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 June 30, 2005



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 Employer         
|Incorporation 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 July 6, 2005, the issuer had 852,075shares of its common stock issued and outstanding.



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



1



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TABLE OF CONTENTS









PART I - FINANCIAL INFORMATION





Item 1.  Financial Statements

3

Consolidated Balance Sheet as of June 30, 2005 (unaudited)

3-4

Consolidated Statement of Operations for the three and six months ended

June 30, 2005 and 2004 (unaudited)

5

Consolidated Statement of Cash Flows for the six months ended June 30, 2005

and 2004 (unaudited)

6-7

Notes to Consolidated Financial Statements (unaudited)

8



Item 2.  Management's Discussion and Analysis or Plan of Operation

20



Item 3.  Quantitative and Qualitative Disclosures of Market Risk

24



Item 4.  Controls and Procedures

24



PART II - OTHER INFORMATION

25



Item 1.  Legal Proceedings

25



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

25



Item 3.  Defaults Upon Senior Securities

25



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

25



Item 5.  Other Information

25



Item 6.  Exhibits

26



SIGNATURES

26





2



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PART I - FINANCIAL INFORMATION



ITEM  1.  FINANCIAL  STATEMENTS.



|Palomar Enterprises, Inc.                                                
|-------------------------------------------------------------------------
|Consolidated Balance Sheet                                               
|as of June 30, 2005                                                      
|(unaudited)                                                              
|                                                                         
|                                                                         
|                                                                         
|ASSETS:                                                                  
|                                                                         
|                                                                         
|                                                                         
|Total current assets                                                     
|                                                                         
|Property, plant and equipment, net of accumulated depreciation of $33,439
|Goodwill                                                                 
|                                                                         
|TOTAL ASSETS                                                             
|                                                                         
|LIABILITIES AND STOCKHOLDERS' EQUITY                                     
|                                                                         
|LIABILITIES:                                                             
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Total current liabilities                                                
|                                                                         
|                                                                         
|                                                                         
|TOTAL LIABILITIES                                                        
|                                                                         
|MINORITY INTEREST                                                        



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





3



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|                                          
|------------------------------------------
|                                          
|                                          
|Palomar Enterprises, Inc.                 
|Consolidated Balance Sheet, continued     
|As of June 30, 2005                       
|(unaudited)                               
|                                          
|                                          
|                                          
|STOCKHOLDERS' EQUITY:                     
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|Total stockholders' equity                
|                                          
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|                                          



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





4



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|Palomar Enterprises, Inc.                                       
|----------------------------------------------------------------
|Consolidated Statements of Operations                           
|For the Three Months and Six Months Ended June 30, 2005 and 2004
|(unaudited)                                                     
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Revenue                                                         
|Cost of goods sold                                              
|                                                                
|Gross profit                                                    
|                                                                
|Operating expenses:                                             
|                                                                
|                                                                
|                                                                
|                                                                
|Total operating expenses                                        
|                                                                
|Loss from operations                                            
|                                                                
|Other income or (expense)                                       
|                                                                
|                                                                
|                                                                
|                                                                
|(Loss) before provision for taxes                               
|                                                                
|Provision for income taxes                                      
|                                                                
|Net (loss)                                                      
|                                                                
|Weighted average number of                                      
|                                                                
|                                                                
|Net (loss) per share - basic and fully diluted                  
|                                                                
|                                                                



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





5



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|Palomar Enterprises, Inc.                      
|-----------------------------------------------
|Consolidated Statements of Cash Flows          
|For the Six Months Ended June 30, 2005 and 2004
|(unaudited)                                    
|                                               
|                                               
|                                               
|                                               
|                                               
|Cash flows from operating activities           
|Net (loss) for the period                      
|Minority interest in net loss                  
|Adjustments to reconcile net (loss) to         
|                                               
|                                               
|                                               
|                                               
|Changes in operating assets and liabilities:   
|                                               
|                                               
|                                               
|                                               
|Net cash (used) by operating activities        
|                                               
|Cash flows from investing activities           
|                                               
|                                               
|Net cash (used) by investing activities        
|                                               
|Cash flows from financing activities           
|                                               
|                                               
|                                               
|                                               
|Net cash provided by financing activities      
|                                               
|Net increase in cash                           
|Cash - beginning                               
|Cash - ending                                  



