UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
                                    ---------


(Mark One)

[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934
     For the quarterly period ended June 30, 2004


[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
     For the transition period from                to
                                   ---------------   ---------------

33-23617
--------
(Commission file number)

Material Technologies, Inc.
---------------------------
(Exact name of small business issuer as specified in its charter)

Delaware
--------
(State or other jurisdiction
of incorporation or organization)

95-4622822
----------
(IRS Employer
Identification No.)

11661 San Vicente Boulevard
Suite 707
Los Angeles, California 90049
-----------------------------
(Address of principal executive offices)

(310) 208-5589
--------------
(Issuer's telephone number)


-----------------------------
(Former name, former address and former fiscal year, if changed since last
report)

[X]  Check whether the issuer (1) filed all reports required to be filed by
     Section 13 or 15(d) of the 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.

                      APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of each of the issuer's classes of common
equity; as of June 30, 2004
Class A Common Stock - 72, 789,818 shares issued, 66,488,975 shares outstanding
Class B Common Stock - 600,000 shares issued and outstanding
Class A Preferred - 337 shares issued and outstanding
Class B Preferred - 167 shares issued and outstanding
Class C Preferred - 1,350 shares issued and outstanding
Class D Preferred -4,490,000 shares issued and outstanding





                                        1
<PAGE>










                                      INDEX
                                      -----





                                                                         Page
                                                                       --------

Part 1. Financial Information

     Item 1. Financial Statements

          Consolidated Balance Sheets                                   3 - 4

          Consolidated Statements of Operations -
               Second Quarter Ended June 30, 2003 and 2004 and
               from the Company's inception (October 21, 1983)
               through June 30, 2004                                      5

          Consolidated Statements of Cash Flows
               Second Quarter Ended June 30, 2003 and 2004 and
               from the Company's inception (October 21, 1983)
               through June 30, 2004                                    6 - 7

          Notes to Consolidated Financial Statements                      8


     Item 2. Management's Discussion and Analysis                        14


     Item 3. Quantitative and Qualitative Disclosures about
             Market Risk                                                 16


Part 2. Other Information                                                16










                                        2
<PAGE>






Part 1.   Financial Information
-------------------------------


Item 1.   Financial Statements
------------------------------



MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
================================================================================



                                              December 31,          June 30,
                                                  2003                2004
                                            ----------------    ----------------
                                                                  (Unaudited)
ASSETS

  CURRENT ASSETS
    Cash                                    $        47,664     $       119,449
    Receivable due in research contracts             28,004               3,027
    Receivable from officer                          83,940              88,192
    Employee receivable                               1,350               2,689
    Receivable from tax authorities                     161                   -
    Prepaid expenses                                  4,179               3,000
                                            ----------------    ----------------

      TOTAL CURRENT ASSETS                          165,298             216,357
                                            ----------------    ----------------

  FIXED ASSETS
    Property and equipment, net
      of accumulated depreciation                    20,626              18,147
                                            ----------------    ----------------

  OTHER ASSETS
     Intangible assets, net of
      accumulated amortization                       10,004               8,946
    Refundable deposit                                2,348               2,348
                                            ----------------    ----------------

      TOTAL OTHER ASSETS                             12,352              11,294
                                            ----------------    ----------------

      TOTAL ASSETS                          $       198,276     $       245,798
                                            ================    ================




















                             See accompanying notes
                                        3
<PAGE>



<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
=====================================================================================================================


                                                                                   December 31,          June 30,
                                                                                       2003                2004
                                                                                 ----------------    ----------------
                                                                                                       (Unaudited)

LIABILITIES AND STOCKHOLDERS'  (DEFICIT)

<S>                                                                              <C>                 <C>
  CURRENT LIABILITIES
    Legal fees payable                                                           $       219,154     $       138,403
    Fees payable to R&D subcontractors                                                    25,000                   -
    Accounting fees payable                                                               37,984              20,938
    Other accounts payable                                                                78,671              13,528
    Accrued expenses                                                                      17,920              15,145
    Accrued officer wages                                                                142,446             178,446
    Notes payable - current portion                                                       25,688              25,688
    Payable on research and
      development sponsorship                                                            638,003             696,716
    Loans payable - others                                                                60,438              61,250
                                                                                 ----------------    ----------------

      TOTAL CURRENT LIABILITIES                                                        1,245,304           1,150,114

  SECURED CONVERTIBLE DEBENTURE                                                          345,333           1,065,457
                                                                                 ----------------    ----------------

      TOTAL LIABILITIES                                                                1,590,637           2,215,571
                                                                                 ----------------    ----------------

  MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY                                            38,422              38,422
                                                                                 ----------------    ----------------


