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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(MARK ONE)
 [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 For the fiscal year ended September 30, 2002     OR

 [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the transition period from __________ to __________

                         Commission File Number 33-3560D

                               CONECTISYS CORPORATION
                 (Name of small business issuer in its charter)

           COLORADO                                           84-1017107
-------------------------------                            ----------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)

                        24730 AVENUE TIBBITTS, SUITE 130
                            VALENCIA, CALIFORNIA 91355
                    (Address of principal executive offices)

       Issuer's telephone number (including area code): (661) 295-6763

         Securities registered under Section 12(b) of the Exchange Act:
          Title of each class      Name of each exchange on which registered
                None                                   None

            Securities registered under Section 12(g) of the Exchange Act:
                           Common Stock, no par value
                                (Title of Class)
_____________________

Check whether  the issuer  (1) filed  all reports  required to  be filed by
Section 13 or 15(d) of the Exchange  Act during the past 12 months (or  for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days. YES | |  NO |X|

Check if there is  no disclosure of delinquent  filers in response to  Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB. |  |

The registrant's revenues for the twelve months ended September 30, 2002
were $0 (zero).

As of January 6, 2003, the aggregate market value of the common equity held
by nonaffiliates of the registrant was approximately $888,680.  The number
of shares outstanding  of the registrant's  only class of  common stock was
97,110,266 on January 6, 2003.

Transitional Small Business Disclosure Format (check one):YES |  | NO |X|

DOCUMENTS INCORPORATED BY REFERENCE: None.

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                                  <page>1

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Company Overview

        We were incorporated in Colorado on February 2, 1986 under the name
Coastal Financial  Corp.  On   December 5,   1994, Coastal  Financial Corp.
changed  its name to BDR Industries, Inc. which changed its name on October
16, 1995, to ConectiSys Corporation.

        Since 1995, we have been  engaged in the development of  a low-cost
automatic meter reading, or AMR, solution. We have developed a low-cost AMR
solution  that   includes  a   proprietary  system  employing   specialized
hardware  and  software that  will  allow  for  residential  and commercial
applications.  Our  proprietary  system is  called  H-Net(TM),  which is  a
trademark of ConectiSys.

        We are  currently in   a cost-reduction  phase of   the development
of our  H -Net(TM)   system  and   have   completed   the   development for
commercial   production  of   our H-Net(TM)   4.0  wireless   meter reading
product. We have not yet sold any H-Net(TM) systems and  we do  not  expect
any  significant    sales  of  our  H-Net(TM)    systems  until mid   2003.
Accordingly,  we  have not earned  any significant revenues from  the  sale
of  H-Net(TM)   systems.  We  have  no   history  of   revenues   and  have
incurred  significant   losses  since    the beginning  of  the development
of our  H-Net(TM) system.  We have a significant accumulated  deficit   and
negative   working     capital.  As     a    result    of   our   financial
condition,    our   independent  auditors    have    issued    an   opinion
questioning  our  ability to continue as a going concern.

Industry Overview

        Over the   past several   years, the   AMR industry   has undergone
tremendous growth. Many factors have contributed to this growth, including:

o       a surge in demand for wireless data transmission services that
        increase the efficiency of meter reading service companies;

o       mandates by federal and state regulators requiring that the energy
        industry utilize automatic meter reading technologies and read
        meters with increased frequency;

o       an apparent nation-wide trend toward deregulation of the energy
        industry, which may enable a large number of new energy service
        providers to enter the market who will require easily obtainable,
        accurate and comprehensive data regarding their customers' energy
        usage; and

o       a growing preference among commercial, industrial and governmental
        enterprises for automation of remote data acquisition and collection
        activities through wired and wireless communications technologies.

        Although the need for a comprehensive, low-cost AMR solution has
become  widespread  a  viable  solution  remains  unmet  for  many reasons,
including the following:

o       the high cost of hardware and installation of traditional wireless
        data collection processes employing technologies similar to
        cellular or other wireless data transmission towers;

o       the failure of existing AMR systems to satisfy the mandates imposed
        by government regulations concerning the collection and
        transmission of data; and


                                  <page>2


o       the failure of existing AMR systems to provide true two-way data
        communications, a result of which those systems are less accurate
        and do not provide increases in efficiency allowed by two-way data
        communications systems.

        Responding to the growing demand for communications services and
increased competitive  pressures, businesses  and government  organizations
that  rely  heavily  on  information  technology  are  devoting significant
resources to the evaluation and purchase of data transmission products.

        According to the Annual Electricity Utility Report for 2000 of the
Energy   Information   Administration,  which   compiles   official  energy
statistics from the United  States government, there are  approximately 125
million energy meters in the  United States, approximately 12.5 million  of
which  are  located  in  California.  Our  goal  is  to  achieve sufficient
proliferation  of our  H-Net(TM) system  so that  it is  installed in  one
percent of the  energy meters in  the United States  or ten percent  of the
energy  meters  in  the  State  of  California.  Initially,  we  intend our
principal efforts to be focused  on the deployment of our  H-Net(TM) system
in the State of California.

Our Strategy

        We have strived to develop expertise relating to AMR systems and
products. Our goal is to become a leading provider of products and services
relating to data acquisition from  remote locations and data collection  at
centralized locations. Our business strategy to achieve this goal  includes
the following elements:

o       Develop strategic relationships.  We have explored and intend to
        continue    to  explore    the  possibility    of  entering    into
        strategic relationships  with   manufacturers  of  energy   meters,
        utility  companies,  energy  providers  and  others   in  order  to
        promote  the adoption  of our  H -Net(TM) system within the  energy
        and AMR industries.

o       Establish outsource manufacturing for full-scale commercial
        production.   We   have  the   means  of   outsourcing  small-scale
        production of the  products employed in  our H-Net(TM)  system.  We
        intend to  continue  the  cost -  reduction phase  of our H-Net(TM)
        system's development and in doing so, we intend to examine  various
        manufacturing  alternatives,   including  strategic   relationships
        with    manufacturers   of    energy   meters    and    third-party
        manufacturing of the products employed  in our H-Net(TM) system for
        use in energy meters.

o       Build market share for our products.  We intend to establish
        ourselves as the source  for comprehensive, low-cost AMR  solutions
        and  plan to focus  on building  our own  market share  for our   H
        -Net(TM)  system and  further develop  our H-Net(TM)  system where
        market demand is identified.  We also plan to develop  new products
        and enhancements  to meet  or exceed  the evolving  requirements of
        both centralized and  remote applications of  our technologies.

o       Intensify our marketing activities.  As funds become available, we
        intend to  invest  in  a comprehensive   targeted, product-specific
        marketing  program to  raise  awareness  of ConectiSys   and our  H
        -Net(TM)  system and in order to attract customers.

o       Continue to develop wireless products.  We intend to continue to
        invest in research  and development  of  wireless products to  meet
        the needs of the AMR industry. We believe  that the expertise  that
        we  have  developed  in creating   our existing   H-Net(TM) system
        will enable  us  to enhance our  products,  develop  new   products
        and  services   and  respond   to emerging  technologies in  a cost
        -effective and timely manner.


                                  <page>3

Our H-Net(TM) System

        Our H-Net(TM) system is designed to enable users to remotely read
electronic energy usage meters  without the necessity of  someone traveling
to and  physically reading  the meter.  The predominant  method of  reading
electronic meters is for an individual  to travel to the site of  the meter
and make a record of the data compiled by that meter, either manually as  a
notation in  a log  book or  electronically by  inputting the  data into  a
handheld or other electronic  data retention device. In  the case of a  log
book,  the  information  is   then  typically  recorded  manually   into  a
centralized database for energy usage tracking and billing purposes. In the
case of a  electronic data retention  device, the information  is typically
downloaded to a centralized database for these purposes. Residential meters
are customarily read on a monthly basis, allowing only a limited ability to
track energy  usage fluctuations  over periods  of less  than one month. In
addition,  physical reading  of meters  is accompanied  by the  problem of
reader error,  causing inefficiencies  resulting from  necessary corrective
procedures. Our H-Net(TM)  system is designed  to provide continuous  meter
- reading capabilities, address the inefficiencies that accompany  physical
meter reading and provide additional benefits to its users.

        We believe that the anticipated deployment costs of our H-Net(TM)
system  are small  compared to  other AMR  products because  there are  no
cellular  or  other  telecommunications  or  wireless  towers  to  erect or
expensive hardware infrastructure to install.  We anticipate that all field
installations  and  deployment programs  of  our H-Net(TM)  system  will be
administered  by  United Telemetry  Company,  one of  our  two wholly-owned
subsidiaries.  The  data  collected by  H-Net(TM)-equipped  meters  will be
transmitted over  the unlicensed  ISM 900  MHz radio  frequency band. Our H
-  Net(TM)  system allows  for  high-density data  transmissions,  which we
believe makes  it ideal  for metropolitan  and other  crowded areas where a
large amount of data would normally be collected.

H-Net(TM)-Equipped Meters

        Our H-Net(TM) system is comprised of the following three principal
components  that  operate together  to  provide what  we  believe to  be  a
comprehensive,  low-cost  AMR  solution:   H-Net(TM)-equipped  meters, base
stations  and a  network operating  center. The  first component  of our  H
-Net(TM) system is an electronic meter put into service at a residence that
is  equipped  with  a  circuit   board  that  contains  a  memory   module,
microprocessor and a  two-way radio transmission  and receiver device  that
operates in the ISM  900 MHz radio frequency  band. This circuit board  may
also be retrofitted to some existing meters. We refer to each energy  meter
equipped with this circuit board and  that is connected to our AMR  network
as an H- Net(TM)-equipped meter or a "node." With the installation of  each
H-Net(TM)- equipped meter, the existing installed H-Net(TM)-equipped meters
self-  configure  by  transmitting configuration  data  to  other H-Net(TM)
-equipped  meters and  receiving configuration  data from  other H-Net(TM)
-equipped meters.

Base Stations

        Our AMR network, when it is operational, will be partially
comprised of these H-Net(TM)-equipped meters, each communicating to another
with the final communication of  data in a given communication  cycle being
transmitted  to  the  second  component of  our  H-Net(TM)  system,  a base
station. We anticipate that a base station will be housed in a small  metal
box, no larger than the size of a shoe box, that contains a memory  module,
microprocessor, radio  transmission and  receiver device  and a  modem. The
node  and  base  station  configuration  is  similar  to  a  hub  and spoke
configuration, but rather than direct communication among each of the nodes
and the base station, numerous nodes will communicate with one another in a
web configuration with  some nodes sending  final transmission to  the base
station of  the data  collected by  many other  nodes. The  base station is
designed to  receive data  transmissions from  various nodes  in its  local
network and use its modem to place a local telephone call and transmit  the
data it has collected to the  third component of our H-Net(TM) system,  our
network operating center. We anticipate that the base stations will deliver
energy  meter data  four times  an hour,  twenty-four hours  a day  to our
network operating center.


                                  <page>4

Network Operating Center

        We plan to use a computer center located at our main office
facility  to store  the information  gathered from  the H-Net(TM)-equipped
meters. We call this computer center our network operating center.  We have
designed  our network  operating center  to support  up to  one million  H
-Net(TM)- equipped meters. We anticipate that our network operating  center
will be  the central  control center  for our  entire AMR  network and will
operate in a large  geographic area. We plan  to use the network  operating
center to  archive all  data for  future use  and as  a protective  measure
against data loss or corruption. After the data archival process, we expect
that the network operating center will handle uploading of the data to  the
Internet where  it can  be accessed  by users  directly and also downloaded
through an interpreter software program into a utility company's or  energy
service  provider's  database.  We anticipate  that  our  network operating
center   will   be    administered   by   our    wholly-owned   subsidiary,
eEnergyServices.com, Inc.

The H-Net(TM) Network

        The  H-Net(TM) network,  once deployed,  will be  comprised of  our
network  operating  center  and  local networks,  which  in  turn  are each
comprised  of   a base   station  and  H-Net(TM)-equipped  meters.   Each H
-Net(TM)-equipped   meter   can    communicate   with    other   H-Net(TM)
-equipped   meters  that  are  up   to a  distance  of approximately   one
-quarter mile  away. We  plan  to  install a   base station   for  every  H
-Net(TM)-equipped   meter  area.     Our base   stations   are  designed to
receive data transmissions from up to 20,000  H-Net(TM)-equipped meters. We
have  designed  our  system  so  that  a  base  station  can transmit  the
accumulated  data it has  received from the  H-Net(TM) -equipped meters  in
its local  network  by  telephone  every  fifteen minutes   by   using  its
modem   to communicate   with   our  network operating  center.   Once  the
data  from   the H   -  Net(TM)-equipped meters  arrives   from the    base
stations  at the  network operating  center,  the data   can  be  assembled
into  various formats   for billing  customers as  well as for   management
of energy  purchasing and energy conservation programs.

        Our H-Net(TM) system has certain limitations inherent in each local
network, each of which is comprised of H-Net(TM)-equipped meters and a base
station. Each local network has the following principal limitations:

o       it can consist of a maximum of 20,000 H-Net(TM)-equipped meters;

o        each H-Net(TM)-equipped  meter must  be within  approximately one
         -quarter  mile   of  another   H-Net(TM)-equipped  meter   in  the
         same local network; and

o       the maximum radius of a local network is five miles.

        In  addition  to  the limitations  described  above,  our H-Net(TM)
-equipped meters transmit data using the ISM  900 MHz radio frequency band,
which  is an unlicensed frequency band. Because this frequency band is  not
regulated, it may be subjected to heavy communication traffic, which  could
potentially  cause interference   with the   data transmissions   of our  H
-Net(TM)-equipped meters.

H-Net(TM) Services

        We plan to offer a wide variety of services to utility companies
and energy service providers in addition to reading their customers' energy
meters. We anticipate that  these services will include  energy management,
data storage  and archiving,  and the  provision of  near real-time  energy
usage  data in  order to  evaluate energy  consumption and  determine cost
savings  procedures. We  plan to  provide complete  billing and  accounting
transaction services to utility companies  and energy providers as well  as
to end-users of energy.


                                  <page>5

        Our  H-Net(TM) system  employs new  technology developed  to allow
utility companies   and  energy  service  providers   to have   a  wireless
network  of intelligent meters, with each meter communicating with  another
and   passing  data  back   and  forth,  allowing  near   real-time  energy
consumption data  to  be  collected.  We   believe  that    energy  service
providers   will    have   an opportunity  to  save  money  by  efficiently
collecting accurate  energy usage  profiles and using this  near  real-time
energy usage data to  competitively bid for energy in the newly deregulated
energy markets.

        Our H-Net(TM) system has been designed so that an energy service
provider can determine exactly how much electric power a metropolitan area,
a neighborhood, or even an individual residence is using. Energy users  who
have H-Net(TM)-equipped meters will have the ability to check their  energy
consumption  and  billing  rates  in  near  real-time  by  obtaining   this
information  over  the  Internet,  which  we  believe  will  promote energy
conservation.

H-Net(TM) Product Development and Pilot Programs

        Our product development efforts are directed toward developing an
AMR solution  in the  form of  our H-Net(TM)  system. We  believe that  our
existing expertise in data transmission  devices provides us with a  strong
technology base to pursue  this objective. Our product  development efforts
focus on the following principles:

o       Development of New Products and Technology. We plan to assess
        domestic  and  international  market  trends,  with  the  focus  of
        developing   new  products   designed   to   meet  emerging  market
        demands.   In  developing  new  products,  we plan  to  attempt  to
        combine our  existing technology   base with  new  technologies  to
        provide  a  broader  range  of  automation  and data communications
        and data acquisition solutions to end users.

o       Improvement of Existing Technology. We seek to expand the features
        and  functionality  of  our  existing  H-Net(TM)  system technology
        through modifications and enhancements  to meet the changing  needs
        of the marketplace. We are reviewing the design of our products  to
        determine  areas  of  potential cost  savings  or  enhanced product
        quality and reliability.

        We believe our future success will depend, in part, upon our
ability to expand and enhance the  features of our H-Net(TM) system and  to
develop and introduce new products designed to meet changing customer needs
on  a cost-  effective and  timely basis.  Consequently, failure  by us  to
respond  on  a  timely  basis  to  technological  developments,  changes in
industry standards or  customer requirements, or  any significant delay  in
product development or introduction,  could have a material  adverse effect
on our business  and results of  operations. We cannot  assure you that  we
will  respond   effectively  to   technological  changes   or  new  product
announcements by others or that we will be able to successfully develop and
market new products or product enhancements.

        On February 15, 2000, we successfully launched our H-Net(TM) pilot
test  program  in  Los Angeles,  California.  Although  this initial  pilot
program was small, it was a working model of our first-generation H-Net(TM)
system that demonstrated the capabilities of our H-Net(TM) system as an AMR
solution. This initial pilot program  demonstrated the technology of our  H
-  Net(TM) system,  which remotely  acquires near  real-time data  from an
energy meter, processes this  data to show energy  usage and cost, and  can
display this information on the Internet.


                                  <page>6

        In September 2000, we successfully launched a second pilot test
program  for which  we developed  a portable  wireless network  capable of
demonstrating our H-Net(TM) system anywhere in the country.

        Based upon the success of our early-generation H-Net(TM) systems in
our first two pilot test programs in demonstrating our H-Net(TM) system  as
a  viable  means  of  remotely reading  energy  meters  and  collecting the
resulting data,  we successfully  launched a  third pilot  test program  in
September 2001.

        During 2002, we reached an understanding for the evaluation of our
H-Net(TM) system in the Advanced Power and Energy Program at the University
of California, Irvine. The program was to provide three levels of extensive
laboratory and field-testing and evaluation.

        The Advanced Power and Energy Program was engaged in the
development of  test protocols  for distributed  resources, including micro
turbine generators, fuel cells,  and combined heat and  power applications.
The  Advanced  Power  and  Energy  Program  had  plans  to  undertake   the
development of test protocols for  advanced meter reading and real  time-of
-  use metering  under the  auspices of  stakeholder agencies  such as  the
California Energy Commission.  As part  of this program, the University  of
California, Irvine, through its Advanced Power and Energy Program,  planned
to test  and evaluate  technologies such  as our  H-Net(TM) system with the
understanding that its  mission was to  accelerate the market  viability of
energy-related technologies and systems.

        We have been informed by the director of the Advanced Power and
Energy Program that it is currently reorganizing. The director has  further
informed us  that the  Advanced Power  and Energy  Program has  changed its
priorities and  does not  intend to  test real  time meter reading devices.
Since we  have an  agreement with  the director  of the  Advanced Power and
Energy Program  to test  our H-Net(TM)  system, we  will continue to pursue
testing and the completion of a  pilot program with the Advanced Power  and
Energy Program.  We believe that the current budget crisis in the State  of
California  may cause  sever financial  cut-backs at  all California  state
university-operated research facilities and that this budget crisis is  the
cause  of  the  recent  reorganization by  the  Advanced  Power  and Energy
Program.

        We believe that if we are able to cause the Advanced Power and
Energy Program to complete its testing and pilot program relating to our  H
- Net(TM) system, that the  Advanced Power and Energy Program  will provide
our H- Net(TM) system a national  platform upon which to prove itself  as a
viable, efficient and reliable method of automated meter reading at a  cost
that is comparable to the current physical methods of meter reading.

        We are actively pursuing and planning other field testing programs
with  various utility  companies and  energy service  providers across  the
country. However, we expect that  future field testing programs will  be in
conjunction with the  first stages of  sales or licensing  of our H-Net(TM)
system to utility companies, energy service providers and other parties.

The H-Net(TM) Wireless Network Vision

        We have designed and will continue to design our H-Net(TM) system to
deliver  a  comprehensive  and   robust  AMR  solution  that   enables  the
realization of  substantial efficiencies  in the  remote meter  reading and
centralized data  collection contexts  and that  provides numerous features
and services. In addition to its many other planned features and  services,
we are designing our H-Net(TM) system to:

o       constantly monitor an end-user's energy meter and gather meter data
        and display it on the Internet in fifteen-minute intervals, twenty-
        four hours a day;

o       allow the end-user to access an information link on the Internet
        taking them directly to the energy usage data transmitted by  their
        H-Net(TM)- equipped meter;

o       provide utility companies, and energy service providers with
        reliable and accurate electricity usage records;


                                  <page>7

o       enable a utility company or energy service providers to supply to
        end-users  over  the  Internet  information  and  special incentive
        offers  regarding  the use  of  energy at  off-peak  times, thereby
        improving energy conservation  during critical peak  periods. Other
        innovative offers may also be implemented such as pre-payment plans
        and direct purchases of additional energy over the Internet;

o       allow an end-user to pay his or her energy bills over the Internet,
        at a very low administrative cost to the utility company and reduce
        billing delays;

o       allow the monitoring of energy usage levels to ensure that utility
        companies and energy  service providers are  aware of any  delivery
        problems, including power outages and energy thefts;

o       provide utility companies with the ability to determine which of
        its  customers does  not have  power without  the aid  of customer
        service  phone  calls,  thereby   allowing  service  crews  to   be
        dispatched  more efficiently.  By using  our H-Net(TM)  system, we
        believe  that a  utility company  will be  in a  position to  know
        precisely when each  end-user's service is  restored and the  exact
        duration of a power outage;

o       enhance safety and convenience by allowing the remote delivery and
        termination   of   electricity,  with   all   billing  transactions
        completely automated.  We plan  to design  our H-Net(TM)  system to
        allow  end-users  to  request over  the  Internet  the delivery  of
        electricity;

o       allow the distribution of electricity more efficiently and
        inexpensively with energy usage and other vital data informing each
        decision through the entire energy supply channel. We believe  that
        by using  our H-Net(TM)system,  energy purchasers  can make precise
        forecasts of purchasing requirements, eliminating much of the  over
        -  and  under-purchasing  of energy  that  contributes  to volatile
        wholesale energy prices;

o       allow end-users who are preparing to terminate or switch energy
        service providers to use the Internet to inform the current  energy
        service provider of the change. At a precise time, selected by  the
        end-user, our  H- Net(TM)  system has  the ability  to read the end
        -user's  H-Net(TM)-equipped  meter,  pass  the  information  to the
        current energy service provider's  system to produce a  final bill,
        and disconnect the end-user's electricity. In the case of a  change
        in an energy service provider, the data from an H-Net(TM)- equipped
        meter can automatically be routed to a new energy service provider;
        and

o       enable lower energy costs as a result of its efficiencies, quicker
        transactions with less paperwork  and reduced potential for  error.
        Lower energy and transaction costs will assist the transition to an
        open, competitive market for energy.

Government Regulation

        Our H-Net(TM) system is designed to comply with a significant number
of industry standards  and regulations, some  of which are  evolving as new
technologies are deployed. In the United States, our H-Net(TM) system  must
comply  with  various  regulations defined  by  the  United States  Federal
Communications Commission, or FCC, and Underwriters Laboratories, or  other
nationally-recognized test laboratories, as well as industry standards. The
regulatory  approval  process can  be  time-consuming and  can  require the
expenditure of  substantial resources.  We cannot  assure you  that the FCC
will grant  the requisite  approvals for  our H-Net(TM)  system on a timely
basis, or at all. The failure of our H-Net(TM) system to comply, or  delays
in  compliance,  with the  various  existing and  evolving  standards could
negatively  impact  our  ability  to  proliferate  our  H-Net(TM)   system.
Government regulations regarding  the manufacture, sale  and implementation
of products  and systems  similar to  our H-Net(TM)  system and  other data
communications devices are subject to future change. We cannot predict what
impact, if any, such changes may have upon our business.

                                  <page>8

        We do not anticipate that any government regulations will hamper
our efforts to  deploy our H-Net(TM)  system. Rather, the  restructuring of
the energy market in the United  States has required the reading of  energy
meters much more frequently than the current practice of once a month, thus
making the physical meter  reading techniques currently in  use inadequate.
Our H-Net(TM)  system is  designed to  meet various  government regulations
mandating  frequent  meter  readings  and  we  are  attempting  to position
ourselves so that we  will be a beneficiary  of these mandates. We  believe
that if we  are able to  preserve our relationship  with the University  of
California, Irvine,  as a  result of  its high-profile  Advanced Power  and
Energy Program, we may be provided with a significant opportunity to secure
government recognition  of our  H-Net(TM) system,  and we  hope that we can
position our H-Net(TM) system to be referred to in government  regulations,
or informally, as the standard in the AMR industry.

