As filed with the Securities and Exchange Commission on October 22, 1999
Registration No._______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTHSTAR ELECTRONICS, INC.
(Name of Small Business Issuer in its Charter)
#33-0803434
(I.R.S. Employer Identification Number)
Suite 1455-409 Granville Street
Vancouver, BC
V6C 1T2
(604) 685-0364
(Address, including zip code and telephone number, including area
code and registrant's principal executive office and principal
place of business)
Dr. Wilson E. Russell
Suite 1455-409 Granville Street
Vancouver, BC
V6C 1T2
(604) 685-0364
(Address, including zip code and telephone number, including area
code, of agent for service) Copies to:
O'Neill & Company
Barristers & Solicitors
Suite 1880, Royal Centre
1055 West Georgia Street, Box 11122
Vancouver, British Columbia
V6E 3P3
Approximate date of proposed sale to the public: As soon as
practicable following effectiveness of the Registration Statement
CALCULATION OF REGISTRATION
Title of each Class of Dollar Amount Proposed Amount of
Securities to be Registered To be Registered Maximum registration fee
per share
- -------------------------------------------------------------------------------------
Common Stock $800,000 $1.00US $278*
- ---------------------------------------------------------------------
Disclosure Alternative Used: Alternative 1 ___
Alternative 2_X_
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined
if this prospectus is truthful and complete. Any representation to the
contrary is a criminal offence.
PROSPECTUS SUMMARY
This is a brief summary of the information in this prospectus. We
encourage you to read the entire prospectus before you decide whether
and how to invest in the shares offered.
"SEE RISK FACTORS"
Northstar Electronics, Inc.
- ------------------------------
Northstar Electronics, Inc., based in Vancouver, BC, was organized
under the laws of the State of Delaware on May 11, 1998. At that time,
the corporation was titled Scientific Technologies, Inc. See Exhibits
for documentation supporting the name change.
The company was originally incorporated for the purpose of high
technology development and manufacturing of underwater communications
systems and contract manufacturing.
The Company acquired all of the issued and outstanding common shares
in Northstar Technical Inc., in January of 1999. Northstar is a high
technology development and manufacturing company with two main business
activities (as above) Northstar's objectives are to become a leader in
marine electronics and a major regional contract manufacturer. As a
result of the acquisition, Northstar became a subsidiary of the company.
Northstar has developed a core technology for underwater communications
which has applications in the fishery, offshore oil and gas, defence,
marine transportation, oceanographic and environmental industries.
The first application is the NETMIND system for the world's commercial
fishing industry.
NETMIND monitors the performance of a trawl and is both a
conservation tool and an efficiency tool. It consists of a group of
electronic sensors that transmit measurements from the net through
the water to a receiver on the ship. The information is displayed
on a computer screen and the captain can see what activities are
occurring in the net. He then knows how to adjust the height and
width of the net opening, how much fish are in the opening and when
the net is full and ready to be pulled in. Fishermen call NETMIND,
their `eyes beneath the sea.
The Offering
- ---------------
Securities Offered: Up to 800,000 shares of common stock.
Regulation S: The shares are being offered pursuant to
Regulation S of the United States Securities act of 1933 to
persons who are not US persons.
Use of Proceeds: The proceeds to the company from the sale of
the shares will be approximately $800,000 assuming all shares
are sold. (Use of Proceeds)
Securities Issued: As of the date of this document there are
7,604,481 shares of Common Stock issued and outstanding. Upon
the completion of the offering there will be 8,604,481 shares
of Common Stock issued and outstanding if the offered shares are
fully sold. 200,000 shares have been issued under Regulation S.
(See Exhibits)
RISK FACTORS
An investment in common stock involves many substantial risk factors,
including those associated generally with a new venture and a high
technology undertaking which does not have a developed marketing
structure into a tested market. Although management itself feels
that there is a substantial demand for its product at the proposed
price, the assumption has yet to be tested in full operation. The
Company itself has a limited operating history.
Risk Factors Related to the Company's Business
Status of Venture: The Company, formed in 1998, has had no
significant operations or business assets, and is in its early
development stage. In January 1999, it purchased all shares of
Northstar Technical Inc. (Northstar) as described below.
No-Operating History: The company has been in actual operation
under its current management for a relatively short time. It faces
all of the risks inherent in a new business and those risks
specifically inherent in the development and operation of a new
business, including, but not limited to, uncertainty as the ability
to develop a market for a new product in a new area. The Company is
not expected to generate any specific revenues until it completes a
further offering of its securities. The purchase of the securities
offered hereby must be regarded as the placing of funds at risk in a
new or "start-up" venture with all of the unforeseen costs, expenses,
problems and difficulties to which such ventures are subject.
Management Risks Inherent in High-Technology Businesses:
New ventures, particularly those involved in high technology, have
substantial inherent risks. These risks are in three general areas:
human, technical and mechanical. Notwithstanding any pre-production
planning, any new products can incur any unexpected problems in
full-scale production, all of which cannot always be foreseen or
accurately predicted. Designs can be unworkable, for unpredicted
reasons. Quality control and component sourcing failures are to be
expected from time to time. Any operation, including the one
described here, is substantially dependent upon the capabilities
and performance of both management and sales personnel. Mistakes
in judgement or performance can be costly and, in instances, disabling.
Therefore, management skill, experience, character and reliability are
of premium importance.
Production Risks In High Technology Ventures
The high-technology product line requires the Company to deal with
suppliers and subcontractors supplying highly-specialized parts,
operating highly sophisticated and narrow tolerance equipment and
performing highly-technical calculations and tasks. Components must
be custom designed and manufactured, which is not only complicated and
expensive, but can require a number of months to accomplish. Slight
mistakes in either the design or manufacturing can result in
unsatisfactory parts which may not be correctable. Since this
operation uses the talents of various professions, mistakes from
very slight oversights or miscommunications can occur, resulting not
only in costly delays and lost orders, but in disagreements regarding
liability and, in any event, extended delays in production.
Nature of Market Appeal:
Although management believes that the product will have sustained
market demand over an extended period into the future, it is possible
that current indications of commercial demand are limited to current
market conditions only. It is possible that demand may be directed to
similar or other competing products because of technical developments
or preferences or simply because of overwhelming commercial promotion
within a short period of time, thereby limiting the commercial viability
of the product either prior to or shortly after the Company reaches an
initial level of economic profitability. Unexpected negative publicity,
even if not relating directly to the Company or its own products and
even if unwarranted, can devastate a market. Such unusual fortuities
can never be predicted.
RISK FACTORS RELATING TO MARKET PROTECTION
Market Competition: The fishing trawl monitoring business is
dominated by a number of larger competitors who are well established
in the marketplace, have experienced and talented management, are
well financed and have recognized trade names related to their product
lines. Although the company believes Northstar's product line has
certain distinctive characteristics which allow it to penetrate the
existing market and acquire a significant market share in its special
niche to be profitable, there is no assurance that existing companies
will not aggressively compete by introducing new products substantially
similar to the Company's and at a price below that at which the Company
can compete. Should this occur, the Company may not be able to survive
for a sufficient time to reach viability.
Inherently Limited Nature of Market Protection:
The Company knows of several products directly competing with Northstar's
NETMIND technology. It is conceivable that new or similar products are
now being or will be produced and distributed by one or more other
entities. As some security from competition within the market place,
the Company is relying on the protection which it hopes to realize
under the United States and foreign patent laws. It is even conceivable
that certain patent copyright claims superior to the Company's unfiled
are either pending or planned, either within the U.S. or other foreign
countries, which could significantly impact the Company's rights to the
use of all, or important aspects, of the NETMIND technology. It is
further conceptually possible that similar devices could be designed
which, although not identical and therefore not infringing on the
company's proprietary right, could function adequately to be distributed
into the same market. Moreover, it is even possible that an unpatented
or uncopyrighted but prior existing device or design may exist which
simply has never been made public and therefore not known to Management
or the industry in general. Such a device could be introduced into the
market without infringing upon the Company's current rights. If any
such competing non-infringing devices are produced and distributed,
the Company's profit potential could be seriously limited.
Patent Protection is Not Self-Enforcing:
The Company plans to file copyright claims within the United States
and countries where major markets exist. However, even apart from a
superior right to the Company's claim to exclusive design and concept
rights, if one or more competitors should yet produce and distribute
a product apparently with the protection of one or more of those
claims, the cost of enforcing the Company's claim could fall on the
Company itself. The costs can be substantial and ultimately could
be beyond the financial resources of the Company. Even if it is not,
the legal costs required in protecting that claim could seriously
debilitate the Company's other operations. Thus, even though the
patent may be valid, investors should be aware that it is not
self-enforcing.
Cautions on Copyright Protection:
If any of those copyright claims are challenged in a future lawsuit
by one or more competitors, it is possible, though not probable,
that a court could find one or more of those claims invalid, or at
least too broad. The courts, and not the granting agencies are
generally the final arbiters on such maters. If challenged, the
court, through its own interpretation of the laws and facts may
either determine the patent to be completely invalid or the claim
to be considerably narrower than defined in the patent documents
issued by the patent offices.
Dependence Upon Key Personnel:
At least in the near term, the Company is dependent upon its
executive officers and certain key employees and consultants,
the loss of any one of whom could have a material adverse effect
on the Company. The Company has not obtained key man life insurance
on the lives of its key personnel except for a policy of CDN $250,000
on Wilson Russell payable to Northstar Technical Inc. At the present
time, the Company has not entered into consulting and employment
agreements with each of its key employees. Alternatively, the primary
means of maintaining their relationship with the Company's pursuit is
their equity interest. The continued success of the Company will also
be dependent upon its ability to attract and retain highly qualified
personnel in the sales area. There can be no assurance that the
company will be able to recruit and attain such personnel.
