UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C.  20549



FORM
10-KSB-A



[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES

EXCHANGE
ACT OF 1934

For
the fiscal year ended December 31, 2003



[
] TRANSITION REPORT PURSUANT TO 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: 333-90031



Exact
name of small business issuer as specified in its charter

Northstar
Electronics, Inc.



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



Address
of principal executive offices

Suite
# 1455- 409 Granville Street,

Vancouver,
British Columbia,

Canada
V6C 1T2



Registrant’s
telephone number

(604)
685-0364



Securities
registered pursuant to section 12(b) of the Act

None



Securities
registered pursuant to section 12(g) of the Act

100,000,000
shares of common stock with a par value of $0.0001 each



Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (s229.405 of this chapter) is not contained herein,
and 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]

State
the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. The aggregate market value
shall be 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 60 days prior to the date of
filing. (See definition of affiliate in Rule 405, 17 CFR 230.405).
Note –If a determination as to whether a particular
person or entity is an affiliate cannot be made without involving
unreasonable effort and expense, the aggregate market value of the
common stock held by non-affiliates may be calculated on the basis of
assumptions reasonable under the circumstances, provided that the
assumptions are set forth in this Form.



Aggregate
market value of voting common equity held by non-affiliates as of
December 31, 2003:  $4,500,000 approximately



Aggregate
market value of non-voting common equity held by non-affiliates as of
December 31, 2003:  $NIL



Indicate
whether the registrant is an accelerated filer based on the market
value of its public float held by non-affiliates at the end of the
most recent second fiscal quarter:

[
] Yes  [x] No



Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:

Outstanding
shares of common stock as of February 28, 2004: 15,841,256

Outstanding
shares of preferred stock as of February 28, 2004: Nil



Documents
incorporated by reference: None



Northstar
Electronics, Inc.

Index

Part
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 Holders

Part
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 Procedures

Part
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

Part
IV

Item
13.	Exhibits and Reports on form 8-K

Item
14.           Principal Accountants Fees and Services

Signatures

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) in
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 and aerospace contract
manufacturing opportunities.



Sonar
Products and Technologies

NTI
developed a wireless communications technology with undersea
applications. The technology is used in underwater sensing devices
and can send information from one place in the ocean to another
place. The electronic sensors 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
launches and ramps up its efforts to protect U.S. waterways and
marine borders from ships, submarines and unwanted intruders.
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 are
intended to protect naval ships, harbors and ports.



Research and Development - AQUACOMM

AQUACOMM is a $2.5Million fully funded in-house
research and development  program at Northstar that has been 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 for
three years, Northstar believes that AQUACOMM will result in the
development of up to 10 new technologies during this period. To date,
Northstar has expended $1,783,039Cdn on this development program and
has recovered $1,105,484Cdn.



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 a large 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 have such a
system ready this year and intends to market the system through a
strategic alliance with an international oil field communications
company.



Northstar believes it can build on its expertise
in sonar technology and marine engineering to become a Commercial
Sonar Center of Excellence upon the completion of its AQUACOMM
program.



The
NETMIND System

The
first application of NTI’s core technology is the NETMIND
system. NTI developed, manufactures and markets this product for the
world’s commercial fishing industry.



The
NETMIND Market

NETMIND
was introduced to the fishing industry in late 1996. To date,
approximately 180 systems have been sold in North America, Europe,
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
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

Astroflight
- battery chargers

Mercury
Wire Products - tow cable for hydrophone

Electrosonic
- electronic components

Future
Active Inc. - electronic components

Prism
- 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 180 NETMIND systems to over 100 different
customers with no dependence on one or a few major customers.



Competition
– NETMIND

The
system has two main competitors, Furuno in Japan and Scanmar in
Norway, both of which are private companies. Little information is
available to the public on either of these companies; however, we
believe that NETMIND has technical advantages over each. This belief
is based on our testing program, which established our technical
specifications, and on information gleaned from Furuno and from
Scanmar. We have no direct access to any competitor’s test
data.

The
NETMIND, Furuno and Scanmar systems consist of wireless acoustic
sensors used underwater and all three systems operate by illustrating
how the fishing net is behaving while being towed. However, unlike
its competitors, 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 competitors.
We believe the rugged design of various NETMIND components has
surpassed competitor’s designs in that NETMIND’s unique
components require very little maintenance.

While
NETMIND continues to expand its market presence, we believe the
Company is smaller in size and resources when compared to its
competitors. NTI’s staff numbers twenty one while we believe
Scanmar and Furuno each employ many times that number. As well, we
believe the competitors’ facilities are substantially larger
than NTI’s.



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, Iceland, Ireland, New Zealand, Scotland, Spain,
Denmark and South Africa. We support all sales efforts with product
brochures, pamphlets, and customer testimonials and with booths at
trade shows such as Fish Expo in Seattle. 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 of its sophistication and, regardless
of patent protection, it is expected it would take several years for
a new player to catch up to 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 2003. 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 produces 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.



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. For
example, Canada has announced the award in 2004 of a contract for the
US$2Billion Maritime Helicopter Project (MHP) that will require the
type of console displays NTI can manufacture.



NTI
signed a US$2Million contract with Lockheed Martin, Manassas,
Virginia on October 19, 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.



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 2003, 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 regarding contract opportunities which is similar to
dealing with four independent companies. 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 2003 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 expertise,
NNL has developed its approach to securing and executing large
defense contracts by bringing together a number of affiliate
companies thereby being able to present a unique capability to prime
defense contractors.  A major potential project in this area is the
$3Billion Maritime Helicopter Project, the contract for which is
expected to be awarded in 2004. Because NNL offers ‘one stop
shopping’ to twenty five companies with a wide range of
relevant expertise, it is anticipated that some contract work for the
Maritime Helicopter Project will flow to NNL, regardless of which
consortia wins the bid.



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
plus 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, with TYCO International, submitted a bid to provide the
dual 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 assemblies of competing companies.
The project is expected to continue for the lifetime of the JSF
program with the first contract award expected in 2004.





EMPLOYEES

As of
December 31, 2003 the Company had a total of 31 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 atwww.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

No
change since previous filing



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 and 2003 and annual reports (form 10KSB) for
December 31, 2000, 2001 and 2002.



The
Company has amended its December 31, 2003 Form 10KSB to include the
name and address of its auditors on its audit report, which
information was inadvertently left out of the original filing. The
Company’s auditors continue to be Pannell Kerr Forster located
in Vancouver, British Columbia.



