UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)

|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2005

|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

              For the transition period from _________ to _________

                        Commission file number: 333-87293

                              SENSE HOLDINGS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                      Florida                           82-0326560
                      -------                           ----------
         (State or Other Jurisdiction of             (I.R.S. Employer
          Incorporation or Organization)            Identification No.)

              4503 N.W. 103rd Avenue
                 Sunrise, Florida                          33351
     ----------------------------------------           ----------
     (Address of Principal Executive Offices)           (Zip Code)

Issuer's Telephone Number: (954) 726-1422

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  None

     Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. |_|

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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|_|

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |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|

     The issuer's revenues for the fiscal year ended December 31, 2005 was
$501,078.

     The aggregate market value of the issuer's common equity held by
non-affiliates, as of April 10, 2006 was $13,655,771.

     As of April 10, 2006, there were 47,950,768 shares of the issuer's common
equity outstanding.

     Documents incorporated by reference: Form 10-KSB for the period ended
December 31, 2004

     Transitional Small Business Disclosure Format (Check one): Yes|_|  No|X|

<PAGE>

                                Table of Contents
                                                                            Page
                                                                            ----
PART I

     Item 1.   Description of Business......................................   1

     Item 2.   Description of Property......................................  17

     Item 3.   Legal Proceedings............................................  17

     Item 4.   Submission of Matters to a Vote of Security Holders..........  17


PART II

     Item 5.   Market for Common Equity, Related Stockholder Matters and
               Purchases of Equity Securities...............................  17

     Item 6.   Management's Discussion and Analysis or Plan of Operation....  18

     Item 7.   Financial Statements.........................................  26

     Item 8.   Changes In and Disagreements With Accountants on Accounting
               and Financial Disclosure.....................................  27

     Item 8A.  Controls and Procedures......................................  27

     Item 8B.  Other Information............................................  27


PART III

     Item 9.   Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act............  27

     Item 10.  Executive Compensation.......................................  31

     Item 11.  Security Ownership of Certain Beneficial Owners and
               Management and Related Stockholder Matters...................  35

     Item 12.  Certain Relationships and Related Transactions...............  36

     Item 13.  Exhibits.....................................................  36

     Item 14.  Principal Accountant Fees and Services.......................  38

<PAGE>

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

         Certain statements in this annual report contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to implement our strategic
initiatives, economic, political and market conditions and fluctuations,
government and industry regulation, interest rate risk, U.S. and global
competition, and other factors. Most of these factors are difficult to predict
accurately and are generally beyond our control. You should consider the areas
of risk described in connection with any forward-looking statements that may be
made herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this annual
report in its entirety, including the risks described in "Risk Factors." Except
for our ongoing obligations to disclose material information under the Federal
securities laws, we undertake no obligation to release publicly any revisions to
any forward-looking statements, to report events or to report the occurrence of
unanticipated events. These forward-looking statements speak only as of the date
of this annual report, and you should not rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business.

         When used in this annual report, the terms the "Company," "we," "us,"
"ours," and similar terms refers to Sense Holdings, Inc., a Florida corporation,
and our subsidiary.

                                        i
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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

BUSINESS

BACKGROUND

We design, develop, manufacture and sell fingerprint-based identification
products and systems that incorporate state-of-the-art biometric technology to
verify a person's identity. We have developed two turnkey integrated
applications that incorporate our proprietary BioClock(R) hardware platform:

      o  Our "CheckPrint(R) T/A" systems are designed primarily for use by
         employers who desire to verify the presence of employees at the
         workplace, and to monitor their time and attendance at work; and,

      o  Our "CheckPrint(R) A/C" systems are designed to permit access to locked
         buildings, offices or other secured areas only to selected individuals,
         whose identities can be verified using our fingerprint identification
         software.

We also own, license or have optioned for purchase the following additional
security-related technologies:

      o  Micro Electro Mechanical Sensors, or MEMS, technology for use in the
         field of explosive detection. We believe that this technology will
         enable us to develop products for governmental use, as well as for
         security-related applications including airport security. No products
         have yet been developed incorporating these technologies, however we
         plan on funding final development stage at Oak Ridge National
         Laboratories during the second quarter of 2006 and we are targeting a
         completion date of September, 2006 to launch products to the
         marketplace.

Our modest revenue-generation to date has been derived primarily from our sales
of our biometric BioClock(R) and CheckPrint(R) products. These sales have taken
place for the most part to a few major customers. As such we are dependent upon
the few major customers and any disruption in that business will significantly
decrease our sale revenues if other business is not secured. Our negative
financial results have been due, in substantial part, to a lack of capital
necessary to commence aggressive marketing programs. While we have funded our
growth to date through the sale of our debt and equity securities, we require
operating revenues or alternative financing in order to fully implement our
business plan and achieve profitability.

BIOMETRICS INDUSTRY

The use of unique physical traits to verify a person's identity is known as
biometric identification. Biometric identification includes fingerprinting, hand
geometry, iris scanning, retinal scanning, voice recognition, face recognition
and signature analysis. Biometric technology has been used for decades in
government and law enforcement applications. Until recently, these systems were
too expensive to manufacture to make retail marketing realistic. However, with
the introduction of more powerful computers and the development of more advanced
software applications, biometric identification techniques can be adapted for
commercial purposes on an economically feasible basis. In addition, there is
currently a much greater awareness of biometrics as it relates to security
applications.

There are many alternatives in the biometric industry that include, but are not
limited to, fingerprint recognition, facial recognition, voice recognition and
palm recognition, iris scanning and retinal scanning. Many providers have used
the different methods in different applications. To date, applications include
time and attendance, access control, crowd scanning and computer access. The
industry is in its infancy regarding applications however the technology
regarding biometric detection is a rapidly maturing science. Presently, there
are many companies entering the biometric detection and application industry
while many other companies have failed at trying to create a marketable product.
There are few companies that have been in the industry for multiple years and
continue to use their experience to market biometric detection devices and
applications.

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<PAGE>

We believe that fingerprint identification is far more effective in
authenticating employees' actual attendance at work than traditional time clock
verification. By authenticating a person's identity, biometric identification
can substantially reduce incidents of employee fraud inherent in the use of
other forms of employee identification and attendance verification, such as
punch clocks. We also believe that fingerprint verification is less intrusive,
more widely accepted and more cost effective than other available forms of
biometric identification. Also, the use of biometrics for access control is
becoming widely accepted in the marketplace. This is especially true for access
to sensitive workspaces like an airport tarmac.

Many factors, including recent world events, have created increased demand for
new biometric applications to secure access, not only to physical areas, but
also sensitive data. Among the applications that are being developed are the use
of biometrics to validate the identities of individuals at security checkpoints
before boarding a plane, entering a building, crossing a border, and accessing a
computer.

PRODUCTS AND SYSTEMS

BIOCLOCK(R)

Our biometric systems are designed and built around our proprietary hardware
platform known as BioClock(R), a stand-alone platform, or completely network
enabled system, that replaces a traditional wall-mounted or freestanding swipe
or punch-card time clock. Identity verification is accomplished by comparing an
individual's scanned and digitized fingerprint to the fingerprint profile stored
in a computer database. The user's fingerprint is scanned by means of a
silicon-based reader with sensors that capture the fingerprint image. The image
is then converted into data that is stored in the system's computer database,
and saved as a reference for comparison to the fingerprint offered for
identification.

BioClock(R) replaces traditional identification devices such as: swipe cards;
punch cards; PIN numbers; or, passwords that can be stolen or voluntarily
provided by the owner to another person. Alternatively, BioClock(R) can be used
in conjunction with traditional identification devices for added security. We
have made our systems modular so the user can choose which parts of the
technology they wish to use. In addition, we have designed our systems to be
compatible with many existing technologies so that they can be integrated into
an existing system in a seamless fashion. As a result, we believe BioClock(R)
reduces incidents of fraud associated with traditional identification systems
that do not effectively preclude individuals from using another person's means
of identification while keeping integration hurdles and costs down.

We have also developed two integrated hardware and software applications that
incorporate BioClock(R) in an "off the shelf" configuration for performing time
and attendance and access control.

CheckPrint(R) T/A

Our time and attendance systems, which are marketed under the name,
CheckPrint(R) T/A:

      o  Use fingerprint verification to authenticate the identity of employees
         when they arrive at and leave work;

      o  Gather data, including the time each employee attends work and what
         areas were accessed by an employee;

      o  Perform payroll functions and other record keeping calculations using
         the data that is gathered;

      o  Provide electronic export capability to over 150 independent
         third-party payroll service providers to facilitate the use of
         automated payroll checks between Sense customers and their payroll
         service provider;

      o  Generate logs and reports, including 60 standard reports; and

      o  Perform other functions including employee scheduling, job cost
         analysis, editing time punches, electronic calculations and related
         record keeping.

                                       2
<PAGE>

Our standard CheckPrint(R) T/A systems include a 100 person user base. We are
currently developing data base management capabilities for larger numbers of
employees, while maintaining system accuracy. These developments include the use
of a PIN number in conjunction with biometrics, that make the number of users
only limited by the data storage capacity of the system, without adverse effects
on accuracy.

CheckPrint(R) A/C

Our access control systems, which are marketed under the name CheckPrint(R) A/C,
are security systems that permit access to locked buildings, offices or other
secured areas only to those whose identities can be verified, using our
proprietary fingerprint identification software. Our CheckPrint(R) A/C systems,
which can be used with or without Smart Card technology, can be programmed for
different levels of security, permitting access only to recognized individuals
who have the requisite level of security clearance. Our current version of
CheckPrint(R) A/C system incorporates access control capability for single door
access. We are developing software application infrastructure that will enable a
single CheckPrint(R) A/C system to control access to multiple locations. We
market CheckPrint(R) A/C at a higher price than CheckPrint(R) T/A, to reflect
the increased level of technology and functionality provided by CheckPrint(R)
A/C.

CheckPrint(R) ATAC

Our access control systems and time and attendance systems have been combined
into one product offering both capabilities. We market this combined product
under the name CheckPrint(R) ATAC. The combined system can be used with or
without Smart Card technology. The system incorporates time and attendance and
access control capability for multiple doors at multiple locations. We market
CheckPrint(R) ATAC at a higher price than CheckPrint(R) A/C, to reflect the
increased level of technology and functionality.

BDS

We have developed software into a Biometric Distribution Server. We market this
software in combination with our other systems under the name CheckPrint(R) BDS.
The software allows our systems to operate in a multi-unit configuration. Thus
many remote sites can be managed from a central database. We believe the
CheckPrint(R) BDS application is a significant enhancement to our core product
offering and the field of biometrics.We have applied for patent protection with
the United States Patent and Trademark office and are currently protected by
Patent Pending.

We have also developed and are marketing:

      o  CheckPrint(R) SDK, a software development kit for biometrics that
         enables purchasers and licensees to create custom applications for our
         software and hardware. The SDK was developed to work in conjunction
         with our hardware and assists developers in the creation of robust
         biometric fingerprint applications. The SDK is separated into 3
         categories - imaging, algorithm, and database. We believe that a
         successful deployment of an SDK application by a purchaser or licensee
         may lead to increased sales of our hardware products.

      o  CheckPrint(R) DTU, provides users with the ability to secure a computer
         terminal, and files and folders, via fingerprint identification. The
         hardware is a stand-alone peripheral that can be connected to a port on
         an existing computer to permit fingerprint identification.

      o  CheckPrint(R) SDTU, provides users the ability to secure a computer
         terminal with fingerprint biometric technology and a smart card. The
         hardware is a stand-alone peripheral that can be connected to a port on
         an existing computer to permit fingerprint identification. There are
         many applications that can be written around the secure data storage
         capability of a smart card that is unlocked by a fingerprint biometric
         signature. For example, in a university setting information such as
         meal plan credits can be stored on the smart card and deducted as used
         by the biometrically identified user.

The Bill of Materials and all associated design advantages for BioClock(R) are
kept strictly confidential and protected by trade secret laws of the United
States and Florida. In addition, all of the CheckPrint(R) software required to
run the hardware platform in Sense's configuration enjoys protection under the
copyright laws of the United States.

                                       3
<PAGE>

PRODUCT DEVELOPMENT, MANUFACTURING AND ASSEMBLY

CheckPrint(R) T/A is configured, as a stand alone unit comprised of a TFT Flat
Panel display, internal computer, keypad, and silicon fingerprint reader.
CheckPrint(R) T/A automatically authenticates the employee's identity; tracks
total hours, and calculates the correct pay rates. Sense offers CheckPrint(R)
T/A models to support any size employee base.

We design, develop, manufacture, and sell the CheckPrint(R) T/A security
solution. We have developed time and attendance, access control and security
system software applications, as well as a complete hardware system solution
based on a Pentium(R) PC processor backbone. Our products work in a network
environment and we can connect to any existing network infrastructure or we can
setup the network at the customer's request. Data is transmitted through TCP/IP
protocol and we can link unlimited CheckPrint(R) T/A units together in any
environment or facility. Sense also can remotely communicate with other
CheckPrint(R) T/A units using a modem which transmits required data over the
standard telephone lines. The CheckPrint(R) T/A systems are unsupervised
security and clock-in stations replacing the standard wall mounted time clock or
swipe systems. An employee or another authorized user uses his or her
fingerprint to replace a password, PIN or swipe card.

CheckPrint(R) T/A systems and CheckPrint(R) A/C systems are driven by our
proprietary software. We believe that the software components for our biometric
identification systems are proprietary because the software was developed by our
technical staff, and all rights to the creation of these software applications
have been assigned to the company. The source code for the software is our
proprietary property. All employees are under a contractual obligation, and /or
the work for hire doctrine, to assign their intellectual property rights to
Sense. This software enables our systems to gather, filter and sort data,
generate reports from the data and compute payroll information for export to
third party payroll services.

Most of the hardware components for our biometric systems are off-the shelf, and
we are not dependent on any one vendor for these components. However, certain
hardware components have been designed by our in-house engineering staff or
designed to our specifications as works for hire by independent contractors. We
have entered into an agreement with Test Systems Engineering, under which Test
Systems Engineering has designed, engineered and configured some of our hardware
components for CheckPrint(R) T/A and CheckPrint(R) A/C systems. They are a
valuable resource for many engineering tasks and have a state of the art design
and manufacturing facility. All product testing and assembly is performed
"in-house" in order to maintain quality control. Our agreement with Test Systems
Engineering terminated on December 31, 2005, and may be automatically renewed
for consecutive one-year terms. For its services, Test Systems Engineering
receives a fee payable at the rate of $75 per hour. We are not dependent on Test
Systems Engineering for its services.

Our biometric systems currently incorporate a silicon-based fingerprint scanner
with sensors to capture a user's fingerprint. Related software then compares the
user's fingerprint to the digitized reference sample stored in the system's
database, and verifies the user's identity. The silicon-based technology is used
in conjunction with our own software that interfaces between the silicon product
and our biometric systems. We currently purchase the silicon-based technology
from an independent supplier. We believe that this supplier is able to provide
us with our foreseeable requirements for these components. We are not dependent
on the supplier for our sensor needs.

On September 9, 1999, we entered into an agreement with Integrated Design, Inc.
under which Integrated Design developed a software program to enable the payroll
data produced by CheckPrint(R) T/A to be exported to over 150 third party
payroll services such as ADP and Paychex. We have licensed the software from
Integrated Design and are required to pay license fees on a per user basis. This
fee is incorporated into the cost of our overall product. Integrated Design was
paid a $10,000 software development fee to customize their software to our
application. The software development agreement is for a term of five years, the
agreement automatically renews on the five year anniversaries unless either
party notifies the other before the end of the then current term, but may be
canceled by either party on 90 days written notice. The agreement also provides
us access to the software and allows us to continue to use Integrated Design's
software in the event of such company's dissolution, bankruptcy or similar
events. If our agreement with Integrated Design terminates, we will incur time
and expense to develop alternative software links for data export. Delays in the
successful development of alternative software links could adversely affect us.

                                       4
<PAGE>

ACQUISITION OF MICRO SENSOR TECHNOLOGIES, INC. AND THE MEMS TECHNOLOGY AND
PATENT RIGHTS WITH UT-BATTELLE LLC

On May 31, 2001, we acquired all of the outstanding shares of Micro Sensor
Technologies, Inc., a Florida corporation ("Micro Sensor"). The shares were
acquired from UTEK Corporation and UT-Battelle LLC, the shareholders of Micro
Sensor, in a stock-for-stock exchange, for total consideration of 2,000,000
shares of our common stock. Following the acquisition, Micro Sensor became our
wholly-owned subsidiary, and we indirectly acquired the rights and obligations
of Micro Sensor under various agreements to which it is a party, including a
Patent License Agreement with UT-Battelle LLC, a presently expired Consulting
Agreement with Dr. Thomas Thundat and a presently expired Work for Others
Agreement with UT-Battelle LLC. UT-Battelle LLC is the technology transfer
management company created at Oak Ridge National Laboratory. Pursuant to the
stock-for stock transfer, UTEK received 1,850,000 common shares of Sense and
UT-Battelle received 150,000 common shares of Sense.

Under the Patent License Agreement, Micro Sensor became the exclusive licensee
of UT-Battelle with respect to certain patented technology owned by UT-Battelle
relating to the use, sale or offer for sale of intellectual property
incorporating MEMS sensors for the detection of explosives. Micro Electro
Mechanical Sensors, or MEMS, are comprised of micro cantilevers that molecules
of explosive material attach to, thus causing the cantilevers to diffract or
bend. When diffraction is detected, the sensors are alerted to the presence of
an explosive molecule. This technology thus assists in the detection of
unexploded ordinance including bombs, grenades, shells, rockets, and other
explosive devices either placed as mines or fallen as projectiles whether buried
or camouflaged.

The exclusive license from UT-Battelle did not include explosive detection for
security applications, including airport security. UT-Battelle acquired the
licensed rights under a contract with the United States Department of Energy,
pursuant to which the technology was developed at the Oak Ridge National
Laboratory in Oak Ridge, Tennessee.

Effective August 1, 2005, we entered into an Exclusive Patent License Agreement
with UT-Battelle, LLC. The License Agreement supersedes and replaces an
agreement dated March 26, 2001. Under the August 1, 2005 license agreement, we
license certain patent rights relating to the detection of unexploded ordnance
and chemical vapor detetion for security applications. Under the License
Agreement, UT-Battelle has granted us the exclusive right to manufacture, use,
sell, offer for sale and sublicense yet to be developed products incorporating
the licensed patents, relating to (a)chemical vapor detection and (b) the
detection of unexploded ordnance, including bombs, hand grenades, rockets and
other unexploded devices. We have also been granted for a 24-month period from
the effective date of the agreement a right of first refusal to negotiate a
patent license agreement with UT-Battelle for its proprietary technology
relating to the detection of biological warfare agents in security applications,
such as anthrax, cholera, ebola, plague, ricin, smallpox and tularemia.

Oak Ridge National Laboratory continues its research and development efforts
toward a commercially viable Micro Sensor to be incorporated into our product
line of sensors. We are engineering systems and hardware to incorporate the
sensor, as envisioned, into handheld explosive detection devices. Dr. Bruce
Warmack serves as our liaison at Oakridge National Laboratory.

As consideration for the license grants by UT-Battelle, we have:

      o  Paid UT-Battelle an aggregate of $150,000 in cash proceeds;

      o  Issued to UT-Battelle 833,333 shares of our unregistered common stock
         (the "Shares");

      o  Agreed to pay to UT-Battelle a royalty equal to 4% of net sales of
         products incorporating the licensed patents, subject to minimum royalty
         payments of $10,000 for 2006, $20,000 for 2007 and $25,000 for 2008 and
         thereafter;

      o  Agreed to pay to UT-Battelle, in the event we sublicenses the licensed
         patents, the greater of 50% of the Company's revenues from sublicensing
         and the minimum required royalties described above; and Reimburse
         UT-Battelle for certain costs and expenses of securing patent
         protection for the licensed patented technology.

                                       5
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On January 1, 2006, we entered into a stock exchange agreement with UT-Battelle.
In connection with this agreement, UT-Battelle, LLC returned 683,333 shares of
common stock previously issued by us (see note 5) for $150,000 in cash. The
returned shares were cancelled upon receipt.

RESEARCH AND DEVELOPMENT COSTS

From the inception of our current activities in July 1998 through December 31,
2005, we have spent approximately $1,800,000 on research and development
activities. For the years ended December 31, 2005 and 2004, research and
development, consisting mainly of salaries and research and development fees
associated with a Cooperative Research and Development Agreement, amounted to
$314,233 and $163,492, respectively.

Cooperative Research and Development Agreement
----------------------------------------------

On November 7, 2005, we entered into a Cooperative Research and Development
Agreement ("CRADA") with UT-Battelle, LLC under its U.S. Department of Energy
Contract No. DE-AC05-00OR22725. The CRADA is for the development of a hand-held
sensor with high sensitivity and selectivity for the detection of explosives
initially and then to expand the capabilities to include chemical and biological
warfare agents and narcotics. We have agreed to provide $150,000 within thirty
(30) days after the effect day of the CRADA. We will provide additional payments
of $65,000 sixty (60) days after the effect day or the CRADA; $65,000 ninety
(90) days after the effective day of the CRADA; $65,000 120 days after the
effective day of the CRADA; $65,000 180 days after the effective day of the
CRADA; $65,000 210 days after the effective day of the CRADA and a final payment
of $49,000 240 days after the effective date of the CRADA. Failure by us to
provide the necessary advance funding is cause for termination of the CRADA in
accordance with the termination article of this CRADA. There are no assurances
that such expenditures will develop products that we can market or upon terms
and conditions which are acceptable to our client base.

SALES, MARKETING AND PRICING

Many of our goods and services are customized to individual customer needs.
However, our core products, which we market under the marks BioClock(R) and
CheckPrint(R) as systems, range from $2,500 to the hundreds of thousands of
dollars, depending on the number of users, sites and functionality of the
system. We also offer software updates and on-site service contracts for
additional fees. We also sell other goods and services, such as a desk top
finger sensor, a desk top finger sensor with a smart card reader built into the
desk top unit, software developer's kits and database management tools, at
suggested retail prices.

We market our systems to manufacturers, retailers and other businesses with at
least 15 to 100 employees, to whom we market our smaller turnkey solution. We
also market to larger businesses, including Fortune 500 Companies that require
full custom integration solutions. We sell our systems through an in-house sales
force as well as original equipment manufacturers ("OEMS") and independent sales
representatives. We engage in direct marketing programs, trade show
participation, and local, regional and national advertising campaigns to
generate sales. Moreover, we have offered consulting and design services to
specialized biometric development and deployment projects. By offering our
expertise in the design and deployment of biometric systems we may gain
additional revenues and create another marketing avenue.

Our network of independent sales representatives, through which we presently
derive less than ten (10%) percent of our revenues, currently serve markets
throughout the United States, South America and the Pacific rim. We intend to
engage sales representatives and consultants to cover additional territories
over the next 12 months. Domestically, or through international representative,
consultants or strategic partners, we intend to seek penetration of the
automotive, retail merchandise, home and business security, food processing
facilities, textile manufacturing and trucking and transport distribution
markets through the services of these representatives. A commission based upon
the sales prices of systems sold by them generally compensates sales
representatives.

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<PAGE>

We intend to license and sell our systems to third party OEMs, integrators and
software developers, for incorporation in their products. License fees and
royalty fees will be negotiated on a case by case basis, and take into
consideration various factors including competitive pricing, the nature of the
installation, the number of users to be tracked, and the extent of enhancements,
modifications and customization required by the customer. Basic, extended and
enhanced maintenance services will also be made available for an annual fee.

