10-Q: SensaSure Technologies Inc. Reports Q3 2024 Results, Announces Strategic Shift to Energy Sector

SensaSure Technologies Inc. reported its financial results for the quarter ended January 31, 2024, and detailed a strategic shift from medical technology to the energy sector through a merger with Verde Bio Holdings.

Summary

• SensaSure Technologies Inc. reported a net loss of $1.66 million for the nine months ended January 31, 2024, compared to a net loss of $490,495 for the same period in 2023.
• The company's revenue decreased to $1,146 for the nine months ended January 31, 2024, from $4,414 in the same period of 2023.
• Operating expenses increased to $1.13 million for the nine months ended January 31, 2024, compared to $488,718 for the same period in 2023, primarily due to increased share-based compensation.
• SensaSure is winding down its medical technology subsidiary, Sensabues, due to difficulties in raising capital and commercialization challenges.
• The company has entered into a merger agreement with Verde Bio Holdings, Inc., to transition into the energy sector, focusing on oil and gas minerals and royalties.
• As of January 31, 2024, the company had no cash or restricted cash, compared to $26,958 at the beginning of the period.
• The company's total liabilities were $617,853 as of January 31, 2024, down from $1,101,239 at April 30, 2023, due to the deconsolidation of Sensabues.
• Basic and diluted loss per share was $0.029 for the nine months ended January 31, 2024, compared to $0.005 for the same period in 2023.

Sentiment

Score: 2

Explanation: The document indicates a significant strategic shift due to the failure of the previous business model, substantial financial losses, and a lack of cash. The company is in a precarious financial position, and the transition to a new sector is highly risky.

Positives

• The company is proactively addressing its financial challenges by winding down its underperforming medical technology business.
• The merger with Verde Bio Holdings provides a clear strategic direction into the energy sector.
• The company is taking steps to reduce operating expenses by winding down Sensabues.
• The company has identified a new business segment to develop energy related businesses.

Negatives

• The company experienced a significant net loss of $1.66 million for the nine months ended January 31, 2024.
• Revenue decreased substantially to $1,146 for the nine months ended January 31, 2024.
• Operating expenses increased significantly to $1.13 million for the nine months ended January 31, 2024.
• The company had no cash or restricted cash as of January 31, 2024.
• The company is winding down its subsidiary, Sensabues, indicating a failure of its previous business model.

Risks

• The company's ability to continue as a going concern is dependent on obtaining additional financing.
• The merger with Verde Bio Holdings is subject to closing conditions and may not be completed.
• The company faces risks associated with transitioning to a new business segment in the energy sector.
• The company's internal controls over financial reporting are considered ineffective.
• The company has a history of recurring losses and a working capital deficiency.

Future Outlook

The company expects to close the merger with Verde Bio Holdings in the second quarter of calendar year 2024 and will focus on the acquisition and management of high-quality, cash-flowing oil and gas minerals and royalties.

Management Comments

• Management believed that the current business of commercializing the exhale breath technology patents was no longer feasible.
• Management has been in the process of establishing a new business segment to develop energy related businesses.
• Management expects that new opportunities will present themselves as a result of the Merger in the oil, gas and mineral industries.

Industry Context

The strategic shift from medical technology to the energy sector reflects a significant change in the company's business model, potentially driven by challenges in the MedTech market and opportunities in the energy sector. This move is not uncommon for companies seeking to leverage their resources in more profitable or stable industries.

Comparison to Industry Standards

• The company's financial performance is significantly below industry standards for both MedTech and energy companies.
• The lack of revenue and significant losses are not typical for established companies in either sector.
• The decision to wind down Sensabues indicates a failure to compete effectively in the MedTech market.
• The transition to the energy sector is a high-risk move, as the company has no prior experience in this industry.
• Comparable companies in the MedTech space, such as those developing diagnostic devices, typically show more consistent revenue streams and lower operating losses.
• Companies in the oil and gas sector, such as those focused on mineral rights, usually have established revenue models and a history of cash flow, which SensaSure currently lacks.

Related Party Transactions

• The company had various transactions with related parties, including loans, payables, and interest accruals.
• Salary payable to the former Chief Executive Officer of the Company who was also a director of Sensabues was $182,885 as of January 31, 2024.
• The company had loans from a former director of SensaSure, with interest expenses of $510 and $278 for the nine months ended January 31, 2024.
• Accounts payable and accrued liabilities to a related party were $271,296 as of January 31, 2024.

Stakeholder Impact

• Shareholders face significant risk due to the company's poor financial performance and strategic shift.
• Employees may be affected by the winding down of Sensabues and the transition to a new business model.
• Customers of the previous MedTech business will be impacted by the discontinuation of products and services.
• Creditors face uncertainty regarding the company's ability to repay debts.

Next Steps

• The company expects to close the merger with Verde Bio Holdings in the second quarter of calendar year 2024.
• The company will focus on the acquisition and management of high-quality, cash-flowing oil and gas minerals and royalties.
• The company plans to increase personnel resources and technical accounting expertise within the accounting function.
• The company plans to recruit and appoint one or more outside directors to the board of directors who shall be appointed to an audit committee.

Key Dates

Keywords

Merger, Energy Sector, Oil and Gas, Financial Results, Strategic Shift, Deconsolidation, Share-based compensation, Net Loss, Operating Expenses, Going Concern, ExaBreath, MedTech