<pre>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
| | Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
| X | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CONECTISYS CORPORATION
___________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
___________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
| | Fee computed on table below per Exchange Act Rules 14a 6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
_______________________________________________________________
2. Aggregate number of securities to which transaction applies:
_______________________________________________________________
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0?11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
_______________________________________________________________
4. Proposed maximum aggregate value of transaction:
_______________________________________________________________
5. Total fee paid:
_______________________________________________________________
| | Fees paid previously with preliminary materials.
| | Check box if any part of the fee is offset as provided by Exchange
Act Rule 0?11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1. Amount Previously Paid:________________________________________
2. Form, Schedule or Registration Statement No.:__________________
3. Filing Party:__________________________________________________
4. Date Filed: __________________________________________________
CONECTISYS CORPORATION
24730 Avenue Tibbits, Suite 130
Valencia, California 91355
March 14, 2003
To Our Shareholders:
You are cordially invited to attend the 2003 annual meeting of
shareholders of ConectiSys Corporation that will be held at 10:00 a.m.
local time on April 16, 2003 at the Valencia Hyatt, the Newhall Room, 24500
Town Center Drive, Valencia, California 91355. All holders of our
outstanding common stock as of the close of business on March 7, 2003 are
entitled to vote at the 2003 annual meeting.
Enclosed is a copy of the notice of annual meeting of shareholders,
a proxy statement and a proxy card. A current report on the business
operations of ConectiSys will be presented at the meeting, and shareholders
will have an opportunity to ask questions.
We hope you will be able to attend the 2003 annual meeting. Whether
or not you expect to attend, it is important that you complete, sign, date
and return the proxy card in the enclosed envelope in order to make certain
that your shares will be represented at the 2003 annual meeting.
Sincerely,
/S/ROBERT A. SPIGNO
Robert A. Spigno
Chairman of the Board and
Chief Executive Officer
CONECTISYS CORPORATION
24730 Avenue Tibbits, Suite 130
Valencia, California 91355
NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 16, 2003
__________________________
NOTICE IS HEREBY GIVEN that the 2003 annual meeting of shareholders
of ConectiSys Corporation, a Colorado corporation, will be held at 10:00
a.m. local time on April 16, 2003 at the Valencia Hyatt, the Newhall Room,
24500 Town Center Drive, Valencia, California 91355, for the following
purposes:
1. To elect three directors to the board of directors;
2. To consider and vote upon a proposal to approve an
amendment to our Articles of Incorporation to increase our
authorized shares of common stock from 250,000,000 shares
to 1,000,000,000 shares;
3. To ratify the selection of Hurley & Company as our
independent certified public accountants to audit the
financial statements of ConectiSys for the year ending
September 30, 2003; and
4. To transact such other business as may properly come before
the 2003 annual meeting or any adjournment or adjournments
thereof.
The board of directors has fixed the close of business on March 7,
2003 as the record date for the determination of shareholders entitled to
notice of and to vote at the 2003 annual meeting and all adjourned meetings
thereof.
By Order of the Board of Directors
/S/ ROBERT A. SPIGNO
Robert A. Spigno
Chairman of the Board and
Chief Executive Officer
Dated: March 14, 2003
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN
ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU LATER DESIRE TO REVOKE YOUR
PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED
PROXY STATEMENT.
CONECTISYS CORPORATION
24730 Avenue Tibbits, Suite 130
Valencia, California 91355
PROXY STATEMENT
_____________________
2003 ANNUAL MEETING OF SHAREHOLDERS
APRIL 16, 2003
_____________________
THESE PROXY MATERIALS ARE FIRST BEING MAILED TO
SHAREHOLDERS ON OR ABOUT MARCH 14, 2003
_____________________
VOTING AND PROXY
This proxy statement is being furnished in connection with the
solicitation of proxies by our board of directors for use at the 2003
annual meeting of shareholders to be held at 10:00 a.m. local time on April
16, 2003 at the Valencia Hyatt, the Newhall Room, 24500 Town Center Drive,
Valencia, California 91355 and at any adjournments of the 2003 annual
meeting. When a proxy is properly executed and returned, the shares it
represents will be voted according to directions noted on the proxy. If no
specification is indicated, the shares will be voted "for" each of the
proposals listed on the proxy. Any shareholder giving a proxy has the power
to revoke it at any time before it is voted by providing written notice to
our corporate Secretary, by issuance of a subsequent proxy, or by voting in
person at the 2003 annual meeting.
At the close of business on March 7, 2003, the record date for
determining shareholders entitled to notice of and to vote at the 2003
annual meeting, we had issued and outstanding 143,577,368 shares of common
stock. Only shareholders of record at the close of business on the record
date are entitled to notice of and to vote at the 2003 annual meeting or at
any adjournments of the meeting.
Each share of common stock entitles the holder of record to one
vote on any matter coming before the 2003 annual meeting. In voting for
directors, however, shares may be voted cumulatively for persons whose
names have been placed in nomination prior to the voting for the election
of directors, but only if a shareholder present at the 2003 annual meeting
gives notice at the 2003 annual meeting, prior to the voting for the
election of directors, of his or her intention to vote cumulatively. Notice
of intention to vote cumulatively may not be given by simply marking and
returning a proxy.
If any shareholder gives proper notice of his or her intention to
vote cumulatively, then each shareholder eligible to vote will be entitled
to cumulate his or her votes and to give any one or more of the nominees
whose names have been placed in nomination prior to the voting a number of
votes equal to the total number of directors to be elected multiplied by
the number of shares that the shareholder is entitled to vote. In addition,
the person or persons holding the proxies solicited by our board of
directors will exercise their cumulative voting rights, at their
discretion, to vote the shares they hold in such a way as to ensure the
election of as many of the nominees of the board of directors as they deem
possible. This discretion and authority of the proxy holders may be
withheld by checking the box on the proxy card marked "withhold from all
nominees." However, such an instruction will also deny the proxy holders
the authority to vote for any or all of the nominees of the board of
directors, even if cumulative voting is not called for at the 2003 annual
meeting.
1
A shareholder may choose to withhold from the proxy holders the
authority to vote for any of the individual candidates nominated by our
board of directors by marking the appropriate box on the proxy card and
striking out the names of the disfavored candidates as they appear on the
proxy card. In that event, the proxy holders will not cast any of the
shareholder's votes for candidates whose names have been crossed out,
whether or not cumulative voting is called for at the 2003 annual meeting.
However, the proxy holders will retain the authority to vote for the
candidates nominated by the board of directors whose names have not been
struck out and for any candidates who may be properly nominated at the 2003
annual meeting. If a shareholder wishes to specify the manner in which his
or her votes are allocated in the event of cumulative voting, he or she
must appear and vote in person at the 2003 annual meeting. Ballots will be
available at the 2003 annual meeting for shareholders who desire to vote in
person.
Under Colorado law and our Bylaws, a majority of the shares
entitled to vote, represented in person or by proxy, will constitute a
quorum at a meeting of shareholders. Generally, if a quorum is present,
then the affirmative vote of a majority of the shares represented and
voting on any matter other than the election of directors will constitute
the act of the shareholders, so long as the number of shares voting in
favor of any proposal equals at least a majority of the quorum. Although
abstentions and "broker non-votes" are not counted either "for" or
"against" any proposals, if the number of abstentions or "broker non-votes"
results in the votes "for" a proposal not equaling at least a majority of
the quorum required for the meeting, the proposal will not be approved.
This will be the case even though the number of votes "for" the proposal
exceeds the number of votes "against" the proposal.
