NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
1. |
DESCRIPTION OF BUSINESS |
SensaSure Technologies, Inc. (“SensaSure”
or “Company”) was incorporated on September 8, 2020 under the laws of the State of Nevada with an authorized share capital
of 250,000,000 common shares, 5,000,000 of Class A and 5,000,000 Class B preferred shares. The Company did not issue any number of common
shares, Class A and Class B preferred shares before December 21, 2020.
Sensa Bues AB (“Sensa Bues”) was incorporated
in the Kingdom of Sweden in November 2009. Sensa Bues AB owns the core intellectual properties for the design of sample collection devices
and the methodologies to collect, extract and detect the non-volatile substances presented within aerosols in exhaled breath. These aerosols,
which originate from the lungs and blood, are captured using electret-based filter technologies. This non-invasive breath-based
biological sample collection and testing methodology is called ExaBreath (“EB”) technology.
Sensa Bues AB performs medical device design and
research focusing on developing and commercializing EB for disease detection, exposure monitoring, and drug metabolism.
On December 21, 2020, the Company completed a
reverse recapitalization via a share exchange agreement with Sensa Bues AB and the shareholders who owned 270,339 common shares that represented
72.82% of the total issued and outstanding common shares in Sensa Bues AB. Under the share exchange agreement, the shareholders of Sensa
Bues AB, agreed to exchange their shares of Sensa Bues AB 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 Sensa Bues AB hold their ownership of Sensa Bues AB 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 Sensa Bues AB and parent company of Sensa Bues AB (“Subsidiary”). No goodwill or other intangible assets were recorded
during the reverse capitalization. As noted earlier, this transaction has been accounted for as a reversed recapitalization, the operating
results included in this discussion reflect the historical operating results of Sensa Bues AB prior to the reverse capitalization transaction.
During April 2021, the Company increased its ownership
interest in Sensa Bues AB pursuant to private placements completed by Sensa Bues AB where 277,296 common shares and 93,032 common shares
were issued to the Company and noncontrolling interests respectively. (Note 8 (b)).
During the three months ended July 31, 2022, the
Company increased its ownership interest in Sensa Bues AB pursuant to private placements completed by Sensa Bues AB where 2,200,000 common
shares and 440 common shares were issued to the Company and noncontrolling interests respectively.
On April 30, 2022, the Company owned 74% (74%
- April 30, 2021) of the total issued and outstanding common shares in Sensa Bues AB (Note 8 (c)).
On January 31, 2023, the Company owned 93.53%
(74% - April 30, 2022) of the total issued and outstanding common shares in Sensa Bues AB (Note 8 (c)).
2. |
BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION |
(a) |
Basis of Presentation |
The accompanying unaudited condensed interim consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”)
for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read in conjunction with the Company’s audited consolidated
financial statements for the years ended April 30, 2022 and 2021 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, 2023. The Company’s fiscal year-end is April 30.
The unaudited condensed interim consolidated financial
statements include the accounts of the Company and its less than wholly owned subsidiary, Sensa Bues AB. Intercompany accounts and transactions
have been eliminated.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
(b) |
Basis of Consolidation |
Sensa Bues AB and SensaSure were deemed to be
under common control. Accordingly, the combination of the two entities has been accounted for as a reorganization of entities under common
control in accordance with ASC 805 guidelines, whereby the resulting controlling entity, namely, SensaSure recognized the assets and liabilities
of the Sensa Bues AB transferred at their carrying amounts with a carry-over basis. The reorganization of entities under common control
was retrospectively applied to the financial statements of all prior periods when the financial statements are issued for a period that
includes the date the share exchange transaction occurred.
Equity interests in Sensa Bues AB held by parties
other than SensaSure are presented as non-controlling interests in equity.
