SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 333-87293
SENSE HOLDINGS, INC.
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(Name of Small Business Issuer in Its Charter)
FLORIDA 82-0326560
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7300 WEST McNAB ROAD
TAMARAC, FLORIDA 33321
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(Address of Principal Executive Offices)(Zip Code)
(954) 726-1422
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Securities Exchange Act of
1934:
Title of Each Class Name of Each Exchange on Which Registered
None None
Securities registered under Section 12(g) of the Securities Exchange Act of
1934:
COMMON STOCK, PAR VALUE $.10 PER SHARE
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(Title of Class)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ] No [X]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not 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. [ ]
State registrant's revenues for the year ended December 31, 1999: $49,192.
State the aggregate market value of the voting stock held by non-affiliates of
the registrant computed by reference to the closing bid price of its Common
Stock as reported by the OTC Bulletin Board on April 4, 2000 ($1.50): $4,815,915
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the registrant's Common Stock, par value
$.10 per share (the "Common Stock"), as of March 31, 2000, was 6,072,142.
Transitional Small Business Disclosure Format (check one) Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
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This Annual Report Form 10-KSB contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements,
other than statements of historical facts, included in or incorporated by
reference into this Form 10-KSB, are forward-looking statements. In addition,
when used in this document the words "anticipate," "estimate," "intends,"
"project" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Although the Company believes that the expectations we include in
such forward-looking statements are reasonable, we cannot assure you that these
expectations will prove to be correct.
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
Sense Holdings, Inc. is a Florida corporation. We design, develop,
manufacture and sell products that use biometric technology to verify a person's
identity. Unique physical traits such as fingerprints, retina lines, voice waves
and palm prints are known as biometric traits, and their use to verify a
person's identity is known as biometric identification.
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 and sought an operating business that we might
acquire.
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 now own and operate 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.
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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 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.
Industry
The use of unique physical traits to verify a persons' identity, is
known as "biometric" identification. Biometric identification includes
fingerprinting, hand geometry, iris scanning, signature verification and voice
analysis. Biometric technology has been used for decades in government and law
enforcement applications. But, until recently, these systems were too expensive
to manufacture to make retail marketing realistic. 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.
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 systems.
Products
We currently have one biometric security identification system, which
we call "CheckPoint T/A(TM)". CheckPoint T/A(TM) has hardware and software
components that identify an employee by comparing his or her fingerprint to the
fingerprint on file with the employer, while gathering time and attendance data
each time the employee's fingerprint is read. The user's fingerprint is scanned
by means of an optical reader with sensors that scan and capture the image of
the fingerprint. The image is then converted into data that is stored in the
employer's computer database as a reference for comparison to the fingerprint of
the employee offered at the workplace. CheckPoint T/A(TM)'s functions include:
o authenticating the identity of employees when they arrive at and
leave work;
o gathering data, including the time each employee attends work;
o performing calculations based on the data that is gathered, and
exporting this information electronically, to third-party payroll
software, such as that provided by ADP, so that automated payroll
checks can be produced;
o granting access to locked buildings, offices or other secured areas;
and
o producing logs and reports related to the foregoing.
We have completed the production of pilot versions of CheckPoint
T/A(TM), and have built and shipped 15 prototypes that are being field tested by
a limited group of select customers. We commenced delivery of these products in
the third quarter of fiscal 1999 and began generating revenues from those sales
in the fourth quarter. We also have firm orders for an additional 30 systems.
These systems are scheduled for shipment in the first quarter of 2000. We
recently completed development of a second generation product, and expect
revenues from those product sales during the first half of fiscal year 2000. We
also expect that enhancements to our second generation product will support a
larger database, and enable us to
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market CheckPoint T/A(TM) to larger companies, resulting in a greater profit
margin to us. We anticipate that enhanced versions of our product will be
available for shipment during the first half of fiscal 2000.
We are also developing a modified version of CheckPoint T/A(TM), to be
known as CheckPoint A/C(TM). CheckPoint A/C(TM) will incorporate "access
control" functions into our CheckPoint T/A(TM) system. These functions will
provide user access to buildings, offices and other secure areas, based upon
authentication of the user's fingerprint. The program can incorporate different
levels of security to permit access to places based upon the level of the user's
security clearance.
To date, we have developed a CheckPoint T/A(TM) system that
incorporates access control for single door access. We are currently developing
software application infrastructure that will enable a single CheckPoint T/A(TM)
system to control access to multiple locations. We intend to market CheckPoint
A/C(TM) at a higher price than CheckPoint T/A(TM), to provide for the increased
level of technology and functionality provided by CheckPoint T/A(TM) .
Product Development, Manufacturing and Assembly
A CheckPoint T/A(TM) system consists of an optical fingerprint scanner
with sensors, a custom-built Pentium-based computer with VGA color display and
our proprietary software.
