--------------------------------------------------------------------------------

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

                                   FORM  10-QSB

|X|  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act  of  1934
                  For  the  quarterly  period  ended  March  31,  2005

| |  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: 000-22711

                              BLUEGATE  CORPORATION
                 (Name  of  small  business  issuer  in  its  charter)

                      Nevada                               76-0640970
       (State  or  other  jurisdiction  of              (I.R.S.  Employer
         incorporation  or  organization)              Identification  No.)

            701 North Post Oak Road, Suite 630, Houston, Texas 77024
                    (Address of principal executive offices)

                voice:  713-686-1100           fax:  713-682-7402
                 Issuer's Telephone Number, Including Area Code

     Check  whether  the  Issuer  (1)  filed all reports required to be filed by
Section  13  or  15(d)  of the Securities 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

     On  May  9,  2005,  the  registrant  had  outstanding  4,899,637  shares of
Common  Stock,  $0.001  par  value  per  share.

     Transitional  Small  Business  Disclosure  Format:     Yes  | |   No  |X|

                                     PART  I
                              FINANCIAL INFORMATION


ITEM  1.     FINANCIAL  STATEMENTS.




                              BLUEGATE CORPORATION
                                   __________




              UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                              BLUEGATE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEET

                                   __________


                                                              MARCH 31,     DECEMBER 31,
                                                                 2005           2004
     ASSETS                                                  (UNAUDITED)       (NOTE)
     ------                                                  ------------  --------------
<S>                                                          <C>           <C>
Current assets:
  Cash and cash equivalents                                  $    36,617   $       3,708
  Accounts receivable,                                           212,124         209,856
  Note receivable                                                126,026         146,814
  Other                                                           30,234          29,429
                                                             ------------  --------------

    Total current assets                                         405,001         389,807

Goodwill                                                          50,160               -

Property and equipment, net                                       96,803          73,458
                                                             ------------  --------------

      Total assets                                           $   551,964   $     463,265
                                                             ============  ==============


LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

Current liabilities:
  Book overdraft                                             $         -   $       9,620
  Notes payable                                                   12,800           2,800
  Notes payable to related parties                                34,000         389,018
  Accounts payable                                               592,021         715,836
  Accrued liabilities                                            269,375         296,637
  Deferred revenue                                               196,202         217,073
                                                             ------------  --------------

    Total current liabilities                                  1,104,398       1,630,984
                                                             ------------  --------------

Commitment and contingencies

Stockholders' deficit:
  Series A Convertible Non-Redeemable Preferred stock,
    $.001 par value, 20,000,000 shares authorized, 110,242
    shares issued and outstanding, $5,000 per share
    liquidation preference ($551,210 aggregate liquida-
    tion preference)                                                   -               -
  Series B Convertible Non-Redeemable Preferred stock,
    $0.001 par value, 10,000,000 shares authorized, no
    shares issued and outstanding                                      -               -
  Common stock, $.001 par value, 50,000,000 shares auth-
    orized, 3,239,825 shares issued and outstanding                3,240           2,549
  Additional paid-in capital                                   7,597,229       6,184,450
  Subscription receivable                                         (8,510)        (11,141)
  Deferred compensation                                         (346,867)              -
  Unissued common stock                                        1,047,201               -
  Accumulated deficit                                         (8,844,727)     (7,343,577)
                                                             ------------  --------------

    Total stockholders' deficit                                 (552,434)     (1,167,719)
                                                             ------------  --------------

      Total liabilities and stockholders' deficit            $   551,964   $     463,265
                                                             ============  ==============
</TABLE>


Note:  The  balance sheet at December 31, 2004 has been derived from the audited
financial  statements  at  that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States  of  America  for  complete  financial  statements.


                             See accompanying notes.


