UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                  Annual Report Pursuant to Section 13 or 15(d)

                     of the Securities Exchange Act of 1934

                                   FORM 10-KSB

[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the fiscal year ended December 31, 1999
[ ] 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 000-93341

                            OnLine Power Supply, Inc.
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                 (Name of Small Business Issuer in its charter)

                Nevada                                    84-1176494
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    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

    6909 South Holly Circle, #200, Englewood, CO                 80112
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      (Address of principal executive offices)                (Zip Code)

Issuer's telephone number 303.741.5641
                          ------------

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
--------------------------------------------------------------------------------
                                (Title of class)

--------------------------------------------------------------------------------
                                (Title of class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant  was required to filed such  reports) YES X, and (2) has been subject
to such filing requirements for the past 90 days. NO X

         Indicate by check mark if disclosure of delinquent filers,  pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the  Registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

         Registrant's revenues in fiscal year 1999 were $314,829.

         Aggregate market value of the voting stock held by non-affiliates as of
         March 24, 2000:  $196,500,000.
         Number of common shares outstanding as of December 31, 1999 and
         March 24, 2000:  16,954,119 shares.

         Documents incorporated by reference:  None. However, exhibits are
         incorporated. See Item 13.
         Transitional Small Business Disclosure Format:  YES ___  NO ___


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                                     PART I

Item 1.  Description of Business.

(a)      Business Development

         We were originally founded as a Colorado  corporation in 1991 under the
name  Roth  Financial  Fitness,   Inc.  to  market  the  financial  fitness  and
wealth-building  concepts of J.W.  Roth.  We  developed a mail order  program of
videos,  workbooks,  telephone  consultant  sessions with financial  experts and
monthly newsletter.  These items were marketed and sold through infomercials and
television advertising featuring  celebrities.  This business was not successful
and the plan of operations was abandoned in late 1994.

         In July 1995,  we changed our name to OnLine  Entertainment,  Inc.  and
developed  a business  plan to sell  entertainment  products  which we  packaged
through the Internet.  Our products were to include nature films,  rock and roll
record  compilations,  and other  items.  In late  1995 and  early  1996 we also
performed  a  limited  amount  of media  advertising  placement  work for  other
companies  (arranging  radio and television  advertising  time for our clients).
This business plan also was unsuccessful.

         In 1996, we acquired 100% of the stock of Glitch Master Marketing, Inc.
Our acquisition of the common stock of that entity in exchange for shares of our
common stock was treated for accounting  purposes as a recapitalization  of that
entity,  with that entity as the acquiror.  The entertainment  business line was
discontinued after the merger.

         In 1997 we acquired Renaissance  Systems,  Inc. and formed OnLine Power
Supply,  Inc. as a 100%  subsidiary  to develop new products in the power supply
business (Renaissance was not continued as a separate  subsidiary).  In December
1999 the two subsidiaries OnLine Power Supply, Inc. and Glitch Master Marketing,
Inc.  transferred  their assets and liabilities to us and the subsidiaries  were
dissolved.  As used in this Form 10-KSB, unless otherwise specified,  references
to OPS mean either the former subsidiary  OnLine Power Supply,  Inc. or the line
of  products  it has  developed,  and  references  to GMM mean either the former
subsidiary  Glitch Master Marketing,  Inc. or the products it has developed.  In
2000, GMM products will be discontinued.

         We  changed  our name to OnLine  Power  Supply,  Inc.  and at that time
changed our stock symbol to "OPWR" from "ONLN."

(a)(1)  Form  and  Year of  Organization.  A Nevada  corporation  (originally  a
Colorado  corporation  formed in 1991, then changed to Nevada corporate domicile
in 1996).

(a)(2)   Any Bankruptcy, Receivership or Similar Proceeding.  None



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(a)(3)   Any Material Reclassification,  Merger,  Consolidation,  or Purchase or
Sale of a Significant  Amount of Assets not in the Ordinary  Course of Business.
None in 1998 or 1999.

(b)      Business of Issuer

         We have developed  patented and patent pending  proprietary  technology
for what we believe are better power supply systems for electronic  devices (our
OPS line of products).  The  electrical  current  (power supply) going into such
devices has to be converted and controlled so the power is constantly and evenly
supplied in the right format.  Computers,  for example,  must use direct current
(steady flow, or "DC"), but most output from electrical suppliers (utilities) is
alternating  current  ("AC").  There is a power supply system in every  computer
which  converts  the AC power  into DC.  These  computers  are used in  personal
computing,  office environments,  industrial  applications,  tele- communication
switching stations, and a host of other uses.

         We estimate  that the total annual United States market for the size of
power supply systems which we have designed is approximately $4 billion, meaning
that original equipment manufacturers ("OEM") and end users in the United States
buy that dollar  volume  every  year.  Another $5 billion is spent on systems in
Europe and Asia every year.  Our business  model  projects that our OPS line may
start to be  "designed  into" new  generations  of smaller  advanced  electronic
devices by a number of manufacturers. Our competitors' current products will not
fit the new  generations'  standards  of  efficiency,  size and weight which the
manufacturers appear to be adopting on their own. Therefore, our products should
enable us to capture a share of the annual market.

         Through  1999 we made and sold a computer  power  interruption  circuit
under the name  "Glitch  Master."  This part of our business is winding down and
will be discontinued for the most part in 2000.

         Our  offices  are  located  at 6909  South  Holly  Circle,  suite  200,
Englewood, Colorado 80112; telephone 303.741.5641 (fax 303.741.5679).

(b)(1)   Principal products or services and their markets.

         There are two basic  technologies  for converting AC power to DC power:
linear and switching.  Linear power supply  technology has been around since the
turn of the century. It consists of a transformer, bridge rectifier and a filter
cap. It is bulky, heavy and very inefficient,  dissipating over 50% of its power
to heat. A 200 watt power supply weighs approximately 40 lbs. and is 19" x 10" x
7",  however,  the  advantage is a very clean,  smooth output of the voltage and
current which is needed in many applications.

         Thirty years ago, electrical  engineers  discovered how to increase the
efficiency and size of the linear power supply by immediately  changing AC power
to DC power then  switching the  transformer on and off at high speeds to create
the flow of power across the transformer. This is known as switching technology.
The downfall of this technique is noisy power (switching the

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transformer on and off creates huge surges, spikes, harmonics and radiated noise
in  systems).  However,  motors  and  logic  circuits  don't  mind  this  noise.
Therefore, the computer industry exclusively uses these power supplies. They are
large and inefficient.  Because they are inefficient,  a lot of electrical power
going into the system is wasted and lost to heat; almost all computers using the
traditional  switching technology must use ventilating fans to keep the systems'
operating  temperatures cool. Also, more capacity (a bigger system) is needed to
compensate for inefficiencies.

         We believe we have developed a significant improvement to the switching
technology, by designing semiconductor controls into the switching technology to
create high efficiency systems that enhance voltage conversion. This new product
line features  significant  improvement in efficiency (93% efficient compared to
50%-70% in current technology), size and weight (80% lighter) and a reduction in
parts count of up to 50%.

         Our technology,  which is exclusively  owned, will produce power supply
products  for   applications   in  the  electronics   industry,   including  the
telecommunication,  industrial,  commercial,  medical,  government  and computer
markets. Prototype products have been developed and patents have been filed. One
patent has been granted to date by the United States Patent and Trademark Office
(Pat.  No.5,798,671)  which relates to our earlier  versions of the OPS products
(power corrected front end modules). An application for another patent was filed
in  1999  which  covers  numerous   refinements  and  improvements  to  the  OPS
technology.  The second  patent is now in review at the United States Patent and
Trademark Office.  Certification by Underwriters  Laboratories has been received
for certain  components of the OPS products.  Discussions with a number of large
corporations are ongoing for possible contracts to buy OPS products. To date, no
contacts have been secured.

         Presently,  we are in discussions with a number of potential  customers
who may buy our OPS products.  We are making prototype  versions of our products
for  evaluation  by  potential  customers,  which  include  some  of the  larger
corporations  in the United States.  We have sold only a few of the OPS products
as demonstration units, and we have not signed any contracts yet.  Manufacturing
will be done by others,  so we won't have to build  factories.  Our products are
marketed by employees and independent distributors. We are estimating that if we
obtain  contracts for the OPS  products,  our per unit sales price would be from
$150 to  $500.  Based  on  detailed  discussions  with  Saturn  Electronics  and
Engineering,  Inc. our direct operating costs are estimated to be 50% or less of
sales.  Therefore,  if we can sign  contracts  for this line,  we may have sales
revenues in 2000 and 2001, but whether we can make any profits in this period of
time will depend on the amount of our general and  administrative,  engineering,
and product design costs.

         GMM has sold unique products related to better power supply performance
since 1990;  these products are sold to several niche markets which require very
stable power for  voltage-sensitive  computer and machinery  operations.  We are
winding down this product.  We have recorded revenues from sales of this product
line in 1998 and 1999,  but presently are not  predicting  significant  sales in
2000.

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Power Supply Technology

         We believe the OPS  technology  will produce a new  generation of power
supply devices.  While new electronic  products are being introduced in smaller,
faster, more complex and more powerful  configurations,  the power supply, which
is one of the most basic  components  of all  electronics,  has not  changed its
basic technology since AC current became the standard.  Every electronic product
today  uses  a  20-year  old  inefficient  technology  to  convert  and  control
electrical current. While this technology works,  significant advances are being
made in  electronic  applications.  However,  these  continued  advances  in new
products are being limited by the  limitations of the power supply systems which
are presently  available in the market.  Current  possibilities  in  electronics
"architecture"  are becoming limited by power supply systems which are too large
and heavy, and run inefficiently and generate  significant amounts of heat (lost
power). Present power systems also lose power at higher temperatures.

         For example, a traditional AC to DC power supply systems for a computer
usually  operates at about 70%  efficiency.  Computer  designers  must design in
power supplies  which are rated  significantly  higher  (usually 30% higher at a
minimum) than the applications really need. Fans are needed to keep temperatures
at  acceptable  levels.  Additional  components  and circuits  help minimize the
intrusion  of  spikes,  harmonics  and  radiated  electrical  "noise"  which are
unavoidable  in the  systems  and  still  cannot  be  eliminated,  even with the
introduction  of switching  technology in the 1960s.  These needed  features add
cost,  complexity,  size and weight to the end product,  i.e. the power  system.
Therefore,  while  advances in circuit  technology  keep producing more powerful
applications  which need less space, the unchanged power supply technology keeps
the overall size of the devices larger than necessary.

         We have applied a problem solving strategy to power supply systems, and
designed and built new devices that will keep pace with  advances in  electronic
manufacturing.  The new technology is  significantly  different from traditional
linear or  switching  power supply  products.  OPS  products  feature  93%-97.4%
efficiency  factors,  80% reduction in weight,  and up to 50% fewer parts (which
decreases  the size  and  complexity  of the  products).  Additionally,  the new
products experience  virtually no magnetic thermal deration (loss of performance
because of heat build up);  therefore,  fans and other ventilating  measures are
not needed.

         We have  completed our first new technology  product,  the Power Factor
Corrected Front End module  ("PFCFE").  The PFCFE is a modular power supply that
converts AC voltage to DC voltage.  Any electrical  machine,  such as electronic
equipment  with  "memory"  supplied by a computer  chip,  requires DC voltage to
operate. The PFCFE converts,  translates and conditions AC voltage from the wall
plug into DC power  language  that  sophisticated  electronic  equipment can use
efficiently.  The PFCFE design,  small size and weight  provide  flexibility  to
end-user design engineers, particularly in the telecommunications industry. This
design  allows the PFCFE to be utilized  in  distributed  power  systems or as a
modification  to existing power  supplies that require power factor  correction.
The power factor  correction brings the front end voltage and current into phase
and enables the unit

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to pull  constant  current  from the power  line.  It  eliminates  damaging  and
inefficient harmonies and current spikes.

         We believe the PFCFE device  exceeds the  requirements  of new European
standards  that  take  effect  in  2001.  These  standards   require   efficient
utilization of power  throughout  Europe and will  ultimately  become  worldwide
standards.  Efficiency is measured with  reference to the "perfect power factor"
of 1.0; the PFCFE's power factor is .99984.

         We have produced prototypes of the PFCFE module and obtained electrical
certifications  for the prototypes,  and are completing  development of its next
new technology,  a 48 Vdc distributed  power supply.  We believe these first two
OPS  products  will  form the  basis  for  approximately  30  product  lines for
different power requirements and commercial uses.

         One  application of the PFCFE is a very small module which is adaptable
to distributed power systems (particularly in  telecommunications)  and will fit
into a PS2 computer power supply. Currently, prototype units are being evaluated
by a number of large potential customers.

         We have conducted  performance test comparisons between the PFCFE and a
"state-of-the- art" competitive  product. We believe these tests demonstrate the
superiority of the PFCFE to the best competitive  products on the market because
PFCFE was more efficient and dissipates  substantially less heat without thermal
deration. The PFCFE may have a technological advantage in the marketplace.

         Performance  and design  testing has been  conducted on a regular basis
since  August  1997.  In August  1997,  Doyle &  Associates,  Inc.  ran tests to
evaluate the long term market  feasibility of our then-current OPS product line.
These tests  included  verification  of  operating  efficiencies,  power  factor
correction  ratings,  and the operating  temperature  range for our product line
versus  other  companies'  products.  Richard L. Doyle  provides  us  consulting
services from time to time.

         In  October  1998,  INTERtest  Systems  Inc.  conducted  tests  at  its
independent   laboratory   to  evaluate   our   products'   compatibility   with
internationally  accepted  standards and to insure  product  compatibility  into
certain   market  arenas  such  as   telecommunications.   These  tests  covered
electromagnetic  compatibility  for the "immunity  standard" in the  electronics
industry;   levels  of  radiated   emissions;   conformance  with  standards  of
electromagnetic  discharge  requirements;  radiated  frequency,  electrical fast
transients  and  transients   surge,   and   radio-frequency   fields   inducted
disturbances.  The standards used in the tests were CENELEC EN 50 081-1:1992; 55
022:1995; 50 082-1:1992;  and 61 000-4-2 through 4-6:1995.  Our products met all
of these standards.

         Later in 1998, INTERtest Systems Inc. ran an initial testing review for
tolerances  related to  compatibility  with electronic  components  (spacing and
clearance,  and  short  circuits),  as well as  safety  issues  which  would  be
addressed by Underwriters' Laboratories.  Some changes in design were adopted to
improve tolerances compatibility.

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         In August  1999,  Accelerated  Reliability  Test Centers (a division of
QualMark  Corporation)  conducted  highly  accelerated  life testing ("HALT") to
uncover potential design and/or process weaknesses in our products.  During HALT
testing, the OPS power supply units were subjected to increasingly higher stress
levels  caused  by  vibration,   heat,  rapid   temperature   change;   combined
environments,  and power cycling.  Our products  passed the HALT testing without
difficulty.

         In  October  1999,  UL  approved  the OPS  product  line  under UL file
#E203110, Project #99NK36016.

         In November 1999,  Doyle and Associates  conducted a "mean time between
failure " test to determine long term reliability of our products.  The Bellcore
Standard data base was used as the performance reference benchmark. Our products
were rated at a temperature  of 50 degrees  Centigrade to last 798,557 hours (91
years).

Technical Comparisons of OPS and Traditional Power Supply Devices

         We have  summarized  in the chart below the benefits of OPS  technology
compared  to  the  devices  made  by  our  competitors.  The  chart  reflects  a
statistical  analysis of our  competitors'  products as  published  in technical
journals and trade magazines.  Traditionally, power supply devices are evaluated
according  to  their  specifications,  which  are a  demonstration  of  expected
performance  in the field.  For  example,  a 1000 watt power supply rated at 70%
efficiency will dissipate  significantly  more heat (300 watts).  This condition
would require  cooling by a fan to keep moving air over the device to remove the
heat buildup.  However, this condition also would make such a unit less reliable
because it operates in a narrow  temperature range while taking up more valuable
space  within  the power  supply  unit.  A 1000 watt OPS power  supply  with 90%
efficiency  will  dissipate  only 100  watts of heat,  which  means it will last
longer,  require  less  cooling  (none in some  applications),  and  allow it to
operate  over a  greater  temperature  range in a  dramatically  smaller  space.
Therefore,  we believe the OPS power supply devices are smaller,  lighter,  more
efficient, and more reliable. These benefits are summarized below.

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OPS POWER SUPPLY FEATURES/BENEFITS         CONVENTIONAL SWITCH/LINEAR TECHNOLOGY

Weight-1 lb. 9 ounces                                 300w=5.5lbs.
         (250-1000w)                                  1000w= 11.2 lbs.

Dimensions- 2.7" x 6.7" x 1.5"                         5" x 5" x 11"(1000w)
         27.13 cu.in.                                 275 cu.in.
         (250-1000w)

93%-97.5% efficient                                   50%-75% efficient

Fan may not be required-coolest                       Fan required-high heat
in industry

MTBF- 800,000 hours +                                 MTBF-100,000 hours

Hold up time- 300 ms +                                16 ms
Power Factor Correction <.999                         Power Factor typically .60
(Perfect Power Factor 1.0)
Power Density 18 watts/cu.in.                         2.5 watts/cu.in.

No minimum load required                              required

Power fail warning                                    none

N + 1 Operation                                       N + 1 Operation

Small idling losses                                   % idling losses

Operating temperature -55(degree)C                   0(degree)C to 60(dEGREE)C
to 100(degree)C                                      typical loss 50% of power
No power deration due to temperature                 due to temp. deration above
                                                     45(degree)C

Output Power range-250 watts to 9,600 watts         Multiple sizes and weights
Same size and weight

Independently isolated and regulated                Always running
lines with floating outputs


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<TABLE>
<CAPTION>

                          FEATURES/BENEFITS/DESCRIPTION

BENEFIT            OPS PRODUCTS                                         INDUSTRY STANDARDS

<S>                <C>                                                  <C>
Efficiency         OPS products achieve                                 Average efficiency is
                   over 90% efficiencies. Front                         75% in switching power
                   end power modules will be                            supplies and 50% in linear
                   97% efficient.                                       power supplies.

