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EX-3 - CERTIFICATE - SENSE TECHNOLOGIES INC | exhibit32.htm |
EX-3 - CERTIFICATE - SENSE TECHNOLOGIES INC | exhibit31.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended November 30, 2010
OR
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[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From to
Commission File Number: 000-29990
SENSE TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
British Columbia |
| 90010141 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
2535 N. Carleton Avenue Grand Island, Nebraska |
| 68803 |
(Address of principal executive offices) |
| (Zip Code) |
(308) 381-1355
(Registrants telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
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 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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
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Large accelerated filer [ ] |
| Accelerated filer [ ] |
Non-accelerated filer [ ] |
| Smaller reporting company [X ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
| Outstanding at January 15, 2011 |
Common Stock |
| 81,751,780 shares |
TABLE OF CONTENTS
Sense Technologies Inc. Form 10-Q
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PART I-FINANCIAL INFORMATION | 1 |
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ITEM 1. FINANCIAL STATEMENTS. | 1 |
BALANCE SHEETS AS OF NOVEMBER 30, 2010 (UNAUDITED) AND FEBRUARY 28, 2010 | 2 |
STATEMENTS OF LOSSES FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2010 AND 2009 (UNAUDITED) | 3 |
STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2010 AND 2009 (UNAUDITED) | 4 |
STATEMENT OF STOCKHOLDERS DEFICIENCY FOR THE NINE MONTHS ENDED NOVEMBER 30, 2010 (UNAUDITED) | 5 |
NOTES TO UNAUDITED FINANCIAL STATEMENTS | 6 |
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 11 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 14 |
ITEM 4. CONTROLS AND PROCEDURES. | 14 |
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PART II-OTHER INFORMATION | 15 |
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ITEM 1. LEGAL PROCEEDINGS. | 15 |
ITEM 1A. RISK FACTORS. | 15 |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 15 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. | 15 |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. | 15 |
ITEM 5. OTHER INFORMATION. | 15 |
ITEM 6. EXHIBITS. | 15 |
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SIGNATURES | 16 |
Item 1. Financial Statements.
SENSE TECHNOLOGIES INC.
INTERIM FINANCIAL STATEMENTS
November 30, 2010
(Stated in US Dollars)
( Unaudited )
Sense Technologies Inc. Form 10-Q
Page 1
SENSE TECHNOLOGIES INC.
BALANCE SHEETS
As of November 30, 2010 and February 28, 2010
(Stated in US Dollars)
(Unaudited)
|
| November 30, |
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| February 28, |
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| 2010 (unaudited) |
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| 2010 |
|
ASSETS |
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Current |
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Cash | $ | 5,026 |
| $ | 709 |
|
Accounts receivable |
| 720 |
|
| 7,034 |
|
Accounts receivable related party |
| 2,532 |
|
| 2,532 |
|
Inventory |
| 76,654 |
|
| - |
|
Prepaids |
| 15,452 |
|
| 8,974 |
|
Total Current Assets |
| 100,384 |
|
| 19,249 |
|
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|
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Equipment Net of accumulated depreciation of $101,857 and $93,308 at November 30, 2010 and February 28, 2010, respectively |
| 41,121 |
|
| 49,399 |
|
Security Deposit |
| 800 |
|
| - |
|
Intangible assets |
| 51 |
|
| 51 |
|
Total Assets | $ | 142,356 |
| $ | 68,699 |
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LIABILITIES |
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Current |
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Accounts payable | $ | 264,417 |
| $ | 251,055 |
|
Accounts payable related party |
| 43,950 |
|
| 47,284 |
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Accrued expenses |
| 681,039 |
|
| 841,155 |
|
Accrued expenses related party |
| 683,593 |
|
| 977,945 |
|
Notes payable |
| 472,981 |
|
| 472,062 |
|
Notes payable related party |
| 432,500 |
|
| 432,500 |
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Advances payable related entity |
| 8,450 |
|
| 19,105 |
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Dividends payable |
| 258,426 |
|
| 234,732 |
|
Convertible promissory notes payable |
| 584,447 |
|
| 584,447 |
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Total Current Liabilities |
| 3,429,803 |
|
| 3,860,285 |
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STOCKHOLDERS' DEFICIENCY |
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Class A preferred shares, without par value, redeemable at $1 per share, 20,000,000 shares authorized, 315,914 shares issued |
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at November 30, 2010 (February 28, 2010: 315,914) |
| 315,914 |
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| 315,914 |
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Common stock, without par value 100,000,000 shares authorized, |
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74,637,984 shares issued at November 30, 2010 (February 28, 2010: 66,804,651) |
| 13,973,175 |
|
| 13,135,268 |
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Common stock subscribed |
| 179,889 |
|
| 190,889 |
|
Deficit |
| (17,756,425 | ) |
| (17,433,657 | ) |
Total Stockholders Deficiency |
| (3,287,447 | ) |
| (3,791,586 | ) |
Total Liabilities and Stockholders Deficiency | $ | 142,356 |
| $ | 68,699 |
|
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Sense Technologies Inc. Form 10-Q
Page 2
SENSE TECHNOLOGIES INC.