DEPENDENCE ON A FEW MAJOR CUSTOMERS

Significant portions of our sales to date have been, and will continue to be,
made through a small number of significant customers. Approximately 83% of the
sales during the year ended December 31, 2005, were derived from one customer,
Federal Express. This customer accounted for 93% of the outstanding accounts
receivable at December 31, 2005. For the year ended December 31, 2004, 72% or
our revenues were derived from three customers; American Airlines, Federal
Express, and Pearson Education. Specifically, American Airlines accounted for
35.6%, Federal Express accounted for 20.8%, and Pearson Education accounted for
15.4%. Any disruption in our relationships with one or more of these customers,
or any significant variance in the magnitude or the timing of orders from any
one of these customers, may result in decreases in our results of operations,
liquidity and cash flows. Any such adverse operating results will likely
decrease the market price of our common stock.

INTELLECTUAL PROPERTY

Patents

We currently have on file with the United States Patent and Trademark Office, a
utility patent that was converted from a provisional patent covering the
proprietary use of our technology and the proprietary hardware used in our
application. In addition, we have on file a provisional patent regarding our
CheckPrint(R) BDS, a biometric middleware utility, and a utility patent
regarding a handheld explosive detection unit. Our goods and services are
clearly marked as patent pending. Several other products and methods are being
identified as potential patent subject matter, and once the analysis is complete
applications will be sought. There is no guarantee that our patent applications
will mature into registrations for patents. We have retained patent counsel to
review the projects and advise where subject matter applicable for patent
protection exists, and to prepare applications for the same. All of our
employees are under an obligation to assign inventive material to Sense
Holdings, Inc.

Please see above Sections titled: ACQUISITION OF MICRO SENSOR TECHNOLOGIES, INC.
AND THE MEMS TECHNOLOGY for information regarding licensed and optioned patent
rights.

Trademarks

We maintain common law rights to our trademarks. The common law rights protect
the use of marks used to identify our goods and services since the time of their
first use in commerce. We have a registration for our flagship software product
CheckPrint(R) and our flagship hardware product BioClock(R). In addition, we
have registered Sense(R) as our corporate identity, meCard(R) used to identify
identification cards used in conjunction with our biometric systems and
"Security Solutions at a Touch of a Finger" (R). Several other marks are being
identified as strong product and service identifiers and trademark search and
applications are underway. There is no guarantee that our trademark applications
will mature into registration of trademarks.

Copyrights

We currently have on file several copyright applications covering our source
code. We maintain common law rights to our proprietary copyrights. The common
law rights protect the actual programming code, the look and feel of its display
screens and material contained in our user manuals since the time of the
copyrightable works creation. In addition, we have an application on file with
the United States Copyright Office covering our proprietary source code, the
look and feel of our display screens and user manuals. There is no guarantee
that our application will mature into a registration for copyright.

                                       7
<PAGE>

Whether or not we obtain formal protection for our products and/or systems, we
intend to vigorously protect our ownership rights. However, protection of our
rights will not prevent others from developing similar technology on their own
or developing other products that may be used for purposes similar to ours. If
these events occur, others may become our competitors, which could have a
material adverse effect on our business, financial condition and results of
operations.

COMPETITION

We face competition from companies engaged in the time and attendance industry,
as well as in the security and access control industry. Competition may come
from companies using biometric fingerprint technology, as well as from companies
using other biometric identification methods. Competitors also include companies
marketing traditional forms of employee verification and attendance products,
including time clocks, ID badges, passwords and PIN numbers. Many of our
competitors may have longer operating histories and greater financial and other
resources than we have. Our ability to compete successfully will depend on many
factors, including our ability to adapt to changing technologies and meet the
needs of the marketplace on a price competitive and timely basis.

Competition in time and attendance services exists from various software
developers and product manufacturers, the largest of which is Kronos, a publicly
traded company (NASDAQ National Market System: KRON) providing software
applications based on a swipe card identifier. Other competitors in time and
attendance application development include Simplex, Stromberg, TimeAmerica, Time
Systems and ADP. Principal competition in fingerprint biometrics includes
Identix, Crossmatch, Secugen Fujitsu, and Cogent Systems. Other biometric
technology providers include Recognition Systems (hand geometry), LG Electronics
(LG Iris) (iris identification) and Visage ( Facial recognition ). Many of our
competitors have a substantially longer operating history than we do and have
substantially greater financial and other resources than we do. While we believe
that our ability to offer a total package of time and attendance and access
control software and innovative hardware gives us a competitive marketing
advantage, unless we are able to penetrate the marketplace and gain name
recognition for our products and technology, we may be unable to compete
effectively.

We have initiated due diligence to begin development of our handheld MEMS
multi-substance detector. We plan to develop a handheld detector with the
capabilities of detecting explosives, chemical and biological substances and
narcotics. We will work in conjunction with Oak Ridge National Laboratory
utilizing our on-staff expertise. We will face competition in this sector of
business from industry participants such as GE Interlogix, OSI Rapiscan,
Scientex, Isonics to name a few, along with other methods of detection such as
K-9 units. We feel price and performance will guide this product as the industry
leader in this sector.

We believe that we can effectively compete in our industry because:

      o  Biometric identification is more reliable than traditional employment
         verification methods;

      o  Fingerprint identification is less costly and more recognized than
         other currently available forms of biometric identification;

      o  Our systems provide a total solution, turnkey approach to our
         customers;

      o  Our systems are network enabled and can be remotely accessed by a
         system administrator to get valuable real time information regarding
         the customer's work force and security at the workplace;

      o  Our systems offer an enterprise solution in that the systems are
         completely scalable for large numbers of employees and multiple access
         points and numerous locations;

      o  Our systems are modular and offer a variety of identification methods
         that can be added to the basic system;

      o  Our systems are software driven and the software is customizable to a
         customer's particular needs; and,

      o  Biometric identification does not use ID badges, passwords, PIN numbers
         or other devices that have historically been misused by employees to
         the detriment of employers.

                                       8
<PAGE>

We have not deployed technology in the explosive detection arena as the products
are still under development and do not have an ability to describe our
competitive advantages or disadvantages at this time.

Our inability to compete successfully with any of our products could have a
material adverse effect on our business, financial condition and results of
operations.

EMPLOYEES

We currently employ 6 people, all of whom are full-time employees, in the
following capacities: three executive officers, one of which is the Chief
Executive Officer, one of which is the Chief Financial officer one of which is
the Chief software designer and programmer, one specializing in the field of
mechanical and electrical engineering one warehouse and assembly employee, and
one sales person dedicated to marketing all of our proprietary and licensed
products. Our employees are not subject to a collective bargaining agreement. We
believe that relations with our employees are good.

CORPORATE HISTORY

We were organized in Idaho, under the name Century Silver Mines, Inc., on
February 5, 1968. Originally, we developed mining properties, but by 1998 we had
ceased those operations.

Sense Technologies, Inc. was organized under the laws of the State of Florida on
July 13, 1998. Sense Technologies was formed for the purpose of engaging in
developing and marketing biometric devices for use in employee identification
and security-related products.

In January 1999, we acquired all of the outstanding shares of Sense Technologies
for a purchase price consisting of 4,026,700 of our shares, issued to the former
shareholders of Sense Technologies. We operated Sense Technologies, Inc. as our
wholly owned subsidiary. At the time of the acquisition, Century Silver Mines
had no operations and Sense Technologies was developing its proprietary
biometric security systems. Immediately following the acquisition, the former
shareholders of Sense Technologies owned approximately 93% of our outstanding
shares.

At the time of the acquisition, the principal owners of Sense Technologies were
Dore Scott Perler and Andrew Goldrich. Dore Perler was its president, Andrew
Goldrich was its secretary and treasurer, and Messrs. Perler and Goldrich were
the members of its board of directors. At the time of the acquisition, the
officers and directors of Century Silver Mines were John Branz, Kirk Scott and
Barbara Scott, the mother of Kirk Scott. There were 288,300 outstanding shares
of Century Silver Mines owned by approximately 750 holders, none of whom, to our
knowledge, owned in excess of 5% of the outstanding shares. However, we
understand that Kirk Scott, Barbara Scott and James Scott, her brother-in-law,
owned an aggregate of approximately 29% of the outstanding shares of Century
Silver Mines at the time of the acquisition.

In January 1999, we reduced the shares of our stock that were outstanding by
combining each 7.74 shares that were outstanding, into one share. All numbers of
shares in this annual report reflect the January 1999 share combination. In June
1999, we changed our corporate domicile from Idaho to Florida and, in connection
with the domicile change we changed our name to Sense Holdings, Inc. In May
2000, we increased the number of shares of common stock we are authorized to
issue to 20,000,000, in January 2002, we increased our authorized common stock
to 40,000,000 shares and in April 2004, we increased our authorized to
100,000,000 shares.

In May of 2001 we acquired all of the issued and outstanding capital stock of
Micro Sensor, a company specializing in explosive detection technology. Micro
Sensor is now a wholly owned subsidiary of Sense Holdings. In January 2002, in
an effort to unify our corporate identity we ceased operating under the name
Sense Technologies, Inc., and began operating only as Sense Holdings, Inc.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our Common Stock is ComputerShare Trust
Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401 and its
telephone number is (303) 262-0600.

                                       9
<PAGE>

RISK FACTORS

Readers should carefully consider the following risk factors and all other
information contained in this Annual Report. Investing in our common stock
involves a high degree of risk. Any of the following risks could adversely
affect our business, financial condition and results of operations and could
result in a complete loss of your investment. No assurances can be given that
the risks and uncertainties described below are the only risks and uncertainties
that we face.

RISKS RELATED TO OUR BUSINESS

OUR WEAK FINANCIAL CONDITION HAS RAISED, AND WILL LIKELY CONTINUE TO RAISE,
SUBSTANTIAL DOUBT REGARDING OUR ABILITY TO CONTINUE AS A "GOING CONCERN," WE
HAVE EXPERIENCED HISTORICAL LOSSES WE MAY HAVE TO CEASE OPERATIONS IF WE DO NOT
GENERATE MEANINGFUL REVENUE AND ACHIEVE PROFITABILITY AND INVESTORS MAY LOSE
THEIR INVESTMENT. We have incurred substantial operating and net losses, as well
as negative operating cash flows, since our inception. For the fiscal years
ended December 31, 2005 and 2004, we experienced net losses of ($1,832,795) and
($1,499,284), respectively. At December 31, 2005, we had an accumulated deficit
of ($11,059,850). Our operating results for future periods will include
significant expenses, including product development expenses, sales and
marketing costs, programming and administrative expenses, for which we may not
have offsetting revenues or available capital. As a result, we may never
generate meaningful revenue and/or achieve profitability in the future.

Our current significant working capital deficit at December 31, 2005, among
other factors, resulted in our independent certified public accountants
modifying their audit report on our consolidated financial statements for the
fiscal years ended December 31, 2005 and 2004 to express substantial doubt as to
our ability to continue as a going concern. We remain in need of substantial
additional investment capital to fund our longer-term operating needs, including
the servicing of our remaining debt obligations and the conducting of those
marketing activities we believe necessary to achieve meaningful sales growth.

OUR BUSINESS IS CAPITAL INTENSIVE AND ADDITIONAL FINANCING MAY NOT BE AVAILABLE,
AS SUCH, ESPECIALLY IN LIGHT OF OUR HISTORICAL LOSSES, WE MAY HAVE TO CEASE
OPERATIONS AND INVESTORS MAY LOSE THEIR INVESTMENT. Our operations are capital
intensive and our growth and ongoing operations will consume a substantial
portion of our available working capital. We have engaged in numerous financing
activities over the past few years but have been unable to utilize the funds
raised to achieve positive financial results. Furthermore, we will require
additional capital in order to fund our operations and research projects, and we
do not have any commitments for additional financing. Additional funding, if
required, may not be available, or if available, may not be available upon
favorable terms. Insufficient funds will prevent, or delay, us from implementing
our business strategy. Due to our small revenue base, low level of working
capital and the inability to conclude development agreements with major
manufacturing companies, we have been unable aggressively pursue our product
development strategy to date. We will require significant additional financing
and/or a strategic alliance with a well-funded development partner to undertake
our business plan. Failure to receive additional funding or enter into a
strategic alliance could limit our growth, limit our likelihood of profitability
and worsen our financial condition and may correspondingly decrease the market
price of our common stock, or may cause us to cease operations all together.

OUR CONTINUED SALE OF EQUITY SECURITIES WILL DILUTE EXISTING SHAREHOLDERS AND
MAY DECREASE THE MARKET PRICE FOR OUR COMMON STOCK. Given our limited revenues
and prospect for revenues for the 2006 fiscal year, we will require additional
financing which will require the issuance of additional equity securities. We
expect to continue our efforts to acquire further financing in the future to
fund additional marketing efforts, product development expenses, programming and
administrative expenses, which will result in future dilution to existing
outstanding shareholders.

                                       10
<PAGE>

BECAUSE WE ARE DEPENDENT UPON A FEW MAJOR CUSTOMERS FOR SUBSTANTIALLY ALL OF OUR
CURRENT SALES, THE LOSS OF ANY ONE OF THEM WOULD REDUCE OUR REVENUES, LIQUIDITY
AND HINDER OUR ABILITY TO BECOME PROFITABLE, AS SUCH, WE MAY HAVE TO CEASE
OPERATIONS AND INVESTORS MAY LOSE THEIR INVESTMENT. Significant portions of our
sales to date have been, and will continue to be, made through a small number of
significant customers. Specifically, one customer, Federal Express, accounted
for approximately eighty-three percent (83%) of our revenues for the fiscal year
ended December 31, 2005. This same customer accounts for 93% of the accounts
receivable at year ending December 31, 2005. Approximately 72% of our sales for
the year ended December 31, 2004, were derived from three customers, American
Airlines, Federal Express, and Pearson Education. Any disruption in our
relationships with one or more of these customers, or any significant variance
in the magnitude or the timing of orders from any one of these customers, may
result in decreases in our results of operations, liquidity and cash flows. Any
such adverse operating results will likely decrease the market price of our
common stock.

WE DEPEND ON THE CONTINUED SERVICES OF OUR EXECUTIVE OFFICERS AND THE LOSS OF A
KEY EXECUTIVE COULD SEVERELY IMPACT OUR OPERATIONS, CAUSE DELAY AND ADD EXPENSE
TO OUR OPERATION. The execution of our present business plan depends on the
continued services of Dore Scott Perler, our Chief Executive Officer and
President, Andrew Goldrich, our Chief Financial Officer and Vice President, and
Shawn Tartaglia, our Chief Technical Officer. We do not currently maintain
key-man insurance on their lives. While we have entered into employment
agreements with each of them, the loss of any of their services would be
detrimental to our business, financial condition and results of operations. We
may not retain or replace the services of our key officers.

WE HAVE ELECTED NOT TO VOLUNTARILY ADOPT VARIOUS CORPORATE GOVERNANCE MEASURES,
WHICH MAY RESULT IN SHAREHOLDERS HAVING LIMITED PROTECTIONS AGAINST INTERESTED
DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS. Recent Federal
legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the
adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. We have not
yet adopted these corporate governance measures and, since our securities are
not yet listed on a national securities exchange or Nasdaq, we are not required
to do so. However, to the extent we seek to have our Common Stock listed on a
national securities exchange or Nasdaq, such requirements will require us to
make changes to our current corporate governance practices, which changes may be
costly and time consuming. Furthermore, the absence of such practices with
respect to our Company may leave our shareholders without protections against
interested director transactions, conflicts of interest and similar matters. As
an example of one Sarbanes-Oxley requirement, currently none of the members of
our board of directors are considered to be "independent" for purposes of
Sarbanes-Oxley. We may not be able to attract a sufficient number of directors
in the future to satisfy this requirement if it becomes applicable to us.

WE MAY BE EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROLS OVER
FINANCIAL REPORTING AND OUR ABILITY TO HAVE THOSE CONTROLS ATTESTED TO BY OUR
INDEPENDENT AUDITORS. As directed by Section 404 of the Sarbanes-Oxley Act of
2002 ("SOX 404"), the Securities and Exchange Commission adopted rules requiring
public companies to include a report of management on the company's internal
controls over financial reporting in their annual reports, including Form
10-KSB. In addition, the independent registered public accounting firm auditing
a company's financial statements must also attest to and report on management's
assessment of the effectiveness of the company's internal controls over
financial reporting as well as the operating effectiveness of the company's
internal controls. We were not subject to these requirements for the fiscal year
ended December 31, 2005. We are evaluating our internal control systems in order
to allow our management to report on, and our independent auditors attest to,
our internal controls, as a required part of our Annual Report on Form 10-KSB
beginning with our report for the fiscal year ended December 31, 2006.

While we expect to expend significant resources in developing the necessary
documentation and testing procedures required by SOX 404, there is a risk that
we will not comply with all of the requirements imposed thereby. At present,
there is no precedent available with which to measure compliance adequacy.
Accordingly, there can be no positive assurance that we will receive a positive
attestation from our independent auditors.

In the event we identify significant deficiencies or material weaknesses in our
internal controls that we cannot remediate in a timely manner or we are unable
to receive a positive attestation from our independent auditors with respect to
our internal controls, investors and others may lose confidence in the
reliability of our financial statements and our ability to obtain equity or debt
financing could suffer.

                                       11
<PAGE>

FAILURE OF OUR INTERNAL SYSTEMS MAY CAUSE SYSTEM DISRUPTIONS, REDUCE LEVELS OF
CUSTOMER SERVICE, AND OTHERWISE DAMAGE OUR OPERATIONS WHICH COULD LEAD TO LOST
SALES AND MAY INCREASE OUR OVERHEAD WHICH WOULD ADD EXPENSE AND DELAY OUR
OPERATIONS. We use internally developed systems to operate our service and for
transaction processing, including billing and collections processing. We must
continually improve these systems in order to meet the level of use.
Furthermore, in the future, we may add features and functionality to our
products and services using internally developed or third party licensed
technologies. Our inability to:

         a) add software and hardware;

         b) develop and upgrade existing technology, transaction processing
            systems and network infrastructure to meet increased volume through
            our processing systems; or

         c) provide new features or functionality may cause system disruptions,
            slower response times, reductions in levels of customer service,
            decreased quality of the user's experience, and delays in reporting
            accurate financial information. Any such failure could result in a
            loss of business and worsen our financial condition and may
            correspondingly decrease the market price of our common stock.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

WE HAVE ACQUIRED LICENSE RIGHTS TO CERTAIN PATENTED INTELLECTUAL PROPERTY;
HOWEVER, WE MAY NOT BE SUCCESSFUL IN DEVELOPING OR MARKETING COMMERCIALLY VIABLE
PRODUCTS INCORPORATING THE INTELLECTUAL PROPERTY, WHICH COULD ADD EXPENSE AND
DELAY OPERATIONS. We acquired Micro Sensor and the MEMS technology but have not
yet commercially exploited such intellectual property through the development of
final products. Although we may never develop or market products incorporating
the intellectual property, we may still remain responsible for paying minimum
annual royalties to the licensor.

WE WILL BE REQUIRED TO PAY MINIMUM ANNUAL ROYALTIES FOR LICENSED INTELLECTUAL
PROPERTY EVEN IF WE ARE UNABLE TO GENERATE REVENUES FROM OUR USE OF THE
INTELLECTUAL PROPERTY, WHICH COULD ADD EXPENSE AND DELAY OPERATIONS. Effective
August 1, 2005, we entered into an Exclusive Patent License Agreement with
UT-Battelle, LLC. The License Agreement supersedes and replaces an agreement
dated March 26, 2001. Under the August 1, 2005 license agreement, we license
certain patent rights relating to the detection of unexploded ordnance and
chemical vapor detetion for security applications. Under the License Agreement,
UT-Battelle has granted us the exclusive right to manufacture, use, sell, offer
for sale and sublicense yet to be developed products incorporating the licensed
patents, relating to (a)chemical vapor detection and (b) the detection of
unexploded ordnance, including bombs, grenades, rockets and other unexploded
devices. We have also been granted for a 24-month period from the effective date
of the agreement a right of first refusal to negotiate a patent license
agreement with UT-Battelle for its proprietary technology relating to the
detection of biological warfare agents in security applications, such as
anthrax, cholera, ebola, plague, ricin, smallpox and tularemia.

As consideration for the license grants by UT-Battelle, we have:

         o  Paid UT-Battelle an aggregate of $150,000 in cash proceeds;

         o  Issued to UT-Battelle 833,333 shares of our unregistered common
            stock (the "Shares");

         o  Agreed to pay to UT-Battelle a royalty equal to 4% of net sales of
            products incorporating the licensed patents, subject to minimum
            royalty payments of $10,000 for 2006, $20,000 for 2007 and $25,000
            for 2008 and thereafter;

         o  Agreed to pay to UT-Battelle, in the event we sublicenses the
            licensed patents, the greater of 50% of the Company's revenues from
            sublicensing and the minimum required royalties described above; and

         o  Reimburse UT-Battelle for certain costs and expenses of securing
            patent protection for the licensed patented technology.

On January 1, 2006, we entered into a stock exchange agreement with UT-Battelle.
In connection with this agreement, UT-Battelle, LLC returned 683,333 shares of
common stock previously issued by us for $150,000 in cash. We cancelled the
returned shares.

                                       12
<PAGE>

THERE IS UNCERTAINTY OVER WHETHER INTELLECTUAL PROPERTY WE HAVE LICENSED,
OPTIONED OR OTHERWISE HAVE RIGHTS TO INFRINGE ON THE RIGHTS OF THIRD PARTIES,
WHICH COULD ADD EXPENSE AND DELAY OPERATIONS. We acquired Micro Sensor from its
shareholders, including UTEK Corporation. While UTEK has represented to us that,
to the best of their knowledge, Micro Sensor's licensed explosive detection
technology does not infringe on the rights of any third party, UTEK has also
advised us that they did not undertake a formal patent search or other
investigation as to whether the detection technology infringes on the rights of
any third party. In the event it is ultimately found that this technology does
infringe on the rights of a third party, we may be prohibited from developing or
marketing products incorporating the technology, we may remain responsible for
paying minimum annual royalties to the licensor and we may be liable for damages
to the third party upon whose technology we may have infringed.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, THEREBY PERMITTING
COMPETITORS TO DEVELOP THE SAME OR SIMILAR PRODUCTS AND TECHNOLOGIES TO OURS,
WHICH COULD ADD EXPENSE AND DELAY OPERATIONS. Our future results and ability to
compete will be dependent, in large part, upon the marketing and sales of our
developed proprietary products and technologies, the development of future
proprietary products and technologies and the commercialization of licensed and
purchased patented technologies. We intend to rely primarily upon copyright,
trade secret and trademark laws to protect the proprietary components of our
systems. While we have filed U.S. patent applications covering certain of our
systems, the patent applications may not result in the issuance patent.
Additionally, if granted, any patent may be successfully challenged and will not
provided us with meaningful proprietary protections or that we may not have the
financial resources to mount sustained patent defense. Also, while we have
licensed or optioned certain patented technologies, the validity of these
patents may be challenged in the future or a claim of infringement of a holder
of a previously filed patent may be claimed. We could also incur substantial
costs in asserting our intellectual property or proprietary rights against
others or if others assert their rights against us. The failure to successfully
protect our intellectual property and proprietary rights could enable others to
duplicate or claim rights to our products and systems or otherwise develop
similar or competitive products and systems which may result in decreases in our
results of operations, liquidity and cash flows. Any such decreases may
correspondingly decrease the market price of our common stock.

