U.S. 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 March 31, 2006

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF  1934
              For the transition period from _________ to ________

                         Commission File Number: 0-30786

                             NIGHTHAWK SYSTEMS, INC
                             ----------------------
        (Exact name of small business issuer as specified in its charter)

           Nevada                                                87-0627349
           ------                                                ----------
(State or other jurisdiction of                               (I.R.S Employer
 incorporation or organization)                              Identification No.)

                            10715 Gulfdale, Suite 200
                             San Antonio, TX  78216
                             ----------------------
                    (Address of principal executive offices)

                                  210 341-4811
                                  ------------
                           (Issuer's telephone number)

       __________________________________________________________________
    (Former name, former address and former fiscal year, if changed since last
                                     report)

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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEEDING FIVE YEARS

Check  whether  the  registrant  filed  all documents and reports required to be
filed  by  Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities  under  a  plan  confirmed  by  a  court.  Yes  [  ]  No  [  ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

As  of  May  22,  2006,  there were 69,050,611 shares of common stock, par value
$.001  per  share,  of  the  registrant  issued  and  outstanding.

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


                                        1
<PAGE>

                                        INDEX

Part  I     FINANCIAL  INFORMATION

Item  1     Financial  Statements  (unaudited)

     Condensed consolidated balance sheet as of March 31, 2006                 3
     Condensed  consolidated statements of operations for the
     three months ended March 31, 2006 and 2005                                4
     Condensed  consolidated  statement  of  stockholders'
     deficit for the three months ended March 31, 2006                         5
     Condensed  consolidated statements of cash flows for the
     three months ended March 31, 2006 and 2005                                6
     Notes to condensed consolidated financial statements                      8

Item 2      Management's Discussion and Analysis or Plan of Operation         14
Item 3     Controls and Procedures                                            18

Part  II    OTHER  INFORMATION

Item 1     Legal Proceedings                                                  19
Item 2     Unregistered Sales of Equity Securities and Use of Proceeds        19
Item 3     Defaults Upon Senior Securities                                    19
Item 4     Submissions of Matters to a Vote of Security Holders               19
Item 5     Other Information     24
Item 6     Exhibits and Reports on Form 8-K                                   19

Signatures and Certifications                                                 20

                                        2
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                                                        <C>
                                                 NIGHTHAWK SYSTEMS, INC.
                                         CONDENSED CONSOLIDATED BALANCE SHEET
                                                     MARCH 31, 2006
        ASSETS

Current assets:
     Cash                                                                                                  $   109,900
     Accounts receivable, net of allowance for doubtful accounts of $147                                        79,410
     Inventories                                                                                               160,832
     Prepaids                                                                                                  639,127
                                                                                                           ------------
               Total current assets                                                                            989,269
                                                                                                           ------------

Furniture, fixtures and equipment, net                                                                          19,908
Intangible and other assets                                                                                     19,548
                                                                                                           ------------
                                                                                                           $ 1,028,725
                                                                                                           ============


      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable                                                                                       $   292,847
    Accrued expenses                                                                                           338,227
    Line of credit                                                                                              19,792
    Notes payable:
        Related parties                                                                                         13,947
        Other                                                                                                  381,322
                                                                                                           ------------
               Total current liabilities                                                                     1,046,135
                                                                                                           ------------

Long-term liabilities:
   Convertible debt                                                                                          2,104,836
                                                                                                           ------------
Commitments and contingencies

Stockholders' deficit:
    Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding                 -
    Common stock; $0.001 par value; 200,000,000 shares authorized; 66,579,232 issued and outstanding            66,579
    Additional paid- in capital                                                                              7,176,854
    Accumulated deficit                                                                                     (9,365,679)
                                                                                                           ------------
               Total stockholders' deficit                                                                  (2,122,246)
                                                                                                           ------------
                                                                                                           $ 1,028,725
                                                                                                           ============
<FN>
                       The accompanying notes are an integral part of these financial statements.
</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                 <C>           <C>
                               NIGHTHAWK SYSTEMS, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                           THREE MONTHS ENDED MARCH 31,

                                                                        2006          2005
                                                                    ------------  ------------
Revenue                                                             $   141,387   $   171,222
Cost of goods sold                                                       98,812       104,524
                                                                    ------------  ------------
     Gross profit                                                        42,575        66,698

Selling, general and administrative expenses                            757,220       561,660
                                                                    ------------  ------------
     Loss from operations                                              (714,645)     (494,962)

 Interest expense:
     Related parties                                                        684           691
     Other                                                              600,352       130,627
                                                                    ------------  ------------
         Total interest expense                                         601,036       131,318
                                                                    ------------  ------------
Net loss                                                             (1,315,681)     (626,280)
Less: preferred stock dividends                                               -          (219)
                                                                    ------------  ------------
Net loss to common stockholders                                     $(1,315,681)  $  (626,499)
                                                                    ============  ============
Net loss per basic and diluted common share                         $     (0.02)  $     (0.02)
                                                                    ============  ============
Net loss to common stockholders per basic and diluted common share  $     (0.02)  $     (0.02)
                                                                    ============  ============
Weighted average common shares outstanding - basic and diluted       58,219,769    33,733,867
<FN>
          The accompanying notes are an integral part of these financial statements.
</TABLE>

