Quarterly Report (10-q)

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

 

---

 

FORM 10-Q  

 

---

 

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

 

For the Quarterly Period Ended November 30, 2016

 

OR

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

 

For the Transition Period From                             to                           

Commission File Number: 000-29990

 

SENSE TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

British Columbia		90010141
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2535 N. Carleton Avenue Grand Island, Nebraska		68803
(Address of principal executive offices)		(Zip Code)

  

[phone]

(Registrant’s telephone number, including area code)

 

None

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

 

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

 

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

 

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

Large accelerated filer   ☐		Accelerated filer   ☐
Non-accelerated filer        ☐		Smaller reporting company   x

 

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

 

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

 

Class		Outstanding at May 5, 2017
Common Stock		16,185,289 shares

---

 

TABLE OF CONTENTS

Sense Technologies Inc. Form 10-Q

 

PART I-FINANCIAL INFORMATION		1
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS	1
	CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 30, 2016 (UNAUDITED) AND FEBRUARY 29, 2016	2
	CONSOLIDATED   STATEMENTS OF LOSSES FOR THE THREE AND NINE MONTHS  ENDED NOVEMBER 30, 2016 AND 2015 (UNAUDITED)	3
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2016 AND 2015 (UNAUDITED)	4
	STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE NINE MONTHS ENDED NOVEMBER 30, 2016 (UNAUDITED) AND THE YEAR ENDED FEBRUARY 29, 2016	5
	NOTES TO UNAUDITED FINANCIAL STATEMENTS	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	18
ITEM 4.	CONTROLS AND PROCEDURES	19
PART II-OTHER INFORMATION		20
ITEM 1.	LEGAL PROCEEDINGS	20
ITEM 1A.	RISK FACTORS	20
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	20
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	20
ITEM 4.	MINE SAFETY DISCLOSURES	20
ITEM 5.	OTHER INFORMATION	20
ITEM 6.	EXHIBITS	20
SIGNATURES		21

 

 

---

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

 

 

 

SENSE TECHNOLOGIES INC.

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOVEMBER 30, 2016

(Stated in US Dollars)

( Unaudited )

 

 

 

 

 

1

---

Table of Contents

SENSE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

As of   November 30, 2016 and February 29, 2016

(Stated in US Dollars)

		November 30				February 29
		2016				2016
		(Unaudited)
ASSETS
Current
Cash in bank		$	2,451			$	1,298
Accounts receivable			60,000				36,675
Inventory			386,263				-
Prepaids			66,351				12,970
Total Current Assets			515,065				50,943
Fixed Assets
Land – SNP			52,500				-
Leasehold Improvements – SNP			253,389				-
Building and fixtures - SNP			3,722,350				-
Furniture, fixtures and equipment – SNP			98,550				-
Accumulated depreciation – SNP			(28,400	)			-
Total fixed assets			4,098,389				-
Other Assets
Deposit			800				800
Goodwill – SNP			5,466,241				-
Total Other Assets			5,467,041				800
Total Assets		$	10,080,495			$	51,743
LIABILITIES
Current
Accounts payable		$	471,003			$	524,516
Accounts payable-related party			35,884				35,884
Accrued expenses			2,375,601				1,186,047
Accrued expenses-related party			70,811				70,811
Royalty payable – related party			480,000				480,000
Notes payable, current portion			2,322,861				1,190,006
Notes payable, current portion – default			234,734				168,184
Notes payable – related party			295,718				439,590
Advances payable			123,305				-
Advances payable – related entity			73,183				60,158
Dividends payable			447,974				424,281
Convertible promissory notes payable - default			584,447				584,447
Total Current Liabilities			7,515,521				5,163,924
Long-Term Liabilities
Convertible notes payable			800,000				-
Debt Discount			(739,360	)			-
Notes payable			730,432				-
Notes payable – related party			288,312				62,719
Total Long-Term Liabilities			1,079,384				62,719
Total Liabilities			8,594,905				5,226,643
STOCKHOLDERS’ DEFICIENCY
Class A preferred shares, without par value, redeemable at $1 per  share 20,000,000 shares authorized, 315,914 shares  issued at November 30, 2016 (February 29, 2016: 315,914)			315,914				315,914
Class B preferred shares, without par value, redeemable at $10 per share, 700,000 authorized, 700,000 shares issued at November 30, 2016 (February 29, 2016: 0)			5,460,000				-
Common stock, without par value 500,000,000 shares authorized, 16,185,289 shares issued at November 30, 2016 (February 29, 2016: 13,687,678)			16,683,352				15,914,794
Common stock payable			965,049				244,849
Additional paid-in capital			800,000				-
Accumulated Deficit			(22,738,725	)			(21,650,457	)
Total Stockholders’ Deficit			1,485,590				(5,174,900	)
Total Liabilities and Stockholders’ Deficit		$	10,080,495			$	51,743

 

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

2

---

Table of Contents

SENSE TECHNOLOGIES INC.

 CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended November 30, 2016 and 2015

 (Stated in US Dollars)

 (Unaudited)

		Three months ended								Nine months ended
		November 30,								November 30,
		2016				2015				2016				2015
Sales		$	326,394			$	103,995			$	383,394			$	222,483
Direct costs			119,042				15,776				173,470				88,784
Gross profit (loss)			207,352				88,219				209,924				133,699
Operating Expenses
Advertising and promotion			150				4,050				150				6,797
Consulting fees			263,774				66,185				610,738				133,185
Contract labor			1,500				3,000				7,500				9,000
Depreciation			28,400				-				28,400				-
Engineering costs			8,337				-				11,711				874
Filing fees			-				400				9,931				8,666
Insurance			19,024				10,666				42,561				30,904
Bank charges			973				6,415				2,828				7,581
Legal and accounting			(117,249	)			2,075				44,584				38,901
Loan fee			200				-				1,200				-
Office and miscellaneous			19,727				4,105				25,629				8,669
Payroll expenses			18,420				-				18,420				-
Public relations			-				30,000				3,500				30,000
Rent			5,380				2,860				11,750				10,161
Repairs and maintenance			450				-				450				-
Taxes and penalties			2,997				2,997				8,990				8,990
Telephone and utilities			2,828				133				3,113				454
Transfer agent fees			3,500				500				21,150				3,000
Travel and automotive			2,064				2,950				2,205				3,638
			260,475				136,336				854,810				300,820
Net operating loss			(53,123	)			(48,117	)			(644,886	)			(167,121	)
Other income and (expense)
Gain on write-off of accounts payable			37,690				-				37,690				-
Amortization of debt discount			(60,640	)			-				(60,640	)			-
Other expenses			(132,327	)			-				(132,327	)			-
Interest expense			(132,560	)			(44,453	)			(264,411	)			(149,887	)
			(287,837	)			(44,453	)			(419,688	)			(149,887	)
Net loss			(340,960	)			(92,570	)			(1,064,574	)			(317,008	)
Preferred dividends, paid or accrued			7,898				7,898				23,694				23,694
Net loss attributable to common stockholders		$	(348,858	)		$	(100,468	)		$	(1,088,268	)		$	(340,702	)
Basic and diluted loss per share		$	(0.02	)		$	(0.00	)		$	(0.07	)		$	(0.00	)
Weighted average number of shares outstanding			15,597,157				13,533,649				14,816,465				13,177,678

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

 

3

---

Table of Contents

 

SENSE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended November 30, 2016 and 2015

(Stated in US Dollars)

(Unaudited)

		2016				2015
Operating Activities
Net loss for the period		$	(1,064,574	)		$	(317,008	)
Adjustments to reconcile net loss to net cash used in Operating activities:
Depreciation			28,400				-
Amortization of debt discount			60,639				960
Common shares issued for services			205,958				30,000
Changes in non-cash working capital balances related to operations:
Accounts Receivable			(23,325	)			(10,500	)
Inventory			15,616				-
Prepaids			(53,381	)			3,696
Accounts payable			(53,513	)			(45,170	)
Accrued expenses			139,445				111,296
Advances payable			136,330				(59,600	)
Net cash used in operating activities			(608,405	)			(286,326	)
Investment Activities
Acquisition of R&D USA, LLC			(800,000	)			-
Net cash used in investment activities			(800,000	)			-
Financing Activities
Borrowing on notes payable			1,079,469				187,635
Repayment on notes payable			(172,711	)			(106,309	)
Proceeds from common stock issued and payable for cash			502,800				205,000
Net cash provided by financing activities			1,409,558				286,326
Increase (decrease) in cash during the period			1,153				-
Cash, beginning of period			1,298				-
Cash, end of period		$	2,451			$	-
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest		$	60,365			$	25,120
Stock Issued from Common Stock Payable		$	309,000			$	220,000
Stock Issued for Inducement		$	-			$	960
Non-Cash Disclosures of Cash Flow Information:
Accrual of Preferred Stock Dividend		$	23,694			$	23,694
Discount on convertible notes payable		$	800,000			$	-

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS

 

4

---

Table of Contents

SENSE TECHNOLOGIES, INC.

STATEMENT OF STOCKHOLDERS’ DEFICIT

For the nine months ended November 30, 2016 and year end February 29, 2016

(Stated in US Dollars)

		Common Stock								Preferred Stock Class A								Preferred Stock Class B								Common				Additional
		Issued								Issued								Issued								Stock				Paid-In				Accumulated
		Shares				Amount				Shares				Amount				Shares				Amount				Payable				Capital				Deficit				Total
Balance, February 28, 2015			12,704,345			$	15,619,794				315,914			$	315,914				-			$	-			$	244,889			$	-			$	(21,047,354			$	(4,866,757	)
Common stock issued for cash			150,000				45,000				-				-				-				-				-				-				-				45,000
Common stock issued for subscription			733,333				220,000				-				-				-				-				(220,000	)			-				-				-
Common stock issued for services			100,000				30,000				-				-				-				-				-				-				-				30,000
Common shares subscribed			-				-				-				-				-				-				219,000				-				-				219,000
Common shares payable for inducement			-				-				-				-				-				-				960				-				-				960
Dividends accrued			-				-				-				-				-				-				-				-				(31,591				(31,591	)
Net loss			-				-				-				-				-				-				-				-				(571,512				(571,512	)
Balance, February 29, 2016			13,687,678				15,914,794				315,914				315,914				-				--				244,849				-				(21,650,457				(5,174,900	)
Common and Preferred stock issued for R&D USA, LLC			-				-				-				-				700,000				5,460,000				780,000				-				-				6,240,000
Common stock issued for cash			916,667				282,800				-				-				-				-				-				-				-				282,800
Common stock issued for subscription			1,030,001				309,000				-				-				-				-				(309,000	)			-				-				-
Common shares issued for services			551,000				176,758				-				-				-				-				29,200				-				-				205,958
Common shares subscribed			-				-				-				-				-				-				220,000				-				-				220,000
Rounding shares issued			(57	)			-				-				-				-				-				-				-				-				-
BCF on convertible notes payable			-				-				-				-				-				-				-				800,000				-				800,000
Dividends accrued			-				-				-				-				-				-				-				-				(23,694				(23,694	)
Net loss			-				-				-				-				-				-				-				-				(1,064,574				(1,064,574	)
Balance, November 30, 2016 (unaudited)			16,185,289			$	16,683,352				1,015,914			$	5,775,914				700,000			$	5,460,000			$	965,049			$	800,000			$	(22,738,725			$	1,485,590

 

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS 

5

---

Table of Contents

SENSE TECHNOLOGIES, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which assumes that Sense Technologies, Inc. and it’s wholly-owned subsidiary, Sense Natural Products, Inc. (the Company) will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values August be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

While the information presented in the accompanying nine months to November 30, 2016 financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these interim unaudited financial statements be read in conjunction with the Company’s audited financial statements for the year ended February 29, 2016.

