U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d)of the
Securities Exchange Act of 1934
For the year ended November 3, 1997.
[ ] Transition report under section 13 or 15(d) of the
Securities Exchange Act of 1934
[no fee required]
Commission File Number 33-3560D
CONECTISYS CORP.
(Name of small business issuer in its charter)
Colorado 84-1017107
(state or other jurisdiction (I.R.S. Employer
Incorporation or Organization Identification No.)
7260 Spigno Place 91350
Agua Dulce, California
(Address of principal (Zip Code)
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(b) 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.
[X]Yes[ ]No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B Contained herein, and 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-QSB. [X]
State Issuer's revenues for it's most recent fiscal year: $ 380,642
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold on
Feburary 17, 1998 was $ 7,052385. For the purpose 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 November 30, 1997 was 4,677,268
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, and is in the development stage.
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 and
500,000 shares of common stock for licenses and technology. 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, re-routing 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 to entered the market with a vending machine product.
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 ofexisting 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.
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, 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 the internet. PrimeServer is located at PrimeLink's California Office.
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.
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.
In April 1997, PrimeLink signed a lease agreement with Enogex Inc., a subsidiary
of OEG Energy Group. PrimeLink will provide the equipment to Enogex for the
purpose of wireless data gathering from remote gas wells. The lease is
for an initial 26 pilot sites. After 45 days of the pilot, the lease calls
for an additional 224 units to be installed within 18 months. The lease will
continue for an additional 48 months. This agreement was terminated in October
of 1997
In late April 1997 Primelink signed a Development and Marketing Alliance with
Williams Wireless. The alliance provides for joint development of a wide range
of products and cross licensing of the technology. This agreement provides
Primelink with immediate entry into the fastest growing new wireless market in
the country: data gathering and remote monitoring.
In May 1997, PrimeLink received an order for 150 of its TransComm units from
Corn Dancer Inc. to be utilized in their water vending machines. A portion of
the purchase order is to develop host software exclusive for the needs of Corn
Dancer Inc.
In September 1997 Consolidated Edison (ConEd)of New York placed an order with
PrimeLink for the monitoring of its Steam operations in the Manhattan Area.
Primelink beleives that this initial order with ConEd will lead to the
introduction of its product into other markets within the
Consolidated Edison organization (i.e. electric, & gas meter reading
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
had 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 was $ 513,311 as of November 30, 1996. In October
1997 all Notes to S.W. Carver and Robert Spigno were paid through the
issuance of Conectisys Common Stock Restricted under Rule 144
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 were returned to the transfer agent in October 1997
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 sent back to the
transfer agent to be canceled
On August 20,1996 300,000 shares of Rule 144 common stock
were issued to Savoia Corporation, for a loan secured by the
shares. The shares were returned, when funding could not be
acquired. These shares were returned to the transfer agent
in October 1997 and canceled
On December 10, 1996, The Company signed a promissory note to the order
of Black Dog Ranch LLC (BDR). This note was rewritten in June 1997 and reduced
to $ 171,396.50 to properly reflect the amount that the company received from
the sale of stock that BDR owned.
On March 26, 1997, the Company agreed to issue Noel Guardi 4,550 shares of
its restricted common stock for partial payment of services rendered in
November 1997 Mr. Guardi was authorized to receive an additional 4550 share
of restriced common stock for services.
On April 4, 1997, Conectisys issued 16,000 shares of restricted common
stock to settle its law suit with the former directors Case # 96 cv 2585
On July 10, 1997 , Conectisys issued 30,000 shares to James Sharmat for a
portion of his attorney fees
On July 14, 1997, the Company issued 300,000 shares of
restricted common stock under rule 144 to an investor in a
private placement
On August 11, 1997 the Company issued the Board of Directors
in lieu of cash compensation for attendance to meetings of
the Board of Directors shares of restricted common stock
under rule 144.
On August 21, 1997 Patricia Spigno resigned as a member of
the Board of Directors. The remaining board members have
accepted Karl Elliott's desire to become a member of the
Board until the next shareholders vote on such matter
In October 1997 the Company issued the officers of the
corporation in lieu of cash restricted Common stock for
unpaid salaries that had accrued through August 1997. The
Board of Directors resolved to change transfer agents of the
Company to Signature Stock Transfer located in Dallas,
Texas. The Company approved a 1:20 Common stock reverse
split that it expects to ratify at the next annual
shareholders meeting. The Company saw it in its best
interests to contract with two consultants to expand its
development, marketing and sale of its products. An
agreement with an investment banker was also signed. The
Company agreed with Donald Wallace, the former president of
PrimeLink, to a separation, which included his resignation
as an Officer and from its Board of Directors
In November issued Common Stock to two attorneys for
services rendered and Restricted Common Stock to a printer
for services rendered. The company has reduced its assets
because of the unlikelyhood that the Company will be able to
collect on its recievable from CIPI. the company also
reduced the value of the license from Technilink due to the
lack of sales attributed to the license
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 only one competitor to date using Two-Way paging
technology. Mechanical chart recorders are predominant in
the industry today. The TransComm unit is utilized in the
vending machine market has no competition using SkyTel's Two-
Way Paging technology to the companies knowledge. 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. One
competitor uses the similar two-way paging technology. The
major difference between the other competitors devices 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 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.
