NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022 

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 six months ended October 31, 2022, the Company increased its ownership interest in Sensa Bues AB pursuant to private placements completed by Sensa Bues where 2,200,000 common shares and 440 common shares were issued to the Company and noncontrolling interests respectively. (Note 8 (b)).

On October 31, 2023, the Company owned 93.53% (93.53% - April 30, 2023) of the total issued and outstanding common shares in Sensa Bues. On October 31, 2022, the Company owned 93.53% (74% - April 30, 2022) of the total issued and outstanding common shares in Sensa Bues AB (Note 8 (c)).

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, 2023 and 2022 and their accompanying notes.

The accompanying unaudited condensed interim consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending April 30, 2024. The Company’s fiscal year-end is April 30.

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.

Certain prior quarter amounts have been reclassified for consistency with the current period presentation. These reclassifications has no effect on the reported results of the operations or cash flows.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

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.

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 October 31, 2023 and April 30, 2023, had an accumulated deficit of $6,334,768 and $6,027,209 respectively, a working capital deficiency of $1,150,170 and $1,061,593 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)). The Company, during year ended April 30, 2023, obtained working capital loans from related parties in the amount of $39,979. 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, the payable balance became current on April 30, 2023 (Note 7 (c)).

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 had spread to several other countries and infections have been reported globally.

During the past several years, 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 unaudited condensed interim 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 SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

The Company sells devices with collection mechanism for biological samples based upon exhaled breath. Revenue comprises devices delivered to the Company’s customers.

In accordance with ASC 606 - Revenue from Contracts with Customers, the Company recognizes revenue upon the transfer of goods to a customer at an amount that reflects the expected consideration to be received in exchange for those goods. The Company accounts for a customer contract when the rights of the parties, including the payment terms, are identified, the contract has commercial substance, collection of consideration is probable, and the contract has been signed and agreed to by both parties. Revenue is recognized when performance obligations are satisfied by transferring control or economic benefit of the goods to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for its goods.

The principles in ASC 606 are applied using the following five steps:

Cash includes cash on hand and balances with banks. Restricted cash includes proceeds from private placements and shareholder loans financing completed by the Company during years ended April 30, 2021, 2022, 2023 and quarter ended October 31, 2023 that are held in an escrow account. As per the share subscription agreements from January to April 2021, 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.

The non-controlling interests represent the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets, statements of loss, statements of comprehensive loss and statements of stockholders’ deficiency attributed to controlling and non-controlling interests.

The preparation of the 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.

Research and development and all patent maintenance and related filing costs are charged to operations as incurred as the Company is uncertain as to any future economic benefit.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire and compensate for goods or services received, including grants of employee shares, be recognized in the statement of loss based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable. The Company issues compensatory shares for services including, but not limited to, executive, management, operations, corporate communication, finance and administrative consulting services.

The functional currency of the Company’s Swedish-based subsidiary is the Swedish Krona (“SEK”) and the US-based parent is the U.S. dollar (“USD”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net loss for the reporting period. In translating the financial statements of the Company’s Swedish subsidiary from their functional currency into the Company’s reporting currency of USD, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive loss in equity. The Company has not, to the date of These unaudited condensed interim consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The Company’s financial instruments consist primarily of cash and restricted cash held in trust, accounts receivable, subscription receivable, other receivables, accounts payable and accrued liabilities, demand loans, loans from related parties, amounts due to related parties. The carrying amounts of these balances approximate their fair values due to the short-term maturities of these instruments. The carrying value of long term payable to a related party approximates its fair values due to current market rate on such debt.

ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

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.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash and restricted cash held in trust, accounts receivable, subscription receivable, other receivables, accounts payable and accrued liabilities, demand loans, loans from related parties, amounts due to related parties and long term payable to a related party. The Company’s cash and restricted cash held in trust, which are carried at fair values, are classified as Level 1. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.

Income taxes are computed under the asset and liability method reflecting both current and deferred taxes, which reflect the tax impact of all events included in the consolidated financial statements. The balance sheet approach (i) reflects a current tax liability or asset recognized for estimated taxes payable or refundable on tax returns for the current and prior years, (ii) reflects a deferred tax liability or asset recognized for the estimated future tax effects attributable to temporary differences and carry forwards, (iii) measures current and deferred tax liabilities and assets using the enacted tax rate of which the effects of future changes in tax laws or rates are not anticipated, and (iv) reduces deferred tax assets, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company recognizes deferred tax assets only to the extent that management concludes these assets are more-likely-than-not to be realized. Significant judgement is required in assessing and estimating the more-likely-than-not tax consequences of the events included in the consolidated financial statements. Management considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) management determines whether it is more likely- than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of 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 October 31, 2023, April 30, 2023 and October 31, 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 SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective for fiscal years beginning after December 15, 2022. The Company does not expect that this guidance will have a significant impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. There is no significant impact from adopting ASU 2019-12 on the Company’s financial condition, results of operations, and cash flows.