  STOCKHOLDERS'  (DEFICIT)
    Class A preferred stock, $.001 par value, authorized 350,000 Shares,
      issued and outstanding 337 shares at December 31, 2003 and
      June 30, 2004                                                                            -                   -
    Class B preferred stock, $.001 par value, authorized 200,000 Shares,
      issued and outstanding 167 shares at December 31, 2003 and
      June 30, 2004                                                                            -                   -
    Class C preferred stock, $.001 par value, authorized 25,000,000
      shares, issued and outstanding 4,050 at December 31, 2003
      and 1,350 shares at June 30, 2004                                                        4                   1
    Class D preferred stock, $.001 par value, authorized 20,000,000 Shares,
      issued and outstanding 5,440,000 shares at December 31, 2003 and
      4,490,000 shares at June 30, 2004                                                    5,440               4,490
    Class A Common Stock, $.001 par value, authorized 549,400,000
      shares, issued and outstanding 66,488,975 at December 31, 2003 and
      74,617,991 shares issued and 68,317,991 shares outstanding at June 30,
      2004, in reserve 843 shares at December 31, 2003 and June 30, 2004                  66,488              68,317
    Class B Common Stock, $.001 par value, authorized 600,000 Shares,
      issued and outstanding 600,000 shares at December 31, 2003,
      and June 30, 2004                                                                      600                 600
    Additional paid in capital                                                        13,086,976          13,889,191
    Less notes receivable - common stock                                                 (51,096)            (53,090)
    Deficit accumulated during the development stage                                 (14,539,195)        (15,917,704)
                                                                                 ----------------    ----------------

    TOTAL STOCKHOLDERS' (DEFICIT)                                                     (1,430,783)         (2,008,195)
                                                                                 ----------------    ----------------

      TOTAL LIABILITIES AND STOCKHOLDERS'
        (DEFICIT)                                                                $       198,276     $       245,798
                                                                                 ================    ================
</TABLE>



                             See accompanying notes
                                        4
<PAGE>



<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
=======================================================================================================================


                                                                                                         From Inception
                                           For the Three Months Ended       For the Six Months Ended   (October 21, 1983)
                                                    June 30,                        June 30,                Through
                                              2003            2004            2003            2004       June 30, 2004
                                         --------------  --------------  --------------  --------------  --------------
                                          (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)

<S>                                      <C>             <C>             <C>             <C>             <C>
REVENUES
  Sale of fatigue fuses                  $           -   $           -   $           -   $           -   $      64,505
  Sale of royalty interests                          -               -               -               -         198,750
  Research and development revenue                   -           3,066               -          70,335       5,136,696
  Test services                                      -               -               -               -          10,870
    TOTAL REVENUES                                   -           3,066               -          70,335       5,410,821

COSTS AND EXPENSES
  Research and development                      70,478         241,656         101,714         403,242       5,663,322
  General and administrative                   198,041         145,857         536,479         930,275      14,916,154
                                         --------------  --------------  --------------  --------------  --------------
    TOTAL COSTS AND EXPENSES                   268,519         387,513         638,193       1,333,517      20,579,476
                                         --------------  --------------  --------------  --------------  --------------
    INCOME (LOSS) FROM OPERATIONS             (268,519)       (384,447)       (638,193)     (1,263,182)    (15,168,655)
                                         --------------  --------------  --------------  --------------  --------------

OTHER INCOME (EXPENSE)
  Interest income                               13,198           3,156          26,384           6,246         348,487
  Interest expense                             (46,261)        (75,119)        (92,522)       (120,773)       (761,996)
  Forgiveness of indebtedness                        -               -                               -        (289,940)
  Loss on abandonment of joint venture               -               -               -               -         (33,000)
                                         --------------  --------------  --------------  --------------  --------------
    TOTAL OTHER INCOME                         (33,063)        (71,963)        (66,138)       (114,527)       (736,449)
                                         --------------  --------------  --------------  --------------  --------------

NET INCOME (LOSS) BEFORE EXTRAORDINARY
  ITEMS AND PROVISION FOR INCOME TAXES        (301,582)       (456,410)       (704,331)     (1,377,709)    (15,905,104)
PROVISION FOR INCOME TAXES                           -               -            (800)           (800)        (12,600)
                                         --------------  --------------  --------------  --------------  --------------

    NET INCOME (LOSS)                    $    (301,582)  $    (456,410)  $    (705,131)  $  (1,378,509)  $ (15,917,704)
                                         ==============  ==============  ==============  ==============  ==============

PER SHARE DATA
  Basic income (loss) before
    extraordinary item
    BASIC NET (LOSS) PER SHARE           $       (2.14)  $       (0.01)  $       (5.49)  $       (0.02)
                                         ==============  ==============  ==============  ==============
   WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING                        141,110      67,006,008         128,439      67,006,008
                                         ==============  ==============  ==============  ==============
</TABLE>

























                             See accompanying notes
                                        5
<PAGE>



<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
==================================================================================================================================


