ALR TECHNOLOGIES INC. - Quarter Report: 2009 September (Form 10-Q)

alrti10q93009.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

Commission file number 000-30414

ALR TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

3350 Riverwood Parkway, Suite 1900

Atlanta, Georgia 30339

(Address of principal executive offices, including zip code.)

(678) 881-0002

(telephone number, including area code)

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 last 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	[ ]	Accelerated Filer	[ ]
Non-accelerated Filer	[ ]	Smaller Reporting Company	[X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [ ] NO [X]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 76,078,446 as of November 13, 2009.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ALR TECHNOLOGIES INC.

Interim Consolidated Balance Sheets
($ United States)

				September 30		December 31
				2009		2008
				(Unaudited)
Assets
Current assets:
Cash			$	414	$	7,901
Accounts receivable, net of allowance of $908				-		5,048
	(December 31, 2008 - $748)
Prepaid expenses and deposits				10,041		57,536
Deferred interest expenses (note 5)				-		50,400
Total current assets				10,455		120,885
Equipment, net of accumulated depreciation				4,808		6,109
	(net of accumulated depreciation of $26,306;
	December 31, 2008 - $25,005)
			$	15,263	$	126,994


Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued liabilities			$	879,395	$	1,088,256
Payroll payable				18,050		18,050
Interest payable (note 5)				765,714		2,613,008
Advances payable (note 5)				513,391		2,289,982
Promissory notes payable (notes 5 and 7)				4,833,833		6,436,393
Total current liabilities				7,010,383		12,445,689
Shareholders' deficiency
Capital stock (note 6)
		350,000,000 common shares with a par
		value of $0.001 per share authorized
		76,078,446 issued
		(December 31, 2008 - 76,078,446)		76,078		76,078
Commitment to issue shares (note 6(c))				6,762,473		-
Additional paid-in capital				13,377,121		13,300,827
Accumulated deficit				(27,210,792)		(25,695,600)
				(6,995,120)		(12,318,695)
			$	15,263	$	126,994

See accompanying Notes to Interim Consolidated Financial Statements

F-1

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ALR TECHNOLOGIES INC.

Interim Consolidated Statement of Loss and Deficit
($ United States)
Nine months Ended September 30, 2009 and 2008
(Unaudited)

			Three months Ended				Nine months Ended
			September 30				September 30
			2009		2008		2009		2008
Revenue
	Sales	$	-	$	1,988	$	-	$	10,926
	Cost of sales		-		90		-		1,141
			-		1,898		-		9,785
Expenses
	Depreciation		434		306		1,301		916
	Development costs		100,947		46,500		216,197		283,836
	Foreign exchange (gain) loss		30,345		(6,805)		35,404		(11,782)
	Interest		214,305		203,992		662,938		557,704
	Professional fees		54,390		16,522		89,036		52,312
	Rent		9,218		14,172		24,920		40,745
	Selling, general and administration		243,127		205,918		485,396		489,297
			652,766		480,605		1,515,192		1,413,028
Net loss			(652,766)		(478,707)		(1,515,192)		(1,403,243)
Accumulated deficit, beginning of period			(26,558,026)		(24,721,026)		(25,695,600)		(23,796,490)
Accumulated deficit, end of period		$	(27,210,792)	$	(25,199,733)	$	(27,210,792)	$	(25,199,733)
Loss per share, basic and diluted		$	(0.01)	$	(0.01)	$	(0.02)	$	(0.02)
Weighted average shares outstanding,
	- basic and diluted		76,078,446		76,078,446		76,078,446		76,078,446

See accompanying Notes to Interim Consolidated Financial Statements

F-2

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ALR TECHNOLOGIES INC.

Interim Consolidated Statement of Shareholders' Deficiency and Comprehensive Loss
($ United States)
Nine Months Ended September 30, 2009 and Year Ended December 31, 2008
(Unaudited)


	Capital Stock				Commitment		Additional				Total
	Number				to Issue		Paid in				Shareholders’
	of Shares		Amount		Shares		Capital		Deficit		Deficiency
Balance, December 31, 2007	76,078,446	$	76,078	$	-	$	12,951,235	$	(23,796,490)	$	(10,769,177)

Stock-based compensation							349,592				349,592

Loss and comprehensive loss	-		-		-				(1,899,110)		(1,899,110)

Balance, December 31, 2008	76,078,446		76,078		-		13,300,827		(25,695,600)		(12,318,695)

Commitment to issue shares					6,762,473						6,762,473

Stock-based compensation							76,294				76,294

Loss and comprehensive loss									(1,515,192)		(1,515,192)

Balance, September 30, 2009 (unaudited)	76,078,446	$	76,078	$	6,762,473	$	13,377,121	$	(27,210,792)	$	(6,995,120)

See accompanying Notes to Interim Consolidated Financial Statements

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ALR TECHNOLOGIES INC.

