As filed with the Securities and Exchange Commission on October 22, 1999
Registration No._______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTHSTAR ELECTRONICS, INC.
(Name of Small Business Issuer in its Charter)
#33-0803434
(I.R.S. Employer Identification Number)
Suite 1455-409 Granville Street
Vancouver, BC
V6C 1T2
(604) 685-0364
(Address, including zip code and telephone number, including area
code and registrant's principal executive office and principal
place of business)
Dr. Wilson E. Russell
Suite 1455-409 Granville Street
Vancouver, BC
V6C 1T2
(604) 685-0364
(Address, including zip code and telephone number, including area
code, of agent for service) Copies to:
O'Neill & Company
Barristers & Solicitors
Suite 1880, Royal Centre
1055 West Georgia Street, Box 11122
Vancouver, British Columbia
V6E 3P3
Approximate date of proposed sale to the public: As soon as
practicable following effectiveness of the Registration Statement
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION
Title of each Class of Dollar Amount Proposed Amount of
Securities to be Registered To be Registered Maximum registration fee
per share
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock $800,000 $1.00US $278*
- ---------------------------------------------------------------------
</TABLE>
Disclosure Alternative Used: Alternative 1 ___
Alternative 2_X_
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined
if this prospectus is truthful and complete. Any representation to the
contrary is a criminal offence.
<PAGE>
PROSPECTUS SUMMARY
This is a brief summary of the information in this prospectus. We
encourage you to read the entire prospectus before you decide whether
and how to invest in the shares offered.
"SEE RISK FACTORS"
Northstar Electronics, Inc.
- ------------------------------
Northstar Electronics, Inc., based in Vancouver, BC, was organized
under the laws of the State of Delaware on May 11, 1998. At that time,
the corporation was titled Scientific Technologies, Inc. See Exhibits
for documentation supporting the name change.
The company was originally incorporated for the purpose of high
technology development and manufacturing of underwater communications
systems and contract manufacturing.
The Company acquired all of the issued and outstanding common shares
in Northstar Technical Inc., in January of 1999. Northstar is a high
technology development and manufacturing company with two main business
activities (as above) Northstar's objectives are to become a leader in
marine electronics and a major regional contract manufacturer. As a
result of the acquisition, Northstar became a subsidiary of the company.
Northstar has developed a core technology for underwater communications
which has applications in the fishery, offshore oil and gas, defence,
marine transportation, oceanographic and environmental industries.
The first application is the NETMIND system for the world's commercial
fishing industry.
NETMIND monitors the performance of a trawl and is both a
conservation tool and an efficiency tool. It consists of a group of
electronic sensors that transmit measurements from the net through
the water to a receiver on the ship. The information is displayed
on a computer screen and the captain can see what activities are
occurring in the net. He then knows how to adjust the height and
width of the net opening, how much fish are in the opening and when
the net is full and ready to be pulled in. Fishermen call NETMIND,
their `eyes beneath the sea.
<PAGE>
The Offering
- ---------------
Securities Offered: Up to 800,000 shares of common stock.
Regulation S: The shares are being offered pursuant to
Regulation S of the United States Securities act of 1933 to
persons who are not US persons.
Use of Proceeds: The proceeds to the company from the sale of
the shares will be approximately $800,000 assuming all shares
are sold. (Use of Proceeds)
Securities Issued: As of the date of this document there are
7,604,481 shares of Common Stock issued and outstanding. Upon
the completion of the offering there will be 8,604,481 shares
of Common Stock issued and outstanding if the offered shares are
fully sold. 200,000 shares have been issued under Regulation S.
(See Exhibits)
<PAGE>
RISK FACTORS
An investment in common stock involves many substantial risk factors,
including those associated generally with a new venture and a high
technology undertaking which does not have a developed marketing
structure into a tested market. Although management itself feels
that there is a substantial demand for its product at the proposed
price, the assumption has yet to be tested in full operation. The
Company itself has a limited operating history.
Risk Factors Related to the Company's Business
Status of Venture: The Company, formed in 1998, has had no
significant operations or business assets, and is in its early
development stage. In January 1999, it purchased all shares of
Northstar Technical Inc. (Northstar) as described below.
No-Operating History: The company has been in actual operation
under its current management for a relatively short time. It faces
all of the risks inherent in a new business and those risks
specifically inherent in the development and operation of a new
business, including, but not limited to, uncertainty as the ability
to develop a market for a new product in a new area. The Company is
not expected to generate any specific revenues until it completes a
further offering of its securities. The purchase of the securities
offered hereby must be regarded as the placing of funds at risk in a
new or "start-up" venture with all of the unforeseen costs, expenses,
problems and difficulties to which such ventures are subject.
Management Risks Inherent in High-Technology Businesses:
New ventures, particularly those involved in high technology, have
substantial inherent risks. These risks are in three general areas:
human, technical and mechanical. Notwithstanding any pre-production
planning, any new products can incur any unexpected problems in
full-scale production, all of which cannot always be foreseen or
accurately predicted. Designs can be unworkable, for unpredicted
reasons. Quality control and component sourcing failures are to be
expected from time to time. Any operation, including the one
described here, is substantially dependent upon the capabilities
and performance of both management and sales personnel. Mistakes
in judgement or performance can be costly and, in instances, disabling.
Therefore, management skill, experience, character and reliability are
of premium importance.
Production Risks In High Technology Ventures
The high-technology product line requires the Company to deal with
suppliers and subcontractors supplying highly-specialized parts,
operating highly sophisticated and narrow tolerance equipment and
performing highly-technical calculations and tasks. Components must
be custom designed and manufactured, which is not only complicated and
expensive, but can require a number of months to accomplish. Slight
mistakes in either the design or manufacturing can result in
unsatisfactory parts which may not be correctable. Since this
operation uses the talents of various professions, mistakes from
very slight oversights or miscommunications can occur, resulting not
only in costly delays and lost orders, but in disagreements regarding
liability and, in any event, extended delays in production.
Nature of Market Appeal:
Although management believes that the product will have sustained
market demand over an extended period into the future, it is possible
that current indications of commercial demand are limited to current
market conditions only. It is possible that demand may be directed to
similar or other competing products because of technical developments
or preferences or simply because of overwhelming commercial promotion
within a short period of time, thereby limiting the commercial viability
of the product either prior to or shortly after the Company reaches an
initial level of economic profitability. Unexpected negative publicity,
even if not relating directly to the Company or its own products and
even if unwarranted, can devastate a market. Such unusual fortuities
can never be predicted.
<PAGE>
RISK FACTORS RELATING TO MARKET PROTECTION
Market Competition: The fishing trawl monitoring business is
dominated by a number of larger competitors who are well established
in the marketplace, have experienced and talented management, are
well financed and have recognized trade names related to their product
lines. Although the company believes Northstar's product line has
certain distinctive characteristics which allow it to penetrate the
existing market and acquire a significant market share in its special
niche to be profitable, there is no assurance that existing companies
will not aggressively compete by introducing new products substantially
similar to the Company's and at a price below that at which the Company
can compete. Should this occur, the Company may not be able to survive
for a sufficient time to reach viability.
Inherently Limited Nature of Market Protection:
The Company knows of several products directly competing with Northstar's
NETMIND technology. It is conceivable that new or similar products are
now being or will be produced and distributed by one or more other
entities. As some security from competition within the market place,
the Company is relying on the protection which it hopes to realize
under the United States and foreign patent laws. It is even conceivable
that certain patent copyright claims superior to the Company's unfiled
are either pending or planned, either within the U.S. or other foreign
countries, which could significantly impact the Company's rights to the
use of all, or important aspects, of the NETMIND technology. It is
further conceptually possible that similar devices could be designed
which, although not identical and therefore not infringing on the
company's proprietary right, could function adequately to be distributed
into the same market. Moreover, it is even possible that an unpatented
or uncopyrighted but prior existing device or design may exist which
simply has never been made public and therefore not known to Management
or the industry in general. Such a device could be introduced into the
market without infringing upon the Company's current rights. If any
such competing non-infringing devices are produced and distributed,
the Company's profit potential could be seriously limited.
Patent Protection is Not Self-Enforcing:
The Company plans to file copyright claims within the United States
and countries where major markets exist. However, even apart from a
superior right to the Company's claim to exclusive design and concept
rights, if one or more competitors should yet produce and distribute
a product apparently with the protection of one or more of those
claims, the cost of enforcing the Company's claim could fall on the
Company itself. The costs can be substantial and ultimately could
be beyond the financial resources of the Company. Even if it is not,
the legal costs required in protecting that claim could seriously
debilitate the Company's other operations. Thus, even though the
patent may be valid, investors should be aware that it is not
self-enforcing.
Cautions on Copyright Protection:
If any of those copyright claims are challenged in a future lawsuit
by one or more competitors, it is possible, though not probable,
that a court could find one or more of those claims invalid, or at
least too broad. The courts, and not the granting agencies are
generally the final arbiters on such maters. If challenged, the
court, through its own interpretation of the laws and facts may
either determine the patent to be completely invalid or the claim
to be considerably narrower than defined in the patent documents
issued by the patent offices.
Dependence Upon Key Personnel:
At least in the near term, the Company is dependent upon its
executive officers and certain key employees and consultants,
the loss of any one of whom could have a material adverse effect
on the Company. The Company has not obtained key man life insurance
on the lives of its key personnel except for a policy of CDN $250,000
on Wilson Russell payable to Northstar Technical Inc. At the present
time, the Company has not entered into consulting and employment
agreements with each of its key employees. Alternatively, the primary
means of maintaining their relationship with the Company's pursuit is
their equity interest. The continued success of the Company will also
be dependent upon its ability to attract and retain highly qualified
personnel in the sales area. There can be no assurance that the
company will be able to recruit and attain such personnel.
<PAGE>
RISKS RELATED TO THE MANAGEMENT STRUCTURE OF THE COMPANY
Limitation on Liability of Management:
Management will have no liability to the Company for any mistakes or error
of judgement or for any act or omission believed to be within the scope of
authority conferred by the Company's articles unless such acts or omissions
were performed or omitted fraudulently or in bad faith, constituted gross
negligence or were a violation of a director's or officer's fiduciary
obligations to the Company. The Company had agreed to indemnify the
officers and directors against all loss or damage even if caused by an
officer's or director's simple negligence unless such loss or damage
was caused by that officer's or director's fraud, bad faith, gross
negligence or breach of fiduciary obligation.
<PAGE>
RISKS INHERENT IN BUSINESS
No Assurance of Profitability of Operation:
Notwithstanding the business plan and projections made
by the Company, there can be no assurance that the Company
will be able to operate the commercial operation successfully
and in fact, may ultimately fail. Even if the commercial
operation itself is successful, there is no assurance that
any specific level of profitability will be achieved by Management.
Application of Revenues:
Although earnings sufficient to allow the possible payment
of stock dividends in the future may develop, there is no
assurance that earnings sufficient enough to pay such dividends
will ever be achieved. Even if achieved, there is no assurance
that such funds will not be applied by Management to other purposes.
For instance, Management could apply those funds to payment of other
debt which either now exists or may be incurred in the future, capital
expansion or improvements, the creation of reserves, the payment of
compensation or any other of a variety of business purposes .
The decision of what portion of earnings is to be distributed in
payment of dividends and what portion is to be retained for any of
those other purposes is inherently within the discretion of Management.
Dilutionary Possibilities:
A Board of Directors has the inherent right under applicable law ,
for whatever value the Board seems adequate, to the limit of shares
authorized by the Articles, to issue additional shares, and all Common
Stock shareholders, regardless of when the stock is issued, thereafter
generally rank equally in all aspects of that class of stock, regardless
of when issued. A majority of shareholders can vote to amend the Articles
of Incorporation to authorize the issuance of additional preferred shares.
The Board of Directors likewise has the inherent right, limited only by
applicable law, provisions of the Articles of Incorporation and existing
resolutions,
to expand the number of shares in a series, create new series and to
establish
preferences and all other terms and conditions in regard to such newly
created
series. Those terms and conditions may include preferences on an equal
or prior
rank to existing series and to all Common Stock. Those shares may be
issued on
such terms and for such consideration as the Board then deems reasonable
and such
stock then shall rank equally in all aspects of the series and on the
preferences
and conditions so provided, regardless of when issued. Any of those
actions
can not only dilute the Common Shareholders but the relative position
of the
holders of any series of any preferred class. Current shareholders have
no
rights to prohibit such issuance nor inherent `pre-emptive' rights to
purchase
any such stock when offered.
<PAGE>
RISKS RELATED TO THE NATURE OF THE OFFERING
Arbitrary Offering Price:
The offering price of the Common Stock was arbitrarily
determined by Management and is not based on any specific
recognized criteria of value or other practices. Quite specifically,
it should be recognized that it is impossible to determine at what price,
if anything those shares would sell.
Dilution of Proceeds from Common Stock:
The Common Stock offered hereunder is being sold at US$1.00 per share.
Subscribers under this offering will suffer an immediate dilution of
their rights and contribution, as compared to the current shareholders
of the Company. While Management feels that the value of its technology
and of the business plan discussed herein justifies the subscription price,
there is no assurance that this venture will succeed, thereby confirming
that projection of disproportionate value.
GENERAL CAUTION
For all of the aforesaid reasons, and others set forth therein,
the very nature of the Company, its management structure and
the securities being offered here, each involve a notable risk.
Any person considering an investment in the securities offered
hereby should be aware of these and other risk factors. No person
should invest in these securities if that person anticipates an immediate
return on his/her investment. These securities should only be purchased
by persons who can afford to absorb a total loss of their investment and,
at the very least, they have no need for immediate return on that investment.
<PAGE>
DILUTION
The net tangible book value of the company, as of October 15, 1999 was
$156,848
or approximately $0.021 per share. Giving effect to the sale by the Company
of Shares at the Offering price, the pro forma net tangible book value of the
Company would be approximately $156,848 or approximately $0.138 per Share,
which would represent n immediate increase in net tangible book value of
approximately $0.117 per Share to present shareholders and an immediate
dilution of approximately $0.362 per share, or approximately 86.2% to new
investors.
<TABLE>
<CAPTION>
________________________________________________________________________
ASSUMING MAXIMUM
SHARES SOLD
<S> <C>
Offering Price (before deduction of operating expenses) $1.000 per share
Net tangible book value before offering $0.021 per share
Net tangible book value after offering $0.138 per share
Dilution to new investors $0.862 per share
Dilution as a percentage 86.2%
________________________________________________________________________
</TABLE>
Insert brief description of table included, and comparative data section.
(As outlined in draft)
<PAGE>
USE OF PROCEEDS
It is estimated that the Company will use the maximum funds of
$800,000 in the manner set forth below:
Production (Marine Electronics)..............................$150,000
Production (Contract Manufacturing)..........................$200,000
Marketing (Marine Electronics)...............................$100,000
Business Development (Contract Manufacturing)................$100,000
Operating Capital............................................$250,000
Total:.......................................................$800,000
The actual expenditures of the proceeds of the Offering may differ
substantially from the estimated use of proceeds. The actual expenditures
of the proceeds of the Offering will be according to the expenditures deemed
by the Company and its Board of Directors to be in the best interests of
advancing the business of the Company. The actual expenditures will also
vary from the estimated use of proceeds if less than all of the Shares are
sold.
The Company anticipates that the net proceeds from the Offering will be
sufficient to meet its financial requirements for only a short period of time.
The Company, therefore, will require substantial additional capital to fund
its contemplated business plan in the near future.
The Company anticipates expenses associated with the Offering, including
legal, accounting, and stock transfer agent expenses, will be approximately
$10,000US.
The Company anticipates expenses associated with the registration of
the Shares issued pursuant to the Offering, including legal and accounting
expenses, will be approximately $30,000US.
We do not intend to become an investment company under the
Investment Company Act of 1940 and, therefore, may be limited in the
temporary investments we can make with the proceeds of this offering.
To the extent that the net proceeds of this offering are not utilized
immediately, they will be invested in money market accounts, savings
deposits, short-term obligations of the United States government, or other
temporary interest bearing investments in commercial financial institutions.
<PAGE>
BUSINESS
General
Northstar Electronics, Inc., is a corporation originally organized
as Scientific Technologies, Inc. under the laws of the State of Delaware
on May 11, 1998. (See Exhibit-A) The company acquired all of the issued
and outstanding common shares in Northstar Technical Inc. ("Northstar")
in January 1999. Northstar is a high technology development and
manufacturing company with two main business activities. One is
underwater communications systems, the other is contract manufacturing.
Northstar's objectives are to become a leader in marine electronics
and a major regional contract manufacturer. As a result of the
acquisition, Northstar Technical became a subsidiary of the Company.
Plan of Operations
Northstar has spent over CDN $3,500,000 to complete the
development and commercialization of the NETMIND system and
establish a production operation. Northstar has developed a
core technology for underwater communications which has potential
applications in the fishery, offshore oil and gas, defence, marine
transportation, oceanographic and environmental industries. The basic
technology was commercialized in August 1996 when the first
industrial system was produced. The plant has since manufactured
over thirty complete systems.
Industry and Market Overview
NETMIND was introduced to the marketplace in 1996 and sales
have been made in North America and Europe. The targeted customers
have been strategic in that they are industry leaders and government
agencies. Three different agencies of the US government have purchased
systems and have given very positive feedback. International customers
are interested in NETMIND for its price and technical advantages. To date,
Northstar has barely penetrated the potential market which is estimated
to be about 25,000 vessels worldwide. Upon the successful close of
this offering, sales in the first year are estimated to be up to 100
NETMIND systems.
Pricing and Profit
The NETMIND system is offered at a standard retail price of $24,224US.
A recent sales forecast projects, over a three year period, a sales volume
of $2,420,000 dependent upon sales approximated at 90 units. Market
penetration is estimated at 11%.
Distribution
The distribution of NETMIND will consist of factory trained
representatives covering major West Coast ports (San Diego,
Santa Barbara, Seattle/Bellingham, Vancouver, Victoria, Prince
George, etc.); infield demonstrations with independent and corporate
owners in each type of fishery; and via service through stocking
distributors/representative network. Major repairs being available
at the West Coast service centre in Vancouver.
Employees
As of June 15, 1999, the Company had ten employees and three part-time
engineering consultants. The Company believes that its future success
will depend in part on its ability to attract, hire and retain qualified
personnel.
Offices
The primary business activities of the Company are carried on at leased
premises
located at Suite 1455-409 Granville Street, Vancouver, British Columbia,
Canada V6C 1T2. The premises are comprised of 1,000 square feet and is
leased for a term of two years expiring on --check date--.
Northstar Technical Inc. Leases premises at 687 Water Street,
St. John's, Newfoundland, Canada A1C 6J9. The premises are comprised of
3,000 square feet and is leased for a term of two years expiring on
December 31, 2002. The Company does not lease or own any other property.
Products/Contract Manufacturing:
Northstar's second business division focuses on manufacturing
systems for the defense, transportation and communications industries
in strategic alliance with major international contractors.
Several years ago, Northstar signed a Teaming Agreement with
LORAL LIBRASCOPE, in Glendale, California for the manufacture
of control consoles for submarines. This was followed by the first
start-up contract with LOCKHEED-MARTIN which was signed in April 1997.
Northstar is attempting to secure a contract to manufacture consoles
for Canadian Navy submarines. It is expected that other work for
Canadian patrol frigates, destroyers and marine helicopters will
follow on from the submarine contracts. Northstar expects to
establish good relationships with other major defense and communications
contractors in Canada and the United States and significant contract
opportunities are expected through them. The NETMIND system has two
main competitors, Furuno in Japan and Scanmar in Norway. It is believed
that NETMIND has price and technical advantages over each. Technically,
NETMIND has longer sensor battery life, longer operating distance, and
better maintenance and repair features. See `Risk Factors.'
Business Development/Contract Manufacturing
Northstar's business development strategy is based on Northstar as
a second or third tier supplier. As such, the company would initially
pursue small to medium sized contracts primarily in capability areas.
Northstar's immediate objectives will be to establish a strong marketing
presence that will bring its capabilities to the attention of selected prime
contractors, other major project suppliers and government procurement people.
The marketing strategy will encompass development of capability brochures,
marketing to other prime contractors, direct procurement and
direct-marketing to the United States.
<PAGE>
MANAGEMENT'S DISCUSSION
OR PLAN OF OPERATIONS
Overview of Business Plan
Northstar Technical Inc., is a high technology development and
manufacturing company with two main business activities. One is
underwater communications systems, the other is contract manufacturing.
The company's objectives are to become a leader in marine electronics and
a major contract manufacturer.
In January 1999, Northstar merged with Scientific Technologies, Inc.
A company listed on the NASD OTC. Scientific injected $500,000 into
Northstar at the time and now intends to do another injection of funds.
<PAGE>
Present Product
Northstar has developed a core technology for underwater
communications which has applications in the fishery,
offshore oil and gas, defence, marine transportation,
oceanographic and environmental industries. The first
application is the NETMIND system for the world's
commercial fishing industry.
NETMIND monitors the performance of a trawl and is both a
conservation tool and an efficiency tool. It consists of
a group of electronic sensors that transmit measurements
from the net through the water to a receiver on the ship.
The information is displayed on a computer screen and the
captain can see what activities are occurring in the net.
He then knows how to adjust the height and width of the net
opening, how much fish are in the opening and when the net is
full and ready to be pulled in. Fishermen call NETMIND,
their `eyes beneath the sea.'
