Item 405 of Regulation S-B is contained, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ] No [X]

State issuer’s revenues for its most recent fiscal year: US$75,545

As of July 7, 2008, the aggregate market value of the voting common equity held by non-affiliates of the registrant was US$2,300,755, based on the closing trade reported on the NASD Over-the-Counter Bulletin Board quotation system. Shares of Common Stock held by each officer and director and by each person known to the issuer who owns 5% or more of the outstanding Common Stock have been excluded form this calculation as such persons may be considered to be affiliated with the Company

As of July 7, 2008, the Registrant’s outstanding common stock consisted of 50,904,651 shares.

Transitional Small Business Disclosure Format: Yes [   ] No [X]

SENSE TECHNOLOGIES INC.

Form 10-KSB

Table of Contents

Part

Item No.

I

1

Description of Business

2

Description of Property

3

Legal Proceedings

4

Submission of Matters to a Vote of Security Holders

II

5

Market for Common Equity and Related Stockholder Matters

6

         

Management’s Discussion and Analysis or Plan of Operation

7

                        Financial Statements

8

   

Changes in and Disagreements with Accountants on Accounting and

       

     

Financial Disclosure

8A

Controls and Procedures

8B

Other Information

III

9

Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 61(a) of the Exchange Act

10

Executive Compensation

11

 

Security Ownership of Certain Beneficial Owners and Management

12

 

Certain Relationships and Related Transactions

IV

13

Exhibits

14

Principal Accountant Fees and Services

Signatures

Financial Statements

SENSE TECHNOLOGIES INC.

FORM 10-KSB

Note Regarding Forward Looking Statements

This Form 10-KSB contains forward-looking statements, which may be identified as statements containing, including without limitation, the words believes, anticipates, intends, expects or similar words.  These statements are based on our belief as well as assumptions we made using information currently available to us.  Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions.  Actual future results may differ significantly from the results discussed in the forwards-looking statements.  Some, but not all, of the factors that may cause these differences include:  risks related to political and economic uncertainties; risks related to the implementation of our new business strategy; our ability to obtain financing on acceptable terms; competition in the automotive sensing device industry; our ability to obtain widespread acceptance of our sensing devices in the automotive industry; our ability to manage growth; our ability to protect our intellectual property rights; government regulation of the automotive industry as it relates to use of sensing devices; and other uncertainties described elsewhere herein. You should not place undue reliance on these forward-looking statements.

PART I

Item 1.  Description of Business

Overview

We develop and market automotive safety devices that increase driver awareness of people or obstacles located in vehicle blind spots.  Our two product lines consist of Guardian Alert® and ScopeOut®.

Our Guardian Alert® product uses Doppler radar technology to warn vehicle drivers of the presence of people or obstacles in blind spots that exist behind their vehicles when backing up.  Marketing of the product has been primarily to automobile and truck dealers, fleet operators, and other after-market automotive industry participants.  The Company began manufacturing the Guardian Alert® Doppler Awareness System for the passenger car market during the first quarter of fiscal 2003. We are expending marketing efforts to increase our presence in the fleet vehicle market, passenger car aftermarket and additional new channels.  Changes in our management, business plan and the need for additional financing has delayed our marketing and sales plans for the product.  In addition, we require additional funding to continue with development of the product.

In 2004, we acquired the worldwide rights to market and sell the ScopeOut® product.  ScopeOut® is a system of specially designed mirrors which are placed at specific points on automobiles, trucks, sport utility vehicles or commercial vehicles to offer drivers a more complete view behind the vehicle.  Drivers using the product are able to have increased visibility when backing out of parking spaces or garages, and have additional protection from blind spots during lane changes in traffic.  ScopeOut® is being marketed to department stores and other retailers as an after-market automotive safety product, and is also available on-line at www.sensetech.com.

Corporate History

Sense Technologies, Inc. (“Sense”) was incorporated under the laws of the Province of British Columbia, Canada, on May 25, 1988 under the name Wizard Resources Ltd.  Our corporate name was changed to Graham Gold Mining Corporation on October 11, 1988 and subsequently to Sense Technologies Inc. on October 27, 1997 in connection with the acquisition of our current business.  On December 14, 2001, we changed our jurisdiction of organization from British Columbia to the Yukon Territories.  On November 15, 2007, we changed our jurisdiction of organization from the Yukon Territory back to British Columbia.

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Our shares are currently quoted on the Over-the-Counter Bulletin Board (OTCBB) under the trading symbol SNSG.OB.  We were previously listed on the both the Canadian Venture Exchange (now called the TSX Venture Exchange) and the Nasdaq SmallCap Market.  We voluntarily delisted our shares from the Canadian Venture Exchange on October 3, 2001.  On April 25, 2002 our stock was delisted from the Nasdaq Small Cap Market as we were unable to meet quantitative listing requirements.  

Our administrative office is located at 2535 N. Carleton Avenue, Grand Island, Nebraska.  

Industry Overview

We compete in the automotive backing awareness and safety industry. Our products are designed to protect people from death or injury and property from damage that can result from a collision with a vehicle that is backing up or changing lanes.  In those circumstances, vehicles have blind spots that limit the ability of the operator to see obstacles or people that are towards the rear or behind the vehicle.  This has repeatedly resulted in death, injury and property damage, which has in turn prompted several companies to develop and manufacture backing awareness sensing products. The National Highway Traffic Safety Administration reported that approximately 400 people die in the United States annually from accidents involving vehicles backing up.  In addition, property damage and personal injury claims resulting from back-up accidents all suggest a market need for backing awareness safety devices.  

While there are no known products that are similar to our ScopeOut® product, there are a number of backing awareness products available that compete with our Guardian Alert® product.

Various backing awareness products are currently being installed by automobile manufacturers and dealers as optional equipment on consumer and commercial vehicles. However, backing awareness products can range in sophistication and effectiveness.  Such products include loud beeping alerts that sound when a vehicle is placed in reverse gear.  A beeping alert is limited in effectiveness as it does not notify the driver of obstacles behind the vehicle.  Young children up to four years old typically do not have the capacity to understand what the beeping noise means or to understand the possibility of injury from remaining behind a reversing vehicle.  Other awareness products include large round convex mirrors placed at the rear of a vehicle which provide the driver with a line of vision across the rear area of their vehicle.  These devices can be effective for a small class of vehicles such as delivery vans, however are not practical for most consumer or commercial vehicles due to their size and need for training.

