SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996 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. $397,000
As of February 28, 1997 there were 3,671,304 common shares outstanding and the
aggregate market value of the common shares (based upon the average of the bid
price ($0.03) and the asked price ($0.06) reported by brokers) held by
non-affiliates was approximately $126,900.
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 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
which 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 73% of total Company
sales during 1996.
(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 IBM compatible computers. This graphics
system can display minute-by-minute demand data as well as 15-minute, daily,
monthly, and annual summaries. All data is also stored on computer disk for
later inspection. The sale of commercial demand control systems contributed
16% of total Company sales during 1996.
(iii) Special Utility Products
The Company has developed a series of products used to control water heaters,
space heaters, and air conditioners for specific utility applications. Sales
of these products accounted for 11% of net sales in 1996. The Company
anticipates a gradual growth in this portion of the business.
(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 which usually approximate or exceed the lease
payments.
The Company's foreign sales in 1996 were less than 1% of total sales.
(3) Status of any Publicly Announced New Products or Services
During 1996 the Company developed a new series of commercial demand
controllers. These controllers are designed to permit demand monitoring and
controller parameter changes from a remote location by use of a modem.
These new products are in production.
(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 which 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 which may be priced
slightly higher than the competition.
(5) Sources and Availability of Raw Materials
The Company has approximately 16 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: Circle AW, Deltrol, Star Circuits,
and X-10 USA.
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 1996, two major customers accounted for 44% 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 February 28, 1997, the Company had a backlog of orders totaling $12,678
consisting of equipment orders from distributors. The Company anticipates
filling these orders during the current year. The backlog of orders as of
February 28, 1996 was $5,900.
(7) Patents
Most of the Company's demand control systems are not protected by any 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 application was filed in April 1994
for an Adaptive Load Cycler for Controlled Reduction of Energy Use; however,
the Company has no assurance a patent will be issued.
(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 fiscal years ended December 31, 1996 and 1995 the Company expended
$69,700 and $73,900, respectively, on Company sponsored research and
development activities. The Company plans to continue research and
development activities during 1997.
(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 February 28, 1997, the Company had 5 full-time employees. Two were engaged
in administration, two in production, and one in engineering research and
development.
ITEM 2. Properties
The Company leases 5100 sq. ft. of office, research and development, sales, and
manufacturing space at 1450 West Evans, Denver, Colorado for $2,581/month.
Management considers these facilities to be adequate for its requirements for
the immediate future. This lease expires in April 1997.
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 other than 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 is the
Over-the-Counter market. The table below presents the high and low bid price
for the Company's common stock each quarter during the past two years and
reflects inter-dealer prices, without retail markup, markdown, or commission,
and may not represent actual transactions. The Company obtained the following
information from brokers who make a market in the Company's securities.
Bid Bid
Quarter Ended Low High Quarter Ended Low High
03/31/96 $.01 $.06 03/31/95 $.01 $.06
06/30/96 .01 .06 06/30/95 .01 .06
09/30/96 .01 .06 09/30/95 .01 .06
12/31/96 .01 .06 12/31/95 .01 .06
(b) Holders. The approximate number of holders of record of the Registrant's
Common Stock as of February 28, 1997 was 340.
(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
1996 1995 1994 1993 1992
Net Sales $388,700 $567,900 $547,300 $549,700 $1,035,800
Net Earnings (Loss) (74,400) 11,300 (42,800) (126,300) (1,800)
Net Earnings (Loss) Per
Common Share (.02) * (.01) (.03) *
Weighted Average
Common Shares
Outstanding 3,671,304 3,671,304 3,671,304 3,671,304 3,671,304
* Less than $.01 per share
AT YEAR END
Total Assets $217,400 $275,800 $248,700 $261,900 $432,700
Working Capital (Deficiency) (16,700) 50,600 32,900 78,100 196,900
Shareholders' Equity (Deficit)(11,300) 63,100 51,800 94,600 220,900
No dividends have been declared or paid for any of the periods presented.
