SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR
[ ] 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 0-28399
NORSTAR GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) UTAH
(I.R.S. EMPLOYER IDENTIFICATION NO.) 59-1643698
6365 NW 6TH WAY, SUITE 160, FT. LAUDERDALE FLORIDA 33309
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (954) 772-0240
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
NONE N/A
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON SHARES, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS)
CUMULATIVE PREFERRED SHARES
CLASS A PREFERRED
CLASS B PREFERRED
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent files pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X]
As of March 18, 2002, 20,743,825 shares of NorStar Group, Inc. common
stock were outstanding. The approximate aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant, based upon
the last sale price of the Common Stock reported on the Over-the-Counter
Bulletin Board was $829,753 as of March 19, 2001.
Included in this computation are shares held by directors and executive
officers of the Company and their associates as a group. Such inclusion does
signify that members of this group are "affiliates" of or controlled by the
Company.
TABLE OF CONTENTS
PART I.................................................................. 3
Item 1. Business.................................................... 3
(b) Business of the Company................................. 3
(i) Membership............................................. 3
(ii) Providers.............................................. 4
(iii) Market Overview....................................... 4
(iv) Summary of Product Research and Development............ 5
Item 2. Properties.................................................. 6
Item 102 (a) 1. Small Business Issuer engaged in significant mining
operations:................................................. 6
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II................................................................. 8
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 8
Item 6. Management's Discussion and Analysis or Plan of Operations.. 8
Item 7. Financial Statements........................................ 9
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 8
PART III................................................................ 10
Item 9. Directors and Executive Officers of the Registrant.......... 10
Item 10. Executive Compensation...................................... 11
Item 11. Security Ownership of Certain Beneficial Owners and
Management.................................................. 12
Item 12. Certain Relationships and Related Transactions.............. 12
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 13
SIGNATURES.............................................................. 14
PART I
Item 1. Business
(a) General Development of Business
NorStar Group, Inc., a Utah Corporation ("NorStar" or the
"Company") was originally formed in March 1961 as Florist
Accounting Service, Inc. The Company changed its name in 1971
to Luxor Group N.A., Inc. and in 1992 to NorStar Group, Inc.
NorStar has not been the subject of any bankruptcy,
receivership or similar proceeding. There has been no material
reclassification, merger, consolidation, or sale of a
significant amount of assets not in the ordinary course of the
Company's business. NorStar has made a number of acquisitions
over the last few years of businesses and investment
opportunities. In January, 1998, NorStar entered into an
agreement to acquire in their entirety, the Institute of
Metabolic Medicine, Metabolic Treatment Center, Inc., JBA
Medical Management, Inc., and Medical Providers of South West
Florida, Inc. In April, 1992, NorStar also acquired 680 acres
(17 gold mining claims) in Nevada. In March of 1999 NorStar
abandoned the medical venture to concentrate on its Internet
on-line business. NorStar is seeking a joint venture partner
to work its mining claims.
(b) Business of the Company: The business of NorStar is an
Internet online-community of "One Stop Shopping" for products,
entertainment, education and business services from a network
of providers. NorStar's portal provides the subscriber/member
with access to several web browsers, a directory of thousands
of stores, an Internet shopping mall, three dimensional
virtual reality chat rooms, telephone chat, forums, game
rooms, a virtual reality dating service, virtual reality
business conference rooms using virtual reality chat room
technology, specialty advertising rooms with virtual reality
activities, and global e-mail service which can be accessed
through the web anywhere in the world.
(i) Membership :
NorStar offers membership to the 100 million consumers who
currently have, or who will have some form of access to the
Internet. Consumers subscribing to NorStar's network are
offered discounts for products and services through the
Company's provider network. NorStar's strategy is to address
the trend toward rising out of pocket costs by bringing
together a provider network that offers quality products and
services at reduced prices. The Company believes that by
having access to an extensive multi-service provider network
in a region its members
will be able to receive quality services and products at less
than market prices. As a result, NorStar believes that it can
establish a market niche where the discounts obtained by the
membership will far outweigh the cost of membership to join
the NorStar network. The cost for annual family membership is
$120.00. NorStar discounts are designed not to be related in
any way to the dollar amount of purchases, volume of buying or
products so members will not be subject to any minimum
requirements or other restrictions. The member is simply being
provided these programs based on the willingness of service
and product providers to offer their services and products to
customers of the Company at a discount.
(ii) Providers :
The foundation of the Company's business will be the
development and maintenance of a network of providers
comprised of manufacturers, wholesalers, retailers and service
providers. NorStar intends that providers who participate in
the NorStar network will receive some of the following
benefits, including but not limited to: elimination of paper
order form preparation and supporting documentation, reduction
of bad debt, new customers with no additional advertising
expense, and more efficient utilization of personnel and
equipment. The national and regional marketing planned by the
Company should give providers an increased level of exposure.
The Company will also contract with reliable suppliers who
offer computer network accessible products and services. It is
the Company's objective to establish a national network of
providers within 3 years through direct contracts,
affiliations with national organizations and other regional
networks. NorStar anticipates having an appropriate number of
providers under contract and available on the net in the near
future. The distribution method of these products and services
to holders of membership will be via the Internet. No
assurances can be given that the Company will be successful in
establishing a national network. The failure to establish a
national network would have a material adverse effect on the
Company's business, financial condition and results of
operations.
(iii) Market Overview :
The market for discount products and services via the Internet
is in its infancy. The level of demand and acceptance of
discount products and services programs is dependent upon a
number of factors, including growth of consumer access to the
Internet, the Company's ability to develop and maintain
distribution channels to sell memberships to consumers,
acceptance of discounted products and services and the
willingness of service and product providers to offer their
services and products to customers at a discount. The Company
believes that competition will intensify and increase in the
future. NorStar views its primary direct competitors as AOL,
Compuserve, Prodigy, Yahoo, and GeoCities.
