FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

[X] Annual report  pursuant to section 13 or 15(d) of the Securities  Exchange
    Act of 1934 for the fiscal year ended December 31, 2000.
[ ] 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   000-29669

                            OnLine Power Supply, Inc.
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               (Exact Name of Company as Specified in its Charter)

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

 8100 South Akron Street, Suite 308, Englewood, CO              80112
---------------------------------------------------     ------------------------
    (Address of principal executive offices)                  (Zip Code)

Company's telephone Number:  (303) 741-5641

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

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

                                  COMMON STOCK
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                                (Title of Class)
                                      NONE
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                                (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required 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  as
required to file such  reports)  YES X, and (2), has been subject to such filing
requirements for the past 90 days. YES 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 2000 were $104,441.

         Aggregate market value of the voting stock held by non-affiliates as of
         March 13, 2001:  $74,375,000

         Number of common shares outstanding as of December 31, 2000: 21,243,155
         shares.

         Documents incorporated by reference:  None, except for certain exhibits
         (see Item 13).

         Transitional Small Business Disclosure Format:    Yes __   No X



<PAGE>


                 DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

         Except for the historical information,  all of the information which is
contained  in this Form  10-KSB is  comprised  of "forward  looking"  statements
within the Exchange Act of 1934.  Specifically,  all  statements  in this Report
(other than  statements of historical  fact)  regarding our financial  position,
business  strategy and plans and objectives of management for future  operations
are forward-looking  statements.  These forward-looking  statements are based on
the beliefs of  management.  These  statements  involve known and unknown risks,
including the risks  resulting from economic and market  conditions,  accurately
forecasting   operating  and  capital   expenditures   and  capital  needs,  the
uncertainties  of  litigation,  and other business  conditions.  The use in this
Report  of the  words  "anticipate,"  "believe,"  "estimate,"  "expect,"  "may,"
"will,"  "continue," and "intend" and similar words or phrases,  are intended by
us  to  identify   forward-looking   statements   (also  known  as   "cautionary
statements").  These statements reflect our current views with respect to future
events.  They are subject to the  realization  in fact of  assumptions,  but our
actual  operating  results  and  financial  performance  may  prove  to be  very
different from what we now predict or anticipate.

         Although we believe  that our  assumptions  are  reasonable,  we cannot
assure you they will prove to be correct.  Based on changing conditions,  should
any  one  or  more  of the  risks  or  uncertainties  inherent  in our  business
materialize,  or  should  any of our  underlying  assumptions  prove  incorrect,
operating results may vary substantially  from what we now anticipate,  believe,
estimate,  expect, or intend.  All subsequent  written and oral  forward-looking
statements attributable to us are expressly qualified in their entirety by these
cautionary statements.

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<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

BUSINESS DEVELOPMENT

         We  originally  organized as a Colorado  corporation  in 1991 under the
name Roth Financial  Fitness,  Inc. to market  self-help  financial  fitness and
wealth-building   videos  and  workbooks  through  infomercials  and  television
advertising.  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  music  and film
entertainment  products  through the Internet.  This business was not successful
and was abandoned in 1996.

         We entered  the  electronic  product  business in 1996 when we acquired
100%  of the  stock  of  Glitch  Master  Marketing,  Inc.  in a  stock-for-stock
transaction  treated  for  accounting  purposes  as a  recapitalization  of that
entity, with that entity as the acquiror. We kept the OnLine Entertainment, Inc.
name until December 1999.

         In 1997 we formed OnLine Power Supply, Inc., a Colorado corporation, as
a  100%  subsidiary  of  OnLine  Entertainment,   Inc.  and  with  it,  acquired
Renaissance Systems,  Inc., 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.  At the same time, we changed our name to OnLine Power  Supply,  Inc.
and at that time changed our stock symbol to "OPWR" from "ONLN." Our business is
the  design,  manufacture  and  sale  of "AC to DC"  power  supply  systems  for
electronic devices.  Through 1999 we made and sold a computer power interruption
circuit  under  the  name  "Glitch  Master."  This  part  of  our  business  was
discontinued in early 2000.

     (a)(1) FORM AND YEAR OF ORGANIZATION.  A Nevada  corporation  (originally a
Colorado  corporation  formed in 1991, then changed to Nevada corporate domicile
in 1995.)

     (a)(2) ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING.  None

     (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, 1999 or 2000.

     (b) CURRENT BUSINESS  (BUSINESS OF THE ISSUER).  We have developed patented
and patent-pending  proprietary  technology for what we believe are better power
supply systems for electronic  devices for our OnLine Power Supply,  "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.  AC-DC  devices  are  hooked up to DC-DC  devices  in the
computer.  These computers are used in personal computing,  office environments,
industrial  applications,  telecommunication  switching stations,  and a host of
other uses.

         We estimate  that the total annual United States market for the size of
AC to DC power supply  systems which we have designed and are designing to date,
and will continue to improve on with different applications, is approximately $4
billion,  meaning that original equipment manufacturers ("OEM") and end users in
the United States buy that dollar volume every year. This  represents  about 70%
of the AC-DC  device  market (the  balance of the market is for DC-DC  devices).
Another $5 billion is spent on AC-DC systems in Europe and


                                        3

<PAGE>



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, and in late 2000 we were awarded a contract to supply a
specially  designed  power  factor  correction  (PFC)  unit to fit  into a large
telecommunications    hardware    manufacturer's    new    line   of    wireless
telecommunication infrastructure. 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.

         Our  offices  are located at 8100 South  Akron,  Suite 308,  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.

         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 transformer on and
off create 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  semi-conductor controls into the switching technology
to create high efficiency systems that enhance voltage conversion.

         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 were developed,  patents filed, and limited product
orders filled starting in the fourth quarter of 2000 and have continued into the
current  fiscal year  (2001).  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 our products.  To date, a limited number of units have
been ordered by one customer. See "PFC Orders 2000 and First Quarter 2001."

         As  discussed  below  in  this  report,  manufacturing  will be done by
others, so we won't build factories.  Our products are marketed by employees and
independent distributors. We are estimating that if we obtain orders for our new
products,  our per unit sales  price  would  range from  $150.00  for the PFC to
$600.00 for the 48 volt power supply now in development. (see further discussion
in Power Supply Technology paragraph below)

                                        4

<PAGE>



PFC ORDERS 2000 AND FIRST QUARTER 2001

         In the last  quarter  of 2000,  our PFC  unit was  selected  by a large
telecommunications  company  for  incorporation  into  their  wireless  hardware
infrastructure.  We sold 600 PFC  units  for our  customer's  final  evaluation.
During this period of time and  continuing  into the first  quarter of 2001,  we
refined the PFC design for this customer.  As of March 13, 2001 we have received
purchase  orders  from this  customer  for  3,700  PFC units and more  units are
forecasted to follow with delivery dates from January through December 31, 2001.
Due to the limited order size and initial  costs to establish a production  line
at our  manufacturer,  we cannot  predict any  profitability  from these initial
sales orders.  In  anticipation  of substantial  orders being received from this
customer in the second and third  quarters of 2001,  we have ordered  additional
units to be built by our  manufacturer  and are  committed  to purchase  advance
quantities of certain  critical  components to complete the anticipated  orders.
Even though we are optimistic about the potential orders from this customer,  we
cannot  predict the amount of actual  orders  with  certainty  at this time.  We
cannot identify the customer due to  confidentiality  agreements we have signed;
however,  we will disclose their identity as soon as we have permission from the
customer to do so.

POWER SUPPLY TECHNOLOGY

         We believe our 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.  Every  electronic  product  today  uses a  20-year-old  inefficient
technology to convert and control electronic applications. Current possibilities
in electronics  "architecture"  are becoming limited by traditional 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 system 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  needed.  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.

         In late 2000, we completed our first new technology product,  the Power
Factor Corrected Front End Module. In early 2001 we finished  refinements to the
first  generation  PFC and now are selling the "PFC Rev 13" unit  version of the
PFC. The PFC 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 PFC, in general,  converts,
translates  and  conditions AC voltage from the wall plug into DC power language
that sophisticated  electronic equipment can use efficiently.  Our PFC's design,
small  size  and  weight  provide  flexibility  to  end-user  design  engineers,
particularly in the telecommunications

                                       5

<PAGE>


industry. This design allows our PFC 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 to pull constant current from the power line. It
eliminates damaging and inefficient harmonics and current spikes.

         We have obtained electrical certifications for the prototypes,  and are
completing  development of our next new AC-DC  technology,  a 48 Vdc distributed
power  supply.  We  believe  the 48 Vdc and the PFC  will  form  the  basis  for
approximately  30 product lines for different power  requirements and commercial
uses. The 48 Vdc power supply,  incorporating  our PFC technology,  could have a
very large potential market for us because of the advantages we will design into
the product and the existing use of the 48 Vdc world wide.

TECHNICAL COMPARISONS OF OPS AND TRADITIONAL POWER SUPPLY DEVICES

         We have  summarized  in the chart below the benefits of our  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 a fan to keep  moving  air over the  device  to  remove  the heat
buildup.  This  condition  also would make such a unit less reliable  because it
operates  in a  narrow  temperature  range  in  a  dramatically  smaller  space.
Therefore,  we believe that our power supply devices are smaller,  lighter, more
efficient, and more reliable. These benefits are summarized below.

                                       6

<PAGE>




OPS POWER SUPPLY FEATURES/BENEFITS        CONVENTIONAL SWITCH/LINEAR TECHNOLOGY

Weight - 1 lb. 9 ounces                           300w=5.5 lbs.
            (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 in industry     Fan required - high heat

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.

No minimum load required                          required

Power fail warning                                none

N + 1 Operation                                   N + 1 Operation

Small idling losses                               % idling losses

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

                                        7

<PAGE>


                          FEATURES/BENEFITS/DESCRIPTION
<TABLE>
<CAPTION>

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                Larger 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 recent report by Darnell  Group,  Inc.,  Norco,  California,
estimates that the worldwide  market for AC/DC  switching power supplies will be
about $9 billion, with the United States accounting for $4 billion.

         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.

INDUSTRY TRENDS

         We  believe,   over  the  next  five  years,   existing   power  supply
manufacturers will be driven by the marketplace and must improve the performance
of power supply products in order to remain competitive

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<PAGE>


and/or  continue in  business.  The  electronics  industry  is under  continuing
pressure to reduce system sizes. The present power supplies require considerable
amounts of space that must be reduced in size  within the total  system  design.
Major users of DC power supplies,  such as computers and wireless base stations,
have significantly reduced the size of their products over the last three years,
but are still requiring ever smaller packages.  The smaller the system size, the
smaller the space to fit a power supply device which delivers more power.

         Through our new  technological  approach,  we believe the OPS  products
will achieve all of the above improvements needed by the marketplace. We believe
the industry will use these  improvements to continue the race to design smaller
and lighter power supplies.  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 be  approximately  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  is  conducted  on a  sub-contract  (out-sourced)  basis.
Manufacturing  facilities have been identified with certain characteristics that
demonstrate   the  ability  to  produce   quality  and   quantity  to  meet  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 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,  and 48Vdc 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 types 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.

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<PAGE>



         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.