Operations

        During the initial design and engineering phases for our H-Net(TM)
system, we maintained low overhead costs  and we plan to continue to  do so
until manufacturing  and sales  of our  H-Net(TM) system  are underway.  We
plan  to  hire  additional  personnel as  needed  during  the  coming year,
including  managerial,  clerical,  administration,  sales,  marketing,  and
customer service personnel.

        We plan to lease suitable office facilities for our operations
within the Southern California area.  We plan to initially utilize existing
manufacturers to produce our products and will therefore likely not have  a
short-term need to lease or  build manufacturing facilities.  We intend  to
operate not principally as a manufacturer of products, but as a provider of
comprehensive,  cost-effective  AMR  solutions, and  we  plan  to outsource
manufacturing of the hardware employed in our H-Net(TM) system in order  to
achieve the highest cost-efficiencies.

Anticipated Revenues and Marketing

        Our  H-Net(TM)  system  is designed  to  be  a comprehensive,  cost
-effective AMR solution   and an  alternative  to  other AMR   technologies
and   physical  reading  of  meters. Our  H-Net(TM)  system  is  capable of
providing meter  data every fifteen  minutes, twenty-four hours  a day  and
nearly 3,000  times per month. Physical meter  readings cost  approximately
$1.00  per  meter.   Our  H  - Net(TM)  system  is   designed  to  meet the
relatively  low  cost of   physical  meter reading  while  providing nearly
3,000 times  more readings  per  month.  We believe  that our  base cost to
operate a fully-deployed H-Net(TM)  system is approximately $.20 per  meter
per month, or approximately $.0000667  per reading.

        We plan to license our H-Net(TM)  system technology to meter
manufacturers so that they may incorporate it into their meters. We plan on
deriving a small royalty per meter sold for every H-Net(TM)-equipped meter.
We anticipate that  the predominant source  of any future  revenues will be
through  recurring  monthly  service  charges  for  reading,  archiving and
supplying data  from H-  Net(TM)-equipped meters  and from  providing other
services described in more detail above. However, despite our belief of the
cost-effectiveness and significant advantages of our H-Net(TM) system  over
physical meter reading practices and  other AMR technologies, there can  be
no assurances that the market we intent to target will adopt or accept  our
H-Net(TM) system or that we will earn any significant revenues.

                                  <page>9

        We have developed a marketing plan that was formulated to help us
achieve the following objectives:

o       acquisition and retention of strategic beta test placement
        locations for H-Net(TM)-equipped meters;

o       formation of synergistic partnerships with energy service
        providers,  utilities  companies  and  internet  service providers,
        including  joint  ventures,  license  arrangements  and   strategic
        alliances;

o       participation    in   H-Net(TM)-equipped    meter   manufacturing
        partnerships and acquisition of Internet commerce sponsorship;

o       promotion  of unique  features and  specialized services  of our  H
        -Net(TM) system; and

o       creation of industry awareness by implementing a public relations
        and marketing campaign along with establishing a relationship  with
        the  State  of  California  and  other  states  in  an  attempt  to
        facilitate a long- term solution for the nation's energy needs.

        The current principal target of our marketing and sales efforts is
the  utility  and  energy  service  provider  industries.  These industries
consist of a wide variety of organizations that use data communications  in
an automated process application,  such as utilities and  energy management
companies. Responding to deregulation and other major changes taking  place
within the industry, electric  power utility companies have  become leading
advocates in promoting the  implementation of automation and  technological
advancement  as  a  means  of achieving  cost  savings  as  they enter  the
competitive  arena.  Utility  companies  are  automating  numerous distinct
processes within their operating systems. Our H?Net(TM) system is  designed
for and sold for use in:

o       the AMR context, which is intended primarily to eliminate the
        expense  and  inefficiencies of  human  meter readers  and  also is
        intended to provide data archival and delivery services as well  as
        additional value- added services for the end-user; and

o       distribution automation, which is the remote monitoring and control
        of power  distribution networks.  These control  systems are  often
        referred to as SCADA systems.  SCADA is an acronym for  Supervisory
        Control and Data Acquisition.

        If sufficient funds are not available for full deployment of our H-
Net(TM) system, it is our intention to license our H-Net(TM) technology  to
various sectors of the  energy industry, including meter  manufacturers for
integration  into  their  meters.  We also  may  license  our  software and
software systems for archival of the data transmitted by H-Net(TM)-equipped
meters to  various utility  companies and  energy service  providers. Under
this scenario,  we would  also supply  support and  technical assistance to
these  various sectors  of the  energy industry  while collecting  revenues
solely  in  the  form  of fees  for  licensing  and  support and  technical
assistance. We expect  any revenue from  this alternate strategy  to be far
less than our active participation in the collecting and archiving of meter
data and the ancillary services described in greater detail above.

                                  <page>10

Competition

        Many companies have developed data transmission products designed
to meet  the growing  demand for  AMR solutions.  We anticipate  that our H
-Net(TM) system  will compete  on the  basis of  features, price,  quality,
reliability, name  recognition, product  breadth and  technical support and
service. We believe that we generally will be competitive in each of  these
areas.  However,  many  of  our  existing  and  potential  competitors have
significantly   more    financial,   engineering,    product   development,
manufacturing and marketing  resources than we  have. We cannot  assure you
that our  competitors will  not introduce  comparable or  superior products
incorporating  more  advanced technology  at  lower prices,  or  that other
changes in market  conditions or technology  will not adversely  affect our
ability to compete  successfully in the  future. We perceive  the following
companies as  being the  principal competition  to our  AMR solution in the
form of our H-Net(TM) system:

Itron Inc.              Itron provides and has installed AMR systems
                        worldwide. Itron provides "drive-by" automated
                        meter reading equipment.

CellNet Data Systems    CellNet provides fixed-network wireless AMR systems
                        and   has   installed  systems   in   Kansas  City,
                        Minneapolis,  San   Francisco,  Indianapolis,   and
                        through Puget Sound Power.  CellNet has  technology
                        alliances with the major energy meter manufacturers
                        and was recently acquired by Schlumberger.

Schlumberger Ltd.       Schlumberger's Resource Management Systems Division
                        has  deployed  meter reading  systems  that include
                        hand-held  meter   reading  devices.   Schlumberger
                        recently acquired CellNet and Metricom.

Hunt Technologies, Inc. Hunt provides power line carrier AMR systems with
                        capabilities  including  substation  switching. The
                        market  niche  for  Hunt's  AMR  systems  is  rural
                        electric cooperatives.

Metricom Corporation    Metricom provides wireless communication networks
                        with fixed-wireless networks  installed in the  San
                        Francisco Bay Area, Seattle, Washington, D.C.,  and
                        at    universities.     Metricom    and     Whisper
                        Communications,  Inc.  have formed  an  alliance to
                        provide  AMR  systems.    Their  AMR  systems   are
                        installed at KN Energy  and Pacific Gas &  Electric
                        Company.   Metricom   recently   was   acquired  by
                        Schlumberger.

        We believe that we will be the only company able to collect data
transmitted   from   H-Net(TM)-equipped   meters,   thereby   ensuring  our
competitive advantage once we are able to achieve sufficient  proliferation
of our H- Net(TM)-equipped meters.

Customers

        We do not currently have revenue-generating customers as we have
recently emerged from the development stage and have recently completed for
commercial production the  initial development of  our AMR solution  in the
form  of our  H-Net(TM) system.  We anticipate  that once  we commercially
produce and install our H-Net(TM) system, our customers will include energy
meter manufacturers,  energy service  providers, utility  companies and end
-users of energy.

                                  <page>11

Intellectual Property

        We currently rely on a combination of contractual rights,
copyrights, trademarks and trade secrets to protect our proprietary rights.
However, although our H-Net(TM) system and its constituent components could
benefit from patent  protection, we have  chosen to retain  the proprietary
rights associated with our H-Net(TM) system predominantly as trade secrets.
Although we currently rely to a great extent on trade secret protection for
much of our technology, we cannot  assure you that our means of  protecting
our proprietary rights  will be adequate  or that our  competitors will not
independently  develop  comparable  or  superior  technologies  or   obtain
unauthorized access to our proprietary technology.

        We own, license or have otherwise obtained the right to use certain
technologies  incorporated  in  our   H-Net(TM)  system.  We  may   receive
infringement  claims  from  third  parties  relating  to  our  products and
technologies. In those cases, we intend to investigate the validity of  the
claims  and,  if we  believe  the claims  have  merit, to  respond  through
licensing or  other appropriate  actions. To  the extent  claims relate  to
technology included  in components  purchased from  third-party vendors for
incorporation  into our  products, we  would forward  those claims  to the
appropriate vendor.  If we  or our  component manufacturers  are unable  to
license or otherwise provide  any necessary technology on  a cost-effective
basis,  we  could be  prohibited  from marketing  products  containing that
technology, incur substantial  costs in redesigning  products incorporating
that  technology, or  incur substantial  costs defending  any legal  action
taken against us.

Employees

        We have four full time employees and a five person advisory board.
Our  employees  are   involved  in  executive,   corporate  administration,
operations, and sales and marketing functions. We also use the services  of
outside consultants  and experts  on many  of our  projects to  help reduce
costs. We consider our relations with our employees to be good. None of our
employees is represented by a labor union.

ITEM 2. DESCRIPTION OF PROPERTY.

        Our principal operation center is located at 24730 Avenue Tibbitts,
Suite 130,  Valencia, California  91355.  This  1,000 square  foot space is
leased for approximately $1,260 per month.

        We believe that our facilities are adequate for our needs for the
near future.

ITEM 3. LEGAL PROCEEDINGS.

        In February 2002, we borrowed $340,000 from the Mercator Momentum
Fund in   order to   make the   initial $100,000   payment to Laurus Master
Fund, Ltd.  and to  fund continuing  development of  our H-Net(TM)  system.
This loan from   the Mercator  Momentum  Fund  is a   short-term loan   due
May 15, 2002 and  accrues interest  an annual  rate of  18%. The  loan  was
secured by shares  of our  common  stock.  As of  June 13,  2002,  we  owed
Mercator Momentum  Fund approximately  $243,000  of  principal and  accrued
and  unpaid  interest  under   this loan  and   were   in  default  in  the
repayment  of  this debt.

        On June 14, 2002, Mercator Momentum Fund transferred collateral in
the form of 5,861,814 shares of our common stock into its name as a  result
of  our  default on  its  loan. Of  the  5,861,814 shares  of  common stock
transferred into the  name of Mercator  Momentum Fund, 3,500,000  shares of
our common stock were  issued and pledged as  collateral by us in  February
2002, and 2,361,814 shares of  our common stock were pledged  as collateral
by Robert Spigno, our Chief Executive Officer, in February 2002.

        On June 21, 2002, Mercator Momentum Fund filed an action against
ConectiSys Corporation,  Robert A.  Spigno and  Patricia A.  Spigno in  the
Superior Court of California, County of Los Angeles (Case No. BC276283) for
breach of promissory note, foreclosure of security interests and fraud  and
deceit. Mr.  Spigno is  the Chairman  of the  Board and  a director  of our
company  and  is also  our  Chief Executive  Officer.   Ms. Spigno  is  our
Secretary and Chief Financial Officer.  On July 3, 2002, Mercator  Momentum
Fund filed a first amended  complaint in the Superior Court  of California,
County of Los Angeles (Case No.  BC276283) adding a claim for common  count
for  money  lent. Mercator  Momentum  Fund seeks  damages  of approximately
$243,000 plus  approximately $66  in interest  per day  commencing June 21,
2002 and other compensatory and punitive damages of unspecified amount. The
complaint relates to the loan in February 2002 from Mercator Momentum  Fund
of $340,000, as more particularly described above. The case is currently in
the discovery phase.  We believe that  Mercator Momentum Fund's  claims are
without merit because, among other factors, we have affirmative defenses to
those claims, including  usury and the  satisfaction of amounts  owed under
loan from Mercator Momentum Fund as a result of the enforcement by Mercator
Momentum Fund of its  security interest in shares  of our common stock.  We
intend to vigorously defend against these claims and to pursue  appropriate
counterclaims against Mercator Momentum Fund. Due to the size of the amount
owed to Mercator Momentum Fund and our poor financial condition, an adverse
decision in  the litigation  against us  could have  a materially  negative
impact on  our financial  condition and  business prospects,  including the
development of our H-Net(TM) system.

                                  <page>12

        In 1997, the Securities and Exchange Commission filed suit in the
United States District Court in the Central District of California  against
ConectiSys and other individuals seeking permanent injunctions against  all
defendants  and civil  penalties from  those individuals  based on  alleged
violations of Sections 5(a), 5(c) and 17(a)(1)-(3) of the Securities Act of
1933, Sections 15(c) and 10(b) of  the Securities Exchange Act of 1934  and
Rule  10b-5 thereunder  in connection  with the  sale of  common stock  of
ConectiSys  in 1995  and 1996.  Specifically, the  Securities and  Exchange
Commission alleged that a  fraudulent scheme was orchestrated  and directed
by  ConectiSys  and  the  other  defendants  to  engage  in  the  sale  and
distribution of unregistered  shares of the  common stock of  ConectiSys by
creating  the appearance  of an  active trading  market for  the stock  of
ConectiSys and artificially  inflating the price  of its shares.  After the
conduct of a trial of this matter without a jury, the court found in  favor
of the  Securities and  Exchange Commission  on the  claim that  ConectiSys
violated Sections  5(a), 5(c),  and 17(a)  of the  Securities Act  of 1933.
ConectiSys was not found to have violated section 10(b), 10(b-5), or  15(c)
of the  Securities Exchange  Act of  1934. We  were subsequently ordered to
disgorge proceeds totaling $175,000,  but appealed the judgment  against us
in favor of the Securities and Exchange Commission.

        In March 1999, we agreed with the Securities and Exchange
Commission to the terms of a settlement of its litigation against us. Under
the terms  of that  settlement, we  dismissed our  then-pending appeal of a
judgment against us in favor of the Securities and Exchange Commission  and
accepted a permanent injunction  against us prohibiting actions  that would
violate federal securities laws in  connection with the offer, purchase  or
sale of securities. The Securities and Exchange Commission agreed to  waive
a requirement  of the  judgment under  appeal that  we disgorge $175,000 of
proceeds from the sale of our common stock due to our inability to pay this
amount. On March 9, 1999, an amended final judgment of permanent injunction
and other relief memorializing  these agreements was entered  in connection
with the execution by us of a consent to entry of injunction. An injunction
of this nature is viewed unfavorably by analysts and investors and may make
it  more difficult  for us  to raise  additional debt  or equity  financing
necessary to run our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        During the quarter ended September 30, 2002, no matters were
submitted to a vote of the holders of our securities.

                                  <page>13

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

        The following table shows the high and low closing bid prices of
our common stock  for the periods  presented, as obtained  from Pink Sheets
LLC, a  research service  that compiles  quote information  reported on the
National  Association  of  Securities  Dealers  composite  feed  or   other
qualified interdealer quotation medium. The quotations listed below reflect
interdealer prices, without retail  mark-up, mark-down or commissions,  and
may not represent actual transactions.  Our common stock trades on  the OTC
Bulletin Board(R) under the symbol "CNES."

                                                        Price Range
                                                        High    Low
Year Ended September 30, 2001:
        First Quarter (October 1 - December 31)      $  0.325 $ 0.09
        Second Quarter (January 1 - March 30)           0.55    0.09
        Third Quarter (April 1 - June 30)               0.36    0.16
        Fourth Quarter (July 1 - September 30)          0.23    0.11

Year Ended September 30, 2002:
        First Quarter                               $   0.19 $ 0.095
        Second Quarter                                  0.105   0.07
        Third Quarter                                   0.10    0.016
        Fourth Quarter                                  0.036   0.007

        As of January 6, 2003, we had 97,110,266 shares of common stock
outstanding and held of record  by approximately 780 shareholders, and  the
high and low sale prices of a share of our common stock on the OTC Bulletin
Board(R)  on  that date  were  $.012 and  $.011,  respectively. Within  the
holders of record of our common  stock are depositories such as Cede  & Co.
that hold shares of stock for  brokerage firms which, in turn, hold  shares
of stock for beneficial owners.

        We have never paid cash dividends on our common stock and do not
currently  intend  to  pay  cash  dividends  on  our  common  stock  in the
foreseeable future. We are restricted  from paying dividends on our  common
stock under state law, and the terms of our secured convertible debentures.
We currently anticipate  that we will  retain any earnings  for use in  the
continued development of our business.

        Our authorized capital stock consists of 250,000,000 shares of
common stock, no  par value per  share, and 50,000,000  shares of preferred
stock, $1.00 par  value per share.  Of the 50,000,000  authorized shares of
preferred stock, 1,000,000 shares have been designated as Class A Preferred
Stock, or Class A Preferred, 1,000,000 shares have been designated as Class
B  Preferred Stock,  or Class  B Preferred,  and the  remaining 48,000,000
shares  are undesignated.  As of  January 6,  2003, there  were 97,110,266
shares of common stock  outstanding held by approximately  780 shareholders
of record and 200,020 shares of  Class A Preferred outstanding held by  one
holder  of record  and no  shares of  Class B  Preferred outstanding.  The
following is a summary description of our capital stock.

Common Stock

        The holders of outstanding shares of our common stock are entitled
to  receive dividends  out of  assets legally  available at  times and  in
amounts  as  the  board  of directors  may  from  time  to time  determine,
subordinate  to any  preferences that  may be  granted to  the holders  of
preferred stock. Holders of common stock are entitled to one vote per share
on all matters on which the holders of common stock are entitled to vote.

                                  <page>14

        The common stock is not entitled to preemptive rights and may not
be redeemed or converted. Upon our liquidation, dissolution or winding  up,
the  assets  legally available  for  distribution to  our  shareholders are
divided among the holders of the  common stock in proportion to the  number
of shares of common stock held by each of them, after payment of all of our
debts and  liabilities and  fulfillment of  the rights  of any  outstanding
class or series of preferred stock that has priority to distributed assets.
The rights of holders of common  stock are subordinate to those of  holders
of any series of preferred stock.

Preferred Stock

        Preferred stock may be issued from time to time in one or more
series, and our board of directors, without action by the holders of common
stock, may fix or alter the voting rights, redemption provisions,  dividend
rights, dividend rates, claims to  our assets superior to those  of holders
of our common stock, conversion  rights and any other rights,  preferences,
privileges  and restrictions  of any  wholly unissued  series of  preferred
stock.  The board  of directors,  without shareholder  approval, can  issue
shares  of preferred  stock with  rights that  could adversely  affect the
rights of the holders of common stock. The issuance of shares of  preferred
stock could  adversely affect  the voting  power of  the holders  of common
stock and could  have the effect  of making it  more difficult for  a third
party  to  acquire,  or  could  discourage  or  delay  a  third  party from
acquiring, a majority of our outstanding common stock.

Class A Preferred

        Each share of Class A Preferred is entitled to 100 votes per share
on  all matters  presented to  our shareholders  for action.  The Class  A
Preferred  does  not  have any  liquidation  preference,  additional voting
rights, conversion rights, anti-dilution  rights or any other  preferential
rights.

Class B Preferred

        Each share of Class B Preferred is convertible into 10 shares of
our  common stock.  The Class  B Preferred  does not  have any  liquidation
preference, voting rights, other conversion rights, anti-dilution rights or
any other preferential rights.

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is Signature
Stock Transfer, Inc. Its telephone number is (972) 788-4193.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

        The following discussion and analysis should be read in conjunction
with our consolidated  financial statements and  notes and the  information
included  under  the  caption "Risk  Factors"  included  elsewhere in  this
document.  Except  for  historical  information,  the  following discussion
contains forward-looking statements  that involve risks  and uncertainties,
such as statements  of our plans,  objectives, expectations and  intentions
and  our  current  beliefs  regarding revenues  we  might  earn  if we  are
successful  in  implementing  our business  strategies.  See  "Special Note
Regarding  Forward-Looking  Statements" for  further  information regarding
forward-looking statements. Our actual  results may differ materially  from
the results discussed  in the forward-looking  statements as a  result of a
number of factors,  many of which  are beyond our  control, including those
factors discussed under "Risk Factors" and other headings in this document,
which could, among  other things, cause  the price of  our common stock  to
fluctuate substantially.

                                  <page>15

Overview

        Since 1995, we have been engaged in the development of a low-cost
automatic meter reading, or AMR, solution. We have developed a low-cost AMR
solution that includes a proprietary system employing specialized  hardware
and software that will  allow for residential and  commercial applications.
Our  proprietary  system  is  called H-Net(TM),  which  is  a  trademark of
ConectiSys.

        We are currently in a cost-reduction phase of the development of
our  H-Net(TM) system  and have  completed the  development for  commercial
production of our H-Net(TM) 4.0 wireless meter reading product. We have not
yet sold any H-Net(TM) systems and  we do not expect any significant  sales
of our H-Net(TM)  systems until mid  2003. Accordingly, we  have not earned
any significant  revenues from  the sale  of H-Net(TM)  systems. We have no
history  of  revenues  and  have  incurred  significant  losses  since  the
beginning of the development of our H-Net(TM) system. We have a significant
accumulated  deficit  and negative  working  capital. As  a  result of  our
financial  condition,  our  independent  auditors  have  issued  an opinion
questioning our ability to continue as a going concern.

Critical Accounting Policies and Estimates

        The following discussion and analysis is based upon our financial
statements, which have been prepared using accounting principles  generally
accepted in the United States of America.  The preparation of our financial
statements  requires  management  to make  estimates  and  assumptions that
affect  the  reported  amounts  of revenue  and  expenses,  and  assets and
liabilities,  during  the  periods  reported.   Estimates  are  used   when
accounting  for   certain  items   such  as   depreciation,  likelihood  of
realization of certain assets, employee compensation programs and valuation
of intangible assets.  We base  our estimates on historical experience  and
other assumptions that we  believe are reasonable under  the circumstances.
Actual results may differ from our estimates.

        We believe the following critical accounting policies affect our
more significant  judgments and  estimates used  in the  preparation of our
financial  statements.   We  have based  our  financial  statements on  the
assumption of our operations continuing  as a going concern.  As  a result,
we continue to depreciate fixed assets and show certain debts as long-term.
We have written-off  the value of  technology in prior  periods because the
realization of that  value was doubtful.   Our compensation of  consultants
and employees with our capital stock is recorded at estimated market value.
The  volatile  nature  of  the  price  of  our  common  stock  causes  wide
disparities in certain valuations.

        Comparison of Results of Operations for the Fiscal
        Years Ended September 30, 2002 and 2001

        We did not generate any revenues for the fiscal years ended
September 30, 2002 and  September 30, 2001. Cost  of sales for fiscal  2002
was $73,667 as compared to $37,930 for fiscal 2001, an increase of  $35,737
or 94.2%. This increase in cost  of sales primarily was due to  an increase
in production of models and  prototypes of our H-Net(TM) products  that are
used for sales and marketing purposes.

        General and administrative expenses increased by $29,237 or 1.6% to
$1,808,657 for fiscal 2002 as compared to $1,779,420 for fiscal 2001.

        Interest expense increased by $127,190 or 37.7% to $464,410 during
fiscal  2002 as  compared to  $337,220 for  fiscal 2001.  This increase  in
interest expense primarily was due  to an increase in borrowings  under our
convertible debentures and other promissory notes during fiscal 2002.

        Net loss for fiscal 2002 increased by $192,165 or 8.9% to
$2,346,732 as compared to a net loss of $2,154,567 for fiscal 2001.

                                  <page>16

        Liquidity and Capital Resources

        During the twelve months ended September 30, 2002 we financed our
operations solely through private placements of securities. Because we have
recently emerged from  the development stage,  we have never  generated any
revenue from operations.  Our consolidated financial  statements as of  and
for the years  ended September 30,  2002 and 2001  have been prepared  on a
going  concern  basis, which  contemplates  the realization  of  assets and
satisfaction of liabilities in the normal course of business.

        As  of September  30, 2002,  we had  a working  capital deficit  of
approximately   $2,077,000     and    an      accumulated    deficit     of
approximately $22,918,000. As of that date, we had approximately $55,000 in
cash and  cash equivalents.  We   had   accounts    payable   and   accrued
compensation     expenses  of  approximately  $1,117,000.   We had    other
current liabilities,  including amounts  due to officers, accrued interest,
notes and convertible debts   of approximately $1,104,000, including  those
issued  prior to   the  beginning  of  fiscal  year  2002.  To the   extent
convertible  debentures   or  promissory notes  that  we   have issued  are
converted  into shares   of common  stock,  we  will not  be  obligated  to
repay  the  converted  amounts, which   we  estimated  to be  approximately
$89,000 at September 30, 2002.

