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

                                    FORM 10-Q

[X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

                  For the quarterly period ended June 30, 2005

                                       OR

[_]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the transition period from ______ to ______

                        Commission File Number 001-14015


                                 IONATRON, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


             Delaware                                     77-0262908
--------------------------------------------------------------------------------
     (State or Other Jurisdiction           (IRS Employer Identification Number)
    of Incorporation or Organization)

        3590 East Columbia Street
            Tucson, Arizona                                  85714
   (Address of Principal Executive Offices)                (Zip Code)

        Registrant's telephone number, including area code (520) 628-7415

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

Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act)

                       Yes [X] No [ ]


Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of August 1, 2005 there
were 71,240,863 shares of the issuer's common stock, par value $.001 per share,
outstanding.
<PAGE>

                                 IONATRON, INC.
                                  June 30, 2005

PART I -   FINANCIAL INFORMATION

Item 1-    Consolidated Financial Statements
             Consolidated Balance Sheets as of June 30, 2005 (Unaudited)
             and December 31, 2004                                             3

             Consolidated Statements of Operations for the three months
             ended June 30, 2005 and 2004 (Unaudited)                          4

             Consolidated Statements of Operations for the six months
             ended June 30, 2005 and 2004 (Unaudited)                          5

             Consolidated Statements of Cash Flows for the six months
             ended June 30, 2005 and 2004 (Unaudited)                          6

             Notes to Consolidated Financial Statements                        7

Item 2-    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                          17

Item 3-    Quantitative and Qualitative Disclosures About Market Risk         23

Item 4-    Controls and Procedures                                            23

PART II -  OTHER INFORMATION

Item 1-    Legal Proceedings                                                  24

Item 2-    Unregistered Sales of Equity Securities and Use of Proceeds        24

Item 4-    Submission of Matters to a Vote of Security Holders                24

Item 6-    Exhibits                                                           24

SIGNATURES                                                                    25

                                     - 2 -
<PAGE>

PART I  FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                                 IONATRON, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                        June 30,      December 31,
                                                          2005           2004
                                                      ------------    ------------
                                                      (Unaudited)       (Audited)
                                                      ------------    ------------
<S>                                                   <C>             <C>
ASSETS
  Current assets
     Cash and cash equivalents                        $  1,116,027    $  2,495,779
     Accounts receivable - net                           2,670,196       4,497,350
     Inventory                                           1,028,212         341,334
     Municipal bonds available for sale                    500,000       1,000,000
     Other receivables                                      38,872          30,403
     Prepaid expenses                                      430,667         404,619
                                                      ------------    ------------
Total current assets                                     5,783,974       8,769,485

     Property and equipment, net                         1,500,702       1,416,072
     Goodwill                                            1,487,884       1,487,884
     Unamortized intangible assets                         603,000         603,000
     Amortized intangible assets - net                     218,350         261,450
                                                      ------------    ------------

 TOTAL ASSETS                                         $  9,593,910    $ 12,537,891
                                                      ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
     Accounts payable                                 $  1,757,072    $  1,639,018
     Accrued expenses                                      500,455         841,067
     Note payable to stockholder                         2,800,000       2,800,000
     Billings in excess of costs                            45,042          25,695
     Current portion of capital lease obligation            15,284           2,435
                                                      ------------    ------------
Total current liabilities                                5,117,853       5,308,215

Capital lease obligation                                    31,969           3,482
 Deferred tax liabilities                                   28,731           9,577

 Stockholders' equity
     Preferred stock, 1,000,000 shares
        authorized and unissued                                 --              --
     Common stock, $.001 par value, 100,000,000
        shares authorized; 71,234,613 shares
        issued and outstanding at
        June 30, 2005 and 70,846,204 shares
        issued and outstanding at December 31, 2004         71,235          70,846
     Additional paid-in capital                         10,963,421      10,406,776
     Accumulated deficit                                (6,619,299)     (3,261,005)
                                                      ------------    ------------

 Total stockholders' equity                              4,415,357       7,216,617
                                                      ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $  9,593,910    $ 12,537,891
                                                      ============    ============
</TABLE>

See accompanying notes to consolidated financial statements (unaudited)

                                     - 3 -
<PAGE>

                                 IONATRON, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                       FOR THE THREE MONTHS
                                                           ENDED JUNE 30,
                                                   ----------------------------
                                                       2005            2004
                                                   ------------    ------------

Revenue                                            $  3,956,522    $  1,833,572

Cost of revenue                                       3,775,826       1,726,753
                                                   ------------    ------------


Gross profit                                            180,696         106,819

Operating expenses:
  General and administrative                          1,345,807       1,199,390
  Selling and marketing                                  95,133         119,566
  Research and development                              385,656         120,133
                                                   ------------    ------------
Total operating expenses                              1,826,596       1,439,089
                                                   ------------    ------------

Operating loss                                       (1,645,900)     (1,332,270)

Other (expense) income
  Interest expense                                      (58,102)        (43,184)
  Interest income                                        10,099          21,221
  Other                                                  (7,500)             --
                                                   ------------    ------------
Total other                                             (55,503)        (21,963)
                                                   ------------    ------------

Loss before provision for income taxes               (1,701,403)     (1,354,233)

Income taxes                                              9,293              --
                                                   ------------    ------------

Net loss                                           $ (1,710,696)   $ (1,354,233)
                                                   ------------    ------------

Net loss per share - basic and diluted             $      (0.02)   $      (0.02)
                                                   ============    ============

Weighted average number of shares
   outstanding, basic and diluted                    71,212,062      69,060,586
                                                   ============    ============

See accompanying notes to consolidated financial statements (unaudited)


                                     - 4 -
<PAGE>

                                 IONATRON, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                              FOR THE SIX MONTHS ENDED JUNE 30,
                                               ----------------------------
                                                   2005           2004
                                               ------------    ------------

Revenue                                        $  6,526,793    $  2,106,014

Cost of revenue                                   6,180,312       1,981,753
                                               ------------    ------------

Gross profit                                        346,481         124,261

Operating expenses:
  General and administrative                      2,869,011       1,764,939
  Selling and marketing                             230,662         232,072
  Research and development                          491,646         300,898
                                               ------------    ------------
Total operating expenses                          3,591,319       2,297,909
                                               ------------    ------------

Operating loss                                   (3,244,838)     (2,173,648)

Other (expense) income
  Interest expense                                 (116,179)       (117,700)
  Interest income                                    21,001          21,221
  Other                                                 592              --
                                               ------------    ------------
Total other                                        (94,586)        (96,479)
                                               ------------    ------------

Loss before provision for income taxes           (3,339,424)     (2,270,127)

Income taxes                                         18,870              --
                                               ------------    ------------

Net loss                                       $ (3,358,294)   $ (2,270,127)
                                               ------------    ------------

Net loss per share - basic and diluted         $      (0.05)   $      (0.04)
                                               ============    ============
Weighted average number of shares
  outstanding, basic and diluted                 71,091,456      60,138,283
                                               ============    ============

See accompanying notes to consolidated financial statements (unaudited)

                                     - 5 -
<PAGE>

                                 IONATRON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                          For the six months ended
                                                        -----------------------------
                                                        June 30, 2005  June 30, 2004
                                                        -------------  --------------
<S>                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                               $(3,358,294)   $(2,270,127)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation and amortization                             595,713        368,137
  Loss on equipment disposal                                 58,825          2,188
  Stock option compensation                                 145,981             --
  Deferred income tax provision                              19,154             --
  Changes in working capital components:
   (Increase) decrease in accounts receivable             1,827,154       (613,903)
   (Increase) in costs and estimated earnings in
        excess of billings on uncompleted contracts              --     (1,059,897)
   (Increase) in other receivable                            (8,469)            --
   (Increase) in inventory                                 (686,878)        (1,861)
   (Increase) in prepaid expenses                           (26,048)       (42,639)
    Increase in accounts payable                            118,054        422,260
    Increase in billings in excess of costs                  19,347             --
   (Decrease) in accrued expenses                          (340,612)       (23,166)
                                                        -----------    -----------
           Net cash used in operating activities         (1,636,073)    (3,219,008)
                                                        -----------    -----------

