|UNITED
			STATESSECURITIES
			AND EXCHANGE COMMISSIONWashington,
			D.C.  20549                                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------
|FORM
			10-KSB[x]
			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
			SECURITIESEXCHANGE
			ACT OF 1934For
			the fiscal year ended December 31, 2004
|[
			] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
			SECURITIESEXCHANGE
			ACT OF 1934For
			the transition period from   n/a  to  n/a        
|Commission
			file number: 333-90031                                                                                                                         
|Exact
			name of small business issuer as specified in its charterNorthstar
			Electronics, Inc.                                                             
|State
			or other jurisdiction of incorporation or organization. Delaware                                                                                    
|Address
			of principal executive officesSuite
			# 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 ActNone                                                                                            
|Securities
			registered pursuant to section 12(g) of the Act100,000,000
			shares of common stock with a par value of $0.0001 each                          

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, 2004:  $4,200,000 approximately

Aggregate market value of non-voting common equity held by non-affiliates as of
December 31, 2004:  Not Applicable

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, 2005: 16,002,046
Outstanding shares of preferred stock as of February 28, 2005: Nil
Documents incorporated by reference: NoneNorthstar
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                                                                       
|            | 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, aerospace and homeland security
contract manufacturing opportunities.

Sonar Products and Technologies

NTI developed a wireless communications technology with undersea
applications. The technology is used in underwater sensing devices
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 and the
United States Navy launches and ramps up its efforts to protect
ports, shore side high value assets, and ships from terrorists.
Northstar Electronics has designed and is manufacturing sonar
hardware for homeland security and military defense systems.  These
systems are designed to detect and track combat divers and explosive
laden underwater vehicles and are intended to 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 was created
specifically to develop new, leading edge multiple application sonar
technologies and products for a variety of industries, including:
defense, offshore oil and gas, commercial fishing, oceanography,
marine environment and marine transportation.  The Company has
received funding for this project from the Canadian Federal
Government’s Atlantic Innovation Fund and the National Research
Council, as well as from equity investment.  Scheduled to last until
March 31, 2006, Northstar believes that AQUACOMM will result in the
development of several new technologies during this period. To date,
Northstar has expended $2,165,273 on this development program and has
recovered $1,441,832.

Northstar intends to use its Venture Technology
Business Model to maximize the success of AQUACOMM technologies.  In
this model, a technology developed through AQUACOMM will be partnered
with an established company in a specific industry sector.  One
example could be the co-development of a military underwatercommunications system.  Northstar would develop the “wet”
end and an established defense contractor would be responsible for
the “dry” end.  Since the defense contractor is well
established in the field, it would be the defense contractor that
would undertake the product introduction, marketing and sales
efforts.  Another example of the type of technology that could be
developed under AQUACOMM is the development of a Subsea wireless
communications system for the offshore oil and gas industry.
Northstar expects to develop such a system and intends to market the
system through a strategic alliance with an international oil field
communications company.

 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 230 systems have been sold in North America, Europe,
Ireland, Spain, New Zealand and Russia. The targeted customers have
been strategic in that they are industry leaders and government
agencies. They include the National Oceanic and Atmospheric
Administration (NOAA) in the United States, the United States
Department of the Interior and the Federal Department of Fisheries
and Oceans and Fishery Products International in Canada. Customer
feedback has shown that the NETMIND system enhances efficiency,
reduces gear damage and improves catch quality.

Raw Material Sources and Availability

Raw materials for the manufacture of the NETMIND system are available
from various sources. The principal suppliers are as follows:

Compass Ltd. - stainless steel chamber and end caps for sensors, mounting
flanges for hull mounted hydrophone and other miscellaneous stainless
steel parts

MF Composites - polyurethane, resin and hardener

Battery Specialists - battery chargers

Mercury Wire Products - tow cable for hydrophone

Electrosonic - electronic components

Future Active Inc. - electronic components

UPE - circuit boards

Enerpower - battery packs


To date, NTI has received parts, supplies and materials from these
suppliers in a timely fashion and has met its production schedules.
In our efforts to reduce costs, we now produce transducers and other
components in house.
Major Customer Dependency – NETMIND

NTI has sold approximately 230 NETMIND systems to over 150 different
customers with no dependence on one or a few major customers.


Competition – NETMIND

The system has one main competitor, Scanmar in Norway, which is a private
company. Little information is available to the public on Scanmar;
however, we believe that NETMIND has technical advantages over their
system. This belief is based on our testing program, which
established our technical specifications, and on information gleaned
from Scanmar. We have no direct access to any competitor’s test
data.

