U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended June 30, 2004.

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the transition period from _______ to ________


                        COMMISSION FILE NUMBER: 000-32829

                            PALOMAR ENTERPRISES, INC.
                 (Name of small business issuer in its charter)

                  NEVADA                                      88-0470235
       (State or other jurisdiction                        (I.R.S. Employer
     of incorporation or organization)                    Identification No.)

      1802 N. CARSON ST., NO. 212-2705                          89701
            CARSON CITY, NEVADA                               (Zip Code)
  (Address of principal executive offices)


                                 (775) 887-0670
                           (Issuer's telephone number)

     Check  whether  the  issuer  (1)  filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes  [X]  No  [_]

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest practicable date:  As of June 30, 2004, the
issuer  had  11,623,700  shares  of  its  common  stock  issued and outstanding.

     Transitional  Small  Business  Disclosure Format (check one):
Yes  [_]  No  [X]


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS


<S>                                                                                <C>
PART I - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .   3
   Item 2.  Management's Discussion and Analysis or Plan of Operation . . . . . .  10
   Item 3.  Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . .  11
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
   Item  1.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . .  12
   Item  2.  Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . .  12
   Item  3.  Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . .  12
   Item  4.  Submission of Matters to a Vote of Security Holders. . . . . . . . .  12
   Item  5.  Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .  12
   Item  6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .  12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 . . . . .  14
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 . . . . .  15
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 . . . . .  16
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 . . . . .  17
</TABLE>


                                        1
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS.

     The  financial  statements  and  related notes are included as part of this
Quarterly Report as indexed in the appendix on page F-1 through F------.

ITEM  2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATIONS.

FORWARD-LOOKING INFORMATION

     Much  of  the discussion in this Item is "forward looking" as that  term is
used  in  Section  27A  of  the Securities Act and Section 21E of the Securities
Exchange  Act of 1934.  Actual operations and results may materially differ from
present  plans  and  projections  due  to  changes  in  economic conditions, new
business  opportunities,  changed  business  conditions, and other developments.
Other factors that could cause results to differ materially are described in our
filings  with  the  Securities  and  Exchange  Commission.

     The  following  are  factors  that could cause actual results or  events to
differ  materially  from  those anticipated, and include, but are not limited to
general  economic,  financial and business conditions, changes in and compliance
with  governmental  laws  and  regulations,  including various state and federal
environmental  regulations,  our  ability  to  obtain  additional financing from
outside investors and/or bank and mezzanine lenders; and our ability to generate
sufficient  revenues  to  cover  operating  losses  and  position  us to achieve
positive  cash  flow.

     Readers  are  cautioned not to place undue reliance on the  forward-looking
statements contained herein, which speak only as of the date hereof.  We believe
the  information  contained  in  this  Form 10-QSB to be accurate as of the date
hereof.  Changes may occur after that date.  We will not update that information
except  as  required  by  law  in  the  normal  course  of our public disclosure
practices.

     Additionally,  the  following discussion regarding our financial  condition
and  results  of  operations  should  be  read in conjunction with the financial
statements  and related notes contained in Item 1 of Part I of this Form 10-QSB,
as  well as the financial statements in Item 7 of Part II of our Form 10-KSB for
the  fiscal  year  ended  December  31,  2003.

MANAGEMENT'S PLAN OF OPERATION

     During  the  first  half of 2003, we had no operations and limited  current
assets  with  which  to  finance  our  ongoing operations.  On July 11, 2003, we
changed  our  business  model to become a development company with two operating
divisions:

-    Financial Services, which focuses upon:

     (a)     Real  estate  sales  and  client  services,

     (b)     Mortgage  and  home  loan  origination,

     (c)     Property  acquisition  and  development.

-    Corporate Finance, with a focus on:

     (a)     Developing  and/or  acquiring  cash  flow  positive  businesses,

     (b)     Acquiring  the  real property and assets that are material to those
             businesses.