In April 2021, The FASB issued ASU 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company adopted this guidance for the fiscal year beginning April 1, 2022. There is no significant impact from adopting ASU 2021-04 on the Company’s financial condition, results of operations, and cash flows.

The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems. 

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. During the year ended April 30, 2022, the Company received the subscription proceeds and issued 420,000 common shares accordingly (Note 8 (b)).

At October 31, 2023 and April 30, 2023, the Company had balances in unsecured demand loans from several noncontrolling interests in Sensa Bues AB and a shareholder totaling $26,223 (SEK 293,000) and $28,550 (SEK 293,000), respectively. The loans had an interest rate of 20% per annum. For the six months ended October 31, 2023 and 2022, interest expense was $2,719 and $2,802, respectively.

At October 31, 2023 and April 30, 2023, the Company had balances in unsecured demand loans from a party who has a noncontrolling interests in Sensa Bues AB of $41,192 (SEK 460,247) and $44,846 (SEK 460,247), respectively. The loans had an interest rate of 2% per annum. For the six months ended October 31, 2023 and 2022 , interest expense was $427 and $440, respectively.

At October 31, 2023, the Company had balance in demand loan in the amount of $70,279 from several shareholders (April 30, 2023 - $39,979). Those loans are unsecured, non-interest bearing and due on demand.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

The Company had the following balances and transaction with related parties except disclosed in other notes.:

At October 31, 2023 and April 30, 2023, salary payable to the former CEO of the Company who is also a director of Sensa Bues AB included in amounts due to related parties was $371,736 and $312,347, respectively.

On March 31, 2021, the Company, Sensa Bues AB and the former 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.

At October 31, 2023 and April 30, 2023, expenses paid on behalf of the Company by two former directors of Sensa Bues AB included in amounts due to related parties was $nil and $ nil, respectively.

At October 31, 2023 and April 30, 2023, amounts payable to a former director of Sensa Bues AB included in amounts due to related parties was $nil and $ nil, respectively.

At October 31, 2023 and April 30, 2023, balances of loan from a former director of SensaSure were $49,224 (SEK550,000) and $53,591 (SEK550,000), respectively. The loan is unsecured, bearing interest at 2% per annum and due on demand. The interest expense was $510 and $568 for six months ended October 31, 2023 and 2022, respectively.

At October 31, 2023 and April 30, 2023, balances of loan from a former director of SensaSure were $26,850 (SEK300,000) and $29,232 (SEK300,000), respectively. The loan is unsecured, bearing interest at 2% per annum and due on demand. The interest expense was $278 and $319 for six months ended October 31, 2023 and 2022, respectively.

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 October 31, 2023 and 2022, the interest accrual balance related to overdue invoices from the related party vendor was $138,483 and was included in accounts payable and accrued liabilities to a related party.

As at October 31, 2023, the total accounts payable and accrued liabilities to the related party was $470,445 (April 30, 2023 - $486,826).

For the six months ended October 31, 2023, the total purchase from the related party representing the research and development and patent expenses was in amount of $10,145 (October 31, 2022 - $19,421).

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 (SEK2,798,280), and the parties agreed to settle the accounts payable balance in seven installments (Note 2 (c)) and the payable balance became current on April 30, 2023. Management has evaluated the terms of the agreement in accordance with the guidance provided by ASC 470 and concluded that there was no extinguishment accounting applicable to the modification. The payment modification did not include overdue invoices related interest accruals. At October 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 $6,701 (April 30, 2023 - $6,701).

At October 31, 2023, the current portion of the modified payable balance was $232,458 (April 30, 2023 - $240,012) and the long term portion was $nil (Aril 30, 2023 - $Nil).

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

At   October 31, 2023, the Company is authorized to issue 250,000,000 (April 30, 2023 – 250,000,000) shares of common stock ($0.01 par value).