                                        4
<PAGE>

<TABLE>
<CAPTION>



<S>                                                              <C>          <C>           <C>          <C>            <C>
                            Nighthawk Systems, Inc.
           Condensed Consolidated Statement of Stockholders' Deficit
                       Three months ended March 31, 2006

                                                                        Common stock        Additional
                                                                --------------------------    paid-in     Accumulated
                                                                   Shares        Amount       capital       deficit         Total
                                                                ------------  ------------  ------------  ------------  ------------
Balances, December 31, 2005                                      46,477,158   $    46,477   $ 5,464,436   $(8,049,998)  $(2,539,085)

Common stock issued for Dutchess  puts, net of commissions       12,615,074        12,615     1,142,768                   1,155,383

Common stock issued as incentive for notes payable                1,712,000         1,712       147,168                     148,880

Common stock issued for consulting services                       4,925,000         4,925       232,075                     237,000

Conversion of accrued expenses to common stock                      850,000           850        34,150                      35,000

Amortization of beneficial conversion feature on notes payable                                  153,269                     153,269

Net loss                                                                                                   (1,315,681)   (1,315,681)
                                                                ------------  ------------  ------------  ------------  ------------
Balances, March 31, 2006                                         66,579,232   $    66,579   $ 7,173,866   $(9,365,679)  $(2,122,246)
                                                                ============  ============  ============  ============  ============
</TABLE>

                                        5
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                    <C>           <C>
                                   NIGHTHAWK SYSTEMS, INC.
                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                THREE MONTHS ENDED MARCH 31,

                                                                                           2006         2005
                                                                                       ------------  ----------
Cash flows from operating activities:
      Net loss                                                                         $(1,315,681)  $(626,280)
                                                                                       ------------  ----------
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization                                                             2,384       1,681
   Employee options vested                                                                   2,988           -
   Loan discounts and warrants                                                             111,250      66,063
   Beneficial conversion feature                                                           153,269           -
   Common stock issued for consulting services                                             177,000      15,000
   Common stock issued for interest                                                         88,109           -
   Shares issued as incentives on notes payable                                            193,192      50,250
   Note payable issued for consulting services                                              24,850           -
   Amortization of prepaid consulting expense                                                    -     121,666
Changes in assets and liabilities:
   (Increase) decrease in accounts receivable                                                3,795     (35,754)
   (Increase) decrease in inventories                                                      (80,955)     (9,976)
   (Increase) decrease in prepaids                                                          (2,756)     23,596
   Increase (decrease) in accounts payable                                                   7,598     (38,739)
   Increase in accrued expenses                                                             29,841      24,275
                                                                                       ------------  ----------
Total adjustments                                                                          710,565     218,062
                                                                                       ------------  ----------
Net cash used in operating activities of continuing operations                            (605,116)   (408,218)
                                                                                       ------------  ----------

Cash flows from investing activities:
   Purchases of furniture, fixtures and equipment                                           (8,861)     (1,973)
                                                                                       ------------  ----------
Net cash used in investing activities                                                       (8,861)     (1,973)
                                                                                       ------------  ----------

Cash flows from financing activities:
   Proceeds from notes payable, related parties                                                  -         339
   Payments on notes payable, related parties                                                 (448)       (550)
   Proceeds from notes payable, other                                                      635,000     225,000
   Payments on notes payable, other                                                         (1,880)   (127,765)
   Payments on long term notes payable                                                           -     (13,399)
   Net proceeds from the sale of common stock, and the exercise  of puts and warrants            -     312,547
                                                                                       ------------  ----------
Net cash provided by financing activities                                                  632,672     396,172
                                                                                       ------------  ----------

Net (decrease) increase in cash                                                             18,695     (14,019)
                                                                                       ------------  ----------
Cash, beginning balance                                                                     91,205      61,118
                                                                                       ------------  ----------
Cash, ending balance                                                                   $   109,900   $  47,099
                                                                                       ============  ==========
</TABLE>

                                        6
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                                  <C>             <C>
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (CONTINUED)

Supplemental disclosures of cash flow information:                                 QUARTERLY PERIOD ENDED MARCH 31,
                                                                                           2006         2005
                                                                                       ------------  ----------

Cash paid for interest                                                                 $     8,269   $  18,312
                                                                                       ============  ==========
Supplemental disclosure of non-cash investing and financing activities:

Common shares issued as payments on notes payable, other                               $ 1,205,334
                                                                                       ============

Conversion of accrued expenses to common stock                                         $    35,000   $  56,620
                                                                                       ============  ==========

