UNITED STATES SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549



FORM 10-QSB



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

SECURITIES EXCHANGE ACT OF 1934.



For the quarterly period ended September 30, 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 September 30, 2005, the number of outstanding common shares of stock is:  26,358,608.



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 September 30, 2005 (unaudited)

3-4

Consolidated Statement of Operations for the three and nine months ended

September 30, 2005 and 2004 (unaudited)

5-6

Consolidated Statement of Cash Flows for the nine months ended September 30, 2005

and 2004 (unaudited)

7-8

Notes to Consolidated Financial Statements (unaudited)

9



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

20



Item 3.  Quantitative and Qualitative Disclosures of Market Risk

25



Item 4.  Controls and Procedures

25



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.

27



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 September 30, 2005                                                 
|(unaudited)                                                              
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|ASSETS:                                                                  
|                                                                         
|                                                                         
|                                                                         
|Total current assets                                                     
|                                                                         
|Property, plant and equipment, net of accumulated depreciation of $42,943
|                                                                         
|                                                                         
|                                                                         
|Total other assets                                                       
|                                                                         
|TOTAL ASSETS                                                             
|                                                                         



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 September 30, 2005                  
|(unaudited)                               
|                                          
|                                          
|LIABILITIES AND STOCKHOLDERS' EQUITY      
|                                          
|LIABILITIES:                              
|                                          
|                                          
|                                          
|                                          
|Total current liabilities                 
|                                          
|                                          
|                                          
|TOTAL LIABILITIES                         
|                                          
|MINORITY INTEREST                         
|                                          
|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 Nine Months Ended September 30, 2005 and 2004
|(unaudited)                                                           
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Revenue                                                               
|Cost of goods sold                                                    
|                                                                      
|Gross profit                                                          
|                                                                      
|Operating expenses:                                                   
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Total operating expenses                                              
|                                                                      
|(Loss) from continuing operations                                     
|                                                                      
|Other income or (expense):                                            
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|(Loss) from continuing operations before                              
|income tax and discontinued operations                                
|                                                                      
|Provision for income taxes                                            
|                                                                      
|(Loss) from continuing operations before
discontinued operations      
|                                                                      
|Discontinued operations:                                              
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Net (loss)                                                            
|                                                                      
|Weighted average number of common                                     
|                                                                      
|                                                                      
|Net (loss) per share of common stock                                  
|outstanding before discontinued operations 
basic and diluted        



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



5



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|Palomar Enterprises, Inc.                                             
|----------------------------------------------------------------------
|Consolidated Statements of Operations, continued                      
|For the Three Months and Nine Months Ended September 30, 2005 and 2004
|(unaudited)                                                           
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Net (loss) per share of common stock                                  
|outstanding from discontinued operations 
basic and diluted          
|                                                                      
|Net (loss) per share of common stock                                  
|outstanding - basic and diluted                                       
|                                                                      



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





6



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|Palomar Enterprises, Inc.                            
|-----------------------------------------------------
|Consolidated Statements of Cash Flows                
|For the Nine Months Ended September 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 continuing operations             
|Net cash (used) by discontinued operations           
|Net cash (used) by continuing operations             
|                                                     
|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.



7



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



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



8



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 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.



9



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005





NOTE B - PREPARATION OF FINANCIAL STATEMENTS



The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.



These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein.  It is suggested that these consolidated interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2004 and notes thereto included in the Company's 10-KSB annual report.  The Company follows the same accounting policies in the preparation of interim reports.



Results of operations for the interim periods are not indicative of annual results.



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 $11,437,438.



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.

NOTE C - GOING CONCERN UNCERTAINTY, continued





10



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005





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.



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.



11



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005







NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



On June 30,2005, The Company and one of its Officers entered into a joint venture agreement and purchased a condominium in Lake Havasu as investment real estate. Each party has a 50% interest in the Venture. A joint venture was necessary in order to secure the real estate financing to acquire the property. The assets, liabilities, revenue and expenses of the joint venture have been consolidated in these financial statements.



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 September 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 nine month periods ending September 30, 2005 and 2004.



5.

