Item 1. Condensed Consolidated Financial Statements
NORTHSTAR ELECTRONICS, INC.
Condensed Consolidated Balance Sheets
U.S. Dollars
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|
September 30
2019
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December 31
2018
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unaudited
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|
audited
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|
Assets
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|
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|
|
|
|
|
|
|
|
|
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Current
|
|
|
|
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Cash
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$
|
53,545
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|
$
|
170,831
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|
|
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|
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$
|
53,545
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|
$
|
170,831
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|
|
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|
|
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Liabilities
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|
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Current
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|
|
|
|
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|
Accounts payable and accrued liabilities
|
$
|
1,155,457
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|
$
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1,110,456
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|
Loans payable
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|
442,916
|
|
|
442,916
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|
Due to director
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|
588,019
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|
|
521,074
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|
Legal liability
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|
3,015,012
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|
|
2,855,868
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|
|
|
5,201,404
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4,930,314
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Stockholders’ Deficit
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|
|
|
|
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Authorized:
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|
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|
|
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200,000,000 Common shares with a par value of $0.0001 each
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|
|
|
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20,000,000 Preferred shares with a par value of $0.0001 each
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Issued and outstanding:
|
|
|
|
|
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127,838,231 Common shares (127,838,231 - December 31, 2018)
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12,784
|
|
|
12,784
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|
597,716 Preferred shares (597,716 - December 31, 2018)
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|
404,299
|
|
|
404,299
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|
Additional paid-in capital
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|
8,608,875
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|
|
8,608,875
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|
Accumulated deficit
|
|
(14,173,817)
|
|
|
(13,785,441)
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|
|
|
(5,147,859)
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|
|
(4,759,483)
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|
|
|
|
|
|
|
|
|
$
|
53,545
|
|
$
|
170,831
|
Nature of operations and going concern (Note 1)
See notes to the condensed consolidated financial statements
4
NORTHSTAR ELECTRONICS, INC.
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2019 and 2018
Unaudited
U.S. Dollars
|
|
Three Months
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|
Nine Months
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|
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2019
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|
2018
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2019
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2018
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EXPENSES
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Management
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$
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30,000
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$
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30,000
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|
$
|
90,000
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|
$
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90,000
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|
Consulting fees
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3,550
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|
|
10,000
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|
|
3,550
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|
|
10,000
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|
Administration
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|
15,000
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|
|
15,000
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|
|
45,750
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|
|
45,000
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|
Professional fees
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|
2,042
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|
|
5,625
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|
|
15,111
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|
21,375
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Foreign exchange
(gain) loss
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|
(36,382)
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|
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50,523
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91,107
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(90,850)
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Engineering and
Development
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15,125
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28,000
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|
|
37,750
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88,000
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|
Investor relations
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|
-
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|
|
695
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|
|
6,895
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|
|
1,945
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|
Marketing and sales
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|
-
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|
|
12,000
|
|
|
-
|
|
|
36,000
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|
Office and
Administration
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|
5,774
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|
|
4,405
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|
|
25,718
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|
|
25,094
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|
Interest expense
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|
24,165
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|
|
25,100
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|
|
72,495
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|
|
75,809
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|
Total expenses
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59,274
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|
|
181,348
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|
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388,376
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|
|
302,373
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|
|
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|
|
|
|
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|
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Net loss for the period
|
$
|
(59,274)
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|
$
|
(181,348)
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|
$
|
(388,376)
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|
$
|
(302,373)
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and diluted gain
(loss) per common share
|
$
|
(0.00)
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|
$
|
(0.00)
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|
$
|
(0.00)
|
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding
|
|
127,838,231
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|
|
103,292,315
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|
|
127,838,231
|
|
|
100,167,910
|
See notes to the condensed consolidated financial statements
5
NORTHSTAR ELECTRONICS, INC.
Condensed Consolidated Statement of Changes in Stockholders’ Deficit
Nine Months Ended September 30, 2019
Unaudited
U.S. Dollars
|
|
Number
of
Shares
|
|
Par
Value
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Preferred
Shares
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
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Balance December 31, 2018
|
127,838,231
|
|
$ 12,784
|
|
$ 8,608,875
|
|
$ (13,785,441)
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|
$ 404,299
|
|
$ (4,759,483)
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|
Net loss
|
-
|
|
-
|
|
-
|
|
(388,376)
|
|
-
|
|
(388,376)
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|
Balance September 30, 2019
|
127,838,231
|
|
$ 12,784
|
|
$ 8,608,875
|
|
$ (14,173,817)
|
|
$ 404,299
|
|
$ (5,147,859)
|
See notes to the condensed consolidated financial statements
6
NORTHSTAR ELECTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2019 and 2018
Unaudited
U.S. Dollars
|
|
2019
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|
2018
|
|
|
|
|
|
|
|
|
Operating Activities
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|
|
|
|
|
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Net loss
|
$
|
(388,376)
|
|
$
|
(302,373)
|
|
Items not involving cash
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|
|
|
|
|
|
Foreign exchange loss (gain)
|
|
86,649
|
|
|
(92,953)
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|
Non-cash interest
|
|
72,495
|
|
|
75,809
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|
Non-cash consulting
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-
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10,000
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Changes in non-cash working capital
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|
|
|
|
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Changes in operating assets and liabilities
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|
45,000
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|
169,000
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|
Net cash used in operating activities
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|
(184,232)
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(140,517)
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Financing Activities
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|
|
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|
Issuance of common shares for cash (net of costs)
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|
-
|
|
|
33,440
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|
Loans payable
|
|
-
|
|
|
8,625
|
|
Increases in due to directors
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|
66,945
|
|
|
82,985
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|
Net cash provided by financing activities
|
|
66,945
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|
|
125,050
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|
|
|
|
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|
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Decrease in cash
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|
(117,286)
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|
|
(15,467)
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|
Cash, beginning
|
|
170,831
|
|
|
16,438
|
|
|
|
|
|
|
|
|
Cash, ending
|
$
|
53,545
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|
$
|
971
|
|
|
|
|
|
|
|
|
Non-cash Transactions
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|
|
|
|
|
|
Shares issued for services
|
$
|
-
|
|
$
|
10,000
|
|
|
$
|
-
|
|
$
|
10,000
|
See notes to the condensed consolidated financial statements
7
NORTHSTAR ELECTRONICS, INC.
