U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED June 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM n/a to n/a
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.
Suite # 1455- 409 Granville Street
Vancouver, British Columbia, Canada
V6C 1T2
Address of principal executive offices
(604) 685-0364
Issuer's telephone number
Not Applicable Former name, former address and former fiscal year, if changed
since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or 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[X] No[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): [ ]Large accelerated filer [ ]Accelerated filer [X]Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ]Yes [X]No
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years: Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court. Yes[]
No[] Not Applicable
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. Common shares as of August 1, 2008:
30,190,940
Transitional Small Business Disclosure Format (check one): Yes[] No[X]
PART I - FINANCIAL INFORMATION
Table of Contents Page
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2008 and at December 31, 2007.....F-1
Consolidated Statements of Operations
for the Three and Six Months Ended June30, 2008 and 2007 .................F-2
Consolidated Statements of Changes in Stockholders' Equity
for the Three and Six Months Ended March 31, 2008 ........................F-3
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2008 and 2007...........................F-4
Notes to Consolidated Financial Statements................................F-5
Item 2. Management's Discussion and Analysis or Plan of Operation.........2
Item 3. Controls and Procedures...........................................6
PART II OTHER INFORMATION
Item 1. Legal Proceedings.................................................6
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.......6
Item 3. Defaults Upon Senior Securities...................................7
Item 4. Submission of Matters to a Vote of Security Holders...............7
..
Item 5. Other Information.................................................7
Item 6. Exhibits..........................................................8
SIGNATURES
NORTHSTAR ELECTRONICS, INC.
Consolidated Balance Sheets - U.S. Dollars
June 30 December 31
2008 2007
ASSETS unaudited audited
Current
Cash and cash equivalents $ 27,373 $ 34,053
Accounts receivable 529,713 556,037
Inventory - work in process 88,441 62,267
Investment tax credits receivable - 61,247
Prepaid expenses 55,158 69,872
Total Current Assets 700,685 783,476
Pre contract costs 409,600 268,770
Intangible asset 22,129 24,783
Equipment 53,026 59,756
----------- -----------
Total Assets $1,185,440 $1,136,785
=========== ===========
LIABILITIES
Current
Accounts payable and accrued liabilities $1,425,590 $1,044,624
Loans payable 138,466 137,294
Deferred revenue 44,149 125,668
Due to Cabot Management Limited 53,604 55,528
Due to Directors 744,205 566,321
Current portion of long term debt 191,948 250,289
Total Current Liabilities 2,597,962 2,179,724
Long term debt 1,596,994 1,551,890
------------ ------------
Total Liabilities $4,194,956 $3,731,614
============ ===========
STOCKHOLDERS' EQUITY (DEFICIT)
Authorized
100,000,000 shares of common stock with a par value of $0.0001 each
20,000,000 shares of preferred stock with a par value of $0.0001 each
Issued and outstanding
29,573,440 shares of common stock 2,958 2,766
(27,657,081 December 31, 2007)
40,000 shares of preferred series A stock 30,000 -
Additional paid in capital 4,918,778 4,765,743
Cumulative other comprehensive income (loss) (389,998) (460,287)
Deficit (7,571,254) (6,903,051)
Total Stockholders' Equity (Deficit) (3,009,516) (2,594,829)
------------ ------------
Total Liabilities and Stockholders' Equity $1,185,440 $1,136,785
=========== ============
See notes to the consolidated financial statements
Going Concern (Note 1), Contingencies (Note 5), Subsequent Events (Note 6)
F-1
SIGNATURES
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2008 and 2007
Unaudited
U.S.Dollars
Three Months Six Months
2008 2007 2008 2007
--------------------------------------------
Sales $533,332 $351,140 $916,234 $521,467
Cost of goods sold 354,826 195,234 579,178 235,681
Gross margin 178,506 155,906 337,056 285,786
Recovery of development costs 30,605 78,230 71,248 95,435
Other income (expense) (1,906) (2,368) 6,983 5,832
--------- -------- -------- --------
207,205 231,768 415,287 387,053
--------- -------- -------- --------
EXPENSES
Salaries 260,464 267,886 567,504 477,700
Management and administration fees 67,605 - 67,605 -
Financial consulting 42,650 26,000 42,650 78,220
Professional fees 4,783 (8,562) 27,015 (1,331)
Rent 31,090 15,299 63,300 31,221
Research and development 13,791 770 13,791 1,177
Investor relations 10,500 25,392 21,150 34,756
Office and administration 10,140 23,558 39,570 53,711
Travel and business development 19,084 44,147 84,065 57,198
Interest on debt 46,862 10,146 66,158 13,809
Telephone and utilities 15,857 12,202 30,211 24,590
Amortization 5,236 4,450 10,370 11,304
Finance fees 0 9,865 49,500 9,865
Transfer agent fees 257 1,658 601 3,330
--------- -------- -------- --------
Total expenses $528,319 $ 432,811 $1,083,490 $ 795,550
--------- --------- -------- ---------
Net loss for period $(321,114) $(201,043) $ (668,203)$(408,497)
========== ========== ========== =========
Net loss per share $ (0.01) $ (0.01) $ (0.02) $ (0.02)
========== ========== ========== =========
Weighted average number of shares
outstanding 28,934,951 23,902,844 28,209,175 24,481,319
See notes to the consolidated financial statements
F-2
NORTHSTAR ELECTRONICS, INC.
