Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
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. On May 16,
2020, the Company incorporated a wholly owned subsidiary, ALR Technologies Sg Pte. Ltd. (“ALRT SG”), under the Companies
Act of Singapore. On June 9, 2021, the Company incorporated a wholly owned subsidiary, Canada Diabetes Solution Centre, Inc.,
under the Business Corporations Act of Alberta. The Company has developed its Diabetes Solution, which is a comprehensive approach
to diabetes care consisting of data collection, predictive A1C, insulin dosage adjustment suggestions, performance tracking, remote monitoring
and diabetes test supplies. The Company is seeking commercial opportunities to deploy the Diabetes Solution in the United States (“U.S.”),
Canada and Singapore.
These
unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“U.S. GAAP”) in U.S. dollars and 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-month
periods ended March 31, 2022 and 2021 of $1,404,849 and $1,016,923, respectively. As of March 31, 2022, the Company is unable
to self-finance its operations, has a working capital deficit of $25,371,971 (December 31, 2021 - $24,312,143), accumulated
deficit of $103,419,926 (December 31, 2021 - $102,015,077), limited resources, no source of operating cash flow and no assurance
that sufficient funding will be available to conduct continued product development activities. If the Company is able to finance its
required product development activities, there is no assurance the Company’s current projects will be commercially viable or profitable.
The Company has debts comprised of accounts payable and accrued liabilities, interest payable, lines of credit and promissory notes payable
totaling $25,639,349 currently due, due on demand or considered delinquent. There is no assurance that the Company will not face additional
legal action from creditors regarding delinquent accounts payable, promissory notes payable 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 from related parties through line of credit facilities with available borrowing in principal up to $14,300,000. As of March 31,
2022, the total principal balance outstanding was $12,988,100. The resolution of whether the Company is able to continue as a going concern
is dependent upon the realization of management’s plans. There can be no assurance that the Company will be able to raise any additional
debt or equity capital from the sources described above or that the lenders in the line of credit arrangements will maintain the availability
of borrowing from the line. If management is unsuccessful in obtaining short-term financing or achieving long-term profitable operations,
the Company will be required to cease operations.
In
March 2020, the World Health Organization declared coronavirus, COVID-19, a global pandemic. This contagious disease outbreak, which
has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies and financial
markets globally, potentially leading to an economic downturn. Management does not expect that COVID-19 will have a significant impact
on the Company; however, it could have a potential impact on the Company’s ability to raise money, market its products to attract
customers or procure equipment and parts for its glucose monitoring system.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
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 in default, while continuing to accrue interest at its stated rates. 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 some of 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 2022. 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 lines of credit it has available and other sources of financing.
2. Significant
accounting policies
These
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, ALRT SG, which
was incorporated on May 16, 2020 in Singapore, and Canada Diabetes Solution Centre, Inc., which was incorporated on June 9,
2021 in Alberta, Canada. The Canadian subsidiary is currently inactive. All significant intercompany balances and transactions have been
eliminated on consolidation.
The
unaudited condensed consolidated financial statements as of March 31, 2022 and for the period then ended have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in
annual consolidated 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 the financial position as of March 31, 2022 and December 31,
2021, and the results of operations and cash flows as of March 31, 2022 and 2021, and for the periods then ended, have been made.
Those adjustments consist of normal and recurring adjustments.
These
unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes
thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
The
results of operations for the three-month period ended March 31, 2022 are not necessarily indicative of the results to be expected
for the full year.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
3. Accounts
payable and accrued liabilities
A
summary of the accounts payable and accrued liabilities is as follows:
Schedule of accounts payable and accrued liabilities | |
| | | |
| | |
| |
March 31, 2022 | |
December 31, 2021 |
Accounts payable | |
$ | 993,063 | | |
$ | 806,059 | |
Accrued liabilities | |
| 328,948 | | |
| 322,087 | |
Deferred revenue | |
| 1,352 | | |
| 2,400 | |
Accounts payable and accrued liabilities | |
$ | 1,323,363 | | |
$ | 1,130,546 | |
4. Interest,
advances and promissory notes payable
a) Promissory
notes payable to related parties
A
summary of activities of promissory notes payable to related parties is as follows:
Summary of activities of promissory notes payable | |
|
Promissory Notes Payable to Related Parties | |
Carrying Value |
Balance, December 31, 2020 | |
$ | 3,031,966 | |
Transferred from promissory notes payable pursuant to private transaction | |
| 10,000 | |
Balance, December 31, 2021 and March 31, 2022 | |
$ | 3,041,966 | |
A
summary of the promissory notes payable to related parties is as follows:
Schedule of activity of promissory notes payable to related parties |
|
|
|
|
Promissory
Notes Payable to Related Parties |
March
31,
2022 |
December 31,
2021 |
Promissory
notes payable to relatives of directors collateralized by a general security agreement over all the assets of the Company, past maturity:
|
|
|
|
|
i.
