CONECTISYS CORP.
Unaudited Consolidated Balance Sheet
May-30-1997
May-30-1997 May-30-1996 Nov-30-1996
Unaudited Unaudited Audited
Assets
Current Assets
Cash 3,197 31,441 24,495
Accounts Receivable-trade (net allowance for doubtful 70,237 0 35,532
Stock Subscription Receivable 0 0 0
Other Current Asset 0 6,283 0
Total Current Assets 73,433 37,724 60,027
Notes Receivable net (note 4) 446,625 466,625 446,625
Interest Receivable net (note 4) 35,403 0 7,947
Property and Equipment Net (note 5) 134,195 172,335 150,370
Licenses and Technology, net of accumulated amortization 1,543,784 2,178,430 1,727,242
Other Assets 4,500 4,500 4,500
Total Assets 2,237,941 2,859,614 2,396,711
Liabilities and Shareholder equity
Current Liabilities
Accounts Payables 660,532 364,302 338,822
Accrued Compensation (note 9) 172,868 44,961 136,181
Notes Payables (notes 3 and 6)
Related Party 0 508,130 0
Other 247,719 283,911 247,719
Other Current Liabilities 2,218 14,388 12,245
Accrued interest payable 144,323 0 105,417
Total Current Liabilities 1,227,660 1,215,692 840,384
Long term liabilities
Notes Payables (notes 3 and 6)
Related Party 522,953 0 527,830
Other 201,566 0 163,719
Total Long term liabilities 724,519 0 691,549
Minority Interest 0 69,431 0
Shareholders Equity
Preferred Stock - Class A 1,000,000 Shares Authorized 20,500 16,345 20,500
$ 1.00 Par Value, 20,500 Issued and Outstanding
Convertible Preferred Stock - Class B 1,000,000 Shares 0 0 0
Authorized, $1.00 Par Value, -0- Shares Issued and
Outstanding Common Stock - 250,000,000 Shares
Authorized, No Par Value 6,477,220 6,029,574 6,457,221
2,796,279 Authorized Issued and Outstanding
Accumulated Gain (Deficit) During Developement Stage (6,211,958) 4,471,428 (5,612,943)
Total Shareholder Equity 285,762 1,574,491 864,778
Total Liabilities and Shareholders Equity 2,237,941 2,859,614 2,396,711
CONECTISYS CORP.
Condensed Statement of Operations (6 months ended)
May-30-1997
December 1,1990
(Inception) through
May-30-1997 May-30-1996 May-30-1997
Unaudited Unaudited Unaudited
Revenues 208,094 0 319,257
Cost of Goods Sold 114,414 0 201,391
Gross Profit 93,680 0 117,866
General and Administrative 678,328 710,925 3,548,945
Bad Debt Write-offs 0 0 1,233,897
Loss From Operations (584,647) (710,925) (4,664,975)
Non-Operating Income (Expense) 26,205 2,727 127,253
Interest Expense (40,573) (440,358) (718,241)
Minority Interest 0 51,138 121,747
Net Loss (599,015) $ (1,097,418) (5,134,216)
Weighted Average Shares Outstanding 2,759,067 2,663,373
Net loss per share (0.22) $ (0.41)
CONECTISYS CORP.
