U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

_____________________________________________



FORM 10-QSB



(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2004

[    ] 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 0-12914

_________________________________________________

ENVIRONMENTAL ENERGY SERVICES, INC.

(Exact name of small business issuer as specified in its charter)



|Delaware
(State or other jurisdiction of incorporation or organization) | 43-1953030
(IRS Employer Identification No.)
|----------------------------------------------------------------------- | --------------------------------------------

205 S. Bickford Avenue, El Reno, OK  73036

(Address of Principal Executive Offices)

(405) 262-0800

(Issuer's telephone number)



Not Applicable

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



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.   Yes  X    No  ___



APPLICABLE ONLY TO CORPORATE ISSUERS



State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: as of July 21, 2004, the Registrant had outstanding 354,083,631 shares of its Common Stock, $0.001 par value, which excludes certain shares issued pursuant to the Nikko Litigation which have not been recognized as valid by the Registrant.  (See "Part I, Item 1, Notes to Financial Statements, Note 6.")



Environmental Energy Services, Inc. and Subsidiaries



FORM 10-QSB REPORT INDEX



|                                                                                              | Page No.                                                                               
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------
|PART I.  FINANCIAL INFORMATION                                                                |                                                                                        
|Item 1.  Financial Statements (Unaudited)                                                     |                                                                                        
|                                                                                              | Consolidated Balance Sheet as of June 30, 2004                                         
|                                                                                              | Consolidated Statements of Operations for the Three Months Ended June 30, 2004 and 2003
|                                                                                              | Consolidated Statements of Operations for the Six Months Ended June 30, 2004 and 2003  
|                                                                                              | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003  
|                                                                                              | Notes to Unaudited Consolidated Financial Statements as of June 30, 2004               
|Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operation | 13                                                                                     
|PART II.  OTHER INFORMATION                                                                   | 14                                                                                     
|Item 1.  Legal Proceedings                                                                    | 14                                                                                     
|Item 2.  Changes in Securities                                                                | 14                                                                                     
|Item 3.  Defaults on Senior Securities                                                        | 14                                                                                     
|Item 4.  Submission of Matters to a Vote of Security Holders                                  | 14                                                                                     
|Item 5.  Other Information                                                                    | 14                                                                                     
|Item 6.  Exhibits and Reports on Form 8-K                                                     | 14                                                                                     
|Signatures                                                                                    | 15                                                                                     



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements



Environmental Energy Services, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEET

As of June 30, 2004 (Unaudited)



|ASSETS                                               |                        
|---------------------------------------------------- | -----------------------
|Current Assets:                                      |                        
|Cash                                                 | $                   854
|Total current assets                                 | 854                    
|                                                     |                        
|Other Assets:                                        |                        
|Marketable securities                                | 564,683                
|Investment in Royalty Agreement, net of amortization | 103,679                
|Investment in Private Companies                      | 90,000                 
|Investment - Gas and Oil Leases                      | 550,000                
|Total other assets                                   | 1,308,362              
|                                                     |                        
|Total assets                                         | $            1,309,216 



|LIABILITIES AND STOCKHOLDERS EQUITY                                                                    |                        
|------------------------------------------------------------------------------------------------------ | -----------------------
|                                                                                                       |                        
|Current liabilities:                                                                                   |                        
|Accounts payable, accrued interest, and other liabilities                                              | $                75,267
|                                                                                                       |                        
|Total current liabilities                                                                              | 75,267                 
|                                                                                                       |                        
|Stockholders' equity:                                                                                  |                        
|Preferred stock, $.01 par value; 5,000,000 shares authorized and outstanding                           | -                      
|Common stock, $.01 par value; 500,000,000 shares authorized; 354,083,631 shares issued and outstanding | 354,084                
|Additional paid-in capital                                                                             | 90,404,766             
|Unrealized gain/loss on marketable securities                                                          | (544,877)              
|Accumulated Deficit                                                                                    | (88,980,024)           
|Total Stockholders' Equity                                                                             | ___1,233,949           
|                                                                                                       |                        
|Total Liabilities and Stockholders' Equity                                                             | $            1,309,216 