Interim Statement of Cash Flows
($ United States)
Nine Months Ended September 30, 2009 and 2008
(Unaudited )

			Three months Ended				Nine months Ended
			September 30				September 30
			2009		2008		2009		2008
Cash flows from operating activities:
	Cash received from customers	$	160	$	10,568	$	5,048	$	12,899
	Cash paid to suppliers and employees		(36,348)		(101,299)		(167,084)		(451,465)
	Interest paid		1,815		(3,270)		(330)		(9,737)
Net cash provided by (used in) operating
activities			(34,373)		(94,001)		(162,366)		(448,303)
Cash flows from financing activities:
	Promissory notes payable		34,180		18,000		154,879		518,000

	Promissory notes repaid								(50,000)
Net cash provided by financing activities			34,180		18,000		154,879		468,000
Increase (decrease) in cash during the period			(193)		(76,001)		(7,487)		19,697
Cash, beginning of period			607		98,671		7,901		2,973
Cash, end of period		$	414	$	22,670	$	414	$	22,670
Non-cash operating activities:
Stock-based compensation
	Financing costs	$	16,272	$	8,886	$	54,044	$	104,534
	Compensation costs		-		16,800		22,250		143,791
Commitment to issue shares from the settlement of promissory notes, accounts payable and advances			6,762,473		-		6,762,473		-
		$	6,778,745	$	25,686	$	6,838,767	$	248,325

See accompanying Notes to Interim Consolidated Financial Statements

F-4

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

1. Basis of presentation

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. The Company has developed a line of medication compliance reminder devices and compliance monitoring systems that will assist people with taking their medications and treatments on time and allow for health care professionals to remotely monitor and intervene as necessary if a person is noncompliant.

In April 2008, the Company incorporated a wholly-owned subsidiary in Canada, Canada ALRTech Health Systems Inc. and its activities have been included in the Company’s consolidated financial statements.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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.

Several adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred significant operating losses over the past several fiscal years (nine months period ended September 30, 2009 - $1,515,192; 2008 - $1,403,243; 2007 -$1,190,019), is currently unable to self-finance operations, has working capital deficit of $6,999,928 as at September 30, 2009, $12,324,804 as at December 31, 2008 (2007 - $10,769,177), a deficit of $27,210,792 as at September 30, 2009 , $25,695,600 as at December 31, 2008 (2007 - $23,796,490), limited resources, no source of operating cash flow and no assurances that sufficient funding will be available to conduct further product development and operations.

The Company's ability to continue as a going concern is dependent upon the continued financial support of its creditors and its ability to obtain financing to repay its current obligations and fund working capital and its ability to achieve profitable operations. All of the Company's debt financing is either due on demand or is overdue and now due on demand. The Company will seek to obtain creditors' consents to delay repayment of these outstanding promissory notes payable until it is able to replace this financing with funds generated by operations, replacement debt or from equity financings through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Management plans to obtain financing through the issuance of shares on the exercise of options and warrants and through future common share private placements. Management hopes to realize sufficient sales in future periods to achieve profitable operations. The resolution of the going concern issue is dependent upon the realization of management's plans. There can be no assurance provided that the Company will be able to raise sufficient debt or equity capital, from the sources described above, on satisfactory terms. If management is unsuccessful in obtaining financing or in achieving profitable operations, the Company will be required to cease operations. The outcome of these matters cannot be predicted at this time. The Company is currently financed by loans from a relative of a director of the Company.

The 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 financial statements.

