ALR TECHNOLOGIES INC 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 endedDecember 31, 2021 . This Form 10-Q includes "forward-looking statements", as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These "forward-looking statements" are not based on historical fact and involve assessments of certain risks, developments and uncertainties in our business looking to the future. Such forward-looking statements can be identified by the use of terminology such as "may", "will", "should", "expect", "anticipate", "estimate", "intend", "continue", "believe", or the negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections, forecasts or estimates of future performance and developments. Forward-looking statements contained in this Form 10-Q are based upon assumptions and assessments that we believe to be reasonable as of the date of this report. Whether those assumptions and assessments will be realized will be determined by future factors, developments and events, which are difficult to predict and may be beyond our control. Actual results, factors, developments and events may differ materially from those we assumed and assessed. Risks, uncertainties, contingencies and developments, including those identified in the Risk Factors section of filings we make with theSecurities and Exchange Commission (the "SEC") pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), incorporated by reference herein, could cause our future operating results to differ materially from those set forth in any forward-looking statement. There can be no assurance that any such forward-looking statement, projection, forecast or estimate contained can be realized, or that actual returns, results or business prospects will not differ materially from those set forth in any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. 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 theSEC 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.
Our consolidated financial statements are stated in
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
23 Overview ALRT is a data management company that developed a comprehensive approach to diabetes care that includes: (i) aFood and Drug Administration ("FDA") cleared and Health Insurance Portability and Accountability Act of 1996 ("HIPAA") compliant diabetes management system (as previously defined, the "Diabetes Solution") that collects data directly from blood glucose meters ("BGM") (and which was subsequently modified to integrate with continuous glucose monitoring ("CGM") devices), (ii) a patent pending Predictive A1C algorithm to track treatment success between lab reports, and (iii) an FDA-cleared Insulin Dosing Adjustment program. From this technology portfolio, the Company has developed the Diabetes Solution for human health, and the GluCurve, a modified version of the Diabetes Solution, for animal health ("GluCurve").
ALRT was incorporated under the laws of the state of
The Company has two subsidiaries:
Entity Jurisdiction Ownership Incorporation Date
Percentage
ALR Technologies SG Pte. Ltd. Singapore 100% May
16, 2020
During 2011, the Company received FDA clearance and achieved HIPAA compliance for an early version of its Diabetes Solution. The Company subsequently completed a clinical trial and pilot programs, which led to the development of its "Insulin Dosage Adjustment" technology, for which it received FDA clearance in 2017, and its "Predictive A1C" technology, for which it has submitted a worldwide patent application under the Patent Cooperation Treaty to theWorld Intellectual Property Organization . Subsequently the Company has continued making advancements to its Diabetes Solution technology by increasing functionality and capability to improve diabetes care for patients. The Company is actively seeking to commence revenue-generating activities for the Diabetes Solution. In 2020, the Company: (i) entered into an agreement with Bionime Corporation ("Bionime") whereby the Company will bundle its Diabetes Solution application (or "app") with Bionime BGM and diabetes test supplies and sell the bundle to diabetes patients of private medical clinics inSingapore , (ii) initiated a clinical pilot withSingapore General Hospital to prove the efficacy of the ALRT Diabetes Solution in insulin-treated diabetes patients, (iii) entered into a memorandum of understanding to form a collaboration with Diabetes Singapore, a non-profitSingapore -based organization serving theSingapore Minister for Health and a member of theInternational Diabetes Federation , with the view of raising the diabetes management standard inSingapore , and (iv) advanced its Diabetes Solution to integrate with CGM devices. See page 30 for discussion
on CGM.
