THE RISE AND FALL OF JOYSTAR, AN MLM and the POTENTIAL FALLOUT

THE FACTUAL HISTORY OF JOYSTAR

I've been aware of Joystar since it came onto the Host Agency scene in 2004. I was originally attracted to them through their seemingly outrageous e-mail marketing programs. It was my and other travel industry professional's opinions at the beginning that JoyStar's business model was doomed to failure. My "gut feeling" was they wouldn't be around very long because the numbers made no sense. I now realize that I was looking at Joystar for all the wrong reasons. Instead of a Host Agency attempting to make a big splash I soon realized that Joystar appeared to be a stock play of its CEO, William Alverson, formerly a financial advisor to private companies seeking financing and public listings.

A reason for writing this factual history of Joystar last year was because of Alverson's statements that the mega host agencies like Joystar would swallow up the smaller hosts in the coming months. Joystar had also been consistently recruiting other Host Agency's affiliates. On at least one occasion, Joystar called a Host Agency directly and attempted to recruit one of its top employees. His rational, as Alverson commented, is because Microsoft and others do it. Another reason even more important was the damage a large Host agency could do to our industry if it did fail.

Alverson and I have conversed many times over the last four years both via email and impromptu meetings at travel industry shows. We are both from very different schools of thought. I hope the following gives you more insight into Joystar and provides sufficient information for you to draw your own conclusions.

Let us begin in 1998 when William Alverson was CEO of Travelmax International, Inc., a multi-level-marketing company operating similar to today's Joystar model. Previously, Alverson was CEO of W.M.A. & Associates, a financial public relations firm specializing in investment banking and investor relations for publicly traded companies. I mention this as a prelude to Mr. Alverson's history with the stock market and much of the reason Joystar is a publicly traded company. Mr. Alverson seems more comfortable in this environment.

A company called Network Holdings purchased TravelMax from Alverson around September 1997. Network Holdings subsequently filed a thirteen million dollar lawsuit against Alverson and others alleging that liabilities and other obstacles were not disclosed to current members of Network Holdings by the prior management. Network Holdings subsequently sold its interests to Pro Travel Solutions who eventually went out of business. TravelMax at the time of its sale to Network Holdings allegedly left unpaid commissions to its independent travel agents which were never paid by the take over company.

Mark Guest, a Director of TravelMax International and one of several network marketing executives working with Alverson when Alverson was CEO, once made the following remarks in an interview with NPOS. "TravelMax was created when the independent agent concept was red hot. The firm experienced significant growth with gross sales of travel and travel related products and services nearing one hundred million dollars in less than three years. Again, the company experienced growth challenges, this time from the inside out. The company's infrastructure played a role in the firm not being able to go to the next level." TravelMax, soon thereafter, was acquired by Network Holdings. Mark Guest also said, "I'm not extremely impressed with most of the business models currently available in network marketing. Most are so flawed that they don't have much of a chance once the hype and deceptiveness is gone, which can take just a few weeks or even months in many cases. They tend to be driven only on the "opportunity," not a true value proposition for the end user.

Joystar, formerly called Advanced Refrigeration Technologies, Inc., was incorporated in 1998. Advanced changed its name to Joystar in 2003. Alverson became its President, CFO and Secretary.

Being a master of network marketing and surrounding himself with other multi-level-marketing professionals, as was the case with TravelMax, Joystar embarked on a great marketing blitz of its company to the travel industry in 2004. The main thrust of his early marketing was the 90% commission split with no fees whatsoever. Naturally being free, lots of naive travel agents signed up. However, the surge of new agents has rapidly subsided.

During 2004 and up to this day Joystar, and in particular their CEO, has made some controversial comments both in the print media and in person. For example, I can remember when Joystar was operating its business illegally in the State of Florida as it did not have a Florida's Sellers of Travel license. When the issue was brought up in various chat rooms including Joystar's own community forum, Mr. Alverson wrote that Joystar didn't need to apply because it was grandfathered in through The Miami Cruise Center, a company owned by Larry Norman that Joystar purchased in 2005 for about $100,000 in cash and stock.

Obviously, this was a total fabrication. Meanwhile, it had left many agents also operating illegally in the State of Florida without their knowledge. Joystar, several months later, applied and received their Florida Sellers of Travel License. Joystar's history of outrageous claims from its agent's website containing alleged plagiarized content to alleged exaggerated claims of its potential sales volume, number of active travel agents with Joystar and his declaration of war against the other host agencies has created an untrustworthy feeling between Joystar and much of the travel community. Joystar is embraced by some of the media because they generate much revenue for print magazines.

