##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-QSB



---

|           |                                                                                  
|---------- | ---------------------------------------------------------------------------------
|(Mark one) |                                                                                  
|[XX]       | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

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

For the transition period from ______________ to _____________



---

Commission File Number: 0-32829

Palomar Enterprises, Inc.(Exact name of small business issuer as specified in its charter)

|                         |  |                         
|------------------------ |  | ------------------------
|Nevada                   |  | 88-0470235              
|                         |  |                         
|(State of incorporation) |  | (IRS Employer ID Number)

1046 Angelus, San Diego, CA 92114

---

(Address of principal executive offices)


(619) 692-2590

---

(Issuers telephone number)


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

State the number of shares outstanding of each of the issuers classes of
common equity as of the latest practicable date: October 15, 2001: 9,440,000

Transitional Small Business Disclosure Format (check one): YES [    ] NO [X]





---

TABLE OF CONTENTS



|                                                                                                      |                                                              |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  |  |  |  |  |  | 
|                                                                                                      | Item 1  Part 1  Financial Statements                      
|Part I  Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
|Part II  Other Information                                                                          
|                                                                                                      | Item 1  Legal Proceedings                                  
|                                                                                                      | Item 2  Changes in Securities                              
|                                                                                                      | Item 3  Defaults on Senior Securities                      
|                                                                                                      | Item 4  Submission of Matters to a Vote of Security Holders
|                                                                                                      | Item 5  Other Information                                  
|                                                                                                      | Item 6  Exhibits and Reports on Form 8-K                   
|SIGNATURES                                                                                           



---



##### Table of Contents



Palomar Enterprises, Inc.

Form 10-QSB for the Quarter ended September 30, 2001

Table of Contents

|                               |                                                                    |  |      |    | 
|------------------------------ | ------------------------------------------------------------------ |  | ---- | -- | 
|                               |                                                                    |  | Page
|                               |                                                                    |  |     
|Part I  Financial Information |                                                                    |  |      |   
|                               | Item 1   Financial Statements                                      |  |      | 3  | 
|                               | Item 2   Managements Discussion and Analysis or Plan of Operation |  |      | 10 | 
|Part II  Other Information    |                                                                    |  |      |   
|                               | Item 1 - Legal Proceedings                                         |  |      | 11 | 
|                               | Item 2 - Changes in Securities                                     |  |      | 11 | 
|                               | Item 3 - Defaults on Senior Securities                             |  |      | 11 | 
|                               | Item 4 - Submission of Matters to a Vote of Security Holders       |  |      | 11 | 
|                               | Item 5 - Other Information                                         |  |      | 11 | 
|                               | Item 6 - Exhibits and Reports on Form 8-K                          |  |      | 11 | 
|Signatures                     |                                                                    |  | 11   |   

2



---



##### Table of Contents






Item 1  Part 1  Financial Statements

Palomar Enterprises, Inc.
(a development stage company)Balance Sheets
September 30, 2001 and 2000

(Unaudited)