There are also backing awareness products, including our Guardian Alert⁽® Doppler Awareness System product, that use ultrasound and radar technologies to sense obstacles and people behind a reversing vehicle.  These electronic sensing and alert systems will warn a driver to the existence of obstacles behind a vehicle. Ultrasound backing awareness products are currently being used by some automobile manufacturers as a factory-installed option on certain new vehicle lines.  These products are designed primarily to protect the vehicle from damage in parallel parking situations.  They are designed to detect the bumper of another vehicle when parking and accordingly will typically not detect obstacles below ten inches from the ground.  These sensors must be kept clear of dirt and dust in order to ensure proper functioning.  The system requires that four ultrasonic sensors be placed at various locations on the rear bumper.  The sensors extend through the skin of the bumper, thereby changing the appearance of the exterior of the vehicle.  Backing awareness systems also exist that use pulse radar to detect obstacles.  These systems are installed on the exterior of a vehicle thereby affecting aesthetics of the vehicle, and are typically used for commercial vehicles.

Our Guardian Alert Product

Guardian Alert ®

Our Guardian Alert® Doppler Awareness System backing awareness products use a patented process based on Doppler radar technology.  Our Doppler radar sensing products offer several advantages over ultrasonic and pulse radar sensors.  The Guardian Alert® Doppler Awareness System creates a three-dimensional awareness zone behind a vehicle that extends from the rear of the vehicle outward for the width of the vehicle.  Vertically, the awareness zone begins at ground level and rises up to approximately five feet.  The operator of the vehicle is alerted should any person or obstacle come within the awareness zone as the vehicle is reversing.  The Guardian

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Alert® Doppler Awareness System consists of a single sensor that can be placed under the skin of a plastic bumper thereby not altering the appearance of the vehicle.  We also have a number of other product shapes and

installation options to accommodate a wide range of consumer and commercial vehicles. Our products are designed to be robust and to operate in almost all weather and road conditions.  In contrast to ultrasound and some other backing awareness products, our sensor using the Doppler radar technology is not affected by dust, dirt, snow or other environmental materials that can cover a sensor.

Our Guardian Alert® Doppler Awareness System products are based on a patented system using Doppler radar technology.  We acquired and hold worldwide rights to manufacture and sell the system.

The Guardian Alert® Doppler Awareness System consists of a radar transceiver, a flat antenna, a signal processor, and an audio-visual display unit. The transceiver and antenna are enclosed in an environmentally sealed, high impact resistant, resin housing and mounted on the rear of the vehicle. When activated by placing the vehicle in reverse, the transceiver continuously projects signals and the antenna receives return signals reflected off of objects within the predefined awareness zone. Doppler Shift technology is based on the principle that signals return on a slightly different frequency than they are projected.  The relationship between the phase of the projected signals and the returning signals is used by the product to determine the distance between the rear of the vehicle and the object.  The signal processor then sends a signal to the audio-visual display unit typically located on the dashboard of the vehicle thereby alerting the vehicle operator to the presence of a person or object.  The display unit informs the operator about the presence of an obstacle via a sequence of green, yellow, and red lights set to illuminate at preset distances such as twelve feet, five feet and three feet.  In conjunction with the visual alarm, the audio alarm alerts the driver at corresponding distances with a pulsating tone changing to a constant tone.  The visual display is approximately the size of a small box of matches.

The external units are produced by us using various suppliers.  The external units can be manufactured in various shapes to suit a wide variety of vehicles.  For example, we produce a trailer hitch mount version which fits directly into the receiver on a trailer hitch when not towing.  We also produce a version that is mounted under the skin of a plastic bumper in order that the esthetics of a vehicle are not affected.  Our distribution partner has developed six design options ranging from a license plate mount, to sensors protected by steel casings for commercial applications.

The focus of our current business strategy is the commercialization of our Guardian Alert® Doppler Awareness System products.  There are a number of product extensions and new applications that we may develop in the future as we grow.  These products include side blind spot awareness and docking aids for industrial safety and velocity sensing applications.

Production of our Guardian Alert ® Doppler Awareness System

We outsource the manufacture of the components of our Guardian Alert® Doppler Awareness System.  Our objective is to secure high-volume, low-cost production capabilities. The entire family of products has the same interior components, while the exterior enclosure and mount is available in a variety of options appropriate for different types of vehicles.

The display unit and the radar sensor components of our products are manufactured by Microwave Solutions Limited of Hertfordshire, England.  Our cabling is available from a number of local sources.  Assembly and packaging is done in North Carolina.  We currently believe that production of our products is more cost effective by outsourcing the manufacturing and assembly of the components.   

Market and Marketing of our Guardian Alert ® Doppler Awareness System

The end user of our Guardian Alert® Doppler Awareness System  product is the safety conscious vehicle owner or operator seeking to minimize the risk of loss associated with backing accidents.  Users of backing awareness sensing products, may purchase the product as a factory installed option from the vehicle manufacturer, purchase the product after-market or directly from distributor for installation in commercial or fleet vehicles, or purchase as an after-market consumer add-on to their vehicle.  

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Accordingly, the target market for our Guardian Alert® Doppler Awareness System product can be identified as follows:

·

Manufacturers of vehicles, including cars, sport utility vehicles, light trucks, heavy vehicles and equipment, and original equipment suppliers to these manufacturers.

·

Owners of commercial fleet vehicles and government departments and agencies using fleet vehicles.

·

Consumer outlets of after-market automotive accessories, including dealerships, automotive service shops and automotive retailers, direct sales via the Internet and infomercials.

