**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**





**FORM
      10-QSB**





[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934.





**For
      the quarterly period ended September 30, 2007**





OR





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


EXCHANGE
      ACT OF 1934.





For
      the
      transition period from _______, 20___ to _______, 20___.








Commission
      File Number **:
      000-49672**





**PALOMAR
      ENTERPRISES, INC.**


(Exact
      Name of Small Business Issuer as Specified in its Charter)





**NEVADA**
              
              **06-1588136**(State
                  or Other Jurisdiction of
              
              (IRS
                  EmployerIncorporation
                  or Organization)
              
              Identification
                  Number)





1802
        N.
        CARSON STREET, SUITE 212-3018


CARSON
      CITY, NEVADA 89701


Address
      of Principal Executive Offices





(775)
      887-0670


(Registrant's
      Telephone Number, Including Area Code)











Check
      whether the Issuer (1) has 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 Issuer was required to file such reports), and 2) has been
      subject to such filing requirements for the past 90 days. [ X ] Yes [ ]
      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 September 30, 2007, the issuer had
      251,941,943  shares
      of
      its common stock issued and outstanding.





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







1




**TABLE
      OF CONTENTS**














PART
                I - FINANCIAL INFORMATIONItem
                1. Financial Statements
            3Consolidated
                Balance Sheet as of September 30, 2007 (unaudited)
            3-4Consolidated
                Statement of Operations for the three and nine months endedSeptember
                30, 2007 and 2006 (unaudited)
            5Consolidated
                Statement of Cash Flows for the nine months ended September 30, 2007and
                2006 (unaudited)
            6-7Notes
                to Consolidated Financial Statements (unaudited)
            8Item
                2. Management's Discussion and Analysis or Plan of
                Operation
            20Item
                3. Quantitative and Qualitative Disclosures of Market Risk
            24Item
                4. Controls and Procedures
            24PART
                II - OTHER INFORMATION
            25Item
                1. Legal Proceedings
            25Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            25Item
                3. Defaults Upon Senior Securities
            25Item
                4. Submission of Matters to a Vote of Security Holders.
            25Item
                5. Other Information
            25Item
                6. Exhibits
            26SIGNATURES
            26











2





**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS.**








The
      accompanying unaudited interim consolidated financial statements of Palomar
      Enterprises ("Palomar") have been prepared in accordance with accounting
      principles generally accepted in the United States of America and the rules
      of
      the Securities and Exchange Commission ("SEC"), and should be read in
      conjunction with the audited financial statements and notes thereto contained
      in
      Palomar's Annual Report filed with the SEC on Form 10-KSB. In the opinion of
      management, all adjustments, consisting of normal recurring adjustments,
      necessary for a fair presentation of financial position and the results of
      operations for the interim periods presented have been reflected herein. The
      results of operations for interim periods are not necessarily indicative of
      the
      results to be expected for the full year. Notes to the financial statements
      which would substantially duplicate the disclosure contained in the audited
      financial statements for 2006 as reported in the 10-KSB have been
      omitted.



































































































































3







**Palomar
                Enterprises, Inc.****Consolidated
                Balance Sheet**September
                30,2007
            December
                31,(unaudited)
            2006ASSETS:Cash
            
            $
                196,740
            
            $
                35,187Prepaids
                and other current assets
            -
            
            21,000Total
                current assets
            196,470
            
            56,187Other
                assets
            
            
            
            172,641
            
            69,082Property,
                plant and equipment, net
            3,095,244
            
            3,147,400Goodwill
            377,248
            
            377,248TOTAL
                ASSETS
            $3,841,873
            
            $
                3,649,917**LIABILITIES
                AND STOCKHOLDERS' EQUITY**LIABILITIES:Accounts
                payable
            $
                138,057
            
            $
                18,321Accrued
                expenses
            195,371
            
            136,314Accrued
                Derivative Liability
            178,759
            
            -Current
                portion of notes payable
            1,587,008
            
            2,134,265Total
                current liabilities
            2,263,891
            
            2,298,900Notes
                payable, long term
            3,201,565
            
            2,090,673TOTAL
                LIABILITIES
            5,300,760
            
            4,379,573MINORITY
                INTEREST
            $
                19,038
            
            $
                3,836








The
      accompanying notes are an integral part of these financial
      statements.








