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 November 30, 2009

 

OR

¨

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 ¨ Nox

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest



__________________________________________________________________________________________________________ Page 1


practicable date.

Class

 

Outstanding at January 12, 2010

Common Stock

 

66,804,651 shares

 

 

 

 



 


TABLE OF CONTENTS

Sense Technologies Inc. Form 10-Q


 

PART I-FINANCIAL INFORMATION

3

 

 

ITEM 1. FINANCIAL STATEMENTS.

4

BALANCE SHEETS AS OF NOVEMBER 30, 2009 (UNAUDITED) AND FEBRUARY 28, 2009

4

STATEMENTS OF LOSSES FOR THE THREE AND NINE MONTHS  ENDED NOVEMBER 30, 2009 AND 2008 (UNAUDITED)

5

STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2009 AND 2008 (UNAUDITED)

6

STATEMENT OF STOCKHOLDERS’ DEFICIENCY FOR THE NINE MONTHS ENDED NOVEMBER 30, 2009

 

(UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 2009

7

NOTES TO UNAUDITED FINANCIAL STATEMENTS

8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

10

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

13

ITEM 4T. CONTROLS AND PROCEDURES.

13

 

 

PART II-OTHER INFORMATION

13

 

 

ITEM 1. LEGAL PROCEEDINGS.

13

ITEM 1A. RISK FACTORS.

13

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

13

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

13

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

13

ITEM 5. OTHER INFORMATION.

13

ITEM 6. EXHIBITS.

14

 

 

SIGNATURES

15

  

  

November 30,

  

  

February 28,

  

  

  

2009

  

  

2009

  

ASSETS

  

Current

  

  

  

  

  

  

     Cash

$

7,807

 

$

645

 

     Accounts receivable

 

5,019

 

 

-

 

     Accounts receivable – related party

 

2,532

 

 

2,532

 

     Inventory

 

26,981

  

 

27,611

  

     Prepaids

  

22,435

  

  

14,345

  

  Total Current Assets

  

64,774

  

  

45,133

  

  

  

  

  

  

  

  

Deposit

  

84,928

  

  

84,928

  

Equipment – Net of accumulated depreciation

   of $89,737 and $79,012 at November 30, 2009

   and February 28, 2009, respectively

  

52,970

  

  

63,695

  

Intangible assets

  

52

  

  

52

  

  Total Assets

$

202,724

  

$

 193,808

  

  

  

  

  

  

  

  

LIABILITIES    

  

Current

  

  

  

  

  

  

     Bank overdraft

$

-

  

$

 45,778

  

     Accounts payable

  

280,389

  

  

188,976

  

     Accounts payable – related party

 

47,284

 

 

44,552

 

     Accrued expenses

 

1,037,186

 

 

1,064,664

 

     Accrued expenses – related party

 

678,839

 

 

313,528

 

     Notes payable

 

461,861

 

 

499,842

 

     Notes payable – related party

  

432,500

 

  

427,500

 

     Advances payable – related entity

  

24,935

  

  

-

  

     Dividends payable

  

226,835

  

  

203,141

  

     Convertible promissory notes payable

  

584,447

  

  

584,447

  

  Total Current Liabilities

  

3,774,276

  

  

3,372,428

  

  

  

  

  

  

  

  

STOCKHOLDERS' DEFICIENCY    

  

  

  

  

  

  

  

  

Class A preferred shares, without par value, redeemable at $1 per share, 20,000,000 shares authorized, 315,914 shares issued

  

  

  

  

  

  

 at November 30, 2009 (February 28, 2009: 315,914)

  

315,914

  

  

315,914

  

Common stock, without par value 100,000,000 shares authorized,

  

  

  

  

  

  

 66,804,651 shares issued at November 30, 2009 (February 28, 2009:  62,204,651)

  

13,115,539

  

  

12,903,039

  

Common stock subscribed

  

-

  

  

32,500

  

Common stock to be issued

 

88,889

 

 

88,889

 

Deficit

  

(17,091,894

)

  

(16,518,962

)

  Total Stockholders’ Deficiency

  

(3,571,552

)

  

(3,178,620

  Total Liabilities and Stockholders’ Deficiency

202,724

  

$

 193,808

  

 

 

 

 

 