In any election of directors, the candidates receiving the highest
number of affirmative votes of the shares entitled to be voted for them, up
to the number of directors to be elected by such shares, are elected. Votes
against a candidate and votes withheld have no legal effect.
We will pay the expenses of soliciting proxies for the 2003 annual
meeting, including the cost of preparing, assembling and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail or by
telephone, or by our directors, officers and regular employees who will not
be additionally compensated. We have no present plans to hire special
employees or paid solicitors to assist in obtaining proxies, but we reserve
the option to do so if it appears that a quorum otherwise might not be
obtained. The matters to be considered and acted upon at the 2003 annual
meeting are referred to in the preceding notice and are discussed below
more fully.
ELECTION OF DIRECTORS
(Proposal 1)
Our Bylaws provide for a range of three to seven directors and our
board of directors has fixed the number of directors at three. Directors
are elected annually and hold office until the next annual meeting of
shareholders, until their respective successors are elected and qualified
or until their earlier death, resignation or removal. It is intended that
the proxies solicited by our board of directors will be voted "for"
election of the following three nominees unless a contrary instruction is
made on the proxy: Robert A. Spigno, Lawrence Muirhead and Melissa McGough.
If, for any reason, one or more of the nominees is unavailable as a
candidate for director, an event that is not anticipated, the person named
in the proxy will vote for another candidate or candidates nominated by our
board of directors. However, under no circumstances may a proxy be voted in
favor of a greater number of persons than the number of nominees named
above. As described above, the candidates receiving the highest number of
affirmative votes of the shares entitled to be voted for them, up to the
number of directors to be elected by such shares, are elected. All of the
nominees for director are, at present, directors of ConectiSys.
The current directors and executive officers of ConectiSys, and the
director nominees, and their ages, positions, business experience and
education are as follows:
2
Name Age Position
- -------------------- --- -------------------------------------
Robert A. Spigno (1) 48 Chairman of the Board, Chief
Executive Officer and Director
Lawrence Muirhead (1) 43 Chief Technology Officer and Director
Patricia A. Spigno 45 Chief Financial Officer, Treasurer
and Secretary
Melissa McGough (1) 26 Corporate Administrator and Director
_______________
(1) Member of Stock Option Committee.
All directors hold office until the next annual meeting of
shareholders and until their respective successors are elected or until
their earlier death, resignation or removal. Each officer of ConectiSys
serves at the discretion of the board of directors. Robert A. Spigno and
Patricia A. Spigno were formerly husband and wife. There are no other
family relationships between or among any other directors, director
nominees or executive officers of ConectiSys.
Directors and Director Nominees
Robert A. Spigno has served as our Chief Executive Officer,
Chairman of the Board and as a member of our board of directors since
August 1995. Prior to that time, Mr. Spigno was President, for more than a
decade, of S.W. Carver Corp., a company founded by he and his former wife,
Patricia A. Spigno, that was a commercial builder of residential homes. Mr.
Spigno has over 25 years of experience in executive management and majority
ownership of several privately held companies.
Lawrence Muirhead has served as our Chief Technical Officer and as
a member of our board of directors since October 1997. Prior to that
time, Mr. Muirhead worked for TRW. Mr. Muirhead has over 18 years of
engineering and research and development experience in the aerospace
industry, including over 13 years of experience with TRW, where he helped
lead new product development and deployment. Mr. Muirhead holds a B.S.
degree in physics and a B.A. degree in mathematics from the University of
California, Santa Barbara, and holds an M.S. degree in physics from the
California Institute of Technology.
Melissa McGough has served as a member of our board of directors
since November 1999. Ms. McGough has also been an employee since December
1998 and whose current responsibilities include public relations and
management of our daily office activities. Prior to that time, Ms McGough
was a student.
Executive Officer
Patricia A. Spigno has served as our Chief Financial Officer and
Secretary since August 1995 and served as a member of our board of
directors from August 1995 until October 1997. Prior to that time, Ms.
Spigno was Chief Financial Officer and the head of administration of S.W.
Carver Corp., a company founded by her and her former husband, Robert A.
Spigno. Ms. Spigno has over 22 years of experience in accounting and asset
management.
3
Board Committees and Meetings
Our board of directors has a Stock Option Committee. Our board of
directors does not have an audit committee or a nominating committee. In
the absence of an audit committee or a nominating committee, the entire
board of directors will satisfy the duties of those committees. Selection
of nominees for our board of directors is made by the entire board of
directors.
The Stock Option Committee makes recommendations to the board of
directors concerning incentive compensation for employees and consultants
of ConectiSys and selects the persons entitled to receive options under our
stock option plan and establishes the number of shares, exercise price,
vesting period and other terms of the options granted under those plans.
The Stock Option Committee currently consists of Robert A. Spigno, Lawrence
Muirhead and Melissa McGough. During 2002, the Stock Option Committee held
three meetings and did not take action by written consent on any occasions.
No executive officer of ConectiSys has served as a director or member of
the compensation committee of any other entity whose executive officers
served as a director of ConectiSys.
During 2002, our board of directors held 33 meetings and took
action by written consent on 29 occasions. During 2002, no incumbent
director attended fewer than 75% of the aggregate of the total number of
meetings of the board of directors held during the period for which he or
she has been a director and the total number of meetings held by all
committees of the board on which he or she served during the periods that
he or she served.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
In October 1995, our board of directors set the compensation for
Robert A. Spigno, our Chairman of the Board and Chief Executive Officer.
Mr. Spigno has executed an employment agreement with ConectiSys effective
October 2, 1995, as amended by employment agreement amendments effective
July 24, 1996, August 11, 1997, September 1, 1999 and March 27, 2000 that
provide for annual salary of $160,000 and a performance bonus of up to 50%
of Mr. Spigno's annual salary. On March 27, 2000, Mr. Spigno was granted a
fully- vested five-year option to purchase up to 2,000,000 shares of common
stock at an exercise price of $.3864 per share, which was 50% of the
closing price of a share of our common stock on that date. On September 30,
1999, Mr. Spigno was granted a fully-vested three-year option to purchase
up to 500,000 shares of Class B Preferred Stock at an exercise price of
$5.00 per share, which is $.50 per share of common stock on an as-converted
basis, which was the closing price of a share of our common stock on that
date. On September 11, 2001, the expiration date of this option was
extended to November 1, 2004 and the exercise price per share was reduced
to $2.50 per share, which is $.25 per share of common stock on an as-
converted basis, which was the closing price of a share of our common stock
on that date. On October 21, 2001 Mr. Spigno was granted a fully-vested
three-year option to purchase up to 310,000 shares of Class A Preferred
Stock at an exercise price of $1.00 per share, which was the estimated
value of the Class A Preferred Stock on that date. On June 28, 2002, we
repriced Robert Spigno's fully-vested option to purchase up to 500,000
shares of Class B Preferred Stock from an exercise price of $2.50 per share
to an exercise price of $.50 per share. The exercise price of $.50 per
share equates to $.05 per share of common stock if the Class B Preferred
Stock were converted, which was in excess of the per share price of our
common stock on that date.
In August 1998, our board of directors set the compensation for
Lawrence Muirhead, our Chief Technology Officer. Mr. Muirhead has executed
an employment agreement with ConectiSys effective August 1, 1998, that
provides for annual salary of $150,000 and a performance bonus of up to 50%
of Mr. Muirhead's annual salary. On November 22, 1999, Mr. Muirhead was
granted an option expiring December 31, 2002 to purchase up to 2,000,000
shares of common stock at an exercise price of $.50 per share, which was
the closing price of a share of our common stock on that date. This option
vests upon the achievement of certain specified performance criteria.