CASH FLOW FROM INVESTING ACTIVITIES:
 Purchase of equipment                                     (645,291)      (303,944)
 Proceeds from sale of available for sale investments       500,000
 Proceeds from disposal of equipment                             --          3,208
 Receivables from stockholder                                    --        104,769
                                                        -----------    -----------
           Net cash used in investing activities           (145,291)      (195,967)
                                                        -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from note payable to stockholder                       --      1,000,000
 Repayment on note payable to stockholder                        --       (500,000)
 Principal payments on capital lease obligation              (9,441)          (381)
 Cash acquired from reverse merger                               --      8,905,937
 Exercise of stock options and warrants                     411,053        545,430
                                                        -----------    -----------
           Net cash provided by financing activities        401,612      9,950,986
                                                        -----------    -----------


Net increase (decrease) in cash and cash equivalents     (1,379,752)     6,536,011


Cash and cash equivalents, beginning of period            2,495,779        103,392
                                                        -----------    -----------

Cash and cash equivalents, end of period                $ 1,116,027    $ 6,639,403
                                                        ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         CASH PAID DURING THE PERIOD FOR:
                            Interest                        116,179             --
                            Income taxes                         --             --
</TABLE>

See non-cash investing and financing activities at Note 14
See accompanying notes to consolidated financial statements (unaudited)

                                     - 6 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.    NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NATURE OF BUSINESS AND SUMMARY OF OPERATIONS:

      Ionatron,  Inc.  ("Ionatron")  was formed on June 3, 2002 to  develop  and
market Directed Energy Weapon technology products initially for sale to the U.S.
Government.  The goal of the Company is to produce products that incorporate our
technology  initially for specific U.S.  Government  customer  applications  and
platforms.  Ionatron and the U.S. Government have entered into several contracts
for  products  and  services as well as  Cooperative  Research  and  Development
Agreements for joint  research on Laser Induced  Plasma  Channel  ("LIPC") based
directed energy weapons. We expect to offer U.S. Government approved versions of
our products for commercial security applications in the future. During 2003 and
2002, the Company engaged in research and  development and business  development
activities  culminating  in our first U.S.  Government  contract in September of
2003. During 2004 we demonstrated the laser guided man-made  lightning  directed
energy  technology in the laboratory;  demonstrated the technology  effects on a
variety  of  targets  both under U.S.  Government  contract  and using  internal
research and development funding;  delivered a compact laser source specifically
designed  to  enable  the  technology  under  a U.S.  Government  contract;  and
commenced a U.S. Government contract for the development of a system on a mobile
platform for field  demonstration  and testing.  In 2005, we developed a counter
IED ("Improvised Explosive Device") vehicle for use in Iraq called the Joint IED
Neutralizer ("JIN").

      Through North Star Power  Engineering Inc. ("North Star"), we are involved
in the design and manufacture of a broad range of high voltage equipment for the
defense, aerospace, semi-conductor, and medical industries.

BASIS OF PRESENTATION

      The consolidated financial statements include the accounts of Ionatron and
its wholly owned subsidiaries,  Ionatron Technologies, Inc. and North Star as of
June 30, 2005 (collectively,  "Company,"  "Ionatron," "we," "our" and "us"). All
intercompany  balances and transactions have been eliminated.  In the opinion of
management,  all adjustments  (which include only normal recurring  adjustments)
necessary  for a fair  presentation  of the  results  for  the  interim  periods
presented  have been made.  The results for the six month  period ended June 30,
2005,  may not be  indicative  of the results for the entire  year.  The interim
unaudited  condensed   consolidated  financial  statements  should  be  read  in
conjunction  with  the  Company's  audited  consolidated   financial  statements
contained in its Annual Report on Form 10-K.

      Certain amounts in the 2004  consolidated  financial  statements have been
reclassified to conform to the 2005 presentation.

MERGER AND RECAPITALIZATION:

      On March 18, 2004, a subsidiary  of U. S. Home & Garden,  Inc.  (USHG),  a
non-operating,   publicly  traded  company  merged  into  Ionatron,   Inc.  (the
"Merger").  Following  the Merger,  USHG  stockholders  held 33.89% and Ionatron
stockholders  held 66.11% of USHG common  stock on a fully  diluted  basis.  The
combination  has been  accounted for as a  recapitalization  of Ionatron,  Inc.,
effective  from our  inception  on June 3, 2002 and the  issuance of  19,346,090
common shares and 5,492,009 options and warrants to the USHG stockholders on the
date of merger in exchange for the cash.  We also  acquired in the Merger a $1.6
million  principal amount  subordinated  promissory note from a highly leveraged
entity.  This note matures in 2009 and accrues  interest on a compound  basis at
the rate of 9% per annum until maturity.  We recorded a 100% valuation allowance
for this note due to the uncertainty of collectibility.

      The consolidated  financial  statements  reflect the historical results of
Ionatron,  Inc.,  prior to March  18,  2004,  and the  consolidated  results  of
operations  of the  Company  since March 18,  2004.  All  outstanding  shares of
Ionatron common stock were converted to 48,452,249  shares of USHG common stock.
On April 29, 2004, our stockholders approved the change of our corporate name to
Ionatron,  Inc.,  an  increase of our  authorized  common  stock to  100,000,000
shares, and the classification of the Board of Directors into three classes.  We
also changed our fiscal year end from June 30 to December 31.

ACQUISITION

      In September 2004, we completed the acquisition of  substantially  all the
assets of North  Star  Research  Acquisition  Corporation  (formerly  North Star
Research  Corporation),  a New Mexico  corporation  engaged in the  business  of
designing  and  manufacturing  a broad range of high voltage  equipment  for the
defense, aerospace,  semi-conductor,  and medical industries.  Subsequent to the
acquisition we changed the  corporation's  name to North Star Power  Engineering
Inc. ("North Star").

                                     - 7 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

USE OF ESTIMATES:

      Our consolidated financial statements are prepared in accordance with U.S.
generally accepted  accounting  principles  (GAAP),  which require management to
make  estimates  and  assumptions  that  affect  the  amounts  reported  in  the
consolidated  financial  statements and  accompanying  notes. We have identified
significant  accounting  policies  that require a higher  degree of judgment and
complexity.   See  Note  1  to  the  Company's  audited  consolidated  financial
statements  contained in its Annual Report on Form 10-K,  which is  incorporated
herein by reference for information  with respect to our significant  accounting
policies.

2.    STOCK-BASED COMPENSATION, OPTIONS AND WARRANTS

      The Company has a number of stock-based  employee  compensation plans. The
Company generally grants stock options for a fixed number of shares to employees
and  directors  with an exercise  price  equal to the fair  market  value of the
shares at the date of grant.  The Company  accounts for stock  option  grants to
employees and directors  under the  recognition  and  measurement  provisions of
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees,   and   related   interpretations.   The   Company  has  adopted  the
disclosure-only  provisions of Statement of Financial  Accounting  Standards No.
123,  Accounting  for  Stock-Based  Compensation,  as  amended by  Statement  of
Financial   Accounting   Standards   No.   148,   Accounting   for   Stock-Based
Compensation--Transition  and Disclosure.  Accordingly, no compensation cost has
been recognized for these stock option grants.  Awards under the plans vest over
periods ranging from immediate vesting to five years, depending upon the type of
award. The following table illustrates the effect on net loss and loss per share
if the fair value based method had been applied to all  outstanding and unvested
awards in each period presented, using the Black-Scholes valuation model.