INTERIM STATEMENTS OF LOSS
for the three and nine months ended November 30, 2010 and 2009
(Stated in US Dollars)
(Unaudited)
|
| Three months ended |
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| Nine months ended |
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| November 30, |
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| November 30, |
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| 2010 |
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| 2009 |
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| 2010 |
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| 2009 |
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Sales | $ | 47,355 |
| $ | 70,065 |
| $ | 195,288 |
| $ | 116,193 |
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Direct costs |
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Cost of sales |
| - |
|
| - |
|
| - |
|
| 631 |
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Manufacturing expenses |
| 25,286 |
|
| 7,500 |
|
| 60,854 |
|
| 20,293 |
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Research and development |
| - |
|
| - |
|
| - |
|
| 2,630 |
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Commissions |
| 15,112 |
|
| 15,257 |
|
| 45,089 |
|
| 35,965 |
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Royalties |
| 15,000 |
|
| 50,000 |
|
| 82,000 |
|
| 150,000 |
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| 55,398 |
|
| 72,757 |
|
| 187,943 |
|
| 209,519 |
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| (8,043 | ) |
| (2,692 | ) |
| 7,345 |
|
| (93,326 | ) |
Expenses |
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Advertising and marketing |
| 500 |
|
| 150 |
|
| 1,518 |
|
| 51,808 |
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Consulting fees |
| (400 | ) |
| - |
|
| 29,200 |
|
| 9,500 |
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Contract labor |
| 3,000 |
|
| 1.000 |
|
| 9,000 |
|
| 6,179 |
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Depreciation |
| 2,760 |
|
| 3,575 |
|
| 8,279 |
|
| 10,724 |
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Filing fees |
| 1,195 |
|
| 1,060 |
|
| 5,130 |
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| 3,550 |
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Insurance |
| 6,707 |
|
| 5,565 |
|
| 20,092 |
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| 19,634 |
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Interest and bank charges |
| 37,821 |
|
| 43,867 |
|
| 150,821 |
|
| 139,852 |
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Legal and accounting |
| 6,342 |
|
| 9,157 |
|
| 47,323 |
|
| 45,113 |
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Office and miscellaneous |
| 9,882 |
|
| (49,698 | ) |
| 15,855 |
|
| 106,217 |
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Rent |
| 3,282 |
|
| 17,514 |
|
| 5,001 |
|
| 51,927 |
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Telephone and utilities |
| 14 |
|
| - |
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| 14 |
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| 1,531 |
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Transfer agent fees |
| 2,748 |
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| 1,454 |
|
| 5,512 |
|
| 3,770 |
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Travel and automotive |
| 24 |
|
| 1,942 |
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| 8,674 |
|
| 12,651 |
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| 73,875 |
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| 35,586 |
|
| 306,419 |
|
| 462,456 |
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Net Operating Loss |
| (81,918 | ) |
| (38,278 | ) |
| (299,074 | ) |
| (555,782 | ) |
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Rental income |
| - |
|
| - |
|
| - |
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| 6,544 |
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Net loss from operations |
| (81,918 | ) |
| (38,278 | ) |
| (299,074 | ) |
| (549,238 | ) |
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Preferred dividends, paid or accrued |
| 7,898 |
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| 7,899 |
|
| 23,694 |
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| 23,694 |
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Net loss attributable to common stockholders | $ | (89,816 | ) | $ | (46,177 | ) | $ | (322,768 | ) | $ | (572,932 | ) |
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Basic and diluted loss per share | $ | 0.00 |
| $ | (0.01 | ) | $ | 0.00 |
| $ | (0.01 | ) |
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Weighted average number of shares outstanding |
| 74,021,867 |
|
| 65,642,014 |
|
| 71,166,711 |
|
| 63,342,106 |
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Sense Technologies Inc. Form 10-Q
Page 3
SENSE TECHNOLOGIES INC.