The software portion of CheckPoint T/A(TM) has been developed by our
in-house computer programmers and software engineers. The source code for the
software is our proprietary property. This software enables CheckPoint T/A(TM)
to gather, filter and sort data, generate reports from the data and compute
payroll information for transmission to third party payroll services.
We obtain most of the hardware components for CheckPoint T/A(TM)
off-the-shelf, from various vendors. However, certain hardware components are
designed to our specifications and manufactured exclusively for us by Test
Systems Engineering.
We have entered into a strategic alliance with Test Systems
Engineering. Test Systems Engineering will design, engineer, configure and
assemble the hardware components of CheckPoint T/A(TM), in consultation with us,
and to our specifications. All product testing and assembly will be performed at
Test Systems Engineering's facilities, in order to maintain quality control. Our
agreement with Test Systems Engineering terminates on December 31, 2005, but, as
long as we remain in compliance with our obligations under the agreement, it
will 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 dependent on Test Systems Engineering for its services in producing
CheckPoint T/A(TM).
We have entered into a license agreement with SAC Technologies, Inc.
Under this agreement, we have the non-exclusive right to include SAC's
technology in our identification systems. This technology consists of the
optical fingerprint scanner with sensors and related software that converts a
fingerprint image into data that is stored in CheckPoint T/A(TM)'s database. We
have agreed to pay SAC a one time license fee of $100,000 for the right to use
its technology and manufacture and market CheckPoint T/A(TM) under our name. We
also agreed to pay royalties to SAC of $50 per system sold, with annual minimum
royalties of $50,000. We have paid SAC $37,500 and must pay the balance to SAC
in three quarterly payments. Our agreement with SAC continues until December 21,
2002, but as long as we are not in default of our obligations, the license
agreement will be renewed annually provided that we increase our purchases from
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SAC by at least 20% over the preceding year.
We have been advised that, for reasons unrelated to us, SAC is not
currently able to deliver products to us, as contemplated by our agreement with
SAC. While we have participated in discussions with SAC, at this time we are
unable to determine when or if SAC will be in a position to deliver products we
have ordered. We desire to continue our relationship with SAC and have not yet
determined what, if any, action we will take against SAC, including whether we
will seek to recover amounts we previously paid to SAC.
In light of SAC's inability to deliver product to us at this time, we
have identified technology that serves as a viable alternative to SAC's
technology, as well as a source from whom we can obtain such technology. The
alternative technology is silicon-based, rather than the optical technology used
by SAC. The silicon-based technology is used in conjunction with related
software, as well as our own software that interfaces between the silicon
product and our CheckPoint T/A(TM) system. We currently purchase the silicon-
based technology from a provider located in Melbourne, Florida, on a purchase
order basis. We believe that this supplier is able to provide us with our
foreseeable requirements for these silicon-based products; however, we do not
currently have a written contract with the supplier.
We do not anticipate that we will experience any material delay in
delivering our products as a result of the shift from optical to silicon-based
technology.
We have entered into an agreement with Integrated Design, Inc. under
which Integrated Design has agreed to develop a software program to enable the
payroll data produced by CheckPoint T/A(TM) to be transferred to third party
payroll services such as ADP and Paychex. We have agreed to license the software
from Integrated Design and pay license fees aggregating at least $100,000 during
the first two years of the agreement. We have also agreed to pay Integrated
Design a $10,000 software development fee. The agreement is for a term of five
years, with five year renewal terms, 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 their
dissolution, bankruptcy or similar events.
From our inception in July 1998 through December 31, 1999, we have
spent $218,520 on research and development activities.
Sales and Marketing
We intend to market CheckPoint T/A(TM) systems for base prices ranging
from $5,995 to $7,995, depending on the number of employees who will be tracked
on the system. Expansion modules can be added in one hundred employee
increments, for $495. We will also offer software updates and on-site service
contracts for additional fees.
Initially, we will market CheckPoint T/A(TM) to manufacturers and
retailers with at least 15 employees. We plan to sell CheckPoint T/A(TM) and
future products through an in-house sales force who will use telemarketing lead
generation, direct marketing programs, trade show participation, and local,
regional and national advertising campaigns to generate sales. We are also
evaluating whether our biometric technology can be used to conduct secure
commerce over the Internet.
We have also engaged independent sales representatives to market our
products in the Atlanta, New York, Miami and Los Angeles markets. We intend to
engage sales representatives to cover additional
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territories over the next 12 months. Initially, we intend to seek penetration of
the retail merchandise, home and business security, food processing facilities,
textile manufacturing and trucking and transport distribution markets through
the services of these representatives. Sales representatives are generally
compensated by a commission based upon the sales prices of systems sold by them.
Intellectual Property
We have developed our own software and we claim common law ownership of
our software. We may also seek copyright protection for our software with the
United States Patent and Trademark Office, and are investigating whether our
CheckPoint T/A(TM) system configuration of hardware and software may be the
subject of a successful patent application.
