UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
    FORM 10-KSB
    [x] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the fiscal year ended December 31, 2005
    [] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the transition period from n/a to n/a
    Commission file number: 333-90031Northstar Electronics, Inc.
    Name of small business issuer in its charter

|Delaware                                                             | #33-0803434                            
|-------------------------------------------------------------------- | ---------------------------------------
|State
        or other jurisdiction of incorporation or organization | IRS
        Employer Identification No.

Issuer’s telephone number (604) 685-0364
  Securities registered pursuant to section 12(b) of the ActNone 
  Securities registered pursuant to section 12(g) of the Act100,000,000 shares of common stock with a par value of $0.0001 each
  Check whether the issuer is not required to file reports pursuant to Section
  13 or 15(d) of the Exchange Act [ ]
  Check whether the issuer (1) filed all reports required to be filed by Section
  13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
  period that the registrant was required to file such reports), and (2) has been
  subject to such filing requirements for the past 90 days. (1) [x] Yes
  [ ] No (2) [x] Yes [ ] No 
  Check if there is no disclosure of delinquent filers in response to Item 405
  of Regulation S-B contained in this form, and no disclosure will not be contained,
  to the best of registrant’s knowledge, in definitive proxy or information
  statements incorporated by reference in Part III of this Form 10-KSB or any
  amendment to this Form 10-KSB. [x] 
  Indicate by check mark whether the registrant is a shell company (as defined
  in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
  State issuer’s revenues for its most recent fiscal year. $1,629,594
  State the aggregate market value of the voting and non-voting common equity
  held by non-affiliates computed by reference to the price at which the common
  equity was sold, or the average bid and asked prices of such common equity,
  as of a specified date within the past 60 days. (See definition of affiliate
  in Rule 12b-2 of the Exchange Act). Note –If determining whether a person is an affiliate will involve
  an unreasonable effort and expense, the issuer may calculate the aggregate market
  value of the common equity held by non-affiliates on the basis of reasonable
  assumptions, if the assumptions are stated.
  Aggregate market value of voting common equity held by non-affiliates as of
  February 28, 2006: $1,350,000 approximately
  Aggregate market value of non-voting common equity held by non-affiliates as
  of February 28, 2006: Not Applicable
  State the number of shares outstanding of each of the issuer’s classes
  of common equity, as of the latest practicable date.
  Outstanding shares of common stock as of February 28, 2006: 17,205,715
  Outstanding shares of preferred stock as of February 28, 2006: Nil
  Documents incorporated by reference: None
  Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]Northstar Electronics, Inc.
  IndexRisk FactorsPart I
  Item 1. Description of Business
  Item 2. Description of Properties
  Item 3. Legal Proceedings
  Item 4. Submission of Matters to a Vote of Security HoldersPart II
  Item 5. Market for Registrant’s Common Equity and Related Stockholders
  Matters 
  Item 6. Management’s Discussion and Analysis or Plan of Operation
  Item 7. Financial Statements
  Item 8. Changes in and Disagreements with Accountants on Accounting and 
  Financial Disclosure
  Item 8A Controls and ProceduresPart III
  Item 9. Directors, Executive Officers, Promoters and Control Persons;
  Compliance with Section 16(a) of the Exchange Act
  Item 10. Executive Compensation
  Item 11. Security Ownership of Certain Beneficial Owners and Management
  Item 12. Certain Relationships and Related Transactions
  Item 13. Exhibits and Reports on form 8-K
  Item 14. Principal Accountants Fees and Services
  SignaturesNote Regarding Forward Looking Statements
  Except for statements of historical fact, certain information contained herein
  constitutes ‘forward looking statements’ within the meaning of Section
  27A of the securities Act and Section 21E of the Securities Exchange Act. Forward
  looking statements address our current plans, intentions, beliefs and expectations
  and are statements of our expected future economic performance. Statements containing
  terms like ‘believes’, ‘does not believe’, ‘plans’,
  ‘expects’, ‘intends’, ‘estimates’, ‘anticipates’,
  and other phrases of similar meaning or the negative or other variations of
  these words or other comparable words or phrases are considered to imply uncertainty
  and are forward looking statements.
  Such forward looking statements involve known and unknown risks, uncertainties
  and other factors which may cause the actual results or achievements of the
  Company to be materially different from any future results or achievements of
  the Company expressed or implied by such forward looking statements. Such factors
  include, but are not limited to changes in economic conditions, government regulations,
  contract requirements and abilities, behavior of existing and new competitor
  companies and other risks and uncertainties discussed in this annual report
  on Form 10-KSB.
  We cannot guarantee our future results, level of activity, performance or achievements.
  Neither we nor any other person assumes responsibility for the accuracy and
  completeness of these forward looking statements. We are under no duty to update
  any of the forward looking statements after the date of this report.Risk Factors
  Investment in our common stock involves a high degree of risk. Prospective investors
  should carefully consider the following risk factors in addition to other information
  in this annual report before purchasing our common stock.
  Because we have a net loss from operations of $984,768 for the year ended December
  31, 2005 and have accumulated losses of $5,154,947 from inception, we face a
  risk of insolvency.
  We have never earned substantial operating revenue. We have been dependent on
  equity financing to pay operating costs and to cover operating losses. 
  Because we have no significant sales history and are substantially dependent
  on a major contractor to generate future sales, our future is uncertain if our
  relationship with that major contractor fails.
  The auditor’s report for our December 31, 2005 consolidated financial
  statements includes an additional paragraph that identifies conditions which
  raise substantial doubt about our ability to continue as a going concern. The
  financial statements do not include any adjustments that might result from the
  outcome of this uncertainty.PART I
  Item 1. Description of Business
  The Company was incorporated May 11, 1998 as Scientific Technologies, Inc. under
  the laws of the State of Delaware. The name of the Company was changed to Northstar
  Electronics, Inc.(NEI) September 1999. Subsequently, there has been
  no material reclassification, merger, consolidation, purchase or sale of any
  significant amount of assets other than in the ordinary course of business.
  There have been no bankruptcy, receivership or similar proceedings. 
  The business of the Company is primarily that of its wholly owned subsidiaries,
  Northstar Technical Inc. (NTI) and Northstar Network Ltd.(NNL).
  NTI develops, manufactures and sells undersea wireless sonar communications
  systems and produces, under contract, defense and aerospace electronic systems.
  NNL was incorporated to pursue defense, aerospace and homeland security
  contract manufacturing opportunities.
  Sonar Products and Technologies
  NTI developed a wireless communications technology with undersea applications.
  The technology is used in underwater sensing devices to take certain measurements
  that are then transmitted using underwater sound waves to a receiving unit,
  which processes the data and displays it on a computer monitor. The technology
  has many potential uses in a variety of industries including offshore oil and
  gas, defense, marine transportation, oceanography, environmental and fishing.
  
