Attached files
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EX-32.1 - EX-32.1 - SENSE TECHNOLOGIES INC | ex32-1.htm |
EX-31.1 - EX-31.1 - SENSE TECHNOLOGIES INC | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
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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 November 30, 2016
OR
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☐
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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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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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 May 5, 2017
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Common Stock
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16,185,289 shares
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Sense Technologies Inc. Form 10-Q
PART I-FINANCIAL INFORMATION
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1
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ITEM 1.
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1
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2
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3
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4
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5
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6
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ITEM 2.
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15
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ITEM 3.
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18
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ITEM 4.
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19
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PART II-OTHER INFORMATION
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20
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ITEM 1.
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20
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ITEM 1A.
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20
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ITEM 2.
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20
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ITEM 3.
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20
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ITEM 4.
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20
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ITEM 5.
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20
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ITEM 6.
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20
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21
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PART I – FINANCIAL INFORMATION
SENSE TECHNOLOGIES INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOVEMBER 30, 2016
(Stated in US Dollars)
(Unaudited)
SENSE TECHNOLOGIES, INC.
As of November 30, 2016 and February 29, 2016
(Stated in US Dollars)
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November 30
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February 29
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||||||
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2016
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2016
|
||||||
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(Unaudited)
|
|||||||
|
||||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash in bank
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$
|
2,451
|
$
|
1,298
|
||||
Accounts receivable
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60,000
|
36,675
|
||||||
Inventory
|
386,263
|
-
|
||||||
Prepaids
|
66,351
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12,970
|
||||||
Total Current Assets
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515,065
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50,943
|
||||||
Fixed Assets | ||||||||
Land – SNP
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52,500
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-
|
||||||
Leasehold Improvements – SNP
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253,389
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-
|
||||||
Building and fixtures - SNP
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3,722,350
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-
|
||||||
Furniture, fixtures and equipment – SNP
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98,550
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-
|
||||||
Accumulated depreciation – SNP
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(28,400
|
)
|
-
|
|||||
Total fixed assets
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4,098,389
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-
|
||||||
Other Assets
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||||||||
Deposit
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800
|
800
|
||||||
Goodwill – SNP
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5,466,241
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-
|
||||||
Total Other Assets
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5,467,041
|
800
|
||||||
Total Assets
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$
|
10,080,495
|
$
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51,743
|
||||
|
||||||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts payable
|
$
|
471,003
|
$
|
524,516
|
||||
Accounts payable-related party
|
35,884
|
35,884
|
||||||
Accrued expenses
|
2,375,601
|
1,186,047
|
||||||
Accrued expenses-related party
|
70,811
|
70,811
|
||||||
Royalty payable – related party
|
480,000
|
480,000
|
||||||
Notes payable, current portion
|
2,322,861
|
1,190,006
|
||||||
Notes payable, current portion – default
|
234,734
|
168,184
|
||||||
Notes payable – related party
|
295,718
|
439,590
|
||||||
Advances payable
|
123,305
|
-
|
||||||
Advances payable – related entity
|
73,183
|
60,158
|
||||||
Dividends payable
|
447,974
|
424,281
|
||||||
Convertible promissory notes payable - default
|
584,447
|
584,447
|
||||||
Total Current Liabilities
|
7,515,521
|
5,163,924
|
||||||
Long-Term Liabilities
|
||||||||
Convertible notes payable
|
800,000
|
-
|
||||||
Debt Discount
|
(739,360
|
)
|
-
|
|||||
Notes payable
|
730,432
|
-
|
||||||
Notes payable – related party
|
288,312
|
62,719
|
||||||
Total Long-Term Liabilities
|
1,079,384
|
62,719
|
||||||
Total Liabilities
|
8,594,905
|
5,226,643
|
||||||
|
||||||||
STOCKHOLDERS’ DEFICIENCY
|
||||||||
Class A preferred shares, without par value, redeemable at $1 per share 20,000,000 shares authorized, 315,914 shares issued at November 30, 2016 (February 29, 2016: 315,914)
|
315,914
|
315,914
|
||||||
Class B preferred shares, without par value, redeemable at $10 per share, 700,000
authorized, 700,000 shares issued at November 30, 2016 (February 29, 2016: 0)
|
5,460,000
|
-
|
||||||
Common stock, without par value 500,000,000 shares authorized, 16,185,289 shares issued at November 30, 2016 (February 29, 2016: 13,687,678)
|
16,683,352
|
15,914,794
|
||||||
Common stock payable
|
965,049
|
244,849
|
||||||
Additional paid-in capital
|
800,000
|
-
|
||||||
Accumulated Deficit
|
(22,738,725
|
)
|
(21,650,457
|
)
|
||||
Total Stockholders’ Deficit
|
1,485,590
|
(5,174,900
|
)
|
|||||
Total Liabilities and Stockholders’ Deficit
|
$
|
10,080,495
|
$
|
51,743
|
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES INC.
