ZENOSENSE, INC. - Quarter Report: 2016 March (Form 10-Q)

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to ______________________

000-54936
Commission file number
Zenosense, Inc.
(Exact name of small business issuer as specified in its charter)

Nevada		26-3257291
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
Avda Cortes Valencianas 58, Planta 5, 46015 Valencia, Spain
(Address of principal executive offices)

001 (34) 960454202
(Issuer’s telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark 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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act
Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[ X ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 49,615,297 common shares issued and outstanding as of May 10, 2016

ZENOSENSE, INC.

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7

Item 4.	Controls and Procedures	7

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	8

Item 1A.	Risk Factors	8

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8

Item 3.	Defaults Upon Senior Securities	8

Item 4.	Mine Safety Disclosures	8

Item 5.	Other Information	8

Item 6.	Exhibits	9

	SIGNATURES	10

ZENOSENSE, INC.

FINANCIAL STATEMENTS

As of March 31, 2016 and December 31, 2015 and

For the Three Months Ended March 31, 2016 and 2015

TABLE OF CONTENTS

	Page
Balance Sheets (Unaudited)	F-1

Statements of Operations (Unaudited)	F-2

Statements of Cash Flows (Unaudited)	F-3

Notes to Financial Statements (Unaudited)	F-4 to F-7

ZENOSENSE, INC.

Balance Sheets

(Unaudited)

	March 31, 2016			December 31, 2015
Assets
Current Assets:
Cash	$	550		$	989
Prepaid expense		1,667			4,167
Total assets	$	2,217		$	5,156

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expense	$	44,010		$	33,850
Accounts payable and accrued expense – related party		64,867			49,951
Loan payable		110,000			110,000
Stock payable		67,500			67,500
Total current liabilities		286,377			261,301


Stockholders’ Deficit:
Common stock 500,000,000 shares authorized, $0.001 par value, Shares issued and outstanding: 49,615,297		49,615			49,615
Additional paid in capital		1,005,270			1,005,270
Accumulated deficit		(1,339,045	)		(1,311,030	)
Total stockholders’ deficit		(284,160	)		(256,145	)
Total Liabilities and Stockholders’ deficit	$	2,217		$	5,156

See accompanying notes to these interim unaudited financial statements.

F-1

ZENOSENSE, INC.

Statements of Operations

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

	March 31, 2016			March 31, 2015

Expenses:
General and administrative expense	$	26,606		$	40,014
Total expenses		26,606			40,014

Loss from operations		(26,606	)		(40,014	)

Other expenses:
Interest expense		(1,409	)		(434	)
Total other expenses		(1,409	)		(434	)

Net loss	$	( 28,015	)	$	( 40,448	)

Net loss per common share:
Basic and diluted	$	(0.00	)	$	(0.00	)

Weighted average common shares outstanding:
Basic and diluted		49,615,297			49,614,797

See accompanying notes to these interim unaudited financial statements.

F-2

ZENOSENSE, INC.

Statements of Cash Flows

For the Three Months Ended March 31, 2016 and 2015

(Unaudited)

	March 31, 2016			March 31, 2015

Operating Activities
Net loss	$	(28,015	)	$	(40,448	)

Adjustment to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Prepaid expense		2,500			-
Accounts payable and accrued expense		10,160			11,745
Accounts payable and accrued expense – related party		14,916			9,618
Cash used in operating activities		(439	)		(19,085	)

Financing Activities
Proceeds from loan from a third party		-			20,000
Cash provided by financing activities		-			20,000

Net increase (decrease) in cash		(439	)		915

Cash, beginning of period		989			4,423

Cash, end of period	$	550		$	5,338

Supplemental disclosure of cash flows information
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	-		$	-

See accompanying notes to these interim unaudited financial statements.

F-3

ZENOSENSE, INC.

Notes to the Financial Statements

(Unaudited)

1. Nature of operations

Zenosense, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on August 11, 2008, for the purpose of acquiring and developing mineral properties. In May 2013, the Company terminated its mineral development business.

