As filed with the Securities and Exchange Commission on January 25, 2001
Registration No. 333-50512
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
AMENDMENT NUMBER 3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
(Name of Small Business Issuer in its Charter)
New York 6141 16-1576984
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
_____________________
Single Source Financial Services Corporation Lawrence I. Washor
10780 Santa Monica Boulevard, Suite 240 Washor & Associates
Los Angeles, California 90025 11150 West Olympic Blvd., Suite 980
(888) 262-1600 Los Angeles, California 90064
(Name, address and telephone number (310)479-2660
of registrant's principal executive (Name, address and telephone number
offices and principal place of business) of agent for service)
_____________________
Copies to:
Lawrence I. Washor
Washor & Associates
11150 West Olympic Blvd., Suite 980
Los Angeles, California 90064
Telephone: (310) 479-2660
Facsimile: (310) 479-1022
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
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Common Stock, $.001 par value
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Common Stock Offered by Selling 1,125,000 $ 2.00 $ 2,250,000 $ 550.00
Shareholders
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Total Registration Fee* $ 550.00
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* $1,237.50 was initially paid.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
Subject to Completion January 25, 2001
PROSPECTUS
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
a New York corporation
We are offering a maximum of 1,125,000 shares of common stock for sale by
certain selling shareholders at $2.00 per share ($.001 par value) for their own
accounts on a best-efforts basis for a maximum period of 120 days after the
effective date of this prospectus unless extended by us for an additional 60
days at our sole discretion.
The selling shareholders may sell the shares of common stock directly or
through underwriters, dealers, or agents. They may also pledge some of the
shares of common stock as security. More information about the way the selling
shareholders may distribute the common stock is set forth under the "Plan of
Distribution."
The common stock is not listed on any national securities exchange or any
NASDAQ stock market and there is no current underwriting arrangement in
connection with this offering. There is no trading symbol for the common stock.
Single Source Financial Services Corporation will not receive any proceeds
from shares sold by the selling shareholders and shall bear all the expenses
incurred in connection with registering this offering of common stock. There is
no public market for our common stock and no assurance that a market will
develop.
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE
7 AND "DILUTION" BEGINNING ON PAGE 11.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus will not be used before the effective date of the
registration statement. We are not a reporting company.
Commissions
Offering and Discounts Net Proceeds
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Per Share $2.00 $0 $2.00
Total $2,250,000 $0 $2,250,000
The selling shareholders and any broker-dealers participating in the
distribution of the common stock may be deemed to be "underwriters" within the
meaning of the 1933 Act, and any commissions or discounts given to any
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
The date of this prospectus is , 2001
1
TABLE OF CONTENTS
Page
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Item 3. Summary Information and Risk Factors . . . . . . . . . . . . . . . . . . .4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1. Because We Have Limited Operating History, It Will Be Difficult To Gauge
Our Future Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2. We Have No Operating Profit To Date. If We Fail to Achieve
Profitability, We May Have To Curtail Our Operations . . . . . . . . . . . 7
3. Since We Are Thinly Capitalized And Require Operating Capital, Our
Inability To Raise Capital May Affect Our Ability To Continue Our Operations . . .7
4. Because The Company May Be Subject To The "Penny Stock" Rules, The Level
Of Trading Activity In Our Stock May Be Reduced . . . . . . . . . . . . . 7
5. Since We Rely Heavily On Our Key Employees, The Loss Of Their Services
Could Make It Impossible To Continue The Operations Of The Business . . . .8
6. Because Management's Determination of The Offering Price Was Arbitrarily
Determined, It Bears No Relationship To Actual Valuation . . . . . . . . . 8
7. Our Failure To Manage Growth Effectively Could Impair Our Business . . . . . . . .8
8. Since There Is No Current Public Market For Our Securities, There Can Be
No Assurance That An Investor Can Liquidate His/Her Investment . . . . . .9
9. Because Certain Directors and Officers Constitute A Control Group, They
Could Direct The Company In Ways Which Investors May Not Perceive To Be In Their
Best Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
10. Because of the Rapid Changes in Our Business, There Are No Guarantees
That Our Products Will Not Become Obsolete or Regulated . . . . . . . . . 9
11. Should A Public Market Develop For Our Stock, It May Not Be Maintained
And It May Be Subject To Significant Volatility, Which Could Result In
Litigation Against Us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. Because We Have No Liability or Other Insurance, We Are Subject To
Liability For Any Potential Losses . . . . . . . . . . . . . . . . . . . . . 10
13. Management's Limited Experience Could Make It Difficult For Us To
Compete With Companies Run By More Experienced Management . . . . . . . . 10
14. Because We Utilize A Sales Force of Independent Contractors, The
Inability To Find And Properly Manage A Sales Force Nationwide May Effect Our
Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. Any Inability To Raise Sufficient Capital May Make It Impossible To
Compete With Better Capitalized Competitors . . . . . . . . . . . . . . . . .11
2
Item 4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Item 5. Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 7. Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 8. Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 10. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 11. Security Ownership of Certain Beneficial Owners and Management . . . . . . . 17
Item 12. Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . .19
Item 13. Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . . 20
Item 14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Item 15. Organization Within Last Five Years . . . . . . . . . . . . . . . . . . .21
Item 16. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . .22
Item 17. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . .25
Item 18. Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 19. Certain Relationships and Related Transactions . . . . . . . . . . . . . 28
Item 20. Market for Common Equity and Related Stockholder Matters . . . . . . . .29
Item 21. Executive Compensation - Remuneration of Directors and Officers . . . . . . .29
Item 22. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Item 23. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 30
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS . . . . . . . . . . . . . . . . . .33
Item 24. Indemnification of Directors and Officers . . . . . . . . . . . . . . . .33
Item 25. Other Expenses of Issuance and Distribution . . . . . . . . . . . . . . 34
Item 26. Recent Sales of Unregistered Securities . . . . . . . . . . . . . . . . .34
Item 27. Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Item 28. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3
Item 3. Summary Information and Risk Factors.
This summary is qualified in its entirety by reference to, and should be
read in conjunction with, the more detailed information appearing elsewhere in
this prospectus, which contains more detailed information with respect to each
of the matters summarized in this prospectus as well as other matters not
covered in the summary. All prospective investors should carefully review the
entire contents of the prospectus and the exhibits attached hereto, individually
and with their own tax, legal and business advisors. This summary discusses all
material factors necessary to make an informed investment decision.
All share and per share information reflects a one share for every six
share reverse stock split effective as of October 18, 2000.
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward looking statements and information
relating to our company that are based on the beliefs of management as well as
assumptions made by, and information currently available to, management. When
used in this prospectus, the words "anticipate", "believe", "estimate",
"expect", "will", "could", "may", and similar expressions are intended to
identify forward looking statements but the absence of any word does not mean
that the statement is not forward looking. These statements reflect the current
views of management with respect to future events and are subject to certain
risks, uncertainties, and assumptions, including those described under "Risks
Factors" and elsewhere in this prospectus. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein. In addition to
the other information in this prospectus, the above factors should be carefully
considered in evaluating our company and its business and before purchasing the
securities offered hereby.
The Company: Single Source Financial Services Corporation is a New York
corporation formed on September 19, 1994. Our principal
business address is 10780 Santa Monica Boulevard, Suite
240, Los Angeles, California 90025. The telephone number
is (888)262-1600.
Business of the We intend to acquire several companies in the financial
Company: services area. On November 7, 2000, we acquired Single
Source Electronic Transactions, Inc., a Nevada
corporation. Single Source Electronic Transactions, Inc.
is our only acquisition to date and constitutes our only
operating business.
Single Source Electronic Transactions, Inc. sells and
Leases to merchants various types of equipment used to
record and to facilitate electronic financial
transactions, including credit and debit card purchases.
4
However, where the merchant elects to lease the equipment,
Single Source Electronic Transactions, Inc. sells the
lease to an outside equipment leasing company. We offer
a wide range of electronic transaction equipment,
including credit card processing equipment, debit card
processing equipment, automated teller machines ("ATM")
and smart cards. Additionally, we provide products
which service the construction and maintenance of internet
web sites, as well as electronic credit capabilities, and
electronic check verification equipment. We attempt to
offer access to the electronic processing of these
transactions to our customers at the lowest available
rate. For these reasons, we believe that our operation of
Single Source Electronic Transactions, Inc. will become
profitable over the next few months.
State of Organization Our company was incorporated under the name Ream Printing
of the Company: Paper Corp., pursuant to the laws of the State of New
York, on September 19, 1994. In November, 2000, we
changed its name to Single Source Financial Services
Corporation.
Common Stock Prior to the offering, there are 11,845,689 shares of the
Outstanding Prior to common stock outstanding. 10,012,500 shares were used to
Offering: acquire Single Source Electronic Transactions, Inc These
10,012,500 shares are currently restricted. The
remaining 1,833,189 shares resulted from a 1994 exchange
offer effected under Rule 504 and a subsequent six for
one stock split. These 1,833,189 shares have no
restrictions on transfer or resale.
Securities Offered In the instant offering, the selling shareholders are
Herein: offering 1,125,000 shares of common stock at $2.00 per
share. These 1,125,000 shares are a portion of those
received by the selling shareholders from their sale of
Single Source Electronic Transactions, Inc. to Single
Source Financial Services Corporation.
Sales by Selling 1,125,000 shares of the common stock have been registered
Shareholders: pursuant to the registration statement of which this
Prospectus forms a part for sale by the selling
shareholders. The selling shareholders may sell the
common stock that is a part of this registration at
prevailing prices or in transactions at negotiated prices
or by gift or a combination of all three.
No Proceeds to the We will not receive any of the proceeds from the sale of
Company for the Sale the shares of common stock offered by the selling
of the Stock: shareholders.
5
Common Stock
Outstanding After
Offering: After the offering is complete, we will have 11,845,689
shares of common stock which are issued and outstanding.
2,958,189 shares of the issued and outstanding stock shall
be unrestricted with respect to transfer and resale. In
effect, this stock will be "free-trading".
Risk Factors: Investment in the common stock involves a high degree of
Risk and immediate substantial dilution. See "Risks
Factors" and "Dilution". Among the significant risk
factors are our lack of funds and our corresponding
need to raise additional funds to carry out our plan of
operations, our lack of sufficient operating history to
permit meaningful evaluation of our business operations,
our lack of revenue and our large accumulated deficit, and
the existence of a control block which has the ability to
cause us to act in a fashion with which other shareholders
may disagree.
6
RISK FACTORS
In addition to the other information provided in this prospectus, the
following risk factors should be considered carefully in evaluating our company
and its business before purchasing any of the common stock. A purchase of the
common stock is speculative in nature and involves numerous risks. No purchase
of the common stock should be made by any person who cannot afford to lose the
entire amount of this investment.
1. Because We Have Limited Operating History, It Will Be Difficult To
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Gauge Our Future Performance. We have a limited operating history. Although
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the company was formed in 1994, it has not operated any business during the past
five years and its operation of Single Source Electronic Transactions, Inc. did
not commence until November 7, 2000. This makes it difficult to evaluate our
future performance and prospects. Additionally, there is no history from which
a prospective investor could determine management's ability to properly operate
the business. Our prospects must be considered in light of the risks,
unforeseen problems, expenses, delays, and difficulties frequently encountered
in establishing a new business.
2. We Have No Operating Profit To Date. If We Fail to Achieve
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Profitability, We May Have To Curtail Our Operations. To date, neither Single
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Source Electronic Transactions, Inc. nor we have ever generated a profit in our
business operation. Although management believes that because of our
acquisition of Single Source Electronic Transactions, Inc., which has provided
the company with a wide range of electronic transaction equipment which it can
offer at low rates, we will become profitable within the next 90 days, however,
there can be no assurance that we will do so, or that we will ever make a profit
for that matter. Our inability to obtain adequate capital would limit our
ability to achieve the level of corporate growth that we believe to be necessary
to succeed in our business.
3. Since We Are Thinly Capitalized And Require Operating Capital, Our
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Inability To Raise Capital May Affect Our Ability To Continue Our Operations.
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Our plans for expansion require us to obtain significant operating capital over
the next few years. We intend to acquire other companies similar to Single
Source Electronic Transactions, Inc. and to acquire compatible financial
services companies when, and if, these companies become available. As can be
seen from the attached financials, both Single Source Electronic Transactions,
Inc. and us have limited capital available to fund these anticipated
transactions. Therefore, we will be dependent upon raising funds to accomplish
these goals. In the event that we are able to increase Single Source Electronic
Transactions, Inc.'s revenue as we anticipate we can, we will probably require
additional funds to satisfy our capital needs over the next year. However,
there can be no assurance that we will be able to raise the necessary funds or
that we will be able to do so on terms acceptable to us. Likewise, many of our
competitors are better financed and are in a better position to take advantage
of acquisition opportunities than we are. Nonetheless, we believe that adequate
financing may be available from our current major shareholders.