(iv) Summary of Product Research and Development :
NorStar's publicly announced new product and service includes
the Cybervisor(TM) which is still in the research and
development stage. NorStar filed a Trademark Application for
The "Cybervisor(TM)" a head mounted display unit with related
hardware and software INT. Class:009 The mark consists of text
letters (the Cybervisor) Serial number 75/710459. NorStar
announced that its Cybervisor (TM) IPD (Interactive Personal
Display) unit will be offered in the marketplace for home,
business and school use. NorStar plans to introduce three IPD
models: The Cybervisor (TM), The Super Cybervisor (TM), and
the Cybervisor Jr.(TM). In addition, NorStar has completed
development of a new Web based community called
"VeeAreCity.Com". VeeAreCity.Com, Inc., a Delaware corporation
and wholly-owned subsidiary of the Company ("VeeAreCity") owns
and will operate the Web site. The physical tooling developed
for the VeeAreCity Head Mounted Display ("HMD") appearance
will be owned by VeeAreCity.
The head gear will be manufactured by a third party, at the
anticipated volume levels of 100,000 units/year. VeeAreCity
estimates that it will be able to manufacture the HMD for at a
per unit cost of approximately $200. This price is subject to
change up or down based on the final product specifications.
NorStar also plans to begin construction of its "Cybernizer" a
web pager. In addition, the Cybernizer will be a Internet
navigation tool that will include such features as voice chat
and instant access to all major search engines. The estimated
cost for the development of this project is between $900,000
and $1.1 million. The source for funding the research and
development of this project will come from additional equity
and/or debt financing. No assurance can be given that the
Company will raise the necessary capital to complete this
project, or if completed that it will be accepted in the
marketplace.
NorStar has awarded distributorship agreements totaling $451
million of product to be developed over five years.
NorStar has spent approximately $72,000 during the last two
fiscal years on research and development activities.
NorStar employs five full time employees, four of whom serve
as Officers and Directors of NorStar and two clerical
personnel.
Item 2. Properties
NorStar's place of business is located at 6365 N.W. 6th Way, Fort
Lauderdale, Florida 33309. The premises is described as a CBS and steel class A
building/shared executive suite. NorStar subleases approximately 900 square feet
on a month to month tenancy from American Network Realty. Item 102 (a) 1. Small
Business Issuer engaged in significant mining operations:
NorStar acquired 680 acres (17 gold mining claims) in Nevada and is
seeking a joint venture partner to work the claims.*
Description of Property pursuant to Guide 7, Section 229.801(g) and Section
229.802(g)
The seventeen (17) lode claims are located in the Gold Mountain Mining
District of Esmeralda County, Nevada. Esmeralda County is noted only for its
mining industry. The mines located on the edge of Goldfield, Nevada have
continued to operate on a limited basis until the end of March 1992 when the
Black Hawk mine closed its underground operations. There continues to be several
leach operations in full swing.
Claim Location
The seventeen (17) unpatented claims are located 180 miles north of Las
Vegas, Nevada on state Highway 95 to Lida Junction, south to Gold Point then
south by southeast approximately 8 miles. The claims are situated in Township
8S, Range 41, Sections 11, 14, and 22. The Eastern Group (7 claims) is located
at the elevation of 6,500 to 7,000 feet and is the most mountainous area. The
Western Group (10 claims) is located on a gentle rolling terrain for the most
part. In either case walking is the only way to gain access to the greatest
portion of the claims.
Geology
The rock is primarily Tertiary age quartz monzonite. There are several
visible fault zones and you find that they contain quartz veins and stringers.
Mineralization is easily located on most of the claims and there appear to be
several areas that should be excellent prospects for geologic exploration. There
exists on the claims one (1) 250 foot adit with mineralization showing and four
(4) shafts. The deepest shaft is located on the Western Group of claims and has
been plumbed to 185 feet. Some of the underground workings have been mapped
prior to it filling with water.
Climate
The climate is arid, dry and hot in summertime and windy and cold
November through January. However, snowfall is limited and in most cases would
not interfere with mining operations.
Ore Dumps
There is a 2500 ton dump located near the main shaft. Sampling of this
dump shows that the ore lends itself to the leaching process for recovery of
gold and silver. The gold in this area runs .997 fine. There are also several
other smaller ore dumps scattered among the claims. Since ore is not complex it
can be easily extracted by the leaching method or can be transported to a mill
for crushing and processing. Conclusions
Over the years estimates of ore reserves have been made by several
geologists and mining engineers. Donald R. McGregor stated in his report that by
just stripping the mountain on which the main shaft is located would open up
approximately three and one-half million (3,500,000) tons of ore with an average
grade of .116 ounces gold per ton and .23 ounces of silver per ton. The gross
value of this area alone calculates out to over $146,000,000. Using $350.00/oz.
gold and $5.00/oz silver.
This does not take into account the eastern group of claims. The assays
from this area range from .43 ounces gold and 2.26 ounces silver per ton to .83
ounces gold and 14.06 ounces silver per ton. An extensive core drilling program
in this area could easily produce triple the values calculated for the western
group of claims.
The recovery cost for strip mining and heap leach is about $180 per
ounce. Custom milling would run approximately $220 per ounce. A mining operation
is deemed feasible particularly since the ore is not complex.
*The aforementioned investments in gold mining are for investment
purposes only and should not be construed as the core business or core business
activity of NorStar.
Item 3. Legal Proceedings
NorStar is not involved in any legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of NorStar
Group, Inc. during the fiscal year ended December 31, 2001.
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder Matters
NorStar's common stock is currently traded on the Over-The-Counter
Bulletin Board("OTCBB") under the symbol "NSTG."
The following table indicates the high and low bid sales prices for the
equity for each full quarterly period within the two most recent fiscal years
and any subsequent interim period for which financial statements are included
are as follows:
Year Quarter High Bid Low Bid
2001 1st 0.240 0.095
2001 2nd 0.200 0.060
2001 3rd 0.125 0.042
2001 4th 0.060 0.031
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2000 1st 0.85 0.43
2000 2nd 13/16 0.20
2000 3rd 7/16 0.24
2000 4th 0.85 0.85
(b) Holders
As of March 18, 2002, the approximate number of shareholders of record
of NorStar Common Stock is 257. This information was obtained from the
Company's transfer agent.
