U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2005
or
|_| Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From ____________________ to _________________
Commission File number 0-024828
SENSOR SYSTEM SOLUTIONS, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0204898
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
45 Parker Avenue, Suite A
Irvine, California 92618
(Address of principal executive offices)
(949) 855-6688
(Issuer's telephone number)
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes |_| No |X|
As of June 21, 2005 there were 59,279,241 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format
Yes |_| No |X|
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements: (unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2005 1
(unaudited) and December 31, 2004.
Condensed Consolidated Statements of Operations for three
months ended March 31, 2005 and 2004 (unaudited) 2
Condensed Consolidated Statement of Changes in Stockholders'
Deficiency for the three months ended March 31, 2005 (unaudited) 3
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2005 and 2004 (unaudited) 4
Notes to Condensed Consolidated Financial Statements
(unaudited) 5-10
Item 2. Management's Discussion and Analysis or Plan of Operations 11-16
Item 3. Controls and Procedures 17
PART II. OTHER INFORMATION
Item 1. Legal Proceeding 17
Item 2. Changes In Securities and Small Business Issuer Purchases of
Equity Securities 17
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission Of Matters To a Vote Of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits 18
SIGNATURES 19
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
SENSOR SYSTEM SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2005 (Unaudited)
and December 31, 2004
ASSETS
March 31, 2005 December 31,
CURRENT ASSETS (Unaudited) 2004
------------ ------------
Cash $ 47,716 $ 17,115
Accounts receivable 131,065 100,530
Inventory 212,522 220,445
Prepaids and other current assets 4,872 24,552
------------ ------------
Total current assets 396,175 362,642
Property and equipment, net 294,801 320,717
Other assets 54,112 54,112
------------ ------------
Total assets $ 745,088 $ 737,471
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 691,659 $ 720,817
Notes payable 363,386 263,923
Notes payable, related parties 335,575 718,133
Current portion of capital lease obligations 7,819 7,819
Current portion of deferred rent concession 4,756 5,258
------------ ------------
Total current liabilities 1,403,195 1,715,950
------------ ------------
LONG-TERM LIABILITIES
Capital lease obligations, net of current portion 32,336 34,199
Deferred rent concession, net of current portion 9,515 10,513
------------ ------------
41,851 44,712
------------ ------------
Commitments and contingencies -- --
STOCKHOLDERS' DEFICIENCY (see Note 5)
Preferred stock, $.001 par value, 20,000,000
shares authorized, none outstanding -- --
Common stock, $.001 par value, 180,000,000
shares authorized, 59,279,241 and 3,976,868 shares issued and outstanding 59,279 3,977
Common stock to be issued (15,404,871 and 7,700,000 shares) 878,512 9,300,000
Additional paid-in capital 13,874,202 4,867,790
Deferred compensation (75,458) (186,400)
Accumulated deficit (15,436,493) (15,008,558)
------------ ------------
Total stockholders' deficiency (699,958) (1,023,191)
------------ ------------
Total liabilities and stockholders' deficiency $ 745,088 $ 737,471
============ ============
See accompanying notes to condensed consolidated financial statements.
1
SENSOR SYSTEM SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2005 and 2004 (Unaudited)
2005 2004
------------ ------------
Sales, net $ 205,015 $ 107,279
Cost of goods sold 147,274 105,665
------------ ------------
Gross profit 57,741 1,614
------------ ------------
Operating expenses 330,555 174,342
Amortization of discount on notes payable 155,121 60,612
------------ ------------
Total operating expenses 485,676 234,954
------------ ------------
Net loss $ (427,935) $ (233,340)
============ ============
Loss per common share, basic and diluted $ (.01) $ (.09)
============ ============
Weighted average shares outstanding, basic and
diluted (see Note 5) 59,279,241 2,584,896
============ ============
See accompanying notes to condensed consolidated financial statements.
2
SENSOR SYSTEM SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
For the three months ended March 31, 2005 (Unaudited)
Common Stock Common Stock to be issued
---------------------- ------------------------- Additional
paid-in Deferred Accumulated
Shares Amount Shares Amount capital compensation deficit Total
----------- --------- ----------- ----------- ----------- ------------ ------------ -----------
Balance January 1,
2005 (see Note 5) 3,976,868 $ 3,977 7,700,000 $ 9,300,000 $ 4,867,790 (186,400) $(15,008,558) $(1,023,191)
Forfeit of stock
options -- -- -- -- (99,000) 99,000 -- --
Compensatory stock
issued 1,500,000 1,500 (1,500,000) (1,800,000) 1,798,500 -- -- --
Stock dividend
issued 6,000,000 6,000 (6,000,000) (7,200,000) 7,194,000 -- -- --
Warrants exercised
by shareholders
from merger 47,802,373 47,802 -- -- (47,802) -- -- --
Exercise of warrants
for settlement
of debt -- -- 14,793,290 262,500 -- -- -- 262,500
Common stock to be
issued for
settlement of debt -- -- 411,581 316,012 -- -- -- 316,012
Intrinsic value of
common stock
warrants issued
with note payable -- -- -- -- 160,714 -- -- 160,714
Amortization of
deferred
compensation -- -- -- -- -- 11,942 -- 11,942
Net loss -- -- -- -- -- -- (427,935) (427,935)
----------- -------- ----------- ----------- ----------- ----------- ------------ -----------
Balance March 31, 2005 59,279,241 $ 59,279 15,404,871 $ 878,512 $13,874,202 $ (74,458) $(15,436,493) $ (699,958)
=========== ======== =========== =========== =========== =========== ============ ===========
See accompanying notes to condensed consolidated financial statements.