(b) Liquidity and Capital Resources
The independent auditors' report on the Company's financial statements for the
year ended December 31, 1996, included a "going concern" explanatory para-
graph, which means that the auditors have expressed 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, 1996 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
Working Capital Ratio. Working capital is Current Assets less Current
Liabilities.
1996 1995 1994
Current Ratio .93 1.24 1.17
Sales to Working Capital -- 11.22 16.64
Sales to Total Assets 1.79 2.06 2.20
The major factors affecting these ratios were the net income in 1995 and the
net losses for 1996 and 1994. 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 93,400 18.4% 93,400 93,400 18.4%
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 1997. The Company
currently has no line of credit. If working capital beyond that provided by
profits 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 stock holder 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.
(c) Results of Operations
The Company's net sales in 1996 of $388,700 were 32 percent lower than 1995
net sales of $567,900. Approximately 49% of the sales decrease was due to
international sales declines. Dealer sales also experienced a decrease of
approximately 27%. The net loss for 1996 was $74,400 compared to net
income of $11,300 in the prior year.
Gross Margins. The gross margin percentages were 46%, 46%, and 44%, of sales
for 1996, 1995, and 1994 respectively.
Selling Expenses. Selling expenses as a percentage of sales increased to 5.6%
in 1996 compared to 3.5% in 1995. The primary reasons for the increase was an
increase in trade show attendance and travel and a 32% decrease in net sales.
General and Administrative Expense. General and administrative expenses as a
percentage of sales have increased to 37.7% in 1996 compared to 25.6% in 1995
primarily due to a 32% decrease in net sales.
Research and Development. Research and development expenses decreased slightly
in 1996 due to a decrease in activity.
Inflation. Inflation has no significant impact on the operations of the
Company.
Management's Plans. The Company's 1997 operating plan includes achieving
increased sales goals and continuing its cost reduction program. Management
believes that actions presently being taken to revise the Company's operating
and financial requirements will enable the Company to achieve profitable
operations during 1997.
ITEM 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Dencor Energy Cost Controls, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Dencor Energy Cost Controls,
Inc. (the Company) as of December 31, 1996, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the
years in the two-year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dencor Energy Cost Controls,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company reported a $74,400 net loss for the year
ended December 31, 1996, and a shareholders' deficit and a working capital
deficiency of $11,300 and $16,700, respectively, as of December 31, 1996.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GELFOND HOCHSTADT PANGBURN & CO.
Denver, Colorado
January 24, 1997
DENCOR ENERGY COST CONTROLS, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Current assets:
Cash $ 1,600
Accounts receivable, net of allowance
for doubtful accounts of $8,500 (Note 9) 58,500
Inventories (Note 4) 143,600
Prepaids and other 8,300
Total current assets 212,000
Furniture and equipment 213,300
Less accumulated depreciation 211,300
2,000
Note receivable, net of allowance
for doubtful receivable of $2,300 (Note 3) 3,400
$ 217,400
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Notes payable - shareholders (Note 5) $ 93,400
Accounts payable 33,300
Accrued compensation and benefits 30,600
Accrued interest and other - shareholders (Note 5) 53,600
Deposits 9,900
Warranty reserve 6,300
Other 1,600
Total liabilities (all current) 228,700
Commitments (Note 7)
Shareholders' deficit (Note 8):
Common stock, no par value; authorized,
5,000,000 shares; issued and outstanding,
3,671,304 shares 1,147,600
Accumulated deficit (1,158,900)
(11,300)
$ 217,400
See notes to financial statements.
DENCOR ENERGY COST CONTROLS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Revenues:
Net sales $ 388,700 $ 567,900
Interest and other 8,300 11,500
397,000 579,400
Costs and expenses:
Cost of products sold 208,600 306,300
Selling 22,100 19,800
General and administrative 146,500 145,400
Research and development 69,700 73,900
Provision for doubtful
accounts receivable 5,100 5,000
Interest, substantially to
related parties (Note 5) 19,400 17,700
471,400 568,100
Net income (loss) $ (74,400) $ 11,300
Earnings (loss) per common share $ (.02) $ *
Weighted average common shares
outstanding 3,671,304 3,671,304
* Less than $.01 per share
See notes to financial statements.