RISKS RELATED TO THE MANAGEMENT STRUCTURE OF THE COMPANY
Limitation on Liability of Management:
Management will have no liability to the Company for any mistakes or error
of judgement or for any act or omission believed to be within the scope of
authority conferred by the Company's articles unless such acts or omissions
were performed or omitted fraudulently or in bad faith, constituted gross
negligence or were a violation of a director's or officer's fiduciary
obligations to the Company. The Company had agreed to indemnify the
officers and directors against all loss or damage even if caused by an
officer's or director's simple negligence unless such loss or damage
was caused by that officer's or director's fraud, bad faith, gross
negligence or breach of fiduciary obligation.
RISKS INHERENT IN BUSINESS
No Assurance of Profitability of Operation:
Notwithstanding the business plan and projections made
by the Company, there can be no assurance that the Company
will be able to operate the commercial operation successfully
and in fact, may ultimately fail. Even if the commercial
operation itself is successful, there is no assurance that
any specific level of profitability will be achieved by Management.
Application of Revenues:
Although earnings sufficient to allow the possible payment
of stock dividends in the future may develop, there is no
assurance that earnings sufficient enough to pay such dividends
will ever be achieved. Even if achieved, there is no assurance
that such funds will not be applied by Management to other purposes.
For instance, Management could apply those funds to payment of other
debt which either now exists or may be incurred in the future, capital
expansion or improvements, the creation of reserves, the payment of
compensation or any other of a variety of business purposes .
The decision of what portion of earnings is to be distributed in
payment of dividends and what portion is to be retained for any of
those other purposes is inherently within the discretion of Management.
Dilutionary Possibilities:
A Board of Directors has the inherent right under applicable law ,
for whatever value the Board seems adequate, to the limit of shares
authorized by the Articles, to issue additional shares, and all Common
Stock shareholders, regardless of when the stock is issued, thereafter
generally rank equally in all aspects of that class of stock, regardless
of when issued. A majority of shareholders can vote to amend the Articles
of Incorporation to authorize the issuance of additional preferred shares.
The Board of Directors likewise has the inherent right, limited only by
applicable law, provisions of the Articles of Incorporation and existing
resolutions,
to expand the number of shares in a series, create new series and to
establish
preferences and all other terms and conditions in regard to such newly
created
series. Those terms and conditions may include preferences on an equal
or prior
rank to existing series and to all Common Stock. Those shares may be
issued on
such terms and for such consideration as the Board then deems reasonable
and such
stock then shall rank equally in all aspects of the series and on the
preferences
and conditions so provided, regardless of when issued. Any of those
actions
can not only dilute the Common Shareholders but the relative position
of the
holders of any series of any preferred class. Current shareholders have
no
rights to prohibit such issuance nor inherent `pre-emptive' rights to
purchase
any such stock when offered.
RISKS RELATED TO THE NATURE OF THE OFFERING
Arbitrary Offering Price:
The offering price of the Common Stock was arbitrarily
determined by Management and is not based on any specific
recognized criteria of value or other practices. Quite specifically,
it should be recognized that it is impossible to determine at what price,
if anything those shares would sell.
Dilution of Proceeds from Common Stock:
The Common Stock offered hereunder is being sold at US$1.00 per share.
Subscribers under this offering will suffer an immediate dilution of
their rights and contribution, as compared to the current shareholders
of the Company. While Management feels that the value of its technology
and of the business plan discussed herein justifies the subscription price,
there is no assurance that this venture will succeed, thereby confirming
that projection of disproportionate value.
GENERAL CAUTION
For all of the aforesaid reasons, and others set forth therein,
the very nature of the Company, its management structure and
the securities being offered here, each involve a notable risk.
Any person considering an investment in the securities offered
hereby should be aware of these and other risk factors. No person
should invest in these securities if that person anticipates an immediate
return on his/her investment. These securities should only be purchased
by persons who can afford to absorb a total loss of their investment and,
at the very least, they have no need for immediate return on that investment.
DILUTION
The net tangible book value of the company, as of October 15, 1999 was
$156,848
or approximately $0.021 per share. Giving effect to the sale by the Company
of Shares at the Offering price, the pro forma net tangible book value of the
Company would be approximately $156,848 or approximately $0.138 per Share,
which would represent n immediate increase in net tangible book value of
approximately $0.117 per Share to present shareholders and an immediate
dilution of approximately $0.362 per share, or approximately 86.2% to new
investors.
________________________________________________________________________
ASSUMING MAXIMUM
SHARES SOLD
Offering Price (before deduction of operating expenses) $1.000 per share
Net tangible book value before offering $0.021 per share
Net tangible book value after offering $0.138 per share
Dilution to new investors $0.862 per share
Dilution as a percentage 86.2%
________________________________________________________________________
Insert brief description of table included, and comparative data section.
(As outlined in draft)
USE OF PROCEEDS
It is estimated that the Company will use the maximum funds of
$800,000 in the manner set forth below:
Production (Marine Electronics)..............................$150,000
Production (Contract Manufacturing)..........................$200,000
Marketing (Marine Electronics)...............................$100,000
Business Development (Contract Manufacturing)................$100,000
Operating Capital............................................$250,000
Total:.......................................................$800,000
The actual expenditures of the proceeds of the Offering may differ
substantially from the estimated use of proceeds. The actual expenditures
of the proceeds of the Offering will be according to the expenditures deemed
by the Company and its Board of Directors to be in the best interests of
advancing the business of the Company. The actual expenditures will also
vary from the estimated use of proceeds if less than all of the Shares are
sold.
The Company anticipates that the net proceeds from the Offering will be
sufficient to meet its financial requirements for only a short period of time.
The Company, therefore, will require substantial additional capital to fund
its contemplated business plan in the near future.
The Company anticipates expenses associated with the Offering, including
legal, accounting, and stock transfer agent expenses, will be approximately
$10,000US.
The Company anticipates expenses associated with the registration of
the Shares issued pursuant to the Offering, including legal and accounting
expenses, will be approximately $30,000US.
We do not intend to become an investment company under the
Investment Company Act of 1940 and, therefore, may be limited in the
temporary investments we can make with the proceeds of this offering.
To the extent that the net proceeds of this offering are not utilized
immediately, they will be invested in money market accounts, savings
deposits, short-term obligations of the United States government, or other
temporary interest bearing investments in commercial financial institutions.
BUSINESS
General
Northstar Electronics, Inc., is a corporation originally organized
as Scientific Technologies, Inc. under the laws of the State of Delaware
on May 11, 1998. (See Exhibit-A) The company acquired all of the issued
and outstanding common shares in Northstar Technical Inc. ("Northstar")
in January 1999. Northstar is a high technology development and
manufacturing company with two main business activities. One is
underwater communications systems, the other is contract manufacturing.
Northstar's objectives are to become a leader in marine electronics
and a major regional contract manufacturer. As a result of the
acquisition, Northstar Technical became a subsidiary of the Company.
Plan of Operations
Northstar has spent over CDN $3,500,000 to complete the
development and commercialization of the NETMIND system and
establish a production operation. Northstar has developed a
core technology for underwater communications which has potential
applications in the fishery, offshore oil and gas, defence, marine
transportation, oceanographic and environmental industries. The basic
technology was commercialized in August 1996 when the first
industrial system was produced. The plant has since manufactured
over thirty complete systems.
Industry and Market Overview
NETMIND was introduced to the marketplace in 1996 and sales
have been made in North America and Europe. The targeted customers
have been strategic in that they are industry leaders and government
agencies. Three different agencies of the US government have purchased
systems and have given very positive feedback. International customers
are interested in NETMIND for its price and technical advantages. To date,
Northstar has barely penetrated the potential market which is estimated
to be about 25,000 vessels worldwide. Upon the successful close of
this offering, sales in the first year are estimated to be up to 100
NETMIND systems.
Pricing and Profit
The NETMIND system is offered at a standard retail price of $24,224US.
A recent sales forecast projects, over a three year period, a sales volume
of $2,420,000 dependent upon sales approximated at 90 units. Market
penetration is estimated at 11%.
Distribution
The distribution of NETMIND will consist of factory trained
representatives covering major West Coast ports (San Diego,
Santa Barbara, Seattle/Bellingham, Vancouver, Victoria, Prince
George, etc.); infield demonstrations with independent and corporate
owners in each type of fishery; and via service through stocking
distributors/representative network. Major repairs being available
at the West Coast service centre in Vancouver.
Employees
As of June 15, 1999, the Company had ten employees and three part-time
engineering consultants. The Company believes that its future success
will depend in part on its ability to attract, hire and retain qualified
personnel.
Offices
The primary business activities of the Company are carried on at leased
premises
located at Suite 1455-409 Granville Street, Vancouver, British Columbia,
Canada V6C 1T2. The premises are comprised of 1,000 square feet and is
leased for a term of two years expiring on --check date--.
Northstar Technical Inc. Leases premises at 687 Water Street,
St. John's, Newfoundland, Canada A1C 6J9. The premises are comprised of
3,000 square feet and is leased for a term of two years expiring on
December 31, 2002. The Company does not lease or own any other property.
Products/Contract Manufacturing:
Northstar's second business division focuses on manufacturing
systems for the defense, transportation and communications industries
in strategic alliance with major international contractors.