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                              BLUEGATE CORPORATION

             UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                   FOR THE THREE MONTHS MARCH 31, 2005 AND 2004

                                    __________


                                                         MARCH 31,     MARCH 31,
                                                            2005         2004
                                                        ------------  -----------
<S>                                                     <C>           <C>
Service revenue                                         $   359,547   $  194,535

Cost of services                                            175,764      165,442
                                                        ------------  -----------

  Gross margin                                              183,783       29,093

Selling, general and administrative expenses                724,788      238,173
                                                        ------------  -----------

Loss from operations                                       (541,005)    (209,080)
                                                        ------------  -----------

Other income and (expense):
  Interest income                                               728            -
  Loss on conversion of notes payable to common stock      (946,971)           -
  Interest expense                                          (11,283)      (2,768)
  Other expense                                              (2,619)           -
                                                        ------------  -----------

    Other expense, net                                     (960,145)      (2,768)
                                                        ------------  -----------

Loss from continuing operations                          (1,501,150)    (211,848)
                                                        ------------  -----------

Discontinued operations:
  Loss from operation of discontinued broadband
    internet segment                                              -     (224,424)
                                                        ------------  -----------

      Net income (loss)                                 $(1,501,150)  $ (436,272)
                                                        ============  ===========


Basic and diluted net loss per common share             $     (0.46)  $    (0.20)
                                                        ============  ===========

Weighted average shares outstanding                       3,263,370    1,924,627
                                                        ============  ===========
</TABLE>


                             See accompanying notes.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                                       BLUEGATE CORPORATION

                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                            FOR THE THREE MONTHS ENDED MARCH 31, 2005

                                                            __________

                                                  SERIES A             SERIES B
                           COMMON STOCK        PREFERRED STOCK      PREFERRED STOCK    ADDITIONAL
                        ------------------  --------------------  ------------------    PAID-IN     SUBSCRIPTION      DEFERRED
                         SHARES    AMOUNT    SHARES     AMOUNT     SHARES    AMOUNT     CAPITAL      RECEIVABLE     COMPENSATION
                        ---------  -------  ---------  ---------  ---------  -------  -----------  --------------  --------------
<S>                     <C>        <C>      <C>        <C>        <C>        <C>      <C>          <C>             <C>
Balance at December
  31, 2004              2,548,809  $ 2,549        111  $       -          -  $     -  $ 6,184,450  $     (11,141)  $           -

Issuance of common
  stock for cash          161,016      161          -          -          -        -       26,704              -               -

Conversion of notes
  payable and accrued
  interest for unis-
  sued common stock
  and stock options             -        -          -          -          -        -      806,818              -               -

Issuance of common
  stock to an officer
  as compensation         100,000      100          -          -          -        -      100,900              -               -

Issuance of common
  stock to pay con-
  sulting fees            430,000      430          -          -          -        -      377,969              -        (346,867)

Purchase of certain
  assets of a company
  for unissued common
  stock                         -        -          -          -          -        -            -              -               -

Cash received for com-
  mon stock that has
  not been issued               -        -          -          -          -        -            -              -               -

Receipt of cash for
  subscription receiv-
  able                          -        -          -          -          -        -            -          2,631               -

Stock options issued
  for services                  -        -          -          -          -        -      100,388              -               -

Net loss                        -        -          -          -          -        -            -              -               -
                        ---------  -------  ---------  ---------  ---------  -------  -----------  --------------  --------------

Balance at March 31,
  2005                  3,239,825  $ 3,240        111  $       -          -  $     -  $ 7,597,229  $      (8,510)  $    (346,867)
                        =========  =======  =========  =========  =========  =======  ===========  ==============  ==============


                         UNISSUED
                          COMMON     ACCUMULATED
                          STOCK        DEFICIT        TOTAL_
                        ----------  -------------  ------------
<S>                     <C>         <C>            <C>
Balance at December
  31, 2004              $        -  $ (7,343,577)  $(1,167,719)

Issuance of common
  stock for cash                 -             -        26,865

Conversion of notes
  payable and accrued
  interest for unis-
  sued common stock
  and stock options        706,041             -     1,512,859

Issuance of common
  stock to an officer
  as compensation                -             -       101,000

Issuance of common
  stock to pay con-
  sulting fees                   -             -        31,532

Purchase of certain
  assets of a company
  for unissued common
  stock                    116,160             -       116,160

Cash received for com-
  mon stock that has
  not been issued          225,000             -       225,000

Receipt of cash for
  subscription receiv-
  able                           -             -         2,631

Stock options issued
  for services                   -             -       100,388

Net loss                         -    (1,501,150)   (1,501,150)
                        ----------  -------------  ------------

Balance at March 31,
  2005                  $1,047,201  $ (8,844,727)  $  (552,434)
                        ==========  =============  ============
</TABLE>


                             See accompanying notes.


