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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 2000
REG. NO. 333-34790
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT #3 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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E-STAR HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEVADA 811190 06-1574303
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
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165 EAB PLAZA, WEST TOWER, 6TH FLOOR, UNIONDALE, NY 11566 (516) 522-2725
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DANIEL BOUCHER, PRESIDENT
E-STAR HOLDINGS, INC.
165 EAB PLAZA, WEST TOWER, 6TH FLOOR, UNIONDALE, NY 11566 (516) 522-2725
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
GABRIEL KASZOVITZ, ESQ.
SAUL M. KASZOVITZ, ESQ.
FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA & BASS LLP
750 LEXINGTON AVENUE, NEW YORK, NY 10022-1200
(212) 888-8200 FAX: (212) 888-7776
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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,
other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]
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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. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration number
of the earlier effective registration statement for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, par value $.001 per
share................................. 250,000 Shares $6.00 $1,500,000 $396.00
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Common Stock, par value $.001 per share,
to be sold by a selling shareholder... 100,000 Shares $6.00 $600,000 $159.00
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Total................................... 350,000 Shares $6.00 $2,100,000 $555.00
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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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED
[E-STAR LOGO]
350,000 SHARES
COMMON STOCK
This is an initial public offering of up to 350,000 shares of our common
stock. We are offering to sell 250,000 shares and one of our shareholders,
Millennium Capital Group, is offering to sell 100,000 shares.
Millennium Capital Group and we will be selling our shares on a "best
efforts" basis. The shares will be sold by our officers and directors and by
Millennium Capital Group. No one has agreed to buy any of our shares, and there
is no assurance that any sales will be made. Even if not all, or very few, of
the 350,000 shares are sold, neither we nor Millennium Capital Group will refund
any payments for the shares. The first 250,000 shares sold will be sold by us
and Millennium Capital Group will not sell any of its shares until we have sold
250,000 shares. We and Millennium Capital Group have the right to accept or
reject any subscriptions for shares in whole or in part.
Prior to this offering there has been no public market for the trading of
the shares, and it is possible that no such market will develop or trading will
commence for a substantial period of time after the closing of this offering. We
expect one or more brokers to trade our shares and to apply for the approval of
the shares for quotation on the Nasdaq Bulletin Board, but there is no assurance
that we will be able to secure such listing. The price of the shares has been
determined solely by us, and does not bear any direct relationship to our
assets, operations, book value or other established criteria of value.
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THE PURCHASE OF THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. YOU SHOULD CAREFULLY READ AND CONSIDER THE "RISK FACTORS,"
COMMENCING ON PAGE 6, AND "DILUTION" ON PAGE 15.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE PER SHARE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS(1) US(2) SHAREHOLDER
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$6.00 -- $1,500,000 $600,000
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(1) Our officers and directors and Millennium Capital Group are offering the
shares for sale. If any sales are made by broker/dealers discounts or
commissions are not anticipated to exceed 10% of the offering price.
(2) Before deducting offering expenses payable by us estimated at $125,000.
THE DATE OF THIS PROSPECTUS IS .
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YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK.
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 3
Risk Factors................................................ 6
Disclosure Regarding Forward Looking Statements............. 13
Use of Proceeds............................................. 14
Determination of Offering Price............................. 14
Dilution.................................................... 15
Security Holders............................................ 16
Dividend Policy............................................. 16
Plan of Operation........................................... 16
Business.................................................... 17
Management.................................................. 26
Executive Compensation...................................... 29
Principal and Selling Shareholders.......................... 30
Certain Relationships and Related Transactions.............. 32
Shares Eligible for Future Sale............................. 34
Description of Securities................................... 34
Plan of Distribution........................................ 35
Legal Matters............................................... 36
Experts..................................................... 36
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................ 36
Where You Can Find More Information......................... 38
Financial Statements........................................ F-1
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SUMMARY
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors," beginning on Page 6, and the Consolidated Financial Statements
and Notes, before deciding to invest in our common stock.
E-STAR HOLDINGS, INC.
We intend to acquire, consolidate and operate full-service car wash and
fast lube operations, while simultaneously utilizing the customer bases of these
car wash and fast lube operations to facilitate the expansion of our e-commerce
virtual shopping center, The Portal. To attract customers to our car wash
facilities, we intend to modify each acquired car wash into, or construct a new
car wash as, a sports theme oriented All Star car wash, with each location to be
endorsed by a sports celebrity. When we sometimes refer in this prospectus to
car washes alone, we are also referring to any fast lube operation or gas
station we may operate together with the car wash.
From inception (August 1, 1999) to May 31, 2000 we had revenues of $161,339
of which we received $118,465 from car wash services and sales of gasoline at
facilities we acquired in Oceanside and in Commack, both in New York, and
$42,874 for computer hardware and software installations for a third party by
our subsidiary. We operated the Oceanside facility solely to train our wash
attendants, cashiers and greeters. We closed that facility in May 2000 for
renovations. The $778,822 of operating expenses we incurred in that ten month
period ending May 31, 2000 was mostly for salaries to our employees, including
the personnel we trained at the Oceanside facility and our officers. Since we
have only recently commenced operations and acquiring facilities, we do not
believe that the results of our operations or our cash flows in that ten month
period are indicative of our future operations.
Although we discuss our plans for our future operations in this prospectus,
each investor should be aware that other than the experience of Alphonso
Carrabis, whom we have recently employed, we have had no experience in operating
a chain of car washes, fast lube operations or gas stations. Mr. Carrabis has
more than 20 years of experience in operating car washes. He has no experience
in operating fast lube facilities. Investors should also be aware that:
- at May 31, 2000 our total assets were $2,368,572 and our net worth was
only $383,970;
- we have had insignificant revenues and we have sustained a loss from our
operations of $703,420 from inception on August 1, 1999 to May 31, 2000;
- even if all the 350,000 shares we and Millennium Capital Group are
offering are sold, our founders will own or have the right to vote 93%
of our outstanding shares, giving them total control of our company;
- immediately after paying $6.00 for a share of our common stock, the net
tangible book value of that one share will only be 33 cents, based on
our net tangible book value as of May 31, 2000, resulting in a loss of
$5.67 from such $6.00 purchase price (see "Dilution");
- there is no minimum number of shares we are required to sell to retain
the money we receive from investors. Consequently we will keep the
proceeds from the sale of any of our shares, regardless of how few
shares we sell and regardless of whether we receive enough proceeds from
the sale of our shares to enable us to try to operate our business; and
- our president is employed by us only on a part-time basis.
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Full Service Car Wash Operations
We have commitments from five of our founders to lend us an aggregate of
$11,500,000. See "Certain Relationships and Related Transactions". Based on our
estimates we believe that such $11,500,000 will be sufficient to acquire,
renovate and/or construct car washes, fast lubes/gas stations at between 10 and
20 locations. To acquire, renovate and/or construct additional car wash, fast
lube/gas station sites, we will have to secure additional financing. We cannot
assure you that we will be able to secure such additional financing or that our
estimates of the number of sites we can have in operation from the $11,500,000
to be loaned to us by our five founders, will prove accurate since we cannot
predict what our cost will be in acquiring, renovating and/or constructing a car
wash, fast lube/gas station facility.
We have acquired five sites and have contracted to acquire one more, for
our initial car wash, fast lube and gas station operations. Our first car wash
facility was fully operational by July 4, 2000 and by July 31, 2000 we had two
in full operation, including both with gas stations and one with a fast lube
facility. Our business plan calls for us to have five car wash facilities with
gas stations fully operational by the end of 2000. Fast lube facilities will be
added later because of greater difficulty in complying with government
regulations. Depending on our ability to secure needed financing, acquiring
locations and securing necessary permits from local governmental authorities,
our business plan calls for us to open five additional facilities in the year
2001.
We intend to obtain endorsement agreements with well known athletes and
entertainers, each of whose names will be used to promote our car wash
locations, as well as the entire All Star chain. To further these sports and
entertainment efforts, we have retained Mr. Greg Buttle, former star of the New
York Jets football team and currently president of Unique Sports & Entertainment
Marketing, Inc., of East Meadow, New York, as a consultant and our vice
president for sports and entertainment marketing. We will rely on Mr. Buttle to
secure sports and entertainment personalities for our endorsement agreements.
Virtual Shopping
A full service car wash cleaning, detailing and servicing typically takes
12 to 15 minutes and requires the driver to leave the vehicle. For this time
period the customer is a captive audience. We intend to make this waiting time
both entertaining for the customer and profitable for us, by encouraging our
patrons to access The Portals, which will be computer stations strategically
located at each of our full service car wash facilities. Each Portal will have a
computer directing users to our own internet site, HaggleHouse.com, as well as
access to other valuable and entertaining links, such as automotive related
services, e-commerce retailers and free internet access providers. Through
internet links accessed via The Portals, we hope that our customers will be
attracted to the ease of purchasing a wide variety of merchandise, including,
but not limited to, new and used cars, car insurance and other automotive
related items. Even though the purchases may not be completed at the car wash
itself, our customers will be able to complete the transactions in the privacy
of their homes or offices. We believe our car wash patrons will constitute the
customer base for a virtual shopping network that extends far beyond the four
walls of our car wash locations. We expect to have our website operational by
September 15, 2000 and we will then be able to install Portals in our facilities
as they become operational.
HaggleHouse.com.
The Portals at our car wash locations will be linked to our internet based
HaggleHouse.com, an online, open market style internet trading site from which
our customers will be able to anonymously negotiate their own transactions for
merchandise of all sorts. Although we will try to make automotive products the
main products traded on our Haggle House internet site, we will also
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encourage our car wash customers and others to purchase other merchandise and
services available on our Haggle House website.
Haggle House Auto Mall.
We expect that our Haggle House Auto Mall will primarily feature
advertisements of their products and services by the local merchants in the area
where the particular car wash facility is located.
We were incorporated in February 2000 under the laws of the State of
Nevada. Our executive offices are located at 165 EAB Plaza, West Tower, 6th
Floor, Uniondale, New York 11566, and our telephone number is (516) 522-2725.
THE OFFERING
Common Stock offered............. 250,000 shares in our behalf and 100,000
shares in behalf of one of our
shareholders, Millennium Capital Group
Offering price................... $6.00 per share
Common stock outstanding before
the offering..................... 4,871,000
Common stock to be outstanding
after the offering............... 5,121,000 shares(1)
Use of proceeds.................. We will receive net proceeds from the sale
of 250,000 shares of approximately
$1,375,000 if all 250,000 shares we are
offering are sold. We will not receive any
proceeds from the sale of 100,000 shares
offered by one of our shareholders. If we
pay commissions to brokers or dealers for
selling our shares, our estimated net
proceeds will be reduced by the amount of
those commissions we have to pay. We do not
intend to use such net proceeds for the
acquisition, consolidation, modification or
construction of car wash and fast lube
operations or to further develop our
internet based Portals. We expect to use
such proceeds only for working capital and
general corporate purposes, including
payment of salaries. We expect to secure
other funds to buy and construct our car
wash, fast lube/gas stations and to build
our internet business. See "Use of
Proceeds."
Risk factors..................... An investment in our common stock involves
a high degree of risk. See "Risk Factors,"
beginning on Page 6.
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(1) Assumes the sale of the 250,000 shares offered by us.
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RISK FACTORS
The purchase of the shares we are, and one of our shareholders is, offering
involves a high degree of risk. Before purchasing the shares, you should
consider carefully the following risk factors.
1. WE MAY NOT BE SUCCESSFUL IN RAISING THE MONEY WE WILL NEED TO ACQUIRE MORE
THAN TEN CAR WASH AND FAST LUBE/GAS STATION FACILITIES.
Our objective is to acquire or construct a chain of at least five car wash
and fast lube/gas station facilities by the end of 2000. We hope to build our
proposed internet auction and marketing business by attracting our car wash
customers to The Portals at those facilities. The amount of cash we will need to
acquire, renovate and/or construct a car wash facility, including in some cases
land acquisition costs, will depend on a great number of factors, but primarily
on financing (including purchase money financing) available. While we estimate
that we can acquire or build between ten and twenty car wash facilities (some
with fast lube/gas stations) with the proceeds of loans for $11,500,000 that
five of our founders have promised to give us, we will need additional funds to
acquire or build more car wash and fast lube/gas station facilities. We cannot
give you any assurance that we can secure the funds we will need to build a
larger chain of such facilities. If we cannot secure those funds we will, at
best, operate only a small number of car wash and fast lube/gas station
facilities. While we intend to use the proceeds we receive from this offering
for our operating expenses, including payment of salaries, we may use a portion
of such proceeds for acquiring or building such car wash facilities. See "Use of
Proceeds."
2. WE HAVE NO EXPERIENCE IN OPERATING A CHAIN OF CAR WASH AND FAST LUBE/GAS
STATION FACILITIES.
Except for Mr. Alphonso Carrabis we have no employees or officers who have
any experience in managing a chain of car wash and fast lube/gas station
facilities. Mr. Carrabis' has operated a chain of three car wash facilities
owned by his family, with a gas station attached to only one car wash. He has no
experience in operating a fast lube facility.
3. WE ARE A NEW BUSINESS AND THERE IS A RISK WE MAY NOT BE SUCCESSFUL.
We have never had any operating history. The operation of a new business is
always risky.
4. WE EXPECT TO INCUR LOSSES AND THERE IS A RISK WE MAY NEVER BECOME
PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to use our car washes and Portals. This will take time. We
expect to incur large initial expenses and may never become profitable. Our
future profitability is dependent on numerous factors including the acquisition
and modification costs of car washes, or constructing new car washes, the number
of customers using our car washes and the profitability of our satellite
businesses, primarily our internet trading and marketing subsidiary. If we fail
to become profitable you will lose part or all of your investment.
5. WE DETERMINED THE OFFERING PRICE OF $6.00 PER SHARE ARBITRARILY AND IT WILL
FLUCTUATE IF THE SHARES BECOME FREELY TRADEABLE AFTER THE OFFERING.
We determined the offering price arbitrarily. The offering price is not
indicative of the present or future value of our common stock. As a result, the
market price of our common stock after the offering may be more susceptible to
fluctuations than it otherwise might be. The market price will be affected by
our operating results, which could fluctuate greatly. These operating result
fluctuations could result from expenses of operating and expanding our
operations and other factors which are beyond our control. If our operating
results are below expectations, the market price of our common stock would
probably fall.
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6. WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF
OUTSTANDING SHARES AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL
OR TRADE THE SHARES AFTER THE OFFERING.
Initially, there will be no established market for our common stock. After
the offering, we will encourage broker/dealers to match buy and sell orders for
our common stock on the OTC Bulletin Board. However, the trading markets on the
OTC Bulletin Board lack the depth, liquidity and orderliness necessary to
maintain a liquid market. We do not expect a liquid market for our common stock
to develop for several years, if at all. A public market having depth and
liquidity depends on having enough buyers and sellers at any given time. Because
this is a relatively small offering, we do not expect to have enough
shareholders or outstanding shares available for public trading to support an
active trading market which could negatively affect your ability to sell your
shares and the price you could receive for your shares.
7. WE ARE AUTHORIZED TO ISSUE PREFERRED STOCK WHICH, IF ISSUED, MAY ADVERSELY
AFFECT YOUR VOTING RIGHTS AND REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
Our board of directors is authorized by our articles of incorporation to
issue shares of preferred stock without the consent of our shareholders. Our
preferred stock, when issued, may rank senior to common stock with respect to
voting rights, payment of dividends and amounts received by shareholders upon
liquidation, dissolution or winding up. Such preferences will be set by our
board of directors. The issuance of such preferred shares and the preferences
given the preferred shares, do not need the approval of our shareholders. The
existence of rights which are senior to common stock may reduce the price of our
common shares. We do not have any plans to issue any shares of preferred stock
at this time.
