UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K





[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934 FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 2010





Commission file number 000-30414





ALR TECHNOLOGIES INC.


(Exact name of registrant as specified in its charter)





NEVADA


(State or other jurisdiction of incorporation or organization)





3350 Riverwood Parkway, Suite 1900


Atlanta, Georgia 30339


(Address of principal executive offices, including zip code.)





(678) 881-0002


(telephone number, including area code)





Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to section 12(g) of the Act:NONE
NONE





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES [   ]   NO [X]





Indicate by check mark if the registrant is required to file reports pursuant to Section 13 or Section 15(d) of the Act:  YES [X]   NO [   ]





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES [X]   NO [   ]





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





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[   ]





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large Accelerated Filer
[   ]
Accelerated Filer
[   ]Non-accelerated Filer
[   ]
Smaller Reporting Company
[X](Do not check if a smaller reporting company)





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [   ]   NO [X]





State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of March 31, 2011: $34,236,465.





At March 31, 2011, 213,977,909 shares of the registrant’s common stock were outstanding.




















TABLE OF CONTENTS





Page No.PART IItem 1.
Business
3Item 1A.
Risk Factors
8Item 1B.
Unresolved Staff Comments
8Item 2.
Properties
8Item 3.
Legal Proceedings
9PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
10Item 6.
Selected Financial Data
10Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
11Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
17Item 8.
Financial Statements and Supplementary Data
18Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
47Item 9A.
Controls and Procedures
47Item 9B.
Other Information
50PART IIIItem 10.
Directors, Executive Officers and Corporate Governance
51Item 11.
Executive Compensation
54Item 12.
Security Ownership of Certain Beneficial Owners and Management and  Related Stockholder Matters
57Item 13.
Certain Relationships and Related Transactions, and Director Independence
57Item 14.
Principal Accountant Fees and Services
59PART IVItem 15.
Exhibits, Financial Schedules
60Signatures
62Exhibit Index
64









































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PART I





ITEM 1.          BUSINESS.





Background





ALR TECHNOLOGIES, INC. (the “Company” or “ALRT”) was incorporated under the laws of the State of Nevada on March 24, 1987 as Mo Betta Corp. On December 28, 1998, the Company changed its name from Mo Betta Corp. to ALR Technologies Inc.  In April 1998, the Company changed its business purpose to marketing a pharmaceutical compliance device which was owned by A Little Reminder (ALR) Inc. (“ALR”).





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





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





ALR was incorporated pursuant to the Company Act of British Columbia on May 24, 1996. ALR continued its jurisdiction under the laws of Canada on September 23, 1996 and to the State of Wyoming on July 31, 1998.





ALR owned one subsidiary corporation, Timely Devices, Inc. (“TDI”). TDI was founded in Edmonton, Alberta, Canada on July 27, 1994. ALR owns all of the total outstanding shares of TDI. TDI had only one class of common stock outstanding. On July 31, 2000, the Company sold all of its shares of ALR. As a result of this sale, the Company is no longer using the technology that was used by its previously owned subsidiaries and does not have any assembly capability. The Company now does its own marketing and has designed products based on new technology. The manufacturing and assembling of these products has been contracted out.





In December 1998, the common shares of the Company began trading on the Bulletin Board operated by the National Association of Securities Dealers Inc. under the symbol “MBET.” Subsequently the symbol was changed to “ALRT.”





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





Recent Developments





On March 6, 2011, the chairman of the Company, Mr. Sidney Chan, established a line of credit of up to $2.5 million with the Company for the exclusive purpose of funding the costs of a comprehensive marketing campaign. Under a related agreement, also dated as of March 6, 2011, Mr Chan has been granted 20,000,000 stock options of the Company exercisable at $0.125 per share, expiring March 5, 2016. Such options will vest on the basis of eight (8) options for each one ($1.00) dollar borrowed under the line of credit to meet the costs of the sales and marketing program.





Also on March 6, 2011, the Company granted 250,000 stock options to a consultant. The stock options were exercisable at $0.10 per share for five years from the date of grant. Furthermore, 200,000 stock options granted to a consultant on July 1, 2010, were modified as follows:


·
all 200,000 stock options are to vest immediately


·
the exercise price of the option was reduced from $0.25 per share to $0.10 per share.





All 450,000 of these stock options have been exercised.








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On January 3, 2011, the “Company entered into an agreement with Ms. Christine Kan for additional financing through its existing line of credit borrowing arrangement. The Creditor has granted the Company an increase in the borrowing limit from$1,000,000 to $2,000,000. The original agreement was entered into by the Company and the Creditor on May 25, 2010.  In exchange for providing the increased borrowing limit,


·
Ms. Kan has been granted 20,000,000 stock options of the Company exercisable at $0.05 per share expiring November 29, 2015.


·
the Company has modified the terms of 10,000,000 stock options granted to Ms . Kan on March 7, 2010 and previously modified August 8, 2010. The terms have been modified as follows:


-
Increased the number of stock options granted from 10,000,000 to 20,000,000




-
Reduced the exercise price of the 20,000,000 stock options granted from $0.10 per share to $0.05 per share.




Effective July 1, 2010, the following management changes occurred





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


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


-
Stan Cruitt retired as Chairman of the Board





When Mr. Weinstein took office, he was approved to receive 2,000,000 common shares of the Company at $0.025 per share as compensation for his initial three month term ended September 30, 2010 as President and COO. The common shares were issued to Mr. Weinstein in August 2010.





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





In May 2010, the Company finalized negotiations with Christine Kan for a line of credit borrowing arrangement of $1M. All funds borrowed bear interest at 1% per month, are due on demand and are secured by all the assets of the Company. To date, the Company has borrowed $249,444. The Company granted this creditor 10,000,000 stock options exercisable at $0.10 per share. During August 2010, the term of the option was extended to March 8, 2015.





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





Products





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





The Company’s Health-e-Connect (HeC) system is an internet based product intended for diabetic patients and their health care providers to improve communication and monitoring of patients’ health management programs. One aspect of the system is that HeC will incorporate data uploaded from patients’ glucometers into the ALRT database to quickly assess user compliance and performance compared to provider set targets.This provides patients and caregivers the ability to track patient performance and compliance, thereby allowing timely intervention. By providing this ongoing monitoring and feedback, the HeC system is expected to enhance outcomes and lower costs.





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


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ALRT Health-e-Connect SystemTM for Diabetes Monitoring





HeCfor diabetes monitoring is a communications software platform that will enable health professionals to remotely monitor the health progress specifically relating to diabetic patients. This will facilitate more effective and timely communication of care to these patients.





Diabetes is a leading cause of death, serious illness and disability across North America.  In the United States, it is estimated that 23.6 million people have diabetes. The Canadian Diabetes Association estimates that currently over 2 million Canadians have diabetes and this number is expected to rise to 3 million by the end of the decade. Medical costs due to diabetes and its complications are enormous. In the United States, such costs are estimated to be over $130 billion a year and in Canada, healthcare costs associated with diabetes is $13.2 billion annually.





Diabetes is a lifelong chronic disease with no cure.  However, diabetics 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 person with diabetes mellitus to self-management 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.”  The Company’sHeCfor diabetes monitoring provides an affordable and easy to use communication network as recommended by the Committee.





On July 23, 2010 the Company submitted a 510(k) application to the FDA for its proprietary HeC system. Clearance of the application by the FDA will allow the Company to market the HeC system in the United States. The Company received comments from the FDA and submitted responses to those comments on February 28, 2011 with the aim of receiving clearance upon satisfactory resolution to the comments. The HeC may be offered for sale in the United States when it receives 510(k) clearance.





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





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





Benefits of Healthcare Compliance Reminders





The problem of medication non-compliance is prevalent in the United States. In March of 2004, Medical Care estimated that $300 billion was spent annually as a direct or indirect result of medication non-compliance. Monitoring compliance of disease management activities, such as treatments, medications and diagnostic tests, allows for alerting designated parties when a patient is noncompliant. It also facilitates intervention if the patient is deemed at risk. Often, physicians and caregivers do not detect noncompliance until the next medical appointment.  More timely intervention should result in substantial health benefits to the patient and significant cost savings. The ongoing monitoring of compliance data will also allow for evaluation of compliance behavior over time, resulting in behavior modification or education efforts when appropriate.























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The Company believes that its products for setting timely healthcare compliance reminders/alerts will improve patient-compliance with doctor’s orders for taking medications and other treatments.  Greater compliance with medication and treatment regimens is likely to enhance the patient’s ability to realize the full benefits.  If people do not receive the intended benefit of their medications and health management regimens, their condition may fail to improve; additional complications may develop and compromise the patient’s health further.  This may lead to substantially increased costs of healthcare in general.  Industry data indicate 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 Company’s comprehensive HeCcombines portability, compliance reminders, compliance monitoring and communications network for health professionals.





Reimbursement for Health Professionals





The Company continues to work to obtain confirmation thatHeC will allow for services to be provided by physicians that will be reimbursed by health insurance companies. The reimbursement will be a breakthrough as physicians will be paid to provide these important new services to their patients with chronic conditions.





Business Development and Marketing Strategy





The Company is focusing the majority of its efforts in introducing and marketing its HeCsystem for medical clinics and health professionals to provide direct care to patients and be reimbursed by the patients health benefit plan as well as to health plan payers due to the significant return on investment they can achieve by keeping employees/plan members healthy.





The Company is first targeting customers located in United States because of the large market potential but will also seek to establish selling operations/agreements for sales and distribution in Canada, Europe, Australia and selected countries in Asia and South America. The Company’s initial target market consists of patients with diabetes.





On February 25, 2011 it was announced that Horizon MedCorp. is offering a new program that will use the HeC to track test strip usage and universally supports data uploads from blood glucose meters manufactured by Abbott Diabetes Care, Bayer Diabetes Care, LifeScan Inc. (a Johnson & Johnson Company) and Roche Diabetes Care. The new program will electronically document diabetic patient use of blood glucose test strips and base patient resupply on this documentation.





On March 6, 2011 the Company’s Board of Directors determined it may retain a national firm of sales and marketing agents to conduct a major sales and marketing campaign in the United States and Canada during the next two years in order to promote its Health-e-Connect System (HeC). While a marketing firm has yet to be retained, the sales and marketing program is expected to require significant up front funding. Under an agreement dated as of March 6, 2011, the chairman of ALRT, Mr. Sidney Chan, has established a line of credit of up to $2.5 million for the exclusive purpose of funding the costs of such program.





People with conditions such as cystic fibrosis, transplant patients, congestive heart failure, coronary artery disease, COPD (chronic obstructive pulmonary disease), and cancer may benefit from future versions of our system. The HeC helps patients remember when and how to take their medication and execute therapy tasks.





Another large potential application consists of healthcare provider employees such as case-managers, nurses, and other caregivers. The HeC reports compliance data to caregivers, allowing them to assist their patients in following the proper medication and therapy schedules. Finally, a current use exists for the managers of caregivers. The HeC helps the managers assess their caregivers’ effectiveness in overseeing their patients.











-6-





The Company’s HeC provides a tool that comprehensively addresses the problem of medication non-compliance from a multi-lateral front.  The HeC reminds patients of their medication regimens and therapies, provides caregivers the ability to track the patient compliance, thereby allowing timely intervention, and provides information to the managers to assess the caregiver’s effectiveness.





The HeC is a low-cost, comprehensive system that addresses the growing issue of medication non-compliance with portability and low cost combined with the monitoring capability. Our System fills a critical gap in the healthcare system by providing ongoing oversight of patients.  The Company believes that by addressing the issue of non-compliance, the Company will help patients live longer, healthier lives while also decreasing healthcare costs.  The comprehensive compliance data provided to caregivers will assist them in improving their patient’s healthcare practices and enhance their own operating efficiency.





Other Products





Aside from the HeC, the Company also offers a range of medication reminder products addressing the issue of medication non-compliance of various medication regimens. These medication reminder products are offered to individual patients through pharmacies and the Internet. Pharmaceutical companies have also purchased the devices to distribute to patients using their medications in an effort to improve their medication compliance.





Selling Activities





Medical services companies who have extensive sales networks in the primary targeted areas for diabetes and respiratory will be conducting the selling of the HeC.  They will be utilizing their presence in national, regional and state health care conferences as well as their sales networks to sell directly to medical clinics and hospitals.





Manufacturers





New Challenge Ltd. (NC) is ALRT’s main and only manufacturer for the CHC units. Hortek Technology Limited is ALRT’s main and only manufacturer of the CHC modem and CHC hub. New Challenge Ltd. and Hortek Technology Limited do not have exclusive manufacturing arrangements with the Company. The Company is free to increase the number of suppliers. The contract manufacturers do not have access to the proprietary firmware code embedded in the CHC unit and the CHC modem. The modem is FCC approved.