The NETMIND and Scanmar systems consist of wireless acoustic sensors used
underwater and both systems operate by illustrating how the fishing
net is behaving while being towed. However, 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 competitor.
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
competitor. NTI’s staff numbers nineteen while we believe
Scanmar employs many times that number. Also, we believe the
competitor’s facilities are substantially larger and more
costly 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, Washington. 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 reach parity with the present system.

The Company has obtained Canadian trademark rights to the name NETMIND
effective for fifteen years from August 24, 1999. No other
intellectual property related applications have been filed or
prepared. In the meantime, NTI continues to develop new and
innovative NETMIND products.


Need for Government Approvals – NETMIND

There are no Government approvals required for the NETMIND system in the
areas it is currently sold.

Effect of Existing or Probable Government regulations – NETMIND

There is no effect on the Company’s sales arising from government
regulations and the Company does not anticipate any change to this in
the future.

Research and Development Expenditures – NETMIND

NTI has carried out research and development activities on NETMIND
enhancements in 2004. 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 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 in 1999 to assemble, test and deliver control consoles for
the Canadian Navy’s Victoria Class submarines. Since NTI
successfully completed the project to the satisfaction of both
Lockheed Martin and the Navy, Lockheed Martin has awarded follow-on
contracts to NTI. In 2003, Lockheed Martin and NTI signed a
Manufacturing License Agreement approved by the US State Department.
The Agreement allows for NTI to manufacture command and control
consoles for Lockheed Martin on projects they have anywhere in the
world. As well, NTI is permitted to offer Lockheed Martin’s
console technology directly to the Canadian Armed Forces.

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 2004, 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 2004 on CM research and
development activities.

Costs and Effects of Compliance with Environmental Laws – CM

The Company has incurred no costs or adverse effects in its compliance
with any environmental laws.

SYSTEM INTEGRATION

NNL carries out multifaceted contracts that require several subcontractors to perform specialized
tasks.  This ability to integrate the work of several components to
create one complete system is one of Northstar’s main areas of
business – system integration.

As a result of its capabilities and expertise, NNL has developed a unique approach to
securing and executing large defense contracts. NNL will bring
together a number of Small Medium Size Enterprises (SME) affiliate
companies thereby being able to present a capability to prime defense
contractors.  A major potential project in this area is the $2Billion
Canadian Maritime Helicopter Project. Because NNL offers ‘one
stop shopping’ for 25 companies with a wide range of relevant
expertise, it is anticipated that some contract work for the Maritime
Helicopter Project will flow to NNL.  Verbal commitments have been
made by the sub contractors working on the MHP, however, no firm
contracts have been signed.

NNL has signed a memorandum of interest (MOI) with three separate Lockheed Martin companies in the
United States and with four major subcontractors of Lockheed Martin,
for potential work on the Joint Strike Fighter (JSF) program.

This program is a $200Billion + multinational program led by the United States Government to design
and produce the next generation fighter aircraft, in order to replace
existing fleets of  F-16, F-18, A-10 and Harrier
aircraft worldwide.  Sales are predicted to exceed 3,000 aircraft in
the US and UK alone, with an additional export market of 3,000
aircraft expected.

The JSF contract is the
largest defense contract ever awarded and it will continue for 35
years or longer.  Northstar has developed relationships with Lockheed
Martin, Harris Corporation, TRW, BAE Systems and Northrop Grumman,
which the Company expects will lead to contract work on the JSF
program.

In 2003, NNL as prime contractor, 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 the assemblies of competing
companies. As a result of the testing, the NNL cables are one of
three cables selected for use in the program. The application is
expected to continue for the lifetime of the JSF program with the
first contract award now expected in 2005.

EMPLOYEES

As of December 31, 2004 the Company had a total of 25 full time employees.


PUBLIC INFORMATION

The Company electronically files with the Securities and Exchange
Commission (SEC) all its reports, including, but not limited to, its
annual and quarterly reports. The SEC maintains an internet site
http://www.sec.gov
that contains reports and other information regarding issuers that do
file electronically. The Company maintains a web site address at
www.northstarelectronics.com

Item 2. Description of Properties
The Company leases its corporate offices located at 1455 – 409
Granville Street, Vancouver, British Columbia, Canada    V6C 1T2
Northstar Technical Inc. leases its offices and operations facilities at 1
Duffy Place, Unit #6, St. John’s, Newfoundland, Canada    A1B
4M6
Northstar Network Ltd. leases its offices and operations facilities at 67
Majors Path, Unit #102, St. John’s, Newfoundland, Canada    A1A
4Z9
Item 3. Legal Proceedings

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

Item 4. Submission of Matters to a Vote of Security Holders

No change since previous filing.