On November 22, 2013, the Company filed a certificate of amendment with the State of Nevada and (1) changed its name from “Braeden Valley Mines, Inc.” to “Zenosense, Inc.” and (2) effected an increase in the Company’s authorized shares from 50,000,000 to 500,000,000, with par value of $0.001 per share.

Effective December 4, 2013, the Company entered into a development and exclusive license agreement (“License Agreement”) whereby the Company will provide a third party with capital for the development of the sensory technology for a methicillin resistant Staphylococcus aureus / Staphylococcus aureus (“MRSA/SA”) detection device and other improvements and variations to the products (the “Sgenia Products”) to be used in the hospital and health care environments, in exchange for a worldwide, exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The License Agreement was modified in April 2014 and July 2014 to extend it to cancer sensory products and to modify and extend the development schedule and change the research funding budget to accommodate a lung cancer product as well as the MRSA/SA product.

2. Basis of presentation

The accompanying unaudited interim consolidated financial statements of Zenosense, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on May 20, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2015, as reported on Form 10-K, have been omitted.

3. Going Concern

The financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for 12 months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2016, the Company had not yet achieved profitable operations, had accumulated losses of $1,339,045 since its inception and expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

The Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings, advances, and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives including anticipated cash needs for working capital, for the next fiscal year. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operation, or if obtained, upon terms favorable to the Company.

F-4

ZENOSENSE, INC.

Notes to the Financial Statements

(Unaudited)

4. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation.

Cash and cash equivalents

Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments with an original maturity of ninety days or less. The Company has not experienced any losses on its deposits of cash and cash equivalents.

Research and development

Research and development costs are expensed as incurred.

Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Loss per common share

Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

Subsequent events

The Company evaluated all events or transactions that occurred after March 31, 2016, up through the date these financial statements were issued and no subsequent events occurred that required disclosure in the accompanying financial statements.

Recently Adopted Accounting Standards

The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.

F-5

ZENOSENSE, INC.

Notes to the Financial Statements

(Unaudited)

5. Loans Payable

On November 2, 2015, four promissory notes previously owed to several third parties (the “Prior Notes”) were assigned to a new party (the “Investor”) in one note for a total of $110,000 in principal plus accrued interest of $3,647. The new note bears interest of 5% and is due on demand. At March 31, 2016, the Company had accrued interest of $5,033 in connection with the promissory note.

On March 29, 2016, the Investor gave notice that it demanded repayment of all principal amounts and accrued interest outstanding, due within 90 days of the demand notice

6. Commitments

In December 4, 2013, the Company entered into the License Agreement with Sgenia Industrial S.L. and its subsidiaries, Sgenia Soluciones S.L and ZENON Biosystem S.L (collectively, “Sgenia”) for the development of the Sgenia Products, to be based on the Sgenia sensory technology. Pursuant to the License Agreement, the Company will have a worldwide exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The Company entered into three amendments (the “Amendments”) to the License Agreement to modify and extend the Sgenia Products to include a lung cancer product and change the product development schedule and the research funding budget to accommodate the additional lung cancer product as well as the continuation of the development of the MRSA product.

Additionally, the development stage objectives and milestones were modified to reflect the current state of development of each of the Sgenia Products.

Under the License Agreement, the Company is funding the development of the Sgenia Products pursuant to a research and development plan proposed by Sgenia and accepted by the Company. The funding will be provided on an advance basis, per month, based on agreed development stages. In return, the Company will have the exclusive right to manufacture, formulate, package, market and sell the Sgenia Products world-wide, for 40 years, subject to a limitation on the inclusion of Spain in the territory. All intellectual property developed by Sgenia at any time during the term related to manufacturing, formulating and/or packaging process shall be shared ownership and licensed to

the Company on a royalty-free basis. Sgenia will also supply to the Company, at a negotiated price based on quantity, all of the requirements for the integrated circuits on microchips that are necessary for the operation of the Sgenia Products. Sgenia and the Company will also work together to research and develop the Sgenia Products and establish written plans and reviewing committees for the management of the overall development project and commercialization of the Sgenia Products.

