================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   ----------

                                  FORM 10-QSB/A

    [X] AMENDMENT NO. 1 TO QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2006

    [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                  For the transition period from __________ to ___________

                  Commission file number 333-87224

                       ELECTRONIC SENSOR TECHNOLOGY, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

                 NEVADA                               98-0372780
     (State or Other Jurisdiction of     (I.R.S. Employer Identification No.)
     Incorporation or Organization)

                           1077 Business Center Drive
                         Newbury Park, California 91320
                    (Address of Principal Executive Offices)

                                 (805) 480-1994
                (Issuer's Telephone Number, Including Area Code)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
                                                               Yes [ ] No [X](*)

----------
(*) We were not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act during the past 12 months because (i) our registered
common stock was registered under the Securities Act during such period and was
not registered under the Exchange Act, (ii) we did not have any registration
statement that became effective during such period and (iii) we had less than
300 shareholders of record throughout such period. Although we were not required
to do so, we voluntarily filed such reports with the Securities and Exchange
Commission during such period. On March 24, 2006 we filed a registration
statement on Form 10-SB to register our common stock pursuant to the Exchange
Act, which we subsequently withdrew pursuant to the request of the Securities
and Exchange Commission until our registration statement on Form SB-2, for which
an amendment was last filed on May 1, 2006, is declared effective. Once our
registration statement on Form SB-2 is declared effective, we plan to file
another registration statement on Form 10-SB to register our common stock
pursuant to the Exchange Act. Once our registration statement on Form 10-SB is
effective, we will be subject to the filing requirements of the Securities
Exchange Act.
<PAGE>

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).                       Yes [ ] No [X]

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 54,173,745 shares of common
stock as of September 7, 2006

     Transitional Small Business Disclosure Format                Yes [ ] No [X]

================================================================================


<PAGE>

                                EXPLANATORY NOTE

          We are filing this amended quarterly report on Form 10-QSB/A for the
three months ended March 31, 2006 to restate our unaudited consolidated
financial statements at March 31, 2006 and for the period ended March 31, 2006
in order to properly account for the fair value of derivative liabilities
resulting from the issuance of freestanding warrants and registration rights
granted in connection with the issuance of such warrants (the effect of this
restatement is described further in Note 3 to the Consolidated Financial
Statements included herein). We have also amended the cover page in order to
correct and clarify certain disclosures contained therein.

          The following Items of this amended quarterly report on Form 10-QSB/A
for the period ended March 31, 2006 are amended and restated herein:

          Cover Page:

          o    Disclosure relating to the withdrawal of our registration
               statement on Form 10-SB.

          Part I Financial Information:

          o    Item 1. Financial Statements--Consolidated Balance Sheet as of
               March 31, 2006 (unaudited), Consolidated Statements of Operations
               for the Three Months Ended March 31, 2006 and 2005 (unaudited),
               Consolidated Statements of Cash Flows for the Three Months Ended
               March 31, 2006 and 2005 (unaudited) and Notes to Consolidated
               Financial Statements as of March 31, 2006 (unaudited); and

          o    Item 2. Management Discussion and Analysis of Operations or Plan
               of Operations.

          Part II Other Information:

          o    Item 6. Exhibits--Exhibits 31.1, 31.2, 32.1 and
               32.2--currently-dated certifications from our President and Chief
               Executive Officer and Treasurer and Vice President of Finance and
               Administration, as required by Section 302 and 906 of the
               Sarbanes-Oxley Act of 2002.

The remaining Items are unaffected by the correction in classification, have not
been updated from the disclosure originally contained in our quarterly report on
Form 10-QSB for the period ended March 31, 2006 filed with the Securities and
Exchange Commission on May 11, 2006 and are not reproduced in this Form
10-QSB/A. This amended quarterly report on Form 10-QSB/A for the period ended
March 31, 2006 does not reflect events occurring after the filing of the
quarterly report on Form 10-QSB filed with the Commission on May 11, 2006, nor
does it modify or update the disclosures contained in the quarterly report on
Form 10-QSB filed with the Commission on May 11, 2006, other than as described
above and to correct typographical errors contained therein.

                                       1

<PAGE>

                                     PART I.
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                       ELECTRONIC SENSOR TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2006
                                   (Restated)
                                   (Unaudited)

                                     ASSETS
<TABLE>
<CAPTION>

<S>                                                                         <C>
CURRENT ASSETS:
 Cash and cash equivalents                                               $  4,216,536
 Certificate of deposit-restricted                                            250,000
 Accounts receivable, net of allowance for doubtful accounts                  222,081
 Prepaid expenses                                                              66,333
 Inventories                                                                1,008,098
                                                                         ------------
                       TOTAL CURRENT ASSETS                                 5,763,048

DEFERRED FINANCING COSTS, net of amortization of $69,191                      659,168
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $925,677           166,804
SECURITY DEPOSITS                                                              12,817
                                                                         ------------
                                                                         $  6,601,837
                                                                         ============
                       LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
 Accounts payable and accrued expenses                                   $    531,718
 Deferred revenues                                                            129,167
 Derivative liabilities                                                     4,550,881
                                                                         ------------
                       TOTAL CURRENT LIABILITIES                            5,211,766

CONVERTIBLE DEBENTURES, net of unamortized discount of $6,222,223             777,777
                                                                         ------------
                       TOTAL LIABILITIES                                    5,989,543

STOCKHOLDERS' DEFICIT:
 Preferred stock, $.001 par value 50,000,000 shares authorized
  none issued and outstanding                                                        -
 Common stock, $.001 par value, 200,000,000
  shares authorized, 53,968,643 issued and outstanding                          54,174
 Additional paid-in capital                                                  8,516,354
 Accumulated deficit                                                        (7,958,234)
                                                                          ------------
     TOTAL STOCKHOLDERS' DEFICIT                                               612,294
                                                                          ------------
                                                                          $  6,601,837
                                                                          ============
</TABLE>

            See unaudited notes consolidated to financial statements

                                       2
<PAGE>

                       ELECTRONIC SENSOR TECHNOLOGY, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

                                                       Three Months Ended
                                                            March 31,
                                                -----------------------------
                                                    2006             2005
                                                -------------    ------------
                                                  (Restated)      (Restated)
REVENUES                                         $    532,817    $    219,511
COST OF SALES                                         301,592         149,962
                                                 ------------    ------------
GROSS PROFIT                                          231,225          69,549

