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 EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 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 Number or Employee Identification No.
SUITE # 410 - 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[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): [ ]Large accelerated filer [ ]Accelerated filer [X]NON-ACCELERATED FILER
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 JUNE 30, 2010:
35,142,688
Transitional Small Business Disclosure Format (check one): Yes[] NO[X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS UNAUDITED - PREPARED BY MANAGEMENT
NORTHSTAR ELECTRONICS, INC. Consolidated Financial Statements Consolidated
Balance Sheets at June 30, 2010 and at December 31, 2009 Consolidated Statements
of Operations for the Three and Six Months Ended June 30, 2010 and 2009
Consolidated Statements of Changes in Stockholders' Equity for the Six Months
Ended June 30, 2010 Consolidated Statements of Cash Flows for the Three and Six
Months Ended June 30, 2010 and 2009 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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
SIGNATURES
NORTHSTAR ELECTRONICS, INC. Consolidated Balance Sheets - U.S. Dollars
JUNE 30
December 31
(US Dollars) 2010 2009
UNAUDITED audited
ASSETS
CURRENT
Cash and cash equivalents $ 40,892 $ 108,486
Accounts receivable 112,555 208,973
Investment tax credits receivable - -
Inventory 128,322 132,367
Prepaid expenses 128,338 44,156
--------------------------------
410,107 493,982
DEFERRED CONTRACT COSTS 79,732 193,464
INTANGIBLE ASSET 12,328 14,333
EQUIPMENT 48,131 57,835
--------------------------------
$ 550,298 $ 759,614
================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 1,753,248 $ 1,623,875
Loans payable 188,409 193,161
Due to Cabot Management Limited 51,195 52,078
Due to Directors 1,117,079 1,205,743
Deferred revenue 159,717 273,518
Current portion of long-term debt 967,661 1,339,568
--------------------------------
4,237,309 4,687,943
LONG-TERM DEBT 651,495 708,490
--------------------------------
4,888,804 5,396,433
================================
STOCKHOLDERS' DEFICIT
Authorized:
100,000,000 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:
35,142,688 Common shares (31,939,070 - December 31, 2009) 3,504 3,194
408,000 Preferred series A shares (348,000 - December 31, 2009) 342,772 285,600
ADDITIONAL PAID-IN CAPITAL 5,651,382 5,174,173
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (390,423) (457,939)
ACCUMULATED DEFICIT (9,945,741) (9,641,847)
---------------------------------
(4,338,506) (4,636,819)
---------------------------------
$ 550,298 $ 759,614
=================================
See notes to the consolidated financial statements
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2010 and 2009
Unaudited
U.S.Dollars
Three Months Six Months
-------------- ---------------
2010 2009 2010 2009
---------------------------------------------------
Sales $953,099 $879,565 $2,239,071 $1,382,396
Cost of goods sold 686,244 677,368 1,676,082 995,744
--------------------------------------------------
Gross margin 266,855 202,197 562,989 386,652
Recovery of development costs 0 0 0 0
Other income (expense) (7,122) (12,442) 0 0
--------------------------------------------------
259,733 189,755 562,989 386,652
--------------------------------------------------
EXPENSES
Salaries 215,263 201,989 432,186 377,499
Management and administration fees 45,000 45,000 90,000 93,090
Financial consulting 4,500 0 6,000 5,000
Professional fees 2,920 42,946 10,826 49,072
Rent 27,606 30,404 62,971 63,468
Research and development 0 0 0 0
Investor relations 16,802 0 23,552 12,500
Office and administration 33,140 30,436 70,857 57,428
Travel and business development 18,750 2,072 34,102 14,517
Interest on debt 83,031 89,565 100,992 168,282
Telephone and utilities 7,625 9,018 14,836 16,275
Amortization 4,715 28,800 9,595 31,934
Finance fees (19,994) 10,430 10,967 11,430
--------------------------------------------------
Total expenses 439,358 490,660 866,884 900,495
--------------------------------------------------
Net loss for period $(179,625) $(300,905) $(303,895) $(513,843)
===================================================
Net loss per share $ (0.01) $ (0.01) $ (0.00) $ (0.00)
===================================================
Weighted average number of shares
outstanding 33,629,875 30,322,737 34,358,568 30,171,273
=====================================================
See notes to the consolidated financial statements
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2010
Unaudited
U.S. Dollars
Additional Other
Paid in Comprehensive Accumulated Total Stockholder
Shares Amount Capital Income Deficit (Deficit)
-----------------------------------------------------------------------------------------------------------
Balance
December 31,
2009 31,939,070 $3,194 $5,174,173 $(457,939) $(9,641,846) $(4,922,418)
Net loss for
six months - - - - (303,895) (303,895)
Currency
translation
adjustment - - - 67,516 - 67,516
Issuance of
common stock:
- for conversion 160,000 16 32,812 - - 32,828
- for loan payable 30,000 3 6,597 - - 6,600
- for prepaid
expense 508,844 51 96,949 - - 97,000
- for cash 2,100,000 210 284,790 - - 285,000
- for services 304,774 30 56,061 - - 56,091
