UNITED  STATES
                       SECURITIES  AND  EXCHANGE  COMMISSION
                             Washington,  D.C.  20549

                                   FORM  10-QSB

(MARK  ONE)

[X]  QUARTERLY  REPORT  UNDER  SECTION  13  OR 15(d) OF The Securities  Exchange
     Act  of  1934

                For  the  quarterly  period  ended  June  30,  2004

[  ]  TRANSITION  REPORT  UNDER  SECTION  13  OR  15(d)  OF  The  Securities
     Exchange  Act  of  1934

                         Commission  File  Number  0-30786

                             NIGHTHAWK  SYSTEMS,  INC.
             -----------------------------------------------------
             (Exact  name  of  registrant  as  specified  in  its  charter)

           NEVADA                                             87-0627349
-------------------------------                         ---------------------
(State  or  other  jurisdiction  of                             (IRS  Employer
 Incorporation  or  Organization)                          Identification  No.)

                                  10715  GULFDALE
                                    SUITE  200
                                SAN  ANTONIO,  TX  78216
                     ---------------------------------------
                    (Address  of  Principal  Executive  offices)

          Registrant's  telephone  number,  with  area  code:  (303)  337-4811

Indicate   by,  check  mark  whether  the  registrant  (1) has filed all reports
required to  be filed by Section 13 or 15(d) of the  Securities Exchange  Act of
1934 during the  preceding  twelve  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:

       Class                          Outstanding  at  August  20,  2004
------------------                   ---------------------------------
       Common                                  27,033,688


<PAGE>

                                     PART  I
                              FINANCIAL  INFORMATION

Item  1.  Financial  Statements  (unaudited)

         Condensed  consolidated  balance  sheet  as of June 30, 2004          3

         Condensed  consolidated  statements  of  operations  for  the
         three  and  six  months  ended June 30, 2004 and 2003                 4

         Condensed  consolidated  statement  of  stockholders'
         deficit  for  the  six  months ended June 30, 2004                    5

         Condensed  consolidated  statements  of  cash  flows  for  the
         six  months  ended  June  30, 2004 and 2003                           6

         Notes  to  condensed  consolidated  financial statements              7

Item 2   Management's Discussion and Analysis or Plan of Operation            10

Item  3   Evaluation of Disclosure Controls and Procedures                    13

                            PART  II
                       OTHER  INFORMATION

Item  1   Legal proceedings                                                   13

Item  2   Changes in securities and use of proceeds                           13

Item  3   Defaults upon senior securities                                     14

Item  4   Submission of matters to a vote of securities holders               14

Item  5   Other information                                                   14

Item  6   Exhibits and reports on Form 8-K                                    14


<PAGE>
PART  I  -  FINANCIAL  INFORMATION


<TABLE>
<CAPTION>


                             Nighthawk Systems, Inc.
                      Condensed Consolidated Balance Sheet
                                  June 30, 2004


<S>                                                             <C>
        ASSETS

Current assets:
     Cash                                                       $     2,032
     Accounts receivable, net of allowance for
       doubtful accounts of $134                                     53,274
     Inventories                                                    114,518
     Other                                                           37,749
                                                                ------------

               Total current assets                                 207,573


Furniture, fixtures and equipment, net                               16,920
Intangible assets, net                                                8,658
                                                                ------------
                                                                $   233,151
                                                                ============


      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable                                            $   404,339
    Accrued expenses                                                227,025
    Line of credit                                                   19,842
    Notes payable:
        Related parties                                             109,695
        Other                                                       401,722
    Customer deposits                                                63,740
                                                                ------------
               Total liabilities (all current)                    1,226,363

Commitments and contingencies

Stockholders' deficit:
    Preferred stock; $0.001 par value; 5,000,000
      shares authorized; 5,000 shares issued and outstanding;
      liquidation preference $12,500                                      5
    Common stock; $0.001 par value; 50,000,000
      shares authorized; 26,533,688 issued and outstanding           26,534
    Additional paid-in capital                                    3,264,044
    Special warrants                                                188,775
    Accumulated deficit                                          (4,472,570)
                                                                ------------
               Total stockholders' deficit                         (993,212)
                                                                ------------

                                                                $   233,151
                                                                ============


The accompanying notes are an integral
  part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
                                       Nighthawk Systems, Inc.
                           Condensed Consolidated Statements of Operations


                                             Three months ended June 30,  Six months ended June 30,
                                             ---------------------------  -------------------------
<S>                                           <C>           <C>           <C>           <C>
                                                     2004          2003          2004          2003
                                              ------------  ------------  ------------  ------------

Product sales, net                            $   161,387   $   528,095   $   264,225   $   695,271

Cost of goods sold                                108,057       284,487       180,623       379,017
                                              ------------  ------------  ------------  ------------
     Gross profit.                                 53,330       243,608        83,602       316,254

Selling, general and administrative expenses      264,865       340,205       540,945       654,853
Reversal of 2002 consulting expense                     -       (39,000)            -   $   (39,000)
                                              ------------  ------------  ------------  ------------
     Loss from operations                        (211,535)      (57,597)     (457,343)     (299,599)
                                              ------------  ------------  ------------  ------------

 Interest expense:
     Related parties                                2,227         3,718         5,600         6,661
     Other                                         26,514        11,025        28,839        18,487
                                              ------------  ------------  ------------  ------------

     Loss from continuing operations             (240,276)      (72,340)     (491,782)     (324,747)
                                              ------------  ------------  ------------  ------------

Discontinued operations:
    Income from operations of
       discontinued segment                                      10,713                      23,508
                                                            ------------                ------------

Net loss                                         (240,276)      (61,627)     (491,782)     (301,239)

Less: Preferred stock dividends                      (197)            -          (197)            -
                                              ------------  ------------  ------------  ------------