                                                                                                                    From Inception
                                                      For the Three Months Ended       For the Six Months Ended   (October 21, 1983)
                                                               June 30,                        June 30,                Through
                                                         2003            2004            2003            2004       June 30, 2004
                                                    --------------  --------------  --------------  --------------  --------------
                                                     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)

<S>                                                 <C>             <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                 $    (301,582)  $    (456,410)  $    (705,131)  $  (1,378,509)  $ (15,917,704)
  Adjustments to reconcile net income
    (loss) to net cash provided
    (used) in operating activities
  Depreciation and amortization                             2,285           2,107           4,570           4,214         198,965
  Accrued interest income                                 (13,198)         (3,156)        (25,205)         (6,246)       (293,415)
  Gain on sale of securities                                    -               -               -               -        (196,596)
  Charge off of investment in joint venture                     -               -               -               -          33,000
  Officers' and directors compensation on stock
    subscription modification                                   -               -               -               -       1,500,000
  Issuance of common stock to officer for past
    services                                                    -               -               -               -       1,727,617
  Charge off of deferred offering costs                         -               -               -               -          36,480
  Charge off of long-lived assets due to
    impairment                                                  -               -               -               -          92,919
  Modification of royalty agreement                             -               -               -               -           7,332
  Gain on foreclosure                                           -               -               -               -         (18,697)
  (Increase) decrease in accounts receivable                    -          31,280               -          24,977         (53,355)
  (Increase) decrease in employee advances                      -          (1,339)          1,433          (1,339)         (2,850)
  (Increase) decrease in prepaid expense                        -             152               -           1,340          (2,998)
  Loss on sale of equipment                                     -               -               -               -          12,780
  Issuance of common  stock for services                  102,211         170,627         234,461         723,827       4,696,819
  Issuance of stock for agreement modification                  -               -               -               -             152
  Forgiveness of Indebtedness                                   -               -               -               -         215,000
  Increase (decrease) in accounts                                                                                               -
    payable and accrued expenses                           25,867         (25,748)         35,966         (90,248)        979,589
  Increase in legal fees secured by note payable                -               -                                       1,481,895
  Interest accrued on note payables                        45,574          49,683          91,147          94,649         682,352
  Increase in research and development                                                                                          -
     sponsorship payable                                        -               -               -               -         218,000
  (Increase) in note for litigation settlement                  -               -               -               -         (25,753)
  (Increase) in Deposits                                        -               -               -               -          (2,189)
                                                    --------------  --------------  --------------  --------------  --------------
    TOTAL ADJUSTMENTS                                     162,739         223,606         342,372         751,174      11,287,047
                                                    --------------  --------------  --------------  --------------  --------------
  NET CASH PROVIDED (USED) BY
   OPERATING ACTIVITIES                                  (138,843)       (232,804)       (362,759)       (627,335)     (4,630,657)
                                                    --------------  --------------  --------------  --------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds From sale of equipment                               -               -               -               -          10,250
  Purchase of property and equipment                            -            (677)              -            (677)       (267,149)
  Proceeds from sale of securities                              -               -               -               -         283,596
  Purchase of securities                                        -               -               -               -         (90,000)
  Proceeds from foreclosure                                     -               -               -               -          44,450
  Investment in joint ventures                                  -               -               -               -        (102,069)
  Payment for license agreement                                 -               -               -               -          (6,250)
                                                    --------------  --------------  --------------  --------------  --------------

  NET CASH PROVIDED (USED) BY
   INVESTING ACTIVITIES                                         -            (677)              -            (677)       (127,172)













                             See accompanying notes
                                        6
<PAGE>



<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
==================================================================================================================================


                                                                                                                    From Inception
                                                      For the Three Months Ended       For the Six Months Ended   (October 21, 1983)
                                                               June 30,                        June 30,                Through
                                                         2003            2004            2003            2004       June 30, 2004
                                                    --------------  --------------  --------------  --------------  --------------
                                                     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)

<S>                                                 <C>             <C>             <C>             <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of common stock                          $      29,988   $      18,556   $     140,342   $      18,556   $   3,129,139
  Costs incurred in offerings                             (10,312)         (2,785)        (33,358)         (2,785)       (457,273)
  Purchase of Company's common stock for
    cancellation                                           (7,788)           (974)        (23,508)           (974)        (25,406)
  Sale of common stock warrants                                 -               -               -               -          18,250
  Sale of preferred stock                                  33,900               -          64,500               -         323,005
  Sale of redeemable preferred stock                            -               -               -               -         150,000
  Capital contributions                                         -               -               -               -         301,068
  Payment on proposed reorganization                            -               -               -               -          (5,000)
  Loans to officer                                              -           3,000               -           3,000         781,805
  Repayments from officer                                       -          (3,000)              -          (3,000)       (545,379)
  Increase in loan payable-others                          10,000         310,000          10,000         685,000       1,207,069
                                                    --------------  --------------  --------------  --------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES:                      55,788         324,797         157,976         699,797       4,877,278
                                                    --------------  --------------  --------------  --------------  --------------