3
SENSOR SYSTEM SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For three months ended March 31, 2005 and 2004 (Unaudited)
2005 2004
------------ ------------
Cash flows from operating activities:
Net loss $ (427,935) $ (233,340)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 25,916 28,480
Amortization of discount on notes payable 155,121 60,612
Amortization of deferred compensation 11,942 12,375
Changes in operating assets and liabilities:
Accounts receivable (30,535) 9,413
Inventory 7,923 38,600
Prepaids and other current assets 19,680 (57,076)
Deferred rent (1,500) --
Accounts payable and accrued expenses 21,852 6,071
------------ ------------
Net Cash Used In Operating Activities (217,536) (134,865)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment -- (1,346)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 250,000 250,000
Principal payments on capital leases (1,863) --
------------ ------------
Net Cash Provided By Financing Activities 248,137 250,000
------------ ------------
Net increase in cash and cash equivalents 30,601 113,789
Cash and cash equivalents, beginning of period 17,115 10,711
------------ ------------
Cash and cash equivalents, end of period $ 47,716 $ 124,500
============ ============
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 5,179 $ 1,148
============ ============
Taxes $ 800 $ 800
============ ============
Non-cash investing and financing activities:
Forfeiture of stock options $ 99,000 $ --
Accrued interest added to notes payable principal 51,013 --
Discount related to warrants and convertible notes 160,714 60,612
Exercise of warrants for debt outstanding 262,500 --
Conversion of notes payable 316,012 --
See accompanying notes to condensed consolidated financial statements.
4
SENSOR SYSTEMS SOLUTIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein is unaudited. The interim consolidated
financial statements have been prepared on the same basis as the annual
financial statements and, in the opinion of management, reflect all adjustments,
which include only normal recurring adjustments, considered necessary for a fair
presentation of the Company's consolidated financial position and results of
operations for the periods presented. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and accompanying
notes presented in the Company's Form 10-KSB for the year ended December 31,
2004. Interim operating results are not necessarily indicative of operating
results expected for the entire year.
Description of business
The Company is a manufacturer and assembler of sensors and micro systems, and
its products include thin film sensors, thin film pressure sensors and
micro-machined pressure sensors, and micro systems that may include sensors,
signal conditioning circuits, LCD display, computer interface and molded housing
specifically designed to the customers needs.
Going concern
The Company incurred a net loss of $427,935 and a negative cash flow from
operations of $217,536 for three months ended March 31, 2005, and had a working
capital deficiency of $1,007,020 and a stockholders' deficiency of $699,958 at
March 31, 2005. These matters raise substantial doubt about its ability to
continue as a going concern. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. Management believes
that actions are presently being taken to revise the Company's operating and
financial requirements in order to improve the Company's financial position and
operating results. However, given the levels of its cash resources and working
capital deficiency at March 31, 2005, management believes cash to be generated
by operations will not be sufficient to meet anticipated cash requirements for
operations, working capital, and capital expenditures during 2005. The Company
completed a merger and recapitalization on May 20, 2004, with Spectre
Industries, Inc., to gain access to the United States and European capital
markets, but there can be no assurances that the Company will ultimately be
successful in this regard. The accompanying consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Principles of consolidation
The consolidated financial statements for the three months ended March 31, 2005
and 2004 include the accounts and operations of Sensor Systems Solutions Inc.
and its wholly owned subsidiary. Intercompany accounts and transactions have
been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, 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. Actual results could differ from those estimates.
Stock - based compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosures" as well as those outlined in SFAS No. 123,
"Accounting for Stock-Based Compensation". As permitted by SFAS 148 and SFAS
123, the Company continues to apply the provisions of Accounting Principles
Board Opinion (APB) No. 25, "Accounting for Stock issued to Employees" and
related interpretations in accounting for the Company's stock option plan.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the estimated fair value of the Company's stock at the date of the
grant, over the amount an employee must pay to acquire the stock. Stock based
awards for non-employees are accounted for at fair value equal to the excess of
the estimated fair value of the Company's stock over the option price using an
estimated interest rate to calculate the fair value of the option. There were no
stock based awards to non-employees for the three months ended March 31, 2005.
5
SENSOR SYSTEMS SOLUTIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
Had compensation cost for all stock option grants been determined based on their
fair value at the grant dates, consistent with the method prescribed by SFAS 148
and SFAS 123, our net loss and loss per share would have been adjusted to the
pro forma amounts indicated below:
Three months ended March 31:
2005 2004
------------ ------------
Net loss $ (427,935) $ (233,340)
Add: Stock-based expense included in net loss 11,942 12,375
Deduct: Fair value based stock-based expense (14,720) (14,720)
------------ ------------
Pro forma net loss $ (430,713) $ (235,685)
============ ============
Basic and diluted earnings per share:
As reported $ (.01) $ (0.09)
Pro forma under SFAS No. 123 $ (.01) $ (0.09)
Earnings (loss) per share
Basic earnings (loss) per common share (EPS) are based on the weighted average
number of common shares outstanding during each period(see Note 5). Diluted
earnings per common share are based on shares outstanding (computed as under
basic EPS) and potentially dilutive common shares. As of March 31, 2005 and
2004, the Company had granted stock options for 96,500 and 136,500 shares of
common stock, respectively, that are potentially dilutive common shares but are
not included in the computation of loss per share because their effect would be
anti-dilutive. As of March 31, 2005 and 2004, the Company had granted warrants
for 8,190,155 and 19,461,805 shares of common stock, respectively, that are
potentially dilutive common shares but are not included in the computation of
loss per share because their effect would be anti-dilutive.
