SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q


(Mark One)
[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended: July 03, 2005

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from                   to
                                        ----------------     -------------------

         Commission File Number: 1-11012
                                 -------

                          GLACIER WATER SERVICES, INC.
                          ----------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                 Delaware                                33-0493559
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

1385 Park Center Drive, Vista, California                      92081
--------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)

                                 (760) 560-1111
                                 ---------------
              (Registrant's telephone number, including area code)

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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 [X]  NO [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).  YES [ ]  NO [X]

     Indicate  the number of shares  outstanding  of each of  issuer's  class of
common  stock as of the  latest  practicable  date:  2,267,663  shares of common
stock, $.01 par value, outstanding at July 29, 2005.



<PAGE>

<TABLE>
<CAPTION>
                         PART 1 - FINANCIAL INFORMATION
                          ITEM 1 - FINANCIAL STATEMENTS
                          GLACIER WATER SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

                                                                                     July 3,        January 2,
                                                                                      2005             2005 *
                                                                                      ----             ----
                                        ASSETS                                    (unaudited)
                                        ------
<S>                                                                              <C>              <C>
Current assets:
   Cash and cash equivalents                                                     $      3,427     $      2,256
   Accounts receivable, net of allowance for doubtful accounts of $209 and
    $201 as of July 3, 2005 and January 2, 2005, respectively                           2,212            2,476
   Repair parts                                                                         2,393            2,403
   Prepaid expenses and other                                                             821              950
                                                                                 -------------    -------------
      Total current assets                                                              8,853            8,085

Property and equipment, net                                                            60,974           52,370
Goodwill                                                                                6,868            6,868
Intangible assets, net of accumulated amortization of $796 and $681 as of
 July 3, 2005 and January 2, 2005, respectively
                                                                                          360              475
Investment in Glacier Water Trust I Common Securities                                   2,629            2,629
Investment in Glacier Water Trust I Preferred Securities                                3,357            3,357
Other assets                                                                            5,583            5,716
                                                                                 -------------    -------------
Total assets                                                                     $     88,624     $     79,500
                                                                                 =============    =============

                        LIABILITIES AND STOCKHOLDERS' DEFICIT
                        -------------------------------------
Current liabilities:
   Accounts payable                                                              $      2,704     $      2,759
   Accrued commissions                                                                  2,293            1,989
   Accrued liabilities                                                                  2,597            2,215
   Current portion of deferred rent                                                        19               --
   Current portion of obligations under capital lease                                     271              262
   Current portion of long-term notes payable                                             412              460
                                                                                 -------------    -------------
      Total current liabilities                                                         8,296            7,685

Long-term debt                                                                         87,629           87,629
Long-term notes payable                                                                20,500           10,040
Long-term portion of deferred rent                                                        158              112
Long-term portion of obligations under capital lease                                      523              661
                                                                                 -------------    -------------
Total liabilities                                                                     117,106          106,127

Stockholders' deficit:
  Common stock, $.01 par value; 10,000,000 shares authorized, 2,267,513 and
   2,160,218 shares issued and outstanding as of July 3, 2005 and January 2,
   2005, respectively                                                                      39               38
  Additional paid-in capital                                                           20,369           18,948
  Retained deficit                                                                    (16,328)         (13,051)
  Treasury stock, at cost, 1,587,606 shares as of July 3, 2005 and
   January 2, 2005                                                                    (32,562)         (32,562)
                                                                                 -------------    -------------
      Total stockholders' deficit                                                     (28,482)         (26,627)
                                                                                 -------------    -------------
Total liabilities and stockholders' deficit                                      $     88,624     $     79,500
                                                                                 =============    =============

*Amounts derived from audited information
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       2
<PAGE>


<TABLE>
<CAPTION>
                          GLACIER WATER SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except share and per share data)
                                   (unaudited)


                                                                Three Months Ended               Six Months Ended
                                                           ----------------------------    ----------------------------
                                                             July 03,        June 27,        July 03,        June 27,
                                                               2005            2004            2005            2004
                                                           ------------    ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>             <C>
Revenues                                                   $    19,563     $    19,246     $    37,106     $    36,791
Operating costs and expenses:
   Operating expenses                                           12,555          12,158          23,989          23,833
   Depreciation and amortization                                 3,459           2,590           6,761           5,100
                                                           ------------    ------------    ------------    ------------
      Cost of goods sold                                        16,014          14,748          30,750          28,933

   Selling, general and administrative expenses                  2,718           2,774           5,419           5,405
                                                           ------------    ------------    ------------    ------------
      Total operating costs and expenses                        18,732          17,522          36,169          34,338
                                                           ------------    ------------    ------------    ------------

Income from operations                                             831           1,724             937           2,453

Other expenses:
   Interest expense                                              2,135           1,906           4,214           3,835
                                                           ------------    ------------    ------------    ------------

Loss before income taxes                                        (1,304)           (182)         (3,277)         (1,382)
Income tax benefit                                                  --              --              --              --
                                                           ------------    ------------    ------------    ------------
Net loss                                                        (1,304)           (182)         (3,277)         (1,382)
                                                           ============    ============    ============    ============