Advertising expenses





Advertising and marketing expenses are charged to operations as incurred. Advertising expenses for the nine month periods ending September 30, 2005 and 2004 was $ 37,453 and $30,458, 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.



In the event revenue is generated from the real estate joint venture in Lake Havasu, gross revenue will be split between the joint venture members on a 50-50 basis.



12



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005







NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



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 9-30-2005, the deferred tax asset is related solely to the companys net operating loss carry forward and is fully reserved.



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 September 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.





13



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005





NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



10.

Stock Based Compensation





During the period ending September 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 September 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.



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 nine month periods ended September 30, 2005 and 2004, the Company paid the following:



|                               |           | Three months ended 
September 30, |          | Nine months ended
September 30,
|------------------------------ | --------- | --------------------------------- | -------- | -------------------------------
|                               |           | 2005                              |          | 2004                           
|Fees for Services to Palomar   | $ 173,000 |                                   | $ 70,000 |                                
|Fees for Services to Blackhawk | 24,000    |                                   | -        |                                
|Total Fees                     |           | $ 197,000                         |          | $ 70,000                       



The Company entered into a joint venture Agreement with an officer of the Company to invest in a residential parcel of real estate in Lake Havasu, AZ. The Company amended the original agreement from

a 90/10 basis to a 50/50 joint venture. The Company was originally 10% and the Officer was originally 90%. The JVA was necessary in order to secure the required financing to acquire the property. The purchase price of the property was $479,000, plus closing costs. The purchase money debt on the property consisted of a first mortgage of $359,650 and an equity line in the amount of $71,450. In return for the officer of the company providing the personal credit and guarantee to secure the bank financing, the company has agreed to provide the 10% down payment plus closing costs. At the time of closing, the Company did not have sufficient funds for the down payment, so Brent Fouch advanced the amount of $43,615 on behalf of the company, which will be paid back with zero interest . The deed was initially placed in the name of the officer who obtained the financing, Palomar has subsequently been added to the Deed as 50% owner of record. The Company had paid $10,000 towards the down payment and had reimbursed the officer $10,000 and paid for his portion of the joint venture expenses totaling $4,090 of the remaining $43,615 down payment provided by the officer. As of September 30, 2005, the Company has a balance owed to the officer of $29,525.





14



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 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". The Preferred stock has a preference on liquidation over the common stock. Upon the dissolution, liquidation or winding up of the company, whether voluntary or involuntary, the holders of preferred stock shall be entitled to receive out of the assets of the company preferential distributions any payment made on the common stock or, any other class of capital stock of the company ranking junior to the preferred stock. The preferred class holders shall be entitled to receive cash, stock, or other property, as dividends when, as, and if declared by the board of directors. Such dividend shall be issued at market value. Market value shall be determined by the board of directors, whos decision shall be final and binding upon all parties.



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 eighty-six 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.



The Company issued 33,000,000 shares of Preferred series B stock pursuant to subscription agreement. The Company will receive .02 Euros per share, for a total amount of 660,000 Euros as subscriptions receivable (approx. $772,200 USD).





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.



15



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005





NOTE G - CAPITAL STOCK TRANSACTIONS, continued



COMMON STOCK, continued



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 nine months ended September 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.



The Company cancelled 105 million shares of common stock during the second quarter, 2005 and had them return to Treasury as unissued. These shares have been retroactively adjusted to 7,500 shares post-split.



The Company issued 7,500,000 common shares for web related services to the individual employees of DRCI. These shares have retroactively been adjusted to 7,500 post-split.



The Company issued 67,500,000 shares of common stock for services during the second quarter and recorded compensation expense of $144,200 under the intrinsic value method during the nine months ended September 30, 2005.  Due to the reverse split of 1000-for-1, the number of shares has been retroactively restated to 67,500. The Company issued 10,000,000 shares of Reg-S common stock during second quarter, 2005, which has retroactively changed to 10,000 shares pursuant to a subscription agreement. The Company has received the funds of $50,000 this quarter towards this issuance.



