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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended - December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-30414
ALR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0225807
(State or other jurisdiction of (Employer Identification No.)
incorporation or organization)
15446 Bel-Red Road
Suite 310
Redmond, Washington 98052-5507
(Address of principal executive offices, including zip code.)
(425) 376-2578
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES [ X ] NO [ ]
Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year.
December 31, 1999 - $458,618.
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The aggregate market value of the voting stock held by non-affiliates
on March 31, 2000 was $5,615,736. There are approximately 22,462,946
shares of common voting stock of the Registrant held by non-affiliates.
Issuers involved in Bankruptcy Proceedings during the past Five Years.
Not Applicable.
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date: March 23, 2000 -
26,078,446 shares of Common Stock
Documents Incorporated by Reference
1. Form 10SB Registration Statement (SEC File #000-30414) and all
amendments thereto, which was filed with the Securities and
Exchange Commission and all exhibits thereto.
2. All reports filed with the Securities and Exchange Commission
after December 10, 1999.
3. Form 8-K Current Report and all exhibits thereto, which was filed
with the Securities and Exchange Commission on February 16, 2000.
Transitional Small Business Issuer Format
YES [ ] NO [ x ]
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PART I
ITEM 1. 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.
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. 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.
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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.
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.
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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.
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.
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The Company spent $61,318 on product research in the twelve month
period ending December 31, 1999 compared to $6,105 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.
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.
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The Company is not aware of larger companies with greater
resources that have established web sites to sell medication compliance
devices.
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
CDN$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 have resulted 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 its information technology and non-
information technology to identify and Year 2000 problems and found it
to be Year 2000 compliant. The Company also communicated with its
vendors that supply raw materials for the manufacture of the its
products and communicated with the its manufactures to determine if
they were Year 2000 compliant. In the course of the investigation, the
Company did not encountered any material Year 2000 deficiencies with
the third party vendors and manufacturers.
To date, the Company has not incurred any material costs directly
associated with its compliance efforts, except compensation expense
associated with its salaried employees who have devoted sometime to its
assessment and remediation efforts.
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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."
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. is the Auditor's
report on our consolidated financial statements for the year ended
December 31, 1999 include additional comments that indicate that the
Company has suffered recurring losses and negative cash flow from
operations and has a net capital deficiency at December 31, 1999,
conditions that raise substantial doubt about our ability to continue
as a going concern. Management's plans to overconm these uncertainties
include 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.
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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.
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 65.23% 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.
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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."
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. 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.
ITEM 2. 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.
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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 3. 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 CDN$20,025 related to the
loan. The Company denies the foregoing and intends to litigate
the issue.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to the Shareholders during the
fourth quarter of 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS.
The Company's Common Stock was quoted on the Over-the-Counter
Bulletin Board ("OTCBB") under the symbol ""ALRT." In January 1998,
the National Association of Securities Dealers, Inc. ("NASD") amended
NASD Rule 6530 and 6540 to limit quotations on the OTCBB to the
securities of issuers that report their current financial information
Securities and Exchange Commission, or to banking or insurance
regulators. The Company is required to become complaint with such
amended rules no later than September 2, 1999 (after taking into effect
the benefit of a thirty-day grace period pursuant to NASD Rule 6530 and
6540 amendments.). The Company did not become so compliant by such
date, and trading of the Common Stock of the Company will be limited to
the so-called "pink sheets," until such time as the Company can again
qualify for trading on the OTCBB. It therefore may be more difficult
to dispose of or to obtain accurate price quotations on the Common
Stock. The Company's symbol was changed to "ALRTE" as a result of the
Company's failure to become complaint with the amendments to NASD Rule
6530 and 6540. Summary trading by quarter for the 1999 and 1998 fiscal
years are as follows:
High Low
Fiscal Quarter Bid [1] Bid [1]
1999
Fourth Quarter 0.27 0.055
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
[1] These quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission and may not represent actual
transactions.
At December 31, 1999, there were 32,078,446 common shares of the
Company issued and outstanding.
At December 31, 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.
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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.
Dividends.
The Registrant has never paid a cash dividend on its Common Stock
and has no present intention to declare or pay cash dividends on the
Common Stock in the foreseeable future. The Registrant intends to
retain any earnings which it may realize in the foreseeable future to
finance its operations. Future dividends, if any, will depend on
earnings, financing requirements and other factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS.
The Company has been largely inactive since its incorporation and
has received nominal revenues from operations, but has not earned a
profit or established a 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 secured by a letter of credit issued by TP.
This loan is for a term of six months with interest payable at prime
plus two percent and will be repaid from accounts receivables generated
in the fourth quarter and first quarter 2000 due from TP. 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, and then
established a new distribution contract with TP in June 1999.
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 does not intend to purchase a plant or significant
equipment.
<PAGE> 14
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.
RESULTS OF OPERATIONS - JULY 1, 1997 THROUGH DECEMBER 31, 1999.
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 from the new distribution agreement.
For the Period January 1, 1999 through December 31, 1999
Sales for the period were $458,618 and cost of goods sold were
$388,903 as compared to $218,208 and $159,350, respectively for the six
month period ended December 31, 1998. In addition, the loss on
writedown of inventory for the year ended December 31, 1999 was
$89,285. This resulted in a gross margin of $(19,570) as compared to a
gross margin of $58,858 for the six month period ended December 31,
1998. Proportionally, cost of goods sold increased in the most recent
fiscal period as a result of production problems. The inventory
writedown arose from the Company's plans to revise its procuring and
manufacturing procedures. The Company is now reviewing new
manufacturing alternatives that will lower costs and provide better
reliabilty. Current inventory may not be compatible with the new
manufacturing arrangements. The combination of these two items
contributed towards the negative gross margin for fiscal 1999.