        Cash     used     in    our     operating     activities    totaled
approximately   $1,012,000    for      the     twelve     months      ended
September  30,     2002  as   compared  to     approximately  $492,000  for
the   twelve   months    ended September 30,   2001.   We   used  cash   in
our  investing   activities in  the amounts  of  $7,000   and $11,000   for
the  twelve  months   ended  September  30,  2002  and September  30, 2001,
respectively.

        Cash provided by our financing activities totaled $1,067,000 for
the twelve months ended September 30, 2002 as compared to $475,000 for  the
twelve months ended September 30, 2001. We raised all of the cash  provided
by financing activities during the  twelve months ended September 30,  2002
from the issuance of convertible debentures and/or promissory notes.

        In April 2001, we issued an 8% Convertible Note to Laurus Master
Fund, Ltd., or Laurus,  in the principal amount  of $300,000. We have  been
unable to  repay the  amounts owed  under this  note and  we have failed to
satisfy our obligation  to register for  resale the shares  of common stock
underlying this  note. On  February 15,  2002, and  as amended  on April 2,
2002, we agreed to terms with Laurus regarding our  obligations under  this
note. Under the terms of this  agreement, we paid to Laurus  $100,000  in
cash on February 19, 2002 and $50,000 in cash on  April 5,  2002.  However,
we have not met all the terms of the  February 15, 2002 agreement, as  well
as, the    original terms  under the  April 2001  Convertible Note.  We are
currently working  with Laurus  to pay  down the  remaining balance  of the
original  April   2001  Convertible   Note.  As  of  September   30,  2002,
approximately $129,000 of principal and accrued and unpaid  interest  under
the  original   note  remained   outstanding.  As   of  January   6,  2003,
approximately $60,000 of  principal and accrued  and unpaid interest  under
this note  remained outstanding.

                                  <page>17

        In February 2002, we borrowed $340,000 from the Mercator Momentum
Fund in  order to  make the  initial $100,000  payment under our settlement
arrangement with Laurus and to  fund continuing development of our  H-NetTM
system. This loan from the Mercator Momentum Fund is a short-term loan  due
May 15,  2002 and  accrues interest  an annual  rate of  18%. The  loan was
secured  by shares  of our  common stock.  As of  June 13,  2002, we  owed
Mercator Momentum Fund approximately $243,000 of principal and accrued  and
unpaid interest under  this loan and  were in default  in the repayment  of
this debt.

        On June 14, 2002, Mercator Momentum Fund transferred collateral in
the form of 5,861,814 shares of our common stock into its name as a  result
of  our  default on  its  loan. Of  the  5,861,814 shares  of  common stock
transferred into the  name of Mercator  Momentum Fund, 3,500,000  shares of
our common stock were  issued and pledged as  collateral by us in  February
2002, and 2,361,814 shares of  our common stock were pledged  as collateral
by Robert Spigno, our Chief Executive Officer, in February 2002.

        On June 21, 2002, Mercator Momentum Fund filed an action against
ConectiSys Corporation,  Robert A.  Spigno and  Patricia A.  Spigno in  the
Superior Court of California, County of Los Angeles (Case No. BC276283) for
breach of promissory note, foreclosure of security interests and fraud  and
deceit. Mr.  Spigno is  the Chairman  of the  Board and  a director  of our
company  and  is also  our  Chief Executive  Officer.   Ms. Spigno  is  our
Secretary and Chief Financial Officer.  On July 3, 2002, Mercator  Momentum
Fund filed a first amended  complaint in the Superior Court  of California,
County of Los Angeles (Case No.  BC276283) adding a claim for common  count
for  money  lent. Mercator  Momentum  Fund seeks  damages  of approximately
$243,000 plus  approximately $66  in interest  per day  commencing June 21,
2002 and other compensatory and punitive damages of unspecified amount. The
complaint relates to the loan in February 2002 from Mercator Momentum  Fund
of $340,000, as more particularly  described above. This case is  currently
in the discovery phase. We believe that Mercator Momentum Fund's claims are
without merit because, among other factors, we have affirmative defenses to
those claims, including  usury and the  satisfaction of amounts  owed under
loan from Mercator Momentum Fund as a result of the enforcement by Mercator
Momentum Fund of its  security interest in shares  of our common stock.  We
intend to vigorously defend against these claims and to pursue  appropriate
counterclaims against Mercator Momentum Fund. Due to the size of the amount
owed to Mercator Momentum Fund and our poor financial condition, an adverse
decision in  the litigation  against us  could have  a materially  negative
impact on  our financial  condition and  business prospects,  including the
development of our H-Net(TM) system.

        In March 2002, we issued $300,000 of our secured convertible
debentures to four accredited investors in the first stage of a three-stage
offering. The  secured convertible  debentures are  due March  29, 2003 and
provide for interest at the rate of 12% per annum. The secured  convertible
debentures were accompanied by warrants  to purchase up to an  aggregate of
1,500,000 shares of common stock. The net proceeds of that offering,  after
payment of related expenses, were approximately $225,000. As of January  6,
2003, an aggregate of $176,960 of principal plus related accrued and unpaid
interest  relating  to  the  debentures  issued  in  March  2002   remained
outstanding.

        In May 2002, we issued $150,000 of our secured convertible
debentures to  four accredited  investors in  the second  stage of  a three
- stage offering. The secured  convertible debentures are due May  10, 2003
and  provide  for  interest at  the  rate  of 12%  per  annum.  The secured
convertible debentures were  accompanied by warrants  to purchase up  to an
aggregate  of 750,000  shares of  common stock.  The net  proceeds of  that
offering, after payment of  related expenses, were approximately  $140,000.
As of January 6, 2003, an  aggregate of $150,000 of principal plus  related
accrued and unpaid interest relating to the debentures issued in March 2002
remained outstanding.

                                  <page>18

        In June 2002, we issued $300,000 of our secured convertible
debentures to four accredited investors in the third stage of a three-stage
offering. The  secured convertible  debentures are  due June  17, 2003  and
provide for interest at the rate of 12% per annum. The secured  convertible
debentures were accompanied by warrants  to purchase up to an  aggregate of
1,500,000 shares of common stock. The net proceeds of that offering,  after
payment of related expenses, were approximately $237,500. As of January  6,
2003, an aggregate of $300,000 of principal plus related accrued and unpaid
interest  relating  to  the   debentures  issued  in  June   2002  remained
outstanding.

        In November 2002, we issued $200,000 of our secured convertible
debentures to  three accredited  investors in  the first  stage of  a three
- stage offering. The secured  convertible debentures are due November  27,
2003 and provide  for interest at  the rate of  12% per annum.  The secured
convertible debentures were  accompanied by warrants  to purchase up  to an
aggregate of  1,000,000 shares  of common  stock. The  net proceeds of that
offering, after payment of  related expenses, were approximately  $145,000.
The  investors are  obligated to  purchase an  additional $150,000  of our
secured  convertible  debentures and  warrants  to purchase  up  to 750,000
shares  of  common  stock  within  15  days  after  the  filing  date  of a
registration  statement  covering  the resale  of  shares  of common  stock
underlying  the  convertible  debentures  and  warrants.  Additionally, the
investors are obligated to purchase  an additional $150,000 of our  secured
convertible debentures  and warrants  to purchase  up to  750,000 shares of
common stock  within 5  days after  the effective  date of the registration
statement covering  the resale  of shares  of common  stock underlying  the
convertible debentures and warrants. As of January 6, 2003, the full amount
of the debentures issued in November 2002 remained outstanding.

        As of January 6, 2003 we had two additional notes due September 1,
2003 payable in the aggregate  approximate amount of $254,000 of  which one
note  in  the  principal  amount  of  approximately  $81,000,  plus accrued
interest of approximately $11,000, was held by Robert Spigno, our  Chairman
of the Board and Chief Executive  Officer. These notes bear interest at  an
annual rate of 18%.

        Our  continued operations   are dependent  on  securing  additional
sources  of liquidity through debt and/or equity financing.

        As indicated above, our consolidated financial statements as of and
for the years  ended September 30,  2002 and 2001  have been prepared  on a
going  concern  basis, which  contemplates  the realization  of  assets and
satisfaction of liabilities in the normal course of business. As  discussed
in this document and in Note 1 to our consolidated financial statements for
the years  ended September  30, 2002  and 2001,  we have suffered recurring
losses  from operations  and at  September 30,  2002 had  net capital  and
working  capital   deficiencies.  These   factors,  among   others,  raised
substantial doubt about our ability to continue as a going concern and  led
our independent  certified public  accountants to  modify their unqualified
opinion  to include  an explanatory  paragraph related  to our  ability to
continue as a going concern. The consolidated financial statements included
in this document do not include any adjustments that might result from  the
outcome of this uncertainty.

        We have been, and currently are, working toward identifying and
obtaining  new   sources  of   financing.  Deteriorating   global  economic
conditions  may  cause prolonged  declines  in investor  confidence  in and
accessibility to capital markets. Further, our current secured  convertible
debenture financing  documents contain  notice and  right of  first refusal
provisions and the grant of a security interest in substantially all of our
assets  in  favor of  the  convertible debenture  investors,  all of  which
provisions  will  restrict  our  ability  to  obtain  debt  and/or   equity
financing.

        Any future financing that we may obtain may cause significant
dilution to existing stockholders. Any debt financing or other financing of
securities senior to common  stock that we are  able to obtain will  likely
include financial and other  covenants that will restrict  our flexibility.
At a  minimum, we  expect these  covenants to  include restrictions  on our
ability to pay dividends  on our common stock.  Any failure to comply  with
these  covenants would  have a  material adverse  effect on  our business,
prospects, financial condition, results of operations and cash flows.

                                  <page>19

        If adequate funds are not available, we may be required to delay,
scale back or eliminate portions of our operations and product and  service
development efforts or to obtain funds through arrangements with  strategic
partners or others that may require  us to relinquish rights to certain  of
our technologies or  potential products or  other assets. Accordingly,  the
inability to obtain  such financing could  result in a  significant loss of
ownership and/or control of our proprietary technology and other  important
assets and could  also adversely affect  our ability to  fund our continued
operations  and   our  product   and  service   development  efforts   that
historically have contributed significantly to our competitiveness.

        We are completing research and development of our H-Net(TM) system
with the goal of deployment of the H-Net(TM) system in mid 2003. We believe
that if we are successful in deploying our H-Net(TM) system, we will  begin
to generate revenues from our business activities.

        Risk Factors

        An investment in our common stock involves a high degree of risk.
In addition to the other information in this document, you should carefully
consider the following risk factors before deciding to invest in shares  of
our common  stock. If  any of  the following  risks actually  occurs, it is
likely that our business,  financial condition and operating  results would
be  harmed.  As a  result,  the trading  price  of our  common  stock could
decline, and you could lose part or all of your investment.

         We  have  no  history  of  revenues,  have incurred
         significant losses, expect continued losses and may
         never achieve profitably.  If we continue  to incur
         losses,  we  may have  to  curtail our  operations,
         which may  prevent us  from successfully  deploying
         our H-Net(TM) wireless meter reading system.

        We have no history of revenues, have not been profitable and expect
continued losses.  Historically, we  have relied  upon cash  from financing
activities to fund all of the cash requirements of our activities and  have
incurred  significant  losses and  experienced  negative cash  flow.  As of
September  30,  2002,  we  had  an  accumulated  deficit  of  approximately
$22,918,000. For our  fiscal year ended  September 30, 2002,  we incurred a
net  loss  of  approximately  $2,347,000  and  for  our  fiscal  year ended
September 30, 2001, we incurred a net loss of approximately $2,154,000.  We
cannot predict when  we will become  profitable or if  we ever will  become
profitable, and we may continue to incur losses for an indeterminate period
of time and may never achieve or sustain profitability. An extended  period
of losses and negative cash flow may prevent us from successfully deploying
our H-Net(TM) wireless meter reading  system, or our H-Net(TM) system,  and
operating  or  expanding  our  business.  As  a  result  of  our  financial
condition, our independent auditors have issued an opinion questioning  our
ability to continue as a going concern.

        Our significant losses have resulted principally from costs
incurred in  connection with  the development  of our  H-Net(TM) system and
from costs  associated with  our administrative  activities. We  expect our
operating expenses  to dramatically  increase as  a result  of our  planned
deployment of our  H-Net(TM) system.  Since  we have not  yet completed the
development  of our  H-Net(TM) system,  have no  operating history  and no
sources  of revenues,  we cannot  assure you  that our  business will  ever
become profitable or that we will ever generate sufficient revenues to meet
our expenses and  support our planned  activities. Even if  we are able  to
achieve  profitability,  we  may  be  unable  to  sustain  or  increase our
profitability on a quarterly or annual basis.

                                  <page>20

           Our  independent  auditors have  issued  a report
           questioning our  ability to  continue as  a going
           concern. This  report may  impair our  ability to
           raise additional  financing and  adversely affect
           the price of our common stock.

        The report of our independent auditors contained in our financial
statements  for the  years ended  September 30,  2002 and  2001 includes  a
paragraph that explains that we have incurred substantial losses and have a
working capital  deficit. This  report raises  substantial doubt  about our
ability to  continue as  a going  concern. Reports  of independent auditors
questioning  a  company's  ability  to  continue  as  a  going  concern are
generally viewed  unfavorably by  analysts and  investors. This  report may
make  it difficult  for us  to raise  additional debt  or equity  financing
necessary  to  continue the  development  and deployment  of  our H-Net(TM)
system. We urge potential investors  to review this report before  making a
decision to invest in ConectiSys.

        Without substantial additional financing, we may  be
        unable  to  achieve the  objectives  of our  current
        business strategy,  which could  force us  to delay,
        curtail  or  eliminate   our  product  and   service
        development programs.

        We require additional financing to:

o       produce cost-reduced hardware for our H-Net(TM) system capable of
        large-scale manufacturing; and

o       obtain and implement contracts and joint venture agreements with
        meter manufacturers.

        If we are unable to obtain this financing, we could be forced to
delay,  curtail  or  eliminate  certain  product  and  service  development
programs  or  entirely  abandon our  planned  deployment  of our  H-Net(TM)
system. In addition,  our inability to  obtain financing could  have such a
material adverse effect on  our business, prospects, results  of operations
or financial  condition, that  we may  be forced  to restructure,  file for
bankruptcy, sell assets  or cease operations  entirely, any of  which could
jeopardize an investment in our common stock.

        We  need  and  may be  unable  to  obtain additional
        financing on satisfactory  terms, which may  require
        us to accept financing on burdensome terms that  may
        cause substantial dilution  to our shareholders  and
        impose   onerous  financial   restrictions  on   our
        business.

        We require additional financing. Deteriorating global economic
conditions  may  cause prolonged  declines  in investor  confidence  in and
accessibility to capital markets. Future financing may not be available  on
a timely basis, in  sufficient amounts or on  terms acceptable to us.  This
financing may also dilute existing shareholders' equity. Any debt financing
or other  financing of  securities senior  to our  common stock will likely
include financial and other  covenants that will restrict  our flexibility.
At a  minimum, we  expect these  covenants to  include restrictions  on our
ability to pay dividends  on our common stock.  Any failure to comply  with
these  covenants would  have a  material adverse  effect on  our business,
prospects, financial condition and  results of operations because  we could
lose any then-existing sources of  financing and our ability to  secure new
sources of financing may be impaired.

                                  <page>21

        We are subject to an injunction imposed by a federal
        court  for  violating the  federal  securities laws,
        which may make it more difficult to raise financing.

        In 1997, the Securities and Exchange Commission filed suit in the
United States District Court in the Central District of California  against
ConectiSys and another individual  seeking permanent injunctions and  civil
penalties based on alleged violations  of Sections 5(a), 5(c) and  17(a)(1)
-  (3) of  the Securities  Act of  1933, Section  10(b) of  the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder in connection with the  sale
of common stock of  ConectiSys in 1996. In  March 1999, we agreed  with the
Securities and  Exchange Commission  to the  terms of  a settlement  of its
litigation against us. Under the terms of that settlement, we dismissed our
then- pending appeal of  a judgment against us  in favor of the  Securities
and  Exchange Commission  and accepted  a permanent  injunction against  us
prohibiting  actions  that  would   violate  federal  securities  laws   in
connection with the offer, purchase  or sale of securities. The  Securities
and Exchange Commission agreed to waive a requirement of the judgment under
appeal that we disgorge  $175,000 of proceeds from  the sale of our  common
stock due to our inability to pay this amount. On March 9, 1999, an amended
final judgment of permanent injunction and other relief memorializing these
agreements was entered in connection with the execution by us of a  consent
to entry of injunction. An injunction of this nature is viewed  unfavorably
by analysts and investors  and may make it  more difficult for us  to raise
additional debt or equity financing necessary to run our business.

        Our  default  on the  repayment  of the  convertible
        debentures held  by certain  security holders  could
        have a material and adverse effect on our  business,
        prospects,  results   of  operations   or  financial
        condition.

        Unpaid principal and accrued and unpaid interest on our convertible
debentures becomes immediately due and payable one year from their date  of
issuance, or earlier in the event of a default. The events of default under
the convertible debentures are  similar to those customary  for convertible
debt  securities,  including breaches  of  material terms,  failure  to pay
amounts owed, delisting of our common stock from the OTC Bulletin  Board(R)
or failure to  comply with the  conditions of listing  on the OTC  Bulletin
Board(R).  If  we  default   on  our  obligations  under   the  convertible
debentures,  we  may  be  required  to  immediately  repay  the outstanding
principal amounts of  the debentures and  any accrued and  unpaid interest.
The cash required to repay such amounts would likely have to be taken  from
our working capital. Since  we rely on our  working capital to sustain  our
day  to day  operations and  the development  of our  H-Net(TM) system,  a
default on  the convertible  debentures could  have a  material and adverse
effect  on  our business,  prospects,  results of  operations  or financial
condition.

        We rely heavily on  our management, and the  loss of
        their services could materially and adversely affect
        our business.

        Our success is highly dependent upon the continued services of key
members of our  management, including our  Chairman of the  Board and Chief
Executive  Officer, Robert  A. Spigno,  and our  Chief Technology  Officer,
Lawrence Muirhead. The loss  of Messrs. Spigno or  Muirhead or one or  more
other key members of management could have a material adverse effect on  us
because each of these individuals  has experience and skills upon  which we
draw heavily in our  day-to-day operations, strategic planning  or research
and development activities. The development and operation of our  H-Net(TM)
system is  largely dependent  upon the  skill and  efforts of Mr. Muirhead.
Although we have entered into employment agreements with Messrs. Spigno and
Muirhead, we cannot assure the  continued services of these key  members of
our management team. We do not maintain key-man life insurance policies  on
any member of management.

        We have a limited  operating history of seven  years
        and  very limited  operating experience;  therefore,
        regardless of the viability or market acceptance  of
        our H-Net(TM)  system, we  may be  unable to achieve
        profitability or realize our other business goals.

        Our H-Net(TM) system is the result of a new venture. We have been
engaged in research and development of automatic meter reading technologies
since 1995, and we have only recently completed limited pilot programs  for
our first and only product,  our H-Net(TM) automatic meter reading  system.
We have generated no operating revenues from our H-Net(TM) system and  have
not commenced any of the  widespread marketing and other functions  that we
anticipate  will be  required for  successful deployment  of our  H-Net(TM)
system. Deployment of  our H-Net(TM) system  will involve large-scale  cost
-reduction manufacturing runs for the production of the components employed
in our H-  Net(TM) system.  Our  success will depend  in large part  on our
ability  to  deal  with  the  problems,  expenses  and  delays   frequently
associated with bringing  a new product  to market. Because  we have little
experience in  the deployment  and operational  aspects of  automatic meter
reading technologies, we may be  unable to successfully deploy and  operate
our H-Net(TM) system  even if our  H-Net(TM) system proves  to be a  viable
automatic   meter  reading   solution  and   achieves  market   acceptance.
Consequently, we  may be  unable to  achieve profitability  or realize  our
other business goals.

                                  <page>22

        Many companies with greater resources and  operating
        experience are developing technology similar to that
        employed in  our H-Net(TM)  system. These  companies
        could successfully  compete with  us and  negatively
        affect the  deployment of  our H-Net(TM)  system and
        our opportunity to achieve profitability.

        We anticipate significant competition with our H-Net(TM) system from
many companies. Our H-Net(TM) system is designed to compete with  companies
such  as  those  that  offer meter  reading  services  utilizing  modem and
telephone line communications or drive-by data collection capabilities. Our
H-Net(TM)   system   may  compete   with   numerous  companies,   including
Schlumberger Ltd., Itron, Inc., CellNet Data Systems, Hunt Technologies and
Metricom Corporation, each  of which has  significantly more resources  and
operational and  product development  experience than  we do.   Some of our
potential customers, namely, meter manufacturers and utility companies, may
decide to  develop their  own products  or service  offerings that directly
compete with our H- Net(TM) system. Although we believe that our  H-Net(TM)
system will be  competitive in the  marketplace, we cannot  assure you that
these or other companies with greater experience and greater resources than
ConectiSys will not negatively affect our business prospects and impair our
ability to achieve profitability.

        We are targeting  a new and  evolving market and  we
        cannot be certain that our business strategy will be
        successful.

        The automation of utility meter reading and data distribution is a
relatively new and  rapidly changing market.  We cannot accurately  predict
the size of this market or its potential growth. Our system is one possible
solution for  AMR and  data distribution.  It has  not been  adopted as  an
industry standard and  it may not  be adopted on  a broad scale.  Competing
systems have been and likely will continue to be selected by utilities  and
other  potential  clients.  Participants  in  the  utility  industry   have
historically been  cautious and  deliberate in  making decisions concerning
the adoption of new technology. This process, which can take up to  several
years to complete,  may include the  formation of evaluation  committees, a
review of different technical options, technology trials, equipment testing
and certification, performance and cost justifications, regulatory  review,
one or more requests for  vendor quotes and proposals, budgetary  approvals
and other steps. Only a limited number of utilities have made a  commitment
to purchase our products to date. Consequently, if our H-Net(TM) system  as
an AMR solution is unsuccessful and we are unable to enter into AMR or data
distribution contracts on terms favorable  to us, our business, results  of
operations  and  financial  condition  could  be  materially  and adversely
affected.

        The new and evolving nature of the market that we intend to target
makes an accurate evaluation of our business prospects and the  formulation
of a  viable business  strategy very  difficult. Accordingly,  our business
strategy  may be  faulty or  even obsolete  and as  a result,  we may  not
properly  plan for  or address  many obstacles  to success,  including the
following:

o       the timing and necessity of substantial expenditures for the
        development and deployment of our H-Net(TM) system;

o       the failure to strategically position ourselves in relation to
        joint venture or strategic partners, and potential and actual
        competitors;

o       the failure  of our H-Net(TM)  system to satisfy  the needs of  the
        market  that  we  intend  to  target  and  the  resulting  lack  of
        widespread or adequate acceptance of our H-Net(TM) system; and

o       the difficulties in managing rapid growth of operations and
        personnel.

                                  <page>23

        Our  failure  to  manage  growth  effectively  could
        impair our business.

        We have recently emerged from the development stage and although we
do not currently have revenue-generating operations, our strategy envisions
a  period of  rapid growth  that may  impose a  significant burden  on our
administrative and operational resources. Our ability to effectively manage
growth will  require us  to substantially  expand the  capabilities of  our
administrative and operational resources and to attract, train, manage  and
retain qualified engineers, technicians, salespersons and other  personnel.
There can be no assurance that we will  be able to do so. If we are  unable
to  successfully manage  our growth,  our business,  prospects, results  of
operations  and  financial  condition  could  be  materially  and adversely
affected.

        Because  we  believe  that  proprietary  rights  are
        material to our  success, misappropriation of  those
        rights or  claims of  infringement or  legal actions
        related  to  intellectual  property  could adversely
        impact our financial condition.

        We currently rely on a combination of contractual rights,
copyrights, trademarks and trade secrets to protect our proprietary rights.
However, although our H-Net(TM) system and its constituent components could
benefit from patent  protection, we have  chosen to retain  the proprietary
rights associated with our H-Net(TM) system predominantly as trade secrets.
Although we currently rely to a great extent on trade secret protection for
much of our technology, we cannot  assure you that our means of  protecting
our proprietary rights  will be adequate  or that our  competitors will not
independently  develop  comparable  or  superior  technologies  or   obtain
unauthorized access to our proprietary technology.

