Quarterly Report (10-q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2020

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

For the transition period from: ______ to ______

333-90031

Commission file number

Northstar Electronics, Inc.

Exact name of small business issuer as specified in its charter

Delaware

State or other jurisdiction of organization

33-0803434

IRS Employee incorporation or Identification No.

355 Burrard Street, Suite 1000

Vancouver, BC, Canada V6C 2G8

Address of principal executive offices

(778) 838-3313

Issuer's telephone number

Not Applicable

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 ☒ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐ Yes ☒ No

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares as of September 21, 2021: 127,838,231

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statement of Changes in Stockholders’ Deficit	6
Condensed Consolidated Statements of Cash Flows	7
Notes to the Condensed Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis or Plan of Operation.	11
Item 3. Controls and Procedures	13
PART II - OTHER INFORMATION	14
Item 1. Legal Proceedings.	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	14
Item 3. Defaults Upon Senior Securities.	14
Item 4. Submission of Matters to a Vote of Security Holders.	14
Item 5. Other Information.	14
Item 6. Exhibits.	14
SIGNATURES	15

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

NORTHSTAR ELECTRONICS, INC.

Condensed Consolidated Balance Sheets

U.S. Dollars

	September 30 2020		December 31 2019
	unaudited		audited
Assets

Current
Cash	$	26,790	$	40,261

	$	26,790	$	40,261

Liabilities

Current
Accounts payable and accrued liabilities	$	1,213,623	$	1,220,792
Loans payable		442,916		442,916
Due to director see Note 4		612,352		616,159
Legal liability		3,209,382		3,100,221
		5,478,273		5,380,088

Stockholders’ Deficit
200,000,000 Common shares authorized, with a par value of $0.0001, 127,838,231 Common shares issued and outstanding (127,838,231 - December 31, 2019)		12,784		12,784
20,000,000 Preferred shares authorized, with a par value of $0.0001 597,716 Preferred shares issued and outstanding (597,716 - December 31, 2019)		404,299		404,299
Additional paid-in capital		8,608,875		8,608,875
Accumulated deficit		(14,477,441)		(14,365,785)
		(5,451,483)		(5,339,827)

	$	26,790	$	40,261

Nature of operations and going concern (Note 1)

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2020 and 2019

Unaudited

U.S. Dollars

	Three Months				Nine Months
	2020		2019		2020		2019

EXPENSES
Management	$	-	$	30,000	$	-	$	90,000
Consulting fees		-		3,550		-		3,550
Administration		-		15,000		-		45,750
Professional fees		1		2,042		9,609		15,111
Foreign exchange (gain) loss		15,909		(36,382)		2,892		91,107
Engineering and development		-		15,125		-		37,750
Investor relations		1,110		-		1,110		6,895
Marketing and sales		-		-		-		-
Office and administration		4,767		5,774		10,550		25,718
Interest expense		24,731		24,165		72,495		72,495
Total expenses		46,518		59,274		111,656		388,376

Net loss for the period	$	(46,518)	$	(59,274)	$	(111,656)	$	(388,376)

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

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

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Condensed Consolidated Statement of Changes in Stockholders’ Deficit

Nine Months Ended September 30, 2020

Unaudited

U.S. Dollars

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

Balance December 31, 2019	127,838,231	$12,784	$8,608,875	$(14,365,785)	$404,299	$(5,339,827)
Net loss	-	-	-	(111,656)	-	(111,656)
Balance September 30, 2020	127,838,231	$12,784	$8,608,875	$(14,477,441)	$404,299	$(5,451,483)

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2020 and 2019

Unaudited

U.S. Dollars

	2020		2019

Operating Activities
Net loss	$	(111,656)	$	(388,376)
Items not involving cash
Foreign exchange loss (gain)		36,666		86,649
Non-cash interest		72,495		72,495
Non-cash consulting		-		-
Changes in non-cash working capital
Changes in operating assets and liabilities		(7,169)		45,000
Net cash used in operating activities		(9,664)		(184,232)

Financing Activities
Issuance of common shares for cash (net of costs)		-		-
Loans payable		-		-
Increases in (decrease) to due to directors		(3,807)		66,945
Net cash provided by financing activities		(3,807)		66,945

Decrease in cash		(13,471)		(117,287)
Cash, beginning		40,261		170,831

Cash, ending	$	26,790	$	53,544

Non-cash Transactions
Shares issued for services	$	-	$	-
	$	-	$	-

See notes to the condensed consolidated financial statements

NORTHSTAR ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2020

Unaudited

U.S. Dollars

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

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

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

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

The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year. The accompanying interim consolidated financial statements have been prepared assuming the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months ended September 30, 2020 the Company incurred a net loss of $111,656 and at September 30, 2020 had a working capital deficiency of $5,451,483.