In 1999, the Company changed its distribution form Novapharm to
Technilab. Approximately 76% of the 1999 sales were to the new Canadian
distributor.
The Selling, general and administrative expenses were $254,161 for
the year ended December 31, 1999 as compared with $67,336 for the six
month period ended December 31, 1998. These costs are higher than in
the prior fiscal periods due to opening a new head office in Redmond
Washington and incurring additional expenses associated with promoting
the Company and its products.
The Company incurred Professional fees of $471,772 for the year
ended December 31 1999 as compared with $142,871 for the six month
period ended December 31, 1998. The fees are comprised primarily of
legal, accounting and financial advisory expenses incurred in the
acquisition of ALR by ALRT and ALRT becoming a public company.
The Company incurred an inventory writedown of $89,285 in fiscal
1999. This writedown arose from the Company's plans to revise its
procuring and manufacturing procedures. The Company is now reviewing
new manufacturing alternatives that will lower costs and provide better
reliabilty. Current inventory may not be compatible with the new
manufacturing arrangements.
<PAGE> 15
Wages and Benefits expenses increased to $229,027 for the year
ended December 31, 1999 as compared with $55,638 for the six month
period ended December 31, 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.
Rent increased to $60,562 for the year ended December 31, 1999 as
compared with $8,571 for the six month period ended December 31, 1998
due to the addition of offices in Redmond Washington and Vancouver B.C.
Development costs increased to $61,318 for the year ending
December 31, 1999 as compared with $6,105 for the six month period
ended December 31, 1998 due to costs incurred for product design.
A net loss of $1,141,965 was realised for the 1999 fiscal year as
compared with $256,322 for the six month period ended December 31,
1998. The increased losses were due to the professional fees incurred
in the acquisition of ALR by ALRT and new staff hired. The Company
expects professional 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.
Accounts receivable increased to $192,419 at December 31, 1999
from $10,963 on December 31, 1998 as a result of a large sale to TP in
the fourth quarter.
Inventory decreased to $106,644 at December 31, 1999 from $266,975
on December 31, 1998 as a result of the Company's plan to revise its
manufacturing procedures.
Prepaid expenses, deposits and advances increased to $61,858 on
December 31, 1999 from $1,021 on December 31, 1998 primarily as a
result of an advance to a Vice President and Shareholder(Lorne Drever)
of $55,291.
Accounts payable increased to $509,715 on December 31, 1999 from
$372,775 on December 31, 1998 as a result of continuing operating
losses.
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%. Selling, general and administrative costs
increased to $67,336 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
$142,871 from $42,392 the year prior due to the costs that ALRT
incurred in becoming a public company.
<PAGE> 16
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.
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 26,078,446 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 December 31, 1999, the Company's cash balance was $7,261
compared to $33,642 at December 31, 1998. 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
December 31, 1999 was 0.31 compared to 0.47 as of December 31, 1998.
The Company's current ratio as of June 30, 1998 was 0.76 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.
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 year
ended December 31, 1999 totaled $919,161. The Company incurred a net
loss of $1,141,965 for the year ended December 31, 1999 as compared to
a net loss of $256,322 for the six months ended December 31, 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.
<PAGE> 17
Cash Proceeds from Financing Activities
During the year ended December 31, 1999, the Company raised net
cash proceeds from equity financing in the amount of $918,043. In the
fourth quarter, the Company arranged a bank loan in the amount of
$381,071 to cover operating and manufacturing expenses. The loan is
repayable in two equal installments on February 1, 2000 and May 1,
2000. 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 TP in the first quarter of 2000, 2)
raise additional equity/debt financing as required. and 3) generate new
sales of the Reminder and the Program Station. The Company cannot
continue operating beyond March 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 first quarter of 2000 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.
Negative working capital has had the effect of limiting the
Company from accumulating inventory of manufactured products to
facilitate timely delivery of orders. Furthermore, it has slowed the
pace of product development and reduced the Company's marketing
efforts.
The Company has three loans outstanding that aggregate $234,970
that are past their due date. At December 31, 1999, 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.
The Company is party to two separate legal proceedings more fully
disclosed in Item 8. Legal Proceedings. The claims against the Company
total CDN$119,238.72 plus costs of which the Company recorded
CDN$99,213.72 as a liability in the accounts. Negative outcome of
these proceedings would further increase the negative working capital
position of the Company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial Statements begin on following page.
<PAGE> 18
KPMG LLP
Chartered Accountants
300 - 1674 Bertram Street Telephone (250) 763-5522
Kelowna BC V1Y 9G4 Telefax (250) 763-0044
Canada www.kpmg.ca
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
ALR Technologies Inc.
We have audited the accompanying consolidated balance sheets of ALR
Technologies Inc. and subsidiaries as at December 31,1999 and 1998 and
the related consolidated statements of loss, shareholders' deficiency and
comprehensive income, and cash flows for the periods 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 audits. The consolidated
statements of loss, shareholders' deficiency and comprehensive income and
cash flows for the year ended June 30, 1998 were audited by other
auditors whose report dated February 19, 1999, expressed an unqualified
opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
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 audits provide 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, 1999 and 1998 and the results of its operations and its cash
flows for the periods then ended in accordance with generally accepted
accounting principles in the United States of America.
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 the Company's 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 24, 2000
F-1
<PAGE> 19
ALR TECHNOLOGIES INC.
