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<TITLE>Conectisys 10KSB99</TITLE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
<br>Washington D.C. 20549
<p>FORM 10-KSB
<p>(Mark One)
<p>[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934. For the year ended September 30, 1999.
<p>[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934
<br>[no fee required]
<p>Commission File Number 33-3560D
<p>CONECTISYS CORP.
<br>(Name of small business issuer in its charter)
<p>Colorado 84-1017107
<br>(state or other jurisdiction (I.R.S. Employer
<br>Incorporation or Organization) Identification No.)
<p>24370 Avenue Tibbitts, Suite 130
<br>Valencia, California 91355
<br>(Address of principal of Executive Offices) (Zip Code)
<p>Issuer's telephone number: (661) 295-6763
<p>Securities registered pursuant to Section 12(b) of the Act: None
<br>Securities registered pursuant to Section 12(g) of the Act: None
<p>Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(b) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X]Yes[ ]No
<p>Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B Contained herein, and 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. [X]
<p>State Issuer's revenues for it's most recent fiscal year: $25,655.00.
<br> 
<p>The aggregate number of shares of the voting stock held by non-affiliates
on January 13, 2000 was 8,563,869. The market value of these shares, computed
by reference to the market closing price on December 31, 1999 was $4,007,891.
For the purpose of the foregoing calculation only, all directors and executive
officers of the registrant have been deemed affiliates. The number of shares
outstanding of issuer's classes of equities as of January 13, 2000 was
14,623,301.
<p><b>PART I</b>
<p>Item 1. Description of Business
<p><b>General</b>
<p>Conectisys Corporation (the "Company") was incorporated on February
3, 1986, in Colorado. It is a commercial telecommunications company in
the development stage. Conectisys is the parent company of three subsidiaries
and a division. The subsidiaries are TechniLink Technology Manufacturing,
Inc., Primelink, Inc., and United Telemetry Co., Inc. The lone division
is eEnergyServices.com. During the current fiscal year the Company intends
to consolidate Primelink, Inc. and United Telemetry Co., Inc. with all
operations being conducted under United Telemetry Co., Inc. The Company
further intends incorporate eEnergyServices.com and consolidate the operations
of TechniLink Technology Manufacturing, Inc. and eEnergyServices.com. The
Company believes this will streamline operations and allow for further
delineation of its intra-company operational tasks and better public understanding
of the Company.
<p>Business and Products of Conectisys
<p>Conectisys and its subsidiaries have developed systems and products
for the wireless telemetry markets. Conectisys is focused on several specific
communication technologies.
<p>Conectisys is developing a low-cost AMR solution for both residential
and industrial markets. The product is called HNet(tm) and will be marketed
by United Telemetry Company (UTC). HNet(tm) utilizes a proprietary communication
protocol for bi-directional communication using a wireless radio network.
This technology enables the company to deliver a low-cost wireless network,
which is inexpensive to deploy and operate. This technology may also be
utilized for other remote data acquisition and/or control applications,
where traditional communication is not available because of cost.
<p>The Conectisys network architecture includes a second component, the
"Network Operating Center" or NOC. The HNet(tm) wireless network AMR data
will be transmitted to the "Network Operating Center". The NOC is a state
of the art operating center built to support, one million wireless meter
reading devices four times an hour, twenty four hours a day. The HNet(tm)
Network will be deployed with several up-link capabilities including ISM
band or satellite.
<p>Through the NOC, the company will offer a full array of value added
services to the utility distribution industry in addition to the AMR meter
data. These services will include energy management, data archiving and
e-commerce systems, which allows an end-user real-time data, for evaluation
and cost analysis via the Internet using standard web browsers. eEnergyServices.com
will provide the accounting and financial transaction services. Energy
suppliers, energy brokers and energy service providers along with energy
consumers are the potential customers for these services.
<p>There is currently no dominant AMR technology in the market, today.
The company believes that UTC and eEnergyServices.com wireless network
model presents an effective, low-cost, total solution for the AMR market.
<p>The Company's much-awaited deployment of the HNet(tm) Automatic Meter
Reading (AMR) technology will be introduced through the HNet(tm) pilot
demonstration which is expected to be deployed, and operational by February
15, 2000. The pilot will demonstrate the acquisition of real time data
from the HNet(tm) system, process this data to show power usage and cost,
prepare simulated bills and real-time power usage summaries suitable for
power purchasing with the facts.
<p>Conectisys, through UTC/Primelink Inc, has also developed a wireless
network for automatic meter reading (AMR) for industrial markets utilizing
paging technology. The company has just recently begun to begin marketing
the UTC/Primelink technology at this time.
<br> 
<p>Proprietary Information
<p>The Company relies on proprietary knowledge and employs various methods
to protect its trade secrets, concepts, ideas and designs. The Company
has filed for patent protection on the HNet(tm) product line. However,
such methods may not afford complete protection, and there can be no assurance
that others will not independently develop such processes, concepts, ideas
and designs. The Company, through its subsidiaries, manufactures and markets
its technology. However, such technology is not presently patented in the
United States, and although the Company has undertaken to file one or more
applications for U.S. patents pertaining to the technology, there can be
no assurance that patents will ultimately be issued. Further, the possibility
exists that the technology may be deemed to infringe upon other technology,
which is already patented, or subject to an application filed prior to
the Company's application when filed. In that event, the Company could
be subject to liability for damages for infringement and could be required
to cease production of equipment until appropriate licensing arrangements
are made. The Company could also be subject to competition from the party
deemed to be the owner of the patent pertaining to the technology.
<p>Employees
<p>As of January 13, 2000, the Company and its subsidiaries employed six
full time employees, of whom three are officers of Conectisys.
<p>Item 2. Description of Property
<p>The Company's principal operation center is located at 24370 Avenue
Tibbitts, Suit 130, and Valencia, California 91355. This 1000 sq. ft. space
is leased for $1,244.50 per month.
<p>Additional office space is located at 7260 Spigno Place, Agua Dulce,
California 91350. This space is leased from a related party. The lease
is for executive office space (1090 Square feet) and office equipment.
The lease payment is $2,500 per month. There are no current plans to lease
any additional office space.
<p>Item 3. Legal Proceedings
<p>On December 13, 1999 the Company and Southern Arizona Graphic Associates,
Inc. ("Arizona Lithographers") settled a civil lawsuit filed on June 28,
1999 in the Pima County, Arizona. The Company issued Arizona Lithographers
26,087 shares in exchange for certain photographic rights and reprints.
The case was dismissed with prejudice on December 15, 1999.
<p>On March 26, 1999 the District Court of Arapahoe, State of Colorado
dismissed the civil case against Conectisys Corp. brought by Clamar Capital
Corporation.
<p>On March 5, 1999 the Company entered into an Amended Final Judgment
of Permanent Injunctive Relief with the Securities and Exchange Commission
("SEC") in Securities and Exchange Commission v. Conectisys Corp. et al.,
Civil Case number 96-4146 (MRP). The Company and the SEC agreed on a settlement
in which the Company would dismiss its then pending appeal and take a permanent
injunction that the company would not in the future violate sections 5(a),
5(c), 17(a) d, 10(b), 10(b-5), or 15(c); in return the SEC would not demand
the previously ordered discouragement of $175,000.00.
<br> 
<p>Item 4. Submission of Matters to a Vote of Security Holders
<p>An annual stockholders meeting was not held during the fiscal year ending
September 30, 1999. The Company has planed an Annual Meeting for March
2000.
<p><b>PART II</b>
<p>Item 5. Market for Common Equity and Related Stockholder Matters
<p>When traded, the Company's shares are traded on the electronic over-the-counter
bulletin board. Bid and asked quotations are reported on the bulletin board
under the symbol CNES. The following table indicates the range of high,
low & closing information for the common stock for each fiscal quarter
in 1999.
<blockquote>Quarter ending        
          
High          Low  
         
Close
<br>September 30, 1999        $.760 
      
$.700           
$.750
<br>August 31, 1999          
   
$.900        $.800    
       
$.800
<br>May 31, 1999          
       
$.470        $.470    
       
$.470
<br>February 28, 1999         
 
$.625        $.625    
       
$.625</blockquote>
As of January 13, 2000, there were over 600 shareholders of record of the
Company's common stock.
<p>Holders of the common stock are entitled to receive such dividends as
may be declared by the Company's Board of Directors. The Company has not
declared any cash dividends on its common stock since the company's inception,
and its Board of Directors has no present intention of declaring any dividends.
<p>Item 6. Management's Discussion and Analysis or Plan of Operation
<p>Results of Operations
<p>Loss on operations for the Company for the year ended 1998 was $4,928,682
as compared to a loss of $1,323,831 in fiscal 1999. This is approximately
a 73% decrease in losses from the prior year in the same period. The Company,
over the next 12 months will rely primarily on funding through the sale
of common stock or loans collateralized through common stock and revenues
generated from the initial HNet(tm) product and services deployment. Revenue
in fiscal 1999 was $25,655 as compared to $0 in year ended November 30,
1998. Development of HNet(tm) products will be ongoing throughout the year
with some expected purchase of significant equipment in addition to an
increase in the number of employees.
<p>Liquidity and Capital Resources
<p>As of September 30, 1999, the Company had a working capital deficit
of $2,070,784, consisting of $34,004 in current assets and $2,104,078 in
current liabilities. The Company had a working capital deficit of $1,290,005
at year ended November 30, 1998. The Company has incurred operating losses
in its development stage.
<p>Management's plans for correcting these deficiencies include the future
sales of the HNet(tm) product line and services and to raise capital through
the issuance of common stock to assist in providing the Company with the
liquidity necessary to meet operating expenses. In the longer term, the
Company plans to achieve profitability through its operations. The consolidated
financial statements do not include any adjustments that might result from
the outcome of the uncertainty.
<p>The Company had total assets of $169,076 as of September 30, 1999, and
total liabilities of $2,104,078. Shareholder deficit is $1,935,002 as compared
to $762,646 shareholder deficit as of November 30, 1998.
<p>Cash Flows
<p>The Company had a net loss for the year ended September 30, 1999, of
$1,323,831. The cash used in operations toward this loss was $84,742. The
largest area of loss was the result of non-cash transactions to the Company.
$315,082 was the result of services that were paid through the issuance
of Common stock (approximately 30% of the total net loss). The Company
also had write offs to intangible assets of 283,133 and depreciation and
amortization expenses of $121,413 (approximately 31% of the total net loss).
<p>Effect of Inflation
<p>Inflation did not have any significant effect on the operations of the
Company during the fiscal year ending September 30, 1999. Further, inflation
is not expected to have any significant effect on future operations of
the Company.
<p>Y2K Compliance
<p>The Company experienced no adverse effects and could not identify any
system failures during the "Y2K" transition. The "Y2K" problem did not
pose any operational problems for the Company's computer systems. However,
the Company will continue to monitor the situation.
<br> 
<br> 
<p>The Financial Accounting Standards Board (FASB) Impact
<p>Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," (SFAS No. 130) issued by the FASB is effective for financial statements
with fiscal years beginning after December 15, 1997. Earlier adoption is
permitted. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company does not expect adoption of SFAS No.
130 to have an effect, if any, on its financial position or its results
of operations.
<p>Statement of Financial Accounting Standard No. 131, "Disclosure About
Segments Of An Enterprise And Related Information," (SFAS 131) issued by
the FASB is effective for financial statements with fiscal years beginning
after December 15, 1997. Earlier application is permitted. SFAS No. 131
requires that public companies report certain information about operating
segments, products, services and geographical areas in which they operate
and their major customers. The Company does not expect adoption of SFAS
No. 131 to have an effect on its financial position or results of operations;
however, additional disclosures may be made relating to the above items.
<p>Item 7. Financial Statements
<p>Financial statements are audited and included herein beginning on Exhibit,
page 1 and are incorporated herein by this reference.
<br> 
<p>Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
<p>None.
<br> 
<p><b>PART III</b>
<p>Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
<p>Directors and Officers
<p>The Directors and Officers of the corporation, all of whose terms will
expire at the next annual meeting of the shareholders, or at such time
as their successors shall be elected and qualified, are as follows:
<p>Name            
             
