U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.For the quarterly period ended March 31, 2000.
[ ] 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.)
24730 Avenue Tibbitts
Suite 130
Valencia, California 91355
(Address of principal executive offices)
Issuer's telephone number: (661) 295-6763
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
Common Stock, issued and outstanding as of March 31, 2000:
17,563,347
PART I
Item 1. Financial Statement
A financial statement, unaudited and included herein beginning on page
F-1 (Exhibit 99.0), is incorporated herein by this reference.
Item 2. Management's Discussion and Analysis or Plan of Operation
Except for disclosures that report the Company's historical results, the
statements set forth in this section are forward-looking statements.
Actual results may differ materially from those projected in the forward-
looking statements. Additional information concerning factors that may
cause actual results to differ materially from those in the forward-
looking statements are in the Company's Annual Report on form 10-KSB for
the fiscal year ending September 30, 1999 and in the Company's other
filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company assumes
no obligation to update any forward-looking statements or comments on
the reasons why actual results may differ therefrom.
Conectisys is the parent company of two subsidiaries; United Telemetry
Co., Inc. and eEnergyServices.com, Inc. It is a commercial
telecommunications company primarily engaged in developing,
manufacturing and marketing proprietary telemetry equipment for use in
remote or automated meter reading (AMR) applications.
Results of operations
The Company realized a net loss from operations of $1,682,510 for the
2nd quarter ending March 31, 2000. The Company for the 2nd quarter
ending May 31, 1999 had a net loss from operations of $634,805. The
Company had no revenue for the quarter ending March 31, 2000 and $25,655
for the 2nd Quarter ending May 31, 1999.
Plan of operation
Loss on operations for the Company for the quarter March 31, 2000
increased 265% from the prior year for the same period. These losses
are attributed to the Company's development, marketing and general
expenses. The Company will, over the next 12 months, rely on additional
funding through the sale of common stock. The Company had 26,655.00
revenues in fiscal 1999.
Liquidity and Capital Resources
As of March 31, 2000, the Company had a negative working capital of
$1,719,105 consisting of $290,528 in current assets and $2,009,633 in
current liabilities. The Company had a negative working capital of
$1,759,529 at quarter ended May 31, 1999. The Company is dependent on
achieving profitable operations through the success of its subsidiaries
to continue as a going concern.
The Company had total assets of $379,793 as of March 31, 2000, and total
liabilities of $2,009,633. Shareholder deficit is $1,629,840, as
compared to a deficit of $1,288,173 fiscal 2nd quarter ended May 31,
2000. The Company issued 1,939,672 shares of common stock for cash and
services during the 2nd quarter ending March 31, 2000.
Cash Flows
The Company had a net loss for the 2nd quarter ending March 31, 2000 of
$1,682,510. The cash used in operations toward this loss was $486,482.
The largest area of loss was the result of non-cash transactions to the
Company. Services to the Company that were not paid with cash totaled
$1,458,784. The Company issued shares for $528,888 of stock restricted
under rule 144 and incurred $232,000 in debt to finance the operating
losses for the quarter ending March 31, 2000.
The Company's management plans for correcting these deficiencies include
the future sales of the licensed products and services. Working capital
to meet the Company's operating expenses will be raised through a
secondary offering of the Company's Common Stock expected to be filed
with the United States Securities & Exchange Commission this fiscal year.
The Company filing of a secondary offering of its common stock is for
the long term funding requirements of a large-scale deployment of the
HNet System. In the longer term, the Company plans to achieve
profitability through the subsidiaries operations; however there are no
assurances that profitability will be achieved. The Company has
experienced negative cash flow from operations since inception and
expects to continue to experience negative cash flow from operations for
the near term.
Effect of inflation
Inflation did not have any significant effect on the operations of the
Company during the quarter ended March 31, 2000. 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 Financial Accounting Standard No. 130, "Reporting
Comprehensive Income," (SFAS No. 130) issued by the FASB is effective
for financial statements with fiscal years beginning after December 15,
1997. Earlier adoption is permitted. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. The Company does not
expect adoption of SFAS No. 130 to have an effect, if any, on its
financial position or its results of operations.
Statement of Financial Accounting Standard No. 131, "Disclosure About
Segments Of An Enterprise And Related Information," (SFAS 131) issued by
the FASB is effective for financial statements with fiscal years
beginning after December 15, 1997. Earlier application is permitted.
SFAS No. 131 requires that public companies report certain information
about operating segments, products, services and geographical areas in
which they operate and their major customers. The Company does not
expect adoption of SFAS No. 131 to have an effect on its financial
position or results of operations; however, additional disclosures may
be made relating to the above items.
PART II
Other Information
Item 1. Legal Proceedings
On February 23, 2000 in the Company's 10-QSB for the first quarter 2000,
the Company disclosed that a disagreement existed between Braemar
Management, Ltd. and the Company regarding the removal of certain
restrictions on their stock, which they had purchased over two (2) years
ago, may escalate into litigation between the parties. On March 13, 2000
the parties settled the disagreement and pursuant to a formal agreement
between Braemar Management, Ltd. and Conectisys Corporation the
restriction on Braemar's 1.5 million shares were removed as follows:
600,000 shares on March 13, 2000; 600,000 shares on April 10, 2000, and
300,000 on April 20, 2000.
