ALR TECHNOLOGIES INC. - Quarter Report: 2010 September (Form 10-Q)

alr10q09302010.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o

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. (Check one):

Large Accelerated Filer	o	Accelerated Filer	o
Non-accelerated Filer	o	Smaller Reporting Company	x
(Do not check if 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 o NO x

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 213,527,909 as of November 5, 2010.

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Index

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Note Regarding Forward Looking Statements	22
	Overview	22
	Critical Accounting Policies	24
	Results of Operations	27
	Liquidity and Capital Resources	29
	Off-Balance Sheet Arrangements	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	29

Item 4.	Controls and Procedures.	29


	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings.	30

Item 1A.	Risk Factors.	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	31

Item 5.	Other Information.	31

Item 6.	Exhibits.	32

Signatures		33

Exhibit Index		34

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.

ALR TECHNOLOGIES INC. AND SUBSIDIARY
Development Stage Company
Condensed Consolidated Balance Sheets
($ United States)


	September 30			December 31
	2010			2009
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	198		$	658
Prepaid expenses and other assets		16,184			42
Total current assets		16,382			700

Equipment, net		-			4,375
Total Assets	$	16,382		$	5,075


LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	783,785		$	797,493
Payroll payable		18,050			18,050
Interest payable		1,354,095			967,921
Advances payable		165,422			266,046
Promissory notes payable		5,869,388			5,275,333
Total liabilities	$	8,190,740		$	7,324,843

STOCKHOLDERS’ DEFICIT:
Common stock
Authorized : 350,000,000 common shares with a par
value of $0.001 per share
213,527,909 and 213,527,909 shares issued and
outstanding, respectively		213,527			211,527
Additional paid-in capital		23,382,260			22,648,973
Accumulated deficit		(31,770,145	)		(30,180,268	)
Total Stockholders’ deficit		(8,174,358	)		(7,319,768	)
Total liabilities and stockholders’ deficit	$	16,382		$	5,075

See accompanying notes to the condensed consolidated financial statements.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY
Development Stage Company
Condensed Consolidated Statements of Operations
($ United States)
(Unaudited)



													October 21, 1998
	Three months Ended						Nine months Ended						(Inception)
	September 30						September 30						to September 30,
	2010			2009			2010			2009			2010
Revenue
Sales	$	-		$	-		$	-		$	-		$	2,994,931
Cost of sales		-			-			-			-			3,325,639
Gross Margin		-			-			-			-			(330,708	)
Operating Expenses
Depreciation		-			434			309			1,301			52,694
Development costs		46,539			100,947			144,539			216,197			2,979,926
Interest		310,628			302,909			1,076,807			952,308			14,837,144
Professional fees		24,096			54,390			81,170			89,036			1,697,870
Rent		-			9,218			-			24,920			495,696
Selling, general and administration		116,828			273,788			282,986			520,805			11,117,721
Total Operating Expenses		498,091			741,686			1,585,811			1,804,567			31,181,051
Operating (Loss)		(498,091	)		(741,686	)		(1,585,811	)		(1,804,567	)		(31,511,759	)
Other Expenses (Income)
Loss on write-off equipment		-			-			4,066			-			36,623
Other expenses		-			-			-			-			425,965
Other income		-			-			-			-			(204,202	)
Total Other Expenses		-			-			4,066			-			258,386
Net (Loss)	$	(498,091	)	$	(741,686	)	$	(1,589,877	)	$	(1,804,567	)	$	(31,770,145	)

Loss per share, basic and diluted	$	-		$	(0.01	)	$	(0.01	)	$	(0.02	)
Weighted average shares outstanding,
- basic and diluted		212,767,039			76,078,446			211,945,491			76,078,446

See accompanying notes to the condensed consolidated financial statements.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Condensed Consolidated Statements of Cash Flows

($ United States)

(Unaudited)


							October 21, 1998
	Nine months Ended						(Inception)
	September 30						to September 30,
	2010			2009			2010
OPERATING ACIVITIES
Net loss	$	(1,589,877	)	$	(1,806,761	)	$	(31,770,145	)
Depreciation		309			1,301			52,694
Disposal of equipment		4,066			-			36,623
Stock-based compensation-development costs		-			22,250			528,618
Stock-based compensation-interest expenses		545,789			104,444			5,545,054
Stock-based compensation-selling, general and admin		50,000			-			2,992,939
Other non-cash items included in net loss		511			-			294,531
Non-cash imputed interest expenses		138,987			291,569			2,773,816
Equity instruments issued to settle liabilities					-			1,871,718
Changes in assets and liabilities:
Decrease in receivables		-			5,048			-
Increase in prepaid expenses		(16,142	)		47,495			(16,185	)
Increase (decrease) in accounts payable and accrued liabilities		(13,708	)		273,605			1,314,315
Increase in advances payable		(100,624	)		425,843			3,166,880
Increase in interest payable		386,174			471,814			3,156,672
Net cash provided by (used in) operating
activities		(594,515	)		(163,392	)		(10,053,469	)
INVESTING ACTIVITIES
Purchase of equipment		-			-			(43,078	)
Net cash used in investing activities		-			-			(43,078	)
FINANCING ACTIVITIES
Other financing activities		-			-			(108,254	)
Expenditures to repurchase shares		-			-			(342,038	)
Proceeds from issuance of shares		-			-			1,512,403
Repayment of promissory notes payable		-			-			(970,879	)
Proceeds from issuance of promissory notes payable		594,055			155,905			10,005,513
Net cash provided by financing activities		594,055			155,905			10,096,745
Net increase (decrease) in cash		(460	)		(7,487	)		198
Cash, beginning of period		658			7,901			-
Cash, end of period	$	198		$	414		$	198
Supplemental information:
Cash paid for interest expenses		5,857			530			1,223,335

See accompanying notes to the condensed consolidated financial statements.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

1. Basis of Presentation, Nature of Operations and Going Concern

ALR Technologies Inc. (the "Company") was incorporated under the laws of the state of Nevada on March 24, 1987 as Mo Betta Corp. On October 21, 1998 the Company acquired a subsidiary, which was subsequently disposed of, through in a reverse take-over acquisition. On December 28, 1998, the Company changed its name 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. The Company is currently assessing the marketplace for its product to determine its commercial feasibility.