Williams Wireless and
Coca Cola. Williams Wireless is part of The Williams
Companies. The Company has signed in the last quarter of
1997 a purchase order with Consolidated Edison, but no
revenues were recieved in 1997 from this order.
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 November 30, 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,
a related party. 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 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 Company plans to renew the lease again in 1998
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 has moved from Widmer Rd,
Lenexa, Kansas 66215.
to 24730 Avenue Tibbits Unit 130 Valencia, CA 91355
PrimeLink leased approximately 600 square feet of of office
space and 400 square feet warehouse space for $ 500 a month
for a one year term. TechniLink is located at 7260 Spigno
Place Agua Dulce, CA 91350
Item 3. Legal Proceedings
There are two legal proceeding to which the Company is a
party. The first
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 permanent injunctions from violating
securities laws. The SEC does not seek any civil penalties
from the Company. The courts having conducted a trial of
this matter without a jury and taken it under submission,
found for the plaintiff as follows: against Conectisys on
the claim that the defendant violated section 5(a), 5(C),
17(a). Conectisys was NOT found to have violated section
10(b), 10(b-5), or 15(c). The Plaintiff was ordered to file
proposed findings of fact and conclusions of law. The
Plaintiff has filed subsequent to the year ended November
30 1997 with its conclusions and finding and is requesting
that the Company disgorge alleged profits plus interest
totalling
$ 1,013,514.60. The Company has filed objections to their
claims. After the court settles the findings and
conclusions, the court will enter further orders with
respect remedy or remedies to be granted to the plaintiff.
The second case is was brought by Clamar Capital Corp. (the
"Plaintiff ") against Smith Benton & Hughes; Michael Zaman;
Claudia Zaman; Andrew Pitt and Conectisys Corp.(collectively
the "Defendants"). The case was brought before the District
Court of Arapahoe, State of Colorado, case No. 97-CV-1442,
Division 3. The Plaintiff did not specify an amount of
damages that it seeks from the defendants.
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
electronic over-
the-counter bulletin board. Bid and asked quotations are
reported on the
bulletin board under the symbol CNES. As of February 15,
1997, there were appoximately 7 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 and the 20:1
reverse stock splits.
Quarter ending Bid Ask Bid Ask
High High Low Low
November 93 0 500.000 0 500.000
February 94 0 500.000 0 500.000
May 94 5.000 500.000 5.000 500.000
August 94 20.000 505.000 5.000 500.000
November 94 225.00 750.000 20.000 100.000
February 95 262.50 300.000 200.000 265.000
May 95 257.50 380.000 2.500 105.000
August 95 180.00 390.000 50.000 100.000
November 95 141.26 240.000 122.500 110.000
February 96 240.00 300.000 122.500 122.500
May 96 412.50 440.000 217.500 240.000
August 96 455.00 500.000 120.000 120.000
November 96 252.50 300.000 10.000 80.000
February 97 230.00 150.000 20.000 10.000
May 97 45.000 47.400 15.000 20.000
August 97 25.000 25.000 5.000 5.000
November 5.000 17.600 .750 .750
Current February 27, 3.490 4.000
1997
The above quotations reflect inter-dealer prices, without
retail mark-up,
markdown or commission and may not represent actual
transactions.
As of November 30, 1997, there were approximately 566
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 $ 2,657,954
for the year ended
November 30, 1997, with $ 380,642 of revenues. The Company
in the 12 month period ended November 30, 1996, had losses
of $ 2,238,933 with $ 111,163 revenues.
Plan of operation
Loss on operations for the Company for the year ended 1996
was
$2,238,933 as compared to a loss of $ 2,657,954 in fiscal
1997. This is a 18%
increases in losses from the prior year in the same period.
The Company will,
over the next 12 months, rely on the revenues from its
subsidiaries, collection
of notes receivables and additional funding through the sale
of common stock or
loans colateralized through common stock. Revenues in fiscal
1997 were $ 380,642 as compared to $ 111,163 in year ended
November 30, 1996. The $ 380,642 in revenues are a 242 %
increase over revenues obtained in the same period in 1996.