DENCOR ENERGY COST CONTROLS, INC.
STATEMENTS OF SHARHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996 AND 1995
Common Stock
Accumulated Shareholders'
Shares Amount deficit equity (deficit)
Balances, January, 1, 1995 3,671,304 $1,147,600 $(1,095,800) $ 51,800
Net income 11,300 11,300
Balances, December 31, 1995 3,671,304 1,147,600 (1,084,500) 63,100
Net loss (74,400) (74,400)
Balances, December 31, 1996 3,671,304 $1,147,600 $(1,158,900) $(11,300)
See notes to financial statements.
DENCOR ENERGY COST CONTROLS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Cash flows from operating activities:
Net income (loss) $ (74,400) $ 11,300
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation 3,900 5,400
Provision for doubtful accounts
receivable 5,100 5,000
Changes in operating assets and
liabilities:
Accounts and other receivables 16,600 (26,400)
Inventories 30,600 (20,600)
Prepaids and other 100
Accounts payable (17,600) (900)
Accrued compensation and benefits 7,900 (2,800)
Accrued interest and other - shareholders 18,100 16,000
Deposits 9,900
Warranty reserve 600
Other liabilities (2,300) 2,600
Total adjustments 72,200 (21,000)
Net cash used in
operating activities (2,200) (9,700)
(Continued)
DENCOR ENERGY COST CONTROLS, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Cash flows from financing activities:
Proceeds from notes payable - shareholders $ $ 300
Net cash provided by financing activities 300
Net decrease in cash (2,200) (9400)
Cash, beginning 3,800 13,200
Cash, ending $ 1,600 $ 3,800
Supplemental disclosure of cash flow
information:
Cash paid during the year for interest $ 200 $ 1,700
See notes to financial statements.
DENCOR ENERGY COST CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
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 and Canada.
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.
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.
Earnings (loss) per share:
Earnings (loss) per common share is computed based upon the weighted
average number of common shares outstanding during the period.
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.
DENCOR ENERGY COST CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. Organization and significant accounting policies (continued):
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.
Recently issued accounting standards:
Management does not believe that any recently issued accounting standards
will have a material impact on the Company's financial position or results
of operations.
2. Going concern, results of operations, and management's plans:
The Company's financial statements for the year ended December 31, 1996
have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments
in the normal course of business. For the year ended December 31, 1996,
the Company reported a $74,400 net loss and a shareholders' deficit and
a working capital deficiency of $11,300 and $16,700, respectively, at
December 31, 1996. The Company has also experienced difficulty and
uncertainty in meeting its liquidity needs. These factors raise
substantial doubt about the Company's ability to continue as a going
concern.
The Company's 1997 operating plan includes achieving increased sales goals
and maintaining its cost reduction program, which primarily includes a
reduction in labor costs. Management believes that actions presently being
taken under its 1997 operating plan will enable the Company to achieve
profitability during 1997. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue
as a going concern.
3. Note receivable:
The note receivable is due on demand from a customer, bears interest at 18%
and is unsecured.
DENCOR ENERGY COST CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
4. Inventories:
Inventories at December 31, 1996 consist of:
Finished products $ 7,400
Sub-assemblies and work-in-process 38,900
Component parts 97,300
$ 143,600
The elements of cost in inventories include materials, labor and overhead.
5. Notes payable - shareholders:
The notes payable to shareholders are unsecured, due on demand, and bear
interest at 12% to 18.25% per year. The weighted average interest rates
during the years ended December 31, 1996 and 1995 were approximately 18.4%
and 17.3%, respectively. Interest expense of approximately $18,400 and
$17,100 associated with these notes payable was charged to operations for
the years ended December 31, 1996, and 1995, respectively.
