UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
--------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 333-87293
SENSE HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
Florida 82-0326560
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
4503 NW 103rd Avenue
Sunrise, Florida 33351
(Address of Principal Executive Offices) (Zip Code)
(954) 726-1422
(Issuer's Telephone Number, Including Area Code)
Check mark whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes[x] No [ ]
The number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 15,544,257 shares of Common Stock as
of March 31, 2002.
SENSE HOLDINGS, INC. AND SUBSIDIARIES
INDEX
Page
Part 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - March 31, 2002 (unaudited) 2
Consolidated Statements of Operations (unaudited)
for the Three Months Ended March 31, 2002 and 2001 3
Consolidated Statements of Cash Flow (unaudited) for
the Three Months Ended March 31, 2002 and 2001 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operations 6
PART II OTHER INFORMATION 7
Item 1. Legal Proceedings 7
Item 2. Changes in Securities and Use of Proceeds 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matter to a Vote of Security Holders 7
Item 6. Exhibits and reports on Form 8-K 7
Signatures 8
SENSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2002
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 2,284,877
Accounts receivable (Net of allowance for
doubtful accounts of $20,000) 40,766
Inventories 109,787
Advances - shareholders 83,222
Prepaid expenses 14,092
------------------
TOTAL CURRENT ASSETS 2,532,744
PROPERTY AND EQUIPMENT, net 22,017
DEFERRED FINANCING COSTS, net 355,128
OTHER ASSETS 456,966
------------------
TOTAL ASSETS $ 3,366,855
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 169,712
Accrued interest 61,542
Notes payable 1,055,000
------------------
TOTAL CURRENT LIABILITIES 1,286,254
------------------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 40,000,000 shares
authorized; 15,544,257 shares issued and outstanding 1,554,425
Additional paid-in capital 5,106,773
Deferred compensation (29,466)
Accumulated deficit (4,551,131)
------------------
TOTAL STOCKHOLDERS' EQUITY 2,080,601
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,366,855
==================
See notes to consolidated financial statements
3
SENSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
-------------------------------------------
2002 2001
------------------ -------------------
(unaudited) (unaudited)
Sales $ 42,045 $ 6,894
Cost of goods sold 13,034 3,780
------------------ -------------------
Gross profit 29,011 3,114
------------------ -------------------
OPERATING EXPENSES:
General and administrative 439,112 82,070
Research and development 120,000 29,500
Depreciation and amortization 28,236 690
------------------ -------------------
587,348 112,260
------------------ -------------------
Loss from operations (558,337) (109,146)
OTHER EXPENSES:
Interest expense, net (247,513) (8,227)
------------------ -------------------
Net loss $ (805,850) $ (117,373)
================== ===================
Net loss per common share - basic
and diluted $ (0.06) $ (0.02)
================== ===================
Weighted average number of shares
outstanding - basic and diluted 12,864,206 7,051,636
================== ===================
See notes to consolidated financial statements
4
SENSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
------------------------------------------
2002 2001
------------------- -------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (805,850) $ (117,373)
------------------- -------------------
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization 231,629 690
Common stock issued for services and interest 92,188 29,265
Changes in assets and liabilities:
Accounts receivable 8,102 (3,655)
Inventories 9,384 3,264
Prepaid expenses 87,880 -
Other assets - 12,500
Accounts payable and accrued expenses (91,360) (88,573)
Accrued interest 26,375 -
------------------- -------------------
Total adjustments 364,198 (46,509)
------------------- -------------------
NET CASH USED IN OPERATING ACTIVITIES (441,652) (163,882)
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,935) -
------------------- -------------------
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES (17,935) -
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts from (repayment of) bank overdraft - (4,162)
Repayments of (proceeds from) short-term loans - (150,000)
Advances to shareholders (7,000) 12,458
Proceeds from the sale of common stock 2,625,625 586,350
Costs of common stock offering (315,075) -
------------------- -------------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 2,303,550 444,646
------------------- -------------------
NET (DECREASE) INCREASE IN CASH 1,843,963 280,764
CASH - beginning of year 440,914 -
------------------- -------------------
CASH - end of period $ 2,284,877 $ -
=================== ===================
See notes to consolidated financial statements
5
SENSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC"). The accompanying consolidated financial
statements for the interim periods are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the periods presented. The consolidated financial
statements include the accounts of Sense Holdings, Inc. and its subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
These financial statements should be read in conjunction with the consolidated
financial statements and related footnotes for the year ended December 31, 2001
and notes thereto contained in the Report on Form 10-KSB as filed with the
Securities and Exchange Commission. The results of operations for the three
months ended March 31, 2002 are not necessarily indicative of the results for
the full fiscal year ending December 30, 2002.
