UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2008March 31, 2021
| | 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 9135514308 S. Gosss Road, Cheney, Washington 99004
(Address of Principal Executive Offices)
(661) 295-6763(949) 929-5455
(Issuer's Telephone Number, Including Area Code)
Not applicable
(Former name, former address and former fiscal year, if
changed since last report)Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 | | No |X|
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files).
Yes | | No |X|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | | Accelerated filer | |
Non-accelerated filer | | Smaller reporting company |X|
(DoEmerging growth company |X|
If an emerging growth company, indicate by check mark if the registrant has
elected not check if a smaller reporting company)to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act. | |
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No | |
As of August 18, 2008,April 19, 2021, there were 28,821,560,267888,579 shares of the issuer's common
stock, no par value per share, outstanding.
- --------------------------------------------------------------------------------
Page
----
PART I - FINANCIAL INFORMATION
Page
----
Item 1.1 Unaudited Financial Statements.
Condensed Consolidated Balance Sheets as of June 30, 2008 (unaudited)and
September 30, 2007 (audited)........................................F-1
Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended June 30, 2008 (unaudited) and 2007 (unaudited)
and the Cumulative Period From December 1, 1990 (Inception)
Through June 30, 2008 (unaudited)......................................F-3
Condensed Consolidated Statements of Changes in Shareholders'
Equity (Deficit) for the Cumulative Period From
December 1, 1990 (Inception) Through June 30, 2008 (unaudited).........F-4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 2008 (unaudited) and 2007 (unaudited) and
the Cumulative Period From December 1, 1990 (Inception) Through
June 30, 2008 (unaudited).............................................F-17
Notes to Condensed Consolidated Financial Statements (unaudited)...........F-20Statements......................................3
Item 2.2 Management's Discussion and Analysis or Plan of Operations...........2Financial...................9
Condition and Results of Operations
Item 3.3 Quantitative and Qualitative Disclosures About Market Risk...........9Risk..........16
Item 4.4 Controls and Procedures.............................................10
Item 4T. Controls and Procedures.............................................10Procedures.............................................16
PART II - OTHER INFORMATION
Item 1.1 Legal Proceedings...................................................10Proceedings...................................................17
Item 1A.1A Risk Factors........................................................10Factors........................................................17
Item 2.2 Unregistered Sales of Equity Securities and Use of Proceeds.........10Proceeds.........17
Item 3.3 Defaults Upon Senior Securities.....................................10Securities.....................................17
Item 4. Submission of Matters to a Vote of Security Holders.................124 Mine Safety Procedures..............................................18
Item 5.5 Other Information...................................................12Information...................................................18
Item 6. Exhibits............................................................12
Signatures...................................................................13
Exhibits Filed with this Report on Form 10-Q
ITEM6 Exhibits............................................................18
ii
Part I - Financial Information
Item 1. FINANCIAL STATEMENTS.Unaudited Financial Statements
CONECTISYS CORPORATION
AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATEDUNAUDITED BALANCE SHEET June 30, 2008 and September 30, 2007AS OF MARCH 31, 2021
June 30, Sept. 30,
2008 2007
Unaudited Audited
-------------- --------ASSETS
Assets
Current assets
Cash and& cash equivalents $ 123 40,834
Employee advance 42,056 1,000
Prepaid expenses 23,251 87,553
-------------- --------equivalent $___________
Total current assets 65,430 129,387
Property and equipment, net of accumulated
depreciation of $394,919 82,729 98,183
Other assets
Deposits 4,698 4,698
Loan fees, net of accumulated
amortization of $512,056 19,724 25,392
---------- -------$___________
Total assets $ 172,581 257,660
========== =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-1
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2008 and September 30, 2007
June 30, Sept. 30,
2008 2007
Unaudited Audited
------------------ ----------$___________
LIABILITIES AND SHAREHOLDERS' DEFICITEQUITY
Current liabilities
Accounts payable $ 238,727 208,538
Accrued compensation 2,418,148 2,070,615
Due to officers 40,174 537
Accrued interest payable 498,132 360,614
Other current liabilities 144,677 14,352
Notes payable and current portion of
long-term debt 2,029,107 2,072,303
------------- ---------expense 10,321
Advances from former officer 20,073
------------
Total current liabilities 5,368,965 4,726,959
Long-term debt, net of current portion 4,604,205 3,789,300$ 30,394
------------
TOTAL LIABILITIES $ 30,394
============
Commitments and contingenciescontingency -
-
SHAREHOLDERS' DEFICITStockholders' Equity
Preferred stock
Common stock * - Class A, $1.00no par value; 1,000,000250,000,000
shares authorized 215,865888,579 shares issued and
outstanding 215,865 215,865
Convertible preferred stock - Class B, $1.00
par value; 1,000,000 shares authorized,
-0- shares32,246,441
(Accumulated deficit) (32,276,835)
--------------
Total equity (30,394)
--------------
Total liabilities and equity $ (30,394)
==============
* On March 10, 2021, the Company implemented a 10,000 to 1 reverse
split of the issued and outstanding 0 -
Common stock - no par value; 50,000,000,000shares of its common stock.
Except shares authorized, 28,820,358,267all references to number of shares and
23,177,633,821
sharesper share information in these financial statements have been
retroactively adjusted to reflect such split.
See notes to the unaudited financial statements.
1
CONECTISYS CORPORATION
UNAUDITED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended March 31,
2021 2020
------------------ --------------
REVENUE $ - $ -
COST OF REVENUE - -
------------------ --------------
GROSS PROFIT (LOSS) $ - $ -
GENERAL AND ADMINISTRATIVE EXPENSES $ 3,128 $ 889
------------------- --------------
NET(LOSS) $ (3,128) $ (889)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES *
Basic and diluted 888,579 88,579
================== =============
(LOSS) PER SHARE
Basic and diluted $ (0.00) $ (0.01)
================== =============
* On March 10, 2021, the Company implemented a 10,000 to 1 reverse split of the
issued and outstanding respectfully 30,198,397 29,538,421
Additional paid-in capital:
Convertible preferred stock - Class B, $1.00 par
value, 1,000,000 stock options exercisable 100,000 100,000
Common stock - no par value 67,620,000
warrants exercisable 1,373,082 1,372,514
Accumulated deficit during development stage (41,687,933) (39,485,399)
------------ ------------
Total shareholders' deficit (9,800,589) (8,258,599)
------------ ------------
Total liabilitiesshares of its common stock. Except shares authorized, all
references to number of shares and shareholders' deficit $ 172,581 257,660
============ ============
The accompanyingper share information in these financial
statements have been retroactively adjusted to reflect such split.
See notes are an integral part of these condensed consolidatedto the unaudited financial statements.
F-22
CONECTISYS CORPORATION
AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended June 30, 2008 and 2007
And the Cumulative Period
From December 1, 1990 (Inception) Through June 30, 2008
Dec. 1, 1990
(Inception)
Period
3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended Through
Jun. 30 Jun. 30 Jun. 30 Jun. 30 Jun. 30
2008 2007 2008 2007 2008
Unaudited Unaudited Unaudited Unaudited Unaudited
Revenues $ 0 $ 6,922 $ 0 $ 6,922 $ 524,382
Cost of prototypes and samples 0 80,082 48,765 140,271 1,616,026
----------------- ----------------- ----------------- ----------------- -----------
Gross loss 0 (73,160) (48,765) (133,349) (1,091,644)
General and administrative expenses 290,627 425,617 1,052,539 1,086,076 26,595,254
Bad debt 0 0 0 0 1,680,522
Write-off of deposits
and intangible assets 0 10,000 0 10,000 1,331,714
----------------- ----------------- ----------------- ----------------- -----------
Loss from operations (290,627) (508,777) (1,101,304) (1,229,425) (30,699,134)
Other income (expenses)
Forgiveness of debt 0 0 0 0 504,462
Settlement 0 0 0 0 (125,000)
Other income 0 0 0 0 12,072
Interest income 0 397 0 4,150 111,542
Interest expense (266,280) (498,788) (1,101,230) (1,406,482) (11,554,375)
Minority interest 0 0 0 0 62,500
----------------- ----------------- ----------------- ----------------- -----------
Net loss $ (556,907) $ (1,007,168)$ (2,202,534) $ (2,631,757)$ (41,687,933)
================= ================= ================= ================= ============
Weighted-average shares outstanding 28,820,358,267 20,409,372,713 25,150,934,791 17,747,268,701
Net loss per share, basic and diluted (0.00) (0.00) (0.00) (0.00)
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATEDUNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock
Common Stock Additional Stock During the Shareholders'
Class A and B No Par Value Paid in* Subscription
Development Equity
Shares Value Shares Value CapitalAmount Receivable Stage (Deficit)
---------- ---------- ----------- ---------- ---------- ----------- ----------- -----------
Accumulated Deficit Total
------------------------------------------------------------------------
Balance, Dec. 1, 1990
(re-entry
development stage) 0September 30, 2020 88,579 $ 0 10,60932,246,441 $ 1,042,140(100) $ (32,273,707) $(27,366)
Sale of Shares 800,000 $ 100
Net Loss $ (3,128) $ (3,128)
-------------------------------------------------------------------------
Balance, March 31, 2021 888,579 $ 32,246,441 $ 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, November 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. 1994 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 A 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 condensed consolidated financial statements.
F-4(32,276,835) $(30,394)
=========================================================================
* On March 10, 2021, the Company implemented a 10,000 to 1 reverse split of
the issued and outstanding shares of its common stock. Except shares
authorized, all references to number of shares and per share information
in these financial statements have been retroactively adjusted to reflect
such split.
See notes to the unaudited financial statements.