7
4. Because The Company May Be Subject To The "Penny Stock" Rules, The
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Level Of Trading Activity In Our Stock May Be Reduced. The Securities and
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Exchange Commission ("Commission") has adopted rules that regulate broker-dealer
practices in connection with transactions in "penny stocks". Penny stocks
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
NASDAQ system, provided that current price and volume information with respect
to transactions in these securities are provided by the exchange or system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document prepared by the Commission, which specifies information
about penny stocks and the nature and significance of risks of the penny stock
market. The broker-dealer also must provide the customer with bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements indicating the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that, prior to a transaction in a penny stock not
otherwise exempt from those rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction.
Penny stock disclosure requirements may have the effect of reducing the
trading activity in the secondary market for any of our stock that becomes
subject to the penny stock rules, which may result in our investor having more
difficulty selling their shares.
5. Since We Rely Heavily On Our Key Employees, The Loss Of Their
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Services Could Make It Impossible To Continue The Operations Of The Business.
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Our future success will depend in part on the services of our key personnel and,
additionally, on our ability to identify, hire and retain additional qualified
personnel. There is significant competition for qualified personnel in the
areas of our activities, and there can be no assurance that we will be able to
continue to attract and retain the personnel necessary for the development of
our business. Because of the intense competition, there can be no assurance
that we will be successful in adding personnel as needed to satisfy our staffing
requirements. Failure to attract and retain key personnel could have a material
adverse effect on our company. We do not maintain key person life insurance on
any of our key personnel.
6. Because Management's Determination of The Offering Price Was
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Arbitrarily Determined, It Bears No Relationship To Actual Valuation.
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Management has arbitrarily determined the offering price of the common stock.
Among the factors considered in determining the price of the common stock were
management's opinion of the prospects of the company, the background of the
company and the results of its short operating history and current conditions
affecting the business and operations. However, the offering price does not
bear any relationship to our assets, earnings, book value, cash flow, or other
generally accepted criteria of valuation.
7. Our Failure To Manage Growth Effectively Could Impair Our Business.
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With every newly organized corporation, it is important that we manage our plans
for growth. To date, we have required, and are expected to continue to require,
the full utilization of our management, financial, and other resources, since we
have not had adequate working capital. Our ability to expand our business
effectively will depend on our ability to improve and expand our operations,
including our financial and management information systems, and to recruit,
train and manage executive staff and other employees. There can be no assurance
that we will be able to manage our growth effectively, and the failure to
effectively manage our growth may have a materially adverse effect on our
results of operations. Furthermore, there can be no assurance that we will
experience any growth.
8
8. Since There Is No Current Public Market For Our Securities, There
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Can Be No Assurance That An Investor Can Liquidate His/Her Investment. Prior to
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this offering, there has been no public market for the common stock currently
being offered. There can be no assurance that any public market will develop,
even if this offering were to prove successful, or that if a public market were
to develop it will continue to be maintained. Therefore, there can be no
assurance that an investor will be able to liquidate his/her investment in our
public stock if the investor should desire to do so.
9. Because Certain Directors and Officers Constitute A Control Group,
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They Could Direct The Company In Ways Which Investors May Not Perceive To Be In
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Their Best Interest. Our directors, officers and principal (greater than 5%)
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shareholders, taken as a group, together with their affiliates, beneficially
own, in the aggregate, a majority of our outstanding common stock. Certain
principal shareholders are directors or executive officers of the company and
certain other company principals are related by blood to each other. As a
result of this ownership, these shareholders may be able to exert significant
influence, or even control, over matters requiring approval by the shareholders
of Single Source Financial Services Corporation, including the election of
directors. The shareholders of Single Source Financial Services Corporation may
not perceive the foregoing to be in their best interest.
10. Because of the Rapid Changes in Our Business, There Are No
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Guarantees That Our Products Will Not Become Obsolete or Regulated. At the
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current time, there is substantial development in the manner in which consumers
pay merchants for goods and services. In addition to credit cards, consumers
use, inter alia, smart cards, debit cards, ATM machines, signature verification
processes, and the internet. Our current business operations are based upon
these changes in payment methodology. For this reason, we offer through
purchase and lease a wide variety of equipment which a merchant can use to
obtain virtually instantaneous electronic payment for products and services sold
to a consumer. However, the industry is rapidly changing and developing and we
must keep abreast of any developments and changes as they occur if we are to
remain competitive. Furthermore, the rapid development of the industry may
cause certain products or services to become obsolete. There can be no
assurance as to which services, if any, may become obsolete and what effect
obsolescence will have on us. Also, as the amount of national debt increases or
decreases, federal and state governments may regulate this industry through the
passage of new laws. Currently, only the banking aspects of this industry are
regulated. There is no way to predict the effect that additional regulation
would have upon the manner in which we do business.
11. Should A Public Market Develop For Our Stock, It May Not Be
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Maintained And It May Be Subject To Significant Volatility, Which Could Result
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In Litigation Against Us. There is currently no public market for our common
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stock. Should there develop a market for our common stock there is no assurance
that any regular trading market will be sustained. The trading prices of our
common stock could be subject to wide fluctuations in response to:
(i) The company's financial results;
(ii) The company's introduction of new services ;
(iii) Competitive companies and products; and
(iv) General economic conditions.
9
In addition, in recent years, the stock market as a whole has experienced a
high level of price and volume volatility. During this period, market prices
for many companies, particularly small and emerging growth companies, have
experienced wide price fluctuations not necessarily related to the operating
performance of these companies. The market price for our common stock may be
affected by general stock market volatility. If a market does not develop for
our common stock, new investors and the selling shareholders may be required to
retain their stock position in the company for an indefinite period of time.
Additionally, in the past, following periods of volatility in the market
price of many company's securities, securities class action litigation has
occurred against the issuing company. There can be no assurance that litigation
will not occur in the future with respect to our company. Any litigation could
result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect on our business,
prospects, financial condition and results of operation.
12. Because We Have No Liability or Other Insurance, We Are Subject To
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Liability For Any Potential Losses. Our business may expose us to potential
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liability risks that are inherent in the marketing of products. However, we do
not currently have any liability insurance. Since products liability insurance
is expensive, there can be no assurance that we will be able to obtain or
maintain any insurance on acceptable terms or, if obtained, that any liability
insurance will provide adequate coverage against potential liabilities,
including products liability claims. Although we are attempting to become
additional insureds on the policies of the manufacturers from whom we purchase
equipment, there can be no assurance that we will be able to do so. In
addition, we intend to obtain general liability insurance to cover the day to
day risks of operating a business. Notwithstanding the foregoing, we intend to
attempt to avoid activities which contain unacceptable liability exposure.
Nonetheless, management believes that the inability to obtain appropriate
insurance could have a material adverse effect upon the business in operations
and growth. Specifically, if we are unable to obtain adequate insurance, both
general liability insurance, or products liability insurance, it may not be
prudent to expand our product base or operations by hiring additional employees
or opening additional offices. Any failure to expand our growth, or any
impediment in our ability to invest in additional products or the marketing of
its products would inevitably affect our revenues and profits.
13. Management's Limited Experience Could Make It Difficult For Us To
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Compete With Companies Run By More Experienced Management. Except for Mr.
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Graham and Mr. Gifis, our current management has only limited experience in the
electronic reporting and processing of financial transactions. (See
"Management"). This could prove to be detrimental to our growth and success.
Since success or failure of our company depends to a large extent upon
management, their lack of experience or the loss of Mr. Graham and/or Mr.
Gifis, could substantially impair our ability to sell our products and services,
or impair our ability to manage the day to day operations of the business.
14. Because We Utilize A Sales Force of Independent Contractors, The
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Inability To Find And Properly Manage A Sales Force Nationwide May Effect Our
- --------------------------------------------------------------------------------
Growth. We operate from offices located in California and in other States using
independent contractors for our sales force. There can be no assurance that we
will be able to find sufficient numbers of independent contractors to keep the
10
various offices operating or that we will be able to manage these independent
contractors sufficiently to keep the offices operating at maximum efficiency and
profitability. Therefore, our ability to successfully hire and manage our sales
force in the various states may affect our ability to expand, affecting our
financial success and growth. This is especially true as the number of offices
in the various States increases.
15. Any Inability To Raise Sufficient Capital May Make It Impossible To
-------------------------------------------------------------------
Compete With Better Capitalized Competitors. We will be competing with other
- ----------------------------------------------
organizations which offer similar products many of which are better financed and
have been in the business longer than we have. This competition in conjunction
with any inability to raise capital could make it impossible to compete with
them in the market and therefore carry out our plan of operations.
Item 4. Use of Proceeds.
We will receive no proceeds from the sale of the common stock by the
selling shareholders.
Item 5. Determination of Offering Price.
Management has considered the following factors to determine the offering
price of our common stock being offered through this registration. Our common
stock is not yet quoted on the OTC Bulletin Board or any other national
securities exchange or automated quotation system and therefore does not
currently have an average bid or ask price. The offering price of the common
stock was determined by our management based upon their own evaluation of
operations and potential. However, this value has no relationship to any
established criteria of value, such as book value or earnings per share.
Additionally, because we have no significant operating history and we have not
generated any significant earnings to date, the offering price of the common
stock is not based on past earnings. Nor is the offering price of the common
stock indicative of the current market value of our assets.
Item 6. Dilution.
As of October 31, 2000, we had 1,833,189 shares of common stock issued and
outstanding with a net tangible book value of ($2,685) or a net tangible book
value of ($.00146) per share. On November 7, 2000, we purchased Single Source
Electronic Transactions, Inc. for 10,057,500 shares of common stock, a portion
of which shares are being registered herein.
We are registering 1,125,000 shares of the common stock paid to acquire
Single Source Electronic Transactions, Inc. at $2.00 per share. Thus, as of
November 7, 2000, there were 11,845,689 shares of our common stock issued and
outstanding.
Assuming that as of October 31, 2000, we had obtained all the assets of
Single Source Electronic Transactions, Inc., there would be a total of
11,845,689 shares of common stock issued and outstanding with a net tangible
book value of ($99,213) or a net tangible book value of ($.00837) per share.
Assuming that all 1,125,000 shares registered in this offering were sold, the
purchasing shareholders would own 9.49% of our issued and outstanding shares.
The dilution to the purchasing stockholders would be $2.00837 per share or
(1.00415) per share based on a purchase price of $2.00 per share.
11
Net tangible book value per share is obtained by subtracting from the total
tangible assets the total liabilities and then dividing the sum by the total
number of outstanding shares. Dilution is the difference between the public
offering price per share and the net tangible book value per share immediately
after the offering.
The following Chart sets forth dilution.
Public Offering price per share $2.00
Net tangible book value per share
as of October 31, 2000 ($.00837)
Pro forma net tangible book value
per share after Offering ($.00837)
Dilution per share to stock purchasers $2.00837
Gain per share to original shareholders $2.00837
Item 7. Selling Shareholders.
The following table sets forth the number of shares of common stock which
may be offered for sale from time to time by the selling shareholders upon the
effectiveness of this prospectus. To the extent that we are aware that the
selling shareholders own any restricted common stock or any additional
unrestricted common stock, it is also set forth below. None of the selling
shareholders have held any position or office with us, except as specified in
the following table. Other than the relationships described below, none of the
selling shareholders had or have any material relationship with us.
Percentage
Percentage of of common
common stock stock held by
Number of held by selling share-
shares sought to share-holders olders after
be registered in Additional before offering Positions Positions Held offering
Name this offering shares held Held - SSFS - SSET completed
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Baki Arbria 20,487 479,513 - 4.20% N/A N/A 4.00%
restricted
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Brandon Becker 663,539 2,271,875 - 22.90% Vice Director 21.20%
restricted President and
236,342 - Director
unrestricted
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Lorraine Dorsey 250,000 N/A 2.10% N/A N/A 0.00%
12
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Arlene Rosenblatt 20,487 1,296,875 - 12.10% Director Director 11.90%
restricted
118,171 -
unrestricted
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Michael Sock 20,487 361,342 - 4.20% N/A N/A 4.00%
restricted
118,171 -
unrestricted
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Harry L. Wilson 25,000 225,000 - 2.10% Secretary, Director 1.90%
restricted Treasurer and
Director
- ----------------- ---------------- ------------ ---------------- -------------- -------------- --------------
Item 8. Plan of Distribution.
