SCOTTSDALE, Ariz., Nov. 19, 2002 (PRIMEZONE) -- OneSource Technologies, Inc. (OTCBB:OSRC) today reported consolidated revenues of $2.2 million for the nine months ended September 30, 2002, a five percent (5%) increase compared to revenues of $2.1 million for the same period of 2001. Net Loss for the nine months ended September 30, 2002 narrowed to just $20 thousand (less than one cent per share) compared to a Net Loss of $400 thousand ($0.02 per share) for the nine months ended September 30, 2001.
Consolidated revenues of $760 thousand were also reported today for the three months ended September 30, 2002 and represent a seven percent (7%) increase compared to consolidated revenues of $713 thousand for the same period in 2001. OneSource reported Net Income of $37 thousand (less than one cent per share) for the quarter ended September 30, 2002 compared to a Net Loss of $31 thousand (less than one cent per share) for the three months ended September 30, 2001.
"Third quarter results are a positive demonstration that initiatives implemented over the past year and a half have successfully produced this turnaround," said Jerry Washburn, CFO of the Company. "This second consecutive quarter of profitable results documents that we have turned the corner and put our operational problems in the past."
"The infrastructure, management and process improvements that have been effected are now contributing positive cash flows and profits that we anticipate will continue through the balance of 2002," concluded Washburn.
About OneSource
OneSource is engaged in three closely related and complimentary lines of IT and business equipment support products and services, 1) equipment maintenance services, 2) equipment installation and integration services, and 3) value added equipment supply sales. Each segment also utilizes the Internet to facilitate distribution of its service and product offerings. OneSource is a leader in the technology equipment maintenance and service industry, and is the inventor of the unique OneSource Flat-Rate Blanket Maintenance System(TM). This innovative patent pending program provides customers with a Single Source for all general office, computer and peripheral and industry specific equipment technology maintenance and installation services.
OneSource's Cartridge Care division is a quality leader in remanufactured toner cartridge distribution in the southwest and is the supplier of choice for a number of Fortune 1000 companies in that region. OneSource has realigned this division and invested heavily in eCommerce initiatives to stage the division for substantial expansion over the next two years to enable Cartridge Care to extend its high-quality reputation beyond its southwestern regional roots.
Product and Company names mentioned herein are for identification purposes and may be trademarked or registered trademarks of their respective companies. This press release may contain forward-looking information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended, and is subject to the safe harbors created by those sections.
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2002
ASSETS
CURRENT ASSETS:
Cash $ 94,117
Accounts receivable 254,598
Inventories 225,474
Other current assets 11,673
-----------
Total current assets 585,862
-----------
PROPERTY AND EQUIPMENT,
net of accumulated depreciation
of $ 188,470 127,699
GOODWILL 235,074
DEFERRED INCOME TAXES 140,187
OTHER ASSETS 3,528
-----------
TOTAL ASSETS $ 1,092,349
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 171,614
Accrued expenses and other liabilities 322,734
Deferred revenue 168,471
Bank line of credit 50,000
Current portion capital leases 1,787
Current portion of debt 939,392
-----------
Total current liabilities 1,653,997
-----------
INSTALLMENT NOTES - LONG-TERM PORTION 4,776
-----------
TOTAL LIABILITIES 1,658,773
-----------
STOCKHOLDERS' DEFICIT
Preferred Stock, $.001 par value,
1,000,000 shares authorized, none issued
Common Stock, $.001 par value,
50,000,000 shares authorized,
26,853,317 issued and outstanding at
September 30, 2002 26,853
Paid in capital 2,703,794
Accumulated deficit (3,297,071)
-----------
(566,424)
===========
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,092,349
===========
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDING SEPTEMBER 30
Restated Restated
3rd Qtr 3rd Qtr YTD YTD
2002 2001 2002 2001
REVENUE, net 759,615 712,556 $2,159,456 $2,055,502
COST OF REVENUE 491,912 408,824 1,392,013 1,168,323
------------------------------------------------
GROSS PROFIT 267,703 303,732 767,443 887,179
GENERAL AND ADMINI-
STRATIVE EXPENSES 193,417 247,751 640,744 879,776
SELLING AND
MARKETING EXPENSES 1,500 46,599 19,486 140,682
------------------------------------------------
