-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T7/L+6Lq4AkesXwlNJJ3FoJCPn+U2HVj7V0w38AoSBA4QMAc+7NUqRMPwdrbaa2p NtwB8H33dFjujnjkPXZilQ== 0000312066-01-000003.txt : 20010315 0000312066-01-000003.hdr.sgml : 20010315 ACCESSION NUMBER: 0000312066-01-000003 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DENCOR ENERGY COST CONTROLS INC CENTRAL INDEX KEY: 0000312066 STANDARD INDUSTRIAL CLASSIFICATION: AUTO CONTROLS FOR REGULATING RESIDENTIAL & COMML ENVIRONMENT [3822] IRS NUMBER: 840658020 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-09255 FILM NUMBER: 1568273 BUSINESS ADDRESS: STREET 1: 1450 WEST EVANS CITY: DENVER STATE: CO ZIP: 80223 BUSINESS PHONE: 3039221888 MAIL ADDRESS: STREET 1: 1450 W EVANS STREET 2: 1450 W EVANS CITY: DENVER STATE: CO ZIP: 80223 10KSB/A 1 0001.txt SECURITIES AND EXCHANGE COMMISSION0 Washington, D.C. 20549 FORM 10-KSB/A1 (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000 or [ ] Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___________ to __________________ Commission file number 0-9255 Dencor Energy Cost Controls, Inc. (Exact name of registrant as specified in its charter) Colorado 84-0658020 (State or other jurisdiction of ( I.R.S. Employer Identification No.) incorporation or organization) 1450 West Evans, Denver, Colorado 80223 (Address Of Principal Executive Offices) (Zip Code) Issuer's telephone number, including area code: (303) 922-1888 Securities registered pursuant to Section 12 (b) of the Act: None None (Title of Each Class) (Name of each exchange on which registered) Securities registered pursuant to Section 12 (g) of the Act: Common Stock No Par Value (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or an amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $220,400 As of March 6, 2001 there were 22,749,804 common shares outstanding and the aggregate market value of the common shares (based upon the average of the bid price ($2/16) and the asked price ($15/32) reported by brokers) held by non-affiliates was approximately $2,219,500. Transitional Small Business Disclosure Format (check one): Yes ; No X PART I ITEM 1. Business (a) General Development of Business. Dencor Energy Cost Controls, Inc. (the "Company") was incorporated on January 16, 1974, under the laws of the State of Colorado for the purpose of developing, manufacturing, and marketing electronic devices. Currently, the Company's primary activity is the manufacture and sale of electrical demand controllers which manage electricity consumed in residences and commercial establishments and energy control devices used by utilities to modify residential energy use patterns. The Company has its headquarters, production facilities, and research and development laboratories in Denver, Colorado. (b) Business of Issuer. The Company is engaged in only one industry, that of designing, developing, manufacturing, marketing, and installing products and systems which assist in monitoring energy and controlling the cost of energy utilization. Management of the Company does not recognize any significant business difference, at least at this time, between sales of residential demand controllers, special relay equipment for utilities, temperature activated duty cyclers, commercial demand controllers, and interlocks. (1) Principal Products Produced and Services Rendered (i) Energy Management Systems - Residential The Company's primary business is the assembly and sale of control systems that reduce electrical energy costs. Its principal product is the electrical demand controller that enables a homeowner having an electric heating system or a central air conditioning system to control the peak use of electricity. This enables the homeowner to achieve cost savings in geographic locations served by electric utilities that include a demand factor in their residential billing rates. Demand rates are used by electric utilities to encourage consumers to reduce their peak usage of electricity. A demand controller monitors the total power consumption and turns off selected loads, typically heating circuits, during peak consumption periods, restoring them at the end of that period. The controller automatically keeps the consumption within the level selected. The principal markets for residential demand control systems are in regions served by utilities with a demand rate for residential customers. The residential demand controller is designed for homes heated electrically by baseboard heaters, radiant heaters, heat pumps, electric boilers and electric furnaces, and may also be used to control air conditioners. The sale of residential demand control systems contributed 31% of total Company sales during 2000. (ii) Energy Management Systems - Commercial The Company has developed demand controllers for commercial buildings. One model of the commercial systems includes a graphics system to interface commercial demand controllers to computers using the windows operating system. These controllers are designed to permit demand monitoring and controller parameter changes from a remote location by use of telephone lines and a modem. This graphics system can display minute-by-minute demand data as well as 15- minute, daily summaries. All data is also stored in an Access database on computer disk for later inspection. The sale of commercial demand control systems contributed 25% of total Company sales during 2000. (iii) Special Utility Products The Company has developed equipment to monitor and report power outages and a series of products used to control water heaters, space heaters, and air conditioners for specific utility applications. Sales of special utility products contributed 44% of total Company sales during 2000. (2) Distribution