Reclassification

 

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

Recently Adopted and Recently Enacted Accounting Pronouncements

 

In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) (“ASU 2015-16”). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

NOTE 2 – GOING CONCERN

 

At November 30, 2016, the Company had not yet achieved profitable operations, had an accumulated deficit of $22,738,725 (February 29, 2016 - $21,650,457) since its inception and incurred a net loss of $1,064,574 (2015 - $317,008) for the nine months ended November 30, 2016 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers obtaining additional funds by equity financing and/or from related party. Management expects the Company’s cash requirement over the twelve-month period ended February 28, 2017 to be $300,000. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.

6

---

Table of Contents

NOTE 3 – PREPAID EXPENSES

 

As of November 30, 2016, included in prepaid expenses $66,351 (February 29, 2016: $12,970) is $25,063 for an insurance premium for the directors of the Company financed through AFCO.  Insurance policy is from August 23, 2016 to August 23, 2017.

Prepaid insurance of $39,100 for an insurance premium for the directors of Company, insurance policy is from September, 2017 to September, 2018 and $2,188 for utilities paid for December 2016. 

NOTE 4 – FIXED ASSETS

The following is a summary of this category, including estimated useful lives of the assets:

		November 30, 2016				November 30, 2015
Land		$	52,500			$	-
Leasehold improvements (7yrs)			253,389				-
Building and fixtures (7yrs)			3,722,350				-
Furniture, fixtures and equipment (7yrs)			98,550				-
Subtotal			4,126,789				-
Less: Accumulated Depreciation			(28,400	)			-
Total		$	4,098,389			$	-

NOTE 5 – INTANGIBLES

Intangible assets are comprised of Goodwill in the amount of $5,466,241 as part of the consideration for the acquisition of the soy meal business assets as described in Note 13.

NOTE 6 – ACCRUED EXPENSES/ACCRUED EXPENSES – RELATED PARTY

 

Other liabilities and accrued expenses consisted of the following:

 

		November 30,				February 29,
		2016				2016
Accounts payable		$	471,003			$	524,516
Accounts payable – related party			35,884				35,884
Accrued royalties payable – Guardian Alert			480,000				480,000
Detail of Accrued Expenses:
Accrued interest payable			1,153,060				952,872
Accrued non-resident withholding taxes, including accrued interest			201,119				193,556
Accrued taxes payable			37,796				39,619
Accrued payroll liabilities			3,212				-
Accrued cash loan fees			157,500				-
Customer liability – FC Stone			822,914				-
Total accrued expenses		$	2,375,601			$	1,186,047
Detail of Accrued Expense – Related party:
Accrued payroll – related party			53,694				53,694
Other accrued liabilities – related party			17,117				17,117
Total accrued expenses – related party		$	70,811			$	70,811

 

As of November 30, 2016, included in the related party payables is $33,495 (February 29, 2016: $33,495) and $2,389 (February 29, 2016: $2,389) owing to directors of the Company, an accounting firm in which a director of the Company is a partner and a company controlled by the Company’s President and a director with respect to unpaid fees, purchases and expenses, $480,000 (February 29, 2016: $480,000) owing to stockholders of the Company in respect of royalties payable and $53,694 (February 29, 2016: $53,694) owing to the former president of the Company in respect of unpaid wages.

 

At November 30, 2016, advances payable of $73,183 (February 29, 2016: $60,158) are due to a company controlled by a director of the Company.  

7

---

Table of Contents

The accounts payable and advances payable are unsecured, non-interest bearing and have no specific terms of repayment. Sense Technologies, Inc. plans to use the funds from sales, and if we are able to raise funds through equity issuances, to fund the payment of delinquent liabilities.

 

NOTE 7 – ROYALTIES PAYABLE

Pursuant to the licenses with ScopeOut® license called for $150,000 to be paid over two years (paid) along with a royalty of 10% of wholesale price for each ScopeOut® unit sold, but not less than $2.00 per unit. In order to maintain the exclusive license for the ScopeOut® products, in accordance with the license agreement with Palowmar Industries, LLC, we are required to pay royalties to the licensor based on the following minimum quantities of units sold:

 

a)

30,000 units per year beginning in years 1-2

b)

60,000 units per year beginning in years 3-4

c)

100,000 units per year beginning in years 5 and above.

During 2010, the Company re-negotiated the exclusive license agreement with the Scope Out® inventor. All prior minimum royalties were eliminated, and accordingly, the Company recorded $602,907 additional capital for a related party write-off.

Prepaid royalties payable under the new license are $5,000 per month for twelve months commencing September 1, 2010. The new agreement also calls for a 5% royalty with a $.75 per unit maximum “minimum royalty” to retain exclusivity with the following volumes:

 

End of calendar year containing the second anniversary:	30,000 units
End of calendar year containing the third anniversary:	60,000 units
End of calendar year containing the fourth anniversary:	110,000 units
End of calendar year containing the fifth anniversary and thereafter:	125,000 units

 

No royalties are currently accrued as we have not yet reached the end of the calendar year containing the second anniversary.