Patents and Trademarks





The Company received the following patent in 2009:





-
US Patent 7,607,431 issued 10-27-2009 for patient compliance and remote monitoring of patient’s use of nebulizer compressors.





The Company has the following patent applications pending:





-
Provisional Patent Application serial number 61/271,852 filed on July 27, 2009.  Title is Patient Care  Coordination System Including Home Use of Medical Apparatus.





The Company has received the following patents prior to 2009:





-
US Patent 6,934,220 received on August 23, 2005 entitled Portable Programmable Medical Alert Device.





-
US Patent D446, 740 received on August 21, 2001 for Ornamental design of a Medication Alert Device in the shape of a heart.











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-
US Patent D446, 739 received on August 21, 2001 for Ornamental Design of a Medication Alert Device in the shape of a dog bone.





-
US Patent D4467, 074 received on August 28, 2001 for Ornamental Design of a Medication Alert Device in the shape of a stylized paw.





Competition





The Company competes with other corporations that produce medication compliance devices and monitoring systems, some of whom have greater financial, marketing and other resources than we do, but none currently offer a comprehensive compliance system that offers the full spectrum of benefits and features that our system does with cost efficiencies.





A few companies currently offer compliance monitoring systems but at much higher prices and with fewer benefits than our system.   Patient compliance with medications is also being addressed with methods such as information pamphlets, compliance packaging, as well as other forms of devices. The devices include clocks, labels, organization systems, pagers as well as electronic remote diagnostic monitoring systems.  None of these offer comprehensive compliance reminders, monitoring and messaging. The health care home monitoring opportunity has been recognized by other companies and several are now either currently selling or are developing systems that could be competitive with the ALRT systems.





Employees





The Company has one employee, who is an Officer and Director of the Company. The Company contracts eights persons, two of whom are officers of the Company. The employees and consultants of the Company have contracts which outlines their roles and responsibilities, as well as outlines the confidentiality requirements for all matters pertaining to the Company.





ITEM 1A.
RISK FACTORS.





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





ITEM 1B.       UNRESOLVED STAFF COMMENTS.





None.





ITEM 2.          PROPERTIES.





None.















































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ITEM 3.          LEGAL PROCEEDINGS.





Accounts payable and accrued liabilities as of December 31, 2010 includes $180,666 (December 31, 2009 -$180,666) of amounts owing to a supplier, which the Company has previously disputed and has refused to provide payment. The amount payable stems from services provided during 2004. The vendor has not sought any actions to collect the amounts and management does not expect to ever pay this amount.  Management asserts that the Company has no obligation to the vendor as the vendor did not perform the work sought as expected and the Company never took possession of the end product. The outcome of this matter cannot be determined at this time. Any additional liability realized, if any, will be recognized once the amount is determinable. Any gain on settlement of the account payable will be recorded in the period that an agreement with the supplier is reached and the amount becomes determinable.





During 2009 the following judgment was rendered: Niblock Financial Systems, Inc. et al v. ALR Technologies, Inc. Forsyth Count North Carolina File Number 0-9-CVS-2220. The judgment against the Company was in the amount of $600,000 in favor of Niblock Financial Systems, Inc. and $550,000 in favor of Gordon Niblock, plus court costs and attorney’s fees. The judgment was rendered as a result of the Company’s failure to pay amounts due under several promissory notes. On September 30, 2009, subject to the entry of that judgment, the Company reached a Settlement Agreement with the two plaintiffs, resulting in a cash payment, a credit to the judgment and an assignment of the Judgment to Christine Kan.  As part of the settlement, a former Director of the Company assigned debts of ALR to the plaintiffs. The debts originally having no terms of repayment were amended to have the following terms of repayment:





As part of the Settlement Agreement a director of the Company at the time assigned unsecured advances payable of the Company totaling $425,000 with no stated terms of interest or repayment to the plaintiffs. As part of the Settlement Agreement, the Company agreed to the following repayment terms:





-           $300,000 repayable at a rate of $25,000 per month and


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





The plaintiffs (Niblock Financial Systems, Inc. et al) filed a motion of default against the Company (ALR Technologies, Inc.) in the Superior Court of Forsyth County, North Carolina (case number 10-CVS-685) for failure to meet the repayment terms of the $300,000 promissory note. On October 26, 2010, case 10-CVS-685 was heard and the court found in favor of the plaintiff, meaning the Company was ordered to repay full principle of $300,000 along with $10,918 of accrued interest initial from the original settlement date, being September 30, 2009. While the interest rate was not included in the original settlement agreement, the Company did not contest the inclusion of interest in the judgment.  The Company has not made any repayments under the terms of the settlement agreement for either the loan totaling $300,000, the loan totaling $125,000, or the judgment reached against the Company. It is expected that the plaintiffs will file a motion for default on the promissory note repayable totaling $125,000.





Mr. Stan Link holds a note from the Company, which is in arrears. The matter was reduced to a Consent Judgment in the amount of $43,608.25 on April 13, 2009. This full amount is still outstanding and continues to accrue interest at the stated rate of the note.





On December 14, 2010, Ms. Irene Ho demanded that we repay her promissory note. No amount has been repaid to date and no terms were renegotiated. As of the date of this report, the total balance due is $365,000.





























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PART II





ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.





The Company’s Common Stock is quoted on the Bulletin Board operated by the Federal Industry Regulatory Authority (“FINRA”) under the symbol “ALRT.” The following table sets forth the high and low sales prices for our common stock for each quarter within the last two fiscal years:.





Quarter Ended
High Bid [1]
Low Bid [1]December 31, 2010
0.100
0.020September 30, 2010
0.042
0.018June 30, 2010
0.045
0.027March 31, 2010
0.060
0.035December 31, 2009
0.120
0.030September 30, 2009
0.280
0.020June 30, 2009
0.150
0.020March 31, 2009
0.100
0.020





[1]           These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.





At December 31, 2010, there were 213,527,909 common shares of the Company issued and outstanding.





No cash dividends has been declared by the Company nor is any intended to be declared. The Company is not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render the Company insolvent. Dividend policy will be based on the Company’s cash resources and needs and it is anticipated that all available cash will be needed for working capital.





There are no securities authorized for issuance under any equity compensation plans.





Securities Authorized From Issuance under Equity Compensation Plans





The Company does not have any equity compensation plans and accordingly the Company does not have any securities authorized for issuance under an equity compensation plan.





ITEM 6.          SELECTED FINANCIAL DATA.





The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.















































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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





General





The Company’s business is focused on enhancement on adherence to disease and healthcare management programs through monitoring, reminders and improved communications. We provide this through our patient reminder products which monitor medication compliance and provide intervention mechanisms when lack of compliance occurs. The Company’s primary business markets are the providers of health insurance and the providers of disease and case management services, including the home care industry.





The largest potential for sustainable long term growth and value generation lies with the market segments that have the most influence on the end-user and the most to gain from improved healthcare results. These market segments are the health insurance providers, the medical clinics and physicians who provide the care for people with chronic disease.  Our focus is currently on medical clinics, hospitals and health plans with diabetics being the initial patient targets.





Revenue





Revenues for the year ended December 31, 2010 decreased to $Nil from $5,000 in 2009. The Company has been devoting its efforts for the past four years to developing the HeC patient monitoring and compliance system, a communications platform to allow health professionals and case managers to communicate as needed to the patient and/or to other health professionals.   The Company needs to obtain FDA 510(K) approval for glucose monitoring and establish financial rationale for healthcare providers to realize sales.  On July 23, 2010 the Company submitted a 510(k) application to the FDA for its proprietary HeC system. Clearance of the application by the FDA will allow the Company to market the HeC system in the United States. The Company has received comments from the FDA andsubmitted responses to those comments on February 28, 2011  with the aim of receiving clearance upon satisfactory resolution to the comments. The HeC may be offered for sale in the United States when it receives 510(k) clearance.





Product Development





With the completion of the diabetes system and commercial launch in plans in place,  the Company expects to add additional home monitoring capabilities, including monitoring the essential diagnostic readings such as blood pressure, peak flow, weight, A1c and more are in development with completion expected in 2011.





The Company received US patent to cover its compliance monitoring system that works specifically with nebulizer compressors and patent application has been submitted to cover other elements of our comprehensive HeC system. The Company has also been granted patents that cover the primary ease-of-use feature and one button programming. One-button programming is an important element in many of our Compliance Reminder products.





Product development and research costs were $249,870 in 2010 and $ 264,105 in 2009.





Operating Capital





The Company is funding operations through the line of credit financing it has available. The majority of the Company’s expenditures go towards product development, market development and administrative activities. Certain management of the Company have volunteered to have their compensation deferred until cash flow allows for payment and certain creditors have agreed to additional stock option grants in return for either 1) deferred payment on interest or 2) agreements of note extensions in other cases. All stock options granted as compensation for deferment of payment have been recorded at their value fair value using the Black-Scholes option pricing model and have been expensed over the agreed upon period of deferment where applicable.











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Although cash flow from sales of products and services are expected in late 2011, there is no certainty of this, and if sales do increase there is no certainly that it will reach the level necessary to cover operating costs and debt load. The Company has limited resources and is exploring un-established markets and methods for selling its products. Management believes the business plan of the Company will give it the best opportunity to achieve commercial feasibility but due to the nature of the HeC, there is substantial uncertainty over the Company’s ability to execute the plan, the level of success associated with the execution of its business plan or the actual timeline to execute the plan. If the actual timeline for the execution of the business plan is substantially longer than planned, it could jeopardize the Company’s long term success.





In May 2010, the Company finalized negotiations with Christine Kan (the “Creditor”) for a line of credit borrowing arrangement of $1M. The Creditor is the wife of Sidney Chan the Chairman and Chief Executive Officer of the Company. All funds borrowed bear interest at 1% per month, are due on demand and are secured by all the assets of the Company. As consideration for agreeing to provide the line of credit and advancing funds prior to finalization of the terms of the line of credit, on March 7, 2015 (reported on our Form 10-Q for the period ended March 31, 2010), the Company granted the creditor 10,000,000 stock options exercisable at $0.10 per share with a fair value, as determined using the Black Scholes model, of approximately $410,000. During August 2010, the term of the option was extended to March 8, 2015 (reported on our Form 10-Q for the period ended September 30, 2010), which increased the fair value by approximately $86,000 to approximately $496,000.





On December 14, 2010, Ms. Irene Ho demanded that we repay her promissory note. No amount has been repaid to date and no terms were renegotiated. As at the date of this report, the total balance due is $365,000.





On January 3, 2011, the Company entered into an agreement with Christine Kan for additional financing through its existing line of credit borrowing arrangement. Ms. Kan granted the Company an increase in the borrowing limit from$1,000,000 to $2,000,000. On May 25, 2010, the Company and Ms. Kan agreed to terms on the line of credit arrangement for $1,000,000. The line of credit will continue to bear simple interest at 1% per month on the borrowed balance, is due on demand and is secured by a general security agreement over all the tangible and intangible assets of the Company. As of December 31, 2010, the Company has borrowed $845,565.





In exchange for providing the increased borrowing limit, Ms. Kan has been granted 20,000,000 stock options of the Company exercisable at $0.05 per share expiring November 29, 2015. Also as consideration for providing this additional financing, the Company has modified the terms of 10,000,000 stock options granted to Ms. Kan on March 7, 2010 and modified August 8, 2010. The terms have been modified as follows:





§
Increased the number of stock options granted from 10,000,000 to 20,000,000


§
Reduced the exercise price of the 20,000,000 stock options granted from $0.10 per share to $0.05 per share.





The Company owes Ms. Kan approximately $3,500,000 in promissory note payables, line of credit arrangements and other debts at December 31, 2010.





On March 6, 2011 the Company’s Board of Directors determined it may retain a national firm of sales and marketing agents to conduct a major sales and marketing campaign in the United States and Canada during the next two years in order to promote its Health-e-Connect System (HeC). While a marketing firm has yet to be retained, the sales and marketing program is expected to require significant up front funding. The chairman of the Company, Mr. Sidney Chan, established a line of credit of up to $2.5 million with the Company for the exclusive purpose of funding the costs of a comprehensive marketing campaign. Under a related agreement, also dated as of March 6, 2011, Mr. Chan has been granted 20,000,000 stock options of the Company exercisable at $0.125 per share, expiring March 5, 2016. Such options will vest on the basis of eight (8) options for each one ($1.00) dollar borrowed under the line of credit to meet the costs of the sales and marketing program.