The North American automotive manufacturers segment has been growing consistently for the last several years beginning with the emergence of the minivan as a force in the market and continuing with the more recent trend towards sport utility vehicles. We believe this segment and the large luxury sedan segment provide the best markets for our products. Our primary efforts will initially be focused on the mid to higher end of this market that is expected to be less price sensitive and more interested in new technologies. We are actively marketing to decision makers in the original equipment market through manufacturers.  Our marketing emphasis has, however, been to the higher margin market including dealerships and consumer outlets.  Dealerships provide an opportunity to add our product to a vehicle after it leaves the manufacturer, but before it is sold.

The 200 million vehicles currently on US roads also provide a number of opportunities for marketing our backing awareness products. There are also eight million large trucks owned by commercial enterprises and approximately 4.5 million fleet vehicles on dealership service plans, which provide a significant point of sale opportunity. Millions of vehicles each year are repaired at collision centers, which could offer the product in conjunction with the repair of a rear bumper. Additionally, most new car warranties require regular oil changes, which are often performed at dealerships. These visits will provide additional point of sale opportunities for dealerships that are already stocked with Guardian Alert® Doppler Awareness Systems.

Our product can result in economic benefit as well as improved vehicle safety to fleet operators and consumers in these markets. Based on our research and experience in the fleet market tells us that fleet operators and risk managers place a greater emphasis on statistical economic analysis than consumers. Equipping fleets of vehicles requires a significant capital expenditure that needs to be evaluated relative to the fleet owner's other needs and limited capital.

We believe that consumers weigh cost, safety benefit to persons and property and aesthetic appeal in making a decision to purchase a backing awareness product.  We believe that the products ease of demonstration and high degree of functionality can provide a consumer with an appreciation of the benefits in protection of property and person.  We estimate the cost of a system installed on a consumer vehicle would generally range from $300 to $700, which we believe would appeal to most new-vehicle buyers that are interested in the safety and protection aspect of the product.  In perspective, the cost of the product is less than typical insurance deductibles and therefore avoiding one incident would allow the product to pay for itself. In addition to actual repair cost, Guardian Alert ® Doppler Awareness System purchasers also receive the benefit of saving the considerable time and inconvenience of having their vehicle repaired and processing insurance claims.  Our product can also be installed beneath the plastic skin of a bumper, thereby not altering the appearance of the vehicle.

Sense has designed distinct pricing strategies for each of its three primary markets according to the following principles:

·

The product should be priced at a level readily acceptable to SUV and light truck purchasers;

·

Attractive margin must be made available to OEMs and distribution partners;

·

Fleet products must offer attractive ROI to owners; and

·

Margins to Sense will increase faster with higher volume than higher pricing.

We believe our price points are somewhat better than competing products and additionally provide us with immediate operating margin contribution.  Over the long-term, as volumes grow to higher levels, there will be sufficient opportunity to lower manufacturing costs.

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Competition and Our Competitive Advantages

The backing awareness industry includes manufacturers of active sensing devices using ultrasonic, infrared and radar technology to detect the presence of obstacles or persons behind a reversing vehicle.  There are also a number of passive systems such as convex rear cross-view mirrors, rearward facing television cameras and reversing sound alerts.  While we compete with all backing awareness devices, we view our primary source of competition as being in the active sensing market.  Passive devices require driver training and are susceptible to driver error as they do not actively warn a driver of the presence of obstacles or people behind the vehicle.  We have identified seven competitors in the active sensor market: Echo Vision, Hindsight 20/20, Bosch, Delphi, Valeo, Rostra and Groenveld which is manufactured by Gintec LTD in Israel.

We believe the Guardian Alert® Doppler Awareness System is superior to any competing technology in each active sensor category.  Our system is the only patented Doppler radar device available.  Among Doppler radar products, our Guardian Alert® Doppler Awareness System is the only product that uses a single sensor, which we believe results in easier and less expensive installation. Ease of installation is a primary concern among vehicle dealers which provides us with a competitive advantage over other Doppler radar sensing and ultrasonic products.

Other systems use infrared or ultrasonic sensors.  Infrared sensors project infrared beams and detect reflected infrared light from objects in the scanned zone behind the vehicle, which in turn activates an audio or visual alarm. Ultrasonic Systems work on the principle of emitting an ultrasonic sound burst and detecting a reflected energy wave returned to the source by contact with an object in the detection zone, again activating an alarm.  Both systems require a clean sensor in order to function properly, and accordingly performance can be affected by environmental conditions.

We believe our product has competitive advantages over ultrasonic systems.  Ultrasonic systems have emerged as a factory installed option on some vehicle lines.  Due to the four precisely tuned sensors and the in-bumper design requirements of these systems it is not practical to install them outside of the factory on cars or light trucks. The most important distinguishing characteristic between the Guardian Alert® Doppler Awareness System and ultrasonic systems is that ultrasonic systems are designed primarily to detect the bumper of another vehicle while parallel parking. They do not provide coverage all of the way to the ground and therefore tend to offer the vehicle operator a false sense of security. Additionally, since the sensors cannot “see” through a bumper, the systems cannot be mounted behind the skin of the bumper, which affects the aesthetic appearance of the vehicle.

We also believe our product has competitive advantages over infrared systems as those systems require a clear line of site with the obstacle in order to function properly, which means effectiveness may diminish with environmental conditions such as dirt or bright light.

The infrared and ultra sonic technologies were independently tested and evaluated along with a microwave radar system by the U.S. Bureau of Mines (Bureau of Mines Circular/1986) in a study of back-up driver's aid systems for mining vehicles. Infrared Systems were found to be the least reliable for detecting objects in the rear blind area. Bright sunlight and reflections from bright objects could trigger false alarms and their range depends upon the reflectivity of the detected object. Also, the narrow beam pattern necessitates the use of arrays of sensors to scan the desired zone, increasing system cost and complexity and decreasing reliability. Furthermore, both of the competitive technologies are to some degree affected by adverse weather conditions such as rain, fog, snow, ice or wind. The Bureau of Mines Study found that the microwave radar system was not affected by weather conditions.

Our product is robust, uses a single sensor that is not affected by most environmental conditions, and provides a full range of detection behind the vehicle, including near ground level.   We have also priced our product competitively or below most other competing products.  