RISKS RELATED TO THE INDUSTRIES IN WHICH WE OPERATE

WE FACE SEVERE COMPETITION FROM TIME AND ATTENDANCE PROVIDERS, SECURITY
COMPANIES, IN GENERAL, BIOMETRIC SECURITY DEVICE PROVIDERS, EXPLOSIVE DETECTION
COMPANIES, MANY OF WHOM HAVE GREATER RESOURCES THAN WE DO, WHICH COULD CAUSE US
TO LOSE SALES ADD EXPENSE AND DELAY OUR OPERATIONS. We may be unable to
effectively compete in the marketplaces in which we operate. We engage in
providing time and attendance resources to employers in several sectors of the
marketplace. We also provide building access control security devices, and we
are developing technologies for explosive detection.

Our time and attendance and control access security devices incorporate
biometric fingerprint technology, "smartcard" technology, or other data input
technologies. We will compete with other providers of time and attendance
services, as well as with access control, security companies. Our competitors in
time and attendance applications include Kronos, Simplex, Smartime Software,
Time and Tech.com and Unitime Systems. Other biometric technology providers
include Identix, Secugen, Bioscrypt, and Fujitsu. These providers use
traditional technologies employed in identification and access control, as well
as biometric technologies.

Our explosive detection technology is still in the developmental stage as it
incorporates the MEMS technology, which has yet to be commercially exploited.
There are several other explosive detection providers that have significant
inroads to the market sector. There are also government compliance issues that
certain of our competitors in this field have already overcome. One specific
competitor is Invision Technologies, Inc., which has agreed to be acquired by GE
Infrastructure, a unit of General Electric, for $900 million. Invision's
technology is not MEMS-based and it is widely used by the U.S. Transportation
and Safety Administration.

Most of these competitors have a longer operating history than we do and many of
them have substantially greater financial and other resources than we do. As a
result, we will likely encounter greater difficulty in implementing our business
plans than will our competitors. The introduction of similar or superior
products by current or future competitors may result in decreases in our results
of operations, liquidity and cash flows. Any such decreases may correspondingly
decrease the market price of our common stock.

                                       13
<PAGE>

WE ARE DEPENDENT UPON THIRD PARTY SOFTWARE, AND IF WE HAVE DIFFICULTY OBTAINING
NECESSARY SOFTWARE, WE WILL BE UNABLE TO MEET CONTRACTUAL OBLIGATIONS, WHICH
COULD CAUSE US TO LOSE SALES AND ADD EXPENSE AND DELAY OUR OPERATIONS. We
license software from Integrated Design, Inc. pursuant to a contract that
enables the data gathered by CheckPrint(R) T/A systems to be formatted and
transmitted to third party payroll services. Either party, on ninety days prior
written notice with or without cause, may terminate such agreement. In the event
such agreement was terminated, we would be required to license similar software
from a third party vendor or develop our own links for data export. Any failure
or delay in licensing or developing such software could result in our inability
to meet our contractual obligations and may result in decreases in our results
of operations, liquidity and cash flows. Any such decreases may correspondingly
decrease the market price of our common stock.

OTHER TYPES OF BIOMETRIC SECURITY DEVICES ARE BEING DEVELOPED AND MARKETED, AND
WE ARE UNCERTAIN IF FINGERPRINT BIOMETRIC SECURITY DEVICES WILL BE ACCEPTED IN
THE MARKETPLACE, WHICH COULD CAUSE US TO LOSE SALES ADD EXPENSE AND DELAY OUR
OPERATIONS. Our developed products incorporate fingerprint biometrics as the
basis for authenticating a person's identity. Other forms of biometric
identification, including iris scanning, voice patterns and signature
verification, are being marketed, developed and tested, both by us and others.
We have integrated several other forms of biometrics into our products on a
proto-type basis, but the fingerprint remains our standard offering. Our future
results will be dependent on our ability to successfully market our biometric
systems and support services to end-users, distributors and resellers.
Successful marketing will depend upon the acceptance of fingerprint biometrics
as a preferred form of identification. We have not commissioned a formal market
or research study to determine whether fingerprint identification is preferred
to other forms of biometric identification or whether sufficient demand for our
products and services exists to enable us to sustain operations, expand or
achieve profitability. A lack of demand for fingerprint biometric systems could
reduce our revenues attributable almost exclusively to sales of systems
incorporating a fingerprint biometric, and may result in decreases in our
results of operations, liquidity and cash flows. Any such decreases may
correspondingly decrease the market price of our common stock.

OUR PRODUCTS RELY ON FINGERPRINT BIOMETRICS AND THE LACK OF TECHNOLOGICAL
DIVERSIFICATION IN OUR PRODUCTS COULD CAUSE OUR RESULTS TO SUFFER, WHICH COULD
CAUSE US TO LOSE SALES ADD EXPENSE AND DELAY OUR OPERATIONS. Almost all of our
products and systems incorporate fingerprint biometric technology. Our future
results may depend on the continued reliability and acceptance of Biometrics as
a method of identity verification. As a result, in the event of unforeseen
adverse events in the development, enhancement, reliability, marketing or
acceptance of fingerprint biometrics, we will be unable to temper its effects by
relying upon sales of other products. In addition, we do not currently know when
products under development incorporating other biometrics, explosive detection
technology will generate revenues, or whether they can be successfully marketed.
In light of our lack of product diversification unforeseen events related to our
narrow product offering may result in decreases in our results of operations,
liquidity and cash flows. Any such decreases may correspondingly decrease the
market price of our common stock.

RISK RELATED TO OUR SECURITIES AND CAPITAL STRUCTURE

TRADING IN OUR COMMON STOCK DURING 2005 WAS LIMITED, SO OUR SHAREHOLDERS MAY NOT
BE ABLE TO SELL AS MUCH STOCK AS THEY WANT AT PREVAILING PRICES. Shares of the
common stock are traded on the OTCBB. Approximately 350,000 shares were traded
on an average daily trading basis during 2005. If limited trading in the common
stock continues, it may be difficult for our shareholders to sell in the public
market at any given time at prevailing prices. Also, the sale of a large block
of our common stock at any time could depress the price of our common stock to a
greater degree than a company that typically has higher volume of trading of
securities.

                                       14
<PAGE>

THE LIMITED PRIOR PUBLIC MARKET AND TRADING MARKET MAY CAUSE POSSIBLE VOLATILITY
IN OUR STOCK PRICE WHICH MAY CAUSE YOU TO LOSE SOME OR ALL OF YOUR INVESTMENT.
There has only been a limited public market for our common stock and an active
trading market in our common stock may not be maintained. The OTCBB is an
unorganized, inter-dealer, over-the-counter market that provides significantly
less liquidity than NASDAQ, and quotes for stocks included on the OTCBB are not
listed in the financial sections of newspapers, as are those for the NASDAQ
Stock Market. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have particularly affected the market
prices of many smaller companies. The trading price of our common stock is
expected to be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts' earnings estimates,
announcements of innovations by us or our competitors, general conditions in the
industry in which we operate and other factors. These fluctuations, as well as
general economic and market conditions, may decrease the market price of our
common stock.

THE MARKET PRICE FOR OUR COMMON STOCK MAY BE SUBJECT TO EXTREME VOLATILITY,
WHICH MAY CAUSE YOU TO LOSE SOME OR ALL OF YOUR INVESTMENT. The market for
securities of high-technology companies, including companies such as ours that
participate in emerging markets, has historically been more volatile than the
market for stocks in general. As a result, the price of our common stock may be
subject to wide fluctuations in response to factors some of which are beyond our
control, including, without limitation, the following:

      o  Quarter-to-quarter variations in our operating results;

      o  Our announcement of material events;

      o  Price fluctuations in sympathy to others engaged in our industry; and,

      o  The effects of media coverage of our business.

PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF THE
COMPANY'S SECURITIES, WHICH MAY CAUSE YOU TO LOSE SOME OR ALL OF YOUR
INVESTMENT. The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. As a result, our common
stock is subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Securities and Exchange Commission relating
to the penny stock market. The broker-dealer must also disclose the commission
payable to both the broker-dealer and the registered representative, current
quotations for the securities and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of broker-dealers to sell our securities
and may affect the ability of investors to sell our securities and the price at
which such purchasers can sell any such securities.

Our shareholders should be aware that, according to the Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include:

      o  Control of the market for the security by one or a few broker-dealers
         that are often related to the promoter or issuer;

      o  Manipulation of prices through prearranged matching of purchases and
         sales and false and misleading press releases;

      o  "Boiler room" practices involving high pressure sales tactics and
         unrealistic price projections by inexperienced sales persons;

      o  Excessive and undisclosed bid-ask differentials and markups by selling
         broker-dealers; and

                                       15
<PAGE>

      o  The wholesale dumping of the same securities by promoters and
         broker-dealers after prices have been manipulated to a desired level,
         along with the inevitable collapse of those prices with consequent
         investor losses.

Our management is aware of the abuses that have occurred historically in the
penny stock market.

ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK AVAILABLE FOR
ISSUANCE MAY DECREASE THE MARKET PRICE FOR OUR COMMON STOCK. We are authorized
to issue 100,000,000 shares of common stock. As of the date of this annual
report, there were 47,950,768 shares of common stock issued and outstanding. We
have also reserved a total of 18,908,180 shares for future issuance consisting
of 4,445,000 shares issuable upon the exercise of options that have been
granted, approximately 1,002,840 shares available for issuance under our stock
option plans and 13,460,340 shares issuable upon exercise of warrants that have
been granted. The options and warrants are exercisable at prices ranging from
$.10 to $1.50 per share. To the extent stock is issued upon the exercise of
options or warrants, our existing shareholders will experience further dilution.
In addition, in the event that any future financing should be in the form of, be
convertible into or exchangeable for, equity securities, the issuance of our
shares upon their exercise will result in additional dilution.

WE MAY ISSUE PREFERRED STOCK, WHICH MAY DECREASE THE MARKET PRICE FOR OUR COMMON
STOCK AND MAY HAVE RIGHT SUPERIOR TO YOUR COMMON STOCK RIGHTS. In addition to
the above-referenced shares of common stock that we may issue without
shareholder approval, we have the right to authorize and issue preferred stock.
We presently have no issued and outstanding shares of preferred stock and while
we have no present plans to issue any shares of preferred stock, our Board of
Directors has the authority, without shareholder approval, to create and issue
one or more series of such preferred stock and to determine the voting, dividend
and other rights of holders of such preferred stock. The issuance of any of such
series of preferred stock may have superior rights to the holders of common
stock.

WE HAVE NO HISTORY OF PAYING DIVIDENDS ON OUR COMMON STOCK. We have never paid
any cash dividends on our shares of common stock and do not anticipate paying
any cash dividends on our common stock in the foreseeable future. We plan to
retain any future earnings to finance growth. If we decide to pay dividends to
the holders of the common stock, such dividends may not be paid on a timely
basis.

OUR COMMON STOCK IS THINLY TRADED AND AN ACTIVE AND VISIBLE TRADING MARKET FOR
OUR COMMON STOCK MAY NOT DEVELOP. Our common stock is currently traded on a
limited basis on the OTC Bulletin Board under the symbol "SEHO". The quotation
of our common stock on the OTCBB does not assure that a meaningful, consistent
and liquid trading market currently exists. We cannot predict whether a more
active market for our common stock will develop in the future. In the absence of
an active trading market:

      o  Investors may have difficulty buying and selling or obtaining market
         quotations;

      o  Market visibility for our common stock may be limited; and

      o  A lack of visibility for our common stock may have a depressive effect
         on the market price for our common stock.

OTHER RISKS

LIMITATION ON DIRECTOR/OFFICER LIABILITY MAY LIMIT THE AMOUNT YOU CAN RECOVER
FOR A BREACH FIDUCIARY DUTIES BY AN OFFICER OR DIRECTOR. As permitted by Florida
law, our certificate of incorporation limits the liability of our directors for
monetary damages for breach of a director's fiduciary duty except for liability
in certain instances. As a result of our charter provision and Florida law,
shareholders may have limited rights to recover against directors for breach of
fiduciary duty. In addition, our certificate of incorporation provides that we
shall indemnify our directors and officers to the fullest extent permitted by
law. Thus your right to recover damages as a shareholder may be limited.

THE SALE OF SHARES ELIGIBLE FOR FUTURE SALE COULD HAVE A DEPRESSIVE EFFECT ON
THE MARKET PRICE FOR OUR COMMON STOCK AND COULD CAUSE YOU TO LOSE SOME OR ALL OF
YOUR INVESTMENT.

As of the date of this annual report, there are 47,950,768 shares of common
stock issued and outstanding.

                                       16
<PAGE>

Of the currently issued and outstanding shares, 33,252,858 shares of our common
stock (of which 2,781,530 shares are owned by our officers, directors and
principal shareholders) have been registered for resale or will have been held
for in excess of one year and are currently available for public resale pursuant
to Rule 144 promulgated under the Securities Act ("Rule 144"). The resale of our
shares of common stock owned by officers, directors and affiliates is subject to
the volume limitations of Rule 144. In general, Rule 144 permits our
shareholders who have beneficially owned restricted shares of common stock for
at least one year to sell without registration, within a three-month period, a
number of shares not exceeding one percent of the then outstanding shares of
common stock. Furthermore, if such shares are held for at least two years by a
person not affiliated with us (in general, a person who is not one of our
executive officers, directors or principal shareholders during the three month
period prior to resale), such restricted shares can be sold without any volume
limitation. Sales of our common stock under Rule 144 or pursuant to such
registration statement may have a depressive effect on the market price for our
common stock.

IT IS NOT POSSIBLE TO FORESEE ALL RISKS WHICH MAY AFFECT US. MOREOVER, WE CANNOT
PREDICT WHETHER WE WILL SUCCESSFULLY EFFECTUATE OUR CURRENT BUSINESS PLAN. EACH
PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS AND MERITS OF
AN INVESTMENT IN THE SHARES AND SHOULD TAKE INTO CONSIDERATION WHEN MAKING SUCH
ANALYSIS, AMONG OTHERS, THE RISK FACTORS DISCUSSED ABOVE.


ITEM 2.  DESCRIPTION OF PROPERTIES

Our corporate offices to approximately 7,000 square feet of office space in
Sunrise, Florida. The lease is with an unaffiliated party. Our monthly lease
payment is $4,664. Our lease expired in March 2005. We are currently on a
month-to-month leasing arrangement with our landlord. Our relationship with our
landlord is good and we are currently negotiating a new lease. These facilities
are suitable and adequate for our current needs and allow for anticipated
expansion during the term of the lease. We currently maintain commercial general
liability and property insurance coverage with policy limits of $1,000,000 and
$125,000, respectively. We may increase this coverage to the extent business
growth dictates.


ITEM 3.  LEGAL PROCEEDINGS

We are not a party to any material legal proceeding, nor are any of our
officers, directors or affiliates, a party adverse to us in any legal
proceeding.


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

We submitted no matters to our shareholders during the fourth quarter in the
year ending December 31, 2005.


                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our shares of common stock are currently traded on the Over-the-Counter Bulletin
Board under the symbol SEHO (previously CTSMD). Prior to February 28, 2000, our
shares were listed on the National Quotation Bureau's Pink Sheets. There is
currently a limited trading market for our shares and we do not know whether an
active market will develop. The quarterly reported high and low bid prices for
the common stock are shown below for the period two fiscal years ended December
31, 2005. The quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission, and may not represent actual transactions. The quotation
of our common stock on the OTC Bulletin Board does not assure that a meaningful,
consistent and liquid trading market for such securities currently exists and,
in fact at the present time, such a market does not exist.

                                       17
<PAGE>

         Period                                    High                Low
         ------                                    -----              -----
         First Quarter ended 3/31/04               $0.42              $0.22
         Second Quarter ended 6/30/04              $0.59              $0.21
         Third Quarter ended 9/30/04               $0.25              $0.13
         Fourth Quarter ended 12/31/04             $0.36              $0.14

         First Quarter ended 3/31/05               $0.35              $0.17
         Second Quarter ended 6/30/05              $0.21              $0.15
         Third Quarter ended 9/30/05               $0.38              $0.17
         Fourth Quarter ended 12/31/05             $0.37              $0.24

On April 7, 2006, the last sale price of our common stock as reported on the
OTCBB was $0.32.

As of April 7, 2006, our common stock is owned of record by approximately 1,000
holders. We have never paid cash dividends on our common stock. We intend to
keep future earnings, if any, to finance the expansion of our business, and we
do not anticipate that any cash dividends will be paid in the foreseeable
future. Our future payment of dividends will depend on our earnings, capital
requirements, expansion plans, financial condition and other relevant factors.

The Securities and Exchange Commission has adopted regulations which generally
define a "penny stock" to be any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Depending on market
fluctuations, our common stock could be considered to be a "penny stock". A
penny stock is subject to rules that impose additional sales practice
requirements on broker/dealers who sell these securities to persons other than
established customers and accredited investors. For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of these securities. In addition he must receive the purchaser's
written consent to the transaction prior to the purchase. He must also provide
certain written disclosures to the purchaser. Consequently, the "penny stock"
rules may restrict the ability of broker/dealers to sell our securities, and may
negatively affect the ability of holders of shares of our common stock to resell
them.

Recent Sales of Unregistered Securities

On October 1, 2005, we issued 40,000 shares of our common stock for business
development services rendered.

On October 22, 2005, the Company issued 45,000 shares of its common stock for
business development services rendered.

The consultants and advisors (a) had a preexisting business relationship with
us, (b) had access to financial statements and other relevant information
concerning the Company; (c) had such knowledge in business and financial matters
that they were able to understand the risks and merits of an investment in the
Company, and were, therefore, sophisticated investors at the time of acquisition
and (d) the shares that were issued contained a legend restricting their
transferability absent registration under the Act or the availability of an
applicable exemption there from. Accordingly, these transactions were exempt
from the registration requirements of the Act by reason of Section 4(2) of the
Act and the rules and regulations there under.

Please refer to Item 11 Section - Compensation Under Existing Equity
Compensation Plans for options granted under existing employee stock
compensation plans.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following analysis of the results of operations and financial condition of
the Company should be read in conjunction with the financial statements of Sense
Holdings, Inc. for the year ended December 31, 2005 and notes thereto contained
in this Report on Form 10-KSB of Sense Holdings, Inc.

OVERVIEW

We design, develop, manufacture and sell fingerprint-based identification
products and systems that incorporate state-of-the-art biometric technology to
verify a person's identity. We also own, license or have optioned for purchase
the additional security-related technologies.

                                       18
<PAGE>

Our current base of customers primarily consists of one large enterprise level
client and numerous smaller companies. To date, our ability to conduct
significant marketing activities that we deem critical to building broad market
awareness of, and demand for, our systems have been severely limited due to
financial constraints. The financial constraints were brought on in part by the
cash required to be spent in research and development. However, we have been
successful in limiting further research and development expenses and have sought
to market and refine our existing systems. We continue to seek funds to enable
us to begin to move forward with such marketing without the burden of past
research and development expenditures.

We have incurred substantial operating and net losses, as well as negative
operating cash flows, since our inception. As a result, we continued to have
significant working capital and limited shareholders' equity at December 31,
2005. In recognition of such, our independent certified public accountants
included an explanatory paragraph in their report on our consolidated financial
statements for the year ended December 31, 2005 that expressed substantial doubt
regarding our ability to continue as a going concern.

Although profit margins may be lower for existing system sales, lower profit
margins are significantly offset by dramatically lower operating costs. In
addition, we will continue to make customizations to our existing systems if
such systems can be supported by our reduction in research and development
spending and our smaller staff. However, additional funding identified above is
still needed to fund our longer-term operating needs, including our continued
conducting of those marketing activities we deem critical to building broad
public awareness of, and demand for, our current systems. Within the
restrictions set forth above, we are continuing to pursue additional financing.
We believe that additional financing, a reduction in research and development
expenses followed by the sales increases we expect to realize from the
additional marketing activities will be sufficient to support us until that
point in time at which we forecast that our business will become self-sustaining
from internally generated cash flow. There is no assurance we will be able to
raise additional financing or increase sales in the coming year.

We have realized, and expect to continue to realize, a substantial gross margin
averaging approximately 62% in 2005 on our product sales and higher gross
margins on service related revenues. With respect to our operating cost
structure, we implemented a series of difficult, yet necessary, cost-cutting
measures during our preceding fiscal year. The most significant of which was the
elimination of substantially all non-critical personnel, consultants and
infrastructure.

We currently operate with a core staff of 6 full-time employees. Additionally,
we eliminated a substantial portion of our product research and development
expenditures in the prior year. We expect to continue to reduce research and
development expenses as we focus on existing systems. We expect that our product
research and development needs and expenditures for the foreseeable future will
remain nominal.

Although we have limited our current expenditures on research and development,
and have eliminated non-critical personnel, we have maintained the employees
necessary to continue operations and incorporate changes to our core products
based on customers needs. We have done this to reduce expenses and because our
core products are operational and saleable to a broad market with very little
modification.

                                       19
<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2005 AS COMPARED TO YEAR ENDED DECEMBER 31, 2004

REVENUES

For the year ended December 31, 2005, we generated revenues of $501,078. The
cost of goods sold was $167,577. This resulted in a gross profit of $333,501 and
a gross profit percentage of 67% for the year ended December 31, 2005. For the
year ended December 31, 2004, we generated revenues of $139,321. The cost of
goods sold was $55,581, which included a $36,600 reserve expense for slow-moving
inventory. This resulted in a gross profit of $83,740 and a gross profit
percentage of 60%. The increase in revenues generated was $361,757 or 260%. The
increase in revenues is mainly attributed to the sale of 100 of our BC-300
Biometric Pilot Authentication Stations for deployment by Federal Express at
select domestic operation facilities amounting to $386,700 in the fourth quarter
of 2005, and an increase in service revenues and maintenance revenues offset by
decreased sales of our product to other customers. Currently, we lack working
capital funds to spend on marketing and advertising programs. Also, we have
dedicated man hours and resources to the acquisition and development of
intellectual property during fiscal 2005 and 2004, which has taken away from
sales efforts of our existing product line. We continue to refocus on the sale
of our existing product line, expanding our existing product line and continue
to seek sufficient capital to engage in effective sale efforts. Our revenue
breakdown is summarized below:

                                                     Year Ended
                                                    December 31,
                                                 ------------------
                                                   2005      2004
                                                 -------   --------
         Revenues:
           Sale of tangible products .........  $440,042    $82,097
           Service and maintenance ...........    61,036     57,224
                                                 -------   --------

              Total revenues .................  $501,078   $139,321
                                                --------   --------

OPERATING EXPENSES

For the year ended December 31, 2005, research and development costs amounted to
$314,233 as compared to $163,492 for the year ended December 31, 2004, an
increase of $150,741 or 92% that consisted of an increase in the amortization of
our acquired license rights of $10,000, and other fees paid to third parties for
development of security products of approximately $148,000 in 2005.

For the year ended December 31, 2005, compensation and related taxes increased
to $435,148 as compared to $350,990 for the year ended December 31, 2004, an
increase of $84,158 or 24%. The increase was attributable to an increase in
executive and office salaries in 2005, the granting of stock options to an
employee which was valued using the intrinsic method of accounting of $5,000,
offset by the allocation of $156,000 of salaries to research and development for
the year ended December 31, 2005 as compared to $78,000 for the year ended
December 31, 2004.

For the year ended December 31, 2005, consulting expenses amounted to $718,653
as compared to $330,025 for the year ended December 31, 2004, an increase of
$388,628 or 118%. The increase is related to the grant of common stock for
business development and investor relations services in 2005 as well as the
amortization of deferred compensation for shares previously issued.