The Company issued 17,500,000 shares of common stock for services during the nine months ended September 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 nine months ended September 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 September 30, 2005, the Company has not received the promised funds and therefore is in the process of having 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 nine months ended September 30, 2005, the Company issued 10,000,000 shares of common stock which were issued pursuant to a subscription agreement.  As of September 30, 2005, the Company has received the promised funds of $ 50,000. 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 1,490,000 shares of common stock for services during the nine month period ending, September 30, 2005 and recorded compensation expenses of:  $ 91,900.00.





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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005





NOTE G - CAPITAL STOCK TRANSACTIONS, continued



COMMON STOCK, continued



During the nine months ended September 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 nine months ended September 30, 2005, the Company issued 21,000,000 shares of common stock which were issued pursuant to a subscription agreement.  As of September 30, 2005, the Company has received the promised funds of:  $ 107,970 vs. this issuance and pursuant to the subscription agreement.  The company affected a reverse split and these shares now represent 21,000.



During the nine months ended September 30, 2005, the Company cancelled 22,000,000 shares of common stock which were issued pursuant to a subscription agreement.  The Company did not receive 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 nine months ended September 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.



During the nine months ending September 30, 2005, the Company issued 24,000,000 common shares pursuant to a subscription agreement. The Company expects to receive the funds for these shares issued in the fourth quarter, 2005. The Company will receive .03 Euros per share, for a total of 720,000 Euros

(approx. $842,400 USD) as a subscription receivable.



During the nine months ending September 30, 2005 the Company issued 16,700 shares of Regulation S common stock pursuant to a subscription agreement, in which The Company shall receive the best price possible for the shares issued. The Company has received $136,000 towards 6,700 shares and expects to receive the balance in fourth quarter, 2005. The Company did not record a receivable for the remaining shares, as the amount could not be reasonably estimated.



NOTE H - PROPERTY



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



|Land and Building              |  | $   1,877,059
|------------------------------ |  | -------------
|Office equipment               |  | 19,509       
|Total                          |  | 1,896,568    
|Less: Accumulated depreciation |  | (42,943)     
|Property & equipment, net      |  | $   1,853,625



Assets are being depreciated from five to forty years using principally the straight line method.  Depreciation expense was $24,804 and $18,139 for the nine months ended September 30, 2005 and 2004, respectively.



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005







NOTE I - NOTES PAYABLE AND BANK LINE OF CREDIT



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



Note payable to Lending Institution, original balance of $980,000,

interest at 7.5% per annum. Due in monthly principal and

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

$   833,435



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

At the payees discretion, the debt may be converted to common stock

starting August, 2006.



Joint Venture:  Note Payable, bank due in

monthly installments of $1,958, including interest of 5.125%,

collateralized by Lake Havasu condominium.

358,378



Equity Line Payable Bank due interest only monthly Prime plus 2%

(Currently 6.49%)

71,450



Note payable to officer, original balance of $43,615, 0% interest,

due upon demand

29,525





$1,617,788





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 $17,656 and the total loss from disposal of the business was $166,223.



NOTE K  JOINT VENTURE



The Company entered into a joint venture Agreement with an officer of the Company to invest in a residential parcel of real estate in Lake Havasu, AZ. The Company amended the original agreement from

a 90/10 basis to a 50/50 joint venture. The Company was originally 10% interest and the Officer was originally 90% interest. The JVA was necessary in order to secure the required financing to acquire the property. The purchase price of the property was $479,000, plus closing costs. The purchase money debt on the property consisted of a first mortgage of $359,650 and an equity line in the amount of $71,450. In return for the officer of the company providing the personal credit and guarantee to secure the bank financing, the company has agreed to provide the 10% down payment plus closing costs. At the time of closing, the Company did not have sufficient funds for the down payment, so Brent Fouch advanced the amount of $43,615 on behalf of the company, which will be paid back with zero interest . The deed was initially placed in the name of the officer who obtained the financing, Palomar has subsequently been added



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PALOMAR ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE PERIOD ENDED September 30, 2005





NOTE K  JOINT VENTURE, continued



to the Deed as 50% owner of record. The Company had paid $10,000 towards the down payment and had reimbursed the officer $10,000 and paid for his portion of the joint venture expenses totaling $4,090of the remaining $43,615 down payment provided by the officer. As of September 30, 2005, the Company has a balance owed to the officer of $29,525.