Such “calendar year” commencing the minimum royalties to retain exclusivity is the first year within which an Original Equipment Manufacturer (OEM) and/or Tier 1 manufacturer sub-licenses the Scope Out® product.

For any sub-licenses of the product, royalties are shared as follows:

 

	OEM/Tier 1 Supplier Sub Licensor:	65% Sense Technologies
		35% Inventor
	Any other Sub-Licensor:	50% Sense Technologies
		50% Inventor

 

The current royalties accrued for Scope Out royalties are $nil as of November 30, 2016 and February 29, 2016.

 

Pursuant to the Guardian Alert licenses, we are required to make royalty payments to the licensors and meet sales targets as follows:

 

a)

$6.00(US) per unit on the first one million units sold;

b)

thereafter, the greater of $4.00(US) per unit sold or 6% of the wholesale selling price on units sold; and

c)

50% of any fees paid to Sense in consideration for tooling, redesign, technical or aesthetic development or, should the licensors receive a similar fee, the licensors will pay 50% to Sense.

In order to retain the exclusive right to this license we incurred minimum royalty fees. Because we were unable to pay these fees, we accrued the royalties as a payable. Royalties accruals were ceased in 2004 and rights of exclusivity were forfeited. Royalties payable to Guardian Alert are $480,000 and $480,000 as of November 30, 2016 and February 29, 2016, respectively.

 

8

---

Table of Contents

NOTE 8 – NOTES PAYABLE, CONVERTIBLE NOTES PAYABLE, AND NOTES PAYABLE – RELATED PARTY

 

		November 30,				February 29,
		2016				2016
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due February 23, 2018 and January 7, 2018.		$	282,029			$	282,029
Promissory notes payable to related party, unsecured, bearing interest at the rate of 12% per annum with repayment between December, 2016 and December, 2017.			439,590				439,590
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due February 23, 2018.			20,057				20,057
Promissory notes payable, unsecured, bearing interest at the rate of 12% per annum with repayment due March 30, 2012.  In default.			10,000				10,000
Finance agreement on directors’ and officers’ liability policy secured by the unearned insurance premium, bearing interest at 7.75%, maturing June 23, 2016.  This agreement is repayable in monthly principal and interest payments of $2,174.			-				6,574
Finance agreement on directors and officers liability policy, bearing interest at 7.75% per annum, due December 2016.			710				-
Promissory note payable, unsecured, bearing interest at the rate of 5.25% per annum, due in December 2007. In default.			100,000				100,000
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing January 26, 2018.			59,500				59,500
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing June 1, 2014.  In default.			54,734				54,734
Promissory note payable, unsecured, bearing interest at the rate of 7% per annum, maturing July 27, 2017.			50,000				50,000
Promissory note payable, unsecured, bearing interest at the rate of 5.5% per annum, maturing between May, 2017 and October, 2017.			165,000				65,000
Promissory note payable, personally guaranteed by a director of the Company, bearing interest at 4.0% per annum and maturing August 27, 2018.			44,440				62,719
Promissory note payable, unsecured, bearing interest at the rate of 7% per annum, maturing June 4, 2016 and July 17, 2017. In default, $20,000.			30,000				30,000
Promissory note payable, unsecured, bearing interest at the rate of 5.5% per annum, maturing December 24, 2017.			25,000				25,000
Promissory note payable, unsecured, bearing interest at the rate of 5.5% per annum, maturing between October, 2016 and October, 2017.  In default, $50,000.			165,000				165,000
Promissory note payable, unsecured, bearing interest at the rate of 6% per annum, maturing August 8, 2017.			-				35,000
Promissory note payable, unsecured, bearing interest at the rate of 12% per annum, maturing between June and December, 2017.			130,000				133,450
Promissory note payable, unsecured, bearing interest at the rate of 12% per annum with repayment due February 23, 2017.			313,846				313,846
Promissory note payable, unsecured, bearing interest at the rate of 10% per annum with repayment due between January and August, 2017.			18,350				-
Finance agreement on directors’ and officers’ liability policy secured by the unearned insurance premium, bearing interest at 7.05%, maturing June 23, 2017.  This agreement is repayable in monthly principal and interest payments of $2,437.			18,712				-
Finance agreement on directors and officers liability policy, bearing interest at 7.75% per annum, due July 2017.			32,289				-
Promissory note payable, secured by the Scribner Nebraska Plant, bearing interest at the rate of 12% per annum with repayment due September 8, 2019.			400,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, bearing interest at the rate of 12% per annum with repayment due September 8, 2019			338,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, bearing interest at the rate of 12% per annum with repayment due September 8, 2019			62,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			25,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			13,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due July 1, 2017.			592,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			28,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			15,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			136,100				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 7, 2017.			7,500				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			17,500				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 1, 2017.			13,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 1, 2017.			73,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with no repayment date.			51,700				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.			130,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.			75,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 7, 2017.			15,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			35,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.			20,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due August 31, 2017.			311,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due July 1, 2017.			311,000				-
Promissory note payable, secured by the Scribner Nebraska Plant, accruing interest with repayment due June 30, 2017.			36,000				-
Promissory note payable, no stated interest or maturity date			8,000				8,000
			4,672,057				1,860,499
Less: current portion			(2,853,313	)			(1,797,780	)
Long-term portion		$	1,818,744			$	62,719

 

9

---

Table of Contents

At November 30, 2016, the Company is in arrears with respect to five of the above notes payable totaling $234,734.