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



6



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|Palomar Enterprises, Inc                        
|------------------------------------------------
|Consolidated Statements of Cash Flows, continued
|For the Six Months Ended June 30, 2005 and 2004 
|(unaudited)                                     
|                                                
|                                                
|                                                
|                                                
|Supplemental disclosures:                       
|                                                
|                                                
|                                                
|Non-cash investing and financing activities:    
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                





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





7



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005







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 2004 as reported in the 10-KSB have been omitted.



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.  The Company was initially formed for the purpose of developing an aircraft service company for private aircraft owners that would offer on-site preventative maintenance and repair services.  There were no material operating activities under this plan, and it was abandoned in 2001.



In October 2001, the Company launched a new debt acquisition business whereby it would acquire non-performing debt from financial institutions and use the services of various debtor location services to attempt collection of these purchased amounts.  There have been no revenues recorded from this line of business, and it is no longer being pursued.



In February 2003, the Company entered the nutraceutical market.  Total revenues to date recorded from this line of business are $180.  However, management determined that this business line would be extremely difficult to implement and discontinued all efforts in this field.  On July 11, 2003, the Company's management was changed and the Company's future emphasis will be to develop a business in the financial services sector.



On May 1, 2004 the Company entered into a joint venture agreement with Prize Pizza LLC (Prize).  Under the terms of the agreement, the Company issued 25,000,000 shares of common stock in exchange for a sixty percent interest in Prize.  The transaction was valued at $200,000, based on the stock's market value on the date of acquisition.  Because the Company held a controlling interest in Prize, the financial statements presented as of June 30, 2004 were consolidated.  Effective as of August 20, 2004, the Company abandoned all operations of Prize and has recorded all related activities as discontinued operations in the year ended December 31, 2004.



Prior to January 1, 2004, the Company was in the development stage.  Periods presented prior to that date represent the operations of the Company while it was in the development stage.  Operations from January 1, 2004, represent that of the Company as no longer a development stage enterprise. The Company faces many operating and industry challenges.  There is no meaningful operating history to evaluate the Company's prospects for successful operations.  Future losses for the Company are anticipated.  The proposed plan of operations would include attracting investors to fund expansion and ongoing operations.



8



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005





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



NOTE C - GOING CONCERN UNCERTAINTY



The Company has been unable to generate sufficient operating revenues and has incurred cumulative operating losses of $11,040,623.



The Company has implemented a business plan to operate as a mortgage broker and a lender for sub-prime auto loans.  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.  As mentioned above, the Company has not obtained the capital needed to achieve management's plans and support its operations, and there is no assurance that the Company will be able to raise such financing. These factors raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments that might result from this uncertainty.





9



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005





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 sixty percent interest in Prize Pizza, LLC ("Prize") prior to the abandonment of the investment. All significant inter-company accounts and transactions have been eliminated. The Company abandoned its interest in Prize during the three months ended December 31, 2004. On May 1, 2004, the Company issued 25,000,000 (250 post splits) shares of its common stock to acquire a 60% interest in Prize. The transaction was valued at the trading price of the common stock of $0.008 per share (pre-split) plus the net liabilities assumed. Prize was newly formed to develop and operate a Pizza restaurant in Tempe, Arizona. The 60% interest was determined on the basis of profit and loss allocations as specified in the operating agreement.



The investment was accounted for using the purchase method of accounting. The purchase price of Prize was allocated as follows:



| | Leasehold improvements                            |  | $  159,216
| | ------------------------------------------------- |  | ----------
| | Equipment                                         |  | 94,728    
| | Current assets                                    |  | 13,858    
| | Excess of purchase price over net assets acquired |  | 239,198   
| | Bank debt                                         |  | (80,000)  
| | Affiliate debt                                    |  | (227,000) 
| | Total                                             |  | $  200,000



The above allocation excludes the minority interest of approximately, $133.000.