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.
The Company in the first quarter of fiscal 1998 shipped its
first product to Consolidated Edison, Steam Divison, a new
customer to PrimeLink. The Company is working diligently on
this account.
Liquidity and capital Resources
As of November 30, 1997, the Company had a negative working
capital of
$ 1,186,807, consisting of $ 20,577 in current assets and
$1,207,384 in
current liabilities. The Company had a negative working
capital of
$ 780,357 at year ended November 30, 1996, This is a 52 %
increase in negative
working capital compared to November 30, 1997. The Company
is dependent on achieving profitable operations through its
acquisitions and the collection of outstanding receivables
to continue as a going concern.
The Company had total assets of $ 1,306,567, at November 30,
1997, and total
liabilities of $ 1,207,384. Shareholder equity is $ 99,183
as compared to
$864,778 fiscal year ended November 30, 1996.
Cash Flows
The Company had a net loss for the year ended November 30,
1997, of
$ 2,657,954. The cash used in operations toward this loss
was $ 354,355. The
largest area of loss was the result of non-cash
transactions to the Company
$ 690,603., (26%), was the result of service that were paid
through the issuance of Common stock. The Company also had
depreciation and amortorzation expenses of $ 502,421 this is
approximately 19% of the total net loss. The Company had a
$ 669,670 dollar provision for bad debt,(25%) The cash used
in investing was $ 67,563 (2.5%), of the total loss. The
Company sold approximately $ 399,980 worth of its stock
under rule 144 and Regulation S to finance a portion of its
losses.
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,
however there are no assurances that profitability will be
achieved.
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
On March 3, 1997, FASB issued Statement of Financial
Accounting Standards
No. 128, Earnings per Share (SFAS 128). This pronouncement
provides a different
method of calculating earnings per share than is currently
used in accordance
with APB 15, Earnings per Share. SFAS 128 provides for the
calculation of Basic
and Diluted earning per share. Basic earnings per share
includes no dilution and
is computed by dividing income available to common share
holders by the weighted
average number of common shares outstanding for the period.
Diluted earnings per
share reflects the potential dilution of securities that
could share in the
earning of the entity, similar to fully diluted earnings per
share. This
pronouncement is effective for fiscal years and interim
periods ending after
December 15, 1997; early adoption is not permitted. The
Company has not
determined the effect, if any, of adoption on its EPS
computation(s)
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
Karl Elliott Director
Robert A. Spigno, President and Chief Executive Officer,
Director
Robert A. Spigno, age 44, 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 38, 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 .
Patricia A. Spigno, Secretary and Treasurer
Patricia A. Spigno, age 39, 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.
Karl E. Elliott, Director
Karl Elliott, age 42, 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.
Significant Employees
Karl Elliott, age 42, 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 of persons in which served forms ofremuneration
in group
Robert A. Spigno CEO/President $ 75,335
All officers and directors
as a group (four persons) $ 200,032
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
1998, 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.
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 Unexercisable Exercisable Unexercisable
Robert Spigno 1,471,195 0 $3,677,987 0
Patricia Spigno 500,000 0 $1,250,000 0
Richard Dowler 500,000 0 $1,250,000 0
Employment Contracts
On December 4, 1995, the Board of Directors approved
employment agreements
with its executive officers (of which two are members of 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
On August 11, 1997 the employment agreements with the
executive officers were amended with the following changes:
Robert Spigno
THIS AMENDMENT AGREEMENT is made and entered into
effective the 11th day of August, 1997, by and between
Conectisys, Inc., a Colorado corporation ("CONECTISYS"),
("Employer"), and Robert Spigno ("Employee").
The following amendments to the language of the
paragraphs as noted herein are hereby amended to the initial
signing of the Employment Agreement, dated October 2, 1995,
as follows;
The amendments are effective September 1, 1997:
1. Employment and term. Employer hereby employs Employee
and Employee hereby accepts employment from Employer to
perform the duties set forth below, for a term of Five (5)
years, subject to the provisions of this Agreement, and
thereafter shall be automatically extended for subsequent
five (5) year terms unless terminated as provided herein.
Employee's employment hereunder shall be continued
thereafter from term to term until either party shall give
Sixty (60) days prior written notice of termination.
Notwithstanding the foregoing, this Agreement may be sooner
terminated as provided in Paragraph 8 hereof.
2. Duties. Employee shall devote his full time and
efforts to the business of Employer, and shall be an officer
of Conectisys holding the title of President / CEO.