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 losses over the three and nine month periods ended September 30, 2010 of $498,091 and $1,589,877, respectively. In addition, losses incurred for the years ended December 31, 2009 and 2008 were $2,200,301 and $2,313,328, respectively. As of September 30, 2010, the Company is currently unable to self-finance its operations, has a working capital deficit of $8,174,358 ($7,319,768 at December 31, 2009), an accumulated stockholders’ deficit of $31,770,145 ($30,180,268 at December 31, 2009), limited resources, no source of operating cash flow, and no assurance that sufficient funding will be available to conduct further product development activities or operations. Once product development activities are completed, there is no assurance the Company’s current projects will be commercially viable or profitable. The Company has debts comprised of accounts payable, payroll payable, interest and promissory notes payable totalling $8,065,740 currently due or considered delinquent. There is no assurance that the Company will not face legal action from creditors regarding delinquent accounts payable, payroll payable, promissory notes and interest payable. Any one or a combination of these above conditions could result in the failure of the business and cause the Company to cease 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 fund working capital and overhead requirements, fund the development of the Company’s product line and ultimately, the Company’s ability to achieve profitable operations and repay overdue obligations. Management has obtained short-term financing through a line of credit facility with available borrowing up to $1 million (As at September 30, 2010 the balance outstanding was $594,055). This facility will allow the Company to pursue widespread distribution of its product line. The resolution of whether the Company is able to continue as a going concern is dependent upon the realization of management’s plans. If additional financing is required, the Company plans to raise needed capital through the exercise of share options and by future common share private placements. There can be no assurance that the Company will be able to raise any additional debt or equity capital from the sources described above, or that the lender in the line of credit arrangement will maintain the availability of borrowing from the line. If management is unsuccessful in obtaining short-term financing or achieving long-term profitable operations, the Company will be required to cease operations.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

1. Basis of Presentation, Nature of Operations and Going Concern (continued)

All of the Company’s debt is either due on demand or is default and is now due on demand, while continuing to accrue interest at its stated rate. The Company will seek to obtain creditors’ consents to delay repayment of the outstanding promissory notes payable and related interest thereto, until it is able to replace this financing with funds generated by operations, recapitalization with replacement debt or from equity financings through private placements. 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. In the past, creditors have successfully commenced legal action against the Company to recover debts outstanding. In those instances, the Company was able to obtain financing from related parties to cover the verdict or settlement; however, there is no assurance that the Company would be able to obtain the same financing in the future. If the Company is unsuccessful in obtaining financing to cover any potential verdicts or settlements, the Company will be required to cease operations.

The Company’s activities will necessitate significant uses of working capital beyond 2010. Additionally, the Company’s capital requirements will depend on many factors, including the success of the Company’s continued product development and distribution efforts. The Company plans to continue financing its operations with the line of credit it has available.

While the Company strongly believes that its capital resources will be sufficient in the near term, there is no assurance that the Company’s activities will generate sufficient revenues to sustain its operations without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company.

2. Significant accounting policies

The following (a) condensed consolidated balance sheet as of December 31, 2009, which was derived from audited financial statements, and (b) the unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of September 30, 2010 and 2009, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments.

These condensed consolidated financial statements should be read in conjunction with a reading of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the U.S. Securities and Exchange Commission.

The results of operations for the three and nine month p ended September 30, 2010, are not necessarily indicative of the results to be expected for the full year.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

2. Significant accounting policies (continued)

a) Development Stage Company

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, developing operating assets and raising capital. Accordingly, the Company is considered to be in the development stage as defined in ASC 915 Development Stage Entities. While the Company generated revenues from its previous generation of products, the Company has not generated any revenues from its current principal operations, and there is no assurance of future revenues.

b) Principles of consolidation

These condensed consolidated financial statements include the accounts of the Company and its integrated wholly-owned subsidiary, ALRTech Health Systems Inc. (incorporated in British Columbia, Canada on April 15, 2008). All significant inter-company balances and transactions have been eliminated.

c) Stock-based compensation

The Company follows the fair value method of accounting for 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 condensed consolidated financial statements. The Company estimates the fair value of the 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.

d) Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and operating loss carry-forwards that are available to be carried forward to future years for tax purposes.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. When it is not considered to be more likely than not that a deferred income tax asset will be realized, a valuation allowance is provided for the excess.

The Company follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (“FASB”) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the positions will be sustained upon examination by the tax authorities. It also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of September 30, 2010, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

e) Loss per share

Basic loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the three and nine month period ended September 30, 2010. Diluted loss per share is calculated by dividing the net loss by the sum of the weighted average number of shares outstanding and the dilutive equivalent shares outstanding during the period. 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 loss per common shares when the effect would be anti-dilutive.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

2. Significant accounting policies: (continued)

f) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring management estimates include the determination of the fair value of common shares issued as settlement of promissory notes payable, interest payable, advances payable and accounts payable; the determination of accrued liabilities, the fair value of promissory notes payable and interest payable; and assumptions used in the determination of fair value of stock options granted. Management believes the estimates are reasonable; however, actual results could differ from those estimates.

g) Recent accounting pronouncements

i. Adopted

In August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”). This update provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosure”, for the fair value measurement of liabilities when a quoted price in an active market is not available. ASU 2009-05 is effective for reporting periods beginning after August 28, 2009. The Company has adopted this pronouncement which has had no material effect on its condensed consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

3. Equipment

			September 30, 2010
			Accumulated		Net book
	Cost		depreciation		value
Computer equipment	$	-	$	-	$	-
Office equipment		-		-		-
	$	-	$	-	$	-

				December 31, 2009
			Accumulated		Net book
	Cost		depreciation		Value
Computer equipment	$	25,549	$	21,963	$	3,586
Office equipment		5,566		4,777		789
	$	31,115	$	26,740	$	4,375

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

4. Interest, advances and promissory notes payable

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 two creditors holding promissory notes payable (the “plaintiffs”) an aggregate amount of $1,988,000 for principal, interest and legal fees incurred. Subsequent to the verdict, the Company, two directors, a relative of a director (the “Purchaser”) and the plaintiffs entered into a settlement agreement (the “Settlement Agreement”) whereby a relative of a director acquired $1,313,000 of debts from the plaintiffs in a private transaction. The remaining $675,000 due to the plaintiffs was exchanged for common shares of the Company as part of a separate debt for shares settlement (note 6). As part of the Settlement Agreement, a second director, not related to the Purchaser, assigned unsecured advances payable of the Company with no stated terms of interest, totalling $425,000, to the plaintiffs. As part of the Settlement Agreement, the Company agreed to the following repayment terms:

- $300,000 repayable at a rate of $25,000 per month (note 6); and

- $125,000 repayable in whole by January 15, 2011.

a) Interest payable

A summary of the interest payable activity is as follows:

Balance, December 31, 2008	$	2,613,008
Interest incurred on promissory notes payable		674,021
Interest payable retired through the issuance of shares		(2,319,108	)
Balance, December 31, 2009		967,921
Interest incurred on promissory notes payable		392,031
Repayment of interest payable through line of credit		(5,857	)
Balance, September 30, 2010	$	1,354,095

Interest payable is to the following:

	September 30		December 31
	2010		2009
Relatives of directors	$	846,504	$	592,848
Directors		1,168		1,168
Non-related parties		506,423		373,905
	$	1,354,095	$	967,921

Historically, all interest payable incurred is from interest incurred at the stated rate of promissory notes issued by the Company. The payment terms, security and any interest payable are based on the underlying promissory notes payable that the Company has outstanding.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

4. Interest, advances and promissory notes payable (continued)

b) Advances Payable

A summary of the advances payable activity is as follows:

Balance, December 31, 2008	$	2,289,982
Advances accrued		605,498
Advances payable converted into promissory notes payable from lawsuit (note 4(c))		(425,000	)
Advances payable retired through the issuance of shares (note 4(d))		(2,204,434	)
Balance, December 31, 2009		266,046
Advances accrued		223,430
Advances repaid from proceeds of line of credit		(324,054	)
Balance, September 30, 2010	$	165,422

