SCOTTSDALE, Ariz., Nov. 20, 2003 (PRIMEZONE) -- OneSource Technologies, Inc., (OTCBB:OSRC) reported consolidated revenues of $802 thousand for the quarter ended September 30, 2003, a 6% increase over third quarter 2002 revenues of $760 thousand. Consolidated year-to-date revenues of $2.4 million were 9% greater than the $2.2 million reported for the first nine months of 2002. The Company reported Net Losses of $18 thousand (less than $0.00 per share) of $115 thousand (less than $0.00 per share) for the quarter-ended September 30 and year-to-date 2003 respectively, compared to Net Income of $37 thousand (less than $0.00 per share) and Net Loss of $20 thousand (less than $0.00 per share) respectively for the quarter ended September 30 and year-to-date 2002.
"Revenues through the third quarter 2003 continued to show improvement over the prior year," said Michael Hirschey, CEO of the Company. "And both operating divisions continued to contribute positive cash flow," continued Hirschey. "As part of our focus on again growing the Company we initiated a relationship with a west coast toner remanufacturing supplier that gives the Company the ability to significantly extend its product mix and at the same time do so at lower cost," added Hirschey. "Consequently we elected to discontinue the Company's remanufacturing operations in Scottsdale and to focus on expanding our toner remanufacturing customer base as a distributor for this west coast remanufacturer. "Doing so will save the Company approximately $15 thousand a month in direct costs without sacrificing our ability to service both our existing customers as well as significantly expand our market penetration in that space," concluded Hirschey.
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.
(Financial and Management Information follows)
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2003
-----------------------------------------------------
-----------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 49,204
Accounts receivable 301,431
Inventories 226,747
Other current assets 2,500
-----------
Total current assets 579,882
-----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $ 211,344 74,524
GOODWILL 235,074
DEFERRED INCOME TAXES 140,187
OTHER ASSETS 3,028
-----------
TOTAL ASSETS $ 1,032,695
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 93,778
Accrued expenses and other liabilities 344,635
Deferred revenue 199,461
Current portion of debt 974,762
-----------
Total current liabilities 1,612,636
-----------
INSTALLMENT NOTES - LONG-TERM PORTION 0
-----------
TOTAL LIABILITIES 1,612,636
-----------
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.001 par value,
1,000,000 shares authorized, none
issued
Common Stock, $.001 par value,
50,000,000 shares authorized,
37,979,011 --
issued and outstanding at
September 30, 2003 37,979
Paid in capital 2,758,182
Accumulated deficit (3,376,102)
-----------
(579,941)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,032,695
===========
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30
-------------------------------------------------
3RD QTR 3RD QTR YTD YTD
2003 2002 2003 2002
-------------------------------------------------
REVENUE, net $ 802,210 $ 759,615 $ 2,350,289 $ 2,159,456
COST OF REVENUE 480,663 491,912 1,432,779 1,392,013
---------- ---------- ---------- ----------
GROSS PROFIT 321,547 267,703 917,510 767,443
GENERAL AND
ADMINISTRATIVE
EXPENSES 200,871 193,417 682,701 640,744
SELLING AND
MARKETING
EXPENSES 82,057 1,500 132,701 19,486
---------- ---------- ---------- ----------
Operating
income 38,619 72,786 102,108 107,213
OTHER INCOME
(EXPENSE):
Interest
expense (38,609) (35,059) (105,004) (99,891)
Other income
(expense) (1,270) (1,098) (2,435) (27,589)
Loss from
litigation
settlements (16,813) -- (109,581) --
---------- ---------- ---------- ----------
Total other
expense (56,692) (36,157) (217,020) (127,480)
NET INCOME (LOSS) $ (18,073) $ 36,629 $ (114,912) $ (20,267)
========== ========== ========== ==========
NET INCOME PER
SHARE -
Basic $ ** $ ** $ ** $ **
Diluted $ ** $ ** $ ** $ **
Weighted Average
Shares
Outstanding:
Basic 37,246,402 25,940,650 37,979,011 25,065,002
Diluted 37,246,402 26,048,650 37,979,011 25,065,002
**Less than $0.01 per share
OneSource Technologies, Inc.
Management's Discussion and Analysis of Operations
September 30, 2003
Introduction
The financial results discussed herein include the consolidated operations of OneSource Technologies, Inc, (hereinafter "OneSource" and/or "the Company") for the three and nine month periods ended September 30, 2003, and 2002. OneSource is engaged in two closely related and complimentary lines of technology and business equipment support activities; 1) equipment maintenance services, ("Maintenance"), and 2) value added equipment supply sales, ("Supplies"). 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 program provides customers with a Single Source for all general office, computer and peripheral and industry specific equipment technology maintenance, installation and supplies products.
