UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction | (Commission File Number) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
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(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging company, indicate by check mark
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provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant
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As of September 14, 2023,
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. Dollars, except share data or otherwise stated)
FOR THE THREE MONTHS PERIOD
JULY 31, 2023 AND 2022
INDEX TO FINANCIAL STATEMENTS
F-1
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars, except share data or otherwise stated)
as of July 31, 2023 and April 30, 2023
| Note | As at July 31, 2023 (unaudited) | As at April 30, 2023 (audited) | ||||||||
| $ | $ | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash | 3 (b) | |||||||||
| Restricted cash held in trust | 3 (b) | |||||||||
| Subscription receivable | 4, 8 (b) | |||||||||
| Prepayments and other receivables | ||||||||||
| Total current assets | ||||||||||
| Total assets | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFIECIENCY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable and accrued liabilities | 5 | |||||||||
| Accounts payable and accrued liabilities to a related party | 7(c) | |||||||||
| Demand Loans | 6 | |||||||||
| Loans from related parties | 7(b) | |||||||||
| Amount due to related parties | 7(a) | |||||||||
| Total current liabilities | ||||||||||
| Total liabilities | ||||||||||
| STOCKHOLDERS’ DEFICIECY | ||||||||||
| Class A Preferred stock, $ | 8 | |||||||||
| Class B Preferred stock, $ | 8 | |||||||||
| Common stock, $ | 8 | |||||||||
| Shares to be issued ( | 8 | |||||||||
| Additional paid-in capital | ||||||||||
| Foreign currency translation reserve | ( | ) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total deficit attributable to equity holders of the Company | ( | ) | ( | ) | ||||||
| Total equity attributable to non-controlling interests | ||||||||||
| Development reserve | 8 (d) | |||||||||
| Total deficit | ( | ) | ( | ) | ||||||
| Total liabilities and stockholders’ deficiency | ||||||||||
Reverse Recapitalization (Note 1)
Contingencies (Note 9)
Subsequent events (Note 10)
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
F-2
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(In U.S. Dollars, except share data or otherwise stated)
| Note | Three
Months | Three
Months | ||||||||
| $ | $ | |||||||||
| Revenue | 3 (a) | |||||||||
| Expenses | ||||||||||
| General and administrative expense | 8 (b) | ( | ) | ( | ) | |||||
| Research and development expense | 3 (f), 7 | ( | ) | |||||||
| TOTAL OPERATING EXPENSES | ( | ) | ( | ) | ||||||
| Interest expenses, net | 6, 7 | ( | ) | ( | ) | |||||
| NET LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||||
| Income taxes | ||||||||||
| NET LOSS | ( | ) | ( | ) | ||||||
| Less: net loss attributable to non-controlling interests | ||||||||||
| Net loss attributable to the Company | ( | ) | ( | ) | ||||||
| ( | ) | ( | ) | |||||||
| Weighted average number of common shares outstanding | ||||||||||
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
F-3
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(In U.S. Dollars, except share data or otherwise stated)
| Three Months Ended July 31, 2023 (unaudited) | Three Months Ended July 31, 2022 (unaudited) | |||||||
| $ | $ | |||||||
| Net loss for the period | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments | ||||||||
| Total comprehensive loss for the period | ( | ) | ( | ) | ||||
| Attributable to: | ||||||||
| Net loss attributable to the Company | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments attributable to the Company | ||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments attributable to non-controlling interests | ||||||||
| ( | ) | ( | ) | |||||
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
F-4
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(In U.S. Dollars, except share data or otherwise stated)
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
| Common Stock | Class
A | Class
B Preferred Stock | Shares to be issued | Additional
paid-in Capital | Foreign
Currency Translation Reserve | Accumulated deficit | Total deficit attributable to equity holders of the Company | Non- controlling interests | Development Reserve | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note | Shares | $ | Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2023 (audited) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of vested shares | 8 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 31, 2023 (unaudited) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Class
A | Class
B Preferred Stock | Shares to be issued | Additional
paid-in Capital | Foreign
Currency Translation Reserve | Accumulated deficit | Total deficit attributable to equity holders of the Company | Non- controlling interests | Development Reserve | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note | Shares | $ | Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2022 (audited) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary issuance of shares pursuant to private placement | 8 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of vested shares | 8 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of dilution of ownership in subsidiary pursuant to issuance of shares | 8 | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 31, 2022 (unaudited) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
F-5
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(In U.S. Dollars, except share data or otherwise stated)
| Note | Three Months Ended July 31, 2023 (unaudited) | Three Months Ended July 31, 2022 (unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
| Net loss | ( | ) | ( | ) | ||||||
| Adjustments for: | ||||||||||
| Amortization of vested shares | 8(b) | |||||||||
| Changes in: | ||||||||||
| Accounts receivable | ( | ) | ||||||||
| Prepayments and other receivables | ( | ) | ||||||||
| Accounts payable and accrued liabilities to third parties and a related party | ( | ) | ||||||||
| Amounts due to related parties | ||||||||||
| Long term payable to a related party | ( | ) | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
| Proceeds from subsidiary issuance of shares to noncontrolling interests | 8(b) | |||||||||
| Net cash provided by financing activities | ||||||||||
| Effect of exchange rate changes on cash and restricted cash held in trust | ( | ) | ||||||||
| Net increase (decrease) in cash and restricted cash held in trust | ( | ) | ( | ) | ||||||
| Cash and restricted cash held in truest at the beginning of the period | ||||||||||
| Cash and restricted cash held in trust at the end of the period | ||||||||||
| Supplemental cash flows information | ||||||||||
| Income tax paid | ||||||||||
| Interest paid | ||||||||||
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
F-6
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
| 1. | DESCRIPTION OF BUSINESS |
SensaSure Technologies, Inc. (“SensaSure”
or “Company”) was incorporated on September 8, 2020 under the laws of the State of Nevada with an authorized share capital
of
Sensa Bues AB (“Sensa Bues”) was incorporated in the Kingdom of Sweden in November 2009. Sensa Bues AB owns the core intellectual properties for the design of sample collection devices and the methodologies to collect, extract and detect the non-volatile substances presented within aerosols in exhaled breath. These aerosols, which originate from the lungs and blood, are captured using electret-based filter technologies. This non-invasive breath-based biological sample collection and testing methodology is called ExaBreath (“EB”) technology.
Sensa Bues AB performs medical device design and research focusing on developing and commercializing EB for disease detection, exposure monitoring, and drug metabolism.
On December 21, 2020,
During April 2021, the Company increased its ownership
interest in Sensa Bues AB pursuant to private placements completed by Sensa Bues AB where
During the three months ended July 31, 2022, the
Company increased its ownership interest in Sensa Bues AB pursuant to private placements completed by Sensa Bues where
On July 31, 2023, the Company owned
| 2. | BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION |
| (a) | Basis of Presentation |
The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the years ended April 30, 2023 and 2022 and their accompanying notes.