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                BLUEGATE CORPORATION
              UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                                     __________


                                                           MARCH 31,     MARCH 31,
                                                              2005         2004
                                                          ------------  -----------
<S>                                                       <C>           <C>
Cash flows from operating activities:
  Net loss                                                $(1,501,150)  $ (436,272)
  Adjustments to reconcile net loss to net cash
    used in operating activities:                           1,281,924      207,385
                                                          ------------  -----------

      Net cash used by continuing operations                 (219,226)    (206,477)
      Net cash used by discontinued operations                      -      (22,410)
                                                          ------------  -----------

        Net cash used by operating activities                (219,226)    (228,887)
                                                          ------------  -----------

Cash flows from investing activities:
  Payments received on note receivable                         20,788            -
  Purchase of computers and equipment                         (42,769)           -
  Proceeds from disposition of property and equipment               -        4,366
                                                          ------------  -----------

      Net cash used by continuing operations                  (21,981)       4,366
      Net cash used by discontinued operations                      -            -
                                                          ------------  -----------

        Net cash provided (used) by investing activities      (21,981)       4,366
                                                          ------------  -----------

Cash flows from financing activities:
  Repayment of book overdraft                                  (9,620)     (28,766)
  Proceeds from notes payable                                  10,000       40,000
  Repayment of notes payable                                        -         (795)
  Repayment of notes payable to related parties                     -      (14,000)
  Collection of subscription receivable                         2,631            -
  Proceeds from sale of common stock                          251,865      227,587
                                                          ------------  -----------

      Net cash provided by continuing operations              274,116      224,026
      Net cash provided by discontinued operations                  -            -
                                                          ------------  -----------

        Net cash provided by financing activities             274,116      224,026
                                                          ------------  -----------

Net increase (decrease) in cash and cash equivalents           32,909         (495)

Cash and cash equivalents at beginning of period                3,708        9,485
                                                          ------------  -----------

Cash and cash equivalents at end of period                $    36,617   $    8,990
                                                          ============  ===========


Non-Cash Investing and Financing Activities:

  Issuance of common stock for acquisition
    of TEKMedia Communications, Inc.                      $   116,160   $        -
  Common stock issued for conversion of
    notes payable                                             355,018            -
  Common stock issued for conversion of
    accrued interest                                           56,573            -
  Common stock issued for conversion of
    Accounts payable                                          154,297            -
<FN>
                              See accompanying notes.
</TABLE>


                                       F-5
<PAGE>
                              BLUEGATE CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


1.   BASIS  OF  PRESENTATION  AND  CRITICAL  ACCOUNTING  POLICIES
     ------------------------------------------------------------

     Bluegate  Corporation  (the  "Company")  is  a  Nevada Corporation that was
     originally  established  to  conduct  an  effort  to  capitalize  on  the
     telecommunications  industry  downturn  that began during 2000. The Company
     has now focused its efforts on providing the healthcare community BLUEGATE,
     the  Company's  secure  medical  network  using  Cisco System's(TM) virtual
     private  network  technology  to  assist  in  compliance  with  the  Health
     Insurance Portability and Accountability Act of 1996 ("HIPPA").

     The  Company  was  originally  incorporated  as  Solis Communications, Inc.
     ("Solis")  on  July  23,  2001  and  adopted  a  name  change  to  Crescent
     Communications  Inc.  upon  completion  of  a reverse acquisition of Berens
     Industries, Inc.

     The  unaudited  consolidated condensed financial statements included herein
     have  been  prepared  without  audit  pursuant to the rules and regulations
     of the Securities and Exchange Commission. Certain information and footnote
     disclosures  normally  included  in  financial  statements  prepared  in
     accordance  with  accounting  principles  generally  accepted in the United
     States  of  America  have been condensed or omitted, pursuant to such rules
     and  regulations.  These  unaudited  consolidated  condensed  financial
     statements  should  be  read  in  conjunction with the audited consolidated
     financial  statements  and  notes  thereto  of  Bluegate  Corporation  (the
     "Company")  included  in the Company's Annual Report on Form 10-KSB for the
     year ended December 31, 2004.