Several years ago, Northstar signed a Teaming Agreement with
LORAL LIBRASCOPE, in Glendale, California for the manufacture
of control consoles for submarines. This was followed by the first
start-up contract with LOCKHEED-MARTIN which was signed in April 1997.
Northstar is attempting to secure a contract to manufacture consoles
for Canadian Navy submarines. It is expected that other work for
Canadian patrol frigates, destroyers and marine helicopters will
follow on from the submarine contracts. Northstar expects to
establish good relationships with other major defense and communications
contractors in Canada and the United States and significant contract
opportunities are expected through them. The NETMIND system has two
main competitors, Furuno in Japan and Scanmar in Norway. It is believed
that NETMIND has price and technical advantages over each. Technically,
NETMIND has longer sensor battery life, longer operating distance, and
better maintenance and repair features. See `Risk Factors.'
Business Development/Contract Manufacturing
Northstar's business development strategy is based on Northstar as
a second or third tier supplier. As such, the company would initially
pursue small to medium sized contracts primarily in capability areas.
Northstar's immediate objectives will be to establish a strong marketing
presence that will bring its capabilities to the attention of selected prime
contractors, other major project suppliers and government procurement people.
The marketing strategy will encompass development of capability brochures,
marketing to other prime contractors, direct procurement and
direct-marketing to the United States.
MANAGEMENT'S DISCUSSION
OR PLAN OF OPERATIONS
Overview of Business Plan
Northstar Technical Inc., is a high technology development and
manufacturing company with two main business activities. One is
underwater communications systems, the other is contract manufacturing.
The company's objectives are to become a leader in marine electronics and
a major contract manufacturer.
In January 1999, Northstar merged with Scientific Technologies, Inc.
A company listed on the NASD OTC. Scientific injected $500,000 into
Northstar at the time and now intends to do another injection of funds.
Present Product
Northstar has developed a core technology for underwater
communications which has applications in the fishery,
offshore oil and gas, defence, marine transportation,
oceanographic and environmental industries. The first
application is the NETMIND system for the world's
commercial fishing industry.
NETMIND monitors the performance of a trawl and is both a
conservation tool and an efficiency tool. It consists of
a group of electronic sensors that transmit measurements
from the net through the water to a receiver on the ship.
The information is displayed on a computer screen and the
captain can see what activities are occurring in the net.
He then knows how to adjust the height and width of the net
opening, how much fish are in the opening and when the net is
full and ready to be pulled in. Fishermen call NETMIND,
their `eyes beneath the sea.'
NETMIND was introduced to the marketplace in late 1996 and sales
have been made in North America and Europe. The targeted customers
have been strategic in that they are industry leaders and government
agencies. Three different agencies in the US government have purchased
systems and have given very positive feedback. International customers
are interested in NETMIND for its price and technical advantages over the
Japanese and Norwegian competition.
To date, Northstar has barely penetrated the market which is
estimated to be about 25,000 vessels world-wide. Provided the
company is successful in its financing efforts, sales in the first
year after the injection of funds are estimated to be about
100 NETMIND systems.
Competition
The NETMIND system has two main competitors, Furuno in
Japan and Scanmar in Norway. NETMIND has price and technical
advantages over each. For a typical system, our retail price is
$34,000 compared with about $52,000 for Furuno and about $56,000
for Scanmar. Technically, NETMIND has longer sensor battery life,
longer operating distance, and better maintenance and repair features.
Technology Protection
Since commercializing NETMIND, Northstar has made many enhancements
to the system. These activities have resulted in an optimum design
for which a patent application is intended. The technology is difficult
to replicate because of its sophistication and, regardless of patent
protection, it should take several years for a new player to catch up
to the present system. In the meantime, Northstar is developing new
innovative NETMIND products which should ensure a competitive edge.
Future Opportunities
Northstar's second technology application will likely be for
the multi billion dollar offshore oil and gas industry. One
potential product is for the remote control of subsea wellheads.
This is especially important as the industry goes into deeper and
deeper water to find and produce petroleum.
Further business opportunities are envisaged for the defense,
marine transportation, oceanographic and environmental industries.
The possibilities include sonar towed arrays for seismic exploration,
sonar towed arrays for submarines, docking systems for large ocean going
ships, positioning systems for oil and gas drilling platforms, acoustic
measurements for ocean currents, and diver communications for the
recreational diving industry. Northstar would look to strategic
alliances with other companies and government agencies to reduce
technological risks and open doors to new markets.
Contract Manufacturing
Northstar's second business division focuses on
manufacturing systems for the defense, transportation
and communications industries in strategic alliance with
major international contractors. Several years ago, Northstar
signed a Teaming Agreement with LOCKHEED MARTIN to manufacture
consoles for the Canadian Navy submarines. Other work for Canadian
patrol frigates, destroyers and the Maritime Helicopter Project
should follow on from the submarine contracts. Northstar expects
to establish good relationships with other major defense and
communications contractors in Canada and the US and significant
contract opportunities are expected through them.
Projected Revenues
Northstar's management is comprised of a small team of individuals
experienced in the development, manufacturing and sale of ocean industry
technologies. Dr. Wilson Russell, Chairman and CEO, has 25 years
experience in the field and has established himself as an
international consultant in ocean industry, oil, gas, and high technology.
Dr. David is the Technical Director and is one of the world's leaders in
developing and manufacturing ocean instrumentation for the defense industry.
Mr. Brian Gamberg, P.Eng., Senior Electronics Engineer, has over 20 years
experience developing marine systems. Mr. Jim Hall is Production Manager
and heads up a highly trained and competent manufacturing operation.
Mr. James Radford, President of First Watch Marine Ltd., is the NETMIND
marketing agent and has 25 years experience in marketing and sales.
Mr. William Dawe, C.A., is Northstar's financial consultant.
Plant/Corporate Offices
The manufacturing plant is located in St. John's Newfoundland and
its corporate headquarters are located in Vancouver, B.C.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN SECURITY OWNERS
The following table sets forth, as of September 15, 1999,
the beneficial ownership of the Company's Common Stock by
each officer and director of the Company, by each person
known by the Company to own beneficially more than 10% of
the Company's Common Stock outstanding and by the officers
and directors of the Company as a group. Except as otherwise
indicated, all stocks are owned directly.
Name and Address Number of Shares Percentage of
Title of Class of Beneficial Owner of Common Stock Common Stock
Common Stock Frank Power 990,000
998 Riverside Drive
Port Coquitlam, B.C.
Canada V3B 7Y4
Common Stock Wilson Russell 964,883
4742 Collingwood St.
Vancouver, B.C.
Canada V6S 2B4
Common Stock Lee Meyer 100,000
9629 Alene Drive
Tujunga, CA
91042
Common Stock Ladner Enterprises 597,900
Common Stock Monaco Ventures 1,000,000
Common Stock London 700,000
Common Stock All officers and 2,054,883
Directors as a
Group (3 persons)
The following directors and officers of the Company have been
granted options to purchase shares of the Company's stock as follows:
Optionee Position Options Option Price Per Share
Wilson Russell Director 250,000 $0.50
Frank Power Director 100,000 $0.50
(2) Record owners and beneficial See "SECURITY OWNERSHIP
owners of 5% or more of any OF MANAGEMENT AND CERTAIN
class of our securities: SECURITY HOLDERS
(3) Promoters: None, except for officers and directors
(4) Affiliates None, except for officers and directors
(5) Counsel: O'Neill and Company
Barristers and Solicitors
Suite 1880, Royal Centre
1055 West Georgia Street, Box 11122
Vancouver, British Columbia V6E 3P3
Att: Mike Taylor/Stephen O'Neill
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and
directors of the Company, their present positions with the Company,
and their biographical information. Each director will serve until
the next annual meeting of shareholders, and thereafter if re-elected.
Name of Director Age
Dr. Wilson Russell 53
Mr. Frank Power 56
Mr. Lee Meyer 54
Name of Officer Office
Dr. Wilson Russell 53 President
Mr. Frank Power 56 Vice-President
As a Delaware corporation, the final responsibility for the management of
the affairs of the Company rests with the Board of Directors. That Board
currently consists of three directors. Those directors are elected at the
annual meeting of the shareholders and serve for an annual term until they
resign or are replaced. Those directors meet or otherwise consult with one
another on a regular basis. To review the affairs of the company and to
adopt or confirm any resolutions which are necessary to grant contractual
and other authority to administrative officers. The directors may, and
probably will, designate an executive committee to which they will grant
limited authority to make certain ministerial decisions on behalf of the
board.
The following sets forth information as to the principal occupation and
business experience for at least the past five years of each of those
directors and officers.
Dr. Wilson Russell: Dr. Russell received a Master's Degree in
Engineering and in Physics from Memorial University of Newfoundland
and a Doctorate in engineering Physics from the University of
Aix-Marseille in France. Dr. Russell's numerous positions include:
geophysicist with Pan-American Petroleum (AMOCO) in Calgary, Alberta
(1968); professor and researcher at Memorial University (1968 to 1977);
Director of Engineering at NORDCO Ltd. (1977 to 1980); and Associate
Director of the Newfoundland Petroleum Directorate. After starting
his own consulting and technology development firm in 1983,
Dr. Russell has also managed the preparation of the development
plan for the $6 billion Hibernia development which was submitted
to the government for approval of the project; invented,
developed and commercialized the Hydroball current profiling system,
a unique phased array ocean current profiling system which won the
silver medal at the Canada Awards for Business Excellence in 1986;
and developed a fibre optic modem for TRW in the United States.