NET INCREASE (DECREASE) IN CASH
      AND CASH EQUIVALENTS                                (83,055)         91,316        (204,783)         71,785         119,449
BEGINNING BALANCE CASH AND
      CASH EQUIVALENTS                                    130,054          28,133         251,782          47,664               -
                                                    --------------  --------------  --------------  --------------  --------------
ENDING BALANCE CASH AND CASH
    EQUIVALENTS                                     $      46,999   $     119,449   $      46,999         119,449   $     119,449
                                                    ==============  ==============  ==============  ==============  ==============
</TABLE>
































                             See accompanying notes
                                        7
<PAGE>




                           MATERIAL TECHNOLOGIES, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements


Note 1.   In the opinion of the Company's management, the accompanying unaudited
          consolidated financial statements contain all adjustments  (consisting
          of  normal  recurring   accruals)  necessary  to  present  fairly  the
          financial position of the Company as of June 30, 2004, and the results
          of its  operations  and  cash  flows  for the  six-month  periods  and
          three-month  periods  ended  June 30,  2004 and  2003.  The  operating
          results of the Company on a semi-annual and quarterly basis may not be
          indicative of operating results for the full year.

          On September  23, 2003,  the Company's  Board of Directors  declared a
          1,000 for 1 reverse  stock  split of its Class A Common  Stock and all
          classes of its Preferred  Stock.  The financial  statements  have been
          retroactively  restated as if the reverse stock split  occurred at the
          beginning of each period presented.


Note 2.   Summary of Significant Accounting Policies

     a.   Principles of consolidation

          The  accompanying   financial  statements  include  the  accounts  and
          transactions  of  Material  Technologies,  Inc.  and its wholly  owned
          subsidiaries,  Matech  International,  Inc and Matech Aerospace,  Inc.
          Intercompany   transactions  and  balances  have  been  eliminated  in
          consolidation.

     b.   Accounts Receivable

          Accounts  receivable  are  reported  at  the  customers'   outstanding
          balances  less any allowance  for doubtful  accounts.  Interest is not
          accrued on overdue accounts receivable.

     c.   Allowance for Doubtful Accounts

          The allowance for doubtful accounts on accounts  receivable is charged
          to  income  in  amounts  sufficient  to  maintain  the  allowance  for
          uncollectible  accounts at a level management  believes is adequate to
          cover any probable losses.  Management  determines the adequacy of the
          allowance  based on historical  write-off  percentages and information
          collected from individual customers

     d.   Property and Equipment

          Property  and  equipment  are  stated  at  cost.  Major  renewals  and
          improvements  are charged to the asset  accounts  while  replacements,
          maintenance  and repairs,  which do not improve or extend the lives of
          the  respective  assets,  are  expensed.  At  the  time  property  and
          equipment are retired or otherwise  disposed of, the asset and related
          accumulated  depreciation  accounts  are  relieved  of the  applicable



                                        8
<PAGE>






          amounts.  Gains or losses from  retirements  or sales are  credited or
          charged to income.

          Material Technologies,  Inc. depreciates its property and equipment as
          follows:

             Financial statement reporting - straight line method as follows:

               Machinery                                    5 years
               Computer equipment                         3-5 years
               Office equipment                             5 years

          Long-Lived Assets

          As of January 1, 2002,  the Company  adopted  Statement  of  Financial
          Accounting  Standards  No.  144,  "Accounting  for the  Impairment  or
          Disposal of Long-Lived  Assets," which requires that long-lived assets
          be reviewed for impairment whenever events or changes in circumstances
          indicate that the  historical  cost-carrying  value of an asset may no
          longer be  appropriate.  The Company  assesses  recoverability  of the
          carrying  value of an asset by  estimating  the  future net cash flows
          expected to result from the asset, including eventual disposition.  If
          the  future  net cash  flows are less than the  carrying  value of the
          asset, an impairment loss is recorded equal to the difference  between
          the asset's carrying value and fair value or disposable value.

     e.   Net Loss Per Share

          The  Company   adopted  the   provisions  of  Statement  of  Financial
          Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share" ("EPS")
          that  established  standards  for the  computation,  presentation  and
          disclosure  of  earnings  per share,  replacing  the  presentation  of
          Primary EPS with a  presentation  of Basic and diluted EPS.  Basic and
          diluted EPS is calculated by dividing net loss by the weighted average
          shares number of shares outstanding during the year.

     f.   Accounting Estimates

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States requires management
          to make estimates and assumptions that affect certain reported amounts
          and disclosures.  Accordingly,  actual results could differ from those
          estimates.

     g.   Fair Value of Financial Instruments

          The Company  estimates the fair value of its financial  instruments at
          their  current  carrying  amounts  since the  assets  and  liabilities
          approximate their respective fair values.

     h.   Stock Based Compensation

          For 1998 and subsequent  years, the Company has adopted FASB Statement
          123  which  establishes  a fair  value  method of  accounting  for its
          stock-based  compensation  plans.  Prior to 1998, the Company used APB
          Opinion 25.



