U.S. SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal
year ended November 30, 1996
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _______ to ______
Commission File Number 2-33-3560D
CONECTISYS CORPORATION
(Name of small business issuer in its charter)
Colorado 84-1017107
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
7260 Spigno Place
Agua Dulce, 91350
California
(Address of (Zip Code)
principle
executive offices)
Issuer's telephone number: (805) 268-0305
Securities registered pursuant to Section 12(b) of the
Act: None Securities registered pursuant to Section 12(g)
of the Act: None
Check whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained herein,
and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-
KSB. [X]
State issuer's revenues for its most recent fiscal year:$ 111,163
The aggregate market value of the voting stock held by
non affiliates computed by reference to the price at
which the stock sold on January 14, 1997, was $11,241,770.
For purposes of the foregoing calculation only, all directors and
executive officers of the registrant have been deemed affiliates.
The number of shares outstanding of each of the issuer's
classes of common equity, as of January 14, 1997, was
2,775,729
PART I
Item 1. Description of Business
General
Conectisys Corporation, formerly known as BDR
Industries, Inc. (the Company ), was incorporated on
February 3, 1986, in Colorado. In November 1995, the
name of the Company was changed to Conectisys Corporation.
For several years prior to 1994, the Company was a shell
corporation with no assets and no revenues. Originally,
the Company was engaged in the manufacture of yachts but
that business ultimately was unsuccessful. Creditors
foreclosed on the assets of the Company in lieu of
foreclosure on the Company.
During 1995, the Company's only operations consisted
of Creative Image Products, Inc., a wholly owned
subsidiary acquired in 1994 that manufactured organic
insecticide. The Company invested in substantial
improvements to the factory and equipment, but sales
anticipated for fiscal 1995 did not occur. Management of
Creative Image Products requested that the Company
unwind its acquisition of Creative Image Products by
the Company due to the financial needs of Creative Image
Products. The Board of Directors of the Company agreed.
Creative Image Products signed a promissory note in the
amount of $1,302,500 for the funds previously advanced
to Creative Image Products by the Company.
In September 1995, the Company purchased 80% of the
outstanding stock of TechniLink, Inc., a California
corporation (TechniLink), and 80% of the outstanding
stock of PrimeLink, Inc., a Kansas corporation
(PrimeLink), in exchange for an aggregate of 200,000
shares of common stock in the Company. As a result,
TechniLink and PrimeLink became subsidiaries of the
Company.
TechniLink has developed the Cube 2001 series for the
monitoring and controlling of various devices in the
petroleum and gas industry.
PrimeLink has developed a product line that uses
cutting edge communications to assist in the monitoring
of meters for utility companies and the petroleum
industry. This technology, while eliminating the need for
a meter reader, is more significant in enabling the
utility companies to utilize energy conservation and, in
the case of power companies, rerouting of electrical
power to areas where it is needed. The devices are also
in use in vending machines to monitor sales and functions
of the vending machine without the physical inspection
usually needed.
Business and Products of PrimeLink
Government regulation and the need to lower operational
costs are requiring many businesses to acquire operating
information from widespread or mobile operations. The
cost of the computer equipment to acquire the data is
only part of the overall costs. Communication equipment
capital cost and recurring charges are often higher than
the cost of the computer.
An opportunity exists to combine a reliable low-cost
communications technology with proven remote data
monitoring to provide a unique solution to these cost
sensitive, data acquisition opportunities. The key
technologies are narrowband PCS, which has been developed
by Mtel Corporation for two-way paging, and data
communications protocol conversion for pipeline control
systems. PrimeLink and Mtel's SkyTel business unit have
agreed to jointly market narrowband-PCS data acquisition
solutions.
Potential applications are numerous, including electric
and gas utility meters; pipeline gas flow measurement;
vending machine monitoring; and transportation monitoring
and tracking are just some of the potential applications
of the technology. PrimeLink proposes to enter the market
with a gas pipeline product (about 600,000 unit market)
because of the experience of the principals of PrimeLink, but the
electricity meter market (over 65 million unit market) is
being aggressively pursued as PrimeLink establishes
itself.
The key concept behind PrimeLink's business is the
unique combination of existing technologies to provide
low cost monitoring and control equipment combined with
low cost communications for sites where real-time
monitoring is not required. The monitoring and control
products will be based on an industry-leading data
acquisition software kernel. The benefit of using this
kernel is that it is well proven and already supports a
wide range of industry communication protocols.
PrimeLink's current product line consists of the
following:
TransComm- This product provides two-way
access to SkyTel 2 Way networks which provides
inexpensive data transfer services for small amounts of
data. TransComm is ideal for applications where small
amounts of data (about 128 bytes per day) are required
infrequently, such as electric utility meter reading, gas
utility meter reading, pipeline gas flow measurement,
pipeline cathodic protection monitoring, pipeline leak
detection monitoring, transpiration diagnostic and
location monitoring, etc.
UtiliComm- This product comprises a TransComm
unit with a single board computer (or remote terminal
unit (RTU)) connected to the electric or gas meter and to
the narrowband PCS transceiver. The RTU will include
programming to monitor the meter, calculate energy usage
and send the data to the utility company on a regular
schedule and in a data format which is compatible with
their central computer system.
LiquiComm- This product comprises a TransComm
unit with a single board computer (the same board used in
the UtiliComm unit) connected to the oil, water, or other
liquid meter and to the narrowband PCS transceiver. The
RTU will include programming to monitor the meter,
calculate liquid flow based on pulse inputs programming
to monitor the meter, calculate liquid flow based on
pulse inputs from the meter and send the data to the
owner/operator on a regular schedule and in a data format
which is compatible with their central computer system.
FloComm- This product comprises a TransComm unit
with a single board computer (the same as the UtiliComm
RTU except for the addition of three analog inputs)
connected to the gas flow measurement orifice run and to
the narrowband PCS transceiver. The RTU will include
programming to monitor the meter, calculate gas flow and
send the data to the owner/operator on a regular schedule
and in a data format which is compatible with their
central computer system.
PrimeServer- In order to simplify integration of
the PrimeLink data into a customer's system, we will
provide a gateway product called PrimeServer which
handles all network interaction and delivers the data to
the customer in the optimum protocol and physical
interface, i.e., MODBUS over Ethernet. PrimeServer may be
located at the customer's site or at Mtel's Networking
Operating Center (NOC).
Although the standard package is small, low-powered and
very cost-effective, PrimeLink will offer options which
are designed to provide flexible, customer orientated
solutions.
Initial marketing efforts will be concentrating on
launching FloComm. The primary reason for this approach
is the experience the key personnel have in the gas
pipeline market. The market is a niche market compared to
remote electric meter reading and has therefore not
attracted the interest of giants such as AT&T.
The target market for FloComm is replacement of
mechanical chart recorders (MCR) on gas pipelines. Some
600,000 sites have been identified by the Gas Research
Institute.
On February 15, 1996, PrimeLink entered into a Joint
Marketing and Development Agreement (Agreement) with
SkyTel Corp. pursuant to which PrimeLink agreed to
customize and develop a paging technology based receiver
for use in connection with SkyTel's two-way wireless
messaging services and system (the SkyTel Network) and
both parties agreed to assist each other in the marketing
of the PrimeLink product and the SkyTel Network. The
Company believes that the joint marketing of its product
with the SkyTel System could have significant potential
for the Company. However, the Agreement does not require
any purchases of the PrimeLink product by SkyTel, and may
not necessarily result in any significant revenues for
the Company. The Agreement is for a two-year term, and
will automatically renew for additional one-year terms
until terminated by either party.
On February 16, 1996, PrimeLink received an order from
SkyTel for the production of 1,000 serial interface board
units to be utilized by Coca Cola. Although the revenues
to be received by the Company from this order are not
material, the Company is hopeful that additional orders
will be received for the units. To date, however, no
other orders have been received, and there can be no
assurance that there will be any additional orders. The
above mentioned order from SkyTel, was transferred in
April of 96, Coca Cola requested that PrimeLink sell and
consult directly to them.
In June of 1996, PrimeLink signed a pilot project with
Wiltech a division of Williams Natural Gas. The total
value of this project is approximately 1.8 million
dollars. The initial Flowcomm units for this pilot were
installed in November and are transmitting data very
successfully.
In November 1996 PrimeLink delivered its first
UtiliComm units to Transdata. These units are the first
for electric meters from PrimeLink. Transdata supplies
Enron Corp. with these meters. To date, other orders have
been received, but of no significant dollar value and
there can be no
assurance that there will be any additional orders.