 

 

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS


 



_________________________________________________________________________________________________ Page 4


SENSE TECHNOLOGIES INC.
INTERIM STATEMENTS OF LOSS
for the three and nine months ended November 30, 2009 and 2008
(Stated in US Dollars)
(Unaudited)


  

  

Three months ended

  

  

Nine months ended

  

  

  

November 30,

  

  

November 30,

  

  

  

2009

  

  

2008

  

  

2009

  

  

2008

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

$

70,065

  

$

4,871

  

$

116,193

  

$

118,538

  

Direct costs

  

  

  

  

  

  

  

  

  

  

  

  

     Cost of sales

 

-

  

 

33

  

 

631

  

 

31,018

  

     Manufacturing expenses

  

7,500

  

  

-

  

  

20,293

  

  

3,572

  

     Research and development

  

-

  

  

7,856

  

  

2,630

  

  

11,156

  

     Commissions

 

15,257

 

 

5,100

 

 

35,965

 

 

15,300

 

     Royalties

 

50,000

 

 

30,000

 

 

150,000

 

 

90,000

 

 

 

72,757

 

 

42,989

 

 

209,519

 

 

151,046

 

 

 

(2,692

)

 

(38,118

)

 

(93,326

)

 

(32,508

)

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

     Advertising and marketing

 

150

 

 

59,015

 

 

51,808

 

 

179,385

 

     Consulting fees

 

 

-

 

101,200

 

 

9,500

 

 

126,100

 

     Contract labor

 

1,000

 

 

1,000

 

 

6,179

 

 

6,000

 

     Depreciation

  

3,575

  

  

5,076

  

  

10,724

  

  

11,181

  

     Filing fees

  

1,060

  

  

2,735

  

  

3,550

  

  

4,485

  

     Financing fees

  

-

  

  

-

  

  

-

  

  

36,354

  

     Insurance

  

5,565

  

  

8,599

  

  

19,634

  

  

25,874

  

     Interest and bank charges  

  

43,867

  

  

50,165

  

  

139,852

  

  

121,872

  

     Legal and accounting

  

9,157

  

  

37,639

  

  

45,113

  

  

37,690

  

     Office and miscellaneous

  

(49,698

)

  

48,306

  

  

106,155

  

  

60,878

  

     Rent

  

17,514

  

  

16,846

  

  

51,927

  

  

49,715

  

     Shareholder information and printing

  

-

  

  

-

  

  

62

  

  

-

  

     Telephone and utilities

  

-

  

  

1,140

  

  

1,531

  

  

3,480

  

     Transfer agent fees

  

1,454

  

  

780

  

  

3,770

  

  

6,352

  

     Travel and automotive

  

1,942

  

  

4,087

  

  

12,651

  

  

15,414

  

  

  

35,586

  

  

336,588

  

  

462,456

  

  

684,780

  

Net Operating Loss

 

(38,278

)

 

(374,706

)

 

(555,782

)

 

(717,288

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 Rental income

  

-

  

  

  -

  

  

6,544

  

  

-

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from operations

 

 (38,278

)

 

 (374,706

)

 

 (549,238

)

 

 (717,288

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred dividends, paid or accrued

 

7,899

 

 

7,898

 

 

23,694

 

 

23,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

$

(46,177

)

$

(382,604

)

$

(572,932

)

$

(740,978

)

  

  

  

  

  

  

  

  

  

  

  

  

  

Basic and diluted loss per share

$

 (0.00

)

$

 (0.01

)

$

 (0.01

)

$

 (0.01

)

  

  

  

  

  

  

  

  

  

  

  

  

  

Weighted average number of shares outstanding

  

65,642,014

  

  

55,520,207

  

  

63,342,106

  

  

50,456,333

 



SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS







__________________________________________________________________________________________________ Page 5


SENSE TECHNOLOGIES INC.
INTERIM STATEMENTS OF CASH FLOWS
for the nine months ended November 30, 2009 and 2008
(Stated in US Dollars)
(Unaudited)


  

 

3 Months

Ended

11/30/2009

 

9 Months
ended 11/30/2009

  

3 Months
ended 11/30/2008

 

9 Months
ended 11/30/2008

  

Operating Activities

$

 

 

  $

  

$

 