         In 2000, we placed our first order with Saturn to make 500 units of our
PFC product and paid $60,832 of  non-recurring  engineering  charges incurred by
Saturn's staff in connection  with the order. In 2001, we scaled this order back
to 25 because we changed the product's  design in minor respects (to develop the
"Rev. 13" version). Due to the small size of this order, we paid for these units
directly, including the engineering charges. Most of these charges involved test
equipment  required on Saturn's  production line and tooling which Saturn put in
place to build the OPS products. We own this equipment.  We will have to pay for
some similar charges as they are 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 2001; products will
be used  for  demonstration  and  promotional  purposes  with  distributors  and
potential customers.

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

         Our  initial  sales  and  marketing   strategy  is  to  sell  into  the
industrial,  telecommunication,  medical,  government,  military  markets  where
current power supply  solutions are  vulnerable  to, and can be replaced by, our
products.  These initial markets will have the greatest impact because they have
established needs that are not adequately met by current industry products. 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 our  marketing  efforts  targets  sales  to  original
equipment  manufacturers  that put  their  own brand  name on the  device.  This
requires  us to work with the  design  departments  to  satisfy  unique  product
specification demands.

         To assist in the sales to OEM's  and other  industry  markets,  we have
established a network of 13 independent  sales  representatives  and value-added
distribution  companies,   with  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 and valuable exposure 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   designated
territories of the United States,  Canada, Far East, Mexico,  South America, and
Europe.

         In the third or fourth  quarter  of 2001,  we  expect to  increase  our
in-house sales force to support the network of distributors, representatives and
OEM's. Our current  engineers are able to provide  technical support and provide
design  solutions to  significant  applications  to the key  decision  makers at
customers'

                                       10

<PAGE>


offices (their  engineers).  We will be hiring more  engineering  people in this
area as needed, probably in the second and third quarters of 2001.

(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 insignificant  player in the power industry because
the current makers of power supply devices are well-established and selling high
volumes of product. The competition has extensive resources in terms of customer
history and market  share,  manufacturing  facilities,  operating  capital,  and
distribution  channels.  We hope to compete favorably because of a superior line
of OPS  products  which are  smaller,  lighter,  cooler  running and more output
efficient.  We think our technology produces design benefits and advantages that
will  prove  attractive  to the  market  and  allow  us to  price  our  products
competitively and possibly 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 manufacturing components are off the shelf items
readily  available  from  multiple  sources;  however,  one major  component  is
presently  available from only one source in the United  States.  We have placed
long lead orders for these critical  components to insure adequate  supplies for
the timely scheduling of production at Saturn.

(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
has been  reviewed and the claim  accepted as filed by 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 2000 and 1999,  we spent  $1,410,256  and  $455,435 on research  and
development of our PFC product,  most of which will not be directly passed on to
any one customer.

(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, 2000, we employed 22 people,  21 full-time.  The number
of total employees may increase to 38 in 2001.

                                       11

<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY.

         Our new office and  laboratory  space  (occupied  February  23,  2001 )
occupies 9,500 square feet of space and is leased through February 28, 2006 at a
net rental rate of $10.50 per square foot per year. These offices were remodeled
for our purposes and are suitable for our current level of administrative staff,
engineering  research and development  areas, and sales. If we continue to grow,
we may have to lease more space in the same  building  later (we have a right of
first refusal to rent more contiguous  space in 2002). We have general  business
insurance  coverages for product  liability,  personal  injury,  fire damage and
other casualty losses,  in amounts we think are adequate.  We don't own any real
estate.

ITEM 3.  LEGAL PROCEEDINGS.

         A claim for damages  against us  (totaling  $390,000  from a court case
dating back to 1994) is being appealed to a Federal District Court Judge after a
Magistrate  ruled in our favor on the case in 1999.  The original  claim was the
result  of an  aborted  merger  attempt  between  Max  Music,  Inc.  and  OnLine
Entertainment,  Inc. in 1994. The Magistrate recommended that the District Court
enter judgment in our favor on the alleged claims.

         The trustee for the claimant (Max Music, Inc.) then filed objections to
the  Magistrate's  findings and we have filed a reply to the objections with the
District  Court Judge.  We believe our position  will be upheld on appeal due to
the original  trying of facts in the case, but as in any litigation  proceeding,
the ultimate resolution is still unresolved and remains uncertain.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         On December 7, 2000,  the  shareholders  voted to approve the following
matters at the annual shareholders' meeting:

     1.  Re-elect the Directors.

                                            For             Against      Abstain
                                            ---               ---          ---
         Kris M. Budinger                  11,250,531       28,170        77,079
         Thomas Glaza                      11,210,231       68,470        77,079
         Ronald W. Mathewson               11,250,531       28,170        77,079
         Gary R. Fairhead                  11,250,531       28,170        77,079

       2.Ratify appointment of auditors.

                                            For             Against      Abstain
                                            ---               ---          ---
                                           11,305,359       16,391        34,030


                                       12

<PAGE>


                                     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." The high and low bid  quotations  for the common  stock for the last two
full years were as follows:

     QUARTER ENDED                       HIGH                       LOW
     -------------                       ----                       ---

     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

     March 31, 2000                      $29.94                     $6.00
     June 30, 2000                       $13.75                     $5.38
     September 30, 2000                  $ 9.97                     $5.31
     December 31, 2000                   $11.03                     $5.69

         At March 13, 2001, we had 9 shareholders  of record owning 2,800 shares
of preferred stock (without  designation),  and approximately 1,917 shareholders
of record owning 21,243,155 shares of common stock.

         We have not declared any dividends on the common stock and don't expect
to declare any  dividends  in the  foreseeable  future.  We will keep any future
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 audited
financial  statements  filed  with  this  report.   Except  for  the  historical
information  contained herein,  this report contains forward looking  statements
that involve risks and uncertainties,  including  manufacturing risks associated
with   implementing   new   process   technology,   achieving   commercial-scale
manufacturing  levels,  achieving consistent yields and quality,  uncertainty of
market  acceptance  and  timing of market  acceptance,  as well as other  risks.
Please see "Disclosure Regarding Forward Looking Statements" at the beginning of
this report.

BUSINESS PLAN STRATEGY

         Following   the  shutdown  of  our  other   product   line   activities
(GlitchMaster  circuits) at the end of 1999,  we have  focused on improving  the
patent pending  technology now being marketed as a Power Factor  Corrected Front
End  Module.  (PFCFEM,  also  referred  to as the "PFC  unit").  The  technology
produces  a unique  module  that is lighter  in  weight,  smaller in size,  more
reliable,  cooler  to  operate  and can be  designed  into most  other  existing
applications   for   AC/DC   power   conversion   because   of  these   enabling
specifications.

         Product design  engineers were the primary  targets of the sales effort
throughout  the year 2000. A large  telecommunications  company has designed the
PFC unit into the power controls of their wireless communications infrastructure
program. Deliveries of evaluation units late in 2000 to this company have led to
an initial  customer  forecast (to be ready) to supply 40,023 units during 2001,
and an additional  20,448 units in the first  quarter 2002,  but this is just an
estimate and actual orders and sales will be  determined by sequential  purchase
orders for actual numbers of units and actual delivery dates.  Other Fortune 100
companies are currently testing the technology,  possibly for designing our unit
into  their  product  applications;  orders  from  new  customers  in  2001  are
anticipated as evaluations are completed.

                                       13

<PAGE>


         An intensive  advertising  and marketing  campaign,  developed with the
help of one of the largest  public  relations  agencies in the Denver area,  has
placed our product  information  with our  targeted  audience  and  programmed a
sequence of  advertisements in industry  specific  publications  aimed at design
engineers. Our website contains information about the company and the technology
that has led to frequent requests for additional product  information and sample
units.   Many  potential  users  of  the  technology  want  to  wait  until  our
follow-along  48-volt  power supply  product line is available  from us later in
2001.

         Production  of the  units  is  outsourced  to  Saturn  Electronics  and
Engineering Inc. with the first large volume production runs scheduled for March
2001 and continuing thereafter. The production line at Saturn is fully automated
and has been customized with various testing and assembly  equipment  components
to allow  large  volumes of units to be  manufactured  with a minimum  amount of
problems.  In anticipation of current and anticipated  orders, long lead product
components  have been ordered from our suppliers to insure timely  deliveries of
parts for manufacturing.

         Unexpected  delays in  finalizing  the PFC  occurred  while we solved a
customer's request for higher operating specifications, which resulted in a slow
start to sales of this line  (small  scale sales  started in the fourth  quarter
2000)  while  research  and  development  and  general  administrative  overhead
expenses continued. Sales and deliveries of the PFC started in the first quarter
of 2001.  The net  result of this  decision  to design  the PFC to meet a common
wireless  telecommunication   application  is  a  more  desirable  product  with
applications in many other hostile  environments.  The better product affords us
more "competitive distance" between the capabilities of our unit and other AC/DC
units known to be available in the market place today. In addition, the improved
product will be  incorporated  into the 48-volt power supply product line now in
design stages, and will shorten the new product line's lead time to market.

         Our short term business strategy is to increase our product  technology
awareness by delivering  our message to the power  industry and to our potential
customers   through   representatives,   a  network  of   distributors,   direct
advertising,  the website and through our  attendance at various power  industry
trade show events.  The PFC unit serves to introduce our new design concepts for
power correction to design engineers, while the new 48-volt unit, expected to be
introduced in 2001,  will be marketed as the preferred  power supply product for
many industrial applications.

         The timeline to introduce  changes of this magnitude to a market can be
long; however, we have already captured the attention of a significant number of
major players in the power supply manufacturing  industry.  Continuing education
for the product  designers  about the  strategic  design  advantages  of the new
technology  should  lead to other  "design  in" awards and  supplier  agreements
similar to the existing wireless  telecommunication  infrastructure  application
for which we have existing orders.

ANALYSIS OF FINANCIAL CONDITION

         Cash and short-term investments were $5,041,000 at January 1, 2000; the
final  proceeds from private  sales of common stock added another  $7,352,000 of
cash for  working  capital  in the first  quarter of 2000.  Therefore,  cash and
short-term investments at December 31, 2000 were approximately  $8,899,000 after
the losses in operations  for the year  consumed  approximately  $3,192,500  and
capital asset purchases totaled approximately $274,400. Approximately $27,100 of
cash was consumed for various balance sheet items.

         The relocation of the corporate offices and laboratory in February 2001
required  approximately  $200,000  in cash;  however,  now the  ongoing  cost of
occupancy will only increase approximately $2,500 per month for the net addition
of 5,000 square feet (50 %). The  remainder of operating  costs,  including  all
research and  development,  are  estimated to average  $300,000  cash per month.
Purchases of  production  line  equipment  and  component  parts are budgeted to
require another $ 300,000 in cash during 2001.

                                       14

<PAGE>


         Our present cash and short-term  investments,  plus the interest earned
thereon,  will sustain  operations at present  budgeted  levels until the end of
2002  without  any net sales  revenues,  debt  financing  or  raising  of equity
capital.  Revenues  will begin in the first quarter of 2001 and are projected to
continue  with  an  existing  (and  potential  large  volume)  customer  in  the
telecommunications industry.

         The present office and laboratory space (moved into March 1, 2001) will
accommodate  40-45  employees  and we expect to reach that level in the last two
quarters  of 2002;  a  contiguous  space  totaling  2,025  square  feet could be
available  to us in 18 months  on a first  right of  refusal  basis to allow for
growth beyond the existing leasehold.