The accompanying notes and accountant's report are an integral part of these statements



Environmental Energy Services, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30, 2004 and 2003

(Unaudited)



|                                                      | Three Months ended June 30
|----------------------------------------------------- | --------------------------
|                                                      | 2004                      
|                                                      |                           
|Revenues                                              | $              223,666    
|Cost of Goods Sold                                    | -                         
|Gross Profit                                          | 223,666                   
|                                                      |                           
|Expenses                                              |                           
|Selling, general and administrative                   | 132,681                   
|Depreciation and amortization                         | 15,556                    
|Total Expenses:                                       | 148,237                   
|                                                      |                           
|Income (Loss) from operations                         | 75,429                    
|                                                      |                           
|Other income (expense)                                |                           
|Interest expense, net                                 | -                         
|Gain on settlements of amounts due                    | -                         
|                                                      |                           
|                                                      |                           
|Total other income (expense)                          | -                         
|                                                      |                           
|Net Income                                            | $                75,429   
|                                                      |                           
|Unrealized Gain (Loss)                                | (22,598)                  
|                                                      |                           
|Comprehensive Income (Loss)                           | $                52,831   
|                                                      |                           
|Earnings per share:                                   |                           
|Basic                                                 | $                    0.00 
|Diluted                                               | $                    0.00 
|                                                      |                           
|Weighted average number of common shares outstanding: |                           
|Basic                                                 | 354,083,631               
|Diluted                                               | N/A                       







The accompanying notes and accountant's report are an integral part of these financial statements.







Environmental Energy Services, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Six Months Ended June 30, 2004 and 2003

(Unaudited)



|                                                      | Six Months ended June 30   
|----------------------------------------------------- | ---------------------------
|                                                      | 2004                       
|                                                      |                            
|Revenues                                              | $                438,306   
|Cost of Goods Sold                                    | -                          
|Gross Profit                                          | 438,306                    
|                                                      |                            
|Expenses                                              |                            
|Selling, general and administrative                   | 324,756                    
|Bad debt                                              | -                          
|Depreciation and amortization                         | 31,112                     
|Total Expenses:                                       | 355,868                    
|                                                      |                            
|Gain (Loss) from operations                           | 82,438                     
|                                                      |                            
|Other income (expense)                                |                            
|Interest expense, net                                 | -                          
|Gain on settlement of debt                            | -                          
|                                                      |                            
|Total other income (expense)                          | -                          
|                                                      |                            
|Net Income                                            | $                 83,220   
|                                                      |                            
|Unrealized Gain (Loss)                                | (65,931)                   
|                                                      |                            
|Comprehensive Income                                  | $                  16,507  
|                                                      |                            
|Earnings per share:                                   |                            
|Basic                                                 | $                      0.00
|Diluted                                               | $                      0.00
|                                                      |                            
|Weighted average number of common shares outstanding: |                            
|Basic                                                 | 354,083,631                
|Diluted                                               | N/A                        





The accompanying notes and accountant's report are an integral part of these statements





Environmental Energy Services, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2004 and 2003

(Unaudited)