Conversion of notes payable and accrued interest to common stock
   Notes payable                                                                                     $  29,498
   Accrued interest                                                                                      1,752
                                                                                                     ----------
Total amount converted                                                                               $  31,250
                                                                                                     ==========

Preferred stock dividends issued in common stock                                                     $     219
                                                                                                     ==========
<FN>
                    The accompanying notes are an integral part of these financial statements.
</TABLE>

                                        7
<PAGE>
                             NIGHTHAWK SYSTEMS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   THREE MONTHS ENDED MARCH 31, 2006 AND 2005
                                   (unaudited)

1.  ORGANIZATION,  GOING  CONCERN,  RESULTS OF OPERATIONS AND MANAGEMENT'S PLANS

ORGANIZATION

Nighthawk  Systems,  Inc.  ("the  Company") designs and manufactures intelligent
remote power control products that are easy to use, inexpensive and can remotely
control  virtually  any  device  from  any location.  The Company's proprietary,
wireless  products  are ready to use upon purchase, so they are easily installed
by  anyone, regardless of technical ability, and are also easily integrated into
third-party products, systems and processes.  They allow for intelligent control
by  interpreting  instructions  sent  via  wireless  media,  and  executing  the
instructions  by  'switching'  the  electrical  current  that powers the device,
system  or  process.  Nighthawk's  intelligent  products  can  be  activated
individually, in pre-defined groups, or en masse, and for specified time periods
with  a  simple  click  of  a  mouse  or  by  dialing  a  telephone  number.

GOING  CONCERN,  RESULTS  OF  OPERATIONS  AND  MANAGEMENT'S  PLANS

The  Company  incurred  a  net  loss  of  approximately  $1.3 million during the
quarter  ended  March  31,  2006  and  had  a  stockholders' deficit and working
capital deficiency  of  approximately  $2.1  million  and  $57,000 respectively,
as  of  March  31,  2006.  These  conditions  raise  substantial doubt about the
Company's  ability to continue as a going concern.  Although no assurance can be
given  that  such  plans will be successfully implemented, management's plans to
address  these  concerns  include:

 -  Raising  working  capital  through  additional  borrowings.
 -  Raising  equity  funding  through  sales  of  the  Company's  common  stock.
 -  Implementation  of  the  Company's  sales  and  marketing  plans.

During  a  prior  year  the Company signed a financing arrangement with Dutchess
Private  Equities,  II,  L.P.  ("Dutchess")  under  which  the  Company received
$250,000 in exchange for a convertible debenture during August 2004. 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. Since entering into the arrangement
with Dutchess, the Company has utilized the arrangement to obtain enough cash to
cover  its  operating  cash  flow  deficits  on  a  monthly  basis.

For  more  information  on  transactions  with  Dutchess  during the three month
period  ending  March  31,  2006,  please  see  Note  3  -  Notes  payable.

Although  no  assurance  may be given that it will be able to do so, the Company
expects to be able to continue to access funds under this arrangement to help it
fund near-term and long-term sales and marketing efforts, and to cover cash flow
deficiencies.


                                        8
<PAGE>

The  Company's  strategic  initiatives  for  2006  include:

 -  Capitalize  on  existing  enterprise  sales  opportunities
 -  Cultivate  and  capitalize  on  indirect  sales  channels
 -  Enhance  our  marketing effort to support direct and indirect sales channels
 -  Bundle  our  products  with  ancillary  products  and  services  to  enhance
    revenue  opportunities
 -  Develop  and  sell  a  device  that functions on multiple wireless protocols
 -  Form  an  advisory  board with relevant industry expertise and relationships
 -  Execute  on  a  strategic  acquisition that is scalable and complementary to
    our  existing  business


The Report of the Company's Independent Registered Public Accounting Firm on the
Company's  financial  statements  as of and for the year ended December 31, 2005
includes  a  "going concern" explanatory paragraph which means that the auditors
expressed  substantial  doubt about the Company's ability to continue as a going
concern.  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.

2.  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 the financial statements and notes thereto included in the
Company's  Annual  Report  on Form 10-KSB for 2005 filed with the Securities and
Exchange  Commission  (the  "SEC").

3.  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.  The
Company  had  no  bill  and  hold  sales at December 31, 2005 or March 31, 2006.
Revenue  related to airtime billing is recognized when the service is performed.
Some  customers  pre-pay airtime on a quarterly or annual basis and the pre-paid
portion  is recorded as deferred revenue.  Deferred revenue, included in accrued
expenses  on  the  balance  sheet  at  March 31, 2006, is approximately $13,073.

PROVISION  FOR  DOUBTFUL  ACCOUNTS

The  Company  reviews  accounts  receivable  periodically for collectibility and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed  necessary.

                                        9
<PAGE>

CONCENTRATIONS

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist primarily of trade accounts receivable.  Receivables arising
from  sales  to  customers  are  not collateralized and, as a result, management
continually monitors the financial condition of its customers to reduce the risk
of  loss.  At  March 31, 2006, the Company had approximately $79,410 in accounts
receivable,  net  of the allowance for doubtful accounts.  Approximately $34,000
of  this  balance  was  from  three customers, which was collected subsequent to
March  31,  2006.