Advances payable are to the following:

	September 30		December 31
	2010		2009
Advances payable to:
Relatives of directors	$	158	$	967
Companies controlled by directors		71,005		185,821
Current and former directors		94,259		79,258
	$	165,422	$	266,046

Advances payable are unsecured, have no stated terms of interest and are due on demand.

c) Promissory notes payable:

A summary of the promissory notes payable activity is as follows:

Balance, December 31, 2008	$	6,436,393
Promissory notes payable issued		199,405
Promissory notes payable converted from advance payable from the settlement of lawsuit (note 4(b))		425,000
Promissory notes payable retired through the issuance of shares (note 4(d))		(1,785,465	)
Balance, December 31, 2009		5,275,333
Promissory notes payable issued		594,055
Balance, September 30, 2010	$	5,869,388

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

4. Interest, advances and promissory notes payable (continued)

c) Promissory notes payable (continued)

During the nine months ended September 30, 2010, the Company borrowed a total of $594,055 from a relative of a director as a draw on an operating line of credit finalized during May 2010. Amounts borrowed on the line of credit bear interest at 1% per month, are due on demand and are secured by a floating charge against the assets of the Company. Previous to the completion of the line of credit, the creditor had advanced amounts under the same terms that have been rolled into the line of credit borrowing. As consideration for the line of credit, the Company granted 10,000,000 options to the creditor (note 5(b)).

During the year ended December 31, 2009, the Company received proceeds of $154,879 from a director and a relative of a director in exchange for the issuance of promissory notes payable. The promissory notes issued are due on demand with interest at 1.0% per month and are collateralized by a floating charge against assets of the Company. As consideration for the loan, 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 granted to the lenders and were recorded as interest expense totalling $54,044. These options were fully vested once granted. As of December 31, 2009, these 620,000 stock options were cancelled as part of the agreement for subscribing for shares at the price of $0.05 per share completed in December 2009. There was no accounting impact on the cancellation of these options.

Promissory notes payable are to the following:

Relatives of Directors				September, 2010		December 31, 2009

Promissory notes payable to relatives of directors collateralized by a general security agreement on all the assets of the Company, due on demand:

	i.	Interest at 1% per month	$	1,439,672	$	845,618

	ii.	Interest at 1.25% per month		51,347		51,347

	iii.	Interest at the U.S. bank prime rate plus 1%		500,000		500,000

Promissory notes payable, unsecured to relatives of a former director, bearing interest at 0.625% per month, with $50,000 repayable on October 5, 2004 and $60,000 repayable on July 28, 2006, due on demand				110,000		110,000

Promissory notes payable, unsecured, to relatives of a director, bearing interest at 1% per month, due on demand				1,465,000		1,445,000
			$	3,566,019	$	2,951,965

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

4. Interest, advances and promissory notes payable (continued)

c) Promissory notes payable (continued)

Unrelated Lenders				September, 2010		December 31, 2009

Unsecured promissory notes payable to unrelated lenders:

	i.	Interest at 1% per month, repayable on September 30, 2009, due on demand	$	450,000	$	450,000

	ii.	Interest at 1% per month, with $50,000 repayable on December 31, 2004, $75,000 repayable on August 18, 2007, $75,000 repayable on November 19, 2007 and the balance due on demand. All are due on demand, accruing interest at the same rate.		887,457		907,456

	iii.	Interest at 0.625% per month, with $40,000 repayable on December 31, 2004, all due on demand		40,000		40,000

	iv.	Non-interest-bearing, repayable on July 17, 2005, due on demand		270,912		270,912

	v.	Non-interest-bearing loan repayable at $25,000 per month beginning October 2009, none repaid to date		300,000		300,000

	vi.	Non-interest-bearing loan, due January 15, 2011		125,000		125,000

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, all due on demand				230,000		230,000
				2,303,369		2,323,368
			$	5,869,388	$	5,275,333

d) Shares for debt settlement

In September 2009, the Company offered their creditors the chance to collect their debts outstanding through the issuance of shares. All the creditors, comprising both related and unrelated individuals, which accepted the offer agreed with the Company on a price of $0.05 per share. The agreements were completed on September 30, 2009 and the common shares were issued in December 2009. In total, the Company issued 135,249,463 common shares at $0.05 per share for a total amount of $6,762,473. As part of the terms of the subscription agreement, subscribers agreed to cancel 41,948,000 stock options previously granted to them by the Company at the exercise price of $0.25 per share. The stock options cancelled had previously vested and there was no accounting impact on the cancellation. The following table describes the details of payments of the entire subscription:

-13-

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

4. Interest, advances and promissory notes payable (continued)

	Number of				Promissory						Total
	Shares		Interest		Notes		Advances		Accounts		Amount
Subscribers	Subscribed		Payable		Payable		Payable		Payable		Subscribed

Relatives of directors		66,660,482	$	811,526	$	831,875	$	1,689,623	$	-	$	3,333,024

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

Unrelated parties		47,447,756		996,164		785,758		108,000		482,466		2,372,388

Total		135,249,463	$	2,319,108	$	1,758,465	$	2,202,434	$	482,466	$	6,762,473

e) Interest expense

During the nine months ended September 30, 2010, the Company incurred interest expense of $1,076,807 (2009: $952,308) as follows:

-	$392,031(2009: $558,489) incurred on promissory notes payables outstanding as shown in note 6(c);
-	$138,987 (2009: $289,375) incurred from the calculation of imputed interest on accounts payable outstanding for longer than one year, advances payable and promissory notes payable, which had no stated interest rate.;
-	$545,789 (2009: $104,444) incurred on stock options granted to creditors

5. Capital stock

a) Authorized share capital:

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

b) Issued share capital:

On July 1, 2010 the Company entered into an agreement with an Officer to issue 2,000,000 common shares as compensation for the initial three months of services provided by the Officer to the Company. The common shares were valued at $0.025 per share for a total value of $50,000. The amount was determined to be the fair market value since the individual became an Officer upon entering into this agreement and immediately prior to that was an arm’s length individual.

-14-

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

5. Capital stock (continued)

c) Stock options:

During the nine months period ended September 30, 2010:

The Company granted 11,400,000 stock options as follows:

10,000,000 stock options to a relative of a director for advancing funds on the line of credit under negotiation. The options are exercisable at $0.10 per share and expire on December 31, 2011. These options vested immediately and the fair value totalling $409,512 was allocated to interest expense. Later during the year, the expiry date of all 10,000,000 stock options was extended to March 7, 2015. Additional stock-based compensation expense of $87,255 reflecting the increased fair value of these modified stock options

-	1,200,000 stock options to creditors of the Company exercisable at $0.25 per share for a term of five years expiring June 30, 2015. These options with a fair value of $49,022 vested immediately.

-	200,000 stock options to a consultant of the Company exercisable at $0.25 per share for a term of five years expiring June 30, 2015. The stock options have a fair value of $8,309. Commencing July 1, 2011, 50,000 of the stock options vest each July 1 until all the stock options are fully vested.

