<pre>

                          UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C. 20549

                           FORM 10-KSB

(Mark One)
|X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
       For the fiscal year ended September 30, 2007     OR

| |  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

 For the transition period from __________ to ___________

                   Commission File Number 33-3560 D
                         ________________________

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

                       Colorado                       84-1017107
           (State or Other Jurisdiction of           (I.R.S. Employer
             Incorporation or Organization)           Identification No.)

          25115 Avenue Stanford, Suite 320, Valencia, California 91355
                  (Address of Principal Executive Offices)

                            (661) 295-6763
               (Issuer's Telephone Number, Including Area Code)

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

     Securities registered under Section 12(g) of the Exchange Act:
                       Common Stock, no par value
                            (Title of Class)
                         _____________________
Check whether issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.  |   |

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

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES |X|  NO |   |

The registrant's revenues for the year ended September 30, 2007 were $6,922.

As of January 14, 2008, the aggregate market value of the common equity held by
non-affiliates of the registrant was approximately $2.5 million. As of that
date, the number of shares outstanding of the registrant's only class of common
stock was 26,286,672,599.

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

DOCUMENTS INCORPORATED BY REFERENCE: None.

--------------------------------------------------------------------------------
                                      PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Company Overview

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

        Since 1995, we have been engaged in the development of a low-cost
automatic meter reading, or AMR, solution. We have developed a low-cost AMR
solution that includes a proprietary system employing specialized hardware and
software that will allow for residential and commercial applications. Our
proprietary system is called H-NET(TM), which is a trademark of ConectiSys. Our
H-NET(TM) system is currently comprised of two principal components: our H-
NET(TM) 5.0 product, which itself is comprised of circuitry and a radio
transmitter, and our H-NET(TM) BaseStation. Our H-NET(TM) 5.0 product is a
component that is designed to be part of a digital energy meter to read and
wirelessly transmit meter data to our H-NET(TM) BaseStation. Our H-NET(TM)
BaseStation is designed to receive and relay the meter data over standard land
lines and cellular connections to a central location where the data is compiled
and utilized.

        We are continuing the development of our H-NET(TM) system. Our recent
development efforts have focused on redesigning our H-NET(TM) circuitry from a
three-board circuit to a one-board circuit. This redesign was completed in
November 2005 and testing of our new H-NET(TM) circuitry has begun. We
redesigned our H-NET(TM) circuitry to respond to redesigns of meter products by
meter manufacturers. These redesigns by meter manufacturers were directed at
reducing costs and resulted in reduced available space for integration of
circuitry from third-party technology providers such as ConectiSys.

        In August 2004, we submitted to the FCC our H-NET(TM) 5.0 product for
approval for commercialization and sale and received FCC certification for this
product in December 2004. In December 2004, we submitted to the FCC our H-
NET(TM) BaseStation for approval for commercialization and sale and received FCC
certification for this product in March 2005. Concurrently with the development
of our H-NET(TM) BaseStation, which is a single-channel design, we have been
developing an eight-channel H- NET(TM) BaseStation.  Our eight-channel H-NET(TM)
BaseStation is designed to communicate with up to 7,500 H-NET(TM) 5.0 product
installations per network due to its multiple channel design and to deliver
real-time energy consumption data at low-cost. In July 2005, we submitted to the
FCC our eight-channel H-NET(TM) BaseStation product for approval for
commercialization and sale and received FCC certification for this product in
January 2006.

        We have not yet sold any H-NET(TM) systems. However, we are actively
pursuing sales of our H-NET(TM) systems with meter manufacturers and other
companies in the energy industry. We have a history of only inconsequential
revenues and have incurred significant losses since the beginning of the
development of our H-NET(TM) system. We have significant accumulated and working
capital deficits. As a result of our financial condition, our independent
auditors have issued a report questioning our ability to continue as a going
concern.

        We have recently completed and successfully demonstrated a significant
update of our H-NET(TM) system's hardware and software technologies in
cooperation with one of the major electric meter manufacturers.  We believe that
this update will provide us with a product that has incorporated more advanced
wireless technologies with a more market- competitive and cost-effective design
and greater reliability.  We are also pursuing different applications of our H-
NET(TM) technologies that may be synergistic with our current marketing plan in
markets in which we intend to compete.

<page>2

Industry Overview

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

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

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

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

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

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

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

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

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

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

        We estimate that there are approximately 140 million electrical energy
meters in the United States, approximately 17 million of which are located in
California.  Our goal is to achieve sufficient proliferation of our H-NET(TM)
system so that it is installed in one percent of the electrical energy meters in
the United States or ten percent of the electrical energy meters in the State of
California.  Initially, we intend our principal efforts to be focused on the
deployment of our H- NET(TM) system in the State of California.

Our Strategy

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

<page>3

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

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

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

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

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

Our H-NET(TM) System

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

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

<page>4

transmissions, which we believe makes it ideal for metropolitan and other
crowded areas where a large amount of data would normally be collected.

 H-NET(TM)-Equipped Meters

        Our H-NET(TM) system is comprised of the following two principal
components that operate together to provide what we believe to be a
comprehensive, low-cost AMR solution:  our H-NET(TM) 5.0 product, which itself
is comprised of circuitry and a radio transmitter, and our H- NET(TM)
BaseStation. In addition to these two principal components, our H-NET(TM) system
utilizes a network operating center. The first component of our H-NET(TM) system
is an electronic meter put into service at a residence that is equipped with a
circuit board that contains a memory module, microprocessor and a two-way radio
transmission and receiver device that operates in the ISM 900 MHz radio
frequency band. This circuit board may also be retrofitted to some existing
meters. We refer to each energy meter equipped with this circuit board and that
is connected to our AMR network as an H-NET(TM)- equipped meter or a "node."
With the installation of each H-NET(TM)- equipped meter, the existing installed
H-NET(TM)-equipped meters self- configure by transmitting configuration data to
other H-NET(TM)-equipped meters and receiving configuration data from other H-
NET(TM)-equipped meters.

 Base Stations

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

 Network Operating Center

        We plan to use a computer center located at our main office facility to
store the information gathered from the H-NET(TM)-equipped meters. We call this
computer center our network operating center.  We have designed our network
operating center to support up to 250,000 H- NET(TM)-equipped meters. We
anticipate that our network operating center will be the central control center
for our entire AMR network and will operate in a large geographic area. We plan
to use the network operating center to archive all data for future use and as a
protective measure against data loss or corruption. After the data archival
process, we expect that the network operating center will handle uploading of
the data to the Internet where it can be accessed by users directly and also
downloaded through an interpreter software program into a utility company's or
energy service provider's database. We anticipate that our network operating
center will be administered by our wholly-owned subsidiary, eEnergyServices.com,
Inc.

 The H-NET(TM) Network

        The H-NET(TM) network, once deployed, will be comprised of our network
operating center and local networks, which in turn are each comprised of a base
station and H-NET(TM)-equipped meters. Each H-NET(TM)-equipped meter can

<page>5

communicate with other H-NET(TM)-equipped meters that are up to a distance of
approximately one-quarter mile away. We plan to install a base station for every
H-NET(TM)-equipped meter area.  Our base stations are designed to receive data
transmissions from up to 7,500 H- NET(TM)-equipped meters. We have designed our
system so that a base station can transmit the accumulated data it has received
from the H- NET(TM)-equipped meters in its local network by telephone every
fifteen minutes by using its modem to communicate with our network operating
center. Once the data from the H-NET(TM)-equipped meters arrives from the base
stations at the network operating center, the data can be assembled into various
formats for billing customers as well as for management of energy purchasing and
energy conservation programs.

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

        o       it can consist of a maximum of 7,500 H-NET(TM)-equipped meters;

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

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

        In addition to the limitations described above, our H-NET(TM)-equipped
meters transmit data using the ISM 900 MHz radio frequency band, which is an
unlicensed frequency band. Because this frequency band is regulated, the H-
NET(TM) system requires FCC approval for compliance and sales. In August 2004,
we submitted to the FCC our H-NET(TM) 5.0 product for approval for
commercialization and sale and received FCC certification for this product in
December 2004. In December 2004, we submitted to the FCC our H-NET(TM)
BaseStation for approval for commercialization and sale and received FCC
certification for this product in March 2005. In July 2005, we submitted to the
FCC our eight- channel H-NET(TM) BaseStation product for approval for
commercialization and sale and received FCC certification for this product in
January 2006.

 H-NET(TM) Services

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

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

        Our H-NET(TM) system has been designed so that an energy service
provider can determine exactly how much electric power a metropolitan area, a
neighborhood, or even an individual residence is using. Energy users who have H-
NET(TM)-equipped meters will have the ability to check their energy consumption

<page>6

and billing rates in near real-time by obtaining this information over the
Internet, which we believe will promote energy conservation.

H-NET(TM) Product Development and Pilot Programs

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

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

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

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

        Beginning in 2000, we successfully launched and completed H-NET(TM)
demonstration programs at various locations in Southern California. In 2004, we
began a similar program in Los Angeles County, California at various sites in
the Southern California Edison service territory. Our H-NET(TM) meters for this
program were installed by Southern California Edison in May 2004 and the program
recorded and continues to record real-time meter data seamlessly and error-free.
We plan to expand this demonstration program during 2008 and expect that it will
continue to grow with additional commercial and residential clients.

        We are in the process of evaluating meter manufacturers as potential
business partners for the installation of the H-NET(TM) system into their
meters.

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

The H-NET(TM) Wireless Network Vision

        We have designed and will continue to design our H-NET(TM) system to
deliver a comprehensive and robust AMR solution that enables the realization of
substantial efficiencies in the remote meter reading and centralized data

<page>7

collection contexts and that provides numerous features and services. In
addition to its many other planned features and services, we are designing our
H-NET(TM) system to:

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

        o       allow the end-user to access an information link on the Internet
                taking him or her directly to the energy usage data transmitted
                by the H-NET(TM)-equipped meter;

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

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

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

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

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

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

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

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

<page>8

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

Government Regulation

        Our H-NET(TM) system is designed to comply with a significant number of
industry standards and regulations, some of which are evolving as new
technologies are deployed. In the United States, our H-NET(TM) system must
comply with various regulations defined by the FCC and Underwriters
Laboratories, or other nationally-recognized test laboratories, as well as
industry standards.

        The regulatory approval process can be time-consuming and can require
the expenditure of substantial resources. The failure of our H-NET(TM) system to
comply, or delays in compliance, with the various existing and evolving
standards could negatively impact our ability to sell or license our H-NET(TM)
system. Government regulations regarding the manufacture, sale and
implementation of products and systems similar to our H-NET(TM) system and other
data communications devices are subject to future change. We cannot predict what
impact, if any, such changes may have upon our business.

        In August 2004, we submitted to the FCC our H-NET(TM) 5.0 product for
approval for commercialization and sale and received FCC certification for this
product in December 2004. In December 2004, we submitted to the FCC our H-
NET(TM) BaseStation for approval for commercialization and sale and received FCC
certification for this product in March 2005. In July 2005, we submitted to the
FCC our eight-channel H-NET(TM) BaseStation product for approval for
commercialization and sale and received FCC certification for this product in
January 2006.

        We do not anticipate that any government regulations will hamper our
efforts to deploy our H-NET(TM) system. Rather, the restructuring of the energy
market in the United States has required the reading of energy meters much more
frequently than the current practice of once a month, thus making the physical
meter reading techniques currently in use inadequate. Our H-NET(TM) system is
designed to meet various government regulations mandating frequent meter
readings and we are attempting to position ourselves so that we will be a
beneficiary of these mandates.

Operations

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

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

Anticipated Revenues and Marketing

        Our H-NET(TM) system is designed to be a comprehensive, cost-effective
AMR solution and an alternative to other AMR technologies and physical reading
of meters. Our H-NET(TM) system is capable of providing meter data every fifteen
minutes, twenty-four hours a day and nearly 3,000 times per month. We estimate

<page>9

that physical readings of a meter cost approximately $1.00 per reading. Our H-
NET(TM) system is designed to meet the relatively low cost of physical meter
reading while providing nearly 3,000 times more readings per month. We believe
that the base cost to operate a fully-deployed H-NET(TM) system is approximately
$.20 per meter per month, or approximately $.0000667 per reading.

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

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

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

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

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

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

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

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

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

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

<page>10

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

Competition

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

        CellNet Data Systems    CellNet provides fixed-network wireless AMR
                                systems and has installed systems in various
                                cities and areas throughout North America.
                                CellNet has technology alliances with major
                                energy meter manufacturers and is a subsidiary
                                of Schlumberger.

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

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

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

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

Customers

        We do not currently have revenue-generating customers. We have not yet
sold any H-NET(TM) systems. However, we are actively pursuing sales of our H-
NET(TM) systems with meter manufacturers and other companies in the energy
industry. We anticipate that once we commercially produce and install our H-
NET(TM) system, our customers will include energy meter manufacturers, energy
service providers, utility companies and end-users of energy.

<page>11

Intellectual Property

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

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

Employees

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

ITEM 2. DESCRIPTION OF PROPERTY.

        Our principal center of operations is located at 25115 Avenue Stanford,
Suite 320, Valencia, California 91355.  This 1,100 square foot space is leased
for approximately $2,500 per month. We believe that our facilities are adequate
for our needs for the near future.

ITEM 3. LEGAL PROCEEDINGS.

        We are not a party to any material pending legal proceedings. We are
subject to legal proceedings, claims and litigation arising in the ordinary
course of business. While the amounts claimed may be substantial, the ultimate
liability cannot presently be determined because of considerable uncertainties
that exist. Therefore, it is possible the outcome of such legal proceedings,
claims and litigation could have a material effect on quarterly or annual
operating results or cash flows when resolved in a future period. However, based
on facts currently available, management believes such matters will not have a
material adverse effect on our financial position, results of operations or cash
flows.

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

        None.

<page>12

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL
        BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

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

                                                      Price Range
                                                      -----------
                                                    High          Low
                                                  --------      -------
        Year Ended September 30, 2007:

        First Quarter (October 1 - December 31)   $0.0005       $0.0002
        Second Quarter (January 1 - March 30)      0.0003        0.0001
        Third Quarter (April 1 - June 30)          0.0002        0.0001
        Fourth Quarter (July 1 - September 30)     0.0001        0.0001*

        Year Ended September 30, 2006:
        First Quarter                             $0.0003       $0.0002
        Second Quarter                             0.0020        0.0001
        Third Quarter                              0.0014        0.0004
        Fourth Quarter                             0.0005        0.0003
__________
*       Indicates lowest reported closing bid price during the period; however,
        on numerous days during the period, there was no closing bid.

Holders

        As of January 14, 2008, we had 26,286,672,599 shares of common stock
outstanding and held of record by approximately 700 shareholders, and the high
and low sale prices of a share of our common stock on the OTC Bulletin Board on
that date were $.0001 and $.0001, respectively. Within the holders of
record of our common stock are depositories such as Cede & Co. that hold shares
of stock for brokerage firms which, in turn, hold shares of stock for beneficial
owners.

Dividends

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

<page>13

Recent Sales of Unregistered Securities

        In July 2007, we issued an aggregate of 1,690,186,150 shares of common
stock to four accredited investors upon conversion of an aggregate of $83,640 in
principal and certain related interest on our convertible debentures.

        In August 2007, we issued an aggregate of 276,390,928 shares of common
stock to four accredited investors upon conversion of an aggregate of $13,820 in
principal and certain related interest on our convertible debentures.

        Exemption from the registration provisions of the Securities Act of 1933
for the transactions described above is claimed under Section 4(2) of the
Securities Act of 1933, among others, on the basis that such transactions did
not involve any public offering and the purchasers were sophisticated with
access to the kind of information registration would provide.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

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

Overview

        Since 1995, we have been engaged in the development of a low-cost
automatic meter reading, or AMR, solution. We have developed a low-cost AMR
solution that includes a proprietary system employing specialized hardware and
software that will allow for residential and commercial applications. Our
proprietary system is called H-NET(TM), which is a trademark of ConectiSys. Our
H-NET(TM) system is currently comprised of two principal components: our H-
NET(TM) 5.0 product, which itself is comprised of circuitry and a radio
transmitter, and our H-NET(TM) BaseStation. Our H-NET(TM) 5.0 product is a
component that is designed to be part of a digital energy meter to read and
wirelessly transmit meter data to our H-NET(TM) BaseStation. Our H-NET(TM)
BaseStation is designed to receive and relay the meter data over standard phone
lines to a central location where the data is compiled and utilized.

        We are continuing the development of our H-NET(TM) system. Our recent
development efforts have focused on redesigning our H-NET(TM) circuitry from a
three-board circuit to a two-board circuit. This redesign was completed in
November 2005 and testing of our new H-NET(TM) circuitry has begun. We
redesigned our H-NET(TM) circuitry to respond to redesigns of meter products by
meter manufacturers. These redesigns by meter manufacturers were directed at
reducing costs and resulted in reduced available space for integration of
circuitry from third-party technology providers such as ConectiSys.

        In August 2004, we submitted to the FCC our H-NET(TM) 5.0 product for
approval for commercialization and sale and received FCC certification for this
product in December 2004. In December 2004, we submitted to the FCC our H-
NET(TM) BaseStation for approval for commercialization and sale and received FCC

<page>14

certification for this product in March 2005. Concurrently with the development
of our H-NET(TM) BaseStation, which is a single-channel design, we have been
developing an eight-channel H- NET(TM) BaseStation.  Our eight-channel H-NET(TM)
BaseStation is designed to communicate with up to 7,500 H-NET(TM) 5.0 product
installations per network due to its multiple channel design and to deliver
real-time energy consumption data at low-cost. In July 2005, we submitted to the
FCC our eight-channel H-NET(TM) BaseStation product for approval for
commercialization and sale and received FCC certification for this product in
January 2006.

        We have not yet sold any H-NET(TM) systems. However, we are actively
pursuing sales of our H-NET(TM) systems with meter manufacturers and other
companies in the energy industry. We have a history of only inconsequential
revenues and have incurred significant losses since the beginning of the
development of our H-NET(TM) system. We have a significant accumulated deficit
and a deficiency in working capital. As a result of our financial condition, our
independent auditors have issued a report questioning our ability to continue as
a going concern.

        We have recently completed and successfully demonstrated a significant
update of our H-NET(TM) system's hardware and software technologies in
cooperation with one of the major electric meter manufacturers.  We believe that
this update will provide us with a product that has incorporated more advanced
wireless technologies with a more market- competitive and cost-effective design
and greater reliability.  We are also pursuing different applications of our H-
NET(TM) technologies that may be synergistic with our current marketing plan in
markets in which we intend to compete.

Critical Accounting Policies and Estimates

        We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements.

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

 Going Concern Assumption

        We have based our financial statements on the assumption of our
operations continuing as a going concern.  As a result, we continue to
depreciate fixed assets and show certain debts as long-term.  As of September
30, 2007, we had a deficiency in working capital of approximately $4.6 million
and had an accumulated deficit of approximately $39.5 million, which raise
substantial doubt about our ability to continue as a going concern.  Our plans
for correcting these deficiencies include the future sales and licensing of our
products and technologies and the raising of capital through the issuance of
common stock, which are expected to help provide us with the liquidity necessary
to meet operating expenses.  An investor group has advanced us an aggregate
amount of approximately $7.3 million.  Over the longer- term, we plan to achieve
profitability through our operations from the sale and licensing of our H-NET
(TM) automatic meter-reading system. Our consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
the recorded asset amounts or the amounts and classification of liabilities that
might be necessary should we be unable to continue our existence.