3
CONECTISYS CORPORATION
AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATEDUNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)CASH FLOWS
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B No Par Value Paid-in Subscript. Development Equity
Shares Value Shares Value Capital Receivable Stage (Deficit)
--------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
Cash, February 13, 1995 - $ - 1,160 $ 232,000 $ - $ - $ - $ 232,000
Debt repayment, February 13,
1995 - - 2,040 408,000 - - - 408,000
Debt repayment, February 20,
1995 - - 4,778 477,810 - - - 477,810
Acquisition of assets, CIPI
February 1995 - - 28,750 1,950,000 - - - 1,950,000
Acquisition of assets, April 5,
1995 - - 15,000 - - - - -
Cash and services, April and
May 1995 - - 16,000 800,000 - - - 800,000
Cash, June 1, 1995 - - 500 30,000 - - - 30,000
Acquisition of assets and
services, September 26, 1995 - - 4,000 200,000 - - - 200,000
Cash, September 28, 1995 - - 41 3,000 - - - 3,000
Acquisition of assets,
September 1995 - - 35,000 1,750,000 - - - 1,750,000
Return of assets, CIPI
September 1995 - - (27,700) (1,950,000) - - - (1,950,000)
Net loss for the year - - - - - - (2,293,867) (2,293,867)
--------- ----------- -------- ----------- -------- ------------ ---------- -----------
Balance,
November 30, 1995 16,345 $ 16,345 129,569 $ 5,031,834 $ - $ - $(3,374,010)$ 1,674,169
Shares issued in exchange for:
Cash, February 1996 - - 1,389 152,779 - - - 152,779
Debt repayment, February 1996 - - 10,000 612,000 - - - 612,000
Services, February 1996 - - 3,160 205,892 - - - 205,892
Cash, March 1996 - - 179 25,000 - - - 25,000
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B No Par Value Paid-in Subscript. Development Equity
Shares Value Shares Value Capital Receivable Stage (Deficit)
--------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares returned and canceled,
March, 1996 - $ - (15,000)$ - $ - $ - $ - $ -
Services, April 1996 - - 13 2,069 - - - 2,069
Services, September 1996 4,155 4,155 586 36,317 - - - 40,472
Services, October 1996 - - 6,540 327,000 - - - 327,000
Debt repayment, November 1996 - - 2,350 64,330 - - - 64,330
Net loss for the year - - - - - - (2,238,933) (2,238,933)
--------- ---------- ---------- ----------- ---------- --------- ------------ -----------
Balance,
November 30, 1996 20,500 $ 20,500 138,786 $ 6,457,221 $ - $ - $ (5,612,943) $ 864,778
Shares issued in exchange for:
Services, March 1997 - - 228 6,879 - - - 6,879
Services, April 1997 - - 800 13,120 - - - 13,120
Services, July 1997 - - 1,500 16,200 - - - 16,200
Cash, July 1997 - - 15,000 300,000 - - - 300,000
Services, August 1997 - - 5,958 56,000 - - - 56,000
Adjustment for partial shares due
to reverse stock split (1:20) - - 113 - - - - -
Services, October 1997 - - 1,469,666 587,865 - - - 587,865
Debt repayment, October 1997 - - 1,540,267 620,507 - - - 620,507
Cash, October 1997 - - 1,500,000 281,250 - - - 281,250
Services, November 1997 - - 4,950 10,538 - - - 10,538
Net loss for the year - - - - - - (2,739,268) (2,739,268)
--------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
Balance,
November 30, 1997 20,500 $ 20,500 4,677,268 $ 8,349,580 $ - $ - $(8,352,211)$ 17,869
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-6
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B No Par Value Paid-in Subscript. Development Equity
Shares Value Shares Value Capital Receivable Stage (Deficit)
--------- ---------- ---------- ----------- ---------- ---------- ------------ -----------
Shares issued in exchange for:
Services, December 1997
through November 1998 - $ - 2,551,610 $ 2,338,264 $ - $ - $ - $ 2,338,264
Debt repayment, April 1998
through September 1998 - - 250,000 129,960 - - - 129,960
Cash, January 1998 through
July 1998 - - 4,833,334 1,139,218 - - - 1,139,218
Acquisition of assets,
July 1998 - - 300,000 421,478 - - - 421,478
Acquisition of remaining 20%
minority interest in
subsidiary, July 1998 - - 50,000 59,247 - - - 59,247
Services, November 1998 60,000 60,000 - - - - - 60,000
Net loss for the year - - - - - - (4,928,682) (4,928,682)
--------- ---------- ---------- ----------- ---------- ------------ ---------- -----------
Balance,
November 30, 1998 80,500 $ 80,500 12,662,212 $12,437,747 $ - $ - $(13,280,893)$ (762,646)
Shares issued in exchange for:
Shares returned and canceled,
December, 1998 - - (1,350,000) (814,536) - - - (814,536)
Services, December 1998
through September 1999 - - 560,029 349,454 150,000 - - 499,454
Cash, December 1998
through September 1999 - - 1,155,800 129,537 - - - 129,537
Debt repayment, Sept. 1999 39,520 39,520 960,321 197,500 100,000 - - 337,020
Net loss for the period - - - - - - (1,323,831) (1,323,831)
--------- ---------- ---------- ----------- -------- ------------ ---------- -----------
Balance,
September 30, 1999 120,020 $ 120,020 13,988,362 $12,299,702 $250,000 $ - $(14,604,724)$(1,935,002)
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-7
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 exercise 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 condensed consolidated financial statements.
F-8
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 exercise 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 exercise 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 condensed consolidated financial statements.
F-9
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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
exercise 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 condensed consolidated financial statements.
F-10
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 condensed consolidated financial statements.
F-11
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 condensed consolidated financial statements.
F-12
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 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 condensed consolidated financial statements.
F-13
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 period 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 condensed consolidated financial statements.
F-14
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B 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 condensed consolidated financial statements.
F-15
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Cumulative Period from December 1, 1990 (Inception) Through June 30, 2008
Deficit
Accumulated Total
Preferred Stock Common Stock Additional Stock During the Shareholders'
Class A & B No Par Value Paid-in Subscript. Development Equity
Shares Value Shares Value Capital Receivable Stage (Deficit)
-------- -------- ------------ ---------- --------- ---------- ------------ ------------
Shares issued in exchange for:
Cash, October through March 2008
with prices ranging from
$0.00005 to $0.00050 per share 0 $ 0 1,000,000,000 $ 60,000 $ 0 $ 0 $ 0 $ 60,000
Services, November 2007, valued
at $0.0003 per share 0 0 25,000,000 2,500 0 0 0 2,500
Issuance of 16,000,000 warrants
October 2007 through March
2008, at an exercise price of
$0.0009 per share, in conjunction
with $415,000 principal value of 6%
convertible debt 0 0 0 0 568 0 0 568
Conversion of $220,838 principal
value of 8% and 12% convertible
debt, $331,256 of derivative
conversion option, along with
$45,383 accrued interest 0 0 4,617,724,444 597,476 0 0 0 597,476
Net loss for the year 0 0 0 0 0 0 (2,202,534) (2,202,534)
--------- --------- -------------- ---------- --------- ------- ----------- -----------
Balance, June 30, 2008 215,865 $ 215,865 28,820,358,267 $30,198,397 $1,473,082 $ 0 $(41,687,933) $(9,800,589)
========= ========= ============== =========== ========== ======== ============= ============
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-16
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2008 and 2007
And the Cumulative Period
From December 1, 1990 (Inception) Through June 30, 2008
Dec. 1, 1990
(Inception)
9Six Months Ended 9 Months Ended Through
June 30, June 30, June 30,
2008 2007 2008
Unaudited Unaudited UnauditedMarch 31,
2021 2020
------------------ --------------- --------------- --------------
Cash flows from operating activities:CASH FLOWS FROM INVESTING ACTIVITIES
Net loss(loss) $ (2,202,534)(3,128) $ (2,631,757)$ (41,687,933)
Adjustments(1,889)
Adjustment to reconcile net (loss) to
net cash used in (provided by)provided by (used in) operating activities:
Provision for bad debt write-offs 0 0 1,422,401
DepreciationChange in operating assets and amortization
of property 17,894 16,339 1,784,520
Stock issued for services 2,500 22,500 7,673,473
Stock issued for interest 0 0 535,591
Settled damages 0 0 (25,000)
Minority interest 0 0 (62,500)
Write-off of deposits and
intangible assets 0 0 1,331,714
Amortization of loan fees
and note discounts 585,720 729,525 5,551,237
Mark-to-market of derivative
conversion option 370,146 326,017 3,762,407
Forgiveness of debt 0 0 (504,462)
Changes in:
Accounts/employee advances
receivable 5,201 0 (95,700)
Prepaid expenses and deposits 22,217 109,478 162,861
Increase (decrease) in liabilities Accounts payable 47,787 (36,353) 2,526,358
Accrued compensation 347,533 73,041 3,590,156
Due to/400 300
Advances from officers 39,637 65 670,935
Accrued interest and other current
liabilities 250,245 354,690 1,680,693
----------------- ----------------- -----------------
Total adjustments 1,688,880 1,595,302 30,004,684
----------------- ----------------- -----------------former officer $ 2,628 889
Net cash used in operating activities (513,654) (1,036,455) (11,683,249)
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-17
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF(100) -
CASH FLOWS For the Nine Months Ended June 30, 2008 and 2007
And the Cumulative Period
From December 1, 1990 (Inception) Through June 30, 2008
Dec. 1, 1990
(Inception)
9 Months Ended 9 Months Ended Through
June 30, June 30, June 30,
2008 2007 2008
Unaudited Unaudited Unaudited
---------------- ---------------- --------------
Investing activities:
Increase in notes receivable $ 0 $ 0 $ (1,322,500)
CostFROM INVESTING ACTIVITIES - -
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of license & technology 0 0 (94,057)
Purchase of cds 0 430,733 0
Purchase of equipment (2,441) (14,284) (344,466)
----------------- ----------------- -----------------
Net cash provided by (used in)
investing activities (2,441) 416,449 (1,761,023)
Cash flows from financing activities:
Commoncommon stock issuance 60,000 0 3,677,172
Stock warrant issuance 568 1,017 206,702
Preferred stock issuance 0 0 16,345
Proceeds from stock purchase 0 0 281,250
Loan fees from debt, other 0 (20,000) (599,555)
Proceeds from debt, related 0 0 206,544
Proceeds from debt, other 414,816 649,520 10,277,681
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 475,384 630,537 13,444,396
----------------- ----------------- -----------------
Net increase (decrease) in cash and
cash equivalents (40,711) 10,531 123
Cash and cash equivalents at100 -
CASH AND CASH EQUIVALENT, beginning of period 40,834 19,936 0
----------------- ----------------- -----------------
Cash and cash equivalents atyear - -
------------------ ----------------
CASH AND CASH EQUIVALENT, end of periodyear $ 123- $ 30,467-
================== ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax $ 123
================= ================= =================
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-18
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2008 and 2007
And the Cumulative Period
From December 1, 1990 (Inception) Through June 30, 2008
Dec. 1, 1990
(Inception)
9 Months Ended 9 Months Ended Through
June 30, June 30, June 30,
2008 2007 2008
Unaudited Unaudited Unaudited
-------------- -------------- --------------
Supplemental disclosures of
Cash flow information:$
------------------ ----------------
Cash paid for interest $ 3,422 $
5,040 $ 709,719
Cash paid for income Taxes 0 0 20,050
Non-cash investing and financing activities
Common stock issued for:
Note receivable 0 0 281,250
Prepaid expenses 0 0 264,748
Property and equipment 0 0 130,931
Licenses & technology 0 0 2,191,478
Acquisition of remaining
minority interest in subsidiary 0 0 59,247
of debt 552,094 584,537 14,590,223
Accrued services & interest 2,500 516,051 5,778,511
Preferred stock issued for
services - 0 75,845
Repayment of debt 0 0 119,520
Preferred stock options issued 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 condensed consolidated------------------ ----------------
See notes to the unaudited financial statements.
