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EXCEL - IDEA: XBRL DOCUMENT - SENSE TECHNOLOGIES INC | Financial_Report.xls |
EX-31.1 - SENSE TECHNOLOGIES INC | ex31-1.htm |
EX-32.1 - SENSE TECHNOLOGIES INC | ex32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended May 31, 2012
OR
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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
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90010141
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2535 N. Carleton Avenue
Grand Island, Nebraska
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68803
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(Address of principal executive offices)
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(Zip Code)
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(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 ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company x
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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
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Outstanding at October 18, 2012
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Common Stock
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102,768,448 shares
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TABLE OF CONTENTS
Sense Technologies Inc. Form 10-Q
PART I-FINANCIAL INFORMATION |
1
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ITEM 1. |
1
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2
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3
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4
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5 | ||
6
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ITEM 2. |
10
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ITEM 3. |
12
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ITEM 4T. |
12
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PART II-OTHER INFORMATION |
14
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ITEM 1. |
14
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ITEM 1A. |
14
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ITEM 2. |
14
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ITEM 3. |
14
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ITEM 4. |
14
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ITEM 5. |
14
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ITEM 6. |
14
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SIGNATURES |
15
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PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
SENSE TECHNOLOGIES INC.
INTERIM FINANCIAL STATEMENTS
May 31, 2012
(Stated in US Dollars)
( Unaudited )
SENSE TECHNOLOGIES, INC.
BALANCE SHEETS
As of May 31, 2012 and February 29, 2012
(Stated in US Dollars)
May 31
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February 29
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|||||||
2012
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2012
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|||||||
ASSETS
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||||||||
Current
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||||||||
Cash
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$ | - | $ | - | ||||
Accounts Receivable
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36,970 | 1,956 | ||||||
Inventory
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8,179 | - | ||||||
Prepaids
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11,087 | 8,914 | ||||||
Total Current Assets
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56,236 | 10,870 | ||||||
Deposit
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800 | 800 | ||||||
Prepaid royalties, non-current
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53,757 | 57,698 | ||||||
Equipment – Net of accumulated depreciation of $118,439 and $115,384 at May 31, 2012 and February 29,2012, respectively
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24,790 | 27,323 | ||||||
Intangible assets
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51 | 51 | ||||||
Total Assets
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$ | 135,634 | $ | 96,742 | ||||
LIABILITIES
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||||||||
Current
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||||||||
Bank overdraft
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$ | 14,471 | $ | 192 | ||||
Accounts payable
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294,748 | 308,341 | ||||||
Accounts payable-related party
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36,084 | 36,528 | ||||||
Accrued expenses
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1,322,667 | 1,282,073 | ||||||
Accrued expenses-related party
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70,811 | 70,811 | ||||||
Notes payable, current portion
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604,030 | 606,051 | ||||||
Notes payable-related party
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412,090 | 412,090 | ||||||
Advances payable – related entity
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22,957 | 3,117 | ||||||
Dividends payable
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305,813 | 297,915 | ||||||
Convertible promissory notes payable
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584,447 | 584,447 | ||||||
Total Current Liabilities
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3,668,118 | 3,601,565 | ||||||
Notes payable, long-term
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139,000 | 139,000 | ||||||
Total Liabilities
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3,807,118 | 3,740,565 | ||||||
STOCKHOLDERS' DEFICIENCY
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||||||||
Class A preferred shares, without par value, redeemable at $1 per share 20,000,000 shares authorized, 315,914 shares issued at May 31, 2012 (February 29, 2012: 315,914)
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315,914 | 315,914 | ||||||
Common stock, without par value 150,000,000 shares authorized, 102,768,448 shares issued at May 31, 2012 (February 29, 2012: 100,818,448)
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14,841,715 | 14,783,215 | ||||||
Common stock payable
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118,889 | 141,389 | ||||||
Deficit
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(18,948,002 | ) | (18,884,341 | ) | ||||
Total Stockholders’ Deficiency
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(3,671,484 | ) | (3,643,823 | ) | ||||
Total Liabilities and Stockholders’ Deficiency
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$ | 135,634 | $ | 96,742 |
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES INC.
