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| ALRT.OB > SEC Filings for ALRT.OB > Form 10-Q on 19-Aug-2008 | All Recent SEC Filings |
19-Aug-2008
Quarterly Report
Forward Looking Statements
The following information must be read in conjunction with the unaudited Financial Statements and Notes thereto included in Item 1 of this Quarterly Report and the audited Consolidated Financial Statements and Notes thereto and Management's Discussion and Analysis or Plan of Operations contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2007. Except for the description of historical facts contained herein, the Form 10Q contains certain forward-looking statements concerning future applications of the Company's technologies and the Company's proposed services and future prospects, that involve risk and uncertainties, including the possibility that the Company will: (i) be unable to commercialize services based on its technology, (ii) ever achieve profitable operations, or (iii) not receive additional financing as required to support future operations, as detailed herein and from time to time in the Company's future filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Critical Accounting Policies
The preparation of our financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results may differ from these estimates under different assumptions or conditions. We believe the accounting polices that are most critical to our financial condition and results of operations and involve management's judgment and/or evaluation of inherent uncertain factors are as follows:
Basis of Presentation. The financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If the Company were not to continue as a going concern, it would likely not be able to realize on its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements. As described in note 1 to the interim financial statements, at June 30, 2008, there are certain conditions that exist which raise substantial doubt about the validity of this assumption. The Company's ability to continue as a going concern is dependent upon continued financial support of its creditors and its ability to obtain financing to repay its current obligations and fund working capital and its ability to achieve profitable operations. The Company will seek to obtain creditors consent to delay repayment of its outstanding promissory notes payable until it is able to replace this financing with funds generated from operations, replacement debt or from equity financing through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Management plans to obtain financing through the issuance of additional debt, the issuance of shares on the exercise of options and warrants and through future common share private placements. Management hopes to realize sufficient sales in future years to achieve profitable operations. Failure to achieve management's plans may result in the Company curtailing operations or writing assets and liabilities down to liquidation values, or both.
Revenue recognition. The Company recognizes sales revenue at the time of delivery when title has transferred to the customer, persuasive evidence of an arrangement exists, the fee is fixed and determinable and the sales proceeds are collectible. Provisions are recorded for product returns based on historical experience. Sales revenue, in transactions for which the Company does not have sufficient historical experience, is recognized when the return privilege period has expired. Changes in sales terms could materially impact the extent and timing of revenue recognition.
Results of Operations Management is focusing the majority of its efforts on introducing and marketing its line of medication reminders and compliance systems to the health management industry. ALRT Med Reminders are being marketed and sold directly to disease management companies, health insurance providers, pharmaceutical manufacturers, retail pharmacy chains and to organizations representing specific therapeutic categories. The Company is first targeting customers located in United States because of market potential but has also established selling operations/agreements for sales and distribution in Canada, Europe, Australia and South America.
Contracts with companies that will provide selling support to medical supply companies and health services providers as well as contracts with companies that sell directly to institutions and large medical practices were completed in 2004. Additional contracts are in process as the Company completes development of its home health monitoring system. The Company will also utilize advertising/promotion and publicity activities to pharmaceutical manufacturers, contract research organizations, independent pharmacies and consumers.
Sales revenue was $7,199 in the quarter ended June 30, 2008 as compared to $20,806 in the quarter ended June 30, 2007. The decrease in sales is mainly due to the Company's decision to phase out older generation of its products and concentrate its effort to develop ALRT500.
For the six months ended June 30, 2008, sales revenue was $8,938 as compared to $135,570 for the same six month period last year. The decrease in sales is mainly due to the Company's decision to phase out older generation of its products and concentrate its effort to develop ALRT500.
Development costs were $46,522 for the quarter ended June 30, 2008 as compared with $98,903 for the quarter ended June 30, 2007. Development costs incurred during the first quarter of 2008 related to the allocation of additional programming resources required for the development of the ALRT500 LCD (Liquid Crystal Display) Med Reminders and the ALRT Interactive Response System (AIRS).