<page>15

 Stock-Based Compensation

        Our compensation of consultants and employees with our capital stock is
recorded and/or disclosed at estimated market value.  The volatile nature of the
price of our common stock causes wide disparities in certain valuations.

        Statement of Financial Accounting Standards, or SFAS, No. 123,
"Accounting for Stock-based Compensation," or SFAS No. 123, established a fair
value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non- employees
in exchange for equity instruments.  We adopted this accounting standard on
January 1, 1996. SFAS No. 123 also encourages, but does not require, companies
to record compensation cost for stock- based employee compensation.

        We adopted the provisions of SFAS No. 123 (Revised 2004), "Share-Based
Payment," or SFAS 123R, on January 1, 2006.  Accordingly, compensation costs for
all share-based awards to employees are measured based on the grant date fair
value of those awards and recognized over the period during which the employee
is required to perform service in exchange for the award (generally over the
vesting period of the award).  We have no awards with market or performance
conditions.  Excess tax benefits as defined by SFAS 123R (when applicable) will
be recognized as an addition to additional paid-in capital.  Effective January
1, 2006 and for all periods subsequent to that date, SFAS 123R supersedes our
previous accounting under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," or APB 25.  In March 2005, the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 107, or
SAB 107, relating to SFAS 123R.  We have applied the provisions of SAB 107 in
our adoption of SFAS 123R.

        We adopted SFAS 123R using the modified prospective transition method,
which provides for certain changes to the method for valuing share-based
compensation.  The valuation provisions of SFAS 123R apply to new awards and to
awards that are outstanding at the effective date and subsequently modified or
cancelled.  Estimated compensation expense for awards outstanding at the
effective date will be recognized over the remaining service period using the
compensation cost calculated for pro forma disclosure purposes under Financial
Accounting Standards Board, or FASB, Statement No. 123, "Accounting for Stock-
Based Compensation," or SFAS 123.  In accordance with the modified prospective
transition method, our consolidated financial statements for prior periods were
not restated to reflect, and do not include, the effect of SFAS 123R.

        The value of the stock-based award is determined using a pricing model
whereby compensation cost is the excess of the fair market value of the stock as
determined by the model at the grant date or other measurement date over the
amount an employee must pay to acquire the stock. Shares of our common stock
issued in exchange for goods or services are valued at the cost of the goods or
services received or at the market value of the shares issued, depending on the
ability to estimate the value of the goods or services received.

        Comparison of Results of Operations for the Fiscal Years Ended September
        30, 2007 and 2006

        We generated $6,922 in revenues for the fiscal year ended September 30,
2007 and generated no revenues for the fiscal year ended September 30, 2006.
Cost of prototypes and samples sold for fiscal 2007 was $224,772 as compared to
$211,120 for fiscal 2006, representing an increase of $13,652, or 6.5%. This
increase in cost of prototypes and samples sold was primarily due to an increase
in production of models and prototypes of our H-NET(TM) products that are used
for sales and marketing purposes.

<page>16

        General and administrative expenses for fiscal 2007 were $1,457,650 as
compared to $1,329,175 for fiscal 2006, representing an increase of $128,475, or
9.7%. This increase in general and administrative expenses was primarily due to
increased salaries.

        Interest expense for fiscal 2007 was $2,080,351 as compared to
$1,499,470 for fiscal 2006, representing an increase of $580,881, or 38.7%. This
increase in interest expense was primarily due to an increase in net borrowings
under our convertible debentures and other debt during fiscal 2007, resulting in
a corresponding increase in amortization of convertible debt discount on these
debentures.

        Net loss for fiscal 2007 was $3,766,554 as compared to $3,052,297 for
fiscal 2006, representing an increase of $714,257, or 23.4%. The increase in net
loss was primarily due to the increase in interest expense, as described above.

Liquidity and Capital Resources

        During the year ended September 30, 2007, we financed our operations
solely through private placements of securities. We are actively pursuing sales
of our H-NET(TM) systems with meter manufacturers and other companies in the
energy industry. However, we have not yet sold any H-NET(TM) systems. We have a
history of only inconsequential revenues and have incurred significant losses
since the beginning of the development of our H-NET(TM) system. We have
significant accumulated and working capital deficits. As a result of our
financial condition, our independent auditors have issued a report questioning
our ability to continue as a going concern. Our consolidated financial
statements as of September 30, 2007 and for the years ended September 30, 2007
and 2006 have been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business.

        As of September 30, 2007, we had a working capital deficit of
approximately $4.6 million and an accumulated deficit of approximately $39.5
million. As of that date, we had approximately $41,000 in cash and cash
equivalents. We had accounts payable and accrued compensation expenses of
approximately $2.3 million. We had other current liabilities, including amounts
due to officers, accrued interest and current portion of convertible debentures
of approximately $2.4 million, including debts incurred prior to the beginning
of fiscal year 2007. To the extent convertible debentures or promissory notes
that we have issued are converted into shares of common stock, we will not be
obligated to repay the converted amounts.

        Cash used in our operating activities totaled approximately $1.3 million
for the year ended September 30, 2007 and approximately $1.4 million for the
year ended September 30, 2006.  Cash provided by our investing activities
totaled approximately $414,000 for the year ended September 30, 2007, as
compared to cash used in our investing activities of approximately $511,000 for
the year ended September 30, 2006. The increase in cash provided by our
investing activities was primarily caused by the sale of short-term investments.

        Cash provided by our financing activities totaled approximately $931,000
for the year ended September 30, 2007 as compared to approximately $1.4 million
for the year ended September 30, 2006. We raised all of the cash provided by
financing activities during the year ended September 30, 2007 from the issuance
of common stock, convertible notes and warrants.

        Unpaid principal and accrued and unpaid interest on our convertible
debentures and notes becomes immediately due and payable from one to three years
from their dates of issuance, depending on the debenture or note, or earlier in
the event of a default. The events of default under the convertible debentures
and notes are similar to those customary for convertible debt securities,
including breaches of material terms, failure to pay amounts owed, delisting of

<page>17

our common stock from the OTC Bulletin Board or failure to comply with the
conditions of listing on the OTC Bulletin Board and cross-defaults on other debt
securities.

        As of January 14, 2008, we were in default under our obligations to
register for resale shares of our common stock underlying certain of our
outstanding convertible debentures and notes due to our failure to timely
register for resale a sufficient number of shares of our common stock upon
conversion of those convertible debentures and notes.  Our registration
obligations require us to register for resale 200% of all registrable
securities, which are largely comprised of the shares of common stock issuable
upon conversion or exercise of our outstanding convertible debentures, notes and
warrants.  We have historically been unable to register for resale the full
required amounts of shares of common stock due in part to limitations in our
available authorized capital.  As we have increased our authorized capital from
time to time, we have often been reluctant to utilize all or nearly all
available authorized capital to satisfy our registration obligations.  This
reluctance arises from our need to maintain available authorized capital for
other potential financing transactions that we may need to conduct to fund our
research and development and otherwise maintain sufficient capital resources to
fund our operations.  In addition, because the number of registrable securities
is calculated based on a discount to the prevailing market price of our common
stock, and market prices for our common stock have generally declined throughout
the duration of our convertible debenture and note financings, the number of
registrable securities has substantially increased.  Accordingly, although we
may have been in compliance initially, the decline in market prices for our
common stock has caused us to fall out of compliance with our registration
obligations.

        As of January 14, 2008, we were also in default under our obligations to
make interest payments under nearly all of our outstanding convertible
debentures and notes due to our lack of liquidity to fund those interest
payments.  Although we received substantial cash investments in connection with
our convertible debenture and note financing transactions, we have been
reluctant to make quarterly cash interest payments to our investors.  This
reluctance arises from our need to maintain sufficient capital resources to fund
our research and development and our operations.  However, on various occasions,
we have prepaid certain interest amounts in connection with convertible
debenture and note financing transactions.  In these instances, we were able to
at least temporarily, and on occasion fully, comply with our interest payment
obligations until the convertible debentures or notes were fully converted into
shares of our common stock.  In our most recent February 2007 and March 2006
convertible note financing transactions, we did not prepay any interest amounts
and we expect to continue indefinitely to be in default of our obligations to
make quarterly interest payments under those convertible notes as well as
numerous other convertible debentures and notes outstanding from prior financing
transactions.

        As of January 14, 2008, we owed principal and unpaid interest on our
convertible debentures and notes in an aggregate amount of approximately $3.5
million, net of approximately $103,000 of prepaid interest, all of which we
believe would be immediately due and payable upon demand by the holders of our
secured convertible debentures and notes.

        As a result of the above defaults, the holders of our secured
convertible debentures and notes are entitled to pursue their rights to
foreclose upon their security interest in all of our assets.  In the event that
the holders of our secured convertible debentures and notes foreclose upon their
security interest in all of our assets, we could lose all of our assets,
including our intellectual property and other technology associated with our H-
NET(TM) system, which would have a material and adverse effect on our business,
prospects, results of operations and financial condition. In addition, the
holders of our secured convertible debentures and notes were entitled to demand
immediate repayment of the outstanding principal amounts of the debentures and
notes and any accrued and unpaid interest. The cash required to repay such
amounts would likely have to be taken from our working capital.  Since we rely
on our working capital to sustain our day to day operations and the development

<page>18

of our H-NET(TM) system, a default on the convertible debentures or notes could
have a material and adverse effect on our business, prospects, results of
operations or financial condition.  However, as of that date, other than the
receipt of a notice of default, we were not aware of any action taken by the
holders of our secured convertible debentures and notes to pursue such rights,
and as of that date we also were not aware of any other legal or similar action
taken by those holders to enforce their rights or as a result of our defaults
under those secured convertible debentures and notes.

        We plan to register for resale with the Securities and Exchange
Commission a portion of the shares of common stock underlying the convertible
debentures and notes under which we are in default and expect that the
convertible debentures and notes ultimately will be converted into shares of our
common stock and that we therefore will not be obligated to repay the
outstanding principal and accrued and unpaid interest amounts on those
debentures and notes.
<table>

        As of January 14, 2008, we had issued the following secured convertible
debentures and notes, which provide for interest at the rate of 12% per annum,
except for the notes issued in March 2005, which provide for interest at the
rate of 8% per annum, and the notes issued in March 2006 and February 2007,
which provide for interest at the rate of 6% per annum, and warrants to purchase
common stock to various accredited inventors in connection with debenture and
note offering transactions:

                                                                                       Unexpired
                        Original          Net          Remaining     Accrued and       Warrants
                        Principal      Proceeds to      Principal       Unpaid         Issued in
Issuance Date          Amount($)(1)  ConectiSys($)(2)   Amount($)    Interest($)(3)   Offering(#)
---------------        ------------- ----------------- -----------  ----------------  -----------
<C>                      <C>        <C>               <C>           <C>              <C>
November 27, 2002     $ 200,000      $     144,000      $   -       $     -             1,000,000
March 3, 2003           150,000            100,000          -           27,720            750,000
May 12, 2003            150,000            100,000          -           36,000            750,000
November 25, 2003       100,000             76,000          -           24,000            500,000
December 3, 2003         50,000             31,000          -           12,000            250,000
December 31, 2003        50,000             44,000          -           12,000            250,000
February 18, 2004        50,000             35,000          -           12,000            250,000
March 4, 2004           250,000            203,000          -           59,048          1,250,000
April 19, 2004          250,000            165,000          -             -               750,000
June 30, 2004           625,000            452,000          -             -             1,875,000
September 9, 2004       625,000            482,000          -             -             1,875,000
March 17, 2005        1,400,000          1,148,000         825,145     200,137          2,800,000
March 8, 2006         1,270,000          1,180,000         954,989      88,863         20,320,000
February 13, 2007     1,350,000          1,240,000       1,350,000      41,836         27,000,000
                      ------------   -------------      -----------   ---------        -----------
        Total:       $6,520,000      $   5,400,000      $3,130,134    $ 513,604        59,620,000
   ________________  ============    =============      ==========    =========        ===========
        (1)     Amounts shown do not include additional convertible debentures
                issued prior to November 27, 2002 having an aggregate original
                principal amount of $750,000 that were fully converted to
                equity.

        (2)     Amounts are approximate and represent net proceeds after
                deducting expenses incurred in connection with the offering as
                well as expenses for legal fees incurred in connection with
                preparation of reports and statements filed with the Securities
                and Exchange Commission.

        (2)     Amounts are approximate and represent accrued (and unpaid)
                interest outstanding as of January 14, 2008. The total amount of
                accrued and unpaid interest does not account for approximately
                $103,000 of outstanding pre-paid interest.
</table>
<page>19

        Each of the above outstanding secured convertible debentures or notes,
except for the convertible notes issued in March 2005 and 2006 and February
2007, are due one year following their respective issuance dates.  The
convertible notes issued in March 2005 are due two years following their
issuance dates.  The convertible notes issued in March 2006 and February 2007
are due three years following their issuance dates. The conversion price of our
secured convertible debentures is the lower of 40% of the average of the three
lowest intra-day trading prices of a share of our common stock on the OTC
Bulletin Board during the twenty trading days immediately preceding the
conversion date, and either (a) $.06 for the June 2002 convertible debentures,
(b) $.01 for the November 2002, March and May 2003 convertible debentures, (c)
$.005 for the November and December 2003 and the February, March, April, June
and September 2004 convertible debentures and the March 2005 convertible notes,
or (d) $.03 for the March 2006 and February 2007 convertible notes. As of
January 14, 2008, the applicable conversion price was approximately $0.00004
per share.

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

        As indicated above, our consolidated financial statements as of
September 30, 2007 and for the years ended September 30, 2007 and 2006 have been
prepared on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. As discussed
in this report and in Note 2 to our consolidated financial statements included
in this report, we have suffered recurring losses from operations and at
September 30, 2007 had substantial net capital and working capital deficiencies.
These factors, among others, raised substantial doubt about our ability to
continue as a going concern and led our independent registered public accounting
firm to modify its unqualified report to include an explanatory paragraph
related to our ability to continue as a going concern. The consolidated
financial statements included in this document do not include any adjustments
that might result from the outcome of this uncertainty.

        We have been, and currently are, working toward identifying and
obtaining new sources of financing. Our current convertible debenture and note
investors have provided us with an aggregate of approximately $7.3 million in
financing to date. No assurances can be given that they will provide any
additional financing in the future. Our current secured convertible debenture
and note financing documents contain notice and right of first refusal
provisions and the grant of a security interest in substantially all of our
assets in favor of the convertible debenture and note investors, all of which
provisions will restrict our ability to obtain debt and/or equity financing from
any investor other than our current investors.

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

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

<page>20

Effect of Inflation

        Inflation did not have any significant effect on our operations during
the year ended September 30, 2007.  Further, inflation is not expected to have
any significant effect on our future operations.

Impact of New Accounting Pronouncements

        The FASB has established new accounting pronouncements.  We do not
expect the adoption of these pronouncements to have a material impact on our
financial position, results of operations or cash flows.

        In September 2006, the FASB issued Statement of Financial Accounting
Standards, or SFAS, No. 157, Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, or GAAP, and expands disclosures about fair value
measurements.  SFAS No. 157 applies under other accounting pronouncements that
require or permit fair value measurements.  Prior to SFAS No. 157, there were
different definitions of fair value and limited guidance for applying those
definitions in GAAP.  Moreover, that guidance was dispersed among the many
accounting pronouncements that require fair value measurements.  Differences in
that guidance created inconsistencies that added to the complexity in applying
GAAP.  The changes to current practice resulting from the application of SFAS
No. 157 relate to the definition of fair value, the methods used to measure fair
value, and the expanded disclosures about fair value measurements. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities, which permits entities to choose
to measure many financial instruments and certain other items at fair value
which are not currently required to be measured at fair value.  SFAS No. 159 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.

        In December 2007, the FASB issued SFAS No. 141R, Business Combinations,
which establishes principles and requirements for how the acquirer recognizes
and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree, goodwill
acquired in the business combination, or a gain from a bargain purchase. SFAS
No. 141R is effective for financial statements issued for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008.

        In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements, which establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for financial
statements issued for fiscal years beginning on or after December 15, 2008, and
interim periods within those fiscal years.

<page>21

Risk Factors

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

                            Risks Related to Our Business

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

        Unpaid principal and accrued and unpaid interest on our convertible
debentures and notes becomes immediately due and payable from one to three years
from their dates of issuance, depending on the debenture or note, or earlier in
the event of a default. The events of default under the convertible debentures
and notes are similar to those customary for convertible debt securities,
including breaches of material terms, failure to pay amounts owed, delisting of
our common stock from the OTC Bulletin Board or failure to comply with the
conditions of listing on the OTC Bulletin Board and cross-defaults on other debt
securities.

        As of January 14, 2008, we were in default under our obligations to
register for resale shares of our common stock underlying certain of our
outstanding convertible debentures and notes due to our failure to timely
register for resale a sufficient number of shares of our common stock upon
conversion of those convertible debentures and notes.  In addition, as of that
date, we were also in default under our obligations to make interest payments
under nearly all of our outstanding convertible debentures and notes due to our
lack of sufficient capital resources to fund those interest payments.  As of
that date, we owed principal and unpaid interest on our convertible debentures
and notes in an aggregate amount of approximately $3.5 million, net of
approximately $103,000 of prepaid interest, all of which we believe would be
immediately due and payable upon demand by the holders of our secured
convertible debentures and notes.

        As a result of the above defaults, the holders of our secured
convertible debentures and notes are entitled to pursue their rights to
foreclose upon their security interest in all of our assets.  In the event that
the holders of our secured convertible debentures and notes foreclose upon their
security interest in all of our assets, we could lose all of our assets,
including our intellectual property and other technology associated with our H-
NET(TM) system, which would have a material and adverse effect on our business,
prospects, results of operations and financial condition. In addition, the
holders of our secured convertible debentures and notes were entitled to demand
immediate repayment of the outstanding principal amounts of the debentures and
notes and any accrued and unpaid interest. The cash required to repay such
amounts would likely have to be taken from our working capital. Since we rely on
our working capital to sustain our day to day operations and the development of
our H-NET(TM) system, a default on the convertible debentures or notes could
have a material and adverse effect on our business, prospects, results of
operations or financial condition.

<page>22

        We have a history of only inconsequential revenues, have incurred
        significant losses, expect continued losses and may never achieve
        profitability. If we continue to incur losses, we may have to curtail
        our operations, which may prevent us from successfully deploying our H-
        NET(TM) wireless meter reading system.

        We have a history of only inconsequential revenues, have not been
profitable and expect continued losses. Historically, we have relied upon cash
from financing activities to fund all of the cash requirements of our activities
and have incurred significant losses and experienced negative cash flow. As of
September 30, 2007, we had an accumulated deficit of approximately $39.5
million. For our fiscal year ended September 30, 2007, we incurred a net loss of
approximately $3.8 million and for our fiscal year ended September 30, 2006, we
incurred a net loss of approximately $3.1 million. We cannot predict when we
will become profitable or if we ever will become profitable, and we may continue
to incur losses for an indeterminate period of time and may never achieve or
sustain profitability. An extended period of losses and negative cash flow may
prevent us from successfully deploying our H-NET(TM) wireless meter reading
system, or our H-NET(TM) system, and operating or expanding our business. As a
result of our financial condition, our independent auditors have issued a report
questioning our ability to continue as a going concern.