Consolidated Balance Sheets
$United States
December 31, 1999 and 1998
1999 1998
ASSETS
Current assets:
Cash $ 7,261 $ 33,642
Accounts receivable, net of
allowance of $6,735
(1998 - $1,454) 192,419 10,963
Income taxes recoverable - 8,727
Inventories (note 4) 106,644 266,975
Prepaid expenses, deposits
and advances 61,858 1,021
------------ ----------
368,182 321,328
Fixed assets (note 5) 26,714 29,658
------------ ----------
$ 394,896 $ 350,986
============ ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Bank loan (note 6) $ 381,071 $ -
Accounts payable and
accrued liabilities 509,715 372,775
Current portion of long term
debt (note 7) 290,953 309,889
------------ ----------
1,181,739 682,664
Long term debt (note 7) 13,613 136,081
Shareholders' deficiency:
Capital stock (note 8) 32,078 422,143
Additional paid in capital 1,245,759 -
Deficit (2,100,570) (958,605)
Accumulated other comprehensive income
Cumulative translation adjustment 22,277 68,703
------------ ----------
(800,456) (467,759)
Related party transactions (note 9)
Commitment (note 10)
Contingencies (note 11)
Subsequent events (note 12)
------------ ----------
$ 394,896 $ 350,986
============ ==========
See accompanying notes to consolidated financial statements
On behalf of the Board:
/s/ Sidney Chan /s/ Kenneth Robulak
Director Director
F-2
<PAGE> 20
ALR TECHNOLOGIES INC.
Consolidated Statements of Loss
$United States
Six month
Year Ended period ended Year ended
12/31/99 12/31/98 06/30/98
Sales $ 458,618 $ 218,208 $ 409,870
Cost of sales
Cost of goods sold 388,903 159,350 297,024
Loss on write-down of
inventory 89,285 - -
----------- ---------- ----------
478,188 159,350 297,024
----------- ---------- ----------
(19,570) 58,858 112,846
Operating expenses
Depreciation 12,116 4,124 8,894
Development costs 61,318 6,105 35,202
Foreign exchange (gain) loss (1,783) 13,149 -
Interest 23,005 17,386 20,738
Loss on write-down of fixed
assets (note 12(c)) 12,217 - -
Professional fees 471,772 142,871 42,392
Rent 60,562 8,571 23,124
Selling, general and
administrative 254,161 67,336 83,716
Wages and benefits 229,027 55,638 125,490
----------- ---------- ----------
1,122,395 315,180 339,556
----------- ---------- ----------
Net loss before the
undernoted 1,141,965 256,322 226,710
Other income (expense):
Loss on disposal of
fixed assets - - (16,126)
Loss on write-off of
loan receivable - - (5,720)
----------- ---------- ----------
- - (21,846)
----------- ---------- ----------
Net loss for the period $ 1,141,965 $ 256,322 $ 248,556
=========== ========== ==========
Loss per share $ 0.04 $ 0.01 $ 0.01
=========== ========== ==========
Weighted average shares
outstanding 30,747,841 26,349,931 20,789,863
=========== ========== ==========
See accompanying notes to consolidated financial statements
F-3
<PAGE> 21
ALR TECHNOLOGIES INC.
Consolidated Statement of Shareholders' Deficiency and Comprehensive
Income
$United States
Year ended December 31, 1999, six month period ended December 31, 1998
and year ended June 30, 1999
Additional
Share Paid-In
Capital Capital
(Note 8) (Note 8) Deficit
Balance, June 30, 1997 $ 206,051 $ - $ (453,727)
Net change in capital
stock (note 8) 99,739 - -
Comprehensive income:
Net loss - - (248,556)
Foreign currency
translation adjustment
(note 2(a)) - - -
---------- ------------ ------------
Comprehensive loss
---------- ------------ ------------
Balance, June 30, 1998 305,790 - (702,283)
Net change in capital
stock (note 8) 116,353 - -
Comprehensive income:
Net loss - - (256,322)
Foreign currency
translation adjustment
(note 2(a)) - - -
---------- ------------ ------------
Comprehensive loss
---------- ------------ ------------
Balance,
December 31, 1998 422,143 - (958,605)
Net change in capital
stock (note 8) (390,065) - -
Net changes in additional
paid in capital (note 8) - 1,245,759 -
Comprehensive income
Net loss - - (1,141,965)
Foreign currency
translation adjustment
(note 2 (a))
---------- ------------ ------------
Comprehensive loss
---------- ------------ ------------
Balance,
December 31, 1999 $ 32,078 $ 1,245,759 $ (2,100,570)
========== ============ ============
See accompanying notes to consolidated financial statements
F-4 a
<PAGE> 22
ALR TECHNOLOGIES INC.