Net loss to common stockholders               $  (240,473)  $   (61,627)  $  (491,979)  $  (301,239)
                                              ============  ============  ============  ============

Loss from continuing operations per
  basic and diluted common share              $     (0.01)            *   $     (0.02)  $     (0.02)
                                              ============  ============  ============  ============

Income from discontinued operations per
  basic and diluted common share                                      *                           *
                                                            ============                 ============

Net loss to common stockholders,
  basic and diluted                           $     (0.01)            *   $     (0.02)  $     (0.01)
                                              ============  ============  ============  ============

Weighted average common shares outstanding,
  basic and diluted                             25,911,034    21,632,681    25,434,668    21,484,056
                                              ============  ============  ============  ============

*  Less than $0.01 per share

The accompanying notes are an integral
  part of these financial statements.
</TABLE>
                                           3
                                            4

<TABLE>
<CAPTION>

                                                 Nighthawk Systems, Inc.
                                Condensed Consolidated Statement of Stockholders' Deficit
                                             Six Months Ended June 30, 2004



<S>                          <C>        <C>      <C>          <C>       <C>          <C>        <C>            <C>

                              Preferred  Stock       Common    Stock     Additional
                              ------------------  ---------------------  Paid-in      Special    Accumulated
                              Shares     Amount   Shares       Amount    Capital      Warrants   Deficit        TOTAL
                              ---------  -------  -----------  --------  -----------  ---------  -------------  --------
Balances, December
   31, 2003                           -        -  24,320,902   $24,321   $ 2,855,289          -  $ (3,980,591) $(1,100,981)

Common stock
 warrants subscribed for cash                      1,488,333     1,488       235,862  $ 188,775                    426,125

Common stock
 issued for services                                 365,000       365        62,735                                63,100

Common stock
 issued for interest payable                          33,750        34         6,716                                 6,750

Conversion of
 notes payable to common stock                       375,000       375        80,141                                80,516

Preferred stock
 issued for cash                  5,000  $     5                              12,495                                12,500

Issuance of stock
 options to consultant                                                        10,560                                10,560

Cancellation
 of shares                                           (50,000)      (50)           50                                     -

Series A
 preferred dividends                                     703         1           196                     (197)           -


Net loss                                                                                             (491,782)   (491,782)
                              ---------  -------  -----------  --------  -----------  ---------  -------------  ----------

Balances,
 June 30, 2004                    5,000  $     5  26,533,688   $26,534   $ 3,264,044  $ 188,775  $ (4,472,570)  $(993,212)
                              =========  =======  ===========  ========  ===========  =========  =============  ==========


The accompanying notes are an integral
  part of these financial statements.
</TABLE>

                                                 5



<TABLE>
<CAPTION>


                                    Nighthawk Systems, Inc.
                        Condensed Consolidated Statements of Cash Flows

                                                                      Six months ended June 30,
                                                                      -------------------------
<S>                                                                      <C>         <C>
                                                                              2004        2003
                                                                         ----------  ----------

Cash flows from operating activities:
      Net loss                                                           $(491,782)  $(301,239)
                                                                         ----------  ----------

Adjustments to reconcile net loss to
   net cash used in operating activities:

   Income from operations of discontinued segment                                -     (23,508)
   Depreciation and amortization                                             3,854       2,836
   Common stock issued for services                                         63,100           -
   Common stock issued for interest                                          6,750      11,500
   Issuance of stock options to consultants                                 10,560           -
   Cancellation of consulting agreement                                          -     (39,000)
Change in assets and liabilities:
   Decrease (increase) in accounts receivable                              (11,357)    120,926
   Increase in inventories                                                 (39,189)   (124,297)
   Increase in accounts payable                                             11,801      80,882
   Increase in accrued expenses                                             35,313      31,981
   Decrease in deferred revenue                                                  -    (354,114)
   Increase in customer deposits                                               196      60,000
   Increase in other assets                                                 (2,394)    (47,054)
                                                                         ----------  ----------
Total adjustments                                                           78,634    (279,848)
                                                                         ----------  ----------

Net cash used in operating activities                                     (413,148)   (581,087)
                                                                         ----------  ----------

Cash flows from investing activities:
   Purchases of furniture, fixtures and equipment                                -     (14,158)
                                                                         ----------  ----------
Net cash used in investing activities                                            -     (14,158)
                                                                         ----------  ----------

Cash flows from financing activities:
   Repayment of cash overdraft                                              (3,902)          -
   Proceeds from notes payable, related parties                             25,516      43,733
   Payments on notes payable, related parties                              (34,655)    (40,052)
   Payments made on factoring arrangement, net                                   -     (82,502)
   Proceeds from notes payable, other                                       25,000     200,000
   Payments on notes payable, other                                        (10,404)    (14,383)
   Payments on other related party payable                                 (25,000)          -
   Net proceeds from issuance of common stock                              237,350     128,000
   Proceeds from issuance of preferred stock                                12,500           -
   Net proceeds from issuance of special warrants                          188,775           -
                                                                         ----------  ----------
Net cash provided by financing activities                                  415,180     234,796
                                                                         ----------  ----------

Cash provided by discontinued operations                                                 7,480
                                                                                     ----------

Net increase (decrease) in cash                                              2,032    (352,969)
Cash, beginning                                                                  -     428,677
                                                                         ----------  ----------
Cash, ending                                                             $   2,032   $  75,708
                                                                         ==========  ==========


Supplemental disclosure of cash flow information:

Cash paid for interest                                                   $  17,222   $   4,708
                                                                         ==========  ==========

Supplemental disclosure of non-cash investing and financing activities:

Conversion of note payable and accrued interest to common stock
  Note payable                                                           $  71,640
  Accrued interest                                                           8,876
                                                                         ----------
                                                                         $  80,516
                                                                         ==========


The accompanying notes are an integral
  part of these financial statements.
</TABLE>