|                                           |                                                                                                                      |                            |     |         |     |               |       |               |       |  |  | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------- | -------------------------- | --- | ------- | --- | ------------- | ----- | ------------- | ----- |  |  | 
|                                           |                                                                                                                      |                            |     |         |     | September 30, |       | September 30,
|                                           |                                                                                                                      |                            |     |         |     | 2001          |       | 2000         
|                                           |                                                                                                                      |                            |     |         |     |               |       |              
|ASSETS                                    
|Current Assets                             |                                                                                                                      |                            |     |         |     |               |       |              
|                                           | Cash on hand and in bank                                                                                             |                            | $   | 176     |     |               | $     | 5,884         |      
|                                           |                                                                                                                      |                            |     |         |     |               |       |              
|Total Assets                               |                                                                                                                      | $                          | 176 |         |     | $             | 5,884 |              
|                                           |                                                                                                                      |                            |     |         |     |               |       |              
|LIABILITIES AND SHAREHOLDERS EQUITY      
|Current Liabilities                        |                                                                                                                      |                            |     |         |     |               |       |              
|                                           | Accounts payable  trade                                                                                             |                            | $   |        |     |               | $     | 100           |      
|                                           |                                                                                                                      |                            |     |         |     |               |       |              
|Commitments and Contingencies              |                                                                                                                      |                            |     |         |     |               |       |              
|Shareholders Equity                       |                                                                                                                      |                            |     |         |     |               |       |              
|                                           | Common stock  $0.001 par value,
50,000,000 shares authorized,
9,440,000 shares issued and outstanding, respectively |                            |     | 9,440   |     |               |       | 9,440         |      
|                                           | Additional paid-in capital                                                                                           |                            |     | 2,360   |     |               |       | 2,360         |      
|                                           | Deficit accumulated during the development stage                                                                     |                            |     | (11,624 | )   |               |       | (6,056        | )    
|                                           |                                                                                                                      |                            |     |         |     |               |       |              
|                                           |                                                                                                                      | Total shareholders equity |     |         | 176 |               |       |               | 5,744 | 
|                                           |                                                                                                                      |                            |     |         |     |               |       |              
|Total Liabilities and Shareholders Equity |                                                                                                                      | $                          | 176 |         |     | $             | 5,844 |              
|                                           |                                                                                                                      |                            |     |         |     |               |       |              

The financial information presented herein has been prepared by management
without audit by independent certified public accountants.

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

3



---



##### Table of Contents



Palomar Enterprises, Inc.
(a development stage company)Statements of Operations and Comprehensive Income
Nine and Three months ended September 30, 2001
Period from March 11, 1999 (date of inception) through September 30, 2001

(Unaudited)

|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |        | 
|----------------------------------------------------------------------------------------------------------- | ----------------------------------- | --- | ------------- | ----- | ------------- | --- | ------------- | ----- | ------------- | --- | ------------------- | ----- |  | - | --------- | -- |  | - | -------------- | ------ | 
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   | Period from   
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   | March 11, 1999
|                                                                                                            |                                     |     | Nine months   |       | Nine months   |     | Three months  |       | Three months  |     | (date of inception)
|                                                                                                            |                                     |     | ended         |       | ended         |     | ended         |       | ended         |     | through            
|                                                                                                            |                                     |     | September 30, |       | September 30, |     | September 30, |       | September 30, |     | September 30,      
|                                                                                                            |                                     |     | 2001          |       | 2000          |     | 2001          |       | 2001          |     | 2001               
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                    
|Revenues                                                                                                    |                                     | $   |              |       |               | $   |              |       |               | $   |                    |       |  | $ |          |    |  | $ |               |       
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|Operating expenses                                                                                          |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|                                                                                                            | General and
administrative
expenses |     |               | 5,318 |               |     |               | 6,056 |               |     |                     | 2,742 |  |   |           | 56 |  |   |                | 11,624 | 
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|Loss before
Income Taxes                                                                                    |                                     |     | (5,318        | )     |               |     | (6,056        | )     |               |     | (2,742              | )     |  |   | (56       | )  |  |   | (11,624        | )     
|Provision for
Income Taxes (benefit)                                                                        |                                     |     |              |       |               |     |              |       |               |     |                    |       |  |   |          |    |  |   |               |       
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|Net Loss                                                                                                    |                                     |     | (5,318        | )     |               |     | (6,056        | )     |               |     | (2,742              | )     |  |   | (56       | )  |  |   | (11,624        | )     
|Other comprehensive
income                                                                                  |                                     |     |              |       |               |     |              |       |               |     |                    |       |  |   |          |    |  |   |               |       
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|Comprehensive Income                                                                                        |                                     | $   | (5,318        | )     |               | $   | (6,056        | )     |               | $   | (2,742              | )     |  | $ | (56       | )  |  | $ | (11,624        | )     
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|Loss per weighted-average
share of common stock
outstanding, computed
on Net Loss  basic and
fully diluted |                                     | nil |               | nil   |               | nil |               | nil   |               | nil
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       
|Weighted-average number
of shares of common
stock outstanding                                               |                                     |     | 9,440,000     |       |               |     | 3,292,847     |       |               |     | 9,440,000           |       |  |   | 4,850,435 |    |  |   | 4,655,095      |       
|                                                                                                            |                                     |     |               |       |               |     |               |       |               |     |                     |       |  |   |           |    |  |   |                |       