(c) |
Liquidity and going concern |
The Company is in the early stages of commercializing
its product and in the process of its initial public offering. It is concurrently in development mode, operating research and development
programs in order to develop an ecosystem of technologies and commercialize other proposed products. The Company has incurred recurring
losses from operations, and as at January 31, 2023 and April 30, 2022, had an accumulated deficit of $5,797,777 and $4,433,352 respectively,
a working capital deficiency of $839,338 and $445,270 respectively. The Company, during year ended April 30, 2022 and April 30, 2021,
through several private placements, raised $368,200 and $893,014 respectively (Note 8 (b)). On March 30, 2021, Sensa Bues AB, through
an agreement with a vendor that is controlled by a then-director of Sensa Bues AB, modified the payment term of payable balance in the
amount of $333,744 to settle the payable balance in seven installments (Note 7 (c)). During the year ended April 30, 2021, the Company,
Sensa Bues AB and a director of the Company reached an agreement to settle account payable in the amount of $326,337 by issuing options
to purchase common shares of Sensa Bues AB with a guarantee of subscription of the Company’s common shares upon exercise of the
option by the optionee (Note 7 (a) and Note 8 (b)).
The Company’s operating plan is predicated
on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise
additional financing and the state of the general economic environment in which the Company operates. There can be no assurance that these
assumptions will prove to be accurate in all material respects, or that the Company will be able to successfully execute its operating
plan. In the absence of additional appropriate financing, the Company may have to modify its operating plan or slow down the pace of development
and commercialization of its proposed products.
These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on the Company’s
ability to meet obligations as they become due and to obtain additional equity or alternative financing required to fund operations until
sufficient sources of recurring revenues can be generated.
These unaudited condensed interim consolidated
financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company expects to finance their future operations
primarily through cash flow from capital contributions from the shareholders of the Company. In the event that the Company requires additional
funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives,
the shareholders of the Company indicated the intent and ability to provide additional equity financing.
In December 2019, a novel strain of coronavirus
(COVID-19) emerged. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy,
it has now spread to several other countries and infections have been reported globally.
During 2020, 2021, 2022 and 2023, as a result
of COVID-19 infections having been reported throughout both the United States and Sweden, certain national, provincial, state and local
governmental issued proclamations and/or directives aimed at minimizing the spread of COVID-19. Due to the disruption of the COVID-19
crisis, the Company’s business activities might be subject to certain level of adverse impact. At the date of approval of these
consolidated financial statements, it is still not possible to reliably estimate the effect of these developments as well as the impact
on the financial results and condition of the Company in future periods. Management is monitoring these developments on the Company’s
operations and is taking all steps to ensure that employees are following all public health and safety protocols.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The Company adopted Accounting Standards Codification
Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) on May 1, 2018. In accordance with ASC 606, revenue
is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company
expects to be entitled in exchange for those goods or services by applying the core principles – 1) identify the contract with a
customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price
to performance obligations in the contract, and 5) recognize revenue as performance obligations are satisfied.
The Company sells devices with collection mechanism
for biological samples based upon exhaled breath. Revenue is recognized upon delivery of devices (at a point in time). In order to recognize
revenue, management considers whether or not the following criteria are met: persuasive evidence of a commercial arrangement exists, price
is fixed and determinable and collectability is reasonably assured and delivery has occurred.
(b) | Cash and restricted cash held in trust |
Cash includes cash on hand and balances with banks.
Restricted cash includes proceeds from private placements completed by the Company during years ended April 30, 2021 and 2022 that are
held in an escrow account. As per the share subscription agreements, and the Escrow Agreement dated January 26, 2021, restricted cash
can only be used for expenses related to listing process and for professional expenses of the first eighteen months’ statutory filings
from the date the Company successfully completes the listing process.
(c) | Non-controlling interests |
The non-controlling interests represent the portion
of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented
as a separate component of equity on the condensed interim 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 condensed interim consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred
income tax assets and related valuation allowance, accruals, stock options, principles of consolidation and reverse recapitalization and
assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically,
and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
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.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
(f) | Research and development |
Research and development and patent related expenses are charged to
operations as incurred.
(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 condensed interim consolidated 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, condensed interim consolidated 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 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, 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. |
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
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, 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 is carried at fair values, is classified as a 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 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 carryforwards, (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
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. Eos 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 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, 2023 and 2022.
Operating segments are components of an enterprise
about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. All revenues are currently earned in Sweden and significantly all of the assets
of the Company are used for the Company’s medical device design and research and distribution activities that is carried out in
Sweden. The Company has one reportable segment and operating segment: Medical device design and research and distribution.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
(m) | Recently issued accounting pronouncements |
In June 2016, the FASB issued ASU 2016-13, “Financial
Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with
subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the
use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to
estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial
asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime
expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This
pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On
November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective
date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL),
the revised effective date is January 2023.
