SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): ~~April~~ May 1526, 2005

NEON Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-25457	76-0345839
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

14100 Southwest Freeway, Suite 500, Sugar Land, Texas		77478
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (281) 491-4200


(Former name or former address, if changed since last report)

Check ~~the~~ the appropriate box below if the Form 8-K filing is intended to ~~simultaneously~~ simultaneously satisfy the filing obligation of the registrant under any of the ~~following~~ following provisions ~~(see General Instruction A.2. below)~~:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

~~Item~~ Section 1.01 Entry into a Material ~~definitive~~ Agreement.

On ~~April~~May 1526, 2005, ~~NEON~~ ~~entered~~the ~~into~~Compensation aCommittee ~~Note Purchase Agreement with John J. Moores, NEON’s largest shareholder~~ and ~~its former Chairman of~~ the Board, toof ~~sell~~Directors ~~the~~of ~~$3.0 million and the $3.58 million secured promissory notes issued to~~ NEON ~~by Peregrine/Bridge Transfer Corporation~~Systems, ~~now known as Neon Enterprise Software,~~ Inc. ~~Mr.~~ ~~Moores~~set isthe ancompensation ~~affiliate of Neon Enterprise Software, Inc. In consideration~~ for the ~~sale~~executive officers of ~~such notes, Mr. Moores delivered to~~ NEON ~~$4.35~~for ~~million~~the infiscal ~~cash~~year ~~and~~ending ~~a non-negotiable~~March 31, ~~unsecured promissory note from Mr~~2006. Such ~~Moores~~compensation tochanges ~~NEON~~were ingranted ~~the~~after ~~original~~due ~~principal~~consideration ~~amount~~ of ~~$2,234,028. Such~~an ~~promissory~~independent ~~note~~compensation ~~will~~survey ~~accrue~~and ~~simple~~the ~~interest~~Compensation Committee’s atconsideration ~~a rate~~ of ~~4.0% per annum, and provides that Mr. Moores will pay NEON $250,000 per quarter until~~ the ~~full~~performance ~~principal and interest is paid in full. The purchase~~ of the ~~Neon~~executive ~~Enterprise~~officers ~~Software~~during ~~notes~~the ~~was~~fiscal ~~reviewed~~year ~~and~~ended ~~approved by NEON’s Board of Directors on April~~March 1531, 2005. The ~~transaction~~changes ~~was~~to ~~closed~~executive oncompensation ~~April 15, 2005.~~were as follows:

AThe base salary of Jerry Paladino, NEON’s Senior Vice ~~detailed~~President ~~description~~(“SVP”) of ~~the~~Worldwide ~~transactions~~Sales, ~~between~~was ~~NEON~~increased ~~and~~from ~~Neon~~$160,000 ~~Enterprise~~to $180,000 ~~Software~~annually. ~~can~~Mr. Paladino bealso ~~found~~received an additional $100,000 in ~~NEON~~target incentive compensation. Mr. Paladino’s additional ~~Form~~incentive ~~10-K~~compensation ~~for~~is not guaranteed and is based upon the attainment ~~fiscal~~of ~~year~~his ~~ended~~worldwide ~~March 31,~~sales quota and NEON’s achievement of its confidential ~~2004~~internal earnings target as ~~filed~~set ~~with~~by the ~~Securities~~Board ~~and~~of ~~Exchange~~Directors. ~~Commission~~The onchanges ~~June~~in Mr. ~~29,~~Paladino’s ~~2004~~compensation were the result of his promotion to SVP of Worldwide Sales from VP of North American Sales.

OnThe ~~April 18,~~annual ~~2005,~~target ~~NEON~~bonuses ~~Systems,~~of ~~Inc.~~Chris ~~issued~~Garner, aSVP of ~~press~~Research ~~release~~and ~~announcing~~Development, ~~the~~and ~~Note~~Shelby ~~Purchase~~R. ~~Agreement~~Fike, ~~between~~SVP ~~NEON~~ and ~~John~~General J.Counsel, were ~~Moores~~increased from $40,000 to $50,000. ~~The~~ ~~press~~Such ~~release~~bonuses isare ~~filed~~not asguaranteed and are ~~Exhibit~~based ~~99.1~~upon toa ~~this~~combination ~~Current~~of ~~Report~~NEON’s onand ~~Form~~the ~~8-K~~individual’s performance.

~~Item~~In 9addition to the compensation changes described above, the Compensation Committee and the Board also approved an amendment of the Employment Agreements of Mark J.01 ~~Financial~~Cresswell, ~~Statements~~NEON’s President and ~~Exhibits~~CEO, and Mr. Fike to increase the amount of severance paid under Section 7.c. of the Employment Agreement from six months to twelve months compensation.

(c)		Exhibits.
10.1		Promissory Note Purchase Agreement dated April 15, 2005 between Neon Systems, Inc., Neon Enterprise Software, Inc., and John J. Moores
10.2		Non-Negotiable Promissory Note dated April 15, 2005 between John J. Moores as Maker and NEON Systems, Inc. as Payee
99.1		Press Release dated April 18, 2005.

2SIGNATURES

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

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

Dated: June 2, 2005	NEON SYSTEMS, INC.


	/s/ Brian D. Helman
	Brian D. Helman
	Chief Financial Officer and Secretary

Dated: April 21, 2005	NEON SYSTEMS, INC.
	/s/ Brian D. Helman
	Brian D. Helman
	Chief Financial Officer and Secretary

INDEX TO EXHIBITS

Exhibit
Number		Description of Document
10.1		Promissory Note Purchase Agreement dated April 15, 2005 between NEON Systems, Inc., Neon Enterprise Software, Inc., and John J. Moores
10.2		Non-Negotiable Promissory Note dated April 15, 2005 between John J. Moores as Maker and NEON Systems, Inc. as Payee
99.1		Press Release dated April 18, 2005.

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