                                                      6
                             NIGHTHAWK  SYSTEMS,  INC.
              NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
                  SIX  MONTHS  ENDED  JUNE  30,  2004  AND  2003


1.   Basis  of  presentation:

The  accompanying  unaudited  condensed consolidated financial statements, which
include  the  accounts  of  Nighthawk  Systems,  Inc.  and  its  subsidiary  PCT
(collectively  referred  to  herein  as  "the  Company"),  have been prepared in
accordance with accounting principles generally accepted in the U.S. for interim
financial information. In the opinion of management, all adjustments (consisting
of  only  normal  recurring  items), which are necessary for a fair presentation
have  been  included.  The  results  for  interim  periods  are  not necessarily
indicative  of  results that may be expected for any other interim period or for
the  full year. These condensed consolidated financial statements should be read
in  conjunction  with  a  reading  of the financial statements and notes thereto
included  in  the  Company's  Form  10-KSB annual report for 2003 filed with the
Securities  and  Exchange  Commission  (the  "SEC").

    Going  concern,  results  of  operations  and  management's  plans:

The  Company  has incurred operating losses for several years. These losses have
caused  the  Company  to  operate  with  limited  liquidity  and  have  created
both  a  stockholders'  deficit  and working capital deficiency of approximately
$1.0  million  as  of June 30,  2004.  These  conditions raise substantial doubt
about the Company's ability to continue as a going  concern.  Management's plans
to  address  these  concerns  include:

     1.  Raising  working  capital  through  additional  borrowings.
     2.  Raising  equity  funding  through  sales  of the Company's common stock
         or  preferred  stock.
     3.  Improving  working  capital  through  increased  sales of the Company's
         products  and  services  and  the  reduction  of  expenses.

The accompanying financial statements do not include any adjustments relating to
the  recoverability and classification of assets or the amounts  of  liabilities
that might be necessary should the Company be unsuccessful in implementing these
plans,  or  otherwise  be  unable  to  continue  as  a  going  concern.

In August 2004, the Company signed a financing arrangement with Dutchess Private
Equities,  II,  L.P.  ("Dutchess").  Under  the  terms  of  the arrangement, the
Company  received $100,000 under a convertible debenture on August 11, 2004, and
will  receive  an  additional  $100,000 and $50,000 under the debenture upon the
filing  and  effectiveness,  respectively,  of a registration statement with the
Securities  and  Exchange  Commission.  The  Company  also  signed an investment
agreement  under which Dutchess agreed to purchase up to $10.0 million in common
stock  from the Company, at the Company's discretion, over the next three years,
subject  to  certain  limitations  including  the Company's then current trading
volume.  The  Company also signed a consulting agreement with a company in which
an  employee  of  Dutchess  is a member of management.  Under the agreement, the
company  was  issued  500,000  shares  of  Company  common  stock.

2.  Significant  accounting  policies

    Revenue  recognition

Revenue from product sales is recognized when all significant obligations of the
Company  have  been  satisfied.  Revenues  from  equipment  sales are recognized
either  on  the completion of the manufacturing process, or upon shipment of the
equipment  to  the customer, depending on the Company's contractual obligations.
The  Company  occasionally  contracts to manufacture items, bill for those items
and  then  hold  them  for  later  shipment  to  customer-specified  locations.

During  the  six  months  ended  June  30,  2004, the Company's largest customer
accounted  for 44% of sales, and the Company purchased 53% of its inventory from
a  single  supplier.  During  the  six months ended June 30, 2003, two customers
accounted  for  approximately  49%  and  30%  of  sales,  respectively.

    Inventories

Inventories  at  June  30, 2004 consist entirely of parts  and  pre-manufactured
component  parts. The Company  monitors inventory for turnover and obsolescence,
and records reserves for excess  and  obsolete  inventory  as  appropriate.  The
Company  did not have a reserve for excess or obsolete inventory  as of June 30,
2004.

    Net  loss  per  share

Basic net loss  per  share  is  computed  by dividing the net loss applicable to
common stockholders by the weighted-average  number  of  shares  of common stock
outstanding  for  the  year.  Diluted  net loss per share reflects the potential
dilution that could occur  if  dilutive  securities  were exercised or converted
into common stock or resulted in the issuance of common  stock  that then shared
in the earnings of the Company, unless the effect of such inclusion would reduce
a  loss  or  increase  earnings  per share.  For the three and six month periods
ended June 30, 2004  and  2003,  the  effect of the inclusion of dilutive shares
would  have  resulted  in  a  decrease  in  loss  per  share.  Accordingly,  the
weighted  average shares outstanding have not been adjusted for dilutive shares.

    Stock-based  compensation

The  Company  has  elected  to  continue  to  account for stock option grants in
accordance  with  APB  25  and  related interpretations. Under APB 25, where the
exercise  price  of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation is recognized.  No
employee  options  were  issued  or vested during the three month periods ending
June  30,  2003  and  2004.  The Company issued employee options in January 2003
that  vested  in  January  2003  and  2004.  The  Company  has  not  recognized
compensation  expense  during the six month periods ended June 30, 2003 and 2004
because  the  exercise price of the options equaled or exceeded the market price
of  the  Company's  common  stock  on  the  dates  the options were granted.  If
compensation  expense  for the Company's stock-based compensation plans had been
determined  consistent  with  SFAS  123, the Company's net loss and net loss per
share  including  pro forma results would have been the amounts indicated below:

                                         7

<TABLE>
<CAPTION>



<S>                                                              <C>                   <C>

                                                                  Six Months Ended June 30,
                                                                 ---------------------------
                                                                            2004        2003
                                                                 -----------------  ----------
Net loss applicable to common stockholders:                      $       (491,979)  $(301,239)

As reported
Total stock-based employee compensation expense determined
  under fair value based method for all employee awards, net
  of related tax effects                                                   (8,100)     (8,100)
                                                                 -----------------  ----------
Pro forma net loss applicable to common stockholders             $       (500,079)  $(309,339)
                                                                 -----------------  ----------

Pro forma net loss per share applicable to common stockholders:
As reported:
Basic and diluted                                                $          (0.02)  $   (0.01)
Pro forma:
Basic and diluted                                                $          (0.02)  $   (0.01)
</TABLE>



The  pro  forma  effect  on  net loss may not be representative of the pro forma
effect on net income or loss of future years due to, among other things: (i) the
vesting  period of the stock options and the (ii) fair value of additional stock
options  in  future  years.

