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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 August 31, 2012
 
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 ¨  No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
 
Outstanding at December 3, 2012
Common Stock
 
102,768,448 shares
 
 
TABLE OF CONTENTS
Sense Technologies Inc. Form 10-Q
 
     
PART I-FINANCIAL INFORMATION
1
     
ITEM 1.
1
 
2
 
3
 
4
 
5
 
6
     
ITEM 2.
12
ITEM 3.
14
ITEM 4T.
15
     
PART II-OTHER INFORMATION
16
     
ITEM 1.
16
ITEM 1A.
16
ITEM 2.
16
ITEM 3.
16
ITEM 4.
16
ITEM 5.
16
ITEM 6.
16
     
17
 

 
PART I-FINANCIAL INFORMATION
 
Item 1. Financial Statements.


 
SENSE TECHNOLOGIES INC.
INTERIM FINANCIAL STATEMENTS
August 31, 2012
(Stated in US Dollars)
( Unaudited )
 
 
 
 
Page 1

 
SENSE TECHNOLOGIES, INC.
BALANCE SHEETS
As of August 31, 2012 and February 29, 2012
(Stated in US Dollars)

   
August 31
   
February 29
 
   
2012
   
2012
 
             
ASSETS
 
Current
           
Cash
 
$
-
   
$
-
 
Accounts receivable
   
65,282
     
1,956
 
Inventory
   
8,179
     
-
 
Prepaids
   
24,748
     
8,914
 
Total Current Assets
   
98,209
     
10,870
 
Deposit
   
800
     
800
 
Prepaid royalties, non-current
   
47,621
     
57,698
 
Equipment – Net of accumulated depreciation of $120,450 and $115,384 at August 31, 2012 and February 29,2012, respectively
   
22,257
     
27,323
 
Intangible assets
   
51
     
51
 
Total Assets
 
$
168,938
   
$
96,742
 
                 
LIABILITIES
 
Current
 
Bank overdraft
 
$
15,888
   
$
192
 
Accounts payable
   
273,222
     
308,341
 
Accounts payable-related party
   
36,084
     
36,528
 
Accrued expenses
   
890,327
     
819,190
 
Accrued expenses-related party
   
533,694
     
533,694
 
Notes payable, current portion
   
609,908
     
606,051
 
Notes payable-related party
   
397,090
     
412,090
 
Advances payable – related entity
   
101,252
     
3,117
 
Dividends payable
   
313,711
     
297,915
 
Convertible promissory notes payable
   
584,447
     
584,447
 
Total Current Liabilities
   
3,755,623
     
3,601,565
 
                 
Notes payable, related party, long-term
   
15,000
     
-
 
Notes payable, long-term
   
139,000
     
139,000
 
Total Liabilities
   
3,909,623
     
3,740,565
 
                 
STOCKHOLDERS' DEFICIENCY
 
   
Class A preferred shares, without par value, redeemable at $1 per  share 20,000,000 shares authorized, 315,914 shares  issued at August 31, 2012 (February 29, 2012: 315,914)
   
315,914
     
315,914
 
Common stock, without par value 150,000,000 shares authorized, 102,768,448 shares issued at August 31, 2012 (February 29, 2012: 100,818,448)
   
14,841,715
     
14,783,215
 
Common stock payable
   
141,389
     
141,389
 
Deficit
   
(19,039,703
)
   
(18,884,341
)
Total Stockholders’ Deficiency
   
(3,740,685
)
   
(3,643,823
)
    Total Liabilities and Stockholders’ Deficiency
 
$
168,938
   
$
96,742
 
 
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
 
 
Page 2


SENSE TECHNOLOGIES INC.
 INTERIM STATEMENTS OF LOSS
For the three and six months ended August 31, 2012 and 2011
 (Stated in US Dollars)
 (Unaudited)

   
Three months ended
   
Six months ended
 
   
August 31,
   
August 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Sales
  $ 74,622     $ 10,542     $ 140,302     $ 62,351  
Direct costs
    45,717       37,924       84,119       87,377  
                                 