Smaller            OPS products have greater                            Smallest 1000 watt footprint
                   watt per cubic inch power than                       is 5"x 5" x 11" (275 cu.in.)
                   previously achieved. Most models
                   will fit into a 2.7"x 6.7"x 1.5" footprint
                   (27.13 cu.in.)

Lighter            OPS products will weigh 1.9 lbs                      Industry products weigh
                   for 1000 watts unit.                                 12-14+ lbs for 1000 watts.

Cooler             Higher efficiencies result in smaller                Large heat dissipations
                   heat dissipations. Most OPS                          cooled by low reliability
                   products may not require a fan                       fans.
                   for cooling.

Reliability        Higher efficiencies, cooler running                  MTBF is determined by the
                   power supplies and high quality                      quality of the fan, about 100,000
                   component selection will result                      hours.
                   in a high MTBF in the 1,000,000
                   Hrs. range.

Agencies           OPS products will comply with                        Power supply companies who
                   National & International standards.                  do not adapt to European
                                                                        standards will not be able to
                                                                        compete in the worldwide
                                                                        market by the year 2001.
</TABLE>

Power Supply Industry

         The power supply industry is expected to show continued  growth for the
next four years. A report by Darnell Group, Inc., Norco,  California,  estimates
that the worldwide  market for AC/DC  switching  power  supplies in 1999 will be
about $9 billion, with the United States accounting for $4 billion.

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         The top 10 power supply manufacturing  companies  represented about 60%
of the market in 1997. Ranked in order (and taking into consideration the merger
between  Computer  Products  and  Zytec,   which  formed  Artesyn)  are:  Lucent
Technologies, Delta Products, Astec, Artesyn, Lite-On, Reltec, Vicor, Celestica,
Lambda Electronics, and Cherokee International.  Other mergers continued in 1998
and 1999 as these  companies  seek  increased  market share.  We believe our new
technology will have dramatic  impact to an industry where basic  technology has
not changed in 20 years.  Some of the leading  companies have contacted us about
possible joint ventures or other ways of doing business  together,  but we don't
yet have any agreements in these respects.

Industry Trends

         We believe that over the next five years,  manufacturers will be forced
by the  marketplace  to  improve  power  supply  products  in  order  to  remain
competitive.  The electronics  industry is under  continuing  pressure to reduce
system  sizes where a power supply will  require  considerable  amounts of space
within the system. For example,  computers,  laptops, and wireless base stations
have  significantly  reduced  their size over the last three years,  but, at the
same time, have continued to increase in capability.  This increased  capability
has increased  the power  requirements  which the power supply can deliver,  but
these requirements at the same time must be met by a smaller package.  Reduction
of the  size of a system  reduces  the  overall  space  in the  system  which is
available to fit in a power supply device which delivers more power.

         Through our new  technological  approach,  we believe the OPS  products
will achieve all of the improvements  needed by the marketplace.  We believe the
industry will use these  improvements to continue its race to become smaller and
lighter, in particular. This will have considerable impact with respect to size,
durability,  and the rugged qualities of casing. For example, a high-end network
file server would typically  utilize 675 watt power supplies.  Each power supply
would be about 5"x 5"x 11", weigh 8.8 lbs. and  approximately  be 75% efficient.
As a result,  the case would have to occupy 15" of vertical space;  168.75 watts
of consumed  power would be lost to heat  dissipation.  By  comparison,  our OPS
products  would  weigh a total  of 3 lbs.,  utilize  6" of  vertical  space  and
dissipate only 141.75 watts of heat.  These are  significant  improvements  that
will provide definite advantages to system design engineers in the future.

         Manufacturing

         Manufacturing will be conducted on a sub-contract basis.  Manufacturing
facilities   have  been  identified  and  have  certain   characteristics   that
demonstrate  the  ability  to  produce  quality  and  quantity  to meet  the our
expectations.  These  manufacturers  specialize in the design and manufacture of
power supplies for various  applications to include facsimiles,  printers,  disk
drives,  telecommunication  equipment,  test instruments and personal computers.
Dedicated,  innovative  and energetic  workforces,  and modern  facilities  with
proven technology  characterize these high quality, cost effective manufacturing
facilities.  Production  systems of the manufacturers  have been approved by BAT
and are also ISO 9001  and ISO  9002  and QS 9000  market  certified  companies.
Performance  of  consistent  timely  delivery  and  a  high  degree  of  on-site
engineering and quality

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control are  specified.  Initial  production  capabilities  easily exceed 35,000
units per month.  Statistical process control is fully applied in the production
process.

         In December 1999 we established a  manufacturing  agreement with Saturn
Electronics  and  Engineering,  Inc.  Auburn  Hills,  Michigan.  Saturn  is  the
exclusive  global  manufacturer of the OPS products we develop and sell, for the
duration of the specific  product  families (front end units, 48V power supply).
To help finance our  manufacturing  costs (inventory of parts and engineering at
Saturn),  Saturn will buy the inventory and pay its own engineering  costs,  and
will take security  interests  (pledges as collateral) in our customer  purchase
orders and  accounts  receivable.  Terms are  expected to be 30 days net payment
from customers.  Customer payments will be deposited into an escrow  arrangement
so that Saturn  will  recover its  advances  first  before we receive any of the
money.  We will require our customers to pay an initial  deposit equal to 30% of
the order;  these  payments  would be split 75% to Saturn and 25% to us. The 70%
balance  for the  order  when  completed  would be paid  into the  escrow by the
customer upon delivery, with the net balance paid to us after Saturn deducts its
costs and advances. In certain circumstances,  there may be an advantage for the
customer and for us for Saturn to act as the selling agent,  because Saturn is a
minority owned business. In these type of transactions, Saturn will receive a 5%
markup on sales.

         If we become  insolvent  or unable to pay our debts to Saturn,  we will
grant Saturn a royalty free license to finish off inventory on hand and sell the
OPS  products  direct to our  customers  to  complete  existing  purchase  order
requirements.  This license would expire when those orders have been  completed.
In turn, Saturn has a first right of refusal to acquire our technology,  patents
and designs if we become insolvent or unable to pay our debts.

         Saturn  has agreed to be price  competitive  within a 10% range of bids
from  comparable   manufacturers   who  offer  comparable   financing,   design,
engineering and quality support.

         We signed the  agreement  with Saturn  because of Saturn's high quality
work and capacity to make and deliver what we  anticipate  could be  substantial
orders in the future. We believe their terms are favorable to our small company.

         We had placed our first  order with Saturn to make 500 units of out PFC
Front End product and pay $60,832 of nonrecurring  engineering  charges incurred
by Saturn's  staff in  connection  with the order.  In 2000 we scaled this order
back to 25 because we changed the product's design in minor respects. Due to the
small size of this order,  we will pay for these units  directly,  including the
engineering  charges.  Most of these charges involve test equipment  required on
Saturn's production line and tooling which Saturn must put in place to build the
OPS products.  We will own this equipment.  We will have to pay for some similar
charges as needed to build  specific  configurations  of the line for customers,
but these  amounts  will be  reimbursed  to us as payments are made from escrow.
Delivery  of the order is  expected  in March  2000;  products  will be used for
demonstration and promotional purposes, until we finish design improvements.

                                       11


<PAGE>



         In general,  we believe that  manufacturing by sub-contract  represents
the most  efficient cost  effective  manner to bring OPS products to market.  We
intend to use trade secret, nondisclosure, and non-circumvention agreements with
our sub contractors including Saturn.

(b)(2)   Distribution methods of the products or services (sales and marketing).

         Our  initial  sales  and  marketing   strategy  is  to  sell  into  the
industrial/tele-  communication/   medical/government/  military  markets  where
current  power supply  solutions are  vulnerable  to, and can be replaced by our
products with their superior features and attributes. These initial markets will
have the greatest impact for us because they have established needs that are not
adequately met by current  industry  product.  Most device trends continue to be
driven by combinations of needs for smaller,  lighter, more efficient,  and more
reliable power supply solutions that demand cooler operation.

         A major part of the our  marketing  efforts  will be sales to  original
equipment  manufacturers  who put  their  own  brand  name on the  device.  This
requires us to work with the design  departments  to satisfy the unique  product
specification demands.

         To  assist  in sales to  OEM's  and  other  industry  markets,  we have
established a network of 13 independent  sales  representatives  and value added
distribution  companies,  with a  combined  staff  of 100  people.  The  average
experience  of the  personnel is 20 years.  We have and will  continue to select
those representatives and distribution companies who have significant experience
and expertise in the power supply industry.  We believe that a well informed and
well-trained  network  of  independent  representatives  and  distributors  will
provide  immediate,  valuable exposure and demonstration  value to those markets
most likely to utilize our products.

         Independent sales  representatives are appointed to market and sell OPS
products in  designated  territories.  They are required to adhere to all of our
sales  policies  including  pricing and terms in our approved  price  lists.  We
provide  at no cost  to the  representatives  copies  of  technical  literature,
promotional  materials and product samples.  We will pay  representatives  5% of
gross sales in their  territories,  based on net invoiced price (total  invoiced
price less discounts,  credits,  allowances,  freight  charges and duties).  Our
agreements  with the  representatives  each  have a one year  term  which can be
renewed by us.  Representatives  are not allowed to market or sell products that
compete  with  our  products.   Presently,  the  network  of  independent  sales
representatives and distribution companies extends through all of the designated
territories of the United States,  Canada, Far East, Mexico,  South America, and
Europe.

         In the third or fourth  quarter  of 2000,  we  expect to  increase  our
in-house sales force to support the network of distributors, representatives and
OEMs. Our current  engineers are able to provide  technical  support and provide
design  solutions to  significant  applications  to the key  decision  makers at
customers' offices (their engineers).  We will be hiring more engineering people
in this area as needed, probably in the second and third quarters of 2000.

                                       12


<PAGE>



PPC Products (Glitch Master)

         The Glitch  MasterTM is a product  designed to protect and maintain the
power supply for direct  current (DC)  circuitry.  The primary  target market is
personal  computers and workstations;  these machines are highly  susceptible to
momentary power outages which lead to data loss,  hardware and software  damage,
and delays for  restarting  the computer  system and  retrieving  data from hard
drive  memory.  The Glitch  Master will keep a computer from "going down" during
brief power interruptions.  The Glitch MasterTM is a unique non-battery solution
which  costs less and is easier to  maintain  than  alternative  approaches.  At
startup,  the device absorbs energy during the first 8 seconds,  which creates a
ride-through capacity which will handle 95% of all power interruptions.

         The Glitch Master  circuit can be installed in a computer  system power
supply, or it can be incorporated into new power supply designs.  GMM now offers
142  types of power  supplies;  the new ATX  series is  designed  for the new P6
processor  microchip which has been  introduced by Intel;  the ATX will increase
the number of power supplies offered to 170 variations.

         A specific example of the application of the device is the installation
in Flying "J" Truck  Stops.  Flying "J" had a unique  problem  with the computer
kiosks used by truckers at the stops: Each time the store's  refrigeration units
would turn on or off, a power spike or sag would occur and cause a lockup at the
computer kiosks. Each incident required restarting the computer in the kiosk, at
least several times each day.

         TON  Services,  Inc., a third party not related to us, builds the touch
screen kiosks for Flying "J" Truck Stops (there are more than 75 of these travel
plazas in the western and midwestern states, each with at least two kiosks). TON
Services,  Inc.  chose to use the GMM  products  in the kiosks to relieve  power
problems. The Glitch Master was installed at the stores in 1997 and 1998 and the
problems have ceased.

         Other  institutions  using the Glitch Master technology include Brigham
Young University,  Regis University, USAF Academy, West Point, US Naval Academy,
Novelle, and Iomega.

         GMM also provides  custom design and problem solving for its customers,
which has led to  significant  business  opportunities  with  customers  such as
Novelle  and  Iomega.  For the  balance  of 2000 and  thereafter,  we  intend to
concentrate on custom power supplies markets.

Manufacturing and Marketing

         For the line of GMM  products  which we sold  through  1999 and are now
winding  down,  the products are assembled by our  personnel  using  standard PC
power  supply  items  available  from a  variety  of  vendors,  which  then  are
retrofitted with the GMM circuit which is made for us by Suhtech  Corporation in
Korea.  Marketing  is  handled  on a direct  basis by GMM,  and also by  several
manufacturer  representative  firms in  different  parts of the  United  States,
Canada, and other countries, as well as through distributor sales companies.

                                       13


<PAGE>



Competition

         The Glitch  Master best serves the low-cost  power  protection  for the
personal  computer market and the  workstation  market.  In this area,  there is
virtually no direct  competition,  because  consumers are hesitant to pay a high
price for uninterrupted power.

         Competition for the Glitch Master is a product that is classified as an
uninterruptible  power  supply.  The primary  competition  for the Glitch Master
product  is a  battery  backup  UPS.  We  believe  the  Glitch  MasterTM  offers
advantages  over a battery  backup system  because it is cheaper and it does not
require batteries. When the computer starts up, the Glitch Master absorbs energy
during the first 8 seconds. Thus, it does not have to be a source of energy on a
continual basis as with a battery backed system. A power interruption during the
first 8 seconds of operation merely requires the user to restart the system

Marketing Strategy

         The strategy  for Glitch  Master is to  emphasize  product  quality and
protection of assets.  One of the most likely computer  components to break down
or wear out is the power supply.  However, power supplies are often perceived as
a commodity by the end user. The Glitch  MasterTM  improves  quality for the end
user as well as  increases  the life of the power  supply and  provides  product
differentiation.

         The Glitch  MasterTM  power  supplies  protect  the assets of a company
including hardware, the integrity of the data stored in the computer, as well as
time and welfare of management. When demonstrating a computer system with Glitch
MasterTM a prospective customer can unplug the computer from the wall plug for a
short period and reinsert it without losing data.  Management believes this is a
sales advantage over other competitors.

         GMM provides a 2 year warranty of its products to  customers.  The cost
of the warranty program is approximately 5% of the sales of the products.

Employees

         We now employ 19 people  full time  including  officers  and  technical
personnel,  and one part time administrative person. We may increase this number
to 30 in 2000.

(b)(3)  Status of any publicly announced new product or service. Not applicable.

(b)(4)  Competitive  business  conditions  and our  competitive  position in the
industry  and methods of  competition.  See Power Supply  Industry  under (b)(1)
above.  Presently we are an insig- nificant  player in the industry  because the
current makers of power supply devices are  established and selling high volumes
of product.  The competition  has extensive  resources in terms of market share,
manufacturing facilities, capital, and distribution channels. We hope to compete
with a

                                       14


<PAGE>



superior  line of OPS  products  which are  smaller,  lighter,  cooler  and more
efficient  overall,  which we think are benefits which will prove attractive and
allow  us to  price  our  products  competitively  if not at a  premium  in some
instances.

(b)(5)  Sources and  availability  of raw  materials  and the names of principal
suppliers.  All of our OPS product  components are off the shelf items available
from  numerous  manufacturers,  except for one item which is available  from one
source in the United States.

(b)(6)   Dependence on one or a few major customers.  Not applicable.

(b)(7)  Patents,  trademarks,   licenses,   franchises,   concessions,   royalty
agreements or labor contracts,  including duration.  Not applicable,  except for
patents.  One patent has been  granted to date by the United  States  Patent and
Trademark  Office (Pat.  No.5,798,671)  which relates to our earlier versions of
the OPS products (power corrected front end modules). An application for another
patent was filed in 1999 which covers numerous  refinements and  improvements to
the OPS  technology.  The second  patent is now in review at the  United  States
Patent and Trademark Office.

(b)(8)   Need for any government approval of principal products or services.
 Not applicable.

(b)(9)   Effect of existing or probable governmental regulation on our business.
Not applicable.

(b)(10)  Estimate of research and  development  costs for last two fiscal years,
and if  applicable,  the extent such costs are borne  directly by customers.  In
1999 we spent  $455,435 on research and  development  of our OPS products  (1998
$319,559).

(b)(11)  Costs and effects of compliance with environmental laws (federal, state
and local).  Not applicable.

(b)(12) Number of total employees and number of full time employees. At December
31, 1999 we employed 21 people,  20 full time. The number of total employees may
increase up to 30 in 2000.

Item 2.  Description of Property.

         We don't own any real estate.  Our offices  occupy 4,630 square feet of
space and are leased through January 2001 at $6,950 per month. These offices are
suitable for our current level of administration staff, engineering research and
development  areas,  and  sales.  We may  have to lease  more  space in the same
building in 2000 as we grow in operations. We have general business coverage for
product  liability,  personal injury,  fire damage and other casualty losses, in
amounts we think are adequate.

                                       15


<PAGE>



Item 3.  Legal Proceedings.

         Related to Bankruptcy Trustee. In June 1994, we entered into agreements
to merge with MaxMusic,  Inc., a Colorado  corporation,  whereby  MaxMusic would
acquire  our  assets and  certain  of our  liabilities.  These  agreements  were
terminated  in December  1994.  MaxMusic,  Inc.  subsequently  filed a voluntary
chapter 7  bankruptcy  petition in 1995,  Case No.  95-11101  SBB, in the United
States  Bankruptcy  Court for the District of Colorado.  In December  1997,  the
trustee for the bankruptcy  estate filed a complaint against us on behalf of the
bankruptcy  estate seeking damages in the amount of $392,000,  plus interest and
penalties, for alleged payments that had benefited us. In December 1998, we paid
$150,000 to the trustee to settle the claims (and interest and penalties) sought
by the Trustee.  This money was loaned to us by a trust  maintained  by a family
member of Kris M. Budinger, president.

         In April 1999 the  trustee  filed an action in United  States  District
Court (Denver,  Colorado) seeking enforcement (through a garnishment proceeding)
against us of a judgement  obtained by the trustee  against a former officer and
director (who resigned in February 1996) for the same amount  originally  sought
to be recovered  against us, less the $150,000 paid by us in December  1998. The
amount now being sought by the trustee is  approximately  $390,000;  recovery is
sought  based on a 1996  agreement  by us to  indemnify  the former  officer and
director against certain liabilities. We are resisting the trustee's attempts to
collect the balance of the claims,  and believe the trustee's efforts are wholly
without merit.