The accompanying unaudited condensed interim consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending April 30, 2024. The Company’s fiscal year-end is April 30.
The unaudited condensed interim consolidated financial statements include the accounts of the Company and its less than wholly owned subsidiary, Sensa Bues AB. Intercompany accounts and transactions have been eliminated.
Certain prior quarter amounts have been reclassified for consistency with the current period presentation. These reclassifications has no effect on the reported results of the operations or cash flows.
F-7
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| (b) | Basis of Consolidation |
Sensa Bues AB and SensaSure were deemed to be under common control. Accordingly, the combination of the two entities has been accounted for as a reorganization of entities under common control in accordance with ASC 805 guidelines, whereby the resulting controlling entity, namely, SensaSure recognized the assets and liabilities of the Sensa Bues AB transferred at their carrying amounts with a carry-over basis. The reorganization of entities under common control was retrospectively applied to the financial statements of all prior periods when the financial statements are issued for a period that includes the date the share exchange transaction occurred.
Equity interests in Sensa Bues AB held by parties other than SensaSure are presented as non-controlling interests in equity.
| (c) | Liquidity and going concern |
The Company is in the early stages of commercializing
its product and in the process of its initial public offering. It is concurrently in development mode, operating research and development
programs in order to develop an ecosystem of technologies and commercialize other proposed products. The Company has incurred recurring
losses from operations, and as at July 31, 2023 and April 30, 2023, had an accumulated deficit of $
The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise additional financing and the state of the general economic environment in which the Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Company will be able to successfully execute its operating plan. In the absence of additional appropriate financing, the Company may have to modify its operating plan or slow down the pace of development and commercialization of its proposed products.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on the Company’s ability to meet obligations as they become due and to obtain additional equity or alternative financing required to fund operations until sufficient sources of recurring revenues can be generated.
These unaudited condensed interim consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company expects to finance their future operations primarily through cash flow from capital contributions from the shareholders of the Company. In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, the shareholders of the Company indicated the intent and ability to provide additional equity financing.
In December 2019, a novel strain of coronavirus (COVID-19) emerged. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it had spread to several other countries and infections have been reported globally.
During the past several years, as a result of COVID-19 infections having been reported throughout both the United States and Sweden, certain national, provincial, state and local governmental issued proclamations and/or directives aimed at minimizing the spread of COVID-19. Due to the disruption of the COVID-19 crisis, the Company’s business activities might be subject to certain level of adverse impact. At the date of approval of these unaudited condensed interim consolidated financial statements, it is still not possible to reliably estimate the effect of these developments as well as the impact on the financial results and condition of the Company in future periods. Management is monitoring these developments on the Company’s operations and is taking all steps to ensure that employees are following all public health and safety protocols.
F-8
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Revenue recognition |
The Company sells devices with collection mechanism for biological samples based upon exhaled breath. Revenue comprises devices delivered to the Company's customers.
In accordance with ASC 606 - Revenue from Contracts with Customers, the Company recognizes revenue upon the transfer of goods to a customer at an amount that reflects the expected consideration to be received in exchange for those goods. The Company accounts for a customer contract when the rights of the parties, including the payment terms, are identified, the contract has commercial substance, collection of consideration is probable, and the contract has been signed and agreed to by both parties. Revenue is recognized when performance obligations are satisfied by transferring control or economic benefit of the goods to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for its goods.
The principles in ASC 606 are applied using the following five steps:
| 1. | Identify the contract with a customer; |
| 2. | Identify the performance obligation(s) in the contract; |
| 3. | Determine the transaction price; |
| 4. | Allocate the transaction price to the performance obligation(s) in the contract; and |
| 5. | Recognize revenue when (or as) the performance obligation(s) are satisfied. |
| (b) | Cash and restricted cash held in trust |
Cash includes cash on hand and balances with banks. Restricted cash includes proceeds from private placements and shareholder loans financing completed by the Company during years ended April 30, 2021, 2022, 2023 and quarter ended July 31, 2023 that are held in an escrow account. As per the share subscription agreements from January to April 2021, and the Escrow Agreement dated January 26, 2021, restricted cash can only be used for expenses related to listing process and for professional expenses of the first eighteen months’ statutory filings from the date the Company successfully completes the listing process.
| (c) | Non-controlling interests |
The non-controlling interests represent the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets, statements of loss, statements of comprehensive loss and statements of stockholders’ deficiency attributed to controlling and non-controlling interests.
| (d) | Critical management judgment and use of estimates |
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals, stock options, principles of consolidation and reverse recapitalization and assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
| (e) | Accounts receivable |
Accounts receivable consists of amounts due to the Company from research institutions. Accounts receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.
| (f) | Research and development |
Research and development and all patent maintenance and related filing costs are charged to operations as incurred as the Company is uncertain as to any future economic benefit.
F-9
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| (g) | Stock based compensation |
The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire and compensate for goods or services received, including grants of employee shares, be recognized in the statement of loss based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.
The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable. The Company issues compensatory shares for services including, but not limited to, executive, management, operations, corporate communication, finance and administrative consulting services.
| (h) | Foreign Currency Translation |
The functional currency of the Company’s Swedish-based subsidiary is the Swedish Krona (“SEK”) and the US-based parent is the U.S. dollar (“USD”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net loss for the reporting period. In translating the financial statements of the Company’s Swedish subsidiary from their functional currency into the Company’s reporting currency of USD, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive loss in equity. The Company has not, to the date of These unaudited condensed interim consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
| (i) | Fair Value of financial instruments |
The Company’s financial instruments consist primarily of cash and restricted cash held in trust, accounts receivable, subscription receivable, other receivables, accounts payable and accrued liabilities, demand loans, loans from related parties, amounts due to related parties. The carrying amounts of these balances approximate their fair values due to the short-term maturities of these instruments. The carrying value of long term payable to a related party approximates its fair values due to current market rate on such debt.
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
| ● | Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities. |
| ● | Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets. |
| ● | Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value. |
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
F-10
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash and restricted cash held in trust, accounts receivable, subscription receivable, other receivables, accounts payable and accrued liabilities, demand loans, loans from related parties, amounts due to related parties and long term payable to a related party. The Company’s cash and restricted cash held in trust, which are carried at fair values, are classified as Level 1. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
| (j) | Income Taxes |
Income taxes are computed under the asset and liability method reflecting both current and deferred taxes, which reflect the tax impact of all events included in the consolidated financial statements. The balance sheet approach (i) reflects a current tax liability or asset recognized for estimated taxes payable or refundable on tax returns for the current and prior years, (ii) reflects a deferred tax liability or asset recognized for the estimated future tax effects attributable to temporary differences and carry forwards, (iii) measures current and deferred tax liabilities and assets using the enacted tax rate of which the effects of future changes in tax laws or rates are not anticipated, and (iv) reduces deferred tax assets, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.
ASC 740 prescribes a recognition threshold and
a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.
The Company recognizes deferred tax assets only to the extent that management concludes these assets are more-likely-than-not to be realized.
