[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES ACT
OF 1934
For the quarterly period ended June 30, 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
Six Months Ended June 30, 2000
(Unauditied)
INDEX Page
----- ----
Part I
Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets at June 30, 2000
and December 31, 1999 1
Consolidated Statements of Operations Three Months
and Six Months Ended June 30, 2000 and June 30, 1999 2
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 2000 3
Consolidated Statements of Cash Flows Six Months Ended
June 30, 2000 and June 30, 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)
================================================================================
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------
Assets
Current
Cash $17,030 $39,454
Receivables 656,291 105,609
Inventory and work-in-progress 103,880 79,938
Prepaid expenses 6,137 6,349
--------------------------------------------------------------------------------
Total Current Assets 783,338 231,350
Property and Equipment 32,418 26,746
--------------------------------------------------------------------------------
Total Assets $815,756 $258,096
================================================================================
Liabilities
Current
Accounts payable and accrued liabilities $631,772 $100,547
Loans payable 13,886 15,296
Current portion of long-term debt 43,901 44,276
--------------------------------------------------------------------------------
Total Current Liabilities 689,559 160,119
Long-Term Debt 478,387 501,114
Due to Cabot Management Limited 62,090 74,600
Due to Director 113,532 84,848
--------------------------------------------------------------------------------
Total Liabilities 1,343,568 820,681
--------------------------------------------------------------------------------
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 7,618,181 shares 762 760
Additional Paid-In Capital 1,000,969 972,271
Stock Subscriptions 10,000 10,000
Other Comprehensive Income 32,371 13,554
Deficit (1,571,914) (1,559,170)
--------------------------------------------------------------------------------
Total Stockholders' Equity (527,812) (562,585)
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $815,756 $258,096
--------------------------------------------------------------------------------
NORTHSTAR ELECTRONICS INC.
Consolidated Statements of Operations
Three Months and Six Months Ended June 30
(Unaudited)
(U.S. Dollars)
================================================================================
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------
Revenue $736,264 $117,987 $891,678 $175,180
Costs of goods sold 528,375 54,797 602,184 88,245
--------------------------------------------------------------------------------
Gross Profit 207,889 63,190 289,494 86,935
Other Income 2,263 444 3,276 4,183
--------------------------------------------------------------------------------
210,152 63,634 292,770 91,118
--------------------------------------------------------------------------------
Expenses
Salaries 84,980 47,808 161,183 127,606
Office 20,572 9,775 31,296 23,702
Professional fees 17,930 8,595 40,870 23,744
Rent 14,464 7,469 24,677 14,445
Value of Director's
uncompensated services 7,500 0 15,000 0
Travel 5,137 735 7,162 5,248
Interest 4,119 6,008 12,560 11,934
Telephone 3,935 1,395 6,290 3,745
Management fees 1,103 3,185 4,624 10,057
Amortization 926 1,194 1,852 2,356
--------------------------------------------------------------------------------
160,666 86,164 305,514 222,837
--------------------------------------------------------------------------------
Net Income (Loss) for Period $49,486 $(22,530) $(12,744) $(131,719)
================================================================================
Net Income (Loss) Per Share $ 0.01 $ (0.01) $ (0.02) $ (0.02)
================================================================================
Weighted Average Number of
Common Shares Outstanding 7,608,094 7,406,679 7,606,288 6,651,368
NORTHSTAR ELECTRONICS INC.
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 2000
(U.S. Dollars)
(Unaudited)
================================================================================
Additional Stock Other Accumu- Total
Paid-In Subscr- Comprehensive lated Stockholder
Shares Amount Capital iptions Income Deficit Equity
--------------------------------------------------------------------------------
Balance Dec.
31, 1999 7,604,481 $760 $972,271 $10,000 $13,554 $(1,559,170) $(562,585)
Net loss for
six months 0 0 0 0 0 (12,744) (12,744)
Value of
director's
uncompensated
services 0 0 15,000 0 0 0 15,000
Other
comprehensive
income 0 0 0 0 18,817 0 18,817
Issuance of
Common stock
for cash 13,700 2 13,698 0 0 0 13,700
--------------------------------------------------------------------------------
Balance June
30, 2000 7,618,181 $762 $1,000,969 $10,000 $32,371 $(1,571,914) $(527,812)
================================================================================
NORTHSTAR ELECTRONICS INC.