The Company had intended to perform a valuation of identifiable intangible assets to allocate the excess of the purchase price over the net assets acquired.  However, after numerous operational difficulties could not be resolved, the Company determined that it would abandon its investment in Prize effective on August 20, 2004.





The Blackhawk Fund (Blackhawk) is a subsidiary of Palomar Enterprises. Palomar is the majority owner of Blackhawk, which is publicly traded on the OTC B.B. (BHWK). Palomar owns approximately 56% of Blackhawk on a fully-diluted basis. The financials of Palomar are inclusive of all activity of Blackhawk, as well as Palomar Enterprises, on a consolidated basis. This includes all revenue, expenses, losses and operations.



The Company has a $50,000 Floating note line of credit from Blackhawk.  The advances bear interest of 8% per annum and are payable in semi-annual installments over the next three years and are unsecured.  As of June 30, 2005, the amount advanced from Blackhawk was $46,000.  This transaction has been eliminated upon consolidation.



10



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005







NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



3.

Goodwill



The Financial Accounting Standard Board (:FASB) recently issued Statements of Financial Accounting Standards Nos. 141 Business Combinations, 142 Goodwill and Other Intangible Assets and 144 Accounting for the Impairment or Disposal of Long-Lived Assets.  (:SFAS 141, SFAS 142 and SFAS 144). All of these pronouncements are effective for fiscal years beginning after December 31, 2001. Under SFAS 141, a company must use the purchase method of accounting for all business acquisitions. SFAS 142 requires a company to periodically evaluate for impairment (as opposed to amortize) goodwill and intangible assets.



Goodwill resulting from the acquisition of The Blackhawk Fund (:Blackhawk) accounted for as a purchase. The Company follows SFAS No. 142 and as such, will test the goodwill balance for impairment at least on an annual basis. Such analysis will be based upon the expected future cash flows of Blackhawk. There was $-0- and $-0- as impairment of goodwill as of June 30, 2005 and 2004.



4.

Research and development expenses





Research and development expenses are charged to operations as incurred.  There were no research and development costs incurred in the six month periods ending June 30, 2005 and 2004.



5.

Advertising expenses





Advertising and marketing expenses are charged to operations as incurred. Advertising expenses for the six month periods ending June 30, 2005 and 2004 was $29,267 and $2,344, respectively.



6.

Revenue recognition





The Company generates revenue from the sale of real estate, brokerage commissions and rental properties. Revenues from real estate sales and commissions are recognized on execution of the sales contract. Rental income is recognized in the period earned. 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 realizes revenue from its subsidiary, The Blackhawk Fund, from existing consulting services.



7.

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 June 30, 2005, the deferred tax asset is related solely to the Company's net operating loss carry forward and is fully reserved.



11



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005





NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



8.

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 June 30, 2005, the Company's outstanding warrants are considered anti-dilutive.



On July 5, 2005, the Company declared a 1,000 to one reverse stock split of its common stock. All stock numbers presented in the financial statements have been retroactively restated to reflect this reverse split.





In May and June 2002, in connection with the sale of Units pursuant to a Private Placement Memorandum, dated May 15, 2002, the Company issued stock warrants (5/15/02 Warrants) to the purchasers of six shares of common stock to purchase up to an additional six shares of restricted, unregistered common stock at a price of $100,000.00 per share.





In August and September 2002, in connection with the sale of Units pursuant to a Private Placement Memorandum, dated August 1, 2002, the Company issued stock warrants (8/1/02 Warrants) to the purchasers of five shares of common stock to purchase up to an additional five shares of restricted, unregistered common stock at a price of $100,000.00 per share.





| |                         |  | Warrants
outstanding at
June 30, 2004 |  | Exercise price
| | ----------------------- |  | ------------------------------------- |  | --------------
| | 5/15/02 Warrants        |  | 6                                     |  | 6             
| | 8/1/02 Warrants         |  | 5                                     |  | 5             
| | Totals at June 30, 2004 |  | 11                                    |  | 11            





The warrants have no stated expiration date.



9.

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.





12



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005





NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



10.