Whether or not we obtain formal protection for our software, hardware
or CheckPoint T/A(TM) system, 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 and our financial condition and the results of our operations
may be adversely affected.
Competition
We do not believe that intense competition currently exists for
biometric security systems for use in the private sector. However, the demand
for more reliable security systems is high and we expect that additional
competition will develop as others develop technologies for applications similar
to ours. 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 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. Competition is likely to include companies with
longer operating histories and greater financial and other resources than we
have.
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 CheckPoint T/A(TM) uses biometric technology, tracks employee
attendance and performs payroll functions not available through the
use of currently available competitive products;
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; and
o CheckPoint T/A(TM) has other security-related applications, such as
limiting access to secure areas only to personnel who are authorized
and whose identity can be verified.
Our inability to compete successfully will have a material adverse effect on our
financial condition and results of our operations.
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Employees
We currently employ nine people, six of whom are full-time employees,
in the following capacities: three executive officers, one administrative
employee, three sales and marketing personnel and two programmers. Our employees
are not represented by a collective bargaining unit. We believe that relations
with our employees are good.
ITEM 2. DESCRIPTION OF PROPERTIES
We currently lease approximately 1,300 square feet of office space at
our Tamarac, Florida headquarters. The lease is with an unaffiliated party. Our
monthly lease payments range from approximately $1,166 to $1,285 over the lease
term. The lease expires in July 2002 and provides that we may not assign or
sublet the premises without the landlord's prior written consent. These
facilities are suitable and adequate for our current needs. 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 SECURITYHOLDERS
Not Applicable.
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 reported high and low bid prices for
the common stock are shown below for the period from July 1, 1997 through
December 31, 1999. An "*" indicates that no trades were reported during the
quarter. The quotations, which were provided by the research department of the
Nasdaq Stock Market, Inc., reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
Period High Low
Fourth Quarter ended 12/31/97 * *
First Quarter ended 3/31/98 $.09375 $.0625
Second Quarter ended 6/30/98 * *
Third Quarter ended 9/30/98 * *
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Fourth Quarter ended 12/31/98 * *
First Quarter ended 3/31/99 $3.50 $1.00
Second Quarter ended 6/30/99 $1.00 $.75
Third Quarter ended 9/30/99 * *
Fourth Quarter ended 12/31/99 $1.00 $1.00
Our common stock is owned of record by approximately 800 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.
There are currently 6,072,142 shares of our common stock outstanding.
Of these shares, 1,973,755 shares are freely tradeable and the balance of
4,098,387 shares are restricted and may be sold only if a registration statement
covering those shares is in effect or if there is an available exemption from
registration. In May 2000, approximately 4,000,000 restricted shares issued in
January 1999 will become available for sale under Rule 144. If we do not have a
substantial market for our shares, a significant number of shares being sold
could greatly affect the market and cause a decline in the price of our common
stock. Moreover, historic market prices may not be indicative of the prices at
which our shares can be bought or sold.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements of the Company and the notes thereto appearing
elsewhere.
Results of Operations - July 13, 1998 (Inception) - December 31, 1998
We generated no revenues during the period from our inception through
December 31, 1998. Operating expenses were $174,629 for the period ended
December 31, 1998. These expenses consisted mainly of general and administrative
expenses of $99,611 primarily attributable to salaries, advertising costs of
approximately $14,000, professional fees of approximately $30,000, and research
and development expenses of $71,510, consisting of software purchased for use in
the production of security systems.
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Results of Operations - January 1, 1999 - December 31, 1999 (Audited)
For the year ended December 31, 1999, we generated revenues of $49,192.
The cost of goods sold was $35,496 resulting in a gross profit of $13,716 for
the year end period. Operating expenses were $719,715 for the year ended
December 31, 1999. These expenses consisted mainly of general and administrative
expenses of $300,088 primarily attributable to salaries and professional fees,
non-cash compensation expenses of $260,000 and research and development expenses
of $147,010 consisting of software purchased for use in the production of
security systems. The significant increase in our operating expenses during 1999
reflect our full year of operations, the commencement of payments of officers'
salaries and salary payments for a larger technical staff, and legal and
accounting fees relating to this registration statement.
Liquidity, Capital Resources and Plan of Operations
We have financed our growth and cash requirements through capital
contributions from existing shareholders. 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.
Cash used in operations for the period from July 13, 1998 (inception)
to December 31, 1999 was approximately $625,000 attributable primarily to the
net loss of approximately $880,000 offset by non-cash compensation of $260,000,
increases in accounts receivable of $59,000, increases in inventory of $10,000
and increases in prepaid and other current assets of $3,000 offset by increases
in accounts payable and accrued expenses of $66,000. Cash used in investing
activities was approximately $14,000 which was for the purchase of property and
equipment. Cash provided by financing activities during the period was
approximately $893,000 from the sale of common stock of $698,000 and capital
contributions of $200,000 offset by loans to shareholders of approximately
$5,000. Total cash increased by approximately $254,000 during the period.