Business and Products of TechniLink
TechniLink Technology Manufacturing, Inc.
(TechniLink) is a multifaceted corporation who provides
products and services for the Industrial Automation
Market. The products consist of hardware and software to
ensure an industrial plant's ability to automate more
efficiently.
For many years people have opened and closed valves
manually in the petrochemical and utility industries. In
some cases, they still do. In most modernized industrial
plants today, MOVs, AOVs and motors have replaced people.
This process is called Industrial Automation. Major U.S.
industrial related corporations are down-sizing
internally to compete in a global environment.
The main technology that TechniLink is involved with is
LON (local operating network) by Echelon. This technology
creates an easy to use, and very interoperable system.
By dramatically reducing the installation cost of a
computer controlled valve and motor network, customers
are now able to afford the benefits associated with
around-the-clock diagnostics, auditing documentation and
sequence monitoring. The LonWorks based Cube 2001
System offers the following key benefits:
Substantial cost savings from simplified design
and minimization of installation costs.
Significant reductions in material quantities
with regard to cables, distribution and
junction boxes.
Sophisticated software packages providing
historical audits of each device on the network
and continuous serial/digital diagnosis of an
array of vital functions.
Major reductions in the space required for
control room apparatus.
High flexibility in the planning or expansion
of each installation.
By far the most important benefits offered by the Cube
2001 are improved efficiency and productivity through
reductions in labor, maintenance and downtime costs.
The Cube's unique advantages using the neuron chip by
Echelon can be expected to arrive at a winning position
in the consumer's mind. Now the customer can install a
device knowing he can hook up other devices and is not
locked to sole source vendors. The resulting selling
basis for our product is interoperability. Simply
stated, the product will work with any other Lon based
product and all other Lon based products will work with
it. The Company believes that the product's ease of
installation makes the product as versatile on retrofit
as anything on the market.
Other Matters
On January 2, 1996, S.W. Carver ("SWC") a California
corporation owned primarily by Robert Spigno, loaned the
Company an additional amount of $50,000. The loan is
payable on demand and the unpaid principal is due and
payable December 15, 1996. The loan bore interest at the
rate of 10% per annum. Interest was waived to the $50,000
loan at the same time 800,000 restricted share was issued
for collateral to the $400,000 loan from SWC to
TechniLink. The restricted shares that were issued to
this transaction were returned to the Corporation in June
of 1996 and interest was reinstated to the loans, There
has been no principal or interest payments towards the $
400,000 note as of November 30, 1996. In March of 1996
SWC sold to the company's subsidiary TechniLink a vehicle
for the use of its president. The cost of the vehicle was
$12,000 on account. The terms of this note are 3 years at
12% interest No interest or principal was paid in fiscal
1996 for this loan The total outstanding principal to SWC
is $ 519,795 as of November 30, 1996
On February 21, 1996, the Company entered into an
Investment Banking Agreement (The Agreement) with Chalet
Capital Corp. (CCC) The term of the agreement is for a
period of two years. CCC will perform investment banking
services consisting of consulting on the public
securities market, investor relations, possible merger
candidates. In consideration of their services the
Company shall grant an option to purchase 1,000,000
shares at $2.50 per share. As part of the agreement CCC
was required to exercise its option for 100,000 shares
within 30 days for a total of $ 250,000. CCC as of May
1996 paid the company approximately $ 250,000. CCC has
also performed consulting services to the Company.
In October the Company issued 130,800 shares
to CCC. The company through an S-8 registered 1,000,000
shares per the Agreement. The 130,000 shares were
returned and converted to free trading shares per the
agreement. At the Company's annual meeting in November,
attending shareholders expressed concern over the S8. The
Company through an 8-K canceled the issuance of any other
shares in regard to the S-8.
In February 1996, the Company and Hollywood Trenz,
Inc. (HTNZ) mutually agreed to terminate the ADA Sign
Purchase Agreement and Agreement for the Purchase of
Common Stock between them dated March 23, 1995 and to
return the shares transferred pursuant to that agreement.
As a result, the Company returned to HTNZ 600,000 shares
of HTNZ common stock and HTNZ returned to the Company
300,000 shares of the Company's common stock.
On March 19, 1996, the Board of Directors of the
Company authorized the Company to open an account with
Oppenheimer & Co., Inc. In connection therewith,
certificates for an aggregate of 1,000,000 shares of the
Company's common stock which are beneficially owned by
Robert A. Spigno were deposited with Oppenheimer. It is
the Company's hope that Oppenheimer will become a market
maker in the Company's common stock.
On July 17, 1996, the Company issued 500,000 shares to
Adventuress Productions Inc. for the purpose of securing
a loan. This transaction was not completed and the shares
were returned to the Company in September 1996. These
shares are not included in the outstanding shares
On July 25, 1996, Conectisys signed an agreement with
Avonni Holding Group Inc. (AHG). The agreement was for
the investment of 6,000,000 shares of Rule 144 Common
Stock with Avonni for 366 days The return on this
investment would have been approximately 12% if funds
were delivered, but because of the instability in the
stock over the following months funding could not be secured and the
stock certificates were returned to the Company, and are
not included in the outstanding shares.
On August 20,1996 1,000,000 and 300,000 shares of
Rule 144 common stock were issued to Lloyd Hawk and
Associates and Savoia Corporation respectively, for a
loan secured by the shares. The shares were returned,
when funding could not be acquired. These shares are not
included in the outstanding shares.
On September 3, 1996, 1727 shares of Rule 144 common
stock were issued to Micro Automation Development (MAD)
to reduce debt in the Company's subsidiary TechniLink.
The debt was for services provided to TechniLink
On September 12, 1996, The Company issued to Internet
Stock Guide Inc., 10,000 shares of Rule 144 common stock
for payment of an advertising contract on there World
Wide Web and consulting services. The agreement is for a
one year term with the option of a second year
On September 23, 1996, The company issued 4155 shares
of Preferred stock to Robert Spigno, President of
Conectisys Corp. for the reduction of compensation
accrued to Mr. Spigno.
Competition
Conectisys with its subsidiaries PrimeLink and
TechniLink have minimal competition in most markets.
PrimeLink's device FloComm that replaces mechanical chart
recorders in the field for the petro-chemical industry
has no known competition to date using two-way paging
technology. Mechanical chart recorders are predominant in
the industry today. The closest competitor uses spread
spectrum radio which the FlowComm product is adaptable
to. The TransComm unit is utilized in the vending machine
market has no competition using SkyTel's TwoWay Paging
technology. Cellular and dedicated line telephone are the
closest competition to the TransComm device The device
that PrimeLink uses for automatic meter reading (AMR) has
the most competition. The major difference between the
competition and PrimeLink's device is that the
competition utilizes spread spectrum radios that either
have a drive by collection process or require the build
out of cellular transmission sites. PrimeLink in
connection with SkyTel uses Two-Way Paging technology to
accomplish this without the extra costs.
TechniLink's Cube 2001 system for real time control of
valve and actuators, are believed to have no known
competition using the Echelon neuron chip currently. The
most competitive forces in the CUBE's market fall in
three categories:
A] Powell C2, a mechanical relay technology that has been
around for over 30 years. This type of system is
susceptible to random operation from lightning strikes.
TechniLink's Cube 2001 uses processor technology.
Processor technology is a viable replacement to
mechanical relays and is not subject to the random
operation condition
B] DCS & PLC based I/O systems. DCS (Digital Control
System) & PLCs (Programmable Logic Controller) are micro
processor based industrial type computers. These are
inherently expensive. The cube 2001 is much more cost
effective, low voltage keeps wire replacement to a
minimum, self acquiring network keeps programming costs
down
C] MANUFACTURERS SYSTEMS are created by the actuator
manufacturers. It gets a lot of notoriety because the
manufacturers that sell actuators to the refineries also
want to control their future. This is best done by
supplying the control system for the actuators.
TechniLink's system will work with any actuator that
needs control (universal control) therefore releasing the
plant from being "locked" into a system that may not
conform to their needs The CUBE 2001 System is
inexpensive to maintain as well
Suppliers
The company has three key suppliers: Echelon
Corporation, producers of the neuron processor chip,
SkyTel; providers of the telecommunication network; and
Motorola, producers of the Two-Way pager component
Both subsidiaries, PrimeLink and TechniLink will be
using outside vendors for the assembly of their
respective products. This will reduce capital costs since
there are a vast number of vendors to choose from.