The Company has filed with the SEC an SB-1 registration statement April
20, 2000, an S-8 registration November 2000 and quarterly reports
(form 10QSB) for June and September 2000 and for March, June and
September 2001, 2002, 2003 and 2004 and annual reports (form 10KSB)
for December 31, 2000, 2001, 2002 and 2003.



PART II

|                                    | 2004       | 2003       | 2002       | 2001       | 2000       | 1999      
|----------------------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ----------
|Total
        revenue               | $1,461,528 | $1,641,960 | $976,234   | $1,176,527 | $2,301,378 | $462,659  
|Cost of goods
        sold          | 245,305    | 230,213    | 253,377    | 472,227    | 1,370,427  | 136,955   
|Discounts                           | 129,111    | 198,950    | 148,425    | 171,830    | 187,392    | 69,399    
|                                    | 374,416    | 429,163    | 401,802    | 644,057    | 1,557,819  | 206,354   
|Gross margin                        | 1,087,112  | 1,212,797  | 574,432    | 532,470    | 743,559    | 256,305   
|Expenses                            | 1,918,653  | 1,905,942  | 1,366,567  | 974,394    | 595,823    | 623,826   
|Net income
        (loss)           | $(831,541) | $(693,145) | $(792,135) | $(441,924) | $147,736   | $(367,521)
|Net income
        (loss) per share | $(0.05)    | $(0.05)    | $(0.08)    | $(0.06)    | $ 0.02     | $(0.05)   

Our second development program is called AQUACOMM for which we are
receiving considerable financial support from the federal government
of Canada. The Company’s plans call for the commercialization
of several new products over the next year. 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. We expect to introduce several AQUACOMM sonar products to
the marketplace in 2005.

Netmind

Sales of NETMIND systems decreased in 2004 from 2003 primarily because of
uncertain quota allocations in key European markets and also as a
result of delays in introducing new technologies into these markets.
We expect to resume our NETMIND sales growth in 2005 by launching an
aggressive international campaign in the spring of 2005, to be funded
in part by a conditionally repayable loan.

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

Contract Manufacturing

Northstar remained active pursuing contract manufacturing opportunities during
2004. We expect to play a strong regional role in fulfilling the
extensive industrial benefit requirements of the $2billion Maritime
Helicopter Project. 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.
Northstar has also been performing R&D work with an RFID company
by assisting them with the development of a Radio Frequency
Identification (RFID) Pen Reader. NNL expects to sign a manufacturing
license agreement to manufacture this product in March 2005

Systems Integration

During 2002 and 2003 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 the contract work
we expect on the Maritime Helicopter Project, the JSF and other
defense related projects. During 2004 we continued systems
integration work on the intruder detection system to prepare for
production orders. The Company continues to pursue further contract
business and is now anticipating several contracts in 2005.

Gross margins remained stable at 73% compared with 74% for 2003, 59% in
2002 and 44% in 2001. The percentage increase over prior years 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 and other grants totaling
$633,268 in revenue (2003 - $633,731 and for 2002 - $218,597). A
significant cause of any fluctuation in the gross margin percentages
would be 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 2004 the
Company spent $707,697 on design engineering and prototype
development related to the development of underwater sonar technology
($848,277 in 2003 and $609,299 in 2002). The Company received
contract revenues of $122,489 in 2004 (2003 - $325,000 and 2002
-$179,269) and government incentives of $547,338 (2003 - $626,496 and
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
$(831,541) for 2004 compared to losses of $(693,145) for 2003
$(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 $(634,218) in 2004 compared to
cash used by operations of $(368,708) in 2003, $(589,419) during 2002
and cash used by operations of $(138,931) during 2001.  In 2003, the
Company was successful in raising net equity financing of $1,096,040
and $706,793 in 2002 through a Regulation S common share issuance and
private placements but raised no equity funding during 2004.

