Capsource Financial, Inc. First Quarter 2008 Sales Down by 80%
as Slowing US Economy Spills Over into Mexico

BOULDER, CO – (MARKET WIRE) – CapSource Financial, Inc. (OTC BB: CPSO.OB - News) announced that for the first quarter ended March 31, 2008, consolidated net sales decreased by 80.44% to $2,086,534 compared to $10,664,902 for the same period last year. Net sales is made up of two components: trailer and parts sales, which decreased by $8,597,202, in the first quarter of 2008, a decrease of 81.69% compared to the same period of 2007, and lease/rental income, which increased by $18,837, an increase of 13.4% compared to the same period last year.

President and CFO Fred Boethling said, “The decline in our overall sales in the first quarter ended March 31, 2008 was primarily due to a decline in sales by our Mexican operations. Trends in the sales of transportation equipment in Mexico generally follow those in the U.S. although they tend to lag by two to three quarters.  We  believe that the decline in demand for trailers in Mexico mirrors the decline experienced in the U.S. during the second half of 2006 and the first half of 2007. In the U.S., demand for trailers is generally a function of freight volume which is an important indicator of total economic activity. As the economy grows, freight volume increases, carrier profitability improves and demand for new equipment increases. Conversely, as freight volume declines, carrier margins are squeezed and equipment purchases are delayed.”  Boethling also noted, “Carriers must replace older equipment on an ongoing basis. When purchases are delayed during economic downturns demand is built up. When the economy improves carriers must invest in both replacing older equipment as well as growth. As a result trailer sales typically improve sharply nearing the end of economic downturns.”

Gross profit consists of net sales and rental income less cost of sales and operating leases. For the first quarter ended March 31, 2008, gross profit decreased $514,914, or 73.26%, to $187,906 compared to $702,820 for the same period in 2007. This decrease in gross profit resulted from the decrease of $8,578,368 in total sales and was partially offset by an increase in lease/rental income.

Selling, general and administrative expense for the first quarter ended March 31, 2008 was $849,750 compared to $895,728 for the same period of 2007, a decrease of 5.1%. This decrease was mainly due to additional expenses related to our acquired U.S. operation in the same period in 2007.

Operating loss consists of net sales less cost of sales and operating leases and selling, general and administrative expenses. In the first quarter of 2008, we recognized operating loss of $661,844, compared to an operating loss of $192,908 for the same period of 2007, an increase of $468,936. This increase in operating loss resulted from a decrease in sales and gross profit, partially offset by the decrease in selling, general and administrative expense.
Net interest expense for the first quarter ended March 31, 2008 was $124,695 compared to $106,434 for the same period of 2007. This increase of $18,261 resulted from higher debt in 2008 utilized to finance inventory.

Other income/(expense), net, which is primarily foreign exchange gains/(loss) in our Mexican operation, was a gain of $ 395 in the first quarter ended March 31, 2008 compared to a loss of $18,552 in the same period of the last year.

Income taxes of $24,881 and $22,009 were accrued for the three months ended March 31, 2008 and 2007, respectively. This tax primarily represents an alternative tax, which is an alternative tax incurred by our Mexican operations. This tax is applicable to most Mexican corporations that have no taxable income.

Our net loss for the first quarter ended March 31, 2008 was $811,025, or $0.04 per basic and diluted share, compared to a net loss of $339,903, or $0.02 per basic and diluted share for the same period of 2007. This increase in net loss was caused by the impact of a decrease in sales, and an increase in net interest expense, partially offset by a decrease in selling, general and administrative expense and an increase in lease/rental income.

Boethling concluded by noting, “We anticipate an improving sales environment during the second half of 2008 or the first half of 2009. Based on trends, sales should improve first in the U.S. and later in Mexico. Once carriers perceive an improving transportation environment they typically move quickly to replace aging equipment and trailer sales generally improve industry-wide.”

For Additional Information Contact:   CapSource: Fred Boethling at (888) 574-6744
                                                Visit the company’s website:  www.capsource-financial.com