The financial information presented herein has been prepared by management
without audit by independent certified public accountants.

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

4



---



##### Table of Contents



Palomar Enterprises, Inc.
(a development stage company)Statements of Cash Flows
Nine months ended September 30, 2001
Period from March 11, 1999 (date of inception) through September 30, 2001

(Unaudited)

|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                  |       | 
|------------------------------------------------ | -------------------------------------------------------------------------------- | ------------------------------------ | ------ | ------------- | - | ------------- | ----- | ------------------- | ----- | - | ------ | ---------------- | ----- | 
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        | Period from     
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        | December 5, 1996
|                                                 |                                                                                  |                                      |        | Nine months   |   | Nine months   |       | (date of inception)
|                                                 |                                                                                  |                                      |        | ended         |   | ended         |       | through            
|                                                 |                                                                                  |                                      |        | September 30, |   | September 30, |       | September 30,      
|                                                 |                                                                                  |                                      |        | 2001          |   | 2000          |       | 2001               
|                                                 |                                                                                  |                                      |        |               |   |               |       |                    
|Cash Flows from Operating Activities             |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|                                                 | Net Loss                                                                         |                                      | $      | (5,318        | ) |               | $     | (6,056              | )     |   | $      | (11,624          | )    
|                                                 | Adjustments to reconcile net income to net cash
provided by operating activities |                                      |        |               |   |               |       |                     |       |   |        |                  |      
|                                                 |                                                                                  | Common stock issued for services     |        |               |  |               |       |                     | 6,000 |   |        |                  | 6,000 | 
|                                                 |                                                                                  | Increase in Accounts payable  trade |        |               |  |               |       |                     | 100   |   |        |                  |      | 
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|Net cash used in operating activities            |                                                                                  |                                      | (5,318 | )             |   |               | 44    |                     |       |   | (5,624 | )               
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|Cash Flows from Investing Activities             |                                                                                  |                                      |       |               |   |               |      |                     |       |   |       |                 
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|Cash Flows from Financing Activities             |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|                                                 | Proceeds from sale of common stock                                               |                                      |        |              |   |               |       | 5,800               |       |   |        | 5,800            |      
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|Net cash provided by financing activities        |                                                                                  |                                      |       |               |   |               | 5,800 |                     |       |   | 5,800  |                 
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|Increase (Decrease) in Cash and Cash Equivalents |                                                                                  |                                      | (5,318 | )             |   |               | 5,844 |                     |       |   | 176    |                 
|Cash and cash equivalents at beginning of period |                                                                                  |                                      | 5,494  |               |   |               |      |                     |       |   |       |                 
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 
|Cash and cash equivalents at end of period       |                                                                                  | $                                    | 176    |               |   | $             | 5,844 |                     |       | $ | 176    |                 
|                                                 |                                                                                  |                                      |        |               |   |               |       |                     |       |   |        |                 

The financial information presented herein has been prepared by management
without audit by independent certified public accountants.

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

5



---



##### Table of Contents



Palomar Enterprises, Inc.
(a development stage company)

Notes to Financial Statements

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 formed for
the purpose of developing an aircraft service company for private aircraft
owners that would offer on-site preventative maintenance and repair services.

