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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(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, 1999 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
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Commission file number 0-28399
Norstar Group, Inc.
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(Exact name of registrant as specified in its charter)
Utah 59-1643698
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6365 NW 6th Way, Suite 160, Ft. Lauderdale Florida 33309
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(Address of principal executive offices) ( Zip Code)
Registrant's telephone number, including area code (954) 772-0240
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Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
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None N/A
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Securities registered pursuant to Section 12 (g) of the Act:
Common Shares, Par value $0.01 per share
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(Title of Class)
Cumulative Preferred shares
Class A Preferred
Class B Preferred
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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 .
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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 27, 2000, 15,493,825 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 $9,296,295 as of March 27, 2000.
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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I ....................................................................................4
Item 1. Business...................................................................4
(b) Business of the Company....................................................4
i) Membership..............................................................4
(ii) Providers.............................................................5
(iii) Market Overview......................................................5
(iv) Summary of Product Research and Development...........................5
Item 2. Properties.................................................................7
Item 102 (a) 1. Small Business Issuer engaged in significant mining operations:....7
Item 3. Legal Proceedings..........................................................9
Item 4. Submission of Matters to a Vote of Security Holders.......................10
PART II ...................................................................................11
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.....11
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations...........................................................12
Item 7. Financial Statements......................................................16
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure....................................................17
PART III...................................................................................18
Item 9. Directors and Executive Officers of the Registrant........................18
Item 10. Executive Compensation....................................................19
Item 11. Security Ownership of Certain Beneficial Owners and Management............20
Item 12. Certain Relationships and Related Transactions............................21
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........22
SIGNATURES.................................................................................23
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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.
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(b) Business of the Company: The business of NorStar is to create an
Internet online-community of "One Stop Shopping" for products,
entertainment, education and business services from a network
of providers. NorStar's portal will provide 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 intends to offer 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 will be
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
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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
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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 tooling for the HMD will be located
at Interactive Imaging Systems ("IIS"), the manufacturer. As a
significant portion of this HMD design is based on proprietary
IIS technology, IIS will retain the rights, title and ownership
to this technology. In the event IIS is unable or unwilling to
manufacture the HMD, VeeAreCity will be granted certain rights
to have the product manufactured by a mutually agreed upon third
party, at the anticipated volume levels of 100,000 units/year.
IIS estimates that it will be able to manufacture the HMD for
VeeAreCity 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 spent approximately $20,000 during the last two
fiscal years on research and development activities.
NorStar employs seven full time employees, five of whom serve as
Officers and Directors of NorStar and two clerical personnel.
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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) un-patented claims are located 180 miles north of
Las Vegas, Nevada on state Highway 95 to Lida Junction, the 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
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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.
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*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.
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Item 3. Legal Proceedings
<TABLE>
<CAPTION>
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Name of Court Date Proceeding Began Principal Parties Description of Facts Relief Sought
Or Action Taken
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<S> <C> <C> <C> <C>
Circuit Court in 03/19/98 Knight & Reich v. This is a lawsuit pertaining Joint Stipulation of
and for the 12th Judicial MTC, JBA and NorStar to medical records Dismissal agreed to
Circuit in and for Lee County
Florida
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Circuit Court in 03/20/98 NorStar, et al. v. Agolli Lawsuit for injunctive relief Injunctive Relief
and for the 12th Judicial Ginoli, Reich and Knight counterclaim filed for unpaid Joint agreement
Circuit in and for Lee County wages and benefits Stipulation to Dismiss
Florida Action and
Counterclaim
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Circuit Court in 06/24/98 JBA and NorStar v. Lawsuit seeking to enforce Agreed to Joint
and for the 12th Judicial Ginoli and Agolli non-compete agreement Stipulation to
Circuit in and for Lee County Dismissal of action
Florida
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Circuit Court in 03/31/98 Agolli, Ginoli et al. v. Action for unpaid wages Stipulation of
and for the 12th Judicial NorStar, JBA et. al. and benefits. Counterclaim Dismissal agreed
Circuit in and for Lee County for breach of contract, breach to between all
Florida of fiduciary duty, and for civil Parties
theft
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</TABLE>
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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, 1999.
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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:
<TABLE>
<CAPTION>
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Year Quarter High Bid Low Bid Year Quarter High Bid Low Bid
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<S> <C> <C> <C> <C> <C> <C> <C>
1998 2nd 5/16 3/16 1999 2nd 13/16 0.20
1998 3rd 1 3/16 3/16 1999 3rd 13/16 0.20
1998 4th 3/8 1/8 1999 4th 7/16 0.24
1999 1st 15/16 1/4 2000 1st 0.85 0.43
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</TABLE>
(b)Holders
As of February 29, 2000, the approximate number of shareholders of
record of NorStar Common Stock is 242. 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.