In July 2019, the FASB issued ASU 2019-07, Codification
Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure
Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires
a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in
the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in
stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on
April 1, 2019. The additional elements of the ASU did not have a material impact on the Company’s condensed interim 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. The
Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash
flows.
In March 2020, the FASB issued ASU No. 2030-20
Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a)in ASU No. 2016-01,
b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e)
in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments
in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and
easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following
paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years. The Company has adopted this ASU for the year ended April
30, 2021.
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 does not
expect that the new guidance will significantly impact its condensed interim consolidated financial statements.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
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 was 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 amount of $27,300 at April 30, 2021. The number
of shares to be issued was 420,000. The Company received the subscription proceeds during three months ended July 31, 2021 and issued
420,000 common shares accordingly (Note 8 (b)).
5. |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES TO THIRD PARTIES |
| |
January 31, 2023 | | |
April 30, 2022 | |
Accounts payable | |
$ | 7,839 | | |
$ | 52,178 | |
Accrued liabilities | |
| 65,394 | | |
| 65,714 | |
| |
$ | 73,233 | | |
$ | 117,892 | |
At January 31, 2023 and April 30, 2022, the Company
had balances in demand loans from several noncontrolling interests in Sensa Bues AB and a shareholder totaling $27,985 (SEK 293,000) and
$29,811 (SEK 293,000), respectively. The loans had an interest rate of 20% per annum. For the nine months ended January 31, 2023 and 2022,
interest expense was $4,109 and $5,045, respectively.
At January 31, 2023 and April 30, 2022, the Company
had balance in demand loans from a party who has a noncontrolling interests in Sensa Bues AB of $43,958 (SEK 460,247) and $46,827 (SEK
460,247), respectively. The loans had an interest rate is 2% per annum. For the nine months ended January 31, 2023 and 2022, interest
expense was $679 and 3,087, respectively.
At January 31, 2023, the Company had balance in
demand loan in the amount of $39,979 (April 30, 2022 - $Nil)
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, 2023 and April 30, 2022, salary
payable to a former director of the Company who is also a director of Sensa Bues AB included in amounts due to related parties was $261,813
and $196,740 respectively.
On March 31, 2021, the Company, Sensa Bues AB
and the then-CEO of the Company who is also a director of Sensa Bues AB reached an agreement to settle account payable in the amount of
$326,337 by issuing options to purchase common shares of Sensa Bues AB with a guarantee of subscription of the Company’s common
shares upon exercise of the option by the optionee (Note 2 (c) and Note 8 (b)). The agreement allows the director to subscribe aggregated
3,400 common shares of Sensa Bues AB. The term of the Agreement is for thirty-six months from March 31, 2021. The Company guaranteed that
it shall purchase shares of the optionee during the term of the agreement based on the formula of 50 common shares of the Company for
each one shares the optionee subscribed of Sensa Bues AB.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
(b) |
Loans from related parties |
At January 31, 2023 and April 30, 2022, balances
of loan from a former director of Sensa Bues AB were $ 52,531 (SEK550,000) and $55,959 (SEK550,000) respectively. The loan is unsecured,
bearing interest at 2% per annum and due on demand. The interest expense was $867 and $954 for nine months ended January 31, 2023 and
2022 respectively.
At January 31, 2023 and April 30, 2022, balances
of loan from a former director of Sensa Bues AB were $28,654 (SEK300,000) and $30,523 (SEK300,000) respectively. The loan is unsecured,
bearing interest at 2% per annum and due on demand. The interest expense was $473 and $520 for nine months ended January 31, 2023 and
2022 respectively.
(c) |
Payable and interest accrual to a related party |
The accounts payable balance related to professional
services provided by a vendor that is controlled by a then-director of Sensa Bues AB.
As at January 31, 2023, the interest accrual balance
related to overdue invoices from the related party vendor was $138,483 ($138,483 – April 30, 2022) and was included in accounts
payable and accrued liabilities to a related party.