Customers
Revenues for the Company have come from two major
companies. Wiltech and Coca Cola. Wiltech is a division
of Williams Natural Gas, One of the largest natural gas
suppliers in the U.S.
Proprietary Information
The Company relies on proprietary knowledge and
employs various methods to protect its trade secrets,
concepts, ideas and designs. However, such methods may
not afford complete protection, and there can be no
assurance that others will not independently develop such
processes, concepts, ideas and designs. The Company,
through its subsidiaries, manufactures and markets its
technology. However, such technology is not presently
patented in the United States, and although the Company
has undertaken to file one or more applications for U.S.
patents pertaining to the technology, there can be no
assurance that patents will ultimately be issued,
Further, the possibility exists that the technology may
be deemed to infringe upon other technology which is
already patented or subject to an application filed prior
to the Company's application when filed, In that event,
the Company could be subject to liability for damages for
infringement and could be required to cease production of
equipment until appropriate licensing arrangements are
made, The Company could also be subject to competition
from the party deemed to be the owner of the patent
pertaining to the technology.
Employees
As of January 14, 1997, the Company and its
subsidiaries employed 7 full time employees, of whom 3
are officers of Conectisys. At this time there are no
grievances of any kind from the employees of the Company.
Item 2. Description of Property
The Company's principal executive offices are located
at 7260 Spigno Place, Agua Dulce, California 91350. The
space is leased from SWC. The lease is for office space
(1090 Square feet) and equipment to run the day to day
operations of the corporation. The lease was for a
period 11 months at $ 2000.00 per month that expired in
December 1996. The lease was renewed in January 1997 for
an additional 12 months and there is an option to
purchase at the end of the period The terms of the lease
are below what could be obtained from an outside 3rd
party. Management believes that its corporate offices are
suitable and more than adequate for its present needs.
There are no plans to lease any additional space.
The location for PrimeLink is 9875 Widmer Rd, Lenexa,
Kansas 66215. PrimeLink rents approximately 560 square
feet of space from Johnson County Business Tech Center
for $ 600.00 per month. TechniLink is located at 7260
Spigno Place Agua Dulce, CA 91350
Item 3. Legal Proceedings
There is one legal proceeding pending to which the
Company is a party. The case, Securities and Exchange
Commission (Plaintiff) Vs. Andrew S. Pitt, Conectisys
Corp., Devon Investments Advisors, Inc., B & M Capital
Corp., Mike Zaman, and Smith Benton & Hughes, Inc.
(Defendants) Civil Case # 96 4164. The Case Alleges that
a fraudulent scheme was orchestrated and directed by the
defendants to engage in the sale and distribution of
unregistered shares of Conectisys by creating the
appearance of an active trading market for the stock of
Conectisys and artificially inflating the price of its
shares. In the suit the SEC seeks disgorgment of profits
from illegal activity and permanent injunctions from
violating securities laws. The SEC does not seek any
civil penalties from the Company.
The Company has brought suit against former directors
and officers of the Corporation. The suit is for the
improper issuance of stock to the former Directors and
Officers. The case is scheduled to be heard in the second
quarter of 1997 Item 4. Submission of Matters to a Vote
of Security Holders
Matters were submitted to a vote of security holders
during the Annual Meeting of Stockholders held on
November 15, 1996:
1. The election of 3 directors to serve until
the next annual meeting and until their successors are
duly elected.
2. To consider and ratify the amendment to the
Articles of Incorporation changing the name to Conectisys
Corporation.
3. To conduct such other business as may
properly come before the meeting.
All directors and matters were voted on and through a
majority of votes were accepted.
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters
When traded, the Company's shares are traded on the
NASDAQ electronic over-the-counter bulletin board. Bid
and asked quotations are reported on the bulletin board
under the symbol CNES. As of January 10, 1997, there
were three market makers quoting the stock. The
following table indicates the range of high and low
Ask/Bid information for the common stock for each fiscal
quarter since December 1, 1993: All prices have been
converted to reflect the 250-1 reverse stock split.
Quarter ending Bid Ask Bid Ask
High High Low Low
November 93 0 25.000 0 25.000
February 94 0 25.000 0 25.000
May 94 .250 25.000 .250 25.000
August 94 1.000 25.250 .250 25.000
November 94 11.250 37.500 1.000 5.000
February 95 13.125 15.000 10.000 13.250
May 95 12.875 19.000 1.000 5.250
August 95 9.000 19.500 .125 5.000
November 95 7.063 12.000 2.500 5.500
February 96 12.000 15.000 6.125 6.125
May 96 20.625 22.000 10.875 12.00
August 96 22.750 25.000 6.000 6.000
November 96 12.625 15.000 .500 4.000
Current January 27, 2.500 5.000
1996
The above quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not
represent actual transactions.
The Company has been advised by the Division of
Enforcement of the Securities and Exchange Commission
that the Division is conducting an investigation
concerning recent trading in the Company's common stock.
The price of the common stock had risen dramatically from
February 1996, through June 1996, despite the fact that
the Company continues to have operating losses and has
not received any material purchase commitments from
customers. The price of the stock fell when the
Securities and Exchange commission placed a temporary
restraining order on Smith Benton and Hughes, a principal
market maker at that time.
As of November 30, 1996, there were 551 shareholders of
record of the Company's common stock.
Holders of the common stock are entitled to receive
such dividends as may be declared by the Company's Board
of Directors. The Company has not declared any cash
dividends on its common stock since inception, and its
Board of Directors have no present intention of declaring
any dividends.
Item 6. Management's Discussion and Analysis or Plan of
Operation Results of operations
The Company realized a net loss on operations of
$2,238,933 for the year ended November 30, 1996, with $
111,163 of revenues. The Company in the year ending
November 30, 1995, had losses of $ 2,293,867 with no
revenues. Plan of operation
Loss on operations for the Company for the fiscal
year ended 1995 was $2,293,867 as compared to a loss of $
2,238,933 in fiscal 1996. This is a 2% reduction in
losses from the prior year. The Company will, over the
next 12 months, rely on the revenues from its
subsidiaries, collection of notes receivable and
additional funding through the sale of common stock or
loans colateralized through common stock. The decrease
in losses was a result of the start of revenues ($
111,163) and no additional acquisitions to the company.
Development for the subsidiaries products will be
ongoing throughout the year with no expected purchase of
significant equipment or plants at this time. There is no
expected significant change in the number of employees at
this time Pilot projects that were started in the third
quarter of 1996 should roll over into full production by
the end of the second quarter in fiscal 1997, generating
larger revenues in the beginning of the third quarter.
Additional pilot projects are in negotiations and are
expected to come online at the beginning of the second
quarter of 1997 Liquidity and capital Resources
As of November 30, 1996, the Company had a negative
working capital of $ 780,357, consisting of $ 60,027 in
current assets and $840,384 in current liabilities. The
Company had a negative working capital of $ 984,498 at
year ended November 1995, This is a 21% increase in
working capital compared to November 30, 1995. The
Company is dependent on achieving profitable operations
through its recent acquisitions and the collection of
outstanding receivable to continue as a going concern.
The independent auditors, for the Company have NOT
issued an opinion on the financial statements of the
Company which is qualified, subject to the ability of the
Company to continue as a going concern. The Company will
need financing to generate enough cash to satisfy it's
obligations
The Company had total assets of $ 2,396,711, at
November 30, 1996, and total liabilities of $ 1,531,933
The Company has a net operating loss carry forward of
approximately $ 3,454,392 available to offset future
taxable income, due to the fact that it is more likely
than not to realize this deferred tax asset, a valuation
allowance has been recorded. Shareholder equity is
$864,77 as compared to $ 1,674,169 year ended November
1995. The major portion of the loss in equity resulted
from the exercise of options. The options were issued in
1995 as part of a note to the company. The options were
exercised to relieve outstanding debt to the Company. The
difference between market price and the option price was
posted to interest expense. Costs of the Company are
being financed by loans collateralized by securities, and
sale of securities through private placements and
revenues.
Cash Flows
The Company had a net loss for the year ended
November 30, 1996, of $2,238,933 The cash used in the
operations toward this loss was $328,857 or 15% of the
loss. The largest area of the loss was the result of non-
cash transactions to the Company $ 519,789, (24%), was
the result of amortization and depreciation. The cash
used in investing was $ 61,875 (2%), of the total loss.
The Company received most of its cash, $ 413,316, from
financing activities.