Item 2. Changes in Securities and Use of Proceeds
Options & Warrants Issued
On March 6, 2000 the Company issued warrants to purchase 563,500 shares
of common stock at an exercise price of $2.00 per share with an
expiration date of March 1, 2003.
Additionally, a 250,000 share Performance Award Option at an exercise
price of $.50 per share, with an expiration date of July 15, 2000 was
issued. The Performance Award Option was to a Consultant and all of the
250,000-share option was exercised during the 2nd quarter ending March
31, 2000 resulting in $125,000.00 in cash to the Company. (See also
Item 5 below).
Stock Subscriptions
In January 2000 the Company received $75,000.00 in three Stock
Subscription Agreements for restricted common stock. The stock was sold
for $.25 per share, approximately 50% of the market price at the time of
the purchase, which management believes are exempt from registration
under 4(2) of the 1933 Securities Act.
On February 2, 2000 the Company's Board of Directors issued 412,000
shares of restricted common stock for $103,000.00 in services rendered
by Lawrence Muirhead pursuant to his Employment Agreement and previously
accrued consulting fees prior to the execution of his Employment
Agreement; specifically $13,000.00 in consulting fees and $90,000 in
accrued compensation through February 1, 2000. All stock is restricted
and issued at $.25 per share.
On February 22, 2000 the Company's Board of Directors issued 100,000
shares of restricted common stock for $86,00.00 for all past services to
the Company's former CFO, Richard Dowler.
On March 6, 2000 the Company's Board of Directors issued 135,000 shares
of restricted common stock for $89,041.00 in cash to its CTO, Lawrence
Muirhead.
506 Private Placement Offering
On February 1, 2000 the Company began a Private Placement Offering under
Regulation D, Rule 506 in two (2) year, 10% interest bearing Convertible
Notes. The Notes are convertible to restricted common stock at a rate
of 50% of the market price at the date of conversion. THESE NOTES WILL
ONLY BE SOLD TO ACCREDITED INVESTORS AS THE TERM IS DEFINED IN THE
PRIVATE PLACEMENT MEMORANDUM AND RULE 501(A) OF REGULATION D PROMULGATED
BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE 1933 ACT WITH A
MINIMUM INVESTMENT OF $25,000.00. The Private Placement Memorandum is
available from the Company upon request or it can be viewed in its
entirety on the Company's web site www.conectisys.net.
The Company has sold $195,000.00 in Promissory Notes. $120,000.00 have
been converted to the Company's restricted common stock at the rate of
$.598/share. Three (3) Promissory Notes are still outstanding in the
aggregate amount of $75,000.00.
Item 4. Submission of Matters to a Vote of Security Holders
Shareholders Meeting
The annual meeting of the shareholders of Conectisys Corporation was
held at One World Trade Center, Long Beach, California in the 2nd Floor
Auditorium on March 15, 2000, at 10:00 a.m. Pursuant to a vote of the
shareholders of the Corporation at the Annual Meeting the current Board
of Directors were elected for another term, until the Annual Meeting of
the Shareholders expected in March 2001.
Report of Annual Shareholders Meeting
March 15, 2000
World Trade Center
2nd Floor Auditorium
Long Beach, California
Meeting Called to Order
A quorum was present:
Record holders of the Common stock as of February 14, 2000 (the "Record
Date") were entitled to vote at the Meeting. As of the Record date,
there were 15,609,888 shares of Common Stock issued and outstanding.
Holders of the Common Stock on the Record Date are entitled to one vote
for each share held as of the Record Date. The presence, in person or
by proxy, of holders of at least a majority of the outstanding Common
Stock entitled to vote at the Meeting constituted a quorum for the
transaction of business as indicated in the following table:
Needed for Quorum 7,804,944
Proxy Votes Received by Mail for current Board of Directors 6,471,000
Shares/Votes Held by Board of Directors & Officers of Conectisys
Robert A. Spigno 740,347
Patricia A. Spigno 201,062
Lawrence P. Muirhead 135,000
Melissa Weger 44,981
--------------
Total Directors and Officers as a whole 1,121,390
S.W. Carver Corp. 1,034,000
Total Towards Quorum 8,626,390
Class A Preferred Stock
Number of Shares
Robert A. Spigno 120,020 x 100 votes =
12,002,000
Vote on Board of Directors Nominees:
Robert Spigno
Lawrence Muirhead
Melissa Weger
The Board of Directors received 20,628,390 out of 27,611,888 possible
votes for retention of the current Board of Directors. (74.7%). The
Board of Directors was elected until the next annual meeting of
shareholders.
Item 5. Other Information
eEnergyServices Division Incorporated
On January 11, 2000 the Company incorporated its division eEnergy
Services. The new, wholly owned subsidiary is a Nevada corporation
called eEnergyServices.com, Inc. The current Board of Directors of
Conectisys Corporation is also acting as eEnergyServices.com, Inc.'s
Directors with Robert A. Spigno as President, Melissa Weger as Treasurer
and Patricia A. Spigno as Secretary.