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2008
Unaudited
U.S. Dollars
Additional Other Total Stockholder
Paid in Comprehensive Accumulated Equity
Shares Amount Capital Income Deficit (Deficit)
---------------------------------------------------------------------------------------------------------
Balance
December 31,
2007 27,657,081 $2,766 $4,765,743 $(460,287) $(6,903,051) $(2,594,829)
Net loss for
six months - - - - (668,203) (668,203)
Currency
translation
adjustment - - - 70,289 - 70,289
Issuance of
common stock:
- for cash 1,166,664 117 84,883 - - 85,000
- for services 749,695 75 68,152 - - 68,227
Balance
June 30,
2008 29,573,440 $2,958 $4,918,778 $(389,998) $(7,571,254) $(3,039,516)
-------------------------------------------------------------------------------------------------------
Series A shares of preferred stock - subscribed 30,000
-------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) $(3,009,516)
-------------------------------------------------------------------------------------------------------
See notes to the consolidated financial statements
F-3
NORTHSTAR ELECTRONICS, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2008 and 2007
Unaudited
U.S.Dollars
2008 2007
Operating Activities ----------- -------------
Net income (loss) $(668,203) $(408,497)
Adjustments to reconcile net income (loss) to net
cash used by operating activities
Amortization 10,302 11,304
Issuance of common stock for services 68,227 122,495
Changes in operating assets and liabilities 237,772 (70,270)
----------- -------------
Net cash (used) provided by operating activities (351,902) (353,968)
----------- -------------
Investing Activities
Property and equipment (3,849) (10,452)
----------- -------------
Net cash (used) provided by investing activities (3,849) (10,452)
Financing Activities
Issuance of common shares for cash (net of costs) 115,000 134,250
Increase (repayment) of long term debt 49,231 243,505
Advances from (repayment to) directors 179,225 4,636
---------- ------------
Net cash (used) provided by financing activities 343,456 382,391
---------- ------------
Effect of foreign exchange on translation 5,615 9,252
Inflow (outflow) of cash (6,680) 27,223
--------- -----------
Cash, beginning of period 34,053 24,300
--------- ----------
Cash, end of period $ 27,373 $ 51,523
========= ==========
Supplemental information
Interest paid $66,158 $ 13,809
Shares issued for services $78,227 $ 122,495
Corporate income taxes paid $ 0 $ 0
See notes to the consolidated financial statements
F-4
NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2008
Unaudited
U.S. Dollars
1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN
These consolidated financial statements include the accounts of Northstar
Electronics, Inc. ("the Company") and its wholly owned subsidiaries Northstar
Technical Inc. ("NTI") and Northstar Network Ltd. ("NNL"). All inter-company
balances and transactions are eliminated. The Company was incorporated May 11,
1998 in the State of Delaware and had no operations other than organizational
activities prior to the January 2000 merger with NTI described as follows: On
January 26, 2000 the Company completed the acquisition of 100% of the shares of
NTI. The Company, with the former shareholders of NTI receiving a majority of
the total shares then issued and outstanding, effected the merger through the
issuance of 4,901,481 shares of common stock from treasury. The transaction has
been accounted for as a reverse takeover resulting in the consolidated financial
statements including the results of operations of the acquired subsidiary prior
to the merger.
