UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB


(MARK ONE)

(X)  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

( )  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE
     TRANSITION FROM _________ TO _________


                         COMMISSION FILE NUMBER 1-31730

                            CAPSOURCE FINANCIAL, INC.
                            -------------------------
           (Name of Small Business Issuer as Specified in its charter)
           -----------------------------------------------------------

        COLORADO                                          84-1334453
        --------                                          ----------
(State of incorporation)                       (IRS Employer Identification No.)

               2305 CANYON BOULEVARD, SUITE 103, BOULDER, CO 80302
               ---------------------------------------------------
             (Address of principal executive offices and Zip Code)

                 (Registrant's telephone number) (303)245-0515
                                                 -------------


CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT DURING THE PAST 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 ( ) NO (X)

THERE WERE 8,225,375 SHARES OF COMMON STOCK OUTSTANDING AT JUNE 30, 2003.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):   YES ( )  NO (X)


<PAGE>


                            CAPSOURCE FINANCIAL, INC.

                                      INDEX

PART I - FINANCIAL INFORMATION

                                                                        PAGE NO.
                                                                        --------

    ITEM 1. UNAUDITED CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS

    Balance Sheets as of June 30, 2003 and December 31, 2002..................3

    Statements of Operations for the three month and six
      month periods ended June 30, 2003 and 2002..............................4

    Statements of Cash Flows for the six month periods
      ended June 30, 2003 and 2002............................................5

    Notes to Unaudited Condensed, Consolidated Financial
      Statements..............................................................6

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS...............................8

    ITEM 3. CONTROLS AND PROCEDURES..........................................11


PART II - OTHER INFORMATION

    ITEM 1. LEGAL PROCEEDINGS................................................11

    ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................11

    ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................11

    ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.............11

    ITEM 5. OTHER INFORMATION................................................11

    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................11

SIGNATURES...................................................................13


                                       2
<PAGE>


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

        CAPSOURCE FINANCIAL, INC. AND SUBSIDIARIES

        Unaudited Condensed Consolidated Balance Sheets


                                                   JUNE 30,     DECEMBER 31,
                                                    2003            2002
                                                 -----------    -----------
Assets
------
Current assets:
   Cash and cash equivalents                     $   165,680        118,452
   Rents and accounts receivable, net                416,926        346,761
   Mexican value added taxes receivable              337,443        205,086
   Inventory                                         812,761        263,306
   Advances to vendors                               604,645        325,930
   Prepaid public offering costs                     308,847        208,595
   Other current assets                              252,569         15,568
                                                 -----------    -----------
           Total current assets                    2,898,871      1,483,698
Property and equipment, net                        2,126,967      2,508,548
Other assets                                          89,286         45,693
                                                 -----------    -----------
Total assets                                     $ 5,115,124      4,037,939
                                                 ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
   Accounts payable and accrued expenses         $ 1,089,306        450,427
   Deposits and advance payments                     544,186        126,929
   Notes payable                                     866,583        758,586
   Convertible notes payable, net of discount        445,230        369,624
   Payable to stockholder                          1,319,516        660,070
                                                 -----------    -----------
           Total current liabilities               4,264,821      2,365,636
Long-term debt                                       416,280        352,769
                                                 -----------    -----------
           Total liabilities                       4,681,101      2,718,405

Commitments and contingencies

Stockholders' equity:
   Common stock and additional paid-in capital     7,010,712      7,010,712
   Accumulated deficit                            (6,576,689)    (5,691,178)
                                                 -----------    -----------
           Total stockholders' equity                434,023      1,319,534
                                                 -----------    -----------
Total liabilities and stockholders' equity       $ 5,115,124      4,037,939
                                                 ===========    ===========

See accompanying notes to unaudited condensed, consolidated financial
statements.




