<PAGE>
FORM 10-Q SB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
-------------------------------
OR
( ) 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 0-20947
-------------------------
ON-SITE SOURCING, INC
(Exact name of registrant as specified in its charter)
DELAWARE 54-1648470
------------------------------ ---------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1111 N. 19TH STREET, SUITE 404, ARLINGTON, VA 22209
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 276-1123
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed 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 was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
------- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of September 30, 1996.
COMMON STOCK 0.01 PAR VALUE NUMBER OF SHARES
--------------------------- ----------------
NO CLASS 4,787,355
PREFERRED STOCK 0.01 PAR VALUE
------------------------------
NO CLASS NONE
<PAGE>
ON-SITE SOURCING,INC.
INDEX
PART I. FINANCIAL INFORMATION. Page No.
Item 1. Financial Statements
Balance sheets -
September 30, 1996 and December 31, 1995 3
Statements of Earnings -
three and nine months ended September 30, 1996
and 1995 4
Statements of Stockholders Equity
nine months ended September 30, 1996 and 1995 5
Statements of Cash Flows -
nine months ended September 30, 1996 and 1995 6
Notes to financial statements 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and
Results of Operations. 12-14
PART II. OTHER INFORMATION
SIGNATURES 15
Item 6. Exhibit 10(a). Agreement dated September 23, 1996
between the Company and Joseph Sciacca
Page 2 of 15
<PAGE>
ON-SITE SOURCING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------- ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 3,784,883 $ 38,116
Accounts Receivable, Net 2,136,793 809,927
Prepaid supplies 213,245 54,407
------------ ---------
Total Current Assets 6,134,921 902,450
Fixed Assets, net 1,713,667 500,056
Other Assets 50,980 75,529
------------ ---------
$ 7,899,568 $ 1,478,035
------------ ---------
------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade $ 563,829 $ 506,695
Accrued and other liabilities 268,514 148,693
Line of credit and other borrowings - 260,000
Current portion of long-term debt 72,243 81,954
Deferred Taxes 93,400 -
------------ ---------
Total Current Liabilities 997,986 997,342
Long-term Debt, net of
current portion 353,118 125,384
Deferred Rent 98,772 83,626
Commitments and Contingencies - -
Stockholders' Equity
Common stock, $.01 par value,
20,000,000 shares authorized,
4,787,355 and 2,187,000 shares
issued and outstanding 47,874 21,870
Preferred stock, $.01 par value,
1,000,000 shares authorized,
no shares issued
and outstanding - -
Additional paid-in capital 6,354,501 488,140
Accounts and notes receivable-
shareholders (50,400) -
Retained Earnings (Deficit) 97,717 (238,327)
------------ ---------
6,449,692 271,683
------------ ---------
$ 7,899,568 $ 1,478,035
------------ ---------
------------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 15
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ 6,368,487 $ 3,534,424 $ 2,641,926 $ 1,282,023
Cost of sales 4,616,899 2,749,899 1,822,890 1,029,878
------------- ------------ ----------- ------------
Operating Margin 1,751,588 784,525 819,036 252,145
Selling and shipping 663,143 263,742 354,273 112,416
Administration 653,757 388,580 267,172 142,167
------------- ------------ ----------- ------------
1,316,900 652,322 621,445 254,583
------------- ------------ ----------- ------------
Earnings from Operations 434,688 132,203 197,591 (2,438)
Other Income (Expense)
Other Income 62,394 - 40,921 -
Other expense,
primarily interest (64,138) (80,804) (14,596) (25,678)
------------- ------------ ----------- ------------
Earnings Before Income Taxes 432,944 51,399 223,916 (28,116)
Income Taxes 96,900 - 68,400 -
------------- ------------ ----------- ------------
Net Earnings $ 336,044 $ 51,399 $ 155,516 $ (28,116)
------------- ------------ ----------- ------------
------------- ------------ ----------- ------------
Net earnings per share $ 0.10 $ 0.02 $ 0.03 $ (0.01)
------------- ------------ ----------- ------------
Average number of Common Shares
and Common Share Equivalents
outstanding during the period 3,402,181 2,648,377 5,150,694 2,648,377
------------- ------------ ----------- ------------
------------- ------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 15
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months ended September 30, 1996
---------------------------------------------------------------------------------