In 2021: (i) the Company announced it had advanced its Diabetes Solution for
animal health purposes under the brand name "GluCurve" and (ii) the Company
announced its intent to redomicile to
While the ALRT Diabetes Solution is offered both individually and bundled with BGMs, the Company is focused on offering the ALRT Diabetes Solution with a cost effective CGM. ALRT believes that the current trend in diabetes care is shifting from the use of traditional BGM to diabetes care management using CGM and that CGM will become the future standard of diabetes care. ALRT believes it is uniquely positioned to bundle its Diabetes Solution application with CGM to improve health outcomes globally at a price point that is reasonable for wide scale adoption. The Company is focusing its resources on seeking opportunities in theASEAN (Association of Southeast Asia Nations ) area to secure supply of CGM through one or more strategic transactions. 24
As it continues to try to identify a suitable strategic CGM transaction, as of the time of filing this Report, ALRT desires to complete its redomestication transaction toSingapore , even though it has not yet identified a suitable CGM source for human health or finalized its supply arrangement for animal health. ALRT currently considers both its proposed redomestication, and also its ongoing search for a CGM supply source, as critical to its successful commercial launch for both human and animal health. No guaranties can be given as to the timing or successful completion of either the redomestication or a strategic CGM transaction. Recent Developments
OnJanuary 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 onFebruary 18, 2022 , subsequently extended toMarch 15, 2022 . On such case-by-case basis, the Company allowed for the exercise of any such shares untilAugust 12, 2022 . The Company recognized share subscription receivable of$25 pursuant to its registration statement and issued a total of 500 shares of common stock for gross proceeds of$25 . OnMarch 18, 2022 , the Company extended the commitment letters previously issued 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$1,541,000 in promissory notes and interest payable fromDecember 31, 2021 toDecember 31, 2022 . OnMarch 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, fromSeptember 30, 2021 andDecember 31, 2021 toDecember 31, 2022 and fromJune 30, 2022 toJune 30, 2023 . OnMarch 18, 2022 , the Company amended 2,500,000 options previously granted to an individual onOctober 4, 2021 by vesting 1,000,000 options and cancelling the remaining 1,500,000 options with performance conditions. During the period endedMarch 31, 2022 ,$59,639 related to the 1,000,000 options that vested immediately was recorded.
Effective
In
Recent Developments - Subsequent to
OnApril 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, effectiveJune 30, 2022 . Additional Financing Rights Offering
OnDecember 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 atDecember 31, 2021 , the Company issued 26,496,635 unrestricted shares of common stock related to proceeds received of$1,324,832 . The Company had untilOctober 29, 2021 to sell the remaining 101,025,592 shares of common stock for total proceeds of$5,051,280 , if exercised. OnDecember 14, 2021 , the Company filed a post-effective amendment to distribute subscription rights to purchase up to an aggregate 101,025,592 shares of our common stock at a price of$0.05 per share. Each stockholder as of the record date of theDecember 4, 2020 Form S-1 Registration Statement who received rights and had not previously exercised those subscription rights as of the expiration date ofJanuary 22, 2021 , received one subscription right for each previous subscription right held as at such time. The rights expiredMarch 15, 2022 . On such case-by-case basis, the Company allowed for the exercise of any such shares untilApril 1, 2022 . Management may, at its discretion, allocate unexercised subscription rights to non-shareholders within 150 days (August 12, 2022 ) following the expiration date ofMarch 15, 2022 . InMarch 2022 , the Company recognized share subscription receivable of$25 pursuant to its registration statement and issued an additional 500 shares of common stock for gross proceeds of$25 . 25 Products 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 inthe United States for other chronic health conditions. Diabetes is a leading cause of death, serious illness and disability acrossNorth 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 theAmerican 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:
· Testing blood glucose levels four or more times per day;
· Injecting insulin at least three times a day or using an insulin pump;
· Adjusting insulin dose according to food intake and exercise;
· Following a diet and exercise plan; and
· Monthly visits to healthcare team.
26 Failure to Control Diabetes
We believe there are five causes why diabetes is not controlled:
1. Patient non-adherence; 2. Unreliable data; 3. Data overload; 4. Clinical inertia; and
5. Insulin under-prescription.
Patient Non -adherence As noted inPatrick Connole , "UnitedHealthcare, Other Large InsurersSeek Better Adherence to Diabetes Care", Health Plan Week,February 11, 2013 , Volume 23, Issue 5, 80% ofUnited 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 Healthcare providers ("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:
· 37% within 6 months;
· 11% within 6-12 months; and
· 52% never.
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. 27 Cleveland Clinic Study
A team at
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 ofCleveland 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) 28 Company Products ALRT Diabetes SolutionALR 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;
· Direct meter uploads;
· Machine intelligent data processing;
· Predictive A1C; and
· Insulin dosage adjustment.
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.