Gross profit
    28,905       (27,382 )     56,183       (25,026 )
 Expenses                                
   Advertising and marketing
    -       70       -       2,876  
   Consulting fees
    33,500       20,172       44,500       36,172  
   Contract labor
    3,000       3,000       6,000       6,000  
   Depreciation
    2,533       2,759       5,066       5,519  
   Filing fees
    1,400       7,593       2,050       7,816  
   Insurance
    7,196       6,660       14,194       13,294  
   Bank charges
    618       615       1,339       1,407  
   Legal and accounting
    6,290       19,365       13,385       20,509  
   Office and miscellaneous
    3,882       2,213       7,178       4,826  
   Rent
    4,043       3,711       7,607       7,453  
   Telephone and utilities
    166       105       238       189  
   Transfer agent fees
    5,048       1,130       5,048       2,301  
   Travel and automotive
    3,266       1,054       3,288       5,096  
      70,942       68,447       109,893       113,458  
Net operating loss
    (42,037 )     (95,829 )     (53,710 )     (138,484 )
                                 
 Interest expense
    41,605       57,910       85,856       97,809  
                                 
Net loss
    (83,642 )     (153,739 )     (139,566 )     (236,293
                                 
Preferred dividends, paid or accrued
    7,898       7,898       15,796       15,796  
                                 
Net loss attributable to common stockholders
  $ (91,540 )   $ (161,637 )   $ (155,362 )   $ (252,089 )
                                 
Basic and diluted loss per share
  $ 0.00     $ 0.00     $ 0.00     $ 0.00  
                                 
Weighted average number of shares outstanding
    102,768,448       92,544,173       101,857,035       90,247,977  

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

 
Page 3


SENSE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the three and six months ended August 31, 2012 and 2011
(Stated in US Dollars)
 
  
 
Three Months
 Ended
August 31, 2012
   
Three Months
 Ended
August 31, 2011
   
Six Months
 Ended
August 31, 2012
   
Six Months
 Ended
August 31, 2011
 
Operating Activities
                       
   Net (loss) for the period
  $ (83,642 )   $ (153,739 )   $ (139,566 )   $ (236,293 )
   Adjustments to reconcile net loss to net cash used in
   Operating activities:
                               
      Depreciation
    2,533       2,760       5,066       5,519  
    Amortization of debt discount
    -       20,000       -       20,000  
   Changes in non-cash working capital balances related to operations:
                               
      Accounts receivable
    (28,312 )     4,600       (63,326 )     (1,039 )
      Inventory
    -       -       (8,179 )     (32,721 )
      Prepaids
    (7,525 )     (74,322 )     (5,757 )     (74,853 )
      Accounts payable
    (20,109 )     (29,834 )     (19,867 )     (34,908 )
      Accrued expenses
    30,383       16,441       71,138       35,405  
      Advances payable
    78,295       (2,853 )     98,135       (43,568 )
  
                               
Net cash used by operating activities
    (28377 )     (216,947 )     (62,356 )     (362,458 )
  
                               
Financing Activities
                               
   Borrowing on debt
    20,857       126,925       20,857       149,536  
   Payments on debt
    (14,980 )     (5,865 )     (17,001 )     (12,828 )
   Proceeds from common share subscriptions
    22,500       95,000       58,500       225,000  
  
                               
Net cash provided by financing activities
    28,377       216,060       62,356       361,708  
  
                               
Increase (Decrease) in cash during the period
    -       (887 )     -       (750 )
  
                               
Cash, beginning of period
    -       887       -       750  
  
                               
Cash, end of period
  $ -     $ -     $ -     $ -  
Supplemental Disclosures of Cash Flow Information:
                               
   Cash paid for interest
  $ 7,567     $ -     $ 8,805     $ -  
   Accrual of preferred stock dividend
  $ 7,898     $ 7,898     $ 15,796     $ 15,796  
   Stock issued for common stock payable
  $ -     $ -     $ 22,500     $ -  

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
 
 
Page 4

 
SENSE TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
As of the period ended August 31, 2012
(Stated in US Dollars)

   
Common Stock
   
Preferred Stock
   
Common
             
   
Issued
         
Issued
         
Stock
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Payable
   
Deficit
   
Total
 
                                           
Balance, February 28, 2011
   
87,951,781
   
$
14,392,215
     
315,914
   
$
315,914
   
$
88,889
   
$
(17,979,597
)
 
