UNITED STATES SECURITIES AND
EXCHANGE COMMISSION Washington, D.C.  20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001
Commission File No. 0-20947 ON-SITE SOURCING, INC.(Exact name of registrant as specified
  in its charter)
  DELAWARE
  
  54 1648470(State or other jurisdiction of
  
  (I.R.S.  Employer Identification Number)Incorporation or organization)
  1111 North 19th
  Street, Sixth Floor, Arlington, Virginia 22209(Address of principal executive
  offices)(703) 276-1123(Registrants telephone number)NONE(Former name, former address and former
  fiscal year, if changed since last report)
 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.
YesxNo ̈. Indicate the
number of shares outstanding of each of the issuers classes of common stock,
as of May 15, 2001: Common
  Stock, $.01 par value
  4,943,625
  shares
   ON-SITE
SOURCING, INC.

INDEX



Part I.               Financial Information

Item
1.               Financial Statements:
                                        Balance Sheets as
of March 31, 2001 (unaudited) and December 31, 2000

Statements
of Operations for the Three Months Ended March 31, 2001 and 2000  (unaudited)

Statements
of Cash Flows for the Three Months Ended March 31, 2001 and 2000  (unaudited)

Notes to Financial
Statements  March 31, 2001 (unaudited)

Item
2.               Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Liquidity

Item
3.               Quantitative
and Qualitative Disclosures About Market Risk

Part II.              Other Information

Item
1.               Legal
Proceedings

Item
2.               Changes in
Securities and Use of Proceeds

Item
4.               Submission
of Matters to a Vote of Security Holders

Item
5.               Other
Information

Item
6.               Exhibits
and Reports on Form 8-K


ON-SITE SOURCING, INC.BALANCE SHEETS Unaudited March 31, 2001
  December
  31, 2000ASSETSCURRENT ASSETSCash and cash equivalents
  $3,837
  $3,428Accounts receivable, net
  9,556,082
  9,762,093Prepaid supplies
  678,672
  677,771Prepaid expenses
  559,262
  471,764Prepaid income taxes
  485,765
  715,674Notes receivable, current portion
  144,691
  131,355Total current assets
  11,428,308
  11,762,085Property and equipment, net
  14,730,914
  15,024,026OTHER ASSETSNotes receivable, net of current
  portion
  83,245
  117,753Goodwill, net
  985,596
  1,011,944Other assets, net
  211,087
  163,423$27,439,150
  $28,079,231LIABILITIES AND
  STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable - trade
  $2,229,295
  $3,149,926Accrued and other liabilities
  1,078,489
  853,986Line of credit
  5,969,151
  5,809,598Current portion of long-term debt
  1,830,110
  1,401,184Provision for income taxes, current
  286,485
  286,485Total current liabilities
  11,393,531
  11,501,179NONCURRENT LIABILITIESLong-term debt net of current portion
  7,323,200
  8,097,810Deferred rent
  189,177
  189,177Deferred income taxes
  438,076
  438,076Total liabilities
  19,343,983
  20,226,242Commitments and
  contingencies
  -
  -STOCKHOLDERS' EQUITYCommon stock, $.01 par value,
  20,000,000 shares authorized 5,057,215 and 5,057,215 shares issued and
  outstanding
  50,572
  50,572Preferred stock,$.01 par value,
  1,000,000 shares authorized, no shares issued and outstanding
  -
  -Subscription receivable
  (50,400)
  (50,400)Additional paid in capital
  6,786,244
  6,786,244Treasury stock  (113,590 shares of common stock at cost)
  (396,152)
  (396,152)Accumulated Earnings (Deficit)
  1,704,905
  1,462,7258,095,169
  7,852,989$27,439,150
  $28,079,231 See
notes to financial statements ON-SITE SOURCING, INC.STATEMENTS
OF OPERATIONS UnauditedThree
  Months EndedMarch
  31, 2001
  March
  31, 2000Revenue
  $9,449,649
  $9,772,365Costs and expensesCost of sales
  6,362,965
  5,999,6053,086,684
  3,772,760Selling expense
  897,377
  910,230Administrative expense
  1,422,004
  1,080,3012,319,381
  1,990,531Earnings from operations
  767,303
  1,782,229Other income (expense)Other income
  72,690
  2,335Other expense
  (397,813)
  (147,644)(325,123)
  (145,309)Earnings (Loss) before
  income taxes
  442,180
  1,636,920Income tax
  (benefit)expense
  200,000
  652,000Net (Loss) Earnings
  $242,180
  $984,920Basic Shares
  4,943,625
  4,881,440Basic earnings (loss)
  per common share
  $0.05
  $0.20Dilutive Shares
  4,966,710
  5,262,309Diluted earnings per
  share
  $0.05
  $0.19 See
notes to financial statements