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Our ScopeOut® Product

ScopeOut®

ScopeOut® is a system of specially designed mirrors which are placed at specific points on automobiles, trucks, vans, sport utility vehicles and commercial vehicles, to offer drivers a more complete view of the blind spots located toward the rear of the vehicle.  Drivers are able to have increased visibility when backing out of parking spaces or garages, and have additional protection from blind spots during lane changes in traffic.  ScopeOut®’s high-tech aerodynamic mirrors help drivers see approaching traffic and more easily detect a host of potential hazards behind the vehicle that might otherwise be blocked from view.

This after-market automotive device installs easily on vehicles within minutes, and it provides drivers with 270 degrees of rear visibility, allowing drivers to see a panoramic view behind them. Two models are available, one for cars and one designed to fit most sport utility vehicles, trucks, minivans, station wagons or hatchbacks. Either model fits a wide variety of vehicles, can be installed with no special equipment, and can be removed at any time without altering or damaging the vehicle.

We have an exclusive worldwide license agreement to manufacture and market the ScopeOut® adjustable mirrors system. The product is a stand-alone or complementary product to the existing Guardian Alert® product line.

Production of our ScopeOut® Product

All of our manufacturing and engineering is being out-sourced to a firm located in Phoenix, Arizona.  The product is ready for immediate commercial production and sales.

Market and Marketing of our ScopeOut® Product

The potential market for ScopeOut® is owners or operators of cars, vans, SUV’s and trucks worldwide.   There are over 200 million vehicles on the road at any given time, and 16 to 18 million new vehicles being built and sold each year.  In combination with our Guardian Alert®, we have the only “Surround Safety System” that addresses all the blind spots encountered around the rear of most vehicles at a cost that permits us to set price points that are affordable for most consumers.

There are a number of ways to market this product, either individually, or as a combination.

Marketing outlets include, but are not limited to, the following:

·

New and used auto dealers

·

AAA Insurance

·

AARP

·

Mass merchandisers

·

Drugstore chains

·

Insurance companies

·

Rental car companies

·

Electronics stores

·

Supermarket chains

·

Independent auto aftermarket stores

·

OEM market

·

Internet and infomercials

·

QVC and HSN

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We are presently building a National Representative Organization that will allow for our products to be introduced to all the various markets.

Competition and Our Competitive Advantages

Based on our research, we have found no products comparable in pricing and design to ScopeOut® that addresses the hazard created with vehicles backing out blind in parking lots and driveways, while offering an additional lane-changing safety feature.

Our Patents, Trademarks & Licenses

Patents & Trademarks

The following countries have granted patent rights respecting the Guardian Alert® Doppler Awareness System backing awareness system: United States, Canada, Australia, South Africa, Taiwan, the United Kingdom, Korea and Japan.  The Guardian Alert® Doppler Awareness System is a registered trademark.

We have also received a US Patent on our trailer hitch mount sensor product that easily installs in the receiver-hitch on any vehicle equipped with such a hitch.

The ScopeOut® product is generally covered by US Patent Numbers 6,715 893 and 6,799,857, with various other patent applications currently pending, all of which are included in the exclusive license agreement.

Licenses & Royalties

We hold non-exclusive worldwide rights to develop, manufacture, market and license the Guardian Alert® Doppler Awareness System technology and products.  We hold these rights pursuant various license agreements with the Driver Alert Group, the original group of patent holders and Stinson & Associates, a holder of certain rights under license from Driver Alert Group. These license agreements provide us with the right to market the products to all federal, state, local and foreign governments and agencies, including the postal service, the rights to enter into manufacturing and marketing agreements with automotive and other manufacturers worldwide, and generally the rights to any other markets including school buses, construction equipment and mining equipment.

Pursuant to these licenses, we are required to make royalty payments to the licensors and meet sales targets as follows:

a)

$6.00(US) per unit on the first one million units sold;

b)

thereafter, the greater of $4.00(US) per unit sold or 6% of the wholesale selling price on units sold; and

c)

50% of any fees paid to Sense in consideration for tooling, redesign, technical or aesthetic development or, should the licensors receive a similar fee, the licensors will pay 50% to Sense.

Prior to 2004, the Company had held an exclusive license and patent rights.  Under the terms and conditions of maintaining the exclusive rights, the Company was required to manufacture and sell a minimum number of units as follows:

(i)

30,000 units by the end of the calendar year containing the second anniversary of the date of commencement of commercial production;

(ii)

a cumulative total of 60,000 units by the end of the calendar year containing the third anniversary of the date of commencement of commercial production;

(iii)

a cumulative total of 110,000 units by the end of the calendar year containing the fourth anniversary of the date of commencement of commercial production;

(iv)

a cumulative total of 210,000 units by the end of the calendar year containing the fifth anniversary of the date of commencement of commercial production; and

(v)

an additional 125,000 units by the end of each calendar year thereafter.

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In order to retain the exclusive right to manufacture, market and distribute the Guardian Alert, the Company had been required, upon being assigned the license, to manufacture and sell various minimum numbers of units by certain milestone dates.  As a result of not being able to meet the minimum milestone requirements under the license agreement, during the year ended February 28, 2004, the Company determined that it did not wish to retain the exclusive right to manufacture, market and distribute the Guardian Alert unit and ceased accruing the minimum royalty due to the licensor. Any product sales subsequent to this date are considered to be part of the minimum royalty until such time that amounts exceed the minimum royalty accrued.

We entered into a sub-license agreement with S&S Distributing, LLC of Elkhorn, Nebraska whereby S&S acquired certain rights to develop market and distribute Guardian Alert® Doppler Awareness System products in 1998, but it is no longer in effect.  The sub-license agreement provided for certain minimum purchases of products from Sense, and certain expenditure requirements for development and marketing.  The sub-license also provided that any new versions of the sensing device that are developed by S&S will be made available for manufacture and distribution by Sense.  S&S is continuing to sell Sense units.

Pursuant to a consulting and engineering agreement with Maple Consulting, we agreed to pay a royalty of $0.50 for each Guardian Alert® Doppler Awareness System sold that was designed pursuant to the agreement, up to a maximum of 200,000 units.

