##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM
10-KSB/A
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 2-13328
For the fiscal year ending November 30, 2005
 SENTEX SENSING TECHNOLOGY, INC.
  New Jersey
    
    22-2333899(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 1801 East Ninth Street
    
    44114Cleveland, Ohio
    
    (Zip Code)(Address of principal executive offices)
 (216) 687-0289
 
 
 X
 X
  X




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X
  TABLE OF CONTENTS  Part IV Item 13  Exhibits, Financial Statement Schedules, and Reports on Form 8-K See Page 16ITEM 1 BUSINESSITEM 3 LEGAL PROCEEDINGSITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERSITEM 6 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDITEM 7 FINANCIAL STATEMENTSITEM 8 CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIALITEM 8A. CONTROLS AND PROCEDURESITEM 8B. OTHER INFORMATIONPART IIIITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACTITEM 10 EXECUTIVE COMPENSATIONITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERSITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 13 EXHIBIT LISTS AND REPORTS ON FORM 8-KITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICESSIGNATUREEX-31.1 CertificationEX-31.2 CertificationEX-32.1 CertificationEX-32.2 Certification    Table of Contents  
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State of Ohio, Department of Administrative Services v. IQ Solutions, LLC, et al.
  
   
  
   2005
    
    HIGH
    
    LOW1st Quarter
    
    .05
    
    .022nd Quarter
    
    .03
    
    .023rd Quarter
    
    .05
    
    .024th Quarter
    
    .09
    
    .01
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2004
    
    HIGH
    
    LOW1st Quarter
    
    
    N/A
    
    
    
    N/A2nd Quarter
    
    
    N/A
    
    
    
    N/A3rd Quarter
    
    
    N/A
    
    
    
    N/A4th Quarter
    
    
    .05
    
    
    
    .01
   4




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6




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7
    Table of Contents  ITEM 8 CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  8
    Table of Contents  9
    Table of Contents  ITEM 9
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
  Name
    
    Age
    
    PositionRobert S. Kendall
    
    
    67
    
    
    Chairman, President and TreasurerJames S. OLeary
    
    
    68
    
    
    DirectorWilliam R. Sprow
    
    
    67
    
    
    Controller
     10
    Table of Contents  ANNUAL COMPENSATIONOTHER ANNUALYEAR
    
    SALARIES
    
    BONUS
    
    COMPENSATIONRobert S. Kendall
    
    2005
    
    -0-
    
    -0-
    
    -0-(Chief Executive Officer)
    
    2004
    
    -0-
    
    -0-
    
    -0-2003
    
    -0-
    
    -0-
    
    -0-
     11
    Table of Contents  ITEM 11
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
 Equity Compensation Plan Information
 Number of securities to be
    
    
    
    Number of securities remaining available forissued upon exercise of
    
    Weighted average exercise
    
    future issuance under equity compensationoutstanding options, warrants
    
    price of outstanding options,
    
    plans (excluding securities reflected inand rights
    
    warrants and rights


    
    column (a))Plan category
    
    (a)
    
    (b)
    
    (c)Equity compensation plans approved by security
holders
    
    
    0
    
    
    
    0
    
    
    
    7.000.000Equity compensation plans not approved by
security holders
    
    NA
    
    NA
    

NATotal
    
    
    0
    
    
    
    0
    
    
    
    7,000,000
  NAME AND ADDRESS
    
    AMOUNT AND NATUREOF BENEFICIAL OWNER (1)
    
    OF BENEFICIAL OWNER
    
    PERCENTAGERobert S. Kendall (2)
    
    
    48,029,814
    
    
    
    47.2
    %James S. OLeary
    
    
    
    
    
    
    Julius L. Hess
    
    
    
    
    
    
    Ronald M.
Lipson
    
    
    687,500
    
    
    
    *3 Laurel Hill LanePepper Pike, Ohio 44124CPS Capital, Limited (3)
    
    
    48,029,814
    
    
    
    47.2
    %1801 East Ninth StreetCleveland, Ohio 44114All Directors and Officers
    
    
    48,717,314
    
    
    
    47.9
    %
 12
    Table of Contents  1)
    
    The name and address of each individual is listed in the table, except where
otherwise indicated, is c/o Sentex Sensing Technology, Inc., 1801 East Ninth
Street, Cleveland, Ohio 44114.2)
    
    All common shares distributed to Mr. Kendall are held of record by CPS
Capital, Ltd. or are beneficially owned by CPS Capital, Ltd. Mr. Kendall and his
wife own 100% of the outstanding membership interests in CPS Capital, Ltd.3)
    
    CPS is the record holder of 48,029,814 Common Shares and has sole voting and
dispositive power with respect to such shares.
 
