**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

 

 

**x**

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the Quarterly Period Ended May 31, 2011**

 

**OR**

 

 

** ̈**

**TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 **For the Transition Period From                            to**

**Commission File Number: 000-29990**

 

**SENSE TECHNOLOGIES INC.**

**(Exact name of registrant as specified in its charter)**

**British Columbia**

 

**90010141**

**(State or other jurisdiction of incorporation or organization)**

 

**(I.R.S. Employer Identification No.)**

**2535 N. Carleton Avenue**

**Grand Island, Nebraska**

 

**68803**

**(Address of principal executive offices)**

 

**(Zip Code)**

  

**(308) 381-1355**

**(Registrant’s telephone number, including area code)**

**None**

**(Former name, former address and former fiscal year, if changed since last report)**

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    x      No     ̈

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES   o      NO   x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

 

 

Large accelerated filer   ̈

 

Accelerated filer   ̈

Non-accelerated filer        ̈

 

Smaller reporting company   x

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈  No x

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

**Class**

 

**Outstanding at August 29, 2011**

Common Stock

 

92,285,115 shares

TABLE OF CONTENTS

Sense Technologies Inc. Form 10-Q
 

 

 

**PART I-FINANCIAL INFORMATION**

**1**

 

 

ITEM 1. FINANCIAL STATEMENTS.

1

BALANCE SHEETS AS OF MAY 31, 2011 (UNAUDITED) AND FEBRUARY 28, 2011

2

STATEMENTS OF LOSSES FOR THE THREE  MONTHS  ENDED MAY 31, 2011 AND 2010 (UNAUDITED)

3

STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MAY 31, 2011 AND 2010 (UNAUDITED)

4

STATEMENT OF STOCKHOLDERS’ DEFICIENCY FOR THE THREE MONTHS ENDED MAY 31, 2011

 

(UNAUDITED) AND THE YEAR ENDED FEBRUARY 28, 2011

5

NOTES TO UNAUDITED FINANCIAL STATEMENTS

6

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

10

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

13

ITEM 4T. CONTROLS AND PROCEDURES.

13

** **

 

**PART II-OTHER INFORMATION**

**14**

 

 

ITEM 1. LEGAL PROCEEDINGS.

14

ITEM 1A. RISK FACTORS.

14

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

14

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

14

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

14

ITEM 5. OTHER INFORMATION.

14

ITEM 6. EXHIBITS.

14

** **

 

**SIGNATURES**

**15**

 

**PART I-FINANCIAL INFORMATION
**Item 1. Financial Statements.**

**SENSE TECHNOLOGIES INC.**

**INTERIM FINANCIAL STATEMENTS**

**May 31, 2011**

(Stated in US Dollars)

( Unaudited )

Form 10-Q 

Page 1

**SENSE TECHNOLOGIES INC.**

 BALANCE SHEETS

** As of May 31, 2011 and February 28, 2011**

 (Stated in US Dollars)

 (Unaudited)

  

  

May 31,

  

  

February 28,

  

  

  

2011

  

  

2011

  

**ASSETS**

  

Current

  

  

  

  

  

  

     Cash

$

887

 

$

750

 

     Accounts receivable

 

6,773

 

 

1,134

 

     Accounts receivable – related party

 

2,532

 

 

2,532

 

     Inventory

 

204,086

 

 

171,365

 

     Prepaids

  

11,662

 

  

11,131

  

  Total Current Assets

  

225,940

  

  

186,912

  

  

  

  

  

  

  

  

Equipment – Net of accumulated depreciation of $96,068 and $104,346 at May 31, 2011 and February 28, 2011, respectively

  

35,602

  

  

38,361

  

Deposits

 

800

 

 

800

 

Intangible assets

  

51

  

  

51

  

  Total Assets

$

262,393

  

$

226,124

  

  

  

  

  

  

  

  

**LIABILITIES**    

  

Current

  

  

  

  

  

  

     Bank overdraft

$

-

  

$

8,485

  

     Accounts payable

  

349,420

  

  

341,932

  

     Accounts payable – related party

 

39,873

 

 

43,950

 

     Accrued expenses

 

1,195,901

 

 

1,176,935

 

     Accrued expenses – related party

 

70,811

 

 

70,811

 