The Company’s funding of the MRSA product development was limited to an initial approved budget of $1,256,438, of which $526,846 was advanced by the Company. As a result of the Amendment of July 2014, at the date of this report, the revised and approved budget is approximately $1,142,143, of which $769,787 has been advanced (including the amount advanced under the prior budget) as of March 31, 2016. The Company is currently committed to advancing approximately EUR656,000, for research and development under the revised and approved budget, and subject to Sgenia meeting certain milestones. Some of the milestones have not been met as of March 31, 2016. The aggregate of the advances paid by the Company are recorded as research and development expenses. The budget may be changed by mutual agreement from time to time.

In addition to providing the development funding, the Company will also pay royalties for completed sales of the Sgenia Products, payable 60 days after each fiscal quarter of the Company (the “Royalties”). The Royalties will be 20% of net sales, which is calculated based on gross sales of the device and the installation and training for the Sgenia Products, less various expenses, including manufacturing, components acquired from Sgenia, commissions, refunds and discounts and sales taxes. If the Sgenia Products are sold by Sgenia in Spain for original use in Spain, then the Royalties on those sales will be reduced. The Company also has the right to sublicense to other parties throughout the world, except in Spain if and when, if at all, Sgenia seeks to act as the distributor in that territory.

The Company has the option to fund the development of future proposed products based on the Sgenia intellectual property, and if funded the Company will obtain the right to manufacture, market and sell the resulting devices.

F-6

ZENOSENSE, INC.

Notes to the Financial Statements

(Unaudited)

7. Related Party Transactions

On December 5, 2013, the Company entered into a one-year service agreement with Mr. Carlos Jose Gil, through his consulting firm, Ksego Engineering S.L., under which the Company obtains his services as the Chief Executive Officer of the Company. The agreement is now on a month-to-month basis. Mr. Gil receives a base salary and additional compensation equal to 10% of the net sales generated from the License Agreement. During the three months ended March 31, 2016, the Company recorded $0 of general and administrative expenses related to amounts paid/owed to Ksego Engineering S.L. for services rendered by Mr. Gil. As of March 31, 2016, the Company owes Mr. Gil $64,867. No additional compensation based on net sales has been earned to date.

8. Subsequent Events

On April 20, 2016 (the “Issue Date”), the Investor agreed to a further loan of $40,000 to assist the Company to meet its immediate liabilities, to carry out compliance work and become current in its filing obligations under the Securities Act of 1934 and to continue to seek funding for its operations in an amount that would allow the Company’s business to continue, including funding the product development under the license with Sgenia, and make repayment of the Prior Notes listed in Note 5. The notice given on March 29, 2016 remained in place. The further loan was made under a Securities Purchase Agreement (the “Agreement”) which closed on April 26, 2016 (the “Closing”). Pursuant to the Agreement and upon the Closing, the Company issued a convertible note in a principal amount of $40,000 (the “April 2016 Note”). The April 2016 Note bears a 5% interest per annum and is due on April 19, 2018. The April 2016 Note may be prepaid at any time within 90 days of the Issue Date.

Starting from September 20, 2016, the April 2016 Note can be convertible into shares of common stock (the “Conversion”) of the Company, at the discretion of the holder, at a price of $0.001 per share subject to a blocker provision that limits the amount issued at any time to 4.99% of the outstanding shares of Common Stock. The Company has initially reserved 40,000,000 shares of Common Stock issuable upon the Conversion.