Interest at 1% per month |
$ |
720,619 |
$ |
720,619 |
ii.
Interest at 1.25% per month |
|
51,347 |
|
51,347 |
iii.
Interest at the U.S. bank prime rate plus 1% |
|
100,000 |
|
100,000 |
iv.
Interest at 0.5% per month |
|
695,000 |
|
695,000 |
|
|
|
|
|
Promissory
notes payable, unsecured, to relatives of a director, bearing interest at 1% per month, past maturity |
|
1,475,000 |
|
1,475,000 |
Total
Promissory Notes Payable to Related Parties |
$ |
3,041,966 |
$ |
3,041,966 |
|
|
|
|
|
|
|
|
|
|
All
amounts past maturity continue to accrue interest at their stated rates and are considered due on demand.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
4. Interest,
advances and promissory notes payable (continued)
b) Promissory
notes payable to unrelated parties
A
summary of activities of promissory notes payable to unrelated parties is as follows:
Schedule of Promissory Notes Payable to Unrelated Parties | |
| | |
Promissory Notes Payable to Unrelated Parties | |
Carrying Value |
Balance, December 31, 2020 | |
$ | 2,254,353 | |
Reclassified to interest payable | |
| (10,985 | ) |
Extinguished through issuance of shares of common stock (note 6) | |
| (20,000 | ) |
Transferred to promissory notes payable pursuant to private transaction | |
| (10,000 | ) |
Balance, December 31, 2021 | |
| 2,213,368 | |
Promissory note received | |
| 199,395 | |
Balance, March 31, 2022 | |
$ | 2,412,763 | |
A
summary of the promissory notes payable to unrelated parties is as follows:
Schedule of activity of promissory notes payable to unrelated parties |
|
|
|
|
Promissory
Notes Payable to Unrelated Parties |
March
31,
2022 |
December 31,
2021 |
Unsecured
promissory notes payable to unrelated lenders, past maturity: |
|
|
|
|
i.
Interest at 1% per month |
$ |
1,317,456 |
$ |
1,317,456 |
ii.
Interest at 0.667% per month |
|
425,000 |
|
425,000 |
iii.
Interest at 0.625% per month |
|
150,000 |
|
150,000 |
iv.
Non-interest-bearing |
|
270,912 |
|
270,912 |
v.
Fixed interest |
|
199,395 |
|
- |
|
|
|
|
|
Promissory
notes payable, secured by a guarantee from the Chief Executive Officer, bearing interest at 1% per month past maturity |
|
50,000 |
|
50,000 |
Total
Promissory Notes Payable to Unrelated Parties |
$ |
2,412,763 |
$ |
2,213,368 |
|
|
|
|
|
|
|
|
|
|
The
Company received an advance from a shareholder for Singapore dollars (“SGD”) $270,000 (US$199,395), with a fixed interest
amount of SGD$8,000, which will mature and be repayable on July 31, 2022.
All
amounts past maturity continue to accrue interest at their stated rates and are considered due on demand.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
4. Interest,
advances and promissory notes payable (continued)
c) Interest
payable
A
summary of the interest payable activity is as follows:
Schedule of interest payable activity | |
|
Interest Payable | |
Carrying Value |
Balance, December 31, 2020 | |
$ | 3,575,326 | |
Reclassified from promissory notes payable | |
| 10,985 | |
Interest incurred on promissory notes payable | |
| 527,336 | |
Interest payable retired through issuance of shares | |
| (3,000 | ) |
Balance, December 31, 2021 | |
| 4,110,647 | |
Interest incurred on promissory notes payable | |
| 137,536 | |
Balance, March 31, 2022 | |
$ | 4,248,183 | |
Interest
payable is due to related and non-related parties as follows:
Schedule of Interest payable due to related and non-related parties | |
| | | |
| | |
Interest Payable | |
March 31, 2022 | |
December 31, 2021 |
Related parties | |
$ | 1,279,462 | | |
$ | 1,200,170 | |
Unrelated parties | |
| 2,968,721 | | |
| 2,910,477 | |
Interest payable | |
$ | 4,248,183 | | |
$ | 4,110,647 | |
The
payment terms, security and any interest payable are based on the underlying promissory notes payable that the Company has outstanding.