4









**Palomar
                Enterprises, Inc.**Consolidated
                Balance Sheet, continuedSeptember
                30, 2007
            December
                31,(Unaudited)
            2006STOCKHOLDERS'
                EQUITY:Preferred
                stock, $0.00001 par value, 10,000,000 sharesauthorized,
                no shares issued or outstanding -
            
            -Series
                A preferred stock, $0.00001 par value, 10,000,000
                sharesauthorized,
                8,950,000 shares issued and
              outstanding
            90
            
            90Series
                B preferred stock, $0.00001 par value, 50,000,000 sharesauthorized,
                30,000,000 shares issued and outstanding 300
            
            300
                330-Series
                C preferred stock, $0.00001 par value, 30,000,000 sharesauthorized,
                no shares issued or outstanding -
            
            -
                -Common
                stock, $0.00001 par value, 25,000,000,000 sharesauthorized,
                251,941,943 and 74,039,643 shares
            
            9Issued
                and outstanding 2,519
            740Shares
                not yet earned
            Earned
                (1,347,434)
            (207,235)Additional
                paid-in capital
            18,513,942
            
            14,154,009Accumulated
                deficit
            (18,647,342)
            
            (14,681,396)Total
                stockholders' (deficit) equity
            (
                1,477,925)
            
            (733,492)TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            3,841,873
            
            3,649,917





The
      accompanying notes are an integral part of these financial
      statements.
















5











**Palomar
                Enterprises, Inc.****Consolidated
                Statements of Operations****For
                the Three Months and Nine Months Ended September 30, 2007 and
                2006****(unaudited)**For
                the Three Months Ended
            
            For
                the Nine Months EndedSeptember
                30,
            
            September
                30,2007
            
            2006
            
            2007
            
            2006Revenue
            
            $
            126,506
            
            $
            233,461
            
            $
            732,601
            
            $
            612,177Cost
                of goods sold
            
            
            81,929
            
            
            191,344
            
            
            537,708
            
            
            389,924Gross
                profit
            
            
            44,577
            
            
            42,117
            
            
            194,893
            
            
            222,253Operating
                expenses:General
                and administrative
            
            
            46,063
            
            
            467,539
            
            
            296,135
            
            
            893,549Facilities
                and rent
            
            
            24,504
            
            
            36,616
            
            
            54,810
            
            
            79,249Consulting,
                legal and professional
            
            
            730,587
            
            
            53,796
            
            
            3,019,060
            
            
            251,130Payroll
                and related costs
            
            
            215,377
            
            
            215,701
            
            
            373,413
            
            
            708,041Total
                operating expenses
            
            
            1,016,531
            
            
            773,652
            
            
            3,743,418
            
            
            1,931,969Loss
                from operations
            
            
            (971,954)
            
            
            (731,535)
            
            
            (3,548,525)
            
            
            (1,709,716)Other
                income or (expense)Interest
                expense
            
            
            (79,160)
            
            
            (27,238)
            
            
            (260,707)
            
            
            (126,533)Minority
                interest, loss on derivative,JV
            
            
            69,113
            
            
            1,203
            
            
            (156,714)
            
            
            8,127Total
                other income or (expense)
            
            
            (10,047)
            
            
            (26,035)
            
            
            (417,421)
            
            
            (118,406)(Loss)
                before provision for taxes
            
            
            (982,001)
            
            
            (757,570)
            
            
            (3,965,946)
            
            
            (1,828,122)Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                (loss)
            
            $
            (982,001)
            
            $
            (757,570)
            
            $
            (3,965,946)
            
            $
            (1,828,122)Weighted
                average number ofcommon
                shares outstanding - basic and fully diluted
            
            
            415,345,276
            
            
            35,375,307
            
            
            192,778,690
            
            
            30,749,661Net
                (loss) per share - basic and fully diluted
            
            $
            (0.00)
            
            $
            (0.02)
            
            $
            (0.02)
            
            $
            (0.06)





The
      accompanying notes are an integral part of these financial
      statements.








