10-Q - Quarterly report [Sections 13 or 15(d)]

Document Info
Form Name: 10-Q
Filed: May 11, 2018
 
10Q 10-Q 1 neik_10q.htm QUARTERLY REPORT

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.


For the quarterly period ended: March 31, 2018


[  ]  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from: ________ to _________


333-90031

Commission file number


Northstar Electronics, Inc.

Exact name of small business issuer as specified in its charter


Delaware

33-0803434

State or other jurisdiction

of organization

IRS Employee incorporation

or Identification No.


2020 General Booth Blvd, Unit 230,

Virginia Beach, VA, USA 23454

Address of principal executive offices


(778) 838 3313

Issuer's telephone number


1130 West Pender Street, Suite 950

Vancouver, BC, Canada  V6E 4A4

Former name, former address and former fiscal year, if changed since last report



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated Filer [  ]

Accelerated Filer [  ]

Non-accelerated filer    [  ]

Smaller reporting Company [X]

(Do not check if a smaller reporting company)

Emerging growth company [  ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

[  ]Yes  [X] No


Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:


Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

Yes[  ]  No [  ]  Not Applicable


Applicable only to corporate issuers:


State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Common shares as of March 31, 2018:  98,579,815


Transitional Small Business Disclosure Format (check one):

Yes [  ]  No [X]


















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Table of Contents



PART I - FINANCIAL INFORMATION

4

Item 1. Financial Statements

4

Consolidated Balance Sheets

4

Consolidated Statements of Operations

5

Consolidated Statement of Changes in Stockholders' Deficit

6

Consolidated Statements of Cash Flows

7

Notes to Consolidated Financial Statements

8

Item 2. Management's Discussion and Analysis or Plan of Operation.

11

Item 3. Controls and Procedures

13

PART II - OTHER INFORMATION

13

Item 1. Legal Proceedings.

13

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

13

Item 3. Defaults Upon Senior Securities.

13

Item 4. Submission of Matters to a Vote of Security Holders.

13

Item 5. Other Information.

13

Item 6. Exhibits

13

SIGNATURES

14




















3



PART I - FINANCIAL INFORMATION


Item 1. Interim Consolidated Financial Statements


NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Balance Sheets

(U.S. Dollars)



 

 

March 31,

2018

 

December 31,

2017

 

 

unaudited

 

audited

Assets

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

Cash

$

8,360

$

16,438

Total assets

$

8,360

$

16,438

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

Accounts payable and accrued liabilities

$

1,005,295

$

941,115

Loans payable

 

434,291

 

434,291

Due to directors (note 3)

 

453,775

 

424,538

Legal liability

 

2,942,081

 

3,001,471

Total liabilities

 

4,835,442

 

4,801,415

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

Authorized:

 

 

 

 

  200,000,000 Common shares with a par value of $0.0001 each

  20,000,000 Preferred shares with a par value of $0.0001 each

 

 

 

 

Issued and outstanding:

 

 

 

 

  98,579,815  Common shares

  (98,579,815 - December 31, 2017)

 

9,858

 

9,858

  597,716  Preferred series A, B and C shares  

  (597,716 - December 31, 2017)

 

404,299

 

404,299

Additional paid-in capital

 

8,333,396

 

 8,333,396

Subscription receivable

 

-

 

 (5,035)

Accumulated deficit

 

(13,574,635)

 

 (13,527,495)

Total stockholders' deficit

 

(4,827,082)

 

(4,784,977)

Total liabilities and stockholders' deficit

$

8,360

$

16,438


Nature of operations and going concern (note 1)




See notes to the interim consolidated financial statements



4



NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Statements of Operations

Three Months Ended March 31

Unaudited

U.S. Dollars



 

 

2018

 

2017

Expenses

 

 

 

 

  Administration

$

15,000

$

15,000

  Professional fees

 

5,180

 

6,750

  Management fees (note 3)

 

30,000

 

15,000

  Engineering

 

32,000

 

-

  Rent

 

2,571

 

2,237

  Investor relations

 

775

 

785

  Office

 