Joystar started out as a multi-level-marketing company but gradually eliminated the MLM pyramid scheme portion and moved to a pure marketing company with an eye on its daily stock price. Nevertheless, as of May 3, 2006, Joystar was rated #191 in the MLM rankings. Joystar no longer allows criticism of its product on its community forum and agents have been blocked from posting anything negative. Mr. Alverson is very good at putting spins on bad news especially when it comes to its financial status and the number of active travel agents.

Remember when Joystar claimed its first profit ever for the second quarter 2006 and the horns blew triumphantly, only to be followed later with restating the financial to a loss? When a loss hit the third quarter 2006 results, nothing was said other than sales were up over the previous year. Joystar has lost nearly 19 million dollars since its inception. This loss of funds was evidently replaced by the sale of stock to outsiders, especially to one Chinese investor who now controls 20% of Joystar. Mr. Alverson and his wife Katherine West control Joystar.

Joystar claims over 4000 agents. Mr. Alverson has stated at two previous Travel Trade shows that he has 1400 and 1500 active agents. Using that old theory that 20% of the agents book 80% of the travel then Joystar's number of active agents should be around 800. That makes Joystar smaller than good host agencies like Travel Planners International and Nexion. They prefer to recruit serious travel agents as opposed to Joystar playing the numbers game. It does not appear Joystar can rightfully claim the status of a "mega" host agency.

On December 18, 2006, Joystar filed with the SEC, among other items, to increase their authorized shares of common stock from fifty million to two hundred million in order that they may, in the future, offer more shares to investors as well as to honor current commitments. Joystar also stated that various stockholders are planning to offer for sale their stock including Alverson and his wife Katherine West, who are planning to offer for sale over 2.4 million shares owned by them. When learning about Joystar it is important to bypass the hype and take the time to look at the SEC records. They are boring but factual. I've read them and they scared me to death. Go to http://www.sec.gov/edgar/companysearch.html and type in Travelstar. Joystar's auditors, in several reports have stated that historical losses raise substantial doubt about Joystar's ability to continue as a going concern.

No doubt, Joystar and Mr. Alverson will attempt to negate the above facts and allege that my company and I are just whining and fear Joystar's competition. However, the facts speak for themselves and no spin by Alverson can change that.

	THE REASONS FOR JOYSTAR'S COMING COLLAPSE

You really need to understand JoyStar's history along with my comments below to fully appreciate why JoyStar's demise will soon be here.

JoyStar, as the company was named after its purchase, was originally set up as a pure Host Agency i.e. no direct consumer sales. Bill Alverson, a charismatic individual had, not long before starting JoyStar, sold a company called TravelMax International to some investors who apparently didn't perform a sufficient "due diligence" and were apparently unaware that this company had a serious financial problem. The company went out of business shortly thereafter with many agents not receiving their commissions. The business model of TravelMax was entirely multi-level-marketing.

JoyStar, in its early days, became the "darling" of the travel media because it was spreading advertising dollars everywhere. One media publication called them "the Host Agency on Steroids." Little did they realize the damage steroids can cause overtime.

JoyStar offered prospective travel agent affiliates free sign up fees, free monthly fees, free any fees plus receiving 80-90% of the revenues. They blasted out gimmicky emails, operated circus style trade booths and provided "cha ching" money seminars. They totally operated with an MLM mentality. The only thing missing was the actual pyramid type scheme which didn't come into play until recent months under the name of TravelStar.biz.

Mr. Alverson, its CEO, continued to insult, threaten and slander members of the travel industry, especially this writer and our beloved Joel Abels, the former publisher of Travel Trade Magazine. He had everyone fooled except the few of us including Joanie Ogg, who at the time as a side note, was forced by ASTA to allow JoyStar to join as a NACTA member.

Armed with a bad business model and investor monies Alverson set out to take the travel industry by storm by adding thousands of agents, most of which never produced any sales. JoyStar became the largest Host Agency with over 4000 alleged affiliates however, the sales volume average per agent rivaled that of a perfect MLM company. Perhaps that is why they were dumped by RCL because they looked and acted similar to an MLM.

JoyStar never made a dime from operations in its 4 year history. Whenever it released its financial statements to the SEC that showed continued losses Alverson would come up with another plan that surely was going to make money for the company. All this to keep the investors at bay and the stock price level. First it was creating the "Enterprise" program that would pay out 100% commissions to producing agents for a relatively small monthly fee, then it was to expand to selling travel to the consumer directly and finally in recent months his complete return to the MLM style with TravelStar.biz. Each of these programs were announced following a bad financial statement.