     In  the  opinion  of  management,  the  unaudited  consolidated  condensed
     financial  information  included  herein  reflect  all  adjustments,
     consisting only of normal, recurring adjustments, which are necessary for a
     fair  presentation  of  the  Company's  financial  position,  results  of
     operations and cash flows for the interim periods presented. The results of
     operations  for  the  interim  periods presented herein are not necessarily
     indicative  of  the  results  to  be  expected for a full year or any other
     interim period.

     STOCK-BASED  COMPENSATION
     -------------------------

     The  Company  has  adopted  Statement  of  Financial  Accounting  Standards
     ("SFAS")  No.  123  -  "Accounting  for  Stock  Based  Compensation." Under
     SFAS  No. 123, the Company is permitted to either record expenses for stock
     options  and other employee compensation plans based on their fair value at
     the  date  of  grant  or to continue to apply our current accounting policy
     under  Accounting  Principles Board, ("APB") Opinion No. 25 "Accounting for
     Stock  Issued  to  Employees,"  and recognize compensation expense, if any,
     based  on  the  intrinsic value of the equity instrument at the measurement
     date.  In  December  of 2002, the FASB issued SFAS No. 148, "Accounting for
     Stock-  Based  Compensation  -  Transition and Disclosure - An Amendment to
     FASB  Statement No. 123" to provide alternative methods of transition for a
     voluntary  change  to  the  fair  value  based  method  of  accounting  for
     stock-based employee compensation. The Company elected to not change to the
     fair  value  based  method  of  accounting  for  stock  based compensation.
     Additionally, the statement amended disclosure requirements of SFAS No. 123
     to  require  more prominent disclosure in both annual and interim financial
     statements.


                                       F-6

<PAGE>
                              BLUEGATE CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


1.   BASIS  OF  PRESENTATION  AND  CRITICAL  ACCOUNTING  POLICIES,  CONTINUED
     ------------------------------------------------------------------------

     SIGNIFICANT  ESTIMATES
     ----------------------

     The  preparation  of  consolidated  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  dates  of  the  consolidated  financial
     statements  and  the  reported  amounts of revenues and expenses during the
     periods.  Actual  results  could differ from estimates making it reasonably
     possible that a change in the estimates could occur in the near term.

     REVENUE  RECOGNITION
     --------------------

     Revenue  from  telecommunications  services  are  recognized  based  upon
     contractually  determined  service  charges  to  individual  customers.
     Telecommunications services are billed in advance and revenues are deferred
     until  the period in which the services are provided. At March 31, 2005 and
     December  31,  2004,  deferred  service  revenue was $196,202 and $217,073,
     respectively.

2.   GOING  CONCERN  CONSIDERATIONS
     ------------------------------

     During  the three months ended March 31, 2005, and the years ended December
     31,  2004  and  2003  the  Company  has  been unable to generate cash flows
     sufficient  to  support  its  operations and has been dependent on debt and
     equity  raised  from qualified individual investors. During the years ended
     December  31,  2004  and  2003,  the Company experienced negative financial
     results as follows:

<TABLE>
<CAPTION>
                                               2004          2003
                                           ------------  ------------
<S>                                        <C>           <C>
       Net loss                            $  (640,199)  $(2,543,629)
       Negative cash flow from operations   (1,299,842)   (1,423,363)
       Negative working capital             (1,241,177)   (1,743,942)
       Stockholders' deficit                (1,167,719)   (1,140,379)
</TABLE>

     These  negative  factors have continued during the three months ended March
     31,  2005  and  raise  substantial  doubt  about  the  Company's ability to
     continue as a going concern.

     The  Company  has  supported  current  operations by: 1) raising additional
     operating  cash  through  private  placements  of  its common stock, and 2)
     issuing  stock and options as compensation to certain employees and vendors
     in lieu of cash payments.

     These  steps  have provided the Company with the cash flows to continue its
     business  plan,  but  have  not  resulted in significant improvement in the
     Company's  financial  position.  Management  is considering alternatives to
     address its critical cash flow situation that include:


                                       F-7
<PAGE>
                              BLUEGATE CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


2.   GOING  CONCERN  CONSIDERATIONS,  CONTINUED
     ------------------------------------------

     -    Raising  capital  through  additional sale of its common and preferred
          stock and/or debt securities.