$
(3,182,579
)
Common stock issued for cash
   
10,866,667
     
326,000
     
-
     
-
     
-
     
-
     
326,000
 
Common stock issued for services
   
1,500,000
     
45,000
     
-
     
-
     
-
     
-
     
45,000
 
Common stock issued for debt discount
   
500,000
     
20,000
     
-
     
-
     
-
     
-
     
20,000
 
Common stock subscribed
   
-
     
             
-
     
52,500
     
-
     
52,500
 
Dividends
   
-
     
-
     
-
     
-
     
-
     
(31,591
)
   
(31,591
)
Net income (loss) for the period
   
-
     
-
     
-
     
-
     
-
     
(873,153
)
   
(873,153
)
Balance, February 29, 2012
   
100,818,448
     
14,783,215
     
315,914
     
315,914
     
141,389
     
(18,884,341
)
   
(3,643,823
)
Common stock issued for cash
   
1,200,000
     
36,000
     
-
     
-
     
-
     
-
     
36,000
 
Common stock issued for subscription
   
750,000
     
22,500
     
-
     
-
     
(22,500
)
   
-
     
-
 
Common stock subscribed
   
-
     
-
     
-
     
-
     
22,500
     
-
     
22,500
 
Dividends
   
-
             
-
     
-
     
-
     
(15,796
)
   
(15,796
)
Net income (loss) for the period
   
-
             
-
     
-
     
-
     
(139,566
)
   
(139,566
)
Balance, August 31, 2012
   
102,768,448
   
$
14,841,715
     
315,914
   
$
315,914
   
$
141,389
   
$
(19,039,703
)
 
$
(3,740,685
)
 
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
 
 
Page 5


SENSE TECHNOLOGIES, INC.
 NOTES TO FINANCIAL STATEMENTS
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCUNTING

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

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

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

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

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

In December 2011, the FASB issued ASU No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact, if any, that the adoption of this pronouncement may have on its results of operations or financial position.
 
 
Page 6

 
NOTE 2 – GOING CONCERN
 
At August 31, 2012, the Company had not yet achieved profitable operations, had an accumulated deficit of $19,011,703 (February 29, 2012 - $18,884,341) since its inception and incurred a net loss of $111,566 (2011 - $ 236,293) for the six months ended August 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 – PREPAID EXPENSES

As of August 31, 2012, included in prepaid expenses is $20,653.56 for an insurance premium for the directors of the Company financed through Flatiron Capital.  Insurance policy is from August 23, 2012 to August 23, 2013.

NOTE 4 – ACCRUED EXPENSES/ACCRUED EXPENSES – RELATED PARTY
 
Other liabilities and accrued expenses consisted of the following:
 
  
 
August 31,
   
February 29,
 
   
2012
   
2012
 
Bank overdraft
 
$
15,888
   
$
192
 
Accounts payable
   
273,222
     
308,341
 
Accounts payable – related party
   
36,084
     
36,528
 
                 
Detail of Accrued Expenses:
               
Accrued interest payable
   
663,315
     
588,327
 
Accrued non-resident withholding taxes, including accrued interest
   
153,220
     
153,220
 
Credit card
   
6,908
     
8,975
 
Commissions Payable
   
3,317
     
2,934
 
Other accrued liabilities
   
17,117
     
17,117
 
Accrued taxes payable
   
46,450
     
48,617
 
  Total accrued expenses
 
$
890,327
   
$
819,190
 
                 
Detail of Accrued Expense – Related party:
               
Accrued royalties payable Guardian Alert – related party
 
$
480,000
   
$
480,000
 
Accrued payroll – related party
   
53,694
     
53,694
 
  Total accrued expenses – related party
 
$
533,694
   
$
533,694
 
 
 
Page 7

 
NOTE 5 – NOTES PAYABLE, CONVERTIBLE NOTES PAYABLE, AND NOTES PAYABLE – RELATED PARTY

  
 
August 31,
   
February 29,
 
   
2012
   
2012
 
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment terms between August 2012 and July, 2012.
 