Dr.Russell founded NewTech Instruments Ltd., in partnership with
a subsidiary of Bell Canada and was the first Chairman of the Board
of Directors of Seabright Corporation. Dr. Russell has also acted
as a consultant for the Canadian federal government, the provincial
governments of British Columbia and Newfoundland, the Canadian Consul
in Boston, Massachusetts, Mobil Oil, the Defense Research Establishment
Pacific and the French Navy. Dr. Russell founded Northstar in 1989 and
serves as Chairman and Chief Executive Officer. He is also a director
and President of Cabot Management Ltd. And, until recently, was a
director at the University of Victoria's Innovation and development
Corporation.
Mr. Frank Power: Mr. Power, a business management consultant, has
managed and administered several public companies for the last 15 years.
Since 1894, Mr. Power has provided services, including strategic planning,
management, administration, design and construction of major mining
projects both nationally and internationally. He has owned and operated
several consulting companies which have been providing comprehensive
services in the industrial and high-technology fields as well as the
mining field. His expertise also includes re-activating public companies,
project acquisitions, public and private funding, as well as developing
and taking private companies public. He is equally skilled to function
in the public markets of both Canada and the United States. Mr. Power
is President and Owner of Pow Con Management since 1981 and Premier
Enterprises Ltd. Since 1994. These companies manage, administrate
and finance reporting companies. He served as President and Director
of several Vancouver reporting companies and publicly listed companies
since 1986 to present. Since 1992, Mr. Power has served as President
of World Organics Inc., listed on the Vancouver Stock Exchange.
From 1996 to 1997, Mr. Power served as President and Director of
Accuimage Diagnostics and he is also the past President of Security
Industries, Inc. These companies are traded on the OTC Bulletin Board.
Mr. Lee Meyer: Mr. Meyer, since completing his Business Administration
Degree from Arizona State University, has held positions as Managing
Director of Omni International; Vice-President and Director of World
Organics, Inc., a reporting company; Secretary and Treasurer of Tec
Industries Corp., a specialty equipment rental agency; and owner and
President of Stretchcoat, a national manufacturer and marketer of
specialty products. Mr. Meyer has also represented major principals
selling products nationally.
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets out certain information as to the company's
three highest paid officers and directors for the period from the
commencement of Scientific's Business to June 15, 1999. No other
compensation was paid to any such officer or director other than
the cash compensation set forth below:
Summary Compensation Table
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Dr. Wilson Russell Director and President $16,300
Mr. Frank Power Director and Vice-President $10,000
Mr. Lee Meyer Director N/L
Officers and Directors Directors and Officers $26,300
of the Company as a
Group
The compensation paid to directors and officers to June 15, 1999 is believed by
the Company to be below market rates for the services provided by the
directors and officers, having regard to their experience and
qualifications. The Company anticipates compensation being increased
to market rates upon the Company achieving sufficient revenues and/or
financing to pay such increased compensation.
INTEREST OF MANAGEMENT AND
OTHERS IN CERTAIN TRANSACTIONS
There are no material contracts entered into by the Company
within the two years preceding the date hereof which are
still in effect, except as follows:
Completion of the previous offering: The Company completed
an offering of 363,000 shares on January 26, 1999.
The proceeds of the offering were US$363,000. The
purchasers of the shares were all non-US residents.
Acquisition of Northstar: the Company acquired Northstar in
January 1999, pursuant to an agreement dated July 31, 1998.
The Company purchased all of the issued and outstanding shares
of Northstar in exchange for 4,901,481 shares of the Company's
Common Stock which were issued from treasury.
Copies of the foregoing contracts and any reports referred to
in this registration statement may be inspected at the head
office of the Company at Suite 1455-409 Granville Street, Vancouver,
British Columbia, Canada V6C 1T2, during normal business hours while
the Offering contemplated hereunder is in progress to and including the
closing date.
Except for the acquisition of Northstar, none of the following persons
has any direct or indirect material interest in any transaction to which
the Company is a party since the incorporation of the Company in May, 1998
or in any proposed transaction to which the Company is proposed to be a
party:
(A) any director or officer of the party
(B) any proposed nominee for election as a director of the company
(C) any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to the Company's
Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or
any relative of such spouse, who has the same house as such person
or who is a director or officer of any parent or subsidiary of the Company.
DESCRIPTION OF SECURITIES
General:
The securities being offered are the shares of the Company's common stock,
par value $0.0001 per share. Under the Company's Articles of Incorporation,
the total number of shares of all classes of stock that the Company shall
have authority to issue is 100,000,000 shares o common stock par value
$0.0001 per share (the "Common stock") and 20,000,000 shares of preferred
stock, par value $0.0001 per share (the "Preferred Stock"). As of October
15, 1999, a total of 7,604,801 shares of Common Stock are issued and
outstanding. All issued and outstanding shares of the Common Stock
are fully paid and non-assessable.
Common Stock:
Holders of Common Stock have the right to cast one vote for
each share held of record on all matters submitted to a vote
of holders of Common Stock, including the election of directors.
Holders of a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy,
are necessary to constitute a quorum at any meeting of the Company's
stockholders, and the vote by the holders of a majority of such outstanding
shares is required to effect certain fundamental corporate changes such as
liquidation, merger or amendment of the Company's Articles of Incorporation.
Holders of Common Stock are entitled to receive dividends pro
rata based on the number of shares held, when, as and if declared
by the Board of Directors, from funds legally available therefore.
In the event of the liquidation, dissolution, or winding up of affairs
of the Company, all assets and funds of the Company remaining after the
payment of all debts and other liabilities shall be distributed, pro rata a
mong the holders of the Common Stock. Holders of Common Stock are not
entitled to pre-emptive or subscription or conversion rights, and there
are no redemption or sinking fund provisions applicable tot he Common Stock.
All outstanding shares of Common Stock are fully paid and non-assessable.
Transfer Agent:
Signature Stock Transfer of Dallas, Texas is the transfer agent for
the Shares.
14675 Midway Road-Suite 1221
Dallas, TX 75244
Tel: (972) 788-4193
Fax: (972) 788-4194
Share Purchase Warrants:
None.
LITIGATION
The Company is a defendant in a lawsuit commenced against the Company by
the Company's former master distributor. The former distributor has
alleged that the Company has interfered with the ability of the former
distributor to sell products. The company has filed a counterclaim for
monies owing by the former distributor to the Company. An adverse
outcome to the lawsuit could have an adverse material impact upon the
Company.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As per Risks Related to the Management Structure of the Company,
management will have no liability to the Company for any mistakes
errors of judgement or for any act of omission believed to be within
the scope of authority conferred by the Company's articles unless
such acts or omissions were performed or omitted fraudulently or in
bad faith, constituted gross negligence or were a violation of a
director's or officer's fiduciary obligations to the Company. The
Company has agreed to indemnify the officers and directors against
all loss or damage even if caused by that officer's or director's
fraud, bad faith, gross negligence or breach of fiduciary obligation.
FINANCIAL STATEMENTS-This section should comprise the audited and
unaudited financial statements of Northstar Electronics/Scientific
Technologies and Northstar Technical, Inc.
Index to Financials
i) Northstar Electronics, Inc. for period of 7 months ending July 31,
1999 Consolidated and unaudited.
ii) Northstar Technical audited financials for period ending December
31,1998 includes auditors report.
iii) Scientific Technologies, Inc.(now known as Northstar Electronics,
Inc.) audited financial statements for period ending December 31,
1998 , including auditors report.
iv) Northstar Technical, Inc. unuadited financial statements for
period ending July 31, 1999.
- --------------------------------------------------------------------
i) NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED BALANCE SHEET
(Unaudited)
FOR THE 7 MTHS ENDED JULY 31, 1999
ASSETS
Current US$
Bank and term deposit 45,456.60
Receivables 153,358.07
Inventory 83,860.14
Prepaid Expenses 2,549.06
==========
285,223.87
Capital Assets 24,759.53
Deferred development costs Netmind/contract 575,201.06
599,960.59
==========
885,184.46
LIABILITIES
Current
Payables and accruals 73,187.01
Loans payable (Note 2) 13,779.80
==========
86,966.81
Long term debt ( Note 3) 489,738.61
Loans payable to Cabot Management Limited, no set terms
of repayment 79,225.70
Loans payable to shareholders, no set terms of payment 79,887.91
==========
648,852.22
SHAREHOLDERS' EQUITY
Share Capital (Note 4) 971,335.44
Earnings (loss) for period (212,030.52)
Deficit (609,939.49)
==========
149,365.43
885,184.46
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED INCOME STATEMENT
(Unaudited)
FOR THE 7 MONTHS ENDED JULY 31, 1999
US$
Revenue
Sales 171,769.89
Interest Income 652.93
==========
172,422.83
Less cost of goods sold 72,812.34
99,610.49
Expenses
Business Development 1,277.16
Business Tax 128.05
Commissions 30,866.67
Depreciation 54,407.64
Dues and fees 3,234.33
Exchange (9,005.94)
Insurance 1,047.37
Interest and Bank 20,553.57
Lab Expenses 84,662.08
Management Fees 36,666.67
Marketing 1,492.81
Misc. 928.18
Office Expenses 27,445.49
Professional Fees 32,553.77
Rent 16,792.09
Salaries/Wages/employee benefits 49,732.57
----------
352,782.53
Less: allocation to Deferred Technology (41,141.52)
==========
311,641.01
Earnings (loss) (212,030.52)
NOTES:
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Accounting treatment
This internal interim consolidated balance sheet has been
prepared by combining the July 31st, 1999 internal
non-consolidated balance sheet of Scientific Technologies
Inc. and the internal balance sheet of Northstar Technical
Inc. On consolidation all intercompany receivable and
payable balances have been eliminated.