3. Compensation. During the term of this Agreement,
Employee shall receive as compensation for his services, an
annual base salary of One Hundred Sixty Thousand
Dollars($160,000). During the subsequent terms of employment
under this agreement, Employer shall negotiate Employee's
annual base salary in good faith; provided, however, that
Employer shall pay Employee an annual base salary in such
subsequent terms of employment in an amount no less than the
annual base salary paid Employee during the term hereunder.
Employee shall further receive a bonus, paid at year end,
equal to six percent (6%) of all net profits before taxes
earned by Conectisys. Employee shall further receive a
bonus, paid at year end, equal to fifty percent (50%) of
employee's salary for compensation to the employee's
continuing employment to the Company ("Staying Bonus").
Staying Bonus shall be compensated for, with Conectisys
Corp. restricted common stock under rule 144 ("The Stock").
The calculation for the value of the Stock will be, fifty
percent (50%) of the average bid and ask price for the stock
for the 30 days prior to the issuance. Employee shall have
an option to purchase up to 500,000 shares of Conectisys
Corporation restricted stock under rule 144, at a cost of
Fifty (50%) of the average market value during the prior 30
days of trading; this option shall remain open for Three(3)
years with an option to renew said option for an additional
Three(3) years.
Richard Dowler
THIS AMENDMENT AGREEMENT is made and entered into
effective the 11th day of August, 1997, by and between
Conectisys, Inc., a Colorado corporation ("CONECTISYS"),
("Employer"), and Richard Dowler ("Employee").
The following amendments to the language of the
paragraphs as noted herein are hereby amended to the initial
signing of the Employment Agreement, dated October 2, 1995,
as follows;
The amendments are effective September 1, 1997:
1. Employment and term. Employer hereby employs Employee
and Employee hereby accepts employment from Employer to
perform the duties set forth below, for a term of Three (3)
years, subject to the provisions of this Agreement, and
thereafter shall be automatically extended for subsequent
Three (3) year terms unless terminated as provided herein.
Employee's employment hereunder shall be continued
thereafter from term to term until either party shall give
Sixty (60) days prior written notice of termination.
Notwithstanding the foregoing, this Agreement may be sooner
terminated as provided in Paragraph 8 hereof.
2. Duties. Employee shall devote his full time and
efforts to the business of Employer, and shall be an officer
of Conectisys holding the title of Chief Financial Officer.
3. Compensation. During the term of this Agreement,
Employee shall receive as compensation for his services, an
annual base salary of Eighty Thousand Dollars($80,000).
During the subsequent terms of employment under this
agreement, Employer shall negotiate Employee's annual base
salary in good faith; provided, however, that Employer shall
pay Employee an annual base salary in such subsequent terms
of employment in an amount no less than the annual base
salary paid Employee during the term hereunder. Employee
shall further receive a bonus, paid at year end, equal to
two percent (2%) of all net profits before taxes earned by
Conectisys. Employee shall further receive a bonus, paid at
year end, equal to fifty percent (50%) of employee's salary
for compensation to the employee's continuing employment to
the Company ("Staying Bonus"). Staying Bonus shall be
compensated for, with Conectisys Corp. restricted common
stock under rule 144 ("The Stock"). The calculation for the
value of the Stock will be, fifty percent (50%) of the
average bid and ask price for the stock for the 30 days
prior to the issuance. Employee shall have an option to
purchase up to 500,000 shares of Conectisys Corporation
restricted stock under rule 144, at a cost of Fifty (50%) of
the average market value during the prior 30 days of
trading; this option shall remain open for Three(3) years
with an option to renew said option for an additional
Three(3) years.
Patricia Spigno
THIS AMENDMENT AGREEMENT is made and entered into
effective the 11th day of August, 1997, by and between
Conectisys, Inc., a Colorado corporation ("CONECTISYS"),
("Employer"), and Patricia A. Spigno ("Employee").
The following amendments to the language of the
paragraphs as noted herein are hereby amended to the initial
signing of the Employment Agreement, dated October 2, 1995,
as follows;
The amendments are effective September 1, 1997:
1. Employment and term. Employer hereby employs Employee
and Employee hereby accepts employment from Employer to
perform the duties set forth below, for a term of Three (3)
years, subject to the provisions of this Agreement, and
thereafter shall be automatically extended for subsequent
Three (3) year terms unless terminated as provided herein.
Employee's employment hereunder shall be continued
thereafter from term to term until either party shall give
Sixty (60) days prior written notice of termination.
Notwithstanding the foregoing, this Agreement may be sooner
terminated as provided in Paragraph 8 hereof.
2. Duties. Employee shall devote his full time and
efforts to the business of Employer, and shall be an officer
of Conectisys holding the title of Secretary / Treasurer.