OPERATING EXPENSES:
Research and development                              211,799         140,172
Selling, general and administrative                   780,092         567,950
                                                 ------------    ------------
TOTAL OPERATING EXPENSES                              991,891         708,122
                                                 ------------    ------------
LOSS FROM OPERATIONS                                 (760,666)       (638,573)

OTHER INCOME AND (EXPENSE):
Other expense                                            (217)           (239)
Other income - derivatives                          1,220,197         119,550
Other expense - derivatives                                 -      (2,205,642)
Gain (loss) on sale of property and equipment               -          13,257
Interest expense                                     (730,391)        (20,566)
                                                 ------------    ------------
TOTAL OTHER INCOME AND EXPENSE                        489,589      (2,093,640)
                                                 ------------    ------------
NET (LOSS)                                       $   (271,077)   $ (2,732,214)
                                                 ============    ============
(Loss) per share, basic                          $      (0.01)   $      (0.05)
                                                 ============    ============
Weighted average number of shares, basic           54,145,922      52,640,310
                                                 ============    ============
(Loss) per share, diluted                        $      (0.03)   $      (0.05)
                                                 ============    ============
Weighted average number of shares, diluted         54,145,922      52,640,310
                                                 ============    ============

            See unaudited notes to consolidated financial statements

                                        3

<PAGE>

                       ELECTRONIC SENSOR TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                               Three Months Ended
                                                                    March 31,
                                                        -------------------------------
                                                             2006             2005
                                                        -------------    --------------
                                                          (Restated)       (Restated)
<S>                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                       $    (271,077)   $  (2,732,214)
Adjustments to reconcile net income (loss) to net
 cash provided by (used in)operating activities:
Depreciation and amortization                                   8,666            1,845
Fair value of derivatives at date of issuance                       -        2,205,642
Decrease in fair value of derivative liability             (1,220,197)        (119,550)
Issuance of shares for services                                21,000                -
Amortization of debt discount                                 583,333                -
Amortization of deferred financing costs                       51,894                -
Changes in assets and liabilities:
Accounts receivable                                           243,695         (106,349)
Inventories                                                   (68,476)           7,212
Prepaid expenses                                                3,603           (7,324)
Security deposits                                                   -              140
Accounts payable and accrued expenses                          50,919          120,797
Deferred revenues                                             (12,500)         (12,500)
Due to related party                                                -          (60,000)
Interest payable                                                    -           (5,544)
Other current liabilities                                           -           (1,016)
                                                        -------------    -------------
Net cash provided by (used in) operating activities          (609,140)        (708,861)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment                        -           16,064
Decrease (increase) in restricted security deposit            668,678         (900,651)
Purchase of property and equipment                            (62,924)         (55,044)
                                                        -------------    -------------
Net cash provided by (used in) investing activities           605,754         (939,631)
                                                        -------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in line of credit                                          -         (200,000)
Repayment of partners' loans payable                                -         (110,000)
Proceeds from issuance of common stock                              -        3,811,708
                                                        -------------    -------------
Net cash provided by financing activities                           -        3,501,708
                                                        -------------    -------------
NET INCREASE (DECREASE) IN CASH                                (3,385)       1,853,217
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            4,219,921           26,430
                                                        -------------    -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $   4,216,536    $   1,879,647
                                                        =============    =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest                                                $     140,000    $      21,217
                                                        =============    =============
NON-CASH FINANCING ACTIVITIES
  Fair value of derivative liabilities issued in
   connection with issuance of common stock              $          -    $   5,897,800
                                                        =============    =============
</TABLE>

            See unaudited notes to consolidated financial statements.

                                       4
<PAGE>

                       ELECTRONIC SENSOR TECHNOLOGY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                                 MARCH 31, 2006

     (1)  BASIS OF PRESENTATION

          The accompanying unaudited consolidated financial statements have been
          prepared in accordance with generally accepted accounting principles
          for interim financial statements and with the instructions to Form
          10-QSB and Article 10 of Regulation S-B. Accordingly, they do not
          include all the information and disclosures required for annual
          financial statements. These financial statements should be read in
          conjunction with the consolidated financial statements and related
          footnotes for the year ended December 31, 2005, included in the Annual
          Report filed on Form 10-KSB/A for the year then ended.

          In the opinion of the management of Electronic Sensor Technology, Inc.
          (the "Company"), all adjustments (consisting of normal recurring
          accruals) necessary to present fairly the Company's financial position
          as of March 31, 2006, and the results of operations and cash flows for
          the three month period ending March 31, 2006 have been included. The
          results of operations for the three-month period ended March 31, 2006
          are not necessarily indicative of the results to be expected for the
          full year. For further information, refer to the consolidated
          financial statements and footnotes thereto included in the Company's
          Annual Report filed on Form 10-KSB/A as filed with the Securities and
          Exchange Commission for the year ended December 31, 2005.

     (2)  BASIS OF CONSOLIDATION

          The accompanying financial statements include the accounts of the
          Company and its wholly owned subsidiaries. All intercompany balances
          and transactions have been eliminated in consolidation.

     (3)  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          (a)  NATURE OF BUSINESS

               The Company develops and manufactures electronic devices used for
               vapor analysis.

          (b)  CASH AND CASH EQUIVALENTS

               The Company considers highly liquid financial instruments with
               maturities of three months or less at the time of purchase to be
               cash equivalents. The Company did not have any cash equivalents
               at March 31, 2006.

          (c)  REVENUE RECOGNITION

               The Company records revenue from direct sales of products to
               end-users when the products are shipped, collection of the
               purchase price is probable and the Company has no significant
               further obligations to the customer. Costs of remaining
               insignificant Company obligations, if any, are accrued as costs
               of revenue at the time of revenue recognition. Cash payments
               received in advance of product or service revenue are recorded as
               deferred revenue.

          (d)  SHIPPING AND HANDLING

               The Company accounts for shipping and handling costs as a
               component of "Cost of Sales".

                                       5
<PAGE>

          (e)  PROPERTY AND EQUIPMENT

               Property and equipment are stated at cost, net of accumulated
               depreciation. Depreciation is computed using the straight-line
               method over the estimated useful lives of five years.

          (f)  INVENTORIES

               Inventories are comprised of raw materials, work in process, and
               finished goods. Inventories are stated at the lower of cost or
               market and are determined using the first-in, first-out method.

