UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 0-9255
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RELIABLE POWER SYSTEMS, INC.
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(Exact name of small business issuer as specified in its charter)
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Colorado 84-0658020
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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399 Perry Street, Suite 300, Castle Rock, Colorado 80104
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(Address of principal executive offices)
(720) 733-8970
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(Issuer's telephone number)
Dencor Energy Costs Controls, 1450 West Evans, Denver, Colorado 80223
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(Former name, former address and former fiscal year, if changed
since last report)
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: 7,971,679
shares issued at October 31, 2001
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
RELIABLE POWER SYSTEMS, INC.
INDEX
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Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) 1
Balance Sheets - September 30, 2001 and December 31, 2000 1
Statements of Operations - Three Months Ended September 30,
2001 and Nine Months Ended September 30, 2001 2
Statement of Cash Flows - Nine Months Ended September 30,
2001 3
Notes to Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis 6-8
PART II. OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds 8-9
Item 5. Subsequent Events 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
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RELIABLE POWER SYSTEMS, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
(Consolidated and Unconsolidated Balance Sheets)
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<Caption>
ASSETS September 30, December 31
2001 2000
------------- ------------
(UNAUDITED)
CURRENT ASSETS:
Cash $ -- $ --
Accounts receivable, net of allowance for doubtful
accounts of $9,954 and $0, respectively 46,158 --
Inventories 693,066 --
Prepaids and other current assets 158,801 --
------------ ------------
Total Current Assets 898,025 --
------------ ------------
Property and equipment, net of accumulated
depreciation of $4,643 and $0, respectively 35,344 --
Goodwill, net of amortization of $48,168 and
$0, respectively 1,336,297 --
Security deposits 46,795 --
Employee receivable 60,000 --
Deferred loan costs 54,375 --
------------ ------------
TOTAL ASSETS $ 2,430,836 $ --
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 268,657 $ 1,170
Accrued compensation and taxes 179,753 --
Note payable - related party 50,000 --
Accrued interest payable 15,544 --
Other current liabilities 17,221 --
------------ ------------
Total Current Liabilities 531,175 1,170
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Long-term debt - note payable 685,000 --
Convertible private bridge debt 895,000 --
Other long-term liabilities 4,206 --
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Total Liabilities 2,115,381 --
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STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value, authorized 15,000,000 shares:
Series A, 0 issued and outstanding -- --
Series B, 300,000 and 0 respectively,
issued and outstanding 300,000 --
Common stock, no par value, authorized 65,000,000
shares, 10,758,679 and 1,990 respectively,
issued and outstanding 1,516,900 --
Accumulated deficit (1,501,445) (1,170)
------------ ------------
Total Stockholders' Equity (Deficit) 315,455 (1,170)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,430,836 $ --
============ ============
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
RELIABLE POWER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<Caption>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30, 2001 30, 2001
--------------- ---------------
REVENUES:
Net Sales $ 65,289 $ 128,314
Interest and other 1,306 2,927
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Total Revenues 66,595 131,241
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COSTS AND EXPENSES:
Cost of goods sold 45,685 95,805
Selling 92,642 143,270
General and administrative 430,946 1,111,722
Research and development 99,971 171,962
Interest 40,217 55,946
Depreciation 3,430 4,643
Amortization 20,767 48,168
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Total Costs and Expenses 733,658 1,631,516
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NET LOSS $ (667,063) $ (1,500,275)
============ ============
NET LOSS PER COMMON SHARE $ (0.06) $ (0.21)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,681,505 7,205,783
============ ============
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
RELIABLE POWER SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
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<Caption>
NINE MONTHS
ENDED SEPTEMBER
30, 2001
---------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net loss $ (1,500,275)
Adjustments to reconcile net loss to net cash (used) in
Operating activities:
Depreciation 4,643
Amortization 48,168
Stock based compensation 381,000
Changes in assets and liabilities:
Accounts receivable (20,158)
Inventories (577,766)
Prepaids and other current assets (248,772)
Accounts payable and accrued expenses 175,295
Accrued Interest payable 15,544
Wages and taxes payable 179,753
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Net Cash (Used) by Operating Activities (1,542,568)
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CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of property and equipment (33,097)
Acquisition of subsidiary (314,335)
Loan to employee (60,000)
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Net Cash (Used) by Investing Activities (407,432)
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CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from note payable - related party 50,000
Proceeds from long-term debt - note payable 685,000
Proceeds from convertible private bridge debt 895,000
Proceeds from sale of common stock 320,000
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Net Cash Provided by Financing Activities 1,950,000
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NET CHANGE IN CASH --
CASH, BEGINNING OF PERIOD --
------------
CASH, END OF PERIOD $ --
============
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
RELIABLE POWER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The consolidated Financial Statements of the Company as of September
30, 2001 and for the three and nine month periods ended September 30, 2001 have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in the Company's annual financial statements
prepared in accordance with generally accepted accounting principles have been
consolidated 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, the accompanying unaudited consolidated
Financial Statements contain all adjustments, which consist only of normal and
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows of the Company as of September 30, 2001,
and for the periods then ended.