The Company has had no substantial operations or substantial assets since
inception. Due to the lack of sustaining operations from inception, the
Company is considered in the development stage and, as such, has generated no
significant operating revenues and has incurred cumulative operating losses of
approximately $11,625.

The Company follows the accrual basis of accounting in accordance with
generally accepted accounting principles and has a year-end of December 31.

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

Note B  Going Concern Uncertainty

The Company is fully dependent either future sales of securities or upon its
current management and/or advances or loans from significant stockholders or
corporate officers to provide sufficient working capital to preserve the
integrity of the corporate entity during the development phase.

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 significant stockholders 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 or significant stockholders to provide additional future funding.

Note C  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. |  | Organization costs                                                                                                                                                                                                                                                                    
|  
|   |  | The Company has adopted the provisions of AICPA Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities whereby all organizational
and initial costs incurred with the inception and initial capitalization of
the Company were charged to operations as incurred.

6



---



##### Table of Contents



Palomar Enterprises, Inc.
(a development stage company)

Notes to Financial Statements  Continued

Note C  Summary of Significant Accounting Policies  continued

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. |  | Research and development expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Research and development expenses are charged to operations as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|4. |  | Advertising expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | Advertising and marketing expenses are charged to operations as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|5. |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The Company uses the asset and liability method of accounting for income
taxes. At September 30, 2001 and 2000, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.                                                                                                                                                                                           
|  
|6. |  | Earnings (loss) per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Basic earnings (loss) per share is 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, 2001 and 2000,
respectively, the Company had no warrants and/or options outstanding.

Note D  Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.

(Remainder of this page left blank intentionally)

7



---



##### Table of Contents



Palomar Enterprises, Inc.
(a development stage company)

Notes to Financial Statements  Continued

Note E  Income Taxes

The components of income tax (benefit) expense for the nine months ended
September 30, 2001 and 2000 and for the period from March 10, 1999 (date of
inception) through September 30, 2001, respectively, are as follows:

|         |          |   |               |   |               |   |                     |   |  |   |                |   | 
|-------- | -------- | - | ------------- | - | ------------- | - | ------------------- | - |  | - | -------------- | - | 
|         |          |   |               |   |               |   |                     |   |  |   | Period from   
|         |          |   |               |   |               |   |                     |   |  |   | March 10, 1999
|         |          |   | Nine months   |   | Nine months   |   | (date of inception)
|         |          |   | ended         |   | ended         |   | through            
|         |          |   | September 30, |   | September 30, |   | September 30,      
|         |          |   | 2001          |   | 2000          |   | 2001               
|         |          |   |               |   |               |   |                    
|Federal: |          |   |               |   |               |   |                     |   |  |   |                |  
|         | Current  |   | $             |  |               |   | $                   |  |  |   | $              |  | 
|         | Deferred |   |               |  |               |   |                     |  |  |   |                |  | 
|         |          |   |               |   |               |   |                     |   |  |   |                |  
|         |          |   |              |   |               |   |                    |   |  |   |               |  
|         |          |   |               |   |               |   |                     |   |  |   |                |  
|State:   |          |   |               |   |               |   |                     |   |  |   |                |  
|         | Current  |   |               |  |               |   |                     |  |  |   |                |  | 
|         | Deferred |   |               |  |               |   |                     |  |  |   |                |  | 
|         |          |   |               |   |               |   |                     |   |  |   |                |  
|Total    |          | $ |              |   |               | $ |                    |   |  | $ |               |  
|         |          |   |               |   |               |   |                     |   |  |   |                |  

As of September 30, 2001, the Company has a net operating loss carryforward of
approximately $7,325 to offset future taxable income. Subject to current
regulations, this carryforward will begin to expire in 2019. The amount and
availability of the net operating loss carryforwards may be subject to
limitations set forth by the Internal Revenue Code. Factors such as the number
of shares ultimately issued within a three year look-back period; whether there
is a deemed more than 50 percent change in control; the applicable long-term
tax exempt bond rate; continuity of historical business; and subsequent income
of the Company all enter into the annual computation of allowable annual
utilization of the carryforwards.

The Companys income tax expense for the nine months ended September 30, 2001
and 2000 and the period from March 10, 1999 (date of inception) through
September 30, 2001, respectively, are as follows:

|                                                    |                                                              |                    |        |               |   |               |        |                     |   |   |        |                |   | 
|--------------------------------------------------- | ------------------------------------------------------------ | ------------------ | ------ | ------------- | - | ------------- | ------ | ------------------- | - | - | ------ | -------------- | - | 
|                                                    |                                                              |                    |        |               |   |               |        |                     |   |   |        | Period from   
|                                                    |                                                              |                    |        |               |   |               |        |                     |   |   |        | March 10, 1999
|                                                    |                                                              |                    |        | Nine months   |   | Nine months   |        | (date of inception)
|                                                    |                                                              |                    |        | ended         |   | ended         |        | through            
|                                                    |                                                              |                    |        | September 30, |   | September 30, |        | September 30,      
|                                                    |                                                              |                    |        | 2001          |   | 2000          |        | 2001               
|                                                    |                                                              |                    |        |               |   |               |        |                    
|Statutory rate applied to loss before income taxes  |                                                              | $                  | (1,808 | )             |   | $             | (2,059 | )                   |   | $ | (3,952 | )             
|Increase (decrease) in income taxes resulting from: |                                                              |                    |        |               |   |               |        |                     |   |   |        |               
|                                                    | State income taxes                                           |                    |        |              |   |               |        |                    |   |   |        |               |  
|                                                    | Deferral of organization expenses
for tax reporting purposes |                    |        | (306          | ) |               |        | 1,836               |   |   |        | 1,462          |  
|                                                    | Other, including reserve for deferred tax asset              |                    |        | 2,114         |   |               |        | 223                 |   |   |        | 2,490          |  
|                                                    |                                                              |                    |        |               |   |               |        |                     |   |   |        |               
|                                                    |                                                              | Income tax expense |        | $             |  |               |        | $                   |  |   |        | $              |  | 
|                                                    |                                                              |                    |        |               |   |               |        |                     |   |   |        |               

8



---



##### Table of Contents



Palomar Enterprises, Inc.
(a development stage company)

Notes to Financial Statements  Continued

Note E  Income Taxes  continued

Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs and statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and
tax bases of assets and liabilities give rise to deferred tax assets and
liabilities as of September 30, 2001 and 2000, respectively:

|                       |                                  |   |               |        |               |   |   |      |  
|---------------------- | -------------------------------- | - | ------------- | ------ | ------------- | - | - | ---- | -
|                       |                                  |   | September 30, |        | September 30,
|                       |                                  |   | 2001          |        | 2000         
|                       |                                  |   |               |        |              
|Deferred
tax assets   
|                       | Net operating loss carryforwards |   | $             | 2,490  |               |   | $ | 223  |  
|                       | Less valuation allowance         |   |               | (2,490 | )             |   |   | (223 | )
|                       |                                  |   |               |        |               |   |   |     
|Net Deferred Tax Asset |                                  | $ |              |        |               | $ |  |     
|                       |                                  |   |               |        |               |   |   |     

Note F  Common Stock Transactions

On March 27, 2000, the Company amended its Certificate of Incorporation to
allow for the issuance of up to 50,000,000 shares of $0.001 par value common
stock from the originally authorized amount of 25,000 shares of no par value
common stock. The effect of this change is reflected in the accompanying
financial statements as of the first day of the first period presented.

On November 30, 2000, the Companys Board of Directors approved and implemented
an 80 for 1 forward stock split on the issued and outstanding shares of common
stock. This action caused the issued and outstanding shares to increase from
118,000 to 9,440,000. The effect of this action is reflected in the
accompanying financial statements as of the first day of the first period
presented.