|                                                                                                     | 2004                      | 2003                 
|---------------------------------------------------------------------------------------------------- | ------------------------- | ---------------------
|                                                                                                     |                           |                      
|Cash flow from operating activities:                                                                 |                           |                      
|Net income (loss)                                                                                    | 16,507                    | 763,298              
|Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |                           |                      
|Depreciation and amortization                                                                        | 31,112                    | 31,112               
|Stock issued in lieu of cash payment                                                                 | -                         | 200                  
|Gain on settlement of notes payable                                                                  | -                         | (132,946)            
|Unrealized gain/loss                                                                                 | 65,931                    | 1,266,574            
|Changes in assets and liabilities:                                                                   |                           |                      
|Accounts receivable and prepaid expenses                                                             | -                         | -                    
|Accounts payable, accrued interest and other liabilities                                             | (45,957)                  | (348,151)            
|                                                                                                     |                           |                      
|Net cash provided by (used in) operating activities                                                  | 67,593                    | ,580,087             
|                                                                                                     |                           |                      
|Cash flow from investing activities:                                                                 |                           |                      
|Investment in private company                                                                        | -                         | (27,500)             
|Investment in public company                                                                         | (120,000)                 | (1,672,947)          
|                                                                                                     |                           |                      
|Net cash provided by (used in) investing activities                                                  | (120,000)                 | (1,700,447)          
|                                                                                                     |                           |                      
|Cash flows from financing activities:                                                                |                           |                      
|Repayment of officer advances, net of new advances                                                   | -                         | (499,000)            
|Net Borrowings from CVIA                                                                             | -                         | 771,808              
|Repayments of loans                                                                                  | -                         | (139,941)            
|                                                                                                     |                           |                      
|Net cash provided by financing activities:                                                           | -                         | 132,867              
|                                                                                                     |                           |                      
|Net increase (decrease) in cash                                                                      | $              (52,407)   | $           12,507   
|Cash and cash equivalents at beginning of period                                                     | $                 53,261  | $                  89
|Cash and cash equivalents at end of period                                                           | $                     854 | $           12,596   



SUPPLEMENTARY DISCLOSURE OF NONCASH TRANSACTIONS

|                 | 2004 | 2003  
|---------------- | ---- | ------
|Interest Expense | -    | 33,273



The accompanying notes and accountant's report are an integral part of these statements



Environmental Energy Services, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004 (Unaudited)

1.       Basis of Presentation

The accompanying unaudited financial statements have been prepared by Environmental Energy Services, Inc. (the "Company" or "Environmental Energy Services") pursuant to the rules and regulations of the U. S. Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. This Form 10-QSB Report should be read in conjunction with the Form 10-KSB Report of Environmental Energy Services, Inc. for the fiscal year ended December 31, 2003, as filed with the U. S. Securities and Exchange Commission.

The results of operations for the period ended June 30, 2004 are not indicative of the results that may be expected for the full year.

2.        Summary of Significant Accounting Policies

Nature of Operations.  	Since June 2001, the Company has not conducted active operations, but has announced its intention to enter the business of acquiring, developing and operating coal, gas and other energy related assets in Alaska.  The Company is not in active operations at this time.

Amortization.  Amortization was calculated by the straight-line method using the following lives:

|Royalty agreement | 6 years
|----------------- | -------

Amortization expense for the six months ended June 30, 2004 and 2003 was $31,112 and $31,112, respectively.

Long Lived Assets.  In March 1995, Statement of Financial Accounting Standards SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of was issued.  SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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

Liquidity.  As of June 30, 2004, the Company's current liabilities exceeded its current assets by $74,413. The Company's assets exceed its liabilities by $1,233,949 at June 30, 2004.  This represents a significant improvement from prior periods.  The Company is no longer dependent on capital injections from officers and other outside parties.  In the quarter ended March 31, 2003, the Company reached an agreement that enables it to receive quarterly royalty payments in an amount that it believes is sufficient to satisfy its routine accounting, managerial, legal and basic general and administrative expenses.

Earnings Per Share.  The Company has adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share," specifying the computation, presentation and disclosure requirements of earnings per share information.  Basic earnings per share has been calculated based upon the weighted average number of common shares outstanding.  Diluted net income per share is calculated based on the weighted average number of common shares and common stock equivalents outstanding during the year.

Advertising.  The Company expenses advertising costs as incurred.  There was no advertising expense for the quarters ended June 30, 2004 and 2003.

