----

----

**U.S.      SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-QSB**

**Amendment      Number 1**

| þ | QUARTERLY                REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF                1934                       |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                  |
|   | For                the quarterly period ended June 30, 2005                                                                           |
|   |                                                                                                                                  |
|  ̈ | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE                ACT OF                1934 |

**Bluegate      Corporation **

| **Nevada**                                                                    |   | **76-0640970**                                      |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or Other Jurisdiction of Incorporation or Organization) |   | (I.R.S.                Employer Identification No.) |
|                                                                          |   |                                                |
|                                                                          |   |                                                |
| **701                North Post Oak, Road, Suite 630, Houston, Texas**        |   | **77024**                                           |
| (Address                of Principal Executive Office)                        |   | (Zip                Code)                           |

**APPLICABLE      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING **

**THE      PRECEDING FIVE YEARS **

**APPLICABLE      ONLY TO CORPORATE ISSUERS **

----

----

----

Table          of Contents

**BLUEGATE      CORPORATION**

**TABLE      OF CONTENTS**

**__________**

|  **PART                    I. FINANCIAL                    INFORMATION** |
|-------------------------------------------------------------------------------|
|                                                                          |   |   |
| **Item                    1.**                                                | **Financial                    Statements** |   |
|                                                                          |   |   |
|                                                                          | Unaudited                    Consolidated Financial Statements | F-1 |
|                                                                          |   |   |
|                                                                          | Consolidated                    Balance Sheets as of June 30, 2005 (Unaudited) and                    December 31, 2004 | F-2 |
|                                                                          |   |   |
|                                                                          | Unaudited                    Consolidated Statements of Operations for three                    months and six months ended June 30, 2005 and 2004 | F-3 |
|                                                                          |   |   |
|                                                                          | Unaudited                    Consolidated Statements of Cash Flows for the six                    months ended June 30, 2005 and 2004 | F-4 |
|                                                                          |   |   |
|                                                                          | Notes                    to Unaudited Consolidated Financial                    Statements | F-5 |
|                                                                          |   |   |
| **Item                    2.**                                                | **Management’s                    Discussion and                    Analysis** | I- |
|                                                                          |   |   |
| **Item                    3.**                                                | **Evaluation                    of Disclosure Controls and                    Procedures** | I- |
|                                                                          |   |   |
|                                                                          |   |   |
|  **PART                    II. OTHER INFORMATION**                       |
|                                                                          |   |   |
| **Item                    2.**                                                | **Changes                    in Securities** | II-1 |
|                                                                          |   |   |
| **Item                    6.**                                                | **Exhibits                    and Reports on Form 8-K** | II-1 |
|                                                                          |   |   |
|                                                                          | **Signatures** | II-2 |
|                                                                          |   |   |
|                                                                          | **Certifications** | II-3 |