INTERIM STATEMENTS OF CASH FLOWS
for the three and nine months ended November 30, 2010 and 2009
(Stated in US Dollars)
(Unaudited)
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| Three Months Ended November 30, 2010 |
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| Three Months Ended November 30, 2009 |
|
| Nine Months Ended November 30, 2010 |
| Nine Months Ended November 30, 2009 |
|
Operating Activities |
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Net income (loss) for the period | $ | (81,918 | ) |
| $ (38,278 | ) | $ | (299,074 | ) | $ (549,238 | ) |
Adjustments to reconcile net loss to net cash used in |
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Operating activities: |
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Depreciation |
| 2,760 |
|
| 3,575 |
|
| 8,279 |
| 10,724 |
|
Changes in non-cash working capital balances related to operations: |
|
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Accounts receivable |
| 19,650 |
|
| (2,209 | ) |
| 6,314 |
| (5,019 | ) |
Inventory |
| (76,654 | ) |
| - |
|
| (76,654 | ) | 630 |
|
Prepaids |
| 5,907 |
|
| (12,919 | ) |
| (7,278 | ) | (8,090 | ) |
Accounts payable and accrued liabilities |
| 57,573 |
|
| 46,963 |
|
| 147,812 |
| 386,201 |
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Net cash used by operating activities |
| (72,682 | ) |
| (2,868 | ) |
| (220,601 | ) | (164,792 | ) |
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Financing Activities |
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Borrowing on debt |
| - |
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| 37,057 |
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| 40,774 |
| 52,418 |
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Payments on debt |
| (13,292 | ) |
| (26,408 | ) |
| (39,856 | ) | (60,464 | ) |
Proceeds from common share subscriptions |
| 91,000 |
|
| - |
|
| 224,000 |
| 180,000 |
|
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Net cash provided by financing activities |
| 77,708 |
|
| 10,649 |
|
| 224,918 |
| 171,954 |
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Increase (Decrease) in cash during the period |
| 5,026 |
|
| 7,781 |
|
| 4,317 |
| 7,162 |
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Cash, beginning of period |
| - |
|
| 26 |
|
| 709 |
| 645 |
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Cash, end of period | $ | 5,026 |
| $ | 7,807 |
| $ | 5,026 | $ | 7,807 |
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Supplemental Disclosures of Cash Flow Information: |
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Forgiveness of related party accrual |
| - |
|
| - |
|
| 602,907 |
| - |
|
Preferred dividends accrued |
| 7,898 |
|
| 7,898 |
|
| 23,694 |
| 23,694 |
|
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Sense Technologies Inc. Form 10-Q
Page 4
SENSE TECHNOLOGIES INC.
STATEMENT OF STOCKHOLDERS DEFICIENCY
for the nine months ended November 30, 2010
(Stated in US Dollars)
(Unaudited)
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| Common Stock |
| Preferred Stock |
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| Common |
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| Issued Shares |
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Amount |
| Issued Shares |
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Amount |
| Contributed Surplus |
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| Stock Subscribed |
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| Accumulated Deficit |
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Total |
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Balance, February 28, 2010 | 66,804,651 |
| $ | 13,115,539 |
| 315,914 |
| $ | 315,914 | $ | 19,729 |
| $ | 190,889 |
| $ | (17,433,657 | ) | $ | (3,791,586 | ) | |||
Common share subscriptions |
|
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|
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| - |
|
| 121,000 |
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| 121,000 |
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Common Stock Issued for cash | 7,833,333 |
|
| 235,000 |
| - |
|
| - |
| - |
|
| (132,000 | ) |
| - |
|
| 103,000 |
| |||
Write-off of related party accrual | - |
|
| 602,907 |
| - |
|
| - |
|
| - |
| - |
|
| - |
|
| 602,907 |
| |||
Dividends |
|
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|
|
|
|
|
|
|
|
|
|
|
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|
| (23,694 | ) |
| (23,694 | ) | |||
Net income (loss) for the period |
|
|
|
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|
|
|
|
|
|
|
|
|
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|
| (299,074 | ) |
| (299,074 | ) | |||
Balance, November 30, 2010 | 74,637,984 |
| $ | 13,953,446 |
| 315,914 |
| $ | 315,914 | $ | 19,729 |
| $ | 179,889 |
| $ | (17,756,425 | ) | $ | (3,287,447 | ) |
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Sense Technologies Inc. Form 10-Q
Page 5
SENSE TECHNOLOGIES INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Note 1
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.
While the information presented in the accompanying nine months to November 30, 2010 financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these interim unaudited financial statements be read in conjunction with the Companys audited financial statements for the year ended February 28, 2010.
Inventory
Inventory consists of finished goods which are recorded at the lower of average cost or net realizable value. Average cost is determined using the weighted-average method and includes invoice cost, duties and freight where applicable plus direct labor applied to the product and an applicable share of manufacturing overhead. A provision for obsolescence or slow moving inventory items is estimated by management based on historical and expected future sales and is included in cost of goods sold.
Recently Adopted And Recently Enacted Accounting Pronouncements
In February 2010, the FASB issued ASU No. 2010-09 Subsequent Events (ASC Topic 855) Amendments to Certain Recognition and Disclosure Requirements (ASU No. 2010-09). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Companys financial position and results of operations.