The shares covered by this prospectus may be distributed from time to time
by the selling shareholders in one or more transactions that may take place on
the over-the-counter market. These include ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more broker-dealers
for resale of these shares as principals, at market prices existing at the time
of sale, at prices related to existing market prices, through Rule 144
transactions or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling shareholders
in connection with sales of securities.
The selling shareholders may sell the securities in one or more of the
following methods, which may include crosses or block transactions:
* through the "pink sheets", on the over-the-counter Bulletin Board, or
on any exchanges or over-the-counter markets on which our shares may
be listed from time-to-time, in transactions which may include
special offerings, exchange distributions and/or secondary
distributions, pursuant to and in accordance with the rules of any
exchanges, including sales to underwriters who acquire the shares for
their own account and resell them in one or more transactions or
through brokers, acting as principal or agent;
* in transactions other than on these exchanges or in the
over-the-counter market, or a combination of these transactions,
including sales through brokers, acting as principal or agent, sales
in privately negotiated transactions, or dispositions for value by
any selling shareholder to its partners or members, subject to rules
relating to sales by affiliates; or
* through the writing of options on our shares, whether or not these
options are listed on an exchange, or other transactions requiring
delivery of our shares, or the delivery of our shares to close
out a short position.
Any of the foregoing transactions may be effected at market prices prevailing at
the time of sale, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices.
In making sales, brokers or dealers used by the selling shareholders may
arrange for other brokers or dealers to participate. The selling shareholders
and others through whom these securities are sold may be "underwriters" within
the meaning of the Securities Act for the securities offered, and any profits
realized or commission received may be considered underwriting compensation.
13
At the time a particular offer of the securities is made by or on behalf of
a selling shareholder, to the extent required, a prospectus is to be delivered.
The prospectus will include the number of shares of common stock being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for the shares of
common stock purchased from the selling shareholder, and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
We have told the selling shareholders that the anti-manipulative rules
under the Securities Exchange Act of 1934, including Regulation M, may apply to
their sales in the market. We have also told the selling shareholders of the
need for delivery of copies of this prospectus in connection with any sale of
securities that are registered by this prospectus.
Sales of securities by us and the selling shareholders or even the
potential of these sales may have a negative effect on the market price for
shares of our common stock.
Item 9. Legal Proceedings.
There are no legal actions pending or threatened against us. Nor do we
contemplate the filing of any legal action in the future.
However, there is a lawsuit pending against Single Source Electronic
Transactions, Inc. and Michael Veni, the Manager of Single Source Electronic
Transactions, Inc.'s Los Angeles office. They are named as defendants in a
lawsuit entitled E-Commerce Processing, a California corporation v. Michael
-------------------------------------------------------------
Venni and Single Source Financial Services Corporation Electronics (sic)
- --------------------------------------------------------------------------------
Transactions, Los Angeles Superior Court Case No. BC 237039. The case alleges
- ------------
that Single Source Electronic Transactions, Inc. wrongfully hired E-Commerce
Processing ("ECI") staff from ECI, that Single Source Electronic Transactions,
Inc. took ECI trade secret information, leads, and customers, that Single Source
Electronic Transactions, Inc. defamed ECI, and that Single Source Electronic
Transactions, Inc. committed unfair competition. ECI seeks unspecified
compensatory and punitive damages.
Single Source Electronic Transactions, Inc. denies ECI's allegations and
denies that it owes any amount to ECI. Single Source Electronic Transactions,
Inc. also contends that ECI interferred with its business by calling its staff
in order to threaten and harass them and by defaming Single Source Electronic
Transactions, Inc. Single Source Electronic Transactions, Inc. has filed a
cross-complaint against ECI for defamation, interference with prospective
business advantage, and various other torts.
This action is presently in the discovery stage and there is currently
little ongoing activity in the action.
Single Source Electronic Transactions, Inc. has no other actions pending.
14
Item 10. Management.
Our directors and principal executive officers are as follows:
Name Age Position
---- --- --------
Arnold F. Sock 46 President and Director
Brandon Becker 29 Vice President and Director
Name Age Position
---- --- --------
Harry L. Wilson 56 Secretary, Chief Financial
Officer and Director
Pamela Becker 54 Director
Arlene Rosenblatt 66 Director
Arnold F. Sock was elected a Director of Single Source Financial Services
Corporation in July, 2000 and President in September, 2000. Since 1994 Mr. Sock
has been a Consultant to various businesses regarding business, management,
operations, accounting, financial and legal matters. He has also been an
officer and/or director of various businesses.
Mr. Sock currently serves in the following capacities with the following
companies: Chairman of the Board and Secretary of Tax Debt Negotiators, Inc.
(TDN) (a tax debt resolution firm) since December, 1998; President of Taxpayer
Service Network, Inc. (TSN) (an EAP provider offering tax and credit debt
resolutions) since October, 1999; and Director and Secretary of TDN Marketing
Corporation (markets TDN and TSN products and services) since April, 2000.
Prior to becoming President of Single Source Financial Services
Corporation, Mr. Sock was a Director and President of Internet Business's
International, Inc., a publicly traded company (OTC:BB: IBUI) from November,
1998 through August, 1999. Prior to that Mr. Sock was Director of Operations
for Commercial Ventures, Inc., a real estate investment company from September,
1997 to September, 1998. For the four years prior to that Mr. Sock provided
business consulting services to a wide variety of businesses.
Mr. Sock teaches real estate law for the Construction management
Certificate program at California State University at Dominquez Hills as an
Adjunct Professor. Mr. Sock has an Associate in Science degree in Business
Administration and a Bachelor of Science degree in Accounting from Roger
Williams University, a Juris Doctorate degree from the University of West Los
Angeles and a Master of Laws in Taxation from Golden Gate University Law School.
Mr. Sock is a member of the California State Bar.
15
Brandon Becker was elected Vice President and a Director of Single Source
Financial Services Corporation in September, 2000. Since 1998, Mr. Becker has
been President of Los Angeles Commercial Investments, Inc., a business broker.
Mr. Becker is also a Director of Tax Debt Negotiators, Inc., a corporation which
provides assistance to persons with state and federal tax debt problems. From
1995 to 1998, Mr. Becker was the Manager of Venture Capital Investment Group,
Inc., which assists businesses in resolving their debt problems. From 1991 to
1994, Mr. Becker was Executive Vice President for Concord Business Investments,
a business broker. Mr. Becker attended Santa Monica City College. Brandon
Becker is the son of Pamela Becker.
Harry L. Wilson was elected a Director of Single Source Financial Services
Corporation in July, 2000 and Secretary and Chief Financial Officer in
September, 2000. Since 1998, Mr. Wilson has been President and a Director of
Tax Debt Negotiators, Inc., a corporation which provides assistance to persons
with state and federal tax debt payment problems. From 1997 to 1998, Mr. Wilson
was Secretary/Treasurer of IRS Solutions, which provides assistance to persons
with state and federal tax debt problems. From 1994 to 1997, Mr. Wilson was
Director of Central Processing for Kaye Kotts, which negotiates the resolution
of IRS collection matters. Mr. Wilson holds a Bachelor of Arts degree from the
University of California at Santa Barbara and an MBA from Pepperdine University.
Pamela Becker was elected a Director of Single Source Financial Services
Corporation in July, 2000. Since 1991, Mrs. Becker has been the Escrow
Officer/Manager of Vera's Escrow and its predecessor First City Escrow. Prior
to 1991, Mrs. Becker owned and operated various businesses including a Burger
King franchise and several hotels. Mrs. Becker attended the University of
California at Berkeley and Boston University. Mrs. Becker is the mother of
Brandon Becker.
Arlene Rosenblatt was elected a Director of Single Source Financial
Services Corporation in July, 2000. For the past four years, Mrs. Rosenblatt
has acted as a Consultant to small businesses regarding computer-related
problems. Prior to commencing her consulting practice, Mrs. Rosenblatt served
for 31 years as a high school teacher in California with certification in
business organizations, computers and math. Mrs. Rosenblatt is active with and
has served as President of various community organizations which have an
emphasis in business management and cost control. Mrs. Rosenblatt has a
Bachelor of Science degree from the University of California at Los Angeles.
With respect to Single Source Electronic Transactions, Inc., its principal
executive officers are Messrs. William Graham and Arnold Sock. Mr. Graham is
the president and Mr. Sock is the secretary/treasurer.
William Graham, 58, was the President of Single Source Electronic
Transactions, Inc. from its formation in 1998 until it was acquired by Single
Source Financial Services Corporation. Mr. Graham currently holds the same
position in Single Source Electronic Transactions, Inc. From 1995 until Single
Source Electronic Transactions, Inc. began operating in January, 2000, Mr.
Graham was an independent sales officer for 1st National Processing and 1st
National Bankcard of Simi Valley, California, one of the largest independent
processors for credit card transactions in the United States. Previous to that,
Mr. Graham was Vice President and National Trainer for T.V. Fanfare, an
advertising firm, for which Mr. Graham worked off and on for 22 years. Mr.
Graham has been involved in direct sales for his entire career.
16
Arnold F. Sock, 46, is the Secretary and Treasurer of Single Source
Electronic Transactions, Inc. For Mr. Sock's background, please turn to page 15
where the information appears.
The directors of Single Source Electronic Transactions, Inc. are Mr. Arnold
F. Sock, Mr. Brandon Becker, Ms. Pamela Becker, Mr. Harry Wilson and Ms. Arlene
Rosenblatt. For their background, please turn to pages 15 and 16 where the
information appears.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following tables set forth certain information regarding the beneficial
ownership of Single Source Financial Services Corporation's common stock as of
November 7, 2000, by each person or entity known by Single Source Financial
Services Corporation to be the beneficial owner of more than 5% of the
outstanding shares of common stock, each of Single Source Financial Services
Corporation's directors and named executive officers, and all directors and
executive officers of Single Source Financial Services Corporation as a group.
On November 7, 2000, there were 11,845,689 shares of common stock issued and
outstanding.
(a) Securities Ownership of Certain Beneficial Owners.
------------------------------------------------------
As of November 7, 2000, the following shareholders held more than 5% of the
issued and outstanding common stock of Single Source Financial Services
Corporation:
Name and Address of Amount and Nature of Percent of
Title of Case Beneficial Owner Beneficial Ownership --
- ------------- ------------------------ --------------------
Class
- ---------
Common Brandon Becker 3,171,756 shares 22.90%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Kendra Becker 918,171 shares 6.63%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Pamela Becker 935,533 shares 6.75%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Arlene Rosenblatt 1,435,533 shares 10.36%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Julie Rosenblatt 918,171 shares 6.63%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
17
Common Arnold F. Sock 1,421,875 shares 10.26%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
(b) Securities Ownership by Management.
-------------------------------------
As of November 7, 2000, the following table shows the amount of common
stock beneficially held by our management:
Name and Address of Amount and Nature of Percent of
Title of Case Beneficial Owner Beneficial Ownership --
- ------------- ------------------------ --------------------
Class
- ---------
Common Brandon Becker 3,171,756 shares 22.90%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Pamela Becker 935,533 shares 6.75%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Arlene Rosenblatt 1,435,533 shares 10.36%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Arnold F. Sock 1,421,875 shares 10.26%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Harry L. Wilson 250,000 shares 1.80%
10780 Santa Monica Blvd. direct ownership
Santa Monica, CA 90025
Common Officers and Directors 7,214,697 shares 52.10%
Taken as a Whole direct ownership
Beneficial Ownership. Beneficial ownership is determined in accordance
with the rules of the Commission and generally includes voting or investment
power with respect to securities. In accordance with Commission rules, shares
of our common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60
days of the date of the table are deemed beneficially owned by the optionees.
Subject to community property laws, where applicable, the persons or entities
named in the table above have sole voting and investment power with respect to
all shares of our common stock indicated as beneficially owned by them.
18
(c) Changes in Control.
--------------------
Management is not aware of any arrangements which may result in "changes in
control" as that term is defined by the provisions of Section 228.403(c) of
Regulation S-B.
Item 12. Description of Securities.
We are authorized to issue 100,000,000 shares of common stock, $.001 par
value, with each share of common stock having equal rights, including voting
privileges. The holders of our common stock are entitled to one vote for each
share of record and each fractional share shall be entitled to a corresponding
fractional vote, on all matters to be voted on by shareholders. There is no
cumulative voting.