         Our current ratio (current  assets over current  liabilities)  is 15:1.
Our quick ratio  (defined as cash over accounts  payable) is 10:1  Shareholders'
equity at December  31, 2000 is  $9,299,450  or $ .44 per  outstanding  share of
stock. We have incurred no significant debt to support operations,  except for a
$43,066  bank  loan used for  purchasing  equipment  and  $64,541  in  remaining
equipment lease obligations.

         As a result of the offer by the company in 1999 to refund certain stock
investments  made by  shareholders  in 1998 and 1999,  a reserve for a potential
liability was recorded at December 31, 1999 totaling  $1,281,815.  The offer was
extended to approximately 360 investors and no one requested to have their money
returned  to  cancel  their  investment.  Therefore,  all of the  $1,281,815  in
potential rescission liability was reclassified as equity capital  contributions
accordingly during 2000.

RESULTS OF OPERATIONS

         The year over year  analysis of the net operating  revenues  reflects a
shutdown of the business of selling  GlitchMaster  products during 1999 and only
nominal  sales  (for  evaluation  purposes)  of the PFC unit  during  the fourth
quarter of 2000.  Revenue  in 1999 is for a  discontinued  product  line and the
revenue in 2000 is the result of  deliveries  of sample units of the new product
line. Some of the non-recurring  engineering costs (at Saturn) have been charged
to the first  production line units of the PFC in 2000 and produced a gross loss
of $30,687  because the resulting  total absorbed cost of each unit exceeded the
selling price to the customers.

         At the end of 1999,  the  development  effort  to  complete  the  newly
patented  technology was in full operation.  The company had 19 full time people
dedicated to making bench test and prototype  units,  introducing the technology
to the customers and achieving a fully reporting company  administration  level.
Overhead for 2000 grew from $175,000 per month to $300,000 per month as the head
count increased,  legal and accounting  increased and other costs increased as a
result  of the out  placement  of the  public  relations,  advertising,  certain
marketing, and investor relations functions.

         The research and  development  costs,  including  test parts,  contract
manufacturing  of boards and  housings,  independent  lab  testing of the units,
travel costs associated with the  establishment  of the contract  manufacturer's
agreement and general costs of the laboratory operation, increased from $455,435
in 1999 to $1,410,256 in 2000. The benefit of spending six additional  months in
2000 and an additional  $1,000,000 is the improvement of the PFC unit (initially
completed in December,  1999) to include a greater operating voltage range, more
advantageous EMI levels, a smaller housing,  greater reliability,  added startup
and  sharing  features,  as  well  as  overall  improved  operating  performance
specifications.

         Non cash stock based  compensation  cost of $363,117 for the year ended
December  31,  2000 was the result of  recording  of the  estimated  cost to the
company of exercised  stock options by certain  ex-employees  as required by the
recent FIN 44 and other accounting pronouncements.  These options were exercised
on a "cashless"  basis,  a feature of our  incentive  stock option plan that has
since been discontinued.

                                       15

<PAGE>


         Selling,  general and administrative expenses increased from $1,096,891
in 1999 to  $2,493,268 in 2000,  partially as a result of several  non-recurring
expense items: (A) $244,033 to record the severance  package of a senior officer
who retired during 2000; (B) $150,000 of increased legal and accounting costs to
become an SEC full reporting company; and (C) the cost for initiating the public
and investor relations  programs of approximately  $384,000 and upfront costs of
marketing and advertising costs totaling approximately $285,000.

         Sales  of the  PFC  and  the  awaited  completion  and  release  of the
developing 48-volt power supply should result in quarter over quarter increasing
sales during 2001.  Operating  losses are still expected  during the first three
quarters  of the year,  however,  sufficient  sales in the  fourth  quarter  may
generate  profits for the quarter and help  reduce or  eliminate  any  operating
losses for the full year. The costs of research and development will continue at
levels  experienced  in 2000 and may increase  during 2001 as the laboratory and
support staff continues to grow.

ITEM 7.  FINANCIAL STATEMENTS.

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


                                     16

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES



                                Table of Contents

                                                                          Page

Independent Auditors' Report.................................................18

Consolidated Financial Statements

        Consolidated Balance Sheet...........................................19

        Consolidated Statements of Operations................................20

        Consolidated Statement of Shareholders' Equity ......................21

        Consolidated Statements of Cash Flows................................23

Notes to Consolidated Financial Statements...................................25


                                       17

<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,  2000  and  the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
the years  ended  December  31,  2000 and  1999.  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 audits.

We  conducted  our  audits  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  audits
provide 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,  2000  and the  results  of  their
operations  and their cash flows for the years ended  December 31, 2000 and 1999
in conformity with generally accepted accounting principles.





                                            Ehrhardt Keefe Steiner & Hottman PC
February 16, 2001
Denver, Colorado


                                       18

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet
                                December 31, 2000
<TABLE>
<CAPTION>


                                                             Assets
Current assets
<S>                                                                                  <C>
   Cash                                                                              $  3,181,728
   Certificates of deposit                                                                650,000
   Short term investments in commercial paper                                           5,067,156
   Accounts receivable, net of allowance for uncollectible
    accounts totaling $187                                                                 29,819
   Other receivable                                                                        40,050
   Inventory                                                                               79,643
   Accrued interest receivable                                                             50,239
   Prepaid expenses                                                                       128,184
                                                                                     ------------
         Total current assets                                                           9,226,819

Property and equipment, less accumulated depreciation of $138,148                         434,437
Equipment under capital leases, less accumulated depreciation of $28,987                   72,976
Goodwill, less accumulated amortization of $157,076                                       104,718
Acquired technology costs, less accumulated amortization of $76,440                        50,960
Patent, less accumulated amortization of $8,387                                            58,582
Other assets                                                                               18,114
                                                                                     ------------
Total assets                                                                         $  9,966,606
                                                                                     ============

<CAPTION>
                                              Liabilities and Shareholders' Equity
Current liabilities
<S>                                                                                  <C>
   Accounts payable                                                                  $    379,836
   Equipment note payable, current maturity                                                19,840
   Current maturities on capital lease obligations                                         31,212
   Accrued interest payable                                                                19,063
   Officer's retirement liability                                                         108,000
   Other                                                                                   52,650
                                                                                     ------------
         Total current liabilities                                                        610,601
                                                                                     ------------
Long-term liabilities
   Capital lease obligations, less current maturities                                      33,329
   Note payable, less current maturity                                                     23,226
Total long-term liabilities                                                                56,555
                                                                                     ------------
         Total liabilities                                                                667,156
                                                                                     ------------

Shareholders' equity
   Preferred stock, $.0001 par value; 1,000,000 shares authorized; 2,800 shares
    issued and outstanding                                                                   --
   Common stock; $.0001 par value; 50,000,000 shares authorized; 21,243,155
    shares issued and outstanding                                                           2,124
   Additional paid-in capital                                                          29,277,729
   Stock option notes receivable                                                          (83,127)
   Retained deficit                                                                   (19,897,276)
                                                                                     ------------
         Total shareholders' equity                                                     9,299,450
                                                                                     ------------
Total liabilities and shareholders' equity                                           $  9,966,606
                                                                                     ============

</TABLE>
                 See notes to consolidated financial statements

                                       19

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                         For the Years Ended
                                                             December 31,
                                                     ----------------------------
                                                         2000            1999
                                                     ------------    ------------
<S>                                                  <C>             <C>
Net sales                                            $    104,441    $    299,408
Cost of sales                                             135,128         233,386
                                                     ------------    ------------
     Gross profit (loss)                                  (30,687)         66,022
                                                     ------------    ------------
Other operating costs and expenses
   Research and development                             1,410,256         455,435
   Stock-based compensation                               363,117            --

Selling, general and administrative expenses            2,493,268       1,096,891

Other
   Loss on sale of assets                                   2,983             437
   Loss on write-down of inventory                           --            41,616
   Gain on settlement of accounts payable                    --            (3,314)
                                                     ------------    ------------
                                                        4,269,624       1,591,065
                                                     ------------    ------------
     Loss from operations                              (4,300,311)     (1,525,043)

Interest income                                           551,018          15,421
Interest (expense)                                        (37,079)        (50,733)
Losses from litigation settlements                           --           (28,000)
                                                     ------------    ------------
     Net (loss)                                        (3,786,372)     (1,588,355)

Preferred stock dividends                                    --        (4,949,407)
                                                     ------------    ------------

Net (loss) available to common shareholders          $ (3,786,372)   $ (6,537,762)
                                                     ============    ============

Basic weighted average common shares outstanding       19,119,813      12,491,158
                                                     ============    ============

Basic loss per common share                          $       (.20)   $      (0.13)
                                                     ============    ============

Diluted weighted average common shares outstanding     19,119,813      12,491,158
                                                     ============    ============

Diluted loss per common share                        $       (.20)   $      (0.13)
                                                     ============    ============
</TABLE>

                 See notes to consolidated financial statements

                                       20

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                 Consolidated Statement of Shareholders' Equity
                   December 31, 1998 through December 31, 2000

<TABLE>
<CAPTION>

                                                                                                               Series A Cumulative
                                                                                 Preferred Stock                 Preferred Stock
                                                                              -----------------------     --------------------------
                                                                                                                             Stated
                                                                              Shares        Par Value        Shares          Value
                                                                              --------      ---------      ---------      ----------
<S>                                                                             <C>                        <C>            <C>
Balance, December 31, 1998                                                      12,467              1       125,000        250,000

Cumulative preferred stock issued in private placement                            --             --          25,600         51,200

Common stock issued for services                                                  --             --            --             --

Common stock issued for sales commissions                                         --             --            --             --


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

Common stock issued for retirement of debt                                        --             --            --             --

Common stock issued in private placement                                          --             --            --             --

Stock offering costs                                                              --             --            --             --

Stock subject to rescission                                                       --             --            --             --

Declaration of 6% preferred stock dividend on cumulative preferred stock          --             --           7,860         15,720

Conversion of cumulative preferred stock to common stock                          --             --         (33,460)       (66,920)

Net (loss) for the year ended December 31, 1999                                   --             --            --             --
                                                                              ---------     ---------      ---------      ---------
</TABLE>


                 See notes to consolidated financial statements

                                      21a

<PAGE>


                  ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                 Consolidated Statement of Shareholders' Equity
                   December 31, 1998 through December 31, 2000
                               (continued)
<TABLE>
<CAPTION>
                                                                                 Series B Cumulative
                                                                                   Preferred Stock                Common Stock
                                                                              ------------------------    --------------------------
                                                                                              Stated
                                                                                Shares        Value         Shares         Par Value
                                                                              ---------     ---------     ----------       ---------
<S>                                                                           <C>            <C>           <C>                <C>
Balance, December 31, 1998                                                        --             --       11,846,826          1,185

Cumulative preferred stock issued in private placement                         272,750        545,501           --             --

Common stock issued for services                                                  --             --           25,000              2

Common stock issued for sales commissions                                         --             --          336,350             34

Conversion of non-cumulative preferred stock to common stock                      --             --          254,000             25

Common stock issued for retirement of debt                                        --             --           53,571              5

Common stock issued in private placement                                          --             --        3,222,104            322

Stock offering costs                                                              --             --             --             --

Stock subject to rescission                                                       --             --       (1,243,151)          (124)

Declaration of 6% preferred stock dividend on cumulative preferred stock        26,574         53,148           --             --

Conversion of cumulative preferred stock to common stock                      (299,324)      (598,649)     1,216,268            122