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 $168,764 (2003 -
$69,972). The Company is negotiating to secure an equity financing in
the short term and is in discussions with several financing firms.
The Company also expects to increase revenues in 2005 from sales of
its NETMIND system and related products. As well, the Company has
tendered proposals and price quotations on a submarine control
console manufacturing contract and an aircraft carrier anti terrorism
system manufacturing contract, both contracts of which are
anticipated to be awarded in 2005. The availability of sufficient
future funds will depend to an extent on product sales and the
obtaining of manufacturing contracts, estimated in the amount of
$2.3m, 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, 2004 and 2003 (U.S.
Dollars)
Report of Independent Registered Public Accounting Firm

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, 2004 and 2003 and the
consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years ended December 31, 2004.
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 Canada and the standards of the Public Company Accounting
Oversight Board (PCAOB) (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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Northstar Electronics, Inc., as at December 31, 2004 and 2003 and the
results of its operations and its cash flows for each of the three
years ended December 31, 2004 in accordance with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in note 1 to the financial statements, the Company has a working
capital deficiency and has sustained operating losses for the past
three years. These matters raise substantial doubt about the
Company’s ability to continue as a going concern. The financial
statements do not include any adjustment that might result from the
outcome of this uncertainty.

Pannell Kerr Forster

\s\

Chartered Accountants

(registered with the PCAOB as “Smythe Ratcliffe”)

Vancouver,

B.C., Canada

March 16, 2005

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

|                                                                     | 2004        | 2003       
|-------------------------------------------------------------------- | ----------- | -----------
|Assets                                                               |             |            
|                                                                     |             |            
|Current                                                              |             |            
|Cash                                                                 | $57,641     | $613,040   
|Accounts
        receivable (note 5)                                 | 251,635     | 227,444    
|Inventory                                                            | 156,086     | 161,602    
|Prepaid
        expenses                                             | 15,605      | 11,148     
|Total
        Current Assets                                         | 480,967     | 1,013,234  
|Intangible asset(note
        6)                                     | 37,285      | 37,285     
|Equipment
        (note 6)                                           | 106,144     | 118,956    
|                                                                     |             |            
|Total
        Assets                                                 | $624,396    | $1,169,475 
|                                                                     |             |            
|Liabilities                                                          |             |            
|                                                                     |             |            
|Current                                                              |             |            
|Accounts
        payable and accrued liabilities                     | $409,007    | $236,255   
|Loans
        payable (note 7)                                       | 50,000      | 58,905     
|Deferred
        revenue (note 2g)                                   | 127,616     | 143,309    
|Current
        portion of long-term debt (note 8)                   | 100,937     | 83,527     
|Total
        Current Liabilities                                    | 687,560     | 521,996    
|                                                                     |             |            
|Long
        term debt (note 8)                                      | 454,711     | 376,282    
|Discount on long term debt (note
        8)                          | 166,655     | 137,910    
|Due
        to Cabot Management Limited (note 9)                     | 88,866      | 85,268     
|Due
        to Director (note 9)                                     | 1,036       | 44,255     
|Total
        Liabilities                                            | 1,398,828   | 1,165,711  
|                                                                     |             |            
|Contingencies
        and Commitment (notes 10 and 11)               |             |            
|                                                                     |             |            
|Stockholders’
        Equity (Deficit)                               |             |            
|                                                                     |             |            
|Common
        Stock (note 12)                                       |             |            
|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                                       |             |            
|15,913,805
        (15,838,074 – 2003) Common shares                 | 1,591       | 1,584      
|Additional
        Paid-in Capital                                   | 3,531,360   | 3,423,191  
|Other
        Comprehensive Income (loss)                            | (137,204)   | (82,373)   
|Accumulated
        Deficit                                          | (4,170,179) | (3,338,638)
|Total
        Stockholders’ Equity (Deficit)                         | (774,432)   | 3,764      
|Total
        Liabilities and Stockholders’ Equity (Deficit)         | $624,396    | $1,169,475 

