Forward-Looking Statements

The following information must be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Quarterly Report and the audited Consolidated Financial Statements and Notes thereto and Management’s Discussion and Analysis or Plan of Operations contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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 (“SEC”) 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 consolidated 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. In April 1998, the Company changed its business purpose to marketing a pharmaceutical compliance device.

In December 1998, the common shares of the Company began trading on the Bulletin Board operated by the National Association of Securities Dealers Inc. under the symbol “MBET.” On December 28, 1998, the Company changed its name from Mo Betta Corp. to ALR Technologies Inc. Subsequently, the symbol was changed to “ALRT”.

During 2011, the Company received Food and Drug Administration (“FDA”) clearance and achieved Health Insurance Portability and Accountability Act of 1996 (HIPAA) compliance for its earlier version of the Diabetes Solution. With these key achievements and successful clinical trials completed, the Company undertook a pilot program in 2014. The Company obtained significant findings from this pilot program, which led to the development of its Insulin Dosage Adjustment (“IDA”).

During 2017, the Company received FDA clearance for Insulin Dose Adjustment (“IDA”) and submitted worldwide patent application under the patent cooperation treaty to the World Intellectual Property Organization for the Predictive A1C innovation it has licensed from its Chief Executive Officer. The Company is actively seeking to commence revenue-generating activities for its Diabetes Solution in Singapore and is conducting further pilot programs in the United States and Singapore.

Recent Developments

On January 28, 2021, the Company’s Board of Directors approved the grant of options to six individuals to acquire an aggregate 32,000,000 shares of common stock at an exercise price of $0.05 per share with expiry dates between May 17, 2024 and December 31, 2025. All of the options granted have vesting conditions, of which 12,000,000 are time-based vesting conditions and 20,000,000 are performance-based vesting conditions.

On February 22, 2021, the Company granted three individuals the option to acquire an aggregate 5,000,000 shares of common stock at an exercise price of $0.05 per share until May 17, 2024. All of the options granted will not vest until immediately before expiry.

On April 14, 2021, the Company’s Board of Directors approved the grant of options to acquire an aggregate 28,500,000 shares of common stock at a price of $0.05 per share until December 31, 2025. The options to acquire shares will vest according to performance or time-based conditions and none of these options granted had vested as of the date of this report.

The Company entered into two Debt Settlement Agreements whereby the Company has agreed to issue an aggregate 4,400,000 shares of common stock to two creditors of the Company to extinguish $194,186 in accounts payable and $23,000 in promissory notes and interest. The shares were issued on May 10, 2021. The Company also issued commitment letters to two creditors offering them an aggregate of 20,000,000 shares of common stock in exchange for the extinguishment of $1,511,377 in promissory notes and interest payable prior to December 31, 2021.

On May 12, 2021, the Company’s Board of Directors amended the option to acquire 2,000,000 shares, previously granted on January 28, 2021 to a consultant, to 3,000,000 shares of common stock at a price of $0.05 per share until December 31, 2025. All other terms of the January 28, 2021 grant remain the same and the options are subject to performance vesting conditions.

On May 31, 2021, the Company granted one consultant the option to acquire 5,000,000 shares of common stock of the Company at a price of $0.05 per share until December 31, 2025 subject to performance vesting conditions.

On June 1, 2021, the Company announced that it is taking steps to redomicile the Company to Singapore. As part of the process, the Company intends to effect a share exchange plan of merger under the laws of Nevada and Singapore in which shareholders will exchange their shares of the Company for shares in a Singapore entity, on a one-for-one basis, with the Singapore entity becoming the parent company. The transaction will be subject to shareholder approval and approval of the relevant corporate and securities regulatory authorities in both jurisdictions where required.

On June 8, 2021, the Company announced the establishment of the ALRT Animal Health Division, a new business division, which will introduce the world’s first and only Continuing Glucose Monitoring System (“CGMS”) for diabetic companion animals.