8. WE MAY NOT BE ABLE TO MANAGE GROWTH.
If we succeed in growing, growth will place significant burdens on our
management and on our operational and other resources. We will need to attract,
train, motivate, retain and supervise our senior managers and other employees
and develop a managerial infrastructure. If we are unable to do this, our
business venture may not be successful.
9. WE MAY NOT BE ABLE TO INTEGRATE BUSINESSES WE ACQUIRE AND WE MAY NOT
ACHIEVE OPERATING EFFICIENCIES.
Our future growth and profitability depend substantially on our ability to
operate and integrate acquired car wash facilities which we will continue to
operate. Our strategy is to achieve economies of scale and brand name
recognition in part through acquisitions that increase our size. We cannot
assure you that our efforts to integrate acquired car wash operations will be
effective or that we will realize expected results. Our failure to achieve any
of these results could have a material adverse effect on our business and
results of operations.
10. WE FACE POTENTIAL LIABILITIES ASSOCIATED WITH ACQUISITIONS OF BUSINESSES.
The businesses we acquire may have liabilities that we do not discover or
may be unable to discover during our preacquisition investigations, including
liabilities arising from environmental contamination or prior owners'
noncompliance with environmental laws or other regulatory requirements and for
which we, as a successor owner or operator, may be responsible.
11. OUR CAR WASH BUSINESS MAY SUFFER UNDER CERTAIN WEATHER CONDITIONS.
Seasonal trends in some periods may affect our car wash business. In
particular, long periods of rain can adversely affect our car wash business as
people typically do not wash their cars during such
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periods. Conversely, extended periods of warm, dry weather may encourage
customers to wash their own cars which can adversely affect our car wash
business.
12. CONSUMER DEMAND FOR OUR CAR WASH SERVICES IS UNPREDICTABLE.
Our financial condition and the results of our operations will depend
substantially on consumer demand for our car wash services. Our business depends
on consumers' choosing to employ our services to wash their cars rather than
washing their cars themselves or not washing their cars at all. We cannot assure
you that we will have any significant consumer demand for the car wash and other
services we will be offering.
13. WE MUST MAINTAIN OUR CAR WASH EQUIPMENT OR THE CAR WASH IN WHICH IT IS
LOCATED WILL BECOME INOPERABLE.
Although we undertake to keep our car washing equipment in proper operating
condition, the operating environment found in car washes results in frequent
mechanical problems. If we fail to properly maintain a car wash's equipment, the
car wash could become inoperable, resulting in a loss of revenue to us from the
inoperable location.
14. OUR BUSINESS WILL BE NEGATIVELY AFFECTED IF WE ARE UNABLE TO HIRE ENOUGH
EMPLOYEES.
The operation of a car wash is labor intensive requiring a number of
unskilled employees. If we are unable to hire enough employees we may not be
able to operate our car washes profitably.
15. OUR CAR WASH AND CAR SERVICES BUSINESS FACE GOVERNMENTAL REGULATION. SUCH
REGULATION COULD IMPEDE OUR OPERATIONS AND SLOW OUR GROWTH.
We are governed by federal, state and local laws and regulations, including
environmental regulations, that regulate the operation of our car wash centers
and other car services businesses. Car wash centers utilize cleaning agents and
waxes in the washing process that are then discharged in waste water along with
oils and fluids washed off of vehicles. Other car services, such as gasoline and
lubrication, use a number of oil derivatives and other regulated hazardous
substances. As a result, we are governed by environmental laws and regulations
dealing with, among other things:
- transportation, storage, presence, use, disposal and handling of
hazardous materials and hazardous wastes;
- discharge of storm water; and
- underground storage tanks.
If we were found to be in violation of applicable environmental laws and
regulations, we could be responsible for clean up costs, property damage and
fines or other penalties, any one of which could have a material adverse effect
on our financial condition and results of operations.
16. WE FACE SIGNIFICANT COMPETITION IN THE CAR CARE INDUSTRY.
The car care industry is highly competitive. Competition is based primarily
on location, facilities, customer service, available services and rates. Because
barriers to entry into the car care industry are relatively low, competition may
be expected to continually arise from new sources. In the car wash sector of our
business we also face competition from outside the car wash industry, such as
gas stations and convenience stores, that offer automated car wash services. In
some cases, these competitors may have significantly greater experience and
financial and operating resources than we do. In our car service businesses, we
face competition from a number of sources, including regional
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and national chains, gasoline stations and companies and automotive companies
and specialty stores, both regional and national.
17. OUR CAR WASH CUSTOMERS MAY NOT CONSIDER 12-15 MINUTES SUFFICIENT TIME TO
UTILIZE OUR INTERNET RELATED SERVICES WHILE WAITING FOR THEIR CARS TO BE
WASHED.
We plan to install computers (our Portals) at our car wash facilities on
the assumption that our car wash customers will use our computers during the
12-15 minute period that their cars are being washed. If our assumption is
incorrect and our car wash customers do not consider that 12-15 minute waiting
period sufficient time to use our computers, then our installation of our
computers in our car wash locations will not lead our car wash customers to use
our internet related businesses.
18. SINCE WE HAVE NOT YET INSTALLED OUR COMPUTERIZED INTERNET OPERATING
SYSTEMS, WE CANNOT BE SURE THAT OUR SYSTEMS FOR OUR PROPOSED INTERNET
BUSINESS WILL OPERATE EFFICIENTLY OR AT ALL.
We expect to install computerized operating systems for our proposed
internet negotiating and marketing businesses. Since we have not yet installed
such computer operating systems we cannot assure you that they will operate
efficiently or at all.
19. WE WILL FACE RISKS ENCOUNTERED BY SMALL COMPANIES IN INTERNET RELATED
BUSINESSES AND MAY BE UNSUCCESSFUL IN ADDRESSING THOSE RISKS.
We face risks frequently encountered by small companies in new and rapidly
evolving markets, including the market for online advertising and direct
marketing. We may not succeed in addressing these risks, and our business
strategy may not be successful. These risks include uncertainties about our
ability to:
- attract a larger number of consumers to our websites;
- sign up new internet advertising and marketing clients;
- add new and compelling content to our websites;
- manage our operations;
- adapt to potential decreases in online advertising rates;
- successfully introduce new products and services;
- continue to develop and upgrade our technology and to minimize technical
difficulties and system downtime;
- create and maintain the loyalty of our internet advertising and marketing
clients and website subscribers and visitors;
- develop new strategic relationships and alliances; and
- attract, retain and motivate qualified personnel.
20. WE FACE THE RISK OF UNCERTAIN PROTECTION OF OUR INTELLECTUAL PROPERTY
RIGHTS, PRIMARILY THE TRADE NAMES WE HOPE WILL GIVE US CONSUMER
RECOGNITION.
We hope to establish consumer recognition for our All Star car washes and
The Portal. To the extent we are successful we will have to rely on trademark
and copyright law, trade secret protection and confidentiality and/or license
agreements with employees, customers, partners and others to protect our
proprietary rights. We can give you no assurance that the steps we may take to
protect our proprietary rights will be adequate or that third parties will not
infringe or misappropriate our copyrights, trademarks, trade dress and similar
proprietary rights. In addition, we can give you no
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assurance that even if we achieve consumer recognition for our trade names that
other parties will not assert infringement claims, in which case we may have to
defend or protect our intellectual property rights at significant cost.
21. IF THIRD PARTIES ACQUIRE DOMAIN NAMES THAT ARE SIMILAR TO OUR DOMAIN
NAMES, THEY COULD TAKE CUSTOMERS AWAY FROM OUR WEBSITE.
We currently hold many internet domain names, including HaggleHouse.com and
estarholdings.com. We may be unable to prevent third parties from acquiring
similar domain names, which could reduce the value of our trade names and take
customers away from our website. Domain names generally are regulated by
internet regulatory bodies. The regulation of domain names in the United States
and in foreign countries is evolving. Regulatory bodies could establish
additional top level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. The relationship between
regulations governing domain names and laws protecting trademarks and similar
intellectual property rights is unclear. Therefore, we may be unable to prevent
third parties from acquiring domain names that infringe on, or otherwise
decrease the value of, our intellectual property rights.
22. SECURITY AND PRIVACY BREACHES COULD SUBJECT US TO LITIGATION AND LIABILITY
AND DETER CONSUMERS FROM USING OUR WEBSITES.
We could be subject to litigation and liability if third parties penetrate
our network security or otherwise misappropriate our users' personal or credit
card information. This liability could include claims for unauthorized purchases
with credit card information, impersonation or other similar fraud claims. It
could also include claims for other misuses of personal information, such as for
unauthorized marketing purposes. The need to transmit confidential information
securely has been a significant barrier to electronic commerce and
communications over the internet. Any compromise of security could deter people
from using the internet in general or, specifically, from using the internet to
conduct transactions that involve transmitting confidential information, such as
purchases of goods or services. Also, our relationships with consumers may be
adversely affected if the security measures we use to protect their personal
information prove to be ineffective. We cannot predict whether events or
developments will result in a compromise or breach of the technology we use to
protect our customers' personal information.
Furthermore, our computer servers may be vulnerable to computer viruses,
physical or electronic break ins and similar disruptions. We may need to expend
significant funds and other resources to protect against a security breach or to
alleviate problems caused by any such breaches. We may be unable to prevent or
remedy all security breaches. If any of these breaches occur, we could lose
internet advertising and visitors to our websites.
23. WE MAY FACE THE RISK OF OUR INABILITY TO FULLY UTILIZE THE INTERNET
RESULTING FROM THE INCREASED USAGE AND POTENTIAL INSTABILITY OF THE
INTERNET AND THE WORLD WIDE WEB.
The usage of the world wide web for services such as those we offer will
depend in significant part on continued rapid growth in the number of households
and commercial, educational and government institutions with access to the
internet, in the level of usage by individuals and in the number and quality of
products and services designed for use on the internet. Because usage of the
internet as a source for information, products and services is a relatively
recent phenomenon, it is difficult to predict whether the number of users drawn
to the internet will continue to increase and whether any significant market for
usage of the internet for such purposes will continue to develop and expand. We
can give you no assurance that internet usage patterns will not decline as the
novelty of the medium recedes or that the quality of products and services
offered online will improve sufficiently to continue to support user interest.
Failure of the internet to stimulate user interest and
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be accessible to a broad audience at moderate costs would jeopardize the markets
for the internet portion of our planned businesses.
Moreover, issues regarding the stability of the internet's infrastructure
remain unresolved. The rapid rise in the number of internet users and increased
transmission of audio, video, graphic and other multimedia content over the
internet has placed increasing strains on the internet's communications and
transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the internet
and could reduce the usage of the internet by businesses and individuals. In
addition, to the extent that the internet continues to experience significant
growth in the number of users and level of use without corresponding increases
and improvements in the internet infrastructure, the internet may not be able to
support the demands placed upon it by such continued growth. Any failure of the
internet to support such increasing number of users due to inadequate
infrastructure or otherwise would seriously limit the development of the
internet as a viable source of local interactive content and service, which
could materially and adversely affect the acceptance of the internet portion of
our planned businesses which would, in turn, materially and adversely affect our
financial condition and results of operations.
24. WE FACE RISKS FROM POTENTIAL GOVERNMENT REGULATION AND OTHER LEGAL
UNCERTAINTIES RELATING TO THE INTERNET.
Laws and regulations that apply to internet communications, commerce and
advertising are becoming more prevalent. The adoption of such laws could create
uncertainty in use of the internet and reduce the demand for our services.
Recently, Congress enacted legislation regarding children's privacy on the
internet. Additional laws and regulations may be proposed or adopted with
respect to the internet, covering issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. The passage
of legislation regarding user privacy or direct marketing on the internet may
reduce demand for our services on our planned internet business or limit our
ability to provide customer information to marketers. Furthermore, the growth of
electronic commerce may prompt calls for more stringent consumer protection
laws. For example, the European Union recently adopted a directive addressing
data privacy that may result in limits on the collection and use of consumer
information.
We intend our services to be available on the internet in many states and
possibly in foreign countries, and these states or foreign countries may claim
that we are required to qualify to do business in their jurisdictions. Our
failure to qualify in any such jurisdictions, if we were required to do so,
could subject us to taxes and penalties and could restrict our ability to
enforce contracts in those jurisdictions.
25. OUR OPERATIONS ARE DEPENDENT SUBSTANTIALLY ON THE SERVICES OF OUR
EXECUTIVE OFFICERS.
Our operations are dependent substantially on the services of our executive
officers, particularly Jeffrey Leader, our vice president for car wash
operations, and Alphonso Carrabis, for our car wash operations, and Sean
Michtavy, our vice president for systems operations, and Jason Levine, our chief
technology officer, for our internet related businesses. If we lose the services
of any of those four persons, the loss could have a material adverse effect on
our business and results of operations. We do not maintain key man life
insurance policies on such key employees.
26. WE ARE CONTROLLED BY OUR FOUNDERS AND PURCHASERS OF OUR SHARES WILL HAVE
NO INFLUENCE IN MANAGING OUR AFFAIRS.
Assuming the sale of all the 350,000 shares we and Millennium Capital Group
are offering, our founders own or have the right to vote approximately 93% of
our outstanding stock, giving them total
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influence over our affairs. Their influence would affect important functions,
including the election of our directors and our ability to enter into
transactions with affiliates and related parties and the approval or prevention
of any proposed merger, sale of assets or other business combination. Their
influence, thus, could prevent us from doing things that would increase our
common stock's price, or force us to do things that could lower our common
stock's price.
27. WE WILL HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS RECEIVED BY
US FROM THIS OFFERING AND THERE IS A RISK THAT WE MIGHT USE THEM
INEFFECTIVELY.
We will have broad discretion over how we use the net proceeds that we
receive from this offering, and we could spend those proceeds in ways with which
you might not agree. We cannot assure you that we will use these proceeds
effectively. We plan to use the proceeds from this offering received by us for
the purposes stated in the "Use of Proceeds" section of this prospectus. Our
business strategy includes purchases, modification and construction of car wash
facilities, and, if we cannot secure other funds for that purpose we may use a
substantial portion of the offering proceeds received by us to buy, modify or
construct only a few car wash facilities. See "Use of Proceeds."
28. WE MAY NOT SELL MANY OF THE SHARES OFFERED THEREBY RAISING INSUFFICIENT
CAPITAL FOR OUR IMMEDIATE NEEDS.
There is no minimum number of shares that we are required to sell in this
offering. Regardless of the number of shares we sell purchasers will not be
entitled to a refund of their payments. In the event that we sell less than the
250,000 shares we propose to sell in this offering, we may not be able to
develop our business and compete in the marketplace as aggressively as if more
shares were sold.
29. YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE SHARES YOU
PURCHASE.
Purchasers of the shares being sold in the offering will experience
immediate and substantial dilution in the net tangible book value of their
shares. See "Dilution." In addition, we will seek to raise additional funds
after this offering. If we raise additional funds through the issuance of equity
securities, you may experience significant additional dilution in the shares you
purchase.
30. WE MAY NOT MAINTAIN ADEQUATE GENERAL LIABILITY AND COMMERCIAL INSURANCE OR
PRODUCT LIABILITY INSURANCE TO PROTECT US FROM CLAIMS MADE AGAINST US
WHICH ARE GENERALLY COVERED BY SUCH INSURANCE.
Although we plan to carry general liability, product liability and
commercial insurance, we can give you no assurance that the insurance we secure
will be adequate to protect us against any general, commercial and/or product
liability claims. Any general, commercial and/or product liability claim which
is not covered by such policies, or is in excess of the limits of liability of
such policies, could have a material adverse effect on our financial condition.
We can give you no assurance that we will be able to secure or maintain this
insurance on reasonable terms.
31. WE MAY BECOME SUBJECT TO PENNY STOCK REGULATIONS WHICH COULD NEGATIVELY
AFFECT YOUR ABILITY TO SELL OUR COMMON STOCK OR THE PRICE YOU COULD
RECEIVE.