Consolidated Statement of Shareholders' Deficiency and Comprehensive
Income
$United States
Year ended December 31, 1999, six month period ended December 31, 1998
and year ended June 30, 1999
Accumulated Total
Other Shareholders'
Comprehensive Equity
Income (Deficit)
Balance, June 30, 1997 $ 5,006 $ (242,670)
Net change in capital
stock (note 8) - 99,739
Comprehensive income:
Net loss - (248,556)
Foreign currency
translation adjustment
(note 2(a)) 36,341 36,341
--------- ------------
Comprehensive loss (212,215)
--------- ------------
Balance, June 30, 1998 41,347 (355,146)
Net change in capital
stock (note 8) - 116,353
Comprehensive income:
Net loss - (256,322)
Foreign currency
translation adjustment
(note 2(a)) 27,356 27,356
--------- ------------
Comprehensive loss (228,966)
--------- ------------
Balance,
December 31, 1998 68,703 (467,759)
Net change in capital
stock (note 8) - (390,065)
Net changes in additional
paid in capital (note 8) - 1,245,759
Comprehensive income
Net loss - (1,141,965)
Foreign currency
translation adjustment
(note 2 (a)) (46,426) (46,426)
--------- ------------
Comprehensive loss $ (1,188,391)
--------- ------------
Balance,
December 31, 1999 $ 22,277 $ (800,456)
========= ============
See accompanying notes to consolidated financial statements
F-4b
<PAGE> 23
ALR TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
$United States
Six month
Year Ended period ended Year ended
12/31/99 12/31/98 06/30/98
Cash flows from operating
activities (note 13):
Cash received from customers $ 277,162 $ 221,547 $ 601,719
Cash paid to suppliers
and employees (1,173,318) (419,744) (983,122)
Interest paid (23,005) (9,430) (29,482)
------------ ---------- ----------
Net cash used by
operating activities (919,161) (207,627) (282,186)
Cash flows from financing activities:
Proceeds from bank loan 381,071 - -
Proceeds from long term debt - 42,990 135,886
Repayment of long term debt (183,264) (15,130) (96,598)
Cash acquired on business
Combination 43,469 32,704 -
Advances to ALR Tech. prior
to business combination (253,151) - -
Advances to TDI - 58,697 -
Cash received on exercise
of warrants 918,043 95,219 -
Common shares issued for
cash - - 489,141
Common shares acquired - - (203,860)
------------ ---------- ----------
Net cash provided by
financing activities 906,168 214,480 324,569
Cash flows from investing
activities:
Purchase of fixed assets (8,589) (8,467) (8,990)
Foreign currency translation
adjustment (4,799) (679) 25,146
------------ ---------- ----------
Increase (decrease) in cash (26,381) (2,293) 58,539
Cash, beginning of period 33,642 35,935 (22,604)
------------ ---------- ---------
Cash, end of period $ 7,261 $ 33,642 $ 35,935
============ ========== =========
Non-cash financing and investing activities (note 14).
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 24
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
ALR Technologies Inc. (the "Company" or "ALR Tech.") was incorporated
under the laws of the State of Nevada on May 24, 1987. The Company is
listed in the National Association of Security Dealers Over the Counter
Bulletin Board. The principal business activity of the Company includes
the design, marketing, and distribution of a pharmaceutical compliance
device called the ALRT Medication Reminder. Approximately 75% of the
Company's 1999 sales were from one customer under an exclusive
distribution agreement in Canada. Three different customers accounted
for approximately 93% and 68% of the Company's sales for the six month
period ended December 31, 1998 and the year ended June 30, 1998
respectively.
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.
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 additional funding from
shareholders' (see note 12(b)) and through future private placements.
Management plans to realize sufficient sales in future years to achieve
profitable operations.
2. Significant accounting policies:
a) Translation of financial statements
For the all periods presented, the Company operated primarily in
Canada, and its consolidated 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.
$1.4433 (December 31, 1998 - US $1.00 per Cdn. $1.5333; June
30, 1998 - US $1.00 per Cdn. $1.4716).
F-6
<PAGE> 25
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
2. Significant accounting policies (continued):
ii) Revenues and expenses are translated at the average exchange
rate for the year ended December 31, 1999, being US $1.00 per
Cdn. $1.4844 (six month period ended December 31, 1998 - US
$1.00 per Cdn. $1.5285; year ended June 30, 1998 - US $1.00 per
Cdn. $1.4216).
iii) 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 subsidiaries, A Little Reminder (ALR) Inc. ("ALR
Inc.") and Timely Devices Inc. ("TDI"). All significant intercompany
balances and transactions have been eliminated on consolidation.
Effective April 30, 1999, ALR Tech. 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, shareholders' deficiency and
comprehensive income and cash flows reflect the results of operations and
cash flows of ALR Inc., for the year ended December 31, 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.
The 0.04% minority interest in ALR Inc. is not material and, therefore,
has not been presented in these consolidated financial statements.
Effective July 27, 1998, Tren Exploration Inc. ("ALR Inc.") 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 ALR Inc. through the exchange of their Class A common
shares for Class A common shares of ALR Inc., 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 ALR Inc. and, as a result ALR Inc. acquired 100% of the
outstanding common shares of TDI. Also on this date, ALR Inc. changed
its name to A Little Reminder (ALR) Inc. 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'
deficiency and comprehensive income and cash flows reflect the results of
operations and cash flows of TDI for the six month period ended December
31, 1998, combined with those of its legal parent, ALR Inc., from
acquisition on July 27, 1998, in accordance with generally accepted
accounting principles for reverse acquisitions.
F-7
<PAGE> 26
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
2. Significant accounting policies (continued):
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.
d) Financial instruments
The fair values of cash, accounts receivable, income taxes recoverable,
bank loan and accounts payable and accrued liabilities approximate their
carrying values due to the relatively short periods to maturity of these
instruments. The fair value of the term loans, financing agreement, 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 possible to arrive at a fair value for the demand
loan as the maturity date is not determinable. It is not practical to
determine a fair value for the promissory note payable and advances to
and loans from shareholders due to the nature of the amounts and the
absence of a ready market for such financial instruments. 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 materials 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) Fixed assets
Fixed assets are stated at cost. Depreciation is provided using the
following bases and annual rates:
Asset Basis Rate
Automotive equipment Declining balance 30%
Computer equipment Declining balance 30%
Office equipment Declining balance 20%
Leasehold improvements Straight-line 50%
Production equipment Declining balance 30%
F-8
<PAGE> 27
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
2. Significant accounting policies (continued):
g) Loss per share
Loss per share has been calculated using the weighted average number of
common shares issued and outstanding during the period. The number of
issued and outstanding common shares of ALR Tech. for periods prior to
April 30, 1999 reflect the equivalent number of ALR Tech. common shares
issued in exchange for ALR Inc. Class A shares at those dates.
h) Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss carryforwards are available future tax
deductions.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
When it is not considered to be more likely than not that a deferred tax
asset will be realized, a valuation allowance is provided for the excess.
i) Commitments and contingencies
Liabilities for loss contingencies, including environmental remediation
costs, arising from claims, assessments, litigation, fines and penalties
and other sources are recorded when it is probable that a liability has
been incurred and the amount of the assessment and/or remediation can be
reasonably estimated. Recoveries from third parties which are probable
of realization are separately recorded, and are not offset against the
related liability, in accordance with Financial Accounting Standards
Board Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts."
j) Revenue recognition
The Company recognizes revenue at such time as the product is shipped to
the customer.
k) Accounting standards change
In June 1998, the Financial Accounting Standards Board issued SFAS no.
133, "Accounting for Derivative Instruments and Hedging Activities."
Adoption of this statements is not expected to have a significant impact
on the Company's results of operations or financial position.
F-9
<PAGE> 28
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
3. Business combination:
ALR Tech. business combination with ALR Inc.:
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
Fixed assets 5,768
Accounts payable and accrued liabilities (56,726)
Advances from ALR Inc. (253,151)
----------
$ (69,148)
----------
Consideration given for net assets acquired
36,533,130 common shares issued $ (69,148)
==========
As ALR Inc. is deemed to be the continuing entity, capital stock and
additional paid in capital have been increased by $36,533 and $1,027,794
respectively (note 8 (b)) as a result of accounting for this combination
as a reverse takeover.
In connection with the business combination, 6,000,000 shares (ALR Inc.
treasury shares prior to the business combination) were returned for
cancellation and the Company acquired and canceled 10,000,000 shares for
$1,000.
Under reverse takeover accounting principles and the purchase method of
accounting, the results of operations of ALR Tech. are 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 combinations of
ALR Tech. and ALR Inc. as if the combinations were effective July 1, 1997
and 1998 and January 1, 1998:
F-10
<PAGE> 29
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
3. Business combination (continued):
December 31, December 31, June 30,
1999 1998 1998
(Unaudited) (Unaudited) (Unaudited)
Sales $ 458,618 $ 218,208 $ 409,870
=========== ========= ===========
Net loss for the period $ 1,462,195 $ 281,039 $ 1,562,862
=========== ========= ===========
Loss per share $ (0.05) $ (0.01) $ (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.
b) ALR Inc. business combination with ALR (old):
Effective July 27, 1998, ALR (old) and ALR Inc. executed a business
combination agreement. ALR Inc. 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 ALR Inc. for every Class A common share of ALR
(old). As the former shareholders of ALR (old) obtained control of ALR
Inc. 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 ALR Inc. with the
results of ALR Inc.'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 Inc. 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
Inc. has been decreased by $1,804,343 (note 8 (b)) as a result of
accounting for this combination as a reverse takeover.
Under reverse takeover accounting principles and the purchase method of
accounting, the results of operations of ALR Inc. are included in the
consolidated financial statements only from the effective date of the
acquisition.
F-11
<PAGE> 30
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 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
ALR Inc., ALR (old) and TDI as if the combinations were effective July 1,
1998 and 1997:
December 31, June 30,
1998 1998
(Unaudited) (Unaudited)
Sales $ 218,208 $ 409,870
========== ===========
Net loss for the period $ 260,464 $ 1,562,862
========== ===========
Loss per Class A share $ (0.01) $ (0.08)
========== ===========
The pro-forma financial information does not necessarily reflect the
results of operations that would have occurred had ALR Inc., ALR (old)
and TDI constituted a single entity during such periods.
4. Inventories:
1999 1998
Raw materials $ - $ 260,065
Finished goods 106,644 6,910
---------- ---------
$ 106,644 $ 266,975
========== =========
5. Fixed assets:
1999
Accumulated Net book
Cost depreciation value
Automotive equipment $ 22,531 $ 14,182 $ 8,349
Computer equipment 20,148 7,835 12,313
Office equipment 3,666 367 3,299
Leasehold improvements 4,405 1,652 2,753
-------- -------- --------
$ 50,750 $ 24,036 $ 26,714
======== ======== ========
1998
Accumulated Net book
Cost depreciation 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
======== ======== ========
F-12
<PAGE> 31
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
6. Bank loan:
The bank loan (Cdn. $550,000) bears interest at prime plus 2.0%, is
repayable in two equal installments on February 1, and May 1, 2000 and is
secured by a general assignment of book debts and an irrevocable letter
of credit from a supplier.
7. Long term debt:
1999 1998
Term loan, due August 30, 1999, bearing
interest at prime plus 4.5%, secured by
a general security agreement and
postponement of certain shareholder
loans (Cdn. $91,919 and Cdn. $134,871) $ 63,687 $ 87,961
Financing agreement, repayable in monthly
instalments of $380 (Cdn. $550) including
interest at 10.90%; secured by specific
automotive equipment with a carrying value
of $8,349 (Cdn. $10,448 and Cdn. $15,582) 7,239 10,162
Note payable, unsecured, bearing interest
at prime plus 1.5% and due January 31,
1999 (Cdn. $212,213 and Cdn. $212,213) 147,033 138,403
Grant repayable, unsecured and due January
30, 1999. Overdue payments bear interest
at prime plus 2.0% (Cdn. $35,000 and
Cdn. $35,000) 24,250 22,827
Demand loan payable to a former shareholder
of ALR Inc., unsecured, bearing no interest,
and with no stated terms of repayment
(Cdn. $75,000 and Cdn. $75,000) 51,964 48,914
Shareholders' loans, unsecured, bearing
no interest and with no stated terms of
repayment (Cdn. $15,000 and Cdn. $77,645) 10,393 70,205
Promissory note payable to a company owned
by two shareholders, repaid in the year
(Cdn. $103,495) - 67,498
--------- ---------
304,566 445,970
Current portion due within one year 290,953 309,889
--------- ---------
$ 13,613 $ 136,081
========= =========
F-13
<PAGE> 32
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
7. Long term debt (continued):
Interest on long term debt totalled $18,963 for the year ended December
31, 1999 (six month period ended December 31, 1998 - $17,386, year ended
June 30, 1998 - $20,738).