The holders of our common stock are entitled to receive dividends when, as
and if declared by our Board of Directors from funds legally available for
distribution to shareholders. However, the determination as to whether cash
dividends should issue is at the sole discretion of our Board of Directors. In
the event of liquidation, dissolution or winding up of our company, the holders
of common stock are entitled to share ratably in all assets remaining available
for distribution to them after payment of our liabilities and after provision
has been made for each class of stock, if any, having preference in relation to
our common stock.
Holders of the shares of our common stock have no preemptive rights. All
of the outstanding shares of our common stock are duly authorized, validly
issued, fully paid and non-assessable.
Dividend Policy. Any payment of dividends will be at the sole and absolute
discretion of our Board of Directors and will depend upon earnings, financial
condition, capital requirements, amount of indebtedness, contractual
restrictions with respect to payment of dividends, and other factors. Any
dividends may be paid in cash, property or shares of our common stock. We have
not paid any dividends since our formation, and it is not probable that any
dividends on our common stock will be declared at any time in the foreseeable
future. Any future dividends will be subject to the discretion of our Board of
Directors, and will depend upon, among other things, the operating and financial
condition of our company, our capital requirements and general business
conditions. Therefore, there can be no assurance that any dividends on our
common stock will be paid in the future.
COMMON STOCK ELIGIBLE FOR FUTURE SALE.
If our shareholders sell substantial amounts of the common stock in the
public market following this offering, the prevailing market price of the common
stock could decline, as well as our ability to raise equity capital in the
future. Upon the closing of this offering and assuming all shares of common
stock available for sale herein are sold, we will have outstanding an aggregate
of 11,845,689 shares of common stock (including the common stock being offered
herein). All of the common stock sold in this offering will be freely tradeable
without restriction and other shares of our common stock will be eligible for
sale in the public market as follows:
19
Number of Shares Nature of Shares When Available For Sale
- ----------------- ---------------------------------------------- --------------------------
1,833,189 On October 1994, Ream Paper Printing Stock is currently freely
Corp. (now Single Source Financial tradeable without
Services Corporation) in exchange for restriction on transfer or
receiving certain assets from Active resale.
Science Systems, Inc. issued 10,999,133
shares of our common stock directly to our
shareholders as part of a 504 offering under
Regulation "D".
On September 19, 1994, Ream Paper Corporation
(now Single Source Financial Services
Corporation) was incorporated in New York.
In October, 1994, in exchange for receiving
certain assets from Active Science Systems,
Inc., Ream issued 10,990,113 shares of its
common stock to the shareholders of Active
Science Systems, Inc., on a pro rata basis.
The exchange was accomplished under Rule 504
of Regulation D which permitted the issuance
the 10,990,113 shares without restriction on
transfer or resale. Furthermore, the Ream
Paper stock was spun off to all shareholders
of Active Science Systems, Inc. on a pro rata
basis.
Pursuant to a reverse stock split in 2000,
the remaining 1,833,189 shares of common
stock from the spin-off are free trading.
8,887,500 Shares acquired on purchase of Single Restriction on Shares may
Single Source Electronic Transactions, be removed in
Inc. and not registered in this offering. accordance with the
provisions of Rule 144.
Item 13. Interest of Named Experts and Counsel.
No "expert", as that term is defined pursuant to Section 228.509(a) of
Regulation S-B, or Single Source Financial Services Corporation's "counsel", as
that term is defined pursuant to Section 228.509(b) of Regulation S-B, was hired
on a contingent basis, or will receive a direct or indirect interest in our
company, or was a promoter, underwriter, voting trustee, director, officer or
employee of our company, at any time prior to the filing of this registration
statement.
Item 14. Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.
Article VI of our Articles of Incorporation and Article IV of our Bylaws
include provisions eliminating the personal liability of our directors and
officers to us and to our shareholders for damages for breach of fiduciary duty
as a director or officer. Accordingly, the Articles of Incorporation provide
that our directors may have no liability to our shareholders for any mistakes or
errors of judgment or for any act of omission, unless any act or omission
involves intentional misconduct, bad faith, a knowing violation of law or a
personal financial gain or other advantage. The Bylaws provide that the
directors and officers may have no personal liability unless finally adjudicated
to be liable for negligence or misconduct in the performance of duty.
20
It is the opinion of the Securities and Exchange Commission that corporate
officers and directors may not be indemnified for liabilities arising from
securities law violations. We have been informed of the position of the
Securities and Exchange Commission that any indemnification is against public
policy as expressed in the securities act of 1933 and is, therefore,
unenforceable.
Item 15. Organization Within Last Five Years.
In October 1994, in exchange for receiving certain assets from Active
Science Systems, Inc., we issued 10,990,133 shares of our common stock directly
to our shareholders.
Ream Paper Printing Corp. was spun off. The 10,999,133 shares of common
stock was then exchanged on a pro rata basis with the shareholders for their
stock in the parent company. The exchange was accomplished under Rule 504 of
Regulation D promulgated under the Securities Act of 1933 and a Form D was filed
with the Securities and Exchange Commission. Under the then effective law, this
stock was issued without any restriction on resale or transfer.
Pursuant to a reverse stock split in late 2000, the remaining 1,833,189
shares of common stock are free trading.
On November 7, 2000, we purchased 100% of the issued and outstanding stock
of Single Source Electronic Transactions, Inc. for 10,012,500 shares of our
restricted common stock. The acquisition was made in order to permit us to
acquire the financial electronic transaction business of Single Source
Electronic Transactions, Inc. Our stock was distributed to the shareholders of
Single Source Electronic Transactions, Inc. on a pro rata basis. For a
breakdown of the stock, please see the chart contained below:
Name of Shareholder Number of Shares of Single Source Financial Services
------------------- ----------------------------------------------------
Corporation Common Stock
--------------------------
(a) Baki Arbria 500,000
(b) Brandon Becker 2,935,414
(c) Kendra Becker 800,000
(d) Martin Becker 200,000
(e) Pamela Becker 817,362
(f) Lorraine Dorsey 250,000
(g) Mara Gorodezky 125,000
(h) Arlene Rosenblatt 1,317,362
(i) Julie Rosenblatt 800,000
(j) Sid Rosenblatt 200,000
(k) Arnold F. Sock, Esq. 1,303,704
(l) Leona Sock 131,829
(m) Michael Sock 381,829
(n) Harry L. Wilson 250,000
------------
10,012,500
21
In this regard, it should be noted that Brandon Becker, Kendra Becker,
Martin Becker, and Pamela Becker are immediate family members. It should also
be noted that Sid Rosenblatt, Julie Rosenblatt and Arlene Rosenblatt are
immediate family members. Arnold F. Sock, Michael Sock, and Leona Sock are also
immediate family members.
We have no parent companies and other than Single Source Electronic
Transactions, Inc., we have no subsidiaries.
Additional information about certain relationships and related transactions
is provided more completely under the portion of this prospectus entitled
"Certain Relationships and Related Transactions" at Item 19 below.
Item 16. Description of Business.
(a) Business Development.
---------------------
We are a New York corporation which was incorporated on September 19, 1994
under the name Ream Printing Paper Corp. On October 18, 2000, the Board of
Directors voted to change the name of our corporation to Single Source Financial
Services Corporation which name change took place in late 2000.
We have never been in bankruptcy, receivership, or any similar proceeding.
On November 7, 2000, we acquired Single Source Electronic Transactions,
Inc., a Nevada corporation for 10,012,500 shares of our common stock. Prior to
the acquisition, we had not engaged in any business for a number of years.
Single Source Electronic Transactions, Inc. was formed in January, 1998,
and commenced operation in California in January, 2000. Although we have
operated at a loss to date, Single Source Electronic Transactions, Inc.'s
business has expanded and management believes that Single Source Electronic
Transactions, Inc. will become profitable after approximately three months due
to the continued expansion of the business in sales volume and geographic
coverage.
The purchase of Single Source Electronic Transactions, Inc. was our initial
acquisition and we believe it to be a material acquisition. Single Source
Electronic Transactions, Inc. is an independent sales organization which sells
and leases electronic transaction equipment to merchants. These merchants have
no direct relationships with any processors, which are in the business of
processing credit card transactions for the merchants. Based upon our
acquisition of Single Source Electronic Transactions, Inc., we, through Single
Source Electronic Transactions, Inc., sell and lease all types of financial
electronic transaction equipment to merchants and offer the merchants access to
electronic processing of these transactions. In the event that the merchant
elects to acquire the equipment through a lease transaction, Single Source
22
Electronic Transactions, Inc. sells the lease to an equipment leasing company at
a discounted rate. The leases are generally four year leases which require the
merchant to make a down payment and make monthly payments to the leasing
company. At the end of the term, the merchant has the option to (a) return the
equipment; (b) buy the equipment for 10% of the lease cost; or (c) continue to
lease the equipment. Most merchants either purchase the equipment outright or
return it at the end of the lease term. Although Single Source Electronic
Transactions, Inc. has been operating since January, 2000, we have only been
involved in the operation of the Single Source Electronic Transactions, Inc. for
a relatively short period of time. During that period, we have attempted to
improve profitability by (a) cutting back on overhead; (b) avoiding lease
transactions to non-creditworthy merchants since the transactions cannot be
completed; (c) locate the various compatible products for sale to the merchants;
and (d) increase salesperson productivity. Salesperson productivity is being
improved by cutting back on salesperson's draws and by terminating
non-productive salesmen. We have also attempted to increase Single Source
Electronic Transactions, Inc.'s sales products by adding offices and by
acquiring other independent sales offices throughout the United States.
Generally, the cost of the acquisition is minimal given many independent sales
offices wish to work for larger organizations with better sales backup, sales
volume, and benefits.
Based upon the Single Source Electronic Transactions, Inc. acquisition, we
have rented several offices located in Los Angeles, California, Mission Hills,
California, Irvine, California, San Diego, California, Houston, Texas,
Providence, Rhode Island, and Denver, Colorado. We have also acquired an
independent contractor who is selling for us in Virginia. Thus, as a result of
the acquisition, we currently have approximately twenty-five (25) employees who
are managers and administrative personnel responsible for the individual offices
and our company as a whole and approximately seventy (70) independent
contractors who are responsible for selling our products directly to individual
merchants. The independent contractors are commissioned while our employees are
salaried. As of this time, we are considering closing the Mission Hills.
We continue to operate as an independent sales organization in that we do
not have a formal relationship with any specific processor. Single Source
Electronic Transactions, Inc. is the first and only business which we have
operated during the past three years.
(b) Business of Issuer.
--------------------
At the current time, our exclusive business is the sale and lease of
various types of financial electronic transaction equipment to merchants and the
offer to merchants of access to electronic processing of these transactions.
However, in those cases where a merchant elects to lease equipment, Single
Source Electronic Transactions, Inc. sells the lease to an equipment leasing
company. We offer processing services through 1st National Processing, a third
party processor and other processors depending on merchant type. With respect
to those accounts which we refer to 1st National Processing and other
processors, we receive a small residual stream of payments. These payments
constitute a small percentage of the fees generated on the business sent to the
processor by those customers we refer to the processor, and are called a
"residual" portfolio.
We operate by causing our independent contractors to contact merchants in
order to sell or lease to the merchants equipment to perform financial
electronic transactions including credit and debit card transactions. We carry
a number of different brands of electronic transaction processing equipment and
sell and lease the equipment at prices ranging from $500.00 to $2,500.00
depending on the price of equipment being sold or released. We also offer
electronic transaction processing services to our equipment buyers or lessees
through 1st National Processing and other processors in order to permit them to
process the customer's electronic transactions.
23
We offer a wide variety of electronic transaction processing equipment to
merchants including credit card processing equipment, debit card processing
equipment, smart cards, ATMs, electronic check verification services, and
internet web sites capable of taking credit cards, debit cards, and checks. In
addition, we offer, through 1st National Processing and other processors, what
we believe to be the lowest transaction processing fee available.
Basically, a credit or debit card electronic transaction is done as
follows: The card is swiped through a terminal at the merchant's facility and
an amount of purchase is punched in. Thereafter the card and transaction
information is electronically transmitted to a third party processor. The
processor sends the information to a database network to verify that the card is
not listed as stolen, lost, altered or otherwise invalid. If the card is valid,
the third party processor then elects to process the transaction or forward it
to a larger processor for processing. The election is made based on the
transaction amount, type of merchant, and whether the card was used at the
terminal or the card information was orally provided (e.g., telephone order).
