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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period _______ from to _______.
0-30414
Commission file number
ALR TECHNOLOGIES, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
State of Nevada 88-0225807
(State or other jurisdiction (I.R.S. Employer of Incorporation or
Organization) or Identification Number)
1201 Cornwall Avenue
Suite 203
Bellingham Washington 98225
(Address of Principal Executive Offices)
(360) 650-9100
(Issuer's Telephone Number, including Area Code)
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date: Common, $.001 par
value per share: 21,078,446 outstanding as of June 30, 2000
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ x ]
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Forward Looking Statements
The following information must be read in conjunction with the unaudited
Consolidated Financial Statements and Notes thereto included in Item 1 of
this Quarterly Report and the audited Consolidated Financial Statements and
Notes thereto and Management's Discussion and Analysis or Plan of
Operations contained in the Company's Annual Report on Form 10K-SB for the
year ended December 31, 1999. Except for the description of historical
facts contained herein, the Form 10Q-SB contains certain forward-looking
statements concerning future applications of the technologies to be
acquired by the Company and the Company's proposed services and future
prospects, that involve risk and uncertainties, including the possibility
that the Company will: (i) be unable to commercialize services based on its
technology, (ii) ever achieve profitable operations, or (iii) not receive
additional financing as required to support future operations, as detailed
herein and under "Item 2, Management Discussion and Analysis" and from time
to time in the Company's future filings with the Securities and Exchange
Commission and elsewhere. Such statements are based on management's
current expectations and are subject to a number of factors and
uncertainties which could cause actual results to differ materially from
those described in the forward-looking statements.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALR TECHNOLOGIES INC.
Consolidated Balance Sheets
($ United States)
June 30, 2000 and December 31, 1999
2000 1999
(Unaudited)
Assets
Current assets:
Cash $ 2,984 $ 7,261
Accounts receivable - 192,419
Inventories - 106,644
Prepaid expenses, deposits
and advances 23,716 61,858
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26,700 368,182
Fixed assets, net of
accumulated depreciation 11,430 26,714
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$ 38,130 $ 394,896
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Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Bank loan $ - $ 381,071
Accounts payable and
accrued liabilities 650,784 509,715
Promissory notes payable (note 3) 400,000 -
Current portion of long term debt
(note 4) 277,268 290,953
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1,328,052 1,181,739
Long term debt (note 4) 10,116 13,613
Shareholders' equity (deficit)
Capital stock (note 5) 21,078 32,078
Additional paid in capital 1,118,581 1,245,759
Deficit (2,479,272) (2,100,570)
Accumulated other comprehensive income
Cumulative translation adjustment 39,575 22,277
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(1,300,038) (800,456)
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Subsequent event (note 6)
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$ 38,130 $ 394,896
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See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Consolidated Statements of Loss
($ United States)
Three month and six month periods ended June 30, 2000 and 1999
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
Sales $ 29,903 $ 16,872 $ 182,006 $ 54,912
Cost of sales 5,372 13,051 111,994 41,762
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24,531 3,821 70,012 13,150
Expenses:
Amortization 1,635 - 3,273 1,257
Development costs 25,532 686 40,728 1,141
Foreign exchange
loss (gain) 909 2,625 3,888 (3,145)
Interest 19,648 5,584 31,074 9,031
Professional fees 7,745 (38,438) 44,405 266,820
Rent 13,664 8,831 28,482 14,601
Selling, general
and administrative 41,969 80,035 76,061 99,218
Wages and benefits 124,285 82,709 216,589 137,718
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235,387 142,032 444,500 526,641
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Loss from operations 210,856 138,211 374,488 513,491
Other expense:
Loss on disposal of
capital assets (3,111) - (4,214) -
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Net loss for
the period $ (213,967) $ (138,211) $ (378,702) $ (513,491)
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Net loss per share $ (0.01) $ (0.01) $ (0.02) $ (0.02)
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Weighted average
shares outstanding 21,078,446 31,516,147 23,012,512 29,414,469
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See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
($ United States)
Six month periods ended June 30, 2000 and 1999
(Unaudited)
Six Months Ended June 30
2000 1999
Cash flows from operating activities
(note 7):
Cash received from customers $ 373,376 $ 52,515
Cash paid to suppliers and employees (235,243) (586,475)
Interest paid (31,074) (9,031)
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Net cash provided (used) by
operating activities 107,059 (542,991)
Cash flows from financing activities:
Loan proceeds 400,000 -
Repayment of bank loan (373,853) -
Repayment of long term debt (9,809) (149,913)
Shares issued for cash - 908,642
Shares issued for net cash
assets on acquisition (209,682)
Shares acquired for cash (138,178) -
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Net cash provided (used) by
financing activities (121,840) 549,047
Cash flows from investing activities:
Purchase of capital assets - (8,837)
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Net cash used in investing activities - (8,837)
Foreign currency translation adjustment 10,504 (3,050)
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Increase (decrease) in cash
during the period (4,277) (5,831)
Cash, beginning of period 7,261 33,642
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Cash, end of period $ 2,984 $ 27,811
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Non-cash financing and investing activities (note 8)
See accompanying notes to consolidated financial statements
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
June 30, 2000
1. Basis of presentation
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United
States of America on a going concern basis which presumes the realization
of assets and the discharge of liabilities in the normal course of
operations in the foreseeable future.