          (g)  USE OF ESTIMATES

               The preparation of the financial statements in conformity with
               generally accepted accounting principles requires management to
               make estimates and assumptions that affect the reported amounts
               of assets and liabilities and disclosures of contingent assets
               and liabilities at the date of the financial statements and the
               recorded amounts of revenues and expenses during the reporting
               period. Actual results could differ from those estimates.

          (h)  FAIR VALUE OF FINANCIAL INSTRUMENTS

               The fair value of certain financial instruments, including
               accounts receivable, accounts payable and accrued liabilities,
               approximates their carrying value due to the short maturity of
               these instruments.

          (i)  LONG-LIVED ASSETS

               The Company reviews long-lived assets, such as property and
               equipment, to be held and used or disposed of, for impairment
               whenever events or changes in circumstances indicate that the
               carrying amount of an asset may not be recoverable. If the sum of
               the expected cash flows, undiscounted and without interest, is
               less than the carrying amount of the asset, an impairment loss is
               recognized as the amount by which the carrying amount of the
               asset exceeds its fair value. At September 30, 2005 no assets
               were impaired.

          (j)  DERIVATIVE LIABILITIES

               In June 2005, the Financial Accounting Standard Board issued EITF
               05-04. EITF 05-04 addresses the question as to whether liquidated
               damages pursuant to a registration rights agreement should be
               combined as a unit with the underlying financial instruments and
               be evaluated as a single instrument. EITF 05-04 does not reach a
               consensus on this matter and allows for the treatment as a
               combined unit (Views A and B) as well as separate freestanding
               financial instruments (View C). On September 15, 2005, the FASB
               staff postponed further discussion of EITF 05-04. As of May 31,
               2006, the FASB still has not rescheduled EITF 05-04 for further
               discussion.

               In connection with the issuance of a convertible debentures and
               related warrants, we granted liquidated damages pursuant to a
               separate registration right agreement. The Company adopted View C
               of EITF 05-04. Accordingly, the liquidated damages pursuant to
               this registration right agreement were evaluated as a stand alone
               financial instrument. This treatment did not have a significant
               different effect than if the Company would have adopted View A or
               B, because the classification of the warrants and certain
               embedded features of the convertible debentures were classified
               as derivative liabilities. The Company believes that should the
               FASB staff reach a consensus on EITF 05-04 and select combined
               treatment (View A or B), the embedded conversion features and the
               warrants will have to be evaluated as a combined unit with the
               liquidated damages pursuant to the registration rights agreement,
               and accordingly, be evaluated as derivative liabilities. The
               Company does not believe that its measurement of the derivative
               liabilities under View A or View B would significantly differ
               from its measurement of the derivative liabilities under View C
               in these circumstances.

                                       6
<PAGE>

               The Company accounts for liquidated damages granted pursuant to
               registration rights which are not included in a separate
               registration right agreement as a combined unit with the warrants
               which are contemporaneously issued with the registration rights
               pursuant to SFAS 133 "Accounting for Derivative and Hedging
               Activities" and EITF 00-19.

               The Company accounts for its embedded conversion features and
               freestanding warrants pursuant to SFAS No. 133, "Accounting for
               Derivative Instruments and Hedging Activities", which requires a
               periodic valuation of their fair value and a corresponding
               recognition of liabilities associated with such derivatives. The
               recognition of derivative liabilities related to the issuance of
               shares of common stock is applied first to the proceeds of such
               issuance, at the date of issuance, and the excess of derivative
               liabilities over the proceeds is recognized as other expense in
               the accompanying consolidated financial statements. Any
               subsequent increase or decrease in the fair value of the
               derivative liabilities, which are measured at the balance sheet
               date, are recognized as other expense or other income,
               respectively.

          (k)  BASIC AND DILUTED EARNINGS PER SHARE

               Basic earnings per share are calculated by dividing income
               available to stockholders by the weighted-average number of
               common shares outstanding during each period. Diluted earnings
               per share are computed using the weighted average number of
               common and dilutive common share equivalents outstanding during
               the period. Dilutive common share equivalents consist of shares
               issuable upon the exercise of stock options and warrants embedded
               conversion features (calculated using the reverse treasury stock
               method). The outstanding options, warrants and shares equivalent
               issuable pursuant to embedded conversion features amounted to
               58,558,501 and 5,576,871at March 31, 2006 and 2005, respectively.
               The outstanding options, warrants and shares equivalent issuable
               pursuant to embedded conversion features and warrants at March
               31, 2006 and 2005, respectively, are excluded from the loss per
               share computation for that period due to their anti-dilutive
               effect. The Company adjusted the numerator for any changes in
               income or loss that would result if the contract had been
               recorded as an equity instrument for accounting purposes during
               the period. However, the Company did not adjust the numerator for
               interest charges during the period on the convertible debentures
               because it would have been anti-dilutive.

               The following sets forth the computation of basic and diluted
               earnings per share at March 31:

                                                       2006            2005
                                                    ----------      ----------
                                                    (Restated)      (Restated)

Numerator:
Net income (loss)                                  $  (271,077)   $ (2,732,214)
Net other income (expense)associated with
 derivative contracts                                1,220,197      (2,086,092)
                                                   ------------    -----------
Net income (loss) for diluted earnings per
  share purposes                                    (1,491,274)   $   (646,122)
                                                   ===========    ============
Denominator:
Denominator for basic earnings per share-
 Weighted average shares outstanding                54,145,922      52,640,310
Effect of dilutive warrants, embedded
 conversion features and liquidated damages                  -               -
                                                  ------------    ------------
Denominator for diluted earnings per share-
 Weighted average shares outstanding                54,145,922      52,640,310
                                                  ============   =============
Basic earnings (loss) per share                   $      (0.01)   $      (0.05)
                                                  ============   =============
Diluted earnings (loss) per share                 $      (0.03)   $      (0.05)
                                                  ============   =============

                                       7
<PAGE>

     (4)  CONVERTIBLE DEBENTURES

          During December 2005, we issued in a private offering $7,000,000
          aggregate principal amount of convertible debentures due December 7,
          2009. The convertible debentures are convertible at a variable
          conversion price, which is the lesser of $0.4544 or 90% of the average
          of the volume weighted average price for the 20 consecutive trading
          days immediately prior to the conversion date. The convertible
          debentures are convertible at any time on or prior to the maturity
          date at the option of the debenture holder. We received $7,000,000 in
          cash as consideration. The convertible debentures bear interest at 8%,
          payable in cash or stock, at the Company's options, and are required
          to be redeemed in 9 equal quarterly payments commencing January 1,
          2008.

