OSRC .03 news.(COMTEX)B: OneSource Reports Second Quarter 2003 Results
B: OneSource Reports Second Quarter 2003 Results
SCOTTSDALE, Ariz., Aug 21, 2003 (PRIMEZONE via COMTEX) -- OneSource
Technologies, Inc., (OTCBB:OSRC) reported consolidated revenues of $771 thousand
for the quarter ended June 30, 2003, a 7% increase over second quarter 2002
revenues of $721 thousand. Consolidated year-to-date revenues of $1.5 million
were also 7% greater than the $1.4 million reported for the first six months of
2002. The Company reported Net Losses of $84 thousand (less than $0.00 per
share) and $97 thousand (less than $0.00 per share) for the quarter-ended June
30 and year-to-date 2003 respectively, compared to Net Income of $54 thousand
(less than $0.00 per share) and Net Losses of $57 thousand (less than $0.00 per
share) respectively for the quarter ended June 30 and year-to-date 2002.
"Revenues through the second 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. "But
we elected to settle a number of legacy issues that have been distracting
management rather than continue to incur further legal costs of pursuing them
and in doing so we incurred settlement fees of about $93 thousand in the quarter
that essentially eliminated our profit for the periods", added Hirschey. "The
good news though is we now have these distractions behind us so we can
concentrate on again growing the business and regain the momentum we enjoyed in
the past," 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 JUNE 30, 2003
---------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 39,606
Accounts receivable 417,213
Inventories 210,118
Other current assets 3,168
-----------
Total current assets 670,105
-----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $ 199,212 86,656
GOODWILL 235,074
DEFERRED INCOME TAXES 140,187
OTHER ASSETS 5,178
===========
TOTAL ASSETS $ 1,137,200
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 193,083
Accrued expenses and other liabilities 283,167
Deferred revenue 196,699
Current portion of debt 1,028,344
-----------
Total current liabilities 1,701,293
-----------
INSTALLMENT NOTES - LONG-TERM PORTION 4,776
-----------
TOTAL LIABILITIES 1,706,069
-----------
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.001 par value, 1,000,000
shares authorized, none issued
Common Stock, $.001 par value, 50,000,000
shares authorized, 37,779,011 --
issued and outstanding at June 30, 2003 37,779
Paid in capital 2,751,382
Accumulated deficit (3,358,030)
-----------
(568,869)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,137,200
===========
ONESOURCE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30
------------------------------------------
2ND QTR 2ND QTR YTD YTD
2003 2002 2003 2002
---------------------------------------------------
REVENUE, net $ 771,322 $ 720,851 $ 1,548,079 $ 1,399,841
COST OF REVENUE 471,348 409,905 952,116 900,101
---------------------------------------------------
GROSS PROFIT 299,974 310,946 595,963 499,740
GENERAL AND
ADMINISTRATIVE
EXPENSES 213,519 191,874 481,830 447,327
SELLING AND
MARKETING
EXPENSES 45,414 11,381 50,644 17,986
---------------------------------------------------
Operating
income 41,041 107,691 63,489 34,427
OTHER INCOME
(EXPENSE):
Interest
expense (31,516) (29,722) (66,395) (64,832)
Other income
(expense) (1,247) (24,398) (1,165) (26,491)
Loss from
litigation
settlements (92,768) -- (92,768) --
---------------------------------------------------
Total
other
expense (125,531) (54,120) (160,328) (91,322)
---------------------------------------------------
NET INCOME
(LOSS) $ (84,490) $ 53,571 $ (96,840) $ (56,895)
===================================================
NET INCOME PER
SHARE -
Basic $ (a) $ (a) $ (a) $ (a)
Diluted $ (a) $ (a) $ (a) $ (a)
Shares
Outstanding:
Basic 37,246,402 22,045,674 32,981,294 22,045,674
Diluted 37,246,402 22,045,674 32,981,294 22,045,674
(a) Less than $0.01 per share
ONESOURCE TECHNOLOGIES, INC.
Management Comments
June 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 six month periods ended June 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"), 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 and operating income have increased while net income has declined in
the six months ended June 30, 2003 compared to the same period in fiscal 2002.
The following table summarizes the comparative results for the two periods:
Summary of Operations 2003 2002
Revenues $1,548,079 $1,399,841
Cost of Revenue 952,116 900,100
Gross Profit 595,963 499,741
Selling General and Administrative Costs 532,474 465,314
Operating Income 63,489 34,427
Other Income (Expense) (67,560) (91,322)
Loss from Litigation Settlements (92,768) -
Net Loss $ (96,839) $ (56,895)
While consolidated revenues to date have increased by eleven percent (11%) in
2003 compared to 2002, consolidated cost of revenues increased six percent (6%)
resulting in a nineteen percent (19%) increase in gross profit. This reflects
the continuing efforts to control parts costs in the maintenance division.
Changes implemented early in the second quarter of 2002 have shown continuing
improvement through the end of the second quarter 2003 as gross margins of the
maintenance division for the six months ended June 30, 2003 increased to 41%
versus 35% for the first six months of 2002. Management will continue to focus
on this aspect of the maintenance division in order to continue to bring down
parts usage rates.