For the three and nine months ended November 30, 2016 and 2015
(Stated in US Dollars)
(Unaudited)
|
Three months ended
|
Nine months ended
|
||||||||||||||
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November 30,
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November 30,
|
||||||||||||||
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2016
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2015
|
2016
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2015
|
||||||||||||
|
||||||||||||||||
Sales
|
$
|
326,394
|
$
|
103,995
|
$
|
383,394
|
$
|
222,483
|
||||||||
Direct costs
|
119,042
|
15,776
|
173,470
|
88,784
|
||||||||||||
|
||||||||||||||||
Gross profit (loss)
|
207,352
|
88,219
|
209,924
|
133,699
|
||||||||||||
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||||||||||||||||
Operating Expenses
|
||||||||||||||||
Advertising and promotion
|
150
|
4,050
|
150
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6,797
|
||||||||||||
Consulting fees
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263,774
|
66,185
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610,738
|
133,185
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||||||||||||
Contract labor
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1,500
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3,000
|
7,500
|
9,000
|
||||||||||||
Depreciation
|
28,400
|
-
|
28,400
|
-
|
||||||||||||
Engineering costs
|
8,337
|
-
|
11,711
|
874
|
||||||||||||
Filing fees
|
-
|
400
|
9,931
|
8,666
|
||||||||||||
Insurance
|
19,024
|
10,666
|
42,561
|
30,904
|
||||||||||||
Bank charges
|
973
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6,415
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2,828
|
7,581
|
||||||||||||
Legal and accounting
|
(117,249
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)
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2,075
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44,584
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38,901
|
|||||||||||
Loan fee
|
200
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-
|
1,200
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-
|
||||||||||||
Office and miscellaneous
|
19,727
|
4,105
|
25,629
|
8,669
|
||||||||||||
Payroll expenses
|
18,420
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-
|
18,420
|
-
|
||||||||||||
Public relations
|
-
|
30,000
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3,500
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30,000
|
||||||||||||
Rent
|
5,380
|
2,860
|
11,750
|
10,161
|
||||||||||||
Repairs and maintenance
|
450
|
-
|
450
|
-
|
||||||||||||
Taxes and penalties
|
2,997
|
2,997
|
8,990
|
8,990
|
||||||||||||
Telephone and utilities
|
2,828
|
133
|
3,113
|
454
|
||||||||||||
Transfer agent fees
|
3,500
|
500
|
21,150
|
3,000
|
||||||||||||
Travel and automotive
|
2,064
|
2,950
|
2,205
|
3,638
|
||||||||||||
|
260,475
|
136,336
|
854,810
|
300,820
|
||||||||||||
Net operating loss
|
(53,123
|
)
|
(48,117
|
)
|
(644,886
|
)
|
(167,121
|
)
|
||||||||
|
||||||||||||||||
Other income and (expense)
|
||||||||||||||||
Gain on write-off of accounts payable
|
37,690
|
-
|
37,690
|
-
|
||||||||||||
Amortization of debt discount
|
(60,640
|
)
|
-
|
(60,640
|
)
|
-
|
||||||||||
Other expenses
|
(132,327
|
)
|
-
|
(132,327
|
)
|
-
|
||||||||||
Interest expense
|
(132,560
|
)
|
(44,453
|
)
|
(264,411
|
)
|
(149,887
|
)
|
||||||||
|
(287,837
|
)
|
(44,453
|
)
|
(419,688
|
)
|
(149,887
|
)
|
||||||||
Net loss
|
(340,960
|
)
|
(92,570
|
)
|
(1,064,574
|
)
|
(317,008
|
)
|
||||||||
|
||||||||||||||||
Preferred dividends, paid or accrued
|
7,898
|
7,898
|
23,694
|
23,694
|
||||||||||||
|
||||||||||||||||
Net loss attributable to common stockholders
|
$
|
(348,858
|
)
|
$
|
(100,468
|
)
|
$
|
(1,088,268
|
)
|
$
|
(340,702
|
)
|
||||
|
||||||||||||||||
Basic and diluted loss per share
|
$
|
(0.02
|
)
|
$
|
(0.00
|
)
|
$
|
(0.07
|
)
|
$
|
(0.00
|
)
|
||||
|
||||||||||||||||
Weighted average number of shares outstanding
|
15,597,157
|
13,533,649
|
14,816,465
|
13,177,678
|
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES, INC.
For the nine months ended November 30, 2016 and 2015
(Stated in US Dollars)
(Unaudited)
|
2016
|
2015
|
||||||
Operating Activities
|
||||||||
Net loss for the period
|
$
|
(1,064,574
|
)
|
$
|
(317,008
|
)
|
||
Adjustments to reconcile net loss to net cash used in
Operating activities:
|
||||||||
Depreciation
|
28,400
|
-
|
||||||
Amortization of debt discount
|
60,639
|
960
|
||||||
Common shares issued for services
|
205,958
|
30,000
|
||||||
Changes in non-cash working capital balances related to operations:
|
||||||||
Accounts Receivable
|
(23,325
|
)
|
(10,500
|
)
|
||||
Inventory
|
15,616
|
-
|
||||||
Prepaids
|
(53,381
|
)
|
3,696
|
|||||
Accounts payable
|
(53,513
|
)
|
(45,170
|
)
|
||||
Accrued expenses
|
139,445
|
111,296
|
||||||
Advances payable
|
136,330
|
(59,600
|
)
|
|||||
Net cash used in operating activities
|
(608,405
|
)
|
(286,326
|
)
|
||||
Investment Activities
|
||||||||
Acquisition of R&D USA, LLC
|
(800,000
|
)
|
-
|
|||||
Net cash used in investment activities
|
(800,000
|
)
|
-
|
|||||
Financing Activities
|
||||||||
Borrowing on notes payable
|
1,079,469
|
187,635
|
||||||
Repayment on notes payable
|
(172,711
|
)
|
(106,309
|
)
|
||||
Proceeds from common stock issued and payable for cash
|
502,800
|
205,000
|
||||||
Net cash provided by financing activities
|
1,409,558
|
286,326
|
||||||
|
||||||||
Increase (decrease) in cash during the period
|
1,153
|
-
|
||||||
|
||||||||
Cash, beginning of period
|
1,298
|
-
|
||||||
|
||||||||
Cash, end of period
|
$
|
2,451
|
$
|
-
|
||||
|
||||||||
Supplemental Disclosures of Cash Flow Information:
|
||||||||
|
||||||||
Cash Paid for Interest
|
$
|
60,365
|
$
|
25,120
|
||||
Stock Issued from Common Stock Payable
|
$
|
309,000
|
$
|
220,000
|
||||
Stock Issued for Inducement
|
$
|
-
|
$
|
960
|
||||
Non-Cash Disclosures of Cash Flow Information:
|
||||||||
Accrual of Preferred Stock Dividend
|
$
|
23,694
|
$
|
23,694
|
||||
Discount on convertible notes payable
|
$
|
800,000
|
$
|
-
|
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES, INC.