. Short term loans
9% TD Select Line of credit $ 3,400
Short term loan Eastern Meridian per specific terms,
(repaid in full October, 1999) $10,379
=======
$13,779
. Long Term Debt
10% loan payable to Pathfinder Enterprises Inc. in monthly
interest payments only to July 5, 2002 $160,000
ACOA (Federal Government Agency) interest free loan repayable
in sixty monthly and consecutive installments of $2,170. $130,221
ACOA (Federal Government Agency) interest free loan repayable
in twenty-four monthly and consecutive installments of $4,167 $100,000
10% loan payable to Enterprise Newfoundland and Labrador in
monthly interest payments plus principal amount payable on
demand. $ 12,841
ACOA (Federal Government Agency) interest free loan repayable
in 36 monthly and consecutive installments of $4,373 beginning
when full loan draw down is received. Secured by postponements
on Cabot Management Limited's loan of $87,224 and a
shareholders' loan $12,707
$ 86,676
========
$489,738
. Capital Stock
Authorized
20,000,000 preferred shares at $0.0001 par value
100,000,000 common shares at $0.0001 par value
. Issued and outstanding
7,614,493 common shares 761
Additional paid in capital 970,574
========
$971,335
- ----------------------------------------------------------------
ii) NORTHSTAR TECHNICAL INC. St. John's, Newfoundland
FINANCIAL STATEMENTS
Audited
December 31, 1998
SULLIVAN, LEWIS AND WHITE-Charter Accountants
AUDITORS' REPORT-To the Shareholders of Northstar Technical, Inc.
We have audited the balance sheet of Northstar Technical Inc.
as of December 31, 1998 and the statements of loss and deficit
and changes in cash resources for the nine months then ended.
These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly,
in all material respects, the financial position of the
company as at December 31, 1998 and the results of its
operations and the changes in its cash resources for the
nine months then ended in accordance with generally accepted
accounting principles.
The accompanying financial statements have
been prepared assuming the company will continue as a
going concern. To date the company's operations are mainly
in the development stages and has not established revenues
sufficient to cover its operating costs. It is management's
opinion that the company's main NETMIND division and the new
contract manufacturing division will generate future revenues
sufficient to cover all costs and result in annual net incomes.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
St. John's, Newfoundland /s/ Sullivan, Lewis and White
July 14, 1999 Chartered Accountants
NORTHSTAR TECHNICAL INC.
BALANCE SHEET
DECEMBER 31, 1998
December 31, March 31,
ASSETS 1998 1998
Current
Bank $1,238 $3,829
Receivables (Note 2) 148,583 228,052
Work in progress 3,688 7,101
Inventory 52,591 88,356
Prepaid expenses 2,269 4,127
208,369 331,465
Capital assets (Note 3) 25,523 27,733
Deferred development costs (Note 4) 768,311 824,744
Deferred charges (Note 5) 110,287 82,305
$1,112,490 $1,266,247
LIABILITIES
Current
Payables and accruals $212,038 $199,556
Loans payable (Note 6) 158,815 138,790
Long term debt payable within one year (Note 7) 10,716 127,340
381,569 465,686
Long term debt (Note 7) 704,630 588,006
Loans payable to Cabot Management Limited,
no set terms of repayment (Note 8) 138,339 136,530
Loans payable to shareholder, no set terms
of repayment 120,370 83,602
1,344,908 1,273,824
========= =========
Contingent liability (Note 9)
SHAREHOLDERS' DEFICIENCY
Share capital (Note 10) 622,453 605,372
Deficit (854,871) (612,949)
(232,418) (7,577)
$1,112,490 $1,266,247
ON BEHALF OF THE BOARD:
_________________________ Director
_________________________ Director
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 3.
STATEMENT OF LOSS AND DEFICIT
NINE MONTHS ENDED DECEMBER 31, 1998
Nine Months Year
Ended Ended
December 31, March 31,
1998 1998
Revenue $252,565 $272,631
Direct costs 147,155 140,891
Gross profit 105,410 131,740
Other income 8,231 13,934
113,641 145,674
Expenses
Amortization of capital assets 6,992 15,917
Amortization of deferred development costs 72,224 87,621
Bank charges and interest 15,608 16,196
Contract manufacturing division (Note 11) 72,341 126,008
Heat and light 1,905 10,343
Insurance 1,838 2,027
Interest on loans 43,911 55,963
Management and marketing fees 4,992 16,235
Marketing/Market Research costs 3,606 5,742
Municipal taxes 1,249 2,960
Miscellaneous 5,194 3,855
Office operating 10,240 18,859
Professional fees 17,138 35,296
Rent 32,435 37,685
Repairs and maintenance 2,423 4,693
Telephone 9,590 11,184
Travel 3,739 6,865
Wages and benefits 50,138 66,992
Write off obsolete inventory stock 0 14,405
Less: Allocation to deferred development costs 0 (149,808)
355,563 389,038
Net loss (Note 12) (241,922) (243,364)
Deficit, beginning of period (612,949) (351,303)
(854,871) (594,667)
Dividends paid on preference shares 0 (42,282)
Discount earned on redemption of Class A
preference shares 0 24,000
Deficit, end of period $(854,871) $(612,949)
========== ==========
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 4.
STATEMENT OF CHANGES IN CASH RESOURCES
NINE MONTHS ENDED DECEMBER 31, 1998
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Cash provided by (used in)
Operations
Net loss $(241,922) $(243,364)
Amortization 104,667 124,114
Net change in non-cash working capital items 153,012 10,434
15,757 (108,816)
Financing
Proceeds from long term debt 0 130,015
Proceeds from issuance of common shares 17,081 595,287
Advances from Cabot Management Limited 1,809 5,694
Advances from shareholder 36,768 70,043
Repayment of long term debt 0 (30,000)
Discount on redemption of preference shares 0 24,000
Redemption of preference shares 0 (84,000)
Payment of dividends on preference shares 0 (42,282)
Conversion of Class C preference shares 0 (287,333)
55,658 381,424
Investments
Increase in deferred charges - net (53,433) (102,881)
Increase in deferred development cost - net (15,791) (152,496)
Purchase of capital assets, net of investment
tax credits (4,782) (11,304)
(74,006) (266,681)
Net change in bank position (2,591) 5,927
Bank position, beginning of period 3,829 (2,098)
Bank position, end of period $1,238 $3,829
======== ========
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 5.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Significant accounting policies
a. Capital assets
Capital assets are recorded at cost less any government assistance
and are being amortizated over their estimated useful lives using
the rates and methods set out below:
Computer equipment 20% on a declining balance basis
Computer software 30% on a declining balance basis
Office furniture and equipment 20% on a declining balance basis
Leasehold improvements 20% on a straight line basis
b. Deferred development costs
All costs, including share of overhead costs, associated
with the development of the NETMIND System have
been capitalized in these financial statements as deferred
development costs. These costs are being amortized against
income on a straight line basis over a period of ten years. If
it becomes evident in a given year that the sales market for
this technology declines , then the remaining costs will be
amortized over a shorter period.
The company acquired the initial technology for the
NETMIND System from the receiver of National Petroleum and
Marine Consultants Limited and Altair Marine Systems Limited for
the sum of $ 1. Prior to going into receivership, these two companies
had spent approximately $ 1,740,408 on the development of this technology.
To date Northstar Technical Inc. has spent $ 1,847,795 on this technology,
including overhead costs of $ 621,430, which has been reduced by various
assistance and tax credits totalling
$ 879,546 as referred to in Note 4.
c. Deferred charges
Deferred charges consist of initial planning, startup and overhead c
osts related to contract manufacturing in association with Lockheed
Martin - Federal Systems Inc. These costs amounted to $ 156,314 at
December 31, 1998, as referred to in Note 5, and are being amortized
on a straight line basis over a five year term.
d. Inventory
The company's inventory is valued at the lower of cost and net
realizable value.
e. Investment tax credits
Investment tax credit refunds arising from the incurrence of qualifying
research and development expenditures have been recorded in these financial
statements as a reduction of the applicable deferred development costs.
f. Government assistance
The company has been awarded assistance under government programs.