Next, the processor contacts the card issuer's bank (issuing bank) to see if
there is sufficient credit available on the card account to allow the
transaction to be approved. If the transaction is approved the issuing bank
sends the funds due to the processor's bank (settlement bank). The settlement
bank then deducts the processor's fees, placing them in the processor's account,
and forwards the balance to the merchant's bank (receiving bank). These
transactions are almost instantaneous and allow for the prompt exchange of
funds.
Additionally, after the transaction is completed, a portion of the funds
collected by the processor are paid to the independent sales offices as a
residual. Although the residual per transaction is very small, due to a large
number of transactions, the residual can increase in value substantially. For
example, Single Source Electronic Transactions, Inc.'s current residual for 1st
National Processing is about 15% of the amount received by the processor.
Since we have taken over the Single Source Electronic Transactions, Inc.
business, there has been no publicly announced new product or service.
Likewise, there is no major customer since the customer base is fairly broad.
The business does not utilize raw materials. The business purchases equipment
for resale and lease and this equipment is readily available. Our major
suppliers are CrossCheck, Inc. for check guarantee equipment, Talento for EFT
Terminals, MAGTEK for MICR Check Readers, TASQ for ATMs, and similar dealers for
other related equipment.
We have no patents, trademarks, licenses, franchises, concessions,
royalties or labor contracts. However, we intend to develop and trademark an
appropriate corporate logo over the next few months.
Although electronic transaction processing is regulated through the banking
industry, the independent sales office business is not currently regulated by
any governmental entity. We are aware of no environmental law issues in
connection with our company's operations.
24
We are aware of no current attempts to impose governmental regulation on
our current business. Therefore, we are unable to predict in any meaningful way
what regulation, if any, would be imposed and what effect it would have upon us.
However, management believes that it would be able to comply with all
regulations and that to the extent these regulations cause certain companies to
cease operations, it would improve our competitive position.
Although the electronic financial transaction industry is relatively new,
it has generated a good deal of interest since it permits merchants to obtain
prompt payment for their sales of goods and services at a relatively small
price. As a result thereof, the business is very competitive and there are
thousands of companies seeking to sell these services or to process these
transactions. We believe that we have an edge over many of our competitors
because we have an extremely wide variety of electronic transaction methods
available to our customers and because we offer what we believe to be the lowest
transaction processing fees in the United States through 1st National
Processing. The diversity in transaction processing methods is important since
we carry a wide variety of equipment and we will generally carry all of the
different types of equipment a customer desires.
(c) Reports to Security Holders.
------------------------------
As of this time, we are not required to deliver any annual reports to our
security holders. However, commencing on October 31, 2001, we intend to do so
voluntarily. Management currently intends that these reports will include
audited financial statements.
We are not yet a reporting company. However, after this Registration
becomes effective, we intend to file all of the required quarterly and annual
reports.
Our web site is located at www.ssetonline.com. This web site explains the
services we currently offer. Our toll free telephone number is (888) 262-1600.
Item 17. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(a) Plan of Operation.
-------------------
During the next 12 months, we intend to expand the current operations of
Single Source Electronic Transactions, Inc. by opening and developing new
offices in various additional parts of the United States. In order to open a
new office, Single Source Electronic Transactions, Inc., must lease space, hire
and train management for the office and hire and train independent contractors
to sell our products to merchants. We believe that the cost of opening an
office is approximately $25,000 to $50,000. This includes maintaining a small
inventory of equipment and waiting for the generation of sales after the office
is opened. It is anticipated that as each office is open, Single Source
Electronic Transactions, Inc. will add 2 to 5 management employees and 5 to 15
independent contractor salesmen. This cost can be minimized by hiring
experienced management and sales staff in the various locations where Single
Source Electronic Transactions, Inc. desires to open its offices. Historically,
we have expanded the business and covered operating deficits by borrowing, and
repaying, funds from existing major shareholders. We anticipate that we will
continue to borrow money from major shareholders over the next six (6) months.
25
We are always looking for compatible new equipment, new brands and types of
electronic transaction materials to market to our customers. For example, we
have recently located inexpensive flash web sites for sale to customers and
Single Source Electronic Transactions, Inc. is currently offering them for sale.
We do not anticipate adding any significant plant or equipment. Nor do we
anticipate engaging in any product research and development.
However, we are currently considering the possible acquisition of an
electronic transaction processor. We believe that the acquisition of a
processor will enable us to maximize the income from those merchants which it
signs for processing. Management also believes that it can acquire a small to
mid-size processor for our common stock and approximately $1,000,000 in cash
depending upon the processor. This will enable us to obtain income from
processing transactions, which can be referred to our processor by independent
sales offices, in addition to those owned by Single Source Electronic
Transactions, Inc. However, there can be no assurance that we will acquire a
processor during the next 12 months, or at all.
In addition, we would also consider the acquisition of any other
complimentary financial services business which may be presented to us.
However, there can be no assurance that any business opportunity will be
presented to us, or that if any opportunity is presented to us, we will be able
to acquire the business on terms acceptable to us.
(b) Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------
Results of Operations.
- -----------------------
During the past 2 years, we have had no business operations and there have
been no changes in our financial condition until November 7, 2000. On November
7, 2000, we acquired Single Source Electronic Transactions, Inc. for 10,012,500
shares of our common stock. However, we have not operated Single Source
Electronic Transactions, Inc. for a sufficient time to enable these operations
to present sufficient data for any meaningful analysis of the issues being
presented in this Item 17(b).
Since we have engaged in virtually no business activity during the two year
period, we have had little need of funds and, in fact, have had limited
financial resources. To the extent that we have required funds for our own use
or for the use of Single Source Electronic Transactions, Inc., we have borrowed
funds from our shareholders.
However, Single Source Electronic Transactions, Inc., has been operating
for more than 14 months and we have operated it since November 7, 2000.
Management currently believes that we will have four distinct sources of funds
available to it during the next 12 months.
First, Single Source Electronic Transactions, Inc. should generate profit
from its sales and leasing of electronic transaction equipment to merchants.
As time passes, Single Source Electronic Transactions, Inc. will continue to
expand and the amount of revenue generated through its primary sales activities
should also continue to expand. In addition, management believes that as Single
Source Electronic Transactions, Inc. expands and its sales increase, its
percentage overhead will correspondingly decrease.
26
Second, Single Source Electronic Transactions, Inc. should generate income
from its residual steam. When an independent sales office, such as Single
Source Electronic Transactions, Inc., refers a customer to a processor of
electronic transactions and the customer uses that processing company to process
its transactions, the independent sales office receives a certain minor portion
of the processing fees which is called a "residual" portfolio. The residual is
paid each month and is maintained as an off balance sheet item. Additionally,
independent sales offices and processors periodically sell their residual
portfolio to others. In January, 2001, Single Source Electronic Transactions,
Inc. sold its residual portfolio for $426,000. As Single Source Electronic
Transactions, Inc. continues to expand its business, its residual portfolio will
increase correspondingly.
Third, we are continuing to look for additional products which can be sold
by Single Source Electronic Transactions, Inc. One product which we recently
discovered is flash web sites which can be sold to merchants for a relatively
small amount.
Fourth, we believe that we should be able to continue to borrow funds from
our shareholders for our use or for that of Single Source Electronic
Transactions, Inc. However, we anticipate that the need for shareholder
borrowing will decrease substantially over the next 12 months.
One trend which management also believes will impact our liquidity is that
Single Source Electronic Transactions, Inc. is receiving an increasing number of
customer referrals from 1st National Processing in exchange for referring the
processing business. The management anticipates that this will not only result
in a greater sales volume but also in a larger amount of residuals generated.
Additionally, although management believes that Single Source Electronic
Transactions, Inc. will continue to expand its operations and increase its
revenue under Single Source Financial Services Corporation, there is uncertainty
since we have only been involved with Single Source Electronic Transactions,
Inc. for a very short time.
Furthermore, neither we nor Single Source Electronic Transactions, Inc.
have any material commitment. Although we anticipate expansion and acquisitions
of other businesses, there are no existing commitments that require us to do so.
Although our business is not seasonal in nature, the residuals tend to be
larger during the holiday season because there are a greater number of consumer
transactions.
In short, we have limited short term liquidity since we have limited
operations. However, due to the anticipated increased long term liquidity of
Single Source Electronic Transactions, Inc., management believes that we should
be able to maintain substantial long term liquidity as Single Source Electronic
Transactions, Inc. expands and additional acquisitions are made.
Single Source Electronic Transactions, Inc., is currently generating
sufficient revenue to enable it to maintain and to expand its operations. Thus,
its current short term liquidity appears adequate to satisfy its current
financial needs. In addition, as Single Source Electronic Transactions, Inc.
continues to expand its operations and its need for expansion capital decreases,
its liquidity should expand.
27
Item 18. Description of Property.
We do not own any real estate or any other significant property. However,
we do lease an office located at 10780 Santa Monica Blvd., Suite 240, Los
Angeles, California 90025. Single Source Electronic Transactions, Inc. also
uses a portion of the office.
Furthermore, Single Source Electronic Transactions, Inc. does not own any
real estate or any other significant property. However, Single Source
Electronic Transactions, Inc. does lease the following offices:
1. San Diego Office, 11440 West Bernardo Court, Suite 30, San Diego,
California 92127;
2. Mission Hills Office, 15545 Devonshire Street, Suite 200, Mission
Hills, California 91345;
3. Orange County Office, 17900 Skypark Circle, Suite 230, Irvine,
California 92614;
4. Rhode Island Office, One Davol Square, Suite 9, Providence, Rhode
Island 02903;
5. Denver Office, 707 Seventeenth Street, Suite 2972, Denver, Colorado
80202; and
6. Houston Office, 1000 F.M. Road, Suite 206, Houston, Texas 77090.
Item 19. Certain Relationships and Related Transactions.
On November 7, 2000, we purchased 100% of the issued and outstanding stock
of Single Source Electronic Transactions, Inc. for 10,012,500 shares of our
restricted common stock. The acquisition was made in order to permit us to
acquire the business of Single Source Electronic Transactions, Inc. The
10,012,500 shares of our common stock was then distributed to the shareholders
of Single Source Electronic Transactions, Inc. on a pro rata basis. For a
breakdown of the stock distribution, please see the chart contained in response
to Item 15.
In this regard, it should be noted that Brandon Becker, Kendra Becker,
Martin Becker, and Pamela Becker are immediate family members of each other. It
should also be noted that Sid Rosenblatt, Julie Rosenblatt and Arlene Rosenblatt
are immediate family members of each other. Finally, Arnold F. Sock, Esq.,
Michael Sock, and Leona Sock are also immediate family members of each other.
Item 20. Market for Common Equity and Related Stockholder Matters.
(a) Market Information.
-------------------
28
Our common stock is not currently being traded on any public trading market
or markets. The common stock is our only class of security.
At the current time, there are 1,833,189 issued and outstanding shares of
common stock which have no restriction on transfer or resale in accordance with
a Rule 504 reorganization. Through this offering, we propose to register
1,125,000 additional shares of common stock in the hands of certain
shareholders. Subject to this offering becoming effective, there will be
2,958,189 shares of common stock eligible for trading.
The remaining 8,932,500 shares of common stock issued to acquire Single
Source Electronic Transactions, Inc. is restricted stock. The restriction on
the transfer of this stock may be removed in accordance with the safe harbor
contained in Rule 144. Rule 144 provides that after their stock is held for one
year, the holding shareholder may sell the greater of 1% of the number of shares
of our issued and outstanding stock or the average number of shares sold per
week over the prior 3 weeks through a broker-assisted public transaction in each
fiscal quarter. However, this requires that we be current in our required
financial reporting and if we are not current in our financial reporting, the
restriction on transfer on our common stock may not be removed under Rule 144.
The same number of shares may be sold in each succession quarter until the
holding shareholder has sold all his/her stock. Furthermore, after the stock
has been held for 2 years, all remaining stock of the holding shareholder may be
sold unless the shareholder is one of our officers, directors, or five percent
(5%) shareholders. Thus, within the next year, all of the 8,932,500 restricted
shares will be eligible for sale under Rule 144.
(b) Holders.
-------
At the current time, there are approximately 1,400 shareholders of our
common stock.
(c) Dividends.
---------
To date, no cash dividends have been issued. It is not anticipated that
any cash dividends will be issued in the foreseeable future. Management is
aware of no restriction on its ability to pay dividends on the common stock.