                                        9
<PAGE>






     i.   Revenue Recognition

          Significantly  all  of the  Company's  revenue  is  derived  from  the
          Company's  contracts  relating  to  the  further  development  of  the
          Electrochemical  Fatigue  Sensor  (EFS).  Revenue on the  contracts is
          recognized at the time services are rendered.

          All other  revenue  is  reported  in the  period  that the  income was
          earned.

     j.   Cash and Cash Equivalents

          For  purposes of the  statement of cash flows,  the Company  considers
          cash and  cash  equivalents  to  include  all  stable,  highly  liquid
          investments with maturities of three months or less.

     k.   Income Taxes

          The Company  accounts  for its income  taxes under the  provisions  of
          Statement of Financial  Accounting  Standards  109 ("SFAS  109").  The
          method of  accounting  for income taxes under SFAS 109 is an asset and
          liability  method.   The  asset  and  liability  method  requires  the
          recognition  of deferred tax  liabilities  and assets for the expected
          future tax consequences of temporary differences between tax bases and
          financial reporting bases of other assets and liabilities.


Note 3.   Receivable from officer

          As of June 30, 2004, the Company is owed by its President,  Mr. Robert
          M.  Bernstein,  $88,192 for  various  advances  made to him  including
          accrued interest.  Advances are assessed interest at a rate of 10% per
          annum, are unsecured,  and due on demand.  Accrued interest recognized
          as  income  for the  three-months  ended  June 30,  2003 and 2004 were
          $2,524 and  $2,159..  Accrued  interest  recognized  as income for the
          six-months ended June 30, 2003 and 2004 were $3,816 and $4,252.


Note 4.   Intangibles

          Intangible assets consist of the following:

                                    Period of                June 30,
                                    Amortization        2003          2004
                                    ------------      -------       -------

          Patent Costs               17 Years        $ 28,494      $ 28,494
          License Agreement          17 Years           6,250         6,250
              (See Note 5)
          Website                    5  Years           5,200         5,200
                                                     ---------     ---------
                                                       39,944        39,944
          Less Accumulated Amortization               (28,882)      (30,998)
                                                     ---------     ---------

                                                     $ 11,062      $  8,946
                                                     =========     =========



                                       10
<PAGE>





          Amortization charged to operations for the three-months ended June 30,
          2003 and 2004 were $529, and $529, respectively.  Amortization charged
          to  operations  for the  six-months  ended June 30, 2003 and 2004 were
          $1,058, and $1,058, respectively.

          Estimated amortization expense for the next five years is as follows:

               2005         $2,116
               2006         $1,596
               2007         $1,076
               2008         $1,076
               2009         $1,076


Note 5.   Convertible Debentures

          On  September  23,  2003,  the Company  entered  into a Class A Senior
          Secured   Convertible   Debenture  (the  "Debenture")  with  Palisades
          Capital,  LLC or its  registered  assigns  ("Palisades"),  pursuant to
          which Palisades has agreed to loan to the Company up to $1,500,000, of
          which a total of $1,025,000 has been funded through June 30, 2004.

          Under the Debenture,  Palisades has the option,  after March 30, 2004,
          to  convert  the  principal  amount  of all  moneys  loaned  under the
          Debenture,  together with accrued  interest,  into Common Stock of the
          Company at the lesser of (i) 50% of the average ten closing prices for
          the Company's  Common Stock for the ten (10) trading days  immediately
          preceding  the  Conversion  Date or (ii) $0.10 (the  lesser of the two
          being referred to as the "Conversion  Price").  In the event Palisades
          loans the full  $1,500,000 face amount of the Debenture to the Company
          and subsequently elects to exercise its right to convert the Debenture
          into the Company's Common Stock at a time when the Conversion Price is
          less than four cents per share  Palisades would receive at least fifty
          million  (50,000,000)  shares of Common Stock resulting in a change in
          control of the Common Stock of the Company.  However,  Mr.  Bernstein,
          the Company's President and Chief Financial Officer would still retain
          voting  control  as a result of his  holding  of one  hundred  percent
          (100%) of the Class B Common Stock.

