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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED AUGUST 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
________________
COMMISSION FILE NUMBER 0-31217
E-STAR HOLDINGS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 06-1574303
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
165 EAB PLAZA
WEST TOWER, 6TH FLOOR
UNIONDALE, NEW YORK 11566
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(516) 522-2725
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes ___
No ___. Not applicable. This is the first such report being filed.
The number of shares outstanding of the issuer's common stock is 4,871,000 (as
of September 30, 2000)
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ORTEC INTERNATIONAL, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
QUARTER ENDED AUGUST 31, 2000
ITEMS IN FORM 10-QSB
<TABLE>
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Page
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Facing page
Part I
Item 1. Financial Statements 1
Item 2. Plan of Operation 6
Part II
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds 8
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
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E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31, February 29,
2000 2000
(Unaudited) Audited
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 398,704 $ 1,041,095
Accounts receivable 71,391 6,787
Deposits 127,500 177,500
Inventory 53,602 -
Prepaid expenses 37,900 6,302
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Total current assets 689,097 1,231,684
Property and equipment, net 6,185,697 209,357
Security deposits 66,035 12,705
Software development, net 109,220 -
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Total assets $7,050,049 $ 1,453,746
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable - stockholders $ 705,645 $ 485,104
Accounts payable 511,480 16,186
Accrued liabilities 191,349 106,000
Deferred revenue 132,379 -
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Total current liabilities 1,540,853 607,290
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Long term notes payable 6,082,300 -
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Total liabilities 7,623,153 607,290
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Minority interest in consolidated subsidiary -
Stockholders' equity
Common stock, par value $0.001; 100,000,000 shares
authorized ; 4,871,000 and 4,860,000 shares outstanding 4,871 4,860
respectively
Additional paid-in capital 982,519 1,060,085
Accumulated deficit (1,560,494) (218,489)
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Total stockholders' equity (deficit) (573,104) 846,456
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Total liabilities and stockholders' equity $7,050,049 $ 1,453,746
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Three Income and
Six Months Months Expenses from
Ended Ended inception to
August 31, August 31, August 31,
2000 2000 2000
------------------ ------------------ --------------------
<S> <C> <C> <C>
Revenues $ 2,938,385 $2,818,133 $ 2,979,472
Membership income 12,035 12,035 12,035
------------------ ------------------ --------------------
total income 2,950,420 2,830,168 2,991,507
------------------ ------------------ --------------------
Cost of sales 2,413,862 2,413,862 2,413,862
Salaries, benefits and consulting fees 870,932 703,072 918,059
Rent 87,680 74,564 98,155
Professional fees 36,467 38,817 43,917
Depreciation and amortization 85,016 69,599 86,048
Research and development 110,384 41,750 110,384
Other costs and expenses 570,432 425,881 759,641
------------------ ------------------ --------------------
Total expenses 4,174,773 3,767,545 4,430,066
------------------ ------------------ --------------------
Loss before interest expense (1,224,353) (937,377) (1,438,559)
Interest expense 117,652 104,632 121,935
------------------ ------------------ --------------------
------------------ ------------------ --------------------
Net loss (1,342,005) (1,042,009) (1,560,494)
================== ================== ====================
Basic and diluted net loss per common share $ (0.28) $ (0.21)
================== ==================
Weighted average shares used in basic and diluted 4,871,000 4,871,000
net loss per share calculation
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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E-STAR HOLDINGS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
August 1, 1999
Six Months Inception Date
Ended to
August 31, 2000 August 31, 2000
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,342,005) $ (1,560,494)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 85,016 86,048
Stock based compensation 66,000 126,000
Changes in operating assets and liabilities
