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 September 30, 2005

[  ]  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                            (I.R.S Employer
of 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 November 21, 2005 there were 43,596,002 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]

<PAGE>

<TABLE>
<CAPTION>

<S>              <C>                                                                             <C>
                                               Index

Part I . . . .   Financial Information

Item 1 . . . .   Financial Statements (unaudited)
                 Condensed consolidated balance sheet as of September 30, 2005                    2
                 Condensed consolidated statements of operations for the three
                 and nine month periods ended September 30, 2005 and 2004                         3
                 Condensed consolidated statement of stockholders' deficit for
                 the nine months ended September 30, 2005 . . . . . . . .                         4
                 Condensed consolidated statements of cash flows for the nine
                 months ended September 30, 2005 and 2004                                         5
                 Notes to condensed consolidated financial statements                             7

Item 2 . . . .   Management's Discussion and Analysis or Plan of Operation                       15
Item 3 . . . .   Controls and Procedures                                                         22

Part II. . . .   Other Information

Item 1 . . . .   Legal Proceedings                                                               23
Item 2 . . . .   Unregistered Sales of Equity Securities and Use of Proceeds                     23
Item 3 . . . .   Defaults Upon Senior Securities                                                 23
Item 4 . . . .   Submissions of Matters to a Vote of Security Holders                            23
Item 5 . . . .   Other Information                                                               23
Item 6 . . . .   Exhibits and Reports on Form 8-K                                                24

                 Signatures and Certifications                                                   25
</TABLE>
                                        1
<PAGE>

                         PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                   Nighthawk Systems, Inc.
                                            Condensed Consolidated Balance Sheet
                                                     September 30, 2005
<S>                                                                                                                <C>
        ASSETS

Current assets:
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $     5,410
     Accounts receivable, net of allowance for doubtful accounts of $750 . . . . . . . . . . . . . . . . . . . . . .        62,157
     Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        78,386
     Prepaids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       111,032
                                                                                                                       ------------
               Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       256,985
                                                                                                                       ------------

Furniture, fixtures and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        12,675
Intangible and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        14,762
                                                                                                                       ------------
                                                                                                                       $   284,422
                                                                                                                       ============

      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $   300,448
    Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       273,306
    Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        19,792
    Notes payable:
        Related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        14,814
        Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,821,940
                                                                                                                       ------------
               Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,430,300
                                                                                                                       ------------

Commitments and contingencies

Stockholders' deficit:
    Preferred stock, $0.001 par value; 5,000,000 shares authorized; 5,000 issued and outstanding;
    liquidation preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $    12,500
    Common stock; $0.001 par value; 200,000,000 shares authorized; 42,262,941 issued and outstanding . . . . . . . .        42,263
    Additional paid- in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     5,294,230
    Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (7,494,871)
                                                                                                                       ------------
               Total stockholders' deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (2,145,878)
                                                                                                                       ------------
                                                                                                                       $   284,422
                                                                                                                       ============
<FN>

                             The accompanying notes are an integral part of these financial statements.
</TABLE>
                                        2
<PAGE>

<TABLE>
<CAPTION>

                                                       Nighthawk Systems, Inc.
                                            Condensed Consolidated Statements of Operations

<S>                                                             <C>                 <C>             <C>                <C>
                                                                Three months ended September 30,    Nine months ended September 30,
                                                                    2005                2004            2005               2004
                                                                ------------        ------------    ------------       ------------

Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   120,973         $   221,723     $   390,567        $   485,948
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . .       91,579             163,786         281,203            344,409
                                                                ------------        ------------    ------------       ------------
     Gross profit. . . . . . . . . . . . . . . . . . . . . . .       29,394              57,937         109,364            141,539

Selling, general and administrative expenses . . . . . . . . .      476,496             348,005       1,626,195            888,950
                                                                ------------        ------------    ------------       ------------
     Loss from operations. . . . . . . . . . . . . . . . . . .     (447,102)           (290,068)     (1,516,831)          (747,411)

 Interest expense:
     Related parties . . . . . . . . . . . . . . . . . . . . .          627              34,041           1,466             39,641
     Other . . . . . . . . . . . . . . . . . . . . . . . . . .      130,224              97,329         619,232            153,918
                                                                ------------        ------------    ------------       ------------
         Total interest expense. . . . . . . . . . . . . . . .      130,851             131,370         620,698            193,559
                                                                ------------        ------------    ------------       ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . .     (577,953)           (421,438)     (2,137,529)          (940,970)
Less: preferred stock dividends. . . . . . . . . . . . . . . .         (224)               (223)           (664)              (420)
                                                                ------------        ------------    ------------       ------------
Net loss to common stockholders. . . . . . . . . . . . . . . .  $  (578,177)        $  (421,661)    $(2,138,193)       $  (941,390)
                                                                ============        ============    ============       ============

Net loss per basic and diluted common share. . . . . . . . . .  $     (0.01)        $     (0.01)    $     (0.06)       $     (0.03)
                                                                ============        ============    ============       ============

Net loss to common stockholders per basic and
diluted common share . . . . . . . . . . . . . . . . . . . . .  $     (0.01)        $     (0.01)    $     (0.06)       $     (0.03)
                                                                ============        ============    ============       ============

Weighted average common shares outstanding - basic and diluted   40,626,529          28,714,168      37,228,455         27,190,261
                                                                ============        ============    ============       ============
<FN>

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

                                        3
<PAGE>
<TABLE>
<CAPTION>

<S>                                       <C>        <C>        <C>       <C>        <C>        <C>       <C>         <C>
                                                                 Nighthawk Systems, Inc.
                                                Condensed Consolidated Statements of Stockholders' Deficit
                                                            Nine months ended September 30, 2005

                                            Preferred Stock       Common stock       Additional
                                         --------------------- ---------------------  paid-in    Special   Accumulated
                                           Shares      Amount    Shares     Amount    capital    Warrants    deficit      Total
                                         ---------- ---------- ---------- ---------- ---------- ---------- ----------- ------------
Balances, December 31, 2004. . . . . . .     5,000  $  12,500  31,959,247 $  31,960  $3,884,516 $ 188,775 $(5,357,342) $(1,239,591)