Since our inception, we have been engaged in research and development
activities relating to our first generation of biometric security products. We
commenced delivery of these products in the third quarter of fiscal 1999 and
began generating revenues from those sales in the fourth quarter. We recently
completed development of a second generation product, and expect revenues from
those product sales during the first half of fiscal year 2000. We also expect
that enhancements to our second generation product will support a larger
database, and enable us to market CheckPoint T/A(TM) to larger companies,
resulting in a greater profit margin to us. We anticipate that enhanced versions
of our product will be available for shipment during the first half of fiscal
2000.
Based upon purchase orders we have received, anticipated future product
sales and cash on hand, we do not believe that we will be required to raise
additional capital in order to meet our cash flow needs over the next twelve
months. However, in order to remain competitive in the marketplace, we must
develop new products and enhance our existing products. 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.
Additional funding may not be available to us on acceptable terms.
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Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two-digit entries to represent years in the date code
field. Computer systems and products that do not accept four-digit year entries
will need to be upgraded or replaced to accept four-digit year entries to
distinguish years beginning with 2000 from prior years.
We have completed the process of becoming compliant with the Year 2000
requirements at an approximate cost of $2,000. Compliance includes all phases of
our information technology and non-information technology. In order to address
Year 2000 concerns, we developed CheckPoint T/A(TM) to accept four digit year
coding. All computer systems that we use for product development, testing and
other purposes have been tested to assure Year 2000 compliance, and any failing
systems were updated or replaced, and retested. Included in this process are our
basic input output systems, also known as BIOS, which control the time and date
functions of our products' hardware systems. Our BIOS are supplemented by a
back-up, real time clock, which confirms that the BIOS function properly, and
makes adjustments as are necessary.
As discussed elsewhere in this report, we have material relationships
with various third parties, including SAC Technologies, Inc., Test Systems
Engineering and Integrated Design, Inc. We have contacted each of these
third-parties and confirmed that their computer systems are Year 2000 compliant.
We have been advised by Integrated Design that the computer systems of the major
third-party payroll service providers which interfaces with the software
developed for us by Integrated Design, are also Year 2000 compliant.
Neither Sense Holdings nor any third parties with whom we have material
relationships, suffered any significant adverse consequences resulting from the
transition to Year 2000. However, it is possible that companies including us and
our third-party contractors, will suffer adverse Year 2000 consequences over the
near term. In order to minimize potential adverse effects, we have designated
experienced personnel and consultants to identify, correct, test and implement
solutions to Year 2000 problems, if and when they arise. In addition, we have
purchased excess inventory of products and components, in the event that future
Year 2000 consequences causes delays in our ability to obtain component
supplies. We have also identified alternate suppliers of non-proprietary
components that we may approach should our inventory of components outlast
third-party vendors' Year 2000 problems. We have not established any other
contingency plan to address Year 2000 issues should they arise, and we do not
intend to do so.
ITEM 7. FINANCIAL STATEMENTS
See "Index to Financial Statements" for the financial statements
included in this Form 10-KSB.
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SENSE HOLDINGS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheet...................................................F-3
Consolidated Statements of Operations........................................F-4
Consolidated Statements of Stockholders' (Deficit) Equity....................F-5
Consolidated Statements of Cash Flows........................................F-6
Notes to Consolidated Financial Statements............................F-7 - F-11
F-1
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Sense Holdings, Inc. and Subsidiary
Tamarac, Florida
We have audited the accompanying consolidated balance sheet of Sense
Holdings, Inc. and Subsidiary as of December 31, 1999, and the related
consolidated statements of operations, stockholders' (deficit) equity, and cash
flows for the period July 13, 1998 (Inception) through December 31, 1998 and for
the year ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amount and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sense
Holdings, Inc. and Subsidiary as of December 31, 1999, and the results of its
operations and its cash flows for the period July 13, 1998 (Inception) through
December 31, 1998 and for the year ended December 31, 1999, in conformity with
generally accepted accounting principles.