The SEC 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 Nasdaq). Prior
to a transaction in a penny stock, a broker/dealer is required to:
- deliver a standardized risk disclosure document prepared by the SEC that
provides information about penny stocks and the nature and level of risks
in the penny stock market;
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- provide the customer with current bid and offer quotations for the penny
stock;
- explain the compensation of the broker/dealer and its salesperson in the
transaction;
- provide monthly account statements showing the market value of each penny
stock held in the customer's account; and
- 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.
These requirements may have the effect of reducing the level of trading
activity for a stock that becomes subject to the penny stock rules. If our
shares become subject to the penny stock rules, you may find it more difficult
to sell your shares and you may receive a lesser price for your shares in any
such sale.
32. OUR OUTSTANDING COMMON STOCK MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR
SHARES WHICH YOU ARE BUYING.
We have 4,771,000 shares of our common stock presently issued and
outstanding which will not be sold in this offering. We cannot predict the
effect, if any, that sales of these outstanding shares or the availability of
those shares for sale, will have on the market prices of our common stock.
33. SINCE WE HAVE NEVER PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT
INTEND TO DO SO IN THE FORESEEABLE FUTURE, YOU WILL ONLY REALIZE AN
ECONOMIC GAIN ON YOUR INVESTMENT FROM AN APPRECIATION, IF ANY, IN THE
MARKET PRICE OF OUR COMMON STOCK.
We have never paid, and have no intentions in the foreseeable future to
pay, any dividends on our common stock. Therefore, if you purchase any shares in
this offering, in all likelihood, you will only realize a profit on your
investment if the market price of our common stock increases in value.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This prospectus includes "forward looking statements". For example,
statements included in this prospectus regarding our financial position,
business strategy and other plans and objectives for future operations, and
assumptions and predictions about future acquisitions, demand for our services
and products, supply, costs, marketing and pricing factors are all forward
looking statements. When we use words like "intend," "anticipate," "believe,"
"estimate," "plan" or "expect," we are making forward looking statements. We
believe that the assumptions and expectations reflected in such forward looking
statements are reasonable, based on information available to us on the date of
this prospectus, but we cannot assure you that these assumptions and
expectations will prove to have been correct or that we will take any action
that we may presently be planning. We have disclosed certain important factors
that could cause our actual results to differ materially from our current
expectations under "Risk Factors" and elsewhere in this prospectus. You should
understand that forward looking statements made in connection with this offering
are necessarily qualified by these factors.
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USE OF PROCEEDS
We estimate that the net proceeds to be received by us from the sale of the
shares of common stock offered hereby, and after deducting $125,000 estimated
offering expenses, will be approximately $1,375,000 if the maximum number of
250,000 shares offered by us are sold. If we pay commissions to broker/dealers
for effecting sales of our shares, the net proceeds we receive will be further
reduced by the amount of the commissions we pay. We intend to use such net
proceeds primarily for our working capital and general corporate purposes,
including payment of salaries. However, if the opportunity arises for us to
acquire, modify or construct a car wash facility and we have not secured other
funds for that purpose, we may use a portion of the net proceeds we receive from
this offering for such purpose. We will not receive any proceeds from the sale
of 100,000 shares offered hereby by one of our shareholders.
DETERMINATION OF OFFERING PRICE
We have determined the initial $6.00 offering price of the shares
arbitrarily. Such offering price is not based on the general condition of the
equities market or the valuations of other companies in our market segment.
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DILUTION
Dilution is the difference between the $6.00 purchase price you will pay
for a share and the net tangible book value of that share immediately after you
purchase it. You will experience an immediate and substantial dilution of $5.67
out of the $6.00 you pay for a share, because the net tangible book value of
your shares will immediately be reduced to 33 cents.
Our net tangible book value at May 31, 2000, is $383,970 or $0.08 per share
of common stock. Net tangible book value per share represents the amount of
total tangible assets less liabilities, divided by 4,871,000, the number of
shares of common stock outstanding at May 31, 2000. See "Description of Capital
Stock." After giving effect to the sale of 250,000 shares (in the event that all
of the shares offered by us are sold), the as adjusted net tangible book value
at May 31, 2000, would be $1,758,970 or $0.33 per share. This represents an
immediate increase in net tangible book value of $0.25 per share to the existing
shareholders and an immediate and substantial dilution of $5.67 per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Public offering price per share of common stock offered
hereby.................................................... $6.00
Net tangible book value per share before offering........... $0.08
Increase per share attributable to new investors............ $0.25
As adjusted net tangible book value per share after
offering.................................................. $0.33
Dilution per share to new investors......................... $5.67
</TABLE>
The following tables summarize the relative investments of investors
pursuant to this offering and our current shareholders, based on a per share
offering price of $6.00 before deduction of offering expenses, and assuming the
sale of only the 250,000 shares offered by us.
<TABLE>
<CAPTION>
CURRENT PUBLIC
MINIMUM SHAREHOLDERS INVESTORS TOTAL
------- ------------ ---------- ----------
<S> <C> <C> <C>
Number of Shares of Common Stock Purchased........... 4,871,000 250,000 5,121,000
Percentage of Outstanding Common Stock after
Offering........................................... 95.12 4.88 100
Gross Consideration Paid............................. $1,087,390 $1,500,000 $2,587,390
Percentage of Consideration Paid..................... 42.03 57.97 100
Average Consideration Per Share of Common Stock...... $ 0.22 $ 6.00
</TABLE>
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SECURITY HOLDERS
At July 31, 2000, there were 12 record holders of our common stock.
DIVIDEND POLICY
We have not paid, and have no current plans to pay, dividends on our common
stock. Even if we were to elect to pay any dividends, we may incur indebtedness
in the future, the terms of which may prohibit or effectively restrict dividend
payments.
PLAN OF OPERATION
The proceeds that we will receive from the sale of the 250,000 shares we
are offering, assuming that all such 250,000 shares are sold, will be used 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 will need to raise additional funds in the next twelve months to execute
our plans for acquiring, renovating and/or building car washes, and acquiring
land for some of the car washes that we hope to build. Assuming that 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 loans we can acquire or build
between ten and twenty facilities. We cannot be more precise as to the number of
facilities we can acquire or build with such loans because we do not know
whether a location we want to acquire can be leased or has to be purchased; if
purchased whether the purchase price will be required to be paid in cash or will
consist in part of deferred payments; what will be the cost of modifications to
a facility or of constructing a new facility, particularly to comply with local
zoning laws, and the size of the facility acquired, modified or constructed. If
we do not receive all or a portion of such loans 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.
We believe that revenues from our car wash operations will be our primary
source of income, followed by revenues from sales of gasoline, then from our
fast lube services and then from merchandise sales at our car wash and gas
station facilities. We cannot now estimate what will be the relative importance
to us of the amount of the revenues, if any, that we receive from our internet
related services. Nor can we at this time estimate how long it will take for us
to be profitable.
As we acquire or build car wash and fast lube/gas station facilities we
will have to employ enough additional unskilled employees to perform the car
wash services and we will also have to employ additional supervisory and
executive personnel to operate the car wash and fast lube/gas station facilities
and/or other proposed business enterprises. 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.
From inception (August 1, 1999) to May 31, 2000 we had revenues of $161,339
of which we received $118,465 from car wash services and sales of gasoline at
facilities we acquired in Oceanside and in Commack, both in New York, and
$42,874 for computer hardware and software installations for a third party by
our subsidiary. We operated the Oceanside facility solely to train our wash
attendants, cashiers and greeters. We closed that facility in May 2000 for
renovations and expect to reopen it in August 2000. The $778,822 of operating
expenses we incurred in that ten month period ending May 31, 2000 was mostly for
salaries to our employees, including the personnel we trained at the Oceanside
facility and our officers. Most of the personnel we trained at the Oceanside
facility continue to be employed by us to help with the renovation of that
facility and our other facilities not yet in operation, and in our Commack
facility. Since we have only recently commenced operations and acquiring
facilities, we do not believe that the results of our operations or our cash
flows in that ten month period are indicative of our future operations.
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BUSINESS
The following description of our business should be read in conjunction
with the information included elsewhere in this prospectus. This description
contains certain forward looking statements that involve risks and
uncertainties. See "Disclosure Regarding Forward Looking Statements" and "Risk
Factors" elsewhere in this prospectus.
OVERVIEW
We intend to operate most of our All Star car wash locations as full
service wash facilities. In full service locations, interior cleaning and
detailing are offered to the customer, together with conveyor drive through
washing and waxing, with each wash taking approximately 12 to 15 minutes. At a
full service wash, the customer must leave the automobile while the entire car
is being cleaned, inside and out. We intend to make this waiting time both
entertaining for the customer and profitable for us, by encouraging our
customers to access The Portals, computer stations strategically located in the
car wash facility.
Depending on the space available we expect to have up to five computers
available to our car wash customers at each of our full service car wash
facilities. To use a computer the customer will be asked to provide us with his
name, address and other information we may request, which will become part of
our customer data base. When such information is provided the customer will be
given a code name. Using such code the customer will be able to access our own
internet site, HaggleHouse.com. While we cannot be certain that a car wash
customer will utilize the 12 to 15 minutes while his car is being washed to use
a computer at that car wash facility, we believe that the customer will use our
computer because he will probably have nothing else to do while he waits for his
car.
We hope to generate revenues from the use of our computers in the following
ways:
- from advertising that will be displayed on our computers when they are
not used and on our HaggleHouse website;
- fees paid to us by e-commerce merchants for directing our customers to
their websites. For example, if an e-commerce company selling automobile
insurance pays us the fee we request, we will refer any customer who
wants to research automobile insurance to that company's website
providing information about the automobile insurance it sells;
- fees paid us by one or more persons for displaying their names,
advertising messages and merchandise in the cubicle in which one of our
computers will be located, and
- fees paid to us by persons who sell merchandise or services on our
HaggleHouse.com open marketplace. See "HaggleHouse.com".
Even if the customer uses our computer in the short time span while his car
is being washed the customer may not have enough time at our car wash to make
any purchase decisions or otherwise make use of our computers in a commercially
meaningful way. However, our customer will be able to access our website from
his home or from other computers and, using the code name we provided him,
complete any transaction he is interested in from such other computer.
Our internet related services that will be available at our car wash
facilities are being developed and will be directed by Jason Levine, one of our
key employees. For the past seven years Mr. Levine provided consulting services
to retail and wholesale businesses in analyzing their computer technology,
particularly to extract information from their customer and inventory data bases
for more effective marketing and greater efficiency.
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ACQUISITION AND CONSOLIDATION STRATEGY
We have acquired five sites on Long Island, NY. At the one in Commack we
commenced car wash and gasoline sales operations, by July 4, 2000. At the one in
Sayville we commenced car wash, gasoline sales and fast lube operations at the
beginning of August, 2000. At the other three locations we intend to renovate or
build car wash and fast lube operations. The other three sites are in Oceanside,
Copiague and Port Jefferson. In both Oceanside and Commack we have purchased
leases in which we are granted options to buy the properties. In Copiague we
have purchased a twenty year lease. In Sayville and Port Jefferson we purchased
the real estate. In Oceanside we have also entered into two contracts to
purchase adjacent properties. The Oceanside and Commack properties were
previously operated as gas stations, the Copiague property as a car wash, the
Sayville property as a car wash, fast lube and gas station, and the Port
Jefferson property is an abandoned gas station. We are not continuing any of the
businesses operated at those locations before we purchased them. We have filed
plans, or are preparing plans for filing, with the municipal authorities at
those three locations for construction of our new car wash and fast lube/gas
station facilities. We have also entered into a contract to acquire a thirty
year leasehold in Uniondale formerly used as a car wash. We plan to renovate the
existing buildings for use as car wash, fast lube and gas station facilities.
Uniondale is also a community on Long Island. Wherever possible we will try to
operate a fast lube facility and a gas station at each of our car washes because
we believe that the use of any one of those facilities will make it easier for
our customers to use our other services located there also. However, we may not
be able to locate fast lube or gas station facilities at some of our car wash
locations because of space limitations or local zoning restrictions.
We have commitments from five of our founders to lend us an aggregate of
$11,500,000. See "Certain Relationships and Related Transactions". Based on our
estimates we believe that such $11,500,000 will be sufficient to acquire,
renovate and/or construct car washes, fast lubes and at some sites gas stations,
at between 10 and 20 locations. To acquire, renovate and/or construct additional
car wash, fast lube/gas station sites, we will have to secure additional
financing. We cannot assure you that we will be able to secure such additional
financing or that our estimates of the number of sites we can have in operation
from the $11,500,000 to be loaned to us by five of our founders, will prove
accurate since we cannot predict what our cost will be in acquiring renovating
and/or constructing a car wash, fast lube/gas station facility.
THE PORTAL
The Portal will be a computer station designed for user friendliness and
flexibility. There will be from one to five such computer stations at each of
our full service car washes, the number depending on available space and the
anticipated number of customers. After being provided a code name a car wash
customer can either access our HaggleHouse.com website, or just view the
products and services for sale through The Portal. If our customer wants to shop
on the internet, in his search for a particular product or service, our website
will first direct him to the website of a merchant offering that product or
service who will have paid us a fee for such first direction. Our customer will,
however, not be restricted to that merchant but can from our website access the
websites of other merchants offering the same type of products. Any person will
be able to access our HaggleHouse.com website from other computers outside our
car wash locations. The other products and services we plan to offer through The
Portal, apart from our HaggleHouse website, will not be accessible outside our
car wash locations.
HaggleHouse.com
We anticipate that many of our customers will use their free time at the
car wash to utilize The Portal. Once logged in to The Portal, that customer will
be directed to our website,
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HaggleHouse.com, which is an open marketplace where people may buy, sell and
trade merchandise with no immediate online purchase commitments. We believe
HaggleHouse.com will be attractive to our customers because it allows users to
bid anonymously. All we do is provide the buyers, sellers and traders with the
technology and resources to conduct their transactions. We will generate revenue
from the website by the payment to us by both buyers and sellers of a fee for
each transaction consummated, as well as through our online advertisements.
As with all e-commerce, the greater the number of "hits" to a website, the
greater amount of money that site may charge for advertisements. We believe that
a significant additional advantage in acquiring an increasing number of full
service car washes is that it will increase the number of users of
HaggleHouse.com, thereby increasing the revenue the website may generate for us.
HaggleHouse Malls
At HaggleHouse.com, we anticipate a user being able to buy, sell or trade
any item -- large or small, from yo-yos to yachts. Each category of products
will be separately listed in different sections of our HaggleHouse website. We
refer to each such category of products as a "mall". Each HaggleHouse mall will
service an area surrounding a given All Star car wash facility. We believe
neighborhood store owners and merchants will be able to make use of the
HaggleHouse mall as an inexpensive way to advertise their merchandise and
special promotions to the users of the local All Star facility, as well as to
other neighborhood internet users who will have discovered the convenience of
shopping through our HaggleHouse website. As in a physical shopping mall,
HaggleHouse mall advertisers will be able to select locations of various sizes
and with more or less prominent "locations" in order to advertise their
merchandise. The more prominent the location and the larger the size, the higher
the "rent" an advertiser will pay to us for the location in the mall. Because
our car wash, fast lube and gas station business is automotive based, we believe
that the section of our HaggleHouse website devoted to listing automobiles and
automotive products and services for sale (our HaggleHouse "Auto Mall") will be
the one most widely used. We intend for our Haggle House Auto Mall to facilitate
viewing automobiles, appraising automobiles, electronic payments, credit
approvals, negotiating purchases and sales of automobiles and previewing
inventory. Our Auto Mall will be a true interactive negotiation, including
sound, animation, panoramas, and an ability to interact with other participants.
