Exhibit 99 Unaudited Financial Statements
CONECTISYS CORP.
Unaudited Consolidated
Balance Sheet
May-31-1998
May-31- May-31- Nov-30-
1998 1997 1997
Unaudited Unaudited Audited
Assets
Current Assets
Cash 148,372 3,197 17,265
Accounts Receivable-trade
(net allowance for 7,571 70,237 3,411
doubtful accounts of
($379)
Stock Subscription
Receivable -0- -0- -0-
Other Current Asset -0- -0- -0-
Total Current Assets 155,943 73,434 20,677
Notes Receivable 444,000 446,625 181,270
net(note4)
Interest receivable -0- 35,403 -0-
net(note 4)
Property and Equipment 145,247 134,195 118,904
Net(note 5)
Licenses and technology 837,468 1,543,784 954,430
, net of accumulated
amortization of($824,854)
Other Assets 0 4,500 -0-
Total Assets 1,582,658 1,275,281 2,237,941
Liabilities and Shareholder equity
Current Liabilities
Accounts Payables 269,901 660,532 410,455
Accrued Compensation
(note 9) 292,433 172,868 223,448
Notes Payables (notes 3 and 6)
Related Party -0- -0- -0-
Other 442,932 247,719 444,463
Other liabilities 69,122 2,218 85,050
Accrued interest payable 111,744 144,323 92,779
Total Current Liabilities 1,186,133 1,227,660 1,256,195
Long term liabilities
Notes Payables (notes 3 and 6)
Related Party -0- 522,953 -0-
Other -0- 201,566 1,216
Total long term liaibilities -0- 724,519 1,216
Minority Interest -0- -0- -0-
Shareholders Equity
Preferred Stock - Class A
1,000,000 Shares Authorized 80,500 20,500 20,500
$ 1.00 Par Value, 80500
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, 10,042,415 Authorized
9,242,415 Issued and Outstanding
9,591,699 6,477,220 8,349,581
Accumulated Gain (Deficit)
During Development Stage
(9,275,674) (6,211,958) (8,352,211)
Total Shareholders Equity
396,525 285,762 17,870
Total Liabilities and
shareholders equity 1,582,655 2,237,941 1,275,281
CONECTISYS CORP.
Condensed Statement of
Operations (6 months ended)
May-31-1998
December
1,1990
(Inception
) through
May-31-1998 May-31- May-31-
1997 1998
Unaudited Unaudited Unaudited
Revenues 2,960 208,094 494,765
Cost of goods sold 110,722 114,414 435,613
Gross Profits (107,762) 93,680 59,152
General and Administrative 794,743 678,328 5,576,895
Bad Debt Write-offs -0- -0- 1,680,522
Loss from operations (902,505) (584,648) (7,198,265)
Non operating income (expense) 706 26,205 (282,717)
Interest Expense (21,665) (40,573) (781,408)
Minority Interest -0- -0- 121,747
Net loss ($923,463) ($599,016)($8,147,932)
Weighted Average shares 4,254,265 2,759,067
Net loss per share $ (0.22) $ (0.22)
CONECTISYS CORP.