    
Capacity            
             
         
Remuneration           
Common Stock
<br>Robert A. Spigno          
 
CEO/President/COB          
      
350,000 (1)
<br>Lawrence P. Muirhead    CTO/Director    
             
          
10,000 (1998)
<br>Melissa Weger          
     
Corp. Administrator/Director      0
<p>1. Mr. Spigno received 260,000 shares in 1999 and 90,000 shares in 1998.
<p>On November 15, 1999 Richard Dowler was removed from the Board of Directors
and Melissa Weger was appointed to fill his vacancy.
<br> 
<p>Item 10. Executive Compensation
<p>Remuneration
<p>Cash remuneration for services in all capacities rendered to the Company
ended September 30, 1999 to all directors and officers as a group was as
follows:
<br>Cash or cash equivalent forms
<br>Name Capacity Of remuneration
<br>Robert A. Spigno CEO/President $240,000.00
<br>Patricia A. Spigno Secretary/Treasurer $120,000.00
<br>Lawrence P. Muirhead CTO $150,000.00
<br>Melissa Weger Corp. Administrator $ 36,400.00
<br>The Company has plans for profit sharing, insurance, and stock option
plans for the benefit of its officers, directors or other employees for
fiscal year 1999, but has not yet adopted any such programs.
<p>In 1994, the Company established a compensatory benefit plan, pursuant
to which up to 20,000 shares of common stock may be issued to persons that
the Board of Directors deems are owed some form of compensation for services
to the Company. There no shares were granted under this program in 1998.
<p>In November 1999, the Company established a Non-Qualified Stock Option
and Stock Bonus Plan for independent consultants to the Company. The Plan
authorized the issuance of up to one (1) million shares of common stock.
In furtherance of the Plan the Company filed an S-8 Registration Statement
in December 1999.Pursuant to the Plan the Company has issued 616,087 shares
of common stock under the Plan; 116,087 for services and 500,000 for retainers
for services.
<p>Stock
<p>Robert A. Spigno, Patricia A. Spigno and Melissa Weger were respectively
granted 539,539, 139,700 and 44,981 shares of stock restricted under rule
144. This stock was for services in all capacities rendered to the Company
during the fiscal year ending September 30, 1999. Mr. Muirhead was not
granted stock during the fiscal year.
<p>Stock Options
<br>As of January 13, 2000:
<p>Common Stock
<br>No. Of Options Exercise Price Duration
<p>Robert A. Spigno 3,500,000 $.15 - $.50 10-36 Months
<br>Lawrence Muirhead(1) 2,000,000 $.50 36 months
<br>Patricia Spigno 500,000 (60% of Mkt.) 52 months
<br>Melissa Weger 100,000 (50% of Mkt.) 32 months
<p>Class A Preferred Stock
<p>Robert A. Spigno 29,980 $1.00 18 months
<p>Class B Preferred Stock
<p>Robert A. Spigno 500,000 $5.00 36 months
<p>(1) Options do not vest until completion and deployment of a 30-unit
pilot of the HNet(tm) system.
<p>Employment Agreements
<p>1. The President and CEO of the Company entered into an agreement dated
October 2, 1995 (which was amended September 1, 1997 and September 1, 1999)
for a period of five years, and he is entitled to receive a base salary
of $160,000 per year. The employee shall further receive a bonus, paid
at year-end, equal to 50% of the employee's salary, for continued employment.
The staying bonus will be compensated for with the Company's restricted
common stock. He is also granted an option to purchase up to 2,000,000
shares of the Company's restricted common stock at a price equal to 50%
of the average market value for the prior 30 days of trading from the date
of purchase.
<p>2. The Secretary and Treasurer of the Company entered into an Agreement
dated October 2, 1995 (which was amended September 1, 1997 and September
1, 1999) for a period of three years, and she is entitled to receive a
base salary of $80,000 per year. The employee shall further receive a bonus,
paid at year-end, equal to 50% of the employee's salary, for continued
employment. The staying bonus shall be compensated for with the Company's
restricted common stock. She is also granted an option to purchase up to
500,000 shares of the Company's restricted common stock at a price equal
to 60% of the average market value for the prior 180 days of trading from
the date of purchase.
<p>3. The Chief Technical Officer of the Company entered into an Agreement
dated August 1, 1998 for an initial term of three years, and he is entitled
to receive a base salary of $150,000 per year, with a minimum of $90,000
to be paid annually in cash and the balance paid (at the option of the
Company) in cash or restricted common stock under rule 144. The employee
shall receive a hire-on bonus of $75,000 worth of the Company's restricted
common stock under rule 144, at one-half market price. The employee shall
further receive performance bonuses (paid in restricted common stock, as
above) upon successful completion of specific milestones pertaining to
the implementation and deployment of certain software (up to $862,500).
If substantially all performance milestones are met, he is also granted
an option to purchase up to 500,000 shares of the Company's restricted
common stock at a price equal to 60% of the average market value for the
prior 180 days of trading from the date of purchase.
<p>4. The Chief Financial Officer of the Company entered into an agreement
dated October 2, 1995 (which was amended September 1, 1997) for a period
of three years, and he is entitled to receive a base salary of $80,000
per year and an annual bonus of 2% of the Company's pretax income. The
employee shall further receive a bonus, paid at year-end, equal to 50%
of the employee's salary, for continued employment. The staying bonus shall
be compensated for with the Company's restricted common stock. He is also
granted an option to purchase up to 500,000 shares of the Company's restricted
common stock at a price equal to 50% of the average market value at the
date of purchase. Effective February 1999, he resigned from the Company.
<p>Item 11. Security Ownership of Certain Beneficial Owners and Management
<p>As of January 13, 2000, the Company had 14,623,301 outstanding shares
of common stock. Each common share entitles the holder to one vote on any
matter submitted to shareholders for approval. The Company has authorized
1,000,000 shares of Class A Preferred Stock, $1.00 par value per share,
of which 100,000 shares currently are issued and outstanding. Preferred
Class A stock has 100 to 1 voting rights of which 120,020 are outstanding.
Also authorized are 1,000,000 shares of Class B Preferred Stock, $1.00
par value per share. Class B Preferred stock has conversion rights of 10
common stock shares to 1 share Class B Preferred stock of which there no
stock outstanding.
<p>In September 1999, the Company issued options to purchase 500,000 shares
each (a total of 1,000,000) of its Class B convertible preferred stock
at a price of $5.00 per share in exchange for debt reduction of $50,000
each (a total of $100,000) to a note holder and the Company's president.
<p>On September 30, 1999 the Company issued options for 1,000,000 shares
of Class B Preferred Stock ($.10 each) in exchange for debt reduction of
$50,000 each (a total of $100,000) to a note holder and the Company's president.
The options carry an exercise price of $5.00 per share with an expiration
date of November 1, 2002.
<p>On November 1, 1999 the Company issued warrants to purchase 506,500
shares of common stock at an exercise price of $2.00 per share with an
expiration date of November 1, 2001.
<p>Beneficial Owners Owning 5% or more      
     
Number of Shares        Percentage of
common Stock
<br>Pacific Trade Services        
             
             
     
1,650,000           
         
11.3%
<br>Braemar Management         
             
             
    
1,500,000           
         
10.3%
<br>S.W. Carver Corp.         
             
             
        
1,034,003           
           
7.1%
<br>Carl Attman          
             
             
             
        
753,739            
          
5.2%
<p>Security ownership of Management
<br>Robert A. Spigno (1)         
             
             
    
740,347            
             
5.1%
<br>Patricia A. Spigno (2)         
             
             
    
201,062            
            
1.4%
<br>Lawrence P. Muirhead         
             
             
  
135,000            
             
0.9%
<br>Melissa Weger          
             
             
             
  
44,981            
             
0.3%
<p>Total Directors and Officers as a whole      
     
1,121,690           
            
7.7%
<p>Class A Preferred Stock         
             
             
 
Number of Shares         Percentage
of Class A Preferred
<br>Robert A. Spigno          
             
             
           