    
    Represents less than 1% of the outstanding Common Shares.
   13
    Table of Contents  14
    Table of Contents  15
    Table of Contents  EXHIBITNUMBER
    
    EXHIBIT DESCRIPTION3.1
    
    Certificate of Incorporation, as amended (3)3.2
    
    First Amended and Restated Bylaws of the Company (6)3.3
    
    Certificate of Incorporation of Sentex Acquisition Corp. (4)3.5
    
    Certificate of Merger (Sentex Systems, Inc. into Sentex) (4)3.6
    
    Certificate of Incorporation of Sentex Systems, Inc. (5)4.1
    
    Specimen Certificate of Common Shares (3)10.2
    
    Consulting Agreement with Ms. Joanne Bianco, dated March 1,
1996 (2)10.3
    
    Sentex 1996 Long-Term Incentive Stock Option Plan (1)21.1
    
    List of Subsidiaries (6)31.1
    
    302 Certification of Chief Executive Officer31.2
    
    302 Certification of Chief Financial Officer32.1
    
    Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act of 200
 1)
    
    Incorporated by reference to Annex A of the Joint Proxy
Statement/Prospectus which is a part of Amendment No. 1 to the Registration
Statement on Form S-4, filed on October 4, 1996, File No. 333-12993 (the
Registration Statement).2)
    
    Incorporated by reference to exhibits of the Registration Statement
bearing the same exhibit numbers.3)
    
    Incorporated by reference to exhibits bearing same exhibit numbers,
filed with the Companys Registration Statement on Form S-1, File No. 2-86860.4)
    
    Incorporated by reference to exhibits bearing the same exhibit
numbers, file with the Companys Form 10-KSB for the fiscal year ended
November 30, 1992.
 16
    Table of Contents  5)
    
    Incorporated by reference to exhibits bearing the same exhibit
numbers, filed with the Companys Form 10-KSB for the fiscal year ended
November 30, 1984.6)
    
    Incorporated by reference to exhibits bearing the same exhibit
numbers, filed with the Companys Form 10-KSB for the fiscal year ended
November 30, 1996.
   
     
   Date: April 18, 2006
    
    SENTEX SENSING TECHNOLOGY, INC.By:
    
    /s/ Robert S. KendallRobert S. Kendall, Chief Executive Officer
 17
    Table of Contents  /s/ Robert S. KendallRobert S. Kendall
    
    Chairman, President and Treasurer
    
    April 18, 2006/s/ James S. OLearyJames S. OLeary
    
    Director
    
    April 18, 2006/s/ William R. SprowWilliam R. Sprow
    
    Chief Financial Officer
    
    April 18, 2006/s/ William R. SprowWilliam R. Sprow
    
    Controller
    
    April 18, 2006
 18
    Table of Contents  SENTEX SENSING TECHNOLOGY, INC.
AND SUBSIDIARIES
 CONSOLIDATED FINANCIAL REPORT
 F-1
    Table of Contents  PageAUDITORS REPORT ON THE FINANCIAL STATEMENTS
    
    
    F-3FINANCIAL STATEMENTSConsolidated balance sheet
    
    
    F-4Consolidated statements of operations
    
    
    F-5Consolidated statements of stockholders equity (deficit)
    
    
    F-6Consolidated statements of cash flows
    
    
    F-7Notes to consolidated financial statements
    
    
    F-8 - F-18
 F-2
    Table of Contents  Independent Auditors Report
 
      
 F-3
    Table of Contents  ASSETSCURRENT ASSETSCash
    
    $
    68Total current assets
    
    
    
    
    
    $
    68OTHER ASSETSInvestment
in JJJ-RT, LLC
    
    
    
    
    
    
    $
    68LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIESNotes payable:Related party
    
    $
    7,090,712Trade and other accounts payable ($441,671 to
related parties)
    
    
    555,147Accrued liabilities
    
    
    14,123Consulting contracts payable
    
    
    21,249Convertible subordinated notes payable
    
    
    12,423Total current liabilities
    
    
    