                                       3

<PAGE>






                   CAPSOURCE FINANCIAL, INC. AND SUBSIDIARIES

            Unaudited Condensed Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED             SIX MONTHS ENDED
                                        --------------------------     -------------------------
                                          JUNE 30,       JUNE 30,       JUNE 30,       JUNE 30,
                                            2003           2002           2003           2002
                                        -----------     ----------     ----------     ----------
<S>                                     <C>              <C>            <C>            <C>
Net sales and rental income             $ 1,112,437      1,070,782      1,881,062      1,798,009
Cost of sales and operating leases       (1,012,605)      (896,326)    (1,632,853)    (1,510,787)
Selling, general and administrative        (402,190)      (354,115)      (793,209)      (683,487)
                                        -----------     ----------     ----------     ----------
Operating loss                             (302,358)      (179,659)      (545,000)      (396,265)
Interest, net                              (139,726)       (58,968)      (278,479)      (107,372)
Other income (expense)                      (16,694)       (67,984)       (52,253)       (65,617)
                                        -----------     ----------     ----------     ----------
Loss before income taxes                   (458,778)      (306,611)      (875,732)      (569,254)
Income taxes                                 (6,165)            --         (9,779)            --
                                        -----------     ----------     ----------     ----------
Net loss                                $  (464,943)      (306,611)      (885,511)      (569,254)
                                        ===========     ==========     ==========     ==========

Net loss per basic and diluted share    $     (0.06)         (0.04)         (0.11)         (0.07)
                                        ===========     ==========     ==========     ==========

Weighted-average shares
    outstanding, basic and diluted        7,877,038      7,835,862      7,877,038      7,834,387
                                        ===========     ==========     ==========     ==========
</TABLE>

See accompanying notes to unaudited condensed, consolidated financial
statements.


                                       4
<PAGE>



                   CAPSOURCE FINANCIAL, INC. AND SUBSIDIARIES

            Unaudited Condensed Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                              SIX MONTHS ENDED
                                                                           ----------------------
                                                                            JUNE 30,     JUNE 30,
                                                                              2003         2002
                                                                           ---------     --------
<S>                                                                        <C>           <C>
Cash flows from operating activities:
   Net loss                                                                $(885,511)    (569,254)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
         Depreciation                                                        189,026      148,455
         Accretion of discount on convertible notes payable
            and payable to stockholder                                       117,808       42,633
         Issuance of common stock to acquire minority interest                    --       26,250
         Changes in operating assets and liabilities:
            Rents and other receivables                                     (202,522)     (57,190)
            Inventory                                                       (549,455)     (46,364)
            Other current assets                                            (615,968)    (199,591)
            Accounts payable and accrued expenses                            638,879      322,158
            Deposits and advance payments                                    417,257      101,080
            Other assets                                                     (43,593)     (10,311)
                                                                           ---------     --------
                    Net cash used in operating activities                   (934,079)    (242,134)
                                                                           ---------     --------

Cash flows from investing activities:
   Purchase of property and equipment                                        (43,927)    (326,974)
   Proceeds from disposition of property and equipment                       236,482      132,527
                                                                           ---------     --------
                    Net cash provided by (used in) investing activities      192,555     (194,447)
                                                                           ---------     --------

Cash flows from financing activities:
   Proceeds from payable to stockholder                                      686,097      305,452
   Proceeds from notes payable                                               107,997           --
   Proceeds from convertible notes payable                                        --      146,595
   Reduction in convertible notes payable                                     (5,342)          --
                                                                           ---------     --------
                    Net cash provided by financing activities                788,752      452,047
                                                                           ---------     --------


                    Net increase in cash and cash equivalents                 47,228       15,466

Cash and cash equivalents, beginning of the period                           118,452      106,616
                                                                           ---------     --------

Cash and cash equivalents, end of the period                               $ 165,680      122,082
                                                                           =========     ========
</TABLE>


See accompanying notes to unaudited condensed, consolidated financial
statements.




                                       5
<PAGE>

Notes to Unaudited Condensed, Consolidated Financial Statements

(1) BASIS OF PRESENTATION In our opinion, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments, except as noted elsewhere in the notes to the
consolidated condensed financial statements) necessary to present fairly our
financial position as of June 30, 2003, and the results of operations and cash
flows for the interim periods presented. These statements are condensed and,
therefore, do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. The statements
should be read in conjunction with the consolidated financial statements and
notes included in our annual report on Form 10-K for the year ended December 31,
2002. The results of operations for the three and six months ended June 30,
2003, are not necessarily indicative of the results to be expected for the full
year.

