UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-QSB
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Commission
File No. 0-13328
For
the
quarterly period ending February 28, 2007
SENTEX
SENSING TECHNOLOGY, INC.
(Exact
name of registrant as specified in its charter)
New
Jersey
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22-2333899
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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1801
East Ninth Street
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Cleveland,
Ohio
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44114
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(Address
of principal executive offices)
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(Zip
Code)
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(216)
687-0289
(Registrant’s
telephone number including area code)
Securities
registered pursuant to Section 12 (b) of the Exchange Act:
None
Securities
registered pursuant to Section 12 (g) of the Exchange Act:
Common
Shares, no par value
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 of 15(d) of the Securities and 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
X No
__
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes_ No X
Number
of
shares of Common Shares (No Par Value) of SENTEX SENSING TECHNOLOGY, Inc.,
issued and outstanding as of February 28, 2007 is 199,847,764.
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
NOVEMBER
30, 2006 AND FEBRUARY 28, 2007
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November
30,
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February
28,
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|
|
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2006
|
|
2007
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|
|
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(Audited)
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(Unaudited)
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ASSETS
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|
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|
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OTHER
ASSETS
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|
|
|
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|
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Distribution
agreement
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|
|
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1,900,000
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|
1,900,000
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|
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|
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|
|
|
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TOTAL
ASSETS
|
|
|
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|
$
|
1,900,000
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|
$
|
1,900,000
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|
|
|
|
|
|
|
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|
LIABILITIES
AND STOCKHOLDERS' EQUITY
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CURRENT
LIABILITIES
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Notes
payable:
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Related
party
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$
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7,726,012
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$
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7,857,277
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Trade
and other accounts payable ($441,671 and
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$441,671
to related parties)
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533,760
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507,257
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|
Accrued
liabilities
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-
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Consulting
contracts payable
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-
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Convertible
subordinated notes payable
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12,423
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|
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12,423
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|
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|
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TOTAL
CURRENT LIABILITIES
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|
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8,272,195
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8,376,956
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STOCKHOLERS'
EQUITY
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Common
stock, no par value
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Authorized
- 200,000,000 shares
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|
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Issued
- 199,847,764 shares
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|
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Outstanding
- 199,847,764 shares
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|
|
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4,767,579
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4,767,579
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Accumulated
deficit
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|
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(11,139,774
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)
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|
(11,244,535
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)
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TOTAL
STOCKHOLDERS' EQUITY
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|
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(6,372,195
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)
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|
(6,476,956
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)
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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|
|
|
|
$
|
1,900,000
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|
$
|
1,900,000
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|
See
Notes
to Consolidated Financial Statements
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED
FEBRUARY 28, 2006 AND FEBRUARY 28, 2007 (UNAUDITED)
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Three
Months Ended
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Feb
28,
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Feb
28,
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2006
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2007
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REVENUES
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Sales
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$
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-
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$
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-
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Interest
and other income
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5,246
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|
-
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|
Total
Revenues
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5,246
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-
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COST
OF GOODS SOLD
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-
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-
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GROSS
PROFIT
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5,246
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-
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OPERATING
EXPENSES
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Administration
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26,777
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6,480
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Total
expenses
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26,777
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6,480
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LOSS
FROM OPERATIONS
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(21,531
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)
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(6,480
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)
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OTHER
EXPENSE
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Interest
