabilities decreased by $326,949, long-term debt increased by
$159,651.
During the period ended September 30, 2000, the Company transferred a
leased automobile with a net book value of $8,342 to a former shareholder
in consideration for the assumption by the shareholder of the related
debt in the amount of $7,239.
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Forward Looking Statements
The following information must be read in conjunction with the
unaudited Consolidated Financial Statements and Notes thereto included in
Item 1 of this Quarterly Report and the audited Consolidated Financial
Statements and Notes thereto and Management's Discussion and Analysis or
Plan of Operations contained in the Company's Annual Report on Form 10K-
SB for the year ended December 31, 1999. Except for the description of
historical facts contained herein, the Form 10Q-SB contains certain
forward-looking statements concerning future applications of the
technologies to be acquired by the Company and the Company's proposed
services and future prospects, that involve risk and uncertainties,
including the possibility that the Company will: (i) be unable to
commercialize services based on its technology, (ii) ever achieve
profitable operations, or (iii) not receive additional financing as
required to support future operations, as detailed herein and under "Item
2, Management Discussion and Analysis" and from time to time in the
Company's future filings with the Securities and Exchange Commission and
elsewhere. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties
which could cause actual results to differ materially from those
described in the forward-looking statements.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Overview
ALR Technologies Inc., is in the business of designing, marketing
and distributing medical reminder compliance devices. During the quarter
the Company sold its wholly-owned subsidiaries, A Little Reminder (ALR)
Inc. and Timely Devices Inc.
The Company is finalizing the development and marketing of its new
Pet Reminder(tm) products. It has finalized product design, point of
sale materials and is negotiating distribution agreements with animal
pharmaceutical distributors. The Company will supply initial orders with
product now being manufactured by RadioShack (300,000 pieces) and expects
to receive its initial delivery of product in November 2000. The Company
is negotiating credit facilities to finance manufacturing costs for
prospective distributor purchase orders in excess of the 300,000 pieces
now being manufactured by RadioShack.
The Company continues to develop a line of reminders for the human
market that it plans to market in the first half of 2001.
Results of Operations
Sales
There were no sales during the three month period ended September
30, 2000, as compared with $197,911 in the same period in fiscal 1999. On
a year to date basis, revenue in the first nine months of fiscal 2000
totaled $182,006, a decrease of 28% over the first nine months of fiscal
1999. This was a result of the shut down of the Edmonton, AB
manufacturing operation in the first quarter of the year and the emphasis
on the development of new products and markets.
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Gross Profit
The Company's gross profit on sales for the nine months ended
September 30, 2000, was $70,012 as compared with $105,859 for same period
in fiscal 1999. The decrease in gross profit is primarily attributable
to the decreased sales volume in 2000.
Development Costs
Development costs increased to $11,010 in the third quarter from
$8,103 in the third quarter of fiscal 1999 as the Company increased its
expenditures of the development of the animal healthcare reminder and
Generation 5 of the reminder compliance device for the human market. For
the nine months ended September 30, 2000, development costs were $51,738,
up from $9,244 for the same period in the prior fiscal year.
Foreign Exchange (Gain) Loss
Up to the date of the sale of the subsidiaries, the Company's
operations were substantially conducted in Canadian dollars. The foreign
exchange loss resulting from fluctuations in the value of the Canadian
dollar relative to the US dollar was $582 in the third quarter of 2000 as
compared with a gain of $3 in the third quarter of fiscal 1999. For the
nine month period ended September 30, 2000, the foreign exchange loss was
$4,470 as compared with a gain of $3,148 in the first nine months of
1999.
Interest
Costs to service the Company's debt rose in the third quarter of
2000 to $17,607 as compared to $3,534 for the same period in 1999 as the
Company had an increase in the overall level of debt financing due to
promissory notes issued. Similarly, interest for the first nine months
of fiscal 2000 was $48,681, up from $12,565 for the same period last
year.