For the nine months ended November 30, 2016 and year end February 29, 2016
(Stated in US Dollars)
|
Common Stock
|
Preferred Stock Class A
|
Preferred Stock Class B
|
Common
|
Additional
|
|||||||||||||||||||||||||||||||||||
|
Issued
|
Issued
|
Issued
|
Stock
|
Paid-In
|
Accumulated
|
||||||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Payable
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Balance, February 28, 2015
|
12,704,345
|
$
|
15,619,794
|
315,914
|
$
|
315,914
|
-
|
$
|
-
|
$
|
244,889
|
$
|
-
|
$
|
(21,047,354
|
$
|
(4,866,757
|
)
|
||||||||||||||||||||||
Common stock issued for cash
|
150,000
|
45,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
45,000
|
||||||||||||||||||||||||||||||
Common stock issued for subscription
|
733,333
|
220,000
|
-
|
-
|
-
|
-
|
(220,000
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||
Common stock issued for services
|
100,000
|
30,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
30,000
|
||||||||||||||||||||||||||||||
Common shares subscribed
|
-
|
-
|
-
|
-
|
-
|
-
|
219,000
|
-
|
-
|
219,000
|
||||||||||||||||||||||||||||||
Common shares payable for inducement
|
-
|
-
|
-
|
-
|
-
|
-
|
960
|
-
|
-
|
960
|
||||||||||||||||||||||||||||||
Dividends accrued
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(31,591
|
(31,591
|
)
|
|||||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(571,512
|
(571,512
|
)
|
|||||||||||||||||||||||||||||
Balance, February 29, 2016
|
13,687,678
|
15,914,794
|
315,914
|
315,914
|
-
|
--
|
244,849
|
-
|
(21,650,457
|
(5,174,900
|
)
|
|||||||||||||||||||||||||||||
Common and Preferred stock issued for R&D USA, LLC
|
-
|
-
|
-
|
-
|
700,000
|
5,460,000
|
780,000
|
-
|
-
|
6,240,000
|
||||||||||||||||||||||||||||||
Common stock issued for cash
|
916,667
|
282,800
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
282,800
|
||||||||||||||||||||||||||||||
Common stock issued for subscription
|
1,030,001
|
309,000
|
-
|
-
|
-
|
-
|
(309,000
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||
Common shares issued for services
|
551,000
|
176,758
|
-
|
-
|
-
|
-
|
29,200
|
-
|
-
|
205,958
|
||||||||||||||||||||||||||||||
Common shares subscribed
|
-
|
-
|
-
|
-
|
-
|
-
|
220,000
|
-
|
-
|
220,000
|
||||||||||||||||||||||||||||||
Rounding shares issued
|
(57
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||
BCF on convertible notes payable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
800,000
|
- |
800,000
|
||||||||||||||||||||||||||||||
Dividends accrued
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(23,694
|
(23,694
|
)
|
|||||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,064,574
|
(1,064,574
|
)
|
|||||||||||||||||||||||||||||
Balance, November 30, 2016 (unaudited)
|
16,185,289
|
$
|
16,683,352
|
1,015,914
|
$
|
5,775,914
|
700,000
|
$
|
5,460,000
|
$
|
965,049
|
$
|
800,000
|
$
|
(22,738,725
|
$
|
1,485,590
|
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
SENSE TECHNOLOGIES, INC.
(Unaudited)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
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 Sense Technologies, Inc. and it’s wholly-owned subsidiary, Sense Natural Products, Inc. (the Company) will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values August be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.
While the information presented in the accompanying nine months to November 30, 2016 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, 2016.
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, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) (“ASU 2015-16”). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.
In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.
NOTE 2 – GOING CONCERN
At November 30, 2016, the Company had not yet achieved profitable operations, had an accumulated deficit of $22,738,725 (February 29, 2016 - $21,650,457) since its inception and incurred a net loss of $1,064,574 (2015 - $317,008) for the nine months ended November 30, 2016 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, 2017 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 November 30, 2016, included in prepaid expenses $66,351 (February 29, 2016: $12,970) is $25,063 for an insurance premium for the directors of the Company financed through AFCO. Insurance policy is from August 23, 2016 to August 23, 2017.
Prepaid insurance of $39,100 for an insurance premium for the directors of Company, insurance policy is from September, 2017 to September, 2018 and $2,188 for utilities paid for December 2016.
NOTE 4 – FIXED ASSETS
The following is a summary of this category, including estimated useful lives of the assets:
November 30, 2016
|
November 30, 2015
|
|||||||
Land
|
$
|
52,500
|
$
|
-
|
||||
Leasehold improvements (7yrs)
|
253,389
|
-
|
||||||
Building and fixtures (7yrs)
|
3,722,350
|
-
|
||||||
Furniture, fixtures and equipment (7yrs)
|
98,550
|
-
|
||||||
Subtotal
|
4,126,789
|
-
|
||||||
Less: Accumulated Depreciation
|
(28,400
|
)
|
-
|
|||||
Total
|
$
|
4,098,389
|
$
|
-
|
NOTE 5 – INTANGIBLES
Intangible assets are comprised of Goodwill in the amount of $5,466,241 as part of the consideration for the acquisition of the soy meal business assets as described in Note 13.