      Pro-forma compensation and non-employee compensation are based on the fair
value of the options  granted  which has been  estimated at the various dates of
the grants  using the  Black-Scholes  option-pricing  model  with the  following
assumptions:

o     Fair  market  value of the  underlying  common  stock based on our closing
      common stock price on the date the option is granted;
o     Risk-free  interest  rate  based  on the  weighted  averaged  5-year  U.S.
      Treasury note strip rates;
o     Volatility is based on comparable  companies  considered as we do not have
      sufficient trading history for our common stock;
o     No expected dividend yield based on future dividend payment plans; and
o     Expected life of the options is five years.


               For the three months ended June 30,
--------------------------------------------------------------------
                                             2005            2004
                                          -----------    -----------
Net loss:
   As reported                            $(1,710,696)   $(1,354,233)

   Pro forma stock compensation expense      (722,959)      (195,531)
                                          -----------    -----------

   Pro forma                              $(2,433,655)   $(1,549,764)
                                          ===========    ===========

Net loss per share - basic and diluted:
   As reported                            $     (0.02)   $     (0.02)
                                          ===========    ===========

   Pro forma                              $     (0.03)   $     (0.02)
                                          ===========    ===========

      Compensation   expense  recorded  for  shares  and  options  delivered  to
non-employees   for  the  three  months  ended  June  30,  2005  and  2004,  was
approximately $51,000 and $153,000 respectively,  which was charged to operating
expenses with an offsetting entry to additional paid in capital.

                                     - 8 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                  For the six months ended June 30,
-------------------------------------------------------------------
                                            2005            2004
                                         -----------    -----------
Net loss:
   As reported                           $(3,358,294)   $(2,270,127)

   Pro forma stock compensation expense   (2,810,427)      (195,531)
                                         -----------    -----------

   Pro forma                             $(6,168,721)   $(2,465,658)
                                         ===========    ===========

Net loss per share - basic and diluted:
   As reported                           $     (0.05)   $     (0.04)
                                         ===========    ===========

   Pro forma                             $     (0.09)   $     (0.04)
                                         ===========    ===========

      Compensation   expense  recorded  for  shares  and  options  delivered  to
non-employees for the six months ended June 30, 2005 and 2004, was approximately
$146,000 and $153,000 respectively, which was charged to operating expenses with
an offsetting entry to additional paid in capital.

      The fair value for these  options was estimated at the date of grant using
a  Black-Scholes  option  pricing model with the following  assumptions  for the
three  month  periods  ended  June 30,  2005 and 2004,  respectively:  risk-free
interest  rates of 3.3% and 3.0% per annum;  and expected  volatility of 75% for
both periods. We used the following  assumptions for the six month periods ended
June 30, 2005 and 2004, respectively:  risk-free interest rates of 3.3% and 3.0%
per annum; and expected volatility of 62% and 75%.

      A summary of the  activity  of options  under the plans for the six months
ended June 30, 2005 follows:

                                          Number of   Weighted Average
                                           Options     Exercise Price
                                         -----------    -----------


Outstanding at December 31, 2004           3,647,925    $      2.34

Granted                                      830,850           7.68
Exercised                                   (359,083)          1.42
Forfeited                                   (100,475)          5.75
                                         -----------    -----------

Outstanding at June 30, 2005               4,019,217    $      3.44
                                         ===========    ===========

                                     - 9 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

      Additional information about outstanding options to purchase the Company's
common stock as of June 30, 2005 is as follows:
<TABLE>
<CAPTION>
                                   Options Outstanding                   Options Exercisable
                      ------------------------------------------     -------------------------
                                       Weighted Avg.
                                         Remaining     Weighted Avg.               Weighted Avg.
                      Number of       Contractual Life   Exercise      Number of     Exercise
Exercise Price         Shares           (In Years)        Price         Shares        Price
-------------------   ---------    ------------------    --------    ------------    ---------
<C>     <C>           <C>                  <C>             <C>        <C>             <C>
$0.48 - $0.75         1,701,750            3.72            $ 0.63     1,701,750       $ 0.63
$2.85 - $5.77         1,314,967            3.83            $ 3.85       905,334       $ 3.96
$6.00 - $8.79         1,002,500            4.59            $ 7.66       350,000       $ 7.96
                                                                      ---------       ------
      Total                                                           2,957,084       $ 2.52
                                                                      ---------       ------

      A summary of the activity of warrants follows:

                                            Number of
                                           Underlying     Weighted Average
                                             Shares        Exercise Price
                                            --------         --------

    Outstanding at December 31, 2004         607,460         $   0.63

    Exercised                                (43,860)        $   0.63
                                            --------         --------

    Outstanding at June 30, 2005             563,600         $   0.63
                                            --------         --------

      Additional   information  about  outstanding   warrants  to  purchase  the
Company's common stock as of June 30, 2005 is as follows:

                                 Warrants Outstanding                   Warrants Exercisable
                      ------------------------------------------     -------------------------
                                       Weighted Avg.
                                         Remaining     Weighted Avg.               Weighted Avg.
                      Number of       Contractual Life   Exercise      Number of     Exercise
Exercise Price         Shares           (In Years)        Price         Shares        Price
-------------------   ---------    ------------------    --------    ------------    --------
       $0.63           563,600             3.72           $ 0.63        563,600        $ 0.63
                                                                        -------        ------

       Total                                                            563,600        $ 0.63
                                                                        -------        ------
</TABLE>


3.    PENDING ACCOUNTING PRONOUNCEMENTS

      The  Securities  and Exchange  Commission  (SEC) has changed the effective
date of the Statement of Financial  Accounting  Standards No. 123 (revised 2004)
(SFAS  123(R)),  "Share-Based  Payment,"  to the  beginning  of the first annual
period  beginning  after  June  15,  2005.  In  addition,  the  SEC  has  issued
interpretation  of SFAS No. 123(R) in its Staff  Accounting  Bulletin (SAB) 107.
Thus, Ionatron  must adopt SFAS  123(R),  while  taking into  consideration  the
guidance in SAB 107 no later than January 1, 2006.  SFAS No.  123(R) and SAB 107
may negatively impact our earnings;  however,  we have not completed an analysis
of all of the  differences  between  Statement No. 123(R),  SFAS No. 123 and SAB
107, including the specific transition method to be utilized upon adoption.


                                     - 10 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

4.     ACCOUNTS RECEIVABLE

         Accounts receivable consist of the following at:

                                                        June 30,   December 31,
                                                          2005         2004
                                                      -----------  -----------
Billed:
         Completed contracts                          $   361,254  $    17,432
         Contracts in progress                          1,207,829    2,264,509
         Retained                                         100,000      100,000

Unbilled cost and estimated earnings
  on uncompleted contracts                              1,001,113    2,132,841
                                                      -----------  -----------

                                                        2,670,196    4,514,782
         Less: Allowance for doubtful accounts                 --       17,432
                                                      -----------  -----------

          Total                                       $ 2,670,196  $ 4,497,350
                                                      ===========  ===========


       The components of unbilled cost and estimated earnings on uncompleted
contracts consist of the following at:

                                                        June 30,   December 31,
                                                          2005         2004
                                                      -----------  -----------

Cost incurred on uncompleted contracts                $16,433,003  $10,054,620
Estimated earnings                                      1,048,880      739,332
                                                      -----------  -----------

  Total billable costs and estimated earnings          17,481,883   10,793,952
  Less: Billings to date                               16,525,812    8,686,806
                                                      -----------  -----------

          Total                                       $   956,071  $ 2,107,146
                                                      ===========  ===========

Included in accompanying balance sheet under the following captions:

Unbilled costs and estimated earnings on
  uncompleted contracts included in accounts
  receivable                                          $ 1,001,113  $ 2,132,841


Billings in excess of costs                               (45,042)     (25,695)
                                                      -----------  -----------

          Total                                       $   956,071  $ 2,107,146
                                                      ===========  ===========

5.    INVENTORY

      Inventories,   primarily  consisting  of  labor,  overhead  and  materials
pertaining  to long-term  contracts,  are carried at cost. At December 31, 2004,
inventory was comprised only of materials. The reserve for obsolescence was zero
at June 30, 2005 and December 31, 2004.