F-19
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis4
Conectisys Corporation
Notes to Unaudited Financial Statements
March 31, 2021
Note 1 - Nature of presentationbusiness and organization
ConectiSys Corporation (the "Company") was 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.
The accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements containedCompany was engaged in the Company's Annual Report ondevelopment of a low-cost automatic meter
reading, or AMR, solution until it ceased all business activity in 2008.
Conectisys was an SEC reporting company until 2008. Its last Form 10-KSB10-K,
for the fiscal year ended September 30, 2007. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) necessary2007, was filed on Jan 4, 2008; its last Form 10-Q,
for the fair presentation have been included. The results
for thethree and nine months ended June 30, 2008, do not necessarily indicatewas filed on Sep. 15,
2008.
As of June 30, 2008, Conectisys had notes payable aggregating
$6,633,312.
Of this total, several five-year notes aggregating $3,082,655
were payable to NIR & Affiliates. NIR was a mutual fund run by Corey
Ribotsky. NIR provided Conectisys with significant funding from 2002
through 2008 in the results that mayform of convertible notes with stock conversion at a
significant discount to the market (up to 80% at times) commonly known as
a "pipe". In March 2008 NIR provided the last of its funding to Conectisys.
In the 3rd quarter of 2008 Conectisys was in default on its obligations to
NIR by (1) failure to pay interest and (2) failure to maintain an active
SB-2 filing for issuance of the convertible shares. In 2009, Conectisys
failed to timely file its 2008 10-K Report. Conectisys was removed from
trading on the OTC and began trading on the Pink Sheets.
The balance of the convertible notes, aggregating $3.550,657, were payable
to AJW, New Millennium Capital Partners and Laurus Master Fund.
All the notes were due at various times from 2002 to 2008. There were no
repayments and, after the six-year statute of limitations, all the notes
and the related accrued interest,$498,132 as of June 30, 2008, became
null and void at various times through April 2017.
Conectisys was a victim of predatory lending by Corey Ribotsky and his NIR
Group, as evidenced by a civil complaint filed by the U.S, Securities &
Exchange Commission ("SEC") against Mr. Ribotsky, NIR and others
on September 28, 2011 in Federal Court in the Eastern District of New York.
To settle the SEC's related administrative proceedings, Ribotsky consented
to be expectedbarred from any future association with any broker, dealer, investment
adviser, municipal securities dealer, municipal advisor, transfer agent, or
nationally recognized statistical rating organization.
The statute of limitations to sue in contract matters or debt collection is
6 years in the State of New York which was the agreed upon jurisdiction by
both Conectisys and NIR. Further, NIR and all its affiliates ceased to
operate as a result of the SEC enforcement actions.
As of April 2017, all obligations, notes, debt, warrants, and options are
past their due dates and barred from any collection efforts since the time
frame allowed by the statute of limitations for a legal action has expired.
5
From November 2002 to March 2008, Conectisys issued an aggregate of 67,620,000
five-year and seven-year Common Stock warrants to accredited investors in
connection with several convertible debenture financing arrangements.
All such warrants and all stock options expired unexercised.
All assets as of June 30, 2008, $172,581, were fully amortized or realized
by the full year.end of fiscal 2008.
As of June 30, 2008, the Company had $2,418,148 in accrued compensation and
$40,174 due to officers. None of these obligations were paid and became null
and void after the six-year statute of limitations.
Accounts payable and other current liabilities were either partially paid or
became null and void after the six-year statute of limitations.
From its inception in 1986 through June 30, 2008, Conectisys had aggregate
revenues of approximately $524,000 from the sale of its H-NET AMR systems.
Operations: None
Customers: None
Employees: None
Note 2 Basis of Presentation and Summary of significant accounting policies
Basis of presentation
---------------------
The accompanying financial statements have been prepared in accordance with the
generally accepted accounting principles in the United States of America
("U.S. GAAP") and pursuant to the rules and regulations of the Securities
Exchange Commission ("SEC"). The Company's fiscal year ends on September 30.
Cash and cash equivalents
-------------------------
Cash and cash equivalents consist of amounts of cash on hand and bank deposits.
Use of estimates and assumptions
--------------------------------
The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principlesU.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets
and liabilities reported and disclosuredisclosures of contingent assets and liabilities
atas of the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period.periods presented. Actual results could materially differ from
thosethese estimates.
NetIncome taxes
------------
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their perspective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which the temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the
6
period that includes the enactment date. Valuation allowances are recorded,
when necessary, to reduce deferred tax assets to the amount expected to be
realized.
As a result of the implementation of certain provisions of ASC 740, Income
Taxes ("ASC 740"), which clarify the accounting and disclosure for uncertainty
in tax position, as defined, ASC 740 seeks to reduce the diversity in practice
associated with certain aspects of the recognition and measurement related
to accounting for income taxes. The Company has adopted the provisions of
ASC 740 and has analyzed filing positions in each of the federal and state
jurisdictions where the Company is required to file income tax returns, as
well as open tax years in such jurisdictions. The Company has identified
the U.S. federal jurisdiction, and the states of Nevada and California, as
its "major" tax jurisdictions. However, the Company has certain tax attribute
carryforwards, which will remain subject to review and adjustment by the
relevant tax authorities until the statute of limitations closes with respect
to the year in which such attributes are utilized.
The Company believes that its income tax filing positions and deductions will
be sustained on audit and do not anticipate any adjustments that will result
in a material change to its financial position. Therefore, no reserves for
uncertain income tax positions have been recorded pursuant to ASC 740. The
Company's policy for recording interest and penalties associated with
income-based tax audits is to record such items as a component of income
taxes.
Commitments and Contingencies
-----------------------------
In the ordinary course of business, the Company is subject to certain
contingencies, including legal proceedings and claims arising out of the
business that relate to a wide range of matters, such as government
investigations and tax matters. The Company recognizes a liability for
such contingency if it determines it is probable that a loss has
occurred and a reasonable estimate of the loss can be made. The
Company may consider many factors in making these assessments including
historical and specific facts and circumstances of each matter.
Loss per share
--------------
Basic loss per common share - basic and diluted
Netis computed by dividing net loss per common share basic and diluted is based onattributable to
holders of Common Stock by the weighted average number of common and common equivalent sharesCommon Stock
outstanding forduring 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.
As of June 30, 2008, the Company had 28,820,358,267 shares of common stock
outstanding. If all of the Company's unexpired warrants and options 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 dilutedperiod. Diluted loss per share becausereflect the
potential dilution that could occur if securities to issue Common Stock
were exercised.
Recently issued accounting pronouncements
-----------------------------------------
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)
Simplifying the Accounting for Income Taxes. The update is intended
to simplify the current rules regarding the accounting for income taxes
and addresses several technical topics including accounting for franchise
taxes, allocating income taxes between a loss in continuing operations
and in other categories such as discontinued operations, reporting income
taxes for legal entities that are not subject to income taxes, and interim
accounting for enacted changes in tax laws. The new standard is effective
for fiscal years beginning after December 15, 2020; however, early adoption
is permitted.
The Company does not expect the adoption of their
anti-dilutive nature)this standard have a material
impact on the consolidated and combined financial statements. The Company
does not believe other recently issued but not yet effective accounting
standards, if currently adopted, would have a material effect on its
financial position, statements of operations and cash flows.