PROPOSED ANONYMOUS BUYING AND SELLING OF AUTOMOBILES ON THE HAGGLEHOUSE
AUTO MALL
(i) Buyers. A buyer chooses a region to search. Our database stores items
for sale to be searched regionally. This allows buyers to be able to "drive"
electronically to a "nearby" location to see items before committing to a
purchase. After a region is chosen, categories of items will be listed and the
buyer will be able to determine if the cars are listed by a private seller or by
one of our affiliated dealers. Buyers are then able to search for new or used
cars based on make, model and year. The search results are then displayed (four
or five on a page). If an ad has a picture, it will be displayed; if not, a box
with "picture not available" is displayed. A comparison is also offered to the
buyer so the buyer can view two similar items side-by-side to make a better
decision. The buyer is then able to ask the seller a question, make an offer,
store car information, or get the seller's code name, which permits the seller
to remain anonymous. By choosing one of these options, the buyer is required to
register in our system. Our system will require the buyer to enter certain of
his or her personal information and answer a questionnaire, including name,
address, e-mail address, day phone, evening phone and credit card information.
The buyer will choose on the questionnaire the means by which dealers and
sellers can contact the buyer (by fax, HaggleHouse message bin only, e-mail,
phone). After the buyer confirms all of the information on the confirmation
page, he/she is asked to choose a login name (code name) and a password. The
login name is meant to hide the identity of the buyer to the sellers. Code names
of buyers will be different from the code names of sellers to
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<PAGE> 21
assure anonymity. If the buyers have any questions, they are able to click a
link and open a form. The form allows the buyer to fill in his/her code name and
questions. As soon as the buyer indicates any interest, the buyer is registered
by our system as someone who has buying interest in the region. This is the
information that will be forwarded to participating dealers. By inquiring about
an automobile, the buyer could get a response from every member dealer with a
better or similar deal.
The buyer can also offer or "bid" on the car immediately and the
information will be sent to the dealer or private seller directly. The buyer may
click on a link that opens another form that has fields to enter the buyer's
code name and offered amount. The buyers are told they will receive a response
within 24 hours in our system via a message box. Each buyer will get their own
message box and at login have the ability to check their messages. The buyer
also has the ability to store a vehicle in his/her message box for further
consideration and comparisons. The item under consideration is stored there for
30 days and is removed automatically when 30 days expire or when the ad is
removed by the seller.
If the buyer is happy with the initial listed guaranteed price, or is happy
with a response, he/she can click on the "get ID" icon that will allow the buyer
to identify the seller by code name.
(ii) Individual Private Sellers. For a seller to post an ad in our system
we will require registration. The seller logs into our system via a "to place an
ad" link from our home page. This page will offer a form that requests all of
the information our company needs: name, address, e-mail address, day phone,
evening phone and credit card information. After reviewing the confirmation
page, the seller chooses a code name and a password. The following page is the
ad form. Each seller fills in his/her code names and the vehicle make, model,
price and year. There is an additional notes field that allows the seller to
type in a detailed description of the auto, including options, transmission,
mileage and color. On this page we also offer the ability for the seller to post
a picture. In the event we take the picture at one of our car wash locations, a
diskette with the picture on it will be given to the seller, or the picture will
be e-mailed to the seller, to place the ad with the picture at the seller's
home. Once the ad is posted, the private seller may begin receiving e-mails with
questions and offers. The seller then responds to the buyer's individual message
box by logging into our site and clicking a "respond to message" link. If an
offer was given and the seller is happy with the offer, the seller may execute
the sale by clicking on the "Sell" button. At this point, the seller will be
given the real identity of the buyer via a link from the seller. The seller is
given the contact information that the buyer offered in his/her questionnaire.
An e-mail is also automatically sent to the buyers, letting them know that their
offer has been accepted and the seller will be contacting them shortly. The
seller will also be identified to the buyer in this e-mail.
The seller and buyer will each pay us a fee when the seller or the buyer
accepts the other's offer. We will collect those fees by charging the seller's
and the buyer's credit cards. We believe that such charge will be from $7.50 to
$15.00 to the seller and an identical amount to the buyer for each accepted
offer, although we may charge more or less, based on our operating experience.
We will offer a few different packages for posting an ad. Sellers may pay per ad
posted or for a "booth." Booths will come in varying sizes, allowing sellers to
list only a few items or a great number of items. Sellers may opt to use banners
or advertisements. An ad will cost a percentage of the amount of the item for
sale. We expect to charge between one and two percent, although we may charge
more or less, based on our operating experience. These charges will be collected
by charging the seller's credit card, at the time the seller registers with us
when credit card information is given.
(iii) Commercial Sellers -- Dealers. We do not sell cars. We leave that to
the dealers. We generate leads to help a dealer's business grow. When a person
using our car wash registers with us to use our computer at our car wash
location, or when a person registers in our system in order to make inquiries
about an automobile listed for sale or to secure the seller's code name to make
an offer for the listed automobile, he/she will be asked to permit us to provide
his/her name to third parties for
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<PAGE> 22
marketing purposes. Such lists will then be made available to automobile
dealers. Dealers may list as many cars from their inventory as they want to
list, at no charge. Buyers from our All Star Car Wash locations in that area, as
well as buyers who are using the internet to shop, will have immediate access to
dealers' listings. As with private sellers we will charge a dealer per ad posted
or for a booth.
When a buyer provides us with information as to the make, type, color and
other information (such as options) that such buyer is seeking to purchase, we
will provide that information together with the buyer's name and contact
information to dealers who register with us. If a dealer wants priority service
in receiving such leads and access to our special advertising opportunities, we
offer our three tier option package which lets dealers choose the service they
want.
- TIER 1 -- This is open to all dealers -- free of charge. All they need to
do is register in our Tier 1 Group and they will be informed of any and
all leads in their region. We guarantee to e-mail them a buyer's contact
information within four hours of our receipt of such information.
- TIER 2 -- For a fixed fee per month, a dealer receives priority service.
We guarantee to e-mail the dealer information about all leads in their
region within thirty minutes of our receipt of such information. We also
offer Tier 2 dealers an inventory management program which will allow
dealers to maintain up-to-date records of the vehicles in their inventory
and the use of digital picture taking equipment so that they can transmit
by computer photographs of the vehicles they are offering for sale on our
HaggleHouse Auto Mall.
- TIER 3 -- For a fixed fee per month we will provide a Tier 3 dealer the
same services and equipment that we provide to a Tier 2 dealer and in
addition, based on the information the buyer provides when he registers
with us, we will provide the Tier 3 dealer with a credit and background
report about the buyer and also provide the Tier 3 dealer with five free
monthly banner or headline advertisements on our HaggleHouse Auto Mall.
We have not yet determined the monthly charge we will ask Tier 2 and Tier 3
dealers to pay. We may also, based on our operating experience, decide to charge
dealers for our Tier 1 services. Dealers will, as will private sellers, pay us a
fee of from $7.50 to $15.00 when the dealer or a buyer accepts the other's offer
through our HaggleHouse Auto Mall.
Growth of the Internet and Online Commerce
Over the past several years, the internet has emerged as a powerful and
efficient new medium, enabling people worldwide to exchange information,
communicate and conduct business electronically. The number of people using the
internet continues to expand rapidly. The internet has become the fastest
growing communications medium in history, according to the eAdvertising Report,
a publication prepared by Advertising Age and eMarketer. The eAdvertising Report
states that the internet reached 50 million Americans in only five years, as
compared to 13 years for television, 38 years for radio and 10 years for cable
television.
Businesses have recognized the online commerce opportunity and are
increasingly using the internet to sell and distribute products and services. As
online commerce and the number of people using the internet grow, advertisers
and direct marketers are increasingly using the internet to locate customers,
advertise products or services and facilitate transactions. The eAdvertising
Report estimates that approximately $1.5 billion was spent by U.S. companies on
internet advertising worldwide in 1998, and this amount is expected to grow to
approximately $2.6 billion by the end of 1999 and to approximately $8.9 billion
in 2002. According to the eAdvertising Report, internet advertising spending
will account for approximately 1.2% of the total advertising spending in 1999
and this amount is predicted to grow to 3.4% in 2002.
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Our Management Information System
Our management information system allows for the transfer of transaction
data over the internet in real time to our corporate headquarters directly into
our accounting database. This allows for real time monitoring of each car wash
site. From the moment the car enters our car wash our information system allows
us to capture and make use of servicing, tracking and accounting information
that allows us to monitor the performance and conditions at each local facility
giving management an accurate, real time window into the ongoing operation,
enabling immediate and effective decision making.
We anticipate that each retail location will have a main computerized point
of sale (POS) system that facilitates transactions with customers. This POS
system will be connected to the car wash tunnel control system. Each retail
location may also include other transaction POS system facilities to be used for
other services offered, including lube centers and gasoline dispensers. Each
customer transaction will generate financial and inventory data that will be
stored and processed locally and also forwarded to our corporate headquarters.
We consolidate the business data gleaned from the POS systems at each
retail location at our administrative headquarters. This allows management to be
able to effect price changes, special promotions and other decisions from our
headquarters. This same technology creates current reports on our car wash
system as a whole, as well as on individual facilities. Reports on growth,
turnover time, retained customers, car wash efficiency and profit center
performance are generated with a touch of a button.
The data provided to our headquarters will come from several different
sources and must be converted so that it can be merged on a single system at our
headquarters. We believe our management information system is designed to
accomplish this task.
The data storage concept of the management information system is that of a
shared architecture (SA) database, whereby a universal and consistent database
format is designed to accommodate present applications and future technology.
The structure of this database includes standardized tags attached to each piece
of data defining its content and application. Any application can read from or
store data in the shared architecture database by using transformers, which read
these tags and translate the data between the application structures and the
shared architecture database.
For example, one of the pieces of data stored in the SA database is the
customer's name. This might be in the form of two fields, "Last Name" and "First
Name". These will be the standard data "tags" for those pieces of information.
In the POS system this same information may be called "Given Name" and
"Surname". In order to connect the POS with the SA, a small program called a
transformer is used that automatically changes the tag of "Surname" to "Last
Name" and "Given Name" to "First Name". Similarly, our accounting system might
call these same pieces of information "Name 1" and "Name 2". A similar
transformer will connect these with the SA tags.
Portal Competition
The Portal will be competing, in general, with all other internet commerce
providers for the attention of the e-commerce customer base, and in particular,
with other well established auction and bidding sites, such as E-bay.com and
Priceline.com. We will be competing, among other things, on the basis of name
recognition, availability of inventory on The Portal, the maintenance of the
security and anonymity we guarantee our users and the ability of our users to
easily navigate our sites. Due to the limited barriers to entry to the
e-commerce industry, we cannot give you any assurance that we will not encounter
significant increased competition in the future, which could limit our ability
to maintain or increase market share or maintain our profit margins (if any).
The industry in which we compete is characterized by developments requiring
rapid adaptation to provide competitive products
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<PAGE> 24
and services. We believe that increased competition within the online retail
market could result in reduced market share and increased spending on marketing
and product development, which could have a materially adverse effect on our
financial condition and operating results. Most of our competitors have
significantly greater financial, technical and marketing resources and greater
name recognition than we do. We cannot assure you that we will be able to
compete effectively with current or future competitors.
FULL SERVICE CAR WASH OPERATIONS
We intend to acquire, consolidate, modify and build car wash operations,
initially in the Greater New York metropolitan area, and to have approximately
one third of these locations also equipped with fast lube and/or gasoline
stations. We expect that some of the gasoline stations will also have
convenience stores. Our management has targeted for potential acquisition up to
200 existing and potential car washes and fast lube locations in the Greater New
York metropolitan area. Thereafter, we intend to continue to identify, acquire
and build additional prime car wash and fast lube/gas station locations. We
intend to select locations by carefully monitoring traffic volume, local
competition, neighborhood demographics, and, in the case of existing locations,
verified sales volume and price. In the event we succeed in establishing a
significant market presence in the Greater New York Metropolitan area, we intend
to expand our operations up the Northeastern corridor into New England and other
geographical areas within the United States. We can give you no assurance as to
the number of such facilities we will actually be able to acquire, build or
operate in the future, whether within or outside the Greater New York
Metropolitan Area.
ENDORSEMENTS BY SPORTS AND ENTERTAINMENT PERSONALITIES
We intend to obtain endorsement agreements with various athletes and
entertainers, each of whose names will be used to promote one or more car wash
locations, as well as the entire All Star chain, with all locations consolidated
under the "All Star" name. To further these sports entertainment efforts, we
have retained Mr. Greg Buttle, former star of the New York Jets football team
and currently President of Unique Sports & Entertainment Marketing, Inc., of
East Meadow, New York, as a consultant and our vice president for sports and
entertainment marketing.
The agreement we will offer to each such celebrity will be on the following
terms. For each car wash location where we will use the celebrity's name to
promote sales, we will pay the celebrity a one time $10,000 fee plus 10,000
shares of our common stock. For such payments we will have the right to use the
celebrity's name at a single car wash location for five years. The 10,000 shares
will be issued 5,000 shares on the first anniversary of the agreement and the
remaining 5,000 shares on the second anniversary of the agreement. One year
after the issuance of shares to the celebrity, the celebrity may, for a period
of one year, if he or she can't sell such shares in the public securities
markets for a price of $6.00 or more per share, compel us to purchase such
shares for $6.00 each. Such celebrity will, at our option, make not less than
five personal appearances at the car wash site each year. We will pay the
celebrity $1,000 plus his or her travel expenses for each appearance.
We also will establish an All Star Collectibles website through which we
will try to sell collectibles autographed by such celebrities. We will pay the
celebrities 15% of the amount by which the price for which we sell their
autographed collectible exceeds the price at which we buy the collectible.
Mr. Buttle and we have entered into such agreement for use of Mr. Buttle's
name to promote car wash sales at our Commack, Long Island car wash facility.
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The Car Care
During the 12 to 15 minutes the customer is using The Portal station, his
or her car is in the process of being attended to by our employees. On the
interior, the car is vacuumed, windows are cleaned, ashtrays are emptied, and
the dashboard is dusted. On the exterior, the car is washed, hand toweled dry
and the tires are cleaned. We intend to offer a wide range of service options,
from the "Blitz" (exterior wash only), the "Slam Dunk" (a full service wash,
with clear coat sealant, clean coat polish, chassis bath and rust inhibitor),
the "Hat Trick" (all services for the Slam Dunk plus wheel bright and tire
dressing) to the "Grand Slam" (a Hat Trick plus a wax applied by hand). In order
to provide the best wash, we intend that our facilities will use only the
highest quality equipment.
The Quick Lube/Oil Change
We estimate that one of every three of our car washes will also have a
quick lube facility which will offer multi point oil changes, draining and
flushing transmission fluid, draining and flushing brake fluid, draining and
flushing power steering fluid, flushing and filling the radiator, fuel injection
cleaning and (in some locations) state inspection. All Star operations will not
become repair services, a direction which, we believe, increases overhead and
complicates delivery of high quality service.
The Detailing Station
In combination with a full service car wash we plan to offer detailing
services, which will include, in most locations, hand washing, machine waxing,
carpet shampooing, upholstery cleaning, leather and vinyl interior dressing,
deodorizing and engine cleaning. We intend to also offer a number of other
services, such as paint touch-up, paintless dent removal and windshield repair.
The Cash-and-Carry Store
Like most car wash operations, we anticipate that our All Star locations
will feature the sale of automobile related products. However, this will serve
as just one aspect of our "retail boutique" concept. Relying on the sports
entertainment theme we plan to use our All Star car washes for event oriented
merchandising (such as basketball events and competitions at the site, hosted by
our celebrity sports and entertainment personalities). At our day to day retail
operations we intend to feature sports items, memorabilia and merchandise, and a
sports photo gallery, including autographed copies of photographs signed by our
sports and entertainment personalities.
We hope our retail operations will also play to the mid-week audience
(typically mothers with children) and the portion of the weekend audience
(typically fathers with children) that will be attracted to children's games,
novelty and collectible items (e.g., Beanie Babies, Milkie Pens, Pokemon cards
and other fad items). We intend to offer these items at reasonable market prices
because our objective will be to have the children lead the parents to our car
washes.