/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
February 21, 2000
F-2
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SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS:
Cash $ 254,317
Accounts receivable 59,795
Inventory 10,345
Loans receivable - shareholders 4,900
Prepaid expenses 37,500
Other current assets 2,892
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TOTAL CURRENT ASSETS 369,749
PROPERTY AND EQUIPMENT, net 11,010
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$ 380,759
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 65,654
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TOTAL CURRENT LIABILITIES 65,654
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STOCKHOLDERS' EQUITY:
Common stock, $.10 par value,
10,000,000 shares authorized;
6,072,142 shares issued and outstanding 607,214
Additional paid-in capital 550,619
Accumulated deficit (842,728)
---------
TOTAL STOCKHOLDERS' EQUITY 277,605
---------
$ 380,759
=========
See notes to consolidated financial statements
F-3
<PAGE>
SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year From July 13,
Ended 1998 (Inception)
December 31, to December 31,
1999 1998
----------- ----------------
SALES $ 49,192 $ --
COST OF GOODS SOLD 35,476 --
----------- ---------------
GROSS PROFIT 13,716 --
----------- ---------------
OPERATING EXPENSES:
Depreciation 1,927 858
Rent 10,290 2,650
Research and development 147,010 71,510
Non-cash compensation 260,000 --
General and administrative 262,588 99,611
----------- ---------------
681,815 174,629
----------- ---------------
NET LOSS $ (668,099) $ (174,629)
=========== ===============
NET LOSS PER COMMON SHARE $ (0.14) $ 0.04
=========== ===============
WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 4,759,456 4,315,000
=========== ===============
See notes to consolidated financial statements
F-4
<PAGE>
SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Total
Number of Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit (Deficit) Equity
--------- ---------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, July 13, 1998 (Inception) 288,708 $ 28,871 $ (28,871) $ -- $ --
Capital contribution -- -- 58,583 -- 58,583
Net loss -- -- -- (174,629) (174,629)
--------- ---------- ----------- ----------- ---------------
Balance, December 31, 1998 288,708 28,871 29,712 (174,629) (116,046)
Issuance of common stock pursuant
to share exchange agreement 4,026,700 402,670 (402,670) -- --
Capital contribution -- -- 141,200 -- 141,200
Cancellation of common stock (50,000) (5,000) 5,000 -- --
Issuance of Common Stock 1,266,734 126,673 571,377 -- 698,050
Issuance of Common Stock
for services rendered 540,000 54,000 206,000 -- 260,000
Net loss -- -- -- (668,099) (705,599)
--------- ---------- ----------- ----------- ---------------
Balance, December 31, 1999 6,072,142 $ 607,214 $ 550,619 $ (880,228)$ 277,605
========= ========== =========== =========== ===============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year From July 13,
Ended 1998 (Inception)
December 31, to December 31,
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(668,099) $(174,629)
--------- ---------
Adjustments to reconcile net loss to net
cash used in operations:
Depreciation 1,927 858
Non-cash compensation 260,000 --
Changes in assets and liabilities:
Increase in accounts receivable (59,795) --
Increase in inventory (10,345) --
Increase in prepaid expenses (37,500) --
Increase in other current assets (1,258) (1,634)
Increase in accounts payable and accrued expenses 36,730 28,924
--------- ---------
Total adjustments 189,759 28,148
--------- ---------
NET CASH USED IN OPERATIONS (478,340) (146,481)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,340) (9,455)
--------- ---------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,340) (9,455)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock to be issued (110,500) 110,500
Loans to shareholders (4,900) --
Proceeds from the sale of common stock 698,050 --
Capital contribution 141,200 58,583
--------- ---------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 723,850 169,083
--------- ---------
NET INCREASE IN CASH 241,170 13,147
CASH - beginning of period 13,147 --
--------- ---------
CASH - end of period $ 254,317 $ 13,147
========= =========
See notes to consolidated financial statements
F-6
<PAGE>
SENSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
Sense Technologies, Inc.("Sense")was formed on July 13, 1998 to design, develop,
manufacture and sell biometric security identification systems.
On January 19, 1999, Sense was acquired by Century Silver Mines, Inc. ("CSM"),
an Idaho corporation, for 4,026,700 shares of CSM stock (the "Exchange"). The
Exchange was completed pursuant to the Agreement and Plan of Reorganization
between Sense and CSM. The Exchange has been accounted for as a reverse
acquisition under the purchase method for business combinations. Accordingly,
the combination of the two companies is recorded as a recapitalization of Sense,
pursuant to which Sense is treated as the continuing entity. In August 1999,
pursuant to the approval of the Board of Directors of CSM, the name of the
company changed to Sense Holdings, Inc. (the "Company").
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION - The financial statements include
the accounts of the Company and its wholly-owned subsidiary.
All material intercompany transactions have been eliminated.
B. REVENUE RECOGNITION - The Company recognizes revenues as units
of its product are shipped to its customers.
C. EQUIPMENT - Equipment is carried at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the various assets.
D. INVENTORIES - Inventories are stated at the lower of average
cost or market.
E. INCOME TAXES - Income taxes are accounted for under Statement
of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which is an asset and liability approach that
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial
statements or tax returns.
F. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts
reported in the balance sheet for cash, receivables, and
accounts payable approximate their fair market value based on
the short-term maturity of these instruments.
G. 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 and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results
F-7
<PAGE>
could differ from those estimates.
H. IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews
long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the
carrying amounts may not be recovered. At December 31, 1999,
the Company believes that there has been no impairment of its
long-lived assets except the license agreement (see note 1 L).
I. COMPREHENSIVE INCOME - The Company has adopted Statement of
Financial Accounting Standards No. 130 ("SFAS 130) "Reporting
Comprehensive Income". Comprehensive income is comprised of
net loss and all changes to the statements of stockholders'
equity, except those due to investments by stockholders,
changes in paid-in capital and distribution to stockholders.
For the period ended December 31, 1998 and 1999, the Company
had deemed comprehensive income to be negligible.
J. RESEARCH AND DEVELOPMENT - Research and development costs are
expensed as incurred. These costs primarily consists of fees
paid for the development of the Company's software. Research
and development costs for the period ended December 31, 1998
and for the year ended 1999 were $71,510 and $147,010,
respectively.
K. STOCK BASED COMPENSATION - The Company accounts for stock
transactions in accordance with APB No. 25, "Accounting for
Stock Issued to Employees." In accordance with Statement of
Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," the Company adopted
the pro forma disclosure requirements of SFAS 123.
L. LICENSING AGREEMENTS - Licensing agreements are stated at
cost, less accumulated amortization. Amortization is computed
using the straight-line method over an estimated life of ten
years based upon management's expectations relating to the
life of the technology and current competitive market
conditions. The estimated life is reevaluated each year based
upon changes in these factors.
M. EARNINGS PER SHARE - The Company has adopted the provisions of
Financial Accounting Standards No. 128, "Earnings Per Share".
Basic net loss per share is based on the weighted average
number of shares outstanding. Potential common shares included
in the computation are not presented in the financial
statements as their effect would be anti-dilutive.
2. EQUIPMENT
Equipment is as follows:
Computer equipment $ 13,795
Less: Accumulated depreciation 2,785
---------
$ 11,010
=========
F-8
<PAGE>
3. COMMITMENTS
A. RENT - The Company leases office space under operating leases
commencing September 1999. The lease expires July 2002.
Minimum rental commitments are as follows:
2000 $ 13,400
2001 $ 14,340
2002 $ 8,489
B. LICENSE AGREEMENT - The Company entered into a licensing
agreement with a software development company. Under this
agreement, the Company has exclusive rights to include the
software company's technology in its identification systems. The
Company has agreed to pay $100,000 for the right to use this
technology. The Company has also agreed to pay royalties of $50
per system sold, with annual minimum royalties of $50,000. As of
December 31, 1999, the Company has paid $37,500. The Company
terminated its agreement and does not intend to pay the remaining
balance.
C. EMPLOYMENT AGREEMENTS - In March 1999 the Company entered into
one-year employment agreements with three officers. The total
commitment to the Company for these agreements will aggregate
$200,200.
4. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires the recognition of deferred tax assets
and liabilities for both the expected impact of differences between
the financial statements and tax basis of assets and liabilities, and
for the expected future tax benefit to be derived from tax loss and
tax credit carryforwards. SFAS No. 109 additionally requires the
establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets.
The provision (benefit) for income taxes differs from the amounts
computed by applying the statutory federal income tax rate to income
(loss) before provision for income taxes, the reconciliation is as
follows:
F-9
<PAGE>
For the Period
Year Ended July 31, 1998
December 31, (Inception) through
1999 December 31, 1998
------------ -------------------
Taxes benefit computed at
statutory rate $ (289,000) $ (69,000)
Permanent differences 104,000 -
Income tax benefit not utilized 185,000 69,000
------------ ---------
Net income tax benefit $ - $ -
============ =========
The Company has a net operating loss carryforward for tax purposes
totaling approximately $897,000 at December 31, 1999 expiring through
the year 2014.
Listed below are the tax effects of the items related to the Company's
net tax liability:
Tax benefit of net operating
loss carryforward $ 254,000
Valuation Allowance (254,000)
---------
Net deferred tax asset recorded $ -
=========
5. STOCKHOLDERS' EQUITY
COMMON STOCK
On January 15, 1999 the Company declared a 1 for 7.74 reverse stock
split. The financial statements for all periods presented have been
retroactively adjusted for the stock split.
On January 19, 1999, the Company issued 4,026,700 shares of common
stock to former shareholders of Sense Technologies, Inc., in connection
with the Company's acquisition of all of the issued and outstanding
shares of Sense Technologies, Inc. The Company also received cash of
$141,200 relating to the acquisition.
In January 1999, the Company issued an aggregate of 290,000 shares of
common stock to various consultants, in consideration of services
rendered to the Company. Such shares were valued at an aggregate of
$72,500 or $.25 per share. Such issuance was recorded as non-cash
compensation expense.
In March 1999, the Company issued an aggregate of 240,000 shares of
common stock to various people, for an aggregate of $60,000 or $.25 per
share.