7
Subsequent event
----------------
The Company evaluated subsequent events and transactions after March 31,
2021 through the date that these unaudited financial statements are
available to be as follows:
Class B preferred stock options 10,000,000
Convertible note holder - common stock warrants 57,620,000
--------------
Subtotal 67,620,000
Accrued officer compensation ($520,000),
convertible into common stock 616,823,358
Convertible note holder principal value
($3,072,634), accrued interest ($498,132)
assumed converted into common stock at
$0.000035 per share 102,021,885,714
---------------
Total potential common stock equivalents 102,706,329,072
Reclassifications
Certain prior period amountsissued. There are no material subsequent events that
required recognition or additional disclosure in the financial statements.
Going concern
-------------
The accompanying financial statements have been reclassified to conform to the current
year's presentation.
F-20
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 2. GOING CONCERN UNCERTAINTY
Asprepared in conformity
with generally accepted accounting principles, which contemplate
continuation of June 30, 2008, the Company hadas a deficiencygoing concern. Additional capital
infusion is necessary in working capital of
approximately $5,300,000order to fund current expenditures, acquire
business opportunities and had incurred cumulative net losses since inception
of approximately $41,700,000, which raiseachieve profitable operations. This factor
raises substantial doubt about the Company's ability to continue as a
going concern.
8
Item 2. Management's plansDiscussion and Analysis of Financial Condition
and Results of Operations Our Company
Conectisys Corporation, a Colorado corporation ("Conectisys", the "Company,
"we", "us" or "our") is a shell company seeking to create value for correcting these deficiencies includeits
shareholders by merging with another entity with experienced management
and opportunities for growth in return for shares of our Common Stock.
No potential merger candidate has been identified at this time.
We do not propose to restrict our search for a business opportunity to
any particular industry or geographical area and may, therefore, engage
in essentially any business in any industry. We have unrestricted
discretion in seeking and participating in a business opportunity,
subject to the future salesavailability of such opportunities, economic conditions,
and licensingother factors.
The selection of a business opportunity in which to participate is
complex and risky. Additionally, we have only limited resources and
may find it difficult to locate good opportunities. There can be no
assurance that we will be able to identify and acquire any business
opportunity which will ultimately prove to be beneficial to us and
our shareholders. We will select any potential business
opportunity based on our management's best business judgment.
Our activities are subject to several significant risks, which arise
primarily as a result of the Company's productsfact that we have no specific business
and technologies,may acquire or participate in a business opportunity based on the
raisingdecision of capital
throughmanagement, which potentially could act without the issuanceconsent,
vote, or approval of additional convertible debt securitiesour shareholders. The risks faced by us are further
increased as a result of a lack of resources and salesour inability to provide
a prospective business opportunity with significant capital.
Our History
The Company was 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.
The Company was engaged in the development of common stock, 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 $7,285,000 through numerous similar funding
tranches occurringa low-cost automatic
meter reading, or AMR Solution, until it ceased all business activity
in April 2002 through June 30, 2008.
DuringWe filed our last Form 10-K for the year ended September 30, 2007 on
January 14, 2008.
We filed our last Form 10-Q for the same investor group advanced the Company an additional
$1,250,000. 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, $100,000 in September 2007,
$100,000 in October 2007, $100,000 in November 2007, $100,000 in December 2007,three and $115,000 in March 2008, including certain fees payable, in connection with
this additional financing. 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. PREPAID EXPENSES
The Company has accrued a prepaid expense of $80,000 as a staying bonus for its
Chief Executive Officer as per his employment contract (see Note 5). The staying
bonus was amortized over the calendar year 2007. The unamortized balance at
June 30, 2008 was $0.
At June 30, 2008, the balance in prepaid expenses totaled $23,251. Included
in prepaid expenses is $20,000 in an escrow account designated for key man life
insurance, and $3,251 in prepaid taxes.
The company has paid a security deposit of $4,698 under its existing lease
agreement for office space in Valencia, California (see Note 10).
F-21
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 4. LOAN FEES
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
$0.003 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 an exercise price of $0.0009 per share. Loan fees associated with
these loans amounted to $20,000. As of September 30, 2006, aggregate loan fees
amounted to $539,555, and accumulated amortization of these loan fees was
$511,315.
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.
During the nine months ended
June 30, 2008 on September 15, 2008.
Since August 1, 2020, Mr. Danilo Cacciamatta has been the sole
director and only officer of the Company.
Revenue
We have had no revenues from fiscal year 2008 through the date of
this filing.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. 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.
General Business Plan
Our business plan to seek a merger has many uncertainties which pose
risks to investors.
We intend to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities presented to us by
9
persons or firms which desire to seek the advantages of an issuer
who has complied with the Securities Act of 1934 (the "1934 Act").
We will not restrict our search to any specific business, industry
or geographical location, and we may participate in business ventures
of virtually any nature. This discussion of our proposed business
is purposefully general and is not meant to be restrictive of our
unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we may be able to participate
in only one potential business venture because of our lack of
financial resources. We may seek a business opportunity with entities
which have recently commenced operations, or that desire to utilize
the public marketplace in order to raise additional capital in order
to expand into new products or markets, to develop a new product
or service, or for other corporate purposes. All of these activities
have risk to investors including dilution and management.
We expect that the selection of a business opportunity will be complex.
Due to general economic conditions, rapid technological advances being
made in some industries and shortages of available capital, we believe
that there are numerous firms seeking the benefits of an issuer
who has complied with the 1934 Act. Such benefits may include
facilitating or improving the terms on which additional equity
financing may be sought, providing liquidity for incentive stock
options or similar benefits to key employees, providing liquidity
(subject to restrictions of applicable statutes) for all stockholders
and other factors. Potentially, available business opportunities may
occur in many different industries and at various stages of development,
all of which will make the task of comparative investigation and analysis
of such business opportunities extremely difficult and complex.
We have, and will continue to have, essentially no assets to provide
the owners of business opportunities. However, we will be able to
offer owners of acquisition candidates the opportunity to acquire a
controlling ownership interest in an issuer who has complied with the
1934 Act without incurring the cost and time required to conduct an
initial public offering.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, our Board of Directors. We intend to concentrate
on identifying preliminary prospective business opportunities which may
be brought to our attention through present associations of our director,
professional advisors or by our stockholders. In analyzing prospective
business opportunities, we will consider such matters as (i) available
technical, financial and managerial resources; (ii) working capital and
other financial requirements; (iii) history of operations, if any, and
prospectsfor the future; (iv) nature of present and expected competition;
(v) quality, experience and depth of management services; (vi) potential
for further research, development or exploration; (vii) specific risk
factors not now foreseeable but that may be anticipated to impact the
proposed activities of the company; (viii) potential for growth or
expansion; (ix) potential for profit; (x) public recognition and
acceptance of products, services or trades; (xi) name identification;
and (xii) other factors that we consider relevant. As part of our
investigation of the business opportunity, we expect to meet personally
with management and key personnel. To the extent possible, we intend to
utilize written reports and personal investigation to evaluate the
above factors.
We will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after
closing of the proposed transaction.
Acquisition Interest
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture,
or licensing agreement with another company or entity. We may also acquire
stock or assets of an existing business. Upon consummation of a transaction,
it is probable that our present management and stockholders will no longer
be in control of us. In addition, our sole director may, as part of the
terms of the acquisition transaction, resign and be replaced by new directors
without a vote of our stockholders, or sell his stock in us. Any such sale
will only be made in compliance with the securities laws of the United
States and any applicable state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under
application federal and state securities laws. In some circumstances,
as a negotiated element of the transaction, we may agree to register all
or a part of such securities immediately after the transaction is consummated
10
or at specified times thereafter. If such registration occurs, it will
be undertaken by the surviving entity after it has successfully consummated
a merger or acquisition and is no longer considered an inactive company.
The issuance of substantial additional securities and their potential sale
into any trading market which may develop in our securities may have a
depressive effect on the value of our securities in the future. There is no
assurance that such a trading market will develop.
While the actual terms of a transaction cannot be predicted, it is expected
that the parties to any business transaction on will find it desirable to
avoid the creation of a taxable event and thereby structure the business
transaction in a so called "tax free" reorganization under Sections 368(a)
(1) or 351 of the Internal Revenue Code (the "Code"). In order to obtain
tax-free treatment under the Code, it may be necessary for the owner of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, our stockholders would retain less than 20% of the
issued and outstanding shares of the surviving entity. This would result in
significant dilution in the equity of our stockholders.
As part of our investigation, we expect to meet personally with management
and key personnel, visit and inspect material facilities, obtain
independent analysis of verification of certain information provided,
check references of management and key personnel, and take other reasonable
investigative measures, to the extent of our limited financial resources and
management expertise. The manner in which we participate in an opportunity
will depend on the nature of the opportunity, the respective needs and
desires of both parties, and the management of the opportunity.
With respect to any merger or acquisition, and depending upon, among
other things, the target company's assets and liabilities, our
stockholders will in all likelihood hold a substantially lesser
percentage ownership interest in us following any merger or acquisition.
The percentage ownership may be subject to significant reduction in the
event we acquire a target company with assets and expectations of growth.
Any merger or acquisition can be expected to have a significant dilutive
effect on the percentage of shares held by our stockholders.
We will participate in a business opportunity only after the negotiation
and execution of appropriate written business agreements. Although the
terms of such agreements cannot be predicted, generally we anticipate
that such agreements will (i) require specific representations and
warranties by all of the parties; (ii) specify certain events of
default; (iii) detail the terms of closing and the conditions which
must be satisfied by each of the parties prior to and after such
closing; (iv) outline the manner of bearing costs, including costs
associated with the Company's attorneys and accountants; (v) set
forth remedies on efaults; and (vi) include miscellaneous other terms.
