Notes to the Interim Consolidated Financial Statements
March 31, 2018
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, 2017 Form 10-K.
The Company is in the process of regenerating its operations. The results of operations for the three months ended March 31, 2018 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 three months to March 31, 2018 the Company incurred a net loss of $47,140 and at March 31, 2018 had a working capital deficiency of $4,827,082.
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.
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2. SHARE CAPITAL
COMMON STOCK
During the three months ended March 31, 2018 the Company issued nil common shares. The Company received subscription of $5,035 related to issuance in prior year.
During the three months ended March 31, 2017, the Company issued 2,500,000 shares of common stock for cash of $25,000 and issued 2,037,206 shares of common stock for conversion of 31,910 preferred class B shares.
PREFERRED SHARES
All classes of 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 March 31, 2018, the outstanding number of preferred Classes A, B and C shares are 582,716 (December 31, 2017: 582,716), 15,000 (December 31, 2017: 15,000) and nil (December 31, 2017: nil), respectively.
3. RELATED PARTY TRANSACTIONS
a)
The amount of $453,775 (December 31, 2017: $424,538) due to a director of the Company has no specific terms of repayment, is non-interest bearing and unsecured.
b)
The Company accrued management fees of $30,000 in total to a director of the Company for his services as an officer of the Company during the three months ended March 31, 2018 (2017: $15,000).
c)
The Company accrued engineering fees of $Nil in total to a director of the Company for his services during the three months ended March 31, 2018 (2017: $15,000), which are included in business development expense.
4. CONTINGENCIES
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 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$3,797,704 ($2,942,081). In accordance with agreements signed between NTI, NNL and the Company, the Company was jointly and severally liable for the obligations. Further, the claim amount bears a daily interest of CAD$358 from February 15, 2013 to settlement. During the three months ended March 31, 2018, the Company recorded interest expenses of $25,472.
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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 are no events known to management subsequent to March 31, 2018 that would have a material impact on these interim financial statements.
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