  Homeland Security and Military Defense
  The Company expects that design and manufacture of homeland security and anti-terrorism
  systems will grow to become a major component of Northstar’s business
  over the next five years as the United States Department of Homeland Security
  and the United States Navy launches and ramps up its efforts to protect ports,
  on shore high value assets and ships from terrorists. Northstar Electronics
  has designed and is manufacturing sonar hardware for homeland security and military
  defense systems. These systems are designed to detect and track combat divers
  and explosive laden underwater vehicles and are intended to provide warning
  to naval ships, harbors and ports.
  Research and Development - AQUACOMM
  AQUACOMM is a multi year fully funded in-house research and development program
  at Northstar that was created specifically to develop new, leading edge multiple
  application sonar technologies and products for a variety of industries, including:
  defense, offshore oil and gas, commercial fishing, oceanography, marine environment
  and marine transportation. The Company has received funding for this project
  from the Canadian Federal Government’s Atlantic Innovation Fund and the
  National Research Council, as well as from equity investment. Scheduled to last
  until March 31, 2006, Northstar believes that AQUACOMM will result in the development
  of several new technologies during this period. To date, Northstar has expended
  $2,981,895 on this development program and has recovered $1,795,101.
  Northstar intends to use its Venture Technology Business Model to maximize the
  success of AQUACOMM technologies. In this model, a technology developed through
  AQUACOMM will be partnered with an established company in a specific industry
  sector. One example could be the co-development of a military underwatercommunications system. Northstar would develop the “wet” end
  and an established defense contractor would be responsible for the “dry”
  end. Since the defense contractor is well established in the field, it would
  be the defense contractor that would undertake the product introduction, marketing
  and sales efforts. Another example of the type of technology that could be developed
  under AQUACOMM is the development of a Subsea wireless communications system
  for the offshore oil and gas industry. Northstar expects to develop such a system
  and intends to market the system through a strategic alliance with an international
  oil field communications company. To date, no such product or arrangement is
  in place.
  The NETMIND System 
  The Company’s first underwater sonar product based on our core technology
  was the NETMIND system. NETMIND is both a conservation tool as well as an efficiency
  tool. Electronic sensors attached to a fishing trawl measure the height and
  width of the net opening, the water temperature, the depth of the net and the
  amount of fish caught plus other parameters. The sensor information is transmitted
  via a wireless communications link back to the ship.
  NETMIND helps prevent over fishing and allows fishermen to fill and empty their
  nets more efficiently with a cost effective benefit on profits. This gives regulators
  flexibility in reducing quotas when attempting to conserve limited fishstocks.
  The NETMIND Market 
  NETMIND was introduced to the fishing industry in late 1996. To date, approximately
  240 systems have been sold in North America, Ireland, Spain, New Zealand and
  Russia. The targeted customers have been strategic in that they are industry
  leaders and government agencies. They include the National Oceanic and Atmospheric
  Administration (NOAA) in the United States, the United States Department of
  the Interior and the Federal Department of Fisheries and Oceans and Fishery
  Products International in Canada. Customer feedback has shown that the NETMIND
  system enhances efficiency, reduces gear damage and improves catch quality.
  Raw Material Sources and Availability 
  Raw materials for the manufacture of the NETMIND system are available from various
  sources. The principal suppliers are as follows:
  Compass Ltd. - stainless steel chamber and end caps for sensors, mounting flanges
  for hull mounted hydrophone and other miscellaneous stainless steel parts
  MF Composites - polyurethane, resin and hardener
  Battery Specialists - battery chargers
  Mercury Wire Products - tow cable for hydrophone
  Electrosonic - electronic components
  Future Active Inc. - electronic components
  UPE - circuit boards
  Enerpower - battery packs
  To date, NTI has received parts, supplies and materials from these suppliers
  in a timely fashion and has met its production schedules. In our efforts to
  reduce costs, we now produce transducers and other components in house.
  Major Customer Dependency – NETMIND
  NTI has sold approximately 240 NETMIND systems to over 160 different customers
  with no dependence on one or a few major customers.
  Competition – NETMIND 
  The system has one main competitor, Scanmar in Norway, which is a private company.
  The NETMIND and Scanmar systems consist of wireless acoustic sensors used underwater
  and both systems operate by illustrating how the fishing net is behaving while
  being towed. However, NETMIND sensors are fully serviceable. The electronic
  circuitry is contained in stainless steel cylinders within each component and
  is easily removed for repair by opening the end cap. 
  We believe that NETMIND components have a longer battery life and a more effective
  communication over a longer distance than its competitor. We believe the rugged
  design of various NETMIND components has surpassed competitor’s designs
  in that NETMIND’s unique sensors require very little maintenance.
  While NETMIND continues to attempt to expand its market presence, we believe
  the Company is smaller in size and resources when compared to its competitor.
  As a consequence NETMIND pricing is competitive.
  Distribution of the NETMIND System 
  NETMIND is sold directly to customers by our own sales staff and through marine
  electronics dealers. We have dealer representation in Canada, the United States,
  Ireland, New Zealand, Scotland, Spain, Portugal and Denmark. We support all
  sales efforts with product brochures, pamphlets, and customer testimonials and
  with booths at trade shows in Seattle, Washington and Providence, Rhode Island.
  We also advertise in trade magazines, notably ‘The Navigator’ and
  ‘Fishing News International’. Articles on the NETMIND have appeared
  recently in ‘National Fisherman’, Alaskan Fisherman’s Journal’
  and ‘SEA Technology’.
  Technology Protection – NETMIND
  Since commercializing NETMIND in 1996, NTI has made many enhancements to its
  system. These activities have resulted in an optimum design for which a patent
  application may be submitted. The technology is difficult to replicate because
  it consists of custom, linked, assembler language software running on custom
  hardware and, regardless of patent protection, it is expected it would take
  several years for a new player to reach parity with the present system. 
  The Company has obtained Canadian trademark rights to the name NETMIND effective
  for fifteen years from August 24, 1999. No other intellectual property related
  applications have been filed or prepared. In the meantime, NTI continues to
  develop new and innovative NETMIND products.
  Need for Government Approvals – NETMIND
  There are no Government approvals required for the NETMIND system in the areas
  it is currently sold. 
  Effect of Existing or Probable Government regulations – NETMIND
  There is no effect on the Company’s sales arising from government regulations
  and the Company does not anticipate any change to this in the future.
  Research and Development Expenditures – NETMIND
  NTI has carried out research and development activities on NETMIND enhancements
  in 2005. None of these costs were borne directly by customers nor did these
  costs directly affect NTI’s pricing structure.
  Costs and Effects of Compliance with Environmental Laws – NETMIND
  NTI has incurred no costs nor suffered any effects to maintain compliance with
  any environmental laws.
  CONTRACT MANUFACTURING (CM)
  NEI’s second business activity, conducted through both its subsidiary
  companies (NTI and NNL) is contract manufacturing where the Company assembles
  electronic systems under contract to the defense and aerospace industry (called
  ‘build to print’). We build products according to designs provided
  by our customers. The Company’s main customer is currently Lockheed Martin,
  for whom Northstar provides production engineering, sourcing and procurement
  of parts, assembly of parts into systems, testing and shipping. The Company
  has manufactured submarine control consoles under several contracts with Lockheed
  Martin Naval Electronics in Manassas, Virginia and is working on a $1.2M command
  and control console contract awarded by Lockheed to the Company in the fourth
  quarter of 2005 and expected to be substantially completed by the second quarter
  of 2006. 
  The Company markets its services in this area primarily through a network of
  contacts in the industry, attendance at trade shows and at conferences and special
  missions sponsored by the Department of Defense. In the past Northstar has attended
  defense and aerospace exhibitions in the United States and Canada and has participated
  in several missions to meet prime contractors involved in the Joint Strike Fighter
  Program in the United States.
  The CM Market 
  NTI has focused attention on the North American military market. The United