Item 21. Executive Compensation - Remuneration of Directors and Officers.
During our last completed fiscal year, ended October 31, 2000, no
compensation was awarded to, earned by or paid to any of our officers or
directors, although compensation may be paid in the future.
Monetary compensation of $150,000 per year is to be paid to William Graham,
President of Single Source Electronic Transactions, Inc., the business acquired
by us on November 7, 2000. Mr. Graham will also be paid the cost of leasing a
2000 Lincoln, the monthly cost of a cell phone and the cost of his health
benefits.
29
We have not entered into any employment contracts or any compensatory plan
or arrangement with any of our officers or directors or with any officer or
director of Single Source Electronic Transactions, Inc. except for William
Graham.
Item 22. Financial Statements.
Index to Financial Statements and Financial Statements appear hereinafter.
Item 23. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
There have been no changes in or disagreements with our accountants as
required to be disclosed pursuant to Section 228.304 of Regulation S-B.
However, we changed our accountants in the Fall of 2000, from Rotenberg &
Company, LLP, located in Rochester, New York, to Jonathon P. Reuben, C.P.A., an
accountancy corporation, Torrance, California. The sole purpose for the change
was to enable us to employ and utilize an accounting firm closer to our main
office geographically.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
has been passed upon by Washor & Associates, Los Angeles, California.
EXPERTS
The financial statements of Single Source Financial Services Corporation
for the fiscal year ended October 31, 1999 appearing in this prospectus and
registration statement have been included herein in reliance on the report of
Rotenberg & Company, LLP, Certified Public Accountants, given on the authority
of that firm as experts in accounting and auditing. Financial statements of
Single Source Electronic Transactions, Inc. with a ten (10) month ending October
31, 2000 appearing in this prospectus and registration statement have been
included herein in reliance on the report of Jonathon P. Reuben, C.P.A., an
accountancy corporation, given on the authority of that firm as experts on
accounting and auditing.
ADDITIONAL INFORMATION
We will be subject to certain informational requirements of the Exchange
Act, and, in accordance therewith, will file reports and other information with
the Securities and Exchange Commission. These reports and other information can
be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington D.C.
20549 or at regional offices of the Securities and Exchange Commission at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and
Seven World Trade Center, New York, New York 10048. Copies of these materials
can be obtained at prescribed rates from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Securities and Exchange Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission. The address of this site is http://www.sec.gov. The telephone
-------------------
number for the Securities and Exchange Commission is 1-800-SEC-0330.
30
We have filed a registration statement on Form SB-2 relating to the
securities offered in this offering with the Securities and Exchange Commission.
The prospectus does not contain all of the information set forth in that
registration statement. For further information with respect to us and to the
securities offered in this offering, you may review that registration statement,
including the exhibits thereto. Statements contained in this prospectus as to
the content of any contract or other document referred to in this prospectus are
not necessarily complete and in each instance reference is made to the copy of
any contract or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by reference thereto.
31
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security offered by this Shares prospectus, or an offer to sell
or a solicitation of an offer to buy any security, by any person in any
jurisdiction in which any offer or solicitation would be unlawful. Neither the
delivery of this prospectus nor any sale made hereunder shall under any
circumstances, imply that the information in this prospectus is correct as of
any time subsequent to the date of this prospectus.
TABLE OF CONTENTS
Page
----
Summary Information and Risk Factors . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . .11
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . .17
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 19
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . . .20
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . . . . . . . . . . . 20
Organization Within Last Five Years . . . . . . . . . . . . . . . . . . . 21
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Certain Relationships and Related Transactions . . . . . . . . . . . . . .28
Market for Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Executive Compensation - Remuneration of
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . 30
Indemnification of Directors and Officers . . . . . . . . . . . . . . . . 33
Other Expenses of Issuance and Distribution . . . . . . . . . . . . . . .34
Recent Sales of Unregistered Securities . . . . . . . . . . . . . . . . . 34
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Until _______, 2001 (___ days from the date of this prospectus), all persons
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
SINGLE SOURCE FINANCIAL SERVICES
CORPORATION
1,125,000 Shares of Common Stock
_______________________
PROSPECTUS
_______________________
___________, 2001
32
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article Six of our Articles of Incorporation eliminates the personal
liability of the directors to the company or the shareholders for damages for
any breach of duty. Personal liability is not eliminated if a judgment or other
final adjudication adverse to the director establishes that his acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit or
other advantage to which he was not legally entitled or that he violated certain
provisions of New York law. The provisions of New York establish director
liability for voting for or concurring in the declaration of improper dividends,
improper purchases of our common stock, certain improper distributions of assets
to shareholders and improper loans.
Article Six of our Bylaws provide that the company will indemnify officers
and directors except in relation to matters as to which they shall be finally
adjudicated to be liable for negligence or misconduct in the performance of
duty.
Indemnification Agreements. We anticipate entering into indemnification
agreements with each of our directors and executive officers pursuant to which
we shall indemnify each director and officer for all expenses and liabilities,
including criminal monetary judgments, penalties and fines, incurred by each
director or officer in connection with any criminal or civil action brought or
threatened against any director or officer for being or having been an executive
officer or director of the company, to the extent allowed by applicable law and
the charter documents.
Director and Officer Liability Insurance. At some time in the future we
may obtain director and officer liability insurance which could provide coverage
against certain securities laws violations.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the company
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission any indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against any
liabilities (other than our payment of expenses incurred or paid by a director,
officer or controlling person of the company in the successful defense of any
action, suit or proceeding) is asserted by any director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether any
indemnification by it is against public policy as expressed in the 1993 Act and
will be governed by the final adjudication of any issue.
33
Item 25. Other Expenses of Issuance and Distribution.
We will pay all expenses in connection with the registration of the common
stock and no other expenses. The estimated expenses of issuance and
distribution are set forth below.
Registration Fee Approximately $ 1,237.50
Legal Fees Approximately $ 35,000.00
Accounting Fees Approximately $ 7,000.00
Administrative Expenses Approximately $ 6,762.50
-----------
Total $ 50,000.00
Item 26. Recent Sales of Unregistered Securities.
During the past 3 years, we have only issued unregistered securities on one
occasion. On November 7, 2000, we issued 10,012,500 shares of common stock for
all of the issued and outstanding stock of Single Source Electronic
Transactions, Inc., a Nevada corporation. Single Source Electronic Transactions
is seeking to register 1,125,000 shares of that stock in this Offering. No
other stock has been issued during the past 3 years.
Item 27. Exhibit Index.
Copies of the following documents are filed with this registration
statement, Form SB-2, as exhibits:
Exhibit No.
- -----------
1 Underwriting Agreement (Not Applicable)
2 Plan of Merger (Not Applicable)
3.1 Articles of Incorporation
3.2 Certificate of Amendment of the Certificate of Incorporation
3.3 Bylaws
4 Instruments Defining Rights (Not Applicable)
5.1 Securities Opinion of Washor & Associates Regarding Legality of
Securities Being Registered
8 Opinion Re: Tax Matters (Not Applicable)
9 Voting Trust Agreement (Not Applicable)
34
10.1 Stock Purchase Agreement
11.1 Computation of Per Share Earnings
15 Letter on Unaudited Interim Financial Information (Not Applicable)
16 Letter on Change in Certifying Accountant (Not Applicable)
21.1 List of the Registrant's Subsidiaries
23.1 Consent of Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Powers of Attorney (appears on signature page in Part II of the
registration statement)
25 Statement of Eligibility of Trustee (Not Applicable)
26 Invitations For Competitive Bids (Not Applicable)
35
Item 28. Undertakings.
A. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
any indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against any liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by any
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether any indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of any issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) deemed to be the initial bona fide offering thereof.
(2) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Los Angeles, California on the 23rd day of January, 2001.
SINGLE SOURCE FINANCIAL SERVICES
CORPORATION
By: /s/ Arnold F. Sock
-------------------------------
Arnold F. Sock, President
POWER OF ATTORNEY
Each of the undersigned hereby authorizes Arnold F. Sock as his
attorney-in-fact to execute in the name of each person and to file any
amendments (including post-effective amendments) to this Registration Statement
as the Registrant deems appropriate and appoints such person as attorney-in-fact
to sign on his behalf individually and in each capacity stated below and to file
all amendments, exhibits, supplements and post-effective amendments to this
Registration Statement.
36
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated:
Signature Title Date
--------- ----- ----
/s/ Arnold F. Sock President and Director January 23rd, 2001
- ------------------------ (Principal Executive Officer)
Arnold F. Sock
/s/ Harry L. Wilson Chief Financial Officer January 23rd, 2001
- ------------------------ Secretary and Director
Harry L. Wilson
/s/ Brandon Becker Vice President and Director January 23rd, 2001
- ------------------------
Brandon Becker
/s/ Pamela Becker Director January 23rd, 2001
- ------------------------
Pamela Becker
/s/ Arlene Rosenblatt Director January 23rd, 2001
- ------------------------
Arlene Rosenblatt
37
INDEX TO FINANCIAL STATEMENTS
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
(formerly REAM PRINTING PAPER CORP.)
FISCAL YEAR ENDED OCTOBER 31, 1999
and FISCAL YEAR ENDED OCTOBER 31, 2000
Page
Table of Contents For Audited Financial Audited
Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Independent Auditor's Report of Jonathon P. Reuben . . . . . F-3
Independent Auditor's Report of Rotenberg & Company, LLP . . F-4
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Operations . . . . . . . . . . . . . . . . . . F-6
Statement of Stockholders' Equity (Deficit). . . . . . . . . F-7
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-8
Notes to Financial Statements of Single Source
Financial Services Corporation (Formerly Ream
Printing Paper Corp.). . . . . . . . . . . . . . . . . . . . F-9
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
FISCAL YEAR ENDED OCTOBER 31, 1999
and FISCAL YEAR ENDED OCTOBER 31, 2000
Table of Contents For Audited Financial Audited
Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Independent Auditors' Report . . . . . . . . . . . . . . . . F-11
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-12
Statements of Operations . . . . . . . . . . . . . . . . . . F-13
Statement of Stockholders' Equity (Deficit). . . . . . . . . F-14
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-15
Notes to Financial Statements of Single Source
Electronic Transactions, Inc.. . . . . . . . . . . . . . . . F-16
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
(formerly REAM PRINTING PAPER CORP.)
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma Combined Financial Data. . . . . . . . . . . . . . F-17
Unaudited Pro Forma Combined Statement of Operations . . . . F-18
Unaudited Pro Forma Combined Balance Sheets. . . . . . . . . F-19
REAM PAPER PRINTING CORP.
(A Development Stage Company)
(A New York Corporation)
Rochester, New York
TABLE OF CONTENTS
Independent Auditor's Report of Jonathon P. Reuben . . . . . F-3
Balance Sheet at October 31, 2000. . . . . . . . . . . . . . F-4
Statement of Operations and Deficit Accumulated During
the Development Stage . . . . . . . . . . . . . . . . . . F-5
Statements of Stockholders' Deficit. . . . . . . . . . . . . F-6
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . F-7
Notes to Financial Statements. . . . . . . . . . . . . . . . F-8
F-2
Independent Auditors' Report
Board of Directors
Single Source Financial Services Corporation
Los Angeles, California
We have audited the accompanying balance sheets of Single Source Financial
Services Corporation, formerly Ream Printing Paper Corp., (A Development Stage
Company) as of October 31, 2000 and 1999, and the related statements of
operations and deficit accumulated during the development stage, stockholders'
deficit., and cash flows for the two years ended and for the period from
inception (September 19, 1994) through October 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Single Source Financial
Services Corporation as of October 31, 2000 and 1999, and the results of its
operations and its cash flows for the two years ended and for the period
from inception (September 19, 1994) through October 31, 2000.
/s/ Jonathon P. Reuben C.P.A.
Jonathon P. Reuben, C.P.A.