Recent Accounting Pronouncements
In November 2004, the FASB issued Statement of Financial Accounting Standards
No. 151, "Inventory Costs". This Statement amends the guidance in ARB No. 43
Chapter 4 Inventory Pricing, to require items such as idle facility costs,
excessive spoilage, double freight and rehandling costs to be expensed in the
current period, regardless if they are abnormal amounts or not. This Statement
will become effective for us in the first quarter of 2006. The adoption of SFAS
No. 151 is not expected to have a material impact on our financial condition,
results of operations, or cash flows.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" (SFAS 123R), which revises SFAS No. 123. SFAS 123R also supersedes APB
No. 25 and amends SFAS No. 95, "Statement of Cash Flows". In general, the
accounting required by SFAS 123R is similar to that of SFAS No. 123. However,
SFAS No. 123 gave companies a choice to either recognize the fair value of stock
options in their income statements or disclose the pro forma income statement
effect of the fair value of stock options in the notes to the financial
statements. SFAS 123R eliminates that choice and requires the fair value of all
share-based payments to employees, including the fair value of grants of
employee stock options, be recognized in the income statement, generally over
the option vesting period. SFAS 123R must be adopted by small-business issuers
as of the first interim or annual reporting period of the first fiscal year
beginning on or after December 15, 2005. Early adoption is permitted.
The Company is currently evaluating the timing and manner in which it will adopt
SFAS 123R. As permitted by SFAS 123, the Company currently accounts for
share-based payments to employees using APB 25's intrinsic value method.
Accordingly, adoption of SFAS 123R's fair value method will have an effect on
results of operations, although it will have no impact on overall financial
position. The impact of adoption of SFAS 123R cannot be predicted at this time
because it will depend on levels of share-based payments granted in the future.
However, had SFAS 123R been adopted in prior periods, the effect would have
approximated the SFAS 123 pro forma net loss and loss per share disclosures as
shown above. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as currently required, thereby reducing net
operating cash flows and increasing net financing cash flows in periods after
adoption.
6
SENSOR SYSTEMS SOLUTIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
NOTE 2 NOTES PAYABLE
Notes payable consist of the following at March 31, 2005 and December 31, 2004:
March 31,
2005 December 31,
(unaudited) 2004
------------ ------------
Two lines of credit, unsecured, interest payable monthly at 8.75%
and 10.0% per annum, due on demand. $ 92,983 $ 92,983
Note payable, unsecured, interest payable monthly at Prime + 3% per annum
(prime rate at March 31, 2005 was 5.75%), due on demand. 40,000 40,000
Note payable, unsecured, interest payable monthly at 10% per annum, payable
as a percentage of any future private or public stock offerings. 90,000 90,000
Three notes payable, secured by all assets of the Company, interest at 8% per
annum, payable at various maturities through February 21, 2006. At December 31,
2004, there were two notes payable totaling $ 90,000. On February 22, 2005, a
note payable for $200,000 was issued. At maturity, the notes are convertible at
the holder's option at a conversion price equal to 70% of the weighted average
price of the common stock for the 30 trading days immediately preceding the
conversion date. In addition, each note has warrants attached that, once the
note is converted into stock, allow the holder to purchase stock at 85% of the
weighted average price of the common stock for the 30 trading days immediately
preceding the conversion date. The aggregate intrinsic value of the beneficial
conversion feature of these notes and warrants, valued at $186,428 (of which
$128,571 is related to the note issued in 2005), has been recorded as loan
discount costs and is being amortized over the life of the respective note as
additional interest cost. 290,000 90,000
Less remaining debt discount (149,597) (49,060)
------------ ------------
$ 363,386 $ 263,923
============ ============
7
SENSOR SYSTEMS SOLUTIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
NOTE 3 NOTES PAYABLE, RELATED PARTIES
Notes payable to related parties consist of the following at March 31, 2005 and
December 31, 2004:
March 31,
2005 December 31,
(unaudited) 2004
------------ ------------
Note payable to the sister of the Company's Chief Executive Officer, secured by
all assets of the Company, interest at 14.25% per annum, due December 31, 2004.
The note payable was originally issued by Advanced Custom Sensors, Inc. (ACSI),
which merged with the company in 2004. In connection with the note payable, ACSI
issued a warrant expiring September 17, 2008, to purchase 190,665 shares of
ACSI's common stock at $.50 per share (The ACSI warrant is convertible into
5,372,940 shares of the Company's stock). The intrinsic value of the warrant
($190,665) has been recorded as loan discount costs and are being amortized over
the life of the note as additional interest cost. The Company is currently
negotiating an extension of this note. $ 190,665 $ 190,665
Note payable to the sister of the Company's Chief Executive Officer, secured by
all assets of the Company, interest at 10.0% per annum, due March 15, 2005. The
note payable was originally issued by ACSI in 2003, at which time ACSI issued a
warrant expiring September 17, 2008, to purchase 100,000 shares of stock at $.50
per share (the ACSI warrant is convertible into 2,817,215 shares of the
Company's common stock). The intrinsic value of the original warrant ($100,000)
was recorded as a loan discount cost, and was amortized over the life of the
original note as additional interest cost. The original note was due September
16, 2004. On September 16, 2004, a new note issued to replace the original note.
At maturity, the new note is convertible at the holder's option at a conversion
price equal to 80% of the weighted average price of the common stock for the 30
trading days immediately preceding the conversion date. In addition, the note
has warrants attached that, once the note is converted into stock, allow the
holder to purchase stock at 85% of the weighted average price of the common
stock for the 30 trading days immediately preceding the conversion date. The
intrinsic value of the beneficial conversion feature of the note and warrants,
valued at $48,125, has been recorded as loan discount costs and is being
amortized over the life of the note as additional interest cost.