----

Table          of Contents

**ITEM      1. FINANCIAL STATEMENTS**

| **BLUEGATE                CORPORATION**                                                                                                                                                                                                                                                           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                BALANCE SHEETS**                                                                                                                                                                                                                                                    |
| **UNAUDITED**                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                              |   | **June                30,** |   | **December                31,** |   |
|                                                                                                                                                                                                                                                                                              |   | **2005** |   | **2004** |   |
| **ASSETS**                                                                                                                                                                                                                                                                                        |   | **(Unaudited)** |   |   |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Current                assets:                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                          |   | $ | 169,756 |   | $ | 3,708 |   |
| Accounts                receivable, net                                                                                                                                                                                                                                                           |   |   | 108,109 |   |   | 209,856 |   |
| Inventory                                                                                                                                                                                                                                                                                         |   |   | 46,231 |   |   | - |   |
| Note                receivable                                                                                                                                                                                                                                                                    |   |   | - |   |   | 146,814 |   |
| Prepaid                expenses and other                                                                                                                                                                                                                                                         |   |   | 31,863 |   |   | 29,429 |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                current assets                                                                                                                                                                                                                                                               |   |   | 355,959 |   |   | 389,807 |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Property                and equipment, net                                                                                                                                                                                                                                                        |   |   | 60,516 |   |   | 73,458 |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Long                term investment                                                                                                                                                                                                                                                               |   |   | 30,000 |   |   | - |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                assets                                                                                                                                                                                                                                                                       |   | $ | 446,475 |   | $ | 463,265 |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ DEFICIT**                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Current                liabilities:                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |
| Convertible                notes payable, net of unamortized discount of $$47,266                                                                                                                                                                                                                 |   | $ | 86,734 |   | $ | 389,018 |   |
| Note                payable                                                                                                                                                                                                                                                                       |   |   | 12,800 |   |   | 2,800 |   |
| Accounts                payable                                                                                                                                                                                                                                                                   |   |   | 608,195 |   |   | 725,456 |   |
| Accrued                liabilities                                                                                                                                                                                                                                                                |   |   | 487,425 |   |   | 513,710 |   |
| Advance                on purchase of equity securities                                                                                                                                                                                                                                           |   |   | 275,000 |   |   | - |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                current liabilities                                                                                                                                                                                                                                                          |   |   | 1,470,154 |   |   | 1,630,984 |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Commitments                and contingencies                                                                                                                                                                                                                                                      |   |   | - |   |   | - |   |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Stockholders’                deficit:                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Series                A Convertible Non-Redeemable Preferred stock, $.001 par value, 20,000,000                shares authorized, 110,242                issued                and outstanding, $5,000 pre share liquidation preference($551,210                aggregate liquidation preference) |   |   | - |   |   | - |   |