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

|                                                | 2004       | 2003       | 2002      
|----------------------------------------------- | ---------- | ---------- | ----------
|                                                |            |            |           
|Revenues(notes 2 and 4)                         | $1,461,528 | $1,641,960 | $976,234  
|Discounts                                       | 129,111    | 198,950    | 148,425   
|                                                |            |            |           
|Revenues
        net of Discounts               | 1,332,417  | 1,443,010  | 827,809   
|Cost
        of Goods Sold                      | 245,305    | 230,213    | 253,377   
|                                                |            |            |           
|Gross
        Margin                            | 1,087,112  | 1,212,797  | 574,432   
|                                                |            |            |           
|Expenses                                        |            |            |           
|Research
        and development                | 781,151    | 848,277    | 439,003   
|Tax
        credits on research and development | (161,450)  | (138,810)  | (55,401)  
|Salaries,
        wages and benefits            | 442,831    | 358,970    | 248,553   
|Travel
        and marketing                    | 238,728    | 163,143    | 145,610   
|Consulting                                      | 136,201    | 219,161    | 129,875   
|Rent                                            | 121,434    | 108,623    | 95,226    
|Professional
        fees                       | 94,552     | 91,440     | 63,975    
|Office                                          | 86,561     | 45,387     | 51,446    
|Business
        development                    | 68,281     | 82,221     | 85,491    
|Telephone,
        light and heat               | 50,217     | 48,820     | 32,671    
|Interest
        on long-term debt              | 14,052     | 18,574     | 32,043    
|Interest
        and bank charges               | 7,528      | 9,917      | 43,779    
|Miscellaneous                                   | 3,283      | 12,404     | 22,460    
|Amortization                                    | 35,284     | 37,815     | 31,836    
|                                                | 1,918,653  | 1,905,942  | 1,366,567 
|Net
        Loss                                | (831,541)  | (693,145)  | (792,135) 
|Other
        Comprehensive Income (Loss)       | (54,831)   | (107,586)  | (12,095)  
|Total
        Comprehensive Loss                | $(886,372) | $(800,731) | $(804,230)
|Net
        Loss Per Share                      | $(0.05)    | $(0.05)    | $(0.08)   
|                                                |            |            |           
|Weighted
        Average Number of Shares       |            |            |           
|Outstanding                                     | 15,774,802 | 14,446,986 | 9,954,597 

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

|                                          |                   |        | Additional | Other              |              | Total                   
|----------------------------------------- | ----------------- | ------ | ---------- | ------------------ | ------------ | ------------------------
|                                          | Number
        of | Par    | Paid-in    | Comprehensive      | Accumulated  | Stockholders’           
|                                          | Shares            | Value  | Capital    | Income             | Deficit      | Equity
        (Deficit)
|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         
|Issuance
        of common stock:         |                   |        |            |                    |              |                         
|For
        services                      | 244,394           | 24     | 97,120     | 0                  | 0            | 97,144                  
|On
        exercise of option             | 1,000,000         | 100    | 0          | 0                  | 0            | 100                     
|Cancellation
        of common stock:     |                   |        |            |                    |              |                         
|Issued
        in error (note 12)         | (1,000,000)       | (100)  | 100        | 0                  | 0            | 0                       
|Other
        (note 12)                   | (168,663)         | (17)   | 17         | 0                  | 0            | 0                       
|Stock
        option benefit – legal fees | 0                 | 0      | 10,932     | 0                  | 0            | 10,932                  
|Other
        comprehensive (loss)        | 0                 | 0      | 0          | (54,831)           | 0            | (54,831)                
|Net
        loss                          | 0                 | 0      | 0          | 0                  | (831,541)    | (831,541)               
|Balance,
        December 31, 2004        | 15,913,805        | $1,591 | $3,531,360 | $(137,204)         | $(4,170,179) | $(774,432)              