Significant judgement is required in assessing and estimating the more-likely-than-not tax consequences of the events included in the
consolidated financial statements. Management considers all available positive and negative evidence, including future reversals of existing
temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. The Company records uncertain tax
positions in accordance with ASC 740 on the basis of a two-step process in which (i) management determines whether it is more likely-
than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the
more likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than
| (k) | Loss per share |
The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at July 31, 2023, April 30, 2023 and July 31, 2022.
| (l) | Operating Segments |
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. All revenues are currently earned in Sweden and significantly all of the assets of the Company are used for the Company’s medical device design and research and distribution activities that is carried out in Sweden. The Company has one reportable segment and operating segment: Medical device design and research and distribution.
F-11
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| (m) | Recently issued accounting pronouncements |
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective for fiscal years beginning after December 15, 2022. The Company does not expect that this guidance will have a significant impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. There is no significant impact from adopting ASU 2019-12 on the Company’s financial condition, results of operations, and cash flows.
In April 2021, The FASB issued ASU 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company adopted this guidance for the fiscal year beginning April 1, 2022. There is no significant impact from adopting ASU 2021-04 on the Company’s financial condition, results of operations, and cash flows.
The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.
| 4. | SUBSCRIPTION RECEIVABLE |
During the year ended April 30, 2021, SensaSure,
via several private placements with proceeds of $
F-12
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| 5. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES TO THIRD PARTIES |
| As of | ||||||||
July
31, | April 30, 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| $ | $ | |||||||
| 6. | DEMAND LOANS |
At July 31, 2023 and April 30, 2023, the Company
had balances in unsecured demand loans from several noncontrolling interests in Sensa Bues AB and a shareholder totaling $
At July 31, 2023 and April 30, 2023, the Company
had balances in unsecured demand loans from a party who has a noncontrolling interests in Sensa Bues AB of $
At July 31, 2023, the Company had balance in demand
loan in the amount of $
F-13
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| 7. | RELATED PARTIES TRANSACTIONS |
The Company had the following balances and transaction with related parties except disclosed in other notes.:
| (a) | Amounts due to related parties |
At July 31, 2023 and April 30, 2023, salary payable
to the former CEO of the Company who is also a director of Sensa Bues AB included in amounts due to related parties was $
On March 31, 2021, the Company, Sensa Bues AB
and the former CEO of the Company who is also a director of Sensa Bues AB reached an agreement to settle account payable in the amount
of $
At July 31, 2023 and April 30, 2023, expenses paid on behalf of the Company by two former directors of Sensa Bues AB included in amounts due to related parties was $ and $ , respectively.
At July 31, 2023 and April 30, 2023, amounts payable to a former director of Sensa Bues AB included in amounts due to related parties was $ and $ , respectively.
| (b) | Loans from related parties |
At July 31, 2023 and April 30, 2023, balances
of loan from a former director of SensaSure were $
At July 31, 2023 and April 30, 2023, balances
of loan from a former director of SensaSure were $
| (c) | Payables and interest accrual to a related party |
The accounts payable balance related to professional services provided by a vendor that is controlled by a then-director of Sensa Bues AB.
As at July 31, 2023 and 2022, the interest accrual
balance related to overdue invoices from the related party vendor was $
As at July 31, 2023, the total accounts payable
and accrued liabilities to the related party was $
For the three months ended July 31, 2023, the
total purchase from the related party representing the research and development and patent expenses was in amount of $
On March 30, 2021, Sensa Bues AB, through a settlement
agreement with the vendor, modified the payment term of accounts payable balance related to professional services provided in the amount
of $
At July 31, 2023, the current portion of the modified
payable balance was $
F-14
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
| 8. | STOCKHOLDERS’ DEFICIENCY |
| (a) | Authorized and Issued Stock |
As at April 30, 2023, the Company is authorized
to issue
As at April 30, 2023 and 2022, the Company is
authorized to issue
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes A preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. The Conversion was completed on January 31, 2022 and Class A preferred stock were converted
into
As at April 30, 2023, the Company is authorized
to issue
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes B preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class B preferred stock were converted
into
At July 31, 2023, common shares issued and outstanding
totaled
At July 31, 2023, there were Class A shares of Preferred Stock that were issued and outstanding (April 30, 2023 – ) (Note 8 (b)).
At July 31, 2023, there were Class B shares of Preferred Stock that were issued and outstanding (April 30, 2023 – ) (Note 8 (b)).
| (b) | Share issuance |
Share issuance during the year ended April 30, 2021
During the year ended April 30, 2021, Sensa Bues
AB, via a private placement for proceeds of $
On December 21, 2020, the Company completed a
reverse recapitalization via a share exchange agreement with Sensa Bues AB and the shareholders who owned
F-15
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
During the year ended April 30, 2021, Sensa Bues
AB, via several private placements for proceeds of $
During the year ended April 30, 2021, SensaSure
acquired an additional
During the year ended April 30, 2021, SensaSure,
via several private placements with proceeds of $
During year ended April 30, 2022, the Company
has revised the lock up periods of certain shareholders, resulting in a change of total number of shares to be released at different time.
This process was completed on April 4, 2022.
During the year ended April 30, 2021, SensaSure
issued
During the year ended April 30, 2021, SensaSure
issued
F-16
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes A preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class A preferred stock were converted
into
During the year ended April 30, 2021, SensaSure
issued
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes B preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class B preferred stock were converted
into
During December 2022, upon a voluntarily surrender
from a director of the Company, the Company cancelled
During the year ended April 30, 2021, the Company,
Sensa Bues AB and a director of the Company reached an agreement to settle accounts payable in the amount of $
Share issuance during the year ended April 30, 2022
The Company recognized a subscription receivable
in amount of $
During the year ended April 30, 2022, SensaSure,
via several private placements, raised proceeds of $
F-17
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
During the year ended April 30, 2022, the Company approved the issuance of 2,118,000 shares of the common stock to several consultants and directors. The fair value of the share-based compensation was in the amount of $148,260 and was included in the general and admirative expenses as well as a credit made in common stock in amount of 21,180 and additional paid-in capital in amount of 127,080 respectively. The fair value of the shares of common stock issued was determined by using the most recent private placement price at $0.07 per share. One of the consultants is a related party individual and the share awards was 2,100,000 common shares with an amount of 147,000.
During the year ended April 30, 2022, SensaSure issued 3,080,000 common stock to a consultant of the Company for services to be provided in future including completion of certain financing projects and regulatory services. The fair value of the shares of common stock issued was determined by using the most recent private placement price at $0.07 per share. At April 30, 2022 and 2023, none of these services were rendered. Accordingly, the Company has not recognized any share based compensation expense during the year.