Conectisys is the parent company of two subsidiaries, United Telemetry
Co., Inc. and eEnergyServices.com., Inc. During the current 2nd quarter,
the Company consolidated the business enterprises of Primelink, Inc. and
United Telemetry Co., Inc. with all operations now being conducted under
United Telemetry Co., Inc. The Company further consolidated the
operations of Technilink Technology Manufacturing, Inc. into
eEnergyServices.com. The Company believes this will streamline
operations and allow for further delineation of its intra-company
operational tasks and better public understanding of the Company.
Conectisys and its subsidiaries have developed systems and products for
the wireless telemetry markets with a focus on several specific
communication technologies.
In furtherance of this consolidation, on March 15, 2000, after unanimous
approval of the shareholders at their respective Annual Meetings, the
Company officially dissolved its two older subsidiaries, Technilink
Technology Manufacturing, Inc. and Primelink, Inc. as corporations.
Form S-8 Registration Filed
In December, 1999, the Company filed a Form S-8 registration statement
for the Conectisys Corporation Non-Qualified Stock and Stock Bonus Plan
(the "Plan"). The purpose of the Plan is to compensate independent
consultants of the Company through the granting of non-qualified stock
options (as described in Sections 83 and 421 of the Internal Revenue
Code). Shares of stock covered by stock options and stock bonuses
consist of 1,000,000 shares of the common stock of the Company. The
entire registration has been filled. 600,000 shares were issued to
consultants under the Plan for past services rendered, 150,000
represented retainers on ongoing consulting contracts, and 250,000
shares were issued at $.50 per share pursuant to a Performance Award
Option to a Consultant. The entire 250,000-share option was exercised
during the 2nd quarter ending March 31, 2000 resulting in $125,000.00
in cash to the Company.
HNet 1st Generation Pilot
On February 15, 2000 the Company successfully launched its HNet Pilot in
Los Angeles, California. Although the initial pilot is small, it is a
working model of the capabilities of the HNet System. The Company's
much-awaited deployment of the HNet Automatic Meter Reading (AMR) pilot
demonstrates HNet's technology which acquires real time data1 from an
electric meter, processes this data to show power usage and cost, and
can display this information via the Internet. Ultimately, the HNet
System will be capable of preparing bills and real-time power usage
summaries suitable for power purchasing.
Based upon HNet's initial pilot success in proving the HNet System as a
viable system of administration and reporting for the AMR market place,
the Company is expecting to release a larger and more substantial 2nd-
generation pilot by July 2000. Additionally, the Company has engineered
a portable HNet System that is capable of demonstrating the HNet System
anywhere in the country from the street to a utility company's boardroom
or corporate facility.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibit 99.0 Financial Statement (Unaudited)
(b) During the Registrant's fiscal quarter ending March 31, 2000, the
registrant filed no current reports on Form 8-K.
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: May 12, 2000 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, May 12, 2000
(Robert A. Spigno) Chief Executive Officer,
and President
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED BALANCE SHEET
March 31, 2000
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Balance, December 1, 1990 (re-entry development stage)
0 0 10,609 1,042,140 (1,042,140) 0
Shares issued in exchange for:
Cash, May 31, 1993
0 0 1,000 1,000 0 1,000
Capital contribution, May 31, 1993
0 0 2,000 515 0 515
Services, March 26, 1993
0 0 2,000 500 0 500
Services, March 26, 1993
0 0 1,200 600 0 600
Net loss for the year
0 0 0 0 (5,459) (5,459)
Balance, November 30, 1993
0 0 16,809 1,044,755 (1,047,599) (2,844)
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares issued in exchange for:
Services, May 1, 1994
0 0 2,400 3,000 0 3,000
Cash, September 1, 1994
0 0 17,771 23,655 0 23,655
Services, September 15, 1994
0 0 8,700 11,614 0 11,614
Cash, September 26, 1994
0 0 3,000 15,000 0 15,000
Cash, October 6, 1994
16,345(A) 16,345 0 0 0 16,345
Cash, September and October, 1994
0 0 1,320 33,000 0 33,000
Net loss for the year
0 0 0 0 (32,544) (32,544)
Balance, November 30, 1994
16,345 16,345 50,000 1,131,024 (1,080,143) 67,226
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares issued in exchange for:
Cash, February 13, 1995
0 0 1,160 232,000 0 232,000
Debt repayment, February 13, 1995
0 0 2,040 408,000 0 408,000
Debt repayment, February 20, 1995
0 0 4,778 477,810 0 477,810
Acquisition of assets, CIPI February, 1995
0 0 28,750 1,950,000 0 1,950,000
Acquisition of assets, April 5, 1995
0 0 15,000 0 0 0
Cash and services, April and May 1995
0 0 16,000 800,000 0 800,000