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,
2003 and 2002 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.





Results
of Operations

The
following table sets forth for the years indicated items included in
the Company’s consolidated statement of operations:



|                               | 2003           | 2002       | 2001       | 2000       | 1999        | 1998        
|------------------------------ | -------------- | ---------- | ---------- | ---------- | ----------- | ------------
|Total
			revenue               | $
			1,641,960 | $976,234   | $1,176,527 | $2,301,378 | $462,659    | $193,913    
|Cost
			of goods sold          | 230,213        | 253,377    | 472,227    | 1,370,427  | 136,955     | 71,189      
|Discounts                      | 198,950        | 148,425    | 171,830    | 187,392    | 69,399      | 29,087      
|                               | 429,163        | 401,802    | 644,057    | 1,557,819  | 206,354     | 100,276     
|Gross
			margin                | 1,212,797      | 574,432    | 532,470    | 743,559    | 256,305     | 93,637      
|Expenses                       | 1,905,942      | 1,366,567  | 974,394    | 595,823    | 623,826     | 80,676      
|Net
			income (loss)           | $(693,145)     | $(792,135) | $(441,924) | $147,736   | $(367,521)  | $(187,039)  
|Net
			income (loss) per share | $(0.05)        | $(0.08)    | $(0.06)    | $
			0.02  | $
			(0.05) | $
			 (0.03)





As a result of its design
engineering programs and expenditures, Northstar Electronics, Inc. is
building an infrastructure to position itself for significant growth.
 In each of its core areas of business, the Company has proven itself
with an ability to deliver high quality projects on time and within
budget.



DISCUSSION

The
Company’s revenues were $1,641,960 for 2003 ($976,234 in 2002)
and we incurred a net loss of $(693,145) for 2003 [$(792,135) in
2002]. Management is confident that the steps taken this past year
can provide the basis for substantially increased revenues and
profitability over the ensuing years.



Sonar
Products and Technologies

Most
of the loss is attributable to the Company’s development
projects to design and develop sonar products, sonar systems and
leading edge sonar technologies. The development program has taken on
two complementary directions, one aimed at defense and Homeland
Security, the other aimed at civilian markets in offshore petroleum,
environment and commercial fishing industries.



In
2002 and 2003, we carried out work on an underwater sonar system
designed to protect ports, offshore oil platforms and ships from
underwater threats, including combat divers. We designed and built
the sonar and mechanical hardware components of a prototype
underwater intruder detection system for a major defense contractor,
which markets the system. In 2003 we received a follow-on order for
additional intruder detection systems and we expect substantial
production orders after testing is completed by the military. We
believe that Homeland Security will form the largest part of our
business over the next five years.



Our
second development program is called AQUACOMM for which we are
receiving considerable financial support from the federal government
of Canada. The program plan calls for the development of up to ten
new products over the next two to three years. At present we are
putting in place the technological infrastructure including new
specialized equipment, laboratory facilities and engineering
personnel. With this infrastructure established, we are able to draw
on the particular capabilities needed for the development of each
product.

One
example of the type of system we intend to develop is for the
offshore petroleum industry. Floating production systems, in the
shape of ships, are held in place by a large subsea buoy that is
moored to anchoring points on the ocean floor. It is important prior
to the mating of the ship with the buoy to monitor the motions of the
buoy in six degrees of freedom. Through our AQUACOMM program, we can
develop a system that measures these motions (heading, pitch and
roll) along with depth, water temperature, salinity and water current
speed. All of the data would be then transmitted via our sonar
communication link to a receiver on a support ship.

An
important part of our AQUACOMM program is enhancements to our NETMIND
trawl monitoring system for the commercial fishing industry. These
enhancements would give NETMIND an advantage over our competitors
and, therefore, we expect to see resulting increased sales and
profits. Several AQUACOMM sonar products are expected to be
introduced to the marketplace in 2004.



Netmind

Sales
of NETMIND systems increased in 2003 over 2002 primarily because of
new markets opened up in Europe. In particular, the new dealership in
Spain is exceeding sales expectations for that area.

Previously
mentioned technical enhancements are being introduced and will
continue to be introduced throughout 2004. These enhancements
combined with an aggressive national and international marketing
campaign should lead to a further growth in NETMIND sales revenues
for 2004.



Contract
Manufacturing

Northstar
remained active pursuing contract manufacturing opportunities during
2003. We expect to play a strong regional role in fulfilling the
extensive industrial benefit requirements of the $3billion Maritime
Helicopter Project that will be part of the contract. We also expect
to carry out more submarine console contracts for Lockheed Martin
Naval Electronics and Surveillance Systems in Manassas, Virginia,
having signed a Manufacturing License Agreement with them in 2003. We
are also actively pursuing business development for contract work on
the Joint Strike Fighter (JSF) program for which Lockheed Martin in
Dallas-Fort Worth is the prime contractor. The areas we have focused
on to date have been fiber optics, training and courseware. In
particular, we have bid to provide the dual mode fiber optic
assemblies for the JSF.



Systems
Integration

During
2002 we carried out the development of the sonar hardware and
mechanical housing for the intruder detection system, as mentioned
above. We conducted the project as a system integration in that
Northstar Network was the project manager and contracted other
companies to perform sub-tasks. Northstar then brought all the
sub-tasks together to make and test the final system.  We foresee
carrying out future system integration projects on contract work we
expect on the Maritime Helicopter Project, the JSF and other defense
related projects. During 2003, we continued systems integration work
on the intruder detection system.

Total
revenues were $1,641,960 for 2003 compared with $976,234 in 2002 and
$1,176,527 in 2001. Contract revenues declined over the years 2001
and 2002. The Company continues to pursue further contract business
and is anticipating several substantial contracts in 2004.

Gross
margins were 74% for 2003  compared with 59% in 2002 and 44% in 2001.
The percentage increase was created by lower component costs and
higher gross margins associated with NETMIND sales, a decrease in the
lower margined contract sales volume and the inclusion of Aquacomm
grants totaling $633,731 in revenue (2002 - $218,597). A significant
cause of the fluctuation in the gross margin percentages is due to
changes in the revenue mix where the Company is now generating
revenue with significantly less direct costs attached.



As
mentioned previously, in 2002, the Company was successful in funding
its $2.5Million AQUACOMM product development program. In 2003 the
Company spent $848,277 on design engineering and prototype
development related to the development of underwater sonar technology
($609,299 in 2002). The Company received contract revenues of
$325,000 (2002 -$179,269) and government incentives of $626,496 (2002
-$218,597) during the current year to offset certain of these costs.
The direct result of extensive spending on design engineering and
prototype development during the current year has been a loss of
$(693,145) for 2003 compared to losses of $(792,135) in 2002 and
$(441,924) in 2001.



The
Company expects that design and manufacture of homeland security and
anti-terrorism systems will be a major component of its business over
the next five years. The Company is expecting to receive production
contracts from a major US defense contractor for the sonar hardware
portions of detection systems.



The
Company used cash in operations of $(368,708) in 2003 compared to
cash used by operations of $(589,419) during 2002 and cash used by
operations of $(138,931) during 2001.  Cash used in operations was
offset by the Company’s raising of capital by the issuance of
its common shares. In 2003, the Company was successful in raising net
equity financing of $1,096,040 ($706,793 in 2002) through a
Regulation S common share issuance and private placements.



The
Company’s working capital and capital requirements will depend
on many factors, including the ability of the Company to increase
sales from marketing of the NETMIND system in order to generate
sufficient funds to cover the current level of operating expenses.
The Company further intends to create working capital from the
business to be generated pursuant to the Manufacturing License
Agreement with Lockheed Martin. During the most recent fiscal year
the Company increased its long-term debt by $106,331. The
availability of sufficient future funds will depend to an extent on
the obtaining of manufacturing contracts on a timely basis.
Accordingly, the Company may be required to issue securities to
finance any working capital requirements. There can be no assurance
whether or not such future financings will be available on
satisfactory terms.



Certain
statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"),
press releases, presentations by the Company of its management and
oral statements) may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995.  Words such as "expects," "anticipates,"
"intends," "plans," "believes,"
"seeks," "estimates," and "should," and
variations of these words and similar expressions, are intended to
identify these forward-looking statements. Actual results may
materially differ from any forward-looking statements.  Factors that
might cause or contribute to such differences include, among others,
competitive pressures and constantly changing technology and market
acceptance of the Company's products and services.  The Company
undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements, which may be made to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.



Item
7. Financial Statements

NORTHSTAR
ELECTRONICS, INC.

Index
to Consolidated Financial Statements December 31, 2003 and 2002 (U.S.
Dollars)



Report
of Independent Chartered Accountants

Consolidated
Balance Sheets

Consolidated
Statements of Operations

Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)

Consolidated
Statements of Cash Flows

Notes
to Consolidated Financial Statements



TO
THE BOARD OF DIRECTORS AND STOCKHOLDERS

OF
NORTHSTAR ELECTRONICS, INC.



We
have audited the consolidated balance sheets of Northstar
Electronics, Inc. as at December 31, 2003 and 2002 and the
consolidated statements of operations, stockholders' deficit and cash
flows for each of the three years ended December 31, 2003.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.



We
conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require
that we plan and perform the audits 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.  We believe that our audits provide
a reasonable basis for our opinion.



In
our opinion, these consolidated financial statements present fairly,
in all material respects, the consolidated financial position of
Northstar Electronics, Inc., as at December 31, 2003 and 2002 and the
results of its operations and its cash flows for each of the three
years ended December 31, 2003 in accordance with accounting
principles generally accepted in the United States of America.





Pannell
Kerr Forster

\S\

Chartered
Accountants



7th
Floor, Marine Building, 355 Burrard Street

Vancouver,
B.C., Canada V6C
2G8



March
26, 2004

NORTHSTAR
ELECTRONICS, INC.

Consolidated
Balance Sheets

December
31

(U.S.
Dollars)



|                                                                       | 2003        | 2002       
|---------------------------------------------------------------------- | ----------- | -----------
|Assets                                                                 |             |            
|                                                                       |             |            
|Current                                                                |             |            
|Cash                                                                   | $613,040    | $117,690   
|Accounts
          receivable (note 5)                                 | 227,444     | 345,454    
|Inventory                                                              | 161,602     | 147,846    
|Prepaid
          expenses                                             | 11,148      | 4,682      
|Total
          Current Assets                                         | 1,013,234   | 615,672    
|Intangible asset
          (note 6)                                    | 37,285      | 33,613     
|Property
          and equipment (note 6)                              | 118,956     | 104,458    
|                                                                       |             |            
|Total
          Assets                                                 | $1,169,475  | $753,743   
|                                                                       |             |            
|Liabilities                                                            |             |            
|                                                                       |             |            
|Current                                                                |             |            
|Accounts
          payable and accrued liabilities                     | $236,255    | $418,555   
|Loans
          payable (note 7)                                       | 58,905      | 72,863     
|Deferred
          revenue (note 5)                                    | 143,309     | 0          
|Current
          portion of long-term debt (note 8)                   | 83,527      | 62,079     
|Total
          Current Liabilities                                    | 521,996     | 553,497    
|                                                                       |             |            
|Long
          term debt (note 8)                                      | 376,282     | 315,932    
|Discount on long
          term debt (note 8)                          | 137,910     | 113,377    
|Due
          to Cabot Management Limited (note 9)                     | 85,268      | 70,105     
|Due
          to Director (note 9)                                     | 44,255      | 140,297    
|Total
          Liabilities                                            | 1,165,711   | 1,193,208  
|                                                                       |             |            
|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                                       |             |            
|15,838,074 (11,907,976
          - 2002) Common shares                 | 1,584       | 1,191      
|Additional
          Paid-in Capital                                   | 3,423,191   | 2,179,624  
|Other
          Comprehensive Income (loss)                            | (82,373)    | 25,213     
|Accumulated
          Deficit                                          | (3,338,638) | (2,645,493)
|Total
          Stockholders' Equity (Deficit)                         | 3,764       | (439,465)  
|                                                                       |             |            
|Total
          Liabilities and Stockholders' Equity (Deficit)         | $1,169,475  | $753,743   

NORTHSTAR
ELECTRONICS, INC.

Consolidated
Statements of Operations

Years
Ended December 31

(U.S.
Dollars)



|                                                 | 2003            | 2002          | 2001           
|------------------------------------------------ | --------------- | ------------- | ---------------
|                                                 |                 |               |                
|Revenues                                         | $
				1,641,960 | $
				976,234 | $
				1,176,527
|FONT FACE="Univers, Arial, sans-serif">Discounts | 198,950         | 148,425       | 171,830        
|                                                 |                 |               |                
|Revenues
				net of Discounts                    | 1,443,010       | 827,809       | 1,004,697      
|Cost
				of Goods Sold                           | 230,213         | 253,377       | 472,227        
|                                                 |                 |               |                
|Gross
				Margin                                 | 1,212,797       | 574,432       | 532,470        
|                                                 |                 |               |                
|Expenses                                         |                 |               |                
|Research
				and development                     | 848,277         | 439,003       | 71,852         
|Tax
				credits on research and development      | (138,810)       | (55,401)      | (26,142)       
|Salaries,
				wages and benefits                 | 358,970         | 248,553       | 330,316        
|Consulting                                       | 219,161         | 129,875       | 42,900         
|Travel
				and marketing                         | 163,143         | 145,610       | 167,321        
|Rent                                             | 108,623         | 95,226        | 78,423         
|Business
				development                         | 82,221          | 85,491        | 76,147         
|Office                                           | 45,387          | 51,446        | 38,092         
|Interest
				and bank charges                    | 9,917           | 43,779        | 4,228          
|Professional
				fees                            | 91,440          | 63,975        | 87,523         
|Telephone,
				light and heat                    | 48,820          | 32,671        | 26,067         
|Interest
				on long-term debt                   | 18,574          | 32,043        | 32,065         
|Miscellaneous                                    | 12,404          | 22,460        | 13,818         
|Amortization                                     | 37,815          | 31,836        | 31,784         
|                                                 | 1,905,942       | 1,366,567     | 974,394        
|Net
				Loss                                     | (693,145)       | (792,135)     | (441,924)      
|Other
				Comprehensive Income (Loss)            | (107,586)       | (12,095)      | 3,314          
|Total
				Comprehensive Loss                     | (800,731)       | $(804,230)    | $(438,610)     
|Net
				Loss Per Share                           | $(0.05)         | $(0.08)       | $(0.06)        
|                                                 |                 |               |                
|Weighted
				Average Number of Shares            |                 |               |                
|Outstanding                                      | 14,446,986      | 9,954,597     | 7,820,940      

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       | Stockholder         
|                                      | Shares        | Value        | Capital    | Income         | Deficit           | Equity
				(Deficit)
|Balance,
				December 31, 2001        | 7,942,009     | $794
				794 | $1,146,447 | $
				37,308   | $
				(1,853,358) | $
				(668,809)     
|Issuance
				of common stock          |               |              |            |                |                   |                     
|For
				cash                          |               |              |            |                |                   |                     
|On
				private placement              | 3,173,309     | 318          | 1,114,448  | 0              | 0                 | 1,114,766           
|On
				exercise of options            | 78,123        | 8            | 0          | 0              | 0                 | 8                   
|For
				services                      | 714,535       | 71           | 275,075    | 0              | 0                 | 275,146             
|Share
				issue costs                 | 0             | 0            | (407,981)  | 0              | 0                 | (407,981)           
|Valuation
				of stock options        | 0             | 0            | 51,635     | 0              | 0                 | 51,635              
|Other
				comprehensive income (loss) | 0             | 0            | 0          | (12,095)       | 0                 | (12,095)            
|Net
				loss                          | 0             | 0            | 0          | 0              | (792,135)         | (792,135)           
|Balance
				December 31, 2002         | 11,907,976    | $1,191       | $2,179,624 | $25,213        | $(2,645,493)      | $(439,465)          
|Issuance
				of common stock          |               |              |            |                |                   |                     
|For
				cash                          |               |              |            |                |                   |                     
|On
				private placements             | 1,782,405     | 178          | 798,967    | 0              | 0                 | 799,145             
|On
				unit offerings                 | 1,720,235     | 172          | 587,328    | 0              | 0                 | 587,500             
|On
				exercise of options            | 25,000        | 3            | 12,497     | 0              | 0                 | 12,500              
|For
				services                      | 152,361       | 15           | 72,261     | 0              | 0                 | 72,276              
|For
				fees                          | 250,097       | 25           | 103,881    | 0              | 0                 | 103,906             
|Share
				issue costs – for cash      | 0             | 0            | (303,105)  | 0              | 0                 | (303,105)           
|-
				for shares                      | 0             | 0            | (103,906)  | 0              | 0                 | (103,906)           
|Valuation
				of stock options        | 0             | 0            | 75,644     | 0              | 0                 | 75,644              
|Other
				comprehensive (loss)        | 0             | 0            | 0          | (107,586)      | 0                 | (107,586)           
|Net
				loss                          | 0             | 0            | 0          | 0              | (693,145)         | (693,145)           
|Balance,
				December 31, 2003        | 15,838,074    | $1,584       | $3,423,191 | $
				(82,373) | $(3,338,638)      | $
				3,764         

NORTHSTAR
ELECTRONICS, INC.

Consolidated
Statements of Cash Flows

Years
Ended December 31

(U.S.
Dollars)



|                                                   | 2003       | 2002       | 2001      
|-------------------------------------------------- | ---------- | ---------- | ----------
|                                                   |            |            |           
|Operating
				Activities                           |            |            |           
|Net
				loss                                       | $(693,145) | $(792,135) | $(441,924)
|Adjustments
				to reconcile net loss to net cash  |            |            |           
|Used
				in operating activities                   |            |            |           
|Amortization                                       | 37,815     | 31,836     | 31,784    
|Stock
				based and uncompensated services         | 75,644     | 51,635     | 42,900    
|Services
				paid with common stock                | 72,276     | 275,146    | 87,610    
|Changes
				in operating assets and liabilities    |            |            |           
|Accounts
				receivable                            | 162,195    | (206,001)  | 302,970   
|Prepaid
				expenses                               | (5,543)    | 716        | (3,339)   
|Inventory                                          | 15,039     | (40,589)   | 28,279    
|Accounts
				payable and accrued liabilities       | (165,703)  | 89,973     | (187,211) 
|Deferred
				revenue                               | 132,714    | 0          | 0         
|                                                   |            |            |           
|Cash
				Used in Operating Activities              | (368,708)  | (589,419)  | (138,931) 
|                                                   |            |            |           
|Investing
				Activities                           |            |            |           
|Acquisition
				of equipment                       | (45,810)   | (78,004)   | (24,080)  
|Proceeds
				on disposal of equipment              | 9,415      | 0          | 0         
|                                                   |            |            |           
|Cash
				Used in Investing Activities              | (36,395)   | (78,004)   | (24,080)  
|                                                   |            |            |           
|Financing
				Activities                           |            |            |           
|Issuance
				of common stock for cash              | 1,096,040  | 706,793    | 0         
|Loans
				payable (repayment)                      | (73,823)   | 79,941     | (9,067)   
|Proceeds
				from long-term financing              | 69,972     | 30,066     | 189,415   
|Repayment
				of long-term debt                    | (69,923)   | (186,668)  | (83,466)  
|Advances
				from (repayment to) director          | (132,030)  | 115,896    | (23,088)  
|                                                   |            |            |           
|Cash
				Provided by Financing Activities          | 890,236    | 746,028    | 73,794    
|                                                   |            |            |           
|Effect
				of Foreign Currency Translation on Cash | 10,217     | (614)      | 3,314     
|                                                   |            |            |           
|Inflow
				(Outflow) of Cash                       | 495,350    | 77,991     | (85,903)  
|Cash,
				Beginning of Year                        | 117,690    | 39,699     | 125,602   
|                                                   |            |            |           
|Cash,
				End of Year                              | $613,040   | $117,690   | $39,699   
|                                                   |            |            |           
|Supplemental
				Information                       |            |            |           
|Interest
				paid                                  | $18,574    | $32,043    | $32,065   

NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(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 2000 merger described below.  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.



On January 26,
2000, the Company completed the acquisition of 100% of the shares of
Northstar Technical Inc.  The Company effected the merger through 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 has been
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.



2.	SIGNIFICANT
ACCOUNTING POLICIES



(a)	Revenue
recognition



Revenue from the
sales of the NETMIND system are 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.  Contract manufacturing sales are recorded as each contracted
unit is delivered to the contracting customer.



Revenue from
fixed price research and development contracts is recognized using
the percentage of completion method whereby revenue is recognized at
the same percentage that contract costs to date is of total costs at
contract completion.



(b)	Inventory



Inventories are
valued at the lower of average cost and net realizable value.



(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 in
the applicable research and development expense.

NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



2.	SIGNIFICANT
ACCOUNTING POLICIES (Continued)



(e)	Property and
equipment



Property and
equipment are recorded at cost less any government assistance
received and are 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.



(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 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.



For reporting
purposes, assets and liabilities of non - U.S. subsidiaries that
operate in a local currency environment are translated to U.S.
dollars at year end exchange rates. Translation adjustments are
recorded as other Comprehensive income or (loss) not affecting
deficit within stockholders’ equity.

NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



>2.	SIGNIFICANT
ACCOUNTING POLICIES (Continued)



(i)	Other
comprehensive income (loss)



The Company has
other comprehensive income (loss) arising from foreign currency
translation of the subsidiary companies financial statements to US
funds.  Accordingly, other comprehensive income (loss) is shown as a
separate component of stockholders' equity (deficit).



(j)	Use of
estimates



The preparation
of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.  Significant areas requiring the use of management estimates
relate to the determination of the impairment of assets, useful lives
for depreciation and amortization.  Financial results as determined
by actual events could differ from those estimates.







(k)	Net loss
per share



Net loss per
share calculations are based on the weighted average number of common
shares outstanding during the year.  Diluted net income per share is
computed using the weighted average number of common and dilutive
common equivalent shares outstanding during the year.  The following
is a reconciliation of the numerators and denominators of the basic
and diluted net loss per share computations for the periods
presented:



|                                  |            | Weighted       |               
|--------------------------------- | ---------- | -------------- | --------------
|                                  |            | Average        | Net           
|                                  | Net        | Number         | Loss          
|                                  | Loss       | of
					Shares | Per
					Share
|Year
					ended December 31, 2001 |            |                |               
|Basic
					net loss               | $(441,924) | 7,820,940      | $
					(0.06) 
|                                  |            |                |               
|Year
					ended December 31, 2002 |            |                |               
|Basic
					net loss               | $(792,135) | 9,954,597      | $
					(0.08) 
|                                  |            |                |               
|Year
					ended December 31, 2003 |            |                |               
|Basic
					net loss               | $(693,145) | 14,446,986     | $(0.05)       

Diluted loss per
share is not shown as it is anti-dilutive



(l)
Stock-Based Compensation



The
Company applies the intrinsic value method of accounting as
prescribed by APB Opinion No. 25 “Accounting for Stock Issued
to Employees” and related interpretations, in accounting for
options granted to employees. As such, compensation expense is
recorded on the date of the grant when the market price of the
underlying stock exceeds the exercise price. SFAS 123 “Accounting
for Stock-based Compensation” establishes accounting and
disclosure requirements using the fair value-based method of
accounting for stock-based compensation plans. As allowed by SFAS
123, the company elected to



NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



2.	SIGNIFICANT
ACCOUNTING POLICIES (Continued)



continue to
apply the intrinsic value-based method of accounting described above
and has adopted the disclosure requirements of SFAS 123.



Compensation
expense of $nil  (2002-$24,000; 2001 - $37,240) was recognized as
salaries expense.  Had compensation expense been determined as
provided in SFAS 123 using the Black-Scholes option-pricing model,
the pro-forma effect on the Company's net loss and per share amounts
would have been as follows:



|                                                       | 2003       | 2002          | 2001         
|------------------------------------------------------ | ---------- | ------------- | -------------
|Net
					loss, as reported                             | $(693,145) | $(792,135)    | $(441,924)   
|Deduct:
					stock-based employee compensation expense |            |               |              
|expense
					under intrinsic value method              | 0          | 24,000        | 37,240       
|                                                       |            |               |              
|Add:
					total stock-based compensation expense       |            |               |              
|determined
					under fair value based method          | (54,560)   | (414,054)     | (67,480)     
|                                                       |            |               |              
|Net
					loss, pro-forma                               | $(747,705) | $(1,182,189)  | $(472,164)   
|                                                       |            |               |              
|Net
					loss per share, as reported                   | $(0.05)    | $(0.08)       | $(0.06       
|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          | (0.01)     | (0.04)        | (0.01)       
|                                                       |            |               |              
|Net
					loss per share, pro-forma                     | $(0.06)    | $
					(0.12) | $
					(0.07)



The fair value
of each option grant is calculated using the following weighted
average assumptions:

|Expected
				life (years)
				  5                                            | 7      | 5     
|---------------------------------------------------------------------------- | ------ | ------
|Risk
				free interest rate
				2.75%                                        | 4.38%  | 4.00% 
|Expected
				volatility
				93.93%                                           | 80.86% | 45.04%
|Expected
				dividend yield                                            0.00% | 0.00%  | 0.00% 



During the year
the Company granted stock options to consultants and accounted for
the options using the Black-Scholes option pricing model resulting in
 consulting expense of $58,610 recorded by the Company. In addition,
$17,034 (2002 - $23,136) relating to stock options granted in a prior
year, and vested in 2003, for legal services has been expensed as
professional fees.



(l)	Recent
accounting pronouncements



1. In
	January 2003 the FASB issued interpretation No. 46, Consolidation of

Variable
Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements. Interpretation 46
establishes accounting guidance for consolidation of variable
interest entities that function to support the activities of the
primary beneficiary. Interpretation 46 applies to any business
enterprise both private and public that has a controlling interest,
contractual relationship or other business relationship with a
variable interest entity. The Company has no investment in or
contractual relationship or other business relationship with a
variable interest entity and



NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



2.	SIGNIFICANT
ACCOUNTING POLICIES (Continued)



therefore
the adoption did not have any impact on the Company’s
consolidated financial position, results of operations or cash flows.



1. On
	April 30, 2003 the FASB issued Statement No. 149, Amendment of

Statement
133 on Derivative Instruments and Hedging Activities. Statement 149
is intended to result in more consistent reporting of contracts as
either freestanding derivative instruments subject to Statement 133
in its entirety, or as hybrid instruments with debt host contracts
and embedded derivative features. In addition, Statement 149
clarifies the definition of a derivative by providing guidance on the
meaning of initial net investments related to derivatives. Statement
149 is effective for contracts entered into or modified after June
30, 2003. The adoption of Statement 149 did not have any effect on
its consolidated financial position, results of operations or cash
flows.



1. On
	May 15, 2003 the FASB issued Statement No. 150, Accounting for

Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. Statement 150 establishes standards for classifying and
measuring as liabilities certain financial instruments that embody
obligations of the issuer and have characteristics of both
liabilities and equity. Statement 150 represents a significant change
in practice in the accounting for a number of financial instruments,
including mandatory redeemable equity instruments and certain equity
derivatives that frequently are used in connection with share
repurchase programs. Statement 150 is effective for all financial
instruments created or modified after May 31, 2003 and to other
instruments as of September 1, 2003. The adoption of Statement 150 on
July 1, 2003 did not have any impact on its consolidated financial
position, results of operations or cash flows.



iv.         In
December 2002, FASB issued SFAS 148, “Accounting for
Stock-based Compensation – Transition and Disclosure, an
amendment to SFAS 123”. SFAS 148 provides two additional
transition methods for entities that adopt the preferable method of
accounting for stock-based compensation. Further, the statement
requires disclosure of comparable information for all companies
regardless of whether, when, or how an entity adopts the preferable,
fair value method of accounting. These disclosures are now required
for interim periods in addition to the traditional annual disclosure.
The amendment to SFAS 123, which provides for additional methods, are
effective for the periods beginning after December 15, 2002, although
earlier application is permitted. The amendments to the disclosure
requirements are required for financial reports containing condensed
financial statements for interim periods beginning after December 15,
2002.



3.	FINANCIAL
INSTRUMENTS



1. Fair
	values

The carrying
value of cash, accounts receivable, accounts payable and accrued
liabilities and loans payable approximate their fair value because of
the short maturity of these financial instruments. The fair value of
long term debt net of discount for interest free loans, the
significant portion of long term debt being interest free or with
fixed interest rates, and amounts due to related parties all
approximate their fair values.











NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



>3.	FINANCIAL
INSTRUMENTS(Continued)



ii
Interest rate risk

The Company is
not exposed to significant interest rate risk due to the short term
maturity of its monetary current assets and current liabilities.



iii
Credit risk

The Company is
exposed to credit risk with respect to its accounts receivable. The
Company follows a program of credit evaluations of customers and
limits the amount of credit extended when deemed necessary. The
Company maintains provisions for potential credit losses and any such
losses to date have been within management’s expectations.



iv
Foreign exchange risk

The Company
translates the results of foreign operations into US currency using
          rates approximating the weighted average exchange rate for
the year. The             exchange rate may vary from time to time.



4.	ECONOMIC
DEPENDENCE



During 2003 one
customer accounted for 35% of the Company's sales (28% 2002 and
2001).  The Company has no further contracts in place with this
customer at this time although additional orders are anticipated from
this customer.



5.	ACCOUNTS
RECEIVABLE



|                                                     | 2003     | 2002    
|---------------------------------------------------- | -------- | --------
|Trade
				receivables                                | $125,886 | $93,066 
|Government
				assistance - research and development | 0        | 197,239 
|Investment
				tax credits receivable                | 101,558  | 55,149  
|                                                     |          |         
|                                                     | $227,444 | $345,454



During 2002 the
Company received approval for government assistance to a maximum

amount of
$2,200,000Cdn based on 60.2% of eligible project costs estimated at

$3,658,765Cdn.



The project,
‘Aquacomm’, is a research and development project to
develop new             products. Qualifying costs must be incurred
prior to March 31, 2005. During 2003 the             Company received
advances in excess of costs incurred and shown as deferred revenue
         at December 31, 2003. During 2002 the Company incurred
qualifying costs on which the             applicable government
assistance of $197,239 was not received until 2003 and was
 shown as a receivable at the 2002 year end. Assistance received is
contingently             repayable as disclosed in Note 10 (ii).





NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



6.	PROPERTY
AND EQUIPMENT



|2003                        
|----------------------------
|                            
|                            
|                            
|                            
|Computer
					equipment     
|Computer
					software      
|Furniture
					and equipment
|Manufacturing
					equipment
|Leasehold
					improvements 
|                            
|                            

During
the 2003 year the Company reduced the cost of property and equipment
additions

by
$42,040 in government assistance received.



|2002                        
|----------------------------
|                            
|                            
|                            
|                            
|Computer
					equipment     
|Computer
					software      
|Furniture
					and equipment
|Manufacturing
					equipment
|Leasehold
					improvements 
|                            
|                            



Intangible Asset



The Company
acquired the design rights and tooling for a significant component of
its Netmind system at a cost of $37,285.  The asset has an indefinite
life and will be tested for impairment annually.



7.	LOANS
PAYABLE



|                                                                                                             | 2003    | 2002         
|------------------------------------------------------------------------------------------------------------ | ------- | -------------
|10%
				term loan with monthly interest payments only, due July 3, 2006.                                     | $50,000 | $
				      0
|10%
				demand loan payable on June 26, 2004                                                                 | 8,905   | 6,656        
|10%
				loan payable to Enterprise Newfoundland and Labrador in monthly
				interest payments, due on demand | 0       | 2,817        
|10%
				demand loan payable on November 5, 2002.  The loan was repaid in
				January, 2003                   | 0       | 63,390       
|                                                                                                             | $58,905 | $72,863      



NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



8.	LONG-TERM
DEBT



|                                                                                                                                              | 2003      | 2002     
|--------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---------
|Atlantic
					Canada Opportunities Agency ("ACOA")                                                                                            |           |          
|Interest
					free loan with monthly principal repayments of $3,256 Cdn
					($94,395 Cdn: 2002 - $133,467 Cdn)                               | $72,778   | $84,605  
|12% loan
					with monthly principal repayments of $1,786 Cdn plus interest
					($53,574Cdn: 2002 -$75,006 Cdn)                              | 41,306    | 47,546   
|Interest
					free loan repayable in 72 monthly consecutive instalments of
					$3,119 Cdn ($130,975 Cdn: 2002 - $168,403 Cdn)                | 100,982   | 106,751  
|Interest
					free unsecured loan repayable in monthly payments of Cdn $5,938
					commencing April, 2005 ($448,875 Cdn: 2002 - $350,875 Cdn) | 346,083   | 222,420  
|Interest
					free loan payable $867Cdn monthly commencing January 2004
					($47,432 Cdn)                                                    | 36,570    | 30,066   
|                                                                                                                                              | 597,719   | 491,388  
|Less:
					 Current portion                                                                                                                   | 83,527    | 62,079   
|                                                                                                                                              | 514,192   | 429,309  
|Discount
					on interest free loans payable                                                                                                  | (137,910) | (113,377)
|                                                                                                                                              |           |          
|                                                                                                                                              | $376,282  | $315,932 



Principal
repayment terms are approximately:



|2004       | $83,527 
|---------- | --------
|2005       | $124,730
|2006       | $112,604
|2007       | $77,370 
|2008       | $59,422 
|Thereafter | $140,066
|           | $597,719





9.	RELATED
PARTY TRANSACTIONS



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 and has no set terms of

repayment and is
subordinated to amounts due to ACOA.



10.	CONTINGENT
LIABILITIES



(i)       The
Company is a defendant in a lawsuit commenced against them in 1999 by
their former master distributor.  The former distributor has alleged
that the Company 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.







NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



10.	CONTINGENT
LIABILITIES(Continued)



(ii)   The
Company is contingently liable to repay $852,328 ($1,105,484Cdn) in
assistance received under the Atlantic Innovation Fund. The
assistance is repayable annually commencing August 1, 2005 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.



11.	COMMITMENT



The Company is
committed to minimum rental payments of $77,000 per year for the next
two years for office space and operations facilities.



12.	STOCK
OPTIONS



The following
table summarizes the Company's stock option activity for the years
ended December 31, 2003 and 2002:

|                                |                |                        | Weighted     
|------------------------------- | -------------- | ---------------------- | -------------
|                                |                | Exercise               | Average      
|                                | Number         | Price                  | Exercise     
|                                | of
					Shares | Per
					Share         | Price        
|Balance,
					December 31, 2001 | 1,547,123      | $
					0.0001 to $0.60 | $
					0.48  
|Granted
					during year        | 1,755,000      | $
					0.50 to $ 1.00  | $
					0.56  
|Cancelled
					or expired       | (100,000)      | $
					0.50            | $
					0.50  
|Exercised                       | (78,123)       | $
					0.0001          | $
					0.0001
|                                |                |                        |              
|Balance,
					December 31, 2002 | 3,124,000      | $
					0.50 to $ 1.00  | $
					0.57  
|Granted
					during year        | 522,500        | $0.50
					to $1.50    | $0.81        
|Cancelled
					or expired       | (485,000)      | $0.50
					to $1.00    | $0.62        
|Exercised                       | (25,000)       | $0.50                  | $0.50        
|                                |                |                        |              
|Balance, December 31, 2003      | 3,136,500      | $0.50
					to $1.50    | $0.57        



Warrants



The
Company has issued 1,428,570 warrants exercisable at $0.50 per share.
The

warrants
provide  for a cashless exercise and expire in July, 2010.



During
the year ended December 31, 2003 the Company issued 291,665 warrants

exercisable
at $0.35 to $0.50. These warrants expired unexercised during the
year.



As at December
31, 2003 and 2002 the outstanding stock options granted to directors,
employees and others are as follows:







NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



12.	STOCK
OPTIONS (Continued)



|                                        | Exercise      | Number
					of Shares
|--------------------------------------- | ------------- | ---------------------
|Expiry
					Date                        | Price         | 2003                 
|                                        |               |                      
|February
					12, 2004                  | $
					0.50   | 425,000              
|February
					12, 2009                  | $
					0.50   | 265,000              
|October
					12, 2009                   | $
					0.50   | 25,000               
|December
					15, 2010                  | $
					0.50   | 244,000              
|October
					26, 2003                   | $
					0.50   | 0                    
|March
					31, 2006                     | $
					0.0001 | 0                    
|April
					24, 2011                     | $
					0.50   | 25,000               
|May
					25, 2006                       | $
					0.0001 | 0                    
|September
					17, 2006                 | $
					0.50   | 50,000               
|January
					26, 2006                   | $
					0.50   | 75,000               
|June
					25, 2007                      | $
					0.50   | 125,000              
|June
					25, 2007                      | $
					0.75   | 175,000              
|July
					5, 2007                       | $
					0.50   | 815,000              
|December
					19, 2012                  | $
					0.50   | 405,000              
|October
					1, 2003                    | $
					0.50   | 0                    
|October
					1, 2003                    | $
					0.75   | 0                    
|October
					1, 2003                    | $
					1.00   | 0                    
|December
					4, 2011                   | $
					0.50   | 10,000               
|May
					31, 2008                       | $0.50         | 50,000               
|May
					31, 2008                       | $0.75         | 75,000               
|May
					31, 2008                       | $1.00         | 75,000               
|May
					31, 2008                       | $1.25         | 75,000               
|May
					31, 2008                       | $1.50         | 50,000               
|July
					8, 2008                       | $0.50         | 22,500               
|April
					30, 2008                     | $0.50         | 150,000              
|Total
					outstanding  and exercisable | 3,136,500     | 3,124,000            



Subsequent
to December 31, 2003 options expiring February 12, 2004 were extended
to

February
12, 2009 by the Company.



13.	INCOME
TAXES



The subsidiaries
have operating losses which may be carried forward to apply against
future year's Canadian taxable income.  The tax effect has not been
recorded in these consolidated financial statements.  These losses
expire as follows:



|2004       | $367,978  
|---------- | ----------
|2005       | 194       
|2006       | 211,391   
|Thereafter | 832,478   
|           | $1,412,041









NORTHSTAR
ELECTRONICS, INC.

Notes
to Consolidated Financial Statements

Years
Ended December 31, 2003 and 2002

(U.S.
Dollars)



The components
of future income tax assets are as follows:



|                                    | 2003       | 2002      
|----------------------------------- | ---------- | ----------
|Future
				income tax assets        |            |           
|Non-capital
				loss carry forwards | $1,412,041 | $1,001,000
|Approximate
				tax rate            | 40%        | 40%       
|                                    | 564,817    | 400,400   
|Less:
				 Valuation allowance      | (564,817)  | (400,400) 
|                                    | $0         | $0        



Item
8. Changes in and Disagreements With Accountants on Accounting and
Financial

Disclosure

There
are no reportable disagreements on accounting or financial disclosure
issues



Item
8A.  Controls and Procedures

Within
90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the
Company’s management, including the Company’s Executive
and Financial Officer, of the effectiveness of the design and
operation of the Company’s disclosure and control procedures.
Based upon that evaluation, the Chief Executive and Financial Officer
concluded that the Company’s disclosure and control procedures
are effective. There were no significant changes in the Company’s
internal controls or in other factors that could significantly affect
these subsequent to the date of their evaluation.



PART
III



Item
9. Directors, Executive Officers, Promoters and Control Persons;

Compliance
with Section 16(a) of the Exchange Act

Name
of Director		Age		Office

Wilson
Russell, PhD		58		President and Principal Financial Officer

Mr.
Robert Blair		72		Director

David
Buttle, PhD                  55                     Director



Item
10. Executive compensation

During
the year the Company paid $53,550 (2002 - $35,227) to Wilson Russell
for his services.



Item
11. Security Ownership of Certain Beneficial Owners and Management



|Class  | Name
			and Address                                                                                   | Number
			of Shares | Percentage
			of Shares*
|------ | ----------------------------------------------------------------------------------------------------- | ------------------- | ------------------------
|Common | Frank
			Power
			998
			Riverside Drive
			Port
			Coquitlam, B.C.
			Canada
			   V3B 7Y4           | 1,018,200           | 6.43%                   
|Common | Wilson
			Russell
			4742
			Collingwood Street
			Vancouver,
			B.C.
			Canada
			   V6S 2B4         | 2,540,743           | 16.04%                  
|Common | David
			Buttle
			The
			Well House, Burkham
			Wokington,
			Berkshire
			United
			Kingdom RG114P5 | 44,399              | 0.28%                   
|Common | All
			officers and directors
			as
			a group                                                        | 2,585,142           | 16.32%                  



*Based
on 15,838,074 shares of common stock issued and outstanding December
31, 2003

Item
12. Certain Relationships and Related Transactions

No
change since previous filing



PART
IV



Item
13. Exhibits and Reports on Form 8-K

No
change in exhibits since previous filing

No
Form 8K was filed during the fourth quarter of 2003



Item
14. Principal Accountants Fees and Services

During
the year the Company’s auditors and principal accountants
received approximately $34,695 in remuneration for audit and related
(quarterly reviews) services. No other services were provided to the
Company by its auditors and principal accountants.



SIGNATURES



Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.



(Registrant)				Northstar
Electronics, Inc.



By
(Signature and Title)                   /S/ WILSON RUSSELL

Date	March
16, 2004		Wilson Russell, PhD, President, Principal Financial
Officer





By(Signature and Title)		/S/ ROBERT BLAIR

# Date
  March 16, 2004		Robert
Blair, Director





By
(Signature and Title)                   /S/
DAVID BUTTLE

Date
  March 16, 2004                    David Buttle, PhD,
Director



CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18
W.S.C. SECTION 1350 as adopted and PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, the undersigned Chief Executive Officer
and chief Financial Officer, or persons fulfilling similar functions,
each certify:

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, 2003 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



By:
   /s/Wilson Russell

Title:
 Chief Executive Officer and Chief Financial Officer

Date:
 March 16, 2004



302
CERTIFICATION



I,
 Wilson Russell, Chief Financial Officer, certify that:



1.
I have reviewed this annual report  on  Form  10-KSB  of  Northstar
Electronics, Inc.;



2.
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;



3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;



4.
I am responsible for establishing and maintaining disclosure controls
and procedures, as defined in Exchange Act Rules 13a – 14 and
15d – 14, for the registrant and have:

1. designed
	such disclosure controls and procedures to ensure that material
	information

relating
to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

1. evaluated
	the effectiveness of the registrant’s disclosure controls and
	procedures as of

a
date within 90 days prior to the filing date of this annual report
(the “Evaluation Date”); and

1. presented
	in this annual report our conclusions about the effectiveness of the

disclosure
controls and procedures based on our evaluation as of the Evaluation
Date.



5.
I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit

committee
of the registrant's board of directors or persons performing the
equivalent functions:

1. all
	significant deficiencies in the design or operation of internal
	controls which could

adversely
affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

1. any fraud, whether or not material, that
	involves management or other employees who

have
a significant role in the registrant's internal controls.



6.
I have indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.





Date:
March 16, 2004                    /s/  Wilson
Russell________________

Wilson Russell, CEO and Chief Financial
Officer and Director

30