Additional Accounts Retained
Common Common Paid-In and Notes Earnings
Shares Stock Capital Receivable (Deficit) Total
----------- --------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1996 2,187,000 $ 21,870 $ 488,140 $ - $(238,327) $ 271,683
Sale of Common Stock 2,600,355 26,004 5,866,361 5,892,365
Accounts and Notes -
Receivable-
shareholders (115,000) (115,000)
Payments received 64,600 64,600
Net Earnings for the
Period 336,044 336,044
----------- --------- ---------- ------------- ----------- ----------
Balance at
September 30, 1996 4,787,355 $ 47,874 $6,354,501 $ (50,400) $ 97,717 $6,449,692
----------- --------- ---------- ------------- ----------- ----------
----------- --------- ---------- ------------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended September 30, 1995
--------------------------------------------------------------------------------
Additional Accounts Retained
Common Common Paid-In and Notes Earnings
Shares Stock Capital Receivable (Deficit) Total
----------- --------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1995 2,187,000 $ 21,870 $ 488,140 $ - $(313,955) $ 196,055
Net Earnings for
the Period 51,399 51,399
----------- --------- ---------- ------------- ----------- ----------
Balance at
September 30, 1995 2,187,000 $ 21,870 $ 488,140 $ - $(262,556) $ 247,454
----------- --------- ---------- ------------- ----------- ----------
----------- --------- ---------- ------------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 15
<PAGE>
ON-SITE SOURCING, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------ --------------
<S> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents
Cash Flows from Operating Activities
Net Earnings $ 336,044 $ 51,399
----------- -----------
Adjustments to reconcile net earnings
to net cash from Operations
Depreciation 158,358 74,754
Disposal of fixed assets (1,413) -
Changes in assets and liabilities
Increase in accounts receivable (1,326,866) (229,036)
Increase in prepaid supplies (158,838) (34,342)
(Increase) decrease in other assets 24,549 (37,220)
Increase in accounts payable 57,134 293,683
Increase in accrued liabilities 119,821 79,854
Increase in deferred taxes 93,400 -
Increase in deferred rent 15,146 7,822
----------- -----------
Total Adjustments (1,018,709) 155,515
----------- -----------
Net Cash (Used in) Provided by
Operating Activities (682,665) 206,914
----------- -----------
Cash Flows Used in Investing Activities
Capital expenditures (1,370,556) (129,239)
Purchase of CRC, net - (9,161)
----------- -----------
Net Cash used in investing activities (1,370,556) (138,400)
----------- -----------
Cash Flows from Financing Activities
Proceeds from sale of common stock 5,841,965 -
Borrowings under long-term debt
agreements 751,870 -
Payments under long-term debt
agreements (283,847) (57,619)
Payments under short-term debt
agreements (250,000) -
Net (payments) borrowings under
line of credit (260,000) 70,034
----------- -----------
Net Cash Provided by Financing Activities 5,799,988 12,415
----------- -----------
Net Increase in Cash 3,746,767 80,929
Cash and cash equivalents,
Beginning of Period 38,116 7,965
----------- -----------
Cash and cash equivalents, End of Period $3,784,883 $ 88,894
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6 of 15
<PAGE>
ON-SITE SOURCING, INC.
Notes to Interim Financial Statements
(unaudited)
- ------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- ------------------------------------------------------------------------------
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in the annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Company believes that
the disclosures made are adequate to make the information presented not
misleading.
In the opinion of management, the accompanying condensed financial
statements reflect all necessary adjustments and reclassifications that are
necessary for fair presentation for the periods presented. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes filed in the SB-2. The results of
operations for the nine month period ended September 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
REVENUE RECOGNITION
Revenue from facilities management is recognized based on monthly fixed
fees and, in certain cases, variable per copy fees, as contained in
facilities management agreements. Revenue from reprographic services is
recognized on a per copy basis upon completion of the services. Revenue
from the sale of refurbished copiers is recognized when the copiers are
shipped and transfer of title occurs.