Consolidated Statement of Cash Flows
Six Months Ended June 30
(Unaudited)
(U.S. Dollars)
--------------------------------------------------------------------------------
2000 1999
================================================================================
Operating Activities
Net loss $(12,744) $(131,719)
Adjustments to reconcile net loss to
net cash used by operating activities
Amortization and depreciation 1,852 2,356
Value of director's uncompensated services 15,000 0
Changes in operating assets and liabilities (47,193) (265,512)
--------------------------------------------------------------------------------
Net Cash Used by Operating Activities (43,085) (394,875)
--------------------------------------------------------------------------------
Investing Activity
Acquisition of property and equipment (6,936) (11,795)
--------------------------------------------------------------------------------
Financing Activities
Issuance of common stock 13,700 563,000
Repayment of long-term debt (9,096) (16,819)
Advances from (repayment to) Cabot Management Limited (3,860) 6,630
Advances from director 8,036 30,500
--------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 8,780 583,311
--------------------------------------------------------------------------------
Effect of Foreign Currency Translation on Cash 18,817 0
--------------------------------------------------------------------------------
Inflow (Outflow) of Cash (22,424) 176,641
Cash, Beginning of Period 39,454 1,238
--------------------------------------------------------------------------------
Cash, End of Period $17,030 $$177,87
================================================================================
NORTHSTAR ELECTRONICS INC.
Notes to Consolidated Financial Statements
Three Months and Six Months Ended June 30, 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 filed 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 June 30, 2000 and December 31, 1999 and the consolidated
results of operations and the consolidated statement of cash flows for the
three months and six months ended June 30, 2000. The results of operations for
the three months and six months ended are not necessarily indicative of the
results to be expected for the entire fiscal year.
2. COMMON STOCK
During the three months ended June 30, 2000, 13,700 common stock was issued for
cash.
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 and six month
periods ended June 30, 2000 and June 30, 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. NOAA recently specified
the NETMIND system in its Statement of Requirements for a new research vessel
to be constructed.
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 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. Prefabrication was carried out in this
quarter with first console delivery expected in the third 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
----------------
There was no reportable subsequent event.
Results of Operations
---------------------
Comparison of the three months ended June 30, 2000 with the three months ended
June 30, 1999.
Revenue for the three month period ended June 30, 2000 was $736,264 compared to
$117,987 of revenue recorded during the same period of the prior year. This
increase was created by an increase in NETMIND system sales and the activities
of the Lockheed Martin contract. Gross profits increased from $63,190 (53.6%) in
the prior period to $207,889(28.2%)in the current period. The percentage
decrease was created by high component costs associated with the Lockheed Martin
contract.
Net income for the three month period ended June 30, 2000 was $49,486 compared
to ($22,530) in the three months ended June 30, 1999. This marks the first
quarter in the company's history that a profit has been
realized.
Comparison of the six months ended June 30, 2000 with the six months ended June
30, 1999
--------------------------------------------------------------------
Revenue for the six month period ended June 30, 2000 was $891,678 compared to
$175,180 of revenue recorded during the same period of the prior year. This
increase was created by an increase in NETMIND system sales and the activities
of the Lockheed Martin contract. Gross profits increased from $86,935 (49.6%)
in the prior period to $289,494 (32.5%) in the current period. The percentage
decrease was created by high component costs associated with the Lockheed Martin
contract.
Net income (loss) for the six month period ended June 30, 2000 was ($12,744)
compared to ($131,719) in the six months ended June 30, 1999.
Cash used in operations was ($43,085) in the six month period ended June 30,
2000 compared to ($394,875) in the six month period ended June 30, 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 June 30, 2000 with December 31, 1999
-------------------------------------------------------------------------
Financing activities resulted in a net infusion of $8,780 cash in the six month
period ended June 30, 2000 compared to a net infusion of $583,311 cash in the
six month period ended December 31, 1999. As well, cash at June 30, 2000 was
$17,030 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 June 30, 2000 current assets totaled $783,338 compared to $231,350 at
December 31, 1999. A decrease in cash of $22,424 was offset by an increase of
$23,942 in inventories. Current liabilities grew from $160,119 in the prior
period to $689,559 in the current period. This growth primarily resulted from
high costs associated with the Lockheed Martin contract.
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.
Issued 13,700 shares of common stock for cash $13,700.
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)
August 02, 2000
By: /s/ Wilson Russell
Dr. Wilson Russell, PhD
President
Principal Financial Officer
