UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
January 31, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
SENSASURE TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in its Charter)
| Nevada | | 001-41209 | | 87-2406468 |
(State or other jurisdiction
of incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
4730 S. Fort Apache Rd., Suite 300 Las Vegas, NV | | 89147 |
| (Address of Principal Executive Offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (347) 325-4677
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically 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). Yes ☒ No ☐
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 | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ | | |
If an emerging company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of March 25, 2024, the Registrant had 56,349,183 had shares of common stock, $0.01 par value per share, issued and outstanding.
SENSASURE TECHNOLOGIES INC.*
Special Note Regarding Forward-Looking Statements
Information included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of SensaSure Technologies Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references to the “Company”, “we”, “us” or “our” are references to SensaSure Technologies Inc., a Nevada corporation, and its subsidiaries.
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. Dollars, except share data or otherwise stated)
FOR THE THREE AND NINE MONTHS PERIOD
JANUARY 31, 2024 AND 2023
INDEX TO FINANCIAL STATEMENTS
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars, except share data or otherwise stated)
as of January 31, 2024 and April 30, 2023
| | | Note | | As at
January 31,
2024
(unaudited) | | | As at
April 30,
2023
(audited) | |
| | | | | $ | | | $ | |
| ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash | | 3(b) | | | - | | | | 26,786 | |
| Restricted cash held in trust | | 3(b) | | | - | | | | 172 | |
| Accounts receivable | | | | | - | | | | - | |
| Subscription receivable | | 4, 8(b) | | | - | | | | - | |
| Prepayments and other receivables | | | | | - | | | | 12,688 | |
| Total current assets | | | | | - | | | | 39,646 | |
| Total assets | | | | | - | | | | 39,646 | |
| | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFIECIENCY | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | |
| Accounts payable and accrued liabilities | | 5 | | | 63,500 | | | | 105,868 | |
| Accounts payable and accrued liabilities to a related party | | 7(c) | | | 271,296 | | | | 486,826 | |
| Demand Loans | | 6 | | | 100,172 | | | | 113,375 | |
| Loans from related parties | | 7(b) | | | - | | | | 82,823 | |
| Amount due to related parties | | 7(a) | | | 182,885 | | | | 312,347 | |
| Total current liabilities | | | | | 617,853 | | | | 1,101,239 | |
| | | | | | | | | | | |
| Non-current liabilities: | | | | | | | | | | |
| Payable to a related party, long term | | 8 | | | - | | | | - | |
| Total liabilities | | | | | 617,853 | | | | 1,101,239 | |
| | | | | | | | | | | |
| STOCKHOLDERS’ DEFICIECY | | | | | | | | | | |
| Class A Preferred stock, $0.001 par value, 5,000,000 authorized as at January 31, 2024 and April 30, 2023, respectively. Issued and outstanding shares: Nil and Nil as at January 31, 2024 and April 30, 2023, respectively. | | 8 | | | - | | | | - | |
| Class B Preferred stock, $0.001 par value, 5,000,000 authorized as at January 31, 2024 and April 30, 2023, respectively. Issued and outstanding shares: Nil and Nil as at January 31, 2024 and April 30, 2023, respectively. | | 8 | | | - | | | | - | |
| Common stock, $0.01 par value, 250,000,000 authorized as at January 31, 2024 and April 30, 2023, respectively. Issued and outstanding common shares: and 56,349,183 as at January 31, 2024 and 56,349,183 at April 30, 2023, respectively. | | 8 | | | 563,492 | | | | 425,431 | |
| Shares to be issued (804,000 and 804,000 common shares at January 31, 2024 and April 30, 2023 respectively) | | 8 | | | 15,755 | | | | 15,755 | |
| Additional paid-in capital | | | | | 2,286,039 | | | | 4,533,073 | |
| Foreign currency translation reserves | | | | | - | | | | (231,505 | ) |
| Accumulated deficit | | | | | (3,483,139 | ) | | | (6,027,209 | ) |
| Total deficit attributable to equity holders of the Company | | | | | (617,853 | ) | | | (1,284,455 | ) |
| Total equity attributable to non-controlling interests | | | | | - | | | | 42,061 | |
| Development reserve | | 8(d) | | | - | | | | 180,801 | |
| Total deficit | | | | | (617,853 | ) | | | (1,061,593 | ) |
| Total liabilities and stockholders’ deficiency | | | | | - | | | | 39,646 | |
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.
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
(In U.S. Dollars, except share data or otherwise stated)
| | | Note | | Three Months
Ended
January 31,
2024
(unaudited) | | | Three Months
Ended
January 31,
2023
(unaudited) | | | Nine Months
Ended
January 31,
2024
(unaudited) | | | Nine Months
Ended
January 31,
2023 (unaudited) | |
| | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | |
| Revenue | | 3(a) | | | - | | | | - | | | | 1,146 | | | | 4,414 | |
| | | | | | | | | | | | | | | | | | | |
| Expenses | | | | | | | | | | | | | | | | | | |
| General and administrative expense | | 8(b) | | | (828,374 | ) | | | (100,638 | ) | | | (1,124,726 | ) | | | (414,547 | ) |
| Research and development expense | | 3(f),7 | | | - | | | | (54,750 | ) | | | (10,145 | ) | | | (74,171 | ) |
| TOTAL OPERATING EXPENSES | | | | | (828,374 | ) | | | (155,388 | ) | | | (1,134,871 | ) | | | (488,718 | ) |
| | | | | | | | | | | | | | | | | | | |
| Interest expenses, net | | 6,7 | | | - | | | | (2,059 | ) | | | (4,009 | ) | | | (6,191 | ) |
| Loss on deconsolidation of subsidiary | | | | | (519,442 | ) | | | - | | | | (519,442 | ) | | | - | |
| NET LOSS BEFORE INCOME TAXES | | | | | (1,347,816 | ) | | | (157,447 | ) | | | (1,657,176 | ) | | | (490,495 | ) |
| Income taxes | | | | | | | | | | | | | | | | | | |
| NET LOSS | | | | | (1,347,816 | ) | | | (157,447 | ) | | | (1,657,176 | ) | | | (490,495 | ) |
| Less: net loss attributable to non-controlling interests | | | | | - | | | | 4,041 | | | | 1,801 | | | | 9,838 | |
| Net loss attributable to the Company | | | | | (1,347,816 | ) | | | (153,406 | ) | | | (1,655,375 | ) | | | (480,657 | ) |
| | | | | | | | | | | | | | | | | | | |
| Basic and diluted loss per share | | | | | (0.024 | ) | | | (0.002 | ) | | | (0.029 | ) | | | (0.005 | ) |
| | | | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | | | 56,349,183 | | | | 81,764,161 | | | | 56,349,183 | | | | 97,736,842 | |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
(In U.S. Dollars, except share data or otherwise stated)
| | | Three Months
Ended
January 31,
2024
(unaudited) | | | Three Months
Ended
January 31,
2023
(unaudited) | | | Nine Months
Ended
January 31,
2024
(unaudited) | | | Nine Months
Ended
January 31,
2023
(unaudited) | |
| | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | |
| Net loss for the period | | | (1,347,816 | ) | | | (157,447 | ) | | | (1,657,176 | ) | | | (490,495 | ) |
| Foreign currency translation adjustments | | | - | | | | (37,760 | ) | | | 66,783 | | | | 35,597 | |
| Deconsolidation of subsidiary | | | - | | | | - | | | | (66,783 | ) | | | - | |
| Total comprehensive loss for the period | | | (1,347,816 | ) | | | (195,207 | ) | | | (1,657,176 | ) | | | (454,898 | ) |
| | | | | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | | | | |
| Net loss attributable to the Company | | | (1,347,816 | ) | | | (153,406 | ) | | | (1,655,375 | ) | | | (480,657 | ) |
| Foreign currency translation adjustments attributable to the Company | | | - | | | | (35,317 | ) | | | 61,374 | | | | 33,295 | |
| Deconsolidation of subsidiary | | | - | | | | | | | | (61,374 | ) | | | - | |
| Net loss attributable to non-controlling interests | | | - | | | | (4,041 | ) | | | (1,801 | ) | | | (9,838 | ) |
| Foreign currency translation adjustments attributable to non-controlling interests | | | - | | | | (2,443 | ) | | | 5,409 | | | | 2,302 | |
| Deconsolidation of subsidiary | | | - | | | | | | | | (5,409 | ) | | | - | |
| | | | (1,347,816 | ) | | | (195,207 | ) | | | (1,657,176 | ) | | | (454,898 | ) |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(In U.S. Dollars, except share data or otherwise stated)
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