     During  the  second  quarter of 2004, we have made significant progress  in
both  divisions.  In  the  quarter, the Financial Services Division accomplished
the  following:


                                        2
<PAGE>
     (a)     The Palomar Group Real Estate Sales  and  Client  Services division
currently  contracts a number of real estate agents and has been productive.  We
changed  our business in July of 2003, and as such, year-to-year comparisons are
not  a  good  indication  of  our  performance.

     (b)     The  Palomar  Group  Lending  &  Home Loans had another  productive
quarter  in  its  mortgage  and  home  loan  originations  business.

     (c)     The  Palomar  Group  Property Acquisition and Development group  is
tasked  with  locating  and  acquiring  revenue  generating  properties.

     During  the  first  quarter  of  2004,  the first property, a single family
residence  in  Carlsbad,  California was secured. In the second quarter, we sold
this  property.

     The  Property Acquisition and Development group also exercised an option to
purchase,  and  subsequently  completed  the  purchase, of an office facility in
Carlsbad,  California.  Rental  revenue  is  currently  being  earned  from this
property.

     We  have  created  and reworked our website at www.palomar-financial.com to
serve  as  the hub of our real estate efforts. We have also mirrored our site at
www.thepalomargroup.com.
-----------------------

     In  the  second  quarter,  the  Corporate Finance Division accomplished the
following:

     (a)     We  completed  construction and opened the Prize Pizza location  in
Tempe,  Arizona in May 2004.  While we have begun to generate revenues from this
location, we do not expect to become profitable for at least six months.

     (b)     Our  Joint  Venture  with  K & S Family Entertainment to  introduce
Prize  Pizza  in  New  Mexico  is  still pending the directing partners of K & S
Family  Entertainment  securing financing commitment for the planned Gallup, New
Mexico  facility.  We  may  consider  terminate  this  agreement if K & S Family
Entertainment  is  unable  to  secure  sufficient  funding.

     (c)     We  have  implemented  a program to begin to purchase secured  auto
notes.  We  signed  a  master  agreement  with Price Right Auto Group in Fenton,
Michigan.  The  agreement  grants us the right to purchase, on a funds available
basis,  up  to  $1,000,000 worth of secured auto contracts from Price Right Auto
Group.

     Our plans through fiscal year 2004 include:

     (a)     Securing  the  necessary  financing  for  Prize Pizza, New Mexico;

     (b)     Increasing  revenues  and  market  share  for  our  real  estate
operations;

     (c)     Continuing to acquire assets and revenue generating properties and
securing the revenue and long-term appreciation from these activities;

     (d)     Expanding  the  products our financial services division offers to
include notes, deeds of trust and other types of financing.

     Our plans through fiscal year 2004 include:

     (a)     Renovate and relocate our real estate operations into our recently
purchased  office  facility  in  Carlsbad,  California.

     (b)     Continue  to  purchase  secured  auto  contracts.


                                        3
<PAGE>
     (c)     Expand  our  real  estate  presence  by recruiting and supporting a
larger number of both real estate and mortgage professionals.

     (d)     Continue  to seek new properties to acquire and fold these into our
operations.

     (e)     Oversee  our  Prize  Pizza joint venture project in Tempe, Arizona
and  seek  ways  to  improve  cash  flow  and  become  profitable.

     (f)     Identify  and  work  with  other potential joint venture partners.

     (g)     Continue  to  acquire  assets  and  expand  our  potential revenue
streams.

SECOND QUARTER COSTS AND CHANGES IN FINANCIAL CONDITIONS

     In  the  three  months  ended  June  30, 2004, we generated an aggregate of
$509,046  in  revenues  from  our  operations compared to no revenues during the
three  month  period  ended  June 30, 2003. During the six months ended June 30,
2004, we generated $544, 624 in revenues as compared to $180 during the year ago
period.

     Cost  of  goods  sold during the three month period ended June 30, 2004 was
$414,030,  resulting in a gross profit of $95,016 for that period. For the three
months ended June 30, 2003, we incurred no cost of goods sold. In the six months
ended  June 30, 2004, cost of goods sold was $414,030. Resultantly, gross profit
during  the  six  months  ended  June 30, 2004 was $130,594. In the year ago six
month  period  ended  June  30,  2003, cost of goods sold amounted to $39, which
provided  for  gross  profit  of  $141.