          In connection with the issuance of the convertible debentures, the
          Company issued five-year warrants to purchase 12,130,314 shares of
          common stock at an exercise price of $0.4761 per share. Furthermore,
          the Company granted liquidated damages pursuant to a registration
          rights agreement.

          The convertible debentures and related agreements provide, among other
          things, for:

          1)   Liquidated damages amounting to 2% per month of the outstanding
               principal amount, payable in cash or stock, to the debenture
               holders in the event that a registration statement covering the
               shares underlying the convertible debentures is not declared
               effective within 150 days of the date the debentures were issued.
               The liquidated damages are payable in cash monthly or in unpaid,
               bear interest at 18% per annum. If unpaid by January 1, 2008 and
               thereafter, they may be converted in shares of common stock at
               the same prevailing rate as the remaining principal amount of the
               convertible debentures;

          2)   Default interest rate of 18% and a default premium of 30% of the
               principal amount of the debentures, payable in cash or stock.
               Events of default include, among other things, if a payment,
               whether cash or stock is not paid on time and cured within three
               days, if the Company's common stock is not quoted for trading for
               at least five trading days, if a registration is not effective
               within 180 days after December 5, 2005. The default interest rate
               and the default premium may be converted in shares of common
               stock at the same prevailing rate as the remaining principal
               amount of the convertible debentures;

          3)   A reset feature of the conversion price in the event of a
               subsequent equity or convertible financing with an effective
               price lower than the debenture conversion price, whereby the
               aforementioned variable conversion price of the convertible
               debentures is adjusted to the new lower effective price of the
               subsequent equity or convertible financing;

          4)   A prepayment premium amounting to 30% of the principal balance of
               the convertible debentures in the event that the Company, at its
               sole option, prepays the convertible debentures before its due
               date. The prepayment is payable in cash only; and

          5)   The warrants require that the Company reimburse any holder of a
               warrant in respect of any trading loss resulting from the failure
               of the Company to timely deliver shares issued pursuant to the
               exercise of warrants. This compensation may be paid in shares of
               common stock or cash. The exercise price of the warrants, which
               is $0.4761 per share at the date of the agreement, may be reduced
               to $0.001 per share, at a monthly rate $0.03 per share if the
               registration statement we are required to file at the request of
               the warrant holders with respect to the common stock underlying
               the warrants is not declared effective within six months of the
               date of issuance of the warrants.

          In connection with the issuance of the convertible debentures, we
          issued 485,213 warrants to a company in partial consideration for
          financial advisory services. The warrants have the same terms as
          those granted to the debenture holders. The fair value of the
          warrants (at the time of their issuance) and related professional
          fees pertaining to the issuance of the convertible debentures
          have been recorded as deferred financing costs.

                                       8
<PAGE>

          The deferred financing costs are amortized over the term of the
          convertible debentures. See Note 6 - Derivative Liabilities for
          further information on the accounting and measurement of the
          derivative liabilities associated with the issuance of the convertible
          debentures and related agreements.

     (5)  OPTIONS

          Company adopted a Stock Incentive Option Plan in April 2005. No
          options have been granted through March 31, 2006.

     (6)  DERIVATIVE LIABILITIES

          FEBRUARY 2005 TRANSACTION

          During February 2005, we recognized derivative liabilities of
          approximately $6.0 million pursuant to the issuance of 3,985,000
          freestanding warrants and granting certain registration rights which
          provided for liquidated damages in the event of failure to timely
          register the shares in connection with the issuance of shares of
          common stock and the related warrants.

          There are no liquidated damages provided for untimely effectiveness of
          the registration of shares pursuant to piggy-back registration rights.
          The Company intends to register all shares and warrants pursuant to
          the subscriber piggy-back registration rights.

          The agreement pursuant to which the warrants were issued and the
          registration rights were granted provided for liquidated damages
          pursuant to demand registration rights in the event of a failure to
          timely register the shares after demand is made by the holders of a
          majority of the warrants and shares of common stock issued pursuant to
          such agreement. The demand registration rights of these investors are
          such that if the Company fails to register the investors shares,
          including the shares underlying the warrants, the Company will pay a
          cash penalty amounting to 1% of the amount invested per month,
          $39,850, if the registration statement is not filed within 60 days of
          demand or is not declared effective within 150 days from the date of
          initial filing. The maximum liability associated with the liquidated
          damages amounts to 49% of the gross proceeds associated with the
          issuance of shares of common stock, which amounts to $1,952,650. The
          percentage of liquidated damages amounts to the difference between 60
          months, which is the inherent time limitation under which the
          underlying shares would be free-trading (three year term and two year
          holding period) and 11 months, which is the grace period for
          registering the shares (no demand permitted for four months, two-month
          period to file and five-month period to become effective), times the
          penalty percentage, which is 1%. The Company believes that the
          likelihood that it will incur any liabilities resulting from the
          liquidated damages pursuant to the demand registration rights is
          remote considering that it will register the shares and the shares
          underlying the warrants pursuant to piggy-back registration rights,
          which do not contain liquidated damages.

          Because the registration rights were not granted under a separate
          registration rights agreement, we considered those features in
          evaluating whether the associated warrants should be classified as
          derivative liabilities. Considering that the amount of the maximum
          penalty is 49%, the Company cannot conclude that that this discount
          represents a reasonable approximation of the difference between
          registered and unregistered shares under paragraph 16 of EITF 00-19.
          Accordingly, the warrants issued in connection with the February 2005
          transaction are considered derivative liabilities.

          The fair value of the warrants issued in connection with the February
          2005 transaction at the date of issuance of the warrants and the
          granting of registration rights and at March 31, 2006 is as follows:

                                         At issuance       At March 31, 2006
             Freestanding warrants      -------------    --------------------
                                          $6,017,350             $ 0

                                       9
<PAGE>

         The Company used the following assumptions, using the Black Scholes
         Model to measure the identified derivatives as follows:

         Freestanding warrants

                                        At issuance       At March 31, 2006
                                      --------------    --------------------
             Market price:            $         2.40    $               0.23
             Exercise price:          $         1.00    $               1.00
             Term:                           3 years              2.08 years
             Volatility:                          39%                     39%
             Risk-free interest rate:           2.78%                   4.82%
             Number of warrants:           3,985,000               3,985,000

DECEMBER 2005 TRANSACTION

          During December 2005, in connection with the issuance of the
          convertible debentures, the Company determined that the conversion
          feature of the convertible debentures represents an embedded
          derivative since the debentures are convertible into a variable number
          of shares upon conversion. Because there is no explicit number of
          shares that are to be delivered upon satisfaction of the convertible
          debentures and that there is no cap on the number of shares to be
          delivered upon expiration of the contract to a fixed number, the
          Company is unable to assert that it had sufficient authorized and
          unissued shares to settle its obligations under the convertible
          debentures and therefore, net-share settlement is not within the
          control of the Company. Accordingly, the convertible debentures are
          not considered to be conventional debt under EITF 00-19 and the
          embedded conversion feature must be bifurcated from the debt host and
          accounted for as a derivative liability.