  States and Canada have many programs where NTI’s services could be used.
  This includes programs to manufacture control consoles for submarines, helicopters
  and fixed wing aircraft. 
  NTI signed a contract with Lockheed Martin, Manassas, Virginia in 1999 to assemble,
  test and deliver control consoles for the Canadian Navy’s Victoria Class
  submarines. Since NTI successfully completed the project to the satisfaction
  of both Lockheed Martin and the Navy, Lockheed Martin has awarded follow-on
  contracts to NTI. In 2003, Lockheed Martin and NTI signed a Manufacturing License
  Agreement approved by the US State Department. The Agreement allows for NTI
  to manufacture command and control consoles for Lockheed Martin on projects
  they have anywhere in the world. As well, NTI is permitted to offer Lockheed
  Martin’s console technology directly to the Canadian Armed Forces. The
  current control console contract was awarded pursuant to the manufacturing license
  agreement.
  Competition – CM 
  For control consoles produced for Lockheed Martin, NTI’s competition would
  be primarily similar sized companies as NTI in the United States, Canada or
  abroad. We are not aware, at this time, of any companies in particular that
  are direct competitors. However, we expect that, dependent upon the economic
  and political factors influencing Lockheed Martin, there will indeed be strong
  competition for future contracts. NTI’s main competitive advantages are
  price (our labor and overhead rates are low compared to many other jurisdictions)
  and quality (we have proven performance) based on the success to date of the
  submarine control console contract.
  Marketing – CM 
  With respect to other Lockheed Martin divisions and with other prime contractors,
  we expect to use our success on the submarine console contract to showcase our
  expertise. The benefits of our marketing efforts are contacts made through networking
  in the industry and attendance at trade shows, conferences and special missions
  sponsored by the department of defense. In 2005, we continued to attend defense
  and aerospace exhibitions in Canada and the United States and we participated
  in several missions to meet prime contractors involved in the Joint Strike Fighter
  Program in the United States.
  Technology Protection – CM 
  NTI currently owns no proprietary technology requiring protection with respect
  to its CM activities.
  Raw Material Sources and Availability – CM 
  Materials and parts are available on an as needed basis from a variety of sources
  in the United States and Canada. 
  Dependence on One or a Few Major Customers – CM 
  NTI currently depends to a great extent on Lockheed Martin for its contracts.
  Lockheed Martin is comprised of many semi-autonomous divisions, which have many
  customers. We are dealing with four divisions, similar to dealing with four
  independent companies, regarding contract opportunities. We are attempting to
  reduce our dependency on these Lockheed Martin divisions by contacting other
  large prime contractors about CM opportunities with them. We expect this activity
  will result in NTI developing new business in addition to business with Lockheed
  Martin in the future. 
  Need for Government Approvals – CM 
  There are no government approvals applicable to our CM activities, except any
  required as part of a contract. In that event, the requirement would be passed
  down from the prime contractor as a part of the statement of work
  Effect of Existing or Probable Government Regulations – CM 
  Commerce between the United States and Canada in the defense and aerospace industry
  is governed by some general rules and regulations. These typically require a
  prime contractor, such as Lockheed Martin, to obtain certain United States government
  clearances before providing NTI with potentially sensitive information. Similarly,
  a Canadian prime contractor would need Canadian government clearances to give
  classified information to a United States subcontractor. To date, these clearances
  have not caused any problems for our CM activities and we do not anticipate
  any in the foreseeable future.
  Research and Development Expenditures – CM 
  NTI has incurred no expenditures in fiscal 2005 on CM research and development
  activities.
  Costs and Effects of Compliance with Environmental Laws – CM 
  The Company has incurred no costs or adverse effects in its compliance with
  any environmental laws.
  SYSTEM INTEGRATION 
  NNL carries out multifaceted contracts that require several subcontractors to
  perform specialized tasks. This ability to integrate the work of several components
  to create one complete system is one of Northstar’s main areas of business
  – system integration.
  As a result of its capabilities and expertise, NNL has developed a unique approach
  to securing and executing large defense contracts. NNL will bring together a
  number of Small Medium Size Enterprises (SME) affiliate companies thereby being
  able to present a capability to prime defense contractors. A major potential
  project in this area is the $2Billion Canadian Maritime Helicopter Project.
  Because NNL offers ‘one stop shopping’ for approximately 25 companies
  with a wide range of relevant expertise, it is anticipated that some contract
  work for various Canadian government procurements will flow to NNL. Verbal commitments
  have been made to NNL by contractors bidding programs in Canada to include NNL
  under the Industrial Regional Development Plan (IRB). To date, no contracts
  have been signed or awarded to the Company.
  NNL has signed a memorandum of interest (MOI) with three separate Lockheed Martin
  companies in the United States and with four major subcontractors of Lockheed
  Martin, for potential work on the Joint Strike Fighter (JSF) program. This program
  is a $200Billion + multinational program led by the United States Government
  to design and produce the next generation fighter aircraft, in order to replace
  existing fleets of F-16, F-18, A-10 and Harrier aircraft worldwide. Sales are
  predicted to exceed 3,000 aircraft in the US and UK alone, with an additional
  export market of 3,000 aircraft expected.
  The JSF contract is the largest defense contract ever awarded and it will continue
  for 35 years or longer. Northstar has developed relationships with Lockheed
  Martin, Harris Corporation, TRW, BAE Systems and Northrop Grumman, which the
  Company expects will lead to contract work on the JSF program. 
  In 2003, NNL as prime contractor, submitted a bid with TYCO International to
  provide multi mode and single mode fiber optic assemblies for the JSF. Prototype
  test assemblies were provided to the customer and extensive testing was carried
  out on them as well as on the assemblies of competing companies. As a result
  of the testing, the NNL cables are one of several cables selected for potential
  use in the program. The supply of assemblies is expected to continue for the
  lifetime of the JSF program with the first contract award now anticipated for
  2007.
  To date, Northstar has not yet been awarded any contracts related to the JSF
  contract.
  EMPLOYEES As of December 31, 2005 the Company had a total of 22 full time employees.
  PUBLIC INFORMATION 
  The Company electronically files with the Securities and Exchange Commission
  (SEC) all its reports, including, but not limited to, its annual and quarterly
  reports. The SEC maintains an internet site (http://www.sec.gov) that contains
  reports and other information regarding issuers that do file electronically.
  The Company maintains a web site address at www.northstarelectronics.com
  Item 2. Description of Properties
  The Company leases its corporate offices located at 1455 – 409 Granville
  Street, Vancouver, British Columbia, Canada V6C 1T2
  Northstar Technical Inc. leases its offices and operations facilities at 1 Duffy
  Place, Unit #6, 
  St. John’s, Newfoundland, Canada A1B 4M6
  Northstar Network Ltd. leases its offices and operations facilities at 67 Majors
  Path, Unit #102, St. John’s, Newfoundland, Canada A1A 4Z9
  Item 3. Legal Proceedings
  The Company is a defendant in a lawsuit commenced against them in 1999 by their
  former master distributor. The former distributor has alleged that the Company
  has interfered with the ability of the former distributor to sell products.
  The Company has filed a counter claim for monies owing by the former distributor
  to the Company.
  Item 4. Submission of Matters to a Vote of Security Holders
  No change since previous filing.
  The Company has filed with the SEC an SB-1 registration statement April 20,
  2000, an S-8 registration November 2000 and quarterly reports (form 10QSB) for
  June and September 2000 and for March, June and September 2001, 2002, 2003,
  2004 and 2005 and annual reports (form 10KSB) for December 31, 2000, 2001, 2002,
  2003 and 2004. PART II
  Item 5. Market for Registrant’s Common Equity and Related Stockholder
  Matters
  No change since previous filing
  Item 6. Management’s Discussion and Analysis or Plan of Operation
  The following discussion, comparison and analysis should be read in conjunction
  with the Company’s accompanying audited consolidated financial statements
  for the years ended December 31, 2005 and 2004 and the notes related thereto.
  The discussion of results, causes and trends should not be construed to infer
  conclusions that such results, causes or trends necessarily will continue in
  the future.
  DISCUSSION
  The following table sets forth for the years indicated items included in the
  Company’s consolidated statement of operations:

