U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004
[ ] 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 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
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[ ]
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 [X]
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 August 5, 2004: 16,957,129
Transitional Small Business Disclosure Format (check one):
Yes [] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHSTAR ELECTRONICS, INC. Consolidated Financial Statements
Six Months Ended June 30, 2004 - U.S. Dollars
Unaudited - Prepared by management
Consolidated Balance Sheets at June 30, 2004 and at December 31, 2003
Consolidated Statements of Operations for the Three and Six Month Periods Ended
June 30, 2004
Consolidated Statements of Changes in Stockholders' Equity for the Six Months
Ended June 30, 2004
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
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 8K
SIGNATURES.
NORTHSTAR ELECTRONICS, INC.
Consolidated Balance Sheets
U.S. Dollars
|
June 30 |
December 31 |
|
2004 |
2003 |
ASSETS |
|
|
Unaudited |
|
|
Current |
|
|
Cash |
$283,831 |
$613,040 |
Receivables |
171,531 |
227,444 |
Inventory and work in progress |
182,716 |
161,602 |
Prepaid expenses |
19,731 |
11,148 |
Total Current Assets |
657,809 |
1,013,234 |
Intangible assets |
37,285 |
37,285 |
Property and Equipment |
86,962 |
118,956 |
Total Assets |
$782,056 |
$1,169,475 |
|
|
|
LIABILITIES |
|
|
Current |
|
|
Accounts payable and accrued liabilities |
$179,131 |
$236,255 |
Loans payable |
50,000 |
58,905 |
Deferred revenue |
- |
143,309 |
Current portion of long term debt |
91,198 |
83,527 |
|
|
|
Total Current Liabilities |
320,329 |
521,996 |
Long Term Debt |
561,417 |
514,192 |
Due to Cabot Management Limited |
80,301 |
85,268 |
Due to Director |
10,613 |
44,255 |
Total Liabilities |
972,660 |
1,165,711 |
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 |
|
|
15,957,129 shares of common stock |
1,596 |
1,584 |
(15,838,074 December 31, 2003) |
|
|
Additional Paid in Capital |
3,476,323 |
3,423,191 |
Other Comprehensive Income |
(40,041) |
(82,373) |
Deficit |
(3,628,482) |
(3,338,638) |
Total Stockholders' Equity (Deficit) |
(190,604) |
3,764 |
Total Liabilities and Stockholders' Equity |
$782,056 |
$1,169,475 |
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Operations
Three Months and Six Months Ended June 30
Unaudited
U.S. Dollars
|
Three Months |
Six Months |
||
|
2004 |
2003 |
2004 |
2003 |
Sales |
$219,461 |
$200,183 |
$487,742 |
$588,897 |
Discounts |
23,023 |
53,771 |
42,696 |
104,242 |
|
|
|
|
|
Sales net of discounts |
$196,438 |
$168,665 |
$445,046 |
$491,783 |
Cost of goods sold |
73,741 |
19,383 |
220,297 |
168,296 |
|
|
|
|
|
Gross margin |
122,697 |
149,282 |
224,749 |
323,487 |
Recovery of research and development |
308,538 |
251,975 |
437,955 |
325,381 |
Other income |
4,207 |
4,127 |
12,635 |
4,651 |
|
435,442 |
405,384 |
675,339 |
653,519 |
|
|
|
|
|
Expenses
|
|
|
|
|
Salaries |
306,631 |
231,099 |
558,677 |
368,320 |
Financial consulting |
6,373 |
12,526 |
12,573 |
102,689 |
Professional fees |
4,567 |
7,784 |
13,540 |
23,091 |
Advertising and marketing |
32,800 |
33,369 |
46,814 |
55,423 |
Rent |
28,265 |
25,538 |
58,280 |
49,760 |
Research and development |
22,498 |
45,812 |
38,777 |
45,812 |
Investor relations |
26,630 |
33,253 |
62,381 |
56,236 |
Office and administration |
30,655 |
31,605 |
49,865 |
48,224 |
Travel and business development |
29,915 |
18,600 |
70,562 |
25,759 |
Interest on debt
|
3,840 |
8,355 |
7,146 |
16,706 |
Telephone and utilities |
12,991 |
13,097 |
23,725 |
23,788 |