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.
On September 30, 2009, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards Codification (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 GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Companys financial statements.
In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. We are currently evaluating the impact of this standard, but would not expect it to have a material impact on our results of operations or financial condition.
Sense Technologies Inc. Form 10-Q
Page 6
SENSE TECHNOLOGIES INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Note 1
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Adopted And Recently Enacted Accounting Pronouncements (Continued)
Effective July 1, 2009, we adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 105-10, Generally Accepted Accounting PrinciplesOverall ("ASC 105-10"). ASC 105-10 establishes the FASB Accounting Standards Codification (the "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 U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates ("ASUs"). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout these financials have been updated for the Codification.
In May 2009, the FASB issued ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and requirements for evaluating and reporting subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be disclosed in the financial statements. ASC Topic 855 also requires disclosure of the date through which subsequent events are evaluated by management. ASC Topic 855 was effective for interim periods ending after June 15, 2009 and applies prospectively. Because ASC Topic 855 impacts the disclosure requirements, and not the accounting treatment for subsequent events, the adoption of ASC Topic 855 did not impact our results of operations or financial condition.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Note 2
Going Concern
At November 30, 2010, the Company had not yet achieved profitable operations, had an accumulated deficit of $17,756,425 (February 28, 2010 - $17,433,657) since its inception and incurred a net loss of $299,074 (2009 - $549,238) for the nine months ended November 30, 2010 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Companys ability to continue as a going concern. The Companys ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers obtaining additional funds by equity financing and/or from related party. Management expects the Companys cash requirement over the twelve-month period ended February 28, 2011 to be $300,000. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.
Note 3
Inventory
During the quarter ended November 30, 2010, the Company purchased $76,654 of inventory from third party suppliers consisting of finished goods. As of November 30, 2010 none of this inventory has been sold and the entire balance remains an asset as of period end.
Note 4
Common Stock
a)
Common stock subscribed
During the nine months ended November 30, 2010, the company issued 7,833,333 shares of common stock previously subscribed. The company received proceeds of $224,000 for 7,466,666 shares of common stock at $.03 per share for the nine month period.
Sense Technologies Inc. Form 10-Q
Page 7
SENSE TECHNOLOGIES INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Note 4
Common Stock (Continued)
b)
Commitments:
Stock-based Compensation Plan
|
| November 30, |
| February 28, | ||||||
|
| 2010 |
| 2010 | ||||||
|
| Shares |
|
| Weighted Average Exercise Price |
| Shares |
|
| Weighted Average Exercise Price |
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at beginning of period |
|
2,000,000 |
|
|
$0.04 |
|
2,000,000 |
|
|
$0.04 |
Expired |
| - |
|
| - |
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at end of the period |
|
2,000,000 |
|
|
$0.04 |
|
2,000,000 |
|
|
$0.04 |
At November 30, 2010, the following employee and director common share purchase options were outstanding entitling the holders thereof the right to purchase one common share for each share purchase option held:
Number | Exercise Price | Expiry Date |
1,000,000 | $0.05 | December 31, 2012 |
1,000,000 | 0.03 | December 31, 2014 |
Note 5
Related Party Transactions
The Company incurred the following items with directors and companies with common directors and shareholders:
|
| November 30, | |||
|
| 2010 |
|
| 2009 |
|
|
|
|
|
|
Royalties | $ | - |
| $ | 150,000 |
Interest expense | $ | 12,975 |
| $ | 139,852 |
As of November 30, 2010, included in accounts payable is $33,495 (February 28, 2010: $33,495) owing to an accounting firm in which a director of the Company is a partner and $14,298 (February 28, 2010: $13,789) to a shareholder with respect to unpaid fees and interest on promissory notes, $480,000 (February 28, 2010: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, $0 (February 28, 2010: $473,334) owing to a director of the Company in respect of royalties payable and $53,694 (February 28, 2010: $53,694) owing to the former president of the Company in respect of unpaid wages.
As of November 30, 2010, included in advances payable is $8,450 (February 28, 2010: $19,105) owed to a company controlled by a director.
Sense Technologies Inc. Form 10-Q
Page 8
SENSE TECHNOLOGIES INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Note 5
Related Party Transactions (Continued)
As of November 30, 2010, promissory notes payable of $432,500 (February 28, 2010: $432,500) is due to a profit-sharing and retirement plan administered by a director of the Company. Terms are:
Date Due: | Amount |
September, 2010 | $ 50,000 |
October, 2010 | 75,000 |
November, 2010 | 22,500 |
December, 2010 | 20,000 |
June, 2011 | 5,000 |
June, 2011 | 20,000 |
May, 2011 | 150,000 |
August, 2011 | 90,000 |
Total | $432,500 |
All bear interest at 12% per annum.