   Common stock issued, and puts and
    warrants exercised for cash. . . . .                        3,013,452     3,013     407,789                            410,802
   Common stock issued as incentive on
    notes payable. . . . . . . . . . . .                        1,755,000     1,755     246,545                            248,300
   Common stock and options issued for
    consulting and other services. . . .                        1,235,462     1,235     236,796                            238,031
   Common stock issued for
    settlement of lawsuit. . . . . . . .                          250,000       250      22,250                             22,500
   Conversion of accrued liabilities to
    common stock . . . . . . . . . . . .                          313,100       313      56,307                             56,620
   Conversion of notes payable and
    accrued interest to common stock . .                        2,761,958     2,762     252,227                            254,989
   Series A preferred dividend . . . . .                            4,972         5          (5)                                 -
   Exercise of Special Warrants. . . . .                          969,750       970     187,805  (188,755)                       -
   Net loss. . . . . . . . . . . . . . .                                                                   (2,137,529)  (2,137,529)
                                         ---------- ---------- ---------- ---------- ---------- ---------- ----------- ------------
Balances, September 30, 2005 . . . . . .     5,000  $  12,500  42,262,941 $  42,263  $5,294,230 $       - $(7,494,871) $(2,145,878)
                                         ========== ========== ========== ========== ========== ========== =========== ============
<FN>

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

                                        4
<PAGE>

<TABLE>
<CAPTION>

                                                               Nighthawk Systems, Inc.
                                                  Condensed Consolidated Statements of Cash Flows
                                                           Nine months ended September 30,

<S>                                                                                                    <C>             <C>

                                                                                                           2005            2004
                                                                                                       ------------    ------------

Cash flows from operating activities:
      Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $(2,137,529)    $  (940,970)
                                                                                                       ------------    ------------
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4,740           5,781
   Bad debt expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,648               -
   Beneficial conversion feature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -          83,333
   Amortization of loan discounts and warrants . . . . . . . . . . . . . . . . . . . . . . . . . . .       266,049               -
   Common stock and options issued for consulting and other services . . . . . . . . . . . . . . . .       238,031         223,988
   Common stock and warrants issued for interest . . . . . . . . . . . . . . . . . . . . . . . . . .             -          77,616
   Common stock issued for placement fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -          12,500
   Amortization of shares issued as incentives on notes payable. . . . . . . . . . . . . . . . . . .       180,007               -
   Amortization of shares issued for prepaid consulting. . . . . . . . . . . . . . . . . . . . . . .       318,138               -
Changes in assets and liabilities, net of business acquisition:
   Decrease (increase) in accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . .       (18,052)        (14,231)
   (Increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (51,676)        (32,840)
   Decrease in prepaids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        34,482               -
   Decrease in other assets and intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . .        (1,020)        (95,748)
   Increase in customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -         (58,129)
   Increase in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -          55,000
   (Increase) decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (121,805)        (21,240)
   Increase in accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       116,058          32,430
                                                                                                       ------------    ------------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       966,600         334,050
                                                                                                       ------------    ------------
Net cash used in operating activities of continuing operations . . . . . . . . . . . . . . . . . . .    (1,170,929)       (606,920)
                                                                                                       ------------    ------------

Cash flows from investing activities:
   Purchases of furniture, fixtures and equipment. . . . . . . . . . . . . . . . . . . . . . . . . .        (4,348)              -
                                                                                                       ------------    ------------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (4,348)              -
                                                                                                       ------------    ------------
Cash flows from financing activities:
   Repayment of cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -          (3,902)
   Proceeds from the sale of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -          12,500
   Proceeds from notes payable, related parties. . . . . . . . . . . . . . . . . . . . . . . . . . .         1,070          25,809
   Payments on notes payable, related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . .        (1,658)        (35,054)
   Proceeds from notes payable, other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,173,654          85,000
   Payments on notes payable, other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (1,464,300)        (30,214)
   Proceeds from issuance of convertible debt and warrants . . . . . . . . . . . . . . . . . . . . .             -         250,000
   Payments on other related party payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -         (25,000)
   Proceeds from the issuance of special warrants. . . . . . . . . . . . . . . . . . . . . . . . . .             -         188,775
   Net proceeds from the sale of common stock, and the exercise of puts and warrants . . . . . . . .       410,802         237,350
                                                                                                       ------------    ------------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,119,569         705,264
                                                                                                       ------------    ------------

Net (decrease) increase in cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (55,708)         98,344
Cash, beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        61,118               -
                                                                                                       ------------    ------------
Cash, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $     5,410     $    98,344
                                                                                                       ============    ============

</TABLE>

                                        5
<PAGE>

<TABLE>
<CAPTION>

                                            Condensed Consolidated Statements of Cash Flows
                                                              (continued)
<S>                                                                                                    <C>             <C>
Supplemental disclosures of cash flow information:
                                                                                                           2005            2004
                                                                                                       ------------    ------------
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $   195,244     $    21,900
                                                                                                       ============    ============
Supplemental disclosure of non-cash investing and financing activities:

Common shares issued as incentives for notes payable . . . . . . . . . . . . . . . . . . . . . . . .   $   248,300
                                                                                                       ============    ============

Common shares issued for prepaid consulting agreements . . . . . . . . . . . . . . . . . . . . . . .   $   207,500
                                                                                                       ============    ============

Conversion of accrued expenses to common stock . . . . . . . . . . . . . . . . . . . . . . . . . . .   $    83,226
                                                                                                       ============    ============

Conversion of notes payable and accrued interest to common stock
   Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $   240,623     $   215,015
   Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        14,362          22,179
                                                                                                       ------------    ------------
Total amount converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $   254,987     $   237,194
                                                                                                       ============    ============

Preferred stock dividends issued in common stock . . . . . . . . . . . . . . . . . . . . . . . . . .   $       664     $       420
                                                                                                       ============    ============
<FN>

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

</TABLE>

                                        6
<PAGE>
                             NIGHTHAWK SYSTEMS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
         THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (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
turn  on  or  off  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 paging and satellite
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 $1.38 million during the year
ended  December 31, 2004 and a net loss of approximately $2.1 million during the
nine  months  ended September 30, 2005.  The Company had a stockholders' deficit
and working capital deficiency of approximately $1.24 million and $1.04 million,
respectively,  as  of  December  31,  2004  and  $2.1  million  and $2.2 million
respectively, as of September 30, 2005. 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:

          1.  Raising  working  capital  through  additional  borrowings.
          2.  Raising equity funding through sales of the Company's common
              stock.
          3.  Implementation  of  a  sales  and  marketing  plan.

Additional  borrowings  and  equity  fundraising:

In August 2004, 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 the third quarter of 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.

During the nine months ended September 30, 2005, Dutchess loaned the company net
cash  proceeds  of approximately $1.2 million in the form of notes payable.  The
notes  have  no  stated  interest  rate  but have a face amount greater than the
funded  amount.  This difference is recognized as interest expense over the life
of  the  loan.  Under  the terms of the notes, Dutchess is also issued incentive
shares, which are recorded as prepaid interest and expensed over the life of the
loan.

During the nine months ended September 30, 2005, the Company exercised eight (8)
puts to Dutchess totaling 2,013,452 shares for net proceeds of $271,726.  Of the
total  proceeds,  $174,633 was used to repay portions of previously issued notes
to  Dutchess  and  $97,093  went  to  the  Company.