Amortization |
8,350 |
2,693 |
16,940 |
8,098 |
Proposal development costs |
- |
2,346 |
- |
2,346 |
Repairs and maintenance |
2,151 |
290 |
5,255 |
3,265 |
Transfer agent fees |
312 |
773 |
648 |
1,808 |
Total expenses |
515,978 |
467,140 |
965,183 |
831,325 |
Net loss for period |
$ (80,536) |
$ (61,756) |
$(289,844) |
$(177,806) |
Net loss per share |
$ (0.01) |
$ (0.00) |
$ (0.01) |
$ (0.01) |
Weighted average number of shares |
||||
outstanding |
15,922,951 |
12,799,104 |
15,838,074 |
13,156,432 |
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2004
Unaudited
U.S. Dollars
|
|
|
|
Other Compre- hensive Income |
Accumu- lated Deficit |
Total Stockholder Equity (Deficit) |
|
|
|
Additional Paid in Capital |
|||
|
|
|
||||
|
Shares |
Amount |
||||
Balance December 31, 2003 |
|
|
|
|
|
|
15,838,074 |
$1,584 |
$3,423,191 |
$(82,373) |
$(3,338,638) |
$ 3,764 |
|
Net loss for six months |
|
|
|
|
|
|
- |
- |
- |
- |
(289,844) |
(289,844) |
|
Other comprehensive credits (debits) |
|
|
|
|
|
|
- |
- |
- |
42,332 |
- |
42,332 |
|
Issuance of common stock for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
119,055 |
12 |
53,132 |
- |
- |
53,144 |
|
|
|
|
|
|
|
|
Balance June 30, 2004 |
15,957,129 |
$1,596 |
$3,476,323 |
$(40,041) |
$(3,628,482) |
$(190,604) |
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Cash Flows
Six Months Ended June 30
Unaudited
U.S. Dollars
|
2004 |
2003 |
Operating Activities |
|
|
Net income (loss) |
$(289,844) |
$(177,806) |
Adjustments to reconcile net income (loss) to net cash used by operating activities |
|
|
Amortization |
16,940 |
8,098 |
Issuance of common stock for services |
53,144 |
110,710 |
Changes in operating assets and liabilities |
(251,917) |
(222,828) |
Net cash provided by (used by) operating activities |
(471,677) |
(281,826) |
|
|
|
Investing Activity |
|
|
Recovery of or (Acquisition of) property and equipment |
|
|
10,925 |
(12,495) |
|
|
|
|
Financing Activities |
|
|
Issuance of common stock – net proceeds |
- |
585,947 |
Increase (repayment) of long term debt |
71,177 |
121,012 |
Due to Cabot Management Limited |
(2,645) |
11,513 |
Advances from (repayment to) director |
36,557 |
(127,109) |
Net cash (used) provided by financing activities |
105,089 |
591,363 |
Effect of foreign currency translation on cash |
26,454 |
(63,743) |
|
|
|
Inflow (outflow) of cash |
(329,209) |
233,299 |
Cash, beginning of period |
613,040 |
117,690 |
|
|
|
Cash, end of period |
$ 283,831 |
$ 350,989 |
|
|
|
Supplemental information |
|
|
Interest paid |
$7,146 |
$16,706 |
Shares issued for services |
119,055 |
254,164 |
Corporate income taxes paid |
$0 |
$0 |
NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2004
Unaudited
U.S. Dollars
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 as follows: 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.
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.
These unaudited consolidated interim 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, 2003 Form 10-KSB.
In the opinion of the Company’s management, this consolidated interim financial information reflects all adjustments necessary to present fairly the Company’s consolidated financial position at June 30, 2004 and the consolidated results of operations and the consolidated cash flows for the three and six months then ended. At June 30, 2004, 24% of the Company’s revenues were generated from one contract (June 30, 2003, 52% of the Company’s revenues were generated from one contract) – the Company is continually marketing its services for follow on contracts.
The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results to be expected for the entire fiscal year.