     The  total operating expenses for the three months ended June 30, 2004 were
approximately  $1,237,374  consisting  primarily  of  consulting,  legal  and
professional  fees  aggregating  $792,351.  Payroll  expenses  were $343,142 and
general  and  administrative expenses totaled $67,741, while facilities and rent
contributed  $34,140  to  our expenses. Our management believes that these costs
will  be  recurring and there is nothing to suggest any substantial reduction or
increase  for  the  foreseeable future. In comparison, during the previous three
months  ended  June 30, 2003, total operating expenses were $272,328, consisting
primarily of payroll and related costs of $125,195. We also incurred general and
administrative  expenses  in  the  amount  of  $80,727,  as  well as $64,317 for
consulting,  legal  and  professional  fees  and $2,089 in facilities and rental
expenditures.

     In the six months ended June 30, 2004, we incurred total operating expenses
of  $2,206,454,  consisting  significantly of consulting, legal and professional
fees  of  $1,662,326.  Payroll  and  related costs contributed $371,547 to total
expenses, while general and administrative expenses totaled $128,034 and $44,547
went  toward facilities and rent expense. Our expenditures during the six months
ended June 30, 2003 were $347,929. General and administrative expenses accounted
for  $136,628,  while  payroll  and  related  costs were an additional $127,596.
Consulting,  legal  and  professional  fees contributed $75,544 to our operating
expenses  during  the  six  months  ended June 30, 2003, and facilities and rent
expense  added  $8,161.

     In  the  three  months  ended  June  30,  2004,  we experienced a loss from
operations  of  approximately  $1,142,358,  as compared to loss of approximately
$272,328  for  the quarter ended June 30, 2003. In the six months ended June 30,
2004 our loss from operations was $2,075,860, while in the same six month period
during  2003  our  loss  from  operations  totaled  $347,788.

     During  both the three months ended June 30, 2004 and six months ended June
30, 2004, we recorded interest expense of $14,811. We did not incur any interest
expense  in  2003.

     Resultantly,  our  net  loss  aggregated  to  $1,127,984  during the second
quarter of 2004, compared to a net loss of $272,328 during the year ago quarter.
Through  the  six  months  ended  June  30,  2004,  we experienced a net loss of
$2,061,486.  In contrast, our net loss during the six months ended June 30, 2003
was  $347,788.  We  expect to continue to experience net losses going forward in
the  foreseeable  future.


                                        4
<PAGE>
RESULTS  OF  OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

     At  June  30,  2004,  our  current  assets  of  $721,750  exceeded  current
liabilities  in  the  amount  of  $103,232 by $618,518. We generated a cash flow
deficit  from  operations  of $1,100,790 for the six months ended June 30, 2004.
Cash  flow  deficits from operating activities for the six months ended June 30,
2004  is  primarily  attributable  to our net loss from operations of $2,061,486
adjusted  primarily  for  common  stock  issued to consultants and employees for
services  of  $941,503.

     During  the  six  months  ended June 30, 2004, we had a net cash outflow of
$622,543  for  investing activities. These funds were used primarily to purchase
property and equipment aggregating $468,530 during that six month period.

     Cash  flows  provided  from financing activities was $2,139,146 for the six
months ended June 30, 2004. This was mainly from proceeds received from officers
and  employees for stock options exercised during this period. All proceeds were
used  for  working  capital.

     As  discussed  by  our  accountants  in  the  audited  financial statements
included in Item 7 of our Annual Report on Form 10-KSB, our revenue is currently
insufficient  to  cover  our  costs  and  expenses.  We  anticipate  raising any
necessary capital from outside investors coupled with bank or mezzanine lenders.
As  of  the  date of this report, we have not entered into any negotiations with
any  third  parties  to  provide  such  capital.

     While  we  have  raised  capital  to meet our working capital and financing
needs in the past, additional financing is required in order to meet our current
and projected cash flow deficits from operations and development.