On June 22, 2021, the Company provided termination notices to four individuals which included that they would have 30 days to exercise their options, or those options would be cancelled. As a result a total of 22,500,000 stock options granted in 2019 with an exercise price of $0.035 expired unexercised on July 22, 2021.

On June 27, 2021, the Company’s Board of Directors cancelled 7,400,000 stock options granted in previous years to three individuals with an average exercise price of $0.033. These individuals have not provided services to the Company since mid-2020. All of the options had vested in previous years.

On June 27, 2021, the Company’s Board of Directors approved the grant of the option to acquire an aggregate 21,000,000 shares of common stock at a price of $0.05 per share until June 30, 2026 to four individuals. All of the options will vest according to performance or time-based conditions. None of these options have vested to date.

On June 30, 2021, the Company amended the option to acquire 4,365,001,300 shares of common stock granted on July 1, 2016 by extending the expiry date from July 1, 2021 to April 12, 2024. All of the options had vested in previous years.

Recent Developments – Subsequent to June 30, 2021

Effective July 22, 2021, the Company cancelled 22,500,000 stock options exercisable at $0.035 related to the termination of certain contractors and advisors.

On July 19, 2021, the Company elected to extend the outside date to place the remaining rights under the rights offering from July 31, 2021 to October 29, 2021 (see below under Financing).

Financing

Rights Offering

On December 4, 2020, the Company filed a Form S-1 Registration Statement to distribute subscription rights to purchase up to an aggregate 127,522,227 shares of our common stock at a price of $0.05 per share. As at June 30, 2021, the Company issued 26,496,635 unrestricted shares of common stock related to proceeds received of $1,324,832. The Company has until October 29, 2021 to sell the remaining 101,025,592 shares of common stock for total proceeds of $5,051,280, if exercised.

Exercise of Stock Options

On February 8, 2021, the Company issued 800,000 shares of common stock for proceeds of $12,000 for the exercise of options at $0.015 per share.

Products

ALRT has developed its Diabetes Solution product by utilizing internet-based technologies to facilitate the healthcare provider’s (“HCPs”) ability to monitor their diabetes patients’ health and ensure adherence to health maintenance activities.

The ALRT Diabetes Solution is a remote monitoring and care facilitation platform that allows patients to upload the blood glucose data from their blood glucose meters on a weekly basis. The ALRT System processes and converts each data set to a predictive A1C value and shares it with the patient’s physician. The System provides the physician with therapy advancement suggestions based on current clinical practice guidelines. Patients receive therapy assessments and adjustments in much shorter cycles, keeping A1Cs at target, mitigating diabetes complications and lowering costs of care.

ALRT previously conducted a clinical trial utilizing manual blood glucose data analysis and follow-up care. The trial demonstrated that remote diabetes care is associated with significant lowering of A1C levels. The study concluded that continuing intervention using an internet-based glucose monitoring system is an effective way of improving glucose control compared to conventional care. A second clinical trial demonstrated that this type of Internet-based Blood Glucose Monitoring System (“IBGMS”) was associated with comparable reductions in A1C levels with that of more expensive CGMS. The Company is planning further trials to demonstrate the added value of the predictive A1C and therapy advancement features of the ALRT System.

In the future, the Company may seek to adapt its Diabetes Solution to be used in the management of other chronic diseases. The Company may be required to obtain additional clearance from the FDA prior to commencing selling activities in the United States for other chronic health conditions.

Diabetes is a leading cause of death, serious illness and disability across North America. By the year 2030, it is expected that 1 in 10 adults, globally, will have diabetes (diagnosed and undiagnosed instances). We believe diabetes is a global pandemic.

Data from the American Diabetes Association (“ADA”) shows 30 million Americans have diabetes and 84 million have prediabetes. That is 1 in 3 Americans coping with the disease or serious threat of it. The total cost of diagnosed diabetes is staggering at $327 billion annually ($237 billion in direct medical costs and $90 billion in reduced productivity), putting serious drag on an already strained healthcare system. Taking a broader view, the global cost of diabetes was estimated at a whopping $825 billion annually in 2016.