| Series                B Convertible Non-Redeemable Preferred stock, $.001 par value, 10,000,000                shares authorized; no shares issued and outstanding                                                                                                                                |   |   | - |   |   | - |   |
| Common                stock, $.001 par value, 50,000,000 shares authorized, 5,031,343 and                2,548,809 shares issued and outstanding at June 30, 2005 and December                31,                2004, respectively                                                               |   |   | 5,032 |   |   | 2,549 |   |
| Additional                paid-in capital                                                                                                                                                                                                                                                         |   |   | 9,003,300 |   |   | 6,184,450 |   |
| Subscription                receivable                                                                                                                                                                                                                                                            |   |   | (15,006 | ) |   | (11,141 | ) |
| Deferred                compensation                                                                                                                                                                                                                                                              |   |   | (117,365 | ) |   | - |   |
| Accumulated                deficit                                                                                                                                                                                                                                                                |   |   | (9,899,638 | ) |   | (7,343,577 | ) |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                stockholders’ deficit                                                                                                                                                                                                                                                  |   |   | (1,023,678 | ) |   | (1,167,719 | ) |
|                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Total                liabilities and stockholders’ deficit                                                                                                                                                                                                                                  |   | $ | 446,475 |   | $ | 463,265 |   |

----

| **BLUEGATE                CORPORATION**                                       |
|-------------------------------------------------------------------------------|
| **CONSOLIDATED                STATEMENTS OF OPERATIONS**                      |
| **UNAUDITED**                                                                 |
|                                                                          |   |   |   |   |   |
|                                                                          |   |   |   |   |   |
|                                                                          |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|                                                                          |   | **June                30,** |   | **June                30,** |   |
|                                                                          |   | **2005** |   | **2004** |   | **2005** |   | **2004** |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                revenue                                                |   | $ | 409,936 |   | $ | 161,709 |   | $ | 875,767 |   | $ | 372,177 |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of services                                               |   |   | 233,720 |   |   | 111,035 |   |   | 421,731 |   |   | 224,631 |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross                margin                                                   |   |   | 176,216 |   |   | 50,674 |   |   | 454,036 |   |   | 147,546 |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                general and administrative expenses                   |   |   | 898,329 |   |   | 250,956 |   |   | 2,051,726 |   |   | 596,235 |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                from operations                                           |   |   | (722,113 | ) |   | (200,282 | ) |   | (1,597,690 | ) |   | (448,689 | ) |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                                |   |   | (2,184 | ) |   | - |   |   | (2,932 | ) |   | - |   |
| Loss                on conversion of notes payable to common stock            |   |   | - |   |   | - |   |   | 892,882 |   |   | - |   |
| Interest                expense                                               |   |   | 39,393 |   |   | 27,955 |   |   | 70,372 |   |   | 38,795 |   |
| Other                income                                                   |   |   | - |   |   | - |   |   | (1,951 | ) |   | - |   |
| Other                expense                                                  |   |   | 297 |   |   | - |   |   | - |   |   | - |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                from continuing operations                                |   |   | (759,620 | ) |   | (228,237 | ) |   | (2,556,060 | ) |   | (487,484 | ) |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued                operations:                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain                from sale of discontinued broadband internet segment      |   |   | - |   |   | 643,627 |   |   | - |   |   | 643,627 |   |
| Loss                from operation of discontinued broadband internet segment |   |   |  - |   |   | (133,806 | ) |   |  - |   |   | (310,832 | ) |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations                            |   |   | - |   |   | 509,821 |   |   | - |   |   | 332,795 |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                              |   | $ | (759,620 | ) | $ | 281,584 |   | $ | (2,556,060 | ) | $ | (154,689 | ) |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                and diluted:                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per common share                             |   | $ | (0.17 | ) | $ | 0.14 |   | $ | (0.69 | ) | $ | (0.08 | ) |
| Continuing                operations                                          |   |   | (0.17 | ) |   | (0.11 | ) |   | (0.69 | ) |   | (0.25 | ) |
| Discontinued                operations                                        |   |   | - |   |   | 0.25 |   |   | - |   |   | 0.17 |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding                            |   |   | 4,572,590 |   |   | 2,021,098 |   |   | 3,710,123 |   |   | 1,934,583 |   |