Condensed Statement of Cash
Flows (6 months)
May-31-1998
December
1,1990
May-31-1998 May-31- Nov-30- (Incepti
1997 1997 on)
through
Unaudited Unaudited audited May-31-
1998
Operating Activities
Net Income (loss) (923,463) (599,015) (2,739,268) (8,197,932)
Adjustments to reconcile
net income (loss)to net cash Provided by
(used in) operating activities:
Depreciation and amortization
186,367 242,175 871,866 1,579,293
Provision for bad debt -0- 48,810 447,915 1,422,401
Stock issued for services 105,888 19,999 690,602 2,170,084
Stock issued for interest -0- -0- 88,951 535,591
Minority interest -0- -0- -0- (121,747)
Changes in operating assets and liabilities
(Increase) decrease in assets
Accounts receivable (4,160) (34,705) 30,831 (11,772)
Interest receivable -0- (76,266) 7,947 (95,700)
Deposits -0- -0- 4,500 -0-
Increase (decrease) in
liabilities
Accounts payable (140,553) 321,710 71,633 269,901
Accrued interest payable 18,964 38,906 18,964
Accrued compensation 8,985 36,687 87,267 292,434
Other current liabilities (15,927) (10,027) 60,140 250,825
Net cash provided by (used
in) operating activities (703,899) (11,726) (377,616) (1,887,658)
Investing Activities
Increase in notes receivable 178,550 -0- -0- (1,143,950)
Costs of licenses & technology (49,399) (39,392) (60,465) (143,457)
Purchase of equipment (46,374) (3,154) (7,096) (111,440)
Net cash from (used) in
investing activities 82,775 (42,546) (67,561) (1,398,847)
Financing Activities
Common Stock issued for cash 752,230 -0- 399,980 1,712,865
Dividends received -0- -0- -0- -0-
Preferred Stock issuance -0- -0- -0- 16,345
Proceeds from debts
Related party -0- -0- -0- 206,544
Other -0- 36,473 57,894 1,540,731
Payments on debt
Related -0- (3,500) (19,927) (53,172)
Other -0- -0- -0- (8,951)
Decrease in subscription
receivable -0- -0- -0- 20,000
Contributed capital -0- -0- -0- 515
Net cash from (used) in
financing activities 752,230 32,973 437,947 3,434,877
Net Increase (decrease) 131,106 (21,298) (7,230)
Cash begining of period 17,265 24,495 24,495
Cash end of period 148,371 3,197 17,265
Cash paid during the year for
Interest -0- -0- -0- 130,825
Corporate Taxes -0- 851 1,082 1,650
Non Cash Activities
Common stock issued for
PP&E -0- -0- 9,225 130,931
Licenses & technology -0- -0- 396,964 1,770,000
Repayment of debt -0- -0- 620,507 1,674,835
Services & interest 105,888 19,999 781,690 2,736,816
Note Receivable 444,000 -0- -0- 725,250
CONECTISYS CORP.
Statement of Shareholders Equity
May-30-1998
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
____________________________
CONECTISYS CORP.
Statement of Shareholders Equity (continued)
May-30-1998
Shares issued in exchange for:
Cash, February 13, 1995 - - 23,200 232,000 - 232,000
Debt repayment, February 13, 1995 - - 40,800 408,000 - 408,000
Debt repayment, February 20, 1995 - - 95,562 477,810 - 477,810
Acquisition of assets,
CIPI February 1995 - - 575,000 1,950,000 - 1,950,000
Acquisition of assets,
April 5, 1995 (Note 7 ) - - 300,000 - - -
Cash and services,
April and May 1995 - - 320,000 800,000 - 800,000
Cash, June 1, 1995 - - 10,000 30,000 - 30,000
Acquisition of assets and
services, September 26, 1995 - - 80,000 200,000 - 200,000
Cash, September 28, 1995 - - 825 3,000 - 3,000
Acquisition of assets,
September 1995 - - 700,000 1,750,000 - 1,750,000
Return of assets, CIPI
September 1995 - - (554,000) (1,950,000) - (1,950,000)
Net loss for the year - - - - (2,293,867) (2,293,867)
Balance, November 30, 1995 16,345 16,345 2,591,387 5,031,834 (3,374,010) 1,674,169
________________________________
Shares issued in exchange
for(Note 7):
Cash, February, 1996 - - 27,778 125,000 - 152,779
Debt repayment, February, 1996 - - 200,000 639,779 - 612,000
Services, February, 1996 - - 63,199 205,892 - 205,892
Cash, March, 1996 - - 3,571 25,000 - 25,000
Shares returned and
canceled, March, 1996 - - (300,000) - - -
Services, April, 1996 - - 267 2,069 - 2,069
Services, September, 1996 4,155 4,155 11,727 36,317 - 40,472
Services, October, 1996 - - 130,800 327,000 - 327,000
Debt repayment, November, 1996 - - 47,000 64,330 - 64,330
Net loss for the year - - - - (2,238,933) (2,238,933)
Balance, November 30, 1996 20,500 $20,500 2,775,729 $6,457,221 $(5,612,943) $ 864,778
CONECTISYS CORP.