4
In October 1995, our board of directors set the compensation for
Patricia A. Spigno, our Chief Financial Officer and Secretary. Ms. Spigno
has executed an employment agreement with ConectiSys effective October 2,
1996, as amended by employment agreement amendments effective July 24,
1996, September 1, 1999 and March 27, 2000 that provide for annual salary
of $80,000 and a performance bonus of up to 50% of Ms. Spigno's annual
salary. On March 27, 2000, Ms. Spigno was granted a fully-vested two-year
option to purchase up to 500,000 shares of common stock at an exercise
price of $.38 per share, which was 50% of the closing price of a share of
our common stock on that date.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our executive officers and directors, and persons who beneficially
own more than 10% of a registered class of our common stock to file initial
reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission. These officers, directors and
stockholders are required by Securities and Exchange Commission regulations
to furnish us with copies of all such reports that they file.
Based solely upon a review of copies of these reports furnished to
us during 2002 and thereafter, or written representations received by us
from reporting persons that no other reports were required, we believe that
all Section 16(a) filing requirements applicable to our reporting persons
during 2002 were complied with, except as described below.
The following individuals are in the process of preparing late
Forms 4 to report on the following numbers of Forms 4 the following numbers
of transactions that inadvertently were not timely reported: Robert A.
Spigno - 5 reports, 7 transactions; and Lawrence Muirhead - 2 reports, 2
transactions.
5
Compensation of Executive Officers
The Summary Compensation Table below provides information
concerning the annual and long-term compensation for services in all
capacities to ConectiSys of our Chief Executive Officer, our Chief
Technology Officer and our Chief Financial Officer and Secretary, or the
named executives, during the years ended September 30, 2002, 2001 and 2000.
There were no other executive officers whose annual salary and bonus
compensation exceeded $100,000 during the year ended September 30, 2002.
<table>
Summary Compensation Table
Long-Term
Compensation
------------
Awards
------------
Annual Compensation Securities
Name and Underlying All Other
Principal Position Year Salary($) Bonus($)(1) Options(#) Compensation ($)
------------------- ------- --------- ----------- ------------ ----------------
Robert A. Spigno, 2002 $160,000 $80,000 -- --
Chief Executive Officer 2001 $160,000 $80,000 6,453,634 --
2000 $160,000 $80,000 -- $13,750(2)
Lawrence Muirhead, 2002 $150,000 -- -- --
Chief Technology Officer 2001 $150,000 -- 2,000,000 --
2000 $150,000 -- -- --
Patricia A. Spigno, 2002 $ 80,000 $40,000 -- --
Chief Financial Officer 2001 $ 80,000 $40,000 500,000 --
and Secretary 2000 $ 80,000 $40,000 -- $13,750(2)
_______________
(1) Amounts represent approximate fair market value on the date of
grant of common stock granted.
(2) Represents amounts paid in connection with the rental of office
space to ConectiSys.
</table>
Stock Option Grants in 2002
In fiscal 2002, no options or stock appreciation rights were
granted to the named executives.
6
Option Exercises and Fiscal Year-End Values
The following table sets forth the number of shares acquired and
value realized upon exercise of options during the fiscal year ended
September 30, 2002 and the number of exercisable and unexercisable in-the-
money stock options and their values at September 30, 2002 for the named
executives. An option is "in-the-money" if the fair market value for the
underlying securities exceeds the exercise price of the option.
<table>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Option Table
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities Underlying Value ($)of Unexercised
Shares Unexercised Options In-the-Money Options at
Acquired on Value September 30, 2002 September 30, 2002 (1)
Name Exercise Realized ($) Exercisable(#) Unexercisable(#) Exercisable Unexercisable
--------------------- ------------ ------------ -------------- ---------------- -------------- ----------------
Robert A. Spigno --- --- 6,453,634 --- --- ---
Lawrence Muirhead --- --- --- 2,000,000 --- ---
Patricia Spigno --- --- 500,000 --- --- ---
_______________
(1) The closing sale price of our common stock on the OTC Bulletin
Board(R) as of September 30, 2002 was $.012.
</table>
Long-Term Incentive Plan Awards
In fiscal 2002, no awards were given to named executives under
long-term incentive plans.
Repricing of Options and SARs
Except as specified below, no adjustments to or repricing of stock
options or stock appreciation rights previously awarded to the named
executives occurred in fiscal 2002.
On June 28, 2002, we repriced Robert Spigno's fully-vested option
to purchase up to 500,000 shares of Class B Preferred Stock from an
exercise price of $2.50 per share to an exercise price of $.50 per share.
The exercise price of $.50 per share equates to $.05 per share of common
stock if the Class B Preferred Stock were converted, which was in excess of
the per share price of our common stock on that date.
Compensation of Directors
Our directors do not receive any compensation in their capacity as
members of the board of directors, but may be reimbursed for reasonable
expenses incurred in connection with attendance of meetings of the board of
directors.
The advisors to our board of directors each receive 250,000 shares
of common stock as yearly compensation for their advisory services.
Indemnification of Directors and Officers
The Colorado Business Corporation Act, or CBCA, requires that each
director discharge his duties to ConectiSys in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner that he reasonably believes to be in the
best interests of ConectiSys. Generally, a director will not be liable to
ConectiSys or its shareholders, for any action he takes or omits to take as
a director if, in connection with such action or omission, he performed the
duties of his position in compliance with the standards described above.
7
Our Articles of Incorporation provide that ConectiSys may indemnify
any director or officer of ConectiSys to the full extent permitted by
Colorado law. Under the CBCA, except for the situation described below, a
corporation may indemnify a person made a party to a proceeding because the
person is or was a director against liability incurred in the proceeding
if:
o the person conducted himself in good faith;
o the person reasonably believed, in the case of conduct in
an official capacity with ConectiSys, that his conduct was
in the best interests of ConectiSys and, in all other
cases, that his conduct was at least not opposed to the
best interests of ConectiSys; and
o in the case of any criminal proceeding, the person had no
reasonable cause to believe his conduct was unlawful.
Under the CBCA, ConectiSys may not indemnify a director as
described above:
o in connection with a proceeding by or in the right of
ConectiSys, in which the director was adjudged liable to
ConectiSys; or
o in connection with any other proceeding charging that the
director derived an improper personal benefit, whether or
not involving action in an official capacity, in which
proceeding the director was adjudged liable on the basis
that he derived an improper personal benefit.
Under the CBCA, ConectiSys is required to indemnify any director
who is wholly successful on the merits or otherwise, in the defense of any
proceeding to which the director was a party because the person is or was a
director, against reasonable expenses incurred by him in connection with
the proceeding.
Section 2115 of the California General Corporation Law, or the
California Corporations Code, provides that corporations such as ConectiSys
that are incorporated in jurisdictions other than California and that meet
various tests are subject to several provisions of the California
Corporations Code, to the exclusion of the law of the jurisdiction in which
the corporation is incorporated. We believe that as of September 30, 2002,
we met the tests contained in Section 2115. Consequently, we are subject
to, among other provisions of the California Corporations Code, Section 317
which governs indemnification of directors, officers and others. Section
317 generally eliminates the personal liability of a director for monetary
damages in an action brought by or in the right of ConectiSys for breach of
a director's duties to ConectiSys or our shareholders except for liability:
o for acts or omissions that involve intentional misconduct
or a knowing and culpable violation of law;
o for acts or omissions that a director believes to be
contrary to the best interests of ConectiSys or our
shareholders or that involve the absence of good faith on
the part of the director;
o for any transaction for which a director derived an
improper personal benefit;
8
o for acts or omissions that show a reckless disregard for
the director's duty to ConectiSys or our shareholders in
circumstances in which the director was aware, or should
have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to
ConectiSys or our shareholders;
o for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the
director's duty to ConectiSys or our shareholders; and
o for engaging in transactions described in the California
Corporations Code or California case law which result in
liability, or approving the same kinds of transactions.