----

Table          of Contents

| **BLUEGATE                CORPORATION**                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                STATEMENTS OF CASH FLOWS**                                                                                                  |
| **UNAUDITED**                                                                                                                                             |
|                                                                                                                                                      |
| _______________                                                                                                                                           |
|                                                                                                                                                      |   |   |   |   |   |
|                                                                                                                                                      |   | **Six                Months Ended** |   |
|                                                                                                                                                      |   | **June                30,** |   | **June                30,** |   |
|                                                                                                                                                      |   | **2005** |   | **2004** |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Cash                flows from operating activities:                                                                                                      |   |   |   |   |   |   |   |
| Net                loss                                                                                                                                   |   | $ | (2,556,060 | ) | $ | (154,689 | ) |
| Adjustments                  to reconcile net loss to net cash usedin                  operating activities:                                              |   |   |   |   |   |   |   |
| Accretion                of debt discount                                                                                                                 |   |   | 52,734 |   |   | - |   |
| Depreciaton                                                                                                                                               |   |   | 42,512 |   |   | 4,351 |   |
| Amortization                of deferred compensation                                                                                                      |   |   | - |   |   | 12,008 |   |
| Bad                debt expense                                                                                                                           |   |   | 103,710 |   |   | - |   |
| Common                stock issued for services                                                                                                           |   |   | 491,312 |   |   | 12,000 |   |
| Common                stock options and warrants issued for services                                                                                      |   |   | 275,186 |   |   | - |   |
| Gain                on sale of connectivity business                                                                                                      |   |   | - |   |   | (643,627 | ) |
| Loss                on debt conversion                                                                                                                    |   |   | 892,882 |   |   | - |   |
| Impairment                of non-current assets                                                                                                           |   |   | - |   |   | 36,000 |   |
| Changes                in assets and liabilities:                                                                                                         |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                                                        |   |   | (19,128 | ) |   | 69,385 |   |
| Inventory                                                                                                                                                 |   |   | (46,231 | ) |   | - |   |
| Prepaid                and other current assets                                                                                                           |   |   | (8,988 | ) |   | (7,734 | ) |
| Accounts                payable                                                                                                                           |   |   | 198,605 |   |   | (96,230 | ) |
| Accrued                expenses                                                                                                                           |   |   | 42,606 |   |   | (57,473 | ) |
| Other                assets                                                                                                                               |   |   | (2,184 | ) |   | - |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                cash used in continuing operations                                                                                                     |   |   | (533,045 | ) |   | (515,177 | ) |
| Net                cash used in discontinued operations                                                                                                   |   |   | - |   |   | (310,832 | ) |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                cash used by operating activities                                                                                                      |   |   | (533,045 | ) |   | (826,009 | ) |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                                                                      |   |   |   |   |   |   |   |
| Proceeds                from sale of connectivity services business                                                                                       |   |   | - |   |   | 900,000 |   |
| Purchase                of shares for long term investment                                                                                                |   |   | (30,000 | ) |   | - |   |
| Payments                received on note receivable                                                                                                       |   |   | 20,768 |   |   | - |   |
| Proceeds                from sale of property and equipment                                                                                               |   |   | - |   |   | 4,366 |   |
| Purchase                of property and equipment                                                                                                         |   |   | (29,570 | ) |   | - |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                cash provided by (used in) continuing operations                                                                                       |   |   | (38,802 | ) |   | 4,366 |   |
| Net                cash provided by discontinued operations                                                                                               |   |   | - |   |   | 900,000 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                cash provided by (used in) investing activities                                                                                        |   |   | (38,802 | ) |   | 904,366 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                                                                      |   |   |   |   |   |   |   |
| Decrease                in bank overdraft                                                                                                                 |   |   | (9,620 | ) |   | (63,705 | ) |
| Proceeds                from notes payable                                                                                                                |   |   | 110,000 |   |   | 40,000 |   |
| Payments                on notes payable                                                                                                                  |   |   | - |   |   | (321,975 | ) |
| Advances                on purchases of equity securities                                                                                                 |   |   | 275,000 |   |   | - |   |
| Proceeds                from subscription receivable                                                                                                      |   |   | 4,134 |   |   | - |   |
| Issuance                of common stock for cash                                                                                                          |   |   | 358,381 |   |   | 355,012 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                cash provided by continuing operations                                                                                                 |   |   | 737,895 |   |   | 9,332 |   |
| Net                cash provided by discontinued operations                                                                                               |   |   | - |   |   | - |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                cash provided by financing activities                                                                                                  |   |   | 737,895 |   |   | 9,332 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                increase in cash and cash equivalents                                                                                                  |   |   | 166,048 |   |   | 87,689 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Cash                and cash equivalents at beginning of period                                                                                           |   |   | 3,708 |   |   | 9,845 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of period                                                                                                 |   | $ | 169,756 |   | $ | 97,534 |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Non                Cash Transactions:                                                                                                                     |   |   |   |   |   |   |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Issuance                  of common stock and common stock equivalents for conversion of                  related                  party notes payable    |   | $ | 355,018 |   | $ | - |   |
| Issuance                  of common stock and common stock equivalents for conversion of                  related                  accured interest       |   |   | 68,891 |   |   | - |   |
| Issuance                  of common stock and common stock equivalents for conversion of                  related                  party accounts payable |   |   | 154,297 |   |   | - |   |
| Nationwide                settlement:                                                                                                                     |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                                                        |   |   | 122,429 |   |   | - |   |
| Accounts                payable                                                                                                                           |   |   | 151,949 |   |   | - |   |
| Note                receivable                                                                                                                            |   |   | 128,230 |   |   | - |   |
|                                                                                                                                                      |   |   |   |   |   |   |   |
| Supplemental                Disclosure of Cash Flow Information:                                                                                          |   |   |   |   |   |   |   |
| Cash                paid for interest                                                                                                                     |   |   | 2,072 |   |   | - |   |

