FORM 10-QSB
(Mark One)
[x]QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITES ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from ___________ to ____________
Commission file number: 333-90031
Northstar Electronics,Inc.
(Exact name of small business issuer as specified in
its charter)
Delaware #333-0803434
(State or other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
Suite # 1455- 409 Granville Street, Vancouver, British
Columbia, Canada V6C 1T2
(Address of principal executive offices)
(604) 685-0364
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PROCEEDING FIVE YEARS
Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of
the Exchange Act after the distribution of securities under
a plan confirmed by a court. Yes[ ] No[ ]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
NORTHSTAR ELECTRONICS INC.
Consolidated Financial Statements
Three Months Ended March 31, 2000
INDEX Page
- ----- ----
Part I
Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 2000
and December 31, 1999 1
Consolidated Statements of Operations Three Months Ended
March 31, 2000 and March 31, 1999 2
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 2000 and December 31, 1999 3
Consolidated Statements of Cash Flows Three Months Ended
March 31, 2000 and March 31, 1999 4
Notes to Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II
Other Information
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
NORTHSTAR ELECTRONICS INC.
Consolidated Balance Sheets
(Unaudited)
(U.S. Dollars)
- --------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- --------------------------------------------------------------------------------
Assets
Current
Cash $17,020 $39,454
Receivables 131,613 105,609
Inventory and work-in-progress 110,325 79,938
Prepaid expenses 5,746 6,349
- --------------------------------------------------------------------------------
264,704 231,350
Property and Equipment 27,334 26,746
- --------------------------------------------------------------------------------
Total Assets $292,038 $258,096
- --------------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $163,692 $100,547
Loans payable 14,133 15,296
Current portion of long-term debt 44,180 44,276
- --------------------------------------------------------------------------------
222,005 160,119
Long-Term Debt 487,204 501,114
Due to Cabot Management Limited 65,950 74,600
Due to Director 121,568 84,848
- --------------------------------------------------------------------------------
Total Liabilities 896,727 820,681
- --------------------------------------------------------------------------------
Stockholders' Equity
Common Stock
Authorized
100,000,000 Shares of common stock with a par value of $0.0001 each
20,000,000 Shares of preferred stock with a par value of $0.0001 each
Issued and outstanding
Common stock 7,604,481 shares $760 $760
Additional Paid-In Capital 979,771 972,271
Stock Subscriptions 10,000 10,000
Other Comprehensive Income 26,181 13,554
Deficit (1,621,401) (1,559,170)
- --------------------------------------------------------------------------------
Total Stockholders' Equity (604,689) (562,585)
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $292,038 $258,096
- --------------------------------------------------------------------------------
See notes to consolidated financial statements.
NORTHSTAR ELECTRONICS INC.
Consolidated Statements of Operations
Three Months Ended March 31
(Unaudited)
(U.S. Dollars)
- --------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------
Revenue $155,414 $56,123
Costs of goods sold 73,809 32,814
- --------------------------------------------------------------------------------
Gross Profit 81,605 23,309
Other Income 1,013 2,986
- --------------------------------------------------------------------------------
82,618 26,295
- --------------------------------------------------------------------------------
Expenses
Salaries, wages and employee benefits 76,203 53,698
Professional fees 22,940 17,147
Office and miscellaneous 10,724 6,479
Rent 10,213 7,019
Interest 8,441 9,727
Value of director's uncompensated services 7,500 7,500
Management and marketing fees 3,521 6,860
Telephone 2,355 1,728
Travel 2,026 3,839
Commissions 0 26,300
Amortization and Depreciation 926 1,169
- --------------------------------------------------------------------------------
144,849 141,466
- --------------------------------------------------------------------------------
Net Loss For Period $(62,231) $(115,171)
- --------------------------------------------------------------------------------
Net Loss Per Share $(0.01) $(0.02)
- --------------------------------------------------------------------------------
Weighted Average Number of
Common Shares Outstanding 7,604,481 5,168,745
- --------------------------------------------------------------------------------
See notes to consolidated financial statements.
NORTHSTAR ELECTRONICS INC.