          The embedded conversion features are as follows:

          Default Interest Rate and Premium: The default interest rate is 18%
          while the stated rate of the convertible debentures is 8%.
          Additionally, the Company is liable to pay for a premium amounting to
          30% of the principal amount of the convertible debentures in the event
          of default. This embedded derivative could at least double the
          investor's initial rate of return on the host contract and could also
          result in a rate of return that is at least twice what otherwise would
          be the market return for a contract that has the same terms as the
          host contract and that involves a debtor with similar credit quality.
          Furthermore, the default interest rate may be triggered by certain
          events of defaults which are not related to credit-risk-related
          covenants or the Company's creditworthiness (e.g., if a registration
          statement is not effective within 180 days after December 7, 2005).
          The default provisions are effective, at the holders' option, upon an
          event of default. Although a registration statement covering the
          shares underlying the convertible debentures has not been declared
          effective as of June 30, 2006, the debenture holders have not notified
          the Company of an election to accelerate the debentures, nor have any
          claims for liquidated damages been received.

          Reset Feature Following Subsequent Financing: The debenture provides
          for a reset feature of the conversion price in the event of a
          subsequent equity or convertible financing with an effective price
          lower than the debenture conversion price, whereby the aforementioned
          variable conversion price of the convertible debentures is adjusted to
          the new lower effective price of the subsequent equity or convertible
          financing , which amounts to 10% of the shares issuable pursuant to
          the convertible debentures, which is the effective discount to market
          value we would offer in the event we provide for a subsequent private
          placement financing. This reset does not constitute a standard
          anti-dilution provision and is indexed to an underlying other than an
          interest rate or credit risk.

          Conversion Rate: The convertible debentures are convertible at a
          variable conversion price, which is the lesser of $0.4544 or 90% of
          the average of the volume weighted average price for the 20
          consecutive trading days immediately prior to the conversion date. The
          convertible debentures are convertible at any

                                       10
<PAGE>

          time on or prior to the maturity date at the option of the debenture
          holder. The implied conversion embedded feature amounts to a
          conversion discount of 10% to market.

          The Company believes that the aforementioned embedded derivatives meet
          the criteria of SFAS 133, including Implementation issue No. B16 and
          EITF 00-19, when appropriate, and should be accounted for as
          derivatives with a corresponding value recorded as a liability.

          In connection with the issuance of the convertible debentures, the
          Company issued warrants to the debenture holders. The related warrants
          require that the Company reimburse any holder of a warrant in respect
          of any trading loss resulting from the failure of the Company to
          timely deliver shares issued pursuant to the exercise of warrants.
          This compensation may be paid in shares of common stock or cash.
          Accordingly, we have accounted for such warrants as derivatives.

          In connection with the issuance of the convertible debentures, the
          Company granted liquidated damages pursuant to a registration rights
          agreement. The liquidated damages amount to 2% per month of the
          outstanding principal amount, payable in cash or stock, to the
          debenture holders in the event that a registration statement covering
          the shares underlying the convertible debentures is not declared
          effective within 150 days of the date the debentures were issued. The
          liquidated damages are payable in cash monthly or if unpaid, bear
          interest at 18% per annum. If unpaid by January 1, 2008 and
          thereafter, they may be converted in shares of common stock at the
          same prevailing rate as the remaining principal amount of the
          convertible debentures. Pursuant to View C of EITF 05-04 the
          liquidated damages are accounted for as a separate derivative. While
          the liquidated damages may be settled in stock if unpaid by January 1,
          2008, the Company determined that it was more likely that they would
          be paid in cash shortly after their occurrence and has used such
          assumption in measuring the fair value of the derivative liability
          associated with the liquidated damages. The maximum liability
          associated with the liquidated damages amount to 38% of the gross
          proceeds associated with the issuance of the convertible debentures,
          which amounts to $2,660,000.

          Additionally, because there is no explicit number of shares that are
          to be delivered upon satisfaction of the convertible debentures, the
          Company is unable to assert that it had sufficient amount of
          authorized and unissued shares to settle its obligations under the
          convertible debentures. Accordingly, all of the Company's previously
          issued and outstanding instruments, such as warrants, as well as those
          issued in the future, would be classified as liabilities as well,
          effective with the issuance of the convertible debentures and until
          the Company is able to assert that it has a sufficient amount of
          authorized and unissued shares to settle its obligations under all
          outstanding instruments. At the date of the issuance of the
          convertible debentures, the Company had 1,941,871 warrants outstanding
          which were classified as derivatives.

          The fair value of the derivative liabilities at the date of issuance
          of the convertible debentures and at March 31, 2006 are as follows:

                                           At issuance        At March 31, 2006
                                          -------------       -----------------
                                            (Restated)            (Restated)

          Freestanding warrants            $  3,532,348       $    756,932
          Embedded conversion features        3,463,542          3,601,449
          Liquidated damages                    192,500            192,500
          Other outstanding warrants            143,268                  0

          The Company used the following methodology to value the embedded
          conversion features and liquidated damages:

          It estimated the discounted cash flows payable by the Company, using
          probabilities and likely scenarios, for event of defaults triggering
          the 30% penalty premium and 18% interest accrual, subsequent financing
          reset, and liquidated damages, such as the untimely effectiveness of a
          registration statement. If the additional cash

                                       11
<PAGE>

          consideration was payable in cash or stock, it determined the amount
          of additional shares that would be issuable pursuant to its
          assumptions. The Company will revisit the weight of probabilities and
          the likelihood of scenarios at each of the measurement dates of the
          derivative liabilities, which are the balance sheet dates.