Condensed Statement of Cash Flows (6 months)
May-30-1997
December 1,1990
May-30-1997 May-30-1996 Nov-30-1996 (Inception) through
Unaudited Unaudited Audited May 30,1997
Operating activities
Net Income (loss) (599,015) (1,097,418) (2,238,933) (5,134,216)
Adjustments to reconcile net income (loss)
to net cash Provided by (used in)
operating activities:
Depreciation and amortization 242,175 0 519,789 763,234
provision for bad debt 48,810 0 118,611 1,023,296
Stock issued for sevices 19,999 207,961 575,433 1,482,544
Stock issued for interest 0 439,779 446,640 446,640
Minority interest 0 (51,138) (120,569) (121,747)
Changes in operating assets and liabilities
(Increase) decrease in assets
Accounts receivable (34,705) (419) (38,862) (73,148)
Interest receivable (76,266) 0 (95,281) (179,913)
Deposits 0 0 0 (4,500)
Increase (decrease) in liabilities
Accounts payable 321,710 321,369 295,889 660,532
Accrued interest payable 38,906 0 0 38,906
Accrued compensation 36,687 (8,334) 82,886 172,868
Other current liabilities (10,027) 2,266 105,540 107,635
Net cash provided by (used in) operating activities (11,726) (185,934) (348,857) (817,869)
Investing activities
Increase in notes receivable 0 0 0 (1,322,500)
Costs of licenses & technology (39,392) 0 (30,340) (72,984)
Purchase of equipment (3,154) (6,254) (31,535) (61,124)
Net cash from (used) in investing activities (42,545) (6,254) (61,875) (1,456,607)
Financing Activies
Common Stock issued for cash 0 150,000 150,000 560,655
Dividends received 0 0 0 0
Prefferd Stock issuance 0 0 0 16,345
Proceeds from debts
Related party 0 0 150,309 206,544
Other 36,473 126,866 155,203 1,519,310
Payments on debt
Related (3,500) (55,148) (33,245) (36,745)
Other 0 (8,951) (8,951)
Decrease in subscription receivable 0 0 20,000 20,000
Contributed capital 0 0 515
Net cash from (used) in financing activities 32,973 221,718 433,316 2,227,673
Net Increase (decrease) in cash (21,298) 29,530 22,584 3,197
Cash beginning of period 24,495 1,911 1,911
Cash end of period 3,197 31,441 24,495 3,197
Cash paid during the year for
Interest 0 0 41,874 41,874
Taxes 851 0 800 1,650
Non Cash Activities
Common stock issued for
PP&E 0 0 35,362 130,931
Licenses & technology 0 0 0 1,770,000
Repayment of debt 0 200,000 257,469 1,143,279
Services & interest 19,999 645,670 1,017,918 1,960,325
CONECTISYS CORP.
STATEMENT OF SHAREHOLDERS EQUITY
May-30-1997
Deficit Accumu-
Preferred Stock lated During
Class A Common Stock Development
Shares Amount Shares Amount Stage Total
Balance, December 1, 1990 (re-entry
development stage) - $ - 212,188 $ 1,042,140 $ (1,042,140) $ -
Shares issued in exchange for:
Cash, May 31, 1993 - - 20,000 1,000 - 1,000
Capital contribution, May 31, 1993 - - 40,000 515 - 515
Services, March 26, 1993 - - 40,000 500 - 500
Services, March 26, 1993 - - 24,000 600 - 600
Net loss for the year ended
November 30, 1993 - - - (5,459) - (5,459)
Balance, November 30, 1993 - - 336,188 1,044,755 (1,047,599) (2,844)
________________________________________________________________________________________________________________________________
Shares issued in exchange for:
Services, May 1, 1994 - - 48,000 3,000 - 3,000
Cash, September 1, 1994 - - 355,426 23,655 - 23,655
Services, September 15, 1994 - - 173,986 11,614 - 11,614
Cash, September 26, 1994 - - 60,000 15,000 - 15,000
Cash, October 6, 1994 16,345 16,345 - - - 16,345
Cash, September and
October, 1994 - - 26,400 33,000 - 33,000
Net loss for the year - - - - (32,544) (32,544)
Balance, November 30, 1994 16,345 16,345 1,000,000 1,131,024 (1,080,143) 67,226
_______________________________________________________________________________________________________________________________
Shares issued in exchange for:
Cash, February 13, 1995 - - 23,200 232,000 - 232,000
Debt repayment, February 13, 1995 - - 40,800 408,000 - 408,000
Debt repayment, February 20, 1995 - - 95,562 477,810 - 477,810
Acquisition of assets,
CIPI February 1995 - - 575,000 1,950,000 - 1,950,000
Acquisition of assets,
April 5, 1995 (Note 10) - - 300,000 - - -
Cash and services,
April and May 1995 - - 320,000 800,000 - 800,000
Cash, June 1, 1995 - - 10,000 30,000 - 30,000
Acquisition of assets and services,
September 26, 1995 - - 80,000 200,000 - 200,000
Cash, September 28, 1995 - - 825 3,000 - 3,000
Acquisition of assets,
September 1995 - - 700,000 1,750,000 - 1,750,000
Return of assets, CIPI September 1995 - - (554,000) (1,950,000) - (1,950,000)
Net loss for the year - - - - (2,293,867) (2,293,867)
Balance, November 30, 1995 16,345 16,345 2,591,387 5,031,834 (3,374,010) 1,674,169
________________________________________________________________________________________________________________________________
Shares issued in exchange for (Note 7):
Cash, February, 1996 - - 27,778 125,000 - 152,779
Debt repayment, February, 1996 - - 200,000 639,779 - 612,000
Services, February, 1996 - - 63,199 205,892 - 205,892
Cash, March, 1996 - - 3,571 25,000 - 25,000
Shares returned and
cancelled, March, 1996 - - (300,000) - - -
Services, April, 1996 - - 267 2,069 - 2,069
Services, September,1996 4,155 4,155 11,727 36,317 - 40,472
Services, October, 1996 - - 130,800 327,000 - 327,000