    
    
    $
    7,693,654COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITY (DEFICIT)Common stock, no par valueAuthorized - 200,000,000 shares
Issued - 111,460,911 shares
Outstanding - 103,764,911 shares
    
    $
    2,867,579Retained earnings (deficit)
    
    
    (10,291,697
    )Treasury shares at cost, 7,696,000 shares
    
    
    (269,468
    )Total stockholders equity (deficit)
    
    
    
    
    
    
    (7,693,586
    )$
    68
  F-4
    Table of Contents  2005
    
    
    2004REVENUESSales
    
    $
    
    
    
    $
    Other income
    
    
    159,175
    
    
    
    33,596Total revenues
    
    
    159,175
    
    
    
    33,596COST AND EXPENSESCost of sales
    
    
    
    
    
    
    Selling, general and administrative
    
    
    255,730
    
    
    
    240,949Total costs and expenses
    
    
    255,730
    
    
    
    240,949LOSS FROM OPERATIONS
    
    
    (96,555
    )
    
    
    (207,353
    )OTHER EXPENSEInterest
    
    
    369,819
    
    
    
    219,969Other Expense
    
    
    3,665
    
    
    
    LOSS FROM CONTINUING OPERATIONS
    
    
    (470,039
    )
    
    
    (427,322
    )NET LOSS ON DISPOSAL OF SUBSIDIARY
    
    
    (14,414
    )
    
    
    INCOME(LOSS) FROM DISCONTINUED OPERATIONS
    
    
    107,817
    
    
    
    (353,512
    )NET LOSS
    
    $
    (376,636
    )
    
    $
    (780,834
    )NET LOSS PER SHARE (BASIC AND DILUTED)
    
    $
    (0.00
    )
    
    $
    (0.01
    )WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    
    
    101,967,651
    
    
    
    101,764,911
  F-5
    Table of Contents  TotalRetained
    
    
    
    
    
    
    
    
    
    
    StockholdersCommon Stock
    
    
    Earnings
    
    
    Treasury Stock
    
    
    EquityShares
    
    
    Amount
    
    
    (Deficit)
    
    
    Shares
    
    
    Amount
    
    
    (Deficit)Balance  November 30, 2003
    
    
    109,460,911
    
    
    $
    2,867,579
    
    
    $
    (9,134,227
    )
    
    
    7,696,000
    
    
    $
    (269,468
    )
    
    $
    (6,536,116
    )Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    (780,834
    )
    
    
    
    
    
    
    
    
    
    
    (780,834
    )Balance  November 30, 2004
    
    
    109,460,911
    
    
    
    2,867,579
    
    
    
    (9,915,061
    )
    
    
    7,696,000
    
    
    
    (269,468
    )
    
    
    (7,316,950
    )Issued shares
    

    
    2,000,000Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    (376,636
    )
    
    
    
    
    
    
    
    
    
    
    (376,636
    )Balance  November 30, 2005
    
    
    111,460,911
    
    
    $
    2,867,579
    
    
    $
    (10,291,697
    )
    
    
    7,696,000
    
    
    $
    (269,468
    )
    
    $
    (7,693,586
    )
  F-6
    Table of Contents  2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (376,636
    )
    
    $
    (780,834
    )Adjustments to reconcile net loss to net cash
used by operating activities:Loss on disposal of subsidiary
    
 
 (14,414
    )Forgiveness
of inter-company debt
    
 
 (232,500
    )Depreciation and amortization
    
    
    3,134
    
    
    
    1,082Noncash interest expense
    
    
    369,819
    
    
    
    141,098Changes in assets and liabilities:Accounts receivable
    
    
    5,700
    
    
    
    127,275Inventory
    
    
    7,219
    
    
    
    240,122Other assets
    
    
    36,042
    
    
    
    4,800Accounts payable
    
    
    78,692
    
    
    
    (136,166
    )Accrued liabilities
    
    
    (508,585
    )
    
    
    (40,060
    )Total adjustments
    
    
    (226,065
    )
    
    
    338,151Net cash used by operating activities
    
    
    (602,701
    )
    
    
    (442,683
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of leasehold improvements
    
    
    (19,003
    )
    
    
    Cash transfer to Regency Technologies, Ltd.
    