ON-SITE SOURCING, INC.STATEMENTS
OF CASH FLOWS Unaudited
  Three Months EndedMarch
  31,2001
  2000Cash flows from
  operating activitiesNet earnings (loss)
  $242,180
  $984,920Adjustments to
  reconcile net earnings (loss) to net cash     (used in) provided by operationsDepreciation and
  amortization
  540,340
  302,492Loss (gain) on
  disposition of equipment
  25,763
  -Changes in assets and
  liabilities(Increase) decrease in accounts
  receivable, net
  206,011
  (3,120,168)(Increase) decrease in prepaid supplies
  (901)
  20,415(Increase) decrease in prepaid expenses
  (87,498)
  (92,078)(Increase) decrease in other assets
  (47,664)
  19,406Increase (decrease) in accounts payable
  - trade
  (920,631)
  241,384Increase in accrued and other
  liabilities
  270,727
  284,364Increase (decrease) in deferred rent
  -
  15,000Increase (decrease) in provison for
  income taxes
  229,909
  652,004Increase (decrease) in deferred taxes
  -
  -Total Adjustments
  216,056
  (1,677,181)Net cash provided by
  (used in) operations
  458,237
  (692,261)Cash flows from
  investing activitiesCapital Expenditure
  (277,851)
  (742,076)Net cash used in
  investing activities
  (277,851)
  (742,076)Cash flows from
  financing activitiesProceeds from sale of common stock and          exercise of warrants
  -
  127,960Proceeds of long-term debt agreements
  -
  -Payments under long-term debt
  agreements
  (339,530)
  (51,486)Net borrowing (payments) under line of
  credit agreement
  159,553
  1,358,013Net cash provided by
  financing activities
  (179,977)
  1,434,487NET INCREASE
  (DECREASE) IN     CASH AND CASH EQUIVALENTS
  409
  150Cash and cash
  equivalents, beginning
  3,428
  22,682Cash and cash
  equivalents, ending
  $3,837
  $22,832 See
notes to financial statements ON-SITE SOURCING, INC.NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)

1.          ORGANIZATION

Nature of Business

On-Site Sourcing, Inc. (the Company) was
incorporated in Virginia on December 1992 and changed its state incorporation
to Delaware in January 1996.  The
Company provides digital imaging, document management, litigation
reprographics, color & digital printing services and facilities management
to law firms, corporations, non-profit organizations, accounting firms,
financial institutions and other organizations throughout the East Coast of the
United States. Services are performed in the metropolitan areas of
Philadelphia, Pennsylvania; Washington, D.C.; Atlanta, Georgia; and New York,
New York, and Gaithersburg, Maryland.2.          SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Use of Estimates

In preparing financial statements in conformity
with generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period.  Management
estimates include the allowance for doubtful accounts on accounts
receivable.  Actual results could differ
from those estimates.  Significant
estimates are made when accounting for the allowance for uncollectible accounts
in connection with accounts receivable.Revenue Recognition