At December 31, 1999, scheduled payments of $234,970 on outstanding
debt were overdue. The Company has not received any waivers from
creditors for the late payments on these debts (note 11(a)).
The aggregate maturities in agreements of long term debt, excluding
shareholders' loans, for each of the two years subsequent to December 31,
1999 are as follows:
2000 - $290,953; 2001 - $3,220.
8. Capital stock and additional paid in capital:
a) Authorized:
75,000,000 common shares with a par value of $0.001 each.
b) Issued and outstanding:
1999 1998
Capital stock
Common shares (see below) $ 32,078 $ 617,799
124,695 Class B shares of ALR Inc. - 1
----------- ---------
32,078 617,800
Treasury shares (6,000,000
Class A shares) - (195,657)
----------- ---------
$ 32,078 $ 422,143
----------- ---------
Additional paid in capital
(see below) $ 1,245,759 $ -
=========== =========
The continuity of the Company's issued and outstanding common shares and
additional paid in capital is as follows:
Number of
shares Amount
ALR (old)
Balance, June 30, 1998 21,950,000 $ 489,142
Exchanged into ALR Inc. 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 ALR Inc. issued to
ALR (old) shareholders at time of business
combination on July 27, 1998 22,437,500 $ 489,142
========== =========
F-14
<PAGE> 33
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
8. Capital stock and additional paid in capital (continued):
b) Issued and outstanding:
Number of
shares Amount
ALR Inc.
Balance, June 30, 1998 10,253,180 $ 2,293,485
Reduction in the book value of ALR
Inc.'s Class A share capital to that
of ALR (old) - (1,804,343)
---------- -------------
Balance, July 26, 1998, prior
business combination with ALR (old) 10,253,180 489,142
Class A shares issued to acquire
Class A shares of ALR (old) (above),
recorded at the carrying value of
ALR Inc.'s net assets 22,437,500 33,438
---------- -------------
Balance, July 27, 1998, after
business combination with ALR (old) 32,690,680 522,580
Issued on exercise of warrants for
cash at $0.26 (Cdn. $0.40) per share 365,000 95,219
---------- -------------
Balance, December 31, 1998 33,055,680 617,799
Issued on exercise of warrants for
cash at $0.27 (Cdn. $0.40) per share 3,491,000 938,043
Value of treasury shares exchanged
for ALR Tech. common shares - (207,857)
Class A shares not exchanged for
ALR Tech. common shares (13,550) -
---------- -------------
ALR Tech. common shares issued to
acquire ALR Inc. Class A shares 36,533,130 $ 1,347,985
---------- -------------
F-15
<PAGE> 34
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
8. Capital stock and additional paid in capital (continued):
Additional
Number of Capital paid in
shares stock capital
ALR Tech.
Balance, December 31, 1998 11,041,500 $ 11,042 $ 20,708
Issued for cash at $0.50
per share 503,816 503 251,405
----------- --------- -----------
11,545,316 11,545 272,113
Increase in book value of
ALR Tech. capital stock and
additional paid in capital
to that of ALR Inc. - 36,533 1,027,794
----------- --------- -----------
Balance, April 30, 1999,
prior to business combination
with ALR Inc. 11,545,316 48,078 1,299,907
Common shares issued to acquire
ALR Inc. Class A shares,
recorded at 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, December 31, 1999 32,078,446 $ 32,078 $ 1,245,759
========== ========= ===========
c) Stock options:
The Company is committed to issuing 200,000 stock options to former
directors once a stock option plan is formally adopted. Each option will
allow the holder to purchase one of the Company's common shares at an
exercise price of $0.50 per share. The options will expire on June 4,
2001.
9. Related party transactions:
During the year ended December 31, 1999, the Company incurred
professional fees to a company owned by two shareholders totaling
$136,050 (six months period ended December 31, 1998 - $12,444, year ended
June 30, 1998 - nil). The transactions were incurred in the normal
course of the Company's operations and were, accordingly, recorded at the
exchange amount of consideration established and agreed to by the related
parties. At December 31, 1999 and 1998, the Company had the following
related party balances:
F-16
<PAGE> 35
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
9. Related party transactions (continued):
1999 1998
Advances to shareholders included in
prepaid expenses, deposits and advances $ 55,291 $ -
Accounts payable and accrued liabilities $ 14,744 $ -
Long term debt (note 7) $ 10,393 $ 137,703
======== =========
During the year ended December 31, 1999, the Company entered into an
agreement, with two shareholders, to acquire promissory notes receivable
from unrelated parties with a face value of $693,000 (Cdn. $1,000,000)
through the issuance of promissory notes payable. The promissory notes
receivable are secured by a pledge of 5,000,000 of the Company's common
shares. The promissory notes payable issued by the Company are due
December 31, 1999 (note 12(a)) and can be fully settled through the
return of the promissory notes received upon issuance. As the promissory
notes received by the Company were in default at the date of the
transaction and their collection was doubtful, their fair value was
determined to be nil. Consequently, the promissory notes received and
the promissory notes issued have been recorded at the fair value of the
promissory notes received, which is nil.