d) Interest
expense
During
the period ended March 31, 2022, the Company incurred interest expense of $550,636 (2021 - $479,367) as follows:
| · | $384,922
(2021 - $314,737) incurred on lines of credit payable as shown in note 5; |
| · | $137,536
(2021 - $132,218) incurred on promissory notes (notes 4(a) and 4(b)); |
| · | $26,138
(2021 - $31,963) 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; and |
| · | $2,040
(2021 - $449) interest on other items. |
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
5.
Lines of credit
A
summary of lines of credit activity is as follows:
Schedule of lines of credit activity | |
|
Lines of Credit | |
Total |
Balance, December 31, 2020 | |
$ | 11,914,092 | |
Advances received on lines of credit | |
| 1,149,279 | |
Interest incurred on lines of credit | |
| 1,402,187 | |
Repayment of interest on lines of credit (note 6(b)) | |
| (456,725 | ) |
Balance, December 31, 2021 | |
| 14,008,833 | |
Advances received on lines of credit | |
| 299,695 | |
Interest incurred on lines of credit | |
| 384,922 | |
Repayment of interest on lines of credit (note 6(b)) | |
| (80,376 | ) |
Balance, March 31, 2022 | |
$ | 14,613,074 | |
On
December 10, 2021, the Company and the spouse of the Chairman entered into an amendment agreement to increase the borrowing limit on
the line of credit provided by the spouse of the Chairman to the Company from $2,000,000 to $4,000,000. The terms of amounts to be advanced
under the amendment are consistent with the line of credit. In connection with the line of credit, the Company granted the spouse of
the Chairman the option to acquire 40,000,000 shares of common of the Company at a price of $0.05 per share until December 31, 2026
(note 7).
As
of March 31, 2022, the Company had two lines of credit as follows:
Schedule of lines of credit |
|
|
|
|
|
|
|
|
Creditor |
Interest
Rate |
Borrowing
Limit |
Repayment
Terms |
Principal
Borrowed |
Accrued
Interest |
Total
Outstanding |
Security |
Purpose |
Chairman
and CEO |
1%
per Month |
$
10,300,000 |
Due
on Demand |
$
10,283,100 |
$
1,481,047 |
$
11,764,147 |
General
Security over Assets |
General
Corporate Requirements |
Wife
of Chairman |
1%
per Month |
4,000,000 |
Due
on Demand |
2,705,000 |
143,927 |
2,848,927 |
General
Security over Assets |
General
Corporate Requirements |
Total |
|
$
14,300,000 |
|
$
12,988,100 |
$
1,624,974 |
$
14,613,074 |
|
|
As
of December 31, 2021, the Company had two lines of credit as follows:
Creditor |
Interest
Rate |
Borrowing
Limit |
Repayment
Terms |
Principal
Borrowed |
Accrued
Interest |
Total
Outstanding |
Security |
Purpose |
Chairman
and CEO |
1%
per Month |
$
10,300,000 |
Due
on Demand |
$
10,220,700 |
$
1,208,582 |
$
11,429,282 |
General
Security over Assets |
General
Corporate Requirements |
Wife
of Chairman |
1%
per Month |
4,000,000 |
Due
on Demand |
2,467,705 |
111,846 |
2,579,551 |
General
Security over Assets |
General
Corporate Requirements |
Total |
|
$
14,300,000 |
|
$
12,688,405 |
$
1,320,428 |
$
14,008,833 |
|
|
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
6. Capital
stock
| a) | Authorized
capital stock |
10,000,000,000
shares of common stock with a par value of $0.001 per share.