| | | | | Common Stock | | | Class A Preferred Stock | | | Class B Preferred Stock | | | Shares to be issued | | | Additional
paid-in Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated deficit | | | (Deficit) | | | Non-
controlling interests | | | Development
Reserve | | | Total | |
| | | Note | | Shares | | | $ | | | Shares | | | $ | | | Shares | | | $ | | | Shares | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Balance at October 31, 2023 (unaudited) | | | | | 56,349,183 | | | | 447,431 | | | | - | | | | - | | | | - | | | | - | | | | 804,000 | | | | 15,755 | | | | 4,665,073 | | | | (170,131 | ) | | | (6,334,768 | ) | | | (1,376,640 | ) | | | 45,669 | | | | 180,801 | | | | (1,150,170 | ) |
| Amortization of vested shares | | | | | - | | | | 116,061 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 696,365 | | | | - | | | | - | | | | 812,426 | | | | - | | | | - | | | | 812,426 | |
| Loss for the period | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,347,816 | ) | | | (1,347,816 | ) | | | - | | | | - | | | | (1,347,816 | ) |
| Foreign translation adjustment | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Deconsolidation of subsidiary | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,075,399 | ) | | | 170,131 | | | | 4,199,445 | | | | 1,294,177 | | | | (45,669 | ) | | | (180,801 | ) | | | 1,067,707 | |
Balance at
January 31, 2024 (unaudited) | | | | | 56,349,183 | | | | 563,492 | | | | - | | | | - | | | | - | | | | - | | | | 804,000 | | | | 15,755 | | | | 2,286,039 | | | | - | | | | (3,483,139 | ) | | | (617,853 | ) | | | - | | | | - | | | | (617,853 | ) |
| | | | | Common Stock | | | Class A
Preferred
Stock | | | Class B
Preferred
Stock | | | Shares to be
issued | | | Additional
paid-in
Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated
deficit | | | (Deficit) | | | Non-
controlling
interests | | | Development
Reserve | | | Total | |
| | | Note | | Shares | | US$ | | | Shares | | | US$ | | | Shares | | | US$ | | | Shares | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | |
| Balance at October 31, 2022 (unaudited) | | | | | 105,723,183 | | | 576,820 | | | | - | | | | - | | | | - | | | | - | | | | 36,000 | | | | 2,520 | | | | 4,258,896 | | | | (178,630 | ) | | | (5,644,371 | ) | | | (984,765 | ) | | | 52,945 | | | | 240,641 | | | | (691,179 | ) |
| Subsidiary issuance of shares pursuant to private placement | | 8 | | | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Amortization of vested shares | | 8 | | | - | | | 3,190 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,098 | | | | - | | | | - | | | | 7,288 | | | | - | | | | - | | | | 7,288 | |
| Issuance of common shares for service | | 8 | | | 8,800,000 | | | 5,500 | | | | - | | | | - | | | | - | | | | - | | | | 18,000 | | | | 1,260 | | | | 33,000 | | | | - | | | | - | | | | 39,760 | | | | - | | | | - | | | | 39,760 | |
| Cancellation of common shares | | 8 | | | (58,174,000 | ) | | (216,370 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 216,370 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Loss for the period | | 8 | | | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (153,406 | ) | | | (153,406 | ) | | | (4,041 | ) | | | - | | | | (157,447 | ) |
| Foreign translation adjustment | | | | | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (35,317 | ) | | | - | | | | (35,317 | ) | | | (2,443 | ) | | | - | | | | (37,760 | ) |
| Effect of dilution of ownership in subsidiary pursuant to issuance of shares | | 8 | | | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Balance at January 31, 2023 (unaudited) | | | | | 56,349,183 | | | 369,140 | | | | - | | | | - | | | | - | | | | - | | | | 54,000 | | | | 3,780 | | | | 4,512,364 | | | | (213,947 | ) | | | (5,797,777 | ) | | | (1,126,440 | ) | | | 46,461 | | | | 240,641 | | | | (839,338 | ) |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(In U.S. Dollars, except share data or otherwise stated)
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
| | | | | Common Stock | | | Class A Preferred Stock | | | Class B Preferred Stock | | | Shares to be issued | | | Additional
paid-in Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated deficit | | | (Deficit) | | | 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 | | | | | - | | | | 138,601 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 828,365 | | | | - | | | | | | | | 966,426 | | | | - | | | | - | | | | 966,426 | |
| Loss for the period | | | | | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,655,375 | ) | | | (1,655,375 | ) | | | (1,801 | ) | | | - | | | | (1,657,176 | ) |
| Foreign translation adjustment | | | | | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 61,374 | | | | - | | | | 61,374 | | | | 5,409 | | | | - | | | | 66,783 | |
| Deconsolidation of subsidiary | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,075,399 | ) | | | 170,131 | | | | 4,199,445 | | | | 1,294,177 | | | | (45,669 | ) | | | (180,801 | ) | | | 1,067,707 | |
| Balance at January 31, 2024 (unaudited) | | | | | 56,349,183 | | | | 563,492 | | | | - | | | | - | | | | - | | | | - | | | | 804,000 | | | | 15,755 | | | | 2,286,039 | | | | - | | | | (3,483,139 | ) | | | (617,853 | ) | | | - | | | | - | | | | (617,853 | ) |
| | | | | Common Stock | | | Class A Preferred Stock | | | Class B Preferred Stock | | | Shares to be issued | | | Additional
paid-in Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated deficit | | | (Deficit) | | | Non-
controlling interests | | | Development
Reserve | | | Total | |
| | | Note | | Shares | | | US$ | | | Shares | | | US$ | | | Shares | | | US$ | | | Shares | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | |
| Balance at April 30, 2022 (audited) | | | | | 105,723,183 | | | | 564,060 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,242,504 | | | | (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 | | | - | | | | 15,950 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 20,490 | | | | - | | | | - | | | | 36,440 | | | | - | | | | - | | | | 36,440 | |
| Issuance of common shares for service | | 8 | | | 8,800,000 | | | | 5,500 | | | | - | | | | - | | | | - | | | | - | | | | 54,000 | | | | 3,780 | | | | 33,000 | | | | - | | | | - | | | | 42,280 | | | | - | | | | - | | | | 42,280 | |
| Cancellation of common shares | | 8 | | | (58,174,000 | ) | | | (216,370 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 216,370 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Loss for the period | | 8 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (480,657 | ) | | | (480,657 | ) | | | (9,838 | ) | | | - | | | | (490,495 | ) |
| Foreign translation adjustment | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 33,295 | | | | - | | | | 33,295 | | | | 2,302 | | | | - | | | | 35,597 | |
| Effect of dilution of ownership in subsidiary pursuant to issuance of shares | | 8 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (51,632 | ) | | | (883,768 | ) | | | (935,400 | ) | | | 935,400 | | | | - | | | | - | |
| Balance at January 31, 2023 (unaudited) | | | | | 56,349,183 | | | | 369,140 | | | | - | | | | - | | | | - | | | | - | | | | 54,000 | | | | 3,780 | | | | 4,512,364 | | | | (213,947 | ) | | | (5,797,777 | ) | | | (1,126,440 | ) | | | 46,461 | | | | 240,641 | | | | (839,338 | ) |
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
See effect of reverse recapitalization (Note 1)
SENSASURE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
(In U.S. Dollars, except share data or otherwise stated)
| | | | | Nine Months Ended | | | Nine Months Ended | |
| | | | | January 31, | | | January 31, | |
| | | | | 2024 | | | 2023 | |
| | | Note | | (unaudited) | | | (unaudited) | |
| | | | | $ | | | $ | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
| Net loss | | | | | (1,657,176 | ) | | | (490,495 | ) |
| Adjustments for: | | | | | | | | | | |
| Amortization of vested shares | | 8(b) | | | 966,426 | | | | 36,440 | |
| Issuance of shares for services | | 8(b) | | | - | | | | 42,280 | |
| Loss upon deconsolidation | | | | | 519,442 | | | | - | |
| Changes in: | | | | | | | | | | |
| Accounts receivable | | | | | - | | | | - | |
| Prepayments and other receivables | | | | | 465 | | | | (11,446 | ) |
| Accounts payable and accrued liabilities to third parties and a related party | | | | | (9,545 | ) | | | (43,423 | ) |
| Amounts due to related parties | | | | | 59,389 | | | | 65,073 | |
| Long term payable to a related party | | | | | - | | | | (28,673 | ) |