6











**Palomar
                Enterprises, Inc.****Consolidated
                Statements of Cash Flows****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**For
                the Nine Months EndedSeptember
                30,2007
            
            2006**Cash
                flows from operating activities**Net
                (loss) for the period
            
            $
            (3,965,946)
            
            $
            (1,828,122)Minority
                interest in net loss
            
            
            19,038Adjustments
                to reconcile net (loss) tonet
                cash (used) by operating activities:Depreciation
            
            
            25,520
            
            
            24,266Common
                stock issued for services
            
            
            2,273,436
            
            
            95,525Accrued
                Derivative Liability
            
            
            178,759
            
            
            -Changes
                in operating assets and liabilities:Decrease
                in inventory
            
            
            -
            
            
            -(Increase)
                decrease in prepaid expenses/other
            
            
            (82,559)
            
            
            (25,245)-Increase
                (decrease)in accounts payable and accrued expenses
            
            
            178,793
            
            
            (14,203)Net
                cash (used) by operating activities
            
            
            (1,372,959)
            
            
            (1,747,779)**Cash
                flows from investing activities**Purchase
                of property and equipment,net
            
            
            26,635
            
            
            (625,083)Minority
                interest in real estate j/v
            
            
            -
            
            
            1,622Net
                cash (used) by investing activities
            
            
            26,635
            
            
            (623,461)**Cash
                flows from financing activities**Proceeds
                from note payable/net of repayments
            
            
            563,635
            
            
            1,860,869Shares
                issued for Debt reduction
            
            
            (88,434)Proceeds
                from sale of common stock/stock subscribed
            
            
            1,032,585
            
            
            898,110Proceeds
                from exercise of stock optionsNet
                cash provided by financing activities
            
            
            1,507,877
            
            
            2,758,979Net
                increase in cash
            
            
            161,553
            
            
            387,739Cash
                - beginning
            
            
            35,187
            
            
            44,361Cash
                - ending
            
            $
            196,740
            
            $
            432,100






The
      accompanying notes are an integral part of these financial
      statements.









7











**Palomar
                Enterprises, Inc****Consolidated
                Statements of Cash Flows, continued****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**2006
            
            2005Supplemental
                disclosures:Interest
                paid
            
            $
            193,632
            
            $
            67,877Income
                taxes paid
            
            $
            -
            
            $
            -Non-cash
                investing and financing activities:Common
                stock issued for services
            
            $
            2,273,436
            
            $
            95,525Property
                acquired under note payable
            
            $
            -
            
            $Common
                stock issued to officers
            
            $
            -
            
            $Common
                stock issued to acquire sixty percent interestin
                Prize Pizza, Inc.
            
            $
            -
            
            $
















































































The
      accompanying notes are an integral part of these financial
      statements.





8












**Palomar
                Enterprises, Inc****Notes
                to Financial Statements****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**




**NOTE
      A - ORGANIZATION AND DESCRIPTION OF BUSINESS**




Palomar
      Enterprises, Inc. (Company) was incorporated on March 10, 1999 in accordance
      with the laws of the State of Nevada.




**NOTE
      B - PREPARATION OF FINANCIAL STATEMENTS**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.




Management
      further acknowledges that it is solely responsible for adopting sound accounting
      practices, establishing and maintaining a system of internal accounting control
      and preventing and detecting fraud. The Company's system of internal accounting
      control is designed to assure, among other items, that 1) recorded transactions
      are valid;




2)
      valid
      transactions are recorded; and 3) transactions are recorded in the proper period
      in a timely manner to produce financial statements which present fairly the
      financial condition, results of operations and cash flows of the Company for
      the
      respective periods being presented The Company is in the real estate development
      and mortgage business employing 13 real estate brokers.




**NOTE
      C - GOING CONCERN UNCERTAINTY**




The
      Company has been unable to generate sufficient operating revenues and has
      incurred operating losses.




The
      Company is operating as a mortgage broker and real estate developer. However,
      the Company is dependent upon the available cash on hand and either future
      sales
      of securities or upon its current management and/or advances or loans from
      controlling shareholders or corporate officers to provide sufficient working
      capital.




There
      is
      no assurance that the Company will be able to obtain additional funding through
      the sales of additional securities or, that such funding, if available, will
      be
      obtained on terms favorable to or affordable by the Company. It is the intent
      of
      management and controlling shareholders to provide sufficient working capital
      necessary to support and preserve the integrity of the corporate
      entity.




However,
      there is no legal obligation for either management and/or controlling
      shareholders to provide such additional funding.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern.




The
      financial statements do not include any adjustments that might result from
      this
      uncertainty.



