For  the  purpose  of  the  above  table, the fair value of each option grant is
estimated  as  of the date of grant using the Black-Scholes option-pricing model
with  the  following  assumptions:

<TABLE>
<CAPTION>



<S>                      <C>         <C>
                          2004            2003

Dividend yield. . . . .    0.0%            0.0%
Expected volatility . .  1.122       1.229 - 1.316
Risk-free interest rate   4.50%           4.50%
Expected life in years.    3           1 - 3
</TABLE>


The  weighted average fair value at date of grant for options granted during the
first  six  months of 2004 was $0.032 using the above assumptions.  The weighted
average  fair  value  at  date of grant for options granted during 2003 was from
$0.009  to  $0.027  using  the  above  assumptions.

During  the  first  six  months  of  2004, the Company issued 330,000 options to
purchase  common stock of the Company to non-employees which vested immediately.
In  accordance  with SFAS 123, the Company recognized $10,560 in expense related
to  these  options  during  the  period  ended  June  30,  2004.


2.  Related  party  transactions:

During  the  six  months ended June 30, 2004, the Company repaid $9,655 on notes
payable  to two officers of the Company, as well as $25,000 to a shareholder and
former director under an arrangement entered into in December 2003.  The Company
also  borrowed  and  repaid  $25,000  from  a company in which its Chairman is a
partner.


3.  Notes  payable

Effective  March  1,  2004,  the  Company  reached an agreement with its largest
creditor  under which, in return for an additional $25,000 in borrowings and the
extension of the maturity dates of his three notes to July 31, 2004, the Company
granted  the  creditor  a  secured  position  in the assets of the Company.  The
Company  also  agreed  on  a  going-forward  basis  to pay the creditor interest
monthly at an annual rate of 8% on the new total of $375,000 in notes, with $750
of  the  monthly interest due being paid in cash and the remainder being paid in
stock  at  a  rate  of  $0.20  per  share.  From March through June of 2004, the
Company  issued  33,750 shares to the creditor for $6,750 of interest owed under
this  arrangement.  In  August 2004, the creditor extended the maturity dates of
the  notes  to  October  31, 2004, and agreed to convert $50,000 of his $210,000
convertible  note to common stock of the Company at the prescribed rate of $0.20
per  share.  The  creditor also loaned the Company an additional $60,000 under a
90-day arrangement for the purpose of purchasing parts needed to complete orders
that  had  been  placed  by the Company's customers as of that date.  Under this
arrangement, the creditor will receive varying percentages of the cash collected
from those customers until his note balance, plus interest at the annual rate of
10%  is  collected  in  full.

                                         8


Effective  June  30,  2004,  a  creditor  of  the  Company  converted $71,640 in
principal  and  $8,876  in accrued interest into 375,000 shares of the Company's
common  stock  and a warrant to purchase 375,000 shares of common stock at $0.25
per  share.

During  the  six-month  period  ended  June  30,  2004,  the  Company  repaid  a
stockholder  $7,543  owed  to  him  under  a short-term note, and made $2,861 in
payments  to  a  financial  institution.


4.  Stock  transactions:

During the six months ended June 30, 2004, the Company received $127,850, net of
offering  costs of $900, for the issuance of 858,333 shares of commons stock and
warrants  to  purchase  858,333 additional shares for $214,583. The Company also
issued  options  to  a  consultant to purchase 330,000 shares of common stock at
$0.15  per  share  which  were  exercised  in full during March 2004. A total of
365,000  shares  of  common  stock  were  issued  during the six month period to
consultants  in return for $63,100 in services, and the Company received $60,000
in  cash  proceeds  upon  the  exercise  of  300,000  options during the period.

In  order to provide the Company with working capital, a Canadian brokerage firm
sponsored  a  private placement of up to $300,000 in Special Warrants, which are
convertible  into  shares of common stock of the Company at $0.20 per share, and
also  provide the purchaser with a warrant to purchase an equal number of shares
of  common  stock  of  the Company for a period of two years at $0.30 per share.
The  Special  Warrants  will  automatically  convert  at  the  earlier  of i) an
effective  registration  statement  filed  with  the  Securities  and  Exchange
Commission  or  receipt  of  a  qualified  prospectus  by  a Canadian provincial
authority,  whichever comes later; or ii) one year from their date of issue.  As
of  June  30,  2004, the Company had issued $188,775 in Special Warrants, net of
issuance  costs  of  $43,625.