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

</TABLE>


                 See notes to consolidated financial statements

                                      21b

<PAGE>

                  ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                 Consolidated Statement of Shareholders' Equity
                   December 31, 1998 through December 31, 2000
                               (continued)
<TABLE>
<CAPTION>

                                                                             Additional     Stock                          Total
                                                                              Paid-in    Option Notes     Retained     Shareholders'
                                                                              Capital     Receivable      (Deficit)        Equity
                                                                             ---------    -----------    -----------   -------------
<S>                                                                         <C>           <C>            <C>            <C>
Balance, December 31, 1998                                                   8,879,706    $      --      $(9,573,142)     (442,250)

Cumulative preferred stock issued in private placement                            --             --            --          596,701

Common stock issued for services                                                62,835           --            --           62,837

Common stock issued for sales commissions                                      252,229           --            --          252,263

Conversion of non-cumulative preferred stock to common stock                   249,975           --            --             --

Common stock issued for retirement of debt                                     149,995           --            --          150,000

Common stock issued in private placement                                     6,443,891           --            --        6,444,213

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

Stock subject to rescission                                                 (1,281,691)          --            --       (1,281,815)

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

Conversion of cumulative preferred stock to common stock                     6,117,587           --            --        5,452,140

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

</TABLE>

                 See notes to consolidated financial statements

                                       21c

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                 Consolidated Statement of Shareholders' Equity
                   December 31, 1998 through December 31, 2000
                                  (continued)

<TABLE>
<CAPTION>

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

<S>                                                                          <C>          <C>                <C>       <C>
Balance, December 31, 1999                                                   10,467              1           --            --

Conversion of non-cumulative preferred stock to common stock                 (7,667)            (1)          --            --

Stock offering costs (36,624 shares issued at $2 per share included)           --             --             --            --

Common stock issued in private placement                                       --             --             --            --

Reverse rescission liability                                                   --             --             --            --

Stock exchanged for public relations fees                                      --             --             --            --

Stock exchanged for consulting services                                        --             --             --            --

Warrants granted for investor relations services                               --             --             --            --

Stock issued in exercise of options                                            --             --             --            --

Options granted (directors)                                                    --             --             --            --

Net (loss) for the year ended December 31, 2000                                --             --             --            --
                                                                            --------      ----------     -----------   ----------
Balance, December 31, 2000                                                    2,800       $   --             --        $   --
                                                                            ========      ==========     ===========   ==========
</TABLE>

                 See notes to consolidated financial statements

                                      22a


<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                 Consolidated Statement of Shareholders' Equity
                   December 31, 1998 through December 31, 2000
                                  (continued)

<TABLE>
<CAPTION>

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

<S>                                                                         <C>           <C>           <C>            <C>
Balance, December 31, 1999                                                         --          --       15,710,968         1,571

Conversion of non-cumulative preferred stock to common stock                       --          --           15,334             1

Stock offering costs (36,624 shares issued at $2 per share included)               --          --           36,624             4

Common stock issued in private placement                                           --          --        4,148,216           415

Reverse rescission liability                                                       --          --        1,243,151           124

Stock exchanged for public relations fees                                          --          --           10,000             1

Stock exchanged for consulting services                                            --          --            8,124             1

Warrants granted for investor relations services                                   --          --             --            --

Stock issued in exercise of options                                                --          --           70,738             7

Options granted (directors)                                                        --          --             --            --

Net (loss) for the year ended December 31, 2000                                    --          --             --            --
                                                                            ----------    ----------    ----------     ---------
Balance, December 31, 2000                                                         --     $    --       21,243,155     $   2,124
                                                                            ==========    ==========    ==========     =========
</TABLE>

                 See notes to consolidated financial statements

                                      22b

<PAGE>

                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                 Consolidated Statement of Shareholders' Equity
                   December 31, 1998 through December 31, 2000
                                  (continued)

<TABLE>
<CAPTION>
                                                                         Additional        Stock                          Total
                                                                          Paid-in       Option Notes     Retained     Shareholders'
                                                                          Capital        Receivable      (Deficit)        Equity
                                                                         ---------       -----------    -----------   -------------

<S>                                                                    <C>             <C>             <C>             <C>
Balance, December 31, 1999                                               19,914,828            --       (16,110,904)      3,805,496

Conversion of non-cumulative preferred stock to common stock                   --              --              --              --

Stock offering costs (36,624 shares issued at $2 per share included)       (944,825)           --              --          (944,821)

Common stock issued in private placement                                  8,296,017            --              --         8,296,432

Reverse rescission liability                                              1,281,691            --              --         1,281,815

Stock exchanged for public relations fees                                    59,999            --              --            60,000

Stock exchanged for consulting services                                      24,934            --              --            24,935

Warrants granted for investor relations services                            135,065            --              --           135,065

Stock issued in exercise of options                                         446,237         (83,127)           --           363,117

Options granted (directors)                                                  63,783            --              --            63,783

Net (loss) for the year ended December 31, 2000                                --              --        (3,786,372)     (3,786,372)
                                                                       ------------    -------------   -------------   -------------
Balance, December 31, 2000                                             $ 29,277,729    $    (83,127)   $(19,897,276)   $  9,299,450
                                                                       ============    =============   =============   =============
</TABLE>


                 See notes to consolidated financial statements

                                       22c

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                     For the Years Ended
                                                                                        December 31,
                                                                                --------------------------
                                                                                    2000           1999
                                                                                -----------    -----------
Cash flows from operating activities
<S>                                                                             <C>            <C>
   Net loss                                                                     $(3,786,372)   $(1,588,355)
   Adjustments to reconcile net loss to net cash used in operating activities
     Depreciation and amortization                                                  199,080        116,821
     Gain on write-off of accounts payable                                             --           (3,314)
     Stock based compensation                                                       363,117           --
     Options issued for services                                                    198,848           --
     Common stock issued for services                                                84,935         62,839
     Write-down of inventory to fair value                                           37,368         41,616
     Loss on sale of asset                                                            2,983            437
     Changes in certain assets and liabilities
       Receivables, inventory and other current assets                             (306,364)        (1,673)
       Accounts payable and other current liabilities                                13,912         58,213
                                                                                -----------    -----------
                                                                                    593,879        274,939
                                                                                -----------    -----------
         Net cash (used in) operating activities                                 (3,192,493)    (1,313,416)
                                                                                -----------    -----------
Cash flows from investing activities
   Cash received from maturity of certificates of deposit                         2,450,000           --
   Purchases of equipment                                                          (274,437)      (125,641)
   Payments to acquire patent                                                       (41,438)       (23,977)
   Purchases of certificates of deposit                                                --       (3,100,000)
   Purchases of short term investments                                           (5,067,156)          --
                                                                                -----------    -----------
         Net cash (used in) investing activities                                 (2,933,031)    (3,249,618)
                                                                                -----------    -----------
Cash flows from financing activities
   Proceeds from sale of stock                                                    8,296,432      7,040,914
   Payments for offering costs                                                     (944,821)      (495,973)
   Principal payments on capital leases                                             (28,061)        (9,362)
   Payments on line of credit                                                          (731)          --
   Proceeds from debt issuance                                                       60,000        177,000
   Principal debt payments                                                          (16,934)      (359,519)
                                                                                -----------    -----------
         Net cash provided by financing activities                                7,365,885      6,353,060
                                                                                -----------    -----------
Net increase in cash                                                              1,240,361      1,790,026

Cash - beginning of year                                                          1,941,367        151,341
                                                                                -----------    -----------
Cash - end of year                                                              $ 3,181,728    $ 1,941,367
                                                                                ===========    ===========
</TABLE>

(Continued on next page.)

                See notes to consolidated financial statements.

                                       23

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES


(Continued from previous page.)


Supplemental disclosure of cash flow information:
         Cash paid for  interest  during the years ended  December  31, 2000 and
          1999 was $28,651 and $56,009, respectively.

Non-cash investing and financing transactions:
         Conversion of debt to common stock for the year ended December 31, 1999
was $150,000.
         Acquisition  of  equipment  under  capital  leases for the years  ended
          December 31, 2000 and 1999 was $24,002 and $77,962, respectively.
         During  the  year  ended  December  31,  2000,   7,667  shares  of  the
          outstanding  preferred  stock were converted into 15,334 shares of the
          Company's common stock.
         Warrants for the  purchase  of 70,501  shares of the  Company's  common
          stock were  exercised  during the year ended  December  31,  2000 with
          notes totaling $154,205 received as consideration.
         The Company  issued 36,624 shares of common stock during the year ended
          December 31, 2000 as payment for costs related to the private offering
          of stock for sale.
         During the year ended  December 31, 2000 the liability for common stock
          rescission was  reclassified  to common stock and  additional  paid-in
          capital upon expiration of the rescission rights.


                 See notes to consolidated financial statements

                                     24

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

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.

Basis of Consolidation
----------------------

The  consolidated  financial  statements  for the year ended  December  31, 1999
include  the   accounts  of  OnLine  Power   Supply,   Inc.   (formerly   OnLine
Entertainment, Inc.) and its wholly owned subsidiaries, Glitch Master Marketing,
Inc.  and  OnLine  Power  Supply,  Inc.  (collectively,   the  "Company").   All
significant  inter-Company  transactions  and accounts  were  eliminated  in the
consolidated  financial statements.  The financial statements for the year ended
December  31,  2000 are for Online  Power  Supply  Inc.,  the  remaining  parent
Company,  after the wholly owned subsidiaries were liquidated into the parent at
December 31, 1999.

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.


                                       25

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------

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 power supply  manufacturing  component parts purchased in
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.  The  inventory of
parts will be used in the  manufacture of the power factor  corrected  front end
modules during the next operating cycle and the quantities are necessary to meet
the production  scheduling without interruptions caused by delays related to the
parts procurement process.

Property, Depreciation and Maintenance
--------------------------------------

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.  Total  amortization  expense for the years ended  December 31,
2000 and 1999 is $85,733 and $78,150  respectively.  Amortization  expense of $0
(2000) and $25,791 (1999) has been recorded as research and development costs.

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.


                                       26

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------

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.

Reclassifications
-----------------

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

Impairment of Long-Lived Assets
-------------------------------

The  Company  follows  Statement  of  Financial  Accounting  Standard  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.

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.

Marketable Securities
---------------------

The Company  classifies  its investment  securities in one of three  categories:
trading,  available-for-sale or held-to-maturity.  Trading securities are bought
and  held  principally  for  the  purpose  of  selling  them in the  near  term.
Held-to-maturity  securities  are those  securities in which the Company has the
ability and intent to hold the security until maturity. All other securities not
included in trading or held-to-maturity are classified as available-for-sale.

Held-to-maturity  securities  are recorded at amortized  cost,  adjusted for the
amortization   or   accretion   of   premiums   or   discounts.    Trading   and
available-for-sale  securities  are recorded at fair value.  Unrealized  holding
gains and losses on trading  securities  are  included in  earnings.  Unrealized
holding  gains and losses on  available-for-sale  securities  are excluded  from
earnings and are reported as a separate  component of stockholder's and member's
equity until realized.  Transfers of securities  between categories are recorded
at fair value at the date of transfer.


                                       27

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------

Marketable Securities (continued)

Realized gains and losses for securities  classified as  available-for-sale  and
held-to-maturity are recognized in earnings upon sale or redemption at maturity.
The specific  identification  method is used to determine the cost of securities
sold.   Discounts   or   premiums   are   accreted   or   amortized   using  the
level-interest-yield  method to the  earlier of the call date or maturity of the
related held-to-maturity security.