     By adjusting our operations and development to the level of capitalization,
we  believe  we  have  sufficient  capital resources to meet projected cash flow
deficits  through  the  next  12  months.  However,  if  thereafter  we  are not
successful  in  generating  sufficient  liquidity  from operations or in raising
sufficient  capital  resources,  on  terms  acceptable  to  us, there could be a
material  adverse  effect  on our business, results of operations, liquidity and
financial  condition.

     We  will  continue  to  evaluate  opportunities  for corporate development.
Subject  to  our ability to obtain adequate financing at the applicable time, we
may enter into definitive agreements on one or more of those opportunities.

     Our  independent  certified  public accountants have stated in their report
included  in  our December 31, 2003 Form 10-KSB, that we have incurred operating
losses  in  the  last  two  years, and that we are dependent upon our ability to
develop  profitable operations. These factors among others may raise substantial
doubt  about  our  ability  to  continue  as  a  going  concern.

RECENT DEVELOPMENTS

     Effective June 3, 2004, we increased the number of our authorized shares of
common stock to 9,000,000,000 shares by filing a Certificate of Amendment to our
Certificate of Incorporation with the Secretary of State of Nevada.

     Effective  June 21, 2004 we implemented a reverse split of our common stock
on  the  basis  of  one  post-consolidation share for each 100 pre-consolidation
shares  by filing a Certificate of Amendment to our Certificate of Incorporation
with  the  Secretary  of  State  of  Nevada.


                                        5
<PAGE>
OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

ITEM 3.  CONTROLS AND PROCEDURES.

     Disclosure  controls  and procedures are controls and other procedures that
are  designed  to  ensure that information required to be disclosed by us in the
reports  that  we  file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's  rules  and  forms.  Disclosure  controls  and procedures
include,  without  limitation,  controls  and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange  Act  is  accumulated and communicated to our management, including our
principal  executive  and  financial  officers,  as  appropriate to allow timely
decisions  regarding  required  disclosure.

     Evaluation  of disclosure and controls and procedures. As of the end of the
period  covered  by this Quarterly Report, we conducted an evaluation, under the
supervision  and with the participation of our chief executive officer and chief
financial  officer,  of  our  disclosure  controls and procedures (as defined in
Rules  13a-15(e)  of  the  Exchange  Act).  Based  on this evaluation, our chief
executive  officer  and  chief  financial  officer concluded that our disclosure
controls  and procedures are effective to ensure that information required to be
disclosed  by  us  in  reports  that we file or submit under the Exchange Act is
recorded,  processed,  summarized and reported within the time periods specified
in  Securities  and  Exchange  Commission  rules  and  forms.

     Changes  in internal controls over financial reporting. There was no change
in  our  internal  controls,  which  are included within disclosure controls and
procedures,  during  our  most  recently  completed  fiscal  quarter  that  has
materially  affected, or is reasonably likely to materially affect, our internal
controls.

                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     We  are  not  currently  a  party  to any legal proceedings required to be
described  in  response  to  Item  103  of  Regulation  S-B.

ITEM 2.  CHANGES IN SECURITIES.

     During the three and six months ended June 30, 2004, we conducted a private
placement  of  our common stock, whereby we issued 121,250 and 352,750 shares of
our  common  stock and received cash proceeds of $48,500 and $158,600 under this
private  placement  during  the three months and six months ended June 30, 2004,
respectively.

     We  grant shares of our common stock from time to time as consideration for
services  rendered by employees and consultants. During the three and six months
ended  June  30, 2004 we granted 779,750 and 1,215,200 shares of common stock as
consideration  for  services. The shares were expensed at their trading value of
approximately  $0.01.

     We  also  issued 497,471 shares to two of our officers as consideration for
services  during  the  three  month  period ended June 30, 2004. The shares were
expensed  at  their  trading  value  of  approximately  $0.0035.