Accounts receivable (64,604) (71,391)
Prepaid expenses (31,598) (37,900)
Other assets (106,932) (119,637)
Accounts payable 495,294 511,480
Accrued expenses 85,349 191,349
Deferred revenue 132,379 132,379
---------------------- -----------------------
Cash used in operating activities (681,101) (742,166)
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INVESTING ACTIVITIES
Purchase of Software (109,220) (109,220)
Deposits on leaseholds 50,000 (127,500)
Purchase of Property and equipment (6,061,356) (6,271,745)
---------------------- -----------------------
Cash used in investing activities (6,120,576) (6,508,465)
---------------------- -----------------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net (143,555) 861,390
Proceeds from loans 4,082,300 4,082,300
Proceeds from loans payable - stockholders 2,220,541 2,705,645
---------------------- -----------------------
Cash provided by financing activities 6,159,286 7,649,335
---------------------- -----------------------
Net (decrease) in cash and cash equivalents (642,391) 398,704
Cash and cash equivalents at beginning of period 1,041,095 -
---------------------- -----------------------
Cash and cash equivalents at end of period $ 398,704 $ 398,704
====================== =======================
Supplemental Information:
Interest payments -
Income Tax payments -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
E-STAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
AUGUST 31, 2000
1. Basis of Presentation
The unaudited financial statements included in the Form 10Q-SB have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q-SB and Item 310(b)
of Regulation SB. The financial information furnished herein reflects all
adjustments, which in the opinion of management are necessary for a fair
presentation of the Company's financial position, the results of operations and
cash flows for the 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.
There are no comparative financial statements for August 31, 1999, since
activities did not begin until August 1, 1999.
2. Leasehold Acquisitions
The Company completed the purchase of two additional sites including land and
building for $3,600,000. These acquisitions were financed by the assumption of
$500,000 of existing debt and mortgages amounting to $3,000,000.
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3. Subsequent events
The Company completed the purchase of two additional sites including land and
building for $1,025,000. The purchase was financed by existing loans and a
mortgage, collateralized by the real estate.
On September 26, 2000 the Company completed an SB-2 filing to raise $1,500,000.
To date the Company has received $110,000 net of expense.
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ITEM 2. PLAN OF OPERATION
The proceeds that we will receive from the sale of the 250,000
registered shares we are currently offering without engaging an underwriter,
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 hope that by July 1, 2001 our income from the operation of
our existing and to be opened car wash, gasoline and fast lube facilities will
be sufficient to meet our operating expenses.
During the twelve month period ending August 31, 2001 we plan to spend
approximately $200,000 to continue to develop our management information system
and the system which will operate our proposed computer based e-commerce. We
will try to attract the customers at our car wash sites to use our proposed
e-commerce business.
We have acquired the seven sites on Long Island, NY, listed below at
which we are operating or intend to operate car wash, gasoline sales and/or fast
lube facilities.
<TABLE>
<CAPTION>
DATE OPERATIONS
BEGAN OR ARE
ADDRESS OWNED/LEASED DATE ACQUIRED EXPIRATION OF LEASE PROJECTED TO BEGIN
<S> <C> <C> <C> <C>
Oceanside
210 Atlantic Avenue Leased. We have an January 20, 2000 May 31, 2008. We Operations
Oceanside, NY 11572 option to purchase have five 5-year commenced
this property. options to extend this November 11, 2000.
lease to May 31, 2033. Car wash and
and gasoline.
222 Atlantic Avenue Leased. We have May 1, 2000 October 31, 2004
Oceanside, NY 11572 entered into a
contract to purchase
this property.
Copiague
1191 Sunrise Highway Leased March 30, 2000 February 1, 2020 Under renovation;
Copiague, NY 11726 projected to open in
January 2001.
Car wash only. Fast
lube later.
</TABLE>
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<TABLE>
<CAPTION>
DATE OPERATIONS
BEGAN OR ARE
ADDRESS OWNED/LEASED DATE ACQUIRED EXPIRATION OF LEASE PROJECTED TO BEGIN
<S> <C> <C> <C> <C>
Commack
1103 Jericho Turnpike Leased. We have an April 4, 2000 March 2009 Except for incidental
Commack, NY 11725 option to purchase revenues prior to July
this property. 2000, full operations
commenced in July
2000. Car wash and
gasoline. Fast lube
later.
