ALR TECHNOLOGIES INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(Edgar Glimpses Via Acquire Media NewsEdge) Forward Looking Statements
The following information must be read in conjunction with the unaudited
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 10-K for the year ended December 31, 2011.
Except for the description of historical facts contained herein, the Form 10-Q
contains certain forward-looking statements concerning future applications of
the Company's technologies 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 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
that could cause actual results to differ materially from those described in the
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
Our financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles.
In this quarterly report, unless otherwise specified, all references to "common
shares" refer to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our", the "Company" and
"ALRT" mean ALR Technologies Inc, unless otherwise indicated.
ALR Technologies Inc. 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 to ALR Technologies Inc. Also in in December 1998, the common shares of the
Company began trading on the "Over the Counter Bulletin Board". Today the
Company trades under the symbol "ALRT."
On April 15, 2008, the Company incorporated a wholly-owned subsidiary in Canada
under the name Canada Alrtech Health Systems Inc.
On May 25, 2010, the Company finalized negotiations with Christine Kan, wife of
the Chairman of the Board and CEO, for a line of credit borrowing arrangement
for $1M. All funds borrowed bear interest at 1% per month, are due on demand and
are secured by all the assets of the Company. To date, the Company has borrowed
$249,444. The Company granted this creditor 10,000,000 stock options exercisable
at $0.10 per share. During August 2010, the term of the option was extended to
March 8, 2015.
On January 3, 2011, the Company entered into an agreement with Christine Kan to
amend the original agreement for additional financing through its existing line
of credit borrowing arrangement. Ms. Kan has granted the Company an increase in
the borrowing limit from $1,000,000 to $2,000,000. In exchange for providing the
increased borrowing limit,
· Ms. Kan has been granted 20,000,000 stock options of the Company
exercisable at $0.05 per share expiring November 29, 2015.
· A second modification of the terms of 10,000,000 stock options previously
granted to Ms. Kan on March 7, 2010 and previously modified August 8, 2010.
The terms have been modified as follows:
- Increased the number of stock options granted from 10,000,000 to 20,000,000
- Reduced the exercise price of the 20,000,000 stock options granted from
$0.10 per share to $0.05 per share.
On March 6, 2011, the Chairman of the Company, Mr. Sidney Chan, established a
line of credit of up to $2.5 million with the Company for the exclusive purpose
of funding the costs of a comprehensive marketing campaign. Under a related
agreement, also dated as of March 6, 2011, Mr. Chan has been granted 20,000,000
stock options of the Company exercisable at $0.125 per share, expiring March 5,
2016. Such options will vest on the basis of eight (8) options for each one
($1.00) dollar borrowed under the line of credit to meet the costs of the sales
and marketing program. On October 24, 2011, the March 6, 2011 agreement was
amended to allow the Company to borrow the remaining funds available for general
corporate matters. As at December 31, 2011, 7,624,488 stock options had vested
as a result of borrowings. On June 27, 2012, the stock options were modified as
described on the following page.
Also on March 6, 2011, the Company granted 250,000 stock options to Mr. Peter
Stafford. The stock options were exercisable at $0.10 per share for five years
from the date of grant. Furthermore, 200,000 stock options previously granted to
Mr. Steven Brassard on July 1, 2010, were modified as follows:
· all 200,000 stock options are to vest immediately.
· the exercise price of the option was reduced from $0.25 per share to $0.10
All 450,000 of these stock options have been exercised.
On May 4, 2011, the Company granted 1,000,000 stock options to Mr. Larry
Weinstein, President of the Company, for services provided in getting the
Company's FDA submission completed. The options are exercisable at $0.20 per
share for five years from the date of grant. The Company valued the stock-based
compensation resulting from this grant at $210,000 and allocated this to
selling, general and administration expenses. On June 27, 2012, the stock
options were modified to reduce the exercise price from $0.20 per share to $0.07
per share. There was no additional compensation cost expense incurred as a
result of this modification.
On May 24, 2011, the Company granted 100,000 stock options to Mr. Ken Robulak,
consultant of the Company, for services rendered. The options are exercisable at
$0.20 per share for five years from the date of grant. The Company valued the
stock-based compensation resulting from this grant at $21,000. On June 27, 2012,
the stock options were modified to reduce the exercise price from $0.20 per
share to $0.07 per share. There was no additional compensation cost expense
incurred as a result of this modification.
On October 12, 2011, the Company announced that it had modified its by-laws to
allow the Board of Directors to appoint Directors for any empty seat. Also on
October 12, 2011, the Company announced that it had set aside 10,000,000 common
shares (to be issued directly or upon the exercise incentive stock options) to
allocate to individuals joining the Company in the future, such as future
directors, consultants and members of management. The shares will be issued to
such persons, at such price or prices as determined by the Board of Directors,
or a Committee thereof duly authorized by the Board.
On October 17, 2011, the Company announced that it had received 510(k) clearance
from the U.S. Food and Drug Administration (FDA) for the HeC System for remote
monitoring of patients in support of effective diabetes management problems.
On November 1, 2011 the Company moved from its previous office at 3350 Riverwood
Parkway, Suite 1900 Atlanta, Georgia 30339 to its new office located at 7400
Beaufont Springs Drive Suite 300 Richmond, VA 23225.
On April 10, 2012, our board of directors approved an amendment to our bylaws to
provide that action of shareholders may be taken without a meeting of
shareholders provided that a record thereof is made in writing and signed by
holders of a majority of each class of our outstanding shares.