The Company  accounts for its  short-term  investments  in  commercial  paper as
held-to-maturity securities recorded at amortized cost.


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  Employees"  (APB25).  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  basis  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 5.

Earnings (Loss) Per Common Share
--------------------------------

Basic earnings per common share have been computed based on the weighted average
number of common  shares  outstanding.  Diluted  earnings per share  reflect 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 2000 and 1999,
respectively,  3,447,421  and  1,966,568  shares were  excluded from the diluted
earnings per share calculation,  as these shares were  anti-dilutive.  Had these
shares been included in the calculation,  diluted weighted average common shares
outstanding  would have increased to 21,708,531 and 14,776,519 in 2000 and 1999,
respectively.


                                       28

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------

Concentrations and Credit Risk
------------------------------

The Company has concentrated its credit risk for cash by maintaining deposits in
financial  institutions and  institutional  money market accounts,  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  $8,598,884 at December 31, 2000 and  $4,847,344
at December 31, 1999, for the excess of the deposit liabilities  reported by the
financial  institution  over the amount that would have been  covered by federal
insurance.  The Company has not  experienced any losses to date in such accounts
and believes that any future risk of losses is minimal.

Approximately  53% of the  Company's  net sales in 2000 were from one  customer.
Another  customer was  responsible  for  approximately  48% of the Company's net
sales in 1999.


NOTE 2 - PROPERTY AND EQUIPMENT
-------------------------------

Property and equipment consisted of the following:

                                                      December 31,
                                                 ----------------------
                                                   2000          1999
                                                 ---------    ---------
Furniture and fixtures                           $  23,145    $  13,500
Trade show exhibit booth                            96,343       96,343
Engineering and other equipment                    415,040      181,740
Computers                                           90,444       79,162
Software                                            49,576       24,465
                                                 ---------    ---------
                                                   674,548      395,210
Less accumulated depreciation                     (167,135)     (69,906)
                                                 ---------    ---------
                                                 $ 507,413    $ 325,304
                                                 =========    =========

Depreciation  expense for the years  ended  December  31, 2000 and 1999  totaled
$113,347  and  $38,671,  respectively.  In 2000  and  1999,  $0 and  $15,567  of
depreciation expense was included in research and development costs.


                                       29

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 3 - SHORT-TERM DEBT
------------------------

Short-term debt consisted of the following note payable:
                                                                December 31,
                                                           ---------------------
                                                             2000        1999
                                                           --------    ---------
Note payable to bank,  collateralized
by equipment and certificates of deposit,
due in monthly installments of $1,866
including interest and matures January 2003.               $ 19,840    $      --
                                                           --------    ---------

Line-of-Credit
--------------

The  Company  had a  $50,000  revolving  line-of-credit,  which was paid in full
during 2000.

Stock Rescission Offer
----------------------

The Board of  Directors  approved  on  December  1, 1999 the  conversion  of all
preferred A & 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 conducted without a proper exemption
pursuant to the  regulations in the Securities Act of 1933. A liability has been
accrued at December 31, 1999 in the amount of original shareholder's  investment
plus 7% interest per annum for 18 months.  The rescission offer expired in April
2000  without  any  requests  for  refunds  of  the  shareholders'  investments,
therefore,  100% of the  liability  was reversed and restored as equity in April
2000.

NOTE 4 - OTHER LIABILITIES
--------------------------

During  1994 and 1995,  the  Company  incurred  approximately  $118,000 of trade
payables  as  a  result  of a  discontinued  line  of  business.  The  remaining
liabilities  total  $65,340 at December 31, 2000.  Some are secured by judgments
against the Company and some of the  creditors  are not  currently  pursuing the
payment of their claims.


NOTE 5 - SHAREHOLDER'S EQUITY
-----------------------------

Preferred Stock
---------------

On December 7, 1999, the Company's Board of Directors  approved the payment of a
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.


                                       30

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 5 - SHAREHOLDER'S EQUITY (CONTINUED)
-----------------------------------------

Preferred Stock (continued)
---------------------------

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 of $1.00 per
common share.  The  resulting  conversion  transaction  resulted in a beneficial
conversion to the shareholders and a charge to the Company of $4,901,438,  which
is the  difference  of the  current  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.

Roth Financial  Fitness,  Inc. issued preferred shares in 1992 with the right to
convert to common  shares.  At December 31, 2000, all except 2,800 shares of the
preferred shares had been converted by the shareholders.

Common Stock
------------

Beginning  in  August  1999  and  ending  in  March  2000,  the  Company  raised
$14,740,645 in equity capital by selling  7,370,320 shares of restricted  common
stock in  private  placement  transactions  to  approximately  2,000  accredited
investors.

The Company  circulated three separate private  placement  memorandums  offering
shares of $.0001 par value common stock of the Company during 1999 and 2000. 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 under an exemption from  registration
pursuant the ACT. The broker dealers were paid a commission up to ten percent of
the  subscriptions  accepted  by the  Company.  Offering  commissions  were paid
utilizing a combination  of cash and restricted  common stock.  The officers and
directors of the Company did not receive any  commissions or  compensation  from
these offerings.

Following is a summary of the offerings undertaken:
<TABLE>
<CAPTION>

                                             1999 No. 1            1999 No.2             2000
                                             ----------            ---------             ----

<S>                                         <C>                 <C>                 <C>
Offering price per share                    $2.00 per share     $2.00 per share     $2.00 per share
Number of shares sold                             2,473,533             748,571           4,148,216
Proceeds, before costs and expenses         $     4,947,071     $     1,497,142     $     8,296,432
</TABLE>

                                       31

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 5 - SHAREHOLDER'S EQUITY (CONTINUED)
-----------------------------------------

Non-Qualified Stock Options
---------------------------

On September 1, 1999, the Board of Directors  granted  non-qualified  options to
purchase  523,000 and 500,000  shares of common stock to two key  executives  in
accordance  with the  terms of their  employment  agreements.  The  options  are
exercisable  at $3.00 per share and vest over five  years;  none of the  options
have been  exercised  as of December  31, 2000 and will expire on  September  1,
2009.

On June 28, 2000, the Board of Directors granted 100,000 non-qualified executive
options to purchase  shares of common  stock to a senior  officer in  accordance
with his employment  agreement.  The options are  exercisable at $4.50 per share
and vest over five years.  None of the options  were  exercised  at December 31,
2000 and will expire in 2010.

The Board of  Directors  approved a Board of  Director's  stock  option  plan on
August 11,  2000 to have the ability to attract  the best  qualified  members to
serve on the board by offering  them options for ownership in exchange for their
commitment to participate on the Board.  The plan reserves  500,000  options for
issuance; 30,000 options have been granted in 2000 to three board members at the
time they were  elected (or  appointed)  to become  members.  The  options  were
granted at market  price and are  immediately  vested;  none were  exercised  at
December 31, 2000. They will expire three years from the date of grant.

Qualified Stock Options
-----------------------

The Board of  Directors,  with the approval of the  shareholders,  adopted a new
Qualified  Incentive  Stock  Option  Plan on  December  1, 1999 to  replace  and
incorporate the prior 1998 ISOP plan and its  participants.  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 incentive compensation. The Company is
authorized to grant a total of 3,500,000  common shares under this plan of which
928,986  and  421,624  have  been  granted  as of  December  31,  2000 and 1999,
respectively.  The options expire on December 13, 2009 and 70,738 of the options
were exercised as of December 31, 2000.

                                       32

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




NOTE 5 - SHAREHOLDER'S EQUITY (CONTINUED)
-----------------------------------------
<TABLE>
<CAPTION>
                                                                                                                          Weighted
                                                                                                                          Average
                                                                                Weighted     Weighted                     Exercise
                                  Incentive    Executive     Options Issued     Average      Average                      Price -
                                    Stock      Employment      Not Related      Exercise      Fair        Currently      Currently
                                   Options       Options        to a Plan        Price        Value       Exercisable    Exercisable
                                  ---------    ----------    --------------    ---------     --------     -----------    -----------

<S>                                 <C>         <C>                <C>         <C>           <C>           <C>           <C>
Outstanding December 31, 1998       212,500     1,000,000          300,000     $   4.64                    1,512,500     $     4.64

   Options canceled                    --            --           (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

   Options exercised                (70,738)         --               --          (3.25)
   Options granted                  507,362       130,000             --           3.46         3.46
                                   --------    ----------    --------------    ---------     --------     ----------     ----------
Outstanding December 31, 2000       858,248     2,153,000             --       $   4.07                    2,174,548     $     4.48
                                   ========    ==========    ==============    =========     ========     ==========     ==========
</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 - $4.50                    1,811,937    $   3.08          5.13        931,937     $    3.02
$5.44 - $6.18                    1,183,311        5.51          6.98      1,226,611          5.53
$8.13 - $10.62                      16,000        8.75          4.98         16,000          8.75
                                ----------   ---------    ----------     ----------     ---------
                                 3,011,248        4.07          5.86      2,174,548          4.48
                                ==========   =========    ==========     ==========     =========
</TABLE>

                                       33

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


NOTE 5 - SHAREHOLDER'S EQUITY (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.

                                           For the Year Ended
                                               December 31,
                                       ----------------------------
                                           2000            1999
                                       ------------    ------------
Net losses
   As reported                         $(3,786,372)    $(1,588,355)
     Increased loss due to
       Employee stock option plan          (43,780)       (834,656)
       Executive employment options     (1,272,548)     (2,578,743)
                                       ------------    ------------

Pro forma                              $(5,102,700)    $(5,001,754)
                                       ============    ============

   Loss per common share
     As reported                       $     (0.20)    $     (0.13)
     Pro forma                         $     (0.27)    $     (0.40)

The  weighted  average  fair  value  of  options  granted  during  2000 and 1999
estimated on the date of grant using the Black-Scholes  option-pricing model was
$5.60  and  $2.77,  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 79.58%  (2000) and 97.16%  (1999),  risk-free
interest rate of 6.62 (2000 and 1999) percent,  and an expected life of three to
five years.


NOTE 6 - NON-EMPLOYEE STOCK BASED COMPENSATION
----------------------------------------------

During 2000,  the Company  issued 36,624 shares of restricted  common stock to a
broker for selling commissions.  A public relations and an advertising firm were
issued 18,124  shares of restricted  common stock for services at an agreed upon
value for the shares and services.


                                       34

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 6 - NON-EMPLOYEE STOCK BASED COMPENSATION (CONTINUED)
----------------------------------------------------------

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  commission expense in the income statements.  A total of $252,263
was recorded as offering expense in the form of brokers' commissions.

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  $62,839,  the  amount of the total  invoices.  The  resulting  expenses  are
included in the accompanying consolidated financial statement.


NOTE 7 - RELATED PARTY TRANSACTIONS
-----------------------------------

As of January 1, 1999, the Company was indebted to an officer of the Company for
operating cash advances totaling $142,750.  During 1999, the Company borrowed an
additional  $89,000 from the  officer.  All notes  included  interest at 10% per
annum  and were due on  demand.  The  Company  repaid  all  notes in full,  with
interest, to the officer totaling $231,750 in 1999.

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

During  1999,  the  Company  paid stock  offering  commissions  of $385,589 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  agreement  with the  broker
required 10% selling  commissions be paid on equity funds raised pursuant to the
selling agreement.  As of December 31, 1999, the Company owed unpaid commissions
of $174,554 to this broker.  All commissions  have been paid to the broker as of
December 31, 2000.