----

Table          of Contents

**BLUEGATE      CORPORATION**

**NOTES      TO FINANCIAL STATEMENTS**

**1.**
**BASIS      OF PRESENTATION**

**Stock-Based      Compensation**

|                                                                                                                                   |   | **THREE-MONTHS                ENDED** |       | **SIX-MONTHS                ENDED** |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|-------------------------------------|--------|
|                                                                                                                                   |   | **June                30,**           |       | **June                30,**         |   | **June                30,** |   | **June                30,** |   |
|                                                                                                                                   |   | **2005**                              |       | **2004**                            |   | **2005** |   | **2004** |   |
| Net                income (loss) attributable to common shareholders as                reported                                        |   | $                                     | (759,620   | )                                   | $      | 281,584 |   | $ | (2,556,060 | ) | $ | (154,689 | ) |
| Stock                based employee compensation included in reported net loss                                                         |   |                                  | 53,707     |                                |   | - |   |   | 160,424 |   |   | - |   |
| Total                stock-based employee compensation expense determined under fair value                based method for all options |   |                                  | (450,818   | )                                   |   | - |   |   | (1,012,473 | ) |   | - |   |
| Pro                forma net loss                                                                                                      |   | $                                     | (1,156,731 | )                                   | $      | 281,584 |   | $ | (3,408,109 | ) | $ | (154,689 | ) |
| Basic                and diluted loss per share                                                                                        |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| As                reported:                                                                                                            |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                                                                                       |   | $                                     | (0.17      | )                                   | $      | 0.14 |   | $ | (0.69 | ) | $ | (0.08 | ) |
| Continuing                operations                                                                                                   |   |                                  | (0.17      | )                                   |   | (0.11 | ) |   | (0.69 | ) |   | (0.25 | ) |
| Discontinued                operations                                                                                                 |   |                                  | -          |                                |   | 0.25 |   |   | - |   |   | 0.17 |   |
| Pro                forma:                                                                                                              |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                                                                                       |   |                                  | (0.25      | )                                   |   | 0.14 |   |   | (0.92 | ) |   | (0.08 | ) |
| Continued                operations                                                                                                    |   |                                  | (0.25      | )                                   |   | (0.11 | ) |   | (0.92 | ) |   | (0.25 | ) |
| Discontinued                operations                                                                                                 |   |                                  | -          |                                |   | 0.25 |   |   | - |   |   | 0.17 |   |
|                                                                                                                                   |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding:                                                                                    |   |                                  | 4,572,590  |                                |   | 2,021,098 |   |   | 3,710,123 |   |   | 1,934,583 |   |

----

Table          of Contents

**2.      **
**CONVERTIBLE      NOTES PAYABLE**

| ·   | Signed                a $100,000 convertible promissory note. The note bears interest of                10%,                matures in November 2005 and is unsecured. The note payable is convertible                into common stock at $.50 per share. There were 100,000 detachable                warrants attached to the note with a relative fair value of $38,557.                The                intrinsic value of the conversion feature totaled $61,443 resulting                in a                discount of $100,000 to the note payable. The discount will be amortized                over the life of the note. The details are as                follows: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Face                value of note payable              |   | $      | 100,000 |   |
|--------------------------------------------------------|--------|--------|---------|--------|
| Less:                discount related to warrants      |   |   | (38,557 | )      |
| discount                related to conversion feature  |   |   | (61,443 | )      |
| Add:                amortization of discount           |   |   | 52,734  |   |
| Carrying                value of note at June 30, 2005 |   | $      | 52,734  |   |

| ·   | Converted                $355,018 of principal, $68,891 of interest and $154,297 of accounts                payable for 1,008,630 shares of common stock and 1,008,630 warrants.                See                note 4 for details. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**3.      **
**NOTE      PAYABLE**

**4.      **
**COMMON      STOCK, OPTIONS AND WARRANTS**

| ·   | Sold                817,353 shares of common stock and 550,000 warrants for cash proceeds                of                $358,381. The warrants have an exercise price of $1.00 to $1.25,                expire in                three years and vest immediately. The relative fair value of the                warrants                was $135,311. 192,335 of the 817,353 shares were sold under Regulation                S                to foreign investors for $93,112 with net proceeds of $25,382 to                Bluegate                and $67,730 retained by the foreign broker. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Issued                1,008,630 shares of common stock and 1,008,630 warrants with an aggregate                value of $1,471,088 to officers and directors in exchange for their                convertible notes payable and accounts payable. Principal of $355,018,                interest of $68,891 and accounts payable of $154,297 were converted                leaving a loss on conversion to Bluegate of $892,882. The warrants                have an                exercise price of $1.00, expire in three years and vest                immediately. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Issued                656,563 shares of common stock valued at $491,312 for services provided                by                consultants and an officer of Bluegate. The officer received 100,000                shares valued at $101,000. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Granted                100,000 warrants in connection with a $100,000 convertible note.                See note                2 for details. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Received                cash totaling $4,134 for subscriptions                receivable. |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Granted                1,875,000 stock options to officers and directors. The intrinsic                value was                $240,500 of which $158,924 was recognized in the six months ended                June 30,                2005. The options have an exercise price of $.50 to $1.50, expire                in five                years and have various vesting                terms. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Granted                275,000 stock options to two consultants. The fair value of the options                was $152,052 of which $116,262 was recognized in the six months ended                June                30, 2005. The options have an exercise price of $.50 to $1.00, expire                in                six months to three years and have various vesting                terms. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**5.      **
**LONG      TERM INVESTMENT**