Share issuance and shares to be issued during the year ended April 30, 2023
During the year ended April 30, 2023, included
into shares to be issued were
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes B preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class B preferred stock were converted
into
During the three months ended July 31, 2022, SensaSure
acquired an additional
During the three months ended January 31, 2023,
the Company approved the issuance of
During the year ended April 30, 2021, the Company issued
| Common shares vested | Common shares cancelled upon resignation | At year end | At year end | At year | At year end | |||||||||||||||||||||||||||||||||||||||
| Common shares issued | Common shares | Common Stock | Additional paid-in Capital | Common shares | Common Stock | Additional paid-in Capital | Common shares outstanding | Common shares vested | end Common Stock | Additional paid-in Capital | ||||||||||||||||||||||||||||||||||
| Shares | Shares | $ | $ | Shares | $ | $ | Shares | Shares | $ | $ | ||||||||||||||||||||||||||||||||||
| At April 30, 2021 | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Amortization of vested shares | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Cancellation of common shares | - | - | - | - | ( | ) | - | - | ( | ) | - | - | - | |||||||||||||||||||||||||||||||
| At April 30, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of vested shares | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Cancellation of common shares | - | ( | ) | - | - | ( | ) | - | - | - | ||||||||||||||||||||||||||||||||||
| At April 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
F-18
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2023 AND 2022
(continued)
At April 30, 2023, there were
For three months ended July 31, 2022, there were
At July 31, 2023 and April 30, 2023, there were
and
At July 31, 2023 and April 30, 2023, there were
| (c) | Noncontrolling interest |
| As At | As At | As At | As At | |||||||||||||
| July 31, | April 30, | July 31, | April 30, | |||||||||||||
| 2023 | 2023 | 2022 | 2022 | |||||||||||||
| (%) | (%) | (%) | (%) | |||||||||||||
| Ownership percentage | ||||||||||||||||
| Common shareholders of the Company | ||||||||||||||||
| Noncontrolling interests | ||||||||||||||||
| For the quarter | For the quarter | |||||||
| ended | ended | |||||||
| July 31, | July 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Transfer from noncontrolling interests | ||||||||
| Increase in the Company’s accumulated deficit for Sensa Bues AB issuance of common shares to the Company and noncontrolling interests (Note 8 (b)) | ( | ) | ||||||
| Change from net loss attributable to the Company and transfer from noncontrolling interests | ( | ) | ||||||
| (d) | Development reserve |
In compliance with the
Swedish Annual. Accounts Act (the “Act”), SensaBues financial statements recognize a development reserve. This reserve is
considered restricted and is not distributable as dividends. SensaBues can transfer from the balance of development reserve to accumulated
deficit those amounts to the extent of those qualified expenses that occurred in the prior year. For the year ended April 30, 2023, SensaBues
transferred $
| 9. | CONTINGENCY |
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As at July 31, 2023 and April 30, 2023 there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.
| 10. | SUBSEQUENT EVENTS |
The Company’s management has evaluated subsequent events up to September 14, 2023, the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined there are no material subsequent events to be disclosed.
F-19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Sensasure,” “our,” “us” or “we” refer to Sensasure Technologies Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.
Overview
SensaSure is a medical technology or “MedTech”, company supplying a simple device and method to collect a breath sample for lab-based analysis. Exhaled breath contains aerosols which originate from the lungs and blood. These aerosols contain revealing information for analytics, diagnostics, and therapeutics. SensaSure’s patented method is called ExaBreath (EB) and it can collect, extract, detect and identify non-volatile compounds present in every exhaled breath by utilizing existing lab-based testing infrastructure and procedures. EB is applicable in toxicology, pharmacology, and clinical biochemistry. We have not applied for, nor has our EB device received approval from any government agency in the European Union or from the U.S. Food and Drug Administration (“FDA”). We can provide no assurance that any government regulatory body will clear our EB device for commercial use.
We believe EB may enhance the overall user experience in a wide range of applications and markets such as workplace drug testing, anti-doping in sport, law enforcement, e-health, and telemedicine. In the case of anti-doping, EB may reduce the time, cost, and overall burden that drug programs place on athletes, other participants, and the wider stakeholders such as leagues and associations. EB may improve the user experience for both donors and collectors during sample collection process.
Drug control programs represent significant market segments due to the necessity of testing in most sports, industries, law enforcement agencies, ministries, police forces, criminal justice systems and by many employers for the insurance industry.
We believe that our business model will follow a methodology to try to reduce risks, including transferring the manufacturing costs to third parties to reduce capital investment which we hope will provide relatively higher margin business based upon our EB collection device to improve user acceptability and analytical credibility in areas such as anti-doping in sport. We expect that this will increase the credibility and perceived value of doping control programs resulting in a stronger deterrence factor and better protection for the integrity of sport.
The global device market in drug testing is estimated to be nearly $4.5 billion in 2020 and is estimated to reach $10 billion by 2025 (According to BCC Research, Drug Testing Market Report 2019). The estimates provided here are based on varying estimates from research companies and actual numbers may vary significantly. While there are several basic types of drug tests, the most common method is urine testing.
We continue to work with our lab partners to expand the applicability of our product across a wide range of market segments. There are ongoing as well as follow-on studies in the areas of SARS-CoV-2 testing, biomarker discovery, cannabis testing, and anti-doping in sport. Our lab partner in the field of cannabis testing, RCU Labs (Roseville, CA), had a recent technical paper published in Nature. The paper’s title is “A comprehensive breath test that confirms recent use of inhaled cannabis within the impairment window.” RCU Labs’ methodology uses SensaSure’s device and breath collection technology as part of their test. This type of test is needed by law enforcement agencies and employers worldwide.
Our lab partner in anti-doping (German Sports University, Cologne, Germany), had a technical paper published entitled “Probing for factors influencing exhaled breath drug testing in sports - pilot studies focusing on the tested individual’s tobacco smoking habit and sex.” This study used SensaSure’s device and adds further data in support of our product’s suitability and applicability in the field of anti-doping testing in sport.
We continue to expand our IP portfolio with an important patent in Brazil now granted. This patent is for a “Portable sampling device and method for drug testing from exhaled breath.” This brings our IP portfolio to a total of 111 granted patents.
1
Current Challenges
The current challenges facing the drug testing industry are many and varied. Increasing the overall effectiveness and accuracy of the drug control program remains a priority. However, reducing the burden imposed upon participants in terms of time, cost, inconvenience, and intrusiveness are also important.
Our intent is to significantly improve the user experience for donors and collectors during the sample collection process as well as simplify and reduce the costs of sample preparation, packaging, and transportation to the labs. The EB method may lead to improved overall detection accuracy thus reducing the incidence of false positives and to avoid legal outcomes.
Our EB device is quick to use and may provide more predictable sample collection times to enable more samples to be planned and collected. The EB device can enable new sample collection formats and work patterns (i.e., youth testing, remote collection, and monitoring by video). We believe our EB device may fulfill the unmet analytical need for a recent cannabis use and impairment test. The EB device provides a solution platform that is flexible and responsive in a wide range of applications.