On October 4, 1999,  a note  payable to a family  trust of an officer was issued
53,571 shares of common  stock,  measured at the then fair market value of $2.80
per share to satisfy the debt.  The original note liability of $150,000 was paid
in full as a result of the issuance of the shares at December 31, 1999.


                                       35

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 8 - INCOME TAXES
---------------------

A reconciliation  of the US statutory  federal and state income tax rates to the
effective rate follows:

                                                   December 31,     December 31,
                                                      2000              1999
                                                   ------------     ------------
US statutory federal rate                             34.0%           34.0%
State income tax rate, net of federal benefit          3.3             3.3
Net operating loss for which no tax benefit
        is currently available                       (37.3)          (37.3)
                                                    -------         -------
                                                        - %             - %
                                                    =======         =======

A  substantial  net  operating  loss carry  forward at December 31, 2000 will be
limited as an offset to future  tax  liabilities  because of the  changes in the
line of business  that resulted in the tax losses and the change in ownership of
the Company after the losses were incurred. The tax regulations limit the use of
the tax  loss  carry  forward  against  future  tax  liability  in  this  set of
circumstances.

NOTE 9 - 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, 2000 and 1999  totaled  $104,229  and  $61,033,  respectively.  The
Company moved into a new leased office and  laboratory  location on February 23,
2001. (See subsequent events footnote.) The lease commitment is $8,309 per month
for 60 months beginning March 1, 2001.

Future minimum net rental payments under this office lease are as follows:

    Years Ended December 31,

             2001                          $   106,738
             2002                               99,708
             2003                               99,708
             2004                               99,708
             2005                               99,708
             2006                               16,612
                                           -----------
                                           $   522,182
                                           ===========

                                       36

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
--------------------------------------------------

Stock Based Performance Bonuses for Executives
----------------------------------------------

As part  of  their  five-year  executive  employment  agreements,  two  officers
(including  one who  retired  March 1, 2000) were  granted  options to  purchase
500,000  shares each of the  Company's  common stock with vesting to be achieved
based on future performance  criteria.  The future performance criteria were not
met for years ending  December 31, 1999 and 2000. If the Company's  consolidated
gross revenues exceed  $9,000,000 by December 31, 2001, the executives will vest
in 30% of the options granted to them.

The  options  are  exercisable  at $.0001 per share and expire on March 4, 2009.
None of the options have been exercised at December 31, 2000.

Manufacturing Agreement
-----------------------

In December 1999, the Company entered into a manufacturing agreement with Saturn
Electronics and  Engineering,  Inc.  ("Saturn").  Saturn is the exclusive global
manufacturer  of the Company's  OPS  products,  for the duration of the specific
product  families  (front end units and 48Vdc  power  supply).  To help  finance
manufacturing costs (inventory of parts and engineering at Saturn),  Saturn will
buy the inventory and pay its own  engineering  costs.  In turn,  they will take
security  interests  (pledges as  collateral)  in 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 the Company  receives any of
the money. The Company will require customers to pay an initial deposit equal to
30% of the  order;  these  payments  would be split 75% to Saturn and 25% to the
Company.  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 the Company
after Saturn deducts its costs and advances.

Public Relations Agreement
--------------------------

In September  2000, the Company signed a 12-month  contract with Pfeiffer Public
Relations,  Inc. ("PPR") to provide investor public relations  services.  PPR is
paid base  compensation  of $7,000  per month and has been  issued  warrants  to
purchase  10,000  shares of restricted  common stock at $9.50,  10,000 shares at
$12.50 and 10,000 shares at $15.50.  The warrants are fully vested. The contract
may be canceled by either party on 30 days notice.


NOTE 10 - LITIGATION AND SETTLEMENTS
------------------------------------

The Company settled two lawsuits (originating in 1995) by paying cash amounts of
$28,000 and $10,000, respectively, in 2000.


                                       37

<PAGE>


                   ONLINE POWER SUPPLY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



NOTE 10 - LITIGATION AND SETTLEMENTS (CONTINUED)
------------------------------------------------

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  in  full  satisfaction  of the
obligation.  The Company  made the $150,000  payment on December 21, 1998,  with
proceeds from the $150,000 loan from the family trust of the Company's President
(Note 3).  However,  in April  1999,  the Max Music  trustee  filed an action in
United States District Court seeking additional enforcement against the Company,
through garnishment  proceedings of a judgment obtained by the Max Music trustee
against a former  officer  and  director of the  Company  equal to the  original
amount sought,  less the $150,000  payment above.  The Company is contesting the
attempt  to  collect  the  garnishment  portion  and  expects to prevail in this
matter.


NOTE 11 - SUBSEQUENT EVENTS
---------------------------

In January 2001,  the Company  entered into a 60-month  lease for new office and
laboratory space. The Company refurbished and remodeled the space to accommodate
its own  use at a cost of  approximately  $85,000  and  occupied  the  space  on
February 23, 2001. The space is approximately 9,500 square feet and includes the
first right of refusal to lease a contiguous  2,025 square feet of space when it
becomes  available in mid 2002. The commitment for the base rent totals $498,540
over 60 months beginning March 1, 2001.

In February  2001,  Saturn  Electronics  and  Engineering  Inc.  entered into an
agreement with OPS to be a distributor of its products.  Saturn is a shareholder
in the Company and has an agreement  (sub-contract  arrangement)  to manufacture
the initial  power  supply  product  lines.  Saturn will be one of a total of 15
distributors  across  the  nation  selling  our  products  along  with 100 sales
representatives with many years of industry selling experience.

                                       38

<PAGE>



Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         We changed  audit firms in January  2000 as  disclosed in our last Form
10-KSB report.

                                    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                48           President, COO, CEO                         1994
                                                  Treasurer

     Thomas L. Glaza                 64           Director                                    1999

     Ronald W. Mathewson             63           Director                                    2000

     Gary Fairhead                   49           Director                                    2000

     Richard L. Millspaugh           55           Chief Financial Officer,
                                                  Secretary

     Garth A. Woodland               36           Vice President - Engineering
                                                  Research & Development

     Chris A. Riggio                 41           Vice President - Research & Development

     Fred Budinger                   56           Vice President - Operations

     Warren "Eli" Reed               26           Director International Sales and Marketing

     Christine Maxwell               30           Director International Sales and Marketing
</TABLE>


         The Board of Directors has established the number of Directors at four,
by amending the bylaws in this  respect in August 2000,  as permitted by the law
of our  corporate  domicile  (Nevada).  Each serves a one year term,  or until a
successor is elected to the Board. There are no arrangements or agreements among
shareholders for the election of any Director.

         KRIS M. BUDINGER,  48, has been President,  Chief Operating Officer and
Treasurer  of OnLine  since  July 29,  1996,  and was  appointed  to take on the
responsibilities  of CEO in March 2000, after the former CEO (Larry Arnold) left
OnLine.  He has been a Director since early 1995 and was elected  Director again
at the last shareholders'  meeting in December 2000. Mr. Budinger is employed by
OnLine and therefore is not an independent Director. Mr. Budinger is a member of
the audit committee.


                                       39

<PAGE>


         His  primary   duties  cover   supervision   of  product   development,
coordination of  research-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,  66, was appointed to the Board of Directors of OnLine
in July  1999 and  re-elected  to  serve as a  Director  of  OnLine  at the last
shareholders'  meeting  in  December  2000.  He  serves as an  outside  (but not
independent) Director, and is not employed by OnLine.

          He is  currently  an  independent  consultant  and also a Director  of
Ceimis Inc., a Los Angeles based private company that provides  internet related
software for companies to manage and collaborate their internal  departments and
outside  entities  involved  with the  release of new or  significantly  revised
products.  He recently  retired from MAPICS  Inc., a public  company with annual
revenues of $160 million  dollars.  Mr.  Glaza was VP of Marketing  and Business
Development  for  this  Enterprise  Resource  Planning  software  company.   His
responsibilities  at MAPICS  included  negotiating  the terms and  conditions of
marketing rights  associated with new software  products,  developing  corporate
strategy,   managing   traditional   marketing   activities   such  as   product
specifications,  advertising schedules,  trade show productions and coordinating
promotional materials and events.

         He was CEO of GMD, a $10 million dollar company that provided  computer
consulting services to manufacturing and distribution companies implementing new
software  control  systems.  During his 25-year career with IBM, he held various
positions in sales and marketing,  both in the United States and Europe. He is a
member and Fellow of the American  Production and  Information  Control  Society
("APICS"). Mr. Glaza graduated in 1957 with a Bachelor's degree and in 1959 with
an MBA degree from the University of Michigan.

         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. This family  relationship  precludes Thomas Glaza from
classification as an "independent" Director.

         RONALD W.  MATHEWSON,  63, was  appointed  to the Board of Directors of
OnLine in March 2000 to fill the vacancy  resulting  from the departure of Larry
G. Arnold.  He is not employed by OnLine, is an independent  Director,  and is a
member of the audit committee.

         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 Fibreboard  Corporation with Owens Corning. From June 1994 to November
1995 he served as Executive  Vice  President  and  President  of MagneTek,  Inc.
Lighting Products Group. Mr. Mathewson was Vice President and General Manager of
the Building


                                       40

<PAGE>


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 Manger, and Venture Manager.

         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.

         GARY R. FAIRHEAD,  49, was appointed a Director of OnLine on August 11,
2000 to fill the vacancy created when the Board of Directors  amended the bylaws
to increase the number of directors from three to four.  Mr.  Fairhead is not an
employee of OnLine,  is an  independent  Director,  and is a member of the audit
committee.

         Since  1990,  Mr.  Fairhead  has been the  President,  Chief  Executive
Officer and a Director of SigmaTron International,  Inc., a Delaware corporation
listed on the Nasdaq  National  Market  System.  SigmaTron,  based in Elk Grove,
Illinois,  is an  independent  provider of  electronic  manufacturing  services,
including printed circuit board assemblies and completely  assembled  (boxbuild)
electronic products.  SigmaTron reported net sales of $88,885,000 for the fiscal
year ended April 30, 2000. Mr.  Fairhead is also a Director of Circuit  Systems.
Inc.,  an Illinois  corporation  listed on the Nasdaq Small Cap Market.  Circuit
Systems manufactures printed circuit boards.  Circuit Systems reported net sales
of $23 million for the third quarter in fiscal 2000.

         Mr.  Fairhead  received  his  Bachelor  of Science  degree in 1974 from
Purdue University, and his Master of Science,  Industrial Administration in 1978
from the  Krannert  School of  Business,  Purdue  University.  Since  1995,  Mr.
Fairhead  has been a trustee of the Central  States  Union and a Director of the
Lattof Branch of the YMCA.

DIRECTOR COMPENSATION

         The  non-executive  Directors  (Mr.  Glaza,  Mr.  Mathewson,   and  Mr.
Fairhead) each have received  nonqualified  options to purchase 10,000 shares of
our common stock for their  services as Directors and we expect to continue this
program in future  years.  See below.  The options were fully vested upon grant;
the  exercise  price per share is $2.88 for Mr.  Glaza  (option  expires in July
2002), $4.50 for Mr. Mathewson (option expires in June 2003), and $8.375 for Mr.
Fairhead (option expires in August 2003), in each case equal to the market price
of our stock when the options were  granted.  We pay the travel  expenses of the
non-executive  Directors to attend Board  meetings,  but we do not pay any other
compensation  to them for their  service.  Mr.  Budinger is paid a salary as the
Chief Executive Officer but is not separately paid for service as a Director.