         After  extensive  hearings,  on  November  19,  1999 the United  States
Magistrate  Judge,  United States  District  Court entered  findings of fact and
conclusions  of law to the effects  that the  trustee's  garnishment  claims are
barred  by the  1998  settlement  with  us and  our  payment  in the  underlying
adversary   proceeding  in  Bankruptcy  Court,  and  that  the   indemnification
provisions of the 1996 agreement  between us and the former officer and director
are not applicable or enforceable in connection with the bankruptcy proceedings.
The Magistrate has  recommended  that the District Court enter  judgement in our
favor on the garnishment claims.

         The trustee  has filed  objections  to the  Magistrate's  findings  and
conclusions,  and to his  recommendations,  and we have  filed a reply  with the
Magistrate.  We believe our  position  will  prevail,  but as in any  litigation
proceedings, the ultimate resolution is uncertain.

         Other. Since 1996 we have been defending a lawsuit by Fox Sports,  Inc.
which in 1999 was pending in California  Superior court,  (file number BC20946).
Fox sought approximately $150,000 in damages for alleged breach of a contract to
distribute film; the dispute arose out of arrangements  discussed between us and
Fox to distribute video film products when we were involved in the entertainment
business in 1996.  In March 2000 we settled this matter by paying  approximately
$28,000.

                                       16


<PAGE>



Item 4.  Submission of Matters to a Vote of Security Holders.

         On December  2, 1999 the  shareholders  voted to approve the  following
matters at a special shareholders' meeting (voting numbers are in parentheses):

         1. Change our name to "OnLine Power  Supply,  Inc." to reflect the main
thrust of our business.

                                    For              Against       Abstain
                                    ---              -------       -------
                                 6,349,715           11,120            100

         2.  Reelect two of the  directors  and elect Thomas L. Glaza as a third
director.

                                    For              Against       Abstain
                                    ---              -------       -------
         Larry G. Arnold          6,257,913          96,432          6,590
         Kris M. Budinger         6,261,768          93,967          5,200
         Thomas Glaza             6,258,838          91,897         10,200

         3. Approve the Incentive Stock Option Plan which previously was adopted
by the board of directors in 1998.

                                    For              Against       Abstain
                                    ---              -------       -------
                                  5,835,620          481,576         9,320

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

         Our common  stock is traded on the  over-the-counter  market on the OTC
Electronic  Bulletin Board (referred to sometimes as the OTCBB) under the symbol
"OPWR." We changed our symbol to "OPWR" when we changed our name in January 2000
by filing with the Nevada Secretary of State,  following shareholder approval in
December 1999. None of the preferred stock has been traded. The high and low bid
quotations for the common stock, by quarters, starting when trading commenced in
the second quarter of 1998 as reported by the OTCBB were as follows:

                  Quarter Ended                    High                Low
                  -------------                    ----                ---

                  June 30, 1998                  $   4.75           $  1.75
                  September 30, 1998                 3.06              0.78
                  December 31, 1998                  3.50              0.75


                  March 31, 1999                     4.50              1.88
                  June 30, 1999                      4.75              2.50
                  September 30, 1999                 3.75              2.25
                  December 31, 1999                  6.75              2.65

         At March 24, 2000 we had 20 shareholders of record owning 10,467 shares
of preferred stock (without  designation),  and approximately 1,714 shareholders
of record  owning  16,954,119  shares of common  stock.  The number of shares of
common stock includes the shares issued on conversion of all series A and series
B preferred stock and the dividend thereon, which took effect in December 1999.

                                       17


<PAGE>



         The closing  price on Friday,  March 24,  2000 was $13.50.  There is no
guarantee  that the stock  will  continue  to trade at this  price.  There is no
relationship  between this recent price and our current  financial  condition or
results of operations through the date of this Form 10-KSB.

         We have not declared any dividends on the common stock and don't expect
to declare any from any future profits in the foreseeable  future.  We will keep
any profits to expand our operations.

Item 6.  Management's Discussion and Analysis or Plan of Operation

         The  following  discussion  should  be read  in  conjunction  with  the
consolidated financial statements filed with this report.

         We were  originally  founded  in 1991  under  the name  Roth  Financial
Fitness,  Inc. to market the financial fitness and  wealth-building  concepts of
J.W.  Roth.  We developed a mail order program of videos,  workbooks,  telephone
consultant sessions with financial experts and monthly newsletters.  These items
were marketed and sold through infomercials and television advertising featuring
celebrities.  This business was not  successful  and the plan of operations  was
abandoned in late 1994.

         In July 1995,  we changed our name to OnLine  Entertainment,  Inc.  and
developed  a business  plan to sell  entertainment  products  which we  packaged
through the Internet.  Our products were to include nature films,  rock and roll
record  compilations,  and other  items.  In late  1995 and  early  1996 we also
performed  a  limited  amount  of media  advertising  placement  work for  other
companies  (arranging  radio and television  advertising  time for our clients).
This business plan also was unsuccessful.

         In 1996, we acquired 100% of the stock of Glitch Master Marketing, Inc.
Our acquisition of the common stock of that entity in exchange for shares of our
common stock was treated for accounting  purposes as a recapitalization  of that
entity,  with that entity as the acquiror.  The entertainment  business line was
discontinued after the merger.

         In 1997 we acquired Renaissance  Systems,  Inc. and formed OnLine Power
Supply,  Inc. as a 100%  subsidiary  to develop new products in the power supply
business (Renaissance was not continued as a separate  subsidiary).  In December
1999 the two subsidiaries OnLine Power Supply, Inc. and Glitch Master Marketing,
Inc.  transferred their assets and liabilities to us and the subsid- iaries were
dissolved.  This action was taken to simplify  our  accounting  systems and will
have no  effect  on our  operations  or  financial  statements.  Our  historical
financial  statements included in this Form 10-KSB are consolidated (which means
they  reflect  the  assets,  liabilities,  revenues  and  expenses  of  the  two
subsidiaries).  Starting  with the  fiscal  year  ended  December  31,  2000 our
financial statements will be for one entity and will not be consolidated.

         Liquidity and capital  resources,  and results of  operations,  for two
fiscal years 1998 and 1999. In 1998 and 1999 we received $6,548,019 in cash (net
of offering costs) from the sale of

                                       18


<PAGE>



preferred and common stock.  Over that 24 month period,  these funds, plus gross
operating  profits totaling  $134,203 from sales of the Glitch Master Marketing,
Inc.  ("GMM")  product  line,  have been used to pay  $1,901,057  in general and
administrative expense,  $774,994 in OPS product research and development costs,
and $218,000 in  litigation  settlement  costs in 1998  ($150,000 of these costs
were  borrowed  from a trust  controlled  by a  member  of one of our  officer's
family).  General and  administrative  expenses  for the two years 1999 and 1998
included officers' salaries $377,000;  administrative  salaries $193,942;  sales
salaries  $159,136;  trade show costs $361,767;  legal and accounting  $227,553;
office lease $100,876;  travel $97,975;  public  relations  $176,239;  insurance
$61,822; and other $166,938.

         Revenues  from GMM  sales in  fiscal  1999 were  $299,408  compared  to
$262,564 1998,  representing a small  increase.  We realized a gross profit from
GMM sales of $66,022 and $68,181 in 1999 and 1998. One GMM customer  represented
48% of 1999 sales and 9% of sales in 1998.

         Losses from  operations  were $1,525,043 in 1999 compared to $1,240,241
in 1998.  Among the principal  items  causing the increased  losses from 1998 to
1999 in  fiscal  1998 were  increased  expenses  for  laboratory  personnel  and
equipment,  management and administrative  salaries and related office expenses.
In 1999 we have been fully  developing  the corporate  infrastructure  needed to
become a large  volume  maker of power supply  systems.  Increased  expenditures
planned  for 2000 may have to be  scaled  back to the  extent we have to pay out
substantial  costs in the  rescission  offer,  or if sales efforts fall short of
current expectations.

*        Salaries,  commissions  and payroll taxes  increased by $254,577 during
         1999 as a result  of  increased  staffing.  This  item is  expected  to
         increase  by an  additional  $100,000  in  2000  because  of  increased
         research and staffing.

*        Research and development expenditures were $454,435 for our OPS product
         line in 1999, compared to $319,559 in 1998. For 2000 we may spend up to
         $750,000 for research and  development  of new follow along versions of
         our basic power supply technology.

*        We issued stock for services. In 1999 we recorded an expense of $62,837
         for this item,  compared to $59,799 for 1998. If we continue to need to
         raise money by selling stock in private  placements in future years, we
         may be issuing more stock for services (i.e.  the brokerage  firms that
         place the offering for us). We can't  predict  whether or how much this
         may occur.

*        To develop  customer  contacts,  sign up distributors and contract with
         sales   representatives,   our  personnel  have  traveled  extensively,
         attended  trade shows and  purchased a trade show booth,  and conducted
         informational seminars. Total expenses for these items were $242,000 in
         1999 and $278,702 in 1998. We may spend more than $500,000 for expanded
         efforts in this area in 2000.

                                       19


<PAGE>



*        Legal and  accounting  expenses  were  $144,271  in 1999 and $83,282 in
         1998.  The  increases  in 1999 were  related  primarily  to  litigation
         expense as a result of a prior line of business,  which should decrease
         significantly  after in 2000.  However,  legal and accounting  expenses
         associated  with  becoming  registered  with the  Commission  under the
         Securities  Exchange  Act of 1934 may  offset  expected  savings in the
         litigation area to some extent.

*        In 1998 we  contracted  with an outside  source for investor  relations
         services  at  a  cost  of  $144,265  without  acceptable   results.  We
         terminated the relationship in 1999 in favor of performing this service
         in-house and realized considerable savings. These costs were $31,973 in
         1999 compared to $144,265 in 1998.

*        In 1998 we wrote  off  a  bad debt for  $74,000 owed by a Glitch Master
         customer.

*        As a result of winding down the business of  manufacturing  and selling
         the original line of Glitch Master products, a write off of $41,616 was
         recorded in 1999 for an obsolete inventory of parts.

*        Our retained deficit at December 31, 1998 was $9,573,142.  The retained
         deficit at  December  31,  1999 was  $16,110,904,  which  reflects  our
         incurring a net loss for that year of $1,588,355,  a charge to retained
         earnings of $47,969 for series A and B preferred stock dividends, and a
         charge  of  $4,901,438  as a result  of a  conversion  feature  when we
         converted  the series A and B preferred  stock into common  stock.  The
         amount of this charge was established using the difference  between the
         $5.03  trading  price  on the  December  1999  conversion  date and the
         effective $1.00 cost basis to the investors.

         Our operating loss in 1999 was $1,525,043 as compared to $1,240,241 for
1998,  representing a year over year increase of $284,802. The principal reasons
for this trend are the  additional  costs  incurred  to develop  the new product
technology and the hiring of staff at all levels in advance of customer  orders.
The  results  of  operations  of  Glitch  Master  as a  subsidiary  in 1999 were
consistent and produced losses for 1999 and 1998.

         Continuing  losses  are  expected  until the  commercialization  of OPS
products is completed  which is expected to occur in the first three quarters of
2000.  We can't  predict with  certainty  the final date for  development  to be
completed and result in the start of  production  against  specific  orders from
customers.  Operating  losses will continue to occur until the revenue stream is
established. In this context, commercialization will mean contracts for sale are
signed and  sufficiently  performed to be profitable.  At the present time there
are no contracts in hand.

         General and  administrative  expenses  will  increase in 2000 as we add
staff and we may  expand our  facilities  if needed.  Research  and  development
salaries also will increase from hiring more engineers and support staff.

                                       20


<PAGE>



         Additional  working  capital was obtained in 1999 resulting in cash and
certificates  of deposit  totaling  $5,041,367  at December 31, 1999 compared to
$151,341 at December  31, 1998.  In 1998,  we borrowed  money from  officers and
raised some equity capital for operating  funds, and there was a working capital
(deficit) of  ($366,709) at the end of 1998.  Proceeds from equity  financing in
1999 will allow us to meet our  obligations  in a timely  manner in 2000, as our
working capital at December 31, 1999 was $4,550,523.

         We do not  foresee  the need for  additional  financing  in 2000 unless
start up orders  require added up-front  funding to secure raw  materials,  fund
work in  process  and  provide  capital  for  operating  cycles in excess of our
present cash needs projections.  If we have all our products manufactured for us
by Saturn, there should be a reduced need for such additional financing.

         Sales of the GMM products, and expected sales of the OPS products, have
not been and are not expected to be seasonal.

         The contingent stock rescission  liability of $1,281,815  (representing
original  invested  amounts,  without  interest)  has been recorded as temporary
capital subject to rescission (an offset reducing equity capital) on our balance
sheet at December 31, 1999. In 1998, a portion of this amount  (i.e.,  $550,700)
was so recorded to reflect the amount  subject to  rescission  during that year.
The actual liability will be determined and reclassified based on the results of
the  rescission  offer in the first and second  quarters 2000. At that time, the
balance  of  the  temporary  capital  amount  not  actually  rescinded  will  be
reclassified as permanent capital. See "Rescission Offer" below.

Rescission Offer

         General.  On February 24, 2000 we started our rescission offer directed
to approximately 180 investors who bought common and preferred stock from us for
$1,281,815 in cash.  The  preferred  stock with its 6% dividend was converted to
common  stock in  December  1999,  so the  rescission  offer is  directed to the
holders of a total of 1,243,151  shares of common stock.  Our  rescission  offer
(registered with the SEC) is approximately 50% complete at March 24, 2000 and we
have not received  any  redquests  from  shareholders  to have their  investment
returned,  which means (1) that  shareholders who invested $600,000 have decided
to keep their stock, (2) our shareholders'  equity has increased by that amount,
and (3) our liabilities have decreased by that amount.

         Background of the rescission  offer and the 1933 Act;  Estimated amount
of the rescission.  From September 1997 through September 1999, we sold stock to
investors for  $1,845,050 in cash:  136,800 shares of common stock (at $5.00 per
share)  and  573,700  shares of  series A and  series B  cumulative  convertible
preferred stock (at $2.00 per share except for 2,250 shares at $4.00 per share).
The series A and series B preferred stock had the same rights. In December 1999,
we converted all of the preferred stock, plus another 34,434 shares of preferred
stock which we issued to pay the 6% annual dividend on the series A and series B
stock, for a total of 608,134 preferred shares, into a total of 1,216,268 shares
of common stock. At the time, we

                                       21


<PAGE>



believed that the original  common and  preferred  shares had been sold in three
separate   private   placements  of  securities   which  were  exempt  from  SEC
registration  under the 1933 Act and similar  exemptions from registration under
the states' securities laws.

         However,  facts  came to our  attention  in  1999  which  created  some
uncertainty  whether the exemptions from SEC registration  under the 1933 Act in
fact were available for all of the shares sold in the three private  placements.
Specifically,  we had  sold  other  securities  in the 12  month  period  before
September 1997, so for the first private  placement we did not have available to
us the full amount of the one exemption ($1 million under rule 504 in a 12 month
period);  $134,415  of our first  private  placement  offering  exceeded  our $1
million  limit.  Another  exemption  (rule 506) was not  available to us because
considered as a group,  there were  approximately 45  "nonaccredited  investors"
among the  investors  who paid the last  $134,415  of the money  raised from the
first  offering  of  common  stock in early  1998,  but rule 506 only  allows 35
nonaccredited investors. We also took into account the fact that in the series A
and series B  preferred  stock  private  placement  offerings  later in 1998 and
continuing into early 1999, there were 69 nonaccredited  investors in that group
of  investors.  These two  offerings  could be deemed to have been one  offering
under SEC integration rules. These two facts mean that we did not have available
an exemption under rule 506. Under SEC rules, in general an individual  investor
is  nonaccredited  if he or she has a net worth of less than $1 million  (either
singly or together with a spouse), or historical and current expected annual net
income of less than $200,000 ($300,000 together with a spouse).

         For clarification,  please note that we conducted private placements of
our  securities  before and after the "three  private  placement  offerings"  of
common and preferred stock.

                                       22


<PAGE>



         Background of facts. This table summarizes some of the information, and
also shows how we  calculated  the number of rescission  shares  involved in the
refund  offer.  Note  that the data is as of the start of the offer and does not
reflect post-February 24, 2000 results of the refund offer.
<TABLE>
<CAPTION>

START
DATE OF           TYPE OF      NO. SHARES     PRICE PER        NO. OF  RES-           REASON FOR
OFFERING          SHARES       SOLD           SHARE            CISSION SHARES         RESCISSION

<S>               <C>          <C>            <C>                <C>                  <C>
April 1997        common       110,000        $5.00              None                 Not applicable

Sept. 1997        common       136,800        $5.00              26,883               Exceeded $1 million
1st pvt offering                                                                      Rule 504 limit
                                                                                      otherwise available
                                                                                      for 12 months ending
                                                                                      Sept. 1997 because
                                                                                      of prior offering
                                                                                      before April 1997,
                                                                                      and the presence of
                                                                                      40 nonaccredited
                                                                                      investors made
                                                                                      rule 506 unavailable.

Oct. 1998         preferred B  442,700        $2.00              885,400              Exceeded rule 504
2d pvt offering                                                  common shares(2)     limit, and approx-
                                                                                      imately 69 non-
                                                                                      accredited investors
                                                                                      (including preferred
                                                                                      A investors) made
                                                                                      rule 506 unavailable.
Nov. 1998         preferred A  131,000        $2.00(3)           262,000
3d pvt offering                                                  common shares(2)      Exceeded rule 504
                                                                                       limit (same type of
                                                                                       security as preferred
                                                                                       B), and approximately
                                                                                       69 non-accredited
                                                                                       investors (including
                                                                                       preferred B investors)
                                                                                       made rule 506 not
                                                                                       available.
</TABLE>
<TABLE>
<CAPTION>

Add dividend of 6% on preferred stock, paid in December
1999 in shares of preferred stock then converted to common stock:
<S>               <C>          <C>            <C>                <C>                  <C>
                  preferred B   26,574        n/a                53,148               No exemption
                                                                 common shares        required for dividend.

                  preferred A     7,860       n/a                15,720               No exemption
                                                                 common shares        required for dividend.
                                 TOTAL RESCISSION
                                 SHARES                          1,243,151
                                                                 COMMON SHARES

                                       23


<PAGE>


<FN>

(1)      These are the last shares sold in the $5.00 common stock offering.
(2)      Reflects  conversion in 1999 of each 1 preferred share into 2 shares of
         common stock. No extra  consideration was received by us or paid by the
         preferred  shareholders,  so the  effective  price  per  share  for the
         converted common stock was $1.00 per share of common stock.