3. Compensation. During the term of this Agreement,
Employee shall receive as compensation for his services, an
annual base salary of Eighty Thousand Dollars($80,000).
During the subsequent terms of employment under this
agreement, Employer shall negotiate Employee's annual base
salary in good faith; provided, however, that Employer shall
pay Employee an annual base salary in such subsequent terms
of employment in an amount no less than the annual base
salary paid Employee during the term hereunder. Employee
shall further receive a bonus, paid at year end, equal to
two percent (2%) of all net profits before taxes earned by
Conectisys. Employee shall further receive a bonus, paid at
year end, equal to fifty percent (50%) of employee's salary
for compensation to the employee's continuing employment to
the Company ("Staying Bonus"). Staying Bonus shall be
compensated for, with Conectisys Corp. restricted common
stock under rule 144 ("The Stock"). The calculation for the
value of the Stock will be, fifty percent (50%) of the
average bid and ask price for the stock for the 30 days
prior to the issuance. Employee shall have an option to
purchase up to 500,000 shares of Conectisys Corporation
restricted stock under rule 144, at a cost of Fifty (50%) of
the average market value during the prior 30 days of
trading; this option shall remain open for Three(3) years
with an option to renew said option for an additional
Three(3) years.
Item 11. Security Ownership of Certain Beneficial Owners
and Management
As of November 30, 1997, the Company had 4,677,804
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
Mandariin Overseas 1,377,536 29.42%
Investment
Robert A. Spigno (1) 478,581 10.22%
S.W. Carver Corp. 1,944,721 41.54%
Security ownership of
Management
Richard Dowler 48,868 1.04%
Patricia A. Spigno 61,362 1.31%
Robert A. Spigno 478,581 10.22%
Karl E Elliott 19,250 .41%
Total Directors and 608,061 12.99%
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 61,362 shares owned by Patricia
Spigno (spouse). The
aggregate beneficially owned by Robert A. Spigno is Shares
468,438 (11.53%)
(2) Does not include 478,581 shares owned by Robert A.
Spigno (spouse). The
aggregate beneficially owned by Patricia A. Spigno is
468,438 Shares. (11.53%)
Item 12. Certain Relationships and Related Transactions
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 S.W. Carver Corp, (SWC) which is owned
by
Robert A. Spigno and Patricia A. Spigno. SWC is to maintain
the day to day
accounting needs of the company. SWC 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. This note was was paid with
the issuance of Restricted Common Stock in October 1997
In October 1997 the Company reduced its debt from
$777,888.34 to $ 30,000 with S.W.Carver by issuing
1,944,720 Restricted Common Stock under rule 144
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, 1997, the
registrant filed the following current reports on Form 8-K:
8-K Filed April 3, 1997
8-K Filed April 22, 1997
8-K Filed May 1, 1997
8-K Filed May 28, 1997
8-K Filed June 30, 1997
8-K Filed October 15, 1997
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,
(Robert A. Spigno) Chief Executive 1997
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, Treasurer March 14, 1997
(Patricia A. Spigno)
_Exhibit 99 Unaudited Financial Statements
CONECTISYS CORP.
Unaudited Consolidated Balance Sheet (Year Ended)
Nov-30-1997
<TABLE>
<CAPTION>
Nov-30-1997 Nov-30-1996
Unaudited Audited
<S> <C> <C>
Assets
Current Assets
Cash 17,265 24,495
Accounts Receivable-trade
(net allowance for doubtful of ($379) 3,411 35,532
Stock Subscription Receivable 0 0
Other Current Asset 0 0
Total Current Assets 20,577 60,027
Notes Receivable net (note 4) 181,270 446,625
Interest Receivable net (note 4) 0 7,947
Property and Equipment Net (note 5) 118,904 150,370
Licenses and Technology, net of accumulated amortization 985,716 1,727,242
Other Assets 0 4,500
Total Assets 1,306,567 2,396,711
CONECTISYS CORP.
Unaudited Consolidated Balance Sheet (continued)
Nov-30-1997
Liabilities and Shareholder equity
Current Liabilities
Accounts Payables 410,455 338,822
Accrued Compensation (note 9) 223,448 136,181
Notes Payables (notes 3 and 6)
Related Party 0 0
Other 445,679 247,719
Other Current Liabilities 35,050 12,245
Accrued interest payable 92,752 105,417
Total Current Liabilities 1,207,384 840,384
Long term liabilities
Notes Payables (notes 3 and 6)
Related Party 0 527,830
Other 0 163,719
Total Long term liabilities 0 691,549
Minority Interest 0 0
Shareholders Equity
Preferred Stock - Class A 1,000,000 Shares Authorized 20,500 20,500
$ 1.00 Par Value, 20,500 Issued and Outstanding
Convertible Preferred Stock - Class B 1,000,000 Shares 0 0
Authorized, $1.00 Par Value, -0- Shares Issued and
Outstanding
Common Stock - 250,000,000 Shares
Authorized, No Par Value 8,349,581 6,457,221
4,677,268 Authorized Issued and Outstanding
Accumulated Gain (Deficit) During Development Stage (8,270,896) (5,612,943)
Total Shareholder Equity 99,183 864,778
Total Liabilities and Shareholders Equity 1,306,567 2,396,711
</TABLE>
CONECTISYS CORP.