120,020            
          
100%
<p>1. Does not include 201,062 shares owned by Patricia A. Spigno (spouse)
or 1,034,003 shares owned by S.W. Carver Corp. S.W. Carver Corp. is a privately
owned corporation owned by Robert A. Spigno and Patricia A. Spigno.
<p>2. Does not include 757,839 shares owned by Robert A. Spigno (spouse)
or 1,034,003 shares owned by S.W. Carver Corp. S.W. Carver Corp. is a privately
owned corporation owned by Robert A. Spigno and Patricia A. Spigno.
<br> 
<p>Item 12. Certain Relationships and Related Transactions
<p>In February 1996, the Company entered into an office space and office
equipment lease agreement with S. W. Carver Corp. S.W. Carver is a privately
owned corporation owned by Robert A. Spigno and Patricia A. Spigno, the
CEO and CFO, respectively, of Conectisys. The initial term of this lease
was for 11 months at a rate of $2,000 per month. The lease is for a period
of twelve months, renewable annually in April at the option of the lessee.
<p>In April, 1998, the monthly lease payment was increased from $2,000
to $2,500. Lease expense for the year ended December 31, 1999 was $30,000.00.
<p>Item 13. Exhibits and Reports on Form 8-K
<p>(a) Exhibits
<p>Financial Data Schedule
<br>Financial Statements
<p>(b) Since December 1, 1999 the Registrant filed the following current
reports on Form 8-K:
<p>November 24, 1999 & October 18, 1999
<p>Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
<br> 
<p>CONECTISYS CORPORATION
<p>Date: January 13, 2000 By /S/ Robert A. Spigno
<br>Robert A. Spigno, President
<br> 
<br> 
<p>Pursuant to the requirements of the Securities Exchange Act of 1934,
the following persons on behalf of the Registrant and in the capacities
and on the dates indicated have signed this Report below.
<p>Signature
<br>Title
<p>Date
<br>/S/ Robert A. Spigno
<br>(Robert A. Spigno)
<br>Chairman of the Board, Chief Executive Officer, President and Director
<p>January 13, 2000
<br> 
<br> 
<br> 
<p>1
<p>  CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage
Company)
<br>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<p>Page No.
<p>INDEPENDENT AUDITORS' REPORT 1-2
<p>CONSOLIDATED FINANCIAL STATEMENTS
<p>Consolidated Balance Sheet 3-4
<p>Consolidated Statements of Operations 5
<p>Consolidated Statements of Changes in
<br>Shareholders' Equity (Deficit) 6-9
<p>Consolidated Statements of Cash Flows 10-12
<p>Notes to Consolidated Financial Statements 13-33
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>INDEPENDENT AUDITORS' REPORT
<br> 
<br> 
<br> 
<p>Board of Directors
<br>Conectisys Corporation and Subsidiaries
<br>Agua Dulce, California
<br> 
<br> 
<p>We have audited the accompanying consolidated balance sheet of Conectisys
Corporation and Subsidiaries
<br>(a development stage company) (the "Company") as of September 30, 1999,
and the related consolidated
<br>statements of operations, changes in shareholders' equity (deficit),
and cash flows for the ten month
<br>period then ended, the year ended November 30, 1998, and the cumulative
period from December 1, 1990
<br>(inception of development stage) through September 30, 1999. These
consolidated financial statements
<br>are the responsibility of the Company's management. Our responsibility
is to express an opinion on
<br>these consolidated financial statements based on our audit.
<p>We conducted our audit in accordance with generally accepted auditing
standards. Those standards
<br>require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated
<br>financial statements are free of material misstatements. An audit includes
examining, on a test basis,
<br>evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also
<br>includes assessing the accounting principles used and significant estimates
made by management, as well
<br>as evaluating the overall consolidated financial statement presentation.
We believe that our audit
<br>provides a reasonable basis for our opinion.
<p>In our opinion, the consolidated financial statements referred to above
present fairly, in all material
<br>respects, the consolidated financial position of Conectisys Corporation
and Subsidiaries as of September
<br>30, 1999, and the results of their operations and their cash flows
for the ten month period then ended,
<br>the year ended November 30, 1998, and the cumulative period from December
1, 1990 (inception of
<br>development stage) through September 30, 1999, in conformity with generally
accepted accounting
<br>principles.
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>1
<br> 
<p>The accompanying consolidated financial statements have been prepared
assuming that the Company will
<br>continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has
<br>suffered recurring losses from operations and has a deficiency in working
capital at September 30, 1999
<br>that raise substantial doubt about its ability to continue as a going
concern. Management's plans
<br>concerning these matters are also described in Note 1. The consolidated
financial statements do not
<br>include any adjustments that might result from the outcome of this
uncertainty.
<br> 
<br> 
<br> 
<p>Hurley & Company
<br> 
<p>Granada Hills, California
<br>December 30, 1999
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>2
<br> 
<p>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<br>September 30, 1999
<br> 
<br> 
<br> 
<p>ASSETS
<p>Current assets:
<br>Cash and cash equivalents        
    
$  27,004
<br>Deposits           
             
             
       
7,000
<br>            
 
             
             
            
-----------
<br>Total current assets         
             
    
34,004
<p>Property and equipment, net        
    
95,072
<p>Other assets
<br>Licenses and technology, net of
<br>accumulated amortization of
<br>$381,478           
             
             
   
40,000
<br>            
             
             
             
-----------
<p>Total assets          
             
         
$ 169,076
<br>            
             
             
     
===========
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>The accompanying notes are an integral part of these consolidated financial
statements.
<p>3
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED BALANCE SHEET
<br>September 30, 1999
<br> 
<p>LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<p>Current liabilities:
<br>Notes payable and
<br>current portion of long-term debt       
             
            
$ 626,934
<br>Accounts payable          
             
             
             
         
262,341
<br>Accrued compensation         
             
             
             
  
887,383
<br>Due to officer          
             
             
             
             
  
133,195
<br>Other current liabilities        
             
             
             
    
194,225
<br>            
             
             
             
             
             
  
------------
<br>Total current liabilities        
             
             
             
  
2,104,078
<p>Long-term debt, net of current portion -
<p>Commitments and contingencies -
<p>SHAREHOLDERS' EQUITY (DEFICIT):
<p>Preferred stock Class A, $1.00 par value;
<br>1,000,000 shares authorized,  120,020
<br>shares issued and outstanding       
             
             
       
120,020
<br>Convertible preferred stock Class B,
<br>$1.00 par value; 1,000,000 shares
<br>authorized, -0- shares issued and
<br>outstanding -
<br>Common stock, no par value; 250,000,000
<br>shares authorized, 13,988,362
<br>shares issued and outstanding       
             
             
   
12,299,702
<br>Stock options exercisable, convertible preferred
<br>stock Class B, 1,000,000 stock options
<br>issued and outstanding, common stock
<br>600,000 stock options issued and outstanding     
           
250,000
<br>Deficit accumulated during the development stage    
(14,604,724)
<br>            
             
             
             
             
             
  
------------
<br>Total shareholders' deficit        
             
             
        
(1,935,002)
<br>            
             
             
             
1             
             
 
------------
<br>Total liabilities and
<br>shareholders' deficit         
             
             
             
     
$ 169,076
<br>            
             
             
             
             
           
============
<p>The accompanying notes are an integral part of these consolidated financial
statements.
<br> 
<p>4
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF OPERATIONS
<br>For the Ten Months Ended September 30, 1999,
<br>the Year Ended November 30, 1998, and the Cumulative Period
<br>From December 1, 1990 (Inception) Through September 30, 1999
<br> 
<p>            
             
             
             
            
Ten Months           
             
             
             
 
Dec. 1, 1990
<br>            
             
             
             
             
    
Ended            
    
Year Ended           
           
(Inception)
<br>September 30,          
             
             
    
November 30,           
             
             
             
  
Through
<br>1999            
             
             
             
         
1998            
             
             
             
     
Sept. 30, 1999
<br>            
             
             
             
            
-----------           
     
-----------           
         
--------------
<br>Net revenues          
             
             
        
$ 25,655            
        
$ -             
             
      
$ 517,460
<p>Cost of sales           
             
             
           
94,434            
        
400,671            
             
 
819,996
<br>            
             
             
             
             
   
-----------           
     
-----------           
     
--------------
<br>Gross profit (loss)         
             
             
     
(68,779)            
     
(400,671)            
           
(302,536)
<p>Operating expenses:
<br>General and administrative        
             
       
928,186            
    
3,797,483           
             
9,557,821<br>Bad debt write-offs        
             
             
             
 -            
             
   -          
             
     1,680,522<br>      
             
             
             
             
         -----------  
             
 
-----------           
         
--------------<br>Loss from operations      
             
             
    
(996,965)            
    
(4,198,154)           
      
(11,540,879)
<p>Settled damages          
             
             
            
25,000            
            
-             
             
      
25,000
<p>Interest income          
             
             
             
   
227             
           
1,640            
 
           
102,915
<p>Interest expense          
             
             
        
(68,960)            
         
(40,664)            
        
(876,657)
<p>Write-off of
<br>intangible assets          
             
             
        
(283,133)            
        
(632,257)            
    
(1,299,861)
<p>Minority interest         
             
             
             
-             
             
     
(59,247)            
            
62,500
<br>            
             
             
             
             
   
-----------           
         
-----------           
     
--------------
<br>Net loss           
             
             
             
  
$(1,323,831)           
     
$(4,928,682)           
 
$ (13,526,982)
<br>             
             
             
             
           
===========          
  
===========         ==============
<p>Weighted average shares
<br>outstanding
<br>basic and diluted         
             
             
     
12,244,646           
         
8,891,629
<p>Net loss per share
<br>basic and diluted         
             
             
             
$ (.11)            
            
$ (.55)
<br>            
             
             
             
        
===========           
     
===========
<p>The accompanying notes are an integral part of these consolidated financial
statements.
<p>5
<br> 
<p>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<br>For the Cumulative Period December 1, 1990 (Inception) Through September
30, 1999
<br> 
<br> 
<pre>            
             
             
             
          Common   
   Deficit</pre>

<pre>            
             
             
             
             
             
   and    Accumulated    
  Total</pre>

<pre>            
             
         Preferred Stock  
       Common Stock     
   Pref. B   During the  Shareholders'</pre>

<pre>            
             
            Class A 
           
  No Par Value         Stock 
   Development     Equity</pre>

<pre>            
             
         Shares    Value
       Shares      
 Value    Options       Stage 
     (Deficit)</pre>

<pre>            
             
      ---------   ----------
  ---------- ----------- -------- ------------ ------------</pre>

<pre>Balance,</pre>

<pre> December 1, 1990</pre>

<pre>(re-entry</pre>

<pre>  development stage)        
         -     $
      -      
  10,609 $ 1,042,140 $    -   $ (1,042,140) $
       -</pre>

<pre>Shares issued in exchange for:</pre>

<pre> Cash, May 31, 1993        
          -    
        -      
   1,000       1,000   
   -          
  -          1,000</pre>

<pre> Capital contribution,</pre>

<pre>  May 31, 1993         
             
 -            - 
        2,000     
    515      -    
        -      
      515</pre>

<pre> Services, March 26, 1993       
     -         
   -         2,000  
       500      - 
           -   
         500</pre>

<pre> Services, March 26, 1993       
     -         
   -         1,200  
       600      - 
           -   
         600</pre>

<pre>Net loss for the year         
       -       
     -         
  -           -  
      -       
  (5,459)      (5,459)</pre>

<pre>             
              
    ---------   ----------
  ---------- ----------- -------- ------------  -----------</pre>

<pre>Balance,</pre>

<pre> November 30, 1993         
          -    
        -      
  16,809   1,044,755      -  
   (1,047,599)      (2,844)</pre>

<pre>Shares issued in exchange for:</pre>

<pre> Services, May 1, 1994        
       -       
     -         2,400
       3,000      - 
           -   
       3,000</pre>

<pre> Cash, September 1, 1994        
     -         
   -        17,771   
   23,655      -     
       -       
  23,655</pre>

<pre> Services, September 15, 1994      
  -           
 -         8,700   
   11,614      -    
        -     
    11,614</pre>

<pre> Cash, September 26, 1994       
     -        
    -         3,000 
     15,000      -  
          -   
      15,000</pre>

<pre> Cash, October 6, 1994        
    16,345       16,345  
       -       
    -        -   
         -     
    16,345</pre>

<pre> Cash, September and October,</pre>

<pre>  1994          
             
        -      
      -        
 1,320      33,000      - 
           -   
      33,000</pre>

<pre>loss for the year          
          -    
        -      
     -         
  -        -     
   (32,544)     (32,544)</pre>

<pre>             
              
    ---------  
 ---------- ----------- ----------- -------- ------------  ------------</pre>

<pre>Balance,</pre>

<pre> November 30, 1994         
       16,345     
  16,345      50,000   1,131,024 
     -     (1,080,143)   
   67,226</pre>
 
<p> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>The accompanying notes are an integral part of these consolidated financial
statements.
<p>6
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<pre>
For the Cumulative Period December 1, 1990 (Inception) Through September 30, 1999
</pre>

<pre>            
             
             
             
             
            
  Common     Deficit</pre>

<pre>            
             
             
             
             
             
   and     Accumulated    
  Total</pre>

<pre>            
             
         Preferred Stock  
       Common Stock    
    Pref. B   During the  Shareholders'</pre>

<pre>            
             
            Class A 
           
  No Par Value         Stock 
   Development     Equity</pre>

<pre>            
             
         Shares  
  Value       Shares   
    Value    Options    
   Stage      (Deficit)</pre>