29
Insulin Dose Adjustment
Included in the Diabetes Solution is Insulin Dose Adjustment ("IDA"). 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.
ALRT Prediabetes 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 topayer protocols.
Evolution of the Diabetes Solution
During 2021, the Company enrolled a small number of patients with Diabetes Singapore into the Diabetes Solution utilizing BGM, which provided for improved efficacy of the Diabetes Solution.
The Company is preparing for a clinical trial for its Diabetes Solution for
human health utilizing CGM and to concurrently submit an FDA application for
clearance to sell the Diabetes Solution in
Continuous Glucose Monitoring
A CGM is a medical device that is worn on the body of a diabetic subject for up to 14 days and continually takes glucose (blood sugar) readings every 1-5 minutes. A CGM consists of three pieces:
1) A sensor that measures glucose levels in the interstitial fluid that is
attached to the skin of the subject via an adhesive pad;
2) A Bluetooth transmitter that wirelessly sends the glucose readings to a
mobile device or reader and can be integrated into the sensor or come
as a separate piece that clips into the sensor; and
3) An applicator that applies the sensor onto the subject.
A CGM can be factory calibrated thus eliminating the need for diabetics to prick their finger to test blood on a strip inserted into a BGM throughout the day. A CGM works by utilizing glucose oxidase-based enzymes that are coated onto an electrode that is inserted into the subcutaneous tissue when the sensor is applied to the skin. The transmitter then securely sends the data wirelessly to a receiver, such as a mobile device, where the data is organized and displayed for the user.
All subjects have a target blood glucose range. Time in range is the amount a subject spends in the target blood glucose range. The time in range method works with the data provided by the CGM's data by looking at the amount of time your blood sugar has been in target range and the times you have had high blood sugar or low blood sugar. This data is helpful in finding out which types of foods and what activity level causes your blood sugar to rise and fall and assessing
adherence to a care plan. 30 ALR GluCurve for Pets
ALR 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 that consists of the following steps:
1) The pet is dropped off at a veterinary clinic;
2) The pet is given an insulin shot;
3) The clinic staff will draw blood every 2 hours for 10-12 hours,
performing the following steps each time:
a. test the blood in a BGM;
b. record readings;
c. plot the data into a graph;
d. assess the effectiveness of the insulin dose and glycemic control; and
4) The pet is picked up by their owner.
The GluCurve Pet CGM solves the multiple issues that arise from doing an in-clinic glucose curve:
· Inaccurate data;
· Manual process of data collection, review and analysis; and
· Burden on the clinic staff and the pet owner.
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. This 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. This is 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 platform provides the pet owner and practitioner with the historical blood glucose data to allow for management of the pet's health and tracking.
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. Current Status The Company has completed non-inferiority studies with aUnited States -based veterinary clinic for the GluCurve app and the CGM supplies being bundled with the GluCurve app. The results indicated the CGM utilized were non-inferior to other competing CGM systems. The Company is seeking to secure a strategic transaction with a pharmaceutical company with a global sales network in order to commercialize the GluCurve CGM. The Company has made the GluCurve app available on Google Play and theApple Store for users of the validation and non-inferiority studies. 31 Results of Operations Three months endedMarch 31, 2022 compared to Three months endedMarch 31, 2021 Three Months Three Months Amount ($) Percentage (%) Ended Ended Increase / Increase / March 31, 2022 March 31, 2021 (Decrease) (Decrease) Revenue$ 1,000 - 1,000 100 Cost of revenue (1,000 ) - (1,000 ) 100 Gross margin - - - -
Operating Expenses
Product development costs 127,000 112,000 15,000 13 Professional fees 172,000 217,000 (45,000 ) (21 ) Selling, general and administrative 555,000 208,000
347,000 167
Operating loss 854,000 537,000 317,000 59
Loss before other item 854,000 537,000 317,000 59
Other Item
Interest expense 551,000 479,000 72,000 15
Total other item 551,000 479,000 72,000 15
Net Loss $ 1,405,000 1,016,000 389,000 38
The net loss for the three-month period ended March 31, 2022 was 38% ($389,000 )
higher than the net loss at March 31, 2021 . Loss before other item and
stock-based compensation was $48,000 (10%) higher during the three months ended
March 31, 2022 , as compared to the three months ended March 31, 2021 . We
highlight that loss before other item and stock-based compensation is a
"non-GAAP financial measure". This measure is calculated by removing those items
from the net loss presented on our consolidated statements of operations. This
measure does not have a standardized meaning under U.S. GAAP. Management uses
this measure internally to evaluate its results of operations, as it removes the
impact of stock-based compensation, non-operational losses and interest
accretion.