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

|                                                       | 2004       | 2003       | 2002      
|------------------------------------------------------ | ---------- | ---------- | ----------
|Operating
        Activities                           |            |            |           
|Net
        loss                                       | $(831,541) | $(693,145) | $(792,135)
|Adjustments
        to reconcile net loss to net cash  |            |            |           
|used
        in operating activities                   |            |            |           
|Amortization                                           | 35,284     | 37,815     | 31,836    
|Stock
        based and uncompensated services         | 10,932     | 75,644     | 51,635    
|Services
        paid with common stock                | 97,144     | 72,276     | 275,146   
|Changes
        in operating assets and liabilities    |            |            |           
|Accounts
        receivable                            | (6,784)    | 162,195    | (206,001) 
|Prepaid
        expenses                               | (3,792)    | (5,543)    | 716       
|Inventory                                              | 17,882     | 15,039     | (40,589)  
|Accounts
        payable and accrued liabilities       | 157,411    | (165,703)  | 89,973    
|Deferred
        revenue                               | (110,754)  | 132,714    | 0         
|                                                       |            |            |           
|Cash
        Used in Operating Activities              | (634,218)  | (368,708)  | (589,419) 
|                                                       |            |            |           
|Investing
        Activities                           |            |            |           
|Acquisition
        of equipment                       | (13,531)   | (45,810)   | (78,004)  
|Proceeds
        on disposal of equipment              | 0          | 9,415      | 0         
|                                                       |            |            |           
|Cash
        Used in Investing Activities              | (13,531)   | (36,395)   | (78,004)  
|                                                       |            |            |           
|Financing
        Activities                           |            |            |           
|Issuance
        of common stock for cash              | 100        | 1,096,040  | 706,793   
|Loans
        payable (repayment)                      | (2,927)    | (73,823)   | 79,941    
|Proceeds
        from long-term financing              | 168,764    | 69,972     | 30,066    
|Repayment
        of long-term debt                    | (89,919)   | (69,923)   | (186,668) 
|Advances
        from (repayment to) director          | 23,900     | (132,030)  | 115,896   
|                                                       |            |            |           
|Cash
        Provided by Financing Activities          | 99,918     | 890,236    | 746,028   
|                                                       |            |            |           
|Effect
        of Foreign Currency Translation on Cash | (7,568)    | 10,217     | (614)     
|                                                       |            |            |           
|Inflow
        (Outflow) of Cash                       | (555,399)  | 495,350    | 77,991    
|Cash,
        Beginning of Year                        | 613,040    | 117,690    | 39,699    
|                                                       |            |            |           
|Cash,
        End of Year                              | $57,641    | $613,040   | $117,690  
|                                                       |            |            |           
|Supplemental
        Information                       |            |            |           
|Interest
        paid                                  | $14,052    | $18,574    | $32,043   

NORTHSTAR    ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003 
(U.S. Dollars)

---

NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003 
(U.S. Dollars)

---

|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    

NORTHSTAR  ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003 
(U.S. Dollars)

---

|(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.                                                           

NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003
(U.S. Dollars)

---

|                                 |              | Weighted
				Average | Net
				Loss 
|-------------------------------- | ------------ | -------------------- | -------------
|                                 | Net
				Loss | Number
				of Shares | Per
				Share
|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)      
|Year
				ended December 31, 2004 |              |                      |              
|Basic
				net loss               | $(831,541)   | 15,894,483           | $(0.05)      

|                                                          | 2004       | 2003             | 2002            
|--------------------------------------------------------- | ---------- | ---------------- | ----------------
|Net
        loss, as reported                             | $(831,541) | $(693,145)       | $(792,135)      
|Deduct:
        stock-based employee compensation expense |            |                  |                 
|expense
        under intrinsic value method              | 0          | 0                | 24,000          
|Add:
        total stock-based compensation expense       |            |                  |                 
|determined
        under fair value based method          | (38,552)   | (54,560)         | (414,054)       
|Net
        loss, pro-forma                               | $(870,093) | $(747,705)       | $(1,182,189)    
|Net
        loss per share, as reported                   | $(0.05)    | $(0.05)          | $(0.08)         
|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)     | (0.01)           | (0.04)          
|Net
        loss per share, pro-forma                     | $(0.06)    | $
        (0.06) | $
        (0.12)

---

|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% 

|i.   | 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 therefore the
			adoption did not have any impact on the Company’s
			consolidated financial position, results of operations or cash
			flows.                                                                                                                                                    
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ii.  | 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 the Company’s consolidated financial position,
			results of operations or cash flows.                                                                                                                                                                                                                  
|iii. | 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
			2004, FASB issued a revision of FASB Statement No. 123, Accounting
			for Stock-Based Compensation. This Statement supersedes APB
			Opinion No. 25, Accounting for Stock Issued to Employees, and its
			related implementation guidance. This revised pronouncement
			requires that all stock options and warrants be accounted for
			using the Fair Value Method. This pronouncement will impact on the
			Company, as the Company currently accounts for all options and
			warrants using the Intrinsic Value Method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|v.   | FIN
			46(R), Consolidation of Variable Interest Entities, applies at
			different dates to different types of enterprises and entities,
			and special provisions apply to enterprises that have fully or
			partially applied Interpretation 46 prior to issuance of
			Interpretation 46(R). Application of Interpretation 46 or
			Interpretation 46(R) is required in financial statements of public
			entities that have interests in variable interest entities or
			potential variable interest entities commonly referred to as
			special-purpose entities for periods ending after December 15,
			2003. Application by public entities (other than small business
			issuers) for all other types of entities is required in financial
			statements for periods ending after March 15, 2004. Application by
			small business issuers to entities other than special-purpose
			entities and by non-public entities is required at various dates
			in 2004 and 2005. There is no impact on the Company’s
			financial statements.
|vi.  | In
			December 2004, the FASB issued SFAS Statement No. 153, “Exchanges
			of Nonmonetary Assets.” The statement is an amendment of APB
			Opinion No. 29 to eliminate the exception for nonmonetary
			exchanges of similar productive assets and replaces it with a
			general exception for exchanges of nonmonetary assets that do not
			have commercial substance. The Company believes that the adoption
			of this standard will have no material impact on its financial
			statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|i.   | 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.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                                                                                                                                                                  