<pre>            
            
       ---------   ----------
  ---------- ----------- -------- ------------ ------------</pre>

<pre>Shares issued in exchange for:</pre>

<pre> Cash, February 13, 1995      
       -     $ 
     -       
  1,160 $   232,000 $    -   $ 
       -   $  
  232,000</pre>

<pre> Debt repayment, February 13,</pre>

<pre>  1995         
            
          -   
         -    
     2,040     408,000  
    -         
   -        408,000</pre>

<pre> Debt repayment, February 20,</pre>

<pre>  1995          
             
        -      
      -       
  4,778     477,810     
 -            - 
       477,810</pre>

<pre> Acquisition of assets, CIPI</pre>

<pre>  February, 1995        
            
 -            - 
       28,750   1,950,000  
    -         
   -      1,950,000</pre>

<pre> Acquisition of assets, April 5,</pre>

<pre>  1995          
             
        -     
       -      
  15,000         -  
      -       
     -        
    -</pre>

<pre> Cash and services, April and</pre>

<pre>  May 1995         
            
      -       
     -       
 16,000     800,000     
 -            - 
       800,000</pre>

<pre> Cash, June 1, 1995        
          -   
         -    
       500     
 30,000      -      
      -       
  30,000</pre>

<pre> Acquisition of assets and</pre>

<pre>  services, September 26, 1995      
 -            - 
        4,000   
  200,000      -   
         -   
     200,000</pre>

<pre> Cash, September 28, 1995       
     -        
    -         
   41       3,000   
   -          
  -          3,000</pre>

<pre> Acquisition of assets,</pre>

<pre>  September 1995        
            
 -            - 
       35,000   1,750,000  
    -         
   -       1750,000</pre>

<pre> Return of assets, CIPI</pre>

<pre>  September, 1995        
            - 
           -  
     (27,700) (1,950,000)     - 
           -  
   (1,950,000)</pre>

<pre>Net loss for the year        
        -     
       -      
     -        
   -        -   
  (2,293,867)  (2,293,867)</pre>

<pre>            
             
      ---------
  ----------- ----------- ----------- -------- ------------ ------------</pre>

<pre>Balance,</pre>

<pre> November 30, 1995        
        16,345    
   16,345     129,569   5,031,834 
     -     (3,374,010) 
  1,674,169</pre>

<pre>Shares issued in exchange for:</pre>

<pre> Cash, February, 1996       
         -    
        -     
    1,389     152,779   
   -          
  -        152,779</pre>

<pre> Debt repayment, February 1996      
 -            - 
       10,000     612,000
      -       
     -        612,000</pre>

<pre> Services, February, 1996       
     -        
    -         3,160
     205,892      -  
          -   
     205,892</pre>

<pre> Cash, March, 1996        
           -  
          -   
        179     
 25,000      -      
      -       
  25,000</pre>
The accompanying notes are an integral part of these consolidated financial
statements.
<p>7
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<br>For the Cumulative Period December 1, 1990 (Inception) Through September
30, 1999
<pre>           
            
            
            
            
            
       Common     
 Deficit</pre>

<pre>           
            
            
            
            
            
         and   
 Accumulated      Total</pre>

<pre>           
            
          
 Preferred Stock        
 Common Stock       
 Pref. B   During the  Shareholders'</pre>

<pre>           
            
            
  Class A         
     No Par Value      
   Stock    Development    
 Equity</pre>

<pre>           
            
           Shares 
   Value       Shares  
     Value    Options   
    Stage      (Deficit)</pre>

<pre>           
            
        --------- 
  ----------
  ---------- ----------- -------- ------------ ------------</pre>

<pre>Shares returned and canceled,</pre>

<pre>  March, 1996         
             
  -     $      -  
     (15,000)$       - 
  $    -   $      
  -    $       -</pre>

<pre> Services, April, 1996       
        -     
       -      
      13       2,069
      -       
     -        
  2,069</pre>

<pre> Services, September, 1996       
  4,155        4,155   
      586       6,317
      -       
     -        
 40,472</pre>

<pre> Services, October, 1996       
      -       
     -        
 6,540     327,000      - 
           -  
      327,000</pre>

<pre> Debt repayment, November, 1996      - 
           -   
      2,350      64,330 
     -         
   -         64,330</pre>

<pre>Net loss for the year        
        -     
       -      
     -        
   -        -   
  (2,238,933)  (2,238,933)</pre>

<pre>            
             
      ---------
  ----------- ----------- ----------- -------- ------------ ------------</pre>

<pre>Balance,</pre>

<pre> November 30, 1996        
        20,500    
   20,500     138,786   6,457,221 
     -     (5,612,943)  
   864,778</pre>

<pre>Shares issued in exchange for:</pre>

<pre> Services, March, 1997       
        -     
       -      
     228       6,879 
     -        
    -         
 6,879</pre>

<pre> Services, April, 1997       
        -     
       -      
     800      13,120  
    -         
   -         13,120</pre>

<pre> Services, July, 1997       
         -    
        -     
    1,500      16,200  
    -         
   -         16,200</pre>

<pre> Cash, July, 1997        
            - 
           -  
      15,000     300,000 
     -        
    -        300,000</pre>

<pre> Services, August, 1997       
       -      
      -       
  5,958      56,000    
  -           
 -         56,000</pre>

<pre>Adjustment for partial shares due</pre>

<pre> to reverse stock split (1:20)      
 -            - 
          113   
      -       
 -            - 
           -</pre>

<pre> Services, October, 1997       
      -       
     -     1,469,666   
  587,865      -     
       -      
  587,865</pre>

<pre> Debt repayment, October, 1997      
 -            - 
    1,540,267     620,507   
   -           
 -        620,507</pre>

<pre> Cash, October, 1997        
         -     
       -     1,500,000 
    281,250      -   
         -     
   281,250</pre>

<pre> Services, November, 1997       
     -         
   -         4,950  
    10,538      -    
        -      
   10,538</pre>

<pre>Net loss for the year        
        -     
       -      
     -        
   -        -   
  (2,739,268)  (2,739,268)</pre>

<pre>            
             
      ---------
  ----------- ----------- ----------- -------- ------------
  ------------</pre>

<pre>Balance,</pre>

<pre> November 30, 1997        
        20,500    
   20,500   4,677,268   8,349,580  
    -     (8,352,211)   
   17,869</pre>
 
<p> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>The accompanying notes are an integral part of these consolidated financial
statements.
<p>8
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<br>For the Cumulative Period December 1, 1990 (Inception) Through September
30, 1999
<pre>            
             
             
             
             
             
 Common      Deficit</pre>

<pre>            
             
             
             
             
             
   and    Accumulated     
 Total</pre>

<pre>            
             
         Preferred Stock  
       Common Stock     
   Pref. B   During the  Shareholders'</pre>

<pre>            
             
            Class A
             
 No Par Value         Stock  
  Development     Equity</pre>

<pre>            
             
         Shares   
 Value       Shares     
  Value    Options      
 Stage      (Deficit)</pre>

<pre>            
             
      ---------   ----------
  ---------- ----------- -------- ------------ ------------ 
 Shares issued in exchange for:</pre>

<pre> Services, December, 1997</pre>

<pre>  through November, 1998       
      -    $    
   -     2,551,610 $ 2,338,264 $  
  -   $        - 
  $  2,338,264</pre>

<pre> Debt repayment, April, 1998</pre>

<pre>  through September, 1998       
     -        
    -       250,000  
   129,960      -    
        -     
   129,960</pre>

<pre> Cash, January, 1998 through</pre>

<pre>  July, 1998         
             
   -          
  -     4,833,334   1,139,218  
    -         
   -      1,139,218</pre>

<pre> Acquisition of assets,</pre>

<pre>  July, 1998         
             
   -          
  -       300,000    
 421,478      -      
      -       
 421,478</pre>

<pre> Acquisition of remaining 20%</pre>

<pre>  minority interest in</pre>

<pre>  subsidiary, July, 1998       
      -       
     -        50,000
      59,247      - 
           -  
       59,247</pre>

<pre> Services, November, 1998       
  60,000       60,000    
     -        
   -        -   
         -    
     60,000</pre>

<pre>Net loss for the year        
        -     
       -      
     -        
   -        -   
  (4,928,682)  (4,928,682)</pre>

<pre>            
             
      ---------  -----------
  ---------- ----------- -------- ------------  ------------</pre>

<pre>Balance,</pre>

<pre> November 30, 1998       
         80,500   
    80,500  12,662,212  12,437,747  
    -    (13,280,893)   
 (762,646)</pre>

<pre>Shares issued in exchange for:</pre>

<pre> Shares returned and canceled,</pre>

<pre>  December, 1998        
            
 -           
 -    (1,350,000)   (814,536)   
  -           
 -       (814,536)</pre>

<pre> Services, December, 1998</pre>

<pre>  through September, 1999       
     -        
    -       560,029  
   349,454  150,000       
   -        499,454</pre>

<pre> Cash, December, 1998</pre>

<pre>  through September, 1999       
     -        
    -     1,155,800   
  129,537      -     
       -      
  129,537</pre>

<pre> Debt repayment, Sept., 1999      39,520
       39,520     960,321
     197,500  100,000     
     -        337,020
</pre>

<pre>Net loss for the period        
      -       
     -        
   -          
 -        -    
 (1,323,831)  (1,323,831)</pre>

<pre>            
             
      ---------  ----------- -----------
 ----------- -------- ------------  ------------</pre>

<pre>Balance,</pre>

<pre> September 30, 1999        
      120,020  $   120,020 
 13,988,362 $12,299,702 $250,000 $(14,604,724) $(1,935,002)</pre>

<pre>            
             
      =========  ===========  ==========
=========== ======== ============  ===========</pre>
The accompanying notes are an integral part of these consolidated financial
statements.
<p>9
<p>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF CASH FLOWS
<br>For the Ten Months Ended September 30, 1999,
<br>the Year Ended November 30, 1998, and the Cumulative Period
<br>From December 1, 1990 (Inception) Through September 30, 1999
<br> 
<br> 
<br> 
<pre>            
             
    Ten Months        
          Dec. 1, 1990</pre>

<pre>            
             
       Ended    Year Ended 
      (Inception)</pre>

<pre>            
             
  September 30, November 30,       
 Through</pre>

<pre>            
             
       1999      
   1998        Sept. 30, 1999</pre>

<pre>            
             
   -----------  ------------    -------------</pre>

<pre>Cash flows from operating</pre>

<pre> activities:</pre>

<pre>Net loss           
         $(1,323,831) $ (4,928,682)
    $(13,526,982)</pre>

<pre>Adjustments to reconcile</pre>

<pre> net loss to net cash used</pre>

<pre> in operating activities:</pre>

<pre>  Stock issued for services    (315,082)  
  2,398,264        4,147,378</pre>

<pre>  Stock issued for interest       
  -           
  -           
 535,591</pre>

<pre>  Provision for bad debt</pre>

<pre>   write-offs        
            
   -          
   -          1,422,401</pre>

<pre>  Minority interest        
         -    
      59,247      
    (62,500)</pre>

<pre>  Settled damages        
       (25,000)     
     -        
    (25,000)</pre>