NOTE 6 – ACCRUED EXPENSES/ACCRUED EXPENSES – RELATED PARTY
Other liabilities and accrued expenses consisted of the following:
|
November 30,
|
February 29,
|
||||||
|
2016
|
2016
|
||||||
Accounts payable
|
$
|
471,003
|
$
|
524,516
|
||||
Accounts payable – related party
|
35,884
|
35,884
|
||||||
Accrued royalties payable – Guardian Alert
|
480,000
|
480,000
|
||||||
|
||||||||
Detail of Accrued Expenses:
|
||||||||
Accrued interest payable
|
1,153,060
|
952,872
|
||||||
Accrued non-resident withholding taxes, including accrued interest
|
201,119
|
193,556
|
||||||
Accrued taxes payable
|
37,796
|
39,619
|
||||||
Accrued payroll liabilities
|
3,212
|
-
|
||||||
Accrued cash loan fees
|
157,500
|
-
|
||||||
Customer liability – FC Stone
|
822,914
|
-
|
||||||
Total accrued expenses
|
$
|
2,375,601
|
$
|
1,186,047
|
||||
|
||||||||
Detail of Accrued Expense – Related party:
|
||||||||
Accrued payroll – related party
|
53,694
|
53,694
|
||||||
Other accrued liabilities – related party
|
17,117
|
17,117
|
||||||
Total accrued expenses – related party
|
$
|
70,811
|
$
|
70,811
|
As of November 30, 2016, included in the related party payables is $33,495 (February 29, 2016: $33,495) and $2,389 (February 29, 2016: $2,389) owing to directors of the Company, an accounting firm in which a director of the Company is a partner and a company controlled by the Company’s President and a director with respect to unpaid fees, purchases and expenses, $480,000 (February 29, 2016: $480,000) owing to stockholders of the Company in respect of royalties payable and $53,694 (February 29, 2016: $53,694) owing to the former president of the Company in respect of unpaid wages.
At November 30, 2016, advances payable of $73,183 (February 29, 2016: $60,158) are due to a company controlled by a director of the Company.
The accounts payable and advances payable are unsecured, non-interest bearing and have no specific terms of repayment. Sense Technologies, Inc. plans to use the funds from sales, and if we are able to raise funds through equity issuances, to fund the payment of delinquent liabilities.
NOTE 7 – ROYALTIES PAYABLE
Pursuant to the licenses with ScopeOut® license called for $150,000 to be paid over two years (paid) along with a royalty of 10% of wholesale price for each ScopeOut® unit sold, but not less than $2.00 per unit. In order to maintain the exclusive license for the ScopeOut® products, in accordance with the license agreement with Palowmar Industries, LLC, we are required to pay royalties to the licensor based on the following minimum quantities of units sold:
a) |
30,000 units per year beginning in years 1-2
|
b) |
60,000 units per year beginning in years 3-4
|
c) |
100,000 units per year beginning in years 5 and above.
|
During 2010, the Company re-negotiated the exclusive license agreement with the Scope Out® inventor. All prior minimum royalties were eliminated, and accordingly, the Company recorded $602,907 additional capital for a related party write-off.
Prepaid royalties payable under the new license are $5,000 per month for twelve months commencing September 1, 2010. The new agreement also calls for a 5% royalty with a $.75 per unit maximum “minimum royalty” to retain exclusivity with the following volumes:
End of calendar year containing the second anniversary:
|
30,000 units
|
End of calendar year containing the third anniversary:
|
60,000 units
|
End of calendar year containing the fourth anniversary:
|
110,000 units
|
End of calendar year containing the fifth anniversary and thereafter:
|
125,000 units
|
No royalties are currently accrued as we have not yet reached the end of the calendar year containing the second anniversary.
Such “calendar year” commencing the minimum royalties to retain exclusivity is the first year within which an Original Equipment Manufacturer (OEM) and/or Tier 1 manufacturer sub-licenses the Scope Out® product.
For any sub-licenses of the product, royalties are shared as follows:
|
OEM/Tier 1 Supplier Sub Licensor:
|
65% Sense Technologies
|
|
|
35% Inventor
|
|
|
|
|
Any other Sub-Licensor:
|
50% Sense Technologies
|
|
|
50% Inventor
|
The current royalties accrued for Scope Out royalties are $nil as of November 30, 2016 and February 29, 2016.
Pursuant to the Guardian Alert licenses, we are required to make royalty payments to the licensors and meet sales targets as follows:
a) |
$6.00(US) per unit on the first one million units sold;
|
b) |
thereafter, the greater of $4.00(US) per unit sold or 6% of the wholesale selling price on units sold; and
|
c) |
50% of any fees paid to Sense in consideration for tooling, redesign, technical or aesthetic development or, should the licensors receive a similar fee, the licensors will pay 50% to Sense.
|
In order to retain the exclusive right to this license we incurred minimum royalty fees. Because we were unable to pay these fees, we accrued the royalties as a payable. Royalties accruals were ceased in 2004 and rights of exclusivity were forfeited. Royalties payable to Guardian Alert are $480,000 and $480,000 as of November 30, 2016 and February 29, 2016, respectively.
NOTE 8 – NOTES PAYABLE, CONVERTIBLE NOTES PAYABLE, AND NOTES PAYABLE – RELATED PARTY
|
November 30,
|
February 29,
|
||||||
|
2016
|
2016
|
||||||
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due February 23, 2018 and January 7, 2018.
|
$
|
282,029
|
$
|
282,029
|
||||
Promissory notes payable to related party, unsecured, bearing interest at the rate of 12% per annum with repayment between December, 2016 and December, 2017.
|
439,590
|
439,590
|
||||||
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due February 23, 2018.
|
20,057
|
20,057
|
||||||
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due March 30, 2012. In default.
|
10,000
|
10,000
|
||||||
Finance agreement on directors’ and officers’ liability policy secured by the unearned insurance premium, bearing interest at 7.75%, maturing June 23, 2016. This agreement is repayable in monthly principal and interest payments of $2,174.
|
-
|
6,574
|
||||||
Finance agreement on directors and officers liability policy, bearing interest at 7.75% per annum, due December 2016.
|
710
|
-
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 5.25% per annum, due in December 2007. In default.
|
100,000
|
100,000
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing January 26, 2018.
|
59,500
|
59,500
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing June 1, 2014. In default.
|
54,734
|
54,734
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 7% per annum, maturing July 27, 2017.
|
50,000
|
50,000
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 5.5% per annum, maturing between May, 2017 and October, 2017.
|
165,000
|
65,000
|
||||||
Promissory note payable, personally guaranteed by a director of the Company, bearing interest at 4.0% per annum and maturing August 27, 2018.
|
44,440
|
62,719
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 7% per annum, maturing June 4, 2016 and July 17, 2017. In default, $20,000.
|
30,000
|
30,000
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 5.5% per annum, maturing December 24, 2017.
