NORTHSTAR ELECTRONICS INC - Quarter Report: 2020 March (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2020

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

For the transition period from: ________ to _________

333-90031

Commission file number

Northstar Electronics, Inc.

Exact name of small business issuer as specified in its charter

Delaware

33-0803434

State or other jurisdiction

of organization

IRS Employee incorporation

or Identification No.

2020 General Booth Blvd, Unit 230,

Virginia Beach, VA, USA 23454

Address of principal executive offices

(780) 660 0937

Issuer's telephone number

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No[ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated Filer [ ]	Accelerated Filer [ ]
Non-accelerated filer [X]	Smaller reporting Company [X]
(Do not check if a smaller reporting company)	Emerging growth company [ ]

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

[ ]Yes [X] No

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

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

Yes[ ] No [ ] Not Applicable

Applicable only to corporate issuers:

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

Common shares as of September 30, 2020: 127,838,231

Transitional Small Business Disclosure Format (check one):

Yes [ ] No [X]

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Interim Consolidated Balance Sheets	4
Interim Consolidated Statements of Operations	5
Interim Consolidated Statement of Changes in Stockholders’ Deficit	6
Interim Consolidated Statements of Cash Flows	7
Notes to the Interim Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis or Plan of Operation.	10
Item 3. Controls and Procedures	11
PART II - OTHER INFORMATION	12
Item 1. Legal Proceedings.	12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	12
Item 3. Defaults Upon Senior Securities.	12
Item 4. Submission of Matters to a Vote of Security Holders.	12
Item 5. Other Information.	12
Item 6. Exhibits.	12
SIGNATURES	13

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Balance Sheets

U.S. Dollars

	March 31 2020		December 31 2019
	unaudited		audited
Assets

Current
Cash	$	33,204	$	40,261
Total assets	$	33,204	$	40,261

Liabilities

Current
Accounts payable and accrued liabilities	$	1,235,792	$	1,220,792
Loans payable		442,916		442,916
Due to director		614,928		616,159
Legal liability		2,861,441		3,100,221
Total liabilities		5,155,077		5,380,088

Stockholders’ Deficit
Authorized:
200,000,000 Common shares with a par value of $0.0001 each
20,000,000 Preferred shares with a par value of $0.0001 each
Issued and outstanding:
127,838,231 Common shares (127,838,231 - December 31, 2019)		12,784		12,784
597,716 Preferred series A, B and C shares (597,716 - December 31, 2019)		404,299		404,299
Additional paid-in capital		8,608,875		8,608,875
Accumulated deficit		(14,147,831)		(14,365,785)
Total stockholders’ deficit		(5,121,873)		(5,339,827)
Total liabilities and stockholders’ deficit	$	33,204	$	40,261

Nature of operations and going concern (note 1)

Subsequent event (note 5)

See notes to the interim consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Statements of Operations

Three Months Ended March 31

Unaudited

U.S. Dollars

	2020		2019

EXPENSES
Administration	$	15,000	$	15,750
Professional fees		2,126		13,298
Management fees		-		30,000
Engineering		-		11,250
Rent		2,250		2,658
Investor relations		-		3,375
Office		1,910		1,918
Foreign exchange (gain) loss		(263,484)		57,887
Interest		24,244		24,165
Total expenses		(217,954)		160,301

Net income (loss) for the period	$	217,954	$	(160,301)

Basic and diluted gain (loss) per common share	$	0.00	$	(0.00)

Weighted average number of shares outstanding		127,838,231		127,838,231

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Statement of Changes in Stockholders’ Deficit

Three Months Ended March 31, 2020

Unaudited

U.S. Dollars

	Number of Shares	Par Value	Additional Paid-In Capital	Accumulated Deficit	Preferred Shares	Total Stockholders’ Deficit

Balance December 31, 2019	127,838,231	$ 12,784	$ 8,608,875	$ (14,365,785)	$ 404,299	$ (5,339,827)
Net income (loss)	-	-	-	(217,954)	-	(217,954)
Balance March 31, 2020	127,838,231	$ 12,784	$ 8,608,875	$ (14,147,831)	$ 404,299	$ (5,121,873)

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Interim Consolidated Statements of Cash Flows

Three Months Ended March 31

Unaudited

U.S. Dollars

	2020		2019

Operating Activities
Net income (loss)	$	217,954	$	(160,301)
Items not involving cash
Foreign exchange (gain) loss		(263,024)		34,218
Accrued interest		24,244		24,165
Changes in non-cash working capital
Changes in operating assets and liabilities		13,769		72,133
Net cash used in operating activities		(7,057)		(29,785)

Decrease in cash		(7,057)		(29,785)
Cash, beginning		40,261		170,831

Cash, ending	$	33,204	$	141,046

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2020

Unaudited

U.S. Dollars

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

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

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

These unaudited consolidated interim financial statements have been prepared by management in accordance with GAAP for interim financial information, are condensed and do not include all disclosures required for annual financial statements. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company’s audited consolidated financial statements filed as part of the Company’s December 31, 2019 Form 10-K.