All of our car washes will feature enhanced food services by replacing the
industry's traditional coffee pot with high-end vending machines for cappuccino
and other revenue-producing quick-food items. In addition, our washes will offer
free advertising coffee mugs and free coffee all day to professionals in the
taxi and livery business, as well as a low cost breakfast buffet for them while
they wait for their car to be washed.
Car Care Competition
The extent and kind of competition that we face varies. The car wash
industry is highly competitive. Competition is based primarily on location,
facilities, customer service, available services and rates. Because barriers to
entry into the car wash industry are relatively low, competition may be expected
to continually arise from new sources not currently competing with us. In this
sector of our
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business we also face competition from outside the car wash industry, such as
gas stations and convenience stores that offer automated car wash services. In
some cases, these competitors may have significantly greater financial and
operating resources than we do. In our car service businesses, we face
competition from a number of sources, including regional and national chains,
gasoline stations and companies and automotive companies and specialty stores,
both regional and national.
EMPLOYEES
We presently employ 70 people all on a full time basis, including two
executive officers. Sixty five of these people are or will be managers or
assistant managers and other employees at our facilities. We anticipate adding
additional employees as we acquire additional car washes and as further needs
arise.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings, nor do we know of
any claims against us that could have a material adverse effect on us or on our
operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel Boucher.............. 54 President, Chief Executive Officer and Director
Jeffrey Leader.............. 45 Vice President -- Car Wash Operations,
Treasurer, Secretary and Director
Sean Michtavy............... 27 Vice President -- Systems Operations and
Director
Greg Buttle................. 46 Vice President -- Sports and Marketing
Bruce Bendell............... 46 Director
Michael A. Civin, Ph.D. .... 53 Director
Abraham Samuel Marrache..... 50 Director
Isaac Samuel Marrache....... 44 Director
Ely Sakhai.................. 48 Director
Harvey Glicker.............. 56 Director
</TABLE>
Daniel Boucher holds an M.A. in Communications and Media and a B.A. in
Liberal Arts from the University of Akron in Akron, Ohio. Since 1993, Mr.
Boucher has served as the Publisher and General Manager of Buy-Lines Press. In
that capacity, he has produced three weekly advertising periodicals that are
distributed from newsstands with combined circulation of in excess of 100,000
readers. He has also overseen the publication of the Korean and Spanish language
versions of Buy-Lines. From 1992 to mid 1993, Mr. Boucher was the General
Manager for Danieli & O'Keefe Associates, a computer technology industry. In
1991, he was the Vice President of Market Services, Eastern Regions for
InfoWorld, an international data group trade publication.
Jeffrey Leader has a B.A. in Business from Brooklyn College (1976). From
1992 until his recent employment with us, Mr. Leader was a principal of Enge
Collection, a garment manufacturer.
Sean Michtavy has an A.A. degree from Rancho Santiago Canyon College
(1997). Before serving as Vice President of our Radence Generation II subsidiary
in 1999, Mr. Michtavy worked as a systems analyst and programmer at Budd Van
Lines from 1998 to 1999. From 1992 to 1998, Mr. Michtavy was Western Regional
Sales Representative and Information Systems Assistant for Budd Van Lines in
Rancho Cucamonga, California.
Greg Buttle has a B.S. from Penn State University (1976) where he was
captain of the football team and an All-America linebacker. From 1976 to 1985
Mr. Buttle was a linebacker on the New York Jets football team. He was selected
to the NFL Rookie of the Year team, was selected as an all pro linebacker in the
1979-80 season, served as defensive captain and was a player representative to
the Players Association. From 1989 to the present Mr. Buttle has served as
president and chief executive officer of Unique Sports Entertainment and
Marketing, Inc., which organizes and implements celebrity driven events such as
celebrity golf tournaments, sports award dinners, celebrity fashion shows and
celebrity fund raising events. Mr. Buttle also has other diverse business
interests.
Bruce Bendell holds a B.A. in Accounting and Economics from Queens College
(1975). Mr. Bendell has been in the automotive business since 1972. Most
recently, from 1985 to the present, Mr. Bendell has been the president of Major
Automotive Group, a group of automobile dealerships with annual sales of over
$200 million. During this period, he has also been President of Major Fleet and
Leasing Corporation, a full service automobile leasing and financing company.
Since 1995, he has been Chairman of Fidelity Holdings, Inc., a publicly-traded
company involved in the ownership of retail auto dealerships and providers of
telecommunications services. In addition, Mr. Bendell has
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held memberships in numerous professional and civic associations and
organizations. He is a Director of the Queens Chamber of Commerce; a Director of
Long Island City Business Development; a Director of the Board of Managers for
the Long Island City YMCA; a member of the Queens District Attorney's Business
Advisory Council; and Chairman of the Bell Atlantic Customer Advisory Board.
Michael A. Civin, Ph.D. holds an A.B. cum laude in General Studies from
Harvard (1968), an M.A. in English from the University of Oregon (1971), an M.A.
(1985) and Ph.D. (1988) in Psychology from the Derner Institute at Adelphi
University, and a Post Doctoral Certificate in Psychoanalysis and Psychotherapy
from the Derner Institute at Adelphi University. He is a New York State licensed
Clinical Psychologist. Dr. Civin has been an Associate Clinical Professor of
Psychology at the Derner Institute since 1993, and has been on the faculty of
the Post Doctoral Program in Psychoanalysis and Psychotherapy at Derner since
1998. He was the Founder and Director of the M.A. in General Psychology at
Derner from 1995 to 1999. From 1989 to 1994, he was an Associate Professor of
Psychology at New York Institute of Technology and was Director of that
institution's Masters Program in Professional Studies. Since 1994, Dr. Civin has
been the Director of Clinical Training at the Baldwin Council against Drug
Abuse. He is currently President and Chief Executive Officer of Clocktower
Psychological Services in Roslyn, New York. In 1975 he founded an independent
management consulting firm, MC Management Consulting. From that date to the
present, Dr. Civin has consulted for dozens of businesses nationwide and
internationally. Dr. Civin has published numerous scholarly papers on use of the
internet. His book on internet psychology, Male Female Email, is published by
The Other Press.
Abraham Samuel Marrache holds an M.A., with honors, in Jurisprudence from
Oxford University in England and a Diploma in International Studies from the
University of Geneva in Switzerland. A British national, Mr. Marrache has been,
since 1996, a consultant to Chase Manhattan Bank in Spain, a representative for
the Euromony Publishing Group, a member of Impax Capital Corporation, a British
based corporation providing corporate finance advisory and strategic consulting
services, particularly in the environmental utilities sector, and a partner of
Marrache Freres Limited, a partnership which originates, structures and finances
corporate acquisitions. In 1996, he was President Designate of Chemical Banque
Suisse of Geneva, Switzerland. From 1991 to 1996, he was the Head of Private
Banking and the Promoter/President of Chemical Ahorro, S.G.I.I.C., of Madrid,
Spain. Between 1985 and 1996, he served as the Managing Director and Deputy
Manager of Chemical Bank, Madrid Branch, in Madrid, Spain. Mr. Marrache is the
translator from English to Spanish of "Introduction to the Eurocurrency Markets"
and the author of numerous articles on banking and jurisprudence. He is the
winner of the Justas Castellanas, 1993 literary prize. He is a member of the
Honourable Society of the Inner Temple of England and Wales, the Honorary
President of Associations of Oxford University Alumni of Spain and Venezuela,
and a Patron of the Salvador de Madariaga Foundation in Spain.
Isaac Samuel Marrache holds degrees from the University of London, School
of Oriental and African Studies, and an LLM from the University of London, the
London School of Economics and Political Science. Mr. Marrache is the founder
and for the past seventeen years has been the senior partner of Marrache & Co.,
a firm of barristers and solicitors, with offices in Gibraltar and London,
England. He has been a Freeman and Liveryman of the City of London, a member of
the International Bar Association and the Gibraltar Lawyers Association, a
Notary Public of Gibraltar and a Commissioner for Oaths of the Inner Temple of
England and Wales. He is a retired Sub-Lieutenant of the Royal Navy Reserves. He
is the co-author of the law digest on Gibraltar which appears in the
Martindale-Hubble directory, as well as author of numerous legal books and a
contributor to legal publications.
Mr. Abraham Samuel Marrache and Mr. Isaac Samuel Marrache are brothers.
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Ely Sakhai is a civil engineering graduate of Columbia University. He has
been engaged in the art gallery business in New York City for the last fifteen
years. He is President and Director of ACOR, a company which plans to pursue new
oil and gas leases in Australia, Canada and the United States.
Dr. Harvey Glicker holds a BS in Biology and Physics from Hunter College
(1965), and a Doctor of Dental Surgery with a John Kolmer honors award in
medical science from Temple University (1969). He obtained a specialist
certification in periodontics from New York University in 1973. Dr. Glicker
previously held staff positions at Long Island Jewish Medical Center and North
Shore University Hospital, both on Long Island. He has an established
periodontal practice on Long Island for over 25 years. Dr. Glicker has been
involved with the venture capital development of numerous private and public
companies, including Fidelity Holdings, Inc. (FKHG), Muse Technologies, Inc.
(MUZE), Preferred Voice (PFVI), Visual Data Corp. (VDAT), Edulink, Inc. (MYIQ),
US Home and Garden Corp. (USHG), World Communication Group, United Medical
Corp., Travel Link Services, Paramotor, Inc., Millennium Vu, Laser Medical and
Innercircle Pharmacal, Inc.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors currently receive
no compensation for serving on the Board of Directors.
BOARD COMMITTEES
Messrs. Daniel Boucher, Bruce Bendell and Ely Sakhai serve as the Executive
Committee of the Board of Directors. The Board of Directors does not have an
Audit or Compensation Committee and the functions of such committees are
currently performed by the entire Board of Directors.
KEY EMPLOYEES
We employ Mr. Alphonso Carrabis to supervise our car wash operations. Mr.
Carrabis is 33 years old and has had over 20 years experience in working in and
operating 13 car washes owned by him and other members of his family. All of
those car washes are located on Long Island. Mr. Carrabis and members of his
family own 3 car washes on Long Island which they have leased for operation to
unrelated third parties.
We employ Mr. Jason Levine as our Chief Technology Officer to direct our
internet related services and programs. Mr. Levine is 28 years old. For the past
seven years he has provided consulting services to retail and wholesale
businesses in analyzing their computer technology, particularly to extract
information from their customer and inventory data bases for more effective
marketing and greater efficiency.
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EXECUTIVE COMPENSATION
Mr. Daniel Boucher, our chief executive officer, received no compensation
from us in 1999. None of our other executive officers except Mr. Sean Michtavy
received any compensation from us in 1999 and in 1999 we paid Mr. Michtavy less
than $100,000.
EMPLOYMENT AGREEMENTS
Our subsidiary corporations have entered into the following employment and
consulting agreements. The agreements with Messrs. Leader and Michtavy require
them to devote full time to our affairs, while the agreement with Mr. Buttle is
a consulting agreement which requires him to devote an average of fourteen hours
a week to our affairs.
<TABLE>
<CAPTION>
NO. OF SHARES OF
COMMON STOCK TO BE
GRANTED OVER TERM OF
AGREEMENT WITHOUT COST
BASE ANNUAL TO EMPLOYEE OR
NAME TERM SALARY CONSULTANT
---- ------- ----------- ----------------------
<S> <C> <C> <C>
Jeffrey Leader......................... 3 years $85,000 None
Sean Michtavy.......................... 5 years 75,000 35,000
Greg Buttle............................ 3 years 72,000 30,000
</TABLE>
Mr. Michtavy's base annual salary increases each year with a base annual salary
of $150,000 in the fifth year of his contract. Mr. Leader's base annual salary
increases based on the number of car washes we acquire, up to $175,000 if we
acquire 29 car washes. The agreements with Messrs. Leader and Michtavy provide
for cost of living salary adjustments and additional compensation based on
increases in our earnings per share.
Mr. Daniel Boucher is employed by us part time. We do not expect to employ
him full time until our revenues and profits, if any, permit. We expect Mr.
Boucher to devote approximately 20 to 30 hours per month to our affairs. We now
pay Mr. Boucher at the following hourly rate for the time he devotes to our
affairs: $100 in cash plus shares of our common stock having a market value of
$100 at the time such services are rendered. Either we or Mr. Boucher can
terminate such employment arrangement at any time. As of the date of this
prospectus we have already issued 1,000 shares to Mr. Boucher.
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<PAGE> 31
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of July 31, 2000 with
respect to the beneficial ownership of our common stock by (i) each of our
current directors (ii) each of our officers, (iii) all of our directors and
officers as a group, (iv) each person known by us to own beneficially more than
five per cent (5%) of the outstanding shares of our common stock and (v)
Millennium Capital Group, the selling shareholder.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE ------------------------
NAME AND ADDRESS OF OF BENEFICIAL SHARES BEFORE AFTER
BENEFICIAL OWNER OWNERSHIP** OFFERED* OFFERING OFFERING**(1)
------------------- ----------------- -------- -------- -------------
<S> <C> <C> <C> <C>
Daniel Boucher*.................... 1,000 -- *** ***
Jeffrey Leader*.................... -- -- -- --
Sean Michtavy*..................... 15,000 -- *** ***
Greg Buttle........................ 5,000 -- *** ***
1900 Hempstead Turnpike
East Meadow, NY
Bruce Bendell...................... 1,000,000(2) -- 20.5 19.5
43-40 Northern Blvd.
Long Island City, NY
Michael A. Civin, Ph.D............. -- -- -- --
46 Sea Cliff Avenue
Seacliff, NY
Abraham Samuel Marrache............ 750,000(3) -- 15.4 14.6
Fortress House
9 Cathedral Square
Gibraltar
Isaac Samuel Marrache.............. 1,750,000(2)(3) -- 35.9 34.1
74 Ragged Staff
Queensway Quay
Gibraltar
Ely Sakhai......................... 750,000 -- 15.4 14.6
818 Third Avenue
New York, New York
Harvey Glicker..................... -- -- -- --
700 Hillside Avenue
New Hyde Park, New York
The Millennium III Trust........... 750,000(2)(3) -- 15.4 14.6
5 Cannon Lane
Gibraltar
Brockport Trading Limited.......... 1,250,000 -- 25.7 24.4
292A Main Street
Gibraltar
Knightdale Enterprises Limited..... 750,000(3) -- 15.4 14.6
292A Main Street
Gibraltar
The Millennium I Trust............. 250,000(2)(3) -- 5.1 4.9
5 Cannon Lane
Gibraltar
</TABLE>
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<PAGE> 32
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE ------------------------
NAME AND ADDRESS OF OF BENEFICIAL SHARES BEFORE AFTER
BENEFICIAL OWNER OWNERSHIP** OFFERED* OFFERING OFFERING**(1)
------------------- ----------------- -------- -------- -------------
<S> <C> <C> <C> <C>
Millennium Capital Group........... 100,000(4) 100,000 2.1 --
330 Motor Parkway
Suite 201
Hauppaugue, NY
3,521,000(1)(2)(3) -- 72.3 68.8
All officers and directors as a
group (11 persons)...............
</TABLE>
---------------
* The address of these persons is at our offices, 165 EAB Plaza, West Tower,
6th Floor, Uniondale, New York 11566
** The number of shares of common stock beneficially owned by each person or
entity is determined under rules promulgated by the Securities and Exchange
Commission. Under such rules, beneficial ownership includes any shares as to
which the person or entity has sole or shared voting power or investment
power. Unless otherwise indicated, each person or entity referred to above
has sole voting and investment power with respect to the shares listed. The
inclusion herein of any shares deemed beneficially owned does not constitute
an admission of beneficial ownership of such shares.
*** Less than 1%.
(1) Assuming sale of all the 350,000 shares offered hereby.
(2) Mr. Bruce Bendell's holdings do not include the 750,000 shares owned by the
Millennium III Trust and the 250,000 shares owned by The Millennium I Trust.