Revenue from reprographic and imaging services
is recognized on a per copy or document basis upon completion of the services.
Facilities management revenue is recognized based on monthly fixed fees and, in
certain cases, on a variable per copy fee basis, as defined in facilities
management agreements.  Printing
revenues are recognized on a job-by-job basis.Depreciation and Amortization

Property and equipment are stated at cost.  Depreciation on property and equipment is
computed on a straight-line basis over the estimated useful lives of the assets
ranging from two to forty years for financial reporting purposes.  Accelerated methods are used for tax
purposes.Effective January 1, 1999, management
reevaluated the useful life of certain equipment and, as a result, increased
its estimate of the useful life of certain equipment from five to fifteen
years.Goodwill

In connection with the two acquisitions the
company made in the first nine months of 2000, Goodwill in the amount of
$1,053,926 was recorded and is being amortized over a period of 10 years.Earnings (Loss) Per Common Share

Basic earnings (loss) per share exclude dilution
and are calculated using the average number of shares outstanding.  Diluted earnings (loss) per share is
computed on the basis of the average number of shares outstanding plus the
effect of outstanding stock options using the treasury stock method.Unaudited
  Three months ended March 31,2001
  2000Net
  earnings (loss) available for common shareholders (A)
  $242,180
  $984,920Average
  outstanding:Common
  stock (B)
  4,943,625
  4,881,440Employee
  stock options
  23,085
  380,869Common
  stock and common stock equivalents (C)
  4,966,710
  5,262,309Earnings
  (loss) per share:Basic (A/B)
  $0.05
  $0.20Diluted
  (A/C)
  $0.05
  $0.19Unexercised
employee stock options to purchase 1,553,869 and 85,000 shares of the Companys
common stock as of March 31, 2001 and 2000, respectively, were not included in
the computations of diluted earnings per share because the options exercise
prices were greater than the average market price of the Companys common stock
during the respective period.

3.          SALE OF INFORMATION TECHNOLOGY
DIVISION

On September 30, 1999, the Company entered into
a purchase and sale agreement with a former stockholder and employee to sell
the rights and contracts to provide certain information technology services to
customers previously serviced by the Companys Information Technology
Division.  The sale price of $270,000 is
financed by a note agreement between the Company and the former
shareholder.  The note accrues interest
at 8% per annum, is payable in interest-only installments through October 2000
and in principal and interest installments until maturity in September
2002.  At March 31, 2001, $227,936
remains payable to the Company.In connection with the sale, the Company entered
into an additional note agreement with the former shareholder in the amount of
$50,000.  The note accrues interest at
8% per annum and is payable in monthly principal and interest installments
until maturity in October 2000 At March 31, 2001, there was no balance owed to
the Company.ACQUSITIONSOn April 12, 2000, the Company purchased certain
assets and assumed certain liabilities of Legend Lithographics, Inc. and
Pseudon Communications, Inc. (collectively, "Legend"), a digital
printing and copying company, for $438,172 in cash. The purchase price has been
allocated to the fair value of the assets acquired and liabilities assumed.On September 6, 2000, the Company entered into a
Stock Purchase Agreement with Duplicating and Design, Inc.
("D&D") a digital printing and graphic design company. Under the
agreement, the Company purchased the capital stock of D&D for an aggregate
purchase price of $741,078 in cash, payable in three installments through 2002.
The Company has recognized the acquisition as a purchase for accounting
purposes. The purchase price has been allocated to the fair value of the assets
acquired and liabilities assumed. The operations of D&D are included in the
operations of the Company as of the acquisition date. In connection with the
Legend and D&D acquisitions, the assets acquired and liabilities assumed
are as follows:Tangible
  assets acquired at fair value
  $356,785Goodwill
  1,053,926Liabilities
  assumed at fair value
  (231,461)$1,179,2504. SEGMENT INFORMATION

The current
services that we provide include the following segments: reprographics, imaging
services, facilities management, and printing services.