5. ACCOUNTS RECEIVABLE

|                                          | 2004     | 2003    
|----------------------------------------- | -------- | --------
|Trade
        receivables                 | $126,038 | $125,886
|Investment
        tax credits receivable | 125,597  | 101,558 
|                                          | $251,635 | $227,444

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

|                                    | 2003     | Accumulated
            Amortization | Net     
|----------------------------------- | -------- | ------------------------------------ | --------
|Computer
            equipment      | $34,944  | $14,782                              | $20,162 
|Computer
            software       | 59,098   | 38,831                               | 20,267  
|Furniture
            and equipment | 49,439   | 18,740                               | 30,699  
|Manufacturing
            equipment | 73,940   | 31,280                               | 42,660  
|Leasehold
            improvements  | 7,729    | 2,561                                | 5,168   
|                                    | $225,150 | $106,194                             | $118,956

|                                                                          | 2004    | 2003   
|------------------------------------------------------------------------- | ------- | -------
|10%
					term loan with monthly interest payments only, due July 3, 2006. | $50,000 | $50,000
|10%
					demand loan payable on June 26, 2004                             | 0       | 8,905  
|                                                                          | $50,000 | $58,905

|                                                                                                                                                                           | 2004      | 2003     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---------
|Atlantic
					Canada Opportunities Agency ("ACOA")                                                                                                                         |           |          
|Interest
					free loan with monthly principal repayments of $3,256 Cdn
					($55,323 Cdn: 2003 - $94,395Cdn)                                                              | $45,918   | $72,778  
|12% loan
					with monthly principal repayments of $1,786 Cdn plus interest
					($32,142 Cdn: 2003 $53,574 Cdn)                                                           | 26,678    | 41,306   
|Interest
					free loan repayable in 72 monthly consecutive instalments of
					$3,119 Cdn ($93,547 Cdn: 2003 - $130,975 Cdn)                                              | 77,644    | 100,982  
|Interest
					free unsecured loan repayable in monthly payments of Cdn $5,938
					commencing April, 2005 ($498,750 Cdn: 2003 - $448,875 Cdn)                              | 413,963   | 346,083  
|Interest
					free loan payable $867Cdn monthly ($37,028 Cdn: 2003 - $47,432
					Cdn)                                                                                     | 30,733    | 36,570   
|Interest
					free unsecured loan to a maximum of $275,000 Cdn repayable in
					monthly payments of Cdn $4,583 commencing July, 2006 ($133,687
					Cdn: 2003 - $nil Cdn) | 110,960   | 0        
|Interest
					free unsecured loan to a maximum of $102,691 Cdn repayable in
					monthly payments of Cdn $1,712 commencing July, 2006 ($19,768
					Cdn: 2003 - $nil Cdn)  | 16,407    | 0        
|                                                                                                                                                                           | 722,303   | 597,719  
|Less:
					 Current portion                                                                                                                                                | 100,937   | 83,527   
|                                                                                                                                                                           | 621,366   | 514,192  
|Discount
					on interest free loans payable                                                                                                                               | (166,655) | (137,910)
|                                                                                                                                                                           | $454,711  | $376,282 

Principal repayment terms are approximately as follows:

|2005       | $124,730
|---------- | --------
|2006       | $143,953
|2007       | $140,068
|2008       | $122,120
|Thereafter | $191,432
|$722,303  

NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003 
(U.S. Dollars)

---

|                                |                |                     | Weighted           
|------------------------------- | -------------- | ------------------- | -------------------
|                                | Number         | Exercise
					Price | Average            
|                                | of
					Shares | Per
					Share      | Exercise
					Price
|Balance,
					December 31, 2002 | 3,124,000      | $0.50
					to $1.00 | $0.57              
|Granted
					during the year    | 522,500        | $0.50
					to $1.00 | $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 $1.00 | $0.57              
|Granted
					during year        | 1,195,000      | $0.50               | $0.50              
|Cancelled
					or expired       | (1,375,000)    | $0.50               | $0.62              
|Exercised                       | 0              |                     |                    
|Balance, December 31, 2004      | 2,956,500      | $0.50
					to $1.00 | $0.57              

NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003 
(U.S. Dollars)

---

|                                              | Exercise  | Number
            of Shares
|--------------------------------------------- | --------- | ----------------------------
|Expiry
            Date                       | Price     | 2004                        
|December
            31, 2005                 | $0.50     | 120,000                     
|January
            26, 2006                  | $0.50     | 75,000                      
|September
            17, 2006                | $0.50     | 50,000                      
|June
            25, 2007                     | $0.50     | 125,000                     
|June
            25, 2007                     | $0.75     | 175,000                     
|July
            5, 2007                      | $0.50     | 815,000                     
|April
            30, 2008                    | $0.50     | 150,000                     
|May
            31, 2008                      | $0.50     | 0                           
|May
            31, 2008                      | $0.75     | 0                           
|May
            31, 2008                      | $1.00     | 0                           
|May
            31, 2008                      | $1.25     | 0                           
|May
            31, 2008                      | $1.50     | 0                           
|July
            8, 2008                      | $0.50     | 22,500                      
|February
            12, 2009                 | $0.50     | 640,000                     
|October
            12, 2009                  | $0.50     | 25,000                      
|December
            15, 2010                 | $0.50     | 244,000                     
|April
            24, 2011                    | $0.50     | 25,000                      
|December
            4, 2011                  | $0.50     | 10,000                      
|November
            17, 2012                 | $0.50     | 25,000                      
|December
            19, 2012                 | $0.50     | 405,000                     
|May
            1, 2013                       | $0.50     | 25,000                      
|April
            7, 2014                     | $0.50     | 25,000                      
|Total
            outstanding and exercisable | 2,956,500 | 3,136,500                   

NORTHSTAR ELECTRONICS, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2004 and 2003 
(U.S. Dollars)

---

|2005       | $194      
|---------- | ----------
|2006       | 211,391   
|Thereafter | 2,031,997 
|           | $2,243,582

|                                            | 2004       | 2003      
|------------------------------------------- | ---------- | ----------
|Future
            income tax assets        |            |           
|Non-capital
            loss carry forwards | $2,243,582 | $1,412,041
|Approximate
            tax rate            | 40%        | 40%       
|                                            | 897,433    | 564,817   
|Less:
            Valuation allowance       | (897,433)  | (564,817) 
|                                            | $0         | $0        



PART III

|Name
			of Director    | Age | Office                                      
|---------------------- | --- | --------------------------------------------
|Wilson
			Russell, PhD | 59  | President
			and Principal Financial Officer
|Robert
			Blair, PhD   | 75  | Director                                    
|David
			Buttle, PhD   | 56  | Director                                    

|Class  | Name
			and Address                                                                                   | Number
			of Shares | Percentage
			of Shares*
|------ | ----------------------------------------------------------------------------------------------------- | ------------------- | ------------------------
|Common | Wilson
			Russell
			4742
			Collingwood St.
			Vancouver,
			B.C.
			Canada
			V6S 2B4               | 3,316,191           | 20.72%                  
|Common | David
			Buttle
			The
			Well House, Burkham
			Wokington,
			Berkshire
			United
			Kingdom RG114P5 | 44,399              | 0.28%                   
|Common | All
			officers and directors
			as
			a group                                                        | 3,360,590           | 21.00%                  

SIGNATURES

|(Registrant)                                            | Northstar
			Electronics, Inc.                                                         
|------------------------------------------------------- | ---------------------------------------------------------------------------------------
|By
			(Signature and Title)
			Date
			 March 22, 2005  | /S/
			WILSON RUSSELL
			Wilson
			Russell, PhD, President, Principal Financial Officer
|By
			(Signature and Title)
			Date
			  March 22, 2005 | /S/
			ROBERT BLAIR
			Robert
			Blair, PhD, Director                                  
|By
			(Signature and Title)
			Date
			  March 22, 2005 | /S/
			DAVID BUTTLE
			David
			Buttle, PhD, Director                                  

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:

a) 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

b) any fraud, whether or not material, that involves management or other employees who have
a role in the registrant's internal controls.

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

Date: March 22, 2005                    /s/  Wilson Russell________________

Wilson Russell, President and Principal Financial Officer