In 2001, PCT issued 391,200 shares of its common stock in return for $391,200 in
cash  proceeds.  Based  on  a  review  of  Company  records during 2003, Company
management  determined  that  the  391,200  of  associated  warrants to purchase
391,200  shares  of  common stock at $1.50 per share were never delivered to the
purchasers  subsequent  to their investment.  Company management also determined
this  to  be  the case with 255,000 shares issued by the Company between January
and  June  2002  in  return for $255,000 in cash proceeds, for which warrants to
purchase  255,000  shares  at  $1.50  per  share  should  have  been  delivered.
According to Company records, all such warrants should have been exercisable for
a  period  of  two  years  from  their  date of issuance; therefore, the 391,200
warrants  owed  to  investors  from  2001 expired without being delivered to the
investors.  In  order  to fulfill the terms of their investment, in January 2004
the  Company  granted  new  warrants  to  each of the investors whose funds were
received in 2001 and during the first six months of 2002 in order to permanently
replace  those  that  were  never issued.  Terms of the new warrants allowed the
investors  to purchase one share of Series A Preferred Stock for $2.50 per share
for  every $10 originally invested in the Company.  The Preferred Stock will pay
a  quarterly dividend of 7% annual interest in the form of Company common stock.
The  Preferred Stock is convertible into common shares of the Company on a 1 for
10  basis  at  any  date  through  June 30, 2005.  On that date, all outstanding
Preferred  Stock  will  convert  to  common  stock on a 1 for 10 basis.  The new
warrants to purchase Preferred Stock were to be exercised on or before April 30,
2004.  A total of 5,000 shares of Series A Preferred Stock were purchased during
the  six month period ended June 30, 2004, and preferred stock dividends of $197
were accrued in the form of 703 shares of Common Stock by  the  Company.

5.  Discontinued  operations:

Effective  July  31, 2003, the Company sold the remaining assets and liabilities
of  its  paging  airtime business segment.  The financial results of this paging
business  segment  are  presented as discontinued operations in the accompanying
financial  statements.

6.  Legal  matters

In  May 2003, the Company was sued by a former Board member seeking recovery for
the  value  of  350,000  shares,  or $209,500, and $120,000 due his firm under a
retainer  agreement  between  the Company and his firm.  The former Board member
had previously signed a settlement agreement with the Company in which he agreed
to  cancel  all potential claims against the Company and its directors in return
for  150,000  unregistered  shares  trading  at a value of $0.60 or higher.  The
Company  does  not  believe  it owes the former Board member anything beyond the
settlement  agreement  and  has actively defended its position. Discovery in the
case  has stopped due to the plaintiffs claim that he has lost his eyesight.  No
assurance  can  be  given,  however,  as  to  the  ultimate outcome of the case.

The  Company,  along  with  the  current  officers and board members and several
former  directors,  were  sued by a former director and his son for, among other
things,  breach  of  contract  for  unlawful  termination and failure to provide
stock.  The  alleged  breaches  and  other claims all stem from their service as
director  of  the Company and chief financial officer, respectively, for part of
2001  and  part  of  2002.  The  aggregate  amount  of  damages  claimed  is not
specified.  The  case  is  proceeding  in  the  state court in Denver, Colorado.
Several  of the individually-named defendants have been voluntarily dismissed by
the  plaintiffs.  The  Company plans to vigorously defend itself and its current
directors  and officers.  No assurance can be given, however, as to the ultimate
outcome  of  the  case.

                                         9


7.     Subsequent  events

In August 2004, the Company signed a financing arrangement with Dutchess Private
Equities,  II,  L.P.  ("Dutchess").  Under  the  terms  of  the arrangement, the
Company  received $100,000 under a convertible debenture on August 11, 2004, and
will  receive  an  additional  $100,000 and $50,000 under the debenture upon the
filing  and  effectiveness,  respectively,  of a registration statement with the
Securities  and  Exchange  Commission.  The  Company  also  signed an investment
agreement  under which Dutchess agreed to purchase up to $10.0 million in common
stock  from the Company, at the Company's discretion, over the next three years,
subject  to  certain  limitations  including  the Company's then current trading
volume.  The  Company also signed a consulting agreement with a company in which
an  employee  of  Dutchess  is a member of management.  Under the agreement, the
company  was  issued  500,000  shares  of  Company  common  stock.

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

Forward-Looking  Statements

Discussions  and  information  in this document, which are not historical facts,
should  be considered forward-looking statements. With regard to forward-looking
statements,  including  those  regarding  the  potential revenues from increased
sales,  and  the  business  prospects  or any other aspect of NightHawk Systems,
Inc.'s  business,  actual results and business performance may differ materially
from  that  projected or estimated in such forward-looking statements. NightHawk
Systems, Inc. ("the Company") has attempted to identify in this document certain
of the factors that it currently believes may cause actual future experience and
results  to differ from its current expectations. Differences may be caused by a
variety  of  factors, including but not limited to, adverse economic conditions,
entry  of  new and stronger competitors, inadequate capital and the inability to
obtain  funding  from  third  parties.

The  following  information  should  be  read  in conjunction with the unaudited
condensed  consolidated  financial statements included herein which are prepared
in accordance with accounting principles generally accepted in the United States
of  America  for  interim  financial  information.

The Three Months Ended June 30, 2004 Compared to the Three Months Ended June 30,
2003

Net  sales  for  the  three  month  period  ended June 30, 2004 were $161,387 as
compared  to  $528,095 for the corresponding period of the prior year, a decline
of  69%  between periods presented. Approximately $447,480 or 85% of the product
sales during the quarter ending June 30, 2003 came from two customers who placed
orders  totaling approximately $816,000. These orders were for the Company's NH2
rebooting  device  for a kiosk manufacturer and operator, and load control units
for  an  electric  utility  customer.  The NH2 order was substantially completed
during  fiscal 2003, while the load control unit order remains approximately 80%
complete  as  of  June  30, 2004 pending further instructions from the customer.
Although the Company processed orders for more customers during the 2004 quarter
than it did during the 2003 quarter, the orders were smaller in the current year
period  than  the prior period. Cash flow constraints also prevented the Company
from  generating  more  revenues  during  the  quarter  ended June 30, 2004. The
Company  had a backlog of orders in excess of $300,000 early in the quarter, but
did  not have the inventory on hand to process all of the orders immediately. As
a  result,  the Company had to wait to receive critical parts and only a portion
of  the  orders  were  processed  and  shipped  during  the  period.