     -    Merging  the  Company  with  another business that compliments current
          activities.

     -    Reducing  cash  operating  expenses  to  levels  that are in line with
          current  revenues.  Reductions  can  be  achieved through the issuance
          of  additional  common  shares  of the Company's stock in lieu of cash
          payments to employees or vendors.

     These  alternatives  could  result  in  substantial  dilution  of  existing
     stockholders.  There  can  be  no  assurances  that  the  Company's current
     financial  position  can  be improved, that it can raise additional working
     capital  or  that  it  can achieve positive cash flows from operations. The
     Company's  long-term  viability  as  a  going concern is dependent upon the
     following:

     -    The  Company's  ability to locate sources of debt or equity funding to
          meet current commitments and near term future requirements.

     -    The  ability  of  the  Company to achieve profitability and ultimately
          generate  sufficient  cash  flow  from  operations  to  sustain  its
          continuing operations.


3.   ACQUISITION  OF  TEKMEDIA  COMMUNICATIONS,  INC.("TEKMEDIA")
     ------------------------------------------------------------

     On  March  1, 2005, the Company acquired the assets of TEKMedia in exchange
     for  132,000  shares  of  the  Company's  common  stock.  Following  is  an
     analysis of the assets acquired and the purchase price:

<TABLE>
<CAPTION>
<S>                         <C>
     Assets acquired:
       Accounts receivable    66,000
       Goodwill               50,160
                            --------

     Common stock issued    $116,160
                            ========
</TABLE>


4.   INCOME  TAX
     -----------

     The difference between the Federal statutory income tax rate of 34% and the
     Company's  effective  rate  is  primarily  attributable to increases in the
     valuation  allowance offset against deferred tax assets associated with the
     Company's net operating losses.


                                       F-8
<PAGE>
                              BLUEGATE CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


5.   STOCKHOLDERS'  EQUITY
     ---------------------

     During  the  three  months  ended  March  31,  2005, the Company engaged in
     various  transactions  affecting  stockholders'  equity,  as  follows:

     -    The  Company  sold  common stock under Regulation S to various foreign
          investors  under  investment  agreements  entered  into  during  2002.
          The investment agreements generally provide for the sale of restricted
          common stock at 35% of the current trading price in the United States.
          During the three month period ended March 31, 2005 161,016 shares were
          issued for $26,865.

     -    Officers  and  directors  holding convertible notes totaling $355,018,
          agreed  to  convert  those  notes,  related  accrued  interest  of
          $56,573  and  accounts  payable  for  legal  services of $154,297 into
          common  stock.  The  stock was issued subsequent to March 31, 2005. In
          connection  with  the conversions, the Company issued the officers and
          directors a total of 1,008,630 three-year options to acquire shares of
          the  Company's  common  stock.  The  options  are  exercisable after a
          vesting  period  at $1.00 per share. The unissued common stock and the
          stock  options  granted  under  the  conversion totaled were valued at
          $1,512,859  and  the  Company  recognized  a loss on the conversion of
          $946,971

     -    The  Company  issued  10,000  shares  of common stock to a director as
          compensation totaling $101,000.

     -    The  Company  issued  common  stock  for  consulting services totaling
          $31,532.

     -    The  Company  purchased  certain  assets  of  TEKMedia in exchange for
          132,000  shares  of  common  stock  valued  at  $116,160. These shares
          were not yet issued at March 31, 2005.

     -    The Company sold common stock for $225,000 in, however the shares have
          not been issued.

     -    The Company received cash totaling $2,631 for subscription receivable.

     -    The  Company  issued options to acquire shares of the Company's common
          stock  to  a  consultant.  The  options  are  exercisable  after  a
          vesting period at $1.00 per share.


                                       F-9
<PAGE>
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS.


FORWARD-LOOKING  STATEMENT

     This Management's Discussion and Analysis should be read in conjunction
with the audited financial statements and notes thereto as set forth in our
annual report on Form 10-KSB for the year ended December 31, 2004.