Basic and diluted loss per common share:
   Net loss applicable to common stockholders              $     (0.58)    $     (0.09)    $     (1.48)    $     (0.65)
                                                           ============    ============    ============    ============
      Weighted average shares used in calculation            2,243,656       2,119,790       2,207,856       2,119,637

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       3
<PAGE>


<TABLE>
<CAPTION>
                          GLACIER WATER SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

                                                                                Six Months Ended
                                                                                ----------------
                                                                             July 3,        June 27,
                                                                              2005            2004
                                                                              ----            ----
<S>                                                                       <C>             <C>
Cash flow from operating activities:
  Net loss                                                                $   (3,277)     $   (1,382)
  Adjustments to reconcile net loss to net cash provided by
   operating activities:
     Depreciation and amortization                                             6,761           5,100
     Loss on disposal of assets                                                   21             251
  Change in operating assets and liabilities:
     Accounts receivable                                                         264            (170)
     Repair parts                                                                 10            (152)
     Prepaid expenses and other                                                  129             489
     Payment for prepaid contract rights                                        (909)            (68)
     Other assets                                                                254              73
     Accounts payable, accrued commissions and accrued liabilities               631             802
                                                                          -----------     -----------
           Net cash provided by operating activities                           3,884           4,943
                                                                          -----------     -----------

Cash flows from investing activities:
  Investment in property and equipment                                       (14,483)         (4,973)
                                                                          -----------     -----------
           Net cash used in investing activities                             (14,483)         (4,973)
                                                                          -----------     -----------

Cash flows from financing activities:
  Principal payments on line of credit and long-term notes payable            (2,088)           (830)
  Proceeds from long-term notes payable                                       12,500           2,218
  Principal payments under capital lease obligations                            (129)           (120)
  Proceeds from issuance of stock                                              1,422              32
  Increase in deferred rent                                                       65              --
                                                                          -----------     -----------
           Net cash provided by financing activities                          11,770           1,300
                                                                          -----------     -----------

Net increase in cash and cash equivalent                                       1,171           1,270
Cash and cash equivalents, beginning of period                                 2,256           1,924
                                                                          -----------     -----------
Cash and cash equivalents, end of period                                  $    3,427      $    3,194
                                                                          ===========     ===========




                                                                                Six Months Ended
                                                                                ----------------
                                                                             July 3,        June 27,
                                                                              2005            2004
                                                                              ----            ----
Supplemental disclosure of cash flow information:
   Cash paid for interest                                                 $    4,150      $    3,757
                                                                          ===========     ===========
   Cash paid for income taxes                                             $       14      $        3
                                                                          ===========     ===========

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       4
<PAGE>




                          GLACIER WATER SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  July 3, 2005
                                   (unaudited)

1. Basis of Presentation

     Glacier  Water  Services,   Inc.,  a  Delaware  corporation  ("Glacier"  or
"Company"),  is  primarily  engaged in the  operation  of  self-service  vending
machines  that  dispense  drinking  water to  consumers.  In the  opinion of the
Company's management, the accompanying consolidated financial statements reflect
all adjustments necessary for a fair presentation of the consolidated  financial
position of the Company and its  subsidiaries  and the  consolidated  results of
their  operations  for the three- and  six-month  periods ended July 3, 2005 and
June 27, 2004 and their cash flows for the  six-month  period ended July 3, 2005
and June 27, 2004.  Although the Company  believes that the disclosures in these
financial  statements  are  adequate  to  make  the  information  presented  not
misleading,  certain  information,   including  footnote  information,  normally
included in  financial  statements  prepared in  accordance  with United  States
generally accepted accounting  principles has been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission.  Results
of operations  for the three- and  six-month  periods ended July 3, 2005 are not
necessarily  indicative of 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 on Form 10-K for the year ended
January 2, 2005.

2. Stock Option Plans

     In  December  2002,  the FASB  issued  Statement  of  Financial  Accounting
Standards (SFAS) No. 148,  Accounting for Stock-Based  Compensation - Transition
and  Disclosure.  SFAS No. 148 amends SFAS No. 123,  Accounting for  Stock-Based
Compensation,  to provide  alternative  methods of  transition  for a  voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition,  SFAS No. 148 amends the disclosure  requirements of
SFAS No.  123 to  require  prominent  disclosures  in both  annual  and  interim
financial  statements  about the method of accounting for  stock-based  employee
compensation and the effect of the method used on reported results.

     In December 2004, the Financial  Accounting  Standards  Board (FASB) issued
Statement  of  Financial  Accounting  Standards  (SFAS) No.  123R  (SFAS  123R),
"Share-Based Payment",  which replaces SFAS No. 123, "Accounting for Stock-Based
Compensation" and supercedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS 123R requires compensation costs related to share-based payment
transactions  to  be  recognized  in  the  financial  statements.  With  limited
exception,  the amount of compensation  cost is measured based on the grant date
fair value of the  equity or  liability  instruments  used.  SFAS 123R  requires
liability for awards to be re-measured  each reporting  period and  compensation
costs to be  recognized  over the period  that an employee  provides  service in
exchange  for the  award.  SFAS123R  is  effective  beginning  the first  annual
reporting period that begins after June 15, 2005. The Company plans to adopt the
provisions of SFAS 123R prospectively  effective fiscal year 2006. The Company's
Stock  Compensation  Program  expired in March 2004 and no options  were granted
during the year ended January 2, 2005 or the three- and six-month  periods ended
July 3, 2005.  The Company is currently  determining  the effect of SFAS 123R on
the Company's consolidated financial statements.