          The Company used the following assumptions to measure the identified
          derivatives, using the Lattice valuation model, as follows:

          Embedded conversion features

                                          At issuance      At March 31, 2006
                                         --------------   ------------------
                                          (Restated)            (Restated)

          Market price:                    $     0.4880         $       0.23
          Conversion price:                $     0.4544         $       0.21
          Term:                                 4 years           3.67 years
          Volatility:                                39%                  39%
          Risk-free interest rate:                 4.39%                4.82%

          Freestanding warrants

          The derivative liability amounts to the fair value of the warrants
          issuable upon exercise, assuming that the underlying shares will not
          be timely registered. We computed the fair value of this embedded
          derivative using the Black Scholes valuation model with the following
          assumptions:

                                          At issuance      At March 31, 2006
                                         --------------   ------------------
                                          (Restated)          (Restated)

          Market price:                    $      0.488         $       0.23
          Exercise price:                  $     0.4761         $       0.34
          Term:                                 5 years           4.67 years
          Volatility:                                39%                  39%
          Risk-free interest rate:                 4.39%                4.82%

          We adjusted the effective exercise price to reflect the contractual
          adjustment assuming that the warrants will most likely be registered
          during the fourth quarter of 2006.

          Liquidated damages

          The liquidated damages, payable in cash, are valued using the
          weighting probabilities and likely scenarios to estimate the amount of
          liquidated damages and were valued at approximately $192,500 at the
          date of the grant of the registration rights and at March 31, 2006.

          The aggregate fair value of the derivative liabilities associated with
          the warrants, embedded conversion features, and liquidated damages in
          connection with the issuance of the convertible debentures and related
          agreements amounted to approximately $7.05 million at the date of
          issuance which exceeded the principal amount of the convertible
          debentures by approximately $50,000. The Company recognized $7,000,000
          as debt discount and the excess amount has been recorded as other
          expenses. Additionally, approximately $136,000 of the fair value of
          the warrants was recorded as deferred financing costs.

          The aggregate fair value of all derivative liabilities upon issuance
          of the various debt and equity instruments amounted to $13.3 million,
          of which $10.7 million was allocated to the net proceeds of the
          issuance of common stock and convertible debentures, $2.4 million was
          allocated to other expenses and approximately $136,000 was allocated
          to deferred financing costs.

                                       12
<PAGE>

          The decrease in fair value of the derivative liabilities between
          measurement dates, which are the date of issuance of the various debt
          and equity instruments and the balance sheet date, which is March 31,
          2006 amounted to approximately $1.2 million and has been recorded as
          other income. In 2005, approximately $7.6 million was recorded as
          other income.

     (7)  LINE OF CREDIT

          In September 2004, the Company's subsidiary renewed its revolving line
          of credit agreement for borrowings up to $1,800,000. The line of
          credit was assumed and renewed by the Company. Borrowings under this
          agreement bear interest at prime, are guaranteed by certain related
          parties and are collateralized with the assets of the Company and by
          the certificate of deposit.

     (8)  RESTATEMENT OF INTERIM FINANCIAL STATEMENTS

          In connection with the filing of an amendment to our registration
          statement on Form SB-2/A with the Securities and Exchange Commission,
          and after reviewing certain accounting principles we had applied in
          our financial statements for the periods ended March 31, 2005, June
          30, 2005 and September 30, 2005 previously filed with the Commission,
          management has determined that those financial statements should no
          longer be relied upon as they did not properly account for certain
          liquidated damages associated with a $3.985 million private placement
          of warrants and shares of our common stock that occurred in February
          2005; and with a $7,000,000 private offering of convertible debentures
          and warrants that occurred in December 2005 . Previously, the Company
          had not reflected the liquidated damages at their fair value nor their
          effect on other outstanding convertible instruments. Pursuant to the
          terms of the warrants that the Company issued and the registration
          rights granted in such private placement and offering, the warrant
          holders are entitled to liquidated damages pursuant to demand
          registration rights in the event of a failure to timely register the
          shares after demand is made by the holders of a majority of the
          warrants and shares of common stock issued pursuant to such agreement.
          The demand registration rights of these investors are such that if the
          Company fails to register the investors shares, including the shares
          underlying the warrants, the Company will pay a cash penalty amounting
          to 1% of the amount invested per month, $39,850, if the registration
          statement is not filed within 60 days of demand or is not declared
          effective within 150 days from the date of initial filing. The maximum
          liability associated with the liquidated damages amounts to 49% of the
          gross proceeds associated with the issuance of shares of common stock,
          which amounts to $1,952,650. The percentage of liquidated damages
          amounts to the difference between 60 months, which is the inherent
          time limitation under which the underlying shares would be
          free-trading (three year term and two year holding period) and 11
          months, which is the grace period for registering the shares (no
          demand permitted for four months, two-month period to file and
          five-month period to become effective), times the penalty percentage,
          which is 1%. The Company believes that the likelihood that it will
          incur any liabilities resulting from the liquidated damages pursuant
          to the demand registration rights is remote considering that it will
          register the shares and the shares underlying the warrants pursuant to
          piggy-back registration rights, which do not contain liquidated
          damages. Because the registration rights were not granted under a
          separate registration rights agreement, we considered those features
          in evaluating whether the associated warrants should be classified as
          derivative liabilities. Considering that the amount of the maximum
          penalty is 49%, the Company cannot conclude that that this discount
          represents a reasonable approximation of the difference between
          registered and unregistered shares under paragraph 16 of EITF 00-19.
          Accordingly, the warrants issued in connection with the February 2005
          transaction are considered derivative liabilities.

          The proper accounting for such liquidated damages provision affects
          the following figures in our quarterly financial statements:

          Increases in additional paid-in capital ($10,466,134), and accumulated
          deficit ($4,025,518). Decreases in deferred financing costs
          ($101,898), derivative liabilities ($6,542,512), other
          income-derivatives ($466,849), net income ($466,850), loss per
          share-basic ($0.01), and loss per share-diluted ($0.03). Additionally,
          on the statement of cash flows, there was a decrease in net income
          ($466,850) and an increase in the fair value of derivative liabilities
          ($466,850).

                                       13

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

You should read the following discussion and analysis of our financial condition
and results of operations together with our interim financial statements and the
related notes appearing at the beginning of this report. The interim financial
statements and this Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 2005 and the
related Management's Discussion and Analysis of Financial Condition and Results
of Operations, both of which are contained in our Annual Report on Form 10-KSB/A
filed with the Securities and Exchange Commission.