        We own, license or have otherwise obtained the right to use certain
technologies  incorporated  in  our   H-Net(TM)  system.  We  may   receive
infringement  claims  from  third  parties  relating  to  our  products and
technologies. In those cases, we intend to investigate the validity of  the
claims  and,  if we  believe  the claims  have  merit, to  respond  through
licensing or  other appropriate  actions. To  the extent  claims relate  to
technology included  in components  purchased from  third-party vendors for
incorporation  into our  products, we  would forward  those claims  to the
appropriate vendor.  If we  or our  component manufacturers  are unable  to
license or otherwise provide  any necessary technology on  a cost-effective
basis,  we  could be  prohibited  from marketing  products  containing that
technology, incur substantial  costs in redesigning  products incorporating
that  technology, or  incur substantial  costs defending  any legal  action
taken against us.

        Shares of  our common  stock eligible  or to  become
        eligible for public sale could adversely affect  our
        stock price and  make it difficult  for us to  raise
        additional   capital   through   sales   of   equity
        securities.

        As of January 6, 2003, we had outstanding 97,110,266 shares of
common  stock,  of  which  all  but  approximately  60,000,000  shares were
unrestricted under the Securities  Act of 1933. As  of January 6, 2003,  we
also  had  outstanding  options,  warrants,  promissory  notes, convertible
debentures and  preferred stock  that were  exercisable for  or convertible
into  approximately  211,000,000  shares  of  common  stock,  approximately
180,000,000  of  which  are  covered by  registration  rights.  Sales  of a
substantial number of shares of our  common stock in the public market,  or
the perception that  sales could occur,  could adversely affect  the market
price of our common  stock. Any adverse effect  on the market price  of our
common stock  could make  it difficult  for us  to raise additional capital
through sales of equity  securities at a time  and at a price  that we deem
appropriate.

                                  <page>24

        Conversion or exercise of our outstanding derivative
        securities   could    substantially   dilute    your
        investment  because  the  conversion  and   exercise
        prices  of  those securities  and/or  the number  of
        shares of common  stock issuable upon  conversion or
        exercise  of   those  securities   are  subject   to
        adjustment.

        We have issued various notes, debentures and warrants that are
convertible or exercisable at prices that are subject to adjustment due  to
a variety  of factors,  including fluctuations  in the  market price of our
common stock and  the issuance of  securities at an  exercise or conversion
price less  than the  then-current exercise  or conversion  price of  those
notes, debentures or warrants. As of January 6, 2003, the closing price  of
a share of our common stock on the OTC Bulletin Board(R) was $.011. On that
date,  our  notes,  debentures  and  warrants  outstanding  with adjustable
conversion  and/or exercise  prices were  convertible or  exercisable into
approximately 192,000,000 shares of our common stock. The number of  shares
of  common  stock  that  these  adjustable  securities  ultimately  may  be
converted into or exercised for could prove to be greater than this  amount
if the  market price  of our  common stock  declines. You could, therefore,
experience  substantial dilution  of your  investment as  a result  of the
conversion or exercise of our outstanding derivative securities.

        The applicable conversion price of our debentures issued to certain
security holders is variable and does not have a lower-limit, therefore the
dilutive  effect  to  our   existing  security  holders  is   theoretically
limitless.  Conversely,  because  the variable  conversion  price  of these
debentures has an upper limit, an increase in the trading price of a  share
of our common stock will result  in a limited benefit to existing  security
holders with respect to the  conversion of these debentures. The  following
table  sets forth  the number  of shares  issuable upon  conversion of  the
principal portion of the debentures issued to certain security holders  and
outstanding as of  January 6, 2003,  based upon the  indicated hypothetical
trading prices:

                                         Approximate         Percentage
Hypothetical       Conversion           Number of Shares    of Company's
Trading Price      Price (1)              Issuable(2)       Common Stock (3)
-------------     -----------------    -----------------   ---------------
   $.020              $.0100             82,700,000            45.99%
   $.015              $.0075            110,300,000            53.18%
   $.010              $.0050            165,400,000            63.01%
   $.005              $.0025            330,800,000            77.31%
_______________
(1)     The conversion price of our debentures is the lower of 50% of the
average of  the three  lowest intraday  trading prices  of a  share of  our
common stock on  the OTC Bulletin  Board(R) during the  twenty trading days
immediately preceding  the conversion  date, and  either (a)  $.06 for  the
March,  May and  June 2002  convertible debentures,  or (b)  $.01 for  the
November  2002  convertible  debentures  and  the  additional   convertible
debentures to  be issued  in subsequent  investment tranches  in connection
with  the November  2002 debenture  offering. As  of January  6, 2003,  the
applicable conversion price was $.005.

(2)     Our current authorized capital allows us to issue a maximum of
250,000,000 shares of common stock.

(3)     Amounts are based on 97,110,266 shares of our common stock
outstanding as of January 6,  2003 plus the corresponding number  of shares
issuable. Each of the holders of our convertible debentures may not convert
our debentures into  more than 4.9%  of our then-outstanding  common stock;
however,  the holders  may waive  the 4.9%  limitation, thus  allowing the
conversion of their debentures into a  number of shares of common stock  in
excess of 4.9% of our then-outstanding common stock.

                                  <page>25

        The holders of our convertible debentures may elect to receive
payment for accrued  and unpaid interest  on our convertible  debentures in
shares of our common  stock based on the  conversion price and on  the same
terms described above with respect to conversions of the principal  portion
of  these  debentures. As  a  result of  conversions  of the  principal  or
interest portion  of our  convertible debentures  and related  sales of our
common stock by the holders of our convertible debentures, the market price
of our common stock could be depressed, thereby resulting in a  significant
increase in the number of shares issuable upon conversion of the  principal
and interest portions of these debentures. You could, therefore, experience
substantial dilution of  your investment as  a result of  the conversion of
the principal or interest portions of our convertible debentures.

        If our security holders engage in short sales of our
        common stock, including sales of shares to be issued
        upon   conversion   or   exercise   of    derivative
        securities,  the  price  of  our  common  stock  may
        decline.

        Selling short is a technique used by a shareholder to take
advantage  of  an  anticipated  decline  in  the  price  of  a  security. A
significant number of short sales or a large volume of other sales within a
relatively short period of time can create downward pressure on the  market
price of a security.  The decrease in market  price would allow holders  of
our derivative  securities that  have conversion  or exercise  prices based
upon a  discount on  the market  price of  our common  stock to  convert or
exercise their  derivative securities  into or  for an  increased number of
shares  of our  common stock.  Further sales  of common  stock issued  upon
conversion  or  exercise  of our  derivative  securities  could cause  even
greater declines  in the  price of  our common  stock due  to the number of
additional  shares available  in the  market, which  could encourage  short
sales  that could  further undermine  the value  of our  common stock.  You
could, therefore, experience a decline in the value of your investment as a
result of short sales of our common stock.

        Our current financing arrangements could prevent our
        common stock  from being  listed on  Nasdaq or other
        principal markets.

        Nasdaq and other principal markets require that, to be eligible for
inclusion in the  stock market, a  company's common stock  have a specified
minimum bid price per  share. Convertible debenture financings,  especially
those with  variable conversion  prices with  low or  no low-price  limits,
characteristically exert downward  pressure on the  market for a  company's
common stock. This pressure, if  applied against the market for  our common
stock, may prevent our  common stock from being  listed on Nasdaq or  other
principal markets, but  we do not  currently satisfy various  other listing
requirements and thus are not in a position to have our common stock listed
on any of those markets.

        Our  common stock  price is  subject to  significant
        volatility, which could result in substantial losses
        for investors and in litigation against us.

        The stock market as a whole and individual stocks historically have
experienced extreme price  and volume fluctuations,  which often have  been
unrelated to the performance of the related corporations. During the  three
months ended September 30, 2002, the high and low closing bid prices of our
common stock were  $.036 and $.007,  respectively. The market  price of our
common stock may exhibit significant fluctuations in the future response to
various factors, many of which are beyond our control and which include:

o       variations in our quarterly operating results, which variations
        could result from, among other things, changes in the needs of one
        or more of our customers;

o       changes in market valuations of similar companies and stock market
        price and volume fluctuations generally;

o       economic conditions specific to the industries in which we operate;

                                  <page>26

o       announcements by us or our competitors of new or enhanced products,
        technologies or  services or  significant contracts,  acquisitions,
        strategic relationships, joint ventures or capital commitments;

o       regulatory developments;

o       additions or departures of key personnel; and

o       future sales of our common stock or other debt or equity
        securities.

        If our operating results in future quarters fall below the
expectations of market makers, securities analysts and investors, the price
of our  common stock  likely will  decline, perhaps  substantially. In  the
past, securities class action litigation  often has been brought against  a
company  following  periods  of  volatility  in  the  market  price  of its
securities.  We may  in the  future be  the target  of similar  litigation.
Securities litigation could result in substantial costs and liabilities and
could divert management's attention and resources. Consequently, the  price
at which you purchase shares of  our common stock may not be  indicative of
the price that  will prevail in  the trading market.  You may be  unable to
sell your shares of common stock at or above your purchase price, which may
result in substantial losses to you.

        Because we are subject  to the "Penny Stock"  rules,
        the level of  trading activity in  our stock may  be
        reduced.

        Broker-dealer practices in connection with transactions in "penny
stocks" are regulated  by penny stock  rules adopted by  the Securities and
Exchange  Commission.  Penny  stocks,  like  shares  of  our  common stock,
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on
Nasdaq).  The  penny  stock  rules  require  a  broker-dealer,  prior  to a
transaction  in a  penny stock  not otherwise  exempt from  the rules,  to
deliver a standardized risk  disclosure document that provides  information
about penny stocks  and the nature  and level of  risks in the  penny stock
market. The broker-dealer also must  provide the customer with current  bid
and offer quotations  for the penny  stock, the compensation  of the broker
- dealer and its salesperson in the transaction, and, if the  broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's  presumed  control  over the  market,  and  monthly account
statements  showing  the market  value  of each  penny  stock held  in  the
customer's account. In addition,  broker-dealers who sell these  securities
to persons other than established customers and "accredited investors" must
make a  special written  determination that  the penny  stock is a suitable
investment for the purchaser and receive the purchaser's written  agreement
to the transaction. Consequently, these requirements may have the effect of
reducing the level of trading activity, if any, in the secondary market for
a security subject to  the penny stock rules,  and investors in our  common
stock may find it difficult to sell their shares.

        Because  our  stock  is  not  listed  on  a national
        securities exchange,  you may  find it  difficult to
        dispose  of  or  obtain  quotations  for  our common
        stock.

        Our common stock trades under the symbol "CNES" on the OTC Bulletin
Board(R). Because our stock trades on the OTC Bulletin Board(R)rather  than
on a  national securities  exchange, you  may find  it difficult  to either
dispose of, or to obtain quotations as to the price of, our common stock.

        Our preferred stock may delay or prevent a  takeover
        of   ConectiSys,   possibly   preventing   you  from
        obtaining higher stock prices for your shares.

        Our board of directors has the authority to issue up to 50,000,000
shares of preferred  stock and to  fix the rights,  preferences, privileges
and  restrictions, including  voting rights  of those  shares, without  any
further vote  or action  by our  shareholders. Of  these shares,  1,000,000
shares have been designated as Class A Preferred Stock and 1,000,000 shares
have been designated as Class B Preferred Stock. The rights of the  holders
of  our common  stock are  subject to  the rights  of the  holders of  our
outstanding preferred stock  and will be  subject to, and  may be adversely
affected by, the rights of the  holders of any preferred stock that  we may
issue  in the  future. The  issuance of  preferred stock,  while providing
desired  flexibility in  connection with  possible acquisitions  and other
corporate purposes, could have the effect of making it more difficult for a
third party to  acquire a majority  of our outstanding  voting stock, which
would  delay,  defer  or  prevent  a  change  in  control  of   ConectiSys.
Furthermore,  preferred stock  may have  other rights,  including economic
rights  senior to  the common  stock, and,  as a  result, the  issuance of
preferred  stock could  adversely affect  the market  value of  our common
stock.

                                  <page>27

        Certain provisions of our articles of  incorporation
        and bylaws  allow concentration  of voting  power in
        one individual, which may, among other things, delay
        or frustrate the removal of incumbent directors or a
        takeover  attempt,  even  if  such  events  may   be
        beneficial to our shareholders.

        Provisions of our articles of incorporation and bylaws may delay or
frustrate the  removal of  incumbent directors  and may  prevent or delay a
merger, tender  offer or  proxy contest  involving ConectiSys  that is  not
approved by our board of directors, even if those events may be  beneficial
to the interests of our shareholders.  For example, as of January 6,  2003,
Robert A. Spigno,  our Chairman of  the Board and  Chief Executive Officer,
was the holder of 200,020 shares of our Class A Preferred Stock. As of that
date, Mr. Spigno also held an option, exercisable at $1.00 per share  until
its expiration on  December 1, 2003,  to purchase up  to 250,000 additional
shares of our Class A Preferred Stock. Under our articles of incorporation,
each share of Class A Preferred Stock is entitled to 100 votes per share on
all matters  presented to  our shareholders  for action.  Consequently, Mr.
Spigno  may have  sufficient voting  power to  control the  outcome of  all
corporate matters submitted to the  vote of our common shareholders.  Those
matters could include  the election of  directors, changes in  the size and
composition  of the  board of  directors, and  mergers and  other business
combinations involving ConectiSys. In addition, through his control of  the
board of  directors and  voting power,  Mr. Spigno  may be  able to control
certain  decisions,  including decisions  regarding  the qualification  and
appointment  of officers,  dividend policy,  access to  capital (including
borrowing from third-party  lenders and the  issuance of additional  equity
securities), and the  acquisition or disposition  of assets by  ConectiSys.
Also, the concentration of  voting power in the  hands of Mr. Spigno  could
have  the  effect  of  delaying  or  preventing  a  change  in  control  of
ConectiSys, even if the change  in control would benefit our  shareholders,
and may adversely affect the market price of our common stock.

        SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This report contains forward-looking statements, including among
        others:

o       our product development activities;

o       our business strategy for establishing a presence in the AMR
        market;

o       anticipated trends in our financial condition and results of
        operations;

o       the impact of the continuing threat of terrorism and the responses
        to such threat by military, government, business and the public;
        and

o       our ability to distinguish ourselves from our current and future
        competitors.

        You can identify forward-looking statements generally by the use of
forward-looking terminology such  as "believes," "expects,"  "may," "will,"
"intends," "plans," "should," "could," "seeks," "pro forma," "anticipates,"
"estimates," "continues," or other variations thereof, including their  use
in the negative, or by  discussions of strategies, opportunities, plans  or
intentions.  You  may  find  these  forward-looking  statements  under  the
captions "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and  Results of  Operations," and  "Description of  Business," as
well as captions elsewhere in this report. A number of factors could  cause
results  to differ  materially from  those anticipated  by  forward-looking
statements, including those discussed under "Risk Factors" and "Description
of Business."

                                  <page>28

        These forward-looking statements necessarily depend upon
assumptions  and estimates  that may  prove to  be incorrect.  Although we
believe that the assumptions and estimates reflected in the forward-looking
statements are  reasonable, we  cannot guarantee  that we  will achieve our
plans, intentions or  expectations. The forward-looking  statements involve
known and  unknown risks,  uncertainties and  other factors  that may cause
actual  results  to differ  in  significant ways  from  any future  results
expressed or implied by the forward-looking statements.

ITEM 7. FINANCIAL STATEMENTS.

        Our consolidated financial statements  are filed with and  begin on
page F-1 of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES.

        None.

                                  <page>29

                             PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors and Executive Officers

The directors and executive officers of ConectiSys and their ages,
positions, business experience and education as of January 6, 2003 are as
follows:


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.

Business Experience

        Directors

        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  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.

        Patricia A. Spigno has served as our Chief Financial Officer and
Secretary since August 1995 and 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.

        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.

                                  <page>30

        All directors hold office until the next annual meeting of
shareholders, 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 or executive officers of
ConectiSys.

Advisors to Our Board of Directors

        Rodney W. Lighthipe has served as an advisor to our board of
directors since April 2001. Mr. Lighthipe also served as our President from
September 2000 until his resignation in September 2001. Prior to that time,
Mr. Lighthipe served as Director of  Research for San Diego Gas &  Electric
from 1992 until 1996 and was responsible for the development and deployment
of  new  technologies.  Mr. Lighthipe  was  Research  Manager for  Southern
California  Edison  from  1980  to  1987  and  organized  an  international
consortium of companies for the  design, construction and operation of  the
world's  largest coal  gasification plant.   Mr. Lighthipe  was also  Power
Contracts  Manager  for Southern  California  Edison from  1974  until 1980
during which he opened new transmission paths throughout the Western United
States and Canada for the purchase and sale of bulk electric power. Some of
Mr. Lighthipe's Major projects  included the installation of  photovoltaics
in  remote  areas  and  the launch  of  a  "smart  card" project  employing
residential telephone systems. Mr. Lighthipe has also acted as a consulting
engineer in  the energy  and telecommunications  industries and  served two
tours of duty in Vietnam as a Lieutenant in the United States Navy.

        Dr. Hugo Pomrehn has served as an advisor to our board of directors
since April 2001.  On June 28,  1992, Dr. Pomrehn  was nominated by  former
President George Bush to  serve as the Under  Secretary of Energy, and  was
confirmed by the  United States Senate  for that position  on September 29,
1992. As  Under Secretary  to Admiral  James Watkins,  Dr. Pomrehn  was the
third-ranking official  at the  U.S. Department  of Energy,  which employed
approximately 170,000 personnel  and had an  annual budget of  $20 billion.
Dr. Pomrehn's professional  career covers a  broad spectrum of  involvement
with  energy  and  environmental  technologies.  He  has  been  engaged  in
engineering and management consulting in the energy and nuclear fields  for
more than 30 years and was a Vice President of the Bechtel Corporation.

        Aaron R. Sokol has served as an advisor to our board of directors
since April 2001. Mr. Sokol is a Vice President at Deutsche Bank Alex Brown
where  his  responsibilities include  providing  innovative and  customized
solutions to clients in order to  preserve and enhance their wealth. He  is
also responsible for new business  development as well as global  financial
advisory services for  existing and prospective  clients. Mr. Sokol  joined
Deutsche Bank Alex Brown from Los Angeles-based Scudder Kemper Investments,
Inc. Mr.  Sokol has  also served  as an  Assistant Vice  President at First
Chicago Capital Markets, Inc., and  prior to that, worked in  the corporate
finance department at Nations Bank Capital Markets, Inc. Mr. Sokol holds  a
J.D. degree from Boston  University School of Law  and a M.B.A. in  Finance
and New Venture Management from the University of Southern California.

        Larry W. Siler has served as an advisor to our board of directors
since April 2001. Mr. Siler is currently Manager of Fuel Transportation for
Edison Mission Energy in Chicago,  Illinois. Mr. Siler was the  Coal Supply
Superintendent for Commonwealth Edison  Company in Chicago from  1988 until
1999.  From 1986  until 1988  Mr. Siler  was a  management and  engineering
consultant in Austin, Texas. He  also held positions as the  Fuels Manager,
Engineering Supervisor,  Staff Engineer  and Fuels  Engineer for  the Lower
Colorado River Authority from 1973 until 1986.

        Tod O'Connor has served as an advisor to our board of directors
since April 2001. Mr. O'Connor was Director of Government Relations for two
Edison  International Inc.  subsidiaries, Southern  California Edison  RD&D
Department  and  Edison  Technology Solutions  from  1993  until 1999.  Mr.
O'Connor  also  was employed  by  Pacific Enterprises  and  its subsidiary,
Southern California  Gas Co.  from 1989  until 1993,  and MARC  Associates'
Status Group in Washington, D.C. from  1988 until 1989. Mr. O'Connor was  a
Legislative Aide  in the  United States  House of  Representatives where he
advised House Speaker  Thomas P. (Tip)  O'Neill on pending  legislation and
proposed federal regulations, as well as the Democratic Steering and Policy
Committee from  1980 until  1981. Mr.  O'Connor is  currently President  of
O'Connor  Consulting  Services,  Inc. in  Woodland  Hills,  California. Mr.
O'Connor holds a L.L.M. degree in labor law from Georgetown University  Law
Center, Washington,  D.C., and  a J.D.  degree from  Suffolk University Law
School.

                                  <page>31

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange  Act"),  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 ("Commission"). These
officers, directors and stockholders are required by 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:  Mr.  Robert
Spigno - 5 reports, 7 transactions; and Mr. Lawrence Muirhead - 2  reports,
2 transactions.

                                  <page>32

ITEM 10.        EXECUTIVE COMPENSATION.

        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,  or   the  named
executives, during the years ended September 30, 2000, 2001 and 2002. 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 ($)
     -------------------      -------  --------- ----------- ------------  ----------------
     <C>                      <C>      <C>       <C>         <C>           <C>
     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.

                                  <page>33

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>
              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
     ---------------------      ------------    ------------   -------------- ----------------  --------------  ----------------
     <C>                        <C>             <C>            <C>            <C>               <C>             <C>
     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.

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.

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 price of our common stock on that date.

                                  <page>34

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following table sets forth, as of January 6, 2003, certain
information with  respect to  (i) each  director of  our company,  (ii) the
named executives,  and (iii)  all directors  and executive  officers of our
company as a  group, and (iv)  each person known  to our company  to be the
beneficial owner of more than 5% of our common stock. The information  with
respect to each person specified is as supplied or confirmed by such person
or based upon statements filed with the Commission.

<Table>
Name and Address of             Title of        Amount and Nature of
of Beneficial Owner (1)(2)        Class         Beneficial Ownership(2)     Percent of Class)
--------------------------     ---------       -------------------------   ------------------
<C>                             <C>             <C>                          <C>
Robert A. Spigno                Common                11,436,210(3)               11.04%
                            Class A Preferred            450,020(4)              100.00%
                            Class B Preferred            500,000(5)              100.00%

Patricia A. Spigno              Common                 2,423,863(6)                2.48%

Lawrence Muirhead               Common                   971,393                   1.00%

Melissa McGough                 Common                   454,138(7)                 *

All directors and executive
officers as a group
(4 persons)                     Common                15,285,604(8)                14.68%
                            Class A Preferred            450,020(4)               100.00%
                            Class B Preferred            500,000(6)               100.00%
_______________
*       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)     Beneficial ownership is determined in accordance with the
        rules  of  the  Securities  and  Exchange  Commission   and
        generally includes voting or investment power with  respect
        to securities. Except as indicated by footnote, and subject
        to community  property laws  where applicable,  the persons
        named in the  table above have  sole voting and  investment
        power with respect to all  shares of common stock shown  as
        beneficially owned by them. Shares of common stock  subject
        to options currently exercisable, or exercisable within  60
        days after January 6, 2003, are deemed to be outstanding in
        calculating the percentage ownership  of a person or  group
        but are not deemed to be outstanding as to any other person
        or group.

(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 2,043,654 shares underlying options and  5,000,000
        shares issuable upon conversion of Class B Preferred Stock.
</table>

                                  <page>35

Equity Compensation Plan Information

        The following table gives information about our common stock that
may be issued upon the exercise  of options, warrants and rights under  our
Amended Non-Qualified Stock  Option and Stock  Bonus Plan as  well as stock
options,  warrants and  rights issued  outside of  any formal  plan as  of
September 30, 2002.  shares issuable upon  conversion of Class  B Preferred
Stock.

                    Number of Securities     Weighted Average    Number of
                  to be Issued Upon Exercise Exercise Price of   Securities
                  of Outstanding Options,    Outstanding         Remaining
                        Warrants           Options, Warrants    Available for
Plan Category         and Rights(1)            and Rights      Future Issuance
------------------- --------------------   ------------------ -----------------
Equity compensation
plans approved by
security holders         N/A                     N/A                   N/A

Equity compensation
plans not approved
by security holders  8,807,154(2)               $0.28                  N/A

Total                8,807,154                  $0.28                  N/A
_______________
(1)     Number of shares is subject to adjustment for changes in
        capitalization  for  stock  splits,  stock  dividends   and
        similar events.

(2)     Represents 5,000,000 shares of common stock underlying
        stock options, warrants and rights issued under our Amended
        Non-Qualified  Stock  Option  and  Stock  Bonus  Plan and
        3,807,154 shares of common stock underlying stock  options,
        warrants and rights issued outside of any formal plan.

        Our Amended Non-Qualified Stock Option and Stock Bonus Plan permits
grants of  stock bonuses  and non-qualified  stock options  (NQOs). Vesting
periods under our Amended Non-Qualified  Stock Option and Stock Bonus  Plan
vary from  person to  person, and  options under  the plan  are exercisable
subject to certain standard conditions.

ITEM 12. 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.