NETMIND was introduced to the marketplace in late 1996 and sales
have been made in North America and Europe. The targeted customers
have been strategic in that they are industry leaders and government
agencies. Three different agencies in the US government have purchased
systems and have given very positive feedback. International customers
are interested in NETMIND for its price and technical advantages over the
Japanese and Norwegian competition.
To date, Northstar has barely penetrated the market which is
estimated to be about 25,000 vessels world-wide. Provided the
company is successful in its financing efforts, sales in the first
year after the injection of funds are estimated to be about
100 NETMIND systems.
Competition
The NETMIND system has two main competitors, Furuno in
Japan and Scanmar in Norway. NETMIND has price and technical
advantages over each. For a typical system, our retail price is
$34,000 compared with about $52,000 for Furuno and about $56,000
for Scanmar. Technically, NETMIND has longer sensor battery life,
longer operating distance, and better maintenance and repair features.
Technology Protection
Since commercializing NETMIND, Northstar has made many enhancements
to the system. These activities have resulted in an optimum design
for which a patent application is intended. The technology is difficult
to replicate because of its sophistication and, regardless of patent
protection, it should take several years for a new player to catch up
to the present system. In the meantime, Northstar is developing new
innovative NETMIND products which should ensure a competitive edge.
<PAGE>
Future Opportunities
Northstar's second technology application will likely be for
the multi billion dollar offshore oil and gas industry. One
potential product is for the remote control of subsea wellheads.
This is especially important as the industry goes into deeper and
deeper water to find and produce petroleum.
Further business opportunities are envisaged for the defense,
marine transportation, oceanographic and environmental industries.
The possibilities include sonar towed arrays for seismic exploration,
sonar towed arrays for submarines, docking systems for large ocean going
ships, positioning systems for oil and gas drilling platforms, acoustic
measurements for ocean currents, and diver communications for the
recreational diving industry. Northstar would look to strategic
alliances with other companies and government agencies to reduce
technological risks and open doors to new markets.
Contract Manufacturing
Northstar's second business division focuses on
manufacturing systems for the defense, transportation
and communications industries in strategic alliance with
major international contractors. Several years ago, Northstar
signed a Teaming Agreement with LOCKHEED MARTIN to manufacture
consoles for the Canadian Navy submarines. Other work for Canadian
patrol frigates, destroyers and the Maritime Helicopter Project
should follow on from the submarine contracts. Northstar expects
to establish good relationships with other major defense and
communications contractors in Canada and the US and significant
contract opportunities are expected through them.
Projected Revenues
Northstar's management is comprised of a small team of individuals
experienced in the development, manufacturing and sale of ocean industry
technologies. Dr. Wilson Russell, Chairman and CEO, has 25 years
experience in the field and has established himself as an
international consultant in ocean industry, oil, gas, and high technology.
Dr. David is the Technical Director and is one of the world's leaders in
developing and manufacturing ocean instrumentation for the defense industry.
Mr. Brian Gamberg, P.Eng., Senior Electronics Engineer, has over 20 years
experience developing marine systems. Mr. Jim Hall is Production Manager
and heads up a highly trained and competent manufacturing operation.
Mr. James Radford, President of First Watch Marine Ltd., is the NETMIND
marketing agent and has 25 years experience in marketing and sales.
Mr. William Dawe, C.A., is Northstar's financial consultant.
Plant/Corporate Offices
The manufacturing plant is located in St. John's Newfoundland and
its corporate headquarters are located in Vancouver, B.C.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN SECURITY OWNERS
The following table sets forth, as of September 15, 1999,
the beneficial ownership of the Company's Common Stock by
each officer and director of the Company, by each person
known by the Company to own beneficially more than 10% of
the Company's Common Stock outstanding and by the officers
and directors of the Company as a group. Except as otherwise
indicated, all stocks are owned directly.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage of
Title of Class of Beneficial Owner of Common Stock Common Stock
<S> <C> <C> <C>
Common Stock Frank Power 990,000
998 Riverside Drive
Port Coquitlam, B.C.
Canada V3B 7Y4
Common Stock Wilson Russell 964,883
4742 Collingwood St.
Vancouver, B.C.
Canada V6S 2B4
Common Stock Lee Meyer 100,000
9629 Alene Drive
Tujunga, CA
91042
Common Stock Ladner Enterprises 597,900
Common Stock Monaco Ventures 1,000,000
Common Stock London 700,000
Common Stock All officers and 2,054,883
Directors as a
Group (3 persons)
</TABLE>
<PAGE>
The following directors and officers of the Company have been
granted options to purchase shares of the Company's stock as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Optionee Position Options Option Price Per Share
Wilson Russell Director 250,000 $0.50
Frank Power Director 100,000 $0.50
</TABLE>
(2) Record owners and beneficial See "SECURITY OWNERSHIP
owners of 5% or more of any OF MANAGEMENT AND CERTAIN
class of our securities: SECURITY HOLDERS
(3) Promoters: None, except for officers and directors
(4) Affiliates None, except for officers and directors
(5) Counsel: O'Neill and Company
Barristers and Solicitors
Suite 1880, Royal Centre
1055 West Georgia Street, Box 11122
Vancouver, British Columbia V6E 3P3
Att: Mike Taylor/Stephen O'Neill
<PAGE>
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and
directors of the Company, their present positions with the Company,
and their biographical information. Each director will serve until
the next annual meeting of shareholders, and thereafter if re-elected.
Name of Director Age
Dr. Wilson Russell 53
Mr. Frank Power 56
Mr. Lee Meyer 54
Name of Officer Office
Dr. Wilson Russell 53 President
Mr. Frank Power 56 Vice-President
As a Delaware corporation, the final responsibility for the management of
the affairs of the Company rests with the Board of Directors. That Board
currently consists of three directors. Those directors are elected at the
annual meeting of the shareholders and serve for an annual term until they
resign or are replaced. Those directors meet or otherwise consult with one
another on a regular basis. To review the affairs of the company and to
adopt or confirm any resolutions which are necessary to grant contractual
and other authority to administrative officers. The directors may, and
probably will, designate an executive committee to which they will grant
limited authority to make certain ministerial decisions on behalf of the
board.
The following sets forth information as to the principal occupation and
business experience for at least the past five years of each of those
directors and officers.
Dr. Wilson Russell: Dr. Russell received a Master's Degree in
Engineering and in Physics from Memorial University of Newfoundland
and a Doctorate in engineering Physics from the University of
Aix-Marseille in France. Dr. Russell's numerous positions include:
geophysicist with Pan-American Petroleum (AMOCO) in Calgary, Alberta
(1968); professor and researcher at Memorial University (1968 to 1977);
Director of Engineering at NORDCO Ltd. (1977 to 1980); and Associate
Director of the Newfoundland Petroleum Directorate. After starting
his own consulting and technology development firm in 1983,
Dr. Russell has also managed the preparation of the development
plan for the $6 billion Hibernia development which was submitted
to the government for approval of the project; invented,
developed and commercialized the Hydroball current profiling system,
a unique phased array ocean current profiling system which won the
silver medal at the Canada Awards for Business Excellence in 1986;
and developed a fibre optic modem for TRW in the United States.
Dr.Russell founded NewTech Instruments Ltd., in partnership with
a subsidiary of Bell Canada and was the first Chairman of the Board
of Directors of Seabright Corporation. Dr. Russell has also acted
as a consultant for the Canadian federal government, the provincial
governments of British Columbia and Newfoundland, the Canadian Consul
in Boston, Massachusetts, Mobil Oil, the Defense Research Establishment
Pacific and the French Navy. Dr. Russell founded Northstar in 1989 and
serves as Chairman and Chief Executive Officer. He is also a director
and President of Cabot Management Ltd. And, until recently, was a
director at the University of Victoria's Innovation and development
Corporation.
Mr. Frank Power: Mr. Power, a business management consultant, has
managed and administered several public companies for the last 15 years.
Since 1894, Mr. Power has provided services, including strategic planning,
management, administration, design and construction of major mining
projects both nationally and internationally. He has owned and operated
several consulting companies which have been providing comprehensive
services in the industrial and high-technology fields as well as the
mining field. His expertise also includes re-activating public companies,
project acquisitions, public and private funding, as well as developing
and taking private companies public. He is equally skilled to function
in the public markets of both Canada and the United States. Mr. Power
is President and Owner of Pow Con Management since 1981 and Premier
Enterprises Ltd. Since 1994. These companies manage, administrate
and finance reporting companies. He served as President and Director
of several Vancouver reporting companies and publicly listed companies
since 1986 to present. Since 1992, Mr. Power has served as President
of World Organics Inc., listed on the Vancouver Stock Exchange.
From 1996 to 1997, Mr. Power served as President and Director of
Accuimage Diagnostics and he is also the past President of Security
Industries, Inc. These companies are traded on the OTC Bulletin Board.
Mr. Lee Meyer: Mr. Meyer, since completing his Business Administration
Degree from Arizona State University, has held positions as Managing
Director of Omni International; Vice-President and Director of World
Organics, Inc., a reporting company; Secretary and Treasurer of Tec
Industries Corp., a specialty equipment rental agency; and owner and
President of Stretchcoat, a national manufacturer and marketer of
specialty products. Mr. Meyer has also represented major principals
selling products nationally.
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets out certain information as to the company's
three highest paid officers and directors for the period from the
commencement of Scientific's Business to June 15, 1999. No other
compensation was paid to any such officer or director other than
the cash compensation set forth below:
<TABLE>
<CAPTION>
<S> <C> <C>
Summary Compensation Table
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Dr. Wilson Russell Director and President $16,300
Mr. Frank Power Director and Vice-President $10,000
Mr. Lee Meyer Director N/L
Officers and Directors Directors and Officers $26,300
of the Company as a
Group
</TABLE>
The compensation paid to directors and officers to June 15, 1999 is believed by
the Company to be below market rates for the services provided by the
directors and officers, having regard to their experience and
qualifications. The Company anticipates compensation being increased
to market rates upon the Company achieving sufficient revenues and/or
financing to pay such increased compensation.
<PAGE>
INTEREST OF MANAGEMENT AND
OTHERS IN CERTAIN TRANSACTIONS
There are no material contracts entered into by the Company
within the two years preceding the date hereof which are
still in effect, except as follows:
Completion of the previous offering: The Company completed
an offering of 363,000 shares on January 26, 1999.
The proceeds of the offering were US$363,000. The
purchasers of the shares were all non-US residents.
Acquisition of Northstar: the Company acquired Northstar in
January 1999, pursuant to an agreement dated July 31, 1998.
The Company purchased all of the issued and outstanding shares
of Northstar in exchange for 4,901,481 shares of the Company's
Common Stock which were issued from treasury.
Copies of the foregoing contracts and any reports referred to
in this registration statement may be inspected at the head
office of the Company at Suite 1455-409 Granville Street, Vancouver,
British Columbia, Canada V6C 1T2, during normal business hours while
the Offering contemplated hereunder is in progress to and including the
closing date.
Except for the acquisition of Northstar, none of the following persons
has any direct or indirect material interest in any transaction to which
the Company is a party since the incorporation of the Company in May, 1998
or in any proposed transaction to which the Company is proposed to be a
party:
(A) any director or officer of the party
(B) any proposed nominee for election as a director of the company
(C) any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to the Company's
Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or
any relative of such spouse, who has the same house as such person
or who is a director or officer of any parent or subsidiary of the Company.
<PAGE>
DESCRIPTION OF SECURITIES
General:
The securities being offered are the shares of the Company's common stock,
par value $0.0001 per share. Under the Company's Articles of Incorporation,
the total number of shares of all classes of stock that the Company shall
have authority to issue is 100,000,000 shares o common stock par value
$0.0001 per share (the "Common stock") and 20,000,000 shares of preferred
stock, par value $0.0001 per share (the "Preferred Stock"). As of October
15, 1999, a total of 7,604,801 shares of Common Stock are issued and
outstanding. All issued and outstanding shares of the Common Stock
are fully paid and non-assessable.
Common Stock:
Holders of Common Stock have the right to cast one vote for
each share held of record on all matters submitted to a vote
of holders of Common Stock, including the election of directors.
Holders of a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy,
are necessary to constitute a quorum at any meeting of the Company's
stockholders, and the vote by the holders of a majority of such outstanding
shares is required to effect certain fundamental corporate changes such as
liquidation, merger or amendment of the Company's Articles of Incorporation.
Holders of Common Stock are entitled to receive dividends pro
rata based on the number of shares held, when, as and if declared
by the Board of Directors, from funds legally available therefore.
In the event of the liquidation, dissolution, or winding up of affairs
of the Company, all assets and funds of the Company remaining after the
payment of all debts and other liabilities shall be distributed, pro rata a
mong the holders of the Common Stock. Holders of Common Stock are not
entitled to pre-emptive or subscription or conversion rights, and there
are no redemption or sinking fund provisions applicable tot he Common Stock.
All outstanding shares of Common Stock are fully paid and non-assessable.
Transfer Agent:
Signature Stock Transfer of Dallas, Texas is the transfer agent for
the Shares.
14675 Midway Road-Suite 1221
Dallas, TX 75244
Tel: (972) 788-4193
Fax: (972) 788-4194
Share Purchase Warrants:
None.
<PAGE>
LITIGATION
The Company is a defendant in a lawsuit commenced against the Company by
the Company's former master distributor. The former distributor has
alleged that the Company has interfered with the ability of the former
distributor to sell products. The company has filed a counterclaim for
monies owing by the former distributor to the Company. An adverse
outcome to the lawsuit could have an adverse material impact upon the
Company.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As per Risks Related to the Management Structure of the Company,
management will have no liability to the Company for any mistakes
errors of judgement or for any act of omission believed to be within
the scope of authority conferred by the Company's articles unless
such acts or omissions were performed or omitted fraudulently or in
bad faith, constituted gross negligence or were a violation of a
director's or officer's fiduciary obligations to the Company. The
Company has agreed to indemnify the officers and directors against
all loss or damage even if caused by that officer's or director's
fraud, bad faith, gross negligence or breach of fiduciary obligation.
<PAGE>
FINANCIAL STATEMENTS-This section should comprise the audited and
unaudited financial statements of Northstar Electronics/Scientific
Technologies and Northstar Technical, Inc.
Index to Financials
i) Northstar Electronics, Inc. for period of 7 months ending July 31,
1999 Consolidated and unaudited.
ii) Northstar Technical audited financials for period ending December
31,1998 includes auditors report.
iii) Scientific Technologies, Inc.(now known as Northstar Electronics,
Inc.) audited financial statements for period ending December 31,
1998 , including auditors report.
iv) Northstar Technical, Inc. unuadited financial statements for
period ending July 31, 1999.
- --------------------------------------------------------------------
i) NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED BALANCE SHEET
(Unaudited)
FOR THE 7 MTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current US$
Bank and term deposit 45,456.60
Receivables 153,358.07
Inventory 83,860.14
Prepaid Expenses 2,549.06
==========
285,223.87
Capital Assets 24,759.53
Deferred development costs Netmind/contract 575,201.06
599,960.59
==========
885,184.46
LIABILITIES
Current
Payables and accruals 73,187.01
Loans payable (Note 2) 13,779.80
==========
86,966.81
Long term debt ( Note 3) 489,738.61
Loans payable to Cabot Management Limited, no set terms
of repayment 79,225.70
Loans payable to shareholders, no set terms of payment 79,887.91
==========
648,852.22
SHAREHOLDERS' EQUITY
Share Capital (Note 4) 971,335.44
Earnings (loss) for period (212,030.52)
Deficit (609,939.49)
==========
149,365.43
885,184.46
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED INCOME STATEMENT
(Unaudited)
FOR THE 7 MONTHS ENDED JULY 31, 1999
US$
Revenue
Sales 171,769.89
Interest Income 652.93
==========
172,422.83
Less cost of goods sold 72,812.34
99,610.49
Expenses
Business Development 1,277.16
Business Tax 128.05
Commissions 30,866.67
Depreciation 54,407.64
Dues and fees 3,234.33
Exchange (9,005.94)
Insurance 1,047.37
Interest and Bank 20,553.57
Lab Expenses 84,662.08
Management Fees 36,666.67
Marketing 1,492.81
Misc. 928.18
Office Expenses 27,445.49
Professional Fees 32,553.77
Rent 16,792.09
Salaries/Wages/employee benefits 49,732.57
----------
352,782.53
Less: allocation to Deferred Technology (41,141.52)
==========
311,641.01
Earnings (loss) (212,030.52)
</TABLE>
NOTES:
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Accounting treatment
This internal interim consolidated balance sheet has been
prepared by combining the July 31st, 1999 internal
non-consolidated balance sheet of Scientific Technologies
Inc. and the internal balance sheet of Northstar Technical
Inc. On consolidation all intercompany receivable and
payable balances have been eliminated.
. Short term loans
<TABLE>
<CAPTION>
<S> <C>
9% TD Select Line of credit $ 3,400
Short term loan Eastern Meridian per specific terms,
(repaid in full October, 1999) $10,379
=======
$13,779
. Long Term Debt
10% loan payable to Pathfinder Enterprises Inc. in monthly
interest payments only to July 5, 2002 $160,000
ACOA (Federal Government Agency) interest free loan repayable
in sixty monthly and consecutive installments of $2,170. $130,221
ACOA (Federal Government Agency) interest free loan repayable
in twenty-four monthly and consecutive installments of $4,167 $100,000
10% loan payable to Enterprise Newfoundland and Labrador in
monthly interest payments plus principal amount payable on
demand. $ 12,841
ACOA (Federal Government Agency) interest free loan repayable
in 36 monthly and consecutive installments of $4,373 beginning
when full loan draw down is received. Secured by postponements
on Cabot Management Limited's loan of $87,224 and a
shareholders' loan $12,707
$ 86,676
========
$489,738
. Capital Stock
Authorized
20,000,000 preferred shares at $0.0001 par value
100,000,000 common shares at $0.0001 par value
. Issued and outstanding
7,614,493 common shares 761
Additional paid in capital 970,574
========
$971,335
</TABLE>
- ----------------------------------------------------------------
ii) NORTHSTAR TECHNICAL INC. St. John's, Newfoundland
FINANCIAL STATEMENTS
Audited
December 31, 1998
SULLIVAN, LEWIS AND WHITE-Charter Accountants
AUDITORS' REPORT-To the Shareholders of Northstar Technical, Inc.
We have audited the balance sheet of Northstar Technical Inc.
as of December 31, 1998 and the statements of loss and deficit
and changes in cash resources for the nine months then ended.
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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly,
in all material respects, the financial position of the
company as at December 31, 1998 and the results of its
operations and the changes in its cash resources for the
nine months then ended in accordance with generally accepted
accounting principles.
The accompanying financial statements have
been prepared assuming the company will continue as a
going concern. To date the company's operations are mainly
in the development stages and has not established revenues
sufficient to cover its operating costs. It is management's
opinion that the company's main NETMIND division and the new
contract manufacturing division will generate future revenues
sufficient to cover all costs and result in annual net incomes.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
St. John's, Newfoundland /s/ Sullivan, Lewis and White
July 14, 1999 Chartered Accountants
NORTHSTAR TECHNICAL INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
ASSETS 1998 1998
Current
Bank $1,238 $3,829
Receivables (Note 2) 148,583 228,052
Work in progress 3,688 7,101
Inventory 52,591 88,356
Prepaid expenses 2,269 4,127
208,369 331,465
Capital assets (Note 3) 25,523 27,733
Deferred development costs (Note 4) 768,311 824,744
Deferred charges (Note 5) 110,287 82,305
$1,112,490 $1,266,247
LIABILITIES
Current
Payables and accruals $212,038 $199,556
Loans payable (Note 6) 158,815 138,790
Long term debt payable within one year (Note 7) 10,716 127,340
381,569 465,686
Long term debt (Note 7) 704,630 588,006
Loans payable to Cabot Management Limited,
no set terms of repayment (Note 8) 138,339 136,530
Loans payable to shareholder, no set terms
of repayment 120,370 83,602
1,344,908 1,273,824
========= =========
Contingent liability (Note 9)
SHAREHOLDERS' DEFICIENCY
Share capital (Note 10) 622,453 605,372
Deficit (854,871) (612,949)
(232,418) (7,577)
$1,112,490 $1,266,247
ON BEHALF OF THE BOARD:
_________________________ Director
_________________________ Director
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 3.
STATEMENT OF LOSS AND DEFICIT
NINE MONTHS ENDED DECEMBER 31, 1998
Nine Months Year
Ended Ended
December 31, March 31,
1998 1998
Revenue $252,565 $272,631
Direct costs 147,155 140,891
Gross profit 105,410 131,740
Other income 8,231 13,934
113,641 145,674
Expenses
Amortization of capital assets 6,992 15,917
Amortization of deferred development costs 72,224 87,621
Bank charges and interest 15,608 16,196
Contract manufacturing division (Note 11) 72,341 126,008
Heat and light 1,905 10,343
Insurance 1,838 2,027
Interest on loans 43,911 55,963
Management and marketing fees 4,992 16,235
Marketing/Market Research costs 3,606 5,742
Municipal taxes 1,249 2,960
Miscellaneous 5,194 3,855
Office operating 10,240 18,859
Professional fees 17,138 35,296
Rent 32,435 37,685
Repairs and maintenance 2,423 4,693
Telephone 9,590 11,184
Travel 3,739 6,865
Wages and benefits 50,138 66,992
Write off obsolete inventory stock 0 14,405
Less: Allocation to deferred development costs 0 (149,808)
355,563 389,038
Net loss (Note 12) (241,922) (243,364)
Deficit, beginning of period (612,949) (351,303)
(854,871) (594,667)
Dividends paid on preference shares 0 (42,282)
Discount earned on redemption of Class A
preference shares 0 24,000
Deficit, end of period $(854,871) $(612,949)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 4.