Consolidated Statements of Changes in Stockholders' Equity
Period Ended March 31, 2000 and Year Ended December 31, 1999
(U.S. Dollars)
(Unaudited)
- --------------------------------------------------------------------------------
Additional Other Total
Paid-In Stock Comprehensive Accumulated Stockholder
Shares Amount Capital Subscri- Income (Loss) Deficit Equity
ptions
- --------------------------------------------------------------------------------
Balance 2,140,000 $214 $414,755 $0 $53,929 $(1,191,649) $(722,751)
Dec. 31,
1998
Shares issued
in Jan. 1999
on acquisition
of subsidiary
(note 1) 4,901,481 490 0 0 0 0 490
Liabilities
in excess of
identifiable
assets 0 0 (35,428) 0 0 0 (35,428)
Issuance of
common stock
for cash 563,000 56 562,944 0 0 0 563,000
Stock
subscriptions
received 0 0 0 10,000 0 0 10,000
Value of
director's
uncompensated
services 0 0 30,000 0 0 0 30,000
Other
comprehensive
loss 0 0 0 0 (40,375) 0 (40,375)
Net loss for
the year 0 0 0 0 0 (367,521) (367,521)
- --------------------------------------------------------------------------------
Balance 7,604,481 760 972,271 10,000 13,554 (1,559,170) (562,585)
Dec. 31,
1999
Net loss for 0 0 0 0 0 (62,231) (62,231)
three months
Value of director's
uncompensated
services 0 0 7,500 0 0 0 7,500
Other comprehensive
Income 0 0 0 0 12,627 0 12,627
- --------------------------------------------------------------------------------
Balance
Mar. 31,
2000 7,604,481 $760 $979,771 $10,000 $26,181 $(1,621,401) $(604,689)
- --------------------------------------------------------------------------------
NORTHSTAR ELECTRONICS INC.
Consolidated Statement of Cash Flows
Three Months Ended March 31
(Unaudited)
(U.S. Dollars)
- --------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------
Operating Activities
Net loss $(62,231) $(115,171)
Adjustments to reconcile net loss to net cash used by operating
activities
Amortization and depreciation 926 1,169
Value of director's uncompensated services 7,500 7,500
Changes in operating assets and liabilities 6,194 (47,407)
- --------------------------------------------------------------------------------
Net Cash Used by Operating Activities (47,611) (153,909)
- --------------------------------------------------------------------------------
Investing Activities
Acquisition of property and equipment (1,514) (8,368)
- --------------------------------------------------------------------------------
Financing Activities
Issuance of common stock 0 263,000
Proceeds from (repayment to) long-term debt (14,006) 0
Advances from (repayment to)
Cabot Management Limited (8,650) (10,973)
Advances from (repayment to) director 36,720 (8,341)
- --------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 14,064 243,686
- --------------------------------------------------------------------------------
Effect of Foreign Currency Translation on Cash 12,627 0
- --------------------------------------------------------------------------------
Inflow (Outflow) of Cash (22,434) 81,409
Cash, Beginning of Period 39,454 807
- --------------------------------------------------------------------------------
Cash, End of Period $17,020 $82,216
- --------------------------------------------------------------------------------
NORTHSTAR ELECTRONICS INC.
Notes to Consolidated Financial Statements
Three Months Ended March 31, 2000
(U.S. Dollars)
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
These financial statements include the accounts of Northstar Electronics
Inc. ("the Company") and its wholly-owned subsidiary Northstar Technical
Inc. ("NTI"). All intercompany balances and transactions are eliminated.
The parent company was incorporated May 11, 1998 in the State of Delaware
and had no operations other than organizational activities prior to the
January 1999 merger described below. The Company's business activities
are conducted principally in Canada and the financial statements are
prepared in accordance with United States generally accepted accounting
principles with all figures translated into United States dollars for
reporting purposes.
On January 26, 1999 the Company completed the acquisition of 100% of the
shares of Northstar Technical Inc. NTI has developed a communications
technology that can send information from one place in the ocean to
another place. The merger was effected through the issuance of 4,901,481
shares of treasury stock by the Company with the former shareholders of
the subsidiary receiving a majority of the total shares then issued and
outstanding. The transaction has been accounted for as a reverse take-
over resulting in the consolidated financial statements including the
results of operations of the acquired subsidiary prior to the merger.
These unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United
States for interim financial information. These financial statements are
condensed and do not include all disclosures required for annual
financial statements. The organization and business of the Company,
accounting policies followed by the Company and other information are
contained in the notes to the Company's audited consolidated financial
statements files as part of the Company's December 31, 1999 Form SB-1.
In the opinion of the Company's management, these financial statements
reflect all adjustments necessary to present fairly the Company's
consolidated financial position at March 31, 2000 and December 31, 1999
and the consolidated results of operations and the consolidated statement
of cash flows for the three months ended March 31, 2000 and March 31,
1999. The results of operations for the three months ended are not
necessarily indicative of the results to be expected for the entire
fiscal year.
2. COMMON STOCK
There were no changes in the authorized or the issued and outstanding
common stock during the three months ended March 31, 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
The following discussion should be read in conjunction with the accompanying
unaudited consolidated financial statements for the three month periods ended
March 31, 2000 and March 31, 1999 and the audited consolidated financial
statements for the twelve months ended December 31, 1999 as presented in the
Form SB-1 approved on April 20, 2000.