-12-





Management Compensation





Certain management continues to defer payment on compensation, defer payment on interest on loans they have made to the Company and defer repayment on expenses incurred in the normal course of operations to help conserve the Company’s survival. During 2009, the three Directors at the time, Sidney Chan, Jaroslav Tichy and Stan Cruitt, accepted shares in exchange for the settlement of their debts with the Company. All shares issued and stock options granted were recorded at their fair values.





Operating Issues





The Company has expended significant efforts introducing its human medication and treatment reminder products to specified retail chains, pharmaceutical manufacturers, Contract Research Organizations, Health Management Organizations, Pharmacy Benefits Managers and certain clinics treating specific disease conditions. Sales to December 31, 2010 have not been sufficient for the Company to realize its investment in its inventories. Management plans to recover its investment through sales the ALRT Health-e-Connect (HeC) Diabetes Health Management System.





If management is not successful in its plans, they may be required to raise additional funds from its existing and prospective shareholders.





Results of Operations





December 31, 2010 compared to December 31, 2009





Sales for the year ended December 31, 2010 were $nil as compared to $5,000 for the year ended December 31, 2009. Sales continued to decrease during 2010 as the Company continued to focus its resources on development of the CHC and the development of a business network of pilot programs.





Product development costs for the year ended December 31, 2010 were $249,870 as compared to $264,105 for the year ended December 31, 2009. The majority of the costs incurred relate to services provided by contractors of the Company and a grant for a clinical trial testing, amongst other deliverable, ease of use for internet based glucose monitoring. The decrease in product development costs of $14,235 or 5% is a result of the HeC product design being finalized in 2009. There were limited purchases of components during the 2010 fiscal year.





Interest expense for the year ended December 31, 2010 was $1,238,192, which is comparable to $1,123,980 for the year ended December 31, 2009; however, the drivers of the interest were significantly different. For the year-ended December 31, 2010 there is interest of $546,619 (2009 - $104,444) representing the fair value of stock options issued as a bonus for the deferral of repayment of promissory notes and $183,738 (2009 - $350,461) representing the imputed interest on certain financial liabilities with no stated terms of interest. On September 30, 2009, the Company retired approximately $1.76M of interest accruing promissory notes payable which represented approximately 25% of the promissory notes payables at that time.





Professional fees for the year ended December 31, 2010 were $124,108 as compared to $146,719 for the year ended December 31, 2009. The decrease in professional fees of $22,611 or 15% is due to a combination of lower audit from the change to a US based CPA firm and lower legal fees from reduced complexity in transactions during 2010. In 2009, the debt for shares retirement transaction required internal and external personnel resources of the Company.





Selling, general and administrative expenses for the year ended December 31, 2010 were $458,854 as compared to $633,560 for the year ended December 31, 2009. The decrease of $174,706 or 28% can be substantially attributed to the following: 1) a change of management personnel ($93,600) 2) no advances written off during the year ($80,129).














-13-





December 31, 2009 compared to December 31, 2008





Sales for the year ended December 31, 2009 were $5,000 and cost of goods sold was $nil as compared to $12,848 and $1,199 respectively for the year ended December 31, 2008. Sales were down in fiscal 2009 as a result of the decision to de-emphasize sales and marketing activities of focus the Company’s resources on development of the CHC and development of business network of pilot programs.





Product development costs were $264,105 for the year ended December 31, 2009 versus $414,546 for the year ended December 31, 2008. This decrease relates primarily to the development of the Health-e-Connectreaching the final stage.





Interest expense was $1,123,980 for the year ended December 31, 2009 as compared with $1,187,581 for the year ended December 31, 2008 as the Company continued to rely on loans for funding the Company’s operation. Included in the interest expense is $104,444 (2008 -$71,191) representing the fair value of stock options issued as a bonus for the deferment of repayment of promissory notes and $350,461 (2008: $414,219) representing the imputed interest on certain financial liabilities with no stated terms of interest.





The Company incurred professional fees of $146,719 for the year ended December 31, 2009 as compared with $101,138 for the year ended December 31, 2008 due to higher legal fees for the legal proceedings.





Rent decreased in fiscal 2009 to $35,203 from $49,202 for the year ended December 31, 2008 as the Company is making an effort to lower its overhead costs.





The selling, general and administrative expenses were $597,105 for the year ended December 31, 2009 as compared to $605,567 for the year ended December 31, 2008. The selling, general and administrative expenses were decreased by only $8,462.





Accounts receivable were $nil at December 31, 2009 as compared with $5,048 at December 31, 2008.





Accounts payable and accrued liabilities decreased to $797,493 at December 31, 2009 from $1,088,256 at December 31, 2008 while payroll payable were $18,050 at December 31, 2009 compared to $18,050 at December 31, 2008.





During the year ended December 31, 2009, the Company arranged $154,879 in debt financing in comparison with $519,328 during the year ended December 31, 2008.





Liquidity and Capital Resources





Cash Balances





At December 31, 2010, the Company’s cash balance was $1,829 compared to $658 at December 31, 2009.





Short and Long Term Liquidity





Working CapitalPercentageAt December 31, 2010

At December 31, 2009

Increase / (Decrease)Current Assets
$
1,829
$
700

161Current Liabilities
$
8,615,338
$
7,324,843

18Working Capital (Deficiency)
$
(8,613,509)
$
(7,324,143)

18





With respect to the Company’s short-term liquidity, the Company’s “current ratio” (current assets divided by current liabilities) as of December 31, 2010 was 0.0 as compared to 0.0 as at December 31, 2009. The greater the current ratio, the greater is the short-term liquidity of the Company.





-14-





Current Liabilities





The Company has current liabilities of $8,615,338 as at December 31, 2010 as compared to $7,324,843 as at December 31, 2009. Current liabilities were as follows:





December 31,

2010

December 31,

2009

ChangeAccounts payable and accrued liabilities
$
801,923
$
797,493
$
4,430
1%Payroll payable
$
8,940
$
18,050
$
(9,110)
(50%)Interest payable
$
1,469,898
$
967,921
$
501,977
52%Advances payable
$
213,678
$
266,046
$
(52,368)
(20)Promissory notes payable
$
6,120,889
$
5,275,333
$
845,566
16Total current liabilities
$
8,615,328
$
7,324,843
$
1,290,495
18





The increase in interest payable of $501,977 relates to amounts incurred on promissory notes with stated rates of interest.





The Company obtained a line of credit of US$1,000,000 from a relative of a director in March 2010 (the terms of which were finalized in May 2010) which is unsecured with interest payable on funds borrowed at 1% per month. These proceeds were to be put toward working capital and the continued development of the Company’s product line. On January 3, 2011, the Creditor granted the Company an increase in the borrowing limit from$1,000,000 to $2,000,000. As of December 31, 2010, the Company has borrowed $845,565.





Short and Long Term Liquidity





The Company has incurred significant operating losses over the past several fiscal years (2010 - $2,071,062; 2009 - $2,200,301), is currently unable to self-finance its operations, has a working capital deficit of $8,613,509 (2009 - $7,324,143), a deficit of $32,255,396 (2009 - $30,180,268), limited resources, no source of operating cash flow, no assurances that sufficient funding will be available to conduct further product development and operations and no assurance the Company’s current projects will be commercially viable or profitable.





All of the Company’s debt financing is due on demand. The Company will seek to obtain creditors’ consent to delay repayment of these loans until it is able to replace this financing 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 not to demand immediate payment or 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 cease operations.





Tabular Disclosure of Contractual Obligations:





Payments due by periodLess





Morethan 1

1-3

3-5

Than 5Total

year

years

years

YearsAccounts Payable & Accrued Liabilities
$
801,923
$
801,923
$
-
$
-
$
-Payroll Payable

8,940

8,940

-

-

-Interest Payable

1,469,898

1,469,898

-

-

-Advances Payable

213,678

213,678

-

-

-Promissory Notes Payable

6,120,899

6,120,899

-

-

-$
8,615,338
$
8,615,338
$
-
$
-

-














-15-








Cash FlowsYear Ended

Year EndedDecember 31, 2010

December  31, 2009Cash Flows used in Operating Activities
$
(844,395)
$
(614,648)Cash Flows provided by (used in) Investing Activities
$
-
$
-Cash Flows provided by (used in) Financing Activities
$
845,566
$
607,405Net (decrease) increase in Cash During Period
$
(1,171)
$
(7,243)





Cash Used in Operating Activities





Cash used by the Company in operating activities during the year ended December 31, 2010 totaled $844,395 as compared to $614,648 for year ended December 31, 2009. The Company incurred a net loss of $2,075,128 for the year ended December 31, 2010 as compared to a loss of $2,200,301 for the year ended December 31, 2009.





The main use of cash for operations is product development consulting fees, market development fees, professional fees for audit, legal and accounting services and selling, general and administration cost for salaries and travel.





Cash Proceeds from Financing Activities





During the year ended December 31, 2010, the Company received $845,566 from advances on an operating line or credit from a related party.





During the year ended December 31, 2009, the Company arranged $154,879 in debt financing. In consideration for these loans, the Company has issued options to acquire a total of 620,000 shares of the Company at $0.25 per share exercisable for a period of five years. The fair value of these options has been estimated and recognized in the financial statements in interest expense.  Also during 2009, the Company received $10,000 for issuing 200,000 common shares at the price of $0.05 per share.





Off-Balance Sheet Arrangements





There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.





Critical Accounting Policies





The preparation of consolidated financial statements in conformity with US 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. The Company believes the accounting policies that are most critical to its financial condition and results of operations and involve management’s judgment and/or evaluation of inherent uncertain factors are as follows:
































-16-








Options and warrants issued in consideration for debt. The Company allocates the proceeds received from long-term debt between the liability and the options and warrants issued in consideration for the debt, based on their relative fair values, at the time of issuance. The amount allocated to the options or warrants is recorded as additional paid in capital and as a discount to the related debt. The discount is amortized to interest expense on a yield basis over the term of the related debt.





Stock-based compensation.  The Company follows Statement of Financial Accounting Standards No. 123R, “Share Based Payment” (“SFAS 123R”).  SFAS 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated financial statements.  Stock-based compensation recognized during the period is based on the value of the portion of the stock-based payment awards that are ultimately expected to vest during the period.  The Company estimates the fair value of the stock options using the Black-Scholes valuation model, consistent with the provisions of SFAS 123R.  The Black-Scholes valuation model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility assumption was determined using historical volatility of the Company’s common stock.





Recent Accounting Pronouncements





In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (formerly Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”, (“SFAS 168”)). SFAS 168 replaces FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles", and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.





In December 2007, the FASB issued guidance which is now part of ASC 810-10,“Non-Controlling Interests in Consolidated Financial Statements, an Amendment of Accounting Research Bulletin No. 51” (formerly SFAS 160, “Non-Controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51”). This guidance establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a non-controlling interest, calculation and disclosure of the consolidated net income attributable to the parent and the non-controlling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained non-controlling equity investment. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of this pronouncement had no impact on the Company’s consolidated financial statements.





In April 2008, the FASB issued revised guidance on determining the useful life of intangible assets. The revised guidance, which is now part of ASC 350-30, “General Intangibles Other than Goodwill” (previously Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets”), amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. The guidance is effective for fiscal years beginning after December 15, 2008 and will only apply prospectively to intangible assets acquired after the effective date. Early adoption is not permitted. The adoption of this pronouncement had no impact on the Company consolidated financial statements.




















-17-








In December 2007, the FASB issued amendments to ASC 805, “Business Combinations”(“ASC 805”) (formerly SFAS 141R), which established principles and requirements for the acquirer of a business to recognize and measure in its financial statements the identifiable assets (including in-process research and development and defensive assets) acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The amendments to ASC 805 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Prior to the adoption of ASC 805, in-process research and development costs were immediately expensed and acquisition costs were capitalized. Under ASC 805 all acquisition costs are expensed as incurred. The standard also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In April 2009, the FASB updated ASC 805 to amend the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This update also eliminates the distinction between contractual and non-contractual contingencies. The adoption of this pronouncement had no impact on the Company’s consolidated financial statements.





In April 2009, the FASB issued guidance which is now part of ASC 825-10, “Financial Instruments” (formerly Financial Staff Position SFAS 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (SFAS 107-1 and APB 28-1). This statement amends FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments”, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. The statement also amends APB Opinion No. 28, “Interim Financial Reporting”, to require those disclosures in all interim financial statements. This statement is effective for interim periods ending after June 15, 2009. The adoption of this pronouncement had no impact on the Company’s consolidated financial statements.