Statement of Shareholders Equity (continued)
May-30-1998
Shares issued in exchange
for (see note 7):
Services, March 1997 - - 4,550 6,879 - 6,879
Debt, April 1997 - - 16,000 13,120 - 13,120
Services, July 1997 - - 30,000 16,200 - 16,200
Cash, July 1997 - - 300,000 300,000 - 300,000
Services August 1997 - - 119,150 56,000 - 56,000
Restatement for 1:20
reverse stock split 20,500 $20,500 162,271 $6,849,420 $ - $ -
Adjustment for
partial shares - - 113 - - -
Restated totals 20,500 $20,500 162,385 $6,849,420 $ - $ -
Shares issued in exchange
Officer compensation
October, 1997 - - 465,013 186,004 - 186,004
Director Compensation
October, 1997 - - 60,500 24,200 - 24,200
Services October 1997 - - 944,153 377,661 - 377,661
Debt October 1997 - - 1,540,267 620,507 - 620,507
Note Receivable - - 1,500,000 281,250 - 281,250
Services November 1997 - - 4,950 10,538 - 10,538
Net loss to November, 30 1997 - - - (2,739,268) (2,739,268)
Balance, November 30, 1997 20,500 $20,500 4,677,268 $8,349,581 $(8,352,211) $ 17,869
Shares issued in exchange for:
Services December, 1997 - - 4,550 6,234 - 6,234
Cash January 1998 - - 133,334 25,000 - 25,000
Note receivable January 1998 - - 4,000,000 727,230 - 727,230
Services March, 1998 60,000 60,000 27,263 39,654 - 99,654
Note receivable April 1998 - - 400,000 444,000 - 444,000
Net loss to May,28 1998 - - - (923,463) (923,463)
Balance, May 30, 1998 80,500 $80,500 9,242,415 $9,591,699 $(9,275,674) $ 396,525
See summary of significant accounting policies and notes to consolidated
financial statements.
Summary of Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the transactions
of Conectisys Corporation (the "Company") and its 80% owned subsidiaries
Technilink Technology Manufacturing, Inc. and PrimeLink, Inc. All material
intercompany transactions and balances have been eliminated in the accompanying
consolidated financial statements.
Development Stage Company
The Company returned to the development stage in accordance with SFAS No. 7
on December 1, 1990, and during the fiscal year ended November 30, 1995, the
Company completed two mergers and is in the process of developing its technology
and product lines.
Cash Equivalents
For financial accounting purposes and the statement of cash flows, cash
equivalents include all highly liquid debt instruments with original maturities
of three months or less.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed over
the estimated useful lives of the assets using the straight-line method.
Property and equipment is estimated to have a useful life of 5-7 years.
Net Loss Per Common Share
Net loss per common share is based on the weighted average number of common
and common equivalent shares outstanding for the periods presented. Common
equivalent shares representing the common shares that would be issued on
exercise of convertible securities and outstanding stock options and warrants
reduced by the number of shares which could be purchased from the related
exercise proceeds are not included since their effect would be anti-dilutive.
Stock Issued for Non-cash Consideration
Shares of the Company's no par value common stock issued in exchange for
goods or services are valued at the cost of the goods or services received or at
the market value of the shares issued depending on the ability to estimate the
value of the goods or services received.
Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
License Agreements
The cost of acquiring license rights are capitalized and amortized over the
shorter of the estimated useful life of the license or the term of the license
agreement. The licenses are being amortized over a period of five years. At
November 30, 1997, the Company generated some revenues from the licenses it
acquired. Although management has developed a plan to develop and market the
technology, it is reasonably possible that the estimates of expected future
gross revenue will be reduced significantly in the near term due to competitive
pressure. Consequently, the carrying amount of capitalized licenses at November
30, 1997 may be reduced materially in the near term. The carrying value of the
licenses is subject to periodic evaluation and if necessary the amounts will be
written down to their net realizable value. Technilink's carrying value was
reduced by $625,000 in 1997 due to the lack of income generated form this
license.
Technology
Deferred technology costs include capitalized product development and
product improvement cost incurred after achieving technological feasibility and
are amortized over a period of five years.
Income Taxes
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 109, which requires the Company to recognize deferred tax assets
and liabilities for the expected future tax consequences of events that have
been recognized in the Company's consolidated financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets using the enacted rates in effect in the years in which the
differences are expected to reverse.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of long-lived Assets and for long-lived Assets to be Disposed Of"
(SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment, certain
identifiable intangible assets and goodwill, should be recognized and how
impairment losses should be measured. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) issued
by the FASB is effective for specific transactions entered into after December
15, 1995, while the disclosure requirements of SFAS No.123 are effective for
financial statements for fiscal years beginning no later than December 15, 1995.
The new standard establishes a fair value method of accounting for stock-based
compensation plans and for transactions in which an entity acquires goods and
services from non-employees in exchange for equity instruments. At the present
time, the Company has not determined if it will change its accounting policy for
stock based compensation or only provides 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 reflect the potential dilution of securities that could share in the
earning of the entity, similar to fully diluted earnings per share. This
pronouncement is effective for fiscal years and interim periods ending after
December 15, 1997; early adoption is not permitted. The Company has not
determined the effect, if any, of adoption on its EPS computation(s)
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, stock subscription receivable, accounts
payable, accrued compensation and notes payable other, approximate fair value
because of the short maturity of these instruments. It is not practical to
estimate the fair value of the notes payable related party due to their related
party nature.
Reclassifications
For comparability purposes, certain prior year accounts have been
reclassified to conform with current year presentation.
NOTES TO CONSOLIDATED FINANCIALS
1. Business
Nature of Organization
The Company was incorporated under the laws of Colorado on February 3, 1986, to
analyze and invest in business opportunities as they may occur.
TechniLink has developed the Cube 2001 series for the monitoring and controlling
of various devices in the petroleum and gas industry.
PrimeLink has developed a product line that uses cutting edge communications to
assist in the monitoring of meters for utility companies and the petroleum
industry. This technology, while eliminating the need for a meter reader, is
more significant in enabling the utility companies to utilize energy
conservation and, in the case of power companies, re-routing of electrical power
to areas where it is needed. The devices are also in use in vending machines to
monitor sales and functions of the vending machine without the physical
inspection usually needed.
Effective December 1, 1994, the Company agreed to acquire all of the outstanding
shares of Progressive Administrators, Inc. (PAI) in exchange for 300,000 shares
of its no par value common stock. The transaction was to be accounted for as a
purchase transaction. The shares to be issued by the Company were to be
"restricted securities" within the meaning of Rule 144 of the Securities Act of
1933, as amended. Accordingly, PAI would have been a wholly owned subsidiary of
the Company as of December 1, 1994. PAI was formed in the state of Colorado on
September 14, 1994 and is engaged in the records storage business.
Effective December 1, 1994, the Company also agreed to acquire all of the
outstanding shares of Creative Image Products, Inc. (CIPI) in exchange for
575,000 shares of its no par value common stock. The shares were issued in
February of 1995. The shares issued by the Company were "restricted securities"
within the meaning of Rule 144 of the Securities Act of 1933, as amended.
Accordingly, CIPI was a wholly owned subsidiary of the Company as of December 1,
1994. CIPI was formed in the state of Kansas on April 29, 1994, and is engaged
in the insecticide business and through its wholly owned subsidiary, ADA
Signature Distributors, Inc., the sign manufacturing business.