$

  

   Net loss for the period

 

(38,278

)

 (549,238

)

(374,706

)

 (717,288

)

   Adjustments to reconcile net loss to net cash used in

 

 

 

  

  

 

 

  

  

   Operating activities:

 

 

 

 

 

 

 

 

 

      Depreciation

 

3,575

 

10,724

  

3,391

 

11,181

  

      Common shares issued for services

 

-

 

-

 

122,000

 

122,000

  

   Changes in non-cash working capital balances
   related to operations:

 

 

 

  

  

 

 

  

 

      Accounts receivable

 

(2,209

)

(5,019

)

66,916

 

(1.353

)

      Inventory

 

-

 

630

 

32

 

(82,605

)

      Prepaids

 

(12,919

)

(8,090

)

8,364

 

5,241

 

      Accounts payable and accrued liabilities

 

46,963

 

386,201

  

77,422

 

235,834

 

  

 

 

 

  

  

 

 

  

 

Net cash used by operating activities

 

(2,868)

 

(164,792

)

(96,581

)

(426,990

)

  

 

 

 

  

  

 

 

  

  

Financing Activities

 

 

 

  

  

 

 

  

 

   Borrowing on debt

 

18,483

 

27,483

 

345,585

 

441,273

 

   Payments on debt

 

(26,408

)

(60,464

)

(77,956

)

(77,956

)

   Advances payable – unrelated parties

 

-

 

-

 

(225,000

)

-

 

   Advances payable – related parties

 

18,575

 

24,935

 

8,625

 

(31,425)

 

   Proceeds from common share subscriptions

 

-

 

180,000

  

45,000

 

95,000

  

  

 

 

 

  

  

 

 

  

  

Net cash provided by financing activities

 

10,649

 

171,954

  

96,254

 

426,892

  

  

 

 

 

  

  

 

 

  

  

Decrease in cash during the period

 

7,781

 

7,162

 

(327

)

(98

)

  

 

 

 

  

  

 

 

  

  

Cash, beginning of period

 

26

 

645

  

1,217

 

988

  

  

 

 

 

  

  

 

 

  

 

Cash, end of period

$

7,807

 

7,807

  

890

 

890

  

SENSE TECHNOLOGIES INC.
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
for the period ended November 30, 2009
(Stated in US Dollars)
(Unaudited)


  

Common Stock

 

Preferred Stock

 

Common

 

 

 

Common

 

 

 

 

 

 

  

Issued

 

 

 

 

Issued

 

 

 

 

Stock

 

 

Subscriptions

Stock to

 

 

Accumulated

 

 

 

  

Shares

 

 

Amount

 

Shares

 

 

Amount

 

Subscribed

 

 

Receivable

Be Issued

 

 

Deficit

 

 

Total

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 

  

  

  

  

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 29, 2008

  45,575,551

 

$

12,499,471

 

315,914

 

$

315,914

$

650,500

 

$

 (891,432)

288,889

 

$

 (15,473,645

)

$

 (2,610,303)

Common share subscriptions

 

 

 

  (524,016

)

 

-

 

 

 

245,000

 

 

524,016

 

-

 

 

-

 

245,000

Common Stock issued

8,929,100

 

 

495,584

 

-

 

 

-

 

(863,000

)

 

367,416

 

 

 

 

 

 

-

Management fee shares issued

2,500,000

 

 

200,000

 

-

 

 

-

 

-

 

 

-

 (   200,000

)

 

-

 

 

-

Consulting fees

3,000,000

 

 

100,000

 

 

 

 

 

 

-

 

 

-

 

 

 

-

 

 

100,000

Royalties Payable

2,200,000

 

-

132,000

 

-

 

 

-

 

-

 

 

-

 

-

 

-

 

 

132,000

Dividends

-

  

  

-

  

-

 

 

-

  

-

 

 

-

-

 

 

(31,591

)

  

(31,591

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

 

 

-

 

-

 

 

 

 

-

 

-

 

-

 

 (1,013,726)

 

 

   (1,013,726

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 28, 2009

62,204,651

 

 

12,903,039

 

315,914

 

 

315,914

 

32,500

 

 

-

88,889

 

 

(16,518,962)

 

 

  (3,178,620)

Common share subscriptions

 