Condensed Statement of Operations ( year ended)
Nov-30-1997
<TABLE>
<CAPTION>
December 1,1990
(Inception) through
Nov-30-1997 Nov-30-1996 Nov-30-1997
Unaudited audited Unaudited
<S> <C> <C> <C>
Revenues 380,642 111,163 491,805
Cost of Goods Sold 237,914 86,977 324,891
Gross Profit 142,727 24,186 127,292
General and Administrative 1,911,534 1,715,009 4,782,151
Bad Debt Write-offs 446,625 118,611 1,680,522
Loss From Operations (2,662,057) (1,809,434) (6,742,385)
Non-Operating Income (Expense) (360,447) 98,356 (259,399)
Interest Expense (82,075) (648,424) (759,743)
Minority Interest 0 120,569 121,747
Net Loss (2,657,954) $(2,238,933) (7,193,155)
Weighted Average Shares Outstanding 813,327 2,608,613
Net loss per share (3.27) $ (0.86)
</TABLE>
CONECTISYS CORP.
Condensed Statement of Cash Flows (Year End)
Nov-30-1997
<TABLE>
Caption
December 1,1990
Nov-30-1997 Nov-30-1996 (Inception)through
Unaudited audited Nov 30, 1997
<S> <C> <C> <C>
Operating activities
Net Income (loss) (2,657,954) (2,238,933) (7,193,155)
Adjustments to reconcile net income (loss)
to net cash Provided by (used in)
operating activities:
Depreciation and amortization 502,421 519,789 1,023,480
provision for bad debt 669,670 118,611 1,644,156
Stock issued for services 690,603 575,433 2,153,148
Stock issued for interest 91,087 446,640 537,727
Minority interest 0 (120,569) (121,747)
Changes in operating assets and liabilities
(Increase) decrease in assets
Accounts receivable 33,410 (38,862) (5,033)
Interest receivable 147,387 (95,281) 43,740
Deposits 0 0 (4,792)
Increase (decrease) in liabilities
Accounts payable 71,633 295,889 410,455
Accrued interest payable (12,665) 0 (12,665)
Accrued compensation 87,267 82,886 223,448
Other current liabilities 22,805 105,540 140,467
Net cash provided by (used in) operating activities (354,355) (348,857) (1,160,478)
Investing activities
Increase in notes receivable 0 0 (1,322,500)
Costs of licenses & technology (60,467) (30,340) (94,059)
Purchase of equipment (7,097) (31,535) (65,067)
Net cash from (used) in investing activities (67,563) (61,875) (1,481,625)
CONECTISYS CORP.
Condensed Statement of Cash Flows (year ended) (continued)
Nov-30-1997
Financing Activities
Common Stock issued for cash 399,980 150,000 960,635
Dividends received 0 0 0
Preferred Stock issuance 0 0 16,345
Proceeds from debts
Related party 16,700 150,309 223,244
Other 18,641 155,203 1,501,479
Payments on debt
Related (13,700) (33,245) (46,945)
Other (6,953) (8,951) (15,904)
Decrease in subscription receivable 0 20,000 20,000
Contributed capital 0 515
Net cash from (used) in financing activities 414,668 433,316 2,663,524
Net Increase (decrease) in cash (7,230) 22,584 17,265
Cash beginning of period 24,495 1,911
Cash end of period 17,265 24,495 17,265
Cash paid during the year for
Interest 0 41,874 41,874
Taxes 1,082 800 2,732
Non Cash Activities
Common stock issued for
Purchase of stock 281,250 0 281,250
PP&E 9,225 35,362 140,156
Licenses & technology 396,964 0 2,166,964
Repayment of debt 620,507 257,469 1,753,786
Services & interest 781,690 1,017,918 2,722,016
</TABLE>
CONECTISYS CORP.
Statement of Shareholders Equity
Nov-30-1997
<TABLE>
<CAPTION>
Deficit Accumu-
Preferred Stock lated 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>
CONECTISYS CORP.
Statement of Shareholders Equity (continued)
Nov-30-1997
<TABLE>
<CAPTION>
<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 7 ) - - 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
____________________________________
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>
CONECTISYS CORP.