COMMON STOCK
During the six months ended June 30, 2004, the following shares of common stock were issued for:
Services: 60,455 shares fairly valued at $30,774 at the market value of those
services
Services: 58,600 shares fairly valued at $22,370 at the market value of those
services
Subsequent to June 30, 2004 the Company issued 1,000,000 common shares to Wilson Russell, President and a director of the Company, pursuant to the exercising of a stock option, for proceeds to the Company of $100.
LONG TERM DEBT
Balance due Atlantic Canada Opportunities Agency ("ACOA") December 31, 2003 |
$597,719 |
Increase in ACOA funding during the first quarter | 86,420 |
Foreign exchange translation adjustment | (16,281) |
Repayment of ACOA funding during the second quarter | (15,243) |
Balance due ACOA June 30, 2004 | 652,615 |
Less current portion | 91,198 |
$561,417 |
CONTINGENCIES
(i) The Company is a defendant in a lawsuit commenced against them in 1999 by their former master distributor. The former distributor has alleged that the Company has interfered with the ability of the former distributor to sell products. The Company has filed a counter claim for monies owing by the former distributor to the Company.
(ii) The Company is contingently liable to repay US$1,088,585 in assistance received under the Atlantic Innovation Fund. The assistance is repayable annually commencing August 1, 2005 at the rate of 5% of gross revenues from sales of products resulting from the Aquacomm research and development project. Gross revenues are to be calculated for the fiscal year immediately preceding the due date of the respective payment. Repayment is to continue until the assistance is repaid in full. The Company has recorded $nil sales of Aquacomm related products to June 30, 2004
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 six month periods ended June 30, 2004 and 2003 prepared by management and the audited consolidated financial statements for the twelve months ended December 31, 2003 as presented in the Form 10KSB.
Although the Company has experienced a net loss this quarter, it continues to expend 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. During the quarter ended June 30, 2004 the Company commenced marketing its on board 3D graphical display of trawl status information and has improved both in house hardware and software development systems.
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, through its subsidiaries, is an underwater sonar technology developer, an electronic contract manufacturer, and a systems developer & integrator for the marine industry, defense, and homeland security sectors.
Underwater Sonar Products and Technologies
a - The NETMIND System
The Company’s first underwater sonar product based on our core technology was the NETMIND system. NETMIND’s market is the world’s commercial fishing industry and government oceanic research agencies. Historically, sales of our products have been divided equally between these two market sectors. The east and west coasts of North America provide a market base for NETMIND. One of our largest customers has been the United States National Oceanic and Atmospheric Administration (NOAA). The NETMIND system is sold in Ireland, Spain, Denmark, Germany, Sweden, Portugal, Italy, the United Kingdom, France, the United States, and Canada. Potential markets also exist in South America, Europe, Africa, Asia, New Zealand and Australia.
NETMIND is both a conservation tool as well as an efficiency tool. Electronic sensors attached to a fishing trawl measure the height and width of the net opening, the water temperature, the depth of the net and the amount of fish caught plus other parameters. The sensor information is transmitted via a wireless communications link back to the ship.
NETMIND helps prevent over fishing and allows fishermen to catch fewer fish and still make profits. This gives regulators flexibility in reducing quotas when attempting to conserve limited fish stocks.
Sales for NETMIND increased 37% this quarter over the comparative quarter last year but remain somewhat slower than expected. Sales have not expanded in Europe as anticipated. However, an upswing in activity over the next six months is expected with the introduction of new NETMIND products over the next few months.
b - The AQUACOMM Project
The AQUACOMM project is a $2.5 Million in house research and development program for the development of new, leading edge multiple application sonar technologies and products for a variety of industries. These include defense, offshore oil and gas, commercial fishing, oceanography, marine environment and marine transportation. To date, the Company has expended $1,721,160 pursuant to this program. Among the new developments from the AQUACOMM project are a general purpose acoustic receiver, spread spectrum acoustic communications and improved sensors. The first new commercial product is expected to be released in the next quarter.