Summary of Operations
Revenues have increased while net income has declined in the nine months ended September 30, 2003 compared to the same period in fiscal 2002. However, excluding the Loss from Litigation Settlements, the net loss has declined by over 73% from the year ago period. The following table summarizes the comparative results for the two periods:
-------------------------------------------------------------------- Summary of Operations 2003 2002 -------------------------------------------------------------------- Revenues $ 2,350,289 $ 2,159,456 Cost of Revenue 1,432,779 1,392,013 Gross Profit 917,510 767,443 Selling General and Administrative Costs 815,402 660,230 Operating Income 102,108 107,213 Other Income (Expense) (107,439) (127,480) Loss from Litigation Settlements (109,581) - -------------------------------------------------------------------- Net Loss $ (114,912) $ (20,267) --------------------------------------------------------------------
While consolidated revenues to date have increased by almost nine percent (9%) in 2003 compared to 2002, consolidated cost of revenues have increased by less than three percent (3%) resulting in a nineteen percent (19%) increase in gross profit. This reflects the continuing efforts to control parts costs in the maintenance division along with a more efficient use of our labor resources. Changes implemented early in the second quarter of 2002 have shown continuing improvement through the end of the third quarter 2003 as gross margins of the maintenance division for the nine months ended September 30, 2003 have increased to nearly 43% versus 35% for the first nine months of 2002. Management continues to actively focus on this aspect of the maintenance division in order to continue to bring down the costs incurred for parts and labor per service call.
Revenues
Consolidated revenues increased nine percent (9%) for the nine-month period ended September 30, 2003 compared to the same period in 2002. Consolidated revenues increased six percent (6%) for the three-month period ended September 30, 2003 compared to the same period in 2002. As seen in the following table, supply division revenues for the nine-month period ended September 30, 2003 increased thirteen percent (13%) compared to 2002, while the maintenance division revenues increased just over seven percent (7%):
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Revenues 2003 2002
-----------------------------------------------------------------
Maintenance $ 1,692,217 $ 1,576,290
Supplies 658,072 583,166
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Total $ 2,350,289 $ 2,159,456
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The Company's restructuring and realignment of its maintenance division that was implemented in the fourth quarter of 2001 continues to show positive trends as of the end of the third quarter of 2003.
Maintenance revenues have increased seven percent (7%) and five percent (5%) for the nine-month and three-month periods, respectively, ended September 30, 2003 compared to the same periods in 2002. These increases are the result of added service commitments from existing customers as well as the addition of a new contract. This also reflects significant changes the Company has implemented that have improved maintenance customer satisfaction levels to the highest in the Company's history. Although the Company is not currently focused on equipment installation services, to the degree installation opportunities arise in line with present geographic and staffing resources, the Company will pursue and engage them; however, in the near-term management is concentrating on the maintenance and supplies divisions. Now that operational efficiencies and customer satisfaction levels are substantively improved, management is focusing greater attention on growing revenues via both current account extensions as well as through out-bound sales and marketing efforts.
Supply division revenues increased thirteen percent (13%) and nine percent (9%) for the nine-month and three-month periods, respectively, ended September 30, 2003 compared to the same periods in 2002. Supply division revenues were positively impacted by the division's web-based distribution delivery system, as well as the addition of a large new customer, which also entered into a service agreement with the Company's maintenance division. This new account continues to generate profitable margins and contribute significant new volume and positive cash flow.
Gross Margins
Consolidated gross margins for the nine months ended September 30, 2003 have improved slightly over the nine months ended September 30, 2002. Gross margins increased to thirty-nine percent (39%) versus thirty-six percent (36%). Improved inventory control and field service management contributed to the improved margins. Also contributing to the increase were new revenue opportunities from existing clients not requiring additional labor. These improvements focused on strengthening management oversight and information system and process infrastructures to assure better inventory and call routing and dispatch control in the maintenance division. While the maintenance division increased its gross profit margin by eight percent (8%), the supplies divisions gross profit margin decreased by seven percent (7%). This decrease is a result of the addition of the customer referenced above who is a wholesale customer versus a retail customer. Prices for wholesale customers are generally lower, thus generating lower margins; however, wholesale customer volumes are typically higher than retail customers.
Consolidated gross margins for the three months ended September 30, 2003 increased from the three months ended September 30, 2002. Gross margins increased to forty percent (40%) from thirty-five percent (35%). This increase relates to the addition of a new maintenance customer and also added revenue from a large existing customer.
Selling, General and Administrative Costs
General and administrative costs increased approximately $42,000 for the nine months ended September 30, 2003 compared to the same period in the prior year, an eight percent (7%) increase. These costs increased $6,000 for the three months ended September 30, 2003 compared to the same period in the prior year, a three percent (3%) increase. Despite the increases, these costs have declined year over year as a percentage of revenues between periods, representing twenty-nine percent (29%) of gross revenues for the nine months ended September 30, 2003 versus thirty percent (30%) for the same period in the prior year. They represented twenty-five percent (25%) of revenues for both three-month periods ended September 30, 2003 and 2002. The following table summarizes the significant general and administrative cost categories for the nine months ended September 30, 2003 and 2002:
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General and Administrative 2003 2002
-----------------------------------------------------------------
Salaries, Wages and Benefits $ 180,926 $ 353,039
Facilities 116,198 110,368
Legal and Professional 258,411 92,532
Telecommunication Costs 55,227 53,778
Travel and Entertainment 12,951 13,900
Other 58,988 17,127
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Total $ 682,701 $ 640,744
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Most of the cost categories have nominal changes for the nine months ended September 30, 2003 compared to the same period in 2002. The most significant changes were salaries, wages and benefits and legal and professional costs. The approximately $165,000 increase in legal and professional expenses is primarily attributable to the Company's senior management consultants continuing to expand their role as the Company's strategy is implemented, and to legal fees incurred related to final settlements on certain litigation, discussed further below. The approximately $172,000 decrease in salaries, wages and benefits is due primarily to significant headcount reductions made over the past year as part of the Company's ongoing restructuring. Overall, the Company's headcount has been reduced to 29 employees at September 30, 2003 from 35 at the end of 2002 with most of the reductions being made in the general and administrative category.