On March 30, 2021, Sensa Bues AB, through a settlement
agreement with the vendor, modified the payment term of accounts payable balance related to professional services provided in the amount
of $333,744 (SEK 2,798,280), and the parties agreed to settle the accounts payable balance in seven installments (Note 2 (c)) and the
last payment date was extended to 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, 2023, the accounts payable balance related to professional services provided
by the related party vendor that was not included in the above settlement was $6,568 (April 30, 2022 - $6,997). At January 31, 2023, the
current portion of the modified payable balance was $234,675 (SEK 2,448,280) (April 30, 2022 - $261,683; April 30, 2022 - SEK 2,572,000)
and the long term portion was $nil (SEK nil) (April 30, 2022 - $17,935, SEK 176,280).
As at January 31, 2023, the total accounts payable
and accrued liabilities to the related party was $379,726 (April 30, 2022 - $407,163).
For the nine months ended January 31, 2023 and
2022, the total purchase from the related party representing the research and development and patent expense was in amount of $74,171
and $76,324 respectively.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
8. |
STOCKHOLDERS’ DEFICIENCY |
(a) |
Authorized and Issued Stock |
As at January 31, 2023, the Company is authorized
to issue 250,000,000 (April 30, 2022 – 250,000,000) shares of common stock ($0.01 par value).
As at January 31, 2023, the Company is authorized
to issue 5,000,000 (April 30, 2022 – 5,000,000) shares of Class A preferred stock ($0.001 par value). Class A preferred stock has
a conversion rate of 1 to 1,000 common shares and such conversion can occur subject to various performance condition, service conditions
and lock up period that will vary for each of the issuances. When conversion is available it shall be at the discretion of the preferred
shareholder. Sale of the converted shares shall not occur until sixty (60) months after a NASDAQ listing. There shall be no dividend rights
assigned to the Class A preferred shares. There shall be no registration rights attached to the converted shares. Voting rights per preferred
share are 1,000 common shares.
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes A preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. The Conversion was completed on January 31, 2022 and Class A preferred stock were converted
into 24,371,000 of common shares of the Company. All service conditions and lock up period applied to each of the issuances remained unchanged.
As at January 31, 2023, the Company is authorized
to issue 5,000,000 (April 30, 2022– 5,000,000) shares of Class B preferred stock ($0.001 par value). Class B preferred stock has
a conversion rate of 1 to 1,000 common shares and such conversion can occur subject to various performance condition, service conditions
and lock up period that will vary for each of the issuances. There shall be no dividend rights assigned to the Class B preferred shares.
There shall be no registration rights attached to the converted shares. Vested common shares may become free trading when certain conditions
are met. Each consultant to be advised of their specific conditions that must be met. Voting rights per share are equal to 1,000 common
votes for each preferred share.
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes B preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class B preferred stock were converted
into 31,500,000 of common shares of the Company. All service conditions and lock up period applied to each of the issuances remained unchanged.
At January 31, 2023, common shares issued and
outstanding totaled 56,349,183 (April 30, 2022 – 105,723,183) shares. During the three months ended January 31, 2023, 58,174,000
common shares were cancelled and 8,800,000 common shares were issued (Note 8 (b)).
At January 31, 2023, there were Nil Class A shares
of Preferred Stock that were issued and outstanding (April 30, 2022 – Nil) (Note 8 (b)).
At January 31, 2023, there were Nil Class B shares
of Preferred Stock that were issued and outstanding (April 30, 2022 – Nil) (Note 8 (b)).
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
During the year ended April 30, 2021, Sensa Bues
AB, via a private placement for proceeds of $99,643, issued 10,000 common shares to SensaSure. SensaSure’s common stock has been
adjusted retroactively to give effect for the exchange ratio upon the issuance and resulted in issuance of 499,935 shares of common stock
of SensaSure. The proceeds received was reflected as an increase in common stock in amount of $4,999 and additional paid-in capital in
amount of $94,644 respectively.