          In connection with the financing, the Company's President entered into
          a voting  agreement and irrevocable  proxy,  which provides that until
          September  23,  2006,  if an  Event  of  Default,  as  defined  in the
          Debenture in favor of Palisades and continues for a period of not less
          than 30 days,  all Class B Common  Stock which Mr.  Bernstein  owns of
          record,  or becomes the owner of record in the future will be voted in
          accordance with the directions of Mr. Monty Freedman,  an affiliate of
          Palisades,  or his  designated  successor.  This loss of voting rights
          would create a change in the voting control of the Company.

          The debenture  bears  interest at an annual rate of 10% and matures on
          December  31, 2006 when the  principal  and accrued  interest  becomes



                                       11
<PAGE>






          fully due.  During the  three-month  period ended June 30,  2004,  the
          Company  was  advanced  $310,000  from  Palisades.  The balance of the
          debenture at June 30, 2004 was $1,065,457  including accrued interest.
          Interest  charged to operations  for the  three-months  ended June 30,
          2003  and  2004  pertaining  to this  obligation  were $0 and  $19,274
          respectively.  Interest charged to operations for the six-months ended
          June  30,  2003 and 2004  pertaining  to this  obligation  were $0 and
          $35,124, respectively.


Note 6.   Stock Activity

          On  April  23,  2004,   the  Company   amended  its   Certificate   of
          Incorporation  increasing  the number of  authorized  common shares to
          1,750,000,000 and number of authorized preferred shares to 50,000,000.

          During the quarter  ended June 30, 2004,  the Company  issued  729,276
          shares of its common  stock.  Of the  common  shares  issued,  500,000
          shares were issued  through the  conversion  of 500,000  shares of the
          Company's  Class D  Preferred,  2,700  shares were issued  through the
          conversion of 2,700 shares of the Company's Class C Preferred,  50,000
          shares were issued to a former  attorney of the Company in  settlement
          of fees due him totaling  $39,467,  18,576 shares were issued for cash
          totaling $18,556,  133,000 shares were issued for consulting  services
          valued at  $145,875,  and 25,000  shares were issued to note holder of
          the Company for no consideration.

          Of the 133,000 shares issued for services,  130,000 shares were issued
          subject to a  three-year  restriction  to sale or transfer  the shares
          from date of issuance.  As theses share cannot be sold or  transferred
          for three  years,  the Company  valued the shares at 30% of the market
          price  of  the  shares  on  date  of  issuance.  The  same  three-year
          restriction  exists for the 25,000 shares issued to a note holder that
          is owed $25,688 by the Company and is past due. The 25,000 shares were
          valued at $24,750  (30% of market  value at date of issuance  and this
          amount was charged to operations as an expense.

          Also during the quarter,  the Company entered into  negotiations  with
          Gisbex Holding for possible funding,  the terms of which are currently
          under discussion.  As part of the negotiations,  the Company delivered
          two stock  certificates,  one certificate is for 5,300,000  shares and
          the other one is for 1,000,000 shares. Each certificate bears a legend
          that the shares were issued without  consideration  and are restricted
          from  being  transferred,  sold or have any voting  rights.  If Gisbex
          consummates  the  transaction  and funds are received,  then these two
          certificates  will be replaced  with new ones  bearing no  restrictive
          legends.  If  a  transaction  with  Gisbex  is  not  consummated,  the
          6,300,000 shares will returned to the Company for cancellation. Due to
          the lack of consideration and the restrictions placed on these shares,
          the Company does not consider the 6,300,000  shares issued to Gibex to
          be outstanding.

          Also during the quarter ended June 30, 2004, the Company purchased 260
          shares of common stock from a shareholder for $974.  These shares were
          returned to treasury and canceled.




                                       12
<PAGE>






          On February 15, 2004,  the Company  authorized a  modification  to the
          exercise  price of certain  outstanding  warrants which were issued in
          2003 as part of the Company's offering of Class C-Series A Convertible
          Preferred  Stock  and  Class  A and  Class  B  Common  Stock  Purchase
          Warrants.  The  modification  reduced the  conversion  price under the
          Warrants to purchase Class A Common Stock from $50 per share to $1 per
          share  and  reduced  purchase  price  under the  Class B  Warrants  to
          purchase Class A Common Stock from $100 per share to $2 per share.

          During the quarter ended June 30, 2003, the Company  received  $63,888
          net of offering  costs in exchange for the issuance of 3,500 shares of
          its Class A common stock and 3,400  shares of its Class C  convertible
          preferred  stock.  Each share of Class C preferred is convertible into
          one share of Class A common.  In  addition,  during the  quarter,  the
          Company  issued  2,650  shares of its  Class A common  stock for legal
          services  valued  at  $26,500,  7,571  shares  of Class A  common  for
          consulting  services  valued at $75,711,  and 1,180  shares of Class A
          common in connection with its Regulation S offering valued at $11,803.
          The shares  issued for  non-cash  consideration  were  valued at their
          respective  quoted  market price at date of issuance.  Also during the
          quarter,  the Company  issued 4,242 shares of its Class A common stock
          to the  University  of  Pennsylvania  pursuant  to  the  anti-dilution
          provision of the Company's agreement with the University.