     The  Company  has  options  outstanding  under the 1994 Stock  Compensation
Program.   The  Company  accounts  for  this  plan  under  the  recognition  and
measurement  principles  of APB Opinion No. 25,  Accounting  for Stock Issued to
Employees, under which no compensation cost has been recognized, since the


                                       5
<PAGE>


exercise  prices of the options  granted were not less than the market prices of
the stock on the date of grant.

     The following unaudited pro forma disclosures  represent what the Company's
net loss and loss per  common  share  would have been had the  Company  recorded
compensation  cost for this plan in accordance  with the  provisions of SFAS No.
123:

<TABLE>
<CAPTION>

                                                                 Three Months Ended               Six Months Ended
                                                                 ------------------               ----------------
                                                              July 03,        June 27,        July 03,        June 27,
                                                                2005            2004            2005            2004
                                                                ----            ----            ----            ----
                                                                       (in thousands, except per share data)
<S>                                                        <C>             <C>             <C>             <C>
Net loss applicable to common stockholders,
 as reported                                               $     (1,304)   $       (182)   $     (3,277)   $     (1,382)
                                                           -------------   -------------   -------------   -------------
Deduct:  Total stock-based employee compensation
 expense determined under the fair value method for
 all awards                                                         (23)            (55)            (45)           (230)
                                                           -------------   -------------   -------------   -------------
Pro forma net loss applicable to common stockholders       $     (1,327)   $       (237)   $     (3,322)   $     (1,612)
                                                           =============   =============   =============   =============

Basic and diluted loss per common share:
As reported                                                $      (0.58)   $      (0.09)   $      (1.48)   $      (0.65)
                                                           =============   =============   =============   =============

Pro forma                                                  $      (0.59)   $      (0.11)   $      (1.50)   $      (0.76)
                                                           =============   =============   =============   =============
</TABLE>


3. Earnings per share

     Basic earnings per common share is computed  based on the weighted  average
number of common  shares  outstanding  during the period.  Diluted  earnings per
common share is computed  based on the weighted  average number of common shares
outstanding  during the period increased by the effect of dilutive stock options
and warrants,  using the treasury stock method.  The  computations for basic and
diluted earnings per share are as follows:

<TABLE>
<CAPTION>

                                                                 Three Months Ended               Six Months Ended
                                                                 ------------------               ----------------
                                                              July 03,        June 27,        July 03,        June 27,
                                                                2005            2004            2005            2004
                                                                ----            ----            ----            ----
                                                                     (in thousands except share and per share data)
<S>                                                        <C>             <C>             <C>             <C>
Numerator for basic earnings per share - net loss
 applicable to common shareholders                         $     (1,304)   $       (182)   $     (3,277)   $     (1,382)
                                                           -------------   -------------   -------------   -------------
Denominator - shares:
     Weighted average common shares for basic
      earnings per share                                      2,243,656       2,119,790       2,207,856       2,119,637
     Effect of dilutive securities                                   --              --              --              --
                                                           -------------   -------------   -------------   -------------
Dilutive potential shares for diluted earnings per share      2,243,656       2,119,790       2,207,856       2,119,637
                                                           =============   =============   =============   =============
Loss per share:
     Basic and dilutive loss applicable to
      common shareholders                                  $      (0.58)   $      (0.09)   $      (1.48)   $      (0.65)
                                                           =============   =============   =============   =============

Potentially dilutive securities not included above since
 they are antidilutive                                          359,440         391,304         396,818         384,375
                                                           =============   =============   =============   =============
</TABLE>

4. Long-Term Debt and Line of Credit

     Company Obligated Mandatorily Redeemable Preferred Securities


                                       6
<PAGE>


     On January 27, 1998,  Glacier Water Trust I (the "Trust"),  a newly created
Delaware  business  trust and a wholly-owned  subsidiary of the Company,  issued
105,154  common  securities  to the Company and  completed a public  offering of
3,400,000 of 9.0625%  Cumulative  Trust Preferred  Securities with a liquidation
amount of $25.00 per security  (the "Trust  Preferred  Securities"  and together
with the common  securities  the "Trust  Securities").  The Trust exists for the
sole purpose of issuing Trust Securities and purchasing Subordinated Debentures.
Concurrent with the issuance of such securities, the Trust invested the proceeds
therefrom in an aggregate  principal  amount of  $85,000,000  of 9.0625%  Junior
Subordinated Debentures (the "Subordinated Debentures") issued by the Company.

