PART I - FINANCIAL INFORMATION

ELECTRONIC SYSTEMS TECHNOLOGY, INC.
BALANCE SHEETS
(as prepared by Management)
(Unaudited)

(See "Notes to Financial Statements")

ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
(as prepared by Management)
(Unaudited)

(See "Notes to Financial Statements")

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(as prepared by Management)
(Unaudited)

(See "Notes To Financial Statements")

ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
(as prepared by Management)
(Unaudited)

(See "Notes to Financial Statements")

NOTE 1 - BASIS OF PRESENTATION

The financial statements of Electronic Systems Technology, Inc. (the "Company"), presented in this Form 10QSB are unaudited and reflect, in the opinion of Management, a fair presentation of operations for the three and six month periods ending June 30, 2004 and June 30, 2003. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principals have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Form 10KSB for the year ended December 31, 2003 as filed with Securities and Exchange Commission.

The results of operations for the three and six month periods ended June 30, 2004 and June 30, 2003, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Inventories are stated at lower of cost or market with cost determined using the FIFO (first in, first out) method. Inventories consist of the following:

Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects potential dilution occurring if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The primary weighted average number of common shares outstanding was 5,647,937 and 5,626,325 for the six month periods ended June 30, 2004 and 2003 respectively. For net loss per share calculations, the nondiluted outstanding shares as of June 30, 2004, 5,098,667 shares, is used as a denominator, so as to avoid decreasing the net loss per share amount.

As of June 30, 2004, the Company had stock options outstanding, which have been granted periodically to individual employees and directors with no less than three years of continuous tenure with Company. On February 20, 2004, additional stock options to purchase shares of the Company's common stock were granted to individual employees and directors with no less than three years continuous tenure. The options granted on February 20, 2004 totaled 195,000 shares under option and have an exercise price of $0.80 per share. The options granted on February 20, 2004 may be exercised any time during the period from February 20, 2004 through February 19, 2007. The Company's Form 8-K dated February 20, 2004, as filed with the Securities and Exchange Commission is included herein by reference. All outstanding stock options must be exercised within 90 days after termination of employment.

During the 12-month period from June 30, 2003 to June 30, 2004, 170,000 shares under option expired, no shares under option were exercised, and 195,000 shares under option were granted. At June 30, 2004 there were 555,000 shares under option reserved for future exercises.

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." The Company undertakes to make disclosures and calculations pursuant to SFAS 123 on an annual basis coinciding with the issuance of the Company's Annual Financial Statements. Accordingly, no compensation cost has been recognized for the stock option plan.

For the quarter ended June 30, 2004, the Company’s only item of other comprehensive income (loss) was unrealized losses on marketable securities investments, net of tax in the amount of $9,524 as a result of volatility in mutual fund investments held by the Company. During the second quarter of 2003, the only item of comprehensive income (loss) was unrealized gains on marketable securities investments, net of tax in the amount of $1,938.

NOTE 6 - RELATED PARTY TRANSACTIONS

For the six-month period ended June 30, 2004, services in the amount of $55,646 were contracted with Manufacturing Services, Inc., of which the owner/president is a member of the Board of Directors of the Company.

On June 4, 2004, the Company declared a one-time, non-cumulative, cash distribution to shareholders of record as of June 25, 2004, of $0.01 per share of common stock, with a payable date of July 14, 2004. The payment of the cash distribution was completed by July 14, 2004. For the quarter ended June 30, 2004, the Company recognized a current liability in the amount of $50,987, reflecting the total dollar value of the cash distribution. The Company’s Form 8-K dated June 4, 2004, as filed with the Securities and Exchange Commission is included herein by reference.

Total revenues from the sale of the Company’s ESTeem wireless modem systems, accessories, and services increased to $687,919 for the second quarter of 2004, an increase of 86% when compared to $370,325 for the second quarter of 2003. Gross revenues increased to $693,366 for the quarter ended June 30, 2004, from $376,214 for the same quarter of 2003, reflecting an increase of 84%. Year to date sales increased to $1,282,295 as of June 30, 2004 as compared to $910,912 as of June 30, 2003, reflecting an increase of 40% for 2004. Year to date gross revenues increased to $1,343,323 as of June 30, 2004 as compared to $994,039 as of June 30, 2003, reflecting a year to date increase of 35%. The increase in revenues for the second quarter of 2004 is the result of increases in Foreign Industrial Automation and domestic Mobile Data Computer Systems (MDCS) product sales, when compared with the same quarter of 2003. Management believes the comparative increase in revenues is the result of increased marketing efforts by the Company in the Latin American industrial automation marketplace during the last 18 months. Management is encouraged by the quarterly market performance in Latin America, but remains cautious as volatility in economic conditions and reseller relationships in Latin America make sales and growth estimates difficult to predict.