The Company's 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 Company's
audited consolidated financial statements filed as part of the Company's
December 31, 2007 Form 10-KSB and amendments.
In the opinion of the Company's management, this consolidated interim financial
information reflects all adjustments necessary to present fairly the Company's
consolidated financial position at June 30, 2008 and the consolidated results of
operations and the consolidated cash flows for the six months then ended. For
the six months ended June 30, 2008: 75.7% of the Company's revenues were
generated from a contract with a subsidiary of a major US customer and 10.3%
of the Company's revenues were generated from a different contract with a
Canadian subsidiary of the same US customer. The Company is continually
marketing its services for follow-on contracts and for contracts with other
corporations in the defense industry.
F-5
The results of operations for the six months ended June 30, 2008 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, 2008, the Company incurred a net loss of
$668,203 (year to December 31, 2007: $778,818) and at June 30,2008 had a
working capital deficiency (an excess of current liabilities over current
assets) of $1,897,277 (December 31, 2007: $1,396,248), including $191,948 of
long term debt due within one year (December 31, 2007: $250,289).
Management has undertaken initiatives for the Company to continue as a going
concern. The prospect for placing equity financing, started in the previous
fiscal quarter, continue. The Company is negotiating to secure an equity
financing in the short term and is in discussions with several financing firms.
The Company also expects to increase revenues predominantly from contract
manufacturing sales. A variety of contract opportunities are near completion.
These initiatives are in recognition that the Company, to continue as a going
concern, must generate sufficient cash flow to cover its obligations and
expenses. In addition, management believes these initiatives can provide the
Company with a solid base for profitable operations, positive cash flows and
reasonable growth. 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 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.
2. SHARE CAPITAL
COMMON STOCK
During the six months ended June 30, 2008 the following shares of common stock
were issued: For services: 749,695 shares fairly valued at $68,227, the market
value of those services For cash: 1,166,664 shares fairly valued for cash of
$85,000.
PREFERRED STOCK
For cash: 40,000 series A shares of preferred stock for $30,000. The preferred
shares bear interest at 10% per annum paid semi annually 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
Company's 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, 2008 the Company had received $30,000 for 40,000 preferred shares but
had not issued the shares.
F-6
3. LONG TERM DEBT
Balance due to Atlantic Canada Opportunities Agency ("ACOA")
December 31, 2007 $1,802,179
Increase in ACOA funding 32,000
Effect of foreign exchange on translation to US dollars (45,237)
-----------
Balance due to ACOA June 30, 2008 1,788,942
Less current portion (191,948)
-----------
$1,596,994
===========
4. REVENUE
Six months Six months
2008 2007
---------- -----------
Revenue consists of: NETMIND sales $163,861 $273,105
Contract sales 752,373 248,362
Government assistance 71,248 95,435
Other 6,983 5,832
----------- ----------
$994,465 $622,734
========== ==========
5. CONTINGENCIES
(i) The Company is a defendant in a lawsuit commenced against them in 1999 by
their former master distributor. The former distributor has alleged that the
Company interfered with the ability of the former distributor to sell products.
The Company has filed a counter claim for monies owing by the former distributor
to the Company. There has been no action from either side to date.
(ii)The Company is contingently liable to repay $1,997,144 in assistance
received under the Atlantic Innovation Fund. The assistance is repayable
annually at the rate of 5% of gross revenues from sales of products resulting
from the Aquacomm research and development project. Gross revenues are to be
calculated for the fiscal year immediately preceding the due date of the
respective payment. Repayment is to continue until the assistance is repaid in
full. At June 30, 2008 the Company has accrued $47,949 as repayable.
F-7
6. SUBSEQUENT EVENT
Subsequent to June 30, 2008 the Company issued 617,500 shares of common stock
for services valued at $8,225 plus cash received of $40,000.
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, 2008 and 2007 prepared by management and the audited consolidated
financial statements for the twelve months ended December 31, 2007 as presented
in its Form 10KSB as amended.
Although the Company has experienced an increase in the net loss this quarter
due to the P3 project, it continues to expend effort in developing new markets
for NETMIND, in developing advanced sonar products and in securing additional
contracts for the contract manufacture and assembly of military/government
systems, submarine command and control consoles, multi mode fiber optic cables
and precision machined parts and other components for defense systems.