STOCK OPTION PLANS

         We have  established  two stock option plans that have been approved by
our shareholders (a qualified plan for employees and the other for non-executive
Directors).  We also have  issued  nonqualified  options to five  persons  (four
officers,  and a fifth  person who was an officer  but left  OnLine in  February
2000), and an investment relations firm.

                                       41

<PAGE>


QUALIFIED INCENTIVE STOCK OPTION PLAN

         We have  adopted an  incentive  stock  option plan for the  issuance of
options to purchase up to 3.5 million  shares of common  stock;  the options are
intended  to qualify  under  section 422 of the  Internal  Revenue  Code.  As of
December 31, 2000, we had issued to our employees (including officers) qualified
options to  purchase  428,986  shares of common  stock.  Most of the options are
vested (some vest over time), and are exercisable at different prices from $2.88
to $10.62 per share  (equal to or above  market  prices  when the  options  were
issued).  All of the options may be exercised for cash,  although  employees who
left us in 2000 exercised by a "cashless"  method that resulted in the recording
of $ 363,  117 in  non-cash  compensation  expense to the  Company.  Shares were
issued equal to the remaining share value after  deducting an equivalent  number
of shares at value to complete the option price on the  exercise  date.  The net
forfeited options for shares equivalent to the option price were returned to the
stock  plan and are no  longer  outstanding.  In  October,  2000,  the  Board of
Directors modified the plan to eliminate the "cashless" method of exercising the
options.  All qualified  options will expire if the employee  leaves or when the
options expire (at different  times from 2001 to 2009).  As of December 31, 2000
options to purchase 70,738 shares have been exercised,  resulting in outstanding
options to purchase 398,248 shares as of December 31, 2000.

         The issuance of shares on exercise of options under the incentive stock
option plan is registered  with the Securities  and Exchange  Commission on Form
S-8.

NONQUALIFIED STOCK OPTION PLAN FOR NON-EXECUTIVE DIRECTORS

         To compensate our  non-executive  Directors,  we established a plan for
the  issuance  of options to  purchase  up to  300,000  shares of common  stock;
options  under this plan will not  qualify  under  section  422 of the  Internal
Revenue  Code.  To date,  we have issued  options to purchase  30,000  shares of
common stock to our three non-executive  Directors.  See above. We will register
the  issuance  of  shares  on  exercise  of  options  under  this  plan with the
Securities and Exchange Commission on Form S-8.

NONQUALIFIED OPTIONS (AND WARRANTS)

         From time to time we issue  options or warrants that are not covered by
an option plan and are not qualified  under section 422 of the Internal  Revenue
Code.  These  include  options  granted or to be granted  to  officers:  625,000
options to Kris M.  Budinger  (500,000  vested and 150,000  options which may be
granted  subject  to  performance  vesting);   100,000  options  to  Richard  L.
Millspaugh  (20,000 vested,  80,000 vesting at 20% per year);  1,023,000 options
granted to Garth Woodland  (623,000 vested and 400,000 vesting at 20% per year);
500,000  options  granted to Chris A. Riggio (100,000 vested and 400,000 vesting
at 20% per year); and former officer Larry G. Arnold (500,000 vested and 150,000
options which may be granted subject to performance vesting) and 30,000 warrants
to an investor  relations firm (Pfeiffer  Public  Relations,  Inc., see "Certain
Relationships  and Related  Transactions"  below).  Lesser  amounts of qualified
options  also have been  granted to the officers  (see  "Employment  Agreements"
below).

     (b)      Identification of Certain Significant Employees or Consultants.

         None.

                                       42

<PAGE>


COMPENSATION OF DIRECTORS

         Each of our  present  Directors  who is also an  employee  receives  no
additional  compensation  for  acting as a Director  or  attending  meetings  of
Directors.  We presently pay non-employee Directors all of their costs to attend
Board meetings.

     (c)      FAMILY RELATIONSHIPS.

         Fred Budinger,  Vice President  Operations,  is the brother of the CEO.
Warren "Eli" Reed, Director  International Sales and Marketing,  is a son-in-law
of the CEO.

     (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  receiver,  fiscal  agent or  similar
                  officer by or against 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, or 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 us  under  rule
16a-3(a) since we became registered with the Securities and Exchange  Commission
(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 our  common  stock,  or any other  person  subject to
Section 16 of the  Exchange  Act failed for the period  from  February  24, 2000
through the date of this filing of Form  10-KSB to file on a timely  basis,  the
reports  required by Section  16(a) of the Exchange  Act,  except for Richard L.
Millspaugh who filed four Form 4's on an untimely  basis for sales  occurring in
June and July, 2000 and the cashless  exercise of 25,000 shares of stock options
in June, 2000.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

         The following table shows selected  information  about the compensation
paid or accrued by us to or for the account of the Chief Executive Officer,  the
Chief  Operating  Officer,  (also the  President  in 1999)  and Chief  Financial
Officer for services and bonuses rendered in all capacities to us during each of
the fiscal years


                                       43

<PAGE>


ended  December 31, 2000,  1999 and 1998. No other  executive  officer  received
total annual salary and bonus in excess of $100,000  annually.  Other than stock
options, we do not have any long-term compensation plan.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                                                ANNUAL COMPENSATION
                                                -----------------------------------------------
                                                                                   OTHER ANNUAL
NAME AND POSITION                  YEAR         SALARY            BONUSES          COMPENSATION
-----------------                  ----         ------            -------          ------------

<S>                                <C>          <C>                <C>                  <C>
Kris Budinger, CEO & President     2000         $150,000           $0                   $0
                                   1999         $ 72,000           $36,000              $0
                                   1998         $ 72,000           $0                   $0


Larry Arnold (former CEO)*         2000         $172,643           $0                   $0
                                   1999         $ 72,000           $36,000              $0
                                   1998         $ 72,000           $0                   $0
<CAPTION>

 * Salary through February 2000; retirement pension March - December 2000.

<S>                                 <C>         <C>                <C>                  <C>
Richard Millspaugh, CFO             2000        $ 90,000           $0                   $0
(hired September, 1999)             1999        $ 18,000           $0                   $0
                                    1998        $ 0                $0                   $0
</TABLE>

               This table shows all stock options that we granted
                         to executive officers in 2000.

               Option Grants in 2000 (Qualified and Nonqualified)
<TABLE>
<CAPTION>

                                             PERCENT
                           NUMBER OF         OF ALL OPTIONS
                           SHARES UNDER-     GRANTED TO
                           LYING OPTIONS     EMPLOYEES         EXERCISE    EXPIRATION      GRANT DATE
NAME                       GRANTED           IN 2000           PRICE       DATE          PRES. VALUE(1)

<S>                            <C>              <C>            <C>         <C>             <C>
Fred Budinger                   10,000           7 %           $5.96       2005            $  49,000
Richard L. Millspaugh          100,000          73 %           $4.50       2005            $ 370,000
Warren "Eli" Reed                - 0 -
Christine Maxwell                - 0 -
<FN>

(1)      The Black-Scholes  option-pricing model was used to determine the grant
         date  present  value of the stock  options that we granted to the named
         officer.  The following facts and assumptions  were used in making this
         calculation:  an exercise price of $4.50 to $5.96 per share,  which was
         equal to or  higher  than fair  market  value of our stock on the grant
         date; a zero dividend  yield;  expected  volatility  of 79.58%  (2000);
         risk-free  interest  rate of  6.623 %,  and an  expected  life of three
         years.  Please note that  "present  value at grant date"  assumes  full
         vesting at that date, however, the options vest gradually over a period
         of years (see "Employment Agreements" below).
</FN>
</TABLE>

                                       44

<PAGE>


                    SHARES UNDERLYING OPTIONS AND THEIR VALUE

         This  table  shows  all  outstanding  options,  and  their  value as of
December 31, 2000,  held by each of the named  officers as of that date.  Except
for Mr.  Millspaugh  (who  exercised  11,028  options)  and  Mrs.  Maxwell  (who
exercised  7,382 options),  none of the other officers  exercised any options in
2000.

         In each case,  "value" is determined by  multiplying  (x) the number of
shares  underlying the options by (y) the  difference  between the closing stock
price of $6.00 on December  29, 2000 (the last  trading day of the year) and the
exercise price of the options.  "Exercisable"  means  "vested";  "unexercisable"
means,  "not vested at December  31,  2000;" "in the money"  means the  exercise
price was less than the closing stock price on December 29, 2000.

<TABLE>
<CAPTION>
                               NUMBER OF SHARES                        VALUE OF UNEXERCISED
NAME                           UNDERLYING UNEXERCISED                  IN-THE-MONEY
OF THE                         OPTIONS AT 12/31/00                     OPTIONS AT 12/31/00
OFFICER                        EXERCISABLE/UNEXERCISABLE               EXERCISABLE/UNEXERCISABLE

<S>                                 <C>                                <C>
Kris M. Budinger                    511,650/   -0-                     $   250,000(1)/$ -0-(2)
Richard Millspaugh                  33,972 / 80,000                    $    73,592(3)/$120,000(4)
Chris A. Riggio                     136,032/400,000                    $   382,192(5)/$1,200,000(6)
Garth Woodland                      659,032/400,000                    $ 1,951,192(7)/$1,200,000(8)
----------------
<FN>

        (1)   Value of  unexercised  in-the-money  vested  options  is based
              on 500,000  shares at an  exercise price of $5.50, and 11,650
              shares at $6.18.
        (2)   None of the 150,000 performance options has vested and may not
              be granted,  depending  on OnLine's  fiscal  years'  financial
              performance  in 2001 (see  "Employment  Agreements - With Kris
              Budinger").
        (3)   Based on 20,000 shares at an exercise price of $4.50 and 13,972
              shares at $2.88.
        (4)   Based on 80,000 shares at an exercise price of $4.50.
        (5)   Based on 25,000 shares at an exercise  price of $2.88 plus
              11,032 shares at an exercise price of $5.62 plus 100,000 shares
              at an exercise price of $3.00.
        (6)   Based on 400,000 shares at an exercise price of $3.00 per share.
        (7)   Based on 25,000 shares at an exercise  price of $2.88,  11,032
              shares at an exercise price of $5.62, and 623,000 shares at an
              exercise price of $3.00 (523,000  vested shares plus the first
              20% of the other option on 500,000 shares).
        (8)   Based on 400,000 shares with an exercise price of $3.00 per share.
</FN>
</TABLE>

EMPLOYMENT AGREEMENTS

         -WITH KRIS BUDINGER.  We have a written employment  agreement with Kris
M. Budinger through March 31, 2003 subject to automatic renewal for 5-year terms
unless  terminated  by us on or after  September  30, 2002.  The base salary was
$72,000 per year, subject to increase;  in December 1999, the Board of Directors
increased  the base salary to  $150,000.  Under the  employment  agreement,  Mr.
Budinger was granted  nonqualified  stock options to purchase  500,000 shares of
common  stock at $5.50 per share  (all now  vested),  which was 110% of the fair
value of the stock at March 4, 1998.  These  options  will expire March 4, 2004.
None have been exercised to date.