The results of operations for the three and nine month periods ended
September 30, 2001 are not necessarily indicative of the results to be expected
for the full year. These consolidated financial statements should be read in
conjunction with a reading of the financial statements and the notes therein
included in the Company's latest annual report on Form 10-KSB. It should be
noted that the Form 10-KSB was filed under the Company's former name, Dencor
Energy Cost Controls Inc. and primarily discusses events occurring prior to its
merger with Reliable Power Systems, Inc.
2. Long-Term Debt
As of September 30, 2001, the Company had $685,000 of long-term debt
payable to a financial institution. The Company entered into a two-year loan
agreement with Compass Bank on May 15, 2001. The note bears interest at 7.5% per
annum and is guaranteed by the former Chairman of the Company. The principal
balance is due on May 16, 2003. Interest payments are due on the note on a
monthly basis.
3. Note Payable - Related Party
As of September 30, 2001, the Company had $50,000 of short-term debt
payable to First Western Industries, LLC.. First Western Industries, LLC is
controlled by the Company's former Chairman. The note payable balance could
increase up to a maximum of $125,000 upon receipt of proper documentation under
a letter agreement between the Company and its former Chairman and is due ten
days after the Company raises a minimum of $4,000,000 in private equity
financing (see subsequent event note below). No interest is due on this note
payable per the letter agreement.
4. Convertible Private Bridge Debt
During the third quarter 2001, the Company raised $895,000 in
convertible private bridge debt from private investors. The bridge loan consists
of 17.9 units, with each unit comprised of one $50,000 promissory note and ten
thousand warrants to acquire one share of common stock. The promissory note
shall bear simple interest at the rate of 12 percent per annum and is due and
payable on the earlier of sixty days following the closing of a public offering
of common stock, or one year from the closing of the private placement. The
holders of the promissory note shall have the option to either convert the
outstanding principal and accrued interest into Common Stock of the Company at
$5.00 per share. If a public offering of common stock is complete, each warrant
entitles the holder to purchase one share of the Company's common stock at 80%
of the final price of the public offering. The warrants shall be exercisable for
a period of 24 months following the closing of a public offering of common
stock.
In the event that a public offering of common stock is not complete by
December 31, 2001, the Company may at its option convert the promissory note and
accrued interest into common stock at $3.00 per share. Each warrant shall
entitle the holder to purchase one share of common stock at $3.50 per share.
4
In connection with the convertible private bridge debt the Company
paid commissions to an investment banking firm of $72,500. These fees are being
amortized as interest expense over a four-month period, which commenced on
September 1, 2001. The Company has not recorded any interest expense related to
the embedded beneficial conversion feature contained in the private debt
instrument because the Company has not completed a public offering of stock and
the $5.00 conversion price in the private debt instrument was above the fair
market value of the Company's common stock on the date of issuance. The Company
has not recorded any deferred loan fees related to the fair value of the options
attached to the convertible private bridge debt instrument because the value of
the options was above the fair market value of the Company's common stock on the
date of issuance. The Company has ceased soliciting funds from private investors
under the convertible private bridge debt instrument.