(2) LIQUIDITY Since its inception, the Company has generated losses from
operations, and as of June 30, 2003 had an accumulated deficit of $6,576,689,
and a working capital deficit of $1,365,950. Subsequent to June 30, 2003, we
raised additional capital through the sale of CapSource common stock through a
public offering, which concluded on July 3, 2003. We also may seek additional
funding from existing stockholders. These stockholders have expressed the
willingness and ability to contribute additional capital, if necessary, and to
convert certain existing debt to equity. However, no financing agreements have
been formalized.

We believe that the cash to be received from the future sale of CapSource common
stock and from the private placement of additional debt, plus cash expected to
be generated from operations, will be sufficient to fund operations for the next
twelve months, and to satisfy obligations as they become due.

(3)  NEW ACCOUNTING PRONOUNCEMENTS

SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities"

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The standard requires that a liability for a
cost associated with an exit or disposal activity be recognized and measured
initially at fair value when the liability is incurred. The provisions of the
standard are effective for exit or disposal activities initiated after December
31, 2002. The adoption of SFAS No. 146 did not have a significant effect on our
results of operations.

SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure -
an amendment of FASB Statement No. 123"

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123." This standard provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this standard amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The adoption
of SFAS No. 148 did not change how we currently recognize stock-based
compensation.

We report results of operations under the intrinsic value method of accounting
for stock-based compensation. The Company did not issue any stock awards during
the three and six months ended June 30, 2003 and 2002. In addition, all
previously issued stock-based awards were fully vested as of December 31, 2002.
Therefore, for the three and six months ended June 30, 2003 and 2002, there is
no difference in the reported loss under the intrinsic value method of
accounting for stock awards, compared to the loss calculated using the fair
value recognition provisions of SFAS No. 123.

FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others"



                                       6
<PAGE>

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." Interpretation No. 45 elaborates on the disclosures
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. This interpretation also incorporates, without change, the
guidance in FASB Interpretation No. 34, Disclosure of Indirect Guarantees of
Indebtedness of Others, which is being superseded. The Company is required to
apply the provisions of Interpretation No. 45 to guarantees that are initiated
or modified after December 31, 2002. We believe the adoption of this standard
will not have a material impact on the Company's financial position or results
of its operations. This statement also requires expanded disclosures for certain
types of obligations not covered by the accounting provisions of this
interpretation, such as warranty obligations, which had no impact on the
Company's disclosures in its financial statements for the year ended December
31, 2002.

FASB Interpretation No. 46, "Consolidation of Variable Interest Entities"

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities". Interpretation No. 46 is an interpretation of
Accounting Research Bulletin No. 51, and addresses consolidation by business
enterprises of variable interest entities. This interpretation requires existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries if the entities do not effectively disperse risks among parties
involved. Variable interest entities that effectively disperse risks will not be
consolidated unless a single party holds an interest or combination of interests
that effectively recombines risks that were previously dispersed. The Company is
required to apply the provisions of Interpretation No. 46 to variable interest
entities created after January 31, 2003. We believe the adoption of this
standard will not have an impact on the Company's financial position or results
of operations.

SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity"

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). We are currently evaluating
SFAS No.150, however we do not expect this rule to have an impact on the
Company's financial position or results of operations.

(5) COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes all changes
in stockholders' equity (net assets) from non-owner sources during the reporting
period. Since inception, the Company's comprehensive loss has been the same as
its net loss.

(6) INTEREST AND INCOME TAX PAYMENTS Cash payments for interest were $78,098 and
$32,250 for the six months ended June 30, 2003 and 2002, respectively. Cash
payments for income taxes were $19,288 and $0 for the six months ended June 30,
2003 and 2002, respectively.