Our Solution
We are in an omics revolution, and breathomics is anticipated to offer one of the most significant opportunities to healthcare. SensaSure owns what we believe may be a low cost and transformative breath-based technology. EB may have the potential to:
| 1 | ensure cleaner sports competition | |
| 2 | help to make schools, roads, and workplaces safer | |
| 3 | facilitate the detection and diagnosis of diseases earlier |
Exhaled breath contains aerosols which originate from lungs and blood. These aerosols contain revealing information for diagnostics, therapeutics, and analytics. SensaSure owns the core IP for the design of a collection device as well as the methodology to collect, extract and detect the non-volatile substances present within these aerosols using a simple electret-based filter technology. This technology called ExaBreath (EB) is intended to offer an alternative to blood, urine and oral fluid collection processes in many situations.
SensaSure’s testing methodology is a non-invasive way to collect chemicals in breath, for disease detection, exposure monitoring, and drug metabolism. We believe that SensaSure’s core technology will be a major asset for medical research, healthcare, law enforcement, workplace drug testing and professional sports organizations.
Our Products and Ongoing Development
The different methods of biological sample collection for drug testing are diverse and can be expensive. The data for our device has been collected by universities and hospitals which provides us with independent research some of which has been published in journals related to drug testing. Our EB device has four main characteristics:
| ● | breath offers a new low cost and non-invasive sampling methodology. | |
| ● | breath sampling has been found to be an extremely sensitive, back-to-lab based technique, which has been developed into a complete end-to-end analytical platform for use in toxicology, pharmacology and clinical biochemistry that can provide improvements to analyses, diagnostics, and therapies. Independent studies confirm our approach for a back-to-lab technique. | |
| ● | EB can detect a wide range of exogenous substances, such as drugs of abuse (narcotics), therapeutic drugs (antibiotics) and performance enhancing drugs used in sports (stimulants) as well as many other compounds. | |
| ● | EB can detect a wide range of endogenous substances associated with the study of metabolomics and the determination of biomarkers. These may be used to provide health monitoring and diagnostics support. This may make EB a useful tool for breathomics and biomarker discovery. |
2
Since 2010, we have indirectly participated in more than 30 studies/trials worldwide conducted by:
| Organization | Country | Areas of Testing with EB Device | ||
| UC San Diego | United States | Drugs of Abuse | ||
| NIH NIDA | United States | Drugs of Abuse | ||
| German Sports University | Germany | Sports Anti-Doping, Drugs of Abuse | ||
| Jena University Hospital | Germany | Therapeutic Drugs | ||
| University of Gent | Belgium | Drugs of Abuse, Therapeutic Drugs | ||
| Karolinska University Hospital | Sweden | Biomarkers, Drug of Abuse | ||
| University Hospital Schleswig-Holstein | Germany | Infectious Diseases COVID-19 (SARS-CoV-2 RNA) | ||
| ABF Labs | Germany | Biomarkers | ||
| Atomic Energy Commission | France | Biomarkers |
with an additional 20 or more trials ongoing across a range of application specific areas. So far 80 substances have been detected across 25 categories using a commercial grade electrostatic filter membrane. A great amount of work and effort has been performed in the field of drug testing and anti-doping through collaborative partnerships with key industry players. Further work is planned to gather validation data and increase the IP portfolio. Our area of interest has been expanded to include more projects in the field of biomarker discovery.
Since the current distribution of our product is limited to research organizations, distribution is relatively easy as the product is sent to only a few locations. This level of business is supported by a large inventory of devices held in a flexible secure storage facility in Stockholm, Sweden. Any large quantity shipments of product are sent from Sweden. Sample and small quantity shipments are sent from the UK, where a small inventory is held at the home-office of the CEO. UK based inventory was established to facilitate ongoing operations during COVID-19 lock-down restrictions. All transportation of the product is done using commercial courier services. All order processing steps, and associated paperwork is handled internally by the Company’s accountant and management. The current production and delivery system functions well, even throughout the disruptions to business caused by COVID-19.
In the future, when appropriate, we will develop a larger scale production and delivery system whereby the processes will be outsourced to a 3rd party specialist manufacturing partner when required. This partner will source the piece parts, manufacture the product then assemble and package the kits before storing as inventory or drop shipping as order fulfillment. This will be done in a suitably certified facility with the relevant ISO or other quality control standards that are applicable to the medtech industry. This partner may also be used to provide all the logistical operations directly with vendors. This could include all order fulfillment requirements including any eventual volume supply agreements. There are many suitable partners available in the US and Europe who can provide the manufacturing capability as well as the entire suite of order fulfillment services into the medtech market.
While we believe that, from a technological and/or medical perspective, there are no material disadvantages to the use of our product in comparison to other commercially available alternative products. Our product is relatively new, and we currently have limited commercialization, sales and marketing experience. Our product will compete against alternative products that are well-established and are widely accepted. Many of our competitors are large, well-capitalized companies such as Abbott Labs, NMS Labs and LabCorp, with significantly greater market share and resources than we have. Our success will depend in part on our ability to increase adoption of our product, expand existing relationships with our potential customers, obtain regulatory clearances or approvals for our product, where necessary. We cannot provide any assurance that our EB device will receive any regulatory approvals to sell the product commercially.
Why ExaBreath?
We believe that ExaBreath is Safe - Simple - Effective
| ● | EB testing is suitable for drug testing such as anti-doping in sport. | |
| ● | EB is a quick, easy, and non-intrusive collection process. | |
| ● | EB is a one-time-use device to prevent cross-contamination. | |
| ● | EB is potentially less expensive to collect than some other matrices. | |
| ● | Unlike urine, the detection window of EB closely mimics that of blood so EB may be a better indication of recent use, which is likely to cause impairment (driving) or enhancement (sport). |
Based upon our research, we believe that the statements we have made above are accurate. It will be up to regulatory agencies such as the FDA that will conduct an analysis regarding the accuracy of these statements. We believe that our filing with the FDA will not occur for 3-5 years. There is no assurance that any regulatory body will approve or clear our EB device for use.
3
Our Growth Strategy
Our mission is to provide a safe, effective, low cost, and easy-to-use device to support and improve outcomes for drug testing. We believe the following strategies will advance our mission and will contribute to our future success and growth.
| ● | Expand strategic partnership engagements to support future production and distribution systems. |
| ● | Advance our EB device as a common method for collection of samples for drug testing. |
| ● | Grow our specialized sales force across geographies to foster deeper relationships with partners, third party vendors and drive revenue growth. |
| ● | Execute on our business model to expand and build an application specific EB device for the collection of samples for different applications and market sectors. |
| ● | Leverage our EB Technology to develop new products that satisfy significant unmet testing needs such as biomarker discovery. |
| ● |
Drive profitability by scaling our business operations to achieve cost and production efficiencies.