Reprographics
involves the copying and management of large amounts of documents extracted in
their original format, from the offices and files of our customers. Our
reprographic services include copying, binding, drilling, "Bates"
stamping, labeling, collating, assembling and quality review. Our reprographic
centers, currently located in Virginia, New York, Pennsylvania, and Georgia,
are open 24 hours a day, seven days a week to handle the prompt turn around
time often requested by our customers. A typical job ranges in size from single
documents with a small number of pages to multiple sets of documents, which can
exceed a million pages. A job is typically picked up by our in-house dispatch
service and brought back to our production center. The jobs are then processed
per the customer's instructions and reviewed by our quality control staff.
Documents are then returned to the client via our dispatch service.
Reprographic jobs are generally billed on a job-by-job basis, based on the
number of copies and the level of difficulty in copying the original documents.
Each of our reprographic centers are staffed with in-house technicians which
service our copiers in event they need repairs.

Imaging
services involves the conversion or transfer of traditional paper based and
electronic based documents into electronic media or vice versa. Services
provided in our Imaging Services Division primarily cater to law firms and
their clients. A typical job involves a law firm that is representing a client
in a litigation matter. In order for the law firm to prepare for its case it
often must review a large number of documents, emails, and email attachments.
As a result, the law firms often have a need to search and retrieve appropriate
documents in a timely and efficient matter. In order to help meet this need,
our Imaging Services Division offers case management consulting, electronic
scanning of documents converting email and attachments to images,
indexing/coding, optical character recognition (OCR), electronic discovery,
blowback printing, training, technical support and electronic document search
and retrieval services. Imaging services are typically billed on a job-by-job
basis, based on the number of images and complexity of the retrieval
applications.

Facilities
management services allow companies to out-source certain, non-core business,
back-office functions. Our target clients include companies that require a
large amount of people, equipment and other resources to manage their back
office requirements. Based on an analysis of our client's needs, we place our
employees and equipment at the customer's premises. The particular customer's
internal processes dictate the services we provide. Services we currently
provide include copy room management, mailroom administration, facsimile
management, supply room management, and maintenance of office equipment. At
each of our facilities management locations we utilize SiteTrax, our
proprietary software. SiteTrax tracks information related to copy, mail, fax,
shipping and courier, materials usage, and hours worked. It also provides
integrated cost accounting and invoicing information for our customers and
helps them allocate expenses accordingly. Facilities management contracts,
which are billed on a monthly basis, include a monthly base charge plus fees for
any additional services provided.

Printing
services include both black and white and color digital production of catalogs,
brochures, postcards, stationary, direct mail, newsletters, and exhibit
materials. Our target customers, for these services include our existing
customers and other organizations requiring print media. In addition, we also
provide ancillary services, which include graphic design, mailing, special
finishing, storage, fulfillment, and delivery services. Printing jobs are
typically billed on a job-by-job basis depending on several factors, including
quantity, number of colors, quality of paper, and graphic design time.

The Company
evaluates performance based on profit and loss from operations before income
taxes and does not review information regarding the allocation of assets to
each segment. In addition, corporate administrative costs are not allocated to
each segment. There are no intersegment sales or transfers

Revenue and
profit by reportable segment for the quarters ended March 31, 2001, and 2000
are as follows:

Unaudited
  Three months ended March 31, 2001Reprographics
  Imaging
  FM
  Digital PrintingRevenue
  $5,322,869
  $2,698,202
  $685,318
  $743,260Segment profit
  $800,766
  $911,396
  $108,251
  $(259,782)

Unaudited
  Three months ended March 31, 2000Reprographics
  Imaging
  FM
  Digital PrintingRevenue
  $6,002,699
  $2,974,736
  $794,930
  $0.00Segment profit
  $670,511
  $1,745,737
  $109,393
  $0.00Item 2.  Management's Discussion and
Analysis of Financial Condition and Results of Operations

FORWARD LOOKING DISCLOSURE

Certain information included herein contains
statements that are forward-looking, such as statements relating to plans for
future expansion and other business development activities as well as operating
costs, capital spending, financial sources and the effects of competition.  Such forward-looking information is subject
to changes and variations which are not reasonably predictable and which could
significantly affect future results. 
Accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company.  These changes and variations which could
significantly affect future results include, but are not limited to, those
relating to the adequacy of operating and management controls, operating in a
competitive environment and a changing environment, including new technology
and processes, existing and future vendor relationships, the Companys ability
to access capital and meet its debt service requirements, dependence on
existing management, general economic conditions, and changes in federal or
state laws or regulations.