On May 17, 2012, shareholders holding a majority of the outstanding shares of
our common stock executed a written consent approving the amendment to the
articles of incorporation to: (1) increase the authorized shares of common stock
from 350,000,000 to 500,000,000 shares with a par value of $0.001; and, (2)
create a class of 500,000,000 preferred shares, $0.001 par value per shares, the
terms of which to be determined by the board of directors. On July 5, 2012 the
certificate of amendment to affect the change was issued by the Office of the
Secretary of the State of Nevada.
On June 27, 2012, the 20,000,000 stock options granted to the Chairman on March
6, 2011 were modified as follows:
- All stock options remaining unvested were immediately vested
- The exercise price was reduced from $0.125 per share to $0.07 per share
The compensation expense related to the vesting of the unvested options was
$1,252,386 and the compensation expense related to the reduction of the exercise
price of the stock options was $1,280.
Furthermore, on June 27, 2012, the Company granted the Chairman 15,750,000 stock
options with an exercise price of $0.07 per share and expiry date on March 6,
2016. The compensation expense related to these stock options was $1,130,988.
On June 27, 2012, the Company granted 700,000 stock options to five consultants
with exercise prices of $0.07 per share, expiring on June 27, 2017. Of the
700,000 stock options, 500,000 stock options vest on the grant date and 200,000
have the following vesting terms: 100,000 vest on May 28, 2013 and 100,000 vest
on May 29, 2014. The stock options and the respective amounts were granted to
the following individuals:
· Viper Enterprises LLC
· Ms. Michelle Gillespie 100,000
· Ms. Jenifer Wagner 100,000
· Ms. Sarah Cox 100,000
· Mr. Glen Reyes 200,000
On August 15, 2012, a creditor and relative of a Director and Officer exercised
20,000,000 stock options at an exercise of $0.05 per share, which the Company
applied against accrued interest due and payable to the creditor on promissory
notes and a line of credit.
On August 20, 2012, the Company granted 500,000 stock options to two newly
appointed directors of the Company with an exercise price of $0.06 per share and
expiry date on August 16, 2017 and vesting immediately upon the grant date:
· Mr. Alfonso Salas
· Mr. Kenneth Robulak 250,000
Description of Business
ALR Technologies is a leader in the emerging field of Chronic Disease Management
utilizing in-home, patient-focused technology. ALR Technologies products utilize
internet based technologies to facilitate health care providers the ability to
monitor their patient's health and ensure adherence to health maintenance
The Company's Health-e-Connect (HeC) system is an internet based product
initially intended for patients with diabetes and their health care providers to
improve communication and monitoring of patients' health management programs.
One aspect of the system is that HeC will incorporate data uploaded from
patients' glucose meters into the ALRT database to quickly assess user adherence
and performance compared to provider set targets, such as prescriptions and
guidelines. This provides patients and caregivers the ability to track patient
performance and adherence, thereby allowing timely intervention, which would
consist of contact by the caregiver to patient. By providing this ongoing
monitoring and feedback, the HeC system is expected to enhance outcomes of
patients' health as measured by A1c and lower costs borne by the US health care
system related to this chronic disease.
The HeC system has received United States FDA 510(k) clearance for sale. The
Company is currently focusing its efforts on introducing and marketing its HeC
system for patients and health care providers in the United States. The Company
has limited financial resources and is actively seeking agency and marketing
relationships to reach widespread adoption. In addition, the Company is working
to establish health insurance company reimbursement for HeC services.
The Company's HeC System for diabetes management provides an affordable and easy
to use tool to provide the communication network as recommended by the
Committee. HeC includes a communications software platform that also enables
health professionals to remotely monitor the health progress specifically
relating to patients with diabetes. This facilitates more effective and timely
communication of care to these patients.
The HeC system is compatible with the majority of glucose meters available for
sale in the United States and also through the Company's universal upload cable.
Once development and testing is completed, the universal cable will be offered
to customers who've adopted the HeC system.
Since receiving FDA clearance, the Company's senior leadership team has been
presenting how the HeC system uniquely supports mutual priorities around
improved patient care, healthcare cost-containment, accountability, and job
creation based on the results from the clinical trials conducted and applied to
studies surrounding diabetes management by numerous sources.
In the future, the Company may seek to adapt its HeC system to be used in the
management of other chronic diseases. The Company would be required to obtain
additional clearance from the FDA prior to commencing selling activities in the
United States for other purposes.
Critical Accounting Policies and Going Concern
Our discussion and analysis of our results of operations and liquidity and
capital resources are based on our unaudited condensed consolidated financial
statements for the nine months ended September 30, 2012 and 2011, which have
been prepared in accordance with GAAP.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and disclosure of contingent assets and liabilities. We base our
estimates on historical and anticipated results, trends, and various other
assumptions that we believe are reasonable under the circumstances, including
assumptions as to future events. These estimates form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. By their nature, estimates are subject to
an inherent degree of uncertainty. Actual results may materially differ from our
The Company's condensed consolidated financial statements have been prepared on
a going-concern basis, which presumes the realization of assets and the
discharge of liabilities and commitments in the normal course of operations for
the foreseeable future. See note 1 of the condensed consolidated financial
Due to our being a development stage company and not having generated
significant revenues, in the Notes to our financial statements, we have included
disclosure regarding concerns about our ability to continue as a going concern.
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