Cost of goods sold decreased by $176,430 or 62% to $108,057 for the three months
ended  June  30,  2004  from  $284,487 for the corresponding period of the prior
year,  but increased as a percentage of revenues between the periods from 54% in
2003  to  67% in 2004. This increase as a percentage of revenues was largely due
to  the  increase  in production efficiency that that Company experienced in the
prior  year's  quarter  given  the two large orders it was producing during that
period.  The  Company  currently produces all its units in-house and maintains a
staff  of  three  persons  for  such  purposes.  Salaries and benefits for these
personnel  are  recorded  as  a direct cost of sales regardless of the number of
products  produced. As the number of units produced rises, the direct labor cost
associated  with  each  unit  typically  decreases.  The  Company's gross margin
decreased  from 46% to 33% from last year's period to this year's period, due to
the  decreased  production  from  the  two  major  contracts  discussed  above.

Selling, general and administrative expenses for the three months ended June 30,
2004  decreased  by $75,340 or 22% to $264,865 from $340,205 for the three month
period  ended  June  30, 2003. This decrease was largely the result of decreased
personnel  and  personnel-related  costs,  as  well  as  a decrease in legal and
auditing  fees.  During the second quarter of 2003, the Company canceled 300,000
shares  of common stock previously issued to a consultant during 2002. A $39,000
reduction  in  consulting expense was recorded during the second quarter of 2002
related  to  this  cancellation, as the Board determined that the shares had not
been  properly  authorized for issuance, and that there was a lack of sufficient
evidence  that  any  services  had  been  performed.

Interest  expense  increased  by  approximately  $14,000 between the three-month
periods  presented,  due mainly to the extension and restructuring of notes held
by  the  Company's  largest creditor.  During April 2004, the Company reached an
agreement with this creditor under which, in return for an additional $25,000 in
borrowings  and  the  extension of the maturity dates of his three notes to July
31,  2004,  the Company granted the creditor a secured position in the assets of
the  Company.  The  Company  also  agreed  on  a  going-forward basis to pay the
creditor  interest  monthly at an annual rate of 8% on the new total of $375,000
in  notes,  with  $750  of  the  monthly interest due being paid in cash and the
remainder  being paid in stock at a rate of $0.20 per share.  During the quarter
ended  June  2004,  the  Company  recorded  in  excess  of  $14,000  in interest
associated  with  the  three  notes.

                                         10

The  net  loss  for  the  three-month  period  ended  June 30, 2004 was $240,276
compared  to $61,627 for the three-month period ended June 30, 2003. The Company
produced  and  shipped more units during the quarter ended June 30, 2003 than in
any  other  quarter  in  its  history,  largely  because  of the two orders that
produced  85%  of  the revenues for that period. As mentioned above, the Company
processed  more  orders  for  more customers during the 2004 quarter than it did
during  the 2003 quarter, but the orders were smaller in the current year period
than  the  prior period. As such, gross profit declined between the two periods.
As  mentioned above, cash flow constraints prevented the Company from completing
its  total  backlog  of  business during the quarter ended June 30, 2004. If the
Company  had  had  adequate  inventory  levels  to produce its backlog of orders
completely during the quarter, revenues and gross profit results would have been
larger, and the net loss for the period would have been smaller. Reduced monthly
selling,  general  and  administrative expenses also contributed to the improved
results  during  the  month  of  June  2004.

After  giving consideration to prior year results for the Company's discontinued
airtime  operations  in 2003, the net loss per share increased slightly to $0.01
per  share  from  last  year's  quarter  to  this  year's  quarter.

The  Six  Months  Ended  June 30, 2004 Compared to the Six Months Ended June 30,
2003

Net sales for the six month period ended June 30, 2004 were $264,225 compared to
$695,271 for the corresponding period of the prior year. Approximately $605,000,
or  87%  of  the product sales during the quarter ending June 30, 2003 came from
two  customers  who  placed orders totaling approximately $816,000. These orders
were  for  the  Company's  NH2  rebooting  device  for  a kiosk manufacturer and
operator,  and  load  control  units  for an electric utility customer.  The NH2
order  was  substantially  completed  during fiscal 2003, while the load control
unit  order  remains  approximately  80%  complete  as  of June 30, 2004 pending
further  instructions  from the customer.  Although the Company processed orders
for  more customers during the 2004 quarter than it did during the 2003 quarter,
the  orders  were  smaller  in  the  current  year period than the prior period.

Cost  of  goods sold decreased by $198,394 or 52% to $180,623 for the six months
ended  June  30,  2004  from  $379,017 for the corresponding period of the prior
year,  but increased as a percentage of revenues between the periods from 55% in
2003  to  68%  in  2004.   This  increase  was  largely  due  to the increase in
production  efficiency that that Company experienced in the prior year's quarter
given  the  two  large  orders it was producing during that period.  The Company
currently produces all its units in-house and maintains a staff of three persons
for  such purposes.  Salaries and benefits for these personnel are recorded as a
direct  cost  of  sales  regardless  of the number of products produced.  As the
number  of units produced rises, the direct labor cost associated with each unit
typically  decreases.  The Company's gross margin decreased from 45% to 32% from
last  year's  period to this year's period, due to the decreased production from
the  two  major  contracts  discussed  above.

Selling,  general  and administrative expenses for the six months ended June 30,
2004  decreased  by  $113,908 or 17% to $540,945 from $654,853 for the six month
period  ended  June  30,  2003.  Although  the Company incurred additional costs
during  the  six  months  ended  June  30,  2004 for consulting fees for product
marketing  and  investor  relations,  as  well  as  for research and development
expenses  related  to  the Company's satellite-based unit, these costs were more
than offset by reductions in personnel and personnel-related costs, as well as a
decrease  in  professional  fees  from  legal and auditing services. The Company
expects sales of its satellite-based unit to begin producing revenues during the
last  six  months  of 2004.  During the period ending June 30, 2003, the Company
canceled 300,000 shares of common stock previously issued to a consultant during
2002.  A  $39,000 reduction in consulting expense was recorded during the second
quarter  of  2002 related to this cancellation, as the Board determined that the
shares  had not been properly authorized for issuance, and that there was a lack
of  sufficient  evidence  that  any  services  had  been  performed.

