[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from n/a to n/a
333-90031
Commission file number
Northstar Electronics, Inc.
Exact name of small business issuer as specified in its charter
Delaware
State or other jurisdiction of organization
#33-0803434
IRS Employee incorporation or 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
Not Applicable
Former name, former address and former fiscal year, if changed since last report
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING 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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NORTHSTAR ELECTRONICS, INC.
Consolidated Financial Statements
Three Months Ended March 31, 2002
U.S. Dollars
Unaudited
Prepared by management
Consolidated Balance Sheets at March 31, 2002 and at December 31, 2001
Consolidated Statements of Operations for the Three Months Ended March 31, 2002
Consolidated Statements of Changes in Stockholders' Equity for the Three Months
Ended March 31,2002
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002
Notes to Consolidated Financial Statements
NORTHSTAR ELECTRONICS, INC.
Consolidated Balance Sheets
Unaudited
U.S. Dollars
March 31 December 31
ASSETS 2002 2001
----------- -----------
Current
Cash $ 69,994 $ 39,699
Receivables 97,978 139,453
Inventory and work in progress 158,706 107,257
Prepaid expenses 5,417 5,398
----------- -----------
Total Current Assets 332,095 291,807
Property and Equipment 89,708 91,903
----------- -----------
Total Assets $421,803 $383,710
----------- -----------
LIABILITIES
Current
Accounts payable and accrued liabilities $284,032 $325,075
Loans payable - 6,778
Current portion of long term debt 215,000 211,208
----------- -----------
Total Current Liabilities 499,032 543,061
Long term debt 451,862 428,808
Due to Cabot Management Limited 57,325 56,249
Due to Director 37,735 24,401
----------- -----------
Total Liabilities 1,045,954 1,052,519
----------- -----------
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
8,919,872 shares of common stock
(7,942,009 December 31,2001) 892 794
Additional paid in capital 1,469,820 1,146,447
Other comprehensive income 26,274 37,308
Deficit (2,121,137) (1,853,358)
----------- -----------
Total Stockholders' Equity (Deficit) (624,151) (668,809)
----------- -----------
Total Liabilities and Stockholders' Equity $421,803 $383,710
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Operations
Three Months Ended March 31
Unaudited
U.S.Dollars
Three Months
2002 2001 2000
--------- -------- --------
Sales $197,252 $353,036 $155,414
Cost of goods sold 110,788 107,926 73,809
--------- -------- --------
Gross margin 86,464 245,110 81,605
Other income 6,160 1,602 1,013
--------- -------- --------
92,624 246,712 82,618
--------- -------- --------
Expenses
Salaries 114,637 64,900 76,203
Financial consulting 93,288 - -
Management services 28,603 - -
Professional fees 19,819 51,286 22,940
Value of Director's
uncompensated services - 23,250 7,500
Advertising and marketing 14,013 18,226 3,521
Rent 23,759 17,552 10,213
Investor relations 13,716 - -
Research and development - 15,607 -
Office 11,038 11,298 10,724
Travel and business development 9,350 8,991 2,026
Interest on debt 9,570 7,067 5,517
Telephone and utilities 8,400 4,648 2,355
Proposal development costs 7,012 - -
Repairs and maintenance 4,032
Amortization 1,840 1,596 926
Bank charges and interest 1,056 146 2,924
Transfer agent 270 - -
--------- -------- --------
360,403 224,567 144,849
--------- -------- --------
Net income (loss) for period $(267,779) $22,145 $(62,231)
--------- -------- --------
Net income (loss) per share $(0.03) $0.00 $(0.01)
Weighted average number of
shares outstanding 8,267,963 7,681,737 7,604,481
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 2002
Unaudited
U.S. Dollars
Other
Additional Compre- Accumu- Total
Paid in hensive lated Stockholder
Shares Amount Capital Income Deficit Equity (Deficit)
--------------------------------------------------------------------------------
Balance
December 31,
2001 7,942,009 $794 $1,146,447 $37,308 $(1,853,358) $(668,809)
Net loss
for
three months - - - - (267,779) (267,779)
Other
comprehensive
(debits) - - - (11,034) - (11,034)
Value of
uncompensated
services - - - - - -
Issuance of
common stock
for cash 855,363 86 286,025 - - 286,111
Issuance of
common stock
for services 122,500 12 37,348 - - 37,360
--------------------------------------------------------------------------------
Balance
March 31,
2002 8,919,872 $892 $1,469,820 $26,274 $(2,121,137) $(624,151)
-------------------------------------------------------------------------------
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Cash Flows
Three Months Ended March 31, 2002
Unaudited
U.S.Dollars
March 31
2002 2001 2000
---- ---- ----
Operating Activities
Net income (loss) $(267,779) $22,145 $(62,231)
Adjustments to reconcile net
income (loss) to net cash
used by operating activities
Amortization 1,840 1,596 926