<pre>  Write-off of intangible</pre>

<pre>    assets       
            
   283,133       632,257  
      1,299,861</pre>

<pre>  Depreciation and</pre>

<pre>    amortization       
         121,413   
    394,020        1,523,887
</pre>

<pre>  Changes in:</pre>

<pre>   Accounts receivable       
       -       
    3,411         
  (4,201)</pre>

<pre>   Accrued interest</pre>

<pre>    receivable       
             
  -           
  -           
 (95,700)</pre>

<pre>   Deposits        
            
  (7,000)          - 
            (7,000)</pre>

<pre>   Accounts payable       
      (13,096)     (135,018) 
        262,341</pre>

<pre>   Accrued compensation       
  478,440       248,017   
       949,905</pre>

<pre>   Due to officer        
       555,193      
     -         
   555,193</pre>

<pre>   Other current liabilities    161,088  
     (68,951)        
 358,890</pre>

<pre>            
             
   -----------  ------------    -------------</pre>

<pre>Total adjustments          
  1,239,089     3,531,247     
  10,861,046</pre>

<pre>            
             
   -----------  ------------    -------------</pre>

<pre>Net cash used in</pre>

<pre> operating activities        
  (84,742)   (1,397,435)      (2,665,936)
</pre>

<pre>            
             
  -----------  ------------    -------------</pre>

<p><br>The accompanying notes are an integral part of these consolidated
financial statements.
<p>10
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>CONSOLIDATED STATEMENTS OF CASH FLOWS
<br>For the Ten Months Ended September 30, 1999,
<br>the Year Ended November 30, 1998, and the Cumulative Period
<br>From December 1, 1990 (Inception) Through September 30, 1999
<br> 
<pre>            
             
   Ten Months         
          Dec. 1, 1990</pre>

<pre>            
             
      Ended     Year Ended 
      (Inception)</pre>

<pre>            
             
  September 30, November 30,       
 Through</pre>

<pre>            
             
       1999      
   1998        Sept. 30, 1999</pre>

<pre>            
             
   -----------  ------------    -------------</pre>

<pre> Cash flows from investing</pre>

<pre> activities:</pre>

<pre>  Issuance of</pre>

<pre>   notes receivable       
  $       -    $  
      -      $ 
 (1,322,500)</pre>

<pre>  Costs of licenses</pre>

<pre>   and technology       
            - 
            - 
           (94,057)</pre>

<pre>  Purchase of equipment       
  (12,255)      (58,855)    
    (136,176)</pre>

<pre>            
             
   -----------   -----------  
  -------------</pre>

<pre>Net cash used in</pre>

<pre> investing activities       
   (12,255)      (58,855)  
    (1,552,733)</pre>

<pre>           
            
     -----------   -----------  
  -------------</pre>

<pre>Cash flows from financing</pre>

<pre> activities:</pre>

<pre>  Common stock issuance       
  129,537     1,139,218    
    2,129,410</pre>

<pre>  Preferred stock issuance      
    -         
    -         
    16,345</pre>

<pre>  Proceeds from debt, other      
   -         129,960 
       1,670,691</pre>

<pre>  Proceeds from debt, related      
 -            
 -            206,544
</pre>

<pre>  Proceeds from stock purchase      - 
        181,270    
      281,250</pre>

<pre>  Payments on debt, other      
 (11,270)       (5,689)    
     (25,910)</pre>

<pre>  Payments on debt, related       
  -           
  -           
 (53,172)</pre>

<pre>  Decrease in stock</pre>

<pre>   subscription receivable      
    -         
    -         
    20,000</pre>

<pre>  Contributed capital       
        -     
        -     
           515</pre>

<pre>           
            
     -----------   -----------  
  -------------</pre>

<pre>Net cash provided by</pre>

<pre>  financing activities       
  118,267     1,444,759    
    4,245,673</pre>

<pre>            
             
   -----------   -----------  
  -------------</pre>

<pre>Net increase (decrease) in</pre>

<pre>  cash and cash equivalents      21,270
       (11,531)     
     27,004</pre>

<pre>Cash and cash equivalents</pre>

<pre>  at beginning of period       
   5,734        17,265 
            
 -</pre>

<pre>            
             
  ------------   -----------    -------------</pre>

<pre>Cash and cash equivalents</pre>

<pre>  at end of period        
 $     27,004   $     5,734
    $      27,004</pre>
             
             
============   ===========    =============
<br>The accompanying notes are an integral part of these consolidated financial
statements.
<br>11
<br> CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage
Company)
<br>CONSOLIDATED STATEMENTS OF CASH FLOWS
<br>For the Ten Months Ended September 30, 1999,
<br>the Year Ended November 30, 1998, and the Cumulative Period
<br>From December 1, 1990 (Inception) Through September 30, 1999
<br> 
<br> 
<br> 
<pre>            
             
    Ten Months        
          Dec. 1, 1990</pre>

<pre>            
             
       Ended     Year Ended
       (Inception)</pre>

<pre>            
             
  September 30,  November 30,      
  Through</pre>

<pre>            
             
       1999      
   1998        Sept. 30, 1999</pre>

<pre>            
             
   -----------   -----------  
  -------------</pre>

<pre>Supplemental disclosures of</pre>

<pre>  cash flow information:</pre>

<pre>  Cash paid for interest    $    
    92   $     2,767  
  $     130,917</pre>

<pre>            
             
   ===========   ===========  
  =============</pre>

<pre>  Cash paid for income taxes$      
 -     $       -  
    $       1,650</pre>

<pre>            
             
   ===========   ===========  
  =============</pre>

<pre>Non-cash financing activities:</pre>

<pre>  Common stock issued</pre>

<pre>   in exchange for:</pre>

<pre>    Note receivable       
  $       -     $ 
      -      $   
  281,250</pre>

<pre>    Property and equipment  $    
   -     $      
 -      $     130,931</pre>

<pre>    Licenses and technology $     
  -     $   421,478    $ 
  2,191,478</pre>

<pre>    Acquisition of remaining</pre>

<pre>     minority interest in</pre>

<pre>     subsidiary      
       $      
 -     $    59,247    $ 
     59,247</pre>

<pre>    Repayment of debt and</pre>

<pre>     interest       
        $   197,500  
 $   129,960    $   1,804,795</pre>

<pre>    Services and interest   $   
    -     $ 2,338,264   
 $   4,969,192</pre>

<pre>  Preferred stock issued</pre>

<pre>   in exchange for:</pre>

<pre>    Services       
         $    
   -     $    60,000  
  $      60,000</pre>

<pre>    Repayment of debt      
$    39,520   $      
 -      $      39,520</pre>

<pre>  Preferred stock options</pre>

<pre>   issued in exchange for:</pre>

<pre>    Repayment of debt      
 $   100,000   $      
 -      $     100,000</pre>
 