To the extent indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of ConectiSys under the above provisions, or otherwise,
we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable.
Certain Relationships and Related Transactions
In October 1995, our board of directors set the compensation for
Robert A. Spigno, our Chairman of the Board and Chief Executive Officer.
Mr. Spigno has executed an employment agreement with ConectiSys effective
October 2, 1995, as amended by employment agreement amendments effective
July 24, 1996, August 11, 1997, September 1, 1999 and March 27, 2000 that
provide for annual salary of $160,000 and a performance bonus of up to 50%
of Mr. Spigno's annual salary. On March 27, 2000, Mr. Spigno was granted a
fully- vested five-year option to purchase up to 2,000,000 shares of common
stock at an exercise price of $.3864 per share, which was 50% of the
closing price of a share of our common stock on that date. On September 30,
1999, Mr. Spigno was granted a fully-vested three-year option to purchase
up to 500,000 shares of Class B Preferred Stock at an exercise price of
$5.00 per share, which is $.50 per share of common stock on an as-converted
basis, which was the closing price of a share of our common stock on that
date. On September 11, 2001, the expiration date of this option was
extended to November 1, 2004 and the exercise price per share was reduced
to $2.50 per share, which is $.25 per share of common stock on an as-
converted basis, which was the closing price of a share of our common stock
on that date. On October 21, 2001 Mr. Spigno was granted a fully-vested
three-year option to purchase up to 310,000 shares of Class A Preferred
Stock at an exercise price of $1.00 per share, which was the estimated
value of the Class A Preferred Stock on that date.
In August 1998, our board of directors set the compensation for
Lawrence Muirhead, our Chief Technology Officer. Mr. Muirhead has executed
an employment agreement with ConectiSys effective August 1, 1998, that
provides for annual salary of $150,000 and a performance bonus of up to 50%
of Mr. Muirhead's annual salary. On November 22, 1999, Mr. Muirhead was
granted an option initially expiring December 31, 2002 to purchase up to
2,000,000 shares of common stock at an exercise price of $.50 per share,
which was the closing price of a share of our common stock on that date.
This option vests upon the achievement of certain specified performance
criteria. On January 6, 2003, we extended the expiration date of this
option to December 31, 2004.
In October 1995, our board of directors set the compensation for
Patricia A. Spigno, our Chief Financial Officer and Secretary. Ms. Spigno
has executed an employment agreement with ConectiSys effective October 2,
1996, as amended by employment agreement amendments effective July 24,
1996, September 1, 1999 and March 27, 2000 that provide for annual salary
of $80,000 and a performance bonus of up to 50% of Ms. Spigno's annual
salary. On March 27, 2000, Ms. Spigno was granted a fully-vested two-year
option to purchase up to 500,000 shares of common stock at an exercise
price of $.38 per share, which was 50% of the closing price of a share of
our common stock on that date.
9
Effective August 1995, we leased office space from S.W. Carver
Corporation, a company owned by Robert Spigno and Patricia Spigno. The
original lease period was twelve months, renewable annually each April at
the option of ConectiSys. Effective April 1998, the monthly rent was
increased from $2,000 to $2,500. Aggregate lease expenditures for the ten-
month period ended September 30, 1999 were $25,000 and for the year ended
September 30, 2000 were $27,500. This office space lease was terminated in
September 2000. We believe the lease rates were at fair market value.
At September 30, 2000, Robert Spigno had made cumulative cash
advances to ConectiSys of $75,000. On October 1, 2000, these advances were
memorialized in a revolving promissory note, executed by ConectiSys in
favor of Mr. Spigno, due on demand, at an annual interest rate of 18%.
During the year ended September 30, 2001, additional cash advances were
made by Mr. Spigno under this note in the amount of $20,000 and we repaid
an aggregate of $50,000 to Mr. Spigno on this note. As of September 30,
2001, total accrued and unpaid interest was $11,880, resulting in a $56,880
balance under the note. On September 30, 2001, we executed a new
promissory note due September 1, 2002 initially in that amount. For the
year ended September 30, 2000, we incurred interest expenses in the amount
of $21,766, including $10,583 associated with the assumption by Mr. Spigno
of a promissory note due S.W. Carver Corporation, which was repaid in May
2000. On September 1, 2002, we executed a new promissory note due September
1, 2003 initially in the aggregate amounts owed to Mr. Spigno as of that
date. The aggregate amounts due Mr. Spigno under these arrangements as of
September 30, 2002 was $87,564.
At September 30, 2000, Patricia Spigno had made cumulative cash
advances to ConectiSys of $61,945, under a revolving promissory note
effective October 1, 2000, executed by ConectiSys in favor of Ms. Spigno,
due on demand, at an annual interest rate of 18%. During the year ended
September 30, 2001, we repaid an aggregate of $40,681 to Ms. Spigno on this
note. As of September 30, 2001, total accrued and unpaid interest was
$4,610, resulting in a $25,874 balance under the note. On September 30,
2001, we executed a new promissory note due September 1, 2002 initially in
that amount. Ms. Spigno also borrowed on a personal credit card for our
benefit in the amount of $18,455, bringing our total obligation due Ms.
Spigno at September 30, 2001 to $44,329. During the year ended September
30, 2002, additional loan advances from Ms. Spigno were $19,500 and accrued
interest was $2,269 and we repaid $39,500, resulting in an aggregate loan
balance due at September 30, 2002 of $8,143. The loan balance is currently
due on demand and continues to accrue interest at the rate of 18% per year.
On March 27, 2000, Robert Spigno was granted a fully-vested five-
year option to purchase up to 2,000,000 shares of common stock at an
exercise price of $.3864 per share, which was 50% of the closing price of a
share of our common stock on that date.
On March 27, 2000, Patricia Spigno was granted a fully-vested two-
year option to purchase up to 500,000 shares of common stock at an exercise
price of $.38 per share, which was 50% of the closing price of a share of
our common stock on that date.
On May 22, 2000, we issued 2,056,346 shares of common stock and
20,000 shares of Class A Preferred Stock to Robert Spigno upon the exercise
of options in exchange for an aggregate exercise price of $509,972
represented by the cancellation of debt and accrued compensation.
On July 31, 2000 we issued 34,857 shares of common stock valued at
$10,962 to Robert Spigno as compensation for services rendered.
On July 31, 2000 we issued 89,886 shares of common stock valued at
$28,269 to Lawrence Muirhead as compensation for services rendered.
10
On July 31, 2000 we issued 9,157 shares of common stock valued at
$2,880 to Melissa McGough as compensation for services rendered.
On July 31, 2000 we issued 357,968 shares of common stock valued at
$112,581 to Patricia Spigno as compensation for services rendered.
On September 28, 2000 we issued 47,521 shares of common stock
valued at $75,083 to Lawrence Muirhead as a hiring bonus that was due Mr.
Muirhead but that had not yet been paid.
On October 30, 2000 we issued 67,959 shares of common stock valued
at $14,815 to Robert Spigno as compensation for services rendered.