FIXED ASSETS
Fixed assets consists of copy center equipment, office furniture and
fixtures, and delivery equipment. Depreciation is provided for in
sufficient amounts to relate the cost of depreciable assets to operations
over their estimated service lives, ranging from three to seven years. The
straight line method is followed for financial reporting purposes.
Accelerated methods are used for tax purposes.
CAPITALIZED SOFTWARE
The Company capitalizes certain initial development costs after
technological feasibility has been demonstrated. Such capitalized amounts
are amortized commencing with product introduction over the lesser of the
expected sales cycle or over the estimated economic life. Capitalized
software costs are included in Other Assets and are reduced to net
realizable value at September 30, 1996.
Page 7 of 15
<PAGE>
ON-SITE SOURCING, INC.
Notes to Interim Financial Statements--Continued
(unaudited)
- ------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- ------------------------------------------------------------------------------
INCOME TAXES
The provision for income taxes presented in the statements of earnings is
based upon the estimated effective tax rate for the year, and is largely
determined by management's estimate as of the interim date of projected
taxable income for the entire fiscal year.
EARNINGS PER COMMON SHARE
The Company's common stock was split 100-for-one and 18-for-one in March
1995 and February 1996, respectively. All earnings per share amounts in
the financial statements have been restated to give effect to the stock
splits.
Earnings per common share is based on the weighted average number of common
shares and, if dilutive, common equivalent shares outstanding during each
year. Such average shares include the weighted average number of common
shares outstanding (3,402,181 in 1996 and 2,187,000 1995) plus the shares
issuable upon exercise of stock options and warrants after the assumed
repurchase of common shares with the related proceeds (454,584 in 1996 and
1995). Options and warrants granted, as well as certain shares issued
during the one-year period prior to the initial public offering (see Note
H), are treated as outstanding in calculating earnings per share for both
periods presented.
NOTE B--CREDIT FACILITIES
At September 30, 1996, the Company had available a $450,000 working capital
line of credit at the bank's prime rate (8.25%) plus 1%, which is due on
demand. The credit facility is collateralized by the assets of the Company
and guaranteed by the Company's chairman, and the Company's president and
his spouse. At September 30, 1996 there were no borrowings under the
working capital line of credit.
The above note is subject to certain covenants; at various times throughout
the period the Company was in violation of certain covenants. The banks
have waived their rights under the default provisions through December 31,
1996.
Page 8 of 15
<PAGE>
ON-SITE SOURCING, INC.
Notes to Interim Financial Statements--Continued
(unaudited)
- -----------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- -----------------------------------------------------------------------------
The Company has retired all bank debt and short term borrowings with the
proceeds of the initial public offering.
The Company has financed certain major equipment purchases under
capitalized leases, with terms of sixty months.
NOTE C--RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH AN OFFICER/SHAREHOLDER
During the nine months ended September 30, 1996 and 1995, the Company
recorded the following transaction with an officer/shareholder:
- During the nine months ended September 30, 1996, the Company incurred
approximately $193,900 for legal services rendered by the
officer/shareholder. Included in the accounts payable as of September
30, 1996, is approximately $9,000 in legal fees due to the
officer/shareholder.
TRANSACTIONS WITH A SHAREHOLDER
During the nine months ended September 30, 1996 and 1995 the Company
recorded the following transactions with a shareholder:
- During the nine months ended September 30, 1996 and 1995, the Company
recorded revenue of approximately $343,800 and $267,000, respectively,
for services provided to a shareholder under a facilities management
agreement. Included in accounts receivable as of September 30, 1996,
is approximately $110,000 due from the shareholder.
- In March 1996, the Company entered into a two-year consulting agreement
with its underwriters/shareholder for financial and marketing services
totaling $60,000 which was paid from the proceeds of the initial
public offering.
Page 9 of 15
<PAGE>
ON-SITE SOURCING, INC.
Notes to Interim Financial Statements--Continued
(unaudited)
- ------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- ------------------------------------------------------------------------------
ACCOUNTS AND NOTES RECEIVABLE -- SHAREHOLDERS
- The company had a note receivable from an officer/director for $89,900
in connection with the exercise of stock options. The balance of the
note at September 30, 1996 was $50,400.