Special Note Regarding Forward Looking Statements
- -------------------------------------------------
Certain statements in this report and elsewhere (such as in other filings by
the company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the company of its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. Factors that might cause or
contribute to such differences include, among others, competitive pressures and
constantly changing technology and market acceptance of the company's products
and services. The company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements, which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Northstar Services
- ------------------
Northstar's operations currently are those of its wholly owned subsidiary
Northstar Technical Inc. (NTI) and it is in this context the company's services
are described.
We have two main activities: underwater wireless communications and electronic
contract manufacturing.
Underwater Wireless Communications
In the communications area, our first product is the NETMIND system for the
commercial fishing industry. We won a competitive bid in the fall of 1999 with
the United States Government Agency NOAA (National Oceanic and Atmospheric
Administration) to supply them with a number of NETMIND systems. This was an
important event, as we believe the contract award put our product and the
technology behind it at the forefront of the industry.
We intend to build on the success of the NETMIND system by initiating our
Venture Technology Business Model. In this model, we intend to invest our
core technology in partnerships with established companies in a wide variety
of industry sectors. We intend to develop the products and the recognized
company partners would carry out the product introduction, marketing and sales.
We intend to fully implement Northstar's dynamic business model. Using the
Internet, we intend to seek partners in offshore oil and gas, the environmental
sector, oceanography, marine transportation, recreational diving, and defense.
We intend to promote our technology on our website with potential applications
in al the above mentioned industry sectors. We also intend to promote the
technology partnerships in trade magazine advertisements, at trade shows and
through our worldwide network of business contacts.
We intend the partnerships to be 50/50 joint ventures. The industry sector
partners would pay 50% of the development costs of the products and 100% of the
marketing costs. We expect to use this template to create up to 12 new
products over the next three years, provided we are successful in generating
sufficient joint ventures.
Electronic Contract Manufacturing
In the fall of 1999 we signed a contract with Lockheed Martin in the United
States to fabricate and test fire control consoles for the Canadian "Victoria
Class" submarine retrofit program. Preparations were carried out in this
quarter to commence the fabrication in the second quarter. The contract is
expected to be completed in the fall of 2000.
We expect to expand our electronic contract manufacturing business with
important customers like Lockheed Martin, as well as those in the offshore oil
and gas, transportation and communication industries.
Subsequent Event
- ----------------
On April 20, 2000 the United States Securities and Exchange Commission approved
our Form SB-1 registration statement. Northstar is now a reporting issuer
pursuant to the Securities Exchange Act of 1933. As well, a 1,000,000
common share offering was registered, two hundred thousand of which had been
previously placed. The offering will constitute new financing for Northstar.
Results of Operations
- ---------------------
Comparisons of the three months ended March 31, 2000 with the three months
ended March 31, 1999.
Revenue for the three month period ended March 31, 2000 was $155,414 compared
to $56,123 of revenue recorded during the same period of the prior year. This
increase was created by an increase in NETMIND system sales, including our
first sales to a Russian company. Gross profits increased from $23,309 (41.5%)
in the prior period to $81,605 (52.5%)in the current period. The percentage
increase was created by a reduction in component costs for the NETMIND system
production and increased efficiency in production operations.
Cash used in operations was ($47,611) in the three month period ended March 31,
2000 compared to ($153,909) in the three month period ended March 31, 1999.
This decrease was due to net loss reduction of $52,940 coupled with a decrease
in cash applied to non-working capital items.
Comparison of Financial Position at March 31, 2000 with December 31, 1999
- -------------------------------------------------------------------------
Financing activities resulted in a net infusion of $14,064 in the three month
period ended March 31, 2000 compared to a net infusion of $243,686 in the three
month period ended March 31, 1999. As well, cash at March 31, 2000 was $17,020
compared with $39,454 at December 31, 1999. This was because there were
no private placements in the current period whereas there were private
placements in the prior period.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2000 current assets totaled $264,704 compared to $231,350 at
December 31, 1999. A decrease in cash of $22,434 was offset by an increase of
$30,388 in inventories. Current liabilities grew from $160,119 in the prior
period to $220,005 in the current period. This growth primarily resulted from
increases of $63,145 in payables and accruals. This increase was created
partially by the growth in inventories.
The company expects to complete a private placement of $800,000 before
September 30, 2000. These funds would be used for marketing and promotion of
products, business development, production of products and operating capital.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No change since previous filing.
Item 2. Changes in Securities.
No change since previous filing.
Item 3. Defaults Upon Senior Securities.
No change since previous filing.
Item 4. Submission of Matters To a Vote of Security Holders.
No change since previous filing.
Item 5. Other Information.
No change since previous filing.
Item 6. Exhibits and Reports on Form 8-K.
No change since previous filing.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Northstar Electronics, Inc.
(Registrant)
May 15, 2000
By: /s/ Wilson Russell
Dr. Wilson Russell, PhD
President
Principal Financial Officer