--------------------------------------------------------------------------------------------------------------
Balance
June 30,2010 35,042,688 $3,504 $5,651,382 $(390,423) $(9,945,741) $(4,681,278)
--------------------------------------------------------------------------------------------------------------
Series A shares of preferred stock -balance December 31, 2009 285,600
Series A shares of preferred stock - converted (32,828)
Series A shares of preferred stock - subscribed 90,000
-------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) June 30, 2010 $(4,338,506)
=============================================================================================================
See notes to the consolidated financial statements
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2010 and 2009
Unaudited
U.S.Dollars
2010 2009
Operating Activities
Net income (loss) $(303,895) $(513,843)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Amortization 9,595 31,934
Write down of deferred start up costs 113,698 30,167
Issuance of common stock for services 56,091 11,432
Changes in operating assets and liabilities 175,507 52,567
-------------------------
Net cash (used) provided by operating activities 50,996 (387,743)
-------------------------
Investing Activities
Property and equipment disposal (purchase) 1,197 (8,194)
-------------------------
Net cash (used) provided by investing activities 1,197 (8,194)
-------------------------
Financing Activities
Issuance of common shares for cash (net of costs) 375,000 61,500
Increase (repayment) of long term debt (405,761) 115,916
Advances from (repayment to) directors (86,727) 143,289
Net cash (used) provided by financing activities (117,488) 320,705
--------------------------
Effect of foreign exchange on translation (2,299) (72,076)
--------------------------
Inflow (outflow) of cash (67,594) (147,308)
Cash, beginning of period 108,486 210,348
--------------------------
Cash, end of period $ 40,892 $ 63,040
--------------------------
Supplemental information
Interest paid $ 100,992 $168,282
Shares issued for prepaid expense $ 97,000 $ 0
Shares issued for loan repayment $ 6,600 $ 0
Corporate income taxes paid $ 0 $ 0
See notes to the consolidated financial statements
NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2010
Unaudited
U.S. Dollars
1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN
These consolidated financial statements include the accounts of Northstar
Electronics, Inc. ("the Company") and its wholly owned subsidiaries Northstar
Technical Inc. ("NTI") and Northstar Network Ltd. ("NNL"). The Company was
incorporated May 11, 1998 in the State of Delaware and had no operations other
than organizational activities prior to the January 2000 merger with NTI described
as follows: On January 26, 2000 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 takeover resulting in the
consolidated financial statements including the results of operations of the
acquired subsidiary prior to the merger. All intercompany balances and
transactions are eliminated.
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, 2009 Form 10-K.
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, 2010 and the consolidated results of
operations and the consolidated cash flows for the six months then ended. For the
six months ended June 30, 2010: 100% of the Company's revenues were generated from
contracts with two major customers. The Company is continually marketing its
services for new and follow on contracts.
The results of operations for the six months ended June 30, 2010 are not
necessarily indicative of the results to be expected for the entire fiscal year.
The accompanying 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 six months to June 30, 2010 the Company incurred a net loss of $303,895 and at
June 30, 2010 had a working capital deficiency (an excess of current liabilities
over current assets) of $3,827,202 (December 31,
2009: $4,193,961), including $967,661 of long term debt due within one year
(December 31, 2009: $1,339,568).
Management has undertaken initiatives for the Company to continue as a going
concern, for example: the Company is negotiating to secure an equity financing in
the short term and is in discussions with several financing firms. The Company
also expects to increase revenues contract sales. As well, the Company continues
to seek manufacturing assembly contracts to increase revenue. These initiatives
are in recognition that the Company to continue as a going concern must generate
sufficient cash flow to cover its obligations and expenses. In addition,
management believes these initiatives can provide the Company with a solid base
for profitable operations, positive cash flows and reasonable growth. 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. SHARE CAPITAL
During the six months ended June 30, 2010 the following capital transactions
occurred:
COMMON STOCK
January 1 to March 31, 2010:
For services: 178,810 shares fairly valued at $32,191 - the market value of those
services
For cash: 1,100,000 shares fairly valued for cash of $160,000.
For conversion of Preferred shares: 160,000 fairly valued for cash of $32,828
April 1 to June 30, 2010:
For services: 125,964 shares fairly valued at $23,900 - the market value of those
services
For cash: 1,000,000 shares fairly valued for cash of $125,000.