An Accountancy Corporation
Torrance. California
January 31, 2001
F-3
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
FORMERLY REAM PRINTING PAPER CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS-Restated
OCTOBER 31,
--------------------
2000 1999
--------- ---------
Restated Restated
ASSETS
Current Assets $ - $ -
Other Assets
Investment in marketable securities, at cost 10,999
--------- ---------
TOTAL ASSETS $ - $ 10,999
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Franchise taxes payable $ 100 $ 1,515
Accrued expenses - 1,170
--------- ---------
TOTAL CURRENT LIABILITIES 100 2,685
--------- ---------
STOCKHOLDERS' DEFICIT
Common Stock, $.001 par value, 100,000,000
shares authorized, 1,833,189 shares issued
and outstanding October 31, 2000 and 1999 1,833 1,833
Additional Paid-in Capital 12,298 20,165
Deficit Accumulated During the Development Stage (14,231) (13,684)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (100) 8,314
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ - $ 10,999
========= =========
F-4
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
FORMERLY REAM PRINTING PAPER CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATION AND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE
DEFICIT
FOR THE YEAR ENDED ACCUMULATED
OCTOBER 31, DURING THE
2000 1999 DEVELOPMENT STAGE
----------- ----------- -------------------
Restated Restated Restated
REVENUE $ - $ - $ -
OPERATING EXPENSES
General and administrative expenses (547) (55) (14,231)
----------- ----------- -------------------
NET LOSS $ (547) $ (55) $ (14,231)
=========== =========== ===================
BASIC LOSS PER SHARE $ (0.0003) $ (0.0000)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,833,189 1,833,189
=========== ===========
F-5
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
FORMERLY REAM PRINTING PAPER CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT - Restated
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
----------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE
--------- ------- --------- ---------
BALANCE - SEPTEMBER 19, 1994 - $ - $ - $ -
Adjustment to Give Effect to Recapitlization -
October 3, 1994 1,833,189 1,833 9,166 -
Donated Capital - - 10,999 -
Net loss from inception (September 19, 1994) through
October 31, 1994 - - - (10,999)
--------- ------- --------- ---------
Balance - October 31, 1994 1,833,189 1,833 20,165 (10,999)
Distribution to shareholders of securities in closely held companies - - - -
Net Loss for the Year Ended October 31, 1995 - - - (349)
--------- ------- --------- ---------
Balance - October 31, 1995 1,833,189 1,833 20,165 (11,348)
Net Loss for the Year Ended October 31, 1996 - - - (333)
--------- ------- --------- ---------
Balance - October 31, 1996 1,833,189 1,833 20,165 (11,681)
Net Loss for the Year Ended October 31, 1997 - - - (325)
--------- ------- --------- ---------
Balance - October 31, 1997 1,833,189 1,833 20,165 (12,006)
Net Loss for the Year Ended October 31, 1998 - - - (1,623)
--------- ------- --------- ---------
Balance - October 31, 1998 1,833,189 1,833 20,165 (13,629)
Net loss for the year ended October 31, 1999 - - - (55)
--------- ------- --------- ---------
BALANCE - OCTOBER 31, 1999 1,833,189 1,833 20,165 (13,684)
Donated Capital - - 3,132 0
Property distributed to shareholders - - (10,999)
Net loss for the year ended October 31, 2000 - - - (547)
BALANCE - OCTOBER 31, 2000 1,833,189 $ 1,833 $ 12,298 ($14,231)
========= ======= ========= =========
F-6
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
FORMERLY REAM PRINTING PAPER CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
ACCUMULATED
FOR THE YEAR ENDED DEFICIT
OCTOBER 31, DURING THE
2000 1999 DEVELOPMENT STAGE
--------- ------ -------------------
Restated Restated Restated
CASH FLOWS FROM OPERATING ACTIVITIES $ (547) $ (55) $ (14,231)
Net income (loss)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Increase (Decrease) in Liabilities
Increase (decrease) in franchise tax payable (1,415) - (100)
Increase (decrease) in accrued expenses (1,170) - -
-------- ------ -------------------
NET CASH USED IN OPERATING ACTIVITIES (3,132) (55) (14,331)
-------- ------ -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Expenses paid by shareholders' 3,132 55 14,331
-------- ------ -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,132 55 14,331
-------- ------ -------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - - -
BEGINNING BALANCE - CASH AND CASH EQUIVALENTS - - -
-------- ------ -------------------
ENDING BALANCE - CASH AND CASH EQUIVALENTS $ - $ - -
======== ====== ===================
SUPPLEMENTAL INFORMATION:
CASH PAID FOR:
Interest Expense $ - $ -
======== ======
Income Taxes $ - $ -
======== ======
F-7
NOTES TO FINANCIAL STATEMENTS OF
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
(Formerly Ream Printing Paper Corp.)
NOTE 1 - ORGANIZATION
Ream Printing Paper Corp. (the "Company") was incorporated in New York on
September 19, 1994. In October 1994, in exchange for receiving certain
assets from Active Science Systems, Inc., the Company issued 10,990,133
shares of its common stock directly to its shareholders. The Company was
formed for the purpose of acquiring the operations of a printing supply
company. This transaction was not consummated and the Company has remained
dormant until November 2000, when the Company acquired Single Source
Electronic Transactions, Inc. ("SSET"), and changed its name to Single
Source Financial Services Corporation.
The Company is in the development stage as defined in FASB Statement 7. The
Company has not paid any dividends and dividends, which may be paid in the
future, will depend on the financial requirements of the Company and other
relevant factors. Prior to the acquisition of SSET, the Company was
actively seeking and attempting to acquire on-going businesses.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. INVESTMENTS
Investments in companies in which the Company has less than a 20% interest
are carried at cost. Dividends received from those companies are included
in other income. Dividends received in excess of the Company's
proportionate share of accumulated earnings are applied as a reduction of
the cost of the investment.
b. NET LOSS PER SHARE
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" ("EPS") that established
standards for the computation, presentation and disclosure of earnings per
share, replacing the presentation of Primary EPS with a presentation of
Basic EPS.
c. PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
d. INCOME TAXES
The Company accounts for its income taxes under the provisions of Statement
of Financial Accounting Standards 109 ("SFAS 109"). The method of
accounting for income taxes under SFAS 109 is an asset and liability
method. The asset and liability method requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences of
temporary differences between tax bases and financial reporting bases of
other assets and liabilities.
e. FAIR VALUE OF FINANCIAL INSTRUMENTS
Pursuant to SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments", the Company is required to estimate the fair value of all
financial instruments included on its balance sheets as of June 30, 2000
and December 31, 1999. The Company considers the carrying value of such
amounts in the financial statements to approximate their face value.
NOTE 3 - ISSUANCE OF COMMON STOCK
The Company issued 10,999,133 shares of its common stock in exchange for
shares of common stock in privately held companies. In October 2000, the
Company authorized a 6:1 reverse stock split thereby reducing the total
number of shares outstanding to 1,833,189. The Company's financial
statements have been prepared as if the reverse stock split occurred at the
Company's inception. Each share outstanding is entitled to one vote.
NOTE 4 - INVESTMENTS
As discussed in Note 3, the Company received shares of common stock
in four closely held companies, in exchange for the issuance of 10,999,133
of the Company's common stock. The securities received have no readably
determinable value, and the Company valued these securities at the par
value of the common stock exchanged
In July 2000, the Company distributed to a entity wholly owned by the
Company's shareholders the stock in the four private companies.
NOTE 5 - PERIOD ADJUSTMENTS
The financial statements as previously prepared failed to include the
acquisition of common stock in four privately held companies. The
accompanying financial statements have been prepared to include the
transactions relating to these acquisitions.
NOTE 6 - INCOME TAXES
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current, depending on the classification of the assets and liabilities
to which they relate.
The Company did not calculate a provision for deferred taxes for the years
ended December 31, 1999 and 2000, as any timing differences between
financial statement and income tax reporting purposes were immaterial.
The Company has available at December 31, 2000, approximately $15,000 of
unused operating loss carryforwards that may be applied against future
taxable income and that expire in various years through out 2020.
An allowance has been provided for by the Company which reduced the tax
benefits accrued by the Company for these start up costs to zero, as it
cannot be determined when, or if, the tax benefits derived from these
losses will materialize.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company's shareholders have personally paid expenses incurred by the
Company. The Shareholder's have made these advances without expectation of
reimbursement. The Company has treated these advances as contributions to
capital.
NOTE 8 - SUBSEQUENT EVENTS
a) On November 7, 2000, the Company acquired 100% of the outstanding
stock of Single Source Electronic Transactions, Inc. in exchange for
issuing 10,012,500 shares of its common stock.
F-8
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
FINANCIAL STATEMENTS
Contents
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . F-11
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-12
Statements of Operations . . . . . . . . . . . . . . . . . . F-13
Statement of Stockholders' Equity (Deficit). . . . . . . . . F-14
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-15
Notes to Financial Statements. . . . . . . . . . . . . . . . F-16
F-10
Independent Auditors' Report
Board of Directors
Single Source Electronic Transactions, Inc.
Los Angeles, California
We have audited the accompanying balance sheets of Single Source Electronic
Transactions, Inc., as of October 31, 2000, and December 31, 1999, and the
related statements of operations, cash flows, and stockholders' equity, for the
ten months ended October 31, 2000, and for the year ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Single Source Electronic
Transactions, Inc as of October 31, 2000, and December 31, 1999, and the results
of its operations and its cash flows for the ten months ended October 31, 2000,
and for the year ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ Jonathon P. Reuben C.P.A.
Jonathon P. Reuben, C.P.A.
An Accountancy Corporation
Torrance. California
January 17, 2001
F-11
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
BALANCE SHEETS
October 31, December 31,
2000 1999
ASSETS
Current Assets
Cash and Cash Equivalents $ 6,845 $ 4,607
Loans receivable 9,750 -
Inventories 42,197 -
Total Current Assets 58,792 4,607
Property and Equipment
Furniture 992 -
Office equipment 9,347 -
10,339 -
Accumulated depreciation (220) -
10,119 -
Other Assets
Note Receivable - Employee 25,422 -
Purchase merchant portfolios
(net accumulated amortization) - 15,600
Deposits and other assets 6,938 -
32,360 15,600
Total Assets $ 101,271 $ 20,207
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Bank overdraft $ 17,697 -
Franchise tax payable 800 800
Accounts payable 79,432
Accrued payroll 7,122
Other payables - 3,635
Total Current Liabilities 105,051 4,435
Long Term Debt 92,743 -
Total Liabilities 197,794 4,435
Stockholders' Equity (Deficit)
Common Stock, par value $.001,
authorized 25,000,000 shares,
issued and outstanding 1,000
shares at October 31, 2000,
and at December 31, 1999 1 1
Additional Paid in Capital 6,999 6,999
Retained Earnings (Deficit) (103,523) 8,772
Total Stockholders' Equity
(Deficit) (96,523) 15,772
Total Liabilities and Stock-
holders' Equity (Deficit) $ 101,271 $ 20,207
F-12
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
STATEMENT OF OPERATIONS
For the Ten Months For the Year
Ended Ended
October 31, 2000 December 31, 1999
Revenues $ 571,462 $ 62,681
Cost of revenues (128,196) (10,096)
Gross profit 443,266 52,585
Selling, general, and
administrative expenses (958,507) (43,129)
Net Income (Loss) from operations (515,241) 9,456
Other income (expense)
Gain on sale of residual interest
in merchant accounts 413,067 -
Interest income 422 -
Interest expense (9,743) -
Net Income (Loss) before income
taxes (111,495) 9,456
Provision for income tax (800) (800)
Net Income (Loss) before income
taxes $ (112,295) $ 8,656
Basic Income (Loss) Per Share $ (112) $ 9
F-13
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Additional Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit)
Balance - December 31, 1998 1,000 $ 1 $ 6,999 $ 116
Net income for the year ended
December 31, 1999 - - - 8,656
Balance - December 31, 1999 1,000 $ 1 $ 6,999 $ 8,772
Net loss for the ten-months ended
October 31, 2000 - - - (112,295)
Balance - October 31, 2000 1,000 $ 1 $ 6,999 $-103,523
F-14
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
STATEMENTS OF CASH FLOWS
For the Ten For the Year
Months Ended
Ended December 31,
October 31, 2000 1999
Cash Flows from Operating Activities
Net income (loss) $ (112,295) $ 8,656
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 2,887 400
Interest income (422) -
Interest expense 9,743 -
Gain on sale of interest in merchant
account residuals (413,067) -
(Increase) Decrease in Assets
(Increase) decrease in loans receivable -
(Increase) decrease in inventories (42,197) -
(Increase) decrease in deposits and
other assets (6,938) -
Increase (Decrease) in Liabilities
Increase (decrease) in bank overdraft 17,697 -
Increase (decrease) in income tax payable - 800
Increase (decrease) in accounts payable 79,432 -
Increase (decrease) in accrued payroll 7,122 -
Increase (decrease) in accrued payroll (3,635) 3,635
Net cash used in operating activities (461,673) 13,491
Cash Flows from Investing Activities
Acquistion of interest in merchant account residuals - (16,000)
Advances to employees (34,750) -
Equipment acquisition (10,339) -
Net cash provided (used) in investing activities (45,089) (16,000)
Cash Flows from Financing Activities
Advances from affiliates 509,000 -
Net cash provided by financing activities 509,000 -
Net Increase (Decrease) in Cash and Cash
Equivalents 2,238 (2,509)
Beginning Balance - Cash and Cash
Equivalents 4,607 7,116
Ending Balance - Cash and Cash
Equivalents $ 6,845 $ 4,607
Supplemental Information:
Non-cash Investing and Financing Activities:
On October 31, 2000, the Company sold its residual interest in all merchant accounts
that the Company had in interest in to an affiliate in cancellation of $426,000 of
indebtedness.