----

Table          of Contents

**6.      **
**SUBSEQUENT      EVENTS**

| ·   | Issued                50,000 shares of common stock to an investor for conversion of $25,000                of it's convertible note                payable. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Issued                two investors an aggregate of 100,000 shares at $.50 per share. One                investor also received warrants to purchase 25,000 shares at $1.00                and                warrants to purchase 25,000 shares at $1.25. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Issued                one investor 500,000 shares at $.50 per share and warrants to purchase                250,000 shares at $1.00 and warrants to purchase 250,000 shares at                $1.25                for total consideration of                $250,000. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Issued                one investor 100,000 shares at $.50 per share and warrants to purchase                50,000 shares at $1.00 and warrants to purchase 50,000 shares at                $1.25. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Issued                to each of five investors options to purchase 10,000 shares at $1.50                in                consideration for their serving on a medical advisory                committee. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table          of Contents

**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS**

**FORWARD      LOOKING STATEMENT**

**ABOUT      US**

----

Table          of Contents

| 1.   | To                fill as much of the national HIPAA compliant secured communications                void                that exists between the physician and the hospital as we can,                and |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | To                “backfill” with services to the physicians that join our Bluegate                network to insure we are the IT outsource firm of choice for all                of their                technology needs. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**
** **

**Revenue      Recognition**

**Stock-Based      Compensation**

**General**

----

Table          of Contents

|                                              |   | **Year                Ended**   |       |
|---------------------------------------------------|--------|---------------------------------|------------|
|                                              |   | **December                31,** |       |
|                                              |   | **2004**                        |       | **2003** |   |
| 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 | ) |

|                                              |   | **Six                Months**     |       |
|---------------------------------------------------|--------|-----------------------------------|------------|
|                                              |   | **Ended                June 30,** |       |
|                                              |   | **2005**                          |       | **2004** |   |
| Net                loss                           |   | $                                 | (2,556,060 | ) | $ | (154,689 | ) |
| Negative                cash flow from operations |   |                              | (533,045   | ) |   | (826,009 | ) |
| Negative                working capital           |   |                              | (1,114,195 | ) |   | (968,522 | ) |
| Stockholders’                deficit        |   |                              | (1,023,678 | ) |   | (916,048 | ) |

| §   | 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. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**RESULTS      OF OPERATIONS**

**Three      months ended June 30, 2005 as compared to the three months ended June 30,      2004**

----

Table          of Contents

**Six      months ended June 30, 2005 as compared to the six months ended June 30,      2004**

**Forecast      of Growth in our HIPAA Customer Base**

**Subsequent      event**

----

Table          of Contents

**LIQUIDITY      AND CAPITAL RESOURCES**

| §   | 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. |
|--------------------|---------------------------------------------|

**ITEM      3. CONTROLS AND PROCEDURES**

| (a)   | Evaluation                of disclosure controls and                procedures. |
|-----------------|---------------------------------------------------------------------------------|

| (b)   | Changes                in internal control over financial                reporting. |
|-----------------|-------------------------------------------------------------------------------------|

----

Table          of Contents

**PART      II**

**ITEM      1. LEGAL PROCEEDINGS**

**We      **

**ITEM        2. UNREGISTERED SALES OF EQUITY        SECURITIES**

----

Table            of Contents

----

Table            of Contents

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM      5. OTHER INFORMAION**

**ITEM      6. EXHIBITS AND REPORTS ON FORM 8-K.**

| ExhibitNumber          |  Exhibit              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   |

----

Table          of Contents

**SIGNATURES**

|                                 | Bluegate                Corporation    |
|--------------------------------------|----------------------------------------|
|                                 |                                   |
| Date:                August XX, 2005 | /s/                Manfred Sternberg   |
|                                 | Manfred                Sternberg,      |
|                                 | Chief                Executive Officer |
|                                 |                                   |
|                                 |                                   |
|                                 |                                   |
|                                 | Bluegate                Corporation    |
|                                 |                                   |
| Date:                August XX, 2005 | /s/                Greg J. Micek       |
|                                 | Greg                J. Micek,          |
|                                 | Chief                Financial Officer |

----