Stock Based Compensation





During the period ending June 30, 2005, the Company issued stock options from time-to-time to executives, key employees and members of the Board of Directors. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," and continues to account for stock based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". All stock options granted in the period ending June 30, 2005 have exercise prices at 85% of the market price of the Company's common stock at the dates of the grants. Accordingly, no compensation cost has been recognized for the stock options granted to employees.



RECENT ACCOUNTING PRONOUNCEMENTS



The Company adopted SFAS No. 142. Under the new rules, the Company will no longer amortize goodwill and other intangible assets with indefinite lives, but such assets will be subject to periodic testing for impairment. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs to be included in results from operations may be necessary. SFAS No. 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption.



Any goodwill impairment loss recognized as a result of the transitional goodwill impairment test will be recorded as a cumulative effect of a change in accounting principle no later than the end of fiscal year 2002. The adoption of SFAS No. 142 had no material impact on the Company's consolidated financial statements SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS No. 143 will not have a material impact on its consolidated results of operations and financial position upon adoption. The Company plans to adopt SFAS No. 143 effective January 1, 2003.



SFAS No. 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144 superseded Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". The Company adopted SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no material impact on Company's consolidated financial statements.



In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale- leaseback transactions. We do not expect the adoption to have a material impact to our financial position or results of operations.



13



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005





NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



RECENT ACCOUNTING PRONOUNCEMENTS, continued



In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. We do not expect the adoption to have a material impact to our financial position or results of operations.



In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9," which removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition, this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. The requirements relating to acquisitions of financial institutions are effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. The adoption of this statement did not have a material impact to our financial position or results of operations as we have not engaged in either of these activities.



In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure," which amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of Statement 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of this statement did not have a material impact on our financial position or results of operations as we have not elected to change to the fair value based method of accounting for stock-based employee compensation.



In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." Interpretation 46 changes the criteria by which one company includes another entity in its consolidated financial statements. Previously, the criteria were based on control through voting interest. Interpretation 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. The consolidation requirements of Interpretation 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. We do not expect the adoption to have a material impact to our financial position or results of operations.



14



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005







NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



RECENT ACCOUNTING PRONOUNCEMENTS, continued



In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends SFAS No. 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires that contracts with similar characteristics be accounted for on a comparable basis. The provisions of SFAS 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS 149 did not have a material impact on our results of operations or financial position.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of SFAS 150 did not have a material impact on our results of operations or financial position.



NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS



The carrying amount of cash, prepaid expenses, 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



The Company pays consulting fees to entities owned by two senior officers and directors of the Company for management services rendered to Palomar and to The Blackhawk Fund.  During the three and six month periods ended June 30, 2005 and 2004, the Company paid the following:



|                               |  | Three months ended 
June 30, |  | Six months ended
June 30,
|------------------------------ |  | ---------------------------- |  | -------------------------
|                               |  | 2005                         |  | 2004                     
|Fees for Services to Palomar   |  | $           -                |  | $ 217,000                
|Fees for Services to Blackhawk |  | 19,700                       |  | -                        
|Total Fees                     |  | $ 19,700                     |  | $ 217,000                





15



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005







NOTE G - CAPITAL STOCK TRANSACTIONS



PREFERRED STOCK



We are currently authorized to issue 100,000,000 shares of preferred stock with a par value of $0.00001. We have designated three series of preferred stock, Series, "A", "B" and "C".



Series A preferred stock is comprised of 10,000,000 shares.  Each share of the Series A preferred stock is convertible into 1,000 shares of our common stock.  On all matters submitted to a vote of the holders of the common stock, including, without limitation, the election of directors, a holder of shares of the Series A preferred stock is entitled to the number of votes on such matters equal to the number of shares of the Series A preferred stock held by such holder multiplied by 1,000.



On October 25, 2004, 9,000,000 shares of Series "A" preferred stock were issued to two officers of the Company. As a result of the granting of their voting preferred shares, the two officers effectively have approximately ninety nine percent voting control of the Company.



Series B preferred stock is comprised of 50,000,000 shares.  Each share of the Series B preferred stock is convertible into 100 shares of our common stock. On all matters submitted to a vote of the holders of the common stock, including, without limitation, the election of directors, a holder of shares of the Series B preferred stock is entitled to the number of votes on such matters equal to the number of shares of the Series B preferred stock held by such holder multiplied by 100.



