Item 1. Financial Statements
NORTHSTAR ELECTRONICS, INC.
Consolidated Balance Sheets
(US Dollars)
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June 30,
2016
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December 31,
2015
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unaudited
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audited
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Assets
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Current
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Cash and cash equivalents
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$
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3,887
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$
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23,752
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Prepaid expenses
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--
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--
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3,887
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23,752
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Total assets
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$
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3,887
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$
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23,752
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Liabilities
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Current
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Accounts payable and accrued liabilities
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$
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454,319
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$
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315,816
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Loans payable
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404,276
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424,276
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Due to Directors
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519,395
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499,734
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1,377,990
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1,239,826
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Long-term debt
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--
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--
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1,377,990
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1,239,826
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Stockholders Deficit
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Authorized:
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200,000,000 Common shares with a par value of $0.0001 each
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20,000,000 Preferred shares with a par value of $0.0001 each
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Issued and outstanding:
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83,506,767 Common shares (79,396,847 - December 31, 2015)
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8,351
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7,940
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515,621 Preferred series A shares (535,496 - December 31, 2015)
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421,209
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456,209
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Additional Paid-in Capital
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8,177.024
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8,105,572
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Accumulated Other Comprehensive Income (Loss)
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134,035
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134,035
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Loss on discontinued operations
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(4,072,358)
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(4,072,359)
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Contingency reserve
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7,500,000
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7,500,000
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Accumulated Deficit
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(12,780,130)
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(12,780,130)
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Deficit accumulated in the development stage
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(762,234)
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(567,342)
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(1,374,103)
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(1,216,074)
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$
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3,887
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$
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23,752
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See notes to the consolidated financial statements
Nature of operations and going concern (note 1) Contingent liabilities (note 3)
4
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2016 and 2015
Unaudited
U.S. Dollars
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Three Months
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Six Months
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2016
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2015
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2016
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2015
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Revenue
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$
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--
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$
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--
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$
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--
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$
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--
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Cost of goods sold
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--
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--
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--
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--
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Gross margin
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--
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--
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--
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--
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Expenses
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Salaries
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--
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--
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--
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--
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Management fees
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12,500
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12,500
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25,000
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25,000
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Administrative fees
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6,250
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6,250
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12,500
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14,550
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Professional fees
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5,625
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--
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13,500
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--
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Foreign exchange
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371
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(651)
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300
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(651)
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Engineering research and development
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84,000
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--
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84,000
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--
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Investor relations
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2,050
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--
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2,050
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--
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Marketing and sales
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42,000
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--
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42,000
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--
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Office and administration
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7,138
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3,664
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11,179
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11,930
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Travel and business development
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--
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--
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--
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2,926
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Total expenses
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159,934
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21,763
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190,529
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53,755
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Net loss for the period
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$
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(159,934)
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$
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(21,763)
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$
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(190,529)
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$
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(53,755)
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Interest expense
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(4,364)
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-
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(4,364)
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-
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Comprehensive (loss) for the period
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(164,298)
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(21,763)
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(194,893)
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(53,755)
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Net (loss) per share
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$
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(0.00)
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$
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(0.01)
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$
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(0.00)
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$
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(0.00)
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Weighted average number
of shares outstanding
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80,751,807
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70,771,847
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80,074,327
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70,771,847
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See notes to the consolidated financial statements
5
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Changes in Stockholders Equity
Six Months Ended June 30, 2016
Unaudited
U.S. Dollars
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Number of
Shares
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Par
Value
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Additional
Paid-In
Capital
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Other
Compre-hensive
Income (Loss)
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Accumulated
Deficit
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Preferred
Shares
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Total
Stockholder
Deficit
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Balance December 31, 2015
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79,396,847
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$
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7,940
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$
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8,105,572
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$
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3,561,676
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$
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(13,347,471)
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$
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456,209
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$
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(1,216,074)
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Issuance of common stock
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For cash
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2,678,520
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268
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32,232
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-
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-
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-
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32,500
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Conversion of preferred
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1,431,400
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143
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39,220
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1
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(4,364)
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(35,000)
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-
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Net loss for six months
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-
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-
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-
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-
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(190,529)
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-
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(190,529)
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Balance June 30, 2016
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83,506,767
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$
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8,351
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$
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8,177,024
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$
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3,561,677
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$
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(13,542,364)
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$
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421,209
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$
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(1,374,103)
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See notes to the consolidated financial statements
6
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2016 and 2015
Unaudited
U.S. Dollars
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2016
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2015
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Operating Activities
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Net income (loss)
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$
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(194,893)
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$
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(53,755)
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Adjustments to reconcile net income (loss)
to net cash used by operating activities
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Equity based compensation
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25,000
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25,000
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Issuance of common stock for interest expense
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4,364
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--
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Changes in accounts payable
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138,503
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12,500
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Net cash (used) provided by operating activities
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(27,026)
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(16,255)
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Investing Activities
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Property and equipment
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--
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--
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Net cash (used) provided by investing activities
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--
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--
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Financing Activities
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Issuance of common shares for cash (net of costs)
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32,500
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--
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Loans payable
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(20,000)
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2,645
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Advances from (repayment to) directors
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(5,339)
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(2,895)
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Net cash (used) provided by financing activities
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7,161
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(250)
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Effect of foreign exchange on translation
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--
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--
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Inflow (outflow) of cash
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(19,865)
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(16,505)
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Cash, beginning of period
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23,752
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17,288
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Cash, end of period
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$
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3,887
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$
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783
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Supplemental information
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Interest paid
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$
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0
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$
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0
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Shares issued for prepaid expense
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$
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0
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$
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0
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Shares issued for loan repayment
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$
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0
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$
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0
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Corporate income taxes paid
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$
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0
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$
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0
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See notes to the consolidated financial statements
7
NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2016
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. These financial statements are consolidated with the Companys wholly owned subsidiary, National Five Holding Ltd. Any intercompany transactions have been eliminated on consolidation.
The Companys 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 Companys audited consolidated financial statements filed as part of the Companys December 31, 2015 Form 10-K and amendments.
In the opinion of the Companys management, this consolidated interim financial information reflects all adjustments necessary to present fairly the Companys consolidated financial position at June 30, 2016 and the consolidated results of operations and the consolidated cash flows for the three and six months then ended. The Company is in the process of regenerating its operations in the aviation field.
The results of operations for the six months ended June 30, 2016 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, 2016 the Company incurred a net loss of $194,893 and at June 30, 2016 had a working capital deficiency (an excess of current liabilities over current assets) of $1,374,103 (December 31, 2015: $1,216,074. The Company is contingently liable for approximately $7,500,000 to repay assistance received under the Atlantic Innovation Fund (see also note 3).
8
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.
Should management be unsuccessful in its initiative to finance its operations the Companys 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
COMMON STOCK
During the three months ended June 30, 2016 the Company issued the following common shares of stock:
-
1,278,520 shares for cash of $12,500
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1,400,000 shares for cash of $20,000
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1,400,000 shares for conversion of 19,875 preferred shares valued at $35,000
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31,400 shares for $4,364 interest expense
PREFERRED STOCK
Issued for cash:
The preferred shares bear interest at 10% per annum paid semiannually 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 Companys 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, 2016 the Company had 515,621 preferred shares outstanding valued at $421,209.
3. CONTINGENCIES
The Company is contingently liable to repay $2,294,755 in assistance received under the Atlantic Innovation Fund, repayable annually at the rate of 5% of gross revenues from sales of products resulting from the Companys research and development project. The Company became in default of this conditional loan, was unable to represent itself in Newfoundland court and ACOA was awarded a $7,500,000 judgment against the Company. The Company generated negligible revenues from the program and is in absolute disagreement with this outcome.
4. 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.
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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 six month periods ended June 30, 2016 and June 30, 2015 prepared by management and the consolidated financial statements for the twelve months ended December 31, 2015 as presented in the Form 10K 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 Companys Services
We continue to move in a new direction whereby we intend to build our own systems in the civilian aviation sector. We believe that this affords improved control over our business outcomes.
The Company is working on plans to obtain rights to a single engine turbo prop airplane with industrial applications. If successful, we intend to manufacture the airplane and market it internationally. We also intend to provide Maintenance, Repair and Overhaul (MRO) services in close proximity to customers. The Companys wholly owned subsidiary, National Five Holding Ltd, is a 60% shareholder of Northstar Sealand Enterprises Ltd (NSEL). The constituent parts of NSEL have experience in working on certified commercial aircraft and government military contracts, and have access to an established aircraft parts manufacturing facility.
Results of Operations
Comparison of the three and six months ended June 30, 2016 with the three and six months ended June 30, 2015:
Gross revenues from all sources for the three month period ended June 30, 2016 were $0 compared to $0 in the comparative prior three month period. Gross revenues from all sources for the six month period ended June 30, 2016 were $0 compared to $0 in the comparative prior six month period. The Company has not generated revenue as it continues to reorganize its business.
10
The net loss for the three month period ended June 30, 2016 was $(164,298) compared to a net loss of $(53,755) for the three months ended June 30, 2015. The increase in net loss for the three and six month period was in part due to the fact the Company incurred engineering expenses related to its venture development and sales/marketing expense in determining market acceptance of its venture.
Comparison of Financial Position at June 30, 2016 with December 31, 2015
The Companys working capital deficiency increased at June 30, 2016 to $1,374,103 with current liabilities of $1,377,990 which are in excess of current assets of $3,887. At December 31, 2015 the Company had a working capital deficiency of $1,216,074. See also contingent liabilities, note 3 to the financial statements for the six months ended June 30, 2016.
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, 2015. 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 from operations for the six months ended June 30, 2016 was $(27,026) compared to an outflow of cash of $(16,255) in the comparative prior six months ended June 30, 2015. During the current period, the Company received $32,500 ($0 in the comparative prior period) from equity funding and received $0 (received $0 in the comparative period) long term debt leaving cash on hand at June 30, 2016 of $3,887 compared to cash on hand of $23,752 at December 31, 2015. 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 Companys continued operations are dependent upon obtaining revenues from outside sources or raising additional funds through debt or equity financing.
11