<p> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>The accompanying notes are an integral part of these consolidated financial
statements.
<br>The accompanying notes are an integral part of these consolidated financial
statements.
<p>12
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
<p>Organization
<p>Conectisys Corporation (the "Company") was incorporated under the laws
of Colorado on February 3,
<br>1986, to analyze and invest in business opportunities as they may occur.
<p>TechniLink has developed the Cube 2001 series for the monitoring and
controlling of various devices
<br>in the petroleum and gas industry.
<p>PrimeLink has developed a product line that uses cutting edge communications
to assist in the
<br>monitoring of meters for utility companies and the petroleum industry.
This technology, while
<br>eliminating the need for a meter reader, is more significant in enabling
the utility companies to
<br>utilize energy conservation and, in the case of power companies, re-routing
of electrical power to
<br>areas where it is needed. The devices are also in use in vending machines
to monitor sales and
<br>functions of the vending machine without the physical inspection usually
needed.
<p>Effective December 1, 1994, the Company agreed to acquire all of the
outstanding shares of
<br>Progressive Administrators, Inc. ("PAI") in exchange for 300,000 shares
of its no par value common
<br>stock. The transaction was to be accounted for as a purchase transaction.
The shares to be issued
<br>by the Company were to be "restricted securities" within the meaning
of Rule 144 of the Securities
<br>Act of 1933, as amended. Accordingly, PAI would have been a wholly-owned
subsidiary of the Company
<br>as of December 1, 1994. PAI was formed in the state of Colorado on
September 14, 1994 and is
<br>engaged in the records storage business.
<p>Effective December 1, 1994, the Company also agreed to acquire all of
the outstanding shares of
<br>Creative Image Products, Inc. ("CIPI") in exchange for 575,000 shares
of its no par value common
<br>stock. The shares were issued in February of 1995. The shares issued
by the Company were
<br>"restricted securities" within the meaning of Rule 144 of the Securities
Act of 1933, as amended.
<br>Accordingly, CIPI was a wholly-owned subsidiary of the Company as of
December 1, 1994. CIPI was
<br>formed in the state of Kansas on April 29, 1994 and is engaged in the
insecticide business and,
<br>through its wholly-owned subsidiary, ADA Signature Distributors,
<p>13
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Organization (continued)
<p>Inc., the sign manufacturing business. During 1995, the Company's
<br>only operations consisted of CIPI's manufacturing of organic insecticides
prior to its disposal. On
<br>September 28, 1995, the Company entered into an agreement to unwind
the acquisition of CIPI. CIPI
<br>issued a promissory note to the Company in the amount of $1,302,500
to reimburse the Company for
<br>cash advances. In accordance with the agreement, the shares issued
to CIPI were exchanged for all
<br>shares issued to the Company. The shares outstanding carry no value
on the financial statements.
<br>In 1997, the Company wrote-off this note receivable as it was deemed
uncollectible.
<p>On February 15, 1996, PrimeLink entered into a Joint Marketing and Development
Agreement (the
<br>"Agreement") with SkyTel Corp. pursuant to which PrimeLink agreed to
customize and develop a paging
<br>technology based receiver for use in connection with SkyTel's two-way
wireless messaging services
<br>and system (the "SkyTel Network") and both parties agreed to assist
each other in the marketing of
<br>the Primelink product and the SkyTel Network. The Company believes
that the joint marketing of its
<br>product with the SkyTel System could have significant potential for
the Company. However, the
<br>Agreement does not require any purchases of the PrimeLink product by
SkyTel, and may not necessarily
<br>result in any significant revenues for the Company. The Agreement is
for a two-year term, and will
<br>automatically renew for additional one-year terms until terminated
by either party.
<p>In September 1995, the Company acquired 80% of the outstanding stock
of TechniLink, Inc., a
<br>California corporation, and 80% of the outstanding stock of PrimeLink,
Inc., a Kansas corporation,
<br>in exchange for an aggregate of 200,000 shares of the Company's common
stock. The acquisitions were
<br>accounted for as purchases. Both PrimeLink and TechniLink are start-up
companies with no material
<br>operating activity and therefore no pro forma statements of operations
were provided for 1995.
<p>The acquisitions of these companies occurred in connection with the
signing of the license
<br>agreements discussed in Note 8. The Company issued a total of 700,000
shares of common stock and
<br>assumed a loan of $400,000 to acquire the licenses and the Corporations.
The only major asset
<br>acquired from PrimeLink and
<br>TechniLink was the license and technology. The stock issued was
<p>14
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<p>Organization (continued)
<p>valued at $1,750,000, the fair market value of common stock issued,
and is included in licenses and
<br>technology on the balance sheet.
<p>On July 22, 1998, the Company acquired the remaining 20% interest in
TechniLink, Inc. for 50,000
<br>shares of the Company's common stock valued at $59,247.
<p>Basis of presentation and going concern uncertainty
<p>The accompanying consolidated financial statements include the transactions
of Conectisys
<br>Corporation, its wholly-owned subsidiary TechniLink, Inc., and its
80% owned subsidiary PrimeLink,
<br>Inc. All material intercompany transactions and balances have been
eliminated in the accompanying
<br>consolidated financial statements. Certain prior year amounts in the
accompanying consolidated
<br>financial statements have been reclassified to conform to the current
period's presentation.
<p>The Company returned to the development stage in accordance with SFAS
No. 7 on December 1, 1990 and
<br>during the fiscal year ended November 30, 1995. The Company has completed
two mergers and is in the
<br>process of developing its technology and product lines.
<p>As of September 30, 1999, the Company had a deficiency in working capital
of approximately
<br>$2,070,000, and had incurred continual operating losses since its return
to the development stage
<br>($1.8 million in 1996, $2.3 million in 1997, $4.2 million in 1998,
and $1.0 million in 1999 (ten
<br>months)), which raise substantial doubt about the Company's ability
to continue as a going concern.
<p>Management's plans for correcting these deficiencies include the future
sales of their newly
<br>licensed products and to raise capital through the issuance of common
stock to assist in providing
<br>the Company with the liquidity necessary to retire the outstanding
debt and meet operating expenses
<br>(See Note 13(b)). In the longer term, the Company plans to achieve
profitability through the
<br>operations of the subsidiaries. The accompanying consolidated financial
statements do not include
<br>any adjustments relating to the recoverability and classification of
the recorded asset amounts or
<br>the amounts and classification of liabilities that might be necessary
should the Company be unable
<br>to continue in existence.
<br>15
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Use of estimates
<p>The preparation of the Company's consolidated financial statements in
conformity with generally
<br>accepted accounting principles necessarily requires management to make
estimates and assumptions
<br>that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and
<br>liabilities at the date of the consolidated financial statements and
the reported amounts of
<br>revenues and expenses during the reporting period. Actual results could
differ from those
<br>estimates.
<p>Fair value of financial instruments
<p>Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial
<br>Instruments", requires that the Company disclose estimated fair values
for its financial
<br>instruments. The following summary presents a description of the methodologies
and assumptions used
<br>to determine such amounts. Fair value estimates are made at a specific
point in time and are based
<br>on relevant market information and information about the financial
instrument; they are subjective
<br>in nature and involve uncertainties, matters of judgment and, therefore,
cannot be determined with
<br>precision. These estimates do not reflect any premium or discount that
could result from offering
<br>for sale at one time the Company's entire holdings of a particular
instrument. Changes in
<br>assumptions could significantly affect the estimates.
<p>Since the fair value is estimated at September 30, 1999, the amounts
that will actually be realized
<br>or paid at settlement of the instruments could be significantly different.
<p>The carrying amount of cash and cash equivalents is assumed to be the
fair value because of the
<br>liquidity of these instruments. Accounts payable, accrued compensation,
other current liabilities,
<br>and notes payable approximate fair value because of the short maturity
of these instruments.
<p>Cash and cash equivalents
<p>Cash and cash equivalents include cash on hand and on deposit and highly
liquid debt instruments
<br>with original maturities of three months or less.
<br> 
<p>16
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Property and equipment
<p>Property and equipment are stated at cost. Depreciation is computed
on property and equipment using
<br>the straight-line method over the expected useful lives of the assets,
which are generally five
<br>years for vehicles and office equipment and seven years for furniture
and fixtures.
<p>Licensing agreements
<p>The costs of acquiring license rights are capitalized and amortized
over the shorter of the
<br>estimated useful life of the license or the term of the license agreement.
The licenses are being
<br>amortized over a period of five years. During the year ended November
30, 1998, the Company
<br>acquired additional license rights in the amount of $421,478 from TechniLink.
Although the license
<br>remains viable, the Company currently lacks the resources to develop
and market it. Accordingly,
<br>during the ten month period ended September 30, 1999, the Company accelerated
amortization on this
<br>asset by writing it down to its net realizable value of $40,000, incurring
a charge of $283,133.
<br>The balance of the carrying value of older licenses and deferred technology
was written-off during
<br>the year ended November 30, 1998, as a consequence of persistent competitive
pressure. The expense
<br>incurred was $632,257.
<p>Technology
<p>Deferred technology costs include capitalized product development
<br>and product improvement costs incurred after achieving technological
feasibility and are amortized
<br>over a period of five years.
<p>Impairment of long-lived assets
<p>Statement of Financial Accounting Standards No. 121, "Accounting
<br>for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of" (SFAS No. 121)
<br>issued by the Financial Accounting Standards Board (FASB) is effective
for financial
<br>statements for fiscal years beginning after December 15, 1995. The
standard establishes new
<br>guidelines regarding when impairment losses on long-lived assets, which
include plant and equipment,
<br> 
<p>17
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Impairment of long-lived assets (continued)
<p>certain identifiable intangible assets and goodwill, should be recognized
and how impairment losses
<br>should be measured.
<p>Accounting for stock-based compensation
<p>Statement of Financial Accounting Standards No. 123, "Accounting
<br>for Stock-based Compensation" (SFAS No. 123) establishes a fair value
method of accounting for
<br>stock-based compensation plans and for transactions in which an entity
acquires goods or services
<br>from non-employees in exchange for equity instruments. The Company
adopted this accounting standard
<br>on January 1, 1996. SFAS No. 123 also encourages, but does not require,
companies to record
<br>compensation cost for stock-based employee compensation. The Company
has chosen to account for
<br>stock-based compensation utilizing the intrinsic value method prescribed
in Accounting Principles
<br>Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
compensation cost
<br>for stock options is measured as the excess, if any, of the fair market
price of the Company's stock
<br>at the date of grant over the amount an employee must pay to acquire
the stock. Also, in accordance
<br>with SFAS No. 123, the Company has provided footnote disclosures with
respect to stock-based
<br>employee compensation. The cost of stock-based compensation is measured
at the grant date on the
<br>value of the award, and this cost is then recognized as compensation
expense over the service
<br>period. The value of the stock-based award is determined using a pricing
model whereby compensation
<br>cost is the excess of the fair market value of the stock as determined
by the model at the grant
<br>date or other measurement date over the amount an employee must pay
to acquire the stock.
<p>Stock issued for non-cash consideration
<p>Shares of the Company's no par value common stock issued in
<br>exchange for goods or services are valued at the cost of the goods
or services received or at the
<br>market value of the shares issued, depending on the ability to estimate
the value of the goods or
<br>services received.
<br> 
<br> 
<br> 
<br> 
<p>18
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Income taxes
<p>The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 109, which requires
<br>the Company to recognize deferred tax assets and liabilities for the
expected future tax
<br>consequences of events that have been recognized in the Company's consolidated
financial statements
<br>or tax returns. Under this method, deferred tax liabilities and assets
are determined based on the
<br>difference between the financial statement carrying amounts and tax
basis of assets using the
<br>enacted rates in effect in the years in which the differences are expected
to reverse.
<p>Net loss per common share  diluted
<p>Net loss per common share  diluted is based on the weighted
<br>average number of common and common equivalent shares outstanding for
the periods presented. Common
<br>equivalent shares representing the common shares that would be issued
on exercise of convertible
<br>securities and outstanding stock options and warrants reduced by the
number of shares which could be
<br>purchased from the related exercise proceeds are not included since
their effect would be anti-
<br>dilutive.
<p>New accounting pronouncements
<p>Statement of Financial Accounting Standard No. 130, "Reporting
<br>Comprehensive Income," (SFAS No. 130) issued by the FASB is effective
for financial statements with
<br>fiscal years beginning after December 15, 1997. Earlier adoption is
permitted. SFAS No. 130
<br>establishes standards for reporting and display of comprehensive income
and its components in a full
<br>set of general purpose financial statements. The Company does not expect
adoption of SFAS No. 130
<br>to have a material effect on its financial position or its results
of operations.
<p>Statement of Financial Accounting Standard No. 131, "Disclosure About
Segments of an Enterprise and
<br>Related Information," (SFAS No. 131) issued by the FASB is effective
for financial statements with
<br>fiscal years beginning after December 15, 1997. Earlier application
is permitted. SFAS No. 131
<br>requires that public companies report certain information about operating
segments, products,
<br>services and geographical areas in which they operate
<br> 
<p>19
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>New accounting pronouncements (continued)
<p>and their major customers. The Company does not expect adoption of SFAS
No. 131 to have an effect
<br>on its financial position or results of operations; however, additional
disclosures may be made
<br>relating to the above items.
<br> 
<p>NOTE 2. RELATED PARTY TRANSACTIONS
<p>The Company leases office space from S.W. Carver Corporation, a company
owned by a major shareholder
<br>of the Company. The lease is for a period of twelve months, renewable
annually in April at the
<br>option of the lessee. Effective April, 1998, the monthly rent was increased
from $2,000 to $2,500.
<br>Lease expense for the ten month period ended September 30, 1999 and
the year ended November 30, 1998
<br>was $25,000 and $28,000, respectively.
<br> 
<p>NOTE 3. NOTES RECEIVABLE
<p>A note receivable from CIPI of $1,302,500 was deemed to be uncollectible
and was written-off in the
<br>fiscal year ended November 30, 1997, resulting in a bad debt expense
of $446,625. The Company had
<br>previously provided a cumulative allowance for doubtful accounts of
$855,875 in fiscal 1996 and
<br>1995. Interest receivable on this note was also written-off accordingly.
<p>A promissory note was received on a stock purchase agreement for 1,500,000
shares in the amount of
<br>$281,250 during the year ended November 30, 1997. An initial payment
of $99,980 was received,
<br>leaving a balance of $181,270 at year-end. The balance was collected
in full during the year ended
<br>November 30, 1998.
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>20
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 4. PROPERTY AND EQUIPMENT
<p>Property and equipment at September 30, 1999 consisted of the following:
<br> 
<br> 
<pre>Office equipment         
        $ 217,388</pre>

<pre>Furniture and fixtures        
       16,609</pre>

<pre>Vehicles          
             
      35,362</pre>

<pre>            
             
       -----------</pre>

<pre>Total cost          
             
   269,359</pre>

<pre>Accumulated depreciation        
   (174,287)</pre>

<pre>            
             
       -----------</pre>

<pre>Net book value          
           $ 95,072</pre>
             
             
             
             
           
===========
<br> 
<p>NOTE 5. DUE TO OFFICER
<p>During the ten month period ended September 30, 1999, the Company
<br>received cash advances from its president totaling $555,193. At
<br>September 30, 1999, $197,500 of these advances was exchanged for
<br>The assumption of a promissory note to S.W. Carver, due on demand
<br>(and in no event later than October 1, 2000) at an annual interest
<br>rate of 10%, and another $287,020 of these advances was exchanged
<br>for equity. Also at September 30, 1999, $62,522 in accrued
<br>compensation was transferred to the advance account, resulting in a
<br>balance of $133,195. This balance was converted into a promissory
<br>note due on demand (and in no event later than October 1, 2000) at
<br>an annual interest rate of 10%.
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>21
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 6. NOTES PAYABLE
<p>Notes payable at September 30, 1999 consisted of the following:
<br> 
<br> 
<pre>Note payable to Devon</pre>