NOTE D--COMMITMENTS
The Company has annual rental and lease commitments with a term of one year
or more. Effective January 1, 1997, the Company will expand its Arlington,
Virginia, production facility to approximately 31,000 square feet, and has
executed a new lease which will supercede its existing lease agreement.
The lease is for a five year period expiring on December 31, 2002, and the
annual minimum lease expense is $450,000 per year.
The Company has entered into a lease agreement to expand its operations to
New York City. The lease is for a period of ten years and expires on
October 31, 2006. The annual lease obligation giving effect for step
increases as called for in the agreement is $139,667.
The Company entered into a new lease obligation for its Frederick, Maryland
location for approximately 2,500 square feet. The lease has a term of five
years and expires on May 31, 1999. The annual minimum lease obligation
under the lease is $15,000.
NOTE E--INCENTIVE STOCK OPTION PLAN
In 1996 and in 1995, the Company adopted an incentive stock option plan,
under which a pool of 200,000 and 510,000, shares respectively have been
reserved. The plans are administered and terms of option grants are
established by the Board of Directors. Under the terms of the plans,
options may be granted to the Company's employees and directors to purchase
shares of common stock. Options become exercisable ratably over a vesting
period as determined by the Board of Directors, and expire over terms not
exceeding ten years from the date of grant, three months after termination
of employment, or one year after the death or permanent disability of the
employee. The Board of Directors determines the option price (not less
than fair market value) at the date of grant.
Pursuant to an employment agreement, the Company had outstanding options to
sell 162,000 shares of common stock to an officer/director of the Company
at an exercise price of $.56 per share. The options, which were fully
vested during 1994, were exercised on March 29, 1996 for $90,000. In
connection with the exercise of the options, the Company loaned $89,900 to
the officer/director. The loan bears interest at 6% per year with the
remaining principal and interest due April 1, 1998. The balance of the
note on September 30,1996 was $50,400.
Page 10 of 15
<PAGE>
ON-SITE SOURCING, INC.
Notes to Interim Financial Statements--Continued
(unaudited)
- ------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- ------------------------------------------------------------------------------
At September 30, 1996, the Company had outstanding options to sell 126,000
shares of common stock to an officer/director at an exercise price of $1.11
per share. As of September 30, 1996, the options are fully vested. The
options expire in December 2000.
The Company has outstanding employee stock options for 332,000 shares of
common stock at exercise prices ranging from $1.11 to $3.25 per share. As
of September 30, 1996, 79,500 of the shares are vested with the remainder
scheduled to vest through December 2001. The options expire at various
times through December 2001. The Company granted a total of 60,000
options to its outside directors which vest quarterly over two years. The
fair value of options granted to outside directors are charged to expense
as they vest.
NOTE F--PUBLIC OFFERING
On July 9,1996 the Company completed its initial public offering, whereby
the Company offered 960,000 units, each consisting of two shares of common
stock, $.01 par value and one common stock purchase warrant, to the public
at a price of $6.25 per unit. The warrants are redeemable by the Company
for $.01 per warrant, upon 30 days prior written notice, provided the
average closing bid price of the common stock for ten consecutive days
prior to the date of the redemption notice is $7.00 or more per share. The
Company had also granted the underwriters an option to purchase up to
144,000 additional units solely to cover overallotments, of which, 140,200
were exercised on August 15, 1996. Upon the closing of the initial public
offering, the underwriters were granted an option to purchase up to an
aggregate of 96,000 units at $10.00 per unit. The options will be
exercisable during a four-year period commencing one year from the date of
the initial public offering.
The gross proceeds from the offering and the exercise of the underwriters
overallotment were $6,876,250. The net proceeds to the Company after
deducting offering costs were $5,431,913. In connection with the offering,
2,200,400 shares of common stock and 1,100,200 warrants were issued.
Page 11 of 15
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
On-Site Sourcing, Inc. (the "Company") provides reprographic and facilities
management services to law firms, non-profit organizations, accounting firms,
financial institutions and other organizations throughout the East Coast of
the United States. In order to meet the highly specialized requirements of
each client, On-Site offers a variety of customized reprographic and
facilities management services. The Company provides reprographic services
24 hours per day, seven days per week including copying, binding, labeling,
collating and indexing in support of complex document-intensive litigation as
well as higher volume production of manuals, brochures and other materials
for corporations and non-profit organizations. On-Site also provides
on-premises management of customers' support services including mailroom
operations, facsimile transmission, records and supply room management and
copying services.