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Item 6. Managements Discussion and Analysis of Financial Condition and Results
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 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 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
VeeAreCity and the Burbs. 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. 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.
Results of Operations:
Year ended December 31, 1999 as compared to Year Ended December 31,
1998
Commencing in 1998, the Company began the development of its internet
business which 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 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 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
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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 intends to be completed with
development of its Internet business during the third quarter of 2000.
During 1997, the Company attempted to enter the medical field via its
acquisition of JBA Medical Management, Inc. ("JBA Medical"). JBA
Medical was the operator of a medical clinic in Ft. Myers, Florida and
had planned to open additional clinics in various locations in Florida.
Pursuant, to a plan adopted by its board of directors, the Company
discontinued and abandoned its medical operations in the first quarter
of 1998 to concentrate on its Internet business. Therefore, the company
did not have any revenues from its continuing operations during either
1998 or 1999.
During the year ended December 31, 1999, the Company's operating
expenses increased by approximately $1,863,000 to approximately
$2,304,000 from approximately $441,000 for the year ended December 31,
1998. The primary cause of the increase was non-cash charges resulting
from the issuance of shares of common stock for services. During 1999,
the Company issued 6,701,500 shares of common stock for services having
a fair market value of $2,079,225 on the date of issuance as compared
to only 1,222,288 shares of common stock having a fair value of
$328,557 being issued for services in 1998. The balance of the
company's operating expenses was fairly consistent between the two
periods.
In addition the Company recognized a loss from its discontinued medical
venture during 1998 of approximately $549,000 of which approximately
$202,000 came from its operation of the venture and approximately
$347,000 resulted from the Company recognizing a loss on the disposal
of its investment.
As a result of the above, the Company incurred a loss of approximately
$2,304,000 for 1999, all from continuing operations, as compared to
approximately $990,000 for 1998, of which approximately $441,000 was
from continuing operations.
(a) Liquidity and Capital Resources
As of December 31, 1999, NorStar had working capital of approximately
$56,000.
During the years ended December 31, 1999 and 1998, the company sold
4,427,500 and 57,125 shares of common stock and received net proceeds
of approximately $552,500 and $143,000 respectively. During the years
ended December 31, 1999 and 1998, the Company was able to satisfy
certain obligations to professionals, consultants and employees by the
issuance of shares of common stock for services performed. The Company
issued 6,701,500 and 1,222,288 shares of common stock for such services
having a fair value of approximately $2,079,225 and $329,000
respectively, for the years ended December 31, 1999 and 1998.
Subsequent to December 31, 1999, the Company entered into contractual
obligations aggregating approximately $1,100,000 related to
Intellectual Property development for services to be rendered
subsequent to that date in connection with the ongoing development of
its Internet business. These contractual obligations are contingent
upon the Company's ability to raise the
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necessary funds either through the sale of additional shares of common
stock and/or debt, strategic relationships or other arrangements. There
can be no assurances that such additional funding will be available on
terms attractive to us or at all. The failure to raise capital when
needed could materially affect our business, results of operations and
financial condition.
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, 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.
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Impact of Year 2000
I. Overview
The Y2K issue concerned many currently installed computer systems and
software products that were coded to accept only two digit entries in
the date code field. It was widely anticipated that on the occasion of
the arrival of the year 2000 the entry of "00" was expected to be read
as 1900 rather than 2000. In order to distinguish the 21st century from
the 20th century the date code fields needed to accept four digit year
entries as opposed to the then current two digits. The Company
recognized the worlds ever increasing reliance on computers and
computer technology to provide services and data to a need-it-now user
population. To that end, NorStar in their analysis of the Y2K issue,
implemented tests on all of their mission critical hardware and
software as well as requiring Y2K disclosure statements from any vendor
they do business with. NorStar also engaged the services of an outside
consultant who conducted the Year 2000 assessment and compliance review
for the Company.
II. Evaluation
The internal and external tests performed on both NorStar's IT and
non-IT systems ensured that NorStar's systems would function on January
1, 2000 and beyond and necessitated a finding that there were no
remaining phases or testing procedures. Because most of NorStar's
computer systems have been upgraded or replaced in the last 4 years,
the effect of non-compliant hardware and software was determined to be
minimal.