The Company's ability to continue as a going concern is dependent
upon its ability to obtain financing to repay its current obligations and
its ability to achieve profitable operations. The outcome of these
matters cannot be predicted at this time.
The consolidated financial statements do not give effect to any
adjustments which could be necessary should the Company be unable to
continue as a going concern and, therefore, be required to realize its
assets and discharge its liabilities in other than the normal course of
business and at amounts differing from those reflected in the
consolidated financial statements.
Management plans to obtain financing through short-term borrowings
and through the sale of warrants (see note 5 (d)). Management plans to
realize sufficient sales in future years to achieve profitable
operations.
2. Significant accounting policies
(a) General
The information included in the accompanying consolidated interim
financial statements is unaudited and should be read in conjunction with
the annual audited financial statements and notes thereto contained in
the Company's Report on Form 10-KSB for the fiscal year ended December
31, 1999. In the opinion of management, all adjustments, consisting of
normal recurring accruals, necessary for fair presentation of the results
of operations for the interim periods presented have been reflected
herein. The results of operations for the interim periods presented are
not necessarily indicative of the results to be expected for the entire
fiscal year.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
June 30, 2000
(Unaudited)
2. Significant accounting policies (continued):
(b) Basis of consolidation
The consolidated financial statements include the accounts of ALR
Technologies Inc. ("ALR Tech") and its wholly-owned subsidiaries, A
Little Reminder (ALR) Inc. ("ALR Inc.") and Timely Devices Inc. All
significant intercompany balances and transactions have been eliminated
on consolidation.
Effective April 30, 1999, the Company acquired 99.96% of the issued
outstanding Class A common shares of ALR Inc. through an exchange of
shares. As ALR Inc. shareholders obtained control of ALR Tech through
the exchange of their Class A common shares for common shares of ALR
Tech, the acquisition of ALR Inc. has been accounted for in these
consolidated financial statements as a reverse acquisition.
Consequently, the consolidated statements of loss and cash flows reflect
solely the results of operations and cash flows of ALR Inc. for the
period to the acquisition date, 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.
3. Promissory notes payable
A promissory note in the amount of $350,000 is payable to a relative
of a Director of the Company, bears interest at US bank prime rate plus
one percent and is due September 30, 2000. A second promissory note in
the amount of $50,000 is payable to an Officer of the Company, bears
interest at US bank prime rate plus one percent and is due September 30,
2000.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
June 30, 2000
4. Long term debt
At June 30, 2000, scheduled payments of $226,688 by Timely Devices
Inc. were overdue (see Note 6). The Company has not received any waivers
from creditors for the late payments on these debts. Legal claims have
been filed to demand payment of certain of the outstanding balances owing
totalling $199,766 at June 30, 2000.
5. Capital stock
a) Authorized:
75,000,000 common shares with a par value of $0.001 per share.
b) Issued and outstanding:
Additional
Number of Capital Paid in
Shares Stock Capital
Balance, December 31, 1999 32,078,446 $ 32,078 $ 1,245,759
Common shares acquired and
cancelled (note 5(c)) (6,000,000) (6,000) (69,370)
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26,078,446 26,078 1,176,389
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Common shares acquired for
cancellation (note 5(c)) (5,000,000) (5,000) (57,808)
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Balance, June 30, 2000 21,078,446 $ 21,078 $ 1,118,581
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c) Common shares acquired for cancellation
On February 2, 2000, the Company closed a settlement agreement
with a Director, a company controlled by that Director and several
other parties, pursuant to which the Company acquired 11,000,000 of its
own common shares for cancellation. Total consideration paid pursuant
to this agreement was $138,178. As a result of this transaction, the
number of issued and outstanding shares of the Company will be reduced
to 21,078,446 common shares.