Diabetes is a lifelong chronic disease with no cure. However, people with diabetes can take steps to control their disease and reduce the risk of developing the associated serious complications, thereby controlling healthcare costs. The Canadian Diabetes Association Clinical Practice Guidelines Expert Committee reports that, “Successful diabetes care depends on the daily commitment of persons with diabetes mellitus to self-manage through the balance of lifestyle and medication. Diabetes care should be organized around a multi- and interdisciplinary diabetes healthcare team that can establish and sustain a communication network between the person with diabetes and the necessary healthcare and community systems”. Diabetes incidence rates, economic costs and human costs are increasing even though we know how to control the disease. The Diabetes Control and Complication Trial conducted from 1983 to 1993 outlined management as follows:

We believe there are five causes why diabetes is not controlled:

Patient Non-adherence

As noted in Patrick Connole, “UnitedHealthcare, Other Large Insurers Seek Better Adherence to Diabetes Care”, Health Plan Week, February 11, 2013, Volume 23, Issue 5, 80% of United States patients with diabetes do not follow their prescribed care plan. Central to conventional diabetes care is patient self-management.

Unreliable Data

As noted in Gonder-Frederick, L.A., et al, “Self Measurement of Blood Glucose: Accuracy of Self-Reporting Data and Adherence to Recommended Regimen” Diabetes Care, Volume 11, no. 7, July 1988, 77% of patient data contain errors.

Data Overload

HCPs face a lack of timely and reliable blood glucose data, resulting in delays to advance therapy and sub-optimal insulin dosing. The amount of patient data for clinicians to analyze is too vast and significant during 15-minute clinical appointments, and the information they have is unreliable.

Clinical Inertia

As noted in Khunti, K., et al, “Clinical Inertia in People with Type 2 Diabetes: A Retrospective Cohort Study of More than 80,000 People.” Diabetes Care, Volume 36, no. 11, July 2013, across over 80,000 patients, when A1C goals were not met, therapy intensification was late across every measure. It took on average 19 months to escalate patients with an average A1C of 8.7% from single medication to dual therapy and 82 months to escalate patients with an average A1C of 8.8% from dual medication to triple therapy. Furthermore, they found that it took approximately 20 years to advance patients with an average A1C of over 9% to insulin. At the end of the study, less than 50% of the patients had their treatment intensified.

Furthermore, in Treatment intensification for patients with type 2 diabetes and poor glycaemic control by Fu and Sheenan, it was noted that out of 11,525 patients investigated with an A1C greater than 8% patients received intensification as follows:

Failure to respond to higher than targeted A1C with treatment intensification puts patients with escalated A1C at risk for complications and diabetes-associated co-morbidities.

Insulin Under-prescription

Insulin dosing is complex requiring review of large amounts of data, which takes significant amounts of time. We believe HCPs routinely under-prescribe insulin to ensure they avoid insulin dosage adjustments, which could result in hypoglycemia for their patients.

Cleveland Clinic Study

A team at Cleveland Clinic examined historical electronic medical record data of more than 7,300 patients with type 2 diabetes and concluded that there is a pervasiveness of clinical inertia for the management of type 2 diabetes in real-world clinical practice settings.

The selected patients had an A1C value of ≥ 7% on a stable regimen of two oral anti-diabetic agents for at least 6 months (from 2005 to 2016). The median time to treatment intensification after A1C was above target was longer than one year. For patients with an A1C of ≥ 9%, therapy was not intensified in 44% of patients.