Statement of Shareholders Equity (continued)
Aug-30-1997
<TABLE>
<CAPTION>
Shares issued in exchange
for (see note 7):
<S> <C> <C> <C> <C> <C> <C>
Services, March 1997 - - 4,550 6,879 - 6,879
Debt, April 1997 - - 16,000 13,120 - 13,120
Services, July 1997 - - 30,000 16,200 - 16,200
Cash, July 1997 - - 300,000 300,000 - 300,000
Services August 1997 - - 119,150 56,000 - 56,000
Restatement for 1:20
reverse stock split 20,500 $20,500 162,271 $6,849,420 $ - $ -
Adjustment for
partial shares - - 113 - - -
Restated totals 20,500 $20,500 162,385 $6,849,420 $ - $ -
Shares issued in exchange
Officer compensation
October, 1997 - - 465,013 186,004 - 186,004
Director Compensation
October, 1997 - - 60,500 24,200 - 24,200
Services October 1997 - - 944,153 377,661 - 377,661
Debt October 1997 - - 1,540,267 620,507 - 620,507
Note Receivable - - 1,500,000 281,250 - 281,250
Services November 1997 - - 4,950 10,538 - 10,538
Net loss to November, 30 1997 - - - - (2,657,954) (2,657,954)
Balance, nov 30, 1997 20,500 $20,500 4,677,268 $8,349,581 $(8,270,897) $ 99,183
</TABLE>
________________________________
summary of significant accounting policies and notes to consolidated
financial statements.
Summary of Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include
the transactions
of Conectisys Corporation ( the "Company") 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 Stage Company
The Company returned to the development stage in accordance
with SFAS No. 7
on December 1, 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 Equivalents
For financial accounting purposes and the statement of cash
flows, cash
equivalents include all highly liquid debt instruments with
original maturities
of three months or less.
Property and Equipment
Property and equipment are recorded at cost. Depreciation
is computed over
the estimated useful lives of the assets using the straight-line
method.
Property and equipment is estimated to have a useful life of 5-7
years.
Net Loss Per Common Share
Net loss per common share is based on the weighted average
number of common
and common 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
anti-dilutive.
Stock Issued for Noncash Consideration
Shares of the Company's no par value common stock issued in
exchange for
goods or services 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.
SUMMARY OF ACCOUNTING POLICIES (continued)
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.
License Agreements
The cost of acquiring license rights are 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, 1997, 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, 1997 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. Technilink's
carrying value was reduced by $ 625,000 in 1997 due to the lack
of income generated form this license .
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.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 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.
On March 3, 1997, FASB issued Statement of Financial
Accounting Standards
No. 128, Earnings per Share (SFAS 128). This pronouncement
provides a different
method of calculating earnings per share than is currently used
in accordance
with APB 15, Earnings per Share. SFAS 128 provides for the
calculation of Basic
and Diluted earning per share. Basic earnings per share includes
no dilution and
is computed by dividing income available to common share holders
by the weighted
average number of common shares outstanding for the period.
Diluted earnings per
share reflects the potential dilution of securities that could
share in the
earning of the entity, similar to fully diluted earnings per
share. This
pronouncement is effective for fiscal years and interim periods
ending after
December 15, 1997; early adoption is not permitted. The Company
has not
determined the effect, if any, of adoption on its EPS
computation(s)
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash
and cash
equivalents, accounts 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
practical 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.
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.
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, re-routing 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.
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.
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 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. The
Receivable to this loan was written down to zero in 1997.
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.
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.
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 Concern
As of November 30, 1997 and 1996, the Company has a deficiency in
working capital
of $ 1,186,807 and $ 780,357, 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 Party Transactions
The Company issued 2,494 and 2,515,891 shares of common stock
during the years
ended November 30, 1996 and 1997, respectively, to a related
party in exchange
for services, debt and compensation. which approximates the fair
market value of the shares issued.
The Company also rents office space from S.W. Carver Corporation,
a company
owned by a major shareholder of the Company. The rent is
continue on a month to month basis. The Company also paid S.W.
CarverCorporation for bookkeeping services which are included in
general and administrative expenses these services have been
discontinued. Also, the Company had notes payable to S.W.
Carver Corporation, see Note 6.
4. Notes Receivable
During the year ended November 30, 1995 and 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. In 1997 the
Company provided an allowance for the entire amount of the Note.
5. Property and Equipment
Property and equipment consisted of the following:
November 97, 1997 1996
Office equipment / $ 162,888 $ 140,545
furniture
Vehicles 35,362 35,362
Sub-total 198,250 175,907
Less: accumulated
depreciation (79,345) (2,520)
Total $ 118,905 $ 173,387
Depreciation expense for the years ended November 30, 1996 and
1997, totaled
$38,263 and $79,345, respectively.