		November 30, 2016				February 29, 2016
Convertible notes payable:
Series B secured promissory notes payable, secured by a charge over the Company’s inventory, bearing interest at 10% per annum and are payable on demand, along with accrued interest thereon, on or after August 30, 2005. These notes plus accrued interest August be redeemed at any time after August 30, 2005. These notes August be converted into common shares of the Company at any time prior to demand for payment at the rate of one common share for each $0.29 of principal and interest owed. As of February 28, 2014 and February 28, 2013, these notes were in default.		$	534,447			$	534,447
Unsecured promissory notes bearing interest at 10% per annum. These notes plus accrued interest are convertible into common shares of the Company at the rate of one common share for each $5.40 of principal and interest owed. These notes have matured and the holders thereof have received default judgments against the Company.			50,000				50,000
		$	584,447			$	584,447

At November 30, 2016, the Company is in arrears with respect to nine convertible notes payable totaling $584,447.

 

Future minimum note payments as of November 30, 2016 are as follows:

 

Years Ending February 28,
2017		$	2,330,193
2018			914,331
2019			901,600
Thereafter			525,933
Total		$	4,672,057

 

NOTE 9 – PREFERRED STOCK

The Class A preferred shares entitle the holders thereof to cumulative dividends of $0.10 per share annually and the right to convert the preferred shares into common shares at the rate of $0.29 per share. The shares were redeemable at the option of the Company at any time after August 30, 2005 at the redemption price of $1.00 per share plus payment of unpaid dividends.

Dividends on Class A preferred shares are payable annually on July 31 of each year. During the nine months ended November 30, 2016, the Company accrued dividends payable of $23,694 (February 29, 2016: $31,591). Dividends are currently accruing and total $ 447,974 .

The Company issued 700,000 Class B preferred stock as part of the consideration for the acquisition of the soy meal business assets as described in Note 13.

The Class B preferred shares may be redeemed in part or in whole by the Corporation at is sole option, at any time after September 7, 2016.  Redemption of the Class B preferred shares by the Corporation will be made pro-rata to the holders thereof, at a redemption price of $10 per Class B preferred shares.  The shares are convertible into common shares at the rate of 20 common shares for each $10 Class B preferred share at any time by election of the preferred shares holders.  Holders of the Class B preferred shares shall be entitled to currently vote based upon the common share equivalence.

NOTE 10 – COMMON STOCK

a)            Common stock issued for cash

During the nine months ended November 30, 2016, the Company received $220,000 of common stock subscribed in common stock payable for 770,334 shares.  During the nine months ended November 30, 2016, the Company issued 916,667 shares of common stock for cash proceeds of $282,800.  During the nine months ended November 30, 2016, the Company issued 1,030,001 shares of common stock from stock payable totaling $309,000.

During the year ended February 29, 2016, the Company issued 150,000 shares of common stock for cash proceeds of $45,000.  As of February 29, 2016, there were be 730,000 shares valued at $219,000 subscribed but not issued.

10

---

Table of Contents

The Company issued promissory notes with stock granted as an incentive.  The stock was valued with relative fair value of common stock compared to fair market value of debt, common stock valued with closing price on date of agreement at $0.02. $960 recorded as a debt discount.  As the debt was due on demand, the discount was fully expensed in the first quarter ended May 31, 2015.   

The Company issued 396,667 shares of common stock for cash proceeds of $119,000 which was received in prior years and was initially record in in stock issued from stock payable as of February 29, 2016.

The Company issued 733,333 shares of common stock for cash proceeds of $220,000 which was received in prior years and was recorded as Common Stock Payable at February 28, 2015.

b)            Common stock for services

 

During the year ended February 29, 2008, the Company granted an officer and a director of the Company to the right to receive 2,500,000 common shares for past services provided. The fair value of each common share was $0.08 on the grant date. The shares, fully vested and non-forfeitable on the grant date, were issued in 2009. This balance is presented as Common Stock as of February 28, 2010. Further, in connection with a consulting services agreement, the Company also committed to issue 1,111,110 common shares with fair value of $88,889, being $0.08 per share based on the quoted market price of the Company’s common shares. This balance is presented as Common Stock Payable as of November 30, 2016 and February 29, 2016.

During the nine months ended November 30, 2016, the Company issued 495,000 common shares for consulting services and 56,000 common shares for interest expense and $29,200 of common stock payable for services. The fair value of each common share was $0.30 based on the closing trading price on the issue date and was recorded as consulting expense of $205,958.

During the year ended February 29, 2016, the Company issued 100,000 common shares for consulting services. The fair value of each common share was $0.30 based on the closing trading price on the grant date and was recorded as consulting expense of $30,000.

The Company issued 1,000,000 shares of common stock valued at $780,000 as part of the consideration for the acquisition of the soy meal business assets as describe in Note 13.

c)    Common stock rounding shares

On April 21, 2016, the Company completed a 10-for-one reverse split of its issued and outstanding shares of common stock.  Shares were rounded down 57 shares because of this split.

 d)           Options

 

Stock-based Compensation Plan

 

The Company has adopted a Stock Option Plan (‘the plan”) in which the Compensation Committee of the Board of Directors makes a determination to whom options should be granted and at what price and their terms of vesting.

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. For employees, the compensation expense is amortized on a straight-line basis over the requisite service period which approximates the vesting period. Compensation expense for stock options granted to non-employees is amortized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model.