 

 

 

 

 

 

 

 

 

180,000

 

 

 

 

 

 

 

 

 

180,000

Common Stock Issued

4,600,000

 

 

212,500

 

-

 

 

-

 

(212,500

)

 

-

 

-

 

-

 

 

-

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,694

)

 

(23,694)

Net loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(549,238

)

 

(549,238)

Balance, November 30, 2009


66,804,651

 


$


13,115,539

 


315,194

 


$


315,914


$


-

 

 


-


88,889

 


$


(17,091,894


)


$


(3,571,552)


 

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS


 

____________________________________________________________________________________________________________________________________________________________ Page 7


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 twelve months to February 28, 2009 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, 2009.


Recently Adopted Accounting Pronouncements

Effective June 30, 2009, the Company adopted a new accounting standard issued by the FASB related to the disclosure requirements of the fair value of the financial instruments. This standard expands the disclosure requirements of fair value (including the methods and significant assumptions used to estimate fair value) of certain financial instruments to interim period financial statements that were previously only required to be disclosed in financial statements for annual periods. In accordance with this standard, the disclosure requirements have been applied on a prospective basis and did not have a material impact on the Company’s financial statements.


Recently Issued Accounting Standards

In August 2009, the FASB issued an amendment to the accounting standards related to the measurement of liabilities that are recognized or disclosed at fair value on a recurring basis. This standard clarifies how a company should measure the fair value of liabilities and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The Company does not expect the impact of its adoption to be material to its financial statements.


In October 2009, the FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective for the Company on January 1, 2011.


In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective for the Company on January 1, 2011.


Note 2

Common Stock


  

a)

Escrow:

  

At November 30, 2009, there were 5,970,190 performance shares held in escrow by the Company’s transfer agent. Included in this amount are 3,250,000 escrow shares to be earned out on the basis of one share for each $0.50 of cash flow generated by the Company. Once these shares are earned out, the remaining 2,720,190 escrow shares are to be earned out for each $5.00 of cash flow generated by the Company. The release of these shares is subject to the direction or determination of the relevant regulatory authorities.



 

_____________________________________________________________________________________________________________________ Page 8




b)

Commitments:


  

Stock-based Compensation Plan

  

  

  

November 30,

  

  

February 28,

  

  

  

  

2009

  

  

2009

  

  

  

  

  

  

  

Weighted

  

  

  

  

  

Weighted

  

  

  

  

  

  

  

Average

  

  

  

  

  

Average

  

  

  

  

  

  

  

Exercise

  

  

  

  

  

Exercise

  

  

  

  

Shares

  

  

Price

  

  

Shares

  

  

Price

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Outstanding and exercisable at

  

  

  

  

  

  

  

  

  

  

  

  

  

beginning of period

  

1,025,000

  

 

$0.07

  

  

1,025,000

  

 

$0.07

  

  

Expired

  

(25,000

)

 

(1.00

)

  

(25,000

)

 

(1.00

)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Outstanding and exercisable at

  

  

  

  

  

  

  

  

  

  

  

  

  

end of the period

  

1,000,000

  

 

$0.05

  

  

1,000,000

  

 

$0.05

  


At November 30, 2009, 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


Note 3


Related Party Transactions

 

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

  

  

  

  

  

November 30,

  

  

  

  

  

  

2009

  

  

2008

  

  

  

  

  

  

  

  

  

  

  

 

Royalties

 

 

$

150,000

 

$

90,000

 

  

Interest expense

 

  

$

139,852

  

$

 30,988

 


As of November 30, 2009, included in accounts payable is $47,284 (February 28, 2009: $33,774) owing to an accounting firm in which a director of the Company is a partner and a shareholder with respect to unpaid fees and interest on promissory notes,  $480,000 (February 28, 2009: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, $423,335 (February 28, 2009: $273,500) owing to a director of the Company in respect of royalties payable and $50,992 (February 28, 2009: $50,992) owing to the former president of the Company in respect of unpaid wages.


As of November 30, 2009, included in advances payable is $24,935 (February 28, 2009: $0) owed to a company controlled by a director.