(c) Dividend
NorStar has not paid dividends on its capital stock and does not
anticipate that it will do so in the foreseeable future. NorStar intends to
retain any future earnings for reinvestment in its business. Payments of
dividends in the future will depend upon NorStar's growth, profitability,
financial condition and other factors that NorStar's Board of Directors may deem
relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion regarding NorStar and its business and
operations contains "forward-looking statements" within the meaning of Private
Securities Litigation Reform Act of 1995. Such statements consists of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof of other variations thereon or
comparable
terminology. The reader is cautioned that all forward-looking statements are
necessarily speculative and there are certain risks and uncertainties that could
cause actual events or results to differ materially from those referred to in
such forward-looking statements. NorStar does not have a policy of updating or
revising forward-looking statements and thus it should not be assumed that
silence by management of NorStar over time means that actual events are bearing
out as estimated in such forward-looking statements.
OVERVIEW
NorStar Group, Inc. was originally incorporated in the State of Utah in
March 1961 as Florist Accounting Services, Inc., a finance company that was
primarily engaged in factoring accounts receivables for florists in Utah. The
name Florist Accounting Services, Inc. was changed to Luxor Group N.S. Inc.
during 1971 and to Norstar Group, Inc during 1992.The Company was unable to
develop a profitable operation and became inactive until April 1992. During the
period from April 1992 through December 31, 1999 the Company acquired and/or
began to develop and dispose of, several businesses and certain other
investments. In 1998, the company began the development of its Internet business
which involves the creation of a portal to a cyber-city, an on-line community of
"One Stop Shopping" for products, entertainment, education and business
services. The on-line community is being developed through its two subsidiaries
VeeAreCity.com, Inc. and VeeAreCity the Burbs.com, Inc.. The portal is designed
to provide subscriber/member with access to several web browsers, a directory to
thousands of stores, three dimensional virtual reality ("VR") chat rooms, forums
and game rooms, a VR dating service, VR business conference room, specialty
advertising rooms with VR activities and global e-mails that can be accessed
through the web anywhere in the world. The company intends to generate revenues
from this business primarily through usage fees from certain of its activities
and the sale of annual memberships to consumers who will be offered discounts on
products and services through a provider network to be developed by the company.
The Company also holds mineral rights attributable to 17 claims that were
acquired for gold mines located in the Gold Mountain mining district of
Esmeralda County Nevada. However, management does not expect mining operations
to become one of the Company's core businesses. Management is attempting to find
a joint venture partner to assist the company in developing these claims.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.
Web site and development costs:
The Company accounts for costs incurred in connection with the
development of a web site in accordance with Statement of Position 98-1,
"Accounting for Costs of Computer Software Developed or Obtained for Internal
Use" and Emerging Issues Task Force Issue No. 00-2, "Accounting for Web Site
Development Costs." Accordingly, all costs incurred in planning the development
of a web site are expensed as incurred. Costs, other than general and
administrative and overhead costs, incurred in the web site application and
infrastructure development stage, which involves acquiring or developing
hardware and software to operate the web site, are capitalized. Fees paid to an
Internet service provider for hosting a web site on its server(s) connected to
the Internet are expensed over the estimated period of benefit. Other costs
incurred during the operating stage, such as training, administration and
maintenance costs, are expensed as incurred. Costs incurred during the operating
stage for upgrades and enhancements of a web site are capitalized if it is
probable that they will result in added functionality. Capitalized web site and
development costs are amortized on a straight-line basis over their estimated
useful life.
The Company capitalized costs of approximately $193,000 in 2000 and
$45,000 in prior years that were incurred in connection with the acquisition and
development of software in the application and infrastructure development stage
and the enhancement of its web sites. The Company will begin to amortize
capitalized web site and development costs when it begins to generate revenues
from sales of memberships to subscribers which management estimates will be in
the third quarter of the year ending December 31, 2002.
Impairment of long-lived assets:
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). Under SFAS
121, impairment losses on long-lived assets, such as capitalized web site and
development costs, are recognized when events or changes in circumstances
indicate that the undiscounted cash flows estimated to be generated by such
assets are less than their carrying value and, accordingly, all or a portion of
such carrying value may not be recoverable. Impairment losses are then measured
by comparing the fair value of assets to their carrying amounts.
Stock based compensation:
In accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), the
Company will recognize compensation costs as a result of the issuance of stock
options granted to employees based on the excess, if any, of the fair value of
the underlying stock at the date of grant or award (or at an appropriate
subsequent
measurement date) over the amount the employee must pay to acquire the stock.
Therefore, the Company will not be required to recognize compensation expense as
a result of any grants of stock options to employees at an exercise price that
is equivalent to or greater than fair value. The Company will also make pro
forma disclosures, as required by Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), of net income
or loss as if a fair value based method of accounting for stock options granted
to employees had been applied instead if such amounts differ materially from the
historical amounts.
In accordance with SFAS 123, the Company will also recognize the cost
of shares, options, warrants and other equity instruments issued to
non-employees as consideration for services as expense over the periods in which
the related services are rendered by a charge to compensation cost and a
corresponding credit to additional paid-in capital. Generally, cost will be
determined based on the fair value of the equity instruments at the date of
issuance. The fair value of options, warrants and similar equity instruments
will be estimated based on the Black-Scholes option-pricing model, which meets
the criteria set forth in SFAS 123, and the assumption that all of the options
or other equity instruments will ultimately vest. The effect of actual
forfeitures will be recognized as they occur.
RESULTS OF OPERATIONS:
Year ended December 31, 2001 as compared to year ended December 31,
2000.
The company did not have any revenues during either the year ending
December 31, 2001 or 2000. Management estimates that the Company will not begin
to generate revenues from sales of memberships to subscribers until the third
quarter of the year ending December 31, 2002.
During the year ended December 31, 2001, the Company's operating
expenses decreased by approximately $168,000 to approximately $383,000 from
approximately $551,000 for the year ended December 31, 2000. The primary cause
of the decrease was non-cash charges in 2001 and 2000, respectively, of
approximately $221,000 and $500,000. These non-cash charges related to (i)
amortization of unearned compensation which resulted from the issuance of stock
options to consultants relating to the agreements described below and (ii)
services, compensation and other expenses paid through the issuance of common
stock.
On April 17, 2000, the Company entered into agreements with three
consultants. Under these agreements, the consultants will, among other things,
assist the Company in finding businesses located primarily in England,
other European countries and the Northeastern section of the United States of
America that will advertise in and/or link to the Company's on-line community.
