SENSE TECHNOLOGIES INC - FORM 10-Q

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EX-31.1 - SENSE TECHNOLOGIES INC	ex31-1.htm
EX-32.1 - SENSE TECHNOLOGIES INC	ex32-1.htm
EXCEL - IDEA: XBRL DOCUMENT - SENSE TECHNOLOGIES INC	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended May 31, 2013


¨	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

(Registrant’s 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 o 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.


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 issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 21, 2013
Common Stock		102,768,448 shares

Table of Contents

TABLE OF CONTENTS

Sense Technologies Inc. Form 10-Q

PART I-FINANCIAL INFORMATION			1

ITEM 1.		FINANCIAL STATEMENTS	1
		BALANCE SHEETS AS OF MAY 31, 2013 (UNAUDITED) AND FEBRUARY 28, 2013	2
		STATEMENTS OF LOSSES FOR THE THREE MONTHS ENDED MAY 31, 2013 AND 2012 (UNAUDITED)	3
		STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MAY 31, 2013 AND 2012 (UNAUDITED)	4
		STATEMENT OF STOCKHOLDERS’ DEFICIENCY FOR THE THREE MONTHS ENDED MAY 31, 2013 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 2013	5
		NOTES TO UNAUDITED FINANCIAL STATEMENTS	6

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13
ITEM 4.		CONTROLS AND PROCEDURES	13

PART II-OTHER INFORMATION			14

ITEM 1.	LEGAL PROCEEDINGS		14
ITEM 1A.	RISK FACTORS		14
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		14
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		14
ITEM 4.	MINE SAFETY DISCLOSURES		14
ITEM 5.	OTHER INFORMATION		14
ITEM 6.	EXHIBITS		14

SIGNATURES			15

Table of Contents

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

SENSE TECHNOLOGIES INC.

INTERIM FINANCIAL STATEMENTS

May 31, 2013

(Stated in US Dollars)

( Unaudited )

Page 1

Table of Contents

SENSE TECHNOLOGIES, INC.

BALANCE SHEETS

As of May 31, 2013 and February 28, 2013

(Stated in US Dollars)

	May 31,				February 28,
	2013				2013
	(Unaudited)

ASSETS
Current
Cash		$	35,867			$	69,022
Accounts Receivable			35,071				52,710
Prepaids			11,850				19,466
Total Current Assets			82,788				141,198
Deposit			800				800
Equipment – Net of accumulated depreciation of $127,875 and $125,516 at May 31, 2013 and February 28, 2013, respectively			14,832				17,191
Intangible assets			51				51
Total Assets		$	98,471			$	159,240

LIABILITIES
Current
Accounts payable		$	407,428			$	283,159
Accounts payable-related party			35,884				35,884
Accrued expenses			1,001,730				969,656
Accrued expenses-related party			70,811				70,811
Royalty payable – related party			480,000				480,000
Notes payable, current portion			520,286				533,934
Notes payable, current portion – default			263,000				263,000
Notes payable-related party - default			439,590				439,590
Advances payable – related entity			128,020				121,020
Dividends payable			337,404				329,507
Convertible promissory notes payable - default			584,447				584,447
Deferred Revenue			157,500				157,500
Total Current Liabilities			4,426,100				4,268,508

Notes payable, long-term			26,720				36,666
Total Liabilities			4,452,820				4,305,174

STOCKHOLDERS' DEFICIENCY

Class A preferred shares, without par value, redeemable at $1 per share 20,000,000 shares authorized, 315,914 shares issued at May 31, 2013 (February 28, 2013: 315,914)			315,914				315,914
Common stock, without par value 150,000,000 shares authorized, 102,768,448 shares issued at May 31, 2013 (February 28, 2013: 102,768,448)			14,868,018				14,868,018
Common stock payable			154,889				154,889
Deficit			(19,693,170	)			(19,484,755	)
Total Stockholders’ Deficiency			(4,354,349	)			(4,145,934	)
Total Liabilities and Stockholders’ Deficiency		$	98,471			$	159,240

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

Page 2

Table of Contents

SENSE TECHNOLOGIES INC.