F-5

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

2. Significant accounting policies

The information included in the accompanying interim consolidated 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-K for the fiscal year ended December 31, 2008. In the opinion of management, all adjustments, consisting of normal recurring adjustments, 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.

a) Stock-based compensation:

The Company estimates the fair value of share-based payment awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s financial statements. Stock-based compensation recognized during the period is based on the value of the portion of the stock-based payment awards that are ultimately expected to vest during the period. The Company estimates the fair value of stock options using the Black-Scholes valuation model. The Black-Scholes valuation model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility assumption was determined using historical volatility of the Company’s common stock.

b) Basic and diluted net loss per common share

Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share is calculated by dividing the net loss by the sum of the weighted average number of common shares outstanding and the dilutive common equivalent shares outstanding during the year. Common equivalent shares consist of the shares issuable upon exercise of stock options and warrants calculated using the treasury stock method. Common equivalent shares are not included in the calculation of the weighted average number of shares outstanding for diluted net loss per common share when the effect would be anti-dilutive.

c) Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Canada ALRTech Health Systems Inc. (incorporated in British Columbia, Canada). All significant inter-company balances and transactions have been eliminated.

d) Recent accounting pronouncements

In May 2009, the FASB issued new guidance for accounting for subsequent events. The new guidance, which is now part of ASC 855-10, Subsequent Events (formerly, SFAS No. 165, Subsequent Events) is consistent with existing auditing standards in defining subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued or are available to be issued, but it also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The new guidance defines two types of subsequent events: “recognized subsequent events” and “non-recognized subsequent events.” Recognized subsequent events provide additional evidence about conditions that existed at the balance sheet date and must be reflected in the company’s financial statements. Non-recognized subsequent events provide evidence about conditions that arose after the balance sheet date and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. The new guidance was effective on a prospective basis for interim or annual periods ending after June 15, 2009. The Company adopted the provisions as required.

F-6

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

Effective January 1, 2008, the Company adopted ASC 825, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The adoption of ASC 825 did not have a material impact on the consolidated financial statements.

In April 2009, the FASB issued ASC 825-10. ASC 825-10 extends disclosure requirements to interim period financial statements, in addition to the existing requirements for annual periods and disclosure of the methods and significant assumptions used to estimate fair value. ASC 825-10 is effective for interim and annual periods ending after June 15, 2009. The adoption of ASC 825-10 did not have a material impact on the consolidated financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140 (“SFAS 166”). SFAS 166 eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity's continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company will adopt SFAS 166 in fiscal 2010. The Company does not expect that the adoption of SFAS 166 will have a material impact on the Company’s financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No.167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The Company will adopt SFAS 167 in fiscal 2010. The Company does not expect that the adoption of SFAS 167 will have a material impact on the Company’s financial statements.

In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles), (“SFAS 168”). SFAS 168 replaces FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles", and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 did not have a material impact on the Company’s financial statements.

3. Inventories

		September 30		December 31
		2009		2008
Inventories, at cost	$	263,520	$	263,520
Provision for decline of value		(263,520)		(263,520)
	$	Nil	$	Nil

The Company's inventories consists of product parts and finished goods inventories. The Company has expended significant efforts introducing its Human Prescription Reminders ("Med Reminders") to disease management companies, home care companies, pharmaceutical manufacturers, health management organizations, pharmacy benefits managers and certain clinics treating specific disease conditions. Sales to December 31, 2008 have not been sufficient for the Company to realize its investment in these inventories. Management plans to recover its investment in inventories through sales via the channels indicated above and through international markets. As of December 31, 2008, management had recorded a provision of $263,520 (December 31, 2008 - $263,520) in respect of its Med Reminder inventory.

F-7

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

4. Prepaid expenses and deposits

The Company's has prepaid expenses of $10,041 during the period.

5. Promissory notes payable

During the nine months ended September 30, 2009, the Company received a total of $154,879 from a relative of a director in exchange for promissory notes payable. The promissory note is due on demand with interest at 1.0% per month and is secured by a floating charge against assets of the Company. As further consideration, 620,000 options exercisable into common shares of the Company at an exercise price of $0.25 per share for a period of five years were issued (see note 6(b)).

On September 4, 2009, the Company received a Notice of Credit to Judgment from the Superior Court of the State of North Carolina, whereby the Company was ordered to pay the two notes payable creditors an aggregate payment of $675,000, being partial payment of total interest outstanding plus $40,000 legal fees. On the same date, this partial judgment was assigned to a relative of a director. (note 7)

During the year ended December 31, 2008, the Company entered into an agreement with a non-related party whereby the Company received a total $450,000 over a four-month period starting from March 2008 in exchange for promissory notes payable. The promissory note is due for repayment on September 30, 2009 with interest at 1.0% per month and is unsecured. As further consideration, 1,800,000 options exercisable into common shares of the Company at an exercise price of $0.25 per share until March 31, 2013 were issued. The stock-based compensation arising from this stock option has been estimated to be $104,534 using the Black-Scholes option pricing model and amortized as interest expenses over the loan period. As of September 30, 2009, the unamortized interest was $0.