6. Income taxes:
The components of the deferred tax assets as of December 31, 1996, were as
follows:
Current deferred tax assets:
Receivables, due to
allowance for doubtful accounts $ 2,200
Inventories, due to obsolescence reserve
and additional costs inventoried for tax purposes 17,300
Compensated absences 4,100
Warranty reserve 1,300
Total current gross deferred tax assets 24,900
Less valuation allowance (24,900)
Net current deferred tax assets $ -
DENCOR ENERGY COST CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
6. Income taxes (continued):
Noncurrent deferred tax assets:
Net operating loss carryforwards $ 170,400
Other tax credits carryforwards 21,800
Total noncurrent gross deferred tax assets 192,200
Less valuation allowance (192,200)
Net noncurrent deferred tax assets $ -
The net decrease during the year in the total valuation allowance was
$4,300.
The difference between taxes computed at the statutory federal tax rate
and the effective tax rate is reconciled below:
Years ended December 31,
1996 1995
Income tax (expense) benefit computed at
statutory federal tax rate $ 13,600 $ (1,700)
Deferred tax benefit recognized
(not recognized) (13,600) 1,700
Income tax (expense) benefit computed at
the effective tax rate $ - $ -
At December 31, 1996, 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 2011 as
follows:
Net General
operating business
loss credit
carryforwards carryforwards
1997 $ 53,500 $ 300
1998 192,500 300
1999 91,200
2000
2001
Thereafter 514,800 21,200
$852,000 $ 21,800
DENCOR ENERGY COST CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
7. Commitments:
The Company leases its facility and certain equipment under non-
cancelable operating leases that expire through 1999. Future rentals
on these non-cancelable operating leases are approximately $12,700,
$2,300 and $1,600 for the years ended December 31, 1997, 1998 and 1999,
respectively. Lease rental expense of approximately $39,300 and
$39,500 was charged to operations for the years ended December 31, 1996
and 1995, respectively.
8. Common stock:
At December 31, 1996, the Company has reserved 196,000 shares of common
stock for issuance under a restricted stock bonus plan. All employees
and directors of the Company, with the exception of the President, are
eligible to receive stock bonuses under this plan. There have been no
shares issued under this plan.
9. Concentration of credit risk:
The Company extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure to
losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses
and maintains allowances for anticipated losses.
During 1996, two customers accounted for approximately 23%, and 21% of net
sales. During 1995, four customers accounted for approximately 12%, 13%,
14% and 22% of net sales. As of December 31, 1996, 60% of the Company's
accounts receivable were due from three customers.
The Company's export and domestic sales consist of the following:
Years ended December 31,
1996 1995
Net sales, Canada $ 500 $ 88,000
Net sales, United States 388,200 479,900
Total net sales $ 388,700 $ 567,900
DENCOR ENERGY COST CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
10. Fair value of financial instruments:
The carrying values of the Company's financial instruments, including
cash, receivables, accounts payable and accrued liabilities,
approximate fair values primarily because of the short maturities
of these instruments. The fair values of notes due to shareholders
are not practicable to estimate, due to the indefinite payment terms
of the amounts, and due to the related party nature of the underlying
transactions.
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 February 28, 1997, is furnished with respect
to each Director:
Year First
Elected as
Name of Director Age Director Position with Company
Theodore A. Hedman 58 1988 Director, Vice President,
Secretary, Manager of
Engineering
Ronald L. Knauber 58 1996 Director, Treasurer
Maynard L. Moe 62 1974 Chairman of the Board and President
All Directors serve for one-year terms which expire at the annual shareholders
meeting in 1997. For the period ended December 31, 1996, all corporate
officers were also directors.
(b) Identification of Executive Officers
Position
Name of Officer Age (Date Elected To Position)
Theodore A. Hedman 58 Director, Vice President, Secretary,
Manager of Engineering (March 24, 1988)
Ronald L. Knauber 58 Treasurer (June 13, 1996); Director
Maynard L. Moe 62 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 Registrant since 1974.
Mr. Hedman has been Manager of Engineering for Dencor since 1979.
Since 1996 Ronald L. Knauber has been an Application Engineer and Manufacturers
Representative with Wescom Marketing. From 1993 to 1996 Mr. Knauber was owner
of Qualified Communications, Inc., an electronics systems contractor
specializing in sound and security systems.
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.
Based on information furnished to Registrant, 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.