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
June 30, 2000
(Unaudited)
5. Capital stock (cont.)
d) Warrants
On April 11, 2000, the Company agreed to issue 11 million warrants
at an exercise price of $0.25 to various parties including related
parties. 4,000,000 of the warrants will expire on September 30, 2000 and
7,000,000 warrants will expire on May 31, 2005. On July 17, 2000, the
Company modified the terms of the 4,000,000 warrants. Up to 4,000,000
warrants will now be sold at $0.25 per warrant with a September 30, 2000
closing date. The 4,000,000 warrants are exercisable into common shares
at $0.001 per share.
6. Subsequent event
On July 31, 2000, the Company sold its wholly-owned subsidiaries, A
Little Reminder (ALR) Inc. and Timely Devices Inc. for proceeds of $1. As
at and for the six month period ended June 30, 2000, the consolidated
financial statements reflect the following amounts for these subsidiaries:
Assets $ 260
Liabilities $ 609,687
Sales $ 182,006
Cost of sales $ 111,994
Expenses $ 31,419
At June 30, 2000, the Company owned $458,515 to A Little Reminder (ALR) Inc.
7. Reconciliation of net loss for the period to net cash provided
(used) by operating activities
Six Months Ended June 30
2000 1999
Net loss for the period $ (378,702) $ (513,491)
Adjustments to reconcile net loss
for the period to net cash provided
(used) by operating activities
Depreciation 3,273 1,257
Loss on disposal of capital assets 4,214 -
Decrease (increase) in
accounts receivable 192,419 (2,358)
Decrease (increase) in inventories 106,644 (94,159)
Decrease (increase) in prepaid
expenses, deposits & advances 38,142 55,702
Increase in accounts payable 141,069 10,058
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Net cash provided (used) by
operating activities $ 107,059 $ (542,991)
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ALR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements
($ United States)
June 30, 2000
(Unaudited)
8. Non-cash financing and investing activities
During the period ended June 30, 2000, the Company transferred a
leased automobile with a net book value of $8,342 to a former shareholder
in consideration for the assumption by the shareholder of the related
debt in the amount of $7,239.
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Item 2. Management Discussion and Analysis
Overview
ALR Technologies Inc., is in the business of designing, marketing and
distributing medical reminder compliance devices.
During the quarter, the Company's subsidiary had nominal sales as the
balance of the first year purchase commitment from its Canadian
distributor, Technilab Pharma ("TP"), had been shipped in the first
quarter. On July 31, 2000, the Company sold its wholly-owned
subsidiaries, A Little Reminder (ALR) Inc. and Timely Devices Inc. and
therefore is no longer party to the distribution agreement. Instead,
the Company is finalizing the development and marketing of its new Pet
Reminder(TM) and designing a new reminder for the human market.
Results of Operations
Sales
During the three month period ended June 30, 2000, sales were $29,903,
a slight increase from the same period in fiscal 1999 when sales were
$16,872. On a year to date basis, revenue in the first six months of
fiscal 2000 totaled $182,006, an increase of 231% over the first six
months of fiscal 1999. This sales increase is primarily the result of
the shipment of the final third of TP's first year purchase commitment
under the Distributorship Agreement.
Gross Profit
The Company's gross profit on sales was $24,531 (82%) for the three
months ended June 30, 2000 as compared to $3,821 (23%) for the same
period in the prior year. For the six months ended June 30, 2000, the
gross profit was $70,012 as compared with $13,150 for same period in
fiscal 1999. The increased gross profit is primarily attributable to
the increased sales volume in 2000.
Development Costs
Development costs increased to $25,532 in the second quarter from $686
in the second quarter of fiscal 1999 as the Company increased its
expenditures of the development of the animal healthcare reminder and
Generation 5 of the reminder compliance device for the human market.
For the six months ended June 30, 2000, development costs were $40,728,
up from $1,141 for the same period in the prior fiscal year.
Foreign Exchange (Gain) Loss
To date, the Company's operations have been substantially conducted in
Canadian dollars. The foreign exchange loss resulting from
fluctuations in the value of the Canadian dollar relative to the US
dollar was $909 in the second quarter of 2000 as compared with $2,625
in the second quarter of fiscal 1999. For the six month period ended
June 30, 2000, the foreign exchange loss was $3,888 as compared with a
gain of $3,145 in the first six months of 1999.