The monthly cash obligation of approximately $3,100 consisting of loan payments, homeowners association dues, utilities and insurance, will be borne equally by the company and officer. Upon sale of the property, the company will receive a return of the full down payment it provided and the two entities will split the remainder of the sales proceeds on a 50/50 basis.





NOTE L  LEASE COMMITMENTS



The Company leases their office space under a noncancellable lease expiring June 30, 2006. The minimum monthly lease commitment under this lease is $900 per month and totals $8,100 through lease expiration. In addition the Company has leased automobiles for company business of the offices. The minimum monthly lease commitment under these leases is $2,141 through August 31, 2008 and $1,253 per month through August 31, 2009.



NOTE M:  SEGMENT REPORTING



The company has two principal operating segments which are the financial services division and the corporate finance division.  The financial services division focuses upon mortgage and home loan origination, real estate sales and client services and property acquisition and development. This group operates as The Palomar Group.



The corporate finance division 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 and also offers various types of consulting services and financial instruments, including, but not limited to:  notes, deeds of trust, floating notes and other financing mechanisms.  This group operates as The BlackHawk Fund, Inc.



The two divisions are managed and operated in separate facilities.  The Palomar Group occupies the first floor office space in the company owned facility located at 2585 Pio Pico Dr. in Carlsbad, CA.  The BlackHawk Fund, Inc. operates out of the corporate offices located at 1802 N. Carson Street in Carson City, Nevada.



The summary financial information for the two reportable segments is as follows:



$  122,851 combined real estate groups

8,443 rental income (Pio Pico tenant)

10,900 BlackHawk Fund (consulting services fees)



$  142,194 Total for the period ending 09-30-2005.



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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 September 30, 2005 compared to the three months ended September 30, 2004:



Total net sales and revenue were at $ 142,194 for the three months ending September 30, 2005 compared to $ 126,829 for the prior period.   This represents an increase of approximately 12 percent.  The period ending September 30, 2005 represents that the company is gaining a solid position in its core real estate groups in the Southern California real estate marketplace.



Our gross profit for the three months ended September 30, 2005 compared to 2004 decreased to

$ 46,182 from $ 126,829.



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Total operating expenses for the three months ended September 30, 2005 were $ 443,778 compared to $1,016,257 for the same period in 2004.



Net loss for the period ending September 30, 2005 was $ 395,868 compared to a net loss for the prior period in 2004 which were $ 1,297,626. This represents a reduction of net loss of $($ 901,758) for the period ending September 30, 2005 that represents a decrease of approximately 69 percent.



Interest expense, net for the three months ending September 30, 2005 was $ 29,218. The interest expense for the prior period in 2004 was $ 22,310.  This represents an increase of $ 6,908 which is an increase of approximately 31 percent for 2005.





Nine months ended September 30, 2005 compared to the nine months ended September 30, 2004.



Total net sales and revenues were at $ 427,577 for the nine months ended September 30, 2005 compared to $ 653,797 for the prior period, a decrease of $ 226,219.  The prior period included the proceeds from a disposition of a company asset.



Our gross profit for the nine months ended September 30, 2005 compared to 2004 decreased to $ 109,980 from $ 251,822. Gross margin as a percentage of sales decreased to 26 percent in 2005 compared to 39% in 2004.



Total operating expenses for the nine months ended September 30, 2005 were $1,655,312 compared to 2004, which were $ 3,147,692.



Net loss was ($ 1,297,626) for nine-month period ending September 30, 2005, compared to an operating loss of ($ 3,139,447) for the same period in 2004.



Interest expense, net for the nine months ended September 30, 2005 was $ 80,421, compared to interest expense of $33,577 for the same period 2004.



LIQUIDITY AND CAPTIAL RESOURCES:



As of September 30, 2005 we had a deficiency in working capital of $415,422.



Cash used by investing activities totaled $467,683, used for property, plant and equipment for the nine months ending September 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 a solid operating quarter of the company, posting revenue for the quarter ending September 30, 2005 of: $ 122,851. This same division posted revenue for same quarter ending September 30, 2004 of:  $ 126,829.



The property acquisition & development group realized revenue for the quarter ending September 30, 2005 of: $ 8,443.