Here are a few items happening at TravelStar/JoyStar as of this writing.

• JoyStar has not renewed its Seller of Travel license in Florida and would be operating illegally in that State.
• The investors are in turmoil and are allegedly planning action.
• Agents are not being paid their commissions with one agent being owed over $35,000. Alverson claimed he was under subpoena when one didn't exist.
• Advertising bills and others are not being paid.
• Payroll taxes were not being deposited.
• Employees are quitting or being terminated including management employees.
• Several high producing agents have left JoyStar including a chapter president.
• Bank of America has frozen at least one of their accounts.
• Rumors exist that funds are or were diverted to a Nevada bank.

The end appears imminent unless the investors can dump TravelStar's CEO, add more capital and find that person who is qualified to operate the company and places its agents first rather than its stock price. The company has an infrastructure although key employees are leaving or have already left.

	WHERE DO WE GO FROM HERE?

I really hope that some guardian angel will arrive that can take over the TravelStar operation, take the company private, eliminate those insane programs, dump the hobbyist agents and concentrate on its core of commissioned agents, if any remain, and stop the giveaway programs. However, I am not that optimistic.

When the collapse becomes official I hope that some of the larger Host Agencies, including my own Coral Sands Travel and with support from PATH, STARS, NACTA and OSSN, come up with a program that will help the JoyStar agents recover all or part of their commissions. I would also encourage an investigation take place to determine if any SEC violations took place as a result of insider maneuvering as well to determine if any funds were diverted to Jupiter, Florida where Alverson is building a million dollar plus home, as alleged.

Beyond taking care of the agents, Host Agencies should really take a good look at their own programs. I feel the 100% commission program should be eliminated and the 90% program should increase its requirements. There is no Host agency that will make money with these programs and a "no fee" policy. I see no problem with short term offers that include these programs.

PATH and any organization supporting Host Agencies needs to make and support tougher rules in becoming a Host Agency. Perhaps a designation called the "Certified Host Agency" be established that requires a host agency, among other requirements, to place a percentage of their commissions in an escrow account or provide an insurance policy that safeguards the agent's commissions.

I have been discussing JoyStar now for four years and the truth is finally being realized by many, however late. The biggest challenge we have moving forward is the effect the MLMs will have on the professional travel agent and the consumer. We need to begin to clean up our act before a government body does it for us. It all begins with the suppliers who have the ability to stop doing business with them with help from all the organizations and media.

In any event, when any company goes out of business it is bad business for everyone.

Comments

[MLM network Godwin]

Excellent Blog! Great history,I liked this.

[Bruce Nierenberg]

Great review and history. To the point.When you look at this company I have to agree with you that if the operation was revitalized and managed/set up to make money for its member agencies and not as a stock play it has potential. If that happened could you see supporting it in the future? Experienced new management with proven track record, agent friendly,combined with new capital to stabilize the business?

[Peter Stilphen]

Hello Bruce,
I have been out of town and just got to see your comment. The answer is absolutely yes under certain conditions. They are really deep in the hole with travel agents, host agencies and suppliers, yet, it can be salvaged. I would be pleased to discuss this in another forum. my email address is host@coral SandsTravel.com and Tel# is 866-481-4678

Peter

[Rick Nicqi]

I have been following your blog since the beginning and you have been right all along, Joystar and now Travelstar are both scams run by Bill Alversen, why do you think he moved to florida! He had burned ALL his bridges in california and has no friends left, he owes almost everyone that ever came in contact with him money and probably left for his own personal safety. Lets hope the SEC does investigate this guy once and for all because if they dont he will just be running a new scam in a few months.
One thing your article failed to mention is that after he and his wife scamed out of TravelMax they FLED to Mexico for 3+ years!!! so they would not have to give the money back, they waited until everything "blew over" then came back and started Joystar.

[JT]

Excellent article.

This whole episode is Deja TravelMax. No doubt Alverson and his wife will once again disappear until everything blows over, maybe to come back and do it all yet again.

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I am investor that has lost $60,000+ to this scam artist. If you are an investor or agent with Joystar please file a complaint with the SEC, FBI, and Attorney Generals office. If enough voices are heard maybe they will investigate this crook and put him where he belongs.

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They're baaacckkk. Now they call themselves TravelStar Affiliate Network. Their website is travelstar.biz and it is constantly down. Yet another scam coming to you by the minds of criminals. I learned about it when someone I know from Longview, TX tried to recruit me...and he is a well-known scam artist himself!! STAY AWAY!!

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