NINE MONTHS 1996 VS. 1995
Revenue for the nine months ended September 30, 1996 increased 80% or
$2,834,063 to $6,368,487 as compared to $3,534,424, recorded for the nine
months ended September 30, 1995. The principal reason for the increase is
due to increased volume of work orders fulfilled through increased capacity
at the Rosslyn, VA reprographic facility, increased sales volume at the
Philadelphia facility and the Atlanta facility becoming fully operational.
For the nine months ended September 30, 1996 cost of sales increased
$1,867,000 or 68% over the same period in 1995. Operating margins increased
123% to $1,751,588, a $967,063 increase over the same period last year. As a
percent of sales, operating margins improved from 22% for the nine months
ended September 30, 1995 to 27.5 % in this period. In relation to sales,
costs of sales and related operating margins improved due to the acquisition
of equipment previously leased, volume purchasing discounts and increased
production per labor hour. Every dollar in increased sales volume over last
year contributed $.34 to the 1996 operating margins.
Selling and shipping increased by $399,401 to $663,143 over the same period
last year. As a percent of sales, this represents an increase from 7.4% for
the nine months ended September 30,1995 to 10.4% in the same period in 1996,
primarily due to the addition of personnel, higher commissions associated
with increased revenue, and expansion into new markets.
Administration expenses for the nine months ended September 30, 1996
increased $265,177 to $653,757 over the same period last year due primarily
to professional fees, increases in staffing and personnel costs, and travel
associated with the expansion into new markets. Administration decreased
from 10.9% to 10.2% of sales over the same period last year.
Page 12 of 15
<PAGE>
EARNINGS FROM OPERATIONS
Earnings from operations increased 228% or $302,485 from $132,203 to
$434,688 over the nine months ended September 30, 1995. The increase is due
to increased marketing efforts, higher margins and continued expansion into
new markets.
OTHER INCOME AND EXPENSES
Other income (expenses) decreased $79,060 compared to the first nine months
of 1995 due to the purchase by the Company of equipment previously under
capital leases obligations resulting in lower interest expense. Other income,
primarily interest on short term treasury obligations was $62,394.
NET EARNINGS
For the nine months ended September 30, 1996 the Company generated net
earnings of $336,044 as compared to $51,399 for the same period last year.
This represents an increase of $284,645 or 554%. Earnings per share for the
nine months ended September 30, 1996 were $.10 compared to $.02 for the nine
months ended September 30, 1995. Increases in earnings in 1996 as compared
to the 1995 periods primarily result from the continuing growth of the
litigation support operations due to focused marketing efforts and expansion
of our client base.
LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 1996 AND SUBSEQUENT ACTIVITY
On July 9, 1996 the Company's registration statement was declared effective.
Approximately $1,500,000 of the net proceeds totaling $5,431,913 were used to
curtail its line of credit and other borrowings, bridge financing and
accounts payable. The Company has funded its expansion and growth by
utilizing the proceeds of its initial public offering and long term
financing, where appropriate, for significant capital outlays.
The Company anticipates that the net proceeds from the initial public
offering, proceeds from the overallotment options, and cash flow from
operations will be sufficient to meet the Company's expected cash
requirements for the next twelve months. There can be no assurances that
unforeseen events may not require more working capital than the Comapny has
at its disposal.
THREE MONTHS 1996 VS. 1995
The principal reasons for the increases in operations for the three months
ended September 30, 1996 vs. 1995 are outlined in the discussion of the nine
month results. There were no material items adversely impacting the
financial position of the Company.
Revenue for the three months ended September 30, 1996 more than doubled
increasing 106% to $2,641,926 as compared to $1,282,023 for the three months
ended September 30, 1995. Cost of sales and the related operating margin
improved to 31% based in part on increased productivity per labor hour.
Page 13 of 15
<PAGE>
Earnings from operations were $197,591 as compared to a loss of $2,438 for
the three months ended September 30, 1995 primarily due to increased volume
as a result of increased capacity and marketing efforts.