The expected volatility of options granted has been determined using the historical stock price. The Company uses historical data to estimate option exercise, forfeiture and employee termination within the valuation model. For non-employees, the expected term of the options approximates the full term of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. Based on the best estimate, management applied the estimated forfeiture rate of Nil in determining the expense recorded in the accompanying Statement of Loss.

 

11

---

Table of Contents

The Company has granted directors common share purchase options. These options were granted with an exercise price equal to the market price of the Company’s stock on the date of the grant.

	November 30, 2016
	Options				Weighted Average Exercise Price
Outstanding and exercisable at beginning of the year			300,000			$	0.40
Issued during the year			-				-
Outstanding and exercisable, November 30, 2016			300,000			$	0.40

 

	February 29, 2016
	Options				Weighted Average Exercise Price
Outstanding and exercisable at beginning of the year			300,000			$	0.40
Issued during the year			-				-
Outstanding and exercisable, February 29, 2016			300,000			$	0.40

At November 30, 2016, the following director common share purchase options were outstanding entitling the holders thereof the right to purchase one common share for each share purchase option held:

			Exercise
Number			Price				Expiry Date
	300,000			$	0.30		December 31, 2016

 

d)            Warrants

As of November 30, 2016 and February 29, 2016, the Company had no outstanding warrants .

 

NOTE 11 – RELATED PARTY TRANSACTIONS

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

	November 30,
	2016				2015
Interest expense		$	26,375			$	26,375

As of November 30, 2016, included in accounts payable is $33,495 (February 29, 2016: $33,495) owing to an accounting firm in which a director of the Company is a partner and $2,389 (February 29, 2016: $2,389) to a shareholder with respect to unpaid fees and interest on promissory notes, $480,000 (February 29, 2016: $480,000) owing to shareholders of the Company in respect of royalties payable with no interest accruing, and $53,694 (February 29, 2016: $53,694) owing to the former president of the Company in respect of unpaid wages.

As of November 30, 2016, included in advances payable is $73,183 (February 29, 2016: $60,158) owed to a company controlled by a director.

As of November 30, 2016, promissory notes payable of $439,590 (February 29, 2016: $439,590 is due to a profit-sharing and retirement plan administered by a director of the Company.  Terms are:

Date Due:		Amount
August, 2016		$	12,500
April, 2016			15,000
November, 2016			27,500
December, 2016			384,590
Total		$	439,590

 

All bear interest at 12% per annum.

As of November 30, 2016, promissory note payable of $44,440 (February 29, 2016: $62,719) is personally guaranteed by a related party of the director of the company.

12

---

Table of Contents

NOTE 12 – CONCENTRATIONS AND CONTINGENCIES

Concentrations

Approximately 100% of the Company’s revenues for Guardian Alert are obtained from one (1) customer. The Company is exposed to significant sales and accounts receivable concentration. Sales to these customers are not made pursuant to a long term agreement. Customers are under no obligation to continue to purchase from the Company.

For the nine months ended November 30, 2016, one (1) customer accounted for approximately 100% of Guardian Alert revenue. For the nine months ended November 30, 2015, there were two (2) customer that accounted for 99% of Guardian Alert revenue.

 

Contingencies

During the normal course of business we from time to time be involved in litigation or other possible loss contingencies. As of November 30, 2016 and November 30, 2015 management is not aware of any possible contingencies that would warrant disclosure pursuant to SFAS 5.

Commitments

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

A 5% royalty with a $.75 per unit maximum “minimum royalty” to retain exclusivity with the following volumes:

 

End of calendar year containing the second anniversary:	30,000 units
End of calendar year containing the third anniversary:	60,000 units

 

NOTE 13 – SOY MEAL ACQUISITION

On September 7, 2016, the Company entered into a final agreement with R and D, USA, LLC for the acquisition of the business assets comprising R and D USA, LLC’s means of production of soy meal and soy oil products and non-GMO soy products, certified organic soy products, refined soy oils, agricultural soy oils, and other related specialty soy based soil enhancer crop products, including all intellectual and intangible property related thereto.

It immediately transferred these assets into its newly created wholly-owned subsidiary, Sense Natural Products, Inc.

The acquisition was accounted for as a business combination and we valued all assets and liabilities acquired at their fair value on the date of acquisition.  An independent valuation expert assisted us in determining these fair values.  The assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition.

The allocation of the purchase price to assets and liabilities based upon fair value determinations was as follows:

Inventory		$	401,879
Land			52,500
Leasehold Improvements			253,389
Buildings and Fixtures			3,722,350
Furniture and Equipment			98,550
Goodwill			5,466,241
Total assets acquired			9,994,909
Liabilities assumed			(2,954,909	)
Net assets acquired		$	7,040,000

The purchase price consists of the following:

Cash paid		$	800,000
Common stock at closing and upon operation			780,000
Preferred stock at closing			5,460,000
Total purchase price		$	7,040,000

The following information presents unaudited pro forma consolidation results of operations for the nine months ended November 30, 0216 and the year ended February 29, 2016, as if the acquisition described above had occurred on the March 1, 2016 and March 1, 2015.  The pro forma financial information is not necessarily indicative of the operating results that would have occurred if the acquisition been consummated as of the date indicated, nor are they necessarily indicative of future operating results.