During 1995, the Company's only operations consisted of CIPI's manufacturing of
organic insecticides prior to its disposal. On September 28, 1995 the Company
entered into an agreement to unwind the acquisition of CIPI. CIPI issued a
promissory note to the Company in the amount of $1,302,500 to reimburse the
Company for cash advances. In accordance with the agreement, the shares issued
to CIPI were exchanged for all shares issued to the Company. The shares
outstanding carry no value on the financial statements. The Receivable to this
loan was written down to zero in 1997.
On February 15, 1996, PrimeLink entered into a Joint Marketing and Development
Agreement ("Agreement") with SkyTel Corp. pursuant to which PrimeLink agreed to
customize and develop a paging technology based receiver for use in connection
with SkyTel's Two-Way wireless messaging services and system (the "SkyTel
Network"). Both parties agreed to assist each other in the marketing of the
PrimeLink product and the SkyTel Network. The Company believes that the joint
marketing of its product with the SkyTel System could have significant potential
for the Company. However, the Agreement does not require any purchases of the
PrimeLink product by SkyTel, and may not necessarily result in any significant
revenues for the Company. The Agreement is for a two-year term, and will
automatically renew for additional one-year terms until terminated by either
party.
Change of Control
During the year ended November 30, 1994, the Company issued a combination of
voting common and voting preferred shares to Black Dog Ranch, LLC, an unrelated
party, sufficient to transfer control of the Company to Black Dog Ranch, LLC.
Accordingly, the Company is a subsidiary of Black Dog Ranch, LLC. In connection
with the transfer of control, the Company changed its name to BDR Industries,
Inc. During the year ended November 30, 1995, 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 Performa 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
$586,198 and $1,154,226, 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 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 acquired
subsidiaries. The consolidated financial statements do not include any
adjustments that might result from the outcome of the uncertainty.
3. Related Party Transactions
The Company issued 2,494 and 2,515,891 shares of common stock during the years
ended November 30, 1996 and 1997, respectively, to a related party in exchange
for services, debt and compensation which approximates the fair market value of
the shares issued.
The Company also rents office space from S.W. Carver Corporation, a company
owned by a major shareholder of the Company. The rent is continued on a month
to month basis. The Company also paid S.W. Carver Corporation for bookkeeping
services, which are included in general and administrative expenses. These
services have been discontinued. Also, the Company had notes payable to S.W.
Carver Corporation, see Note 6.
4. Notes Receivable
During the year ended November 30, 1995 and 1994, the Company advanced to CIPI
$1,302,500. A note payable to the Company evidences this advance, due on demand
or October 1, 1998, whichever is first. Interest on the note is at the rate of
ten percent per year. As of November 30, 1996 and 1995, the Company has
provided an allowance of $855,875 against this receivable. Interest receivable
on this note has also been reserved accordingly. In 1997 the Company provided
an allowance for the entire amount of the Note.
5. Property and Equipment
Property and equipment consisted of the following:
May 98, 1998 1997
Office equipment / $ 209,262 $ 158,944
furniture
Vehicles 35,362 35,362
Sub-total 244,624 194,306
Less: accumulated
depreciation (99,378) (60,111)
Total $ 145,247 $ 134,195
Depreciation expense for the years ended November 30, 1996 and 1997, totaled
$38,263 and $79,345, respectively.