As stated above, we will not acquire or merge with any entity which
cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction.
If such audited financial statements are not available at closing,
or within time parameters necessary to insure our compliance within
the requirements of the 1934 Act, or if the audited financial
statements provided do not conform to the representations made by
that business to be acquired, the definitive closing documents will
provide that the proposed transaction will be voidable, at the discretion
of our present management. If such transaction is voided, the definitive
closing documents will also contain a provision providing for
reimbursement for our costs associated with the proposed transaction.
Competition
We believe we are an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns that have significantly
greater financial and personnel resources and technical expertise than we
have. In view of our limited financial resources and limited management
availability, we will continue to be at a significant competitive
disadvantage compared to our competitors.
11
Investment Company Act 1940
Although we will be subject to regulation under the Securities Act of
1933, as amended, and the 1934 Act, we believe we will not be subject
to regulation under the Investment Company Act of 1940 (the 1940 Act)
insofar as we will not be engaged in the business of investing or trading
in securities. In the event we engage in business combinations that result
in us holding passive investment interests in a number of entities, we could
be subject to regulation under the 1940 Act. In such event, we would be
required to register as an investment company and incur significant
registration and compliance costs. We have obtained no formal determination
from the SEC as to our status under the 1940 Act and, consequently,
any violation of the 1940 Act would subject us to material adverse
consequences. We believe that, currently, we are exempt under Regulation
3a-2 of the 1940 Act.
Intellectual Property
We own no intellectual property.
Employees
We presently have no full time executive, operational, or clerical staff.
Mr. Cacciamatta has been the sole director and sole officer of the Company
receivedsince August 1, 2020.
Factors Affecting Future Performance
Rather than an aggregateoperating business, our goal is to obtain debt and/or equity
financing to meet our ongoing operating expenses and attempt to merge with
another entity with experienced management and opportunities for growth in
return for shares of $415,000our Common Stock to create value for our shareholders.
Although there is no assurance that this series of events will be successfully
completed, we believe we can successfully complete an acquisition or merger
which will enable us to continue as a going concern. Any acquisition or merger
will most likely be dilutive to our existing stockholders.
Plan of Operations
We are currently investigating to identify and acquire a target company or
business seeking the perceived advantages of being a publicly held corporation.
Our principal business objective for the next 12 months and beyond such time
will be to achieve long-term growth potential through a combination with a
business rather than immediate, short-term earnings. The Company will not
restrict our potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of business.
The Company does not currently engage in any business activities that provide
cash flow. The costs of investigating and analyzing business combinations and
administering the Company's business for the next 12 months are estimated to
be as follows:
(i) filing of Exchange Act reports, (approximately $5,000);
(ii) costs relating to consummating an acquisition (approximately $5,000); and
(iii) general and administrative expenses (approximately $5,000).
To the extent that the Company's capital resources are insufficient to meet
current or planned operating requirements, the Company will seek additional
funds through equity or debt financing, collaborative or other arrangements
with corporate partners, licensees or others, and from other sources, which
may have the same accredited investor group in exchange for 6% convertible
debentures maturing February 13, 2010,effect of diluting the holdings of existing shareholders. The
Company has no current arrangements with respect to, or sources of, such
additional financing and March 28, 2011, convertible at the lesser of $0.03 per share and 40%Company does not anticipate that existing
shareholders will provide any portion of the averageCompany's future financing
requirements.
No assurance can be given that additional financing will be
available when needed or that such financing will be available on terms
acceptable to the Company. If adequate funds are not available, the Company
may be required to delay or terminate expenditures for certain of its
12
programs that it would otherwise seek to develop and commercialize. This
would have a material adverse effect on the Company. These factors raise
substantial doubt about the ability of the lowest three intra-dayCompany to continue as a
going concern.
The Company may consider a business that has recently commenced operations,
is a developing company in need of additional funds for expansion into new
products or markets, is seeking to develop a new product or service, or
is an established business which may be experiencing financial or operating
difficulties and is in need of additional capital. In the alternative, a
business combination may involve the acquisition of, or merger with, a
company which does not need substantial additional capital, but which
desires to establish a public trading pricesmarket for its shares, while avoiding,
among other things, the time delays, significant expense, and loss of
voting control which ay occur in a public offering.
None of our officers or directors has had any preliminary contact or
discussions with any representative of any other entity regarding a
business combination with us. Any target business that is selected may
be a financially unstable company or an entity in its early stages of
development or growth, including entities without established records
of sales or earnings. In that event, we will be subject to numerous
risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition,
we may effect a business combination with an entity in an industry
characterized by a high level of isk, and, although our management
will endeavor to evaluate the isks inherent in a particular target
business, there can be no assurance that we will properly ascertain
or assess all significant risks.
Our management anticipates that it
will likely be able to effect only one business combination,
due primarily to our limited financing, and the dilution of interest
for present and prospective shareholders, which is likely to occur
as a result of our management's plan to offer a controlling interest
to a target business in order to achieve a tax-free reorganization.
This lack of diversification should be considered a substantial risk
in investing in us, because it will not permit us to offset potential
losses from one venture against gains from another.
The Company anticipates that the selection of a sharebusiness combination
will be complex and extremely risky. Because of commongeneral economic
conditions, rapid technological advances being made in some industries
and shortages of available capital, our management believes that there
are numerous firms seeking even the limited additional capital that
we will have and/or the perceived benefits of becoming a publicly traded
corporation. Such perceived benefits of becoming a publicly traded
corporation include, among other things, facilitating or improving
the terms on which additional equity financing may be obtained, providing
liquidity for the rincipals of and investors in a business, creating a
means for providing incentive stock duringoptions or similar benefits to key
employees, and offering greater flexibility in structuring acquisitions,
joint ventures and the 20like through the issuance of stock. Potentially
available business combinations may occur in many different industries
and at various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities
extremely difficult and complex.
Sources of Business Opportunities
The Company intends to use various sources in its search for potential
business opportunities, including its officers and directors, consultants,
special advisors, securities broker-dealers, venture capitalists, members
of the financial community and others who may present management with
unsolicited proposals. Because of the Company's limited capital, it may
not be able to retain on a fee basis professional firms specializing in
business acquisitions and reorganizations. The Company will most likely
have to rely on outside sources, not otherwise associated with the Company
that will accept their compensation only after the Company has finalized a
successful cquisition or merger. The Company will rely upon the expertise
and contacts of such persons, use notices in written publications and
personal contacts to find merger and acquisition candidates, the exact
number of such contacts are dependent upon the skill and industriousness
of the participants and the conditions of the marketplace. To date the
Company has not engaged or entered into any definitive agreements nor
13
understandings regarding retention of any consultant to assist the Company
in its search for business opportunities, nor is management presently in
a position to actively seek or retain any prospective consultants for
these purposes.
The Company does not intend to restrict its search to
any specific kind of industry or business. The Company may investigate
and ultimately acquire a venture that is in its preliminary or development
stage, is already in operation, or in various stages of its corporate
existence and evelopment. Management cannot predict at this time the
status or nature of any venture in which the Company may participate.
A potential venture might need additional capital or merely desire
to have its shares publicly traded. The most likely scenario for a
possible business arrangement ould involve the acquisition of, or merger
with, an operating business that does not need additional capital, but
which merely desires to establish a public trading days immediately
preceding conversion. These convertible debentures were accompaniedmarket for its shares.
Management believes that the Company could provide a potential public
vehicle for a private ntity interested in becoming a publicly held
corporation without the time and expense typically associated with
an initial public offering.
Evaluation
Once the Company has identified a particular entity as a potential
acquisition or merger candidate, management will seek to determine
whether acquisition or merger is warranted or whether further
investigation is necessary. Such determination will generally
be based on management's knowledge and experience. See Item 5.
Directors and Executive Officers. Management may elect to engage
outside independent consultants to perform preliminary analysis of
potential business opportunities. However, because of the Company's
limited capital it may not have the necessary funds for a complete and
exhaustive investigation of any particular opportunity. Management will
not devote full time to finding a merger candidate and will continue
to engage in outside nrelated activities.
In evaluating such potential business opportunities, the Company will
consider, to the extent relevant to the specific opportunity, several
factors including potential benefits to the Company and its shareholders;
working capital, financial requirements and availability of additional
financing; history of operation, if any; nature of present and expected
competition; quality and experience of management; need for further
research, development or exploration; potential for growth and expansion;
potential for profits; and other factors deemed relevant to the specific
opportunity.
Because the Company has not located or identified any specific
business opportunity as of the date hereof, there may be unidentified risks
that cannot be adequately expressed prior to the identification of a
specific business opportunity. There can be no assurance following
consummation of any acquisition or merger that the business venture will
develop into a going concern or, if the business is already operating,
that it will continue to operate successfully. Many of the potential
business opportunities available to the Company may involve new and
untested products, processes or market strategies which may not ultimately
prove successful.
Form of Potential Acquisition or Merger
Presently the Company cannot predict the manner in which it might
participate in a prospective business opportunity. Each separate
potential opportunity will be reviewed and, upon the basis of that
review, a suitable legal structure or method of participation will
be chosen. The particular manner in which the Company participates in a
specific business opportunity will depend upon the nature of that
opportunity, the respective needs and desires of the Company and
management of the opportunity, and the relative negotiating strength
of the parties involved. Actual participation in a business venture
may take the form of an asset urchase, lease, joint venture, license,
partnership, stock purchase, reorganization, merger or consolidation.
The Company may act directly or indirectly through an interest in a
partnership, corporation, or other form of organization however, the
Company does not intend to participate in opportunities through the
purchase of minority stock positions.