At the present time any partnership that we have regarding the study of our device is on a study by study basis. We do not have any specific relationships that require us to perform any of the functions that are being performed by the independent research organization. As we move forward we will work to develop strategic relationships that will be beneficial to both parties. We provide the number of units requested by the research organization and bill them for the same. We do not provide any services during the clinical or pre-clinical study. |
The Opportunity
We are in an omics revolution, and breathomics (exhaled breath) may offer one of the biggest opportunities to healthcare. SensaSure owns a transformative breath-based technology that can potentially:
| 1 | detect and diagnose diseases earlier, | |
| 2 | make roads and workplaces safer, and | |
| 3 | ensure cleaner sport |
Exhaled breath contains aerosols which originate from lungs and blood. These aerosols contain revealing information for diagnostics, therapeutics, and analytics. SensaSure owns the core IP for the design of a collection device and the methodology to collect, extract and detect the non-volatile substances present within these aerosols using electret-based filter technology. This technology called ExaBreath (EB) may be able to displace blood, urine, and oral fluid collection processes in certain situations as a more convenient, reliable, and less costly alternative.
SensaSure’s testing methodology is a non-invasive way to measure chemicals in breath, for disease detection, exposure monitoring, and drug metabolism. Our core technology could be a major asset for medical research, healthcare, law enforcement, workplace drug testing and professional sport organizations. Through our subsidiary there are several patents that we hope will protect our device. The table under Intellectual Property/Patents, below, provides information regarding our patents.
Our EB device has not received any approval from a government agency in the European Union nor from the FDA. We can provide no assurance that any government regulatory body will clear our EB device for commercial use.
4
Intellectual property
Our success depends in part on our ability to obtain, maintain, protect and enforce our proprietary technology and intellectual property rights, in particular, our patent rights, preserve the confidentiality of our trade secrets, and operate without infringing the valid and enforceable patents and other proprietary rights of third parties. We rely on a combination of patent, trademark, trade secret, copyright and other intellectual property rights and measures to protect the intellectual property rights that we consider important to our business. We also rely on know-how and continuing technological innovation to develop and maintain our competitive position.
We seek to protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, and others who may have access to our proprietary information. However, trade secrets and proprietary information can be difficult to protect. While we have confidence in the measures we take to protect and preserve our trade secrets and proprietary information, such measures can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets and proprietary information may otherwise become known or be independently discovered by competitors.
As of January 31, 2022, we own 4 issued U.S. patents with 2 currently being published and 105 issued foreign patents, relating to our current EB technology. A complete list of our patents is contained in our Annual Report on the Form 10-K filed with the Securities and Exchange Commission.
The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark Office in examining and granting a patent or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date. We cannot be sure that our pending patent applications that we have filed or may file in the future will result in issued patents, and we can give no assurance that any patents that have issued or might issue in the future will protect our current or future products, will provide us with any competitive advantage, and will not be challenged, invalidated, or circumvented.
For more information regarding the risks related to our intellectual property, including the above referenced inter partes reviews, please see the section titled “Risk Factors— Risks Related to Our Intellectual Property.”
5
Critical accounting policies
The unaudited condensed consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States Dollars. Significant accounting policies are summarized below:
| (a) | Revenue recognition |
The Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) on May 1, 2018. In accordance with ASC 606, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by applying the core principles – 1) identify the contract with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to performance obligations in the contract, and 5) recognize revenue as performance obligations are satisfied.
The Company sells devices with collection mechanism for biological samples based upon exhaled breath. Revenue is recognized upon delivery of devices (at a point in time). In order to recognize revenue, management considers whether or not the following criteria are met: persuasive evidence of a commercial arrangement exists, price is fixed and determinable and collectability is reasonably assured and delivery has occurred.
| (b) | Cash and restricted cash held in trust |
Cash includes cash on hand and balances with banks. Restricted cash includes proceeds from private placements and shareholder loans financing completed by the Company during years ended April 30, 2021, 2022, 2023 and quarter ended July 31, 2023 that are held in an escrow account. As per the share subscription agreements from January to April 2021, and the Escrow Agreement dated January 26, 2021, restricted cash can only be used for expenses related to listing process and for professional expenses of the first eighteen months’ statutory filings from the date the Company successfully completes the listing process.
| (c) | Non-controlling interests |
The non-controlling interests represent the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets, statements of loss, statements of comprehensive loss and statements of stockholders’ deficiency attributed to controlling and non-controlling interests.
| (d) | Critical management judgment and use of estimates |
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals, stock options, principles of consolidation and reverse recapitalization and assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
| (e) | Accounts receivable |
Accounts receivable consists of amounts due to the Company from research institutions. Accounts receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.
| (f) | Research and development |
Research and development and all patent maintenance and related filing costs are charged to operations as incurred as the Company is uncertain as to any future economic benefit.
6
| (g) | Stock based compensation |
The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire and compensate for goods or services received, including grants of employee shares, be recognized in the statement of loss based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.
The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable. The Company issues compensatory shares for services including, but not limited to, executive, management, operations, corporate communication, finance and administrative consulting services.
| (h) | Foreign Currency Translation |
The functional currency of the Company’s Swedish-based subsidiary is the Swedish Krona (“SEK”) and the US-based parent is the U.S. dollar (“USD”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net loss for the reporting period. In translating the financial statements of the Company’s Swedish subsidiary from their functional currency into the Company’s reporting currency of USD, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive loss in equity. The Company has not, to the date of these unaudited condensed interim consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
| (i) | Fair Value of financial instruments |
The Company’s financial instruments consist primarily of cash and restricted cash held in trust, accounts receivable, subscription receivable, other receivables, accounts payable and accrued liabilities, demand loans, loans from related parties, amounts due to related parties. The carrying amounts of these balances approximate their fair values due to the short-term maturities of these instruments. The carrying value of long term payable to a related party approximates its fair values due to current market rate on such debt.
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
| ● | Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities. |
| ● | Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets. |
| ● | Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value. |
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash and restricted cash held in trust, accounts receivable, subscription receivable, other receivables, accounts payable and accrued liabilities, demand loans, loans from related parties, amounts due to related parties and long term payable to a related party. The Company’s cash and restricted cash held in trust, which are carried at fair values, are classified as Level 1. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
7
| (j) | Income Taxes |
Income taxes are computed under the asset and liability method reflecting both current and deferred taxes, which reflect the tax impact of all events included in the consolidated financial statements. The balance sheet approach (i) reflects a current tax liability or asset recognized for estimated taxes payable or refundable on tax returns for the current and prior years, (ii) reflects a deferred tax liability or asset recognized for the estimated future tax effects attributable to temporary differences and carry forwards, (iii) measures current and deferred tax liabilities and assets using the enacted tax rate of which the effects of future changes in tax laws or rates are not anticipated, and (iv) reduces deferred tax assets, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company recognizes deferred tax assets only to the extent that management concludes these assets are more-likely-than-not to be realized. Significant judgement is required in assessing and estimating the more-likely-than-not tax consequences of the events included in the consolidated financial statements. Management considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) management determines whether it is more likely- than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
| (k) | Loss per share |
The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at July 31, 2023, April 30, 2023 and July 31, 2022.
| (l) | Operating Segments |
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. All revenues are currently earned in Sweden and significantly all of the assets of the Company are used for the Company’s medical device design and research and distribution activities that is carried out in Sweden. The Company has one reportable segment and operating segment: Medical device design and research and distribution.
| (m) | Recently issued accounting pronouncements |
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective for fiscal years beginning after December 15, 2022. The Company does not expect that this guidance will have a significant impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. There is no significant impact from adopting ASU 2019-12 on the Company’s financial condition, results of operations, and cash flows.