In June 1999, the Company issued 25,000 shares of common stock to
various consultants, in consideration of services rendered to the
Company. Such shares were valued at an aggregate of $18,750 or $.75 per
share. Such issuance was recorded as non-cash compensation expense.
In July 1999, the Company issued 225,000 shares of common stock to
various consultants,
F-10
<PAGE>
in consideration of services rendered to the Company. Such shares were
valued at an aggregate of $168,750 or $.75 per share.
From April to August 1999, the Company issued an aggregate of 1,026,733
shares of common stock for an aggregate purchase price of $770,050 or
$.75 per share.
STOCK OPTION PLAN
On July 19, 1999, the board of directors adopted the Company's 1999
stock option 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 us in securing and retaining key employees,
directors and consultants by allowing them to participate in the
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. The 1999 stock option plan is currently administered by
the Company's board of directors.
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 the 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 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% f 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. As December 31,
1999, the Company has not granted any options under the 1999 stock
option plan.
F-11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
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 39 Chief Executive Officer, President and
Director
Andrew Goldrich 38 Vice President and Director
Shawn Tartaglia 30 Chief Technical Officer and Director
Julie Slater 40 Director
Dore Scott Perler has served as our Chief Executive Officer and
President and a member 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 and a member of our
Board of Directors, 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 salesforce and was responsible for overall
financial and marketing activities.
Shawn Tartaglia has served as our Chief Technical Officer and a member
of our Board of Directors, 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, he
was employed by Solopak Pharmaceuticals, a privately-held pharmaceutical
supplier, as its Systems and Telecommunications Manager.
Julie Slater has served on our Board of Directors since January 1999.
From 1984 and continuing until the present, Ms. Slater is Vice President of All
Eyes Optical, a privately-held optometry and retail eye wear provider.
We have also engaged several consultants who we believe are significant
to our business. They are:
Doug Kilarski is our Operations Director, Business Operations. Mr.
Kilarski has served as a
11
<PAGE>
consultant to us, through Test Systems Engineering, since July 1998. From 1994
to the present he is the Vice President, Analyst for Aspen Business Development,
a privately-held business development organization.
Alex Schlinkmann is our Operations Director, Hardware Engineering and
Manufacturing. Mr. Schlinkmann has been a consultant to us, through Test Systems
Engineering, since July 1998. From 1991 to the present he serves a President and
Design Engineer for Test Systems Engineering, a privately-held manufacturer of
automated assembly machines.
Jamie Schlinkmann is our Operations Director, Hardware Design. Mr.
Schlinkmann is the brother of Alex Schlinkmann, and has been a consultant to us
since July 1998. From 1991 to the present he serves as Vice President and Design
Engineer for Test Systems Engineering, a privately-held manufacturer of
automated assembly machines.
Board Committees: We do not as yet have an audit committee or a
compensation committee. However, as and when we elect independent directors, we
expect to organize these committees.
Employment Agreements. In March 1999, we entered into employment
agreements with each of Dore Scott Perler, Andrew Goldrich and Shawn Tartaglia.
Each agreement provides for employment at our discretion, and may be terminated
at any time, for any reason not prohibited by law. The agreements require each
employee to devote all of his work time and attention to our business, and
contain confidentiality provisions prohibiting the employee from divulging
information concerning our business to any third party. Each employee is
entitled to participate in our stock option plan, and in all other benefit
programs established by the board of directors for the benefit of our employees.
We pay Messrs. Perler and Goldrich annual salaries at the rate of $67,600 per
year, and Mr. Tartaglia at the rate of $65,000 per year.
All directors serve for one year and until their successors are
elected and qualify. Directors do not receive compensation for serving as
directors. Officers are elected by the Board and their terms of office are,
except as otherwise stated in employment contracts, at the discretion of the
Board.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
We are not 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.
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 during each fiscal year since our inception
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,
1999:
12
<PAGE>
<TABLE>
<CAPTION>
Fiscal Other Annual LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options/ (#) Payouts Compensation
- --------------------------- ---- ------- ----- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dore Scott Perler, CEO 1999 $53,400 - - - - $2,329
1998 - - - - - -
</TABLE>
Other annual compensation cosists of automobile and gas allowance ($1,429) and
health insurance premiums ($900).
Option Grants in Last Fiscal Year
The following table sets forth information concerning our grant of
options to purchase shares of our common stock during the fiscal year ended
December 31, 1999 to (a) our President and Chief Executive Officer; and (b) each
of our executive officers who earned more than $100,000 during the fiscal year
ended December 31, 1999.