9










**Palomar
                Enterprises, Inc****Notes
                to Financial Statements****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**









**NOTE
      D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




1.
      Cash
      and cash equivalents




The
      Company considers all cash on hand and in banks, including accounts in book
      overdraft positions, certificates of deposit and other highly- liquid
      investments with maturities of three months or less, when purchased, to be
      cash
      and cash equivalents.




2.
      Principles of consolidation




The
      consolidated financial statements include the accounts of the Company and its
      ninety eight percent interest in Blackhawk. All significant inter- company
      accounts and transactions have been eliminated.




The
      Blackhawk fund is publicly traded on the OTC B.B. (BHWK). The financials of
      Palomar are inclusive of all activity of The BlackHawk Fund, as well as Palomar
      Enterprises, on a consolidated basis. This includes all revenue, expenses,
      losses and operations.




3.
      Research and development expenses




Research
      and development expenses are charged to operations as incurred. There were
      no
      research and development costs incurred in the period ending September 30,
      2007.




4.
      Advertising expenses




Advertising
      and marketing expenses are charged to operations as incurred. Advertising
      expenses for the period ending September 30, 2007 was $100,917.




5.
      Revenue recognition




The
      Company generates revenue from the sale of real estate, brokerage commissions,
      rental properties and mortgage loan originations. Revenues from real estate
      sales and commissions are recognized on execution of the sales contract. The
      Company records gross commissions on the sales of properties closed. The Company
      pays the broker of record five percent of all transactions and 100 percent
      of
      personal sales. This is in accordance with standard procedures. The Company
      compensates its independent agents on a sliding scale between 70 and 80 percent
      based on productivity. The Company also recognizes sales when it sells
      properties that have been held for sale when their renovation is complete.
      Revenue is recognized at "closing".




The
      Company also realizes revenue from its subsidiary, The Blackhawk Fund, from
      its
      media production business for sale of media "spots" and
      infomercials.




6.
      Income
      Taxes




The
      Company utilizes the asset and liability method of accounting for income taxes.
      Temporary differences represent differences in the recognition of assets and
      liabilities for tax and financial reporting purposes, primarily accumulated
      depreciation and amortization.




As
      of
      September 30, 2007, the deferred tax asset is related solely to the Company's
      net operating loss carryforward and is fully reserved.










10












**Palomar
                Enterprises, Inc****Notes
                to Financial Statements****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**




7.
      Earnings (loss) per share




Basic
      earnings (loss) per share are computed by dividing the net income




(loss)
      by
      the weighted-average number of shares of common stock and common stock
      equivalents (primarily outstanding options and warrants). Common stock
      equivalents represent the dilutive effect of the assumed exercise of the
      outstanding stock options and warrants, using the treasury stock method. The
      calculation of fully diluted earnings (loss) per share assumes the dilutive
      effect of the exercise of outstanding options and warrants at either the
      beginning of the respective period presented or the date of issuance, whichever
      is later. As of September 30, 2007, the Company's outstanding warrants are
      considered anti-dilutive.




8.
      Use of
      Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the accounting period. Actual results could differ from those
      estimates.




**RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      July
      2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in
      Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an enterprises' financial statements in accordance
      with SFAS No. 109, "Accounting for Income Taxes". FIN 48 prescribes a
      recognition threshold and measurement attributable for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognizing, classification,
      interest and penalties, accounting in interim periods, disclosures and
      transitions. FIN 48 is effective for fiscal years beginning after December
      15,
      2006. The Company is currently reviewing the effect, if any, FIN 48 will have
      on
      its financial position and operations.





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measures" ("SFAS
      No.
      157"). SFAS No157 defines fair value, establishes a framework for measuring
      fair
      value in generally accepted accounting principles ("GAAP"), expands disclosures
      about fair value measurements, and applies under other accounting pronouncements
      that require or permit fair value measurements. SFAS No. 157 does not require
      any new fair value measurements, however the FASB anticipates that for some
      entities, the application of SFAS No. 157 will change current practice. SFAS
      No.
      157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007, which for the Company would be its fiscal year
      beginning November 1, 2008. The implementation of SFAS No. 157 is not expected
      to have a material impact on the Company's results of operations and financial
      condition.