     Notes payable

 

464,028

 

 

461,380

 

     Notes payable – related party

  

399,590

 

  

386,590

 

     Advances payable – related entity

  

27,132

  

  

67,850

  

     Dividends payable

  

274,222

  

  

266,323

  

     Convertible promissory notes payable

  

584,447

  

  

584,447

  

  Total Current Liabilities

  

3,405,424

  

  

3,408,703

  

  

  

  

  

  

  

  

**STOCKHOLDERS' DEFICIENCY**    

  

  

  

  

  

  

  

  

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

  

  

  

  

  

  

 at May 31, 2010 (February 28, 2010: 315,914)

  

315,914

  

  

315,914

  

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

  

  

  

  

  

  

87,951,781 shares issued and outstanding at May 31, 2011 (February 28, 2011:  87,951,781)

  

14,392,215

  

  

14,392,215

  

Common stock subscribed

  

218,889

  

  

88,889

  

Retained Deficit

  

(18,070,049

)

  

(17,979,597

)

  Total Stockholders’ Deficiency

  

(3,143,031

)

  

(3,182,579

) 

  Total Liabilities and Stockholders’ Deficiency

$ 

262,393

  

$

 226,124

  

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Form 10-Q 

Page 2

**SENSE TECHNOLOGIES INC.**

 INTERIM STATEMENTS OF LOSS

 for the three months ended May 31, 2011 and 2010

 (Stated in US Dollars)

 (Unaudited)

 

 

 

 

 

 

 

  

 

Three months ended

 

  

  

May 31, 

  

  

 

2011

 

 

2010

 

Sales

$

51,809

 

$

46,125

 

Direct costs

 

  

 

 

  

 

     Cost of sales

 

10,779

 

 

-

 

     Manufacturing expenses

 

7,685

 

 

10,253

 

     Research and development

 

3,000

 

 

-

 

     Commissions

 

12,027

 

 

8,227

 

     Royalties – Related parties

 

15,962

 

 

50,000

 

 

 

49,453

 

 

68,480

 

 

 

2,356

 

 

(22,355)

 

Expenses

 

 

 

 

 

 

     Advertising and marketing

 

2,806

 

 

-

 

     Consulting fees

 

16,000

 

22,700

 

     Contract labor

 

3,000

 

 

3,000

 

     Depreciation

 

2,760

 

 

2,760

 

     Filing fees

 

223

 

 

3,735

 

     Insurance

 

6,634

 

 

6,769

 

     Bank charges  

  

792

  

  

597

  

     Legal and accounting

 

1,144

 

 

10,620

 

     Office and miscellaneous

 

2,613

 

 

3,416

 

     Rent

 

3,742

 

 

816

 

     Repairs and maintenance

 

-

 

 

-

 

     Telephone and utilities

 

84

 

 

-

 

     Transfer agent fees

 

1,171

 

 

2,764

 

     Travel and automotive

 

4,042

 

 

1,357

 

  

 

45,011

 

 

58,534

 

Net Operating Loss

 

(42,655)

 

 

(80,889)

 

 

 

 

 

 

Interest Expense

 

39,899

 

 

74,493

 

 

 

 

 

 

Net Loss

 

(82,554)

 

 

(155,382)

 

 

 

 

 

 

Preferred dividends, paid or accrued

 

7,898

 

 

7,898

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

$

(90,452)

 

$

(163,280)

 

 

 

 

 

 

Basic and diluted loss per share

$

 (0.00)

 

$

 (0.00)

 

 

 

 

 

 

Weighted average number of shares outstanding

 

87,951,781

 

 

66,804,651

 

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Form 10-Q 

Page 3

**SENSE TECHNOLOGIES INC.**

 INTERIM STATEMENTS OF CASH FLOWS

 for the three months ended May 31, 2011 and 2010

 (Stated in US Dollars)

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

Three Months

Ended 

May 31, 2011

 

Three Months

Ended

May 31, 2010

 

Operating Activities

 

 

 

 

 

 

 

 

 

   Net loss for the period

 

 

 

 

$

(82,554)

$

(155,382)

 

   Adjustments to reconcile net loss to net cash    used in

 

 

 

 

 

 

 

  

 

   Operating activities:

 

 

 

 

 

 

 