5. Common Stock:
As of September 30, 2001, the Company had 10,758,679 shares of common
stock issued and outstanding. This represented an increase of 10,294,801 shares
post split over the outstanding shares of Dencor Energy Costs Controls, Inc. on
December 31, 2000. This increase was the result of the reverse triangular merger
by and among, Reliable Power Systems, Inc., Dencor Energy Cost Controls, Inc.
and Denmer Corporation all as more fully described in the 8-K filed on February
16, 2001, the 8-K/A filed on April 16, 2001, and the 10-KSB/A filed on March 20,
2001.
On April 10, 2001, the Company held a shareholders meeting and among
other things, increased its authorized common stock to 190,000,000 shares. As a
result of this increase in authorized common stock the Series A Preferred Stock
was converted to 9,300,000 shares of common stock post split. On April 11, 2001,
the Company effectuated a 1 for 18 reverse stock split (as approved at the April
10, 2001 shareholders meeting). All per share amounts have been restated to
reflect the reverse stock split. On April 12, 2001, the Company decreased its
authorized common stock to 65,000,000 shares.
During the third quarter 2001 the Company issued 120,000 shares of
common stock to an executive recruiting firm, and individuals with the executive
recruiting firm, for sales and executive placements. A director of the Company
is an affiliate of the executive recruiting firm.
On October 5, 2001 the Company's former Chairman and his affiliated
entities transferred a total of 8,787,000 shares of common stock. A total of
2,000,000 shares were transferred to the Company's new Chairman. A total of
2,000,000 shares were transferred to the Company's Vice-Chairman and Chief
Executive Officer. A total of 2,000,000 shares were transferred to a newly
elected Director of the Company. The Company's former Chairman also surrendered
2,787,000 shares to the Company, which were cancelled and returned to authorized
and unissued status. There was no cash consideration involved with any of the
above stock transactions.
6. Capital Leases
The Company has entered into capital leases with an independent third
party telephony company. As of September 30, 2001 property and equipment
includes $8,302 acquired through the capital lease. Accumulated depreciation
related to these assets was $408 as of September 30, 2001.
5
RELIABLE POWER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Cautionary Note About Forward-Looking Statements
All statements contained herein that are not statements of historical fact
constitute "Forward-Looking Statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (Securities Act), and Section 21E of the
Securities Exchange Act of 1934, as amended (Exchange Act). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
could cause our actual results to differ materially from historical results or
from any future results expressed or implied by such forward-looking statements.
Readers are urged to consider statements that include the terms "believe,"
"belief," "expects," "plans," "anticipates," "intends" or the like to be
uncertain and forward-looking. Forward-looking statements also include
projections of financial performance, statements regarding management's plans
and objectives and statements concerning any assumptions relating to the
foregoing. For a discussion of developments since September 30, 2001, see
"Subsequent Events" below.
References in this document to "us", "we", or "The Company" refer to
Reliable Power Systems, Inc. its predecessors and subsidiaries.
The following discussion involves the combined operations for the nine month
period ended September 30, 2001 of Reliable Power Systems, Inc. from January 1,
2001 to September 30, 2001 and Dencor Energy Cost Controls, Inc. operations from
February 7, 2001 to September 30, 2001. The following discussion involves the
consolidated operations for the three month period ended September 30, 2001 of
Reliable Power Systems, Inc. from July 1, 2001 to September 30, 2001 and Dencor
Energy Cost Controls, Inc. from July 1, 2001 to September 30, 2001. On February
7, 2001, Dencor Energy Cost Controls, Inc. entered into a reverse, triangular
merger with Reliable Power Systems, Inc.. As a result of the accounting
treatment of that merger, the historical accounting information for Dencor
Energy Cost Controls, Inc. was eliminated and replaced with the historical
accounting information of Reliable Power Systems, Inc. This accounting treatment
primarily resulted in the elimination of accumulated deficit of Dencor Energy
Cost Controls and the creation of $1,384,465 of goodwill. On April 10, 2001 we
held a shareholders meeting and among other items, officially changed our name
to Reliable Power Systems, Inc. A detailed description of the items considered
at the April 10, 2001, shareholders meeting is contained in our Form 14C filed
on March 7, 2001.