Series C preferred stock is comprised of 30,000,000 shares.   Each share of our Series C preferred stock is convertible into 1,000 shares of our common stock. The shares of our Series C preferred stock do not have voting rights.



The remaining authorized 10,000,000 shares of preferred stock are undesignated.



COMMON STOCK



We are currently authorized to issue 25,000,000,000 shares of common stock with a par value of $0.00001. We have designated one class of common stock, Class "B".



Class B common stock is comprised of 1,000,000,000 shares.   Class B common stock will have a different CUSIP number from the common stock.  The Class B common stock will not be adjusted upon subdivision of combination of common stock.



The remaining authorized 24,000,000,000 shares of common stock are undesignated.



On July 5, 2005, the Company declared a 1,000 to one reverse stock split of its common stock. All stock numbers presented in the financial statements have been retroactively restated to reflect this reverse split.



During the six months ended June 30, 2005, employees exercised options to acquire 792,100,000 shares of common stock on a cashless basis through an outside broker.  The broker sold the shares on the open market and Palomar received proceeds totaling $182,013.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 792,100.



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005







NOTE G - CAPITAL STOCK TRANSACTIONS, continued



COMMON STOCK, continued



The Company issued 67,500,000 shares of common stock for services during the same period and recorded compensation expense of $510,214 under the intrinsic value method during the six months ended June 30, 2005.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 67,500.



During the six months ended June 30, 2005, the Company issued 52,000,000 shares of common stock which were issued as collateral pursuant to a Promissory Note with Pini Ben David.  As of June 30, 2005, the Company has not received the promised funds and therefore intends to have these shares cancelled.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 52,000.



During the six months ended June 30, 2005, the Company issued 10,000,000 shares of common stock which were issued pursuant to a subscription agreement.  As of June 30, 2005, the Company has not received the promised funds and looks to receive funds vs. this issuance.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 10,000.



The Company issued 17,500,000 shares of common stock for services during the six months ended June 30, 2005 and recorded compensation expense of $74,000.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 17,500.



During the six months ended June 30, 2005, the Company issued 10,000,000 shares of common stock which were issued in exchange for cash of $35,500.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 10,000.



During the six months ended June 30, 2005, the Company issued 21,000,000 shares of common stock which were issued pursuant to a subscription agreement.  As of June 30, 2005, the Company has not received the promised funds and looks to receive funds vs. this issuance.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 21,000.



During the six months ended June 30, 2005, the Company cancelled 22,000,000 shares of common stock which were issued pursuant to a subscription agreement.  The Company did not received the promised funds and therefore had these shares cancelled.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 22,000.



During the six months ended June 30, 2005, the Company cancelled 1,850,000 shares of common stock which were issued pursuant to a consulting agreement.  The consultant did not perform as agreed and therefore the Company had these shares cancelled.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 1,850.





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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005







NOTE H - PROPERTY



Property and equipment consisted of the following at June 30, 2005:



|Building                       |  | $   1,395,612
|------------------------------ |  | -------------
|Office equipment               |  | 17,631       
|Total                          |  | 1,413,243    
|Less: Accumulated depreciation |  | (33,439)     
|Property & equipment, net      |  | $   1,379,804



Assets are being depreciated from five to forty years using the straight line method.  Depreciation expense was $15,300 and $10,684 for the six months ended June 30, 2005 and 2004, respectively.



NOTE I - NOTES PAYABLE AND BANK LINE OF CREDIT



Notes payable and bank line of credit at June 30, 2005 are comprised of the following:



Note payable to lending institution, original balance of $980,000,

interest at 7.5% per annum.  Requires monthly principal and

interest payments of 6,852 through 2034.  Collateralized by building.

$839,907



Convertible debentures payable to investor group, original balance

of $325,000, interest at 8% per annum, interest payable quarterly.

Principal and accrued interest are convertible at any time at the rate

of 80% of the average three lowest closing bid prices of the twenty

trading days immediately preceding the conversion, limited to a

maximum of 4.99% of the total outstanding common stock on the

date of conversion.  Principal due July and August 2005.