Revenues
Consolidated revenues increased eleven percent (11%) for the six-month period
ended June 30, 2003 compared to the same period in 2002. Consolidated revenues
increased seven percent (7%) for the three-month period ended June 30, 2003
compared to the same period in 2002. As seen in the following table, supply
division revenues for the six-month period ended June 30, 2003 increased four
(4%) compared to 2002, while the maintenance division revenues increased
fourteen (14%):
Revenues 2003 2002
Maintenance $1,091,458 $ 959,437
Supplies 456,621 440,404
Total $1,548,079 $1,399,841
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 second quarter of 2003.
Maintenance revenues have increased fourteen percent (14%) and thirteen percent
(13%) for the six-month and three-month periods, respectively, ended June 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 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 four percent (4%) and decreased eight percent
(8%) for the six-month and three-month periods, respectively, ended June 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. The decline in supplies division revenue in the three-month period
ended June 30, 2003 is due primarily to timing of certain customers' purchases
compared to the prior year.
Gross Margins
Consolidated gross margins for the six months ended June 30, 2003 have improved
slightly over the six months ended June 30, 2002. Gross margins increased to
thirty-eight percent (38%) versus thirty-six percent (36%). Improved inventory
control and field service management contributed to the improved margins. 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 six percent (6%), 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 June 30, 2003 decreased
slightly from the three months ended June 30, 2002. Gross margins decreased to
thirty-nine percent (39%) from forty-three percent (43%). This decrease is due
primarily to the addition of the new wholesale supplies division customer
discussed above.
Selling, General and Administrative Costs
General and administrative costs increased approximately $35,000 for the six
months ended June 30, 2003 compared to the same period in the prior year, an
eight percent (8%) increase. They increased $21,000 for the three months ended
June 30, 2003 compared to the same period in the prior year, an eleven percent
(11%) increase. Despite the increases, these costs remained relatively
consistent as a percentage of revenues between periods, representing thirty-one
percent (31%) of gross revenues for the six months ended June 30, 2003 versus
thirty-two percent (32%) for the same period in the prior year. They represented
twenty-seven percent (27%) of revenues for both three- month periods ended June
30, 2003 and 2002. The following table summarizes the significant general and
administrative cost categories for the six months ended June 30, 2003 and 2002:
General and Administrative 2003 2002
Salaries, Wages and Benefits $ 142,187 $ 222,803
Facilities 76,870 73,616
Legal and Professional 173,376 52,467
Telecommunication Costs 34,883 32,744
Travel and Entertainment 10,316 9,005
Other 44,198 56,692
Total $ 481,830 $ 447,327
Most of the cost categories have nominal changes for the six months ended June
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
$120,000 increase in legal and professional expenses is primarily attributable
to the Company's senior management consultants expanding 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
$80,000 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 June 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 six months ended June 30, 2003 and 2002:
Selling and Marketing 2003 2002
Salaries Commissions and Benefits $ 38,796 $ 13,681
Advertising and Promotion 4,018 4,163
Travel and Entertainment 7,830 142
Total $ 50,644 $ 17,986
The significant increase in selling and marketing costs is largely the result of
the Company's efforts to refocus on implementing and supporting the sales and
marketing plan, now that most of the operational, infrastructure and management
changes made as part of the restructuring over the past year are largely in
place.
The following table summarizes other income (expense) for the six months ended
June 30, 2003 and 2002:
Interest and Other Income (Expense)
Other Income (Expense) 2003 2002
Interest $ (66,395) $ (64,831)
Other (1,165) (26,491)
Loss from litigation settlements (92,768) -
Total $ (160,328) $ (91,322)
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 quarter ended June 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 being recorded in the
second quarter ended June 30, 2003.
Liquidity and Capital Resources
The following table sets forth selected financial condition information as of
June 30, 2003 compared to December 31, 2002:
Balance Sheet 2003 2002
Working Capital ($1,031,188) ($1,007,838)
Total Assets $1,137,200 $1,205,944
Debt Obligation $1,033,120 $985,310
Shareholders' Deficit ($568,869) ($530,543)
Liquidity and capital resources continued to be a problem during the first six
months of 2003. Total costs exceed revenues throughout the first six months
ended June 30, 2003, but are expected to improve in the third quarter. If not
for the loss from legal settlements of $92,768 recorded in the quarter ended
June 30, 2003 and the associated legal fees, the Company would have been
profitable and would have generated positive cash flow in the second quarter.
With these legal issues now behind the Company, management believes it can
continue to improve both cash flow and profitability in the near-term through
continued new business. In addition, management is continuing its efforts to
negotiate additional funding opportunities intended to re-capitalize the
Company.
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 June 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.
SOURCE: OneSource Technologies, Inc.
By Staff
CONTACT: OneSource Technologies, Inc.
Michael Hirschey, CEO
(480) 889-1177
mhirschey@1sourcetech.com
(C) 2003 PRIMEZONE, All rights reserved.
-0-
INDUSTRY KEYWORD: Business Services
SUBJECT CODE: EARNINGS
TECHNOLOGY
HARDWARE
Earnings Releases and Operating Results
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