                                  <page>36

        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 compensation 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.

        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.

                                  <page>37

        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.

        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.

                                  <page>38

        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.

        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 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.

        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.

                                  <page>39

        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, 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.

        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.

                                  <page>40

        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 "Management-Compensation  of Executive
Officers" and "Management-Compensation of Directors."

ITEM 13.        EXHIBITS AND REPORTS ON FORM 8-K.

        (a)     Exhibits.

        Reference is made to the Index to Exhibits that follows the
consolidated financial statements contained in this report.

        (b)     Reports on Form 8-K.

        During the quarter ended September 30, 2002, the Registrant did not
file any current reports on Form 8-K.

                                  <page>41

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002

                                                              Page No.

INDEPENDENT AUDITORS' REPORT                                   F-1-2

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheet                                     F-3-4

Consolidated Statements of Operations                          F-5

Consolidated Statements of Changes in
 Shareholders' Equity (Deficit)                                F-6-12

Consolidated Statements of Cash Flows                          F-13-15

Notes to Consolidated Financial Statements                     F-16-52


INDEPENDENT AUDITORS' REPORT


Board of Directors
Conectisys Corporation and Subsidiaries
Valencia, California


We have audited the accompanying consolidated balance sheet of  Conectisys
Corporation and Subsidiaries (a development stage company) (the "Company")
as  of September  30, 2002,  and the  related consolidated  statements of
operations, changes in shareholders' equity (deficit), and cash flows  for
the years  ended September  30, 2002  and 2001,  and the cumulative period
from December 1, 1990  (inception of development stage)  through September
30, 2002, except that we did not audit these financial statements for  the
period December 1, 1990 (inception of development stage) through  November
30, 1997; these financial statements were audited by other auditors, whose
reports  dated March  6, 1998  (for the  period December  1, 1994  through
November 30, 1997) and  January 9, 1995 (for  the period December 1,  1990
(inception of development stage) through November 30, 1994), respectively,
expressed  a  going  concern  uncertainty.   These  consolidated financial
statements  are  the  responsibility  of  the  Company's  management.  Our
responsibility is to  express an opinion  on these consolidated  financial
statements based on our audits.

We conducted  our audits  in accordance  with auditing  standards generally
accepted in the United States of America.  Those standards require that  we
plan and perform  the audits to  obtain reasonable assurance  about whether
the consolidated financial  statements are  free of  material misstatement.
An  audit includes  examining, on  a test  basis, evidence  supporting  the
amounts and  disclosures in   the consolidated  financial  statements.   An
audit   also  includes  assessing   the  accounting  principles  used   and
significant estimates made  by  management,  as  well  as  evaluating   the
overall  consolidated financial statement  presentation.  We  believe  that
our audits  provide a reasonable basis for our opinion.

In our  opinion, the  consolidated financial  statements referred  to above
present  fairly,  in  all  material  respects,  the  consolidated financial
position of  Conectisys Corporation  and Subsidiaries  as of  September 30,
2002, and  the results  of their  operations and  their cash  flows for the
years ended  September 30,  2002 and  2001, and  the cumulative period from
December 1,  1990 (inception  of development  stage) through  September 30,
2002, in conformity  with accounting principles  generally accepted in  the
United States of America.

<page>F-1

The  accompanying  consolidated  financial  statements  have  been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated  financial statements, the Company has  suffered
recurring losses from operations and has a deficiency in working capital at
September  30,  2002.   These matters  raise  substantial  doubt about  its
ability  to continue  as a  going concern.   Management's plans  concerning
these matters  are also  described in  Note 1.   The consolidated financial
statements  do  not include  any  adjustments that  might  result from  the
outcome of this uncertainty.


                                         Hurley & Company


Granada Hills, California
January 7, 2003

<page>F-2

CONECTISYS  CORPORATION  AND  SUBSIDIARIES  (A  Development  Stage Company)
CONSOLIDATED BALANCE SHEET
September 30, 2002




ASSETS

Current assets:
Cash and cash equivalents                            $    55,101
     Debt issuance costs - current, net of
       accumulated amortization of $131,172               89,103
                                                     -----------
Total current assets                                     144,204

Property and equipment, net of
     accumulated depreciation of $280,373                 51,339

Other assets:
License rights and technology, net of
  accumulated amortization of $421,478                      -
                                                     -----------

     Total assets                                    $   195,543
                                                     ===========

The accompanying notes are an integral part of these consolidated financial
statements.

<page>F-3

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED BALANCE SHEET (continued)
September 30, 2002


LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                   $    188,898
  Accrued compensation                                    927,850
  Due to officers                                         130,484
  Accrued interest                                        206,476
  Other current liabilities                                11,928
  Notes payable and
    current portion of long-term debt                     755,149
                                                     ------------
Total current liabilities                               2,220,785

Long-term debt, net of current portion                     89,730

Commitments and contingencies                                 -

SHAREHOLDERS' DEFICIT:

Preferred stock - Class A, $1.00 par value;
  1,000,000 shares authorized, 200,020
  shares issued and outstanding                           200,020
Convertible preferred stock - Class B,
  no par value; 1,000,000 shares
  authorized, -0- shares issued and outstanding               -
Common stock, no par value; 250,000,000
  shares authorized, 64,311,823
  shares issued and outstanding                        18,435,238
Additional paid-in capital:
  Convertible preferred stock - Class B, no
    par value; 1,000,000 stock options exercisable        100,000
  Common stock, no par value;
    8,807,154 stock options and warrants exercisable    1,343,695
  Beneficial conversion option, debt instruments          724,238
Deficit accumulated during the development stage      (22,918,163)
                                                     ------------
Total shareholders' deficit                            (2,114,972)
                                                     ------------
Total liabilities and
 shareholders' deficit                               $    195,543
                                                     ============
The accompanying notes are an integral part of these consolidated financial
statements.

<page>F-4

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended September 30, 2002 and 2001,
and the Cumulative Period
From December 1, 1990 (Inception) Through September 30, 2002

                               Year          Year      Dec. 1, 1990
                              Ended         Ended       (Inception)
                          September 30, September 30,     Through
                               2002          2001     Sept. 30, 2002
                           -----------   -----------  --------------
Net revenues               $       -     $       -      $    517,460

Cost of sales                   73,667        37,930         641,388
                           -----------   -----------  --------------
Gross loss                    (73,667)      (37,930)       (123,928)

Operating expenses:
 General and administrative  1,808,657     1,779,420      17,169,130
 Bad debt expense                  -             -         1,680,522
                           -----------   -----------  --------------
Loss from operations        (1,882,324)   (1,817,350)    (18,973,580)

Other income (expense):
 Settled damages                   -             -            25,000
 Other income                      -             -            12,072
 Interest income                     2             3         102,923
 Interest expense             (464,410)     (337,220)     (1,769,475)
 Write-off of
  intangible assets                -             -        (1,299,861)
 Minority interest                 -             -            62,500
                           -----------   -----------  --------------
Net loss                   $(2,346,732)  $(2,154,567) $  (21,840,421)
                           ===========   ===========  ==============

Weighted average number
 of shares outstanding -
 basic and diluted          39,976,138    27,201,207

Net loss per share -
 basic and diluted         $      (.06)  $      (.08)
                           ===========   ===========


The accompanying notes are an integral part of these consolidated financial
statements.

<page>F-5

CONECTISYS CORORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) For
the Cumulative Period December 1, 1990 (Inception) Through September 30,
2002

<table>

                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock       Additional    Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
                               <C>       <C>        <C>        <C>         <C>        <C>        <C>          <C>
Balance,
 December 1, 1990
(re-entry
  development stage)                 -   $      -       10,609 $ 1,042,140 $      -   $      -   $ (1,042,140)$       -

Shares issued in exchange for:
 Cash, May 31, 1993                  -          -        1,000       1,000        -          -            -         1,000
 Capital contribution,
  May 31, 1993                       -          -        2,000         515        -          -            -           515
 Services, March 26, 1993            -          -        2,000         500        -          -            -           500
 Services, March 26, 1993            -          -        1,200         600        -          -            -           600
Net loss for the year                -          -          -           -          -          -         (5,459)     (5,459)
                               --------- ----------  --------- ----------- ---------- ------------ ---------- -----------
Balance,
 November 30, 1993                   -          -       16,809   1,044,755        -          -     (1,047,599)     (2,844)

Shares issued in exchange for:
 Services, May 1, 1994               -          -        2,400       3,000        -          -            -         3,000
 Cash, September 1, 1994             -          -       17,771      23,655        -          -            -        23,655
 Services, September 15, 1994        -          -        8,700      11,614        -          -            -        11,614
 Cash, September 26, 1994            -          -        3,000      15,000        -          -            -        15,000
 Cash, October 6, 1994            16,345     16,345        -           -          -          -            -        16,345
 Cash, September and October,
  1994                               -          -        1,320      33,000        -          -            -        33,000
Net loss for the year                -          -          -           -          -          -        (32,544)    (32,544)
                               --------- ----------  --------- ----------- ---------- ------------ ---------- -----------
Balance,
 November 30, 1994                16,345     16,345     50,000   1,131,024        -          -     (1,080,143)     67,226


The accompanying notes are an integral part of these consolidated financial statements.

<page>F-6

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 2002


                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock       Additional    Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
 Cash, February 13, 1995             -   $      -        1,160 $   232,000 $      -   $      -   $        -   $   232,000
 Debt repayment, February 13,
  1995                               -          -        2,040     408,000        -          -            -       408,000
 Debt repayment, February 20,
  1995                               -          -        4,778     477,810        -          -            -       477,810
 Acquisition of assets, CIPI
  February, 1995                     -          -       28,750   1,950,000        -          -            -     1,950,000
 Acquisition of assets, April 5,
  1995                               -          -       15,000         -          -          -            -           -
 Cash and services, April and
  May 1995                           -          -       16,000     800,000        -          -            -       800,000
 Cash, June 1, 1995                  -          -          500      30,000        -          -            -        30,000
 Acquisition of assets and
  services, September 26, 1995       -          -        4,000     200,000        -          -            -       200,000
 Cash, September 28, 1995            -          -           41       3,000        -          -            -         3,000
 Acquisition of assets,
  September 1995                     -          -       35,000   1,750,000        -          -            -     1,750,000
 Return of assets, CIPI
  September, 1995                    -          -      (27,700) (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    129,569   5,031,834        -          -     (3,374,010)  1,674,169

Shares issued in exchange for:
 Cash, February, 1996                -          -        1,389     152,779        -          -            -       152,779
 Debt repayment, February 1996       -          -       10,000     612,000        -          -            -       612,000
 Services, February, 1996            -          -        3,160     205,892        -          -            -       205,892
 Cash, March, 1996                   -          -          179      25,000        -          -            -        25,000


The accompanying notes are an integral part of these consolidated financial statements.

<page>F-7

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 2002


                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock        Additional   Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares returned and canceled,
  March, 1996                        -   $      -      (15,000)$       -   $      -   $      -   $        -   $       -
 Services, April, 1996               -          -           13       2,069        -          -            -         2,069
 Services, September, 1996         4,155      4,155        586      36,317        -          -            -        40,472
 Services, October, 1996             -          -        6,540     327,000        -          -            -       327,000
 Debt repayment, November, 1996      -          -        2,350      64,330        -          -            -        64,330
Net loss for the year                -          -          -           -          -          -     (2,238,933) (2,238,933)
                               --------- ---------- ---------- -----------  ---------- --------- ------------ -----------
Balance,
 November 30, 1996                20,500     20,500    138,786   6,457,221        -          -     (5,612,943)    864,778

Shares issued in exchange for:
 Services, March, 1997               -          -          228       6,879        -          -            -         6,879
 Services, April, 1997               -          -          800      13,120        -          -            -        13,120
 Services, July, 1997                -          -        1,500      16,200        -          -            -        16,200
 Cash, July, 1997                    -          -       15,000     300,000        -          -            -       300,000
 Services, August, 1997              -          -        5,958      56,000        -          -            -        56,000
Adjustment for partial shares due
 to reverse stock split (1:20)       -          -          113         -          -          -            -           -
 Services, October, 1997             -          -    1,469,666     587,865        -          -            -       587,865
 Debt repayment, October, 1997       -          -    1,540,267     620,507        -          -            -       620,507
 Cash, October, 1997                 -          -    1,500,000     281,250        -          -            -       281,250
 Services, November, 1997            -          -        4,950      10,538        -          -            -        10,538
Net loss for the year                -          -          -           -          -          -     (2,739,268) (2,739,268)
                               --------- ---------- ---------- ----------- ---------- ----------  ----------- -----------
Balance,
 November 30, 1997                20,500     20,500  4,677,268   8,349,580        -          -     (8,352,211)     17,869


The accompanying notes are an integral part of these consolidated financial statements.

<page>F-8

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 2002


                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock        Additional   Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value    Capital    Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
 Services, December, 1997
  through November, 1998             -   $      -    2,551,610 $ 2,338,264 $      -   $      -            -   $ 2,338,264
 Debt repayment, April, 1998
  through September, 1998            -          -      250,000     129,960        -          -            -       129,960
 Cash, January, 1998 through
  July, 1998                         -          -    4,833,334   1,139,218        -          -            -     1,139,218
 Acquisition of assets,
  July, 1998                         -          -      300,000     421,478        -          -            -       421,478
 Acquisition of remaining 20%
  minority interest in
  subsidiary, July, 1998             -          -       50,000      59,247        -          -            -        59,247
 Services, November, 1998         60,000     60,000        -           -          -          -            -        60,000
Net loss for the year                -          -          -           -          -          -     (4,928,682) (4,928,682)
                               --------- ---------- ---------- ----------- ---------- ------------ ---------- -----------
Balance,
 November 30, 1998                80,500     80,500 12,662,212  12,437,747        -          -    (13,280,893)   (762,646)

Shares issued in exchange for:
 Shares returned and canceled,
  December, 1998                     -          -   (1,350,000)   (814,536)       -          -            -      (814,536)
 Services, December, 1998
  through September, 1999            -          -      560,029     349,454    150,000        -            -       499,454
 Cash, December, 1998
  through September, 1999            -          -    1,155,800     129,537        -          -            -       129,537
 Debt repayment, Sept., 1999      39,520     39,520    960,321     197,500    100,000        -            -       337,020
Net loss for the period              -          -          -           -          -          -     (1,323,831) (1,323,831)
                               --------- ---------- ---------- -----------   -------- ------------ ---------- -----------
Balance,
 September 30, 1999              120,020    120,020 13,988,362  12,299,702    250,000        -    (14,604,724) (1,935,002)


The accompanying notes are an integral part of these consolidated financial statements.

<page>F-9

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 2002


                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock        Additional   Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares re-acquired and
  canceled, October, 1999            -   $      -      (17,500)$   (12,000)$      -   $      -   $        -   $   (12,000)
Shares issued in exchange for:
 Services, October, 1999 through
  September, 2000, valued from
  $0.25 to $0.80 per share           -          -    2,405,469     990,949        -          -            -       990,949
 Retainers, debt and accrued
  liabilities, October, 1999
  through September, 2000, valued
  from $0.25 to $1.57 per share      -          -    2,799,579   1,171,638        -          -            -     1,171,638
 Cash, October, 1999 through
  September, 2000, with subscription
  prices ranging from $0.25 to
  $0.66 per share                    -          -    2,295,482     839,425        -      (15,450)         -       823,975
Issuance of 563,500 consultant
  stock options, March, 2000,
  at an exercise price of $2.00
  per share                          -          -          -           -      214,130        -            -       214,130
Reduction of exercise prices
  on 2,600,000 officer and employee
  common stock options, March, 2000,
  to $0.38 and approximately $0.39
  per share                          -          -          -           -    1,113,610        -                  1,113,610
Exercise of 2,056,346 common and
  20,000 preferred officer stock
  options, May, 2000, with
  common stock strike prices
  ranging from $0.15 to approx.
  $0.39 per share, in exchange
  for officer debt                20,000     20,000  2,056,346     897,707   (407,735)       -            -       509,972
Issuance of 500,000 consultant
  stock options, September, 2000,
  with floating exercise prices
  set at 15% below current market    -          -          -           -       65,000        -            -        65,000
Net loss for the year                -          -          -           -          -          -     (3,812,140) (3,812,140)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Balance,
 September 30, 2000              140,020    140,020 23,527,738  16,187,421  1,235,005    (15,450) (18,416,864) (  869,868)

The accompanying notes are an integral part of these consolidated financial statements.

<page>F-10

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 2002


                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock        Additional   Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
 Services, October, 2000 through
  September, 2001, valued from
  $0.11 to $0.40 per share           -   $      -    3,471,007 $   572,790 $      -   $      -   $        -   $   572,790
 Retainers, debt and accrued
  liabilities, October, 2000
  through September, 2001, valued
  from $0.11 to $0.43 per share      -          -    3,688,989     487,121        -          -            -       487,121
 Cash, October, 2000 through
  March, 2001, with subscription
  prices ranging from $0.075 to
  $0.083 per share                   -          -    1,045,500      78,787        -          -            -        78,787
Collection of stock subscription
  receivable, October, 2000,
  on 61,800 shares                   -          -          -           -          -       15,450          -        15,450
Exercise of 400,000 common
  stock options, January, 2001,
  at a strike price of $0.085 per
  share, in exchange for debt        -          -      400,000      86,000    (52,000)       -            -        34,000
Issuance of 1,000,000 common
  stock warrants, April, 2001,
  at an exercise price of $0.192
  per share, in conjunction with
  $300,000 principal value of
  8% convertible debt                -          -          -           -       77,228        -            -        77,228
Issuance of 2,000,000 consultant
  stock options, September, 2001,
  at a strike price of $0.13 per
  share                              -          -          -           -      115,000        -            -       115,000
Beneficial conversion option,
  April, 2001 through September,
  2001, pertaining to $300,000
  principal value and accrued
  interest on 8% convertible debt    -          -          -           -      155,027        -            -       155,027
Net loss for the year                -          -          -           -          -          -     (2,154,567) (2,154,567)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Balance,
 September 30, 2001              140,020    140,020 32,133,234  17,412,119  1,530,260        -    (20,571,431) (1,489,032)

The accompanying notes are an integral part of these consolidated financial statements.

<page>F-11

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 2002


                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock        Additional   Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------

Shares issued in exchange for:
 Services, October, 2001 through
  September, 2002, valued from
  $0.02 to $0.25 per share           -   $      -    2,180,000 $   179,916 $      -   $      -   $        -   $   179,916
 Debt and accrued liabilities,
  October, 2001 through September,
  2002, with common shares
  valued from $0.01 to $0.15 per
  share and preferred A shares
  valued at $1.00 per share       60,000    60,000  10,948,077     428,563        -          -            -       488,563
 Cash, October, 2001 through
  September, 2001, with prices
  ranging from $0.01 to $0.083
  per share                          -          -    5,833,334     200,000        -          -            -       200,000
Exercise of 550,000 common stock
  options by a consultant at a
  strike price of $0.13 per share,
  in exchange for debt               -          -      550,000     103,125    (31,625)       -            -        71,500
Issuance of 3,750,000 warrants,
  April, 2002 through June, 2002,
  at an exercise price of $0.045
  per share, in conjunction with
  $750,000 principal value of 12%
  convertible debt                   -          -          -           -      100,087        -            -       100,087
Beneficial conversion option,
  April 2002, through June, 2002,
  pertaining to $750,000 principal
  value of 12% convertible debt      -          -          -           -      649,913        -            -       649,913
Conversion of $93,130 principal
  value of 12% convertible debt
  along with $6,916 accrued
  interest, net of $69,233
  convertible debt discount          -          -   12,667,178     111,515    (80,702)       -            -        30,813
Net loss for the year                -          -          -           -          -          -     (2,346,732) (2,346,732)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Balance,
 September 30, 2002              200,020 $  200,020 64,311,823 $18,435,238 $2,167,933 $      -   $(22,918,163)$(2,114,972)
                               ========= ========== ========== =========== ========== ========== ============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
</table>

<page>F-12

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2002 and 2001,
and the Cumulative Period
From December 1, 1990 (Inception) Through September 30, 2002

                                Year         Year         Dec. 1, 1990
                                Ended       Ended         (Inception)
                           September 30, September 30,       Through
                                2002         2001        Sept. 30, 2002
                            -----------  ------------    -------------
Cash flows from operating
 activities:
  Net loss                  $(2,346,732) $ (2,154,567)    $(21,840,421)

Adjustments to reconcile
 net loss to net cash used
 in operating activities:
  Stock issued for services     179,916       687,790        7,386,773
  Stock issued for interest         -             -            535,591
  Provision for bad debt
   write-offs                       -             -          1,422,401
  Minority interest                 -             -            (62,500)
  Settled damages                   -             -            (25,000)
  Write-off of intangible
    assets                          -             -          1,299,861
  Depreciation and
    amortization of property     27,309        32,077        1,669,974
  Amortization of debt issuance
    costs and note discount     377,512       265,030          642,542
  Changes in:
   Accounts receivable              -             -             (4,201)
   Accrued interest
    receivable                      -             -            (95,700)
   Prepaid exp. and deposits     48,800       158,546          182,346
   Accounts payable             308,251        65,961          620,248
   Accrued compensation         394,459       402,823        2,034,022
   Due to officers              (62,293)       26,209          673,792
   Accrued interest and
    other current liabilities    61,078        24,199          456,843
                            -----------  ------------    -------------
Total adjustments             1,335,032     1,662,635       16,736,992
                            -----------  ------------    -------------
Net cash used in
 operating activities        (1,011,700)     (491,932)      (5,103,429)
                             -----------  ------------    -------------
The accompanying notes are an integral part of these consolidated financial
statements.

<page>F-13

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2002 and 2001,
and the Cumulative Period
From December 1, 1990 (Inception) Through September 30, 2002

                                Year         Year         Dec. 1, 1990
                               Ended        Ended          (Inception)
                           September 30, September 30,        Through
                                2002         2001        Sept. 30, 2002
                            -----------  ------------    -------------
Cash flows from investing
 activities:
  Issuance of
   notes receivable         $       -    $        -      $  (1,322,500)
  Costs of license rights
   and technology                   -             -            (94,057)
  Purchase of equipment          (6,687)      (10,734)        (198,530)
                            -----------   -----------    -------------
Net cash used in
 investing activities           (6,687)      (10,734)      (1,615,087)
                            -----------   -----------    -------------
Cash flows from financing
 activities:
  Common stock issuance         200,000        78,787        3,232,172
  Stock warrant issuance        100,087        77,228          177,315
  Preferred stock issuance          -             -             16,345
  Proceeds from debt, other   1,244,790       386,399        3,483,880
  Debt issuance costs from
   debt, other                 (187,500)      (32,775)        (220,275)
  Proceeds from debt, related       -             -            206,544
  Proceeds from stock purchase      -             -            281,250
  Payments on debt, other      (290,000)      (50,000)        (386,407)
  Payments on debt, related         -             -            (53,172)
  Decrease in stock
   subscription receivable          -          15,450           35,450
  Contributed capital               -             -                515
                            -----------   -----------    -------------
Net cash provided by
  financing activities        1,067,377       475,089        6,773,617
                            -----------   -----------    -------------
Net increase (decrease) in
  cash and cash equivalents      48,990       (27,577)          55,101

Cash and cash equivalents
  at beginning of period          6,111        33,688              -
                           ------------   -----------    -------------
Cash and cash equivalents
  at end of period         $     55,101   $     6,111    $      55,101
                           ============   ===========    =============
The accompanying notes are an integral part of these consolidated financial
statements.

<page>F-14

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2002 and 2001,
and the Cumulative Period
From December 1, 1990 (Inception) Through September 30, 2002

                                Year         Year         Dec. 1, 1990
                               Ended        Ended          (Inception)
                           September 30, September 30,        Through
                                2002         2001        Sept. 30, 2002
                            -----------   -----------    -------------
Supplemental disclosures of
  cash flow information:

  Cash paid for interest    $   127,868   $    33,864    $     337,669
                            ===========   ===========    =============

  Cash paid for income taxes$       800   $       800    $       4,850
                             ===========   ===========    =============

Non-cash investing and financing activities:

  Common stock issued
   in exchange for:
    Note receivable         $       -     $       -      $     281,250
    Prepaid expenses        $       -     $    48,800    $     182,346
    Property and equipment  $       -     $       -      $     130,931
    Licenses and technology $       -     $       -      $   2,191,478
    Acquisition of remaining
     minority interest in
     subsidiary             $       -     $       -      $      59,247
    Repayment of debt and
     interest               $   530,876   $   472,321    $   4,356,056
    Services and interest   $       -     $       -      $   4,949,192
  Preferred stock issued
   in exchange for:
    Services                $       -     $       -      $      60,000
    Repayment of debt       $    60,000   $       -      $     119,520
  Preferred stock options
   issued in exchange for:
    Repayment of debt       $       -     $       -      $     100,000

The accompanying notes are an integral part of these consolidated financial
statements.