Debt repayment, November, 1996 - - 47,000 64,330 - 64,330
Net loss for the year - - - - (2,238,933) (2,238,933)
Balance, November 30, 1996 20,500 $20,500 2,775,729 $6,457,221 $(5,612,943) $ 864,778
Net loss for the quarter ended
February 28, 1997 - - - - (310,344) (310,344)
Balance, February 28, 1997 20,500 $20,500 2,775,729 $6,457,221 $(5,923,287) $ 554,434
Shares issued in exchange for
Services, March 1997 - - 4,550 6,879 6,879
Debt, April 1997 - - 16,000 13,120 13,120
Net loss for the quarter ended
May 30, 1997 - - - - (288,671) (288,671)
Balance, February 28, 1997 20,500 $20,500 2,796,279 $6,477,220 $(6,211,958) $ 285,761
_______________________________________________________________________________
See summary of significant accounting policies and notes to consolidated
financial statements.
F-6
SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the transactions
of Conectisys Corporation ( the "Company") and its 80% owned subsidiaries
Technilink, Inc. and Primelink, Inc. All material intercompany transactions and
balances have been eliminated in the accompanying consolidated financial
statements.
Development Stage Company
The Company returned to the development stage in accordance with SFAS No. 7
on December 1, 1990 and during the fiscal year ended November 30, 1995, the
Company completed two mergers and is in the process of developing its technology
and product lines.
Cash Equivalents
For financial accounting purposes and the statement of cash flows, cash
equivalents include all highly liquid debt instruments with original maturities
of three months or less.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed over
the estimated useful lives of the assets using the straight-line method.
Property and equipment is estimated to have a useful life of 5-7 years.
Net Loss Per Common Share
Net loss per common share is based on the weighted average number of common
and common equivalent shares outstanding for the periods presented. Common
equivalent shares representing the common shares that would be issued on
exercise of convertible securities and outstanding stock options and warrants
reduced by the number of shares which could be purchased from the related
exercise proceeds are not included since their effect would be antidilutive.
Stock Issued for Noncash Consideration
Shares of the Company's no par value common stock issued in exchange for
goods or services are valued at the cost of the goods or services received or at
the market value of the shares issued depending on the ability to estimate the
value of the goods or services received.
Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SUMMARY OF ACCOUNTING POLICIES (continued)
License Agreements
The cost of acquiring license rights are capitalized and amortized over the
shorter of the estimated useful life of the license or the term of the license
agreement. The licenses are being amortized over a period of five years. At
November 30, 1996, the Company generated some revenues from the licenses it
acquired. Although management has developed a plan to develop and market the
technology, it is reasonably possible that the estimates of expected future
gross revenue will be reduced significantly in the near term due to competitive
pressure. Consequently, the carrying amount of capitalized licenses at November
30, 1996 may be reduced materially in the near term. The carrying value of the
licenses is subject to periodic evaluation and if necessary the amounts will be
written down to their net realizable value.
Technology
Deferred technology costs include capitalized product development and
product improvement cost incurred after achieving technological feasibility and
are amortized over a period of five years.
Income Taxes
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 109, which requires the Company to recognize deferred tax assets
and liabilities for the expected future tax consequences of events that have
been recognized in the Company's consolidated financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets using the enacted rates in effect in the years in which the
differences are expected to reverse.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment, certain
identifiable intangible assets and goodwill, should be recognized and how
impairment losses should be measured. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) issued
by the FASB is effective for specific transactions entered into after December
15, 1995, while the disclosure requirements of SFAS No.123 are effective for
financial statements for fiscal years beginning no later than December 15, 1995.
The new standard establishes a fair value method of accounting for stock-based
compensation plans and for transactions in which an entity acquires goods and
services from nonemployees in exchange for equity instruments. At the present
time, the Company has not determined if it will change its accounting policy for
stock based compensation or only provide the required financial statement
disclosures. As such, the impact on the Company's financial position and
results of operations is currently unknown.