| Net cash used in operating activities | | | | | (120,999 | ) | | | (430,244 | ) |
| | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | |
| Deconsolidation of cash from winding-up subsidiary | | | | | (26,786 | ) | | | - | |
| Net cash used in investing activities | | | | | (26,786 | ) | | | - | |
| | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | |
| Proceeds from subsidiary issuance of shares to noncontrolling interests | | | | | - | | | | 45 | |
| Proceeds from demand loan | | | | | 29,893 | | | | 39,979 | |
| Proceeds from related party loans | | | | | 70,279 | | | | - | |
| Net cash provided by financing activities | | | | | 100,172 | | | | 40,024 | |
| | | | | | | | | | | |
| Effect of exchange rate changes on cash and restricted cash held in trust | | | | | 20,655 | | | | 7,670 | |
| Net decrease in cash and restricted cash held in trust | | | | | (26,958 | ) | | | (382,550 | ) |
| Cash and restricted cash held in trust at the beginning of period | | | | | 26,958 | | | | 437,177 | |
| Cash and restricted cash held in trust at the end of period | | | | | - | | | | 54,627 | |
| | | | | | | | | | | |
| 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)
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
| 1. | DESCRIPTION OF BUSINESS |
SensaSure Technologies, Inc. (“SensaSure”, “Company”, “we”, “us” or “our”) was incorporated on September 8, 2020 under the laws of the State of Nevada.
Sensabues AB (“Sensabues”) was incorporated in the Kingdom of Sweden in November 2009. Until November 1, 2023, Sensabues owned 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.
On December 21, 2020, the Company completed a reverse recapitalization via a share exchange agreement with Sensabues and the shareholders who owned 270,339 common shares that represented 72.82% of the total issued and outstanding common shares in Sensabues. Under the share exchange agreement, the shareholders of Sensabues, agreed to exchange their shares of Sensabues for common shares of SensaSure at an exchange ratio of approximate 1:49.99. Pursuant to the share exchange transactions (see share exchange agreement noted above), SensaSure issued a total of 13,515,183 common shares and the then- shareholders of Sensabues hold their ownership of Sensabues through SensaSure (Note 8 (b)). Upon completion of the share exchange transaction, SensaSure became the controlling shareholder that owned 74.82% the total issued and outstanding common shares in Sensabues and parent company of Sensabues. No goodwill or other intangible assets were recorded during the reverse capitalization.
During April 2021, the Company increased its ownership interest in Sensabues pursuant to private placements completed by Sensabues where 277,296 common shares and 93,032 common shares were issued to the Company and noncontrolling interests respectively. (Note 8 (b)).
During the nine months ended January 31, 2023, the Company increased its ownership interest in Sensabues pursuant to private placements completed by Sensabues where 2,200,000 common shares and 440 common shares were issued to the Company and noncontrolling interests respectively. (Note 8 (b)).
On October 31, 2023, the Company owned 93.53% (93.53% - April 30, 2023) of the total issued and outstanding common shares in Sensabues.
During the three months ended January 31, 2024, the Company began winding-up the business of Sensabues to reduce operating expenses associated with maintaining the exhale breath technology patents. Since then, management of the Company has been in the process of establishing a new business segment to develop energy related businesses which led to the entry into that certain agreement and plan of merger with Verde Bio Holdings, Inc., a Nevada corporation (“Verde”), and Formation Minerals Inc., a Nevada corporation and our wholly-owned subsidiary (“Merger Sub”), as of December 11, 2023, as amended as of February 8, 2024 (the “Merger Agreement”), providing for the merger of Merger Sub with and into Verde, with Verde continuing as the surviving entity (the “Merger”). Subject to the satisfaction or waiver of the closing condition, we expect to close the Merger in the second quarter of calendar year 2024. As of February 26, 2024, the Sensabues business is no longer under the control of the Company and will cease to exist upon the completion of bankruptcy procedures. Following the Merger, we intend to focus on the acquisition and management of high quality, cash flowing oil and gas minerals and royalties under Verde’s current business plan.
| 2. | BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION |
The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. 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.
During the three months ended January 31, 2024, Sensabues was in the process of winding up, therefore the Company lost control of Sensabues for accounting purposes. Sensabues was deconsolidated from the Company’s financial statements retroactively as of November 1, 2023. Any revenue earned or expenses incurred by Sensabues that occurred prior to deconsolidation, on November 1, 2023, is included within the Condensed Consolidated Statement of Loss, Condensed Consolidated Statement of Comprehensive Loss and Condensed Consolidated Statement of Cash Flows.
The unaudited condensed interim consolidated financial statements include the accounts of the Company and Merger Sub. Intercompany accounts and transactions have been eliminated.
Certain prior quarter amounts have been reclassified for consistency with the current period presentation. These reclassifications have no effect on the reported results of the operations or cash flows.
| (b) | Basis of Consolidation |
Prior to November 1, 2023, Sensabues and SensaSure were deemed to be under common control. Accordingly, the combination of the two entities was 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 Sensabues 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 Sensabues held by parties other than SensaSure are presented as non-controlling interests in equity.
Sensabues was deconsolidated from the Company’s financial statements prospectively as of November 1, 2023, pursuant to the winding-up of Sensabues. As a result, the Company lost control of the Sensabues. At January 31, 2024, the assets and liabilities were no longer included within the Company’s consolidated balance sheet. The additional paid-in capital, foreign currency translation reserves, accumulated deficits, non-controlling interests and the development reserve that related to Sensabues were no longer included within the Company’s consolidated balance sheet. The interim condensed consolidated statements of loss included the six months of activities related to Sensabues prior to the winding-up.
Formation Minerals, Inc., is a Nevada corporation and a wholly-owned subsidiary of the Company, formed on December 11, 2023 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Other than the entry into the Merger Agreement, Formation Minerals Inc. has not conducted any activities and had any accounting transactions through January 31, 2024 or the date hereof.
| (c) | Liquidity and going concern |
Until November 2023, SensaSure was a medical technology or “MedTech” company that supplied 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, and it can collect, extract, detect and identify non-volatile compounds present in exhaled breath by utilizing existing lab-based testing infrastructure and procedures. ExaBreath is applicable in toxicology, pharmacology, and clinical biochemistry. Sensabues, SensaSure’s then-wholly-owned subsidiary, owned 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. During the nine months ended January 31, 2024, due to the difficulties in raising adequate capital, the significant cost of maintaining the patents, and delays in engaging appropriate commercialization partners, the management of SensaSure believed that the current business of commercializing the exhale breath technology patents was no longer feasible. SensaSure began winding-up the business of Sensabues to reduce operating expenses associated with maintaining the exhale breath technology patents. Since then, management of SensaSure has been in the process of establishing a new business segment to develop energy related businesses which led to the entry into the Merger Agreement. (Note 1).