On  March 9, 2005, Dutchess exercised 250,000 warrants at $0.125 each, for total
proceeds  of  $31,250,  $15,000  of  which  was  applied to an outstanding note.

The  Company  used  the  proceeds  from the notes, puts and warrants to fund its
operating cash flow deficits and to repay outstanding notes and accrued interest
and  penalties  to  Dutchess.

For more information on the transactions with Dutchess, please see Note 5, Notes
payable.

                                        7
<PAGE>

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.

The  sales  and  marketing  plan  for  2005  includes  the  following:

          -  Hiring sales and marketing personnel. The Company hired a marketing
          consultant in December 2004 and increased its sales force in the first
          quarter  of  2005  with  experienced  salespeople  with  the  goal  of
          effectively  targeting  existing and new markets. In October 2005, the
          Company  hired an individual with expertise in the wireless automation
          industry  as  general  manager.

          -  Product  marketing  including  print  media and attendance at trade
          shows.  This  method  has proved the most effective for the Company to
          date,  and it plans to increase its presence in these areas to attract
          new  customers.

          - An improved Internet presence. The Company launched a new website in
          May  2005  to  improve  content  and to make the site more friendly to
          search  engines. The Company has plans to add e-commerce functionality
          at  a  future  date.

          -  Leveraging  existing  customer  relationships  by  up-selling  new
          products  or  fully  integrating  systems with the Company's products.

          -  The  establishment  of distribution and dealer networks. Through an
          effective  dealer  network,  the Company can increase awareness in its
          products  and  utilize  a dealer's sales force to actively promote its
          products.  During  2005,  the  Company has signed sales representative
          agreements  with  three  electrical  utility  wholesalers and with one
          reseller  of  products  to  wireless  Internet  service  providers.

          -  New applications in irrigation control, civil defense and emergency
          management. The current product design can be altered with little cost
          to  the  Company  to  be  effectively implemented into a wide array of
          fields.  Through  the  commitment  of  funding,  the  Company  can now
          research all possible applications and begin to market directly to new
          customers.

          -  The  development  and  launch  of a product designed to be used for
          multiple  purposes  by  consumers.

In  addition  to  the marketing and sales objectives, the Company has identified
the  following  strategic  goals  for  2005:

          -  Joint  ventures  with  wireless  service  providers  and  equipment
          manufacturers.

          -  The  identification  of  complementary  products  and companies for
          potential  acquisition.

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 2004 filed with the Securities and
Exchange  Commission  (the  "SEC").

                                        8
<PAGE>

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, 2004 or September 30, 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 September 30, 2005, is approximately $7,757.

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.

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  September  30,  2005,  the  Company  had approximately $63,000 in
accounts  receivable, net of the allowance for doubtful accounts.  Approximately
$32,000  of this balance, or 51%, was from three customers.  As of September 30,
approximately  $11,000  of  this balance was still owed by one of the customers,
and  the  remainder  had  been  collected.

During  the three month period ended September 30, 2005, two customers accounted
for  approximately  32%  of  total  revenue.  During the nine month period ended
September  30,  2005,  two  customers  accounted  for approximately 37% of total
revenue.

During  the three and nine month periods ended September 30, 2005, the Company's
largest  supplier  accounted for approximately 33% and 56%, respectively, 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.

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.

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 nine month periods
ended September 30, 2005 and the year ended December 31, 2004, 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.

                                        9
<PAGE>

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.

Reclassifications

Certain  amounts reported in the consolidated financial statements for the three
and  nine  months  ended September 30, 2004 have been reclassified to conform to
the  September  30,  2005  presentation.

Stock-based  compensation

The  Company  has  adopted  Statement of Financial Accounting Standards No. 123,
"Accounting  for  Stock-Based Compensation" ("SFAS 123"). The provisions of SFAS
123  allow companies to either expense the estimated fair value of stock options
or  to  continue  to  follow  the intrinsic value method set forth in Accounting
Principles  Bulletin  Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB  25") but disclose the pro forma effects on net income (loss) had the fair
value of the options been expensed. The Company has elected to continue to apply
APB  25  in  accounting  for  its  employee  stock  option  incentive  plans.

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.  As  all  employee options were issued at or above
market  during  2004  and the first nine months of 2005, no compensation expense
was  recognized  in  either  of  the  periods.  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:

<TABLE>
<CAPTION>

<S>                                                             <C>                 <C>             <C>                <C>
                                                                Three months ended September 30,    Nine months ended September 30,
                                                                --------------------------------    -------------------------------
                                                                    2005                2004            2005               2004
                                                                ------------        ------------    ------------       ------------
Net loss applicable to common stockholders:
As reported . . . . . . . . . . . . . . . . . . . . . . . . .   $  (578,177)        $  (421,661)    $(2,138,193)       $  (941,390)
Total stock-based employee compensation expense
 determined under fair value based method for all
 employee awards, net . . . . . . . . . . . . . . . . . . . .        (3,398)             (3,510)        (15,694)           (10,305)
                                                                ------------        ------------    ------------       ------------
Pro forma net loss. . . . . . . . . . . . . . . . . . . . . .   $  (581,575)        $  (425,171)    $(2,153,887)       $  (951,695)
                                                                ============        ============    ============       ============

Net loss per share:
As reported:
Basic and diluted . . . . . . . . . . . . . . . . . . . . . .   $     (0.01)        $     (0.01)    $     (0.06)       $     (0.03)
Pro forma:
Basic and diluted$. . . . . . . . . . . . . . . . . . . . . .   $     (0.01)        $     (0.01)    $     (0.06)       $     (0.04)
</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>             <C>                <C>
Black Scholes Assumptions                                       Three months ended September 30,    Nine months ended September 30,
                                                                --------------------------------    -------------------------------
                                                                    2005                2004            2005               2004
                                                                ------------        ------------    ------------       ------------

Dividend yield. . . . . . . . . . . . . . . . . . . . . . . .       0.00%               0.00%            0.00%             0.00%
Expected volatility . . . . . . . . . . . . . . . . . . . . .       1.31                1.122            1.31              1.122
Risk-free interest rate . . . . . . . . . . . . . . . . . . .    2.8% - 4.5%            4.50%        2.8% - 4.50%          4.50%
Expected life in years
                                                                 1 - 2 years           3 years        1 - 2 years         3 years
</TABLE>

                                       10
<PAGE>

The  weighted average fair value at date of grant for options granted during the
first  quarter  of 2005 was $0.132 per share using the above assumptions.  There
were no options granted to employees during the first nine months of 2004 or the
second  and  third  quarters  of  2005.