Cash, June 1, 1995
0 0 500 30,000 0 30,000
Acquisition of assets and services, September 26, 1995
0 0 4,000 200,000 0 200,000
Cash, September 28, 1995
0 0 41 3,000 0 3,000
Acquisition of assets, September 1995
0 0 35,000 1,750,000 0 1,750,000
Return of assets, CIPI September, 1995
0 0 (27,700) (1,950,000) 0 (1,950,000)
Net loss for the year
0 0 0 0 (2,293,867) (2,293,867)
Balance, November 30, 1995
16,345 16,345 129,569 5,031,834 (3,374,010) 1,674,169
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares issued in exchange for:
Cash, February, 1996
0 0 1,389 152,779 0 152,779
Debt repayment, February 1996
0 0 10,000 612,000 0 612,000
Services, February, 1996
0 0 3,160 205,892 0 205,892
Cash, March, 1996
0 0 179 25,000 0 25,000
Shares returned and canceled, March, 1996
0 0 0 (15,000) 0 0 $ 0
Services, April, 1996
0 0 13 2,069 0 2,069
Services, September, 1996
4,155(A) 4,155 586 36,317 0 40,472
Services, October, 1996
0 0 6,540 327,000 0 327,000
Debt repayment, November, 1996
0 0 2,350 64,330 0 64,330
Net loss for the year
0 0 0 0 (2,238,933) (2,238,933)
Balance, November 30, 1996
20,500 20,500 138,786 6,457,221 (5,612,943) 864,778
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares issued in exchange for:
Services, March, 1997
0 0 228 6,879 0 6,879
Services, April, 1997
0 0 800 13,120 0 13,120
Services, July, 1997
0 0 1,500 16,200 0 16,200
Cash, July, 1997
0 0 15,000 300,000 0 300,000
Services, August, 1997
0 0 5,958 56,000 0 56,000
Adjustment for partial shares due to reverse stock split (1/20)
0 0 113 0 0 0
Services, October, 1997
0 0 1,469,666 587,865 0 587,865
Debt repayment, October, 1997
0 0 1,540,267 620,507 0 620,507
Cash, October, 1997
0 0 1,500,000 281,250 0 281,250
Services, November, 1997
0 0 4,950 10,538 0 10,538
Net loss for the year
0 0 0 0 (2,739,268) (2,739,268)
Balance, November 30, 1997
0 20,500 4,677,268 8,349,580 (8,352,211) 17,869
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares issued in exchange for:
Services, December, 1997 through November, 1998
0 0 2,551,610 2,338,264 0 2,338,264
Debt repayment, April, 1998 through September, 1998
0 0 250,000 129,960 0 129,960
Cash, January, 1998 through July, 1998
0 0 4,833,334 1,139,218 0 1,139,218
Acquisition of assets, July, 1998
0 0 300,000 421,478 0 421,478
Acquisition of 20% minority interest in subsidiary, July, 1998
0 0 50,000 59,247 0 59,247
Services, November, 1998
60,000(A) 60,000 0 0 0 60,000
Net loss for the year
0 0 0 0 (4,928,682) (4,928,682)
Balance, November 30, 1998
80,500 80,500 12,662,212 12,437,747 (13,280,893) (762,646)
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares returned and canceled, December, 1998
0 0 (1,350,000) (814,536) (814,536)
Services, December, 1998 through September, 1999
0 0 560,029 349,454 349,454
Cash, December, 1998 through September, 1999
0 0 1,155,800 129,537 129,537
Debt repayment, Sept., 1999
39,520(A) 39,520 960,321 197,500 237,020
Services, December, 1998 through September, 1999
150,000(B) 150,000(B) 0 0 150,000
Debt repayment, Sept., 1999
100,000(A) 100,000 0 0 100,000
Net loss for the period
0 0 0 0 (1,323,831) (1,323,831)
Balance, September 30, 1999
370,020 $ 370,020 13,988,362 $12,299,702 $(14,604,724) $(1,935,002)
Total
Preferred Stock Common Stock Shareholders
Class A and B No Par Value Accumulated Equity
Shares Value Shares Value Deficit (Deficit)
Shares issued in exchange for:
Services, October, 1999 through March, 2000
0 0 2,454,924 1,458,784 1,458,784
Cash, October, 1999 through March, 2000
0 0 1,120,061 528,888 528,888
Net loss for the period
0 0 0 0 (1,682,510) (1,682,510)
Balance, March 31, 2000
370,020 $ 370,020 17,563,347 $14,287,374 $(16,287,234) $(1,629,840)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Conectisys Corporation (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'sonly 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. In 1997, the Company wrote-off this note receivable as it
was deemed uncollectible.
On February 15, 1996, PrimeLink entered into a Joint Marketing and
Development Agreement (the "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 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 pro forma statements of operations were provided.
The acquisitions of these companies occurred in connection with the
signing of the license agreements discussed in Note 8. 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.
On July 22, 1998, the Company acquired the remaining 20% interest in
TechniLink, Inc. for 50,000 shares of the Company's common stock valued
at $59,247.
Basis of presentation and going concern uncertainty
The accompanying consolidated financial statements include the
transactions of Conectisys Corporation, its wholly-owned subsidiary
TechniLink, Inc., and its 80% owned subsidiary PrimeLink, Inc. All
material intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements. Certain prior
period amounts in the accompanying consolidated financial statements have
been reclassified to conform to the current period's presentation.