We currently sell quality energy products and technologies along with energy
control systems to commercial, industrial, and utility customers.
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2001
NET SALES
Our sales for the three month period ended September 30, 2001 were
$65,289. $28,763 of these sales was attributable to quality energy products and
the remaining $36,526 was attributable to Dencor Energy Cost Controls, Inc.'s
historical business.
COST AND EXPENSE
Our costs of goods sold for three month period ended September 30, 2001
were $45,685. $22,808 of these costs was attributable to quality energy products
and the remaining $22,877 is attributable to Dencor Energy Cost Controls, Inc.'s
historical business.
Our selling expenses for the three month period ended September 30,
2001 were $92,642, or as a percentage of net sales were 142%. This is a
substantially higher percentage than we anticipate for future periods and is
primarily due to recruiting fees of a sales manager and travel costs associated
with introducing our quality energy products and technologies to potential sales
customers.
6
Our general and administrative expenses for the three month period
ended September 30, 2001 were $430,946. These costs are primarily attributable
to the legal and accounting fees related to a cancelled public offering of
common stock, recruiting fees associated with an executive management placement
and moving into new corporate offices. While we do not anticipate any material
decrease in these costs, we anticipate that future expenses will increase as a
result of our increased size.
Our research and development expenses for the three month period ended
September 30, 2001 were $99,971 or as a percentage of net sales were 153%. This
increase is primarily due to development of our future quality energy products.
We anticipate substantially increasing our research and development activities.
However, we believe research and development expenses will decrease as a
percentage of net sales with additional sales of energy quality products.
EARNINGS
Our net loss for the three month period ended September 30, 2001 was
$667,063. The net loss was due to legal and accounting expenses associated with
the cancelled public offering of common stock, recruiting fees associated with
new placements within our organization, interest expense related to the
convertible private bride debt and moving the Company's new office.
LIQUIDITY
For the nine month period ended September 30, 2001 net cash used by
operating activities was $1,542,568. This cash was used for a variety of
operating purposes, including salaries, research and development and other
corporate expenses. For the nine month period ended September 30, 2001 net cash
used by investing activities was $407,432. This cash was used primarily for the
acquisition of a subsidiary. For the nine month period ended September 30, 2001,
net cash provided by financing activities was $1,950,000. This cash was provided
by proceeds received from a note payable from Compass Bank, proceeds received
from the convertible private bridge debt, a note payable to First Western
Industries, LLC. and sale of common stock.
As of September 30, 2001 we had a cash balance of $0. We have not yet
generated any significant source of revenue. If working capital beyond that
provided by cash flow is needed, additional debt and equity financing will be
sought. We are attempting to raise equity financing during the fourth quarter
2001. As discussed in Subsequent Events below, the Company has raised additional
equity financing subsequent to September 30, 2001. There is no assurance that
the Company will be able to raise equity or additional debt financing.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001
NET SALES
Our sales for the nine month period ended September 30, 2001 were
$128,314. $28,763 of these sales was attributable to quality energy products and
the remaining $99,551 was attributable to Dencor Energy Cost Controls, Inc.'s
historical business.
COST AND EXPENSE
Our costs of goods sold for the nine month period ended September 30,
2001 were $95,805. $22,808 of these costs was attributable to quality energy
products and the remaining $72,997 is attributable to Dencor Energy Cost
Controls, Inc.'s historical business.
Our selling expenses for the nine month period ended September 30, 2001
were $143,270, or as a percentage of net sales were 112%. This is a
substantially higher percentage than we anticipate for future periods and is
primarily due to the hiring of a Vice President of Sales who will primarily
focus on the sale of quality energy products, recruiting fees of a sales manager
and travel costs associated with introducing our quality energy products and
technologies to potential sales customers.