The Company's revenues have historically fluctuated from quarter to quarter due to timing factors such as customer order placement and product shipments to customers, as well as customer buying trends, and changes in the general economic environment. The procurement process regarding plant and project automation, or project development, which usually surrounds the decision to purchase ESTeem products can be lengthy. This procurement process may involve bid activities unrelated to the ESTeem products, such as additional systems and subcontract work, as well as capital budget considerations on the part of the customer. Because of the complexity of this procurement process, forecasts in regard to the Company's revenues become difficult to predict.

The Company's revenues fall into three major customer categories, Domestic, Export and U.S. Government sales. Domestic commercial sales increased to $454,272 in the second quarter of 2004, as compared to $315,334 for the second quarter of 2003, due to increased product sales for MDCS projects, when compared with the same quarter for 2003. Foreign export sales for the second quarter of 2004 increased to $232,156 as compared to the $54,856 in the same quarter of 2003. The increase in export sales is due to increased sales of the Company’s products for Industrial Automation projects in Mexico and Ecuador, which Management believes is the result of the Company’s increased marketing efforts in the Latin American region. U.S. Government sales increased slightly to $1,443 in the second quarter of 2004 when compared with second quarter 2003 U.S. Government sales of $135.

During the quarter ended June 30, 2004 material and services provided to Application Data Systems Inc (ADSI), a reseller of the Company’s MDCS products, accounted for 14% of the Company’s sales and service revenues. No other sales to a single customer comprised 10% or more of the Company’s product sales for the quarter ended June 30, 2004.

A percentage breakdown of EST's major customer categories of Domestic, Export and U.S. Government Sales, for the second quarter of 2004 and 2003 are as follows:

A percentage breakdown of EST's product sales categories for the second quarter of 2004 and 2003 are as follows:

Sales for the second quarter of 2004 and 2003 include foreign export sales as follows:

The geographic distribution of foreign sales for the second quarter of 2004 and 2003 is as follows:

The majority of the Company's domestic and foreign sales for the second quarter of 2004 were used in Industrial Automation applications. It is Management’s opinion that the majority of the Company’s sales will continue to be in Industrial Automation applications for the foreseeable future. Industrial Automation applications for the Company’s products will be augmented by sales of MDCS for public safety entities. During the second quarter of 2004, MDCS sales accounted for 26% of the Company’s sales and service revenues. Management believes MDCS sales may increase in the near term, however cannot be assured due to public safety entity purchases being linked to uncertain government funding.

Based on prior sales experience, the majority of U.S. Government purchases of the Company’s products are pursuant to the Company’s General Services Administration (GSA) contract. Management believes that although there was a slight increase in government sales, the trend is for decreased U.S. Government sales, which Management believes may continue for the foreseeable future. Due to the uncertain nature of U.S. Government purchasing, Management does not base profitability or liquidity projections on expected U.S. Government sales.

The Corporation had backlog of $107,000 as of June 30, 2004, primarily for foreign shipments awaiting prepayment, and ongoing MDCS projects. The Company’s customers generally place orders on an "as needed basis". Shipment for most of the Company’s products is generally made within 5 to 10 working days after receipt of customer orders, with the exception of ongoing, scheduled projects, and custom designed equipment.

Cost of sales percentage for the second quarters of 2004 and 2003 was 40% and 46%, respectively. The cost of sales decrease for the second quarter of 2004 is the result of the types and quantities of products sold during the quarter providing increased profit margins and therefore a lower cost of sales for the products sold, when compared with the same quarter of 2003.

Operating expenses for the second quarter of 2004 increased $46,805 from the second quarter of 2003. The following is an outline of operating expenses:

During the second quarter of 2004, Finance and Administration expenses increased $3,961 from the same quarter of 2003. The increase is the result of increased department wages and payroll related taxes paid during the quarter and increased department specific travel expenses incurred when compared the same quarter of 2003.