Mr. Bruce Bendell is the grantor and members of his immediate family are the
indirect income beneficiaries of The Millennium III Trust and of The
Millennium I Trust, but Mr. Bendell does not exercise any voting or
investment power over the shares held by such trusts, such power belonging
exclusively to the trustee. The trustee is not an affiliate of Mr. Bendell
but is an affiliate of Isaac Samuel Marrache, who, as a result of his shared
control of the trustee, may be deemed to have shared voting and investment
power over the 1,000,000 shares owned by such two trusts. Therefore such
1,000,000 shares are included among Mr. Isaac Samuel Marrache's holdings.
(3) Consists of 750,000 shares owned by Knightdale Enterprises Limited, over
which shares Abraham Samuel Marrache and Isaac Samuel Marrache have shared
investment and voting power; the shares owned by The Millennium III Trust
and the Millennium I Trust, because Mr. Isaac Samuel Marrache and his
brother (not Abraham Samuel Marrache) each own an interest in the trustee of
such trusts and therefore Mr. Isaac Samuel Marrache may be deemed to have
shared voting and investment power over our shares held by such trusts. Mr.
Isaac Samuel Marrache disclaims any beneficial interest in any of those
shares.
(4) Does not include 150,000 shares issuable upon exercise of seven year options
we intend to grant to Millennium Capital Group, exercisable at $1.50 per
share, but only in the event that we sell all 250,000 shares offered by us
hereby. Such options, if granted, will be granted for services performed for
us by the officers of Millennium Capital Group prior to this offering.
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<PAGE> 33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FOUNDERS
We have sold shares of our common stock to some of our officers, directors
and other persons, all of whom we consider to be our founders, at prices
significantly lower than the $6.00 per share price at which we are now offering
our common stock.
Prior to our incorporation in February 2000, we sold an aggregate of
1,100,000 preincorporation shares to the following four persons in the following
amounts at a price of five cents per share.
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
Bruce Bendell.............................................. 250,000
The Millennium I Trust..................................... 250,000
Brockport Trading Limited.................................. 500,000
Millennium Capital Group................................... 100,000
</TABLE>
The $55,000 aggregate purchase price for those 1,100,000 shares was paid to and
used by our subsidiaries which were then already incorporated.
In February and April 2000 we sold an aggregate of 3,750,000 shares of our
common stock to the following five persons in the following amounts, at a price
of 26 2/3 cents per share.
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
Bruce Bendell.............................................. 750,000
The Millennium III Trust................................... 750,000
Brockport Trading Limited.................................. 750,000
Knightdale Enterprises Limited............................. 750,000
Ely Sakhai................................................. 750,000
</TABLE>
These five persons have also agreed that, at our option, they will lend to our
subsidiaries up to $2,300,000 each. We intend to use the proceeds of such loans
to purchase existing car washes and fast lube/gas stations, or to construct them
at sites we will acquire. Each loan will be repayable five years after it is
made and bear interest at the rate of 10% per annum, which interest is payable
on the maturity dates of the loans. In consideration for such persons making
such loans to our subsidiaries, we will grant such lenders five year warrants
entitling them to purchase one share of our common stock for every two dollars
loaned by such person to us. Each such warrant will only be exercisable one year
after the date of grant. The exercise prices of those warrants will be as
follows:
(a) if at the time the warrant is issued our common stock is listed
for trading on a national or regional securities exchange or on Nasdaq, at
a price which is 30% below the average closing prices of our common stock,
as quoted on such exchange or on Nasdaq, for twenty consecutive trading
days prior to the date we receive the loan for which such warrant is
issued,
(b) otherwise, at an exercise price of $1.25 per share for the first
tranche of such loans made to us; at $1.75 per share for the second
tranche, with the exercise price increasing by 50 cents for each successive
tranche of such loans made to us.
At our option the warrant holders can be compelled to exercise their
warrants but only for the purpose of reducing (or satisfying) the then unpaid
balance of, and unpaid accrued interest on, the loans made to us by such warrant
holder and in connection with which such warrants were issued.
Mr. Bruce Bendell is one of our directors. He is the grantor and members of
his immediate family are the indirect income beneficiaries of both The
Millennium III Trust and The Millennium I
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<PAGE> 34
Trust, although Mr. Bendell does not exercise any voting or investment power
over the shares of our common stock owned by such trusts or over any securities
of other companies owned by such trusts. Such power is exercised exclusively by
the trustee of such trusts, who is not affiliated with Mr. Bendell.
Mr. Isaac Samuel Marrache, one of our directors, is the owner, together
with his brother (not Abraham Samuel Marrache), of a corporation which is
licensed by the Financial Services Commission of Gibraltar to act as a trustee,
and which corporation is the trustee of The Millennium III Trust and The
Millennium I Trust. Messrs. Abraham Samuel Marrache and Isaac Samuel Marrache
and two of their brothers have control of, and are the beneficial owners of
Knightdale Enterprises Limited.
Brockport Trading Limited is controlled and owned by Mr. David Winder of
Gibraltar.
Mr. Ely Sakhai is one of our directors.
EMPLOYEES AND CONSULTANTS
We or our subsidiaries have entered into employment and consulting
agreements with Messrs. Greg Buttle and Sean Michtavy, and are about to enter
into a consulting agreement with Mr. Daniel Boucher, pursuant to the terms of
which we have issued shares of our common stock to such individuals as part of
the compensation paid by us to them. Under the terms of such agreements we are
obligated to issue additional shares of our common stock to such three persons
if they continue to be employed by us. Messrs. Boucher and Michtavy are
directors and executive officers of E-Star and Mr. Buttle is an officer of the
subsidiary of E-Star which will operate our car wash and fast lube/gas station
facilities. As of August 1, 2000, as part of their compensation we issued 15,000
shares to Mr. Michtavy, 5,000 shares to Mr. Buttle and 1,000 shares to Mr.
Boucher.
In addition Mr. Michtavy owns 10% of the outstanding capital stock of the
subsidiary that will operate our Haggle House internet business. We own the
other 90% of such subsidiary's outstanding common stock.
As of July 27, 2000 such five persons have loaned us an aggregate of
$3,403,000, on account of their obligations to lend us such $11,500,000 in
aggregate. In addition Mr. Jeffrey Leader, one of our directors and executive
officers has loaned us $300,000. We used and are using the proceeds of such
loans for buying and renovating, and costs incurred for such purchases and
renovations, some of the properties we have already acquired and where we will
be operating car washes. Repayment of approximately $1,600,000 of such loans is
secured by a second mortgage (subordinate to a $1,500,000 purchase money first
mortgage) on our Sayville facility.
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<PAGE> 35
SHARES ELIGIBLE FOR FUTURE SALE
All of the 4,771,000 presently outstanding shares of our common stock which
are not offered for sale by this prospectus, are restricted securities and may
not be sold except in compliance with Rule 144 under the Securities Act. In
general, under Rule 144 a person who has owned restricted shares of common stock
beneficially for at least one year is entitled to sell, within any three month
period, a number of shares that does not exceed the greater of (i) one percent
of the total number of outstanding shares of the same class or (ii) if the
shares are quoted on Nasdaq, or on a securities exchange, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of E-Star for at least the three months immediately
preceding the sale and who has beneficially owned shares of our common stock for
at least two years is entitled to sell such shares under Rule 144 without regard
to any of these limitations.
We cannot predict the effect, if any, that sales of these outstanding
shares or the availability of those shares for sale, will have on the market
price of our common stock.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are currently authorized to issue 100,000,000 shares of common stock,
par value $.001 per share, of which 4,871,000 shares are presently issued and
outstanding. If we sell and issue an additional minimum 250,000 shares in this
offering 5,121,000 shares will be outstanding.
The holders of our common stock are entitled to one vote per share for the
election of directors and with respect to all other matters to be voted on by
shareholders. Shares of common stock do not have cumulative voting rights.
Therefore, the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors if they choose to do so and, in that
event, the holders of the remaining shares will not be able to elect any
directors. The holders of common stock are entitled to receive dividends when,
as and if declared by our Board of Directors out of legally available funds. In
the event of our liquidation, dissolution or winding up, the holders of common
stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the common stock.
Holders of shares of common stock, as such, have no conversion, preemptive or
other subscription rights, and there are no redemption provisions applicable to
the common stock.
PREFERRED STOCK
Our certificate of incorporation provides that we are authorized to issue
10,000,000 shares of "blank check" preferred stock, which may be issued from
time to time in one or more series upon authorization by our Board of Directors.
Our Board of Directors without further approval of our stockholders, is
authorized to fix any dividend rights, conversion rights, voting rights,
redemption rights and terms, liquidation preferences and any other rights,
preferences, privileges and restrictions applicable to each series of preferred
stock. The issuance of preferred stock, while providing us flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of the common
stock. Under certain circumstances, the issuance of our preferred stock could
also make it more difficult for a third party to gain control of our company,
discourage bids for our common stock at a premium or otherwise adversely affect
the price of our common stock. To date, we have not issued any preferred stock.
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<PAGE> 36
TRANSFER AGENT
The transfer agent for the common stock is , whose address is
.
PLAN OF DISTRIBUTION
ARBITRARY DETERMINATION OF OFFERING PRICE
We have determined the initial offering price of the shares arbitrarily.
The offering price is not indicative of the present or future value of our
common stock.
LIMITED STATE REGISTRATION
We will qualify or register the sales of the shares in a limited number of
states. We will not accept subscriptions from investors resident in other
states.
TERMS OF SALE OF THE SHARES
This is an initial public offering of up to 350,000 shares of our common
stock. We are offering to sell 250,000 shares and a selling shareholder is
offering to sell 100,000 shares.
We and the selling shareholder will be selling our shares on a "best
efforts" basis. The 100,000 shares it is offering will be sold by the selling
shareholder. However, the selling shareholder will not sell any shares until we
have sold all the 250,000 shares we are offering for sale. The 250,000 shares we
are offering will be sold by our officers and directors. No one has agreed to
buy any shares, and there is no assurance that any sales will be made. Even if
not all, or very few, of the 350,000 are sold, we will not refund any payments
for the shares. We and the selling shareholder have the right to accept or
reject any subscriptions for shares offered hereby in whole or in part. We will
reimburse our officers and directors for expenses incurred in connection with
the offer and sale of the shares. Our officers and directors are relying on Rule
3a4-1 of the Securities Exchange Act as a "safe harbor" from registration as a
broker/dealer in connection with the offer and sale of the shares. In order to
rely on such "safe harbor" provisions provided by Rule 3a4-1, an officer of
director must (1) not be subject to a statutory disqualification; (2) not be
compensated in connection with such selling participation by payment of
commissions or other remuneration based either directly or indirectly on such
transactions; (3) not be an associated person of a broker/dealer; and (4) (i)
restrict participation to transactions involving offer and sale of the shares,
(ii) perform substantial duties for E-Star after the close of the offering not
connected with transactions in securities, and not have been associated with a
broker or a dealer for the preceding 12 months, and not participate in selling
and offering of securities for any issuer more than once every 12 months, and
(iii) restrict participation to written communications or responses to inquiries
of potential purchasers. Our officers and directors intend to comply with the
guidelines enumerated in Rule 3a4-1.
USE OF A BROKER/DEALER
We may locate one or more broker/dealers who may offer and sell the shares
on terms acceptable to us. If we determine to use a broker/dealer, such
broker/dealer must be a member in good standing of the National Association of
Securities Dealers, Inc., and registered, if required, to conduct sales in those
states in which it would sell the shares. We and/or the selling shareholder
anticipate that we would not pay in excess of 10% as a sales commission for any
sales of the shares. If a broker/dealer were to sell shares, it is likely that
such broker/dealer would be deemed to be an underwriter of the shares as defined
in Section 2(11) of the Securities Act and we would be required to obtain a no
objection position from the National Association of Securities Dealers, Inc.,
regarding
35
<PAGE> 37
the underwriting and compensation terms entered into between us and such
broker/dealer. In addition, we would be required to file a post-effective
amendment to the registration statement of which this prospectus is a part to
disclose the name of such selling broker/dealer and the agreed underwriting and
compensation terms. We currently have no agreements or understandings with any
broker/dealer to offer shares for sale.
LEGAL MATTERS
The legality of the common stock included in this prospectus has been
passed upon for us by Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, New
York, New York.
EXPERTS
Our consolidated financial statements as of February 29, 2000 included in
this prospectus were audited by Peter C. Cosmas Co., CPAs, Independent Certified
Public Accountants, as stated in their report appearing herein and are included
in reliance upon the report of that firm given on their authority as experts in
accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Subsection 1 of Section 78.037 of the Nevada Revised Statutes (the "Nevada
Law") empowers a corporation to eliminate or limit the personal liability of a
director or officer to the corporation or its stockholders for damages for
breach of fiduciary duty as a director or officer, but such a provision must not
eliminate or limit the liability of a director or officer for (a) acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law or (b) the payment of distributions in violation of Section 78.300 of the
Nevada Law.
Our articles of incorporation limit the personal liability of our directors
and officers for damages for breach of fiduciary duty in a manner identical in
scope to that permitted under the Nevada Law. Our articles of incorporation also
provide that any repeal or modification of that provision shall apply
prospectively only.
Subsection 1 of Section 78.7502 of the Nevada Law empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise (an
"Indemnified Party"), against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by the
Indemnified Party in connection with such action, suit or proceeding if the
Indemnified Party acted in good faith and in a manner the Indemnified Party
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe the Indemnified Party's conduct was unlawful.
Subsection 2 of Section 78.7502 of the Nevada Law empowers a corporation to
indemnify any Indemnified Party who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in the capacity of an Indemnified Party against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by the Indemnified Party in connection with the defense or
settlement of such action or suit if the
36
<PAGE> 38
Indemnified Party acted under standards similar to those set forth above, except
that no indemnification may be made in respect of any claim, issue or matter as
to which the Indemnified Party shall have been adjudged to be liable to the
corporation or for amounts paid in settlement to the corporation unless and only
to the extent that the court in which such action or suit was brought determines
upon application that in view of all the circumstances the Indemnified Party is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
Section 78.7502 of the Nevada Law further provides that to the extent an
Indemnified Party has been successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to in subsection (1) or (2) described
above or in the defense of any claim, issue or matter therein, the corporation
shall indemnify the Indemnified Party against expenses (including attorneys'
fees) actually and reasonably incurred by the Indemnified Party in connection
therewith.
Subsection 1 of Section 78.751 of the Nevada Law provides that any
discretionary indemnification under Section 78.7502 of the Nevada Law, unless
ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may
be made by a corporation only as authorized in the specific case upon a
determination that indemnification of the Indemnified Person is proper in the
circumstances. Such determination must be made (a) by the stockholders, (b) by
the board of directors of the corporation by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding,
(c) if a majority vote of a quorum of such disinterested directors so orders, by
independent legal counsel in a written opinion, or (d) by independent legal
counsel in a written opinion if a quorum of such disinterested directors cannot
be obtained.
Subsection 2 of Section 78.751 of the Nevada Law provides that a
corporation's articles of incorporation or bylaws or an agreement made by the
corporation may require the corporation to pay as incurred and in advance of the
final disposition of a criminal or civil action, suit or proceeding, the
expenses of officers and directors in defending such action, suit or proceeding
upon receipt by the corporation of an undertaking by or on behalf of the officer
or director to repay the amount if it is ultimately determined by a court that
he is not entitled to be indemnified by the corporation. Said Subsection 2
further provides that the provisions of that Subsection 2 do not affect any
rights to advancement of expenses to which corporate personnel other than
officers and directors may be entitled under contract or otherwise by law.
Subsection 3 of Section 78.751 of the Nevada Law provides that
indemnification and advancement of expenses authorized in or ordered by a court
pursuant to said Section 78.751 does not exclude any other rights to which the
Indemnified Party may be entitled under the articles of incorporation or any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
for either an action in his official capacity or in another capacity while
holding his office. However, indemnification, unless ordered by a court pursuant
to Section 78.7502 or for the advancement of expenses under Subsection 2 of
Section 78.751 of the Nevada Law, may not be made to or on behalf of any
director or officer of the corporation if a final adjudication establishes that
his or her acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action. Additionally, the
scope of such indemnification and advancement of expenses shall continue as to
an Indemnified Party who has ceased to hold one of the positions specified
above, and shall inure to the benefit of his or her heirs, executors and
administrators.
