Notes to Interim Consolidated Financial Statements
Nine Months Ended September 30, 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 results of operations for the nine months ended September 30, 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 nine months ended September 30, 2018 the Company incurred a net loss of $302,373 and at September 30, 2018 had a working capital deficiency of $5,043,910.
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, 2018, the Company issued 28,258,416 shares of common stock for cash of $268,455 of which $240,050 was received subsequent to September 30, 2018. Each share had one-half share purchase warrant attached to it which allows the holder to purchase one common share for each full share purchase warrant at an exercise price of $0.05 for a term of two years from the issuance date.
During the nine months ended September 30, 2018 the Company issued 1,000,000 shares of common stock with a fair value of $10,000 for consulting services. Each share had one-half share purchase warrant attached to it which allows the holder to purchase one common share for each full share purchase warrant at an exercise price of $0.05 for a term of two years from the issuance date.
PREFERRED SHARES
At September 30, 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
WARRANTS
|
|
|
|
| |
|
Exercise
|
|
Number of Warrants
|
Expiry Date
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Price
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|
2018
|
|
2017
|
Open (1)
|
$ 0.50
|
|
389,170
|
|
389,170
|
Open (1)
|
$ 0.75
|
|
389,170
|
|
389,170
|
Open (2)
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$ 0.25
|
|
51,600
|
|
51,600
|
April 20, 2019
|
$ 0.04
|
|
2,500,000
|
|
2,500,000
|
November 7, 2018
|
$ 0.05
|
|
1,562,500
|
|
1,562,500
|
December 25, 2018
|
$ 0.05
|
|
265,000
|
|
265,000
|
May 18, 2019
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$ 0.05
|
|
1,495,000
|
|
-
|
September 30, 2020
|
$ 0.05
|
|
13,134,208
|
|
-
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Total outstanding and exercisable
|
|
|
19,786,648
|
|
5,157,440
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Weighted average outstanding life of
warrants (years)
|
|
|
1.46 - 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.
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3. LEGAL LIABILITY
During 2000 to 2008, the Companys 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 ($2,378,894). Further, the claim amount bears a daily interest of CAD$358 from February 15, 2013 to settlement. During the nine months ended September 30, 2018, the Company recorded interest expenses of $75,809.
4. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2018, the Company accrued management fees payable of $90,000 (September 30, 2017: $75,000) in total to a director of the company.
At September 30, 2018, there is a balance of $507,523 (December 31, 2017: $424,538) owing to a director of the Company for management fees and expenses reimbursement. The balance is included in current 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
On October 2, 2018 the Company collected its subscriptions receivable in cash for the amount of $240,050.
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