500,000,000
shares of preferred stock with a par value of $0.001 per share.
b) Issued
capital stock
During
the period ended March 31, 2022:
|
i. |
On January 18, 2022, the Company issued a prospectus whereby it distributed 101,025,592 subscription rights to its shareholders to purchase shares of common stock of the Company at a price of $0.05 per share. The rights were set to expire on February 18, 2022, subsequently extended to March 15, 2022. On such case-by-case basis, the Company allowed for the exercise of any such shares until April 1, 2022. Management may, at its discretion, allocate unexercised subscription rights to non-shareholders within 150 days (August 12, 2022) following the expiration date of March 15, 2022. On March 21, 2022, the Company recognized share subscriptions receivable of $25 pursuant to its registration statement and issued a total of 500 shares of common stock for gross proceeds of $25. |
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
6. Capital
stock (continued)
b) Issued
capital stock (continued)
During
the year ended December 31, 2021:
|
i. |
On January 4, 2021, 1,000 shares of common stock were cancelled by a shareholder; no consideration was exchanged. |
|
ii. |
On April 12, 2021, the Company elected to extend the initial 90-day period (April 22, 2021) by an additional 100-day period related to the closing of the rights offering. The Company had until July 31, 2021 to sell the remaining 113,025,592 shares of common stock. The Company further extended the offering period to October 29, 2021. The Company filed a post-effective amendment to further extend the rights offering from October 29, 2021 to March 15, 2022. On such case-by-case basis, the Company allowed for the exercise of any such shares until April 1, 2022. Management may, at its discretion, allocate unexercised subscription rights to non-shareholders within 150 days (August 12, 2022) following the expiration date of March 15, 2022. |
|
iii. |
The Company collected subscriptions of $1,124,832 pursuant to its registration statement and issued a total of 26,496,635 shares of common stock for gross proceeds of $1,324,832; $200,000 of the proceeds had been collected during the year ended December 31, 2020 and recognized as obligation to issue shares. |
|
iv. |
The Company received proceeds of $12,000 pursuant to the exercise of options to acquire 800,000 shares of common stock at a price of $0.015 per share. |
|
v. |
The Company entered into two shares for debt agreements with two creditors to issue an aggregate 4,400,000 shares of common stock at a fair value of $0.057 per share for a purchase price of $250,800 in exchange for the retirement of $217,186 of liabilities comprised of: |
·
Accounts payable - $ 194,186
·
Promissory notes – Principal - $ 20,000
·
Line of credit – Accrued interest - $ 3,000
The
Company recognized loss on debt settlement of $33,614. The Company also issued commitment letters to two creditors offering them an aggregate
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 (note 8). These offer letters expired on December 31, 2021 without the parties executing any settlements.
On March 18, 2022, the Company extended the offer letters from December 31, 2021 to December 31, 2022 for the settlement of
$1,541,000 in promissory notes and interest payable. As of the date of these condensed consolidated financial statements, the offer letters
have not been executed.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
7.
Additional paid-in capital
Stock
options
A
summary of stock option activity is as follows:
Schedule of share-based compensation, stock options, activity |
|
|
|
|
|
|
|
Three
Months Ended
March 31,
2022 |
Year
Ended
December 31,
2021 |
|
Number
of Options |
Weighted
Average Exercise Price |
Number
of Options |
Weighted
Average Exercise Price |
Outstanding,
beginning of period |
5,497,001,500 |
$ |
0.006 |
5,362,701,500 |
$ |
0.004 |
Granted |
- |
$ |
- |
165,000,000 |
$ |
0.050 |
Exercised
|
- |
$ |
- |
(800,000) |
$ |
(0.015) |
Cancelled |
(60,000,000) |
$ |
(0.036) |
(29,900,000) |
$ |
(0.034) |
Outstanding,
end of period |
5,437,001,500 |
$ |
0.005 |
5,497,001,500 |
$ |
0.006 |
|
|
|
|
|
|
|
Exercisable,
end of period |
5,223,701,500 |
$ |
0.004 |
5,221,701,500 |
$ |
0.004 |
During
the period ended March 31, 2022:
On
March 18, 2022, the Company modified 70,000,000 options previously granted to a number of advisors and independent contractors by extending
the vesting period under vesting terms, which have not been met, from September 30, 2021 and December 31, 2021 to December 31,
2022 and from June 30, 2022 to June 30, 2023.