Recently  issued  accounting  pronouncements

In  December 2004, 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 will be effective for small
business  issuers  as  of the beginning of the first interim or annual reporting
period  that  begins  after December 15, 2005.  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.

4.  Related  party  transactions

During  the  year  ended  December 31, 2004, a business partner of the Company's
Chairman  billed the Company $20,000 for consulting services.  The liability was
settled for 175,000 shares of the Company's common stock in the first quarter of
2005.  During  the  second  quarter  of 2005, the Company sold 100,000 shares of
common stock to this same individual for $20,000.  We did not publicly offer the
securities  and  this  person  is  an accredited investor.  No underwriters were
involved  in  the  sale.

                                       11

<PAGE>
5.  Notes  payable

<TABLE>
<CAPTION>

<S>                                                      <C>
At September 30, 2005, notes payable consist of the following:

Related parties:
Note payable, officer; unsecured; interest at prime rate plus 5.5%
  (12.25% at September 30, 2005); due on demand. . . . . . . . . . . . . . . . . . . . . .  $  9,824
Note payable, officer; unsecured; interest at 23.99%, revolving. . . . . . . . . . . . . .     4,990
                                                                                            ---------
                                                                                            $ 14,814
                                                                                            =========
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, 15.99% interest rate, revolving. . . . . . . .   20,436
Note payable, $120,000 face amount,  no stated interest rate but with an implied
  annual rate of 73.70%, due December 12, 2005 (2). . . . . . . . . . . . . . . . . . . . .   64,134
Note payable, $240,000 face amount,  no stated interest rate but with an implied
 annual rate of 71.55%, due December 19, 2005 (2) . . . . . . . . . . . . . . . . . . . . .  225,069
Note payable, $120,000 face amount,  no stated interest rate but with an implied
  annual rate of 65.16%, due January 8, 2006 (2). . . . . . . . . . . . . . . . . . . . . .  110,762
Note payable, $820,154 face amount, no stated interest rate but with an implied
annual rate of 11.81%, due February 8, 2006 (2) . . . . . . . . . . . . . . . . . . . . . .  804,947
Note payable, $156,000 face amount, no stated interest rate but with an implied
annual rate of 41.92%, due August 3, 2006 (2) . . . . . . . . . . . . . . . . . . . . . . .  134,333
Note payable, $162,000 face amount, no stated interest rate but with an implied
annual rate of 36.89 percent, due September 1, 2006 . . . . . . . . . . . . . . . . . . . .  137,250
                                                                                            ---------
                                                                                         $ 1,821,940
                                                                                         ============
<FN>

1)     The  Company  is  currently in discussions with Mr. Revesz, the holder of
the  notes that are in default, and as of the date of this report, no demand for
payment  had  been  made  by  Mr.  Revesz. In April 2004, the Company reached an
agreement  with Mr. Revesz, a former board member, 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.

2)     On  May  12, 2005, Dutchess loaned the Company $100,000.  The note had no
stated  interest  rate but had a face amount of $120,000 and matures on December
12,  2005.  Under  the  terms of the note, Dutchess was issued 100,000 incentive
shares  of common stock.  The Company recorded the fair value of these incentive
shares  as  prepaid  interest, and will expense their value over the term of the
note.  The  implied  annual  rate  of  interest  is  73.70%.

On  May  19, 2005, Dutchess loaned the Company $200,000.  The note had no stated
interest  rate  but  had  a  face amount of $240,000 and matures on December 19,
2005.  A  portion  of the proceeds of this loan was used to repay the note dated
January  18, 2005 with a face amount of $270,000, which matured on May 18, 2005.
Under  the  terms  of  the note, Dutchess was issued 200,000 incentive shares of
common  stock.  The Company recorded the fair value of these incentive shares as
prepaid  interest,  and will expense their value over the term of the note.  The
implied  annual  rate  of  interest  is  71.55%.

On  June  8, 2005, Dutchess loaned the Company $100,000.  The note had no stated
interest  rate but had a face amount of $120,000 and matures on January 8, 2006.
Under  the  terms  of  the note, Dutchess was issued 100,000 incentive shares of
common  stock.  The Company recorded the fair value of these incentive shares as
prepaid  interest,  and will expense their value over the term of the note.  The
implied  annual  rate  of  interest  is  65.16%.

On  July  8, 2005, Dutchess loaned the Company $795,154.  The note had no stated
interest rate but had a face amount of $820,154 and matures on February 8, 2006.
A  portion  of the proceeds of this loan was used to repay a note dated April 7,
2005  with  a face amount of $586,200, which matured on June 7, 2005.  Under the
terms of the note, Dutchess was issued 285,000 incentive shares of common stock.
The  Company  recorded  the  fair  value  of  these  incentive shares as prepaid
interest,  and  will  expense  their  value  over  the  term  of  the  note.

On August 3, 2005, Dutchess loaned the Company $130,000.  The note had no stated
interest  rate  but had a face amount of $156,000 and matures on August 3, 2006.
Under  the  terms  of  the note, Dutchess was issued 285,000 incentive shares of
common  stock.  The Company recorded the fair value of these incentive shares as
prepaid  interest,  and  will  expense  their  value  over the term of the note.

On  September  1,  2005, Dutchess loaned the Company $135,000.  The note had not
stated  interes  rate but had a face amount of $162,000 and matures on September
1,  2006.  Under  the  terms  of the note, Dutchess was issued 285,000 incentive
shares  of common stock.  The Company recorded the fair value of these incentive
shares  as  prepaid  interest, and will expense their value over the term of the
note.

During  the  period from January 1, 2005 through September 30, 2005, the Company
exercised  eight  (8) puts to Dutchess totaling 2,013,452 shares for proceeds of
$271,726  less commissions of $13,586.  Of the total proceeds, $174,633 was used
to repay portions of previously issued notes to Dutchess and $67,838 went to the
Company.

On  March 9, 2005, Dutchess exercised 250,000 warrants at $0.125 each, for total
proceeds  of  $31,250,  $15,000  of  which  was applied to outstanding notes and
accrued  interest.

Also during the period from January 1, 2005 through September 30, 2005, Dutchess
elected  to  convert the entire $250,000 36-month convertible note for 2,761,958
shares  of  the  Company's  common  stock.

</TABLE>

                                       12
<PAGE>

6.  Stockholders'  Deficit

Preferred  stock

Preferred  stock  dividends of $664 were accrued in the form of a stock dividend
equal  to  4,972  shares  of  common stock of the Company during the nine months
ended  September  30,  2005.

Common  stock

The  Company  held  a  special shareholders' meeting on January 6, 2005 where an
amendment  to  the  Amended  and Restated Articles of Incorporation of Nighthawk
Systems,  Inc.  was  approved to increase the number of authorized shares of our
common  stock  from  50,000,000  to  200,000,000.