For the year ended December 31, 2005, other selling, general and administrative
expenses were $583,544 as compared to $634,977 for the year ended December 31,
2004, a decrease of $51,433 or 8% and included the following:

                                                   2005          2004
                                                 --------      --------
         Rent .............................      $ 53,055      $ 56,546
         Professional fees ................       123,365       152,218
         Bad debt .........................        26,226        86,357
         Other operating expenses .........       380,898       339,856
                                                 --------      --------

              Total .......................      $583,544      $634,977
                                                 ========      ========

                                       20
<PAGE>

For the year ended December 31, 2005, rent expense decreased by $3,491 as
compared to the 2004 period due the receipts of rental income of $4,800 from the
leasing of office space on a month-to-month basis.

For the year ended December 31, 2005, professional fees decreased by $28,853 or
19%. The decrease is primarily related to professional fees incurred due to the
filing of our registration statement on form SB-2 in 2004. For the year ended
December 31, 2005, we incurred legal expense of $42,750 from the issuance of
common shares for legal services rendered. Additionally, in 2004, we paid
$15,000 to a consultant seeking opportunities in China.

For the year ended December 31, 2005, bad debt expense amounted to $26,226 as
compared to $86,357 for the year ended December 31, 2004, a decrease of $60,131
or 70%.

For the year ended December 31, 2005, other operating expenses increased to
$380,898 as compared to $339,856 for the year ended December 31, 2004, an
increase of $41,042 or 12%. The increase was attributable to an increase in
public relations expenses of approximately $85,000 offset by a decrease in
operating expenses primarily related to cost-cutting measures.

OTHER INCOME (EXPENSES)

Interest income for the year ended December 31, 2005 was $10,305 compared to
$4,834 for the year ended December 31, 2004. The increase is due to an increase
in interest-bearing deposits and interest income accrued on loans from
shareholders of $2,375.

Interest expense decreased to $77,857 for the year ended December 31, 2005 as
compared to interest expense of $108,143 for the year ended December 31, 2004.
This decrease is attributable to the repayment of our outstanding debt during
2004.

For the year ended December 31, 2005, we recorded amortization of debt issuance
costs of $46,593 related to fees paid in connection with our convertible notes
payable compared to $0 for the year ended December 31, 2004.

For the year ended December 31, 2005, we recorded a loss from the sale of
marketable securities of $573 as compared to a loss of $1,760 for the year ended
December 31, 2004. Additionally, for the year ended December 31, 2005, we
recorded an unrealized gain on securities held of $0 as compared to an
unrealized gain of $1,529 for the year ended December 31, 2004.

OVERALL

We reported a net loss for the year ended December 31, 2005 of $(1,832,795)
compared to a net loss for the year ended December 31, 2004 of $(1,499,284).
This translates to an overall per-share loss of ($.05) for the year ended
December 31, 2005 compared to per-share loss of ($.06) for the year ended
December 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our growth and cash requirements through equity investments and
debt and equity financing. We do not currently have any credit facilities from
financial institutions or private lenders. We do not currently have any material
commitments for capital expenditures accept as disclosed herein.

In April 2004, we consummated a capital raise through a private placement
offered to accredited investors. We offered investment units each costing
$35,000, with each unit consisting of (a) a number of shares of common stock of
the Company determined by dividing the unit price by $.175 per share and (b) one
common stock purchase warrants for every two shares of common stock received
upon conversion with an exercise price of $.20 per share. In April 2004, we sold
six units under the private placement aggregating 1,200,000 shares of common
stock and 600,000 warrants for net proceeds of $210,000. The warrants expire in
April 2009.

In May 2004, note holders comprising the $750,000 notes payable converted
$175,000 of debt into 673,078 shares of common stock. Additionally, we repaid
notes holders $550,000.

                                       21
<PAGE>

On May 10, 2004, we issued 6,600,000 shares of common stock and granted
1,650,000 warrants for net proceeds of approximately $1,188,000 in connection
with a private placement. In June 2004, we issued an additional 3,200,000 shares
of common stock and granted 800,000 warrants for net proceeds of approximately
$545,750 in connection with a private placement.

During the year ended December 31, 2005, we received proceeds of $171,460 from
the exercise of warrants.

On June 30, 2005, we offered for sale a maximum of 15 units (the "Units") for
$50,000 per Unit, to accredited investors only. Each Unit consists of a
Promissory Note in the principal amount of $50,000 (the "Notes") and a Common
Stock Purchase Warrant (the "Warrants") to purchase 50,000 shares of the common
stock, par value $0.10 per share of the Company, exercisable at $0.16 per share
for a period of 5 years. As of December 31, 2005, the Company received net
proceeds in the amount of $602,550 in connection with the private placement and
has granted 669,500 in purchase warrants. In connection with this transaction,
the Company issued warrants to purchase 334,750 shares of common stock, as
compensation to the placement agent.

In September 2005, we paid $150,000 for exclusive patent licensing rights to
UT-Battelle and will pay a royalty equal to 4% of net sales of products
incorporating the licensed patents, subject to minimum royalty payments of
$10,000 for 2006, $20,000 for 2007 and $25,000 for 2008 and thereafter.
Additionally, we agreed to pay to UT-Battelle, in the event we sublicenses the
licensed patents, the greater of 50% of the Company's revenues from sublicensing
and the minimum required royalties described above and reimburse UT-Battelle for
certain costs and expenses of securing patent protection for the licensed
patented technology.

On November 7, 2005, we entered into a Cooperative Research and Development
Agreement ("CRADA") for the development of a hand-held sensor with high
sensitivity and selectivity for the detection of explosives initially and then
to expand the capabilities to include chemical and biological warfare agents and
narcotics. We have agreed to provide $150,000 within thirty (30) days after the
effect day of the CRADA which was paid in 2005. We will provide additional
payments of $65,000 sixty (60) days after the effect day or the CRADA; $65,000
ninety (90) days after the effective day of the CRADA; $65,000 120 days after
the effective day of the CRADA; $65,000 180 days after the effective day of the
CRADA; $65,000 210 days after the effective day of the CRADA and a final payment
of $49,000 240 days after the effective date of the CRADA. Failure by us to
provide the necessary advance funding is cause for termination of the CRADA in
accordance with the Termination article of this CRADA. There are no assurances
that such expenditures will develop products that we can market or upon terms
and conditions which are acceptable to our client base.

On March 7, 2006, we completed a private placement of $2,451,000 of financing of
units of our securities consisting in the aggregate of 11,140,910 shares of its
common stock and warrants to purchase 5,570,455 shares of common stock. The
warrants are exercisable at $0.35 per share for a term of five years. The
purchasers of the units are certain accredited investors. The net proceeds from
the transaction are being used to eliminate debt of the Company owing to certain
prior note holders and for working capital purposes. The prior note holders have
also agreed to convert an additional $142,500 principal amount of such notes for
647,722 shares of common stock, which conversion is exempt from registration by
virtue of Section 3(a)(9) of the Securities Act of 1933.

For the year ended December 31, 2005, net cash used in operating activities
amounted to $1,237,328 and was attributable primarily to the net loss of
$1,832,795 offset by non-cash compensation of $725,796, depreciation and
amortization of $11,620, the amortization of the debt offering costs of $46,593,
the amortization of the discount on notes payable of $45,675, the amortization
of license rights of $25,000, other non-cash items and change in asset and
liability accounts.

Cash used in operations for the year ended December 31, 2004 was $910,770
attributable primarily to the net loss of $1,499,284 offset by non-cash
compensation of $335,652, depreciation and amortization of $11,618, the
amortization of the discount on notes payable of $75,520, other non-cash items
and change in asset and liability accounts.

                                       22
<PAGE>

For the year ended December 31, 2005, net cash used in investing activities was
$126,998 attributable to the acquisition of patent license rights $150,000
offset by proceeds received from the sale of marketable securities of $23,002.
For the year ended December 31, 2004, net cash provided by investing activities
was $50,032 and consisted of net proceeds from the sale of marketable securities
of $63,329 offset by funds used for the purchase of marketable securities of
$13,297.

For the year ended December 31, 2005, net cash provided by financing activities
was $755,480 and consisted of proceeds from the exercise of common stock
warrants of $171,460 and the receipt of proceeds from notes payable of $669,500
offset by the payment of placement fees of $66,950 and the repayment of all
outstanding margin loans of $18,530. For the year ended December 31, 2004, net
cash provided by financing activities was $1,406,796 and consisted of net
proceeds from the sale of stock of $1,943,750 and proceeds from margin loan of
$13,046 offset by the repayment of loans of $550,000.

As a result of the above, total cash decreased by $608,846 during year ended
December 31, 2005 as compared to an increase in cash of $546,058 for the year
ended December 31, 2004.

Since our inception, we have been engaged in research development activities
relating to our first generation of biometric security products. We commenced
delivery of these products in the third quarter of 1999 and have been generating
revenues since the fourth quarter of 1999. We have completed development of our
second and third generation product, and have recognized revenue on their sales
since the year ended December 31, 2000. We have also recognized revenue for
consulting fees since the third quarter of 2000. We will continue to make
enhancements to our second-generation product so that it will support a larger
database, and enable us to market CheckPrint T/A to larger companies, resulting
in a greater profit margin to us. We will continue to develop other products and
services relating to biometrics, security, data management, explosive detection,
and consulting services.

In the long term, based upon purchase orders we have received, anticipated
future product sales and cash on hand, we believe that we will have the need for
additional capital investment and are actively pursuing additional outside
capital investments that will be necessary to meet our cash flow needs beyond
the next twelve months. This is due primarily to our history of sales lagging
expenses. However, we have taken action to reduce our expenses and plan to focus
more on future sales.

In the short term, less than twelve months, we do not foresee needing additional
capital unless, an unforeseen business opportunity requires more funds than we
have currently on hand. On both the long and short term, should revenues not
reach projected levels or should unforeseen events arise, we may be required to
secure additional funds to meet our operating needs sooner than anticipated.

CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 to our consolidated financial statements includes a
summary of the significant accounting policies and methods used in the
preparation of our consolidated financial statements. The following is a brief
discussion of the more significant accounting policies and methods used by us.

ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses. On an
ongoing basis, management evaluates these estimates, including those related to
allowances for doubtful accounts receivable and long-lived assets. Management
bases these estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis of making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

                                       23
<PAGE>

INTANGIBLE ASSETS

Intangible assets consist of acquired license rights to certain patented
technology designed to detect unexploded ordinance including bombs, hand
grenades, shells, rockets, and other explosive devices. These costs are
capitalized and amortized using the straight-line method over expected useful
lives of five years based upon management's expectations relating to the life of
the license rights and current competitive market conditions. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," we periodically review our
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the intangible may not be fully
recoverable. We recognize an impairment loss when the sum of expected
undiscounted future cash flows is less than the carrying amount of the asset.
The amount of impairment is measured as the difference between the asset's
estimated fair value and its book value. We did not consider it necessary to
record any impairment charges during the year ended December 31, 2005.

REVENUE RECOGNITION

The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin 104 for revenue recognition. In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectability is reasonably assured. The
following policies reflect specific criteria for the various revenues streams of
the Company:

The Company recognizes revenues as units of its product are delivered and
installed to its customers.

Revenue from periodic maintenance agreements is generally recognized ratably
over the respective maintenance periods provided no significant obligations
remain and collectibility of the related receivable is probable

Revenue from the performance of services is recognized upon completion of the
service.

LONG-LIVED ASSETS

We review the carrying value of property and equipment and intangibles for
impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying
amount to the undiscounted cash flows that the asset or asset group is expected
to generate. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value.

INVENTORY

Inventory is stated at the lower of average cost or market and consists of raw
materials and finished goods.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheet for cash, marketable
securities, receivables, inventory and accounts payable approximate their fair
market value based on the short-term maturity of these instruments.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. These costs primarily
consist of salaries paid for the development of the Company's software and
technology and fees paid to a third party in connection with a Cooperative
Research and Development Agreement. Research and development costs for the years
ended December 31, 2005 and 2004 were $314,233 and $163,492, respectively.

                                       24
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R),
"Share-Based Payment," under the modified prospective method. SFAS No. 123(R)
eliminates accounting for share-based compensation transactions using the
intrinsic value method prescribed under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and requires instead that such transactions be
accounted for using a fair-value-based method. Under the modified prospective
method, we are required to recognize compensation cost for share-based payments
to employees based on their grant-date fair value from the beginning of the
fiscal period in which the recognition provisions are first applied. For periods
prior to adoption, the financial statements are unchanged, and the pro forma
disclosures previously required by SFAS No. 123, as amended by SFAS No. 148,
will continue to be required under SFAS No. 123(R) to the extent those amounts
differ from those in the Statement of Operations. The adoption of SFAS No. 123
(R) may have a material effect on our financial statements.

In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS
154"). This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,
and changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. APB Opinion No. 20
previously required that most voluntary changes in accounting principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new accounting principle. This Statement requires
retrospective application to prior periods' financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. When it is
impracticable to determine the period-specific effects of an accounting change
on one or more individual prior periods presented, this Statement requires that
the new accounting principle be applied to the balances of assets and
liabilities as of the beginning of the earliest period for which retrospective
application is practicable and that a corresponding adjustment be made to the
opening balance of retained earnings (or other appropriate components of equity
or net assets in the statement of financial position) for that period rather
than being reported in an income statement. When it is impracticable to
determine the cumulative effect of applying a change in accounting principle to
all prior periods, this Statement requires that the new accounting principle be
applied as if it were adopted prospectively from the earliest date practicable.
This Statement shall be effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. We do not believe
that the adoption of SFAS 154 will have a significant effect on our financial
statements.

On June 29, 2005, the EITF ratified Issue No. 05-2, "The Meaning of
'Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, 'Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF Issue 05-2 provides guidance on determining whether
a convertible debt instrument is "conventional" for the purpose of determining
when an issuer is required to bifurcate a conversion option that is embedded in
convertible debt in accordance with SFAS 133. Issue No. 05-2 is effective for
new instruments entered into and instruments modified in reporting periods
beginning after June 29, 2005. The adoption of this pronouncement did not have a
material effect on our financial statements.

In September 2005, Issue No. 05-4, "The Effect of a Liquidated Damages Clause on
a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF 05-4 provides guidance to issuers as to how to
account for registration rights agreements that require an issuer to use its
"best efforts" to file a registration statement for the resale of equity
instruments and have it declared effective by the end of a specified grace
period and, if applicable, maintain the effectiveness of the registration
statement for a period of time or pay a liquidated damage penalty to the
investor. We have adopted view C of this pronouncement. Accordingly, we have
bifurcated registration rights from their related free standing financial
instruments and recorded them at fair value.

                                       25
<PAGE>

In September 2005, the FASB ratified the Emerging Issues Task Force's ("EITF")
Issue No. 05-7, "Accounting for Modifications to Conversion Options Embedded in
Debt Instruments and Related Issues," which addresses whether a modification to
a conversion option that changes its fair value affects the recognition of
interest expense for the associated debt instrument after the modification and
whether a borrower should recognize a beneficial conversion feature, not a debt
extinguishment if a debt modification increases the intrinsic value of the debt
(for example, the modification reduces the conversion price of the debt). This
issue is effective for future modifications of debt instruments beginning in the
first interim or annual reporting period beginning after December 15, 2005. We
are currently in the process of evaluating the effect that the adoption of this
pronouncement may have on our financial statements.

In September 2005, the FASB also ratified the EITF's Issue No. 05-8, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature,"
which discusses whether the issuance of convertible debt with a beneficial
conversion feature results in a basis difference arising from the intrinsic
value of the beneficial conversion feature on the commitment date (which is
recorded in the shareholder's equity for book purposes, but as a liability for
income tax purposes), and, if so, whether that basis difference is a temporary
difference under FASB Statement No. 109, "Accounting for Income Taxes." This
Issue should be applied by retrospective application pursuant to Statement 154
to all instruments with a beneficial conversion feature accounted for under
Issue 00-27 included in financial statements for reporting periods beginning
after December 15, 2005. We are currently in the process of evaluating the
effect that the adoption of this pronouncement may have on our financial
statements.

Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.

OFF-BALANCE SHEET ARRANGEMENTS

Under SEC regulations, we are required to disclose our off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors. An off-balance sheet arrangement means
a transaction, agreement or contractual arrangement to which any entity that is
not consolidated with us is a party, under which we have:

      o  Any obligation under certain guarantee contracts;

      o  Any retained or contingent interest in assets transferred to an
         unconsolidated entity or similar arrangement that serves as credit,
         liquidity or market risk support to that entity for such assets;

      o  Any obligation under a contract that would be accounted for as a
         derivative instrument, except that it is both indexed to our stock and
         classified in stockholder's equity in our statement of financial
         position; and

      o  Any obligation arising out of a material variable interest held by us
         in an unconsolidated entity that provides financing, liquidity, market
         risk or credit risk support to us, or engages in leasing, hedging or
         research and development services with us.

As of the date of this report, we do not have any off-balance sheet arrangements
that we are required to disclose pursuant to these regulations. In the ordinary
course of business, we enter into operating lease commitments, purchase
commitments and other contractual obligations. These transactions are recognized
in our financial statements in accordance with generally accepted accounting
principles in the United States.


ITEM 7.  FINANCIAL STATEMENTS

See Index to Financial Statements for the financial statements included in this
Form 10-KSB.

                                       26
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND FINANCIAL
         DISCLOURE STATEMENTS

         None.


ITEM 8A. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer (collectively, the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for us. Based upon such officers' evaluation
of these controls and procedures and subject to the limitations noted
hereinafter, the Certifying Officers have concluded that our disclosure controls
and procedures are effective to ensure that information required to be disclosed
by us in this Annual Report is accumulated and communicated to management,
including our principal executive officers as appropriate, to allow timely
decisions regarding required disclosure.

The Certifying Officers have also indicated that there were no significant
changes in our internal controls or other factors that could significantly
affect such controls subsequent to the date of their evaluation, and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.

Our management, including each of the Certifying Officers, does not expect that
our disclosure controls or our internal controls will prevent all error and
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. In addition, 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. Because of 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, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and their
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of these inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.


ITEM 8B. OTHER INFORMATION

NONE

                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

The following table includes the names, positions held and ages of our executive
officers and directors.

NAME                     AGE                     POSITION

Dore Scott Perler        45      Chief Executive Officer, President and
                                 Chairman of the Board

Andrew Goldrich          45      Chief Financial Officer, Vice President,
                                 Director, Treasurer and Secretary

Shawn Tartaglia          36      Vice President, Chief Technical Officer and
                                 Director

Julie Slater             47      Director


                                       27
<PAGE>

DORE SCOTT PERLER has served as our Chief Executive Officer, President and
Chairman of our board of directors since July 1998. From May 1993 to July 1998,
Mr. Perler was a founder, Director, and Vice President of Sales covering the
Southeast United States and Latin America, for Latinrep, Inc., a manufacturer's
representative organization. He assisted in the formation of Latin Channels, a
trade show for Latin American distributors.

ANDREW GOLDRICH has served as our Vice President, Chief Financial Officer,
Treasurer, Secretary and a Director since July 1998. From January 1984 to July
1998, Mr. Goldrich was Vice President of Sales and Finance for Sassy Knitting
Mills, Inc., a privately held garment manufacturer. He was a founder of Sassy
Knitting Mills, where he implemented a national sales force and was responsible
for overall financial and marketing activities.

SHAWN TARTAGLIA has served as our Vice President, Chief Technical Officer and
Director since July 1998. From November 1997 to July 1998, Mr. Tartaglia was
Manager of Information Systems for CompScript, Inc., a privately held
pharmaceutical provider. From February 1993 to November 1997, Solopak
Pharmaceuticals, a privately held pharmaceutical supplier, employed him as its
Systems and Telecommunications Manager.

JULIE SLATER has served as a Director on our board of directors since January
1999. From 1984 and continuing until the present, Ms. Slater has been Vice
President of All Eyes Optical, a privately held optometry and retail eyewear
provider. She is the sister-in-law to our Chief Executive Officer, Dore Perler.

ADVISORY BOARDS AND KEY CONSULTANTS

We have established two advisory boards: an Operations Advisory Board and the
Executive Operation Board. The Operations Advisory Board makes suggestions to
the Board of Directors regarding hardware, engineering and manufacturing. The
Executive Advisory Board makes suggestions to the Board of Directors regarding
strategic goals and objectives of the organization.

We have also engaged several consultants who have played significant roles for
us since our inception. The members of our advisory boards and consultants are:

ALEX SCHLINKMANN is a member of our Operations Advisory Board and a consultant.
Mr. Schlinkmann has been a consultant to us, through Test Systems Engineering,
since July 1998. Since 1991 he has been President and Design Engineer for Test
Systems Engineering. He has helped with the design of several components of our
hardware housing, given advice on best manufacturing methods and constructed
prototypes of new hardware housings and components.

JAMIE SCHLINKMANN is also a member of our Operations Advisory Board and a
consultant. Mr. Schlinkmann is the brother of Alex Schlinkmann, and has been a
consultant to us since July 1998. Since 1991 he has been Vice President and
Design Engineer for Test Systems Engineering. He has also helped with the design
of several components of our hardware housing, given advice on best
manufacturing methods and constructed prototypes of new hardware housings and
components.

PHILIP KENDAL is a member of our Executive Advisory Board and a consultant. Mr.
Kendal is a successful business professional and currently serves as the
Chairman of G-Com2 Solutions, which provides systems and services are designed
to expedite document preparation and reduce production time and cost. This
value-added process dramatically benefits its clients in the mutual fund,
commercial and association industries.

The Advisory Board positions are voluntary and each member is an equity owner in
Sense.

BOARD OF DIRECTORS

All Directors serve for one year or such longer time until their successors are
elected and qualify. Directors do not receive compensation for serving as such.
The Board of Directors appoints officers and terms of office are, unless
otherwise stated in employment contracts, at the discretion of the Board of
Directors.

                                       28
<PAGE>

Pursuant to a Private Placement Agreement, wherein Joseph Stevens and Company,
Inc., ("Joseph Stevens") assisted in the placement of $750,000 in our securities
to individual investors in 2001, Joseph Stevens has the right to designate one
member to our board of directors or, in lieu thereof, appoint one observer to
our board of directors until not later than March 26, 2006. To date, Joseph
Stevens has not designated a director or observer. We have agreed to reimburse
such designee for out-of-pocket expenses incurred in connection with attending
meetings of our board of directors.

BOARD COMMITTEES

We do not as yet have an audit committee or a compensation committee. Our Board
of Directors, by majority, handles the tasks of unformed board committees. No
members of our board are independent, within the meaning of rules of the
Securities and Exchange Commission or self-regulatory organizations. Inasmuch as
the Company does not have an audit committee, the Company does not have an
"audit committee financial expert" within the meaning of Item 401(e) of
Regulation SB.

CODE OF ETHICS

We have adopted a code of ethics applicable to all of our officers, directors
and employees. The code of ethics also includes provisions that apply only to
our chief executive officer and senior financial officers. A copy of our code of
ethics is file as an exhibit to Form 10-KSB for the year ended December 31, 2004
as filed with the Securities and Exchange Commission.

EMPLOYMENT AGREEMENTS AND COMPENSATION PACKAGES

EMPLOYMENT AGREEMENTS

In December 2002, the Company entered into two-year employment contracts with
its Chief Executive Officer, Chief Financial Officer and Chief Technology
Officer that expired on December 31, 2004. On April 1, 2005, we entered into
three-year employment contracts with our Chief Executive Officer, Chief
Financial Officer and Chief Technology Officer which expire on April 1, 2008.
Specific terms are detailed below:

DORE PERLER. Pursuant to his employment agreement with us, Mr. Perler renders
full-time professional services to Sense in the capacity of Chief Executive
Officer. He is obligated, at all times, to faithfully, industriously and to the
best of his ability, perform all duties set forth in Sense bylaws and in policy
statements of the board of directors.