The Company earned $40,921 from interest on overnight investments and reduced
its interest expense from $25,678 to $14,596 over the same period last year.
Net earnings for the three month period ended September 30, 1996 were
$155,516 as compared to a net loss of $28,116 for the three month period
ended September 30, 1995. Earnings per share for the three month period
ended September 30, 1996 were $.03 compared to a loss of $.01 for the same
period last year.
Page 14 of 15
<PAGE>
Part II. Other Information
SIGNATURES
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 hereunto duly authorized.
ON-SITE SOURCING, INC.
--------------------------
Date: NOVEMBER 1996 By: /S/CHRISTOPHER J. WEILER
---------------- ---------------------------
Christopher J. Weiler
President and
Chief Executive Officer
By: /S/JOSEPH SCIACCA
---------------------------
Joseph Sciacca
Vice President of Finance and
Chief Financial Officer
Page 15 of 15
<PAGE>
Exhibit 10(a)
EMPLOYMENT AGREEMENT
This at will Employment Agreement ("Agreement") is entered into as of
this 26th day of September, 1996 by and between On-Site Sourcing, Inc. with
address of 1111 N. 19th Street, Suite 404, Arlington, Virginia 22209 ("OSS"
or the "Company") and Joseph Sciacca ("Mr. Sciacca" or the "Executive") with
home address at 7224 Beechwood Rd, Alexandria, VA 22209.
WHEREAS, OSS desires to employ the services of Mr. Sciacca as a full-time
employee without distraction and considers such employment in the best
interests of the Company and its shareholders, and Mr. Sciacca desires to be
employed full time by the Company; and
WHEREAS, OSS and Mr. Sciacca desire to enter into an at will Agreement
reflecting the terms under which Mr. Sciacca will be employed by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. TERM. This at will Employment Agreement will remain in effect for a
three year period from the date of the Agreement with the understanding that
employment shall be at will. It will be renewed automatically for succeeding
periods of one year unless sooner terminated with or without cause as
provided in sections 6 and 7 below.
2. NATURE OF EMPLOYMENT. Mr. Sciacca shall be employed as the Chief
Financial Officer of the Company with full power and authority as determined
by the Board of Directors of OSS (the "Board"). Mr. Sciacca agrees to
diligently and faithfully perform such duties and serve in the above capacity
or in such capacities as the Board of Directors of the Company shall
determine.
Mr. Sciacca's duties as Chief Financial Officer include but are not
limited to the following:
(a) Report to the President and Chief Executive Officer of the Company.
(b) Manage the company's financial operations.
(c) Assist the Company in the development of all phases of the Company's
present and future business.
Mr. Sciacca shall perform any and all duties now and hereafter assigned to
Mr. Sciacca by the Company's Board of Directors. Mr. Sciacca shall at all times
conduct himself in accordance with the Company's stated policies and procedures
as may be in effect from time to time.
1
<PAGE>
Mr. Sciacca shall be employed by the Company on a full-time basis and
shall not during the term of this Agreement be engaged in any other business
activity that, in the judgment of the Company's Board of Directors, impedes
or detracts from Mr. Sciacca's performance of services for the Company
hereunder. During the period of employment, Mr. Sciacca further agrees not
to (i) solely or jointly with others undertake or join any planning for or
organization of any business activities of the Company, and (ii) directly or
indirectly, engage or participate in any other activities in conflict with
the best interests of the Company. The Company understands that Mr. Sciacca
will begin working immediately while he is in the process of closing out his
private practice. Mr. Sciacca has indicated that he will be employed on a
full-time basis within six months.
3. COMPENSATION FOR SERVICES. As consideration to Mr. Sciacca for
services rendered under this Agreement, OSS shall compensate Mr. Sciacca as
follows:
(a) BASE SALARY. Mr. Sciacca shall receive a base salary of $ 90,000
per year payable monthly and thereafter to be determined at the discretion of
the Board of Directors upon an annual review of Mr. Sciacca's performance.
(b) BENEFITS. Mr. Sciacca shall be entitled to all other benefits
normally accorded to full time employees of OSS, including such bonuses,
prescription, life insurance, medical insurance, holidays and expense
accounts as are consistent for other key senior management personnel or as
may be decided by the Executive if said items are discretionary with the
Executive.