On
March 18, 2022, the Company amended 2,500,000 options previously granted to an individual on October 4, 2021 by vesting 1,000,000
options with performance conditions and cancelling the remaining 1,500,000 options. During the period ended March 31, 2022, $59,639 related
to the 1,000,000 options that vested immediately was recorded.
Effective
March 18, 2022, the Company cancelled 20,000,000 stock options exercisable at $0.015, 10,000,000 stock options exercisable at $0.035
and 28,500,000 exercisable at $0.05 related to the termination of certain contractors.
During
the period ended March 31, 2022, the Company recorded a total of $319,789 in compensation expense related to the vesting of stock
options granted in 2021, including the $59,639 from the modification of vesting terms of 1,000,000 options.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
7.
Additional paid-in capital (continued)
Stock
options (continued)
During
the year ended December 31, 2021:
On
January 28, 2021, the Company granted the option to acquire an aggregate 32,000,000 shares of common stock at a price of $0.05 per share
to six individuals. All of the options will vest according to performance or time-based conditions. Options to acquire 22,000,000 shares
of common stock will expire December 31, 2025, and options to acquire 10,000,000 shares of common stock will expire May 17,
2024. As at March 31, 2022, 2,000,000 (December 31, 2021, 1,000,000) options have vested to date. The fair value of the options
granted totals $1,706,244, of which $573,292 relates to stock options that have time-based vesting conditions and $1,132,952 relates
to stock options that have performance vesting conditions. During the period ended March 31, 2022, $52,238 (December 31, 2021 -
$248,189) related to stock options with time-based vesting conditions and $56,648 (December 31, 2021 - $nil) related to stock options
with performance-based vesting conditions was recognized. The remaining fair value of $1,349,169 has not been recorded.
On
February 22, 2021, the Company granted the option to acquire an aggregate 5,000,000 shares of common stock at a price of $0.05 per share.
These options were granted to three individuals and have an expiry date of May 17, 2024. None of these options have vested to date. The
fair value of the options granted totaled $225,141. During the period ended March 31, 2022, $17,319 (December 31, 2021 - $57,730)
related to stock options with time-based vesting conditions was recognized. The remaining fair value of $150,092 has not been recorded.
On
April 14, 2021, the Company’s Board of Directors approved the grant of the option to acquire an aggregate 28,500,000 shares of
common stock at a price of $0.05 per share until December 31, 2025 to five individuals. All of the options will vest according to
performance or time-based conditions; 200,000 options have vested to date. The fair value of the options granted totaled $1,565,812,
of which $351,621 related to stock options that have time-based vesting conditions and $1,214,191 related to stock options that have
performance vesting conditions. During the period ended March 31, 2022, $27,279 (December 31, 2021 - $88,540) related to the stock
options with time-based vesting conditions was recognized. The remaining fair value of $1,449,993 has not been recorded.
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 increase the option by 1,000,000 to provide the optionee the option to acquire an aggregate 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. The fair value of the additional 1,000,000 amended options granted
totaled $54,940 was not recorded, as it cannot be determined that it is more likely than not that the performance condition will be met.
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. The fair value of the options granted totaled
$254,708 was not recorded, as it cannot be determined that it is more likely than not that the performance condition will be met.
On
June 27, 2021, the Company cancelled 7,400,000 stock options with an average exercise price of $0.033.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
7.
Additional paid-in capital (continued)
Stock
options (continued)
During
the year ended December 31, 2021: (continued)
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. The fair value of the options granted totaled $1,374,208, of which $26,175 related to stock options with time-based
vesting conditions and $1,348,033 related to stock options with performance vesting conditions. During the period ended March 31, 2022,
$4,908 (December 31, 2021 - $9,816) related to the stock options with time-based vesting conditions was recognized. The remaining
fair value of $1,359,484 has not been recorded.
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. The options were granted in connection with lines of credit provided by
the Chairman and his spouse, which are currently outstanding (note 5). All of the options had vested in previous years. The fair
value of the amendments totaled $1,287,834 and was recorded during the year ended December 31, 2021 in interest expense.