During  the  first  quarter  of  2005,  the  Company  issued  463,100 shares for
consulting and other services, of which 175,000 shares were issued to a business
partner  of  the Company's Chairman to settle a $20,000 liability for consulting
services  performed  and  expensed  in  2004.

During  the  first  quarter  of  2005, the Company sold 650,000 shares of common
stock  to  an  investor  for  cash at a price of $0.15 per share for proceeds of
$97,500.  Warrants  to  purchase  650,000  shares of common stock at an exercise
price  of  $0.25  per share were also included in the sale.  We did not publicly
offer  the  securities  and  the  investor  is  an  accredited  investor.  No
underwriters  were  involved  in  the  sale.

During  the  second  quarter  of 2005, the Company sold 100,000 shares of common
stock  to  a business partner of the Company's Chairman for $20,000.  We did not
publicly  offer  the  securities  and this person is an accredited investor.  No
underwriters  were  involved  in  the  sale.

During  the  second quarter of 2005, the Company issued 250,000 shares of common
stock  to  Prospect Hunter, Inc. for marketing services for a period of one year
beginning  in  April  2005.

Also  during  the  second quarter of 2005, the Special Warrant holders exercised
their  right  to  969,750  shares  of  the  Company's common stock.  The Special
Warrants  were  sold  in  2004 for net proceeds of $188,775 and consisted of the
right  to  one share of the Company's common stock and one warrant to purchase a
share  of the Company's common stock for $0.30.  The warrants remain unexercised
as  of  the  date  of  this  report.

During  the  third  quarter of 2005, the Company issued 100,000 stock options to
two  sales  consultants  with an exercise price equal to the market price of the
common  stock on the date of issuance.  The Company recognized $5,850 in expense
related  to  the  issuance  of  the  options.

7.     Legal  settlement

In  April  2004,  the  Company,  along with current officers, board members, and
several  of  the  Company's former directors, were sued in the Colorado District
Court  by  a former director (Larry Brady) and former member of management (Mark
Brady,  Larry's  son)  for,  among other things, breach of contract for unlawful
termination and failure to provide stock allegedly promised during their service
as  Company director and chief financial officer, respectively, for part of 2001
and  part  of  2002.  The  Company denied the allegations.  Further, the Company
counter-sued  the  Brady's  for  non-performance and breach of fiduciary duties.
Pursuant to a court order, dated June 23, 2005, the judge terminated the Bradys'
lawsuit,  dismissing  it,  outright.  In  July  of 2005, in an effort to bar the
Brady's from raising these issues in the future, the Company engaged in a mutual
release  of  all  claims  and  issued  a total of 250,000 shares of unregistered
common  stock and $10,000 to Lawrence Brady, Mark Brady, and their counsel.  The
Company  recognized  $32,500  in expenses for the quarter ended June 30, 2005 in
relation  to  this  settlement.

8.     Subsequent  events

On  October  3,  2005,  Dutchess loaned the Company $145,000 in exchange for the
issuance  of  a  $145,000 convertible debenture that matures on October 3, 2010.
The  debenture carries an annual coupon of 10%, and is convertible at the lesser
of  (i)  75%  of the lowest closing bid price at the time of each conversion, or
(ii)  $0.075.  The  Company  also issued 362,500 incentive shares along with the
debenture.

                                       13
<PAGE>

On  October  31, 2005, Dutchess loaned the Company $125,000 under a note payable
with  a  face amount of $150,000.  There is no stated interest rate on the note,
which  is  due  October  31,  2006.  The Company issued 460,000 incentive shares
along  with  the  note.

________________________________________________________________________________
OUR  INDEPENDENT  PUBLIC  ACCOUNTANTS  HAVE  NOT  COMPLETED  THEIR REVIEW OF THE
FINANCIAL  STATEMENTS  AND  ACCOMPANYING  NOTES  INCLUDED IN THIS FORM 10-QSB AS
REQUIRED  BY RULE 10-01 (c)(4) OF REGULATION S-X.  UPON COMPLETION OF THE REVIEW
BY  OUR  INDEPENDENT PUBLIC ACCOUNTANTS, SHOULD ANY ADJUSTMENT(S) BE REQUIRED TO
BE  MADE  TO  THESE  FINANCIAL STATEMENTS, AN AMENDED FORM 10-QSB WILL BE FILED.
________________________________________________________________________________

                                       14
<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

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.

                                       15
<PAGE>

The  Company  has  historically had minimum funds available to it to support its
operations  and  has  been  largely  dependent on private equity placements with
accredited  investors  to  fund its negative cash flows.  As such, the Company's
ability  to  fund  and  sustain sales and marketing efforts was very limited. In
August  2004,  the  Company signed a financing arrangement with Dutchess Private
Equities,  II,  L.P.  Under  the  terms  of the amended arrangement, the Company
received  a  total  of  $250,000 under a debenture during the three-month period
ended September 30, 2004.  The Company also signed an investment agreement under
which,  subsequent  to the December 2004 effectiveness of its  SB-2 registration
statement  filed with the Securities  and  Exchange Commission ("SEC"), 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.
As is more fully explained in Liquidity and Capital Resources below, the Company
began  utilizing  this  investment  agreement  in December 2004 and continued to
utilize  this  agreement in the first half of 2005 in order to implement a sales
and  marketing  effort  designed  to  stimulate revenue growth.   This sales and
marketing  plan  for  2005  includes  the  following:

- Hiring sales and marketing personnel. The Company increased its sales force in
the  first  quarter  of  2005  with  experienced  salespeople  with  the goal of
effectively  targeting  existing  and  new markets. In October 2005, the Company
hired  an  individual  with  expertise  in  the  wireless automation industry as
general  manager.

-  Product  marketing  including print media and attendance at trade shows. This
method  has  proved  the most effective for the Company to date, and it plans to
increase  its  presence  in  these  areas  to  attract  new  customers.

-  An improved Internet presence. The Company launched a new website in May 2005
to  improve  content  and  to make the site more friendly to search engines. The
Company  has  plans  to  add  e-commerce  functionality  at  a  future  date.

- Leveraging existing customer relationships by up-selling new products or fully
integrating  systems  with  the  Company's  products.

-  The  establishment  of distribution and dealer networks. Through an effective
dealer network, the Company can increase awareness in its products and utilize a
dealer's  sales force to actively promote its products. During 2005, the Company
has  signed  sales  representative  agreements  with  three  electrical  utility
wholesalers  and  with  one  reseller  of  products to wireless Internet service
providers.

-  New  applications  in  irrigation  control,  civil  defense  and  emergency
management.  The  current  product design can be altered with little cost to the
Company  to  be effectively implemented into a wide array of fields. Through the
commitment  of  funding,  the Company can now research all possible applications
and  begin  to  market  directly  to  new  customers.