     Certain statements contained in this report, including, without limitation,
statements containing the words, "likely," "forecast," "project," "believe,"
"anticipate," "expect," and other words of similar meaning, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking statements. Given
these uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. We disclaim any obligation to update any such
factors or to announce publicly the results of any revision of the
forward-looking statements contained or incorporated by reference herein to
reflect future events or developments. In addition to the forward-looking
statements contained in this Form 10-QSB, the following forward-looking factors
could cause our future results to differ materially from our forward-looking
statements: competition, capital resources, credit resources, funding,
government compliance and market acceptance of our products and services.


<PAGE>
CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

     Our discussion and analysis of our financial condition and results of
operations are based upon financial statements which have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate these estimates. We base our estimates on historical
experience and on assumptions that are believed to be reasonable. These
estimates and assumptions provide a basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions, and these differences may be material.

     We believe that the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

     REVENUE RECOGNITION. Revenue is recognized based upon contractually
determined monthly service charges to individual customers. Services are billed
in advance and, accordingly, revenues are deferred until the period in which the
services are provided. At March 31, 2005, total deferred service revenue was
$196,202.

     STOCK-BASED COMPENSATION. Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") established financial
accounting and reporting standards for stock-based employee compensation plans.
It defined a fair value based method of accounting for an employee stock option
or similar equity instrument and encouraged all entities to adopt that method of
accounting for all of their employee stock compensation plans and include the
cost in the income statement as compensation expense. However, it also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". We
account for compensation cost for stock option plans in accordance with APB
Opinion No. 25.

     Effective June 17, 2004, we entered into an Asset Sale Agreement (the
"Agreement") with DFW Internet Services, Inc. ("DFW"), a Texas corporation and a
wholly-owned subsidiary of MobilePro Corporation for the sale of certain assets
related to connectivity services including wireless, digital subscriber line and
traditional communication technologies to business and residential customers.
Under the terms of this Agreement, we will receive a total of $1,150,000 of
which $900,000 was already paid to us in cash and $250,000 was a one-year
promissory note due in June 2005. Additionally, DFW acquired 85% of accounts
receivable associated with services provided to our customers through June 17,
2004. Further, DFW entered into a one-year sublease for a portion of our office
space at 701 N. Post Oak Road, Suite 630, Houston, Texas, at a rental rate of
$3,000 per month. The terms and conditions of the transactions were the result
of arms-length negotiations by the parties. We received a fairness opinion from
an independent third-party that the asset sale was fair and equitable to us. As
a result of the Agreement our operations are now solely based on BLUEGATE (tm),
our branded HIPAA compliant broadband digital connectivity offering for
healthcare providers nationally.

     We remain dependent on outside sources of funding for continuation of our
operations. Our independent auditors made a going concern qualification in their
report dated March 28, 2005 (included in our annual report on Form 10-KSB for
the year ended December 31, 2004), which raises substantial doubt about our
ability to continue as a going concern.

     During the three months ended March 31, 2005, and the years ended December
31, 2004 and 2003, we have been unable to generate cash flows sufficient to
support its operations and have been dependent on debt and equity raised from
qualified individual investors. During the years ended December 31, 2004 and
2003, the Company experienced negative financial results as follows:

<TABLE>
<CAPTION>
                                              Year
                                              Ended
                                              December 31,

                                          2004           2003
                                      ------------  --------------

<S>                                   <C>           <C>
  Net loss                            $  (640,199)  $  (2,543,629)
  Negative cash flow from operations   (1,299,842)     (1,423,363)
  Negative working capital             (1,241,177)     (1,743,942)
  Stockholders' deficit                (1,167,719)     (1,140,379)
</TABLE>

     During  the  three  months  ended  March  31, 2005, we experienced negative
financial  results  as  follows:


<PAGE>
<TABLE>
<CAPTION>
                                                          Three Months
                                                         Ended March 31,

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

<S>                                              <C>                <C>
  Net loss                                       $     (1,501,150)  $    (436,272)
  Negative cash flow from continuing operations          (219,226)       (228,887)
  Negative working capital                               (699,397)     (1,868,580)
  Stockholders' deficit                                  (552,434)     (1,337,064)
</TABLE>


     These factors raise substantial doubt about our ability to continue as a
going concern. The financial statements contained herein do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should we be unable to continue in existence. Our ability to continue as a going
concern is dependent upon our ability to generate sufficient cash flows to meet
our obligations on a timely basis, to obtain additional financing as may be
required, and ultimately to attain profitable operations. However, there is no
assurance that profitable operations or sufficient cash flows will occur in the
future.