Methods of Products The Company's demand control systems are currently being marketed through traditional electrical distribution channels. They are being sold to electrical distributors who, in turn, market and distribute these systems to electrical contractors who provide installation services to the builder or to the consumer. The Company also sells to dealers who specialize in selling energy products to customers and also utilizes manufacturer's representatives to promote the distribution of its products. The Company also sells to organizations that have lease/purchase plans with customers. This enables the customer to realize cost savings that usually approximate or exceed the lease payments. (3) Status of any Publicly Announced New Products or Services During 2000 the Company developed equipment to control dimmable electronic lighting ballasts. This equipment entered production during the last quarter of 2000. (4) Competitive Conditions Competition is intense in the energy management control system market. The Company competes directly with several relatively small electronic companies in its residential controller market and with the major manufacturers of electrical controls for its commercial demand controllers. Several companies manufacture systems that are similar in concept to the Company's demand controllers. Many of the companies with which the Company competes and will be competing in both the residential and commercial market have substantially greater financial and technical capabilities. Products of these companies often compete directly with those being offered by the Company and with those currently in development. The Company strives to produce high quality products that may be priced slightly higher than the competition. (5) Sources and Availability of Raw Materials The Company has approximately 17 suppliers for its components. Its semi- conductor components are made by a variety of primary semi-conductor manufacturers. The Company also has components made to order from several local and national vendors. It is believed that adequate sources are available and the Company has had no significant difficulty in obtaining components. The Company believes other alternate sources are available if required. The principal suppliers are American Circuit Technology, Cooper B-Line, Deltrol, Denver Beta, EMJD and Future Electronics. Its suppliers' productive capacities are believed to be sufficient to meet any rapid delivery requirements of customers or to any continuous allotment of goods. (6) Major Customers During 2000, four major customers accounted for 47% of the Company's net sales. These customers are not affiliated with the Company. The loss of any of these customers may adversely affect the Company's business. As of January 17, 2001, the Company had a backlog of orders totaling $10,200 consisting of equipment orders from distributors and utilities. The Company anticipates filling these orders during the current year. The backlog of orders as of January 17, 2000 was $1800. (7) Patents Most of the Company's demand control systems are not protected by patents. While management believes that patent protection may be desirable in some instances, it does not consider such protection essential to the ultimate success of the Company. A patent was issued April 4, 1989 for a Variable-Limit Demand Controller for Metering Electrical Energy. In 1991, the Company entered into a non-exclusive licensing agreement with an unrelated third party for use of the Company's patent. A patent was issued October 7, 1997 for an Adaptive Load Cycler for Controlled Reduction of Energy Use. (8) Government Approval There is no requirement for government approval of principal products or services. The Company has no government contracts. (9) Government Regulations There is no known material effect from known or probable government regulations. (10) Research and Development In the years ended December 31, 2000 and 1999, the Company expended $82,500 and $95,200, respectively, on Company sponsored research and development activities. The Company plans to continue research and development activities during 2001. (11) Environmental Protection The Company's compliance with federal, state, and local laws and regulations relating to the discharge of material into the environment or otherwise relating to the protection of the environment does not have a material impact on the Company's capital expenditures. (12) Employees On January 15, 2001, the Company had 4 full-time employees and 1 part-time employee. Two were engaged in administration, two in production, and one in engineering research and development. ITEM 2. Properties The Company leases 3500 sq. ft. of office, research and development, sales, and manufacturing space at 1450 West Evans, Denver, Colorado for $1,870/month. Management considers these facilities to be adequate for its requirements for the immediate future. This lease expires in May 2002 and has a 6-month cancellation clause. See Note 7 of the Notes to Financial Statements for additional information about the Company's commitments under terms of non-cancelable leases. ITEM 3. Legal Proceedings The Company is not a party to any legal proceedings, including any ordinary routine litigation incidental to its business, nor, to the best of its knowledge, are any such proceedings threatened or contemplated. ITEM 4. Submission of Matters to a Vote of Security Holders No matter was submitted during the fourth quarter. PART II ITEM 5. Market for the Registrant's Common Stock and Related Security Holder Matters (a) The principal market on which the Company's common stock is traded on the OTC Bulletin Board under the symbol