For prepaid expenses: 508,844 shares fairly valued at $97,000 - the market value
of those expenses
For reduction of a loan payable: 30,000 shares fairly valued at $6,600 - the
amount of the loan repaid
PREFERRED STOCK
For cash: 408,000 series A shares of preferred stock for $342,772 (inclusive of
100,000 shares for $90,000 received during the three months ended March 31, 2010).
The preferred shares bear interest at 10% per annum paid semi annually not in
advance and are convertible to shares of common stock of the Company after two
years from receipt of funds at a 20% discount to the then current market price of
the Company's common stock. The preferred shares may be converted after six months
and before two years under similar terms but with a 15% discount to market. At
June 30, 2010 the Company had received $342,772 for 408,000 preferred shares but
had not issued the shares.
3. LONG TERM DEBT
Balance owing December 31, 2009 $2,048,058
Repayment (405,761)
Effect of foreign exchange on translation to US (23,141)
------------
Balance due June 30, 2010 1,619,156
Less current portion (967,661)
------------
$ 651,495
=============
4. REVENUE
Six months Six months
2010 2009
-------------------------
Revenue consists of:
Product sales $ 0 $ 39,393
Contract sales 2,239,071 1,343,003
Government assistance 0 0
Other (7,122) 0
--------------------------
$ 2,231,949 $ 1,382,396
=============================
5. 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 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. There has been no action from either side to date.
(ii) The Company is contingently liable to repay $1,997,144 in assistance
received under the Atlantic Innovation Fund. The assistance is repayable annually
at the rate of 5% of gross revenues from sales of products resulting from the
Company's Aquacom 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. At June 30, 2010 the Company has accrued $52,531 as repayable.
6. 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.
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, 2010 and June 30, 2009 prepared by management and the audited
consolidated financial statements for the twelve months ended December 31, 2009 as
presented in the Company's Form 10K as filed.
Although the Company has experienced a net loss this quarter, it continues to
expend effort to secure additional contracts for the manufacture and assembly of
military/government systems, submarine command and control consoles, multi-mode
fiber optic cables, precision, machined parts and other components for aerospace
and defense systems.
The Company believes that its overall business prospects look promising and
anticipates increased revenues in the near to medium future.
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,
a defense electronics contract manufacturer (CM) and a defense systems integrator
(DSI).
UNDERWATER SONAR PRODUCTS AND TECHNOLOGIES
A) PROJECT X
The company is seeking arrangements with Lockheed Martin Canada to market the
prototype units developed in conjunction with the original Lockheed development
team. Production of this unit is anticipated in 2011.
B) DEFENSE SONAR SYSTEMS
The Company is a subcontractor on Lockheed Martin's anti-terrorism Swimmer
Detection System (SDS). The SDS is a wide band high frequency sonar system
designed specifically to detect and classify underwater terrorist threats. The
design and technology is applicable to innovative military sonar products.
DEFENSE CONTRACT MANUFACTURING
The Company, with its updated facilities,completed further reviews for
opportunities on submarine console work from Lockheed Martin Manassas for
approximately 20 consoles. Final bid submission was made during the quarter with
anticipated contract award taking place in the following quarter. Separately, the
bid for component manufacture of aircraft access doors for new water bomber
aircraft construction moved to final stages.
The Company's wholly owned subsidiary, Northstar Network Ltd.,continued work
on the Master Purchase Order for the Wing Assembly Upgrade Components for the
P-3 ORION aircraft from Lockheed Martin Aeronautics totaling US$6,807,191.
Approximately two-thirds of this contract has been completed. The Company is
manufacturing components for new production service life extension kits for
this Lockheed Martin Service Life Extension Program. These components will
add more than 15,000 flying hours to each aircraft, representing 15 to 20
additional years of service for this critical maritime patrol and reconnaissance
resource.
In addition to the P3 Project, work was in full development for the
manufacture/assembly of the new prototype Machine Control Console for
L3 Communication MAPPS Ltd. for the Canadian Navy Frigate Upgrade program. The
first shipset was delivered during the quarter. Over 60 units will be
delivered under this contract.
SYSTEMS INTEGRATION
The Company continues to enhance its approach to securing and executing large
defense contracts by bringing together affiliate companies. The overall affiliate
capability, which is substantial, is presented to the prime contractors. Marketing
efforts continue in this area to broaden our exposure for manufacturing
opportunities.
The aforementioned P3 ORION Master Purchase Order and the L3 Communications MAPPS
Ltd. contract are examples of how Systems Integration works for us. In these
projects, six subcontractors carry out various tasks, with Northstar bringing all
component parts together for engineering, testing, quality control and delivery to
the customer.
RESULTS OF OPERATIONS
Comparison of the three and six months ended June 30, 2010 with the three and
six months ended June 30, 2009:
Gross revenues from sales, miscellaneous income and recovery of research and
development for the three month period ended June 30, 2010 were $945,977
compared to $867,123 in the comparative prior three month period. Gross revenues
from sales, miscellaneous income and recovery of research and development for
the six month period ended June 30, 2010 were $2,239,071 compared to $1,382,396
in the comparative prior six month period.