     Furthermore,  we declared a reverse stock split of 100 shares to one in the
three  months  ended June 30, 2004. All stock numbers presented in the financial
statements  have  been  retroactively  restated  to  reflect  the reverse split.


                                        6
<PAGE>
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     On  May  28,  2004, at the annual meeting of our shareholders, our majority
shareholders  voted  to  elect  a board of directors consisting of the following
members:  Steve  Bonenberger  and  Brent Fouch. Prior to our annual meeting, our
board  of directors consisted of two members, Steve Bonenberger and Brent Fouch.
Following  our  annual  meeting  of  shareholders, our board will continue to be
composed of Messrs. Bonenberger and Fouch as our only directors.

     Our majority shareholders also voted in favor of the following resolutions:

-    To  ratify  the  selection  of  Epstein, Weber & Conover, P.L.C., Certified
     Public  Accountants  ("Epstein, Weber") as our independent auditors for the
     fiscal  year  ended  December 31, 2003 and to appoint Epstein, Weber as our
     independent  auditors  until  our  next  annual  meeting  of  stockholders;

-    To  increase  the  authorized  number  of  shares  of our common stock from
     1,000,000,000  to  9,000,000,000  shares;

-    To  approve  the  following  stock  plans:

     (a)     2003  Qualified  Stock  Option  Plan,  adopted  by  our  directors
effective  January  1,  2003,  with  1,500,000 shares of our common stock in the
aggregate  authorized  for  issuance  under  the  Plan;

     (b)     2003  Qualified  Stock  Option  Plan,  adopted  by  our  directors
effective  May  29,  2003,  with  9,000,000  shares  of  our common stock in the
aggregate  authorized  for  issuance  under  the  Plan.

     (c)     Employee  Stock  Incentive  Plan  for the Year 2003 adopted by  our
directors  on  June  16, 2003, with 16,000,000 shares of our common stock in the
aggregate  authorized  for  issuance  under  the  Plan.

     (d)     Non-Employee Directors and Consultants Retainer Stock Plan for  the
Year  2003  adopted  by our directors on June 16, 2003, with 1,000,000 shares of
our  common  stock  in  the  aggregate  authorized  for issuance under the Plan.

     (e)     Employee  Stock  Incentive Plan for the Year 2003 No. 2 adopted  by
our  directors  on August 1, 2003, with 70,000,000 shares of our common stock in
the  aggregate  authorized  for  issuance  under  the  Plan.

     (f)     Non-Employee Directors and Consultants Retainer Stock Plan for  the
Year  2003  No.  2  adopted  by our directors on August 1, 2003, with 28,000,000
shares  of  our  common stock in the aggregate authorized for issuance under the
Plan.

     (g)     Stock  Incentive  Plan  for  the  Year  2003  No. 3 adopted by  our
directors  on October 6, 2003, with 23,000,000 shares of our common stock in the
aggregate  authorized  for  issuance  under  the  Plan.

     (h)     Non-Employee Directors and Consultants Retainer Stock Plan for  the
Year  2003  No.  3  adopted by our directors on October 6, 2003, with 10,000,000
shares  of  our  common stock in the aggregate authorized for issuance under the
Plan.

     (i)     Employee  Stock  Incentive Plan for the Year 2003 No. 4 adopted  by
our  directors  on November 19, 2003, with 90,000,000 shares of our common stock
in  the  aggregate  authorized  for  issuance  under  the  Plan.


                                        7
<PAGE>
     (j)     Non-Employee  Directors and Consultants Retainer Stock Plan for the
Year  2003  No.4  adopted by our directors on November 19, 2003, with 40,000,000
shares  of  our  common stock in the aggregate authorized for issuance under the
Plan.

-    To  grant  discretionary  authority  to  our board of directors to effect a
     reverse  split  of  our  common  stock  on  the  basis  of  up  to  one
     post-consolidation  share  for  each  250  pre-consolidation  shares.

     The  total number of votes cast in favor of each of the above proposals was
437,000,000  shares  of  our common stock, which number exceeded the majority of
the  issued  and  outstanding  shares  of  our  common  stock on the record date
required  to  pass  the proposed amendments. The total number of votes cast with
respect  to  each of the above proposals was 858,902,857 votes. The total number
of  abstentions  with  respect  to  each of the above proposals was 421,902,857.