III. Conclusion
Based on the information provided from NorStar internal and external
research NorStar is confident that it is adequately prepared to handle
the Y2K problem beyond the year 2000. In addition, the Company has not
incurred any problems relating to the Y2K issue to date.
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Item 7. Financial Statements
Our Consolidated Balance Sheet as of December 31, 1999 and our
Consolidated Statements of Operations, Stockholders' Equity and Cash Flows for
each of the years ended December 31, 1999 and 1998, together with the reports of
J.H. COHN, LLP, independent Public Accountants begin on page F-1 of this Annual
Report on Form 10-KSB.
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Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable
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PART III
Item 9. Directors and Executive Officers of the Registrant
<TABLE>
<CAPTION>
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Name Age Title Directorship Five Years Business Experience
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<S> <C> <C> <C> <C>
Harry F. DiFrancesco 73 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
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Andrew S. Peck 54 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.
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Maynard Neil Aboguv 55 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.
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Jerry R. Saver 52 V.P. of Sales Director* Mr. Saver has over 20 years of extensive
sales and marketing experience.
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Jay Sanet 49 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 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.
</TABLE>
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 2000 Annual Meeting of Stockholders pursuant to Regulation 14A
not later than 120 days after December 31, 1999.
18
<PAGE>
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, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Name of Capacity in Salaries, Fees Deferred Shares of
Fiscal Year Individual which served & Commissions Bonuses Compensation Common Stock
- ----------- ---------- ------------ -------------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1999 Harry DiFrancesco* Pres. & Dir $0.00 1,000,000
Jay Sanet* V.P. & Dir. $0.00 100,000
Andrew S. Peck* Sect, Treas. & Dir $0.00 100,000
Jerry R. Saver* V.P. Asst Sect & Dir $0.00 25,000
Maynard N. Abguv* V.P. & Dir. $0.00 50,000
2000 Harry DiFrancesco* Pres. & Dir $0.00 **
Jay Sanet* V.P. & Dir. $0.00 **
Andrew S. Peck* Sect, Treas. & Dir $0.00 **
Jerry R. Saver* V.P. Asst Sect & Dir $0.00 **
Maynard N. Abguv* V.P. & Dir. $0.00 **
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
19
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(b) Security Ownership of Management
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Title of Name and address Amount and nature Percentage of
class of beneficial owners of beneficial ownership class
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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 125,000 .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
--------------------------------------------------------------------------------------------
Common Stock Jerry Saver 25,000 .2%
6365 N.W. 6th Way, Suite 160
Fort Lauderdale, Fl 33309
--------------------------------------------------------------------------------------------
</TABLE>
(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.
20
<PAGE>
Item 12. Certain Relationships and Related Transactions
(a) Transactions With Management and Others:
None
(b) Certain Business Relationships:
None
21
<PAGE>
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
10. Material Contract
22
<PAGE>
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
---------------------------------
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 _____ day of March 2000.
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 Dircetor
/s/ Jerry R. Saver
- ---------------------------------- Vice President Sales, Director
Jerry R. Saver
<PAGE>
NorStar Group, Inc. and Subsidiaries
Index to Financial Statements
PAGE
Report of Independent Public Accountants F-2
Consolidated Balance Sheet
December 31, 1999 F-3
Consolidated Statements of Operations
Years Ended December 31, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity
Years Ended December 1999 and 1998 F-5
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-7/12
* * *
<PAGE>
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, 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1999, and their results of operations and
cash flows for the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
Roseland, New Jersey
March 13, 2000
F-2
<PAGE>
NorStar Group, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1999
Assets
Current assets - cash $ 179,176
Capitalized software development costs 44,936
Mineral rights, at estimated net realizable value -
-----------
Total $ 224,112
===========
Liabilities and Stockholders' Equity
Current liabilities - noninterest bearing demand notes payable to
stockholders $ 123,309
-----------
Commitments
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; 15,493,825 shares issued and outstanding 154,938
Additional paid-in capital 5,410,090
Accumulated deficit (5,464,225)
-----------
Total stockholders' equity 100,803
-----------
Total $ 224,112
===========
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
NorStar Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Years Ended December 31, 1999 and 1998
1999 1998
---- ----
Revenues $ - $ -
------------ ------------
Operating expenses:
Selling 23,014 79,080
General and administrative 2,281,034 361,780
------------ ------------
Total 2,304,048 440,860
------------ ------------
Loss from continuing operations (2,304,048) (440,860)
------------ ------------
Discontinued medical operations:
Loss from operations (201,617)
Loss on disposal (347,500)
------------
Loss from discontinued operations (549,117)
------------ ------------
Net loss $ (2,304,048) $ (989,977)
