UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-9255 DENCOR ENERGY COST CONTROLS, INC. (Exact name of small business issuer specified in its charter) Colorado 84-0658020 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1450 West Evans, Denver, Colorado 80223 (Address of principal executive office) (Zip Code) (303) 922-1888 (Registrant's telephone number, including area code) 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 APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. No par value per share: 3,671,304 shares outstanding at Sept. 30, 1996. Transitional Small Business Disclosure Format Yes No X DENCOR ENERGY COST CONTROLS, INC. PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements (Condensed Balance Sheets) ASSETS Sept. 30 Dec. 31 1996 1995 (unaudited) CURRENT ASSETS: Cash $ 5,800 $ 3,800 Accounts Receivable,net of allowance for doubtful accounts of $9,200 65,400 77,000 Inventories 155,100 174,200 Other 15,000 8,300 TOTAL CURRENT ASSETS 241,300 263,300 Furniture & Equipment 213,300 213,300 Less Accumulated Depreciation (210,400) (207,400) 2,900 5,900 Other Receivables, net of allowance for doubtful receivables of $1,700 7,000 6,600 $251,200 $275,800 LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes Payable - Shareholders $ 93,400 $ 93,400 Accounts Payable 41,400 52,800 Accrued Compensation and Benefits 21,000 22,700 Accrued Interest - Shareholders 47,200 33,600 Warranty Reserve 6,300 6,300 Other 1,200 3,900 TOTAL CURRENT LIABILITIES 210,500 212,700 STOCKHOLDERS' EQUITY Common Stock, no par value, authorized 5,000,000 shares; issued & outstanding, 3,671,304 shares 1,147,600 1,147,600 Deficit (1,106,900) 1,084,500) Stockholders' Equity 40,700 63,100 $ 251,200 $ 275,800 See notes to condensed financial statements DENCOR ENERGY COST CONTROLS, INC. STATEMENTS OF OPERATIONS (unaudited) Three Months Nine Months Ended Sept. 30 Ended Sept. 30 1996 1995 1996 1995 REVENUES: Net Sales $ 100,000 $ 149,000 $ 299,900 $ 434,800 Interest and Other 2,300 3,800 6,200 7,200 TOTAL REVENUES 102,300 152,800 306,100 442,000 COSTS AND EXPENSES; Cost of Products Sold 50,000 89,500 161,100 243,800 Selling 7,000 5,700 16,200 15,600 General and Administrative 30,700 33,000 86,700 98,100 Research and Development 15,800 19,500 50,600 56,000 Interest 4,700 4,300 13,900 13,200 108,200 152,000 328,500 426,700 NET EARNINGS (LOSS) $ (5,900) $ 800 $(22,400) $ 15,300 NET EARNINGS (LOSS) PER COMMON SHARE: Net Earnings (loss) $ (.0017) $ .0003 $ (.0062) $ .0042 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,671,304 3,671,304 3,671,304 3,671,304 See notes to condensed financial statements DENCOR ENERGY COST CONTROLS, INC. STATEMENT OF CASH FLOWS (unaudited) Nine Months Ended Sept. 30 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ (22,400) $ 15,300 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation 3,000 4,100 Provision for (recovery of) losses on doubtful accounts receivable Changes in operating assets and liabilities: Accounts and other receivables 11,200 (49,800) Inventories 19,100 (15,800) Other assets (6,700) (6,200) Accounts payable (11,400) 20,500 Accrued compensation and benefits (1,700) 2,800 Accrued interest - shareholders 3,600 12,500 Warranty reserve 500 Other liabilities (2,700) 3300 Total adjustments 24,400 (28,100) Net cash provided by (used in) operating 2,000 (12,800) activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes payable- Shareholders 300 NET INCREASE (DECREASE) IN CASH 2,000 (12,800) CASH AND CASH EQUIVALENTS, beginning of year 3,800 13,200 CASH AND CASH EQUIVALENTS, end of quarter $ 5,800 $ 700 Supplemental disclosure of cash flow information: Cash paid during the nine months ended for interest $ 400 $ 200 See notes to condensed financial statements DENCOR ENERGY COST CONTROLS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS A. The condensed Financial Statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of the Company, all accompanying unaudited condensed Financial Statements contain all adjustments, which consist only of recurring adjustments, necessary to make the financial statements not misleading and to present fairly the financial position as of September 30, 1996, and the results of operations and cash flows for the nine months then ended September 30, 1996 and 1995. The results of operations for the nine-month period ended September 30, 1996 and 1995, are not necessarily indicative of the results to be expected for the full year. It is suggested that these Condensed Financial Statements be read in conjunction with the Financial Statements and the notes therein included in the Company's latest annual report on Form 10-KSB. B. Long-Term Debt: As of the end of Third Quarter, 1996, the Company had no long-term debt. C. Common Stock: During the Third Quarter, 1996, the Company sold no stock. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET SALES Third Quarter sales of $100,000 were approximately 33% less than sales for the comparable period in 1995. Year to date sales of $299,900 were approximately 31% less than sales for the comparable period in 1995. The decrease in sales was the result of a decrease in sales of utility products sold through international distribution as well as a decrease in sales to dealers. COST AND EXPENSE Cost of Products Sold as a percentage of net sales decreased to 50.0% for the third quarter of 1996 compared with 60.0% for the same period in the prior year. Cost of Products Sold as a percentage of net sales decreased to 53.7% for year to date 1996 compared to 56.1% for the comparable period in 1995. The decrease was due to the decreased sales of utility products which have a higher cost per unit of sales than other products. DENCOR ENERGY COST CONTROLS, INC. Selling expenses as a percentage of sales increased to 7.0% for the third quarter compared to 3.9% for the same period in the prior year. Selling expenses as a percentage of sales increased to 5.4% for year to date compared to 3.6% for the comparable period in 1995. The increase was due to decreased sales as well as increased travel expense. General and Administrative expenses decreased from the same quarter in the prior year and year to date due to a decrease in personnel. Research and Development expenses decreased slightly compared to the same quarter in the prior year and year to date due to decreased development activity. EARNINGS The loss for the second quarter was $5,900 compared to earnings of $800 for the same period in the prior year. The loss for the year to date was $22,400 compared to earnings of $15,300 for the comparable period in 1995.The loss was due to decreased sales. LIQUIDITY The Independent Auditor's Report on Dencor Energy Cost Controls, Inc. Financial Statements for the year ended December 31, 1995 included a "going concern" explanatory paragraph which means that the Auditors have expressed substantial doubt about the Company's ability to continue as a going concern. Management's plans in regards to the factors which prompted the explanatory paragraph are discussed in Note 2 to the Company's December 31, 1995 Financial Statements. The Company's current ratio is 1.15 at the Quarter ended September 30, 1996. Management believes the acid ratio (cash and accounts receivable divided by current liabilities) of .34 is within the limits of reasonable liquidity. PART II OTHER INFORMATION Items 1 through 5 would appear to require no answers according to the instructions. Item 6. Exhibits And Reports On Form 8-K (a) The following Exhibit is filed as part of this Quarterly Report on Form 10-Q: 27. Financial Data Schedule. (b) During the quarter ended September 30, 1996, the Registrant did not file any reports on Form 8-K. SIGNATURE 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. DENCOR ENERGY COST CONTROLS, INC. Registrant By: Maynard L. Moe President Date: October 31, 1996