During  the  three months ended March 31, 2006, the Company had three individual
customers  that accounted for approximately 36% of total revenue. Each of theses
three  customers  accounted  for  10%  to 14% of total revenue. During the three
months  ended  March  31,  2005, one customer accounted for approximately 46% of
total  revenue.

During  the  three  months  ended  March 31, 2006, three suppliers accounted for
approximately  67%  of  the  Company's  purchases  of pre-manufactured component
materials.

INVENTORIES

Inventories  consist  of  parts  and  pre-manufactured  component  materials and
finished goods.  Inventories are valued at the lower of cost or market using the
first-in,  first-out  (FIFO)  method.

PROPERTY  AND  EQUIPMENT

Property  and equipment are recorded at cost. Depreciation is recorded using the
straight-line  method  over  the  estimated useful lives of five to seven years.
Maintenance  and  repairs  are  expensed  as  incurred  and  improvements  are
capitalized. Upon sale or retirement of assets, the cost and related accumulated
depreciation  or amortization is eliminated from the respective accounts and any
resulting  gains  or  losses  are  reflected  in  operations.

INTANGIBLE  ASSETS

Intangible  assets include patent costs and are stated at cost.   If the patents
are  granted,  the  Company  will  then  begin  to amortize the patents over the
shorter  of  the  lives  of  the patents or the estimated useful lives using the
straight-line  method. The Company reviews these and any other long-lived assets
for  impairment  whenever  events  or  changes  in  circumstances indicate their
carrying  amounts may not be recoverable.  Recoverability of an asset to be held
and  used  is  measured  by  a comparison of the carrying amount of the asset to
future  undiscounted  cash  flows expected to be generated by the asset.  If the
asset  is considered to be impaired, the impairment to be recognized is measured
by  the  amount by which the carrying amount of the asset exceeds the fair value
of  the  asset.  Based  on  its  review,  management  does  not believe that any
impairment  of  intangible  or other long-lived assets exists at March 31, 2006.

INCOME  TAXES

Deferred  tax  assets  and liabilities are recorded for the estimated future tax
effects of temporary differences between the tax basis of assets and liabilities
and  amounts reported in the accompanying balance sheets, and for operating loss
and tax credit carry forwards. The change in deferred tax assets and liabilities
for  the  period  measures the deferred tax provision or benefit for the period.
Effects  of  changes  in enacted tax laws on deferred tax assets and liabilities
are  reflected  as  adjustments to the tax provision or benefit in the period of
enactment.  The  Company's deferred tax assets have been completely reduced by a
valuation  allowance  because  management  does  not  believe realization of the
deferred  tax  assets  is  sufficiently  assured  at  the  balance  sheet  date.

                                       10
<PAGE>

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 quarter ended March 31, 2006 and
the year ended December 31, 2005, 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.

USE  OF  ESTIMATES

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

STOCK-BASED  COMPENSATION

During  the first quarter of fiscal 2006, the Company adopted the provisions of,
and  accounts  for  stock-based  compensation  in accordance with, the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No. 123
-  revised  2004 ("SFAS 123R") "Share-Based Payment" which replaced Statement of
Financial  Standards  No.  123  ("SFAS  123"),  "Accounting  for  Stock-Based
Compensation"  and  supersedes  APB  Opinion  No. 25 ("APA 25"), "Accounting for
Stock Issued to Employees".  Under the fair value recognition provisions of this
statement,  stock-based compensation cost is measured at the grant date based on
the  fair  value  of  the  award and is recognized as expense on a straight-line
basis  over  the  requisite  service  period,  which is the vesting period.  The
Company  elected  the modified-prospective method, under which prior periods are
not  revised  for  comparative  purposes.  The valuation provisions of SFAS 123R
apply to new grants and to grants that were outstanding as of the effective date
and  are  subsequently  modified.


3.  NOTES  PAYABLE

<TABLE>
<CAPTION>

<S>                                                                                                                    <C>
At March 31, 2006, notes payable consist of the following:

Related parties:
Note payable, officer; unsecured; interest at prime rate plus 5.5% (12.24% at March 31, 2006); due on demand             $    9,554
Note payable, officer; unsecured; interest at 23.99%, revolving                                                               4,393
                                                                                                                         -----------
                                                                                                                         $   13,947
                                                                                                                         ===========

Other:
Convertible note payable to stockholder, 8% interest rate, in default as of the date of this report (1)                  $  160,000
Notes payable to stockholder, 8% interest rate, in default as of the date of this report (1)                                165,000
Unsecured note with a financial institution, 17.24% interest rate, revolving                                                 17,222
Note payable, $198,000 face amount, no stated interest rate but with an implied annual rate of 41.09%,
  due December 12, 2006 (2)                                                                                                  39,100
                                                                                                                         -----------
                                                                                                                         $  381,322
                                                                                                                         ===========