============ ============
Basic net loss per common share:
Loss from continuing operations $ (.21) $ (.13)
Loss from discontinued operations (.16)
------------ ------------
Net loss $ (.21) $ (.29)
============ ============
Basic weighted average common shares outstanding 11,129,941 3,378,168
============ ============
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
NorStar Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional
Number of Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit Total
--------- ------ ------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 2,851,412 $ 28,854 $2,377,867 $(85,000) $(2,170,200) $ 151,521
Issuance of shares upon receipt
of proceeds from subscription
receivable 34,000 85,000 85,000
Shares issued for professional
and other services and em-
ployee compensation 1,222,288 12,223 316,334 328,557
Proceeds from sale of shares 57,125 571 57,454 58,025
Net loss (989,977) (989,977)
--------- --------- ---------- -------- ----------- -----------
Balance, December 31, 1998 4,164,825 41,648 2,751,655 - (3,160,177) (366,874)
Issuance of shares for payment
of consulting fees payable 200,000 2,000 138,000 140,000
Shares issued for professional
and other services and
employee compensation 6,701,500 67,015 2,012,210 2,079,225
Proceeds from sale of shares 4,427,500 44,275 508,225 552,500
Net loss (2,304,048) (2,304,048)
--------- --------- ---------- --------- ----------- -----------
Balance, December 31, 1999 15,493,825 $154,938 $5,410,090 $ - $(5,464,225) $ 100,803
========== ======== ========== ========= =========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
NorStar Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- -----
<S> <C> <C>
Operating activities:
Net loss $(2,304,048) $ (989,977)
Adjustments to reconcile net loss to net cash
used in operating activities:
Services, compensation and other expenses
paid through the issuance of common stock 2,079,225 328,557
Write-off of goodwill attributable to discontinued
operations 347,500
Changes in operating assets and liabilities -
accrued expenses (959) 959
----------- -----------
Net cash used in operating activities (225,782) (312,961)
----------- -----------
Investing activities - software development costs capitalized (44,936)
-----------
Financing activities:
Net proceeds from issuance of common stock,
including proceeds from payments of sub-
scriptions receivable 552,500 143,025
Proceeds from issuance (repayment) of notes
payable to stockholders (102,606) 161,495
----------- -----------
Net cash provided by financing activities 449,894 304,520
----------- -----------
Net increase (decrease) in cash 179,176 (8,441)
Cash, beginning of period - 8,441
----------- -----------
Cash, end of period $ 179,176 $ -
=========== ===========
Supplemental disclosure of cash flow information:
Income taxes paid $ - $ -
=========== ===========
Interest paid $ - $ -
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
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, 1999, NorStar had
two subsidiaries, VeeAreCity.com, Inc. ("VeeAreCity") and
VeeAre City 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, 1999.
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, 1999, the Company, was
attempting to develop an Internet business through VeeAreCity
and The Burbs and was holding an investment in mineral rights,
as further described below. During 1998, the Company bought
and abandoned a medical business (see Note 3).
In 1998, the Company began the development of its Internet
business which 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, 1999, 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 4). 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
<PAGE>
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Summary of significant accounting policies:
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
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Software development costs:
Pursuant to Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed," the Company is required
to charge the costs of creating a computer software product
to research and development expense as incurred until the
technological feasibility of the product has been
established; thereafter, all related software development
and production costs are required to be capitalized.
Commencing upon the initial release of a product,
capitalized software development costs and any costs of
related purchased software are generally required to be
amortized over the estimated economic life of the product
based on current and estimated future revenues. Thereafter,
capitalized software development costs and costs of
purchased software are reported at the lower of unamortized
cost or estimated net realizable value. Due to the inherent
technological changes in the software development industry,
estimated net realizable values or economic lives may
decline and, accordingly, the amortization period may have
to be accelerated.
Charges to research and development expenses for software
development costs incurred prior to the establishment of
technological feasibility were not material in 1999 and
1998.
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 goodwill and
capitalized software 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.
F-8
<PAGE>
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Summary of significant accounting policies (concluded):
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 1999 and 1998.
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. The Company did not have any potentially
dilutive common shares outstanding during 1999 and 1998.
All reference as to numbers of shares of common stock have
been retroactively adjusted as appropriate for a 1-for-5
reverse split approved by the board of directors and the
stockholders of the Company on April 1, 1998
Recent accounting pronouncements:
The Financial Accounting Standards Board and the Accounting
Standards Executive Committee of the American Institute of
Certified Public Accountants had issued certain accounting
pronouncements as of December 31, 1999 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 1999 and 1998.