Expense
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110,752
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98,281
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NET
LOSS
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|
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(132,283
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)
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(104,762
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)
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NET
PROFIT(LOSS) PER SHARE (BASIC AND
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DILUTED)
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$
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(0.00
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)
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$
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(0.00
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)
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WEIGHTED
NUMBER OF SHARES OUTSTANDING
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103,764,911
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199,847,764
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|
See
Notes
to Consolidated Financial Statements
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOW FOR THE THREE MONTHS
ENDED
FEBRUARY 28, 2006 AND FEBRUARY 28, 2007 (UNAUDITED)
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Three
Months Ended
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Feb
28,
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Feb
28,
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|
2006
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|
2007
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OPERATING
ACTIVITIES:
|
|
|
|
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|
Net
loss
|
|
$
|
(132,283
|
)
|
$
|
(104,762
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)
|
Adjustment
to reconcile net loss to net
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cash
used by operating activities:
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Depreciation
and amortization
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-
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-
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Noncash
interest expense
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110,752
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98,281
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Accounts
receivable
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-
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-
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Inventories
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-
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-
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Other
assets
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-
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-
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Accounts
payable
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|
(18,818
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)
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|
(26,503
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)
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Accrued
liabilities
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-
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-
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Total
Adjustments
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91,934
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71,778
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|
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|
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Net
cash used by operating activities
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|
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(40,349
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)
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|
(32,984
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)
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Proceeds
on notes and accounts payable - related party
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40,281
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32,984
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Payments
on note payable - related party
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-
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-
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Net
cash provided by financing activities
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40,281
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32,984
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|
|
|
|
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|
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NET
INCREASE (DECREASE) IN CASH
|
|
|
(68
|
)
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|
-
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|
|
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CASH
- BEGINNING OF PERIOD
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68
|
|
|
-
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|
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CASH
- END OF PERIOD
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|
$
|
-
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|
$
|
-
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|
|
|
|
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|
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|
Supplemental
disclosure of cash flow information:
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Cash
paid during the quarter for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
$
|
-
|
|
See
Notes
to Consolidated Financial Statements
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1)
In
the opinion of management, the unaudited financial statements contain all
adjustments (consisting of only normal recurring accruals and repayments)
necessary to present fairly the financial position at February 28, 2007 and
the
results of operations and cash flows for the three months ended February 28,
2006 and February 28, 2007.
These
interim statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company’s Annual Report on Form
10-KSB for the fiscal year ended November 30, 2006 (Commission File No.
2-13328).
(2)
The
results of operations for the three months ended February 28, 2006 and February
28, 2007 are not necessarily indicative of the results to be expected for the
full year.
(3)
PROFIT(LOSS) PER SHARE
Profit(loss)
per share is calculated using the weighted average number of common shares
outstanding. Potentially dilutive securities are insignificant.
(4)
PRINCIPLES OF CONSOLIDATION
The
consolidated financial statements include the accounts of Sentex Sensing
Technology, Inc. and its wholly-owned subsidiaries (the “Company”). All material
inter-company accounts and transactions have been eliminated in
consolidation.
(5)
LEGAL
PROCEEDINGS
State
of Ohio, Department of Administrative Services v. IQ Solutions, LLC, et
al.;
Case
No. 03-CVH05-6054; Franklin County Common Pleas Court, Ohio.
During
October 2004, the Company was dismissed without prejudice from the above-caption
and previously disclosed matter.
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
FINANCIAL
CONDITION
Working
Capital and Liquidity
During
the last several fiscal years, the Company has incurred losses from operations.
In addition, the Company’s certified public accountants, Hausser + Taylor
LLC, have included in their auditors’ report, which covers the Company’s
financial statements for the years ended November 30, 2005 and November 30,
2006, a statement that the Company’s recurring losses from operations raised
substantial doubt about the Company’s ability to continue as a going concern.
For the period ended November 20, 2005 and Fiscal Year 2006, the Company
sustained losses of approximately $377,000 and $579,000, respectively. These
losses have had a substantial adverse effect on the working capital of the
Company.
Net
Tax
Operating Loss Carryforwards
As
of
February 28, 2007 the Company has approximately $17,060,000 in net tax operating
loss carryforwards which will expire at various dates through the year 2027.
Federal tax law imposes restrictions on the use of net operating loss
carryforwards in the event of a change in ownership, such as a merger. Due
to
the merger with Monitek, approximately $6,265,000 of the $17,060,000 net
operating losses may be subject to these limitations and potentially may not
be
able to provide any economic benefit to the Company.