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 has completed two mergers and is in the process of
developing its technology and product lines.
As of March 31, 2000, the Company had a deficiency in working capital of
approximately $1,720,000, and had incurred continual operating losses
since its return to the development stage ($1.8 million in 1996, $2.3
million in 1997, $4.2 million in 1998, $1.0 million in 1999 (ten months)
and 1.7 million for the six months ended March 31, 2000), 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 (See Note 13(b)). In the longer term, the Company plans to
achieve profitability through the operations of the subsidiaries. The
accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of the
recorded asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to continue in
existence.
Use of estimates
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily
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 consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values for its financial instruments. The following
summary presents a description of the methodologies and assumptions
used to determine such amounts. Fair value estimates are made at a
specific point in time and are based on relevant market information and
information about the financial instrument; they are subjective in
nature and involve uncertainties, matters of judgment and, therefore,
cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one
time the Company's entire holdings of a particular instrument. Changes
in assumptions could significantly affect the estimates.
Since the fair value is estimated at March 31, 2000, the amounts that
will actually be realized or paid at settlement of the instruments could
be significantly different.
The carrying amount of cash and cash equivalents is assumed to be the
fair value because of the liquidity of these instruments. Accounts
payable, accrued compensation, other current liabilities, and notes
payable approximate fair value because of the short maturity of these
instruments.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and on deposit and highly
liquid debt instruments with original maturities of three months or
less. All funds on deposit are with one financial institution.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed on
property and equipment using the straight-line method over the expected
useful lives of the assets, which are generally five years for vehicles
and office equipment and seven years for furniture and fixtures.
Licensing agreements
The costs 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. During the year ended November 30, 1998, the Company
acquired additional license rights in the amount of $421,478 from
TechniLink. Although the license remains viable, the Company currently
lacks the resources to develop and market it. Accordingly, during the
ten month period ended September 30, 1999, the Company accelerated
amortization on this asset by writing it down to its net realizable
value of $40,000, incurring a charge of $283,133. The balance of the
carrying value of older licenses and deferred technology was written-off
during the year ended November 30, 1998, as a consequence of persistent
competitive pressure. The expense incurred was $632,257.
Technology
Deferred technology costs include capitalized product development and
product improvement costs incurred after achieving technological
feasibility and are amortized over a period of five years.
Impairment of long-lived assets
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 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.
Accounting for stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-based Compensation" (SFAS No. 123) establishes a fair value method
of accounting for stock-based compensation plans and for transactions in
which an entity acquires goods or services from non-employees in
exchange for equity instruments. The Company adopted this accounting
standard on January 1, 1996. SFAS No. 123 also encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation. The Company has chosen to account for stock-based
compensation utilizing the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market price of the
Company's stock at the date of grant over the amount an employee must
pay to acquire the stock. Also, in accordance with SFAS No. 123, the
Company has provided footnote disclosures with respect to stock-based
employee compensation. The cost of stock-based compensation is measured
at the grant date on the value of the award, and this cost is then
recognized as compensation expense over the service period. The value
of the stock-based award is determined using a pricing model whereby
compensation cost is the excess of the fair market value of the stock as
determined by the model at the grant date or other measurement date over
the amount an employee must pay to acquire the stock.
Stock issued for non-cash 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.
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.
Net loss per common share - diluted
Net loss per common share - diluted 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.
New accounting pronouncements
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income," (SFAS No. 130) issued by the FASB is effective
for financial statements with fiscal years beginning after December 15,
1997. Earlier adoption is permitted. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The
Company does not expect adoption of SFAS No. 130 to have a material
effect on its financial position or its results of operations.
Statement of Financial Accounting Standard No. 131, "Disclosure About
Segments of an Enterprise and Related Information," (SFAS No. 131)
issued by the FASB is effective for financial statements with fiscal
years beginning after December 15, 1997. Earlier application is
permitted. SFAS No. 131 requires that public companies report certain
information about operating segments, products, services and geographical
areas in which they operate and their major customers. The Company does
not expect adoption of SFAS No. 131 to have an effect on its financial
position or results of operations; however, additional disclosures may be
made relating to the above items.
NOTE 2. RELATED PARTY TRANSACTIONS
The Company leases office space from S.W. Carver Corporation, a company
owned by a major shareholder of the Company. The lease is for a period
of twelve months, renewable annually in April at the option of the
lessee. Effective April, 1998, the monthly rent was increased from
$2,000 to $2,500. Lease expense for the six month period ended March
31, 2000 and the ten months ended September 30, 1999 was $15,000 and
$25,000, respectively.
NOTE 3. NOTES RECEIVABLE
A note receivable from CIPI of $1,302,500 was deemed to be uncollectible
and was written-off in the fiscal year ended November 30, 1997, resulting
in a bad debt expense of $446,625. The Company had previously provided
a cumulative allowance for doubtful accounts of $855,875 in fiscal 1996
and 1995. Interest receivable on this note was also written-off
accordingly.