                                       7
<PAGE>



(7)  SUPPLEMENTAL BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
                                                     JUNE 30, 2003   DEC. 31, 2002
<S>                                                   <C>             <C>
          Rents and accounts receivable, net:
               Rents and accounts receivable          $   508,568     $   425,856
               Allowance for doubtful accounts            (91,642)        (79,095)
                                                      -----------     -----------
          Total rents and accounts receivable, net    $   416,926     $   346,761
                                                      ===========     ===========

          Property and equipment, net:
               Trailer and semi-trailer equipment     $ 2,884,572     $ 3,349,319
               Vehicles                                    56,891          38,635
               Furniture and computer equipment           112,138          87,214
                                                      -----------     -----------
                                                        3,053,601       3,475,168
               Accumulated depreciation                  (926,634)       (966,620)
                                                      -----------     -----------
          Total property and equipment, net           $ 2,126,967     $ 2,508,548
                                                      ===========     ===========

</TABLE>


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

This discussion contains forward-looking statements, which we have made pursuant
to the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements reflect our current views with respect to
future events. Actual results may vary materially and adversely from those
anticipated, believed, estimated or otherwise indicated. Without limiting the
foregoing, the words "believes," "anticipates, "plans," "expects," and similar
expressions, are intended to identify forward-looking statements. In addition,
forward looking statements include, but are not limited to, statements regarding
future financing needs, future revenues, future profitability and factors
affecting future liquidity. A number of important factors could cause the
Company's actual results to differ materially from those indicated in the
forward-looking statements in this discussion, which include, without
limitation, inability to obtain sufficient additional financing when needed,
inability to maintain a price advantage over our competitors and adverse effects
of general and international economic conditions. We do not undertake to update
any forward-looking statement that may be made from time to time by us or on our
behalf.


OVERVIEW

CapSource Financial, Inc. is a U.S. corporation engaged principally in the
business of selling and leasing truck trailers. We conduct our business through
our operation of two wholly owned subsidiaries in Mexico.

REMEX, our lease/rental subsidiary, leases truck trailer equipment under
operating lease contracts that are denominated in U.S. dollars. This reduces our
exchange rate risk, transferring it to the lessees.

RESALTA, our trailer sales/distribution company, has the exclusive right to
distribute Hyundai truck trailers in Mexico. RESALTA began operations in 2001.

During the second quarter ended June 30, 2003, we offered to the public up to
3,000,000 shares of our common stock as our initial public offering. We
concluded the offering on July 3, 2003, resulting in the sale of a total of
348,339 shares at $1.75 per share, resulting in net proceeds of approximately
$300,000. The additional capital we received as part of the offering is not
reflected in our Financial Statements as of June 30, 2003, because the stock was
not subscribed until the conclusion of the offering period.

RESULTS OF OPERATIONS

Consolidated net sales and rental income in the second quarter ended June 30,
2003, increased 3.9% to $1,112,437, compared with $1,070,782, in the same period
last year. This increase was primarily driven by increased trailer



                                       8
<PAGE>

sales. The lease/rental income generated by the lease/rental subsidiary, REMEX,
remained even with last year, as we concentrated our working capital investments
in trailer inventory and facilities to expand the RESALTA sales operations. In
January 2003, we opened a new trailer sales and storage facility in Mexico City,
giving us the capability to respond more quickly to customer orders.

For the six months ended June 30, 2003, consolidated net sales and rental income
increased 4.6% to $1,881,062, compared with $1,798,009 in the same period last
year. This increase was a result of increased trailer sales, as well as
increased lease/rental income that took place in the first quarter ended March
31, 2003.

Our operating loss consists of net sales and lease income less costs of sales
and operating expenses. We recognized an operating loss of $302,358 in the
second quarter ended June 30, 2003, compared with $179,659 in the same period
last year. This operating loss increase was primarily the result of higher
selling, general and administrative expenses incurred by RESALTA, related to the
hiring in January 2003 of a full-time general manager to direct our
sales/distribution operations. In addition, we incurred costs to lease the new
trailer sales/storage facility beginning in January 2003. These costs were
incurred as we implement our strategy to expand the RESALTA sales/distribution
operations, increasing our visibility as the exclusive Hyundai trailer
distributor in Mexico, and focusing more attention on customer service. Also, in
the second quarter ended June 30, 2003, REMEX sold thirteen flatbed trailers,
which were removed from lease during the quarter. Eleven of these trailers were
returned by the lessee in worse condition than should be expected under normal
use, and had to be disposed of at a price below their net book value. The
resulting loss of $29,000 was charged to cost of operating leases. We are
attempting to recover some of this loss from the former lessee, but have not
recorded any possible recovery in our results of operations.