On October 30, 2000 we issued 60,868 shares of common stock valued
at $13,269 to Lawrence Muirhead as compensation for services rendered.
On October 30, 2000 we issued 12,950 shares of common stock valued
at $2,823 to Patricia Spigno as compensation for services rendered.
On April 23, 2001 we issued 2,293,855 shares of common stock valued
at $247,102 to Robert Spigno as compensation for services rendered.
On April 23, 2001 we issued 226,118 shares of common stock valued
at $30,450 to Lawrence Muirhead as compensation for services rendered.
On April 23, 2001 we issued 333,343 shares of common stock valued
at $45,000 to our then president, Rodney Lighthipe as compensation for
services rendered.
On April 23, 2001 we issued 50,000 shares of common stock valued at
$5,290 to Melissa McGough as a bonus.
On April 23, 2001 we issued 452,954 shares of common stock valued
at $48,943 to Patricia Spigno as compensation for services rendered.
On July 20, 2001 we issued 79,651 shares of common stock valued at
$14,815 to Robert Spigno as compensation for services rendered.
On July 20, 2001 we issued 89,946 shares of common stock valued at
$16,729 to Lawrence Muirhead as compensation for services rendered.
On July 20, 2001 we issued 120,968 shares of common stock valued at
$22,500 to our then president, Rodney Lighthipe as compensation for
services rendered.
On July 20, 2001 we issued 25,637 shares of common stock valued at
$4,768 to Patricia Spigno as compensation for services rendered.
On September 11, 2001, Robert Spigno was granted a fully-vested
option to purchase up to 500,000 shares of Class B Preferred Stock at an
exercise price of $2.50 per share. This equates to $.25 per share of common
stock if the Class B Preferred Stock were converted, which was the price of
our common stock on that date.
On October 21, 2001, Mr. Spigno was granted a fully-vested option
to purchase up to 310,000 shares of Class A Preferred Stock at an exercise
price of $1.00 per share, which was the estimated value on that date.
11
On December 19, 2001, Mr. Spigno exercised a portion of an option
to purchase 60,000 shares of Class A Preferred Stock for $1.00 per share,
which was the estimated value on that date.
In March 2002, we issued to AJW Partners, LLC, New Millennium
Capital Partners II, LLC, AJW Qualified Partners, LLC (f/k/a Pegasus
Capital Partners, LLC) and AJW Offshore, Ltd. (f/k/a AJW/New Millennium
Offshore, Ltd.) an aggregate of $300,000 of our 12% Convertible Debentures
due March 29, 2003, or the March 2002 offering, which were accompanied by
warrants to purchase up to an aggregate of 1,500,000 shares of common
stock. The debentures are immediately convertible into shares of common
stock at an initial per share price equal to the lesser of $.06 and 50% of
the average of the lowest three intraday trading prices during the 20
trading days immediately preceding a conversion. The warrants are
immediately exercisable for shares of common stock at an initial per share
price equal to the lesser of $.045 and the average of the lowest three
intraday trading prices during the 20 trading days immediately preceding a
conversion. As of September 30, 2002, $206,870 in principal amount plus
related interest on the March 2002 debentures was outstanding.
In May 2002, we issued to AJW Partners, LLC, New Millennium Capital
Partners II, LLC, AJW Qualified Partners, LLC (f/k/a Pegasus Capital
Partners, LLC) and AJW Offshore, Ltd. (f/k/a AJW/New Millennium Offshore,
Ltd.) an aggregate of $150,000 of our 12% Convertible Debentures due May
10, 2003, or the May 2002 offering, which were accompanied by warrants to
purchase up to an aggregate of 750,000 shares of common stock. The
debentures are immediately convertible into shares of common stock at an
initial per share price equal to the lesser of $.06 and 50% of the average
of the lowest three intraday trading prices during the 20 trading days
immediately preceding a conversion. The warrants are immediately
exercisable for shares of common stock at an initial per share price equal
to the lesser of $.045 and the average of the lowest three intraday trading
prices during the 20 trading days immediately preceding a conversion. As of
September 30, 2002, $150,000 in principal amount plus related interest on
the May 2002 debentures was outstanding.
In June 2002, we issued to AJW Partners, LLC, New Millennium
Capital Partners II, LLC, AJW Qualified Partners, LLC (f/k/a Pegasus
Capital Partners, LLC) and AJW Offshore, Ltd. (f/k/a AJW/New Millennium
Offshore, Ltd.) an aggregate of $300,000 of our 12% Convertible Debentures
due June 17, 2003, or the June 2002 offering, which were accompanied by
warrants to purchase up to an aggregate of 1,500,000 shares of common
stock. The debentures are immediately convertible into shares of common
stock at an initial per share price equal to the lesser of $.06 and 50% of
the average of the lowest three intraday trading prices during the 20
trading days immediately preceding a conversion. The warrants are
immediately exercisable for shares of common stock at an initial per share
price equal to the lesser of $.045 and the average of the lowest three
intraday trading prices during the 20 trading days immediately preceding a
conversion. As of September 30, 2002, $300,000 in principal amount plus
related interest on the June 2002 debentures was outstanding.
In June 2002, Laurus Master Fund transferred into its name 519,865
shares of our common stock pledged by Lawrence Muirhead as security for a
loan made by Laurus to us in April 2001 in the original principal amount of
$300,000.
In June 2002, Mercator Momentum Fund transferred into its name
2,361,814 shares of our common stock pledged by Robert Spigno as security
for a loan made by Mercator to us in February 2002 in the original
principal amount of $340,000.
On June 28, 2002, we repriced Robert Spigno's fully-vested option
to purchase up to 500,000 shares of Class B Preferred Stock from an
exercise price of $2.50 per share to an exercise price of $.50 per share.
The exercise price of $.50 per share equates to $.05 per share of common
stock if the Class B Preferred Stock were converted, which was in excess of
the price of our common stock on that date.
12
In July 2002, Laurus Master Fund transferred into its name 47,521
shares of our common stock pledged by Lawrence Muirhead as security for a
loan made by Laurus to us in April 2001 in the original principal amount of
$300,000.
In August 2002, Laurus Master Fund transferred into its name
294,857 shares of our common stock pledged by Robert Spigno as security for
a loan made by Laurus to us in April 2001 in the original principal amount
of $300,000.
In September 2002, Laurus Master Fund transferred into its name
117,021 shares of our common stock pledged by Lawrence Muirhead as security
for a loan made by Laurus to us in April 2001 in the original principal
amount of $300,000.
In September 2002, Laurus Master Fund transferred into its name
500,000 shares of our common stock pledged by Robert Spigno as security for
a loan made by Laurus to us in April 2001 in the original principal amount
of $300,000.
In October 2002, Laurus Master Fund transferred into its name
279,539 shares of our common stock pledged by Robert Spigno as security for
a loan made by Laurus to us in April 2001 in the original principal amount
of $300,000.
In October 2002, Laurus Master Fund transferred into its name
1,458,059 shares of our common stock pledged by Patricia Spigno as security
for a loan made by Laurus to us in April 2001 in the original principal
amount of $300,000.
In November 2002, we issued to AJW Partners, LLC, AJW Qualified
Partners, LLC (f/k/a Pegasus Capital Partners, LLC) and AJW Offshore, Ltd.