6. Notes Payable
The notes payable consisted of the following:
February 28, 1998 1998 1997
Notes payable to S.W. Carver
Corporation
(a related party) unsecured,
due on $ -0- $
demand at 10% interest, unpaid 513,311
balance payable on February 15,
1998
Note payable to Devon Investment
Advisors
Unsecured, due on demand at 10% 241,824 241,824
Interest
Note payable to Black Dog Ranch, LLC
Unsecured, due on demand at 8%
interest, unpaid balance on 171,397 171,397
January 15, 1998
Note payable to Investor's Financial 25,000 25,000
Note payable to Ford Motor Credit,
secured by vehicle, interest at
12.9%, 4,712 12,530
unpaid balance on May 30, 1998
Note payable to Robert Spigno
(related
party) unsecured, due on demand
at -0- 8,000
10% interest, unpaid balance on
February 15, 1998
Total notes payable 442,932 972,062
7. Shareholders' Equity
The Company is authorized to issue 50,000,000 shares of $1.00 par value
preferred stock, no liquidation preference. One million of the preferred shares
are designated as Class A preferred shares which have super voting power wherein
each share receives 100 votes and has anti-dilution rights. One million of the
preferred shares are designated, as Class B preferred shares, which have
conversion rights wherein each share may be converted into ten shares of common
stock.
In March & July 1997, the Company issued 4,550 and 30,000 shares of common stock
respectively for attorney fees in relation to various legal matters.
In April 1997, settled a lawsuit with the former directors of the Company. The
Company issued to the former directors 16,000 shares of common stock.
In July the Company issued 300,000 shares of common stock to an investor for
cash.
In August 1997, the Company issued 119,150 shares of common stock to the members
of the board of directors for services.
In October 1997, the Company entered into two consulting agreements. In
consideration for services to the Company, the consultants were paid 500,000
shares of common stock for services rendered. The company entered in to an
agreement for funding and issued 1,500,000 for a note receivable that has been
subsequently paid in full.
In March 1998 the company issued 60,000 shares of its Class A Preferred Stock to
an officer for compensation for services
8. Income Taxes
Deferred income taxes consisted of the following:
November 30, 1997 1996
Deferred tax asset, net $5,286,496 $3,454,392
operating
loss carryforward
Deferred tax liability - -
Valuation allowance (5,286,496) (3,454,392)
Net deferred taxes $ - $ -
The valuation allowance offsets the net deferred tax asset since it is more
likely than not it would not be recovered.
9. Commitments and Contingencies
Employment Agreements
Incorporated by reference 10KSB year ended November 30, 1995, 1996, 1997
Litigation
There are two legal proceedings to which the Company is a party. The first case,
Securities and Exchange Commission (Plaintiff) Vs. Andrew S. Pitt, Conectisys
Corp., Devon Investments Advisors, Inc., B & M Capital Corp., Mike Zaman, and
Smith Benton & Hughes, Inc. (Defendants) Civil Case # 96-4164. The Case alleges
that a fraudulent scheme was orchestrated and directed by the defendants to
engage in the sale and distribution of unregistered shares of Conectisys by
creating the appearance of an active trading market for the stock of Conectisys
and artificially inflating the price of its shares. In the suit, the SEC seeks
permanent injunctions from violating securities laws. The SEC does not seek any
civil penalties from the Company. The courts having conducted a trial of this
matter without a jury and taken it under submission, found for the plaintiff as
follows: against Conectisys on the claim that the defendant violated section
5(a), 5(c), 17(a). Conectisys was NOT found to have violated section 10(b),
10(b-5), or 15(c). The Plaintiff was ordered to file proposed findings of fact
and conclusions of law. The Plaintiff has filed subsequent to the year ended
November 30, 1997, with its conclusions and findings and is requesting that the
Company disgorge alleged profits plus interest totaling $1,013,514.60. The
Company has filed objections to their claims. After the court settles the
findings and conclusions, the court will enter further orders with respect
remedy or remedies to be granted to the plaintiff.
The second case was brought by Clamar Capital Corp. (the "Plaintiff ") against
Smith Benton & Hughes; Michael Zaman; Claudia Zaman; Andrew Pitt and Conectisys
Corp. (collectively the "Defendants"). The case was brought before the District
Court of Arapahoe, State of Colorado, case No. 97-CV-1442, Division 3. The
Plaintiff did not specify an amount of damages that it seeks from the
defendants.