In consideration for these services as Chief Executive Officer, effective April
1, 2005, we will pay Mr. Perler a salary of $137,500 per annum through May 6,
2005 and $156,000 through May 7, 2006. In addition, Mr. Perler is provided a car
allowance of up to $500 per month.

ANDREW GOLDRICH. Pursuant to his employment agreement with us, Mr. Goldrich
renders full-time professional services to Sense in the capacity of Chief
Financial Officer. He is obligated, at all times, to faithfully, industriously
and to the best of his ability, perform all duties set forth in Sense bylaws and
in policy statements of the board of directors.

In consideration for these services as Chief Financial Officer, effective April
1, 2005, we will pay Mr. Goldrich a salary of $137,500 per annum through May 6,
2005 and $156,000 through May 7, 2006. In addition, Mr. Goldrich is provided a
car allowance of up to $500 per month.

SHAWN TARTAGLIA. Pursuant to his employment agreement with us, Mr. Tartaglia
renders full-time professional services to Sense in the capacity of Chief
Technical Officer. He is obligated, at all times, to faithfully, industriously
and to the best of his ability, perform all duties set forth in Sense bylaws and
in policy statements of the board of directors.

In consideration for these services as Chief Technical Officer, Effective April
1, 2005, we will pay Mr. Tartaglia a salary of $96,800 per annum.

                                       29
<PAGE>

INCENTIVE COMPENSATION

In addition to the base salary, each of our executives who have employment
agreements with us are entitled to receive, as incentive compensation in respect
of each calendar year (or portion thereof) of Sense, an amount determined in
accordance with any bonus or short term incentive compensation program (which
may be based upon achieving certain specified performance criteria) which may be
established by the board. Sense's Board of Directors shall review the
determination as to the amounts of any awards available to our executives under
these programs at least annually. The review shall ensure that such amounts are
competitive, and comparable, with awards granted to similarly situated
executives of publicly held companies comparable to Sense.

OTHER BENEFITS

The employment agreements with our executives also provide other benefits.
Executives receive 10 paid vacation days and such other paid holidays in
accordance with Sense's policy. In addition, they are compensated in accordance
with Sense's disability policies. An executive may receive up to six (6) months
salary continuation in the event of short-term disability. An executive may be
granted permission to be absent from Sense during working days to attend
professional meetings and to attend to such outside professional duties in the
biometrics field as have been mutually agreed upon. Attendance at such approved
meetings and accomplishment of approved professional duties shall be fully
compensated service time and shall not be considered vacation time. We shall
reimburse the executive for all expenses incurred by the executive incident to
attendance at approved professional meetings and such entertainment expenses
incurred by the executive in furtherance of Sense's interests, provided,
however, that such reimbursement is approved by the Board of Directors. We pay
dues to professional associations and societies and to such service
organizations and clubs of which the executive is a member, which has been
approved by the Board of Directors as being in the best interests of Sense. The
executives receive all other fringe benefits to which all other employees of
Sense are entitled.

INSURANCE

All of our executives are covered under our general liability insurance policy
for all acts done by him in good faith as an officer throughout the term of
their contracts with us. Sense does not have an additional insurance policy
covering its Directors and Officers. We also provide comprehensive health and
major medical insurance for our executives and their families, according to
Sense's benefit package.

TERMINATION

In the event of involuntary termination without "cause" or disability, each
executive will be entitled to the following compensation for the succeeding 24
months following the date of termination:

      o  A total of two hundred (200%) percent of the executive's base
         compensation in effect on the date of the employment termination; plus

      o  A total of two hundred (200%) percent of the executive's annual
         incentive bonus earned on a quarterly basis as of the date of the
         termination, assuming the executive was employed on the last day of the
         quarter in which termination of employment occurred.

In the event the executive is terminated for "cause" the executive will be
entitled to any unpaid salary through the date of termination and deferred
compensation will be forfeited. In the event there is a "Change in Control", we
will be required to pay the executive a lump sum equal to 299% of the
executive's base compensation in effect on the date of employment plus 299% of
the executive's prior year incentive bonus. The executives may, at their
discretion, elect to terminate the contract the executive must give the board 90
days written notice and the executive would not be entitled to severance
benefits.

                                       30
<PAGE>

INDEMNIFICATION

Our Articles of Incorporation further provide for the indemnification of any and
all persons who serve as our director, officer, employee or agent to the fullest
extent permitted under Florida law. Insofar as indemnification for liabilities
arising under the Act may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Commission, this indemnification is
against public policy as expressed in the securities laws, and is, therefore
unenforceable.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

We are not currently subject to Section 16(a) of the Securities Exchange Act of
1934, and, therefore, our directors and executive officers, and persons who own
more than ten percent of our common stock are not required to file with the
Securities and Exchange Commission reports disclosing their initial ownership
and changes in their ownership of our common stock. We have agreed to register
under Section 12(g) of the Securities Exchange Act of 1934, at which time our
directors, executive officers and 10% shareholders will become subject to
section 16(a). We have not as yet registered our securities under Section 12(g).


ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information relating to all compensation awarded
to, earned by or paid by us for each of the last three fiscal years ended
December 31, to: (a) our President and Chief Executive Officer; and (b) each of
our executive officers who earned more than $100,000 during the fiscal year
ended December 31, 2005:
<TABLE>
<CAPTION>
                                 Annual Compensation                  Long-Term Compensation
                      -------------------------------------------    -------------------------
                                                                     Restricted     Securities
                                                     Other Annual       Stock       Underlying
Name and Principal    Fiscal     Salary     Bonus    Compensation      Awards        Options       All Other
Position               Year        ($)       ($)         ($)             ($)          SAR (#)     Compensation
------------------    ------    --------    -----    ------------    -----------    ----------    ------------
<S>                    <C>      <C>         <C>          <C>         <C>              <C>              <C>
Dore Scott Perler,     2005     $146,702    $  -         $  -        $ 96,700(3)      550,000          -0-
Chief Executive        2004     $131,788    $  -         $  -        $ 91,100(1)      600,000          -0-
Officer                2003     $125,000    $  -         $  -        $   -               -             -0-

Andrew Goldrich,       2005     $146,702    $  -         $  -        $ 96,700(3)      550,000          -0-
Chief Financial        2004     $131,788    $  -         $  -        $ 91,100(1)      600,000          -0-
Officer                2003     $125,000    $  -         $  -        $   -               -             -0-

Shawn Tartaglia        2005     $ 96,000    $  -         $  -        $ 61,800(4)      350,000          -0-
Director and Chief     2004     $ 96,000    $  -         $  -        $ 42,800(2)      300,000          -0-
Operating Officer      2003     $ 96,000    $  -         $  -        $   -               -             -0-
</TABLE>
________

   (1) Represents the estimated fair value of 250,000 stock options granted at
       exercise prices of $.27, 250,000 stock options granted at $.19 and
       100,000 stock options at $.17.

   (2) Represents the estimated fair value of 250,000 stock options granted at
       exercise prices of $.19 and 50,000 stock options at $.17.

   (3) Represents the estimated fair value of 400,000 stock options granted at
       exercise prices of $.22 and 150,000 stock options at $.20.

   (4) Represents the estimated fair value of 200,000 stock options granted at
       exercise prices of $.22 and 150,000 stock options at $.20.

                                       31
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

         The following table sets forth information concerning individual grants
of options made during Fiscal 2005 to the Named Executive Officers.
<TABLE>
<CAPTION>
                                             % of Total
                      Number of Shares     Options Granted    Exercise or      FMV of
                     Underlying Options    to Employees in     Base Price    Shares on        Expiration
                        Granted (#)          Fiscal Year        ($/Sh)       Grant Date          Date
------------------   ------------------    ---------------    -----------    ----------    -----------------
<S>                       <C>                   <C>             <C>            <C>         <C>
Dore Scott Perler         400,000               28.2%           $ 0.22         $ 0.195     September 2, 2010
Dore Scott Perler         150,000               28.2%           $ 0.20         $ 0.20      May 13, 2010
Andrew Goldrich           400,000               28.2%           $ 0.22         $ 0.195     September 2, 2010
Andrew Goldrich           150,000               28.2%           $ 0.20         $ 0.20      May 13, 2010
Shawn Tartaglia           200,000               17.9%           $ 0.22         $ 0.195     September 2, 2010
Shawn Tartaglia           150,000               17.9%           $ 0.20         $ 0.20      May 13, 2010
</TABLE>

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

The following table indicates each exercise of stock options (or tandem SARS)and
freestanding SRAS during the last fiscal year by each of the names executive
officers and the total number and value of exercisable and unexercisable stock
options held by Named Executive Officers as of December 31, 2005.
<TABLE>
<CAPTION>
                                                    Number of Securities            Value of Unexercised
                                                   Underlying Unexercised               In-the-Money
                       Shares                   Options at Fiscal Year-End (#)   Options at Fiscal Year-end
                    acquired on     Value       ------------------------------   ---------------------------
Name                Exercise(#)   Realized($)   Exercisable      Unexercisable   Exercisable   Unexercisable
-----------------   -----------   -----------   -----------      -------------   -----------   -------------
<S>                      <C>           <C>       <C>                   <C>         <C>             <C>
Dore Scott Perler        -             -         1,300,000             -           $48,500         $  -
Andrew Goldrich          -             -         1,300,000             -           $48,500         $  -
Shawn Tartaglia          -             -           875,000             -           $37,500         $  -
</TABLE>

INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN

1999 Plan: On July 19, 1999, the board of directors and shareholders adopted our
1999 stock option plan. We reserved 1,500,000 shares of common stock for
issuance upon exercise of options granted from time to time under the 1999 stock
option plan. The 1999 stock option plan is intended to assist us in securing and
retaining key employees, directors and consultants by allowing them to
participate in our ownership and growth through the grant of incentive and
non-qualified options.

Under the stock option plan we may grant incentive stock options only to key
employees and employee directors, or we may grant non-qualified options to our
employees, officers, directors and consultants. Our board of directors currently
administers the 1999 stock option plan.

                                       32
<PAGE>

Subject to the provisions of the stock option plan, the board will determine who
shall receive options, the number of shares of common stock that may be
purchased under the options, the time and manner of exercise of options and
exercise prices. The term of options granted under the stock option plan may not
exceed ten years or five years for an incentive stock option granted to an
optionee owning more than 10% of our voting stock. The exercise price for
incentive stock options will be equal to or greater than 100% of the fair market
value of the shares of the common stock at the time granted. However, the
incentive stock options granted to a 10% holder of our voting stock are
exercisable at a price equal to or greater than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the board, in its discretion, but in no event shall the
exercise price be less than 75% of the fair market value of the shares of common
stock on the date of grant. The exercise price may be payable in cash or, with
the approval of the board, by delivery of shares or by a combination of cash and
shares. Shares of common stock received upon exercise of options will be subject
to restrictions on sale or transfer. As of December 31, 2005 we have outstanding
options to purchase 1,250,000 shares under the 1999 stock option plan. There are
250,000 shares remaining under the 1999 stock option plan and none of the
options granted to date have been exercised.

2001 Plan: On November 28, 2001, the board of directors adopted our 2001 equity
compensation plan, and on November 28, the 2001 plan was ratified by holders of
a majority of our outstanding common stock. We had reserved 2,000,000 shares of
common stock for issuance as stock grants and upon exercise of options granted
from time to time under the 2001 equity compensation plan. The 2001 plan is
intended to assist us in securing and retaining key employees, directors and
consultants by allowing them to participate in our ownership and growth through
the grant of incentive and non-qualified options, as well as direct stock
grants.

Under the 2001 plan, we may grant incentive stock options only to key employees
and employee directors. We may grant non-qualified options and issue direct
stock awards to our employees, officers, directors and consultants. Our Board of
Directors currently administers the 2001 equity compensation plan.

Subject to the provisions of the 2001 plan, the board will determine who shall
receive options or grants, the number of shares of common stock that may be
purchased under the options, the time and manner of exercise of options and
exercise prices. The term of options granted under the stock option plan may not
exceed ten years or five years for an incentive stock option granted to an
optionee owning more than 10% of our voting stock. The exercise price for
incentive stock options will be equal to or greater than 100% of the fair market
value of the shares of the common stock at the time granted. However, the
incentive stock options granted to a 10% holder of our voting stock are
exercisable at a price equal to or greater than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the board, in its discretion, but in no event shall the
exercise price be less than the par value for our common stock The exercise
price may be payable in cash or, with the approval of the board, by delivery of
shares or by a combination of cash and shares. The board may also direct the
issuance of shares of our common stock as awards under the 2001 plan. Absent
registration under the Securities Act of 1933, as amended, or the availability
of an applicable exemption there from, shares of common stock received as stock
grants and upon exercise of options will be subject to restrictions on sale or
transfer. As of December 31, 2005, we have granted options or awarded shares in
the amount of 1,978,660 under the 2001 plan. Under the 2001 plan, there are
21,340 shares remaining and none of the options granted to date have been
exercised.

2005 Plan: On June 16, 2005, the board of directors adopted our 2005 equity
compensation plan, and on June 16, 2005, the 2005 plan was ratified by holders
of a majority of our outstanding common stock. We had reserved 2,000,000 shares
of common stock for issuance as stock grants and upon exercise of options
granted from time to time under the 2001 equity compensation plan. The 2005 plan
is intended to assist us in securing and retaining key employees, directors and
consultants by allowing them to participate in our ownership and growth through
the grant of incentive and non-qualified options, as well as direct stock
grants.

Under the 2005 plan we may grant incentive stock options only to key employees
and employee directors. We may grant non-qualified options and issue direct
stock awards to our employees, officers, directors and consultants. Our Board of
Directors currently administers the 2001 equity compensation plan.

                                       33
<PAGE>

Subject to the provisions of the 2005 plan, the board will determine who shall
receive options or grants, the number of shares of common stock that may be
purchased under the options, the time and manner of exercise of options and
exercise prices. The term of options granted under the stock option plan may not
exceed ten years or five years for an incentive stock option granted to an
optionee owning more than 10% of our voting stock. The exercise price for
incentive stock options will be equal to or greater than 100% of the fair market
value of the shares of the common stock at the time granted. However, the
incentive stock options granted to a 10% holder of our voting stock are
exercisable at a price equal to or greater than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the board, in its discretion, but in no event shall the
exercise price be less than the par value for our common stock The exercise
price may be payable in cash or, with the approval of the board, by delivery of
shares or by a combination of cash and shares. The board may also direct the
issuance of shares of our common stock as awards under the 2001 plan. Absent
registration under the Securities Act of 1933, as amended, or the availability
of an applicable exemption there from, shares of common stock received as stock
grants and upon exercise of options will be subject to restrictions on sale or
transfer. As of December 31, 2005, we have granted options or awarded shares in
the amount of 1,268,500 under the 2005 plan. Under the 2005 plan, there are
731,500 shares remaining and none of the options granted to date have been
exercised.

The following table sets forth, as of December 31, 2005, information known to us
relating to shares, options, warrants and rights issued under existing equity
compensation plans.
<TABLE>
<CAPTION>
                                                                                            (c)
                                     (a)                       (b)            Number of Securities remaining
                             Number of securities       Weighted-average           available for future
                               issued or to be          exercise price of         issuance under equity
                             issued upon exercise          outstanding             compensation plans
                            of outstanding options      options, warrants         (excluding securities
Plan Category                warrants and rights            and rights           reflected in column (a))
-------------               ----------------------      -----------------     ------------------------------
<C>                               <C>                         <C>                        <C>
Equity Compensation Plans approved by Security Holders
------------------------------------------------------

1999 Plan                         1,250,000                   $.23                       250,000
2001 Plan                         1,978,660                   $.21                        21,340
2005 Plan                         1,268,500                   $.21                       731,500

Equity Compensation Plans not approved by Security Holders
----------------------------------------------------------

                                  1,400,000                   $.36                          -
</TABLE>

Other Plans

Other plans include equity compensation plans not approved by shareholders.
These plans are comprised of options granted and/or warrants issued to employees
and non-employees, including directors, consultants, advisors, suppliers,
vendors, customers and lenders for purposes including to provide continued
incentives, as compensation for services and/or to satisfy outstanding
indebtedness to them.

As of December 31, 2005, we had outstanding warrants covering 13,460,340 shares
of our common stock under equity plans not approved by shareholders. The
warrants have exercise prices ranging from $.10 per share to $1.50 per share and
expiration dates ranging from April 2006 to September 2010.

The grants of these options were approved on a case-by-case basis by the board
of directors, and are within the limits of the number of shares that we are
authorized to issue. The grants of warrants were not authorized by our
shareholders. We may, in the future, authorize the grant of additional options
and/or issuance of additional warrants for the foregoing purposes and other
valid corporate purposes.

                                       34
<PAGE>

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

As authorized by the Florida Business Corporation Law, our Articles of
Incorporation provide that none of our directors shall be personally liable to
for monetary damages for breach of fiduciary duty as a director, to
shareholders, except liability for:

      o  Any breach of the director's duty of loyalty to our company or its
         shareholders;

      o  Acts or omissions not in good faith or which involve intentional
         misconduct or a knowing violation of law;

      o  unlawful payments of dividends or unlawful stock redemptions or
         repurchases; and

      o  any transaction from which the director derived an improper personal
         benefit.

This provision limits our rights and the rights of our shareholders to recover
monetary damages against a director for breach of the fiduciary duty of care
except in the situations described above. This provision does not limit our
rights or the rights of any shareholder to seek injunctive relief or rescission
if a director breaches his duty of care. These provisions will not alter the
liability of directors under federal securities laws.

Our Articles of Incorporation further provide for the indemnification of any and
all persons who serve as our director, officer, employee or agent to the fullest
extent permitted under Florida law.

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC, this indemnification is against public policy as expressed in the
securities laws, and is, therefore unenforceable.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of the date of this annual report,
information known to us relating to the beneficial ownership of shares of common
stock by: each person who is the beneficial owner of more than five percent of
the outstanding shares of common stock; each director; each executive officer;
and all executive officers and directors as a group.

Unless otherwise indicated, the address of each beneficial owner in the table
set forth below is in care of: Sense Holdings, Inc., 4503 NW 103rd Avenue, Suite
200, Sunrise, Florida 33351.

We believe that all persons named in the table have sole voting and investment
power with respect to all shares of common stock beneficially owned by them.

Under securities laws, a person is considered to be the beneficial owner of
securities he owns and that can be acquired by him within 60 days from the date
of this annual report upon the exercise of options, warrants, convertible
securities or other understandings. We determine a beneficial owner's percentage
ownership by assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person and which are exercisable
within 60 days of the date of this annual report, have been exercise or
converted.

Except as other wise required by Securities and Exchange Commission rules
relating to beneficial ownership, the table does not give effect to the issuance
of up to:

      o  4,445,000 shares of common stock issuable upon exercise of options that
         have been granted;

      o  1,001,840 in the event that shares available for award under our stock
         option plans are awarded; and

      o  13,460,340 shares of common stock issuable upon exercise of outstanding
         purchase warrants;

                                       35
<PAGE>

Name and Address of             Amount and Nature of               Percentage
 Beneficial Owner               Beneficial Ownership                of Class
-------------------             --------------------                --------

Dore S. Perler                  2,469,723 shares(1)                   7.00%
9400 S.W. 49th Place
Cooper City, FL 33328

Andrew Goldrich                 2,329,519 shares(1)                   6.13%
21653 Marigot Drive
Boca Raton, FL 33428

Shawn Tartaglia                 1,068,585 shares(2)                   3.05%
6888 Ashburn Road
Lake Worth, FL 33467

Julie Slater                       48,703 shares(3)                      *
402 N.W. 118th Terrace
Coral Springs, FL 33071

Officers and Directors          5,916,530 shares(3)                  16.18%
as a group (4 persons)
_________

* Less than 1%.

(1) Includes 1,300,000 shares issuable upon exercise of currently exercisable
    options.

(2) Includes 875,000 shares issuable upon exercise of currently exercisable
    options.

(3) Includes 10,000 shares issuable upon exercise of currently exercisable
    options.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the years 2000, 2001 and 2002, Dore Perler was loaned $42,000, Andrew
Goldrich was loaned $24,500 and Shawn Tartaglia was loaned $1,722. As of
December 31, 2004, $57,000 of these balances are still owed. These loans bear
interest at 4% per annum, are secured by Sense common shares held by the
respective individual, and are payable on December 31, 2006.


ITEM 13. EXHIBITS

Exhibit No.  Description of Document
-----------  -----------------------

  2.1        Agreement and Plan of Merger between Century Silver Mines, Inc. and
             Sense Holdings, Inc. (1)

  3.1(a)     Articles of Incorporation of Sense Holdings, Inc. (1)

  3.1(b)     Articles of Merger of Century Silver Mines, Inc. into Sense
             Holdings, Inc. (FL) (1)

  3.1(c)     Articles of Merger of Century Silver Mines, Inc. into Sense
             Holdings, Inc. (ID) (1)

  3.2        Bylaws (1)

  4.1        Trilogy Capital Partners, Inc. Warrant Agreement dated August 29,
             2005 (6)

  5.1        Opinion and Consent of Joseph D. Garrity, Esq. Chartered (*)

  10.1       1999 Stock Option Plan (1)

  10.2       Employment Agreement between the Company and Dore Scott Perler (1)

  10.3       Employment Agreement between the Company and Andrew Goldrich (1)

  10.4       Employment Agreement between the Company and Shawn Tartaglia (1)

                                       36
<PAGE>

  10.5       Technology License Agreement, as amended, with SAC Technologies,
             Inc. (1)

  10.6       Lease for Tamarac Office (1)

  10.11      Manufacturing and Non-Compete Agreement with Test Systems
             Engineering (1)

  10.12      Sales Agreement with Integrated Design, Inc.(1)

  10.13      Agreement and Plan of Acquisition dated May 31, 2001 with Micro
             Sensor Technologies, Inc. (2)

  10.14      Patent License Agreement dated March 26, 2001, between Micro Sensor
             Technologies, Inc. and UT-Battelle, LLC (2)

  10.15      Consulting Agreement dated June 1, 2001, between Micro Sensor
             Technologies, Inc., and Dr. Thomas Thundat (2)

  10.16      Work for Others Agreement dated June 4, 2001, between UT-Battelle,
             LLC and Micro Sensor Technologies, Inc.(2)

  10.17      Form of Promissory Note, as amended (4)

  10.18      Lease for Sunrise Office. (4)

  10.19      2001 Equity Compensation Plan (3)

  10.20      Employment Agreement between the Company and Dore Scott Perler as
             of December 16, 2002 (4)

  10.21      Employment Agreement between the Company and Andrew Goldrich as of
             December 16, 2002 (4)

  10.22      Employment Agreement between the Company and Shawn Tartaglia as of
             December 16, 2002 (4)

  10.23      Promissory Notes and related Agreements closed on August 13, 2003
             (5)

  10.24      Cooperative Research and Development Agreement (CRADA) between
             UT-Battelle, LLC and Sense Holdings Incorporated

  10.25      Trilogy Capital Partners, Inc. Letter of Engagement dated September
             19, 2005 (6)

  31.1       Certification of the Chief Executive Officer pursuant to Section
             302 of the Sarbanes-Oxley Act of 2002(*)

  31.2       Certification of the Chief Financial Officer pursuant to Section
             302 of the Sarbanes-Oxley Act of 2002(*)

  32.1       Certification of Chief Executive Officer Certification pursuant to
             Section 906 of the Sarbanes-Oxley Act of 2002 (*)

  32.2       Certification of Chief Financial Officer Certification pursuant to
             Section 906 of the Sarbanes-Oxley Act of 2002 (*)
___________

(1) Incorporated by reference to exhibits with the corresponding number filed
    with our registration statement on Form SB-2 (File No. 333-87293).