A promissory note was received on a stock purchase agreement for
1,500,000 shares in the amount of $281,250 during the year ended November
30, 1997. An initial payment of $99,980 was received, leaving a balance
of $181,270 at year-end. The balance was collected in full during the
year ended November 30, 1998.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 consisted of the following:
Office equipment $ 217,388
Furniture and fixtures 16,609
Vehicles 35,362
----------
Total cost 269,359
Accumulated depreciation (200,094)
----------
Net book value $ 69,265
==========
NOTE 5. DUE TO OFFICER
During the ten month period ended September 30, 1999, the Company
received cash advances from its president totaling $555,193. At
September 30,1999, $197,500 of these advances was exchanged for the
assumption of a promissory note to S.W. Carver, due on demand (and in
no event later than October 1, 2000) at an annual interest rate of 10%,
and another $287,020 of these advances was exchanged for equity. Also
at September 30, 1999, $62,522 in accrued compensation was transferred
to the advance account, resulting in a balance of $133,195. This balance
was converted into a promissory note due on demand (and in no event
later than October 1, 2000) at an annual interest rate of 10%. For
NOTE 6. NOTES PAYABLE
Notes payable at March 31, 2000 consisted of the following:
Note payable to Devon Investment Advisors, $ 241,824
unsecured, due on demand,
interest payable at an annual rate of 10%
Note payable to Black Dog Ranch LLC, 278,728
unsecured, due on demand,
interest payable at an annual rate of 18%
Note payable to Deauville Capital Partners, 75,000
unsecured, due two years from date of note
with an option to convert to common stock,
interest payable at an annual rate of 10%
---------
Total notes payable $ 595,552
Current portion (595,552)
---------
Long-term portion $ 0
The maturity of long-term debt at March 31, 2000 was as follows:
Year ended September 30, 2000: $ 595,552
Thereafter 0
---------
Total notes payable $ 595,552
=========
NOTE 7. SHAREHOLDERS' EQUITY (DEFICIT)
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 December, 1997, the Company issued 4,550 shares of its common stock
in exchange for legal services valued at $2,733.
In January, 1998, the Company issued 133,334 shares of its common stock
to an investor for $167,730.
In February, 1998, the Company entered into a stock purchase agreement
with two subsidiaries of BVI Corporation, resulting in the purchase of
4,000,000 shares of the Company's common stock at a subscription price
of $.158625 per share, with a total value of $634,500.
In April, June, and September, 1998, 500,000 shares of common stock were
issued to a creditor in exchange for debt of $129,960.
In April and June, 1998, 80,023 shares of the Company's common stock
were issued in exchange for consulting services valued at $132,254.
In July, 1998, 450,000 shares of the Company's common stock were issued
to three investors for cash in the aggregate of $336,988.
In July, 1998, the Company issued 300,000 shares of its common stock to
the minority interest shareholder of TechniLink, Inc. in exchange for
the acquisition of licensed technology valued at $421,478, and issued
another 50,000 shares in exchange for the remaining 20% minority interest
valued at $59,247.
In July, 1998, 120,000 shares of the Company's common stock were issued
to four Company directors for director fees totaling $246,186.
In July, 1998, the Company issued 3,000 of its common shares in exchange
for consulting fees of $4,325.
In July, 1998, the Company issued another 425,000 shares of its common
stock to two consultants for services valued at $832,868.
In July, 1998, the Company issued 6,283 shares of its common stock in
exchange for printing services valued at $10,805.
In August, 1998, the Company issued 58,637 shares of its common stock
for consulting services totaling $91,147.
In September, 1998, the Company issued 1,410,000 shares of its common
stock for market consulting services totaling $880,967.
In October and November, 1998, the Company issued 444,117 shares of its
common stock in exchange for consulting services of $136,979.
In November, 1998, the Company issued 60,000 shares of its Class A $1.00
par value preferred stock as officer compensation.
In December, 1998, the Company canceled 1,350,000 shares of its common
stock previously issued to a consultant and valued at $814,536, which
were contingent on the establishment of a $5,000,000 line of credit
(never achieved).
In December, 1998, the Company issued 750,000 shares of its common stock
valued at $50,000 to a consultant for services rendered.
In January and September, 1999, the Company issued a total of 152,548
shares of its common stock for consultant services rendered of $45,360.
During the months March, 1999 through September, 1999, the Company
issued a total of 405,800 shares of its common stock valued at $79,537
in a private placement.
In September, 1999, the Company issued 100,000 shares of its common
stock for consultant fees rendered of $84,644.
In September, 1999, the Company issued 960,321 shares of its common
stock to repay related party debt of $197,500.
In September, 1999, the Company issued a total of 47,481 shares of its
common stock valued at $15,957 as hiring bonuses for two employees.
In September, 1999, the Company issued 260,000 shares of its common
stock to its president as compensation for director fees of $203,493
and also issued him 39,520 of its Class A $1.00 par value preferred
stock to partially repay debt.
In September, 1999, the Company issued options to purchase 500,000
shares each (a total of 1,000,000) of its Class B convertible preferred
stock at a price of $5.00 per share in exchange for debt reduction of
$50,000 each (a total of $100,000) to a note holder and the Company's
president.