For the six months ended June 30, 2008, development costs were $237,336 as compared to $153,089 for the same six month period last year. Development costs incurred during the six months of 2008 related to the allocation of additional programming resources required for the development of the ALRT500 LCD (Liquid Crystal Display) Med Reminders and the ALRT Interactive Response System (AIRS). Development costs for the six months ended June 30, 2008 and 2007 include $143,791 and $47,391, respectively, of non-cash compensation costs related to options issued for services in the period.
For the six months ended June 30, 2008, interest expense was $353,712 as compared to $348,051 for the same six month period last year. The amount for the current period included $20,534 relating to options issued in exchange for $450,000 loan received during the period from March to June 2008, which loan is due for repayment on September 30, 2009. The Company continues to rely on debt financing and extensions on debt obligations.
Professional fees were $21,510 for the quarter ended June 30, 2008 as compared with $22,705 for the quarter ended June 30, 2007. Fees were slightly lower primarily due to lesser accounting and audit services obtained in the period.
For the six months ended June 30, 2008, professional fees were $35,790 as compared to $39,208 for the same six month period last year. Fees were lower primarily due to lesser accounting and audit services obtained in the period.
The selling, general and administrative expenses were $135,670 for the quarter ended June 30, 2008 as compared to $191,736 for the quarter ended June 30, 2007. The decrease relates primarily to lower investor relations activities during the current period.
For the six months ended June 30, 2008, selling, general and administrative expenses were $283,379 as compared to $351,207 for the same six month period last year. The decrease relates primarily to lower investor relations activities during the current period.
Net loss of $398,329 for the quarter ended June 30, 2008 decreased from a loss of $512,319 for the same quarter in 2007 mainly due to decrease in product development and selling, general and administration expenses. The largest component of this decrease was the selling, general and administration expenses.
For the six months ended June 30, 2008, net loss was $924,536 as compared to $812,172 for the same six month period last year. The largest component of this increase was the non-cash interest and compensation costs related to options issued for product development and loan.
Liquidity and Capital Resources
Cash Balances and Working Capital
As of June 30, 2008, the Company's cash balance was $98,671 compared to $2,973 as of December 31, 2007. As of June 30 2008, the Company had a working capital deficiency of $11,083,258 as compared to a working capital deficiency of $10,773,657 as of December 31, 2007.
As of June 30, 2008, the Company does not have the current financial resources and committed financing to enable it to meet its overheads, purchase commitments and debt obligations over the next 12 months.
All of the Company's debt financing is either due on demand or has a maturity date of less than one year, with the exception of one non-related party debt which is due greater than one year. The Company will seek to obtain creditors' consents to delay repayment of these loans until it is able to replace these financings with funds generated by operations, replacement debt or from equity financings through private placements or the exercise of options and warrants. While the Company's creditors have agreed to extend repayment deadlines in the past, there is no assurance that they will continue to do so in the future. Failure to obtain either replacement financing or creditor consent to delay the repayment of existing financing could result in the Company having to curtail operations.
Cash Provided by (Used in) Operating Activities
Cash used by the Company in operating activities during the quarter was $291,742 in comparison with $73,603 during the same quarter last year. The increase was mainly due to lower cash received from the customers and increased payments to suppliers during the current quarter.
For the six months ended June 30, 2008, cash used in operating activities was $354,302 in comparison with $82,405 for the same six month period in 2007. The increase was mainly due to lower cash received from the customers during the current period and increased payments to suppliers.
Cash Proceeds from Financing Activities
During the quarter ended June 30, 2008, the Company received $390,000 loan from a non-related party plus $50,000 from a relative of a director as compared to $75,000 in the six-month period of 2007 from a relative of a director. The Company repaid $50,000 during the quarter.
During the six months ended June 30, 2008, the Company received $450,000 loan from a non-related party plus $50,000 from a relative of a director as compared to $75,000 in the six-month period of 2007 from a relative of a director. The Company repaid $50,000 during the period.
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.
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