 

 

      Depreciation

 

 

 

 

 

2,760

 

2,760

 

   Changes in non-cash working capital balances

    related to operations:

 

 

 

 

 

 

 

  

 

      Accounts receivable

 

 

 

 

 

(5,639)

 

(23,816)

 

      Inventory

 

 

 

 

 

(32,721)

 

-

 

      Prepaids

 

 

 

 

 

(531)

 

(1,359)

 

      Accounts payable and accrued liabilities

 

 

 

 

 

(26,827)

 

66,620

 

  

 

 

 

 

 

 

 

  

 

Net cash used by operating activities

 

 

 

 

 

(145,512)

 

(111,177)

 

  

 

 

 

 

 

 

 

  

 

Financing Activities

 

 

 

 

 

 

 

  

 

   Borrowing on debt

 

 

 

 

 

22,612

 

25,064

 

   Payments on debt

 

 

 

 

 

(6,963)

 

(17,596)

 

   Proceeds from common share subscriptions

 

 

 

 

 

130,000

 

103,000

 

  

 

 

 

 

 

 

 

  

 

Net cash provided by financing activities

 

 

 

 

 

145,649

 

110,468

 

  

 

 

 

 

 

 

 

  

 

Increase (Decrease) in cash during the period

 

 

 

 

 

137

 

(709)

 

  

 

 

 

 

 

 

 

  

 

Cash, beginning of period

 

 

 

 

 

750

 

709

 

  

 

 

 

 

 

 

 

  

 

Cash, end of period

 

 

 

 

$

887

$

 -

 

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for interest  

 4,955   

19,693

Preferred dividends accrued   

7,898  

7,898

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

Form 10-Q 

Page 4

**SENSE TECHNOLOGIES INC.**

 STATEMENT OF STOCKHOLDERS’ DEFICIENCY

 for the period ended May 31, 2011

 (Stated in US Dollars)

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Common Stock

 

Preferred Stock

 

 

 

Common

 

 

 

 

 

 

 

  

Issued

 

 

 

 

Issued

 

 

 

 

 

 

Stock 

 

 

Accumulated

 

 

 

 

  

Shares

 

 

Amount

 

Shares

 

 

Amount

 

 

 

Subscribed

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 28, 2010

66,804,651

 

$

13,135,268

 

315,914

 

$

315,914

 

 

$

190,889

$

 (17,433,657

)

$

(3,791,586

)

Common Stock issued

21,147,130

 

 

634,414

 

-

 

 

-

 

 

 

(102,000)

 

 

 -

 

 

532,414

 

Options Issued to Directors

-

 

 

19,626

 

-

 

 

-

 

 

 

 

 

- 

 

 

19,626

 

Dividends

-

  

  

-

  

-

 

 

-

  

 

 

-

 

 (31,591

)

  

(31,591

)

Write-off of related party gain on conversion of debt

                - 

 

 

71,138

 

         -

 

 

          -

 

 

 

               -

 

-

 

71,138

 

Forgiveness of related party royalties

-

 

 

523,335

 

          -

 

 

          -

 

 

 

               -

 

-

 

523,335

 

Write-off gain on forgiveness of related party accounts payable

-

 

 

8,434

 

          -

 

 

          -

 

 

 

               -

 

-

 

8,434

 

Net loss for the period

- 

 

 

-

 

-

 

 

- 

 

 

 

 -

 

  (514,349

)

 

(514,349

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 28, 2011

87,951,781

 

 

14,392,215

 

315,914

 

 

315,914

 

 

 

88,889

 

 (17,979,597

)

 

(3,182,579

)

Common Stock Subscribed

-

 

 

-

 

-

 

 

-

 

 

 

130,000

 

 -

 

 

130,000

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (7,898

)

 

(7,898

)

Net loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (82,554

)

 

(82,554

)

Balance, May 31, 2011

87,951,781

 

$

14,392,215

 

315,194

 

$

315,914

 

$

 218,889

 

$

 (18,070,049

)

$

(3,143,031

)

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
 

Form 10-Q 

Page 5

**SENSE TECHNOLOGIES INC.**

 NOTES TO THE INTERIM FINANCIAL STATEMENTS

Note 1

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

While the information presented in the accompanying three months to May 31, 2011 financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these interim unaudited financial statements be read in conjunction with the Company’s audited financial statements for the year ended February 28, 2011.