Sales revenue for the three month period ended June 30, 2010 was $953,099 (8%
increase) compared to $879,565 of sales revenue recorded during the same three
month period of the prior year. This comparative increase is the direct result
of the Lockheed Martin P3 and the L3 Communication MAPPS contracts. Sales
revenue for the six month period ended June 30, 2010 was $2,239,071 (62%
increase) comparable to $1,382,396 in the prior period. Gross margins decreased
3% from $386,652 (28%) in the prior six month period to $562,989 (25%) in the
current six month period.
The net loss for the three month period ended June 30, 2010 was $(179,625)
(40.3% decrease) compared to a net loss of $(300,905) for the three months ended
June 30, 2009. The reduction in the loss resulted from the small increase in
gross margin and further streamlining of operational expenditures during this
period.
Salaries increased to $432,186 for the six months ended June 30, 2010 compared
to salaries of $377,499 for the comparative prior six months ended June 30, 2009
as the Company expanded its workforce in anticipation of increased contract
sales. Salaries may increase with new projects anticipated in the aeronautics
area, commensurate with corresponding increases in revenues.
Travel and business development costs were $34,102 for the six months and
$14,517 for the comparative prior period ended June 30, 2009 as the Company
invested in travel to meetings to increase its customer awareness. Additional
travel costs were associated with production review requirements.
The Company is actively pursuing contracts for its sonar capabilities in
military and anti terrorist applications. For its efforts pursuing opportunities
in land-based military applications over the past year, on June 3, a Letter of
Intent was signed with DEW Engineering and Development of Ottawa, ON and our
subsidiary, Northstar Network Ltd. (NNL). This agreement provides for
collaboration between NNL and DEW on a number of Canadian defense projects with
potential expenditures up to $16M over the next several years for the
manufacture/assembly of material components for land-based, military armoured
vehicles.
In other manufacturing areas, the Company commenced production work for
mechanical locking devices for a marine design and supply company. Successful
completion of this work could open a new area of marine business development for
Northstar.
Cost recoveries of $nil are comparable to $nil recovered in the comparative
prior six month period.
COMPARISON OF FINANCIAL POSITION AT JUNE 30, 2010 WITH DECEMBER 31, 2009
The Company's working capital deficiency increased at June 30, 2010 to $3,827,202
with current liabilities of $4,237,309 which are in excess of current assets of
$410,107. At December 31, 2009 the Company had a working capital deficiency of
$2,424,049.
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,
2009. 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
the Company may undertake in the future, these estimates 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
The Company has increased its shareholders' deficit as a result of its efforts to
increase its business activity and customer base. Cash outflow for the six months
ended June 30, 2010 was $(67,594) compared to a cash outflow of $(147,308) in the
comparative prior six month period. During the six months ended June 30, 2010 the
Company received $375,000 from equity funding and paid out $405,761 to reduce long
term debt leaving cash on hand at June 30, 2010 of $40,892 compared to cash on
hand of $108,486 at December 31, 2009.
Until the Company receives revenues from new contracts 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 preferred share offering pursuant to
Regulations D and S with the expectation of obtaining up to $5,000,000. Any funds
so raised are targeted for contract financing, product development, facilities,
marketing and general working capital. 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-QSB, 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.
(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.
No change since previous filing.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Options Granted Date Exercise Price Expiry Date
Nil
Warrants Issued
During the six month period ended June 30, 2010 the Company issued nil share purchase
warrants.
Common Stock Issued Date Consideration
----------------------------------------------------------------------------------------
1,075,000 January, 2010 cash of $157,500
10,345 January, 2010 services valued at $3,000
160,000 February, 2010 conversion of 40,000 preferred shares for $32,191
46,778 February, 2010 services valued at $12,541
121,687 March, 2010 services valued at $16,650
25,000 March, 2010 cash of $2,500
1,000,000 April 27, 2010 cash of $125,000
108,277 April 27, 2010 services and expenses valued at $19,900
30,000 May 12, 2010 repayment of loan in the amount of $6,600
26,531 June 2, 2010 expenses valued at $6,000
500,000 June 16, 2010 expenses valued at $95,000
Preferred Stock Subscribed
100,000 series A shares, for cash of $90,000, convertible to shares of common stock -
proceeds were used in working capital.
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
Exhibit 31.1 - CERTIFICATION SECTION 302
Exhibit 32.1 CERTIFICATION SECTION 906
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 16, 2010 Northstar Electronics, Inc.
(Registrant)
By: /s/ Wilson Russell
Wilson Russell, PhD, President and Chief Financial Officer