The three consultants received options to purchase a total of 1,300,000 shares
of the Company's common stock that will be exercisable at $.40 per share at any
time during the term of the consulting agreements as consideration for their
services.
The aggregate fair value of the options granted to the consultants of
$377,000 as of the date of grant, as determined based on the Black-Scholes
option-pricing model, was recorded as unearned compensation, which will be
amortized to expense over the periods in which the related services are
rendered, as required by generally accepted accounting principles in the United
States of America. The Company incurred amortization expense associated with
these agreements of approximately $141,000 and $236,000 in 2001 and 2000,
respectively. In addition, the Company satisfied $80,000 and $264,000 of
services compensation and other expenses in 2001 and 2000 ,respectively, through
the issuance of common stock. These decreases in non-cash expenses were offset
somewhat by an increase of approximately $72,000 in research and development
costs which were incurred in 2001.
As a result of the above, the Company incurred a loss of approximately
$383,000 or $.02 per common share for the year ended December 31, 2001 as
compared to approximately $551,000 or $.03 per common share for the comparable
period ended December 31, 2000. The basic weighted average common shares
outstanding were 18,924,647 and 15,777,295 for the year ended December 31, 2001
and 2000, respectively.
Liquidity and Capital Resources
NorStar's consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. However, the Company has not
generated any significant revenues on a sustained basis from its current
operations. Management estimates that the Company will not begin to generate
revenues from sales of memberships to subscribers until the third quarter of the
year ending December 31, 2002. As shown in the consolidated financial
statements, the Company has continued to incur net losses, approximately
$383,000 and $551,000 in 2001 and 2000, respectively, although a substantial
portion of the losses was attributable to non-cash charges for the fair value of
shares and stock options issued for services, compensation and other expenses.
As of December 31, 2001, the Company had a cash balance of only $2,500, a
working capital deficiency of approximately $208,000 and an accumulated deficit
of $6,397,000. Management believes that the Company will continue to incur net
losses through at least December 31, 2002 and that it will need additional
equity and/or debt financing of at least $2,000,000 to enable it to fully
develop its web services as initially planned and sustain its operations until
it can achieve profitability and generate cash flows from its operating
activities on a
recurring basis. These matters raise substantial doubt about the Company's
ability to continue as a going concern.
Management is attempting to obtain additional financing for the Company
through the issuance of equity securities, loans from financial institutions
and/or agreements with strategic partners. However, management cannot assure
that the Company will be able to sell equity securities, obtain loans from
financial institutions and/or form strategic alliances that will generate
financing on acceptable terms. If the Company is not able to obtain adequate
financing, it may have to curtail or terminate some or all of its operations.
During 2001, the Company financed its operations primarily from its existing
cash and or the proceeds of approximately $164,000 of notes from its
stockholders.
We do not believe that our business is subject to seasonal trends or
inflation. On an ongoing basis we will attempt to minimize any effect of
inflation on our operating results by controlling operating costs and whenever
possible, seeking to insure that subscription rates and usage fees reflect
increases in costs due to inflation.
The Company believes the following trends, events and uncertainties
could have a material impact on their short-term and/or long-term liquidity. The
market for Internet discount services and product programs is relatively new and
is evolving rapidly. NorStar's future growth is dependent upon its ability to
create, develop and distribute programs that are accepted by its clients as an
integral part of their business model for communicating with their targeted
audiences. Demand and market acceptance of discount products and service
programs is dependent upon a number of factors, including the growth in consumer
access to and acceptance of these programs, the willingness of service and
product providers to offer their services and products to customers of NorStar
at a discount, and NorStar's ability to develop and maintain distribution
channels to sell memberships to consumers. The failure of providers or consumers
to participate in NorStar's programs or substantial increases in the adequacy or
availability of other programs could have a material and adverse impact on
NorStar's business, operating results and financial condition. In addition,
NorStar does not have long-term contracts and needs to establish relationships
with new vendors. As a result, providers of discounted services or products to
NorStar's members may unilaterally reduce the scope of, or terminate their
relationships with NorStar. The termination of NorStar's business relationship
or a material reduction in the availability of services or products from any of
NorStar's significant providers or networks thereof or NorStar's failure to
develop significant new provider relationships would materially and adversely
affect its business, operating results and financial condition.
NorStar believes that within the market niche it seeks to develop, the following
known trends, events or uncertainties that have had or that are reasonably
expected to have a material impact on their net sales or revenues or income from
their continuing operations will include the following: (i) The market for
discounted products and services is characterized by rapid changes in
participating companies, consumers and service provider requirements and
preferences, new service and product introductions and evolving industry
standards that could render NorStar's existing service practices and
methodologies obsolete; (ii) NorStar's success will depend, in large part, on
its ability to improve its existing services, develop new services and solutions
that address the increasingly sophisticated and varied needs of NorStar's
clients, and respond to technological advances, emerging industry standards and
practices, and competitive service offerings; and (iii) NorStar may not be
successful in responding quickly, cost-effectively and sufficiently to these
developments. If NorStar is unable, for technical, financial or other reasons,
to adapt in a timely manner in response to changing market conditions or these
requirements, its business, results of operations and financial condition would
be materially adversely affected.
NORSTAR GROUP, INC AND SUBSIDIARIES
Index to Financial Statements
PAGE
Report of Independent Public Accountants F-2
Consolidated Balance Sheet
December 31, 2001 F-3
Consolidated Statements of Operations
Years Ended December 31, 2001 and 2000 F-4
Consolidated Statements of Stockholders' Equity
Years Ended December 2001 and 2000 F-5
Consolidated Statements of Cash Flows
Years Ended December 31, 2001 and 2000 F-6
Notes to Consolidated Financial Statements F-7/13
F-1
Report of Independent Public Accountants
To the Board of Directors and Stockholders
NorStar Group, Inc.