During the year ended December 31, 2009:

The Company granted 620,000 stock options to relative of a director as follows:

-	275,000 stock options exercisable at $0.25 per share for a term of five years expiring March 20, 2014

-	208,000 stock options exercisable at $0.25 per share for a term of five years expiring March 31, 2014

-	137,000 stock options exercisable at $0.25 per share for a term of five years expiring October 31, 2014

All of the options granted vested immediately. The 620,000 stock options were granted as a bonus for not demanding repayment and the fair value totalling $54,044 was allocated to interest expense.

On September 30, 2009, the Company cancelled 41,948,000 stock options as a condition of the debt retirement. The options cancelled consisted of 19,778,000 stock options from directors and 22,170,000 stock options from non-employees, all were fully vested and recognized as stock-based compensation expense prior to cancellation.

-15-

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

5. Capital stock (continued)

A summary of stock option activity is as follows:

	Nine months Ended					Year Ended
	September 30, 2010					December 31, 2009
	Number of					Number of			Weighted Average
	Options			Exercise Price		Options			Exercise Price
Outstanding, beginning of period		3,505,000		$	0.25		106,575,463		$	0.25
Granted		11,400,000			0.12		620,000			0.25
Cancelled		-			-		(41,948,000	)		0.25
Expired		(1,200,000	)	$	0.25		(61,742,463	)		0.25

Outstanding, end of period		13,705,000		$	0.12		3,505,000		$	0.25

Exercisable, end of period		13,505,000		$	0.12		3,505,000		$	0.25

The options outstanding at September, 2010 and December 31, 2009 were as follows:

	September 30, 2010				December 31, 2009

Expiry Date	Options		Exercise Price		Options		Exercise Price

March 17, 2010		-	$	-		200,000	$	0.25
July 8, 2010		-	$	-		500,000	$	0.25
September 12, 2010		-	$	-		500,000	$	0.25
October 17, 2010 (expired)		150,000	$	0.25		150,000	$	0.25
April 7, 2011		200,000	$	0.25		200,000	$	0.25
December 19, 2011		1,455,000	$	0.25		1,455,000	$	0.25
March 7, 2015		10,000,000	$	0.10		-	$	-
June 30, 2015		1,400,000	$	0.25		-	$	-
May 31, 2017		500,000	$	0.25		500,000	$	0.25
Total		13,705,000	$	0.12		3,505,000	$	0.25
Aggregate intrinsic value	$	-			$	-
Weighted Average Remaining Contractual Life		3.62				1.31

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options, based on the $0.04 (December 31, 2009: $0.06) closing stock price of the Company’s common stock on the NASDAQ over-the-counter market (OTC) on September 30, 2009. As of September 30, 2010, none (December 31, 2009: none) of the stock options outstanding were in-the-money.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

5. Capital stock (continued)

The Company uses the fair value method for determining stock-based compensation for all options granted during the fiscal periods. The fair value was determined using the Black-Scholes option pricing model based on the following weighted average assumptions:

	September 30, 2010			December 31, 2009

Risk-free interest rate		1.76	%		1.81	%
Expected life	5 years			5 years
Expected dividends		0	%		0	%
Expected volatility		252	%		225	%
Forfeiture rate		0	%		0	%

The weighted average fair value for the options granted during 2010 was $0.05 (2009: $0.09).

The compensation cost of the stock options granted was allocated as follows:

	Three months ended September 30, 2010		Three months ended September 30,2009		Nine months ended September 30, 2010		Nine months ended September 30, 2009
Interest expense:
Relatives of directors	$	87,255	$	16,272	$	496,767	$	54,044
Non-employees		49,022		-		49,022		-
		136,277		16,272		545,789		54,044
Development costs:
Directors and officers		-		-		-		6,488
Non-employees		-		-		-		15,762
						-		22,250
Professional fees:
Directors and officers		-		-		-		-
Non-employees		519		-		511		-
		511		-		511		-
	$	136,788	$	16,272	$	546,300	$	76,294

6. Contingencies

A creditor of the Company had previously commenced legal proceedings against the Company for an unpaid promissory note payable for $300,000. The Company had agreed to payment terms of $25,000 per month commencing in October 2009 as part of the Settlement Agreement (note 4). To date, the Company has made no payments and the loan is considered to be in default. The full amount of the debt has been recorded by the Company as it recognizes the amount is a legal liability. A motion of default judgement has been requested by the Plaintiff. No further amounts relating to any associated costs and legal fees have been recorded as of September 30, 2010 as the amounts while considered likely, are not estimable.

-17-

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

7. Related party transactions

Related party transactions included the following:

	Three months Ended September 30, 2010		Three months Ended September 30, 2009		Nine months Ended September 30, 2010		Nine months Ended September 30, 2009
Development costs:
Services rendered by directors and officers	$	15,000	$	15,000	$	30,000	$	30,000
Stock options granted to directors and officers		-		-		-		6,488

Interest expense:
Promissory notes issued to relatives of directors		93,618		109,972		258,351		207,493
Stock options granted to relatives of directors		87,255		16,272		496,767		54,044

Selling, general and administration:
Compensation to directors and officers		97,400		79,950		143,020		159,900

	$	293,273	$	221,194	$	928,138	$	457,925

Except as discussed in the next paragraph, all transactions with related parties were incurred in the normal course of operations and measured at the exchange amount, which is the amount of consideration 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 5(b).

8. Commitments:

The Company has annual compensation arrangements with the following individuals:

Sidney Chan	$	144,000
Dr. Jaroslav Tichy	$	60,000
Lawrence Weinstein	$	156,000

The contracts are automatically renewed annually 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. Weinstein’s contract provides for periodically increases in the amounts of monthly compensation during the first year of as a President and Director of the Company. After the initial year, Mr. Weinstein will earn no less than $13,000 per month as agreed upon by Mr. Weinstein and the other directors.

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ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

8. Commitments: (continued)

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 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

Any other amounts distributed to each key employee are to be determined by the Board of Directors.

9. Financial instruments

The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, advances payable, interest payable and promissory notes payable.

Fair Value

The fair values of cash and certain accounts payable and accrued liabilities approximate their carrying values due to the relatively short periods to maturity of these instruments.

Certain accounts payable have been outstanding longer than one year. The Company has recorded imputed interest at a rate of 1% per month over the period the payables have been outstanding for longer than one year, with a corresponding amount recognized in additional paid-in capital. The calculated amount represents the implicit compensation for the use of funds beyond a reasonable term for regular trade payables.

For the purposes of fair value analysis, promissory notes payable can be separated into three classes of financial liabilities.

i. Interest-bearing promissory notes and related interest payable

ii. Non-interest-bearing promissory notes past due

iii. Non-interest-bearing promissory note due in the future.

The interest-bearing promissory notes payable are all delinquent and have continued to accrue interest at their stated rates. The Company currently does not have the funds to extinguish these debts and will continue to incur interest until such time as the liabilities are extinguished. There is not an active market for delinquent loans for a Company with a similar financial position. Management asserts the carrying values of the promissory notes and related interest payable are a reasonable estimate of fair value as they represent the Company’s best estimate of their legal obligation for these debts. As there is no observable market for interest rates on similar promissory notes, the fair value was estimated using level 3 inputs in the fair value hierarchy.