SIGNIFICANT ACCOUNITNG  POLICIES**:**

**Recently Adopted And Recently Enacted Accounting Pronouncements**

In April 2008, the FASB issued ASC 350-10, "Determination of the Useful Life of Intangible Assets." ASC 350-10 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350-10, "Goodwill and Other Intangible Assets." ASC No. 350-10 is effective for fiscal years beginning after December 15, 2008. The adoption of this ASC did not have a material impact on our consolidated financial statements. 

In April 2009, the FASB issued ASC 805-10, "Accounting for Assets Acquired and Liabilities assumed in a Business Combination That Arise from Contingencies—an amendment of FASB Statement No. 141 (Revised December 2007), Business Combinations". ASC 805-10 addresses application issues raised by preparers, auditors and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805-10 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. ASC 805-10 will have an impact on our accounting for any future acquisitions and its consolidated financial statements. 

In May 2009, the FASB issued ASC Topic 855, “Subsequent Events”. ASC Topic 855 established principles and requirements for evaluating and reporting subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be disclosed in the financial statements. ASC Topic 855 also requires disclosure of the date through which subsequent events are evaluated by management. ASC Topic 855 was effective for interim periods ending after June 15, 2009 and applies prospectively. Because ASC Topic 855 impacts the disclosure requirements, and not the accounting treatment for subsequent events, the adoption of ASC Topic 855 did not impact our consolidated results of operations or financial condition. See Note 10 for disclosures regarding our subsequent events.   

Effective July 1, 2009, we adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 105-10, Generally Accepted Accounting Principles—Overall ("ASC 105-10"). ASC 105-10 establishes the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates ("ASUs"). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout these consolidated financials have been updated for the Codification. 

Form 10-Q 

Page 6

In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. We are currently evaluating the impact of this standard, but would not expect it to have a material impact on the our consolidated results of operations or financial condition.

In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.”  The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010.  Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of the Update.  The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows.

In February 2010, the FASB Accounting Standards Update 2010-11 (ASU 2010-11), “Consolidation (Topic 810):  Amendments for Certain Investment Funds.”  The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period.  Early application is not permitted.  The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.

In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASU Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”).  ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events.  The adoption did not have an impact on the Company’s financial position and results of operations.     

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements.”  ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets.  This ASU is effective for interim and annual reporting periods beginning after December 15, 2009.  The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.

**Reclassification**

Certain amounts reported in the prior period financial statements have been reclassified to the current period presentation.

Note 2

GOING CONCERN

At May 31, 2011, the Company had not yet achieved profitable operations, had an accumulated deficit of $18,070,049 (February 28, 2011 - $17,979,597) since its inception and incurred a net loss of $82,554 (2010 - $ 155,382) for the three months ended May 31, 2011 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, 2012 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.

Form 10-Q 

Page 7

Note 3

COMMON STOCK

a) 

Commitments:

Stock-based Compensation Plan

  

  

May 31,

  

  

February 28,

  

  

  

2011

  

  

2011

  

  

  

  

  

  

Weighted

  

  

  

  

  

Weighted

  

  

  

  

  

  

Average

  

  

  

  

  

Average

  

  

  

  

  

  

Exercise

  

  

  

  

  

Exercise

  

  

  

Shares

  

  

Price

  

  

Shares

  

  

Price

  

Outstanding and exercisable

  

  

  

  

  

  

  

  

  

  

  

  

beginning of period

  

3,000,000

  

 

$0.04

  

  

2,000,000

  

 

$0.04

  

Expired

  

-

 

 

-

 

  

-

 

 

-

 

Outstanding and exercisable 

  

  

  

  

  

  

  

  

  

  

  

  

end of the period

  

3,000,000

  

 

$0.04

  

  

2,000,000

  

 

$0.04

  

At May 31, 2011, the following employee and director common share purchase options were outstanding entitling the holders thereof the right to purchase one common share for each share purchase option held:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

Exercise Price

Expiry Date

 

1,000,000

$0.05

December 31, 2012

 

1,000,000

$0.03

December 31, 2014

 

1,000,000

$0.03

December 31, 2015

Common Shares Subscribed

As of May 31, 2011, the Company has received $130,000 in respect of private placements of 4,333,334 common shares at $.03 per share.