We hold a world-wide exclusive and perpetual license with ScopeOut® products pursuant to a license agreement with Palowmar Industries, LLC and Lowell Martinson.

Our ScopeOut® license called for $150,000 to be paid over two years (paid) along with a royalty of 10% of wholesale price for each ScopeOut® unit sold, but not less than $2.00 per unit.  In order to maintain the exclusive license for the ScopeOut® products, in accordance with the license agreement with Palowmar Industries, LLC, we are required to pay royalties to the licensor based on the following minimum quantities of units sold:

(i)

30,000 units per year beginning in years 1-2

(ii)

60,000 units per year beginning in years 3-4

(iii)

100,000 units per year beginning in years 5 and above.

We have not been able to pay the minimum royalty requirement as noted above but we have accrued the required minimum royalty annually and we have an agreement with the licensor to extend the requirement for payment to September 1, 2008.  

Governmental Approval

Because our Guardian Alert product is an emitting device, the Federal Communications Commission (FCC) we were required to obtain equipment authorization which was granted on October 31, 1995.  The microwave signals emitted by the device can potentially interfere with radar detectors and other existing emitting systems. All FCC tests have been completed and a FCC certification in the name of Sense Technologies Inc. has been obtained. There are no other material regulatory approvals required for Sense to achieve its stated business objectives.

Employees

We currently have no employees.  We have hired three independent consultants for purposes of marketing and selling our ScopeOut® products.

Item 2.  Description of Property

Sales inquiries for Guardian Alert® products are being processed for Sense by Tim Goldsbury and Associates, Inc., at Alhambra Plaza, 725 N. Hwy A-1-A, Jupiter, FL  33477, and for Scopeout® by Lowell Martinson at the Sense offices at 4043 W. Kitty Hawk, Suite 7, Chandler, AZ 85226.  Administration is handled from offices located at 2535 N Carleton Avenue, Grand Island, Nebraska. Both the Florida and Nebraska office spaces are provided to us at no cost.  We have determined that the value of contributed premises to be insignificant.

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Item 3.  Legal Proceedings

To the best of our knowledge, there are no legal actions pending, threatened or contemplated against us.

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’s shareholders during the fourth quarter of fiscal year 2008.

PART II

Item 5.

Market for Common and Preferred equity and Related Stockholder Matters

Market and Trading Price for Common Shares

Price quotations for trades in our shares are currently posted on the Over-the-Counter Bulletin Board (“OTCBB”), which is a quotation service administered by the National Association of Securities Dealers (NASD). Our trading symbol on this service is “SNSG”.  From June of 2000 to April 25, 2002, our shares were traded on the Nasdaq SmallCap Market. Our shares were also listed on the Canadian Venture Exchange (now called the TSX Venture Exchange) until October 3, 2001, when we voluntarily delisted.

The following table shows the high and low sales prices, in U.S. dollars, of our common stock on the OTCBB for each quarter within the last two fiscal years:

Quarter Ended	High	Low
February 29, 2008	$0.18	$0.06
November 30, 2007	$0.20	$0.06
August 31, 2007	$0.07	$0.03
May 31, 2007	$0.07	$0.04
February 28, 2007	$0.31	$0.04
November 30, 2006	$0.35	$0.15
August 31, 2006	$0.29	$0.10
May 31, 2006	$0.40	$0.12

The above sales prices were based on the closing trades reported on the NASD Over-the-Counter Bulletin Board quotation system and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

  

As of February 29, 2008, there were 319 shareholders of record holding 45,575,551 shares of our common stock; as of July 7, 2008, there were 50,904,651 common shares outstanding.  

Dividends

There are no dividend restrictions in the Company.

Recent Sales of Unregistered Securities

On May 14, 2007, one investor under Rule 506 of Regulation D, subscribed for 150,000 common shares at a price of $.10 per share for total proceeds to the Company of $15,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

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On June 14, 2007, one investor under Rule 506 of Regulation D, subscribed for 300,000 common shares at a price of $.10 per share for total proceeds to the Company of $30,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On July 13, 2007, one investor under Rule 506 of Regulation D, subscribed for 25,000 common shares at a price of $.10 per share for total proceeds to the Company of $2,500.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On October 9, 2007, one investor under Rule 506 of Regulation D, subscribed for 75,000 common shares at a price of $.10 per share for total proceeds to the Company of $7,500.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On October 16, 2007, three investors under Rule 506 of Regulation D, subscribed for 1,000,000 common shares at a price of $.05 per share for total proceeds to the Company of $50,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On November 9, 2007, one investor under Rule 506 of Regulation D, subscribed for 50,000 common shares at a price of $.10 per share for total proceeds to the Company of $5,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On November 30, 2007, one investor under Rule 506 of Regulation D, subscribed for 500,000 common shares at a price of $.10 per share for total proceeds to the Company of $50,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On December 11, 2007, one investor under Rule 506 of Regulation D, subscribed for 100,000 common shares at a price of $.10 per share for total proceeds to the Company of $10,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On December 19, 2007, one investor under Rule 506 of Regulation D, subscribed for 300,000 common shares at a price of $.10 per share for total proceeds to the Company of $30,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

On February 15, 2008, one investor under Rule 506 of Regulation D, subscribed for 100,000 common shares at a price of $.10 per share for total proceeds to the Company of $10,000.  The shares are restricted pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

All of these shares were issued on July 2, 2008.

Preferred Shares

The preferred shares are entitled an annual dividend of $0.10 per share payable on July 31 of each calendar year.

The preferred shares are convertible into common shares of the Company at the rate of one common share for each 0.29 preferred share. Upon conversion, all preferred share rights cease except the right to receive declared and unpaid dividends

The preferred shares are redeemable at the option of the Company at the redemption price of $1 per Class A preferred share plus payment of all dividends cumulated thereon.  

Item 6.  Management’s Discussion and Analysis or Plan of Operation  

The following discussion and analysis should be read in conjunction with our audited Financial Statements and Notes thereto for the period ended February 29, 2008 and our revised audited Financial Statements and notes thereto for the period ended February 28, 2007.