Management's plans for correcting these deficiencies
include, the future sales of the licensed products and to
raise capital through the issuance of common stock to
assist in providing to the company the liquidity
necessary to retire the outstanding debt and meet
operating expenses. In the longer term, the Company plans
to achieve profitability through operations of the
subsidiaries.
Effect of inflation
Inflation did not have any significant effect on the
operations of the company during the fiscal year ending
November 30, 1996. Further, inflation is not expected to
have any significant effect on future operations of the
Company.
The Financial Accounting Standards Board (FASB) Impact
Statement of FASB standards No. 121 Accounting for
the impairment of long lived assets and for long lived
assets to be disposed of (SFAS No. 121) is effective for
financial statements for fiscal years beginning after
December 15, 1995. The new standard establishes new
guidelines regarding when impairment losses on long lived
assets, which include plant and equipment, certain
identifiable intangible assets and goodwill, should be
recognized and how impairment losses should be measured.
The Company does not expect adoption to have a material
effect on its financial position or result of operations
SFAS No 123 Accounting for stock based compensation
(SFAS No 123) Issued by the FASB is effective for
specific transactions entered into after December 15,
1995. While the disclosure requirements of SFAS No 123
are effective for financial statements for fiscal years
beginning no later than December 15, 1995. The new
standard establishes a fair value method of accounting
for stock based compensation plans and for transactions
in which an entity acquires goods and services from non-
employees in exchange for equity instruments. At the
present time, the Company has not determined if it will
change its accounting policy for stock based compensation
or only provide the required financial statement
disclosures. As such, the impact on the Company's
financial position and results of operation is currently
unknown
Item 7. Financial Statements
Financial statements are Unaudited and included
herein beginning on page F1 and are incorporated herein
by this reference.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
In April 1996 the Company chose to dismiss Cordovano
& Co. and engaged BDO Seidman LLP, Los Angeles, Ca. The
dismissal was at the recommendation and approval of the
Company's Board of Directors. There were no
disagreements with the former accountants on any matter
or accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a) of the
Exchange Act Directors and Officers
The Directors and Officers of the corporation, all of
whose terms will expire at the next annual meeting of the
shareholders, or at such time as their successors shall
be elected and qualified, are as follows:
Names Position
Robert A. Spigno Chief Executive Officer,
President,
and Chairman of the Board
Richard Dowler Chief Financial Officer and
Director
Patricia A. Spigno Secretary, Treasurer and
Director
Robert A. Spigno, President and Chief Executive Officer,
Director
Robert A. Spigno, age 42, has been Chief Executive
Officer, President and Chairman of the Board of the
Company since August 1995. Prior thereto, Mr. Spigno
received his General Contractors license from the State
of California in 1978, and then ventured out to the Home
Building Industries as a sole proprietor. In 1989, he
formed a California corporation named S.W. Carver
Corporation, which Mr. Spigno served as, President and
Chairman of the Board since 1989.
Richard Dowler, Director, Chief Financial Officer
Controller
Richard Dowler, age 36, is currently the Chief
Financial Officer and Director of Operations for the
Company, serving in such positions since August 1995.
Prior to this he was the Director of Operations for S.W.
Carver Corp. for five years.
From 1986 to 1990, Mr. Dowler was General Manager
for a construction firm, overseeing the estimating,
purchasing and accounting departments. Mr. Dowler has
been directly responsible for up to eight projects
running simultaneously with over one hundred fifty
employees with budgets of over $ 1,000,000 each.
Patricia A. Spigno, Director, Secretary and Treasurer
Patricia A. Spigno, age 38, has been Secretary,
Treasurer and a director of the Company since August
1995. Prior thereto, she has for nineteen years acted as
a key management person in the operation of privately
held companies. Since January 1990, she has acted as
Secretary and Treasurer of S. W. Carver Corp. Her
involvement in these and other companies has been from
the conceptual stage of the formation of the company
through startup and then on to the daily operations.
Her skills in the area of detailed accounting has aided
her in the duties of asset management. She has been
responsible for all aspects of accounting in a company
with over two hundred employees and an average annual
gross sales of several million dollars. Mrs. Spigno has
managed all banking related transactions including
specific account management, wire transfers, letters of
credit, and payroll. She has also managed all aspects of
escrow accounting. She currently holds an active
California Real Estate license. Mrs. Spigno is the spouse
of Robert A. Spigno.
Significant Employees
Don Wallace, age 52, is currently serving as
President & CEO of PrimeLink Inc. a subsidiary of
Conectisys Corp.
Prior to this he was President & CEO of Arcom Control
Systems Inc., Kansas City, MO. from September 1991, to
November 1995.
Mr. Wallace was responsible to British ownership of
Arcom for complete operation. The owner of Arcom is a
publicly traded company with total sales of $250 million.
Achieved sales in 1995 of $6 million with a profitable
operation. Arcom develops and markets various computer
based process control and data communications products
for the oil and gas industry. Mr. Wallace developed
relationships and alliances with major users and
manufacturers such as Williams Companies, Saudi Aramco,
Bailey Controls and Honeywell. He also developed
business relationships in Saudi Arabia and South America.
Karl Elliott, age 41, is currently Serving as President
and Chairman of the Board of TechniLink Technology
Manufacturing Inc. a subsidiary of Conectisys
Corporation. He has served in this capacity since
February 1995. Prior to this, from November 1994 to
February 1995 he owned a sole proprietorship providing
control system design services. From October 1988 to
March 1995 He served as the MIS Manager/ Systems
Integration Manager for Valve Systems and Controls, A
Crane Company.
Responsibilities included implementation of the MIS
System. The system is an IBM RISC 6000 using Sysbase
RDMS. Software was developed using AIX (UNIX) and SQL.
The system supports all aspects of the four district
offices and one hundred plus employees. Other
accomplishments include the creation of Systems
Integration Division. Products that came out of this
division 2 wire base field networks, Pole Top RTU and the
Universal Network Manager (UNM). The UNM is a STE
based 16 port multiple protocol communication
controller
Item 10. Executive Compensation
Renumeration
Cash renumeration accrued for services in all
capacities rendered to the Company ended November 30,
1996, to all directors and officers as a group was as
follows: Name of individual Capacities in Cash or
cash
equivalent or number ofpersons in which served forms of
remuneration
in group
Robert A. Spigno CEO/President $ 62997.50
All officers and directors
as a group (three persons) $ 148529
see notes (1)(2)(3)
The Company has plans for profit sharing, insurance
and stock option plans for the benefit of its officer,
directors or other employees for fiscal year 1997, but
has not yet adopted any such programs. In 1994, the
Company established a compensatory benefit plan,
pursuant to which up to 20,000 shares of common stock may
be issued to persons that the Board of Directors deems
are owed some form of compensation for services to the
Company.
On December 4, 1995, the Company issued restricted
shares of its common stock to each of its executive
officers and directors as incentive for their prior
performance during the past year and in lieu of cash
compensation which they did not receive.
The following shares were issued:
104,165 restricted shares to Robert A. Spigno in
payment of $20,833 owed him.(1)
350,000 restricted shares to Robert A. Spigno as
incentive per director's agreement (1)
2,381 restricted shares to Richard Dowler in payment
of $8,333 owed him.
50,000 restricted shares to Richard Dowler as
incentive per director's agreement (2)
33,334 restricted shares to Patricia A. Spigno in
payment for $6,667 owed her.(3)
100,000 restricted shares to Patricia A. Spigno as
incentive per director's agreement (3)
(1) Subsequently the 104,165 and the 350,000 shares have
been returned to the Company's treasury by Mr. Spigno, in
June 1996, reducing the renumeration to him by
approximately $ 1,591,556
(2) Subsequently the 50,000 shares have been returned to
the Company's treasury by Mr. Dowler in June 1996,
reducing the renumeration to him by approximately
$175,000
(3) Subsequently the 33,334 and the 100,000 shares have
been returned to the Company's treasury by Mrs. Spigno in
June 1996, reducing the renumeration to her by
approximately $467,341
Stock Option Exercises and option values
Fiscal year end option values
Number of Unexercised Value of Unexercised, In
Option Shares at Fiscal the Money Options at
Year End Fiscal Year End
Name Exercisable Exercisable
Unexercisabe
unexercisable
Robert Spigno 1,331,195 0 $ 7,987,170 0
Patricia Spigno 500,000 0 $ 3,000,000 0
Richard Dowler 500,000 0 $ 3,000,000 0
Employment Contracts
On December 4, 1995, the Board of Directors approved
employment agreements with its executive officers (who
also constitute the Board of Directors) and the payment
of restricted stock to the officers for their past
services. These agreements are incorporated by reference
to the 10-K for the year ended November 30, 1995
Item 11. Security Ownership of Certain Beneficial Owners
andManagement
As of January 27, 1997, the Company had 2,775,729
outstanding shares of common stock. Each common share
entitles the holder to one vote on any matter submitted
to shareholders for approval. The Company has authorized
1,000,000 shares of Class A Preferred Stock, $1.00 par
value per share, of which 20,500 shares currently are
issued and outstanding. Preferred Class A stock has 100
to 1 voting rights. Also authorized are 1,000,000 shares
of Class B. Preferred Stock, $1.00 par value per share.