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.

Certain of the creditors and the Company have agreed to settle their debts for the issuance of 25,668,720 shares of common stock valued at $358,828. See also Note 4

2. SHARE CAPITAL

COMMON STOCK

The Company issued nil shares of common stock during the nine months ended September 30, 2020. See also Note 4

WARRANTS

	Exercise	Number of Warrants
Expiry Date	Price	2020	2019
Open(1)	$ 0.50	389,170	389,170
Open(1)	$ 0.75	389,170	389,170
Open(2)	$ 0.25	51,600	51,600
September 30, 2020	$ 0.05	-	13,134,208
Total outstanding and exercisable		829,940	13,964,148
Weighted average outstanding life of warrants (years)		Open	0.94 - 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, 2020, the Company recorded interest expenses of $72,495 (2019: $72,495).

4. RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2020, the Company accrued management fees payable of $nil (2019: $90,000) in total to a director of the company.

At September 30, 2020, there is a balance of $612,352 (December 31, 2019: $616,159) owing to a director of the Company for management fees and expense reimbursement. The amount is included in current liabilities, are unsecured and payable on demand. The creditor and the Company have agreed to settle this debt for the issuance of 31,000,000 shares of common stock valued at $612,352.

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

Other than details in Note 4, there have been no transactions outside of normal day to day activities subsequent to September 30, 2020.

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, 2020 and September 30, 2019, prepared by management, and the audited consolidated financial statements for the twelve months ended December 31, 2019 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

The Company has been working to obtain the rights to build our own systems in the civilian aviation sector with the belief that this would improve control over the business outcomes compared to the contract manufacturing business.

The Company has been working on an agreement to purchase the worldwide rights to manufacture a single engine Turbo Prop airplane with industrial applications from a subsidiary of a large international aerospace company. Unfortunately, the Company was unable to obtain suitable financing for its projected plans, the agreement did not materialize and the project has been abandoned. The Company has a further agreement to retain up to a 35% interest in the project with an engineering firm that has expressed further interest in the project.

Results of Operations

Comparison of the three and nine months ended September 30, 2020 with the three and nine months ended September 30, 2019:

Gross revenues from all sources for the three month period ended September 30, 2020 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, 2020 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.

There was a net loss for the nine month period ended September 30, 2020 of $111,656 compared to a net loss of $388,376 for the nine months ended September 30, 2019. The decrease in the losses is a result of the collapse of its project due to lack of funding.

There was a net loss for the three month period ended September 30, 2020 of $46,518 compared to a net loss of $59,274 for the three months ended September 30, 2019 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.

Comparison of Financial Position at September 30, 2020 with December 31, 2019

The Company’s working capital deficiency increased at September 30, 2020 to $5,451,483 with current liabilities of $5,478,273 which are in excess of current assets of $26,790. At December 31, 2019 the Company had a working capital deficiency of $5,339,827. See also legal liabilities, note 3 to the financial statements for the nine months ended September 30, 2020.

Critical Accounting Policies and Estimates

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

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

Liquidity and Capital Resources

Cash outflow for the nine months ended September 30, 2020 was $9,664 compared to an outflow of cash of $184,232 in the comparative prior nine months ended September 30, 2019. During the current period, the Company received $nil ($nil in the comparative prior period) from equity funding leaving cash on hand at September 30, 2020 of $26,790 compared to cash on hand of $53,545 at September 30, 2019. Until the Company receives revenues from new contracts it will be dependent upon equity and loan financings to compensate for the outflow of cash anticipated from operations.

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

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

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Based on the evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of the date of this Quarterly Report on Form 10-Q, our chief executive officer and chief financial officer has concluded that our disclosure controls and procedures are designed to ensure that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner. The disclosure controls were not effective at September 30, 2020.

(b) Changes in internal controls

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

No change since previous filing.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Options Granted: Nil

Warrants Issued: Nil

Common Stock Issued: Nil

Preferred Stock Subscribed: Nil

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.

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.