STATEMENTS OF LOSSES

For the three months ended May 31, 2013 and 2012

(Stated in US Dollars)

(Unaudited)

	For the three months ended
	May 31,			May 31,
	2013			2012

Sales	$	152,224		$	65,680

Direct Costs		249,114			38,402

Gross Profit (Loss)		(96,890	)		27,278

Operating Expenses
Consulting fees		10,500			11,000
Contract labor		3,000			3,000
Depreciation		2,359			2,533
Filing fees		1,866			650
Insurance		7,616			6,998
Bank charges		455			722
Legal and accounting		8,836			7,095
Office and miscellaneous		5,146			3,268
Rent		4,338			3,564
Shareholder information and printing		-			26
Telephone and utilities		176			72
Transfer agent fees		390			-
Travel and automotive		12,892			22
		57,574			38,950
Net operating loss		(154,464	)		(11,672	)

Other Income and (Expenses)
Interest Expense		(46,053	)		(44,091	)

Net loss		(200,517	)		(55,763)

Preferred dividends, paid or accrued		7,898			7,898

Net loss attributable to common stockholders	$	(208,415	)	$	(63,661	)

Basic and diluted loss per share	$	(0.00	)	$	(0.01	)

Weighted average number of shares outstanding		102,768,448			100,945,622

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

Page 3

Table of Contents

SENSE TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

For the three months ended May 31, 2013 and 2012

(Stated in US Dollars)

(Unaudited)

	2013			2012
Operating Activities
Net loss for the period	$	(200,517	)	$	(55,763	)
Adjustments to reconcile net loss to net cash used in Operating activities:
Depreciation		2,359			2,533
Changes in non-cash working capital balances related to operations:
Accounts Receivable		17,639			(35,014	)
Inventory		-			(8,179	)
Prepaids		7,616			1,767
Accounts payable		124,269			242
Accrued expenses		32,074			40,596
Advances payable		7,000			19,840
Net cash used in operating activities		(9,560	)		(33,978	)
Financing Activities
Borrowing on notes payable		-			6,671
Repayment on notes payable		(20,519	)		(5,865	)
Repayment on bank indebtedness		(3,076	)		(2,828	)
Proceeds from common stock issued for cash		-			36,000
Net cash provided (used) by financing activities		(23,595	)		33,978

Increase (decrease) in cash during the period		(33,155	)		-

Cash, beginning of period		69,022			-

Cash, end of period	$	35,867		$	-

Supplemental Disclosures of Cash Flow Information:

Cash Paid for Interest	$	15,190		$	1,238
Accrual of Preferred Stock Dividend	$	7,898		$	7,898
Stock Issued from Common Stock Payable	$	-		$	22,500

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

Page 4

Table of Contents

SENSE TECHNOLOGIES, INC.

STATEMENT OF STOCKHOLDERS’ DEFICIENCY

As of the period ended May 31, 2013

(Stated in US Dollars)

	Common Stock				Preferred Stock				Common
	Issued				Issued				Stock			Accumulated
	Shares		Amount		Shares		Amount		Payable			Deficit			Total

Balance, February 29, 2012		100,818,448	$	14,783,215		315,914	$	315,914	$	141,389		$	(18,884,341	)	$	(3,643,823	)
Common stock issued for cash		1,200,000		326,000		-		-		-			-			326,000
Common stock issued for subscription		750,000		22,500		-		-		(22,500	)		-			-
Options issued to Directors		-		26,303		-		-		-			-			26,303
Common shares subscribed		-		-		-		-		36,000			-			36,000
Dividends		-		-		-		-		-			(31,591	)		(31,591	)
Net income (loss) for the period		-		-		-		-		-			(568,823	)		(568,823	)
Balance, February 28, 2013		102,768,448		14,868,018		315,914		315,914		154,889			(19,484,755	)		(4,145,934	)
Dividends		-		-		-		-		-			(7,898	)		(7,898	)
Net income (loss) for the period		-		-		-		-		-			(200,517	)		(200,517	)
Balance, May 31, 2013 (unaudited)		102,768,448	$	14,868,018		315,914	$	315,914	$	154,889		$	(19,693,170	)	$	(4,354,349	)

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

Page 5

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SENSE TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCUNTING

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 three months to May 31, 2013 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 Company’s audited financial statements for the year ended February 28, 2013.