The Company intends to use its Venture Technology Business Model to maximize the success of the new AQUACOMM technologies. In this model, our core technology is invested in partnerships with established companies in the different industry sectors.
c – Defense Sonar System
The Company completed a contract for a major defense contractor to design and construct prototype sonar hardware for a defense protection system for Navy ships and ports. This system, called an Intruder Detection System (IDS), can detect marine threats from terrorists in small surface boats, terrorist divers, and underwater vehicles carrying explosives. Sophisticated feature-based classification algorithms separate the threat from marine life that may exist at the installation locale. Data processing software is used to reject swimmer targets that are not on a threat trajectory. Northstar successfully designed and built the mechanical housing, hydrophones, and sonar for the IDS prototype systems. We expect that Homeland Security and Anti-Terrorism will become a major part of our business over the next five years with production of these and other systems.
Electronic Contract Manufacturing
As an electronic contract manufacturer, Northstar offers build-to-print manufacturing. This involves manufacturing a specific product for a client who supplies the production drawings and parts list. Northstar is attempting to leverage our in-house and Network affiliate capabilities, in addition to our large pool of vendor suppliers, to be competitive and capable in a wide range of manufacturing activity; from precision machining of parts for aerospace customers to delivery of complete retail electronic products. An example of this type of contract is a portable hand-held electronic asset management device. The expected production volume is a minimum of several thousand per year. To ensure cost-competitiveness, Northstar, if awarded the contract, plans to outsource the circuit board manufacturing but would carry out final assembly and testing in-house. In this type of contract, Northstar also provides follow-on engineering support services to ensure continuous product improvement, cost savings and profit improvements, thus forging strong, mutually beneficial relationships with our customers, and ensuring follow-on business.
As an electronic contract manufacturer Northstar successfully carried out a contract for Lockheed Martin, Manassas, Virginia to fabricate and test command and control consoles for Navy submarines. This contract was successfully completed in early 2001. A follow-on contract was received and completed in the fall of 2001. We have signed a manufacturing license agreement with Lockheed Martin under which Northstar can manufacture consoles for Lockheed Martin on projects they may have anywhere in the world.
We are attempting to expand our electronic contract manufacturing business with our current customers, as well as with customers in the offshore oil and gas, transportation and communication industries.
Systems Development & Integration
Billions of dollars in contracts are awarded each year to large defense contractors. Northstar decided several years ago that we had existing skill sets and could develop them to become a subcontractor to the large prime contractors.
The Company is developing its approach, through Northstar Network Ltd., to securing and executing large defense contracts by bringing together affiliate companies. The overall capability, which is substantial, is presented to the prime contractors.
System Integration activity involves Northstar’s management of the project, integration of components and subassemblies into a complete system, completion of the factory acceptance testing and shipment of the completed unit(s) to the customer. The delivered product could include top-level standalone systems, or subassemblies of a larger package. Design and assembly drawings are normally provided by the prime contractor. An example of one of this type of contract is the production of the previously mentioned submarine command and control consoles. In this contract we integrated over two hundred components, supplied from twenty six separate sub-contractors or suppliers, into single integrated systems. The Intruder Detection System (IDS) project for maritime anti-terrorism is another example of an application where Northstar was prime contractor and subcontracted out some of the work to gain efficiencies and improve profitability.
Potential Opportunities
Near Term
Intruder Detection System (IDS) – Northstar is pursuing military work to produce these systems for a major defense contractor.
Large Volume Contract Manufacturing – Northstar is pursuing a contract to manufacture an electronic device for a customer. Initial orders are expected in the next few months.
E-Learning/Courseware – Northstar is pursuing a contract to supply E-Learning/Courseware services to a UK company.
Maritime Helicopter Project (MHP) – The MHP is a $2.4 billion contract recently awarded to a team lead by Sikorsky. Northstar is pursuing various contract opportunities on the MHP and several positions in support of the Full Flight Simulator for the MHP.
Submarine Command and Control Consoles - Northstar has bid on contracts to provide various interactive consoles to be used in the training of submariners.
Longer Term
Northstar is pursing contract opportunities on twelve other military projects, including the supply of fiber optic assemblies for the Joint Strike Fighter (JSF) airplane and the supply of components on the targeting-pod for the F-18 aircraft.
Results of Operations
Comparison of the three and six months ended June 30, 2004 with the three and six months ended June 30, 2003:
Gross revenues from sales, miscellaneous and research and development recovery for the three month period ended June 30, 2004 were $532,206 compared to $478,538 in the comparative prior period. Gross revenues from sales, miscellaneous and research and development recovery for the six month period ended June 30, 2004 were $938,332 compared to $926,057 in the comparative prior period.