13

---

Table of Contents

Proforma financials for the nine months ended November 30, 2016:

		Sense Technologies Inc				R&D USA LLC				Pro Forma Combined
Sales			147,000			$	669,740				816,740
Direct Costs			38,416				288,054				326,470
Gross Profit			108,584				381,686				490,270
Operating Expenses			794,123				79,358				873,481
Net Operating Income (Loss)			(685,539	)			302,328				(383,211	)
Other Income (Expenses)			(155,523	)			(264,165	)			(419,688	)
Net Income (Loss)			(841,062	)			38,163				(802,899	)

Proforma financials for the year ended February 29, 2016:

		Sense Technologies Inc				R&D USA LLC				Pro Forma Combined
Sales			318,318				1,889,605				2,207,923
Direct Cost			111,868				1,304,354				1,416,222
Gross Profit			206,450				585,251				791,701
Operating Expenses			451,853				167,408				619,261
Net Operating Income (Loss)			(245,403	)			417,843				172,440
Other Income (Expenses)			(326,109	)			59,144				(266,965	)
Net Income (Loss)			(571,512	)			476,987				(94,525	)

NOTE 14 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through May 5, 2017, the date of which the financial statements were available to be issued.

14

---

Table of Contents

Management’s Discussion And Analysis

Sense Technologies Inc. Form 10-Q

 

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

The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto for the period ended November 30, 2016 and our Financial Statements and notes thereto for the period ended November 30, 2015.

1.           Overview of Operations

 

Sense holds a non-exclusive license to manufacture, distribute, market and sublicense world-wide, a patented technology which is used to produce the Guardian Alert® backing awareness system for motor vehicles utilizing microwave radar technology.  The Company assembles the product in Charlotte, NC.  The company also holds a non-exclusive license to manufacture, distribute, market and sublicense world-wide, the ScopeOut® product, a patented system of specially-designed mirrors which are placed at specific points on vehicles to offer drivers a more complete view of the blind spots toward the rear of the vehicle.  This product is manufactured in China through an outsourced vendor.

2.           Results of Operations

For the three and nine month period ended November 30, 2016 as compared to the three and nine month period ended November 30, 2015.

	For the three months ended								For the nine months ended
	November 30, 2016				November 30, 2015				November 30, 2016				November 30, 2015
Sales
Sales Guardian Alert			90,000				103,995				147,000				222,483
Sales Scope Out			-				-				-				-
Sales Soy Product			236,394				-				236,394				-
			326,394				103,995				383,394				222,483

Sales for the nine months ended November 30, 2016 decreased by 34% from $222,483 to $147,000 due to decreased demand for Guardian Alert.  Revenue is recognized by management only upon receipt of an actual purchase order from a customer, and the related invoicing to the company or, in the absence of a purchase order (i.e., verbal order), the actual invoicing to the customer, when the products are shipped and collection is reasonably assured.

Sales of Guardian Alert for the three months ended November 30, 2016 decreased by 14% from $103,995 to $90,000 due to decrease sales from key customers.

Sales of soybean meal and other soybean ancillary products increased because the acquisition of the soybean business assets occurred during the quarter ended November 30, 2016.

15

---

Table of Contents

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

 

		For the three months ended								For the nine months ended
		November 30, 2016				November 30, 2015				November 30, 2016				November 30, 2015
Direct Cost
Scope Out Direct Costs
Manufacturing expenses			-				-				-				-
Research and development			-				-				-				-
Commissions			-				-				-				-
Royalties - related party			15,000				10,000				45,000				40,000
Total Scope Out Direct Costs			15,000				10,000				45,000				40,000
Guardian Alert Direct Costs
Manufacturing expenses			-				-				-				2,469
Research and development			1,500				5,776				10,700				37,815
Commissions			12,488				-				27,716				8,500
Royalties			-				-				-				-
Total Guardian Alert Direct Costs			13,988				5,776				38,416				48,784
Soy Meal Direct Costs
Product Costs			90,054				-				90,054				-
Total Soy Meal Direct Costs			90,054				-				90,054				-
Total Direct Costs			119,042				15,776				173,470				88,784

 

Direct costs typically include the cost of raw materials necessary to make our products.  It also includes the cost of shipping the products from manufacturing location to our warehouse.  Direct costs also include costs in respect of obsolete inventory.

Direct costs related to Scope Out® were $15,000 and $10,000 for the three month periods ended November 30, 2016 and 2015, respectively.

Direct costs related to Scope Out® were $45,000 and $40,000 for the nine month period ended November 30, 2016 and 2015, respectively.

Direct costs related to Guardian Alert were $13,988 and $5,776for the three month period ending November 30, 2016 and 2015, respectively. This change represents a increase of 142%. Commission expenses were $12,488 and $nil for the three month period ended November 30, 2016 and 2015, respectively. Commission expense increased due to an increase in commissioned sales.  Research and development expenses were $1,500 and $5,776 for the three month periods ended November 30, 2016 and 2015, respectively.

Direct costs related to Guardian Alert were $38,416 and $48,784 for the nine month period ending November 30, 2016 and 2015, respectively. This change represents a decrease of 22%. Commission expenses were $27,716 and $8,500 for the nine month period ended November 30, 2016 and 2015, respectively. Commission expense increased 226% due to an increase in commissioned sales.  Manufacturing expenses were $nil and $2,469 for the nine month period ended November 30, 2016 and 2015, respectively.  Manufacturing expenses in Direct Costs for the Guardian Alert® for the nine months ended in 2016 and 2015 represents assembly costs for the sales achieved for the same period.  Research and development expenses were $10,700 and $37,815 for the nine month periods ended November 30, 2016 and 2016, respectively.

 

16

---

Table of Contents

Direct costs related to soy meal were $90,054 and $nil for the three and nine month period ending November 30, 2016 and 2015, respectively.