6. Notes Payable
The notes payable consisted of the following:
November 30, 1997 1997 1996
Notes payable to S.W. Carver
Corporation
(a related party) unsecured,
due on $ -0- $
demand at 10% interest, unpaid 518,230
balance payable on February 15,
1998
Note payable to Devon Investment
Advisors
unsecured, due on demand at 10% 241,824 241,824
interest
Note payable to Black Dog Ranch, LLC
unsecured, due on demand at 8%
interest, unpaid balance on 171,397 -
January 15, 1998
Note payable to Investor's Financial 25,000 -
Note payable to Ford Motor Credit,
secured by vehicle, interest at
12.9%, 7,458 15,771
unpaid balance on February 25,
1999
Note payable to Robert Spigno
(related
party) unsecured, due on demand
at -0- 8,000
10% interest, unpaid balance on
February 15, 1998
Total notes payable 445,679 775,825
7. Shareholders' Equity
The Company is authorized to issue 50,000,000 shares of $1.00 par
value
preferred stock, no 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 March & July 1997, the Company issued 4,550 and 30,000 shares
of common stock respectively for attorney fees in relation to
various legal matters
In April 1997, Settled a law suit with the former directors of
the Company. The Company issued to the former directors 16,000
shares of common stock
In July the Company issued 300,000 shares of common stock to an
investor for cash
In August 1997 the Company issued 119,150 shares of common stock
to the members of the board of directors for services.
In October, 1997, the Company entered into two consulting
agreements In consideration for services to the Company, paid
the consultants 500,000 shares of common stock for services
rendered. the company entered in to an agreement for funding and
issued 1,500,000 for a note receivable that has susequently paid
in full
8. Income Taxes
Deferred income taxes consisted of the following:
November 30, 1997 1996
Deferred tax asset, net $ 3,454,392 $ 3,454,392
operating
loss carryforward
Deferred tax liability - -
Valuation allowance (3,454,392) (3,454,392)
Net deferred taxes $ - $ -
The valuation allowance offsets the net deferred tax asset
since it is more
likely than not it would not be recovered.
9. Commitments and Contingencies
Employment Agreements
Incorporated by reference 10KSB year ended November 30, 1995,
1996
Litigation
There are two legal proceeding to which the Company is a party.
The first
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 permanent injunctions from violating securities
laws. The SEC does not seek any civil penalties from the Company.
The courts having conducted a trial of this matter without a jury
and taken it under submission, found for the plaintiff as
follows: against Conectisys on the claim that the defendant
violated section 5(a), 5(C), 17(a). Conectisys was NOT found to
have violated section 10(b), 10(b-5), or 15(c). The Plaintiff was
ordered to file proposed findings of fact and conclusions of law.
The Plaintiff has filed subsequent to the year ended November 30
1997 with its conclusions and finding and is requesting that the
Company disgorge alleged profits plus interest totalling $
1,013,514.60. The Company has filed objections to their claims.
After the court settles the findings and conclusions, the court
will enter further orders with respect remedy or remedies to be
granted to the plaintiff.
The second case is was brought by Clamar Capital Corp. (the
"Plaintiff ") against Smith Benton & Hughes; Michael Zaman;
Claudia Zaman; Andrew Pitt and Conectisys Corp.(collectively the
"Defendants"). The case was brought before the District Court of
Arapahoe, State of Colorado, case No. 97-CV-1442, Division 3. The
Plaintiff did not specify an amount of damages that it seeks from
the defendants.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted
from SEC Form 10KSB and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<CASH> 17265
<SECURITIES> 0
<RECEIVABLES> 184681
<ALLOWANCES> 379
<INVENTORY> 0
<CURRENT-ASSETS> 20577
<PP&E> 198250
<DEPRECIATION> (79345)
<TOTAL-ASSETS> 1306567
<CURRENT-LIABILITIES> 1207384
<BONDS> 0
0
20500
<COMMON> 8349581
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1306567
<SALES> 380642
<TOTAL-REVENUES> 380642
<CGS> 237914
<TOTAL-COSTS> 2662057
<OTHER-EXPENSES> 360447
<LOSS-PROVISION> 446625
<INTEREST-EXPENSE> 82075
<INCOME-PRETAX> (2657954)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2657954)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2657954)
<EPS-PRIMARY> (3.27)
<EPS-DILUTED> (3.27)<F1>
<FN>
<F1>Due to the net loss all warrants and options are
considered anti-dilutive
</FN>
</TABLE>