(2) Incorporated by reference to exhibits with the corresponding number filed
    with our registration statement on Form SB-2 (File No.333-62874).

(3) Incorporated by reference to exhibits with the corresponding number filed
    with our registration statement on Form S-8 (File No.333-81306).

(4) Previously filed with Form 10-KSB December 31, 2002

(5) Previously filed with Form 10-QSB September 30, 2003

(6) Previously filed with Form 10-QSB for the period ended September 30, 2005 as
    filed on November 15, 2005 (*) Filed herewith

                                       37
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The aggregate fees billed by the Company's auditors for professional services
rendered in connection with the audit of the Company's annual consolidated
financial statements for fiscal 2005 and 2004 and reviews of the consolidated
financial statements included in the Company's Forms 10-KSB for fiscal 2005 and
2004 were approximately $35,500 and $35,500, respectively.

AUDIT-RELATED FEES

For fiscal 2005 and 2004, the Company's auditors billed for service related to
an SB-2 registration filing with the SEC in the amount of $0 and $7,580
respectively. The Company's auditors did not bill any additional fees for
assurance and related services that are reasonably related to the performance of
the audit or review of the Company's financial statements and are not reported
under "Audit Fees" above.

TAX FEES

The aggregate fees billed by the Company's auditors for professional services
for tax compliance, tax advice, and tax planning were $0 and $0 for fiscal 2005
and 2004, respectively.

ALL OTHER FEES

The aggregate fees billed by the Company's auditors for all other non-audit
services rendered to the Company, such as attending meetings and other
miscellaneous financial consulting, in fiscal 2005 and 2004 were $0 and $0,
respectively.

                                       38
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       Sense Holdings, Inc.
Date:   April 14, 2006
                                       By: /s/ Dore Scott Perler
                                           ------------------------
                                           Dore Scott Perler, DIRECTOR,
                                           CHIEF EXECUTIVE OFFICER AND PRESIDENT



In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

     Signature                          Capacity                       Date
     ---------                          --------                       ----


/s/ Dore Scott Perler     Director, Chief Executive Officer       April 14, 2006
---------------------     and President (Principal Executive
Dore Scott Perler         Officer)


/s/ Andrew Goldrich       Chief Financial Officer and Director    April 14, 2006
---------------------     (Principal Financial and Accounting
Andrew Goldrich           Officer)


/s/ Shawn Tartaglia       Chief Technical Officer and Director    April 14, 2006
---------------------
Shawn Tartaglia


/s/ Julie Slater          Director                                April 14, 2006
---------------------
Julie Slater


                                       39
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


                                    CONTENTS



Report of Independent Registered Public Accounting Firm......................F-2

Consolidated Financial Statements:

   Consolidated Balance Sheet at December 31, 2005...........................F-3

   Consolidated Statements of Operations -
      For the Years Ended December 31, 2005 and 2004.........................F-4

   Consolidated Statements of Changes in Shareholders' Equity (Deficit) -
      For the Years Ended December 31, 2005 and 2004.........................F-5

   Consolidated Statements of Cash Flows -
      For the Years Ended December 31, 2005 and 2004.........................F-6

Notes to Consolidated Financial Statements...........................F-7 to F-36



                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders:
Sense Holdings, Inc.
Tamarac, Florida

We have audited the accompanying consolidated balance sheet of Sense Holdings,
Inc. and Subsidiary as of December 31, 2005, and the related consolidated
statements of operations, changes in shareholders' equity (deficit) and cash
flows for the years ended December 31, 2005 and 2004. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amount and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Sense
Holdings, Inc. and Subsidiary, as of December 31, 2005, and the consolidated
results of their operations and their cash flows for the years ended December
31, 2005 and 2004, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has an accumulated deficit of
$11,059,850, has a net loss for the year ended December 31, 2005 of $1,832,795,
and used cash in operations of $1,237,328 for the year ended December 31, 2005.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regards to these matters are also
described in Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                        /s/Sherb & Co., LLP
                                        -------------------
                                        Sherb and Co., LLP
Boca Raton, Florida                     Certified Public Accountants
April 14, 2006

                                       F-2
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2005

                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents ....................................   $     28,696
  Accounts receivable, net of allowance
    for doubtful accounts of $46,259 ...........................        456,135
  Inventories, net .............................................         40,020
  Debt issuance costs ..........................................         89,692
  Other current assets .........................................         71,135
                                                                   ------------

     Total current assets ......................................        685,678
                                                                   ------------

PROPERTY AND EQUIPMENT, net ....................................         13,560
                                                                   ------------

OTHER ASSETS:
  Intangible asset, net ........................................        275,000
  Due from shareholders ........................................         59,375
  Deposit ......................................................          9,807
                                                                   ------------

     Total other assets ........................................        344,182
                                                                   ------------

     Total assets ..............................................   $  1,043,420
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Convertible notes payable, net ...............................   $    576,506
  Note payable .................................................         25,000
  Accounts payable .............................................        169,968
  Accrued expenses .............................................         71,988
  Accrued interest payable .....................................         39,624
  Due to related parties .......................................          5,464
  Deferred revenue .............................................         48,569
                                                                   ------------

     Total current liabilities .................................        937,119
                                                                   ------------

SHAREHOLDERS' EQUITY:
  Common stock, $.10 par value, 100,000,000 shares
    authorized; 35,042,191 shares issued and outstanding .......      3,504,220
  Additional paid-in capital ...................................      8,294,501
  Accumulated deficit ..........................................    (11,059,850)
  Deferred compensation ........................................       (632,570)
                                                                   ------------

     Total shareholders' equity ................................        106,301
                                                                   ------------

     Total liabilities and shareholders' equity ................   $  1,043,420
                                                                   ============

                 See notes to consolidated financial statements.

                                       F-3
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                         For the Year Ended
                                                            December 31,
                                                    ---------------------------
                                                         2005          2004
                                                    ------------   ------------
Revenues:
   Sale of tangible products .....................  $    440,042   $     82,097
   Service and maintenance .......................        61,036         57,224
                                                    ------------   ------------

         Total revenues ..........................       501,078        139,321

Cost of goods sold - tangible products ...........       167,577         55,581
                                                    ------------   ------------

Gross profit .....................................       333,501         83,740
                                                    ------------   ------------

Operating expenses:
   Compensation and related taxes ................       435,148        350,990
   Consulting expense ............................       718,653        330,025
   Research and development ......................       314,233        163,492
   Other selling, general and administrative .....       583,544        634,977
                                                    ------------   ------------

         Total operating expenses ................     2,051,578      1,479,484
                                                    ------------   ------------

Loss from operations .............................    (1,718,077)    (1,395,744)
                                                    ------------   ------------

Other income (expenses):
   Loss on sale of securities ....................          (573)        (1,760)
   Interest income ...............................        10,305          4,834
   Interest expense ..............................       (77,857)      (108,143)
   Debt issuance costs ...........................       (46,593)             -
   Unrealized gain on securities .................             -          1,529
                                                    ------------   ------------

        Total other income (expenses) ............      (114,718)      (103,540)
                                                    ------------   ------------

Net loss .........................................  $ (1,832,795)  $ (1,499,284)
                                                    ============   ============


Net loss per common share - basic and diluted ....  $      (0.05)  $      (0.06)
                                                    ============   ============

Weighted average number of shares
   outstanding - basic and diluted ...............    33,884,551     26,639,839
                                                    ============   ============

                 See notes to consolidated financial statements.

                                       F-4
<PAGE>
<TABLE>
                                              SENSE HOLDINGS, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
                                         FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
<CAPTION>

                                      Common Stock, $.10 Par Value
                                      ----------------------------    Additional                                  Shareholders'
                                        Number of                       Paid-in       Deferred     Accumulated       Equity
                                          Shares         Amount        Capital     Compensation      Deficit        (Deficit)
                                        ----------     ----------     ----------   ------------   ------------    ------------
<S>                                     <C>            <C>            <C>           <C>           <C>             <C>
Balance, December 31, 2003 ...........  18,303,515     $1,830,352     $5,840,200    $(234,563)    $ (7,727,771)   $  (291,782)

Common stock issued for cash .........  11,980,000      1,198,000        745,750            -                -      1,943,750

Common stock issued for debt .........     673,078         67,308        107,692            -                -        175,000

Common stock issued for services .....   1,616,265        161,626        238,675     (304,000)               -         96,301

Amortization of deferred compensation            -              -              -      239,351                -        239,351

Net loss for the year ................           -              -              -            -       (1,499,284)    (1,499,284)
                                        ----------     ----------     ----------    ---------     ------------    -----------

Balance, December 31, 2004 ...........  32,572,858      3,257,286      6,932,317     (299,212)      (9,227,055)       663,336

Common stock issued upon exercise of
 warrants ............................     926,500         92,650         78,810            -                -        171,460

Common stock issued for debt .........      70,000          7,000          7,700            -                -         14,700

Common stock issued for services .....     639,500         63,950         80,605      (89,940)               -         54,615

Common stock issued for license rights     833,333         83,334         66,666            -                -        150,000

Grant of warrants for services .......           -              -        785,123     (755,100)               -         30,023

Grant of stock options for services ..           -              -        135,276     (130,276)               -          5,000

Grant of warrants in connection with
 private placement ...................           -              -        208,004            -                -        208,004

Amortization of deferred compensation            -              -              -      641,958                -        641,958

Net loss for the year ................           -              -              -            -       (1,832,795)    (1,832,795)
                                        ----------     ----------     ----------    ---------     ------------    -----------

Balance, December 31, 2005 ...........  35,042,191     $3,504,220     $8,294,501    $(632,570)    $(11,059,850)   $   106,301
                                        ==========     ==========     ==========    =========     ============    ===========

                                        See notes to consolidated financial statements.

                                                              F-5
</TABLE>
<PAGE>
<TABLE>
                                  SENSE HOLDINGS, INC. AND SUBSIDIARY
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                               For the Year Ended
                                                                                  December 31,
                                                                         -----------------------------
                                                                             2005              2004
                                                                         -----------       -----------
<S>                                                                      <C>               <C>
Cash flows from operating activities:
  Net loss ........................................................      $(1,832,795)      $(1,499,284)
                                                                         -----------       -----------
  Adjustments to reconcile net loss to net cash used in operations:
    Depreciation and amortization .................................           11,620            11,618
    Common stock, warrants and options issued for services ........           83,838            96,301
    Amortization of deferred compensation .........................          641,958           239,351
    Interest income on shareholder loans ..........................           (2,375)                -
    Amortization of debt issuance costs ...........................           46,593                 -
    Amortization of discount of notes payable .....................           45,675            75,520
    Amortization of license rights ................................           25,000                 -
    Loss on sale of investments ...................................              573             1,760
    Unrealized gain on investments ................................                -            (1,529)
    Reserve for obsolete inventory ................................            4,000            36,600
    Allowance for doubtful accounts ...............................           (1,179)             (345)
  Changes in assets and liabilities:
    Accounts receivable ...........................................         (405,775)          111,390
    Inventories ...................................................           (7,419)           12,588
    Other current assets ..........................................          (59,092)            2,229
    Accounts payable ..............................................          122,513           (16,620)
    Due to related parties ........................................            5,464            11,722
    Accrued expenses ..............................................           33,003           (10,220)
    Accrued interest payable ......................................           18,561             2,089
    Deferred revenue ..............................................           32,509            16,060
                                                                         -----------       -----------

      Total adjustments ...........................................          595,467           588,514
                                                                         -----------       -----------

Net cash used in operating activities .............................       (1,237,328)         (910,770)
                                                                         -----------       -----------

Cash flows from investing activities:
  Purchases of marketable securities ..............................                -           (13,297)
  Purchase of intangible asset ....................................         (150,000)                -
  Proceeds from sales of marketable securities ....................           23,002            63,329
                                                                         -----------       -----------

Net cash flows provided by (used in) investing activities .........         (126,998)           50,032
                                                                         -----------       -----------

Cash flows from financing activities:
  Proceeds from convertible notes payable .........................          669,500                 -
  Payment of debt issuance costs ..................................          (66,950)                -
  Payments on notes payable .......................................                -          (550,000)
  Net proceeds from sale of common stock ..........................                -         1,943,750
  Proceeds from margin loan .......................................                -            13,046
  Repayment of margin loan ........................................          (18,530)                -
  Proceeds from exercise of warrants ..............................          171,460                 -
                                                                         -----------       -----------

Net cash flows provided by financing activities ...................          755,480         1,406,796
                                                                         -----------       -----------

Net increase (decrease) in cash and cash equivalents ..............         (608,846)          546,058

Cash and cash equivalents - beginning of year .....................          637,542            91,484
                                                                         -----------       -----------

Cash and cash equivalents - end of year ...........................      $    28,696       $   637,542
                                                                         ===========       ===========

Supplemental disclosure of cash flow information:
  Cash paid for:
    Interest ......................................................      $    15,876       $    27,863
                                                                         ===========       ===========
    Income taxes ..................................................      $         -       $         -
                                                                         ===========       ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for debt ....................................      $    14,700       $   175,000
                                                                         ===========       ===========
  Common stock issued for license rights ..........................      $   150,000       $         -
                                                                         ===========       ===========
  Warrants granted for debt discount and debt issuance costs ......      $   208,004       $         -
                                                                         ===========       ===========

                            See notes to consolidated financial statements.

                                                  F-6
</TABLE>
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - BASIS OF PRESENTATION

Organization
------------

Sense Technologies, Inc. ("the Company" or Sense") is a Florida Corporation,
formed on July 13, 1998. The Company designs, develops, manufactures and sells
fingerprint-based identification products and systems that incorporate
state-of-the-art biometric technology to verify a person's identity. The Company
has also licensed certain patented technology designed to detect unexploded
ordinance including bombs, grenades, shells, rockets, and other explosive
devices.

Principles of Consolidation
---------------------------

The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America ("US GAAP"). The
consolidated financial statements include the accounts of Sense Holdings, Inc.
and its wholly-owned subsidiary. All material intercompany balances and
transactions have been eliminated.

Use of Estimates
----------------

The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates. Significant estimates in 2005 and 2004 include the allowance for
doubtful accounts, stock-based compensation, and the useful life of property and
equipment and license rights.

Cash and Cash Equivalents
-------------------------

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

Accounts Receivable
-------------------

The Company has a policy of reserving for uncollectible accounts based on its
best estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to
determine whether an allowance is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account
may be in doubt. Account balances deemed to be uncollectible are charged to the
allowance after all means of collection have been exhausted and the potential
for recovery is considered remote. At December 31, 2005, the Company has
established, based on a review of its outstanding balances, an allowance for
doubtful accounts in the amount of $46,259.

Accounts receivable from one customer accounted for 93% of the Company's
accounts receivable balance at December 31, 2005.

                                       F-7
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Marketable Securities
---------------------

Marketable securities are classified as trading securities and are held for
resale in anticipation of short-term market movements. Gains or losses are
recognized in the statement of operations when the marketable securities are
sold. Unrealized gains or losses are recognized in the statement of operations
on a monthly basis based on changes in the estimated fair value. For the years
ended December 31, 2005 and 2004, net unrealized gains related to investments
held for trading were $0 and $1,529, respectively. For the years ended December
31, 2005 and 2004, net realized losses related to investments sold were $(573)
and $(1,760), respectively.

Inventories
-----------

Inventories are stated at the lower of average cost or market and consist of raw
materials and finished goods. The Company writes down inventory for estimated
obsolescence or unmarketable inventory based upon assumptions and estimates
about future demand and market conditions. If actual market conditions are less
favorable than those projected by the Company, additional inventory write-downs
may be required. At December 31, 2005, the Company has recorded a reserve for
obsolete inventory of $40,600.

Property and Equipment
----------------------

Property and equipment are carried at cost. Depreciation and amortization are
provided using the straight-line method over the estimated economic lives of the
assets. The cost of repairs and maintenance is expensed as incurred; major
replacements and improvements are capitalized. When assets are retired or
disposed of, the cost and accumulated depreciation are removed from the
accounts, and any resulting gains or losses are included in income in the year
of disposition. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", the Company examines the possibility of decreases in the value of fixed
assets when events or changes in circumstances reflect the fact that their
recorded value may not be recoverable.

Intangible Assets
-----------------

Intangible assets consist of acquired license rights to certain patented
technology designed to detect unexploded ordinance including bombs, hand
grenades, shells, rockets, and other explosive devices. These costs are
capitalized and amortized using the straight-line method over expected useful
lives of five years based upon management's expectations relating to the life of
the license rights and current competitive market conditions.

                                       F-8
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Impairment of Long-Lived Assets
-------------------------------

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," The Company
periodically reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. The Company recognizes an impairment loss when the sum of
expected undiscounted future cash flows is less than the carrying amount of the
asset. The amount of impairment is measured as the difference between the
asset's estimated fair value and its book value. The Company did not consider it
necessary to record any impairment charges during the year ended December 31,
2005.

Income Taxes
------------

Under the asset and liability method of FASB Statement 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities, and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Deferred
tax assets are reduced by a valuation allowance, when in the Company's opinion
it is likely that some portion or the entire deferred tax asset will not be
realized.

Revenue Recognition
-------------------

The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin No. 104 , "Revenue Recognition in Financial
Statements". In general, the Company records revenue when persuasive evidence of
an arrangement exists, services have been rendered or product delivery has
occurred, the sales price to the customer is fixed or determinable, and
collectability is reasonably assured. When a customer order contains multiple
items such as hardware, software, and services which are delivered at varying
times, the Company determines whether the delivered items can be considered
separate units of accounting as prescribed under Emerging Issues Task Force
("EITF") Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables"
("EITF 00-21"). EITF 00-21 states that delivered items should be considered
separate units of accounting if delivered items have value to the customer on a
standalone basis, there is objective and reliable evidence of the fair value of
undelivered items, and if delivery of undelivered items is probable and
substantially in the Company's control.

                                       F-9
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (continued)
-------------------------------

The following policies reflect specific criteria for the various revenues
streams of the Company:

The Company generates revenue from the sale of its products. Revenues from the
sale of these items are recognized upon delivery of the product to the customer.

Revenue from periodic maintenance agreements is generally recognized ratably
over the respective maintenance periods provided no significant obligations
remain and collectibility of the related receivable is probable.

Revenue from the performance of services is recognized upon completion of the
service.

Fair Value of Financial Instruments
-----------------------------------

The carrying amounts reported in the balance sheet for cash, accounts
receivable, inventories, accounts payable and accrued expenses, and notes
payable approximate their fair market value based on the short-term maturity of
these instruments.

Research and Development
------------------------

Research and development costs are expensed as incurred. These costs primarily
consist of salaries paid for the development of the Company's software and
technology and fees paid to a third party in connection with a Cooperative
Research and Development Agreement. Research and development costs for the years
ended December 31, 2005 and 2004 were $314,233 and $163,492, respectively.

Warranty Obligations
--------------------

The Company generally provides the ultimate consumer a warranty with each
product and accrues warranty expense at the time of the sale based on the
Company's prior claims history. Actual warranty costs incurred are charged
against the accrual when paid. At December 31, 2005 the Company has accrued
warranty expense of $15,000 which has been included in accrued expenses on the
consolidated balance sheet.

                                      F-10
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loss Per Common Share
---------------------

Basic net earnings (loss) per share equals net earnings (loss) divided by the
weighted average shares outstanding during the year. The computation of diluted
net earnings per share does not include dilutive common stock equivalents in the
weighted average shares outstanding as they would be anti-dilutive. The
Company's common stock equivalents at December 31, 2005 include the following:

         Convertible notes payable ..................         2,575,000
         Option .....................................         4,445,000
         Warrants ...................................        13,460,340
                                                             ----------
                                                             20,480,340
                                                             ==========
Non-Employee Stock-Based Compensation
-------------------------------------

The cost of stock based compensation awards issued to non-employees for services
are recorded at either the fair value of the services rendered or the
instruments issued in exchange for such services, whichever is more readily
determinable, using the measurement date guidelines enumerated in Emerging
Issues Task Force Issue ("EITF") 96-18, "Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services" ("EITF 96-18").

Stock Based Compensation
------------------------

The Company accounts for stock options issued to employees in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations which
are more fully described in Note 11. As such, compensation cost is measured on
the date of grant as the excess of the current market price of the underlying
stock over the exercise price. Such compensation amounts, if any, are amortized
over the respective vesting periods of the option grant. The Company adopted the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
and SFAS 148, "Accounting for Stock-Based Compensation Transition and
Disclosure", which permits entities to provide pro forma net income (loss) and
pro forma earnings (loss) per share disclosures for employee stock option grants
as if the fair-valued based method defined in SFAS No. 123 had been applied. The
Company accounts for stock options and stock issued to non-employees for goods
or services in accordance with the fair value method of SFAS 123.

                                      F-11
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock Based Compensation (continued)
------------------------------------

Had compensation cost for the stock option plan been determined based on the
fair value of the options at the grant dates consistent with the method of SFAS
123, "Accounting for Stock Based Compensation", the Company's net loss and loss
per share would have been changed to the pro forma amounts indicated below for
the years ended December 31, 2005 and 2004:

                                                      2005            2004
                                                  -----------     -----------

         Net loss as reported ................    $(1,832,795)    $(1,499,284)
         Less: total stock-based employee
         compensation expense determined under
         fair value based method, net of
         related tax effect ..................       (388,501)       (227,730)
                                                  -----------     -----------

         Pro forma net loss ..................    $(2,221,296)    $(1,727,014)
                                                  ===========     ===========

         Basic and diluted loss per share:
                 As reported .................    $      (.05)    $      (.06)
                                                  ===========     ===========

                 Pro forma ...................    $      (.06)    $      (.06)
                                                  ===========     ===========

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants:

                                                      2005            2004
                                                  ------------    -----------
         Dividend yield ......................    0%              0%
         Expected volatility range ...........    138% to 144%    74% to 130%
         Risk-free interest rate .............    3.75%-4.00%     4.00%
         Expected holding periods ............    3-5 years       3-5 years

Advertising
-----------

Advertising is expensed as incurred. Advertising expenses for the years ended
December 31, 2005 and 2004 totaled approximately $88,717 and $3,795,
respectively.

                                      F-12
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentrations of Credit Risk
-----------------------------

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
accounts receivable, and notes payable. The Company's investment policy is to
invest in low risk, highly liquid investments. The Company does not believe it
is exposed to any significant credit risk in its cash investment.

The Company performs on-going credit evaluations of its customer base including
those included in accounts receivable at December 31, 2005, and, generally, does
not require collateral. The Company maintains reserves for potential credit
losses and such losses have been within management's expectations.

For the year ended December 31, 2004, three customers accounted for 72% of the
Company's revenues. For the year ended December 31, 2005, one customer accounted
for 83% of the Company's revenues. One customer accounted for 93% of the
outstanding gross accounts receivable at December 31, 2005.

Registration Rights Agreements
------------------------------

The Company has adopted View C of EITF 05-4 "Effect of a Liquidated Damages
Clause on a Freestanding Financial Instrument Subject to EITF 00-19" ("EITF
05-4"). Accordingly, the Company classifies as liability instruments, the fair
value of registration rights agreements when such agreements (i) require it to
file, and cause to be declared effective under the Securities Act, a
registration statement with the SEC within contractually fixed time periods, and
(ii) provide for the payment of liquidating damages in the event of its failure
to comply with such agreements. Under View C of EITF 05-4, (i) registration
rights with these characteristics are accounted for as derivative financial
instruments at fair value and (ii) contracts that are (a) indexed to and
potentially settled in an issuer's own stock and (b) permit gross physical or
net share settlement with no net cash settlement alternative are classified as
equity instruments.