Three Months Three Months Amount ($) Percentage (%)
Ended Ended Increase / Increase /
March 31, 2022 March 31, 2021 (Decrease) (Decrease)
Loss Before Other Items$ 854,000 537,000 317,000 59 Stock-based compensation included in selling, general and administrative expense, professional fees and product development costs 320,000 51,000 269,000 527 Loss Before Other Items and Stock-based Compensation$ 534,000 486,000 48,000 10 The loss before interest and stock-based compensation for the Company's three months endedMarch 31, 2022 increased by$48,000 due primarily to increased selling, general and administrative fees of as a result of costs incurred in relation to ALRT SG and in relation to the Rights Offering. 32
Selling, General and Administrative
Selling, general and administrative costs incurred consist of salaries and consulting fees of management personnel, stock-based compensation for options vested 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. During the period, the Company had increased selling, general and administrative operating expenses, as compared to the same period in 2021. The selling, general and administrative expenses, excluding stock-based compensation, increased by$98,000 during 2022, as compared to 2021, primarily driven by an increase in salaries, payroll expenses and consulting fees paid to personnel, mailing and printing of materials related to the Rights Offering in the current period offset by fees paid to a market research firm related to commercialization plans for the Company's Diabetes Solution in the comparative period of the prior year. The components of selling, general and administrative expenses and the changes therein can be seen as follows: Three Months Three Months Amount ($) Ended Ended Increase / Selling, general and administrative: March 31, 2022 March 31, 2021 (Decrease) Salaries and consulting fees$ 204,000 141,000 63,000 Travel and trade shows 4,000 2,000 2,000
Website and information technology 7,000 5,000 2,000 Transfer agent, filing fees and quotation costs 9,000 3,000 6,000 Market research consulting fees 10,000 24,000
(14,000 )
Payroll expenses 18,000 - 18,000
License and permits 1,000 10,000 (9,000 )
Shareholder communications 28,000 5,000 23,000
Foreign exchange 9,000 - 9,000
Other general and administration
costs 16,000 18,000 (2,000 )
Subtotal 306,000 208,000 98,000
Stock-based compensation 249,000 - 249,000
Total $ 555,000 208,000 347,000
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 Company incurred stock-based compensation expense of
$62,000 during Q1 2022 related to the vesting of options to its product
development team compared to $36,000 during Q1 2021.
Professional fees
Professional fees incurred consists 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. Excluding the difference in net loss attributed to the vesting of stock options granted in the prior year, professional fees decreased by$39,000 from the comparative period of the prior year. The decrease in professional fees was mainly due to recruiter fees paid in the comparative period of the prior year offset by an increase in legal fees in the current period. During the period, the increase in legal fees related to:
· Assessing business structure alternatives, including evaluating and forming the
animal health division;
· Evaluating retaining additional personnel to support commercialization
strategies in
· Its proposed migration to
· Completing the rights offering financing, preparing subsequent amendments to
extend the rights offering and issuing the post-effective amendment to the
rights offering. 33
By type of professional cost, the variance can be seen as follows:
Three Months Amount ($)
Ended Three Months Ended Increase /
Professional fees: March 31, 2022 March 31, 2021 (Decrease)
Corporate auditor $ 22,000 $ 10,000 12,000
Accounting fees 36,000 39,000 (3,000 )
Tax consultant fees 14,000 24,000 (10,000 )
Legal fees 90,000 69,000 21,000
Recruiter fees - 48,000 (48,000 )
Market consultants and outreach 1,000 12,000 (11,000 )
Subtotal 163,000 202,000 (39,000 )
Stock-based compensation 9,000 15,000 (6,000 )
Total $ 172,000 $ 217,000 (45,000 )
Interest expense
Interest expense was from the following sources for the three months ended
March 31, 2022 and 2021:
Three Months Amount ($)
Ended Three Months Ended Increase /
Interest expense: March 31, 2022 March 31, 2021 (Decrease)
Interest expense incurred on
promissory notes $ 138,000 $ 132,000 6,000
Interest expense incurred on lines
of credit 385,000 315,000 70,000
Imputed interest on zero interest
loans and other 28,000 32,000 (4,000 )
Total $ 551,000 $ 479,000 72,000
Interest on Promissory Notes
The Company received an advance from a shareholder for SGD$270,000 (
Interest on Lines of Credit
The Company has two line of credit facilities with balances as follows:
Amount ($)
Three Months Ended Three Months Ended Increase /
Lines of credit: March 31, 2022 March 31, 2021 (Decrease)
Line of credit provided by Mr.