RESULTS
OF OPERATIONS
On
November 20, 2005, JJJ-RT, LLC assumed the operations of the former Regency
Technologies, Ltd.
The
Company currently has no active operation. Expenses shown on the Consolidated
Statement of Operations include corporate administrative overhead
only.
Investment
in Regency Technologies, Ltd.:
Due
to a
change in control, the Company now accounts for its investment in JJJ-RT, LLC
on
the equity method. However, losses and distributions have exceeeded the
Company’s investment in JJJ-RT, LLC. Accordingly, the Company has reflected such
investments at zero. The Company’s share of future losses in this investment
will be suspended for book purposes. Furthermore the Company’s share in future
income will not be recognized until the aggregate of such income equals the
aggregate of their suspended losses.
The
net
loss on disposal of subsidiary (Regency Technologies, Ltd.) is the result of
recognizing the net investment deficit in Regency as of November 20, 2005 as
income to bring the value of the investment to zero and decreasing that gain
by
the forgiveness of inter-company debt as stated in the Contribution and
Investment Agreement.
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS (continued)
The
following table sets forth certain summarized financial information of JJJ-RT,
LLC, the Company’s only investment, based upon the applicable financial
statements, adjusted for accounting principles generally accepted in the United
States of America. This information is for the eight months ended February
28,
2007 and has not been audited or reviewed.
BALANCE
SHEET DATA
|
|
2006
|
|
Current
assets
|
|
$
|
582,223
|
|
Leasehold
improvements
|
|
|
15,439
|
|
Computer
and office equipment
|
|
|
141,523
|
|
Goodwill/client
lists
|
|
|
294,786
|
|
Other
assets
|
|
|
426
|
|
|
|
|
|
|
Total
assets
|
|
|
1,034,397
|
|
|
|
|
|
|
Current
liabilities
|
|
|
61,434
|
|
|
|
|
|
|
Other
liabilities
|
|
|
1,063
|
|
|
|
|
|
|
Partners’
equity
|
|
|
971,900
|
|
|
|
|
|
|
Total
liabilities and partners’ equity
|
|
$
|
1,034,397
|
|
|
|
|
|
|
STATEMENT
OF INCOME DATA
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
780,716
|
|
Net
income(loss)
|
|
$
|
64,736
|
|
SUBSEQUENT
EVENT
Since
the
conclusion of Fiscal Year 2006, the Company has been working diligently to
raise
capital and do a strategic acquisition that will move us forward very
quickly.
We
have
reached preliminary agreements with several entities and consequently signed
a
Memorandum of Understanding (MOU) with these organizations.
Our
goal
is to achieve final agreements under documentation that all parties can live
with and bring them to a final conclusion.
We
will
attempt to keep you posted as we have through press releases and other
communications.
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS (continued)
CHANGES
IN ACCOUNTING STANDARDS
New
Accounting Standards - In September 2006, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting Standards No. 158 (“SFAS
158”), “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and
132(R)”, effective for the Company for the year ending December 31, 2006. This
statement requires the recognition of the overfunded or underfunded status
of a
defined benefit postretirement plan as an asset or liability on the balance
sheet, and the recognition of changes in that funded status through other
comprehensive income. The Company does not believe the adoption of this standard
will have a material impact on the consolidated financial
statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157 (“SFAS 157”), “Fair Value Measurements”, effective for the Company beginning
on January 1, 2008. This Statement defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value measurements.
This statement establishes a fair value hierarchy that distinguishes between
valuations obtained from sources independent of the entity and those from the
entity’s own unobservable inputs that are not corroborated by observable market
data. SFAS 157 expands disclosures about the use of fair value to measure assets
and liabilities in interim and annual periods subsequent to initial recognition.
The disclosures focus on the inputs used to measure fair value and for recurring
fair value measurements using significant unobservable inputs, the effect of
the
measurements on earnings or changes in net assets for the period. The Company
does not believe the adoption of this standard will have a material impact
on
the consolidated financial statements.