$
243,000
   
$
243,000
 
                 
Promissory notes payable to related party, unsecured, bearing interest at the rate of 12% per annum with repayment between August 2012 and April 2013
   
412,090
     
412,090
 
                 
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due January 12, 2012
   
10,000
     
10,000
 
                 
 Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due March 30, 2012
   
10,000 
     
10,000
 
                 
Promissory notes payable, personally guaranteed by a director of the Company, bearing interest at the rate of 5.5% per annum and maturing May 11, 2016
   
79,844 
     
85,607
 
                 
Finance agreement on directors and officers liability policy, bearing interest at 7.75%, maturing August 23, 2013. This agreement is repayable in monthly principal and interest payments of $1,791.
   
20,441
     
5,444
 
                 
Promissory note payable, unsecured, bearing interest at the rate of 5.25% per annum, no maturity date
   
100,000
     
100,000
 
                 
Promissory note payable, unsecured, bearing interest at the rate of 12.0% per annum, no maturity date.
   
100,000
     
100,000
 
                 
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing June 1, 2014.
   
181,567
     
189,000
 
                 
Promissory note payable, no stated interest or maturity date
   
2,000
     
2,000
 
     
1,160,998
     
1,157,141
 
Less current portion
   
(1,006,998
   
(918,141
Long-term portion
 
$
154,000
   
$
139,000
 
 
 
Page 8

 
The Company is in arrears with respect to four notes payable totaling $275,500.

Convertible notes payable
 
August 31,
   
February 29,
 
   
2012
   
2012
 
Series B secured promissory notes payable, secured by a charge over the Company’s inventory, bearing interest at 10% per annum and are payable on demand, along with accrued interest thereon, on or after August 30, 2005. These notes plus accrued interest may be redeemed at any time after August 30, 2005. These notes may be converted into common shares of the Company at any time prior to demean for payment at the rate of one common share for each $0.29 of principal and interest owed. As of February 29, 2012 and February 28, 2011, these notes were in arrears.
  $ 534,447     $ 534,447  
                 
Unsecured promissory notes bearing interest at 10% per annum. These notes plus accrued interest are convertible into common shares of the Company at the rate of one common share for each $5.40 of principal and interest owed. These notes have matured and the holders thereof have received default judgments against the Company.
    50,000       50,000  
    $ 584,447     $ 584,447  

The Company is in arrears with respect to seven convertible notes payable totaling $584,447.

Future minimum note payments as of August 31, 2012 are as follows:
 
Years Ending February 28,
     
2013
  $ 1,502,588  
2014
    135,000  
2015
    19,000  
Thereafter
    -  

NOTE 6 – PREFERRED STOCK

Dividends on preferred shares are payable annually on July 31 of each year. During the six months ended August 31, 2012 and the year ended February 29, 2012, the Company accrued dividends payable of $15,796 and $31,591, respectively. Dividends are currently accruing and total 313,711.
 
NOTE 7 – COMMON STOCK
 
a)           Common stock issued for cash
 
During the six months ended August 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.
 
 
Page 9

 
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.

   
August 31, 2012
 
   
Options
   
Weighted
Average
Exercise
Price
 
Outstanding and exercisable at beginning of the year
   
3,000,000
   
$
0.04
 
Issued during the year
   
-
     
-
 
Outstanding and exercisable, August 31, 2012
   
3,000,000
   
$
0.04
 
 
   
February 29, 2012
 
 
    
 
Options
   
Weighted
Average
Exercise
Price
 
Outstanding and exercisable at beginning of the year
   
3,000,000
   
$
0.04
 
Issued during the year
   
-
     
-
 
Outstanding and exercisable, February 29, 2012
   
3,000,000
   
$
0.04
 

At August 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
 
  
Number
 
Price
 
Expiry Date
       
  
1,000,000
 
$
0.05
 
December 31, 2012
1,000.000
 
$
0.03
 
December 31, 2014
1,000,000
 
$
0.03
 
December 31, 2015

Warrants

As of August 31, 2012 and February 29, 2012, the Company had no outstanding warrants.
 
NOTE 8 – RELATED PARTY TRANSACTIONS

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

  
 
August 31,
 
  
 
2012
   
2011
 
Interest expense
 
$
24,744
   
$
23,788
 

As of August 31, 2012, included in accounts payable and accrued expenses are $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 August 31, 2012, included in advances payable is $101,252 (February 29, 2012: $3,117) owed to a company controlled by a director.
 