Reclassification

Certain amounts reported in the prior period financial statements have been reclassified to the current period presentation.

Recently Adopted and Recently Enacted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

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In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 has not had a material impact on our financial position or results of operations.

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of ASU 2011-12 has not had a material impact on our financial position or results of operations.

In December 2011, the FASB issued ASU No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact, if any, that the adoption of this pronouncement may have on its results of operations or financial position.

NOTE 2 – GOING CONCERN

At May 31, 2013, the Company had not yet achieved profitable operations, had an accumulated deficit of $19,693,170 (February 28, 2013 - $19,484,755) since its inception and incurred a net loss of $200,517 (2012 - $ 55,763) for the three months ended May 31, 2013 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s 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 Company’s cash requirement over the twelve-month period ended February 28, 2014 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.

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NOTE 3 – ACCRUED EXPENSES/ACCRUED EXPENSES – RELATED PARTY

Other liabilities and accrued expenses consisted of the following:

	May 31,		February 28,
	2013		2013
Accounts payable	$	407,428	$	283,159
Accounts payable – related party		35,884		35,884
Deferred Revenue		157,500		157,500
Accrued royalties payable – Guardian Alert		480,000		480,000

Detail of Accrued Expenses:
Accrued interest payable		772,346		741,483
Accrued non-resident withholding taxes, including accrued interest		163,304		163,304
Credit card		4,585		5,397
Commissions Payable		16,391		13,285
Accrued taxes payable		45,104		46,187
Total accrued expenses	$	1,001,730	$	969,656

Detail of Accrued Expense – Related party:
Accrued payroll – related party		53,694		53,694
Other accrued liabilities – related party		17,117		17,117
Total accrued expenses – related party	$	70,811	$	70,811

The Company is in arrears with respect to thirteen notes payable totaling $1,287,037.

NOTE 4 – COMMON STOCK

Options

Stock-based Compensation Plan

The Company has adopted a Stock Option Plan (‘the plan”) in which the Compensation Committee of the Board of Directors makes a determination to whom options should be granted and at what price and their terms of vesting.

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. For employees, the compensation expense is amortized on a straight-line basis over the requisite service period which approximates the vesting period. Compensation expense for stock options granted to non-employees is amortized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model.

The expected volatility of options granted has been determined using the historical stock price. The Company uses historical data to estimate option exercise, forfeiture and employee termination within the valuation model. For non-employees, the expected term of the options approximates the full term of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. Based on the best estimate, management applied the estimated forfeiture rate of Nil in determining the expense recorded in the accompanying Statement of Loss.

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The Company has granted directors common share purchase options. These options were granted with an exercise price equal to the market price of the Company’s stock on the date of the grant.

	May 31, 2013
	Options		Weighted Average Exercise Price
Outstanding and exercisable at beginning of the year		3,000,000	$	0.04
Issued during the year		-		-
Outstanding and exercisable, May 31, 2013		3,000,000	$	0.04

	February 28, 2013
	Options			Weighted Average Exercise Price
Outstanding and exercisable at beginning of the year		3,000,000		$	0.04
Expired during the year		(1,000,000	)		(0.05	)
Issued during the year		1,000,000			0.03
Outstanding and exercisable, February 28, 2013		3,000,000		$	0.04

At May 31, 2013, the following director common share purchase options were outstanding entitling the holders thereof the right to purchase one common share for each share purchase option held:

		Exercise
Number		Price		Expiry Date

	3,000,000	$	0.03	December 31, 2014

Warrants

As of May 31, 2013 and February 28, 2013, the Company had no outstanding warrants.