Influence of Government Regulation.  The Company's prior and potential operations are and would be subject to and substantially affected by extensive federal, state and local laws, regulations, orders and permits, which govern environmental protection, health and safety, zoning and other matters.  These regulations may impose restrictions on operations that could adversely affect the Company's results, such as limitations on the expansion of disposal facilities, limitations on or the banning of disposal of out-of-state waste or certain categories of waste or mandates regarding the disposal of solid waste.  Because of heightened public concern, companies in the waste management business may become subject to judicial and administrative proceedings involving federal, state or local agencies.  These governmental agencies may seek to impose fines or to revoke or deny renewal of operating permits or licenses for violations of environmental laws or regulations or to require remediation of environmental problems at sites or nearby properties, or resulting from transportation or predecessors' transportation and collection operations, all of which could have a material adverse effect on the Company.  Liability may also arise from actions brought by individuals or community groups in connection with the permitting or licensing of operations, any alleged violations of such permits and licenses or other matters.  The Forward Looking Statements assume that there will be no materially negative impact on its operations due to governmental regulation.

Potential Environmental Liability.  The Company may incur liabilities for the deterioration of the environment as a result of its past and potential future operations.  Any substantial liability for environmental damage could materially adversely affect the operating results and financial condition of the Company.  Due to the limited nature of insurance coverage of environmental liability, if the Company were to incur liability for environmental damage, its business and financial condition could be materially adversely affected.

Marketable Securities.  The Company accounts for marketable securities in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities."  This statement requires securities that are available for sale to be carried at fair value, with changes in fair value recognized as a separate component of stockholders' equity.  As a result of disputes surrounding the Company's investment in Startec, Inc., certain trading restrictions and thin trading activity, the Company has classified the securities as long-term assets.  As a result of trading restrictions on the Company's investment in Corporate Vision, Inc. and thin trading activity, the Company has classified the securities as long-term assets.  Marketable securities consist of the following investments:

|Corporate Vision, Inc. (14,605,803 shares) | $   365,145
|------------------------------------------ | -----------
|Startec, Inc. (665,125 shares)             | 199,538    
|Total                                      | $   564,683



Comprehensive Income.  The Company has adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income."  SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements.  The effect of SFAS 130 is reflected in these financial statements.

3.	Accounts Payable, Accrued Interest and Other Liabilities

Accounts payable, accrued interest and other liabilities at June 30, 2004, consist of the following:

|Trade payables | $            48,267
|-------------- | -------------------
|Interest       | 27,000             
|               | $            75,267



4.	Notes and Loans Payable - Current Liabilities

As of June 30, 2004, the Company is not indebted under any notes classified as short-term liabilities.

5.	Notes and Loans Payable - Long-Term Liabilities

As of June 30, 2004, the Company has no indebtedness classified as a long-term liability.

6.	Commitments and Contingencies

Pursuant to an Agreement dated June 27, 2002, the Company agreed to issue an investor an additional 25,000,000 shares common stock in the event the Company was not able to raise an additional $950,000 by August 31, 2002 in order to make a final payment on the Company's purchase of certain gas leases.  The Company failed to raise the funds, and did not made the final payment.  The Company agreed to issue the shares in the second quarter of 2004, but to date has not done so.

Global Convertible Notes

The Company is obligated to issue shares of its common stock on certain notes in the original principle amount of $1,590,000 originally issued by Global Eco-Logical Services, Inc., although the Company is not obligated to pay the debt itself.  The conversion price is the market price of the Company's common stock at the time of conversion, subject to a minimum conversion price of $0.10 per share, which is significantly greater than the current market price of the common stock at this time.

Nikko Action and Series A and B Debentures.