Note 6
Accrued Liabilities/Accrued Liabilities Related Party
| November 30, 2010 | February 28, 2010 |
Accrued Liabilities: |
|
|
Lease Settlement | 51,065 | 69,065 |
Accrued payroll | 53,694 | 53,694 |
Accrued interest payable | 402,490 | 533,327 |
Accrued non resident withholding taxes, including accrued interest | 133,052 | 133,052 |
Accrued fees | 17,117 | 17,117 |
Accrued taxes payable | 23,621 | 34,900 |
| $681,039 | $841,155 |
Accrued royalties payable- related party | 480,000 | 953,334 |
Accrued interest payable related party | 176,382 | - |
Accrued taxes payable related party | 27,211 | 24,611 |
| $683,593 | $977,945 |
Note 7
Concentrations
The Company operates in one industry segment being the production, marketing and distribution of safety awareness products in the automotive industry. Substantially, all of the Companys operations and assets are located in the United States. During the nine months ended November 30, 2010, there were two customers that accounted for $183,040 (93%) of sales revenue. During the nine months ended November 30, 2009, there were two customers that accounted for $114,338 (99%) of sales revenue.
Note 8
Lawsuit Settlement
In August 2009, the Company settled litigation related to breach of lease and past due rent for $73,065. Prior to November 30, 2010, the Company paid $22,000 (February 28, 2010: $4,000) of this judgment. The remaining balance of $51,065 is presented as Accrued Expenses as of November 30, 2010.
Sense Technologies Inc. Form 10-Q
Page 9
SENSE TECHNOLOGIES INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Note 9
Write-off of Accrued Royalties and Interest
During the second quarter of this fiscal year, the Company re-negotiated the exclusive license agreement with the ScopeOut inventor. All prior minimum royalties were eliminated, and accordingly, the Company recorded $602,907 additional capital for a related party write-off.
Prepaid royalties payable under the new license are $5,000 per month for twelve months commencing September 1, 2010. The new agreement also calls for a 5% royalty with a $.75 per unit maximum minimum royalty to retain exclusivity with the following volumes:
End of calendar year containing the second anniversary:
30,000 units
End of calendar year containing the third anniversary:
60,000 units
End of calendar year containing the fourth anniversary:
110,000 units
End of calendar year containing the fifth anniversary and thereafter:
125,000 units
Such calendar year commencing the minimum royalties to retain exclusivity is the first year within which an Original Equipment Manufacturer (OEM) and/or Tier 1 manufacturer sub-licenses the ScopeOut product.
For any sub-licenses of the product, royalties are shared as follows:
OEM/Tier 1 Supplier Sub Licensor:
65% Sense Technologies
35% Inventor
Any other Sub-Licensor:
50% Sense Technologies
50% Inventor
Note 10
Subsequent events
7,113,796 shares of common stock were issued subsequent to November 30, 2010 and through the date of this filing and in the opinion of management are required to be disclosed. Notes to a related party, Schroeder & Schreiner, PC 401(K) Profit Sharing Plan and Trust SDK, were replaced with two new notes as follows:
$168,218, dated December 15, 2010, 12% interest, term 360 days
$216,372, dated December 15, 2010, 12% interest, term 360 days
Sense Technologies Inc. Form 10-Q
Page 10
Managements Discussion And Analysis
Sense Technologies Inc. Form 10-Q
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto for the period ended November 30, 2010 and our Financial Statements and notes thereto for the period ended November 30, 2009.
1.
Overview of Operations
Sense holds a non-exclusive license to manufacture, distribute, market and sublicense world-wide, a patented technology which is used to produce the Guardian Alert® backing awareness system for motor vehicles utilizing microwave radar technology. The Company assembles the product in Charlotte, NC. The company also holds an exclusive license to manufacture, distribute, market and sublicense world-wide, the ScopeOut® product, a patented system of specially-designed mirrors which are placed at specific points on vehicles to offer drivers a more complete view of the blind spots toward the rear of the vehicle. This product is currently manufactured in China through an outsourced vendor.
2.
Results of Operations
For the three and nine month period ended November 30, 2010 as compared to the three and nine month period ended November 30, 2009.
| Three months ended November 30 |
| Nine months ended November 30 | ||
| 2010 | 2009 |
| 2010 | 2009 |
|
|
|
|
|
|
Sales |
|
|
|
|
|
Sales Guardian Alert | 47,355 | 70,065 |
| 195,288 | 114,513 |
Sales Scope Out | - | - |
| - | 1,680 |
| 47,355 | 70,065 |
| 195,288 | 116,193 |
Sales for the nine months ended November 30, 2010 increased by 68% from $116,193 to $195,288 due to increased demand for Guardian Alert and a shift of our focus from Scope Out® to Guardian Alert sales. Revenue is recognized by management only upon receipt of an actual purchase order from a customer, and the related invoicing to the company or, in the absence of a purchase order (i.e., verbal order), the actual invoicing to the customer, when the products are shipped and collection is reasonably assured.