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
August 27, 2021, the Company granted a member of the Board of Directors the option to acquire 5,000,000 shares of common stock at a price
of $0.05 per share until June 30, 2026. The fair value of the options granted totaling $304,692 was fully recorded at grant.
On
October 4, 2021, the Company granted two individuals the option to acquire an aggregate 17,500,000 options at an exercise price of $0.05
per share until September 30, 2026; 15,000,000 of the options will vest according to time-based conditions and 2,500,000 will vest
according to performance conditions. On March 18, 2022,
the Company cancelled 1,500,000 options and vested 1,000,000 options with performance vesting conditions. As
at March 31, 2022, 1,000,000 (December 31, 2021 - nil) options have vested to date. The fair value of the options granted
totaled $1,043,690, of which $894,592 related to stock options that have time-based vesting conditions and $149,098 related to stock
options that have performance vesting conditions. During the period ended March 31, 2022, $101,758 (December 31, 2021 - $101,758)
related to stock options with time-based vesting conditions and $59,639 (December 31, 2021 - $nil) related to stock options with performance-based
vesting conditions was recognized. The remaining fair value of $780,535 has not been recorded.
On
December 10, 2021, the Company granted one creditor the option to acquire 40,000,000 shares of common stock of the Company at a price
of $0.05 per share until December 31, 2026 in connection with receiving line of credit financing (note 5). The fair value of
the options granted totaled $2,137,286 and was fully recorded upon the Company entering into the financing agreement with the creditor.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
7.
Additional paid-in capital (continued)
Stock
options (continued)
During
the year ended December 31, 2021: (continued)
On
December 10, 2021, the Company granted one consultant the option to acquire 10,000,000 shares of common stock of the Company at a price
of $0.05 per share until December 31, 2026 subject to performance vesting conditions. The fair value of the options granted totaled
$534,321 was not recorded, as it cannot be determined that it is more likely than not that the performance condition will be met.
During
the year ended December 31, 2021, the Company recorded a further $167,373 in compensation expense related to the vesting of stock
options granted in previous years.
Outstanding
The
options outstanding at March 31, 2022 and December 31, 2021 were as follows:
Schedule of Options Outstanding |
|
|
|
|
|
|
|
|
|
|
|
March 31,
2022 |
December 31,
2021 |
Expiry
Date |
Options |
Exercise
Price |
Intrinsic
Value |
Options |
Exercise
Price |
Intrinsic
Value |
|
|
|
|
|
|
|
|
|
|
|
November
27, 2022 |
5,600,000 |
$ |
0.015 |
$ |
0.044 |
5,600,000 |
$ |
0.015 |
$ |
0.045 |
January
31, 2023 |
20,500,000 |
$ |
0.015 |
$ |
0.044 |
40,500,000 |
$ |
0.015 |
$ |
0.045 |
June
13, 2023 |
5,000,000 |
$ |
0.015 |
$ |
0.044 |
5,000,000 |
$ |
0.015 |
$ |
0.045 |
March
14, 2024 |
6,650,000 |
$ |
0.035 |
$ |
0.024 |
6,650,000 |
$ |
0.035 |
$ |
0.025 |
April
12, 2024 |
4,925,001,500 |
$ |
0.002 |
$ |
0.057 |
4,925,001,500 |
$ |
0.002 |
$ |
0.058 |
April
12, 2024 |
3,350,000 |
$ |
0.015 |
$ |
0.044 |
3,350,000 |
$ |
0.015 |
$ |
0.045 |
April
12, 2024 |
200,000 |
$ |
0.030 |
$ |
0.029 |
200,000 |
$ |
0.030 |
$ |
0.030 |
May
6, 2024 |
13,000,000 |
$ |
0.035 |
$ |
0.024 |
13,000,000 |
$ |
0.035 |
$ |
0.025 |
May
17, 2024 |
57,000,000 |
$ |
0.050 |
$ |
0.009 |
77,000,000 |
$ |
0.050 |
$ |
0.010 |
May
17, 2024 |
19,400,000 |
$ |
0.035 |
$ |
0.024 |
19,400,000 |
$ |
0.035 |
$ |
0.025 |
June
17, 2024 |
- |
$ |
- |
$ |
- |