    
    (34,248
    )
    
    
    Net cash provided by investing activities
    
    
    (53,251
    )
    
    
    CASH FLOWS FROM FINANCING ACTIVITIESProceeds on notes and accounts payable  related party
    
    
    697,999
    
    
    
    2,910,225Payments on notes and accounts payable  related party
    
    
    (54,851
    )
    
    
    (2,500,000
    )Net cash provided by financing activities
    
    
    643,148
    
    
    
    410,225NET DECREASE IN CASH
    
    
    (12,804
    )
    
    
    (32,458
    )CASH  BEGINNING OF YEAR
    
    
    12,872
    
    
    
    45,330CASH  END OF YEAR
    
    $
    68
    
    
    $
    12,872Supplemental disclosure of cash flow information:Cash paid during the year for:Interest
    
    $
    
    
    
    $
    33,296
   F-7
    Table of Contents  Note 1.
    
    Organization, Background, Industry Segment and Discontinued Operations
        Years Ended November 30,2005
    
    
    2004REVENUESNet Sales
    
    $
    2,996,278
    
    
    $
    3,847,228COST AND EXPENSESCost of sales
    
    
    1,705,855
    
    
    
    2,931,456Selling and general
    
    
    1,376,403
    
    
    
    1,303,052Total costs and expenses
    
    
    3,082,258
    
    
    
    4,234,508INCOME(LOSS) FROM OPERATIONS
OF DISCONTINUED OPERATIONS
    
    
    (85,980
    )
    
    
    (387,280
    )Other income
    
    
    193,797
    
    
    
    33,768NET INCOME(LOSS)
    
    $
    107,817
    
    
    $
    (353,512
    )
 F-8
    Table of Contents  Note 2.
    
    Summary of Significant Accounting Policies
 A.
    
    Going Concern  The accompanying financial statements have been prepared
in conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern. However,
the Company has in the past and continues to sustain substantial net and operating
losses. In addition, the Company has used substantial amounts of working capital in
its operations which has reduced the Companys liquidity to a very low level. At
November 30, 2005, current liabilities exceed current assets by $7,693,586.
Additionally, at November 30, 2005, the Company has no operations. These and other
matters raise substantial doubt about the Companys ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence. The Companys ability to continue in existence is
primarily dependent upon its planned ability to arrange adequate financing and to
attain profitable operating activities to sustain required cash flows.B.
    
    Receivable and Credit Policies  Through November
20, 2005 accounts receivable were uncollateralized
customer obligations due with various trade terms from the invoice
date and were
stated at the amount billed to the customer. Payments of accounts
receivable were
applied to the specific invoices identified on the customers remittance advice.
The carrying amount of accounts receivable was reported net of the allowance for
doubtful accounts reserve, which reflects managements best estimate of the amount
that would not be collected. Management individually reviews all accounts receivable
balances and any customer account balances with invoices dated over 120 days past
due were considered delinquent. These delinquent invoice amounts plus any other invoices deemed not to
be collected were reserved for in the allowance for doubtful accounts reserve.
Specific accounts were charged directly to the reserve when management obtained
evidence of a customers insolvency or otherwise determined that
the account was
uncollectible.C.
    
    Revenue Recognition  Through November
20, 2005 the Company recorded revenue as
customers were billed
for consulting services.D.
    
    Concentration of Credit and Risk Factors  Financial instruments which
potentially subject the Company to concentrations of credit risk
include cash and equivalents and accounts and notes receivable. The Company places
its cash and cash equivalents with high credit quality financial institutions. The
amount on deposit in any one institution that exceeds federally insured limits is
subject to credit risk. Also see Notes 2.B., 2.G. and 13.E.
    
    Use of Estimates  The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
 F-9
    Table of Contents  Note 2.
    
    Summary of Significant Accounting Policies (Continued)
 F.
    
    Income Taxes  The Company utilizes Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, which requires an asset
and liability approach to financial accounting and reporting for income taxes. The
difference between the financial statement and tax basis of assets and liabilities
is determined annually. Deferred income tax assets and liabilities are computed for
those temporary differences that have future tax consequences using the current
enacted tax laws and rates that apply to the periods in which they are expected to
affect taxable income. Valuation allowances are established, if necessary, to
reduce the deferred tax asset to the amount that will, more likely than not, be
realized. Income tax expense is the current tax payable or refundable for the
period plus or minus the net change in the deferred tax assets and liabilities.G.
    