On May 17, 2016, (the “Second Issue Date”), the Investor agreed to exchange the Prior Notes for two new convertible notes (the “May 2016 Notes”). The exchange was made under a two separate Securities Exchange Agreements (the “Agreements”) which closed on May 17, 2016 (the “Second Closing”). Pursuant to the Agreements and upon the Second Closing, the Company issued the May 2016 Notes, one for the principal amount of $53,197 (the total aggregate amount owed, including accrued interest, under the Prior Notes issued on December 1, 2014, February 27 and May 22, 2015) and the other for the principal amount of $62,547 (the total amount owed, including accrued interest, under the Prior Note issued July 11, 2015), for a combined aggregate principal amount of $115,744, consisting of $110,000 owed under the aggregate principal amount of the Prior Notes and aggregate accrued interest of $5,744 due under the Prior Notes. The May 2016 Notes bear a 5% interest per annum and are due on May 16, 2018. The May 2016 Notes may be prepaid at any time within 90 days of the Second Issue Date. The May 2016 Notes can be convertible into share of common stock of the Company at the discretion of the holder, at a price of $0.001 per share subject to a blocker provision that limits the amount issued at any time to 4.99% percent of the outstanding shares of Common Stock. The Company has initially reserved 115,744,000 shares of Common Stock issuable upon the Conversion.

F-7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

This section of this quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

As used in this quarterly report, the terms “we,” “us,” “our,” “our company” and “Zenosense” mean Zenosense, Inc., unless otherwise indicated. We have no subsidiaries.

General Overview

Zenosense, Inc. was incorporated on August 11, 2008 in the State of Nevada. Our authorized common stock currently consists of 500,000,000 authorized shares of common stock, with par value of $0.001.

The original purpose of the company was to acquire and to develop mineral properties and to engage in the exploration for gold and other mineral properties. On May 15, 2013, our mining lease expired and we lost our right to explore the mining property. We then became a shell company, as defined under the Securities and Exchange Act of 1934, as amended, until December 4, 2013, when we entered into the transaction with Sgenia described below.

In the summer of 2013, we started to look for other business opportunities. We became interested in sensory technology devices for use in hospitals and health care environments. During the latter part of the year, we began to negotiate a license agreement with the developers of such technology (the “Sgenia Technology”), and in December 2013, we entered into a Development and Exclusive License Agreement (the “License Agreement”) with Sgenia Industrial, S.L. (“Sgenia”) and its subsidiaries Sgenia Soluciones, S.L. (“Sgenia Subsidiary”) and ZENON Biosystem, S.L. (“Zenon”), all of which were formed under the laws of Spain. The products currently being developed under the License Agreement include one to be used in the detection of methicillin resistant Staphylococcus aureus/Staphylococcus aureus (“MRSA/SA”) in the healthcare environment and another to be used to detect lung cancer in patients. Under the terms of the License Agreement, we will provide Zenon with capital for the development of the devices that utilizes the Sgenia Technology (the “Sgenia Products”), in exchange for a worldwide, exclusive license to manufacture, formulate, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The License Agreement gives us additional rights to improvements and developments to the Sgenia Products and future products using the Sgenia Technology.

In December 2013, we filed an amendment to our charter to change our name from “Braeden Valley Mines, Inc.” to “Zenosense, Inc.” and to increase the number of our authorized shares of Common Stock from 50,000,000 shares to 500,000,000 shares. The amendments were approved by our stockholders on November 23, 2013 at the annual meeting of the stockholders. We also entered into capital contribution agreements to reduce the number of outstanding shares held by our prior management, converted some outstanding debt and raised initial working capital, in part to be able to finalize the License Agreement and make the initial development payment.

To fund our obligations under the License Agreement, we have sold shares of common stock on a private placement basis and converted funds advanced to the Company into common shares of the Company.

As a result of the change of our corporate name to Zenosense, Inc., the trading symbol of the company changed to “ZENO.”

Plan of Operation

Our business plan is to develop devices to be used in hospitals and other medical care centers to detect MRSA/SA and the signs of lung cancer, and to fund the medical trials of those medical devices. Our principal activity since December 2013 has been funding the development of the Sgenia Products. At March 31, 2016, we had working capital deficit of $284,160. Our current cash assets are not sufficient to cover our current and expected expenses, including the funding obligation under the License Agreement, and therefore, we will need to obtain further financing, without which we will not be able to execute our business plan.