Sales for the three months ended November 30, 2010 decreased by 32% from $70,065 to $47,355 due also to the shift of our focus from Scope Out® to Guardian Alert sales.
We continued to market both products. While it is the company objective to grow sales, no assurance can be given that we will be successful in this manner and sustain comparable sales in future periods.
|
| For the three months ended November 30 | For the nine months ended November 30 | ||
|
| 2010 | 2009 | 2010 | 2009 |
Direct Cost |
|
|
|
| |
Scope Out Direct Costs |
|
|
|
| |
| Cost of sales | - | - | - | 631 |
| Manufacturing expenses | - | - | - | 7,462 |
| Research and development | - | - | - | 2,630 |
| Commissions | - | - | - | - |
| Royalties - related party | - | 50,000 | - | 150,000 |
Total Scope Out Direct Costs | - | 50,000 | - | 160,723 | |
Guardian Alert Direct Costs |
|
|
|
| |
| Cost of sales | - | - | - | - |
| Manufacturing expenses | 25,286 | 7,500 | 60,854 | 12,831 |
| Research and development | - | - | - | - |
| Commissions | 15,112 | 15,257 | 45,089 | 35,965 |
| Royalties | 15,000 | - | 82,000 |
|
Total Guardian Alert Direct Costs | 55,398 | 22,757 | 187,943 | 48,795 | |
Total Direct Costs | 55,398 | 72,757 | 187,943 | 209,519 |
Sense Technologies Inc. Form 10-Q
Page 11
Managements Discussion And Analysis
Sense Technologies Inc. Form 10-Q
Overall direct costs for the current three and nine months ending decreased due primarily to no manufacturing costs and reduced royalty expense of the Scope Out® product.
Direct costs typically include the cost of raw materials necessary to make our products. It also includes the cost of shipping the products from manufacturing location to our warehouse. Direct costs also include costs in respect of obsolete inventory.
Direct costs related to Scope Out® were $0 and $160,723 for the nine month periods ended November 30, 2010 and 2009, respectively, a decrease of 100%. The decrease is primarily attributable to the decrease in cost of sales, manufacturing and research and development costs. Royalty expenses for the quarter ended November 30, 2010 were $0 compared to $150,000 for the quarter ended November 30, 2009.
Direct costs related to Scope Out® for the three month period ended November 30, 2010 and 2009 decreased 100% from $50,000 to $0 due to the decrease in cost of sales, manufacturing costs and research and development costs. Royalty expenses for the three month period were $0 for 2010 compared to $50,000 in 2009.
Direct costs related to Guardian Alert were $187,943 and $48,975 for the nine month period ending November 30, 2010 and 2009 respectively. This change represents an increase of 284%. Commission expenses were 45,089 and $35,965 for the nine month period ended November 30, 2010 and 2009, respectively. Commission expense increased 25% due to increased sales for the nine months. Manufacturing expenses were $60,854 and $12,831 for the nine month period ended November 30, 2010 and 2009, respectively. Manufacturing expenses in Direct Costs for the Guardian Alert® for the nine months ended in 2010 represents assembly costs for the sales achieved for the same period.
Direct costs related to Guardian Alert® were $55,398 and $22,757 for the three month period ending November30, 2010 and 2009 respectively. This change represents an increase of 143%. Commission expenses were $15,112 and $15,257 for the three month period ended November 30, 2010 and 2009, respectively. Commission expense decreased slightly for the three months. Manufacturing expenses were $25,286 and $7,500 for the three month period ended November 30, 2010 and 2009, respectively. Manufacturing expenses in Direct Costs for the Guardian Alert® for the three months ended in 2010 represents assembly costs for the sales achieved for the same period.