Note  4

RELATED PARTY TRANSACTIONS

 

 

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

  

  

  

  

  

               May 31,

  

  

  

  

  

  

2011

  

  

2010

  

 

Royalties

 

 

$

-

 

$

50,000

 

  

Interest expense

 

  

$

34,193

  

$

 41,364

 

As of May 31, 2011, included in accounts payable is $33,495 (February 28, 2011: $33,495) owing to an accounting firm in which a director of the Company is a partner and $6,378 (February 28, 2011: $10,455) to a shareholder with respect to unpaid fees and interest on promissory notes,  $480,000 (February 28, 2011: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, and $53,694 (February 28, 2010: $53,694) owing to the former president of the Company in respect of unpaid wages.

As of May 31, 2011, included in advances payable is $27,132 (February 28, 2011: $67,850) owed to a company controlled by a director.

As of May 31, 2011, promissory notes payable of $399,590 (February 28, 2010: $384,590) is due to a profit-sharing and retirement plan administered by a director of the Company.  Terms are:

Date Due:

Amount

December, 2011

$   216,372

December, 2011

168,218

April, 2012 

 15,000

Total         

$   399,590

All bear interest at 12% per annum.

Form 10-Q 

Page 8

Note 5 

ACCRUED LIABILITIES/ACCRUED LIABILITIES – RELATED PARTY

  

         May 31, 

        2011

    February 28, 

    2011

Accrued Liabilities:

 

 

Lease Settlement

41,721

45,065

Credit card payable

-

4,119

Accrued interest payable

481,080

453,568

Accrued non resident withholding taxes, including

 accrued interest  

143,136

143,136

Accrued royalties

480,000

480,000

Accrued taxes payable

49,964

51,047

 

$1,195,901

$1,176,935

 

 

 

Accrued payroll- related party

53,694

53,694

Accrued liabilities – related party

17,117

17,117

  

$70,811

$70,811

Note 6

CONCENTRATIONS

The Company operates in one industry segment being the production, marketing and distribution of safety awareness products in the automotive industry. Substantially, all of the Company’s operations and assets are located in the United States. During the three months ended May 31, 2011, there were two customers that accounted for $47,953 (93%) of sales revenue.   During the three months ended May 31, 2010, there were two customers that accounted for $43,325 (94%) of sales revenue.

Note 7

LAWSUIT SETTLEMENT

In August 2009, the Company settled litigation related to breach of lease and past due rent for $73,065.  Prior to May 31, 2011, the Company paid $31,344 (February 28, 2011:  $28,000) of this judgement.  The remaining balance of $41,721 is presented as Accrued Expenses as of May 31, 2011. 

Note 8

SUBSEQUENT EVENTS

Subsequent to May 31, 2011, 4,333,334 shares of common stock were issued for $130,000.

Management has evaluated subsequent events through August 29, 2011, the date of which the financial statements were available to be issued.

**Management’s Discussion And Analysis**

Sense Technologies Inc. Form 10-Q

 
**Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.**

The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto for the period ended May 31, 2011 and our Financial Statements and notes thereto for the period ended May 31, 2010.

**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.

Form 10-Q 

Page 9

**2.**

**Results of Operations**

*For the three month period ended May 31, 2011 as compared to the three month period ended May 31, 2010.*

                                                   For the three months ended

 

May 31, 2011

May 31, 2010

Sales

 

 

Sales Guardian Alert

                51,809 

46,125

Sales Scope Out

-

-

 

51,809

46,125

Sales for the quarter ended May 31, 2011 increased by 12% from $46,125 to $51,809 due to increased demand for Guardian Alert and a shift of our focus from Scope Out to Guardian Alert sales. Revenue is recognized by management only upon receipt of an actual purchase order from a customer, and the related invoicing to the company or, in the absence of a purchase order (i.e., verbal order), the actual invoicing to the customer, when the products are shipped and collection is reasonably assured.

We continued to market both products.  While it is the company objective to grow sales, no assurance can be given that we will be successful in this manner and sustain comparable sales in future periods.

