1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-QSB
-------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED NOVEMBER 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
_________________.
COMMISSION FILE NUMBER 0-31217
E-STAR HOLDINGS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 06-1574303
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
165 EAB PLAZA
WEST TOWER, 6TH FLOOR
UNIONDALE, NEW YORK 11566
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(516) 522-2725
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE
---------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
-----------------------------
The number of shares outstanding of the issuer's common stock is 5,001,533 (as
of January 11, 2001)
================================================================================
2
E-STAR HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
QUARTER ENDED NOVEMBER 30, 2000
ITEMS IN FORM 10-QSB
Page
----
Facing page
Part I
- ------
Item 1. Financial Statements. 1
Item 2. Plan of Operation 5
Part II
- -------
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use
of Proceeds 7
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to
a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 8
Signatures
3
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
ASSETS
------
November 30, February 29,
2000 2000
(unaudited) Audited
-------------- --------------
Current assets:
Cash and cash equivalents $ 78,790 $ 1,041,095
Accounts receivable 96,047 6,787
Deposits 27,500 177,500
Inventory 53,939 -
Prepaid expenses 82,634 6,302
-------------- --------------
Total current assets 338,910 1,231,884
Property and equipment, net 8,011,420 209,357
Security deposits 66,030 12,705
Software development, net 166,951 -
-------------- --------------
Total assets $ 8,583,311 $ 1,453,746
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Loans payable - stockholders $ 705,645 $ 485,104
Accounts payable 611,636 16,186
Accrued liabilities 217,551 106,000
Deferred revenue 182,653 -
-------------- --------------
Total current liabilities 1,717,485 607,290
-------------- --------------
Long term notes payable 7,419,657 -
-------------- --------------
Total liabilities 9,137,142 607,290
-------------- --------------
Minority interest in consolidated subsidiary
Stockholders' equity
Common stock par value $0.001; 100,000,000 shares
authorized : 4,978,433 and 4,860,000 shares outstanding 4,979 4,860
respectively
Additional paid-in capital 1,595,564 1,060,085
Accumulated deficit (2,154,374) (218,489)
-------------- --------------
Total stockholders' equity (deficit) (553,831) 846,456
-------------- --------------
Total liabilities and stockholders' equity $ 8,583,311 $ 1,453,746
============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
1
4
E-STAR HOLDINGS INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Accumulated
Three Income and
Nine Months Months Expenses from
Ended Ended inception to
November 30, November 30 November 30,
2000 2000 2000
--------------------- ----------------- ---------------------
Revenue $ 5,395,595 $ 2,457,210 $ 5,436,682
Plan Sales 76,844 64,809 76,844
--------------------- ----------------- ---------------------
Total income 5,472,439 2,522,019 5,513,528
--------------------- ----------------- ---------------------
Cost of sales 4,562,785 2,148,923 4,562,785
Salaries, benefits and consulting fees 1,325,549 454,617 1,372,676
Rent 256,322 168,642 266,797
Professional fees 70,206 33,739 77,656
Depreciation and amortization 122,685 37,669 123,717
Research and development 192,252 81,868 192,252
Other costs and expenses 637,030 86,598 826,239
--------------------- ----------------- ---------------------
Total expenses 7,166,829 2,992,056 7,422,122
--------------------- ----------------- ---------------------
Loss before interest expense (1,694,390) (470,037) (1,908,596)
Interest expense 241,495 123,843 245,778
--------------------- ----------------- ---------------------
--------------------- ----------------- ---------------------
Net loss (1,935,885) (593,880) (2,154,374)
===================== ================= =====================
Basic and diluted net loss per common share $ (0.40) $ (0.12)
===================== =================
Weighted average shares used in basic and diluted 4,877,661 4,877,661
net loss per share calculation
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
2
5
E-STAR HOLDINGS INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
AUGUST 1, 1999
NINE MONTHS INCEPTION DATE
ENDED TO
NOVEMBER 30, 2000 NOVEMBER 30, 2000
------------------- ------------------
OPERATING ACTIVITIES
Net loss $ (1,935,885) $ (2,154,374)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 122,685 123,717
Stock based compensation 81,000 141,000
Changes in operating assets and liabilities
Accounts receivable (89,260) (96,047)
Prepaid expenses (76,332) (82,634)
Other assets (107,264) (119,637)
Accounts payable 595,450 611,636
Accrued expenses 111,551 217,551
Deferred revenue 182,653 182,653
------------------- ------------------
Cash used in operating activities (1,115,402) (1,176,135)
------------------- ------------------
INVESTING ACTIVITIES
Purchase of Software (166,951) (166,951)
Deposits on leaseholds 150,000 (27,500)
Purchase of Property and equipment (7,924,748) (8,135,137)
------------------- ------------------
Cash used in investing activities (7,941,699) (8,329,588)
------------------- ------------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 454,598 1,459,211
Proceeds from loans 7,640,198 8,125,302
------------------- ------------------
Cash provided by financing activities 8,094,796 9,584,513
------------------- ------------------
Net (decrease) in cash and cash equivalents (962,305) 78,790
Cash and cash equivalents at beginning of period 1,041,095 -
------------------- ------------------
Cash and cash equivalents at end of period $ 78,790 $ 78,790
=================== ==================
Supplemental information:
Interest payments -
Income Tax payments -
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
3
6
E-STAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOVEMBER 30, 2000
1. Basis of Presentation
The unaudited financial statements included in the Form 10Q-SB have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q-SB and Item 310(b)
of Regulation SB. The financial information furnished herein reflects all
adjustments, which in the opinion of management are necessary for a fair
presentation of the Company's financial position, the results of operations and
cash flows for the periods presented.