Interest expense increased by approximately $9,300 between the six-month periods
presented,  due  mainly  to  the increase in notes held by the Company's largest
creditor.  This  creditor  first loaned the Company $200,000 under a convertible
note  in  May  2003.  He  later  loaned the Company an additional $150,000 under
unsecured  notes  during  the  last  five months of 2003. During April 2004, the
Company  reached  an  agreement with this creditor under which, in return for an
additional  $25,000 in borrowings and the extension of the maturity dates of his
three  notes  to  July  31,  2004,  the  Company  granted the creditor a secured
position  in  the  assets  of  the  Company.  The  Company  also  agreed  on  a
going-forward basis to pay the creditor interest monthly at an annual rate of 8%
on  the  new  total  of $375,000 in notes, with $750 of the monthly interest due
being  paid in cash and the remainder being paid in stock at a rate of $0.20 per
share.

The  net loss for the six month period ended June 30, 2004 was $491,782 compared
to  $301,239  for the six month period ended June 30, 2003. The decrease was due
to the near-completion of the two large orders discussed above during 2003.  The
Company  produced and shipped more units during the quarter ending June 30, 2003
than in any other quarter in its history, largely because of the two orders that
produced  87%  of  the  revenues for that period. The Company has processed more
orders for more customers during the first six months of 2004 than it did during
the  first  half of 2003, but the orders were smaller in the current year period
than the prior period.   As such, gross profit declined between the two periods.

The  net loss per share from continuing operations, which exclude the results of
the Company's airtime operations segment during 2003, was $0.02 for both periods
presented.

                                         11

Liquidity  and  Capital  Resources

The  Company's  financial statements for the three and six months ended June 30,
2004  have  been  prepared  on  a  going  concern  basis, which contemplates the
realization  of  assets and the settlement of liabilities and commitments in the
normal  course  of business. For the six months ended June 30, 2004, the Company
reported  a  net  loss  of  $491,782  and has both a stockholders'  deficit  and
working  capital  deficiency  of approximately $1.0 million as of June 30,  2004

The Independent Auditors' Report on the Company's financial statements as of and
for  the  year  ended  December  31, 2003 included a "going concern" explanatory
paragraph  which  means  that the auditors expressed substantial doubt about the
Company's  ability  to  continue  as  a  going  concern.

During  the  six-month  period  ended  June  30, 2004, the Company used cash of
approximately  $413,000  in its normal operating activities.  The Company raised
approximately  $438,000  during  the  six  months from the sale of common stock,
warrants  to purchase common stock, and preferred stock.   Approximately $50,000
in  cash  proceeds  were generated from the issuance of short term notes.  Funds
provided from these issuances of debt and equity were used to fund the Company's
operations  during  the  period  and  to  make approximately $74,000 in payments
toward  the  Company's  debt  obligations  during  the  quarter.

Until  the Company is able to generate positive cash flows from operations in an
amount  sufficient to cover its current liabilities and debt obligations as they
become  due, it will remain reliant on borrowing funds or selling equity to meet
those  obligations.   The  Company  has  historically sold its equity securities
through  private  placements  with  various  individuals.  Raising funds in this
manner typically requires much time and effort to find new accredited investors,
and the terms of such an investment must be negotiated for each investment made.
Cash  from these types of investments has historically been generated in amounts
of  $50,000 or less, in an unpredictable manner, making it difficult to fund and
implement  a  broad-based  sales  and  marketing  program.

During  February  2004, the Company met with several brokerage firms and private
equity  groups  to  investigate  the  possibilities of raising an amount of cash
sufficient to both fund a comprehensive sales and marketing plan and improve its
working  capital  position  from  a  deficit  to a surplus. As a result of those
meetings,  the  Company  announced  in March 2004 that a brokerage firm based in
Vancouver,  British  Columbia  would sponsor an offering of equity securities of
the Company.  However, this offering would be performed on a best-efforts basis,
without any guarantee of success.  In an effort to fund the Company's operations
in advance of such an offering, the brokerage firm sponsored a private placement
of  Special  Warrants  which  are  convertible into units consisting of both one
share  of  common  stock  of  the  Company  at  $0.20 per share and a warrant to
purchase  one  share of common stock at $0.30 per share.  This private placement
effort  resulted  in  net  proceeds  of  $188,775.

In August 2004, the Company signed a financing arrangement with Dutchess Private
Equities,  II,  L.P.  ("Dutchess").  Under  the  terms  of  the arrangement, the
Company  received $100,000 under a convertible debenture on August 11, 2004, and
will  receive  an  additional  $100,000 and $50,000 under the debenture upon the
filing  and  effectiveness,  respectively,  of a registration statement with the
Securities  and  Exchange  Commission.  The  Company  also  signed an investment
agreement  under which Dutchess agreed to purchase up to $10.0 million in common
stock  from the Company, at the Company's discretion, over the next three years,
subject  to  certain  limitations  including  the Company's then current trading
volume.  Although  the  amount  and  timing of specific cash infusions available
under  the  entire financing arrangement cannot be predicted with certainty, the
arrangement  represents a contractual commitment by Dutchess to provide funds to
the  Company.  Although no assurance may be given that it will be able to do so,
the Company expects to be able to access funds under this arrangement to help it
fund  near-term  and  long-term  sales  and  marketing  efforts.