Assuming that we are able to obtain operational funding, in addition to any funding necessary to maintain our status as a public company, subject to regular review and additional assessment of requirements, currently we anticipate that we will incur the following expenses over the twelve (12) month period following funding in connection with the development of the Sgenia Products: (1) we will have to fund the future development expenses of Sgenia in the approximate amount of 656,000 euros, (2) payment of compensation to our officers, employees, and consultants of approximately $100,000, (3) legal, audit and reporting expenses of approximately $50,000, and (4) general working capital. Additional unknown expenses may arise from time to time, which we cannot currently identify or determine a possible expense. We will need additional funding to cover our anticipated expenses mentioned above, and for future development and implementation of our business plan.

In light of our current inability to fund our operations and fund the Sgenia license and the fact that the Sgenia research is delayed, we reviewed with Sgenia the development schedule and funding requirements for the initial products and requirements to develop the cancer sensory devices, and have agreed in principle to an alternative development schedule which would result in the lengthening of the developmental schedule for these products and an increase of the budget requirements. The schedule and funding will be finalized once we have obtained sufficient funding, for which we cannot give any assurance that we will be able to obtain. We have been attempting to secure the necessary funding to continue either the existing development schedule and corresponding budget or the alternative development schedule. We have engaged with a number of interested parties, however, to date, we have not been successful in securing the requisite funding.

Recently we have been presented with the opportunity to participate with a third party in the development of a novel Point of Care medical diagnostic device targeting cardiac markers with the aim of developing a device for the rapid diagnosis of heart attack and cardiac related illnesses. Utilizing a magnetic nanoparticle detection technology, the intention is to deliver a test platform that can produce laboratory accuracy standard results or better in a handheld device in less than eight minutes. The technology platform is already protected by several patent applications and one patent grant, now in the national phase in key geographic areas. The initial cardiac device, if successful, would target a global market for cardiac biomarker testing predicted to reach $7.2 billion by 2018.1 The test platform is also expected be applicable to a multiplicity of immunoassay tests representing a potential overall market opportunity estimated to be worth $23.7 billion per annum worldwide by 2019.2 We have received interest on this opportunity from a potential investor who had originally shown interest in the lung cancer and MRSA sensory devices but declined to move forward with an investment into those projects. Discussions are ongoing and no formal terms have been agreed. We are also required to comply with covenants included in our existing debt agreements which, absent any waiver, may prohibit our ability to accept funding to pursue this opportunity. Nevertheless we intend to actively pursue this early stage opportunity in parallel with our existing business, in the hope that we can come to agreement with the prospective investor. There is no guarantee that such an agreement or investment can be concluded.

Liquidity and Capital Resources

As of March 31, 2016 and December 31, 2015, our total assets were $2,217 and $5,156, respectively, and our total current liabilities were $286,377 and $261,301, respectively. As of March 31, 2016, we had a working capital deficit of $284,160. Our financial statements report a net loss of $28,015 for the three months ended March 31, 2016.

We have had recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. Our financial statements reflect that there is a going concern qualification.

Currently, we have only limited cash and similar assets, which do not allow us to continue with the funding obligations of the license with Sgenia. The license agreement has not been declared in default. Further funding of the development project is not yet due as Sgenia has not completed the current stage of development terms.

As noted in our financial statements, in March 2016, we received notice of default on the Prior Notes. On May 17, 2016, we exchanged the Prior Notes for the May 2016 Notes (as defined in the financial statements).

Additionally, we received $40,000 as a further cash investment from the Investor on April 26, 2016, which was subscribed for after the Investor declared the default. The Company issued the April 2016 Note (as defined in the financial statements) in a principal amount of $40,000.00 to the Investor. The April 2016 Note and the May 2016 Notes contain standard anti-dilution provisions and other customary representations, warranties and covenants by, among and for the benefit of the parties. Additionally, the Investor has the right of first refusal in any future equity financing and impose restrictions on the Company’s ability to make distributions to its shareholder, repurchase shares of Common Stock, incur certain liabilities or sell assets. Notwithstanding the foregoing, the Company is permitted to raise additional capital relating to the Development and Exclusive License Agreement, effective December 4, 2013, as amended. The April 2016 Note and the May 2016 Notes also include customary event of default provisions and impose penalties on the Company in certain default events.