During the second quarter of 2004, marketing expenses increased $14,561 from the same period in 2003. The increase is the result of increased department salaries, travel expenses and advertising when compared with the same quarter of 2003.

Customer service expenses had a minor increase of $404 during the second quarter of 2004, when compared with the same quarter of 2003.

The Corporation earned $5,447 in interest and dividend income during the quarter ended June 30, 2004. Sources of this income were money market accounts and marketable securities investments.

Engineering support costs decreased to $22,567 for the quarter ended June 30, 2004, as compared to $25,266 for the same period of 2003. The Company had decreased engineering services revenues for the second quarter of 2004, which as a result the Company recognized reduced engineering support costs.

The Company had net income of $78,575 for the second quarter of 2004, compared to a $30,660 net loss for the same quarter of 2003. The increased profitability is attributable to increased sales revenues and improved profit margins during the second quarter of 2004 when compared with the same of 2003.

B. Financial Condition, Liquidity and Capital Resources

The Corporation's current asset to current liabilities ratio at June 30, 2004 was 12.7:1 compared to 12.6:1 at December 31, 2003. For the quarter ending June 30, 2004, the Company had cash and cash equivalents of $572,413, compared to cash and cash equivalent holdings of $378,103 at December 31, 2003. Available for sale marketable securities increased to $1,345,886 compared to $1,341,491 at December 31, 2003. Certain components of investments held by the Company, if sold as of June 30, 2004, would have presented a realized loss net of tax of $14,988 as a result of volatility in mutual fund investments held by the Company, as compared with a potential loss net of tax, of $9,474 as of December 31, 2003. The contingency for these items is reflected in the Balance Sheet as Accumulated other comprehensive loss, and the Statement of Comprehensive Income, respectively, as of June 30, 2004.

Accounts receivable decreased to $249,144 as of June 30, 2004, from December 31, 2003 levels of $284,972, due to sales and collection differences during the second quarter of 2004, when compared with year-end 2003. Inventory decreased to $490,526 at June 30, 2004, from December 31, 2003 levels of $511,972. The Company's fixed assets, net of depreciation, increased to $232,522 as of June 30, 2004, from December 31, 2003 levels of $222,674, due to capital expenditures of $34,688 for fixed assets and being offset by depreciation of $24,836, and loss on asset disposition of $4. The Company’s capital expenditures for fixed assets were primarily production related equipment, development software and related computer upgrades. Management foresees additional capital expenditures may be necessary in 2004 to support the production and sale of the Company’s products.

As of June 30, 2004, the Company’s trade accounts payable balance was $70,512 as compared with $44,848 at December 31, 2003, and reflects amounts owed for inventory items and contracted services. Refundable deposit liability was $2,792 for the quarter ended June 30, 2004, and reflects prepaid foreign sales prior to shipment. Accrued liabilities as of June 30, 2004 were $41,689, compared with $52,203 at December 31, 2003, and reflect items such as accrued vacation benefits, accrued payroll tax and state excise tax liabilities. The Company announced a cash distribution, payable during July 2004 in the amount of $50,987, which has been recognized as a liability as of June 30, 2004. Federal Income Taxes payable increased to $43,799 as of June 30, 2004 a result of the Company’s year-to-date increased profitability.

In Management's opinion, the Company's cash and cash equivalent reserves, and working capital at June 30, 2004 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during the remainder of 2004.

1. Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive and its Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d- 14(c) as of a date within 90 days of the filing date of this quarterly report on Form 10-QSB (the "Evaluation Date"), have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made known to it by others within the Company, particularly during the period in which this quarterly report on Form 10-QSB was being prepared.
   
2. Changes in Internal Controls. There were not significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions.

Item #1 Election of Director:

John L. Schooley

Form 8-K dated February 20, 2004 is incorporated herein by reference.

Form 8-K dated June 4, 2004 is incorporated herein by reference.

Exhibit Index Reference Form 10-QSB

Exhibit Number Notes to Financial Statements

4. Instruments defining the Rights of Security Holders including indentures.

Form 8K dated February 20, 2004 is incorporated herein by reference

11. Statement Re: computation of per share earnings Note 3 to Financial Statements

31.1 CEO Certification

31.2 CFO Certification

32 Section 906 Certification

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.