NOTE 5 – RELATED PARTY TRANSACTIONS

The Company incurred the following items with directors and companies with common directors and shareholders:

	May 31,
	2013		2012
Interest expense	$	12,363	$	12,381

As of May 31, 2013, included in accounts payable is $33,495 (February 28, 2013: $33,495) owing to an accounting firm in which a director of the Company is a partner and $2,389 (February 28, 2013: $2,389) to a shareholder with respect to unpaid fees and interest on promissory notes, $480,000 (February 28, 2013: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, and $53,694 (February 28, 2013: $53,694) owing to the former president of the Company in respect of unpaid wages.

As of May 31, 2013, included in advances payable is $128,020 (February 28, 2013: $121,020) owed to a company controlled by a director.

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As of May 31, 2013, promissory notes payable of $439,590 (February 28, 2013: $439,590 is due to a profit-sharing and retirement plan administered by a director of the Company. Terms are:

Date Due:	Amount
December, 2012	$	216,372
December, 2012		168,218
April, 2012		15,000
August, 2012		12,500
November, 2013		27,500
Total	$	439,590

All bear interest at 12% per annum.

NOTE 6 – CONCENTRATIONS AND CONTINGENCIES

Concentrations

Approximately 98% of the Company’s revenues are obtained from three (3) customers and one of these customers represents a significant portion of the accounts receivable. The Company is exposed to significant sales and accounts receivable concentration. Sales to these customers are not made pursuant to a long term agreement. Customers are under no obligation to continue to purchase from the Company.

For the three months ended May 31, 2013, one (3) customer accounted for approximately 98% of revenue. For the three months ended May 31, 2012, there was one (1) customer that accounted for 87% of sales revenue.

Contingencies

During the normal course of business we may from time to time be involved in litigation or other possible loss contingencies. As of May 31, 2013 and May 31, 2012 management is not aware of any possible contingencies that would warrant disclosure pursuant to SFAS 5.

Commitments

Our future minimum royalty payments on the ScopeOut® agreement consist of the following:

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

NOTE 7 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through August 21, 2013, the date of which the financial statements were available to be issued.

As of July 3, 2013, the Company borrowed $25,000 on a one year note, paying interest monthly.

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Management’s Discussion And Analysis

Sense Technologies Inc. Form 10-Q

Item 2. Management’s 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 May 31, 2013 and our Financial Statements and notes thereto for the period ended May 31, 2012.

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 a non-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 manufactured in China through an outsourced vendor.

2. Results of Operations

For the three month period ended May 31, 2013 as compared to the three month period ended May 31, 2012.

	For the three months ended
	May 31, 2013		May 31, 2012
Sales
Sales Guardian Alert		152,224		65,680
Sales Scope Out		-		-
		152,224		65,680

Sales for the quarter ended May 31, 2013 increased by 132% from $65,680 to $152,224 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.

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 May 31,
	2013		2012
Direct Cost
Scope Out Direct Costs
Cost of sales		-		-
Manufacturing expenses		-		-
Research and development		-		-
Commissions		-
Royalties - related party		15,000		15,000
Total Scope Out Direct Costs		15,000		15,000

Guardian Alert Direct Costs
Cost of sales		-		-
Manufacturing expenses		196,424		6,761
Research and development		7,500		3,000
Commissions		30,190		9,700
Royalties		-		3,941
Total Guardian Alert Direct Costs		234,114		23,402
Total Direct Costs		249,114		38,402

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.

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Direct costs related to Scope Out® were $15,000 and $15,000 for the three month periods ended May 31, 2013 and 2012, respectively.