| Selling, General, and Administrative | |||
| For the three months ended November 30 | For the nine months ended November 30 | ||
| 2010 | 2009 | 2010 | 2009 |
Advertising and marketing | 500 | 150 | 1,518 | 51,808 |
Consulting fees | (400) | - | 29,200 | 9,500 |
Contract labor | 3,000 | 1,000 | 9,000 | 6,179 |
Depreciation | 2,760 | 3,575 | 8,279 | 10,724 |
Filing fees | 1,195 | 1,060 | 5,130 | 3,550 |
Insurance | 6,707 | 5,565 | 20,092 | 19,634 |
Interest and bank charges | 37,821 | 43,867 | 150,821 | 139,852 |
Legal and accounting | 6,342 | 9,157 | 47,323 | 45,113 |
Office and miscellaneous | 9,882 | (49,698) | 15,855 | 106,217 |
Rent | 3,282 | 17,514 | 5,001 | 51,927 |
Telephone and utilities | 14 | - | 14 | 1,531 |
Transfer agent fees | 2,748 | 1,454 | 5,512 | 3,770 |
Travel and automotive | 24 | 1,942 | 8,674 | 12,651 |
Total | 73,875 | 35,586 | 306,419 | 462,456 |
Sense Technologies, Inc. had selling, general and administrative expenses of $306,419 for the nine month period ended November 30, 2010 compared to selling, general and administrative expenses of $462,456 for the nine month period ended November 30, 2009, a 34% decrease in selling, general and administrative expenses from the prior period.
Sense Technologies Inc. Form 10-Q
Page 12
Managements Discussion And Analysis
Sense Technologies Inc. Form 10-Q
General and administrative expenses of $73,875 for the three month period ended November 30, 2010 compared to selling, general and administrative expenses of $35,586 for the three month period ended November 30, 2009, a 108% increase in selling, general and administrative expenses from the prior period.
Advertising and marketing fees decreased 97% as compared to the prior nine month period. We had marketing fees of $1,518 and $51,808 for the nine month period ended November 30, 2010 and 2009, respectively.
For the three month period advertising and marketing fees increased 233%. We had marketing fees of $500 and $150 for the three month period ended November 30, 2010 and 2009, respectively
The Company determined that prior expenses for marketing and advertising costs related to the sales plan for Scope Out® were not producing results. Management believed it was in the best interest of the company to discontinue these costs. The Company is concentrating on Guardian Alert® sales based on market interest, and in doing so as cost-efficiently as possible, the Company has replaced those costs with a little-to-no cost effort of asking existing fleet-customers to refer the Guardian Alert® products to other fleets. Additionally, the company is paying more in commissions, as previously stated, because of the efforts to incentivize the sales of the Guardian Alert® to fleets.
Legal and accounting fees increased from $45,113 in the nine month period ended November 30, 2009 to $47,323 for the nine month period ended November 30, 2010.
Legal and accounting fees decreased from $9,157 in the three month period ended November 30, 2009 to $6,342 for the three month period ended November 30, 2010.
Office and miscellaneous fees were $15,855 and $106,217 for the nine month period ended November 30, 2010 and 2009, respectively. The decrease was largely due to reduction of expenses for our Phoenix office.
Office and miscellaneous fees were $9,882 and $(49,698) for the three month period ended November 30, 2010 and 2009, respectively. The decrease was largely due to reduction of expenses for our Phoenix office
We had a loss from operations of $299,074 for the quarter ended November 30, 2010, compared to a loss from operations of $549,238 for the quarter ended November 30, 2009, a decrease in loss from operations of $250,164. The decrease in the loss from operations was primarily attributable to the increase in sales of the Guardian Alert® and decrease in expenses related to the closing the Arizona facility.
During the quarter, the Company re-negotiated the exclusive license agreement with the Scope Out® inventor. All prior minimum royalties were eliminated, and accordingly, the Company recorded $602,907 additional capital for a related party write-off.
Prepaid royalties payable under the new license are $5,000 per month for twelve months commencing September 1, 2010. The new agreement also calls for a 5% royalty with a $.75 per unit maximum minimum royalty to retain exclusivity with the following volumes:
End of calendar year containing the second anniversary:
30,000 units
End of calendar year containing the third anniversary:
60,000 units
End of calendar year containing the fourth anniversary:
110,000 units
End of calendar year containing the fifth anniversary and thereafter:
125,000 units
Such calendar year commencing the minimum royalties to retain exclusivity is the first year within which an Original Equipment Manufacturer (OEM) and/or Tier 1 manufacturer sub-licenses the Scope Out® product.
For any sub-licenses of the product, royalties are shared as follows:
OEM/Tier 1 Supplier Sub Licensor:
65% Sense Technologies
35% Inventor
Any other Sub-Licensor:
50% Sense Technologies
50% Inventor
Sense Technologies Inc. Form 10-Q
Page 13
Managements Discussion And Analysis
Sense Technologies Inc. Form 10-Q
Following summarizes the overall operations results for the nine month period ended November 30:
|
|
| Increase | % Increase |
| 2010 | 2009 | ( Decrease) | (decrease) |
|
|
|
|
|
Sales | 195,288 | 116,193 | 79,095 | 68.07 |
Direct Costs | 187,943 | 209,519 | (21,576) | (10.30) |
General and Administrative expenses | 306,419 | 462,456 | (156,037) | (33.74) |
Net Loss | (299,074) | (555,782) | (256,708) | (46.19) |
Basic and Diluted Loss per share | ( .00) | ( .01) |
|
|
Liquidity and Capital Resources
Our cash position at November 30, 2010 was $5,026 as compared to $709 at February 28, 2010. This increase was due to our use of cash in operating and investing activities and cash provided by financing activities as described below.