     The Subordinated Debentures are unsecured obligations of the Company to the
trust and are subordinate  and junior in right of payment to other  indebtedness
of the Company.  The Trust relies on payments on the Subordinated  Debentures to
make distributions on the Trust Preferred Securities. Distributions on the Trust
Preferred  Securities are payable  monthly in arrears by the Trust.  The Company
may cause the Trust to defer the  payment of  distributions  for a period not to
exceed 60 consecutive  months.  During any such deferral  period,  distributions
will  accrue and  compound  quarterly,  and the  Company  may not declare or pay
distributions  on its common or  preferred  stock or debt  securities  that rank
equal or junior to the Subordinated Debentures.  To date, the Company is current
on all  distributions.  The Trust Preferred  Securities are subject to mandatory
redemption upon the repayment of the  Subordinated  Debentures at the redemption
price  equal to the  aggregate  liquidation  amount of the  Securities  plus any
accumulated and unpaid  distributions.  The  Subordinated  Debentures  mature on
January 31,  2028,  but may be redeemed at the option of the Company at any time
since  January  31,  2003.   The  Company   effectively   provides  a  full  and
unconditional guarantee of the Trust's obligations under the Trust Securities.

     The Company's Board of Directors authorized the purchase of up to 1,250,000
of the  Trust  Preferred  Securities.  As of  July  3,  2005,  the  Company  had
repurchased  921,400 of the Trust  Preferred  Securities  at an average  cost of
$16.40 per share.  The Company did not repurchase any shares of Trust  Preferred
Securities  during the three- and six-month  periods ended July 3, 2005 and June
27,  2004.  As of July 3, 2005,  the  Company  had used  $15,118,000  in cash to
repurchase  $23,035,000  face  value  of the  Trust  Preferred  Securities  less
$1,098,000 of deferred  financing  costs.  The Company may continue to make such
purchases from time to time in open market transactions or block trades.

     Pursuant to an Exchange  Offer,  which  commenced  on February 26, 2003 and
expired on April 11, 2003,  holders of a total of 983,880 shares of Common Stock
exchanged  those shares for a total of 787,105 Trust  Preferred  Securities then
held by the Company at a ratio of one share of Common Stock for  eight-tenths of
a Trust  Preferred  Security.  The Exchange  Offer  increased  long-term debt by
approximately  $19,678,000,  which represents the total liquidation value of the
787,105 Trust Preferred Securities.

     In December 2003,  FASB issued  Interpretation  No. 46R,  Consolidation  of
Variable  Interest  Entities ("FIN 46R"),  which supercedes  FIN46. The Trust is
considered a variable  interest entity under FIN 46R. Prior to FIN 46R, variable
interest  entities  were  generally  consolidated  by  an  enterprise  when  the
enterprise had a controlling  financial interest through ownership of a majority
voting interest in the entity.  Under FIN 46R, a variable interest entity should
be  consolidated  by its  primary  beneficiary.  Because  the Company is not the
primary  beneficiary of the Trust, the financial  statements of the Trust are no
longer included in the consolidated financial statements of the Company. FIN 46R
may be adopted either by recording a cumulative effect adjustment as of the date
of the adoption,  or restating prior period  financial  statements.  The Company
opted  to  restate  prior  period  financial  statements.  As a  result  of  the
de-consolidation, the Company has recorded its ownership of 105,154 Common Trust
Securities of the Trust and its ownership of 134,295  shares of Trust  Preferred
Securities  as  long-term  assets  and  has  recorded  the  Junior  Subordinated
Debentures as long-term debt at a face value of $87,629,000. At July 3, 2005 and


                                       7
<PAGE>

June 27, 2004,  there were  3,265,705  Trust  Preferred  Securities  outstanding
(other than the 134,295 held by the Company).















                                       8
<PAGE>


Line of Credit and Notes Payable

     On October 7, 2003, the Company  restructured its credit facility with City
National  Bank in  connection  with the  acquisition  of Water  Island.  The two
existing  revolving  notes,  under which no borrowings  were  outstanding,  were
replaced with a new $12,000,000 revolving credit facility,  which had a maturity
date of February 1, 2009. The credit  availability  on the new revolving  credit
facility was reduced by $400,000 every three months  beginning  February 7, 2004
until its  maturity in  February  2009.  The credit  facility  required  monthly
interest  payments at the City  National  Bank's prime rate plus 1.00%.  The new
credit facility required a quarterly unused facility fee of 0.50% per annum, and
contained certain customary  financial  covenants which restricted  indebtedness
and capital expenditures.  On March 26, 2004, the City National Bank reduced the
interest rate of the  revolving  credit  facility to City National  Bank's prime
rate. All other terms on the credit facility remained the same.