8,379

 

4,284

  Business development (note 3)

 

12,000

 

15,010

  Foreign exchange (gain)/loss

 

(84,237)

 

23,266

  Interest (note 4)

 

25,472

 

24,065

 

 

47,140

 

106,397

 

 

 

 

 

Net loss for the period

$

(47,140)

$

(106,397)

 

 

 

 

 

Basic and diluted loss per common share

$

(0.00)

$

(0.00)

 

 

 

 

 

Weighted average number of shares outstanding

 

98,579,815

 

87,585,179

















See notes to the interim consolidated financial statements



5



NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Statement of Changes in Stockholders' Deficit

Unaudited

U.S. Dollars



 

Number

of

Shares

 

Par

Value

 

Additional

Paid-In

Capital

 

Subscriptions

receivable

 

Accumulated

Deficit

 

Preferred

Shares

 

Total

Stockholders'

Deficit

Balance, December 31,2016

86,887,609

$

8,639

$

8,194,737

$

-

$

(12,888,370)

$

436,209

$

(4,248,785)

Issuance for cash (note 2)

2,500,000

 

250

 

24,750

 

-

 

-

 

-

 

25,000

Issuance on conversion of

preferred B shares (note 2)

2,037,206

 

204

 

31,706

 

-

 

-

 

(31,910)

 

-

Net loss

-

 

-

 

-

 

-

 

(106,397)

 

-

 

(106,397)

Balance March 31, 2017

91,424,815

 

9,093

 

8,251,193

 

-

 

(12,994,767)

 

404,299

 

(4,330,182)

Issuance for cash

4,405,000

 

440

 

37,095

 

(5,035)

 

-

 

-

 

32,500

Adjustment

-

 

50

 

(50)

 

-

 

-

 

-

 

-

Issued for services

2,750,000

 

275

 

29,225

 

-

 

-

 

-

 

29,500

Fair value of warrants issued

-

 

-

 

15,933

 

-

 

-

 

-

 

15,933

Net loss

-

 

-

 

-

 

-

 

(532,728)

 

-

 

(532,728)

Balance December 31, 2017

98,579,815

 

9,858

 

8,333,396

 

(5,035)

 

(13,527,495)

 

404,299

 

(4,784,977)

Subscription collected (note 2)

-

 

-

 

-

 

5,035

 

-

 

-

 

5,035

Net loss

-

 

-

 

-

 

-

 

(47,140)

 

-

 

(47,140)

Balance March 31, 2018

98,579,815

$

9,858

$

8,333,396

$

-

$

(13,574,635)

$

404,299

$

(4,827,082)























See notes to the interim consolidated financial statements



6



NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Statements of Cash Flows

Three Months Ended March 31

Unaudited

U.S. Dollars



 

 

2018

 

2017

 

 

 

 

 

Operating Activities

 

 

 

 

Net loss

$

(47,140)

$

(106,397)

Items not involving cash:

 

 

 

 

    Foreign exchange loss

 

(84,862)

 

21,636

Changes in non-cash working capital

 

 

 

 

    Changes in operating assets and liabilities

 

118,889

 

70,467

Net cash used in operating activities

 

(13,113)

 

(14,294)

 

 

 

 

 

Financing Activities

 

 

 

 

  Subscription received

 

5,035

 

25,000

Net cash provided by financing activities

 

5,035

 

25,000

 

 

 

 

 

Increase (decrease) in cash

 

(8,078)

 

10,706

  Cash, beginning

 

16,438

 

6,078

 

 

 

 

 

  Cash, ending

$

8,360

$

16,784


















See notes to the interim consolidated financial statements



7



NORTHSTAR ELECTRONICS, INC.

Notes to the Interim Consolidated Financial Statements

March 31, 2018

Unaudited

U.S. Dollars



1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN


Northstar Electronics, Inc. (the "Company") was incorporated on May 11, 1998 in the state of Delaware. The Company is doing research and development on single engine aircrafts for business use.


The Company's business activities are conducted in Canada.  However, the financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") with all figures translated into United States dollars for financial reporting purposes.  