ITEM 5.  OTHER INFORMATION.

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)     Exhibits.

<TABLE>
<CAPTION>
EXHIBIT NO.                               IDENTIFICATION OF EXHIBIT
----------                                -------------------------
<C>          <S>
   3.1**     Articles of Incorporation
   3.2*      Articles of Amendment to the Articles of Incorporation
   3.3**     Bylaws
   10.1**    Joint Venture Agreement between Palomar Enterprises, Inc. and Prize Pizza LLC.
   31.1*     Certification of Steven Bonenberger, Chief Executive Officer of Palomar Enterprises, Inc.,
             pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of
             2002.
   31.2*     Certification of Brent Fouch, Chief Financial Officer of Palomar Enterprises, Inc., pursuant to
             18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
   32.1*     Certification of Steven Bonenberger, Chief Executive Officer of Palomar Enterprises, Inc.,
             pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of
             2002.
   32.2*     Certification of Brent Fouch, Chief Financial Officer of Palomar Enterprises, Inc., pursuant to
             18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002
</TABLE>

__________
*    Filed herewith.
**   Previously filed.


                                        8
<PAGE>

(b)     Reports on Form 8-K.

-    On  May  7,  2004,  we  filed  a Current Report regarding the Joint Venture
     Agreement  with  Prize  Pizza  LLC.

                                   SIGNATURES

     In  accordance  with  the  requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   PALOMAR ENTERPRISES, INC.

Dated August 19, 2004.

                                   By /s/ Steven Bonenberger
                                     -----------------------
                                     Steven Bonenberger,
                                     Chief Executive Officer


                                        9
<PAGE>
<TABLE>
<CAPTION>
                                    APPENDIX

PALOMAR ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2004 (UNAUDITED)

<S>                                                                         <C>
ASSETS
   Cash                                                                     $   558,706
   Notes receivable                                                             154,013
   Prepaids and other current assets                                              5,667
   Inventory                                                                      3,364
                                                                            ------------
Total current assets                                                            721,750

Property, plant and equipment, net of accumulated depreciation of $10,685     1,625,123

Deposits and other assets                                                        13,877

Goodwill                                                                        239,198

                                                                            ------------
TOTAL ASSETS                                                                $ 2,599,948
                                                                            ============

LIABILITIES AND STOCKHOLDERS' EQUITY:

   Accounts Payable                                                         $    42,039
   Accrued Expenses                                                               2,938
   Bank line of credit                                                           50,000
   Current portion of notes payable                                               8,255

                                                                            ------------
Total current liabilities                                                       103,232

   Notes payable to related parties                                             352,546
   Note payable, long term                                                      971,745

                                                                            ------------
TOTAL LIABILITIES                                                             1,427,523
                                                                            ------------

MINORITY INTEREST                                                               104,148

STOCKHOLDERS' EQUITY:
   Common stock, $.001 par value, 5,000,000,000 shares
      authorized, 11,626,500 shares issued;
      11,623,700 outstanding                                                     11,627
   Additional paid-in capital                                                 8,619,601
   Accumulated deficit                                                       (7,535,533)
   Treasury Stock - at cost (2,800 shares)                                      (27,418)
                                                                            ------------

      Total stockholders' equity                                              1,068,277

                                                                            ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $ 2,599,948
                                                                            ============
</TABLE>


                                      F - 1
<PAGE>
<TABLE>
<CAPTION>
PALOMAR ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                        Three months      Six months      Three months      Six months
                                            ended            ended            ended            ended
                                        June 30, 2004    June 30, 2004    June 30, 2003    June 30, 2003
                                       ------------------------------------------------------------------
<S>                                    <C>              <C>              <C>              <C>
Revenues                               $      509,046   $      544,624   $            -   $          180
Cost of goods sold                            414,030          414,030                -               39
                                       ------------------------------------------------------------------