DENC. The table below presents the high and low closing prices for each quarterly period. The quotations reflect inter-dealer prices, without retail markup, markdown, or commission, and may not represent actual transactions. Fiscal 2000 Fiscal 1999 Low High Low High 03/31/00 $.02 $.34 03/31/99 $.04 $.08 06/30/00 .10 .25 06/30/99 .05 .05 09/30/00 .06 .11 09/30/99 .03 .05 12/31/00 .05 .06 12/31/99 .01 .04 The high and low bid quotations on March 6, 2001 were $2/16 and $15/32, respectively. (b) Holders. The approximate number of holders of record of the Registrant's Common Stock as of January 17, 2001 was 430. (c) The Registrant has paid no dividends from inception to date and does not currently intend to do so. ITEM 6. Management's Discussion and Analysis (a) Selected Financial Data Year Ended December 31 2000 1999 1998 1997 1996 Net Sales $210,800 $247,700 $318,200 $437,700 $388,700 Net Income (Loss) (207,600) (235,600) (153,100) (74.200) (74,400) Net Income (Loss) Per Common Share (.03) (.05) (.03) (.02) (.02) Weighted Average Common Shares Outstanding 6,788,571 4,854,231 4,296,674 3,671,304 3,671,304 * Less than $.01 per share AT YEAR END Year Ended December 31 2000 1999 1998 1997 1996 Total Assets $157,100 $167,200 $172,500 $201,700 $217,400 Working Capital (Deficiency) (561,700) (439,900) (222,900) (102,600) (16,700) Shareholders' Equity (Deficit)(554,800) (431,300) (210,300) (85,500) (11,300) No dividends have been declared or paid for any of the periods presented. (b) Liquidity and Capital Resources During the 12 months ended December 31, 2000, net cash used in operating activities was approximately $29,900. Net cash used in operating activities during the 12 months ended 1999 was approximately $10,900. Net cash used in operating activities during the 12 months ended December 31, 2000 includes the net loss for the year of $207,600 reduced by non-cash expenses and a net change in operating assets and liabilities of approximately $177,700. Net cash used in operating activities during the 12 months ended December 31, 1999 includes the net loss for the year of $235,600 reduced by non-cash expenses and a net change in operating assets and liabilities of approximately $224,700. Cash flows provided by financing activities was approximately $34,000 during the 12 months ended December 31, 2000 compared to cash flows provided by financing activities of approximately $3,100 during the 12 months ended December 31, 1999. During 2000 the Company sold 2,600,000 of common stock in exchange for cash of $31,000 and notes payable to shareholders of $42,000. The independent auditors' report on the Company's financial statements for the year ended December 31, 2000 includes a "going concern" explanatory paragraph, which includes factors that raise substantial doubt about the Company's ability to continue as a going concern. Management plans in regard to the factors which prompted the explanatory paragraph are discussed in Note 2 to the Company's December 31, 2000 financial statements. The Company considers, and currently uses for internal management purposes, a number of measures of liquidity. These measures include the Current Ratio, which is the ratio of current assets to current liabilities and the Sales to Total Assets Ratio. Working capital is current assets less current liabilities. 2000 1999 1998 Current Ratio .21 .26 .44 Sales to Total Assets 1.34 1.48 1.72 The major factors affecting these ratios were the net losses for 2000, 1999 and 1998. The Company has made extensive use of short-term debt as summarized in the following table: Maximum Average Weighted Weighted amount amount average Balance at average outstanding outstanding interest end of interest during the during the rate during Notes Payable period rate period period period Shareholders $166,100 18.2% $166,000 $141,000 18.2% The weighted average interest rate during the period was based on the outstanding balance and interest rate at each month-end for each note. The Company anticipates continuing short-term borrowing in 2001. The Company currently has no line of credit. If working capital beyond that provided by cash flow is needed, additional debt financing will be sought. If traditional debt financing is not available, the Company will attempt to raise working capital by private borrowing including stockholder loans, or sales of stock through private placements, although no assurances can be given that financing will be available. The Company at present has no long-term debt. New Accounting Pronouncements In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities was issued. This statement, as amended, is effective for fiscal years beginning after June 15, 2000. Currently, the Company does not have any derivative financial instruments and does not participate in hedging activities. Therefore, management believes that SFAS No. 133 will not have an impact on its financial position or results of operations. In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements. SAB No. 101, as amended by SAB No. 101A and SAB No.101B, is effective no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. SAB No. 101 provides the staff's views in applying generally accepted accounting principals to selected revenue recognition issues. Currently, the Company believes that it complies with the accounting and disclosure described in SAB No. 101; therefore, management believes that SAB 101 will not impact the Company's financial statements. (c) Results of Operations The Company's net sales in 2000 of $210,800 were 15% lower than the net sales of $247,700 in 1999. The net sales decrease was substantially due to a decrease in international sales from approximately $68,700 in 1999 to approximately $17,200 in 2000, a 75% decrease. Dealer sales increased 42% from approximately $48,000 in 1999 to $ 68,200 in 2000. The net loss for 2000 was $207,600 compared to net loss of $235,600 in the prior year. Gross Margins. The gross margin was $72,600, 34% of sales, for 2000 compared to $78,200, 32% of sales, in the prior year. The increase in the gross margin was due to the shift from lower margin international sales to higher margin dealer sales. Selling Expenses. Selling expenses were $12,800, 6.1% of sales, in 2000 compared to $14,400, 5.8% of sales, in 1999. General and Administrative Expense. General and administrative expenses were $140,400, 66.6% of sales, in 2000 compared to $172,200, 69.5 % of sales, in 1999. The decrease was due to reduced administrative staff activity. Research and Development. Research and development expenses decreased 13.3% to $82,500 in 2000 compared to $95,200 in 1999. The decrease was due to a decrease in compensation and software development activity. Inflation. Inflation has no significant impact on the operations of the Company. Subsequent events: In February 2001, the Company entered into a merger agreement with Reliable Power Systems, Inc. ("Reliable") and completed certain other related transactions. Reliable was formed in July 2000 and is a start up company. Following is a summary of these agreements and transactions that occurred subsequent to December 31, 2000: a. The Company formed Denmer Corporation, a new wholly-owned subsidiary of the Company. b. Reliable was merged into Denmer Corporation. In this transaction, the shareholders of Reliable exchanged all of the issued and outstanding shares of Reliable for 12,600,000 shares of the Company's common stock and 3,348,000 shares of the Company's Series A voting convertible preferred stock. Each share of the Series A preferred stock is convertible into 50 shares of common stock and is entitled to 50 votes. c. At the time of closing of the merger, Reliable was required to have $300,000 of unrestricted cash in excess of its liabilities. Upon completion of the merger, this cash was loaned by Denmer to the Company and used to pay $300,000 of notes payable, accrued interest and other liabilities of the Company. d. The Company converted approximately $300,000 of accrued compensation and benefits to 300,000 shares of Series B voting redeemable preferred stock. The Series B preferred stock has a stated and liquidation value of $1.00 per share, dividends rights on the same basis as the common stock, and voting rights of one vote per share of preferred stock. The Series B preferred stock is required to be redeemed by the Company in three equal installment in February 2002, 2003 and 2004. The Company has the option of redeeming the preferred stock for cash at its stated value or with common stock at its then fair market value, provided that the fair market value of the common stock is not less than $2.00 per share nor more than $10.00 per share. Until the Series B preferred stock is redeemed, the Company may not issue any preferred stock with liquidation preferences ahead of the Series B preferred stock. e. Certain shareholders of the Company forgave approximately $39,589 of accrued interest, compensation payable and other amounts due them. f. The Company issued 1,800,000 shares of common stock and $20,000 to a third party for a finders and other fees related to the merger transaction. g. The Company cancelled its employment arrangements with its two executive officers and entered into employment contracts. The employment contracts have a three-year term and provide for base salary, bonuses based on sales, and stock options. h. On February 6, 2001 Reliable Power Systems, Inc. hired David Mazur as Senior Vice President - Chief Technology Officer. Mr. Mazur will assist the Company with expanding its product line to include uninterruptible power systems for commercial and industrial customers. Mr. Mazur has extensive experience in the energy management and supply business including sales, product development, and management. The Company also believes Mr. Mazur will be able to help increase sales of its existing products. As a result of these transactions, the Company has outstanding 22,749,804 shares of common stock and the former shareholders of Reliable assumed control of the Company. Under the terms of the transaction, Theodore Hedman, a former director of the Company, resigned on February 7, 2001 and Thomas J. Wiens was appointed Chairman of the Board of Directors. David Groom was appointed Secretary and Maynard L. Moe appointed Vice-President of Operations. The Company has filed a preliminary information statement in anticipation of the annual meeting of shareholders. At the annual meeting, the Company's shareholders are to consider and take action on several matters including the following: a. Ratify the merger agreement with Reliable. b. Effectuate a 1 for 18 reverse stock split. c. Decrease the authorized common stock to 65,000,000 shares and to increase the authorized preferred stock to 15,000,000 shares. d. Change the name of the Company to Reliable Power Systems, Inc. e. Approve the Reliable Power Systems Equity Incentive Plan. Under the plan the maximum number of shares of common stock that may be issued upon exercise or payment will not exceed 900,000 shares. Incentive options and stock appreciation rights may be granted to officers, directors and employees of the Company with exercise prices equal to the fair market value of the stock on the date of the grant. Nonqualified options may be granted to advisors and consultants of the Company at exercise prices not less than 50% of the fair market value of the stock on the date of grant. ITEM 7. Financial Statements The Form 10-KSB filed on March 9, 2001 was inadvertently filed before the release of the Company's independent auditors' report on the Company's financial statements was authorized. It is anticipated the final version will include proforma information concerning Reliable Power Systems, Inc. No substantive change in the financial information for the Company is anticipated. The Form-10KSB with audited financial information is expected to be submitted before April 2, 2001. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED BALANCE SHEET DECEMBER 31, 2000 ASSETS Current assets: Cash $ 4,600 Accounts receivable, net of allowance for doubtful accounts of $10,400 (Note 9) 26,000 Inventories (Notes 4 and 5) 115,300 Prepaids and other 4,300 Total current assets 150,200 Furniture and equipment 213,300 Less accumulated depreciation 213,300 - Long-term receivables, net of allowance for doubtful receivables of $10,400 (Note 3) 6,900 $ 157,100 LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Notes payable - shareholders (Note 5) $ 166,100 Accounts payable 22,200 Accrued compensation and benefits 403,100 Accrued interest and advances due to shareholders (Note 5) 116,600 Warranty reserve 3,200 Other 700 Total liabilities (all current) 711,900 Commitments (Notes 2,7 and 11) Shareholders' deficit (Note 8): Preferred stock, no par value, authorized 5,000,000 shares; none issued and outstanding Common stock, no par value, authorized 25,000,000 shares; issued and outstanding, 8,349,804 shares 1,274,700 Accumulated deficit (1,829,500) (554,800) $ 157,100 See notes to financial statements. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 Revenues: Net sales $ 210,800 $ 247,700 Interest and other 9,600 6,300 220,400 254,000 Costs and expenses: Cost of products sold 138,200 169,500 Selling 12,800 14,400 General and administrative 140,400 172,200 Research and development 82,500 95,200 Provision for doubtful receivables 3,700 4,200 Interest, substantially to related parties (Note 5) 50,400 34,100 428,000 489,600 Net loss $ (207,600) $ (235,600) Basic and diluted loss per common share $ (.03) $ (.05) Weighted average common shares outstanding 6,788,571 4,858,231 See notes to financial statements. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED STATEMENTS OF SHAREHOLDERS' DEFICIT YEARS ENDED DECEMBER 31, 2000 AND 1999 Common Stock Accumulated Shareholders' Shares Amount deficit deficit Balances, January 1, 1999 4,803,804 $1,175,800 $(1,386,300) $ (210,500) Issuance of common stock for services 750,000 11,700 11,700 Issuance of common stock for compensation 196,000 3,100 3,100 Net loss (235,600) (235,600) Balances, December 31, 1999 5,749,804 $1,190,600 $(1,621,900) $ (431,300) Issuance of common stock in exchange for notes payable, shareholders 1,050,000 42,000 42,000 Issuance of common stock in private placement 800,000 16,000 16,000 Issuance of common stock upon exercise of stock option 750,000 15,000 15,000 Forgiveness of accrued interest due to shareholder 11,100 11,100 Net loss (207,600) (207,600) Balances, December 31, 2000 8,349,804 $1,274,600 $(1,829,500) $ (554,800) See notes to financial statements. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 Cash flows from operating activities: Net loss $(207,600) $ (235,600) Adjustments to reconcile net loss to net cash used in operating activities: Provision for doubtful receivables 3,700 (4,100) Non-cash expense incurred upon issuance of common stock 14,800 Changes in operating assets and liabilities: Accounts receivable (4,600) (1,000) Inventories 12,600 10,200 Prepaids and other 800 1,000 Long-term receivables 1,700 4,000 Accounts payable (20,700) 28,600 Accrued compensation and benefits 131,000 138,500 Accrued interest and advances due to shareholders 53,500 32,700 Other liabilities (300) Total adjustments 177,700 224,700 Net cash used in operating activities (29,900) (10,900) Cash flows from financing activities: Proceeds from notes payable - shareholders 18,000 13,100 Proceeds from notes payable - others 20,000 Principal payments on notes payable - shareholders (15,000) (10,000) Principal payments on notes payable - others (20,000) Proceeds from issuance of common stock 31,000 Net cash provided by financing activities 34,000 3,100 Net increase (decrease) in cash 4,100 (7,800) Cash, beginning 500 8,300 Cash, ending $ 4,600 $ 500 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 5,900 $ 1,400 Supplemental disclosure of non-cash investing and financing activities: Forgiveness of accrued interest owed to a shareholder $ 11,100 Notes payable, shareholders, issued in exchange for accrued interest owed to shareholders $ 47,900 Common stock issued in exchange for notes payable, shareholders $ 42,000 See notes to financial statements. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 1. Organization and significant accounting policies: Organization: Dencor Energy Cost Controls, Inc. (the "Company") manufactures and markets electrical energy cost control devices and equipment which are sold primarily to distributors and dealers in the United States Canada and South America. There is only one business segment. Inventories: Inventories are stated at the lower of cost (first-in, first-out; FIFO) or market. Furniture, equipment, and depreciation: Furniture and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets of three to five years. As of December 31, 2000, all furniture and equipment has been fully depreciated. Revenue recognition: Revenue is derived from sales of electrical demand controllers and energy control devices. Revenue from sales is recorded at the time of delivery to the customer. Research and development: Research and development costs are charged to operations as incurred. Product warranties: Estimated costs related to product warranties are provided for at the time of sale. Loss per share: Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted loss per share reflects the potential dilution that could occur if securities other than contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Stock options are not considered in the calculation, as the impact of the potential shares would be to decrease loss per share. Therefore, diluted loss per share is equivalent to basic loss per share. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2000 AND 1999 1. Organization and significant accounting policies (continued): Accounting for income taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. Use of estimates in the preparation of financial statements: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Comprehensive income: Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income" establishes requirements for disclosure of comprehensive income which includes certain items previously not included in the statements of operations, including minimum pension liability adjustments and foreign currency translation adjustments, among others. During the years ended December 31, 2000 and 1999, the Company had no items of comprehensive income. Recently issued accounting standards: The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement, as amended, is effective for fiscal years beginning after June 15, 2000. Currently, the Company does not have any derivative financial instruments and does not participate in hedging activities. Therefore, management believes that SFAS No. 133 will not have an impact on its financial position or results of operations. In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements. SAB No. 101, as amended by SAB No. 101A and SAB No.101B, is effective no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. SAB No. 101 provides the SEC staff's views in applying generally accepted accounting principals to selected revenue recognition issues. Currently, the Company believes that it complies with the accounting and disclosure described in SAB No. 101; therefore, management believes that SAB 101 will not impact the Company's financial statements. DENCOR ENERGY COST CONTROLS, INC. UNAUDITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2000 AND 1999 6. Income taxes: The components of deferred tax assets at December 31, 2000, were as follows: Current deferred tax assets: Receivables, due to allowance for doubtful accounts $ 4,200 Inventories, due to obsolescence reserve and additional costs inventoried for tax purposes 14,200 Unpaid salary expense and related payroll taxes 73,300 Compensated absences 6,700 Warranty reserve 600 Total current deferred tax assets 99,000 Less valuation allowance (99,000) Net current deferred tax assets $ - Noncurrent deferred tax assets: Net operating loss carryforwards $ 177,400 Other tax credit carryforwards 53,400 Total noncurrent gross deferred tax assets 230,800 Less valuation allowance (230,800) Net noncurrent deferred tax assets $ - The net increase during the year in the total valuation allowance was $42,200. The difference between taxes computed at the statutory federal tax rate and the effective tax rate is reconciled below: Years ended December 31, 2000 1999 Income tax benefit computed at statutory federal tax rate $ 46,900 $ 53,900 Deferred tax benefit not recognized (46,900) (53,900) Income tax benefit computed at the effective tax rate $ - $ - At December 31, 2000, the Company had net operating loss and general business credit carryforwards which may be used to reduce future taxable income and taxes payable, respectively, and which expire through 2020 as follows: Net General operating business loss credit carryforwards carryforwards 2002 $151,900 2003 2004 2005 Thereafter 627,800 $ 53,400 $779,700 $ 53,400 The Company's net operating loss-carryforwards may be subject to annual limitations which could reduce or defer the utilization of the losses due to the merger transaction that occurred in February 2001 (Note 11). DENCOR ENERGY COST CONTROLS, INC. UNAUDITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31,2000 AND 1999 11. Subsequent events (continued): a. The Company formed Denmer Corporation, a new wholly-owned subsidiary of the Company. b. Reliable was merged into Denmer Corporation. In this transaction, the shareholders of Reliable exchanged all of the issued and outstanding shares of Reliable for 12,600,000 shares of the Company's common stock and 3,348,000 shares of the Company's Series A voting convertible preferred stock. Each share of the Series A preferred stock is convertible into 50 shares of common stock and is entitled to 50 votes. c. At the time of closing of the merger, Reliable was required to have $300,000 of unrestricted cash in excess of its liabilities. Upon completion of the merger, this cash was loaned by Denmer to the Company and used to pay $300,000 of notes payable, accrued interest and other liabilities of the Company. d. The Company converted approximately $300,000 of accrued compensation and benefits to 300,000 shares of Series B voting redeemable preferred stock. The Series B preferred stock has a stated and liquidation value of $1.00 per share, dividends rights on the same basis as the common stock, and voting rights of one vote per share of preferred stock. The Series B preferred stock is required to be redeemed by the Company in three equal installment in February 2002, 2003 and 2004. The Company has the option of redeeming the preferred stock for cash at its stated value or with common stock at its then fair market value, provided that