On March 3, 1997, FASB issued Statement of Financial Accounting Standards
No. 128, Earnings per Share (SFAS 128). This pronouncement provides a different
method of calculating earnings per share than is currently used in accordance
with APB 15, Earnings per Share. SFAS 128 provides for the calculation of Basic
and Diluted earning per share. Basic earnings per share includes no dilution and
is computed by dividing income available to common share holders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earning of the entity, similar to fully diluted earnings per share. This
pronouncement is effective for fiscal years and interim periods ending after
December 15, 1997; early adoption is not permitted. The Company has not
determined the effect, if any, of adoption on its EPS computation(s)
SUMMARY OF ACCOUNTING POLICIES (contiued)
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, stock subscription receivable, accounts
payable, accrued compensation and notes payable other, approximate fair value
because of the short maturity of these instruments. It is not practical to
estimate the fair value of the notes payable related party due to their related
party nature.
Reclassifications
For comparability purposes, certain prior year accounts have been
reclassified to conform with current year presentation.
NOTES TO CONSOLIDATED FINANCIALS
1. Business
Nature of Organization
The Company was incorporated under the laws of Colorado on February 3, 1986, to
analyze and invest in business opportunities as they may occur.
TechniLink has developed the Cube 2001 series for the monitoring and controlling
of various devices in the petroleum and gas industry.
PrimeLink has developed a product line that uses cutting edge communications to
assist in the monitoring of meters for utility companies and the petroleum
industry. This technology, while eliminating the need for a meter reader, is
more significant in enabling the utility companies to utilize energy
conservation and, in the case of power companies, re-routing of electrical power
to areas where it is needed. The devices are also in use in vending machines to
monitor sales and functions of the vending machine without the physical
inspection usually needed.
Effective December 1, 1994, the Company agreed to acquire all of the outstanding
shares of Progressive Administrators, Inc. (PAI) in exchange for 300,000 shares
of its no par value common stock. The transaction was to be accounted for as a
purchase transaction. The shares to be issued by the Company were to be
"restricted securities" within the meaning of Rule 144 of the Securities Act of
1933, as amended. Accordingly, PAI would have been a wholly-owned subsidiary of
the Company as of December 1, 1994. PAI was formed in the state of Colorado on
September 14, 1994 and is engaged in the records storage business.
Effective December 1, 1994, the Company also agreed to acquire all of the
outstanding shares of Creative Image Products, Inc. (CIPI) in exchange for
575,000 shares of its no par value common stock. The shares were issued in
February of 1995. The shares issued by the Company were "restricted securities"
within the meaning of Rule 144 of the Securities Act of 1933, as amended.
Accordingly, CIPI was a wholly-owned subsidiary of the Company as of December 1,
1994. CIPI was formed in the state of Kansas on April 29, 1994 and is engaged
in the insecticide business and through its wholly-owned subsidiary, ADA
Signature Distributors, Inc., the sign manufacturing business.
During 1995, the Company's only operations consisted of CIPI's manufacturing of
organic insecticides prior to its disposal. On September 28, 1995 the Company
entered into an agreement to unwind the acquisition of CIPI. CIPI issued a
promissory note to the Company in the amount of $1,302,500 to reimburse the
Company for cash advances. In accordance with the agreement, the shares issued
to CIPI were exchanged for all shares issued to the Company. The shares
outstanding carry no value on the financial statements.
On February 15, 1996, PrimeLink entered into a Joint Marketing and Development
Agreement ("Agreement") with SkyTel Corp. pursuant to which PrimeLink agreed to
customize and develop a paging technology based receiver for use in connection
with SkyTel's Two-Way wireless messaging services and system (the "SkyTel
Network") and both parties agreed to assist each other in the marketing of the
PrimeLink product and the SkyTel Network. The Company believes that the joint
1. Business(Continued)
Nature of Organization (Continued)
marketing of its product with the SkyTel System could have significant potential
for the Company. However, the Agreement does not require any purchases of the
PrimeLink product by SkyTel, and may not necessarily result in any significant
revenues for the Company. The Agreement is for a two-year term, and will
automatically renew for additional one-year terms until terminated by either
party.
Change of Control
During the year ended November 30, 1994, the Company issued a combination of
voting common and voting preferred shares to Black Dog Ranch, LLC, an unrelated
party, sufficient to transfer control of the Company to Black Dog Ranch, LLC.