8
In April 2021, The FASB issued ASU 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company adopted this guidance for the fiscal year beginning April 1, 2022. There is no significant impact from adopting ASU 2021-04 on the Company’s financial condition, results of operations, and cash flows.
The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.
Results of Operations
Consolidated Financial Position
As of July 31, 2023 we have Total Assets of $25,203 compared to $39,646 at April 30, 2023. The decrease of $14,443 during the three month period is due primarily to the decrease in our cash and restricted cash held in trust. Our Total Assets consist of Current Assets only.
Our Current Liabilities as of July 31, 2023 are $1,142,103 compared to $1,101,239 at April 30, 2023. The increase in our current liabilities of $40,864 is mainly attributed to increase in amount due to related parties (see note 7 of unaudited interim condensed consolidated financial statements). We have no long term liabilities at July 31, 2023 and April 30, 2023. Our total liabilities as of July 31, 2023 is $1,142,103 compared to $1,101,239 as of April 30, 2023.
9
Management believes that it will need to raise additional capital to commercialize, market and manufacture products to generate revenue. The following table is from our unaudited condensed interim balance sheet as of July 31, 2023.
| Note | As at July 31, 2023 (unaudited) | As at April 30, 2023 (audited) | ||||||||
| $ | $ | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash | 3 (b) | 12,188 | 26,786 | |||||||
| Restricted cash held in trust | 3 (b) | - | 172 | |||||||
| Subscription receivable | 4, 8 (b) | - | - | |||||||
| Prepayments and other receivables | 13,015 | 12,688 | ||||||||
| Total current assets | 25,203 | 39,646 | ||||||||
| Total assets | 25,203 | 39,646 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFIECIENCY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable and accrued liabilities | 5 | 118,543 | 105,868 | |||||||
| Accounts payable and accrued liabilities to a related party | 7(c) | 483,426 | 486,826 | |||||||
| Demand Loans | 6 | 111,720 | 113,375 | |||||||
| Loans from related parties | 7(b) | 80,957 | 82,823 | |||||||
| Amount due to related parties | 7(a) | 347,457 | 312,347 | |||||||
| Total current liabilities | 1,142,103 | 1,101,239 | ||||||||
| Total liabilities | 1,142,103 | 1,101,239 | ||||||||
| STOCKHOLDERS’ DEFICIECY | ||||||||||
| Class A Preferred stock, $0.001 par value, 5,000,000 authorized as at July 31, 2023 and April 30, 2023, respectively. Issued and outstanding shares: Nil and Nil as at July 31, 2023 and April 30, 2023, respectively. | 8 | - | - | |||||||
| Class B Preferred stock, $0.001 par value, 5,000,000 authorized as at July 31, 2023 and April 30, 2023, respectively. Issued and outstanding shares: Nil and Nil as at July 31, 2023 and April 30, 2023, respectively. | 8 | - | - | |||||||
| Common stock, $0.01 par value, 250,000,000 authorized as at July 31, 2023 and April 30, 2023, respectively. Issued and outstanding common shares: and 56,349,183 as at July 31, 2023 and 56,349,183 at April 30, 2023, respectively. | 8 | 436,431 | 425,431 | |||||||
| Shares to be issued (804,000 and 804,000 common shares at July 31, 2023 and April 30, 2023 respectively) | 8 | 15,755 | 15,755 | |||||||
| Additional paid-in capital | 4,599,073 | 4,533,073 | ||||||||
| Foreign currency translation reserve | (214,484 | ) | (231,505 | ) | ||||||
| Accumulated deficit | (6,176,077 | ) | (6,027,209 | ) | ||||||
| Total deficit attributable to equity holders of the Company | (1,339,302 | ) | (1,284,455 | ) | ||||||
| Total equity attributable to non-controlling interests | 41,601 | 42,061 | ||||||||
| Development reserve | 8 (d) | 180,801 | 180,801 | |||||||
| Total deficit | (1,116,900 | ) | (1,061,593 | ) | ||||||
| Total liabilities and stockholders’ deficiency | 25,203 | 39,646 | ||||||||
10
Consolidated Results of Operations
Comparative Results for the Three Months Ended July 31, 2023 and 2022
The Company had revenue from sales for the three months period ended July 31, 2023 of $335. The loss per share, both basic and diluted, was $0.003 (July 31, 2022 – $0.002). This was anticipated by the Company since the efforts of the Company have been focused on commercialization of the technologies and maintaining operations.
For the three months period ended July 31, 2023 we had a revenue of $335 which is an decrease in revenue from the same period ended July 31, 2022 of $3,734. Management believes it is important to participate in the commercialization process that are currently ongoing.
Our total general administrative expenses and research and development expenses have decreased and was in the amount of $141,885 (July 31, 2022 - $181,268). The reduction in costs is largely due to savings in legal and other overhead expenses.
The following provides the details for the results of our operations for the periods ended July 31, 2023 and 2022.
| Note | Three Months Ended July 31, 2023 (unaudited) | Three Months Ended July 31, 2022 (unaudited) | ||||||||
| $ | $ | |||||||||
| Revenue | 3 (a) | 335 | 3,734 | |||||||
| Expenses | ||||||||||
| General and administrative expense | 8 (b) | (141,885 | ) | (181,268 | ) | |||||
| Research and development expense | 3 (f), 7 | (6,914 | ) | - | ||||||
| TOTAL OPERATING EXPENSES | (148,799 | ) | (181,268 | ) | ||||||
| Interest expenses, net | 6, 7 | (2,041 | ) | (2,137 | ) | |||||
| NET LOSS BEFORE INCOME TAXES | (150,505 | ) | (179,671 | ) | ||||||
| Income taxes | - | - | ||||||||
| NET LOSS | (150,505 | ) | (179,671 | ) | ||||||
| Less: net loss attributable to non-controlling interests | 1,637 | 1,520 | ||||||||
| Net loss attributable to the Company | (148,868 | ) | (178,151 | ) | ||||||
| Basic and diluted loss per share | (0.003 | ) | (0.002 | ) | ||||||
| Weighted average number of common shares outstanding | 56,349,183 | 105,723,183 | ||||||||
11
The condensed interim consolidated statements of comprehensive loss for the three months ended July 31, 2023 over 2022 in the table below reflect the total comprehensive loss for the period and the amount attributable to common shareholders and non- controlling interests.
| Three Months Ended July 31, 2023 (unaudited) | Three Months Ended July 31, 2022 (unaudited) | |||||||
| $ | $ | |||||||
| Net loss for the period | (150,505 | ) | (179,671 | ) | ||||
| Foreign currency translation adjustments | 18,198 | 12,352 | ||||||
| Total comprehensive loss for the period | (132,307 | ) | (167,319 | ) | ||||
| Attributable to: | ||||||||
| Net loss attributable to the Company | (148,868 | ) | (178,151 | ) | ||||
| Foreign currency translation adjustments attributable to the Company | 17,021 | 11,554 | ||||||
| Net loss attributable to non-controlling interests | (1,637 | ) | (1,520 | ) | ||||
| Foreign currency translation adjustments attributable to non-controlling interests | 1,177 | 798 | ||||||
| (132,307 | ) | (167,319 | ) | |||||
At July 31, 2023 we have a total of 56,349,183 shares of common stock outstanding.