GENERAL

On-Site
Sourcing, Inc. (On-Site, Company, We or Us) provides digital imaging,
document management, litigation reprographics, color & digital printing
services and facilities management to law firms, corporations, 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, we offer a variety of customized reprographic and facilities management
services.  We provide reprographic and
imaging 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.  We also provide on-premises
management of customers support services including mailroom operations,
facsimile transmission, records, and supply room management and copying
services.

On–Site
Sourcing, Inc. was founded in 1992 and currently has locations in
Virginia, Maryland, Pennsylvania, New York and Georgia.

RESULTS
OF OPERATIONS

Three
Months Ended March 31, 2001 Compared With Three Months Ended March 31, 2000

Revenue for the
three months ended March 31, 2001 decreased by 3% or $322,716 to $9,449,649
over the comparable period in 2000. The decrease in revenues is primarily due
to a large reprographics and imaging job, approximately $2,800,000, processed
during the first quarter of 2000. 
Revenues, for the quarter ended March 2001, also included $743,260 of
digital printing revenue related to the two acquisitions completed in the
second and third quarter of 2000.

As a percentage
of sales, Cost of Sales for the three months ended March 31, 2001 increased to
67% from 61% over the comparable period in 2000.  The increase is primarily due to our digital printing operations not
operating at full capacity.  Cost of
Sales for our digital printing operation, was $786,555, compared to revenue of
$743,260 for the quarter ending March 2001. 
Additional factors contributing to the increase in Cost of Sales include
the growth of our imaging services division.

During the year
2000 the company invested heavily in imaging technology and personal.  The company has also expanded its imaging
operations to New York and Georgia.  The
Company expects Cost of Sales margins to improve as sufficient revenues are
generated to absorb certain fixed costs associated with Cost of Sales.  Cost of sales include expenses related to
compensation and benefits to employees, occupancy costs, equipment costs,
supplies, and other costs which are directly related to providing goods and
services to our clients.

As a percentage of sales, Selling
Expenses for the three months ended March 31, 2001 remained consistent at 9%,
as compared to the comparable period in 2000.Selling expenses include compensation and related
benefits, travel & entertainment expenditures, marketing, and other costs
related to our sales staff.

Administrative Expense for the three months ended March 31, 2001
increased $341,703 to $1,422,004. The increase is primarily due to increased
administrative staffing related to the two acquisitions completed during the
second and third quarter of 2000 (approximately $140,000), growth and the
expansion of our imaging services division to Georgia and New York
(approximately $88,000), and increases in corporate administrative expenses to
handle the revenue growth experienced by the company (approximately $112,000).

Other Income for the three months ended March 31, 2001 increased
by $70,355 to $72,690 over the comparable periods in 2000.  Rental income in the amount of $71,523, as a
result of subletting the property in Alexandria, Virginia was included in other
income.  The Company purchased the
property in 2000 for its future headquarters and Virginia production center.  The Company anticipates moving into the
building during the fourth quarter of 2001.

Other expense for the three months ended March 31, 2001 increased
by $250,169 to $397,813 over the comparable periods in 2000.  Other expense is composed of interest
expense, loss on disposal of assets, and expenses related to the Alexandria, VA
property, purchased by the Company for its future headquarters.