During the nine month period ended September 30, 2009, a promissory note repayable in Canadian dollars to a director increased by $13,115 due to unfavorable exchange rate changes with the United States dollars.

			September 30		December 31
			2009		2008
Interest payable to:
	Relatives of directors	$	314,906	$	1,257,586
	Companies controlled by directors		-		5,790
	Directors		1,166		69,545
	Non-related parties		449,642		1,280,087
		$	765,714	$	2,613,008

			September 30		December 31
			2009		2008
Advances payable to:
	Relatives of directors	$	158	$	19,335
	Companies controlled by directors		65,525		1,089,663
	Directors		447,708		1,180,984
		$	513,391	$	2,289,982

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ALR TECHNOLOGIES INC.
Notes to Interim Consolidated Financial Statements
($ United States)
Nine months Ended September 30, 2009 and 2008
(Unaudited)

	September 30			December 31
		2009		2008

Promissory notes payable to relatives of directors:

Promissory notes payable to a relative of a director, secured by a general security
agreement bearing interest at the rate of 1% per month, due on demand	$	845,618	$	2,029,328

Promissory notes payable to a relative of a director, secured by a general security
agreement bearing interest at the rate of 1.25% per month, due on demand		51,347		251,347

Promissory notes payable to relatives of a director, secured by a general security
agreement bearing interest at the U.S. bank prime rate plus 1% per month, due on demand		500,000		500,000

Promissory notes payable, unsecured, from relatives of a director, bearing interest
at 0.625% per month, with $50,000 repayable on October 5, 2004 and $60,000
repayable on July 28, 2006, which did not occur; currently due on demand with
The same interest rate		110,000		110,000

Promissory notes payable, unsecured, from relatives of a director, bearing interest
at 1% per month, due on demand		295,000		295,000
		1,801,965		3,185,675
Promissory notes payable to directors:
Promissory notes payable to a director, unsecured, bearing interest at 1% per
month, due on demand (Cdn $151,000)		-		123,306
		-		123,306
Promissory notes payable to unrelated parties:
Promissory notes payable to, unsecured, bearing interest at 1% per month,
Repayable September 30, 2009.		450,000		450,000
Promissory notes payable to, unsecured, bearing interest at 1% per month,
which did not occur; currently all due on demand with the same interest rate		2,040,956		2,136,500

Promissory notes payable, unsecured, bearing interest at 0.625% per month, with
$40,000 repayable on December 31, 2004, which did not occur; currently all due
on demand with the same interest rate		40,000		40,000

Promissory notes payable, secured by a guarantee from a director and relative of a
director, bearing interest at 1% per month, with $200,000 repayable on July 31,
2003, which did not occur; currently all due on demand		230,000		230,000

Promissory note payable, unsecured, non-interest bearing , repayable on July 17,
2005, which did not occur: currently due on demand		270,912		270,912
		3,031,868		3,127,412

Total current promissory notes payable	$	4,833,833	$	6,436,393

F-9

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

6. Capital stock

a) Authorized share capital:

350,000,000 common shares with a par value of $0.001 per share

b) Stock options:

The Company accounts for its employee stock-based compensation arrangements in accordance with provisions of Codification No. 123R “Share Based Payments”.

During the nine months ended September 30, 2009, the Company granted 620,000 options in consideration of providing $154,879 loan to the Company. Compensation cost related to these options, being the fair value of the options, has been estimated to be $54,044 and charged to interest expense. The weighted average per share fair value of these options issued in the period was $0.09. The fair value of the options was determined using the Black-Scholes option pricing model, using the expected life of the options of 5 years, volatility factors of 225% risk-free interest rates of 1.81% and no assumed dividend rate. The Company applied zero forfeiture rate in calculating stock based compensation expenses.

During the nine months ended September 30, 2009, 61,542,463 stock options expired unexercised. In addition, 5,827,000 stock options were cancelled as holder of stock options agreed to do so after accepting the right to subscribe the equivalent number of common shares from the Company at the price of $0.05 per share.