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

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

        The report of our independent auditors contained in our financial
statements for the years ended September 30, 2007 and 2006 includes a paragraph
that explains that we have incurred substantial losses and have a working
capital deficit. This report raises substantial doubt about our ability to
continue as a going concern. Reports of independent auditors questioning a
company's ability to continue as a going concern are generally viewed
unfavorably by analysts and investors. This report may make it difficult for us
to raise additional debt or equity financing necessary to continue the
development and deployment of our H- NET(TM) system. We urge potential investors
to review this report before making a decision to invest in ConectiSys.

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

        We require additional financing to produce cost-reduced hardware for our
H-NET(TM) system capable of large-scale manufacturing and to complete the
development of our H-NET(TM) system.  We also require additional funding to
obtain and implement contracts and joint venture agreements with meter
manufacturers. If we are unable to obtain this financing, we could be forced to
delay, curtail or eliminate certain product and service development programs or
entirely abandon our planned deployment of our H-NET(TM) system. In addition,
our inability to obtain financing could have such a material adverse effect on
our business, prospects, results of operations or financial condition, that we
may be forced to restructure, file for bankruptcy, sell assets or cease

<page>23

operations entirely, any of which could jeopardize an investment in our common
stock.

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

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

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

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

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

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

<page>24

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

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

        Our failure to attract and retain key personnel could adversely affect
        our business, financial condition and results of operations.

        Our future success is dependent in part on our ability to attract and
retain certain key personnel. We currently have few employees and need to
attract additional skilled technical, clerical and managerial personnel in all
areas of our business. The competition for such individuals is intense. There
can be no assurance that we will be able to retain our existing personnel or
attract additional qualified personnel in the future. If we are unable to
attract and retain key personnel, our business, financial condition and results
of operations could be adversely affected.

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

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

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

        The automation of utility meter reading and data distribution is a
relatively new and rapidly changing market. We cannot accurately predict the
size of this market or its potential growth. Our system is one possible solution
for AMR and data distribution. It has not been adopted as an industry standard

<page>25

and it may not be adopted on a broad scale. Competing systems have been and
likely will continue to be selected by utilities and other potential clients.
Participants in the utility industry have historically been cautious and
deliberate in making decisions concerning the adoption of new technology. This
process, which can take up to several years to complete, may include the
formation of evaluation committees, a review of different technical options,
technology trials, equipment testing and certification, performance and cost
justifications, regulatory review, one or more requests for vendor quotes and
proposals, budgetary approvals and other steps. Consequently, if our H-NET(TM)
system as an AMR solution is unsuccessful and we are unable to enter into AMR or
data distribution contracts on terms favorable to us, our business, results of
operations and financial condition could be materially and adversely affected.

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

        o       the timing and necessity of substantial expenditures for the
                development and deployment of our H-NET(TM) system;
        o       the failure to strategically position ourselves in relation to
                joint venture or strategic partners, and potential and actual
                competitors;
        o       the failure of our H-NET(TM) system to satisfy the needs of the
                market that we intend to target and the resulting lack of
                widespread or adequate acceptance of our H-NET(TM) system; and
        o       the difficulties in managing rapid growth of operations and
                personnel.

        Our failure to manage growth effectively could impair our business.

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

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

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

        We own, license or have otherwise obtained the right to use certain
technologies incorporated in our H-NET(TM) system. We may receive infringement
claims from third parties relating to our products and technologies. In those
cases, we intend to investigate the validity of the claims and, if we believe
the claims have merit, to respond through licensing or other appropriate
actions. To the extent claims relate to technology included in components
purchased from third-party vendors for incorporation into our products, we would
forward those claims to the appropriate vendor. If we or our component

<page>26

manufacturers are unable to license or otherwise provide any necessary
technology on a cost- effective basis, we could be prohibited from marketing
products containing that technology, incur substantial costs in redesigning
products incorporating that technology, or incur substantial costs defending any
legal action taken against us.

                         Risks Related to Our Common Stock

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

        As of January 14, 2008, we had outstanding 26,286,672,599 shares of
common stock, of which approximately 1,909,790,000 shares were restricted under
the Securities Act of 1933. As of that date, we also had outstanding options,
warrants, convertible debentures and notes and preferred stock that were
exercisable for or convertible into approximately 88,537,000,000 shares of our
common stock, nearly all of which are covered by registration rights. Sales of a
substantial number of shares of our common stock in the public market, or the
perception that sales could occur, could adversely affect the market price of
our common stock. Any adverse effect on the market price of our common stock
could make it difficult for us to raise additional capital through sales of
equity securities at a time and at a price that we deem appropriate.

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

        We have issued various debentures, notes and warrants that are
convertible or exercisable at prices that are subject to adjustment due to a
variety of factors, including fluctuations in the market price of our common
stock and the issuance of securities at an exercise or conversion price less
than the then-current exercise or conversion price of those debentures, notes or
warrants. As of January 14, 2008, the closing price of a share of our common
stock on the OTC Bulletin Board was $.0001. On that date, our debentures,
notes and warrants outstanding with adjustable conversion and/or exercise prices
were convertible or exercisable into approximately 88,527,000,000 shares of our
common stock. The number of shares of common stock that these adjustable
securities ultimately may be converted into or exercised for could prove to be
greater than this amount if the market price of our common stock declines. You
could, therefore, experience substantial dilution of your investment as a result
of the conversion or exercise of our outstanding derivative securities.

        The applicable conversion price of our debentures and notes issued to
certain security holders is variable and does not have a lower-limit, therefore
the dilutive effect to our existing security holders is theoretically limitless.
However, because the variable conversion price of these debentures and notes has
an upper limit, an increase in the trading price of a share of our common stock
will result in a limited benefit to existing security holders with respect to
the conversion of these debentures and notes. The following table sets forth the
number of shares issuable upon conversion of the aggregate principal and all
accrued and unpaid interest on our convertible debentures and notes issued to
certain security holders and outstanding as of January 14, 2008, which amount
was approximately $3.5 million, net of prepaid interest, and is based upon the
indicated hypothetical trading prices:

<page>27


                                        Approximate      Percentage of
Hypothetical                            Number of Shares   Company's
Trading Price     Conversion Price (1)  Issuable (2)     Common Stock (3)
---------------   --------------------  ---------------- ----------------
    $.0008             $.00032           10,938,000,000         29%
    $.0004             $.00016           21,875,000,000         45%
    $.0002             $.00008           43,750,000,000         62%
    $.0001             $.00004           87,500,000,000         77%
_______________
        (1)     The conversion price of our debentures and notes is the lower of
                40% of the average of the three lowest intraday trading prices
                of a share of our common stock on the OTC Bulletin Board during
                the twenty trading days immediately preceding the conversion
                date, and either (a) $.06 for the March, May and June 2002
                convertible debentures, (b) $.01 for the March and May 2003
                convertible debentures, (c) $.005 for the November and December
                2003, and the February and March 2004 convertible debentures and
                the March 2005 convertible notes, or (d) $.03 for the March 2006
                and February 2007 convertible notes. As of January 14, 2008, the
                applicable conversion price was approximately $.00004.
        (2)     Our current authorized capital allows us to issue a maximum of
                50 billion shares of common stock.
        (3)     Amounts are based on 26,286,672,599 shares of our common stock
                outstanding as of January 14, 2008 plus the corresponding number
                of shares issuable. Each of the holders of our convertible
                debentures and notes may not convert our debentures or notes
                into more than 4.9% of our then-outstanding common stock;
                however, the holders may waive the 4.9% limitation, thus
                allowing the conversion of their debentures or notes into a
                number of shares of common stock in excess of 4.9% of our then-
                outstanding common stock.

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

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

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

<page>28

therefore, experience a decline in the value of your investment as a result of
short sales of our common stock.

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

        Nasdaq and other principal markets require that, to be eligible for
inclusion in the stock market, a company's common stock have a specified minimum
bid price per share. Convertible debenture and convertible note financings,
especially those with variable conversion prices with low or no low-price
limits, characteristically exert downward pressure on the market for a company's
common stock. This pressure, if applied against the market for our common stock,
may prevent our common stock from being listed on Nasdaq or other principal
markets.

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

        The stock market as a whole and individual stocks historically have
experienced extreme price and volume fluctuations, which often have been
unrelated to the performance of the related corporations. During the year ended
September 30, 2007, the high and low closing bid prices of our common stock were
$.0005 and $.0001, respectively; however, on numerous days during the period,
there was no closing bid.  The market price of our common stock may exhibit
significant fluctuations in the future response to various factors, many of
which are beyond our control and which include:

        o       variations in our quarterly operating results, which variations
                could result from, among other things, changes in the needs of
                one or more of our customers;
        o       changes in market valuations of similar companies and stock
                market price and volume fluctuations generally;
        o       economic conditions specific to the industries in which we
                operate;
        o       announcements by us or our competitors of new or enhanced
                products, technologies or services or significant contracts,
                acquisitions, strategic relationships, joint ventures or capital
                commitments;
        o       regulatory developments;
        o       additions or departures of key personnel; and
        o       future sales of our common stock or other debt or equity
                securities.

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

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

        Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks, like shares of our common stock, generally
are equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on Nasdaq). The
penny stock rules require a broker-dealer, prior to a transaction in a penny

<page>29

stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and, if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.

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

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

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

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

                    SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

        o       our product development activities;
        o       our business strategy for establishing a presence in the AMR
                market;
        o       anticipated trends in our financial condition and results of
                operations; and
        o       our ability to distinguish ourselves from our current and future
                competitors.

        You can identify forward-looking statements generally by the use of
forward-looking terminology such as "believe," "expect," "may," "will,"
"should," "could," "seek," "estimate," "continue," "anticipate," "intend,"
"future," "plan" or variations of those terms and other similar expressions,
including their use in the negative, or in discussions of strategies,
opportunities, plans or intentions. You should not place undue reliance on these
forward-looking statements, which speak only as to our expectations as of the
date of this report. These forward-looking statements are subject to a number of

<page>30

risks and uncertainties, including those identified under "Risk Factors" and
elsewhere in this report. In addition, these forward-looking statements
necessarily depend upon assumptions, estimates and expectations that may prove
to be incorrect. Although we believe that the assumptions, estimates and
expectations reflected in these forward-looking statements are reasonable,
actual conditions in the AMR industry, and actual conditions and results in our
business, could differ materially from those expressed or implied in these
forward-looking statements. In addition, none of the events anticipated in the
forward-looking statements may actually occur and we cannot assure you that we
will achieve our plans, intentions or expectations. Any of these different
outcomes could cause the price of our common stock to decline substantially.
Except as required by law, we undertake no duty to update any forward-looking
statement after the date of this report, either to conform any statement to
reflect actual results or to reflect the occurrence of unanticipated events.

ITEM 7. FINANCIAL STATEMENTS.

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

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

        None.

ITEM 8A.        CONTROLS AND PROCEDURES.

 Evaluation of Disclosure Controls and Procedures

        We conducted an evaluation under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures.  The term "disclosure controls and
procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by the company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures also include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company's management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate, to allow timely decisions regarding required
disclosure.  Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded as of September 30, 2007 that our disclosure
controls and procedures were effective at the reasonable assurance level.

 Changes in Internal Control over Financial Reporting

        There were no changes in our "internal control over financial reporting"
(as defined in Rule 13a-15(f) under the Exchange Act) during our most recently
completed fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

ITEM 8A(T).     CONTROLS AND PROCEDURES.

        Not applicable.

<page>31

ITEM 8B.        OTHER INFORMATION.

        None.

                                     PART III

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

Directors and Executive Officers

        The directors and executive officers of ConectiSys and their ages,
positions, business experience and education as of January 14, 2008 are as
follows:
         Name                  Age                Position
         ----                  ---                ---------
Robert A. Spigno (1)(2)         53      Chairman of the Board, Chief Executive
                                        Officer, Chief Financial Officer and
                                        Director

Lawrence Muirhead (1)(2)        48      Chief Technology Officer and
                                        Director

Rodney W. Lighthipe             61      Treasurer and Secretary

Melissa McGough (1)             35      Director
_______________
(1)     Member of Stock Option Committee.
(2)     Member of Nominating Committee.

Business Experience

 Directors

        Robert A. Spigno has served as our Chief Executive Officer, Chairman of
the Board and as a member of our board of directors since August 1995. Prior to
that time, Mr. Spigno was President, for more than a decade, of S.W. Carver
Corp., a company founded by him and his former wife, Patricia A. Spigno, that
was a commercial builder of residential homes. Mr. Spigno has over 25 years of
experience in executive management and majority ownership of several privately
held companies.

        Lawrence Muirhead has served as our Chief Technical Officer and as a
member of our board of directors since October 1997. Prior to that time, Mr.
Muirhead worked for TRW. Mr. Muirhead has over 18 years of engineering and
research and development experience in the aerospace industry, including over 13
years of experience with TRW, where helped lead new product development and
deployment. Mr. Muirhead holds a B.S. degree in physics and a B.A. degree in
mathematics from the University of California, Santa Barbara, and holds an M.S.
degree in physics from the California Institute of Technology.

        Melissa McGough has served as a member of our board of directors since
November 1999. Ms. McGough was also our Corporate Administrator from December
1998 until March 2005. Her responsibilities as Corporate Administrator included
public relations and management of our daily office activities. Prior to that
time, Ms McGough was a student.

<page>32

 Executive Officer

        Rodney W. Lighthipe has served as our Treasurer and Secretary since May
2006 and previously served as an advisor to our board of directors from April
2001 through April 2006. Mr. Lighthipe also served as our President from
September 2000 until his resignation in September 2001. Prior to that time, Mr.
Lighthipe served as Director of Research for San Diego Gas & Electric from 1992
until 1996 and was responsible for the development and deployment of new
technologies. Mr. Lighthipe was Research Manager for Southern California Edison
from 1980 to 1987 and organized an international consortium of companies for the
design, construction and operation of the world's largest coal gasification
plant.  Mr. Lighthipe was also Power Contracts Manager for Southern California
Edison from 1974 until 1980 during which he opened new transmission paths
throughout the Western United States and Canada for the purchase and sale of
bulk electric power. Some of Mr. Lighthipe's major projects included the
installation of photovoltaics in remote areas and the launch of a "smart card"
project employing residential telephone systems. Mr. Lighthipe has also acted as
a consulting engineer in the energy and telecommunications industries and served
two tours of duty in Vietnam as a Lieutenant in the United States Navy.

        All directors hold office until the next annual meeting of shareholders
and until their respective successors are elected or until their earlier death,
resignation or removal. Each officer of ConectiSys serves at the discretion of
the board of directors. There are no family relationships between or among any
directors or executive officers of ConectiSys.

 Advisors to our Board of Directors

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

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

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

        Tod O'Connor has served as an advisor to our board of directors since
April 2001. Mr. O'Connor was Director of Government Relations for two Edison
International Inc. subsidiaries, Southern California Edison RD&D Department and

<page>33

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

        Dr. Fredric Brauner was appointed to serve as an advisor to our board of
directors in October 2003. Dr. Brauner is a doctor of medicine, specializing in
dermatology.  He graduated from the University of Vienna and became a doctor in
1977. Dr. Brauner, took over his father's practice in 1983 at the University
Clinic of Dermatology in Vienna. Dr. Brauner is a key investor in ConectiSys and
is leading our efforts to expand our H-NET(TM) system to fit the European
marketplace.

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors, and persons who beneficially own more than 10%
of a registered class of our common stock to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission.
These officers, directors and stockholders are required by the Securities and
Exchange Commission regulations to furnish us with copies of all such reports
that they file.

        Based solely upon a review of copies of these reports furnished to us
during fiscal 2007 and thereafter, or written representations received by us
from reporting persons that no other reports were required, we believe that all
Section 16(a) filing requirements applicable to our reporting persons during
fiscal 2007 were complied with, except that Mr. Robert Spigno did not timely
file a Form 4 to report one transaction.

Board Committees

        Our board of directors has a Stock Option Committee and a Nominating
Committee. Our board of directors does not have an Audit Committee. In the
absence of an Audit Committee, the entire board of directors intends to satisfy
the duties of that committee. Our Nominating Committee has a written charter.

        During fiscal 2007, our board of directors held eleven meetings.  During
fiscal 2007, no incumbent director attended fewer than 75% of the aggregate of
the total number of meetings of the board of directors held during the period
for which he or she has been a director and the total number of meetings held by
all committees of the board on which he or she served during the periods that he
or she served.

        Stock Option Committee. Our Stock Option Committee makes recommendations
to our board of directors concerning incentive compensation for employees and
consultants of ConectiSys, selects the persons entitled to receive options under
our stock option plans and establishes the number of shares, exercise price,
vesting period and other terms of the options granted under those plans. The
Stock Option Committee currently consists of Robert A. Spigno, Lawrence Muirhead
and Melissa McGough. During fiscal 2007, the Stock Option Committee held one
meeting. No executive officer of ConectiSys has served as a director or member
of the compensation committee of any other entity whose executive officers
served as a director of ConectiSys.

<page>34


        Audit Committee. We do not currently have an Audit Committee. In
addition, having no Audit Committee, we do not have an Audit Committee financial
expert.  As a small, development-stage company, it has been exceedingly
difficult for us to attract an independent member of our board of directors, who
would qualify as an Audit Committee financial expert, to serve as the sole
member of the Audit Committee of our board of directors.  We plan to form an
Audit Committee consisting solely of one or more independent members of our
board of directors, at least one of whom will qualify as an Audit Committee
financial expert under the rules and regulations of the Securities and Exchange
Commission, once we are able to identify and attract a satisfactory candidate.

        Nominating Committee. Our Nominating Committee currently consists of two
directors, Robert A. Spigno, who serves as Chairman, and Lawrence Muirhead,
neither of whom is "independent" under the rules and regulations of the
Securities and Exchange Commission or under the current Nasdaq listing
standards. We intend to reconstitute our Nominating Committee with one or more
independent members of our board of directors once we are able to identify and
attract a satisfactory candidate.

        Our Nominating Committee assists our board of directors in the selection
of nominees for election to the board. The committee determines the required
selection criteria and qualifications of director nominees based upon the needs
of ConectiSys at the time nominees are considered and recommends candidates to
be nominated for election to the board. The Nominating Committee was
constituted, and our board of directors adopted a written charter for the
Nominating Committee, in June 2004. A copy of the current charter is available
on our website at http://www.conectisys.com under the headings "Investor
Relations" and "Corporate Governance."  During fiscal 2007, our Nominating
Committee held one meeting.

        Criteria for Director Nominees. Our board of directors believes that it
should be comprised of directors with varied, complementary backgrounds, and
that directors should, at a minimum, exhibit proven leadership capabilities and
experience at a high level of responsibility within their chosen fields, and
have the ability to quickly grasp complex principles of business, finance and
automatic meter reading technologies. Directors should possess the highest
personal and professional ethics, integrity and values and should be committed
to representing the long-term interests of our shareholders.

        When considering a candidate for director, the Nominating Committee
intends to take into account a number of factors, including the following:

        o       independence from management;
        o       depth of understanding of technology, manufacturing, sales and
                marketing, finance and/or other elements directly relevant to
                the technology and business of ConectiSys;
        o       education and professional background;
        o       judgment, skill, integrity and reputation;
        o       existing commitments to other businesses as a director,
                executive or owner;
        o       personal conflicts of interest, if any; and
        o       the size and composition of our existing board of directors.