Mr. Sciacca shall be entitled to two weeks paid vacation per year for
each of the first 4 years of employment beginning at commencement of
employment with the Company. He shall be entitled to three weeks paid
vacation each year after the fourth anniversary which is to be considered
September 1, 2000. No more than two weeks shall be taken consecutively
without the prior written approval by the Company.
Mr. Sciacca shall be entitled to all health and sick leave as is accorded
to other key senior management personnel.
(c) REIMBURSEMENT. Mr. Sciacca shall be reimbursed within fifteen (15)
days for all properly documented OSS business expenses incurred by the
Executive. To the extent permitted by applicable law, OSS, shall treat these
expenses as senior in the right of payment to any other obligation of OSS.
(d) STOCK OPTIONS. Stock options to purchase 75,000 shares of the
Company's common stock at $2.125 per share, the market price of the Company's
common stock as quoted at on the Nasdaq Small Cap Stock Market at the time of
the meeting of the Board of Directors authorizing the options, granted as of
the date of this Agreement. The options shall vest in equal quarterly
installments over a four year period. The options shall be exercisable for a
period of five years from the date of grant. The options are cancelable upon
Mr. Sciacca's termination from the Company for cause as defined in 6(a)
below. Furthermore, the options shall inure to the benefit of the
Executive's heirs and designees.
(e) BONUS. Mr. Sciacca shall be eligible to be paid at each year end a
bonus in an amount at the discretion of the Board of Directors based upon Mr.
Sciacca's performance and the performance of the Company.
2
<PAGE>
(f) STOCK PURCHASE. Mr. Sciacca shall receive a $25,000 loan from the
Company to be used soley for the purpose of purchasing On-Site Sourcing, Inc.
stock at the current market price. The terms of the loan are further described
in the Loan Agreement of September 26, 1996 between Mr. Sciacca and On-Site
Sourcing, Inc.
4. RESPONSIBILITY OF EXECUTIVE. The responsibilities of Mr. Sciacca
under this Agreement are as follows:
(a) Mr. Sciacca agrees to serve OSS for the term of employment specified
in Section 1 above. Mr. Sciacca agrees to (i) devote his full business time
to the business and affairs of OSS, (ii) use his best efforts to promote the
interests of OSS, and (iii) perform faithfully and efficiently the
responsibilities assigned to him by the Board and listed in Section 2 above.
(b) During the term of this Agreement, Mr. Sciacca shall not perform
services for any person or entity that competes directly or indirectly with
the Company. Mr. Sciacca agrees to disclose in writing to the Board any
non-Company activities for which Mr. Sciacca receives compensation for
services rendered. If the Board deems such activities to be excessive and to
conflict with Mr. Sciacca's full time commitment, then the Company shall
notify Mr. Sciacca in writing to limit those activities to periods in which
no time conflict occurs.
(c) Mr. Sciacca agrees to abide by General Company Policies as the same
are duly adopted by the Board from time to time, so long as such Policies do
not conflict with the terms and conditions of this Agreement.
5. COVENANT NOT TO COMPETE; CONFIDENTIALITY AND NON-DISCLOSURE
AGREEMENT. Mr. Sciacca hereby agrees that he will not at any time, without
the express written consent of the Company: (i) disclose, directly or
indirectly, any Confidential Information (as defined below) to anyone outside
the employ of the Company, or (ii) use, directly or indirectly, any
Confidential Information for the benefit of anyone other than the Company.
Confidential Information as used herein means all information of a
business or technical nature disclosed to, learned or developed by Mr.
Sciacca in the course of his employment by the Company, which information
relates to the business of the Company or the business of any customer of the
Company, or the business of any other person, firm, corporation, or other
entity which consults with the Company in connection with the business which
is not generally known in the reprographic or facilities management industry.
Confidential Information shall include, but is not limited to, information
and knowledge pertaining to manufacturing processes, procedures,
developments, improvements, methods of operation, sales and profit figures,
customer and client lists, credit and other financial information about the
Company or their customers, and relationships between the Company and its
customers, clients and others who have business dealings with the Company.