We have audited the accompanying consolidated balance sheet of NorStar Group,
Inc. and Subsidiaries as of December 31, 2001, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 2001 and 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NorStar Group, Inc.
and Subsidiaries as of December 31, 2001, and their results of operations and
cash flows for the years ended December 31, 2001 and 2000, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As further discussed in Note
2 to the consolidated financial statements, the Company's operations have
generated recurring losses, its operating activities have also been using cash
and it had a working capital deficiency and an accumulated deficit as of
December 31, 2001. Such matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
J.H. Cohn LLP
Roseland, New Jersey
March 18, 2002
F-2
NorStar Group, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 2001
Assets
Current assets - cash $ 2,486
Equipment, net of accumulated depreciation of $2,097 2,097
Capitalized web site and development costs 238,391
Mineral rights, at estimated net realizable value --
------------
Total $ 242,974
============
Liabilities and Stockholders' Equity
Current liabilities:
Noninterest bearing demand notes payable to stockholders $ 163,944
Accounts payable and accrued expenses 46,493
------------
Total liabilities 210,437
------------
Commitments and contingencies
Stockholders' equity:
Class A convertible preferred stock, par value $10 per
share; 1,000,000 shares authorized; none issued --
Class B preferred stock, par value $10 per share;
1,000,000 shares authorized; none issued --
Common stock, par value $.01 per share; 150,000,000
shares authorized; 20,743,825 shares issued and outstanding 207,438
Additional paid-in capital 6,222,590
Accumulated deficit (6,397,491)
------------
Total stockholders' equity 32,537
------------
Total $ 242,974
============
See Notes to Consolidated Financial Statements.
F-3
NorStar Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Years Ended December 31, 2001 and 2000
2001 2000
------------ ------------
Revenues $ -- $ --
------------ ------------
Operating expenses:
Selling 142,375 289,995
General and administrative 168,404 260,693
Research and development 71,799
------------ ------------
Totals 382,578 550,688
------------ ------------
Net loss $ (382,578) $ (550,688)
============ ============
Basic net loss per common share $ (.02) $ (.03)
============ ============
Basic weighted average common shares outstanding 18,924,647 15,777,295
============ ============
See Notes to Consolidated Financial Statements
F-4
NorStar Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2001 and 2000
Common Stock
----------------------- Additional
Number of Paid-in Accumulated Unearned
Shares Amount Capital Deficit Compensation Total
---------- -------- ---------- ----------- ------------ ---------
Balance, January 1, 2000 15,493,825 $154,938 $5,410,090 $(5,464,225) $ 100,803
Issuance of shares for payment
of professional and other
services 2,050,000 20,500 243,500 264,000
Effect of issuance of stock
options to consultants 377,000 $ (377,000)
Amortization of unearned com-
pensation 235,625 235,625
Proceeds from sale of shares 1,200,000 12,000 132,000 144,000
Net loss (550,688) (550,688)
---------- -------- ---------- ----------- ------------ ---------
Balance, December 31, 2000 18,743,825 187,438 6,162,590 (6,014,913) (141,375) 193,740
Issuance of shares for payment
of professional and other
services 2,000,000 20,000 60,000 80,000
Amortization of unearned com-
pensation 141,375 141,375
Net loss (382,578) (382,578)
---------- -------- ---------- ----------- ------------ ---------
Balance, December 31, 2001 20,743,825 $207,438 $6,222,590 $(6,397,491) $ -- $ 32,537
========== ======== ========== =========== ============ =========
See Notes to Consolidated Financial Statements
F-5
NorStar Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2001 and 2000
2001 2000
------------ ------------
Operating activities:
Net loss $ (382,578) $ (550,688)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Services, compensation and other expenses
paid through the issuance of common stock 80,000 264,000
Amortization of unearned compensation 141,375 235,625
Depreciation 1,398 699
Changes in operating assets and liabilities -
accounts payable and accrued expenses (19,136) 65,629
------------ ------------
Net cash provided by (used in) operating activities (178,941) 15,265
------------ ------------
Investing activities:
Web site and development costs capitalized (193,455)
Purchases of equipment (4,194)
------------
Net cash used in investing activities (197,649)
------------
Financing activities:
Proceeds from notes payable to stockholders 163,944
Repayments of notes payable to stockholders (123,309)
Net proceeds from sale of common stock 144,000
------------ ------------
Net cash provided by financing activities 163,944 20,691
------------ ------------
Net decrease in cash (14,997) (161,693)
Cash, beginning of year 17,483 179,176
------------ ------------
Cash, end of year $ 2,486 $ 17,483
============ ============
Supplemental disclosure of cash flow information:
Income taxes paid $ -- $ --
============ ============
Interest paid $ -- $ --
============ ============
See Notes to Consolidated Financial Statements
F-6
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Business:
NorStar Group, Inc. ("NorStar") was originally incorporated in the
State of Utah during March 1961 as Florist Accounting Services, Inc.
(the name Florist Accounting Services, Inc. was changed to Luxor Group
N.S. Inc. during 1971 and to NorStar Group, Inc. during 1992). As of
December 31, 2001, NorStar had two subsidiaries, VeeAreCity.com, Inc.
("VeeAreCity") and VeeAreCity The Burbs.com, Inc. ("The Burbs"), both
of which were wholly-owned. As used herein, the "Company" refers to
NorStar or NorStar together with VeeAreCity, The Burbs and/or certain
other subsidiaries that had been acquired and disposed of by NorStar
prior to December 31, 2001.
The Company was originally organized as a finance company that was
primarily engaged in factoring accounts receivable for florists in
Utah. However, the Company was unable to develop profitable financing
operations, and it became substantially inactive until April 1992.
During the period from April 1992 through December 31, 1999, the
Company acquired and/or began to develop, and disposed of, several
businesses and certain other investments.
As of December 31, 2001 and during the years ended December 31, 2001
and 2000, the Company was primarily engaged, through VeeAreCity and The
Burbs, in an attempt to develop an Internet business that it started in
1998. The Internet business involves the creation of a portal to a
cyber-city, online community of "One Stop Shopping" for products,
entertainment, education and business services. The portal is intended
to provide the subscriber/member with access to several web browsers, a
directory of thousands of stores, three dimensional virtual reality
("VR") chat rooms, forums and game rooms, a VR dating service, VR
business conference rooms, specialty advertising rooms with VR
activities and global e-mail services that can be accessed through the
web anywhere in the world. The Company intends to generate revenues
from this business primarily through usage fees from certain of its
activities and the sale of annual memberships to consumers who will be
offered discounts on products and services through a provider network
to be developed by the Company.