     We have supported current operations by: 1) selling off our traditional
connectivity services business, 2) raising additional operating cash through the
private sale of our common stock and options, 3) selling convertible and 4)
issuing stock and options as compensation to certain employees and vendors in
lieu of cash payments.

     These steps have provided us with the cash flows to continue our business
plan, but have not resulted in significant improvement in our financial
position. We are considering alternatives to address our critical cash flow
situation that include:

     -    Raising capital through additional sale of our common and
          preferred stock and/or debt securities.

     -    Reducing cash operating expenses to levels that are in line with
          current revenues. Reductions can be achieved through the issuance of
          additional common shares of our stock in lieu of cash payments to
          employees or vendors.

     These alternatives could result in substantial dilution of existing
stockholders. There can be no assurances that our current financial position can
be improved, that we can raise additional working capital or that we can achieve
positive cash flows from operations. Our long-term viability as a going concern
is dependent upon the following:

     -    Our ability to locate sources of debt or equity funding to meet
          current commitments and near-term future requirements.

     -    Our ability to achieve profitability and ultimately generate
          sufficient cash flow from operations to sustain our continuing
          operations.

     Our fiscal year end is December 31.

     Our operations are located in Houston, Texas. Our business consists of the
sales and marketing of our HIPAA compliant VPN and HIPAA application software.

RESULTS  OF  OPERATIONS

THREE  MONTHS  ENDED  MARCH  31,  2005  COMPARED  TO
THE  THREE  MONTHS  ENDED  MARCH  31,  2005.

     During the three months ended March 31, 2005, our service revenue was
$359,547 compared to $194,535 for the three months ended March 31, 2004. This
represents arevenue increase of $165,012 and is primarily attributable to our
efforts to market BLUEGATE (tm) which is our core business.

     Our cost of sales (cost of services) for the three months ended March 31,
2005 was $175,764 compared to $165,442 for the three months ended March 31,
2004. The increase in cost of sales is due to higher interconnect fees and costs
associated with BLUEGATE (tm).

     Our gross margin for the three months ended March 31, 2005 was $183,783
compared to $29,093 for the three months ended March 31, 2004. The increase in
gross margin is attributable to the fact that our gross margin improves as HIPAA
revenue increases because our fixed costs are a relatively high portion of our
total costs. However, we anticipate that our variable costs will increase as we
expand our HIPAA business.


<PAGE>
     We incurred selling, general and administrative expenses of $724,788 for
the three months ended March 31, 2005 compared to $238,173 for the three months
ended March 31, 2004. The increase in SG&A is attributable to our ramp up of our
sale and marketing efforts.

     We incurred a net loss of $1,501,150 for the three months ended March 31,
2005 compared to a loss of $436,272 for the three months ended March 31, 2004.
The increase in net loss is primarily attributable to non-cash expense of
$946,971 that we recorded upon conversion of notes payable to common stock.

     Forecast  of  Growth  in  our  HIPAA Customer Base.  Since we refocused our
     --------------------------------------------------
business  activities  in  2004  to  concentrate  on  our HIPAA business segment,
we have added an aggregate of more than 950 HIPAA customers through May 9, 2005.
We forecast an increase in the number of HIPAA customers throughout 2005. This
forecast is based on the rate that we are currently acquiring new HIPAA
customers. This growth in the number of HIPAA customers is tempered somewhat
because we incur marketing costs when we add new customers

LIQUIDITY  AND  CAPITAL  RESOURCES

     Our operations for the three months ended March 31, 2005 were funded by our
issuance of common stock and options for cash in private transactions, loans and
the proceeds from the sale of our traditional connectivity business in 2004. We
have continued to take steps to reduce operating expenses relating to our core
business. We have expanded efforts to creating a market for the healthcare
industry. Because of the uncertainty associated with this new market, breakeven
cash flow is not expected until late 2005 at the earliest.

     We disposed of our ISP business segment in 2004 for cash proceeds of
$900,000 and a promissory note for $250,000 due in June 2005. Our cash on hand
at March 31, 2005 was $36,617.