325,000



NOTE J - DISCONTINUED OPERATIONS



As stated in Note A to the financial statements, the Company abandoned its pizza restaurant operations during the year ended December 31, 2004. The total loss incurred from these operations was $43,777 on revenues of $10,594 and the expenses of $54,371 during the six months ended June 30, 2004.



NOTE K  JOINT VENTURE



On June 16, 2005, the Company consummated the purchase of a property on a Joint Venture Agreement.  The purpose of this Joint Venture shall be the purchase, ownership and operation of a property bearing an address of 94 London Bridge Road, Suite 503, Lake Havasu City, Arizona 86403, and being the real property in the State of Arizona. The purchase price of the Joint Venture property is the sum of $479,000,constituting 10 percent of the totalpurchase price of the Joint Venture property.  The initial capital of this Joint Venture has been contributed to the Joint Venture by Palomar, corresponding to Palomars ownership interest.  The loan for the remaining 90 percent of the purchase price was guaranteed personally by Brent Fouch. At the time of closing, the Company did not have sufficient funds for the down payment, so Brent Fouch advanced the amount of $44,451.80. These funds are to be paid back with zero interest as soon as the Company has sufficient investment capital. Upon sale, proceeds shall be distributed first to the balance due on the purchase money loans less the closing costs. The remaining proceeds will be divided in proportion to the Joint Venture: Brent Fouch will receive 90% and Palomar will receive 10% of the proceeds.





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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED June 30, 2005





NOTE L - SUBSEQUENT EVENTS



On July 5, 2005, the Company declared a 1,000 to one reverse stock split of its common stock. All stock numbers presented in the financial statements have been retroactively restated to reflect this reverse split.



Floating Note with The Blackhawk Fund has been paid in full.  Future advances up to the $50,000 limit are available, if required.





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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, 2004.



MANAGEMENT'S PLAN OF OPERATIONS.



CURRENT BUSINESS PLAN



On July 11, 2003, the Company changed its business model to become a real estate services and development company. The Company has two operating divisions:



Financial Services:  which focuses upon:

a.  real estate and client services

b.  mortgage and home loan originations

c.  property acquisition and development.



Corporate Finance, with a focus upon:

a.  developing and/or acquiring cash flow positive businesses

b.  acquiring the real property and assets that are material to those businesses.



RESULTS OF OPERATIONS:



Three months ended June 30, 2005 compared to the three months ended June 30, 2004:



Total net sales and revenue were at  $ 198,819 for the three months ending June 30, 2005 compared to $ 509,046 for the prior period.   This represents a  decrease of 61 percent.  The prior period included the proceeds from a disposition of a company asset.  The period ending June 30, 2005 is the second largest in the history of the company and the largest ever in earned commissions.





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Our gross profit for the three months ended June 30, 2005 compared to 2004 decreased to $37,623 from  $95,016.



Gross margin percentage of sales increased slightly to 18.9 percent in 2005 compared to 18.6. percent in 2005.



Total operating expenses for the three months ended June 30, 2005 were $306,178 compared to $1,237,374 for the same period in 2004.



Net loss for the period ending June 30, 2005 was $(143,782) compared to a net loss for the prior period in 2004 which were $(1,127,984). This represents a reduction of net loss of $($984,202) for the period ending June 30, 2005 that represents a  decrease of  approximately 87 percent.



Interest expense, net for the three months ending June 30, 2005 was $22,278. The interest expense for the prior period in 2004 was $14,811.  This represents an increase of $7,467 which is an increase of approximately 50 percent for 2005.





Six months ended June 30, 2005 compared to the six months ended June 30, 2004.



Total net sales and revenues were at $285,384 for the six months ended June 30, 2005 compared to $544,624 for the prior period, a decrease of $259,240 percent.  The prior period included the proceeds from a disposition of a company asset.



Our gross profit for the six months ended June 30, 2005 compared to 2004 decreased to $63,799 from $130,594. Gross margin as a percentage of sales decreased to 22.4 percent in 2005 compared to 24% in 2004.