Accordingly, the Company is a subsidiary of Black Dog Ranch, LLC. In connection
with the transfer of control, the Company changed its name to BDR Industries,
Inc. During the year ended November 30, 1995 the Black Dog Ranch, LLC sold its
interest in the Company to Robert Spigno who now has the controlling interest in
the Company. BDR Industries, Inc. then changed its name to Conectisys
Corporation.
Formation of Subsidiary
Effective June 24, 1994, the Company formed a wholly-owned subsidiary, CFC
Capital Corporation. The entity is currently inactive.
Acquisition of Privately Held Companies
In September 1995, the Company acquired 80% of the outstanding stock of
Technilink, Inc. a California Corporation, and 80% of the outstanding stock of
Primelink, Inc., a Kansas corporation, in exchange for an aggregate of 200,000
shares of the Company's common stock. The acquisitions were accounted for as
purchases. Both Primelink and Technilink are start-up companies with no material
operating activity and therefore no proforma statements of operations were
provided for 1995.
The acquisitions of these companies occurred in connection with the signing
of the license agreements discussed in Note 9. The Company issued a total of
700,000 shares of common stock and assumed a loan of $400,000 to acquire the
licenses and the Corporations. The only major asset acquired from Primelink and
Technilink was the license and technology. The stock issued was valued at
$1,750,000, the fair market value of common stock issued, and is included in
licenses and technology on the balance sheet.
2. Going Concern
As of May 30, 1997 and 1996, the Company has a deficiency in working capital
of $1,154,227 and $1,177,968, respectively and has incurred operating losses
since its return to the development stage, which raise substantial doubt about
the Company's ability to continue as a going concern.
Management's plans for correcting these deficiencies include the future sales of
their newly licensed products and to raise capital through the issuance of
common stock to assist in providing the Company with the liquidity necessary to
retire the outstanding debt and meet operating expenses. In the longer term,
the Company plans to achieve profitability through the operations of its newly
acquired subsidiaries. The consolidated financial statements do not include any
adjustments that might result from the outcome of the uncertainty.
3. Related Party Transactions
The Company issued 2,494 and 260,000 shares of common stock during the years
ended November 30, 1996 and 1995, respectively, to a related party in exchange
for services. The services were valued at $17,538 and $534,961, respectively,
which approximates the fair market value of the shares issued.
The CEO of the Company exercised 28,805 of his stock options at an exercise
price of $0.20 per share. The Company also issued the CEO 4,155 shares of
Preferred Class A stock for services rendered.
The Company also 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 at a rate of $2,000 per month. The Company also pays S.W. Carver
Corporation for bookkeeping services which are included in general and
administrative expenses. Also, the Company has notes payable to S.W. Carver
Corporation, see Note 6.
In February 1996, the Company's Board of Directors authorized the purchase of a
car for the use of its Chief Financial Officer. The purchase price was
approximately $23,000, of which approximately $18,000 was financed by the
Company. The Board of Directors also determined that the vehicle would be
maintained and fueled in full by the Company.
4. Notes Receivable
During the year ended November 30, 1995 and 1994, the Company advanced to CIPI
$1,302,500. This advance is evidenced by a note payable to the Company, due on
demand or October 1, 1998, whichever is first. Interest on the note is at the
rate of ten percent per year. As of November 30, 1996 and 1995, the Company has
provided an allowance of $855,875 against this receivable. Interest receivable
on this note has also been reserved accordingly.
5. Property and Equipment
Property and equipment consisted of the following:
May 97, 1997 1996
Office equipment $ 144,575 $ 139,493
Furniture and fixtures 14,369 -
Vehicles 35,362 35,362
194,306 174,855
Less: accumulated depreciation (60,111) (2,520)
Total $ 134,195 $ 172,335
Depreciation expense for the years ended November 30, 1996 and 1995, totaled
$38,263 and $946, respectively.
6. Notes Payable
The notes payable consisted of the following:
May 97, 1997 1996
Notes payable to S.W. Carver Corporation
(a related party) unsecured, due on
demand at 10% interest, unpaid
balance payable on February 15, 1998 $ 514,953 $ 512,130
Note payable to Devon Investment Advisors
unsecured, due on demand at 10%
interest 241,824 241,824
Note payable to Black Dog Ranch, LLC
unsecured, due on demand at 8%
interest, unpaid balance on January
15, 1998 171,397 -
Note payable to Investor's Financial 25,000 -
Note payable to Ford Motor Credit,
secured by vehicle, interest at 12.9%,
unpaid balance on February 25, 1999 11,065 17,087
Note payable to Robert Spigno (related
party) unsecured, due on demand at
10% interest, unpaid balance on
February 15, 1998 8,000 8,000
Total notes payable 972,239 779,041
7. Shareholders' Equity
The Company is authorized to issue 50,000,000 shares of $1.00 par value
preferred stock, no liquidation preference. One million of the preferred shares
are designated as Class A preferred shares which have super voting power wherein
each share receives 100 votes and has anti-dilution rights. One million of the
preferred shares are designated as Class B preferred shares which have
conversion rights wherein each share may be converted into ten shares of common
stock.