     On December 1, 2004,  City National Bank increased the  availability on the
credit  facility  to  $25,000,000  and on June  30,  2005,  City  National  Bank
increased the  availability on the credit  facility to $30,000,000.  The revised
credit facility requires monthly interest payments at City National Bank's prime
rate (6.25% per annum at July 3, 2005). The revolving credit facility requires a
quarterly  unused  facility  fee of 0.50%  per annum and  continues  to  contain
certain customary financial covenants,  which restrict  indebtedness and capital
expenditures.  The  Company  pledged  certain  assets  such as repair  parts and
equipment as  collateral  for its  obligations  under the credit  facility.  The
credit  availability  on the  revised  revolving  credit  facility is reduced by
$1,500,000  every three months  beginning  January 1, 2007 until its maturity in
December  2010. The Company was in compliance at July 3, 2005 with all covenants
under  this  credit  facility.  As  of  July  3,  2005,  there  was  $20,500,000
outstanding  on the  credit  facility,  which is  included  in  long-term  notes
payable.  Availability  under the  $30,000,000  revolving  credit  facility  was
$9,500,000 as of July 3, 2005.

     As of July 3, 2005,  there is  $412,000  outstanding  under  notes  payable
associated with the Pure Fill and Water Island acquisitions.  The Pure Fill note
was payable over 4 years in equal quarterly payments and as of July 3, 2005, had
an outstanding balance of $120,000. As of July 3, 2005 the Water Island note had
a balance of $292,000 and is payable in October 2005.  Amounts due after July 3,
2006 under the  Company's  credit  facility  and notes  payable are  included in
long-term  notes payable.  Both the Pure Fill and the Water Island notes payable
accrue  interest at the prime rate  published in the Wall Street  Journal (6.25%
and 4.0% per annum at July 3, 2005 and June 27, 2004, respectively).

5. Comprehensive Loss

     SFAS No. 130, "Reporting  Comprehensive Income," requires classification of
other  comprehensive  income  in a  financial  statement  and  display  of other
comprehensive  income separately from retained  earnings and additional  paid-in
capital.   Other  comprehensive   income  includes  primarily  foreign  currency
translation   adjustments   and  unrealized   gains  (losses)  on   investments.
Comprehensive loss did not differ from the net loss for the three and six months
ended July 3, 2005 and June 27, 2004.


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


     This report contains "forward-looking" information, as that term is defined
by the  federal  securities  laws,  about our  financial  condition,  results of
operations  and business.  You can find many of these  statements by looking for
words such as "may", "will", "expect", "anticipate",  "believe", "estimate", and
similar words used in this report. The forward-looking statements in this report
are intended to be subject to the safe harbor protection provided by the federal
securities laws.


                                       9
<PAGE>


     These forward-looking statements are subject to numerous assumptions, risks
and uncertainties (including trade relations and competition) that may cause our
actual results to be materially  different from any future results  expressed or
implied in those statements.

     Because  the  statements  are  subject to risks and  uncertainties,  actual
results  may  differ   materially   from  those  expressed  or  implied  by  the
forward-looking  statements.  We caution  readers not to place undue reliance on
these statements, which speak only as of the date of this report.

     The  cautionary   statements  set  forth  above  should  be  considered  in
connection with any subsequent written or oral  forward-looking  statements that
we or persons acting on our behalf may issue. We do not undertake any obligation
to review or confirm analysts'  expectations or estimates or to release publicly
any  revisions  to  any   forward-looking   statements  to  reflect   events  or
circumstances  after the date of this  report or to reflect  the  occurrence  of
unanticipated events.

Results of Operations
---------------------

Overview
--------

     Since its inception in 1983,  the Company has created an extensive  network
of water vending  machines located  throughout the United States.  The Company's
water  vending  machines,  which include both outdoor and indoor  machines,  are
placed at supermarkets  and other retail locations in order to take advantage of
the regular customer traffic at such locations.

     Currently  operating  in 40  states,  the  Company  continually  looks  for
opportunities  to  expand  its  presence  in  existing  markets  as  well as new
high-potential  markets.  The  Company  also looks for ways to reduce  operating
costs in all areas. The Company explores  opportunities to implement  technology
to improve  efficiency of servicing the vending  machines to lower its operating
costs.  The Company  continues to monitor  selling,  general and  administrative
expenses and reduce costs where possible.

     During the three- and six- month  periods  ended July 3, 2005,  the Company
continued with a major initiative to upgrade its outside water vending machines.
The  upgrade  results  in a new  generation  machine  ("G-2")  with a new modern
appearance  and  increased   functionality   such  as  dollar  bill  validators,
multi-vend   capability,   a  replaceable   stainless  steel  vend  chamber  and
replaceable  Lexan  panels.  The  Company  plans  to  complete  the  upgrade  of
approximately  11,000 outside  machines by the end of fiscal 2005. As of July 3,
2005, the Company has upgraded  approximately  9,800 machines at a total cost of
approximately  $19,600,000.  The Company  expects that it will expend a total of
approximately $22,000,000 in connection with this major upgrade initiative.  The
initiative  is such that the Company has the ability to time these  expenditures
with the availability of its cash flows from operations and  availability  under
its credit facility.

Revenues
--------

     Revenues for the quarter ended July 3, 2005 increased $317,000, or 1.6%, to
$19,563,000  from  $19,246,000  for the same period last year.  Revenues for the
six-month period ended July 03, 2005 increased $315,000, or 0.9%, to $37,106,000
from  $36,791,000 for the same period last year. As of July 3, 2005, the Company
had approximately  15,100 machines in operation,  compared to 15,200 machines as
of June 27, 2004.  The  Company's new G-2 machines  have  experienced  increased
revenues of  approximately  9.9% and 7.5% for the three- and  six-month  periods
ended July 3, 2005 compared to the same periods last year.