Issuance of common stock
for services 37,360 48,022 0
Uncompensated services - 23,250 7,500
Changes in operating assets
and liabilities (22,022) (52,865) 4,680
-------- -------- --------
Net cash provided by (used by)
operating activities (250,601) 42,148 (49,125)
-------- -------- --------
Investing Activity
(Acquisition) disposal of
property and equipment 355 (7,420) -
Acquisition of transducer
Technology (32,000) - -
-------- -------- --------
(31,645) (7,420) -
-------- -------- --------
Financing Activities
Issuance of common shares
for cash 286,111 - -
Increase (repayment) of
long term debt 23,054 (39,790) (14,006)
Due to Cabot Management
Limited 1,076 (4,220) (8,650)
Advances from (repayment to)
Director 13,334 (18,887) 36,720
-------- -------- --------
Net cash (used by) provided by
financing activities 323,575 (62,897) 14,064
-------- -------- --------
Effect of foreign currency
translation on cash (11,034) 18,897 12,627
-------- -------- --------
Inflow (outflow) of cash 30,295 (9,272) (22,434)
Cash, beginning of period 39,699 125,602 39,454
-------- -------- --------
Cash, end of period $69,994 $116,330 $17,020
-------- -------- --------
Supplemental information
Interest paid $9,570 $7,067 $5,517
Shares issued for services $37,360 $48,022 $0
Corporate income taxes paid $0 $0 $0
NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Three Months Ended March 31, 2002
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 subsidiaries Northstar Technical
Inc. ("NTI") and Northstar Network Ltd. ("NN"). 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. The
Company's business activities are conducted principally in Canada but these
financial statements are prepared in accordance with accounting principles
generally accepted in the United States 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 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 by
management in accordance with accounting principles generally accepted in
the United States 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, 2001 Form 10-KSB.
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 March 31, 2002 and the
consolidated results of operations and the consolidated statement of cash
flows for the three months then ended. The results of operations for the
three months ended March 31, 2002 are not necessarily indicative of the
results to be expected for the entire fiscal year.
2. COMMON STOCK
During the three months ended March 31, 2002, the following shares of
common stock were issued:
For services 122,500
For cash 855,363
--------
977,863
The above common shares issued for services received represent fair value
at the market value of those services.
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, 2002 and March 31, 2001 prepared by management
and the audited consolidated financial statements for the twelve months
ended December 31, 2001 as presented in the Form 10KSB.
Although the Company has experienced a net loss this quarter, it has
expended considerable effort in developing new business in new markets
for NETMIND and for new design and contract manufacturing work in an effort
to materially benefit the future business of the Company.
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
The Company is a Multiple Applications wireless technology developer, a
defense electronics manufacturer and a defense systems integrator.
The Company's operations currently are those of its wholly owned
subsidiaries Northstar Technical Inc. (NTI) and Northstar Network Ltd (NN)
and it is in this context that the company's services are described.
We have three main activities: underwater wireless communications,
electronic contract manufacturing and system integration.
Underwater Wireless Communications
In the communications area, our first product is the NETMIND system for
the commercial fishing industry which utilizes our advanced sonar and
underwater wireless technology.
The Company intends to build on the success of the NETMIND system by
initiating its 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 by
seeking 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 a worldwide network of
business contacts.
Electronic Contract Manufacturing
In the fall of 1999 we signed a contract with Lockheed Martin, Manassas,
Virginia to fabricate and test control consoles for Navy submarines.
This contract was successfully completed in early 2001 and a follow-on
contract was received from Lockheed Martin which was completed in the
fall of 2001. We expect to continue 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.
System Integration
The Company has created a novel approach to securing and executing large
defense contracts by bringing together affiliate companies. The overall
capability, which is substantial, is presented to the prime contractors.
To date, a memorandum of understanding has been signed with Lockheed
Martin Canada to jointly pursue the $2.0billion Maritime Helicopter
Project.