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SENSE TECHNOLOGIES INC.

10KSB

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Overview of Operations

Sense holds a non-exclusive license to manufacture, distribute, market and sublicense world-wide, a patented technology which is used to produce the Guardian Alert® backing awareness system for motor vehicles utilizing microwave radar technology.  The Company assembles the product in Charlotte, NC.  The company also holds an exclusive license to manufacture, distribute, market and sublicense world-wide, the ScopeOut® product, a patented system of specially-designed mirrors which are placed at specific points on vehicles to offer drivers a more complete view of the blind spots toward the rear of the vehicle.  This product is manufactured in China through an outsourced vendor.  The Company has established relationships with large dealership groups and aftermarket product distributors. The Company plans to increase sales through continued development of new marketing relationships.

Results of Operations

For the period ended February 29, 2008 as compared to the period ended February 28, 2007.

Sales for the period ended February 29, 2008 decreased by 23% from $97,532 to $75,546 due to reduced demand.  Revenue is recognized by management only upon receipt of an actual purchase order from a customer, and the related invoicing to the company, or, in the absence of a purchase order (i.e., verbal order), the actual invoicing to the customer, when the products are shipped and collection is reasonably assured.

We continued to market both products with emphasis on large sales opportunities for ScopeOut®.  While it is the company objective to grow sales, no assurance can be given that we will be successful in this manner and sustain comparable sales in future periods.

Direct costs in 2008 were abnormally high due to significant expenses, such as  the write-off of certain of the ScopeOut® inventory in the amount of  $76,891 in and $162,500 in minimum royalties under the ScopeOut® license.  Direct costs in 2007 were also high due to the write-off of $68,307 of certain of the ScopeOut® inventory and $60,000 in minimum royalties under the ScopeOut® license.

Direct costs typically include the cost of raw materials necessary to make our products.  It also includes the cost of shipping the products from manufacturing location to our warehouse.  Direct costs also include costs in respect of obsolete/unsaleable inventory.

Management periodically reviews inventory and makes a determination as to whether any inventory is obsolete.  If we determine that certain materials and or products are not in saleable condition and that the likelihood of them being sold is remote, management will make a decision to write off the inventory and or parts of inventory that it deems will not sell.  If previously written-off inventory later sells, costs of sale are significantly lower due to the previous write-off of those costs.  This can materially affect period gross profit ratios. .

Regarding intangible assets, the company conducts reviews annually in accordance with SFAS 142 regarding possible impairment of related assets.   We have written off the GuardianAlert® license agreement intangible asset in 2005 and the ScopeOut® license agreement intangible asset in 2007 due to poor sales performance results in the past and the uncertainty of the recoverability of the assets.

After careful consideration, management felt the ScopeOut® license should be treated as fully impaired at February 28, 2007.  The initial license was entered in September, 2004, and the first molds for the first iteration of the product were completed in September of 2005.  

The initial inventory, now all written off, was manufactured and delivered to the Company in November 2005.  Significant marketing efforts were undertaken with respect to that first version which resulted in significant promise for potential large sales to occur based on initial meetings introducing the product.  It generally took several meetings with each such potential customer to ultimately learn that the products' aesthetics were not acceptable for mass consumer acceptance.  This was especially true with respect to dealers' installation of the product on its new and used car inventory for such vehicle to be sold with the product intact.  

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In late 2006, and by fiscal year end February 28, 2007, solutions to those aesthetic problems were being developed.  We still expected that inventory of the first iteration was saleable, but likely not with large customers such as retail chains.  Some automobile dealerships previously contacted also had not yet made a final decision whether to use the product on its existing inventory for resale.

The Company undertook the effort to redesign the products using the qualified engineers that assisted with the first design, and physically-feasible aesthetics solutions were determined and evaluated.  The new designs iterations were finally approved in August of 2007, and the first inventory of both versions of the new iterations were manufactured and delivered in November, 2007.

Based on this, management believed at February 28 2007 that existing inventory was still resalable, though likely not in the large volumes per customer as originally anticipated.  Further, management believed that the product could successfully be redesigned, engineered, and prototyped and manufactured in the appropriate aesthetic versions necessary to achieve such large customer sales.  Based on this, when the initial 10-KSB was filed and financial statements issued, no impairment of the intangible asset was believed to exist.  However, management now believes that the total impairment of that intangible asset as of that date is appropriate as there was no assurance at the time that our expectations of solving the aesthetics and other marketing problems would actually be successful.  This is further because no significant sales of the new versions of the product have yet occurred, notwithstanding significant marketing effort to do so.  Since six months have elapsed since the new iteration versions of the products have arrived for demonstration and marketing purposes, within which such sales could have occurred, it seems most appropriate to look at that historical result to anticipate what potential sales might occur in the future.  Unit sales of ScopeOut® products are as follows:

Sense Technologies Inc. Schedule of Scope-Out unit sales for the fiscal years ended February 29, 2008 and February 28, 2007, 2006 and 2005
	2005	2006	2007	2008
Car model	-	10	6	13
SUV model	-	18	7	10
Total ScopeOut® units	-	28	13	23

Accordingly, the Company has concluded that based on the approximately two-year period from entering the ScopeOut® license to February 28, 2007, and considering all events subsequent to that date, the circumstances merited an impairment in value of the ScopeOut® license effective February 28, 2007, in the full amount of the license value, $196,107.        

Also, we expensed the amounts we paid to attorneys to obtain ScopeOut® patents in foreign jurisdictions in our revised Financial Statements.  Originally, the company chose to capitalize these amounts because of the Company's experience with intellectual properties embodied in issued patents.

First, management understood that in the United States, an issued patent maintains a presumption of validity until determined otherwise.  While that is our understanding of the law in the United States, it may not necessarily that of any or all foreign countries. However, it was our presumption that that should more often than not be the case.  Additionally, the Company is presently interacting with a major company in informally evaluating the scope of the patents in covering a product they sell.  That added to management's presumption of a valid patent, insofar as that effort has not yet been completed.  The company's intent was to react with appropriate reductions in values should this informal effort result negatively for the Company.