In May 2009, the FASB issued new guidance for accounting for subsequent events. The new guidance, which is now part of ASC 855-10, “Subsequent Events” (formerly, SFAS No. 165, “Subsequent Events”) is consistent with existing auditing standards in defining subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued or are available to be issued, but it also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The new guidance defines two types of subsequent events: “recognized subsequent events” and “non-recognized subsequent events.” Recognized subsequent events provide additional evidence about conditions that existed at the balance sheet date and must be reflected in the company’s financial statements. Non-recognized subsequent events provide evidence about conditions that arose after the balance sheet date and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. The new guidance was effective on a prospective basis for interim or annual periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.





In August 2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”). This update provides amendments to Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosure”, for the fair value measurement of liabilities when a quoted price in an active market is not available. ASU 2009-05 is effective for reporting periods beginning after August 28, 2009. The Company is currently assessing the future impact of this pronouncement on their future consolidated financial statements.





ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.




















-18-








ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





ALR TECHNOLOGIES INC.





Consolidated Financial Statements


December 31, 2010 and 2009











Index
PageReport of Independent Registered Public Accounting Firm
F-1Consolidated Financial StatementsConsolidatedBalance Sheets
F-2ConsolidatedStatements of Net Loss and Comprehensive Loss
F-3Consolidated Statements of Stockholders’ Deficit
F-4ConsolidatedStatements of Cash Flows
F-5Notes to ConsolidatedFinancial Statements
F-6 – F-24































































































-19-

















REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board of Directors and Stockholders of ALR Technologies, Inc.





We have audited the accompanying consolidated balance sheets of ALR Technologies, Inc. (the "Company"), as of December 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive loss, stockholders' deficit and cash flows for the years then ended, and the period from October 21, 1998 (Inception) through December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ALR Technologies, Inc. as of December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for the years then ended, and the period from October 21, 1998 (Inception) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a loss from operations and an accumulated deficit of $32,255,396 at December 31, 2010. As discussed in Note 1 to the financial statements, the Company has negative cash flows from operations, a working capital deficiency, has promissory notes payable and related interest payable past due and has not established commercial viability of its products. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.








/s/ Anton & Chia, LLP





Newport Beach, California


March 31, 2011




















F-1


-20-








ALR TECHNOLOGIES INC.


Consolidated Balance Sheets


($ United States)


December 31, 2010 and 2009








2010

2009AssetsCurrent assets:Cash
$
1,829
$
658Prepaid expenses and others

-

42Total current assets

1,829

700Equipment, net of accumulated depreciation

-

4,375Total assets
$
1,829
$
5,075Liabilities and Stockholders' DeficitCurrent liabilities:Accounts payable and accrued liabilities
$
801,923
$
797,493Payroll payable

8,940

18,050Interest payable

1,469,898

967,921Advances payable

213,678

266,046Promissory notes payable

6,120,899

5,275,333Total current liabilities and total liabilities

8,615,338

7,324,843Stockholders' DeficitCommon stockAuthorized: 350,000,000 shares with a par value of $0.001 per shareShares issued and outstanding: 213,527,909 shares  (2009 – 211,527,909)

213,527

211,527Additional paid-in capital

23,428,360

22,648,973Deficit

(32,255,396)

(30,180,268)Stockholders’ deficit

(8,613,509)

(7,319,768)Total liabilities and stockholders’ deficit
$
1,829
$
5,075











See accompanying notes to consolidated financial statements















































F-2


-21-





ALR TECHNOLOGIES INC.


Consolidated Statements of Operations


($ United States)


Years Ended December 31, 2010 and 2009 and from Inception through December 31, 2010








2010

2009

October 21, 1998(Inception) to December 31, 2010RevenueSales
$
-
$
5,000
$
2,994,931Cost of sales

-

-

3,325,639-

5,000

(330,708)ExpensesDepreciation

309

1,734

52,694Development costs

249,870

264,105

3,085,257Interest

1,238,192

1,123,980

14,998,529Professional fees

124,108

146,719

1,740,808Selling, general and administration

458,583

668,763

11,789,0142,071,062

2,205,301

31,666,302Loss before other item

(2,071,062)

(2,200,301)

(31,997,010)Write down of equipment

(4,066)

-

(36,623)Write off accumulated exchange adjustment

-

-

37,164Loss on write down of inventories

-

-

(20,245)Settlement of debt





(405,720)Other items

-

-

167,038Net loss and comprehensive loss for year
$
(2,075,128)
$
(2,200,301)
$
32,255,396Loss per share, basic and diluted
$
(0.01)
$
(0.03)Weighted average number of common shares outstanding, basic and diluted

212,344,347

82,387,051





See accompanying notes to consolidated financial statements


















































F-3


-22-





ALR TECHNOLOGIES INC.


Consolidated Statements of Changes in Stockholders’ Deficit


($ United States)


From Inception to December 31, 2010








Common Stock

Additional



TotalNumber of



Paid-in

Accumulated

Stockholders’Shares

Amount

Capital

Deficit

DeficitBalance at Inception October 21, 1998
-
$
-
$
-
$
-
$
-Shares issued for cash
11,545,316
$
11,545
$
272,113
$
-
$
283,658Shares issued in business combination
36,533,130

36,533

958,646

-

995,179Shares re-acquired and cancelled
(27,000,000)

(27,000)

(112,178)

-

(139,178)Shares issued for debt settlement
55,000,000

55,000

3,095,000

-

3,150,000Stock options and warrants granted as compensation and to settle liabilities
-

-

9,087,247

-

9,087,247Imputed interest
-

-

2,284,366

-

2,284,366Net loss for the period from inception toDecember 31, 2008






(27,979,967)

(27,979,967)Balance, December 31, 2008
76,078,446
$
76,078
$
15,585,194
$
(27,979,967)
$
(12,318,695)Imputed interest
-

-

350,461

-

350,461Stock-based compensation
-

-

76,294

-

76,294Shares issued for debt settlement
135,249,463

135,249

6,627,224

-

6,762,473Shares issued for cash
200,000

200

9,800



10,000Net loss for the year
-

-

-

(2,200,301)

(2,200,301)Balance, December 31, 2009
211,527,909
$
211,527
$
22,648,973
$
(30,180,268)
$
(7,319,768)Shares issued for services
2,000,000

2,000

48,000

-

50,000Imputed interest
-

-

183,738

-

183,738Stock-based compensation
-

-

547,649

-

547,649Net loss for the year
-

-

-

(2,075,128)

(2,075,128)Balance, December 31, 2010
213,527,909
$
213,527
$
23,428,360
$
(32,255,396)
$
(8,613,509)





See accompanying notes to consolidated financial statements















































F-4


-23-





ALR TECHNOLOGIES INC.


Consolidated Statements of Cash Flows


($ United States)


Years Ended December 31, 2010 and 2009, and from Inception through December 31, 2010





October 21, 1998(Inception)to December 31,2010

2009

2010OPERATING ACTIVITIESNet loss
$
(2,075,128)
$
(2,200,301)
$
(32,225,396)Depreciation

309

1,734

52,694Disposal of equipment

4,066

-

36,623Stock-based compensation-development costs

-

22,250

528,618Stock-based compensation-interest expenses

546,619

104,444

5,544,884Stock-based compensation-selling, general and admin

50,000

-

2,992,939Other non-cash items included in net loss

1,030

-

265,050Non-cash imputed interest expenses

183,738

350,461

2,818,567Equity instruments issued to settle liabilities

-

-

1,871,718Changes in assets and liabilities:Decrease in receivables

-

5,048

-Decrease in prepaid expenses

42

57,494

-Increase  in accounts payable and accrued liabilities

4,430

191,703

1,314,403Increase (decrease) in payroll payable

(9,110)

-

8,940Increase in advances payable

(52,368)

178,498

3,215,136Increase in interest payable

501,977

674,021

3,272,475Net cash used in operatingactivities

(844,395)

(614,648)

(10,303,349)INVESTING ACTIVITIESPurchase of equipment

-

-

(43,078)Net cash used in investing activities

-

-

(43,078)FINANCING ACTIVITIESExpenditures to repurchase shares

-

-

(342,038)Proceeds from issuance of shares

-

10,000

294,658Repayment of promissory notes payable

-

-

(970,879)Proceeds from issuance of promissory notes payable

845,566

597,405

11,366,515Net cash provided by financing activities

845,566

607,405

10,348,256Net increase (decrease) in cash

1,171

(7,243)

1,829Cash, beginning of period

658

7,901

-Cash, end of period
$
1,829
$
658
$
1,829Supplemental cash flow information:Cash paid for interest

5,857

530

1,223,335








See accompanying notes to consolidated financial statements





























F-5


-24-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








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





ALR Technologies Inc. (the “Company”) was incorporated under the laws of the state of Nevada on March 24, 1987 as Mo Betta Corp. On December 28, 1998, the Company changed its name from Mo Betta Corp. to ALR Technologies Inc. The Company has developed a line of medication compliance reminder devices and compliance monitoring systems that will assist people with taking their medications and treatments on time and allow for health care professionals to remotely monitor and intervene as necessary if a person is non-compliant.





These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) on a going-concern basis, which presumes the realization of assets and the discharge of liabilities and commitments in the normal course of operations for the foreseeable future.





Several adverse conditions cast substantial doubt on the validity of this assumption.  The Company has incurred significant losses over the past several fiscal years (2010 - $2,075,128; 2009 - $2,200,301), is currently unable to self-finance its operations, has a working capital deficit of $8,613,509 (2009 - $7,324,143), a deficit of $32,255,396 (2009 - $30,180,268), limited resources, no source of operating cash flow, no assurance that sufficient funding will be available to conduct further product development and operations, debts comprised of accounts payable, payroll payable, interest and promissory notes payable totaling $8,615,338 currently due or considered delinquent, no assurance that the Company will not face additional legal action from creditors regarding delinquent accounts payable, payroll payable, promissory notes and interest payable, and there is no assurance the Company’s current projects will be commercially viable or profitable. Any one or a combination of these above conditions could result in the failure of the business and require the Company to cease operations.





The Company’s ability to continue as a going-concern is dependent upon the continued financial support of its creditors and its ability to obtain financing to fund working capital and overhead requirements, fund the development of the Company’s product line and ultimately, the Company’s ability to achieve profitable operations and repay overdue obligations. Management has obtained short-term financing through a line of credit facility with available borrowing up to $1 million as at December 31, 2010 and increased to $2 million subsequent to the year-end.  (As at December 31, 2010 the balance outstanding was $845,566). The resolution of whether the Company is able to continue as a going concern is dependent upon the realization of management’s plans. If additional financing is required, the Company plans to raise needed capital through the exercise of share options and by future common share private placements. There can be no assurance that the Company will be able to raise any additional debt or equity capital from the sources described above, or that the lender in the line of credit arrangement will maintain the availability of borrowing from the line. If management is unsuccessful in obtaining short-term financing or achieving long-term profitable operations, the Company will be required to cease operations.





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











F-6


-25-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








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





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





If the going concern assumption were not appropriate for these consolidated financial statements then adjustments may be necessary to the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.  Such adjustments could be material.





2.         Significant accounting policies:





a)
Development Stage Company


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





b)
Principles of consolidation





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





c)
Foreign currency transactions





The Company's functional and reporting currency is the United States dollar. Transactions in foreign currencies are translated into United States dollars at the rates in effect on the transaction dates. Monetary assets and liabilities are translated at the year-end exchange rate.  Non-monetary assets and liabilities are translated using historical rates of exchange.  Revenue and expenses are translated at the rates of exchange prevailing on the dates such items are recognized in operations. Exchange gains or losses arising on translation or settlement of foreign currency monetary items are included in the consolidated statements of loss.





d)
Allowance for doubtful accounts





The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or unwillingness of its customers to make required payments. When the Company becomes aware that a specific customer is unable or unwilling to meet its financial obligations, the Company records a specific allowance to reflect the level of credit risk in the customer’s outstanding receivable balance.








F-7


-26-








ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








2.         Significant accounting policies:(continued)





e)
Inventories





Inventories are recorded at the lower of cost, determined on a weighted average cost basis, and net realizable value.





f)
Equipment





Equipment is recorded at cost less accumulated depreciation.  Depreciation is provided using the following methods and annual rates:





Equipment
Method
RateComputer equipment
Declining balance
30%Office equipment
Declining balance
20%





g)
Options issued in conjunction with debt





The Company allocates the proceeds received from long-term debt between the liability and the attached options issued in conjunction with debt, based on their relative fair values, at the time of issuance. The amount allocated to the options or warrants is recorded as additional paid-in capital and as a discount to the related debt. The discount is amortized to its face value as interest expense using the effective interest rate over the term of the related debt.





h)
Revenue recognition





The Company recognizes sales revenue at the time of delivery of products 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, are recognized when the return privilege period expires.





i)
Stock-based compensation





The Company follows the fair value method of accounting for stock-based compensation. The Company estimates the fair value of share-based payment awards on the date of grant using an option pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated financial statements.  The Company estimates the fair value of the stock options using the Black-Scholes valuation model.  The Black-Scholes valuation model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock.




