The Company has incurred recurring losses from operations, and as at January 31, 2024 and April 30, 2023, had an accumulated deficit of $3,483,139 and $6,027,209, respectively, a working capital deficiency of $617,853 and $1,061,593, respectively. The Company, during year ended April 30, 2023, obtained working capital loans from related parties in the amount of $39,979. During nine months ended January 31, 2024, the Company obtained working capital loans from related parties and third party in the amount of $100,172. On March 30, 2021, Sensabues, through an agreement with a vendor that is controlled by a then-director of Sensabues, modified the payment term of payable balance in the amount of $333,744 to settle the payable balance in seven installments, the payable balance became due on April 30, 2023. For three months ended January 31, 2024, the balance owed by Sensabues was deconsolidated from the interim condensed consolidated balance sheet. (Note 7 (c)).
The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the market demands, 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 its future operations primarily through cash flow from certain the stockholders of the Company and through debt or equity financings. 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, certain stockholders of the Company indicated the intent and ability to provide additional equity financing.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Until November 1, 2023, Company sold 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 recognized 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 stockholder loans completed by the Company during year ended April 30, 2023 and quarter ended January 31, 2024.
| (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 U.S. 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.
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.
| (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.
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.
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 shares of Company common stock, par value $0.01 per share (“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 January 31, 2024, April 30, 2023 or January 31, 2023.
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. Until November 1, 2023, all revenues were earned in Sweden and significantly all of the assets of the Company were used for the Company’s medical device design and research and distribution activities that was carried out in Sweden. The Company has one reportable segment and operating segment. During the three months ended January 31, 2024, the Company began winding-up the business of Sensabues and entered into the Merger Agreement. For three and nine months ended January 31, 2024, the Company had one reportable segment and operating section.
| (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 $793,000 for 12,200,000 common shares subscribed, issued 11,780,000 common shares. The proceeds received were reflected as an increase in common stock in amount of $117,800 and additional paid-in capital in amount of $647,900 respectively. The Company recognized a subscription receivable and shares to be issued in the amount of $27,300 at April 30, 2021. The number of shares to be issued was 420,000. During the year ended April 30, 2022, the Company received the subscription proceeds and issued 420,000 common shares accordingly (Note 8 (b)).
| 5. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES TO THIRD PARTIES |
| | | As of | |
| | | January 31,
2024 | | | April 30,
2023 | |
| Accounts payable | | $ | 20,000 | | | $ | 53,868 | |
| Accrued liabilities | | | 43,500 | | | | 52,000 | |
| | | $ | 63,500 | | | $ | 105,868 | |
Prior to November 1, 2023 and at April 30, 2023, the Company’s then Swedish subsidiary, Sensabues, had balances in unsecured demand loans from several noncontrolling interests in Sensabues and a stockholder totaling $NIL and $28,550 (SEK 293,000), respectively. The loans had an interest rate of 20% per annum. For the nine months ended January 31, 2024 and 2023, interest expense was $2,719 and $4,109, respectively. The balances of loans owed to the those noncontrolling interests in Sensabues were deconsolidated from the interim condensed consolidated balance sheet pursuant to the winding up of Sensabues.
Prior to November 1, 2023 and at April 30, 2023, the Company’s then Swedish subsidiary, Sensabues, had balances in unsecured demand loans from a party who has a noncontrolling interests in Sensabues of $NIL and $44,846 (SEK 460,247), respectively. The loans had an interest rate of 2% per annum. For the nine months ended January 31, 2024 and 2023, interest expense was $427 and $679, respectively. The balances of loan owed to the noncontrolling interests in Sensabues was deconsolidated from the interim condensed consolidated balance sheet pursuant to the winding up of Sensabues.
At January 31, 2024, the Company had balances in demand loans in the amount of $100,172 from several stockholders and a third party (April 30, 2023 - $39,979). Those loans are unsecured, non-interest bearing and due on demand. (Note 2(b)).
| 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 January 31, 2024 and April 30, 2023, salary payable to the former Chief Executive Officer of the Company who was also a director of Sensabues included in amounts due to related parties was $182,885 and $312,347, respectively. The balance owed to the director by Sensabues was deconsolidated from the interim condensed consolidated balance sheet pursuant to the winding up of Sensabues.
| (b) | Loans from related parties |
At January 31, 2024 and April 30, 2023, balance of loan from a former director of SensaSure was $Nil and $53,591 (SEK550,000), respectively. The loan is unsecured, bearing interest at 2% per annum and due on demand. The interest expense was $510 and $867 for nine months ended January 31, 2024 and 2023, respectively. The balance owed to the former director by Sensabues was deconsolidated from the interim condensed consolidated balance sheet pursuant to the winding up of Sensabues. (Note 2(b)).
At January 31, 2024 and April 30, 2023, balances of loan from a former director of SensaSure were $Nil and $29,232 (SEK300,000), respectively. The loan is unsecured, bearing interest at 2% per annum and due on demand. The interest expense was $278 and $473 for nine months ended January 31, 2024 and 2023, respectively. The balance owed to the former director by Sensabues was deconsolidated from the interim condensed consolidated balance sheet pursuant to the winding up of Sensabues.
| (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 Sensabues.
As at January 31, 2024 and April 30, 2023, the interest accrual balance related to overdue invoices from the related party vendor was $138,483 and was included in accounts payable and accrued liabilities to a related party.
As at January 31, 2024, the total accounts payable and accrued liabilities to the related party was $271,296 (April 30, 2023 - $486,826). The balance owed to the related party by Sensabues was deconsolidated from the interim condensed consolidated balance sheet pursuant to the winding up of Sensabues.
For the nine months ended January 31, 2024, the total purchase from the related party representing the research and development and patent expenses was in amount of $10,145 (January 31, 2023 - $74,171).
On March 30, 2021, Sensabues, through a settlement agreement with the vendor, modified the payment term of accounts payable balance related to professional services provided in the amount of $333,744 (SEK2,798,280), and the parties agreed to settle the accounts payable balance in seven installments (Note 2 (c)) and the payable balance became current on April 30, 2023. Management has evaluated the terms of the agreement in accordance with the guidance provided by ASC 470 and concluded that there was no extinguishment accounting applicable to the modification. The payment modification did not include overdue invoices related interest accruals. At January 31, 2024, the accounts payable balance related to professional services provided by the related party vendor that was not included in the above settlement was $Nil (April 30, 2023 - $6,701).
At January 31, 2024, the current portion of the modified payable balance was $132,813 (April 30, 2023 - $240,012) and the long term portion was $nil (Aril 30, 2023 - $Nil).
| 8. | STOCKHOLDERS’ DEFICIENCY |
| (a) | Authorized and Issued Stock |
At January 31, 2024, the Company was authorized to issue 250,000,000 (April 30, 2023 – 250,000,000) common shares.
At January 31, 2024, 56,349,183 (April 30, 2023 – 56,349,183) common shares were issued and outstanding. (Note 8 (b)).
During the year ended April 30, 2023, we issued 54,000 common shares for services provided by the then directors. The fair value of the share-based compensation was $3,780 and was determined by using the most recent private placement price at $0.07 per share. The fair value of the share-based compensation was included in the general and administrative expenses as well as a credit made in shares to be issued. As at April 30, 2023, service related vesting conditions were met for 750,000 common shares, but were not yet issued and therefore were included in shares to be issued. The fair value of the share-based compensation was in the amount of $11,975. The fair value of the share-based compensation was included in general and admirative expenses, as well as a credit made in shares to be issued.
At April 30, 2023, there were 2,800,000 unvested common shares from the conversion of previously issued shares of Class B preferred stock during the year ended April 30, 2022. At April 30, 2023, there were 750,000 vested and to be issued common shares from the conversion of previously issued shares of Class B preferred stock during year ended April 30, 2022. The dollar value associated with those shares in the amount of $35,761 was not included in common stock.
