[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from n/a to n/a
Commission file number: 333-90031
Northstar Electronics, Inc.
(Exact name of small business issuer as specified in
its charter)
Delaware #33-0803434
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.
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NORTHSTAR ELECTRONICS, INC.
Consolidated Financial Statements
Nine Months Ended September 30, 2000
U.S. Dollars
Unaudited
Prepared by management
Consolidated Balance Sheets at September 30, 2000 and at December 31, 1999
Consolidated Statements of Operations for the Three Months and Nine Months
Ended September 30, 2000 and September 30, 1999
Consolidated Statements of Changes in Stockholders' Equity for the Nine Months
Ended September 30, 2000
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
2000 and for the Nine Months Ended September 30, 1999
Notes to Consolidated Financial Statements
NORTHSTAR ELECTRONICS, INC.
Consolidated Balance Sheets
Unaudited U.S. Dollars
September 30 December 31
2000 1999
------------ -----------
ASSETS
Current
Cash $22,800 $39,454
Receivables 270,110 105,609
Inventory and work in progress 203,258 79,938
Prepaid expenses 4,482 6,349
------- -------
Total Current Assets 500,650 231,350
Property and Equipment 32,580 26,746
------- -------
Total Assets $533,230 $258,096
-------- --------
LIABILITIES
Current
Accounts payable and accrued liabilities $355,854 $100,547
Loans payable - 15,296
Current portion of long term debt 46,679 44,276
Total Current Liabilities 402,533 160,119
Long term debt 460,369 501,114
Due to Cabot Management Limited 58,976 74,600
Due to Director 99,817 84,848
Total Liabilities 1,021,695 820,681
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
7,618,181 shares of common stock 762 760
Additional paid in capital 1,008,469 972,271
Stock subscriptions 10,000 10,000
Other comprehensive income 37,528 13,554
Deficit (1,545,224) (1,559,170)
----------- -----------
Total Stockholders' Equity (488,465) (562,585)
----------- -----------
Total Liabilities and Stockholders' Equity $533,230 $258,096
----------- -----------
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Operations
Three Months and Nine Months Ended September 30
Unaudited
U.S.Dollars
Three Months Nine Months
2000 1999 2000 1999
------------------- --------------------
Revenue $273,024 $137,521 $1,164,702 $312,701
Cost of goods sold 126,403 47,493 728,587 135,738
-------- -------- ---------- --------
Gross margin 146,621 90,028 436,115 176,963
Other income (2,262) 2,058 1,014 6,241
-------- -------- ---------- --------
144,359 92,086 437,129 183,204
-------- -------- ---------- --------
Expenses
Salaries 32,422 47,643 198,229 175,249
Office 9,706 22,585 41,002 46,287
Professional fees 7,124 17,772 47,994 41,516
Rent 11,126 6,044 35,803 20,489
Value of Director's
Uncompensated services 7,500 0 22,500 0
Travel and business
Development 32,094 4,463 39,256 9,711
Interest 12,640 7,598 25,200 19,532
Telephone 4,252 1,820 10,542 5,565
Management fees 0 5,028 0 15,085
Amortization 805 1,073 2,657 3,429
Bad debt 0 0 0 87,185
Development costs 0 0 0 46,430
-------- -------- ---------- --------
117,669 114,026 423,183 470,478
-------- -------- ---------- --------
Net income (loss) for period $26,690 $(21,940) $13,946 $(287,274)
---------------------------------------------------------------------------
Net income (loss) per share $0.004 $(0.003) $0.002 $(0.043)
---------------------------------------------------------------------------
Weighted average number
of common shares
outstanding 7,616,822 7,406,679 7,609,951 6,651,368
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 2000
Unaudited
U.S. Dollars
Other
Additional Stock Compre- Accumu- Total
Paid in Subscr- hensive 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 income
(loss) for
nine
months - - - - - 13,946 13,946
Value of
director's
uncompensated
services - - 22,500 - - - 22,500
Other
comprehensive
income - - - - 23,974 - 23,974
Issuance of
common stock
for cash 13,700 2 13,698 - - - 13,700
--------------------------------------------------------------------------
Balance
Sept. 30,
2000 7,618,181 $762 $1,008,469 $10,000 $37,528 $(1,545,224) $(488,465)
--------------------------------------------------------------------------
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 2000
Unaudited
U.S.Dollars
2000 1999
------- ----------
Operating Activities
Net income (loss) $13,946 $(287,274)
Adjustments to reconcile net income (loss) to net
cash used by operating activities
Amortization 2,657 3,429
Value of director's uncompensated services 22,500 0
Changes in operating assets and liabilities (43,540) 346,382
------- ----------
Net cash provided by (used by) operating activities (4,437) 62,537
------- ----------
Investing Activity
Acquisition of property and equipment ( 8,491) (10,760)
------- ----------
Financing Activities
Issuance of common stock 13,700 0
Increase (repayment) of long term debt (40,745) 8,314
Repayment to Cabot Management Limited (15,624) (14,213)
Advances from (repayment to) director 14,969 (7,320)
------- ---------
Net cash (used by) provided by financing activities (27,700) (13,219)
------- ---------
Effect of foreign currency translation on cash 23,974 228
------- ---------
Inflow (outflow) of cash (16,654) 38,786
Cash, beginning of period 39,454 807
------- ---------
Cash, end of period $22,800 $39,593
------- ---------
NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Three Months and Nine Months Ended September 30, 2000
Unaudited
U.S. Dollars
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 inter company balances and transactions are eliminated. The
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 with NTI described below. NTI has developed a communications
technology that can send information from one place in the ocean to another
place. The Company's business activities are conducted principally in Canada
and these financial statements are prepared in accordance with generally
accepted accounting principles in the United States with all figures translated
int United States dollars for reporting purposes.