-19-

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

9. Financial instruments (continued)

Fair Value (continued)

The non-interest-bearing promissory note payable past due is several years delinquent and there have been no renegotiated repayment terms. There is not an active market for default loans not bearing interest nor is there an observable market for lending to companies with a financial position similar to the Company. The Company has recorded imputed interest at a rate of 1% per month over the life of the promissory notes, with a corresponding amount recognized in additional paid-in capital representing the implicit compensation for the use of funds. Management asserts the payment date for these amounts cannot be reasonably determined. Management further asserts there is not a determinable interest rate for arm’s-length borrowings based on the current financial position of the Company and asserts the carrying value is the best estimate of the Company’s legal liability and represents the fair value for the promissory note. This would be considered a level 3 input in the fair value hierarchy.

The non-interest-bearing promissory notes payable due in the future are the result of the Settlement Agreement whereby certain advances payable were assigned to the plaintiffs. As part of the Settlement Agreement, the Company agreed to repayment terms for these non-interest-bearing amounts. Since these amounts now have fixed repayment terms, the Company considers these amounts as promissory notes as opposed to advances. Since the settlement, the Company has not made the required payments on one promissory note where repayments were required prior to the 2009 year-end (note 8). Based on the Company’s current financial position and the maturities of these promissory notes, it is likely the Company will default on the other promissory notes payable in this class. The Company has recorded imputed interest at a rate of 1% per month over the life of the promissory note, with a corresponding amount recognized in additional paid-in capital representing the implicit compensation for the use of funds. Management’s assertion is the carrying value is the best estimate of the Company’s liability and represents the fair value for the promissory note. This would be considered a level 3 input in the fair value hierarchy.

The fair value of advances payable cannot be determined as they are related party amounts that have no stated terms of repayment. There is no market for similar instruments. The Company has recorded imputed interest at a rate of 1% per month over the life of the advances payable, with a corresponding amount recognized in additional paid-in capital representing the implicit compensation for the use of funds.

Credit risk

Financial instruments that potentially subject the Company to credit risk consist of cash. The Company only has an immaterial cash balance and is not exposed to significant credit risk.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and foreign currency risk.

i. Interest rate risk

Interest rate risk consists of two components:

-20-

ALR TECHNOLOGIES INC. AND SUBSIDIARY

Development Stage Company

Notes to Condensed Consolidated Financial Statements

($ United States)

(Unaudited)

9. Financial instruments (continued)

Market risk (continued)

To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk.

The Company is exposed to interest rate cash flow risk on promissory notes payable of $500,000, which incurs a variable interest rate of prime plus 1%. A hypothetical change of 1% on interest rates would increase or decrease net loss and comprehensive loss by $5,000.

To the extent that changes in prevailing market interest rates differ from the interest rate on the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.

The Company’s promissory notes payable consist of $500,000 of variable interest rate notes and $5,369,388 of fixed interest rate notes. All of these notes are past due and are currently due on demand while interest continues to accrue. Due to the delinquency of the fixed interest rate promissory notes payable, there is no active market for these instruments and fluctuations in market interest rates do not have a significant impact on their estimated fair values as of September 30, 2010.

At September 30, 2010, the effect on the net loss and comprehensive loss of a hypothetical change of 1% in market interest rate cannot be reasonably determined.

Foreign currency risk

The Company incurs certain accounts payable, advances payable and expenses in Canadian dollars and is exposed to fluctuations in changes in exchange rates between the US and Canadian dollars. As at September 30, 2010, the effect on net loss and comprehensive loss of a hypothetical change of 10% between the US and Canadian dollar would not be material. The Company has not entered into any foreign currency contracts to mitigate this risk.

10. Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through November 5, 2010, the date the financial statements were issued.

·	On October 17, 2010, 150,000 stock options exercisable at $0.25 expired unexercised.

-21-

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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 Condensed 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, 2009. 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 forward-looking statements.

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 results.

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.

Overview

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 from Mo Betta Corp. to ALR Technologies Inc. In April 1998, the Company changed its business purpose to marketing a pharmaceutical compliance device which was owned by A Little Reminder (ALR) Inc. (“ALR”). ALR was incorporated pursuant to the Company Act of British Columbia on May 24, 1996. ALR continued its jurisdiction under the laws of Canada on September 23, 1996 and to the State of Wyoming on July 31, 1998.

On October 21, 1998, the Company entered into an agreement with ALR whereby the Company would have the non-exclusive right to distribute certain products of ALR.

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.”

In April 1999, the Company acquired 99.9% (36,533,130) of the issued and outstanding Class A shares of common stock of ALR in exchange for 36,533,130 shares of the Company’s common stock thereby making ALR a subsidiary corporation of the Company. ALR also had outstanding 124,695 shares of Class B common stock, none of which was owned by the Company.

-22-

ALR had one wholly owned subsidiary corporation, Timely Devices, Inc. (“TDI”). TDI was founded in Edmonton, Alberta, Canada on July 27, 1994. On July 31, 2000, the Company sold all of its shares of ALR. As a result of this sale, the Company is no longer using the technology that was used by its previously owned subsidiaries and does not have any assembly capability.

On April 15, 2008, the Company incorporated a wholly-owned subsidiary in Canada under the name Canada Alrtech Health Systems Inc.

Recent Developments

Effective July 1, 2010, the following management changes occurred:

-	Lawrence Weinstein was appointed as President, Chief Operating Officer (“COO”) and a Director of the Company

-	Sidney Chan transitioned to Chairman of the Board while retaining the position of Chief Executive Officer

-	Stan Cruitt retired as Chairman of the Board

On the date Mr. Weinstein took office, he received 2,000,000 common shares of the Company as compensation for his initial three month term ended September 30, 2010 as President and COO.

Also on July 1, 2010, the Company granted a total of 1,400,000 stock options to two creditors and a consultant of the Company. The stock options are exercisable at $0.25 per share and expire on June 30, 2015. The stock options granted have varying vesting terms for the different recipients.

In May 2010, the Company finalized negotiations with a relative of a Director for a line of credit borrowing arrangement of $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 September 30, 2009, the Company entered into an agreement with certain creditors to retire $6.762M of debt through the issuance of 135,249,463 common shares. Also on September 30, 2009, the Company agreed to issue 200,000 common shares for gross proceeds of $10,000.

Description of Business

ALR Technologies products will utilize internet based technologies to provide health care providers with the ability to monitor their patient’s health and ensure compliance to health maintenance activities.

The Company’s Health-e-Connect (HeC) system is an internet based product intended for diabetic patients 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’ glucometers into the ALRT database to quickly assess user compliance and performance compared to provider set targets.This provides patients and caregivers the ability to track patient performance and compliance, thereby allowing timely intervention. By providing this ongoing monitoring and feedback, the HeC system is expected to enhance outcomes and lower costs.