Interest expense increased from
$38,530, for the three months ended March 31, 2000 to  $195,517, for the three months ended March 31, 2001, representing
an increase of $156,987. The increase is due to higher utilization of the
Companys line of credit and also additional financing arrangements entered
into by the Company, due to the acquisition of digital printing equipment. The
Companys line of credit balance as of March 31, 2000 was $1,827,488 compared
to $5,969,151 as of March 31, 2001.Loss on disposal of assets totaled
$87,003 for the three months ended March 31, 2000 due to the company relocating
its Atlanta, Georgia facility to a less expensive facility within Atlanta,
Georgia. As a result, certain leasehold improvements were written off.  During the three months ended March 31, 2001
the Company wrote off approximately $25,763 of certain non-performing fixed
assets.During the three months ended March
31, 2001 the Company incurred $176,530 in expenses related to the Alexandria,
VA property. Of this amount, $138,377 was interest expense incurred with the
mortgage on the property.  The remainder
of expenses, $38,153, was expenses related to owning and maintaining the
property.  The Company incurred a net
loss in the amount of $105,007 ($58,783 after the effect of income taxes) in
connection with the Alexandria, Virginia property.  The Company expects a loss of approximately $35,000 (before the
effect of income taxes) per month, until the Company moves into the Alexandria,
Virginia property.LIQUIDITY AND CAPITAL RESOURCES

We
have funded our expansion and growth by utilizing internally generated cash
flow, long term financing, and a commercial line of credit.  We anticipate that the cash flow from
operations and credit facilities will be sufficient to meet the expected cash
requirements for the next twelve months. There can be no assurances that
unforeseen events may not require more working capital than we have at our
disposal.

In order to
assure additional working capital is available to us to fund our growth and
expansion, we had available a $7,000,000 working capital line of credit as of
March 31, 2001. The line of credit is subject to eligible accounts receivable.  The Company has available to borrow, at any
given time, the lessor of the established line of credit or eligible accounts
receivable.  Eligible accounts
receivable are 75% of accounts less than 120 days old.  The working capital line of credit bears
interest at the banks prime rate of interest or the 30-day LIBOR rate plus
2.25%. The line of credit, which expires April 30, 2002, is subject to certain
financial covenants; the most significant requires the company to maintain a
minimum net worth of $6,000,000.  At
March 31, 2001 net advances totaling $5,969,151 were made under the
agreement.  Net worth, as defined under
the agreement, as of March 31, 2001 was at $7,063,347.

In addition, we
have obtained financing for certain equipment and vehicles.  The notes are secured by the equipment and
vehicles, at rates ranging from 5% to 12% and mature at various times between
2000 and 2008.

Item
3. Quantitative and Qualitative
Disclosures about Market Risk

We believe our
market risk exposure with regard to our financial instruments is limited to
changes in interest rates. Based upon the composition of our variable rate debt
outstanding at March 31, 2001 which is primarily borrowings under the working
capital line of credit, we do not believe that a hypothetical increase in the
banks prime rate of interest or the 30 day LIBOR rate would be material to net
income.

Part II.  Other
Information

Item 1.Legal
Proceedings

None.

Item 2.Changes in Securities and Use of
Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Submission of Matters to a Vote of
Security Holders

None.

Item 5.Other
Information

In July 2000, the Company signed a definitive
merger agreement with U.S. Technologies Inc. pursuant to which U.S.
Technologies will acquire the Company. On April 2, 2001 the Company terminated
the agreement with U.S. Technologies pursuant to its right to terminate the
agreement if the average stock price of U.S. Technologies Common Stock during
the twenty trading-day period ending three full trading-days before the close
of the merger is below $0.67.Item 6.Exhibits and
Reports

(A)          EXHIBITS

None.

(B)           REPORTS
ON FORM 8-K
                The Company filed Form 8-K
on April 4, 2001

SIGNATURE

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 thereunto duly authorized.

ON-SITE
  SOURCING, INC.(Registrant)May 15, 2001
  /s/
  Jason ParikhDate
  Jason
  ParikhChief
  Financial Officer(Duly
  Authorized Officer and Principal Financial Officer)