As of December 31, 2001, the Company also held the mineral
rights attributable to 17 claims that were acquired on April 29,
1992 for gold mines located in the Gold Mountain mining district
of Esmeralda County, Nevada (see Note 3). However, management
does not expect mining operations to become one of the Company's
core businesses. Management is attempting to find a joint
venture partner to assist the Company in developing these
claims. If a joint venture partner cannot be found, management
expects that the Company will continue to hold the claims as an
investment.
F-7
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Summary of significant accounting policies:
Basis of presentation:
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. However, the Company has not generated any
significant revenues on a sustained basis from its current
operations. Management estimates that the Company will not
begin to generate revenues from sales of memberships to
subscribers until the third quarter of the year ending
December 31, 2002. As shown in the accompanying consolidated
financial statements, the Company incurred net losses of
approximately $383,000 and $551,000 in 2001 and 2000,
respectively, although a substantial portion of the losses was
attributable to noncash charges for the fair value of shares
and stock options issued for services, compensation and other
expenses. As of December 31, 2001, the Company had a cash
balance of only $2,500, a working capital deficiency of
approximately $208,000 and an accumulated deficit of
$6,397,000. Management believes that the Company will continue
to incur net losses through at least December 31, 2002 and
that it will need additional equity and/or debt financing of
at least $2,000,000 to enable it to fully develop its web
services as initially planned and sustain its operations until
it can achieve profitability and generate cash flows from its
operating activities on a recurring basis. These matters raise
substantial doubt about the Company's ability to continue as a
going concern.
Management is attempting to obtain additional financing for
the Company through the issuance of equity securities, loans
from financial institutions and/or agreements with strategic
partners. However, management cannot assure that the Company
will be able to sell equity securities, obtain loans from
financial institutions and/or form strategic alliances that
will generate financing on acceptable terms. If the Company is
not able to obtain adequate financing, it may have to curtail
or terminate some or all of its operations.
The accompanying consolidated financial statements do not
include any adjustments related to the recoverability and
classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be
unable to continue its operations as a going concern.
Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of NorStar and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use of estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from
those estimates.
F-8
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Summary of significant accounting policies (concluded):
Equipment:
Equipment is stated at cost, net of accumulated depreciation.
Depreciation is provided using the straight-line method over
the estimated useful lives of the assets and amounted to
$1,398 and $699 in 2001 and 2000, respectively.
Web site and development costs:
The Company accounts for costs incurred in connection with the
development of a web site in accordance with Statement of
Position 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use" and Emerging Issues
Task Force Issue No. 00-2, "Accounting for Web Site
Development Costs." Accordingly, all costs incurred in
planning the development of a web site are expensed as
incurred. Costs, other than general and administrative and
overhead costs, incurred in the web site application and
infrastructure development stage, which involves acquiring or
developing hardware and software to operate the web site, are
capitalized. Fees paid to an Internet service provider for
hosting a web site on its server(s) connected to the Internet
are expensed over the estimated period of benefit. Other costs
incurred during the operating stage, such as training,
administration and maintenance costs, are expensed as
incurred. Costs incurred during the operating stage for
upgrades and enhancements of a web site are capitalized if it
is probable that they will result in added functionality.
Capitalized web site and development costs are amortized on a
straight-line basis over their estimated useful life.
The Company capitalized costs of approximately $193,000 in
2000 and $45,000 in prior years that were incurred in
connection with the acquisition and development of software in
the application and infrastructure development stage and the
enhancement of its web sites. The Company will begin to
amortize capitalized web site and development costs when it
begins to generate revenues from sales of memberships to
subscribers which management estimates will be in the third
quarter of the year ending December 31, 2002.
Impairment of long-lived assets:
The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 121"). Under SFAS 121, impairment
losses on long-lived assets, such as capitalized web site and
development costs, are recognized when
events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such
assets are less than their carrying value and, accordingly,
all or a portion of such carrying value may not be
recoverable. Impairment losses are then measured by comparing
the fair value of assets to their carrying amounts.
Advertising:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs, which are included in selling
expenses and charged to operations, were immaterial during
2001 and 2000.
F-9
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Summary of significant accounting policies (continued):
Income taxes:
The Company accounts for income taxes pursuant to the asset
and liability method which requires deferred income tax assets
and liabilities to be computed annually for temporary
differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to
the amount expected to be realized. The income tax provision
or credit is the tax payable or refundable for the period plus
or minus the change during the period in deferred tax assets
and liabilities.
Net earnings (loss) per share:
The Company presents "basic" earnings (loss) per share and, if
applicable, "diluted" earnings per share pursuant to the
provisions of Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS 128"). Basic earnings (loss)
per share is calculated by dividing net income or loss by the
weighted average number of shares outstanding during each
period. The calculation of diluted earnings per share is
similar to that of basic earnings per share, except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if all
potentially dilutive common shares, such as those issuable
upon the exercise of stock options, were issued during the
period. Diluted per share amounts have not been presented in
the accompanying consolidated statements of operations because
the Company had a net loss in 2001 and 2000 and, accordingly,
the assumed effects of the exercise of options that were
granted to consultants in April 2000 and expired in April 2002
(see Note 8) would have been anti-dilutive.
Stock based compensation:
In accordance with the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), the Company will recognize compensation
costs as a result of the issuance of stock options granted to
employees based on the excess, if any, of the fair value of
the underlying stock at the date of grant or award (or at an
appropriate subsequent measurement date) over the amount the
employee must pay to acquire the stock. Therefore, the
Company will not be required to recognize compensation expense
as a result of any grants of stock options to employees at an
exercise price that is equivalent to or greater than fair
value. The Company will also make pro forma disclosures, as
required by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
of net income or loss as if a fair value based method of
accounting for stock options granted to employees had been
applied instead if such amounts differ materially from the
historical amounts.