|                                  | 2005       | 2004       | 2003       | 2002       | 2001      
|--------------------------------- | ---------- | ---------- | ---------- | ---------- | ----------
|Total
      revenue               | $1,629,594 | $1,461,528 | $1,641,960 | $976,234   | $1,176,527
|Cost of goods sold                | 583,870    | 245,305    | 230,213    | 253,377    | 472,227   
|Discounts                         | 94,066     | 129,111    | 198,950    | 148,425    | 171,830   
|                                  | 677,936    | 374,416    | 429,163    | 401,802    | 644,057   
|Gross
      margin                | 951,658    | 1,087,112  | 1,212,797  | 574,432    | 532,470   
|Expenses                          | 1,936,426  | 1,918,653  | 1,905,942  | 1,366,567  | 974,394   
|Net
      (loss)                  | $(984,768) | $(831,541) | $(693,145) | $(792,135) | $(441,924)
|Net
      income (loss) per share | $(0.06)    | $(0.05)    | $(0.05)    | $(0.08)    | $(0.06)   

NORTHSTAR
ELECTRONICS, INC.Consolidated
Balance SheetsDecember
31(U.S.
Dollars)

|                                                                  | 2005        | 2004       
|----------------------------------------------------------------- | ----------- | -----------
|                                                                  |             |            
|Assets                                                            |             |            
|                                                                  |             |            
|Current                                                           |             |            
|Cash                                                              | $46,905     | $57,641    
|Accounts
				receivable (note 5)                                  | 819,419     | 251,635    
|Inventory                                                         | 440,707     | 156,086    
|Prepaid
				expenses                                              | 24,864      | 15,605     
|Total
				Current Assets                                          | 1,331,895   | 480,967    
|Intangible asset (note
				6)                                     | 37,285      | 37,285     
|Equipment
				(note 6)                                            | 78,193      | 106,144    
|                                                                  |             |            
|Total
				Assets                                                  | $1,447,373  | $624,396   
|                                                                  |             |            
|Liabilities                                                       |             |            
|                                                                  |             |            
|Current                                                           |             |            
|Accounts
				payable and accrued liabilities                      | $1,372,745  | $409,007   
|Loans
				payable (note 7)                                        | 50,000      | 50,000     
|Deferred
				revenue(note 2a and 2g)                              | 461,544     | 127,616    
|Current
				portion of long-term debt (note 9)                    | 148,988     | 100,937    
|Total
				Current Liabilities                                     | 2,033,277   | 815,176    
|                                                                  |             |            
|                                                                  |             |            
|Long
				term debt (note 9)                                       | 447,855     | 454,711    
|Discount on long term debt (note
				9)                           | 259,107     | 166,655    
|Due
				to Cabot Management Limited (note 8)                      | 89,873      | 88,866     
|Due
				to Director (note 8)                                      | 120,055     | 1,036      
|Total
				Liabilities                                             | 2,950,167   | 1,398,828  
|                                                                  |             |            
|Contingencies
				and Commitment (notes 10 and 11)                |             |            
|                                                                  |             |            
|Stockholders’
          Equity (Deficit)                          |             |            
|                                                                  |             |            
|Common
				Stock                                                  |             |            
|Authorized                                                        |             |            
|100,000,000
				Common shares with a par value of $0.0001 each    |            
|20,000,000
				 Preferred shares with a par value of $0.0001 each |            
|Issued
				and outstanding                                        |             |            
|17,060,715
				(15,913,805 – 2004) Common shares                  | 1,706       | 1,591      
|Additional
				Paid-in Capital                                    | 3,829,439   | 3,531,360  
|Other
				Comprehensive Income (loss)                             | (178,992)   | (137,204)  
|Accumulated
				Deficit                                           | (5,154,947) | (4,170,179)
|Total
				Stockholders’ Equity (Deficit)                          | (1,502,794) | (774,432)  
|                                                                  |             |            
|Total
				Liabilities and Stockholders’ Equity (Deficit)          | $1,447,373  | $624,396   