Certain information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted, pursuant to such rules and regulations.
These interim statements should be read in conjunction with the audited
February 29, 2000 consolidated financial statements and related notes thereto
included in the Company's February 29, 2000 certified financial statements. The
results of operations for the nine months are not necessarily indicative of the
operating results for the year. The Company presumes that users of the interim
financial information herein have read or have access to the audited financial
statements for the preceding period and that the adequacy of additional
disclosure needed for a fair presentation may be determined in that context.
There are no comparative financial statements for November 30, 1999, there were
limited activities in a subsidiary for this period.
2. Leasehold Acquisitions
The Company completed the purchase of two additional sites including land and
building for $1,400,000. These acquisitions were financed by the assumption of
$720,000 of existing debt.
4
7
Item 2. Plan of Operation
FORWARD LOOKING INFORMATION MAY PROVE INACCURATE
This Quarterly Report on Form 10-QSB contains certain forward looking
statements and information relating to E-Star that are based on the beliefs of
management, as well as assumptions made by and information currently available
to us. When used in this document, the words "anticipate," "believe,"
"estimate," "expect," and "hope," and similar expressions, as they relate to
E-Star, are intended to identify forward looking statements. Such statements
reflect our current views with respect to future events and are subject to
certain risks, uncertainties and assumptions, including those described in this
discussion and elsewhere in this Quarterly Report on Form 10-QSB. 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 as anticipated, believed, estimated or expected. We do not
intend to update these forward looking statements.
General
As of January 11, 2001 we have sold 127,833 of the 250,000 registered
shares we are currently offering. Assuming that the remaining 122,167 of such
250,000 shares are sold, we will use the proceeds from those sales only for our
working capital and general corporate purposes, including payment of salaries.
We believe that such proceeds will be sufficient for our working capital and
general corporate expenses through June 30, 2001. We cannot now estimate whether
such proceeds will be sufficient for such purposes after June 30, 2001, and if
so for how long. We hope that by July 1, 2001 our income from the operation of
our existing and to be opened car wash, gasoline and fast lube facilities will
be sufficient to meet our operating expenses.
During the twelve month period ending November 30, 2001 we plan to spend
approximately $180,000 to continue to develop our management information system
and the system which will operate our proposed computer based e-commerce. We
will try to attract the customers at our car wash sites to use our proposed
e-commerce business..
We have acquired the seven sites on Long Island, NY, listed below at
which we are operating or intend to operate car wash, gasoline sales and/or fast
lube facilities.
5
8
DATE OPERATIONS BEGAN
OR ARE PROJECTED TO
ADDRESS OWNED/LEASED DATE ACQUIRED EXPIRATION OF LEASE BEGIN
Oceanside
- ---------
210 Atlantic Avenue Leased. We have an January 20, 2000 May 31, 2008. We have Operations commenced
Oceanside, NY 11572 option to purchase five 5-year options to November 11, 2000. Car
this property. extend this lease to wash only. Gasoline
May 31, 2033. sales to commence by
and February 8, 2001.
222 Atlantic Avenue Leased. We have May 1, 2000 October 31, 2004
Oceanside, NY 11572 entered into a
contract to purchase
this property.
Copiague
- --------
1191 Sunrise Highway Leased March 30, 2000 February 1, 2020 Under renovation;
Copiague, NY 11726 projected to open in
January 2001.
Car wash only. Fast
lube later.
Commack
- -------
1103 Jericho Turnpike Leased. We have an April 4, 2000 March 2009 Except for incidental
Commack, NY 11725 option to purchase revenues prior to July
this property. 2000, full operations
commenced in July
2000. Car wash and
gasoline. Fast lube
later.
Sayville
- --------
4740-4750 Sunrise Highway Owned. June 16, 2000 N/A Operations commenced in
Sayville, NY 11782 August 2000. Car wash,
gasoline and fast lube.