The Company is currently negotiating an extension of this note. 110,000 110,000
Note payable to an employee of the Company, secured by all assets of the
Company, interest at 8.0% per annum, due November 11, 2005. At maturity, the
note is convertible at the holder's option at a conversion price equal to 70% of
the weighted average price of the common stock for the 30 trading days
immediately preceding the conversion date. In addition, the note has warrants
attached that, once the note is converted into stock, allow the holder to
purchase stock at 85% of the weighted average price of the common stock for the
30 trading days immediately preceding the conversion date. The intrinsic value
of the beneficial conversion feature of the note and warrants, valued at
$12,857, has been recorded as loan discount costs and
is being amortized over the life of the note as additional interest cost. 20,000 20,000
Note payable to shareholder, secured by all assets of the Company, interest at
8.0% per annum, due February 11, 2005. At maturity the note is convertible at
the holder's option at a conversion price equal to 70% of the weighted average
price of the common stock for the 30 trading days immediately preceding the
conversion date. In addition, the note has warrants attached that, once the note
is converted into stock, allow the holder to purchase stock at 85% of the
weighted average price of the common stock for the 30 trading days immediately
preceding the conversion date. The intrinsic value of the beneficial conversion
feature of the note and warrants, valued at $32,143, has been recorded as loan
discount costs and is being amortized over the life of the note as additional
interest cost. 50,000 --
8
SENSOR SYSTEMS SOLUTIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
Note payable, secured by accounts receivable of the Company, interest at 10%,
due February 11, 2005. The note payable was originally issued by ACSI. In
connection with the note payable, ACSI issued a warrant to purchase 500,000
shares of stock at $.50 per share (the ACSI warrant is convertible into
14,088,865 shares of the Company's common stock). The note was payable to
Sino-American, Inc., a company controlled by Mr. Hanlin Chen, a director of the
Company. On March 15, 2005, the warrant was exercised for $250,000 of the debt
outstanding. The balance of the note payable and accrued interest ($300,000) was
exchanged for 390,228 shares of the Company's common stock at approximately
$0.77 per share, which approximated the market value of the stock on March 15,
2005. -- 500,000
Notes payable to shareholder, secured by all assets of the Company, interest at
8% per annum, due October 1, 2005. The note payable was originally issued by
ACSI in 2003, at which time ACSI issued a warrant to purchase 25,000 shares of
stock at $.50 per share (the ACSI shares were convertible into 704,425 shares of
the Company's common stock). The intrinsic value of the original warrant was
valued at $25,000, recorded as loan discount cost, and was amortized over the
life of the original note as additional interest cost. The original note was due
September 16, 2004. On October 2, 2004, a new note was issued to replace the
original note. At maturity, the new note was convertible at the holder's option
at a conversion price of equal to 70% of the weighted average price of the
common stock for the 30 trading days immediately preceding the conversion date.
In addition, the new note has a warrant attached that, once the new noted is
converted into stock, allows the holder to purchase stock at 85% of the weighted
average price of the common stock for the 30 trading days immediately preceding
the conversion date. The intrinsic value of the beneficial conversion feature of
the new note and new warrant, valued at $17,679, has been recorded as loan
discount costs and is amortized over the life of the new note. On March 18,
2005, the ACSI warrant was exercised for $12,500 of the debt outstanding. The
Balance of the note payable and accrued interest ($16,012) was exchanged for
21,353 shares of the Company's common stock at approximately $0.77 per share,
which approximated the market value of the stock on March 15, 2005. -- 27,500
Less remaining debt discount (35,090) (130,032)
------------ ------------
$ 335,575 $ 718,133
============ ============
NOTE 4 STOCKHOLDERS' EQUITY
On May 24, 2004, Sensor System Solutions (formerly known as Spectre Industries,
Inc.,) a Nevada corporation, entered into an agreement and plan of merger with
Advanced Custom Sensors, Inc. (ACSI). Sensor issued 2,584,906 shares of its
common stock and warrants to purchase up to 47,802,373 shares of its common
stock to the shareholders of ACSI in exchange for all the issued and outstanding
shares of ACSI. On January 29, 2005, warrants for the 47,802,373 shares of
common stock were exercised. The Company recorded the par value of the stock
issued ($47,802) as an increase in common stock and a reduction to additional
paid in capital in the accompanying financial statements.
See Note 3 for issuance of stock and warrants to settle related party debt.
NOTE 5 REVISION TO PREVIOUSLY FILED FINANCIAL STATEMENTS
The Company filed an amendment to its Form 10-KSB for the year ended December
31, 2004 to revise the per share value of compensatory stock granted on December
4, 2004 to five individuals, including two directors of the Company. The
7,500,000 shares had originally been valued at $0.24 each or $1,800,000 in
total. This was revised to reflect that 1,500,000 shares were treated as
compensatory stock with a fair market value of $1.20 per share for a total of
$1,800,000 and the remaining 6,000,000 shares were treated as a stock dividend
in the amount of $7,200,000. All share and per share amounts were also revised
to reflect the effects of the grant as if it had occurred at the date of the
merger with ACSI. There was no change to total assets or net loss as of December
31, 2004 and for the year then ended.
9
SENSOR SYSTEMS SOLUTIONS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
Stockholders' deficiency was revised as follows:
December 31, 2004 March 31, 2005
----------------------------------------------- -----------------------------------------------
As previously reported As currently reported As previously reported As currently reported
---------------------- --------------------- ---------------------- ---------------------
Common stock $ 3,977 $ 3,977 $ 59,279 $ 59,279
Common stock to be issued 2,100,000 9,300,000 878,512 878,512
Additional paid in capital 4,867,790 4,867,790 6,674,202 13,874,202
Deferred compensation (186,400) (186,400) (75,458) (75,458)
Accumulated deficit (7,808,558) (15,008,558) (8,236,493) (15,436,493)
---------------------- --------------------- ---------------------- ---------------------
Total stockholders' deficiency $ (1,023,191) $ (1,023,191) $ (699,958) $ (699,958)
====================== ===================== ====================== =====================
Loss per common share and weighted average shares outstanding were revised as
follows:
For three months ended March 31, 2004
----------------------------------------------
As previously reported As currently reported
---------------------- ---------------------
Loss per common share $ (.09) $ (.09)
====================== =====================
Weighted average shares outstanding 2,486,539 2,584,896
====================== =====================
10
Item 2. Management's Discussion And Analysis or Plan of Operation.
