<PAGE>
                       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
<PAGE>

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.



<PAGE>


TABLE OF CONTENTS


<TABLE>
<S>                                                                       <C>
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
</TABLE>


<PAGE>


                                     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



<PAGE>

                  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


<PAGE>


                  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.

<PAGE>

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

<PAGE>

         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.


<PAGE>


                                     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>
 Year         Quarter    High Bid     Low Bid
<S>           <C>        <C>          <C>
 2001          1st        0.240        0.095
 2001          2nd        0.200        0.060
 2001          3rd        0.125        0.042
 2001          4th        0.060        0.031

--------------------------------------------

 2000          1st         0.85         0.43
 2000          2nd        13/16         0.20
 2000          3rd         7/16         0.24
 2000          4th         0.85         0.85
</TABLE>

         (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



<PAGE>


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.

<PAGE>

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


<PAGE>


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,



<PAGE>


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


<PAGE>

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


<PAGE>


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.



<PAGE>
                      NORSTAR GROUP, INC AND SUBSIDIARIES

                          Index to Financial Statements


<TABLE>
<CAPTION>
                                                                          PAGE
<S>                                                                      <C>
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
</TABLE>


                                      F-1
<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, 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
<PAGE>



                      NorStar Group, Inc. and Subsidiaries

                           Consolidated Balance Sheet
                                December 31, 2001


<TABLE>
                             Assets
<S>                                                                       <C>
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
                                                                          ============
</TABLE>


See Notes to Consolidated Financial Statements.



                                      F-3
<PAGE>

                      NorStar Group, Inc. and Subsidiaries

                      Consolidated Statements of Operations
                     Years Ended December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                            2001                 2000
                                                        ------------         ------------
<S>                                                     <C>                  <C>
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
                                                        ============         ============
</TABLE>

See Notes to Consolidated Financial Statements




                                       F-4
<PAGE>


                      NorStar Group, Inc. and Subsidiaries

                 Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                            Common Stock
                                      -----------------------     Additional
                                      Number of                     Paid-in      Accumulated      Unearned
                                        Shares        Amount        Capital        Deficit      Compensation        Total
                                      ----------     --------     ----------     -----------    ------------      ---------
<S>                                   <C>            <C>          <C>            <C>            <C>               <C>
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
                                      ==========     ========     ==========     ===========    ============      =========
</TABLE>



See Notes to Consolidated Financial Statements




                                      F-5
<PAGE>


                      NorStar Group, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
                     Years Ended December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                                             2001                  2000
                                                                          ------------         ------------
<S>                                                                       <C>                  <C>
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                                                        $         --         $         --
                                                                          ============         ============
</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, 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.


<PAGE>


                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
<PAGE>


                      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.


<PAGE>

         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
<PAGE>


                      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

<PAGE>

                  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
<PAGE>


                      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


<PAGE>

                  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
<PAGE>


                      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.

<PAGE>

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

<PAGE>


                      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


<PAGE>


                  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
<PAGE>


                      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.




<PAGE>


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
<PAGE>


                                    PART III

Item 9.  Directors and Executive Officers of the Registrant

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
NAME                     AGE      TITLE            DIRECTORSHIP            FIVE YEARS BUSINESS EXPERIENCE
----                     ---    ----------        ---------------     -----------------------------------------
<S>                      <C>    <C>               <C>                 <C>
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.
</TABLE>



<PAGE>

<TABLE>
<S>                       <C>                     <C>                 <C>
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.
</TABLE>


         *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.

<TABLE>
<S>         <C>                       <C>                       <C>         <C>
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
</TABLE>

<PAGE>


<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>
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                                          **
</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.


Item 11. Security Ownership of Certain Beneficial Owners and Management

(b) Security Ownership of Management


<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------------------
         <S>               <C>                              <C>                       <C>
         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
         --------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


(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


<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




<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 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.

<TABLE>
<CAPTION>
             Signature                      Title
<S>                                         <C>
      /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
</TABLE>