On December 21, 2020, the Company completed a
reverse recapitalization via a share exchange agreement with Sensa Bues AB and the shareholders who owned 270,339 common shares that represented
72.82% of the total issued and outstanding common shares in Sensa Bues AB. Under the share exchange agreement, the shareholders of Sensa
Bues AB, agreed to exchange their shares of Sensa Bues AB 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 Sensa Bues AB hold their ownership of Sensa Bues AB through SensaSure. (Note 1). Shareholders agreed
that from the Effective Date of share exchange agreement the Shareholders shall have up to 243,402 shares to sell when a trading market
begins on the OTC Markets. Eighteen (18) months after the initial listing date of the shares on the NASDAQ Market, the Shareholder shall
have 1,914,704 shares available to sell. Twenty-four (24) months after the initial listing date of the shares on the NASDAQ Market, the
Shareholders shall have 5,744,109 shares available to sell. Any remaining shares held by the Shareholders may be sold subject to Rule
144 trading requirements and Officer/Director restrictions, if applicable. The Shareholders will not (1) offer, pledge, announce the intention
to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any of the Securities or any
securities convertible into, exercisable or exchangeable for or that represent the right to receive shares of Common Stock (including,
without limitation, shares of Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules
and regulations of the Securities and Exchange Commission (the “SEC”) and securities which may be issued upon exercise of
a stock option or warrant) whether now owned or hereafter acquired, or (2) enter into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of ownership of the Securities, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of shares of Common Stock or such other securities, in cash or otherwise; Shareholders further agreed
that any sale of the Securities for twelve months following the end of the Lock Up Period shall be subject to the volume restrictions
of Rule 144.
During the year ended April 30, 2021, Sensa Bues
AB, via several private placements for proceeds of $27,671, issued 93,032 common shares to noncontrolling interests. The proceeds were
reflected as an increase of $27,671 in noncontrolling interests.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
During the year ended April 30, 2021, SensaSure
acquired an additional 267,296 common shares of Sensa Bues AB for cash consideration of $80,800. The additional investment in Sensa Bues
AB and the corresponding increase in Sensa Bues AB’ share capital was eliminated upon consolidation and had no cash flow impact.
During the year ended April 30, 2021, SensaSure,
via several private placements with proceeds of $793,000 for 12,200,000 restricted common shares, issued 11,780,000 common shares. The
proceeds received was 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 in amount of $27,300 as well as shares to be issued at April 30, 2021.
The number of shares to be issued was 420,000. The Company received the subscription proceeds for the three months ended July 31, 2021
and issued 420,000 common shares accordingly (Note 4). The subscribers entered into lock up agreement pursuant to which (i) The Shareholders
shall have 1,715,800 of the shares subscribed to sell when a trading market begins on the OTC Markets; (ii) The Shareholders shall have
5,346,000 of their remaining shares available to sell Six (6) months after the initial listing date of the shares on the NASDAQ Market;
(iii) The Shareholders shall have their remaining shares for trading Eighteen (18) months after the initial listing date of the shares
on the NASDAQ Market; and (iv) In the event the stock does not begin trading on the NASDAQ Market within a period of Thirty-Six (36) months
after the execution of the Share Exchange Agreement, the Shareholders shall have up to Thirty Percent (30%) of their remaining shares
available to sell after the initial listing date of the shares on the OTC Market. The balance of the Shareholder’s shares shall
be available for trading Sixty (60) months after the initial listing date of the shares on the OTC Market (the “Lock Up Period”).
During year ended April 30, 2022, the Company
has revised the lock up periods of certain shareholders, resulting in a change of total number of shares to be released at different time.
This process was completed on April 4, 2022. After the revision, the shareholders shall have 10,898,736 shares available to sell upon
a trading market begins on OTC Market, 7,738,000 shares available to sell upon six months after a trading market begins on OTC Market,
4,750,000 shares available to sell upon initial listing date on the Nasdaq Market, 6,280,000 shares available to sell upon six months
after initial listing date on the Nasdaq Market, 800,000 shares available to sell upon twelve months after initial listing date on the
Nasdaq Market, 3,838,213 shares available to sell upon eighteen months after the initial listing date on Nasdaq Market, 6,620,863 shares
available to sell upon twenty four months after the initial listing date on Nasdaq Market and the balance of the shareholders’ shares
will be available to sell upon sixty months after the initial listing date on Nasdaq Market. Shareholders further agreed that any sale
of the Securities for twelve months following the end of the Lock Up Period shall be subject to the volume restrictions of Rule 144.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
During the year ended April 30, 2021, SensaSure
issued 22,000,000 common shares to directors of the Company for director services that starts from May 1, 2021 to April 30, 2026. If a
director fails to complete the term of his responsibility the unearned portion of the shares shall be returned to the treasury stock of
the Company. The fair value of the shares issued, in amount of $502,614, was determined by allocating the Enterprise Equity Value on a
fully-diluted basis. During January 2022, three directors left the Company and the 7,931,000 unvested shares was cancelled accordingly.