F-10
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Summary of significant accounting policies (concluded):
Stock based compensation (concluded):
In accordance with SFAS 123, the Company will also recognize
the cost of shares, options, warrants and other equity
instruments issued to nonemployees as consideration for
services as expense over the periods in which the related
services are rendered by a charge to compensation cost and a
corresponding credit to additional paid-in capital. Generally,
cost will be determined based on the fair value of the equity
instruments at the date of issuance. The fair value of
options, warrants and similar equity instruments will be
estimated based on the Black-Scholes option-pricing model,
which meets the criteria set forth in SFAS 123, and the
assumption that all of the options or other equity instruments
will ultimately vest. The effect of actual forfeitures will be
recognized as they occur.
Recent accounting pronouncements:
In August 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived
assets. Among other things, SFAS 144 provides guidance on the
implementation of SFAS 121 and other previous pronouncements
related to when and how to measure impairment losses and how
to account for discontinued operations. Management does not
believe that the adoption of SFAS 144 will have a material
impact on the Company's consolidated financial position or
results of operations.
The Financial Accounting Standards Board and the Accounting
Standards Executive Committee of the American Institute of
Certified Public Accountants had issued certain other
accounting pronouncements as of December 31, 2001 that will
become effective in subsequent periods; however, management of
the Company does not believe that any of those pronouncements
would have significantly affected the Company's financial
accounting measurements or disclosures had they been in effect
during 2001 and 2000, and it does not believe that any of
those pronouncements will have a significant impact on the
Company's consolidated financial statements at the time they
become effective.
Note 3 - Investment in mineral rights:
The Company acquired the mineral rights attributable to its
gold mining claims (see Note 1) on April 29, 1992 for shares
of common stock with a fair value of $400,000. Subsequently,
the Company also paid total fees of $200,000 to the former
owner for consulting services related to the development of
the claims. Although, as explained in Note 1, management is
still attempting to find a joint venture partner to assist the
Company in developing these claims, it has not been able to
find one. Based on the inability to find a joint venture
partner and the uncertainties related to the Company's ability
to generate profitable mining operations, the Company wrote
off the carrying value of the investment prior to January 1,
2000.
F-11
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 4 - Income taxes:
As of December 31, 2001, the Company had net operating loss
carryforwards of approximately $6,397,000 available to reduce
future Federal taxable income which will expire at various
dates through 2021. The Company had no other material
temporary differences as of that date. Due to the
uncertainties related to, among other things, the changes in
the ownership of the Company, which could subject those loss
carryforwards to substantial annual limitations, and the
extent and timing of its future taxable income, the Company
offset the deferred tax assets attributable to the potential
benefits of approximately $2,559,000 from the utilization of
those net operating loss carryforwards by an equivalent
valuation allowance as of December 31, 2001.
The Company had also offset the potential benefits of
approximately $2,406,000 and $2,186,000 from net operating
loss carryforwards by equivalent valuation allowances as of
December 31, 2000 and 1999, respectively. As a result of the
increases in the valuation allowance of $153,000 and $220,000
in 2001 and 2000, respectively, the Company did not recognize
any credits for income taxes in the accompanying consolidated
statements of operations to offset its pre-tax losses in those
years.
Note 5 - Concentrations of credit risk:
Financial instruments which subject the Company to
concentrations of credit risk consist primarily of cash. The
Company maintains cash in bank deposit and other accounts the
balances of which, at times, may exceed Federal insurance
limits. At December 31, 2001, such cash balances did not
exceed Federal insurance limits. Exposure to credit risk is
reduced by placing such deposits in major financial
institutions and monitoring their credit ratings.
Note 6 - Preferred stock:
The Company's Articles of Incorporation authorize the issuance
of up to 1,000,000 shares of Class A preferred stock and
1,000,000 shares of Class B preferred stock. No shares of
preferred stock had been issued as of December 31, 2001. Each
share of Class A and Class B preferred stock is nonvoting; is
entitled to an annual dividend, as may be declared by the
Company's board of directors, of 10% that is cumulative; has a
par value of $10 per share; and has a preference in
liquidation equal to its par value plus all declared but
unpaid dividends. Each share of Class A preferred stock is
convertible at any time into five shares of the Company's
common stock.
F-12
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 7 - Stock option plan:
On April 17, 2000, the Board of Directors approved a Stock Option Plan
(the "Plan"), subject to ratification by the Company's stockholders, whereby up
to 2,000,000 shares of the Company's common stock may be granted to key
personnel in the form of incentive stock options and nonstatutory stock options,
as defined under the Internal Revenue Code. Key personnel eligible for these
awards may include all present and future employees of the Company and
individuals who are consultants to the Company as well as nonemployee directors
of the Company. Under the Plan, the exercise price of options must be at least
100% of the fair market value of the common stock on the date of grant (the
exercise price of an incentive stock option for an optionee that holds more than
10% of the combined voting power of all classes of stock of the Company must be
at least 110% of the fair market value on the date of grant). The maximum term
of any stock option granted may not exceed ten years (or five years of an
optionee that holds 10% or more of the Company stock) from the date of grant.
As of March 18, 2002, no stock options had been awarded under the Plan.
Note 8 - Consulting agreements:
On April 17, 2000, the Company entered into agreements with
three consultants that expired on April 17, 2001. Under these agreements, the
consultants were, among other things, assisting the Company in finding
businesses located primarily in England, other European countries and the
Northeastern section of the United States that would advertise in and/or link to
the Company's online community. As of March 18, 2002, management of the Company
and the consultants were negotiating, but had not consummated, extensions of
these agreements.
As consideration for their services, the three consultants received options to
purchase a total of 1,300,000 shares of the Company's common stock that were
exercisable at $.40 per share at any time during the terms of the consulting
agreements. The options expired on April 17, 2001. The aggregate fair value of
the options granted to the consultants of $377,000 as of the date of grant, as
determined based on the Black-Scholes option-pricing model, which was recorded
as unearned compensation and amortized to expense over the period from April 17,
2000 to April 17, 2001, as required by SFAS 123.
Note 9 - Fair value of financial instruments:
The Company's material financial instruments at December 31, 2001 for
which disclosure of estimated fair value is required by certain accounting
standards consisted of cash, accounts payable and notes payable to stockholders.
In the opinion of management, cash and accounts payable were carried at fair
values because of their liquidity and/or short-term maturities. Because of the
relationship of the Company and its stockholders, there is no practical method
that can be used to determine the fair value of the notes payable to
stockholders.