On March 28, 2000, the Company issued an aggregate of 4,800,000 post-forward
split shares (60,000 pre-forward split shares) of restricted, unregistered
common stock to two officers for administrative services and services related
to the development and implementation of the Companys business plan. These
transactions were cumulatively valued at approximately $6,000, which
approximates the fair value of the services provided. These amounts are
charged to operations in the accompanying financial statements.

During September 2000, the Company successfully sold an aggregate 4,640,000
post-forward split shares (58,000 pre-forward split shares) of restricted,
unregistered common stock for gross proceeds of $5,800, pursuant to a private
placement memorandum to non-affiliated private investors. The Company relied
upon Section 4(2) of The Securities Act of 1933, as amended, for an exemption
from registration on these shares.

9



---



##### Table of Contents






Part I  Item 2

Managements Discussion and Analysis of Financial Condition and Results of Operations

(1) Caution Regarding Forward-Looking Information

This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company or management as well as assumptions made by and information currently
available to the Company or management. When used in this document, the words
anticipate, believe, estimate, expect and intend and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view
of the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.

(2) Results of Operations, Liquidity and Capital Resources

The Company maintains a cash balance sufficient to sustain corporate operations
until such time as Management can raise the funding necessary to advance its
business plan. The losses of approximately $5,318 through September 30, 2001
were due to operating expenses including licenses and fees, accounting and
audit fees and office expenses. Sales of the Companys equity securities in
prior periods have allowed the Company to maintain a positive cash balance.

We have a current business plan which proposed to utilize our founders
backgrounds to develop our business from the current concept stage into a
unique aircraft service company offering quality and convenience coupled with
basic servicing needs to a wide range of aircraft owner clientele. Our
business plan projects we will obtain a listing on the Over-the-Counter
Bulletin Board during months one through three; prepare a private placement
memorandum during months one through three; and raise capital of approximately
$2,000,000 through the sale of approximately 2,000,000 shares of common stock
at $1.00 in the private placement to accredited and/or sophisticated investors
during months four through six. During month seven, after raising capital, we
intend to open one service site in Los Angeles, California and one service site
in San Diego, California. During months seven through twelve, in order to
operate both service sites, we intend to expend approximately $60,000 for two
manager-service technicians, $120,000 for four service assistants, $25,000 for
two office clerical employees, $20,000 for inventory, $200,000 for the purchase
and outfitting of four service vehicles, $10,000 for set-up and maintenance of
our web site, $125,000 for advertising, $30,000 for one marketing manager,
$110,000 for the purchase of computers and other fixed assets, $30,000 for
insurance and $62,000 for rent and other operating expenses.

As of the date of this filing, the Company has no operations, assets or
liabilities. Further, there are no assurances that our planned sale of
$2,000,000 of common stock will be successful.

Accordingly, if no funding is received during the next twelve months, we will
be forced to rely on existing cash in the bank and may become dependent upon
management and/or significant shareholders to provide sufficient working
capital to preserve the integrity of the corporate entity at this time. As of
the date of this filing, management and significant shareholders have verbally
committed, if necessary, to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity. However,
management and/or significant shareholders have no formal commitments or
arrangements to advance or loan funds to Palomar.

In such a restricted cash flow scenario, we would be unable to complete our
business plan steps, and would, instead, delay all cash intensive activities.
Without necessary cash flow, we may be dormant during the next twelve months,
or until such time as necessary funds could be raised in the equity securities
market.

10



---



##### Table of Contents






Part II  Other Information




Item 1  Legal Proceedings

None




Item 2  Changes in Securities

None




Item 3  Defaults on Senior Securities

None




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

None




Item 5  Other Information

None




Item 6  Exhibits and Reports on Form 8-K

Exhibits  None

Reports on Form 8-K  None



---




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.              
|                
|October 16, 2001 |  | /s/ Terry Westergard                   
|                 |  |                                        
|                 |  | Terry Westergard
Secretary and Director

11