As of November 30, 2009, promissory notes payable of $432,500 (February 28, 2009: $427,500) is due to a profit-sharing and retirement plan administered by a director of the Company.  Terms are:


Due June, 2009

$   20,000

May, 2009

   150,000

August, 2009

    90,000

September, 2009

    50,000

October, 2009

    75,000

November, 2009

    22,500

December, 2009

    20,000

June, 2010

      5,000

Total

$432,500

All bear interest at 12% per annum.



_____________________________________________________________________________________________________________________ Page 9



Note 4

Accrued Liabilities


 

 

 

  

November 30, 2009

February 28, 2009

Accrued fees

24,611

40,194

Accrued payroll

53,741

55,869

Accrued interest payable

490,307

356,858

Accrued non resident withholding taxes, including

 accrued interest  


120,956


120,956

Accrued royalties payable

903,334

753,334

Accrued San Tan Lawsuit

73,065

-

Accrued taxes payable

50,011

50,981

  

$1,716,025      

$1,378,192

Note 5

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 Company’s operations, and assets are located in the United States. During the nine months ended November 30, 2009, there were two customers that accounted for $114,338 (99%) of sales revenue.   During the nine months ended November 30, 2008, there were two customers that accounted for $81,547 (69%) of sales revenue.


Note 6

Commitments and Contingencies


The Company is in arrears with respect to its lease of property with San Tan Development. As a result, the company is being faced with a judgment in an amount equal to the remaining months of lease commitments and attorney’s fees and costs. Sense has booked a liability in the amount of the judgment and have accrued attorney’s fees. The amount of the lease liability is $107,372. The estimated attorneys fees are based on 20% of damages sought and total $21,474. The property is sub-leased for part of the remaining lease term,  the liability was adjusted by $55,781 in the current quarter.


Note 7

Subsequent events


Subsequent to November 30, 2009 we signed an agreement to use a vendor trade name that required an $80,000 down payment which was paid in cash and a 6% ongoing royalty interest. No events other than those described here that took place subsequent to November 30, 2009 and through the date of this filing in the opinion of management are required to be disclosed.



_____________________________________________________________________________________________________________________ Page 10



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 November 30, 2009 and our Financial Statements and notes thereto for the period ended November 30, 2008.

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 nine month period ended November 30, 2009 as compared to the period ended November 30, 2008.


Sales for the period ended November 30, 2009 decreased by 2% from $118,538 to $116,193 due to reduced demand.  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.


Direct costs in 2009 were higher due to higher minimum royalties under the ScopeOut® license and increase in commissions paid.  Direct costs in 2008 were also high due to minimum royalties under the ScopeOut® license.


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/unsaleable inventory.


Management periodically reviews inventory and makes a determination as to whether any inventory is obsolete.  If we determine that certain materials and or products are not in saleable condition and that the likelihood of them being sold is remote, management will make a decision to write off the inventory and or parts of inventory that it deems will not sell.  If previously written-off inventory later sells, costs of sale are significantly lower due to the previous write-off of those costs.  This can materially affect period gross profit ratios.


Regarding intangible assets, the company conducts reviews annually in accordance with SFAS 142 regarding possible impairment of related assets.   We have written off the GuardianAlert® license agreement intangible asset in 2005 and the ScopeOut® license agreement intangible asset in 2007 due to poor sales performance results in the past and the uncertainty of the recoverability of the assets.


After careful consideration, management felt the ScopeOut® license should be treated as fully impaired at February 28, 2007.  The initial license was entered in September, 2004, and the first molds for the first iteration of the product were completed in September of 2005.  


The initial inventory, now all written off, was manufactured and delivered to the Company in November 2005.  Significant marketing efforts were undertaken with respect to that first version which resulted in significant promise for potential large sales to occur based on initial meetings introducing the product.  It generally took several meetings with each such potential customer to ultimately learn that the products' aesthetics were not acceptable for mass consumer acceptance.  This was especially true with respect to dealers' installation of the product on its new and used car inventory for such vehicle to be sold with the product intact.  


In late 2006, and by fiscal year end February 28, 2007, solutions to those aesthetic problems were being developed.  We still expected that inventory of the first iteration was saleable, but likely not with large customers such as retail chains.  Some automobile dealerships previously contacted also had not yet made a final decision whether to use the product on its existing inventory for resale.