Recent Accounting Pronouncements
--------------------------------

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant-date fair value
of stock options and other equity-based compensation issued to employees. FAS
No. 123R is effective for the first fiscal year beginning after December 15,
2005. The adoption of FAS No. 123R may have a material impact on its financial
statements.

                                      F-13
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (continued)
--------------------------------------------

In April 2005, the Securities and Exchange Commission's Office of the Chief
Accountant and its Division of Corporation Finance has released Staff Accounting
Bulletin (SAB) No.107 to provide guidance regarding the application of FASB
Statement No. 123 (revised 2004), Share-Based Payment. Statement No. 123(R)
covers a wide range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share appreciation
rights, and employee share purchase plans. SAB 107 provides interpretative
guidance related to the interaction between Statement No. 123R and certain SEC
rules and regulations, as well as the staff's views regarding the valuation of
share-based payment arrangements for public companies.

In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS
154"). This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,
and changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. APB Opinion No. 20
previously required that most voluntary changes in accounting principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new accounting principle. This Statement requires
retrospective application to prior periods' financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. When it is
impracticable to determine the period-specific effects of an accounting change
on one or more individual prior periods presented, this Statement requires that
the new accounting principle be applied to the balances of assets and
liabilities as of the beginning of the earliest period for which retrospective
application is practicable and that a corresponding adjustment be made to the
opening balance of retained earnings (or other appropriate components of equity
or net assets in the statement of financial position) for that period rather
than being reported in an income statement. When it is impracticable to
determine the cumulative effect of applying a change in accounting principle to
all prior periods, this Statement requires that the new accounting principle be
applied as if it were adopted prospectively from the earliest date practicable.
This Statement shall be effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The Company does
not believe that the adoption of SFAS 154 will have a significant effect on its
financial statements.

                                      F-14
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (continued)
--------------------------------------------

On June 29, 2005, the EITF ratified Issue No. 05-2, "The Meaning of
`Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF Issue 05-2 provides guidance on determining whether
a convertible debt instrument is "conventional" for the purpose of determining
when an issuer is required to bifurcate a conversion option that is embedded in
convertible debt in accordance with SFAS 133. Issue No. 05-2 is effective for
new instruments entered into and instruments modified in reporting periods
beginning after June 29, 2005. The adoption of this pronouncement did not have a
material effect on the Company's financial statements.

In September 2005, Issue No. 05-4, "The Effect of a Liquidated Damages Clause on
a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF 05-4 provides guidance to issuers as to how to
account for registration rights agreements that require an issuer to use its
"best efforts" to file a registration statement for the resale of equity
instruments and have it declared effective by the end of a specified grace
period and, if applicable, maintain the effectiveness of the registration
statement for a period of time or pay a liquidated damage penalty to the
investor. The Company has adopted view C of this pronouncement. Accordingly, the
Company has bifurcated registration rights from their related free standing
financial instruments and recorded them at fair value. The Company has adopted
view C of this pronouncement, which has resulted in the registration rights
being bifurcated and accounted for at fair value and the common stock purchase
warrants classified as equity.

In September 2005, the FASB ratified the Emerging Issues Task Force's ("EITF")
Issue No. 05-7, "Accounting for Modifications to Conversion Options Embedded in
Debt Instruments and Related Issues," which addresses whether a modification to
a conversion option that changes its fair value affects the recognition of
interest expense for the associated debt instrument after the modification and
whether a borrower should recognize a beneficial conversion feature, not a debt
extinguishment if a debt modification increases the intrinsic value of the debt
(for example, the modification reduces the conversion price of the debt). This
issue is effective for future modifications of debt instruments beginning in the
first interim or annual reporting period beginning after December 15, 2005. The
Company is currently in the process of evaluating the effect that the adoption
of this pronouncement may have on its financial statements.

                                      F-15
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (continued)
--------------------------------------------

In September 2005, the FASB also ratified the EITF's Issue No. 05-8, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature,"
which discusses whether the issuance of convertible debt with a beneficial
conversion feature results in a basis difference arising from the intrinsic
value of the beneficial conversion feature on the commitment date (which is
recorded in the shareholder's equity for book purposes, but as a liability for
income tax purposes), and, if so, whether that basis difference is a temporary
difference under FASB Statement No. 109, "Accounting for Income Taxes." This
Issue should be applied by retrospective application pursuant to Statement 154
to all instruments with a beneficial conversion feature accounted for under
Issue 00-27 included in financial statements for reporting periods beginning
after December 15, 2005. The Company is currently in the process of evaluating
the effect that the adoption of this pronouncement may have on its financial
statements.

Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.

Reclassifications
-----------------

Certain prior periods' balances have been reclassified to conform to the current
period's financial statement presentation. These reclassifications had no impact
on previously reported results of operations or shareholders' equity.

NOTE 2 - GOING CONCERN CONSIDERATIONS

The accompanying consolidated financial statements are prepared assuming the
Company will continue as a going concern. During the years ended December 31,
2005 and 2004, the Company had an accumulated deficit of $11,059,850, a working
capital deficiency of $251,441, incurred losses from operations of $1,832,795
and $1,499,284, respectively, and had negative cash flows from operations in the
amount of $1,237,328 and $910,770, respectively. While the Company is attempting
to increase sales through the licensing of exclusive right to manufacture, use,
sell, offer for sale and sublicense yet to be developed products relating to (a)
chemical vapor detection and (b) the detection of unexploded ordnance, including
bombs, hand grenades, rockets and other unexploded devices, the growth has not
been significant enough to support the Company's daily operations. On March 7,
2006, the Company completed a private placement of $2,451,000 (see note 13) and
management intends to attempt to raise additional funds by way of a public or
private offering. While the Company believes in the viability of its strategy to
improve sales volume and in its ability to raise additional funds, there can be
no assurances to that effect.

                                      F-16
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 3 - INVENTORIES

At December 31, 2005, inventories consist of the following:

         Raw materials ..................................     $ 40,120
         Finished goods .................................       40,500
                                                              --------
                                                                80,620
         Less: Reserve for slow moving inventory ........      (40,600)
                                                              --------
                                                              $ 40,020
                                                              ========

NOTE 4 - PROPERTY AND EQUIPMENT

At December 31, 2005, property and equipment consisted of the following:

                                            Estimated life
                                            --------------
         Computer equipment and software       3-5 years      $ 41,585
         Furniture and fixtures                 7 years         19,104
                                                              --------
                                                                60,689

         Less: Accumulated depreciation
               and amortization                                (47,129)
                                                              --------
                                                              $ 13,560
                                                              ========

For the years ended December 31, 2005 and 2004, depreciation and amortization
expense amounted to $11,620 and $11,618, respectively.

NOTE 5 - INTANGIBLE ASSETS

Effective August 1, 2005, the Company entered into an Exclusive Patent License
Agreement with UT-Battelle, LLC. The License Agreement supersedes and replaces
an agreement dated March 26, 2001. Under the March 26, 2001 license agreement,
the Company licenses certain patent rights relating to the detection of
unexploded ordnance.

Under the License Agreement, UT-Battelle has granted the Company the exclusive
right to manufacture, use, sell, offer for sale and sublicense yet to be
developed products incorporating the licensed patents, relating to (a)chemical
vapor detection and (b) the detection of unexploded ordnance, including bombs,
grenades, rockets and other unexploded devices. The Company has also been
granted a 24-month right of first refusal to negotiate a patent license
agreement with UT-Battelle for its proprietary technology relating to the
detection of biological warfare agents in security applications, such as
anthrax, cholera, ebola, plague, ricin, smallpox and tularemia.

                                      F-17
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 5 - INTANGIBLE ASSETS (CONTINUED)

As consideration for the license grants by UT-Battelle, the Company:

      o  Paid UT-Battelle an aggregate of $150,000, which amount has been paid
         and will be amortized over the estimated license life of 5 years;

      o  Issued to UT-Battelle 833,333 shares of the Company's unregistered
         common stock (the "Shares"). The shares were issued at the fair values
         at the date of the issuance of $150,000 or $.18 per share and will be
         amortized over the estimated license life of 5 years.

      o  agreed to pay to UT-Battelle a royalty equal to 4% of net sales of
         products incorporating the licensed patents, subject to minimum royalty
         payments of $10,000 for 2006, $20,000 for 2007 and $25,000 for 2008 and
         thereafter;

      o  agreed to pay to UT-Battelle, in the event the Company sublicenses the
         licensed patents, the greater of 50% of the Company's revenues from
         sublicensing and the minimum required royalties described above; and

      o  Reimburse UT-Battelle for certain costs and expenses of securing patent
         protection for the licensed patented technology.

At December 31, 2005, intangible assets consist of the following:

         License rights ...............................      $ 300,000
         Less:  accumulated amortization ..............        (25,000)
                                                             ---------

                                                             $ 275,000
                                                             =========

Amortization expense amounted to $25,000 for the year ended December 31, 2005.

Amortization expense attributable to future periods is as follows:

         Years ending December 31:
         2006 .........................................       $ 60,000
         2007 .........................................         60,000
         2008 .........................................         60,000
         2009 .........................................         60,000
         2010 .........................................         35,000
                                                              --------

                                                              $275,000
                                                              ========

                                      F-18
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 6 - CONVERTIBLE NOTES PAYABLE

From June 2005 to September 2005, the Company offered for sale a maximum of 15
units (the "Units") for $50,000 per Unit, to accredited investors only. Each
Unit consists of a promissory note in the principal amount of $50,000 (the
"Notes") and a common stock purchase warrant (the "Warrants") to purchase 50,000
shares of the common stock, par value $0.10 per share of the Company,
exercisable at $0.16 per share for a period of 5 years. The Notes have a term of
14 months, and provide for interest accrual on unpaid principal at the rate of
10% per year. Interest under the Notes is payable quarterly commencing on
September 1, 2005. The Notes are secured by a blanket security interest in all
of the Company's assets. In connection with the offering, the placement agent
with respect to the Units (the "Placement Agent"), or its designee, will act as
the agent of each Note holder solely for the purpose of executing all security
agreements, instruments, filings and notices relevant to the perfection,
recording, release or termination of the security interests, the determination
of events of default as defined in the Notes, and such other similarly related
matters. The placement agent shall be entitled to a placement agent fee of 8%
plus a 2% non-accountable expense allowance. Additionally, the Company agreed to
grant warrants to purchase shares of common stock of the Company to the
placement agent for its services with regard to the offering. The Company will
grant to the placement agent warrants to purchase shares of the Company at an
exercise price of $.16 per share expiring on July 1, 2010 at a rate of 1/2
warrant for every $1 of gross proceeds received by the Company in conjunction
with this offering.

At the sole election of the Holder, any portion of the unpaid principal balance
of these notes may be converted into shares of common stock of the Company at a
conversion rate equal to $0.26 per common share. The Holder shall provide the
Company written notice prior to such payment ("Holder Conversion Notice"). In
the event of default of interest payment, which will be defined as non receipt
of interest payment on the 10th day of the month following a missed payment of
accrued quarterly interest, the interest rate will increase to 18% retroactive
to the date of the last payment and remain at 18% for the duration of the Note.

The Company agreed to file a registration statement within 45 days of the final
closing date of the Offering. The Company shall use its good faith best efforts
to ensure that such registration is declared effective within 90 days of the
Final Closing Date. The Company agrees to respond to any SEC comments within 10
days. In the event that the Company does not respond to SEC comments within 10
days or once the Registration Statement is declared effective, it does not stay
effective for 60 consecutive days, then the number of warrants shall be
increased by two percent (2%) for each 30 day period following such 60 day
period, as the case may be. In connection with a private placement in March 2006
(See note 13), the investors waived this registration rights penalty and agreed
that the Company will register the common shares and underlying warrants with
the Company's anticipated filing of a registration statement in April 2006.

                                      F-19
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 6 - CONVERTIBLE NOTES PAYABLE (CONTINUED)

In aggregate, the Company sold to new investors an aggregate of $669,500 of the
Units for net proceeds of $602,550 (net of placement fees of $66,950). In
connection with these convertible notes, warrants to purchase 669,500 common
shares were issued to the holders at an exercise price per share of $0.16. The
warrants are exercisable immediately and expire five years from date of grant
through September 23, 2010. These warrants were treated as a discount on the
convertible notes and were valued at $138,669 to be amortized over the note
terms of 14 months. The fair market value of each stock warrant grant is
estimated on the date of grant using the Black-Scholes option-pricing model, in
accordance with SFAS No. 123 using the following weighted-average assumptions:
expected dividend yield 0%, risk-free interest rate of 3.25%, volatility ranging
from 138% to 145% and expected term of 5 years. Additionally, in connection with
the convertible notes, the Company did not record any beneficial conversion
since the conversion price was greater than the fair market value.

For the year ended December 31, 2005, the amount of amortization of imputed
interest charged to interest expense was $45,675.

Skyebanc, Inc. ("Skyebanc"), an NASD broker dealer, acted as selling agent in
connection with the offering. The Company paid Skyebanc a total of eight percent
(8%) of the total proceeds resulting from the sale of the securities. The
Company also reimbursed Skyebanc, Inc. for its expenses in the amount of two
percent (2%) of the selling price of the securities sold on a non-accountable
basis. The Company paid placement fees of $66,950 to Skyebanc. The Company also
granted warrants to purchase 334,750 shares of its common stock to Skyebanc for
its services with regard to the offering at an exercise price of $.16 per share,
which warrants expire on July 1, 2010. These warrants were treated as a deferred
debt offering cost on the convertible notes and were valued at $69,335 to be
amortized over the 14-month note terms. The fair market value of each stock
warrant grant is estimated on the date of grant using the Black-Scholes
option-pricing model, in accordance with SFAS No. 123 using the following
weighted-average assumptions: expected dividend yield 0%, risk-free interest
rate of 3.25%, volatility ranging from 138% to 145% and expected term of 5
years. At December 31, 2005, the placement fee was deemed to be a deferred debt
issuance cost on the accompanying balance sheet and is being amortized as a debt
issuance cost over the debenture term of 14 months. For the year ended December
31, 2005, amortization of debt issuance costs amounted to $46,593. At December
31, 2005, accrued interest payable on these notes amounted to $16,686.

The convertible notes payable consists of the following at December 31, 2005:

         Convertible notes payable ......................    $ 669,500
         Less: unamortized discount on note payable .....      (92,994)
                                                             ---------

         Convertible notes payable, net .................    $ 576,506
                                                             =========

                                      F-20
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 7 - NOTE PAYABLE

During fiscal 2003, the Company raised capital from accredited investors under a
private placement memorandum. The private placement provided for the sale of 15
units at a price of $50,000 per unit in order to raise up to a total of
$750,000. Each unit consisted of a Promissory Note of $50,000 and a Common Stock
Purchase Warrant to purchase 25,000 shares of the Company's common stock
exercisable at $.16 per share expiring in five years from the date of the
warrant. The notes had a term of one year and provided for interest accrual on
the unpaid principal balance of 10% per year. In fiscal 2003, the Company
received funds in the amount of $750,000 in connection with the private
placement and issued 375,000 in purchase warrants. In May 2004, note holders
comprising the $750,000 notes payable converted $175,000 of debt into 673,078
shares of common stock. Additionally, in 2004, the Company repaid notes holders
$550,000. As of December 31, 2005, the Company has a remaining note payable of
$25,000 and has accrued interest payable in the amount of $22,938 in connection
with the notes.

For the years ended December 31, 2004, the amount of imputed interest charged to
interest expense was $75,520.

NOTE 8 - RELATED PARTY TRANSACTIONS

Due from shareholders
---------------------

Prior to fiscal 2004, certain shareholders received funds from the Company in
the form of demand notes. At December 31, 2005, the balance on the amount owed
to the Company was $59,375. These loans bear interest at 4% per annum, are
secured by Company common shares held by the respective individuals, and are
payable on December 31, 2006.

Due to related parties
----------------------

From time to time, certain officers of the Company use their respective credit
card for operating purposes or incur expense on behalf of the Company. At
December 31, 2005, the Company owed these officers $5,464.

                                      F-21
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 9 - INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" "SFAS 109". SFAS 109 requires
the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statements and the tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax losses and tax credit carry forwards. SFAS 109 additionally requires
the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Internal Revenue Code Section 382 places a
limitation on the amount of taxable income that can be offset by carry forwards
after a change in control (generally greater than a 50% change in ownership).
The Company has a net operating loss carry forward for tax purposes totaling
approximately $7,600,000 at December 31, 2005, expiring through the year 2025.
The table below summarizes the differences between the Company's effective tax
rate and the statutory federal rate as follows for the periods ended December
31, 2005 and 2004:

                                              Year Ended           Year Ended
                                          December 31, 2005    December 31, 2004
                                          -----------------    -----------------
Tax benefit computed at "expected"
 statutory rate ....................          $(623,000)           $(510,000)
State income taxes, net of benefit .            (18,300)             (15,000)
Other permanent differences ........            258,000              118,500
Increase in valuation allowance ....            383,300              406,500
                                              ---------            ---------
Net income tax benefit .............          $       -            $       -
                                              =========            =========

Deferred tax assets and liabilities are provided for significant income and
expense items recognized in different years for tax and financial reporting
purposes. Temporary differences, which give rise to a net deferred tax asset is
as follows:

                                          December 31, 2005    December 31, 2004
                                          -----------------    -----------------
Tax benefit of net operating loss
 carryforward ......................         $ 2,655,300          $ 2,273,000
Allowance for doubtful accounts ....              16,200               29,200
Allowance for inventory obsolescence              14,000                    -
Valuation Allowance ................          (2,685,500)          (2,302,200)
                                             -----------          -----------

Net deferred tax asset recorded ....         $         -          $         -
                                             ===========          ===========

After consideration of all the evidence, both positive and negative, management
has recorded a valuation allowance at December 31, 2005 and 2004, due to the
uncertainty of realizing the deferred income tax assets. The valuation allowance
was increased by $383,300 from the prior year.

                                      F-22
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 10 - SHAREHOLDERS' EQUITY

Common Stock
------------

In March 2004, the Company, by a vote of the majority shareholders and the
approval of the board of directors, increased its authorized common shares to
100,000,000.

During the quarter ended March 31, 2004, the Company issued 117,625 common
shares of its common stock for services rendered. These services include legal
services, investment relation services and business development services. The
shares were issued at the fair values at the date of the issuance which were at
prices ranging from $.30 to $.34. In connection with these shares, the Company
recorded stock-based consulting expense of $36,625.

During the quarter ended June 30, 2004, the Company issued 360,474 common shares
of its common stock for services rendered. These services include legal
services, investment relations services and business development services. The
shares were issued at the fair values at the date of the issuance which were at
prices ranging from $.23 to $.37. In connection with these shares, the Company
recorded stock-based consulting expense of $103,171.

In April 2004, the Company consummated a capital raise through a private
placement offered to accredited investors. The Company offered investment units
each costing $35,000, with each unit consisting of (a) a number of shares of
common stock of the Company determined by dividing the unit price by $.175 per
share and (b) one common stock purchase warrants for every two shares of common
stock received upon conversion with an exercise price of $.20 per share. In
April 2004, the Company sold six units under the private placement aggregating
1,200,000 shares of common stock and 600,000 warrants for net proceeds of
$210,000. The warrants expire in April 2009.

In May 2004, the Company consummated a capital raise through a private placement
offered to accredited investors. The Company offered, through a placement agent,
investment units each costing $10,000, with each unit consisting of (a) a number
of shares of common stock of the Company determined by dividing the (i)unit
price by (ii) $.20 and (b) a warrant to purchase, at any time prior to the fifth
anniversary following the date of issuance of the warrant, a number of shares
equal to 25% of the number of shares included with the unit, at a exercise price
equal to $.50 per share of common stock. On May 10, 2004, the Company closed on
its initial funding and issued 6,600,000 shares of common stock and granted
1,650,000 warrants for net proceeds of $1,188,000. In June 2004, the Company
closed on additional funding and issued 3,200,000 shares of common stock and
granted 800,000 warrants for net proceeds of $545,750.

                                      F-23
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock (continued)
------------------------

In connection with the May 2004 private placement, the Company entered into a
placement agency agreement with a third party agent. For services rendered under
the Agency Agreement, the Company paid a cash fee equal to 10% of the aggregate
consideration received by the Company in the capital raise, a cash fee equal to
five percent of the gross proceeds received by the Company upon the exercise of
warrants related to this offering and 500,000 shares of common stock. The
500,000 shares of common stock shall increase pro rata following the time that
$1,000,000 is raised in the offering up to a maximum of 1,300,000 common shares.
Additionally, the Company reduced the exercise price of 342,475 warrants
previously granted to the Placement Agent from $.50 to $.10 per share and
extended the expiration date of these warrants to May 2009. In June 2004, the
Company issued 980,000 shares in connection with this agreement

In May 2004, note holders comprising the $750,000 notes payable converted
$175,000 of debt into 673,078 shares of common stock.

In July 2004, the Company issued 9,402 common shares of its common stock for
services rendered. These services include legal services. The shares were issued
at the fair values at the date of the issuance of $.20 per share. In connection
with these shares, the Company recorded stock-based compensation of $1,881.

On November 17, 2004, the Company entered into a six-month consulting agreement
with a third party for business development and investor relations services. In
connection with this consulting agreement, the Company agreed to issue an
aggregate of 1,100,000 shares of common stock for services rendered over the
contract period unless terminated earlier. The Company valued these shares at
their fair market value based on the trading price on the date of issuance of
$.23 per share or $253,000. For the year ended December 31, 2005 and 2004, the
Company recorded non-cash compensation expense of $189,750 and $63,250,
respectively, which was be amortized over the service period.

During the quarter ended December 31, 2004, the Company issued 28,764 common
shares of its common stock for legal services rendered. The shares were issued
at the fair values at the date of the issuance which were at prices ranging from
$.16 to $.22. In connection with these shares, the Company recorded stock-based
compensation expense of $5,625.

On January 1, 2005, the Company entered into a consulting agreement with a third
party for business development services for a six-month period. In connection
with the consulting agreement, the Company issued 75,000 common shares of its
common stock for services rendered and to be rendered in the future. The shares
were issued at the fair values at the date of the issuance of $.17 per share.
For the year ended December 31, 2005, in connection with these shares, the
Company recorded stock-based consulting expense of $12,750.

                                      F-24
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock (continued)
------------------------

In January 2005, the Company issued 605,000 shares of common stock for exercise
of warrants for net proceeds of $120,800.

In February 2005, the Company issued 70,000 shares of common stock for accrued
rent of $14,700.

On March 15, 2005, the Company issued 1,000 common shares of its common stock
for services rendered. The shares were issued at the fair values at the date of
the issuance of $.19 per share. In connection with these shares, the Company
recorded stock-based compensation of $190.

On June 15, 2005, the Company entered into a consulting agreement with a third
party for business development services for a three-month period. In connection
with the consulting agreement, the Company issued 62,500 common shares of its
common stock for services rendered and to be rendered in the future. The shares
were issued at the fair values at the date of the issuance of $11,250 or $.18
per share. For the year ended December 31 2005, in connection with these shares,
the Company recorded stock-based consulting expense of $11,250.

On July 6, 2005, the Company entered into a consulting agreement with a third
party for legal and business services for a six-month period. In connection with
the consulting agreement, the Company issued 225,000 common shares of its common
stock for services rendered and to be rendered in the future. The shares were
issued at the fair values at the date of the issuance of $42,750 or $.19 per
share and were amortized over the service period. For the year ended December 31
2005, in connection with these shares, the Company recorded legal fees of
$42,750.