Long Term:
Convertible debenture, 5% interest rate, due December, 2010                                                              $  500,000
Convertible debenture, 10% interest rate, due December,  2009                                                             1,419,836
Convertible debenture, 10% interest rate, due March, 2011                                                                   185,000
                                                                                                                         -----------
                                                                                                                         $2,104,836
                                                                                                                         ===========
<FN>
1)     Based  on discussions with the shareholder, who is a former board member,
the Company does not expect to receive a notice of default and to have the notes
called  by  the  holder. However, no assurance may be give that this will be the
case.
</TABLE>

                                       11
<PAGE>

On  January  9,  2006,  Dutchess  loaned  the Company $245,000.  The note had no
stated interest rate but had a face amount of $294,000 and matured on January 9,
2007.  Dutchess was issued 653,000 incentive shares of unregistered common stock
valued by the Company at $45,710 for the note, which was secured by put notices.
During  the  three  month  period  ending March 31, 2006, Dutchess exercised put
notices  valued  at $294,000 to pay off the note and was issued 3,477,247 shares
of  common  stock  as  a  result.

On  February  8,  2006,  Dutchess  loaned the Company $205,000 in exchange for a
convertible  debenture  that  was  due  February  8,  2011.  Dutchess was issued
615,000  incentive  shares of unregistered common stock valued by the Company at
$58,770  for  the  debenture,  which  was secured by put notices.  The debenture
contained  a  clause calling for an early redemption penalty of 20%.  During the
three  month period ending March 31, 2006, Dutchess exercised put notices valued
at  $246,000 to pay off the debenture and the redemption penalty, and was issued
2,429,107  shares  of  common  stock  as  a  result.  The  Company  recorded the
redemption  penalty  as  interest expense, and also recorded $68,333 in interest
expense  during  the  period related to the beneficial conversion feature of the
debenture.

On  March  16,  2006,  Dutchess  loaned  the  Company $185,000 in exchange for a
convertible  debenture  that is due March 16, 2011.  Dutchess was issued 444,000
incentive  shares  of unregistered common stock valued by the Company at $44,400
for  the  debenture,  which is secured by put notices.  The debenture contains a
clause  calling  for  an  early  redemption  penalty  of  20%.

In  addition  to  the  activity  discussed  about, during the three month period
ending  March  31,  2006,  Dutchess exercised puts valued at $540,358 to pay off
three  notes  and  one  debenture,  plus  all  related  interest,  that had been
outstanding  at  December 31, 2005, and exercised puts valued at $135,835 to pay
down a note that had been outstanding at December 31, 2005.  Dutchess was issued
6,708,720  shares  as  a  result  of  these  transactions.  The Company recorded
$98,500  in interest expense on these notes and debentures during the period, as
well as $83,908 in interest expense related to the beneficial conversion feature
of  the  debenture.

In  total,  the  Company  recognized  a  total  of  $153,269 in interest expense
related  to  the  beneficial conversion feature of debentures outstanding during
the  period.

On  April  19,  2006,  Dutchess  loaned  the  Company $165,000 in exchange for a
convertible  debenture  that is due April 19, 2011.  Dutchess was issued 366,666
incentive  shares  of unregistered common stock valued by the Company at $33,000
for  the  debenture,  which is secured by put notices.  The debenture contains a
clause  calling  for  an  early  redemption  penalty  of  20%.

On  May  17,  2006,  Dutchess  loaned  the  Company  $130,000  in exchange for a
convertible  debenture  that  is  due May 17, 2011.  Dutchess was issued 690,000
incentive  shares  of unregistered common stock valued by the Company at $41,400
for  the  debenture,  which is secured by put notices.  The debenture contains a
clause  calling  for  an  early  redemption  penalty  of  20%.

Subsequent to March 31, 2006, Dutchess has exercised five puts valued at $97,288
in  order  to  pay  off  the  note  due  December  12, 2006, and to pay down the
debentures  issued in December 2005 and March 2006.  The Company issued Dutchess
1,414,713  shares  of  common  stock  as  a  result.

                                       12
<PAGE>

4.  STOCKHOLDERS'  DEFICIT

COMMON  STOCK

During  the quarterly period ending March 31, 2006, the Company issued 4,925,000
unregistered shares of common stock to consultants for services to be performed.
The Company recognized $177,000 in expense related to these contracts during the
period, and has recorded an additional $60,000 in prepaid expense related to one
of  the  contracts  as  of  March  31,  2006.  The  Company  also issued 850,000
unregistered  shares  of  common  stock  to a consultant for $35,000 in services
rendered  in  2004  and  2005.

                                       13
<PAGE>

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.