The following table summarizes the significant selling and marketing cost categories for the nine months ended September 30, 2003 and 2002:
--------------------------------------------------------------------
Selling and Marketing 2003 2002
--------------------------------------------------------------------
Salaries Commissions and Benefits $ 111,769 $ 14,016
Advertising and Promotion 6,069 4,951
Travel and Entertainment 14,863 519
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Total $ 132,701 $ 19,486
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The increase in selling and marketing costs is largely the result of the Company's efforts to significantly drive new revenue growth by implementing and supporting the sales and marketing initiatives, now that most of the operational, infrastructure and management changes made as part of the restructuring over the past year are largely in place.
Interest and Other Income (Expense)
The following table summarizes other income (expense) for the nine months ended September 30, 2003 and 2002:
--------------------------------------------------------------------
Other Income (Expense) 2003 2002
--------------------------------------------------------------------
Interest $ (105,004) $ (99,891)
Other (2,435) (27,589)
Loss from litigation settlements (109,581) --
--------------------------------------------------------------------
Total $ (217,020) $(127,480)
--------------------------------------------------------------------
Interest cost has remained relatively consistent between periods as the overall debt level has as well. The most significant item in this category is the loss on litigation settlements recorded in the nine months ended September 30, 2003.
During the quarter ended September 30, 2003, the Company entered into an agreement with a former service provider resulting in the issuance of 200,000 restricted shares of common stock. The negotiated settlement resulted in a loss of $7,000 being recorded in the quarter ended September 30, 2003.
During the quarter ended September 30 2003, the Company settled a dispute with a former officer and board member. No legal action had been filed related to this dispute. A payment of $40,000 was made to this individual in exchange for a complete release of all current and future claims against the Company. His employment contract was terminated. The negotiated settlement resulted in a loss of $9,813 being recorded in the quarter ended September 30, 2003.
During the quarter ended June 30, 2003, the Company entered into two separate settlement agreements with two current shareholders and former owners of companies acquired by the Company in 1999. These agreements end all disputes and litigation among the parties. As part of the settlements the Company agreed to compensate one of the parties with 925,694 restricted shares of common stock, $72,000 payable over 24 months and $42,500 payable in a lump sum on April 1, 2005 and convertible at the holder's option into shares of the Company's voting common stock in accordance with the settlement provisions. The other party was granted 1,000,000 restricted shares of common stock, $30,000 payable over 12 months and $30,000 payable in a lump sum on April 15, 2004 and convertible at the holder's into shares of the Company's voting common stock in accordance with the settlement provisions. As part of the settlement agreements both parties agreed to release and indemnify the Company, its officers and directors from any action or claim relating to the past matters now and in the future. The negotiated settlements resulted in a loss of $92,768 recorded in the second quarter ended June 30, 2003.
Liquidity and Capital Resources
The following table sets forth selected financial condition information as of September 30, 2003 compared to December 31, 2002:
-------------------------- -------------------- --------------------
Working Capital ($1,032,754) ($1,007,838)
-------------------------- -------------------- --------------------
Total Assets $1,032,695 $1,205,944
-------------------------- -------------------- --------------------
Debt Obligations $ 974,762 $ 985,310
-------------------------- -------------------- --------------------
Shareholders' Deficit ($579,941) ($530,543)
-------------------------- -------------------- --------------------
Liquidity and capital resources continued to be closely monitored during the first nine months of 2003. Total costs exceeded revenues throughout the nine months ended September 30, 2003, but are expected to improve in the last quarter. If not for the loss from legal settlements of $109,581 and the associated legal fees, the Company would have been profitable and would have generated positive cash flow for the nine month ended September 30, 2003. With these legal issues now entirely behind the Company, management believes it can continue to improve both cash flow and profitability in the near-term through continued new business.
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. The Company agreed to make a twenty-five percent (25%) principal payment to each note holder on July 15, 2001. The notes' due dates were extend to July 15, 2002, but by that date 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. Further, the Company is in communication with the holders and management believes it will be able to negotiate an arrangement that will not adversely impact the Company's continuing operations.
At September 30, 2003, the Company had accrued approximately $47,000 of unpaid payroll taxes, interest and penalties due the IRS. At the end of June 2002, the Company submitted required documentation in support of its "Offer In Compromise" previously filed in 2001 to the IRS. Management believes the Company will be able to successfully liquidate this liability and that the ultimate outcome will not have an adverse impact on the Company's financial position or results of operations.