On August 1, 2005, in connection with a license agreement (see note 5), the
Company issued 833,333 shares of common stock for certain patent licensing
rights, as defined in the agreement. The shares were issued at the fair values
at the date of the issuance of $150,000 or $.18 per share and will be amortized
over the estimated license life of 5 years. For the year ended December 31 2005,
in connection with these shares, the Company recorded an intangible asset of
$150,000 as asset on the accompanying consolidated balance sheet.

In September 2005, in connection with the exercise of 46,500 common stock
warrants, the Company issued 46,500 shares of common stock for proceeds of
$6,660.

                                      F-25
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock (continued)
------------------------

On September 15, 2005, the Company entered into a consulting agreement with a
third party for business development services for a three-month period. In
connection with the consulting agreement, the Company issued 100,000 shares of
its common stock for services rendered and to be rendered in the future. The
shares were issued at the fair values at the date of the issuance of $23,000 or
$.23 per share. For the year ended December 31 2005, in connection with these
shares, the Company recorded stock-based consulting expense of $23,000.

On October 1, 2005, the Company issued 40,000 shares of its common stock for
business development services rendered. The shares were issued at the fair
values at the date of the issuance of $14,800 or $.37 per share. For the year
ended December 31 2005, in connection with these shares, the Company recorded
stock-based consulting expense of $14,800.

On October 3, 2005, the Company issued 20,000 shares of its common stock to a
consultant for accounting services rendered. The shares were issued at the fair
values at the date of the issuance of $6,000 or $.30 per share. For the year
ended December 31 2005, in connection with these shares, the Company recorded
accounting fees of $6,000.

On October 22, 2005, the Company issued 45,000 shares of its common stock for
business development services rendered. The shares were issued at the fair
values at the date of the issuance of $10,125 or $.23 per share. For the year
ended December 31 2005, in connection with these shares, the Company recorded
stock-based consulting expense of $10,125.

In October and November 2005, in connection with the exercise of 275,000 common
stock warrants, the Company issued 275,000 shares of common stock for proceeds
of $44,000.

On November 16, 2005, the Company issued 56,000 shares of common stock for
accrued rent. The shares were issued at the fair values at the date of the
issuance of $19,040 or $.34 per share. For the year ended December 31 2005, in
connection with these shares, the Company recorded rent expense of $19,040.

On November 23, 2005, the Company issued 15,000 shares of its common stock for
legal services rendered. The shares were issued at the fair values at the date
of the issuance of $4,650 or $.31 per share. For the year ended December 31
2005, in connection with these shares, the Company recorded legal fees of
$4,650.

For the year ended December 31, 2005, the Company amortized stock-based
compensation of $299,213 from the issuance of shares in 2004.

                                      F-26
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock Options
--------------------

1999 Stock Option Plan
----------------------

On July 19, 1999, the board of directors adopted the Company's 1999 Stock Option
Plan (the "1999 Plan"). The Company has reserved 1,500,000 shares of common
stock for issuance upon exercise of options granted from time to time under the
1999 stock option plan. The 1999 stock option plan is intended to assist the
Company in securing and retaining key employees, directors and consultants by
allowing them to participate in the Company's ownership and growth through the
grant of incentive and non-qualified options. Under the stock option plan, the
Company may grant incentive stock options only to key employees and employee
directors, or the Company may grant non-qualified options to employees,
officers, directors and consultants. The 1999 stock option plan is currently
administered by the Company's board of directors. Subject to the provisions of
the 1999 stock option plan, the board will determine who shall receive options,
the number of shares of common stock that may be purchased under the options,
the time and manner of exercise of options and exercise prices. The term of the
options granted under the 1999 stock option plan may not exceed ten years (five
years for an incentive stock option granted to an optionee owning more than 10%
of our voting stock).

The exercise price for incentive stock options will be equal to or greater than
100% of the fair market value of the shares of the common stock at the time
granted. However, the incentive stock options granted to a 10% holder of the
Company's voting stock are exercisable at a price equal to or greater than 110%
of the fair market value of the common stock at the date of the grant. The
exercise price for non-qualified options will be set by the board, in its
discretion, but in no event shall the exercise price be less than 75% of the
fair market value of the shares of common stock on the date of grant. The
exercise price may be payable in cash or, with the approval of the board, by
delivery of shares or a combination of cash and shares. Shares of common stock
received upon exercise of options will be subject to restrictions on sale or
transfer.

2001 Equity Compensation Plan
-----------------------------

On November 26, 2001, the board of directors adopted the Company's 2001 Equity
Compensation Plan (the "2001 Plan"). The Company has reserved 2,000,000 shares
of the Company's common stock. The purpose of the 2001 Plan is to provide
designated employees, certain key advisors who perform services for the Company,
and non-employee board members with the opportunity to receive grants of
incentive stock options, nonqualified stock options and restricted stock. The
Company believes that the Plan will encourage the participants to contribute
materially to the growth of the Company, thereby benefiting the Company's
shareholders. The Plan will be administered by the Company's board of directors
or a committee appointed by the board. Subject to the provisions of the stock
option plan, the board of directors or its appointed committee shall have the
sole authority to determine the individuals to whom grants shall be made, the
type, size and terms of the grants to be made to each individual. In addition,
the board or its appointed committee will determine the time when the grants
will be made and the duration of grants including exercise or restrictions and
criteria for exercisability.

                                      F-27
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock Options (continued)
--------------------------------

The term of the options granted under the 2001 Plan may not exceed ten years
(five years for an incentive stock option granted to an optionee owning more
than 10% of our voting stock). The exercise price for incentive stock options
may be equal to or greater than the fair market value of the shares of the
common stock at the time granted. However, the incentive stock options granted
to a 10% holder of the Company's voting stock are exercisable at a price equal
to or greater than 110% of the fair market value of the common stock at the date
of the grant. In the case of an option granted that qualifies as performance
based compensation, the exercise price may not be less than 100% of the fair
market value of the Company's stock on the date of grant. The exercise price for
non-qualified options granted to non-employee directors shall equal 100% of the
fair market value of the Company's common stock at the date of grant. The
exercise price may be payable in cash or, with the approval of the board, by
delivery of shares or a combination of cash and shares. Shares of common stock
received upon exercise of options will be subject to restrictions on sale or
transfer.

In 2004, the Company cancelled 1,780,000 that were not exercised prior to
expiration or termination of employment from employees or were cancelled by the
Company.

On December 30, 2004, the Company granted options to purchase 1,520,000 shares
of common stock to employee and directors of the Company. The options are
exercisable at $0.19 per share, which was greater than the fair market value of
the common stock at the grant date. Accordingly, under APB 25, no compensation
expense was recognized.

On May 13, 2005, the Company granted options to purchase 450,000 shares of
common stock to employee and directors of the Company. The options are
exercisable at $0.20 per share, which was greater than the fair market value of
the common stock at the grant date. Accordingly, under APB 25, no compensation
expense was recognized.

On September 2, 2005, the Company granted options to purchase 1,000,000 shares
of common stock to employee and directors of the Company. The options are
exercisable at $0.22 per share, which was greater than the fair market value of
the common stock at the grant date. Accordingly, under APB 25, no compensation
expense was recognized.

                                      F-28
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock Options (continued)
--------------------------------

On September 28, 2005, the Company granted options to purchase 250,000 shares of
common stock to various individuals serving on the Company's Science and
Security Advisory board for a period of one year. The options are exercisable at
$0.35 per share for a period of three years. These options were valued at
$69,935 to be amortized over the 12-month terms, beginning October 1, 2005. For
the year ended December 31, 2005, the Company recorded stock-based consulting
expense of $17,484 and deferred compensation of $52,451 which will be amortized
over the remaining term. The fair market value of each stock option grant is
estimated on the date of grant using the Black-Scholes option-pricing model in
accordance with SFAS No. 123 using the following weighted-average assumptions:
expected dividend yield 0%, risk-free interest rate of 3.75%, volatility of 144%
and expected term of 3 years.

On September 28, 2005, the Company granted options to purchase 400,000 shares of
common stock to an employee of the Company. The options are exercisable as
follows: 100,000 options at $.40 per share, 100,000 options at $.50 per share,
100,000 options at $.60 per share, and 100,000 options at $.70 per share. The
exercise prices were greater than the fair market value of the common stock at
the grant date. Accordingly, under APB 25, no compensation expense was
recognized for these options. Additionally, the Company granted options to
purchase 100,000 shares of common stock to this employee with an exercise price
of $.30 per share which was less than the fair market value of the common stock
at the grant date. Accordingly, in connection with these options, the Company
recorded stock-based compensation of $5,000 during the year ended December 31,
2005 under the intrinsic value method of APB 25.

On October 1, 2005, the Company entered into a one-year consulting agreement and
granted options to purchase 200,000 shares of common stock to a consultant for
business development services. The options are exercisable at $0.40 per share
and expire on October 1, 2010. These options were valued at $60,341 to be
amortized over the 12-month terms, beginning October 1, 2005. For the year ended
December 31, 2005, the Company recorded stock-based consulting expense of
$15,085 and deferred compensation of $45,256 which will be amortized over the
remaining term. The fair market value of each stock option grant is estimated on
the date of grant using the Black-Scholes option-pricing model in accordance
with SFAS No. 123 using the following weighted-average assumptions: expected
dividend yield 0%, risk-free interest rate of 3.75%, volatility of 144% and
expected term of 5 years.

                                      F-29
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock Options (continued)
--------------------------------

A summary of the stock options as of December 31, 2005 and 2004 and changes
during the periods is presented below:
<TABLE>
<CAPTION>
                                            Year Ended December 31, 2005      Year Ended December 31, 2004
                                           ------------------------------    ------------------------------
                                            Number of    Weighted Average     Number of    Weighted Average
                                             Options      Exercise Price       Options      Exercise Price
                                           ----------    ----------------    ----------    ----------------
<S>                                        <C>                 <C>           <C>                 <C>
Balance at beginning of year .....          2,085,000          $0.35          2,345,000          $0.56
Granted ..........................          2,400,000           0.30          1,520,000           0.22
Exercised ........................                  -           -                     -           -
Forfeited ........................            (40,000)          0.39         (1,780,000)          0.53
                                           ----------          -----         ----------          -----
Balance at end of year ...........          4,445,000          $0.32          2,085,000          $0.35
                                           ==========          =====         ==========          =====

Options exercisable at end of year          4,445,000          $0.32          2,085,000          $0.35
                                           ==========          =====         ==========          =====

Weighted average fair value of
options granted during the year ..                             $0.30                             $0.22
</TABLE>

The following table summarizes information about employee stock options
outstanding at December 31, 2005:
<TABLE>
<CAPTION>
                             Options Outstanding                        Options Exercisable
               ----------------------------------------------     ------------------------------
                                      Weighted
                                       Average       Weighted                           Weighted
 Range of           Number           Remaining       Average           Number            Average
 Exercise        Outstanding at      Contractual     Exercise      Exercisable at       Exercise
  Price        December 31, 2005        Life           Price      December 31, 2005      Price
----------     -----------------     -----------     --------     -----------------     --------
<C>                <C>               <C>              <C>             <C>                <C>
$0.69-0.79           625,000         1.40 Years       $ 0.72            625,000          $ 0.72
 0.50-0.60           200,000         2.75 Years         0.55            200,000            0.55
      0.40           300,000         3.75 Years         0.40            300,000            0.40
 0.30-0.35           350,000         2.75 Years         0.34            350,000            0.34
 0.22-0.27         1,500,000         3.40 Years         0.24          1,500,000            0.24
 0.19-.020         1,470,000         3.20 Years         0.19          1,470,000            0.19
               -----------------                     --------     -----------------     --------
                   4,445,000                          $ 0.323         4,445,000          $ 0.323
               =================                     ========     =================     ========
</TABLE>

                                      F-30
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock Warrants (continued)
---------------------------------

In April 2004, in connection with a private placement, the Company granted
600,000 purchase warrants to investors. The warrants are exercisable at $.20 per
common share and expire in April 2009.

In May and June 2004, in connection with a private placement, the Company
granted 2,450,000 purchase warrants to investors. The warrants are exercisable
at $.50 per common share and expire in May 2009.

On February 21, 2005, the Company granted 200,000 warrants to consultants for
services rendered. The warrants expire 3 years from the date of grant and are
exercisable at $0.30 per warrant. The Company valued these warrants utilizing
the Black-Scholes options pricing model at approximately $0.15 or $30,023 and
recorded stock-based consulting expense.

During June 2005 to September 30, 2005, in connection with a private placement
(See Note 3), the Company granted 669,500 purchase warrants to investors and
granted warrants to purchase 334,750 shares of common stock, as compensation to
the placement agent. The warrants are exercisable at $.16 per common share and
expire in five years.

On September 19, 2005, the Company granted warrants to purchase 3,500,000 shares
of common stock to a consultant for investor relation services for a period of
one year. The warrants are exercisable at $0.19 per share for a period of three
years. The warrants vest and become exercisable as follows: (i) 2,500,000
warrants vest and are immediately exercisable; and (ii) 1,000,000 warrants shall
vest and become exercisable on the earlier of (a) the date the Company has
received aggregate proceeds from the sale of debt or equity securities of not
less than $500,000 after September 19, 2005 or (b) March 18, 2006. The warrants
contain cashless exercise provisions and are subject to registration. These
warrants were valued at $755,100 to be amortized over the 12-month term,
beginning September 19, 2005. The fair market value of each stock warrant grant
is estimated on the date of grant using the Black-Scholes option-pricing model
in accordance with SFAS No. 123 using the following weighted-average
assumptions: expected dividend yield 0%, risk-free interest rate of 3.75%,
volatility of 144% and expected term of 3 years. Since 1,000,000 warrants are
earned over the term of the agreement and the measurement date in not known, the
Company has accounted for these under variable accounting pursuant to EITF
96-18. Accordingly, the Company will record at fair value the unearned warrants
each period through the term of the agreement.

                                      F-31
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)

Common Stock Warrants (continued)
---------------------------------

Stock warrant activity for the years ended December 31, 2005 and 2004 is
summarized as follows:
<TABLE>
<CAPTION>
                                            Year Ended December 31, 2005      Year Ended December 31, 2004
                                           ------------------------------    ------------------------------
                                            Number of    Weighted Average     Number of    Weighted Average
                                             Warrants     Exercise Price      Warrants      Exercise Price
                                           ----------    ----------------    ----------    ----------------
<S>                                        <C>                 <C>            <C>               <C>
Balance at beginning of year ......          9,682,590         $0.87          6,632,590         $1.06
Granted ...........................          4,704,250          0.19          3,050,000          0.44
Exercised .........................           (926,500)         0.185                 -           -
Forfeited .........................                  -           -                    -           -
                                           -----------         ------         ---------         -----
Balance at end of year ............         13,460,340         $0.67          9,682,590         $0.87
                                           ===========         ======         =========         =====

Warrants exercisable at end of year         12,460,340         $0.70          9,682,590         $0.87
                                           ===========         ======         =========         =====

Weighted average fair value of
options granted during the year ...                            $0.19                            $0.44
</TABLE>

The following table summarizes information about stock warrants outstanding at
December 31, 2005:
<TABLE>
<CAPTION>
                            Warrants Outstanding                       Warrants Exercisable
               ----------------------------------------------     ------------------------------
                                      Weighted
                                       Average       Weighted                           Weighted
 Range of           Number           Remaining       Average           Number            Average
 Exercise        Outstanding at      Contractual     Exercise      Exercisable at       Exercise
  Price        December 31, 2005        Life           Price      December 31, 2005      Price
----------     -----------------     -----------     --------     -----------------     --------
<C>                <C>               <C>              <C>             <C>                <C>
$0.50-0.55          2,926,300        3.15 Years       $ 0.52           2,926,300         $ 0.52
 1.25-1.50          5,026,290        1.07 Years         1.28           5,026,290           1.28
      0.30            200,000        2.14 Years         0.30             200,000           0.30
 0.10-0.19          5,307,750        3.90 Years         0.17           4,307,750           0.17
               -----------------                     --------     -----------------     --------
                   13,460,340                         $ 0.67          12,460,340         $ 0.70
               =================                     ========     =================     ========
</TABLE>

                                      F-32
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 12 - COMMITMENTS

Operating Lease
---------------

The Company leases office space on a month-to-month basis. Additionally, the
Company received rental income of $4,800 which has been netted with rent
expense. For the years ended December 31, 2005 and 2004, rent expense was
$54,591 and $56,546, respectively.

Cooperative Research and Development Agreement
----------------------------------------------

On November 7, 2005, the Company entered into a Cooperative Research and
Development Agreement ("CRADA") for the development of a hand-held sensor with
high sensitivity and selectivity for the detection of explosives initially and
then to expand the capabilities to include chemical and biological warfare
agents and narcotics. The Company has agreed to provide $150,000 within 30 days
after the effect day of the CRADA and additional payments as follows:

         60 days after effective date of CRADA               $65,000
         90 days after effective date of CRADA               $65,000
         120 days after effective date of CRADA              $65,000
         150 days after effective date of CRADA              $65,000
         180 days after effective date of CRADA              $65,000
         210 days after effective date of CRADA              $65,000
         240 days after effective date of CRADA              $49,000

Failure by the Company to provide the necessary advance funding is cause for
termination of the CRADA in accordance with the Termination article of this
CRADA.

Employment agreements
---------------------

On April 1, 2005, the Company entered into three-year employment contracts with
our Chief Executive Officer, Chief Financial Officer and Chief Technology
Officer which expire on April 1, 2008. Specific terms are detailed below:

         Pursuant to an employment agreement with the Company's chief executive
         officer (CEO), in consideration for services as CEO, effective April 1,
         2005, the Company will pay CEO a salary of $137,500 per annum through
         May 6, 2005 and $156,000 through May 7, 2006. In addition, CEO is
         provided a car allowance of up to $ 500 per month.

         Pursuant to an employment agreement with the Company's chief financial
         officer (CFO), in consideration for services as CFO, effective April 1,
         2005, we will pay Mr. Goldrich a salary of $137,500 per annum through
         May 6, 2005 and $156,000 through May 7, 2006. In addition, CFO is
         provided a car allowance of up to $ 500 per month.

         Pursuant to an employment agreement with the Company's chief technical
         officer (CTO), in consideration for services as CTO, effective April 1,
         2005, we will pay CTO a salary of $96,800 per annum.

                                      F-33
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 12 - COMMITMENTS (CONTINUED)

Employment agreements (continued)
---------------------------------

         Incentive Compensation

         In addition to the base salary, each of the Company's executives who
         have employment agreements with the Company are entitled to receive, as
         incentive compensation in respect of each calendar year (or portion
         thereof), an amount determined in accordance with any bonus or short
         term incentive compensation program (which may be based upon achieving
         certain specified performance criteria) which may be established by the
         board. The Company's Board of Directors shall review the determination
         as to the amounts of any awards available to our executives under these
         programs at least annually. The review shall ensure that such amounts
         are competitive, and comparable, with awards granted to similarly
         situated executives of publicly held companies comparable to the
         Company.

         Other Benefits

         The employment agreements with our executives also provide other
         benefits. Executives receive 10 paid vacation days and such other paid
         holidays in accordance with Sense's policy. In addition, they are
         compensated in accordance with Sense's disability policies. An
         executive may receive up to six (6) months salary continuation in the
         event of short-term disability. An executive may be granted permission
         to be absent from the Company during working days to attend
         professional meetings and to attend to such outside professional duties
         in the biometrics field as have been mutually agreed upon. Attendance
         at such approved meetings and accomplishment of approved professional
         duties shall be fully compensated service time and shall not be
         considered vacation time. We shall reimburse the executive for all
         expenses incurred by the executive incident to attendance at approved
         professional meetings and such entertainment expenses incurred by the
         executive in furtherance of the Company's interests, provided, however,
         that such reimbursement is approved by the Board of Directors. We pay
         dues to professional associations and societies and to such service
         organizations and clubs of which the executive is a member, which has
         been approved by the Board of Directors as being in the best interests
         of the Company. The executives receive all other fringe benefits to
         which all other employees of Sense are entitled.

                                      F-34
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 12 - COMMITMENTS (CONTINUED)

Employment agreements (continued)
---------------------------------

         Termination

         In the event of involuntary termination without "cause" or disability,
         each executive will be entitled to the following compensation for the
         succeeding 24 months following the date of termination:

         o  A total of two hundred (200%) percent of the executive's base
            compensation in effect on the date of the employment termination;
            plus

         o  A total of two hundred (200%) percent of the executive's annual
            incentive bonus earned on a quarterly basis as of the date of the
            termination, assuming the executive was employed on the last day of
            the quarter in which termination of employment occurred.

         In the event the executive is terminated for "cause" the executive will
         be entitled to any unpaid salary through the date of termination and
         deferred compensation will be forfeited. In the event there is a
         "Change in Control", we will be required to pay the executive a lump
         sum equal to 299% of the executive's base compensation in effect on the
         date of employment plus 299% of the executive's prior year incentive
         bonus. The executives may, at their discretion, elect to terminate the
         contract the executive must give the board 90 days written notice and
         the executive would not be entitled to severance benefits.


NOTE 13 - SUBSEQUENT EVENTS

On January 1, 2006, the Company entered into a stock exchange agreement with
UT-Battelle, LLC. In connection with this agreement, UT-Battelle, LLC returned
683,333 shares of common stock previously issued to the Company (see note 5) for
$150,000 in cash. The Company cancelled the returned shares.

On March 7, 2006, the Company completed a private placement of $2,451,000 of
financing of units of its securities consisting in the aggregate of 11,140,910
shares of its common stock and warrants to purchase 5,570,455 shares of common
stock. The warrants are exercisable at $0.35 per share for a term of five years.
The purchasers of the units are certain accredited investors. The net proceeds
from the transaction are being used to eliminate debt of the Company owing to
certain prior note holders and for working capital purposes. The prior note
holders have also agreed to convert an additional $142,500 principal amount of
such notes for 647,722 shares of common stock, which conversion is exempt from
registration by virtue of Section 3(a)(9) of the Securities Act of 1933.

                                      F-35
<PAGE>

                       SENSE HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)

The warrants are redeemable by the Company at any time following the first
anniversary of the completion of the transaction at a redemption price equal to
$0.05 per warrant share, provided the closing price of the Company's common
stock is in excess of $0.60 for 20 consecutive trading days on the date of the
notice of redemption, and further provided that the average daily trading volume
during this period is greater than 100,000 shares per day.

The securities are subject to "full ratchet" anti-dilution protection during the
initial nine months following the closing, including common stock of the Company
comprising the units and retained by the investor, as well as shares received
upon exercise of the warrants. Following the initial one year period, the
warrants are subject to "weighted-average" anti-dilution protection. There are
limited exceptions to the anti-dilution protection afforded to the investors.

The Company has agreed to file a registration statement covering the shares of
the common stock underlying the securities issued. In the event the registration
statement is not filed by May 7, 2006 or does not become effective by July 21,
2006, then the number of shares of common stock included within the units and
the number of common shares underlying the warrants shall be increased by 2% for
each 30-day period following such period.

Joseph Stevens & Company, Inc. served as placement agent for the transaction and
received a placement agent cash fee of $245,100. In addition, the placement
agent also received a non-accountable expense fee of $73,530. The placement
agent also received 2,451,000 shares of common stock as additional compensation
for serving as placement agent, and is entitled to receive a cash fee equal to
5% of the gross proceeds received by the Company upon exercise of the warrants
in compliance with NASD rules.

                                      F-36