-  The  development  and  launch  of  a product designed to be used for multiple
purposes  by  consumers.

In  addition  to  the marketing and sales objectives, the Company has identified
the  following  strategic  goals  for  2005:

-  Joint  ventures  with wireless service providers and equipment manufacturers.

-  The  identification  of  complementary  products  and companies for potential
acquisition.

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.

                                       16
<PAGE>

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, 2004 or June 30, 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  June  30,  2005, is approximately $7,757.

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.

In  December 2004, 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 will be effective for small
business  issuers  as  of the beginning of the first interim or annual reporting
period  that  begins  after December 15, 2005.  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.

Comparison  of  the Three Months Ended September 30, 2005 and September 30, 2004

Revenue

The  components  of  revenue and their associated percentages of total revenues,
for  the  three  months  ended  June  30,  2005  and  2004  are  as  follows:

<TABLE>
<CAPTION>

<S>                                        <C>          <C>    <C>             <C>   <C>             <C>
                                           Three months ended September 30,
                                           ----------------------------------
                                                 2005              2004            Change $           Change %
                                           ----------------------------------------------------------------------
Revenues:
Rebooting Products: NH100, NH1, NH2 & NH8  $     30,563  25%   $      28,849   13%   $   1,714           6%
Logic Boards: PT 1000& PT Boards. . . . .        14,774  12%          19,785    9%      (5,011)        (25%)
Utility Products: CEO 700 & PT1LC . . . .        51,895  43%         161,185   73%    (109,290)        (68%)
Emergency Alerting - EA1, FAS8 & other. .        10,975   9%               -    0%      10,975           -
Airtime sales . . . . . . . . . . . . . .         9,729   8%          11,384    5%      (1,655)        (15%)
Other products. . . . . . . . . . . . . .         1,840   2%             520    0%       1,320         254%
Freight . . . . . . . . . . . . . . . . .         1,197   1%               -    0%       1,197           -
                                           ----------------------------------------------------------------------
Total revenues                             $    120,973 100%   $     221,723  100%   $(100,750)       (45%)
</TABLE>

Revenues  for  the  three-month period ended September 30, 2005 were $120,973 as
compared  to $221,723 for the corresponding period of the prior year, a decrease
of  45% or approximately $100,000 between periods. The decrease was entirely due
to  a  decline  in revenues from sales of the Company's utility products between
the  periods  presented.    During  the  three  months  ended June 30, 2004, the
Company  delivered  the  final  shipment  of PT1LC load control units to Alabama
Municipal  Electric  Authority("AMEA")  and  recognized revenue of approximately
$70,000  from  the shipment.   The AMEA contract was the second largest contract
in the Company's history, and the Company has not sold any PT1LC units since the
conclusion  of the contract.  Sales of the Company's CEO-700 units also declined
slightly  between  periods.  Revenues  from  the  Company's non-utility products
combined  increased slightly between the periods presented.  The Company started
delivering  some  of it emergency notification products during the quarter ended
September  30,  2005,  mainly  to  firehouses.

                                       17
<PAGE>

The  Company  hired  two  salesmen in February 2005.  The initial focus of these
salesmen  has  been  on  selling  the  Company's  'plug  and  play' products for
rebooting  and electric utility use.  Athough sales of utility products declined
slightly  between  periods,  the Company actually sold its CEO-700 units to more
customers during the current year's quarter than in the previous year's quarter.
Many  of  these  sales  were made on a pilot-test basis, and based on historical
results  the  Company believes that successful testing of its products will lead
to larger follow-on orders and increased revenues.  In addition, the Company has
established  contact  with  several customers who have indicated their desire to
purchase  units  from  the  Company  in  the near future as their budgets allow.
Based  on  interaction with these customers, the Company believes that its sales
of utility-based products will increase in the future.  However, the sales cycle
with  utility  customers  is  relatively  long, and can range from 90 days to 18
months.

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 approximately 72,000 or 44%
to  $91,579  for the three months ended September 30, 2005 from $163,786 for the
corresponding  period  of  the  prior  year  and  increased  only  slightly as a
percentage of revenues between the periods from 74% in the third quarter of 2004
to  76%  in  the  third quarter of 2005. The decrease in gross profit was due to
lower  sales  volume  and  the  decrease  in  gross  margin  was  due  to poorer
utilization  of our productive capacity.  During the quarter ended September 30,
2005,  allocated  overhead  for  production  and  facilities  cost  amounted  to
approximately  $25,518.

Selling,  general  and  administrative  expenses  for  the  three  months  ended
September  30, 2005 increased by approximately $128,000 or 157% to $476,496 from
$348,005  for  the  three-month  period  ended September 30, 2004.  As mentioned
about,  the  Company  hired  two  new  salespeople in February 2005, and it also
contracted  with  an  individually  for  marketing  services  during 2005.  This
accounted  for  approximately  $50,000 of the increase in expenses.  The Company
also spent approximately $50,000 on public relations during the third quarter of
2005  as  compared  to  $0  in  the third quarter of 2004.  The Company used the
services  in  attempt  to  attract  new  investors and customers to the Company.
During  the  third  quarter  of  2005, the Company recognized $42,500 of expense
related  to  its  contract  with  Orbcomm,  Inc.  which was signed in 2003.  The
Company  has  not  yet  sold  any  services  under  the contract, which contains
contract  minimums.

Interest expense from related party notes payable declined approximately $33,000
between  the  periods  presented.  During the third quarter of 2004, the Company
recognized  in  excess  of $30,000 in interest expense associated  with the fair
value  of  warrants  given  to  three  entities  for  the  conversion  of
approximately  $157,000  in  notes  payable  and  accrued  interest  to  common
stock  and  warrants  to  purchase  common  stock.    Interest  expense on other
non-related  party  debt  increased  approximately  $33,000  between  periods
presented,  mainly due to the large increase in notes payable issued during 2005
to  Dutchess  Private  Equities,  L.P.  ("Dutchess").  Some  of these notes have
no  stated  interest  rate  but  have a repayment amount greater than the funded
amount.  The  Company  recognizes  the difference between the face amount of the
notes  and  the  amounts  actually received in cash as interest expense over the
life  of  the  loans.  In  addition, the value of the incentive shares issued in
conjunction  with  the  notes is recognized as interest expense over the life of
the  loans.  Penalties on late payment of notes and any interest incurred during
these periods are also recognized as interest expense.  During last year's third
quarter, the Company also recognized $83,000 in expense related to the non-cash,
beneficial  conversion  feature  of  the debenture agreement between the Company
and  Dutchess.