Cautionary Statement
Statements in this report on Form 10-QSB that are forward-looking are based on
current expectations. Actual results may differ materially. Forward-looking
statements involve numerous risks and uncertainties including, but not limited
to, the possibility that the demand for our products may decline as a result of
possible changes in general and industry specific economic conditions, the
effects of competitive pricing and such other risks and uncertainties as are
described in this report on Form 10-QSB and other documents previously filed or
hereafter filed by us from time to time with the Securities and Exchange
Commission. All forward-looking statements speak only as of the date made, and
we undertake no obligation to update these forward-looking statements .
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes thereto, included as part of
this Quarterly Report.
OVERVIEW
Sensor System Solutions, Inc. (3S) was founded by an engineering management team
with over 50 years of Micro-electro-mechanical-systems or "MEMS" transducer
experience. Its objective is to provide high quality sensors and transducers at
an economical price by employing innovative designs and creative manufacturing
methods. 3S offers a variety of Digital Pressure Gauges, Pressure Transducers,
Pressure Sensors, Force Beams, Load Cells, Strain Gauges and Sensor Kits.
3S commenced operations as a private company in September of 1996. 3S is
headquartered in Irvine, California where 3S occupies a 25,000 square foot
facility fully equipped with fabrication capability.
3S has fifteen (15) employees in the United States, and utilizes a network of
independent contractors and consultants throughout the United States and Asia.
3S produces or supplies a family of nearly thirty (30) distinctive products. 3S
set up a volume production line with an ISO 9000 partner in Taiwan in 2002. This
allows 3S to penetrate high-volume consumer markets that are very price
sensitive. 3S signed a joint venture agreement with China Automotive Systems,
Inc. (NASDAQ: CAAS) in February 2005 to establish a joint venture in China
targeting its automotive sensor market.
3S is a supplier of thin-film and micro-machined force and pressure sensors to
the medical, chemical, oil, and gas industries. 3S believes that its technology
will enable it to become a global supplier of advanced MEMS/Microelectronic
products in myriad developing markets. 3S's strategic plan is to focus on
developing custom MEMS pressure sensor devices and forming strategic
partnerships.
In addition to its core operational assets dedicated to the MEMS sensor markets,
3S owns approximately 7.5% of TransOptiX, Inc., ("TransOptiX"), a business
dedicated to the development and production of high performance optical
switches. TransOptiX intends to make significant progress in 2005 and 2006 in
the optical switch segment by offering its switches at prices up to 40% below
its competition and with better performance.
11
PLAN OF OPERATION
We plan to grow our business in four areas.
ss. Increase the revenue of existing sensor component business . The majority
of our sensor component manufacturing will be moved to our joint venture
in China to help reduce the cost of our products. We will invest to
increase our production capacity and will qualify offshore suppliers to
meet the increasing demands. We will invest in sales and marketing in
order to expand our customer base and to secure more OEM projects.
ss. Develop sensor solution business. With the rapid advances in technology
and wireless telecommunication in the last decade, we can now offer total
sensor solutions at a very affordable price. These sensor solutions are
modules containing sensing elements, signal conditioning circuitry,
software for calibration and interface, and capability of wireless and/or
networking. These sensor solutions will provide information continuously
to decision makers in all phases of business operation.
ss. Penetrate automotive sensor market through China. By leveraging the
marketing channel of our joint venture partner, we will have access to the
automotive market in China immediately. Over the next three years we plan
to increase our production capacity, product offerings, and our
development staff. We anticipate that we will be able to import automotive
sensors produced by our joint venture to North America and Europe by 2008.
ss. Strategic acquisition : We plan to grow our business through strategic
acquisitions. We will actively seek equity or debt funding to bring in the
necessary resources to execute this plan.
RESULTS OF OPERATIONS
Three months Ended March 31, 2005 and 2004
Revenues
We generated revenues of $205,015 for the three months ended March 31, 2005,
which was $97,736 or a 91% increase from $107,279 for the three months ended
March 31, 2004. The increase is the result of the hiring of a full-time sales
manager, the addition of new sales representatives and the introduction of new
products.
Gross Profit
Gross Profit for the three months ended March 31, 2005, was $57,741 or 28.2% of
revenues, compared to $1,614 or 1.5% for the three months ended March 31, 2004.
The $56,127 increase in gross profit was generated by a decrease in cost of
sales percentage, which was the result of increased productivity and
management's efforts to reduce operating expense, and production tooling
improvement.
Total Operating expenses
Operating expense
Operating expense increased to $330,555 for the three months ended March 31,
2005 compared to $174,342 for the three months ended March 31, 2004. The
expenses increased $156,213, primarily as a result of an increase in interest
expense and additional investment in R&D personnel and development, and
professional fees for a public company.
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Amortization of discount on notes payable
Amortization of discount on notes payable increased to $155,121 for the three
months ended March 31, 2005 compared to $60,612 for the three months ended March
31, 2004. The expense increased $94,509, or 156%, primarily due to the
convertible loans from Sino-America and Tina Young.
Net Loss
Net loss increased to ($427,935) for the three months ended March 31, 2005
compared to ($233,340) for the three months ended March 31, 2004. The $194,595
increase in net loss is primarily due to $155,121 of notes payable- debt
discount costs along with increase in investment in R&D and production capacity,
and additional cost for being a public company.
FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES
Going Concern
The Company incurred a net loss of $427,935 and a negative cash flow from
operations of $217,536 for three months ended March 31, 2005, and had a working
capital deficiency of $1,007,020 and a stockholders' deficiency of $699,958 at
March 31, 2005. These matters raise substantial doubt about its ability to
continue as a going concern.
We have relied primarily on cash flow from operations, bank loans, and advances
and investments from our shareholders for our capital requirements since
inception. The company received two convertible loans for a total of $250,000
from two of its existing shareholders in February 2005. This allowed the company
to pay off some of the debt and continue its operation. Current cash on hand
will allow the company to continue its operation for one month.
At March 31, 2005, cash was $47,716 as compared to $17,115 at December 31, 2004.
The increase is due to the $250,000 convertible loans. We have a substantial
working capital deficit. We require $3,000,000 to continue operations for the
next three years. We are in the process of raising capital in the form of equity
and/or debt. However, there is no guarantee that we will raise sufficient funds
to execute our business plan. To the extent we are unable to raise sufficient
funds, our business plan will be required to be substantially modified, its
operations curtailed or protection under bankruptcy/ reorganization laws sought.
We are addressing our liquidity requirements by the following actions: Continue
our programs for selling products; continue to seek investment capital through
the public markets. However, there is no guarantee that these strategies will
enable us to meet our obligations for the foreseeable future.
Commitments and Contingencies
We have the following material contractual obligations and capital expenditure
commitments:
The Company leases certain equipment under two capital leases with monthly
payments of $360 and $701, respectively, including interest at 12.75% per annum.
Future minimum annual rental payments for capitalized leases are as follows:
Three months ended March 31, Amount
--------------------------------------------------------------------------------- -----------
2005 $9,549
2006 12,732
2007 12,732
2008 12,732
2009 3,543
-----------
51,288
Amount representing interest (11,133)
-----------
Present value of minimum lease payments 40,155
Less: Current portion (7,819)
-----------
$ 32,336
===========
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The Company leases its office and facility through 2007 under a long term
operating lease agreement. Under terms of the lease, the Company pays the cost
of repairs and maintenance. The office and warehouse facility is shared with
TransOptix, which signed the lease as co-tenant with the Company. The Company
and TransOptix have entered into an agreement stipulating each entities share of
the rent, however, in event of default by TransOptix, the Company could be
contingently liable for the full amount of the rent.
Future minimum lease commitments for the Company's share under this lease at
March 31, 2005 are as follows:
Three months ended March 31,
2005 $ 72,748
2006 104,906
2007 91,520
--------------
$ 269,174
==============
The total lease commitment as of March 31, 2005 for which the Company could be
contingently liable in the event of default of TransOptix is approximately
$538,348. Rent expense for the three months ended March 31, 2005 and 2004 was
$31,383 and $26,409 respectively.
Inflation and Changing Prices
We do not foresee any adverse effects on our earnings as a result of inflation
or changing prices.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue when risk of loss and title to the product is
transferred to the customer, which occurs at shipment.
Stock - based compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosures" as well as those outlined in SFAS No. 123,
"Accounting for Stock-Based Compensation". As permitted by SFAS 148 and SFAS
123, the Company continues to apply the provisions of Accounting Principles
Board Opinion (APB) No. 25, "Accounting for Stock issued to Employees" and
related interpretations in accounting for the Company's stock option plan.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the estimated fair value of the Company's stock at the date of the
grant, over the amount an employee must pay to acquire the stock. Stock based
awards for non-employees are accounted for at fair value equal to the excess of
the estimated fair value of the Company's stock over the option price using an
estimated interest rate to calculate the fair value of the option.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Recent Accounting Pronouncements
In November 2004, the FASB issued Statement of Financial Accounting Standards
No. 151, "Inventory Costs". This Statement amends the guidance in ARB No. 43
Chapter 4 Inventory Pricing, to require items such as idle facility costs,
excessive spoilage, double freight and rehandling costs to be expensed in the
current period, regardless if they are abnormal amounts or not. This Statement
will become effective for us in the first quarter of 2006. The adoption of SFAS
No. 151 is not expected to have a material impact on our financial condition,
results of operations, or cash flows.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" (SFAS 123R), which revises SFAS No. 123. SFAS 123R also supersedes APB
No. 25 and amends SFAS No. 95, "Statement of Cash Flows". In general, the
accounting required by SFAS 123R is similar to that of SFAS No. 123. However,
SFAS No. 123 gave companies a choice to either recognize the fair value of stock
options in their income statements or disclose the pro forma income statement
effect of the fair value of stock options in the notes to the financial
statements. SFAS 123R eliminates that choice and requires the fair value of all
share-based payments to employees, including the fair value of grants of
employee stock options, be recognized in the income statement, generally over
the option vesting period. SFAS 123R must be adopted no later than July 1, 2005.
Early adoption is permitted.
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The Company is currently evaluating the timing and manner in which it will adopt
SFAS 123R. As permitted by SFAS 123, the Company currently accounts for
share-based payments to employees using APB 25's intrinsic value method.
Accordingly, adoption of SFAS 123R's fair value method will have an effect on
results of operations, although it will have no impact on overall financial
position. The impact of adoption of SFAS 123R cannot be predicted at this time
because it will depend on levels of share-based payments granted in the future.
However, had SFAS 123R been adopted in prior periods, the effect would have
approximated the SFAS 123 pro forma net loss and loss per share disclosures as
shown above. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as currently required, thereby reducing net
operating cash flows and increasing net financing cash flows in periods after
adoption
RISKS RELATED TO OUR BUSINESS
We have had negative cash flows from operations. Our business operations may
fail if our actual cash requirements exceed our estimates, and we are not able
to obtain further financing.