In
      September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
      No. 158, "Employers' Accounting for Defined Benefit Pension and Other
      Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and
      132(R)". This statement requires employers to recognize the overfunded or
      underfunded status of a defined benefit postretirement plan (other than a
      multi-employer plan) as an asset or liability in its statement of financial
      position and to recognize changes in that funded status in the year in which
      the
      changes occur through comprehensive income of a business entity or changes
      in
      unrestricted net assets of a not-for-profit organization. This statement also
      requires an employer to measure the funded status of a plan as of the date
      of
      its year-end statement of financial position, with limited exceptions. The
      provisions of SFAS No. 158 are effective for employers with publicly traded
      equity securities as of the end of the fiscal year ending after December 15,
      2006. The adoption of this statement is not expected to have a material effect
      on the Company's future reported financial position or results of
      operations.



























11








**Palomar
                Enterprises, Inc****Notes
                to Financial Statements****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**








In
      September 2006, the Securities and Exchange Commission ("SEC") issued Staff
      Accounting Bulletin No. 108 (Topic 1N), "Quantifying Misstatements in Current
      Year Financial Statements" ("SAB No. 108"). SAB No. 108 addresses how the effect
      of prior year uncorrected misstatements should be considered when quantifying
      misstatements in current year financial statements. SAB No. 108 requires SEC
      registrants (i) to quantify misstatements using a combined approach which
      considers both the balance sheet and income statement approaches; (ii) to
      evaluate whether either approach results in quantifying an error that is
      material in light of relevant quantitative and qualitative factors; and (iii)
      to
      adjust their financial statements if the new combined approach results in a
      conclusion that an error is material. SAB No. 108 addresses the mechanics of
      correcting misstatements that include effects from prior years. It indicates
      that the current year correction of a material error that includes prior year
      effects may result in the need to correct prior year financial statements even
      if the misstatement in the prior year or years is considered immaterial. Any
      prior year financial statements found to be materially misstated in years
      subsequent to the issuance of SAB No. 108 would be restated in accordance with
      SFAS No. 154, "Accounting Changes and Error Corrections." Because the combined
      approach represents a change in practice, the SEC staff will not require
      registrants that followed an acceptable approach in the past to restate prior
      years' historical financial statements. Rather, these registrants can report
      the
      cumulative effect of adopting the new approach as an adjustment to the current
      year's beginning balance of retained earnings. If the new approach is adopted
      in
      a quarter other than the first quarter, financial statements for prior interim
      periods within the year of adoption may need to be restated. SAB No. 108 is
      effective for fiscal years ending after November 15, 2006, which for Company
      would be its fiscal year beginning


December
      1, 2007. The implementation of SAB No. 108 is not expected to have a material
      impact on the Company's results of operations and financial
      condition.




**NOTE
      E - FAIR VALUE OF FINANCIAL INSTRUMENTS**




The
      carrying amount of cash, notes receivable, accounts payable, accrued liabilities
      and notes payable, as applicable, approximates fair value due to the short-term
      nature of these items. The fair value of the related party notes payable cannot
      be determined because of the Company's affiliation with the parties with whom
      the agreements exist. The use of different assumptions or methodologies may
      have
      a material effect on the estimates of fair values.




**NOTE
      F - RELATED PARTY TRANSACTIONS**




Company
      pays consulting fees to the two officer's companies for management services.
      The
      consulting fees totaled 586,000 as of September 30, 2007 The Company is also
      a
      50% joint venture partner with one of its shareholders in a property. All
      expenses are divided equally.




The
      Company advances funds periodically to its subsidiary. The total advanced to
      date, which is eliminated in consolidation, is $723,996.




In
      the
      first quarter 2007 400,000 shares of preferred stock series A were converted
      into 400,000,000 common shares by the officers.




In
      the
      third quarter 2007 350,000,000 shares of common were converted back to preferred
      series a.












12












**Palomar
                Enterprises, Inc****Notes
                to Financial Statements****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**




**NOTE
      G - PROPERTY**




Property
      and equipment consisted of the following at September 30, 2007:





Building
            $1,395,612Office
                equipment
            $33,145Buildings
                held for sale
            $1,774,900Total
            $3,203,657Less:
                Accumulated depreciation
            ($108,413)Property
                & equipment, net
            $3,095,244




Assets
      are being depreciated from five to forty years using the straight line
      method.