        Prior to nominating a sitting director for re-election at an annual
meeting of shareholders, the Nominating Committee intends to consider the
director's past attendance at, and participation in, meetings of our board of
directors and its committees and the director's formal and informal
contributions to his or her respective activities.

        When seeking candidates for director, the Nominating Committee may
solicit suggestions from incumbent directors, management, shareholders and
others. Additionally, the Nominating Committee may use the services of third
party search firms to assist in the identification of appropriate candidates.

<page>35

After conducting an initial evaluation of a prospective candidate, the
Nominating Committee may interview that candidate if it believes the candidate
might be suitable to be a director. The Nominating Committee may also ask the
candidate to meet with management. If the Nominating Committee believes a
candidate would be a valuable addition to our board of directors, it may
recommend to the full board of directors that candidate's appointment or
election.

        Shareholder Recommendations for Nominations to the Board of Directors.
The Nominating Committee will consider candidates for director recommended by
any shareholder that is the beneficial owner of shares representing more than
one percent of the then-outstanding shares of common stock of ConectiSys and
that has beneficially owned those shares for at least one year. The Nominating
Committee will evaluate such recommendations applying its regular nominee
criteria and considering the additional information set forth below. Eligible
shareholders wishing to recommend a candidate for nomination as a director are
to send the recommendation in writing to the Chairman of the Nominating
Committee, ConectiSys Corporation, 25115 Avenue Stanford, Suite 320, Valencia,
California 91355. A shareholder recommendation must contain the following
information:

        o       documentation supporting that the writer is a shareholder of
                ConectiSys and has been a beneficial owner of shares
                representing more than one percent of the then-outstanding
                shares of common stock of ConectiSys for at least one year and a
                statement that the writer is recommending a candidate for
                nomination as a director;

        o       a resume of the candidate's business experience and educational
                background that also includes the candidate's name, business and
                residence addresses, and principal occupation or employment and
                an explanation of how the candidate's background and
                qualifications are directly relevant to the business of
                ConectiSys;

        o       the number of shares of common stock of ConectiSys beneficially
                owned by the candidate;

        o       a statement detailing any relationship, arrangement or
                understanding, formal or informal, between or among the
                candidate, any affiliate of the candidate, and any customer,
                supplier or competitor of ConectiSys, or any other relationship,
                arrangement or understanding that might affect the independence
                of the candidate as a member of our board of directors;

        o       detailed information describing any relationship, arrangement or
                understanding, formal or informal, between or among the
                proposing shareholder, the candidate, and any affiliate of the
                proposing shareholder or the candidate;

        o       any other information that would be required under SEC rules in
                a proxy statement soliciting proxies for the election of such
                candidate as a director; and

        o       a signed consent of the candidate to serve as a director, if
                nominated and elected.

        In connection with its evaluation, the Nominating Committee may request
additional information from the candidate or the recommending shareholder and
may request an interview with the candidate. The Nominating Committee has
discretion to decide which individuals to recommend for nomination as directors.

Policy With Regard to Board Members' Attendance at Annual Meetings

        It is our policy that our directors are invited and encouraged to attend
all of our annual meetings.  We did not hold an annual meeting in fiscal 2007.

<page>36

Security Holder Communications with the Board of Directors

        Our board of directors has established a process to receive
communications from security holders. Security holders and other interested
parties may contact any member (or all members) of the board of directors, any
committee of the board of directors or any chair of any such committee, by mail.
To communicate with the board of directors, any individual directors or any
group or committee of directors, correspondence should be addressed to the board
of directors or any such individual directors or group or committee of directors
by either name or title.  All such correspondence should be sent "c/o Secretary"
at 25115 Avenue Stanford, Suite 320, Valencia, California 91355.

        All communications received as set forth in the preceding paragraph will
be opened by the Secretary for the sole purpose of determining whether the
contents represent a message to our directors. Any contents that are not in the
nature of advertising, promotions of a product or service, patently offensive
material or matters deemed inappropriate for the board of directors will be
forwarded promptly to the addressee.  In the case of communications to the board
of directors or any group or committee of directors, our Secretary will make
sufficient copies of the contents to send to each director who is a member of
the group or committee to which the envelope is addressed.

Codes of Ethics

        Our board of directors has adopted a Code of Business Conduct and Ethics
that applies to all of our directors, officers and employees and an additional
Code of Business Ethics that applies to our Chief Executive Officer and senior
financial officers.  The Codes of Ethics, as applied to our principal executive
officer, principal financial officer and principal accounting officer
constitutes our "code of ethics" within the meaning of Section 406 of the
Sarbanes-Oxley Act of 2002.  We will provide a copy of our code of ethics to any
person without charge, upon written request to ConectiSys Corporation,
Attention:  Investor Relations, at 25115 Avenue Stanford, Suite 320, Valencia,
California 91355.

Compensation Committee Interlocks and Insider Participation

        No member of our board of directors has a relationship that would
constitute an interlocking relationship with executive officers and directors of
another entity.

Compensation of Directors

        Our directors do not receive any compensation in their capacities as
members of the board of directors, but may be reimbursed for reasonable expenses
incurred in connection with attendance of meetings of the board of directors.
Our directors did not receive any compensation in their capacities as members of
our board of directors in fiscal 2007.

        The advisors to our board of directors each initially received 250,000
shares of common stock as compensation for their advisory services. No
additional compensation has been paid and any future compensation will be in the
discretion of our board of directors.

        We do not have a predetermined or automatic annual or other periodic
program for grants of equity compensation to our directors.  Equity compensation
is granted as and when determined appropriate by our board.

<page>37

Indemnification of Directors and Officers

        The Colorado Business Corporation Act, or CBCA, requires that each
director discharge his duties to ConectiSys in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner that he reasonably believes to be in the best
interests of ConectiSys. Generally, a director will not be liable to ConectiSys
or its shareholders, for any action he takes or omits to take as a director if,
in connection with such action or omission, he performed the duties of his
position in compliance with the standards described above.

        Our Articles of Incorporation provide that ConectiSys may indemnify any
director or officer of ConectiSys to the full extent permitted by Colorado law.
Under the CBCA, except for the situation described below, a corporation may
indemnify a person made a party to a proceeding because the person is or was a
director against liability incurred in the proceeding if:

        o       the person conducted himself in good faith;

        o       the person reasonably believed, in the case of conduct in an
                official capacity with ConectiSys, that his conduct was in the
                best interests of ConectiSys and, in all other cases, that his
                conduct was at least not opposed to the best interests of
                ConectiSys; and

        o       in the case of any criminal proceeding, the person had no
                reasonable cause to believe his conduct was unlawful.

        Under the CBCA, ConectiSys may not indemnify a director as described
above:

        o       in connection with a proceeding by or in the right of
                ConectiSys, in which the director was adjudged liable to
                ConectiSys; or

        o       in connection with any other proceeding charging that the
                director derived an improper personal benefit, whether or not
                involving action in an official capacity, in which proceeding
                the director was adjudged liable on the basis that he derived an
                improper personal benefit.

        Under the CBCA, ConectiSys is required to indemnify any director who is
wholly successful on the merits or otherwise, in the defense of any proceeding
to which the director was a party because the person is or was a director,
against reasonable expenses incurred by him in connection with the proceeding.

        To the extent indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of ConectiSys under the above provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.

<page>38

ITEM 10.        EXECUTIVE COMPENSATION.

Summary Compensation Table

        The following table sets forth summary information concerning the
compensation of our principal executive officer and principal financial officer,
and our Chief Technology Officer (collectively, the "named executive officers"),
for all services rendered in all capacities to us for the years ended September
30, 2007 and 2006.  There were no other officers whose annual compensation
exceeded $100,000 during the year ended September 30, 2007.

<table>
                                                              Stock     All Other
           Name and                           Salary   Bonus   Awards  Compensation  Total
        Principle Position          Year        ($)     ($)     ($)(1)  ($)(2)        ($)
-----------------------------      ------     ------   ------  ------- ------------  -----
                                   <C>        <C>      <C>     <C>     <C>           <C>
Robert A. Spigno
  Chief Executive Officer and       2007     $160,000   $-     $80,000  $  -        $240,000
  Chief Financial Officer           2006      160,000    -      80,000    18,462     258,462

Lawrence Muirhead
        Chief Technology Officer    2007       90,000    -        -        -          90,000
                                    2006      150,000    -        -        -         150,000
</table>
_______________
(1)     The amounts shown are the compensation costs recognized in our financial
        statements for fiscal 2007 and 2006 related to stock grants to Mr.
        Spigno. Amounts represent bonus earned, but deferred and recorded on the
        books and records of ConectiSys as accrued compensation. Amounts are
        payable in common stock of ConectiSys based on a conversion price
        equivalent to 50% of the average of the closing bid and asked prices of
        a share of ConectiSys common stock for the 30 days prior to the end of
        the year in which such bonus was earned. Although our agreement with Mr.
        Spigno provides that the conversion price is to be equal to 50% of the
        average of the closing bid and asked prices of a share of our common
        stock for the 30 days prior to the end of the calendar year, Mr. Spigno
        voluntarily relinquished his right to receive shares for fiscal 2007 and
        2006 based on this conversion price in favor of a conversion price equal
        to 100% of the average of the closing bid and asked prices of a share of
        our common stock for the 30 days prior to the end of the applicable
        calendar year.
(2)     The value of perquisites and other personal benefits was less than
        $10,000 in aggregate for each executive; provided, that Mr. Spigno's
        accrued and unpaid vacation benefits were $18,462 for fiscal 2006, which
        amount remains unpaid. Luca Spigno and Robert Spigno, Jr., each of whom
        is a son of Robert A. Spigno, are full-time employees of ConectiSys
        Corporation and receive annual salaries of $57,200 and $61,880,
        respectively.

Employment Agreements

        Robert A. Spigno

        In October 1995, our board of directors set the compensation for Robert
A. Spigno, our Chairman, Chief Executive Officer and Chief Financial Officer.
Mr. Spigno has executed an employment agreement with ConectiSys effective
October 2, 1995, as amended by employment agreement amendments effective July
24, 1996, August 11, 1997, September 1, 1999 and March 27, 2000 that provide for
annual salary of $160,000 and provided for a bonus of 50% of Mr. Spigno's annual
salary, with the bonus payable in common stock of ConectiSys at the end of each
fiscal year.  See footnotes in "Summary Compensation Table" above for a
description of how Mr. Spigno's bonus is to be calculated. Effective as of April
1, 2007, we extended Mr. Spigno's employment agreement through April 1, 2008.

        Lawrence Muirhead

        In August 1998, our board of directors set the compensation for Lawrence
Muirhead, our Chief Technology Officer.  Mr. Muirhead has executed an employment
agreement with ConectiSys effective August 1, 1998, that provides for annual
salary compensation of $150,000.

<page>39

Outstanding Equity Awards at Fiscal Year End

        As of September 30, 2007, Robert Spigno held an option to purchase
234,155 shares of our Class A preferred stock at an exercise price of $1.00 per
share.  Each share of Class A preferred stock is entitled to 100 votes per share
on all matters presented to our shareholders for action. The Class A preferred
stock does not have any liquidation preference, additional voting rights,
conversion rights, anti-dilution rights or any other preferential rights.  The
Class A preferred stock option is fully vested and expires on November 1, 2009.

        As of September 30, 2007, Robert Spigno held an option to purchase
500,000 shares of our Class B preferred stock at an exercise price of $.05 per
share.  Each share of Class B preferred stock is convertible into 10 shares of
our common stock.  The Class B preferred stock does not have any liquidation
preference, voting rights, other conversion rights, anti-dilution rights or any
other preferential rights.  The exercise price of $.05 per share equates to
$.005 per share of common stock if the Class B preferred stock were converted,
which was in excess of the price of our common stock on that date.  The price of
our common stock on the OTC Bulletin Board(R)as of September 30, 2007 was
$.0001. The Class B preferred stock option is fully vested and expires on
November 1, 2009.

ITEM 11.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS.

        As of January 14, 2008, a total of 26,286,672,599 shares of our common
stock were outstanding. The following table sets forth information as of that
date regarding the beneficial ownership of our common stock both before and
immediately after the offering by:

        o       each person known by us to own beneficially more than five
                percent, in the aggregate, of the outstanding shares of our
                common stock as of the date of the table;
        o       each selling security holder;
        o       each of our directors;
        o       each named executive officer who is a current officer; and
        o       all of our directors and executive officers as a group.

        Beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission, and generally includes
voting or investment power with respect to securities. Except as indicated in
the footnotes to the table, we believe each holder possesses sole voting and
investment power with respect to all of the shares of common stock owned by that
holder, subject to community property laws where applicable. In computing the
number of shares beneficially owned by a holder and the percentage ownership of
that holder, shares of common stock subject to options or warrants or underlying
notes or preferred stock held by that holder that are currently exercisable or
convertible or are exercisable or convertible within 60 days after the date of
the table are deemed outstanding. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person or group.

<page>40

Name and Address of                       Amount and Nature of
Beneficial Owner(1)    Title of Class   Beneficial Ownership(2) Percent of Class
-------------------    --------------   ----------------------- ----------------
Robert A. Spigno       Common            1,403,615,176(3)                5.07%
                       Class A Preferred       450,020(4)              100.00%
                       Class B Preferred       500,000(5)               50.00%

Rodney W. Lighthipe    Common               25,852,388                    *

Lawrence Muirhead      Common                  971,393                    *

Melissa McGough        Common                  354,138                    *

All directors and
executive officers
as a group (4 persons)  Common             1,430,793,095(6)                5.17%
                        Class A Preferred        450,020(4)              100.00%
                        Class B Preferred        500,000(5)               50.00%
        _______________
        *       Less than 1.00%

        (1)     The address of each director and executive officer named in this
                table is c/o ConectiSys Corporation, 25115 Avenue Stanford,
                Suite 320, Valencia, California 91355. Mr. Spigno and Mr.
                Muirhead are directors and executive officers of ConectiSys.
                Ms. McGough is a director of ConectiSys.  Mr. Lighthipe is
                Treasurer and Secretary of ConectiSys.
        (2)     Based upon information furnished to us by the directors and
                executive officers or obtained from our stock transfer books
                showing 26,286,672,599 shares of common stock outstanding as of
                January 14, 2008. Beneficial ownership is determined in
                accordance with the rules of the Securities and Exchange
                Commission and generally includes voting or investment power
                with respect to securities. Except as indicated by footnote, and
                subject to community property laws where applicable, the persons
                named in the table above have sole voting and investment power
                with respect to all shares of common stock shown as beneficially
                owned by them. Shares of common stock subject to options
                currently exercisable, or exercisable within 60 days after
                January 14, 2008, are deemed to be outstanding in calculating
                the percentage ownership of a person or group but are not deemed
                to be outstanding as to any other person or group.
        (3)     Includes (i) 4,992,556 shares held directly, (ii) 5,000,000
                shares issuable upon conversion of Class B preferred stock, and
                (iii)1,393,622,620 shares issuable in connection with payment of
                annual bonuses for calendar years 2002 through 2007. Mr. Spigno
                holds an option to purchase up to 500,000 shares of Class B
                preferred stock.
        (4)     Includes (i) 215,865 shares held directly, and (ii) 234,155
                shares underlying an option to purchase Class A preferred stock.
        (5)     Represents an option to purchase up to 500,000 shares of Class B
                preferred stock.
        (6)     Includes (i) 7,170,475 shares held directly, (ii) 5,000,000
                shares issuable upon conversion of Class B preferred stock, and
                (iii)1,393,622,620 shares issuable in connection with payment of
                annual bonuses to Mr. Spigno for calendar years 2002 through
                2007. Mr. Spigno holds an option to purchase up to 500,000
                shares of Class B preferred stock.

Equity Compensation Plan Information

        No options, warrants or rights under any formal or informal incentive
compensation plan were outstanding, and there were no securities remaining
available for future issuance under any formal incentive compensation plan, as
of September 30, 2007.

<page>41

ITEM 12.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE.

Certain Relationships and Related Transactions

 Miscellaneous

        We are or have been a party to employment and compensation arrangements
with related parties, as more particularly described above under the headings
"Compensation of Directors," "Indemnification of Directors and Officers," and
"Executive Compensation."  We have indemnification obligations to each of our
directors and executive officers.  Our indemnification obligations, including
our certificate of incorporation and bylaws, require us to indemnify our
directors and officers to the fullest extent permitted by Colorado law.

 Robert A. Spigno

        Effective December 31, 2006, Robert A. Spigno earned bonus compensation
under his employment arrangement with ConectiSys in the amount of $80,000
payable in common stock of ConectiSys based on a conversion price equal to 50%
of the average of the closing bid and asked prices of a share of our common
stock for the 30 days prior to December 31, 2006. Although our agreement with
Mr. Spigno provides that the conversion price is to be equal to 50% of the
average of the closing bid and asked prices of a share of our common stock for
the 30 days prior to December 31, 2006, Mr. Spigno voluntarily relinquished his
right to receive shares for 2006 based on this conversion price in favor of a
conversion price equal to 100% of the average of the closing bid and asked
prices of a share of our common stock for the 30 days prior to December 31,
2006. The number of shares of common stock of ConectiSys issuable in connection
with this bonus is 258,064,516.

        Effective December 31, 2007, Robert A. Spigno earned bonus compensation
under his employment arrangement with ConectiSys in the amount of $80,000
payable in common stock of ConectiSys based on a conversion price equal to 50%
of the average of the closing bid and asked prices of a share of our common
stock for the 30 days prior to December 31, 2007. Although our agreement with
Mr. Spigno provides that the conversion price is to be equal to 50% of the
average of the closing bid and asked prices of a share of our common stock for
the 30 days prior to December 31, 2007, Mr. Spigno voluntarily relinquished his
right to receive shares for 2007 based on this conversion price in favor of a
conversion price equal to 100% of the average of only the closing asked
prices of a share of our common stock for the 30 days prior to December 31,
2007. The number of shares of common stock of ConectiSys issuable in connection
with this bonus is 800,000,000.

        Luca Spigno, the son of Robert A. Spigno, is a full-time employee of
ConectiSys Corporation and receives an annual salary of $57,200.

        Robert Spigno, Jr., the son of Robert A. Spigno, is a full-time employee
of ConectiSys Corporation and receives a monthly salary of $61,880.

 Rodney W. Lighthipe

        In May 2006, Rodney W. Lighthipe was appointed as Treasurer and
Secretary of ConectiSys at an initial monthly salary of $4,000.  Mr. Lighthipe's
current annual salary is $78,000.

<page>42

Director Independence

        Of our three directors-Robert A. Spigno, Lawrence Muirhead and Melissa
McGough-only Melissa McGough is "independent" under the current standards for
"independence" established by the Securities and Exchange Commission and NASDAQ.

ITEM 13.        EXHIBITS.

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

ITEM 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES.

        The following table shows the fees paid or accrued by ConectiSys
Corporation for the audit and other services provided by Farber Hass Hurley &
McEwen, LLP (f/k/a Hurley & Company) for the fiscal years shown.



                                         2007          2006
                                         ----          ----
        Audit Fees..................$   35,880  $     33,500
        Audit - Related Fees....        21,200         9,325
        Tax Fees................             -             -
        All Other Fees..........             -             -
                                    ----------- ------------
            Total                   $    57,080 $     42,825
                                    =========== ============

        Audit Fees.  Audit fees consist of amounts billed for professional
services rendered for the audit of our annual consolidated financial statements
included in our Annual Reports on Form 10-KSB.

