NorStar Group, Inc. (OTCBB: OTCBB) has been busy promoting plans to mine for gold and develop a biotech business. As we have seen, however, details of those ventures are sparse. Can investors anticipate immediate results – and revenues – from either project? What can we learn from NorStar’s past? In this article, we explore the Company’s earlier efforts to develop profitable operations.
Gang Aft Aglay?
The history of NorStar’s past business ventures may not bode well for its forays into mining and medicine. In recent years, the Company has declared plans to enter several businesses, with little apparent success. In January 1998, NorStar attempted to acquire a medical clinic, and related businesses, in Florida. It abandoned that endeavor less than one year later.At the time it walked away from the medical clinic, the Company said it had decided to focus its attention instead on development of Internet-related businesses, including a “One Stop Shopping” portal that would include a shopping mall, and incorporate a virtual reality theme, with plans for virtual chat rooms, a virtual reality dating service, virtual reality business conference rooms, specialty advertising rooms, and global e-mail service. NorStar said it would charge a $120 membership fee for access to its services.
The Company did set up a website, called VeeAreCity.com, but while that online community provides links to other sources of news, information and shopping, the long-promised virtual reality features have yet to materialize. Notices on the site indicate that VeeAreCity’s “webmail is not setup,” and that “VR Games Coming Soon.” Instead, most of the existing information on the site is largely derivative and can be obtained elsewhere on the Internet. At present, access to the site is free of charge, which seems logical since it appears to offer few unique services that would justify the Company’s plan to charge a $120 membership fee. Indeed, the Company’s plan is unlikely to bear financial fruit any time soon. As of September 30, 2002, NorStar conceded that it did not expect to generate any revenues from the sale of memberships anytime in the near future.
These delayed developments stand in sharp contrast to the Company’s past promises. On August 16, 2000, for example, NorStar declared that VeeAreCity.com was “finalizing plans to launch the first of its proprietary Internet Virtual Reality Game Rooms.” The Company went on to project that its planned business would generate an estimated $150 million during its first three years of operations.
That same August 16, 2000 press release noted that the Company’s “unique Virtual Reality headgear” would be used in conjunction with its “proprietary online Virtual Reality Games.” Two and one half years after that announcement, consumers still are waiting for both the headgear and those games.
What is the status of that virtual reality headgear? As best we can determine, NorStar has been promoting a virtual reality viewer called the Cybervisor for over two years. The Company describes the Cybervisor as a lightweight, affordable proprietary visor-styled virtual reality system. So far, however, the product has not made its debut in the marketplace. That has not stopped NorStar from issuing numerous press releases extolling the potential of the Cybervisor, and projecting massive revenues from a product that has yet to become a reality – virtual or otherwise.
On December 19, 2000, for instance, NorStar issued a press release announcing that a British outfit, J & D Associates, had been granted the exclusive right to distribute the Cybervisor in the United Kingdom. The Company claimed that the distribution agreement would have a projected income value of $15 million over the next five years. This was just the beginning, according to NorStar’s CEO, Jay Sanet, who said that the Company planned to secure similar distribution agreements for other territories.
Sanet also noted that the NorStar business model projected that the Company would become revenue driven in 2001. It is now 2003 and NorStar still is not generating those promised revenues.
Mr. Sanet’s flights of hyperbole have not been limited to revenue projections. In that same December 19, 2000 press release he proclaimed the Company’s belief that
the Cybervisor™ is going to do for the development, expansion and usage of virtual reality programming of all types what the development of the Guttenberg’s press did for reading or what the union of music and video into MTV did for the music industry.”
And he added that “when the world thinks of innovative Virtual Reality products, NorStar will be the first name to come to mind.”
So far, the Cybervisor has not justified Mr. Sanet’s comments. Mr. Sanet has surfaced as the Company’s principal spokesman, although it does not appear that he has a background in Internet development, virtual reality technology, biotech, or mining. According to his Company biography, Mr. Sanet has an extensive background in the stock brokerage business, as a registered representative at the firm of Meyers, Pollock & Robbins (identified in his bio as Myers, Pollack & Robin) from 1994 to 1995, and as a branch manager at Vision Investment Group (1995) and First National Equity Group (1996-1998).
A Host of Distributors
The J & D distribution announcement was followed by a series of similar press releases that projected future revenues from sales of the Cybervisor. Here are a few examples of what the Company was saying:• On January 9, 2001, NorStar disclosed that Atlas Entertainment of Nashville, Tennessee had agreed to become the exclusive distributor of the Cybervisor in Tennessee. The value of the deal was estimated at $1.5 million.
• Two days later, on January 11, 2001, NorStar announced that VeeAreCity had signed an exclusive distribution and licensing agreement with a company identified as Pt. Sario Jasa Raya for distribution of the Cybervisor in Indonesia. Citing growing Internet use in Indonesia, NorStar’s CEO Jay Sanet opined that the Company “could reap a bonanza from this deal.” According to one report, the deal was expected to be worth $15 million.
• On January 16, 2001, NorStar revealed that “negotiations” were underway with additional distributors in Germany, Brazil and the United States. According to Company CEO Jay Sanet, the Company already had received orders valued at $31.5 million, and was well on its way to its initial goal of $100 million in pre-production sales. He did not indicate who had placed actual orders for the anticipated product, or suggest that the Company had received any payments to date.
• A January 24, 2001 press release claimed that VeeAreCity was negotiating with Middle Eastern companies located in Kuwait, Bahrain, Oman, United Arab Emirates, and Saudi Arabia to distribute the Cybervisor.