Operating Income
(Loss) 72,786 9,382 107,213 (133,279)
OTHER INCOME
(EXPENSE)
Interest expense (35,059) (39,432) (99,891) (197,952)
Other income
(expense) (1,098) 7,692 (27,589) (20,221)
------------------------------------------------
Total other
expense (36,157) (31,740) (127,480) (218,173)
PROFIT/(LOSS) BEFORE
DISCONTINUED OPERATION
AND INCOME TAXES 36,629 (22,358) (20,267) (351,452)
LOSS FROM DISCONTINUED
OPERATION
Loss from operations
of Integration
Division -- (9,107) -- (73,260)
Estimated gain from
disposal of net
assets Integration
Division -- -- -- 24,448
------------------------------------------------
Total Loss from
Discontinued
Operation -- (9,107) -- (48,812)
================================================
NET PROFIT (LOSS) 36,629 (31,465) $(20,267) $(400,264)
================================================
LOSS PER SHARE -
Basic before loss
from discontinued
operation 0.00 (0.00) (0.00) $(0.02)
Loss from
discontinued
operation Note 1 Note 1 Note 1 Note 1
Net loss 0.00 (0.00) (0.00) $(0.02)
Diluted before loss
from discontinued
operation 0.00 0.00 0.00 $ --
Loss from
discontinued
operation Note 1 Note 1 Note 1 Note 1
Net loss 0.00 (0.00) (0.00) $(0.02)
Weighted Average
Shares
Outstanding:
Basic 25,940,650 20,634,789 25,065,002 19,951,500
Diluted 26,048,650 20,634,789 25,065,002 19,951,500
Note 1: Less than $0.00 per share
ONESOURCE TECHNOLOGIES, INC.
Management Comments
September 30, 2002
Introduction
While year-to-date results continue to show an operational loss through the first nine months of 2002, the latest six months (second and third quarter) 2002 results showed marked improvement with a profits before income taxes of $54 thousand and $36 thousand respectively. This reflects the positive effects of restructuring and realignment changes that have been implemented over the past twelve months. In fiscal 2001, management instituted changes to arrest the Company's eroding operational infrastructure as well as refocus the Company's strategic direction. Management is pleased to report that first nine month 2002 results show that the turnaround effort has been successful. Further, management anticipates the Company will end the year 2002 in the black for the year.
In April 2001, as part of management's refocused emphasis on its core business opportunities, the Company discontinued the operations of its equipment integration subsidiary. For comparative purposes the consolidated financial statements of the Company for the three and nine months ended September 30, 2001 have been restated to show the costs incurred in shutting down the segment separately as discontinued operations in the following table of financial data as of September 30, 2001.
Summary of Operations
Operating results for the three quarters and nine months ended September 30, 2002 compared to the nine month period in fiscal 2001 are shown in the following table:
Unaudited YTD
1stQTR 2ndQTR 3rdQTR YTD 2001
2002 2002 2002 2002 Restated
----------------------------------------------------
REVENUE, net $678,990 $720,851 $759,615 $2,159,456 $2,055,502
COST OF REVENUE 490,196 409,905 491,912 1,392,013 1,168,323
----------------------------------------------------
GROSS MARGIN 188,794 310,946 267,703 767,443 887,179
28% 43% 36% 36% 43%
SELLING, General
and
Administrative
Costs 262,058 203,255 194,917 660,230 1,020,458
----------------------------------------------------
Operating
Income
(Loss) (73,265) 107,691 72,786 107,213 (133,279)
----------------------------------------------------
INTEREST and
other
(expenses) (37,202) (54,120) (36,158) (127,480) (218,173)
----------------------------------------------------
INCOME (LOSS)
before
Discontinued
Ops (110,467) 53,571 36,328 (20,267) (327,004)
----------------------------------------------------
DISCONTINUED
operation -- -- -- -- (73,260)
----------------------------------------------------
NET INCOME
(LOSS) $(110,467) $53,571 $36,328 $(20,267) $(400,264)
====================================================
This substantial 95% reduction in year-to-date losses compared to the same period in the prior year reflects management's changed focus and strategic emphasis for the Company. The most significant factor contributing to the improved operating results is the thirty-five percent (35%) decrease in Selling, General and Administrative (SG&A) costs in the three and nine months ended September 30, 2002 compared to 2001. While the approximate $360 thousand year-to-date decrease in SG&A costs is substantial, the Company continues to absorb high G&A costs as a percent of revenues and management continues to focus on implementing measures to bring total G&A costs more in line with the Company's 30% or less of revenues business model.