10. Commitment:
The Company rents premises under operating leases with various expiry
dates to May 31, 2003. The annual rent payable in each of the next four
years under these leases is as follows:
2000 - $32,500; 2001 - $19,000; 2002 - $12,000; and 2003 - $5,000.
11. Contingencies:
a) Legal proceedings:
Certain of the Company's creditors have filed legal claims against the
Company to demand payment of outstanding balances owing, damages and a
reimbursement of legal and other costs. The amount owing to these
creditors at December 31, 1999 totals $215,800 and has been included in
accounts payable and accrued liabilities and long term debt. The
ultimate disposition of these legal proceedings cannot be reasonably
determined.
b) Disputed invoices:
At December 31, 1999, the Company's subsidiary, TDI, has received
invoices from two suppliers, totaling approximately $250,000, which, in
the Company's opinion, do not represent valid claims against TDI. No
amount has been recorded on these invoices at December 31, 1999. The
ultimate disposition of these matters cannot be reasonably determined.
F-17
<PAGE> 36
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
12. Subsequent events:
a) Settlement agreement:
Subsequent to December 31, 1999, the Company reached a settlement
agreement with two shareholders pursuant to which the Company paid a
total of $82,000 and transferred certain automotive equipment (and
related debt) to the shareholders in exchange for their resignation from
the board of directors and the return of 6,000,000 common shares, which
were cancelled. The agreement also provided that the promissory notes
issued by the Company to the shareholders (note 9) were terminated and
canceled.
In connection with the agreement, the Company reacquired 5,000,000 common
shares pledged by the promissory notes receivable referred to in note 9
for nil proceeds to be cancelled in due course.
b) Loan from shareholder:
Subsequent to December 31, 1999, the Company obtained financing by way of
a loan from a shareholder in the amount of $235,000. The proceeds from
the loan were used to fund operations and meet financial commitments
arising from the settlement agreement referred to above.
c) Closure of subsidiary operations:
Subsequent to December 31, 1999, the Company closed the operations of its
subsidiary operation, TDI, and abandoned office and production equipment
at its business location. Consequently, office and production equipment
held at this location have been written down at December 31, 1999.
F-18
<PAGE> 37
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
13. Reconciliation of net loss for the period to net cash used by
operating activities:
Six months
Year Ended period ended Year ended
12/31/99 12/31/98 06/30/98
Net loss for the period $ (1,141,965) $ (256,322) $ (248,556)
Adjustments to reconcile net
loss for the period to net
cash used by operating
activities:
Depreciation 12,116 4,124 8,894
Loss on write-down of
fixed assets 12,217 - -
Loss on disposal of fixed
assets - - 16,126
Loss on write-off of loan
receivable - - 5,720
Interest accrued and included
in long term debt - 5,942 -
(Increase) decrease in accounts
receivable (181,456) 3,339 16,457
Decrease (increase) in
inventories 160,331 (190,145) 6,811
Decrease (increase) in
prepaid expenses, deposits
and advances 130,655 4,383 (4,425)
Increase in accounts payable
and accrued liabilities 80,214 221,052 (83,213)
Decrease in income taxes
recoverable 8,727 - -
------------ ---------- ----------
Net cash used by operating
activities $ (919,161) $ (207,627) $ (282,186)
------------ ---------- ----------
14. Non-cash financing and investing activities:
The Company acquired net assets, as described in note 3, in exchange for
common shares as part of the business combination between ALR Tech. and
ALR Inc. In addition, $253,151 of inter-company debt was eliminated. In
the six month period ended December 31, 1998, the Company issued common
shares, pursuant to a business combination, to acquire non-cash net
assets of $(57,963). In the year ended December 31, 1999, the Company
issued promissory notes payable to two shareholders in exchange for
promissory notes receivable from unrelated parties as discussed in note
9.
F-19
<PAGE> 38
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
15. Income taxes:
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are presented below:
1999 1998
Deferred tax assets (net):
Fixed assets, principally due to
difference in tax and accounting
amortization $ 7,079 $ 1,996
Losses for income tax purposes
carried forward, expire 2006 901,737 359,426
Share issue costs, expire 2002 73,889 104,328
Foreign exploration and development
expenditures 565,036 531,870
------------ ----------
Gross deferred tax assets 1,547,741 997,620
Less valuation allowance (1,547,741) (997,620)
------------ ----------
Net deferred tax assets $ - $ -
============ ==========
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
$3,639,604 and $2,400,489, 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 2006. 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, 1999 will be reported in the
consolidated statement of loss, in the year it is determined that it is
more likely than not that they will be realized.
F-20
<PAGE> 39
ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
$United States
December 31, 1999 and 1998
16. Comparative figures:
Certain comparative figures have been reclassified to conform with the
financial statement presentation adopted in the current year.
F-21
<PAGE> 40
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
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 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
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.
<PAGE> 41
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. On February 2, 2000, Mr. Drever
resigned as an Officer and member of the Board of Directors of ALR and
its subsidiary companies and no longer has an affiliation with the
Company.
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. Mr. Rae resigned as a member of the Board of Directors on April
2, 2000.
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.
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.
<PAGE> 42
Involvement in Certain Legal Proceedings
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer
of the Company has been the subject matter of any legal proceedings,
including bankruptcy, criminal proceedings, or civil proceedings.
Further, no legal proceedings are known to be contemplated by
governmental authorities against any director, executive officer and
person nominated to become a director.
Compliance with Section 16(a) of the Exchange Act.