The Company is focusing the majority of its efforts on introducing and marketing our HeCsystem for patients and health care providers in the United States. The Company has limited financial resources and is actively seeking other marketing relationships. In addition, the Company is working to establish health insurance company reimbursement for Health-e-Connect services.

-23-

On July 23, 2010 the Company submitted a 510(k) application to the FDA for its proprietary HeC system. Clearance of the application by the FDA will allow the Company to market the HeC system in the United States. The Company has received comments from the FDA and is currently preparing responses with the aim of receiving clearance upon satisfactory resolution to the comments. The HeC may be offered for sale in the United States when it receives 510(k) clearance.

On August 2, 2010 the Company announced that results of a clinical trial conducted by Dr Hugh Tildesley et al. using the ALRT Health-e-Connect (HeC) System. The article was published in the August 2010 Diabetes Care publication.

The article is titled “Effect of Internet Therapeutic Intervention on A1C Levels in Patients With Type 2 Diabetes Treated With Insulin” and showed A1C dropping from 8.8% to 7.6% for the Intervention Group using ALRT’s HeC System. The A1C test is important in diabetes treatment management as a long-term measure of control over blood glucose for diabetes patients. According to Center for Disease Control and Prevention, “In general, every percentage drop in A1C blood test results (e.g. from 8% to 7%), can reduce the risk of microvascular complications (eye, kidney and nerve diseases) by 40%.”

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 three and nine months ended September 30, 2010 and 2009, 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 estimates.

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 statements.

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.

Consolidated Results of Operations

	Three Months Ended September 30							Nine Months Ended September 30
					Percentage							Percentage
	2010		2009		Increase /			2010		2009		Increase /
					(Decrease)							(Decrease)
Revenue		-		-					-		-
Cost of Sales

Depreciation		-		434		(100	)		309		1,301		(76	)
Development costs		46,539		100,947		(54	)		144,539		216,197		(33	)
Interest expenses		310,628		302,909		3			1,076,807		952,308		13
Professional fees		24,096		54,390		(56	)		81,170		89,036		(8	)
Rent		-		9,218		(100	)		-		24,920		(100	)
Selling, general and
administrative		116,828		273,788		(57	)		282,986		520,805		(45	)

-24-

Other items
Write-off equipment		-	-	-		4,066	-	100
extinguishment

Tax benefit
Discontinued
Operations

Net Loss	$	498,091	741,686	(33	)	1,589,877	1,804,567	(12	)

Development costs were $46,539 and $144,529 for the three and nine months period ended September 30, 2010 as compared with $100,947 and $216,197 for the same period last year. For the three and nine month periods ended September 30, 2010 and 2009 the Company incurred $46,500 and $139,500 in product development fees paid to consultants. For the three months ended September 30, 2010 there was $51,000 paid to a consultant assisting in the development of the HeC product and for the nine months ended September 30, 2010 there was $22,250 of stock-based compensation for options granted to product development consultants, respectively.

Professional fees were $24,096 and $81,170 for the three and nine months period ended September 30, 2010, respectively as compared with $54,390 and $89,036 due to increased audit fees for the 2009 fiscal year compared to the previous year. The significant difference between the three month period ended September 2010 and 2009 was due to Niblock settlement agreement. As part of the agreement, the Company agreed to pay the Niblocks $40,000 of legal fees incurred in reaching the judgement and settlement.

After taking into account the one-time legal fees incurred as part of the Niblock arrangement, the Company, professional fees increased for the three month and nine month periods ended September 30, 2010 by $9,706 and $32,134.

-	The increase for the three month period ended was due to increased costs incurred for financial reporting consulting

-	The increase for the nine month period ended was due to audit fees $21,000 greater then estimated that weren’t billed by the vendor until the second quarter of 2010.

Interest expense was $310,628 and $1,076,807 for the three and nine months ended September 30, 2010, respectively as compared with $302,909 and $952,308 for the same period last year

Interest expense was from the following sources for the three months ended September 30, 2010 and 2009:

	Three months ended September 30, 2010		Three months ended September 30, 2009		% increase /decrease
Interest based on stated rate of promissory notes	$	130,576	$	181,768		(28	%)
Imputed interest on zero interest loans		43,775		88,069		(50	%)
Stock options granted for promissory notes		136,277		33,072		312	%
Total	$	310,628	$	302,909		3	%

Interest expense was from the following sources for the nine months ended September 30, 2010 and 2009:

	Nine months ended September 30, 2010		Nine months ended September 30, 2009			% increase /decrease
Interest based on stated rate of promissory notes	$	392,031		$	558,488		(29	%)
Imputed interest on zero interest loans		138,987			289,376		(51	%)
Stock options granted for promissory notes		545,789			104,444		422	%
Total	$	1,076,807		$	952,308		13	%

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Interest on Promissory Notes

During the nine months ended September 30, 2010, the Company had significantly lower promissory notes outstanding then during that same period in 2009. Immediately prior to the debt for share retirement on September 30, 2009, the Company had interest bearing promissory notes payable of just under $6.3M as compared to approximately $4.6M after the debt for share retirement. During the twelve months since, the Company issued approximately $600K in interest bearing promissory notes to bring the total up $5.4M in interest bearing promissory notes at September 30, 2010. The significant reduction in interest bearing promissory notes during the three and nine month period ended September 30, 2010 explains the significant decrease in that category of interest expense.

Imputed Interest

During the three and nine months period ended September 30, 2010, the Company had significantly lower zero interest sources of long-term financing then during those same periods in September 2009. The following table shows the sources of zero interest financing before and after the share for debt retirement on September 30, 2009 and compares this to the balance at September 30, 2010.

Zero Interest Financing	Before Transaction September 30, 2009		After Transaction September 30, 2009		As at September 30, 2010
Accounts payable in excess of one year	$	908,293	$	656,845	$	600,569
Advances payable		2,715,825		513,391		166,052
Promissory notes		270,912		695,912		695,912
Total	$	3,895,030	$	1,866,148	$	1,462,533

The large decline in the balance of the zero interest financing over this period explains the large decline in imputed interest for the three and nine month period ended September 30, 2010.

Stock Based Compensation

Stock based compensation allocated to interest expense was significantly higher during the three and nine months ended September 30, 2010 then 2009 due primarily to 10.8 million more options granted during 2010.

During the three and nine month periods ended September 30, 2010, the Company:

-	granted 1,400,000 stock options to creditors of the Company; and

-	extended the term of the 10,000,000 stock options granted to a creditor in the Company’s first quarter of operations in 2010. The term was extended from 21 months to five years.