STATEMENTS OF LOSSES
For the three months ended May 31, 2012 and 2011
(Stated in US Dollars)
For the three months ended
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||||||||
May 31,
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May 31,
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|||||||
2012
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2011
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|||||||
Sales
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$ | 65,680 | $ | 51,809 | ||||
Direct Costs
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38,402 | 49,453 | ||||||
Gross Profit
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27,278 | 2,356 | ||||||
Operating Expenses
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||||||||
Advertising and marketing | - | 2,806 | ||||||
Consulting fees | 11,000 | 16,000 | ||||||
Contract labor | 3,000 | 3,000 | ||||||
Depreciation
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2,533 | 2,760 | ||||||
Filing fees
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650 | 223 | ||||||
Insurance
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6,998 | 6,634 | ||||||
Bank charges
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722 | 792 | ||||||
Legal and accounting
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7,095 | 1,144 | ||||||
Office and miscellaneous
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3,268 | 2,613 | ||||||
Rent
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3,564 | 3,742 | ||||||
Shareholder information and printing
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26 | - | ||||||
Telephone and utilities
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72 | 84 | ||||||
Transfer agent fees
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- | 1,171 | ||||||
Travel and automotive
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22 | 4,042 | ||||||
38,950 | 45,011 | |||||||
Net operating loss
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(11,672 | ) | (42,655 | ) | ||||
Other Income and (Expenses)
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||||||||
Interest Expense
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(44,091 | ) | (39,899 | ) | ||||
Net loss
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(55,763 | ) | (82,554 | ) | ||||
Preferred dividends, paid or accrued
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7,898 | 7,898 | ||||||
Net loss attributable to common stockholders
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$ | (63,661 | ) | $ | (90,452 | ) | ||
Basic and diluted loss per share
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$ | (0.01 | ) | $ | (0.00 | ) | ||
Weighted average number of shares outstanding
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100,945,622 | 87,951,781 |
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the three months ended May 31, 2012 and 2011
(Stated in US Dollars)
2012
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2011
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|||||||
Operating Activities
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||||||||
Net loss for the period
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$ | (55,763 | ) | $ | (82,554 | ) | ||
Adjustments to reconcile net loss to net cash used in
Operating activities:
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||||||||
Depreciation
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2,533 | 2,760 | ||||||
Changes in non-cash working capital balances related to operations:
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||||||||
Accounts Receivable
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(35,014 | ) | (5,639 | ) | ||||
Inventory
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( 8,179 | ) | (32,721 | ) | ||||
Prepaids
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1,767 | (531 | ) | |||||
Deposits
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- | - | ||||||
Accounts payable
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242 | (26,827 | ) | |||||
Accrued expenses
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40,596 | - | ||||||
Advances payable
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19,840 | - | ||||||
Net cash used in operating activities
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(33,978 | ) | (145,512 | ) | ||||
Financing Activities
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||||||||
Borrowing on notes payable
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6,671 | 22,612 | ||||||
Repayment on notes payable
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(5,865 | ) | (6,963 | ) | ||||
Repayment on bank indebtedness
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(2,828 | ) | - | |||||
Proceeds from common stock issued for cash
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36,000 | 130,000 | ||||||
Net cash provided by financing activities
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33,978 | 145,649 | ||||||
Increase in cash during the period
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- | 137 | ||||||
Cash, beginning of period
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- | 750 | ||||||
Cash, end of period
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$ | - | $ | 887 | ||||
Supplemental Disclosures of Cash Flow Information:
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||||||||
Cash Paid for Interest
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$ | 1,238 | $ | 4,955 | ||||
Accrual of Preferred Stock Dividend
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$ | 7,898 | $ | 7,898 | ||||
Stock Issued from Common Stock Payable
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$ | 22,500 | $ | - |
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
As of the period ended May 31, 2012
(Stated in US Dollars)
Common Stock