During the year ended December 31, 2008, the Company granted 6,128,000 options. Of the total granted, 3,000,000 were granted with vesting conditions based on certain performance targets. Even though a final measure of the value of compensation cost does not occur until performance is complete, the estimated fair value of these options was recognized as at December 31, 2008 in the amount of $84,210 and charged to product development costs. This amount has been prorated based on the expected performance period. In consideration of providing loan advances aggregating $569,328 to the Company, 2,278,000 options were granted and vested immediately. Compensation costs related to these options, being the fair value of the options, has been estimated to be $121,591 of which $71,191 has been charged to interest expense and $50,400 has been classified as deferred interest expenses. The balance of the 850,000 stock options were granted for services and vested immediately. Compensation costs related to these options, being the fair value of the options, have been estimated to be $143,791 and have been charged to product development costs. The weighted average per share fair value of options issued in 2008 was $0.13 per option. The fair value of the options was determined using the Black-Scholes option pricing model, using the expected life of the options of 5 years, volatility factors of 188%, risk-free interest rate of 2.72% and zero dividend rate. The Company applies zero forfeiture rate in calculating stock-based compensation expenses.

During the year ended December 31, 2008, the Company cancelled 9,500,000 stock options from a director and 1,000,000 stock options from non-employees, all of which were not vested nor recorded as stock-based compensation expense prior to cancellation. The remaining 2,000,000 stock options that were vested immediately were cancelled as per settlement agreement with a former consultant.

F-10

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

6. Capital stock (continued)

A summary of stock option activity is as follows:

	Nine months Ended			Year Ended
	September 30, 2009			December 31, 2008
	(Unaudited)			(Audited)
			Weighted			Weighted
			Average			Average
	Number of		Exercise	Number of		Exercise
	Options		Price	Options		Price
Outstanding, beginning of period	106,575,463	$	0.25	118,196,463	$	0.25
Granted	620,000		0.25	6,128,000		0.25
Cancelled	(5,827,000)		0.25	(12,500,000)		0.25
Expired	(61,542,463)		0.25	(5,249,000)		0.25

Outstanding, end of period	39,826,000	$	0.25	106,575,463	$	0.25

Exercisable, end of period	24,576,000	$	0.25	89,550,463	$	0.25

As of September 30, 2009, none of the stock options outstanding were in-the-money.

Unvested options at September 30, 2009 consist of 15,450,000 options which will vest based on achieving certain sales and performance targets, including 9,750,000 to two directors and 250,000 to a relative of a director of the Company. Compensation cost related to the 17,025,000 unvested options granted between 2004 to 2009, which value is estimated to be $1,948,758 will be recorded in the period in which the sales or performance targets are achieved or probable of being achieved.

c) Commitment to issue shares:

During the period, the Company offered to its creditors and consultants to purchase up to 135,449,463 common shares at a price of $0.05 per share for a total amount of $6,772,473. The agreements were completed on September 30, 2009 and were approved by the board of directors in October 2009. Of the total, 135,249,463 common shares for a total of $6,762,473 were subscribed by creditors who had agreed to pay for the shares with their debt. The balance of 200,000 common shares were subscribed by two consultants who paid $10,000 in cash subsequently in October 2009. The following table describes the details of payments of the entire subscription:

	Number of				Promissory								Total
	Shares		Interest		Notes		Advances		Accounts				Amount
Subscribers	Subscribed		Payable		Payable		Payable		Payable		Cash		Subscribed
Relatives of directors	66,507,896	$	803,897	$	831,876	$	1,689,623	$	-	$	-	$	3,325,396

Directors	21,141,225		511,418		140,832		404,811		-		-		1,057,061

Non-related parties	47,800,342		1,099,792		802,258		108,000		369,966		10,000		2,390,016

Total	135,449,463	$	2,415,107	$	1,774,966	$	2,202,434	$	369,966	$	10,000	$	6,772,473

As of September 30, 2009, a total of $6,762,473 being the total shares subscribed less $10,000 to be received by cash, was recorded as the Commitment to Issue Shares.

F-11

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

7. Legal actions

Accounts payable and accrued liabilities as of September 30, 2009 includes $180,666 (December 31, 2008 -$180,666) of amounts owing to a supplier, which the Company is in the process of disputing. The outcome of this matter cannot be determined at this time. The gain on settlement of the account payable, if any, will be recorded in the period that an agreement with the supplier is reached and the amount becomes determinable.

On July 21, 2009, two notes payable creditors commenced legal action against the Company to enforce repayment of all outstanding notes payable and interest. On September 4, 2009, the Company received a Notice of Credit to Judgment from the Superior Court of the State of North Carolina, whereby the Company was ordered to pay the two notes payable creditors an aggregate payment of $675,000, being partial payment of total interest outstanding as of June 30, 2009 plus $40,000 legal fees. On the same date, this partial judgment was assigned to a relative of a director.