During the three months ended January 31, 2023, the Company issued 8,800,000 common shares to a then director of the Company, subject to a 24-month vesting term commencing on December 15, 2022. During the year ended April 30, 2023, 1,650,000 common shares vested and the fair value of the share-based compensation was $115,500 and was included in general and administrative expenses as well as a credit made in common stock in amount of 16,500 and additional paid-in capital in amount of 99,000, respectively. The fair value of the common shares issued was determined by using the most recent private placement price at $0.07 per share. During the nine months ended January 31, 2023, 550,000 common shares vested and the Company recorded $5,500 and $33,000] in common stock and additional paid-in capital, respectively. During the three months ended January 31, 2024, the board of directors of the Company approved the full vesting of the 8,800,000 common shares issued to a then-director of the Company, therefore, the remaining 4,950,000 common shares vested and the Company recorded $49,500 and $297,000 in common stock and additional paid-in capital, respectively.
During the three months ended January 31, 2024, the Company recognized $250,326 in share-based compensation and included in general and administrative expenses, as well as made a credit of $35,761 and $214,565 for those vested shares in common stock and additional paid-in capital, respectively.
At April 30, 2023, there were 3,080,000 unvested common shares that were issued to a consultant of the Company. The dollar value associated with those unvested shares in the amount of $30,800 was not included in common stock. During the three months ended January 31, 2024, the Company recognized $215,600 in share-based compensation and included in general and administrative expenses, as well as made a credit of $30,800 and $184,800 for those vested common shares and additional paid-in capital, respectively.
During the nine months ended January 31, 2024, the Company recognized $500,500 in share-based compensation and included in general and administrative expenses, as well as made a credit of $71,500 and $419,000 for those vested shares in common stock and additional paid-in capital, respectively.
At January 31, 2024 and April 30, 2023, there were Nil and 7,150,000, respectively, unvested common shares that were issued to the then director of the Company. The dollar value associated with those unvested shares in the amount of $Nil (April 30, 2023 - $71,500) was not included in common stock.
| (c) | Noncontrolling interest |
For the quarter ended January 31, 2024, the balance of noncontrolling interest was deconsolidated from the interim consolidated balance sheet pursuant to the winding up of Sensabues.
In compliance with the Swedish Annual Accounts 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 $59,804 from development reserve to accumulated deficits (2022 – $108,102). For the quarter ended January 31, 2024, the balance of development reserve was deconsolidated from the interim consolidated balance sheet pursuant to the winding up of Sensabues.
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 January 31, 2024 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.
The Company’s management has evaluated subsequent events up to March 25, 2024, the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events that are needed to be disclosed:
On December 11, 2023, the Company entered into the Merger Agreement, providing for the Merger. At the closing, the Verde stockholders will be entitled to receive a number of shares of the Company’s capital stock having an aggregate value equal to $10,000,000. If the Merger is completed pursuant to the Merger Agreement, upon the effectiveness of the Merger, as consideration of the Merger: (i) each holder of Verde’s common stock, par value $0.001 per share (“Verde Common Stock”) will be entitled to receive for every 275 shares of Verde Common Stock, one common share; (ii) each holder of Verde’s series A convertible preferred stock, par value $0.001 per share (“Verde Series A Stock) will be entitled to receive for every 275 shares of Verde Series A Stock, one share of a newly designated class of Company preferred stock known as the Class A convertible preferred stock, par value $0.001 per share, of the Company; and (iii) each holder of Verde’s series C convertible preferred stock, par value $0.001 per share (“Verde Series C Stock”) will be entitled to receive for every 0.15 shares of Verde Series C Stock one share of a newly designated class of Company preferred stock known as the Class B preferred stock, par value $0.001 per share, of the Company, in each case based on the market price of the Company’s common stock of $0.75 per share, and the number of fully-diluted shares of Verde Common Stock outstanding, as of February 18, 2024. If the market price of the common shares or the number of fully-diluted shares of Verde Common Stock changes before the effective time, then the terms of the Merger will remain the same, but the per share Merger consideration payable will change in accordance with the provisions of the Merger Agreement. Subject to the satisfaction or waiver of closing conditions, the Merger is expected to close in the second calendar quarter of 2024.
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., a Nevada corporation and its subsidiaries. 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 Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
Until November 2023, SensaSure was a medical technology or “MedTech” company that supplied 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, and it can collect, extract, detect and identify non-volatile compounds present in exhaled breath by utilizing existing lab-based testing infrastructure and procedures. ExaBreath is applicable in toxicology, pharmacology, and clinical biochemistry. Sensabues AB (“Sensabues”), SensaSure’s wholly-owned subsidiary, 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. During the nine months ended January 31, 2024, due to the difficulties in raising adequate capital, the significant cost of maintaining the patents, and delays in engaging appropriate commercialization partners, the management of SensaSure believed that the current business of commercializing the exhale breath technology patents was no longer feasible. SensaSure began winding-up the business of Sensabues to reduce operating expenses associated with maintaining the exhale breath technology patents. Since then, management of SensaSure has been in the process of establishing a new business segment to develop energy related businesses which led to the entry into that certain agreement and plan of merger with Verde Bio Holdings, Inc., a Nevada corporation (“Verde”), and Formation Minerals Inc., a Nevada corporation and our wholly-owned subsidiary (“Merger Sub”), as of December 11, 2023, as amended as of February 8, 2024 (the “Merger Agreement”), providing for the merger of Merger Sub with and into Verde, with Verde continuing as the surviving entity (the “Merger”). Subject to the satisfaction or waiver of the closing conditions, we expect to close the Merger in the second quarter of calendar year 2024. As of February 26, 2024, the Sensabues business is no longer under the control of the Company and will cease to exist upon the completion of bankruptcy procedures. Following the Merger, we intend to focus on the acquisition and management of high quality, cash flowing oil and gas minerals and royalties under Verde’s current business plan.
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 (“U.S. GAAP”) and are expressed in United States Dollars. Significant accounting policies are summarized below:
Until November 1, 2023, the Company sold 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 stockholders loans financing completed by the Company during year ended April 30, 2023 and quarter ended January 31, 2024 that were held in an escrow account.
| (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 U.S. 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.
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 related filing costs are charged to operations as incurred as the Company is uncertain as to any future economic benefit.
| (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 Sensabues 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.
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.
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 shares of Company common stock, par value $0.01 per share (“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 January 31, 2024, April 30, 2023 and January 31, 2023.
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. Until November 1, 2023, 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. Until November 1, 2023, the Company had one reportable segment and operating segment: Medical device design and research and distribution. During the three months ended January 31, 2024, the Company began winding-up the business of Sensabues and entered into the Merger Agreement.
| (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.