Our general and administrative expenses for the nine month period ended
September 30, 2001 were $1,111,722. These costs are primarily attributable to
the merger, hiring new professional and support staff, legal and accounting fees
associated with a cancelled public offering of stock, recruitment fees and
moving into new corporate offices. While we do not anticipate any material
decrease in these costs, it is anticipated that future expenses will increase as
a result of our increased size.
7
Our research and development expenses for the nine month period ended
September 30, 2001 were $171,962 or as a percentage of net sales were 134%. This
increase is primarily due to the hiring of a Vice President of Engineering who
will primarily focus on development of quality energy products and development
of our future quality energy products. We anticipate substantial increasing our
research and development activities. However, we believe research and
development expenses will decrease as a percentage of net sales with additional
sales of energy quality products.
EARNINGS
Our net loss for the nine month period ended September 30, 2001 was
$1,500,275. The net loss was due to the expenses related to the merger, legal
and accounting fees associated with a cancelled public offering of stock,
recruitment fees, moving into new corporate offices and the increase in payroll
as a result of hiring additional management, sales, engineering and support
staff.
BACKLOG
At September 30, 2001, we had purchase orders of approximately
$2,700,000 for delivery of harsh environment uninterruptible power supply units.
RELIABLE POWER SYSTEMS, INC
PART II - OTHER INFORMATION
Items 1, 3 and 4 are not applicable during the relevant periods.
Item 2. Changes in Securities and Use of Proceeds
(a) Modification or Limitation of Existing Securities.
The instruments defining the rights of the holders of any class of
registered securities were not directly modified. However, the rights of the
common stock holders were affected by the merger as discussed below in
subparagraph (b).
(b) Limitation or Modification of a Class of Securities by the Issuance of
other Securities.
On February 7, 2001, Dencor Energy Cost Controls, Inc., Denmer
Corporation and Reliable Power Systems, Inc. entered into a reverse, triangular
merger. As a result of that transaction, we issued 3,348,000 shares of our
Series A Convertible Preferred Stock. Each share of series A Convertible
Preferred Stock was convertible into 50 shares of common stock. The effect of
this issuance was to vest our control in the shareholders of Reliable Power
Systems, Inc., the target of the merger. On April 10, 2001, we held a
shareholders meeting and among other things, increased our authorized common
stock to 190,000,000 shares. As a result of this increase in authorized common
stock the Series A Preferred Stock was converted to common stock. On April 11,
2001, we effectuated a 1 for 18 reverse stock split (as approved at the April
10, 2001 shareholders meeting). On April 12, 2001, we decreased our authorized
common stock to 65,000,000 shares.
Additionally, we issued 300,000 shares of its Series B Redeemable and
Convertible Preferred Stock as a result of the merger. The Series B Preferred
Stock has a stated value of $1.00 per share and may be redeemed for cash or
converted into common stock at its then fair market value on certain conversion
dates, provided that the fair market value of the common stock shall be deemed
to be not less than $2.00 per share nor more than $10.00 per share. The holders
of the Series B Preferred Stock are entitled to liquidation preferences over the
holders of both common stock and Series A Preferred Stock. The effect of this
issuance was to make the holders of common stock and Series A Preferred Stock
subordinate to the holders of Series B Preferred Stock in the event of a
liquidation of us. The Series B Preferred Stock was issued to our employees as a
result of their agreements to forgive accrued compensation, interest on that
compensation, and accrued benefits.
8
(c) Information Required by Item 701 of Regulation S-B
On February 7, 2001, we issued 12,600,000 shares of common stock and
3,348,000 shares of our Series A Preferred Stock to the shareholders of Reliable
Power Systems, Inc. as a result of the merger discussed above. Additionally, On
February 7, 2001, we issued 1,800,000 shares of Common Stock to Venture Vest,
Inc. as a finder's fee for the above-described transaction. On February 7, 2001,
we issued 300,000 shares of its Series B Preferred Stock. On April 10, 2001 we
issued 74,571 shares of Common Stock to an executive recruiting firm for senior
management hiring services. On July 31, 2001 we issued 20,000 shares of Common
Stock to employees of an executive recruiting firm and to the executive
recruiting firm for management hiring services. On September 4, 2001 we issued
100,000 shares of Common stock to employees of an executive recruiting firm for
executive management hiring services.