<page>F-15

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Note 1.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Conectisys Corporation  (formerly Coastal  Financial Corp.)(the  "Company")
was incorporated under the laws of Colorado on February 3, 1986, to analyze
and invest in business  opportunities as they may  occur. The Company is  a
development-stage entity  developing automatic  meter reading  technologies
and products  for remote  reading of  electronic energy  meters located  in
residential structures.

On July 15,  1998, United Telemetry  Company, Inc. was  incorporated in the
State of Nevada as a wholly-owned subsidiary of the Company.

On January 11, 2000,  a new Nevada corporation,  eEnergyServices.com, Inc.,
was formed, which has  no net assets and  which has not, as  yet, commenced
operations.

Basis of presentation and going concern uncertainty

The accompanying consolidated financial statements include the accounts and
transactions  of  Conectisys  Corporation,  its  wholly-owned  subsidiaries
eEnergyServices.com, Inc., and United Telemetry Company, Inc.  All material
intercompany  transactions  and  balances  have  been  eliminated  in   the
accompanying  consolidated  financial  statements.   Certain  prior  period
balances  have  been  reclassified   to  conform  to  the   current  year's
presentation.

The Company returned to the development stage in accordance with SFAS No. 7
on December 1,  1990 and during  the fiscal year  ended November 30,  1995.
The Company has completed two mergers  and is in the process of  developing
its technology and product lines.

As of September 30, 2002, the  Company had a deficiency in working  capital
of approximately $2,075,000,  and had incurred  continual net losses  since
its return to the development stage in fiscal 1996 of over $19,000,000,

<page>F-16

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Basis of presentation and going concern uncertainty (continued)

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 and licensing of the Company's  products and technologies the raising
of capital through the issuance of common stock and from continued  officer
advances, which will help provide the Company with the liquidity  necessary
to retire its outstanding debt and meet operating expenses.  Subsequent  to
the end of fiscal year 2002, the Company received $200,000 in funding  from
an accredited investor group, through the issuance of 12% convertible debt,
along with 1,000,000 detachable stock warrants (see Note 15(b)).  This same
investor group had previously advanced  the Company an aggregate amount  of
$750,000 through 3  similar funding tranches  occurring in April,  May, and
June  of  2002.   Over  the  longer  term,  the  Company  plans  to achieve
profitability through the operations of its subsidiaries.  The accompanying
consolidated financial statements do  not include any adjustments  relating
to the recoverability and classification  of the recorded asset amounts  or
the  amounts  and classification  of  liabilities that  might  be necessary
should the Company be unable to continue in existence.

Use of estimates

The  preparation  of  the Company's  consolidated  financial  statements in
conformity  with   generally  accepted   accounting  principles    requires
management  to make  estimates  and assumptions  that  affect the  reported
amounts  of assets  and  liabilities  and disclosure  of  contingent assets
and liabilities at  the date of  the consolidated financial  statements and
the  reported  amounts  of  revenues  and  expenses  during  the  reporting
period.  Actual results could differ from those estimates.

Fair value of financial instruments

Statement of  Financial Accounting  Standards No.  107, "Disclosures  about
Fair Value of  Financial Instruments", requires  that the Company  disclose
estimated fair values for its financial instruments.  The following summary
presents  a  description  of  the  methodologies  and  assumptions  used to
determine such amounts.

<page>F-17

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Fair value of financial instruments (continued)

Fair value estimates are made at a specific point in time and are based  on
relevant market information and information about the financial instrument;
they  are  subjective  in  nature  and  involve  uncertainties,  matters of
judgment  and,  therefore,  cannot  be  determined  with  precision.  These
estimates do  not reflect  any premium  or discount  that could result from
offering for sale at one time the Company's entire holdings of a particular
instrument.   Changes  in   assumptions  could  significantly   affect  the
estimates.

Since the fair value is estimated  at September 30, 2002, the amounts  that
will actually be realized or paid at settlement of the instruments could be
significantly different.  The carrying amount of cash and cash  equivalents
is  assumed  to  be  the  fair value  because  of  the  liquidity  of these
instruments.   Accounts  payable,  accrued  compensation,  due  to officer,
accrued interest, other current liabilities, and notes payable  approximate
fair  value because  of the  short maturity  of these  instruments.  Also,
market  rates of  interest apply  on all  officer advances  and short-term
promissory notes.   Long-term debt  is recorded  at face  value because the
principal amount is convertible into common stock.

Fiscal year

Effective December 1,  1998, the Company  changed its fiscal  year-end from
November 30 to September 30.

Research and development costs

The Company has  been engaged in  researching, engineering, and  developing
its  H-Net(TM) technologies since  August  1995,  and  did  not generate
any revenue during the past fiscal  year.  The Company hopes to  complete
large-scale cost reduction runs for the production and subsequent sale of
the  H -Net TM system in 2003.

<page>F-18

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Cash and cash equivalents

Cash and cash equivalents  include cash on hand  and on deposit and  highly
liquid debt instruments with original  maturities of three months or  less.
All funds on deposit are with one financial institution.

Licensing agreements

The costs of  acquiring license rights  are capitalized and  amortized over
the shorter of the estimated useful life of the license or the term of  the
license agreement.  The licenses are being amortized over a period of  five
years.   During the  year ended  November 30,  1998, the  Company acquired
additional  license  rights  in the  amount  of  $421,478 from  TechniLink.
Although  the  license  remains viable,  the  Company  currently lacks  the
resources to  develop and  market it.   Accordingly, during  the ten  month
period ended September  30, 1999, the  Company accelerated amortization  on
this asset  by writing  it down  to its  net realizable  value of  $40,000,
incurring a  charge of  $283,133.     The  balance was  fully amortized  at
September 30, 2000.

Property and equipment

Property and  equipment are  stated at  cost.  Depreciation  is computed on
property and  equipment using  the straight-line  method over  the expected
useful lives of  the assets, which  are generally three  years for computer
software, five years for vehicles and office equipment, and seven years for
furniture and fixtures.

Technology

Deferred  technology  costs  include  capitalized  product  development and
product   improvement   costs   incurred   after   achieving  technological
feasibility and are  amortized over a  period of five  years.  At September
30, 2002, no deferred technology costs were recognized.

<page>F-19

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Accounting for stock-based compensation

Statement of Financial Accounting Standards No. 123, "Accounting for  Stock
-based Compensation"  (SFAS No.  123) establishes  a fair  value method  of
accounting for stock-based compensation plans and for transactions in which
an entity  acquires goods  or services  from non-employees  in exchange for
equity  instruments.   The  Company  adopted  this  accounting  standard on
January  1, 1996.   SFAS No.  123 also  encourages, but  does not  require,
companies   to   record   compensation   cost   for   stock-based  employee
compensation.   The   Company  has   chosen  to   account  for  stock-based
compensation utilizing the intrinsic value method prescribed in  Accounting
Principles  Board  Opinion  No.   25,  "Accounting  for  Stock   Issued  to
Employees."  Accordingly, compensation cost  for stock options is  measured
as the excess, if any, of the  fair market price of the Company's stock  at
the date  of grant  over the  amount an  employee must  pay to  acquire the
stock.  Also,  in accordance  with SFAS  No. 123,  the Company has provided
footnote  disclosures with  respect to  stock-based employee  compensation.
The cost of stock-based compensation is  measured at the grant date on  the
value  of the  award, and  this cost  is then  recognized as  compensation
expense over  the service  period.  The  value of  the stock-based award is
determined using a pricing model whereby compensation cost is the excess of
the fair market value of the stock as determined by the model at the  grant
date or  other measurement  date over  the amount  an employee  must pay to
acquire the stock.

<page>F-20

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Stock issued for non-cash consideration

Shares of the Company's  no par value common  stock issued in exchange  for
goods or services are valued at the cost of the goods or services  received
or at the market  value of the shares  issued, depending on the  ability to
estimate the value of the goods or services received.

Income taxes

The  Company  files a  consolidated  income tax  return.   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.   The  Company  has  recognized  a
valuation allowance covering 100% of the net deferred tax assets (primarily
tax benefits  from net  operating loss  carryforwards), because  it is more
likely than  not that  the tax  benefits attributable  to the  deferred tax
assets will not be realized in the future.

Net loss per common share - basic and diluted

Net loss per common share - diluted is based on the weighted average number
of  common  and  common  equivalent  shares  outstanding  for  the  periods
presented.  Common  equivalent shares  representing the  common shares that
would be issued on exercise of convertible securities and outstanding stock
options  and  warrants reduced  by  the number  of  shares which  could  be
purchased from the related exercise  proceeds are not included since  their
effect would be anti-dilutive.

<page>F-21

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

Recent accounting pronouncements

The Financial Accounting Standards Board has established the following  new
pronouncements:  SFAS No.  145, "Rescission  of SFAS  No. 4,  44, and  64,
Amendment of FASB Statement No.  13, and Technical Corrections," issued  in
April 2002  and effective  for financial  statements issued  after May  25,
2002,  which effectively  amends SFAS  No. 13,  Accounting for  Leases, to
eliminate an inconsistency  involving sale-leaseback transactions  and also
gives clarity to other existing authoritative pronouncements, SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities,"  issued
in June 2002 and effective  for exit or disposal activities  after December
15,  2002, which  addresses financial  accounting and  reporting for  costs
associated with exit  or disposal activities  and nullifies Emerging  Issue
Task  Force  (EITF)  Issue  No.  94-3,  Liability  Recognition  for Certain
Employee  Termination  Benefits  and  Other  Costs  to  Exit  an   Activity
(including  Certain  Costs  Incurred  in  a  Restructuring,  SFAS  No. 147,
"Acquisitions  of Certain  Financial Institutions  - an  amendment of  FASB
Statements No. 72 and 144 and FASB Interpretation No. 9," issued in October
2002 and  applicable for  acquisitions on  or after  October 1, 2002, which
generally removes acquisitions of financial institutions from the scope  of
both Statement 72 and Interpretation 9 and requires that those transactions
be  accounted for  in accordance  with FASB  Statements No.  141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets, and amends
FASB Statement No. 144, Accounting  for the Impairment or Disposal  of Long
-Lived  Assets,  to  include  in  its  scope  certain  long-term   customer
-relationship intangible  assets of  financial institutions,  and SFAS  No.
148, "Accounting for Stock-Based Compensation - Transition and  Disclosure
- an  amendment of  FASB Statement  No. 123,"  issued in  December 2002 and
effective for fiscal years ending  after December 15, 2002, which  provides
alternative methods of transition for a voluntary change to the fair  value
based method of accounting for stock-based employee compensation.

Adoption of the above accounting  pronouncements is not expected to  have a
material effect on the Company's financial statements.

<page>F-22

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 2. RELATED PARTY TRANSACTIONS

The Company previously leased office  space in Agua Dulce, California  from
S.W. Carver  Corporation, a  company owned  by a  major shareholder  of the
Company.  Around  September 1,  2000, the  lease was  terminated due to the
sale of the building.  At that time the Company moved certain property  and
equipment to its Valencia locations.

The officers of the Company have continually advanced funds to the Company.
These advances  have generally  been in  the form  of revolving  short-term
promissory notes at an annual interest rate of 18% (see Note 7 below).

NOTE 3.    PREPAID EXPENSES AND DEPOSITS

During the year ended September 30, 2000, the Company issued 462,487 shares
of its  common stock  as retainers  for consulting  services ($128,611) and
accounting fees ($4,935).  In  addition, the Company recorded  the unearned
portion of an engineering contract  ($25,000) as a prepaid asset,  bringing
the total prepaid expense balance  at September 30, 2000 to  $158,546.  All
these prepaid  assets were  expensed during  the year  ended September  30,
2001.  Another  386,584 shares  of common  stock (valued  at $43,800)  were
issued  to a  consultant as  a retainer  at September  30, 2001,  for cash
payments that were subsequently made by the consultant to other vendors  in
October  2001.  An  attorney was  paid a  retainer in  September 2001  for
services not yet  rendered, bringing the  total prepaid expense  balance at
September 30, 2001 to $48,800.  These costs were fully expensed during  the
year ended September 30, 2002.

<page>F-23

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 4.    PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2002 consisted of the following:


Office equipment                             $   279,741
Furniture and fixtures                            16,609
Vehicles                                          35,362
                                             -----------
Total cost                                       331,712
Accumulated depreciation                        (280,373)
                                             -----------
Net book value                               $    51,339
                                             ===========

NOTE 5.    LICENSE RIGHTS AND TECHNOLOGY

License rights and technology at September 30, 2002 consisted of the following:

      License rights                               $   421,478
      Accumulated amortization                        (421,478)
                                                    -----------
        Net book value                             $       -

NOTE 6.   DEBT ISSUANCE COSTS

In April 2001, the Company  received proceeds of $300,000 from  an investor
in return for  a six-month 8%  convertible note and  1,000,000 common stock
warrants, exercisable at  $0.192 per share  over a four-year  period.  Debt
issuance costs on  this transaction amounted  to $32,775, and  consisted of
$24,000 in finder's fees,  $8,000 in legal fees,  and $775 in other  costs.
These debt issuance costs were fully amortized at September 30, 2001.

<page>F-24

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 6.   DEBT ISSUANCE COSTS (continued)

In February  2002, the  Company received  $340,000 in  short-term financing
from an investment group through the issuance of a promissory note maturing
on May 15, 2002 and accruing  interest at an annual rate of  18%.  Included
in  the loan  was $40,000  in fees,  consisting specifically  of a  $30,000
finder's fee and a $10,000 legal fee.  These loan fees were fully amortized
at September 30, 2002.

In  March  through  June  2002,  the  Company  received  $750,000  from  an
accredited investor group in exchange for 12% convertible debt, along  with
3,750,000 common stock warrants, exercisable over a four-year period at the
lesser of  $0.045 per  share and  50% of  the average  of the  lowest three
intraday trading prices of  a share of common  stock during the 20  trading
days immediately preceding conversion.  Debt issuance costs associated with
these loans  amounted to  $147,500, of  which $90,000  represented finder's
fees and $57,500 represented legal costs.  Amortization of these fees  over
the pro-rata portion of the one-year term of the loans amounted to  $58,397
through September 30,  2002, leaving an  unamortized balance of  $89,103 at
September  30,  2002.   Total amortization  of  all   debt issuance   costs
during  the  year ended  September  30,  2002  amounted to $98,397.

<page>F-25

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 7.    DUE TO OFFICERS

At September 30,  2000, the Company's  CEO had made  cumulative advances to
the Company  of $75,000.   On October  1, 2000,  these advances were rolled
into a revolving promissory note, due on demand, at an annual interest rate
of 18%.  During the year ended September 30, 2001, additional advances were
made in the amount of $20,000 and note repayments totaled $50,000.  Accrued
interest  was  determined  to  be $11,880,  bringing  the  loan  balance at
September 30, 2001  to $56,880.  A  new promissory note  agreement for this
amount  was  drawn up  at  the close  of  business on  September  30, 2001,
expiring September 1, 2002.  During the year ended September 30, 2002, cash
advances  of  $31,500  were  made.   Additionally,  the  loan  account  was
increased  by  $120,875,  representing the  value  of  2,361,814 restricted
shares of the Company's  common stock held by  the CEO, which were  used as
collateral and transferred to  a note holder in  June of 2002 to  partially
cover a $300,000  debt, and by  $16,202, representing the  value of 794,857
restricted shares of the Company's common stock held by the CEO, which were
pledged to and sold by a convertible note holder on a Company obligation in
and accrued  interest amounted  to $6,913  during the  year ended  default.
Repayments of debt by the Company amounted to $144,806 September 30,  2002,
resulting in a loan balance due  the CEO at September 30, 2002  of $87,564.
The loan  balance at  September 30,  2002 is  currently due  on demand  and
continues to accrue interest at the rate of 18% per year.

The  Company's  Secretary/Treasurer  advanced  the  Company   approximately
$61,945  during  the  year  ended  September  30,  2001,  under  a separate
revolving promissory note agreement effective October 1, 2000.  The note is
a demand  note, which  accrues interest  at an  annual rate  of 18%.  Total
repayments of the  note amounted to  $40,681.  Accrued interest  was $4,610
during the  year ended  September 30,  2001, bringing  the loan  balance at
year-end to $25,874.  A new  promissory note agreement for this  amount was
drawn up at the close of business on September 30, 2001, expiring September
1, 2002.  The Secretary/Treasurer also  borrowed on a personal credit  card
for  the Company's  behalf in  the amount  of $18,455,  bringing the  total
obligation due the  Secretary/Treasurer at September  30, 2001 to  $44,329.
During the year ended September 30, 2002, the personal credit card  balance
was  virtually  paid-off.   Additional  loan  advances  were  $19,500, loan
repayments were $39,500,  and accrued interest  was $2,269 during  the year
ended

<page>F-26

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 7.    DUE TO OFFICERS (continued)

September  30,  2002,   bringing  the  aggregate   loan  balance  due   the
Secretary/Treasurer at September 30, 2002  to $8,143.  The loan balance  at
September  30, 2002  is currently  due on  demand and  continues to  accrue
interest at the rate of 18% per year.

During the period May through September 2002, the Company's Chief Technical
Officer advanced the Company  $32,946, corresponding to 684,407  restricted
shares  of the  Company's common  stock held  by the  officer, which  were
pledged to and sold by a convertible note holder on a Company obligation in
default.  Accrued interest at the annual rate of 18% was $1,831 through the
end  of the  fiscal year,  bringing the  total loan  amount to  $34,777 at
September 30, 2002.   The loan balance  at September 30,  2002 is currently
due on demand and continues to accrue interest at the rate of 18% per year.

The aggregate amount  due officers at  September 30, 2002  was $130,484 and
interest expense on the officer  loans amounted to $11,013 and  $16,490 for
the years ended September 30, 2002 and 2001, respectively.

NOTE 8.    NOTES PAYABLE

Notes payable at September 30, 2002 consisted of the following:

        Registered Convertible Debentures

        Convertible Debenture #1

     Note payable to AJW Partners, LLC            $54,630
      (Convertible Debenture) due on
      March 29, 2003 at an annual interest
      rate of 12%

     Accrued interest of $1,652 and principal
      on Convertible Debenture convertible
      into approximately 18,761,000
      shares of common stock at the price
      of $0.003 at September 30, 2002              1,652         56,282
                                                  --------

<page>F-27

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002


NOTE 8.    NOTES PAYABLE (continued)

     Note payable to New Millennium Capital       $54,630
      Partners II, LLC (Convertible Debenture)
      due on March 29, 2003 at an annual interest
      rate of 12%

     Accrued interest of $1,652 and principal
      on Convertible Debenture convertible
      into approximately 18,761,000
      shares of common stock at the price
      of $0.003 at September 30, 2002               1,652        56,282
                                                  --------

     Note payable to AJW/New Millennium            61,960
      Offshore, Ltd.(Convertible Debenture)
      due on March 29, 2003 at an annual
      interest rate of 12%

     Accrued interest of $1,875 and principal
      on Convertible Debenture convertible
      into approximately 21,278,000
      shares of common stock at the price
      of $0.003 at September 30, 2002               1,875        63,835
                                                  --------

     Note payable to Pegasus Capital Partners, LLC 35,650
      Offshore, Ltd. Ltd. (Convertible
      Debenture) due on March 29, 2003
      at an annual interest rate of 12%

     Accrued interest of $1,078 and principal
      on Convertible Debenture convertible
      into approximately 12,243,000
      shares of common stock at the price
      of $0.003 at September 30, 2002               1,078        36,728
                                                  --------
<page>F-28

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002


NOTE 8.    NOTES PAYABLE (continued)

 Convertible Debenture #2

    Note payable to AJW Partners, LLC            $40,000
     (Convertible Debenture) due on
     May 10, 2003 at an annual interest
     rate of 12%

     Accrued interest of $1,210 and principal
      on Convertible Debenture convertible
      into approximately 13,737,000
      shares of common stock at the price
      of $0.003 at September 30, 2002              1,210         41,210
                                                 --------

     Note payable to New Millennium Capital       40,000
      Partners II, LLC(Convertible Debenture)
      due on  May 10, 2003 at an annual
      interest rate of 12%

     Accrued interest of $1,210 and principal
      on Convertible Debenture convertible
      into approximately 13,737,000
      shares of common stock at the price
      of $0.003 at September 30, 2002              1,210         41,210
                                                 --------

     Note payable to AJW/New Millennium           45,000
      Offshore, Ltd.(Convertible Debenture)
      due on May 10, 2003 at an annual
      interest rate of 12%

     Accrued interest of $1,361 and principal
      on Convertible Debenture convertible
      into approximately 15,454,000
      shares of common stock at the price
      of $0.003 at September 30, 2002              1,361         46,361
                                                 --------

<page>F-29

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002


NOTE 8.    NOTES PAYABLE (continued)

     Note payable to Pegasus Capital Partners, LLC $25,000
      Offshore, Ltd. Ltd. (Convertible
      Debenture) due on May 10, 2003
      at an annual interest rate of 12%

     Accrued interest of $756 and principal
      on Convertible Debenture convertible
      into approximately 8,585,000
      shares of common stock at the price
      of $0.003 at September 30, 2002                  756       25,756
                                                    -------

     Convertible Debenture #3

    Note payable to AJW Partners, LLC               80,000
     (Convertible Debenture) due on
     June 17, 2003 at an annual interest
     rate of 12%

     Accrued interest of $2,420 and principal
      on Convertible Debenture convertible
      into approximately 27,473,000
      shares of common stock at the price
      of $0.003 at September 30, 2002                2,420       82,420
                                                    -------

     Note payable to New Millennium Capital         80,000
      Partners II, LLC(Convertible Debenture)
      due on  June 17, 2003 at an annual
      interest rate of 12%

     Accrued interest of $2,420 and principal
      on Convertible Debenture convertible
      into approximately 27,473,000
      shares of common stock at the price
      of $0.003 at September 30, 2002                2,420       82,420
                                                   --------
<page>F-30

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 8.    NOTES PAYABLE (continued)

     Note payable to AJW/New Millennium           $90,000
      Offshore, Ltd.(Convertible Debenture)
      due on June 17, 2003 at an annual
      interest rate of 12%

     Accrued interest of $2,722 and principal
      on Convertible Debenture convertible
      into approximately 30,907,000
      shares of common stock at the price
      of $0.003 at September 30, 2002               2,722        92,722
                                                  --------

     Note payable to Pegasus Capital Partners, LLC 50,000
      Offshore, Ltd. Ltd. (Convertible
      Debenture) due on June 17, 2003
      at an annual interest rate of 12%

     Accrued interest of $1,512 and principal
      on Convertible Debenture convertible
      into approximately 17,171,000
      shares of common stock at the price
      of $0.003 at September 30, 2002               1,512       51,512
                                                 --------       ------
Subtotal of Registered Convertible Debentures                  676,738
    Less note discount                                        (401,652)
                                                              ---------
Net carrying value of Registered Convertible Debentures        275,086

      Note payable to Devon Investment Advisors,
      unsecured, due on demand, interest payable
      at an annual rate of 10%.                                241,824

     Note payable to Black Dog Ranch LLC,
      unsecured, due on demand, including interest
      at an annual rate of 18%.                                188,126

        Convertible note payable to Laurus Master Fund, Ltd.,
      secured by 3,293,944 shares of common stock
      beneficially owned by officers, with interest
      payable at an annual rate of 8%, conversion
      premium of 25% based on current market price of
      the Company's common stock (as defined), initially
      due October 12, 2001 and extended to
      December 1, 2001.  Currently in default.                 129,214

<page>F-31

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002


NOTE 8.    NOTES PAYABLE (continued)

        Convertible note payable to Rowell A. McHatten, Jr.,
      unsecured, with interest payable at an annual rate
      of 14%, convertible into restricted common stock of
      the Company at $0.06 per share, due April 24, 2003.       10,629
                                                              ---------
      Total notes payable                                      844,879
          Current portion                                     (755,149)
                                                               --------
      Long-term portion                                       $ 89,730
                                                              =========

On April 12,  2001, the Company  received $300,000 in  proceeds from Laurus
Master  Fund, Ltd.  ("Laurus") and  issued a  $300,000 principal  value 8%
convertible note due on October 12, 2001, along with 1,000,000 common stock
warrants, exercisable at $0.192 per share over a four-year period.  $77,228
of  the  proceeds was  allocated  to the  cost  of the  warrants,  with the
remaining $222,772 allocated to the  cost of the debt instrument,  based on
the relative fair market values of the note and the warrants at the date of
issuance.