F-8


-27-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








2.         Significant accounting policies:(continued)





j)
Income taxes





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





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





The Company follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (“FASB”) ASC 740, Income Taxes.  Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the positions will be sustained upon examination by the tax authorities.  It also provides guidance for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  As of December 31, 2010, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.





k)
Loss per share





Basic loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted loss per common share is calculated by dividing the net loss by the sum of the weighted average number of common shares outstanding and the dilutive common equivalent shares outstanding during the year. Common equivalent shares consist of the shares issuable upon exercise of stock options and warrants calculated using the treasury stock method. Common equivalent shares are not included in the calculation of the weighted average number of shares outstanding for diluted loss per common shares when the effect would be anti-dilutive.





l)
Use of estimates





The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring management estimates include the recoverable amount of the Company's inventories; the fair value of common shares issued as settlement of promissory notes payable, and accounts payable and accrued liabilities; the fair value of promissory notes payable and interest payable,  compensation costs of stock options issued to employees and non-employees for services or modification of previous stock option commitments; and financing costs of stock options issued in consideration of promissory notes payable, the extension of their due dates and the modification of previous stock option.  Management believes the estimates are reasonable; however, actual results could differ from those estimates.











F-9


-28-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








2.         Significant accounting policies:(continued)





m)
Commitments and contingencies





Liabilities for loss contingencies, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties that are probable of realization are separately recorded, and are not offset against the related liability.





n)
Segmented information





The Company primarily operates in one reportable segment, the medical devices segment, in the United States. The majority of the Company’s assets are located in United States.





o)
Comprehensive income





Comprehensive income is the overall change in the net assets of the Company for a period, other than changes attributable to transactions with stockholders. It is made up of net income and other comprehensive income.  Other comprehensive income consists of net income and other gains and losses affecting stockholders' equity that under generally accepted accounting principles are excluded from net income. The Company has no items of other comprehensive income (loss) in any period presented. Therefore, as presented in the Company's consolidated statements of loss, net loss equals comprehensive loss.





p)
Fair value of financial instruments





The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payables and accrued liabilities.  These financial instruments are measured at their respective fair values.  For fair value measurement, U.S. GAAP establishes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value:





Level 1 — observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.





Level 2 — include other inputs that are directly or indirectly observable in the marketplace.





Level 3 — unobservable inputs which are supported by little or no market activity.





The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
































F-10


-29-








ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








2.         Significant accounting policies:(continued)





p)
Fair value of financial instruments (continued)





December 31, 2010

December 31, 2009Level 1
Level 2
Level 3
Total

Level 1
Level 2
Level 3
TotalQuoted




QuotedPrices in




Prices inActive




ActiveMarkets
Significant



Markets
Significantor
Other
Significant


or
Other
SignificantIdentical
Observable
Unobservable


Identical
Observable
UnobservableAssets
Inputs
Input


Assets
Inputs
InputAssets:Cash
$
1,829
$
-
$
-
$
1,829

$
658
$
-
$
-
$
658Total assets
$
1,829
$
-
$
-
$
1,829

$
658
$
-
$
-
$
658Liabilities:Advances payable
$
-
$

$
213,678
$
213,678

$
-
$
-
$
266,046
$
266,046Interest payable
$
-
$
-

1,469,898

1,469,898


-

-

967,921

967,921Promissory notes payable

-

-

6,120,899

6,120,899


-

-

5,275,333

5,275,333Total liabilities
$
-
$
-
$
7,804,475
$
7,804,475

$
-
$
-
$
6,509,300
$
6,509,300








The carrying value of trade payables and accrued liabilities approximates their fair value due to their short-term maturities.



















































































F-11


-30-








ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








2.         Significant accounting policies:(continued)





q)
Recently issued and adopted accounting pronouncements





i.           Adopted





In December 2007, the FASB issued amendments to Accounting Standards Codification (“ASC”) 805, “Business Combinations”(“ASC 805”) (formerly SFAS 141R), which established principles and requirements for the acquirer of a business to recognize and measure in its financial statements the identifiable assets (including in-process research and development and defensive assets) acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The amendments to ASC 805 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Prior to the adoption of ASC 805, in-process research and development costs were immediately expensed and acquisition costs were capitalized. Under ASC 805 all acquisition costs are expensed as incurred. The standard also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In April 2009, the FASB updated ASC 805 to amend the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This update also eliminates the distinction between contractual and non-contractual contingencies. The adoption of this pronouncement had no impact on the Company’s consolidated financial statements.





In April 2009, the FASB issued guidance that is now part of ASC 825-10, “Financial Instruments” (formerly Financial Staff Position SFAS 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (SFAS 107-1 and APB 28-1)). This statement amends FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments”, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. The statement also amends APB Opinion No. 28, “Interim Financial Reporting”, to require those disclosures in all interim financial statements. This statement is effective for interim periods ending after June 15, 2009. The adoption of this pronouncement had no impact on the Company’s consolidated financial statements.





In May 2009, the FASB issued new guidance for accounting for subsequent events. The new guidance, which is now part of ASC 855-10, “Subsequent Events” is consistent with existing auditing standards in defining subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued or are available to be issued, but it also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. Recognized subsequent events provide additional evidence about conditions that existed at the balance sheet date and must be reflected in the company’s financial statements. Non-recognized subsequent events provide evidence about conditions that arose after the balance sheet date and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. The new guidance was effective on a prospective basis for interim or annual periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.





F-12


-31-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








2.         Significant accounting policies:(continued)





q)         Recently issued and adopted accounting pronouncements (continued)





ii.           Issued





In August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”). This update provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosure”, for the fair value measurement of liabilities when a quoted price in an active market is not available. ASU 2009-05 is effective for reporting periods beginning after August 28, 2009.





In January 2010, the FASB issued revised authoritative guidance that requires more robust disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements and the transfers between levels 1, 2 and 3. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 (which is January 1, 2010 for the Company) except for disclosures about purchases, sales, issuances and settlements in the roll forward activity in level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years (which is January 1, 2011 for the Company). Early application is encouraged. The revised guidance was adopted as of January 1, 2010. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. .





3.           Equipment:





2010Accumulated

Net bookCost

depreciation

ValueComputer equipment
$
25,549
$
25,549
$
-Office equipment

5,566

5,566

-$
31,115
$
31,115
$
-2009Accumulated

Net bookCost

depreciation

ValueComputer equipment
$
25,549
$
21,963
$
3,586Office equipment

5,566

4,777

789$
31,115
$
26,740
$
4,375


























F-13


-32-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








4.         Interest, advances and promissory notes payable:





On September 4, 2009, the Company received a Notice of Credit to Judgment from the Superior Court of the State of North Carolina, whereby the Company was ordered to pay two creditors holding promissory notes payable (the “plaintiffs”) an aggregate amount of $1,988,000 for principal, interest and legal fees incurred. Subsequent to the verdict, the Company, two directors, a relative of a director (the “Purchaser”) and the plaintiffs entered into a settlement agreement (the “Settlement Agreement”) whereby a relative of a director acquired $1,313,000 of debts from the plaintiffs in a private transaction. The remaining $675,000 due to the plaintiffs was exchanged for common shares of the Company as part of a separate debt for shares settlement (note 6). As part of the Settlement Agreement, a second director, not related to the Purchaser, assigned unsecured advances payable of the Company with no stated terms of interest, totaling $425,000, to the plaintiffs. As part of the Settlement Agreement, the Company agreed to the following repayment terms:





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


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





On October 27, 2010, the Company had a default judgment ruled against them which resulted in being held legally liable for an additional $11,000 of deemed interest. The Company has materially accrued the liability relating to this judgment as of December 31, 2010. The Company has not paid any of the legal interest or the underlying promissory notes payable.





a)         Interest payable





A summary of the interest payable activity is as follows:





Balance, December 31, 2008
$
2,613,008Interest incurred on promissory notes payable

674,021Interest payable retired through the issuance of shares

(2,319,108)Balance, December 31, 2009

967,921Interest incurred on promissory notes payable

507,835Repayment of interest payable through line of credit

(5,858)Balance, December 31, 2010
$
1,469,898





Interest payable is to the following:


December 31,

December 31,2010

2009Relatives of directors
$
911,159
$
592,848Directors

1,168

1,168Non-related parties

557,571

373,905$
1,469,898
$
967,921





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











F-14


-33-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)





4.         Interest, advances and promissory notes payable:





b)         Advances Payable





A summary of the advances payable activity is as follows:





Balance, December 31, 2008
$
2,289,982Advances accrued

605,498Advances payable converted into promissory notes payable from lawsuit (note 4(c))

(425,000)Advances payable retired through the issuance of shares (note 4(d))

(2,204,434)Balance, December 31, 2009

266,046Advances accrued

285,832Advances repaid from proceeds of line of credit

(338,200)Balance, December 31, 2010
$
213,678





Advances payable are to the following:





December 31,

December 31,2010

2009Advances payable to:Companies controlled by directors
$
119,035
$
186,630Current and former directors

94,643

79,416$
213,678
$
266,046





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





c)         Promissory notes payable:





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





Balance, December 31, 2008
$
6,436,393Promissory notes payable issued

199,405Promissory notes payable converted from advance payable from the settlement of lawsuit (note 4(b))

425,000Promissory notes payable retired through the issuance of shares (note 4(d))

(1,785,465)Balance, December 31, 2009

5,275,333Promissory notes payable issued

845,566Balance, December 31, 2010
$
6,120,899





During the twelve months ended December 31, 2010, the Company borrowed a total of $845,566 from a relative of a director as a draw on an operating line of credit finalized during May 2010. Amounts borrowed on the line of credit bear interest at 1% per month, are due on demand and are secured by a floating charge against the assets of the Company. Previous to the completion of the line of credit, the creditor had advanced amounts under the same terms that have been rolled into the line of credit borrowing. As consideration for the line of credit, the Company granted 10,000,000 options to the creditor (note 5(b)).








F-15


-34-








ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)





4.         Interest, advances and promissory notes payable:





On December 14, 2010, a creditor demanded repayment of a promissory note of $200,000 and accumulated interest of approximately $365,000. To date, this amount has not been repaid.





On October 27, 2010, the Company had a default judgment ruled against them which results in being held legally liable for an additional $11,000 of accrued interest. The Company has materially accrued the liability relating to this judgment as of December 31, 2010.





During the year ended December 31, 2009, the Company received proceeds of $154,879 from a director and a relative of a director in exchange for the issuance of promissory notes payable. The promissory notes issued are due on demand with interest at 1.0% per month and are collateralized by a floating charge against assets of the Company. As consideration for the loan, the Company granted 620,000 options to the creditor (note 5(b)).





On April 13, 2009, a consent judgment was reached against the Company for a promissory loan and accrued interest totaling $43,608. The amount has not been repaid and the Company continues to accrue interest on the overdue promissory loan at its legal rate.





Relatives of Directors

December 31,

2010

December 31, 2009Promissory notes payable to relatives of directors collateralized by a general security agreement on all the assets of the Company, due on demand:i.
Interest at 1% per month
$
1,691,183
$
845,618ii.
Interest at 1.25% per month

51,347

51,347iii.
Interest at the U.S. bank prime rate plus 1%

500,000

500,000Promissory notes payable, unsecured to relatives of a former director, bearing interest at 0.625% per month, with $50,000 repayable on October 5, 2004 and $60,000 repayable on July 28, 2006, due on demand

110,000

110,000Promissory notes payable, unsecured, to relatives of a director, bearing interest at 1% per month, due on demand

1,465,000

1,445,000Total Related
$
3,817,530
$
2,951,965


























F-15


-35-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








4.         Interest, advances and promissory notes payable:





Unrelated Lenders

December 31,

2010

December 31, 2009Unsecured promissory notes payable to unrelated lenders:i.
Interest at 1% per month, repayable on September 30, 2009, due on demand
$
450,000
$
450,000ii.
Interest at 1% per month, with $50,000 repayable on December 31, 2004, $75,000 repayable on August 18, 2007, $75,000 repayable on November 19, 2007 and the balance due on demand. All are due on demand, accruing interest at the same rate.