According to lead study author Dr. Kevin Pantalone of Cleveland Clinic’s Endocrinology & Metabolism Institute, “Short of a patient reporting non-adherence to their existing regimen of diabetes therapies, it is hard to imagine a reason why treatment intensification was not observed more frequently, when indicated, particularly in patients with an A1C ≥ 9%. In general, if intensification does not occur, the A1C can be expected to stay the same or get worse, it is not magically going to get better”. (emphasis added)

ALRT Diabetes Solution

ALR Technologies Inc. has created the Diabetes Solution to address the diabetes marketplace globally. The Company’s Diabetes Solution consists of hardware, software and diabetes test supplies. We designed the Diabetes Solution to be focused on the HCP and is agnostic and proactive. Our software operates on iOS, Android, Windows and MacOS systems. Enrollment into the ALRT Diabetes Solution will include a branded glucometer, diabetes test strips, lancets and a carrying case. Our technology collects all the blood glucose data from the glucometers, uploads it to a secure account and ships diabetes test strips as required. The patient data is aggregated to a predictive A1C value for a comprehensive view of the treatment plan and patient adherence to the plan, with the data available (and messaged) to authorized people.

The ALRT Diabetes Solution addresses the five causes for not controlling diabetes with:

Active Patient Monitoring

Industry data indicates that 50% or more of people on medications do not take them as prescribed, and that this non-compliance contributes to 10% of hospitalizations and billions of dollars spent annually in excessive and preventable healthcare costs. Reminding a person to take an action is the first step in our system; monitoring their actions and their data is the second, and intervention when needed is the important follow-up.

The ALRT System monitors patient uploads and the underlying data providing more timely access to patient blood glucose data. Our system initiates interventions by notifying the HCP of out-of-range results, or failure to upload data in accordance with the requirements of the care plan. The ALRT System does not rely upon the patient for uploading data. The ALRT Diabetes Solution provides the notifications and audit trail needed for achieving best practice results. Its performance tracking allows care teams to identify areas in treatment plans that require change of improvement.

Direct Meter Uploads

Data is uploaded via Bluetooth directly from the glucometer into the ALRT application. This ensures that the data is accurate and reliable based on the results of testing.

Machine Intelligent Data Processing

Our machine intelligence processes large amounts of data, notifies relevant stakeholders and flags patients for review making collaboration real time. Across segments and populations, this also provides significant data points on use of diabetes test strips and insulin, which may be significant for businesses in those industries.

Predicative A1C

Included in the Diabetes Solution is Predictive A1C. Predictive A1C is a patent-pending unique feature for monitoring the effectiveness of care plans. This technology utilizes data diagnostics to compare targeted A1C with indicated results. Weekly patient blood glucose data is evaluated, and HCPs are notified as needed for care plan review when blood glucose values exceed parameters set by the HCPs. Our platform provides HCPs with patient prioritization reports and alerts based on the Predictive A1C measures and other related diagnostics. Predictive A1C was designed to assist HCPs in addressing clinical inertia in diabetes care.

Insulin Dose Adjustment

Included in the Diabetes Solution is Insulin Dose Adjustment. IDA is an FDA-cleared feature that makes optimal insulin adjustment suggestions to HCPs based on dosing guidelines from organizations like the ADA. This ensures that HCPs are making timely insulin dosage assessments based on the blood testing results uploaded. ALRT’s next phase of technology advancement will produce an algorithm for advancing non-insulin diabetes therapies according to clinical practice guidelines.

Evolution of the Diabetes Solution

In August 2010, the Company received the results of a clinical trial conducted by Dr. Hugh Tildesley using the ALRT Health-e-Connect System, which was an earlier version of the Diabetes Solution. The trial showed A1C dropping from 8.8% to 7.6% for the Intervention Group using ALRT’s Health-e-Connect System as part of a diabetes management program. The A1C test is important in diabetes treatment management as a long-term measure of control over blood glucose for diabetes patients. According to the 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%”. The trial served as the basis for an article titled Effect of Internet Therapeutic Intervention on A1C Levels in Patients with Type 2 Diabetes Treated with Insulin, which was published in the August 2010 Diabetes Care publication.