the fair market value of the common stock is not less than $2.00 per share nor more than $10.00 per share. Until the Series B preferred stock is redeemed, the Company may not issue any preferred stock with liquidation preferences ahead of the Series B preferred stock. e. Certain shareholders of the Company forgave approximately $39,589 of accrued interest, compensation payable and other amounts due them. f. The Company issued 1,800,000 shares of common stock and $20,000 to a third party for a finders fee and other fees related to the merger transaction. g. The Company cancelled its employment arrangements with its two executive officers and entered into employment contracts. The employment contracts have a three-year term and provide for base salary, bonuses based on sales, and stock options. As a result of these transactions, the Company has outstanding 22,749,804 shares of common stock and the former shareholders of Reliable assumed control of the Company. The Company has filed a preliminary information statement in anticipation of the annual meeting of shareholders. At the annual meeting, the Company's shareholders are to consider and take action on several matters including the following: DENCOR ENERGY COST CONTROLS, INC. UNAUDITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2000 AND 1999 12. Subsequent events (continued): a. Ratify the merger agreement with Reliable. b. Effectuate a 1 for 18 reverse stock split. c. Decrease the authorized common stock to 65,000,000 shares and to increase the authorized preferred stock to 15,000,000 shares d. Change the name of the Company to Reliable Power Systems, Inc. e. Approve the Reliable Power Systems Equity Incentive Plan. Under the plan the maximum number of shares of common stock that may be issued upon exercise or payment will not exceed 900,000 shares. Incentive options and stock appreciation rights may be granted to officers, directors and employees of the Company with exercise prices equal to the fair market value of the stock on the date of the grant. Nonqualified options may be granted to advisors and consultants of the Company at exercise prices not less than 50% of the fair market value of the stock on the date of grant. ITEM 8. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure None PART III ITEM 9. Directors and Executive Officers of the Registrant (a) Identification of Directors The following information, as of January 15, 2001, is furnished with respect to each Director: Year First Elected as Name of Director Age Director Position with Company Theodore A. Hedman 62 1988 Director, Vice President, Treasurer Secretary, Manager of Engineering Edmund Barbour 76 1997 Director Maynard L. Moe 66 1974 Chairman of Board and President All Directors serve for one-year terms which expire at the annual shareholders meeting. For the period ended December 31, 2000, all corporate officers were also directors. (b) Identification of Executive Officers Position Name of Officer Age (Date Elected To Position) Theodore A. Hedman 62 Director, Vice Pres., Secretary, Treasurer Manager of Engineering (March 24, 1988) Maynard L. Moe 66 Chairman of the Board & President (January 16, 1974); Director All Officers serve at the pleasure of the Board. There are no family relationships among the officers or directors listed, and there are no arrangements or understandings pursuant to which any of them were elected as officers. Dr. Moe has served as President for the Company since 1974. Mr. Hedman has been Manager of Engineering for the Company since 1979. Since 1987, Edmund Barbour has been an economics consultant. There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any director or executive officer during the past 5 years. Section 16(a) Beneficial Ownership Reporting Compliance Based on information furnished to the Company, no officer, director, or ten percent shareholder failed to file on a timely basis reports on Forms 3, 4, or 5 during the most recent two fiscal years. Subsequent Event: On February 7, 2001 the Company entered a merger agreement with Reliable Power Systems, Inc. Under the terms of the transaction, Theodore Hedman, a former director of the Company, resigned on February 7, 2001 and Thomas J. Wiens was appointed Chairman of the Board of Directors. David Groom was appointed Secretary and Maynard L. Moe appointed Vice-President of Operations. Additional information on the transaction is given in Note 11 to the Financial Statements. ITEM 10. Executive Compensation Summary Compensation Table The following table sets forth in summary form the compensation received during each of the Company's last three completed fiscal years by the Chief Executive Officer and President of the Company. No executive officer of the Company, including the Chief Executive Officer and President, received total salary and bonus exceeding $100,000 during any of the last three fiscal years. Summary Compensation Table Annual Compensation Long Term Compensation All Other Restricted Other Name and Annual Stock LTIP Compen- Principal Fiscal Salary Bonus Compensation Awards Options Payouts sation Position Year ($) ($) ($) # ($) (4) (1) (2) (3) (4) (5) (6) (7) Maynard Moe 2000 $69,700 -0- -0- -0- -0- -0- -0- Chief Execu- tive Officer, 1999 64,300 -0- -0- -0- -0- -0- -0- President and a Director 1998 69,700 -0- -0- -0- -0- -0- -0- (1) The dollar value of base salary (cash and non-cash) received. (2) The dollar value of bonus (cash and non-cash) received. (3) During the periods covered by the Summary Compensation Table, the Company did not pay any other annual compensation not properly categorized as salary or bonus, including perquisites and other personal benefits, securities or property. (4) During