**NOTE
      H - NOTES PAYABLE**




Notes
      payable at September 30, 2007 are comprised of the following:





Note
                payable to lending institution, originalbalance
                of $980,000interest at 7.5% per annum.Requires
                monthly principal and interest paymentsof
                6,852 through 2034. Collateralized by building.
            $791,561Convertible
                debentures payable to an investor
            $1,204,345group,
                interest at 8% due March 2009.Mortgage
                Payable secured by property Interest at
            1,440,0007.875%
                and 9.25% over prime interest only for the firstten
                years then amortized over 360 months.Mortgage
                Payable, secured by a building 7.875%Interest
                only for ten years
            496,000Credit
                line from a bank up to 500,000 interest only
            497,667at
                one percent over prime.Note
                Payable to a vendor in monthly installmentsOf
                $3,000
            34,000Convertible
                debenture, interest 8%, past due
            325,000Total
            $4,788,573Less
                current portion
            1,587,008Total
                long-term portion
            $3,201,565

















13








**Palomar
                Enterprises, Inc****Notes
                to Financial Statements****For
                the Nine Months Ended September 30, 2007 and
                2006****(unaudited)**








**NOTE
      I - LEASES**




Our
      lease
      at 120 Birmingham Dr. # 110-G Cardiff, CA. 92007 costs $975 per month. We are
      also a party to a lease agreement with Ikon Financial Services. We lease a
      copier from Ikon Financial Services for a price of $445 per month.




**Note
      J-SIGNIFICANT EVENT**




In
      May
      2007, the Company's attorneys, were in receipt of a notification from the SEC,
      alleging a potential violation of The Company's employee stock incentive program
      dating back to 2004. The Company denies any violations occurred and is in the
      process of replying to the letter, but does not feel the event will have a
      material impact on its business.




**Note
      K-SEGMENT INFORMATION**




The
      Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise and
      Related Information, in respect of its operating segments. The Company’s
      reportable segment is Blackhawk Media a media and production enterprise, part
      of
      the 98% subsidiary.




The
      segment is managed separately because each business requires different
      technology and marketing strategies. The Company evaluates performance based
      upon operating earnings of the unit. The accounting policy of the segment are
      the same as those described in the summary of significant accounting policies.
      The corporate assets include cash. There were no significant intercompany
      transactions. In determining operating income (loss) by segment, general
      corporate expenses and other income and expense items of a non operating nature
      are not considered, as such items are not allocated to the Company's segments.
      Segment information for the nine months 2007 is as follows:





Sales
                from Media
            $296,713Cost
                of Sales
            251,303Gross
                Profit
            45,410Media
                Expenses
            253,495Loss
                from Media Segment
            ($208,045)








**NOTE
      L-DERIVATIVE LIABILITY**





The
      Company is accounting for the conversion option in the Convertible Note and
      the
      conversion price in the Securities Purchase Agreement and the associated
      warrants as derivative liabilities in accordance with SFAS 133, “Accounting for
      Derivative Instruments and Hedging Activities” and EITF 00-19 “Accounting for
      Derivative Financial Instruments Indexed to and Potentially Settled in a
      Company’s Own Stock” due to the fact that the conversion feature and the
      warrants both have a variable conversion price.


The
      fair
      value of the Convertible Note was determined utilizing the Black-Scholes stock
      option valuation model. The significant assumptions used in the valuation are:
      the exercise price as noted above; the stock price as of September 30, 2007;
      expected volatility of 66%; risk free interest rate of approximately 4.50%;
      and
      a term of one year.




The
        fair
        value of the Securities Purchase Agreement was determined utilizing the
        Black-Scholes option valuation model. The significant assumptions used in
        the
        valuation are: the exercise price as noted above; the stock price as of
        September 30, 2007; expected volatility of 66%; risk free interest rate of
        approximately 4.50%; and a term of three years.




14







**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.





There
      are
      several 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 its 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, 2006.





**MANAGEMENT'S
      PLAN OF OPERATIONS.**





**CURRENT
      BUSINESS PLAN**





Our
      current business plan is buying, renovating and selling residential real estate
      properties, residential real estate sales, and mortgage brokerage services.
      As
      part and parcel of that we also look for land opportunities and development.
      We
      currently employ three full time employees. We also have six full time licensed
      real estate agents and licensed mortgage brokers.