(f/k/a AJW/New Millennium Offshore, Ltd.) an aggregate of $200,000 of our
12% Convertible Debentures due November 27, 2003, or the November 2002
offering, which were accompanied by warrants to purchase up to an aggregate
of 1,000,000 shares of common stock. The debentures are immediately
convertible into shares of common stock at an initial per share price equal
to the lesser of $.01 and 50% of the average of the lowest three intraday
trading prices during the 20 trading days immediately preceding a
conversion. The warrants are immediately exercisable for shares of common
stock at an initial per share price equal to $.005. Upon filing of a
registration statement covering the resale of shares underlying the
convertible debentures and warrants issued in the November 2002 offering
and covering the resale of shares underlying the convertible debentures and
warrants that the debenture investors are committed to purchasing, the
debenture investors in the November 2002 offering are committed to
purchasing additional convertible debentures in the amount of $150,000 and
related warrants to purchase up to an aggregate of 750,000 shares of common
stock. Upon declaration by the Securities and Exchange Commission of the
registration statement covering the resale of shares underlying the
convertible debentures and warrants issued in the November 2002 offering
and covering the resale of shares underlying the convertible debentures and
warrants that the debenture investors are committed to purchasing, the
debenture investors in the November 2002 offering are committed to
purchasing additional convertible debentures in the amount of $150,000 and
related warrants to purchase up to an aggregate of 750,000 shares of common
stock. The full amount of the debentures issued in the November 2002
offering remains outstanding.
In November 2002, Laurus Master Fund transferred into its name
1,556,346 shares of our common stock pledged by Robert Spigno as security
for a loan made by Laurus to us in April 2001 in the original principal
amount of $300,000.
In November 2002, we issued 636,886 shares of common stock to
Lawrence Muirhead to reimburse him for 636,886 shares pledged by him as
security for a loan made by Laurus Master Fund to us in April 2001 in the
original principal amount of $300,000, which pledged shares were
transferred by Laurus into its name in connection with a default on that
loan.
13
In November 2002, we issued 2,630,742 shares of common stock to
Robert Spigno to reimburse him for 2,630,742 shares pledged by him as
security for a loan made by Laurus Master Fund to us in April 2001 in the
original principal amount of $300,000, which pledged shares were
transferred by Laurus into its name in connection with a default on that
loan.
In November 2002, we issued 1,458,059 shares of common stock to
Patricia Spigno to reimburse her for 1,458,059 shares pledged by her as
security for a loan made by Laurus Master Fund to us in April 2001 in the
original principal amount of $300,000, which pledged shares were
transferred by Laurus into its name in connection with a default on that
loan.
On December 12, 2002, we issued 250,000 shares of common stock
valued at $1,250 to Melissa McGough as bonus compensation.
In January 2003, we issued 2,361,814 shares of common stock to
Robert Spigno to reimburse him for 2,361,814 shares pledged by him as
security for a loan made by Mercator Momentum Fund to us in February 2002
in the original principal amount of $340,000, which pledged shares were
transferred by Mercator into its name in connection with a default on that
loan.
In January 2003, we issued 47,521 shares of common stock to
Lawrence Muirhead to reimburse him for 47,521 shares pledged by him as
security for a loan made by Laurus Master Fund to us in April 2001 in the
original principal amount of $300,000, which pledged shares were
transferred by Laurus into its name in connection with a default on that
loan.
On January 6, 2003, we extended to December 31, 2004, the
expiration date of an option granted to Mr. Muirhead on November 22, 1999
that initially expired December 31, 2002, to purchase up to 2,000,000
shares of common stock at an exercise price of $.50 per share, which was
the closing price of a share of our common stock on the date of grant. This
option vests upon the achievement of certain specified performance
criteria.
On January 6, 2003, we extended to December 31, 2004, the
expiration date of an option granted to Mr. Spigno on November 22, 1999
that initially expired December 31, 2002, to purchase up to 500,000 shares
of common stock at an exercise price of $.15 per share, which was 50% of
the closing price of a share of our common stock on the date of grant. This
option vested immediately.
On January 6, 2003, we extended to December 31, 2004, the
expiration date of an option granted to Ms. McGough on September 1, 1999
that initially expired December 31, 2002, to purchase up to 100,000 shares
of common stock at an exercise price of $.38 per share, which was 50% of
the closing price of a share of our common stock on the date of grant. This
option vested immediately.
We are or have been a party to various employment, consulting and
compensation arrangements with related parties, as more particularly
described above under the headings "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements," "Compensation of Executive
Officers," and "Compensation of Directors."
Security Ownership of Certain Beneficial Owners and Management
As of February 24, 2003, a total of 116,964,306 shares of our common stock
were outstanding. The following table sets forth information as of that
date regarding the beneficial ownership of our common stock both before and
immediately after the offering by:
14
o each person known by us to own beneficially more than five
percent, in the aggregate, of the outstanding shares of our
common stock as of the date of the table;
o each of our directors;
o each executive officer named in the Summary Compensation
Table contained elsewhere in this document; and
o all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission, and generally
includes voting or investment power with respect to securities. Except as
indicated in the footnotes to the table, we believe each holder possesses
sole voting and investment power with respect to all of the shares of
common stock owned by that holder, subject to community property laws where
applicable. In computing the number of shares beneficially owned by a
holder and the percentage ownership of that holder, shares of common stock
subject to options or warrants or underlying convertible debentures or
preferred stock held by that holder that are currently exercisable or
convertible or are exercisable or convertible within 60 days after the date
of the table are deemed outstanding. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person or group.
As described above under the heading "Certain Relationships and
Related Transactions," AJW Partners, LLC, New Millennium Capital Partners
II, LLC, AJW Qualified Partners, LLC (f/k/a Pegasus Capital Partners, LLC)
and AJW Offshore, Ltd. (f/k/a AJW/New Millennium Offshore, Ltd.) hold
convertible debentures and related warrants. The convertible debentures and
related warrants prohibit conversion of those convertible debentures or
exercise of those related warrants to the extent that conversion of those
convertible debentures would result in either of those security holders,
together with their respective affiliates, beneficially owning in excess of
4.99% or 9.99% of our outstanding shares of common stock, and to the extent
that exercise of those related warrants would result in either of those
security holders, together with their respective affiliates, beneficially
owning in excess of 4.99% of our outstanding shares of common stock.
AJW Partners, LLC, New Millennium Capital Partners II, LLC, AJW
Qualified Partners, LLC (f/k/a Pegasus Capital Partners, LLC) and AJW
Offshore, Ltd. (f/k/a AJW/New Millennium Offshore, Ltd.) may waive the
4.99% limitations upon 60 days' prior written notice to us. Also, these
limitations do not preclude AJW Partners, LLC, New Millennium Capital
Partners II, LLC, AJW Qualified Partners, LLC (f/k/a Pegasus Capital
Partners, LLC) and AJW Offshore, Ltd. (f/k/a AJW/New Millennium Offshore,
Ltd.) from converting or exercising a convertible debenture or related
warrants and selling shares underlying the convertible debenture or related
warrants in stages over time where each stage does not cause the security
holder and its affiliates to beneficially own shares in excess of the
limitation amounts. In light of the limitations contained in the
convertible debentures and related warrants, the number of shares shown in
the table as beneficially owned by AJW Partners, LLC, New Millennium
Capital Partners II, LLC, AJW Qualified Partners, LLC (f/k/a Pegasus
Capital Partners, LLC) and AJW Offshore, Ltd. (f/k/a AJW/New Millennium
Offshore, Ltd.) has been limited to 4.99% of the shares of our common stock
outstanding as of the date of the table plus the corresponding number of
shares issuable.