The Company discontinued the operations of its integration subsidiary because too much of its activities were concentrated in the highly competitive and low margin network hardware sales and integration industry which drained resources from the Company's core equipment maintenance and installation divisions. The net effects of discontinued operations are shown separately in the Consolidated Statement of Operations for the nine months ended September 30, 2001.
These improved operating trends are the result of management's focus on a) right sizing Company staff, b) realigning operating divisions, c) general cost cutting, and d) streamlining and empowering management. Management has reduced total staff from 56 employees at December 31, 2000 to 33 at the end of September 2002, yet all of the staff reductions were made in administrative and support functions and not in the core maintenance and supply division operations. Line managers were also realigned to more effectively manage field service and manufacturing operations. As a result customer service levels have dramatically improved to the highest levels in the Company's history.
Revenues and Cost of Revenues
Consolidated revenues increased slightly by about five percent (5%) in the first nine months of 2002 compared to 2001 but consolidated cost of revenues increased nineteen percent (19%) in the same period which decreased consolidated gross profit by seven percent (7%) for the nine months ended September 30, 2002 compared to the same period in 2001. The year-to-date gross margins were adversely affected by additional costs incurred in ramping up new business in the Colorado region and a decline in revenue realizations in the supply division in the second and third quarters of 2002. Neither situation is anticipated to continue as added revenues from new accounts in the service division will absorb the additional costs of the new account startup and higher selling prices in subsequent periods for cartridge shipments will improve margins in the supply division. Management anticipates a return to 40% plus consolidated gross margins for the balance of the year and beyond.
Consolidated revenues have increased in each quarter in 2002, reflecting new business realized in the service division over 2001. All of the increase occurred in the maintenance division as sales in the supply division were down in both second and third quarters of 2002. The increase in maintenance revenues is the result of new business from one of the Company's present customers. As part of the restructuring, the General Manager of the supply division assumed oversight responsibility for all field service operations during the second quarter of 2002 in addition to his GM duties and accordingly was pulled away a great deal with his new responsibilities. Supply division shipments were also adversely affected by startup problems in the division's new Internet distribution channel in the second and third quarters. These issues have now been resolved and the division's new distribution channel is working exceptionally well. Management is committed to this Web-based delivery system and anticipates it will significantly enhance division revenue expansion to existing as well as potential new accounts. A featured focus of this endeavor will be to more deeply cross-sell division products and services into the Company's maintenance and installation customer bases.
Selling, General and Administrative Costs
All costs in this category are lower in the three and nine months ended September 30, 2002 compared to the same period in 2001. The three most significant areas of savings were overhead salaries, occupancy costs and legal and professional fees. Salary and benefit costs in fiscal 2001also included a $68 thousand charge for additional payroll taxes related to periods prior to 2001 that was accrued in the first quarter of 2001. Without this charge, 2001 results would be less but still not comparable to the lower 2002 levels. The remaining difference reflects staff reductions that were made to reduce overhead staff and their related costs. Company staff has been reduced to 33 employees at September 30, 2002 from 56 at the beginning of 2001 with most of the reductions being made in the general overhead category. Facility costs were also reduced in the first nine months as a result of renegotiation of the Company's building lease and a reduction of space leased. All other general administrative costs are down reflecting improvements and cuts that management has installed to curtail and reduce operating costs. Most of these reductions have been realized in the first nine months of 2002. These declines further document the improved effects of management's infrastructure and operational changes.
Results for the nine months ended September 30, 2001 have been restated to correct certain accounting errors that were identified in fiscal 2001 but which related to periods prior to the year ended December 31, 2001. Most of the impact of adjustments to correct these prior period errors were posted to accounts in the G&A cost category which further contributed to the substantial decline in these costs in the three and nine months ended September 30, 2002 compared to the same period in 2001.