                                     - 11 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

6.    MUNICIPAL BONDS AVAILABLE FOR SALE

      Municipal bonds available for sale are those  investments that the Company
intends  to hold for an  indefinite  period  of  time,  but not  necessarily  to
maturity. Any decision to sell a security classified as available for sale would
be based on various factors,  including significant movements in interest rates,
changes in the mix of the Company's assets and liabilities,  liquidity needs, or
other similar factors. These investments are carried at fair value and are based
upon quoted  prices.  There can be no assurance  that prices  estimated for such
securities  can be realized upon ultimate sale.  Unrealized  gains or losses are
reported as increases or decreases in  accumulated  other  comprehensive  income
(loss) in the consolidated statements of stockholders' equity. Realized gains or
losses are determined on the basis of the cost of specific  investments sold and
are included in earnings.

      The following is a summary of the Company's  investment in marketable debt
securities as of June 30, 2005 and December 31, 2004:
<TABLE>
<CAPTION>

                         Gross            Gross            Gross
                       amortized        unrealized       unrealized          Fair
                         cost             gains            losses            value
                  -----------------------------------------------------------------------
                                               June 30, 2005
                  -----------------------------------------------------------------------
<S>                <C>                  <C>                <C>             <C>
Municipal bonds    $  500,000           $     --           $     --        $   500,000

                  -----------------------------------------------------------------------
                                             December 31, 2004
                  -----------------------------------------------------------------------
Municipal bonds    $1,000,000           $     --           $     --        $ 1,000,000
</TABLE>

      At June 30, 2005 and December 31, 2004, municipal bonds available for sale
are  classified  as current  assets on the  consolidated  balance  sheets with a
variable  interest rate that is adjusted to the current  market rate of interest
every seven days. These municipal bonds are readily convertible into cash.

7.    PROPERTY AND EQUIPMENT

         Property and Equipment consists of the following at:

                                                   June 30,      December 31,
                                                     2005           2004
                                                 -----------    -----------

Furniture and leasehold improvements             $   333,410    $   201,249

Equipment and software                             3,362,902      2,957,035
                                                 -----------    -----------

         Total                                     3,696,312      3,158,284

Less accumulated depreciation and amortization    (2,195,610)    (1,742,212)
                                                 -----------    -----------

Net property and equipment                       $ 1,500,702    $ 1,416,072
                                                 ===========    ===========


                                     - 12 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

8.    ACCRUED EXPENSES

      Accrued expenses consisted of the following at:

                                     June 30, 2005   December 31, 2004
                                     ---------------------------------

         Payroll liability             $290,349         $309,818
         Deferred rent                   66,915           52,874
         Warranty reserve                    --           40,000
         Loss reserve                    29,469               --
         Insurance premium financing     28,816          199,171
         Other                           84,906          239,204
                                       --------         --------
         Total accrued expenses        $500,455         $841,067
                                       ========         ========

9.    NOTE PAYABLE TO STOCKHOLDER

      The Company's Chairman, a significant stockholder, has provided funds from
the inception of the Company under a revolving credit  arrangement.  The maximum
amount borrowed was $5.3 million. After pay down of $500,000 and contribution of
$2 million of the revolving credit into equity in the first quarter of 2004, the
remainder  of $2.8  million  was  incorporated  into a new $3 million  revolving
credit  arrangement  with  the  same  terms  as the  original  revolving  credit
agreement.  The note payable to stockholder  bears interest at a variable annual
rate equal to the prime rate plus two percent (2%),  is due upon demand  subject
to Board  approval,  and is  collateralized  by the  assets  of our  subsidiary,
Ionatron  Technologies,  Inc. $2.8 million was  outstanding  under the revolving
credit  arrangements  at June 30, 2005 and December  31, 2004.  Interest on this
note was  approximately  $108,000 and $116,000 for the six months ended June 30,
2005 and June 30, 2004, respectively.

10.   INCOME TAXES

      We account for income  taxes under an asset and  liability  approach  that
requires the expected future tax consequences of temporary  differences  between
book and tax bases of assets and  liabilities  to be  recognized as deferred tax
assets and liabilities.  During the first quarter of 2004, we established a full
valuation  allowance against our deferred tax assets because we determined it is
more likely than not that these  deferred tax assets will not be realized in the
foreseeable  future.  Included in the  deferred  tax asset is a portion  that is
attributable  to losses that were  incurred  prior to a "change in ownership" as
defined by Internal  Revenue  Code rules.  The amount that can be utilized  each
year is fixed; however,  annual limitation amounts not previously utilized carry
over to  subsequent  years  and  can be  utilized  to the  extent  of the  total
unexpired NOL carryforward  amount.  The pre-change of control NOL carryforwards
will begin to expire in 2020.

      For the three and six months  ended June 30,  2005 we recorded a provision
for income  taxes of $9,577 and  $19,154,  respectively,  due to an  increase in
deferred tax liabilities as a result of the tax amortization of goodwill related
to the North Star Acquisition.

11.   SIGNIFICANT CUSTOMERS

      The  majority  of  our  customers  are  either  the  U.S.   Government  or
contractors to the U.S.  Government and represented 98% and 100% of revenues for
the six months ended June 30, 2005 and 2004, respectively.

12.   NET LOSS PER SHARE

      Basic  loss per share is  computed  as net  income  (loss)  divided by the
weighted  average number of common shares  outstanding  for the period.  Diluted
loss per share  reflects  the  potential  dilution  that could occur from common
shares  issuable  through  exercise of stock options and warrants.  The dilutive
effect of options and warrants,  which were not included in the total of diluted
shares because the effect was  antidilutive,  was 2,839,000 and 4,035,000 shares
for the quarters ended June 30, 2005 and 2004, respectively.


                                     - 13 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

13.   COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

      We lease office, manufacturing and storage space at our Tucson facility at
an annual rental of $330,000 under a  non-cancelable  operating  lease agreement
from a company  that is  partially  owned by our  Chairman  and other  principal
stockholders.  The lease expires in November 2012,  contains renewal options and
an escalation  provision at the end of five years that increases our annual rent
by  $49,500.  We are  also  responsible  for  certain  property  related  costs,
including   insurance,   utilities   and  property   taxes.   Rent  expense  was
approximately $88,000 for the six months ended June 30, 2005 and 2004.

      We also lease office,  manufacturing  and storage space at our Albuquerque
facility with an annual rental of  approximately  $99,000.  The lease expires in
August 2007 and contains an  escalation  provision for the last 12 months of the
lease that increases our annual rent by $2,900. The lease also contains an early
termination  provision  effective after July 1, 2006 which is permissible with a
120 day  advance  notice and a payment  of  approximately  $15,000.  We are also
responsible  for  certain  property  related  costs,   including  insurance  and
utilities.

      In addition, on April 1, 2005 we took possession of the 50,148 square feet
of office, manufacturing and warehouse facilities at the Stennis Space Center in
Mississippi for which we had entered into a lease in July 2004.  Prior to taking
possession on April 1, 2005,  the facility was being improved by the landlord to
make the space  ready for lease and these  improvements  needed to be  completed
before we could take  possession.  We did not have access to or control over the
facility prior to taking  possession and had no financial  obligations until the
improvements were completed to our satisfaction and the property was turned over
to us on April 1, 2005. We are also not subject to any  incentives or allowances
for leasehold  improvements from the landlord. The lease is for a five-year term
with the annual rent  increasing  from $266,000 in the first year to $280,000 in
the final  year for an  aggregate  commitment  of  $1,367,000.  The lease may be
renewed  three times in five-year  increments.  Through June 2005 we have paid a
total of $44,000 in deposits on the  facility.  Rent  expense was  approximately
$68,000 for the three months ended June 30, 2005.

      The  Company  also  leases  vehicles  in both the Tucson  and  Albuquerque
facilities  to  facilitate  our  material  purchasing  activities.  These  lease
commitments  total  approximately  $1,062  per  month.  We are  responsible  for
registration, licensing and insurance costs.