(3)      A few of these shares were sold at $4.00.
</FN>
</TABLE>

         Securities Act of 1933. In general,  section 5 of the 1933 Act requires
all offers and sales of securities  in interstate  commerce in the United States
to be  registered  with the SEC. The offer and sale of securities is presumed to
be a "public offering" which must be registered under section 5. If an offer and
sale  is not  registered,  it  must be  either  exempt  or  illegal.  Among  the
exemptions from section 5 registration are the "private  placement"  transaction
exemptions  provided by section 3(b) and SEC rule 505, section 4(2) and SEC rule
506,  and section  4(6),  all such  sections  being  within the 1933 Act.  Under
certain limited circumstances,  an offering may not be a public offering and may
be exempt under  section  4(2)  without  having to be exempt under SEC rule 506.
Another exemption from section 5 registration with the SEC is the SEC's rule 504
exemption  under section  3(b);  this is not a private  placement  exemption but
rather  an  annual  exemption  from SEC  registration  for up to $1  million  in
securities sold (less the amount of other securities sold in the prior 12 months
using rule 504 or in violation  of section 5). The issuer  always has the burden
of  proof  that it  complied  with  the  conditions  to the  availability  of an
exemption for each of its claimed exempt offerings.  If the transactions are not
registered,  and the issuer cannot sustain the burden of showing how it complied
with the  conditions  to one of the 1933 Act  exemptions,  the offer and sale of
such securities would be illegal under the 1933 Act.

          We are not certain that our offer and sale of the preferred stock part
of the  rescission  shares was exempt under the "safe  harbor"  rules of the SEC
(rules  505 and 506)  because of the number of  nonaccredited  investors  in the
series A and series B preferred  stock  (which  might be deemed to have been one
integrated  offering  under  SEC  rules).  The  section  4(6)  exemption  is not
available to us because some  nonaccredited  persons bought preferred stock, and
only accredited  investors are permitted under section 4(6) offerings.  Also, we
are not certain  that the last  $134,415  raised from  selling  shares of common
stock was exempt under rule 504 (we might have  exceeded our  allowable  ceiling
for this kind of exempt offering).  Still,  these  transactions  might be exempt
under federal  court  decisions  which have  interpreted  "public  offering" and
related terms over the years.  However,  the federal court  decisions taken as a
whole do not give clear guidelines on what is, or isn't, an exempt offering, and
in some areas the court decisions are not in agreement on this matter.

         The principal  remedy under the 1933 Act for violations of section 5 is
provided by section  12(a)(1) which allows investors in an offering to sue for a
refund  of what  was paid  for the  securities  (a  "rescission  action"),  plus
interest.  Section 13 of the 1933 Act bars  recovery in the courts by  investors
under section  12(a)(1) unless in a suit brought within one year of the later of
the  investment  transaction  or the date of  delivery of  certificates  for the
securities.  None of the investors who bought the rescission shares have told us
they  intend to sue us to get their money back,  under  either  federal or state
laws.

                                       24


<PAGE>



          Based on the foregoing facts and legal considerations,  we believe may
have sold the rescission  shares in violation of SEC  registration  requirements
under  the 1933  Act.  Therefore,  we  believe  we  might  have a  liability  of
approximately  $1,416,405  (based on  $1,281,815  of  original  investment  plus
$134,590 of interest for 18 months at an average annual rate of 7%). This amount
will  change  as  interest  accrues  at the state law  rates.  On our  financial
statements,  we have recorded  $1,281,815  (the original  invested  amount) as a
liability for the stock subject to this  rescission  offer at December 31, 1999.
Because we believe the  probability of the rescission of shares is unlikely,  no
accrued interest on the rescission was recorded at December 31, 1999.

         Purpose of the rescission  offer and  determination  of offering price.
The  determination  of the question of ultimate  liability is one for the courts
with which  resides the ultimate  authority  for the  interpretation  of section
12(1) of the 1933 Act. We  presently  do not know for certain if we violated the
1933  Act's  registration  provisions,  but we do know that it is  important  to
eliminate the financial and legal  uncertainty  surrounding  the financing  from
sale of the rescission  shares.  Until it is eliminated,  whether by paying back
all the money or having the investors  decide to keep their  rescission  shares,
there will be financial uncertainty: If we need more equity or debt financing in
the future, potential sources of the financing will need to know where the funds
are going to be allocated.  Paying off contingent  liabilities  that mature into
legal claims is usually not acceptable to new investors as a use of their funds.
Also,  until it is eliminated,  there is legal  uncertainty  because we could be
involved in court proceedings to force a refund of the invested money. This kind
of legal uncertainty impacts potential sources of financing we might need in the
future,  and  also  would be  expensive  to  defend  in the  courts  and take up
management's time to the detriment of running our business.

         The offering  price  (refund  offer) of $5.00 per share of common stock
for 26,883 of the  rescission  shares is based on the  original  $5.00 per share
investment price. The offering price (refund offer) of $1.00 per share of common
stock for the  remaining  1,216,268  rescission  shares is based on the original
$2.00 price per share of series A or series B preferred stock,  except for a few
preferred shares sold at $4.00. All of the preferred stock has been converted to
common  stock at the rate of 2  common  shares  for 1  preferred  share,  for an
effective  price of $1.00 per share of common  stock for nearly all shares,  and
$2.00 for a few shares.  In all cases,  the offering prices (refund offers) will
include  interest at the applicable  state rate.  These offering  prices are not
related to the stock market  prices for our stock,  which have ranged from $0.75
to $6.75 per share in 1998 and 1999,  and  averaged  about  $15.00  per share in
January and the first week of February 2000. Instead, these offering prices have
been  determined with reference to the legal rights of the investors to a refund
of their investment plus interest.

         When we  sold  the  original  rescission  shares,  we  established  the
original  offering  prices of those  shares by taking into  account our internal
estimates of the value of the our "intellectual  property" assets,  the business
we then expected to generate over a period of several years,  and other factors.
However,  our offering prices did not bear any relationship to our assets,  book
value, or net worth or any other generally accepted criteria of value.

                                       25


<PAGE>



         State  securities  laws - general.  Investors  in 18 states  bought the
rescission  shares.  In the majority of these states,  we believe that the offer
and sale of the securities was exempt from the registration  provisions of state
securities laws because the securities  were  restricted  under the 1933 Act, or
because the investors in the particular state were accredited,  or because there
were a limited  number of investors in the state.  These states do not generally
require  a  pre-sale  or  post-sale   filing  to  perfect  the  exemption   from
registration  of the offer  and sale of  securities  with the  state  securities
administration agency.

         However,  it has come to our  attention  that the offer and sale of the
rescission  shares in some of the  states  may not have been  exempt  from those
states' registration  provisions.  Therefore,  investors residing in some of the
states may have the right under state laws to a refund of their investment, with
interest (in most of the states). The statutes of limitations for filing a claim
in state courts are usually  longer than the one year  available  under the 1933
Act.

         We have made the rescission  offer to nearly all eligible  shareholders
to remove the financial and legal  uncertainty under both federal and state laws
associated with the offer and sale of the rescission  shares.  However,  we have
determined that it is not practical or advisable to comply with the requirements
of each and every  applicable  state, and therefore have not made the offer in a
few states. The financial uncertainty resulting from not resolving the status of
these investors' dollars is immaterial.

         Holders of  rescission  shares who reside in any states where we do not
make this rescission offer will keep their shares.  Their legal rights under the
1933  Act and  resident  state  securities  laws  will not be  affected  by this
rescission offer.

         State  securities  laws - interest  rates.  All of the state laws where
eligible  shareholders  reside allow for the recovery of annual  interest at the
rate of 6% (not compounded) on the amount of original investment,  except for 8%
in  Colorado,  Missouri  and  Washington;  10%  in  Illinois  and  Texas;  7% in
California;  15% in New Mexico;  10% in Tennessee;  5% in  Wisconsin;  and a few
other different rates. There is no statutory  provision for recovery of interest
in New York or Ohio,  although  under  certain  circumstances  state courts will
award interest on claims.

         Source  of  funds  to pay  the  rescission  offer  and  the  impact  on
outstanding securities.  At December 31, 1999 we had on hand $5,041,367 cash and
cash  equivalents  (certificates  of  deposit),  but only  $566,385  of  current
liabilities  not including the estimated  maximum  amount of $1,416,405 we would
have to pay out if we buy back all of the  rescission  shares  which you and the
other  eligible  shareholders  own.  If we did buy  back  all of the  rescission
shares, we would have on hand approximately $3,624,962 cash and cash equivalents
on a pro forma basis as of December  31,  1999,  which we believe will be enough
cash to pay our current liabilities and fund our plan of operations through 2000
without any positive cash flow from operations.  In any event, on March 24, 2000
we had determined that a significant  amount of the rescission  shares would not
be returned.

                                       26


<PAGE>



         Our ability to pay for this rescission offer comes from the proceeds of
two private  placements of a total of 3,247,000  restricted shares of our common
stock (only to accredited investors) from mid-July 1999 until December 21, 1999,
at $2.00 per share.  The  purpose of these two private  placements  was to raise
money  for our plan of  operations,  not to pay for this  rescission  offer.  We
received net proceeds of $5,844,600 from these private placements,  after paying
$649,400 in commissions  and other offering costs. We have enough extra money on
hand from  unallocated  working capital in those 1999 private  placements to pay
for this rescission  offer. The first of these private  placements was conducted
under the exemptions from registration  allowed by section 4(6) of the 1933 Act;
and the second was  conducted  under  section  4(2) of the 1933 Act and SEC rule
506.

         We believe  that if the market  price for our common stock stays within
the  trading  range of $13.00 - $15.00  which has been  experienced  in January,
February  and March  2000 (the  range was $4.00 to $5.50  from  early  September
through December 1999),  nearly all of the remaining investors may elect to keep
their shares.

         There are no loan  agreements or other  restrictions  on our ability to
pay cash in this rescission offer.  Also, we are incorporated  under Nevada law.
Under  Nevada law we are allowed to to buy back stock if after  payments to you,
we will be able to pay our  debts as they  become  due in the  usual  course  of
business, and our total assets will be more than our total liabilities.

         At December  31,  1999,  there were  16,954,119  shares of common stock
issued and outstand- ing. If on that date all eligible shareholders had accepted
the rescission offer, we would have pur- chased 1,243,151 shares of common stock
(which will be retired and canceled),  and then there would be 15,710,968 shares
of common stock issued and outstanding.

Plan of Operations

         In 2000 we intend  to speed up the  commercialization  process  for OPS
technology.  The  development  of  marketable  product lines for OPS will have a
direct and  significant  impact on revenues and earnings in the future.  Most of
our  resources  will be devoted to support  OPS'  research and  development  and
marketing  efforts,  tailoring  OPS products to the specific  configurations  of
customers'  needs,  and to obtaining  contracts and setting up production  lines
(working  out the  proto-  cols for  parts  inventory  and  other  matters  with
third-party manufacturers). These activities will require substantial amounts of
additional capital.

         The new OPS PFC Front  End  Module  product  is  expected  to enter the
market in the second  quarter.  The new 500 Watt 48 Vdc power supply  product is
expected to enter the market in the third  quarter of 2000.  Additional  testing
and  refinement  of the products  will be completed in early 2000.  Revenues and
earnings  (profits) from sales of these  products will not be predictable  until
well into the initial production period.

                                       27


<PAGE>



         Capital outlays for manufacturing are expected to be minimal because we
will  subcontract  out  all   manufacturing  of  devices  except   demonstration
prototypes.  As production  is underway,  however,  added staff and  warehousing
resources  for  finished  goods will be needed,  and more  technical  and middle
management staff will be hired. We could have as many as 30 employees in 2000.

         More  products are planned,  including a dynamic  array of power output
wattages and multiple DC voltage  outputs.  This expansion of product lines will
continue to project OPS into larger and diversified  markets,  which may lead to
customer diversification.

Item 7.           Financial Statements.

         Financial statements meeting the requirements of Regulation S-B follow.

                                       28


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

Item 22.  Financial Statements

                                Table of Contents

                                                                         Page

Independent Auditors' Report...............................................30

Independent Auditors' Report...............................................31

Consolidated Financial Statements

         Consolidated Balance Sheets.......................................32

         Consolidated Statements of Operations.............................34

         Consolidated Statement of Shareholders' Equity (Deficit)..........35

         Consolidated Statements of Cash Flows.............................37

Notes to Consolidated Financial Statements.................................39



                                       29


<PAGE>


                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
OnLine Power Supply, Inc. and Subsidiaries
Englewood, Colorado

We have  audited the  accompanying  consolidated  balance  sheet of OnLine Power
Supply,  Inc.,  and  Subsidiaries  as of  December  31,  1999,  and the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards required that we plan and perform the audit to obtain reasonable
assurance  about  whether  the  consolidated  financial  statements  are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by management,  as well as evaluating  the overall  consolidated
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of OnLine Power Supply,
Inc.  and  Subsidiaries  as of  December  31,  1999  and the  results  of  their
operations  and their  cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.

                                       /s/Ehrhardt Keefe Steiner & Hottman PC
                                          Ehrhardt Keefe Steiner & Hottman PC

January 31, 2000
Denver, Colorado

                                       30


<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors

OnLine Power Supply, Inc. (Formerly OnLine Entertainment, Inc.)


We have audited the  accompanying  balance  sheet of OnLine Power  Supply,  Inc.
(Formerly OnLine Entertainment, Inc.) and Subsidiaries, as of December 31, 1998,
and the related  statements of operations,  stockholders'  equity and cash flows
for the year then ended. The financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audit 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 audit provides 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 OnLine Power  Supply,  Inc.
(Formerly OnLine  Entertainment,  Inc.) and Subsidiaries as of December 31, 1998
and the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern. The Company has suffered recurring losses from
operations and at December 31, 1998 has a working capital deficit,  which raises
substantial  doubt  about  its  ability  to  continue  as a going  concern.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

                                       /s/ Cordovano and Harvey, P.C.
                                       Cordovano and Harvey, P.C.
March 2, 1999
Denver, Colorado

                                       31


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                                  December 31,
                                                                          ----------------------------
                                                                               1999           1998
                                                                          ------------    ------------
                                              Assets

Current assets
<S>                                                                       <C>             <C>
   Cash                                                                   $ 1,941,367     $    151,341
   Certificates of deposit                                                  3,100,000               -
   Accounts receivable, net of allowance  for uncollectible
    accounts totaling  $364  (1999) and $1,328 (1998)                           6,048           26,247
   Other receivable, net of allowance for uncollectible
    accounts totaling $62,889 (1999 and 1998) (Note 11)                             -               -
   Inventory, at cost                                                          66,713           90,037
   Prepaid expenses                                                             2,780               -
                                                                          -----------     -----------
       Total current assets                                                 5,116,908          267,625
                                                                          -----------     ------------

Property and equipment, less accumulated depreciation
   of $66,135 (1999) and  $34,764 (1998) (Note 2)                             251,114          161,719
Equipment under capital leases, less accumulated depreciation
   of $3,771 (1999) and $0 (1998) (Note 2)                                     74,190               -
Goodwill, less accumulated amortization of
   $104,718 (1999) and $52,359 (1998)                                         157,076          209,435
Acquired technology costs, less accumulated amortization
   of $50,960 (1999) and $25,480 (1998)                                        76,440          101,920
Patent, less accumulated amortization of $492 (1999) and $181 (1998)           25,039            1,373
Other assets                                                                    1,512              712
                                                                          -----------     ------------

Total assets                                                              $ 5,702,279     $    742,784
                                                                          ===========     ============
</TABLE>




                 See notes to consolidated financial statements

                                       32


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES


                           Consolidated Balance Sheets
                                   (continued)

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                          ------------------------------
                                                                              1999              1998
                                                                          -------------     ------------
                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)


Current liabilities
<S>                                                                       <C>               <C>
   Accounts payable                                                       $     245,772     $     86,639
   Accounts payable, related parties (Note 8)                                   101,081               -
   Bank line-of-credit (Note 3)                                                     731           40,500
   Notes payable, related parties (Notes 3 and 8)                                     -          292,750
   Current maturities on capital lease obligations (Note 2)                      20,017               -
   Accrued interest payable                                                      26,012           26,658
   Accrued interest payable, related parties (Note 8)                                -             4,630
   Bonuses payable, related parties (Note 8)                                     72,000               -
   Other (Note 4)                                                               100,772          183,157
                                                                          -------------     ------------
         Total current liabilities                                              566,385          634,334

Long-term liabilities
   Capital lease obligations, less current maturities (Note 2)                   48,583              -
                                                                          -------------     ------------
         Total liabilities                                                      614,968          634,334
                                                                          -------------     ------------

Liability for common stock subject to rescission,
   1,243,151 shares (1999)  (Note 5)                                          1,281,815          550,700
                                                                          -------------     ------------

Commitments and contingencies (Notes 5 and 10)

Shareholders'  equity (deficit)  (Notes 5, 6, 7 and 12)
   Preferred stock,  $.0001
    par value; 1,000,000 shares authorized 10,467
    (1999) and 12,467 (1998) shares issued and outstanding                            1                1
   Series A cumulative, convertible preferred stock,
    $.0001 par value, $2.00 stated value; 250,000 shares authorized;
    0 (1999) and 125,000 (1998) shares issued and outstanding                         -          250,000
   Series B cumulative, convertible preferred stock,
    $.0001 par value, $2.00 stated value; 200,000 shares authorized;
    no shares issued and outstanding                                                  -               -
   Common stock; $.0001 par value; 50,000,000 shares authorized;
    16,954,119 (1999) and 11,846,826 (1998) shares issued
    and outstanding (including rescission shares)                                 1,571            1,185
   Additional paid-in capital                                                19,914,828        8,879,706
   Retained deficit                                                         (16,110,904)      (9,573,142)
                                                                          -------------     ------------
                                                                              3,805,496         (442,250)
                                                                          -------------     ------------
   Total shareholders' equity (deficit)
Total liabilities and shareholders' equity (deficit)                      $   5,702,279     $    742,784
                                                                          ==============    ============