        Audit-Related Fees.  Audit-Related Fees consist of fees billed for
professional services that are reasonably related to the performance of the
audit or review of our consolidated financial statements but are not reported
under "Audit Fees" and include amounts billed for professional services rendered
for reviews of our interim consolidated financial statements included in our
Quarterly Reports on Form 10 QSB and work performed in connection with the
issuance of Consents of Independent Registered Public Accounting Firm included
in Registration Statements on Forms SB-2 and the review thereof by Farber Hass
Hurley & McEwen, LLP (f/k/a Hurley & Company).

        Tax Fees.  Tax Fees consist of fees for professional services for tax
compliance activities, including the preparation of federal and state tax
returns and related compliance matters.

        All Other Fees.  Consists of amounts billed for services other than
those noted above.

        We do not have an Audit Committee.  Our board of directors approved the
Audit Fees for fiscal 2007 and 2006, but none of the other fees for 2007 and
2006 were specifically approved by our board of directors.

<page>43


                                CONECTISYS CORPORATION

                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                           Page
                                                                           ----


Report of Independent Registered Public Accounting Firm.....................F-1

Consolidated Balance Sheet as of September 30, 2007.........................F-2

Consolidated Statements of Operations for the Years Ended
September 30, 2007 and 2006 and the Cumulative Period from
December 1, 1990 (Inception) through September 30, 2007.....................F-4

Consolidated Statements of Changes in Shareholders' Equity (Deficit)
for the Cumulative Period from December 1, 1990 (Inception) through
September 30, 2007..........................................................F-5

Consolidated Statements of Cash Flows for the Years Ended
September 30, 2007 and 2006 and the Cumulative Period from
December 1, 1990 (Inception) through September 30, 2007.....................F-17

Notes to Consolidated Financial Statements..................................F-20

         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Conectisys Corporation and Subsidiaries
Valencia, California

We have audited the accompanying consolidated balance sheet of Conectisys
Corporation and Subsidiaries (a development stage company) (the "Company") as
of September 30, 2007, and the related consolidated statements of operations,
changes in shareholders' equity (deficit), and cash flows for the years ended
September 30, 2007 and 2006, and the cumulative period from December 1, 1990
(inception of development stage) through September 30, 2007, except that we did
not audit these financial statements for the period December 1, 1990 (inception
of development stage) through November 30, 1997; these financial statements
were audited by other auditors, whose reports dated March 6, 1998 (for the
period December 1, 1994 through November 30, 1997) and January 9, 1995 (for the
period December 1, 1990 (inception of development stage) through November 30,
1994), respectively, expressed a going concern uncertainty.  These consolidated
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement.  The
Company is not required to, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. An audit includes examining, on a test basis, evidence
supporting the amounts of disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Conectisys Corporation and Subsidiaries as of September 30, 2007, and the
results of their operations and their cash flows for the years ended September
30, 2007 and 2006, and the cumulative period from December 1, 1990 (inception
of development stage) through September 30, 2007, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in Note 2 to
the consolidated financial statements, the Company has suffered recurring
losses from operations and has a deficiency in working capital at September 30,
2007.  These matters raise substantial doubt about its ability to continue as a
going concern.  Management's plans concerning these matters are also discussed
in Note 2.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/S/ FARBER HASS HURLEY & MCEWEN, LLP
------------------------------------

Granada Hills, California
December 20, 2007

<page>F-1

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED BALANCE SHEET
September 30, 2007


ASSETS

Current assets
  Cash and cash equivalents                                $           40,834
  Employee advance                                                      1,000
  Prepaid expenses                                                     87,553
                                                            -----------------
Total current assets                                                  129,387

Property and equipment, net of accumulated
  depreciation of $377,025                                             98,183

Other assets
  Deposits                                                              4,698
  Loan fees, net of
   accumulated amortization of $534,163                                25,392
                                                            -----------------
Total assets                                               $          257,660
                                                            =================

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

<page>F-2

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED BALANCE SHEET
September 30, 2007


LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                         $          208,538
  Accrued compensation                                              2,070,615
  Due to officers                                                         537
  Accrued interest                                                    360,614
  Other current liabilities                                            14,352
  Notes payable and
   current portion of long-term-debt                                2,072,303
                                                            -----------------
Total current liabilities                                           4,726,959

Long-term debt, net of current portion                              3,789,300

Commitments and contingencies                                             -

SHAREHOLDERS' DEFICIT:

Preferred stock - Class A, $1.00 par value;
  1,000,000 shares authorized, 215,865 shares
  issued and outstanding                                              215,865
Convertible preferred stock - Class B, $1.00
  par value; 1,000,000 shares authorized,
  -0- shares issued and outstanding                                         0
Common stock, no par value - 50,000,000,000 shares
  authorized, 23,177,633,821 shares issued
  and outstanding                                                  29,538,421
Additional paid-in capital:
  Convertible preferred stock - Class B $1.00 par
    value, 1,000,000 stock options exercisable                        100,000
  Common stock, no par value 51,620,000 stock
    options and warrants exercisable                                1,372,514

Deficit accumulated during the development stage                  (39,485,399)
                                                            -----------------
Total shareholders' deficit                                        (8,258,599)
                                                            -----------------
Total liabilities and shareholders' deficit                $          257,660
                                                            =================

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

<page>F-3

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended September 30, 2007 and 2006
      And the Cumulative Period
From December 31, 1990 (Inception) Through September 30, 2007
<table>

                                                               Dec. 1, 1990
                                                                                   (Inception)
                                             Year Ended         Year Ended           Through
                                            September 30,      September 30,      September 30,
                                                2007               2006               2007
                                         -----------------  -----------------  -----------------
                                         <C>                <C>                <C>

Revenues                                 $           6,922  $               0  $         524,382

Cost of prototypes and samples sold                224,772            211,120          1,567,261
                                         -----------------  -----------------  -----------------
Gross loss                                        (217,850)          (211,120)        (1,042,879)

Operating expenses:
General and administrative                       1,457,650          1,329,175         25,542,715
Bad debt expense                                         0                  0          1,680,522
Write-off of deposits
 and intangible assets                              14,853             17,000          1,331,714
                                         -----------------  -----------------  -----------------
Loss from operations                            (1,690,353)        (1,557,295)       (29,597,830)

Other income (expenses):
  Forgiveness of debt                                    0                  0            504,462
  Settled damages                                        0                  0           (125,000)
  Other income                                           0                  0             12,072
  Interest income                                    4,150              4,468            111,542
  Interest expense                              (2,080,351)        (1,499,470)       (10,453,145)
  Minority interest                                      0                  0             62,500
                                           -----------------  ----------------- -----------------
Net loss                                 $      (3,766,554)  $     (3,052,297) $     (39,485,399)
                                           =================  ================= =================

Weighted average shares outstanding
  Basic and diluted                         19,153,984,456      11,530,291,162
                                           =================  =================
Net loss per share - basic and diluted   $           (0.00)  $          (0.00)
                                           =================  =================

The accompanying notes are an integral part of these consolidated financial statements.
</table>
<page>F-4
<table>
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007


                           Preferred Stock       Common Stock            Additional     Stock                 Total
                           Class A and B         No Par Value            Paid in  Subscription Accumulated Shareholders'
                             Shares      Value     Shares      Value     Capital   Receivable   Deficit  Equity(Deficit)
                           ----------  ---------- ----------- ---------- ---------- ----------- ----------- -----------
                           <C>         <C>        <C>         <C>        <C>        <C>         <C>         <C>
Balance, Dec. 1, 1990
(re-entry
development stage)               0    $      0       10,609  $  1,042,140 $      0  $         0 $(1,042,140)$        0

Shares issued in exchange for:
Cash, Aug. 1993                  0           0        1,000         1,000        0            0           0      1,000
Capital contribution,
 Aug. 1993                       0           0        2,000           515        0            0           0        515
Services, Mar. 1993              0           0        2,000           500        0            0           0        500
Services, Mar. 1993              0           0        1,200           600        0            0           0        600
Net loss for the year            0           0            0             0        0            0      (5,459)    (5,459)
                             --------  ---------- -------------  -------- --------- -----------  ----------   ---------
Balance, September 30, 1993      0           0       16,809     1,044,755        0            0  (1,047,599)    (2,844)

Shares issued in exchange for:
Services, May 1994               0           0        2,400         3,000        0            0           0      3,000
Cash, Sep. 1994                  0           0       17,771        23,655        0            0           0     23,655
Services, Sep. 199               0           0        8,700        11,614        0            0           0     11,614
Cash, Sep. 1994                  0           0        3,000        15,000        0            0           0     15,000
Cash, Oct. 1994             16,345      16,345            0             0        0            0           0     16,345
Cash, Sep. and Oct. 1994                     0        1,320        33,000        0            0           0     33,000
Net loss for the year            0           0            0             0        0            0     (32,544)   (32,544)
                           ---------- ---------- -------------  ---------- --------  ----------  ------------ ---------
Balance, November 30, 1994  16,345      16,345       50,000     1,131,024        0            0  (1,080,143)    67,226

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

<page>F-5

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007

                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock      Common Stock       Additional    Stock     During the  Shareholders'
                                     Class A           No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value    Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
 Cash, February 13, 1995             -   $      -        1,160 $   232,000 $      -   $      -   $        -   $   232,000
 Debt repayment, February 13,
  1995                               -          -        2,040     408,000        -          -            -       408,000
 Debt repayment, February 20,
  1995                               -          -        4,778     477,810        -          -            -       477,810
 Acquisition of assets, CIPI
  February, 1995                     -          -       28,750   1,950,000        -          -            -     1,950,000
 Acquisition of assets, April 5,
  1995                               -          -       15,000         -          -          -            -           -
 Cash and services, April and
  May 1995                           -          -       16,000     800,000        -          -            -       800,000
 Cash, June 1, 1995                  -          -          500      30,000        -          -            -        30,000
 Acquisition of assets and
  services, September 26, 1995       -          -        4,000     200,000        -          -            -       200,000
 Cash, September 28, 1995            -          -           41       3,000        -          -            -         3,000
 Acquisition of assets,
  September 1995                     -          -       35,000   1,750,000        -          -            -     1,750,000
 Return of assets, CIPI
  September, 1995                    -          -      (27,700) (1,950,000)       -          -            -    (1,950,000)
Net loss for the year                -          -          -           -          -          -     (2,293,867) (2,293,867)
                               ---------  ----------- -------- -----------   -------- ------------ ---------- -----------
Balance,
 November 30, 1995                16,345     16,345    129,569   5,031,834        -          -     (3,374,010)  1,674,169

Shares issued in exchange for:
 Cash, February, 1996                -          -        1,389     152,779        -          -            -       152,779
 Debt repayment, February 1996       -          -       10,000     612,000        -          -            -       612,000
 Services, February, 1996            -          -        3,160     205,892        -          -            -       205,892
 Cash, March, 1996                   -          -          179      25,000        -          -            -        25,000
Shares returned and canceled,
  March, 1996                        -   $      -      (15,000)$       -   $      -   $      -   $        -   $       -
 Services, April, 1996               -          -           13       2,069        -          -            -         2,069
 Services, September, 1996         4,155      4,155        586      36,317        -          -            -        40,472
 Services, October, 1996             -          -        6,540     327,000        -          -            -       327,000
 Debt repayment, November, 1996      -          -        2,350      64,330        -          -            -        64,330
Net loss for the year                -          -          -           -          -          -     (2,238,933) (2,238,933)
                               --------- ---------- ---------- -----------  ---------- --------- ------------ -----------
Balance,
 November 30, 1996                20,500     20,500    138,786   6,457,221        -          -     (5,612,943)    864,778

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

<page>F-6

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007


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

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

Shares issued in exchange for:
 Services, December, 1997
  through November, 1998             -   $      -    2,551,610 $ 2,338,264 $      -   $      -            -   $ 2,338,264
 Debt repayment, April, 1998
  through September, 1998            -          -      250,000     129,960        -          -            -       129,960
 Cash, January, 1998 through
  July, 1998                         -          -    4,833,334   1,139,218        -          -            -     1,139,218
 Acquisition of assets,
  July, 1998                         -          -      300,000     421,478        -          -            -       421,478
 Acquisition of remaining 20%
  minority interest in
  subsidiary, July, 1998             -          -       50,000      59,247        -          -            -        59,247
 Services, November, 1998         60,000     60,000        -           -          -          -            -        60,000
Net loss for the year                -          -          -           -          -          -     (4,928,682) (4,928,682)
                               --------- ---------- ---------- ----------- ---------- ------------ ---------- -----------
Balance,
 November 30, 1998                80,500     80,500 12,662,212  12,437,747        -          -    (13,280,893)   (762,646)

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

<page>F-7

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007



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

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

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

<page>F-8

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007

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

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

<page>F-9

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007


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

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

<page>F-10

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007

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

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

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

<page>F-11

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007


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

Shares issued in exchange for:
 Services, October, 2002 through
  July, 2003, valued from
  $0.0012 to $0.0100 share           -   $      -    31,500,000 $   134,000 $      -   $      -   $        -   $   134,000
 Debt and accrued liabilities,
  October, 2002 through September,
  2003, valued from $0.0010 to
  $0.0512 per share, including
  transfer of $155,027
  beneficial conversion option                      162,134,748     704,774   (155,027)       -            -       549,747
 Cash, November, 2002 through
  September, 2003, with prices
  ranging from $0.0010 to $0.100
  per share                          -          -   128,500,000     180,000        -          -            -       180,000
Issuance of 2,500,000 warrants,
  November, 2002 through May, 2003,
  at an exercise price of $0.005
  per share, in conjunction with
  $500,000 principal value of 12%
  convertible debt                   -          -           -           -        9,816        -            -         9,816
Beneficial conversion option,
  November, 2002, through May, 2003,
  pertaining to $500,000 principal
  value of 12% convertible debt      -          -           -           -      490,184        -            -       490,184
Conversion of $193,665 principal
  value of 12% convertible debt
  along with $34,355 accrued
  interest, net of $52,340
  convertible debt discount          -          -   103,778,301     353,525   (177,845)       -            -       175,680
Net loss for the year                -          -           -           -          -          -     (2,386,875) (2,386,875)
                               --------- ---------- ----------- ----------- ---------- ---------- ------------ -----------
Balance,
 September 30, 2003              200,020    200,020 490,224,872  19,807,537  2,335,061        -    (25,305,038) (2,962,420)

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

<page>F-12

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007
                                                                                                    Deficit
                                                                                                  Accumulated       Total
                                  Preferred Stock       Common Stock        Additional   Stock     During the  Shareholders'
                                     Class A            No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value     Shares       Value     Capital   Receivable    Stage        (Deficit)
                               --------- ----------  ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
Services, October 2003 through
  August 2004 valued from
  $0.0008 to $0.0026 per share       0   $       0   57,300,000 $    78,400 $         0 $        0 $        0  $     78,400
Issuance of 7,000,000 warrants
 November 2003 through
 September 2004 at exercise Prices
 ranging from $0.002 to  $0.005 per
 share, in conjunction  with
 $2,000,000 principal value of 12%
 convertible debt                    0           0            0            0       9,447         0          0         9,447
Debt and accrued liabilities
  December 2003 with
  preferred stock class A
  valued at $1.00 per share     15,845 A    15,845            0            0           0         0          0        15,845
Debt and accrued liabilities
  November 2003 to September
  2004 with common shares
  valued from $0.001 to $0.0025
  per share                          0           0  156,625,000      163,575           0         0          0       163,575
Cash, November 2003 through
  March 2004 with prices of
  approximately $0.0010              0           0   74,670,000       75,000           0         0          0        75,000
  per share
Re-characterization of beneficial
  conversion option as derivative
  conversion option , October 2003
  pertaining to $963,205 of
  convertible debt at
  September 30, 2003                 0           0            0            0    (881,550)        0          0      (881,550)
Conversion of $218,115 principal
  value of 12% convertible debt
  $327,172 of derivative
  conversion option
  along with $49,008 accrued
  interest, net of $28,571
  convertible debt discount          0           0  352,352,250      565,724            0        0                  565,724
Net loss for the year                0           0            0            0            0        0   4,228,827)  (4,228,827)
                             --------- ----------   -----------  -----------  ----------- --------   ----------  -----------
Balance, September 30, 2004  215,865    215,865   1,131,172,122   20,690,236    1,462,958        0  29,533,865)  (7,164,806)

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

<page>F-13

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007

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

Shares issued in exchange for:
Cash, January 2005 with a price
  of $0.00125 per share            0           0     4,000,000        5,000         0           0           0          5,000
Debt, accrued liabilities
  and prepaid retainer
  October 2004 to September
  2005 with common shares
    valued from $0.0004 to $0.0010
  per share                        0           0   591,300,000      473,362         0           0           0        473,362
Services, December 2004 through
  August 2005 valued from
  $0.0006 to $0.0010 per share     0           0    52,000,000       46,200         0           0           0         46,200
Issuance of 2,800,000 warrants
 November 2004 through
 September 2005 at an exercise
 price of $0.0039 per share, in
 conjunction with $1,400,000
 principle value of 12%
 convertible debt                  0           0             0            0     3,756           0           0          3,756
Conversion of $2,529,378 principal
  value of convertible debt,
  $3,794,067 of derivative
  conversion option
  along with $104,410 accrued
  interest, net of $973,565
  convertible debt discount        0           0 5,610,392,876    5,454,290                    0            0      5,454,290
Net loss for the year              0           0             0            0         0              (3,132,683)    (3,132,683)
                            ----------- --------  ------------- ----------- --------- ----------   ----------    -----------
Balance, September 30, 2005  215,865     215,865 7,388,864,998   26,669,088 1,466,714          0  (32,666,548)    (4,314,881)

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

<page>F-14

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007

                                                                                                   Deficit
                                                                                                 Accumulated       Total
                                  Preferred Stock       Common Stock        Additional   Stock     During the   Shareholders'
                                     Class A            No Par Value         Paid-in   Subscript. Development      Equity
                                  Shares    Value     Shares       Value     Capital   Receivable    Stage        (Deficit)
                                --------- ----------  ---------- ----------- ---------- ---------- -----------   ------------
Shares issued in exchange for:
Cash, April through July 2006
  with prices ranging from
  $0.00015 to $0.00050 per  share      0          0    533,333,333     125,000          0        0            0       125,000
Services, March 2006 valued
  at approximately $0.00071 per share  0          0      4,368,872       3,100          0        0            0         3,100
Issuance of 20,320,000 warrants
 September 2006 at an exercise
 price of $0.0009 per share, in
 conjunction with $1,270,000
 principal value of 6%
 convertible debt                      0          0              0           0      4,551        0            0         4,551
Conversion of $547,376 principal
  value of 8% and 12% convertible debt,
  $821,065 of derivative conversion
  option, along with $8,300 accrued
  interest, net of $243,177
  convertible debt discount            0          0  6,458,227,580   1,133,564          0        0             0    1,133,564
Net loss for the year                  0          0              0           0          0        0    (3,052,297)  (3,052,297)
                               ---------- ---------- ------------- ----------- ----------   ------   ----------- ------------
Balance, September 30, 2006      215,865    215,865 14,384,794,783  27,930,753  1,471,265        0   (35,718,845)  (6,100,962)