      Approximate future minimum lease payments due under these leases are:

             Years ending December 31,               Amount
       --------------------------------------    ----------------

       For the remaining six months of 2005      $       356,000
                       2006                              710,000
                       2007                              687,000
                       2008                              660,000
                       2009                              661,000
                    Thereafter                         1,162,000
                                                 ---------------

                         Total                   $     4,236,000
                                                 ===============

GUARANTEES

      We agree to indemnify  our officers and  directors  for certain  events or
occurrences  arising as a result of the  officers or  directors  serving in such
capacity.  The  term  of the  indemnification  period  is for the  officer's  or
director's  lifetime.  The maximum  amount of future  payments  that we could be
required to make under these indemnification  agreements is unlimited.  However,
we maintain a director's and officer's  liability  insurance  policy that limits
our exposure and enables us to recover a portion of any future  amounts paid. As
a  result,  we  believe  the  estimated  fair  value  of  these  indemnification
agreements  is  minimal  because  of our  insurance  coverage  and we  have  not
recognized any liabilities for these agreements as of June 30, 2005.

                                     - 14 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

LITIGATION

         We may from time to time be involved in legal proceedings arising from
the normal course of business. As of the date of this report, we were not
involved in any legal proceedings.

14.    SUPPLEMENTAL CASH FLOW INFORMATION

      Non-cash Investing and Financing Activities:

                                                   Six Months Ended June 30,
                                                     2005             2004
                                                  ----------      -----------
      Conversion of note payable to common stock  $       --      $ 2,000,000
      Capital lease obligations
        incurred for use of equipment                 50,777               --

15.   AGGREGATE PRODUCT WARRANTY LIABILITY:

      Included in the  acquisition of North Star's assets,  the Company  assumed
liabilities  for warranty claims against the purchased  assets for $40,000.  The
warranty  is for  products  sold by North  Star  prior to the merger and will be
re-evaluated throughout the year.

      Aggregate Product Warranty Liability:
      ------------------------------------------------------------------
      Beginning Balance at December 31, 2004                    $ 40,000

        Payments made under warranties                           (16,500)

        Change for accruals related to product warranties             --

        Change for accruals related to preexisting warranties    (23,500)
                                                                --------
      Ending Balance at June 30, 2005                           $     --
                                                                ========


16.   INDUSTRY SEGMENTS

      The Company is currently  engaged in developing and marketing  through two
distinct  segments:  (1) Ionatron,  where the focus is on Directed Energy Weapon
technology products for sale to the U.S. Government and (2) North Star which was
acquired  September 30, 2004,  where the focus is on the  manufacture  of custom
high  voltage  equipment  for sale in a more  broad-based  market.  Prior to the
acquisition of North Star there was only one segment.

Selected Financial Data for the Three Months Ended June 30, 2005
<TABLE>
<CAPTION>
                                       Depreciation
     Business                              and          Interest      Interest          Net           Capital       Identifiable
     Segment             Revenues      Amortization      Income        Expense     Income/(Loss)    Expenditures       Assets
---------------------  ------------    ------------   ------------   ------------   ------------    ------------   ------------
<S>                    <C>             <C>            <C>            <C>            <C>             <C>            <C>
Ionatron               $  3,518,772    $    290,364   $      9,737   $     57,618   $ (1,756,228)   $    386,116   $  9,532,085

North Star                  614,117          29,774            362            484         45,532              --      3,037,940
                       ------------    ------------   ------------   ------------   ------------    ------------   ------------
Total Company             4,132,889         320,138         10,099         58,102     (1,710,696)        386,116     12,570,025

Intersegment               (176,367)             --             --             --             --              --       (561,115)

Investment in Sub                --              --             --             --             --              --     (2,415,000)
                       ------------    ------------   ------------   ------------   ------------    ------------   ------------
Consolidated Company   $  3,956,522    $    320,138   $     10,099   $     58,102   $ (1,710,696)   $    386,116   $  9,593,910

                       ============    ============   ============   ============   ============    ============   ============
</TABLE>


                                     - 15 -
<PAGE>

                                 IONATRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


Selected Financial Data for the Six Months Ended June 30, 2005
<TABLE>
<CAPTION>
                                     Depreciation
     Business                            and         Interest       Interest                     Capital
     Segment            Revenues     Amortization     Income        Expense      Net Loss     Expenditures
--------------------   -----------    -----------   -----------   -----------   -----------    -----------
<S>                    <C>            <C>           <C>           <C>           <C>            <C>
Ionatron               $ 5,881,919    $   536,334   $    20,219   $   115,596   $(3,257,299)   $   614,096

North Star                 960,325         59,379           782           583      (100,995)        31,195
                       -----------    -----------   -----------   -----------   -----------    -----------
Total Company            6,842,244        595,713        21,001       116,179    (3,358,294)       645,291

Intersegment              (315,451)            --            --            --            --             --

Investment in Sub               --             --            --            --            --             --
                       -----------    -----------   -----------   -----------   -----------    -----------
Consolidated Company   $ 6,526,793    $   595,713   $    21,001   $   116,179   $(3,358,294)   $   645,291
                       ===========    ===========   ===========   ===========   ===========    ===========
</TABLE>

                                     - 16 -
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      Our  discussion  and analysis of the  financial  condition  and results of
operations  should  be read  in  conjunction  with  the  unaudited  consolidated
financial  statements and the related disclosures  included elsewhere herein and
in  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations included as part of our Annual Report on Form 10-K for the year ended
December 31, 2004.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

      Certain  statements  in this  Quarterly  Report  on Form  10-Q  constitute
forward-looking   statements   within  the  meaning  of  the  securities   laws.
Forward-looking  statements  include all statements that do not relate solely to
the  historical  or current  facts,  and can be identified by the use of forward
looking words such as "may", "believe", "will", "expect", "expected", "project",
"anticipate",    "anticipated   estimates",   "plans",   "strategy",   "target",
"prospects" or  "continue".  These forward  looking  statements are based on the
current plans and  expectations of our management and are subject to a number of
uncertainties  and risks that could  significantly  affect our current plans and
expectations,  as well as future results of operations  and financial  condition
and may cause our actual results,  performances or achievements to be materially
different from any future results,  performances  or  achievements  expressed or
implied by such forward-looking  statements.  Important factors that could cause
our actual results to differ  materially from our  expectations are described in
Exhibit 99.1 (Risk Factors) to our Annual Report on From 10-K for the year ended
December 31,  2004.  In making these  forward-looking  statements,  we claim the
protection of the safe-harbor for  forward-looking  statements  contained in the
Private Securities Reform Act of 1995. Although we believe that the expectations
reflected in such  forward-looking  statements are  reasonable,  there can be no
assurance  that such  expectations  will prove to have been  correct.  We do not
assume any  obligation  to update these  forward-looking  statements  to reflect
actual results,  changes in assumptions,  or changes in other factors  affecting
such forward-looking statements.

OVERVIEW

      Ionatron was formed on June 3, 2002 to develop and market  Directed Energy
Weapon technology products initially for sale to the U.S.  Government.  Ionatron
and the U.S.  Government  have entered into several  contracts  for products and
services as well as Cooperative  Research and  Development  Agreements for joint
research on Laser Induced Plasma Channel ("LIPC") based directed energy weapons.
We expect  to offer  U.S.  Government  approved  versions  of our  products  for
commercial  security  applications  in the  future.  During  2003 and 2002,  the
Company engaged in research and development and business development  activities
culminating in our first U.S.  Government  contract in September of 2003. During
2004,  we  demonstrated  the laser guided  man-made  lightning  directed  energy
technology in the laboratory;  demonstrated the technology  effects on a variety
of targets both under U.S.  Government  contract and using internal research and
development funding;  delivered a compact laser source specifically  designed to
enable the technology  under a U.S.  Government  contract;  and commenced a U.S.
Government  contract for the  development  of a system on a mobile  platform for
field   demonstration  and  testing.   In  2005,  we  developed  a  counter  IED
("Improvised  Explosive  Device")  vehicle  for use in Iraq called the Joint IED
Neutralizer ("JIN").