These unaudited consolidated interim financial statements have been prepared by management in accordance with GAAP for interim financial information, are condensed and do not include all disclosures required for annual financial statements. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company's audited consolidated financial statements filed as part of the Company's December 31, 2017 Form 10-K.


The Company is in the process of regenerating its operations. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the entire fiscal year. The accompanying interim consolidated financial statements have been prepared assuming the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the three months to March 31, 2018 the Company incurred a net loss of $47,140 and at March 31, 2018 had a working capital deficiency of $4,827,082.


Management has undertaken initiatives for the Company to continue as a going concern; for example: the Company is attempting to secure an equity financing in the short term. Management is unable to predict the results of its initiatives at this time.


Should management be unsuccessful in its initiative to finance its operations, the Company's ability to continue as a going concern is not certain. These financial statements do not give effect to any adjustments to the amounts and classifications of assets and liabilities which might be necessary should the Company be unable to continue its operations as a going concern.






8



2. SHARE CAPITAL


COMMON STOCK


During the three months ended March 31, 2018 the Company issued nil common shares. The Company received subscription of $5,035 related to issuance in prior year.


During the three months ended March 31, 2017, the Company issued 2,500,000 shares of common stock for cash of $25,000 and issued 2,037,206 shares of common stock for conversion of 31,910 preferred class B shares.

 

PREFERRED SHARES


All classes of the preferred shares bear interest at 10% per annum paid semiannually not in advance and are convertible to shares of common stock of the Company after two years from receipt of funds at a 20% discount to the then current market price of the Company's common stock. The preferred shares may be converted after six months and before two years under similar terms but with a 15% discount to market. At March 31, 2018, the outstanding number of preferred Classes A, B and C shares are 582,716 (December 31, 2017: 582,716), 15,000 (December 31, 2017: 15,000) and nil (December 31, 2017: nil), respectively.


3. RELATED PARTY TRANSACTIONS


a)

The amount of $453,775 (December 31, 2017: $424,538) due to a director of the Company has no specific terms of repayment, is non-interest bearing and unsecured.


b)

The Company accrued management fees of $30,000 in total to a director of the Company for his services as an officer of the Company during the three months ended March 31, 2018 (2017: $15,000).


c)

The Company accrued engineering fees of $Nil in total to a director of the Company for his services during the three months ended March 31, 2018 (2017: $15,000), which are included in business development expense.


4. CONTINGENCIES


During 2000 to 2008, the Company's former subsidiaries North Star Technical Inc. ("NTI") and Northstar Network Ltd. ("NNL") received funding from Atlantic Canada Opportunities Agency ("ACOA") to fund their projects.  In 2013, ACOA filed claims against NTI, NNL and the Company for repayments of advances due to events of default.  The advance and interests ACOA claims totaled CAD$3,797,704 ($2,942,081).  In accordance with agreements signed between NTI, NNL and the Company, the Company was jointly and severally liable for the obligations.  Further, the claim amount bears a daily interest of CAD$358 from February 15, 2013 to settlement. During the three months ended March 31, 2018, the Company recorded interest expenses of $25,472.




9




5. NEW ACCOUNTING PRONOUNCEMENTS


Management does not believe that any recently issued but not yet effective accounting pronouncements if currently adopted would have a material effect on the accompanying consolidated financial statements.


6. SUBSEQUENT EVENT


There are no events known to management subsequent to March 31, 2018 that would have a material impact on these interim financial statements.


































10




Item 2. Management's Discussion and Analysis or Plan of Operation.


The following discussion should be read in conjunction with the accompanying unaudited consolidated financial information for the three month periods ended March 31, 2018 and March 31, 2017 prepared by management and the consolidated financial statements for the twelve months ended December 31, 2017 as presented in its Form 10K as filed.


Special Note Regarding Forward Looking Statements


Certain statements in this report and elsewhere (such as in other filings by the Company with the Securities and Exchange Commission ("SEC"), press releases, presentations by the Company of its management and oral statements) may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Actual results may materially differ from any forward-looking statements.  Factors that might cause or contribute to such differences include, among others, competitive pressures and constantly changing technology and market acceptance of the Company's products and services.  The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.