STATEMENT OF CHANGES IN CASH RESOURCES
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Cash provided by (used in)
Operations
Net loss $(241,922) $(243,364)
Amortization 104,667 124,114
Net change in non-cash working capital items 153,012 10,434
15,757 (108,816)
Financing
Proceeds from long term debt 0 130,015
Proceeds from issuance of common shares 17,081 595,287
Advances from Cabot Management Limited 1,809 5,694
Advances from shareholder 36,768 70,043
Repayment of long term debt 0 (30,000)
Discount on redemption of preference shares 0 24,000
Redemption of preference shares 0 (84,000)
Payment of dividends on preference shares 0 (42,282)
Conversion of Class C preference shares 0 (287,333)
55,658 381,424
Investments
Increase in deferred charges - net (53,433) (102,881)
Increase in deferred development cost - net (15,791) (152,496)
Purchase of capital assets, net of investment
tax credits (4,782) (11,304)
(74,006) (266,681)
Net change in bank position (2,591) 5,927
Bank position, beginning of period 3,829 (2,098)
Bank position, end of period $1,238 $3,829
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 5.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Significant accounting policies
a. Capital assets
Capital assets are recorded at cost less any government assistance
and are being amortizated over their estimated useful lives using
the rates and methods set out below:
Computer equipment 20% on a declining balance basis
Computer software 30% on a declining balance basis
Office furniture and equipment 20% on a declining balance basis
Leasehold improvements 20% on a straight line basis
b. Deferred development costs
All costs, including share of overhead costs, associated
with the development of the NETMIND System have
been capitalized in these financial statements as deferred
development costs. These costs are being amortized against
income on a straight line basis over a period of ten years. If
it becomes evident in a given year that the sales market for
this technology declines , then the remaining costs will be
amortized over a shorter period.
The company acquired the initial technology for the
NETMIND System from the receiver of National Petroleum and
Marine Consultants Limited and Altair Marine Systems Limited for
the sum of $ 1. Prior to going into receivership, these two companies
had spent approximately $ 1,740,408 on the development of this technology.
To date Northstar Technical Inc. has spent $ 1,847,795 on this technology,
including overhead costs of $ 621,430, which has been reduced by various
assistance and tax credits totalling
$ 879,546 as referred to in Note 4.
c. Deferred charges
Deferred charges consist of initial planning, startup and overhead c
osts related to contract manufacturing in association with Lockheed
Martin - Federal Systems Inc. These costs amounted to $ 156,314 at
December 31, 1998, as referred to in Note 5, and are being amortized
on a straight line basis over a five year term.
d. Inventory
The company's inventory is valued at the lower of cost and net
realizable value.
e. Investment tax credits
Investment tax credit refunds arising from the incurrence of qualifying
research and development expenditures have been recorded in these financial
statements as a reduction of the applicable deferred development costs.
f. Government assistance
The company has been awarded assistance under government programs.
Amounts received or receivable under these programs are recorded as a
reduction in the cost of capital assets or as a reduction of the
applicable deferred development costs.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. Receivables
<TABLE>
<CAPTION>
<S> <C> <C>
===============================================
December 31, March 31,
1998 1998
Trade $20,200 $137,701
Government assistance 0 22,486
Investment tax credit refunds 128,383 67,865
$148,583 $228,052
======== ========
</TABLE>
3. Capital assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
=========================
December 31, March 31,
1998 1998
Cost Accumulated Net Book Net Book
Amortization Value Value
Computer equipment $6,654 $3,170 $3,484 $4,099
Computer software 8,892 5,681 3,211 3,945
Furniture and equipment 34,350 16,906 17,444 17,286
Leasehold improvements 15,872 14,488 1,384 2,403
$65,768 $40,245 $25,523 $27,733
======= ======= ======= =======
</TABLE>
4. Deferred development costs
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
1998 1998
Wages and benefits $693,362 $608,461
Materials and other costs 173,736 165,160
Subcontractors 359,267 359,267
Overhead 621,430 621,430
1,847,795 1,754,318
Less:
Government assistance 380,133 362,965
Other assistance 61,685 61,685
Investment tax credits 437,728 377,210
968,249 952,458
Less: Amortization 199,938 127,714
$768,311 $824,744
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. Deferred charges - Contract Manufacturing Division
=============================================
December 31, March 31,
1998 1998
Planning and start up costs $ 28,951 $ 28,951
Overhead costs (Note 10) 127,363 73,930
156,314 102,881
Less: Amortization of deferred charges 46,027 20,576
$110,287 $82,305
======== ========
6. Loans payable
==============================================
December 31, March 31,
1998 1998
10% loan payable to Enterprise Newfoundland
and Labrador in monthly interest payments
plus principal amount payable on demand $20,473 $22,451
12% loan payable to Eastern Meridian Mining
Corporation including accrued interest,
to be repaid in full by March 1, 1999,
secured by the personal guarantee of
Wilson Russell 83,036 75,939
Loan payable to Toronto-Dominion bank,
secured by the personal guarantee of
Wilson Russell. This loan was repaid
in full on September 24, 1998 0 20,000
Loan payable to Brian Gamberg repaid in full
on April 15, 1998 0 20,400
Loan payable to Dr. Carl Wesolowski 55,306 0
$158,815 $138,790
======== ========
7. Long term debt
==========================================
December 31, March 31,
1998 1998
ACOA 7.5% loan with monthly principal
repayments of $ 3,256 commencing June 1, 2000 $195,331 $195,331
ACOA 10.9 % loan with monthly principal
repayments of $ 1,786 beginning July 1, 1999 150,000 150,000
10% loan payable to Pathfinder Enterprises Inc.
in monthly interest payments only to July 5,
2002, secured by a floating charge debenture 240,000 240,000
ACOA 6.25% loan repayable in 72 monthly
consecutive instalments of $ 3,280 beginning
July 1, 2000 if full loan draw down is received.
Secured by postponements on Cabot Management
Limited's loans of $ 130,836 and shareholders'
loan of $ 19,060 130,015 130,015
715,346 715,346
Less: Long term debt payable within one year 10,716 127,340
$704,630 $588,006
======== ========
</TABLE>
8. Loans payable - Cabot Management Limited
Cabot Management Limited, an associated
company, has the option to convert their
interest free loans, totalling $ 138,339
at December 31, 1998, to common shares of
Scientific Technologies Inc. (See Note 13)
9. Contingent liability
The company is presently involved in a dispute
with their distributing agent, whose contract
has now been terminated due to non-payment for
NETMIND systems sold to them. This termination
has lead to court action, the outcome of which
is unknown as at the financial statements date.
10. Share capital
==============================================
December 31, March 31,
1998 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Authorized
An unlimited number of Class A common
shares with no par value
An unlimited number of Class A preference
shares with no par value
An unlimited number of 10% redeemable,
retractable, cumulative, non-voting,
participating Class B preference shares with
no par value
An unlimited number of 10% redeemable,
retractable, cumulative, non-voting,
participating Class C preference shares with
no par value
Issued and outstanding 14,704,440 Class A
common shares $622,453 $605,372
11. Contract Manufacturing Division
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Amortization of deferred charges (Note 5) $25,451 $20,576
Contract labor 0 25,000
Operating expenses 1,199 63,356
Salaries and benefits 105,667 136,038
Less: Direct costs on contract with
Lockheed Martin - Federal Systems, Inc. 0 (25,133)
Wage subsidy/NRC funding (6,543) (19,899)
125,774 199,938
Less: Allocation to deferred charges (Note 5) (53,433) (73,930)
$72,341 $126,008
======== ========
</TABLE>
12. Income taxes
The company has losses carried forward totalling $ 1,531,226 which
have not been recognized in these financial statements. These losses
carried forward can be applied against otherwise taxable income and if
unused will expire in the following years:
December 31, 1999 - $3,811
December 31, 2001 - $37,523
December 31, 2002 - $94,492
December 31, 2003 - $512,179
December 31, 2004 - $367,846
December 31, 2005 - $515,375
Also the company's book values of deferred development costs and
deferred charges exceeds their income tax values by $ 878,598 as at
December 31, 1998.
The net deferred income taxes debit related to both of these items
have not been reflected in these financial statements.
13. Subsequent event
On January 26, 1999 the merger between Northstar Technical Inc. and
Scientific Technologies Inc. was completed which resulted in Northstar
Technical Inc. becoming a wholly owned subsidiary of Scientific
Technologies Inc., a US public trading company.
On January 15, 1999 and January 26, 1999 the shareholders of
Northstar Technical Inc. exchanged their 14,704,440 common shares
for 4,901,480 common shares in Scientific Technologies Inc. on the
basis of three Northstar shares for every one share of Scientific.
- ------------------------------------------------------------------
iii)
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Scientific Technologies, Inc.
(A Development Stage Company)
Vancouver, B.C. Canada
We have auited the accompanying balance sheet of Scientific Technologis,
Inc. (a development stage company) as of July 31, 1998 and the related
statements of operations, stockholders' equity (deficit) and cash flows
from inception on May 11, 1998 through July 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Scientific
Technologies, Inc. (a development stage company) as of July 31, 1998
and the results of its operations and its cash flows from inception
on May 11, 1998 through July 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the company is a development
stage company with no significant operating revenues to date which
raises significant doubt about it's ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
By: /s/
- --------------------------
Jones, Jensen & Company
Salt Lake City, Utah
September 11, 1998
SCIENTIFIC TECHNOLOGIES, INC
(A Develpment Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash $27,436
Total Current Assets 27,436
Total Assets 27,436
========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Account Payable $58,000
Note Payable 5,125
--------
Total Liabilities 63,125
========
STOCKHOLDER's EQUITY (DEFICIT)
Perferred stock authorized, 20,000,000 shares at
$0.0001 par value; no shares issued or outstanding -0-
Common Stock authorized, 100,000,000 shares at
par value; 2,140,000 shares issued and outstanding 214
Additional Paid-in-Capital 24,886
Deficit accumulated during the development stage (60,789)
--------
Total Stockholder's Equity (deficit) (35,689)
--------
TOTAL LIABILILTIES and STOCKHOLDERS EQUITY(Deficit) $ 27,436
========
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Operations
From Inception on
May 11, 1998 Through
July 31, 1998
REVENUES $0
EXPENSES
General and administrative 789
Organizational costs 60,000
Total Expenses (60,789)
NET LOSS $(60,789)
BASIC LOSS PER SHARE $(0.03)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2,140,000
</TABLE>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Additional Accumulated
Common Stock Paid-in During the
Shares Amount Capital
Development
Stage
Inception, May 11, 1998 0 $ 0 $ 0 $ 0
Common stock issued for cash
at $0.0025 per share 2,040,000 204 4,896 0
Common stock issued for cash
at $0.25 per share 100,000 10 24,990 0
Stock offering costs 0 0 (5,000) 0
Net loss from inception on
May 11, 1998 through July 31, 1998 0 0 0 (60,789)
Balance, July 31, 1998 2,140,000 $ 214 $24,886 $(60,789)
</TABLE>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
<S> <C>
From
Inception on
May 11, 1998
Through July 31,
1998
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (60,789)
Changes in operating assets and liabilities:
Increase in accounts payable 58,000
Net Cash (Used) by Operating Activities (2,789)
CASH FLOWS FROM INVESTING ACTIVITIES: 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash 30,100
Stock offering costs (5,000)
Increase in note payable 5,125
Net Cash Provided by Financing Activities 30,225
NET INCREASE (DECREASE) IN CASH 27,436
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,436
Cash paid during the year for:
Interest $ 0
Income taxes $ 0
</TABLE>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
July 31, 1998
NOTE 1- ORGANIZATION
The financial statements presented are those of Scientific
Technologies, Inc. (the Company). The Company was incorporated
under the laws of the State of Delaware on May 11, 1998. The
Company was organized for the purpose of engaging in any activity
or business permitted under the laws of the State of Delaware.
The Company has not began principal operations so it has been
classified as a development stage company.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
b. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period
of the financial statements.
c. Provision for Taxes
At July 31, 1998, the Company has net operating loss carryforward of
approximately $60,789 that may be offset against future taxable income
through 2013. The tax benefit of the loss carryforward has been offset
by a valuation allowance for the same amount.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company considers
all highly liquid investments with a maturity of three months or less,
from the date of purchase, to be cash equivalents.
NOTE 3- GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. The Company has not established revenues sufficient
to cover its operating costs and allow it to continue as a going concern.
The Company is seeking funds from a private placement of its common stock.
In the interim, management has committed to converting all operating and
other costs.
- -------------------------------------------------------------------------
iv)
Northstar Technical Inc.
St. John's, Newfoundland
Internal
Unaudited Financial Statements
July 31,1999
Northstar Technical Inc.
Balance Sheet
As at July 31, 1999
Unaudited
<TABLE>
<CAPTION>
<S> <C> <C>
Current Year Ended
Balance Dec. 31, 1998
Assets
Current
Bank 28,275.60 1,237.72
Accounts Receivable 230,037.10 148,582.94
Inventory 125,790.21 56,279.65
----------- ----------
387,926.50 208,368.34
Fixed Assets, Net of Accumulated
Depreciation
Computer Equipment St. John's 6,637.49 6,142.51
Accum Deprec. Computer SA (3,274.47) (2,908.51)
Computer Equipment Vancouver 1,808.16 511.38
Computer Software St. John's 9,137.86 8,891.88
Accum Deprec. Software SJ (6,258.10) (5,680.88)
Accum Deprec. Computer SJ (261.38) (261.38)
Furniture and Equipment St. John's 33,575.99 30,590.09
Accum Deprec. Furn St. John's (16,518.87) (14,650.29)
Furniture and Equipment Vancouver 3,759.64 3,759.64
Accum Deprec. Furn & Equip VA (2,462.07) (2,255.64)
Lab Equipment 11,369.97 0.00
Leasehold Improvements SA 15,163.31 14,488.23
Amortization St. John's (15,538.23) (14,488.23)
------------ ------------
Total Fixed Assets 37,139.30 25,522.80
Deferred Technology Costs
Deferred Technology Costs 1,186,275.77 1,124,563.49
Amortization Deferred Tech. (323,474.18) (245,965.21)
------------ ------------
Total Deferred Technology Costs 862,801.59 878,598.28
------------ ------------
Total Assets 1,287,867.39 1,112,489.42
============ ============
Northstar Technical Inc.
Liabilities and Shareholders' Equity
As at July 31, 1999
Unaudited
Liabilities
Current Year Ended
Balance Dec. 31, 98
Current
Payables and Accruals 47,185.18 80,567.36
Trade Payables 49,376.33 128,415.22
Total Current Liabilities 96,561.51 208,982.58
Short Term Loan
Accounts Payable adventure 0.00 55,305.76
A/P Eastern Meridian Mining 15,569.54 83,036.27
Loan Payable (TD 32101169) 5,100.16 0.00
Total 20,669.70 138,342.03
Long Term Liabilities
Adventure Capital 240,000.00 240,000.00
Acoa Provisonally Repayable 325,346.00 325,346.00
Acoa Action Loan 150,000.00 150,000.00
Cabot Management 118,838.55 138.338.55
Accounts Payable Enl 19,261.91 20,473.23
Due to STI 679,024.85 3,055.40
Shareholders Loans Russel 64,831.87 120,369.55
Total Long Term Liabilities 1,597,303.18 997,582.73
Equity
Shareholders Equity
Common W. E. Russel 80.00 80.00
Common Adventure Capital 10,000.00 10,000.00
Common J. Radford 5.00 5.00
Class A Common Shareholders 612,368.31 612,368.31
Total Shareholders' Equity 622,453.31 622,453.31
Retained Earnings (854,871.23) (854,871.23)
Profit (Loss) For period (194,249.08) 0.00
Total (1,287,867.39) (854,871.23)
Total Liabilities and Equity 1,287,867.39 1,112,489.42
Northstar Technical Inc.
Accounts Receivable
As at July 31, 1999
Unaudited
Current Year Ended
Balance Dec. 31, 1998
Accounts Receivable
Accounts Receivable Control 148,665.04 20,051.40
A/R Employee Advances 500.00 0.00
A/R HST 20,206.12 0.00
A/R SR&ED 60,517.54 128,382.54
A/R Other 148.40 149.00
Total Receivable 230,037.10 148,582.94
Northstar Technical Inc.
Consolidated Departments
Statements of Earnings
7 Periods Ended July 31, 1999
Unaudited
Current Current
Month YTD
Revenue:
Sales/Contract/Misc Revenue 220.17 257,654.84
Revenue 220.17 257,654.84
Cost of goods sold
Cost of goods sold 552.37 109,218.51
Total cost of goods sold 552.37 109,218.51
Gross Profit (332.20) 148,436.33
Add Government support
Total Government Support 0.00 0.00
Total (332.20) 148,436.33
Expenses:
Lab Expenses 24,597.02 126,993.12
Business Tax (428.91) 192.08
Depreciation 67,421.07 81,611.46
Interest 4,618.52 30,350.25
Office Expenses 2,277.50 38,327.26
Salaries/wages/Emp/ Benefits 11,284.39 74,598.86
Professional Fees 2,645.00 23,326.24
Rent 3,633.75 25,188.14
Insurance 274.34 1,571.06
Marketing 525.00 2,239.22
Less: Allocation to deffered
Technology Cost (61,712.28) (61,712.28)
55,135.40 342,685.41
Earnings (Loss) (55,467.60) (194,249.08)
Earnings (Loss) Before Income Taxes (55,467.60) (194,249.08)
Net Earnings (Loss) For Period (55,467.60) (194,249.08)
</TABLE>
<PAGE>
TABLE OF CONTENTS
3 PROSPECTUS SUMMARY
4 RISK FACTORS
5 RISK FACTORS RELATING TO MARKET PROTECTION
7 RISKS RELATED TO THE MANAGEMENT STRUCTURE OF THE COMPANY
7 RISKS INHERENT IN BUSINESS
8 RISKS RELATED TO THE NATURE OF THE OFFERING
8 GENERAL CAUTION
9 DILUTION
9 USE OF PROCEEDS
10 BUSINESS
12 MANAGEMENT'S DISCUSSION PLAN OF OPERATIONS
14 SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
16 DIRECTOR'S OFFICERS AND SIGNIFICANT EMPLOYEES
17 REMUNERATION OF DIRECTORS AND OFFICERS
18 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
19 DESCRIPTION OF SECURITIES
20 LITIGATION
20 INDEMNIFICATION OF OFFICERS AND DIRECTORS
Northstar Electronics, Inc.
(800,000 shares of Common Stock)
PROSPECTUS
October____, 1999
Until__________, 1999 (90 days after the date of this prospectus)
all dealers effecting transactions in the registered securities, whether
or not participating in this distribution, may be required to deliver
a prospectus.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
As per Risks Related to the Management Structure of the Company,
management
will have no liability to the Company for any mistakes errors of
judgement or
for any act of omission believed to be within the scope of
authority conferred
by the Company's articles unless such acts or omissions were
performed or
omitted fraudulently or in bad faith, constituted gross
negligence or were
a violation of a director's or officer's fiduciary obligations
to the Company.
The Company has agreed to indemnify the officers and directors
against all loss
or damage even if caused by that officer's or director's fraud,
ITEM. 2 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fee $ 287
Accounting fees 12,000
Legal fees 25,000
Other professional fees 10,500
Blue Sky fees and expenses 2,500
Transfer agent's fees 1,900
Printing, including registration 1,500
statement and prospectus
Miscellaneous costs and expenses 2,000
-----------
55,817
</TABLE>
ITEM 3. UNDERTAKINGS
Post-Effective Amendments {Regulation S-B, Item 512-(a)}
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10 (a) (3) of the
Securities Act;
(b) To reflect in the prospectus any fact or events arising after
the effective date of the Registration Statement (or most of the
recent post-effective amendment thereof) which, individually, or
in the aggregate, represent a fundamental change in the information
set forth in the registration Statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement,
including (but not limited to) addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act,
each such post-effective amendment shall be deemed to be a new
registration
statement relating to the securities offered therein, and the offering
of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of
the securities being registered which remain unsold at the termination
of the offering.
<PAGE>
ITEM. 4
UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
The registrant has issued or sold the following securities within one
year
prior to filing this registration statement which were not registered
under
the Securities Act of 1933 (the "Securities Act")
ISSUANCE RESOLUTION-NEW STOCK
CORPORATE RESOLUTION FOR THE ISSUANCE OF NEW SHARES FROM NEW STOCK
SCIENTIFIC TECHNOLOGIES, INC.
(COMPANY NAME, SECURITIES NAME)
COMMON STOCK
(CLASS OF STOCK)
Resolved that Signature Stock Transfer, Inc., a Texas corporation,
sole stock transfer agent for the above class of stock for the above
company to issue the shares described below and increase the outstanding
shares on the books of the company.
Issuance Instructions:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
REGISTERED NUMBER DATE RESTRICTION (IF FREE
NAME & ADDRESS OF SHARES ISSUED TRADING STOCK, IT IS
REQUIRED TO LIST
EXEMPTIONS)
Mr. Michael Ghanadian 200, 000 26/06/99 The shares to be issued will
CH. Diodtai 10 carry a legend restricting
1223 Cologny, Switzerland for resale pursuant to an
available exemption from
registration under the act.
</TABLE>
Increasing the number of shares outstanding by 200,000 shares.