Amounts received or receivable under these programs are recorded as a
reduction in the cost of capital assets or as a reduction of the
applicable deferred development costs.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. Receivables
===============================================
December 31, March 31,
1998 1998
Trade $20,200 $137,701
Government assistance 0 22,486
Investment tax credit refunds 128,383 67,865
$148,583 $228,052
======== ========
3. Capital assets
=========================
December 31, March 31,
1998 1998
Cost Accumulated Net Book Net Book
Amortization Value Value
Computer equipment $6,654 $3,170 $3,484 $4,099
Computer software 8,892 5,681 3,211 3,945
Furniture and equipment 34,350 16,906 17,444 17,286
Leasehold improvements 15,872 14,488 1,384 2,403
$65,768 $40,245 $25,523 $27,733
======= ======= ======= =======
4. Deferred development costs
December 31, March 31,
1998 1998
Wages and benefits $693,362 $608,461
Materials and other costs 173,736 165,160
Subcontractors 359,267 359,267
Overhead 621,430 621,430
1,847,795 1,754,318
Less:
Government assistance 380,133 362,965
Other assistance 61,685 61,685
Investment tax credits 437,728 377,210
968,249 952,458
Less: Amortization 199,938 127,714
$768,311 $824,744
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. Deferred charges - Contract Manufacturing Division
=============================================
December 31, March 31,
1998 1998
Planning and start up costs $ 28,951 $ 28,951
Overhead costs (Note 10) 127,363 73,930
156,314 102,881
Less: Amortization of deferred charges 46,027 20,576
$110,287 $82,305
======== ========
6. Loans payable
==============================================
December 31, March 31,
1998 1998
10% loan payable to Enterprise Newfoundland
and Labrador in monthly interest payments
plus principal amount payable on demand $20,473 $22,451
12% loan payable to Eastern Meridian Mining
Corporation including accrued interest,
to be repaid in full by March 1, 1999,
secured by the personal guarantee of
Wilson Russell 83,036 75,939
Loan payable to Toronto-Dominion bank,
secured by the personal guarantee of
Wilson Russell. This loan was repaid
in full on September 24, 1998 0 20,000
Loan payable to Brian Gamberg repaid in full
on April 15, 1998 0 20,400
Loan payable to Dr. Carl Wesolowski 55,306 0
$158,815 $138,790
======== ========
7. Long term debt
==========================================
December 31, March 31,
1998 1998
ACOA 7.5% loan with monthly principal
repayments of $ 3,256 commencing June 1, 2000 $195,331 $195,331
ACOA 10.9 % loan with monthly principal
repayments of $ 1,786 beginning July 1, 1999 150,000 150,000
10% loan payable to Pathfinder Enterprises Inc.
in monthly interest payments only to July 5,
2002, secured by a floating charge debenture 240,000 240,000
ACOA 6.25% loan repayable in 72 monthly
consecutive instalments of $ 3,280 beginning
July 1, 2000 if full loan draw down is received.
Secured by postponements on Cabot Management
Limited's loans of $ 130,836 and shareholders'
loan of $ 19,060 130,015 130,015
715,346 715,346
Less: Long term debt payable within one year 10,716 127,340
$704,630 $588,006
======== ========
8. Loans payable - Cabot Management Limited
Cabot Management Limited, an associated
company, has the option to convert their
interest free loans, totalling $ 138,339
at December 31, 1998, to common shares of
Scientific Technologies Inc. (See Note 13)
9. Contingent liability
The company is presently involved in a dispute
with their distributing agent, whose contract
has now been terminated due to non-payment for
NETMIND systems sold to them. This termination
has lead to court action, the outcome of which
is unknown as at the financial statements date.
10. Share capital
==============================================
December 31, March 31,
1998 1998
Authorized
An unlimited number of Class A common
shares with no par value
An unlimited number of Class A preference
shares with no par value
An unlimited number of 10% redeemable,
retractable, cumulative, non-voting,
participating Class B preference shares with
no par value
An unlimited number of 10% redeemable,
retractable, cumulative, non-voting,
participating Class C preference shares with
no par value
Issued and outstanding 14,704,440 Class A
common shares $622,453 $605,372
11. Contract Manufacturing Division
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Amortization of deferred charges (Note 5) $25,451 $20,576
Contract labor 0 25,000
Operating expenses 1,199 63,356
Salaries and benefits 105,667 136,038
Less: Direct costs on contract with
Lockheed Martin - Federal Systems, Inc. 0 (25,133)
Wage subsidy/NRC funding (6,543) (19,899)
125,774 199,938
Less: Allocation to deferred charges (Note 5) (53,433) (73,930)
$72,341 $126,008
======== ========
12. Income taxes
The company has losses carried forward totalling $ 1,531,226 which
have not been recognized in these financial statements. These losses
carried forward can be applied against otherwise taxable income and if
unused will expire in the following years:
December 31, 1999 - $3,811
December 31, 2001 - $37,523
December 31, 2002 - $94,492
December 31, 2003 - $512,179
December 31, 2004 - $367,846
December 31, 2005 - $515,375
Also the company's book values of deferred development costs and
deferred charges exceeds their income tax values by $ 878,598 as at
December 31, 1998.
The net deferred income taxes debit related to both of these items
have not been reflected in these financial statements.
13. Subsequent event
On January 26, 1999 the merger between Northstar Technical Inc. and
Scientific Technologies Inc. was completed which resulted in Northstar
Technical Inc. becoming a wholly owned subsidiary of Scientific
Technologies Inc., a US public trading company.
On January 15, 1999 and January 26, 1999 the shareholders of
Northstar Technical Inc. exchanged their 14,704,440 common shares
for 4,901,480 common shares in Scientific Technologies Inc. on the
basis of three Northstar shares for every one share of Scientific.
- ------------------------------------------------------------------
iii)
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Scientific Technologies, Inc.
(A Development Stage Company)
Vancouver, B.C. Canada
We have auited the accompanying balance sheet of Scientific Technologis,
Inc. (a development stage company) as of July 31, 1998 and the related
statements of operations, stockholders' equity (deficit) and cash flows
from inception on May 11, 1998 through July 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Scientific
Technologies, Inc. (a development stage company) as of July 31, 1998
and the results of its operations and its cash flows from inception
on May 11, 1998 through July 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the company is a development
stage company with no significant operating revenues to date which
raises significant doubt about it's ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
By: /s/
- --------------------------
Jones, Jensen & Company
Salt Lake City, Utah
September 11, 1998
SCIENTIFIC TECHNOLOGIES, INC
(A Develpment Stage Company)
BALANCE SHEETS
ASSETS
Current Assets
Cash $27,436
Total Current Assets 27,436
Total Assets 27,436
========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Account Payable $58,000
Note Payable 5,125
--------
Total Liabilities 63,125
========
STOCKHOLDER's EQUITY (DEFICIT)
Perferred stock authorized, 20,000,000 shares at
$0.0001 par value; no shares issued or outstanding -0-
Common Stock authorized, 100,000,000 shares at
par value; 2,140,000 shares issued and outstanding 214
Additional Paid-in-Capital 24,886
Deficit accumulated during the development stage (60,789)
--------
Total Stockholder's Equity (deficit) (35,689)
--------
TOTAL LIABILILTIES and STOCKHOLDERS EQUITY(Deficit) $ 27,436
========
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Operations
From Inception on
May 11, 1998 Through
July 31, 1998
REVENUES $0
EXPENSES
General and administrative 789
Organizational costs 60,000
Total Expenses (60,789)
NET LOSS $(60,789)
BASIC LOSS PER SHARE $(0.03)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2,140,000
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
Additional Accumulated
Common Stock Paid-in During the
Shares Amount Capital
Development
Stage
Inception, May 11, 1998 0 $ 0 $ 0 $ 0
Common stock issued for cash
at $0.0025 per share 2,040,000 204 4,896 0
Common stock issued for cash
at $0.25 per share 100,000 10 24,990 0
Stock offering costs 0 0 (5,000) 0
Net loss from inception on
May 11, 1998 through July 31, 1998 0 0 0 (60,789)
Balance, July 31, 1998 2,140,000 $ 214 $24,886 $(60,789)
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Cash Flows
From
Inception on
May 11, 1998
Through July 31,
1998
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (60,789)
Changes in operating assets and liabilities:
Increase in accounts payable 58,000
Net Cash (Used) by Operating Activities (2,789)
CASH FLOWS FROM INVESTING ACTIVITIES: 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash 30,100
Stock offering costs (5,000)
Increase in note payable 5,125
Net Cash Provided by Financing Activities 30,225
NET INCREASE (DECREASE) IN CASH 27,436
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,436
Cash paid during the year for:
Interest $ 0
Income taxes $ 0
SCIENTIFIC TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
July 31, 1998
NOTE 1- ORGANIZATION
The financial statements presented are those of Scientific
Technologies, Inc. (the Company). The Company was incorporated
under the laws of the State of Delaware on May 11, 1998. The
Company was organized for the purpose of engaging in any activity
or business permitted under the laws of the State of Delaware.
The Company has not began principal operations so it has been
classified as a development stage company.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
b. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period
of the financial statements.
c. Provision for Taxes
At July 31, 1998, the Company has net operating loss carryforward of
approximately $60,789 that may be offset against future taxable income
through 2013. The tax benefit of the loss carryforward has been offset
by a valuation allowance for the same amount.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company considers
all highly liquid investments with a maturity of three months or less,
from the date of purchase, to be cash equivalents.
NOTE 3- GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. The Company has not established revenues sufficient
to cover its operating costs and allow it to continue as a going concern.
The Company is seeking funds from a private placement of its common stock.
In the interim, management has committed to converting all operating and
other costs.
- -------------------------------------------------------------------------
iv)
Northstar Technical Inc.
St. John's, Newfoundland
Internal
Unaudited Financial Statements
July 31,1999
Northstar Technical Inc.