During the three and nine month periods ended September 30, 2009, the Company

-	granted 620,000 stock options to a creditor of the Company

-	amortized expense of $50,400 relating to the deferral of the calculated fair value of 1.8M stock options that were granted in exchange for a loan received in 2008

Selling, general and administrative expenses were $116,828 and $282,986 for the three and nine months period ended September 30, 2010 as compared with $273,788 and $520,805 for the same period last year. The decreases of $156,960 and $237,819 for the three and nine month period can be attributed to the following causes:

-	the new President received compensation of $50,000 in the form of shares issued in the third quarter of 2010

-	the former Chairman of the Company ceased to charge compensation of $13,850 (three months - $41,550, nine months - $124,500) effective January 1, 2010

-	the Company incurred market development fees of approximately $45,000 during the three and nine months ended September 30, 2009 related to sponsoring a clinical trial and market research

-	the Company incurred bad debts of approximately $80K during the three months ended September 30, 2009

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Liquidity and Capital Resources

Working Capital
							Percentage
	At September 30, 2010			At December 31, 2009			Increase / (Decrease)
Current Assets	$	16,382		$	700			2240
Current Liabilities	$	8,190,740		$	7,324,843			12
Working Capital	$	(8,174,357	)	$	(7,324,143	)		12

Current Assets

The Company does not have any significant current assets on its consolidated balance sheet as at September 30, 2010, nor did they have any at December 31, 2009.

Current Liabilities

The Company has current liabilities of $8,190,740 as at September 30, 2010 as compared to $7,324,843 as at December 31, 2009. Current liabilities were as follows:

	September 30, 2010		December 31, 2009		Change
Accounts payable and accrued liabilities	$	783,785	$	797,493	$	(13,708	)	(2	%)
Payroll payable	$	18,050	$	18,050	$	-		(0	%)
Interest payable	$	1,354,095	$	967,921	$	386,174		40
Advances payable	$	165,422	$	266,046	$	(100,624	)	(37	)
Promissory notes payable	$	5,869,388	$	5,275,333	$	594,055		11
Total current liabilities	$	8,190,740	$	7,324,843		866,597		12

The increase in interest payable of $386,174 relates to amounts incurred on promissory notes with stated rates of interest.

The decrease in advances payable of $100,624 consists of counteracting activities as follows:

-	$157,000 of consulting fees accrued to Directors and Officers of the Company.

-	$13,000 of miscellaneous advances

-	$270,100 of advances repaid through the line of credit arrangement

The increase in promissory notes payable of $594,055 was incurred from amounts drawn from on the line of credit made available to the Company.

Cash Flows
	Nine Months Ended			Nine Months Ended
	September 30, 2010			September 30, 2009
Cash Flows used in Operating Activities	$	(594,515	)	$	(163,392	)
Cash Flows provided by (used in) Investing Activities	$	-		$	-
Cash Flows provided by (used in) Financing Activities	$	594,055		$	155,905
Net (decrease) increase in Cash During Period	$	(460	)	$	414

Cash Balances and Working Capital

As of September 30, 2010, the Company’s cash balance was $198 compared to $658 as of December 31, 2009.

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Cash Provided by (Used in) Operating Activities

Cash used by the Company in operating activities during the nine months period ended September 30, 2010 was $594,515 in comparison with $163,392 used during the same period last year. The majority of the expenditures were to repay advances payable, overdue accounts payable owing to certain consultants, pay product development costs, pay accrued professional fees and selling and administration costs associated with the American Diabetes Association conference.

Cash Proceeds from Financing Activities

During the nine months period ended September 30, 2010, the Company received $594,055 loan from a relative of a director as compared to $155,905 from a relative of a director during the same period last year. The loans received in 2010 and 2009 covered the operating requirements for the Company and repaid long outstanding advances and accounts payable. During the nine months ended September 30, 2010 the Company repaid amounts that were unpaid from 2009, including the same nine month period in 2009.

Short and Long Term Liquidity

As of September 30, 2010, the Company does not have the current financial resources and committed financing to enable it to meet its administrative overhead, product development budgeted costs and debt obligations over the next 12 months.

All of the Company’s debt financing is due on demand or will be due in the next twelve months. 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. The Company has faced litigation from creditors in the past and currently being sued by one creditor. There is no assurance that additional creditors will make claims against the Company 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.

Tabular Disclosure of Contractual Obligations:

	Payments due by period
			Less						More
			than 1			1-3		3-5	Than 5
	Total		year		years		years		Years
Accounts Payable & Accrued Liabilities	$	783,785	$	783,785	$	-	$	-	$	-
Payroll Payable		18,050		18,050		-		-		-
Interest Payable		1,354,095		1,354,095		-		-		-
Advances Payable		165,422		165,422		-		-		-
Promissory Notes Payable		5,869,388		5,869,388		-		-		-
	$	8,190,740	$	8,190,740	$	-	$	-		-

In May 2010, the Company finalized a line of credit arrangement with a relative of Director to provide funds of up to $1,000,000. All funds borrowed bear interest at 1% per month and are due on demand. As of September 30, 2010, the Company has borrowed $594,055. The Company will continue to use the funds available from the line of credit to cover administrative overhead and product development requirements until such time it can establish cash flows from operations. In the next six months, the Company anticipates the amount borrowed from the line of credit increase compare to the past six months as it continues to seek reimbursement opportunities and support clinical trials for the HeC.

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Off Balance Sheet Arrangements

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT 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.

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of September 30, 2010. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the nine months period ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During 2009 the following judgment was rendered: Niblock Financial Systems, Inc. et al v. ALR Technologies, Inc., Forsyth County, North Carolina, File Number 0-9-CVS-2220. On July 21, 2009, a judgment was entered against the Company in the amount of $600,000 in favor of Niblock Financial Systems, Inc. and $550,000 in favor of Gordon Niblock, plus court costs and attorney’s fees. The judgment was rendered as a result of the Company’s failure to pay amounts due under several promissory notes. Subject to the entry of that judgment, the Company reached a Settlement Agreement with the two plaintiffs, resulting in a cash payment, a credit to the judgment, and an assignment of the Judgment to Christine Kan. The two plaintiffs received promissory notes as a portion of the settlement, the results of which are reported in the following paragraph. It is not expected that any further litigation will ensue other than as described in the following paragraph. The judgment, now owned by Christine Kan, remains on the books as an active judgment against the Company.

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Current Litigation: Niblock Financial Systems, Inc. et al v. ALR Technologies, Inc., Forsyth County, North Carolina, File Number 10-CVS-685. This action seeks $300,000, plus costs and attorneys fees, and other relief arising out of the promissory note executed by the Company in the context of settlement of the prior lawsuit. The Company did not file an answer to the complaint, as the amount is admittedly owed and a recorded liability of the Company. The plaintiff has filed a motion for default judgment. It is expected the plaintiff will receive a judgment of in excess of $300,000 against the Company, consisting of the principal owed, associated legal fees and other direct costs. It is expected that the judgment will also direct delivery of the shares of stock referenced in the settlement of the prior lawsuit to Plaintiffs. Those share certificates are in escrow with the undersigned firm at this time, until an order is entered.

ITEM 1A. RISK FACTORS

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

·	Mr. Weinstein is a sophisticated investor.

·	The subscriber was furnished with the same information that can be found in a Form S-1 Registration Statement.

ITEM 5. OTHER INFORMATION

The following list is complied of our five (5) Form 8-Ks, which we failed to file:

On June 30, 2010, when Mr. Weinstein took office, he received 2,000,000 common shares of the Company as compensation for his initial three month term ended September 30, 2010 as President and COO.