Sales revenue for the three month period ended June 30, 2004 was $219,461 compared to $200,183 of sales revenue recorded during the same period of the prior year. This comparative increase is the result of increased activity in the fishing industry, which impacted on the sales of the NETMIND systems. Sales revenue for the six month period ended June 30, 2004 was $487,742, comparable to $588,897 in the prior period. Gross profits decreased from $323,487 (66%) in the prior period to $224,749 (46%) in the current period.
The net loss for the three month period ended June 30, 2004 was $(80,536) compared to a net loss of $(61,756) for the three months ended June 30, 2003. Over this past quarter, the Company continued to invest 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.
Travel and business development costs rose to $70,562 for the six months from $25,759 for the comparative prior period ended June 30, 2003 due to the expanded pursuit of defense contracts.
The Company is actively pursuing contracts for its sonar capabilities in military and anti terrorist applications as well as the offshore petroleum industry.
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, Spain and the Scandinavian countries. The system upgrades are being 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 new products. This accounts for an increase in salaries to $558,677 for the six months ended June 30, 2004 compared to salaries of $368,320 for the comparative prior six months ended June 30, 2003. The increased activity resulted in an increase of cost recovery to $437,955 compared with $325,381 recovered in the comparative prior period.
Comparison of Financial Position at June 30, 2004 with December 31, 2003
The Company’s working capital position at June 30, 2004 decreased to $337,480 with current assets of $657,809 which are in excess of current liabilities of $320,329. At December 31, 2003 the Company had working capital of $491,238.
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 financial statements at December 31, 2003. 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 which 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
The Company has increased its shareholder’s deficit as a result of its efforts to increase its business activity and customer base. Cash outflows used in the first quarter ended March 31, 2004 was $(261,657) compared to an outflow of cash of $(67,552) for the three months ended June 30, 2004. In the prior comparative quarter the Company received $545,531 ($nil in the current quarter) from equity funding and received $182,597 in the prior comparative quarter from the proceeds of long term debt (repaid $25,549 in the current quarter). As a result, operations have used cash during the quarter, leaving cash on hand at June 30, 2004 of $283,831 compared to cash on hand of $613,040 at December 31, 2003 and $350,989 at June 30, 2003. Until the Company receives its next contract and/or increases its product sales revenue, it will be dependent upon equity and loan financings to compensate for the outflow of cash anticipated from operations.
The Company is preparing a private placement offering pursuant to Regulations D and S. Any funds so raised are targeted primarily for product development, inventory for contract manufacturing, marketing and general working capital. Additional government support of approximately $1,000,000 is also expected pursuant to the Aquacomm project. At this time, no commitment for funding has been made to the Company.
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 a date within 90 days of the filing date of this Quarterly Report on Form 10-QSB, our chief executive officer and chief financial officer have 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.
(b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation.
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 |
3,182 |
January, 2004 |
services valued at $3,274 |
57,273 |
March, 2004 |
services valued at $27,500 |
8,600 |
April, 2004 |
services valued at $3,870 |
50,000 |
June, 2004 |
services valued at $18,500 |
Subsequent to June 30, 2004 the Company issued 1,000,000 common shares to Wilson Russell, President and a director of the Company, pursuant to the exercising of a stock option, for proceeds to the Company of $100.
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.
August 5, 2004 Northstar Electronics, Inc.
(Registrant)
By: /s/ Wilson Russell
Wilson Russell, PhD, President and Principal Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 W.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, the undersigned Chief Executive Officer and chief Financial Officer, or persons fulfilling similar functions, each certify:
That the financial information included in this Quarterly Report fairly presents in all material respects the financial condition and results of operations of the Company as of June 30, 2004 and for the periods presented in the report; and
That the Quarterly Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities exchange Act of 1934
By: /s/ Wilson Russell
Title: Chief Executive Officer and Chief Financial Officer
Date: August 5, 2004
I, Wilson Russell, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Northstar Electronics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 14 and 15d – 14) for the registrant and have:
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
5. I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
6. I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: August 5, 2004 /s/ Wilson Russell________________
Wilson Russell, Chief Financial Officer and Director