Results of Operations

Overview

The following discussion of the results of operations, cash flows and changes in our financial position should be read in conjunction with our audited financial statements and notes for the year ended December 31, 2015, which are included in our Form 10-K, filed on May 20, 2016.

Three Months Ended March 31, 2016 and 2015

Operating Expenses

Our operating expenses for the three months ended March 31, 2016 and 2015 are outlined in the table below:

	Three Months Ended
	March 31
	2016		2015
General and administrative expenses	$	26,606	$	40,014

General and administrative expenses have decreased as a result of decreased consulting services and a decrease in our legal and accounting fees.

The Company has suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed.

	Three Months Ended		Three Months Ended
Cash Flows	March 31, 2016		March 31, 2015
Net Cash Used in Operating Activities	$	(439)	$	(19,085)
Net Cash Provided by Financing Activities	$	-	$	20,000
Cash increase (decrease) during the period	$	(439)	$	915

We had cash of $550 and $989 as of March 31, 2016 and December 31, 2015, respectively. We had a working capital deficit of $284,160 as of March 31, 2016, compared to working capital deficit of $261,301 as of December 31, 2015.

We used cash in operations of $439 during the three months ended March 31, 2016, for funding certain expenses. We have not funded the Sgenia licence during this period due to a lack of available funds and the fact that Sgenia and Zenon have not completed the preconditions for the next phase of funding.

During the three months ended March 31, 2015, cash used in operations of $19,085, mainly due to our corporate obligations and SEC reporting.

Based on our current operating plan, we will not generate revenue that is sufficient to cover our expenses for at least the next twelve (12) months. In addition, we do not have sufficient cash and cash equivalents to execute our operations for at least the next twelve (12) months. We will need to obtain additional financing to operate our business for the next twelve (12) months. We expect to raise the capital necessary to fund our company through advances or a private placement and public offering of our common stock. Additional financing, whether through public or private equity or debt financing, arrangements with stockholders or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us.

Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations. If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.

Since inception, we have issued 49,615,297 shares of our common stock.

Limited Operating History: Need for Additional Capital

Based on our current operating plan, we do not expect to generate any revenue for at least the next twelve months. In addition, we do not have sufficient cash and cash equivalents to fund our operations for at least the next twelve months. We will need to obtain additional financing to operate our business for the next twelve months. We hope to obtain the capital necessary to fund our business through private placements and public offerings of our common stock. Additional financing, whether through public or private equity or debt financing, arrangements with stockholders or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us. Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock.

Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations. If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.

Off-Balance Sheet Arrangements

We do not have any significant off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4 CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Under the supervision and the participation of our management, consists of our principal executive officer (who is also our principal financial officer), we conducted an evaluation as of March 31, 2016, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer, who is also our principal financial officer, concluded that our disclosure controls and procedures were not effective as of March 31, 2016, because (1) the Company lacks a functioning audit committee and there is a lack of independent directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

(2) the Company has inadequate segregation of duties consistent with control objectives; and (3) the Company has ineffective controls over its period end financial disclosure and reporting processes. The Company operations are also ineffective due to the lack of operating funding.

Changes in internal controls over financial reporting

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

None.

ITEM 1A RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the Company’s annual report on Form 10-K, which was filed with the Securities and Exchange Commission on May [ ], 2016. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4 MINE SAFETY DISCLOSURES

N/A.

ITEM 5 OTHER INFORMATION

None.

ITEM 6 EXHIBITS

The following documents are included herein:

Exhibit Document Description

No.

31.1*	Certification of Principal Executive Officer who is also the Principal Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1*	Certification of Chief Executive Officer who is also the Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
101.INS*	XBRL Instance Document	Filed herewith.
101.SCH*	XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document	Filed herewith.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith.

*Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant.

		ZENOSENSE, INC.

Date: May 23, 2016	By:	/s/Carlos Jose Gil
	Name:	Carlos Jose Gil
	Title:	Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)