    Fair Value of Certain Financial Instruments  The fair values of cash,
accounts receivable, accounts payable, and other short-term obligations approximate
their carrying values because of the short maturity of these financial instruments.H.
    
    Loss Per Share  Loss per share is calculated using the weighted average
number of shares outstanding. Potentially dilutive securities are insignificant.I.
    
    New Accounting Standards  In November 2004, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 151, Inventory Costs, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs and wasted material. This standard
requires that such items be recognized as current-period charges. The standard also
establishes the concept of normal capacity and requires the allocation of fixed
production overhead to inventory based on the normal capacity of the production
facilities. Any unallocated overhead must be recognized as an expense in the period
incurred. This standard is effective for inventory costs incurred starting January
1, 2006. The Company does not believe the adoption of this standard will have a material impact on its
consolidated financial statements.In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets.
This standard amended APB Opinion No. 29, Accounting for Nonmonetary Transactions,
to eliminate the exception from fair value measurement for nonmonetary exchanges of
similar productive assets. This standard replaces this exception with a general
exception from fair value measurement for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has commercial substance if
the future cash flows of the entity are expected to change significantly as a result
of the exchange. This statement is effective for all nonmonetary asset exchanges
completed by the company starting January 1, 2006. The Company does not believe the
adoption of this standard will have a material impact on its consolidated financial
statements.
 F-10
    Table of Contents  Note 2.
    
    Summary of Significant Accounting Policies (Continued)
   J.
    
    
    Certain amounts in the financial statements for the year ended
November 30, 2005 have been reclassified to conform with current year
presentation.
 F-11
    Table of Contents  Note 3.
    
    Investment in Regency Technologies, Ltd.Due to a change in control, the Company now accounts for its
investment in JJJ-RT, LLC on the equity
method. However, losses and distributions have exceeded the Companys investment in
JJJ-RT, LLC. Accordingly, the Company has reflected such investments at
zero. The Companys share of future losses in this investment will be suspended for book
purposes. Furthermore the Companys share in future income will not be recognized until
the aggregate of such income equals the aggregate of their suspended losses.The net loss on disposal of subsidiary (Regency Technologies,
Ltd.) is the result of recognizing the net investment deficit in
Regency as of November 20, 2005 as income to bring the value of the
investment to zero and decreasing that gain by the forgiveness of
inter-company debt as stated in the Contribution and Investment
Agreement. (See note 13.)
 Deficit equity in Regency Technologies, Ltd.
    
    $ 218,086Inter-company debt forgiveness
    
    (232,500
    )Net loss on disposal of subsidiary
    

$ (14,414
    )
 The following table sets forth certain summarized financial information of Regency
Technologies, Ltd., the Companys only investment, based upon the applicable financial
statements, adjusted for accounting principles generally accepted in the United States of
America.
 BALANCE SHEET DATA
    
    2005Current assets
    
    $
    223,085Leasehold improvements
    
    
    15,869Other assets
    
    
    990Total Assets
    
    
    239,944Current Liabilities
    
    
    458,030Partners Equity
    
    
    (218,086
    )Total liabilities and partners equity
    
    $
    239,944
 STATEMENT OF INCOME DATA
 Revenues
    
    $
    2,996,278Net income
    
    $
    107,817
 Note 4.
    
    Accrued LiabilitiesAccrued liabilities consist of the following at November 30, 2005:
 Other
    
    
    14,123$
    14,123
 F-12
    Table of Contents  Note 5.
    
    Notes Payable  Bank and Other Borrowing ArrangementsDuring the years ended November 30, 2005 and 2004, the Companys principal stockholder
(CPS Capital, Ltd.) and the Companys Chairman provided the Company assistance in
connection with funding its working capital needs in the form of loans and security for
bank loans. As of November 30, 2005, the Company had notes
payable of $7,090,712,
including accrued interest of approximately $1,121,000 (bearing interest at 1% over the
prime rate) to its principal stockholder in connection with such unsecured loans.Interest expense for the years ended November 30, 2005 and 2004 amounted to $369,819 and
$219,969, respectively. Interest expense includes $191,456 and $141,098 for the years
ended November 30, 2005 and 2004, respectively, of interest that has been added to the
principal balance of the notes described in the preceding paragraph.Note 6.
    