Because of the Company's current status of inactivity since 2008 and
its concomitant lack of assets and relevant operating history, it is
likely that any potential merger or acquisition with another operating
14
business will require substantial dilution to the Company's existing
shareholders' interests. There will probably be a change in control
of the Company, with the incoming owners of the targeted merger or
acquisition candidate taking over control of the Company. Management
has not established any guidelines as to the amount of control it
will offer to prospective business opportunity candidates, since this
issue will depend to a large degree on the economic strength and
desirability of each candidate, nd the corresponding relative bargaining
power of the parties. However, management will endeavor to negotiate the
best possible terms for the benefit of the Company's shareholders as
the case arises. anagement may actively negotiate or otherwise consent
to the purchase of any portion of their Common Stock as a condition to,
or in connection with, a proposed merger or acquisition. In such an event,
existing shareholders may not be afforded an opportunity to approve or
consent to any particular stock buy-out transactionManagement does not
have any plans to borrow funds to compensate any persons, consultants,
or promoters in conjunction with its efforts to find and acquire or
merge with another business opportunity.
Management does not have any plans
to borrow funds to pay compensation to any prospective business opportunity,
or shareholders, management, creditors, or other potential parties to the
acquisition or merger. In either case, it is unlikely that the Company
would be able to borrow significant funds for such purposes from any
conventional lending sources. In all probability, a public sale of the
Company's securities would also be unfeasible, and management does
not contemplate any form of new public offering at this time. In
the event that the Company does need to raise capital, it would
most likely have to rely on the private sale of its securities.
Such a private sale would be limited to persons exempt under the
Commission's Regulation D or other rule, or provision for exemption,
if any applies. However, no private sales are contemplated by the
Company's management at this time. If a private sale of the Company's
securities is deemed appropriate in the future, management will
endeavor to acquire funds on the best terms available to the Company.
However, there can be no assurance that the Company will be able to
obtain funding when and if needed, or that such funding, if available,
can be obtained on terms reasonable or acceptable to the Company.
In the event of a successful acquisition or merger, a finder's fee, in
the form of cash or securities of the Company, may be paid to persons
instrumental in facilitating the transaction. The Company has not
established any criteria or limits for the determination of a finder's
fee, although most likely an aggregateappropriate finder's fee will be negotiated
between the parties, including the potential business opportunity
candidate, based upon economic considerations and reasonable value
as estimated and mutually agreed upon at that time. A finder's fee
would only be payable upon completion of 16,000,000 common stock warrants, exercisable overthe proposed acquisition or
merger in the normal case, and management does not contemplate any
other arrangement at this time. Current management has not in the
past used any particular consultants, advisors or finders. Management
has not actively undertaken a seven-year
periodsearch for, or retention of, any finder's
fee arrangement with any person. It is possible that a potential merger
or acquisition candidate ould have its own finder's fee arrangement, or
other similar business brokerage or investment banking arrangement,
whereupon the terms may be overned by a pre-existing contract; in such
case, the Company may be limited in its ability to affect the terms of
compensation, but most likely the terms would be disclosed and subject
to approval pursuant to submission of the proposed transaction to a
vote of the Company's hareholders. Management cannot predict any other
terms of a finder's fee arrangement at this time. If such a fee arrangement
was proposed, independent management and directors would negotiate the best
terms available to the Company so as not to compromise the fiduciary
duties of the epresentative in the proposed transaction, and the Company
would require that the proposed arrangement would be submitted to the
shareholders for prior ratification in an exercise priceappropriate manner.
Off-Balance Sheet Arrangements
Per SEC regulations, we are required to disclose our off-balance sheet
arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, such as changes in financial
condition, revenues, expenses, results of $0.0009 per share. Loanoperations, liquidity, capital
expenditures, or capital resources that are material to investors. We
have no off-balance sheet arrangements.
15
Accounting for Acquisitions
In accordance with the guidance for business combinations, we determine
whether a transaction or other event is a business combination, which
requires that the assets acquired and liabilities assumed constitute a
business. Each business combination is then accounted for by applying the
acquisition method. If the assets acquired are not a business, we account
for the transaction or other event as an asset acquisition. Under both
methods, we recognize the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquired entity. In
addition, for transactions that are business combinations, we evaluate
the existence of goodwill or a gain from a bargain purchase. We
capitalize acquisition-related costs and fees associated with these loans amountedasset
acquisitions and immediately expense acquisition-related costs and fees
associated with business combinations.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 2 of our
Unaudited Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This Item does not apply to $25,000.
Total amortizationsmaller reporting companies.
Item 4. Controls and Procedures
Evaluation of all loan fees duringDisclosure Controls and Procedures
Our management conducted an evaluation, with the nine months ended June 30, 2008
amountedparticipation of our
Chief Executive Officer, who is our principal executive officer and
our principal financial and accounting officer, of the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the Exchange Act) as of the end of the period covered by this
registration statement on Form 10. Based on that evaluation, we
concluded that because of the material weakness and significant
deficiencies in our internal control over financial reporting, our
disclosure controls and procedures ere not sufficient as of March 31,
2021. All such weaknesses and deficiencies are principally due to $10,668, leaving an unamortized loan fee balance at June 30, 2008our
lack of $19,724.
NOTE 5. DUE TO/FROM OFFICERS
The aggregate amount dueemployees and financial resources.
16
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Neither we nor any of our officers, at June 30, 2008 was $40,174directors, or holders of five
percent or more of our Common Stock is a party to any pending legal
proceedings and interest
expense on the officer loans amounted to $77 for the nine months ended June
30, 2008.
As of June 30, 2008, the Company owed its officers and former officers
$2,418,148 in accrued compensation. Of this amount, $520,000 was attributable
to aggregate staying bonuses payable to the Presidentbest of our knowledge, no such proceedings by
or against us or our officers, or directors or holders of five percent
or more of our Common Stock have been threatened or is pending against
us.
Item 1A. Risk Factors
This Item does not apply to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and former Chief Financial
Officer, SecretaryUse of Proceeds
On August 1, 2020, our sole director and Treasurerofficer agreed to purchase 800,000
post-split common shares for $100 cash payable upon the effectiveness of
the Company as10,000 for 1 reverse split which occurred on March 10, 2021.
Description of January 31, 2006. An
additional $80,000 payableCommon Stock
We are authorized to issue 250,000,000 shares of our Common Stock, no par
value (the Common Stock). Each share of the President on January 1, 2007 was amortized
over the 2007 calendar year. The staying bonuses areCommon Stock is entitled to
be compensated forshare equally with the Company's common stock, valued at the average bideach other share of Common Stock in dividends from sources
legally available therefor, when, and ask price for the
stock for the 30 days priorif, declared by our board of directors
and, upon our liquidation or dissolution, whether voluntary or involuntary,
to each respective year-end issuance date. The
total common stock to be issued as staying bonuses amounted to 616,823,358 at
September 30, 2007, including 289,156,628 shares to pay the Chief Executive
Officer's January 1, 2006 staying bonus.
F-22
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 6. CONVERTIBLE DEBENTURES
Convertible debentures at June 30, 2008, including convertible debentures
previously entirely converted to equity, secured by substantially allshare equally in the assets of the Company consistedthat are available for
distribution to the holders of the following:
Original Net Remaining Accrued Unexpired
Principal Proceeds to Principal (Unpaid) Warrants
Issuance Date Amount Company(1) Amount Interest(2) Issued
- ------------- ------------ ------------ ------------ ------------- ------------
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 1,148,000 752,645 187,420 2,800,000
March 8, 2006 1,270,000 1,180,000 954,989 115,236 20,320,000
February 13, 2007 1,250,000 1,230,000 1,250,000 76,324 25,000,000
March 28, 2008 115,000 95,000 115,000 2,395 10,000,000
---------- ----------- ----------- ---------- ------------
Total $ 7,285,000 $ 6,077,000 $ 3,072,634 $ 564,143 67,620,000
========== =========== =========== ========== ============
F-23
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 6. CONVERTIBLE DEBENTURES (continued)
Subtotal - convertible debentures $ 3,636,777
Less reclassified accrued interest (498,132)
Less prepaid interest offset ( 66,011)
------------
Subtotal principal value 3,072,634
DerivativeCommon Stock. Each holder of Common
Stock is entitled to one vote per share for all purposes, except that
in the election of directors, each holder shall have the right to vote
such number of shares for s many persons as there are directors to be
elected. Cumulative voting shall not be allowed in the election of directors
or for any other purpose, and the holders of Common Stock have no preemptive
rights, edemption rights or rights of conversion option - 150 percentwith respect to the Common
Stock. Our board of principal 4,608,952
Less unamortized note discount (1,173,295)
-----------
Net carrying value - convertible debentures $ 6,508,291
Convertible note payabledirectors is authorized to Laurus Master Fund, Ltd.,
unsecured, with interest payable at an annual rateissue additional shares of
8%, conversion premiumour Common Stock within the limits authorized by our Articles of
25% based on current
market priceIncorporation and without stockholder action. All shares of the Company'sCommon Stock
have equal voting rights, and oting rights are not cumulative.
As of April 19, 2021, there are 888,579 shares of our common stock (as defined),
initially due October 12, 2001issued
and extended to
December 1, 2001. Currently in default. 10,021
-----------
Total - convertible debentures and notes $ 6,518,312
Current portion 2,029,107
-----------
Long-term portion $ 4,489,205
===========
Asoutstanding.