(Please note-This resolution is only used to increase the control
book).
We, the undersigned, qualified officers of the above named company,
do hereby indemnify Signature Stock Transfer, Inc. And their
employees against any and all actions taken by the above company,
and certify that this is a true copy of a resolution, set forth and
adopted on the below date, and that the said resolution has not been
in any way rescinded, annulled or revoked but the same is still in
full force, and effect.
____________________________ _____________________
Wilson E. Russell, President Frank Power, Director
Dated, this the 29th day
of June, 1999.
Name & Mailing Instructions
Courier all above certificates to:
Scientific Technologies, Inc.*
Attention: Wilson Russell
1455-409 Granville Street
Vancouver, B.C. V6C 1T2
*note that the company has undergone a name change since the filing
of this document,
"SEE EXHIBITS"
The securities offered hereby have not been registered under the
Securities Act of 1933 (The "Act"), and are proposed to be issued
in reliance upon an exemption from the registration requirements
of the act provided by Regulation S promulgated under the act.
Upon any sale, such securities may not be reoffered for sale or
resold or otherwise transferred except in accordance with the
provision of Regulation S, pursuant to effective registration under
the act. Hedging transactions involving the securities may not be
conducted unless in compliance with the act.
SUBSCRIPTION AGREEMENT
Scientific Technologies, Inc.* (See Exhibits)
SUBSCRIPTION AGREEMENT made as of this 25 day of June, 1999
between Scientific Technologies, Inc., a Delaware corporation with
an office at 1455-409 Granville Street, Vancouver, British Columbia
V6C 1T2 ("the Company") and the undersigned ("the Subscriber").
WHEREAS:
A. The company desires to issue a maximum of 1,000,000 shares of
common stock of the Company at a price of $1.00 US per share
("the Offering") pursuant to Regulation S of the United States
Securities Act of 1933 ("the Act").
B. The Subscriber desires to acquire the number of shares of the
Offering set forth on the signature page here of ("the Shares") on
the terms and subject to the conditions of this Subscription Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby
agree as follows:
1. SUBSCRIPTION FOR SHARES
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from
the Company such number of Shares as is set forth upon the signature
page hereof at a price equal to $1.00US per share. Upon execution,
the subscription by the Subscriber will be irrevocable.
1.2 The purchase price is payable by the Subscriber contemporaneously
with the execution and delivery of this Subscription Agreement.
1.3. Upon execution by the Company, the Company agrees to sell such
Shares to the Subscriber for said purchase price subject to the
Company's right to sell to the Subscriber such lesser number of Shares
as it may, in its sole discretion, deem necessary or desirable.
1.4 Any acceptance by the Company by the Subscriber is conditional
upon compliance with all securities laws and other applicable laws of
the jurisdiction in which the Subscribers resident. Each Subscriber
will deliver to the Company all other documentation, agreements,
representations and requisite government forms required by the lawyers
for the Company as required to comply with all securities laws and
other applicable laws of the jurisdiction of the subscriber. The
Company will not grant any registration other qualification rights
to any Subscriber, other than the agreement of the Company to register
the shares with the United States Securities and Exchange Commission
("the SEC") as set forth in Section 2 of this Agreement.
2. REGISTRATION STATEMENT
2.1 The company agrees that within a reasonable time of
execution of this Agreement by the Company that the Company
will prepare and file a registration statement with the SEC
pursuant to the Act on a Form SB-1, or other appropriate
registration statement, as required to qualify the resale of
shares in the United States (the `Registration Statement.')
The Company will use its best efforts to ensure effectiveness
of the Registration Statement within a reasonable period of time
following filing of the Registration Statement.
3. REGULATION S AGREEMENTS OF THE SUBSCRIBER
3.1 The Subscriber agrees only to resell the shares only in
accordance with the provisions of Regulation S of the act pursuant
to registration under the Act, or pursuant to an available exemption
from registration pursuant to the Act.
3.2 The Subscriber agrees not to engage in heading transactions
with regards to the shares unless in compliance with the Act.
3.3 The Subscriber acknowledges and agrees that all certificates
representing the Shares will be endorsed with the following legend
in accordance with Regulation S of the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933(THE"ACT"), AND HAVE
BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED
UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE
OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."
3.4 The Subscriber and the Company agree that the Company will refuse
to register any transfer of the Shares not made in accordance with the
provisions of regulation S of the Act, pursuant to registration under
the Act, or pursuant to an available exemption from registration.
4. REPRESENTATIONS AND WARRANTIES BY THE SUBSCRIBER
4.1 The Subscriber represents and warrants the Company and
acknowledges that the company is relying upon the Subscriber's
representations and warranties in agreeing to sell the Shares to
the Subscriber.
(A) The Subscriber is not a "U.S. Person" as defined by
Regulation S of the Act and is not acquiring the Shares for the
account or benefit of a U.S. person.
A U.S. Person is defined by Regulation S of the Act to
be any person who is:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) any estate of which any executor or administrator is
a U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in
the United States;
(vi) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized, incorporate, or (if an individual)
resident in the United States; and
(vii) any partnership or corporation if:
1. Organized or incorporated under the laws of any foreign
jurisdiction; and
2. Formed by a U.S. person principally for the purpose of
investing in
securities not registered under the Act, unless it is
organized or incorporated, and owned, by accredited
investors {as defined in Section 230.501(a) of the Act}
who are not natural persons, estates or trusts.
(B) The Subscriber recognizes that the purchase of Shares involves a
high degree of risk in that the Company has only recently
commenced its proposed business and may require substantial funds
in addition to the proceeds of this private placement;
(C) an investment in the Company is highly speculative and only
investors who can afford the loss of their investment should
consider investing in the Company and the Shares;
(D) the Subscriber has been delivered the Company's disclosure
statement and its unaudited financial statements for the period
ending December 31, 1998 and has had full opportunity to review
the disclosure document and financial statements with the
Subscriber's legal and financial advisors prior to execution of
this Subscription Agreement;
(E) the Subscriber has such knowledge and experience in finance,
securities, investments, including investment in non-listed and
non-registered securities, and other business matters so as to
be able to protect its interests in connection with this
transaction.
(F) the Subscriber acknowledges that a limited market for the Shares
presently exists and accordingly the Subscriber may not be able
to liquidate its investment.
(G) the Subscriber hereby acknowledges that this offering of Shares
has not been reviewed by the SEC and the Shares are being issued
by the Company pursuant to an exemption from registration
provided by Regulation S pursuant to the Act.
(H) the Subscriber is acquiring the Shares as principal for the
Subscribers own benefit;
(I) the Subscriber is not aware of any advertisement of the Shares;
(J) Subscriber is acquiring the Shares subscribed to hereunder as an
investment for Subscriber's own account, not as a nominee or agent,
and not with a view towards the resale or distribution of any part
thereof, and Subscriber has no present intention of selling,
granting any participation in, or otherwise distributing the same;
(K) Subscriber does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant
participation to such person, or to any third person, with respect
to any of the shares sold hereby;
(L) Subscriber has full power and authority to enter into this Agreement
which constitutes a valid and legally binding obligation,
enforceable in accordance with its terms;
(M) Subscriber can bear the economic risk of this investment, and was not
organized for the purpose of acquiring the Shares;
(N) The Subscriber has satisfied himself or herself as to the full
observance of the laws of his or her jurisdiction in connection with
any invitation to subscribe for the Shares and/or any use of this
Agreement, including (i) the legal requirements within his/her
jurisdiction for the purchase of the Shares, (ii)any foreign exchange
restrictions applicable to such purchase, (iii)any governmental or
other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to
the purchase, holding, redemption sale, or transfer of the Shares.
5. REPRESENTATIONS BY THE COMPANY
5.1 The Company represents and warrants to the Subscriber that:
(A) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate
power to conduct the business which it conducts and proposes to conduct.
(B) Upon issue, the Shares will be duly and validly issued, fully-paid
and non-assessable common shares in the Capital of the Company.
6. TERMS OF SUBSCRIPTION
6.1 Pending acceptance of this subscription by the Company, all funds
paid hereunder shall be deposited by the Company and immediately available
to the Company for the purposes set forth in the disclosure statement.
In the event subscription is not accepted, the subscription funds, will
constitute a non-interest bearing demand loan of the Subscriber to the
Company.
6.2 The Subscriber hereby authorizes and directs the Company to deliver
the Securities to be issued to such Subscriber pursuant to this
Subscription Agreement to the Subscriber's address indicated herein.
6.3 The Subscriber acknowledges and agrees that the subscription for
the Shares and the Company's acceptance of the subscription is not
subject to any minimum subscription for the Offering.
7. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail,
return receipt requested, addressed to the Company, at Suite 1455,
409 Granville Street, Vancouver, British Columbia, Canada V6C 1T2,
Attention: Mr. Wilson E. Russell, President and Chief Executive
Officer, and to the Subscriber at his address indicated on the last
page of this Subscription Agreement. Notices shall be deemed to have
been given on the date of mailing, except notices of change of address,
which shall be deemed to have been given when received.
7.2 Notwithstanding the place where this Subscription Agreement may
be executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed in
accordance and governed by the laws of the State of Nevada.
7.3 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent
of this Subscription Agreement.
IN WITNESS THEREOF, this Subscription Agreement is executed as of the
day and year first written above.
Name of shares subscribed for: _________________________
Signature of Subscriber: _______________________________
Name of Subscriber:__________________________________
Address of Subscriber:_______________________________
________________________________
Subscriber's Social Security Number: ______________________
ACCEPTED BY:
SCIENTIFIC TECHNOLOGIES, INC.*
Signature of Authorized Signatory:__________________
Name of Authorized Signatory:______________________
Position of Authorized Signatory: ___________________
Date of Acceptance:______________________
<PAGE>
ITEM. 5 INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this
Registration
Statement pursuant to Item Part III of Form 1-A and Item 6 of Part II.
Exhibit No. Title of Document
3.10 Certificate of Incorporation
3.11 Bylaws
3.12 Amendments-Name Change
3.2 Opinion Regarding Legality on Shares
10.1 Business and Financial
10.2 Sales Contracts
99.1 Disclosure Statement
99.2 Subscription Agreement
ITEM.6 DESCRIPTION OF EXHIBITS
Exhibit No. Description of Exhibit
3.10 Certificate of Incorporation
3.11 Bylaws
3.12 Amendments-Name Change
3.2 Opinion Regarding Legality on Shares
10.1 Business and Financial
10.2 Sales Contracts
99.1 Disclosure Statement
99.2 Subscription Agreement
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-1 and authorized
this registration statement to be signed on its behalf by the
undersigned, in the City of Vancouver, British Columbia, Canada,
on October__22__, 1999.
By: /s/ Dr. Wilson Russell
/s/ Wilson Russell, Phd
- -----------------------------------
Dr. Wilson Russell, President
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in
the capacities and on the dates stated.
: /s/ Dr. Wilson Russell
/s/Wilson Russell, Phd
- -----------------------------------
/s/ Dr. Wilson Russell, President
President and Director Date: 10/__/99
/s/ Frank Power
-------------------------------
Date filed: October_22___, 1999
SEC File No. __________
Certificate of Incorporation
of
NORTHSTAR ELECTRONICS, INC.
FIRST. The name of this corporation shall be:
NORTHSTAR ELECTRONICS, INC.* (See below)
SECOND. Its registered office in the State of Delaware is to be locate at
1013 Centre Road, in the City of Wilmington, County of New Castle, 19805,
and its registered agent at such address is CORPORATE AGENTS, INC.
THIRD. The purpose or purposes of this corporation shall be:
To engage in any lawful act or activity for which corporations may be
organised under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
One Hundred Twenty Million (1,200,000) shares of which
One Hundred Million(100,000,000) with a par value of
One Tenth of One Mil (.0001) each,
amounting to Ten Thousand Dollars ($10,000.00) are
Common Stock and Twenty Million (20,000,000) shares
with a par value of One Tenth of One Mil. (.0001) each,
amounting to Two Thousand Dollars ($2,000.00) are Preferred Stock.
FIFTH. The name and mailing address of the incorporator is as follows:
Corporate Agents, Inc.
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt,
amend or repeal the by-laws.
IN WITNESS THEREOF, The undersigned, being the incorporator
herein before named, has executed, signed and acknowledged this
certificate of incorporation this eleventh day of May, A.D. 1998.
*Note that the original certification document lists the
corporation As Scientific Technologies, Inc. Documentation supporting
the legal name change is included in Exhibit__3.12__
<PAGE>
BYLAWS
OF
Northstar Electronics, Inc.*
(a Delaware Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates
representing stock in the corporation shall e signed by, or in
the name of, the corporation by the Chairman or Vice-Chairman of
the Board of Directors, if any, or by the President or a
Vice-President and by the Treasurer or an Assistant-Treasurer
or the Secretary or an Assistant Secretary of the corporation.
Any or all of the signatures on nay such certificate may be a
facsimile. In case any officer, transfer agent, or registrar who
has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent,
or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock,
and whenever the corporation shall issue any shares of its
stock as partly paid stock, the certificates representing
shares of any such class or series or of any such partly paid
stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate
representing such shares.
The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate therefore
issued by it, alleged to have been lost, stolen, or destroyed
certificate, or his legal representative, to give the corporation
a bond sufficient to indemnify the corporation against any claim
that may be made against on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new
certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions
imposed by the General Corporation Law, the Board of Directors
of the corporation may provide, by resolution or resolutions
that some or all of any or all classes or series of the stock
of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any
uncertificated shares, the corporation shall send to the
registered owner thereof any written notice prescribed by the
General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but
shall not be required to , issue fractions of a share. If the
corporation does not issue fractions of a share, it shall (1)
arrange for the disposition of fractional interests by those
entitled thereto, (2) pay in cash the fair value of fractions
as a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in
registered form (either represented by a certificate or
uncertificated) or bearer form (represented by a certificate)
which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share.
A certificate for a fractional share or an uncertificated fractional
share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights,
to receive dividends thereon, and to participate in any of the assets
of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the
conditions that the shares for which scrip or warrants are
exchangeable may be sold by the corporation and the proceeds
therefore distributed to the holders of scrips or warrants, or
subject to any other conditions which the Board of Directors may
impose.
4. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares
of stock, if any, transfers or registration of transfers of shares
of stock of the corporation shall be made only on the stock ledger
of the corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed
and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in the case of shares represented
by certificates, on surrender of the certificate or certificates for
such shares of stock properly endorsed and the payment of all taxes
due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the
corporation may determine the stockholders entitled to notice
of or to a vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which
record date shall not be more than sixty or less than ten days before
the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to
notice of or to a vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled
to notice of or to a vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board
of Directors may fix a date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which date shall not be more than ten days
after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed
by the Board of Directors, the record date for determining the
stockholders entitled to consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is required
by the General Corporation Law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered
office
in the State of Delaware, its principal place of business, or an
officer or agent of the corporation having custody of the book in
which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record
date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by the General Corporation Law, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on
the day on which the Board of Directors adopts the resolution taking such
prior action. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled
to exercise any right in respect of any change, conversion or exchange
of stock, or for the purpose of any lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record
date shall not be more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for
any such purpose shall be at the close of the business on the day on
which the Board of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein respect of the
right to notice of a meeting of stockholders or a waiver thereof or
to participate or vote thereat or to consent or dissent in writing
in lieu of a meeting, as the case may be, the term `share' or `shares'
or `shares of stock' or `stockholder' or `stockholders' refers to an
outstanding share or shares of stock and to a holder or holders of
record of outstanding shares of stock when the corporation is
authorized to issue only one class of shares of stock, and said
reference is also intended to include any outstanding share or shares
of any class which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series
or shares of stock or upon which or upon whom the certification of
incorporation confers such rights where there are two or more classes
or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the
certificate of incorporation may provide for more than one class or
series of shares of stock, one of which are limited or denied such
rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number
of shares of stock of any class or series which is otherwise denied
voting rights under the provisions of the certificate of incorporation,
except as any provision of law may
otherwise require.
<PAGE>
7. STOCKHOLDER MEETINGS.
TIME. The annual meeting shall be held on the date at the
time fixed, from time to time, by the directors, provided, that
the first annual meeting shall be held on a date within thirteen
months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the
directors.
PLACE. Annual meetings and special meetings shall be held
at such place, within or without the State of Delaware, as the
directors may, from time to time fix. Whenever the directors shall
fail to fix such place, the meeting shall be held at the registered
office of the corporation in
the State of Delaware.
CALL. Annual meetings and special meetings may be called
by the directors or by any officer instructed by the director to
call the meeting.
NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date, and hour of the meeting
and stating the place within the city or other municipality or
community at which the list of stockholders of the corporation
may be examined. The notice of an annual meeting shall state that
the meeting is called for the election of directors and for the
transaction of other business which may properly come before the
meeting, and shall (if any other action which could be taken at a
special meeting is to be taken at such annual meeting) state the
purpose or purposes for which the meeting is called. The notice of
any meeting shall also include, or be accompanied by, any additional
statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given,
personally or by mail, not less than ten days nor more than sixty
days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, and directed to each stockholder
at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the corporation.
Notice by mail shall be deemed to be given when deposited with postage
thereon prepaid in the United States mail. If a meeting is adjourned
to another time, not more than thirty days hence, and/or to another
place, and if an announcement of the adjourned time and/or place is
made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the directors, after adjournment, fix a new
record date for the adjourned meeting. Notice need not be given to
any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder
at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of stockholders need be
specified in any written waiver of notice.
STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the
stockholders, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period at least ten days prior to the
meeting, either at a place within the city or other municipality or
community where the meeting is to be held, which place shall be
specified in the notice of this meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who
is present. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the
list required by this section or the books of the corporation, or
to vote at any meeting of stockholders.
CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of
seniority and if present and acting - The Chairman of the Board,
if any, the Vice-Chairman of the Board, if any, the President,
a Vice-President, or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders.
The secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as the Secretary of every meeting, but if
neither the Secretary, nor an Assistant Secretary is present the
Chairman of the meeting shall appoint a Secretary of the meeting.
PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of
any meeting, voting, participating at a meeting, or expressing consent
or dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be voted or
acted upon after three years form its date unless such proxy provides
for a longer period. A duly executed proxy shall be irrevocable and,
if, and only as long as, it is coupled with an interest sufficient in
law to support an irrevocable power. A proxy may be made irrevocable
regardless of whether the interest with which it was coupled is an
interest in the stock itself or an interest in the corporation
generally.
INSPECTORS. The directors, in advance of any meeting, may,
but need not, appoint one or more inspectors of election to act at
the meeting or any adjournment thereof. If an inspector or
inspectors are not appointed, the person presiding at the meeting
may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act,
the vacancy may be filled by appointment made by directors in advance
of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties
of inspectors at such meeting with strict impartiality and according
to the best of his ability. The inspectors, if any, shall determine
the number of shares of stock outstanding and the voting power of each,
the shares of stock represented at the meeting, the existence of a
quorum, the validity and effects of proxies, and shall receive votes,
ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count, and tabulate
all votes, ballots or consents, determine the result, and do such
acts that are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
meeting, the inspector or inspectors, if any, shall make a report
in writing of any challenge, question, or matter determined by him
or them and execute a certificate of any fact found by him or them.
Except as otherwise required by subsection (e) of Section 231 of
the General Corporation Law, the provisions of that section shall
not apply to the corporation.
QUORUM. The holders of a majority of the outstanding shares of
stock shall constitute a quorum at a meeting of stockholders of the
transaction of any business. The stockholders present may adjourn
the meeting despite the absence of a quorum.
VOTING. Each share of stock shall entitle the holder thereof to one
vote. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Any other action shall
be authorized by a majority of the votes cast except where the General
Corporation Law prescribes a different percentage of votes and/or a
different exercise of voting power, and except as may be otherwise
prescribed by provisions of the certificate of incorporation and
these Bylaws. In the election of directors, and for any other action,
voting need not be by ballot.
<PAGE>
STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any
annual or special meeting of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize to take such action
at a meeting at which all shares entitled to vote thereon were
presented and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in
writing. Action taken pursuant to this paragraph shall be subject
to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the
Board of Directors of the Corporation. The Board of Directors
shall have the authority to fix the compensation of the members
thereof. The use of the phrase "whole board" herein refers to
the total number of directors which the corporation would have
if there were no vacancies.
QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
a citizen of the United States, or a resident of the State of
Delaware. The initial Board of Directors shall consist of ____
persons. Thereafter the number of directors constituting the
whole board shall be at least one. Subject to the foregoing
limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of
the directors, or, if the number is not fixed, the number shall be,
____. The number of directors may be increased or decreased by
action of the stockholders or of the directors.
ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation,
shall be elected by the incorporator or incorporators and shall hold
office until the first annual meeting of stockholders and until their
successors are elected and qualified and until or until their earlier
resignation or removal. Any director may resign at any time upon written
notice to the corporation. Thereafter, directors who are elected at an
annual meeting of stockholders, and directors who are elected in the
interim to fill vacancies and newly created directorships , shall hold
office until the next annual meeting of stockholders and until their
successors are elected and qualified or until their earlier resignation
or removal. Except as the General Corporation Law may otherwise require,
in the interim between annual meetings of stockholders or of special
meetings of stockholders called for the election of directors and/or
for the removal of one or more directors and for the filling of any
vacancy in that connection, newly created directorships and any
vacancies in the Board of Directors, including unfilled vacancies
resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors
then in office, although less than a quorum, or by the sole remaining
director.
MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors may conveniently assemble.
PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or
at the Direction of the Chairman of the Board, if any, the Vice-Chairman
of the Board, if any, of the President, or of a majority of directors
in the office.
NOTICE OR ACTUAL OR CONSTRUCTION OF WAIVER. No notice shall be
required for regular meetings for which the time and place have been
fixed. Written, oral, or any other mode of notice of the time and
place shall be given for special meetings in sufficient time for the
convenient assembly of directors thereat. Notice need not be given to
any director or any member of a committee of directors who submits a
written waiver of notice signed by him before or after the time stated
therein. Attendance of any such person at a meeting shall constitute
waiver of notice of such meeting, except when he attends a meeting for
the express purpose of objecting, at the beginning of a meeting, to the
transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transact at, nor the purpose of,
any regular or special meeting of the directors need to be specified
in any written waiver of notice.
QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the
whole Board. A majority of the directors present, whether or not a
quorum is present, may adjourn a meeting to another time and place.
Except as herein otherwise provided by the General Corporation Law, the
vote of the majority of directors present at a meeting at which a quorum
is present shall be the act of the Board. The quorum and voting provisions
therein stated shall not be construed as conflicting with any provisions
of the General Corporation Law and these Bylaws which govern a meeting
of directors held to fill vacancies and newly created directorships in
the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and
if present or acting, shall preside at all meetings. Otherwise,
the Vice-Chairman of the Board, if any and if present and acting,
or the President, if present and acting, or any other director of
the Board, shall preside.
REMOVAL OF DIRECTORS. Except as may otherwise be provided by
the General Corporation Law, any director or entire Board of Directors
may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees,
the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors
to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution
of the Board, shall have and may exercise the powers of authority of
the Board of Directors in the management of the business and affairs
of the corporation with the exception of any authority the delegation
of which is prohibited by Section 141 of the General Corporation Law,
and may authorize the seal of the corporation to be affixed to all
papers which may require it.
WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
<PAGE>
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President,
a Secretary, a Treasurer, and, if deemed necessary, expedient or
desirable by the Board of Directors, a Chairman of the Board, or
Vice-Chairman of the Board, an Executive Vice-President, one or more
other Vice-Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers with such titles as the
resolutions of the Board of Directors choosing them shall designate.
Except as may be otherwise provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or
Vice-Chairman of the Board, if any, need be a director. Any number
of offices may be held by the same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him,
each officer shall be chosen for a term which shall continue
until the meeting of the Board of Directors following the next
annual meeting of stockholders and until his successor shall have
been chosen and qualified.
All officers of the corporation shall have such authority and
perform such duties in the management and operation of the corporation
as shall be prescribed in the resolutions of the Board of Directors
designating and choosing such officers and prescribing their authority
and duties, and shall have such additional authority and duties as are
incident to their office except to the extent that such resolutions
may be inconsistent therewith. The Secretary or an Assistant Secretary
of the corporation shall record all of the proceeds of all the meetings
and actions in writing of stockholders, directors, and committees of
directors, and shall exercise such additional duties as the Board shall
assign to him. Any officer may be removed, with or without cause, by
the Board of Directors. Any vacancy, in any office, may be filled by
the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
<PAGE>
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and
the provisions of the General Corporation Law, the power to amend,
alter, repeal these Bylaws and to adopt new Bylaws may be exercised
by the Board of Directors or by the stockholders.
I hereby certify that the foregoing is full, true and a correct
copy of the Bylaws of ____________________, a Delaware corporation
as in effect on the date hereof.
Dated: May 11, 1998
Insert signature.
STATE OF DELAWARE CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
Scientific Technologies, Inc. a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Director of Scientific
Technologies, Inc. resolution were dully adopted setting forth a
proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling
a meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as
follows: RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered "1"
so that, as amended, said Article shall be and read as follows:
THE NAME OF THIS CORPORATION IS `NORTHSTAR ELECTRONICS, INC.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation
was dully called and held upon notice in accordance with Section 222
of the General Corporation Law of the State of Delaware at which
meeting the necessary number of shares a required by statue were
voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.FOURTH: That the capital of said corporation shall
not be reduced under or by reason of said amendment.
IN WITNESS WHEREOF, Said Corporation has caused this certificate to
be signed by Wilson Russell, an Authorized Officer, This 19 day of
August, 1999.
BY: /s/ Wilson Russell
NAME: Wilson Russell
Title: President/Directors
Witnessed By: /s/Frank Power
Name: Frank Power
Title: Director.
State of Delaware: time stamp
Secretary of State
Division of Corporations
Filed 09:00AM 08/26/1999
#991360794-2480085
MANAGEMENT'S DISCUSSION OF FINANCIAL STATEMENTS
Northstar's wholesale revenues were US $168,736 for nine months ending
December 31, 1998 and US $171,770 for seven months ending July 31, 1999.
The gross profit was 48% for the nine months ended December 31, 1998 and
58% for the seven months ending July 31, 1999. Northstar's assets as of
July 31,1999 totaled US $885,184. Long-term debt of US $489,739 consists
of government interest-free loans and a loan of US $160,000 payable to
Pathfinder Enterprises, Inc., a company controlled by a shareholder of
Northstar, with monthly interest payments only to July 2002, secured by
a floating charge debenture. There are shareholder loans of US $159,113
with no fixed terms of repayment. Northstar has an accumulated deficit
of US $609,939 as of July 31,1999.
<PAGE>
Index to Financials
i) Northstar Electronics, Inc. for period of 7 months ending July
31, 1999 Consolidated and unaudited.
ii) Northstar Technical audited financials for period ending December
31,1998 includes auditors report.
iii) Scientific Technologies, Inc.(now known as Northstar Electronics,Inc.)
audited financial statements for period ending December 31, 1998 ,
including auditors report.
iv) Northstar Technical, Inc. unuadited financial statements for period
ending July 31, 1999.
- ------------------------------------------------------------------------
i) NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED BALANCE SHEET
(Unaudited)
FOR THE 7 MTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current US$
Bank and term deposit 45,456.60
Receivables 153,358.07
Inventory 83,860.14
Prepaid Expenses 2,549.06
==========
285,223.87
Capital Assets 24,759.53
Deferred development costs Netmind/contract 575,201.06
599,960.59
==========
885,184.46
LIABILITIES
Current
Payables and accruals 73,187.01
Loans payable (Note 2) 13,779.80
==========
86,966.81
Long term debt ( Note 3) 489,738.61
Loans payable to Cabot Management Limited, no set terms of repayment 79,225.70
Loans payable to shareholders, no set terms of payment 79,887.91
==========
648,852.22
SHAREHOLDERS' EQUITY
Share Capital (Note 4) 971,335.44
Earnings (loss) for period (212,030.52)
Deficit (609,939.49)
==========
149,365.43
885,184.46
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED INCOME STATEMENT
(Unaudited)
FOR THE 7 MONTHS ENDED JULY 31, 1999
US$
Revenue
Sales 171,769.89
Interest Income 652.93
==========
172,422.83
Less cost of goods sold 72,812.34
99,610.49
Expenses
Business Development 1,277.16
Business Tax 128.05
Commissions 30,866.67
Depreciation 54,407.64
Dues and fees 3,234.33
Exchange (9,005.94)
Insurance 1,047.37
Interest and Bank 20,553.57
Lab Expenses 84,662.08
Management Fees 36,666.67
Marketing 1,492.81
Misc. 928.18
Office Expenses 27,445.49
Professional Fees 32,553.77
Rent 16,792.09
Salaries/Wages/employee benefits 49,732.57
----------
352,782.53
Less: allocation to Deferred Technology (41,141.52)
==========
311,641.01
Earnings (loss) (212,030.52)
NOTES:
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Accounting treatment
This internal interim consolidated balance sheet has been prepared
by combining the July 31st, 1999 internal non-consolidated balance
sheet of Scientific Technologies Inc. and the internal balance sheet
of Northstar Technical Inc. On consolidation all intercompany receivable
and payable balances have been eliminated.
. Short term loans
9% TD Select Line of credit $ 3,400
Short term loan Eastern Meridian per specific terms,
(repaid in full October, 1999) $10,379
=======
$13,779
. Long Term Debt
10% loan payable to Pathfinder Enterprises Inc. in monthly
interest payments only to July 5, 2002 $160,000
ACOA (Federal Government Agency) interest free loan repayable
in sixty monthly and consecutive installments of $2,170. $130,221
ACOA (Federal Government Agency) interest free loan repayable
in twenty-four monthly and consecutive installments of $4,167 $100,000
10% loan payable to Enterprise Newfoundland and Labrador in monthly
interest payments plus principal amount payable on demand. $ 12,841
(cont.)
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Long Term debt (cont.)
ACOA (Federal Government Agency) interest free loan repayable in 36
monthly and consecutive installments of $4,373 beginning when full loan
draw down is received. Secured by postponements on Cabot Management
Limited's loan of $87,224 and a shareholders' loan $12,707
$ 86,676
========
$489,738
. Capital Stock
Authorized
20,000,000 preferred shares at $0.0001 par value
100,000,000 common shares at $0.0001 par value
. Issued and outstanding
7,614,493 common shares 761
Additional paid in capital 970,574
========
$971,335
</TABLE>
- -------------------------------------------------------------------------
<PAGE>
ii) NORTHSTAR TECHNICAL INC. St. John's, Newfoundland
FINANCIAL STATEMENTS
Audited
December 31, 1998
SULLIVAN, LEWIS AND WHITE-Charter Accountants
AUDITORS' REPORT-To the Shareholders of Northstar Technical, Inc.
We have audited the balance sheet of Northstar Technical Inc. as at
December 31, 1998 and the statements of loss and deficit and changes
in cash resources for the nine months then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the company as at December
31, 1998 and the results of its operations and the changes in its cash
resources for the nine months then ended in accordance with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the
company will continue as a going concern. To date the company's
operations are mainly in the development stages and has not established
revenues sufficient to cover its operating costs. It is management's
opinion that the company's main NETMIND division and the new contract
manufacturing division will generate future revenues sufficient to cover
all costs and result in annual net incomes. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
St. John's, Newfoundland /s/ Sullivan, Lewis and White
July 14, 1999 Chartered Accountants
NORTHSTAR TECHNICAL INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
ASSETS 1998 1998
Current
Bank $1,238 $3,829
Receivables (Note 2) 148,583 228,052
Work in progress 3,688 7,101
Inventory 52,591 88,356
Prepaid expenses 2,269 4,127
208,369 331,465
Capital assets (Note 3) 25,523 27,733
Deferred development costs (Note 4) 768,311 824,744
Deferred charges (Note 5) 110,287 82,305
$1,112,490 $1,266,247
LIABILITIES
Current
Payables and accruals $212,038 $199,556
Loans payable (Note 6) 158,815 138,790
Long term debt payable within one year (Note 7) 10,716 127,340
381,569 465,686
Long term debt (Note 7) 704,630 588,006
Loans payable to Cabot Management Limited, no set terms
of repayment (Note 8) 138,339 136,530
Loans payable to shareholder, no set terms of repayment 120,370 83,602
1,344,908 1,273,824
========= =========
Contingent liability (Note 9)
SHAREHOLDERS' DEFICIENCY
Share capital (Note 10) 622,453 605,372
Deficit (854,871) (612,949)
(232,418) (7,577)
$1,112,490 $1,266,247
</TABLE>
ON BEHALF OF THE BOARD:
_________________________ Director
_________________________ Director
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 3.
STATEMENT OF LOSS AND DEFICIT
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, March 31,
1998 1998
Revenue $252,565 $272,631
Direct costs 147,155 140,891
Gross profit 105,410 131,740
Other income 8,231 13,934
113,641 145,674
Expenses
Amortization of capital assets 6,992 15,917
Amortization of deferred development costs 72,224 87,621
Bank charges and interest 15,608 16,196
Contract manufacturing division (Note 11) 72,341 126,008
Heat and light 1,905 10,343
Insurance 1,838 2,027
Interest on loans 43,911 55,963
Management and marketing fees 4,992 16,235
Marketing/Market Research costs 3,606 5,742
Municipal taxes 1,249 2,960
Miscellaneous 5,194 3,855
Office operating 10,240 18,859
Professional fees 17,138 35,296
Rent 32,435 37,685
Repairs and maintenance 2,423 4,693
Telephone 9,590 11,184
Travel 3,739 6,865
Wages and benefits 50,138 66,992
Write off obsolete inventory stock - 14,405
Less: Allocation to deferred development costs - (149,808)
355,563 389,038
Net loss (Note 12) (241,922) (243,364)
Deficit, beginning of period (612,949) (351,303)
(854,871) (594,667)
Dividends paid on preference shares - (42,282)
Discount earned on redemption of Class A preference
shares - 24,000
Deficit, end of period $(854,871) $(612,949)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 4.
STATEMENT OF CHANGES IN CASH RESOURCES
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Cash provided by (used in)
Operations
Net loss $(241,922) $(243,364)
Amortization 104,667 124,114
Net change in non-cash working capital items 153,012 10,434
15,757 (108,816)
Financing
Proceeds from long term debt - 130,015
Proceeds from issuance of common shares 17,081 595,287
Advances from Cabot Management Limited 1,809 5,694
Advances from shareholder 36,768 70,043
Repayment of long term debt - (30,000)
Discount on redemption of preference shares - 24,000
Redemption of preference shares - (84,000)
Payment of dividends on preference shares - (42,282)
Conversion of Class C preference shares - (287,333)
55,658 381,424
Investments
Increase in deferred charges - net (53,433) (102,881)
Increase in deferred development cost - net (15,791) (152,496)
Purchase of capital assets, net of investment
tax credits (4,782) (11,304)
(74,006) (266,681)
Net change in bank position (2,591) 5,927
Bank position, beginning of period 3,829 (2,098)
Bank position, end of period $1,238 $3,829
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 5.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Significant accounting policies
a. Capital assets
Capital assets are recorded at cost less any government assistance and
are being amortizated over their estimated useful lives using the rates
and methods set out below:
Computer equipment 20% on a declining balance basis
Computer software 30% on a declining balance basis
Office furniture and equipment 20% on a declining balance basis
Leasehold improvements 20% on a straight line basis
b. Deferred development costs
All costs, including share of overhead costs, associated with the
development of the NETMIND System have been capitalized in these financial
statements as deferred development costs. These costs are being amortized
against income on a straight line basis over a period of ten years. If it
becomes evident in a given year that the sales market for this technology
declines , then the remaining costs will be amortized over a shorter period.
The company acquired the initial technology for the NETMIND System from the
receiver of National Petroleum and Marine Consultants Limited and Altair
Marine Systems Limited for the sum of $ 1. Prior to going into receivership,
these two companies had spent approximately $ 1,740,408 on the development of
this technology. To date Northstar Technical Inc. has spent $ 1,847,795 on
this technology, including overhead costs of $ 621,430, which has been
reduced by various assistance and tax credits totalling
$ 879,546 as referred to in Note 4.
c. Deferred charges
Deferred charges consist of initial planning, startup and overhead
costs related to contract manufacturing in association with
Lockheed Martin - Federal Systems Inc. These costs amounted to
$ 156,314 at December 31, 1998, as referred to in Note 5, and are
being amortized on a straight line basis over a five year term.
d. Inventory
The company's inventory is valued at the lower of cost and net
realizable value.
e. Investment tax credits
Investment tax credit refunds arising from the incurrence of
qualifying research and development expenditures have been recorded
in these financial statements as a reduction of the applicable deferred
development costs.
f. Government assistance
The company has been awarded assistance under government programs.
Amounts received or receivable under these programs are recorded
as a reduction in the cost of capital assets or as a reduction of the
applicable deferred development costs.
NORTHSTAR TECHNICAL INC. 5a.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
2. Receivables
============================================================
December 31, March 31,
1998 1998
Trade $20,200 $137,701
Government assistance - 22,486
Investment tax credit refunds 128,383 67,865
$148,583 $228,052
======== ========
</TABLE>
3. Capital assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==============================
December 31, March 31,
1998 1998
--------------------------------------------
Cost Accumulated Net Book Net Book
Amortization Value Value
Computer equipment $6,654 $3,170 $3,484 $4,099
Computer software 8,892 5,681 3,211 3,945
Furniture and equipment 34,350 16,906 17,444 17,286
Leasehold improvements 15,872 14,488 1,384 2,403
$65,768 $40,245 $25,523 $27,733
======= ======= ======= =======
</TABLE>
4. Deferred development costs
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
1998 1998
Wages and benefits $693,362 $608,461
Materials and other costs 173,736 165,160
Subcontractors 359,267 359,267
Overhead 621,430 621,430
1,847,795 1,754,318
Less:
Government assistance 380,133 362,965
Other assistance 61,685 61,685
Investment tax credits 437,728 377,210
968,249 952,458
Less: Amortization 199,938 127,714
$768,311 $824,744
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. Deferred charges - Contract Manufacturing Division
============================================================
December 31, March 31,
1998 1998
Planning and start up costs $28,951 $28,951
Overhead costs (Note 10) 127,363 73,930
156,314 102,881
Less: Amortization of deferred charges 46,027 20,576
$110,287 $82,305
======== ========
6. Loans payable
============================================================
December 31, March 31,
1998 1998
10% loan payable to Enterprise Newfoundland
and Labrador in monthly interest payments
plus principal amount payable on demand $20,473 $22,451
12% loan payable to Eastern Meridian Mining
Corporation including accrued interest, to be
repaid in full by March 1, 1999, secured by the
personal guarantee of Wilson Russell 83,036 75,939
Loan payable to Toronto-Dominion bank,
secured by the personal guarantee of
Wilson Russell. This loan was repaid
in full on September 24, 1998 0 20,000
Loan payable to Brian Gamberg repaid in full
on April 15, 1998 0 20,400
Loan payable to Dr. Carl Wesolowski 55,306 0
$158,815 $138,790
======== ========
7. Long term debt
============================================================
December 31, March 31,
1998 1998
ACOA 7.5% loan with monthly principal repayments
of $ 3,256 commencing June 1, 2000 $195,331 $195,331
ACOA 10.9 % loan with monthly principal repayments
of $ 1,786 beginning July 1, 1999 150,000 150,000
10% loan payable to Pathfinder Enterprises Inc. in
monthly interest payments only to July 5, 2002,
secured by a floating charge debenture 240,000 240,000
ACOA 6.25% loan repayable in 72 monthly consecutive
instalments of $ 3,280 beginning July 1, 2000 if full
loan draw down is received. Secured by postponements
on Cabot Management Limited's loans of $ 130,836 and
shareholders' loan of $ 19,060 130,015 130,015
715,346 715,346
Less: Long term debt payable within one year 10,716 127,340
$704,630 $588,006
======== ========
8. Loans payable - Cabot Management Limited
Cabot Management Limited, an associated company, has the option to
convert their interest free loans, totalling $ 138,339 at December
31, 1998, to common shares of Scientific Technologies Inc. (See Note 13)
9. Contingent liability
The company is presently involved in a dispute with their distributing
agent, whose contract has now been terminated due to non-payment for
NETMIND systems sold to them. This termination has lead to court action,
the outcome of which is unknown as at the financial statements date.
10. Share capital
============================================================
December 31, March 31,
1998 1998
Authorized
An unlimited number of Class A common shares
with no par value
An unlimited number of Class A preference shares
with no par value
An unlimited number of 10% redeemable, retractable,
cumulative, non-voting, participating Class B preference
shares with no par value
An unlimited number of 10% redeemable, retractable,
cumulative, non-voting, participating Class C preference
shares with no par value
Issued and outstanding 14,704,440 Class A common shares $622,453 $605,372
11. Contract Manufacturing Division
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Amortization of deferred charges (Note 5) $25,451 $20,576
Contract labor 0 25,000
Operating expenses 1,199 63,356
Salaries and benefits 105,667 136,038
Less: Direct costs on contract with Lockheed
Martin - Federal Systems, Inc. 0 (25,133)
Wage subsidy/NRC funding (6,543) (19,899)
125,774 199,938
Less: Allocation to deferred charges (Note 5) (53,433) (73,930)
$72,341 $126,008
======== ========
</TABLE>
12. Income taxes
The company has losses carried forward totalling $ 1,531,226 which have
not been recognized in these financial statements. These losses carried
forward can be applied against otherwise taxable income and if unused will
expire in the following years:
December 31, 1999 - $3,811
December 31, 2001 - $37,523
December 31, 2002 - $94,492
December 31, 2003 - $512,179
December 31, 2004 - $367,846
December 31, 2005 - $515,375
Also the company's book values of deferred development costs and deferred
charges exceeds their income tax values by $ 878,598 as at December 31, 1998.
The net deferred income taxes debit related to both of these items have not
been reflected in these financial statements.
13. Subsequent event
On January 26, 1999 the merger between Northstar Technical Inc. and
Scientific Technologies Inc. was completed which resulted in Northstar
Technical Inc. becoming a wholly owned subsidiary of Scientific Technologies
Inc., a US public trading company.
On January 15, 1999 and January 26, 1999 the shareholders of Northstar
Technical Inc. exchanged their 14,704,440 common shares for 4,901,480 common
shares in Scientific Technologies Inc. on the basis of three Northstar shares
for every one share of Scientific.
SULLIVAN, LEWIS AND WHITE
- -------------------------------------------------------------------------
<PAGE>
iii)
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Scientific Technologies, Inc.
(A Development Stage Company)
Vancouver, B.C. Canada
We have auited the accompanying balance sheet of Scientific Technologis, Inc.