12
| Common Stock | Class
A | Class
B Preferred Stock | Shares to be issued | Additional
paid-in Capital | Foreign
Currency Translation Reserve | Accumulated deficit | Total
deficit attributable to equity holders of the Company | Non- controlling interests | Development Reserve | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note | Shares | $ | Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2023 (audited) | 56,349,183 | 425,431 | - | - | - | - | 804,000 | 15,755 | 4,533,073 | (231,505 | ) | (6,027,209 | ) | (1,284,455 | ) | 42,061 | 180,801 | (1,061,593 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Amortization of vested shares | 8 | - | 11,000 | - | - | - | - | - | - | 66,000 | - | - | 77,000 | - | - | 77,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | - | - | - | - | - | - | (148,868 | ) | (148,868 | ) | (1,637 | ) | - | (150,505 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | - | - | - | - | - | - | - | - | - | 17,021 | - | 17,021 | 1,177 | - | 18,198 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 31, 2023 (unaudited) | 56,349,183 | 436,431 | - | - | - | - | 804,000 | 15,755 | 4,599,073 | (214,484 | ) | (6,176,077 | ) | (1,339,302 | ) | 41,601 | 180,801 | (1,116,900 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Class
A | Class
B Preferred Stock | Shares to be issued | Additional
paid-in Capital | Foreign
Currency Translation Reserve | Accumulated deficit | Total deficit attributable to equity holders of the Company | Non- controlling interests | Development Reserve | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note | Shares | $ | Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2022 (audited) | 105,723,183 | 609,351 | - | - | - | - | - | - | 4,197,213 | (195,610 | ) | (4,433,352 | ) | 177,602 | (881,448 | ) | 240,641 | (463,205 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary issuance of shares pursuant to private placement | 8 | - | - | - | - | - | - | - | - | - | - | - | - | 45 | - | 45 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of vested shares | 8 | - | 6,380 | - | - | - | - | - | - | 8,196 | - | - | 14,576 | - | - | 14,576 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | - | - | - | - | - | - | (178,151 | ) | (178,151 | ) | (1,520 | ) | - | (179,671 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | - | - | - | - | - | - | - | - | - | 11,554 | - | 11,554 | 798 | - | 12,352 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of dilution of ownership in subsidiary pursuant to issuance of shares | 8 | - | - | - | - | - | - | - | - | - | (51,632 | ) | (883,768 | ) | (935,400 | ) | 935,400 | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 31, 2022 (unaudited) | 105,723,183 | 615,731 | - | - | - | - | - | - | 4,205,409 | (235,688 | ) | (5,495,271 | ) | (909,819 | ) | 53,275 | 240,641 | (615,903 | ) | |||||||||||||||||||||||||||||||||||||||||||||
13
Management believes that it will be necessary to sell additional shares to have the funds necessary to continue to pay the legal and accounting fees as the Company continues the process to have its shares trading in a public market. In addition, we may use additional shares to attract contractors in the manufacturing and shipping sectors as we bring our product to the market in Europe.
Liquidity and Capital Resources
Our cash flows used in operating activities for the three month period ended July 31, 2023 compared to the same period in 2022 reflects a decrease of $137,973 net cash used in operating activities. Our net cash provided by financing activities reflects a decrease of $45 for the three month period ended July 31, 2023 compared to the same period in 2022. Cash and restricted cash held in trust at the beginning of the period ended July 31, 2023 was $26,958 compared to $437,177 Cash and restricted cash held in trust at the beginning of the same period in 2022. Cash and restricted cash held in trust at the end of the period ended July 31, 2023 was $12,188 compared to $277,318 Cash and restricted cash held in trust at the end of the same period in 2022.
We believe that it will be necessary to raise additional cash to commence manufacturing and distribution of our product when we have had our partners complete their studies. The table below provides the unaudited condensed interim consolidated statements of cash flows for the three months ended July 31, 2023 and 2022.
| Note | Three Months Ended July 31, 2023 (unaudited) | Three Months Ended July 31, 2022 (unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
| Net loss | (150,505 | ) | (179,671 | ) | ||||||
| Adjustments for: | ||||||||||
| Amortization of vested shares | 8(b) | 77,000 | 14,576 | |||||||
| Changes in: | ||||||||||
| Accounts receivable | - | (1,451 | ) | |||||||
| Prepayments and other receivables | (619 | ) | 1,478 | |||||||
| Accounts payable and accrued liabilities to third parties and a related party | 13,397 | (13,051 | ) | |||||||
| Amounts due to related parties | 42,876 | 39,738 | ||||||||
| Long term payable to a related party | - | (17,443 | ) | |||||||
| Net cash used in operating activities | (17,851 | ) | (155,824 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
| Proceeds from subsidiary issuance of shares to noncontrolling interests | 8(b) | - | 45 | |||||||
| Net cash provided by financing activities | - | 45 | ||||||||
| Effect of exchange rate changes on cash and restricted cash held in trust | 3,081 | (4,080 | ) | |||||||
| Net increase (decrease) in cash and restricted cash held in trust | (14,770 | ) | (159,859 | ) | ||||||
| Cash and restricted cash held in truest at the beginning of the period | 26,958 | 437,177 | ||||||||
| Cash and restricted cash held in trust at the end of the period | 12,188 | 277,318 | ||||||||
| Supplemental cash flows information | ||||||||||
| Income tax paid | - | - | ||||||||
| Interest paid | - | - | ||||||||
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. During the three month period ended July 31, 2023, we have made no material changes or additions with regard to such estimates and judgments.
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Off-Balance Sheet Arrangements
As of July 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting that occurred during the three month period ended July 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our 10-K report filed with the SEC on August 14, 2023. As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There have been no sales of the Securities of the Company for the financial reporting that occurred during the fiscal quarter ended July 31, 2023, covered by this Quarterly Report on Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed as part of this 10-Q:
| Exhibit Number |
Description | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Chief Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SENSASURE TECHNOLOGIES, INC. | ||||
| (Registrant) | ||||
| By: | /S/ CLARENCE CHAN | By: | /S/ CLARENCE CHAN | |
| Clarence Chan | Clarence Chan | |||
| Chief Executive Officer | Acting Chief Financial Officer | |||
| (Principal Executive Officer) | (Principal Financial and Accounting Officer) | |||
| Date: | Sept 14, 2023 | Date: | Sept 14, 2023 | |
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