|
25,000
|
25,000
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 5.5% per annum, maturing between October, 2016 and October, 2017. In default, $50,000.
|
165,000
|
165,000
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing August 8, 2017.
|
-
|
35,000
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 12% per annum, maturing between June and December, 2017.
|
130,000
|
133,450
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 12% per annum with repayment due February 23, 2017.
|
313,846
|
313,846
|
||||||
Promissory note payable, unsecured, bearing interest at the rate of 10% per annum with repayment due between January and August, 2017.
|
18,350
|
-
|
||||||
Finance agreement on directors’ and officers’ liability policy secured by the unearned insurance premium, bearing interest at 7.05%, maturing June 23, 2017. This agreement is repayable in monthly principal and interest payments of $2,437.
|
18,712
|
-
|
||||||
Finance agreement on directors and officers liability policy, bearing interest at 7.75% per annum, due July 2017.
|
32,289
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, bearing interest at the rate of 12% per annum with repayment due September 8, 2019.
|
400,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, bearing interest at the rate of 12% per annum with repayment due September 8, 2019
|
338,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, bearing interest at the rate of 12% per annum with repayment due September 8, 2019
|
62,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
25,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
13,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due July 1, 2017.
|
592,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
28,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
15,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
136,100
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 7, 2017.
|
7,500
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
17,500
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 1, 2017.
|
13,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 1, 2017.
|
73,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with no repayment date.
|
51,700
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.
|
130,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.
|
75,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 7, 2017.
|
15,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
35,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.
|
20,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.
|
311,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due July 1, 2017.
|
311,000
|
-
|
||||||
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.
|
36,000
|
-
|
||||||
Promissory note payable, no stated interest or maturity date
|
8,000
|
8,000
|
||||||
|
4,672,057
|
1,860,499
|
||||||
Less: current portion
|
(2,853,313
|
)
|
(1,797,780
|
)
|
||||
Long-term portion
|
$
|
1,818,744
|
$
|
62,719
|
At November 30, 2016, the Company is in arrears with respect to five of the above notes payable totaling $234,734.
|
November 30,
2016
|
February 29,
2016
|
||||||
Convertible notes payable:
|
||||||||
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 August be redeemed at any time after August 30, 2005. These notes August be converted into common shares of the Company at any time prior to demand for payment at the rate of one common share for each $0.29 of principal and interest owed. As of February 28, 2014 and February 28, 2013, these notes were in default.
|
$
|
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
|
At November 30, 2016, the Company is in arrears with respect to nine convertible notes payable totaling $584,447.
Future minimum note payments as of November 30, 2016 are as follows:
Years Ending February 28,
|
||||
2017
|
$
|
2,330,193
|
||
2018
|
914,331
|
|||
2019
|
901,600
|
|||
Thereafter
|
525,933
|
|||
Total
|
$
|
4,672,057
|
NOTE 9 – PREFERRED STOCK
The Class A preferred shares entitle the holders thereof to cumulative dividends of $0.10 per share annually and the right to convert the preferred shares into common shares at the rate of $0.29 per share. The shares were redeemable at the option of the Company at any time after August 30, 2005 at the redemption price of $1.00 per share plus payment of unpaid dividends.
Dividends on Class A preferred shares are payable annually on July 31 of each year. During the nine months ended November 30, 2016, the Company accrued dividends payable of $23,694 (February 29, 2016: $31,591). Dividends are currently accruing and total $447,974.
The Company issued 700,000 Class B preferred stock as part of the consideration for the acquisition of the soy meal business assets as described in Note 13.
The Class B preferred shares may be redeemed in part or in whole by the Corporation at is sole option, at any time after September 7, 2016. Redemption of the Class B preferred shares by the Corporation will be made pro-rata to the holders thereof, at a redemption price of $10 per Class B preferred shares. The shares are convertible into common shares at the rate of 20 common shares for each $10 Class B preferred share at any time by election of the preferred shares holders. Holders of the Class B preferred shares shall be entitled to currently vote based upon the common share equivalence.
NOTE 10 – COMMON STOCK
a) Common stock issued for cash
During the nine months ended November 30, 2016, the Company received $220,000 of common stock subscribed in common stock payable for 770,334 shares. During the nine months ended November 30, 2016, the Company issued 916,667 shares of common stock for cash proceeds of $282,800. During the nine months ended November 30, 2016, the Company issued 1,030,001 shares of common stock from stock payable totaling $309,000.
During the year ended February 29, 2016, the Company issued 150,000 shares of common stock for cash proceeds of $45,000. As of February 29, 2016, there were be 730,000 shares valued at $219,000 subscribed but not issued.
The Company issued promissory notes with stock granted as an incentive. The stock was valued with relative fair value of common stock compared to fair market value of debt, common stock valued with closing price on date of agreement at $0.02. $960 recorded as a debt discount. As the debt was due on demand, the discount was fully expensed in the first quarter ended May 31, 2015.
The Company issued 396,667 shares of common stock for cash proceeds of $119,000 which was received in prior years and was initially record in in stock issued from stock payable as of February 29, 2016.
The Company issued 733,333 shares of common stock for cash proceeds of $220,000 which was received in prior years and was recorded as Common Stock Payable at February 28, 2015.
b) Common stock for services
During the year ended February 29, 2008, the Company granted an officer and a director of the Company to the right to receive 2,500,000 common shares for past services provided. The fair value of each common share was $0.08 on the grant date. The shares, fully vested and non-forfeitable on the grant date, were issued in 2009. This balance is presented as Common Stock as of February 28, 2010. Further, in connection with a consulting services agreement, the Company also committed to issue 1,111,110 common shares with fair value of $88,889, being $0.08 per share based on the quoted market price of the Company’s common shares. This balance is presented as Common Stock Payable as of November 30, 2016 and February 29, 2016.
During the nine months ended November 30, 2016, the Company issued 495,000 common shares for consulting services and 56,000 common shares for interest expense and $29,200 of common stock payable for services. The fair value of each common share was $0.30 based on the closing trading price on the issue date and was recorded as consulting expense of $205,958.