On January 26, 1999 the Company completed the acquisition of 100% of the shares
of NTI. The Company, with the former shareholders of NTI receiving a majority
of the total shares then issued and outstanding, effected the merger through
the issuance of 4,901,481 shares of common stock from treasury. 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 consolidated financial
statements reflect all adjustments necessary to present fairly the Company's
consolidated financial position at September 30, 2000 and the consolidated
results of operations and the consolidated statement of cash flows for the
three months and nine months then ended. The results of operations for the
three months and nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for the entire fiscal year.
2. COMMON STOCK
During the three months ended September 30, 2000, no common stock was issued.
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 nine month
periods ended September 30, 2000 and September 30, 1999 and the audited
consolidated financial statements for the twelve months ended December 31,
1999 as presented in the Form SB-1 (effective date 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. Actual results may materially differ from any forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures and constantly changing
technology and market acceptance of the company's products and services.
The company undertakes no obligation to publicly release the result of any
revisions to these forwarding statements, which may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Northstar's Services
------------------
The Company's operations currently are those of its wholly owned subsidiary
Northstar Technical Inc. (NTI) and it is in this context that 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. We believe the
contract award put our product and our technology 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 and also placed a new purchase order
under the 1999 contract.
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 the company'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
national 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 to fabricate and test fire control
consoles for a submarine retrofit program. Prefabrication was carried out
in the second quarter with fabrication continuing in this third quarter. The
contract is expected to be completed in the spring of 2001.
We expect to expand our electronic contract manufacturing business with our
current customers, as well as with future customers in the offshore oil and
gas, transportation and communication industries.
Subsequent Event
----------------
There were no reportable subsequent events.
Results of Operations
---------------------
Comparison of the three months ended September 30, 2000 with the three months
ended September 30, 1999.
Revenue for the three month period ended September 30, 2000 was $273,024
compared to $137,521 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
$90,028 (65.5%) in the prior period to $146,621 (53.7%) in the current
period. The percentage decrease was created by high component costs
associated with the console contract.
Net income for the three month period ended September 30, 2000 was $26,690
compared to a loss of ($21,940) in the three months ended September 30, 1999.
This marks the first time in the Company's history that a profit has been
realized in two consecutive quarters.
Comparison of the nine months ended September 30, 2000 with the nine months
ended September 30, 1999
--------------------------------------------------------------------
Revenue for the nine month period ended September 30, 2000 was $1,164,702
compared to $312,701 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 console contract. Gross profits increased from
$176,963 (56.6%) in the prior period to $436,115 (37.4%) in the current
period. The percentage decrease was created by high component costs
associated with the console contract.
Net income for the nine month period ended September 30, 2000 was $13,946
compared to a loss of $(287,274) for the nine month period ended September
30, 1999. This marks the first time in the Company's history that a profit
has been realized in a nine month period.
Cash used in operations was ($4,437) in the nine month period ended September
30, 2000 compared to cash provided by operations of $62,537 in the nine month
period ended September 30, 1999. This decrease was due to net loss reduction
of $301,220 coupled with an increase in cash invested in receivables and
inventories.
Comparison of Financial Position at September 30, 2000 with September 30, 1999
-------------------------------------------------------------------------
Financing activities resulted in a net outflow of $16,654 cash in the nine
month period ended September 30, 2000 compared to a net infusion of $38,786
cash in the nine month period ended September 30, 1999. As well, cash at
September 30, 2000 was $22,800 compared with $39,593 at September 30, 1999.
This decrease was due to the everyday operations of the business.
Liquidity and Capital Resources
-------------------------------
At September 30, 2000 current assets totaled $500,650 compared to $231,350 at
December 31, 1999. Receivables increased $164,501 and inventories increased
$123,320 over the nine month period ended September 30, 1999. These increases
were due mainly to the increased activity on the console contract. Current
liabilities increased $242,414 in the nine months primarily due to the
costs associated with the console contract.
The company expects to complete the private placement of 800,000 common shares
for net proceeds of $800,000.00 before December 31, 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)
November 02, 2000
By: /s/ Wilson Russell
Dr. Wilson Russell, PhD
President
Principal Financial Officer