In the event that Mr. Sciacca voluntarily leaves the Company, Mr. Sciacca
agrees not to compete with the Company on behalf of himself or an entity
founded by Mr. Sciacca within a 75 miles of any of the Company's offices or
within 12 months after leaving the Company. Mr. Sciacca further agrees not
to compete with the Company as an employee of a reprographic or facilities
management company (competitor) located within 100 miles of any of the
Company's offices or within twelve months after leaving the Company.
3
<PAGE>
6. TERMINATION BY THE COMPANY. As this Employment Agreement is at
will, the Board of Directors may terminate the employment of Mr. Sciacca at
any time with or without cause, and in such event the following shall apply.
"Cause" for termination shall be defined as gross neglect by the Executive of
his duties hereunder, willful failure by the Executive to perform his duties
hereunder, conviction of the Executive of a felony committed during the term
of this Agreement, or of any lesser crime or offense involving the property
of the Company or any or its subsidiaries or affiliates, gross malfeasance by
the Executive in connection with the performance of his duties hereunder,
willful engagement in conduct by the Executive or willful refusal without
proper legal cause by the Executive to perform his duties and
responsibilities which he has reason to know is materially injurious to the
Company.
(a) In the event of termination for cause, as defined above, by OSS, all
salary and other benefits paid or provided to the Executive hereunder shall
cease as of the date of termination, and the Company shall have no further
obligations to the Executive. Upon a finding by the Board of Directors that
the Executive has willfully failed or refused to observe or perform his
duties or grossly neglected his duties as specifically set forth in Section 4
hereof, OSS may terminate this agreement for cause provided that the Board of
Directors has first notified the Executive on two separate occasions of such
failure and has given the Executive at least thirty (30) days after each such
occasion to remedy such breach of duty.
(b) In the event of termination by OSS without cause, the Company agrees
to provide the Executive with the following:
(i) Mr. Sciacca shall receive an amount equal to two weeks base
salary plus the value of his other employment benefits accrued at the time of
termination that Mr. Sciacca would have received under this Agreement but for
such termination. Such amount shall be payable to Mr. Sciacca in one
installment two weeks following termination.
(ii) "Termination without cause" shall be defined as: termination
for any reason other than "cause" (as defined previously in Section 6),
continuous disability or incapacity of Mr. Sciacca which prevents him from
performing his duties for a period of not less than three (3) months as
determined by any independent, licensed medical doctor, or death.
7. EFFECT ON SUCCESSORS IN INTEREST. This Agreement shall inure to the
benefit of and be binding upon heirs, administrators, executors, successors
and assigns of each of the parties hereto.
8. NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
including by facsimile, or by recognized courier (such as Federal Express),
or three (3) business days after deposit in the United States Mail, by
registered or certified mail, addressed to a party at its address shown below
or at such other address or facsimile number as such party may designate in
writing to the other party pursuant to this section.
9. ASSIGNMENT. OSS shall have the right to assign this Agreement and
to delegate all of its rights, duties and obligations hereunder, whether in
whole or in part to any parent, affiliate, successor, or subsidiary
organization or company of OSS or corporation with which OSS may merge or
consolidate or which acquires by purchase or otherwise all or substantially
all of OSS assets, but such assignment shall not release OSS from its
obligations under this Agreement. The Executive shall have no right to assign
this Agreement.
4
<PAGE>
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. In the event of
any dispute under this Agreement, it shall be resolved through binding
arbitration in accordance with the rules of the American Arbitration
Association.
11. SEVERABILITY. The provisions of this Agreement are severable, and
in the event that any provision of this Agreement shall be determined to be
invalid or unenforceable under any controlling body of law, such invalidity
or unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and preliminary agreements.
This Agreement may not be amended except in writing executed by the parties
hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
a duly authorized officer, and Mr. Sciacca has signed this Agreement as of
the date and year written above.
The Company:
On-Site Sourcing, Inc.
1111 N. 19th Street, Suite 404
Arlington, Virginia 22209
BY: /S/JOHN S. STOPPELMAN
-------------------------------
John S. Stoppelman
Chairman of the Board of Directors
Executive:
/S/ JOSEPH SCIACCA
--------------------------------
Joseph Sciacca
5
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