5,000,000 |
$ |
0.050 |
$ |
0.010 |
August
16, 2024 |
- |
$ |
- |
$ |
- |
2,500,000 |
$ |
0.050 |
$ |
0.010 |
September
6, 2024 |
- |
$ |
- |
$ |
- |
1,000,000 |
$ |
0.050 |
$ |
0.010 |
October
3, 2024 |
3,500,000 |
$ |
0.035 |
$ |
0.024 |
3,500,000 |
$ |
0.035 |
$ |
0.025 |
October
24, 2024 |
2,000,000 |
$ |
0.035 |
$ |
0.024 |
2,000,000 |
$ |
0.035 |
$ |
0.025 |
December
11, 2024 |
120,000,000 |
$ |
0.015 |
$ |
0.044 |
120,000,000 |
$ |
0.015 |
$ |
0.045 |
April
1, 2025 |
10,000,000 |
$ |
0.035 |
$ |
0.024 |
10,000,000 |
$ |
0.035 |
$ |
0.025 |
May
31, 2025 |
10,000,000 |
$ |
0.035 |
$ |
0.024 |
20,000,000 |
$ |
0.035 |
$ |
0.025 |
May
31, 2025 |
87,300,000 |
$ |
0.050 |
$ |
0.009 |
87,300,000 |
$ |
0.050 |
$ |
0.010 |
December 31,
2025 |
56,500,000 |
$ |
0.050 |
$ |
0.009 |
56,500,000 |
$ |
0.050 |
$ |
0.010 |
June
30, 2026 |
26,000,000 |
$ |
0.050 |
$ |
0.009 |
26,000,000 |
$ |
0.050 |
$ |
0.010 |
September
30, 2026 |
16,000,000 |
$ |
0.050 |
$ |
0.009 |
17,500,000 |
$ |
0.050 |
$ |
0.010 |
December 31,
2026 |
50,000,000 |
$ |
0.050 |
$ |
0.009 |
50,000,000 |
$ |
0.050 |
$ |
0.010 |
Total |
5,437,001,500 |
$ |
0.005 |
$ |
0.053 |
5,497,001,500 |
$ |
0.006 |
$ |
0.054 |
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Remaining Contractual Life |
|
|
2.13 |
|
|
|
|
2.37 |
|
|
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
7.
Additional paid-in capital (continued)
Stock
options (continued)
The
fair value of the stock options granted and vested was allocated as follows:
Schedule of Fair Value of Stock Options Granted-Allocation | |
| | | |
| | |
| |
Three Months Ended March 31, 2022 | |
Three Months Ended March 31, 2021 |
Product development expense | |
$ | 62,168 | | |
$ | 36,145 | |
Professional expense | |
| 8,959 | | |
| 15,225 | |
Selling, general and administrative expenses | |
| 248,662 | | |
| — | |
Fair value of the stock options granted | |
$ | 319,789 | | |
$ | 51,370 | |
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:
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | |
| | | |
| | |
| |
March 31, 2022 | |
December 31,
2021 |
Risk-free interest rate | |
| N/A | | |
| 0.87 | % |
Expected life | |
| N/A | | |
| 4.8 years | |
Expected dividends | |
| N/A | | |
| 0 | % |
Expected volatility | |
| N/A | | |
| 278 | % |
Forfeiture rate | |
| N/A | | |
| 0 | % |
There
were no options granted during the three months ended March 31, 2022. The weighted average fair value for the options granted during
the year ended December 31, 2021 was $0.06.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
8. Related
party transactions and balances
Schedule of related party transactions | |
| |
|
| |
Three Months Ended March 31, 2022 | |
Three Months Ended March 31, 2021 |
Related party transactions included within interest expense: | |
| | | |
| | |
Interest expense on promissory notes issued to relatives of the Chairman and Chief Executive Officer of the Company | |
$ | 79,292 | | |
$ | 78,982 | |
Interest expense on lines of credit payable to the Chairman and Chief Executive Officer of the Company and his spouse | |
$ | 384,922 | | |
$ | 314,737 | |
| |
| | | |
| | |
Related party transactions included within selling, general and administrative expenses: | |
| | | |
| | |
Consulting fees to the Chairman and Chief Executive Officer of the Company accrued on the line of credit available to the Company | |
$ | 62,400 | | |
$ | 62,400 | |
Salary for services as VP Corporate and Director of the Singapore subsidiary to the spouse of the Chairman and Chief Executive Officer of the Company | |
$ | 11,091 | | |
$ | — | |
Rent paid to a company controlled by the spouse of the Chairman and immediate family members | |
$ | 12,200 | | |
$ | — | |
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.