The following discussion and other parts of this Form 10-QSB contain
forward-looking statements that involve risks and uncertainties. Forward-looking
statements can be identified by words such as "anticipates," "expects,"
"believes," "plans," and similar terms. Our actual results could differ
materially from any future performance suggested in this report as a result of
factors, including the risk factors discussed in Exhibit 99.1 hereto, which is
incorporated herein by reference, and factors discussed elsewhere in this report
and in our Annual Report on Form 10-KSB/A for the fiscal year ended December 31,
2005. All forward-looking statements are based on information currently
available to the Company and we assume no obligation to update such
forward-looking statements, except as required by law. Service marks, trademarks
and trade names referred to in this Form 10-QSB are the property of their
respective owners.

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

OVERVIEW

The Company is engaged in the development, manufacturing, and sales of a
patented product called zNose(R); a device designed to detect and analyze
chemical odors and vapors, or, in other words, an electronic "nose." We believe
the zNose(R) is superior to other electronic "noses" because of its speed,
specificity and sensitivity. The zNose(R) is capable of measuring and
quantifying the chemistry of any compound, fragrance, vapor or odor with parts
per trillion sensitivity in 10 seconds. We also believe the zNose(R) has the
unique ability to quantify and speciate the subject chemical vapor by creating
visual olfactory images. This enables the measured odor or vapor to be easily
identified by the user.

We believe that our products will have broad applications in the homeland
security, environmental and laboratory instrumentation markets. The Company is
involved in ongoing product research and development efforts in that regard. The
Company has also concentrated its efforts on further product development,
testing and proving and assembling a sales and support organization.

The Company was originally incorporated under the laws of the state of Nevada as
"Bluestone Ventures, Inc." on July 12, 2000. From inception until February 1,
2005, we engaged in the business of acquiring, exploring and developing certain
mining properties in Ontario, Canada. Upon acquisition of Electronic Sensor
Technology, L.P. ("ELP"), we abandoned our mining business and adopted ELP's
business of developing, manufacturing and selling the vapor analysis device.
Prior to the closing of the mergers, as discussed in the footnotes to the
financial statements, on January 26, 2005, we changed our name to "Electronic
Sensor Technology, Inc."

Our executive offices are located at 1077 Business Center Circle, Newbury Park,
California 91320 and our telephone number is (805) 480-1994.

CRITICAL ACCOUNTING POLICIES

The Company records revenue from direct sales of products to end-users when the
products are shipped, collection of the purchase price is probable and the
Company has no significant further obligations to the customer. Costs of
remaining insignificant Company obligations, if any, are accrued as costs of
revenue at the time of revenue recognition. Cash payments received in advance of
product or service revenue are recorded as deferred revenue.

                                       14
<PAGE>

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the recorded amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

The Company reviews long-lived assets, such as property and equipment, to be
held and used or disposed of, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an impairment loss is
recognized as the amount by which the carrying amount of the asset exceeds its
fair value. At March 31, 2006 no assets were impaired.

We account for liquidated damages pursuant to Emerging Issue Task Force ("EITF")
05-04, View C, "The Effect of a Liquidated Damages Clause on a Freestanding
Financial Instrument", subject to EITF Issue No. 00-19, "Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock". Pursuant to EITF 05-04, View C, liquidated damages payable
in cash or stock are accounted for as a separate derivative, which requires a
periodical valuation of its fair value and a corresponding recognition of
liabilities associated with such derivative. We also account for our embedded
conversion features and freestanding warrants pursuant to SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which requires a
periodic valuation of their fair value and a corresponding recognition of
liabilities associated with such derivatives. The recognition of derivative
liabilities related to the issuance of shares of common stock is applied first
to the proceeds of such issuance, at the date of issuance, and the excess of
derivative liabilities over the proceeds is recognized as other expense in the
accompanying consolidated financial statements. The recognition of derivative
liabilities related to the issuance of convertible debt is applied first to the
proceeds of such issuance as a debt discount, at the date of issuance, and the
excess of derivative liabilities over the proceeds is recognized as other
expense in the accompanying consolidated financial statements. Any subsequent
increase or decrease in the fair value of the derivative liabilities is
recognized as other expense or other income, respectively. The valuation of such
derivatives requires significant judgment. We exercise our judgment in
determining the maximum liabilities associated with such derivatives as well as
the expected volatility related to their fair value. We base our estimate of the
maximum liabilities on our interpretation of the agreements related the
derivatives.

PLAN OF OPERATIONS

Over the course of the next 12 months, we intend to execute our business plan
and focus our business development efforts in the following key areas:

     o    By diversifying our product offerings to enhance the usefulness of our
          solutions for customers who will have already adopted one or more
          products;

     o    By enhancing our product lines and developing new products to attract
          new customers; and

     o    By developing partnering relationships with wide-ranging sales and
          distribution channel leaders already serving our vertical market space
          in a way that assists them in developing new revenue streams and
          opportunities through improved technical and sales support and
          customer services.

                                       15
<PAGE>

RESULTS OF OPERATIONS

The following tables sets forth, in $ and as a percentage of revenues, certain
items included in the Company's Income Statements (see Financial Statements and
Notes) for the periods indicated:

                                      THREE MONTHS ENDED MARCH 31
                                   ---------------------------------
                                        2006             2005
                                   -------------   --------------
STATEMENT OF OPERATIONS DATA:         (Restated)       (Restated)
-----------------------------
Revenues .....................            100%             100%
Cost of Sales ................             57%              68%
Gross Profit .................             43%              32%
Operating Expenses ...........            186%             323%
Loss From Operations .........           (143%)           (291%)
Other Income (Expense) .......             92%            (954%)
Net Income (Loss) ............            (51%)         (1,245%)

THREE MONTHS ENDED MARCH 31, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31, 2005

Revenues are derived from product sales and product support services. For the
three months ended March 31, 2006 revenues were $532,817, compared to $219,511
in 2005. The 143% increase in revenues results from an increase in the number of
zNose(R) units shipped from 6 units in 2005 to 12 units in 2006 for the three
month period. Also contributing to the increase in revenues was a corresponding
increase in sales from product support services.

Cost of Sales consist of product costs and expenses associated with product
support services. For the first quarter period cost of sales was $301,592 for
2006 as compared to $149,962 in 2005. The improvement in cost of sales from 68%
of 2005 revenues to 57% of 2006 revenues is attributed to production
efficiencies and production economies of scales resulting in overhead being
spread over a greater volume of production.

Gross profit was $231,225 for the three months ending March 31, 2006, compared
to $69,549 for the same period in 2005. The increase of 2006 gross profit from
32% in 2005 to 43% of revenues is attributed to increased sales volume offset by
higher product support costs.