    Convertible Subordinated Notes PayableConvertible subordinated notes payable of $12,423 are subordinated to all present and
future obligations of the Company and have a stated interest rate of 5.05% per annum.
The notes can be converted at the holders or Companys option into that number of shares
by dividing the face amount of the note by $.075. The conversion terms contain standard
anti-dilutive provisions to adjust the conversion price. The notes matured December 1,
2000.Note 7.
    
    Commitments and ContingenciesThe Company leases office space under a non-cancelable operating lease which expires
March 1, 2006. The following is a schedule of future minimum lease payments as of
November 30, 2005:
 2006
    
    
    11,910
 Rent expense for the year ended November 30, 2005 was $48,447.
 F-13
    Table of Contents  Note 8.
    
    Stock Incentive PlanThe Company has a long-term incentive plan (Incentive Plan) to provide current and
future directors, officers and employees incentives to stimulate their active interest in
the development and financial success of the Company. The Incentive Plan provides for
the granting of incentive stock options, under Section 422 of the Internal Revenue Code
of 1986, as amended, or other stock options, stock appreciation rights, restricted, or
nonrestricted stock awards to purchase not more than 7,000,000 shares (which shares have
been reserved by the Company) of common stock as determined by the Companys Incentive
Plan Committee (the Committee). The option prices per share of common stock, which are
the subject of incentive stock options and other stock options under the Incentive Plan,
shall not be less than 100% of the fair market value of the Companys shares of common
stock on the date such option is granted. The Committee shall determine when each option
is to expire but no option shall be exercisable for a period of more than 10 years from
the date upon which the option is granted. Generally, options granted under the
Incentive Plan vest or terminate upon the employee leaving the Company and are subject to
automatic acceleration of any vesting requirements given certain changes in control of
the Company. No options were outstanding to purchase the Companys stock during the
years ended November 30, 2005 and 2004.Stock appreciation rights may be awarded by the Committee at the time or subsequent to
the time of the granting of options. Stock appreciation rights awarded shall provide
that the option holder shall have the right to receive an amount equal to 100% of the
excess, if any, of the fair market value of the shares of common stock covered by the
option over the option price. Such amount shall be payable, as determined by the
Committee, in one or more of the following manners: (a) cash; (b) fully-paid shares of
common stock having a fair market value equal to such amount; or (c) a combination of
cash and shares of common stock. As of November 30, 2005, the Company has not granted
any appreciation rights under the Incentive Plan.Note 9.
    
    Profit-Sharing PlanThe Company has a profit-sharing plan and a 401(k) retirement plan for the benefit of
eligible employees. Contributions under the plans are determined at the discretion of
the Board of Directors and are credited to employees based upon a percentage of eligible
salaries. The Company elected to suspend all contributions for the years ended November
30, 2005 and 2004.
 F-14
    Table of Contents  Note 10.
    
    Income TaxesAs referred to in Note 1, the Company utilizes SFAS 109, Accounting for Income Taxes.
A reconciliation between the Companys effective income tax rate and the statutory
federal income tax rate is as follows for the years ended November 30:
 2004
    
    
    2003Expected federal income tax benefit at
the statutory rate
    
    
    (34.0
    )%
    
    
    (34.0
    )%Increase in taxes resulting from:Effect of operating loss for which no tax
carrybacks are available
    
    
    (34.0
    )
    
    
    34.0
    %
    
    
    
    %
  2005
    
    
    2004Deferred tax assets:Net operating loss carryforward
    
    $
    3,437,700
    
    
    $
    3,235,400Other
    
    
    
    
    
    
    Total gross deferred tax assets
    
    
    3,437,700
    
    
    
    3,235,400Less valuation allowance
    
    
    3,437,700
    
    
    
    3,235,400Net deferred tax assets
    
    $
    
    
    
    $
    
    F-15
    Table of Contents  Note 11.
    
    Related Party TransactionsThe Company has a management agreement with an affiliate and significant stockholder, CPS
Capital, Ltd., to perform management and executive services. Based on limited
operations, the Company and CPS agreed to reduce the management fee until the Company
expands its operations. As of November 30, 2005, the balance due for unpaid management
fees was $441,671.Note 12.
    
    Legal ContingenciesDuring October 2004, the Company was dismissed without prejudice from the matter, State
of Ohio, Department of Administrative Services v. IQ Solutions, et al.; Case No.
03-CVH05-6054: Franklin County Common Pleas Court, Ohio which was previously disclosed.Note 13.
    