The
Company also issued commitment letters to two creditors who are relatives of the Chairman and Chief Executive Officer of the Company
offering them an aggregate 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 (note 6(b)(v)). These offer letters expired on December 31, 2021 without the
parties executing any settlements. On March 18, 2022, the Company extended the offer letters from December 31, 2021 to December 31,
2022 for the settlement of $1,541,000 in promissory notes and interest payable. As
of the date of these condensed consolidated financial statements, the offer letters have not been executed.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
9. Commitments
and contingencies
The
Company has had three judgments against it relating to overdue promissory notes and accrued interest, and a fourth creditor has demanded
repayment of an overdue promissory note and accrued interest. To date, the Company has not repaid any of these promissory notes and related
accrued interest and could be subject to further action. The legal liability, totaling $1,262,582, of these promissory notes and related
accrued interest have been fully recognized and recorded by the Company. The Company has accrued interest of $285,457 related to one
of these promissory notes.
On
December 22, 2020, a default judgment was entered against the Company in regard to one of the above noted judgments totaling $551,576,
consisting of the principal amount of $300,000 and accrued interest of $251,576, as of the date of the Civil Summons.
The
Company has a consulting arrangement with Mr. Sidney Chan, Chief Executive Officer and Chairman of the Board of Directors of the Company.
Under the terms of the contract, Mr. Chan will be paid $240,000 per annum for services as Chief Executive Officer. The contract can be
terminated at any time with thirty days’ notice and the payment of two years’ annual salary. Should the contract be terminated,
all debts owed to Mr. Chan and his spouse must be immediately repaid. The initial term of the contract is for one year and automatically
renews for continuous one-year terms. Also, under the terms of the contract are the following:
| 1) | Incentive
revenue bonus |
Mr.
Chan will be entitled to a 1% net sales commission from the sales of any of the Company’s products at any time during his life,
regardless if Mr. Chan is still under contract with the Company.
If
more than 50% of the Company’s stock or assets are sold, Mr. Chan will be compensated for entering into non-compete agreements
based on the selling price of the Company or its assets as follows:
| i. | 2%
of sales price up to $24,999,999 plus |
| ii. | 3%
of sales price between $25,000,000 and $49,999,999 plus |
| iii. | 4%
of sales price between $50,000,000 and $199,999,999 plus |
| iv. | 5%
of sales price in excess of $200,000,000. |
The
Company has a lease agreement for the Singapore office with a remaining obligation of $12,185.
ALR
TECHNOLOGIES INC.
Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022
($
United States)
(Unaudited)
10. Operating
segments
The
Company has one operating segment, development of diabetes hardware and software. The Company’s geographical segments are summarized
as follows:
Schedule of Operating Segments | |
| |
|
| |
March 31, 2022 | |
December 31, 2021 |
Current and Total Assets | |
| | | |
| | |
Other | |
$ | 9,908 | | |
$ | 9,547 | |
Singapore | |
| 125,490 | | |
| 110,527 | |
United States | |
| 131,980 | | |
| 73,143 | |
| |
$ | 267,378 | | |
$ | 193,217 | |
| |
Three Months Ended March 31, 2022 | |
Three Months Ended March 31, 2021 |
Revenue | |
| | | |
| | |
Other | |
$ | — | | |
$ | — | |
Singapore | |
| 1,043 | | |
| — | |
United States | |
| — | | |
| — | |
| |
$ | 1,043 | | |
$ | — | |
| |
| | | |
| | |
Net Loss | |
| | | |
| | |
Other | |
$ | (1,063 | ) | |
$ | — | |
Singapore | |
| (84,392 | ) | |
| — | |
United States | |
| (1,319,394 | ) | |
| (1,016,923 | ) |
| |
$ | (1,404,849 | ) | |
$ | (1,016,923 | ) |
11. Subsequent
event
On
April 27, 2022, the Company provided termination notice to a contractor and as a result the contractor’s 30,000,000 stock options
exercisable at $0.05 will be cancelled, unvested, effective June 30, 2022.