(a development stage company) as of July 31, 1998 and the related statements
of operations, stockholders' equity (deficit) and cash flows from inception
on May 11, 1998 through July 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principlesused and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Scientific Technologies,
Inc. (a development stage company) as of July 31, 1998 and the results of
its operations and its cash flows from inception on May 11, 1998 through
July 31, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the company is a development stage company with
no significant operating revenues to date which raises significant doubt
about it's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
By: /s/
- --------------------------
Jones, Jensen & Company
Salt Lake City, Utah
September 11, 1998
SCIENTIFIC TECHNOLOGIES, INC
(A Develpment Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets
Cash $27,436
Total Current Assets 27,436
------
Total Assets 27,436
========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Account Payable $58,000
Note Payable 5,125
-------
Total Liabilities 63,125
=======
STOCKHOLDER's EQUITY (DEFICIT)
Perferred stock authorized, 20,000,000 shares at
$0.0001 par value; no shares issued or outstanding -0-
Common Stock authorized, 100,000,000 shares at
par value; 2,140,000 shares issued and outstanding 214
Additional Paid-in-Capital 24,886
Deficit accumulated during the development stage (60,789)
--------
Total Stockholder's Equity (deficit) (35,689)
--------
TOTAL LIABILILTIES and STOCKHOLDERS EQUITY(Deficit) $ 27,436
========
</TABLE>
<PAGE>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Operations
<TABLE>
<CAPTION>
From Inception on
May 11, 1998 Through
July 31, 1998
<S> <C>
REVENUES $ 0
EXPENSES
General and administrative 789
Organizational costs 60,000
Total Expenses (60,789)
NET LOSS $ (60,789)
BASIC LOSS PER SHARE $ (0.03)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2,140,000
</TABLE>
<TABLE>
<CAPTION>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
<S> <C> <C> <C> <C>
Additional Accumulated
Common Stock Paid-in During the
Shares Amount Capital Development
Stage
Inception, May 11, 1998 0 $ 0 $ 0 $ 0
Common stock issued for cash
at $0.0025 per share 2,040,000 204 4,896 0
Common stock issued for cash
at $0.25 per share 100,000 10 24,990 0
Stock offering costs 0 0 (5,000) 0
Net loss from inception on May 11, 1998
through July 31, 1998 0 0 0 (60,789)
Balance, July 31, 1998 2,140,000 $ 214 $24,886 $(60,789)
</TABLE>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
May 11, 1998
Through July 31,
1998
<S>
<C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (60,789)
Changes in operating assets and liabilities:
Increase in accounts payable 58,000
Net Cash (Used) by Operating Activities (2,789)
CASH FLOWS FROM INVESTING ACTIVITIES: 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash 30,100
Stock offering costs (5,000)
Increase in note payable 5,125
Net Cash Provided by Financing Activities 30,225
NET INCREASE (DECREASE) IN CASH 27,436
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,436
Cash paid during the year for:
Interest $ 0
Income taxes $ 0
</TABLE>
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
July 31, 1998
NOTE 1- ORGANIZATION
The financial statements presented are those of Scientific Technologies,
Inc. (the Company). The Company was incorporated under the laws of the
State of Delaware on May 11, 1998. The Company was organized for the
purpose of engaging in any activity or business permitted under the
laws of the State of Delaware. The Company has not began principal
operations so it has been classified as a development stage company.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
b. Basic Loss Per Share
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
financial statements.
c. Provision for Taxes
At July 31, 1998, the Company has net operating loss carryforward of
approximately $60,789 that may be offset against future taxable income
through 2013. The tax benefit of the loss carryforward has been offset
by a valuation allowance for the same amount.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company considers
all highly liquid investments with a maturity of three months or less,
from the date of purchase, to be cash equivalents.
NOTE 3- GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. The Company has not established revenues sufficient
to cover its operating costs and allow it to continue as a going concern.
The Company is seeking funds from a private placement of its common stock.
In the interim, management has committed to converting all operating and
other costs.
- ------------------------------------------------------------------
<PAGE>
iv)
Northstar Technical Inc.
St. John's, Newfoundland
Internal
Unaudited Financial Statements
July 31,1999
Northstar Technical Inc.
Balance Sheet
As at July 31, 1999
Unaudited
<TABLE>
<CAPTION>
<S> <C> <C>
Current Year Ended
Balance Dec. 31, 1998
Assets
Current
Bank 28,275.60 1,237.72
Accounts Receivable 230,037.10 148,582.94
Inventory 125,790.21 56,279.65
----------- ----------
387,926.50 208,368.34
Fixed Assets, Net of Accumulated Depreciation
Computer Equipment St. John's 6,637.49 6,142.51
Accum Deprec. Computer SA (3,274.47) (2,908.51)
Computer Equipment Vancouver 1,808.16 511.38
Computer Software St. John's 9,137.86 8,891.88
Accum Deprec. Software SJ (6,258.10) (5,680.88)
Accum Deprec. Computer SJ (261.38) (261.38)
Furniture and Equipment St. John's 33,575.99 30,590.09
Accum Deprec. Furn St. John's (16,518.87) (14,650.29)
Furniture and Equipment Vancouver 3,759.64 3,759.64
Accum Deprec. Furn & Equip VA (2,462.07) (2,255.64)
Lab Equipment 11,369.97 0.00
Leasehold Improvements SA 15,163.31 14,488.23
Amortization St. John's (15,538.23) (14,488.23)
------------ ------------
Total Fixed Assets 37,139.30 25,522.80
Deferred Technology Costs
Deferred Technology Costs 1,186,275.77 1,124,563.49
Amortization Deferred Tech. (323,474.18) (245,965.21)
------------ ------------
Total Deferred Technology Costs 862,801.59 878,598.28
------------ ------------
Total Assets 1,287,867.39 1,112,489.42
============ ============
Northstar Technical Inc.
Liabilities and Shareholders' Equity
As at July 31, 1999
Unaudited
Liabilities
Current Year Ended
Balance Dec. 31, 98
Current
Payables and Accruals 47,185.18 80,567.36
Trade Payables 49,376.33 128,415.22
Total Current Liabilities 96,561.51 208,982.58
Short Term Loan
Accounts Payable adventure 0.00 55,305.76
A/P Eastern Meridian Mining 15,569.54 83,036.27
Loan Payable (TD 32101169) 5,100.16 0.00
Total 20,669.70 138,342.03
Long Term Liabilities
Adventure Capital 240,000.00 240,000.00
Acoa Provisonally Repayable 325,346.00 325,346.00
Acoa Action Loan 150,000.00 150,000.00
Cabot Management 118,838.55 138.338.55
Accounts Payable Enl 19,261.91 20,473.23
Due to STI 679,024.85 3,055.40
Shareholders Loans Russel 64,831.87 120,369.55
Total Long Term Liabilities 1,597,303.18 997,582.73
Equity
Shareholders Equity
Common W. E. Russel 80.00 80.00
Common Adventure Capital 10,000.00 10,000.00
Common J. Radford 5.00 5.00
Class A Common Shareholders 612,368.31 612,368.31
Total Shareholders' Equity 622,453.31 622,453.31
Retained Earnings (854,871.23) (854,871.23)
Profit (Loss) For period (194,249.08) 0.00
Total (1,287,867.39) (854,871.23)
Total Liabilities and Equity 1,287,867.39 1,112,489.42
Northstar Technical Inc.
Accounts Receivable
As at July 31, 1999
Unaudited
Current Year Ended
Balance Dec. 31, 1998
Accounts Receivable
Accounts Receivable Control 148,665.04 20,051.40
A/R Employee Advances 500.00 0.00
A/R HST 20,206.12 0.00
A/R SR&ED 60,517.54 128,382.54
A/R Other 148.40 149.00
Total Receivable 230,037.10 148,582.94
Northstar Technical Inc.
Consolidated Departments
Statements of Earnings
7 Periods Ended July 31, 1999
Unaudited
Current Current
Month YTD
Revenue:
Sales/Contract/Misc Revenue 220.17 257,654.84
Revenue 220.17 257,654.84
Cost of goods sold
Cost of goods sold 552.37 109,218.51
Total cost of goods sold 552.37 109,218.51
Gross Profit (332.20) 148,436.33
Add Government support
Total Government Support 0.00 0.00
Total (332.20) 148,436.33
Expenses:
Lab Expenses 24,597.02 126,993.12
Business Tax (428.91) 192.08
Depreciation 67,421.07 81,611.46
Interest 4,618.52 30,350.25
Office Expenses 2,277.50 38,327.26
Salaries/wages/Emp/ Benefits 11,284.39 74,598.86
Professional Fees 2,645.00 23,326.24
Rent 3,633.75 25,188.14
Insurance 274.34 1,571.06
Marketing 525.00 2,239.22
Less: Allocation to deffered Technology Cost (61,712.28) (61,712.28)
55,135.40 342,685.41
Earnings (Loss) (55,467.60) (194,249.08)
Earnings (Loss) Before Income Taxes (55,467.60) (194,249.08)
Net Earnings (Loss) For Period (55,467.60) (194,249.08)
</TABLE>
<PAGE>
Purchase Order No.: 198422
Date: October 18, 1999
Seller: NorthStar Technical Incorporated
687 Water Street
St. Johns NF A1C 6J9
Attn: Wilson Russell
PARTIES/TYPE OF CONTRACT
This `Firm Fixed Priced' Purchase Order between Lockheed Martin
Corporation (LMC) acting through its Underseas Systems business unit
(LMUSS) (hereinafter referred to as "Buyer") located at 9500 Godwin
Drive, Manassas, VA 20110 and Northstar Technical Incorporated (hereinafter
referred as "Seller") located at 687 Water Street, St. Johns, New Foundland,
Canada is placed on the basis set forth herein.
The Buyer's procurement representative is the only person authorized to
approve changes to the terms and conditions or the requirements of the
Purchase Order. If the Seller complies with any order, direction,
interpretation, approval, or disapproval, conditional approval, or
determination (written or oral) from someone other than the Buyer's
procurement representative, it shall be at Seller's own risk and Buyer
shall not be liable for any increased cost or delay in performance in
accordance with the requirements set forth herein. The Seller shall
ensure that all Seller's personnel are aware of this provision.
Buyer is a signatory to the Defense Industry initiatives on Business
Conduct and Ethics (DII).
PRODUCT/SERVICES
Seller shall furnish the necessary personnel, materials, equipment,
and services required to accomplish the build, assembly, and test of
the Fire Control Consoles (FCC) in accordance with the requirements
of Statement of Work No. INT-98-001 dated March 10, 1998.
Price for all hardware and services will be in accordance with Schedule "A".
REQUIREMENTS/DATA
Work is to be performed in accordance with the following requirements data:
Attachment A: Multi-Function Work Station Statement of Work No. INT-98-001
dated 3/10/98 (Pages 1-42) and Appendix (38 Pages).
Attachment B: Schedule "A" Payment Schedule & Milestone Dependencies
(2 pages).
Attachment C: Lockheed Martin Corporation General Provisions, for
International Commercial Subcontracts/Purchase Orders (CORPDOC 1 INT
dated 3/99) (6 pages including coversheet).
Attachment D: Subcontract No. 198422 Prime Contract Flowdowns dated
10/4/99 (39 pages including coversheet).
Attachment E: Material Inspection and Receiving Report for Victoria
Class Submarine Fire Control System (2 pages including coversheet).
Attachment F: Certificate of Milestone Completion. (2 pages
including coversheet)
Attachment G: Public Works and Government Services Canada Loan
Agreement (6 pages including coversheet).
Attachment H: Vendor Shipping Procedural Instructions for Shipments
to the United States, Revision B, dated 9/02/99 (19 pages including
coversheet).
Attachment I: LMUSS Property Loan Agreement No. 198422-001 (4 pages).
All drawings, specifications or other documents referenced in this
Purchase Order but not attached are incorporated and made a part by
this reference.
PERIOD OF PERFORMANCE AND/OR DELIVERY SCHEDULE
All articles, services and/or data shall be delivered in accordance
with Schedule A. Early delivery of completed milestones is acceptable.
<PAGE>
SHIPPING INSTRUCTIONS
All shipments should be sent to one (1) of the following addresses as
directed in writing by the LMUSS Procurement Representative:
Lockheed Martin Underseas Systems
9500 Godwin Drive
Manassas, VA 20110
Attn: Traffic 001/030
Base Commander W0100
Canadian Forces Base Halifax
Bldg 6, Willow Park
Windsor Street
Halifax, Nova Scotia
B3X 2X0
Shipping Terms: INCOTERMS 1990 DDP (Manassas, VA). Delivery shall
be to the locations specified above. The acceptance point of the
hardware is the NTI Facility in Newfoundland, Canada.
Customs Import Broker
All shipments to the LMUSS Facility will be cleared through the
following customs import broker and subject to the following document:
Emery Customs Broker
44901 Falcon Place, Suite 104
Sterling, VA 20166
Vendor Shipping Procedural Instructions for Shipments to the United
States, Revision B, dated 9/02/99.
Deliverables will be released for shipment using a Certificate of
Milestone Completion and Material Inspection and Receiving Report
for Victoria Class Submarine Fire Control System and will be prepared
by the Subcontractor and, when properly completed and signed, be
distributed via facsimile to the following address and point of contact:
Lockheed Martin Undersea Systems
9500 Godwin Drive
Manassas, VA 20110
Attention: David Batz
CONSIDERATION AND PAYMENT
BUYERS TOTAL LIABILITY/OBLIGATED FUNDS: This Purchase Order is fully
funded for the negotiated price. Therefore, the total commitment of
this Purchase Order is $ 1,910,848 (U.S. Dollars).
AUTHORIZATION TO PROCEED
Seller is not authorized to procure any material or hardware listed on
the Bill of Materials until receipt of written authorization from the
LMUSS Procurement Representative, David Batz.
INSPECTION AND ACCEPTANCE
FCC (10 EACH) MATERIAL RECEIVED LESS PROCESSORS:
Final Acceptance occurs when LMUSS and the Canada Department of National
Defense (DND) Design Authority approves Seller furnished documents
verifying receipt of acceptance material less processors. LMUSS and
the DND Design Authority shall provide written determination of its
findings within 10 days of receipt of the documents. After Final
Acceptance, these items will be made available to the Seller as
Government Furnished Equipment (GFE).
FCC (10 EACH) PROCESSORS RECEIVED:
Final Acceptance occurs when LMUSS and the DND Design Authority approves
Seller furnished documents verifying receipt and acceptance of processors.
LMUSS and the DND Design Authority shall provide written determination of
its findings within 10 days of receipt of the documents. After Final
Acceptance, these items will be made available to the Seller as GFE.
COMPLETE FIRE CONTROL CONSOLE (10 EACH):
The FCC's will be completed and presented for final acceptance. Inspection
for Final Acceptance shall be conducted in accordance with the Fire Control
Console Factory Acceptance Test (FAT) Procedures to be supplied as customer
furnished equipment by LMUSS. The FAT shall be conducted at the Seller's
facility in Canada. LMUSS and the DND Design Authority, at its option,
may witness FAT. Final Acceptance occurs when LMUSS and the DND Design
Authority approves Seller furnished documents verifying successful
completion of FAT. The DND Design Authority shall provide written
determination of its findings within 10 days of receipt of the documents.
ORDER OF PRECEDENCE
In the event of an inconsistency in this Purchase Order, unless otherwise
provided herein, the inconsistency shall be resolved by giving precedence
in the following order.
A) Subcontract 198422 Including Special Provisions
B) Schedule "A" Payment Schedule & Milestone Dependencies
C) Lockheed Martin Corporation General Provisions
D) Subcontract No. 198422 Prime Contract Flowdowns
E) Multi-Function Work Station Statement of Work No. INT-98-001
F) All other documents
<PAGE>
ACCEPTANCE
This Purchase Order is the entire agreement between Buyer and Seller.
It supersedes all prior agreements, oral or written and all other
communications relating to the subject matter of this Purchase Order.
Any terms contained in Seller invoices, acknowledgments, shipping
instructions or other forms that are inconsistent with or different
from this Purchase Order shall be void and of no effect.
This Purchase Order is executed in duplicate originals as of the date
specified on page one.
Please sign and return this Purchase Order to Buyer within ten (10) working
days after receipt.
Lockheed Martin Corporation
/s/ By: David W. Batz
Title: Sr. Subcontract Administrator
Date: October 18, 1999
Northstar Technical Inc.
/s/ By: Wilson E. Russell
Title: President & CEO
Date: October 18, 1999
<PAGE>
June 17, 1999
DISCLOSURE STATEMENT
SCIENTIFIC TECHNOLOGIES, INC.
Suite 1455, 409 Granville Street, Vancouver, British Columbia,
Canada V6C 1T2 Tel. (604) 685-0364
DATE OF DISCLOSURE STATEMENT: June 15, 1999
TYPE OF SECURITIES OFFERED: Shares of Common Stock of the Company
NUMBER OF SECURITIES OFFERED: Up to 1,000,000 Shares of Common Stock
(the "Shares")
Offering Price Underwriter Discount and
Commissions Proceeds to Company
Per Share $1.00 NIL
$1.00
Total (If all shares sold) $1,000,000 NIL
$1,000,000
The securities offered are offered on a best efforts basis. The Shares
are offered by the Company without the benefit of an underwriter.
Sales of Common Stock will commence on the date of this Disclosure
Statement and will terminate on November 30, 1999. There is no minimum
number of Shares to be sold.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), AND ARE PROPOSED TO BE ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. UPON ANY SALE,
SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S,
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE ACT.
INVESTMENT IN THE COMMON STOCK OFFERED BY THE COMPANY INVOLVES A HIGH
DEGREE OF RISK. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. PROSPECTIVE INVESTORS SHOULD
RETAIN THEIR OWN PROFESSIONAL ADVISORS TO REVIEW AND EVALUATE THE
FINANCIAL, ECONOMIC, TAX AND OTHER CONSEQUENCES OF THIS INVESTMENT.
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN
AFFORD TO LOSE THEIR INVESTMENT IN ITS ENTIRETY.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON
THE MERITS OF THIS OFFERING OR GIVEN ITS APPROVAL TO ANY SECURITIES
OFFERED OR TO THE TERMS OF THE OFFERING. THE UNITED STATES SECURITIES
COMMISSION HAS NOT PASSED UPON THE ACCURACY OR COMPLETENESS OF THIS
DISCLOSURE STATEMENT. THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES
OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY 3
RISK FACTORS 5
PLAN OF DISTRIBUTION 10
USE OF PROCEEDS 13
DILUTION 14
DESCRIPTION OF BUSINESS 15
DESCRIPTION OF PROPERTY 20
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES 20
REMUNERATION OF DIRECTORS AND OFFICERS 22
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN SECURITY OWNERS 23
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS 24
SECURITIES BEING OFFERED 25
LITIGATION 27
FINANCIAL STATEMENTS 27
EXHIBITS 28
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this
Disclosure Statement and the exhibits hereto. Prospective investors
are urged to read this Disclosure Statement in its entirety.
The Company
Scientific Technologies, Inc. is a Delaware corporation incorporated on
May 11, 1998.
The Offering
Securities Being Offered Up to 1,000,000 shares of Common Stock of
the Company at a price of $1.00 US per share; See "DESCRIPTION OF
SHARES."
Purchase Price $1.00 US per Share. See "TERMS OF THE
OFFERING."
Regulation S: The Shares are being offered pursuant to
Regulation S of the United States Securities Act of 1933 to persons who
are not "U.S. Persons". See "PLAN OF DISTRIBUTION".
Registration Rights The Company has agreed to register the
Shares with the United States Securities and Exchange Commission in
order to qualify the resale of the Shares in the United States. The
Company will file the required registration statement within a
reasonable time of acceptance of the Subscription. See "PLAN OF
DISTRIBUTION".
Securities Issued As of the date of this Document, there are
7,604,481 shares of Common Stock issued and outstanding. Upon the
completion of this offering, there will be 8,604,481 shares of Common
Stock issued and outstanding if the offered Shares are fully sold. See
"PRINCIPAL STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
Use of Proceeds The proceeds to the Company from the sale
of the Shares will be approximately $1,000,000, assuming all Shares are
sold. See "USE OF PROCEEDS."
Dilution Investors in this offering will experience
substantial dilution. Dilution represents the difference between the
offering price and the net tangible book value per share after the offering.
Additional dilution may result from future offerings or from the exercise
of future options pursuant to any stock option plan or warrants that may
be established by the Company. See "DILUTION".
Risk Factors The securities offered hereby involve a high
degree of risk and should not be purchased by anyone who cannot afford the
loss of their entire investment. Prospective investors should carefully
review and consider the factors set forth in the following section of this
Document entitled "RISK FACTORS," as well as the other information
set-forth herein, before subscribing for any of the Shares offered hereby.
<PAGE>
RISK FACTORS
An investment in the Shares offered herein is highly speculative and
subject to a high degree of risk. Only those persons who can bear the
risk of the entire loss of their investment should participate. Any
investor should carefully consider the risks described below and the other
information in this Disclosure Statement and any other filings the Company
may make with the United States Securities and Exchange Commission
(the "SEC") in the future before investing in the Company's common stock.
The risks described below are not the only ones affecting the Company.
Additional risks that the Company is not aware of or that the Company
currently believes are immaterial may become important factors that affect
its business. If any of the following risks occur, or if others occur,
the Company's business, operating results and financial condition could
be seriously harmed. The trading price of its common stock could decline
due to any of these risks, and any investor may lose all or part of his
or her investment.