During the year ended December 31, 2008, a note payable creditor commenced legal action against the Company to enforce repayment of all outstanding notes payable and interest. As of September 30, 2009, the total outstanding notes payable and interest payable was $44,700. The Company has agreed to settle this balance and was awaiting for final approval by Superior Court Judge. The payment on settlement will be recorded subsequent to the period end.

8. Related party transactions

Related party transactions for the nine months ended September 30, 2009 and 2008 included the following:

		2009		2008
		(Unaudited)		(Unaudited)
Product development costs
Directors and officers	$	45,000	$	45,000

Stock-based compensation in product development
Directors and officers		6,488		129,467

Interest expense
Directors and officers		11,679		10,550
Relatives of directors		273,787		259,140

Stock-based compensation in interest expense
Relatives of directors		54,044		8,886

Compensation
Directors and officers		239,850		2239,850
Relatives of directors		27,000		27,000

	$	657,848	$	719,893

All transactions with related parties were incurred in the normal course of operations and measured at the exchange amount, which is the amount of considerations established and agreed upon by the transacting parties.

Interest on promissory notes payable to related parties, management compensation and compensation paid to a relative of a director have been recorded at the exchange amount, which is the amount agreed to by the parties. Options granted to related parties have been recorded at their estimated fair value as disclosed note 6(b).

F-12

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

9. Commitments:

During 2000, the Company entered into three-year contracts with certain executive officers and directors providing the following annual compensation.

Sidney Chan	$	144,000
Stanley Cruitt	$	156,600
Dr. Jaroslav Tichy	$	60,000

The contracts are automatically renewed annually after the initial three-year term, and may be terminated by the Company at any time, effective thirty days after delivery of notice, without any further compensation.

The terms of Mr. Chan's contract also provides for a commission of 1% of net sales during the term of the agreement as well as a bonus payment on commencement of commercial production of the Pet Reminder. In addition, if more than 50% of the Company's stock or assets are sold, Messrs. Chan, Cruitt and Tichy will be compensated for entering into non-compete agreements based on the selling price of the Company or its assets as follows:

2% of sales price up to $24,999,999 plus

3% of sales price between $25,000,000 and $49,999,999 plus

4% of sales price between $50,000,000 and $199,999,999 plus

5% of sales price in excess of $200,000,000

The terms of Mr. Cruitt's contract was amended in 2008 as a result of his resignation as President on June 16, 2008. Mr. Cruitt was originally entitled to 4,000,000 options with a five-year term exercisable at $0.25 per share of which 2,000,000 stock options vested immediately and the remaining 2,000,000 options subject to sales and performance targets were cancelled in 2008.

10. Reconciliation of net loss to net cash used in operating activities

				Three months Ended				Nine months Ended
				September 30				September 30
				2009		2008		2009		2008
Net loss for the period			$	(652,766)	$	(478,707)	$	(1,515,192)	$	(1,403,243)
Add items not affecting cash:
Depreciation				434		306		1,301		916
Foreign exchange on note payable				24,055		(5,777)		30,641		(10,353)
Stock-based compensation:
	Product development			-		-		22,250		143,791
	Interest			33,072		25,686		104,444		46,220
	Selling, general and administration			-		-				-
Non-cash working capital items:
		Receivable and advances		160		33,580		5,048		1,973
		Inventories		-		79,593		-		58,619
		Prepaid expenses		67,196		(37,828)		47,495		(40,128)
		Accounts payable and accrued liabilities		493,476		289,146		1,141,647		753,902

			$	(34,373)	$	(94,001)	$	(162,366)	$	(448,303)

F-13

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ALR TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

($ United States)

Nine months Ended September 30, 2009 and 2008

(Unaudited)

11. Financial instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, and accrued liabilities, promissory notes, advances payable and interest payable. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values because of the short maturities of those instruments. The carrying value of the promissory notes, advances payable and interest payable reflects the Company’s legal obligation as the amounts have passed their maturity dates.

12. Subsequent event

Subsequent event has been evaluated through November 13, 2009, the date these financial statements were issued. There was no event that requires disclosure other than those already disclosed above.

F-14

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

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, 2008. Except for the description of historical facts contained herein, the Form 10Q 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 forward-looking statements.