The decline in selling costs is largely the result of the Company's turnaround restructuring activities. The paramount objective of that effort was to streamline overall operations and redirect corporate resources toward improving the Company's core maintenance and supply division operating infrastructures and management. Consequently sales and marketing became a casualty of this redirected focus and accordingly have taken a back seat while the realignment was being implemented. Now that operational and management changes are largely in place and attendant infrastructure improved management is concentrating on implementing and significantly supporting the sales and marketing plans that have been heretofore on hold pending completion of the strategic redirectional thrust of the Company.
Interest and Other (Expenses)
Interest costs declined in the first nine months ended September 30, 2002 by about half compared to the first half ended September 30, 2001 mainly because of investment "sweeteners" that were paid in 2001 to secure funding. No such charges were incurred in 2002 and no additional debt has been tranched into the Company since the third quarter of 2001. Interest expense relates to Company short-term borrowings invested to support funding needed in 2000 and 2001 to cover the Company's turnaround and continues. Also contributing to the decline in interest cost is the Company's decision in 2001 to discontinue granting stock incentives to lenders for debt funding.
Liquidity and Capital Resources
The following table sets forth certain financial condition information as of September 30, 2002 compared to December 31, 2001
Balance Sheet 2002 2001
Restated
----------- -----------
Working Capital $(1,068,135) $(1,129,210)
Total Assets $ 1,092,349 $ 1,208,027
Debt Obligations $ 994,168 $ 952,851)
Shareholders' (Deficit) Equity $ (566,424) $ (566,837)
While operationally things have significantly improved since year-end 2001 liquidity and sufficient capital resources continued during the first nine months of 2002. Total costs exceed revenues throughout the first five months but in the last month of the second quarter 2002 revenues exceeded costs and contributed a before tax profit in the second quarter of 2002. Cash flows therefore are now positive and expected to continue to improve through the balance of the year. Short-term obligations remained largely at their year-end 2001 levels and is the primary reason for the continuing decline in the Company's current ratio at September 30, 2002 to 0.33% compared to 0.44% at December 31, 2001. The 0.33% however is an improvement over the 0.26% negative working capital ratio at March 31, 2002.
During the last quarter of 2001, cash flow short falls dropped with the addition of new maintenance business coming on-line in the quarter. Monthly cash deficiency in the first quarter 2002 remained at about $25 thousand versus the $85 to $100 thousand a month negative cash flow throughout much of 2001, but by the end of June 2002 monthly cash flow turned positive for the first time in two and half years. Accordingly the Company has been able to adequately manage cash flow since September 2001 without having to make further borrowings. With the return of positive cash flow from operations management is confident it can manage cash requirements in the near-term while it seeks to negotiate restructuring of the Company's short-term borrowings. The Company is engaged in this regard in negotiations with several investment-banking firms and others with the intent of securing equity funding of $1 million. These negotiations were continuing at September 30, 2002.
Also contributing to the decreased working capital position at September 30, 2002 compared to year-end 2001 was the overall increase in current liabilities versus current assets at December 31, 2001 primarily because of short-term debt. Current asset account balances remained at near December 31, 2001 levels while current liabilities, except short-tem debt levels declined at September 30, 2002.
In March 2001, the Company and holders of four of the Company's notes payable, that were due in March and September of 2001, entered into Note Deferral and Extension Agreements wherein each note holder agreed to defer all principal payments until July 15, 2001, where upon the Company agreed to make a twenty-five percent (25%) principal payment to each note holder and the notes' due dates were extend to July 15, 2002. But at July 15, 2001, the Company was unable to make the scheduled partial principle payment or commence making level monthly principal and interests payments over the remaining twelve-month period of the notes. As part of that agreement the Company also agreed to increase the interest rates of the notes from their stated twelve to fourteen percent (12% to 14%) to eighteen percent (18%). The Company has continued to make timely monthly interest payments to the holders. The Company intends to renegotiate these notes and establish a repayment schedule permitting paying off the obligations over a two to three year period. Management is in communication with the holders and believes it will be able to negotiate such an arrangement.
At September 30, 2002, the Company had accrued approximately $47 thousand of unpaid payroll taxes, interest and penalties. At the end of June 2002, the Company submitted required documentation in support of the "Offer In Compromise" it filed in 2001 with the IRS. Management believes the Company will be able to successfully liquidate this liability without incurring any adverse effects on the Company's financial condition from actions of the IRS.