F-9
<PAGE>
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 3 - Purchase and disposal of medical operations:
On December 10, 1997, the Company consummated the acquisition of
100% of the issued and outstanding shares of common stock of JBA
Medical Management, Inc. ("JBA Medical") for total consideration
of $347,500 comprised of $100,000 which was paid in cash and the
issuance of 300,000 shares of the Company's common stock with an
estimated fair value of $247,500.
JBA Medical was the operator of a medical clinic in Ft. Meyers,
Florida and had planned to open additional clinics in various
other locations in Florida. The Company was required to account
for the acquisition of JBA Medical pursuant to the purchase
method of accounting. Pursuant to a plan adopted by its board of
directors, the Company discontinued and abandoned its medical
operations in the first quarter of 1998. Accordingly, the
results of the Company's medical operations have been included
in the accompanying consolidated statements of operations for
the period from the date of acquisition until the operations
were abandoned and comprise its loss from discontinued
operations in 1998.
As of the date of acquisition, JBA Medical did not have any
material tangible or intangible assets or liabilities.
Accordingly, the cost of the acquisition of $347,500 was
allocated to goodwill. The loss on disposal of discontinued
operations in 1998 is attributable to the write-off of the
goodwill as a result of the abandonment of the medical
operations. Revenues from discontinued medical operations
totaled approximately $182,000 in 1998.
Unaudited pro forma information showing the Company's results of
operations for 1998 assuming the acquisition of JBA Medical had
been consummated at the beginning of that year has not been
presented since such assumption would not have a material effect
on the results of the Company's continuing operations.
Note 4 - 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. The Company also
entered into an agreement whereby it became obligated to pay
total fees of $200,000 to the former owner for consulting
services that were to be provided over the five year period
subsequent to the acquisition. As explained in Note 1,
management has been attempting to find a joint venture partner
to assist the Company in developing these claims.
F-10
<PAGE>
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 4 - Investment in mineral rights (concluded):
Although management is still attempting to find a joint venture
partner, it determined that the investment in the mineral rights
had been impaired based on the inability to find a joint venture
partner and the uncertainties related to the Company's ability
to generate profitable mining operations and, as a result, the
Company wrote off the carrying value of the investment and the
unamortized cost attributable to the consulting fees in 1996.
During 1999, the Company paid the remaining carrying value of
its obligation under the consulting agreement of $140,000 by
issuing 200,000 shares of common stock to the former owner of
the mineral rights with an approximate fair value of $140,000.
The issuance of the shares was a noncash transaction that is not
reflected in the accompanying consolidated statement of cash
flows for 1999.
Note 5 - Income taxes:
As of December 31, 1999, the Company had net operating loss
carryforwards of approximately $5,464,000 available to reduce
future Federal taxable income which will expire at various dates
through 2019. 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
$2,186,000 from the utilization of those net operating loss
carryforwards by an equivalent valuation allowance as of
December 31, 1999.
The Company had also offset the potential benefits from net
operating loss carryforwards of approximately $1,264,000 and
$868,000 by equivalent valuation allowances as of December 31,
1998 and 1997, respectively. Accordingly, although the Company
had pre-tax losses in 1999 and 1998, it increased the valuation
allowance by $922,000 and $396,000 in 1999 and 1998,
respectively, and did not recognize a credit for Federal income
taxes in either year.
Note 6 - 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, 1999, such cash balances exceeded
Federal insurance limits by $83,700. Exposure to credit risk is
reduced by placing such deposits in major financial institutions
and monitoring their credit ratings.
F-11
<PAGE>
NorStar Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 7 - Fair value of financial statements:
The Company's material financial instruments at December 31,
1999 for which disclosure of estimated fair value is required by
certain accounting standards consisted of cash and notes payable
to stockholders. In the opinion of management, cash was carried
at fair value because of its liquidity. 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.
Note 8 - 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, 1999. 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.
Note 9 - Software development costs:
During the period from January 1, 2000 through March 13, 2000,
the Company entered into contracts which obligate it to make
payments aggregating approximately $1,100,000 for services to be
rendered in connection with the on-going development of its web
site.
* * *
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 179,176
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,112
<CURRENT-LIABILITIES> 123,309
<BONDS> 0
0
0
<COMMON> 154,938
<OTHER-SE> (54,135)
<TOTAL-LIABILITY-AND-EQUITY> 224,112
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,304,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,304,048)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,304,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,304,048)
<EPS-BASIC> (.21)
<EPS-DILUTED> (.21)
</TABLE>