In September, 1999, the Company issued options to purchase 600,000
shares of the Company's common stock (500,000 options to its president
and 100,000 options to an employee) valued at $150,000.
In October, 1999, the Company placed 221,200 shares of the Company stock
for sale for $49,920.
In November, 1999, the Company issued 100,000 shares of the Company's
stock valued at $50,000 for accounting services rendered.
In December, 1999, the Company issued 40,000 shares of the Company's
stock valued at $30,000 for accounting services rendered.
In December, 1999, the Company issued 815,000 shares of the Company's
stock valued at $334,177 for consulting services rendered.
In December, 1999, the Company issued 139,770 shares of the Company's
stock valued at $80,000 for bonuses owed to the Secretary of the
Company.
In December, 1999, the Company issued 279,539 shares of the Company's
stock valued at $160,000 for bonuses owed to the President of the
Company.
In December, 1999, the Company issued 26,087 shares of the Company's
stock valued at $18,000 for advertising and promotional brochures.
In January, 2000, the Company cancelled 6,283 shares of the Company's
stock valued at $10,805 for advertising and promotional brochures.
In February, 2000, the Company issued 412,000 shares of the Company's
stock valued at $103,000 for consulting and accrued salary.
In February, 2000, the Company issued 100,000 shares of the Company's
stock valued at $53,767 for consulting services.
In February, 2000, the Company sold 250,000 shares of the Company's
stock for $125,000 in cash.
In February, 2000, the Company issued 100,000 shares of the Company's
stock valued at $89,747 for accrued salaries owed to the ex-Chief
Financial Officer.
In March, 2000, the Company sold 637,672 shares of the Company's stock
for $284,041 in cash.
In March, 2000, the Company issued 420,000 shares of the Company's stock
valued at $534,895 for consulting services.
In March, 2000, the Company issued 20,000 shares of the Company's stock
valued at $16,000 for legal services.
NOTE 8. INCOME TAXES
Deferred income taxes consisted of the following at March 31, 2000:
Deferred tax asset, benefit
of net operating loss
carryforward $ 5,500,000
Deferred tax liability -
Valuation allowance (5,500,000)
-----------
Net deferred taxes $ -
The valuation allowance offsets the net deferred tax asset, since it is
more likely than not that it would not be recovered.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Employment agreements
The Company has entered into six 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. This agreement, along
with his royalty agreement, were mutually terminated. The separation
agreement, as of October 31, 1997, called for a settlement of $12,000 to
be paid $1,000 monthly for the following twelve months. As of March 31,
2000, $4,000 remained unpaid.
2) The President and CEO of TechniLink 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 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. In December, 1998, he
resigned from the Company.
3) The President and CEO of the Company entered into an agreement dated
October 2, 1995 (which was amended September 1, 1997 and September 1,
1999) for a period of five years, and he is entitled to receive a base
salary of $160,000 per year. The employee shall further receive a bonus,
paid at year-end, equal to 50% of the employee's salary, for continued
employment. The staying bonus will be compensated for with the Company's
restricted common stock. 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 50% of the average market value at the date of purchase.
4) The Chief Financial Officer of the Company entered into an agreement
dated October 2, 1995 (which was amended September 1, 1997) for a period
of three years, and he is entitled to receive a base salary of $80,000
per year and an annual bonus of 2% of the Company's pretax income. The
employee shall further receive a bonus, paid at year-end, equal to 50%
of the employee's salary, for continued employment. The staying bonus
shall be compensated for with the Company's restricted common stock.
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 50% of the average
market value at the date of purchase. Effective February, 1999, he
resigned from the Company.
5) The Secretary and Treasurer of the Company entered into an Agreement
dated October 2, 1995 (which was amended September 1, 1997 and September
1, 1999) for a period of three years, and she is entitled to receive a
base salary of $80,000 per year. The employee shall further receive a
bonus, paid at year-end, equal to 50% of the employee's salary, for
continued employment. The staying bonus shall be compensated for with
the Company's restricted common stock. 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 50% of the average market value at the date of purchase.
6) The Chief Technical Officer of the Company entered into an Agreement
dated August 1, 1998 for an initial term of three years, and he is
entitled to receive a base salary of $150,000 per year, with a minimum
of $90,000 to be paid annually in cash and the balance paid (at the
option of the Company) in cash or restricted common stock under rule
144. The employee shall receive a hire-on bonus of $75,000 worth of
the Company's restricted common stock under rule 144, at one-half market
price. The employee shall further receive performance bonuses (paid in
restricted common stock, as above) upon successful completion of specific
milestones pertaining to the implementation and deployment of certain
software (up to $862,500). If substantially all performance milestones
are met, 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.
License agreements
The Company has entered into license agreements with the 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 above), 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 each
licensee a royalty of 5% of net sales of the applicable product. In
addition, in the event of the sale 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. In 1997, there was a separation agreement between
the President of PrimeLink and the Company, whereby the President of
PrimeLink agreed to forfeit royalty rights for a $12,000 settlement.