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

<page>F-15

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through September 30, 2007

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

Shares issued in exchange for:
 Accrued liabilities, November,
  2006, at a price of
  approximately $0.0005 per share     0 $       0    250,000,000  $   124,165  $         0  $        0  $          0    $ 124,165
 Services, February, 2007, valued
  at $0.0003 per share                0         0     75,000,000       22,500            0           0             0       22,500
 Issuance of 19,000,000 warrants
  February 2007 through September,
  2007, at an exercise price of
  $0.0009 per share, in conjunction
  With $950,000 principal value of 6%
  convertible debt                    0         0              0            0        1,249           0             0        1,249
 Conversion of $409,864 principal
  value of 8% and 12% convertible
  debt, $614,795 of derivative
  conversion option, along with
  $436,344 accrued interest           0         0  8,467,839,038   1,461,003             0          0             0     1,461,003
Net loss for the year                 0         0              0           0             0          0    (3,766,554)   (3,766,554)
                               --------- --------- --------------  ----------    ---------     -------   -----------   -----------
Balance, September 30,  2007    215,865 $ 215,865 23,177,633,821  $29,538,421  $ 1,472,514   $      0  $(39,485,399) $ (8,258,599)
                               ========= ========= ==============  ==========    =========     =======   ===========   ===========

The accompanying notes are an integral part of these consolidated financial statements.
</table>
<page>F-16


CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2007 and 2006
      And the Cumulative Period
From December 31, 1990 (Inception) Through September 30, 2007
<table>
                                                                                       Dec. 1, 1990
                                                                                       (Inception)
                                             Year Ended             Year Ended           Through
                                             September 30,         September 30,       September 30,
                                                2007                   2006                 2007
                                            ----------------      ---------------    ----------------
                                            <C>                   <C>                <C>
Cash flows from operating
 activities:
  Net loss                                   $  (3,766,554)     $  (3,052,297)    $  (39,485,399)
    Adjustments to reconcile
      net loss to net cash used
      in (provided by) operating activities:
        Provision for bad debt write-offs                0                  0          1,422,401
        Depreciation and
          amortization of property                  22,224             15,472          1,766,626
        Stock issued for services                   22,500              3,100          7,670,973
        Stock issued for interest                        0                               535,591
        Settled damages                                  0                  0            (25,000)
        Minority interest                                0                  0            (62,500)
        Write-off of deposits and
          intangible assets                         14,853             17,000          1,331,714
        Amortization of loan fees
          and note discounts                     1,165,667            752,710          4,965,517
        Mark-to-market of derivative
          conversion option                        476,249            639,551          3,392,261
        Forgiveness of debt                              0                  0           (504,462)
Changes in:
  Accounts/employee advances
    receivable                                      (1,000)                 0             (5,201)
  Prepaid expenses and deposits                     58,527            (28,447)           140,644
  Accrued interest receivable                            0                  0            (95,700)
  Accounts payable                                  53,921            (37,435)          2,478,571
  Accrued compensation                             191,919            195,505           3,242,623
  Due to/from officers                                  88                 64             631,298
  Accrued interest and
   other current liabilities                       437,689            130,994           1,430,448
                                          ----------------    ---------------    ----------------
      Total adjustments                          2,442,637          1,688,514          28,315,804
                                          ----------------    ---------------    ----------------
Net cash used in operating activities           (1,323,917)        (1,363,783)       (11,169,595)

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

<page>F-17



CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2007 and 2006
      And the Cumulative Period
From December 31, 1990 (Inception) Through September 30, 2007


                                                                                  Dec. 1, 1990
                                                                                   (Inception)
                                             Year Ended         Year Ended           Through
                                            September 30,      September 30,      September 30,
                                                2007               2006               2007
                                            ----------------   ---------------    --------------
Cash flows from investing activities
  Increase in notes receivable                           0                  0         (1,322,500)
  Cost of license & technology                           0                  0            (94,057)
  Sale (purchase) of bank cds                      430,733           (430,733)                 0
  Purchase of equipment                            (16,640)           (79,981)          (342,026)
                                            ----------------   ----------------   ---------------
Net cash provided by (used in)
 investing activities                              414,093           (510,714)        (1,758,583)


Cash flows from financing
 activities:
  Common stock issuance                                  0            125,000          3,617,172
  Stock warrant issuance                             1,249              4,551            206,134
  Preferred stock issuance                                                  0             16,345
  Proceeds from stock purchase                           0                  0            281,250
  Loan fees from debt, other                       (20,000)           (20,000)          (599,555)
  Proceeds from debt, related                            0                  0            206,544
  Proceeds from debt, other                        949,473          1,266,117          9,862,865
  Payments on debt, related                              0                  0            (53,172)
  Payments on debt, other                                0                  0           (604,536)
  Decrease in stock
   subscription receivable                               0                  0             35,450
  Contributed capital                                    0                  0                515
                                          ----------------   ----------------   ----------------
Net cash provided by
 financing activities                              930,722          1,375,668         12,969,012

Net increase (decrease)
 in cash and cash equivalents                       20,898          (498,829)             40,834
Cash and cash equivalents
 at beginning of period                             19,936            518,765                  0
                                          ----------------   ----------------   ----------------
Cash and cash equivalents
 at end of period                         $         40,834  $          19,936   $         40,834
                                          ================   ================   ================

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

<page>F-18

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2007 and 2006
      And the Cumulative Period
From December 31, 1990 (Inception) Through September 30, 2007


                                                                                     Dec. 1, 1990
                                                                                      (Inception)
                                               Year Ended           Year Ended          Through
                                              September 30,        September 30,      September 30,
                                                   2007                2006               2007
                                            ----------------      ---------------    ---------------

Supplemental disclosures of
  Cash flow information:

  Cash paid for interest                       $     7,610        $     2,197        $   709,297
                                                  ===========        ===========        ===========

  Cash paid for income taxes                   $     4,000        $         0        $    20,050
                                                  ===========        ===========        ===========

Non-cash investing and financing activities:
  Common stock issued
   in exchange for:
    Note receivable                            $         0        $         0        $   281,250
    Prepaid expenses                           $         0        $         0        $   264,748
    Property and equipment                     $         0        $         0        $   130,931
    Licenses and technology                    $         0        $         0        $ 2,191,478
    Acquisition of remaining
     minority interest in
     subsidiary                                $         0        $         0        $    59,247
    Repayment of debt                          $ 1,024,659        $ 1,125,264        $14,038,130
    Accrued services
     and interest                              $   560,509        $     8,300        $ 5,776,011
  Preferred stock issued
   in exchange for:
    Accrued services                           $         0        $         0        $    75,845
    Repayment of debt                          $         0        $         0        $   119,520
  Preferred stock options
   issued in exchange for:
    Repayment of debt                          $         0        $         0        $   100,000

  Re-characterize beneficial
    conversion option as debt                  $         0        $         0        $   881,550

The accompanying notes are an integral part of these consolidated financial statements.
</table>
<page>F-19

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

Note 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

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

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

On January 11, 2000, a new Nevada corporation, eEnergyServices.com, Inc., was
formed as a wholly-owned subsidiary of the Company, which, as yet, has no net
assets and has not commenced operations.

Basis of presentation

The accompanying consolidated financial statements include the accounts and
transactions of Conectisys Corporation, its current wholly-owned subsidiaries
eEnergyServices.com, Inc. and United Telemetry Company, as well as its former
wholly owned subsidiary TechniLink, Inc., and former 80% owned subsidiary
PrimeLink, Inc., both of which have been dissolved.  All material intercompany
transactions and balances have been eliminated in the accompanying consolidated
financial statements. Certain prior period balances have been reclassified to
conform to the current year's presentation.

The Company returned to the development stage in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 7 on December 1, 1990 and during the
fiscal year ended November 30, 1995.

The Company has completed two mergers and is in the process of developing its
technology and product lines.

Use of estimates

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

Fair value of financial instruments

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

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

<page>F-20



CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

Note 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

Since the fair value is estimated at September 30, 2007, the amounts that will
actually be realized or paid at settlement of the instruments could be
significantly different.  The carrying amount of cash and cash equivalents is
assumed to be the fair value because of the liquidity of these instruments.
Employee advances, accounts payable, accrued compensation, due to/from  officer,
accrued interest, other current liabilities, and notes payable approximate fair
value because of the short maturity of these instruments. Also, market rates of
interest apply on all officer advances and short-term promissory notes.  Long-
term debt is recorded at face value because the principal amount is convertible
into common stock.

Fiscal year

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

Research and development costs

The Company has been engaged in researching, engineering, and developing its H-
Net(TM) technologies since August 1995.  Such expenses incurred are identified
as "cost of prototypes and samples sold" in the statements of operations.

Cash and cash equivalents

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

Short-term investments

Short-term investments consist of available-for-sale debt securities that are
carried at fair value.  Unrealized gains and losses on short-term investments,
net of tax, are included in shareholders' equity (deficit).  Available-for-sale
debt securities are classified as current assets based on the Company's intent
and ability to use any and all of these securities as necessary to satisfy the
significant short-term liquidity requirements of the business.

Property and equipment

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

Impairment of long-lived and intangible assets

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
requires that the Company periodically review the carrying amounts of its
property and equipment and its finite-lived intangible assets to determine
whether current events or circumstances indicate that such carrying amounts may
not be recoverable. During the year ended September 30, 2006, the Company
determined that its deposits and other costs related to the operation of an on-
line video game company were impaired and a write-down of $17,000 was recorded.
During the year ended September 30, 2007 an additional write-off of $14,853 was
recorded bringing this operation to a close.

<page>F-21

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

Note 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting for stock-based compensation

The compensation for consultants and employees with the Company's capital stock
is recorded at estimated market value.  The volatile nature of the price of the
Company's common stock causes wide disparities in certain valuations.

SFAS No. 123, "Accounting for Stock-Based Compensation," established a fair
value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees in
exchange for equity instruments.  The Company adopted this accounting standard
on January 1, 1996. SFAS No. 123 also encouraged, but did not require,
companies to record compensation cost for stock-based employee compensation.

The Company adopted the provisions of SFAS No. 123(Revised 2004), "Share-Based
Payment" ("SFAS 123R"), on January 1, 2006.  Accordingly, compensation costs for
all share-based awards to employees are measured based on the grant date fair
value of those awards and recognized over the period during which the employee
is required to perform services in exchange for the award (generally over the
vesting period of the award).  The Company has no awards with market or
performance conditions.  Excess tax benefits as defined by SFAS 123R (when
applicable) will be recognized as an addition to additional paid-in capital.
Effective January 1, 2006 and for all periods subsequent to that date, SFAS 123R
supersedes the Company's previous accounting under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").  In March
2005, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 107 ("SAB 107") relating to SFAS 123R.  The Company has applied the
provisions of SAB 107 in its adoption of SFAS 123R.

The Company adopted SFAS 123R using the modified prospective transition method,
which provides for certain changes to the method for valuing share-based
compensation.  The valuation provisions of SFAS 123R apply to new awards and to
awards that are outstanding at the effective date and subsequently modified or
cancelled.  Estimated compensation expense for awards outstanding at the
effective date will be recognized over the remaining service period using the
compensation cost calculated for the pro forma disclosure purposes under FASB
Statement No. 123.  In accordance with the modified prospective transition
method, the Company's consolidated financial statements for prior periods were
not restated to reflect, and do not include, the effect of SFAS 123R.

The value of the stock-based award is determined using a pricing model whereby
compensation cost is the excess of the fair value of the stock as determined by
the model at the grant date or other measurement date over the amount an
employee must pay to acquire the stock.  Shares of the Company's common stock
issued in exchange for goods or services are valued at the cost of the goods or
services received or at the market value of the shares issued, depending on the
ability to estimate the value of the goods or services received.

Net loss per common share - basic and diluted

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

<page>F-22

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

Note 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

As of September 30, 2007, the Company had 23,177,633,821 shares of common stock
outstanding.  If all of the Company's unexpired stock warrants and options
(including contingent issuances) were exercised, and all the principal value and
accrued interest on its outstanding convertible debentures were converted, the
Company's incremental common shares (not included in the denominator of diluted
earnings (loss) per share because of their anti-dilutive nature) would be as
follows:

Class B preferred stock options                   10,000,000
Convertible note holder - common stock warrants   51,620,000
                                              --------------
Subtotal                                          61,620,000

Accrued officer compensation ($520,000),
convertible into common stock                    616,823,358

Convertible note holder principal value
($2,878,472), accrued interest ($360,614)
assumed converted into common stock at
$0.00004 per share                            80,977,150,000
                                              --------------
Total potential common stock equivalents      81,655,593,358

Stock issued for non-cash consideration

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

Income taxes

The Company files a consolidated federal income tax return.  The Company has
adopted SFAS No. 109, which requires the Company to recognize deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's consolidated financial statements or tax
returns.  Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets using the enacted rates in effect in the years in which the
differences are expected to reverse.  The Company has recognized a valuation
allowance covering 100% of the net deferred tax assets (primarily tax benefits
from net operating loss carryforwards), because it is more likely than not that
the tax benefits attributable to the deferred tax assets will not be realized in
the future.

Advertising Costs

The Company expenses advertising costs in the year incurred. Such costs amounted
to $6,766 and $8,716 for the years ended September 30, 2007 and 2006
respectively.

Recently issued accounting pronouncements

The Financial Accounting Standards Board, or FASB, has established new
accounting pronouncements.  The Company does not presently expect the adoption
of these pronouncements to have a material impact on its financial position,
results of operations, or cash flows.

<page>F-23

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007


Note 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 ("SFAS 157"), Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles ("GAAP"), and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements.  Prior to SFAS 157, there were
different definitions of fair value and limited guidance for applying those
definitions in GAAP.  Moreover, that guidance was dispersed among the many
accounting pronouncements that require fair value measurements.  Differences in
that guidance created inconsistencies that added to the complexity in applying
GAAP. The changes to current practice resulting from the application of SFAS 157
relate to the definition of fair value, the methods used to measure fair value,
and the expanded disclosures about fair value measurements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.

In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159 ("SFAS 159"), The Fair Value Option for Financial Assets and Financial
Liabilities, which permits entities to choose to measure many financial
instruments and certain other items at fair value which are not currently
required to be measured at fair value. SFAS 159 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years.

In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141R ("SFAS 141R"), Business Combinations, which establishes principles and
requirements for how the acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree, goodwill acquired in the business
combination, or a gain from a bargain purchase. SFAS 141R is effective for
financial statements issued for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008

In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160 ("SFAS 160"), Noncontrolling interests in Consolidated Financial
Statements, which establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective for financial statements issued for fiscal
years beginning on or after December 15, 2008, and interim periods within those
fiscal years.

Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying consolidated financial statements.

<page>F-24

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 2.    GOING CONCERN UNCERTAINTY

As of September 30, 2007, the Company had a deficiency in working capital of
approximately $4,600,000 and had incurred cumulative net losses since inception
of approximately $40,000,000, which raise substantial doubt about the Company's
ability to continue as a going concern.

Management's plans for correcting these deficiencies include the future sales
and licensing of the Company's products and technologies, the raising of capital
through the issuance of common stock and from continued officer advances, which
are expected to help provide the Company with the liquidity necessary to meet
operating expenses.  An investor group had previously advanced the Company an
aggregate amount of $5,920,000 through twenty-three similar funding tranches
occurring in April 2002 through July 2006.  During the year ended September 30,
2007, the same investor group advanced the Company an additional $950,000. The
Company received $250,000 in February 2007, $100,000 in March 2007, $100,000 in
April 2007, $100,000 in May 2007, $100,000 in June 2007, $100,000 in July 2007,
$100,000 in August 2007, and $100,000 in September 2007, including certain fees
payable, in connection with this additional financing. Subsequent to September
30, 2007, the Company has received funding of another $300,000.  Over the longer
term, the Company plans to achieve profitability through its operations from the
sale and licensing of its H-Net(TM) automatic meter-reading system.  The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of the recorded asset amounts
or the amounts and classification of liabilities that might be necessary should
the Company be unable to continue in existence.

NOTE 3.    RELATED PARTY TRANSACTIONS

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

Effective October 1, 2006, the Company entered into an operating lease for a
residence Located in Valencia, California.  The lease commitment has been
extended through January 31, 2008.  The aggregate lease commitment is $26,160
which includes one month's rent abatement.  The space is being utilized by a
corporate officer and occasionally by other consultants.

NOTE 4.    PREPAID EXPENSES AND DEPOSITS

The Company has accrued a prepaid expense of $80,000 as a staying bonus for its
Chief Executive Officer as per his employment agreement (see Note 10). The
staying bonus is being amortized over the calendar year 2007.  For the calendar
year ended December 31, 2007, $60,000 of this cost had been amortized as officer
salaries through September 30, 2007, resulting in an unamortized balance at
September 30, 2007 of $20,000.

As of September 30, 2007, the balance in prepaid expenses totaled $87,553.
Included in the balance was  the above staying bonus, $20,000 maintained in an
escrow account designated for key man life insurance, a retainer for a law firm
amounting to $18,303, and $29,250 in prepaid taxes and software development.

The Company has paid a security deposit of $4,698 under its existing lease
agreement for office space in Valencia, California (see Note 10).

<page>F-25

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 5.    PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2007 consisted of the following:

Office equipment                             $   361,271
Furniture and fixtures                            57,290
Vehicles                                          35,362
Leasehold improvements                            21,285
                                             -----------
Total cost                                       475,208
Accumulated depreciation                        (377,025)
                                             -----------
Net book value                               $    98,183
                                             ===========

NOTE 6.   LOAN FEES

As of September 30, 2005, aggregate loan fees amounted to $519,555 and
accumulated amortization of these loan fees was $474,353, resulting in an
unamortized loan fee balance of $45,202 at that date.

During the year ended September 30, 2006, the Company received an aggregate of
$1,270,000 from the same accredited investor group in exchange for 6%
convertible debentures maturing March 8, 2009, convertible at the lesser of
$0.005 per share and 40% of the average Of the lowest three intra-day trading
prices of a share of common stock during the 20 trading days immediately
preceding conversion.  These convertible debentures were accompanied by an
aggregate of 20,320,000 common stock warrants, exercisable over a five-year
period at a strike price of $0.0009 per share. Loan fees associated with these
loans amounted to $20,000.

Total amortization of all loan fees during the year ended September 30, 2006
amounted to $36,962, leaving an unamortized loan fee balance at September 30,
2006 of $28,240.

During the year ended September 30, 2007, the Company received an aggregate of
$950,000 from the same accredited investor group in exchange for 6% convertible
debentures maturing February 13, 2010, convertible at the lesser of $0.03 per
share and 40% of the average of the lowest three intra-day trading prices of a
share of common stock during the 20 trading days immediately preceding
conversion. These convertible debentures were accompanied by an aggregate of
19,000,000 common stock warrants, exercisable over a seven-year period at an
exercise price of $0.0009 per share. Loan fees associated with these loans
amounted to $20,000.

Total amortization of all loan fees during year ended September 30, 2007
amounted to $22,848 leaving an unamortized loan fee balance at September 30,
2007 of $25,392.

NOTE 7.    DUE TO/FROM OFFICERS

The aggregate amount due a  former officer at September 30, 2007 was $537.
Interest expense on this loan (at an annual rate of 18%) amounted to $88 and $64
for the years ended September 30, 2007 and 2006, respectively.

As of September 30, 2007, the Company owed its officers and former officers
$2,063,035 in accrued compensation (included in the aggregate accrued
compensation figure of $2,070,615 on the balance sheet).  Of this amount,
$440,000 was attributable to cumulative staying bonuses payable to the President
and former Chief Financial Officer of the Company as of January 1, 2006.  An
additional $80,000 payable to the President on January 1, 2007 is being
amortized over the 2007 calendar year. The staying bonuses are to be compensated
for with the Company's common stock, valued at the average bid and ask price for
the stock for the 30 days prior to each respective year-end issuance date. The
total common stock to be issued as staying bonuses amounted to 616,823,358
shares at September 30, 2007.