                                       10
<PAGE>


Costs and Expenses
------------------

     Operating  expenses,  excluding  depreciation  and  amortization,  for  the
quarter ended July 3, 2005 increased 3.3% to $12,555,000,  or 64.2% of revenues,
compared to  $12,158,000,  or 63.2% of revenues,  for the same period last year.
Operating expenses,  excluding depreciation and amortization,  for the six-month
period ended July 03, 2005 increased 0.7% to $23,989,000 compared to $23,833,000
for the same  period last year.  For the  six-month  period  ended July 3, 2005,
operating  expenses,  excluding  depreciation  and  amortization,  were 64.6% of
revenues which was slightly lower than the 64.8% of revenues for the same period
last year.

     Depreciation and amortization  expense was $3,459,000 for the quarter ended
July 3, 2005, compared to $2,590,000 for the same period last year. Depreciation
and  amortization  expense  includes the  amortization of intangible  assets and
prepaid  contract  rights  of  approximately   $433,000  and  $286,000  for  the
three-month  periods  ended  July 3,  2005  and  June  27,  2004,  respectively.
Depreciation  and  amortization  expense was $6,761,000 for the six-month period
ended July 03,  2005,  compared  to  $5,100,000  for the same  period last year.
Depreciation  and  amortization  expense includes the amortization of intangible
assets and prepaid  contract rights of  approximately  $903,000 and $539,000 for
the six-month  period ended July 03, 2005 and June 27, 2004,  respectively.  The
increase  in  depreciation  and  amortization  expense  for both the  three- and
six-month  periods  was due  primarily  to new capital  expenditures,  primarily
associated  with the G-2  upgrade  of the  Company's  outside  machines,  offset
partially by some assets  becoming fully  depreciated or amortized.  The Company
currently has sufficient  machines in storage available for deployment in fiscal
2005.  Machines that have been previously  installed and are in storage awaiting
redeployment continue to be depreciated.

     SG&A  expenses for the quarter  ended July 03, 2005  decreased  slightly to
$2,718,000, or 13.9% of revenues,  compared to $2,774,000, or 14.4% of revenues,
for the same period last year. SG&A expenses for the six-month period ended July
03, 2005  increased  slightly to $5,419,000,  or 14.6% of revenues,  compared to
5,405,000, or 14.7% of revenues, for the same period last year.

     Interest  expense for the quarter ended July 3, 2005 increased  $229,000 to
$2,135,000,  compared to  $1,906,000  for the same  period  last year.  Interest
expense  for the  six-month  period  ended July 03, 2005  increased  $379,000 to
$4,214,000,  compared to $3,835,000  for the same period last year. The increase
in interest  expense was primarily due to additional  interest  associated  with
higher  outstanding  borrowing on the credit  facility  this year as compared to
last year, primarily due to the G-2 project.

     As a result of the  foregoing,  the  Company had a net loss  applicable  to
common stockholders of $1,304,000 for the three-month period ended July 3, 2005,
compared to a loss of $182,000 for the same period last year.  For the six-month
period  ended July 3, 2005,  the  Company  had a net loss  applicable  to common
stockholders of $3,277,000, compared to a loss of $1,382,000 for the same period
last year.

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

     The Company's  primary sources of liquidity and capital  resources are cash
and cash  equivalents,  cash flows from operations and funds available under the
Company's  credit  facility.  On October 7, 2003, the Company  restructured  its
credit  facility with City National Bank. The new $12,000,000  revolving  credit
facility had a maturity  date of February 1, 2009.  The credit  availability  of
this facility was reduced by $400,000 every three months  beginning  February 7,
2004 until its maturity in February 2009. The revolving credit facility required
monthly interest  payments at the City National Bank's prime rate plus 1.00%. On
March  26,  2004,  the City  National  Bank  revised  the  interest  rate of the
revolving credit facility to City National Bank's prime rate. All other terms on
the credit facility remained the same.


                                       11
<PAGE>


     On December 1, 2004,  City National Bank increased the  availability on the
credit  facility  to  $25,000,000  and on June  30,  2005,  City  National  Bank
increased the  availability on the credit  facility to $30,000,000.  The revised
credit facility requires monthly interest payments at City National Bank's prime
rate (6.25% per annum at July 3, 2005). The revolving credit facility requires a
quarterly  unused  facility  fee of 0.50%  per annum and  continues  to  contain
certain customary financial covenants,  which restrict  indebtedness and capital
expenditures.  The  Company  pledged  certain  assets  such as repair  parts and
equipment as  collateral  for its  obligations  under the credit  facility.  The
credit  availability  on the  revised  revolving  credit  facility is reduced by
$1,500,000  every three months  beginning  January 1, 2007 until its maturity in
December  2010. The Company was in compliance at July 3, 2005 with all covenants
under  this  credit  facility.  As  of  July  3,  2005,  there  was  $20,500,000
outstanding  on the  credit  facility,  which is  included  in  long-term  notes
payable.  Availability  under the  $30,000,000  revolving  credit  facility  was
$9,500,000 as of July 3, 2005.