Balance Sheet
As at July 31, 1999
Unaudited
Current Year Ended
Balance Dec. 31, 1998
Assets
Current
Bank 28,275.60 1,237.72
Accounts Receivable 230,037.10 148,582.94
Inventory 125,790.21 56,279.65
----------- ----------
387,926.50 208,368.34
Fixed Assets, Net of Accumulated
Depreciation
Computer Equipment St. John's 6,637.49 6,142.51
Accum Deprec. Computer SA (3,274.47) (2,908.51)
Computer Equipment Vancouver 1,808.16 511.38
Computer Software St. John's 9,137.86 8,891.88
Accum Deprec. Software SJ (6,258.10) (5,680.88)
Accum Deprec. Computer SJ (261.38) (261.38)
Furniture and Equipment St. John's 33,575.99 30,590.09
Accum Deprec. Furn St. John's (16,518.87) (14,650.29)
Furniture and Equipment Vancouver 3,759.64 3,759.64
Accum Deprec. Furn & Equip VA (2,462.07) (2,255.64)
Lab Equipment 11,369.97 0.00
Leasehold Improvements SA 15,163.31 14,488.23
Amortization St. John's (15,538.23) (14,488.23)
------------ ------------
Total Fixed Assets 37,139.30 25,522.80
Deferred Technology Costs
Deferred Technology Costs 1,186,275.77 1,124,563.49
Amortization Deferred Tech. (323,474.18) (245,965.21)
------------ ------------
Total Deferred Technology Costs 862,801.59 878,598.28
------------ ------------
Total Assets 1,287,867.39 1,112,489.42
============ ============
Northstar Technical Inc.
Liabilities and Shareholders' Equity
As at July 31, 1999
Unaudited
Liabilities
Current Year Ended
Balance Dec. 31, 98
Current
Payables and Accruals 47,185.18 80,567.36
Trade Payables 49,376.33 128,415.22
Total Current Liabilities 96,561.51 208,982.58
Short Term Loan
Accounts Payable adventure 0.00 55,305.76
A/P Eastern Meridian Mining 15,569.54 83,036.27
Loan Payable (TD 32101169) 5,100.16 0.00
Total 20,669.70 138,342.03
Long Term Liabilities
Adventure Capital 240,000.00 240,000.00
Acoa Provisonally Repayable 325,346.00 325,346.00
Acoa Action Loan 150,000.00 150,000.00
Cabot Management 118,838.55 138.338.55
Accounts Payable Enl 19,261.91 20,473.23
Due to STI 679,024.85 3,055.40
Shareholders Loans Russel 64,831.87 120,369.55
Total Long Term Liabilities 1,597,303.18 997,582.73
Equity
Shareholders Equity
Common W. E. Russel 80.00 80.00
Common Adventure Capital 10,000.00 10,000.00
Common J. Radford 5.00 5.00
Class A Common Shareholders 612,368.31 612,368.31
Total Shareholders' Equity 622,453.31 622,453.31
Retained Earnings (854,871.23) (854,871.23)
Profit (Loss) For period (194,249.08) 0.00
Total (1,287,867.39) (854,871.23)
Total Liabilities and Equity 1,287,867.39 1,112,489.42
Northstar Technical Inc.
Accounts Receivable
As at July 31, 1999
Unaudited
Current Year Ended
Balance Dec. 31, 1998
Accounts Receivable
Accounts Receivable Control 148,665.04 20,051.40
A/R Employee Advances 500.00 0.00
A/R HST 20,206.12 0.00
A/R SR&ED 60,517.54 128,382.54
A/R Other 148.40 149.00
Total Receivable 230,037.10 148,582.94
Northstar Technical Inc.
Consolidated Departments
Statements of Earnings
7 Periods Ended July 31, 1999
Unaudited
Current Current
Month YTD
Revenue:
Sales/Contract/Misc Revenue 220.17 257,654.84
Revenue 220.17 257,654.84
Cost of goods sold
Cost of goods sold 552.37 109,218.51
Total cost of goods sold 552.37 109,218.51
Gross Profit (332.20) 148,436.33
Add Government support
Total Government Support 0.00 0.00
Total (332.20) 148,436.33
Expenses:
Lab Expenses 24,597.02 126,993.12
Business Tax (428.91) 192.08
Depreciation 67,421.07 81,611.46
Interest 4,618.52 30,350.25
Office Expenses 2,277.50 38,327.26
Salaries/wages/Emp/ Benefits 11,284.39 74,598.86
Professional Fees 2,645.00 23,326.24
Rent 3,633.75 25,188.14
Insurance 274.34 1,571.06
Marketing 525.00 2,239.22
Less: Allocation to deffered
Technology Cost (61,712.28) (61,712.28)
55,135.40 342,685.41
Earnings (Loss) (55,467.60) (194,249.08)
Earnings (Loss) Before Income Taxes (55,467.60) (194,249.08)
Net Earnings (Loss) For Period (55,467.60) (194,249.08)
TABLE OF CONTENTS
3 PROSPECTUS SUMMARY
4 RISK FACTORS
5 RISK FACTORS RELATING TO MARKET PROTECTION
7 RISKS RELATED TO THE MANAGEMENT STRUCTURE OF THE COMPANY
7 RISKS INHERENT IN BUSINESS
8 RISKS RELATED TO THE NATURE OF THE OFFERING
8 GENERAL CAUTION
9 DILUTION
9 USE OF PROCEEDS
10 BUSINESS
12 MANAGEMENT'S DISCUSSION PLAN OF OPERATIONS
14 SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
16 DIRECTOR'S OFFICERS AND SIGNIFICANT EMPLOYEES
17 REMUNERATION OF DIRECTORS AND OFFICERS
18 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
19 DESCRIPTION OF SECURITIES
20 LITIGATION
20 INDEMNIFICATION OF OFFICERS AND DIRECTORS
Northstar Electronics, Inc.
(800,000 shares of Common Stock)
PROSPECTUS
October____, 1999
Until__________, 1999 (90 days after the date of this prospectus)
all dealers effecting transactions in the registered securities, whether
or not participating in this distribution, may be required to deliver
a prospectus.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
As per Risks Related to the Management Structure of the Company,
management
will have no liability to the Company for any mistakes errors of
judgement or
for any act of omission believed to be within the scope of
authority conferred
by the Company's articles unless such acts or omissions were
performed or
omitted fraudulently or in bad faith, constituted gross
negligence or were
a violation of a director's or officer's fiduciary obligations
to the Company.
The Company has agreed to indemnify the officers and directors
against all loss
or damage even if caused by that officer's or director's fraud,
ITEM. 2 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Filing Fee $ 287
Accounting fees 12,000
Legal fees 25,000
Other professional fees 10,500
Blue Sky fees and expenses 2,500
Transfer agent's fees 1,900
Printing, including registration 1,500
statement and prospectus
Miscellaneous costs and expenses 2,000
-----------
55,817
ITEM 3. UNDERTAKINGS
Post-Effective Amendments {Regulation S-B, Item 512-(a)}
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10 (a) (3) of the
Securities Act;
(b) To reflect in the prospectus any fact or events arising after
the effective date of the Registration Statement (or most of the
recent post-effective amendment thereof) which, individually, or
in the aggregate, represent a fundamental change in the information
set forth in the registration Statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement,
including (but not limited to) addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act,
each such post-effective amendment shall be deemed to be a new
registration
statement relating to the securities offered therein, and the offering
of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of
the securities being registered which remain unsold at the termination
of the offering.
ITEM. 4
UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
The registrant has issued or sold the following securities within one
year
prior to filing this registration statement which were not registered
under
the Securities Act of 1933 (the "Securities Act")
ISSUANCE RESOLUTION-NEW STOCK
CORPORATE RESOLUTION FOR THE ISSUANCE OF NEW SHARES FROM NEW STOCK
SCIENTIFIC TECHNOLOGIES, INC.
(COMPANY NAME, SECURITIES NAME)
COMMON STOCK
(CLASS OF STOCK)
Resolved that Signature Stock Transfer, Inc., a Texas corporation,
sole stock transfer agent for the above class of stock for the above
company to issue the shares described below and increase the outstanding
shares on the books of the company.
Issuance Instructions:
REGISTERED NUMBER DATE RESTRICTION (IF FREE
NAME & ADDRESS OF SHARES ISSUED TRADING STOCK, IT IS
REQUIRED TO LIST
EXEMPTIONS)
Mr. Michael Ghanadian 200, 000 26/06/99 The shares to be issued will
CH. Diodtai 10 carry a legend restricting
1223 Cologny, Switzerland for resale pursuant to an
available exemption from
registration under the act.
Increasing the number of shares outstanding by 200,000 shares.
(Please note-This resolution is only used to increase the control
book).
We, the undersigned, qualified officers of the above named company,
do hereby indemnify Signature Stock Transfer, Inc. And their
employees against any and all actions taken by the above company,
and certify that this is a true copy of a resolution, set forth and
adopted on the below date, and that the said resolution has not been
in any way rescinded, annulled or revoked but the same is still in
full force, and effect.
____________________________ _____________________
Wilson E. Russell, President Frank Power, Director
Dated, this the 29th day
of June, 1999.
Name & Mailing Instructions
Courier all above certificates to:
Scientific Technologies, Inc.*
Attention: Wilson Russell
1455-409 Granville Street
Vancouver, B.C. V6C 1T2
*note that the company has undergone a name change since the filing
of this document,
"SEE EXHIBITS"
The securities offered hereby have not been registered under the
Securities Act of 1933 (The "Act"), and are proposed to be issued
in reliance upon an exemption from the registration requirements
of the act provided by Regulation S promulgated under the act.
Upon any sale, such securities may not be reoffered for sale or
resold or otherwise transferred except in accordance with the
provision of Regulation S, pursuant to effective registration under
the act. Hedging transactions involving the securities may not be
conducted unless in compliance with the act.
SUBSCRIPTION AGREEMENT
Scientific Technologies, Inc.* (See Exhibits)
SUBSCRIPTION AGREEMENT made as of this 25 day of June, 1999
between Scientific Technologies, Inc., a Delaware corporation with
an office at 1455-409 Granville Street, Vancouver, British Columbia
V6C 1T2 ("the Company") and the undersigned ("the Subscriber").