</TABLE>



                 See notes to consolidated financial statements

                                       33


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                 For the Years Ended
                                                                    December 31,
                                                           -----------------------------
                                                               1999             1998
                                                           ------------     ------------

<S>                                                        <C>              <C>
Net sales                                                  $    299,408     $    262,564
Cost of sales                                                   233,386          194,383
                                                           ------------     ------------
         Gross profit                                            66,022           68,181
                                                           ------------     ------------

Other operating costs and expenses
   Research and development                                     455,435          319,559
   Stock-based compensation (Note 7)                             62,839           59,799

Selling, general and administrative expenses                  1,034,015          867,042
Provision for doubtful accounts                                      37           74,217

Other general expenses
   Loss on sale of asset                                            437               38
   Impairment loss on fixed asset (Note 6)                           -            11,018

Loss on write-off of inventory                                   41,616               -

Gain on settlement of accounts payable                           (3,314)         (23,251)
                                                           ------------     ------------
                                                              1,591,065        1,308,422
                                                           ------------     ------------
         Loss from operations                                (1,525,043)      (1,240,241)
                                                           ------------     ------------

Interest income                                                  15,421               -
Interest (expense)                                              (50,733)         (19,289)

Losses from litigation settlements (Note 11)                    (28,000)        (190,000)
                                                           ------------     ------------
         Net loss                                            (1,588,355)      (1,449,530)

Preferred stock dividends (Note 6)                           (4,949,407)         (18,399)
                                                           ------------     ------------

Net loss available to common shareholders                  $ (6,537,762)    $ (1,467,929)
                                                           ============     ============



Basic weighted average common shares outstanding             12,491,158       11,062,039
                                                           ============     ============

Basic loss per common share                                $      (0.13)    $      (0.13)
                                                           ============     ============

Diluted weighted average common shares outstanding           12,491,158       11,062,039
                                                           ============     ============

Diluted loss per common share                              $      (0.13)    $      (0.13)
                                                           ============     ============
</TABLE>


                 See notes to consolidated financial statements

                                       34


<PAGE>



                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

            Consolidated Statement of Shareholders' Equity (Deficit)
                    January 1, 1998 through December 31, 1999

<TABLE>
<CAPTION>

                                                                             Series A Cumulative       Series B Cumulative
                                                        Preferred Stock        Preferred Stock          Preferred Stock
                                                     --------------------    -------------------     -----------------------
                                                                                         Stated                   Stated
                                                      Shares    Par Value     Shares      Value        Shares      Value
                                                     --------   ---------    --------  ---------     ---------   -----------
<S>                                                    <C>      <C>          <C>       <C>            <C>         <C>
Balance, January 1, 1998                               19,467   $     2       125,000  $ 250,000             -    $       -

Sale of common stock (Note 6)                               -         -             -          -             -            -

Common stock issued for services (Note 7)                   -         -             -          -             -            -

Common stock issued for equipment (Note 7)                  -         -             -          -             -            -

Common stock issued to broker for
 commissions related to offerings (Note 7)                  -         -             -          -             -            -

Sale of common stock in private placement                   -         -             -          -             -            -
(Note 12)

Cumulative preferred stock issued in private                -         -       105,400    210,800       169,950      339,900
placement (Note 12)

Stock subject to rescission (Note 5)                        -         -      (105,400)  (210,800)     (169,950)    (339,900)

Stock offering costs                                        -         -             -          -             -            -

Conversion of non-cumulative preferred stock to
common stock (Note 6)                                  (7,000)       (1)            -          -             -            -

Net (loss) for the year ended December 31, 1998             -         -             -          -             -            -
                                                   -----------  --------     --------  ----------    ----------   ----------
Balance, December 31, 1998                             12,467         1       125,000    250,000             -            -
</TABLE>



                 See notes to consolidated financial statements

                                       35a

<PAGE>
            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
                    JANUARY 1, 1998 THROUGH DECEMBER 31, 1999


<TABLE>
<CAPTION>

                                                           Common Stock            Additional                        Total
                                                    --------------------------      Paid-in       Retained        Shareholders'
                                                        Shares      Par Value       Capital       (Deficit)         Equity
                                                    -------------  ------------  -------------   ------------    -------------

<S>                                                   <C>           <C>          <C>             <C>             <C>
Balance, January 1, 1998                              10,347,585    $   1,034    $  8,238,727    $ (8,105,213)   $    384,550

Sale of common stock (Note 6)                            185,427           19          75,425               -          75,444

Common stock issued for services (Note 7)                 79,732            8          59,791               -          59,799

Common stock issued for equipment (Note 7)                14,162            1          23,012               -          23,013

Common stock issued to broker for
 commissions related to offerings (Note 7)             1,106,660          111         864,190               -         864,301

Sale of common stock in private placement                 99,260           10         496,290               -         496,300
(Note 12)

Cumulative preferred stock issued in private                   -            -               -               -         550,700
placement (Note 12)

Stock subject to rescission (Note 5)                           -            -               -               -        (550,700)

Stock offering costs                                           -            -        (877,729)              -        (877,729)

Conversion of non-cumulative preferred stock to
common stock (Note 6)                                     14,000            2               -               -               1

Net (loss) for the year ended December 31, 1998                -            -               -      (1,467,929)     (1,467,929)
                                                   --------------   ----------   -------------   -------------   --------------

Balance, December 31, 1998                            11,846,826        1,185       8,879,706      (9,573,142)       (442,250)
</TABLE>



                 See notes to consolidated financial statements.

                                       35b

<PAGE>



                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
                    JANUARY 1, 1998 THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>

                                                                                    Series A Cumulative       Series B Cumulative
                                                            Preferred Stock          Preferred Stock           Preferred Stock
                                                       ----------------------   -----------------------    -------------------------
                                                                                               Stated                      Stated
                                                        Shares     Par Value      Shares       Value         Shares         Value
                                                       ---------   ----------  ----------  ------------    ----------   ------------

<S>                                                    <C>         <C>         <C>         <C>            <C>                <C>
Balance, December 31, 1998                               12,467    $      1     125,000    $   250,000            -     $        -

Cumulative preferred stock issued in private                  -          -       25,600         51,200      272,750        545,501
placement (Note 12)

Common stock issued for services (Note 7)                     -          -            -              -            -              -

Common stock issued for sales commissions (Note 7)            -          -            -              -            -              -

Conversion of non-cumulative preferred stock
  to common stock (Note 6)                               (2,000)         -     (125,000)      (250,000)           -              -

Common stock issued for retirement of debt (Note 6)           -          -            -              -            -              -

Common stock issued in private placement (Note 12)            -          -            -              -            -              -

Stock offering costs                                          -          -            -              -            -              -

Stock subject to rescission (Note 5)                          -          -            -              -            -              -

Declaration of 6% preferred stock dividend on
cumulative preferred stock (Note 6)                           -          -        7,860         15,720       26,574         53,148

Conversion of cumulative preferred stock to
   common stock (Note 6)                                      -          -      (33,460)       (66,920)    (299,324)      (598,649)

Net (loss) for the year ended December 31, 1999               -          -            -              -            -              -
                                                       ---------   -------    ---------    ------------   ----------    ------------

Balance, December 31, 1999                                10,467   $     1            -    $         -            -     $        -
                                                       =========   =======    =========    ============   ==========    ============
</TABLE>



                 See notes to consolidated financial statements



                                       36a

<PAGE>




                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
                    JANUARY 1, 1998 THROUGH DECEMBER 31, 1999

<TABLE>
<CAPTION>

                                                             Common Stock
                                                        ------------------------     Additional                          Total
                                                                                       Paid-in        Retained        Shareholders'
                                                          Shares      Par Value        Capital        (Deficit)          Equity
                                                        ----------    ----------    -------------   -------------     --------------


<S>                                                     <C>           <C>           <C>             <C>               <C>
Balance, December 31, 1998                              11,846,826    $  1,185      $  8,879,706    $  (9,573,142)    $    (442,250)

Cumulative preferred stock issued in private                     -           -                -                -            596,701
placement (Note 12)

Common stock issued for services (Note 7)                   25,000           2            62,835               -             62,837

Common stock issued for sales commissions (Note 7)         336,350          34           252,229               -            252,263

Conversion of non-cumulative preferred stock
  to common stock (Note 6)                                 254,000          25           249,975               -                 -

Common stock issued for retirement of debt (Note 6)         53,571           5           149,995               -            150,000

Common stock issued in private placement (Note 12)       3,222,104         322         6,443,891               -          6,444,213

Stock offering costs                                             -           -          (959,699)              -           (959,699)

Stock subject to rescission (Note 5)                    (1,243,151)       (124)       (1,281,691)              -         (1,281,815)

Declaration of 6% preferred stock dividend on
cumulative preferred stock (Note 6)                              -           -                -                -             68,868

Conversion of cumulative preferred stock to
   common stock (Note 6)                                 1,216,268         122         6,117,587               -          5,452,140

Net (loss) for the year ended December 31, 1999                  -           -                -        (6,537,762)       (6,537,762)
                                                        -----------   ----------    ------------    --------------    -------------

Balance, December 31, 1999                              15,710,968    $  1,571      $ 19,914,828    $ (16,110,904)    $   3,805,496
                                                        ===========   ==========    ============    =============     =============
</TABLE>



                 See notes to consolidated financial statements



                                       36b


<PAGE>



                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                              For the Years Ended
                                                                                                  December 31,
                                                                                      ----------------------------------
                                                                                            1999                1998
                                                                                      ---------------     --------------
Cash flows from operating activities
<S>                                                                                   <C>                 <C>
  Net loss                                                                            $  (1,588,355)      $  (1,449,530)
                                                                                      --------------      -------------
  Adjustments to reconcile net loss to net cash used by operating activities
    Depreciation and amortization                                                           116,821              93,372
    Gain on write-off of accounts payable                                                    (3,314)            (23,251)
    Common stock issued for services                                                         62,839              59,799
    Debt issued for services                                                                     -              102,750
    Writedown of inventory for obsolescence                                                  41,616                  -
    Write-off of organization costs                                                              -                3,702
    Loss on sale of asset                                                                       437                  37
    Impairment loss on fixed assets                                                              -               11,018
    Changes in certain assets and liabilities
      Receivables, inventory and other current assets                                        (1,673)             42,396
      Accounts payable and other current liabilities                                         58,213             170,881
                                                                                      --------------      -------------
                                                                                            274,939             460,704
                                                                                      --------------      -------------
      Net cash (used in) operating activities                                            (1,313,416)           (988,826)
                                                                                      --------------      -------------

Cash flows from investing activities
  Purchases of equipment                                                                   (125,641)            (98,408)
  Payments to acquire patent                                                                (23,977)             (1,554)
  Purchases of certificates of deposit                                                   (3,100,000)                 -
  Proceeds from sale of equipment                                                                -                   70
                                                                                      --------------      -------------
       Net cash (used in) investing activities                                            (3,249,618)           (99,892)
                                                                                      --------------      -------------

Cash flows from financing activities
  Proceeds from sale of stock                                                             7,040,914           1,122,445
  Payments for offering costs                                                              (495,973)            (13,428)
  Principal payments on capital leases                                                       (9,362)                 -
  Proceeds from debt issuance                                                               177,000             152,956
  Principal debt payments                                                                  (359,519)            (47,830)
                                                                                      -------------       -------------
      Net cash provided by financing activities                                           6,353,060           1,214,143
                                                                                      -------------       -------------

Net increase in cash                                                                       1,790,026            125,425

Cash - beginning of year                                                                     151,341             25,916
                                                                                      --------------      -------------

Cash - end of year                                                                    $    1,941,367      $     151,341
                                                                                      ==============      =============
</TABLE>


                 See notes to consolidated financial statements

                                       37


<PAGE>



                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                                   (continued)

         Supplemental disclosure of cash flow information:

              Cash paid for  interest  during the years ended  December 31, 1999
              and 1998 was $56,009 and $5,186, respectively.

         Non-cash investing and financing transactions:

              Acquisition of property and equipment in exchange for the issuance
              of common stock for the years ended December 31, 1999 and 1998 was
              $0 and $23,012, respectively.

              Conversion  of debt to  preferred  and common  stock for the years
              ended December 31, 1999 and 1998 was $150,000 and $0, respectively
              (Note 8).

              Acquisition of property under vendor financing for the years ended
              December 31, 1999 and 1998 was $0 and $32,044, respectively, (Note
              2)

              Acquisition of equipment  under capital leases for the years ended
              December 31, 1999 and 1998 was $77,962 and $0,  respectively (Note
              2).

                 See notes to consolidated financial statements

                                       38


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies

The  consolidated  financial  statements  include the  accounts of OnLine  Power
Supply, Inc., formerly known as OnLine Entertainment, Inc., and its wholly owned
subsidiaries,  Glitch  Master  Marketing,  Inc.  and OnLine Power  Supply,  Inc.
(collectively,  the "Company").  All significant  intercompany  transactions and
accounts were eliminated in the consolidated financial statements.

Use of Estimates

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles,  requires  management  to make  estimates  and
assumptions  that affect certain  reported  amounts of assets and liabilities at
the date of the financial  statements,  and the reported amounts of revenues and
expenses during the reporting period.  Accordingly,  actual results could differ
from those estimates.

Cash Equivalents

For the purpose of the  statements  of cash flows,  the  Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash equivalents.

Inventory

Inventory  consists of computer  equipment and accessories  purchased for resale
during the ordinary course of business.  The inventory is stated at the lower of
cost or market. The cost is determined by the average cost method.

Property, Equipment and Depreciation

Property and equipment is stated at cost and depreciated using the straight-line
method  over the  estimated  useful  lives of the assets  (three to ten  years).
Maintenance and repair costs are charged to expense as incurred. Gains or losses
on disposition of property and equipment are reflected in income.

Amortization

Amortization of intangible assets is calculated using the  straight-line  method
over five years.  Amortization expense for the years ended December 31, 1999 and
1998 totaled $78,150 and $78,020,  respectively,  and $25,791 (1999) and $25,480
(1998) of this expense is included in research and development costs.

                                       39


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Research and Development

Research  and  development  costs for new  products  are  charged  to expense as
incurred.  The cost of material and equipment that are acquired for research and
development  activities and that have alternative future uses (in other research
and development  projects or otherwise) are capitalized when acquired.  The cost
of the materials consumed and the depreciation of the equipment used are charged
to research and development costs. Purchased research and development costs that
have  alternative  future uses (in other  research and  development  projects or
otherwise) are  capitalized  as acquired  technology and amortized as intangible
assets and charged to research and development costs.

Income Taxes

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences  between the recorded book basis and tax basis
of assets and liabilities  for financial and income tax reporting.  The deferred
tax assets and  liabilities  represented  the future tax return  consequences of
those  differences,  which will either be taxable or deductible  when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset future federal income taxes.

Revenue Recognition

Revenue is  recognized as product is shipped or services  rendered.  The Company
provides a two- year  warranty on its Glitch  Master  product.  A  liability  is
provided for warranty expense based upon historical experience.

Reclassifications

Certain amounts in the prior year  consolidated  financial  statements have been
reclassified  for comparative  purposes to conform with the  presentation in the
current year consolidated financial statements.

Impairment of Long-lived Assets

The Company  follows  Statements  of  Financial  Accounting  Standards  No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of", which requires that an impairment  loss be recognized  when the
carrying  amount of an asset exceeds the expected future  undiscounted  net cash
flows.

                                       40


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments

The  Company  has  determined,   based  on  available  market   information  and
appropriate  valuation  methodologies,  that  the fair  value  of its  financial
instruments   approximates   carrying  value.  The  carrying  amounts  of  cash,
receivables,  payables and other current liabilities  approximate fair value due
to the short-term maturity of the instruments.

Stock-based Compensation

The Company accounts for any stock-based  compensation plans using the intrinsic
value method  prescribed  by the  Accounting  Principles  Board  Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Compensation cost for stock
options,  if any, is measured as the excess of the quoted  market  prices of the
Company's  stock at the date of grant  over the amount an  employee  must pay to
acquire the stock.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation,"  (SFAS 123) was issued in October 1995. This accounting  standard
permits  the use of either a fair value  based  method or the method  defined in
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  (APB 125) to  account  for  stock-based  compensation  arrangements.
Companies  that  elect to use the  method  provided  in APB 25 are  required  to
disclose  the pro forma net  income  and  earnings  per share  that  would  have
resulted from the use of the fair value based method. The Company has elected to
continue to determine  the value of the  stock-based  compensation  arrangements
under the  provision  of APB 25 and,  accordingly,  has  included  the pro forma
disclosures required under SFAS 123 in Note 6.

Earnings (Loss) Per Common Share

Effective  December  31, 1997,  SFAS 128  "Earnings  per Share"  requires a dual
presentation of earnings per share-basic and diluted.  Basic earnings per common
share has been computed  based on the weighted  average  number of common shares
outstanding.  Diluted  earnings  per share  reflects  the  increase  in weighted
average common shares outstanding that would result from the assumed exercise of
outstanding  stock options.  All periods presented have been restated to reflect
the adoption of this standard. In 1999 and 1998, 1,966,568 and 1,076,784 shares,
respectively,  were excluded from the diluted earnings per share calculation, as
these  shares  were  antidilutive.   Had  these  shares  been  included  in  the
calculation,  diluted  weighted  average  common shares  outstanding  would have
increased to 14,776,519 and 11,488,407 in 1999 and 1998, respectively.

                                       41


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Concentrations and Credit Risk

Approximately  48% of the  Company's  net sales in 1999  were from  sales to one
customer.

The Company has concentrated its credit risk for cash by maintaining deposits in
a financial  institutions,  which may at times,  exceed the  amounts  covered by
insurance  provided by the United States Federal Deposit  Insurance  Corporation
(FDIC).  The  maximum  loss that  would  have  resulted  from that risk  totaled
$4,847,344  at December  31,  1999,  for the excess of the  deposit  liabilities
reported by financial  institutions over the amount that would have been covered
by federal insurance. The Company has not experienced any losses to date in such
accounts and accordingly,  believes it is not exposed to any significant  credit
risk.