For the six months ended June 30, 2003, we recognized an operating loss of
$545,000, compared with $396,265 in the same period last year. This operating
loss increase resulted primarily from the hiring in January 2003 of the RESALTA
full-time general manager, and the costs incurred to lease the new trailer
sales/storage facility. In addition, the operating loss was affected by the
$29,000 loss incurred on the disposal of the eleven flatbed trailers in the
second quarter ended June 30, 2003.

Net interest expense was $139,726 in the second quarter ended June 30, 2003,
compared with $58,968 in the same period last year. This increase is associated
with the higher debt levels in 2003 that were incurred primarily to finance the
additional trailer inventory of the RESALTA sales/distribution operations, as
well as to fund the prepaid public offering costs.

For the six months ended June 30, 2003, net interest expense was $278,479,
compared with $107,372 in the same period last year. This increase is associated
with the higher debt levels in 2003 that were incurred to finance the additional
RESALTA trailer inventory, and to fund the prepaid public offering costs.

Other expense decreased to $16,694 during the second quarter ended June 30, 2003
from $67,984 in the same period last year. This reduction was a result of the
decrease in foreign exchange losses, primarily because the exchange rate of the
Mexican peso in relation to the U.S. dollar remained relatively constant during
the second quarter ended June 30, 2003. During the same period last year, the
Mexican peso strengthened in relation to the U.S. dollar, resulting in higher
foreign exchange losses.

For the six months ended June 30, 2003, other expense was $52,253, compared with
$65,617 in the same period last year. The foreign exchange losses incurred
during the six-month period ended June 30, 2003 were comparable to those
incurred last year, because the Mexican peso strengthened in relation to the
U.S. dollar during the same period of both years at a similar rate. However,
other expense incurred last year also included costs resulting from the purchase
of the remaining shares of stock from the minority shareholder of RESALTA,
giving CapSource 100% ownership interest in RESALTA. Consequently, other expense
was reduced for the six months ended June 30, 2003 compared with the same period
last year.

Income taxes of $6,165 were accrued in the second quarter ended June 30, 2003,
compared to $ 0 in the same period last year. This tax, which is an alternative
foreign tax incurred by our Mexican subsidiaries, is applicable to most




                                       9
<PAGE>

Mexican corporations that have no taxable income. Prior to the fourth quarter
ended December 31, 2002, we were exempt from this tax. For the six months ended
June 30, 2003, income taxes were $9,779, compared with $0 in the same period
last year.

We recognized a net loss of $464,943, or 6 cents per diluted share, in the
second quarter ended June 30, 2003, compared with $306,611, or 4 cents per
diluted share, in the same period last year. The increase in the net loss was
due primarily to the additional costs associated with expanding the RESALTA
sales/distribution operations, as well as the increase in interest expense,
partially offset by the reduction in other expense associated with foreign
exchange losses.

For the six months ended June 30, 2003, net loss was $885,511, or 11 cents per
diluted share, compared with $569,254, or 7 cents per diluted share, in the same
period last year.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are from borrowings, principally from our
majority stockholder. Our principal uses of capital have been to fund our
operating losses, and to continue and expand our operations pursuant to our
strategic business plan including: increasing sales by adding to equipment
inventory on display and adding to our lease/rental fleet.

Net cash used in operating activities was $934,079 for the first six months of
2003, compared with $242,134 for the prior-year six-month period. Net operating
cash used in the current period increased compared to the prior year due to
increases in the net loss, inventory, advances to vendors, prepaid public
offering costs and other assets, which were partially offset by an increase in
accounts payable and accrued expenses and deposits and advance payments.

For the six months ended June 30, 2003, we acquired property and equipment of
$43,927, including equipment for the lease/rental pool, offset by disposals of
$236,482, all of which were equipment from the lease/rental pool that were
removed from lease as their lease terms expired. This compares to $326,974 and
$132,527, respectively, for the six months ended June 30, 2002. As a result, net
cash provided by investing activities was $192,555 for the six months ended June
30, 2003. This compares to net cash used in investing activities of $194,447 for
the six months ended June 30, 2002.

During the six months ended June 30, 2003, we received proceeds from payable to
stockholder of $686,097 and proceeds from unsecured notes payable of $107,997.
This was partially offset by a reduction in convertible notes payable of $5,342.
As a result, net cash flow from financing activities during the six months ended
June 30, 2003 was $788,752.