**RESULTS
      OF OPERATIONS:**





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006:**





Total
      revenue was $126,506 for the three months ending September 30, 2007 compared
      to
      $ 233,461 for the prior period. This represents an decrease of 45.4 percent.
      The
      main reason for the decrease is the softening of the housing market.





Our
      gross
      profit for the three months ended September 30, 2007 compared to 2006 was
      $44,577 compared to $42,117.





Total
      operating expenses for the three months ended September 30, 2007 were $1,016,531
      compared to $773,652 for the same period in 2006, with the biggest increases
      deriving from stock for services.







15





Net
      loss
      from operations for the period ending September 30, 2007 was $(971,954) compared
      to a net loss for the prior period in 2006 which was$(731,535). t





Interest
      expense, net for the three months ending September 30, 2007 was $79,160 The
      interest expense for the prior period in 2006 was $27,238. This increase was
      due
      to the higher amount of debt incurred.





**Nine
      months ended September 30, 2006 compared to the nine months ended September
      30,
      2005.**





Total
      net
      sales and revenues were at $732,601 for the nine months ended September 30,
      2007
      compared to $612,177 for the prior period. The reason for the increase was
      due
      to the new media business which was started in 2007.





Our
      gross
      profit for the nine months ended September 30, 2007 compared to 2007 decreased
      to 194,893 from $222,253





Total
      operating expenses for the nine months ended September 30, 2007 were $3,743,418
      compared to 2006, which were $1,931,969.





Net
      loss
      was ($3,548,525) for nine-month period ending September 30, 2007, compared
      to a
      loss of ($1,709,716) for the same period in 2006.





Interest
      expense, net for the nine months ended September 30, 2007 was $260,707 compared
      to 126,533.





**LIQUIDITY
      AND CAPTIAL RESOURCES**





As
      of
      September 30, 2007 we had a deficiency in working capital of
      $2,067,421.





Cash
      used
      by financing activities totaled $1,507,877, mainly from stock sales and
      refinancing of the mortgage.





**CRITICAL
      ACCOUNTING POLICIES**





The
      preparation of our consolidated financial statements in conformity with
      accounting principles generally accepted in the United States requires us to
      make estimates and judgments that affect our reported assets, liabilities,
      revenues, and expenses, and the disclosure of contingent assets and liabilities.
      We base our estimates and judgments on historical experience and on various
      other assumptions we believe to be reasonable under the circumstances. Future
      events, however, may differ markedly from our current expectations and
      assumptions. While there are a number of significant accounting policies
      affecting our consolidated financial statements, we believe the following
      critical accounting policy involve the most complex, difficult and subjective
      estimates and judgments.





**STOCK-BASED
      COMPENSATION**





In
      December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
      Compensation - Transition and Disclosure. This statement amends SFAS No. 123
      -
      Accounting for Stock-Based Compensation, providing alternative methods of
      voluntarily transitioning to the fair market value based method of accounting
      for stock based employee compensation. FAS 148 also requires disclosure of
      the
      method used to account for stock-based employee compensation and the effect
      of
      the method in both the annual and interim financial statements. The provisions
      of this statement related to transition methods are effective for fiscal years
      ending after December 15, 2002, while provisions related to disclosure
      requirements are effective in financial reports for interim periods beginning
      after December 31, 2002.





16





We
      elected to continue to account for stock-based compensation plans using the
      intrinsic value-based method of accounting prescribed by APB No. 25, "Accounting
      for Stock Issued to Employees," and related interpretations. Under the
      provisions of APB No. 25, compensation expense is measured at the grant date
      for
      the difference between the fair value of the stock and the exercise
      price.





**RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      151,
      Inventory Costs- an amendment of ARB No. 43, Chapter 4. This Statement amends
      the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the
      accounting for abnormal amounts of idle facility expense, freight, handling
      costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
      previously stated that "under some circumstances, items such as idle facility
      expense, excessive spoilage, double freight, and rehandling costs may be so
      abnormal as to require treatment as current period charges." This Statement
      requires that those items be recognized as current-period charges regardless
      of
      whether they meet the criterion of "so abnormal." In addition, this Statement
      requires that allocation of fixed production overheads to the costs of
      conversion be based on the normal capacity of the production facilities. This
      Statement is effective for inventory costs incurred during fiscal years
      beginning after June 15, 2005. Management does not believe the adoption of
      this
      Statement will have any immediate material impact on the Company.