Port Jefferson
- --------------
103 Texaco Avenue Owned. July 14, 2000 N/A Under renovation;
Port Jefferson, NY 11777 projected to open
April 2001. Car wash
gasoline and fast lube.
Centerreach
- -----------
2495 Middle Country Road Leased. September 29, 2000 December, 2030 Operations commenced in
Centerreach, NY 11720 November 2000. Car
wash only.
6
9
DATE OPERATIONS BEGAN
OR ARE PROJECTED TO
ADDRESS OWNED/LEASED DATE ACQUIRED EXPIRATION OF LEASE BEGIN
Freeport
- --------
199 Sunrise Highway Owned October 12, 2000 N/A Under renovation;
Freeport, NY 11520 projected to open
March 2001. Car wash,
gasoline and fast lube.
Assuming that approximately $2,000,000 of the balance of $6,104,260
of the $11,500,000 that five of our founders have promised to lend us is
received by us, we estimate that with the proceeds of such additional
$2,000,000 we can acquire or build an additional two facilities. In addition,
we have received from a bank in Chicago an outline under which the bank would
consider proceeding with a first mortgage line of credit facility of up to
$5,000,000 to enable us to purchase the real estate and facilities for car
washes, gas stations and lube centers on Long Island. If we do not receive all
or a portion of such additional loans from our founders, or loans from that
bank under the proposed credit facility, we will try to secure other lenders
or investors to provide us with loans or to purchase our common stock. We do
not have any commitments from any other persons to make such loans to us or to
purchase any shares of our common stock from us.
As we acquire and complete construction of car wash and fast lube/gas
station facilities we will also have to employ additional supervisory and
executive personnel to operate the car wash and fast lube/gas station
facilities. We estimate that we will need from ten to thirty employees at each
of our facilities, depending on the size of the facility and whether the
facility is a car wash only or is combined with a fast lube/gas station.
PART II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(f)(1) September 26, 2000 was the effective date of the first
registration statement filed by us. The file number assigned by the Securities
and Exchange Commission to such registration statement is 333-34790.
(2) Such offering commenced on October 1, 2000.
(3) Such offering has not been terminated.
7
10
(4) The securities we registered for sale in such offering is our
common stock. We registered 350,000 shares of our common stock, 250,000 for sale
by us and 100,000 for sale by one of our stockholders. The offering price is
$6.00 per share, or an aggregate of $1,500,000 for the 250,000 shares offered by
us and an aggregate of $600,000 for the shares offered by our selling
stockholder.
(5) While there is no managing underwriter in such offering, we have
retained Basic Investors, Inc. of Melville, NY, as a selected dealer to sell up
to 100,000 of the shares offered by us. We have agreed to pay Basic Investors a
commission of 10% of all funds received by us from sales made by it.
(6) As of January 11, 2001 we sold 127,833 of the registered shares
for an aggregate of $766,998. Our selling stockholder cannot sell any of its
100,000 registered shares in this offering until we have sold all of our 250,000
registered shares. Of such sales of 127,833 shares, 2700 shares were sold for us
by Basic Investors for an aggregate of $16,200 for which we paid Basic Investors
a commission of $1,620. Of such 127,833 shares, 104,933 shares were sold in the
quarter ended November 30, 2000, for an aggregate of $629,598. None of the
104,933 shares sold by us in the quarter ended November 30, 2000, were sold
through Basic Investors. We incurred no obligations to pay commissions or
finders fees for such sales in the November 30, 2000 quarter. We estimate that
total known expenses incurred by us in this offering, other than commissions to
Basic Investors, aggregates approximately $175,000 as of January 11, 2001. None
of such expenses were or will be paid, directly or indirectly, to any of our
officers, directors or shareholders. Such expenses were paid or will be paid to
our attorneys and accountants, for edgarization of our registration statement
for filing with the Securities and Exchange Commission, for printing of the
prospectus and $5,000 for legal fees and filing expenses incurred by Basic
Investors in connection with this offering.
(7) Net proceeds to us from our sale of such 104,933 shares through
November 30, 2000, after deducting such estimated expenses of $175,000, was
approximately $454,600. However, none of the proceeds we received and will
receive from the sale of additional shares in the offering after November 30,
2000, will be used to pay such estimated expenses.
(8) The net proceeds of $454,600 we received in the quarter ended
November 30, 2000 from the sale of our registered shares were used for our
working capital and general corporate purposes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (1)
8
11
3.2 By-Laws (1)
- ------------------------
(1) Filed as an Exhibit to the Company's Registration Statement on Form SB-2
(File No. 333-34790) and incorporated herein by reference.
(b) Reports on Form 8-K
We did not file any report on Form 8-K in the quarter ended November 30,
2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
Registrant:
E-STAR HOLDINGS, INC.
Date: January 16, 2001 By: /s/ Jeffrey Leader
----------------------------
Jeffrey Leader
Vice President
9