The  net  loss  for the three-month period ended September 30, 2005 was $577,953
compared  to  $421,438  for the three-month period ended September 30, 2004. The
increase  in  net  loss  from  continuing  operations  was  due primarily to the
increased  costs  associated  with  sales and marketing and public relations, as
well  as  the  expensing  of  amounts  owed  to  Orbcomm.

Comparison  of  the  Nine Months Ended September 30, 2005 and September 30, 2004

                                       18
<PAGE>

Revenue

The  components  of  revenue and their associated percentages of total revenues,
for  the  nine  months  ended  September  30,  2005  and  2004  are  as follows:

<TABLE>
<CAPTION>



<S>                                        <C>          <C>    <C>             <C>   <C>             <C>
                                           Nine months ended September 30,
                                           ----------------------------------
                                                 2005              2004            Change $           Change %
                                           ----------------------------------------------------------------------
Revenues:
Rebooting Products: NH100, NH1, NH2 & NH8  $     73,168  19%   $     148,095  30%   $ (74,927)         (51%)
Logic Boards: PT 1000 & PT Boards . . . .        54,441  14%          85,534  18%     (31,093)         (36%)
Utility Products: CEO 700 & PT1LC . . . .       131,040  33%         209,288  43%     (78,248)         (37%)
Emergency notification: EA1, FAS8 & other        10,975   3%               -           10,975           n/a
Hydro 1 . . . . . . . . . . . . . . . . .        76,975  20%               -   -       76,750           n/a
Airtime sales . . . . . . . . . . . . . .        37,519   9%          31,757   7%       5,762           18%
Other product . . . . . . . . . . . . . .         3,137   1%           9,684   2%      (6,547)         (68%)
Freight . . . . . . . . . . . . . . . . .         3,312   1%           1,590   -        1,722          108%
Total revenues. . . . . . . . . . . . . .  $    390,567 100%    $    485,948 100%   $ (95,381)    $    (20%)
</TABLE>

Revenues  for  the  six-month  period  ended September 30, 2005 were $390,567 as
compared to $485,948 for the corresponding period of the prior year, an decrease
of 20% between periods.   This decrease is almost entirely due to the completion
in  2004  of  the two largest contracts in the Company's history.  The Company's
largest  sale  of  rebooting  units ever was made to support a network of kiosks
owned  by  AT&T Wireless.  However, this kiosk program was suspended during 2004
with  the  proposed  merger  of  AT&T  Wireless and Cingular.   Also, during the
period  ending  September  30,  2004 the Company delivered the final shipment of
PT1LC  load  control  units  to Alabama Municipal Electric Authority("AMEA") and
recognized  revenue  of  approximately  $70,000  from  the  shipment.   The AMEA
contract  was  the  second  largest  contract  in the Company's history, and the
Company  has  not  sold  any  PT1LC  units since the conclusion of the contract.
During  the  six  months  ended  June  30, 2005, one customer, who purchased the
Company's  Hydro I product, represented approximately 28% of the Company's total
revenue.  This  sale  offset  the  loss of revenues from the two contracts which
were  completed  during  2004.

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 approximately $63,000 or 18%
to  $281,203  for the nine months ended September 30, 2005 from $344,409 for the
corresponding  period  of  the  prior year,  but stayed relatively constant as a
percentage  of  revenues  between  the  periods  at  approximately  72%.

Selling, general and administrative expenses for the nine months ended September
30,  2005 increased by approximately $737,000 or 83% to $1,626,195 from $888,950
for  the  nine-month  period ended September 30, 2004.  In an effort to increase
customer  awareness  of  its  products,  the  Company  hired  two salespeople in
February  2005,  and  contracted  with  an  individual for marketing services in
December 2004.  Costs directly associated with these individuals caused expenses
to  increase approximately $112,000 between the periods presented.  In addition,
advertising,  trade show and travel costs to support these individuals increased
expenses  approximately  $40,000  between  periods.  The  Company  also  hired a
full-time  corporate  controller in January 2005 at an annual salary of $85,000.
Prior  to  January  2005,  the  Company's  Chief  Executive Officer was also its
Principal  Accounting  and  Financial  Officer.

In  an  effort  to  increase  public  awareness of the Company an to attract new
investors,  the  Company  spent  approximately  $313,000  on  public  relations
campaigns  during  the  first  nine months of 2005, as compared to $0 during the
same period in 2004.  The Company also recognized approximately $92,000 more for
consulting  services  during  2005  period  than  it did during the 2004 period.

Interest expense increased approximately $427,000 or 221% between the nine-month
periods presented. The increase was due primarily to interest expense related to
the  Dutchess  notes,  some  of  which  have  no stated interest rate but have a
repayment  amount  greater  than the funded amount.   The Company recognizes the
difference  between  the  face  amount  of  the  notes  and the amounts actually
received in cash as loan discounts and expenses this amount as interest over the
life  of  the  loans.  In  addition, the value of the incentive shares issued in
conjunction  with  the  notes is recognized as interest expense over the life of
the  loans.  Penalties  on late payment of notes are also recognized as interest
expense.

                                       19
<PAGE>

The  net  loss for the nine-month period ended September 30, 2005 was $2,137,530
compared  to  $940,970  for  the nine-month period ended September 30, 2004. The
increase  in  net loss from continuing operations was due primarily to increased
interest  expense,  expenses for public relations campaigns and costs associated
with  new  sales  and  marketing  personnel.

Liquidity  and  Capital  Resources

The  Company's  financial statements for the six months ended September 30, 2005
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 $1.38 million
during  the  year  ended  December 31, 2004 and a net loss of approximately $2.1
million  during  the  nine  months  ended September 30, 2005.  The Company had a
stockholders'  deficit  and  working  capital  deficiency  of approximately $1.2
million and $1.0 million, respectively, as of December 31, 2004 and $2.1 million
and  $2.2  million  respectively,  as  of  September  30,  2005.

The  Report  of  Independent  Registered Public Accounting Firm on the Company's
financial  statements  as of and for the year ended December 31, 2004 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.

During  the  nine  months  ended  September  30,  2005,  cash  used in operating
activities  was  approximately $1.2 million.  The net loss of approximately $2.1
million for the nine-month period was partially offset by approximately $556,000
in  non-cash  expenses  related  to  shares  issued  for consulting services and
$426,000  in  expenses  related  to  loan  discounts and related incentive stock
awards.  Uses  of  cash  were increases in receivables of approximately $18,000,
inventories  of  approximately  $52,000  as  net payments on accounts payable of
approximately  $122,000.

The  Company  purchased  approximately  $4,300  in  computer  equipment  in  the
nine-month  period  ended  September  30,  2005.