                    For the Three months ended May 31,

 

 

2011

2010

Direct Cost

 

 

Scope Out Direct Costs

 

 

 

Cost of sales

-

-

 

Manufacturing expenses

-

-

 

Research and development

-

-

 

Commissions

-

 

 

Royalties - related party

15,000

50,000

Total Scope Out Direct Costs

15,000

50,000

 

 

 

 

Guardian Alert Direct Costs

 

 

 

Cost of sales

10,779

-

 

Manufacturing expenses

  7,685

10,253

 

Research and development

  3,000

-

 

Commissions

12,027

8,227

 

Royalties - related party

    962

 

Total Guardian Alert Direct Costs

34,453

18,480

Total Direct Costs

49,453

68,480

Overall direct costs for the current quarter ending decreased due primarily to lower royalty costs of the increased Scope Out® sales. 

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 $50,000 for the three month periods ended May 31, 2011 and 2010, respectively, a decrease of 70%. The decrease is primarily attributable to the decrease in royalties. 

Form 10-Q 

Page 10

Direct costs related to Guardian Alert were $34,453 and $18,480 for the three month period ending May 31, 2011 and 2010 respectively. This change represents an increase of 86%. Commission expenses were $12,027 and $8,227 for the three month period ended May 31, 2011 and 2010, respectively. Commission expense increased 46% due to an increase in sales.  Manufacturing expenses were $7,685 and $10,253 for the three month period ended May 31, 2011 and 2010, respectively.  Manufacturing expenses in Direct Costs for the Guardian Alert® for the three months ended in 2011 and 2010 represents assembly costs for the sales achieved for the same period.  

Selling, General, and Administrative

For the three months ended

 

May 31, 2011

May 31, 2010

Advertising and marketing

2,806 

-

Consulting fees

16,000

22,700

Contract labor

3,000

3,000

Depreciation 

2,760

2,760

Filing fees 

223

3,735

Insurance 

6,634

6,769

Bank charges 

792

597

Legal and accounting  

1,144

10,620

Office and miscellaneous 

2,613

3,416

Rent 

3,742

816

Telephone and utilities 

84   

-

Transfer agent fees

1,171

2,764

Travel and automotive

4,042

1,357

Interest expense

39,899

74,493

Total

84,910

133,027

Sense Technologies, Inc. had selling, general and administrative expenses of $84,910 for the three month period ended May 31, 2011 compared to selling, general and administrative expenses of $133,027 for the three month period ended May 31, 2010, a decrease in selling, general and administrative expenses of  36% from the prior period. 

Advertising and marketing fees increased as compared to the prior three month period. We had marketing fees of $2,806 and $0 for the three month period ended May 31, 2011 and 2010, respectively.

Consulting fees decreased from $22,700 for the three month period ended May 31, 2010 to $16,000 for the three month period ended May 31, 2011. The decrease was a result of consulting related to Guardian Alert product sales.

The Company determined that prior expenses for marketing and advertising costs related to the sales plan for ScopeOut® were not producing results. Management believed it was in the best interest of the company to discontinue these costs. The Company is concentrating on Guardian Alert® sales based on market interest, and in doing so as cost-efficiently as possible, the Company has replaced those costs with a “little-to-no cost” effort of asking existing fleet-customers to refer the Guardian Alert® products to other fleets.  Additionally, the company is paying more in commissions, as previously stated, because of the efforts to incentivize the sales of the Guardian Alert® to fleets.

Legal and accounting fees decreased from $10,620 in the three month period ended May 31, 2010 to $1,144 for the three month period ended May 31, 2011.  The decrease was mainly due to prior year expenses related to lease agreements for ScopeOut®.

Form 10-Q 

Page 11

Following summarizes the overall operations results for the three month period ended May 31:

 

 

 

 

 

 

 

 

**Increase**

**%  Increase**

 

**2011**

**2010**

**( Decrease)**

**(decrease)**

 

 

 

 

 

Sales

51,809

46,125

5,684

12.32

Direct Costs

49,453

68,480

(19,027)

(27.79)

General and Administrative expenses

84,910

133,027

(48,117)

(36.18)

Net Loss

(82,554)

(155,382)

(72,828)

(46.87)

Basic and Diluted Loss per share

(  .00)

(      .00)

   

We had a loss from operations of $82,554 for three month period ended May 31, 2011, compared to a loss from operations of $155,382 for the three month period ended May 31, 2010, a decrease in loss from operations of $72,828 from the prior year. 