Class
B Preferred stock has conversion rights of 10 shares
common stock to 1 share Preferred Class B of which no
shares currently are issued and outstanding.
Beneficial Owners Owning Number Of Percentage
5% or more Shares of common
Stock
Karl E. Elliott 350,000 12.61%
Patricia A. Spigno (2) 28,805 1.04%
Robert A. Spigno (1) 355,426 12.80%
Masha Post Commercial Trading 229,962 8.28%
Donald I. & Elizabeth V. Wallace 350,000 12.61%
Claudia J. Zaman 355,368 12.80%
Frank Bellusci 260,000 9.37%
Security ownership of
Management
Richard Dowler 3,494 .13%
Patricia A. Spigno 28,805 1.07%
Robert A. Spigno 355,426 12.80%
Total Directors and 387,739 14%
Officers as a whole
Beneficial Owners Owning Number of
Percentage 5% or more shares of
Class A Preferred
Robert A. Spigno 20,500 100%
(1) Does not include 28,805 shares owned by Patricia
Spigno (spouse). The aggregate beneficially owned by
Robert A. Spigno
is Shares 384,231 (13.84%)
(2) Does not include 355,426 shares owned by Robert A.
Spigno (spouse). The aggregate beneficially owned by
Patricia A. Spigno is 384,231 Shares. (13.84%)
Item 12. Certain Relationships and Related Transactions
In February 1996, the Company's Board of Directors
authorized the purchase of a car for the use of its Chief
Financial Officer, Richard Dowler. The purchase price
was approximately $23,000, of which approximately $18,000
was financed by the Company. The Board of Directors also
determined that the vehicle would be maintained and
fueled in full by the Company.
In February 1996, the Company entered into an
equipment lease/purchase agreement with SWC. The lease
is for 11 months at a rate of $2,000 per month. The
Company has the right to purchase the leased right for
approximately $83,000. However, the lessor has the right
to revoke the purchase option at any time and for any
reason.
The engagement with Carver Accounting Services (CAS),
which is owned by Robert A. Spigno and Patricia A.
Spigno. CAS is to maintain the day to day accounting
needs of the company. CAS is included in the general and
administrative expenses.
Effective March 21, 1995, the Board of TechniLink
approved the purchase of a 1990 Ford Bronco from SWC for
$12,000. The note for the vehicle is at 10% interest
until March of 1998 No principal or interest has been
paid toward this note
Information concerning certain other related party
transactions are contained in response to Item 1 and 11
and which are incorporated herein by this reference.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
99.0 Financial statements
(b) During the Registrant's fiscal year ended
November 30, 1996, the registrant filed the
following current reports on Form 8-K:
8-K Dated November 1, 1996 Filed April 96
8-K Dated February 15, 1996 Filed May 96
8-K Dated June 26, 1996 Filed June 96
8-K Dated November 18, 1996 Filed November 96
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
CONECTISYS CORPORATION
Date: March 14, 1997 By /S/ Robert A.Spigno
Robert A. Spigno,
President
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the
Registrant and in the capacities and on the dates
indicated.
Signature Title Date
/S/Robert A Spigno Chairman of the Board, March 14,1997
(Robert A. Spigno) Chief Executive
Officer, President and
Director
/S/Richard Dowler Chief Financial Officer March 14,1997
(Richard Dowler)(Principal Financial
Officer and Principal
Accounting Officer),
and Director
/S/Patricia A Spigno Secretary, March 14,1997
(Patricia A. Spigno) Treasurer and Director
These financials are unaudited for the year ended November 30, 1996
<PAGE> 1
Conectisys Corporation and Subsidiaries
(A Development Stage Company)
Contents
Consolidated financial statements
Balance sheets F-2 to F-3
Statements of operations F-4
Statements of shareholders equity F-5 to F-7
Statements of cash flows F-8 to F-9
Summary of accounting policies F-10 to F-12
Notes to consolidated financial statements F-13 to F-21
<PAGE> 2
Consolidated Balance Sheets
November 30,
1996 1995
Assets
Current assets
Cash and cash equivalents $ 24,495 $ 1,911
Accounts receivable - trade
(net of allowance for
doubtful accounts of $1,668) 35,532 -
Stock subscription receivable
(received January 1996) - 20,000
--------------------------------
Total current assets 60,027 21,911
Notes receivable, net (Note 4) 446,625 466,625
Interest receivable, net (Note 4) 7,947 7,947
Property and equipment, net (Note 5) 150,370 121,734
Other assets
Licenses and technology, net of accumulated
amortization of $481,528 in 1996
(Notes 1 and 9) 1,727,242 2,178,430
Deposits 4,500 4,500
-------------------------------
Total other assets 1,731,742 2,182,930
--------------------------------
$2,396,711 $2,801,147
See summary of significant accounting policies and notes to consolidated
financial statements.
<PAGE> 3
Balance sheet Continued
November 30,
1996 1995
Liabilities and Shareholders Equity
Current liabilities
Accounts payable $338,822 $ 42,933
Accrued compensation (Note 10) 136,181 53,295
Notes payable (Notes 3 and 6)
Related party - 456,235
Other 247,719 441,824
Other current liabilities 117,662 12,122
-----------------------------
Total current liabilities 840,384 1,006,409
Long-term liabilities (Note 6)
Notes payable
Related 527,830 -
Other 163,719 -
-----------------------------
Total long-term liabilities 691,549 -
Minority interest - 120,569
Commitment (Note 9)
Stockholders equity (Note 7)
Preferred stock - Class A, 1,000,000 shares authorized,
$1.00 par value; 20,500 and 16,345 issued and
outstanding in 1996 and 1995 20,500 16,345
Convertible preferred stock - Class B,
1,000,000 shares authorized, $1.00 par value;
-0- issued and outstanding - -
Common stock, 250,000,000 shares authorized,
no par value; 2,775,729 and 2,291,387 shares
issued and outstanding in 1996 and 1995 6,457,221 5,031,834
Accumulated deficit during development stage (5,612,943) (3,374,010)
------------------------------------
Total shareholders' equity 864,778 1,674,169
-------------------------------------
$2,396,711 $2,801,147
See summary of significant accounting policies and notes to consolidated
financial statements.
<PAGE> 4
Statement of Operations
December 1, 1990
(Inception) through
Years Ended November 30, November 30,
1996 1995 1996
Revenues $111,163 $ - $ 111,163
Costs of goods sold 86,977 - 86,977
-------------------------------------------------
Gross profit 24,186 - 24,186
-------------------------------------------------
Operating expenses
General and administrative
(Note 3) 1,715,009 1,155,608 2,870,617
Bad debt write-offs (Note 4) 118,611 1,115,286 1,233,897
-------------------------------------------------
Loss from operations (1,809,434) (2,270,894) (4,080,328)
Interest income 98,356 5,093 101,048
Interest expense (648,424) (29,244) (677,668)
Minority interest 120,569 1,178 121,747
-------------------------------------------------
Net loss $(2,238,933) $(2,293,867) $(4,535,201)
-------------------------------------------------
Weighted average
shares outstanding 2,608,613 1,984,829
-------------------------------------------------
Net loss per share $ (.86) $ (1.16)
See summary of significant accounting policies and notes to consolidated
financial statements.
