SCOTTSDALE, Ariz., April 29, 2004 (PRIMEZONE) -- OneSource Technologies, Inc., (OTCBB:OSRC) reported consolidated revenues of $3.08 million for the year ended December 31, 2003, a 4% increase over year-end 2002 revenues of $2.9 million. Operating Profit of $52 thousand (less than $0.00 per share) and Net Loss of $433 thousand ($0.01 per share) were also reported for the year-ended December 31, 2003 compared to Operating Income and Net Income of $192 thousand (less than $0.00 per share) and $16 thousand (less than $0.00 per share) respectively for the year ended December 31, 2002.
"2003 operating results reflect the Company's break from the past with the inclusion of one-time charges against income for settlement of all outstanding legacy litigation matters and the discontinuance of the Company's toner remanufacturing operations," said Michael Hirschey, CEO of the Company. "A number of disputes arising in prior years related to certain shareholder matters were resolved during the year so the Company could move forward unimpeded with its strategic plans," continued Hirschey.
"As part of the new management team's analysis of the Company's operations, we found that the remanufactured toner products industry had matured and is now represented by fewer well capitalized mega-remanufactures. Consequently, management and the board determined the Company should discontinue its remanufacturing efforts and their associated costs, and focus instead on sales and marketing of toner products on behalf of one or more of these large, well positioned suppliers. Accordingly, the Company discontinued its toner remanufacturing operations as of year-end and wrote off its investment in facilities and equipment related thereto but retained its toner sales and marketing capabilities," continued Hirschey. "While these charges to income negatively impacted earnings, management is confident that by disposing of the disputes and focusing on toner product sales the Company's future operating results will be significantly enhanced," concluded Hirschey.
About OneSource
OneSource is engaged in two closely related and complementary lines of IT and business equipment support services and products, 1) equipment maintenance services, 2) value added equipment supplies distribution. OneSource is in the technology equipment maintenance and service industry and is the inventor of the unique OneSource Flat-Rate Blanket Maintenance System(tm). This unique 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 provides remanufactured toner cartridges in the south and mountain west and is the supplier of choice for a number of Fortune 2000 companies in those regions. OneSource has realigned this division as an outsourced product sales representative and/or broker on behalf of toner remanufactures that nationally serve the Fortune 2000 market segment.
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 Information follows)
Independent Auditor's Report
We have audited the accompanying consolidated balance sheet of OneSource Technologies, Inc. as of December 31, 2003 and related consolidated statements of operations, stockholders' deficit and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe 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 consolidated financial position of OneSource Technologies, Inc. as of December 31, 2003, and the consolidated results of its operations and cash flows for each of the two years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.
/s/ Epstein, Weber & Conover, P.L.C. ----------------------------- Scottsdale, Arizona February 27, 2004
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003
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ASSETS
CURRENT ASSETS:
Cash $ 91,907
Accounts receivable 308,531
Inventories 179,584
Other current assets 1,750
-----------
Total current assets 581,772
-----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $223,533 63,442
DEFERRED INCOME TAXES 140,187
OTHER ASSETS 3,028
-----------
TOTAL ASSETS $ 788,429
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 48,789
Accrued expenses and other liabilities 313,064
Deferred revenue 220,899
Current portion of debt 485,015
-----------
Total current liabilities 1,067,767
-----------
INSTALLMENT NOTES -- LONG-TERM PORTION 605,000
-----------
TOTAL LIABILITIES 1,672,767
-----------
STOCKHOLDERS' DEFICIT
Preferred Stock, $.001 par value, 1,000,000
shares authorized, none issued -
Common Stock, $.001 par value, 50,000,000
shares authorized, 38,702,623 -
issued and outstanding at December 31, 2003 38,703
Paid in capital 2,831,930
Deferred stock compensation (60,000)
Accumulated deficit (3,694,971)
-----------
(884,338)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 788,429
===========
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 & 2002
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2003 2002
------------ ------------
REVENUE, net $ 3,074,624 $ 2,958,871
COST OF REVENUE 1,900,124 1,928,071
------------ ------------
Gross Profit 1,174,501 1,030,800
GENERAL AND ADMINISTRATIVE EXPENSES 894,285 816,953