A  convertible note  discount of  $77,228 was  also recognized,  which was
effectively fully amortized at September 30, 2002 as interest expense.

The note is convertible (at the option of the holder) into common stock  at
the lesser of 80% of the average of the 3-lowest closing bid prices  during
the 30 trading days  prior to the closing  date (April 12, 2001)  or 80% of
the average of the 3-lowest closing  bid prices during the 30 trading  days
prior to the conversion date (assumed to be September 30, 2002).  At  April
12,  2001, the  note was  convertible into  approximately 2,181,500  common
shares at  an exercise  price of  approximately $0.1021  per share,  and at
September 30, 2002, the note was convertible into approximately  20,189,875
common shares at an exercise  price of approximately $0.0064 per  share. In
either instance,  the fair  value of  the debt  instrument (due  to the 80%
pricing advantage)  was $375,000  (a 25%  premium on  the principal value),
resulting in a further

<page>F-32

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 8.    NOTES PAYABLE (continued)

convertible debt discount of $152,228, representing the difference  between
the note's fair value of $375,000 and the allocated proceeds at issuance of
$222,772.  This discount was also fully amortized at September 30, 2001.

A corresponding $152,228 credit was made to additional paid-in capital  for
the conversion  benefit option,  i.e., the  intrinsic value  of the matured
debt instrument.  Interest accrued  at 8%  on the  $300,000 note  principal
through September  30, 2002  was $17,168;  for presentation  purposes, this
interest was  added to  the principal  value of  the note  at the  year-end
balance sheet date.  The holder can also convert the accrued interest  into
common  stock at  a 25%  premium ($4,292),  bringing the  total conversion
benefit  option  to  $155,027.   Total  amortization  of  interest  on  the
discounted  convertible  note  during the  year  ended  September 30,  2001
(including $32,775 in debt issuance costs associated with the  transaction)
amounted to $265,030.

The maturity  date on  the $300,000  principal value  8% convertible  note,
initially October 12, 2001, was  extended to December 1, 2001.   Because of
the inherent conversion  benefit feature, the  aggregate note with  accrued
interest, totaling  $311,194 at  September 30,  2001, was  classified as  a
long-term liability.

The Company  was unable  to pay-off  the note  at maturity.  However, after
receiving bridge financing from another investment group in February  2002,
the Company  subsequently repaid  $150,000 of  the obligation,  as the note
holder elected to not convert  the debt to shares.  Consequently,  the note
holder sold 1,479,264 of the 4,773,208 shares of the Company's common stock
that had been pledged by  officers of the Company as  collateral, resulting
in  net proceeds  of $49,148.   Adding accrued  interest of  $17,168 at  an
annual rate  of 12%,  brought the  loan balance  at September  30, 2002  to
$129,214.   Subsequent to  September 30,  2002, the  note holder  sold the
remaining 3,293,944 pledged shares for  net proceeds of $67,144 and  netted
another $3,200 from  the issuance of  500,000 new Company  shares, bringing
the total liability down to approximately $60,000.

<page>F-33

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 8.    NOTES PAYABLE (continued)

In February 2002, the Company borrowed $340,000 from the Mercator  Momentum
Fund. This loan from the Mercator  Momentum Fund was a short-term loan  due
May 15, 2002 and  accrues interest at an  annual rate of 18%.  The loan was
secured by shares of common stock. On June 14, 2002 Mercator Momentum  Fund
transferred collateral in the form of   5,861,814 shares of common stock to
their name because the Company was  in default on the loan. Thereafter,  on
June  21,  2002,  Mercator    Momentum  Fund   filed  an    action  against
Conectisys Corporation, Robert  A.   Spigno  and  Patricia  A.   Spigno  in
the  Superior  Court  of California,   County  of  Los  Angeles (Case   No.
BC276283)   for   breach  of  promissory  note,  foreclosure   of  security
interests  and fraud and  deceit. Mr. Spigno is the Chairman of the   Board
and a director of  the Company  and is  also the Company's Chief  Executive
Officer.   Ms.  Spigno  is  the  Company's  Secretary  and  Chief Financial
Officer.  On July  3, 2002, Mercator   Momentum Fund filed  a first amended
complaint in the Superior Court  of California, County of Los Angeles (Case
No.  BC276283) adding a claim for common  count for  money  lent.  Mercator
Momentum    Fund   seeks    damages    of   approximately   $243,000   plus
approximately $66  in interest  per day  commencing June 21, 2002 and other
compensatory  and  punitive  damages  of  unspecified  amount.  The Company
believes   that  Mercator   Momentum  Fund's   claims  are   without  merit
because,  among  other factors,  they  have affirmative  defenses  to those
claims, including  usury and  the satisfaction  of amounts  owed under loan
from Mercator  Momentum Fund  as a  result of  the enforcement  by Mercator
Momentum  Fund of  its security  interest in  shares of  common stock.  The
Company intends  to vigorously  defend against  these claims  and to pursue
appropriate counterclaims against Mercator Momentum Fund.

<page>F-34

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 9. SECURED CONVERTIBLE DEBENTURES

In  order  to  provide  working capital  and  financing  for  the Company's
continued  research  and development  efforts  as of  March  29, 2002,  the
Company entered into a securities purchase agreement and related agreements
with four accredited investors (the "Purchasers") for the purchase of up to
$750,000 of  the Company's  12% Convertible  Debentures due  one year  from
their date of issuance. The Company granted the holders of the debentures a
continuing security interest in all  of the Company's assets to  secure the
Company's  obligations under  the debentures  and related  agreements. The
debentures bear interest at a rate  of 12% per annum, payable quarterly  in
common stock or cash at the option of the Purchasers.

On  March 29,  2002 the  Company issued  an aggregate  of $300,000  of 12%
convertible debentures in a private offering to four accredited  investors.
Three of the investors, if certain conversion limitations are  disregarded,
are beneficial owners of 5% or more of the company's outstanding shares  of
common  stock. The  debentures initially  were convertible  into shares  of
common stock at the lesser of $.06 per share and 50% of the average of  the
lowest three intra-day trading prices of a share of common stock during the
20  trading  days  immediately preceding  conversion.  The  debentures were
accompanied by warrants to purchase up to an aggregate of 1,500,000  shares
of common stock at a per share exercise price equal to the lesser of  $.045
and the average of the lowest three intra-day trading prices during the  20
trading days immediately preceding an exercise.

On  May  10,  2002 the  Company  issued  an aggregate  of  $150,000  of 12%
convertible debentures in a private offering to four accredited  investors.
Three of the investors, if certain conversion limitations are  disregarded,
are beneficial owners of 5% or more of the Company's outstanding shares  of
common  stock. The  debentures initially  were convertible  into shares  of
common stock at the lesser of $.06 per share and 50% of the average of  the
lowest three intra-day trading prices of a share of common stock during the
20  trading  days  immediately preceding  conversion.  The  debentures were
accompanied by warrants to purchase up to an aggregate of 750,000 shares of
common stock at a per share exercise price equal to the lesser of $.045 and
the average  of the  lowest three  intra-day trading  prices during  the 20
trading days immediately preceding an exercise.

<page>F-35

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 9. SECURED CONVERTIBLE DEBENTURES (continued)


On  June  17, 2002  the  Company issued  an  aggregate of  $300,000  of 12%
convertible debentures in a private offering to four accredited  investors.
Three of the investors, if certain conversion limitations are  disregarded,
are beneficial owners of 5% or more of the company's outstanding shares  of
common  stock. The  debentures initially  were convertible  into shares  of
common stock at the lesser of $.06 per share and 50% of the average of  the
lowest three intra-day trading prices of a share of common stock during the
20  trading  days  immediately preceding  conversion.  The  debentures were
accompanied by warrants to purchase up to an aggregate of 1,500,000  shares
of common stock at a per share exercise price equal to the lesser of  $.045
and the average of the lowest three intra-day trading prices during the  20
trading days immediately preceding an exercise.

The  Company's convertible  debentures and  related warrants  contain anti
-dilution  provisions  whereby,  if  the  Company  issues  common  stock or
securities convertible into or exercisable for common stock at a price less
than the conversion or exercise  prices of the debentures or  warrants, the
conversion and exercise  prices of the  debentures or shall  be adjusted as
stipulated in the agreements governing such debentures and warrants.

The fair  value of  the twelve  debt instruments  (due to  the 100% pricing
advantage) in  aggregate was  $1,500,000 (a  100% premium  on the principal
value)  making the  beneficial conversion  option   $649,913  at inception
($750,000 less  the $100,087  allocated to  the issuance  of the  3,750,000
related warrants).

During  the  fiscal  year  ended September  30,  2002,  the  Company issued
12,667,178  shares  of common  stock  in connection  with  regular interest
payments and upon  conversion of an  aggregate of $93,130  of principal and
$6,916  of  related interest  on  the Company's  convertible  debentures. A
corresponding reduction of $80,702 to the beneficial conversion option  was
made.

As of  September 30,  2002, the  Company was  indebted for  an aggregate of
$676,738 of principal and accrued and unpaid interest on these  convertible
debentures. To the  extent debentures issued  by the Company  are converted
into shares of common stock, the Company will not be obligated to repay the
converted amounts.

<page>F-36

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 9. SECURED CONVERTIBLE DEBENTURES (continued)

As part of the recording of the convertible debt transactions, a beneficial
conversion option for $649,913  was recognized, along with  a corresponding
debt discount.   The total  debt discount  of $750,000,  including $100,087
attributable to the  stock warrants, is  being amortized over  the one-year
life of the debt instruments.  $279,115 was amortized through September 30,
2002, resulting  in an  unamortized discount  of $401,652  at September 30,
2002,  which was  net of  $69,233 in  convertible bond  discount that  was
transferred to  equity upon  the conversion  of $93,130  principal value of
debt, along with $6,916 in accrued interest.  Accordingly, the $80,702  pro
-rata  portion  of the  beneficial  conversion option  attributable  to the
$93,130 in debt principal converted, was also transferred to common  stock,
leaving a balance  $724,238 at September  30, 2002.  The  conversion of the
Purchaser  debt and  accrued interest  during the  period resulted  in the
issuance of 12,667,178 shares of the Company's common stock.

As noted above, $93,130 of the $750,000 principal value of convertible debt
at September 30,  2002 had been  converted, leaving a  principal balance of
$656,870 (plus  accrued $19,868)  at September  30, 2002.    $89,730 of the
remaining  principal balance  has been  classified as  long-term, based  on
expected additional principal conversions of $9,970 per month through  June
2003.

NOTE 10.        SHAREHOLDERS' EQUITY (DEFICIT)

The Company's authorized  capital stock consists  of 250,000,000 shares  of
common stock, no  par value per  share, and 50,000,000  shares of preferred
stock, $1.00 par  value per share.  Of the 50,000,000  authorized shares of
preferred stock, 1,000,000 shares have been designated as Class A Preferred
Stock and 1,000,000 shares have been designated as Class B Preferred Stock,
and the remaining 48,000,000 shares  are undesignated. As of September  30,
2002,  there  were  64,311,823   shares  of  the  Company's   common  stock
outstanding held by approximately 750 holders of record and 200,020  shares
of the Company's Class A Preferred Stock outstanding held by one holder  of
record and no shares of Class B Preferred Stock outstanding.

<page>F-37

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 10.        SHAREHOLDERS' EQUITY (DEFICIT) (continued)

Each share of Class A Preferred Stock is entitled to 100 votes per share on
all matters presented to the Company's shareholders for action. The Class A
Preferred Stock does not have any liquidation preference, additional voting
rights, conversion rights, anti-dilution  rights or any other  preferential
rights.

Each share of Class B Preferred Stock is convertible into 10 shares of  the
Company's  common stock.  The Class  B Preferred  Stock does  not have  any
liquidation  preference,  voting  rights,  other  conversion  rights,  anti
-dilution rights or any other preferential rights.

In  October 2000  through April  2001, the  Company issued  250,000 common
shares  to  two  consultants  for  investor  relations  services  valued at
$67,500.

In  October 2000  and April  2001, the  Company issued  229,388 restricted
common shares  to a  consultant for  prior year's  services of  $19,200 and
current year's services of $22,080.

During the months of October 2000,  April 2001, and July 2001, officers  of
the Company were issued a  total of 3,764,249 restricted common  shares for
accrued  compensation  of  $300,291  and  current  year's  compensation  of
$160,927.

In November 2000, the Company issued 50,000 restricted common shares valued
at $20,000 to its outside accountant for services rendered.

In December 2000,  the Company issued  10,000 shares of  common stock to  a
consultant for prior year's accrued services of $4,330.

<page>F-38

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 10.        SHAREHOLDERS' EQUITY (DEFICIT) (continued)

In January  2001, a  consultant exercised  400,000 common  stock options at
$0.085  each; the  $34,000 in  exercise proceeds  were applied  against an
outstanding  note  payable due  the  consultant.  In  connection  with this
transaction,  $52,000  of  additional paid-in  capital  (recorded  as stock
options exercisable) was reclassified to common stock.

In January 2001,  an investor purchased  1,000,000 shares of  the Company's
restricted common stock for $75,000.

In January 2001,  a note holder  converted $75,000 principal  value of debt
for 300,000 restricted shares of the Company's common stock.

In March 2001, 45,500 shares of  the Company's common stock were issued  to
investors in a private placement for $3,787 in cash.  The shareholders also
received 45,500 common stock warrants, exercisable through March 3, 2003 at
$2.00 per share.

In April 2001,  the Company issued  1,000,000 common stock  warrants, along
with $300,000  principal value  8% convertible  debt.  Of  the $300,000  in
proceeds,  $77,228 was allocated  to  the cost  of the warrants,  which are
exercisable at  $0.192 per  share over  a four-year period.  The balance of
the  proceeds   ($222,772)  was  allocated  to   the  cost  of  the    debt
instrument.

In April 2001, the Company recognized the conversion benefit option on  the
$300,000 principal value 8%  convertible debt noted above.   The conversion
benefit  option  was   recorded  at  its   intrinsic  value  of   $152,228,
representing  the difference  between the  fair market  value of  the debt
instrument ($375,000)  and the  recorded initial  cost ($222,772).   At the
date of issuance, the conversion benefit option was based on the conversion
of the debt into 2,181,500 common shares.

In April 2001, the Company issued 50,000 restricted shares each (a total of
150,000 shares)  as bonuses  to a  director and  two consultants, valued at
$16,982.

<page>F-39

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002


NOTE 10.        SHAREHOLDERS' EQUITY (DEFICIT) (continued)

In April 2001, the Company issued 50,000 restricted shares of the Company's
common stock to a consultant for services valued at $5,846.

In April 2001, the Company issued in aggregate 400,000 restricted shares of
the Company's  common stock  (100,000 shares  each) to  four members of its
advisory board for consulting services rendered totaling $46,772.

In June 2001  through September 2001,  the Company issued  1,177,012 common
shares to a consultant for services totaling $232,683.

In September 2001, the Company issued the above consultant another  779,347
shares of the Company's common  stock valued at $$88,300, of  which $44,500
pertained to vendor payables advanced  by the consultant, with the  balance
of $43,800  being a  retainer.  The  consultant was  also issued  2,000,000
common stock options, exercisable at $0.13 each over four years and  valued
at $115,000.

In September 2001, the Company recognized an additional conversion  benefit
option of  $2,799, corresponding  to a  25% premium  on $11,194  in accrued
interest on $300,000 principal value 8% convertible debt.

During the months October 2001  through January 2002, the Company  issued a
total  of 2,333,334  shares of  its restricted  common stock  for cash  of
$145,000 in private placements.  In conjunction with these stock issuances,
the Company issued  700,000 common stock  warrants at an  exercise price of
$1.00 per share, expiring November 2003 through January 2005.

During the period October 2001  through September 2002, the Company  issued
5,300,000  shares  of its  common  stock (of  which  4,100,000 shares  were
restricted) to a consultant in exchange for accrued consulting services  of
$203,566.   In September  2002, 1,000,000  common stock  options were  also
issued to  the consultant  at an  exercise price  of $0.50  until September
2004.  The  common  stock  options  were  not  recorded  in  the  financial
statements, as they had nominal value.

<page>F-40

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 10.        SHAREHOLDERS' EQUITY (DEFICIT) (continued)

In October 2001 through November 2001, the Company issued 60,000 shares  of
its Class A preferred stock to its CEO for a $60,000 reduction of debt.  An
additional 250,000 of  Class A preferred  stock options were  issued to the
CEO at an exercise price per  share of $1.00 through November 2005.   9,890
Class A preferred stock options issued in earlier years to the CEO  expired
in December 2001.

In December 2001 and January 2002, the Company issued 500,000 shares of its
restricted common  stock to  a consultant  in exchange  for media  services
rendered in the amount of $87,500.

In December 2001  and January 2002,  a consultant exercised  550,000 common
stock options at $0.13 per share in exchange for debt of $71,500.  As  part
of the transaction, $31,625 in stock options exercisable was transferred to
common stock.

In January  2002, the  Company  issued 192,100  common  stock warrants   to
investors at an  exercise price of  $2.00 per share,  expiring in September
2004.

During the  months February  2002 through  August 2002,  the Company issued
1,680,000 shares of its  common stock (including 50,000  restricted shares)
in exchange for $85,500 in consulting services.

During  the  months  March  2002  through  June  2002,  the  Company issued
3,750,000 in  three-year common  stock warrants  as part  of a $750,000 12%
convertible debt issuance,  exercisable at the  lower of $0.045  and 50% of
the market  price of  the common  stock (as  defined) through  the date  of
exercise.  The warrants were recorded at $100,087 and the debt at $649,913,
based upon the  relative fair values  of each, and  a beneficial conversion
option for an additional $649,913 was also recognized.

In May 2002 and June 2002, the Company issued a total of 500,000 shares  of
its restricted common stock for cash of $25,000 (net of $25,000 in fees) in
private  placements.   In  conjunction with  these  issuances,  the Company
issued  500,000 common  stock options  at an  exercise price  of $0.50  per
share, expiring April 2004 through  June 2004. The  common  stock   options
were  not   recorded  in   the  financial  statements, as  they had nominal
value.

<page>F-41

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002


NOTE 10.        SHAREHOLDERS' EQUITY (DEFICIT) (continued)

In May  2002, the  Company issued  100,000 shares  of its restricted common
stock  to  an engineering  consultant  in exchange  for  $5,000 in  accrued
services.

In June 2002 through September  2002, the Company issued 12,667,178  of its
common shares to an investor  group in exchange for $93,130  in convertible
debt and  $6,916 in  interest (considered  services).  In  conjunction with
these transactions, $80,702 of  the Company's beneficial conversion  option
was  also transferred  to common  stock, and  $69,233 in  convertible note
discounts was applied against common stock as a result of debt conversion.

In June 2002, the Company issued  48,077 shares of its common stock  to its
former Acting President for $7,788  in accrued compensation. In June  2002,
the Company issued 3,500,000 shares of its common stock valued at  $179,125
in partial settlement of a $300,000 note.

In June 2002, the Company  issued 1,000,000 restricted common shares  to an
outside accountant in exchange for $30,000 in accrued services rendered.

In September 2002,  the Company issued  4,000,000 shares of  its restricted
common stock to a consultant/investor for $30,000 in cash and reduction  of
debt of $10,000.   1,000,000 common stock  options were also  issued to the
consultant at an exercise price of $0.50 until September 2004. The   common
stock  options  were  not  recorded  in  the  financial statements, as they
had nominal value.

<page>F-42

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 11.  INCOME TAXES

Deferred income taxes consisted of the following at September 30, 2002:

      Deferred tax asset, benefit
      of net operating loss
      carryforward                                $ 7,000,000
      Valuation allowance                          (7,000,000)
                                                  -----------
        Net deferred taxes                        $       -
                                                  ===========

The valuation  allowance offsets  the net  deferred tax  asset, since it is
more likely than not that it would not be recovered. During the year  ended
September 30, 2002,   the deferred tax  asset and valuation  allowance were
both increased by $1,000,000.

The Company has  approximately $17,400,000 in  both federal and  California
net  operating  loss  carryforwards.    The  federal  net  operating   loss
carryforwards expire as follows: $2,700,000 in the year 2012, $5,300,000 in
2018,  $1,200,000  in 2019,  $3,500,000  in 2020,  $2,400,000  in 2021  and
$2,300,000 in 2022.  The California net operating loss carryforwards expire
as follows: $2,700,000 in the year 2002, $5,300,000 in 2003, $1,200,000  in
2004, $3,500,000 in 2005, $2,400,000 in 2006, and $2,300,000 in 2007.   The
latest federal  and California  corporate income  tax returns  filed by the
Company were for the tax year ended November 30, 2000.

NOTE 12.        COMMITMENTS AND CONTINGENCIES

Employment agreements

The Company has entered into four employment agreements with key
individuals, the terms of the agreements are as follows:

1)       The CEO  (and again  President) of  the Company  entered into  an
agreement dated October 2,  1995 (which was subsequently  amended September
1, 1997, September 1, 1999, and March 27, 2000) for a period of five  years
(to April 1, 2005), and he is entitled to receive a base salary of $160,000
per year.  The  employee shall further  receive a bonus,  paid at year-end,
equal  to 50%  of the  employee's salary,  for continued  employment.  The
staying bonus will be compensated for with the Company's restricted  common
stock.  He is also granted an option to purchase up to 2,000,000 shares  of
the Company's

<page>F-43

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 12.        COMMITMENTS AND CONTINGENCIES (continued)

restricted common stock at a price equal to 50% of the average market value
for the  prior 30  trading days  before exercise.   On March  27, 2000, the
exercise price was adjusted to a flat $0.3864 per share, with an expiration
date  of  December 2,  2003.

2)    The   Acting President   of the   Company entered   into an agreement
dated September 11,  2000 for a  period of six  months through    March 11,
2001.    On   March   1,   2001   the   agreement   was   extended  through
September  30,   2001.   He   is  entitled   to  receive   a  base   salary
(consulting fees) of  $120,000 per year,   of which 50%  shall be paid   in
cash and 50% shall be paid  in restricted common stock at a  rate equal  to
50% of the  average market closing  price for the  last 5 trading   days of
each quarter. He shall be issued 100,000 shares of restricted common  stock
as a hiring bonus, at  a per share price of $0.28415,  equivalent to 50% of
the average market   closing price for   the prior 30   trading days before
the agreement  date.  He  shall further  receive performance  bonuses (paid
in  restricted  common  stock)  upon  successful  completion  of   specific
milestones pertaining  to the  implementation and  deployment  of  the HNET
System.  The   incentive package   could net   him up  to 650,000 shares of
restricted  common  stock.    As  of September  30,  2002,   none  of these
milestones were met.  He is also granted an option through  March 11,  2001
to purchase up  to 100,000 shares of the  Company's restricted common stock
at a  price of   $0.38 per  share.  This   option has since expired.    The
Acting President  no longer  works for  the Company  in this  capacity, but
remains as a member of the Advisory Board.

3)         The  Secretary and  Treasurer  of the  Company  entered into  an
Agreement dated October 2,  1995 (which was subsequently  amended September
1, 1997, September 1, 1999, and March 27, 2000), for a period of five years
(extended through April  1, 2005), and  she is entitled  to receive a  base
salary of  $80,000 per year.   The employee shall further receive  a bonus,
paid at year-end, equal to 50% of the employee's

<page>F-44

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 12.        COMMITMENTS AND CONTINGENCIES (continued)

Employment agreements (continued)

salary, for continued employment.   The staying bonus shall  be compensated
for with  the Company's  restricted common  stock.  She  is also granted an
option to purchase up to 500,000 shares of the Company's restricted  common
stock at a price equal to 60% of the average market value for the prior 180
trading days before  exercise.  On March  27, 2000, the  exercise price was
adjusted to a flat $0.38 per share, with an expiration date of December 31,
2004.