Nature of Organization

The Company was  incorporated  in Colorado on August 7, 1991, as Roth  Financial
Fitness,  Inc.  On January  12,  1995,  the  Company  changed its name to OnLine
Entertainment,  Inc. In June 1995, the Company re-domiciled in Nevada by merging
with a Nevada  corporation  formed for that  specific  purpose.  The Company now
operates as a Nevada  corporation  doing  business as a foreign  corporation  in
Colorado.  On December  14, 1999,  the Company  changed its name to OnLine Power
Supply, Inc.

During 1999, the Company conducted its primary business  activities  through its
subsidiaries,  Glitch Master  Marketing,  Inc. and OnLine Power Supply,  Inc. On
December 31, 1999,  the Company  dissolved both of these  entities.  All assets,
liabilities and operations of these entities were consolidated into the Company.

Glitch Master Marketing,  Inc. was incorporated in Colorado on September 7, 1990
to manufacture and market the proprietary Glitch Master(TM)product line of power
supplies for the personal computer.

OnLine Power Supply,  Inc. was incorporated in Colorado on November 13, 1996. On
December 17, 1997, OnLine Power Supply, Inc. acquired Renaissance Systems,  Inc.
by a common stock  exchange.  OnLine Power Supply,  Inc.  continued to develop a
proprietary power supply product line and related technology that was started by
Renaissance  Systems,  Inc. The  development  results became the technology that
produces the Company's new power supply product line.


                                       42


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 2 - Property and Equipment

During  1999,  the Company  acquired  equipment  totaling  $77,962 and  executed
capital lease agreements for this equipment. Future minimum lease payments under
these capital leases are as follows:

         2000                                              $    28,369
         2001                                                   28,525
         2002                                                   20,195
                                                           -----------
                                                                77,089

         Less amount representing interest                       (8489)
                                                           -----------

         Net capital lease obligation                      $    68,600
                                                           ===========

During 1998, the Company acquired a trade show booth under vendor financing. The
cost of the booth was $84,963 of which the  Company  paid  $52,919.  The balance
owed on the booth totaling $32,044 was included as other current  liabilities at
December 31, 1998 on the consolidated balance sheets.

Property and equipment,  including equipment under capital leases,  consisted of
the following:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                           ----------------------------
                                                                1999           1998
                                                           -------------    -----------

<S>                                                        <C>              <C>
         Furniture and fixtures                            $     13,500     $    12,119
         Trade show exhibit equipment                            96,343          96,343
         Engineering and other equipment                        181,740          52,838
         Computers                                               79,162          30,343
         Software                                                24,465           4,840
                                                           ------------     -----------
                                                                395,210         196,483
         Less accumulated depreciation                          (69,906)        (34,764)
                                                           ------------     -----------

                                                           $    325,304     $   161,719
                                                           ============     ===========
</TABLE>

Depreciation  expense for the years  ended  December  31, 1999 and 1998  totaled
$38,671  and  $15,352,  respectively.  In 1999 and  1998,  $15,567  and  $6,346,
respectively, of depreciation was included in research and development expense.

                                       43


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 3 - Short-term Debt

Short-term debt consisted of the following notes payable and line-of-credit:

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                     ---------------------------
                                                                          1999          1998
                                                                     -----------    ------------
<S>                                                                  <C>            <C>
Note payable to officer, due on demand, interest at 10.00
 percent, collateralized by receivables, inventory and patent
 rights (Note 8).                                                    $        -     $    15,000

Note payable to officer, due on demand, interest at 10.00
 percent, collateralized by receivables, inventory and patent
 rights (Note 8).                                                             -          25,000

Note payable to officer, due on demand, interest at 10.00
 percent, collateralized by receivables, inventory and patent
 rights (Note 8).                                                             -          68,500

Note payable to officer, due on demand, interest at 10.00
 percent, collateralized by receivables, inventory and patent
 rights (Note 8).                                                             -          34,250

Note payable to an officer's family trust, matures
 December 21, 1999,  interest at 12.00 percent,
 collateralized by 50,000 shares
 of the Company's common stock (Note 8).                                      -         150,000
                                                                     -----------    -----------

                                                                     $        -     $   292,750
                                                                     ===========    ===========
</TABLE>

Line-of-Credit

The Company has a $50,000 revolving line-of-credit, of which, $49,269 was unused
as of December  31,  1999.  Advances  on the line carry an interest  rate of the
prime rate plus 6 percent  (14.50% at  December  31,  1999).  The credit line is
collateralized   by  substantially   all  corporate  assets  and  is  personally
guaranteed by an officer of the Company.  The Company  indemnified  the officer.
Payments on the line are due monthly and are equal to accrued interest plus 2.00
percent of outstanding principal at the end of the prior month.

                                       44


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 4 - Other Liabilities

During 1994 and 1995, the Company incurred approximately $118,000 of liabilities
(payables)  associated with a previous line of business.  Management has settled
or written-off a total of $50,474 in prior years and through  December 31, 1999.
The remaining  liabilities  total $65,340 at December 31, 1999; some are secured
by  judgments  against  the  Company,  some are being  paid  negotiated  monthly
payments and some of the  creditors  are not  currently  pursuing the payment of
their claims.

Note 5 - Rescission Offer

The Board of Directors  approved,  on December 1, 1999,  the  conversion  of all
preferred A and B shares into two common  shares for one  preferred  share.  The
Board of  Directors  also  approved an offer to rescind all  original  preferred
share and certain common share purchaser's  investment plus interest because the
Company  believes that these  offerings may have been executed  without a proper
exemption pursuant to the regulations in the Securities Act of 1933. A liability
has been  accrued on the balance  sheet in the amount of original  shareholder's
investment.  The  original  investment  consists  of $262,000  of  preferred  A,
$885,400 of preferred B and $134,415 of common stock.  Management  believes that
the probability of the shareholders  rescinding their shares is unlikely because
the current  market price of the shares  exceeds  their  original  cost plus any
interest which they would receive;  therefore, the potential accrued interest on
the  rescission  offer of $134,590  has not been  recorded  in the  accompanying
consolidated financial statements.

Note 6 - Shareholders' Equity

Preferred Stock

On December 7, 1999, the Company's Board of Directors approved the payment of 6%
preferred  stock dividend on 131,000 shares of preferred A and 442,700 shares of
preferred B stock.  A total of 7,860 shares of preferred A and 26,574  shares of
preferred B were issued as stock dividends during 1999.

At the time of the conversion of the preferred  shares into common  shares,  the
common  shares were  trading on the over the counter  market at $5.03 per share.
The  preferred A and preferred B  shareholders  have the privilege of converting
their shares into common stock at an effective  investment cost $1.00 per common
share. The resulting conversion  transaction resulted in a beneficial conversion
to  the  shareholders  and  an  imputation  of a  preferred  stock  dividend  of
$4,901,438 which is the difference of the market trading price per share and the
effective $1.00 per share investor cost times the number of common shares issued
as a result of the conversion.

                                       45


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 6 - Shareholders' Equity (continued)

Preferred Stock (continued)

Roth Financial  Fitness,  Inc. issued preferred shares in 1992 with the right to
convert to common shares.  At December 31, 1999, all except 10,467 shares of the
preferred shares have been converted by the shareholders.

Common Stock

On August 12, 1998, the Company  issued 14,162 shares of its  restricted  common
stock in exchange for equipment.  The Board of Directors  valued the transaction
at the market value of the stock issued on the date of the  transaction  of $.85
per  share,  or  $23,013.  The  Company  wrote-down  the  equipment  to its  net
realizable value at December 31, 1998,  resulting in an impairment loss totaling
$11,018 for the year ended December 31, 1998.

Stock Options

On  September  1, 1999,  the Board of Directors  granted  523,000  non-qualified
executive  common stock options to one officer in  accordance  with the terms of
his employment  agreement.  The options are exercisable at $3.00 per share; none
of the options  have been  exercised  as of December 31, 1999 and will expire on
September 1, 2009.

The Board of Directors  adopted a new Qualified  Incentive  Stock Option Plan on
December 1, 1999. The purpose for the plan is to have the ability to offer stock
incentives to key employees as a reward for past  performance and to attract the
best  qualified  new  employees  by  offering  them stock  options as a means of
compensation.  The Company is  authorized  to grant a total of 3,500,000  common
shares under this plan of which  104,124 have been granted at December 31, 1999.
The 104,124  share  options  granted at December  31, 1999 are fully  vested and
exercisable  by the option  holder at $5.62 per  share.  The  options  expire on
December 13, 2009. None of the options were exercised as of December 31, 1999.

On September 25, 1998,  the Company  granted  options for 300,000  shares of its
common stock in exchange for public relations  services.  The options were fully
vested and exercisable at an average price of $3.39 per share and were to expire
on September 25, 2001, if not exercised. On the grant date, the bid price of the
Company's  common stock on the over the counter exchange was $1.37. The Board of
Directors  called the options on May 5, 1999,  none were exercised and they were
cancelled.

                                       46


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 6 - Shareholders' Equity (continued)

Stock Options (continued)

On March 4, 1998, the Board of Directors  granted  nonqualified  executive stock
options to purchase  1,000,000 shares of its common stock to two senior officers
in accordance  with the terms of their  employment  agreements.  The options are
vested and exercisable at $5.50 per share. None of the options were exercised as
of  December  31,  1999 and will  expire  on March 4,  2004,  if not  exercised.
Management  determined the fair value of the Company's common stock based on the
offer  price of a common  stock  offering on the grant  date.  The options  were
granted at 110% of the $5.00 offering  price,  or $5.50 per share. In accordance
with APB 25, no  compensation  expense  related to the options was recognized in
1998.

The Company has a qualified  stock option plan that provides for the granting of
stock options to all  employees.  The Company is  authorized to grant  3,500,000
common  shares under the plan, of which 212,500 have been granted in 1998 and an
additional  105,000  shares in 1999.  All options  are fully  vested on the date
granted and are priced at or above the current  over the counter  share  trading
price. All options granted during 1999 and 1998 were exercisable,  at a weighted
average price of $3.04 per share; however, none of the options were exercised at
December 31, 1999. The options expire on December 16, 2001.

                                       47


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 6 - Shareholders' Equity (continued)

Stock Options (continued)


<TABLE>
<CAPTION>

                                                                                                                        Weighted
                                                                                Weighted                                Average
                                     Incentive    Executive     Options Issued  Average     Weighted                 Exercise Price
                                      Stock       Employment     Not Related    Exercise   Average Fair  Currently    - Currently
                                     Options      Options         to a Plan     Price        Value      Exercisable    Exercisable
                                     ---------   ------------   ------------   ---------   ----------   ------------  - ------------
<S>                                    <C>          <C>             <C>        <C>             <C>
Outstanding December 31, 1997               -              -              -    $      -                           -    $        -
                                                                                                        ------------   ----------

    Options and warrants granted       212,500      1,000,000        300,000        4.64        1.58
                                     ---------   ------------   ------------   ---------   ---------

Outstanding December 31, 1998          212,500      1,000,000        300,000        4.64                   1,512,500         4.64
                                                                                                        ------------  -----------

    Options cancelled                       -              -       (300,000)       (3.00)
    Options granted                    209,124      1,023,000             -         3.38        2.77
                                     ---------   ------------   ------------   ---------   ---------

Outstanding December 31, 1999          421,624      2,023,000             -    $    4.20                   1,921,624  $      4.53
                                     =========   ============   ============   =========                ============  ===========
</TABLE>

All options in 1999 and 1998 were granted above their fair value.

<TABLE>
<CAPTION>

                                                                               December 31, 1999
                                               --------------------------------------------------------------------------
                                                           Options Outstanding                     Options Exercisable
                                               ---------------------------------------------   --------------------------
                                                                Weighted    Weighted Average                    Weighted
                                                                Average        Remaining                         Average
                                                Number          Exercise      Contractual          Number       Exercise
Range of Exercisable Price                     Outstanding       Price           Life            Exercisable      Price
                                               -----------     ----------     ----------       -------------     --------

<S>                                              <C>           <C>                  <C>            <C>           <C>
$2.88 - $3.00                                    1,260,500     $     2.98           6.25             737,500     $   2.96
$5.44 - $5.62                                    1,184,124           5.51           7.96           1,184,124         5.51
                                               -----------     ----------     ----------       -------------     --------

                                                 2,444,624           4.20           7.08           1,921,624         4.53
                                               ===========     ==========     ==========       =============     ========
</TABLE>



                                       48


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 6 - Shareholders' Equity (continued)

Stock Options (continued)

The  Company  continues  to  account  for  stock-based  compensation  using  the
intrinsic value method  prescribed by APB 25, under which no  compensation  cost
for stock options is recognized  for stock option awards granted at or above the
fair market value. Had compensation expense for the Company's stock option plan,
executive  employment  options and options under the public relations  agreement
been  determined  based  upon  fair  values  at the  respective  grant  dates in
accordance  with SFAS 123,  the  Company's  net  earnings and earnings per share
would have been reduced to the pro forma amounts  indicated below. The pro forma
effects  of SFAS 123 are not  indicative  of future  amounts.  Additional  stock
options awards are anticipated in future years.

<TABLE>
<CAPTION>
                                                                  For the Year Ended
                                                                     December 31,
                                                          --------------------------------
                                                                 1999          1998
                                                          --------------    --------------
Net losses
<S>                                                       <C>               <C>
   As reported                                            $  (1,588,355)    $  (1,513,197)
      Increased loss due to
         Employee stock option plan                            (834,656)         (266,688)
         Executive employment options                        (2,578,743)       (2,054,000)
         Public relations agreement options                          -            (66,550)
                                                          -------------     -------------
      Pro forma                                           $  (5,001,754)    $  (3,900,435)
<CAPTION>
                                                          =============     =============
   Loss per common share
<S>                                                          <C>               <C>
      As reported                                            $  (0.13)         $  (0.13)
      Pro forma                                              $  (0.40)         $  (0.35)
</TABLE>

The  weighted  average  fair  value  of  options  granted  during  1999 and 1998
estimated on the date of grant using the Black-Scholes  option-pricing model was
$2.77  and  $1.58,  respectively.  The fair  value  of the  options  granted  is
estimated on the date of grant using the following  assumptions:  dividend yield
of zero, expected volatility of 97.16 (1999) and 60.47 (1998) percent, risk-free
interest rate of 6.623 (1999) and 4.525 (1998) percent,  and an expected life of
three years.

                                       49


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 7 - Stock Based Compensation

During 1999, the Company  issued  336,350 shares of its restricted  common stock
for commissions expense related to various preferred stock offerings.  The Board
of Directors  measured the value of the  transaction  by equating the commission
obligation  to the number of shares  required  based on the current  fair market
value  of  the  common  shares  on the  date  of the  execution  of the  selling
agreement,  dated October 23, 1998,  equal to $.75 per common share. The Company
recorded a beneficial conversion charge equal to $.30 per common share exchanged
as  additional  offering  costs  in  the  accompanying   consolidated  financial
statements. A total of $252,263 was recorded as stock offering costs.

During 1999, the Company issued 25,000 shares of its restricted  common stock to
various providers in exchange for their services.  Management valued the service
at  $62,837,  the  amount of the total  invoices.  The  resulting  expenses  are
included in the accompanying consolidated financial statements.

On May 20, 1998, the Company issued  1,106,660  shares of its restricted  common
stock to brokers as payment for  $117,626 in  commissions  expense  related to a
common stock  offering.  Management  valued the  transaction  at the fair market
value of the stock on the date of the broker  agreement,  September 8, 1997,  or
$.78 per share. The resulting  $864,301 of commission expense is included in the
accompanying consolidated financial statements as stock offering costs.

On October 30, 1998 the Company  issued 79,732 shares of its  restricted  common
stock as payment for $134,484 in advertising and consulting services. Management
valued the  transaction at the fair market value of the stock on the date of the
exchange  or $59,799.  The  resulting  expense is  included in the  accompanying
consolidated financial statements.

Note 8 - Related Parties

As of January 1, 1998,  the  Company  was  indebted to an officer for $62,000 in
connection  with four  promissory  notes  executed in 1997. In 1998, the Company
borrowed from two officers an additional  $35,000 for working capital  purposes.
The Company also executed two additional  promissory  notes to an officer in the
amount of $102,750 for expenses paid on behalf of the Company.  During 1999, the
Company  borrowed  an  additional  $89,000  from an  officer.  All  notes had an
interest  rate of 10% and were due on demand.  The Company  repaid  notes to the
officers of $231,750 in 1999 and $57,000 in 1998. All notes were paid in full as
of December 31, 1999.

On March 2, 1999,  the Company  borrowed  $88,000 from an  affiliated  party for
working  capital  purposes.  The note had an interest rate of 18% and was due on
demand. The note was paid in full as of December 31, 1999.

                                       50


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 8 - Related Parties (continued)

During  1999,  the  Company  paid stock  offering  commissions  of $299,919 to a
broker.  The broker is an affiliated  party by virtue of his  relationship  to a
member of the Company's board of directors.

The broker  received 10% commission on equity funds raised pursuant to a selling
agreement  signed by the  Company.  As of December  31,  1999,  the Company owes
unpaid commissions of $101,081 to the broker.

On December 21, 1998, the Company borrowed  $150,000 from the family trust of an
officer of the  Company.  The  $150,000  promissory  note had an  interest of 12
percent  per annum and was due on December  21,  1999.  On October 4, 1999,  the
family trust  elected to accept  53,571  shares of common  stock,  measured at a
market value of $2.80 per share,  to satisfy the debt. The note was paid in full
on December 31, 1999.

Included in the executive employment agreements of two officers is a performance
bonus based on the  increase of the trading  price per share of the common stock
from trades in December  1998 to trades in December  1999.  The bonus was earned
and is equal to 50% of their total  compensation  for 1999  payable in the first
quarter of 2000.  A current  liability of $72,000 for related  party  bonuses is
recorded on the balance sheet at December 31, 1999.