For the Ten For the Year
Months Ended
Ended December 31,
October 31, 2000 1999
Cash Paid For:
Interest Expense $ - $ -
Income Taxes $ 800 $ -
F-15
NOTES TO FINANCIAL STATEMENT OF
SINGLE SOURCE ELECTRONIC TRANSACTIONS, INC.
Note 1 - Organization
Single Source Electronic Transactions, Inc. (the
"Company") was incorporated in Nevada on
January 5, 1998. The Company is in the business
of selling credit and debit card processing
equipment to retailers. The Company also offers
electronic transaction processing services to its
customers through a third party processor. The
Company receives residuals on each transaction
processed through the processor by the
Company's customers. The Company acts as a
facilitator to its' customers in obtaining lease
financing of the equipment. In these
arrangements the leasing company pays full sales
price of the equipment to the Company without
recourse.
Note 2 - Summary of Significant Accounting Policies
a. Property and Equipment
The cost of property and equipment is
depreciated over the estimated useful lives of the
related assets. Depreciation is computed on the
straight-line method for financial reporting and
income tax reporting purposes.
b. Net Loss Per Share
The Company adopted the provisions of
Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share"
("EPS") that established standards for the
computation, presentation and disclosure of
earnings per share, replacing the presentation of
Primary EPS with a presentation of Basic EPS.
Basic weighted average shares outstanding as of
October 31, 2000, and December 31, 1999 was
1,000 shares.
c. Cash and Cash Equivalents
For purposes of the statement of cash flows, the
Company considers cash and cash equivalents to
include all stable, highly liquid investments with
maturities of three months or less.
d. Pervasiveness of Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at
the date of the financial statements and the
reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from those estimates.
e. Income Taxes
The Company accounts for its income taxes
under the provisions of Statement of Financial
Accounting Standards 109 ("SFAS 109"). The
method of accounting for income taxes under
SFAS 109 is an asset and liability method. The
asset and liability method requires the
recognition of deferred tax liabilities and assets
for the expected future tax consequences of
temporary differences between tax bases and
financial reporting bases of other assets and
liabilities.
f. Fair Value of Financial Instruments
Pursuant to SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments", the
Company is required to estimate the fair value of
all financial instruments included on its balance
sheets as of October 31, 2000, and December
31, 1999. The Company considers the carrying
value of such amounts in the financial statements
to approximate their face value.
Note 3 - Note Receivable - Employee
In August 2000, the Company advanced to an
employee $25,000, which is evidenced by a
promissory note. The loan is assessed interest at
an annual rate of 7%. The loan matures in July
2003, when the principal balance and accrued
interest become fully and due and payable.
Interest accrued on this loan for the ten-month
period ended October 31, 2000 was $423, which
was credited to operations.
Note 4 - Inventories
Inventories at October 31, 2000, consisted of
equipment held for sale to the Company's
customers. Inventories are valued at the lower of
cost determined by the FIFO method or market.
Note 5 - Property and Equipment
Depreciation charged to operations for the ten
months ended October 31, 2000, amounted to
$220. The Company useful lives of furniture and
office equipment for purposes of computing
depreciation is five years.
Note 6 - Related Party Transactions
a) In 1999, the Company acquired all of the
interest in residuals due two of its former
employees for $16,000. The purchase price
was capitalized and amortized over a ten-
year life using the straight-line method for
financial reporting and income tax reporting
purposes. Amortization expense charged to
operations for the ten-month period ended
October 31, 2000, and for the year ended
December 31, 1999, were $2,667 and $400,
respectively.
b) On September 20, 2000, the Company
received two copiers from an affiliate by
assuming the leases on the equipment. The
first lease is payable in monthly installments
of $152, with the final installment due in
June 2005. The second lease is payable in
monthly installments of $167, with the final
installment due in April 2001. The Company
has accounted for the assumption of these
leases as operating leases.
c) The Company leases its Los Angeles office
from an affiliate on a month-to-month basis
at a rate of $4,601.23 per month. Effective
January 1, 2001 this monthly rate increases
to $6,920.42 per month.
d) During 2000, the Company borrowed a total
of $509,000 from an affiliate. The loans are
evidenced by a promissory note and are
assessed interest at an annual rate of 8%.
The principal balance and accrued interest
become payable in thirty-six equal monthly
installments commencing on April 3, 2003.
Any remaining principal and accrued interest
becomes fully due and payable on April 5,
2006. Accrued interest charged to
operations on this loan for the ten-months
ended October 31, 2000, amounted to
$9,743.
On October 31, 2000, the Company sold to the
lender all of its interest in residuals earned
currently and in the future on all customer
accounts in existence at the time of sale for
$426,000. Under the terms of the sale, the
balance owed the affiliate was reduced by the
sales price. The balance of the loan as of
October 31, 2000, amounted to $92,743.
e) The Company has experienced a loss for the
ten-months ended October 31, 2000, of
$112,295, and has liabilities in excess of
assets at October 31, 2000, totaling $95,723.
The Company's shareholders' have
committed to fund any shortfalls necessary to
meet the Company's obligations of at least
the twelve months.
Note 7 - Income Taxes
Deferred income taxes arise from temporary
differences resulting from income and expense
items reported for financial accounting and tax
purposes in different periods. Deferred taxes are
classified as current or non-current, depending
on the classification of the assets and liabilities to
which they relate.
For the Ten Months For the Year
Ended Ended
October 31, 2000 December 31, 1999
Income taxes payable $ - $ 1,418
Less tax benefit of net
operating loss carry back - (1,418)
Income taxes currently payable $ - $ -
The Company did not calculate a provision for
deferred taxes for the ten-month period ended
October 31, 2000, or for the year ended
December 31, 1999, as any timing differences
between financial statement and income tax
reporting purposes were immaterial.
The Company has available at October 31, 2000,
approximately $102,000 of unused operating
loss carryforwards that may be applied against
future taxable income and that expire in 2020.
An allowance has been provided for by the
Company which reduced the tax benefits accrued
by the Company for its net operating losses to
zero, as it cannot be determined when, or if, the
tax benefits derived from these operating losses
will materialize.
Note 8 - Leases
As of October 31, 2000, the Company leases 6
offices that are located in California, Colorado,
Rhode Island, Texas, and Florida, under non-
cancelable leases under terms of one year or less.
In addition, as discussed further in Note 6, the
Company assumed leases on copier equipment,
which expire in various years through 2005.
Rental expense charged to operations for the
ten-month period ended October 31, 2000, and
for the year ended December 31, 1999, were
$85,263, and $0, respectively, consisting solely
of minimum rental payments.
Minimum rental commitments under the
noncancelable equipment lease expire as follows:
2001 $ 1,824
2002 $ 1,824
2003 $ 1,824
2004 $ 1,824
2005 $ 1,216
Total minimum lease payments $ 8,512
Note 9 - Segment Information
The Company currently operates in only one
reportable segment, which conducts business
throughout five States. The Company principally
operated during 1999 and during the ten-month
period ended October 31, 2000, in California
where significantly all of the Company's sales
were generated.
The Company receives significantly all of its
inventory from two suppliers. However,
Management believes that there is no shortage of
inventory available from other suppliers and the
Company's operations would not be affected by
the inability of its current providers to meet its
inventory needs.
F-16
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
(formerly REAM PRINTING PAPER CORP.)
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma Combined Financial Data
The Unaudited Pro Forma Combined Balance Sheet of the Company,
together with the Unaudited Pro Forma Combined Statement of
Operations, have been prepared to illustrate the estimated
effect of the Company's acquisition of Single Source Electronic
Transactions, Inc. as if the acquisition took place on October 31,
2000. For financial statement reporting purposes, the transaction
has been accounted for as a reverse acquisition whereby Single Source
Electronic Transactions, Inc. is treated as the acquirer and the
Company is treated as the acquiree. The Pro Forma Financial Statements
should be read in conjunction with the separate historical financial
statements of the Company and Single Source Electronic Transactions,
Inc. and related notes thereto.
F-17
Single Source Financial Services Corporation
Formerly Ream Printing Paper Corp. (A Development Stage Company)
Unaudited Proforma Combined Statement of Operations
Single Source Single Source
Electronic Financial Services
Transactions, Inc. Corporation Proforma
Ten Months Ended Year Ended Proforma Combined
October 31, 2000 October 31, 2000 Adjustments Company
------------------ ------------------- ----------- ------------
Revenue $ 571,462 $ - - $ 571,462
Costs of revenues (128,196) - - (128,196)
------------------ ------------------- ----------- ------------
Gross profit 443,266 - - 443,266
Operating expenses
General and administrative expenses (958,507) (547) - (959,054)
------------------ ------------------- ----------- ------------
Net income (loss) from operations (515,241) (547) - (515,788)
Other income (expense) 403,746 - 403,746
------------------ ------------------- ----------- ------------
Net loss before income taxes (111,495) (547) - (112,042)
Provision for income tax (800) - - (800)
------------------ ------------------- ----------- ------------
Net Loss $ (112,295) $ (547) $ (112,842)
================== =================== =========== ============
Basic Loss Per Share $ (0.0112) $ (0.0003) $ (0.0095)
================== =================== ============
Weighted Average Shares Outstanding 1) 10,012,500 1) 1,833,189 11,845,689
================== =================== ============
<FN>
1) Issuance of 10,012,500 shares of Single Source Financial
Corporation's common stock in exchange for 100% of the
outstanding stock of Single Source Electronic Transactions, Inc.
F-18
Single Source Financial Services Corporation
Formerly Ream Printing Paper Corp.
Unaudited Pro Forma Combined Balance Sheets
Single Source Single Source
Electronic Financial Services
Transactions, Inc. Corporation Proforma Proforma
October 31, 2000 October 31, 2000 Adjustments Company
------------------ ------------------- ----------- ------------
ASSETS
Current Assets
Cash and cash equivalents $ 6,845 - $ - $ 6,845
Loans receivable 9,750 - -
Inventories 42,197 -
Prepaid Expense - - - -
------------------ ------------------- ----------- ------------
Total Current Assets 58,792 - - 58,792
------------------ ------------------- ----------- ------------
Property and Equipment
Furniture 992 - - 992
Office equipment 9,347 - - 9,347
------------------ ------------------- ----------- ------------
10,339 - - 10,339
Accumulated depreciation (220) - - (220)
------------------ ------------------- ----------- ------------
10,119 - - 10,119
------------------ ------------------- ----------- ------------
Other Assets
Note Receivable - Employee 25,422 - - 25,422
Deposits and other assets 6,938 - -
------------------ ------------------- ----------- ------------
Total Assets $ 101,271 - $ 101,271
================== =================== =========== ============
Liabilites and Stockholders' (Deficit)
Current Liabilities
Bank overdraft $ 17,697 -
Franchise tax payable 800 100
Accounts payable 79,432 79,432
Accrued payroll 7,122 -
------------------ ------------------- ----------- ------------
Total Current Liabilities 105,051 100 - 105,051
------------------ ------------------- ----------- ------------
Long Term Debt 92,743
------------------
Total Liabilities 197,794
Stockholders' (Deficit)
Common stock, Par $.001 $ 1 $ 1,833 1) 10,012 14,435
Additional paid in capital 6,999 12,298 1) (10,012) 9,285
Retained earnings (deficit) (103,523) (14,931) (117,754)
------------------ ------------------- ----------- ------------
Total Stockholders' (Deficit) (96,523) (100) - (96,623)
------------------ ------------------- ----------- ------------
Total Liabilities and
Stockholders' (Deficit) $ 101,271 - - $ 101,271
================== =================== =========== ============
<FN>
1) Issuance of 10,012,500 shares of Single Source Financial
Corporation's common stock in exchange for 100% of the
outstanding stock of Single Source Electronic Transactions, Inc.
F-19