In
June
2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
Accounting for Income Taxes,” effective for the Company beginning on January 1,
2007. FIN 48 clarifies the recognition threshold a tax position is required
to
meet before being recognized in the financial statements. FIN 48 also provides
guidance on disclosure and other matters. Currently, the Company does not expect
this guidance to have a material impact on its financial
statements.
In
March
2006, the FASB issued Statement of Financial Accounting Standards No. 156,
“Accounting for Servicing of Financial Assets” (“SFAS 156”), which amends
accounting and reporting standards for servicing assets and liabilities under
Statement of Financial Accounting Standards No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities”.
Specifically, SFAS 156 requires that all separately recognized servicing assets
and servicing liabilities be initially measured at fair value, if practicable.
For subsequent measurement purposes, SFAS 156 permits an entity to choose to
measure servicing assets and liabilities either based on fair value or lower
of
cost or market. The Company does not believe the adoption of this standard
will
have a material impact on the consolidated financial statements
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No.
159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial
Liabilities”, effective for the Company beginning on January 1, 2008. This
Statement provides entities with an option to report selected financial assets
and liabilities at fair value, with the objective to reduce both the complexity
in accounting for financial instruments and the volatility in earnings caused
by
measuring related assets and liabilities differently. The Company does not
believe the adoption of this standard will have a material impact on the
consolidated financial statements
SENTEX
SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS (continued)
CAUTIONARY
STATEMENT FOR PURPOSES OF THE “SAFE HARBOUR” OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
Certain
statements in the Management’s Discussion and Analysis of Financial Condition
and Results of Operations and the Financial Statements included in this Annual
Report on Form 10-KSB, in the Company’s press releases and in oral statements
made by or with the approval of an authorized executive officer of the Company
constitute “forward-looking statements” as that term is defined under the
Private Securities Litigation Reform Act of 1995. These may include statements
projecting, forecasting or estimating Company performance and industry trends.
The achievement of the projections, forecasts or estimates is subject to certain
risks and uncertainties. Actual results and events may differ materially from
those projected, forecasted or estimated. The applicable risks and uncertainties
include general economic and industry conditions that affect all business,
as
well as matters that are specific to the Company and the markets it serves.
Specific
risks to the Company include an inability of the Company to finance its working
capital needs. In light of this and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation
by
the Company that the Company’s plans and objectives will be
achieved.
CONTROLS
AND PROCEDURES
The
Company’s Chief Executive Officer and Principal Accounting Officer, after
evaluating the effectiveness of the Company’s disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(e) as of the end of the period covered
by
this report, have concluded that the Company’s disclosure controls and
procedures were effective.
There
were no changes in the Company’s internal controls over financial reporting that
occurred during the Company’s last fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially affect,
the Company’s internal controls over financial reporting.
SIGNATURE
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:
Date:
April 20, 2007
|
SENTEX
SENSING TECHNOLOGY, INC.
|
|
|
|
|
By:
|
/s/
Henrik Rubinstein
|
|
|
Henrik
Rubinstein, President
|
|
|
|
|
|
/s/
Robert S. Kendall
|
|
|
Robert
S. Kendall, Chairman and Treasurer
|
|
|
|
|
|
/s/
William R. Sprow
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William
R. Sprow, Chief Financial Officer
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/s/
William R. Sprow
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William
R. Sprow, Controller
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EXHIBITS
AND REPORTS ON FORM 8-K
a)
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Exhibit
31.1302
Certification of Chief Executive
Officer
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Exhibit
31.2 302
Certification of Chief Financial Officer
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Exhibit
32.1 Certification
Pursuant To 18 U. S. C. Section 1350, As Adopted Pursuant To Section
906
Of The
Sarbanes-Oxley Act of 2002
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Exhibit
32.2 Certification
Pursuant To 18 U. S. C. Section 1350, As Adopted Pursuant To Section
906
Of The
Sarbanes-Oxley Act of 2002
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b) |
One
report on Form 8-K was filed with the Commission during the small
business
issuer’s third quarter of Fiscal Year 2006.
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