Sidney Chan $ 10,283,000 $ 9,731,000 552,000
Line of credit provided by Mrs.
Christine Kan 2,705,000 2,000,000 705,000
Total $ 12,988,000 $ 11,731,000 1,257,000
The principal balance of the lines of credit due to Mr.
The Company incurred interest on the lines of credit as follows:
Three Months Amount ($)
Ended Three Months Ended Increase /Interest expense on lines of credit: March 31, 2022 March 31, 2021 (Decrease) Interest expense incurred on the line of credit fromSidney Chan during the period$ 308,000 $ 255,000 53,000 Interest expense incurred on the line of credit fromChristine Kan during the period 77,000 60,000 17,000 Total$ 385,000 $ 315,000 70,000 Imputed Interest During the 2022 and 2021 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. 34
Liquidity and Capital Resources
As At Amount ($) Percentage (%)
March 31, As At Increase / Increase /
Working Capital 2022 December 31, 2021 (Decrease) (Decrease)
Current Assets $ 267,000 $ 193,000 74,000 38
Current Liabilities 25,639,000 24,505,000 1,134,000 5Working Capital Deficiency$ (25,372,000 ) $ (24,312,000 )
(1,060,000 ) 4
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 expected to continue generating revenues in Singapore during the 2022 fiscal
year; however, the amount and timing are uncertain. The revenues generated in
2021 and 2022 are not expected to be sufficient to finance the ongoing
operations of the business and repay the current liabilities. The Company is
also evaluating opportunities for its GluCurve product, the timing and amount of
revenues from which are uncertain. 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 current assets as at
Current Liabilities The Company has current liabilities of$25,639,000 as atMarch 31, 2022 , as compared to$24,505,000 as atDecember 31, 2021 . Current liabilities are as follows: March 31, Change Change 2022 December 31, 2021 ($) (%) Accounts payable and accrued liabilities$ 1,323,000 $ 1,130,000 193,000 17 Promissory notes to related parties 3,042,000 3,042,000 - - Promissory notes to arm's length parties 2,413,000 2,213,000 200,000 9 Interest payable 4,248,000 4,111,000 137,000 3 Lines of credit from related parties 14,613,000 14,009,000 604,000 4 Total current liabilities$ 25,639,000 $ 24,505,000 1,134,000 5
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consists of trade payables and accrued liabilities of the Company. Accounts payable totaling approximately$993,000 , accrued liabilities totaling approximately$329,000 and unearned revenue totaling approximately$1,000 . Approximately$600,000 of accounts payable is more than one year old with the majority of these being more than ten years old.
The fluctuations in accounts payable occurred in the regular course of business.
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Promissory Notes to Related Parties and Promissory Notes Payable to Arm's Length Parties
The Company has promissory notes with 20 individuals or corporations that relate to historical amounts borrowed. With the exception of the SGD$270,000 advance received during the period endedMarch 31, 2022 , there has been no new activity for several years. All of the promissory notes, other than the SGD$270,000 loan, are past due and continue to accrue interest at their respective legal rates of interest (mostly 1% per month). During the three months endedMarch 31, 2022 , the Company received an advance from a shareholder for SGD$270,000 (US$200,000 ), with a fixed interest amount of SGD$8,000.
Interest Payable
Interest payable relates to the unpaid interest expense incurred on the
promissory notes to related parties and promissory notes to arm's length
parties. The change from
All of the promissory notes, except for the promissory note received during the current period, and related interest payable is overdue.
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