Description of June 30, 2008, five-year maturities of the notes payable, including
convertible debentures, were as follows:
Derivative Unamortized Subsequent
Conversion Note Conversion Total
Principal Option Discount to Equity Due
---------- ---------- ---------- -------- --------
Year ended June 30, 2009 817,655 1,211,452 0 0 2,029,107
Year ended June 30, 2010 900,000 1,350,000 (296,075) 0 1,953,925
Year ended June 30, 2011 1,365,000 2,047,500 (877,220) 0 2,535,280
Subsequent conversions to equity 0 0 0 0 0
---------- ---------- ---------- ------ ---------
Total notes payable $ 3,082,655 $ 4,608,952 (1,173,295) $ 0 $ 6,518,312
========== ========== ========== ====== =========
F-24
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 7. 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 three to 20 times each
dollar of 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:
F-25
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 7. 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
Issuances 300,000 450,000 (300,000) 450,000 6,000,000
Amortization -- -- 180,130 180,130 --
Conversions (148,338) (222,506) - (370,844) --
---------- ---------- ----------- --------- -----------
Balance,
December 31, 2007 $3,030,134 $4,545,202 $(1,463,885) $6,111,451 57,620,000
Issuances 115,000 172,500 (115,000) 172,500 10,000,000
Amortization -- -- 195,284 195,284 --
Conversions (72,500) (108,750) - (181,250) --
---------- ---------- ----------- --------- -----------
Balance,
March 31, 2008 $3,072,634 $4,608,952 $(1,383,601) $6,297,985 67,620,000
Issuances -- -- - -- 10,000,000
Amortization -- -- 210,306 210,306 --
Conversions -- -- - -- --
---------- ---------- ----------- --------- -----------
Balance,
June 30, 2008 $3,072,634 $4,608,952 $(1,173,295) $6,508,291 77,620,000
========== ========= =========== ========= ==========
F-26
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 8. SHAREHOLDERS' DEFICIT
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.Preferred Stock
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 June 30, 2008, there
were 28,820,358,267 shares of the Company's common stock outstanding held by
approximately 700 holders of record and 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 Stockpreferred 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 Stockpreferred is convertible into 10 shares of the
Company's common stock.Common Stock. The Class B Preferred Stockpreferred does not have any
liquidation preference, voting rights, other conversion rights,
anti-dilution rights, or any other preferential rights.
During October 2007 through June 30, 2008, the Company issued 4,617,724,446
shares of common stock in connection with the conversion of $220,838 of
principal, $381,256 of derivative conversion option and $45,383 of accrued
interest, for a total conversion amount of $552,093 of the Company's convertible
debentures.
NOTE 9. 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 Chief Executive
Officer 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 andThere 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 Class B Preferred Stock 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 Class B Preferred Stock options
was adjusted to $0.50 per share. In January 2004, the exercise price on the
Class B Preferred Stock options was adjusted to $0.05 per share and the exercise
period was extended to November 1, 2009.
F-27
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 9. STOCK OPTIONS AND WARRANTS (continued)
The Company's Chief Executive Officer 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% (ranging from between 20% to 75%).
The Company adopted the provisions of Statement of Financial Accounting
Standards ("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
service 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 are defined by SFAS 123R (when applicable)and 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 in 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 SFAS No.
123, "Accounting for Stock-Based Compensation" ("SFAS 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.
No options were granted or vested during the interim periods presented, and all
options previously granted had completely vested before January 1, 2005.
Therefore no compensation costs were incurred under SFAS 123R and the actual net
loss equals the pro forma net loss for such interim periods.
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 in accordance with 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, which ranged from 5% to 6% during the years
ended September 30, 2005 and 2004, and stock volatility, which is estimated to
be 190%.
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.
F-28
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 9. STOCK OPTIONS AND WARRANTS (continued)
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 Note 7 above). The allocated
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 exercise 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 would not have vested until certain milestones
had 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 6 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 7 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 7 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 7 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 7 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 2005 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 7 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).
During the year ended September 30, 2005, the 500,000 non-valued common stock
options and the 2,000,000 contingently issuable common stock options noted above
both expired. In addition, 6,300,000 previously-valued common stock options and
warrants expired, consisting of 4,750,000 warrants issued to convertible note
holders at exercise prices ranging from $0.045 to $0.192 per share, 1,450,000
common stock options issued to a consultant at an exercise price of $0.13 per
share, and 100,000 common stock options issued to a director at an exercise
price of $0.38 per share.
F-29
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development
Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 9. STOCK OPTIONS AND WARRANTS (continued)
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 6 above). The allocated
cost of these warrants amounted to $4,551, resulting in a recorded balance of
stock options and warrants exercisable at both September 30, 2006 of 1,471,265
(including $100,000 attributable to 1,000,000 Class B preferred stock options
noted above).
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.
In October through December 2007, 6,000,000 seven-year common stock warrants
were issued to an accredited investor group in connection with a $300,000 6%
convertible debenture financing arrangement (see Note 6 above). The allocated
cost of these warrants amounted to $229, resulting in a recorded balance of
stock options and warrants exercisable at both September 30, 2007 and December
31, 2007 of $1,471,743 (including $100,000 attributable to 1,000,000 Class B
preferred stock options noted above).
In January through March 2008, 10,000,000 seven-year common stock warrants
were issued to an accredited investor group in connection with a $115,000 6.5%
convertible debenture financing arrangement (see Note 6 above). The allocated
cost of these warrants amounted to $339, resulting in a recorded balance of
stock options and warrants exercisable at both September 30, 2007 and March
31, 2008 of $1,473,082 (including $100,000 attributable to 1,000,000 Class B
preferred stock options noted above).
The common stock option and warrant activity during the nine-month period
ended June 30, 2008 and June 30, 2007 is summarized as follows:
Common Stock Weighted
Options Average
and Exercise
Warrants Price
---------- --------
Balance outstanding, October 1, 2007 51,620,000 $ 0.0019
Granted 16,000,000 0.0009
Expired - -
---------- -------
Balance outstanding, June 30, 2008 67,620,000 $ 0.0016
Balance outstanding, October 1, 2007 14,243,654 $ 0.0056
Granted - -
Expired (1,943,654) 0.3800
----------- -------
Balance outstanding, June 30, 2008 12,300,000 $ 0.0050
========== =======
F-30
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
The following table summarizes information about common stock options and
warrants at June 30, 2008:
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 17 $ 0.0050 1,000,000 $ 0.0050
$ 0.0050 - $ 0.0050 750,000 23 $ 0.0050 750,000 $ 0.0050
$ 0.0050 - $ 0.0050 750,000 25 $ 0.0050 750,000 $ 0.0050
$ 0.0050 - $ 0.0050 500,000 29 $ 0.0050 500,000 $ 0.0050
$ 0.0050 - $ 0.0050 250,000 29 $ 0.0050 250,000 $ 0.0050
$ 0.0050 - $ 0.0050 250,000 30 $ 0.0050 250,000 $ 0.0050
$ 0.0050 - $ 0.0050 250,000 32 $ 0.0050 250,000 $ 0.0050
$ 0.0050 - $ 0.0050 1,250,000 32 $ 0.0050 1,250,000 $ 0.0050
$ 0.0020 - $ 0.0020 750,000 34 $ 0.0020 750,000 $ 0.0020
$ 0.0020 - $ 0.0020 1,875,000 39 $ 0.0020 1,875,000 $ 0.0020
$ 0.0020 - $ 0.0020 1,875,000 41 $ 0.0020 1,875,000 $ 0.0020
$ 0.0039 - $ 0.0039 316,066 41 $ 0.0039 316,066 $ 0.0039
$ 0.0039 - $ 0.0039 217,466 21 $ 0.0039 217,466 $ 0.0039
$ 0.0039 - $ 0.0039 1,087,330 21 $ 0.0039 1,087,330 $ 0.0039
$ 0.0039 - $ 0.0039 1,179,138 21 $ 0.0039 1,179,138 $ 0.0039
$ 0.0009 - $ 0.0009 5,920,000 32 $ 0.0009 5,920,000 $ 0.0009
$ 0.0009 - $ 0.0009 1,600,000 32 $ 0.0009 1,600,000 $ 0.0009
$ 0.0009 - $ 0.0009 1,600,000 32 $ 0.0009 1,600,000 $ 0.0009
$ 0.0009 - $ 0.0009 1,600,000 32 $ 0.0009 1,600,000 $ 0.0009
$ 0.0009 - $ 0.0009 9,600,000 32 $ 0.0009 9,600,000 $ 0.0009
$ 0.0009 - $ 0.0009 5,000,000 67 $ 0.0009 5,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 2,000,000 67 $ 0.0009 2,000,000 $ 0.0009
$ 0.0009 - $ 0.0009 10,000,000 67 $ 0.0009 10,000,000 $ 0.0009
- ------------------- ---------- -- -------- ---------- --------
$ 0.0009 - $ 0.0050 67,620,000 44 $ 0.0016 67,620,000 $ 0.0016
================== ========== == ======== ========== ========
F-31
CONECTISYS CORPORATION AND SUBSIDIARIES (A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 10. INCOME TAXES
Deferred income taxes consisted of the following at June 30, 2008:
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 June 30, 2008, 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.
F-32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. We intend that those forward-looking statements be subject to the
safe harbors created by those sections. These forward-looking statements
generally include the plans and objectives of management for future operations,
including plans and objectives relating to our future economic performance, and
can generally be identified by the use of the words "believe," "intend," "plan,"
"expect," "forecast," "project," "may," "should," "could," "seek," "pro forma,"
"estimates," "continues," "anticipate" and similar words. The forward-looking
statements and associated risks may include, relate to, or be qualified by other
important factors, including, without limitation:
o our ability to obtain FCC approval of our H-Net(TM) wireless
meter-reading products;
o the projected growth in the automated meter reading markets;
o our business strategy for establishing and expanding our
presence in these markets;
o our ability to successfully implement our business plans;
o our ability to hire and retain qualified personnel;
o anticipated trends in our financial condition and results of
operations;
o our ability to distinguish ourselves from our competitors; and
o uncertainties relating to economic conditions in the markets in
which we currently operate and in which we intend to operate in
the future.