Notes to Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2019
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 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, 2018 Form 10-K.
The results of operations for the nine months ended September 30, 2019 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 nine months ended September 30, 2019 the Company incurred a net loss of $388,376 and at September 30, 2019 had a working capital deficiency of $5,147,859.
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. These factors raise substantial doubt about the ability of the Company to continue as a going concern.
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.
8
2. SHARE CAPITAL
COMMON STOCK
The Company issued nil shares of common stock during the nine months ended September 30, 2019.
WARRANTS
|
|
Exercise
|
|
Number of Warrants
|
|
Expiry Date
|
Price
|
|
2019
|
|
2018
|
|
Open (1)
|
$ 0.50
|
|
389,170
|
|
389,170
|
|
Open (1)
|
$ 0.75
|
|
389,170
|
|
389,170
|
|
Open (2)
|
$ 0.25
|
|
51,600
|
|
51,600
|
|
April 20, 2019
|
$ 0.04
|
|
-
|
|
2,500,000
|
|
May 18, 2019
|
$ 0.05
|
|
-
|
|
1,495,000
|
|
September 30, 2020
|
$ 0.05
|
|
13,134,208
|
|
13,134,208
|
|
Total outstanding and exercisable
|
|
|
13,964,148
|
|
19,786,648
|
|
Weighted average outstanding life of
warrants (years)
|
|
|
0.94 - Open
|
|
1.35 - Open
|
(1)These warrants were issued in 2005. The expiry date of the warrants are six months after the closing bid price for the common stock of the Company has been over $0.65 and $1.00 per share respectively for five consecutive trading days.
(2)These warrants were issued in 2008 and they do not have an expiry date.
3. LEGAL LIABILITY
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 accordance with agreements signed between NTI, NNL and the Company, the Company was jointly and severally liable for the obligations. 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. Further, the claim amount bears a daily interest of CAD$358 from February 15, 2013 to settlement. During the nine months ended September 30, 2019, the Company recorded interest expenses of $72,495 (2018: $75,809).
4. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2019, the Company accrued management fees payable of $90,000 (2018: $90,000) in total to a director of the company.
At September 30, 2019, there is a balance of $588,019 (December 31, 2018: $521,074) owing to a director of the Company for management fees and expense reimbursement. The amount is included in current liabilities.
9
5. 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.
6. SUBSEQUENT EVENT
There have been no transactions outside of normal day to day activities subsequent to September 30, 2019.
10
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 and nine month periods ended September 30, 2019 and September 30, 2018 prepared by management and the audited consolidated financial statements for the twelve months ended December 31, 2018 as presented in the Company’s Form 10K and amendments 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 are now moving in a new direction whereby we intend to build our own systems in the civilian aviation sector. We believe that this affords improved control over the business outcomes compared to the contract manufacturing business.
The Company is working to purchase worldwide rights to a single engine Turbo Prop airplane with industrial applications from a subsidiary of a large international aerospace company. If successful, we intend to manufacture the airplanes and market them internationally and provide Maintenance, Repair and Overhaul (MRO) services in close proximity to customers. The main applications are Agricultural, Rapid Response Forest Fire Fighting and, most recently, Cloud Seeding. 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 have experience in working on certified commercial aircraft and government military contracts, and have access to an established aircraft parts manufacturing facility.
Results of Operations
Comparison of the three and nine months ended September 30, 2019 with the three and nine months ended September 30, 2018:
Gross revenues from all sources for the three month period ended September 30, 2019 were $0 compared to $0 in the comparative prior three month period. Gross revenues from all sources for the nine month period ended September 30, 2019 were $0 compared to $0 in the comparative prior nine month period. In prior years the Company earned modest consulting fees as the Company continued to reorganize its business.
11
There was a net loss for the three month period ended September 30, 2019 of $59,274 compared to a net loss of $181,348 for the three months ended September 30, 2018 due to a non cash recovery of foreign exchange. The net operations were otherwise comparable to the prior year as the Company continued to reduce office and administration expenses as well as engineering and marketing expenses. The effects on our operations were minimal and we were able to make meaningful advances in our efforts to purchase the rights to the airplane.
Comparison of Financial Position at September 30, 2019 with December 31, 2018
The Company’s working capital deficiency increased at September 30, 2019 to $5,147,859 with current liabilities of $5,201,404 which are in excess of current assets of $53,545. At December 31, 2018 the Company had a working capital deficiency of $4,759,483. See also legal liabilities, note 3 to the financial statements for the nine months ended September 30, 2019.
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, 2018. 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 nine months ended September 30, 2019 was $117,286 compared to an outflow of cash of $15,467 in the comparative prior nine months ended September 30, 2018. During the current period, the Company received $nil ($33,440 in the comparative prior period) from equity funding leaving cash on hand at September 30, 2019 of $53,545 compared to cash on hand of $971 at September 30, 2018. 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.
12