Risk Factors: An investment in the Common Stock involves many substantial
risk factors, including those associated generally with a new venture and
a high technology undertaking which does not have a developed marketing
structure into a tested market. Although management itself feels that
there is substantial demand for its product at its proposed price, that
assumption is yet to be tested in full operation. The Company itself
has a limited operating history.
Risk Factors Related to the Company's Business
Status of Venture: The Company, formed in 1998, has had no significant
operations or business assets, and is yet in its early, development stage.
In January, 1999 it purchased all of the shares of Northstar Technical
Inc. ("Northstar") as described below.
No Operating History: The Company has been in actual operation under its
current management for a relatively short time. It faces all of the risks
inherent in a new business and those risks specifically inherent in the
development and operation of a new business. The likelihood of the
Company's success must be considered in light of the problems, expense,
difficulties and delays frequently encountered in connection with a new
business, including,but not limited to, uncertainty as to the ability to
develop a market for a new product in a new area. The Company is not
expected to generate any significant revenues until it completes a further
offering of its securities. The purchase of the securities offered hereby
must be regarded as the placing of funds at risk in a new or "start-up"
venture with all of the unforeseen costs, expenses, problems and
difficulties to which such ventures are subject.
Management Risks Inherent in High-Technology Businesses: New ventures,
particularly those involved in high technology, have substantial
inherent risks. These risks are in three general areas: technical,
mechanical and human. Notwithstanding any pre-production planning, any
new products can incur unexpected problems in full scale production, all
of which cannot always be foreseen or accurately predicted. Designs can
become unworkable, for unpredicted reasons. Quality control and component
sourcing failures are to be expected from time to time. Any operation,
including the one contemplated here, is substantially dependent upon the
capabilities and performance of both management and sales personnel.
Mistakes in judgement or performance can be costly and, in instances,
disabling. Therefore, management skill, experience, character and
reliability are of premium importance.
Production Risks in High-Technology Ventures: The high-technology
product line requires the Company to deal with suppliers and subcontractors
supplying highly specialized parts, operating highly sophisticated and
narrow tolerance equipment and performing highly technical calculations
and tasks. Components must be custom designed and manufactured, which is
not only complicated and expensive, but can require a number of months to
accomplish. Slight mistakes in either the design or manufacturing can
result in unsatisfactory parts which may not be correctable. Since this
operation uses the talents of various professions, mistakes from very
slight oversights or miscommunications can occur, resulting not only in
costly delays and lost orders but in disagreements regarding liability
and, in any event, extended delays in production.
Conflicts of Interest in Economic and Cost Data: The only production
cost studies and market analysis which are relied upon in this Confidential
Private Placement Offering Memorandum were prepared and performed by
personnel of the Company. Those persons will derive substantial personal
benefits from the start-up of the Company, part of which income will
result whether or not the Company ever achieves sufficient income to
reach economic equilibrium enabling it to make dividend distributions to
shareholders.
Nature of Market Appeal: Although Management believes that the product
will have sustained market demand over an extended period into the future,
it is possible that current indications of commercial demand are limited
to current market conditions only. It is possible that demand may be
directed to other similar or competing products, because of technical
developments or preferences or simply because of overwhelming commercial
promotion, within a short period of time, thereby limiting the commercial
viability of the product either prior to or shortly after the Company
reaches an initial level of economic profitability. Unexpected negative
publicity, even if not relating directly to the Company or its own products
and even if unwarranted, can devastate a market. Such unusual fortuities
can never be predicted.
<PAGE>
Risk Factors Relating to Market Protection
Market Competition: The fishing trawl monitoring business is
dominated by a number of larger competitors who are well established
in the market place, have experienced and talented management, are well
financed and have well recognized trade names related to their product
lines. Although the Company believes Northstar's product line has
certain distinctive characteristics which will allow it to penetrate
the existing market and acquire a sufficient market share in its special
niche to be profitable, there is no assurance that existing companies will
not aggressively compete by introducing new products substantially similar
to the Company's and at a price below that at which the Company can compete.
Should this occur, the Company may not be able to survive for a sufficient
time to reach viability.
Inherently Limited Nature of Patent Protection: The Company knows of
several products directly competing with Northstar's NETMIND technology
described inthis Disclosure Statement and it is conceivable that new
similar products are now being or will be produced and distributed by
one or more other entities. As some security from competition within
the market place, the Company is relying on the protection which it
hopes to realize under the United States and foreign patent laws. See
"Business Plan". It is even conceivable that certain patent copyright
claims superior to the Company's currently unfiled are either pending
or planned, either within the U.S. or other foreign countries, which
could significantly impact the Company's rights to the use of all, or
important aspects, of the NETMIND technology. It is further
conceptually possible that similar devices could be designed which,
although not identical and therefore not infringing upon the Company's
proprietary right, could function adequately to be distributed into
the same market. Moreover, it is even possible that an unpatented or
uncopyrighted but prior existing device or design may exist which simply
has never been made public and therefore not known to Management or the
industry in general. Such a device could be introduced into the market
without infringing upon the Company's current rights. If any such
competing non-infringing devices are produced and distributed, the
Company's profit potential could be seriously limited.
Patent Protection is Not Self Enforcing: The Company plans to file
copyright claims within the United States and countries where major
markets exist. However, even apart from a superior right to the
Company's claim to exclusive design and concept rights, if one or
more competitors should yet produce and distribute a product apparently
within the protection of one or more of those claims, the cost of
enforcing the Company's claim could fall on the Company itself.
The costs can be substantial and ultimately could be beyond the
financial resources of the Company. Even if it is not, the legal
costs required in protecting that claim could seriously debilitate
the Company's other operations. This is an inherent problem in relying
upon patent claims for market protection. Thus, even though the patent
may be valid, investors should be aware that it is not self-enforcing.
Cautions on Copyright Protection: If any of those copyright claims are
challenged in a future lawsuit by one or more competitors, it is possible,
although not probable, that a court could yet find one or more of those
claims invalid, or at least too broad. The courts, and not the granting
agencies are generally the final arbiters on such matters. If challenged,
the court through its own interpretation of the laws and facts may either
determine the patent to be completely invalid or the claim to be
considerably narrower than defined in the patent documents issued by
the patent offices.
Dependence Upon Key Personnel: At least in the near term, the
Company is dependent upon its executive officers and certain key
employees and consultants, the loss of any one of whom could have a
material adverse effect on the Company. The Company has not obtained
key man life insurance on the lives of its key personnel except for a
policy of CDN $250,000 on Wilson Russell payable to Northstar Technical
Inc. At the present time, the Company has not entered into consulting
and employment agreements with each of its key employees. Alternatively,
the primary means of maintaining their relationship with the Company's
pursuit is their substantial equity interest. The continued success of
the Company will also be dependent upon its ability to attract and retain
highly qualified personnel in the sales area. There can be no assurance
that the Company will be able to recruit and retain such personnel.
Risks Related to the Management Structure of the Company
Limitation on Liability of Management: Management will have no
liability to the Company for any mistakes or errors of judgement
or for any act or omission believed to be within the scope of
authority conferred by the Company's articles unless such acts or
omissions were performed or omitted fraudulently or in bad faith,
constituted gross negligence or were a violation of a director's or
officer's fiduciary obligations to the Company. The Company has
agreed to indemnify the officers and directors against all loss or
damage even if caused by an officer's or director's simple negligence
unless such loss or damage was caused by that officer's or director's
fraud, bad faith, gross negligence or breach of fiduciary obligation.
<PAGE>
Risks Inherent in Business Investment
No Assurance of Profitability of Operation: Notwithstanding the business
plan and projections made by the Company, there can be no assurance that
the Company will be able to operate the commercial operation successfully
and in fact, may ultimately fail. Even if the commercial operation itself
is successful, there is no assurance that any specific level of
profitability will be achieved by Management.
Application of Revenues: Although earnings sufficient to allow the
possible payment of stock dividends may in the future develop, there
is no assurance that earnings sufficient to pay such dividends will
ever be achieved. Even if achieved, there is no assurance that such
funds will not be applied by Management to other purposes. For instance,
Management could apply those funds to payment of other debt which either
now exists or may be incurred in the future, capital expansion or
improvements, the creation of reserves, the payment of compensation or
any other of a variety of business purposes. The decision of what
portion of earnings is to be distributed in payment of dividends and
what portion is to be retained for any of those other purposes is
inherently within the discretion of Management.
Dilutionary Possibilities: A Board of Directors has the inherent right
under applicable law, for whatever value the Board deems adequate, to the
limit of shares authorized by the Articles, to issue additional shares,
and all Common Stock shareholders, regardless of when the stock is issued,
thereafter generally rank equally in all aspects of that class of stock,
regardless of when issued. A majority of shareholders can vote to amend
the Articles of Incorporation to authorize the issuance of additional
preferred shares. The Board of Directors likewise has the inherent right,
limited only by applicable law, provisions of the Articles of Incorporation
and existing resolutions, to expand the number of shares in a series,
createnew series and to establish preferences and all other terms and
conditions in regard to such newly created series. Those terms and
conditions may include preferences on an equal or prior rank to existing
series and to all Common Stock. Those shares may be issued on such terms
and for such consideration as the Board then deems reasonable and such
stock shall then rank equally in all aspects of the series and on the
preferences and conditions so provided, regardless of when issued. Any
of those actions can not only dilute the Common Shareholders but the
relative position of the holders of any series of any preferred class.
Current shareholders have no rights to prohibit such issuances nor
inherent "preemptive" rights to purchase any such stock when offered.
RISKS RELATING TO THE NATURE OF THE OFFERING
Arbitrary Offering Price: The offering price of the Common Stock was
arbitrarily determined by the Management and is not based on any specific
recognized criteria of value or other practices. Quite specifically, it
should be recognized that it is impossible to determine at what price if
anything, those shares would sell. See "Terms of Offering", and
"Conflicts of Interest".
Dilution of Proceeds from Common Stock: The Common Stock offered
hereunder is being sold at US$1.00 per share. Subscribers under this
offering will suffer an immediate dilution of their rights and
contribution, as compared to the current shareholders of the Company.
See "Terms of Offering" and "Financial Statements". While Management
feels that the value of its technology and the business plan discussed
herein justifies the subscription price, there is no assurance that
this venture will succeed, thereby confirming that projection of
disproportionate value.
GENERAL CAUTION: For all of the aforesaid reasons, and others set
forth herein, the very nature of the Company, its management structure
and the securities being offered here, each involve a notable risk.
Any person considering an investment in the securities offered hereby
should be aware of these and other risk factors as set forth in this
Disclosure Statement. No person should invest in these securities if
that person anticipates a need for immediate return on his investment.
These securities should only be purchased by persons who can afford to
absorb a total loss of their investment and, at the very least, have no
need for immediate return on that investment.
PLAN OF DISTRIBUTION
Securities Offered
The Offering consists of the offering of up to 1,000,000 shares of
Common Stock of the Company, par value $0.0001 per share (each a
"Share") at a price of $1.00 US per Share (the "Offering").
Sales of Common Stock to the public will commence on the date of this
Disclosure Statement and will terminate on November 30, 1999, unless
extended by the board of directors of the Company. There is no minimum
number of Shares to be sold.
Capital Structure: The Company is authorized to issue a total of
100,000,000 shares of Common Stock and 20,000,000 shares of Preferred
Stock, all of a par value of $0.0001 per share. At the present time,
the Company has issued and outstanding a total of 7,604,481 shares of
that Common Stock. If this Offering is fully subscribed, a maximum of
1,000,000 further shares will be issued in return for those subscriptions.
This will bring the total shares outstanding, at the closing of this
Offering to 8,604,481 shares.
<PAGE>
Regulation S
The Offering is being made pursuant to Regulation S of the United States
Securities Act of 1933 (the "Act"). The Offering is made to persons who
are not "U.S. Persons" as defined by Regulation S of the Act. A "U.S.
Person" is defined by Regulation S of the Act to be any person who is:
a. any natural person resident in the United States;
b. any partnership or corporation organized or incorporated under the
laws of the United States;
c. any estate of which any executor or administrator is a U.S. person;
d. any trust of which any trustee is a U.S. person;
e. any agency or branch of a foreign entity located in the United States;
f. any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized,
incorporate, or (if an individual) resident in the United States;
and
g. any partnership or corporation if:
(1) organized or incorporated under the laws of any foreign
jurisdiction; and
(1) formed by a U.S. person principally for the purpose of investing
in securities not registered under the Act, unless it is organized
or incorporated, and owned, by accredited investors [as defined in
Section 230.501(a) of the Act] who are not natural persons,
estates or trusts.
By execution of the Subscription Agreement, each subscriber for shares
(a "Subscriber") will represent to the Company that the Subscriber is
not a U.S. Person and will agree with the Company as follows as a
condition of the Company selling Shares to any Subscriber:
(A) The Subscriber will resell the Shares only in accordance with
the provisions of Regulation S of the Act pursuant to registration
under the Act, or pursuant to an available exemption from registration
pursuant to the Act;
(A) The Subscriber will not engage in hedging transactions with
regard to the Shares unless in compliance with the Act;
(A) The Subscriber will acknowledge and agree that all certificates
representing the Shares will be endorsed with the following legend in
accordance with Regulation S of the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN
ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT.
SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S,
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT"
(A) The Company will refuse to register any transfer of the Shares
not made in accordance with the provisions of Regulation S of the Act,
pursuant to registration under the Act, or pursuant to an available
exemption from registration.
Registration Rights
The Company will prepare and file a registration statement with the
United States Securities and Exchange Commission (the "SEC") pursuant
to the Act on a Form SB-1, or other appropriate registration statement,
as required to qualify the Shares purchased by each Subscriber for resale
in the United States (the "Registration Statement"). The Company will
undertake to file the Form SB-1 with the SEC within a reasonable time
following the completion of the Offering of the Shares. The Company will
use its best efforts to ensure effectiveness of the Registration Statement
within a reasonable period of time following filing of the Registration
Statement.
Local Securities Laws
The Offering and any subscription for Shares is subject to compliance with
the securities laws and other applicable laws of the jurisdiction in which
any Subscriber for the Offering is resident. Each Subscriber will deliver
to the Company all other documentation, agreements, representations and
requisite government forms required by the lawyers for the Company, in
addition to the Subscription Agreement, as required to comply with all
securities laws and other applicable laws of the jurisdiction of the
Subscriber. The Company will not grant any registration or other
qualification rights to any Subscriber, other than the agreement of
the Company to register the Shares with the SEC, as discussed above.
Best Efforts Basis
The Shares are being offered by the Company on a "best efforts". There is
no minimum number of Shares to be sold pursuant to this Offering. The
Company may immediately use proceeds obtained from this Offering. All
proceeds received by the Company from subscribers for the Shares offered
hereby will be available to the Company immediately.
SUBSCRIPTION AGREEMENT
Subscription for the Shares shall be made pursuant to a subscription
agreement (the "Subscription Agreement") in the form attached to this
Disclosure Statement. The Subscription Agreement contains, among other
things, customary representations and warranties by the Company, covenants
of the Company reflecting the information set forth herein,
representations by the investors and appropriate conditions to closing.
Underwriter
The Shares are being offered by the Company to the public without the
benefit of an underwriter.
Discounts and Commissions
The sales of the Shares being offered by the Company will be carried out
by the Company. The Company will not discount the price of the Shares or
pay a commission to any dealer in connection with the sale of the Shares.
USE OF PROCEEDS
Use of Proceeds: It is estimated that the Company will use the maximum
funds of $1,000,000 in the manner set forth below:
Production (Marine Electronics) $ 150,000
Production (Contract Manufacturing) 200,000
Marketing (Marine Electronics) 200,000
Business Development (Contract Manufacturing) 200,000
Operating Capital 250,000
=========
$1,000,000
The actual expenditures of the proceeds of the Offering may differ
substantially from the estimated use of proceeds. The actual expenditures
of the proceeds of the Offering will be according to the expenditures
deemed by the Company and its board of directors to be in the best
interests of advancing the business of the Company. The actual
expenditures will also vary from the estimated use of proceeds if
less than all of the Shares are sold.
The Company anticipates that the net proceeds from the Offering will be
sufficient to meet its financial requirements for only a short period of
time. The Company, therefore, will require substantial additional capital
to fund its contemplated business plan in the near future.
The Company anticipates expenses associated with the Offering, including
legal, accounting and stock transfer agent expenses, will be approximately
$10,000 US. The Company anticipates expenses associated with the
registration of the Shares issued pursuant to the Offering, including
legal and accounting expenses, will be approximately $30,000 US.
DILUTION
"Net tangible book value" is the amount that results from subtracting the
total liabilities and intangible assets of an entity from its total assets.
"Dilution" is the difference between the offering price of a security such
as the Shares, and its net tangible book value per Share immediately after
the Offering, giving effect to the receipt of net proceeds in the Offering.
As of the date of this Disclosure Statement, the net tangible book value of
the Company was $156,848 or approximately $0.021 per share. Giving effect to
the sale by the Company of all offered Shares at the Offering price, the pro
forma net tangible book value of the Company would be approximately $156,848,
or approximately $0.138 per Share, which would represent an immediate
increase in net tangible book value of approximately $0.117 per Share to
present shareholders and an immediate dilution of approximately $0.362
per Share, or approximately 86.2% to new investors.
The following table illustrates the pro forma per Share dilution assuming
the maximum Shares offered are sold.
ASSUMING MAXIMUM SHARES SOLD
Offering Price (before deduction of Offering expenses) $1.000 per share
Net tangible book value before Offering $0.021 per share
Net tangible book value after Offering $0.138 per share
Dilution to new investors $0.862 per share
Dilution as a percentage 86.2%2
<PAGE>
DESCRIPTION OF BUSINESS
CORPORATE BACKGROUND
Corporate Organization
History: The Company is a corporation organized under the laws of the
State of Delaware on May 11, 1998.
History and Current Status: The Company was originally incorporated for
the purpose of high technology development and manufacturing of
underwater communications systems and contract manufacturing.
Corporate Facilities: The Company maintains its principal corporate
offices at #1455 - 409 Granville Street, Vancouver, British Columbia,
Canada V6C 1T2.
Introduction: The Company acquired all of the issued and outstanding
common shares in Northstar Technical Inc. ("Northstar") in January,
1999. Northstar is a high technology development and manufacturing
company with two main business activities. One is underwater
communications systems, the other is contract manufacturing.
Northstar's objectives are to become a leader in marine electronics
and a major regional contract manufacturer. As a result of the
acquisition, Northstar became a subsidiary of the Company.
Northstar - Corporate Information: Northstar is a corporation
incorporated under the laws of Newfoundland on July 5, 1989 and
extra-provincially registered in British Columbia on April 1, 1997.
The registered and records offices of Northstar are located at 10
Fort William Place, P.O. Box 5939, St. John's, Newfoundland, A1C
5X4 (Telephone: (709) 722-8735, Facsimile: (709) 722-1763).
Northstar's head office is located at Suite 1455, 409 Granville
Street, Vancouver, British Columbia, Canada, V6C 1T2 (Telephone:
(604) 685-0364, Facsimile: (604) 689-8337).
Northstar - General Development and History: Northstar was
founded in 1989 by Dr. Wilson Russell as a technology development
and manufacturing company. Northstar acquired the initial
technology for the NETMIND system from the receiver of National
Petroleum and Marine Consultants Limited and Altair Marine Systems
Limited for the sum of CDN$1.00, which two companies had spent an
aggregate CDN$1,740,000 on the partial development of the technology.
Northstar has since spent over CDN $3,500,000 to complete the
development and commercialization of the NETMIND system and establish
a production operation. The basic technology was commercialized in
August 1996 when the first industrial system was produced. The
plant has since manufactured over thirty complete systems.
The customers of the NETMIND system include the National Oceanics
and Atmospheric Administration (NOAA) in the United States, the United
States Department of the Interior and Fishery Products International
(FPI) in Canada.
In 1995, Northstar signed a Teaming Agreement with Loral Librascope
("Loral") (now Lockheed Martin) of Glendale, California pursuant to
which, if Loral were successful in a proposal to the Canadian Navy,
Northstar would assemble and test multi-function work stations
(submarine control consoles). In 1997, Lockheed Martin entered
into a contract with Northstar pursuant to which Northstar assisted
Lockheed Martin with the production of the first prototype console
on their premises. Northstar is attempting to secure a sole source
contract to manufacture control consoles for the Upholder submarines
which Canada recently purchased from the United Kingdom.
Background Technology: Northstar has developed a core technology
for underwater communications which has applications in the fishery,
offshore oil and gas, defence, marine transportation, oceanographic
and environmental industries. The basic engines are underwater sensors
which take measurements and transmit the information back to a receiver
on board a ship or oil rig.
Each sensor is equipped with one or more acoustic transducers depending
on its function. Analog and digital signal processing and power
management functions are performed by the sensor electronics.
The telemetered data are received by a hull mounted, hydrodynamically
shaped hydrophone. The received signals are amplified at the hydrophone
for transmission via cable to the deck unit processor/display, a small
cabinet mounted at a convenient location on the bridge. The processor
portion of the deck unit decodes the signals and converts them into
engineering units for display on a high resolution colour monitor.
The NETMIND System: The first application of Northstar's core
technology is the NETMIND system for the world's commercial fishing
industry.
NETMIND monitors the performance of a trawl and is both a conservation
tool and an efficiency tool. It consists of a group of electronic
sensors that transmit measurements from the net through the water to
a receiver on the ship. The information is displayed on a computer
screen and the captain can tell what activities are occurring in the
net. He then knows how to adjust the height and width of the net
opening, how much fish are in the opening and when the net is full
and ready to be pulled in. Fishermen call NETMIND their 'eyes
beneath the sea'.