Consolidated Financial Position
The following table is from our unaudited condensed interim balance sheet as of January 31, 2024.
| | | At January 31,
2024
(unaudited) | | | At April 30,
2023
(audited) | |
| | | $ | | | $ | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash | | | - | | | | 26,786 | |
| Restricted cash held in trust | | | - | | | | 172 | |
| Accounts receivable | | | - | | | | - | |
| Subscription receivable | | | - | | | | - | |
| Prepayments and other receivables | | | - | | | | 12,688 | |
| Total current assets | | | - | | | | 39,646 | |
| Total assets | | | - | | | | 39,646 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFIECIENCY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | | 63,500 | | | | 105,868 | |
| Accounts payable and accrued liabilities to a related party | | | 271,296 | | | | 486,826 | |
| Demand Loans | | | 100,172 | | | | 113,375 | |
| Loans from related parties | | | - | | | | 82,823 | |
| Amount due to related parties | | | 182,885 | | | | 312,347 | |
| Total current liabilities | | | 671,853 | | | | 1,101,239 | |
| | | | | | | | | |
| Total liabilities | | | 671,853 | | | | 1,101,239 | |
| | | | | | | | | |
| STOCKHOLDERS’ DEFICIECY | | | | | | | | |
| Class A Preferred stock, $0.001 par value, 5,000,000 authorized as at October 31, 2023 and April 30, 2023, respectively. Issued and outstanding shares: Nil and Nil as at October 31, 2023 and April 30, 2023, respectively. | | | - | | | | - | |
| Class B Preferred stock, $0.001 par value, 5,000,000 authorized as at October 31, 2023 and April 30, 2023, respectively. Issued and outstanding shares: Nil and Nil as at October 31, 2023 and April 30, 2023, respectively. | | | - | | | | - | |
| Common stock, $0.01 par value, 250,000,000 authorized as at October 31, 2023 and April 30, 2023, respectively. Issued and outstanding common shares: and 56,349,183 as at October 31, 2023 and 56,349,183 at April 30, 2023, respectively. | | | 563,492 | | | | 425,431 | |
| Shares to be issued (804,000 and 804,000 common shares at October, 2023 and April 30, 2023 respectively) | | | 15,755 | | | | 15,755 | |
| Additional paid-in capital | | | 2,286,039 | | | | 4,533,073 | |
| Foreign currency translation reserve | | | - | | | | (231,505 | ) |
| Accumulated deficit | | | (3,483,139 | ) | | | (6,027,209 | ) |
| Total deficit attributable to equity holders of the Company | | | (617,853 | ) | | | (1,284,455 | ) |
| Total equity attributable to non-controlling interests | | | - | | | | 42,061 | |
| Development reserve | | | - | | | | 180,801 | |
| Total deficit | | | (617,853 | ) | | | (1,061,593 | ) |
| Total liabilities and stockholders’ deficiency | | | - | | | | 39,646 | |
As of January 31, 2024, we had total assets of $0 compared to $39,646 at April 30, 2023. The decrease of $39,646 during the nine month period was due primarily to the winding up of Sensabues.
Our current liabilities as of January 31, 2024 were $617,853 compared to $1,101,239 at April 30, 2023. The decrease in our liabilities of $483,386 was mainly attributable to deconsolidation of Sensabues. We had no long term liabilities at January 31, 2024 and April 30, 2023.
Results of Operations
The following provides the details for the results of our operations for the periods ended January 31, 2024 and 2023.
| | | Note | | | Three Months
Ended
January 31,
2024
(unaudited) | | | Three Months
Ended
January 31,
2023
(unaudited) | | | Nine Months
Ended
January 31,
2024
(unaudited) | | | Nine Months
Ended
January 31,
2023
(unaudited) | |
| | | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | |
| Revenue | | | 3(a) | | | | - | | | | - | | | | 1,146 | | | | 4,414 | |
| | | | | | | | | | | | | | | | | | | | | |
| Expenses | | | | | | | | | | | | | | | | | | | | |
| General and administrative expense | | | 8(b) | | | | (828,374 | ) | | | (100,638 | ) | | | (1,124,726 | ) | | | (414,547 | ) |
| Research and development expense | | | 3(f), 7 | | | | - | | | | (54,750 | ) | | | (10,145 | ) | | | (74,171 | ) |
| TOTAL OPERATING EXPENSES | | | | | | | (828,374 | ) | | | (155,388 | ) | | | (1,134,871 | ) | | | (488,718 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Interest expenses, net | | | 6,7 | | | | - | | | | (2,059 | ) | | | (4,009 | ) | | | (6,191 | ) |
| Loss on deconsolidation of subsidiary | | | | | | | (519,442 | ) | | | - | | | | (519,442 | ) | | | - | |
| NET LOSS BEFORE INCOME TAXES | | | | | | | (1,347,816 | ) | | | (157,447 | ) | | | (1,657,176 | ) | | | (490,495 | ) |
| Income taxes | | | | | | | | | | | | | | | | | | | | |
| NET LOSS | | | | | | | (1,347,816 | ) | | | (157,447 | ) | | | (1,657,176 | ) | | | (490,495 | ) |
| Less: net loss attributable to non-controlling interests | | | | | | | - | | | | 4,041 | | | | 1,801 | | | | 9,838 | |
| Net loss attributable to the Company | | | | | | | (1,347,816 | ) | | | (153,406 | ) | | | (1,655,375 | ) | | | (480,657 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted loss per share | | | | | | | (0.024 | ) | | | (0.002 | ) | | | (0.029 | ) | | | (0.005 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | | | | | 56,349,183 | | | | 81,764,161 | | | | 56,349,183 | | | | 97,736,842 | |
The condensed interim consolidated statements of comprehensive loss for the three months ended January 31, 2024 over 2023 in the table below reflect the total comprehensive loss for the period and the amount attributable to common stockholders and non- controlling interests.
| | | Three Months
Ended
January 31,
2024
(unaudited) | | | Three Months
Ended
January 31,
2023
(unaudited) | | | Six Months
Ended
January 31,
2024
(unaudited) | | | Six Months
Ended
January 31,
2023
(unaudited) | |
| | | $ | | | $ | | | $ | | | $ | |
| Net loss for the period | | | (1,347,816 | ) | | | (157,447 | ) | | | (1,657,176 | ) | | | (490,495 | ) |
| Foreign currency translation adjustments | | | - | | | | 37,760 | | | | 66,783 | | | | 35,597 | |
| Deconsolidation of subsidiary | | | - | | | | - | | | | (66,783 | ) | | | - | |
| Total comprehensive loss for the period | | | (1,347,816 | ) | | | (195,207 | ) | | | (1,657,176 | ) | | | (454,898 | ) |
| | | | | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | | | | |
| Net loss attributable to the Company | | | (1,347,816 | ) | | | (153,406 | ) | | | (1,655,375 | ) | | | (480,657 | ) |
| Foreign currency translation adjustments attributable to the Company | | | - | | | | (35,317 | ) | | | 61,374 | | | | 33,295 | |
| Deconsolidation of subsidiary | | | - | | | | - | | | | (61,374 | ) | | | - | |
| Net loss attributable to non-controlling interests | | | - | | | | (4,041 | ) | | | (1,801 | ) | | | (9,838 | ) |
| Foreign currency translation adjustments attributable to non-controlling interests | | | - | | | | (2,443 | ) | | | 5,409 | | | | 2,302 | |
| Deconsolidation of subsidiary | | | - | | | | - | | | | (5,409 | ) | | | - | |
| | | | (1,347,816 | ) | | | (195,207 | ) | | | (1,657,176 | ) | | | (454,898 | ) |
At January 31, 2024, we had a total of 56,349,183 common shares outstanding.