During the year ended February 29, 2016, the Company issued 100,000 common shares for consulting services. The fair value of each common share was $0.30 based on the closing trading price on the grant date and was recorded as consulting expense of $30,000.
The Company issued 1,000,000 shares of common stock valued at $780,000 as part of the consideration for the acquisition of the soy meal business assets as describe in Note 13.
c) Common stock rounding shares
On April 21, 2016, the Company completed a 10-for-one reverse split of its issued and outstanding shares of common stock. Shares were rounded down 57 shares because of this split.
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.
|
November 30, 2016
|
|||||||
|
Options
|
Weighted Average
Exercise Price
|
||||||
Outstanding and exercisable at beginning of the year
|
300,000
|
$
|
0.40
|
|||||
Issued during the year
|
-
|
-
|
||||||
Outstanding and exercisable, November 30, 2016
|
300,000
|
$
|
0.40
|
|
February 29, 2016
|
|||||||
|
Options
|
Weighted Average
Exercise Price
|
||||||
Outstanding and exercisable at beginning of the year
|
300,000
|
$
|
0.40
|
|||||
Issued during the year
|
-
|
-
|
||||||
Outstanding and exercisable, February 29, 2016
|
300,000
|
$
|
0.40
|
At November 30, 2016, 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
|
|||||
|
|||||||
300,000
|
$
|
0.30
|
December 31, 2016
|
d) Warrants
As of November 30, 2016 and February 29, 2016, the Company had no outstanding warrants.
NOTE 11 – RELATED PARTY TRANSACTIONS
The Company incurred the following items with directors and companies with common directors and shareholders:
|
November 30,
|
|||||||
|
2016
|
2015
|
||||||
Interest expense
|
$
|
26,375
|
$
|
26,375
|
As of November 30, 2016, included in accounts payable is $33,495 (February 29, 2016: $33,495) owing to an accounting firm in which a director of the Company is a partner and $2,389 (February 29, 2016: $2,389) to a shareholder with respect to unpaid fees and interest on promissory notes, $480,000 (February 29, 2016: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, and $53,694 (February 29, 2016: $53,694) owing to the former president of the Company in respect of unpaid wages.
As of November 30, 2016, included in advances payable is $73,183 (February 29, 2016: $60,158) owed to a company controlled by a director.
As of November 30, 2016, promissory notes payable of $439,590 (February 29, 2016: $439,590 is due to a profit-sharing and retirement plan administered by a director of the Company. Terms are:
Date Due:
|
Amount
|
|||
August, 2016
|
$
|
12,500
|
||
April, 2016
|
15,000
|
|||
November, 2016
|
27,500
|
|||
December, 2016
|
384,590
|
|||
Total
|
$
|
439,590
|
All bear interest at 12% per annum.
As of November 30, 2016, promissory note payable of $44,440 (February 29, 2016: $62,719) is personally guaranteed by a related party of the director of the company.
NOTE 12 – CONCENTRATIONS AND CONTINGENCIES
Concentrations
Approximately 100% of the Company’s revenues for Guardian Alert are obtained from one (1) customer. 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 nine months ended November 30, 2016, one (1) customer accounted for approximately 100% of Guardian Alert revenue. For the nine months ended November 30, 2015, there were two (2) customer that accounted for 99% of Guardian Alert revenue.
Contingencies
During the normal course of business we from time to time be involved in litigation or other possible loss contingencies. As of November 30, 2016 and November 30, 2015 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 13 – SOY MEAL ACQUISITION
On September 7, 2016, the Company entered into a final agreement with R and D, USA, LLC for the acquisition of the business assets comprising R and D USA, LLC’s means of production of soy meal and soy oil products and non-GMO soy products, certified organic soy products, refined soy oils, agricultural soy oils, and other related specialty soy based soil enhancer crop products, including all intellectual and intangible property related thereto.
It immediately transferred these assets into its newly created wholly-owned subsidiary, Sense Natural Products, Inc.
The acquisition was accounted for as a business combination and we valued all assets and liabilities acquired at their fair value on the date of acquisition. An independent valuation expert assisted us in determining these fair values. The assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition.
The allocation of the purchase price to assets and liabilities based upon fair value determinations was as follows:
Inventory
|
$
|
401,879
|
||
Land
|
52,500
|
|||
Leasehold Improvements
|
253,389
|
|||
Buildings and Fixtures
|
3,722,350
|
|||
Furniture and Equipment
|
98,550
|
|||
Goodwill
|
5,466,241
|
|||
Total assets acquired
|
9,994,909
|
|||
Liabilities assumed
|
(2,954,909
|
)
|
||
Net assets acquired
|
$
|
7,040,000
|
The purchase price consists of the following:
Cash paid
|
$
|
800,000
|
||
Common stock at closing and upon operation
|
780,000
|
|||
Preferred stock at closing
|
5,460,000
|
|||
Total purchase price
|
$
|
7,040,000
|
The following information presents unaudited pro forma consolidation results of operations for the nine months ended November 30, 0216 and the year ended February 29, 2016, as if the acquisition described above had occurred on the March 1, 2016 and March 1, 2015. The pro forma financial information is not necessarily indicative of the operating results that would have occurred if the acquisition been consummated as of the date indicated, nor are they necessarily indicative of future operating results.