NORTHSTAR
ELECTRONICS, INC.Consolidated
Statements of OperationsYears
Ended December 31(U.S.
Dollars)

|                                            | 2005         | 2004       | 2003      
|------------------------------------------- | ------------ | ---------- | ----------
|                                            |              |            |           
|Revenues(notes 2 and 4)                     | $1,629,594   | $1,461,528 | $1,641,960
|Discounts                                   | 94,066       | 129,111    | 198,950   
|                                            |              |            |           
|Revenues
				net of Discounts               | 1,535,528    | 1,332,417  | 1,443,010 
|Cost
				of Goods Sold                      | 583,870      | 245,305    | 230,213   
|                                            |              |            |           
|Gross
				Margin                            | 951,658      | 1,087,112  | 1,212,797 
|                                            |              |            |           
|                                            |              |            |           
|Expenses                                    |              |            |           
|Research
				and development                | 890,510      | 781,151    | 848,277   
|Tax
				credits on research and development | (118,928)    | (161,450)  | (138,810) 
|Salaries,
				wages and benefits            | 238,552      | 442,831    | 358,970   
|Travel
				and marketing                    | 192,068      | 238,728    | 163,143   
|Consulting                                  | 224,709      | 136,201    | 219,161   
|Rent                                        | 122,088      | 121,434    | 108,623   
|Professional
				fees                       | 98,898       | 94,552     | 91,440    
|Office                                      | 93,006       | 86,561     | 45,387    
|Business
				development                    | 55,076       | 68,281     | 82,221    
|Telephone,
				light and heat               | 47,086       | 50,217     | 48,820    
|Interest
				on long-term debt              | 47,816       | 14,052     | 18,574    
|Interest
				and bank charges               | 16,822       | 7,528      | 9,917     
|Miscellaneous                               | 0            | 3,283      | 12,404    
|Amortization                                | 28,723       | 35,284     | 37,815    
|                                            | 1,936,426    | 1,918,653  | 1,905,942 
|Net
				Loss                                | (984,768)    | (831,541)  | (693,145) 
|Other
				Comprehensive Income (Loss)       | (41,788)     | (54,831)   | (107,586) 
|Total
				Comprehensive Loss                | $(1,026,556) | $(886,372) | $(800,731)
|Net
				Loss Per Share                      | $(0.06)      | $(0.05)    | $(0.05)   
|                                            |              |            |           
|Weighted
				Average Number of Shares       |              |            |           
|Outstanding                                 | 16,371,329   | 15,774,802 | 14,446,986

NORTHSTAR
ELECTRONICS, INC.Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)Years
Ended December 31(U.S.
Dollars)

|                                      |               |        | Additional |                | Other         |              | Total               
|------------------------------------- | ------------- | ------ | ---------- | -------------- | ------------- | ------------ | --------------------
|                                      | Number
				of | Par    | Paid-in    |                | Comprehensive | Accumulated  | Stockholders’       
|                                      | Shares        | Value  | Capital    |                | Income(Loss)  | Deficit      | Equity
				(Deficit)
|                                      |               |        |            |                |               |              |                     
|Balance,
				December 31, 2003        | 15,838,074    | $1,584 | $3,423,191 | $
				(82,373) | $(3,338,638)  | $
				3,764 
|Issuance
				of common stock:         |               |        |            |                |               |              |                     
|For
				services                      | 244,394       | 24     | 97,120     |                | 0             | 0            | 97,144              
|On
				exercise of option             | 1,000,000     | 100    | 0          |                | 0             | 0            | 100                 
|Cancellation
				of common stock:     |               |        |            |                |               |              |                     
|Issued
				in error (note 12)         | (1,000,000)   | (100)  | 100        |                | 0             | 0            | 0                   
|Other
				(note 12)                   | (168,663)     | (17)   | 17         |                | 0             | 0            | 0                   
|Stock
				option benefit – legal fees | 0             | 0      | 10,932     |                | 0             | 0            | 10,932              
|Other
				comprehensive (loss)        | 0             | 0      | 0          |                | (54,831)      | 0            | (54,831)            
|Net
				loss                          | 0             | 0      | 0          |                | 0             | (831,541)    | (831,541)           
|                                      |               |        |            |                |               |              |                     
|Balance,
				December 31, 2004        | 15,913,805    | $1,591 | $3,531,360 |                | $(137,204)    | $(4,170,179) | $(774,432)          
|Issuance
				of common stock:         |               |        |            |                |               |              |                     
|For
				services                      | 757,740       | 76     | 201,091    |                | 0             | 0            | 201,167             
|For
				cash                          | 389,170       | 39     | 99,841     |                | 0             | 0            | 99,880              
|Finders
				fee:                      |               |        |            |                |               |              |                     
|In
				cash                           | 0             | 0      | (12,689)   |                | 0             | 0            | (12,689)            
|In
				common stock                   | 0             | 0      | (7,781)    |                | 0             | 0            | (7,781)             
|Stock
				option benefit  [note 2(l)] | 0             | 0      | 17,617     |                | 0             | 0            | 17,617              
|Other
				comprehensive (loss)        | 0             | 0      | 0          |                | (41,788)      | 0            | (41,788)            
|Net
				loss                          | 0             | 0      | 0          |                | 0             | (984,768)    | (984,768)           
|                                      |               |        |            |                |               |              |                     
|Balance,
				December 31, 2005        | 17,060,715    | $1,706 | $3,829,439 |                | $(178,992)    | $(5,154,947) | $(1,502,794)        

NORTHSTAR
ELECTRONICS, INC.Consolidated
Statements of Cash FlowsYears
Ended December 31(U.S.
Dollars)

|                                                   | 2005       | 2004       | 2003      
|-------------------------------------------------- | ---------- | ---------- | ----------
|                                                   |            |            |           
|Operating
				Activities                           |            |            |           
|Net
				loss                                       | $(984,768) | $(831,541) | $(693,145)
|Adjustments
				to reconcile net loss to net cash  |            |            |           
|used
				in operating activities                   |            |            |           
|Amortization                                       | 28,723     | 35,284     | 37,815    
|Stock
				based and uncompensated services         | 17,617     | 10,932     | 75,644    
|Services
				paid with common stock                | 193,386    | 97,144     | 72,276    
|Changes
				in operating assets and liabilities    |            |            |           
|Accounts
				receivable                            | (558,690)  | (6,784)    | 162,195   
|Prepaid
				expenses                               | (8,783)    | (3,792)    | (5,543)   
|Inventory                                          | (278,980)  | 17,882     | 15,039    
|Accounts
				payable and accrued liabilities       | 942,204    | 157,411    | (165,703) 
|Deferred
				revenue                               | 338,054    | (110,754)  | 132,714   
|                                                   |            |            |           
|Cash
				Used in Operating Activities              | (311,237)  | (634,218)  | (368,708) 
|                                                   |            |            |           
|Investing
				Activities                           |            |            |           
|Acquisition
				of equipment                       | 0          | (13,531)   | (45,810)  
|Proceeds
				on disposal of equipment              | 3,112      | 0          | 9,415     
|                                                   |            |            |           
|Cash
				Used in Investing Activities              | 3,112      | (13,531)   | (36,395)  
|                                                   |            |            |           
|Financing
				Activities                           |            |            |           
|Issuance
				of common stock for cash              | 87,191     | 100        | 1,096,040 
|Loans
				payable (repayment)                      | (2,205)    | (2,927)    | (73,823)  
|Net
				proceeds from long-term financing          | 107,540    | 78,845     | 49        
|Advances
				from (repayment to) director          | 118,434    | 23,900     | (132,030) 
|                                                   |            |            |           
|Cash
				Provided by Financing Activities          | 310,960    | 99,918     | 890,236   
|                                                   |            |            |           
|Effect
				of Foreign Currency Translation on Cash | (13,570)   | (7,568)    | 10,217    
|                                                   |            |            |           
|Inflow
				(Outflow) of Cash                       | (10,735)   | (555,399)  | 495,350   
|Cash,
				Beginning of Year                        | 57,641     | 613,040    | 117,690   
|                                                   |            |            |           
|Cash,
				End of Year                              | $46,905    | $57,641    | $613,040  
|                                                   |            |            |           
|Supplemental
				Information                       |            |            |           
|Interest
				paid                                  | $47,289    | $14,052    | $18,574   

NORTHSTAR ELECTRONICS,
  INC.Notes to Consolidated Financial StatementsYears Ended December 31, 2005 and 2004(U.S. Dollars)1. ORGANIZATION, BASIS OF PRESENTATION AND NATURE OF OPERATION
  These financial statements include the accounts of Northstar Electronics, Inc.
  ("the Company") and its wholly owned subsidiaries Northstar Technical
  Inc. ("NTI") and Northstar Network Ltd. ("NNL"). All inter-company
  balances and transactions are eliminated. The parent company was incorporated
  May 11, 1998 in the State of Delaware and had no operations other than organizational
  activities prior to the January 26, 2000 acquisition of 100% of the shares of
  Northstar Technical Inc. for the issuance of 4,901,481 shares of treasury stock
  with the former shareholders of the subsidiary receiving a majority of the total
  shares then issued and outstanding. The transaction was accounted for as a reverse
  take over resulting in the consolidated financial statements including the results
  of operations of the acquired subsidiary prior to the merger. As a result of
  the reverse takeover described above the liabilities of the accounting acquiree
  in excess of its identifiable assets were treated as a recapitalization and
  charged to additional paid-in capital.
  The Company, through its subsidiaries, develops, produces and sells an undersea
  wireless communications system ("Netmind") and manufactures, under
  contract, defence and aerospace electronic systems. The Company also carries
  out research and development activities for customers on specific fixed price
  contract bases.
  The Company's business activities are conducted principally in Canada and the
  financial statements are prepared in accordance with accounting principles generally
  accepted in the United States of America with all figures translated into United
  States dollars for reporting purposes.
  The accompanying financial statements have been prepared assuming the Company
  will continue as a going concern, which contemplates the realization of assets
  and satisfaction of liabilities in the normal course of business. During 2005
  the Company incurred a comprehensive loss of $1,026,556 and at December 31,
  2005 had a working capital deficiency (an excess of current liabilities over
  current assets) of $701,382, including $148,988 of long term debt due within
  one year and including $461,544 in deferred revenue which will be included in
  revenue in 2006. Management has undertaken initiatives for the Company to continue
  as a going concern. For example, the Company is negotiating to secure
  an equity financing in the short term and is in discussions with several financing
  firms. The Company also expects to increase revenues in 2006 from contract manufacturing
  revenues and sales of its NETMIND system and related products. The Company has
  tendered proposals and price quotations on an aircraft carrier anti terrorism
  system manufacturing contract along with other anti terrorist and military contracts
  anticipated to be awarded in 2006. These initiatives are in recognition that
  for the Company to continue as a going concern it must generate sufficient cash
  flow to cover its obligations and expenses. In addition, management believes
  these initiatives can provide the Company with a solid base for profitable operations,
  positive cash flows and reasonable growth. Management is unable to predict the
  results of its initiatives at this time. Should management be unsuccessful in
  its initiative to finance its operations the Company’s ability to continue
  as a going concern is uncertain. These financial statements do not give effect
  to any adjustments to the amounts and classifications of assets and liabilities
  which might be necessary should the Company be unable to continue its operations
  as a going concern.2. SIGNIFICANT ACCOUNTING POLICIES
  (a) Revenue recognition
  Revenue from the sales of the NETMIND system is recognized on an accrual basis
  based on agreed terms with the customers. Sales are recorded when the systems
  are delivered and the customer is invoiced at the agreed terms and collection
  is reasonably assured. Contract manufacturing sales are recorded as each contracted
  unit is delivered to the contracting customer.
  Revenue or loss from fixed price research and development contracts is recognized
  using the percentage of completion method whereby revenue or loss is recognized
  at the same percentage that contract costs to date is of total costs at contract
  completion.
  Total revenue includes sales of $957,874 and $671,720 in recovery of research
  and development costs (2004: $828,260 and $633,268 respectively and 2003: $1,154,274
  and $487,686 respectively). Recovery of research and development costs is recognized
  on a periodic basis as cost recovery is applied for.
  (b) Inventory
  Inventories of materials are valued at the lower of average cost and net realizable
  value. Labor components of inventories are valued at cost which is less than
  the agreed contract price.
  (c) Research and development
  Research and development costs are expensed to operations as incurred.
  (d) Investment tax credits
  Investment tax credit refunds arising from the incurrence of qualifying research
  and development expenditures are not recognized until the applicable project
  is approved as a qualifying research and development project by Canada Revenue
  Agency. The refunds are recorded as a reduction of the applicable research and
  development expense.
  (e) Equipment
  Equipment is recorded at cost less any government assistance received and is
  being amortized over their estimated useful lives or term of lease, whichever
  is shorter, using the following rates:
  Computer equipment 30% Declining balance
  Computer software 30% Declining balance
  Furniture and equipment 20% Declining balance
  Manufacturing equipment 20% Declining balance
  Leasehold improvements 20% Straight-line
  (f) Long-lived assets
  SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
  Assets” establishes a single accounting model for long-lived assets to
  be disposed of by sale including discontinued operations. SFAS 144 requires
  that these long-lived assets be measured at the lower of carrying amount or
  fair value less cost to sell, whether reported in continuing operations or discontinued
  operations.
  As such, these long-lived assets of the Company are reviewed when changes in
  circumstances require as to whether their carrying value has become impaired,
  pursuant to SFAS 144. Management considers assets to be impaired if the carrying
  value exceeds the future projected cash flows from related operations (undiscounted
  and without interest charges). If impairment is deemed to exist, the assets
  will be written down to fair value less cost to sell.
  (g) Government assistance
  The Company’s subsidiaries have been awarded assistance under certain
  Government of Canada assistance programs. Amounts received or receivable under
  these programs are recorded as revenue at the time the amounts are approved
  for payment by the government agency. Advances for expenses which the company
  has yet to incur are recorded as deferred revenue.
  (h) Foreign currency translation
  The Company's operations and activities are conducted principally in Canada;
  hence the Canadian dollar is the functional currency. 
  Amounts incurred in U.S. dollars are translated into the functional currency
  as follows:

|(i)   | Monetary assets and liabilities at the rate of exchange in effect as at
      the balance sheet date;                                                              
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii)  | Non-monetary assets and liabilities at the exchange rates prevailing at
      the time of the acquisition of the assets or assumption of the liabilities;
      and
|(iii) | Revenues and expenditures at rates approximating the average rate of exchange
      for the year.                                                                  

|                                                      | 2005         | 2004         | 2003        
|----------------------------------------------------- | ------------ | ------------ | ------------
|Net
				loss, as reported                             | $(984,768)   | $(831,541)   | $(693,145)  
|Deduct:
				stock-based employee compensation expense |              |              |             
|expense
				under intrinsic value method              | 0            | 0            | 0           
|Add:
				total stock-based compensation expense       |              |              |             
|determined
				under fair value based method mmethod  | (40,932)     | (38,552)     | (54,560)    
|                                                      |              |              |             
|Net
				loss, pro-forma                               | $(1,025,700) | $(870,093)   | $(747,705)  
|                                                      |              |              |             
|Net
				loss per share, as reported                   | $(0.06)      | $(0.05)      | $(0.05)     
|Deduct:
				stock-based employee compensation expense |              |              |             
|expense
				under intrinsic value method              | 0            | 0            | 0           
|                                                      |              |              |             
|Add:
				total stock-based compensation expense       |              |              |             
|determined
				under fair value based method          | (0.00)       | (0.01)       | (0.01)      
|                                                      |              |              |             
|Net
				loss per share, pro-forma                     | $(0.06)      | $
				(0.06) | $
				(0.06)

|Expected
				life (years)
				  5     | 5.79   | 
|------------------------------------- | ------ | 
|Risk
				free interest rate
				2.75% | 3.99%  | 
|Expected
				volatility
				93.93%    | 84.96% | 
|Expected
				dividend yield           | 0.00%  | 

|                                       | 2005     | 2004    
|-------------------------------------- | -------- | --------
|                                       |          |         
|Trade
					receivables                 | $713,581 | $126,038
|Investment
					tax credits receivable | 105,838  | 125,597 
|                                       |          |         
|                                       | $819,419 | $251,635

|                             |          | Accumulated  |        
|---------------------------- | -------- | ------------ | -------
|                             | 2005     | Amortization | Net    
|Computer
					equipment      | $56,314  | $44,561      | $11,753
|Computer
					software       | 75,474   | 62,592       | 12,882 
|Furniture
					and equipment | 52,257   | 34,709       | 17,548 
|Manufacturing
					equipment | 69,961   | 36,949       | 33,012 
|Leasehold
					improvements  | 10,851   | 7,853        | 2,998  
|                             | $264,857 | $186,664     | $78,193

|                             |          | Accumulated  |         
|---------------------------- | -------- | ------------ | --------
|                             | 2004     | Amortization | Net     
|Computer
					equipment      | $52,186  | $21,173      | $31,013 
|Computer
					software       | 64,328   | 45,633       | 18,695  
|Furniture
					and equipment | 49,439   | 29,376       | 20,063  
|Manufacturing
					equipment | 73,940   | 39,812       | 34,128  
|Leasehold
					improvements  | 7,729    | 5,484        | 2,245   
|                             | $247,622 | $141,478     | $106,144

NORTHSTAR
ELECTRONICS, INC.Notes
to Consolidated Financial StatementsYears
Ended December 31, 2005 and 2004(U.S.
Dollars)7.	LOANS
PAYABLE

|                                                                                         | 2005    | 2004   
|---------------------------------------------------------------------------------------- | ------- | -------
|10%
					unsecured term loan with monthly interest payments only, due
					July 3, 2006. | $50,000 | $50,000
|                                                                                         | $50,000 | $50,000

1. The
	amount due to Cabot Management Limited, an associated private
	company related by a common shareholder and director, bears no
	interest, has no set terms of repayment and is subordinated to
	amounts due to ACOA.

1. The
	amount due to a director bears no interest, has no set terms of
	repayment and is subordinated to amounts due to ACOA.
2. During
	the year the Company was charged $51,600 (Cdn$60,000 –
	2004:Cdn $60,000) for technical consulting by a company controlled
	by a director. The 2005 fee is included in accounts payable at
	December 31,2005 and is to be settled by the issuance of shares of
	common stock by May 31,2006.

|                                                                                                                                                                                          | 2005      | 2004     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---------
|Atlantic
					Canada Opportunities Agency ("ACOA")                                                                                                                                        |           |          
|Interest
					free loan with monthly principal repayments of $3,256 Cdn
					($16,251 Cdn: 2004 - $55,323Cdn)                                                                             | $13,976   | $45,918  
|12% loan
					with monthly principal repayments of $1,786 Cdn plus interest
					($10,710 Cdn: 2004 $32,142 Cdn)                                                                          | 9,211     | 26,678   
|Interest
					free loan repayable in 72 monthly consecutive instalments of
					$3,119 Cdn ($56,119 Cdn: 2004 - $93,547 Cdn)                                                              | 48,262    | 77,644   
|Interest
					free unsecured loan repayable in monthly payments of Cdn $5,938
					commencing April, 2005 ($493,350 Cdn: 2004 - $498,750 Cdn)                                             | 424,281   | 413,963  
|Interest
					free loan payable $867Cdn monthly ($26,624 Cdn: 2004 - $37,028
					Cdn)                                                                                                    | 22,.897   | 30,733   
|Interest
					free unsecured loan to a maximum of $275,000 Cdn repayable in
					monthly payments of Cdn $4,583 commencing July, 2006 ($177,001
					Cdn: 2004 - $133,687 Cdn)            | 152,221   | 110,960  
|Interest
					free unsecured loan to a maximum of $102,691 Cdn repayable in
					monthly payments of Cdn $1,712 commencing July, 2006 ($14,502
					Cdn: 2004 - $19,768 Cdn)              | 12,472    | 16,407   
|Interest
					free unsecured loan repayable in monthly payments of Cdn $2,875
					commencing August, 2007 ($172,500 Cdn: 2004 - $nil Cdn)                                                | 148,350   | 0        
|Interest
					free unsecured loan repayable in annually at 5% of gross annual
					export sales for the preceding fiscal year commencing August,
					2008 ($28,234 Cdn: 2004 - $nil Cdn) | 24,280    | 0        
|                                                                                                                                                                                          | 855,950   | 722,303  
|Less:
					 Current portion                                                                                                                                                               | (148,988) | (100,937)
|                                                                                                                                                                                          | 706,962   | 621,366  
|Discount
					on interest free loans payable                                                                                                                                              | (259,107) | (166,655)
|                                                                                                                                                                                          | $447,855  | $454,711 

|2006       | $148,988
|---------- | --------
|2007       | $158,957
|2008       | $152,604
|2009       | $101,539
|2010       | $ 90,950
|Thereafter | $202,912
|           | $855,950

1. The
	Company is a defendant in a lawsuit commenced against them in 1999
	by their former master distributor.  The former distributor has
	alleged that the Company has interfered with the ability of the
	former distributor to sell products. The Company has filed a counter
	claim for monies owing by the former distributor to the Company.

1. The
	Company is contingently liable to repay $1,795,101 in assistance
	received under the Atlantic Innovation Fund. The assistance is
	repayable annually at the rate of 5% of gross revenues from sales of
	products resulting from the Aquacomm research and development
	project. Gross revenues are to be calculated for the fiscal year
	immediately preceding the due date of the respective payment.
	Repayment is to continue until the assistance is repaid in full. To
	date, nil revenues from the program have been earned and nil
	royalties have been paid.

|                                |                |                     | Weighted           
|------------------------------- | -------------- | ------------------- | -------------------
|                                | Number         | Exercise
					Price | Average            
|                                | of
					Shares | Per
					Share      | Exercise
					Price
|Balance,
					December 31, 2003 | 3,136,500      | $0.50
					to $1.00 | $0.57              
|Granted
					during year        | 1,195,000      | $0.50               | $0.50              
|Cancelled
					or expired       | (1,375,000)    | $0.50
					to $1.00 | $0.62              
|Exercised                       | 0              |                     |                    
|Balance,
					December 31, 2004 | 2,956,500      | $0.75
					to $0.50 | $0.51              
|Granted
					during year        | 137,500        | $0.50               | $0.50              
|Cancelled
					or expired       | (225,000)      | $0.50               | $0.50              
|Exercised                       | 0              |                     |                    
|Balance, December 31, 2005      | 2,869,000      | $0.75
					to $0.50 | $0.52              

|                                                | Exercise  | Number
              of Shares
|----------------------------------------------- | --------- | ------------------------------
|Expiry
              Date                       | Price     | 2005                          
|December
              31, 2005                 | $0.50     | 0                             
|January
              26, 2006                  | $0.50     | 50,000                        
|September
              17, 2006                | $0.50     | 50,000                        
|June
              25, 2007                     | $0.50     | 125,000                       
|June
              25, 2007                     | $0.75     | 175,000                       
|July
              5, 2007                      | $0.50     | 735,000                       
|April
              30, 2008                    | $0.50     | 150,000                       
|July
              8, 2008                      | $0.50     | 22,500                        
|February
              12, 2009                 | $0.50     | 640,000                       
|October
              12, 2009                  | $0.50     | 25,000                        
|March
              1, 2010                     | $0.50     | 50,000                        
|December
              15, 2010                 | $0.50     | 244,000                       
|April
              24, 2011                    | $0.50     | 25,000                        
|December
              4, 2011                  | $0.50     | 10,000                        
|November
              17, 2012                 | $0.50     | 25,000                        
|December
              19, 2012                 | $0.50     | 405,000                       
|May
              1, 2013                       | $0.50     | 25,000                        
|April
              7, 2014                     | $0.50     | 25,000                        
|March
              1, 2015                     | $0.50     | 87,500                        
|Total
              outstanding and exercisable | 2,869,000 | 2,956,500                     

|Balance, December 31, 2004       | 1,428,570 @ $0.50 expiring August 2010
|-------------------------------- | --------------------------------------
|Issued                           | 389,170 @ $0.50 expiring *            
|                                 | 389,170 @ $0.75 expiring **           
|                                 | 100,000 @ $0.50 expiring May 2009     
|                                 | 100,000 @ $0.75 expiring May 2009     
|                                 | 100,000 @ $1.00 expiring May 2009     
|                                 | 100,000 @ $1.25 expiring May 2009     
|Balance,
      December 31, 2005 | 2,606,910                             

|2006       | $ | 211,391  
|---------- | - | ---------
|Thereafter |   | 2,120,924
|           |   |          
|           | $ | 2,332,315

|                                       |   | 2005      |        | 2004     
|-------------------------------------- | - | --------- | ------ | ---------
|Non-capital losses
					carry forwards | $ | 2,332,315 | $2,243 | 2,243,588
|Approximate tax rate                   |   | 40%       |        | 40%      
|                                       |   | 932,926   |        | 897,433  
|Less: Valuation
					allowance         |   | (932,926) |        | (897,433)
|                                       | $ | 0         | $      | 0        

|Name of Director    | Age | Office                                   
|------------------- | --- | -----------------------------------------
|Wilson Russell, PhD | 60  | President and Principal Financial Officer
|Robert Blair, PhD   | 74  | Director                                 
|David Buttle, PhD   | 57  | Director                                 

|Class  | Name
      and Address                                                                                   | Number
      of Shares | Percentage
      of Shares*
|------ | -------------------------------------------------------------------------------------------------------- | ---------------------- | ---------------------------
|Common | Wilson Russell 
      4742         Collingwood Street
        Vancouver, B.C.
        Canada V6S 2B4     | 3,316,191              | 19.44%                     
|Common | David Buttle
The
        Well House, Burkham
        Wokington, Berkshire
        United Kingdom RG114P5 | 44,399                 | 0.26%                      

|(Registrant)                   | Northstar Electronics, Inc.                                      
|------------------------------ | -----------------------------------------------------------------
|By
      (Signature and Title) | /S/
      WILSON RUSSELL                                         
|Date
      April 17, 2006      | Wilson
      Russell, PhD, President, Principal Financial Officer
|                               |                                                                  
|By(Signature and Title)        | /S/ ROBERT BLAIR                                                 
|Date April 17, 2006            | Robert Blair, PhD, Director                                      
|                               |                                                                  
|By (Signature and Title)       | /S/ DAVID BUTTLE                                                 
|Date April 17, 2006            | David Buttle, PhD, Director                                      

1. That the
	financial information included in this Annual Report fairly presents
	in all material respects the financial condition and results of
	operations of the Company as of December 31, 2005 and for the
	periods presented in the report; and
2. That the Annual
	Report fully complies with the requirements of Sections 13(a) or
	15(d) of the Securities exchange Act of 1934

|Date: April 17, 2006 | /s/ Wilson Russell________________                       
|-------------------- | ---------------------------------------------------------
|                     | Wilson Russell, President and Principal Financial Officer