Research and Development costs for first quarter 2006 were $211,799 versus
$140,172 for 2005. The increase of $71,627 over 2005 R&D expenditures were
mainly for increased personnel related expenses with additional research and
development staff dedicated in the enhancements of existing products and new
product development.

Selling, General and Administrative expenses for the three months ending March
31, 2006 were $780,092, compared to $567,950 for 2005. The $212,142 increase was
due to the hiring of new employees necessitated by the growth of the business,
expanded marketing activities, offset by a reduction in legal and related
expenses incurred in connection with the company's reverse merger in 2005.

Interest expense for the first three months of 2006 was $730,391, as compared to
$20,566 in 2005. The increase in interest expense is primarily due to the
amortization of debt discount and stated interest associated with our
convertible debentures, which were issued in December 2005.

Other income-derivatives primarily consist of the decrease in the fair value of
derivative liabilities between the measurement dates. The increase in other
income-derivatives during the-three-month period ended March 31, 2006 when
compared to prior period is primarily attributable to a decrease in the quoted
price of our common stock. Please refer to Note 6 of our accompanying financial
statements for further explanation of the origin and nature of such income. We
are unable to determine whether we will record further decreases in the fair
value of derivative liabilities in the foreseeable future, which would be
recorded as other income-derivatives. Such decreases would be generally
triggered by a decrease in the fair value of our stock price, upon satisfaction
of liquidated damages pursuant to registration rights, or, possibly, upon
satisfaction of our convertible debentures.

                                       16
<PAGE>

Other expense-derivatives primarily consist of the recognition of derivative
liabilities we issued during the three-month period ended March 31, 2005. No
derivatives were issued during the three-month period ended March 31, 2006.
Please refer to Note 6 of our accompanying financial statements for further
explanation of the origin and nature of such expenses. We believe that we will
incur additional expenses associated with the fair value at issuance of
financial instruments which will be recorded pursuant to derivative accounting.
However, we are unable to determine the expected amount we would recognize
pursuant to such issuances since their fair value is computed based on a number
of assumptions, including, among others, the fair value of our stock price,
expected term and exercise price of the financial instrument and expected
volatility of our stock price, which will only be known at the date of issuance.

LIQUIDITY AND CAPITAL RESOURCES

In the first three months of 2006, net cash used by the Company for operating
activities was $609,140. In the first three months of 2005, cash used by Company
operations was $708,861. Cash used in the first three months of 2006 was
comprised of the net loss for the three-month period of $271,077, less net
non-cash items of $555,304, plus the net change in operating assets and
liabilities of $217,241. Cash used in operations in the three months of 2005 was
comprised of the net loss of $2,732,214, plus net non-cash expenses of
$2,087,937, less the net change in operating assets and liabilities of $64,584.

Investing activities provided cash of $605,754 in the first three months of 2006
and used $939,631 during the same period in 2005. Cash of $62,924 and $55,044
was used in 2006 and 2005, respectively, to purchase of equipment. In 2005,
$900,651 was used to purchase a certificate of deposit as collateral for the
company's line of credit. Whereas in 2006, $668,678 was provided due to a
reduction in the amount of collateral required for the company's line of credit.

There were no financing activities for the first three months of 2006. In first
quarter 2005, financing activities provided cash of $3,501,708 from the issuance
of common stock ($3,811,708), offset by a reduction in the company's line of
credit ($200,000) and repayment of loans from the company's partners ($110,000).

On March 31, 2006 the Company's cash (including cash equivalents) was
$4,216,536, compared to $1,879,647 on March 31, 2005. The Company had a working
capital on March 31, 2006 of $551,282. The working deficit includes $4,550,881
for derivative liabilities - excluding this amount from current liabilities; the
Company's working capital would be $5,102,163. The Company's working deficit at
March 31, 2005 was $4,824,920 - excluding derivative liabilities, working
capital would be $1,072,880.

The Company has a credit facility in place with East West Bank for $500,000. The
entire credit line was available at March 31, 2006.

Although the Company possesses a bank operating line of credit, there can be no
assurance that these proceeds will be adequate for our future capital needs.
There can be no assurance that any required or desired financing will be
available through any other bank borrowings, debt, or equity offerings, or
otherwise, on acceptable terms. If future financing requirements are satisfied
through the issuance of equity securities, investors may experience significant
dilution in the net book value per share of common stock and there is no
guarantee that a market will exist for the sale of the Company's shares.

The Company's primary capital needs are to fund its growth strategy, which
includes creating a sales and marketing staff for the marketing, advertising and
selling of the zNose(R) family of chemical detection products, increasing
distribution channels both in U.S. and foreign countries, introducing new
products, improving existing product lines and development of a strong corporate
infrastructure.

SEASONALITY AND QUARTERLY RESULTS

We do not foresee any seasonality to our revenues or our results of operations.

                                       17
<PAGE>

INFLATION

Although we currently use a limited number of sources for most of the supplies
and services that we use in the manufacturing of our vapor detection and
analysis technology, our raw materials and finished products are sourced from
cost-competitive industries. While prices for our raw materials may vary
significantly based on market trends, we do not foresee any material
inflationary trends for our product sources.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

                                       18
<PAGE>

PART II
OTHER INFORMATION

ITEM 6.  EXHIBITS

Exhibit
  No.        Description
-------      -------------------------------------------------------------------

31.1         Certification of Chief Executive Officer Pursuant to Rule
             13a-14(a)/15d-14(a) of the Exchange Act.

31.2         Certification of Principal Financial and Accounting Officer
             Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.

32.1         Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)
             or 15d-14(b) of the Exchange Act and 18 U.S.C. 1350.

32.2         Certification of Principal Financial and Accounting Officer
             Pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18
             U.S.C. 1350.

99.1         Risk Factors (previously filed).

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

                                       19
<PAGE>

                                   SIGNATURES

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

                                  ELECTRONIC SENSOR TECHNOLOGY, INC.


Dated September 26, 2006          By:    /s/ Teong C. Lim
                                         ---------------------------------------
                                  Name:  Teong C. Lim
                                  Title: President and Chief Executive Officer
                                         (Principal Executive Officer)


Dated September 26, 2006          By:    /s/ Francis Chang
                                         ---------------------------------------
                                  Name:  Francis Chang
                                  Title: Secretary, Treasurer and Vice President
                                         of Finance and Administration
                                         (Principal Accounting Officer)