887,457

907,456iii.
Interest at 0.625% per month, with $40,000 repayable on December 31, 2004, all due on demand

40,000

40,000iv.
Non-interest-bearing, repayable on July 17, 2005, due on demand

270,912

270,912v.
Non-interest-bearing loan repayable at $25,000 per month beginning October 2009, none repaid to date

300,000

300,000vi.
Non-interest-bearing loan, due January 15, 2011 (Unpaid)

125,000

125,000Promissory notes payable, secured by a guarantee from a director and relative of a director, bearing interest at 1% per month,with $200,000 repayable on July 31, 2003, which has been demanded. The remaining $30,000 is due on demand

230,000

230,0002,303,369

2,323,368$
6,120,899
$
5,275,333





d)         Shares for debt settlement





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











F-16


-36-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








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





d)         Shares for debt settlement (continued)


Number of



Promissory





TotalShares

Interest

Notes

Advances

Accounts

AmountSubscribers
Subscribed

Payable

Payable

Payable

Payable

SubscribedRelatives of directors
66,660,482
$
811,526
$
831,875
$
1,689,623
$
-
$
3,333,024Directors
21,141,225

511,418

140,832

404,811

-

1,057,061Non-related parties
47,447,756

996,164

785,758

108,000

482,466

2,372,388Total
135,249,463
$
2,319,108
$
1,758,465
$
2,202,434
$
482,466
$
6,762,473





e)         Interest expense





During the year ended December 30, 2010, the Company incurred interest expense of $1,238,192 (2009: $1,123,980) as follows:





-
$507,835 (2009: $669,075) incurred on promissory notes payables outstanding as shown in note 6(c);-
$183,738 (2009: $350,461) 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.;-
$546,619 (2009: $104,444) incurred on stock options granted to creditors





5.         Capital Stock





a)
Authorized  share capital:





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





b)
Issued share capital:





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





























F-17


-37-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








5.         Capital Stock





c)
Stock options:





During the year ended December 31, 2010:





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





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





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





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





During the year ended December 31, 2009:





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





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


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


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





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





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



































F-18


-38-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








5.         Capital Stock(continued)





c)
Stock options (continued):





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





December 31, 2010

December 31, 2009Expiry Date

Options

Exercise Price

Options

Exercise PriceMarch 17, 2010

-
$
-

200,000
$
0.25July 8, 2010

-
$
-

500,000
$
0.25September 12, 2010

-
$
-

500,000
$
0.25October 17, 2010

-
$
-

150,000
$
0.25April 7, 2011

200,000
$
0.25

200,000
$
0.25December 19, 2011

1,455,000
$
0.25

1,455,000
$
0.25March 7, 2015

10,000,000
$
0.10

-
$
-June 30, 2015

1,400,000
$
0.25

-
$
-May 31, 2017

500,000
$
0.25

500,000
$
0.25Total

13,555,000
$
0.12

3,505,000
$
0.25Aggregate intrinsic value
$
-


$
-Weighted Average Remaining Contractual Life

3.43



2.17





The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options, based on the $0.08 closing stock price of the Company’s common stock on the NASDAQ over-the-counter market on December 31, 2010. As of December 31, 2010, none of the stock options outstanding were in-the-money.





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:





December 31, 2010

December 31, 2009Risk-free interest rate
1.76%

1.81%Expected life
5 years

5 yearsExpected dividends
0%

0%Expected volatility
252%

225%Forfeiture rate
0%

0%





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

















F-19


-39-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








5.         Capital Stock(continued)





c)
Stock options (continued):





The fair value of the stock options granted was allocated as follows:





2010

2009Interest expense:Relatives of directors
$
496,767
$
54,044Non-employees

49,852

50,400546,619

104,444Product development:Directors and officers

-

6,488Non-employees

-

15,762-

22,250Professional fees:Non-employees

1,030

-$
547,649
$
126,694








6.         Contingencies





Accounts payable and accrued liabilities as of December 31, 2010 include $180,666 (2009 - $180,666) of amounts owing to a supplier, which the Company is in the process of disputing. The outcome of this matter cannot be determined at this time. Any adjustment will be recorded in the period that an agreement with the supplier is reached and the amount becomes determinable.





The Company has had three judgments made 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 of these promissory notes and accrued interest have been recorded fully recognize and recorded by the Company.









































F-20


-40-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








7.         Related party transactions:





2010

2009Development costs:Services rendered by directors and officers
$
60,000
$
60,000Stock options granted to directors and officers

-

6,488Interest expense:Promissory notes issued to relatives of directors

326,605

330,923Stock options granted to relatives of directors

496,767

54,044Selling, general and administration:Compensation to directors and officers

189,600

355,800$
1,072,972
$
807,255





All transactions with related parties, except as described below, were incurred in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed upon by the transacting parties.





Options granted to related parties have been recorded at their estimated fair value as disclosed in note 7.





The Company has advances payable, interest payable and promissory notes payable due to related parties, as disclosed in note 4.





8.         Commitments:





The Company has annual compensation arrangements with the following individuals:





Sidney Chan
$
180,000Dr. Jaroslav Tichy
$
60,000Lawrence Weinstein
$
156,000





The contracts are automatically renewed annually and may be terminated by the Company at any time, effective thirty or sixty days after delivery of notice, without any further compensation.





The terms of Mr. Chan’s contract provides for monthly consulting fees of $15,000 per month and vehicle allowance of $800 per month as Chief Executive Officer of the Company. The contract also provides for a commission of 1% of net sales during the term of the agreement. The initial term of the contract is for one year and automatically renews for continuous one year terms.




The terms of Mr. Weinstein’s contract provides for periodic increases in the amount of monthly compensation following the first year as President and Chief Operating Officer of the Company. After the initial year, Mr. Weinstein will earn no less than $13,000 per month as agreed upon by Mr. Weinstein and the other directors. The initial term of the contract is for one year and automatically renews for continuous one year terms.











F-21


-41-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








8.         Commitments(continued):





The terms of Mr. Tichy’s contract provide for monthly consulting fees of $5,000 per month in his services as VP Product Development. The initial term of the contract is for one year and automatically renews for continuous one year terms.





In addition, if more than 50% of the Company’s stock or assets are sold, Messrs. Chan and Tichy will be compensated for entering into non-compete agreements based on the selling price of the Company or its assets as follows:





2% of sales price up to $24,999,999 plus


3% of sales price between $25,000,000 and $49,999,999 plus


4% of sales price between $50,000,000 and $199,999,999 plus


5% of sales price in excess of $200,000,000





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





9.         Financial instruments:





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





Fair value





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





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





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





i.           Interest-bearing promissory notes and related interest payable


ii.          Non-interest-bearing promissory notes past due


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





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





F-22


-42-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








9.         Financial instruments(continued)





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





The non-interest-bearing promissory notes payable due in the future are the result of the Settlement Agreement whereby certain advances payable were assigned to the plaintiffs. As part of the Settlement Agreement, the Company agreed to repayment terms for these non-interest-bearing amounts. Since these amounts now have fixed repayment terms, the Company considers these amounts as promissory notes as opposed to advances. Since the settlement, the Company has not made the required payments on one promissory note where repayments were required prior to the 2009 year-end (note 6). Based on the Company’s current financial position and the maturities of these promissory notes, it is likely the Company will default on the other promissory notes payable in this class. The Company has recorded imputed interest at a rate of 1% per month over the life of the promissory note, with a corresponding amount recognized in additional paid-in capital representing the implicit compensation for the use of funds.   Management’s assertion is the carrying value is the best estimate of the Company’s liability and represents the fair value for the promissory note. This would be considered a level 3 input in the fair value hierarchy.





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





Credit risk





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





Market risk





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





i.          Interest rate risk





Interest rate risk consists of two components:

















F-23


-43-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








Market risk (continued)





i.          Interest rate risk (continued)





a)
Cash Flow Risk





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





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





b)
Price Risk





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





The Company’s promissory notes payable consist of $500,000 of variable interest rate notes and $5,620,898of fixed interest rate notes. All of these notes are past due and are currently due on demand while interest continues to accrue. Due to the delinquency of the fixed interest rate promissory notes payable, there is no active market for these instruments and fluctuations in market interest rates do not have a significant impact on their estimated fair values as of December 31, 2010.





At December 31, 2010, the effect on the net loss and comprehensive loss of a hypothetical change of 1% in market interest rate cannot be reasonably determined.





Foreign currency risk





The Company incurs certain accounts payable, advances payable and expenses in Canadian dollars and is exposed to fluctuations in changes in exchange rates between the US and Canadian dollars. As at December 31, 2010, the effect on net loss and comprehensive loss of a hypothetical change of 10% between the US and Canadian dollar would not be material. The Company has not entered into any foreign currency contracts to mitigate risk.









































F-24


-44-





ALR TECHNOLOGIES INC.


(A Development Stage Company)


Notes to Consolidated Financial Statements


($ United States)








10.       Income taxes:





The provision for income taxes differs from the result that would be obtained by applying the statutory tax rate of 34% (2009 - 34%) to income before income taxes. The difference results from the following items:





2010

2009Computed expected benefit of income taxes
$
(705,544)
$
(748,102)Stock-based compensation

186,204

43,077Non-Deductible interest expense

62,471

119,156Increase in valuation allowance

456,869

585,869Income tax provision
$
-
$
-





The components of the net deferred income tax asset, the statutory tax rate and the amount of the valuation allowance are as follows:





2010

2009Net operating loss carried forward
$
23,708,932
$
22,365,154Tax rate

34%

34%Deferred income tax assets

8,061,037

7,604,152Valuation allowance

(8,061,037)

(7,604,152)Net deferred income tax asset
$
-
$
-





The potential benefit of the deferred income tax asset has not been recognized in these financial statements since it cannot be assured that it is more likely than not that such benefit will be utilized in future years.





The Company believes that the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred income tax assets such that a full valuation allowance has been recorded.





The operating losses amounting to $23,708,932 will expire between 2019 and 2030 if they are not utilized. The following table lists the fiscal year in which the loss was incurred and the expiration date of the operating loss carry-forwards:





Fiscal Year

Amount
Expiry Date1999
$
88,022
20192000

4,425,866
20202001

3,681,189
20212002

2,503,951
20222003

2,775,900
20232004

1,250,783
20242005

1,304,238
20252006

1,532,322
20262007

1,479,818
20272008

1,599,919
20282009

1,723,146
20292010

1,343,733
2030Total
$
23,708,887





F-25


-45-





ALR TECHNOLOGIES INC.


Notes to Consolidated Financial Statements


($ United States)


Years Ended December 31, 2010 and 2009








11.       Subsequent events:





In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 20, 2011, the date the financial statements were issued. The following subsequent events have occurred:





·
On January 3, 2011, the Company entered into an agreement with a creditor for additional financing through its existing line of credit borrowing arrangement. The creditor has granted the Company an increase in its borrowing limit from$1,000,000 to $2,000,000. The terms and conditions of the line of credit will remain the same. There is 1% per month simple interest on the borrowed balance. The line of credit is due on demand and is secured by a general security agreement over all the tangible and intangible assets of the Company.





In exchange for providing the increased borrowing limit, the Creditor has been granted 20,000,000 stock options of the Company exercisable at $0.05 per share expiring November 29, 2015.





Also as consideration for providing this additional financing, the Company has modified the terms of 10,000,000 stock options granted to the Creditor on March 7, 2010 and previously modified August 8, 2010. The terms have been modified as follows:


-
Increased the number of stock options granted from 10,000,000 to 20,000,000




-
Reduced the exercise price of the 20,000,000 stock options granted from $0.10 per share to $0.05 per share.









The creditor is a relative of a Director and Officer of the Company.







·
The Company has defaulted on repaying a promissory note due on January 15, 2011 for $125,000





·
On March 6, 2011, the Company granted 250,000 stock options to a consultant. The stock options were exercisable at $0.10 per share for five years from the date of grant. Furthermore, 200,000 stock options granted to a consultant on July 1, 2010, were modified as follows:





·
all 200,000 stock options are to vest immediately


·
the exercise price of the option was reduced from $0.25 per share to $0.10 per share.





All 450,000 of these stock options were exercised immediately after the Board of Directors approved the above described transaction.





·
On March 6, 2011, the chairman of the Company, Mr. Sidney Chan, established a line of credit of up to $2.5 million with the Company for the exclusive purpose of funding the costs of a comprehensive marketing campaign. Under a related agreement, also dated as of March 6, 2011, Mr Chan has been granted 20,000,000 stock options of the Company exercisable at $0.125 per share, expiring March 5, 2016. Such options will vest on the basis of eight (8) options for each one ($1.00) dollar borrowed under the line of credit to meet the costs of the sales and marketing program.











F-26


-46-





ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.





There were no changes in and disagreements with accountants on accounting and financial disclosure for the years ended December 31, 2010 and 2009.





ITEM 9A.       CONTROLS AND PROCEDURES.





Evaluation of Disclosure Controls and Procedures





Under the supervision and with the participation of the Company’s management, including the principal executive officer and principal financial officer, as of the end of the period covered by this report, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).