     For the six months ended July 3, 2005,  net cash provided by operations was
approximately  $3,884,000.  The  Company  made  capital  investments  in vending
machines and other equipment of approximately $14,483,000, up from $4,973,000 in
the first half of the previous  year,  which was  associated  primarily with the
upgrade of the outside coin machines.  Net cash provided by financing activities
was approximately  $11,770,000,  primarily as a result of additional  borrowings
under the credit  facility.  As of July 3, 2005, the Company had working capital
of $557,000.  Because the Company does not have significant product inventories,
working capital will vary from time to time depending on the timing of payables,
other  accrued  liabilities,  and  payments  of  prepaid  contract  rights.  The
Company's stockholders' deficit as of July 3, 2005 was $28,482,000, which amount
continues to be below the American Stock Exchange's listing guidelines. Although
no actions  have been taken to date,  it is  possible  that the  American  Stock
Exchange could delist the Company's stock.

     The Company  believes  that its cash and cash  equivalents,  cash flow from
operations and the availability  under its credit facility will be sufficient to
meet its  anticipated  amounts  due under its  credit  facility,  operating  and
capital  requirements,  as well as distributions  related to the Trust Preferred
Securities, for at least the next twelve months.

Recent Accounting Pronouncements
--------------------------------

     In December 2004, the Financial  Accounting  Standards  Board (FASB) issued
Statement  of  Financial  Accounting  Standards  (SFAS) No.  123R  (SFAS  123R),
"Share-Based Payment",  which replaces SFAS No. 123, "Accounting for Stock-Based
Compensation" and supercedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS 123R requires compensation costs related to share-based payment
transactions  to  be  recognized  in  the  financial  statements.  With  limited
exception,  the amount of compensation  cost is measured based on the grant date
fair value of the  equity or  liability  instruments  used.  SFAS 123R  requires
liability awards to be re-measured each reporting period and compensation  costs
to be recognized over the period that an employee  provides  service in exchange
for the award.  SFAS 123R is  effective  beginning  the first  annual  reporting
period  that  begins  after  June 15,  2005.  The  Company  plans  to adopt  the
provisions of SFAS 123R prospectively  effective fiscal year 2006. The Company's
Stock  Compensation  Program  expired in March 2004 and no options  were granted
during the year ended January 2, 2005 or the six months ended July 3, 2005.  The
Company  is  currently  determining  the  effect of SFAS  123R on the  Company's
consolidated financial statements.

     In November 2004, the FASB issued FASB Statement No. 151,  Inventory Costs:
an amendment of ARB No. 43, which  establishes  standards for the accounting for
unexpected  production defects and waste and the impact on capitalized inventory
costs.  FASB No. 151 is  effective  for  financial  statements  for fiscal years
beginning  after June 15, 2005. The Company does not expect that the adoption of
FASB 151 will have a material impact on the consolidated financial statements.


                                       12
<PAGE>


     In November 2004,  the FASB issued FASB  Statement No. 152,  Accounting for
Real Estate  Time-Sharing  Transactions - an amendment of FASB Statements No. 66
and No. 67. The  Statement  amends  FASB No.  66,  Accounting  for Sales of Real
Estate,  to reference the financial  accounting and reporting  guidance for real
estate time-sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement
also amends  FASB  Statement  No. 67,  Accounting  for Costs and Initial  Rental
Operations  of  Real  Estate  Projects,  to  state  that  the  guidance  for (a)
incidental  operations and (b) costs incurred to sell real estate  projects does
not apply to real estate  time-sharing  transactions.  FASB No. 152 is effective
for financial  statements  for fiscal years  beginning  after June 15, 2005. The
Company  does not  expect  that the  adoption  of FASB 152 will have a  material
impact on the consolidated financial statements.

     In November  2004,  the FASB issued FASB  Statement  No. 153,  Exchanges of
Nonmonetary  Assets - an  amendment  of APB Opinion No. 29. The  guidance in APB
Opinion  No.  29,  Accounting  for  Nonmonetary  Transactions,  is  based on the
principle that  exchanges of nonmonetary  assets should be measured based on the
fair value of the assets  exchanged.  The  guidance  in that  Opinion,  however,
included certain exceptions to that principle.  This Statement amends Opinion 29
to eliminate  the  exception  for  nonmonetary  exchanges of similar  productive
assets  that do not  have  commercial  substance.  A  nonmonetary  exchange  has
commercial  substance  if the future  cash flows of the entity are  expected  to
change significantly as a result of the exchange.  FASB No. 153 is effective for
financial  statements  for fiscal  periods  beginning  after June 15, 2005.  The
Company  does not  expect  that the  adoption  of FASB 153 will have a  material
impact on the consolidated financial statements.

