U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number
SENSE HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
Florida 82-0326560
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
7300 West McNab Road
Tamarac, Florida 33321
(Address of Principal Executive Offices) (Zip Code)
(954) 726-1422
(Issuer's Telephone Number, Including Area Code)
Check mark whether the Issuer (1) has 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 [x] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to be
filed by Section 12,13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 6,510,636 shares of Common Stock as of
November 1, 2000.
<PAGE>
SENSE HOLDINGS, INC.
INDEX
Page
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 2000 (unaudited) 2
Statements of Operations (unaudited) for the Three
Months and Nine Months Ended September 30, 2000
and 1999 3
Statements of Cash Flow (unaudited) for the Nine Months
Ended September 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operations 6-7
PART II OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 7
Signatures 8
<PAGE>
SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 60,065
Accounts receivable 62,432
Inventories 123,543
Loans receivable - shareholders 16,288
Prepaid expenses 37,500
Other current assets 15,477
---------------
TOTAL CURRENT ASSETS 315,305
PROPERTY AND EQUIPMENT, net 9,510
---------------
$ 324,815
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 140,094
---------------
TOTAL CURRENT LIABILITIES 140,094
---------------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 20,000,000 shares
authorized; 6,510,636 shares issued and outstanding 651,063
Additional paid-in capital 1,275,110
Beneficial conversion feature, net of note payable (75,000)
Accumulated deficit (1,666,452)
---------------
TOTAL STOCKHOLDERS' EQUITY 184,721
---------------
$ 324,815
===============
See notes to consolidated financial statements
2
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<TABLE>
<CAPTION>
SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------------- --------------------- --------------------- ---------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales $ 80,800 $ 54,695 $ 91,591 $ 54,695
Cost of goods sold 5,238 21,690 13,007 21,690
--------------------- --------------------- --------------------- ---------------------
Gross Profit 75,562 33,005 78,584 33,005
OPERATING EXPENSES:
Depreciation 500 680 1,500 1,530
Rent 3,498 3,002 10,494 6,791
Research and development - 60,435 - 107,542
Non-cash compensation 81,000 187,500 418,340 260,000
Interest expense 175,318 - 175,318 -
General and administrative 115,034 61,795 296,656 220,017
--------------------- --------------------- --------------------- ---------------------
375,350 313,412 902,308 595,880
--------------------- --------------------- --------------------- ---------------------
NET LOSS $ (299,788) $ (280,407) $ (823,724) $ (562,875)
===================== ===================== ===================== =====================
Net loss per common share $ (0.05) $ (0.05) $ (0.13) $ (0.11)
===================== ===================== ===================== =====================
Weighted Average
Number of shares outstanding 6,440,973 6,072,142 6,269,308 5,312,290
===================== ===================== ===================== =====================
</TABLE>
See notes to consolidated financial statements
3
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<TABLE>
<CAPTION>
SENSE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
---------------------------------------
2000 1999
----------------- ------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (823,724) $ (562,875)
----------------- ------------------
Adjustments to reconcile net loss to net cash used in operations:
Depreciation 1,500 1,530
Interest expense on beneficial conversion feature 175,000 -
Non-cash compensation 418,340 260,000
Changes in assets and liabilities:
Accounts receivable (2,637) (55,029)
Inventories (113,198) (19,049)
Other current assets (12,585) (38,757)
Accounts payable and accrued expenses 74,440 23,293
----------------- ------------------
Total adjustments 540,860 171,988
----------------- ------------------
NET CASH USED IN OPERATIONS (282,864) (390,887)
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (4,340)
----------------- ------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES - (4,340)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock to be issued - (110,500)
Proceeds from convertible loan 100,000 -
Loans to shareholders (11,388) (11,500)
Capital contribution - 141,200
Proceeds from the sale of common stock - 758,050
----------------- ------------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 88,612 777,250
----------------- ------------------
NET DECREASE (INCREASE) IN CASH (194,252) 382,023
CASH - beginning of period 254,317 13,147
----------------- ------------------
CASH - end of period $ 60,065 $ 395,170
================= ==================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
SENSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
disclosures required for annual financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes for the year ended December 31, 1999 included in the Form
10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of September 30, 2000, and the results of operations and cash flows
for the three-month periods ended September 30, 2000 and 1999 and the nine-month
periods ended September 30, 2000 and 1999 have been included.
The results of operations for the nine-month period ended September 30, 2000,
are not necessarily indicative of the results to be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission for the year ended December 31, 1999.
SALES
Included in sales for the three and nine months ended September 30, 2000, is
$50,000 in consulting revenues derived from a contractual agreement for which
the services have been rendered by the employees of the Company.
CONVERTIBLE LOAN PAYABLE
The Company received a $100,000 convertible loan payable on August 15, 2000. The
loan is due on November 15, 2000 and bears interest at 8% per annum. This loan
is convertible at the Company's discretion into 400,000 shares of common stock.