Sayville
4740-4750 Sunrise Owned. June 16, 2000 N/A Operations
Highway commenced in August
Sayville, NY 11782 2000. Car wash,
gasoline and fast lube.
Port Jefferson
103 Texaco Avenue Owned. July 14, 2000 N/A Under renovation;
Port Jefferson, NY projected to open in
11777 February 2001. Car
wash, gasoline and
fast lube.
Centerreach
2495 Middle Country Leased. September 29, December, 2030 Operations
Road 2000 commenced in
Centerreach, NY 11720 November 2000. Car
wash only.
Freeport
199 Sunrise Highway Owned October 12, 2000 N/A Under renovation;
Freeport, NY 11520 projected to open in
February 2001. Car
wash, gasoline and
fast lube.
</TABLE>
Assuming that approximately $2,000,000 of the balance of $6,830,000 of
the $11,500,000 that five of our founders have promised to lend us is received
by us, we estimate that with the proceeds of such additional $2,000,000 we can
acquire or build an additional two facilities. If we do not receive all or a
portion of such additional 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.
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As we acquire and complete construction of car wash and fast lube/gas
station facilities we will also have to employ additional supervisory and
executive personnel to operate the car wash and fast lube/gas station
facilities. We estimate that we will need from ten to thirty employees at each
of our facilities, depending on the size of the facility and whether the
facility is a car wash only or is combined with a fast lube/gas station.
PART II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(f)(1) September 26, 2000 was the effective date of the first
registration statement filed by us. The file number assigned by the Securities
and Exchange Commission to such registration statement is 333-34790.
(2) Such offering commenced on October 1, 2000.
(3) Such offering has not been terminated.
(4) The securities we registered for sale in such offering is
our common stock. We registered 350,000 shares of our common stock, 250,000 for
sale by us and 100,000 for sale by one of our stockholders. The offering price
is $6.00 per share, or an aggregate of $1,500,000 for the 250,000 shares offered
by us and an aggregate of $600,000 for the shares offered by our selling
stockholder. There is no underwriter in such offering.
(5) As of November 7, 2000 we sold 46,666 of the registered
shares for an aggregate of $279,996. Our selling stockholder cannot sell any of
its 100,000 registered shares in this offering until we have sold all of our
250,000 registered shares. We have not yet incurred any obligations to pay
commissions or finders fees for sales of our shares in the offering. We estimate
that total known expenses incurred by us in this offering aggregates
approximately $170,000 as of November 7, 2000. None of such expenses were or
will be paid, directly or indirectly, to any of our officers, directors or
shareholders. Such expenses were paid or will be paid to our attorneys and
accountants, for edgarization of our registration statement for filing with the
Securities and Exchange Commission and for printing of the prospectus.
(6) Net proceeds to us as of November 7, 2000, after deducting
such estimated expenses, will be only approximately $110,000. However, none of
the proceeds we receive from the sale of additional shares in the offering will
be used to pay such estimated expenses.
(7) We did not sell any shares in the offering in the quarter
ended August 31, 2000, so that we did not spend any of the net proceeds received
by us in that quarter.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibit No. Description
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<S> <C>
3.1 Articles of Incorporation (1)
3.2 By-Laws (1)
27.1 Financial Data Schedule *
</TABLE>
------------------------
* Filed herewith.
(1) Filed as an Exhibit to the Company's Registration Statement on Form
SB-2 (File No. 333-34790) and incorporated herein by reference.
(b) Reports on Form 8-K
We did not file any report on Form 8-K in the quarter ended August 31,
2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
Registrant:
E-STAR HOLDINGS, INC.
Date: November 10, 2000 By: /s/ Jeffrey Leader
-----------------------------------------
Jeffrey Leader
Vice President and Chief Financial
Officer
Principal Financial Officer
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