     In May 2005 the FASB issued FASB Statement No. 154,  Accounting Changes and
Error Corrections.  Statement 154 replaces APB No. 20, Accounting  Changes,  and
FASB Statement No. 3, Reporting  Changes in Interim Financial  Statements.  FASB
No. 154 changes the  accounting  for, and  reporting  of, a change in accounting
principle.  FASB No. 154 requires  retrospective  application  to prior period's
financial  statements of voluntary  changes in accounting  principle and changes
required by new accounting standards when the standard does not include specific
transition  provisions,  unless it is  impracticable  to do so.  FASB No. 154 is
effective  for  accounting  changes and  corrections  of errors in fiscal  years
beginning after December 15, 2005. Early application is permitted for accounting
changes and  corrections of errors during fiscal years  beginning  after June 1,
2005.  The  Company  does not expect  that the  adoption of FASB 154 will have a
material impact on the consolidated financial statements.

ITEM 3 - QUANTITATIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK

     The  Company's  primary  market risk  exposure is interest  rate risk.  The
principal  objectives  of  our  asset/liability  management  activities  are  to
minimize debt and maximize net investment income,  while maintaining  acceptable
levels of  interest  rate  risk and  facilitating  our  funding  needs.  Our net
investment  income and interest expense are subject to the risk of interest rate
fluctuations.  The Company's  outstanding  bank debt is tied to the bank's prime
lending  rate and as such,  the  Company is at risk due to  increases  in market
rates.  A 10% change in the bank's  lending  rate  would have the  potential  of
increasing the annual  interest on the  outstanding  borrowings of the bank debt
and impacting the future earnings of the Company by less than $130,000 annually.
The  Company's  exposure to interest  rate risk also relates to the  opportunity
cost of fixed-rate  obligations  associated with the Trust Preferred Securities.
The  Company  believes  that the fixed  rate of the Trust  Preferred  Securities
approximates  the  Company's  long-term  market  rate.  As of July 3, 2005,  the
Company held no marketable securities available-for-sale.


                                       13
<PAGE>


ITEM 4 - CONTROLS AND PROCEDURES

     Since  July 3, 2005,  the  Company  carried  out an  evaluation,  under the
supervision and with the  participation of our Chief Executive Officer and Chief
Financial  Officer,   of  the  effectiveness  of  our  disclosure  controls  and
procedures,  as such term is defined  in Rule  13a-15(e)  promulgated  under the
Securities and Exchange Act of 1934, as amended.  Based on that evaluation,  the
Chief  Executive  Officer and the Chief  Financial  Officer  concluded  that the
disclosure  controls and procedures  were effective as of July 3, 2005 to ensure
that information required to be disclosed in reports that are filed or submitted
under the Securities and Exchange Act of 1934 is recorded, processed, summarized
and  reported  within the time  periods  specified  in  Securities  and Exchange
Commission  rules and forms.  There has been no change in our internal  controls
over  financial  reporting  during the latest fiscal quarter that has materially
affected,  or is reasonably likely to materially  affect,  our internal controls
over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

     From time to time,  claims are made  against  the  Company in the  ordinary
course of business.  With the assistance from legal counsel,  estimated  amounts
for such claims that are probable and can  reasonably  be estimated are recorded
as liabilities in the consolidated  balance sheets. The likelihood of a material
change in these  estimated  accruals  would be  dependent  on new claims as they
arise and the favorable or unfavorable outcome of the particular litigation.  As
of July 3, 2005,  the  Company was not a party to any legal  proceeding  that is
likely to  reasonably  have a  material  impact on the  results  of  operations,
financial condition or liquidity of the Company.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECUITY HOLDERS

     There were no matters  submitted to a vote of the security  holders  during
the quarter ended July 3, 2005.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     a.  Exhibits
         --------

         31.1 Certification  of  Brian H. McInerney,  Chief  Executive  Officer,
              under SEC Rule 13a-14(a).

         31.2 Certification  of W. David Walters, Chief Financial Officer, under
              SEC Rule 13a-14(a).

         32.1 Certification  of  Brian H. McInerney,  Chief  Executive  Officer,
              under SEC Rule 13a-14(b).

         32.2 Certification of W.  David Walters, Chief Financial Officer, under
              SEC Rule 13a-14(b).

     b.  Reports on Form 8-K
         -------------------

               On May 12, 2005, the Company filed a current report on Form 8-K
          reporting  under Item 12, the issuance of a press  release  disclosing
          the earnings for the quarter ended April 3, 2005.

               On April 1, 2005, the Company filed a current report on Form 8-K
          reporting  under Item 12, the issuance of a press  release  disclosing
          the earnings for the year ended January 2, 2005.



                                       14
<PAGE>





                                   SIGNATURES

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


                                     GLACIER WATER SERVICES, INC.

Date:  July 29, 2005                 By: /s/  Brian H. McInerney
                                         ---------------------------------------
                                         Brian H. McInerney
                                         President and Chief Executive Officer


Date:  July 29, 2005                 By: /s/  W. David Walters
                                         ---------------------------------------
                                         W. David Walters
                                         Senior Vice President and
                                         Chief Financial Officer


                                       15