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results may differ from these estimates under different assumptions or conditions. We believe the accounting polices that are most critical to our financial condition and results of operations and involve management's judgment and/or evaluation of inherent uncertain factors are as follows:

Basis of Presentation. The financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If the Company were not to continue as a going concern, it would likely not be able to realize on its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements. As described in note 1 to the interim financial statements, at September 30, 2009, there are certain conditions that exist which raise substantial doubt about the validity of this assumption. The Company's ability to continue as a going concern is dependent upon continued financial support of its creditors and its ability to obtain financing to repay its current obligations and fund working capital and its ability to achieve profitable operations. The Company will seek to obtain creditors consent to delay repayment of its outstanding promissory notes payable until it is able to replace this financing with funds generated from operations, replacement debt or from equity financing through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Management plans to obtain financing through the issuance of additional debt, the issuance of shares on the exercise of options and warrants and through future common share private placements. Management hopes to realize sufficient sales in future years to achieve profitable operations. Failure to achieve management's plans may result in the Company curtailing operations or writing assets and liabilities down to liquidation values, or both.

Prepaid expenses and deposits. Prepaid expenses and deposits primarily consists of prepaid commission expenses for market development purposes.

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Inventories. Inventories are recorded at the lower of cost, determined on a weighted average cost basis, and net realizable value. Net realizable value reflects the current estimated net selling price or value in use of the item in inventory in a non-forced sale. The Company assesses the need for inventory write-downs based on its assessment of the estimated net realizable value using assumptions about future demand and market conditions. When the results of these assumptions differ from the Company's projections, an additional inventory write-down may be required.

Revenue recognition. The Company recognizes sales revenue at the time of delivery when title has transferred to the customer, persuasive evidence of an arrangement exists, the fee is fixed and determinable and the sales proceeds are collectible. Provisions are recorded for product returns based on historical experience. Sales revenue, in transactions for which the Company does not have sufficient historical experience, is recognized when the return privilege period has expired. Changes in sales terms could materially impact the extent and timing of revenue recognition.

Stock-Based Compensation. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of our shares using daily price observations over an observation period of five years. The risk-free rate is based on the U.S. treasury rate in effect at the time of grant for periods similar to the expected option life. Due to the Company’s history with respect to forfeitures of incentive stock options, the estimate of expired or cancelled options included in the above option valuation was zero.

Valuation of Long-lived Assets The Company assesses the potential impairment of long-lived tangible and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Changes in the operating strategy can significantly reduce the estimated useful life of such assets.

Results of Operations

Management is focusing the majority of its efforts on introducing and marketing the HealthEConnect health management platform and its diabetes management system to the healthcare industry. A health services company based in Georgia has been signed on and has successfully gained customer commitments to implement the HealthEConnect diabetes management system. Corporations that are self-insured are being targeted due to the potential benefits they can achieve with the ALRT HealthEConnect and CHC system. Expected results are better health outcome with their employees and dependents along with lower cost of care for these targeted individuals with diabetes.

The Company is first targeting customers located in United States and in Canada. Pilot programs have been established in each and with pilot outcome results now becoming available, extensive selling activities are being planned for currently in process.

Sales revenue for the quarter ended September 30, 2009 was $0 as compared to $0 for the same quarter last year. There were no sales as the Company's new product is in the final stage of development and early stage of marketing campaign. The Company is fine-tuning the HealthEConnect healthcare management software platform and coordination of software protocols from the various diagnostic equipment such as glucometers necessary for remote monitoring through the ALRT HealthEConnect.

Sales revenue for the nine months ended September 30, 2009 was $0 as compared to $10,926 for the same nine months period last year. The decrease in sales was mainly due to the Company's new product is in the final stage of development and early stage of marketing campaign. The Company is fine-tuning the HealthEConnect healthcare management software platform and coordination of software protocols from the various diagnostic equipment such as glucometers necessary for remote monitoring through the ALRT HealthEConnect.

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Development costs were $100,947 for the quarter ended September 30, 2009 as compared with $46,500 for the same quarter last year. Development costs incurred during the third quarter of 2009 related to the allocation of additional programming resources required for the development of the ALRT500 LCD (Liquid Crystal Display) Med Reminders and the ALRT Interactive Response System (AIRS).

Development costs were $216,197 for the nine months ended September 30, 2009 as compared with $283,836 for the nine months ended September 30, 2008. Development costs incurred during the nine months of 2009 related to the allocation of additional programming resources required for the development of the ALRT500 LCD (Liquid Crystal Display) Med Reminders and the ALRT Interactive Response System (AIRS). Development costs for the nine months ended September 30, 2009 and 2008 include $22,250 and $143,791, respectively, of stock-based compensation recognized in the period.