                                         12


A  challenge  faced  by  the  Company is the ability to purchase and maintain an
inventory  of  parts  necessary  to complete orders as quickly as possible after
they  are  received.  If the Company is able to complete orders more quickly, it
can  generate  and  collect  cash  from its contracts more quickly.  The Company
generates  recurring  orders  from  several  of  its  customers;  therefore, the
expeditious  completion  of  orders  could  lead to the generation of additional
orders  from existing customers and improved cash flows for the Company.   Also,
as  noted earlier, the Company's cost of production will be higher on a per unit
basis  if  it  does  not  maintain minimum levels of production in its facility.
Although the Company had a backlog of $300,000 in customer orders in April 2004,
it  only generated $161,387 in revenues during the quarter ended June 2004 as it
had  to wait for the delivery of parts to process the backlog of orders.  Delays
caused  by  the  purchasing  of  parts  during  the  period ending June 30, 2004
resulted  in  higher  production  costs per product because the Company has some
fixed  costs  associated  with production of units, and therefore decreased cash
inflows  during  the period.  The delays in purchasing also result in a delay in
receiving  follow-up  orders  from  the  customers.

In  an effort to assist the Company in completing orders for customers in a more
expeditious  manner,  in  August  2004 the Company's largest creditor loaned the
Company  an  additional  $60,000.  Proceeds  from  this  loan  have been used to
purchase parts required to complete a backlog of orders held by the Company, and
the  creditor will be repaid from the receipts generated by the orders, plus 10%
annual  interest.

As  a  result  of  funds raised and expected to be raised subsequent to June 30,
2004 the Company believes that it will be able to initiate a sales and marketing
plan designed to utilize direct sales efforts, as well as indirect sales efforts
through  dealer  networks  and  through  improvements  to  its own web site. The
Company  also  plans  to  utilize  funds  generated  through  debt  and  equity
arrangements  to  expedite the production of the orders it receives in an effort
to  improve  the  Company's  ability to generate cash flows from operations on a
recurring  basis.

Item  3.  Controls  and  Procedures

(a)     Evaluation  of  Disclosure  Controls  and  Procedures:

As  required  by Rule 13a-15 of the Securities Exchange Act of 1934, the Company
conducted  an evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the date of this filing.  The
evaluation  was  conducted  under the supervision of the chief executive officer
and  the  chief  financial  officer with the support of the principal accounting
personnel  who  determined  that  the  disclosure  controls  and  procedures are
effective.

The  Company's  disclosure  controls  and procedures are designed to ensure that
records are maintained in reasonable detail to reflect accurately and fairly all
of  the  transactions  and  dispositions  of  assets of the Company, prevent the
unauthorized use or disposition of the Company's assets and that the information
required  to  be  disclosed  in  reports  filed  pursuant to the Exchange Act is
accumulated  and  communicated  to  management,  including  the  Chief Executive
Officer and Chief Financial Officer, in order to provide them with adequate time
to  make  decisions  regarding  required disclosures.  There were no significant
changes  in  the disclosure controls or procedures since the prior public filing
by  the  Company  that  would  materially  affect  the  Company's  controls.

PART  II  -  OTHER  INFORMATION

Item  1   Legal  proceedings

There  have  been  no  material  developments in the McCarthy lawsuit since last
reported  in  the  Company's  10-QSB  filed  on  May  21,  2004.

There  have  been no material developments in the Brady lawsuit filed during the
first  quarterly  reporting period this year, other than the voluntary dismissal
of  some  of the individually named defendants.  The Company, its subsidiary and
the  remaining named defendants continue to contest the lawsuit vigorously.  The
case  is  proceeding  in  the  state  court  in  Denver,  Colorado.

Item  2   Changes  in  securities  and  use  of  proceeds

(c)  During  this reporting period, the Company sold 1,162,000 Special Warrants,
each  of  which is convertible into one share of common stock and one warrant to
purchase  one share of common stock at $0.30 pursuant to a Rule 506 exemption of
Regulation  D.  The  total  offering  price  was $232,400. A total of $43,625 in
commissions  and  legal fees were paid from these proceeds. There were less than
35  individual  purchasers  of  stock and they are all accredited investors. The
individuals  that  purchased  the  Special  Warrants and the amount of stock and
warrants  underlying  their  investment  are  as  follows:

<TABLE>
<CAPTION>



<S>      <C>         <C>          <C>        <C>
Date. .  Purchaser   Investment    # Shares  # Warrants
-------  ----------  -----------  ---------  ----------
5-28-04  C. Vorberg  $    50,000    250,000     250,000
5-28-04  D. Hunter   $    50,000    250,000     250,000
5-28-04  R. Saville  $    60,000    300,000     300,000
5-28-04  F. Hindson  $    12,400     62,000      62,000
6-15-04  C. Vorberg  $    60,000    300,000     300,000
-------  ----------  -----------  ---------  ----------
         Totals      $   232,400  1,162,000   1,162,000
                     ===========  =========  ==========

</TABLE>


                                         13



The  Special  Warrants  will  automatically  convert  at  the  earlier  of i) an
effective  registration  statement  filed  with  the  Securities  and  Exchange
Commission  or  receipt  of  a  qualified  prospectus  by  a Canadian provincial
authority,  whichever  comes  later;  or  ii) one year from their date of issue.


Item  3   Defaults  upon  senior  securities

         None

Item  4   Submission  of  matters  to  a  vote  of  securities  holders

         None

Item  5   Other  information

         None

Item  6   Exhibits  and  Reports

(a)    Exhibits

31  Certification  pursuant  to Rule 13A-14 or 15D-14 of the Securities Exchange
Act  of  1934,  as  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.

32  Certification pursuant to the 18 U.S.C. Section 1350, as adopted pursuant to
Section  906  of  the  Sarbanes-Oxley  Act  of  2002.

(b)     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.

                                                 Nighthawk  Systems,  Inc.
                                                 (Registrant)


Date:  August  23,  2004                         By:  /s/  H.  Douglas Saathoff
                                                 --------------------------
                                                 H.  Douglas  Saathoff
                                                 Chief  Executive  Officer  and
                                                 Chief  Financial  Officer




                                             14