The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in the Company’s reports to Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to ALR Technologies Inc., including the Company’s consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective due to our failure to report of three (3) Form 8-Ks.





We have identified, developed and begun to implement remedial measures in light of the findings of our company’s Principal Executive Officer and Principal Financial Officer assessment of the effectiveness of internal controls over financial reporting, to strengthen our company's disclosure controls and procedures. Our company’s Principal Executive Officer and Principal Financial Officer officer are currently developing a plan and timetable for the implementation of remedial measures intended to strengthen our internal controls over financial reporting. Upon finalization and board approval of the plan, our company’s chief executive officer and chief financial officer intend to implement the plan.




In light of the conclusion that our company's internal controls over financial reporting were ineffective as of December 31, 2010, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regards to this annual report. Accordingly, management believes, based on its knowledge, that: (i) this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this annual report, fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this annual report.





Limitations on the Effectiveness of Controls





The Company’s management, including the CEO and CFO, does not expect that the Company’s Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.





-47-





The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.





CEO and CFO Certifications





Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.





Management’s Report on Internal Control over Financial Reporting





The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.





The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.





Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





The Company’s management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, the management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on the management’s assessment, as of December 31, 2010, the Company’s internal control over financial reporting was effective based on those criteria.





























-48-





Based on this assessment, we found our internal control over financial reporting to be deficient for the following reasons:




(1)
lack of a functioning audit committee and lack of a majority of independent directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;


(2)
insufficient written policies and procedures for reporting requirements and accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and


(3)
ineffective internal control over financial reporting.





Management of the Company believes that the material weaknesses set forth in (2) and (3) above did not affect the Company’s financial results. However, management believes that the lack of a functioning audit committee and a lack of a majority of independent directors on the Company’s board of directors resulting in not effective oversight in the establishment and monitoring of required internal controls and procedures can result in material deficiencies in the Company’s determination to its financial statements for future years.





Management believes that the appointment of one or more independent directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of independent directs on the Company’s board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy that following material weaknesses: (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of the US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes.




Further, during the year, the Company retained a consultant who has the technical expertise and knowledge to implement the proper segregation of duties and the development of effective internal controls over financial reporting. During the 2011 fiscal year, the Company will develop its internal controls over financial reporting to meet its current and projected future needs.  This, coupled with the appointment of additional independent directors will greatly decrease any control and procedure issues that the Company may encounter in the future.




We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.




This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.





Changes in Internal Controls over Financial Reporting





In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no changes, other than described immediately below, in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.





During the year, the Company retained a consultant who has the technical expertise and knowledge to develop effective internal controls over financial reporting. This is likely to materially affect the Company’s internal controls over financial reporting to correct the deficiencies listed above.

















-49-





ITEM 9B.        OTHER INFORMATION.





The following list is complied of our three (3) Form 8-Ks, which we failed to file:





Upon taking office July 1, 2010, Mr. Weinstein received $50,000 as compensation his initial three month term ended September 30, 2010 as President and COO. The terms of Mr. Weinstein’s contract provides for periodic increases in the amounts of monthly compensation following the first year as President and Director of the Company. After the initial year, Mr. Weinstein will earn no less than $13,000 per month as agreed upon by Mr. Weinstein and the other directors.





Also on July 1, 2010, the Company granted a total of 1,200,000 stock options to two creditors and 200,000 stock options to one consultant of the Company. The stock options are exercisable at $0.25 per share and expire on June 30, 2015. The stock options granted have varying vesting terms for the different recipients.





On August 4, 2010, the Company issued 2,000,000 restricted shares of common stock to Lawrence Weinstein in consideration of $50,000.  The shares were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933 in that





·
Mr. Weinstein is a sophisticated investor.


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








































































































-50-





PART III





ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.





The names, ages and positions held by each of the officers and directors of the Company are as follows:








Name
Age
Position HeldSidney Chan
60
Chairman, Chief Executive Officer, Chief Financial Officer, and a member of the Board of DirectorsLawrence Weinstein
48
President, Chief Operating OfficerDr. Jaroslav Tichy
71
Vice-President of Technology and a member of the Board of Directors





All directors have a term of office expiring at the next annual general meeting of the Company, unless re-elected or earlier vacated in accordance with the By-laws of the Company. All officers have a term of office lasting until their removal or replacement by the board of directors.





Sidney Chan – Chairman, Chief Executive, Chief Financial Officer and a member of the Board of Directors of the Company.





Mr. Chan has made a significant contribution to the Company since first becoming involved in August 1997. He has assisted the Company’s financing, product development, corporate development and spearheaded its evolution into a public company. Mr. Chan has been the vision behind the Company’s product development and outlining the business plan around the HeC. Mr. Chan has extensive relationships with Hong Kong area based technology and electronic manufacturers, helping assure the availability of low cost manufacturing and materials procurement. Among his demonstrated strengths, Mr. Chan possesses in-depth knowledge of the equity markets and investment industry, as well as a strong fundamental background in the responsibilities of corporate development and operations. Mr. Chan is an engineer and obtained his Bachelor of Engineering (Mining) degree with distinction in Mineral Economics from McGill University in 1973.





Lawrence Weinstein – President, Chief Operating Officer and a member of the Board of Directors of the Company.





Mr. Weinstein joined ALRT in July 2010, bringing over 25 years of medical device development and management experience from organizations such as Cordis Corporation, DHD Healthcare and PARI Respiratory Equipment. Mr. Weinstein has extensive experience in the development and launch of medical products, including obtaining FDA approval for product lines and developing extensive quality control systems to ensure on-going regulatory compliance. Prior to working with ALRT, Mr. Weinstein had spent nine years working with Pari Respiratory Inc., achieving the position of Senior Vice President of Operations. Pari Respiratory is worldwide private company engages in the design, manufacture, and distribution of aerosol delivery products for patients with respiratory diseases, such as asthma, chronic lung diseases, and cystic fibrosis. Mr. Weinstein received a Bachelor of Science in Chemical Engineering degree from Rensselaer Polytechnic Institute. He earned both a Master of Science degree in Industrial Engineering and an MBA from the University of Miami.

























-51-





Dr. Jaroslav V. Tichy - Vice President, Technology and a member of the Board of Directors of the Company





Since December, 2000, Dr. Tichy has been Vice President of Technology for the Company. From 1984 through 2000, Dr. Tichy was a Systems Design Specialist with Weir-Jones Engineering Consultants Ltd. Dr. Tichy has conducted research and lectured in a wide range of areas including asynchronous switching theory, signal theory and pattern recognition. In addition, he has been involved in a number of development projects including analog, digital and mixed circuit design, digital signal processing and microprocessor and microcontroller based systems. Dr. Tichy received both his PhD and MSc. degrees in computer technology from the Technical University in Brno Czech Republic.





Involvement in Certain Legal Proceedings





During the past ten years, Messrs. Chan, Weinstein and Tichy have not been the subject of the following events:





1.         A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;





2.         Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);





3.         The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities;





i)          Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator,  floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or anassociated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;





ii)         Engaging in any type of business practice; or





iii)        Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;





4.         The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;





5.         Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;





6.         Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;





-52-







7.         Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:





i)          Any Federal or State securities or commodities law or regulation; or





ii)         Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or





iii)        Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or





8.         Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.





Compliance with Section 16(a) of the Exchange Act.





Based solely upon a review of Forms 3, 4 and 5 furnished to the Company during the fiscal years 2010 and 2009, all directors have filed their Form 4 and 5, on a timely basis.





Audit Committee and Charter





The Company has an audit committee and audit committee charter. The Company’s audit committee is comprised of all three directors. None of directors are deemed independent. All three directors also hold positions as officers of the Company. A The Company’s audit committee is responsible for: (1) selection and oversight of its independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by company employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.





Audit Committee Financial Expert





The Company has no financial expert. It believes the cost related to retaining a financial expert at this time is prohibitive. Further, because of the Company’s limited operations, management believes the services of a financial expert are not warranted.





Code of Ethics





The Company has adopted a corporate code of ethics. The Company believes its code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.





Disclosure Committee and Charter





The Company has a disclosure committee and disclosure committee charter. The Company’s disclosure committee is comprised of all of its officers and directors. The purpose of the committee is to provide assistance to the Principal Executive Officer and the Principal Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about the Company and the accuracy, completeness and timeliness of the Company’s financial reports.


-53-





ITEM 11.        EXECUTIVE COMPENSATION.





The following table sets forth information with respect to compensation paid by the Company to officers and directors during the three most recent fiscal years.





Summary Compensation Table


Non-Equity
Non-qualifiedStock
Option
Incentive
Deferred
AllName and

Salary
Bonus
Awards
Awards
Plan
Earnings
Other
TotalPrincipal Position
Year
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)Sidney Chan [2]
2010
180,000
0
0
0
0
0
9,600
189,600Chairman, Chief
2009
180,000
0
0
0
0
0
9,600
189,600Executive Officer &
2008
180,000
0
0
0
0
0
9,600
189,600Chief Financial OfficerLawrence Weinstein [3]
2010
72,500
0
0
0
0
0
0
72,500President & Chief
2009
0
0
0
0
0
0
0
0Operating Officer
2008
0
0
0
0
0
0
0
0Dr. Jaroslav Tichy [4]
2010
60,000
0
0
0
0
0
0
60,000Vice President,
2009
60,000
0
0
0
0
0
0
60,000Technology
2008
60,000
0
0
0
0
0
0
60,000





[1]
All other compensation includes automobile allowance.[2]
At December 31, 2010, salaries and other annual compensation for fiscal 2010 totaling $47,400 remain unpaid and are included in advances payable. Salaries and other annual compensation for fiscal 2010 and 2009 totaling $189,600 remain unpaid and are included in the promissory notes payable of the Company.[3]
On July 1, 2010, Lawrence Weinstein was appointed as President, Chief Operating Officer and Director of the Company.[4]
At December 31, 2010, salaries and other annual compensation for fiscal 2010 totaling $30,000 remain unpaid and are included in advances payable.





Outstanding Equity Awards at December 31, 2010


Equity IncentiveNumber of
Number of
Plan Awards:



Equity IncentiveSecurities
Securities
Securities


Number of
Plan Awards:Underlying
Underlying
Underlying


Shares
Number ofUnexercised
Unexercised
Unexercised
Option
Option
Or Units of Stock
Unearned Shares,Options
Options
Unearned
Exercise
Expiration
that have not
Units thatName
Exercisable
Unexercisable
Options
Price
Date
Vested
have not vested(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)Sidney Chan
0
0
0
0
0
0
0Lawrence Weinstein
0
0
0
0
0
0
0Dr. Jaroslav Tichy
0
0
0
0
0
0
0





On March 6, 2011, Mr. Chan was granted 20,000,000 stock options of the Company, exercisable at $0.125 per share. For each dollar ($1), the Company borrows on the line of credit made available by Mr. Chan, eight (8) stock options will become exercisable. The stock options expire March 5, 2016








-54-





Option Exercises and Stock Vested for the year ended December 31, 2010


Number of

Number of
ValueShares Acquired
Value Realized
Shares Acquired
Realized onOn Exercise
On Exercise
On Vesting
VestingName
(#)
($)
(#)
($)(a)
(b)
(c)
(d)
(e)Sidney Chan
0
0
0
0Lawrence Weinstein
0
0
0
0Dr. Jaroslav Tichy
0
0
0
0





The Company does not have any long-term incentive plans.





The Company has annual compensation arrangements with the following individuals:





Sidney Chan
$
180,000Dr. Jaroslav Tichy
$
60,000Lawrence Weinstein
$
156,000





The contracts are automatically renewed annually and may be terminated by the Company at any time, effective thirty or sixty days after delivery of notice, without any further compensation.





The terms of Mr. Chan’s contract provides for monthly consulting fees of $15,000 per month and vehicle allowance of $800 per month as Chief Executive Officer of the Company. The contract also provides for a commission of 1% of net sales during the term of the agreement. The initial term of the contract is for one year and automatically renews for continuous one year terms.


The terms of Mr. Weinstein’s contract provides for periodic increases in the amount of monthly compensation following the first year as President and Chief Operating Officer of the Company. After the initial year, Mr. Weinstein will earn no less than $13,000 per month as agreed upon by Mr. Weinstein and the other directors. The initial term of the contract is for one year and automatically renews for continuous one year terms.


The terms of Mr. Tichy’s contract provide for monthly consulting fees of $5,000 per month in his services as VP Product Development. The initial term of the contract is for one year and automatically renews for continuous one year terms.