The fair value of the vested portion of share based compensation expenses, in the amount of $73,634, was amortized and recorded in general
and administrative expenses as well as an increase in common stock in amount of $32,230 and additional paid in capital in amount of $41,404
respectively during the nine months ended January 31, 2022. During December 2022, two directors left the Company and the 8,587,000 unvested
shares was cancelled accordingly. The fair value of the vested portion of share based compensation expenses, in the amount of $36,440,
was amortized and recorded in general and administrative expenses as well as an increase in common stock in amount of $15,950 and additional
paid in capital in amount of $20,490 respectively during the nine months ended January 31, 2023.
During the year ended April 30, 2021, SensaSure
issued 31,500 Class B Preferred Stock to directors of the Company for services to be provided. The fair value of the shares issued, in
amount of $502,952, was determined based on the common stock fair value and factoring in the conversion rights which are subject to performance
conditions. Estimates of the timing and successful completion of the performance conditions were made by management. The fair value will
be recorded as an expense as well as an increase in Class B Preferred Stock and additional paid-in capital upon satisfaction of the vesting
conditions. During December 2022, upon a voluntarily surrender from a director of the Company, the Company cancelled 27,950,000 common
shares that were converted from Class B Preferred Stock during year ended April 30, 2022.
During the year ended April 30, 2021, the Company,
Sensa Bues AB and a director of the Company reached an agreement to settle accounts payable in the amount of $326,337 by issuing options
to purchase common shares of Sensa Bues AB with a guarantee of subscription of the Company’s common shares upon exercise of the
option by the optionee (Note 2 (c) and Note 7 (a)). The fair value of the stock option was determined based on the fair value of the services
provided by the director. The difference between the carrying amount of the liability settled and the fair value of options issued is
$nil. The term of the Agreement is for thirty-six months from March 31, 2021. The Company guaranteed that it shall purchase shares of
the optionee during the term of the agreement based on the formula of 50 common shares of the Company for each one shares the optionee
subscribed of Sensa Bues AB.
The Company recognized a subscription receivable
in amount of $27,300 as well as shares to be issued at April 30, 2021. The number of shares to be issued was 420,000. The Company received
the subscription proceeds during the year ended April 30, 2022 and issued 420,000 common shares accordingly (Note 4).
During the year ended April 30, 2022, SensaSure,
via several private placements, raised proceeds of $340,900 ($0.07 per share) and issued 4,870,000 common shares. The proceeds received
was reflected as an increase in common stock in amount of $3,409 and additional paid-in capital in amount of $337,491 respectively. The
subscribers entered into lock up agreement and the shareholders shall have 502,584 shares available to sell upon a trading market begins
on OTC Market, 356,484 shares available to sell upon six months after a trading market begins on OTC Market, 218,663 shares available
to sell upon initial listing date on the Nasdaq Market, 289,278 shares available to sell upon six months after initial listing date on
the Nasdaq Market, 37,012 shares available to sell upon twelve months after initial listing date on the Nasdaq Market, 176,781 shares
available to sell upon eighteen months after the initial listing date on Nasdaq Market, 304,862 shares available to sell upon twenty four
months after the initial listing date on Nasdaq Market and the balance of the shareholders’ shares will be available to sell upon
sixty months after the initial listing date on Nasdaq Market.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the classes A preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class A preferred stock were converted
into 24,371,000 of common shares of the Company. All service conditions and lock up period applied to each of the issuances remained unchanged.
During December 2022, upon a voluntarily surrender from a director of the Company, the Company cancelled 21,637,000 common shares that
were converted from Class A Preferred Stock during year ended April 30, 2022, and $216,370 was reduced from common stock and transferred
to additional paid-in capital.