_____________________________________________________________________________________________________________________ Page 11


Management’s Discussion And Analysis

Sense Technologies Inc. Form 10-Q 



The Company undertook the effort to redesign the products using the qualified engineers that assisted with the first design, and physically-feasible aesthetics solutions were determined and evaluated.  The new designs iterations were finally approved in August of 2007, and the first inventory of both versions of the new iterations were manufactured and delivered in November, 2007.


Based on this, management believed at February 28, 2007 that existing inventory was still resalable, though likely not in the large volumes per customer as originally anticipated.  Further, management believed that the product could successfully be redesigned, engineered, and prototyped and manufactured in the appropriate aesthetic versions necessary to achieve such large customer sales.  Based on this, when the initial 10-KSB was filed and financial statements issued, no impairment of the intangible asset was believed to exist.  However, management now believes that the total impairment of that intangible asset as of that date is appropriate as there was no assurance at the time that our expectations of solving the aesthetics and other marketing problems would actually be successful.  This is further because no significant sales of the new versions of the product have yet occurred, notwithstanding significant marketing effort to do so.  Since six months have elapsed since the new iteration versions of the products have arrived for demonstration and marketing purposes, within which such sales could have occurred, it seems most appropriate to look at that historical result to anticipate what potential sales might occur in the future.  Unit sales of ScopeOut® products were as follows:


Sense Technologies Inc.

Schedule of Scope-Out unit sales

for the fiscal years ended February 29, 2008

and February 28, 2007, 2006 and 2005

 

2005

2006

2007

2008

 

 

 

 

 

Car model

          -

10

6

13

SUV model

          -

18

7

10

Total ScopeOut® units

          -

28

13

23


Accordingly, the Company has concluded that based on the approximately two-year period from entering the ScopeOut® license to February 28, 2007, and considering all events subsequent to that date, the circumstances merited an impairment in value of the ScopeOut® license effective February 28, 2007, in the full amount of the license value, $196,107.        


Also, we expensed the amounts we paid to attorneys to obtain ScopeOut® patents in foreign jurisdictions in our revised Financial Statements.  Originally, the company chose to capitalize these amounts because of the Company's experience with intellectual properties embodied in issued patents.


First, management understood that in the United States, an issued patent maintains a presumption of validity until determined otherwise.  While that is our understanding of the law in the United States, it may not necessarily that of any or all foreign countries. However, it was our presumption that that should more often than not be the case.  Additionally, the Company is presently interacting with a major company in informally evaluating the scope of the patents in covering a product they sell.  That added to management's presumption of a valid patent, insofar as that effort has not yet been completed.  The company's intent was to react with appropriate reductions in values should this informal effort result negatively for the Company.


Secondly, our experience in filing for foreign patents has led to opportunities for evaluation of the subject invention in foreign marketplaces.  Evidently such documents become databases of opportunities for interested companies in the foreign venues for consideration of business relationships.  Such information contained in the application provides for a sufficient amount of means to contact the Company by any interested party in the foreign location.  Accordingly, there is a value with respect to the potential of such networking opportunities to enter business relationships regarding the product by such interested parties.  


Notwithstanding, since the Company has determined that a total impairment of the ScopeOut® license is appropriate at February 28, 2007, such would be indicative that the value of all of the underlying patents to the ScopeOut® license would also be in-turn impaired.  Such weighs on whether any foreign patents should therefore maintain any intangible value for the Company.  Based on these overall circumstances, management believes again that these costs should be treated as expense.


 

_____________________________________________________________________________________________________________________ Page 12


Management’s Discussion And Analysis

Sense Technologies Inc. Form 10-Q 





We also wrote off equipment of $19,341 and an uncollectible promissory note receivable from a group of original investors in the Company in the amount of $585,000 during 2008. This note had been outstanding for several years and its collection was contingent on successful resolution of a bankruptcy proceeding of an unrelated company. During the year ended February 29, 2008, management made the determination that the possibility of collection on this note was remote and determined it should be written-off.

Royalties increased from $90,000 in 2008 to $150,000 in 2009, and increase of 67%, due to the increased requirement of minimum royalties necessary to maintain the exclusivity regarding the ScopeOut® license.