The Company's Services


We intend to build our own systems in the civilian aviation sector. The Company is working on plans to obtain rights to a single engine airplane with industrial applications. If successful, we intend to market the airplane internationally and provide Maintenance, Repair and Overhaul (MRO) services in close proximity to customers. The Company's wholly owned subsidiary, National Five Holding Ltd, is a 60% shareholder of Northstar Sealand Enterprises Ltd (NSEL). The constituent parts of NSEL has experience in working on certified commercial aircraft and government military contracts, and has access to an established aircraft parts manufacturing and assembly facility.


Results of Operations


Comparison of the three months ended March 31, 2018 with the three months ended March 31, 2017.


The net loss for the three-month period ended March 31, 2018 was $47,140 compared to a net loss of $106,397 for the three months ended March 31, 2017. The decrease in net loss was in part due to foreign exchange gain incurred during the three month periods ended March 31, 2018.





11




Comparison of Financial Position at March 31, 2018 with March 31, 2017


The Company's working capital deficiency at March 31, 2018 was $4,827,082, with current liabilities of $4,835,442, which are in excess of current assets of $8,360. At December 31, 2017 the Company had a working capital deficiency of $4,784,977. See also contingent liabilities (note 4) to the financial statements for the three months ended March 31, 2018.


Critical Accounting Policies and Estimates


We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to our annual financial statements at December 31, 2017. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.


Although these estimates are based on our knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Certain accounting policies involve significant judgments and assumptions by us and have a material impact on our financial condition and results. Management believes its critical accounting policies reflect its most significant estimates and assumptions used in the presentation of our financial statements. Our critical accounting policies include revenue recognition, accounting for stock based compensation and the evaluation of the recoverability of long-lived and intangible assets. We do not have off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons, also known as "special purpose entities".


Liquidity and Capital Resources


Cash outflow for the first quarter ended March 31, 2018 was $(8,078) compared to an inflow of cash of $10,706 in the comparative prior quarter March 31, 2017. In the quarter, the Company received $5,035 ($25,000 in the comparative prior quarter) from equity funding and received $0 (received $0 in the comparative quarter) long term debt leaving cash on hand at March 31, 2018 of $8,360 compared to cash on hand of $16,438 at December 31, 2017 and $16,784 at March 31, 2017. Until the Company receives revenues from new contracts it will be dependent upon equity and loan financings to compensate for the outflow of cash anticipated from operations.


At this time, no commitment for funding has been made to the Company.


The Company's continued operations are dependent upon obtaining revenues from outside sources or raising additional funds through debt or equity financing.





12



Item 3. Controls and Procedures


(a)  Evaluation of disclosure controls and procedures


Based on the evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of the date of this Quarterly Report on Form 10-Q, our chief executive officer and chief financial officer has concluded that our disclosure controls and procedures are designed to ensure that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner. The disclosure controls were not effective at December 31, 2016 as the Company was late in its filings at that time.


(b)  Changes in internal controls


There were no changes in our internal controls or in other factors that could affect these controls subsequent to the date of their most recent evaluation.


PART II - OTHER INFORMATION


Item 1. Legal Proceedings.


No change since previous filing.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.


None


Item 3. Defaults Upon Senior Securities.


No change since previous filing.


Item 4. Submission of Matters to a Vote of Security Holders.


At an extraordinary general meeting of shareholders held March 30, 2016 a motion was passed to increase the Company's Authorized Capital to 220,000,000 (two hundred twenty million) shares consisting of 200,000,000 (two hundred million) common shares and 20,000,000 (twenty million) preferred shares


Item 5. Other Information.


No change since previous filing


Item 6. Exhibits


No change since previous filing.




13




SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


May 11, 2018

Northstar Electronics, Inc.

 

(Registrant)

 

 

 

By: /s/ Wilson Russell

 

Wilson Russell, PhD, President and Chief Financial Officer

































14