Total operating expenses for the six months ended June 30, 2005 were $1,211,534 compared to 2004, which were $2,206,454.



Net loss was ($901,757) for six-month period ending June 30, 2005, compared to an operating loss of ($2,061,486) for the same period in 2004.



Interest expense, net for the six months ended June 30, 2005 was $51,203.



LIQUIDITY AND CAPTIAL RESOURCES:



As of June 30, 2005 we had a deficiency in working capital of $417,956.



Cash used by investing activities totaled $10,621, used for property, plant and equipment for the six months ending June 30, 2005.



During the first half of 2003, we had no operations and limited current assets with which to finance our ongoing operations.  In July of 2003 we changed our business model to become a real estate services and development company.  We currently have the following operating divisions:



Financial Services Division.  This division focuses upon mortgage and home loan origination, real estate sales and client services and property acquisition and development.  This division is operating as The Palomar Group:   www.thepalomargroup.com.  This division had the second largest operating quarter in the history of the company, posting revenue for the quarter ending June 30, 2005 of: $181,538. This same division posted revenue for same quarter ending June 30, 2004 of:  $489,889, which included the disposition of a company asset.  This represents a decrease of 63 percent for the period ending June 30, 2005.



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The property acquisition & development group realized revenue for the quarter ending June 30, 2005 of: $8,749.



The Company continues to expand, on a funds available basis, its marketing and advertising programs.  The Company has also continued to add independent agents to its work force.



Corporate Finance Division, which focuses upon developing and/or acquiring cash flow positive businesses and acquiring (when possible) the real property and assets that are material to such businesses:  offering various types of consulting services and financial instruments, including, but not limited to notes, deeds of trusts, floating notes and any other financing mechanisms.



This group operates as a subsidiary as The BlackHawk Fund., and this group had the largest quarter in its operating history.  The BlackHawk Fund posted revenue for the period ending June 30, 2005 of: $8,533. There are no revenues from the prior period ending June 30, 2004 to make comparison.



The BlackHawk Fund estabished a 'floating note' with Palomar for a maximum of $ 50,000.00.  At the end of the quarter, June 30, 2005 this note had a balance of $  41,137.  The note pays a simple interest (only) of 8% and the interest (only) payments are expected on a quarterly basis.



Total Revenues for the quarter ending June 30, 2005 are:



a.

$181,537 combined real estate groups

b.

$8,749 rental income (Pio Pico tenant)

c.

$8,533  BlackHawk Fund

d.

$198,819total.



Plan of Operations for the remaining portion of 2005:



1.

continue to increase the revenue and market share of our core real estate groups

2.

continue to improve the Pio Pico facility and to increase the efficiency of our sales staff

3.

continue to seek to acquire assets and revenue generating properties and to secure the revenue and long-term appreciation from these assets

4.

maximize the potential of The BlackHawk Fund, Inc.

5.

continue to pursue the implementation of our Regulation 'S' offering via the established European network



Significant Events for the quarter ending June 30, 2005:



1.

recorded the second largest revenue quarter in the operating history of the Company

2.

recorded the largest commissions earned revenue quarter in the Company's history

3.

received the first portion of financing from the Regulation 'S'  offering

4.

suspended our ESIP program with the intent to reduce the dilution of the US market and continue to seek to build shareholder value

5.

designated a separate class of common 'B' shares (Regulation 'S') that trade under a separate CUSIP number.  The total number of shares so designated are 1,000,000,000 of which 0- have been issued.

6.

received a separate CUSIP number for the Preferred 'B' shares and will look to list this class of shares on the Berlin Exchange.



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Subsequent Events:



The Company initiated a reverse split of its common shares of 1,000 to 1 that was effective on July 05, 2005.



In July 2005 the Company paid in full all advances under the floating note from Blackhawk.





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.



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



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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 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



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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  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



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ITEM  6.  EXHIBITS.



EXHIBIT

NO.                                             DESCRIPTION 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 August 24, 2005.

By /s/ Steve Bonenberger

Steve Bonenberger, President, Chief

Executive Officer and Director



By:  /s/ Brent Fouch

Brent Fouch, Treasurer, Chief

Financial Officer and Director





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