15
<Table>
Name and Address of Title of Amount and Nature of
of Beneficial Owner (1)(2) Class Beneficial Ownership(2) Percent of Class)
- -------------------------- --------- ------------------------- ------------------
Robert A. Spigno Common 11,436,210(3) 9.27%
Class A Preferred 450,020(4) 100.00%
Class B Preferred 500,000(5) 100.00%
AJW Partners, LLC Common 6,154,720 4.99%
New Millennium Capital
Partners II, LLC Common 6,154,720 4.99%
AJW Offshore, Ltd. Common 6,154,720 4.99%
AJW Qualified Partners, LLC. Common 6,154,720 4.99%
Patricia A. Spigno Common 2,423,863(6) 2.06%
Lawrence Muirhead Common 971,393 *
Melissa McGough Common 454,138(7) *
All directors and executive
officers as a group
(4 persons) Common 15,285,604(8) 12.33%
Class A Preferred 450,020(4) 100.00%
Class B Preferred 500,000(5) 100.00%
_______________
</table>
* Less than 1.00%
(1) The address of each director and executive officer named in
this table is c/o ConectiSys Corporation, 24730 Avenue
Tibbitts, Suite 130, Valencia, California 91355. Mr. Spigno
and Mr. Muirhead are directors and executive officers of
ConectiSys. Ms. McGough is a director of ConectiSys. Ms.
Spigno is an executive officer of ConectiSys.
(2) The address of each of AJW Partners, LLC, New Millennium
Capital Partners II, LLC and AJW Qualified Partners, LLC
and AJW Offshore, Ltd. is 1044 Northern Boulevard, Suite
302, Roslyn, New York 11576. AJW Offshore, Ltd. was
formerly known as AJW/New Millennium Offshore, Ltd. AJW
Qualified Partners, LLC was formerly known as Pegasus
Capital Partners, LLC.
(3) Includes 1,443,654 shares underlying options and 5,000,000
shares issuable upon conversion of Class B Preferred Stock.
Mr. Spigno holds an option to purchase Class B Preferred
Stock.
(4) Includes an option to purchase up to 250,000 shares of
Class A Preferred Stock.
(5) Represents an option to purchase up to 500,000 shares of
Class B Preferred Stock.
(6) Includes 500,000 shares underlying options.
(7) Includes 100,000 shares underlying options.
(8) Includes 7,043,654 shares underlying options.
16
Audit Committee Report
The full board of directors of ConectiSys Corporation, discharging
the duties of an audit committee of the board of directors, discussed with
the independent auditors of ConectiSys Corporation all matters required to
be discussed by generally accepted auditing standards, including those
described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees." Prior to the inclusion and filing
with the Securities and Exchange Commission of the consolidated audited
financial statements in ConectiSys Corporation's annual report on Form 10-
KSB for the year ended September 30, 2002, the board of directors discussed
with management and reviewed ConectiSys Corporation's consolidated audited
financial statements. In addition, the board of directors obtained from the
independent auditors a formal written statement indicating that no
relationships exist between the auditors and ConectiSys Corporation that
might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independent Discussions with Audit
Committees," discerned from discussions with the auditors that no
relationships exist that may impact their objectivity and independence and
satisfied itself as to the auditors' independence. Prior to the filing of
the Form 10-KSB with the Securities and Exchange Commission, and based on
the review and discussions referenced above, the board of directors
recommended that the audited financial statements be included in the Form
10-KSB.
Respectfully submitted,
Board of Directors of ConectiSys Corporation
Robert A. Spigno
Lawrence Muirhead
Melissa McGough
Principal Accounting Firm Fees
The following table sets forth the aggregate fees billed or
expected to be billed to us for services rendered to us for the year ended
September 30, 2002 by our independent auditors, Hurley & Company:
Audit Fees $13,500 (a)
Financial Information
Systems Design and
Implementation Fees -
All Other Fees $15,263 (b)(c)
__________________________
(a) Includes fees for the audit of our annual consolidated financial
statements for the year ended September 30, 2002.
(b) Includes fees for reviews of the condensed consolidated financial
statements included in our quarterly reports on Form 10-QSB for the
year ended September 30, 2002. Also Includes fees for consents
relating to registration statements.
(c) The board of directors has considered whether the provision of
these services is compatible with maintaining the auditor's
independence.
17
AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Proposal 2)
Effective as of February 24, 2003, our board of directors approved
an amendment to Article IV of our Articles of Incorporation to increase the
number of shares of our authorized common stock from 250,000,000 to
1,000,000,000. We refer to this amendment as the authorized share increase.
The full text of the amendment is attached to this proxy statement as
Exhibit A. Our board of directors believes that the authorized share
increase is in the best interests of ConectiSys and our shareholders
because it makes additional shares of common stock available for
acquisitions, financings, present and future employee benefit programs and
other corporate purposes.
In addition, our board of directors believes that the authorized
share increase is critical in light of our recent issuances of convertible
debentures and related warrants. As described above under the heading
"Certain Relationships and Related Transactions," the convertible
debentures and related warrants are convertible into or exercisable for
shares of our common stock. After taking into account the number of shares
currently outstanding or issuable upon conversion or exercise of our
outstanding derivative securities, the number of authorized shares of
common stock provided for in our Articles of Incorporation is not
sufficient to satisfy our obligations to issue shares of common stock to
the convertible debenture investors upon conversion of the convertible
debentures and exercise of the related warrants.
Consequently, the agreements we entered into in connection with our
offerings of the convertible debentures and related warrants required us
to, among other things, reserve subject to shareholder approval, the shares
of common stock underlying the convertible debentures and related warrants
and, on a best efforts basis, increase the authorized number of shares of
our common stock no later than February 28, 2003. If we are unsuccessful in
timely increasing our authorized number of shares of common stock, we will
be in default under those agreements and could face significant adverse
consequences. Those consequences include, among other things, the holders
of the convertible debentures and related warrants, requiring us to pay
substantial penalties, requiring us to repay the convertible debentures
and/or foreclosing upon their security interests in our assets, including
our intellectual property. Any of these events could have a material
adverse effect on our business, operating results, financial condition,
cash flows and ability to service our other indebtedness.
Our board of directors believes that it is in the best interests of
ConectiSys and our shareholders to amend our Articles of Incorporation to
provide sufficient shares of common stock to enable us to satisfy our
obligations to issue shares of common stock as described above and to make
additional shares of common stock available for acquisitions, financings,
present and future employee benefit programs and other corporate purposes.
The additional shares of common stock proposed to be authorized through the
authorized share increase may be issued from time to time as our board of
directors may determine without further action by our shareholders unless
such action is required in a specific case by applicable laws, rules or
regulations. Although our board of directors has no current plans to use
these additional shares of common stock to entrench present management, it
may be able to use these additional shares as a defensive tactic against
hostile takeover attempts. However, no hostile takeover attempts are, to
management's knowledge, currently threatened.
Our Articles of Incorporation, as currently in effect and as
proposed to be amended through the authorized share increase, do not
provide our common shareholders with preemptive rights that would entitle
such persons, as a matter of right, to subscribe for the purchase of any
shares, rights, warrants or other securities or obligations convertible
into, or exchangeable for, securities of ConectiSys.
18
Required Vote of Shareholders and Board Recommendation
The affirmative vote of a majority of the shares of common stock
represented and voting on this proposal is required for approval of this
proposal, provided that the number of shares voting in favor of the
proposal equals at least a majority of the quorum.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PROPOSED AMENDMENT TO OUR ARTICLES OF INCORPORATION.