Section 78.752 of the Nevada Law empowers a corporation to purchase and
maintain insurance or make other financial arrangements on behalf of an
Indemnified Party for any liability asserted against such person and liabilities
and expenses incurred by such person in his or her capacity as an Indemnified
Party or arising out of such person's status as an Indemnified Party whether or
not the corporation has the authority to indemnify such person against such
liability and expenses.
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<PAGE> 39
Our bylaws provide for indemnification of Indemnified Parties substantially
identical in scope to that permitted under the Nevada Law. Such bylaws provide
that the expenses of our directors and officers incurred in defending any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, must be paid by us as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of such director or officer to repay all amounts so
advanced if it is ultimately determined by a court of competent jurisdiction
that the director or officer is not entitled to be indemnified by us.
We have not yet obtained a contract for insurance coverage under which we
and certain Indemnified Parties (including our directors and officers) are
indemnified under certain circumstances with respect to litigation and other
costs and liabilities arising out of actual or alleged misconduct of such
Indemnified Parties. We may secure such a contract of insurance after the
completion of this offering and in addition, we may enter into indemnification
agreements with our directors and officers that require us to indemnify such
directors and officers to the fullest extent permitted by applicable provisions
of Nevada law, subject to amounts paid by insurance.
The above described provisions relating to the indemnification of directors
and officers are sufficiently broad to permit the indemnification of such
persons in certain circumstances against liabilities (including reimbursement of
expenses incurred) arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors and officers, and to persons controlling our
company pursuant to the foregoing provisions, we have been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
As of the date of this prospectus, in order for our common stock to be
quoted on the Bulletin Board, we will become subject to the reporting
requirements of the Securities and Exchange Act. In accordance with the
Securities and Exchange Act, we have and will continue to file reports, proxy
statements and other information with the Commission. Reports and other
information filed by us may be inspected and copied at the public reference
facilities of the Commission in Washington, D.C. Copies of such materials can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. We intend to furnish our shareholders with annual reports containing
audited financial statements and such other periodic reports as we deem
appropriate or as may be required by law.
We will provide without charge to each person who receives this prospectus,
upon written or oral request of such person, a copy of any of the information
that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference. Such requests should be directed by mail
to Mr. Jeffrey Leader, Secretary, E-Star Holdings, Inc., 165 EAB Plaza, West
Tower, 6th Floor, Uniondale, NY 11566, or by telephone at (516) 522-2725.
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<PAGE> 40
We have filed with the Commission a registration statement on Form SB-2 and
all schedules and exhibits thereto under the Securities Act with respect to the
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the registration statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information with respect to us and this offering, reference is made to
such registration statement, including the exhibits filed therewith, which may
be inspected without charge at the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of the registration statement may
be obtained from the Commission at its principal office upon payment of
prescribed fees. Statements contained in this prospectus as to the contents of
any contract or other document are not necessarily complete and, where the
contract or other document has been filed as an exhibit to the registration
statement, each such statement is qualified in all respects by reference to the
applicable document filed with the Commission.
39
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
E-Star Holdings, Inc.
We have audited the accompanying consolidated balance sheet of E-Star
Holdings, Inc. (a development stage enterprise) and subsidiaries as of February
29, 2000 and the related consolidated statement of operations, stockholders'
equity and cash flow from August 1, 1999 (inception date) to February 29, 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 E-Star Holdings, Inc. (a
development stage enterprise) and subsidiaries as of February 29, 2000 and the
results of their operations and their cash flow from August 1, 1999 (inception
date) to February 29, 2000 in conformity with generally accepted accounting
principles.
Peter C. Cosmas Co. CPAs
New York, New York
March 28, 2000, except for Note 10
June 23, 2000
F-1
<PAGE> 42
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
FEBRUARY 29, 2000
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and Cash equivalents................................. $1,041,095
Accounts Receivable....................................... 6,787
Deposits.................................................. 177,500
Prepaid expense........................................... 6,302
----------
Total current assets.............................. 1,231,684
Property and equipment, net................................. 209,357
Security deposits........................................... 12,705
----------
Total assets...................................... $1,453,746
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable -- stockholders.......................... $ 485,104
Accounts payable....................................... 16,186
Accrued liabilities.................................... 106,000
----------
Total current liabilities......................... 607,290
Minority interest in consolidated subsidiary
Stockholders' equity
Common stock, par value $0.001; 100,000,000 shares
authorized ; 4,860,000 shares outstanding................. 4,860
Additional paid-in capital.................................. 1,060,085
Accumulated deficit......................................... (218,489)
----------
Total stockholders' equity........................ 846,456
----------
Total liabilities and stockholders' equity........ $1,453,746
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 43
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
AUGUST 1, 1999 (INCEPTION DATE) TO FEBRUARY 29, 2000
<TABLE>
<S> <C>
Revenues.................................................... $ 41,087
Operating costs and expenses................................ 255,293
---------
Loss from operations................................... (214,206)
Interest expense............................................ 4,283
---------
Net loss.................................................... (218,489)
=========
Basic and diluted net loss per common share................. $ (0.34)
=========
Weighted average shares used in basic and diluted net loss
per share calculation..................................... 647,753
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 44
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FEBRUARY 29, 2000
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID IN ACCUMULATED STOCKHOLDERS
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock, at
inception........................... 1,100,000 $1,100 $ 53,900 $ $ 55,000
Issuance of common stock, pursuant to
a private placement, net of
expense............................. 3,750,000 3,750 946,195 949,945
Stock based compensation.............. 10,000 10 59,990 60,000
Net Loss.............................. (218,489) (218,489)
--------- ------ ---------- --------- ---------
4,860,000 $4,860 $1,060,085 $(218,489) $ 846,456
========= ====== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 45
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
AUGUST 1, 1999 (INCEPTION DATE) TO FEBRUARY 29, 2000
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (218,489)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization.......................... 1,032
Stock based compensation............................... 60,000
Changes in operating assets and liabilities
Accounts receivable.................................... (6,787)
Prepaid expense........................................ (6,302)
Other assets........................................... (12,705)
Accounts payable....................................... 16,186
Accrued expenses....................................... 110,283
----------
Cash used in operating activities.................... (56,782)
----------
INVESTING ACTIVITIES
Purchase of property and equipment.......................... (21,148)
Deposits on leasehold....................................... (177,500)
Acquisition of leasehold.................................... (189,241)
----------
Cash used in investing activities...................... (387,889)
----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net................. 1,004,945
Proceeds from loans payable -- stockholders................. 480,821
----------
Cash provided by financing activities................ 1,485,766
----------
Net increase (decrease) in cash and cash equivalents........ 1,041,095
Cash and cash equivalents at beginning of period............ --
----------
Cash and cash equivalents at end of period.................. $1,041,095
==========
Supplemental Information:
Interest payments...................................... --
Income Tax payments.................................... --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 46
E-STAR HOLDINGS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of Business
E-Star Holdings, Inc. (the "Company") was incorporated in Nevada for the
purpose of acquiring, consolidating and operating full-service car wash and fast
lube operations, while simultaneously utilizing its brick and mortar (presence)
to develop its customer base and expansion of its e-commerce virtual shopping
center, Cyber kiosk. Business activities through its subsidiaries began in
August 1999.
B. Basis of Presentation
The Company and its subsidiaries have devoted their activities from
inception to February 29, 2000 to establish a new business. Planned principal
activities have not commenced and no significant revenues have been produced.
The Company has devoted its activities in raising capital, acquiring site
locations and training personnel. Thus the Company is considered a development
Stage Company under GAAP.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany account and transactions have
been eliminated.
C. Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. Cash
equivalents are carried at fair market value, which approximates cost.
D. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
E. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of its holdings of cash, cash
equivalents and marketable securities. Banking and investing with credit-worthy
financial institutions mitigates risks associated with cash, cash equivalents,
and marketable securities.
F. Property and Equipment
Fixed assets are stated at cost less accumulated depreciation and
amortization. Fixed assets are depreciated on a straight-line basis over the
estimated useful lives of the assets, which range from five to seven years.
Fixed assets purchased under capital leases are amortized on a straight-line
basis over the lesser of the estimated useful life of the asset or lease term.
Leasehold improvements are amortized using the straight-line method over the
term of the related lease or the estimated useful lives of the improvements,
whichever is less.
F-6
<PAGE> 47
E-STAR HOLDINGS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
G. Impairment of Long-lived Assets
The Company evaluates the recoverability of its long-lived assets whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Impairment is measured by comparing the carrying value
of the long-lived assets to the estimated undiscounted future cash flows
expected to result from use of the assets and their ultimate disposition. In
circumstances where impairment is determined to exist, the Company writes down
the impaired asset to its fair value based on the present value of estimated
expected future cash flows.
H. Income taxes
The Company accounts for income taxes under the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are recovered. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amounts expected to be
realized.
I. Revenue Recognition
Revenues are recognized when the services are provided.
J. Advertising Costs
The costs of advertising are expensed as incurred.
K. Net Loss Per Share
Net loss per share is calculated using the weighted average number of
common shares outstanding less the number of shares subject to repurchase.
Common stock that the company has the right to repurchase and shares associated
with outstanding stock options, warrants and convertible preferred stock are not
included in the calculation of diluted loss per share because they are
antidilutive.
L. Comprehensive Income (loss)
SFAS 130 requires the reporting of comprehensive income in addition to net
income from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial information
in the calculation of net income. The Company does not have any comprehensive
income as determined by SFAS 130.
M. Segment Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for reporting information about operating
segments in financial statements. Operating segments are defined as components
of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or chief decision
making group, in deciding how to allocate resources and in assessing
performance. The Company is a development stage enterprise and will establish
segment information when it begins operations.
F-7
<PAGE> 48
E-STAR HOLDINGS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
N. New Accounting Pronouncements
SOP 98-1 requires all costs related to the development of internal use
software other than those incurred during the application development stage to
be expensed as incurred. Costs incurred during the application development stage
are required to be capitalized and amortized over the estimated useful life of
the software. SOP 98-1 does not impact the Company's financial position or
operating results.
SOP 98-5 requires costs of start-up activities and organization costs be
expensed as incurred. All of the Company start up cost has been expensed since
inception.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB No. 101"), which provided guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 did not impact the
Company's revenue recognition policy.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133") SFAS No. 133 is effective
for fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income. The Company does not expect that the
adoption of SFAS No. 133 will have a material impact on its financial statements
because the Company does not currently hold any derivative instruments.
2. BUSINESS COMBINATIONS
The Company's subsidiaries were formed prior to the incorporation of the
Company as the holding company of these subsidiaries. All the transaction of the
subsidiaries are reflected in the consolidated financial statements from the
inception of the subsidiaries in August 1999.
There in a 10% minority interest in Radiance Generation II Inc. which
corporation is responsible for the Company's internet based operations. Since
the subsidiary operated at a loss the minority's 10% share of the loss of $6,460
is not reflected in the statement of operations. Radiance has no net book value
so there is no value reflected on the consolidated balance sheet for minority
interest.
3. FIXED ASSETS
Fixed assets, at cost, consist of the following:
<TABLE>
<S> <C>
Computer equipment.......................................... $ 5,569
Machinery and equipment..................................... 15,579
Leasehold................................................... 189,241
210,389
Less accumulated depreciation............................... 1,032
--------
Total fixed assets................................ $209,357
========
</TABLE>
4. LOANS PAYABLE -- STOCKHOLDERS
Various stockholders loaned the Company $480,821, at an interest rate of
6%, including $4,283 accrued interest at February 29, 2000. The total balance
due is $485,104.
F-8
<PAGE> 49
E-STAR HOLDINGS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENT AND CONTINGENCIES
The Company leases certain property under non-cancelable lease agreements.
Rent expense was $10,475 for the period ended February 29, 2000.
Future minimum payments consisted of the following at February 29, 2000.
<TABLE>
<S> <C>
2001.............................. $101,640
2002.............................. $ 72,000
2003.............................. $ 18,000
2004.............................. $ 0
2005.............................. $ 0
</TABLE>
6. INCOME TAXES
The Company has not recognized any income tax benefit in the accompanying
financial statements.
7. STOCKHOLDER'S EQUITY
The Company issued 1,100,000 shares of common stock for $55,000 as founders
stock.
The Company entered into five subscription agreements to raise $12,500,000.
Each subscription agreement consists of two parts. The first part of each
subscription was for each subscriber to purchase 750,000 shares of the Company's
common stock for $0.26 2/3 per share totaling $200,000. The subscription
agreements were exercised February 23, through February 28, 2000. Gross proceeds
from the aggregate sale of the 3,750,000 shares amounted to $1,000,000, expenses
were $50,055 leaving net proceeds of $949,945.
The second part of each subscription agreement required the subscriber to
loan the Company $2,300,000, as needed. The total loans will amount to
$11,500,000. No loans pursuant to subscription agreements were outstanding at
February 29, 2000. Each loan will be repayable five years after it is made and
bear interest at the rate of 10% per annum, which interest is payable on the
maturity dates of the loan. In consideration for such persons making such loans
to the Company, the Company will grant such lenders five year warrants entitling
them to purchase one share of common stock for every two dollars loaned by such
person. The maximum number of shares issuable if warrants are exercised is
5,750,000 shares or 1,150,000 shares per subscription agreement. The exercise
prices of those shares will be as follows:
(a) If at the time the warrant is issued and the common stock is
listed for trading on a national or regional securities exchange or on
Nasdaq, at a price which is 30% below the average closing prices of the
common stock, as quoted on such exchange or on Nasdaq, for twenty
consecutive trading days prior to the date the Company receives the loan
for which such warrants is issued.
(b) Other wise, at an exercise price of $1.25 per share for the first
tranche of such loans made to the Company; at $1.75 per share for the
second trench, with the exercise price increasing by 50 cents for each
successive tranche of such loans made to the Company.
At the Company's option the warrant holders can be compelled to exercise
their warrants but only for the purpose of reducing (or satisfying) the then
unpaid balance of, and unpaid accrued
F-9
<PAGE> 50
E-STAR HOLDINGS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
interest on, the loans made to the Company by such warrant holder and in
connection with which such warrants were issued.
The Company has issued 35,000 shares of stock to an employee as a signing
bonus. Upon signing the employee vested in 10,000 shares and will vest in the
remaining shares at a rate of 5,000 a year for five years. Stock based
compensation amounting to $60,000 has been recorded.
8. EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with two Employees and
Directors of the Company. The base salaries for the Vice President -- Car Wash
Operations and Vice President -- Systems Operations is $85,000 and $75,000,
respectively. In addition to base salaries, the agreements provide for a bonus
based on Earnings Per Share which is equal to the amount obtained by multiplying
the amount of Base Salary paid to employee for the calendar year preceding the
year for which EPS was calculated by the percentage from the table below that
corresponds to increased profits per share.
<TABLE>
<CAPTION>
INCREASED PROFITS PER
SHARE OF COMMON STOCK PERCENTAGE
--------------------- ----------
<S> <C>
$.01 - $ .10................. 5%
$.11 - $ .20................. 10%
$.21 - $ .30................. 20%
$.31 - $ .40................. 30%
$.41 - $ .50................. 40%
$.51 - $ .60................. 50%
$.61 - $ .70................. 70%
$.71 - $ .80................. 90%
$.81 - $ .90................. 110%
$.91 - $1.00................. 130%
</TABLE>
Under the terms of such agreements the Company is obligated to issue
additional shares of common stock to these two employees if they continue to be
employed by the company.
When the shares are issued additional compensation will be recorded at the
market price on the date of issuance.