During the six months ended June 30, 2002, we received proceeds from payable to
stockholder of $305,452 and proceeds from the issuance of unsecured convertible
notes to others of $146,595. As a result, the net cash flow from financing
activities was $452,047 for the six months ended June 30, 2002.

We anticipate that a major stockholder of the Company will convert approximately
$1,700,000 of debt into common stock during the second half of the year ending
December 31, 2003.

On a long-term basis, liquidity is dependent on continuation and expansion of
operations, the re-leasing and sale of equipment and the receipt of revenue as
well as additional infusions of equity and debt capital. As we increase our
sales in 2003, which include existing commitments from major customers for the
second half of 2003, we expect to reduce our working capital requirements and
begin to generate cash from operations. We believe that proceeds from the sale
of equity securities, including the recently completed public offering of our
common stock, together with cash on hand and cash to be generated from
operations will be sufficient to fund our working capital needs for at least the
next 12 months. In addition, we believe that additional debt financing in the
short term will allow us to implement the Hyundai-RESALTA business opportunity,
increase our lease/rental fleet and pursue other business opportunities pursuant
to our strategic plan. We believe this will result in substantially increased
revenue and liquidity, allowing us to continue and to expand our operations over
the long term. However, there can be no assurance that we will be able to obtain
the additional equity or debt financing in the future.


                                       10
<PAGE>


ITEM 3.  CONTROLS AND PROCEDURES

         (a) Evaluation of disclosure controls and procedures

Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company's periodic SEC filings.

         (b) Changes in internal controls

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regards to significant
deficiencies and material weaknesses.

PART II OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS
          None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

The Company conducted its initial public offering pursuant to a Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission on
October 7, 2002, and thereafter amended and supplemented by Amendment No. 1 to
Form SB-2, Amendment No. 2 to Form SB-2, Post-Effective Amendment No. 1 and
Post-Effective Amendment No. 2, filed with the Securities and Exchange
Commission on December 9, 2002, December 24, 2002, February 25, and July 17,
2003, respectively (the "Registration Statement" (File No. 333-100389). The
offering was contingent upon a minimum number of shares being subscribed for.
The minimum number of shares was not subscribed for on or before June 30, 2003
so no shares were issued by the Company and no proceeds were received by the
Company on or before June 30, 2003.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          None.

ITEM 4.   SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
          None.

ITEM 5.   OTHER INFORMATION
          None.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          None.




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<PAGE>



                                                 LIST OF EXHIBITS


The following exhibits are filed with this Form 10-QSB:

    EXHIBIT NO.                  DESCRIPTION
    -----------                  -----------
        *3.1          Articles of Incorporation
      *3.1.1          Articles of Amendment to the Articles of Incorporation
                        (Name Change)
      *3.1.2          Articles of Amendment to the Articles of Incorporation
                        (Authorized Capital)
        *3.2          By-laws
      **31.1          Certification of C.E.O. pursuant to Section 302 of the
                        Sarbanes-Oxley Act of 2002
      **31.2          Certification of C.F.O. pursuant to Section 302 of the
                        Sarbanes-Oxley Act of 2002
      **32.1          Certification of C.E.O. pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002
      **32.2          Certification of C.F.O. pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002
           *          Incorporated by reference to the Company's Registration
                        Statement on Form SB-2 filed October 7, 2002, as amended
                        by the Company's Amendment No. 1 to Form SB-2 filed
                        December 9, 2002.
          **          Filed herewith.

The financial statements filed as part of this report are listed separately in
the Index to Financial Statements.

The Company did not file, nor was it required to file, any reports on Form 8-K
during the second quarter ended June 30, 2003.




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<PAGE>


                                   SIGNATURES



         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                        CAPSOURCE FINANCIAL, INC.



Date: October 15, 2003                  By: /s/ Fred C. Boethling
                                            ----------------------------------
                                            Fred C. Boethling,
                                            President, Chief Executive Officer
                                            and Director


Date: October 15, 2003                  By: /s/ Steven J. Kutcher
                                            ----------------------------------
                                            Steven J. Kutcher,
                                            Chief Financial Officer







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