On August 4, 2010, the Company issued 2,000,000 restricted shares of common stock to Lawrence Weinstein in consideration of $50,000. The shares were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933 in that: Mr. Weinstein is a sophisticated investor and the subscriber was furnished with the same information that can be found in a Form S-1 Registration Statement.

On September 30, 2009, the Company entered into an agreement with 20 creditors to retire $6.762M of debt through the issuance of 135,249,463 common shares. Also on September 30, 2009, the Company agreed to issue 200,000 common shares for gross proceeds of $10,000.

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ITEM 6. EXHIBITS

The following Exhibits are attached hereto:

		Incorporated by reference
Exhibit					Filed
No.	Document Description	Form	Date	Number	herewith
3.1	Initial Articles of Incorporation.	10-SB	12/10/99	3.1
3.2	Bylaws.	10-SB	12/10/99	3.2
3.3	Articles of Amendment to the Articles of Incorporation, dated October 22, 1998.	10-SB	12/10/99	3.3
3.4	Articles of Amendment to the Articles of Incorporation, dated December 7, 1998.	10-SB	12/10/99	3.4
3.5	Articles of Amendment to the Articles of Incorporation, dated January 6, 2005.	8-K	1/20/05	3.1
10.1	Indemnity Agreement with Marcus Da Silva.	8-K	8/14/00	10.1
10.2	Purchase and Sales Agreement with Marcus Da Silva.	8-K	8/14/00	10.2
10.3	Project Agreement with Tandy Electronics (Far East) Ltd.	10-KSB	4/17/01	10.1
10.4	Agreement with Christine Kan dated May 25, 2010.				X
10.5	Employment Agreement with Lawrence Weinstein dated June 30, 2010.				X
14.1	Code of Ethics.	10-KSB	4/14/03	14.1
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
99.1	Distribution Agreement with Mo Betta Corp.	10-SB	12/10/99	99.1
99.2	Pooling Agreement.	10-SB	12/10/99	99.2
99.3	Amended Pooling Agreement.	10-SB	12/10/99	99.3
99.4	Lock-Up Agreement.	10-SB	12/10/99	99.4
99.5	Termination Agreement with Michael Best.	10-SB	12/10/99	99.5
99.6	Termination Agreement with Norman van Roggen.	10-SB	12/10/99	99.6
99.7	Assignment Agreement.	10-SB	12/10/99	99.7
99.8	Distributorship Agreement.	10-SB/A	1/14/00	99.8
99.9	Settlement Agreement with 706166 Alberta Ltd., 745797 Alberta Ltd., Lorne Drever, Debbie MacNutt, Dean Drever, Sandra Ross and Sidney Chan.	8-K	2/02/00	99.1
99.10	Agreement to Provide Services with Horizon Marketing & Research, Inc.	10-KSB	4/17/01	99.1
99.11	Agreement to Provide Services with Dr. Jaroslav Tichy.	10-KSB	4/17/01	99.11
99.12	Agreement to Provide Services with Knight’s Financial Limited regarding Christine Kan.	10-KSB	4/17/01	99.12
99.13	Agreement to Provide Services with Knight’s Financial Limited regarding Sidney Chan.	10-KSB	4/17/01	99.13
99.14	Agreement to Provide Services with Bert Honsch.	10-KSB	4/17/01	99.14
99.15	Agreement to Provide Services with Kenneth Berkholtz.	10-KSB	4/17/01	99.15
99.16	Agreement to Provide Services with Jim Cleary.	10-KSB	4/17/01	99.16
99.17	Settlement agreement with Ken Robulak.	10-KSB	4/17/01	99.17
99.18	Agreement to Provide Services with RJF Management Resource Associates, LLC.	10-KSB	4/15/02	99.18
99.19	Audit Committee Charter.	10-KSB	4/14/03	99.1
99.20	Disclosure Committee Charter.	10-KSB	4/14/03	99.2

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 15th day of November, 2010.

	ALR TECHNOLOGIES, INC.
	(Registrant)

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

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EXHIBIT INDEX

		Incorporated by reference
Exhibit					Filed
No.	Document Description	Form	Date	Number	herewith
3.1	Initial Articles of Incorporation.	10-SB	12/10/99	3.1
3.2	Bylaws.	10-SB	12/10/99	3.2
3.3	Articles of Amendment to the Articles of Incorporation, dated October 22, 1998.	10-SB	12/10/99	3.3
3.4	Articles of Amendment to the Articles of Incorporation, dated December 7, 1998.	10-SB	12/10/99	3.4
3.5	Articles of Amendment to the Articles of Incorporation, dated January 6, 2005.	8-K	1/20/05	3.1
10.1	Indemnity Agreement with Marcus Da Silva.	8-K	8/14/00	10.1
10.2	Purchase and Sales Agreement with Marcus Da Silva.	8-K	8/14/00	10.2
10.3	Project Agreement with Tandy Electronics (Far East) Ltd.	10-KSB	4/17/01	10.1
10.4	Agreement with Christine Kan dated May 25, 2010.				X
10.5	Employment Agreement with Lawrence Weinstein dated June 30, 2010.				X
14.1	Code of Ethics.	10-KSB	4/14/03	14.1
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
99.1	Distribution Agreement with Mo Betta Corp.	10-SB	12/10/99	99.1
99.2	Pooling Agreement.	10-SB	12/10/99	99.2
99.3	Amended Pooling Agreement.	10-SB	12/10/99	99.3
99.4	Lock-Up Agreement.	10-SB	12/10/99	99.4
99.5	Termination Agreement with Michael Best.	10-SB	12/10/99	99.5
99.6	Termination Agreement with Norman van Roggen.	10-SB	12/10/99	99.6
99.7	Assignment Agreement.	10-SB	12/10/99	99.7
99.8	Distributorship Agreement.	10-SB/A	1/14/00	99.8
99.9	Settlement Agreement with 706166 Alberta Ltd., 745797 Alberta Ltd., Lorne Drever, Debbie MacNutt, Dean Drever, Sandra Ross and Sidney Chan.	8-K	2/02/00	99.1
99.10	Agreement to Provide Services with Horizon Marketing & Research, Inc.	10-KSB	4/17/01	99.1
99.11	Agreement to Provide Services with Dr. Jaroslav Tichy.	10-KSB	4/17/01	99.11
99.12	Agreement to Provide Services with Knight’s Financial Limited regarding Christine Kan.	10-KSB	4/17/01	99.12
99.13	Agreement to Provide Services with Knight’s Financial Limited regarding Sidney Chan.	10-KSB	4/17/01	99.13
99.14	Agreement to Provide Services with Bert Honsch.	10-KSB	4/17/01	99.14
99.15	Agreement to Provide Services with Kenneth Berkholtz.	10-KSB	4/17/01	99.15
99.16	Agreement to Provide Services with Jim Cleary.	10-KSB	4/17/01	99.16
99.17	Settlement agreement with Ken Robulak.	10-KSB	4/17/01	99.17
99.18	Agreement to Provide Services with RJF Management Resource Associates, LLC.	10-KSB	4/15/02	99.18
99.19	Audit Committee Charter.	10-KSB	4/14/03	99.1
99.20	Disclosure Committee Charter.	10-KSB	4/14/03	99.2

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