Subsequent Events
Subsequent to March 31, 2002 the Company issued 672,548 shares of common
stock for cash of $215,000.
Results of Operations
Comparison of the three months ended March 31, 2002 with the three months
ended March 31, 2001.
Revenue for the three month period ended March 31, 2002 was $197,000
compared to $353,036 of revenue recorded during the same period of the prior
year. This comparative decrease is the result of the completion of one of
the Lockheed Martin contracts in early 2001. Gross profits decreased from
$245,110 (69%) in the prior period to $86,464 (44%) in the current period.
The decrease was due to the fact that the costs associated with the final
phase of the console contract were lower than the costs to produce NETMIND
systems. Therefore, in the absence of a console contract in the first quarter
of 2002, the gross profit percentage is lower than the prior year's first
quarter. The Company continues to negotiate for subsequent material contracts
with Lockheed Martin and others.
The net loss for the three month period ended March 31, 2002 was $(267,779)
compared to net income of $22,145 for the three months ended March 31, 2001.
Over this past quarter, the Company has invested considerable resources in
seeking out additional and future contract manufacturing opportunities and
is confident that the efforts will return positive results to the Company
over the ensuing months and years.
During the quarter the Company expended $42,000 on the development of its
Network business concept. To date, Network has generated no revenues.
Network continues to pursue the $2.0 B Maritime Helicopter Project as one
of Lockheed Martin Canada's partners. This contract should be awarded in
2003. Network is also actively attempting to secure a first contract on
the Joint Strike Fighter program in the United States, having already
signed Memoranda of Interest with Lockheed Martin and four of its partner
companies. A large thrust of Network recently has been in the
anti-terrorism field. Specifically, Network is working towards projects
that utilize its world class sonar and marine engineering expertise.
A highly significant event for the Company in this quarter was the
acquisition of specialized sonar and transducer technology used in the
NETMIND system. Northstar is now producing its own sonar transducers at a
lower cost to the Company than when they were purchased outside of the
Company. This new capability shortens the time it takes to develop
enhancements to Company products or new sensors and will positively affect
future gross margins. This new technology will also allow the Company to
expand its acoustic capabilities into military and anti terrorist
applications. We are actively pursuing contracts in these areas and we
expect to see results later this year.
During the quarter the Company increased expenditures on the marketing and
advertising of its NETMIND system and expanded awareness of the NETMIND
system through trade shows and a growing distribution network including
Ireland and the Scandinavian countries. The new Bottom Contact Sensor was
well received by our fishing industry customers and by government
researchers.
The Company continued on its research and development program towards
extending its underwater wireless communication technology into additional
applications and expended further effort in developing proposals for
financing of a major product development program.
Comparison of Financial Position at March 31, 2002 with March 31, 2001
The Company's reduced its working capital deficit at March 31, 2002 to
$(166,937) with current liabilities of $499,032 in excess of current assets
of $332,095. At December 31, 2001 the Company had a working capital deficit
of $251,254.
Liquidity and Capital Resources
The Company has increased its Shareholder's Deficit as a result of its
efforts to expand its current markets and to secure future contract work.
During the quarter the Company issued 855,363 shares of common stock for cash
of $286,111 pursuant to a Regulation S offering. Subsequent to March 31, 2002
the Company received $215,000 for a total of $501,111 pursuant to that same
offering.
Subsequent to March 31, 2002 the Company released a private placement unit
offering pursuant to Regulations D and S for up to 700,000 units at $0.35 per
unit. Each unit consists of one common share plus two warrants: one A warrant
exercisable at $0.50 to acquire one common share and a B warrant exercisable
at $0.75 to acquire one share.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No change since previous filing.
Item 2. Changes in Securities.
Options Granted Date Exercise Price Expiry Date
--------------- ---- -------------- -----------
None - - -
Common Stock Issued Date Consideration
------------------- ---- -------------
21,759 January 31,2002 $7,949
169,982 February 20,2002 $50,995
16,722 February 28,2002 $5,017
2,930 March 01,2002 $796
415,622 March 05,2002 $124,687
56,468 March 12,2002 $16,940
123,200 March 19,2002 $36,960
18,306 March 21,2002 $5,492
151,274 March 26,2002 $46,032
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.
May 11, 2002 Northstar Electronics, Inc.
(Registrant)
By: /s/ Wilson Russell
Dr. Wilson Russell, PhD
President
Principal Financial Officer