Secondly, our experience in filing for foreign patents has led to opportunities for evaluation of the subject invention in foreign marketplaces.  Evidently such documents become databases of opportunities for interested companies in the foreign venues for consideration of business relationships.  Such information contained in the application provides for a sufficient amount of means to contact the Company by any interested party in the foreign location.  Accordingly, there is a value with respect to the potential of such networking opportunities to enter business relationships regarding the product by such interested parties.  

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Notwithstanding, since the Company has determined that a total impairment of the ScopeOut® license is appropriate at February 28, 2007, such would be indicative that the value of all of the underlying patents to the ScopeOut® license would also be in-turn impaired.  Such weighs on whether any foreign patents should therefore maintain any intangible value for the Company.  Based on these overall circumstances, management believes again that these costs should be treated as expense.

We also wrote off equipment of $19,341 and an uncollectible promissory note receivable from a group of original investors in the Company in the amount of $585,000 during the current year. This note has been outstanding for several years and its collection was contingent on successful resolution of a bankruptcy proceeding of an unrelated company. During the year ended February 29, 2008, management made the determination that the possibility of collection on this note was remote and determined it should be written-off.

Royalties increased from $60,000 in 2007 to $162,500 in 2008, and increase of 170%, due to the increased requirement of minimum royalties necessary to maintain the exclusivity regarding the ScopeOut® license.

Consulting fees decreased from $478,855 in 2007 to $198,749 in 2008, a decrease of 58%.  However, the Company was concentrating on marketing, especially its ScopeOut® products, and, accordingly, advertising and marketing expenses increased from $163,369 in 2007 to $235,242 in 2008, an increase of 44% as a result of the Company’s efforts to market the ScopeOut® products.

Insurance expense decreased to $37,226 in the year ended February 29, 2009 from $53,554 in the prior year largely as a result of decreased premiums for each of the product liability and directors and officer’s policies.

Legal, accounting and audit fees increased from $123,271 in 2007 to $186,882 for the year ended February 29, 2008 largely as a result of increased legal expenses associated with services performed in connection with providing opinions on the company’s share capital.

Management fees increased from $nil to $274,800 in 2008 as a result of  $200,000 for common shares to be issued to Bruce Schreiner, President and CEO for past and present services to the Company and $74,800 in respect of stock-based compensation  for options issued to directors, James Iman and Robert Doviak for past and  present  services to the Company.  

Research and development costs increased from $9,762 in 2007 to $18,091 in 2008, an increase of 85%.  This was primarily due to the ScopeOut® products aesthetic re-design.

Travel expenses decreased to $13,056 in 2008 from $32,521 in 2008 due to the Company not having to travel as extensively in order to market its ScopeOut® products as many of the costs are being borne by intermediaries

Following summarizes the overall operations results:

			Increase	%  Increase
	2008	2007	( Decrease)	(decrease)
Sales	$75,546	$97,532	$(21,986)	(23) %
Direct Costs	$260,560	$141,686	$118,874	84 %
General and Administrative expenses	$1,717,595	$1,237,513	$(480,082)	(39) %

The stockholders and directors of the Company have been advised in the independent auditors report that there is substantial doubt that our company has the ability to continue as a going concern.

With respect to the financial condition beyond the fiscal year ending February 29, 2008, the Company will need access to additional funding to meet operating requirements based on its current state of affairs.  Access to funding may come from debts, loans from related parties, stock placement or a combination of the available options. Revenues for fiscal year ended February 29, 2008 were $75,546 and thus, expenses exceeded revenues.  Accordingly, the Company does not expect to be able to fund operations from internally-generated funds until such time as its sales exceed expenses.

As of the date of this filing, the Company had no other funding commitments and there can be no assurance that any such commitments in the future would be obtained on favorable terms, if at all.

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SENSE TECHNOLOGIES INC.

10KSB

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The Company has previously maintained its operations from the sale of capital stock and advances and loans from related and unrelated parties.

Although management is cautiously optimistic about its progress for resolutions to its financing needs, no assurances can be made that its plans will be successful.  Adverse market conditions, general economic conditions and limited access to capital markets can adversely impact the Company and its progress as a going concern.

Liquidity and Capital Resources

Our cash position at February 29, 2008 was $988 as compared to $3,100 at February 28, 2007. This decrease was due to the net of our use of cash in operating and investing activities and cash provided by financing activities as described below.

Our net loss of $2,041,704 for fiscal year 2008 includes non-cash charges of $88,889 for consulting fees to be paid through the issuance of our common stock, management fees expense of $274,800 by virtue of $74,800 as stock based compensation and $200,000 for common shares to be issued, a write-down of $585,000 in respect of a promissory note receivable, write-offs of inventory and equipment totaling $96,232 and a depreciation expense of $15,219. Increases in non-cash working capital during the year amounted to $452,995. Non-cash working capital changes included decreases in inventory and, prepaid expenses and an increase in accounts payable. The net cash used in operating activities for fiscal 2008 was $528,569.

Net cash used in operating activities

Net cash used in operating activities was $528,569 during fiscal year 2008, compared to $673,381 during fiscal 2007. The decrease in cash used in fiscal 2007 was primarily due to the following factors:

(i)	The reduction in cash royalty payments from $60,000 in 2007 to $Nil in 2008
(ii)	The 58% reduction in consulting expenses

(iii)	the issuance of our equity instruments in exchange for services.

Net cash used in investing activities

Net cash used in investing activities was $66,055 during fiscal year 2008 compared to $32,279 during fiscal 2007. The cash used in the current year was used to find the purchase of property and equipment which is primarily used to manufacture our products.

Net cash provided by financing activities

Net cash provided by financing activities was $592,512 during fiscal year 2008 compared to net cash provided of $699,900 during fiscal year 2007.

During fiscal year 2008, we received $210,000 through subscriptions to private placements of our common shares and $370,852 through the issuance of promissory notes receivable. In the fiscal 2007, we had received $419,500 from through subscriptions to private placements of our common shares and $155,900 from the issuance of our common stock. During the year ended February 29, 2008 we issued no common shares for cash.