<pre>Investment Advisors,</pre>

<pre>unsecured, due on demand,</pre>

<pre>interest payable at an</pre>

<pre>annual rate of 10% $ 241,824</pre>

<pre>Note payable to S.W. Carver, unsecured, due on demand,interest payable
at anannual rate of 10% 197,500</pre>

<pre>Note payable to Black Dog Ranch LLC, unsecured, due on demand, interest
payable at an annual rate of 18% 187,610</pre>

<pre>---------</pre>

<pre>Total notes payable         
             
    626,934</pre>

<pre>Current portion         
             
       (626,934)</pre>

<pre>---------</pre>

<pre>Long-term portion $ -</pre>

<pre>=========</pre>

<pre>The maturity of long-term debt at September 30, 1999 was as follows:</pre>

<pre>Year ended September 30, 2000       
      $ 626,934</pre>

<pre>Thereafter -</pre>

<pre>---------</pre>

<pre>Total notes payable         
            
  $ 626,934</pre>
=========
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>22
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 7. SHAREHOLDERS' EQUITY (DEFICIT)
<p>The Company is authorized to issue 50,000,000 shares of $1.00 par value
preferred stock, no
<br>liquidation preference. One million of
<br>the preferred shares are designated as Class A preferred shares which
have super voting power
<br>wherein each share receives 100 votes and has anti-dilution rights.
One million of the preferred
<br>shares are designated as Class B preferred shares which have conversion
rights wherein each share
<br>may be converted into ten shares of common stock.
<p>In December, 1997, the Company issued 4,550 shares of its common stock
in exchange for legal
<br>services valued at $2,733.
<p>In January, 1998, the Company issued 133,334 shares of its common stock
to an investor for $167,730.
<p>In February, 1998, the Company entered into a stock purchase agreement
with two subsidiaries of BVI
<br>Corporation, resulting in the purchase of 4,000,000 shares of the Company's
common stock at a
<br>subscription price of $.158625 per share, with a total value of $634,500.
<p>In April, June, and September, 1998, 500,000 shares of common stock
were issued to a creditor in
<br>exchange for debt of $129,960.
<p>In April and June, 1998, 80,023 shares of the Company's common stock
were issued in exchange for
<br>consulting services valued at $132,254.
<p>In July, 1998, 450,000 shares of the Company's common stock were issued
to three investors for cash
<br>in the aggregate of $336,988.
<p>In July, 1998, the Company issued 300,000 shares of its common stock
to the minority interest
<br>shareholder of TechniLink, Inc. in exchange for the acquisition of
licensed technology valued at
<br>$421,478, and issued another 50,000 shares in exchange for the remaining
20% minority interest
<br>valued at $59,247.
<p>In July, 1998, 120,000 shares of the Company's common stock were issued
to four Company directors
<br>for director fees totaling $246,186.
<br> 
<p>23
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 7. SHAREHOLDERS' EQUITY (DEFICIT) (continued)
<p>In July, 1998, the Company issued 3,000 of its common shares in exchange
for consulting fees of
<br>$4,325.
<p>In July, 1998, the Company issued another 425,000 shares of its common
stock at approximately $1.96
<br>per share to two consultants for services valued at $832,868.
<p>In July, 1998, the Company issued 6,283 shares of its common stock in
exchange for printing services
<br>valued at $10,805.
<p>In August, 1998, the Company issued 58,637 shares of its common stock
for consulting services
<br>totaling $91,147.
<p>In September, 1998, the Company issued 1,410,000 shares of its common
stock for market consulting
<br>services totaling $880,967.
<p>In October and November, 1998, the Company issued 444,117 shares of
its common stock in exchange for
<br>consulting services of $136,979.
<p>In November, 1998, the Company issued 60,000 shares of its Class A $1.00
par value preferred stock
<br>as officer compensation.
<p>In December, 1998, the Company canceled 1,350,000 shares of its common
stock previously issued to a
<br>consultant and valued at $814,536, which were contingent on the establishment
of a $5,000,000 line
<br>of credit (never achieved).
<p>In December, 1998, the Company issued 750,000 shares of its common stock
valued at $50,000 to a
<br>consultant for services rendered.
<p>In January and September, 1999, the Company issued a total of 152,548
shares of its common stock for
<br>consultant services rendered of $45,360.
<p>During the months March, 1999 through September, 1999, the Company issued
a total of 405,800 shares
<br>of its common stock valued at $79,537 in a private placement.
<p>In September, 1999, the Company issued 100,000 shares of its common
stock for consultant fees
<br>rendered of $84,644.
<p>24
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 7. SHAREHOLDERS' EQUITY (DEFICIT) (continued)
<p>In September, 1999, the Company issued 960,321 shares of its common
stock to repay related party
<br>debt of $197,500.
<p>In September, 1999, the Company issued a total of 47,481 shares of its
common stock valued at
<br>$15,957 as hiring bonuses for two employees.
<p>In September, 1999, the Company issued 260,000 shares of its common
stock to its president as
<br>compensation for director fees of $203,493 and also issued him 39,520
of its Class A $1.00 par value
<br>preferred stock to partially repay debt.
<p>In September, 1999, the Company issued options to purchase 500,000 shares
each (a total of
<br>1,000,000) of its Class B convertible preferred stock at a price of
$5.00 per share in exchange for
<br>debt reduction of $50,000 each (a total of $100,000) to a note holder
and the Company's president.
<p>In September, 1999, the Company issued options to purchase 600,000 shares
of the Company's common
<br>stock (500,000 options to its president and 100,000 options to an employee)
valued at $150,000.
<br> 
<p>NOTE 8. INCOME TAXES
<p>Deferred income taxes consisted of the following at September 30, 1999:
<br> 
<p>Deferred tax asset, benefit
<br>of net operating loss
<br>carryforward $ 5,500,000
<br>Deferred tax liability -
<br>Valuation allowance (5,500,000)
<br>-----------
<br>Net deferred taxes $ -
<br>===========
<p>The valuation allowance offsets the net deferred tax asset, since it
is more likely than not that it
<br>would not be recovered.
<br> 
<p>25
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 9. COMMITMENTS AND CONTINGENCIES
<p>Employment agreements
<p>The Company has entered into six employment agreements with key
<br>Individuals, the terms of the agreements are as follows:
<p>1) The President and CEO of PrimeLink entered into an agreement dated
September 15, 1995 for a
<br>period of three years. This agreement, along with his royalty agreement,
were mutually
<br>terminated. The separation agreement, as of October 31, 1997, called
for a settlement of
<br>$12,000 to be paid $1,000 monthly for the following twelve months.
As of September 30,
<br>1999, $4,000 remained unpaid.
<p>2) The President and CEO of TechniLink entered into an agreement dated
September 15, 1995 for a
<br>period of three years. He is entitled to receive a base salary of $90,000
per year and an
<br>annual bonus equal to 15% of the net profits before taxes earned by
TechniLink, Inc. He is
<br>also granted an option to purchase up to 250,000 shares of the Company's
restricted common
<br>stock at a price equal to 50% of the average market value of the stock
on the date of
<br>purchase. In December, 1998, he resigned from the Company.
<p>3) The President and CEO of the Company entered into an agreement dated
October 2, 1995 (which
<br>was amended September 1, 1997 and September 1, 1999) for a period of
five years, and he is
<br>entitled to receive a base salary of $160,000 per year. The employee
shall further receive
<br>a bonus, paid at year-end, equal to 50% of the employee's salary, for
continued employment.
<br>The staying bonus will be compensated for with the Company's restricted
common stock. He is
<br>also granted an option to purchase up to 500,000 shares of the Company's
restricted common
<br>stock at a price equal to 50% of the average market value at the date
of purchase.
<p>4) The Chief Financial Officer of the Company entered into an agreement
dated October 2, 1995
<br>(which was amended September 1, 1997) for a period of three years,
and he is entitled to
<br>receive a base salary of $80,000 per year and an annual bonus
<br>of 2% of the Company's pretax income. The employee shall
<br>further receive a bonus, paid at year-end, equal to 50% of
<p>26
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Employment agreements (continued)
<p>4) Chief Financial Officer (continued)
<p>the employee's salary, for continued employment. The staying bonus shall
be compensated for
<br>with the Company's restricted common stock. He is also granted an option
to purchase up to
<br>500,000 shares of the Company's restricted common stock at a price
equal to 50% of the
<br>average market value at the date of purchase. Effective February, 1999,
he resigned from
<br>the Company.
<p>5) The Secretary and Treasurer of the Company entered into an
<br>Agreement dated October 2, 1995 (which was amended September 1, 1997
and September 1, 1999)
<br>for a period of three years, and she is entitled to receive a base
salary of $80,000 per
<br>year. The employee shall further receive a bonus, paid at year-end,
equal to 50% of the
<br>employee's salary, for continued employment. The staying bonus shall
be compensated for
<br>with the Company's restricted common stock. She is also granted an
option to purchase up to
<br>500,000 shares of the Company's restricted common stock at a price
equal to 50% of the
<br>average market value at the date of purchase.
<p>6) The Chief Technical Officer of the Company entered into an Agreement
dated August 1, 1998
<br>for an initial term of three years, and he is entitled to receive a
base salary of $150,000
<br>per year, with a minimum of $90,000 to be paid annually in cash and
the balance paid (at the
<br>option of the Company) in cash or restricted common stock under rule
144. The employee
<br>shall receive a hire-on bonus of $75,000 worth of the Company's restricted
common stock
<br>under rule 144, at one-half market price. The employee shall further
receive performance
<br>bonuses (paid in restricted common stock, as above) upon successful
completion of specific
<br>milestones pertaining to the implementation and deployment of certain
software (up to
<br>$862,500). If substantially all performance milestones are met, he
is also granted an
<br>option to purchase up to 500,000 shares of the Company's restricted
common stock at a price
<br>equal to 60% of the average market value at the date of purchase.
<br> 
<br> 
<p>27
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>License agreements
<p>The Company has entered into license agreements with the Presidents
of both PrimeLink and
<br>TechniLink. The license agreements were entered into on September 20,
1995, in connection with the
<br>acquisition of PrimeLink and TechniLink (see Note 1 above), and are
for a period of five years. As
<br>consideration for these license agreements, the Company issued each
licensee 250,000 shares of its
<br>restricted common stock and will pay each licensee a royalty of 5%
of net sales of the applicable
<br>product. In addition, in the event of the sale or merger of TechniLink
or PrimeLink, a royalty sum
<br>of 20% of the sales price of the license shall be paid to the licensee;
the sales price shall not be
<br>less than $1,500,000. The licenses were valued at the fair market value
of the stock issued to
<br>obtain the licenses. In 1997, there was a separation agreement between
the President of PrimeLink
<br>and the Company, whereby the President of PrimeLink agreed to forfeit
royalty rights for a $12,000
<br>settlement.
<p>Litigation
<p>There have been three recent legal proceedings in which the Company
has been a party:
<p>The first case, Securities and Exchange Commission (the "Plaintiff")
vs. Andrew S. Pitt, Conectisys
<br>Corp., Devon Investments Advisors, Inc., B&M Capital Corp., Mike
Aaman, and
<br>Smith Benton & Hughes, Inc. (Defendants) Civil Case # 96-4164.
The case alleges that a fraudulent
<br>scheme was orchestrated and
<br>directed by the defendants to engage in the sale and distribution of
unregistered shares of
<br>Conectisys by creating the appearance of an active trading market for
the stock of Conectisys and
<br>artificially inflating the price of its shares. In the suit, the SEC
sought permanent injunctions
<br>from violating securities laws. The SEC did not seek any civil penalties
from the Company. The
<br>courts, having conducted a trial of this matter without jury and taken
it under submission, found
<br>for the plaintiff as follows: against Conectisys on the claim that
the defendant violated section
<br>5(a), 5(c), and 17(a). Conectisys was not found to have violated section
10(b), 10(b-5), or 15(c).
<br>The Company was subsequently ordered to disgorge profits totaling $175,000.
On March 5, 1999, the
<br>Company entered into an Amended Final Judgment of Permanent Injunctive
Relief with the Securities
<br>and Exchange
<p>28
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>Litigation (continued)
<p>Commission ("SEC"). The Company and the SEC agreed on a settlement in
which the Company would
<br>dismiss its then pending appeal and take a permanent injunction that
it would not in the future
<br>violate sections 5(a), 5(c), 17(a), 10(b), 10(b-5), or 15(c); in return
the SEC would not demand the
<br>previously ordered disgorgement of $175,000.
<p>The second case was brought by Clamar Capital Corp. (the "Plaintiff")
against Smith Benton & Hughes;
<br>Michael Zaman; Claudia Zaman; Andrew Pitt and Conectisys Corp. (collectively
the "Defendants"). The
<br>case was brought before the District Court of Arapahoe, State of Colorado,
Case # 97-CV-1442,
<br>Division 3. The Plaintiff did not specify an amount of damages that
it sought from the Defendants.
<br>On March 26, 1999, the District Court of Arapahoe, State of Colorado,
dismissed the civil case
<br>against Conectisys Corp. brought by Clamar Capital Corp.
<p>The third case was brought by Southern Arizona Graphic Associates, Inc.
(the "Plaintiff") against
<br>Conectisys Corporation (the "Defendant"). The case was brought before
the Superior Court of the
<br>State of Arizona, County of Pima, Case # 333852. The claim was for
goods, printing services, and
<br>funds advanced by the Plaintiff. On December 8, 1999, the Company's
Board of Directors approved the
<br>issuance of 26,087 shares of the Company's common stock valued at $18,000
in full settlement of the
<br>defendant's claim. The matter was subsequently dismissed with prejudice.
<br> 
<p>NOTE 10. MAJOR CUSTOMERS
<p>The Company, as a development stage enterprise, had limited revenue
during the ten months ended
<br>September 30, 1999; the Company had sales to one customer comprising
100% of total sales. The
<br>Company did not have any revenues during the year ended November 30,
1998.
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>29
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 11. STOCK OPTIONS
<p>During the fiscal year ended September 30, 1999, the Company issued
to a note holder options to
<br>purchase 500,000 shares of the
<br>Company's Class B preferred stock at an exercise price of $5.00 per
share. As consideration, the
<br>Company reduced the debt by $50,000 and received an extension of time
to pay-off its promissory
<br>note. The Company also issued to its president options to purchase
another 500,000 shares of the
<br>Company's Class B preferred stock at an exercise price of $5.00 per
share in exchange for a
<br>reduction in debt of $50,000. Total consideration received on the above
issued options, as
<br>evidenced by debt reduction, was $100,000. These options can be exercised
between November 1, 1999
<br>and November 1, 2002.
<p>The Company's president currently owns 120,020 of the Company's Class
A Preferred Stock, and has
<br>options to purchase another 29,980 shares for $1.00 per share through
June 16, 2001.
<p>The pro forma information required by SFAS No. 123 is not included
<br>as there were no common stock options granted during the fiscal year
ended November 30, 1998, and
<br>the disclosure for the 600,000 common stock options issued during the
ten month period ended
<br>September 30, 1999 would not be materially different from the amounts
and disclosures already
<br>presented. During this period, 500,000 common stock options were issued
to the Company's president
<br>and another 100,000 common stock options were issued to an employee.
These options are all
<br>exercisable at a cost of 50% of the average market value of the Company's
stock during the prior 30
<br>days of trading before exercise, with the president's options remaining
open for a period of six
<br>years (including a three year option to renew) and the employee's options
remaining open for a
<br>period of four years (including a two year option to renew).
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<p>30
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 11. STOCK OPTIONS (continued)
<p>The Company has granted various common stock options and warrants to
employees; the options and
<br>warrants were granted at approximately the fair market value at the
date of grant and vested
<br>immediately. The common stock option activity during the fiscal years
ended September 30, 1999 and
<br>November 30, 1998 was as follows:
<pre>            
             