In July 2011, the follow-up results of the Dr. Tildesley clinical trial were published in the Canadian Journal of Diabetes. Dr. Tildesley conducted a 12-month study using Health-e-Connect System as an IBGMS to provide intensive blood glucose control to determine the effects of internet-based blood glucose monitoring on A1C levels in patients with type 2 diabetes treated with insulin. Dr. Tildesley concluded that, “While IBGMS intervention was not a substitute for the patient–physician interaction in a clinical setting, it significantly improved A1C and, over time, we observed better glycemic control and patient satisfaction”.

In October 2011, the Company received 510(k) clearance from the FDA for remote monitoring of patients in support of effective diabetes management programs. The 510(k) clearance enabled the Company to commence with the United States marketing and sales launch of its Health-e-Connect System. The Health-e-Connect System has since evolved to be part of the ALRT Diabetes System.

In September 2014, the Company initiated its pilot program with one of the Kansas City Metropolitan Physician Association (“KCMPA”) clinics to deploy its Diabetes Solution. Data from the KCMPA pilot program indicated that a number of patients had achieved reductions in their A1C levels. Furthermore, the data indicated that patients that left the pilot program had increases in A1C subsequent.

On February 18, 2015, the Company filed a 510(k) application with the FDA to add a remote insulin dosing recommendation feature to the Company’s Diabetes Solution. The Company utilized the publicly available algorithm of the American Association for Clinical Endocrinologists (“AACE”) and ADA. This feature allows the Company to regularly run a patient’s blood glucose data (and other key data) through the AACE and ADA algorithm. When the algorithm indicates that the patient’s dose may not be optimal, the Diabetes Solution would provide the HCP that a dose change may be warranted and what the change would be based on AACE and ADA guidelines. The decision about the dose change would rest entirely with the HCP. However, this new feature may make a significant contribution to improving the outcomes of diabetes patients if it allowed HCPs to keep their patients at the optimal dose for longer periods. On September 18, 2017, the Company received clearance from the FDA for its IDA feature within the Company’s Diabetes Solution.

On June 20, 2017, the Company’s Chief Executive Officer filed a worldwide patent application under the Patent Cooperation Treaty to the World Intellectual Property Organization for the Predictive A1C feature. The Company holds the rights to use the Predictive A1C feature. During 2019, the Company and the Chairman have entered into the National Phase for the applications by applying to target member countries.

During 2019, the Company added automated patient management to the Diabetes Solution. The Company is also seeking to have a private label glucometer, diabetes test strips, lancets and carrying cases produced as part of the Diabetes Solution. The Company is in talks with a manufacturer that has global operations.

During 2019, the Company initiated support for CGMS with the ALRT Diabetes Solution. CGM has become the standard of care for patients with type 1 diabetes and is quickly gaining favor with type 2 diabetes patients who use insulin.

ALRT Pre-Diabetes System

A prevention-based feature of the Diabetes Solution, the ALRT Prediabetes System has been designed in direct response to discussions with government healthcare authorities for a scalable solution to the growing problem of prediabetes. The Prediabetes Solution provides patients with educational videos and supplemental content formatted for mobile devices and a private online community to discuss disease management (e.g., support, weight loss, diet, etc.). Most importantly, the System tracks patients and reminds them to test their A1C according to payer protocols.

ALR GluCurve for Pets

ALR Technologies Inc. has developed the GluCurve Pet CGM to address an unmet need in diabetes care for felines and canines by combining the hardware of a CGM with the software of an adapted version of its Diabetes Solution platform for use by veterinarians in animal health.

The GluCurve Pet CGM platform allows the blood glucose readings from the medical device placed on the pet to be uploaded to the cloud where the data is processed and converted into daily glucose curve graphs and data sets that can be reviewed and compared by the veterinarian at any time. The system provides the doctor with insulin dose calculators and recommendations based on current clinical practice guidelines.