the periods covered by the Summary Compensation Table, the Company did not make any award of restricted stock except as noted in the Restricted Stock Bonus Plan below. (5) The Company has had no stock option plans. (6) The Company had a Restricted Stock Bonus Plan, the purpose of which was to attract and retain qualified personnel for responsible positions. The Company had remaining 196,000 shares of the Company's authorized but unissued common stock as of December 31, 1998, to be awarded as stock bonuses to employees, not including Dr. Moe. Stock bonuses are awarded, as an incentive to contribute to the success of the Company, at the discretion of a stock bonus committee, consisting of not less than two directors, from a list of recommendations submitted periodically by the President. The plan may be amended, modified, suspended or withdrawn at any time by the Board of Directors. During the periods covered by the Summary Compensation Table, the remaining 196,000 shares of the Company's authorized but unissued common stock valued at $3,100 was awarded to an employee. No shares remain in the Stock Bonus Plan. (7) No other compensation Compensation of Directors The Company pays its non-employee director $100 per Directors' Meeting attended. It is anticipated that no more than twelve meetings will occur each year. Employment Contracts and Termination of Employment and Change-In-Control Arrangements At the close of the fiscal year the Company did not have any written employment contracts with respect to any of its executive officers. The Company has no compensatory plan or arrangement that results or will result from the resignation, retirement, or any other termination of an executive officer's employment with the Company or from a change-in-control of the Company or a change in an executive officer's responsibilities following a change-in-control. ITEM 11. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners All persons known by the Registrant to own beneficially more than 5% of any class of the Company's outstanding stock on January 15, 2001, are listed below: Percent Name & Address of Amount and Nature of of Title of Class Beneficial Owners Beneficial Ownership Class (w) Common Stock Maynard L. Moe 2,103,650 (x) 25.2 No Par Value 2309 South Jackson Denver, CO 80210 Theodore A. Hedman 844,300(y) 10.1 5445 South Camargo Road Littleton, CO 80123 Edmund & Regina Barbour 610,000 7.3 2765 S. Golden Way Denver, CO 80227 (w) On January 15, 2001, there were 8,349,804 shares of common stock issued and outstanding. (x) Includes 859,650 shares owned of record by Carol M. Moe, wife of Maynard L. Moe. (y) Includes 35,800 shares owned of record by Charlotte Hedman, wife of Theodore A. Hedman. (b) Security Ownership of Management The following table sets forth the number of shares owned beneficially on January 15, 2001 by each Director and by all Officers and Directors as a group. Information as to the beneficial ownership is based upon statements furnished to the Company by such persons. Percent Name & Address of Amount and Nature of of Title of Class Beneficial Owners Beneficial Ownership Class (w) Common Stock Maynard L. Moe 2,103,650 (x) 25.2 2309 South Jackson Denver, CO 80210 Theodore A. Hedman 844,300 (y) 10.1 5445 South Camargo Road Littleton, CO 80123 Edmund Barbour 610,000 7.3 2765 S. Golden Way Denver, CO 80227 Executive Officers 2,507,950 38.3 and Directors as a group (w) On January 15, 2001, there were 8,349,804 shares of common stock issued and outstanding. (x) Includes 859,650 shares owned of record by Carol M. Moe, wife of Maynard L. Moe. (y) Includes 35,800 shares owned of record by Charlotte Hedman, wife of Theodore A. Hedman. (c) Changes in Control On February 7 2001 the Company entered into a merger agreement with Reliable Power Systems, Inc. As a result of this agreement Thomas J. Wiens, 5567 South Perry Park Road, Sedalia, Colorado 80135 has sole voting power for 12,600,000 Common and 3,348,000 Series A Preferred shares which is 94.7% percent of the class of stock. Additional information is given in Note 11 of the financial statements. ITEM 12. Certain Relationships and Related Transactions (a) Transactions with Management and Others None involving more than $60,000. (b) Parents of Small Business Issuer None. (c) Transactions with Promoters None. ITEM 13. Exhibits and Reports on Form 8-K (a) Financial Statements 1. The following financial statements of Dencor Energy Cost Controls are included in Part II, Item 7: Page Balance Sheet - December 31, 2000 10 Statements of Operations - years ended December 31, 2000 and 1999. 11 Statements of Shareholders' Deficit - years ended December 31, 2000 and 1999 12 Statements of Cash Flows - years ended December 31, 2000 and 1999 13 Notes to Financial Statements 14 2. Exhibits 3. Articles of Incorporation and By-Laws are incorporated by reference to Exhibit No. 1 of Form 10 filed May 5, 1980. (b) Reports On Form 8-K There were no reports on Form 8-K for the three months ended December 31, 2000. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Dencor Energy Cost Controls, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DENCOR ENERGY COST CONTROLS, INC. by: MAYNARD L. MOE President (until February 7, 2001) Date: March 7, 2001 In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: March 7, 2001 THEODORE A. HEDMAN Date Director/Vice President /Secretary/Treasurer (All until February 7, 2001) March 7, 2001 EDMUND BARBOUR Date Director March 7, 2001 MAYNARD L. MOE Date Director/Principal Executive Officer (Principal Executive Officer until February 7, 2001) March 7, 2001 THOMAS J. WIENS Date Director/President Effective February 7, 2001 -----END PRIVACY-ENHANCED MESSAGE-----