WHEREAS:
A. The company desires to issue a maximum of 1,000,000 shares of
common stock of the Company at a price of $1.00 US per share
("the Offering") pursuant to Regulation S of the United States
Securities Act of 1933 ("the Act").
B. The Subscriber desires to acquire the number of shares of the
Offering set forth on the signature page here of ("the Shares") on
the terms and subject to the conditions of this Subscription Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby
agree as follows:
1. SUBSCRIPTION FOR SHARES
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from
the Company such number of Shares as is set forth upon the signature
page hereof at a price equal to $1.00US per share. Upon execution,
the subscription by the Subscriber will be irrevocable.
1.2 The purchase price is payable by the Subscriber contemporaneously
with the execution and delivery of this Subscription Agreement.
1.3. Upon execution by the Company, the Company agrees to sell such
Shares to the Subscriber for said purchase price subject to the
Company's right to sell to the Subscriber such lesser number of Shares
as it may, in its sole discretion, deem necessary or desirable.
1.4 Any acceptance by the Company by the Subscriber is conditional
upon compliance with all securities laws and other applicable laws of
the jurisdiction in which the Subscribers resident. Each Subscriber
will deliver to the Company all other documentation, agreements,
representations and requisite government forms required by the lawyers
for the Company as required to comply with all securities laws and
other applicable laws of the jurisdiction of the subscriber. The
Company will not grant any registration other qualification rights
to any Subscriber, other than the agreement of the Company to register
the shares with the United States Securities and Exchange Commission
("the SEC") as set forth in Section 2 of this Agreement.
2. REGISTRATION STATEMENT
2.1 The company agrees that within a reasonable time of
execution of this Agreement by the Company that the Company
will prepare and file a registration statement with the SEC
pursuant to the Act on a Form SB-1, or other appropriate
registration statement, as required to qualify the resale of
shares in the United States (the `Registration Statement.')
The Company will use its best efforts to ensure effectiveness
of the Registration Statement within a reasonable period of time
following filing of the Registration Statement.
3. REGULATION S AGREEMENTS OF THE SUBSCRIBER
3.1 The Subscriber agrees only to resell the shares only in
accordance with the provisions of Regulation S of the act pursuant
to registration under the Act, or pursuant to an available exemption
from registration pursuant to the Act.
3.2 The Subscriber agrees not to engage in heading transactions
with regards to the shares unless in compliance with the Act.
3.3 The Subscriber acknowledges and agrees that all certificates
representing the Shares will be endorsed with the following legend
in accordance with Regulation S of the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933(THE"ACT"), AND HAVE
BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED
UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE
OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."
3.4 The Subscriber and the Company agree that the Company will refuse
to register any transfer of the Shares not made in accordance with the
provisions of regulation S of the Act, pursuant to registration under
the Act, or pursuant to an available exemption from registration.
4. REPRESENTATIONS AND WARRANTIES BY THE SUBSCRIBER
4.1 The Subscriber represents and warrants the Company and
acknowledges that the company is relying upon the Subscriber's
representations and warranties in agreeing to sell the Shares to
the Subscriber.
(A) The Subscriber is not a "U.S. Person" as defined by
Regulation S of the Act and is not acquiring the Shares for the
account or benefit of a U.S. person.
A U.S. Person is defined by Regulation S of the Act to
be any person who is:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) any estate of which any executor or administrator is
a U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in
the United States;
(vi) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized, incorporate, or (if an individual)
resident in the United States; and
(vii) any partnership or corporation if:
1. Organized or incorporated under the laws of any foreign
jurisdiction; and
2. Formed by a U.S. person principally for the purpose of
investing in
securities not registered under the Act, unless it is
organized or incorporated, and owned, by accredited
investors {as defined in Section 230.501(a) of the Act}
who are not natural persons, estates or trusts.
(B) The Subscriber recognizes that the purchase of Shares involves a
high degree of risk in that the Company has only recently
commenced its proposed business and may require substantial funds
in addition to the proceeds of this private placement;
(C) an investment in the Company is highly speculative and only
investors who can afford the loss of their investment should
consider investing in the Company and the Shares;
(D) the Subscriber has been delivered the Company's disclosure
statement and its unaudited financial statements for the period
ending December 31, 1998 and has had full opportunity to review
the disclosure document and financial statements with the
Subscriber's legal and financial advisors prior to execution of
this Subscription Agreement;
(E) the Subscriber has such knowledge and experience in finance,
securities, investments, including investment in non-listed and
non-registered securities, and other business matters so as to
be able to protect its interests in connection with this
transaction.
(F) the Subscriber acknowledges that a limited market for the Shares
presently exists and accordingly the Subscriber may not be able
to liquidate its investment.
(G) the Subscriber hereby acknowledges that this offering of Shares
has not been reviewed by the SEC and the Shares are being issued
by the Company pursuant to an exemption from registration
provided by Regulation S pursuant to the Act.
(H) the Subscriber is acquiring the Shares as principal for the
Subscribers own benefit;
(I) the Subscriber is not aware of any advertisement of the Shares;
(J) Subscriber is acquiring the Shares subscribed to hereunder as an
investment for Subscriber's own account, not as a nominee or agent,
and not with a view towards the resale or distribution of any part
thereof, and Subscriber has no present intention of selling,
granting any participation in, or otherwise distributing the same;
(K) Subscriber does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant
participation to such person, or to any third person, with respect
to any of the shares sold hereby;
(L) Subscriber has full power and authority to enter into this Agreement
which constitutes a valid and legally binding obligation,
enforceable in accordance with its terms;
(M) Subscriber can bear the economic risk of this investment, and was not
organized for the purpose of acquiring the Shares;
(N) The Subscriber has satisfied himself or herself as to the full
observance of the laws of his or her jurisdiction in connection with
any invitation to subscribe for the Shares and/or any use of this
Agreement, including (i) the legal requirements within his/her
jurisdiction for the purchase of the Shares, (ii)any foreign exchange
restrictions applicable to such purchase, (iii)any governmental or
other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to
the purchase, holding, redemption sale, or transfer of the Shares.
5. REPRESENTATIONS BY THE COMPANY
5.1 The Company represents and warrants to the Subscriber that:
(A) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate
power to conduct the business which it conducts and proposes to conduct.
(B) Upon issue, the Shares will be duly and validly issued, fully-paid
and non-assessable common shares in the Capital of the Company.
6. TERMS OF SUBSCRIPTION
6.1 Pending acceptance of this subscription by the Company, all funds
paid hereunder shall be deposited by the Company and immediately available
to the Company for the purposes set forth in the disclosure statement.
In the event subscription is not accepted, the subscription funds, will
constitute a non-interest bearing demand loan of the Subscriber to the
Company.
6.2 The Subscriber hereby authorizes and directs the Company to deliver
the Securities to be issued to such Subscriber pursuant to this
Subscription Agreement to the Subscriber's address indicated herein.
6.3 The Subscriber acknowledges and agrees that the subscription for
the Shares and the Company's acceptance of the subscription is not
subject to any minimum subscription for the Offering.
7. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail,
return receipt requested, addressed to the Company, at Suite 1455,
409 Granville Street, Vancouver, British Columbia, Canada V6C 1T2,
Attention: Mr. Wilson E. Russell, President and Chief Executive
Officer, and to the Subscriber at his address indicated on the last
page of this Subscription Agreement. Notices shall be deemed to have
been given on the date of mailing, except notices of change of address,
which shall be deemed to have been given when received.
7.2 Notwithstanding the place where this Subscription Agreement may
be executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed in
accordance and governed by the laws of the State of Nevada.
7.3 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent
of this Subscription Agreement.
IN WITNESS THEREOF, this Subscription Agreement is executed as of the
day and year first written above.
Name of shares subscribed for: _________________________
Signature of Subscriber: _______________________________
Name of Subscriber:__________________________________
Address of Subscriber:_______________________________
________________________________
Subscriber's Social Security Number: ______________________
ACCEPTED BY:
SCIENTIFIC TECHNOLOGIES, INC.*
Signature of Authorized Signatory:__________________
Name of Authorized Signatory:______________________
Position of Authorized Signatory: ___________________
Date of Acceptance:______________________
ITEM. 5 INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this
Registration
Statement pursuant to Item Part III of Form 1-A and Item 6 of Part II.
Exhibit No. Title of Document
3.10 Certificate of Incorporation
3.11 Bylaws
3.12 Amendments-Name Change
3.2 Opinion Regarding Legality on Shares
10.1 Business and Financial
10.2 Sales Contracts
99.1 Disclosure Statement
99.2 Subscription Agreement
ITEM.6 DESCRIPTION OF EXHIBITS
Exhibit No. Description of Exhibit
3.10 Certificate of Incorporation
3.11 Bylaws
3.12 Amendments-Name Change
3.2 Opinion Regarding Legality on Shares
10.1 Business and Financial
10.2 Sales Contracts
99.1 Disclosure Statement
99.2 Subscription Agreement
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-1 and authorized
this registration statement to be signed on its behalf by the
undersigned, in the City of Vancouver, British Columbia, Canada,
on October__22__, 1999.
By: /s/ Dr. Wilson Russell
/s/ Wilson Russell, Phd
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Dr. Wilson Russell, President
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in
the capacities and on the dates stated.
: /s/ Dr. Wilson Russell
/s/Wilson Russell, Phd
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/s/ Dr. Wilson Russell, President
President and Director Date: 10/__/99
/s/ Frank Power
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Date filed: October_22___, 1999
SEC File No. __________