| | | | | Common Stock | | | Class A
Preferred Stock | | | Class B Preferred Stock | | | Shares to be issued | | | Additional
paid-in Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated deficit | | | (Deficit) | | | Non-
controlling interests | | | Development
Reserve | | | Total | |
| | | Note | | Shares | | | $ | | | Shares | | | $ | | | Shares | | | $ | | | Shares | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Balance at October 31, 2023 (unaudited) | | | | | 56,349,183 | | | | 447,431 | | | | - | | | | - | | | | - | | | | - | | | | 804,000 | | | | 15,755 | | | | 4,665,073 | | | | (170,131 | ) | | | (6,334,768 | ) | | | (1,376,640 | ) | | | 45,669 | | | | 180,801 | | | | (1,150,170 | ) |
| Amortization of vested shares | | | | | - | | | | 116,061 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 696,365 | | | | - | | | | - | | | | 812,426 | | | | - | | | | - | | | | 812,426 | |
| Loss for the period | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,347,816 | ) | | | (1,347,816 | ) | | | - | | | | - | | | | (1,347,816 | ) |
| Foreign translation adjustment | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Deconsolidation of subsidiary | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,075,399 | ) | | | 170,131 | | | | 4,199,445 | | | | 1,294,177 | | | | (45,669 | ) | | | (180,801 | ) | | | 1,067,707 | |
| Balance at January 31, 2024 (unaudited) | | | | | 56,349,183 | | | | 563,492 | | | | - | | | | - | | | | - | | | | - | | | | 804,000 | | | | 15,755 | | | | 2,286,039 | | | | - | | | | (3,483,139 | ) | | | (617,853 | ) | | | - | | | | - | | | | (617,853 | ) |
| | | | | Common Stock | | | Class A Preferred Stock | | | Class B Preferred Stock | | | Shares to be issued | | | Additional
paid-in Capital | | | Foreign Currency Translation Reserve | | | Accumulated deficit | | | (Deficit) | | | Non-
controlling interests | | | Development
Reserve | | | Total | |
| | | Note | | Shares | | | US$ | | | Shares | | | US$ | | | Shares | | | US$ | | | Shares | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | |
Balance at
October 31, 2022 (unaudited) | | | | | 105,723,183 | | | | 576,820 | | | | - | | | | - | | | | - | | | | - | | | | 36,000 | | | | 2,520 | | | | 4,258,896 | | | | (178,630 | ) | | | (5,644,371 | ) | | | (984,765 | ) | | | 52,945 | | | | 240,641 | | | | (691,179 | ) |
| Subsidiary issuance of shares pursuant to private placement | | 8 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Amortization of vested shares | | 8 | | | - | | | | 3,190 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,098 | | | | - | | | | - | | | | 7,288 | | | | - | | | | - | | | | 7,288 | |
| Issuance of common shares for service | | 8 | | | 8,800,000 | | | | 5,500 | | | | - | | | | - | | | | - | | | | - | | | | 18,000 | | | | 1,260 | | | | 33,000 | | | | - | | | | - | | | | 39,760 | | | | - | | | | - | | | | 39,760 | |
| Cancellation of common shares | | | | | (58,174,000 | ) | | | (216,370 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 216,370 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Loss for the period | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (153,406 | ) | | | (153,406 | ) | | | (4,041 | ) | | | - | | | | (157,447 | ) |
| Foreign translation adjustment | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (35,317 | ) | | | - | | | | (35,317 | ) | | | (2,443 | ) | | | - | | | | (37,760 | ) |
| Effect of dilution of ownership in subsidiary pursuant to issuance of shares | | 8 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Balance at
January 31, 2023 (unaudited) | | | | | 56,349,183 | | | | 369,140 | | | | - | | | | - | | | | - | | | | - | | | | 54,000 | | | | 3,780 | | | | 4,512,364 | | | | (213,947 | ) | | | (5,797,777 | ) | | | (1,126,440 | ) | | | 46,461 | | | | 240,641 | | | | (839,338 | ) |
| | | | | Common Stock | | | Class A
Preferred Stock | | | Class B
Preferred Stock | | | Shares to be
issued | | | Additional
paid-in
Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated
deficit | | | (Deficit) | | | 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 | | | | | - | | | | 138,601 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 828,365 | | | | - | | | | - | | | | 966,426 | | | | - | | | | - | | | | 966,426 | |
| Loss for the period | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,655,375 | ) | | | (1,655,375 | ) | | | (1,801 | ) | | | - | | | | (1,657,176 | ) |
| Foreign translation adjustment | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 61,374 | | | | - | | | | 61,374 | | | | 5,409 | | | | - | | | | 66,783 | |
| | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,075,399 | ) | | | 170,131 | | | | 4,199,445 | | | | 1,294,177 | | | | (45,669 | ) | | | (180,801 | ) | | | 1,067,707 | |
| Balance at January 31, 2024 (unaudited) | | | | | 56,349,183 | | | | 563,492 | | | | - | | | | - | | | | - | | | | - | | | | 804,000 | | | | 15,755 | | | | 2,286,039 | | | | - | | | | (3,483,139 | ) | | | (617,853 | ) | | | - | | | | - | | | | (617,853 | ) |
| | | | | Common Stock | | | Class A
Preferred
Stock | | | Class B
Preferred
Stock | | | Shares to be
issued | | | Additional
paid-in
Capital | | | Foreign
Currency
Translation
Reserve | | | Accumulated
deficit | | | (Deficit) | | | Non-
controlling
interests | | | Development
Reserve | | | Total | |
| | | Note | | Shares | | | US$ | | | Shares | | | US $ | | | Shares | | | US $ | | | Shares | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | |
Balance at
April 30, 2022 (audited) | | | | | 105,723,183 | | | | 564,060 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,242,504 | | | | (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 | | | - | | | | 15,950 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 20,490 | | | | - | | | | - | | | | 36,440 | | | | - | | | | - | | | | 36,440 | |
| Issuance of common shares for service | | 8 | | | 8,800,000 | | | | 5,500 | | | | | | | | | | | | | | | | | | | | 54,000 | | | | 3,780 | | | | 33,000 | | | | - | | | | - | | | | 42,280 | | | | - | | | | - | | | | 42,280 | |
| Cancellation of common shares | | 8 | | | (58,174,000 | ) | | | (216,370 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 216,370 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Loss for the period | | 8 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (480,657 | ) | | | (480,657 | ) | | | (9,838 | ) | | | - | | | | (490,495 | ) |
| Foreign translation adjustment | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 33,295 | | | | - | | | | 33,295 | | | | 2,302 | | | | - | | | | 35,597 | |
| Effect of dilution of ownership in subsidiary pursuant to issuance of shares | | 8 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (51,632 | ) | | | (883,768 | ) | | | (935,400 | ) | | | 935,400 | | | | - | | | | - | |
| Balance at January 31, 2023 (unaudited) | | | | | 56,349,183 | | | | 369,140 | | | | - | | | | - | | | | - | | | | - | | | | 54,000 | | | | 3,780 | | | | 4,512,364 | | | | (213,947 | ) | | | (5,797,777 | ) | | | (1,126,440 | ) | | | 46,461 | | | | 240,641 | | | | (839,338 | ) |
Comparative Results for the three months ended January 31, 2024 and 2023
The Company had revenue from sales for the three months period ended January 31, 2024 of $0. The loss per share, both basic and diluted, was $0.024 (January 31, 2023 – $0.002). This was anticipated by the Company since the efforts of the Company have been focused on establishing a new business strategy and updating the Company’s operations.
For the three month period ended January 31, 2024 we had a revenue of $0 which is the same revenue from the same period ended January 31, 2023 which had a revenue in the amount of $0.
For the three month period ended January 31, 2024, our total general administrative expenses and research and development expenses were $828,374 (January 31, 2023 - $155,388).The increase was mainly due to share-based compensation expenses.
Comparative Results for the nine months ended January 31, 2024 and 2023
For the nine month period ended January 31, 2024 we had a revenue of $1,146 which is a decrease in revenue from the same period ended January 31, 2023 which had a revenue of $4,414. This was due to the delays in engaging appropriate commercialization partners to develop exhale breath technology. At January 31, 2024, the loss per share, both basic and diluted, was $0.029 (January 31, 2023 – $0.005). This was anticipated by the Company since the efforts of the Company have been focused on establishing a new business strategy.
For the nine month period ended January 31, 2024, our total general administrative expenses and research and development expenses have increased and were in the amount of $1,134,871 (January 31, 2023 - $488,718). The increase in costs is largely due to increased share based compensation expense.
Liquidity and Capital Resources
Our cash flows used in operating activities for the nine month period ended January 31, 2024 compared to the same period in 2023 reflects a decrease of $309,245 net cash used in operating activities. Our net cash provided by financing activities reflects an increase of $60,148 for the nine month period ended January 31, 2024 compared to the same period in 2023. Cash and restricted cash held in trust at the beginning of the period ended January 31, 2024 was $13,479 compared to $46,419 cash and restricted cash held in trust at the beginning of the same period in 2023. Cash and restricted cash held in trust at the end of the period ended January 31, 2024 was $0 compared to $54,627 cash and restricted cash held in trust at the end of the same period in 2023. Our principal cash requirements are to finance the growth of our operations, including working capital and capital expenditures and for other general corporate purposes. Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities and the timing of introductions of new products and operations. Equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.