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Preferred Stock
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Common
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||||||||||||||||||||||||||
Issued
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Issued
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Stock
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Accumulated
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|||||||||||||||||||||||||
Shares
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Amount
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Shares
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Amount
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Payable
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Deficit
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Total
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||||||||||||||||||||||
Balance, February 28, 2011
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87,951,781 | $ | 14,392,215 | 315,914 | $ | 315,914 | $ | 88,889 | $ | (17,979,597 | ) | $ | (3,182,579 | ) | ||||||||||||||
Common stock issued for cash
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10,866,667 | 326,000 | - | - | - | - | 326,000 | |||||||||||||||||||||
Common stock issued for services
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1,500,000 | 45,000 | - | - | - | - | 45,000 | |||||||||||||||||||||
Common stock issued for debt discount
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500,000 | 20,000 | - | - | - | - | 20,000 | |||||||||||||||||||||
Common stock subscribed
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- | - | - | 52,500 | - | 52,500 | ||||||||||||||||||||||
Dividends
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- | - | - | - | - | (31,591 | ) | (31,591 | ) | |||||||||||||||||||
Net income (loss) for the period
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- | - | - | - | - | (873,153 | ) | (873,153 | ) | |||||||||||||||||||
Balance, February 29, 2012
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100,818,448 | 14,783,215 | 315,914 | 315,914 | 141,389 | (18,884,341 | ) | (3,643,823 | ) | |||||||||||||||||||
Common stock issued for cash
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1,950,000 | 36,000 | - | - | - | - | 36,000 | |||||||||||||||||||||
Common Stock Issued for Subscription
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750,000 | 22,500 | - | - | (22,500 | ) | - | - | ||||||||||||||||||||
Dividends
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- | - | - | - | (7,898 | ) | (7,898 | ) | ||||||||||||||||||||
Net income (loss) for the period
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- | - | - | - | (55,763 | ) | (55,763 | ) | ||||||||||||||||||||
Balance, May 31, 2012
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102,768,448 | $ | 14,841,715 | 315,914 | $ | 315,914 | $ | 118,889 | $ | (18,948,002 | ) | $ | (3,671,484 | ) |
SENSE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
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, 2012 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 29, 2012.
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 September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on March 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.
In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its financial statements.
NOTE 2 – GOING CONCERN
At May 31, 2012, the Company had not yet achieved profitable operations, had an accumulated deficit of $18,948,002 (February 29, 2012 - $18,884,341) since its inception and incurred a net loss of $55,763 (2011 - $ 82,554) for the three months ended May 31, 2012 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, 2013 to be $300,000. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.
NOTE 3 – ACCRUED EXPENSES/ACCRUED EXPENSES – RELATED PARTY
Other liabilities and accrued expenses consisted of the following:
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May 31,
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February 29,
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||||||
2012
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2012
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|||||||
Bank overdraft
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$ | 14,471 | $ | 192 | ||||
Accounts payable
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294,748 | 308,341 | ||||||
Accounts payable – related party
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36,084 | 36,528 | ||||||
Detail of Accrued Expenses:
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||||||||
Accrued royalties payable Guardian Alert
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480,000 | 480,000 | ||||||
Accrued interest payable
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630,371 | 588,327 | ||||||
Accrued non-resident withholding taxes, including accrued interest
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153,220 | 153,220 | ||||||
Credit card
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8,284 | 8,975 | ||||||
Commissions Payable
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3,258 | 2,934 | ||||||
Accrued taxes payable
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47,534 | 48,617 | ||||||
Total accrued expenses
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$ | 1,322,667 | $ | 1,282,073 | ||||
Detail of Accrued Expense – Related party:
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Accrued payroll – related party
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53,694 | 53,694 | ||||||
Other accrued liabilities – related party
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17,117 | 17,117 | ||||||
Total accrued expenses – related party
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$ | 70,811 | $ | 70,811 |
The Company is in arrears with respect to nine notes payable totaling $604,447.