Litigation
There have been three recent legal proceedings in which the Company has
been a party:
The first case, Securities and Exchange Commission (the "Plaintiff") vs.
Andrew S. Pitt, Conectisys Corp., Devon Investments Advisors, Inc., B&M
Capital Corp., Mike Aaman, 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
sought permanent injunctions from violating securities laws. The SEC did
not seek any civil penalties from the Company. The courts, having
conducted a trial of this matter without 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), and 17(a).
Conectisys was not found to have violated section 10(b), 10(b-5), or
15(c). The Company was subsequently ordered to disgorge profits
totaling $175,000. On March 5, 1999, the Company entered into an
Amended Final Judgment of Permanent Injunctive Relief with the Securities
and Exchange Commission ("SEC"). The Company and the SEC agreed on a
settlement in which the Company would dismiss its then pending appeal
and take a permanent injunction that it would not in the future violate
sections 5(a), 5(c), 17(a), 10(b), 10(b-5), or 15(c); in return the SEC
would not demand the previously ordered disgorgement of $175,000.
The second case 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
# 97-CV-1442, Division 3. The Plaintiff did not specify an amount of
damages that it sought from the Defendants. On March 26, 1999, the
District Court of Arapahoe, State of Colorado, dismissed the civil case
against Conectisys Corp. brought by Clamar Capital Corp.
The third case was brought by Southern Arizona Graphic Associates, Inc.
(the "Plaintiff") against Conectisys Corporation (the "Defendant"). The
case was brought before the Superior Court of the State of Arizona,
County of Pima, Case # 333852. The claim was for goods, printing
services, and funds advanced by the Plaintiff. On December 8, 1999,
the Company's Board of Directors approved the issuance of 26,087 shares
of the Company's common stock valued at $18,000 in full settlement of
the defendant's claim. The matter was subsequently dismissed with
prejudice.
NOTE 10. MAJOR CUSTOMERS
The Company, as a development stage enterprise, had no revenue during
the six months ended March 31, 2000. The Company had limited revenues
during the ten months ended September 30, 1999.
NOTE 11. STOCK OPTIONS
During the ten months ended September 30, 1999, the Company issued to a
note holder options to purchase 500,000 shares of the Company's Class B
preferred stock at an exercise price of $5.00 per share. As
consideration, the Company reduced the debt by $50,000 and received an
extension of time to pay-off its promissory note. The Company also
issued to its president options to purchase another 500,000 shares of the
Company's Class B preferred stock at an exercise price of $5.00 per share
in exchange for a reduction in debt of $50,000. Total consideration
received on the above issued options, as evidenced by debt reduction,
was $100,000. These options can be exercised between November 1, 1999
and November 1, 2002.
The Company's president currently owns 120,020 of the Company's Class A
Preferred Stock, and has options to purchase another 29,980 shares for
$1.00 per share through June 16, 2001.
The pro forma information required by SFAS No. 123 is not included as
there were no common stock options granted during the six months ended
March 31, 2000, and the disclosure for the 600,000 common stock options
issued during the ten month period ended September 30, 1999 would not be
materially different from the amounts and disclosures already presented.
During this period, 500,000 common stock options were issued to the
Company's president and another 100,000 common stock options were issued
to an employee. These options are all exercisable at a cost of 50% of
the average market value of the Company's stock during the prior 30 days
of trading before exercise, with the president's options remaining open
for a period of six years (including a three year option to renew) and
the employee's options remaining open for a period of four years
(including a two year option to renew).
The Company has granted various common stock options and warrants to
employees; the options and warrants were granted at approximately the
fair market value at the date of grant and vested immediately. The
common stock option was as follows:
Common Stock
Options Weighted
and Average
Warrants Price
---------- ----------
Balance outstanding, December 1, 1997 3,869,200 $ 1.42
Canceled and expired (869,200) $ (2.50)
----------
Balance outstanding, November 30, 1998 3,000,000 $ .37
Granted 600,000 $ 0.54 (1)
Canceled and expired - -
---------- ----------
Balance outstanding, September 30, 1999 3,600,000 $ 0.40
Granted 563,500 $ 2.00
Canceled and expired - -
---------- ----------
Balance outstanding, September 30, 1999 4,163,500 0.62
========= ========
Notes: (1) Floating strike price
The following table summarizes information about common stock options at
March 31, 2000:
Outstanding Exercisable
Weighted Weighted Weighted
Range of Common Average Average Common Average
Exercise Stock Life Exercise Stock Exercise
Prices Options (Months) Price Options Price
- ------------- --------- ------- -------- --------- --------
$ .20 - $.20 1,000,000 13 $ .20 1,000,000 $ .20
$ .46 - $.46 100,000 47 $ .46 100,000 $ .46
$ .46 - $.46 2,000,000 71 $ .46 2,000,000 $ .46
$ .55 - $.55 500,000 59 $ .55 500,000 $ .55
$ 2.00 563,500 35 $ 2.00 563,500 $ 2.00
$ .20 - $.55 4,163,500 50 $ .62 4,153,500 $ .62
========= == ======= ========= =======