The current method to monitor glucose levels in diabetic felines and canines is to prepare an in-clinic glucose curve which consists of the following steps:

The GluCurve Pet CGM solves the multiple issues that arise from doing an in-clinic glucose curve:

Inaccurate Data

A CGM is placed on the pet by the veterinarian in minutes and the pet is sent home where the glucose readings will be automatically taken and uploaded for up to 14 days which eliminates the stress on the animal from being housed in the clinic and from getting its blood drawn which can elevate glucose levels. A CGM also provides readings every 5 minutes which gives better insight to the veterinarian of the highs and lows of the pet’s glucose levels throughout the day which are often missed when only checking every 2 hours during an in-clinic glucose curve.

Manual Process of Data Collection, Review and Analysis

A CGM automatically uploads 288 glucose readings per day to the ALRT cloud where the data is analyzed, organized, then displayed on the platform for the veterinarian to view. The GluCurve Pet CGM platform provides patient management of diabetic pets so historical data can also be reviewed and compared.

Burden on Clinic Staff and Pet Owner

A CGM is placed on the pet in minutes, after which they are sent home, greatly reducing the time spent by the staff during an in-clinic glucose curve of caring for the pet and manually drawing blood and recording readings every 2 hours.  The platform also greatly reduces the time needed by the doctor to review and make insulin dose adjustments by offering dosing calculators, guidelines, and decision flowcharts based on current clinical practice guidelines.

The net loss for the six months ended June 30, 2021 was 68% ($1,354,000) higher than the net loss at June 30, 2020. Loss before other items and stock-based compensation was $351,000 (66%) higher during the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. We highlight that loss before other items and stock-based compensation is a “non-GAAP financial measure”. This measure is calculated by removing those items from the net loss presented on our unaudited condensed consolidated statements of operations. This measure does not have a standardized meaning under U.S. GAAP. Management uses this measure internally to evaluate its results of operations as it removes the impact of stock-based compensation, non-operational losses and interest accretion.

The net loss before interest and stock-based compensation for the Company’s six months ended June 30, 2021 increased due to increased professional and personnel costs. Professional fees before the additional of related stock-based compensation was $313,000 for the six months ended June 30, 2021 as compared to $75,000 for the six months ended June 30, 2020, an increase of $238,000 (317%).

General and Administrative

General and administrative costs incurred consist of salaries and consulting fees of management personnel, stock-based compensation for options granted to management personnel, travel and trade show costs, rent of the Company’s corporate office, website development costs and general costs incurred through day-to-day operations.

Results of Operations (continued)

During the period, the Company had an increase in selling, general and administrative expenses, primarily driven by an increase in salaries and consulting fees paid to personnel and to a market research firm related to commercialization plans for the Company’s Diabetes Solution. The components of general and administrative expenses and the changes therein can be seen as follows:

During Q2 2021, the Company had increased general and administrative operating expenses, as compared to the same period in 2020. The cash-based general and administrative expenses increased by $170,000 during Q2 2021, as compared to Q1 2020 which was primarily related to increased personnel costs and market research consulting fees.

Product development costs

Substantially all of the product development costs incurred related to a) services provided by contractors of the Company, and b) expenses incurred for product development. The change in balance from the previous year relates primarily to changes in composition of our technical team in the current year, as compared to the previous year. The Company incurred stock-based compensation expense of $98,000 during Q2 2021 related to the grant and vesting of options to its product development team compared to $19,000 during Q2 2020.

Professional fees

Professional costs incurred consist of consulting and advisory fees of certain professionals retained, audit fees, tax consultant fees, recruiter fees, legal fees and stock-based compensation for options granted to professionals. During the period, there was a significant increase in professional fees related to:

By type of professional cost, the variance can be seen as follows:

Excluding the difference in net loss attributed to the grant of stock options in the prior year, professional fees increased by $238,000 from the comparative period of the prior year.