                                       45

<PAGE>


         The  employment   agreement  also  provided  for  the  grant  of  other
nonqualified  performance stock options to purchase 500,000 shares at $.0001 per
share;  if granted,  these options would expire March 4, 2009.  The  performance
options would vest according to a formula based on gross revenues; 70% (350,000)
of the options  have lapsed and won't be granted  because we did not achieve the
financial  goals  required for vesting,  but the 30% balance  (covering  150,000
shares)  could be  granted  and vest if we have  more than $9  million  of gross
revenues in 2001.

          The employment  agreement  provides a cash bonus of 50% of base salary
if the average  closing  price of the common stock for the last 20 business days
of the current year exceeds the previous year's  comparable amount by 51%. Based
on stock prices in December 1999, the bonus was earned and we paid Mr.  Budinger
a cash bonus of $36,000 in March, 2000; December, 2000 closing stock prices were
below the  criteria  for the 50 % cash  bonus,  so no bonus  was  earned or paid
accordingly.

         Separate from the employment agreement,  we issued qualified options to
Mr. Budinger to purchase 11,650 shares of common stock at $6.18 per share.

         -WITH GARTH WOODLAND. Garth Woodland has a five-year written employment
agreement,  at a starting  salary of $84,000  (increased  to  $102,000  per year
effective September 1, 2000). 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.

         -WITH CHRIS  RIGGIO.  Chris Riggio has a five year  written  employment
agreement at a starting  salary of $84,000 per year  (increased  to $102,000 per
year effective  September 1, 2000),  He received  nonqualified  stock options to
purchase  500,000 shares of common stock at $3.00, to vest 20% per year starting
September  1, 2000.  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.

         -WITH  RICHARD  MILLSPAUGH.  Mr.  Millspaugh  has a  five-year  written
employment  agreement,  at a starting  salary of $84,000 per year  (increased to
$102,000 per year effective  September 1, 2000). He received  nonqualified stock
options to purchase 100,000 shares of common stock at $4.50, which will vest 20%
per year starting in 2001. In addition,  we granted to Mr.  Millspaugh  separate
qualified  options to buy 3,206  shares at $5.62  (expiring  on  termination  of
employment  or 2009).  All options will expire on  termination  of employment or
2005. In 2000, he acquired 11,028 shares by exercise of options.

         - WITH FRED BUDINGER.  Mr. Fred Budinger,  Vice President Operations as
of October 26, 2000, is Kris Budinger's brother.  Fred Budinger is paid a salary
of $102,000 per year (effective September 1, 2000, an increase from his starting
salary of $60,000 on January 1,  2000).  We granted to Mr.  Budinger a qualified
stock option to purchase  10,000 shares at $5.96 (market value on the January 3,
2000 grant date),  which are all vested and expire on  termination of employment
or December 13, 2009.

         - WITH WARREN "ELI" REED. Mr. Reed,  Director  International  Sales and
Marketing,  is Kris  Budinger's  son-in-law.  He is paid a salary of $90,000 per
year  (effective  September 1, 2000,  an increase  from his  starting  salary of
$45,000 in 1996).  He has been  granted a qualified  option to  purchase  25,000
shares at $2.88,  all vested,  expiring on termination of employment or December
2001, and a separate  qualified  option to purchase  5,067 shares at $5.62,  all
vested, expiring on termination of employment or December 2009.


                                       46

<PAGE>


         - WITH CHRISTINE  MAXWELL.  Mrs. Maxwell,  also Director  International
Sales and Marketing,  is paid a salary of $90,000 per year (effective  September
1, 2000, an increase from her starting salary in 1990 of $45,000 while at Glitch
Master Marketing, Inc. before its acquisition by OnLine). She has been granted a
qualified  option to purchase  15,000 shares at $2.88,  all vested,  expiring on
termination of employment or December 2001, and a separate  qualified  option to
purchase 5,746 shares at $5.62 expiring on termination of employment or December
2009.

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 March 12, 2001 by each officer and Director,
by any  person  or group  who is known by us to own more  than 5% of our  common
stock, and by the officers and Directors as a group.  The ownership  information
is  based on the  Forms 3 and 4 filed by our  officers  and  Directors  with the
Securities  and  Exchange  Commission  as  required  by  section  16(a)  of  the
Securities  and  Exchange  Act of  1934.  Based  on  those  Forms  3 and 4,  the
beneficial  owners have sole voting and dispositive  power with respect to their
shares except as otherwise noted.

         In each instance, the number of shares shown as owned by the individual
includes  shares  issuable  on  exercise  of  options  which  are  or  would  be
exercisable  by May 12, 2001 (60 days from March 12,  2001),  as required by the
disclosure  rules of the  Securities  and Exchange  Commission.  Similarly,  the
percentage for each person has been  determined by dividing (x) the shares owned
by the  individual  plus the  shares  the  person  has the right to  acquire  on
exercise  of options by May 12,  2001,  by (y) the  21,243,155  shares of common
stock  outstanding as of March 12, 2001, plus for each person with options,  the
number of shares the person has the right to acquire on  exercise  of options by
May 12, 2001. For information about the options,  see "Executive  Compensation -
Employment  Agreements"  above.  The  shares  shown  as owned  by  officers  and
Directors as a group includes  shares  issuable on exercise of options which are
or would be  exercisable  by May 12, 2001, and the percentage of shares shown as
owned  by that  group  has  been  determined  as if all  such  options  had been
exercised.


                                       47

<PAGE>


NAME AND ADDRESS                        AMOUNT OF SHARES        PERCENT OF CLASS

Kris M. Budinger *                        1,390,125  (1)              6.4%
Chief Executive Officer
8100 South Akron, Suite 308
Englewood, Colorado 80112

Richard L. Millspaugh                        37,178                   **
Chief Financial Officer
6335 Lemonwood Drive
Colorado Springs, Colorado 80918

Thomas Glaza *                               70,309                   **
370 Fallen Leaf Lane
Roswell, Georgia 30075

Ronald W. Mathewson *                        14,750                   **
87 Glenmoor Place
Englewood, Colorado 80110

Gary R. Fairhead *                           37,500                   **
2201 Landmeier Road
Elk Grove Village, Illinois 60007

Garth A. Woodland                           819,032                   3.7%
Vice-President Engineering,
8100 South Akron, Suite 308
Englewood, Colorado 80112

Chris A. Riggio                           1,136,845                   4.8%
Vice-President Research
And Development
8100 South Akron, Suite 308
Englewood, Colorado 80112

Fred Budinger                                10,000                   **
Vice President Operations
8100 South Akron, Suite 308
Englewood, Colorado 80112

Christine Maxwell                            22,618                   -0-
Director International Sales
and Marketing
8100 South Akron, Suite 308
Englewood, Colorado 80112

Warren "Eli" Reed                            43,709                   **
Director International Sales
and Marketing
8100 South Akron, Suite 308
Englewood, Colorado 80112

All Officers and Directors as a           3,582,066                  14.4%
Group (10 persons)

*        Director
**       Less than 1%

                                       48

<PAGE>


(1)      Includes  516,691  shares  owned by  immediate  family  members  of Mr.
         Budinger  (Kris's  wife holds sole  voting and  dispositive  power over
         412,291 shares and Mr.  Budinger  shares voting and  dispositive  power
         over 102,400 shares owned by his children.)

ITEM 12. CERTAIN RELATIONS AND RELATED TRANSACTIONS.

          From  January 1, 2000  through  December  31,  2000,  we have paid Mr.
Arnold  (former CEO and  Chairman of the Board of  Directors  who left OnLine on
February  29, 2000)  $172,643 in salary plus  severance  compensation  under the
provisions  of his  employment  agreement,  which  had  the  same  terms  as the
agreement with Mr. Budinger. Mr. Arnold holds options to purchase 500,000 shares
of common  stock at $5.50 per share (all now vested)  which was 110% of the fair
value of the stock at March 4, 1998;  these  options  will expire March 4, 2004.
None have been  exercised to date. Mr. Arnold also is entitled to be granted the
same number of performance options which would be granted to Mr. Budinger if the
financial  target is achieved in 2001. Mr. Arnold also was paid in 2000 the same
cash bonus amount as was paid to Mr. Budinger, based on stock prices in December
1999.

         Thomas  Glaza is a Director of OnLine.  James Glaza,  his  brother,  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,
most recently in 2000. We have paid cash  commissions  of $ 868,290 to Northstar
in 2000 (to include $ 519,529 paid to Mr. James Glaza by  Northstar)  and issued
Mr. James Glaza 82,237  shares of restricted  common  stock,  also in payment of
commissions,  all for his services as a stock broker  associated with Northstar.
Neither Thomas Glaza nor James Glaza owns any stock in Northstar Securities Inc.
Thomas Glaza,  our Director,  did not  participate  in any way to hire Northstar
Securities Inc.

         At  December  31,  2000,  we  did  not  owe  commissions  to  Northstar
Securities,  Inc. for  services  related to our private  placement  offerings of
common stock. We paid all of those obligations in 2000.

         On  September  1, 2000,  we signed a 12-month  contract  with  Pfeiffer
Public Relations,  Inc. ("PPR") to provide investor public relations services to
us.  PPR is paid  base  compensation  of $7,000  per  month and has been  issued
warrants to  purchase  30,000  shares of  restricted  common  stock at $9.50 for
10,000 shares, 10,000 shares at $12.50 and 10,000 shares at $15.50. The warrants
are fully  vested.  The  contract  may be  canceled  by either  party on 30 days
notice.

                                       49

<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                                                                      Sequential
Exhibit No.    Title of Exhibit                                        Page No.
-----------    ----------------                                       ----------

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                                         (1)
10.2           Employment Agreement with Amendments - Larry G. Arnold        (1)
10.3           Employment Agreement with Amendments - Kris M. Budinger       (1)
10.4           Employment Agreement - Richard L. Millspaugh                  (1)
10.5           Employment Agreement - Garth Woodland                         (1)
10.6           Consulting Agreement - Doyle & Associates, Inc.               (1)
10.7           Employment Agreement - Chris Riggio                           (1)

(1)  Incorporated  by reference from exhibits  filed with 1933 Act  registration
statement (SEC No. 333-93341)

     (b) Reports on Form 8-K.

         All 8-K filings were to report matters under Item 5: Other Events

              02/28/00 Press release  Re: mis-information circulating on chat
                       rooms

              02/29/00 Announcement of Larry Arnold, CEO's retirement and
                       resignation as Board member

              03/17/00 Appointment of Mr. Ron Mathewson as a Board member

              05/22/00 Website activation announcement in a press release

              05/24/00 Private sales of shares to accredited investors

              11/22/00 Announcement of wireless communications company selecting
                       the Company's OPS-500-385 PFC Module for use in its
                       telecommunications system


                                       50

<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.


                                                 (Registrant)

Date:     March 29, 2001.              By:         /s/    Kris M. Budinger
                                             -----------------------------------
                                             Kris M. Budinger, CEO


Date:    March 29, 2001.               By:       /s/    Richard L. Millspaugh
                                             -----------------------------------
                                             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 Directors thereunto duly authorized.


Date:    March 29, 2001.              By:       /s/    Thomas Glaza
                                             -----------------------------------
                                             Thomas Glaza

Date:    March 29, 2001.              By:        /s/    Ronald W. Mathewson
                                             -----------------------------------
                                             Ronald W. Mathewson,
Director

Date:    March 29, 2001               By:        /s/    Gary R. Fairhead
                                             -----------------------------------
                                             Gary R. Fairhead


                                       51