<PAGE> 5 For easier viewing View in Courier new 7.5 font
Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Accumulated
Preferred Stock Deficit During
Class A
Common Stock Development
Shares Amount Shares Amount Stage Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 1, 1990 (re-entry
development stage) - $ - 212,188 $1,042,140 $ (1,042,140) $ -
Shares issued in exchange for:
Cash, May 31, 1993 - - 20,000 1,000 - 1,000
Capital contribution, May 31, 1993 - - 40,000 515 - 515
Services, March 26, 1993 - - 40,000 500 - 500
Services, March 26, 1993 - - 24,000 600 - 600
Net (loss) for the year ended
November 30, 1993 - - - - (5,459) (5,459)
Balance, November 30, 1993 - - 336,188 1,044,755 (1,047,599) (2,844)
Shares issued in exchange for:
Services, May 1, 1994 - - 48,000 3,000 - 3,000
Cash, September 1, 1994 - - 355,426 23,655 - 23,655
Services, September 15, 1994 - - 173,986 11,614 - 11,614
Cash, September 26, 1994 - - 60,000 15,000 - 15,000
Cash, October 6, 1994 16,345 16,345 - - 16,345
Cash, September and October, 1994 - - 26,400 33,000 - 33,000
Net (loss) for the year - - - - (32,544) (32,544)
Balance, November 30, 1994 16,345 16,345 1,000,000 1,131,024 (1,080,143) 67,226
</TABLE>
<PAGE> 6 For easier viewing View in Courier new 7.5 font
Statement of Shareholders' Equity (Continued)
<TABLE>
<CAPTION>
Preferred Stock
Class A
Common Stock Accumulated
Shares Amount Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Shares issued in exchange for:
Cash, February 13, 1995 - - 23,200 232,000 - 232,000
Debt repayment, February 13, 1995 - - 40,800 408,000 - 408,000
Debt repayment, February 20, 1995 - - 95,562 477,810 - 477,810
Acquisition of assets, CIPI February 1995 - - 575,000 1,950,000 - 1,950,000
Acquisition of assets, April 5, 1995
(Note 10) - - 300,000 - - -
Cash and services, April and May 1995 - - 320,000 800,000 - 800,000
Cash, June 1, 1995 - - 10,000 30,000 - 30,000
Acquisition of assets and services,
September 26, 1995 - - 80,000 200,000 - 200,000
Cash, September 28, 1995 - - 825 3,000 - 3,000
Acquisition of assets, September 1995 - - 700,000 1,750,000 - 1,750,000
Return of assets, CIPI September 1995 - - (554,000) (1,950,000) - (1,950,000)
Net loss for the year - - - - (2,293,867) (2,293,867)
Balance, November 30, 1995 16,345 16,345 2,591,387 5,031,834 (3,374,010) 1,674,169
</TABLE>
See summary of significant accounting policies and notes to consolidated
financial statements.
<PAGE> 7 For easier viewing View in Courier new 7.5 font
Statement of Shareholders' Equity (Continued)
<TABLE>
<CAPTION>
Preferred Stock
Class A
Common Stock Accumulated
Shares Amount Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Shares issued in exchange for (Note 7):
Cash, February, 1996 - - 27,778 125,000 - 152,779
Debt repayment, February, 1996 - - 200,000 639,779 - 612,000
Services, February, 1996 - - 63,199 205,892 - 205,892
Cash, March, 1996 - - 3,571 25,000 - 25,000
Shares returned and canceled, March, 1996 - - (300,000) - - -
Services, April, 1996 - - 267 2,069 - 2,069
Services, September, 1996 4,155 4,155 11,727 36,317 - 40,472
Services, October, 1996 - - 130,800 327,000 - 327,000
Debt repayment, November, 1996 - - 47,000 64,330 - 64,330
Net loss for the year - - - - (2,238,933) (2,238,933)
Balance, November 30, 1996 20,500 $20,500 2,775,729 $6,457,221 $(5,612,943) $ 864,778
</TABLE>
<PAGE> 8
Statement of Cash Flows
Increase (Decrease) in Cash December 1, 1990
(Inception)through
Years Ended November 30, November 30,
1996 1995 1996
Cash flows from operating activities:
Net loss $(2,238,933) $(2,293,867) $ (4,535,201)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Stock issued for services 575,433 907,000 1,482,433
Stock issued for interest 446,640 - 446,640
Provision for bad debt write-offs 118,611 855,875 974,486
Minority interest (120,569) (1,178) (121,747)
Depreciation and amortization 519,789 946 520,735
(Increase) decrease in assets:
Accounts receivable (38,862) 419 (38,443)
Stock subscription receivable 20,000 - 20,000
Accrued interest receivable (95,281) (6,283) (103,647)
Deposits - (1,500) (4,500)
Increase (decrease) in liabilities:
Accounts payable 295,889 30,027 338,822
Accrued compensation 82,886 53,295 136,181
Other current liabilities 105,540 7,605 117,662
- -------------------------------------------------------------------------------
Net cash used in operating activities (328,857) (447,661) (786,143)
Cash flows from investing activities:
Increase in notes receivable (Note 4) - (1,036,843) (1,322,500)
Costs of licenses and technology (30,340) (3,252) (33,593)
Purchase of equipment (31,535) (3,909) (57,970)
- -------------------------------------------------------------------------------
Net cash used in investing activities (61,875) (1,044,004) (1,414,062)
<PAGE> 9
Statement of Cash Flows (continued)
December 1, 1990
(Inception) through
Years Ended November 30, November 30,
1996 1995 1996
Cash flows from financing activities:
Common stock issuance 150,000 338,000 560,655
Preferred stock issuance - - 16,345
Proceeds from debt, other 155,203 785,634 1,482,837
Proceeds from debt, related 150,309 56,235 206,544
Payments on debt, other (8,951) - (8,951)
Payments on debt, related (33,245) - (33,245)
Contributed capital - - 515
- -------------------------------------------------------------------------------
Net cash provided by
financing activities 413,316 1,179,869 2,224,700
- -------------------------------------------------------------------------------
Net increase (decrease) in cash 22,584 (311,796) 24,495
Cash, beginning of year 1,911 313,707 -
- -------------------------------------------------------------------------------
Cash, end of year $ 24,495 $ 1,911 $ 24,495
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 41,874 $ - $ 41,874
Taxes 800 850 1,650
- -------------------------------------------------------------------------------
Noncash financing activities:
Common stock issued in exchange for:
Property and equipment $ 35,362 $ 95,569 $ 130,931
Licenses and technology $ - $ 1,770,000 $ 1,770,000
Repayment of debt $ 257,469 $ 885,810 $ 1,107,917
Services and interest $1,017,918 $ 907,000 $ 1,936,786
See summary of significant accounting policies and notes to consolidated
financial statements.
<PAGE> 10
Summary of accounting Policies
Basis of The accompanying consolidated financial
Presentation statements include the transactions of
Conectisys Corporation ( the Company )
(formerly BDR Industries, Inc. and formerly
Coastal Financial Corp.) and its 80% owned
subsidiaries TechniLink, Inc. and PrimeLink,
Inc. All material intercompany transactions
and balances have been eliminated in the
accompanying consolidated financial statements.
Development The Company returned to the development stage
Stage in accordance with SFAS No. 7 on December 1,
Company 1990 and during the fiscal year ended November
30, 1995, the Company completed two mergers and
is in the process of developing its technology
and product lines.
Cash For financial accounting purposes and the
Equivalents statement of cash flows, cash equivalents
include all highly liquid debt instruments with
original maturities of three months or less.
Property and Property and equipment are recorded at cost.
Equipment Depreciation is computed over the estimated
useful lives of the assets using the straight-
line method. Office equipment is estimated to
have a useful life of 5-7 years.
Net Loss Net loss per common share is based on the
Per Common weighted average number of common and common
Share equivalent shares outstanding for the periods
presented. Common equivalent shares
representing the common shares that would be
issued on exercise of convertible securities
and outstanding stock options and warrants
reduced by the number of shares which could be
purchased from the related exercise proceeds
are not included since their effect would be
antidilutive.
Stock Issued Shares of the Company s no par value common
for Noncash stock issued in exchange for goods or services
Consideration are valued at the cost of the goods or services
received or at the market value of the shares
issued depending on the ability to estimate the
value of the goods or services received.
<PAGE> 11
Summary of accounting Policies
Estimates The preparation of the 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.
Licenses The cost of acquiring licenses rights are
Agreements capitalized and amortized over the shorter of
the estimated useful life of the license or the
term of the license agreement. The licenses
are being amortized over a period of five
years. At November 30, 1996, the Company
generated some revenues from the licenses it
acquired. Although management has developed a
plan to develop and market the technology, it
is reasonably possible that the estimates of
expected future gross revenue will be reduced
significantly in the near term due to
competitive pressure. Consequently, the
carrying amount of capitalized licenses at
November 30, 1996 may be reduced materially in
the near term. The carrying value of the
licenses is subject to periodic evaluation and
if necessary the amounts will be written down
to their net realizable value.