Our company has had negative cash flows from operations. To date, we have
incurred significant expenses in product development and administration in order
to ready our products for market. Our business plan calls for additional
significant expenses necessary to bring our products to market. We believe we do
not have sufficient funds to satisfy our short-term cash requirements. There is
no assurance that actual cash requirements will not exceed our estimates, in
which case we will require additional financing to bring our products into
commercial operation, finance working capital and pay for operating expenses and
capital requirements until we achieve a positive cash flow. In particular,
additional capital may be required in the event that:
o we incur unexpected costs in completing the development of our technology or
encounter any unexpected technical or other difficulties;
o we incur delays and additional expenses as a result of technology failure;
o we are unable to create a substantial market for our product and services; or
o we incur any significant unanticipated expenses.
We may not be able to obtain additional equity or debt financing on acceptable
terms if and when we need it. Even if financing is available it may not be
available on terms that are favorable to us or in sufficient amounts to satisfy
our requirements. If we require, but are unable to obtain, additional financing
in the future, we may be unable to implement our business plan and our growth
strategies, respond to changing business or economic conditions, withstand
adverse operating results, and compete effectively. More importantly, if we are
unable to raise further financing when required, our continued operations may
have to be scaled down or even ceased and our ability to generate revenues would
be negatively affected.
A decline in the price of our common stock could affect our ability to raise
further working capital and adversely impact our operations.
A prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. Because our operations have been primarily financed through the sale of
equity securities, a decline in the price of our common stock could be
especially detrimental to our liquidity and our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to
reallocate funds from other planned uses and would have a significant negative
effect on our business plans and operations, including our ability to develop
new products and continue our current operations. If the stock price declines,
there can be no assurance that we can raise additional capital or generate funds
from operations sufficient to meet our obligations.
If we issue additional shares in the future this may result in dilution to our
existing stockholders.
Our Amended Certificate of Incorporation authorizes the issuance of 200,000,000
shares of common stock. Our board of directors has the authority to issue
additional shares up to the authorized capital stated in the certificate of
incorporation. Our board of directors may choose to issue some or all of such
shares to acquire one or more businesses or to provide additional financing in
the future. The issuance of any such shares may result in a reduction of the
book value or market price of the outstanding shares of our common stock. It
will also cause a reduction in the proportionate ownership and voting power of
all other stockholders. Further, any such issuance may result in a change of
control of our corporation.
We have a history of losses and negative cash flows, which is likely to continue
unless our products gain sufficient market acceptance to generate a commercially
viable level of sales.
From inception through March 31, 2005, we have incurred aggregate net losses.
There is no assurance that we will operate profitably or will generate positive
cash flow in the future. In addition, our operating results in the future may be
subject to significant fluctuations due to many factors not within our control,
such as market acceptance of our products, the unpredictability of when
customers will order products, the size of customers' orders, the demand for our
products, and the level of competition and general economic conditions.
15
Although we anticipate that we will be able to increase revenues during the next
9 months, we also expect an increase in development and operating costs.
Consequently, we expect to incur operating losses and net cash outflow unless
and until our existing products, and/or any new products that we may develop,
gain market acceptance sufficient to generate a commercially viable and
sustainable level of sales.
Unless we can establish significant sales of our current products, our potential
revenues may be significantly reduced.
We expect that a substantial portion, if not all, of our future revenue will be
derived from the sale of our sensor products. We expect that these product
offerings and their extensions and derivatives will account for a majority, if
not all, of our revenue for the foreseeable future. The successful introduction
and broad market acceptance of our sensor products - as well as the development,
introduction and market acceptance of any future enhancements - are, therefore,
critical to our future success and our ability to generate revenues.
Unfortunately, there can be no assurance that we will be successful in marketing
our current product offerings, or any new product offerings, applications or
enhancements. Failure to achieve broad market acceptance of our sensor products,
as a result of competition, technological change, or otherwise, would
significantly harm our business.
We could lose our competitive advantages if we are not able to protect any
proprietary technology and intellectual property rights against infringement,
and any related litigation could be time-consuming and costly.
Our success and ability to compete depends to a significant degree on our
proprietary technology incorporated in our products. We have taken limited
action to protect our proprietary technology and proprietary computer software.
If any of our competitors copies or otherwise gains access to our proprietary
technology or software or develops similar technologies independently, we would
not be able to compete as effectively.
Further, the laws of foreign countries may provide inadequate protection of such
intellectual property rights. We may need to bring legal claims to enforce or
protect such intellectual property rights. Any litigation, whether successful or
unsuccessful, could result in substantial costs and diversions of resources. In
addition, notwithstanding any rights we have secured in our intellectual
property, other persons may bring claims against us that we have infringed on
their intellectual property rights, including claims based upon the content we
license from third parties or claims that our intellectual property right
interests are not valid. Any claims against us, with or without merit, could be
time consuming and costly to defend or litigate, divert our attention and
resources, result in the loss of goodwill associated with our service marks or
require us to make changes to our website or other of our technologies.
Our products may become obsolete and unmarketable if we are unable to respond
adequately to rapidly changing technology and customer demands.
Our industry is characterized by rapid changes in technology and customer
demands. As a result, our products may quickly become obsolete and unmarketable.
Our future success will depend on our ability to adapt to technological
advances, anticipate customer demands, develop new products and enhance our
current products on a timely and cost-effective basis. Further, our products
must remain competitive with those of other companies with substantially greater
resources. We may experience technical or other difficulties that could delay or
prevent the development, introduction or marketing of new products or enhanced
versions of existing products. Also, we may not be able to adapt new or enhanced
products to emerging industry standards, and our new products may not be
favorably received.
If we fail to effectively manage our growth our future business results could be
harmed and our managerial and operational resources may be strained .