The Company believes that its overall business prospects look promising and
anticipates increased revenues in the near to medium future.
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, through its subsidiaries, is an underwater sonar technology
developer (USTD), a defense electronics contract manufacturer (CM) and a defense
systems integrator (DSI).
2
Underwater Sonar Products and Technologies
a) The NETMIND System
The Company's first underwater sonar product based on core technology is the
NETMIND system. NETMIND's market is the world's commercial fishing industry and
government oceanic research agencies. One of our largest customers has been the
United States National Oceanic and Atmospheric Administration (NOAA).
NETMIND is both a conservation tool as well as an efficiency tool. Electronic
sensors attached to a fishing trawl measure the net opening geometry, water
temperature, depth of the net and the volume of fish caught plus other
parameters. The sensor information is transmitted via a wireless communications
link back to the ship's hydrophone for digital processing and display.
NETMIND aids in preventing over fishing and allows fishermen to catch fewer fish
and still make profits. This gives regulators flexibility in reducing quotas
when attempting to conserve limited fish stocks. NETMIND sales decreased from
the same period last year due to a shortfall in operating capital. Steps have
been taken to make working capital available internally to rectify the situation
and orders are presently moving through production subsequent to March 31, 2008.
A potential and substantial market for NETMIND continues to grow in Ireland,
Scotland, Spain and the surrounding regions, although hampered by higher vessel
fuel costs. Marketing strategies are focused on demonstrating the greater need
for fishing efficiencies using NETMIND.
b) Defense Sonar Systems
The Company is a subcontractor on Lockheed Martin's anti terrorism Swimmer
Detection System (SDS). The SDS is a wide band high frequency sonar system
designed specifically to detect and classify underwater terrorist threats. The
Company, in collaboration with Lockheed Martin Canada, is also involved in the
design of a wide band sonar projector. The design and technology is applicable
to innovative military sonar products one of which the Company is developing for
Lockheed Martin.
Defense Contract Manufacturing
A manufacturing contract for seven submarine command and control consoles,
received in March, nears completion and an additional, similar console
manufacturing contract is anticipated in the following business quarter.
The Company's wholly owned subsidiary, Northstar Network Ltd., increased
production work on the Master Purchase Order (MPO) for the Wing Assembly Upgrade
Component for the P-3 ORION aircraft from Lockheed Martin Aeronautics with
additional staff and increased production from its sub-contractors. During the
quarter, the original MPO saw an increase of $514,656 bringing the total
contract to US$6,821,847 over the same five year period. This work extends to
the year 2012 and the Company is manufacturing components for new production
service life extension kits (48) for this Lockheed Martin Service Life Extension
Program (ASLEP). We expect to see an increase in the total number of aircraft
in the ASLEP program.
Systems Integration
The Company is developing its approach to securing and executing large defense
contracts by bringing together affiliate companies. The overall affiliate
capability, which is substantial, is presented to the prime contractors.
Marketing efforts continue in this area to broaden our exposure for
manufacturing opportunities.
The aforementioned P3 ORION Master Purchase Order is an example of how Systems
Integration works for us. In this project, six subcontractors carry out various
tasks, with Northstar bringing all the component parts together for testing,
quality control and delivery to the customer.
3
Results of Operations
Comparison of the three and six months ended June 30, 2008 with the three and
six months ended June 30, 2007:
Gross revenues from sales, miscellaneous and research and development recovery
for the three month period ended June 30, 2008 were $562,031 compared to
$427,002 in the comparative prior three month period. Gross revenues from sales,
miscellaneous and research and development recovery for the six month period
ended June 30, 2008 were $994,465 compared to $622,734 in the comparative prior
six month period.
Sales revenue for the three month period ended June 30, 2008 was $533,332 (51.9%
increase) compared to $351,140 of sales revenue recorded during the same three
month period of the prior year. This comparative increase is the direct result
of the Lockheed Martin P3 contract and the Lockheed Martin Project X contract.
Sales revenue for the six month period ended June 30, 2008 was $916,234 (75.7%
increase) comparable to $521,467 in the prior period. Gross margins decreased,
percentage wise, from $285,786 (55%) in the prior six month period to $337,056
(37%) in the current six month period.
The net loss for the three month period ended June 30, 2008 was $(321,114)
compared to a net loss of $(201,043) for the three months ended June 30, 2007.