At   October 31, 2023 and 2022, the Company is authorized to issue 5,000,000 (April 30, 2023 – 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.

At   October 31, 2023, the Company is authorized to issue 5,000,000 (April 30, 2023– 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 October 31, 2023, common shares issued and outstanding totaled 56,349,183 (April 30, 2023 – 56,349,183) shares (Note 8 (b)).

At October 31, 2023, there were Nil Class A shares of Preferred Stock that were issued and outstanding (April 30, 2023 – Nil) (Note 8 (b)).

At October 31, 2023, there were Nil Class B shares of Preferred Stock that were issued and outstanding (April 30, 2023 – Nil) (Note 8 (b)).

Share issuance during the year ended April 30, 2021

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.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

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 (Note 8 (c)). The proceeds were reflected as an increase of $27,671 in noncontrolling interests.

During the year ended April 30, 2021, SensaSure acquired an additional 267,296 common shares (Note 8 (c)) 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 subsequently to year end and issued 420,000 common shares accordingly (Note 4). The subscribers entered into lock up agreement pursuant to which (1) The Shareholders shall 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.

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 the year ended April 30, 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 $88,210, was amortized and recorded in general and administrative expenses as well as an increase in common stock in amount of $38,610 and additional paid in capital in amount of $49,600 respectively during the year ended April 30, 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 year ended April 30, 2023.

During the year ended April 30, 2021, SensaSure issued 24,371 Class A Preferred Stock to directors of the Company for services provided. The fair value of the shares issued, in amount of $360,795, was determined based on the common stock fair value and factoring in the conversion rights which are subject to performance condition. Estimates of the timing and successful completion of the performance conditions were made by management. The fair value of the shares issued was recorded as share-based compensation and included in general and administrative expenses with a credit of $24 and $360,771 in Class A Preferred Stock and additional paid-in capital, respectively.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 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.

During the year ended April 30, 2021, SensaSure issued 31,500 Class B Preferred Stock to directors and consultants 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.

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.

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. 

Share issuance during the year ended April 30, 2022

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 $48,700 and additional paid-in capital in amount of $292,200 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.

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 to be provided in future including completion of certain financing projects and regulatory services. 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. At April 30, 2022 and 2023, none of these services were rendered. Accordingly, the Company has not recognized any share based compensation expense during the year.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

Share issuance and shares to be issued during the year ended April 30, 2023

During the year ended April 30, 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.

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. As at April 30, 2023, 750,000 common shares related service conditions were met and the Company included 750,000 common shares into shares to be issued. The fair value of the share-based compensation was in the amount of $11,975. The fair value of the share-based compensation was included in 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 commencement at December 15, 2022. During year ended April 30, 2023, 1,650,000 common shares vested and the fair value of the share-based compensation was in the amount of $115,500 and was included in the general and admirative expenses as well as a credit made in common stock in amount of 16,500 and additional paid-in capital in amount of 99,000 respectively. The fair value of the shares of common stock issued was determined by using the most recent private placement price at $0.07 per share. For six months ended October 31, 2023, there were 2,200,000 number of shares vested and the Company recorded $22,000 and $132,000 into common stock and additional paid-in capital respectively.

During the year ended April 30, 2021, the Company issued 22,000,000 common shares to the directors. Those common shares issued were subject to a 60 months service period. The detailed accounting treatment for those issued but unvested shares are as below:

At April 30, 2023, there were 2,800,000 unvested common shares that was converted from Class B shares of Preferred Stock during year ended April 30, 2022. At April 30, 2023, there were 750,000 vested and to be issued common shares that was converted from Class B shares of Preferred Stock during year ended April 30, 2022. The dollar value associated with those shares in the amount of $35,500 was not included in the common stock.

For six months ended October 31, 2022, there were 1,276,000 number of shares vested and the Company recorded $12,760 and $16,392 into common stock and additional paid-in capital respectively.

SENSASURE TECHNOLOGIES, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2023 AND 2022  

(continued)

At October 31, 2023 and April 30, 2023, there were 4,950,000 and 7,150,000 unvested common shares that was issued to the director of the Company respectively. The dollar value associated with those unvested shares in the amount of $49,500 (April 30, 2023 - $71,500) was not included in the common stock.

At October 31, 2023 and April 30, 2023, there were 3,080,000 unvested common shares that was issued to a consultant of the Company. The dollar value associated with those unvested shares in the amount of $30,800 was not included in the common stock.

During the six months ended October 31, 2023 and 2022, 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: