Notes to Interim Consolidated Financial Statements
Nine Months Ended September 30, 2017
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 interim 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 Companys audited consolidated financial statements filed as part of the Companys December 31, 2016 Form 10-K.
The results of operations for the nine months ended September 30, 2017 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 to September 30, 2017 the Company incurred a net loss of $494,547 and at September 30, 2017 had a working capital deficiency of $4,686,332.
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 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.
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2. SHARE CAPITAL
COMMON STOCK
During the nine months ended September 30, 2017, the Company issued 2,500,000 shares of common stock for cash of $25,000.
During the nine months ended September 30, 2017, the Company issued 750,000 shares of common stock for cash of $7,500. Each common stock is attached with a warrant with an exercise price of $0.04 per common stock for a period of two years. No value was attributed to these warrants.
During the nine months ended September 30, 2017, the Company issued 2,037,206 shares of common stock for conversion of 31,910 preferred class B shares.
During the nine months ended September 30, 2017 the Company issued 1,750,000 shares of common stock with a fair value of $19,500 for consulting services. Of the 1,750,000 common shares, 550,000 common shares have warrants attached to them. Each common stock is attached with a warrant with an exercise price of $0.04 per common stock for a period of two years. The fair value of the warrants was determined to be $5,000 using the Black-Scholes Pricing Model with the following assumptions: dividend yield - 0%, volatility - 282%, risk-free rate - 1%, and expected life - 2 years.
PREFERRED SHARES
At September 30, 2017, the outstanding number of preferred Classes A, B and C shares are 582,716 (December 31, 2016: 582,716), 15,000 (December 31, 2016: 46,910) and nil (December 31, 2016: nil), respectively
WARRANTS
|
|
| |
|
Number of
Warrants
|
|
Exercise Price
per Share
|
Balance December 31, 2016
|
829,940
|
|
$0.15 - $0.75
|
Issued
|
1,300,000
|
|
$0.04
|
Balance September 30, 2017
|
2,129,940
|
|
$0.64
|
As at September 30, 2017 the outstanding warrants are as follows:
|
|
|
|
| |
Expiry Date
|
Exercise
Price
|
|
September
30, 2017
|
|
December
31, 2016
|
Open (1)
|
$ 0.50
|
|
389,170
|
|
389,170
|
Open (1)
|
$ 0.75
|
|
389,170
|
|
389,170
|
Open (2)
|
$ 0.25
|
|
51,600
|
|
51,600
|
April 17, 2019
|
$ 0.04
|
|
1,300,000
|
|
-
|
Total outstanding and exercisable
|
|
|
2,129,940
|
|
829,940
|
Weighted average outstanding life of
options (years)
|
|
|
Open
|
|
Open
|
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3. LEGAL LIABILITY
During 2000 to 2008, the Companys former subsidiaries North Star 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$3,732,200 ($2,992,751). Further, the claim amount bears a daily interest of CAD$358 from February 15, 2013 to settlement. During the nine months ended September 30, 2017, the Company recorded interest expenses of $77,615.
4. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2017, the Company accrued management fees payable of $45,000 in total to a director of the company.
At September 30, 2017, there is a balance of $395,841 (December 31, 2016: $314,550) owing to a director of the Company for management fees and expenses reimbursement. The balance is included in accounts payable and accrued liabilities.
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
There were no material events outside of the normal course of business.
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