Technology Deferred technology costs include capitalized
product development and product improvement
cost incurred after achieving technological
feasibility and are amortized over a period of
five years.
Income Taxes The Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, which
requires the Company to recognize deferred tax
assets and liabilities for the expected future
tax consequences of events that have been
recognized in the Company s consolidated
financial statements or tax returns. Under
this method, deferred tax liabilities and
assets are determined based on the difference
between the financial statement carrying
amounts and tax basis of assets using the
enacted rates in effect in the years in which
the differences are expected to reverse.
<PAGE> 12
Summary of accounting Policies
New Accounting Statement of Financial Accounting Standards No.
Pronouncements 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be
Disposed Of (SFAS No. 121) issued by the
Financial Accounting Standards Board ("FASB") is
effective for financial statements for fiscal
years beginning after December 15, 1995. The
new standard establishes new guidelines
regarding when impairment losses on long-lived
assets, which include plant and equipment,
certain identifiable intangible assets and
goodwill, should be recognized and how
impairment losses should be measured. The
Company does not expect adoption to have a
material effect on its financial position or
results of operations.
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123) issued by the FASB is
effective for specific transactions entered
into after December 15, 1995, while the
disclosure requirements of SFAS No. 123 are
effective for financial statements for fiscal
years beginning no later than December 15,
1995. The new standard establishes a fair
value method of accounting for stock-based
compensation plans and for transactions in
which an entity acquires goods and services
from nonemployees in exchange for equity
instruments. At the present time, the Company
has not determined if it will change its
accounting policy for stock based compensation
or only provide the required financial
statement disclosures. As such, the impact on
the Company s financial position and results of
operations is currently unknown.
Fair Value The carrying amounts of financial instruments
of Financial including cash and cash equivalents, accounts
Instruments receivable, stock subscription receivable,
accounts payable, accrued compensation and
notes payable other, approximate fair value
because of the short maturity of these
instruments. It is not practicable to estimate
the fair value of the notes payable related
party due to their related party nature.
Reclassifications For comparability purposes, certain prior year
accounts have been reclassified to conform with
current year presentation.
<PAGE> 13
Notes to Consolidated Financials
1. Business Nature of Organization
The Company was incorporated under the laws of Colorado on
February 3, 1986, to analyze and invest in business
opportunities as they may occur.
Effective December 1, 1994, the Company agreed to acquire
all of the outstanding shares of Progressive
Administrators, Inc.("PAI") in exchange for 300,000 shares of
its no par value common stock. The transaction was to be
accounted for as a purchase transaction. The shares to be
issued by the Company were to be restricted securities
within the meaning of Rule 144 of the Securities Act of
1933, as amended. Accordingly, PAI would have been a wholly-
owned subsidiary of the Company as of December 1, 1994. PAI
was formed in the state of Colorado on September 14, 1994
and is engaged in the records storage business.
On April 24, 1995 the PAI agreement was terminated prior to
the exchange or issuance of any stock and a promissory note
was issued by PAI to the Company in the amount of $244,000 to
reimburse the Company for cash advances. See details of
receivable at Note 4.
Effective December 1, 1994, the Company also agreed to
acquire all of the outstanding shares of Creative Image
Products, Inc.(CIPI) in exchange for 575,000 shares of its
no par value common stock. The shares were issued in
February of 1995. The shares issued by the Company were
restricted securities within the meaning of Rule 144 of the
Securities Act of 1933, as amended. Accordingly, CIPI was a
wholly-owned subsidiary of the Company as of December 1,
1994. CIPI was formed in the state of Kansas on April 29,
1994 and is engaged in the insecticide business and through
its wholly owned subsidiary, ADA Signature Distributors,
Inc., the sign manufacturing business.
During 1995, the Company s only operations consisted of
CIPI s manufacturing of organic insecticides prior to its
disposal. On September 28, 1995 the Company entered into an
agreement to unwind the acquisition
<PAGE> 14
1. Business Nature of Organization (Continued)
(Continued)
of CIPI. CIPI issued a promissory note to the Company in
the amount of $1,302,500 to reimburse the Company for cash
advances. In accordance with the agreement, the shares issued
to CIPI were exchanged for all shares issued to the
company. The shares outstanding carry no value on the
financial statements.
Change of Control
During the year ended November 30, 1994, the Company issued a
combination of voting common and voting preferred shares to
Black Dog Ranch, LLC, an unrelated party, sufficient to
transfer control of the Company to Black Dog Ranch, LLC.
Accordingly, the Company is a subsidiary of Black Dog Ranch,
LLC. In connection with the transfer of control, the Company
changed its name to BDR Industries, Inc. During the year
ended November 30, 1995 the Black Dog Ranch, LLC sold its
interest in the Company to Robert Spigno who now has the
controlling interest in the Company. BDR Industries, Inc.
then changed its name to Conectisys Corporation.
Formation of Subsidiary
Effective June 24, 1994, the Company formed a wholly-owned
subsidiary, CFC Capital Corporation. The entity is
currently inactive.
Acquisition of Privately Held Companies
In September 1995, the Company acquired 80% of the
outstanding stock of TechniLink, Inc. a California
Corporation, and 80% of the outstanding stock of PrimeLink,
Inc., a Kansas corporation, in exchange for an aggregate of
200,000 shares of the Company s common stock. The
acquisitions were accounted for as purchases. Both PrimeLink
and TechniLink are start-up companies with no material
operating activity and therefore no proforma statements of
operations were provided for 1995.
<PAGE> 15
1. Business Acquisition of Privately Held Companies
(Continued) (Continued)
The acquisitions of these companies occurred in connection
with the signing of the license agreements discussed in Note
9. The Company issued a total of 700,000 shares of common
stock and assumed a loan of $400,000 to acquire the licenses
and the Corporations. The only major asset acquired from
PrimeLink and TechniLink was the license and technology. The
stock issued was valued at $1,750,000, the fair market value
of common stock issued, and is included in licenses and
technology on the balance sheet.
2. Going As of November 30, 1996 and 1995, the Company
Concern has a deficiency in working capital of $780,357
and $984,498, respectively and has incurred operating
losses since its return to the development stage, which
raise substantial doubt about the Company s ability to
continue as a going concern.
Management s plans for correcting these deficiencies include
the future sales of their newly licensed products and to
raise capital through the issuance of common stock to assist
in providing the Company with the liquidity necessary to
retire the outstanding debt and meet operating expenses. In
the longer term, the Company plans to achieve profitability
through the operations of its newly acquired subsidiaries.
The consolidated financial statements do not include any
adjustments that might result from the outcome of the
uncertainty.
3. Related The Company utilized office space on a rent free basis
from an Party officer of the Company during all periods
presented, the value of Transactions these transactions was
immaterial.
The Company issued 2,494 and 260,000 shares of common stock
during the years ended November 30, 1996 and 1995,
respectively, to a related party in exchange for services.
The services were valued at $17,538 and $534,961,
respectively, which approximates the fair market value of the
shares issued.
The CEO of the Company exercised 28,805 of his stock options
at an exercise price of $0.20 per share. The Company also
issued the CEO 4,155 shares of Preferred Class A stock for
services rendered.
<PAGE> 16
Related Party The Company also leases office space from S.W. Carver
Transactions Corporation, a company owned by a major shareholder of the
(continued) Company. The lease is for a Transactions period of twelve
months at a rate of $2,000 per month. The Company also pays
S.W. Carver Corporation for bookkeeping services which are
included in general and administrative expenses. Also the
Company has notes payable to S.W. Carver Corporation, see
Note 6.
Rent expense for the years ended November 30, 1996 and 1995
were $24,000 and $6,000, respectively.
4. Notes During the year ended November 30, 1995 and
Receivable 1994, the Company advanced to CIPI $1,302,500.
This advance is evidenced by a note payable to the Company,
due on demand or October 1, 1998, whichever is first.
Interest on the note is at the rate of ten percent per year.
As of November 30, 1996 and 1995, the Company has provided
an allowance of $855,875 against this receivable. Interest
receivable on this note has also been reserved accordingly.