The Company has entered into an employment agreement with the President. He
is a part-time employee paid at an hourly rate of $100 in cash plus shares of
our common stock having a market value of $100 at the time such services are
rendered, so that his salary is $200 Per Hour.
The Company has also entered into a three year consulting agreement with
the Vice President -- Sports and Marketing. His base compensation is $72,000 per
year. Under the terms of such agreements the Company is obligated to issue
additional shares of common stock. When the shares are issued additional
compensation will be recorded at the market price on the date of issuance.
9. GOVERNMENTAL REGULATIONS
The Company is governed by federal, state and local laws and regulations,
including environmental regulations, that regulate the operation of car wash
centers and the car service businesses. Car wash centers utilize cleaning agents
and waxes in the washing process that are then
F-10
<PAGE> 51
E-STAR HOLDINGS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
discharged in waste water along with oils and fluids washed off of vehicles.
Other car services such as gasoline and lubrication use a mixture of oil
derivatives and other related hazardous substances. The Company believes that
its planned practices and procedures comply with environmental regulations and
does not expect such compliance to have any material effect on the financial
condition or results of operations of the Company. Prior to the acquisition of
leasehold or real estate purchases the Company completes Phase I environmental
assessments. If conditions exist then a Phase II environmental testing and
assessments will take place. The Company believes that there are no contingent
liabilities based on the assessments that have been done. Management believes
that its current practices and procedures for the control and disposition of
such waste comply with applicable federal and state requirements.
10. SUBSEQUENT EVENTS
Subsequent to February 29, 2000 the Company acquired three additional sites
for a total consideration of $4,190,000 including assumption of $2,012,222 in
debt collateralized by the sites. The balance of the $2,177,778 acquisition cost
was financed by demand loans from the Company's founders. The Company has also
contracted to acquire one more site for a total commitment of $700,000. The
Company has available the funds to complete the acquisition from funds available
from its founders.
The Company is filing a registration statement with the Securities and
Exchange Commission relating to a proposed public offering of up to 250,000
shares of the Company's common stock. The net proceeds of $1,375 million are
expected to be used for general corporate purposes, principally working capital
and capital expenditures.
F-11
<PAGE> 52
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
MAY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 212,448
Accounts receivable....................................... 43,091
Deposits.................................................. 187,500
Prepaid expenses.......................................... 81,109
----------
Total current assets.............................. 524,148
Property and equipment, net................................. 1,787,354
Security deposits........................................... 57,070
----------
Total assets...................................... $2,368,572
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable -- stockholders.......................... $1,252,948
Accounts payable....................................... 71,148
Accrued liabilities.................................... 160,157
----------
Total current liabilities......................... 1,484,253
----------
Long term notes payable................................... 500,349
----------
Total liabilities................................. 1,984,602
----------
Minority interest in consolidated subsidiary................ --
Stockholders' equity
Common stock, par value $0.001; 100,000,000 shares
authorized; 4,871,000 shares outstanding.................. 4,871
Additional paid-in capital.................................. 1,082,519
Accumulated deficit......................................... (703,420)
----------
Total stockholders' equity........................ 383,970
----------
Total liabilities and stockholders' equity........ $2,368,572
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 53
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MAY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
Revenues.................................................... $ 120,252
---------
Operating costs and expenses................................ 523,529
Research and development.................................... 68,634
---------
Total expenses......................................... 592,163
---------
Loss before interest expense........................... (471,911)
Interest expense............................................ 13,020
---------
Net loss.................................................... (484,931)
=========
Basic and diluted net loss per common share................. $ (0.10)
=========
Weighted average shares used in basic and diluted net loss
per share calculation..................................... 4,867,333
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 54
E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (484,931)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization.......................... 15,417
Stock based compensation............................... 21,000
Changes in operating assets and liabilities
Accounts receivable.................................... (36,304)
Prepaid expenses....................................... (29,807)
Other assets........................................... (44,365)
Accounts payable....................................... 54,962
Accrued expenses....................................... 67,177
-----------
Cash used in operating activities.................... (436,851)
-----------
INVESTING ACTIVITIES
Purchase of property and equipment.......................... (50,027)
Deposits on leaseholds...................................... (10,000)
Acquisition of leaseholds................................... (1,543,387)
-----------
Cash used in investing activities...................... (1,603,414)
-----------
FINANCING ACTIVITIES
Expenses related to financing activities.................... (43,555)
Proceeds from loans......................................... 500,349
Proceeds from loans payable -- stockholders................. 754,824
-----------
Cash provided by financing activities................ 1,211,618
-----------
Net (decrease) in cash and cash equivalents................. (828,647)
Cash and cash equivalents at beginning of period............ 1,041,095
-----------
Cash and cash equivalents at end of period.................. $ 212,448
===========
Supplemental Information:
Interest payments...................................... --
Income Tax payments.................................... --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 55
E-STAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
MAY 31, 2000
1. BASIS OF PRESENTATION
The unaudited financial statements included in the Form SB-2 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form SB-2 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 period 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 three 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.
2. LEASEHOLD ACQUISITIONS
The Company completed the purchase of two additional leaseholds for
$1,440,000. These acquisitions were financed by the assumption of $500,000 of
existing debt and loans from shareholders amounting to $940,000.
3. SUBSEQUENT EVENTS
The Company completed the purchase of an additional site including land and
building for $3,000,000. The purchase was financed by two mortgages,
collateralized by the real estate.
F-15
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection 1 of Section 78.037 of the Nevada Revised Statutes (the "Nevada
Law") empowers a corporation to eliminate or limit the personal liability of a
director or officer to the corporation or its stockholders for damages for
breach of fiduciary duty as a director or officer, but such a provision must not
eliminate or limit the liability of a director or officer for (a) acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law or (b) the payment of distributions in violation of Section 78.300 of the
Nevada Law.
The Articles of Incorporation of Registrant limit the personal liability of
its directors and officers for damages for breach of fiduciary duty in a manner
identical in scope to that permitted under the Nevada Law. The Articles of
Incorporation of Registrant also provide that any repeal or modification of that
provision shall apply prospectively only.
Subsection 1 of Section 78.7502 of the Nevada Law empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise (an
"Indemnified Party"), against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by the
Indemnified Party in connection with such action, suit or proceeding if the
Indemnified Party acted in good faith and in a manner the Indemnified Party
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe the Indemnified Party's conduct was unlawful.
Subsection 2 of Section 78.7502 of the Nevada Law empowers a corporation to
indemnify any Indemnified Party who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in the capacity of an Indemnified Party against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by the Indemnified Party in connection with the defense or
settlement of such action or suit if the Indemnified Party acted under standards
similar to those set forth above, except that no indemnification may be made in
respect of any claim, issue or matter as to which the Indemnified Party shall
have been adjudged to be liable to the corporation or for amounts paid in
settlement to the corporation unless and only to the extent that the court in
which such action or suit was brought determines upon application that in view
of all the circumstances the Indemnified Party is fairly and reasonably entitled
to indemnity for such expenses as the court deems proper.
Section 78.7502 of the Nevada Law further provides that to the extent an
Indemnified Party has been successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to in subsection (1) or (2) described
above or in the defense of any claim, issue or matter therein, the corporation
shall indemnify the Indemnified Party against expenses (including attorneys'
fees) actually and reasonably incurred by the Indemnified Party in connection
therewith.
Subsection 1 of Section 78.751 of the Nevada Law provides that any
discretionary indemnification under Section 78.7502 of the Nevada Law, unless
ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may
be made by a corporation only as authorized in the specific case upon a
determination that indemnification of the Indemnified Person is proper in the
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<PAGE> 57
circumstances. Such determination must be made (a) by the stockholders, (b) by
the board of directors of the corporation by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding,
(c) if a majority vote of a quorum of such disinterested directors so orders, by
independent legal counsel in a written opinion, or (d) by independent legal
counsel in a written opinion if a quorum of such disinterested directors cannot
be obtained.
Subsection 2 of Section 78.751 of the Nevada Law provides that a
corporation's articles of incorporation or bylaws or an agreement made by the
corporation may require the corporation to pay as incurred and in advance of the
final disposition of a criminal or civil action, suit or proceeding, the
expenses of officers and directors in defending such action, suit or proceeding
upon receipt by the corporation of an undertaking by or on behalf of the officer
or director to repay the amount if it is ultimately determined by a court that
he is not entitled to be indemnified by the corporation. Said Subsection 2
further provides that the provisions of that Subsection 2 do not affect any
rights to advancement of expenses to which corporate personnel other than
officers and directors may be entitled under contract or otherwise by law.
Subsection 3 of Section 78.751 of the Nevada Law provides that
indemnification and advancement of expenses authorized in or ordered by a court
pursuant to said Section 78.751 does not exclude any other rights to which the
Indemnified Party may be entitled under the articles of incorporation or any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
for either an action in his official capacity or in another capacity while
holding his office. However, indemnification, unless ordered by a court pursuant
to Section 78.7502 or for the advancement of expenses under Subsection 2 of
Section 78.751 of the Nevada Law, may not be made to or on behalf of any
director or officer of the corporation if a final adjudication establishes that
his or her acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action. Additionally, the
scope of such indemnification and advancement of expenses shall continue as to
an Indemnified Party who has ceased to hold one of the positions specified
above, and shall inure to the benefit of his or her heirs, executors and
administrators.
Section 78.752 of the Nevada Law empowers a corporation to purchase and
maintain insurance or make other financial arrangements on behalf of an
Indemnified Party for any liability asserted against such person and liabilities
and expenses incurred by such person in his or her capacity as an Indemnified
Party or arising out of such person's status as an Indemnified Party whether or
not the corporation has the authority to indemnify such person against such
liability and expenses.
The Bylaws of Registrant provide for indemnification of Indemnified Parties
substantially identical in scope to that permitted under the Nevada Law. Such
Bylaws provide that the expenses of directors and officers of Registrant
incurred in defending any action, suit or proceeding, whether civil, criminal,
administrative or investigative, must be paid by Registrant as they are incurred
and in advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking by or on behalf of such director or officer to repay
all amounts so advanced if it is ultimately determined by a court of competent
jurisdiction that the director or officer is not entitled to be indemnified by
Registrant.
The above-described provisions relating to the indemnification of directors
and officers are sufficiently broad to permit the indemnification of such
persons in certain circumstances against liabilities (including reimbursement of
expenses incurred) arising under the Act.
Insofar as indemnification for liabilities arising under the Act may be
permitted to the directors and officers of the Registrant, and to persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
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<PAGE> 58
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all estimated costs and expenses in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts. All such expenses will be paid by
the Company.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 555
Blue sky fees and expenses.................................. 10,000*
Edgarizing, printing and engraving expenses................. 24,000*
Legal fees and expenses..................................... 75,000*
Accounting fees and expenses................................ 15,000*
Miscellaneous............................................... 445*
--------
Total.................................................. $125,000*
========
</TABLE>
---------------
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
(a) (i) Prior to its incorporation in February 2000, the Registrant sold
an aggregate of 1,100,000 shares of its common stock to four founders at a price
of 5 cents per share, as follows:
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
Bruce Bendell.............................................. 250,000
The Millennium I Trust..................................... 250,000
Brockport Trading Limited.................................. 500,000
Millennium Capital Group................................... 100,000
</TABLE>
(ii) In February the Registrant sold an aggregate of 3,750,000 shares
of its common stock to five founders at a price of 26 2/3 cents per share,
as follows:
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
Bruce Bendell.............................................. 750,000
The Millennium III Trust................................... 750,000
Brockport Trading Limited.................................. 750,000
Knightdale Enterprises Limited............................. 750,000
Ely Sakhai................................................. 750,000
</TABLE>
(iii) On February 29 and April 1, 2000 the Registrant issued an
aggregate of 21,000 shares of its common stock to two full time employees
and one part time consultant as part of the employment and consulting
compensation paid to them, as follows:
<TABLE>
<CAPTION>
DATE NO. OF SHARES
------- -------------
<S> <C> <C>
Sean Michtavy................................... 2/29/00 10,000
Sean Michtavy................................... 4/1/00 5,000
Daniel Boucher.................................. 4/1/00 1,000
Greg Buttle..................................... 4/1/00 5,000
</TABLE>
(b) There were no underwriters in such transactions nor were the securities
publicly offered. The class of persons to whom the shares were sold or issued
were founders of the Registrant, one full time employee of, and two part time
consultants to, the Registrant.
(c) See information in paragraph (a) above.
(d) All such sales and issuances were exempt from the registration
requirements of Section 5 of the Act pursuant to Section 4(2) of the Act as
transactions by an issuer not involving any public offering.
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<PAGE> 59
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3.1 Articles of Incorporation(1)
3.2 By-laws(1)
5 Opinion re legality(1)
10.1 Employment agreement with Jeffrey Leader(1)
10.2 Proposed employment agreement with Sean Michtavy(1)
10.3 Consulting Agreement with Greg Buttle(1)
23.1 Consent of Peter C. Cosmas Co., CPAs, certified public
accountants(2)
23.2 Consent of Feder Kaszovitz Isaacson Weber Skala & Bass LLP
(included in Exhibit 5)(1)
27 Financial Data Schedule(2)
</TABLE>
---------------
(1) Previously filed.
(2) Filed herewith.
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes that it will:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(a) include any prospectus required by section 10(a)(3) of the
Securities Act;
(b) Reflect in the prospectus any facts of events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(c) include any additional or changed material information on the plan
of distribution.
2. For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities 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
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such 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 such 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 such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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<PAGE> 60
POWER OF ATTORNEY
The Registrant and each person whose signature appears below hereby
appoints Daniel Boucher and Jeffrey Leader, and each of them, as
attorney-in-fact with full power of substitution, to execute in the name and on
behalf of the Registrant and each such person, individually and in each capacity
stated below, one or more amendments (including post-effective amendments) to
this Registration Statement as the attorney-in-fact acting in the premises deems
appropriate and to file any such amendment to this Registration Statement with
the Commission.
SIGNATURES
Pursuant to 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 of filing on Form SB-2 and it has duly caused this second amendment
to its registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Uniondale, State of New York, on
August 2, 2000.
E-STAR HOLDINGS, INC.
By: /s/ DANIEL BOUCHER
------------------------------------
Name: Daniel Boucher
Title: President and CEO
Pursuant to 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 indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DANIEL BOUCHER President (Principal Executive August 2, 2000
------------------------------------------------ Officer)
Daniel Boucher
/s/ JEFFREY LEADER Vice President -- Operations, August 2, 2000
------------------------------------------------ Treasurer and Secretary
Jeffrey Leader (Principal Financial and
Accounting Officer)
/s/ BRUCE BENDELL Director August 2, 2000
------------------------------------------------
Bruce Bendell
/s/ MICHAEL A. CIVIN Director August 2, 2000
------------------------------------------------
Michael A. Civin
/s/ ABRAHAM SAMUEL MARRACHE Director August 2, 2000
------------------------------------------------
Abraham Samuel Marrache
/s/ ISAAC SAMUEL MARRACHE Director August 2, 2000
------------------------------------------------
Isaac Samuel Marrache
/s/ SEAN MICHTAVY Director August 2, 2000
------------------------------------------------
Sean Michtavy
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ELY SAKHAI Director August 2, 2000
------------------------------------------------
Ely Sakhai
/s/ HARVEY GLICKER Director August 2, 2000
------------------------------------------------
Harvey Glicker
</TABLE>
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<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3.1 Articles of Incorporation(1)
3.2 By-laws(1)
5 Opinion re legality(1)
10.1 Employment agreement with Jeffrey Leader(1)
10.2 Proposed employment agreement with Sean Michtavy(1)
10.3 Consulting Agreement with Greg Buttle(1)
23.1 Consent of Peter C. Cosmas Co., CPAs, certified public
accountants(2)
23.2 Consent of Feder Kaszovitz Isaacson Weber Skala & Bass LLP
(included in Exhibit 5)(1)
27 Financial Data Schedule(2)
</TABLE>
---------------
(1) Previously filed.
(2) Filed herewith.