The Company is the successor in a holding company reorganization effected by WasteMasters, Inc. ("WasteMasters") in 2001.  Prior to the holding company reorganization, WasteMasters was indebted on its Series A and Series B Convertible Debentures (the "Debentures"), which had an outstanding principle balance of $2,986,000 at December 31, 1997, plus accrued interest of approximately $323,116.  In January 1998, WasteMasters was sued by four corporations purporting to be the holders of the Debentures to recover judgment on the amount due on the Debentures.  The lawsuit was styled Nikko Trading of American Corporation, et al. v. Environmental Energy Services, Inc., pending in the United States District Court for the Northern District of Texas, Dallas Division, Civil Action No. 3-98CV0048-D (the "Nikko Action").  Prior to filing an answer, WasteMasters and the plaintiffs entered into a Compromise Settlement Agreement (the "Settlement Agreement"), which was entered as a Consent Judgment and filed February 5, 1998 in the with the Court in the Nikko Action.  Pursuant to the Settlement Agreement, WasteMasters issued approximately 63,000,000 shares of restricted Common Stock in exchange for cancellation of the Debentures, accrued interest and penalties.  The Debenture holders also received warrants for the purchase of up to 100,000,000 restricted shares of WasteMasters' common stock exercisable in specified quantities and time periods over the next two to five years at an average price in excess of $1.50 per share.

On December 16, 1998, Stewart Rahr, a shareholder of WasteMasters, filed a motion to intervene in the Nikko Action.  Mr. Rahr requested that the Consent Judgment entered in Nikko Action be vacated, and that Mr. Rahr be granted leave to defend the action derivatively on behalf of WasteMasters.  On February 28, 2000, the Honorable A. Joe Fish, entered findings of fact and conclusions of law in support of two preliminary injunction orders from April 5, 1999 and April 8, 1999.  Subsequently, on March 14, 2000, Judge Fish entered an Order setting aside the Consent Judgment and dismissing the Nikko Action for lack of subject matter jurisdiction. The court's ruling was based on findings that the Consent Judgment was procured as a result of fraud and collusion between Sterritt (who was the Company's chairman and chief executive officer at the time), the plaintiffs in the Nikko Action (who the Court found were secretly controlled by Sterritt and his family) and Edward Roush (counsel for the plaintiffs in the Nikko Action, and attorney for the Sterritt family).  Because of the Court's March 14, 2000 ruling, WasteMasters does not consider any shares issued pursuant to the Consent Judgment as valid. The ruling effects 63,165,066 shares of WasteMasters' outstanding common stock purportedly issued upon conversion of the debentures and 3,800,000 shares of common stock issued purportedly upon the exercise of warrants issued pursuant to the Consent Judgment.

The Company has not assumed liability under the Debentures.  However, pursuant to the holding company reorganization effected in June 2001, the Debentures are convertible into shares of the Company's common stock on the same basis that they were formerly convertible into shares of common stock of WasteMasters.  Therefore, the Company was contingently liable to issue shares of its common stock upon conversion of the Debentures.  In addition, to the extent any shares issued pursuant to the Consent Judgment are held to be valid, the Company would be obligated to recognize those shares as outstanding shares of the Company pursuant to the terms of the holding company reorganization.

On August 8, 2000, Continental filed an adversary proceeding in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, against the original plaintiffs in the Nikko Action. In the adversary proceeding, Continental obtained a declaratory judgment that it was the owner of the Debentures and any shares of common stock of WasteMasters issued in conversion or settlement of the Debentures.  By a Transfer and Assignment dated July 30, 2002, Continental transferred to a third party any interest it had in the Debentures, and any shares of common stock issued or issuable on conversion of the Debentures, including any rights Continental held under the declaratory judgment described above.  The third party then transferred to the Company any interest in the Debentures, the shares issued or issuable on conversion of the Debentures and the declaratory judgment.  Therefore, the Company is no longer contingently liable to issue shares of common stock upon conversion of the Debentures, and the Company's only contingent liability with respect to the Debentures is with respect to any shares originally issued pursuant to the Consent Judgment that are held by bona fide purchasers for value.  The Company believes that from 10 to 14 million shares are held by person who would qualify as bona fide purchasers for value.

7.	Issuance of Common Stock and Warrants

At June 30, 2004, the Company's authorized capital stock was 495,000,000 shares of Common Stock, par value $0.001 per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per share.  On that date, the Company had outstanding 354,083,631 shares of Common Stock and no shares of Preferred Stock. During the quarter ended June 30, 2004, the Company did not issue any Common Stock, options or warrants.