<page>F-26

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 8.    CONVERTIBLE DEBENTURES
<table>


Convertible debentures at September 30, 2007, including convertible debentures
previously entirely converted to equity, secured by substantially all the assets
of the Company, consisted of the following:

                       Original      Net         Remaining      Accrued        Unexpired
                      Principal   Proceeds to   Principal       (Unpaid)        Warrants
Issuance Date          Amount     Company(1)     Amount         Interest(2)     Issued
----------------   ------------- ------------- ------------   -------------   ------------
                   <C>           <C>            <C>             <C>           <C>

March 29, 2002     $    300,000  $    225,000   $    --         $   --              --

May 10, 2002            150,000       129,000        --             --              --

June 17, 2002           300,000       238,000        --             --              --

November 27, 2002       200,000       144,000        --             --          1,000,000

March 3, 2003           150,000       100,000        --           27,720          750,000

May 12, 2003            150,000       100,000        --           36,000          750,000

November 25, 2003       100,000        76,000        --           24,000          500,000

December 3, 2003         50,000        31,000        --           12,000          250,000

December 31, 2003        50,000        44,000        --           12,000          250,000

February 18, 2004        50,000        35,000        --           12,000          250,000

March 4, 2004           250,000       203,000        --           59,048        1,250,000

April 19, 2004          250,000       165,000        --              --           750,000

June 30, 2004           625,000       452,000        --              --         1,875,000

September 9, 2004       625,000       482,000        --              --         1,875,000

March 17, 2005        1,400,000     1,148,000       973,483      187,349        2,800,000

March 8, 2006         1,270,000     1,180,000       954,989       72,223       20,320,000

February 13, 2007       950,000       860,000       950,000       22,126       19,000,000

                     ----------   -----------   -----------   ----------     ------------
Total              $  6,870,000  $  5,612,000  $  2,878,472  $   464,466       51,620,000
                     ==========   ===========   ===========   ==========     ============
</table>
<page>F-27

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 8.    CONVERTIBLE DEBENTURES (continued)

(1)     Amounts are approximate and represent net proceeds after deducting loan
fees and expenses in connection with the issuance as well as certain expenses
for legal fees incurred in connection with the preparation of reports and
statements filed with the Securities and Exchange Commission.

(2)    Amounts represent accrued (unpaid) interest outstanding as of September
30, 2007.  The total amount of accrued and unpaid interest does not account for
$103,852 of outstanding pre-paid interest.

The above secured convertible debentures or notes were all issued to the same
investor group (with four participating investor-members).  Except for the
convertible notes issued subsequent to September 9, 2004, they are due one year
following their respective issuance dates.  The convertible notes issued during
the September 30, 2005 fiscal year are due two years from their respective
issuance dates, and the convertible notes issued during the September 30, 2006
fiscal year and the year ended September 30, 2007 fiscal year are due three
years from their respective issuance dates.

The conversion price of the secured convertible debentures is the lower of 40%
of the average of the three lowest intra-day trading prices of a share of the
Company's common stock on the OTC Bulletin Board during the twenty trading days
immediately preceding the conversion date, and either (a) $0.06 for the June
2002 convertible debentures, (b) $0.01 for the November 2002 and March and May
2003 convertible debentures, (c) $0.005 for the November and December 2003 and
the February, March, April, June, and September 2004 convertible debentures and
the March 2005 convertible notes, or (d) $0.03 for the March 2006 and February
2007 convertible notes.  As of September 30, 2007, the applicable conversion
price was approximately $0.00004 per share, meaning that the principal and
accrued interest (after the allocation of the prepaid interest) were potentially
convertible into approximately 80,977,150,000 common shares of the Company.

Subtotal - convertible debentures (principal and interest)      $  3,342,938

Less reclassified accrued interest                                  (360,614)
Less prepaid interest offset                                        (103,852)
                                                                -------------
Subtotal - principal value                                         2,878,472
Derivative conversion option - 150% of principal                   4,317,708
Less unamortized note discount                                    (1,344,015)
                                                                -------------
Net carrying value - convertible debentures                     $  5,852,165

<page>F-28

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 8.    CONVERTIBLE DEBENTURES (continued)

Convertible note payable to Laurus Master Fund, Ltd.,
  Unsecured, with interest payable at an annual rate of 8%,
  conversion premium of 25% based on current market price
  of the Company's common stock (as defined), initially due
  October 12, 2001.  Currently in default                              9,438
                                                                ------------
Total - convertible debentures and notes                        $  5,861,603
  Current portion                                                  2,072,303
                                                                ------------
  Long-term portion                                             $  3,789,300
                                                                ============

<table>
As of September 30, 2007, five-year maturities of the convertible debentures and
notes were as follows:

                                                                                           Subsequent
    Year ended                                           Derivative         Unamortized   Conversions
   September 30:                         Principal   Conversion Option     Note Discount   to Equity  Total Due
-----------------                       -----------  ------------------    -------------  ----------- ----------
                                        <C>          <C>                   <C>            <C>
     2008                               $   982,921    $   1,460,224       $     -        $ (370,842)$2,072,303
     2009                                   954,989        1,432,484          (521,281)               1,866,192
     2010                                   950,000        1,425,000          (822,734)       -       1,552,266
Subsequent conversions to equity             -                  -                -           370,842    370,842
                                        ----------     -------------      --------------   ---------- ---------
Total convertible debentures and notes  $2,887,910    $    4,317,708       $(1,344,015)  $   -       $5,861,603
                                       ===========     =============       =============   ========== =========
</table>
<page>F-29

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007


NOTE 9. SECURED CONVERTIBLE DEBENTURES - ASSOCIATED
DERIVATIVE CONVERSION OPTION AND CONVERTIBLE DEBT DISCOUNT

In order to provide working capital and financing for the Company's continued
research and development efforts, the Company has entered into a series of
securities purchase agreements and related agreements with an accredited
investor group (the "Purchasers") for the purchase of one-year to three-year
convertible debentures, which bear interest ranging from 6% to 12% per annum,
payable quarterly.  The debentures are currently convertible into common stock
at prices ranging from the lesser of a fixed price ($0.005 to $0.06 per share)
and 40% of the average of the lowest three intra-day trading prices of a share
of common stock during the 20 trading days immediately preceding conversion.
The debentures have also been accompanied by the issuance of three-year to
seven-year common stock warrants (in amounts numbering from 3 to 20 times the
related convertible debt principal issued) and exercisable into the Company's
common stock at prices ranging from $0.0009 to $0.045 per share.  As part of the
recording of the convertible debt transactions, a derivative conversion option
and amortizable convertible debt discount have been recognized.  The carrying
value of the debt is net of the principal value, derivative conversion option,
and unamortized convertible debt discount components.

To the extent debentures issued by the Company are converted into shares of
common stock, the Company will not be obligated to repay the amounts converted.

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

The cumulative history of the Company's convertible debt-related transactions
with the above accredited investor group is summarized as follows:

<page>F-30

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 9. SECURED CONVERTIBLE DEBENTURES - ASSOCIATED
DERIVATIVE CONVERSION OPTION AND CONVERTIBLE DEBT DISCOUNT (continued)
                                               Net        Net
                               Derivative    Convertible  Debt
                    Principal  Conversion      Debt     Carrying    Warrants
Period/Transaction   Amount       Option     Discount    Amount    Outstanding
------------------ ----------  ----------   ----------- ---------  -----------
  Issuances        $  750,000   $      --   $ (750,000) $  --       3,750,000
  Amortization         --              --      279,115   279,115       --
  Conversions        (93,130)          --       69,233   (23,897)      --
                   ----------  ----------   ----------- ---------  -----------
Balance,
September 30, 2002   656,870           --     (401,652)  255,218    3,750,000
  Issuances          500,000           --     (500,000)    --       2,500,000
  Amortization          --             --      653,720   653,720        --
  Conversions       (193,665)          --       52,340  (141,325)       --
                   ----------  ----------   ----------- ---------  -----------
Balance,
September 30, 2003   963,205           --     (195,592)  767,613    6,250,000
  Re-characterize
  Equity as Debt        --        881,550         --     881,550        --
  Bump-up Due to
  Mark-to-Market        --        563,257         --     563,257        --

  Issuances         2,000,000    3,000,000   (2,000,000)3,000,000    7,000,000

  Amortization          --             --      673,705   673,705        --

  Conversions       (218,115)    (327,172)      28,571  (516,716)       --
                   ----------  ----------   ----------- ---------  -----------
Balance,
September 30, 2004 2,745,090    4,117,635   (1,493,316)5,369,409   13,250,000
  Issuances        1,400,000    2,100,000   (1,400,000)2,100,000    2,800,000
  Expirations           --            --          --       --      (3,750,000)
  Amortization          --            --       693,992   693,992         --
  Conversions     (2,529,378)  (3,794,067)     973,565(5,349,880)        --
                   ----------  ----------   ----------- ---------  -----------
Balance,
September 30, 2005 1,615,712    2,423,568   (1,225,759)2,813,521   12,300,000
  Issuances        1,270,000    1,905,000   (1,270,000)1,905,000   20,320,000
  Amortization          --            --       715,748   715,748         --
  Conversions       (547,376)   (821,065)      243,177(1,125,264)        --
                   ----------  ----------   ----------- ---------  -----------
Balance,
September 30, 2006 2,338,336    3,507,503   (1,536,834) 4,309,005  32,620,000
  Issuances          950,000    1,425,000     (950,000) 1,425,000  19,000,000
  Amortization          --            --     1,142,819  1,142,819         --
  Conversions       (409,864)   (614,795)            - (1,024,659)        --
                   ----------  ----------   ----------- --------- -----------
Balance,
September 30, 2007 $2,878,472 $4,317,708   $(1,344,015)$5,852,165  51,620,000
                   =========== ===========  =========== =========  ==========
<page>F-31

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 10.    COMMITMENTS AND CONTINGENCIES

Employment agreements

The Company entered into three employment agreements with key individuals.
The terms of the agreements are as follows:

1)      The Chief Executive Officer (and President) of the Company entered into
an agreement dated October 2, 1995 (which was subsequently amended September 1,
1997, September 1, 1999, and March 27, 2000 for a period of five years to April
1, 2005).  This agreement has been extended annually to April 1, 2008.  He is
entitled to receive a base salary of $160,000 per year.  The Chief Executive
Officer is further to receive a bonus, paid at year-end, equal to 50% of the
Chief Executive Officer's salary, for continued employment. The staying bonus is
to be paid in the Company's restricted common stock. He was also granted an
option to purchase up to 1,943,654 shares of the Company's restricted common
stock at a price equal to 50% of the average market value for the prior 30
trading days before exercise. On March 27, 2000, the exercise price was adjusted
to a fixed rate of approximately $0.39 per share, with an expiration date of
December 2, 2003, which was subsequently extended to December 2, 2005.  These
options have since expired.

2)      The Secretary/Treasurer of the Company entered into an Agreement dated
October 2, 1995 (which was subsequently amended September 1, 1997, September 1,
1999, and March 27, 2000), for a period of five years (extended through April 1,
2005), and she was entitled to receive a base salary of $80,000 per year.  The
Secretary/Treasurer was to receive a bonus, paid at year- end, equal to 50% of
the Secretary/Treasurer's salary, for continued employment.  The staying bonus
was to be paid in the Company's restricted common stock.  She was also granted
an option to purchase up to 500,000 shares of the Company's restricted common
stock at a price equal to 60% of the average market value for the prior 180
trading days before exercise.  On March 27, 2000, the exercise price was
adjusted to a fixed rate of $0.38 per share, with an expiration date of December
31, 2004, which was subsequently extended to December 2, 2005.  These options
have since expired.  The employment agreement with the Secretary/Treasurer was
not extended beyond April 1, 2005, so she was not entitled to the bonus for
continued employment for calendar year 2005.  During the past two fiscal years,
the former Secretary/Treasurer has periodically provided consulting services to
the Company.


3)      The Chief Technical Officer of the Company entered into an agreement
dated August 1, 1998 for an initial term of three years (extended through August
1, 2003 and again through January 19, 2009), 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 the
Company's common stock.  The employee received a hire-on bonus of $75,000 paid
in the Company's common stock, at a discount of one-half market price.  The
Chief Technical Officer is also to receive performance bonuses (paid in 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 to be granted an
option to purchase up to 500,000 shares of the Company's common stock at a price
equal to 60% of the market price at the date of purchase.  As of September 30,
2007, none of the aforementioned milestones had been successfully completed.

Litigation

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

<page>F-32

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 10.    COMMITMENTS AND CONTINGENCIES (continued)

Building Lease

The Company has leased approximately 1,107 square feet of office space in
Valencia, California.  The operating lease commenced November 1, 2005 for a
period of three years and is renewable at the option of the Company for an
additional three year term.  The rent was abated for the months of November and
December 2005, while the Company was incurring approximately $20,076 in
leasehold improvements, before moving in.  A security deposit of approximately
$4,698 was also paid at the inception of the lease.  The initial base rent was
set at $2,214 per month, with annual increases of 3%.  Accordingly, the base
rent was adjusted to approximately $2,283 per month on November 1, 2006.  The
Company must also pay its share of increases in common area maintenance ("CAM")
costs, which currently amount to approximately $187 per month.  Total rental
expense for the years ended September 30, 2007 and 2006 (including other lease
arrangements) was $56,393 and $34,658, respectively.

Future minimum lease payments (excluding CAM costs) required under the building
lease are as follows:

Year ending September 30, 2008          $       28,117
Year ending September 30, 2009                   2,349
                                         -------------
Total lease commitment                  $       30,466
                                         =============

NOTE 11.  CAPITAL STOCK

The Company's authorized capital stock consists of 50,000,000,000 shares of
common stock, no par value per share and 50,000,000 shares of preferred stock,
$1.00 par value per share. On June 28, 2006, the shareholders of the Company
approved an increase in the amount of authorized shares of common stock from
15,000,000,000 to 50,000,000,000. Of the 50,000,000 authorized shares of
preferred stock, 1,000,000 shares have been designated as Class A Preferred
Stock and 1,000,000 shares have been designated as Class B Preferred Stock, and
the remaining 48,000,000 shares are undesignated. As of September 30, 2007,
there were 23,177,633,821 shares of the Company's common stock outstanding held
by approximately 700 holders of record, 215,865 shares of the Company's Class A
Preferred Stock outstanding held by one holder of record and no shares of Class
B Preferred Stock outstanding.

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

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

In November 2006, the company issued 250,000,000 shares of common stock for
accrued services to an accounting firm valued at approximately $0.0003 per share
totaling $124,165.

In February 2007 the Company issued 75,000,000 shares of restricted common stock
to three employees, 25,000,000 shares each, as a bonus for services rendered to
the Company valued at $0.0003 per share totaling $22,500.

During October 2006 through September 30, 2007, the Company issued 8,467,839,038
shares of common stock in connection with the conversion of $409,864 of
principal, $614,795 of derivative conversion option and $436,344 of accrued
interest, for a total conversion amount of $1,461,003 of the Company's
convertible debentures.
<page>F-33
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 12.    STOCK OPTIONS AND WARRANTS

During the fiscal year ended September 30, 1999, the Company issued to a note
holder options to purchase 500,000 shares of the Company's Class B preferred
stock at an exercise price of $5.00 per share.  As consideration, the Company
reduced its debt to the note holder by $50,000 and received an extension of time
to pay-off its promissory note.  The Company also issued to its CEO options to
purchase another 500,000 shares of the Company's Class B preferred stock at an
exercise price of $5.00 per share in exchange for a reduction in debt of
$50,000.  Total consideration received on the above issued options, as evidenced
by debt reduction, was $100,000.  These options were initially exercisable
through November 1, 2002 and are exercisable into common stock at the rate of 10
common shares for each Class B preferred share.  In September 2001, the exercise
price on the options was adjusted to $2.50 per share and the exercise period was
extended to November 1, 2005. In June 2002, the exercise price on the options
was further adjusted to $0.50 per share. In January 2004, the exercise price on
the options was further adjusted to $0.05 per share and the exercise period was
extended to November 1, 2009.

The Company's CEO currently owns 215,865 shares of the Company's Class A
preferred stock, of which 15,845 shares were purchased during the year ended
September 30, 2004, and has options to purchase another 234,155 shares for $1.00
per share through November 1, 2009.

The Company has granted various common stock options and warrants to employees
and consultants.  Generally, the options and warrants were granted at
approximately the fair market value of the Company's common stock at the date of
grant and vested immediately, except that when restricted common stock was
issued, the options and warrants were granted at an average discount to market
of 50%.

The Company previously accounted for employee stock-based compensation under the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25.
Accordingly, compensation expense for common stock options and warrants issued
to employees for services was recorded as the difference between the intrinsic
value of those services as measured by the market value (as discounted, if
applicable) of the common stock at the date of grant and the exercise price,
with pro forma disclosure of the excess market value as required by SFAS No.
123.  Effective January 1, 2006, the Company adopted SFAS no. 123R, which
requires measurement of these options or warrants at fair value from the grant
date.  However, no common stock options or warrants were granted to employees
(including officers and directors) of the Company during the years ended
September 30, 2007 and 2006.

All common stock options and warrants issued to consultants and other non-
employees have been recorded at the fair value of the services rendered and
equivalent to the market value (as discounted, if applicable) of the equity
instruments received as per SFAS No. 123.   The market value was determined by
utilizing an averaging convention of between 5 to 30 days of the closing price
of the Company's common shares as traded on the OTC Bulletin Board (stock symbol
CNES) through the grant date and applying certain mathematical assumptions as
required under the Black-Scholes model.  Such assumptions were generally the
same as those mentioned above when making fair value disclosures for the
issuance of officer and employee stock options.  These included the risk-free
annual rate of return and stock volatility, which were assumed to be 4.50% -
4.75%, and 190% - 195%, respectively.

At September 30, 2002, the Company had an aggregate of 8,807,154 common stock
options and a total of 1,000,000 Class B preferred stock options recorded as
additional paid-in capital at a value of $1,443,695.  Of the common stock
options and warrants, 2,043,654 had been issued to officers and employees and
the remaining 6,763,500 had been issued to consultants and investors.

In November 2002 through May 2003, 2,500,000 seven-year common stock warrants
were issued to an accredited investor group in connection with a $500,000 12%
convertible debenture financing arrangement (see 8 above).  The allocated

<page>F-34

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 12.    STOCK OPTIONS AND WARRANTS (continued)

cost of these warrants amounted to $9,816, resulting in a recorded balance of
stock options and warrants exercisable at September 30, 2003 of $1,453,511
(including $100,000 attributable to 1,000,000 Class B preferred stock options
noted above).

As of September 30, 2003, the Company had an additional 4,852,205 common stock
options that had been granted to consultants and investors at exercise prices
ranging from $0.50 to $2.00 per share, expiring from November 1, 2003 through
January 16, 2005.  Because these strike prices were substantially above the
market price of the Company's common stock, no value was attributed to these
options at the time of grant.  During the year ended September 30, 2004,
4,352,205 of these non-valued options expired, leaving a balance at September
30, 2004 of 500,000 options, exercisable at $1.00 per share and expiring January
16, 2005.  The Company also granted a contingent issuance to its Chief Technical
Officer of 2,000,000 common stock options exercisable at $0.50 per share and
expiring December 31, 2004, which will not vest until certain milestones have
been attained.  These respective common stock options and contingent issuances
have been excluded from the summarized table below.