SELLING AND MARKETING EXPENSE 228,589 21,923
------------ ------------
Operating Income
(Loss) 51,626 191,924
OTHER INCOME (EXPENSE):
Interest expense (120,519) (140,883)
Other income (expense) (5,761) (35,427)
Loss from litigation settlements (124,053) --
Impairment of goodwill (235,074) --
------------ ------------
Total other expense (485,407) (176,310)
------------ ------------
INCOME(LOSS)BEFORE INCOME TAXES (433,781) 15,614
INCOME TAXES
------------ ------------
NET INCOME (LOSS) (433,781) 15,614
============ ============
EARNINGS PER SHARE :
Basic $ (0.01) **
============ ============
Diluted $ (0.01) **
============ ============
Weighted Average Shares Outstanding:
Basic 35,947,039 25,705,509
Diluted 35,947,039 25,705,509
**Less than $0.01 per share
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 & 2002
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2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(433,781) $ 15,614
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operations --
Impairment loss on goodwill 235,074 --
Loss on disposal of fixed assets -- 24,494
Depreciation and amortization 46,507 69,639
Stock issued for services 30,000 20,500
Stock issued for settlements 49,986 --
Legal settlements made with notes
payable 59,254 --
Changes in assets and liabilities:
Accounts receivable 141,898 (138,434)
Inventory 32,362 1,373
Other current assets 8,754 13,548
Other assets -- (1,705)
Accounts payable (139,639) (147,397)
Accrued expenses and other
liabilities 935 36,149
Deferred revenue 20,528 60,745
--------- ---------
Net cash (used) provided
in continuing
operating activities 51,878 (45,475)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment (6,167) (5,269)
Proceeds from disposal of
equipment -- 5,500
--------- ---------
Cash provided by (used in)
investing activities (6,167) 231
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 132,310 69,000
Principal payments on notes payable (141,381) (43,922)
--------- ---------
Net cash provided by
financing activities (9,071) 25,078
--------- ---------
NET DECREASE IN CASH 36,640 (20,166)
CASH, beginning of year 55,267 75,433
--------- ---------
CASH, end of year $ 91,907 $ 55,267
========= =========
Management's Discussion and Analysis of Operations
The financial results discussed herein include the consolidated operations of OneSource Technologies, Inc., (hereinafter "OneSource" and/or "the Company") for the years ended December 31, 2003 and 2002. OneSource is engaged in two closely related and complementary lines of technology and business equipment support activities; 1) equipment maintenance services, ("Maintenance") 2) value added equipment supply sales, ("Supplies"). OneSource is in the technology equipment maintenance and service industry and is the inventor of the 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 supply products.
Summary of Operations
Operating results have improved in the year ended December 31, 2003 compared to the year ended December 31, 2002. The following table summarizes the comparative operating results for the two periods:
-------------------------------------------------------------------- Summary of Operations 2003 2002 -------------------------------------------------------------------- Revenues $3,074,625 $ 2,958,871 Cost of Revenue 1,900,124 1,928,071 Gross Margin 1,174,501 1,030,800 Selling, General and Administrative Costs 1,122,874 838,876 Operating Income (Loss) before Discontinued Operation 51,627 191,924 Other Income (Expense) (126,281) (176,311) Loss from litigation settlements (124,053) -- Loss from discontinued operations (235,074) -- --------------------------------------------------------------------- Net Income (Loss) $ (433,781) $ 15,614 ---------------------------------------------------------------------
During 2003, Management had resolved many issues which had the potential to curtail the growth of the Company. While the net loss for 2003 is $433,781 compared to net income of $15,614 for 2002, this included charges of $235,074 related to the write-down of goodwill associated with the shutdown of in-house manufacturing of toner cartridges. This facet of the business is now being outsourced to a manufacturer in California at more favorable pricing than that achieved by the in-house manufacturing process. Over $124,000 of the net loss is a result of settlement related to litigation or potential litigation.
While consolidated revenues increased slightly by about four percent (4%) in 2003 compared to 2002, consolidated cost of revenues actually declined approximately 1.5% resulting in a fourteen percent (14%) increase in gross profit for the year ended December 31, 2003 compared to the year ended December 31, 2002. Changes implemented early in the first quarter of 2003 started to show improvement by the end of the year as gross margins of the maintenance division had increased significantly to 42% by the end of 2003 versus 34% during the year ended December 31, 2002. Management will continue to focus on this aspect of the service operations in order to continue to bring down parts usage costs.