Due to the difficulties in raising adequate capital, the significant cost of maintaining the patents, and delays in engaging appropriate commercialization partners, the management of Sensasure believes that the current business of commercializing the exhale breath technology patents was no longer feasible. We began winding-up the business of Sensabues to reduce operating expenses associated with maintaining the exhale breath technology patents. Since then, management of Sensasure has been in the process of establishing a new business segment to develop energy related businesses which led to the entry into the Merger Agreement. As of February 26, 2024, the Sensabues business is no longer under the control of Sensasure and will cease to exist upon the completion of bankruptcy procedures. Our management expects that new opportunities will present themselves as a result of the Merger in the oil, gas and mineral industries, increasing our presence and reputation in the energy space more broadly.
The table below provides the unaudited condensed interim consolidated statements of cash flows for the nine months ended January 31, 2024 and 2023.
| | | | | | Nine Months | | | Nine Months | |
| | | | | | Ended | | | Ended | |
| | | | | | January 31, | | | January 31, | |
| | | | | | 2024 | | | 2023 | |
| | | Note | | | (unaudited) | | | (unaudited) | |
| | | | | | $ | | | $ | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |
| Net loss | | | | | | | (1,657,176 | ) | | | (490,495 | ) |
| Adjustments for: | | | | | | | | | | | | |
| Amortization of vested shares | | | 8(b) | | | | 966,426 | | | | 36,440 | |
| Issuance of shares for services | | | 8(b) | | | | - | | | | 42,280 | |
| Loss upon deconsolidation | | | | | | | 519,442 | | | | - | |
| Changes in: | | | | | | | | | | | | |
| Accounts receivable | | | | | | | - | | | | - | |
| Prepayments and other receivables | | | | | | | 465 | | | | (11,446 | |
| Accounts payable and accrued liabilities to third parties and a related party | | | | | | | (9,545 | ) | | | (43,423 | ) |
| Amounts due to related parties | | | | | | | 59,389 | | | | 65,073 | |
| Long term payable to a related party | | | | | | | - | | | | (28,673 | ) |
| Net cash used in operating activities | | | | | | | (120,999 | ) | | | (430,244 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | |
| Deconsolidation of cash from winding-up subsidiary | | | | | | | (26,786 | ) | | | - | |
| Net cash used in investing activities | | | | | | | (26,786 | ) | | | - | |
| | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from subsidiary issuance of shares to noncontrolling interests | | | | | | | - | | | | 45 | |
| Proceeds from demand loan | | | | | | | 29,893 | | | | 39,979 | |
| Proceeds from related party loans | | | | | | | 70,279 | | | | - | |
| Net cash provided by financing activities | | | | | | | 100,172 | | | | 40,024 | |
| | | | | | | | | | | | | |
| Effect of exchange rate changes on cash and restricted cash held in trust | | | | | | | 20,655 | | | | 7,670 | |
| Net decrease in cash and restricted cash held in trust | | | | | | | (26,958 | ) | | | (382,550 | ) |
| Cash and restricted cash held in trust at the beginning of period | | | | | | | 26,958 | | | | 437,177 | |
| Cash and restricted cash held in trust at the end of period | | | | | | | - | | | | 54,627 | |
| | | | | | | | | | | | | |
| 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 nine month period ended January 31, 2024, we have made no material changes or additions with regard to such estimates and judgments.
Prior to November 1, 2023, Sensabues and SensaSure were deemed to be under common control. Accordingly, the combination of the two entities was 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 Sensabues 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 Sensabues held by parties other than SensaSure are presented as non-controlling interests in equity.
Sensabues was deconsolidated from the Company’s financial statements prospectively as of November 1, 2023, pursuant to the winding-up of Sensabues. As a result, the Company lost control of the Sensabues. At January 31, 2024, the assets and liabilities were no longer included within the Company’s consolidated balance sheet. The additional paid-in capital, foreign currency translation reserves, accumulated deficits, non-controlling interests and the development reserve that related to Sensabues were no longer included within the Company’s consolidated balance sheet. The interim condensed consolidated statements of loss included the six months of activities related to Sensabues prior to the winding-up.
Off-Balance Sheet Arrangements
As of January 31, 2024, we did not have any off-balance sheet arrangements and did not have any material commitments or contractual obligations, other the Merger Agreement.
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 who also serves as its Chief Financial Officer, 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 over financial reporting 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 Company’s Chief Executive Officer who also acts as our Chief Financial Officer in consultation with the Company’s independent public accounting firm, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, and identified certain matters involving internal controls and procedures that the Company’s management considered to be material weaknesses as described in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2023, under the standards of the Public Company Accounting Oversight Board. The Company’s management believes that these material weaknesses did not have an effect on the Company’s financial results. However, the Company’s management believes that these material weaknesses resulted in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in the Company’s financial statements in future periods. The Company’s management recognizes that its controls and procedures would be substantially improved if the Company had adequate staffing and an audit committee and as such is actively seeking to remediate this issue.
Based on the foregoing, our Chief Executive Officer who also acts as out Chief Financial Officer concluded that, as of January 31, 2024, our disclosure controls and procedures were ineffective 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.
As the Company grows and operations increase, it is important for management to establish, document and communicate consistent processes over financial reporting to ensure accuracy over financial data and to prevent and detect fraud. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, as the Company grows and operations increase and as sufficient funds become available to us, we plan to:
| ● | increase our personnel resources and technical accounting expertise within the accounting function, including hiring a chief financial officer, to allow for sufficient oversight and segregation of duties consistent with control objectives; and |
| ● | recruit and appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures, such as reviewing and approving estimates and assumptions made by management when funds are available to us. |
We intend to work as quickly as possible to implement these initiatives; however, the lack of adequate working capital and positive cash flow from operations will likely slow this implementation.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the three month period ended January 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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 Quarterly Report include the risk factors described in our Annual Report on Form 10-K filed with the SEC on August 14, 2023 and our Registration Statement on Form S-4 filed with the SEC on March 4, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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 |
| | | |
| 2.1 | | Agreement and Plan of Merger, dated as of December 11, 2023, between SensaSure Technologies Inc., Formation Minerals Inc., and Verde Bio Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on December 15, 2023). |
| | | |
| 2.2 | | Amendment to Agreement and Plan of Merger, dated February 8, 2024 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on February 13, 2024). |
| | | |
| 3.1 | | Articles of Incorporation (Incorporated by reference as Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed on October 4, 2021). |
| | | |
| 3.2 | | Amended Articles of Incorporation (Incorporated by reference as Exhibit 3.2 of the Company’s Registration Statement on Form S-1 filed on October 4, 2021). |
| | | |
| 3.3 | | Certificate of Correction (Incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1 filed on October 4, 2021). |
| | | |
| 3.4 | | Certificate of Correction (Incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form S-1 filed on October 4, 2021). |
| | | |
| 3.5 | | By-Laws (Incorporated by reference as Exhibit 3.3 of the Company’s Registration Statement on Form S-1 filed on October 4, 2021). |
| | | |
| 10.1 | | Side Letter Agreement, dated as of February 6, 2024, by and between Verde Bio Holdings, Inc., SensaSure Technologies Inc. and Spartan Capital Securities, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on February 13, 2024). |
| | | |
| 31.1* | | Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | |
| 32.1** | | Certification of Principal Executive Officer, Principal Financial Officer and Principal 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. |
| * | Filed herewith. |
| ** | Furnished herewith. |
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. | |
| | |
| By: | /s/ James Hiza | |
| | James Hiza | |
| | Chief Executive Officer | |
| | (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | |
| | | |
| Date: | March 25, 2024 | |
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