Interest expense was $214,305 for the quarter ended September 30, 2009 as compared with $203,992 for the same quarter last year. The amount for the quarter included $16,272 relating to options issued in exchange for $34,180 loan received during the period which loans were repayable at demand secured by a floating charge against the Company’s assets. In addition, the amount for the quarter also include $16,800 being the pro-rated portion of stock-based compensation arising from a portion of the $450,000 loan received in March 2008 repayable on September 30, 2009.

Interest expense was $662,938 for the nine months ended September 30, 2009 as compared with $557,704 for the nine months ended September 30, 2008. The amount for the nine months period included $54,044 relating to options issued in exchange for $154,879 loan received during the period which loans were repayable at demand secured by a floating charge against the Company’s assets.

Professional fees were $54,390 for the quarter ended September 30, 2009 as compared with $16,522 for the quarter ended September 30, 2008. Fees were increased significantly due to extra $40,000 legal costs from the court judgment (note 5).

Professional fees were $89,036 for the nine months ended September 30, 2009 as compared with $52,312 for the nine months ended September 30, 2008. Fees were increased significantly due to extra $40,000 legal costs from the court judgment received in September 2009 (note 5).

The selling, general and administrative expenses were $243,127 for the quarter ended September 30, 2009 as compared to $205,918 for the quarter ended September 30, 2008. The increase relates primarily to higher bad debt expenses incurred during the current quarter.

The selling, general and administrative expenses were $485,396 for the nine months ended September 30, 2009 as compared to $489,297 for the nine months ended September 30, 2008. The decrease relates primarily to lower compensation, market development expenses counter-balanced by increased bad debt incurred during the current period.

Net loss of $652,766 for the quarter ended September 30, 2009 increased from a loss of $478,707 for the same quarter in 2008 mainly due to increase in legal costs and development costs.

Net loss of $1,515,192 for the nine months ended September 30, 2009 increased from a loss of $1,403,243 for the same period in 2008 mainly due to increase in interest expenses and legal costs.

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Liquidity and Capital Resources

Cash Balances and Working Capital

As of September 30, 2009, the Company's cash balance was $414 compared to $7,901 as of December 31, 2008. As of September 30 2009, the Company had a working capital deficiency of $6,999,928 as compared to a working capital deficiency of $12,324,804 as of December 31, 2008. The decrease was mainly due to the conversion of debt into subscribed common shares of the Company in the amount of $6,762,473.

Short and Long Term Liquidity

As of September 30, 2009, the Company does not have the current financial resources and committed financing to enable it to meet its overheads, purchase commitments and debt obligations over the next 12 months.

All of the Company's debt financing is either due on demand. The Company will seek to obtain creditors' consents to delay repayment of these loans until it is able to replace these financings with funds generated by operations, replacement debt or from equity financings through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Failure to obtain either replacement financing or creditor consent to delay the repayment of existing financing could result in the Company having to curtail operations.

Cash Provided by (Used in) Operating Activities

Cash used by the Company in operating activities during the nine months ended September 30, 2009 was $162,366 in comparison with $448,303 used during the same period last year. The decrease was mainly due to decreased payments to suppliers during the current period.

Cash Proceeds from Financing Activities

During the nine months ended September 30, 2009, the Company received $154,879 loan from a relative of a director as compared to $450,000 from a non-related party and $68,000 from a relative of a director during in the nine months period of 2008.

Off Balance Sheet Arrangement

The Company has no off balance sheet financing arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that is material to investors.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1A. RISK FACTORS

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

ITEM 6. EXHIBITS

The following Exhibits are attached hereto:

Exhibit No.	Description
10.1	License and Commercialization Agreement with Pari Respiratory Equipment, Inc.

31.1	Certification of Principal Executive and Principal Financial Officer pursuant Section 302
	of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive and Chief Financial Officer pursuant Section 906 of the
	Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 13th day of November, 2009.

	ALR TECHNOLOGIES INC.
	(Registrant)

	BY:	SIDNEY CHAN
		Sidney Chan
		President, Principal Executive Officer, Principal Accounting Officer, Principal Financial Officer Secretary/Treasurer and Director

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EXHIBIT INDEX

Exhibit No.	Description
10.1	License and Commercialization Agreement with Pari Respiratory Equipment, Inc.

31.1	Certification of Principal Executive and Principal Financial Officer pursuant Section 302
	of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive and Chief Financial Officer pursuant Section 906 of the
	Sarbanes-Oxley Act of 2002.

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