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 $100,000 during any of the last three fiscal years.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Other
Annual All Other
Name and Compen- Restricted LTIP compen-
Principal Fiscal Salary Bonus sation Stock Options Payouts sation
Position Year ($)(1) ($)(2) ($)(3) Award(s) (#)(5) ($)(6) ($)(7)
Maynard L. Moe 1996 54,672 -0- -0- -0- -0- -0- -0-
Chief Executive
Officer, Presi- 1995 67,000 -0- -0- -0- -0- -0- -0-
dent, and a
director (8) 1994 60,300 -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.
(5) The Company has had no stock option plans.
(6) The Company has a Restricted Stock Bonus Plan, the purpose of which is to
attract and retain qualified personnel for responsible positions. The
Company has remaining 196,000 shares of the Company's authorized but
unissued common stock as of December 31, 1996, to be awarded as stock
bonuses to employees, not including Dr. Moe. Stock bonuses may be 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. There were no shares awarded during
the periods covered by the Summary Compensation Table.
(7) No other compensation
(8) Compensation Pursuant to Plans
Dr. Moe, for the year 1997, will receive an annual salary of $69,700
payable in substantially equal monthly installments. Dr. Moe will also
receive additional compensation equal to two percent of the Company's first
$100,000 pre-tax net profits, plus four percent of pre-tax profits from
$100,000 to $200,000 plus six percent of the pre-tax profits in excess of
$200,000.
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
The Company does 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 February 28, 1997, 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 703,650 (x) 19.2
No Par Value 2309 South Jackson
Denver, CO 80210
(w) On February 28, 1997, there were 3,671,304 shares of
common stock issued and outstanding.
(x) Includes 159,650 shares owned of record by Carol M.
Moe, wife of Maynard L. Moe.
(b) Security Ownership of Management
The following table sets forth the number of shares owned beneficially on
February 28, 1996, 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 703,650 (x) 19.2
2309 South Jackson
Denver, CO 80210
Theodore A. Hedman 148,300 (y) 4.0
5445 South Camargo Road
Littleton, CO 80123
Ronald L. Knauber 0 0.0
2743 West Long Drive #D
Littleton, CO 80120
Executive Officers 851,950 23.2
and Directors as a
group
(w) On February 28, 1997, there were 3,671,304 shares of
common stock issued and outstanding.
(x) Includes 159,650 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
The Company knows of no contractual arrangements which may at a
subsequent date result in a change of control of the Company.
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, Financial Statement Schedule 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
Independent Auditors' Report. . . . . . . . . . . . . . . . . . 8
Balance Sheet - December 31, 1996. . . . . . . . . . . . . . . 9
Statements of Operations - years ended
December 31, 1996 and 1995. . . . . . . . . . . . . . .10
Statements of Shareholders' Equity (Deficit) - years ended
December 31, 1996 and 1995. . . . . . . . . . . . . . .11
Statements of Cash Flows - years ended
December 31, 1996 and 1995. . . . . . . . . . . . . . .12
Notes to Financial Statements . . . . . . . . . . . . . . . . .14
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or
not required, or because the required information is included in the financial
statements or notes thereto.
3. 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, 1996.
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
Date: March 20, 1997
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 20, 1997 THEODORE A. HEDMAN
Date Secretary/Director/Vice President
March 20, 1997 RONALD L. KNAUBER
Date Treasurer/Director
March 20, 1997 MAYNARD L. MOE
Date Director/Principal Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,600
<SECURITIES> 0
<RECEIVABLES> 61,900
<ALLOWANCES> 10,800
<INVENTORY> 143,600
<CURRENT-ASSETS> 212,000
<PP&E> 213,300
<DEPRECIATION> 211,300
<TOTAL-ASSETS> 217,400
<CURRENT-LIABILITIES> 228,700
<BONDS> 0
<COMMON> 1,147,600
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 217,400
<SALES> 388,700
<TOTAL-REVENUES> 397,000
<CGS> 208,600
<TOTAL-COSTS> 230,700
<OTHER-EXPENSES> 216,200
<LOSS-PROVISION> 5,100
<INTEREST-EXPENSE> 19,400
<INCOME-PRETAX> (74,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,400)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