The Company's directors, executive officers and ten percent
stockholders did not make filings pursuant to Section 16(a) of the
Securities Exchange Act of 1934.
ITEM 10. EXECUTIVE COMPENSATION.
Directors and Officers of the Company, both past and present, have
received the following compensation:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sidney Chan 1999 136,050 0 0 0 0 0 0
President 1998 0 0 0 0 0 0 0
& Director 1997 0 0 0 0 0 0 0
John C.
Baldwin 1999 13,473 0 0 0 0 0 0
President & 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
(resigned)
Lorne
Drever 1999 52,378 0 0 0 0 0 0
CEO & 1998 43,902 0 0 0 0 0 0
Director 1997 24,390 0 0 0 0 0 0
(resigned)
<PAGE> 43
Michael
Best 1999 65,000 0 0 0 0 0 0
CEO & 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
(resigned)
Robert
Eadie 1999 24,500 0 0 0 0 0 0
President 1998 0 0 0 0 0 0 0
& Director 1997 0 0 0 0 0 0 0
(resigned)
Gregory Rae 1999 52,000 0 0 0 0 0 0
Vice 1998 0 0 0 0 0 0 0
President 1997 0 0 0 0 0 0 0
& Director
(resigned)
Kenneth 1999 25,000 0 0 0 0 0 0
Robulak 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
Norman van 1999 0 0 0 0 0 0 0
Roggen 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
(resigned)
Michael 1999 0 0 0 0 0 0 0
Morrison 1998 0 0 0 0 0 0 0
President 1997 0 0 0 0 0 0 0
& Director
(resigned)
Rita
Dickson 1999 0 0 0 0 0 0 0
Secretary 1998 0 0 0 0 0 0 0
(resigned) 1997 0 0 0 0 0 0 0
</TABLE>
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
<PAGE> 44
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 1999 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
1999 fiscal year.
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
2000, subject to the Company generating sufficient revenues to pay the
same.
Sidney Chan $ 90,000
Lorne Drever $ 62,500
Gregory Rae $ 60,000
Kenneth Robulak $ 60,000
Compensation of Directors.
The Company's Board of Directors unanimously resolved that members
receive no compensation for their services, however, they are reimbursed
for travel expenses incurred in serving on the Board of Directors.
No additional amounts are payable to the members of the Company's
Board of Directors for committee participation or special assignments.
<PAGE> 45
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of December 31, 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.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Owner Position of Class
Sidney Chan 2,000,000[1] President and a member 6.23%
3062 S.W. Marine Drive of the Board of Directors
Vancouver, B.C.
Lorne Drever 850,000 Vice President and a 2.65%
4503 154th Street member of the Board
Edmonton, AB T6H 5K6 of Directors
Greg Rae 0 Vice President of 0.00%
258 E. 26th Ave. Technology and a member
Vancouver, B.C. of the Board of Directors
Canada V5V 2H3
Kenneth Robulak 765,500[2] Member of the Board of 2.39%
1384 23rd Street Directors
West Vanouver, B.C.
All officers and 3,615,500 11.27%
directors as a group.
(4 persons)
[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] 646,500 shares are held in the name of Kenneth Robulak and 119,000
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
<PAGE> 46
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.
Changes in Control
To the knowledge of management, there are no present arrangements or
pledges of securities of the Company which may result in a change in
control of the Company.
ITEM 12. 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.
Pursuant to 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.
<PAGE> 47
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, 1999 (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.
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 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> 48
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.
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.
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 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> 49
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.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K
On February 16, 2000, the Company filed an 8-K regarding the
repurchase of 11,000,000 of its own common shares for cancellation.
Exhibits
The following documents are incorporated herein by reference from
the Registrant's Form 10SB Registration Statement and all amendments
thereto, which was filed with the Securities and Exchange Commission and
all exhibits thereto.
(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.
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> 50
The following documents are incorporated herein by reference from
the Registrant's Form 8-K Current Report, which was filed with the
Securities and Exchange Commission on February 16, 2000, and all exhibits
thereto.
99.9 Settlement Agreement dated January 27, 2000, between the
Company, 706166 Alberta Ltd., 745797 Alberta Ltd. Lorne
Drever, Debbie MacNutt, Dean Drever, Sandra Ross and
Sidney Chan.
The following documents are incorporated herein:
27 Financial Data Schedule
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, on this 10th day of April, 2000.
ALR TECHNOLOGIES, INC.
(Registrant)
BY: /s/ Sidney Chan
Sidney Chan, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of
the Registrant and in the capacities and on this 10th day of April,
2000.
SIGNATURES TITLE DATE
/s/ Sidney Chan President and a member April 10, 2000
Sidney Chan of the Board of Directors
/s/ Kenneth Robulak Member of the Board April 10, 2000
Kenneth Robulak of Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at December 31, 1999 Audited and
the Consolidated Statement of Income for the year ended December 31, 1999
Audited and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,261
<SECURITIES> 0
<RECEIVABLES> 199,154
<ALLOWANCES> 6,735
<INVENTORY> 106,644
<CURRENT-ASSETS> 368,182
<PP&E> 50,750
<DEPRECIATION> 24,036
<TOTAL-ASSETS> 394,896
<CURRENT-LIABILITIES> 1,181,739
<BONDS> 304,566
0
0
<COMMON> 32,078
<OTHER-SE> 1,245,759
<TOTAL-LIABILITY-AND-EQUITY> 394,896
<SALES> 458,618
<TOTAL-REVENUES> 458,618
<CGS> 478,188
<TOTAL-COSTS> 1,122,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,005
<INCOME-PRETAX> (1,141,965)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,141,965)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,141,965)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