Note 9 - Income Taxes

A reconciliation of the U.S.  statutory federal income tax rate to the effective
rate follows:


<TABLE>
<CAPTION>
                                                                   December 31,
                                                           ----------------------------
                                                                1999           1998
                                                           ----------        ----------

<S>                                                           <C>                <C>
U.S. statutory federal rate                                   34.00%             34.00%
State income tax rate, net of federal benefit                  3.30               3.30
Provision for bad debts                                          -               (1.99)
 Net operating loss for which no tax benefit
   is currently available                                    (37.30)            (35.31)
                                                           ---------         ----------
                                                                  - %                - %
                                                           =========         ==========
</TABLE>


                                       51


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 9 - Income Taxes (continued)

Deferred taxes consisted of the following:
<TABLE>
<CAPTION>

                                                                      December 31,
                                                           --------------------------------
                                                                  1999            1998
                                                           --------------    --------------

<S>                                                        <C>               <C>
Deferred tax asset, net operating loss                     $    1,452,833    $     879,697
carryforward
Valuation allowance                                           (1,452,833)        (879,697)
                                                           --------------    ------------
Net deferred taxes                                         $           -     $          -
                                                           ==============    =============
</TABLE>

The  valuation  allowance  offsets the deferred tax assets for which there is no
assurance of recovery. The change in the valuation allowance for the years ended
December 31, 1999 and 1998 totaled $573,136 and $534,381,  respectively. The net
operating  loss  carryforwards  expire  through the year 2019. In addition,  the
utilization of the carryforwards may be limited due to certain change in control
events which have occurred in prior periods.

The valuation  allowance will be evaluated at the end of each year,  considering
positive  and  negative  evidence  about  whether the deferred tax asset will be
realized.  At that time,  the  allowance  will either be  increased  or reduced;
reduction could result in the complete  elimination of the allowance if positive
evidence  indicates  that the  value of the  deferred  tax  assets  is no longer
impaired and the allowance is no longer required.

Note 10 - Commitments and Contingencies

Office Lease

The Company  leases  office space under a  non-cancelable  operating  lease that
expires on January  31,  2001.  Total  office  rent  expense for the years ended
December 31, 1999 and 1998 totaled  $61,033 and  $36,942,  respectively.  Future
minimum rental payments under the office lease are as follows:

         December 31,
         ------------

              2000                                          $   83,404
              2001                                               7,030
                                                            ----------
                                                            $   90,434
                                                            ==========



                                       52


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 10 - Commitments and Contingencies

Officer Employment Agreement

As part of their executive  employment  agreements,  two executive officers were
granted options to purchase 500,000 shares each of the Company's common stock on
September 1, 1999.  These  options were granted at the current fair market value
of the common  stock and will expire on September  1, 2004.  These  options will
become vested 20% per year on the anniversary date of the grant. The options are
exercisable at $3.00 per share.

As part of their  executive  employment  agreements,  two senior  officers shall
become fully vested to receive  options to purchase  500,000  shares each of the
Company's common stock if the following corporate goals are achieved:

    1.     If the Company's consolidated gross revenues exceed $3,000,000 by
           December 31, 1999, the executives vest in 35 percent of the options;
    2.     If the Company's consolidated gross revenues exceed $6,000,000 by
           December 31, 2000, the executives vest in an additional 35 percent of
           the options;
    3.     If the Company's consolidated gross revenues exceed $9,000,000 by
           December 31, 2001, the executives  vest in the remaining 30 percent
           of the options:

These options will be valued at the market value of the common stock on the date
the contingency of the corporate goal is achieved,  thus allowing the options to
vest.

The  options  are  exercisable  at $.0001 per share and expire on March 4, 2009.
None of the options have been exercised at December 31, 1999.

Manufacturing Agreement

In December 1999, the Company entered into an exclusive  manufacturing agreement
with Saturn Electronics and Engineering,  Inc.  ("Saturn") for the production of
the power  supply  products  developed  by the  Company.  Under the terms of the
agreement,  Saturn  will  finance the costs of start- up and  production  of the
products with the Company's customer purchase orders and accounts  receivable as
security.

                                       53


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 11 - Litigation and Settlements

Since 1996, the Company has been  defending a lawsuit by Fox Sports,  Inc. which
is pending in California Superior court. Fox seeks damages for alleged breach of
a contract to  distribute  film;  dispute  arose out of  arrangements  discussed
between the Company and Fox to  distribute  video film products when the Company
was  involved in the  entertainment  business in 1996. A trial date has been set
for May 8, 2000. Subsequent to December 31, 1999, the matter has been settled in
principle,  subject merely to  documentation  of the settlement.  As part of the
settlement,  the Company shall pay Fox $28,000. This amount is recorded in other
liabilities  as of December 31, 1999.  If for some reason the  settlement is not
completed, the Company will continue to vigorously defend itself in this matter.

During the year  ended  December  31,  1998,  the  Company  signed a  settlement
agreement in a lawsuit  related to the Chapter 7 bankruptcy of Max Music,  Inc.,
whereby the  Company  agreed to pay  $150,000.  The  Company  made the  $150,000
payment on December 21, 1998,  with proceeds from the $150,000  promissory  note
from the family trust of the Company's  President  (Note 8).  However,  in April
1999,  the trustee  filed an action in United  States  District  Court  (Denver,
Colorado)  seeking  enforcement  (through  garnishment  proceeding)  against the
Company of a judgment  obtained  by the  trustee  against a former  officer  and
director of the  Company  (who  resigned  in February  1996) for the same amount
originally  sought  less the  $150,000  paid in  December  1998.  The Company is
contesting   the  trustee's   claim  citing  the  earlier   settlement  as  full
satisfaction  and will resist all attempts to collect the balance.  The ultimate
potential liability is between $400,000 and $500,000; however, legal counsel and
management  believe  that  the  Company  will  prevail  in this  matter  and the
likelihood of owing any additional money is extremely unlikely.

During the year ended December 31, 1998, the Company  settled a lawsuit  related
to an account payable owed to a trade vendor,  whereby the Company agreed to pay
$15,000.  The Company paid $5,000 on December 1, 1998 with the remaining $10,000
during 1999.

Subsequent  to  December  31,  1998,  the  Company  settled a third  lawsuit for
$25,000, and the balance was paid in full as of December 31, 1999.

The total losses from various litigation  settlements totaled $28,000 (1999) and
$190,000  (1998) and are  included as losses on  litigation  settlements  in the
accompanying consolidated statements of operations.

Glitch Master Marketing,  Inc. ("GMM") and the Company's Chief Executive Officer
("CEO") have been named as  defendants  in a lawsuit in which the  plaintiff was
claiming the sum of $96,000.  The debt was a personal obligation of the CEO. The
CEO obligated  GMM as a guarantor of the note.  The lawsuit was settled on April
22,  1999 for  $98,170,  and the  Company  did not  incur  any of the  financial
liability.

                                       54


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 11 - Litigation and Settlements (continued)

On December 2, 1998, the Company was awarded a judgment in the amount of $62,889
against a customer of Glitch Master Marketing,  Inc. An allowance of 100 percent
of the  receivable of $62,889 as of December 31, 1998 and 1999 has been recorded
due to the uncertainty of collection.

The Company is  involved in other  various  claims and  lawsuits  arising in the
normal course of business. Management believes that any financial responsibility
that may be incurred in  settlement  of such  claims and  lawsuits  would not be
material to the Company's financial position.

Note 12 - Private Offerings

Common Stock

The Company circulated three separate private offering  memorandums  relating to
the  private  offering  of shares of the  $.0001 par value  common  stock of the
Company during 1999 and 1998. The securities have not been  registered  pursuant
to this  Securities  Act of 1933,  as amended  (the  "Act"),  nor have they been
registered under the securities act of any state.  These securities were offered
under an exemption from registration requirements of the Act and exemptions from
registration  provided by  applicable  state  securities  laws.  The  securities
dealers were paid a commission up to ten percent of the  subscriptions  accepted
by the Company. Offering commissions were paid through a combination of cash and
the issuance of  restricted  common  stock.  The  officers and  directors of the
Company did not receive any  commissions  for the sales of stock or compensation
for services from these  offerings.  As a result of potential  violations of the
exemption  provisions of the  regulations of the Act, the Company is offering to
rescind  26,883  shares of  common  stock  investments  totaling  $134,413  plus
interest.  A  rescission  liability  has been  recorded on the balance  sheet at
December 31, 1999 accordingly (Note 5).

Following is a summary of the offerings undertaken in 1999 and 1998.

<TABLE>
<CAPTION>

                                    Offering #1                      Offering #2                 Offering #3
                                    -----------                      -----------                 -----------

<S>                            <C>                             <C>                         <C>
Date:                          September 11, 1997              June 17, 1999               November 12, 1999
Offering:                      $5.00/share                     $2.00/share                 $2.00/share
Minimum:                       $       25,000                  $       500,000             $     -
Maximum:                       $    1,000,000                  $     5,000,000             $     -
</TABLE>



                                       55


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 12 - Private Offerings (continued)

<TABLE>
<CAPTION>
                                    Offering #1                     Offering #2                 Offering #3
                                    -----------                     -----------                 -----------
<S>                            <C>                             <C>                         <C>
Sold in 1997
         Shares                        36,672                          -                         -
         Proceeds              $      183,361                  $       -                   $     -

Sold in 1998
         Shares                        99,260                          -                         -
         Proceeds              $      496,300                  $       -                   $     -

Sold in 1999
         Shares                            -                         2,473,533                    748,571
         Proceeds              $           -                   $     4,947,066             $    1,497,142
</TABLE>

Preferred Stock

The Company circulated two separate private offering memorandums relating to the
private offering of shares of the Series A and B $.0001 par value,  $2.00 stated
value,  cumulative,  convertible preferred stock of the Company during 1998. The
securities have not been  registered  pursuant to the Securities Act of 1933, as
amended (the "Act"),  nor have they been registered  under the securities act of
any  state.  These  securities  were  offered  pursuant  to  an  exemption  from
registration  requirements of the Act and exemptions from registration  provided
by applicable  state  securities  laws. The  securities  were offered on a "best
efforts" basis through  securities dealers and others who may lawfully offer and
sell securities. The securities dealers were paid a commission up to ten percent
of the  subscriptions  accepted by the Company.  Offering  commissions were paid
through a combination  of cash and the issuance of common  stock.  Management of
the Company did not receive any  commissions  or  compensation  for  offering or
selling the securities.

                                       56


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 12 - Private Offerings (continued)

Preferred Stock

Following is a summary of the offerings conducted in 1999 and 1998:

                                         Offering #1               Offering #2
                                         Series B                  Series A
                                         --------                  --------

Date                                   October 12,                November 19,
                                           1998                       1998
Offer                                  $2.00/share                $2.00/share

Sold in 1998
         Shares                           169,950                  105,400
         Proceeds                        $339,900                 $210,800

Sold in 1999
         Shares                           272,750                   25,600
         Proceeds                        $545,500                 $ 51,200


Note 13 - Going Concern

The Company has suffered recurring losses from operations since inception and at
December  31,  1998 had a  working  capital  deficit.  These  conditions  raised
substantial  doubt about the Company's ability to continue as a going concern in
1999. However, the Company has successfully raised equity capital during 1999 to
enable to the  Company to sustain  the  operations  through  the year 2000.  The
Company's  ability to continue  as a going  concern in 1999 has  improved  since
1998. The financial statements,  therefore,  do not include any adjustments that
might result from the outcome of this  uncertainty.  The 1999 audit report dated
January 31, 2000 does not contain a going concern emphasis.

                                       57


<PAGE>




Item 8.  Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure

         On January 12, 2000 we terminated our relationship  with C&H, which had
audited our financial  statements  for fiscal 1996,  1997 and 1998.  C&H's audit
reports on our financial  statements for each of those years  contained a "going
concern  qualification" that because of our recurring losses and lack of working
capital,  there was  substantial  doubt about our ability to continue as a going
concern.   Except  for  the  uncertainty  associated  with  the  "going  concern
qualification,"  C&H's  audit  reports  for those three years did not contain an
adverse  opinion or disclaimer of opinion,  or  modification  as to uncertainty,
audit  scope or  accounting  principles.  Our board of  directors  approved  the
termination of our relationship with C&H and our engagement of the firm Ehrhardt
Keefe Steiner & Hottman PC., Denver, Colorado.

         We  have  never  had  any  disagreements  with  C&H  on any  matter  of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure,  which,  if not resolved to C&H's  satisfaction,  would have
caused C&H to make  reference  to the subject  matter of the dis-  agreement  in
connection with its reports.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act.

(a)(1)(2)(3)  Identification of Directors and Executive Officers.

<TABLE>
<CAPTION>

    Name                       Age            Position                         Director Since
    ----                       ---            --------                         --------------

<S>                             <C>           <C>                                  <C>
    Kris M. Budinger            47            President, COO, CEO,
                                              Treasurer                            1994

    Thomas L. Glaza             63            Director                             1999

    Ronald W. Mathewson         62            Director                             2000

    Richard L. Millspaugh       54            Chief Financial Officer
                                              Secretary

    Garth A. Woodland           35            Vice President - Engineering
                                              Research and Development

    Chris A. Riggio             40            Vice President - Research and
                                              Development
</TABLE>

         Kris M.  Budinger  has been  President,  Chief  Operating  Officer  and
Treasurer  of OnLine since July 29,  1996,  and in addition  has  formally  been
appointed  to take on the  responsibilities  of CEO in March  2000.  His primary
duties cover supervision of product development, coordination

                                       58


<PAGE>



of  research  and  development   with  prospective   customers'   design  needs,
prospective   customer   relations  at  the  corporate   level,  and  developing
relationships  with  manufacturers  and  suppliers.  He had been  the  Chairman,
President,  and CEO of OnLine  Entertainment,  Inc.  (prior to the  merger  with
Glitch Master  Marketing,  Inc. on July 29, 1996) from February 12, 1996 to July
29,  1996.  From  early  1995  to  February  12,  1996  he  was a  Director  and
Vice-President  of OnLine  Entertainment,  Inc. His  responsibilities  at OnLine
Entertainment,  Inc. included  production of original direct response television
programming,  management of product order fulfillment,  telemarketing,  merchant
banking, and television and radio distribution functions.

         Mr. Budinger graduated from the United States Air Force Academy in 1974
and served as a Captain in the USAF until his honorable  discharge in 1980.  Mr.
Budinger was associated with the national investment banking firm E.F. Hutton as
a  registered  representative  from  1981  to  1985,  and  from  1985 to 1988 as
Vice-President  and  Branch  Manager  in  Peoria,   Arizona.  Mr.  Budinger  was
associated with Dean Witter Reynolds as a registered representative from 1988 to
1992,  and during those four years was a  Vice-President  and  Assistant  Branch
Manager in the Sun City, Arizona office of Dean Witter Reynolds.

         Thomas L. Glaza was  appointed  to the board of  directors of OnLine in
July 1999. He serves as an outside  director,  and is not employed by OnLine. He
has been  Director of Marketing for MAPICS  Business  Group-Marcam  Corp.  since
1989.  He  leads  business   activities   associated  with  the  acquisition  of
complementary   software  products;  his  company  is  considered  a  leader  in
developing strategic partnerships in the high growth area of enterprise resource
planning.  In this position,  his group is responsible  for worldwide  marketing
support,  including  product  requirements,   education  strategy,  and  product
information  development and delivery.  He also is involved in issues  regarding
mergers with or acquisitions of other companies.  He leads the effort to develop
and maintain the strategic planning for MAPICS.

         He is a member and Fellow of the American  Production  and  Information
Control Society ("APICS").

         Mr.   Glaza's   brother  James  Glaza  is  associated   with  Northstar
Securities,  Inc., a registered  broker-dealer  in  securities  which has raised
money for us in the past.

         Ronald W.  Mathewson  was appointed to the board of directors of OnLine
in March 2000 to fill the  vacancy  resulting  from the  retirement  of Larry G.
Arnold.

         Mr Mathewson was president  and chief  operating  officer of Fibreboard
Corporation  from  October  1996 to February  1998 during  which time he led the
merger of Fibreborad  Corporation with Owens Corning. From June 1994 to November
1995 he served as executive  vice  president and  president of Magneteck,  Inc.'
Lighting Products Group. Mr. Mathewson was vice president and general manager of
the Building  Insulation  Division of the Johns Manville  Corporation  from June
1988 to June 1994.  From May through  November  1987 he served as president  and
chief operating officer of Miami-Carey  Corporation.  Mr. Mathewson was employed
with General Electric Company from 1981 to 1987 in various management  positions
including general manager, marketing and sales manager,  international strategic
planning and business development manager and venture manager.

                                       59


<PAGE>



         Mr. Mathewson has extensive  experience in strategic business planning,
acquisitions and mergers, and marketing and sales. He received a bachelor degree
in Mechanical Engineering and Business from the University of Wyoming in 1960.

         Richard L.  Millspaugh,  a certified  public  accountant  (licensed  in
Colorado) has been Chief  Financial  Officer for OnLine since September 1, 1999.
From 1990 to 1994 he was Vice President  Finance and part owner of  Fibertection
Corporation.  From 1995 to November 1997, Mr. Millspaugh was employed by Western
Pacific  Airlines,  and  thereafter  until he joined OnLine in 1999 he practiced
accounting at R.F. Hall & Associates, an accounting, tax and audit firm based in
Colorado.  He has also been involved from time to time in special  projects as a
consultant and financial administrator to different companies. In November 1994,
Mr.  Millspaugh filed for personal  bankruptcy  proceedings in the United States
Bankruptcy Court, in connection with a claim made against his personal guarantee
of  a  $988,000  loan  to  Fibertection;  this  obligation  and  other  personal
liabilities were discharged by the court in due course. Mr. Millspaugh  received
a bachelor degree (accounting) from the University of Kansas in 1967.