The Company is in the process of regenerating its operations. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year. The accompanying interim consolidated financial statements have been prepared assuming the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the three months to March 31, 2020 the Company incurred a net cash outflow of $7,057 and at March 31, 2020 had a working capital deficiency of $5,121,873.

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

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

2. RELATED PARTY TRANSACTIONS

a)The amount of $614,928 (December 31, 2019 - $616,159) due to a director of the Company has no specific terms of repayment, is non-interest bearing and unsecured.

b)The Company accrued management fees of $nil in total to a director of the Company for his services as an officer of the Company during the three months ended March 31, 2020 (2019: $30,000).

3. CONTINGENCIES

During 2000 to 2008, the Company’s former subsidiaries Northstar Technical Inc. (“NTI”) and Northstar Network Ltd. (“NNL”) received funding from Atlantic Canada Opportunities Agency (“ACOA”) to fund their projects. In 2013, ACOA filed claims against NTI, NNL and the Company for repayments of advances due to events of default. The advance and interests ACOA claims totaled CAD$3,079,475. In accordance with agreements signed between NTI, NNL and the Company, the Company was jointly and severally liable for the obligations. Further, the claim amount bears a daily interest of CAD$358 from February 15, 2013 to settlement. During the three months ended March 31, 2020, the Company recorded interest expenses of $24,244 (2019: $24,165).

4. NEW ACCOUNTING PRONOUNCEMENTS

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

5. SUBSEQUENT EVENT

In April 2020, 1,495,000 warrants expired unexercised.

In September 2020, another 13,134,208 warrants expired unexercised.

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

The following discussion should be read in conjunction with the accompanying unaudited consolidated financial information for the three month periods ended March 31, 2020 and March 31, 2019 prepared by management and the consolidated financial statements for the year ended December 31, 2019 as presented in its annual Form 10K as filed.

Special Note Regarding Forward Looking Statements

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

The Company’s Services

We intend to build our own systems in the civilian aviation sector. The Company is working on plans to obtain world rights to a single engine turbo prop airplane with industrial applications. If successful, we intend to market the airplane internationally and provide Maintenance, Repair and Overhaul (MRO) services in close proximity to customers. The Company’s wholly owned subsidiary, National Five Holding Ltd, is a 95% shareholder of Northstar Sealand Enterprises Ltd (NSEL). The constituent parts of NSEL has experience in working on certified commercial aircraft and government military contracts, and has access to an established aircraft parts manufacturing and assembly facility.

Results of Operations

Comparison of the three months ended March 31, 2020 with the three months ended March 31, 2019.

The net income for the three-month period ended March 31, 2020, was $217,954 compared to a net loss of $160,301 for the three months ended March 31, 2019. The increase in net operating result was in part due to foreign exchange fluctuations.

Comparison of Financial Position at March 31, 2020 with March 31, 2019

The Company’s working capital deficiency at March 31, 2020 was $5,121,873, with current liabilities of $5,155,077, which are in excess of current assets of $33,204. At December 31, 2019 the Company had a working capital deficiency of $5,339,827.

Critical Accounting Policies and Estimates

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to our annual financial statements at December 31, 2019. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

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

Liquidity and Capital Resources

Cash outflow for the first quarter ended March 31, 2020 was $7,057 compared to an outflow of cash of $29,785 in the comparative prior quarter March 31, 2019. In the quarter, the Company received $0 ($0 in the comparative prior quarter) from equity funding and received $0 (received $0 in the comparative quarter) long term debt leaving cash on hand at March 31, 2020 of $33,204 compared to cash on hand of $40,261 at December 31, 2019. Until the Company receives revenues from new contracts it will be dependent upon equity and loan financings to compensate for the outflow of cash anticipated from operations.

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

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

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Based on the evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of the date of this Quarterly Report on Form 10-Q, our chief executive officer and chief financial officer has concluded that our disclosure controls and procedures are designed to ensure that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner. The disclosure controls were not effective at March 31, 2020.

(b) Changes in internal controls

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.