     We are seeking additional capital to fund expected operating costs. We
believe that future funding may be obtained from public or private offerings of
equity securities, debt or convertible debt securities or other sources.
Stockholders should assume that any additional funding will likely be dilutive.

     If we are unable to raise additional funding, we may have to limit our
operations to an extent that we cannot presently determine. The effect of this
on our business may require the sale of assets, the reduction or curtailment of
new customer acquisition, reduction in the scope of current operations or the
curtailment of business operations.

     Our ability to achieve profitability will depend upon our ability to raise
additional operating capital, the continued growth in demand for connectivity
services and our ability to execute and deliver high quality, reliable
connectivity services.

     Our growth is dependent on attaining profit from our operations and our
raising additional capital either through the sale of stock or borrowing. There
is no assurance that we will be able to raise any equity financing or sell any
of our products at a profit.

     Our  future  capital  requirements will depend upon many factors, including
the  following:

     -    The cost of operating our VPN.

     -    The cost of third-party software.

     -    The cost of sales and marketing.

     -    The rate at which we expand our operations.

     -    The response of competitors.

     -    Our capital expenditures.


ITEM  3.     CONTROLS  AND  PROCEDURES.

(a)  Evaluation  of  disclosure  controls  and  procedures.

     Based on their evaluation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act")), our principal executive officer and principal financial
officer have concluded that as of the end of the period covered by this
quarterly report on Form 10-QSB such disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules and forms.


<PAGE>
(b)  Changes  in  internal  control  over  financial  reporting.

     During the quarter under report, there was no change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

     The evaluation of our disclosure controls included a review of whether
there were any significant deficiencies in the design or operation of such
controls and procedures, material weaknesses in such controls and procedures,
any corrective actions taken with regard to such deficiencies and weaknesses and
any fraud involving management or other employees with a significant role in
such controls and procedures.

     There have been no changes in our internal control over financial
reporting.

                                     PART II
                                OTHER INFORMATION


ITEM  1.     LEGAL  PROCEEDINGS

We  are  a  party  in  the  following  litigation:

     Crescent Communications, Inc. v. Financial News USA, Inc., Cause No.
820,758, In the County Civil Court at Law Number One, Harris County, Texas. We
paid the defendant with the shares of our common stock but the defendant never
performed as promised under the contract. On March 9, 2005, the court signed a
final judgment in our favor granting us the return of 37,500 shares of common
stock (post-reverse split) from the defendant.

     Bluegate Corporation v. The Navi-Gates Corporation and Robert C. Weslock,
Cause No. 2005-00534, In the 234th Judicial District Court of Harris County,
Texas. We recently filed this lawsuit. We filed this lawsuit claiming breach of
contract, deceptive trade practices and fraud.

ITEM  2.     UNREGISTERED  SALES  OF  EQUITY  SECURITIES.

             Information responsive to this Item was previously reported on Form
8-K  dated  March  31,  2005  and  filed  April  6,  2005.

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES.

             None

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

             None.

ITEM  5.     OTHER  INFORMATION.

             None.

ITEM  6.     EXHIBITS.

Exhibit         Exhibit
Number          Name
_____________________________________________________________________

31.1            Certification  pursuant  to  Section  13a-14  of  CEO

31.2            Certification  pursuant  to  Section  13a-14  of  CFO

32.1            Certification  pursuant  to  Section  1350  of  CEO

32.2            Certification  pursuant  to  Section  1350  of  CFO


<PAGE>
                                   SIGNATURES

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


                              BLUEGATE  CORPORATION



May  13,  2005
                              By:  /s/  Manfred  Sternberg
                              Manfred  Sternberg
                              Director,  Chief  Executive  Officer,  President




May  13,  2005
                              By:  /s/  Greg  J.  Micek
                              Greg  J.  Micek
                              Chief  Financial  Officer


<PAGE>
                                  EXHIBIT INDEX


Exhibit         Exhibit
Number          Name
_____________________________________________________________________

31.1            Certification  pursuant  to  Section  13a-14  of  CEO

31.2            Certification  pursuant  to  Section  13a-14  of  CFO

32.1            Certification  pursuant  to  Section  1350  of  CEO

32.2            Certification  pursuant  to  Section  1350  of  CFO