Results of Operations (continued)

Interest expense

Interest expense was from the following sources for the six months ended June 30, 2021 and 2020:

Interest on Promissory Notes

On May 10, 2021, the Company issued 2,000,000 shares of common stock with a fair market price of $0.057 to a creditor to extinguish $20,000 in promissory notes and $3,000 in accrued interest on promissory notes. There were no other significant changes in the amount of promissory notes outstanding as at June 30, 2021 and 2020. The interest incurred on promissory notes was consistent during the six months ended June 30, 2021 and 2020.

The principal balance of the line of credit due to Mr. Sidney Chan decreased as principal of $1,038,967 was retired through the issuance of shares on September 21, 2020. This decrease was offset by advances to Mr. Chan under the line of credit to finance the operations of the Company.

The Company incurred interest on the lines of credit as follows:

Imputed Interest

During the 2021 and 2020 periods, the Company had certain zero interest promissory notes and accounts payable in excess of one year. Pursuant to the Company’s accounting policy, these zero interest amounts are considered to be financing items in nature and are assigned a deemed interest rate (1% per month). The interest incurred on these is expensed as imputed interest and instead of increasing the liabilities of the Company, it is allocated to equity under the financial statement line item additional paid-in capital. The change from the prior period is related to the discussion included under Interest on Promissory Notes above.

The Company has a severe working capital deficiency. It does not have the ability to service its current liabilities for the next twelve months and is reliant on its line of credit facilities to meet its ongoing operations. Until the Company has revenue-producing activities that exceed its operating requirements, it will be unable to service its current liabilities and the working capital deficit will continue to increase. As of the date of this report, the Company has not commenced revenue-generating activities. The Company is expecting to generate revenues in Singapore during the 2021 fiscal year; however, the amount and timing are uncertain. The revenues generated in 2021 are not expected to be sufficient to finance the ongoing operations of the business and repay the current liabilities. The Company is seeking to complete its Rights Offering that would provide additional financing of $5,051,000, which is significantly less than the current liabilities outstanding. There is substantial doubt about the Company’s ability to repay its current liabilities in the near term or any time in the future, which could ultimately lead to business failure.

Current Assets

The Company’s nominal current assets as at June 30, 2021 and December 31, 2020 consist of cash and prepaid expenses.

The fluctuations in accounts payable occurred in the regular course of business.

The increase in interest payable relates to $264,000 of accrued interest incurred on promissory notes at their stated rates of interest, $11,000 relates to the reclassification from promissory notes to arm’s length parties to interest payable and $3,000 was extinguished as a result of shares of common stock issued. All of the promissory notes and related interest payable are overdue.

The increase in the lines of credit payable of $702,000 is attributable to borrowings of:

Cash Balances

As of June 30, 2021, the Company’s cash balance was $376,639 compared to $66,190 as of December 31, 2020.

Cash Used in Operating Activities

Cash used by the Company in operating activities during the six-month period ended June 30, 2021 was $858,000 in comparison with $443,000 used during the same period last year. The Company’s expenditures from operations were used as follows (approximate amounts):

The expenditures incurred were to fund the operating activities of the business.

Short- and Long-term Liquidity

As of June 30, 2021, 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 overdue. 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 is seeking to complete its Rights Offering, there is no certainty that it will be able to do so. If the Company is not able to complete the Rights Offering, it will not have sufficient funds to repay the debt financing past maturity and it will be due on demand. 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 is currently being sued by one creditor. There is no assurance that additional creditors will not 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 cease operations.

The Company will continue to use the funds available from the lines 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 lines of credit to increase compared to the past six months, as it expects to commercially launch its Diabetes Management System before December 31, 2021.

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 six months ended June 30, 2021 and 2020, which have been prepared in accordance with U.S. GAAP.

The preparation of these condensed consolidated 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 differ materially 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 unaudited condensed consolidated financial statements.

Due to our being a development stage company and not having generated significant revenues, in the notes to our condensed consolidated financial statements, we have included disclosure regarding concerns about our ability to continue as a going concern.

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.