         Garth  Woodland  joined us in July  1996.  Mr.  Woodland  has been Vice
President- Engineering,  Research and Development,  since 1999. He has extensive
experience in technical  application  support and technical  design in the power
supply  industry.  From 1992 to 1996 Mr.  Woodland  was  employed  by  ForeSight
Electronics,  Sunnyvale,  California,  a nationwide  distributor of power supply
systems.  His  experience  extends to technical  sales,  training and  effective
management  of  technical  sales  forces,  design  in of new  applications,  and
coordinating  production  line  outputs with sales flow.  He is a  knowledgeable
electrical and audio engineer who is capable in most software applications.  His
technical    Marketing   and   Support    expertise    includes:    Integration,
Test/Verification  Evaluation,  Field Tech Support,  Chit-Sits,  Return Material
Authorization,  and Order  Fulfillment.  His designs include  variable linear DC
Power  Supplies  with 0%  ripple  and a  battery  charging  circuit  for lap top
computers.  While at IBM in 1992,  he  conducted  macro  programming  and repair
support to managers and employee  groups.  Mr. Woodland holds a bachelor of arts
degree in Creative Arts.

         Chris A. Riggio joined us in 1996. Mr. Riggio has been Vice President -
Research and Development since 1999. Previously, he has been an inventor, patent
holder,  and  engineering   consultant  for  a  variety  of   electro-mechanical
applications such as: power control electronics,  audio electronics,  acoustics,
gas and diesel  systems,  electronic  instrumentation,  monitoring  systems  and
process control systems.  He has conducted research and development  projects at
the  University  of  Colorado in the areas of  bio-electromagnetics  and magneto
biology. Mr. Riggio has invented and patented two thyristor control technologies
(Load Factor  Controller and Ideal Voltage  Controller)  and  transferred  other
intellectual   property  rights  pertaining  to  failure  bypass  circuitry  and
precision  thermostat control  technology.  His other areas of expertise include
manufacturing  process support,  quality control  engineering  support,  end use
product  testing,  field  testing,  test protocol  design,  product  performance
characterization,   data  acquisition  system  design,  utility  and  DSM  sales
engineering  support and  training.  He was a founder,  officer and  director of
Renaissance  Systems,  Inc.  from 1994 until we acquired  that  company in 1997.
Renaissance was a small company  engaged  developing new approaches to the power
supply system technologies.

         Under the Nevada  statutes,  the number of directors may be fixed by or
in the manner  provided in the our articles or bylaws.  The bylaws  provide that
the number of directors may be

                                       60


<PAGE>



determined from time to time by resolution of the board of directors.  The board
of directors currently consists of three members.

(b)      Identification of Certain Significant Employees or Consultants.

         Richard  L.  Doyle  serves  as  an  engineering  consultant  to us on a
contract  basis under an agreement  dated August 25, 1997.  There is no set term
for this  agreement.  Mr. Doyle provides  services as requested for  independent
reliability testing of its products. Mr. Doyle receives restricted shares of our
common stock for his services, at the average share price over the 90 day period
in which he renders services, at the rate of $200 of stock for every hour of his
services  (using his billing rate of $100 per hour). We have issued 5,200 shares
to Mr. Doyle under his agreement.  Mr. Doyle graduated with a B.S. in Mechanical
Engineering  from  Oregon  State  University  in  1963:  He  earned  an M.S.  in
Electrical  Engineering from the University of California,  Irvine, in 1969. Mr.
Doyle provides  analytical and  experimental  insights into complex physical and
electrical  phenomena.  He specializes in systems analysis with primary strength
in  electrical  control  systems and dynamics His work in these areas has broken
new ground in advancing the state-of-the-art in aircraft,  missiles,  ships, and
nuclear  reactor  plants.  He provides solid  contributions  to proposals and in
planning organizing  activities.  Mr. Doyle is a registered  Electrical Engineer
and a registered  Civil Engineer with the State of  California,  and is a senior
member of the Institute of Electrical and Electronics  Engineers Inc.,  where he
served as  President  for the years 1995 and 1996.  He is also a member of Sigma
Tau and Pi Tau Sigma  honorary  societies.  Mr.  Doyle has more than 25 years of
experience in the theoretical analysis of dynamic systems including analysis and
design of electrical and mechanical systems. For the past 15 years Mr. Doyle has
been a consultant.  Mr. Doyle's recent experience includes consulting on Nuclear
Power  Plant  equipment.  He  is  presently  involved  in  qualifying  Radiation
Monitoring  equipment for Sorrento  Electronics.  Other recent  consulting tasks
have included Reliability  Studies,  Structural Analysis and Thermal Analysis of
Electronic  circuits.  Previous consulting work included program planning,  test
planning,  and systems  evaluation for Kennecott  Exploration Inc. of San Diego,
California.  He was  responsible  for airlift testing and analysis and developed
plans and analyzed  several slurry  hydraulic tests. Mr. Doyle is not an officer
or director of the Company.

Compensation of Directors

         Each of our  present  directors  who is also an employee of the Company
receives  no  additional  compensation  for  acting as a director  or  attending
meetings  of  directors.  We  presently  pay $100 per  meeting  to  non-employee
directors, plus their travel expenses.

(c)      Family Relationships.

         There are no family relationships.

(d)      Involvement in Certain Legal Proceedings.

         During the past five years, no director,  person  nominated to become a
director, or executive officer of our company:

(1) has filed or had filed against him, a petition under the federal  bankruptcy
law or any state  insolvency law, nor has any court appointed a receive,  fiscal
agent or similar officer by or against

                                       61


<PAGE>



any business of which such person was a general  partner,  or any corporation or
business  association  of which he was an  executive  officer  within  two years
before the time of such filing;

(2)  was convicted in a criminal proceeding or is the named subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses);

(3)  was the  subject  of any  order,  judgment,  or  decree,  not  subsequently
reversed,  suspended  or  vacated,  of  any  court  of  competent  jurisdiction,
permanently  or  temporarily  enjoining,  barring  or  suspending  him from,  or
otherwise  limiting  his  involvement  in, any type of business,  securities  or
banking activities, or

(4) was found by a court of competent  jurisdiction  in a civil action or by the
Securities and Exchange  Commission or the Commodity Futures Trading  Commission
to have  violated any federal or state  securities or  commodities  law, and the
judgment  in such  civil  action  or  finding  by the  Commission  has not  been
subsequently reversed, suspended or vacated.

Based upon a review of Forms 3 and 4  furnished  to the  Registrant  pursuant to
Rule 16a-3(a) since  inception on February 24, 2000 and written  representations
referred to in Item  405(b)(2)(I)  of Regulation  S-K, no  directors,  officers,
beneficial owners of more than ten percent of the Registrant's  common stock, or
any other person subject to Section 16 of the Exchange Act failed for the period
from February 24, 2000 (the date the Company became a reporting company) through
the filing of this Form 10-KSB to file on a timely basis,  the reports  required
by Section 16(a) of the Exchange Act.

Item 10. Executive Compensation

         The  following  table  sets forth  certain  information  regarding  the
compensation  paid or accrued by us to or for the account of the Chief Executive
Officer and the Chief  Operating  Officer (also the  President) for services and
bonuses  rendered in all  capacities to us during each of the fiscal years ended
December 30, 1999,  1998 and 1997. No other  executive  officer  received  total
annual  salary  and bonus in excess  of  $100,000.  We do not have any long term
compensation plan, other than options for restricted stock.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                           Annual Compensation
                                       -----------------------------------------------------
                                                                                Other Annual
         Name and Position             Year         Salary        Bonuses       Compensation
         -----------------             ----         ------        -------       ------------

<S>                                    <C>         <C>               <C>               <C>
Larry Arnold (former CEO)              1999        $72,000           $36,000           $0
                                       1998        $72,000           $0                $0
                                       1997        $72,000           $0                $0

Kris Budinger, COO and President       1999        $72,000           $36,000           $0
(CEO in 2000)                          1998        $72,000           $0                $0
                                       1997        $72,000           $0                $0



                                       62


<PAGE>



Employment Agreements

         We have written employment  agreements with Larry G. Arnold (former CEO
and Chairman of the Board who resigned  February 29, 2000) and Kris M.  Budinger
dated March 4, 1998. Each employment  agreement ends on March 31, 2003,  subject
to  automatic  renewal for 5 year terms unless  terminated  by the Company on or
after  September  30,  2002.  The base  salary is $72,000  per year,  subject to
increases. In December 1999 the board of directors approved a salary of $150,000
to  each  individual  for the  year  2000.  Each  employment  agreement  granted
nonqualified  stock options to purchase  500,000 shares of common stock at $5.50
per share  (all now  vested),  which was the fair value of the stock at March 4,
1998; these options will expire March 4, 2004. None have been exercised to date.
Each  employment  agreement also granted other  nonqualified  performance  stock
options to purchase  500,000  shares of common stock at $.0001 per share;  these
options will expire March 4, 2009. The  performance  options will vest according
to a formula:  If we had more than $3 million of gross  revenues by December 31,
1999,  35% of the options would have vested for Mr. Arnold and Mr.  Budinger (we
didn't make this target so this part of the options has lapsed). If we have more
than $6 million of gross  revenues by December 31, 2000, 35% of the options will
vest for Mr. Arnold and Mr. Budinger.  Finally,  if we have more than $9 million
of gross  revenues by December 31, 2001, an  additional  30% of the options will
vest for Mr.  Arnold  and Mr.  Budinger.  These  options  are  discussed  in our
financial  statements  (note  6 for  the  vested  options  and  note  10 for the
performance options).

         For the year ending December, 1999 and later, each employment agreement
provides a cash bonus of 50% of base salary if the if the average  closing price
of the  common  stock  for the last 20  business  days of the year  exceeds  the
previous year comparable  amount by 51% or more. For fiscal 1999, Mr. Arnold and
Mr. Budinger each will be paid a cash bonus of $36,000 based on stock prices for
that year.

         We have issued qualified  options to Mr. Arnold and Mr. Budinger,  each
for 11,650 shares of common stock at $6.18 per share,  expiring if either leaves
our  employment or when the options  expire in 2009.  Mr.  Arnold's  options for
these shares will expire as he has resigned from our company.

          Garth Woodland has a five year employment agreement,  at a base salary
of $84,000 per year. He received  nonqualified stock options to purchase 523,000
shares  of common  stock at $3.00,  all of which are  vested,  and  options  for
another  500,000  shares  at the  same  price,  to vest  20% per  year  starting
September 1, 2000.  Mr.  Woodland has separate  qualified  options to buy 11,032
shares at $5.62 and 25,000 shares at $2.88;  these options expire on termination
of employment or 2009.

         Chris Riggio has a five year  employment  agreement at a base salary of
$84,000 per year,  and has been issued  nonqualified  stock  options to purchase
500,000 shares of common stock at $3.00, to vest 20% per year. Separate from the
agreement,  Mr. Riggio has an option  (which is  qualified)  to purchase  25,000
shares of common stock at $3.00 per share;  these latter options expire in 2001.
Mr.  Riggio has  separate  qualified  options to buy 11,032  shares at $5.62 and
25,000 shares at $2.88;  these options  expire on  termination  of employment or
2009.

                                       63


<PAGE>



         Mr. Millspaugh has a five year employment  agreement,  at a base salary
of $84,000 per year. He received  nonqualified stock options to purchase 100,000
shares of common stock at $5.625,  which will vest 20% per year. Mr.  Millspaugh
has separate qualified options to buy 3,203 shares at $5.62 and 25,000 shares at
$2.88; these options expire on termination of employment or 2009.

Stock Option Plan

         We have adopted an  incentive  stock option plan for the issuance of up
to 3.5 million shares of common stock; the options are intended to qualify under
section  422 of the  Internal  Revenue  Code.  To date,  we have  issued  to our
employees  (other than  officers)  options to purchase  288,057 shares of common
stock.  The options are vested and exercisable at different prices from $2.88 to
$6.18 per share (equal to or above market  prices when the options were issued),
and will  expire  if the  employee  leaves  us or when the  options  expire  (at
different times from 2001 to 2009).

         Separate  from the  qualified  plan, we have issued an option to Thomas
Glaza, a director,  to purchase  10,000 shares for $2.88 per share;  this option
expires in 2002 and is vested.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

         The following  table sets forth certain  information  about  beneficial
ownership  of our common stock as of Marach 24, 2000 by each person or group who
is known to own more than 5% of our common stock,  by each officer and director,
and by the officers and  directors as a group.  Except as otherwise  noted,  the
beneficial  owners have sole voting and dispositive  power with respect to their
shares. The percentages reflect 16,954,119 shares of common stock outstanding.

         The numbers in the table do not  include  385,222  shares  owned by Mr.
Arnold's wife, of which he disclaims beneficial ownership, 1,000 shares owned by
Mr.  Mathewson's  wife, and also do not include shares issuable upon exercise of
stock options which are held by the named individuals.

                                       64


<PAGE>



         Name and Address                         Amount of Shares       Percent Of Class
         ----------------                         ----------------       ----------------
<S>                                                   <C>                     <C>
         Larry G. Arnold*                             1,424,119               8.0%
         6909 S. Holly Circle
         Suite 200
         Englewood, Colorado 80112

         Kris M. Budinger**                             855,541               5.0%
         6909 S. Holly Circle, Suite 200
         Englewood, Colorado 80112

         Richard L. Millspaugh                            3,000               -0-
         6909 S. Holly Circle, Suite 200
         Englewood, Colorado 80112

         Thomas Glaza**                                   3,000               -0-
         6909 S. Holly Circle, Suite 200
         Englewood, Colorado 80112

         Ronald W. Mathewson**                            3,750               -0-
         87 Glenmoor Place
         Englewood, Colorado 80110

         Garth A. Woodland                               61,000               -0-
         6909 S. Holly Circle, Suite 200
         Englewood, Colorado 80112

         Chris A. Riggio                                500,813               3.0%
         6909 S. Holly Circle, Suite 200
         Englewood, Colorado 80112

         All Officers and Directors as a              1,443,104               8.5%
         Group (6 persons)
</TABLE>

         *        Former Director
         **       Director

Item 12.          Certain Relations and Related Transactions.

         From time to time since 1998 we have  borrowed  money from our officers
to sustain  operations and pay other expenses.  At December 31, 1999 these loans
had been paid off, in the amounts of $231,750  plus $15,098  interest  which was
paid in cash to Larry G.  Arnold,  a former  officer and  director  who resigned
February 29, 2000 (annual interest at 10%), and $150,000 (plus

                                       65


<PAGE>



annual  interest  at 12%)  which  was paid in stock to a trust  controlled  by a
member of Mr.  Budinger's  family.  The trust had loaned the  $150,000  to us in
December  1998 to pay a settlement  to a bankruptcy  trustee.  The loan from the
Budinger trust was paid by issuing  53,571 shares of restricted  common stock at
market value.

         In 1999 we borrowed $88,000 from Falcon Financial Benefit Pension Plan.
We paid off this loan plus annual  interest at 18% in 1999.  One of the trustees
of  this  Plan  is  James  Glaza,  brother  to  Thomas  Glaza  who is one of our
directors.  James  Glaza  is  associated  with  Northstar  Securities,  Inc.,  a
registered  broker-dealer  which has helped us raise  money from time to time in
private placements of our securities. In 1998 and 1999, Northstar has paid James
Glaza  approximately  $299,919 in net sales commissions  related to our sales of
securities  for his  services  as a stock  broker.  These were part of the gross
commissions  we paid to Northstar.  The  financing  activities at Northstar to a
large extent  predated  Thomas  Glaza's  appointment  to our board of directors.
Neither  Thomas  Glaza nor James Glaza are  affiliated  with  Northstar,  nor do
either of them own any stock in  Northstar,  and Thomas Glaza is not an employee
or affiliate or stockholder of the Plan.

         At December 31, 1999 we owed $101,081 in gross commissions to Northstar
Securities,  Inc. for  services  related to our private  placement  offerings of
common  stock in the last two  quarters of 1999.  Part of this payable is due to
James Glaza but the exact amount he will receive from Northstar presently is not
known to us.

Item 13. Exhibits and Reports on Form 8-K

(a)      Exhibits.
<TABLE>
<CAPTION>
                                                                                Sequential
Exhibit No.   Title of Exhibit                                                   Page No.
-----------   ----------------                                                   --------

<S>           <C>                                                                   <C>
 3.1          Articles of Incorporation                                             (1)
 3.2          By-Laws                                                               (1)
 3.3          Certificate of Amendment to Articles of Incorporation                 (1)
 4.1          Preferred Stock Designation - Series A                                (1)
 4.2          Preferred Stock Designation - Series B                                (1)
10.1          Agreement with Saturn                                                 (2)
10.2          Employment Agreement with Amendments - Larry G. Arnold                (3)
10.3          Employment Agreement with Amendments - Kris M. Budinger               (3)
10.4          Employment Agreement - Richard L. Millspaugh                          (3)
10.5          Employment Agreement - Garth Woodland                                 (3)
10.6          Consulting Agreement - Doyle & Associates, Inc.                       (3)
10.7          Employment Agreement - Chris Riggio                                   69
16.1          Letter from Cordovano & Harvey re change of accounting firms          (3)
27.1          Financial Data Schedule per Item 601(c) of Reg. S-B                   78

</TABLE>

                                       66


<PAGE>



(1)      Incorporated by reference from the like-numbered exhibit filed with the
         1933 Act registration statement on Form SB-2 (SEC no. 333-93341).

(2)      Incorporated by reference from the like-numbered exhibit filed with the
         1933 Act registration  statement on Form SB-2, Amendment No. 1 (SEC no.
         333-93341).

(3)      Incorporated by reference from the like-numbered exhibit filed with the
         1933 Act registration  statement on Form SB-2, Amendment No. 2 (SEC no.
         333-93341).

(b)      Reports on Form 8-K.

         There  were no  reports  filed  on Form  8-K  during  the last  quarter
of the fiscal year ended December 31, 1999.

                                       67


<PAGE>



                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                                           ONLINE POWER SUPPLY, INC.
                                           (Registrant)


Date: March 29, 2000                   By:        /s/   Kris M.  Budinger
                                              ----------------------------------
                                              Kris M. Budinger, CEO


                                       By:       /s/   Richard L.  Millspaugh
                                              ----------------------------------
Date: March 29, 2000                          Richard L. Millspaugh, CFO


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Date: March 29, 2000                   By:       /s/  Thomas Glaza
                                              ----------------------------------
                                              Thomas Glaza, Director

Date: March 29, 2000                   By:       /s/   Ronald W.  Mathewson
                                              ----------------------------------
                                              Ronald W. Mathewson, Director



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