GENERAL

The  Company  designs  and  manufactures intelligent remote monitoring and power
control  products  that  are  easy  to use, inexpensive and can remotely control
virtually  any device from any location.  Our proprietary, wireless products are
ready  to  use upon purchase, so they are easily installed by anyone, regardless
of  technical ability, and are also easily integrated into third-party products,
systems  and  processes.  They  allow  for  intelligent  control by interpreting
instructions sent via paging and satellite media, and executing the instructions
by 'switching' the electrical current that powers the device, system or process.
Our  intelligent  products can be activated individually, in pre-defined groups,
or en masse, and for specified time periods with a simple click of a mouse or by
dialing  a  telephone  number.

Our  products  have been uniquely designed and programmed to be simple and ready
to use upon purchase by anyone, almost anywhere, at affordable prices.  As such,
it  is  the Company's goal to have its products become commonplace, accepted and
used  by  businesses  and  consumers  alike  in  their  daily  routines.

We  save  consumers  and  businesses time, effort and expense by eliminating the
need  for a person to be present when and where an action needs to be taken.  By
utilizing  existing  wireless  technology,  we give our users the flexibility to
move  their  application  from  place  to  place,  without  re-engineering their
network.  Currently,  most  commercial  control  applications  utilize telephone
lines,  which  tether  the  system  to  a  single  location  and have associated
installation  and  monthly charges.  Our products make companies more profitable
by  eliminating  installation costs and monthly charges for telephone lines, and
allow  for  remote  control  of unmanned or remote locations that may operate on
traditional  electrical  power,  or  solar  or  battery  generated  power.

Applications  for  our  intelligent  products  include,  but are not limited to:

-     Rebooting  remotely  located  computer  equipment
-     Remote  switching  of  residential  power
-     Managing  power  on  an  electrical  grid
-     Activation/deactivation  of  alarm  and  warning  devices
-     Displaying  or  changing  a  digital  or  printed  message or warning sign
-     Turning  pumps  on  or  off
-     Turning  heating  or  cooling  equipment  on  or  off

                                       14
<PAGE>

Companies both large and small are seeking ways to save money and lower the risk
of  liability  by  replacing  processes  that  require  human  intervention with
processes  that  can  be controlled remotely without on-site human intervention.
Today,  the  remote  control of industrial or commercial assets and processes is
performed mainly through the use of telephone-line based systems.  Opportunities
exist  for  companies  that provide intelligent wireless solutions, as telephone
lines  are  expensive  and  limited  in  availability  and function. Nighthawk's
products  are  wireless,  and can be designed to work with a variety of wireless
media.  The  number  of  applications  for  wireless remote control is virtually
limitless.  The  Company  has  identified  primary  markets  (Utility,  IT
Professional,  Traffic  Control),  as  well  as  secondary  markets (Irrigation,
Outdoor  Advertising,  Oil/Gas,  Security)  for  its  products.

During 2005, the Company hired its first full-time personnel that were dedicated
only  to  developing  sales  channels  and sales opportunities Throughout  2005,
the  sales  staff  was  charged  with  generating new business opportunities for
the  Company's  core  products,  the NH100 rebooting device and the CEO700 whole
house  disconnect device.  It also launched a  new  website  during  2005  which
allows  potential customers to send contact information  and  product  inquiries
directly  to  the  Company  via  the  Internet.

Even  though  the  Company  did not actively market its rebooting devices during
2005,  if  results  from  the one major customer are excluded from both 2004 and
2005, sales of this product actually increased from year to year.  New rebooting
customers  were  added,  primarily within the Wireless Internet Service Provider
industry.  During  2005, in spite of long sales cycles typically associated with
electric  utilities,  the Company added over a dozen new utilities to its CEO700
customer  base.  More  importantly,  these efforts have lead to larger potential
sales  opportunities  within  the electric utility industry.  As of December 31,
2005,  the  Company had submitted bids on over $6.0 million in potential product
sales  within  the  industry, and was in contact with entities that are planning
large  deployments  over  the  next  18  months.


CRITICAL  ACCOUNTING  POLICIES  AND  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 revenue and expenses during
the  reporting  period.  Actual  results  could  differ  from  those  estimates.

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.  There
were  no  bill  and  hold  items  at March 31, 2005.  Revenue related to airtime
billing  is  recognized  when  the service is performed.  Some customers pre-pay
airtime  on  a quarterly or annual basis and the pre-paid portion is recorded as
deferred revenue.  Deferred revenue, included in accrued expenses on the balance
sheet  at  March  31,  2005,  is  approximately  $13,073.

STOCK-BASED  COMPENSATION

We  believe  that  stock-based compensation is a critical accounting policy that
affects  our  financial  condition  and  results  of  operations.  Statement  of
Financial  Accounting  Standards  ("SFAS")  No.  123, Accounting for Stock-Based
Compensation  defines  a  fair-value  based method of accounting for stock-based
employee  compensation  plans  and  transactions  in  which an entity issues its
equity  instruments  to  acquire  goods  or  services  from  non-employees,  and
encourages  but  does  not  require  companies  to  record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to
continue  to  account  for employee stock-based compensation using the intrinsic
value  method  prescribed  in  Accounting  Principles  Board  Opinion  No.  25,
Accounting  for  Stock  Issued  to  Employees  ("APB  No.  25")  and  related
interpretations.