4)         The  Chief Technical  Officer  of the  Company  entered into  an
agreement dated August 1, 1998 for an initial term of three years (extended
through August 1,  2003), and he  is entitled to  receive a base  salary of
$150,000 per year, with  a minimum of $90,000  to be paid annually  in cash
and the balance paid (at the  option of the Company) in cash  or restricted
common stock under rule 144.  The employee shall receive a hire-on bonus of
$75,000 worth of the Company's  restricted common stock under rule  144, at
one-half  market price.   The employee  shall further  receive performance
bonuses  (paid  in  restricted  common  stock,  as  above)  upon successful
completion  of specific  milestones pertaining  to the  implementation and
deployment  of certain  software (up  to $862,500).  If  substantially  all
performance milestones are met, he is also granted an option to purchase up
to 500,000 shares of the Company's restricted common stock at a price equal
to  60%  of the  average  market value  at  the date  of  purchase.  As  of
September  30,  2002,  none  of  the  aforementioned  milestones  had  been
successfully completed.

Litigation

There has been one recent legal proceeding in which the Company has been  a
party:

In February 2002, the Company borrowed $340,000 from the Mercator  Momentum
Fund in order to make an  initial $100,000 payment to  Laurus Master  Fund,
Ltd. and to fund continuing development of the Company's H-Net(TM)  system.
This loan from the Mercator Momentum Fund was a short-term loan due May 15,
2002 and accrues interest at an annual rate of 18%. The loan was secured by
shares of the Company's common stock. As of June 13, 2002, the

<page>F-45

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 12.        COMMITMENTS AND CONTINGENCIES (continued)

Litigation (continued)

Company owed Mercator Momentum Fund approximately $243,000 of principal and
accrued and  unpaid interest  under this  loan and  were in  default in the
repayment of this debt.

On June 14, 2002, Mercator Momentum Fund transferred collateral in the form
of 5,861,814 shares of the Company's common stock into its name as a result
of the  Company's default  on Mercator's  loan. Of  the 5,861,814 shares of
common stock transferred into the name of Mercator Momentum Fund, 3,500,000
shares of the Company's common stock were issued and pledged as  collateral
by the  Company in  February 2002,  and 2,361,814  shares of  the Company's
common stock were  issued and pledged  as collateral by  Robert Spigno, the
Company's Chief Executive Officer, in February 2002.

On June 21, 2002 Mercator Momentum Fund filed an action against  Conectisys
Corporation, Robert A. Spigno and Patricia A. Spigno in the Superior  Court
of California,  County of  Los Angeles  (Case No.  BC276283) for  breach of
promissory note, foreclosure  of security interests  and fraud and  deceit.
Mr. Spigno is the Chairman of the  Board and a director of the Company  and
is also the Company's Chief Executive Officer.  Ms. Spigno is the Company's
Secretary and Chief Financial Officer.  On July 3, 2002, Mercator  Momentum
Fund filed a first amended  complaint in the Superior Court  of California,
County of Los Angeles (Case No.  BC276283) adding a claim for common  count
for  money  lent. Mercator  Momentum  Fund seeks  damages  of approximately
$243,000 plus  approximately $66  in interest  per day  commencing June 21,
2002 and other compensatory and punitive damages of unspecified amount. The
Company believes  that Mercator  Momentum Fund's  claims are  without merit
because,  among  other factors,  they  have affirmative  defenses  to those
claims, including  usury and  the satisfaction  of amounts  owed under loan
from Mercator  Momentum Fund  as a  result of  the enforcement  by Mercator
Momentum  Fund of  its security  interest in  shares of  common stock.  The
Company intends  to vigorously  defend against  these claims  and to pursue
appropriate counterclaims against Mercator Momentum Fund.

<page>F-46

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 12.        COMMITMENTS AND CONTINGENCIES (continued)

Litigation (continued)

The Company, during its normal course of business, may be subject from time
to time to disputes and to legal proceedings against it.  Both counsel  and
management do not  expect that the  ultimate outcome of  any current claims
will have a material adverse effect on the Company's financial statements.

NOTE 13.        FORM S-8 FILINGS

In September 2001, the Company  filed a registration statement on  Form S-8
covering its amended  Non-Qualified Stock Option  and Stock Bonus  Plan for
independent consultants to the Company, which authorizes the issuance of an
additional  3,000,000 shares  of common  stock. 1,000,000  of these  shares
valued at $113,300 were issued to  a consultant as a retainer in  September
2001. Another 1,500,000 shares valued  at $192,566 for accrued services  of
$153,566 and reduction of debt of $39,000 were issued to consultants during
the three  months ended  December 31,  2001. Later  during the  fiscal year
ended September 30, 2002, 500,000  shares valued at $57,500 were  issued to
consultants  for  services of  $25,000  and reduction  of  debt of  $32,500
leaving an unissued balance of zero shares under the Company's amended  Non
-Qualified Stock Option and Stock Bonus Plan.

In August  2002, the  Company filed  a registration  statement on  Form S-8
covering a  1,000,000 shares  issued to  an independent  consultant to  the
Company, which  authorized the  re-sale of  the 1,000,000  shares of common
stock valued at $20,000.

NOTE 14.        STOCK OPTIONS AND WARRANTS

During the fiscal year  ended September 30, 1999,  the Company issued to  a
note holder options to purchase  500,000 shares of the   Company's  Class B
preferred stock at an exercise price of $5.00 per share.  As consideration,
the Company reduced its debt to the note holder by $50,000 and received  an
extension of time to pay-off its promissory note.  The Company also  issued
to its  CEO options  to purchase  another 500,000  shares of  the Company's
Class B preferred stock at an exercise price of $5.00 per share in exchange
for a reduction in debt of $50,000.  Total consideration

<page>F-47

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 14.        STOCK OPTIONS AND WARRANTS (continued)

received on the above issued  options, as evidenced by debt  reduction, was
$100,000.  These options can be exercised through November 1, 2002 and  can
also be converted  into common stock  at the rate  of 10 common  shares for
each Class B preferred share.  In September 2001, the exercise price on the
Class B preferred  stock options was  adjusted to $2.50  per share and  the
exercise period extended to November 1, 2004.

The Company's CEO  currently owns 200,020  shares of the  Company's Class A
preferred stock,  of which  60,000 shares  were purchased  during the  year
ended  September 30,  2002, and  has options  to purchase  another 250,000
shares for $1.00 per share through November 1, 2005.

The Company accounts for stock-based compensation under the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25.  No common
stock options  or warrants  were granted  to officers  and directors of the
Company during  the years  ended September  30, 2002  or  2001.  During the
year ended September 30, 2000, the Company had issued 100,000 common  stock
options to its Acting  President at an exercise  price of $0.38 per  share,
exercisable over a  six-month period.  As  the exercise price  approximated
the market price of the common stock  on the date of grant and the  term of
the options  was short,  no compensation  cost had  to be  recorded in  the
financial statements  under the  Black-Scholes call  option pricing  model.
These common stock options expired on March 11, 2001.

The total balance  of stock options  and warrants exercisable  at September
30, 2000 was $1,235,005,  including $100,000 attributable to  the Company's
Class B preferred stock, as noted above.

In January 2001, a consultant exercised 400,000 out of 500,000 common stock
options that had been  granted in September 2000,  at an exercise price  of
$0.085 per share.  The $34,000 proceeds were applied to an outstanding note
due the  consultant.  Additionally,  $52,000 of  additional paid-in capital
(recorded as stock options  exercisable) was reclassified to  common stock.
This  was  because an  aggregate  fair value  amount  of $65,000  had  been
recognized in the financial statements  when these options were granted  in
September 2000  at an  exercise price  set at  15% below  market.  The fair
value was determined utilizing the Black-Scholes call option

<page>F-48

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 14.        STOCK OPTIONS AND WARRANTS (continued)

pricing model,  assuming a  6% risk  free rate  of return  and a volatility
factor  of 50%.   The remaining  100,000 common  stock options  expired in
September 2001.

In March  2001, 45,500  common stock  warrants were  issued to common stock
subscribers, exercisable at $2.00 per  share through March 3, 2003.   These
warrants had no material value upon issuance.

In April 2001, 1,000,000 common  stock warrants were issued to  an investor
in conjunction with  a $300,000 principal  value 8% convertible  note.  The
warrants are exercisable at $0.192  per share over a four-year  period, and
were valued at $77,228 (see Note 8 above).

In  September  2001,  2,000,000  common  stock  options  were  issued  to a
consultant.  The  options are  exercisable at  $0.13 per  share over a four
-year period and  were valued under  the Black-Scholes call  option pricing
model (assuming a 50% volatility factor and a 5% risk-free rate of  return)
at $115,000, bringing the balance of stock options and warrants exercisable
at the September 30, 2001 fiscal year-end to $1,375,233.

In December 2001 and January 2002, the consultant exercised 550,000 of  the
above common stock options, applying  the $71,500 cost of exercise  against
an outstanding note payable.   Stock options exercisable were  also reduced
and transferred to common stock in the amount of $31,625.

In March 2002 trough June 2002, 3,750,000 three-year common stock  warrants
were issued to an accredited  investor group in connection with  a $750,000
12% convertible debenture  financing arrangement (see  Note 8 above).   The
allocated cost of  these warrants amounted  to $100,087, so  that the total
stock  options  and warrants  exercisable  at September  30,  2002 was  now
$1,443,695.

During the year  ended September 30,  2002, an additional  6,852,205 common
stock options were granted to consultants and investors, at exercise prices
ranging  from  $0.50 to  $2.00  per share,  and  over terms  expiring  from
November 1,  2003 through  January 16,  2005.  Because  these strike prices
were substantially above the market price of the Company's common stock, no
value was attributed to these options at the time of grant.

<page>F-49

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 14.        STOCK OPTIONS (continued)

The  Company  has granted  various  common stock  options  and warrants  to
employees  and  consultants.   Generally,  the  options  and  warrants were
granted at  approximately the  fair market  value of  the Company's  common
stock  at  the date  of  grant and  vested  immediately, except  that  when
restricted rule 144 common stock was issued, the options and warrants  were
granted at an average market discount  of 50% (ranging from between 20%  to
75%).  Compensation expense  for options and  warrants issued to  employees
for services were recorded as the difference between the intrinsic value of
those services as measured by  the (discounted) market value of  the common
stock at the date  of grant and the  exercise price in accordance  with APB
Opinion No. 25,  with pro forma  disclosure of the  excess market value  as
required by FASB No. 123.   All options and warrants issued  to consultants
and other  non-employees were  recorded at  the fair  value of the services
rendered and equivalent to the market value (as discounted, if  applicable)
of the equity instruments received as per FASB No. 123.   The market  value
was determined by utilizing an averaging convention of between 5 to 30 days
of the closing price of the  Company's common shares as traded on  the over
-the-counter bulletin board (stock symbol CNES) through the grant date  and
applying  certain  mathematical  assumptions as  required  under  the Black
-Scholes model.  Such assumptions, pertaining to the risk-free annual  rate
of return and stock volatility, were generally the same as those  mentioned
above when making  fair value disclosures  for the issuance  of officer and
employee stock  options, except  that the  risk-free annual  rate of return
during the latter half of fiscal  2001 and subsequent was assumed to  be 5%
(rather than  6%) due  to the  general decline  of interest rates occurring
throughout the economy and the world.

<page>F-50

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 14.        STOCK OPTIONS AND WARRANTS (continued)

The common stock  option activity during  the fiscal years  ended September
30, 2002 and September 30, 2001 was as follows:

                                           Common Stock      Weighted
                                             Options         Average
                                                and          Exercise
                                             Warrants         Price
                                            ----------       --------
     Balance outstanding, October 1, 2000     3,207,154        $.69

      Granted                                 3,000,000         .15
      Exercised                                (400,000)        .09
      Expired                                  (200,000)        .23
                                             ----------
     Balance outstanding, September 30, 2001  5,607,154         .42

      Granted                                 3,750,000         .05
      Exercised                                (550,000)        .13
                                             ----------
     Balance outstanding, September 30, 2002  8,807,154        $.28
                                             ==========        ====

The following table  summarizes information about  common stock options  at
September 30, 2002:

                          Outstanding                  Exercisable
                           Weighted    Weighted               Weighted
   Range of      Common    Average      Average      Common    Average
   Exercise       Stock      Life      Exercise       Stock   Exercise
    Prices      Options    (Months)      Price       Options    Price
-------------   ---------   -------     -------      --------- -------
$2.00 - $2.00     563,500        23     $  2.00        563,500 $  2.00
$ .38 - $ .38     100,000        27     $   .38        100,000 $   .38
$ .19 - $ .19   1,000,000        30     $   .19      1,000,000 $   .19
$ .05 - $ .05   3,750,000        31     $   .05      3,750,000 $   .05
$ .13 - $ .13   1,450,000        35     $   .13      1,450,000 $   .13
$ .39 - $ .39   1,443,654        38     $   .39      1,443,654 $   .39
$ .38 - $ .38     500,000        38     $   .38        500,000 $   .38

$ .05 - $2.00   8,807,154        33     $   .28      8,807,154 $   .28
=============   =========        ==     =======      ========= =======

<page>F-51

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

NOTE 14.        STOCK OPTIONS AND WARRANTS (continued)

The above tables exclude  4,852,205 warrants exercisable at  prices ranging
from $0.50  to $2.00  per share,  which have  nominal value  and which were
issued  to certain  stock subscription  investors and  consultants.  These
warrants will all expire during the period November 1, 2003 through January
16, 2005.  The tables also  exclude a contingent issuance to  the Company's
Chief Technical Officer  of 2,000,000 common  stock options exercisable  at
$0.50 per share and expiring December 31, 2004.  These common stock options
will not vest until certain milestones have been attained.

NOTE 15.        SUBSEQUENT EVENTS

(a)     In October 2002, the Company filed a registration statement on Form
        S-8 covering a 1,000,000 shares issued to an independent consultant
        to  the Company, which   authorized the  re-sale of   the 1,000,000
        shares of common stock valued at $20,000.

(b)     In November 2002, the Company received funding of another  $200,000
        (net proceeds of $143,600) from  an investor group in exchange  for
        one-year  12%  convertible   debt   and  1,000,000   common   stock
        warrants, exercisable   at $0.005   per  share  over  a  three-year
        period.   During  the quarter  ended December 31, 2002,  this  same
        investor  group also converted   approximately $33,000 of debt  and
        accrued  interest into  7,532,953 shares  of the  Company's common
        stock.

(c)     Through January 6, 2003, in addition to the common share  issuances
        described in Notes  15(a) and 15(b)  above, the Company  has issued
        restricted  common stock  in the  aggregate of  24,265,490 shares,
        valued  at approximately  $371,000.   Of   the  aggregate   amount,
        7,630,468    shares    were  issued    on   account   of    accrued
        consulting   fees   totaling    approximately   $76,000,  7,135,022
        shares  were    issued  to   officers   for   debt  reductions   of
        approximately  $237,000,   750,000  shares   were  issued   to   an
        employee  and a  consultant for  bonuses of  approximately $7,000,
        500,000 shares were  issued to a note  holder for a  debt reduction
        of   approximately  $3,000,  1,250,000  shares   were   issued   to
        members  of  the  Advisory   Board for   services  of approximately
        $13,000, and  7,000,000 shares  were  issued to an   individual for
        $35,000 in cash.
<page>F-52

INDEX TO EXHIBITS


Exhibit
Number           Description
-------          -----------
3.1     Articles of Incorporation of the Registrant (4)

3.2     Articles of Amendment to the Articles of Incorporation of the
        Registrant filed November 7, 1994 (4)

3.3     Articles of Amendment to the Articles of Incorporation of the
        Registrant filed December 5, 1994 (6)

3.4     Articles of Amendment to the Articles of Incorporation of the
        Registrant filed October 16, 1995 (4)

3.5     Bylaws of the Registrant (4)

10.1    Employment Agreement dated October 2, 1995 between the Registrant
        and Robert Spigno (#) (4)

10.2    Amendment to Employment Agreement dated July 24, 1996 between the
        Registrant and Robert Spigno (#) (4)

10.3    Amendment to Employment Agreement dated August 11, 1997 between the
        Registrant and Robert Spigno (#) (4)

10.4    Amendment to Employment Agreement dated September 1, 1999 between
        the Registrant and Robert Spigno (#) (4)

10.5    Amendment to Employment Agreement dated March 27, 2000 between the
        Registrant and Robert Spigno (#) (4)

10.6    Employment Agreement dated August 1, 1998 between the Registrant
        and Lawrence Muirhead (#) (2)

10.7    Employment Agreement dated October 2, 1995 between the Registrant
        and Patricia Spigno (#) (4)

10.8    Amendment to Employment Agreement dated July 24, 1996 between the
        Registrant and Patricia Spigno (#) (4)

10.9    Amendment to Employment Agreement dated September 1, 1999 between
        the Registrant and Patricia Spigno (#) (4)

10.10   Amendment to Employment Agreement dated March 27, 2000 between the
        Registrant and Patricia Spigno (#) (4)

10.11   Agreement dated August 3, 2001 between the Registrant and Radio
        Design Group (1)

                                  <page>42

10.12   Letter of Understanding dated July 24, 2001 between the Registrant
        and Dr. Scott Samuelsen as director of the Advanced Power and
        Energy Program, University of California, Irvine (4)

10.13   Convertible Note dated April 12, 2001 made by the Registrant in
        favor of Laurus Master Fund, Ltd. (4)

10.14   Promissory Note Subscription Agreement dated April 12, 2001 between
        the Registrant and Laurus Master Fund, Ltd. (4)

10.15   Security Agreement dated April 12, 2001 between the Registrant and
        Laurus Master Fund, Ltd. (4)

10.16   Letter Agreement dated September 26, 2001 between the Registrant
        and Laurus Master Fund, Ltd. (4)

10.17   Letter Agreement dated April 2, 2002 between the Registrant and
        Laurus Master Fund, Ltd. (4)

10.18   Promissory Note dated September 1, 2001 made by the Registrant in
        favor of Robert Spigno (#) (4)

10.19   Promissory Note dated September 1, 2001 made by the Registrant in
        favor of Black Dog Ranch, LLC (4)

10.20   Promissory Note dated February 15, 2002 made by the Registrant in
        favor of Mercator Momentum Fund, LP (4)

10.21   ConectiSys Corporation Non-Qualified Stock Option and Stock Bonus
        Plan (2)

10.22   Amended Non-Qualified Stock Option and Stock Bonus Plan effective
        September 11, 2000 (3)

10.23   Amended Non-Qualified Stock Option and Stock Bonus Plan effective
        September 11, 2001 (1)

10.24   Securities Purchase Agreement dated as of March 29, 2002 by and
        between the Registrant and the purchasers named therein (4)

10.25   Form of Secured Convertible Debenture due March 29, 2003 (4)

10.26   Form of Common Stock Purchase Warrant dated as of March 29, 2002
        (4)

10.27   Registration Rights Agreement dated as of March 29, 2002 by and
        between the Registrant and the investors named therein (4)

10.28   Security Agreement dated as of March 29, 2002 between the
        Registrant and the secured parties named therein (4)

10.29   Form of Secured Convertible Debenture due May 10, 2003 (5)

10.30   Form of Common Stock Purchase Warrant dated as of May 10, 2002 (5)

                                  <page>43

10.31   Form of Secured Convertible Debenture due June 17, 2003 (7)

10.32   Form of Common Stock Purchase Warrant dated as of June 17, 2002 (7)

10.33   Securities Purchase Agreement dated as of November 27, 2002 by and
        between the Registrant and the purchasers named therein

10.34   Form of Secured Convertible Debenture due November 27, 2003

10.35   Form of Common Stock Purchase Warrant dated as of November 27, 2002

10.36   Registration Rights Agreement dated as of November 27, 2002 by and
        between the Registrant and the investors named therein

10.37   Security Agreement dated as of November 27, 2002 between the
        Registrant and the secured parties named therein

10.38   Intellectual Property Security Agreement dated as of November 27,
        2002 between the Registrant and the secured parties named therein

21.1    Subsidiaries of the Registrant (4)

23.1    Consent of Independent Certified Public Accountants

_________________

(#)     Management contract or compensatory plan, contract or arrangement
        required to be filed as an exhibit.

(1)     Filed as an exhibit to the Registrant's Form S-8 filed with the
        Securities   and  Exchange   Commission  on   September  21,   2001
        (Registration No. 333-69832) and incorporated herein by reference.

(2)     Filed as an exhibit to the Registrant's Form S-8 filed with the
        Securities   and   Exchange   Commission   on   December   6,  1999
        (Registration No. 333-92181) and incorporated herein by reference.

(3)     Filed as an exhibit to the Registrant's Form S-8 filed with the
        Securities   and  Exchange   Commission  on   September  22,   2000
        (Registration No. 333-46456) and incorporated herein by reference.

(4)     Filed as an exhibit to the Registrant's Form SB-2 filed with the
        Securities and Exchange Commission on April 26, 2002  (Registration
        No. 333- 87062) and incorporated herein by reference.

(5)     Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
        ended March 31, 2002 and incorporated herein by reference.

(6)     Filed as an exhibit to the Registrant's Form SB-2/A No. 1 filed
        with  the  Securities  and  Exchange  Commission  on  June  6, 2002
        (Registration No. 333-87062) and incorporated herein by reference.

(7)     Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
        ended June 30, 2002 and incorporated herein by reference.

                                  <page>44

SIGNATURES

        In accordance  with Section  13 or  15(d) of  the Exchange Act, the
Registrant  caused   this report   to  be  signed  on   its behalf  by  the
undersigned  thereunto duly authorized as of the 21st day of January, 2003.



                                               CONECTISYS CORPORATION

                                               By: /S/ ROBERT A. SPIGNO
                                               ----------------------------
                                               Robert A. Spigno
                                               Chief Executive Officer
                                               (Principal Executive Officer)
                                               and Chairman of the Board

        In accordance with the Exchange Act, this report has been signed by
the following persons on behalf of the Registrant and in the capacities and
as of the dates indicated.

Name                         Title                       Date


/S/ ROBERT A. SPIGNO    Chairman of the Board,           January 21, 2003
ROBERT A. SPIGNO        Chief Executive Officer
                        (principal executive officer)
                        and Director


/S/PATRICIA A. SPIGNO   Chief Financial Officer,         January 21, 2003
PATRICIA A. SPIGNO      Treasurer and Secretary
                        (Principal Financial and
                         Accounting Officer)



/S/LAWRENCE MUIRHEAD    Chief Technology Officer and     January 21, 2003
LAWRENCE MUIRHEAD       Director



/S/MELISSA McGOUGH      Corporate Administrator and      January 21, 2003
MELISSA McGOUGH         Director

                                  <page>45

CERTIFICATIONS

I, Robert A. Spigno, certify that:

        1.      I have reviewed this annual report on Form 10-KSB of
ConectiSys Corporation ("annual report");

        2.      Based on my knowledge, this annual report does not contain
any untrue statement of  a material fact or  omit to state a  material fact
necessary to make the statements made, in light of the circumstances  under
which such statements were made, not misleading with respect to the  period
covered by this annual report; and

        3.      Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial  condition, results of operations  and cash
flows of  the registrant  as of,  and for,  the periods  presented in  this
annual report.

Date: January  21, 2003                     /S/ ROBERT A. SPIGNO
                                                Robert A. Spigno
                                                Chief Executive Officer
                                                (Principal Executive Officer)

I, Patricia A. Spigno, certify that:

        1.      I have reviewed this annual report on Form 10-KSB of
ConectiSys Corporation ("annual report");

        2.      Based on my knowledge, this annual report does not contain
any untrue statement of  a material fact or  omit to state a  material fact
necessary to make the statements made, in light of the circumstances  under
which such statements were made, not misleading with respect to the  period
covered by this annual report; and

        3.      Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial  condition, results of operations  and cash
flows of  the registrant  as of,  and for,  the periods  presented in  this
annual report.

Date: January 21, 2003                      /S/ PATRICIA A. SPIGNO
                                                Patricia A. Spigno
                                                Chief Financial Officer
                                                (Principal Financial and
                                                Accounting Officer)

                                  <page>46

EXHIBITS FILED WITH THIS REPORT

Exhibit
Number                Description
------                -----------
10.33   Securities Purchase Agreement dated as of November 27, 2002 by and
        between the Registrant and the purchasers named therein

10.34   Form of Secured Convertible Debenture due November 27, 2003

10.35   Form of Common Stock Purchase Warrant dated as of November 27, 2002

10.36   Registration Rights Agreement dated as of November 27, 2002 by and
        between the Registrant and the investors named therein

10.37   Security Agreement dated as of November 27, 2002 between the
        Registrant and the secured parties named therein

10.38   Intellectual Property Security Agreement dated as of November 27,
        2002 between the Registrant and the secured parties named therein

23.1    Consent of Independent Certified Public Accountants

99.1    Certifications of Chief Executive Officer and Chief Financial
        Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
        Section 906 of the Sarbanes-Oxley Act Of 2002

                                  <page>47