NOTE 4 – COMMON STOCK
a) Common stock issued for cash
During the three months ended May 31, 2012, the company issued 1,950,000 shares of common stock for cash proceeds of $58,500, of which $22,500 was received in the previous quarter and recorded in Common Stock Payable.
d) 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.
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, 2012
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||||||||
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Options
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Weighted
Average
Exercise
Price
|
||||||
Outstanding and exercisable at beginning of the year
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3,000,000 | $ | 0.04 | |||||
Issued during the year
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- | - | ||||||
Outstanding and exercisable, May 31, 2012
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3,000,000 | $ | 0.04 |
February 29, 2012
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||||||||
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Options
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Weighted
Average
Exercise
Price
|
||||||
Outstanding and exercisable at beginning of the year
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3,000,000 | $ | 0.04 | |||||
Issued during the year
|
- | - | ||||||
Outstanding and exercisable, May 31, 2012
|
3,000,000 | $ | 0.04 |
At May 31, 2012, 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
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|
|||||
Number
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Price
|
Expiry Date
|
|||||
|
|
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|||||
1,000,000 | $ | 0.05 |
December 31, 2012
|
||||
1,000.000 | $ | 0.03 |
December 31, 2014
|
||||
1,000,000 | $ | 0.03 |
December 31, 2015
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Warrants
As of May 31, 2012 and February 29, 2012, 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:
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May 31,
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|||||||
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2012
|
2011
|
||||||
Interest expense
|
$ | 12,381 | $ | 34,193 |
As of May 31, 2012, included in accounts payable is $33,495 (February 29, 2012: $33,495) owing to an accounting firm in which a director of the Company is a partner and $2,589 (February 29, 2012: $3,033) to a shareholder with respect to unpaid fees and interest on promissory notes, $480,000 (February 29, 2012: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, and $53,694 (February 29, 2012: $53,694) owing to the former president of the Company in respect of unpaid wages.
As of May 31, 2012, included in advances payable is $22,957 (February 29, 2012: $3,117) owed to a company controlled by a director.
As of May 31, 2012, promissory notes payable of $412,090 (February 29, 2012: $412,090) 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 | |||
Total
|
$ | 412,090 |
All bear interest at 12% per annum.
NOTE 6 – CONCENTRATIONS AND CONTINGENCIES
Concentrations
Approximately 100% 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, 2012, one (1) customer accounted for approximately 87% of revenue. For the three months ended May 31, 2011, there were two (2) customers that accounted for $47,953 (92%) 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 February 29, 2012 and February 28, 2011 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 September 26, 2012, the date of which the financial statements were available to be issued.
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, 2012 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, 2012 as compared to the three month period ended May 31, 2011.
For the three months ended | ||||||||
May 31, 2012
|
May 31, 2011
|
|||||||
Sales
|
||||||||
Sales Guardian Alert
|
65,680 | 51,809 | ||||||
Sales Scope Out
|
- | - | ||||||
65,680 | 51,809 |
Sales for the quarter ended May 31, 2012increased by 26% from $51,809 to $65,680 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, | ||||||||
2012
|
2011
|
|||||||
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
|
- | 10,779 | ||||||
Manufacturing expenses
|
6,761 | 7,685 | ||||||
Research and development
|
3,000 | 3,000 | ||||||
Commissions
|
9,700 | 12,027 | ||||||
Royalties
|
3,941 | 962 | ||||||
Total Guardian Alert Direct Costs
|
23,402 | 34,453 | ||||||
Total Direct Costs
|
38,402 | 49,453 |
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 $15,000 and $15,000 for the three month periods ended May 31, 2012 and 2011, respectively.
Direct costs related to Guardian Alert were $23,402 and $34,453 for the three month period ending May 31, 2012 and 2011, respectively. This change represents an decrease of 32%. Commission expenses were $9,700 and $12,027 for the three month period ended May 31, 2012 and 2011, respectively. Commission expense decreased 19% due to a decrease in commissioned sales. Manufacturing expenses were $6,761 and $7,685 for the three month period ended May 31, 2012 and 2011, respectively. Manufacturing expenses in Direct Costs for the Guardian Alert® for the three months ended in 2012 and 2011 represents assembly costs for the sales achieved for the same period.