* * *
F-13
PART III
Item 9. Directors and Executive Officers of the Registrant
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE TITLE DIRECTORSHIP FIVE YEARS BUSINESS EXPERIENCE
---- --- ---------- --------------- -----------------------------------------
Harry F. DiFrancesco 75 President Chairman of Bd* In 1965 Mr. DiFrancesco was Chairman, CEO
and President of DiFrancesco Construction
Company. From 1970 to 1975, Mr.
DiFrancesco established and operated a
shoe manufacturing company in Brazil.
From 1979 to 1988, Mr. DiFrancesco was
Chairman of the Board of International
Jewelry Manufacturing Corp. an importer
and wholesaler of diamonds. Mr.
DiFrancesco has more than 40 years of
business experience in real estate
development, importing and jewelry
manufacturing and sales
Andrew S. Peck 56 V.P. of Finance Dir. & Secretary* Since 1990, Mr. Peck has served as
President and Senior Financial Specialist
for Financial Support Services, Inc. Mr.
Peck has more than 20 years of experience
in corporate finance, planning, project
analysis and systems development.
Maynard Neil Aboguv 57 VP of Sales Mgmt Director* Mr. Aboguv has over 15 years of
experience as a sales representative and
manager for various companies
representing several industries.
Jay Sanet 52 V.P. Corp Dev. Director* Mr. Sanet has served as a Director since
December, 1998. From 1996 to 1998, Mr.
Sanet was a branch manager for First
National Equity Group. In 1995 Mr. Sanet
was a branch manager for Vision
Investment Group. From 1994 to 1995 Mr.
Sanet was a registered representative for
Myers, Pollack & Robin. He actively
assists the Company in identifying and
exploring merger candidates.
*Each Director shall hold office until the next annual meeting of
stockholders and until his successor shall have been elected and qualified.
The directors of NorStar hold no other directorship in any other
reporting company. NorStar does not have anyone that it would classify as a
significant employee. There are no family relationships among the directors,
executive officers or persons nominated or chosen by the Company to become
directors or executive officers.
The Company intends to file with the Commission a definitive proxy
statement for the 2002 Annual Meeting of Stockholders pursuant to Regulation 14A
not later than 120 days after December 31, 2001 or a later date to be determined
by the Board of Directors of the Company.
Item 10. Executive Compensation
The following table sets forth certain information concerning the
annual and long-term compensation for services as officers to the Company for
the fiscal year ended December 31, 2001.
2000 Harry DiFrancesco* Pres. & Dir $0.00 1,000,000
Jay Sanet* V.P. & Dir. $0.00 125,000
Andrew S. Peck* Sect, Treas. & Dir $0.00 100,000
50,000
Maynard N. Abguv* V.P. & Dir. $ 0.00
Name of Capacity in Salaries, Fees Deferred Shares of
Fiscal Year Individual which served & Commissions Bonuses Compensation Common Stock
----------- ------------------ ------------------ -------------- ------- ------------ ------------
2001 Harry DiFrancesco* Pres. & Dir $0.00 1,500,000
Jay Sanet* V.P. & Dir. $0.00 225,000
Andrew S. Peck* Sect, Treas. & Dir $0.00 200,000
Maynard N. Abguv* V.P. & Dir. $0.00 50,000
2002 Harry DiFrancesco* Pres. & Dir $0.00 **
Jay Sanet* V.P. & Dir. $0.00 **
Andrew S. Peck* Sect, Treas. & Dir $0.00 **
Maynard N. Abguv* V.P. & Dir. $0.00 **
* The Company has paid no compensation to any of its named executive
officers and directors. In lieu of compensation the officers and directors
received shares of NorStar Common Stock.
** The level of compensation for the Company's named executive officers
and directors will be determined following the next shareholders meeting of the
Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(b) Security Ownership of Management
--------------------------------------------------------------------------------------------
Title of Name and address Amount and nature Percentage of
class of beneficial owners of beneficial ownership class
--------------------------------------------------------------------------------------------
Common Stock Harry F. DiFrancesco 1,500,000 shares 9.7%
6365 N.W. 6th Way, Suite 160
Fort Lauderdale, Fl 33309
--------------------------------------------------------------------------------------------
Common Stock Andrew Peck 200,000 1.29%
6365 N.W. 6th Way, Suite 160
Fort Lauderdale, Fl 33309
--------------------------------------------------------------------------------------------
Common Stock Jay Sanet 225,000 .8%
6365 N.W. 6th Way, Suite 160
Fort Lauderdale, Fl 33309
--------------------------------------------------------------------------------------------
Common Stock Maynard Neil Aboguv 50,000 .3%
6365 N.W. 6th Way, Suite 160
Fort Lauderdale, Fl 33309
--------------------------------------------------------------------------------------------
(c) Change in Control
There are no arrangements, including any pledge by any person of
securities of NorStar or any of its parents, the operation of which may at a
subsequent date result in a change in control of the registrant.
Item 12. Certain Relationships and Related Transactions
(a) Transactions With Management and Others:
None
(b) Certain Business Relationships:
None
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The exhibits listed below are incorporated by reference as previously filed
with the Form 10-SB:
Exhibit
No. Description
3.1 Articles of Incorporation as filed with the Utah Secretary of State
3.1(i) By-laws
3.1 (ii) Specimen Stock Certificate
4(a) Certificate of Existence and Good Standing Status
4(b) Certificate to do business as a Foreign Corporation in the State of
Florida
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORSTAR GROUP, INC.
(Registrant)
By: /s/ Harry DiFrancesco
------------------------------------
Harry DiFrancesco, President and
Chairman of the Board
Date April 2, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the 22nd day of March 2001.
Signature Title
/s/ Harry DiFrancesco
---------------------------------- President and Chairman of the
Harry DiFrancesco Board
/s/ Andrew S. Peck
---------------------------------- Vice President of Finance, Director
Andrew S. Peck and Secretary
/s/ Jay Sanet
---------------------------------- Vice President Corporate
Jay Sanet Development, Director
/s/ Maynard Neil Aboguv
---------------------------------- Vice President Sales Management,
Maynard Neil Aboguv Director