APPROVAL OF INDEPENDENT AUDITORS
(Proposal 3)
Our board of directors has selected the independent certified
public accounting firm of Hurley & Company to audit and comment on our
financial statements for the year ending September 30, 2003, and to conduct
whatever audit functions are deemed necessary. Hurley & Company audited our
financial statements for the year ended September 30, 2002 that were
included in our most recent annual report on Form 10-KSB.
We do not anticipate that a representative of Hurley & Company will
be present at the 2003 annual meeting.
Required Vote of Shareholders and Board Recommendation
Although a vote of shareholders is not required on this proposal,
our board of directors is asking our shareholders to ratify the appointment
of our independent auditors. The affirmative vote of a majority of the
shares of common stock represented and voting on this proposal will
constitute shareholder ratification of the appointment, provided that the
number of shares voting in favor of the proposal equals at least a majority
of the quorum. If shareholder approval of this proposal is not obtained,
our board of directors may reconsider its appointment of independent
auditors.
OUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT AUDITORS.
OTHER MATTERS
Our board of directors knows of no other matters to be brought
before the 2003 annual meeting. However, if other matters should come
before the 2003 annual meeting, it is the intention of the person named in
the proxy to vote such proxy in accordance with his or her judgment on such
matters.
ANNUAL REPORT
A copy of our annual report to the Securities and Exchange
Commission on Form 10-KSB for the year ended September 30, 2002 is
available without charge to shareholders and may be obtained by writing to
Investor Relations Department, ConectiSys Corporation, 24730 Avenue
Tibbits, Suite 130 Valencia, California 91355 (telephone number: (661)
295-6763).
19
SUBMISSION OF SHAREHOLDER PROPOSALS
Under Rule 14a-8 of the Securities and Exchange Commission,
proposals by shareholders that are intended for inclusion in our proxy
statement and proxy and to be presented at our next annual meeting must be
received by us by November 15, 2004, in order to be considered for
inclusion in our proxy materials. These proposals must be addressed to our
Secretary and may be included in next year's proxy materials if they comply
with certain rules and regulations of the Securities and Exchange
Commission governing shareholder proposals. For all other proposals by
shareholders to be timely, a shareholder's notice must be delivered to, or
mailed and received at, the principal executive offices of ConectiSys not
later than January 29, 2004. If a shareholder fails to so notify us of any
such proposal prior to such date, management of ConectiSys will be allowed
to use their discretionary voting authority with respect to proxies held by
management when the proposal is raised at the annual meeting, without any
discussion of the matter in our proxy statement.
20
EXHIBIT A
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CONECTISYS CORPORATION
Pursuant to the provisions of the Colorado Business Corporation
Act, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
FIRST: The name of the corporation is ConectiSys Corporation.
SECOND: The following amendment to the Articles of Incorporation
of ConectiSys Corporation was adopted on April 16, 2003, as prescribed by
the Colorado Business Corporation Act, by a vote of the shareholders of the
corporation. The number of shares voted for the amendment by each voting
group entitled to vote separately on the amendment was sufficient for
approval. The preliminary paragraph of Article IV to the Articles of
Incorporation of ConectiSys Corporation is replaced with the following:
ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which this Corporation shall have
authority to issue is One Billion (1,000,000,000) shares of no par value
each, which shares shall be designated "Common Stock"; and Fifty Million
(50,000,000) shares of $1.00 par value each, which shares shall be
designated "Preferred Stock" and which may be issued in one or more series
at the discretion of the Board of Directors. In establishing a series the
Board of Directors shall give to it a distinctive designation so as to
distinguish it from the shares of all other series and classes, shall fix
the number of shares in such series, and the preferences, rights and
restrictions thereof. All shares of any one series shall be alike in every
particular except as otherwise provided by these Articles of Incorporation
or the Colorado Business Corporation Act.
THIRD: There is no exchange, reclassification or cancellation of
issued shares provided for in this amendment.
FOURTH: The manner in which such amendment effects a change in the
amount of stated capital, and the amount of stated capital as changed by
such amendment, are as follows: the number of shares of "Common Stock" that
the corporation is authorized to issue has increased by Seven Hundred Fifty
Million (750,000,000) shares resulting in the corporation having the
authority to issue up to One Billion (1,000,000,000) shares of "Common
Stock."
Date: April 16, 2003 _________________________________________
Robert A. Spigno, Chief Executive Officer
_________________________________________
Patricia A. Spigno, Secretary
PROXY FOR 2003 ANNUAL MEETING OF SHAREHOLDERS
CONECTISYS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of ConectiSys Corporation (the
"Company") hereby constitutes and appoints Robert A. Spigno, with the power
to appoint his substitute, as attorney and proxy to appear, attend and vote
all of the shares of common stock of the Company standing in the name of
the undersigned on the record date at the 2003 annual meeting of
shareholders of the Company to be held at 10:00 a.m. local time on April
16, 2003 at the Valencia Hyatt, the Newhall Room, 24500 Town Center Drive,
Valencia, California 91355 and at any adjournment or adjournments thereof,
upon the below proposals. The Company's board of directors recommends a
vote FOR each of the following proposals:
1. To elect three directors to the Company's board of directors as
follows:
[ ] FOR all nominees listed below, except [ ] WITHHOLD AUTHORITY to
as marked to the contrary below vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
provided below.)
Robert A. Spigno
Lawrence Muirhead
Melissa McGough
IF THE UNDERSIGNED SHAREHOLDER WISHES TO CUMULATE VOTES IN THE
ELECTION OF DIRECTORS, THE UNDERSIGNED MUST APPEAR AND VOTE IN
PERSON AT THE 2003 ANNUAL MEETING. IF ANY SHAREHOLDER GIVES PROPER
NOTICE AT THE 2003 ANNUAL MEETING OF HIS OR HER INTENTION TO
CUMULATE VOTES IN THE ELECTION OF DIRECTORS, THE PROXY HOLDER WILL
HAVE THE FULL DISCRETION AND AUTHORITY TO VOTE CUMULATIVELY EXCEPT
TO THE EXTENT DESCRIBED IN THE "VOTING AND PROXY" SECTION OF THE
PROXY STATEMENT.
2. To consider and vote upon a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the Company's
number of authorized shares of common stock from 250,000,000 shares
to 1,000,000,000 shares.
[ ] FOR approval [ ] AGAINST approval [ ] ABSTAIN
3. To consider and vote upon a proposal to ratify the appointment of
Hurley & Company as independent certified public accountants of the
Company for the year ending September 30, 2003.
[ ] FOR approval [ ] AGAINST approval [ ] ABSTAIN
4. To vote in his or her discretion on such other business as may
properly come before the meeting, or any adjournment or
adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSALS INDICATED AND IN ACCORDANCE WITH
THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER BUSINESS. ALL OTHER PROXIES
HERETOFORE GIVEN BY THE UNDERSIGNED IN CONNECTION WITH THE ACTIONS PROPOSED
ON THIS PROXY CARD ARE HEREBY EXPRESSLY REVOKED. THIS PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED BY WRITTEN NOTICE TO THE SECRETARY OF THE
COMPANY, BY ISSUANCE OF A SUBSEQUENT PROXY OR BY VOTING IN PERSON AT THE
ANNUAL MEETING.
Please mark, date, sign and return this proxy promptly in the
enclosed envelope. When shares are held by joint tenants, both should sign.
When signing as attorney, as executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED:_____________________________________
___________________________________________
(Signature of Shareholder(s))
___________________________________________
(Print Name(s) Here)
[ ] PLEASE CHECK IF YOU ARE PLANNING
TO ATTEND THE 2003 ANNUAL MEETING.