In November 2003 through December 2003, 1,000,000 seven-year common stock
warrants were issued to an accredited investor group in connection with a
$200,000 12% convertible debenture financing arrangement (see Note 8 above). The
allocated cost of these warrants amounted to $945.

In February 2004 and March 2004, 1,500,000 seven-year common stock warrants were
issued to an accredited investor group in connection with a $300,000 12%
convertible debenture financing arrangement (see Note 8 above).  The allocated
cost of these warrants amounted to $1,417.

In April 2004, 750,000 seven-year common stock warrants were issued to an
accredited investor group in connection with a $250,000 12% convertible
debenture financing arrangement (see Note 8 above).  The allocated cost of these
warrants amounted to $1,181.

In June 2004, 1,875,000 seven-year common stock warrants were issued to an
accredited investor group in connection with a $625,000 12% convertible
debenture financing arrangement (see Note 8 above).  The allocated cost of these
warrants amounted to $2,952.

In September 2004, 1,875,000 seven-year common stock warrants were issued to an
accredited investor group in connection with a $625,000 12% convertible
debenture financing arrangement (see Note 8 above).  The allocated cost of these
warrants amounted to $2,952, resulting in a recorded balance of stock options
and warrants exercisable at September 30, 2004 of $1,462,958 (including $100,000
attributable to 1,000,000 Class B preferred stock options noted above).

In March through September 2005, 2,800,000 five-year common stock warrants were
issued to an accredited investor group in connection with a $1,400,000 8%
convertible debenture financing arrangement (see Note 8 above).  The allocated
cost of these warrants amounted to $3,756, resulting in a recorded balance of
stock options and warrants exercisable at September 30, 2005 of $1,466,714
(including $100,000 attributable to 1,000,000 Class B preferred stock options
noted above).

In March through July 2006, 20,320,000 five-year common stock warrants were
issued to an accredited investor group in connection with a $1,270,000 6%
convertible debenture financing arrangement (see Note 8 above).  The allocated
cost of these warrants amounted to $4,551, resulting in a recorded balance of
stock options and warrants exercisable at September 30, 2007 of $1,471,265
(including $100,000 attributable to 1,000,000 Class B preferred stock options
noted above).

<page>F-35

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 12.    STOCK OPTIONS AND WARRANTS (continued)

In February through September 2007, 19,000,000 seven-year common stock warrants
were issued to an accredited investor group in connection with a $950,000 6%
convertible debenture financing arrangement (see NOTE 8 above).  The allocated
cost of these warrants amounted to $1,249, resulting in a recorded balance of
stock options and warrants exercisable at September 30, 2007 of $1,472,514.

The common stock option and warrant activity during the years ended September
30, 2007 and 2006 is summarized as follows:

                                         Common Stock   Weighted
                                            Options      Average
                                              and       Exercise
                                            Warrants      Price
                                          ----------    --------

Balance outstanding, October 1, 2005      14,243,654    $ 0.0560

  Granted                                 20,320,000      0.0009

  Expired                                 (1,943,654)     0.3845
                                         -----------     -------
Balance outstanding, September 30, 2006   32,620,000    $ 0.0019

  Granted                                 19,000,000      0.0009

  Expired                                        -           -
                                          ----------     -------
Balance outstanding, September 30, 2007   51,620,000    $ 0.0016
                                          ===========     =======

<page>F-36

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007

NOTE 12.    STOCK OPTIONS AND WARRANTS (continued)

The following table summarizes information about common stock options and
warrants at September 30, 2007:

                                  Outstanding             Exercisable
                         Common    Weighted    Weighted      Common    Weighted
     Range of             Stock    Average      Average       Stock    Average
     Exercise           Options/     Life      Exercise     Options/   Exercise
      Prices            Warrants   (Months)     Price      Warrants    Price
  ---------------       ---------  -------     --------    ----------  --------
$ 0.0050 - $ 0.0050     1,000,000       26     $ 0.0050     1,000,000  $ 0.0050
$ 0.0050 - $ 0.0050       750,000       32     $ 0.0050       750,000  $ 0.0050
$ 0.0050 - $ 0.0050       750,000       34     $ 0.0050       750,000  $ 0.0050
$ 0.0050 - $ 0.0050       500,000       38     $ 0.0050       500,000  $ 0.0050
$ 0.0050 - $ 0.0050       250,000       38     $ 0.0050       250,000  $ 0.0050
$ 0.0050 - $ 0.0050       250,000       39     $ 0.0050       250,000  $ 0.0050
$ 0.0050 - $ 0.0050       250,000       41     $ 0.0050       250,000  $ 0.0050
$ 0.0050 - $ 0.0050     1,250,000       41     $ 0.0050     1,250,000  $ 0.0050
$ 0.0020 - $ 0.0020       750,000       43     $ 0.0020       750,000  $ 0.0020
$ 0.0020 - $ 0.0020     1,875,000       48     $ 0.0020     1,875,000  $ 0.0020
$ 0.0020 - $ 0.0020     1,875,000       50     $ 0.0020     1,875,000  $ 0.0020
$ 0.0039 - $ 0.0039       316,066       30     $ 0.0039       316,066  $ 0.0039
$ 0.0039 - $ 0.0039       217,466       30     $ 0.0039       217,466  $ 0.0039
$ 0.0039 - $ 0.0039     1,087,330       30     $ 0.0039     1,087,330  $ 0.0039
$ 0.0039 - $ 0.0039     1,179,138       30     $ 0.0039     1,179,138  $ 0.0039
$ 0.0009 - $ 0.0009     5,920,000       41     $ 0.0009     5,920,000  $ 0.0009
$ 0.0009 - $ 0.0009     1,600,000       41     $ 0.0009     1,600,000  $ 0.0009
$ 0.0009 - $ 0.0009     1,600,000       41     $ 0.0009     1,600,000  $ 0.0009
$ 0.0009 - $ 0.0009     1,600,000       41     $ 0.0009     1,600,000  $ 0.0009
$ 0.0009 - $ 0.0009     9,600,000       41     $ 0.0009     9,600,000  $ 0.0009
$ 0.0009 - $ 0.0009     5,000,000       76     $ 0.0009     5,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
$ 0.0009 - $ 0.0009     2,000,000       76     $ 0.0009     2,000,000  $ 0.0009
-------------------    ----------       --     --------    ----------  --------
$ 0.0009 - $ 0.0050    51,620,000       53     $ 0.0016    51,620,000  $ 0.0016
 ==================    ==========       ==     ========    ==========  ========

NOTE 13.        REVENUE

On January 17, 2007, the Company and Trimark Associates Inc. ("Trimark")
executed an Independent Contractor Agreement (the "Agreement") for the Company
to provide installation of its H-Net(TM) for a key irrigation district
cooperative in Northern California.  The Company was to provide the services
described in individual task orders at compensation rates also set forth
therein. The Agreement was to continue until the services described in the
various task orders were completed.  The Agreement could, however, be terminated
in advance by either party at any time and for any reason with 15-days' prior
written notice.  In April 2007, certain individual task orders were completed
and the Company was compensated by the customer for its initial engineering
evaluation and feasibility work on the project, in the amount of $6,922.  Also
in April 2007, Trimark terminated the contract due to substantial increases in
modifications and challenges in meeting the requirements to further develop the
project.

<page>F-37

CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007


NOTE 14.    INCOME TAXES

Deferred income taxes consisted of the following at September 30, 2007:

      Deferred tax asset, benefit
      of net operating loss
      carryforwards                              $ 13,000,000
      Valuation allowance                         (13,000,000)
                                                  -----------
      Net deferred tax asset                     $       -
                                                  ===========

The valuation allowance fully offsets the net deferred tax asset, since it is
more likely than not that it would not be recovered.  During the year ended
September 30, 2007, the deferred tax asset and valuation allowance were both
increased by $1,200,000.

As of September 30, 2007, the Company has approximately $33,300,000 in federal
and $21,600,000 in California net operating loss carryforwards.  The federal net
operating loss carryforwards expire as follows: $2,700,000 in the year 2012,
$5,300,000 in 2018, $1,200,000 in 2019, $3,500,000 in 2020, $2,300,000 in 2021,
$2,200,000 in 2022, $2,100,000 in 2023, $4,200,000 in 2024 $3,100,000 in 2025,
$3,000,000 in 2026, and $3,700,000 in 2027. The California net operating loss
carryforwards expire as follows: $3,300,000 in 2013, $8,500,000 in 2014,
$3,100,000 in 2015, $3,000,000 in 2016, and $3,700,000 in 2017.

NOTE 15.    SUBSEQUENT EVENTS

Subsequent to September 30, 2007, the Company issued approximately 3,083,000,000
shares of common stock through December 20, 2007 in exchange for the reduction
of approximately $148,000 in principal and  approximately $222,000 in derivative
conversion option, totaling approximately $370,000 in convertible debt.

<page>F-38

                              INDEX TO EXHIBITS

Exhibit
Number  Description
------- -----------
3.1     Articles of Incorporation of the Registrant (2)

3.2     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed November 7, 1994 (2)

3.3     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed December 5, 1994 (3)

3.4     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed October 16, 1995 (2)

3.5     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed April 18, 2003 (5)

3.6     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed August 3, 2004 (10)

3.7     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed August 12, 2005 (13)

3.8     Articles of Amendment to the Articles of Incorporation of the Registrant
        filed June 30, 2006 (15)

3.9     Bylaws of the Registrant (2)

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

10.2    Amendment to Employment Agreement dated July 24, 1996 between the
        Registrant and Robert Spigno (#) (2)

10.3    Amendment to Employment Agreement dated August 11, 1997 between the
        Registrant and Robert Spigno (#) (2)

10.4    Amendment to Employment Agreement dated September 1, 1999 between the
        Registrant and Robert Spigno (#) (2)

10.5    Amendment to Employment Agreement dated March 27, 2000 between the
        Registrant and Robert Spigno (#) (2)

10.6    Amendment to Employment Agreement dated April 1, 2007 between the
        Registrant and Robert Spigno (#)

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

<page>1

10.8    Securities Purchase Agreement dated as of November 27, 2002 by and
        between the Registrant and the purchasers named therein (4)

10.9    Form of Common Stock Purchase Warrant dated as of November 27, 2002 (4)

10.10   Registration Rights Agreement dated as of November 27, 2002 by and
        between the Registrant and the investors named therein (4)

10.11   Security Agreement dated as of November 27, 2002 between the Registrant
        and the secured parties named therein (4)

10.12   Intellectual Property Security Agreement dated as of November 27, 2002
        between the Registrant and the secured parties named therein (4)

10.13   Form of Secured Convertible Debenture due March 3, 2004 (5)

10.14   Form of Common Stock Purchase Warrant dated as of March 3, 2003 (5)

10.15   Form of Secured Convertible Debenture due May 12, 2004 (6)

10.16   Form of Common Stock Purchase Warrant dated as of May 12, 2003 (6)

10.17   Promissory Note dated September 1, 2003 made by the Registrant in favor
        of Black Dog Ranch, LLC (9)

10.18   Letter Agreement dated October 3, 2003 between the Registrant and the
        parties named therein (7)

10.19   Securities Purchase Agreement dated as of November 25, 2003 by and
        between the Registrant and the purchasers named therein (7)

10.20   Form of Secured Convertible Debenture due November 25, 2004 (7)

10.21   Form of Common Stock Purchase Warrant dated as of November 25, 2003 (7)

10.22   Registration Rights Agreement dated as of November 25, 2003 by and
        between the Registrant and the investors named therein (7)

10.23   Security Agreement dated as of November 25, 2003 between the Registrant
        and the secured parties named therein (7)

10.24   Intellectual Property Security Agreement dated as of November 25, 2003
        between the Registrant and the secured parties named therein (7)

10.25   Form of Secured Convertible Debenture due December 3, 2004 (7)

10.26   Form of Common Stock Purchase Warrant dated as of December 3, 2003 (7)

10.27   Form of Secured Convertible Debenture due December 31, 2004 (7)

10.28   Form of Common Stock Purchase Warrant dated as of December 31, 2003 (7)

<page>2

10.29   Form of Secured Convertible Debenture due February 18, 2005 (8)

10.30   Form of Common Stock Purchase Warrant dated as of February 18, 2004 (8)

10.31   Amendment No. 1 to Securities Purchase Agreement dated as of March 4,
        2004 by and between the Registrant and the persons named therein (9)

10.32   Form of Secured Convertible Debenture due March 4, 2005 (8)

10.33   Form of Common Stock Purchase Warrant dated as of March 4, 2004 (8)

10.34   Securities Purchase Agreement dated as of April 19, 2004 by and between
        the Registrant and the purchasers named therein (9)

10.35   Form of Common Stock Purchase Warrant dated as of April 19, 2004 (9)

10.36   Registration Rights Agreement dated as of April 19, 2004 by and between
        the Registrant and the investors named therein (9)

10.37   Security Agreement dated as of April 19, 2004 between the Registrant and
        the secured parties named therein (9)

10.38   Intellectual Property Security Agreement dated as of April 19, 2004
        between the Registrant and the secured parties named therein (9)

10.39   Form of Common Stock Purchase Warrant dated as of June 30, 2004 (10)

10.40   Form of Common Stock Purchase Warrant dated as of September 9, 2004 (11)

10.41   Securities Purchase Agreement dated as of March 17, 2005 by and between
        the Registrant and the purchasers named therein (12)

10.42   Form of Callable Secured Convertible Note due March 17, 2007 (12)

10.43   Form of Stock Purchase Warrant dated as of March 17, 2005 (12)

10.44   Registration Rights Agreement dated as of March 17, 2005 by and between
        the Registrant and the investors named therein (12)

10.45   Security Agreement dated as of March 17, 2005 between the Registrant and
        the secured parties named therein (12)

10.46   Intellectual Property Security Agreement dated as of March 17, 2005
        between the Registrant and the secured parties named therein (12)

10.47   Securities Purchase Agreement dated as of March 8, 2006 by and between
        the Registrant and the purchasers named therein (14)

10.48   Form of Callable Secured Convertible Note due March 8, 2009 (14)

10.49   Form of Stock Purchase Warrant dated as of March 8, 2006 (14)

<page>3

10.50   Registration Rights Agreement dated as of March 8, 2006 by and between
        the Registrant and the investors named therein (14)

10.51   Security Agreement dated as of March 8, 2006 between the Registrant and
        the secured parties named therein (14)

10.52   Intellectual Property Security Agreement dated as of March 8, 2006
        between the Registrant and the secured parties named therein (14)

10.53   Securities Purchase Agreement dated as of February 13, 2007 by and
        between the Registrant and the purchasers named therein (16)

10.54   Form of Callable Secured Convertible Note due February 13, 2010 (16)

10.55   Form of Stock Purchase Warrant dated as of February 13, 2007 (16)

10.56   Registration Rights Agreement dated as of February 13, 2007 by and
        between the Registrant and the investors named therein (16)

10.57   Security Agreement dated as of February 13, 2007 between the Registrant
        and the secured parties named therein (16)

10.58   Intellectual Property Security Agreement dated as of February 13, 2007
        between the Registrant and the secured parties named therein (16)

21.1    Subsidiaries of the Registrant (2)

31.1    Certification Required by Rule 13a-14(a) of the Securities Exchange Act
        of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002

31.2    Certification Required by Rule 13a-14(a) of the Securities Exchange Act
        of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002

32.1    Certification of Chief Executive Officer and Chief Financial Officer
        Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
        of the Sarbanes-Oxley Act of 2002
_________________
(#)     Management contract or compensatory plan, contract or arrangement
        required to be filed as an exhibit.
(1)     Filed as an exhibit to the Registrant's Form S-8 filed with the
        Securities and Exchange Commission on December 6, 1999 (Registration No.
        333- 92181) and incorporated herein by reference.
(2)     Filed as an exhibit to the Registrant's Form SB-2 filed with the
        Securities and Exchange Commission on April 26, 2002 (Registration No.
        333- 87062) and incorporated herein by reference.
(3)     Filed as an exhibit to the Registrant's Form SB-2/A No. 1 filed with the
        Securities and Exchange Commission on June 6, 2002 (Registration No.
        333-87062) and incorporated herein by reference.
(4)     Filed as an exhibit to the Registrant's Form 10-KSB for the year ended
        September 30, 2002 and incorporated herein by reference.

<page>4

(5)     Filed as an exhibit to the Registrant's Form SB-2/A No. 1 filed with the
        Securities and Exchange Commission on May 2, 2003 (Registration No. 333-
        102781) and incorporated herein by reference.
(6)     Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
        ended June 30, 2003 and incorporated herein by reference.
(7)     Filed as an exhibit to the Registrant's Form 10-KSB for the year ended
        September 30, 2003 and incorporated herein by reference.
(8)     Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
        ended December 31, 2003 and incorporated herein by reference.
(9)     Filed as an exhibit to the Registrant's Form SB-2 filed with the
        Securities and Exchange Commission on June 25, 2004 (Registration No.
        333- 116895) and incorporated herein by reference.
(10)    Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
        ended June 30, 2004 and incorporated herein by reference.
(11)    Filed as an exhibit to the Registrant's Form 10-KSB for the year ended
        September 30, 2004 and incorporated herein by reference.
(12)    Filed as an exhibit to the Registrant's Form 8-K filed with the
        Securities and Exchange Commission on March 21, 2005 and incorporated
        herein by reference.
(13)    Filed as an exhibit to the Registrant's Form 10-KSB for the year ended
        September 30, 2005 and incorporated herein by reference.
(14)    Filed as an exhibit to the Registrant's Form 8-K filed with the
        Securities and Exchange Commission on March 15, 2006 and incorporated
        herein by reference.
(15)    Filed as an exhibit to the Registrant's Form SB-2 filed with the
        Securities and Exchange Commission on September 8, 2006 (Registration
        No. 333- 137204) and incorporated herein by reference.
(16)    Filed as an exhibit to the Registrant's Form 8-K filed with the
        Securities and Exchange Commission on February 20, 2007 and incorporated
        herein by reference.

<page>5

                                       SIGNATURES

        In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized as of the 14th day of January, 2008.

                                               CONECTISYS CORPORATION

                                               By: /S/ ROBERT A. SPIGNO
                                                   ----------------------
                                                   Robert A. Spigno
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)

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

      Name                   Title                           Date
---------------------   ------------------------------   ---------------



/S/ ROBERT A. SPIGNO    Chairman of the Board, Chief       January 14, 2008
--------------------    Executive Officer(Principal
Robert A. Spigno        Executive Officer), Chief
                        Financial Officer
                        (Principal Financial and
                        Accounting Officer) and Director


/S/ Lawrence Muirhead   Chief Technology Officer and       January 14, 2008
---------------------   Director
Lawrence Muirhead

/S/Melissa McGough      Director                           January 14, 2008
------------------
Melissa McGough

<page>6


                                EXHIBITS FILED WITH THIS REPORT

Exhibit
Number  Description
------- -----------
10.6    Amendment to Employment Agreement dated April 1, 2007 between the
        Registrant and Robert Spigno

31.1    Certification Required by Rule 13a-14(a) of the Securities Exchange Act
        of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002

31.2    Certification Required by Rule 13a-14(a) of the Securities Exchange Act
        of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002

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

<Page>7