In addition, if more than 50% of the Company’s stock or assets are sold, Messrs. Chan and Tichy will be compensated for entering into non-compete agreements based on the selling price of the Company or its assets as follows:





2% of sales price up to $24,999,999 plus


3% of sales price between $25,000,000 and $49,999,999 plus


4% of sales price between $50,000,000 and $199,999,999 plus


5% of sales price in excess of $200,000,000





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





Compensation of Directors





The Board of Directors consist three members, Mr. Sidney Chan, , Mr. Lawrence Weinstein, and Dr. Jaroslav Tichy. There are no independent directors.





The Company’s Board of Directors unanimously resolved that members receive no compensation for their services; however, they are reimbursed for travel expenses incurred in serving on the Board of Directors. All of the board members are also Officers of the Company. As disclosed above under Executive Compensation, these individuals are all compensated for the office they hold.





-55-





No additional amounts are payable to the members of the Company’s Board of Directors for committee participation or special assignments.





Fees



NonqualifiedEarned or


Non-Equity
DeferredPaid in
Stock
Option
Incentive Plan
Compensation
All OtherCash
Awards
Awards
Compensation
Earnings
Compensation
TotalName
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)Sidney Chan
0
0
0
0
0
0
0Lawrence Weinstein
0
0
0
0
0
0
0Dr. Jaroslav Tichy
0
0
0
0
0
0
0



































































































































-56-





ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





Security Ownership of Certain Beneficial Owners





The following table sets forth, as of December 31, 2010, the beneficial shareholdings of persons or entities holding five percent or more of the Company’s common stock, each director individually, each named executive officer and all directors and officers of the Company as a group.  Each person has sole voting and investment power with respect to the shares of Common Stock shown, and all ownership is of record and beneficial.





Direct Amount of


PercentName of Beneficial Owner
Beneficial Owner

Position
of ClassSidney Chan
98,798,482
[1]
Chairman, Chief Executive Officer, Chief Financial Officer and a member of the Board of Directors
46.20%Lawrence Weinstein
2,000,000

President, Chief Operating Officer and a member of the Board of Directors
0.01%Dr. Jaroslav Tichy
6,202,249

Vice President of Technology and member of the Board of directors
2.90%All Officers and Directors
107,000,731


50.01%as a group (3 people)





[1]           14,845,000 shares are held in the name of Sidney Chan, 500,000 shares are held in the name of KRS Retraction Limited, 83,153,482 shares are owned by Christine Kan, Mr. Chan’s wife, and 300,000 shares are owned equally by Mr. Alexander Chan, Mr. Daniel Chan, and Kathleen Chan, all children of Mr. Chan.





Changes in Control





Mr. Chan and his wife hold 60,000,000 stock options, 40,000,000 of which are currently exercisable and 20,000,000 of which will become exercisable if the Company borrows $2,500,000 for a marketing campaign. If the options were to be exercised by Mr. Chan and his wife, they would own over 50% of the common shares of the Company.





ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.





Year Ended December 31, 2010





All transactions with related parties were incurred in the normal course of operations and measured at the exchange amount, which is the amount of consideration and agreed upon by the transaction parties.





During the year ended December 31, 2010, Christine Kan, wife of Sidney Chan, President, Chief Executive Officer, Chief Financial Officer and Director of the Company loaned the Company a total of $845,565 (2009: $154,879). The loan bears interest at 1% percent per month and is secured by a floating charge against the assets of the Company.





During the year ended December 31, 2010, the Company granted 10,000,000 stock options to Christine Kan for providing the above note financing through the line of credit she offered the Company. The stock options vested immediately and had a calculated fair value of $496,767 using the Black Scholes model. This amount was recorded as interest expense in the Company’s Statements of Loss and Comprehensive Loss.





-57-





During the year ended December 31, 2010, the Company incurred interest expense of $326,605 on promissory notes payable to individuals related to a current and former director of the Company.





Year Ended December 31, 2009





During the year ended December 31, 2009, the promissory note denominated in Canadian dollars plus interest totaling $692,250 payable to Sidney Chan, President, Chief Executive Officer, Chief Financial Officer and Director of the Company were converted into 13,845,000 common shares of the Company at the price of $0.05 per share.  In addition, promissory notes, advances, plus interest totaling $4,197,674 payable to Sidney Chan’s family were converted into 98,798,482 common shares of the Company at the price of $0.05 per share.





During the year ended December 31, 2009, advances totaling $529,699 payable to his wife and a private company controlled by Stan Cruitt, Chairman and Director of the Company were converted into 10,593,976 common shares of the Company at the price of $0.05 per share.





During the year ended December 31, 2009, advances totaling $285,112 payable to a private company controlled by Dr. Tichy, Vice-President Technologies and Director of the Company were converted into 5,702,249 common shares of the Company at the price of $0.05 per share.





During the year ended December 31, 2009, the Company issued the following stock options to common shares of the Company:





·
620,000 stock options to Christine Kan, a relative of Sidney Chan, in consideration of providing loans totaling $154,879 to the Company.  All the options are vested at the time of commitment and the fair value of these options estimated to be $54,044 was charged to interest expense.  The options are exercisable into the Company’s shares for the period of five years from commitment date.  The options were cancelled in December 2009.




























































































-58-





ITEM 14.        PRINCIPAL ACCOUNTING FEES AND SERVICES.





(1)        Audit Fees





The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the Company’s audit of annual consolidated financial statements and review of consolidated financial statements included in the Company’s Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:





2010
$40,000
Anton & Chia LLP2009
$75,000
Smythe Ratcliffe LLP





(2)        Audit-Related Fees





The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported in the preceding paragraph:





2010
$0
Anton & Chia LLP2009
$0
Smythe Ratcliffe LLP





(3)        Tax Fees





The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:





2010
$0
Anton & Chia LLP2009
$0
Smythe Ratcliffe LLP





(4)       All Other Fees





The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:





2010
$0
Anton & Chia LLP2009
$0
Smythe Ratcliffe LLP





(5)        The Company’s audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.





(6)        The percentage of hours expended on the principal accountant’s engagement to audit the Company’s consolidated financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 0%.



































-59-





PART IV





ITEM 15.        EXHIBITS AND FINANCIAL SCHEDULES.





Incorporated by referenceExhibit




FiledNo.
Document Description
Form
Date
Number
herewith3.1
Initial Articles of Incorporation.
10-SB
12/10/99
3.13.2
Bylaws.
10-SB
12/10/99
3.23.3
Articles of Amendment to the Articles of Incorporation, dated October 22, 1998.
10-SB
12/10/99
3.33.4
Articles of Amendment to the Articles of Incorporation, dated December 7, 1998.
10-SB
12/10/99
3.43.5
Articles of Amendment to the Articles of Incorporation, dated January 6, 2005.
8-K
1/20/05
3.110.1
Indemnity Agreement with Marcus Da Silva.
8-K
8/14/00
10.110.2
Purchase and Sales Agreement with Marcus Da Silva.
8-K
8/14/00
10.210.3
Project Agreement with Tandy Electronics (Far East) Ltd.
10-KSB
4/17/01
10.114.1
Code of Ethics.
10-KSB
4/14/03
14.131.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



X32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



X99.1
Distribution Agreement with Mo Betta Corp.
10-SB
12/10/99
99.199.2
Pooling Agreement.
10-SB
12/10/99
99.299.3
Amended Pooling Agreement.
10-SB
12/10/99
99.399.4
Lock-Up Agreement.
10-SB
12/10/99
99.4


























-60-








99.5
Termination Agreement with Michael Best.
10-SB
12/10/99
99.599.6
Termination Agreement with Norman van Roggen.
10-SB
12/10/99
99.699.7
Assignment Agreement.
10-SB
12/10/99
99.799.8
Distributorship Agreement.
10-SB/A
1/14/00
99.899.9
Settlement Agreement with 706166 Alberta Ltd., 745797 Alberta Ltd., Lorne Drever, Debbie MacNutt, Dean Drever, Sandra Ross and Sidney Chan.
8-K
2/02/00
99.199.1
Agreement to Provide Services with Horizon Marketing & Research, Inc.
10-KSB
4/17/01
99.199.11
Agreement to Provide Services with Dr. Jaroslav Tichy.
10-KSB
4/17/01
99.1199.12
Agreement to Provide Services with Knight’s Financial Limited regarding Christine Kan.
10-KSB
4/17/01
99.1299.13
Agreement to Provide Services with Knight’s Financial Limited regarding Sidney Chan.
10-KSB
4/17/01
99.1399.14
Agreement to Provide Services with Bert Honsch.
10-KSB
4/17/01
99.1499.15
Agreement to Provide Services with Kenneth Berkholtz.
10-KSB
4/17/01
99.1599.16
Agreement to Provide Services with Jim Cleary.
10-KSB
4/17/01
99.1699.17
Settlement agreement with Ken Robulak.
10-KSB
4/17/01
99.1799.18
Agreement to Provide Services with RJF Management Resource Associates, LLC.
10-KSB
4/15/02
99.1899.19
Audit Committee Charter.
10-KSB
4/14/03
99.199.20
Disclosure Committee Charter.
10-KSB
4/14/03
99.2















































-61-








SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 29th day of March, 2010.





ALR TECHNOLOGIES, INC.(Registrant)BY:
SIDNEY CHANSidney ChanChairman, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and a member of the Board of Directors





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities.





Signatures
Title
DateSIDNEY CHAN
Chairman, Principal Executive Officer, Principal
March 29, 2011Sidney Chan
Financial Officer, Principal Accounting Officer anda member of the Board of DirectorsLAWRENCE WEINSTEIN
President, Chief Operating Officer and a member
March 29, 2011Lawrence Weinstein
of the Board of DirectorsDR. JAROSLAV TICHY
Vice President of Technology and member of the
March 29, 2011Dr. Jaroslav Tichy
Board of Directors










































































-62-








EXHIBIT INDEX


Incorporated by referenceExhibit




FiledNo.
Document Description
Form
Date
Number
herewith3.1
Initial Articles of Incorporation.
10-SB
12/10/99
3.13.2
Bylaws.
10-SB
12/10/99
3.23.3
Articles of Amendment to the Articles of Incorporation, dated October 22, 1998.
10-SB
12/10/99
3.33.4
Articles of Amendment to the Articles of Incorporation, dated December 7, 1998.
10-SB
12/10/99
3.43.5
Articles of Amendment to the Articles of Incorporation, dated January 6, 2005.
8-K
1/20/05
3.110.1
Indemnity Agreement with Marcus Da Silva.
8-K
8/14/00
10.110.2
Purchase and Sales Agreement with Marcus Da Silva.
8-K
8/14/00
10.210.3
Project Agreement with Tandy Electronics (Far East) Ltd.
10-KSB
4/17/01
10.114.1
Code of Ethics.
10-KSB
4/14/03
14.131.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



X32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



X99.1
Distribution Agreement with Mo Betta Corp.
10-SB
12/10/99
99.199.2
Pooling Agreement.
10-SB
12/10/99
99.299.3
Amended Pooling Agreement.
10-SB
12/10/99
99.399.4
Lock-Up Agreement.
10-SB
12/10/99
99.499.5
Termination Agreement with Michael Best.
10-SB
12/10/99
99.599.6
Termination Agreement with Norman van Roggen.
10-SB
12/10/99
99.699.7
Assignment Agreement.
10-SB
12/10/99
99.799.8
Distributorship Agreement.
10-SB/A
1/14/00
99.899.9
Settlement Agreement with 706166 Alberta Ltd., 745797 Alberta Ltd., Lorne Drever, Debbie MacNutt, Dean Drever, Sandra Ross and Sidney Chan.
8-K
2/02/00
99.1
 
 
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99.10
Agreement to Provide Services with Horizon Marketing & Research, Inc.
10-KSB
4/17/01
99.199.11
Agreement to Provide Services with Dr. Jaroslav Tichy.
10-KSB
4/17/01
99.1199.12
Agreement to Provide Services with Knight’s Financial Limited regarding Christine Kan.
10-KSB
4/17/01
99.1299.13
Agreement to Provide Services with Knight’s Financial Limited regarding Sidney Chan.
10-KSB
4/17/01
99.1399.14
Agreement to Provide Services with Bert Honsch.
10-KSB
4/17/01
99.1499.15
Agreement to Provide Services with Kenneth Berkholtz.
10-KSB
4/17/01
99.1599.16
Agreement to Provide Services with Jim Cleary.
10-KSB
4/17/01
99.1699.17
Settlement agreement with Ken Robulak.
10-KSB
4/17/01
99.1799.18
Agreement to Provide Services with RJF Management Resource Associates, LLC.
10-KSB
4/15/02
99.1899.19
Audit Committee Charter.
10-KSB
4/14/03
99.199.20
Disclosure Committee Charter.
10-KSB
4/14/03
99.2













































































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