On January 31, 2022, the board of directors of
the Company has discussed and approved the conversion of the Class B preferred stock to be done prior to filing an application to the
OTC Markets for trading on the OTC Markets ATS. Conversion was completed on January 31, 2022 and Class B preferred stock were converted
into 31,500,000 of common shares of the Company. All service conditions and lock up period applied to each of the issuances remained unchanged.
As at April 30, 2022, the vesting conditions have not been met.
During the year ended April 30, 2022, the Company
approved the issuance of 2,118,000 shares of the common stock to several consultants and directors. The fair value of the share-based
compensation was in the amount of $148,260 and was included in the general and admirative expenses as well as a credit made in common
stock in amount of 21,180 and additional paid-in capital in amount of 127,080 respectively. The fair value of the shares of common stock
issued was determined by using the most recent private placement price at $0.07 per share. One of the consultants is a related party individual
and the share awards was 2,100,000 common shares with an amount of 147,000.
During the year ended April 30, 2022, SensaSure
issued 3,080,000 common stock to a consultant of the Company for services provided by directors of the Company. The fair value of the
shares of common stock to be issued was determined by using the most recent private placement price at $0.07 per share. At April 30, 2022,
none of these services were rendered. Accordingly, the Company has not recognized any share based compensation expense during the year.
At January 31, 2023, none of these services were rendered. Accordingly, the Company has not recognized any share based compensation expense
during the period.
During the nine months ended January 31, 2023,
included into shares to be issued were 54,000 common stock for services provided by the directors. The fair value of the share-based compensation
was in the amount of $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 admirative expenses as well as a credit made in shares to be issued.
During the three months ended July 31, 2022, SensaSure
acquired an additional 2,200,000 common shares of Sensa Bues AB for cash consideration of $225,641. The additional investment in Sensa
Bues AB and the corresponding increase in Sensa Bues AB’ share capital was eliminated upon consolidation and had no cash flow impact.
During the three months ended January 31, 2023,
the Company approved the issuance of 8,800,000 shares of the common stock to a director of the Company. The shares issued would be vested
in a 24-month term with a date of start at December 15, 2022. During three months ended January 31, 2023, 550,000 common shares vested
and the fair value of the share-based compensation was in the amount of $38,500 and was included in the general and admirative expenses
as well as a credit made in common stock in amount of 5,500 and additional paid-in capital in amount of 33,000 respectively. The fair
value of the shares of common stock issued was determined by using the most recent private placement price at $0.07 per share.
SENSASURE TECHNOLOGIES, INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY
31, 2023 AND 2022
(continued)
(c) |
Noncontrolling interest |
During the three and nine months ended January
31, 2023 and 2022, the years ended April 30, 2022 and April 30, 2021, pursuant to private placements completed by Sensa Bues AB, the Company’s
ownership interests and noncontrolling interests’ ownership in Sensa Bues AB changed as below:
In compliance with the Swedish Annual Accounts Act (the “Act”),
SensaBues financial statements recognize a development reserve. This reserve is considered restricted and is not distributable as dividends.
It can only be used for specific purposes permitted under the Act.
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, 2023 and April 30, 2022
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 15, 2023, the date the condensed interim consolidated financial statements were issued, pursuant to the requirements
of ASC 855 and has determined the following subsequent event.
On December 1, 2022, the Financial Industry Regulatory
Authority (FINRA) processed a Form 211 relating to the initiation of priced quotations of the Company’s common stock, under the
ticker symbol “SSTC,” which means that the submitting broker-dealer has demonstrated to FINRA compliance with FINRA Rule 6432
and therefore has met the requirements under that rule to initiate a quotation for SSTC within four days of December 1, 2022. FINRA’s
processing of a Form 211 in no way constitutes FINRA’s approval of the common stock, the Company, or the Company’ business, and
relates solely to the submitting broker-dealer’s obligation to comply with FINRA Rule 6432 and SEA Rule 15c2-11 when quoting a security.
The company continued its plan to obtain regulatory approval for trading in the OTC market and the Company was approved to be upgraded
to the OTCQB by OTC Markets on February 24, 2023.