NOTE 2 - STOCKHOLDERS' EQUITY
On January 30, 2002, the shareholders of the Company approved an increase in the
number of authorized shares to 40,000,000.
On March 1, 2002, the Company raised $2,625,625 through a private place of 70
units ($37,500 per unit), each unit consisting of 50,000 shares of the Company's
common stock and 50,000 common stock warrants exercisable at $1.25 per share
with an expiration date of five years from the date of closing.
During the quarter ended March 31, 2002, the Company issued 95,287 shares of its
common stock for services rendered. The Company recorded compensation of $92,188
or $0.97 per share.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
financial statements of the Company and the notes thereto appearing elsewhere.
Results of operations - January 1, 2001 - March 31, 2001 (unaudited)
For the quarter ended March 31, 2001, we generated revenues of $6,894. The cost
of goods sold was $3,780 resulting in a gross profit of $3,114 and gross profit
percentage of 45% for the quarter ended. Operating expenses were $112,260 for
the quarter ended. The expenses consisted mainly of general and administrative
expenses of $95,261 primarily attributable to salaries and professional fees.
Results of Operations - January 1, 2002 - March 31, 2002 (unaudited)
For the quarter ended March 31, 2002, we generated revenues of $42,045. The cost
of goods sold was $13,034 resulting in a gross profit of $29,011 and a gross
profit percentage of 69% for the quarter ended. Operating expenses were $587,348
for the quarter ended. These expenses consisted of general and administrative
expenses of $439,112, research and development expenses of $120,000 consisting
of salaries of computer hardware and software developers, and depreciation and
amortization of $28,236, additionally the Company incurred $247,513 of interest
expense related to outstanding promissory notes. The increase in our operating
expenses of $449,191 from the same quarter in the preceding year can be
attributed to the Company's decision to expand its programming staff, office
facilities and other incremental increases in general and administrative
expenses.
Liquidity, Capital Resources and Plan of Operations
We have financed our growth and cash requirements through the sale of our common
stock and stock purchase warrants through a private placement, placed through
V-finance Investments, Inc. We raised $2,625,625 as a result of this placement
and we currently have $1,055,000 in debt from private lenders. We do not have
any material commitments for capital expenditures.
Cash used in operations for the three months ended March 31, 2002, was
approximately $441,652 attributable to a net loss of $805,850 and decreases in
accounts receivable of $8,000, decreases in inventory of $9,000 and decreases of
prepaid expenses of $87,000, as well as, an increase in accrued interest of
$26,000 and offset by a decrease in accounts payable $91,000 and non-cash
depreciation and amortization of $232,000 and common stock issued for services
and interest of $92,000.
Based upon purchase orders we have on hand, and anticipated future product
sales, and cash on hand we believe that we can meet all of our financial
requirements over the next 12 months. Should revenues not reach projected levels
or should unforeseen events arise, we may be required to secure additional funds
to meet our operating needs sooner than anticipated. Additional funding may not
be available to us on acceptable terms.
6
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
On January 30, 2002, the shareholders of the Company approved an increase in the
number of authorized shares to 40,000,000.
On March 1, 2002, the Company raised $2,625,625 through a private place of 70
units ($37,500 per unit), each unit consisting of 50,000 shares of the Company's
common stock and 50,000 common stock warrants exercisable at $1.25 per share
with an expiration date of five years from the date of closing.
During the quarter ended March 31, 2002, the Company issued 95,287 shares of its
common stock for services rendered. The Company recorded compensation of $92,188
or $0.97 per share.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(1) Exhibits
None
(2) Reports on Form 8-K
None
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SENSE HOLDINGS, INC. AND SUBSIDIARIES
Date: May 15, 2002 By: /s/Dore Scott Perler
-----------------
Dore Scott Perler
Chief Executive Officer,
President and Director
(Principal Executive Officer and
Principal Accounting Officer)
8