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Interest
Costs to service the Company's debt rose in the second quarter of 2000
to $19,648 as compared to $5,584 for the same period in 1999 as the
Company had an increase in the overall level of debt financing due to
an additional bank loan and promissory notes issued. Similarly,
interest for the first six months of fiscal 2000 was $31,074, up from
$9,031 for the same period last year.
Professional Fees
Professional fees were $7,745 for the three months ended June 30, 2000.
Professional fees show a recovery of $38,438 for the three months ended
June 30, 1999 due to an over accrual of estimated professional fees in
the first quarter of that year. For the six month periods ended June
30, 2000 and 1999, professional fees were $44,405 and $266,820,
respectively. These costs were substantially higher in the prior year
due to costs related to the reverse takeover which was completed in
April 1999.
Rent
Rent increased to $13,664 for the three months ended June 30, 2000 from
$8,831 for the same period in 1999 as the Company had additional leases
for offices in Redmond, Washington and Vancouver, BC. The six month
year to date amounts were $28,482 for 2000 and $14,601 for 1999.
Selling, general and administrative
Costs for selling, general and administrative were $41,969 for the
three months ended June 30, 2000 versus $80,035 for the three months
ended June 30, 1999 as the Company sought to reduce expenditures. For
the six month period ended June 30, 2000, selling general and
administrative costs were $76,061, down from $99,218 in 1999.
Wages and benefits
Wages and benefits increased from $82,709 to $124,285 for the second
quarter of 2000 versus the same period in the prior year. For the six
month periods ended June 30, wages and benefits increased from $137,718
to $216,589. These increases are primarily due to the addition of a
Chief Financial Officer in the first quarter and the hiring of a new
President in the second quarter.
Loss on disposal of assets
During the quarter, the Company relocated its office from Redmond, WA.
to Bellingham, WA. As a result of the Redmond office shutdown, there
was a loss on disposal of capital assets of $3,111.
Liquidity and Capital Resources
As of June 30, 2000, the Company's principal source of liquidity was
cash of $2,984.
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At June 30, 2000, the Company had a working capital deficiency of
$1,301,352, an increase of $487,795 from December 31, 1999.
During the six month period ended June 30, 2000 the Company generated
net cash of $107,059 from operations.
In addition, the Company entered into a loan agreements with a relative
of a Director of the Company and an Officer of the Company for loans
totaling $400,000 bearing interest at prime plus one percent and with a
maturity date of September 30, 2000. Proceeds from these loans were
used in part to reacquire 11,000,000 shares of the Company for
cancellation for a total purchase price of $138,178.
The Company also repaid its Cdn $500,000 bank loan through collection
of its receivable from TP with respect to the second and third
shipments.
The Company also made three payments on its other bank debt to reduce
the outstanding balance by $9,809.
At this time the Company does not have the resources to meet all of its
obligations, but it is implementing plans in order to generate
sufficient cash flows over the next 12 months. Currently, the Company
requires $70,000 per month to pay basic overheads and further product
development will only be undertaken if there is sufficient capital
available. The Company plans to generate this cash flow in the short
term through additional debt and the sale of warrants. The Company
also intends to complete the development of the animal healthcare
reminder and market this product in the third quarter. In the longer
term, the Company intends to generate new revenues from the sale of the
5th generation reminder. If the Company's efforts to obtain additional
financing are unsuccessful, the Company may have to cease operations.
The Company has three loans aggregating $226,688 that are past their
due date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and the Company's subsidiary corporation, TDI, are
defendants in a lawsuit captioned Mowbrey Gil, Plaintiff, and Timely
Devices Inc. and ALR Technologies Inc., Defendants, Case No. 0003-06732
pending in the Court of the Queen's Bench of Alberta, Judicial District
of Edmonton wherein the plaintiff is seeking a judgment against TDI
and the Company in the amount of CDN$33,174.34 with respect to services
provided plus interest and costs of the action.
Reference is also made to Item 3 of the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999 and Part II, Item 1
of the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2000.
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Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
During the quarter ended March 31, 2000, a subsidiary of the Company,
Timely Devices Inc., went into default on a loan payable, as described
in "Item 1. Legal Proceedings" of the Company's 10-QSB for that
quarter.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended June 30, 2000.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are attached hereto:
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three
month period ended June 30, 2000.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated this _____ day of August, 2000.
ALR Technologies Inc.
BY: _______________________________
Sidney Chan,
Chief Executive Officer
BY: _______________________________
Ken Robulak,
Chief Financial Officer