Direct costs related to Guardian Alert were $234,114 and $23,402 for the three month period ending May 31, 2013 and 2012, respectively. This change represents an increase of 900%. Commission expenses were $30,190 and $9,700 for the three month period ended May 31, 2013 and 2012, respectively. Commission expense increased 211% due to an increase in commissioned sales. Manufacturing expenses were $196,424 and $6,761 for the three month period ended May 31, 2013 and 2012, respectively. Manufacturing expenses in Direct Costs for the Guardian Alert® for the three months ended in 2013 and 2012 represents assembly costs for the sales achieved for the same period.

Selling, General, and Administrative

	For the three months ended
	May 31, 2013		May 31, 2012
Consulting fees		10,500		11,000
Contract labor		3,000		3,000
Depreciation		2,359		2,533
Filing fees		1,866		650
Insurance		7,616		6,998
Bank charges		455		722
Legal and accounting		8,836		7,095
Office and miscellaneous		5,146		3,268
Rent		4,338		3,564
Shareholder information and printing		-		26
Telephone and utilities		176		72
Transfer agent fees		390		-
Travel and automotive		12,892		22
Interest expense		46,053		44,089
Total		103,627		83,041

Sense Technologies, Inc. had selling, general and administrative expenses of $103,627 for the three month period ended May 31, 2013 compared to selling, general and administrative expenses of $83,041 for the three month period ended May 31, 2012, an increase in selling, general and administrative expenses of 25% from the prior period.

Consulting fees decreased from $11,000 for the three month period ended May 31, 2012 to $10,500 for the three month period ended May 31, 2013. The decrease was a result of consulting related to Guardian Alert product sales.

The Company determined that prior expenses for marketing and advertising costs related to the sales plan for ScopeOut® 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 $7,095 in the three month period ended May 31, 2012 to $8,836 for the three month period ended May 31, 2013.

Following summarizes the overall operations results for the three month period ended May 31:

							Increase			% Increase
	2013			2012			( Decrease)			(decrease)

Sales		152,224			65,680			86,544			131.76
Direct Costs		249,114			38,402			210,712			548.70
General and Administrative expenses		103,627			83,041			20,586			24.79
Net Loss		(200,517	)		(55,763	)		(144,754	)		(259.58	)
Basic and Diluted Loss per share		(.00	)		(.01	)

We had a loss from operations of $200,517 for three month period ended May 31, 2013, compared to a loss from operations of $55,763 for the three month period ended May 31, 2012, an increase in loss from operations of $144,754 from the prior year.

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Liquidity and Capital Resources

Our cash position at May 31, 2013 was $35,867 as compared to $69,022 at February 28, 2013. This decrease 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 4,348,349 and 4,145,934 as of May 31, 2013 and February 28, 2013, respectively. If we are unable to raise adequate working capital for fiscal 2014, 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 2014, 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 $15,560 in 2013, compared to $33,978 in 2012. The decrease in cash used in 2013 was largely due to the increase in accounts payable and accrued expenses.

Net cash provided by financing activities

Net cash used by financing activities was $17,595 in 2013 compared to net cash provided of $33,978 in 2012.

In 2013, we received $6,000 through subscriptions to our common shares.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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 Company’s principal executive officer and principal financial officer has concluded that, as of the end of the period covered in this report, the Company’s 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 Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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 quarterly 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 Company’s financial condition, results of operations and cash flows for the periods presented.

The Company’s 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 Company’s 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 Company’s 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 May 31, 2013 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 Company’s internal control over financial reporting.

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PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There were no material changes in our risk factors from our Form 10-K for the year ended February 28, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities during the quarter ended May 31, 2013.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Sense Technologies has entered an agreement with a global company to market the Guardian Alert® under a registered trade name.

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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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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.


August 22, 2013	/s/ BRUCE E. SCHREINER
	Bruce E. Schreiner
	Chief Executive Officer, President, Director, Chief Financial Officer and Principal Accounting Officer

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SENSE TECHNOLOGIES INC - FORM 10-Q - August 22, 2013

Attached files

SENSE TECHNOLOGIES INC Reports