The increase in loss resulted from increased expenses associated with time-
related production demands for First Article Inspections performed on the P3
project. Over this past quarter, the Company continued to invest considerable
resources in seeking out additional and future contract manufacturing
opportunities and is confident that the efforts will return positive results to
the Company over the ensuing months and years.
Travel and business development costs were $84,065 for the six months and
$57,198 for the comparative prior period ended June 30, 2007 as the Company
attempts to increase its customer base and sales orders for NETMIND. During the
three month period, the company reduced operating costs for NETMIND operations.
The Company is actively pursuing contracts for its sonar capabilities in
military and anti terrorist applications as well the Company has bid on several
contract manufacturing military.
Salaries increased to $576,504 for the six months ended June 30, 2008 compared
to salaries of $477,700 (20.7% increase) for the comparative prior six months
ended June 30, 2007 as the Company ramped up work on First Article Production
and Inspection (FIA) of components for the P3 contract. Salaries increases will
decrease to former levels following all FIA parts certification. Salaries may
increase with new projects anticipated in the aeronautics area, commensurate
with corresponding increases in revenues.
Cost recoveries of $71,248 were down from $95,435 recovered in the comparative
prior six month period.
Comparison of Financial Position at June 30, 2008 with December 31, 2007
The Company's working capital deficiency at June 30, 2008 increased to
$1,897,277 (35.9% increase) with current liabilities of $2,597,962 in excess of
current assets of $700,685. At December 31, 2007 the Company had a working
capital deficiency of $1,396,248. As production increased on the P3 Project,
greater purchasing of materials, and sub-contractor costs increased.
Considerable revenue was un-billed at the financial period completion. They
will be recognized in the following financial period.
4
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,
2007. 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
The Company has increased its shareholders' deficit as a result of its efforts
to increase its business activity and customer base. Cash outflow for the six
months ended June 30, 2008 was $(6,680) compared to an increase in cash of
$27,223 in the comparative prior six month period. During the six months, the
Company received $115,000 from equity funding and received $32,000 long term
debt leaving cash on hand at June 30, 2008 of $27,373 compared to cash on hand
of $34,053 at December 31, 2007. Until the Company receives revenues from new
contracts and/or increases its product sales revenue, it will be dependent upon
equity and loan financings to compensate for the outflow of cash anticipated
from operations.
The Company is preparing a private placement preferred share offering pursuant
to Regulations D and S with the expectation of raising up to $5,000,000. Any
funds so raised are targeted for contract financing, product development,
facilities, marketing and general working capital. 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.
5
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.
(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 Date Exercise Price Expiry Date
--------------------------------------------------------------
Nil
Warrants Issued
During the six month period ended June 30, 2008 the Company issued nil share
purchase warrants.
Common Stock Issued Date Consideration
--------------------------------------------------------------------
550,000 January, 2008 finance fees valued at $49,500
133,333 February, 2008 cash of $10,000
199,695 March, 2008 services valued at $18,727
333,332 April 15, 2008 cash of $20,000
166,666 April 28, 2008 cash of $10,000
33,333 May 26, 2008 cash of $5,000
500,000 June 3, 2008 cash of $40,000
Preferred Stock Subscribed
40,000 series A shares for cash of $30,000 and convertible to shares of common
stock - proceeds were used in working capital.
6
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
Exhibit 31.1 -CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1-CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
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.
August 14, 2008 Northstar Electronics, Inc.
(Registrant)
By: /s/ Wilson Russell
-----------------------
Wilson Russell, PhD,
President and Chief Financial Officer
7
Exhibit 31.1 CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Wilson Russell, Chief Executive Officer of Northstar Electronics, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended June
30, 2008 of Northstar Electronics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under my supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities, particularly
during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under my supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report my conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
August 14, 2008
/s/ Wilson Russell
-------------------
Wilson Russell,
Chief Executive Officer and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Solely for the purposes of complying with, and the extent required by 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned certifies, in his capacity as the Chief Executive Officer and Chief
Financial Officer of Northstar Electronics, Inc., that, to his knowledge, the
quarterly report of the company on Form 10-Q for the period ended June 30, 2008
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that the information contained in the report fairly
presents, in all material respects, the company's financial condition and
results of operations.
August 14, 2008
/s/ Wilson Russell
--------------------
Wilson Russell,
Chief Executive Officer and Chief Financial Officer