Consulting fees decreased from $126,100 in 2008 to $9,500 in 2009, a decrease of 93%.  Advertising and marketing expenses decreased from $179,385 in 2008 to $51,808 in 2009, a decrease of 71%, both as a result of adjustments in the Company’s efforts to market the ScopeOut® products.


Following summarizes the overall operations results:

 

 

 

Increase

%  Increase

 

     2009

    2008

( Decrease)

(decrease)

 

 

 

 

 

Sales

116,193

118,538

(2,345)

(1.981)

Direct Costs

209,519

151,046

58,473

38.71

General and Administrative expenses

462,456

684,780

(222,324)

(32.47)

Net Loss

(549,238)

(717,288)

168,050

23.43

Basic and Diluted Loss per share

(        .01)

(        .01)

-    

-


The stockholders and directors of the Company have been advised in the independent auditors report that there is substantial doubt that our company has the ability to continue as a going concern.


With respect to the financial condition beyond the fiscal year ending February 28, 2009, the Company will need access to additional funding to meet operating requirements based on its current state of affairs.  Access to funding may come from debts, loans from related parties, stock placement or a combination of the available options. Revenues for fiscal year ended February 28, 2009 were $75,546 and thus, expenses exceeded revenues.  Accordingly, the Company does not expect to be able to fund operations from internally-generated funds until such time as its sales exceed expenses.


As of the date of this filing, the Company had no other funding commitments and there can be no assurance that any such commitments in the future would be obtained on favorable terms, if at all.


The Company has previously maintained its operations from the sale of capital stock and advances and loans from related and unrelated parties.


Although management is cautiously optimistic about its progress for resolutions to its financing needs, no assurances can be made that its plans will be successful.  Adverse market conditions, general economic conditions and limited access to capital markets can adversely impact the Company and its progress as a going concern.

Liquidity and Capital Resources


Our cash position at November 30, 2009 was $7,807 as compared to $645 at February 28, 2009. This increase was due to our use of cash in operating and investing activities and cash provided by financing activities as described below.


Net cash used in operating activities


Net cash used in operating activities was $139,857 in 2009, compared to $458,415 in 2008. The decrease in cash used in 2009 was largely due to the decrease in ScopeOut® marketing activities. 



Net cash provided by financing activities


Net cash provided by financing activities was $147,019 in 2009 compared to net cash provided of $458,317 in 2008.


In 2009, we received $180,000 through subscriptions to private placements of our common shares.




_____________________________________________________________________________________________________________________ Page 13


Management’s Discussion And Analysis

Sense Technologies Inc. Form 10-Q 





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 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 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 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 November 30, 2009 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.


PART II-OTHER INFORMATION


Item 1. Legal Proceedings.

We are a party to a legal proceeding regarding our lease in Chandler, Arizona.


Item 1A. Risk Factors.

There were no material changes in our risk factors from our Form 10-K for the year ended February 28, 2009.


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, 2009.


Item 3. Defaults Upon Senior Securities.

None.


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, 2009.


Item 5. Other Information.

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





_____________________________________________________________________________________________________________________ Page 14


Sense Technologies Inc. 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.

 

 

Date

Signature

 

 

 

 

January 19, 2010

/S/ BRUCE E. SCHREINER

 

Bruce E. Schreiner, President

 

(principal executive officer) and Director

 

 

_____________________________________________________________________________________________________________________ Page 15


Exhibit 31.1




CERTIFICATIONS


I, Bruce E. Schreiner, certify that:


1.

I have reviewed this report of the fiscal quarter ended November 30, 2009 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 issuer’s 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 issuer’s 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.


5.

The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s 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 issuer’s 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 issuer’s control over financial reporting.



January 19, 2010

 

S/ BRUCE E. SCHREINER

 

Bruce E. Schreiner, Chief Executive Officer

 

_____________________________________________________________________________________________________________________ Page 16



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, 2009 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, 2010


/S/ BRUCE E. SCHREINER

 

Bruce E. Schreiner, President

 

(principal financial and accounting officer)

 


[A signed original of this written statement required by Section 906 has been provided to Pinpoint Recovery Solutions Corp. and will be retained by Pinpoint Recovery Solutions Corp and furnished to the Securities and Exchange Commission or its staff upon request.]

 

 

 

 

_____________________________________________________________________________________________________________________ Page 17