 

Selling, General, and Administrative
		For the three months ended								For the nine months ended
		November 30, 2016				November 30, 2015				November 30, 2016				November 30, 2015
Advertising		$	150			$	4,050			$	150			$	6,797
Consulting fees			263,774				66,185				610,738				133,185
Contract labor			1,500				3,000				7,500				9,000
Depreciation			28,400				-				28,400				-
Engineering costs			8,337				-				11,711				874
Filing fees			-				400				9,931				8,666
Insurance			19,024				10,666				42,561				30,904
Bank charges			973				6,415				2,828				7,581
Legal and accounting			(117,249	)			2,075				44,584				38,901
Loan fee			200				-				1,200				-
Office and miscellaneous			19,727				4,105				25,629				8,669
Payroll expenses			18,420				-				18,420				-
Public relations			-				30,000				3,500				30,000
Rent			5,380				2,860				11,750				10,161
Repairs and maintenance			450				-				450				-
Tax penalties			2,997				2,997				8,990				8,990
Telephone and utilities			2,828				133				3,113				454
Transfer agent fees			3,500				500				21,150				3,000
Travel and automotive			2,064				2,950				2,205				3,638
Interest expense			132,560				44,453				264,411				149,887
			393,035				180,789				1,119,221				450,707

Sense Technologies, Inc. had selling, general and administrative expenses of $393,035 for the three month period ended November 30, 2016 compared to selling, general and administrative expenses of $180,789 for the three month period ended November 30, 2015, an increase in selling, general and administrative expenses of 117% from the prior period. 

General and administrative expenses of $1,119,221 for the nine month period ended November 30, 2016 compared to selling, general and administrative expenses of $450,707 for the nine month period ended November 30, 2015, an increase in selling, general and administrative expenses of 148% from the prior period.

 

Consulting fees increased from $66,185 for the three month period ended November 30, 2015 to $263,774 for the three month period ended November 30, 2016. The increase was a result of consulting related to Guardian Alert product sales.

Consulting fees increased from $133,185 for the nine month period ended November 30, 2015 to $610,738 for the nine month period ended November 30, 2016. The increase was a result of consulting related to Guardian Alert product sales.

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

Legal and accounting fees from a prior quarter were reclassified to consulting fees in the amount of $117,249 in the three month period ended November 30, 2016.

Legal and accounting fees increased from $38,901 in the nine month period ended November 30, 2015 to $44,584 for the nine month period ended November 30, 2016.

17

---

Table of Contents

Following summarizes the overall operations results for the nine month period ended November 30:

 

											Increase				% Increase
			2016				2015				( Decrease)				( decrease)
Sales			383,394				222,483				160,911				72.33
Direct Costs			173,470				88,784				84,686				95.38
General and Administrative expenses			1,119,221				450,707				668,514				148,32
Net Loss			(1,064,574	)			(317,008	)			747,566				235.81
Basic and Diluted Loss per share		$	(0.07	)		$	(0.00	)

We had a loss from operations of $1,064,574 for nine month period ended November 30, 2016, compared to a loss from operations of $317,008 for the nine month period ended November 30, 2015, an increase in loss from operations of $747,566 from the prior year.

 

Liquidity and Capital Resources

Our cash position at November 30, 2016 was $2,451 as compared to $1,298 at February 29, 2016. This was due to our use of cash in operating and investing activities and cash provided by financing activities as described below.

We have a working capital deficit of $7,000,456 and $5,112,981 as of November 30, 2016 and February 29, 2016, respectively. If we are unable to raise adequate working capital for fiscal 2017, we will be restricted in the implementation of our business plan.  If this were to happen, the value of our securities would diminish and we may be forced to change our business plan for fiscal 2017, which would result in the value of our securities declining in value and/or becoming worthless.  If we raise an adequate amount of working capital to implement our business plan, we anticipate incurring significant expenses relating to paying down our notes payable and royalties that are in arrears. Additionally we will incur net losses until a sufficient client base can be established, of which there can be no assurance.

Net cash used in operating activities

 

Net cash used in operating activities was $608,405 in 2016, compared to $268,326 in 2015. The increase in cash used in 2016 was largely due to the increase in inventory, prepaids and accounts payable.

Net cash used in investing activities

Net cash used for investing activities was $800,000 in 2016, compared to $nil in 2015.  The purchase of R&D USA, LLC used cash of $800,000 for the assets purchased.

 

Net cash provided by financing activities

Net cash provided by financing activities was $1,409,558 in 2016 compared to net cash provided of $286,326 in 2015.

During the nine months ended November 30, 2016, we received $440,000 through subscriptions to our common shares compared to $130,000 during the nine months ended November 30, 2015.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

18

---

Table of Contents

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer (who is also acting in the capacity as the principal accounting officer), of the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Company’s principal executive officer and principal financial officer has concluded that, as of the end of the period covered in this report, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

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

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

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

Changes in Internal Control over Financial Reporting

In addition, the Company with the participation of its chief executive officers have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended November 30, 2016 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

19

---

Table of Contents

 

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

 

None.

Item 1A. Risk Factors.

 

There were no material changes in our risk factors from our Form 10-K for the year ended February 29, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

There were no unregistered sales of equity securities during the nine months ended November 30, 2016.

Item 3. Defaults Upon Senior Securities.

 

None.

Item 4. Mine Safety Disclosures.

 

Not applicable.

Item 5. Other Information.

 

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

 

Item 6. Exhibits.

 

31.1	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange act of 1934
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) or Rule 15d-14(b) of the U.S. Securities Exchange Act of 1934
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

20

---

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	SENSE TECHNOLOGIES INC.
May 8, 2017	/s/ BRUCE E. SCHREINER
	Bruce E. Schreiner
	Chief Executive Officer, President, Director, Chief Financial Officer and Principal Accounting Officer

 

 

 

 

21