The Company issued 2,276,610 shares of common stock for the sale of common stock
and  warrants,  as well as puts to Dutchess in return for approximately $410,000
in  net  cash  proceeds during the period.  The Company also received $2,173,654
from  Dutchess  during  the nine-month period in exchange for notes.  These cash
inflows were offset to some degree by payments back to Dutchess on notes payable
of  approximately  $1,460,000  during  the  period.  Net  cash  provided  by all
financing  activities  for  the  nine-month  period ended September 30, 2005 was
$1,119,569.

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  had  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.

In August 2004, 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 the third quarter of 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.

                                       20
<PAGE>

During  the  nine  months  ended  June  30,  2005,  Dutchess  loaned the company
approximately  $2.2  million  in  the  form of notes payable.  The notes have no
stated  interest  rate  but  have  a face amount greater than the funded amount.
This  difference  is  recognized  as interest expense over the life of the loan.
Under  the  terms  of the notes, Dutchess is also issued incentive shares, which
are  recorded  as  prepaid  interest  and  expensed  over  the life of the loan.

During the nine months ended September 30, 2005, the Company exercised eight (8)
puts to Dutchess totaling 1,276,610 shares for net proceeds of $222,726.  Of the
total  proceeds,  $125,633 was used to repay portions of previously issued notes
to  Dutchess  and  $116,838  went  to  the  Company.

On  March 9, 2005, Dutchess exercised 250,000 warrants at $0.125 each, for total
proceeds  of  $31,250,  $15,000  of  which  was applied to outstanding notes and
accrued  interest.

The  Company  used  the  proceeds  from the notes, puts and warrants to fund its
operating cash flow deficits and to repay outstanding notes and accrued interest
and  penalties  to  Dutchess.

For more information on the transactions with Dutchess, please see Note 5, 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.

In  December  2004,  the  Company  identified sales and marketing objectives and
implemented  a  sales  and  marketing  plan  utilizing  the  Dutchess  financing
agreement  designed  to  stimulate  revenue  growth.  This  effort has continued
throughout  2005,  and  as  of  November  21,  2005, the Company has established
relationships  and  business  opportunities  that  it  believes  will  result in
increased  sales  and revenues in the future. The Company is involved in several
separate  negotiations  with  potential customers which it feels could lead to a
substantial  increase in revenues, and has submitted one quote at the request of
a  potential  client  which  could  generate revenues in excess of $5,000,000 in
calendar  2006.  No  assurances  may  be  given,  however, that the Company will
receive  such  orders.  While  our  customers  have  identified  needs  that are
substantial,  our efforts have indicated that customers are more likely to order
our products in stages so that their installation and utilization can be managed
efficiently.  Historical results have shown that once customers have adopted the
use of our products, they often order multiple times thereafter in order to meet
their  overall  needs.  As such, and in order to avoid the concentration of risk
among  only  a  few customers, the Company's approach for the foreseeable future
will  be  to  obtain  customers through test and trial programs if necessary, in
order  to  grow  its overall customer base and increase the likelihood of future
sales  to  those  same  customers.  Initial  customer  contact is typically made
through the use of lead generation programs offered by third parties, attendance
at trade shows, mailers to targeted lists, and direct customer inquiries through
our  website.

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
six-month period ended June 30, 2005, 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 September 30, 2005 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.  However, on September 23, 2005, the Company's
Principal Accounting and Financial Officer, Daniel P. McRedmond, resigned as the
Company's  Corporate  Controller.  As  a  result,  the Company's Chief Executive
Officer,  H.  Douglas  Saathoff, will serve as the Company's Principal Operating
and  Principal  Accounting and Financial Officer until Mr. McRedmond's successor
is  hired.

                                       21
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                           PART II - OTHER INFORMATION

Item  1.  Legal  proceedings

In  April  2004,  the  Company,  along with current officers, board members, and
several  of  the  Company's former directors, were sued in the Colorado District
Court  by  a former director (Larry Brady) and former member of management (Mark
Brady,  Larry's  son)  for,  among other things, breach of contract for unlawful
termination and failure to provide stock allegedly promised during their service
as  Company director and chief financial officer, respectively, for part of 2001
and  part  of  2002.  The  Company denied the allegations.  Further, the Company
counter-sued  the  Brady's  for  non-performance and breach of fiduciary duties.
Pursuant to a court order, dated June 23, 2005, the judge terminated the Bradys'
lawsuit,  dismissing  it,  outright.  In  July  of 2005, in an effort to bar the
Brady's from raising these issues in the future, the Company engaged in a mutual
release  of  all  claims  and  issued  a total of 250,000 shares of unregistered
common  stock and $10,000 to Lawrence Brady, Mark Brady, and their counsel.  The
Company  recognized  $32,500  in expenses for the quarter ended June 30, 2005 in
relation  to  this  settlement.

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

During  the  first  quarter  of  2005, the Company sold 650,000 shares of common
stock  to  an  investor  for  cash  at  a price of $0.15 per share.  Warrants to
purchase  650,000 shares of common stock at an exercise price of $0.25 per share
were  also  included  in the sale.  We did not publicly offer the securities and
the  investor  is  an accredited investor.  No underwriters were involved in the
sale.

During  the  second  quarter  of 2005, the Company sold 100,000 shares of common
stock  to  a business partner of the Company's Chairman for $20,000.  We did not
publicly  offer  the  securities  and this person is an accredited investor.  No
underwriters  were  involved  in  the  sale.

These  securities were issued to the investor in reliance upon an exemption from
the  registration  requirements  of  the Securities Act of 1933, as set forth in
Section  4(2)  under  the  Securities  Act  of 1933 and Rule 506 of Regulation D
promulgated  thereunder  relative to sales by an issuer not involving any public
offering,  to  the extent an exemption from such registration was required.  The
purchaser  represented  to  us  in  connection  with the purchase that; he is an
accredited  investor  and  was acquiring the shares for investment purposes only
and  not  for  distribution,  that he could bear the risks of the investment and
could  hold  the  securities  for  an  indefinite period of time.  The purchaser
received  written  disclosures that the securities had not been registered under
the  Securities  Act  of  1933  and  that  any resale must be made pursuant to a
registration  statement  or  an available exemption from such registration.  The
participant  in  the  offering  described  above  was  given  access to full and
complete  information  regarding  us, together with the opportunity to meet with
our  officers  and  directors  for  purposes  of  asking questions and receiving
answers  in order to facilitate such participant's independent evaluation of the
risks  associated  with  the  purchase  of  our  securities.

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.  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, 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.

                                       22
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(b)  Reports  on  Form  8-K.

None.

                                       23
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                                   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:  November  21,  2005        By:  /s/  H.  Douglas  Saathoff
                               ----------------------------------
                                       H.  Douglas  Saathoff,
                                       Chief  Executive  Officer  and  Principal
                                       Accounting  and  Financial  Officer

                                       24
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