Selling, General, and Administrative
|
||||||||
For the three months ended
|
||||||||
May 31, 2012
|
May 31, 2011
|
|||||||
Advertising and marketing
|
- | 2,806 | ||||||
Consulting fees
|
11,000 | 16,000 | ||||||
Contract labor
|
3,000 | 3,000 | ||||||
Depreciation
|
2,533 | 2,760 | ||||||
Filing fees
|
650 | 223 | ||||||
Insurance
|
6,998 | 6,634 | ||||||
Bank charges
|
722 | 792 | ||||||
Legal and accounting
|
7,095 | 1,144 | ||||||
Office and miscellaneous
|
3,270 | 2,613 | ||||||
Rent
|
3,564 | 3,742 | ||||||
Shareholder information and printing
|
26 | - | ||||||
Telephone and utilities
|
72 | 84 | ||||||
Transfer agent fees
|
- | 1,171 | ||||||
Travel and automotive
|
22 | 4,042 | ||||||
Interest expense
|
44,089 | 39,899 | ||||||
Total
|
83,041 | 84,910 |
Sense Technologies, Inc. had selling, general and administrative expenses of $83,041 for the three month period ended May 31, 2012 compared to selling, general and administrative expenses of $84,910 for the three month period ended May 31, 2011, a decrease in selling, general and administrative expenses of 2% from the prior period.
Advertising and marketing fees increased as compared to the prior three month period. We had marketing fees of $0 and $2,806 for the three month period ended May 31, 2012 and 2011, respectively.
Consulting fees decreased from $16,000 for the three month period ended May 31, 2011 to $11,000 for the three month period ended May 31, 2012. 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 $1,144 in the three month period ended May 31, 2011 to $7,095 for the three month period ended May 31, 2012.
Following summarizes the overall operations results for the three month period ended May 31:
Increase
|
% Increase
|
|||||||||||||||
2012
|
2011
|
( Decrease)
|
(decrease)
|
|||||||||||||
Sales
|
65,680 | 51,809 | 13,871 | 26.77 | ||||||||||||
Direct Costs
|
38,402 | 49,453 | (11,051 | ) | (22.35 | ) | ||||||||||
General and Administrative expenses
|
83,041 | 84,910 | (1,869 | ) | ( 2.20 | ) | ||||||||||
Net Loss
|
(55,763 | ) | (82,554 | ) | (26,791 | ) | (32.45 | ) | ||||||||
Basic and Diluted Loss per share
|
(.00 | ) | (.00 | ) |
We had a loss from operations of $55,763 for three month period ended May 31, 2012, compared to a loss from operations of $82,554 for the three month period ended May 31, 2011, a decrease in loss from operations of $26,791 from the prior year.
Liquidity and Capital Resources
Our cash position at May 31, 2012 was $(14,471) as compared to $(192) at February 29, 2012. 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 3,671,484 and 3,643,823 as of May 31, 2012 and February 29, 2012, respectively. If we are unable to raise adequate working capital for fiscal 2013, 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 2013, 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 $33,978 in 2012, compared to $145,512 in 2011. The decrease in cash used in 2012 was largely due to the increase in accounts receivable, accrued expenses and advances payable.
Net cash provided by financing activities
Net cash provided by financing activities was $33,978 in 2012 compared to net cash provided of $145,649 in 2011.
In 2012, we received $36,000 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 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 May 31, 2012 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.
None.
Item 1A. Risk Factors.
There were no material changes in our risk factors from our Form 10-K for the year ended February 29, 2012.
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, 2012.
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 May 31, 2012.
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
|
|
32.1
|
|
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
|
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.
|
||
October 19, 2012
|
/s/ BRUCE E. SCHREINER
|
|
Bruce E. Schreiner
|
||
Chief Executive Officer, President, Director, Chief Financial Officer and Principal Accounting Officer
|