Revenues
Consolidated revenues increased by 4% in the year ended December 31, 2003 compared to the same period in 2002 as a result of increased revenues in the maintenance divisions. Supply division revenues fell two (2%) compared to 2002. The following table details maintenance and supply division revenues for 2003 & 2002:
Revenues 2003 2002
--------------------------------------------------------------
Maintenance $ 2,274,329 $ 2,137,754
Supplies 800,296 821,117
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Total $ 3,074,625 $ 2,958,871
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The six percent (6%) increase in maintenance revenues during 2003 is the result of added service commitments from existing customers and reflects the positive benefits of changes the Company has implemented that have improved maintenance customer satisfaction levels to the highest in the Company's history. This added business increased the concentration of the Company's revenues with the Kroger Corporation to sixty-seven (67%) percent of total revenues. In December 2003, the Company had successfully renewed the contract to supply maintenance services to a division of the Kroger Corporation. This contract is in effect through January 2005.
Supply division revenues decreased two percent (2%) in 2003 compared to 2002, which was slightly less than management had forecasted for the division. As the remanufactured cartridge business is becoming more competitive and thus driving margins lower, Management has made the concerted effort to pursue the much more highly margined maintenance contracts.
Cost of Revenues and Gross Margins
Consolidated gross margins for the year ended December 31, 2003 were slightly higher compared to 2002. This is the result of increased revenues in the maintenance division which provided margins at 42% versus revenues in the supplies division which provided margins at 29%.
Selling, General and Administrative Costs
General and Administrative costs have increased $77,000 for the year ended December 31, 2003 versus the period ended in 2002. Much of this is due to legal and professional charges associated with the settlement of various litigation issues. Management has also upgraded key personnel to position the Company for additional growth. The following table details the significant components of general and administrative costs :
General and Administrative 2003 2002
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Salaries, Wages and Benefits $ 218,893 $ 469,659
Facilities 155,361 153,571
Legal and Professional 331,607 97,536
Telecommunication Costs 71,692 72,334
Travel and Entertainment 15,015 22,626
Other 101,717 1,226
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Total $ 894,285 $ 816,953
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Sales and Marketing 2003 2002
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Salaries, Commissions and Benefits $ 198,819 $ 14,016
Advertising and Promotion 6,663 6,067
Travel and Entertainment 23,107 1,841
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Total $ 228,589 $ 21,923
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The increase in sales and marketing personnel costs is largely the result of the Company's aggressive strategy of pursuing new sales opportunities. The Company now has 4 full time sales persons as compared to only one-half of the time of one person in 2002.
Other Income (Expense)
Other Income (Expense) 2003 2002
---------------------------------------------------------------------
Interest expense $ (120,519) $ (140,883)
Loss from litigation settlements (124,053) --
Impairment of goodwill (235,074) --
Other (5,761) (35,428)
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Total $ (485,407) $ (176,311)
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Interest costs declined in 2003 by 14% mainly because the Company has stopped accruing interest on debt which the Company believes it may not have the obligation to repay.
The Company also incurred one-time charges of $124,053 related to the settlement of litigation or potential litigation issues. In conjunction with a restructuring of its cartridge supply division, the Company incurred a charge of $235,074 as an impairment of the goodwill previously recorded relating to an acquisition of a company in that division.
Liquidity and Capital Resources
The following table sets forth selected financial condition information as of December 31, 2003 compared to December 31, 2002:
Balance Sheet 2003 2002 ------------- ---- ---- Working Capital $ (485,995) $(1,007,838) ------------------------------------------------------------------- Total Assets 788,429 1,205,944 ------------------------------------------------------------------- Debt Obligations 1,090,015 985,310 ------------------------------------------------------------------- Shareholders' (Deficit) $(884,338) $(530,543) -------------------------------------------------------------------
While operationally things have improved since 2002, liquidity and financing continued to be a challenge during 2003.
To improve overall cash flow the Company has entered into an Agreement with a financing institution to provide advance payments on certain outstanding accounts receivable. At December 31, 2003 the Company owed $132,000 to this institution.
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 subsequently extend to July 15, 2002, but by that date the Company was unable to make the scheduled partial principal payments or commence making level monthly principal and interests payments over the remaining twelve-month period of the notes. As part of the 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 note holders. Further, the Company is in communication with the note holders and believes it will be able to restructure or renegotiate the terms in a manner that will not adversely impact the Company's continuing operations. The Company is also engaged in negotiations with other lenders and investors for the acquisition of outside financing in case it is not able to satisfactorily restructure the debt of the present note holders.
At December 31, 2003, the Company had accrued approximately $48,000 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. Information has been provided, the Company is continuing to fully cooperate, and resolution of this issue should be forthcoming.