      On March 18,  2004,  a subsidiary  of U. S. Home & Garden Inc.  (USHG),  a
non-operating, publicly traded company, merged into Ionatron Technologies, Inc.,
formerly Ionatron, Inc. (the "Merger").  Following the Merger, USHG shareholders
held 33.89% and Ionatron shareholders held 66.11% of the outstanding USHG common
stock. The combination has been accounted for as a recapitalization of Ionatron,
Inc., from our inception on June 3, 2002, and the issuance of 19,346,090  common
shares and 5,429,009  options and warrants to the USHG  shareholders on the date
of merger in exchange for cash. The consolidated  financial  statements  reflect
the  historical  results  of  Ionatron,  Inc.,  prior to March 18,  2004 and the
consolidated results of operations of the Company since March 18, 2004. On April
29,  2004,  our  shareholders  approved  the  change  of our  corporate  name to
Ionatron, Inc., an increase of authorized common stock to 100,000,000 shares and
the  classification of the Board of Directors into three classes.  Ionatron also
changed its fiscal year end from June 30 to December 31.

      In September 2004, we completed the acquisition of  substantially  all the
assets of North  Star  Research  Acquisition  Corporation  (formerly  North Star
Research  Corporation),  a New Mexico  corporation  engaged in the  business  of
designing  and  manufacturing  a broad range of high voltage  equipment  for the
defense, aerospace,  semi-conductor,  and medical industries.  Subsequent to the
acquisition we changed the  corporation's  name to North Star Power  Engineering
Inc. ("North Star").

OPERATING SEGMENTS:

      We are currently  engaged in developing and marketing through two distinct
segments: (1) Ionatron,  where the focus is on Directed Energy Weapon technology
products for sale to the U.S.  Government and (2) North Star, where the focus is
on  the  manufacture  of  custom  high  voltage  equipment  for  sale  to a more
broad-based market.

                                     - 17 -
<PAGE>

CRITICAL ACCOUNTING POLICIES

Use of Estimates

      Our consolidated financial statements are prepared in accordance with U.S.
generally accepted  accounting  principles  (GAAP),  which require management to
make  estimates  and  assumptions  that  affect  the  amounts  reported  in  the
consolidated financial statements and accompanying notes. We have identified the
following  significant  accounting  policies  that  require  a higher  degree of
judgment  and  complexity.  See  Note 1 to the  Company's  audited  consolidated
financial  statements  contained  in its Annual  Report on Form  10-K,  which is
incorporated   herein  by  reference  for  information  with  respect  to  other
significant accounting policies.

Revenues

      Revenue has been derived from ongoing  contract  work for effects  testing
and the  design  and  development  of an in  house  demonstration  system  for a
government  customer.  It is expected that  continued  work on effects  testing,
design and  development of use specific  Ionatron  systems,  advanced design and
proof of principle on an existing contract, compact laser source development and
the  manufacture of a  transportable  demonstrator  will  contribute to revenues
going  forward in 2005.  This work is expected to be generally  performed  under
cost-plus contracts with U.S. Government customers.

      Revenue under  long-term U.S.  Government  contracts is recorded under the
percentage of completion  method.  Revenues,  billable monthly,  under cost plus
fixed fee  contracts  are recorded as costs are  incurred and include  estimated
earned  fees  in the  proportion  that  costs  incurred  to date  bear to  total
estimated costs. Costs include direct labor, direct materials, and subcontractor
costs and overhead. As contracts can extend over one or more accounting periods,
revisions  in  costs  and  earnings  estimated  during  the  course  of work are
reflected during the accounting period in which the facts become known. When the
current  contract  estimate  indicates a loss,  provision  is made for the total
anticipated loss in the current period.

      The asset accounts  receivable  includes  costs and estimated  earnings in
excess of billings on uncompleted contracts which represents revenues recognized
in excess of amounts  billed.  Such revenues are billable under the terms of the
contracts  as of the  balance  sheet  date,  yet were  not  invoiced  until  the
following month, and are generally  expected to be collected within 60 days. The
liability  "billings  in excess  of costs"  represents  billings  and  estimated
earnings in excess of revenues recognized on uncompleted contracts

      Revenues for other products and services are recognized when such products
are delivered and, in connection with certain sales to government agencies, when
the products and services are accepted,  which is normally negotiated as part of
the initial contract. Revenues from commercial, non-governmental,  customers are
based on fixed price  contacts where the sale is recognized  upon  acceptance of
the product or performance of the service.

Cost Of Revenue

      Cost of revenue  under  long-term  U.S.  Government  contracts is recorded
using the cost plus fixed fee  method.  Cost of revenue is recorded as costs are
incurred. Costs include direct labor, direct materials,  subcontractor costs and
manufacturing and administrative  overhead.  General and administrative expenses
allowable under the terms of the contracts are allocated per contract  depending
on its direct labor and material  proportion  to total direct labor and material
of all contracts.

      As contracts can extend over one or more accounting periods,  revisions in
costs  estimated  during the course of work are reflected  during the accounting
period in which the facts become known.

Goodwill and Indefinite Life Intangible Assets

      We account for Goodwill and Indefinite Life Intangible Assets based on the
method of accounting proscribed by the provisions of SFAS No. 142, "Goodwill and
Other  Intangible  Assets," and we have  determined that Ionatron and North Star
are separate  reporting  units.  We believe that the North Star trade name is an
indefinite life intangible asset.

                                     - 18 -
<PAGE>

      Goodwill and indefinite life intangible assets will be tested annually for
impairment  or more  frequently if events or changes in  circumstances  indicate
that the assets might be impaired.  In assessing the  recoverability of goodwill
and  indefinite  life  intangible  assets,  we must make  assumptions  about the
estimated  future cash flows and other  factors to  determine  the fair value of
these assets.

      Assumptions  about  future  revenue  and cash  flows  require  significant
judgment  because of the current  state of the economy  and the  fluctuation  of
actual revenue and the timing of expenses. We develop future cash flows based on
projected sales with the assumption that expenses will grow at rates  consistent
with historical  rates. If the expected cash flows are not realized,  impairment
losses may be recorded in the future.

      For  goodwill,  the  impairment  evaluation  includes a comparison  of the
carrying  value of the reporting  unit  (including  goodwill) to that  reporting
unit's fair value.  If the  reporting  unit's  estimated  fair value exceeds the
reporting unit's carrying value, no impairment of goodwill  exists.  If the fair
value of the reporting unit does not exceed the unit's carrying  value,  then an
additional  analysis is performed  to allocate  the fair value of the  reporting
unit to all of the assets  and  liabilities  of that unit.  If the excess of the
fair value of the reporting unit over the fair value of the identifiable  assets
and  liabilities  is less than the  carrying  value of the unit's  goodwill,  an
impairment charge is recorded for the difference.

      The  impairment  evaluation  for  indefinite  life  intangible  assets  is
performed  by a  comparison  of the asset's  carrying  value to the asset's fair
value.  When the  carrying  value  exceeds  fair value an  impairment  charge is
recorded for the amount of the difference.  An intangible asset is determined to
have an indefinite useful life when there are no legal, regulatory, contractual,
competitive, economic, or any other factors that may limit the period over which
the asset is expected to  contribute  directly or  indirectly to our future cash
flows. In addition, each reporting period, we evaluate the remaining useful life
of an intangible  asset that is not being amortized to determine  whether events
and  circumstances  continue  to  support  an  indefinite  useful  life.  If  an
intangible  asset that is not being  amortized  is  determined  to have a finite
useful  life,  the asset  will be  amortized  prospectively  over the  estimated
remaining useful life and accounted for in the same manner as intangible  assets
subject to amortization.