 
Page 10


As of August 31, 2012, promissory notes payable of $412,090 (February 29, 2012: $412,090) are due to a profit-sharing and retirement plan administered by a director of the Company.  Terms are:

Date Due:
 
Amount
 
August, 2012
 
 $
12,500
 
December, 2012
   
384,590
 
April, 2013
   
15,000
 
Total
 
$
412,090
 
 
All bear interest at 12% per annum.

NOTE 9 – CONCENTRATIONS AND CONTINGENCIES

Concentrations

For the six months ended August 31, 2012, two (2) customers accounted for approximately 89% of revenue. For the six months ended August31, 2011, there were two (2) customers that accounted for 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 August 31, 2012 and February 29, 2012 management is not aware of any possible contingencies that would warrant disclosure pursuant to SFAS 5.

Commitments

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

A 5% royalty with a $.75 per unit maximum “minimum royalty” to retain exclusivity with the following volumes:
 
End of calendar year containing the second anniversary:
30,000 units
End of calendar year containing the third anniversary:
60,000 units
 
NOTE 10 – SUBSEQUENT EVENTS
 
No subsequent event occurred after the date of these financial statements and prior to their issuance, which would require disclosure in these financial statements.

 
Page 11


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 August 31, 2012 and our audited Financial Statements and notes thereto for the year ended February 29, 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 and six month period ended August 31, 2012 as compared to the three and six month period ended August 31, 2011.

   
For the three months ended
   
For the six months ended
 
   
August 31, 2012
   
August 31, 2011
   
August 31, 2012
   
August 31, 2011
 
Sales
                       
Sales Guardian Alert
    74,622       10,542       140,302       62,351  
Sales Scope Out
    -       -       -       -  
      74,622       10,542       140,302       62,351  

Sales for the six months ended August 31, 2012 increased by 125% from $62,351 to $140,302 due to increased demand for Guardian Alert and a shift of our focus from Scope Out to Guardian Alert sales. Revenue is recognized by management only upon receipt of an actual purchase order from a customer, and the related invoicing to the company or, in the absence of a purchase order (i.e., verbal order), the actual invoicing to the customer, when the products are shipped and collection is reasonably assured.

Sales for the three months ended August 31, 2012 increased by 607% from 10,542 to 74,622 due to increased demand from key customers.

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     For the six months ended  
   
August 31, 2012
   
August 31, 2011
   
August 31, 2012
   
August 31, 2011
 
Direct Cost
                       
Scope Out Direct Costs
                       
Cost of sales
    -       -       -       -  
Manufacturing expenses
    -       -       -       -  
Research and development
    -       -       -       -  
Commissions
    -       -       -       -  
Royalties - related party
    15,000       15,000       30,000       30,000  
Total Scope Out Direct Costs
    15,000       15,000       30,000       30,000  
                                 
Guardian Alert Direct Costs
                               
Cost of sales
    -       -       -       10,779  
Manufacturing expenses
    4,337       3,339       11,098       11,023  
Research and development
    7,969       2,150       10,969       5,150  
Commissions
    12,275       16,823       21,975       28,851  
Royalties
    6,136       612       10,077       1,574  
Total Guardian Alert Direct Costs
    30,717       22,924       54,119       57,377  
Total Direct Costs
    45,717       37,924       84,119       87,377  
 
 
Page 12

 
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 August 31, 2012 and 2011, and $30,000 and $30,000 for the six month period ended August 31, 2012 and 2011.

Direct costs related to Guardian Alert® were $54,119 and $57,377 for the six month period ending August 31, 2012 and 2011, respectively. This change represents a decrease of 6%. Commission expenses were $21,975 and $28,851 for the six month period ended August 31, 2012 and 2011, respectively. Commission expense decreased 24% due to a decrease in commissioned sales.  Manufacturing expenses were $11,098 and $11,023 for the six month period ended August 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.

Direct costs related to Guardian Alert® were $30,717 and $22,924 for the three month period ending August 31, 2012 and 2011 respectively. This change represents a increase of 34%. Commission expenses were $12,275 and $16,823 for the three month period ended August 31, 2012 and 2011, respectively. Commission expense decreased 27% due to decreased commissioned sales for the three months.  Manufacturing expenses were $4,337 and $3,339 for the three month period ended August 31, 2012 and 2011, respectively.  Manufacturing expenses in Direct Costs for the Guardian Alert® for the three months ended in 2012 represents assembly costs for the sales achieved for the same period.