Proforma financials for the nine months ended November 30, 2016:
Sense Technologies Inc
|
R&D USA LLC
|
Pro Forma Combined
|
||||||||||
Sales
|
147,000
|
$
|
669,740
|
816,740
|
||||||||
Direct Costs
|
38,416
|
288,054
|
326,470
|
|||||||||
Gross Profit
|
108,584
|
381,686
|
490,270
|
|||||||||
Operating Expenses
|
794,123
|
79,358
|
873,481
|
|||||||||
Net Operating Income (Loss)
|
(685,539
|
)
|
302,328
|
(383,211
|
)
|
|||||||
Other Income (Expenses)
|
(155,523
|
)
|
(264,165
|
)
|
(419,688
|
)
|
||||||
Net Income (Loss)
|
(841,062
|
)
|
38,163
|
(802,899
|
)
|
Proforma financials for the year ended February 29, 2016:
Sense Technologies Inc
|
R&D USA LLC
|
Pro Forma Combined
|
||||||||||
Sales
|
318,318
|
1,889,605
|
2,207,923
|
|||||||||
Direct Cost
|
111,868
|
1,304,354
|
1,416,222
|
|||||||||
Gross Profit
|
206,450
|
585,251
|
791,701
|
|||||||||
Operating Expenses
|
451,853
|
167,408
|
619,261
|
|||||||||
Net Operating Income (Loss)
|
(245,403
|
)
|
417,843
|
172,440
|
||||||||
Other Income (Expenses)
|
(326,109
|
)
|
59,144
|
(266,965
|
)
|
|||||||
Net Income (Loss)
|
(571,512
|
)
|
476,987
|
(94,525
|
)
|
NOTE 14 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through May 5, 2017, the date of which the financial statements were available to be issued.
Management’s Discussion And Analysis
Sense Technologies Inc. Form 10-Q
The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto for the period ended November 30, 2016 and our Financial Statements and notes thereto for the period ended November 30, 2015.
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 nine month period ended November 30, 2016 as compared to the three and nine month period ended November 30, 2015.
|
For the three months ended
|
For the nine months ended
|
||||||||||||||
|
November 30, 2016
|
November 30, 2015
|
November 30, 2016
|
November 30, 2015
|
||||||||||||
Sales
|
||||||||||||||||
Sales Guardian Alert
|
90,000
|
103,995
|
147,000
|
222,483
|
||||||||||||
Sales Scope Out
|
-
|
-
|
-
|
-
|
||||||||||||
Sales Soy Product
|
236,394
|
-
|
236,394
|
-
|
||||||||||||
|
326,394
|
103,995
|
383,394
|
222,483
|
Sales for the nine months ended November 30, 2016 decreased by 34% from $222,483 to $147,000 due to decreased demand for Guardian Alert. 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 of Guardian Alert for the three months ended November 30, 2016 decreased by 14% from $103,995 to $90,000 due to decrease sales from key customers.
Sales of soybean meal and other soybean ancillary products increased because the acquisition of the soybean business assets occurred during the quarter ended November 30, 2016.
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 nine months ended
|
||||||||||||||
|
November 30, 2016
|
November 30, 2015
|
November 30, 2016
|
November 30, 2015
|
||||||||||||
Direct Cost
|
||||||||||||||||
Scope Out Direct Costs
|
||||||||||||||||
Manufacturing expenses
|
-
|
-
|
-
|
-
|
||||||||||||
Research and development
|
-
|
-
|
-
|
-
|
||||||||||||
Commissions
|
-
|
-
|
-
|
-
|
||||||||||||
Royalties - related party
|
15,000
|
10,000
|
45,000
|
40,000
|
||||||||||||
Total Scope Out Direct Costs
|
15,000
|
10,000
|
45,000
|
40,000
|
||||||||||||
|
||||||||||||||||
Guardian Alert Direct Costs
|
||||||||||||||||
Manufacturing expenses
|
-
|
-
|
-
|
2,469
|
||||||||||||
Research and development
|
1,500
|
5,776
|
10,700
|
37,815
|
||||||||||||
Commissions
|
12,488
|
-
|
27,716
|
8,500
|
||||||||||||
Royalties
|
-
|
-
|
-
|
-
|
||||||||||||
Total Guardian Alert Direct Costs
|
13,988
|
5,776
|
38,416
|
48,784
|
||||||||||||
Soy Meal Direct Costs
|
||||||||||||||||
Product Costs
|
90,054
|
-
|
90,054
|
-
|
||||||||||||
Total Soy Meal Direct Costs
|
90,054
|
-
|
90,054
|
-
|
||||||||||||
Total Direct Costs
|
119,042
|
15,776
|
173,470
|
88,784
|
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 $10,000 for the three month periods ended November 30, 2016 and 2015, respectively.
Direct costs related to Scope Out® were $45,000 and $40,000 for the nine month period ended November 30, 2016 and 2015, respectively.
Direct costs related to Guardian Alert were $13,988 and $5,776for the three month period ending November 30, 2016 and 2015, respectively. This change represents a increase of 142%. Commission expenses were $12,488 and $nil for the three month period ended November 30, 2016 and 2015, respectively. Commission expense increased due to an increase in commissioned sales. Research and development expenses were $1,500 and $5,776 for the three month periods ended November 30, 2016 and 2015, respectively.
Direct costs related to Guardian Alert were $38,416 and $48,784 for the nine month period ending November 30, 2016 and 2015, respectively. This change represents a decrease of 22%. Commission expenses were $27,716 and $8,500 for the nine month period ended November 30, 2016 and 2015, respectively. Commission expense increased 226% due to an increase in commissioned sales. Manufacturing expenses were $nil and $2,469 for the nine month period ended November 30, 2016 and 2015, respectively. Manufacturing expenses in Direct Costs for the Guardian Alert® for the nine months ended in 2016 and 2015 represents assembly costs for the sales achieved for the same period. Research and development expenses were $10,700 and $37,815 for the nine month periods ended November 30, 2016 and 2016, respectively.
Direct costs related to soy meal were $90,054 and $nil for the three and nine month period ending November 30, 2016 and 2015, respectively.