These forward-looking statements necessarily depend upon assumptions and
estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in the forward-looking statements are
reasonable, we cannot guarantee that we will achieve our plans, intentions or
expectations. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ in
significant ways from any future results expressed or implied by the forward-
looking statements. We do not undertake to update, revise or correct any
forward-looking statements.
Any of the factors described above or in the "Risk Factors" section of
our most recent annual report on Form 10-KSB could cause our financial results,
including our net income (loss) or growth in net income (loss) to differ
materially from prior results, which in turn 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 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
2
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 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.
Our continued operations are dependent on securing additional sources of
liquidity through debt and/or equity financing. We have received only minimal
funding during 2008 and through the filing of this report and we are in
immediate need of additional financing. If we are unable to obtain funding
soon, we will be unable to continue our operations and our development of our H-
NET(TM) system.
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 June 30,
2008, we had a deficiency in working capital of approximately $5.3 million and
had an accumulated deficit of approximately $41.7 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. 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.
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.
3
Statement of Financial Accounting Standards, "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.
Results of Operations
Comparison of Results of Operations for the Three Months Ended June 30,
2008 and 2007
We did not generate any meaningful revenues for the three months ended
June 30, 2008 and 2007. Cost of prototypes and samples for the three months
ended June 30, 2008 was $0 as compared to $80,082 for the same period in 2007.
The decrease in cost of prototypes and samples was primarily due to a decrease
in production of models and prototypes of our H-Net(TM) products used for sales
and marketing purposes.
General and administrative expenses decreased by $134,990, or 32%, to
$290,627 for the three months ended June 30, 2008 as compared to $425,617 for
the same period in 2007. This decrease was primarily due to fewer business
activities as we have been unable to raise any significant funding during 2008
to fund our business activities.outstanding.
Item 3. Defaults upon Senior Securities
None.
4
Interest expense decreased by $232,508, or 47%, to $266,280 during the
three months ended June 30, 2008 as compared to $498,788 for the same period in
2007. This decrease in interest expense was primarily due to a decrease in net
borrowings outstanding under our convertible debentures and other debt during
the three months ended June 30, 2008 as compared to the same period in 2007,
resulting in a corresponding decrease in amortization of convertible debt
discount on these debentures.
Net loss for the three months ended June 30, 2008 decreased by $450,261,
or 45%, to $556,907 as compared to a net loss of $1,007,168 for the same period
in 2007. The decrease in net loss primarily resulted from the decreases in
general and administrative expenses and interest expense, as discussed above.
Comparison of Results of Operations for the Nine Months Ended June 30,
2008 and 2007
We did not generate any meaningful revenues for the nine months ended
June 30, 2008 and 2007. Cost of prototypes and samples for the nine months
ended June 30, 2008 was $48,765 as compared to $140,271 for the same period in
2007. The decrease in cost of prototypes and samples was primarily due to a
decrease in production of models and prototypes of our H-Net(TM) products used
for sales and marketing purposes.
General and administrative expenses decreased slightly by $33,537, or
3%, to $1,052,539 for the nine months ended June 30, 2008 as compared to
$1,086,076 for the same period in 2007.
Interest expense decreased by $305,252, or 22%, to $1,101,230 during the
nine months ended June 30, 2008 as compared to $1,406,482 for the same period in
2007. This decrease in interest expense was primarily due to a decrease in net
borrowings outstanding under our convertible debentures and other debt during
the nine months ended June 30, 2008 as compared to the same period in 2007,
resulting in a corresponding decrease in amortization of convertible debt
discount on these debentures.
Net loss for the nine months ended June 30, 2008 decreased by $429,223,
or 16%, to $2,202,534 as compared to a net loss of $2,631,757 for the same
period in 2007. The decrease in net loss primarily resulted from the decreases
in general and administrative expenses and interest expense, as discussed above.
Liquidity and Capital Resources
Our continued operations are dependent on securing additional sources of
liquidity through debt and/or equity financing. We have received only minimal
funding during 2008 and through the filing of this report and we are in
immediate need of additional financing. If we are unable to obtain funding
soon, we will be unable to continue our operations and our development of our H-
NET(TM) system.
During the nine months ended June 30, 2008, 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 June 30, 2008 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.
5
As of June 30, 2008, we had a working capital deficit of approximately
$5.3 million and an accumulated deficit of approximately $41.7 million. As of
that date, we had $123 in cash and cash equivalents. We had accounts payable
and accrued compensation expenses of approximately $2.7 million. We had other
current liabilities, including amounts due to officers, accrued interest and
current portion of convertible debentures of approximately $2.7 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 $513,654 for the nine
months ended June 30, 2008 as compared to $1,036,455 for the same period in
2007. Cash used in our investing activities totaled $2,441 for the nine months
ended June 30, 2008 as compared to cash provided by our investing activities of
$416,449 for the same period in 2007. Cash provided by our financing activities
totaled $475,384 for the nine months ended June 30, 2008 as compared to $630,537
in cash provided by our financing activities for the same period in 2007. We
raised all of the cash provided by our financing activities during the nine
months ended June 30, 2008 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
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 August 18
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 August 18, 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
6
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 March 2008, 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 August 18, 2008, we owed principal and unpaid interest on our
convertible debentures and notes in an aggregate amount of approximately $3.6
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. 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.
As of August 18, 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 and March 2008, 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 investors in connection
with debenture and note offering transactions:
7
Unexpired
Original Net Remaining Accrued and Warrants
Principal Proceeds to Principal Unpaid Issued in
Issuance Date Amount($)(1) ConectiSys($)(2) Amount($) Interest($)(2) Offering(#)
- --------------- ------------- ----------------- ----------- ---------------- -----------
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 1,148,000 752,645 232,168 2,800,000
March 8, 2006 1,270,000 1,180,000 954,989 122,929 20,320,000
February 13, 2007 1,250,000 1,145,000 1,250,000 86,392 25,000,000
March 28, 2008 115,000 95,000 115,000 3,630 10,000,000
------------ ------------- ----------- --------- -----------
Total: $6,535,000 $ 5,400,000 $3,072,634 $ 627,887 67,620,000
________________ ============ ============= ========== ========= ===========
(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 August 18, 2008. The total amount of
accrued and unpaid interest does not account for approximately
$103,000 of outstanding pre-paid interest.
Each of the above outstanding secured convertible debentures or notes,
except for the convertible notes issued in March 2005 and 2006, February 2007
and March 2008, 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, February 2007 and
March 2008 are due three years following their issuance dates. The conversion
price of our secured convertible debentures is the lower of 35% 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 20 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, February 2007 and March 2008 convertible notes.
As of August 18, 2008, the applicable conversion price was approximately
$0.000035 per share.
As indicated above, our consolidated financial statements as of June 30,
2008 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 the notes to our consolidated financial statements included
in this report, we have suffered recurring losses from operations and at June
30, 2008 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
8
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.
Effect of Inflation
Inflation did not have any significant effect on our operations during
the three or nine months ended June 30, 2008. Further, inflation is not
expected to have any significant effect on our future operations.
Impact of New Accounting Pronouncements
The Financial Accounting Standards Board, or FASB, has established a
recent accounting pronouncement.
In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. SFAS No. 157 defined fair value, established a framework for
measuring fair value and expands disclosures about fair-value measurements
required under other accounting pronouncements, but does not change existing
guidance as to whether or not an instrument is carried at fair value. SFAS No.
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. We are currently evaluating the impact of adopting SFAS
No. 157.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.Item 4. Mine Safety Disclosures
Not applicable.
9
ITEM 4. CONTROLS AND PROCEDURES.
Our Chief Executive Officer and Chief Financial Officer (our principal
executive officer and principal financial officer, respectively) has concluded,
based on his evaluation as of June 30, 2008 (the "Evaluation Date"), that the
design and operation of our "disclosure controls and procedures" (as defined in
Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as
amended ("Exchange Act")) are effective to ensure that information required to
be disclosed by us in the reports filed or submitted by us under the Exchange
Act is accumulated, recorded, processed, summarized and reported to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding whether or not disclosure is
required.
There were no changes in our internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-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 4T. CONTROLS AND PROCEDURES.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.Item 5. Other Information
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Unregistered Sales of Equity Securities
None.
Dividend Policy
We have never paid cash dividends on our common stock and do not
currently intend to pay cash dividends on our common stock in the foreseeable
future. We are restricted from paying dividends on our common stock under state
law, and the terms of our secured convertible debentures. We currently
anticipate that we will retain any earnings for use in the continued development
of our business.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
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.
10
As of August 18, 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 August 18, 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 March 2008, 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 August 18, 2008, we owed principal and unpaid interest on our
convertible debentures and notes in an aggregate amount of approximately $3.6
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. 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,
11
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEMItem 6. EXHIBITS.
Exhibits
--------
Exhibit
No.Number Description
----------- --------------------- ----------------
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 (*)
__________
(*) Filed herewith.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONECTISYS CORPORATION
Date: September 12, 2008 By: /s/ ROBERT A. SPIGNO
--------------------------
Robert A. Spigno,
Chairman of the Board, President,
Chief Executive Officer and Chief Financial Officer
(principal executive officer and principal
financial and accounting officer)
13
EXHIBITS FILED WITH THIS REPORT ON FORM 10-Q
Exhibit No. Description
----------- -----------
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-OxleySarbanes- 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
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 30, 2021 Conectisys Corporation /s/ Danilo Cacciamatta
----------------------- -------------------------
(Registrant) (Chief Executive Officer)
1419