Additionally, if the loan is paid in cash the Company will issue 100,000
warrants to acquire common stock at $0.50 per share. The Company has recorded a
beneficial conversion feature on this loan of $350,000 or at $1.14 per share.
The beneficial conversion feature will be amortized as interest expense over the
life of the note. For the quarter ended September 30, 2000, the Company has
recorded $175,000 in interest expense relating to the conversion feature. The
loan is netted against the beneficial conversion feature and is reflected in the
equity section of the balance sheet.
STOCKHOLDERS' EQUITY
In May 2000, the Company issued 334,000 shares of its common stock to various
consultants, in consideration for services rendered to the Company. Such shares
were valued at an aggregate of $303,606 or $0.91 per share.
On May 31, 2000, the Company amended its articles of incorporation to increase
the number of common shares it is authorized to issue from 10,000,000 to
20,000,000.
On September 8, 2000, the Company issued 104,494 shares of its common stock to
various consultants for services rendered. The Company recorded compensation of
$114,734 or $1.10 per share.
5
<PAGE>
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 - January 1, 1999 - September 30, 1999 (unaudited)
We generated $54,965 in revenues for the nine months ended September
30, 1999. Operating expenses were $595,880 for the nine months ended September
30, 1999 and $313,412 for the quarter then ended. These expenses consisted
primarily of noncash compensation charges of $260,000, for shares of the
Company's common stock issued for services rendered. Additionally, general and
administrative expenses totaled $220,017 consisting primarily of salaries,
advertising and professional fees. Research and development costs totaling
$107,542, consisted of software purchased for use in the production of security
systems and computer programming salaries.
Results of Operations - January 1, 2000 - September 30, 2000 (unaudited)
For the nine months ended September 30, 2000, we generated revenues of
$91,591 of which $50,000 was derived from consulting services rendered in
regard to biometric identification services, the balance of $41,591 was derived
from the sale of our biometric identification product. The cost of goods sold
was $13,007 resulting in a gross profit of $28,584 or 69% gross margin on the
sale of biometric products for the nine months ended September 30, 2000.
Operating expenses were $902,308 for the nine months ended September 30, 2000
and $375,350 for the quarter then ended. These expenses consisted primarily of
noncash compensation charges of $418,340 relating to shares of the Company's
common stock issued for services rendered and interest charges of $175,000
relating to the beneficial conversion feature on the $100,000 loan issued in
August 2000. Additionally, general and administrative expenses for the nine
months ended September 30, 2000, totaling $296,656 consisted approximately of
salaries and benefits of $196,000, professional fees of $27,000, and travel
costs of $34,000 and miscellaneous office expenses of $40,000.
Liquidity, Capital Resources and Plan of Operations
We have financed our growth and cash requirements through capital
contributions from existing shareholders and through a convertible loan issued
for $100,000 in August 2000. Except for the convertible note we do not 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 nine months ended September 30, 2000,
was approximately $283,000 attributable primarily to a net loss of $823,724, and
increases in inventory and other current assets of $113,198 and $12,585, offset
by noncash compensation and interest charges of approximately $593,000 and
increases in accounts payable and accrued expenses of $74,440. Cash provided by
financing activities was $88,612 for the nine months ended September 30, 2000.
This consisted primarily of a $100, 000 convertible note issued to a private
lender offset by repayments of $11,388 in loans from shareholders. Total cash
decreased $194,252 for the nine months ended September 30, 2000. It is the
Company's itention to renegotiate the terms of the $100,000 loan payable and
extend its due date.
Since our inception, we have been engaged in research development
activities relating to our first generation of biometric security products. We
commenced delivery of these products in the third quarter of 1999 and have been
generating revenues since the fourth quarter of 1999. We have completed
development of our second generation product, and have recognized revenue on its
sales during the nine months ended September 30, 2000. We will continue to make
enhancements to our second generation product so that it will support a larger
database, and enable us to market CheckPrint T/A to larger companies, resulting
in a greater profit margin to us.
6
<PAGE>
Based upon purchase orders we have received, anticipated future product
sales and cash on hand, we believe and are actively pursuing additional outside
capital investments, that will be necessary to meet our cash flow needs over the
next twelve months. Additionally, 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 unforseen 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.
Part II - OTHER INFORMATION
Item 1.Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
On September 8, 2000, the Company issued 104,494 shares of its common
stock to various consultants, in consideration for financial
consulting services rendered to the Company. Such shares were valued
at an aggregate of $114,734 or $1.10 per share. Additionally, these
shares were issued pursuant to an exemption from registration provided
by section 4(2) of the Securities Act of 1933, and the rule and
regulation thereupon
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matter to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits:
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 2000.
7
<PAGE>
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.
SENSE HOLDINGS, INC.
Date: November 13, 2000 /s/Dore Scott Perler
Chief Executive Officer, President and Director
(Principal Executive Officer and Principal
Accounting Officer)
8