          Also during the quarter ended June 30, 2003, the Company purchased 185
          shares of its Class A common  stock from various  shareholders  on the
          open market for $7,788 which were subsequently cancelled.  Also during
          the  quarter,  the 100,000  shares held in reserve  pertaining  to the
          Straight  Documentary  Credit  with  Allied  Boston were return to the
          Company's treasury and cancelled.


























                                       13
<PAGE>






Item 2.   Management's  discussion  and  analysis  of  financial  conditions and
--------------------------------------------------------------------------------
results of operations
---------------------

          Results of Operations for the Six Months Ended June 30, 2004 and 2003
          ---------------------------------------------------------------------

          The Company  generated  $70,335 of revenue  under its two research and
          development  contracts  during the  six-months  ended  June 30,  2004.
          During  the  six-months  ended  June 30,  2003,  the  Company  did not
          generate any revenue with the exception of interest income.

          During the six month period ended June 30, 2004, the Company  incurred
          $403,242 in  development  costs  compared to $101,714  during the same
          period last year. Of the $403,242  incurred in 2004,  $61,127 pertains
          to  salaries,  $34,206 was  incurred in the  purchase of supplies  and
          materials,  and $307,909  was  incurred for outside  services of which
          $125,100  was paid  through  the  issuance  of  120,000  shares of the
          Company's  restricted  common stock. Of the $101,714 incurred in 2003,
          $50,714  pertains  to salaries  and  $40,000  relates to fees paid for
          services  through the issuance of 4,250 shares of the Company's common
          stock.

          General  and   administrative   costs  were   $930,275  and  $536,479,
          respectively, for the six-month periods ended June 30, 2004 and 2003.

          Major costs incurred during 2004, included officer's salary of $96,000
          of which $36,000 was accrued, office salaries of $21,445, professional
          fees of  $93,001,  consulting  fees of  $625,630,  travel of  $16,821,
          telephone  expense of $8,336,  rent of $11,735,  and office expense of
          $18,884.

          Of the  $625,630  in  professional  fees,  $51,655 was paid in cash or
          accrued and the  remaining  $573,975  was paid through the issuance of
          638,000 shares of the Company's common stock.

          Major costs incurred during 2003, included officer's salary of $60,000
          of which $29,000 was accrued, office salaries of $24,573, professional
          fees of  $227,117,  consulting  fees of  $125,282,  travel of $12,386,
          telephone  expense of $8,441,  rent of $14,088,  and office expense of
          $12,460.

          Of the  $227,117  in  professional  fees,  $95,617 was paid in cash or
          accrued and the  remaining  $131,500  was paid through the issuance of
          8,650 shares of the Company's  common stock. Of the $125,282  incurred
          in  consulting  fees,  $67,321 was paid in cash or accrued and $57,961
          was paid through the issuance of 3,821 shares of the Company's  common
          stock.

          Interest earned during the six-months  ended June 30, 2004 and 2003 of
          $6,246  and  $26,384,  respectively,  consists  primarily  of  accrued
          interest earned on promissory  notes due from the Company's  President
          and a Director  on stock  purchases  and  advances.  The  decrease  in
          interest  income for 2004 as compared to 2003  pertain to the December
          2003  cancellation of  interest-bearing  promissory notes due from the



                                       14
<PAGE>






          Company's  President and Secretary totaling $465,000 for the return to
          the  Company of the shares  purchased  for the  respective  promissory
          notes.

          Interest  expense  for the  six-months  ended  June 30,  2004 and 2003
          totaled  $120,733  and  $95,522,  respectively.  Significantly  all of
          interest  expenses during these periods pertain to interest accrued on
          promissory notes due by the Company.


          Results of  Operations  for the Three  Months  Ended June 30, 2004 and
          ----------------------------------------------------------------------
          2003
          ----

          During the  three-month  period  ending  June 30,  2004,  the  Company
          generated  $3,066 of  revenue  from its  research  contract.  Interest
          earned  during the three  months  ended June 30, 2004 and 2003 totaled
          $3,156 and $13,198,  respectively.  Interest earned primarily consists
          of accrued  interest earned on promissory notes due from the Company's
          President and a Director on stock purchases.

          During  the  three-month  period  ended  June 30,  2004,  the  Company
          incurred  $241,656 in development  costs.  Development  costs incurred
          during the same three-month period of 2003 amounted to $70,478. Of the
          $241,656  incurred in 2004,  $30,677 pertains to salaries,  $1,470 was
          incurred in the purchase of supplies and  materials,  and $209,509 was
          incurred for outside  services of which  $125,100 was paid through the
          issuance of 120,000 shares of the Company's restricted common stock.