FUTURE OPERATIONS

Presently, our cash flow generated from operations is not sufficient to meet operating and capital expenses. We have incurred operating losses since inception, and we project this to continue for the next nine to twelve months.

Our present average monthly costs are approximately $40,000 per month. Our plan is to sustain the Company while continuing to market both products, but with the majority of the emphasis on our ScopeOut® products.

We have approximately 4,000 current version ScopeOut® units in inventory. We estimate, at their lowest volume purchase price, we can obtain 5,000 units (one shipping container) at a cost of approximately $65,000 and which should generate a selling price of $105,000. Thus, this leaves approximately $40,000 gross profit per shipping container at the lowest expected selling prices. We anticipate being able to increase the wholesale selling prices for

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SENSE TECHNOLOGIES INC.

10KSB

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different markets and that would result in larger gross profit per container as the inventory purchase price should not go up appreciably. Product costs should decrease as the volume of purchases increases.

As of the date of this report, we have sold approximately 3000 units, necessitating our need to raise enough cash to both re-order the ScopeOut® inventory and maintain our average monthly cash flow obligations. This cost of sales growth will recur if we are successful in selling the products ensuring cash needs are a constant focus for management.

The Company’s payables and presently unserviced debt will be retired only as the net cash flow from this anticipated growth allows.

We project that we will have the following cash needs to fund our ongoing operating expenses and working capital requirements through to February 28, 2009 as detailed below.

Marketing	$           150,000
Engineering, research and development	30,000
General and administrative	300,000
Debt repayment	100,000
General Working Capital (1)	1,000,000
TOTAL	$         1,580,000

 

(1)	Our working capital requirements are impacted by our inventory requirements. Therefore, any increase in sales of our products will be accompanied not only by an increase in revenues, but also by an increase in our working capital requirements.

The continuation of our business is dependent upon obtaining further financing, further market acceptance of our current products and any new products that we may introduce, the continuing successful development of our products and related technologies, and, finally, achieving a profitable level of operations.

We are hopeful that internal cash flow will cover our cash requirements, but otherwise plan to raise additional capital as required to meet the balance of our estimated funding requirements through February 28, 2009, through either or a combination of:

(1)	issuance of promissory notes payable
(2)	private placements of our common shares

(3)	cash flow from operations

The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. In respect of our cash requirements, we plan to raise $50,000 from equity investors via private placements of our common stock  and we need to secure debt financing through a line of credit facility in the amount of $400,000 to finance our initial inventory purchases. Should our inventory not turn over as anticipated, we will need to raise additional funds through a combination of debt issuances and equity offerings. Given our lack of sales in recent years, projecting cash flow from operations is inherently uncertain.  Any funds we generate from operations must, in part, be used to pay down our debt obligations which total $1,246,799 as at February 29, 2008. Our convertible promissory notes payable totaling $584,000 and various accounts payable are significantly in arrears.  While we anticipate being successful in obtaining our required financing, there is no assurance we will be able to do so at terms we find acceptable.   Additionally, we rely upon the continuing support and patience of creditors in connection with current and in-arrears amounts owed to them.  The failure to obtain sufficient financing or continued support of the creditors could result in our company ceasing operations.

Item 7.

Financial Statements

The Company’s audited financial statements for the fiscal year ended February 29, 2008 are attached to this report following the signature page and Certifications.

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SENSE TECHNOLOGIES INC.

10KSB

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Item 8.

Changes In and Disagreements with Accountants and Financial Disclosure

None

Item 8A. Controls and Procedures

We have effected a restatement of our financial results for the year ended February 28, 2007 as previously included in our 2007 Annual Report on form 10-KSB.

The Restatement

This restatement was effected to correct errors in our accounting treatment of:

	(i)	the impairment assessment of the ScopeOut® license; and
	(ii)	the calculation of non-resident withholding tax and associated interest

As a result of our review of these transactions, the effect on the amended accounting for the adjustments above is discussed in Note 18 to our 2008 financial statements.

Evaluation of disclosure controls and procedures and remediation

In connection with the restatement of our financial results for the year ended February 28, 2007, under the direction of our management, we have reevaluated certain disclosure controls and procedures and internal controls over financial reporting. In connection with the restatement we identified a material weakness in our internal controls and procedures relating to the accounting treatment of our intangible asset impairment assessments, the calculation of the proper withholding taxes on payments to non-residents and presentation of preferred stock.

As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 10-KSB, under the direction of our Chief Executive Officer, we have evaluated our disclosure controls and procedures as of February 29, 2008, and we have concluded our disclosure controls and procedures were ineffective as discussed in greater detail below. As of the date of this filing, we are still in the process of remediating such material weaknesses in our internal controls and procedures.

It should be noted that while our management believes our disclosure controls and procedures provide a reasonable level of assurance, they do not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Management’s annual report on internal control over financial reporting

Management is responsible for establishing and maintaining internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our Chief Executive Officer, the effectiveness of our internal control over financial reporting as of February 29, 2008.

Based on its evaluation under the framework in Internal Control—Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was not effective as of February 29, 2008, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

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This annual report does not include an attestation report of our company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management’s report in this annual report.

Limitations on Effectiveness of Controls

Our Chief Executive Officer does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Material Weaknesses Identified

In connection with the preparation of our financial statements for the year ended February 29, 2008, certain significant deficiencies in internal control became evident to management that represent material weaknesses, including:

(i)	Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended February 29, 2008, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected;
(ii)	There is a lack of sufficient supervision and review by our corporate management;
(iii)	Insufficient corporate governance policies. Our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management; and
(iv)	Our company's accounting personnel does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters. Management corrected any errors prior to the release of our company's February 29, 2008 financial statements.

Plan for Remediation of Material Weaknesses

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2009 assessment of the effectiveness of our internal control over financial reporting.

We have implemented certain remediation measures and are in the process of designing and implementing additional remediation measures for the material weaknesses described in this annual report. Such remediation activities include the following:

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