The Financial Accounting Standards Board ("FASB") issued SFAS
No.  123R  "Share-Based Payment", which addresses the accounting for share-based
payment  transactions.  SFAS  123R  eliminates  the  ability  to  account  for
share-based  compensation  transactions  using  APB  25,  and instead, generally
requires  that such transactions be accounted and recognized in the statement of
operations based on their fair value.  SFAS No. 123R offers the Company
alternative  methods  of  adopting  this  standard.  The  Company  has  not  yet
determined  which alternative method it will use.  Depending upon the number and
terms  of  options  that may be granted in future periods, the implementation of
this  standard  could have a material impact on the Company's financial position
and  results  of  operations.

                                       15
<PAGE>

COMPARISON  OF  THE  THREE  MONTHS  ENDED  MARCH  31,  2006  AND  MARCH 31, 2005

Revenue

The  components  of  revenue and their associated percentages of total revenues,
for  the  three  months  ended  March  31,  2006  and  2005  are  as  follows:

<TABLE>
<CAPTION>
<S>                              <C>            <C>            <C>            <C>
                               Quarterly period ended March 31,
                                 ----------------------------
                                      2006           2005         Change %       Change $
                                 -------------  -------------  -------------  -------------
Revenues:
Rebooting products               $ 47,070  33%  $ 21,604  13%       118%      $ 25,466
Logic boards                       17,465  12%    25,853  15%       (32%)       (8,338)
Utility products                   47,998  34%    31,225  18%        54%        16,773
Emergency notification products    17,815  13%         -   -         n/a        17,815
Hydro 1                                 -   -     76,750  45%        n/a       (76,750)
Airtime sales                       8,045   6%    14,233   8%       (43%)       (6,188)
Other product                       1,392   1%       355   0%       292%         1,037
Freight                             1,602   1%     1,202   1%        33%           400
                                 -------------  -------------  -------------  -------------
Total revenues                   $141,387 100%  $171,222 100%       (17%)     $(29,835)
</TABLE>

Revenues  for  the  three-month  period  ended  March  31, 2006 were $141,387 as
compared to $171,222 for the corresponding period of the prior year, a decrease
of  17%  between  periods.  During  the  three  months ended March 31, 2005, one
customer, who purchased the Company's Hydro 1 product, represented approximately
46%  of  the  Company's  total  revenue.  This  sale  was  made  as  part  of  a
stated-funded  project  in  New Mexico, and the Company has not marketed or sold
Hydro 1's since that time.  The Company does not consider the Hydro 1 to be part
of  its  portfolio  of  products  that it markets and sells on an ongoing basis.
Sales of the Company's core products (rebooting, utility, emergency notification
and  logic  boards)  increased  67% between the periods due to the marketing and
sales  efforts  launched  by  the  Company  during 2005.  Sales of the Company's
rebooting  products  more than doubled, as the Company began focusing on selling
to Wireless Internet Service Providers.  Sales of utility products increased 18%
as  the  Company added new customers to its base during 2005 and the first three
months  of 2006.  Utility customers typically order product on a test basis, and
then  reorder  on  a  recurring  basis  if  they  are pleased with the product's
performance.  Sales  of the Company's logic boards decreased between the periods
presented,  but  during  2005  the Company began selling FAS8 firehouse alerting
systems.  Fire  departments began buying the FAS8 instead of using the Company's
PT1000  logic boards for their station alerting.  The decrease in sales of logic
boards  of approximately $8,000 was more than offset by approximately $18,000 in
sales  of  FAS8's.

Cost  of  goods  sold  includes  parts  and  pre-manufactured components used to
assemble our products as well as allocated overhead for production personnel and
facilities  costs.  Cost  of goods sold decreased by $5,712 or 5% to $98,812 for
the three months ended March 31, 2006 from $104,524 for the corresponding period
of  the prior year but increased as a percentage of revenues between the periods
from  61%  in  2005  to  70%  in  2006.  As a result, the Company's gross margin
decreased between the periods from 39% to 30%.  This decrease is almost entirely
due  to  the sale of the higher margin Hydro 1 units during the first quarter of
2005.

Selling,  general  and  administrative expenses for the three months ended March
31,  2006  increased  by  $195,560  or  35%  to  $757,220  from $561,660 for the
three-month  period  ended  March  31,  2005.  This  increase  was  due  to  the
recognition  of  approximately  $180,000  in  noncash expenses from unregistered
stock  issuances  to  public  relations  firms.