As we proceed with the commercialization of our products, we expect to
experience significant and rapid growth in the scope and complexity of our
business. We will need to add staff to market our products, manage operations,
handle sales and marketing efforts and perform finance and accounting functions.
We will be required to hire a broad range of additional personnel in order to
successfully advance our operations. This growth is likely to place a strain on
our management and operational resources. The failure to develop and implement
effective systems, or to hire and retain sufficient personnel for the
performance of all of the functions necessary to effectively service and manage
our potential business, or the failure to manage growth effectively, could have
a materially adverse effect on our business and financial condition.
OFF BALACE SHEET ARRANGMENTS
There are no Off-Balance Sheet Arrangements to report.
16
Item 3. Controls And Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Our management evaluated, with the participation of our Chief Executive and
Financial Officer, the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this Quarterly Report on Form 10-QSB .
Based on this evaluation, our Chief Executive and Financial Officer has
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act)) are inadequate to ensure that information required to be disclosed by us
in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms. We are developing a plan to ensure that all information will be recorded,
processed, summarized and reported on a timely basis. This plan is dependent, in
part, upon reallocation of responsibilities among various personnel, possibly
hiring additional personnel and additional funding. It should also be noted that
the design of any system of controls 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, regardless of how remote.
(b) Changes in Internal Controls.
During the period covered by the Quarterly Report on Form 10-QSB, there were no
significant changes in our internal controls over financial reporting or in
other factors that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes In Securities and Small Business Issuer Purchases of Equity
Securities.
1. On May 24, 2004, Sensor System Solutions (formerly known as Spectre
Industries, Inc.,) a Nevada corporation, entered into an agreement and
plan of merger (the Merger) with Advanced Custom Sensors, Inc. (ACSI).
Sensor issued 2,584,906 shares of its common stock and warrants (the
Merger Warrants) to purchase up to 47,802,373 shares of its common stock
to the shareholders of ACSI in exchange for all the issued and outstanding
shares of ACSI. On January 29, 2005, warrants for 47,802,373 shares of
common stock were exercised. The company recorded $47,802, the par value
of the stock issued, as an increase in common stock and a reduction to
additional paid in capital in the accompanying financial statements .
2. On February 9, 2005, the Company filed an S-8 under the Securities Act of
1933, to register an aggregate of 3,000,000 shares of our common stock
consisting of 1,500,000 shares of our common stock that we have agreed to
issue to each of Ian Grant, a director and our former President and
Matthew Markin, a director pursuant to a written stock compensation
agreement with each of them. The purpose of the stock compensation
agreement is to secure for our company and Messrs. Grant and Markin, our
independent directors, the benefits arising from capital stock ownership
by such directors or officers of, and consultants or advisors to, our
company and subsidiary corporations who have contributed to our company in
the past and who are expected to contribute to our company's future growth
and success. These 3,000,000 shares are part of the 7,500,000 shares
granted to the five shareholders in Spectre on December 4, 2004.
3. Note payable, secured by accounts receivable of the Company, interest at
10%, due February 11, 2005. The note payable was originally issued by
ACSI. In connection with the note payable, ACSI issued a warrant to
purchase 500,000 shares of stock at$.50 per share (the ACSI warrant is
convertible into 14,088,865 shares of the Company's common stock). The
note was payable to Sino-American, Inc., a company controlled by Mr.
Hanlin Chen, a director of the Company. On March 15, 2005, the warrant was
exercised for $250,000 of the debt outstanding. The balance of the note
payable and accrued interest ($300,000) was exchanged for 390,228 shares
of the Company's common stock at approximately $0.77 per share, which
approximated the market value of the stock on March 15, 2005.
4. Notes payable, secured by all assets of the Company, interest at 8% per
annum, due October 1, 2005. The note payable was originally issued by ACSI
in 2003, at which time ACSI issued a warrant to purchase 25,000 shares of
stock at $.50 per share (the ACSI shares are convertible into 704,425
shares of the Company's common stock). The intrinsic value of the original
warrant was valued at $25,000, recorded as loan discount cost, and was
amortized over the life of the original note as additional interest cost.
The original note was due September 16, 2004. On October 2, 2004, a new
note was issued to replace the original note. At maturity, the new note
was convertible at the holder's option at a conversion price equal to 70%
of the weighted average price of the common stock for the 30 trading days
immediately preceding the conversion date. In addition, the new note has a
warrant attached that, once the new note is converted into stock, allows
the holder to purchase stock at 85% of the weighted average price of the
common stock for the 30 trading days immediately preceding the conversion
date. The intrinsic value of the beneficial conversion feature of the new
note and new warrant, valued at $17,679, has been recorded as loan
discount costs and is amortized over the life of the new note. On March
18, 2005, the ACSI warrant was exercised for $12,500 of the debt
outstanding. The balance of the note payable and accrued interest
($16,012) was exchanged for 21,353 shares of the Company's common stock at
approximately $0.77 per share, which approximated the market value of the
stock on March 15, 2005.
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Item 3. Defaults Upon Senior Securities.
The $190,665 promissory note due to Tina Young matured on December 31, 2004. The
Company is currently negotiating a settlement.
The $110,000 convertible loan due to Tina Young matured on March 16, 2005. The
Company is currently negotiating a settlement.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
1. On February 14, 2005, the Company approved the joint venture agreement
with China Automotive Systems, Inc.
2. On March 20, 2005, the Company approved the loan conversions of
Sino-American and Pei Jen Hsu and forwent the warrant exercise charge of
$4,780 for the original ACSI shareholders.
Item 6. Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SENSOR SYSTEM SOLUTIONS, INC.
Dated: March 27, 2006 /s/ Michael Young
----------------------------------
Name: Michael Young
Title: Chief Executive Officer and
Principal Accounting Officer
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