    OtherOn November 20, 2005, Sentex Sensing Technology, Inc. (the Company) entered into a
Contribution and Investment Agreement (the Investment Agreement) with JJJ-RT, LLC
(JJJ-RT), Regency Technologies, Inc. (Regency), a wholly owned subsidiary of the
Company, and Regency Acquisition, LLC (New LLC), a wholly owned subsidiary of Regency.
Under the Investment Agreement, Regency contributed all of its operating assets to New
LLC and New LLC assumed all of the obligations of Regency except for amounts due Robert
Kendall, Chief Executive of the Company, of about $200,000 and certain inter-company
accounts payable between Regency and the Company in the amount of $47,000, and JJJ-RT has
the right to invest up to $800,000 in New LLC on an as-needed basis. The members of
JJJ-RT will primarily control when any such investments are made. For every $10,000 of
capital JJJ-RT invests into New LLC, JJJ-RT would be entitled to 1% of the equity
interest until it owned 50% of the interests of New LLC. These investments by JJJ-RT
would dilute the Companys interests in New LLC. The majority members of JJJ-RT are James
Levine, the Executive Vice President of Regency, and Julius Hess, a former director and
executive officer of the Company and a current officer of Regency. Mr. Levine and Mr.
Hess are the sons-in-law of Mr. Kendall.
 F-16
    Table of Contents  Note 13.
    
    Other (Continued)JJJ-RT would not be entitled to purchase any further equity interests beyond a 50%
interest until the later of (a) the date the Company had another operating business or
(b) January 31, 2006 (the Event Date), as set forth in the Investment Agreement. If the
executive management determines that more than $500,000 in funds are required to be
invested in New LLC prior to the Event Date, then such funds may be invested in New LLC
as a loan, which principal amount of the loan may be converted into equity interests of
New LLC after the Event Date at a rate of 1% of equity interest for each $10,000 of
principal that is converted. Upon conversion of any such loans, all accrued interest on
that portion of the converted principal will be forgiven. JJJ-RT would not have the right
to purchase more than 80% of the equity interests in New LLC, whether by a direct
investment in cash or upon conversion of any loans under the terms of the Investment
Agreement, without further agreement from the Company.The Investment Agreement was subject to the receipt of a fairness opinion (the Fairness
Opinion) as to the fairness to the shareholders of the Company of the transactions
described therein from a financial point of view. The Fairness Opinion was received by
the Company on November 25, 2005. The Fairness Opinion was prepared by Kline & London
CPAs, Inc. (Kline & London). Kline & London had not previously provided services or
received fees from the Company or Regency. Kline & Londons fees for this engagement were
not contingent upon a favorable opinion, and they have no verbal, written or implied
agreement to provide future services or receive future fees from the Company or Regency.The Company, together with the other parties to the Investment Agreement, determined that
JJJ-RT should receive 1% equity in New LLC for each 10,000 invested. Such amount of
compensation was not recommended by Kline & London. However, after reviewing and relying
upon material relating to the financial and operating conditions of the Company and
Regency, including (a) the Investment Agreement, (b) the Operating Agreement of New LLC,
(c) the annual filings with the Securities and Exchange Commission (SEC) for the three
years ended November 30, 2002, 2003 and 2004, (d) the quarterly reports filed with the
SEC for the first three quarters of 2005, (e) internal financial analyses and forecasts
for the Company and Regency prepared by certain members of the senior management of the
Company and Regency, and (f) certain publicly available information with respect to the
Company and Regency and other companies engaged in similar operations, and after
conducting discussions with executive management of the Company, Regency and JJJ-RT
concerning historical financial performance and future business prospects and forecasts
and reviewing summary reports prepared by a financial advisor engaged to raise capital
for the Company, Kline & London provided its opinion that the terms of the Investment
Agreement are fair, from a financial point of view, to the Companys shareholders.No limitations were imposed by the Company on the scope of the investigation by Kline &
London. The Fairness Opinion will be made available for inspection and copying at the
principal executive office of the Company during regular business hours by any interested
equity security holder.
 F-17
    Table of Contents  Note 13.
    
    Other (Continued)The Company will not receive any of the invested cash from JJJ-RT as a payment for its
existing equity interest in Regency, and will be diluted with each sale of equity
interests to JJJ-RT. The Company believes, however, that this transaction provides it the
best opportunity to realize a potential return on its existing investment in light of its
existing options.
 F-18