       Common Stock</pre>

<pre>            
             
         Options   
            
  Weighted</pre>

<pre>           
            
            
 and           
        Average</pre>

<pre>           
            
         Warrants  
            
     Price</pre>

<pre>           
            
         ---------  
            
   --------</pre>

<pre>Balance outstanding,</pre>

<pre>December 1, 1997         
        3,869,200    
           
  $ 1.42</pre>

<pre>Canceled and expired        
     (869,200)       
          $ (2.50)</pre>

<pre>---------</pre>

<pre>Balance outstanding,</pre>

<pre>November 30, 1998         
        3,000,000    
           
  $ .37</pre>

<pre>Granted          
             
      600,000      
           $ 0.54 (1)</pre>

<pre>Canceled and expired - -</pre>

<pre>--------- --------</pre>

<pre>Balance outstanding,</pre>

<pre>September 30, 1999         
        3,600,000    
          
   $ 0.40</pre>

<pre>            
             
           ========= 
            
  ==========</pre>
(1) Floating strike price
<p>The following table summarizes information about common stock options
at September 30, 1999:
<pre>            
             
    Outstanding        
          Exercisable</pre>

<pre>            
             
  Weighted    Weighted      
         Weighted</pre>

<pre>   Range of      Common  
  Average      Average    
  Common    Average</pre>

<pre>   Exercise       Stock 
     Life      Exercise 
      Stock   Exercise</pre>

<pre>    Prices      Options 
   (Months)      Price   
    Options    Price</pre>

<pre>-------------   ---------   -------  
   -------      --------- -------</pre>

<pre>$ .20 -  $.20   1,000,000     
   13     $   .20   
   1,000,000 $   .20</pre>

<pre>$ .46 -  $.46     100,000   
     47     $   .46 
       100,000 $   .46</pre>

<pre>$ .46 -  $.46   2,000,000     
   71     $   .46   
   2,000,000 $   .46</pre>

<pre>$ .55 -  $.55     500,000   
     59     $   .55 
       500,000 $   .55</pre>

<pre> </pre>

<pre>$ .20 -  $.55   3,600,000     
   53     $   .40   
   3,600,000 $   .40</pre>

<pre>            
    =========       
 ==     =======    
  ========= =======</pre>
31
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 12. YEAR 2000 ISSUE
<p>The Year 2000 readiness issue, which is common to most businesses,
<br>arises from the inability of information systems, and other time and
<br>date-sensitive products and systems, to properly recognize and
<br>process date-sensitive information or system failures. Assessments
<br>of the potential cost and effects of Year 2000 issues vary
<br>significantly among businesses, and it is extremely difficult to
<br>predict the actual impact. Recognizing this uncertainty, management
<br>is continuing to actively analyze, assess and plan for various Year
<br>2000 issues in its business.
<p>The Year 2000 issue has an impact on both information technology
<br>("IT") systems and non-IT systems, such as the Company's physical
<br>facilities including, but not limited to, security systems and
<br>utilities. Management believes that the Company's IT systems are
<br>Year 2000 ready. The Company has replaced or upgraded those systems
that have been identified as
<br>non-Year 2000 compliant. Non-IT system issues are more difficult to
identify and resolve. The
<br>Company has actively identified non-IT Year 2000 issues concerning
its products and services, as
<br>well as its physical facility locations. Management has formulated
the necessary actions to ensure
<br>minimal disruption to its business processes.
<br>The costs were immaterial (i.e., less than $5,000) to its financial
position and results of
<br>operations.
<p>The Company has completed efforts to ensure Year 2000 readiness of its
products and services. The
<br>Company's key financial and other in-house systems are already materially
compliant. The Company
<br>has also completed efforts to assess the Year 2000 readiness of its
key suppliers. The Company's
<br>direction of this effort is to ensure the adequacy of resources and
supplies to minimize any potential
<br>business interruptions.
<p>The Year 2000 issue presents a number of other risks and
<br>uncertainties that could impact the Company, such as public
<br>utilities failures, potential claims against it for damages arising
<br>from products and services that are not Year 2000 compliant, and the
<br>response ability of certain government commissions of the various
<br>jurisdictions where the Company conducts business. While the
<br>Company continues to believe the Year 2000 issues described above
<br>will not materially affect its financial position or results of
<br>operations, it remains uncertain as to what extent, if any, the
<br>Company may be impacted.
<p>32
<br>CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
<br>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<br>September 30, 1999
<br> 
<p>NOTE 13. SUBSEQUENT EVENTS
<p>(a) In December, 1999, the Company filed a Form S-8 registration statement
for the Conectisys
<br>Corporation Non-Qualified Stock and Stock Bonus Plan (the "Plan").
The purpose of the Plan
<br>is to compensate independent consultants of the Company through the
granting of non-
<br>qualified stock options (as described in Sections 83 and 421 of the
Internal Revenue Code).
<br>Shares of stock covered by stock options and stock bonuses shall consist
of 1,000,000 shares
<br>of the common stock of the Company. Unless amended by the Board in
writing, the Plan shall
<br>terminate at midnight, January 31, 2003. To date, 616,087 common shares
have been issued to
<br>consultants under the Plan. 116,087 of these shares were for past services
rendered and
<br>500,000 represented retainers on new consulting contracts.
<p>(b) Subsequent to September 30, 1999, the Company has raised additional
capital through the
<br>private placement of another 221,200 common shares of the Company for
approximately $43,000
<br>(through November 23, 1999). In conjunction with these and previous
issuances,
<br>approximately 506,500 stock warrants to purchase shares of the Company's
common stock at an
<br>exercise price of $2.00 per share will be issued to certain shareholders,
exercisable
<br>between November 1, 1999 and November 1, 2002.
<p>(c) In November, 1999, the Company issued options to purchase 2,000,000
shares of the Company's
<br>common stock to its Chief Technical Officer, pursuant to his employment
agreement. The
<br>options are exercisable through December 31, 2002 at an exercise price
of $.50 per share;
<br>however, they will not vest until completion of a working HNet pilot
of 30 units or more.
<p>(d) In November, 1999, the Company's Board of Directors awarded the
Company's President and
<br>Chief Executive Officer options to acquire 500,000 shares of the Company's
common stock at
<br>an exercise price of $.15 per share through December 31, 2002. These
options were awarded
<br>for past service to the Company and were valued at $125,000, which
was accrued as additional
<br>compensation at the September 30, 1999 balance sheet date.
<br> 
<br> 
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