Interest  expense  increased  $469,718  or  358% between the three-month periods
presented.  The  increase  was  due  to interest expense related to the Dutchess
notes  and  debentures,  several which were paid off during the first quarter of
2006  prior  to their maturity date.  When this occurs, the Company expenses any
unamortized  discount  associated  with  the debt being paid off, as well as any
unamortized  beneficial  conversion  expense, any unamortized expense associated
with  incentive shares issued with the debt, and any early redemption penalties.
During  the  first  quarter  of 2006, the Company recognized interest expense of
approximately  $153,000  related  to  the  beneficial  conversion  feature  of
debentures,  as  well  as approximately $192,000 in interest expense related for
the value of incentive shares issued to Dutchess in exchange for money loaned to
the  Company.  The  Company  also  recognized  approximately $77,000 in interest
expense  during the period in early redemption penalties on debentures that were
paid  off  during  the  period.

                                       16
<PAGE>

The  net  loss to common shareholders for the three-month period ended March 31,
2006  was $1,315,681 compared to $626,499 for the three-month period ended March
31,  2005.  The increase in net loss was due primarily to increased expenses for
public  relations  campaigns, and interest expense related to Dutchess notes and
debentures.

LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company's  financial  statements  for the three months ended March 31, 2006
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.  The  Company  incurred  a  net loss of approximately $1.3 million
during the quarter ended  March  31,  2006  and  had a stockholders' deficit and
working  capital  deficiency  of  approximately  $2.1  million  and  $57,000
respectively,  as  of  March  31,  2006.

The Report of the Company's Independent Registered Public Accounting Firm on the
Company's  financial  statements  as of and for the year ended December 31, 2005
includes  a  "going concern" explanatory paragraph which means that the auditors
expressed  substantial  doubt about the Company's ability to continue as a going
concern.

Although  no  assurance  can  be  given  that  such  plans  will be successfully
implemented,  management's  plans  to  address  these  concerns  include:

 -  Raising  working  capital  through  additional  borrowings.
 -  Raising  equity  funding  through  sales  of  the  Company's  common  stock.
 -  Implementation  of  the  Company's  sales  and  marketing  plans.

During  a  prior  year  the Company signed a financing arrangement with Dutchess
Private  Equities,  II,  L.P.  ("Dutchess")  under  which  the  Company received
$250,000 in exchange for a convertible debenture during August 2004. 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. Since entering into the arrangement
with Dutchess, the Company has utilized the arrangement to obtain enough cash to
cover  its  operating  cash  flow  deficits  on  a  monthly  basis.

During  the  quarter ended March 31, 2006, cash used in operating activities was
approximately $605,000.  Net proceeds from the issuance of a note and debentures
to  Dutchess  were  $615,000.  Major  cash  outlays  during  the  quarter  were
approximately  $187,000  for  public  relations  efforts,  $171,000  for
payroll/employee benefits, $81,000 for inventory, $68,000 for consulting expense
and  $39,000  for  sales  and  marketing  efforts.

The  Company issued 12,615,074 shares to Dutchess during the quarter ended March
31,  2006  which  was  used  to  pay  down $1,216,193 in debt during the period.

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 from or selling equity to
Dutchess  or  other  parties  to meet those obligations. 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.

                                       17
<PAGE>

ITEM  3.  CONTROLS  AND  PROCEDURES

(a)  Evaluation  of  Disclosure  Controls  and  Procedures:

The  Company's  management,  including the Company's principal executive officer
and  principal accounting and financial officer, has evaluated the effectiveness
of  the  Company's  disclosure  controls  and  procedures  (as  defined in Rules
13a-15(e)  and  15d-15(e)  under  the Securities Exchange Act of 1934) as of the
three-month  period  ended  March  31, 2006, the period covered by the Quarterly
Report
on  Form  10-QSB.  Based upon that evaluation, the Company's principal executive
officer  and  principal financial and accounting officer have concluded that the
disclosure  controls  and  procedures  were  effective  as of March 31, 2006
to  provide  reasonable  assurance  that  material  information  relating to the
Company  is  made  known  to  management  including  the  CEO.

There were no changes in the Company's internal control over financial reporting
that  occurred  during  the  Company's  last fiscal quarter that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

                                       18
<PAGE>

                           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

The  Company  is in default on two loans from Mr. Revesz, a former board member,
as of the date of this report and is in discussions to extend the maturity dates
on  those  notes.  In  April  2004,  the Company reached an agreement with Tomas
Revesz  under  which,  in return for an additional $25,000 in borrowings and the
extension  of  the  maturity  dates of three notes to July 31, 2004, the Company
granted  the  creditor  a  secured  position  in  the  assets  of  the  Company.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITIES  HOLDERS

None

ITEM  5.  OTHER  INFORMATION

None

ITEM  6.  EXHIBITS  AND  REPORTS

(a)  Exhibits

31.1 Certification of H. Douglas Saathoff, Chief Executive Officer and Principal
Financial  and  Accounting  Officer,  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

                                       19
<PAGE>

                                   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:  May  22,  2006        By:  /s/  H.  Douglas  Saathoff
                                  --------------------------
                                       H.  Douglas  Saathoff,
                                       Chief  Executive Officer, Principal
                                       Accounting and Financial Officer

                                       20
<PAGE>