We did not use an underwriter in association with any of the stock
issuances described above.
In exchange for the 12,600,000 shares of common stock and the 3,348,000
shares of Series A Preferred Stock, we received 100% of the issued and
outstanding stock of Reliable Power Systems, Inc., which primarily consisted of
$300,000 of cash and immaterial liabilities. In exchange for the 1,800,000
shares of common stock issued to Venture Vest, Inc. we received consulting
services related to the merger. In exchange for the Series B Preferred Stock, we
received forgiveness of approximately $340,000 of accrued compensation, interest
on the compensation and benefits.
The securities were issued in accordance with Sections 4(2) and 4(6) of
the Securities Act of 1933 and Rule 145.
As described above, the Series A Preferred Stock and the Series B Preferred
Stock are convertible into common stock.
Item 5. Subsequent Events.
On September 28, 2001, our former Chairman and director resigned. On October 1,
2001 Robert Broderick resigned as a director. On October 4, 2001 Graydon Neher
resigned as a director. These directors resigned voluntarily and had no
disagreements with us.
On October 5, 2001 we finalized an amended and restated letter agreement between
our former Chairman and his affiliated entities. In connection with the amended
and restated letter agreement our former Chairman and his affiliated entities
transferred a total of 8,787,000 shares of common stock. A total of 2,000,000
shares were transferred to our new Chairman. A total of 2,000,000 shares were
transferred to our Vice-Chairman and Chief Executive Officer. A total of
2,000,000 shares were transferred to a newly elected director. Our former
Chairman also surrendered 2,787,000 shares to us, which were cancelled and
returned to authorized and unissued status. There was no cash consideration
involved with any of the above stock transactions. After the above stock
transactions our new Chairman controls 25.1% of our voting common stock. Our
Vice-Chairman and Chief Executive Office controls 25.1% of our voting common
stock. A newly elected director controls 26.8% of our voting common stock. Our
former Chairman through his affiliated entities controls 15.2%, or 1,213,000
shares of our voting common stock.
On October 9, 2001 our new Chairman, Vice-Chairman and Chief Executive Officer
and newly elected director each advanced us $100,000 individually, for a total
of $300,000 for working capital purposes.
On October 17, 2001 we began raising funds via a private equity placement. We
are selling 1,000,000 shares of common stock at $2.00 per share to private
investors. We have currently received $400,000 from the sale of common stock
under the private equity placement as of November 9, 2001.
In October 2001 we forgave a $50,000 loan to our President and Chief Technology
Officer.
On November 2, 2001 we signed a technology development agreement with a third
party developer for the development of a continuous power machine. This term of
the agreement is for a period from November 1, 2001 until the development of a
continuous power machine is complete that is generally acceptable for sale to
the public. We will pay the developer a monthly design fee of $15,000 per month
and the related design and operating costs associated with the development of a
continuous power machine. We have granted the developer 200,000 options to
purchase shares of our common stock at $1.00 per share. The total estimated
costs to develop and build the continuous power machine are approximately $1.3
million. We will own all of the intellectual property developed under the
agreement in perpetuity and will pay the developer royalties for sales of
products sold using the intellectual property.
9
Item 6. Exhibits and Reports On Form 8-K
(a) None
(b) During the quarter ended September 30, 2000, we filed two reports on
Form 8-K:
July 12, 2001 Exclusive Marketing and Technology Agreement
September 6, 2001 Purchase Orders for Harsh Environment
Uninterruptible Power Supply Units
RELIABLE POWER SYSTEMS, INC.
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.
Reliable Power Systems, Inc.
Registrant
By: Jerry A. Mitchell
------------------------------------
Vice President of Finance, Chief
Financial Officer
(Principal Financial and Accounting Officer)
Date: November 14, 2001
------------------------------------
10