**Liquidity and Capital Resources**

Our cash position at May 31, 2010 was $887 as compared to $750 at February 28, 2011. This increase was due to our use of cash in operating and investing activities and cash provided by financing activities as described below.

We have a working capital deficit of 3,179,484 and 3,221,791 as of May 31, 2011 and February 28, 2011 respectively. If we are unable to raise adequate working capital for fiscal 2012, 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 2012, 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 $145,512 in 2011, compared to $111,177 in 2010. The increase in cash used in 2011 was largely due to the increase in inventory. 

**Net cash provided by financing activities**

Net cash provided by financing activities was $145,649 in 2011 compared to net cash provided of $110,468 in 2010.

In 2011, we received $130,000 through subscriptions to private placements of our common shares.

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk**

Not applicable.
**Item 4. Controls and Procedures**

**Disclosure Controls and Procedures**

The Company carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer (who is also acting in the capacity as the principal accounting officer), of the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Company’s principal executive officer 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.

Form 10-Q 

Page 12

The Company, including its principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures or its internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, the Company performed additional analysis and other post-closing procedures in an effort to ensure its consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, the Company believes that the financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.

The Company’s internal conclusion related to its disclosure and procedural controls is due to the number and magnitude or changes to its draft 10Q recommended by the Company’s independent auditor.

The Company plans to continue working with competent outside professionals to help it with quarterly reporting and if its business plan is successful additional improvements in the Company’s accounting department will be made.

**Changes in Internal Control over Financial Reporting**

In addition, the Company with the participation of its chief executive officers have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended May 31, 2011 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.

Form 10-Q 

Page 13

**PART II-OTHER INFORMATION
**Item 1. Legal Proceedings.**

None.
**Item 1A. Risk Factors.**

There were no material changes in our risk factors from our Form 10-K for the year ended February 28, 2011.
**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

There were no unregistered sales of equity securities during the quarter ended May 31, 2011.
**Item 3. Defaults Upon Senior Securities.**

None.
**Item 4. Submission of Matters to a Vote of Security Holders.**

We did not submit any matter to a vote of our stockholders during the quarter ended May 31, 2011.
**Item 5. Other Information.**

Sense Technologies has entered an agreement with a global company to market the Guardian Alert® under a registered trade name.
Form 10-Q

**Item 6. Exhibits.**

 

 

 

31.1

Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange act of 1934

 

 

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) or Rule 15d-14(b) of the U.S. Securities Exchange Act of 1934

 

 

 

 

Form 10-Q 

Page 14

 
**SIGNATURES**

 

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.**

 

 

Date

Signature

 

 

 

 

August 29, 2011

/S/ BRUCE E. SCHREINER

 

Bruce E. Schreiner, President

 

(principal executive officer) and Director

Form 10-Q 

Page 15

**Exhibit 31.1**

**CERTIFICATIONS**

I, Bruce E. Schreiner, certify that:

1.   

I have reviewed this report of the fiscal quarter ended May 31, 2011 of Sense Technologies, Inc.

2.  

 Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  

Based on my knowledge, the financial statement, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.  

The small business issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15e)) for the small business issuer and have:

a) 

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which the annual report is being prepared;

b)  

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c)   

evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation.

d) 

disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. 

The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent function):

a.  

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b.  

any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s control over financial reporting.

August 29, 2011

 

 

 

S/ BRUCE E. SCHREINER

 

Bruce E. Schreiner, Chief Executive Officer

 

Form 10-Q 

Page 16

**Exhibit 32.1**

 
**CERTIFICATION**

**PURSUANT TO 18 U.S.C. SECTION 1350**

**AND RULE 13a-14(b) OR RULE 15d-14(b)**

**OF THE U.S SECURITIES EXCHANGE ACT OF 1934**

In connection with the Quarterly Report of Sense Technologies Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended May 31, 2011 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, and Rule 13a-14(b), that to his knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 29, 2011

 

/S/ BRUCE E. SCHREINER

Bruce E. Schreiner, President

(principal financial and accounting officer)

Form 10-Q 

Page 17****