Nighthawk Systems Reports First Quarter 2009 Results

Nighthawk's CEO, Doug Saathoff, commented, "We entered 2009 on a very positive trend, but were almost immediately hit by difficulties due to the downturn in the economy during the first quarter. Orders for set-top boxes were negligible during the quarter as compared to last year as the hospitality industry stopped or delayed projects due to lower than expected occupancy rates. We received orders from utilities during the quarter, but nearly every supplier of parts for the Company's products was forced to reduce inventory levels due to tighter credit conditions. As a result, lead times for critical parts doubled or tripled during the quarter, making it nearly impossible for the Company to complete and ship orders for power control products that we received during the quarter. In some cases, lead times for parts expanded to 12 weeks."

Mr. Saathoff continued, "Coming off of a record year in 2008, it was disappointing to be affected so significantly and so quickly in ways that were difficult for us to control. However, I think the negative impact for 2009 as a whole may be limited to sales of set-top boxes, as we began to see momentum build in our power control division during the quarter. Ironically, I believe the economy has begun to help generate orders for these products, as companies are looking harder than ever for ways to cut costs, and electric utilities look to limit their exposure to delinquent accounts. We started shipping products on a steady basis in the latter part of April, have continued to receive more orders and have a current order backlog of approximately $730,000 for power control products. This is quite significant when considering that the Company produced a total of approximately $1.25 million in revenues from power control product sales in all of 2008. Government incentives and new regulations are spurring interest in the utility industry just as we are bringing new products into the market. We cut overhead costs to new lows during the quarter, so I remain optimistic that we'll continue to experience growth this year past historical revenue levels, and positive cash flows remain our near-term goal."

Revenues generated during the first quarter of 2009 were $101,362 as compared to $826,321 million for the first quarter of 2008, as demand for set-top boxes was very light and long lead times for critical components lengthened production schedules for the Company's products. Selling, general and administrative costs decreased 37% from last year's quarter to this year's quarter. As a result, the loss before non-cash items such as interest, depreciation and amortization, taxes and preferred dividends improved from $471,465 last year to $394,988 this year. The Company's net loss also improved from $770,197 in the 2008 quarter to $706,594 in the 2009 quarter, while the net loss per common share remained at $0.01 from quarter to quarter.

About Nighthawk Systems, Inc.

Nighthawk is a leading provider of intelligent devices and systems that allow for the centralized, on-demand management of assets and processes. Nighthawk products are used throughout the United States in a variety of mission critical applications, including remotely turning on and off and rebooting devices, activating alarms, and emergency notification, including the display of custom messages. Nighthawk's IPTV set top boxes are utilized by the hospitality industry to provide in-room standard and high definition television and video on demand. Individuals interested in Nighthawk Systems can sign up to receive email alerts by visiting the Company's website at www.nighthawksystems.com.

Statements contained in this release, which are not historical facts, including statements about plans and expectations regarding business areas and opportunities, acceptance of new or existing businesses, capital resources and future business or financial results are "forward-looking" statements. You should not place undue reliance on these forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, including, but not limited to, customer acceptance of our products, our ability to raise capital to fund our operations, our ability to develop and protect proprietary technology, government regulation, competition in our industry, general economic conditions and other risk factors which could cause actual results to differ materially from those projected or implied in the forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this press release to conform these statements to actual results or to changes in our expectations, except as required by law.

****Financial Statements Follow****

NIGHTHAWK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
                                                                         March 31,           December 31,
                                                                         2009                2008
                                                                         (unaudited)         (audited)
ASSETS
CURRENT ASSETS
Cash                                                                $    4,046          $    36,199
Accounts receivable, net                                                 28,033              251,392
Inventories                                                              189,098             179,258
Prepaid expenses                                                         105,129             87,747
TOTAL CURRENT ASSETS                                                     326,306             554,596
FIXED ASSETS
Furniture, fixtures and equipment, net                                   299,253             318,070
Debt issuance cost                                                       321,136             316,567
Intangible assets, net                                                   755,369             848,031
Goodwill                                                                 1,837,138           1,837,138
Other assets                                                             4,320               4,320
NET FIXED ASSETS                                                    $    3,217,216      $    3,324,126
TOTAL ASSETS                                                        $    3,543,522      $    3,878,722
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable                                                    $    464,176        $    553,202
Accrued interest                                                         776,435             652,323
Accrued expenses                                                         176,551             186,763
Deposits and other                                                       20,523              13,107
Line of credit and notes Payable:
Line of credit                                                           5,821               6,221
Convertible notes, net of discount of $716,954 in 2009 and               1,945,108           1,716,553
$645,509 in 2008
Other notes                                                              689,594             767,295
TOTAL CURRENT LIABILITIES                                                4,078,208           3,895,464
Long-term notes payable                                                  24,631              26,240
STOCKHOLDERS' EQUITY (DEFICIT)
Series A Preferred stock; $0.001 par value; 5,000,000 shares                                 -
authorized; no shares issued and outstanding
Series B Preferred stock; $0.001 par value; 1,000,000 shares             6,332,000           6,152,000
authorized; 672,000 shares issued and outstanding at September 30,
2008 and December 31, 2007; liquidation preference of $6,000,000
Common stock; $0.001 par value; 200,000,000 shares authorized;           140,128             138,514
140,128,013 issued and outstanding at March 31, 2009 and
138,513,727 issued and outstanding at December 31, 2008
Additional paid in capital                                               12,789,021          12,780,376
Accumulated deficit                                                      (19,820,466 )       (19,113,872 )
TOTAL STOCKHOLDERS' DEFICIT                                              (559,317    )       (42,982     )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $    3,543,522      $    3,878,722

NIGHTHAWK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
                                                                 Three Months Ended
                                                                 March 31,
                                                                 2009                   2008
Revenue                                                          $    101,362           $    826,321
Cost of revenue                                                       97,777                 668,497
Gross profit                                                          3,585                  157,824
Selling, general and administrative expenses                          398,573                629,289
EBITDA                                                                (394,988    )          (471,465    )
Depreciation and amortization                                         96,695                 107,388
Loss from operations                                                  (491,683    )          (578,853    )
Interest expense                                                      214,911                191,344
Net loss                                                              (706,594    )          (770,197    )
Dividends on preferred stock                                          (180,000    )          (179,507    )
Net loss applicable to common stockholders                       $    (886,594    )     $    (949,704    )
Net loss per basic and diluted common share                      $    (0.01       )     $    (0.01       )
Weighted average number of common shares outstanding, basic and       139,518,172            134,433,060
diluted

SOURCE: Nighthawk Systems, Inc.

Nighthawk Systems, Inc. 
Doug Saathoff, 877-7-NIGHTHAWK, ext. 7 
Chief Executive Officer 
dsaathoff@nighhawksystems.com