RESULTS OF OPERATIONS

      COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005 and 2004
is as follows:

                                                  2005            2004
                                               -----------    -----------
      Revenue                                  $ 3,956,522    $ 1,833,572
      Cost of revenue                            3,775,826      1,726,753
           General and administrative            1,345,807      1,199,390
           Selling and marketing                    95,133        119,566
           Research and development                385,656        120,133
      Other (expense) income:
           Interest expense                        (58,102)       (43,184)
           Interest income                          10,099         21,221
           Other                                    (7,500)            --
                                               -----------    -----------
      Loss before provision for income taxes    (1,701,403)    (1,354,233)
      Provision for income taxes                     9,293             --
                                               -----------    -----------

      Net loss                                 $(1,710,696)   $(1,354,233)
                                               ===========    ===========

      REVENUE

      The increase in revenue for the three months ended June 30, 2005  compared
to 2004 was attributed to increased revenue from governmental  contracts as well
as the  inclusion  of North  Star's  revenue of  $437,750,  net of  intersegment
revenue.  Our revenue,  increased from  approximately $2.6 million for the first
quarter  of 2005 as we  started  billing  on our new JIN  project  in the second
quarter.

      COST OF REVENUE

      Cost of revenue also  increased when compared to the three months ended of
June 30,  2004 due to more work being  done and more  materials  acquired  under
existing government  contracts and the inclusion of North Star's cost of revenue
of $374,422,  net of intersegment  cost of revenue.  Cost of revenue includes an
allocation of general and  administrative  expenses and research and development
costs in accordance with the terms of our contracts.

                                     - 19 -
<PAGE>

      GENERAL AND ADMINISTRATIVE

      The  increase in general  and  administrative  costs for the three  months
ended June 30, 2005 from the three months  ended June 30, 2004 is primarily  due
to an increase of approximately  $783,000 in personnel costs.  Also contributing
to the increase are higher insurance costs of approximately $66,000,  recruiting
costs of approximately  $107,000 and  depreciation  and amortization  expense of
approximately $106,000. Offsetting these increases was a significant rise in the
amount of indirect costs allocated to cost of sales.

      General and administrative  costs for the three months ended June 30, 2005
decreased  from the previous  three months ended March 31, 2005,  primarily as a
result of a decrease in professional  fees of  approximately  $432,000 offset by
increases in recruiting costs of approximately $100,000.

      SELLING AND MARKETING

      Selling and  marketing  expenses  decreased  during the three months ended
June 30, 2005  primarily  resulting from an increase in the allocation of salary
expenses to project oversight and administrative activities.

      RESEARCH AND DEVELOPMENT

      Research and development  expenses  increased 220% during the three months
ended June 30, 2005 as compared to 2004 primarily due to our shift to internally
funded  proof of concept  and  research  and  development  from  production  and
research and development under contracts in 2005.

      INTEREST EXPENSE

      The interest expense on our credit line payable to our Chairman  increased
$14,000  from the second  quarter of 2004 to the same period in 2005 as a result
of the increase in prime rate. See "Liquidity and Capital Resources" for further
information concerning the restructuring of the credit line agreement.

      INTEREST INCOME

      Interest  income in the second quarter of 2005 decreased  $11,000 from the
second  quarter of 2004 as a result of reduction of investment in the short-term
investment fund.

      NET LOSS

      The  operations for the three months ended June 30, 2005 resulted in a net
loss of $1,711,000  an increase from the 2004 net loss of $356,000.  General and
administrative  expenses  increased  12%  primarily  due  to  additional  staff,
additional  insurance costs and depreciation  expense.  Research and development
expenses  increased over 220% from 2004 as expected due to the shift to internal
research and development from development under contracts. Offsetting the impact
of these increases,  2005 selling and marketing expenses decreased 62% resulting
from an allocation of costs to administrative and project oversight activities.

                                     - 20 -
<PAGE>

     COMPARISON OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004 is
as follows:

                                                  2005           2004
                                               -----------    -----------
      Revenue                                  $ 6,526,793    $ 2,106,014

      Cost of revenue                            6,180,312      1,981,753
           General and administrative            2,869,011      1,764,939
           Selling and marketing                   230,662        232,072
           Research and development                491,646        300,898
      Other (expense) income:
           Interest expense                       (116,179)      (117,700)
           Interest income                          21,001         21,221
           Other                                       592             --
                                               -----------    -----------
      Loss before provision for income taxes    (3,339,424)    (2,270,127)
      Provision for income taxes                    18,870             --
                                               -----------    -----------

      Net loss                                 $(3,358,294)   $(2,270,127)
                                               ===========    ===========

      REVENUE

      The increase in revenue for the six months ended June 30, 2005 compared to
2004 was attributed to increased revenue from existing  governmental  contracts,
revenue  from our new JIN  contract  as well as the  inclusion  of North  Star's
revenue of $644,874, net of intersegment revenue.

      COST OF REVENUE

      Cost of revenue also  increased  when  compared to the six months ended of
June 30,  2004 due to more work being  done and more  materials  acquired  under
existing government contracts as well as the new JIN contracts and the inclusion
of North  Star's  cost of  revenue  of  $580,595,  net of  intersegment  cost of
revenue.  Cost of revenue  includes an allocation of general and  administrative
expenses and research and development  costs in accordance with the terms of our
contracts.

      GENERAL AND ADMINISTRATIVE

      The increase in general and administrative  costs for the six months ended
June 30,  2005 from the six months  ended June 30, 2004 is  primarily  due to an
increase of approximately  $1.3 million in personnel costs. Also contributing to
the increase is a rise in depreciation and amortization expense of approximately
$185,000  and  increases in  professional  fees and  insurance of  approximately
$600,000 and $216,000, respectively. Included in the professional fees are costs
of  approximately  $386,000  related  to  compliance  with  Section  404  of the
Sarbanes-Oxley Act of 2002. Offsetting these increases was a significant rise in
the amount of indirect costs allocated to cost of sales.

      SELLING AND MARKETING

      Selling and marketing  expenses remained  consistent during the six months
ended June 30, 2005 when compared to the six months ended June 30, 2004.

      RESEARCH AND DEVELOPMENT

      Research  and  development  expenses  increased  63% during the six months
ended June 30, 2005 as compared to 2004 primarily due to our shift to internally
funded  proof of concept  and  research  and  development  from  production  and
research and development under contracts in 2005.

                                     - 21 -
<PAGE>

      NET LOSS

      The  operations  for the six months ended June 30, 2005  resulted in a net
loss of $3,358,294 an increase from the 2004 net loss of $2,270,127. General and
administrative  expenses  increased  63%  primarily  due  to  additional  staff,
additional  costs associated with being a publicly held company and depreciation
expense.  2005 research and development  expenses  increased by 63% from 2004 as
expected due to the shift to internal  research and development from development
under contracts.  Offsetting the impact of these increases Selling and marketing
expenses  decreased  22%  resulting  from an  allocation  of salary  expenses to
project oversight and administrative activities.

      LIQUIDITY AND CAPITAL RESOURCES

      At June  30,  2005 we had  approximately  $1.1  million  of cash  and cash
equivalents,  a  decrease  of $1.4  million  from cash and cash  equivalents  at
December 31, 2004 of $2.5  million.  Additionally  at June 30, 2005 and December
31, 2004, we had $500,000 and $1.0 million, respectively, of investments held in
a bond fund which is re-priced weekly.

      During the first half of 2005,  we used $1.6  million of cash in operating
activities, consisting primarily of our net loss of $3.4 million and an increase
in  inventory  and a decrease  in accrued  expenses of  $687,000  and  $341,000,
respectively,  partially  offset by  depreciation  and  amortization  expense of
$596,000 and a decrease in accounts receivable of $1.8 million.  The increase in
inventory is primarily  the result of material  acquisitions  in the JIN project
with the U.S.  government.  We anticipate that short-term and long-term  funding
needs will be  provided  from the cash flow from cash and  investments  on hand,
government contracts as well as our available line of credit.