5. Property Property and equipment consisted of the and following:
Equipment
November 30, 1996 1995
Office equipment $141,422 $124,254
Furniture and fixtures 14,369 -
Vehicles 35,362 -
- -------------------------------------------------------------------------------
191,153 124,254
Less: accumulated depreciation (40,783) (2,520)
- -------------------------------------------------------------------------------
Total $ 150,370 121,734
Depreciation expense for the years ended November 30,
1996 and 1995, totaled $38,263 and $946, respectively.
<PAGE> 17
6. Notes The notes payable consisted of the following:
Payable
November 30, 1996 1995
Notes payable to S.W. Carver
Corporation (a related party)
unsecured, due on demand at
10% interest, unpaid balance
payable on February 15, 1998. $ 519,830 $ 456,235
Note payable to Devon Investment
Advisors unsecured, due on demand at
10% interest, unpaid balance payable
on December 1, 1996. 241,824 441,824
Note payable to Black Dog Ranch, LLC
unsecured, due on demand at 8%
interest, unpaid balance on
January 15, 1998 130,203 -
Note payable to Investor s Financial 25,000 -
Note payable to Ford Motor Credit,
secured by vehicle, interest
at 12.9%, unpaid balance on
February 25, 1999 14,411 -
Note payable to Robert Spigno
(related party) unsecured, due
on demand at 10% interest,
unpaid balance on
February 15, 1998 8,000 -
-------------------------------------------------------------
Total notes payable 939,268 898,059
Less: current portion (247,719) (898,059)
----------------------------------------------------------
Long-term portion $691,549 $ -
<PAGE> 18
6. Notes Long-term debt maturity consist of the
Payable following as of November 30, 1996:
(Continued)
Amount
1997 $247,719
1998 689,735
1999 1,814
---------------------------------------------------
Total notes payable $ 939,268
7. The Company is authorized to issue 50,000,000
Shareholders shares of $1.00 par value preferred stock, no
Equity liquidation preference. One million of the preferred
shares are designated as Class A preferred shares which have
super voting power wherein each share receives 100 votes and
has anti-dilution rights. One million of the preferred shares
are designated as Class B preferred shares which have
conversion rights wherein each share may be converted into
ten shares of common stock.
In February, 1996, the Company entered into an investment
banking agreement for a period of two years. In consideration
for services the Company granted the investment banker
options to purchase 1,000,000 shares at $2.50 per share, the
fair value at the date of grant. In October of 1996 the
Company issued the investment banker 130,800 shares of
common stock for services rendered. These shares resulted in
the Company recording consulting fees of $327,000 which is
the fair value of the stock at the date issued.
In February and November of 1996, the Company issued 200,000
and 47,000 shares, respectively, of common stock in
settlement of outstanding obligations, which included
principal and interest. The total debt reduced amounted to
$264,330 and interest of $412,000 for a total of $704,109.
The value of the transaction was based upon the value of the
stock on that date.
In February 1996, the Company issued 63,199 shares of common
stock to various consultants and to an officer of the Company
for services rendered. The transactions were recorded at a
total of $205,892 which approximates the fair value of the
stock given at that date.
<PAGE> 19
7. In February 1996, the Company and Hollywood
Shareholders Trenz, Inc. ( HTNZ ) mutually agreed to
Equity terminate the ADA Sign Purchase Agreement and
(Continued) Agreement for the Purchase of Common Stock
between them dated March 23, 1995 and to return the shares
transferred pursuant to that agreement. As a result, the
Company returned to HTNZ 600,000 shares of HTNZ common
stock, which is valued at zero, and HTNZ returned to the
Company 300,000 shares of the Company s common stock.
On September 3, 1996, 1,727 shares of common stock were
issued to Micro Automation Development (MAD) for services
provided to TechniLink. The transaction was recorded at
$4,317, which approximates the fair value of the stock given
at that date.
On September 12, 1996, the Company issued to Internet Stock
Guide Inc., 10,000 shares of common stock for payment of an
advertising contract on there World Wide Web and consulting
services. The transaction was recorded at $32,000 which
approximates the fair value of the stock given at that date.
On September 23, 1996, the Company issued 4,155 shares of
Preferred stock to Robert Spigno, President of Conectisys
Corp. for the reduction of compensation accrued to Mr.
Spigno.
8. Income Deferred income taxes consisted of the following:
Taxes November 30, 1996 1995
-------------------------------------------------------------
Deferred tax asset, net operating
loss carry-forward $3,454,392 $450,000
Deferred tax liability - -
Valuation allowance (3,454,392) (450,000)
-------------------------------------------------------------
Net deferred taxes $ - $ -
The valuation allowance offsets the net deferred tax
asset for which there is no assurance of recovery.
<PAGE> 20
9. Commitments Employment Agreements
and
Contingencies The Company has entered into five employment agreements with
key individuals, the terms of the agreements are as follows:
1) The President and CEO of PrimeLink entered into an
agreement dated September 15, 1995 for a period of three
years. He is entitled to receive a base salary of $90,000
per year and a bonus equal to 15% of the net profits before
taxes earned by PrimeLink, Inc. He is also granted an
option to purchase up to 250,000 shares of the Company s
restricted common stock at a price equal to 50% of the
average market value of the stock on the date of purchase.
2) The President and CEO of TechniLink entered into an
agreement dated September 13, 1995 for a period of three
years. He is entitled to receive a base salary of $90,000
per year and an annual bonus equal to 15% of the net profits
before taxes earned by TechniLink, Inc. He is also granted
an option to purchase up to 250,000 shares of the Company s
restricted common stock at a price equal to 50% of the
average market value of the stock on the date of purchase.
3) The President and CEO of Company entered into an
agreement dated October 2, 1995 for a period of three years
and he is entitled to receive a base salary of $125,000 per
year and an annual bonus of 15% of the Company s pretax net
income. He is also granted an option to purchase up to
500,000 shares of the Company s restricted common stock at a
price equal to 60% of the average market value at the date
of purchase. 4) The Chief Financial Officer of Company
entered into an agreement dated October 2, 1995 for a period
of three years and he is entitled to receive a base salary
of $50,000 per year and an annual bonus of 1% of the
Company s pretax net income. He is also granted an option to
purchase up to 500,000 shares of the Company s restricted
common stock at a price equal to 60% of the average market
value at the date of purchase. 5) The Secretary and
Treasurer of Company entered into an agreement dated
October 2, 1995 for a period of three years and he is
entitled to receive a base salary of $40,000 per year and an
annual bonus of 2% of the Company s pretax net income. She
is also granted an option to purchase up to 500,000 shares
of the Company s restricted common stock at a price equal to
60% of the average market value at the date of purchase.
<PAGE> 21
9. Commitments License Agreements
and
Contingencies The Company has entered into License agreements with the
(Continued) Presidents of both PrimeLink and TechniLink. The license
agreements were entered into on September 20, 1995, in
connection with the acquisition of PrimeLink and TechniLink
(see Note 1), and are for a period of five years. As
consideration for these license agreements the Company
issued each licensee 250,000 shares of its restricted common
stock and will pay the licensee a royalty of 5% of net sales
of the applicable product. In addition, in the event of the
sale of the license or the acquisition or merger of
TechniLink or PrimeLink, a royalty sum of 20% of the sales
price of the license shall be paid to the licensee, the sales
price shall not be less than $1,500,000. The licenses were
valued at the fair market value of the stock issued to obtain
the licenses.
10. Major For the year ended November 30, 1996, the
Customers Company had sales to two customers comprising
86.0% and 10.4%, respectively of total sales. Accounts
receivable from these customers at November 30, 1996 were
$30,381 and $5,151, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from SEC form 10-K year ended November 30,1996 and is qualified
in its entirety by reference to such financial statement
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 24495
<SECURITIES> 0
<RECEIVABLES> 1339700
<ALLOWANCES> 857543
<INVENTORY> 0
<CURRENT-ASSETS> 60027
<PP&E> 191153
<DEPRECIATION> 40783
<TOTAL-ASSETS> 2396711
<CURRENT-LIABILITIES> 840384
<BONDS> 0
0
20500
<COMMON> 6457221<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2396711
<SALES> 111163
<TOTAL-REVENUES> 111163
<CGS> 86977
<TOTAL-COSTS> 1920597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 118611
<INTEREST-EXPENSE> 648424
<INCOME-PRETAX> (2238133)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2238933
<EPS-PRIMARY> (.86)
<EPS-DILUTED> (.86)<F2>
<FN>
<F1>Shares are the weighted average of shares for the year ended
November 30, 1996
<F2>Due to the Net Loss all options and warrants are
considered anti-dilutive
</FN>
</TABLE>