The Market: NETMIND was introduced to the marketplace in 1996 and sales
have been made in North America and Europe. The targeted customers have
been strategic in that they are industry leaders and government agencies.
Three different agencies of the US Government have purchased systems and
have given very positive feedback. International customers are interested
in NETMIND for its price and technical advantages.
To date, Northstar has barely penetrated the potential market which is
estimated to be about 25,000 vessels worldwide. Upon the successful
close of this offering, sales in the first year are estimated to be
about 100 NETMIND systems.
Competition: The NETMIND system has two known main competitors, Furuno
in Japan and Scanmar in Norway. It is believed that NETMIND has price
and technical advantages over each. Technically, NETMIND has longer
sensor battery life, longer operating distance, and better maintenance
and repair features. See "Risk Factors".
Technology Protection: Since commercializing NETMIND in 1996, Northstar
has made many enhancements to the system. These activities have
resulted in an optimum design for which a patent application is
intended. The technology is difficult to replicate because of its
sophistication and, regardless of patent protection, it is expected
it would take several years for a new player to catch up to the present
system. In the meantime, Northstar is developing new innovative NETMIND
products which should ensure a competitive edge.
Future Opportunities: Northstar's second technology application will
likely be for the multi-billion dollar offshore oil and gas industry.
One potential product is for the remote control of subsea wellheads.
This is especially important as the industry goes into deeper and
deeper water to find and produce petroleum.
Further business opportunities are envisaged for the defense, marine
transportation, oceanographic and environmental industries. The
possibilities include towed arrays for seismic exploration, towed
arrays for submarines, docking systems for large ocean going ships,
positioning systems for oil and gas drilling platforms, acoustic
measurements of ocean currents, and diver to diver communications for
the recreational diving industry. Northstar would look to strategic
alliances with other companies and government agencies to reduce
technological risks and open doors to new markets.
Contract Manufacturing: Northstar's second business division focuses
on manufacturing systems for the defense, transportation and
communications industries in strategic alliance with major
international contractors. Several years ago, Northstar signed a
Teaming Agreement with LORAL LIBRASCOPE, in Glendale, California
for the manufacture of control consoles for submarines. This was
followed by the first start-up contract with LOCKHEED MARTIN which
was signed in April 1997. Northstar is attempting to secure a
contract to manufacture consoles for Canadian Navy submarines. It
is expected that other work for Canadian patrol frigates, destroyers
and maritime helicopters will follow on from the submarine contracts.
Northstar expects to establish good relationships with other major
defense and communications contractors in Canada and the United States
and significant contract opportunities are expected through them.
Historical Financial Information: Northstar has spent over
CDN$1,850,000to complete the development and commercialization
of the NETMIND system. Northstar has received CDN$458,309 in
Scientific Research and Experimental Development refunds from
Revenue Canada. Funding support from the major shareholder and
private investors total approximately CDN$1,565,500 in the form of
share purchases or loans. The federal government of Canada has
provided support totaling approximately CDN$600,000 in the form of
research grants and interest-free loans through the National
Research Council and the Atlantic Canada Opportunities Agency.
Northstar's wholesale revenues were CDN$272,631 for year ending
March 31, 1998 and CDN$252,565 for nine months ending December
31, 1998. The gross profit for the year ending March 31, 1998 was
48% and was 48% for the nine months ending December 31, 1998.
Expenses totaled CDN$388,000 for the year ended March 31, 1999 and
CDN$356,000 for the nine months ended December 31, 1998. Dividends
of CDN$42,282 were paid on Northstar's preference shares in 1998.
These shares have been fully redeemed or converted to common shares.
Northstar's assets as of December 31, 1998 totaled CDN$1,112,490 and
its current liabilities totaled CDN$374,425. Long-term debt of
CDN$711,774 consists of government interest-free loans and a loan
of CDN$240,000 payable to Pathfinder Enterprises Inc., a company
controlled by a shareholder of Scientific, with monthly interest
payments only to July 2002, secured by a floating charge debenture.
There are shareholder loans of CDN$258,709 with no fixed terms of
repayment. Northstar has an accumulated deficit of CDN$854,871 as
of December 31, 1998.
Projected Revenues: Northstar anticipates sales of approximately
CDN$5 million in the first year upon completion of the Offering.
Depending on the financial, production and management resources,
there is potential for CDN$20 million in revenues in the second
year, with greater potential in the third year.
Management: Northstar's management is comprised of a small team
of individuals experienced in the development, manufacture and
sale of ocean industry technologies.
Dr. Wilson Russell, Chairman and Chief Executive Officer, has
25 years experience in the field and has established himself as
an international consultant in ocean industry, oil and gas, and
high technology. Dr. Russell is also a director of the Company.
See "Management" for detailed information regarding Dr. Russell.
Dr. David Buttle is Northstar's Technical Director and one of
the world's leaders in developing and manufacturing ocean
instrumentation for the defense industry. In 1977, Dr. Buttle
founded Marine Acoustics which designed and manufactured sonar
transducers for OEM use and subsea computers for the control of
subsea rock drills. In 1985, Marine Acoustics was reorganized as
Marine Acoustics Ltd. Marine Acoustics Ltd. produces numerous
sonar systems, including exercise mine acoustic telemetry systems,
which are used by the British, United States, Australian, Belgian,
Canadian and Egyptian Navies. Dr. Buttle supervised the design of
the NETMIND system and advises Northstar on production and value
engineering.
Mr. Brian Gamberg, P.Eng., Senior Electronics Engineer, has over
20 years experience developing marine systems, computer and
communications systems and in project management. He has been
involved in the design, development and implementation of both
hardware and software elements of tracking radar systems,
geophysical sounding systems, distributed computing systems,
Geographical Information Systems and embedded instrumentation
systems. Mr. Gamberg is responsible for the development of new
NETMIND technologies and other underwater communication products.
Mr. James Hall is an Electronics Technologist and Northstar's
Production Manager. Mr. Hall is responsible for all production
activities including inventory control, electronic and mechanical
production, testing, quality control and shipping.
Ms. Philomena Kavanagh has extensive experience in office management
and has worked for companies such as Coopers Lybrand, A.H. Murray Ltd.
and Atlantic Specialties Ltd. Ms. Kavanagh is responsible for all
of Northstar's financial and product shipment administration.
Plant, Equipment and Operations: The manufacturing plant is
located in St. John's, Newfoundland. The plant is approximately
3,000 square feet in area and is comprised of an electronics shop,
a mechanical engineering shop, a molding room, a component inventory
area, a finished goods area, research and development offices and
administrative offices. The plant possesses equipment typical of an
electronics manufacturing operation, i.e., oscilloscopes, soldering
stations, computers, flume hood, molding equipment, drill press and
specialty testing and assembly tools. The inventory system is
computerized, with a rigorous quality program in place which covers
incoming components, assembly testing and finished goods testing.
Northstar uses the program TANGO for its computer aided design (CAD)
activities. Lockheed Martin Federal Systems in Manassas, Virginia
has supplied to Northstar proprietary hardware and software for the
testing of submarine control consoles.
Northstar uses outsourcing as much as possible to keep overhead and
staffing levels low. For example, most of the mechanical assemblies
for the NETMIND system are supplied by a local mechanical shop, which
assemblies are then incorporated into the molding of the plastic
housings which are produced in-house.
Northstar currently has ten full-time employees and three part-time
engineering consultants.
<PAGE>
EMPLOYEES
As of June 15, 1999, the Company had ten employees and three
part-time engineering consultants.
None of the Company's employees is represented by a labour union,
and the Company considers its employee relations to be good.
Competition for qualified personnel in the Company's industry
is intense, particularly for software development and other
technical staff. The Company believes that its future success
will depend in part on its continued ability to attract, hire
and retain qualified personnel.
DESCRIPTION OF PROPERTY
The primary business activities of the Company are carried on at
leased premises located at Suite 1455, 409 Granville Street,
Vancouver, British Columbia, Canada V6C 1T2. The premises are
comprised of 1,000 square feet and is leased for a term of two
years expiring on September 30, 1999. Northstar Technical Inc.
leases premises at 687 Water Street, St. John's, Newfoundland,
Canada A1C 6J9. The premises are comprised of 3,000 square feet
and is leased for a term of two years expiring on June 30, 2000.
The Company does not lease or own any other property.
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers
and directors of the Company, their present positions with the
Company, and their biographical information.
Each director will serve until the next annual meeting of
shareholders, and thereafter if re-elected.
Name of Director Age
Dr. Wilson Russell 53
Mr. Frank Power 56
Mr. Lee Meyer 54
Name of Officer Office
Dr. Wilson Russell 53 President
Mr. Frank Power 56 Vice-President
As a Delaware corporation, the final responsibility for the
management of the affairs of the Company rests with the Board
of Directors. That Board currently consists of three directors.
Those directors are elected at the annual meeting of the
shareholders and serve for an annual term or until they resign
or are replaced. Those directors meet or otherwise consult with
one another on a regular basis to review the affairs of the Company
and to adopt or confirm any resolutions which are necessary to
grant contractual and other authority to the administrative
officers. The directors may, and probably will, designate an
executive committee to which they will grant limited authority
to make certain ministerial decisions on behalf of the board
between meetings of the full board. The affairs of the Company
are administered by its executive officers. Those officers are
designated by the Board of Directors to whom those officers are
responsible. The executive officers are generally elected by the
directors on an annual basis and serve throughout that term or
until such earlier time as they resign or are replaced. The
directors may, and in the case of this Company will designate
themselves as senior executive officers of the Company. The
Company's day to day actions will occur through the actions of
those executive officers acting on behalf of the Company.
Throughout this Offering Memorandum the term "Management"
shall be interpreted as the current directors and officers
of the Company designated in the following section.
The following sets forth information as to the principal
occupation and business experience for at least the past
five years of each of those directors and officers.
Dr. Wilson Russell: Dr. Russell received a Masters Degrees
in Engineering and in Physics from Memorial University of
Newfoundland and a Doctorate in Engineering Physics from the
University of Aix-Marseille in France. Dr. Russell's numerous
positions include: geophysicist with Pan American Petroleum
(AMOCO) in Calgary, Alberta (1968); professor and researcher at
Memorial University (1968 to 1977); Director of Engineering at
NORDCO Ltd. (1977 to 1980); and Associate Director of the
Newfoundland Petroleum Directorate. After starting his own
consulting and technology development firm in 1983, Dr. Russell
has also managed the preparation of the developmentplan for the
$6 billion Hibernia development which was submitted to the
government for approval of the project; invented, developed and
commercialized the Hydroball current profiling system, a unique
phased array ocean current profiling system which won the silver
medal at the Canada Awards for Business Excellence in 1986; and
developed a fiber optic modem for TRW in the United States. Dr.
Russell founded NewTech Instruments Ltd. in partnership with a
subsidiary of Bell Canada and was the first Chairman of the Board
of Directors of Seabright Corporation. Dr. Russell has also
acted as a consultant for the Canadian federal government, the
provincial governments of Newfoundland and British Columbia, the
Canadian Consul in Boston, Massachusetts, Mobil Oil, the Defense
Research Establishment Pacific and the French Navy. Dr. Russell
founded Northstar in 1989 and serves as Chairman and Chief
Executive Officer. He is also a director and President of Cabot
Management Ltd. and, until recently, was a director of the
University of Victoria's Innovation and Development Corporation.
Mr. Frank Power: Mr. Power, a business management consultant,
has managed and administered several public companies for the past
15 years. Since 1984, Mr. Power has provided services including
strategic planning, management, administration, design, and
construction of major mining projects both nationally and
internationally. He has owned and operated several consulting
companies which have been providing comprehensive services in the
industrial and high-technology fields as well as the mining field.
His expertise also includes reactivating public companies, project
acquisitions, public and private funding, as well as developing and
taking existing private companies public. He is equally skilled to
function in the public markets both in Canada and the United States.
Mr. Power is President and Owner of Pow Con Management since 1981 and
Premier Enterprises Ltd. since 1994. These companies manage,
administrate and finance reporting companies. He served as President
and Director of several Vancouver reporting companies and publicly
listed companies since 1986 to present. Since 1992, Mr. Power has
served as President of World Organics Inc., listed on the Vancouver
Stock Exchange. From 1996 to 1997, Mr. Power served as President
and Director of Accuimage Diagnostics and he is also past President
of Security Industries, Inc. These companies are traded on the OTC
Bulletin Board.
Mr. Lee Meyer: Mr. Meyer, since completing his Business
Administration degree from Arizona State University, has held
positions including Managing Director of Omni International;
Vice-President and Director of World Organics, Inc., a reporting
company; Secretary and Treasurer of Tec Industries Corp., a specialty
equipment rental agency; and owner and President of Stretchcoat, a
national manufacturer and marketer of specialty products. Mr. Meyer
has also represented major principals selling products nationally.
Management Compensation: The Company has agreed to pay Mr. Frank
Power, Director and Vice President, a past consulting fee of $27,000
and current monthly fees of $2,000 and to pay Wilson Russell, Director
and President, a bonus of $100,000 payable when the Company is able
to pay.
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth certain information as to the Company's
three highest paid officers and directors for the period from the
commencement of Scientific's Business to June 15, 1999. No other
compensation was paid to any such officer or director other than the
cash compensation set forth below.
Summary Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Dr. Wilson Russell Director and President $16,300
Mr. Frank Power Director and Vice President $ 2,000
Mr. Lee Meyer Director NIL
_______
Officers and Directors Directors and Officers $18,300
of the Company as a Group
</TABLE>
The compensation paid to directors and officers to June 15, 1999 is
believed by the Company to be below market compensation rates for the
services provided by the directors and officers, having regard to the
experience and qualifications of the directors and officers. The
Company anticipates compensation being increased to market rates upon
the Company achieving sufficient revenues and/or financings to pay such
increased compensation.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
The following table sets forth, as of September 15, 1999, the beneficial
ownership of the Company's Common Stock by each officer and director of
the Company, by each person known by the Company to beneficially own more
than 10% of the Company's Common Stock outstanding and by the officers and
directors of the Company as a group. Except as otherwise indicated, all
shares are owned directly.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and address Number of Shares Percentage of
Title of class of beneficial owner of Common Stock Common Stock(1)
Common Stock Frank Power 990,000 13.30%
Common Stock Wilson Russell 164,883 2.23%
Common Stock Lee Meyer 100,000 1.35%
Common Stock Ladner Enterprises 1,397,900(2) 18.88%
Common Stock Monaco Ventures 1,000,000(3) 13.51%
Common Stock All Officers and Directors 4,352,783 58.79%
as a Group (3 persons)
</TABLE>
(1) Based on 7,404,481 shares of Common Stock of the Company issued
and outstanding
on June 15, 1999.
(2) [DISCLOSE BENEFICIAL OWNERSHIP AND CONTROL OF STOCK IN NAME OF
LADNER ENTERPRISES]
(3) [DISCLOSE BENEFICIAL OWNERSHIP AND CONTROL OF STOCK IN NAME OF
MONACO VENTURES]
The following directors and officers of the Company have been granted
options to purchase shares of the Company's common stock as follows:
Optionee Position Options Option Price Per Share
Wilson Russell Director 250,000 $0.50
Frank Power Director 100,000 $0.50
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
There are no material contracts entered into by the Company within the
two years preceding the date hereof which are still in effect, except
as follows:
Completion of previous offering: The Company completed an offering of
363,000 shares on January 26, 1999. The proceeds of the offering were
US$363,000. The purchasers of the shares were all non US residents.
Acquisition of Northstar: The Company acquired Northstar in January,
1999 pursuant to an agreement dated July 31, 1998. The Company purchased
all of the issued and outstanding shares of Northstar in exchange for
4,901,481 shares of the Company's Common
Stock which were issued from treasury.
Copies of the foregoing contracts and any reports referred to in this
Disclosure Statement may be inspected at the head office of the Company
at Suite 1455, 405 Granville Street, Vancouver, British Columbia, Canada
V6C 1T2, during normal business hours while the Offering contemplated
hereunder is in progress to and including the closing date.
Except for the acquisition of Northstar, none of the following persons
has any direct or indirect material interest in any transaction to which
the Company is a party since the incorporation of the Company in May, 1998
or in any proposed transaction to which the Company is proposed to be a
party:
(A) any director or officer of the Company;
(B) any proposed nominee for election as a director of the Company;
(C) any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights attached to the
Company's Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or
any relative of such spouse, who has the same house as such person or
who is a director or officer of any parent or subsidiary of the Company.
<PAGE>
SECURITIES BEING OFFERED
The securities being offered are the shares of the Company's common
stock, par value $0.0001 per share. Under the Company's Articles of
Incorporation, the total number of shares of all classes of stock
that the Company shall have authority to issue is 100,000,000 shares
of common stock, par value $0.0001 per share (the " Common Stock")
and 20,000,000 shares of preferred stock, par value $0.001 per share
(the "Preferred Stock"). As of September 15, 1999, a total of
7,404,481 shares of Common Stock are issued and outstanding. No shares
of Preferred Stock are issued or outstanding. All issued and outstanding
shares of the Common Stock are fully paid and non-assessable.
Common Stock
Holders of Common Stock have the right to cast one vote for each share
held of record on all matters submitted to a vote of holders of Common
Stock, including the election of directors. Holders of Common Stock do
not have cumulative voting rights in the election of directors.
Holders of a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy,
are necessary to constitute a quorum at any meeting of the Company's
stockholders, and the vote by the holders of a majority of such
outstanding shares is required to effect certain fundamental corporate
changes such as liquidation, merger or amendment of the Company's
Articles of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by the
Board of Directors, from funds legally available therefor. In the
event of the liquidation, dissolution or winding up of the affairs
of the Company, all assets and funds of the Company remaining after
the payment of all debts and other liabilities shall be distributed,
pro rata, among the holders of the Common Stock. Holders of Common
Stock are not entitled to pre-emptive or subscription or conversion
rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and
non-assessable.
Transfer Agent
Signature Stock Transfer of Dallas, Texas is the transfer agent for
the Shares.
Share Purchase Warrants
None.
Options
The directors of the Company approved an incentive stock option plan
(the "Stock Option Plan"). The directors have approved the following
grants of options pursuant to the Stock Option Plan.
(a) an aggregate of 500,000 options to purchase shares of Common
Stock at a price of $0.50 per share to the Company's officers and
directors.
(a) an aggregate of 275,000 options to purchase shares of Common
Stock at a price of $0.50 per share to the Company's employees.
(a) an aggregate of 15,000 options to purchase shares of Common
Stock at a price of $0.75 per share to the Company's consultants.
All options are subject to a vesting schedule with one-third vesting
on grant, one-third on the first anniversary of the date of grant and
one-third on the second anniversary of the date of grant.
Convertible Securities
Pathfinder Enterprises Inc. has the option to convert a $240,000 CDN
loan to Northstar Technical Inc. to common shares at $0.90 US per
share in the first year and $1.25 US per share in the second year
commencing March 11, 1999.
LITIGATION
The Company is a defendant in a lawsuit commenced against the Company
by the Company's former master distributor. The former distributor has
alleged that the Company has interfered with the ability of the former
distributor to sell products. The Company has filed a counterclaim for
monies owing by the former distributor to the Company. An adverse
outcome to the lawsuit could have a material adverse impact on the
Company.
<PAGE>
FINANCIAL STATEMENTS
The Company's unaudited Financial Statements, as described below,
are attached hereto.
A. Unaudited financial statements for the period ending
January 31, 1999, including:
(a) Consolidated Balance Sheet;
(a) Consolidated Statement of Operations and Deficit;
(a) Consolidated Statement of Shareholders' Equity;
(a) Consolidated Statement of Cash Flows;
(a) Notes to Consolidated Financial Statements.
(a) Financial Statements
The Company's audited financial statements for the eight month period
ended December 31, 1998, together with the auditor's report, are
appended to this Offering Memorandum. The financial statements are
non-consolidated statements for the Company. INVESTORS ARE URGED TO
CAREFULLY REVIEW SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES TO THOSE
FINANCIAL STATEMENTS.
Certain Financial Matters: This statement reflects the position of
the Company on December 31,1998, which is prior to the completion of
the $US 363,000 placement and prior to the purchase of Northstar and
prior to the funding under this Offering. Therefore, such statements
reflect substantially no assets other than cash but do demonstrate
that the Company likewise has few liabilities. Accordingly, the book
value of Common Shares outstanding at the date of their statement are
at this time, negligible. The statement further reflects no income,
other than deposits. Its earnings per share are negative.
Management's Discussion of Financial Statements: The Balance Sheet
and financial statements are audited and are prepared in accordance
with generally accepted accounting principles of the United States.
Specifically, those figures do not, and are not intended to, reflect the
current net fair market value of the Company's assets. That value can
only be estimated, based upon the potential sales and prospective net
income which will be generated from the Company's present and future
technology. Because of the various matters which inherently must occur
in the future, the outcome cannot be precisely determined and is
therefore necessarily a matter of opinion. Management believes that
technology, combined with management's ability to successfully
commercialize the applications through its developed products, to be
substantial. It is that opinion, and not the current financial statement,
upon which the price of the Common Stock is being offered under this
Offering.
ADDITIONAL ATTACHMENTS
The following additional attachments are attached to this Disclosure
Statement:
Attachment Description
No. 1 Subscription Agreement
<PAGE>