We have a working capital deficit of 3,329,419 and 3,791,586 as of November 30, 2010 and February 28, 2010, respectively. If we are unable to raise adequate working capital for fiscal 2010, we will be restricted in the implementation of our business plan. If this were to happen, the value of our securities would diminish and we may be forced to change our business plan for fiscal 2011, which would result in the value of our securities declining in value and/or becoming worthless. If we raise an adequate amount of working capital to implement our business plan, we anticipate incurring significant expenses relating to paying down our notes payable and royalties that are in arrears. Additionally we will incur net losses until a sufficient client base can be established, of which there can be no assurance.
Net cash used in operating activities
Net cash used in operating activities was $220,601 in 2010, compared to $164,792 in 2009. The increase in cash used in 2010 was largely due to the increase in inventory related to Guardian Alert.
Net cash provided by financing activities
Net cash provided by financing activities was $224,918 in 2010 compared to net cash provided of $171,954 in 2009.
In 2010, we received $224,000 through subscriptions to private placements of our common shares.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer (who is also acting in the capacity as the principal accounting officer), of the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Companys principal executive officer has concluded that, as of the end of the period covered in this report, the Companys disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to the Companys management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Sense Technologies Inc. Form 10-Q
Page 14
Managements Discussion And Analysis
Sense Technologies Inc. Form 10-Q
The Company, including its principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures or its internal controls will prevent all error or 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. Due to 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, have been detected. To address the material weaknesses, the Company performed additional analysis and other post-closing procedures in an effort to ensure its consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, the Company believes that the financial statements included in this report fairly present in all material respects the Companys financial condition, results of operations and cash flows for the periods presented.
The Companys internal conclusion related to its disclosure and procedural controls is due to the number and magnitude or changes to its draft 10Q recommended by the Companys independent auditor.
The Company plans to continue working with competent outside professionals to help it with quarterly reporting and if its business plan is successful additional improvements in the Companys accounting department will be made.
Changes in Internal Control over Financial Reporting
In addition, the Company with the participation of its chief executive officers have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended November 30, 2010 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, the Companys internal control over financial reporting.
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
There were no material changes in our risk factors from our Form 10-K for the year ended February 28, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of equity securities during the quarter ended November 30, 2010.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
We did not submit any matter to a vote of our stockholders during the quarter ended November 30, 2010.
Item 5. Other Information.
Sense Technologies has entered an agreement with a global company to market the Guardian Alert® under a registered trade name.
Form 10-Q
Item 6. Exhibits.
31.1 |
| Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange act of 1934 |
|
| |
32.1 |
| Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) or Rule 15d-14(b) of the U.S. Securities Exchange Act of 1934 |
Sense Technologies Inc. Form 10-Q
Page 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
| SENSE TECHNOLOGIES INC. |
|
|
Date | Signature |
|
|
|
|
January 19, 2011 | /S/ BRUCE E. SCHREINER |
| Bruce E. Schreiner, President |
| (principal executive officer) and Director |
Sense Technologies Inc. Form 10-Q
Page 16
Exhibit 31.1
CERTIFICATIONS
I, Bruce E. Schreiner, certify that:
1.
I have reviewed this report of the fiscal quarter ended November 30, 2010 of Sense Technologies, Inc.
2.
Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statement, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.
The small business issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15e)) for the small business issuer and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which the annual report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c)
evaluated the effectiveness of the small business issuers disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation.
d)
disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
5.
The small business issuers other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuers auditors and the audit committee of small business issuers board of directors (or persons performing the equivalent function):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the small business issuers ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuers control over financial reporting.
January 19, 2011
S/ BRUCE E. SCHREINER |
Bruce E. Schreiner, Chief Executive Officer |
Sense Technologies Inc. Form 10-Q
Page 17
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AND RULE 13a-14(b) OR RULE 15d-14(b)
OF THE U.S SECURITIES EXCHANGE ACT OF 1934
In connection with the Quarterly Report of Sense Technologies Inc. (the Company) on Form 10-Q for the fiscal quarter ended November 30, 2010 as filed with the Securities and Exchange Commission (the Report), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, and Rule 13a-14(b), that to his knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
January 19, 2011
/S/ BRUCE E. SCHREINER |
Bruce E. Schreiner, President |
(principal financial and accounting officer) |
Sense Technologies Inc. Form 10-Q
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