In
      December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate
      Time-Sharing Transactions-an amendment of FASB Statements No. 66 and 67" ("SFAS
      152) The amendments made by Statement 152 This Statement amends FASB Statement
      No. 66, Accounting for Sales of Real Estate, to reference the financial
      accounting and reporting guidance for real estate time-sharing transactions
      that
      is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
      Estate Time-Sharing Transactions.
      This Statement also amends FASB Statement No. 67, Accounting for Costs and
      Initial Rental Operations of Real Estate Projects, to state that the guidance
      for (a) incidental operations and (b) costs incurred to sell real estate
      projects does not apply to real estate time-sharing transactions. The accounting
      for those operations and costs is subject to the guidance in SOP 04-2. This
      Statement is effective for financial statements for fiscal years beginning
      after
      June 15, 2005 with earlier application encouraged. We do not anticipate that
      the
      implementation of this standard will have a material impact on its financial
      position, results of operations or cash flows.





On
      December 16, 2004, the Financial Accounting Standards Board ("FASB") published
      Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
      Payment ("SFAS 123R"). SFAS 123R requires that compensation cost related to
      share-based payment transactions be recognized in the financial statements.
      Share-based payment transactions within the scope of SFAS 123R include stock
      options, restricted stock plans, performance-based awards, stock appreciation
      rights, and employee share purchase plans. The provisions of SFAS 123R are
      effective as of the first interim period that begins after June 15, 2005.
      Accordingly, the Company will implement the revised standard in the third
      quarter of fiscal year 2005. Currently, the Company accounts for its share-based
      payment transactions under the provisions of APB 25, which does not necessarily
      require the recognition of compensation cost in the financial statements.
      Management is assessing the implications of this revised standard, which may
      materially impact the Company's results of operations in the third quarter
      of
      fiscal year 2005 and thereafter.





On
      December 16, 2004, FASB issued Statement of Financial Accounting Standards
      No.
      153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,
      Accounting for Nonmonetary Transactions ("SFAS 153"). This statement amends
      APB
      Opinion 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. Under SFAS 153, if
      a
      nonmonetary exchange of similar productive assets meets a commercial-substance
      criterion and fair value is determinable, the transaction must be accounted
      for
      at fair value resulting in recognition of any gain or loss. SFAS 153 is
      effective for nonmonetary transactions in fiscal periods that begin after June
      15, 2005. We do not





17





anticipate
      that the implementation of this standard will have a material impact on its
      financial position, results of operations or cash flows.





**OFF-BALANCE
      SHEET ARRANGEMENTS** .





We
      do not
      have any off-balance sheet arrangements.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK**





None





**ITEM
      4. 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**





None.





**ITEM
      1A. RISK FACTORS**





In
      addition to the other information set forth in this report, you should carefully
      consider the risks and other factors set forth and discussed in our Annual
      Report on Form 10-KSB for the year ended December 31, 2005 and our initial
      registration statement on Form SB-2, which could materially affect our business,
      financial condition or future results. Our projected risks, as outlined in
      both
      our Annual Report and registration statement on Form SB-2 have not substantially
      or materially changed and are, therefore, not restated here. These risks may
      not
      the only risks facing our Company. Additional risks and uncertainties not
      currently known to us or that we currently deem to be immaterial also may
      materially adversely affect our business, financial condition and/or operating
      results.











18





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





None.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5. OTHER INFORMATION**





None.




**ITEM
      6. EXHIBITS.**





**EXHIBIT**


**NUMBER**  **ESCRIPTION
      OF EXHIBIT**





31.1   Certification
      of Chief Executive Officer 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 Chief Financial Officer 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 Chief Executive Officer, 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 Chief Financial Officer pursuant to 18 U.S.C. Sec.1350, as adopted pursuant
      to  Sec.906
      of the Sarbanes-Oxley Act of 2002.














**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:
      November 7 ,
      2007                                                                  
B y: /s/
      Steve Bonenberger


Steve
      Bonenberger, President, Chief Executive
      Officer and Director





By: /s/
      Brent Fouch


Brent
      Fouch, Treasurer, Chief Financial
      Officer and Director







19