Professional Fees
Professional fees were $33,082 for the three months ended September
30, 2000, up slightly from the $29,335 reported for the three months
ended September 30, 1999. For the nine month periods ended September 30,
2000 and 1999, professional fees were $77,487 and $296,155, respectively.
These costs were substantially higher in the prior year due to costs
related to the reverse takeover which was completed in April 1999.
Rent
Rent decreased to $8,594 for the three months ended September 30,
2000 from $10,354 for the same period in 1999 as the Company moved its
headquarters from Redmond, Washington to less expensive premises in
Bellingham, Washington. The nine month year to date amounts were $37,076
for 2000 and $24,955 for 1999.
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Selling, general and administrative
Costs for selling, general and administrative were $56,310 for the
three months ended September 30, 2000 versus $74,394 for the three months
ended September 30, 1999 as the Company sought to reduce expenditures.
For the nine month period ended September 30, 2000, selling general and
administrative costs were $132,371, down from $173,612 in 1999.
Wages and benefits
Wages and benefits increased from $63,805 to $115,582 for the third
quarter of 2000 versus the same period in the prior year. For the nine
month periods ended September 30, wages and benefits increased from
$201,523 to $332,171. These increases are primarily due to the addition
of a Chief Financial Officer in the first quarter and the hiring of a new
President in the second quarter.
Gain on sale of subsidiaries
During the quarter, the Company sold its investment in its
subsidiaries, A Little Reminder (ALR), Inc. and Timely Devices Inc.,
resulting in a gain of $167,038.
Liquidity and Capital Resources
As of September 30, 2000, the Company's principal source of
liquidity was cash of $23,219.
At September 30, 2000, the Company had a working capital deficiency
of $590,238, an decrease of $223,319 from December 31, 1999.
During the nine month period ended September 30, 2000 the Company
used net cash of $314,479 in operations.
In addition, the Company entered into loan agreements with a
relative of a Director of the Company and an Officer of the Company for
loans totaling $500,000 bearing interest at prime plus one percent and
with a maturity date of November 30, 2000. Proceeds from these loans
were used in part to reacquire 11,000,000 shares of the Company for
cancellation for a total purchase price of $138,178. The Company also
borrowed an additional $350,000 from an Officer of the Company. This
loan bears interest at 1% per month and is due August 31, 2002.
The Company also repaid its Cdn $500,000 bank loan through
collection of its receivable from TP with respect to the second and third
shipments.
The Company also made three payments on its other bank debt to
reduce the outstanding balance by $9,809.
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At this time the Company does not have the resources to meet all of
its obligations, but it is implementing plans in order to generate
sufficient cash flows over the next 12 months. Currently, the Company
requires $70,000 per month to pay basic overheads and further product
development will only be undertaken if there is sufficient capital
available. The Company plans to generate this cash flow in the short
term through additional debt and the sale of warrants.
The Company also intends to pursue purchase orders for the Pet
Reminder(tm) in the fourth quarter and, if successful, will have sales of
the product in the first quarter of 2001. In the longer term, the
Company intends to generate new revenues from the sale of the newly
designed human reminders. If the Company's efforts to obtain additional
financing are unsuccessful, the Company may have to cease operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The plaintiff in the action against the Company captioned Mowbrey
Gil, Plaintiff, and Timely Devices Inc. and ALR Technologies Inc.,
Defendants, Case No. 0003-06732 pending in the Court of the Queen's Bench
of Alberta, Judicial District of Edmonton, discontinued their claim
against the Company, without costs, on September 28, 2000.
Reference is also made to Item 3 of the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended September 30, 2000.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are attached hereto:
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on August 14, 2000
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALR Technologies Inc.
November 14, 2000 /s/ Sidney Chan
Date Sidney Chan,
Chief Executive Officer
/s/ Ken Robulak
Ken Robulak,
Chief Financial Officer