Gross profit                                   95,016          130,594                -              141

Operating expenses
   General and administrative                  67,741          128,034           80,727          136,628
   Facilities and rent                         34,140           44,547            2,089            8,161
   Consulting, legal and professional         792,351        1,662,326           64,317           75,544
   Payroll and related costs                  343,142          371,547          125,195          127,596

                                       ------------------------------------------------------------------
Total operating expenses                    1,237,374        2,206,454          272,328          347,929

Loss from operations                       (1,142,358)      (2,075,860)        (272,328)        (347,788)

Interest expense                              (14,811)         (14,811)               -                -

Minority interest in net loss                  29,185           29,185                -                -

                                       ------------------------------------------------------------------
Net loss                               $   (1,127,984)  $   (2,061,486)  $     (272,328)  $     (347,788)
                                       ==================================================================

Net loss per weighted average
   share of common stock
   outstanding - basic and
   fully diluted                       $        (0.12)  $        (0.26)  $        (1.51)  $        (2.47)
                                       ==================================================================

Weighted average number of
   shares of common stock
   outstanding                              9,390,465        8,067,289          180,929          140,776
                                       ==================================================================
</TABLE>

* - Less than $0.01 per share


                                      F - 2
<PAGE>
<TABLE>
<CAPTION>
PALOMAR ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                               Six months       Six months
                                                  ended            ended
                                              June 30, 2004    June 30, 2003
                                             --------------------------------
<S>                                          <C>              <C>
Cash flows from operating activities:
Net loss for the period                      $   (2,061,486)  $     (347,788)
Minority interest in net loss                       (29,185)
Adjustments to reconcile net loss
   to net cash provided by operating
   activities:
    Depreciation                                     10,684              550
   Loss from disposal of fixed assets                     0            9,350
   Common stock issued for services                 767,388          224,897
   Common stock issued to officers                  174,115
Changes in assets and liabilities:
   Inventory                                          8,040                -
   Prepaid expenses                                  (2,321)           7,726
   Other assets                                     (13,002)           2,400
   Accounts payable and accrued liabilities          44,977          (10,419)

                                             --------------------------------
Net cash used in operating activities            (1,100,790)        (113,284)
                                             --------------------------------

Cash flows from investing activities:
   Purchase of property and equipment              (468,530)               -
   Purchase of notes receivable                    (154,013)               -
                                             --------------------------------
Net cash used in investing activities              (622,543)               -
                                             --------------------------------

Cash flows from financiang activities:
   Proceeds from note payable                       395,546                -
   Payments on note payable                        (300,000)
   Proceeds from sale of common stock             2,043,600           52,000
   Proceeds from notes due to officers                    0           51,864
                                             --------------------------------
Net cash provided by investing activities         2,139,146          103,864
                                             --------------------------------
Net increase (decrease) in cash                     415,813           (9,420)
Cash, beginning of period                           142,893           10,547
                                             --------------------------------
Cash, end of period                          $      558,706   $        1,127
                                             ================================
</TABLE>


                                      F - 3
<PAGE>
<TABLE>
<CAPTION>
PALOMAR ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), continued

SUPPLEMENTAL CASH FLOW INFORMATION:

                                     Six Months     Six Months
                                     Ended June     Ended June
                                      30, 2004       30, 2003
                                     -----------    -----------
       Interest Paid                 $    11,923    $       -0-
                                     ===========    ===========



SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

                                                                            Six Months   Six Months
                                                                            Ended June   Ended June
                                                                             30, 2004     30, 2003
<S>                                                                         <C>          <C>
Common stock issued for services                                            $   767,388  $   224,897
                                                                            ===========  ===========

Property acquired under note payable                                        $   980,000  $       -0-
                                                                            ===========  ===========

Common stock issued to officers                                             $   174,155  $       -0-
                                                                            ===========  ===========

Common stock issued to acquire sixty percent interest in Prize Pizza, Inc.  $   200,000  $       -0-
                                                                            ===========  ===========
</TABLE>


                                      F - 4
<PAGE>