• On March 7, 2001, the Company said it had entered into an exclusive distribution agreement with HangZhau Foresight Intellectual Digital Equipment Company Ltd. of China for the right to distribute the Cybervisor. Although the product still had not become available, the press release claimed that the contract would be worth $150 million to NorStar over five years.
• On March 22, 2001, the Company stated that Digital World Holdings Ltd. of Hong Kong had been given exclusive rights to distribute the Cybervisor in Hong Kong and Macau. NorStar estimated the value of this deal at $45 million over five years.
• Less than two weeks later, on April 4, 2001, NorStar revealed that Digital World Holdings Ltd. of Hong Kong had also been granted distribution rights for Taiwan – an arrangement that the Company valued at $45 million over five years.
• The next day, April 5, 2001, NorStar issued a press release stating that Middle East Energy Corporation had been granted exclusive rights to distribute the Cybervisor in Kuwait. The Company said the contract would be worth $8 million over five years. Jay Sanet claimed that the arrangement marked the beginning of NorStar’s penetration “into the Middle Markets” (presumably meaning the Middle East markets), and proclaimed that NorStar now had accumulated over $450 million in pre-production commitments for the Cybervisor.
• On April 19, 2001 NorStar announced that a company called Styland Limited had been given the right to distribute the Cybervisor in Bulgaria. The contact was estimated to be worth $15 million to NorStar over five years.
• On April 24, 2001 the Company confirmed that an exclusive distributorship had been awarded to YUBEX d.o.o. for the Yugoslavian market. The value of the contract was estimated at $8 million over five years.
• An April 26, 2001 announcement revealed that GASCO S.A.R.L. of Beirut, Lebanon had been designated the exclusive distributor for Cybervisor in Lebanon. According to NorStar, this deal would be worth $16 million over five years.
• On May 8, 2001 NorStar issued the last in this series of press releases concerning distribution of the Cybervisor. This time the Company said that Styland Limited would be the exclusive distributor in Macedonia. The value of the contract was estimated at $1.625 million over five years.
In just five months, NorStar had announced distribution agreements which it valued at over $350 million, and pre-production commitments of $450, according to CEO Sanet. Yet there was – and still is – no marketable product.
We were not surprised to discover that volume for NorStar shares tended to increase on and around the dates of these press releases. At the same time, NorStar share prices experienced substantial increases that coincided with the announcements. For example, on January 10, 2001, the day after the Company announced its Cybervisor distribution agreement for the State of Tennessee, 286,000 NorStar shares changed hands and the stock price moved from 11 cents a share to 14 cents a share. The following day, when the Indonesian distributorship was announced, 450,000 shares were traded and the stock closed at 18 cents a share.
The pattern continued after the March 7, 2001 press release disclosing the Chinese distributorship. Share prices hit 20 cents on March 7th, after closing at 14 cents the previous day. Volume for the day was more than one million shares.
On April 4, 2001, when the Taiwanese distributorship was announced, share prices jumped briefly from 10 cents to 13 cents, and volume soared to more than 500,000 shares (from just 28,700 the previous day). A similar spike in volume followed the press release identifying the Yugoslavian distributor.
The onslaught of NorStar press releases diminished after the Macedonian distribution relationship was revealed in May 2001. Then, on September 6, 2001 the Company disclosed that VeeAreCity had launched its initial “Burbs” sites, offering information about specific international cities. NorStar stated that the “Burbs” were designed to assist international distributors who had already produced more than $400 million in pre-production orders for the Cybervisor. The Company disclosed plans to ship the first Cybervisors in 2002.
But no Cybervisors materialized in 2002, and none appear to be on the immediate horizon, despite that supposed $400 million in orders. According to the latest report from the Company’s supporters at The StockBroker.com, the Cybervisor remains in the research and development stage – a process that could remain stalled, perhaps indefinitely, in view of the Company’s financial limitations.
Military Bearings
The recent war in Afghanistan and the threat of hostilities in Iraq have focused public attention on the military and national defense. As we noted earlier, NorStar has seized upon this opportunity to suggest that gold produced from its undeveloped mining claims might be marketed to the defense industry. That seems unlikely, at least in the short-term, since the Company’s mines are not yet in production, and there is no indication that they are likely to become operational soon.But NorStar remains intent upon hitching a ride on the defense industry – this time with the Cybervisor. On January 21, 2003, the Company issued a press release disclosing that it had filed an application with the Central Contractor Registration System of the Department of Defense, a clearing house for research grants. The Central Contractor Registration System does not award grants, it simply maintains data about companies, so that those businesses can be paid if they ultimately are awarded government contracts or grants. At present, 212,940 companies are listed in the system. Not all of them have received, or yet applied for, government funds. To borrow from a well-worn phrase, many are filed, but few are chosen.
The Company says that it plans to submit a proposal to the Department of Defense, seeking financing for the Cybervisor, but does not indicate when it will make that submission. NorStar’s CEO Jay Sanet, concedes, however, that the Company cannot be assured of receiving any grant. Needless to say, The StockBroker.com circulated a “News Alert,” accompanied by a copy of the NorStar press release. But is there any real news here?
Is there more on the horizon for NorStar? The StockBroker.com claims that VeeAreCity plans to introduce “Project Thunderbolt,” consisting of “revolutionary and cutting edge virtual reality chat room software” in 2003. Considering NorStar’s track record, investors might be excused if they view that latest prediction, and any others that may surface, with a healthy skepticism.
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