Selling, General, and Administrative
|
||||||||||||||||
|
||||||||||||||||
|
For the three months ended
|
For the nine months ended
|
||||||||||||||
|
November 30, 2016
|
November 30, 2015
|
November 30, 2016
|
November 30, 2015
|
||||||||||||
Advertising
|
$
|
150
|
$
|
4,050
|
$
|
150
|
$
|
6,797
|
||||||||
Consulting fees
|
263,774
|
66,185
|
610,738
|
133,185
|
||||||||||||
Contract labor
|
1,500
|
3,000
|
7,500
|
9,000
|
||||||||||||
Depreciation
|
28,400
|
-
|
28,400
|
-
|
||||||||||||
Engineering costs
|
8,337
|
-
|
11,711
|
874
|
||||||||||||
Filing fees
|
-
|
400
|
9,931
|
8,666
|
||||||||||||
Insurance
|
19,024
|
10,666
|
42,561
|
30,904
|
||||||||||||
Bank charges
|
973
|
6,415
|
2,828
|
7,581
|
||||||||||||
Legal and accounting
|
(117,249
|
)
|
2,075
|
44,584
|
38,901
|
|||||||||||
Loan fee
|
200
|
-
|
1,200
|
-
|
||||||||||||
Office and miscellaneous
|
19,727
|
4,105
|
25,629
|
8,669
|
||||||||||||
Payroll expenses
|
18,420
|
-
|
18,420
|
-
|
||||||||||||
Public relations
|
-
|
30,000
|
3,500
|
30,000
|
||||||||||||
Rent
|
5,380
|
2,860
|
11,750
|
10,161
|
||||||||||||
Repairs and maintenance
|
450
|
-
|
450
|
-
|
||||||||||||
Tax penalties
|
2,997
|
2,997
|
8,990
|
8,990
|
||||||||||||
Telephone and utilities
|
2,828
|
133
|
3,113
|
454
|
||||||||||||
Transfer agent fees
|
3,500
|
500
|
21,150
|
3,000
|
||||||||||||
Travel and automotive
|
2,064
|
2,950
|
2,205
|
3,638
|
||||||||||||
Interest expense
|
132,560
|
44,453
|
264,411
|
149,887
|
||||||||||||
|
393,035
|
180,789
|
1,119,221
|
450,707
|
Sense Technologies, Inc. had selling, general and administrative expenses of $393,035 for the three month period ended November 30, 2016 compared to selling, general and administrative expenses of $180,789 for the three month period ended November 30, 2015, an increase in selling, general and administrative expenses of 117% from the prior period.
General and administrative expenses of $1,119,221 for the nine month period ended November 30, 2016 compared to selling, general and administrative expenses of $450,707 for the nine month period ended November 30, 2015, an increase in selling, general and administrative expenses of 148% from the prior period.
Consulting fees increased from $66,185 for the three month period ended November 30, 2015 to $263,774 for the three month period ended November 30, 2016. The increase was a result of consulting related to Guardian Alert product sales.
Consulting fees increased from $133,185 for the nine month period ended November 30, 2015 to $610,738 for the nine month period ended November 30, 2016. The increase 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 from a prior quarter were reclassified to consulting fees in the amount of $117,249 in the three month period ended November 30, 2016.
Legal and accounting fees increased from $38,901 in the nine month period ended November 30, 2015 to $44,584 for the nine month period ended November 30, 2016.
Following summarizes the overall operations results for the nine month period ended November 30:
Increase
|
% Increase
|
|||||||||||||||
2016
|
2015
|
( Decrease)
|
( decrease)
|
|||||||||||||
Sales
|
383,394
|
222,483
|
160,911
|
72.33
|
||||||||||||
Direct Costs
|
173,470
|
88,784
|
84,686
|
95.38
|
||||||||||||
General and Administrative expenses
|
1,119,221
|
450,707
|
668,514
|
148,32
|
||||||||||||
Net Loss
|
(1,064,574
|
)
|
(317,008
|
)
|
747,566
|
235.81
|
||||||||||
Basic and Diluted Loss per share
|
$
|
(0.07
|
)
|
$
|
(0.00
|
)
|
We had a loss from operations of $1,064,574 for nine month period ended November 30, 2016, compared to a loss from operations of $317,008 for the nine month period ended November 30, 2015, an increase in loss from operations of $747,566 from the prior year.
Liquidity and Capital Resources
Our cash position at November 30, 2016 was $2,451 as compared to $1,298 at February 29, 2016. This 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 $7,000,456 and $5,112,981 as of November 30, 2016 and February 29, 2016, respectively. If we are unable to raise adequate working capital for fiscal 2017, 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 2017, 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 $608,405 in 2016, compared to $268,326 in 2015. The increase in cash used in 2016 was largely due to the increase in inventory, prepaids and accounts payable.
Net cash used in investing activities
Net cash used for investing activities was $800,000 in 2016, compared to $nil in 2015. The purchase of R&D USA, LLC used cash of $800,000 for the assets purchased.
Net cash provided by financing activities
Net cash provided by financing activities was $1,409,558 in 2016 compared to net cash provided of $286,326 in 2015.
During the nine months ended November 30, 2016, we received $440,000 through subscriptions to our common shares compared to $130,000 during the nine months ended November 30, 2015.
Not applicable.
Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer (who is also acting in the capacity as the principal accounting officer), of the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Company’s principal executive officer and principal financial officer has concluded that, as of the end of the period covered in this report, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
The Company, including its principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures or its internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, the Company performed additional analysis and other post-closing procedures in an effort to ensure its consolidated financial statements included in this quarterly report have been prepared in accordance with generally accepted accounting principles. Accordingly, the Company believes that the financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.
The Company’s internal conclusion related to its disclosure and procedural controls is due to the number and magnitude or changes to its draft 10Q recommended by the Company’s independent auditor.
The Company plans to continue working with competent outside professionals to help it with quarterly reporting and if its business plan is successful additional improvements in the Company’s accounting department will be made.
Changes in Internal Control over Financial Reporting
In addition, the Company with the participation of its chief executive officers have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended November 30, 2016 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
None.
There were no material changes in our risk factors from our Form 10-K for the year ended February 29, 2016.
There were no unregistered sales of equity securities during the nine months ended November 30, 2016.
None.
Not applicable.
Sense Technologies has entered an agreement with a global company to market the Guardian Alert® under a registered trade name.
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.
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May 8, 2017
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/s/ BRUCE E. SCHREINER
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Bruce E. Schreiner
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Chief Executive Officer, President, Director, Chief Financial Officer and Principal Accounting Officer
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