In February, 1996, the Company entered into an investment banking agreement for
a period of two years. In consideration for services the Company granted the
investment banker options to purchase 1,000,000 shares at $2.50 per share, the
fair value at the date of grant. In October of 1996 the Company issued the
investment banker 130,800 shares of common stock for services rendered. These
shares resulted in the Company recording consulting fees of $327,000 which is
the fair value of the stock at the date issued.
In February and November of 1996, the Company issued 200,000 and 47,000 shares,
respectively, of common stock in settlement of outstanding obligations, which
included principal and interest. The total debt reduced amounted to $257,469
and interest of $446,640 for a total of $704,109. The value of the transaction
was based upon the value of the stock on that date.
In February 1996, the Company issued 63,199 shares of common stock to various
consultants and to an officer of the Company for services rendered. The
transactions were recorded at a total of $205,892 which approximates the fair
value of the stock given at that date.
In February 1996, the Company and Hollywood Trenz, Inc. ("HTNZ") mutually agreed
to terminate the ADA Sign Purchase Agreement and Agreement for the Purchase of
Common Stock between them dated March 23, 1995 and to return the shares
transferred pursuant to that agreement. As a result, the Company returned to
HTNZ 600,000 shares of HTNZ common stock, which is valued at zero, and HTNZ
returned to the Company 300,000 shares of the Company's common stock.
On September 3, 1996, 1,727 shares of common stock were issued to Micro
Automation Development (MAD) for services provided to Technilink. The
transaction was recorded at $4,317, which approximates the fair value of the
stock given at that date.
On September 12, 1996, the Company issued to Internet Stock Guide Inc., 10,000
shares of common stock for partial payment of an advertising contract on there
World Wide Web and consulting services. An additional 2000 shares of common
stock were transfered to Internet Stock Guide Inc. from Black Dog Ranch. The
transaction was recorded at $32,000 and 12,000 respectively which
approximates the fair value of the stock given at that date.
On September 23, 1996, the Company issued 4,155 shares of Preferred stock to
Robert Spigno, President of Conectisys Corp. for the reduction of compensation
accrued to Mr. Spigno, the shares were issued at their par value of $1.00 per
share.
8. Income Taxes
Deferred income taxes consisted of the following:
November 30, 1996 1995
Deferred tax asset, net operating
loss carryforward $ 3,454,392 $ 450,000
Deferred tax liability - -
Valuation allowance (3,454,392) (450,000)
Net deferred taxes $ - $ -
The valuation allowance offsets the net deferred tax asset since it is more
likely than not it would not be recovered.
9. Commitments and Contingencies
Employment Agreements
Incorporated by refrence 10KSB year ended November 30, 1995
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), and are for a period of five years. As consideration for these license
agreements the Company issued each licensee 250,000 shares of its restricted
common stock and will pay the licensee a royalty of 5% of net sales of the
applicable product. In addition, in the event of the sale of the license or the
acquisition or merger of Technilink or Primelink, a royalty sum of 20% of the
sales price of the license shall be paid to the licensee, the sales price shall
not be less than $1,500,000. The licenses were valued at the fair market value
of the stock issued to obtain the licenses.
Litigation
The Company is a party in the case, Securities and Exchange Commission
(Plaintiff) Vs. Andrew S. Pitt, Conectisys Corp., Devon Investments Advisors,
Inc., B&M Capital Corp., Mike Zaman, and Smith Benton & Hughes, Inc.
(Defendants) Civil Case #96-4164. The Case alleges that a fraudulent scheme was
orchestrated and directed by the defendants to engage in the sale and
distribution of unregistered shares of Conectisys by creating the appearance of
an active trading market for the stock of Conectisys and artificially inflating
the price of its shares. In the suit the SEC seeks disgorgment of profits from
illegal activity and permanent injunctions from violating securities laws.