      Additionally,  in the  first  half of 2005,  we used  $145,000  in cash in
investing activities,  consisting of equipment purchases partially offset by the
partial liquidation of the investment in municipal bonds. During the six months,
financing activities provided $411,000 of cash, due to option exercises.

      Our cash position  increased during the first half of 2004 by $6.5 million
primarily  as a result of the merger  with USHG that  provided  $8.9  million of
cash.  At June  30,  2004 we had  approximately  $6.6  million  of cash and cash
equivalents.  We used $3.2  million in  operations  and  purchased  $304,000  of
equipment during the period,  which was financed in part, by borrowings from our
Chairman.  Our borrowing arrangement with our Chairman was restructured in March
2004,  after pay down of  $500,000  and his  contribution  of $2  million to our
capital, into a $3 million revolving credit arrangement.

      We believe that we will have sufficient cash, or access to sufficient cash
through potential banking or investing  relationships to meet current and future
cash needs. The transportable  demonstrator  contract,  the JIN contract and one
other  contract,  that  presently  represent  a  major  portion  of our  current
activity,  are on a cost plus fixed fee basis.  This means the  majority of work
performed is done at our  government-approved  rates,  which include general and
administrative  costs,  overhead,  labor and materials,  fees and profit.  These
costs are  accrued as incurred  and billed  monthly.  These  government-approved
rates  are  adjusted  periodically  and  will  be  adjusted  in  the  future  to
incorporate  additional costs as the operations  expand.  Other contracts are at
fixed prices which have commercial type gross margins associated with them.

      BACK-LOG OF ORDERS

      At June 30, 2005, we had a backlog (that is, work load remaining on signed
contracts) of $303,000,  to be completed within the next twelve months.  In July
2005,  we received a $6.4 million  contract for the further  development  of our
LIPC  technology.  The funding for this contract is derived from the Fiscal Year
2005  Congressional  Plus Up contained in the 2005 Department of Defense budget.
The  contract  allows work to begin on critical  items  desired by the  customer
while further discussions  continue as to the remainder of the Scope of Work for
that  funding.  In  August  2005,  we  received  a new  letter  contract  for an
additional  $8.2  million  from  the  U.S.  government  for our JIN  (Joint  IED
Neutralizer)  Project.  The letter contract  provides  continued funding for the
ongoing  JIN  prototype   development  while  the  final  contract  details  are
negotiated.  With respect to the LIPC Transportable  Demonstrator  project, that
effort remains on hold as the Government is transferring  responsibility for the
project to a different  end user  organization.  Upon  completion  of the formal
transfer for project responsibility, we expect the funding will be restarted and
the  Demonstrator  will  be  completed  and  delivered  to  the  new  sponsoring
organization.

                                     - 22 -
<PAGE>

CONTRACTUAL OBLIGATIONS

      As of June 30, 2005, the Company had  contractual  obligations in the form
of non-cancelable  and cancelable  leases,  insurance premium financing and note
payable to stockholder as follows:
<TABLE>
<CAPTION>
                                                      Payment by Period
                                ------------------------------------------------------------
                                                                                     More
                                            Less than 1     1 to 3      4 to 5       than 5
                                 Total         Year         Years       Years        Years
                                ------------------------------------------------------------
<S>                           <C>          <C>          <C>          <C>          <C>
Capital lease                 $   51,677   $   17,704   $   32,327   $    1,646   $       --
Insurance premium financing       28,816       28,816           --           --           --
Note payable to stockholder    2,800,000    2,800,000           --           --           --
Operating lease                4,236,000      710,000    1,374,000    1,251,000      901,000
                                ------------------------------------------------------------

 Total                        $7,116,493   $3,556,520   $1,406,327   $1,252,646   $  901,000
                              ==============================================================
</TABLE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

      In the normal course of business,  our financial  position is subject to a
variety of risks, such as the collectibility of our accounts  receivable and the
recoverability  of the  carrying  values  of  our  long-term  assets.  We do not
presently enter into any transactions involving derivative financial instruments
for risk management or other purposes.

      Our available cash balances are invested on a short-term basis and are not
subject  to  significant  risks  associated  with  changes  in  interest  rates.
Substantially  all of our cash flows are derived from our operations  within the
United States and we are not subject to market risk  associated  with changes in
foreign exchange rates.

      We are exposed to market risk for the impact of interest rate changes,  as
the interest rate of our borrowings  under our revolving  credit  agreement with
our Chairman is subject to changes based on changes in the prime  interest rate;
should that rate increase by 1%, the effect would be an increase in the net loss
for the six months ended June 30, 2005 by $14,000.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

      As of the end of the period  covered by this  report,  an  evaluation  was
carried out under the supervision and with the  participation of our management,
including  our  chief  executive   officer/chief   financial  officer,   of  the
effectiveness  of  our  disclosure  controls  and  procedures.   Based  on  that
evaluation,  our chief executive  officer/chief  financial officer has concluded
that our  disclosure  controls  and  procedures  are  effective  to ensure  that
information  required to be  disclosed  by us in reports  that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules  and  forms.  During  the  quarter  ended  June 30,  2005,  there  were no
significant  changes in our internal  controls over financial  reports that have
materially  affected,  or which are reasonably  likely to materially  affect our
internal controls over financial reporting.

                                     - 23 -
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

      We may from time to time be involved in legal proceedings arising from the
normal course of business.  As of the date of this report,  we were not involved
in any legal proceedings.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

      During the six months  ended June 30,  2005,  the Company  issued  388,409
shares of common  stock upon  exercise of  outstanding  options and  warrants to
employees,  directors and consultants. The securities were issued pursuant to an
exemption from registration pursuant to Section 3(a)(9) of the Securities Act of
1933.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      At the Annual Meeting of Stockholders  of Ionatron,  Inc. held on June 28,
2005,  66,881,117  shares of  Ionatron's  Common  Stock,  or 93.93% of the total
Common Stock outstanding on the record date for such meeting, were represented.

      The  Stockholders  of Ionatron  elected Mr. Robert Howard and Rear Admiral
Thomas W. Steffens (Ret.) as Class I Directors with terms expiring at the Annual
Meeting of  Stockholders to be held in 2008. Of the shares voted with respect to
the  election of Mr.  Howard,  66,542,352  were voted in favor and 338,765  were
withheld.  Of the shares voted with respect to the election of Admiral Steffens,
66,729,528 were voted in favor and 151,589 were withheld.

      Continuing  as Class II  Directors  with  terms  expiring  in 2006 are Mr.
Thomas C. Dearmin,  and Mr. George P. Farley.  Continuing as Class III Directors
with terms expiring in 2007 are Mr. James K. Harlan, and Mr. David C. Hurley.

      The  Stockholders of Ionatron also approved the amendment of the Company's
2004 Stock Incentive Plan to, among other things;  increase the number of shares
of  common  stock  available  for  issuance  under the plan  from  3,000,000  to
5,000,000. Of the shares voted with respect to the ratification of the amendment
of the 2004 Stock Incentive Plan,  51,382,315 were voted in favor,  658,775 were
voted  against and 90,557 were  withheld.  In  addition,  there were  14,749,470
shares that were not voted on this proposal.


ITEM 6   EXHIBITS

EXHIBIT
NUMBER      DESCRIPTION
------      --------------------------------------------------------------------

10.1        Form  of 2004  Stock  Incentive  Plan  Non-Qualifying  Stock  Option
            Agreement for Directors.

31.1        Certification  of  Chief  Executive  and  Chief  Financial   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.

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


                                     - 24 -
<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                           IONATRON, INC.

                                           By /s/ Thomas C. Dearmin
                                           ----------------------------------
                                           Thomas C. Dearmin
                                           Chief Executive Officer, President
                                           and Chief Financial Officer

Date: August 9, 2005


                                     - 25 -