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.



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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 September 30, 2005 of:

$ 10,900. There are no revenues from the prior period ending September 30, 2004 to make comparison.



The company established a floating note with its subsidiary, The BlackHawk Fund, Inc., in the period ending September 30, 2005, the company had advanced a total of:  $25,200



Total Revenues for the quarter ending September 30, 2005:  $ 142,194.



$

122,851

combined real estate groups

8,443

rental income (Pio Pico tenant)

10,900

BlackHawk Fund

$

142,194



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 September 30, 2005:



1.

recorded another solid revenue quarter for its core real estate divisions

2.

received additional funding from the companys REGULATION S offering

3.

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

4.    The company entered into a Joint Venture agreement known as The Havausu Project

5.    The company continued to expand both its marketing efforts & its independent agent

Force for its core real estate groups.



Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The Company issued to investors in Europe, pursuant to Regulation S promulgated under the Securities Act of 1933, 16,700 shares of its common stock.  As of the date of this report, the Company has received $136,000 for the sale of 6,700 of these shares.  The Company expects to receive the balance of funds from the remaining 10,000 shares in the fourth quarter of the current fiscal year.

The Company issued 1,490,000 shares of its common stock for services during the three month period ending, September 30, 2005 and recorded compensation expenses of $91,900.00.

During the three months ending September 30, 2005, the Company issued to an investor in Europe, pursuant to Regulation S promulgated under the Securities Act of 1933, 24,000,000 common shares for a purchase price of €0.03 per share, pursuant to a subscription agreement (approximately $842,400).  The Company expects to receive the funds for these shares before December 31, 2005.



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The cash proceeds received and to be received for the shares were used for legal and accounting expenses, payment towards a joint venture obligation, real estate marketing, general and administrative expenses, and working capital.

The shares were issued in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act.  Each investor took the securities for investment purposes without a view to distribution and had access to information concerning us and our business prospects, as required by the Securities Act.  In addition, there was no general solicitation or advertising for the purchase of our shares.  Our securities were sold only to persons with whom we had a direct personal preexisting relationship, and after a thorough discussion.  Finally, our stock transfer agent has been instructed not to transfer any of such shares, unless such shares are registered for resale or there is an exemption with respect to their transfer.  All certificates representing the shares sold bear a restrictive legend.



Subsequent Events:



1.

The company withdrew its designation of its Common B class

2.

The company received an additional $ 330,467 towards completion of its Preferred B offering

3.

The company launched a new mortgage web portal:  www.tpg-home-loans.com

4.

The company continued to expand both its marketing efforts & to increase the number of

Independent agent force

5.

The company issued 500,000 Regulation S shares to Laguana Partners subsequent to its

Regulation S offering





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.



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RECENT ACCOUNTING PRONOUNCEMENTS



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



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



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



On December 16, 2004, FASB issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions ("SFAS 153"). This statement amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Under SFAS 153, if a nonmonetary exchange of similar productive assets meets a commercial-substance criterion and fair value is determinable, the transaction must be accounted for at fair value resulting in recognition of any gain or loss. SFAS 153 is effective for nonmonetary transactions in fiscal periods that begin after June 15, 2005. We do not anticipate that the implementation of this standard will have a material impact on its financial position, results of operations or cash flows.



24



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OFF-BALANCE SHEET ARRANGEMENTS.



We do not have any off-balance sheet arrangements.



ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK



None



ITEM 4.     CONTROLS  AND  PROCEDURES.



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



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



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





PART II - OTHER INFORMATION



ITEM  1.  LEGAL  PROCEEDINGS.



None.



ITEM  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



25



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ITEM  6.  EXHIBITS.



EXHIBIT

NO.                                             DESCRIPTION OF EXHIBIT



10.1

Joint Venture Agreement effective as of July 7, 2005, between Brent Fouch and Palomar Enterprises, Inc.



10.2

Form of Common Stock Subscription Agreement



31.1        Certification of Chief Executive Officer pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.



31.2        Certification of Chief Financial Officer pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002



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



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









SIGNATURES



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



PALOMAR ENTERPRISES, INC.

Dated November 21, 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





26