          General  and   administration   costs  were   $145,857  and  $198,041,
          respectively,  for the  three-month  periods  ended June 30,  2004 and
          2003.

          The  major  costs  incurred  during  the  three-month  period in 2004,
          consisted of officer's  compensation  of $48,000 of which  $18,000 was
          accrued.  Other expenses  incurred during the three-months  ended June
          30, 2004 included  professional  fees of $11,137,  consulting  fees of
          $34,211,  travel  expenses  of  $6,908,  telephone  expense of $4,631,
          office expense of $8,765, and rent of $8,765.

          Of the $34,211 in consulting fees, $13,436 was paid in cash or accrued
          and the  remaining  $20,775 was paid  through  the  issuance of 13,000
          shares of the Company's common stock.

          The  major  costs  incurred  during  the  three-month  period in 2003,
          consisted of officer's  compensation  of $30,000 of which  $29,000 was
          accrued.  Other expenses  incurred during the three-months  ended June
          30, 2003 included  professional  fees of $65,345,  consulting  fees of
          $58,127,  travel  expenses  of  $5,810,  telephone  expense of $4,124,
          office expense of $8,663, and rent of $7,044.

          Of the  $65,345  in  professional  fees,  $38,845  was paid in cash or
          accrued and the  remaining  $26,500 was paid  through the  issuance of
          2,650 shares of the Company's common stock. Of the $58,127 incurred in
          consulting  fees,  $22,416 was paid in cash or accrued and $35,711 was
          paid  through the  issuance of 3,571  shares of the  Company's  common
          stock.




                                       15
<PAGE>






          Interest  expense for the  three-months  ended June 30, 2004,  totaled
          $75,119 as  compared  to $46,261  incurred  during the same  period in
          2003.


          Liquidity and Capital Resources
          -------------------------------

          Cash and cash  equivalents  as of June 30, 2004 and 2003 were $119,449
          and $46,999, respectively.  During the six-months ended June 30, 2004,
          the Company  received a total of $801,868,  which consisted of $95,312
          from its two research and development  contracts,  $18,556 through the
          sale of 18,576 shares of its common stock, $685,000 in advances on the
          Company's  convertible  debenture,  and a  $3,000  repayment  from the
          Company's  President.  During the same  six-months,  the Company  used
          $722,647 in its operations,  purchased office equipment for $677, used
          $2,785 in its  Regulation  S  offering,  made a $3,000  advance to its
          President  and used $974 to  purchase  its 260 shares of common  stock
          from a shareholder.

          During the  six-months  ended June 30,  2003,  the Company  received a
          total of $214,841,  which  consisted  of $204,841  through the sale of
          14,049  shares of its common stock and 4,074  shares of its  preferred
          stock, and a loan from a third party of $10,000.  During the six month
          period,  the Company used $362,759 in its operations,  used $33,358 in
          its Regulation S offering, and used $23,508 to purchase its 997 shares
          of common stock from the open market.

          As of July 16, 2004, the Company has sufficient cash resources to fund
          approximately 3 to 4 months of current operating expenses.  Without an
          infusion  of  capital  through  the sale of  additional  shares of its
          stock,  the Company may not be able to  continue  operating  after its
          current cash is depleted.


Item 3.   Quantitative and Qualitative Disclosures about Market Risk
--------------------------------------------------------------------

          n/a.


Part II.  Other Information
---------------------------


Item 2.   Changes in Securities
-------------------------------

          During the quarter ended June 30, 2004, the Company  issued  7,029,016
          shares of its common  stock.  Of the  common  shares  issued,  500,000
          shares were issued  through the  conversion  of 500,000  shares of the
          Company's  Class D  Preferred,  2,700  shares were issued  through the
          conversion of 2,700 shares of the Company's Class C Preferred,  50,000
          shares were issued to a former  attorney of the Company in  settlement
          of fees due him  totaling  $39,467,  18,576  shares  were  issued cash
          totaling $18,556,  133,000 shares were issued for consulting  services
          valued at  $145,875,  and 25,000  shares were issued to note holder of
          the Company for no further consideration. As part of the negotiations,



                                       16
<PAGE>






          with Gisbex Holding,  the Company  delivered  6,300,000 common shares.
          These 6,300,000  shares are not  transferable,  have no voting rights,
          and are not considered part of the 68,317,991 shares outstanding as of
          June 30, 2004.  Also during the quarter the Company  purchased  from a
          shareholder  260 shares of its  common  stock  which was  subsequently
          cancelled.

          For the period from July 1, 2004 through  July 16,  2004,  the Company
          issued 1,047,000 shares of its common stock for $123,500.


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


                           Material Technologies, Inc.
                           ---------------------------
                                   Registrant



                             /s/ Robert M. Bernstein
                    ----------------------------------------
                    Robert M. Bernstein, President and Chief
                                Financial Officer























                                       17