Selling, General, and Administrative
             
    For the three months ended     For the six months ended  
   
August 31, 2012
   
August 31, 2011
   
August 31, 2012
   
August 31, 2011
 
Advertising and marketing
    -       70       -       2,876  
Consulting fees
    33,500       20,172       44,500       36,172  
Contract labor
    3,000       3,000       6,000       6,000  
Depreciation
    2,533       2,759       5,066       5,519  
Filing fees
    1,400       7,593       2,050       7,816  
Insurance
    7,196       6,660       14,194       13,294  
Bank charges
    618       615       1,339       1,407  
Legal and accounting
    6,290       19,365       13,385       20,509  
Office and miscellaneous
    3,882       2,213       7,178       4,826  
Rent
    4,043       3,711       7,607       7,453  
Telephone and utilities
    166       105       238       189  
Transfer agent fees
    5,048       1,130       5,048       2,301  
Travel and automotive
    3,266       1,054       3,288       5,096  
Interest expense
    41,605       57,910       85,856       97,809  
      112,547       126,357       195,749       211,267  

Sense Technologies, Inc. had selling, general and administrative expenses of $195,749 for the six month period ended August 31, 2012 compared to selling, general and administrative expenses of $211,267 for the six month period ended August 31, 2011, a decrease in selling, general and administrative expenses of  7% from the prior period. 

General and administrative expenses of $112,547 for the three month period ended August 31, 2012 compared to selling, general and administrative expenses of $126,357 for the three month period ended August 31, 2011, an 11% decrease in selling, general and administrative expenses from the prior period. 

Advertising and marketing fees decreased as compared to the prior six month period. We had marketing fees of $0 and $2,876 for the six month period ended August 31, 2012 and 2011, respectively.

For the three month period advertising and marketing fees decreased 100%. We had marketing fees of $0 and $70 for the three month period ended August 31, 2012 and 2011, respectively.

Consulting fees increased from $36,172 for the six month period ended August 31, 2011 to $44,500 for the six month period ended August 31, 2012. The increase was a result of consulting related to Guardian Alert product sales.

Consulting fees increased from $22,172 for the three month period ended August 31, 2011 to $33,500 for the three month period ended August 31, 2012. The increase was a result of the increase of consulting mainly related to Scope Out® product.

 
Page 13

 
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 decreased from $20,509 in the six month period ended August 31, 2011 to $13,385 for the six month period ended August 31, 2012.

Legal and accounting fees decreased from $19,365 in the three month period ended August 31, 2011 to $6,290 for the three month period ended August 31, 2012.

Following summarizes the overall operations results for the three month period ended August 31:
 
               
Increase
   
%  Increase
 
   
2012
   
2011
   
( Decrease)
   
(decrease)
 
                         
Sales
   
140,302
     
62,351
     
77,951
     
125.02
 
Direct Costs
   
84,119
     
87,377
     
(3,258
)
   
(3.73
)
General and Administrative expenses
   
195,749
     
211,267
     
(15,518
)
   
( 7.35
)
Net Loss
   
(139,566
)
   
(236,293
)
   
(96,727
)
   
(40.93
)
Basic and Diluted Loss per share
   
(.00
)
   
(.00
)
               
 
We had a loss from operations of $139,566 for six month period ended August 31, 2012, compared to a loss from operations of $236,293 for the six month period ended August 31, 2011, a decrease in loss from operations of $96,727 from the prior year.
 
Liquidity and Capital Resources

Our cash position at August 31, 2012 was $(15,888) 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 3,679,847 and 3,590,695 as of August 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 $62,356 in 2012, compared to $362,458 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 $62,356 in 2012 compared to net cash provided of $361,708 in 2011.

In 2012, we received $58,500 through subscriptions to our common shares.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
 
Not applicable.
 
 
Page 14

 
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 August 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.
 
 
Page 15

 
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 August 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 August 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

 
 
Page 16

 
 
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.
 
     
     
December 14, 2012
/s/ BRUCE E. SCHREINER
 
 
Bruce E. Schreiner
 
 
Chief Executive Officer, President, Director, Chief Financial Officer and Principal Accounting Officer
 
 
 

 
Page 17