<TABLE>
<CAPTION>
Percent of
Number of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Options/SARs In Fiscal Base Price
Name Granted (#) Year ($/Sh) Expiration Date
<S> <C> <C> <C> <C>
Dore Scott Perler, CEO - - - -
</TABLE>
Incentive and Non-Qualified Stock Option Plan
On July 19, 1999, the board of directors adopted our 1999 stock option
plan. We have 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. The 1999 stock option
plan is currently administered by our board of directors.
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, 1999 we have not granted
any options under the 1999 stock option plan.
13
<PAGE>
Option Exercises and Holdings
The following table contains information with respect to the exercise
of options to purchase shares of common stock during the fiscal year ended
December 31, 1999 to (a) our President and Chief Executive Officer; and (b) each
of our executive officers who earned more than $100,000 during the fiscal year
ended December 31, 1999.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options/SARs Options/SARs
On Value At FY-End (#) At FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Dore Scott Perler, CEO - - - -
</TABLE>
Long-Term Incentive Plans Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Number Performance
of Shares or Other Estimated Future Payouts Under
Units or Period Until Non-Stock Price-Based Plans
------------------------------
Other Rights Maturation Threshold Target Maximum
Name (#) or Payout ($or #) ($or #) ($ or #)
---- -------------------- --------- ------------------- ----------
<S> <C> <C> <C> <C> <C>
Dore Scott Perler, CEO - - - - -
</TABLE>
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
us or our shareholders for monetary damages for breach of fiduciary duty as a
director, 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.
14
<PAGE>
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 March 31, 2000, 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 care of Sense Holdings, Inc., 7300 West McNab Road,
Suite 117, Tamarac, Florida 33321.
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 prospectus 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 prospectus, have been exercise or converted.
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
- --------------------- --------------------- -------------
Dore S. Perler 1,344,725 22.1%
9400 S.W. 49th Place
Cooper City, FL 33328
Andrew Goldrich 1,284,519 21.2%
21653 Marigot Drive
Boca Raton, FL 33428
Shawn Tartaglia 193,585 3.2%
6888 Ashburn Road
Lake Worth, FL 33467
15
<PAGE>
Julie Slater 38,703 1.0%
402 N.W. 118th Terrace
Coral Springs, FL 33071
Officers and Directors 2,861,532 47.1%
as a group (4 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1998, Dore Scott Perler, our President and a director, and
Andrew Goldrich, our Vice President and a director, founded Sense Technologies
and each of them were issued 1,370,518 shares valued at par, or $137,052 each.
Mr. Perler and Mr. Goldrich each subsequently contributed inventory and other
fixed assets to the capital of Sense Technologies, valued at $29,291.50 each.
Thereafter, Mr. Goldrich gifted 85,999 shares to a family member and Mr. Perler
gifted 25,793 shares to two friends.
In July 1998, Shawn Tartaglia, a founder of Sense Technologies, and our
Chief Technology Officer and a director, was issued 193,585 shares valued at
par, or $19,359.
In August 1998, Julie Slater, a director, purchased shares of Sense
Technologies for $10,000. These shares were converted into 38,703 shares of our
common stock at the time we acquired Sense Technologies.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS:
Exhibit
Number Description
2 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)
10.1 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)
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)
16
<PAGE>
21 Subsidiaries of Registrant (1)
27 Financial Data Schedule (2)
- -------------------------
(1) Incorporated by reference to exhibits with the corresponding number filed
with our registration statement on Form SB-2 (File No. 333-87293).
(2) Filed herewith.
B. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tamarac, Florida on April 10, 2000.
SENSE HOLDINGS, INC.
By: /s/ Dore Scott Perler
-----------------
Dore Scott Perler
Chairman, Chief Executive Officer
and Principal Financial and Accounting Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Dore Scott Perler Chief Executive Officer, April 10, 2000
- ------------------------------------
Dore Scott Perler President and Director
(Principal Executive Officer
and Principal Accounting
Officer)
/s/ Andrew Goldrich Vice President and Director April 10, 2000
- ------------------------------------
Andrew Goldrich
/s/ Shawn Tartaglia Chief Technical Officer April 10, 2000
- ------------------------------------
Shawn Tartaglia and Director
/s/ Julie Slater Director April 10, 2000
- ------------------------------------
Julie Slater
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 1093903
<NAME> SENSE HOLDINGS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 254,317
<SECURITIES> 0
<RECEIVABLES> 59,795
<ALLOWANCES> 0
<INVENTORY> 10,345
<CURRENT-ASSETS> 369,749
<PP&E> 13,795
<DEPRECIATION> 2,789
<TOTAL-ASSETS> 380,759
<CURRENT-LIABILITIES> 65,654
<BONDS> 0
0
0
<COMMON> 607,214
<OTHER-SE> (292,109)
<TOTAL-LIABILITY-AND-EQUITY> 380,759
<SALES> 49,192
<TOTAL-REVENUES> 49,192
<CGS> 35,476
<TOTAL-COSTS> 681,815
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (668,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (668,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (668,099)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