8.	Subsequent Events

There have been no material subsequent events since June 30, 2004.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

The Company's revenues in the three and six months ended June 30, 2004 were $223,666 and $2,266,832, respectively, as compared to revenues in the three and six months ended June 30, 2003 of $438,306 and $2,266,832, respectively.  All of the Company's revenues in both years were derived from its share of royalty payments under a technology license agreement.  The Company expects to receive royalty payments under the license agreement in an undetermined amount though February 2008.  The large royalty receipt received in the periods ended June 30, 2003 reflects many previously disputed quarterly payments paid at one time pursuant to a legal settlement.

Selling, general and administrative expenses in the three and six months ended June 30, 2004 were $132,681 and $324,756, respectively, as compared to three and six months ended June 30, 2003 of $214,466 and $438,234, respectively.  Selling, general and administrative expenses declined $81,785 during the quarter ended June 30, 2004 as compared to the quarter ended June 30, 2003.  The decrease in selling, general and administrative expenses was primarily the result of unusually high legal expenses in 2003 relating to the settlement of litigation claims relating to a royalty interest owned by the Company.

The Company reported income from operations during the three months and six months ended June 30, 2004 of $75,429 and $82,438, respectively, as compared to income from operations during the three and six months ended June 30, 2003 of $2,036,810 and $1,797,486, respectively. The Company's income from operations was substantially higher in the three and six months ended June 30, 2003 due the receipt of over $2,000,000 in royalty payments that had previously been in dispute.  The Company anticipates that the income from operations that it recorded in the three months ended June 30, 2004 is reflective of its income from operations in future quarters.

The Company reported other income (expense) in the three and six months ended June 30, 2004 of $0 and $0, respectively, as compared to other income (expense) in the three and six months ended June 30, 2003 of $164,614 and $232,386, respectively. Other income was higher in 2003 as compared to 2004 as the result of a nonrecurring gain recorded in 2003 as the result of the settlement of certain obligations of the Company. In addition, the Company settled all of its interest-bearing debt in 2003, and as a result the Company recorded an interest expense in 2003 but not in 2004.

The Company reported net income in the three and six months ended June 30, 2004 of $75,429 and $82,438, respectively, as compared to net income in the three and six months ended June 30, 2003 of $2,201,424 and $2,201,424, respectively.

The Company reported comprehensive income in the three and six months ended June 30, 2004 of $52,831 and $16,507, respectively, as compared to comprehensive income in the three and six months ended June 30, 2003 of $873,886 and $763,298, respectively.  The Company's comprehensive income was lower than its net income in all periods due to unrealized losses recorded on the Company's investment in common stock of Corporate Vision, Inc.

Liquidity and Sources of Capital

The Company's consolidated balance sheet as of June 30, 2004 reflects cash and equivalents of $854, total current assets of $854 at historical cost, total current liabilities of $75,267, and a working capital deficit of $74,413.  Most of the Company's current liabilities represent legal, management and auditing fees that are paid each quarter from the royalty payments received and are not expected to be paid from existing cash.

As of June 30, 2004, the Company had no active operations. Because the Company expects to generate regular revenues from its share of quarterly royalty payments under a license agreement, the Company believes that it has adequate liquidity to fund its normal general and administrative expenses and other obligations.  However, the Company's ability to use the royalty payments for purposes other than general and administrative expenses is limited due to liens granted against the Company's interest in the royalty payments.

The Company's principal activities at this time consist of due diligence on potential business opportunities. Specifically, the Company plans to enter the oil and gas business with its acquisition of oil and gas leases in Alaska.  In addition, the Company is actively working on the acquisition of a coal lease in Alaska. The Company's management believes that they will be able to complete the acquisition of these and other leases in Alaska and bring the operations into effect by the end of 2004.  There is, however, no guarantee that they will be able to do so.

Item 3.  Controls and Procedures.

The Company believes that it has sufficient internal controls and procedures for a company that is not engaged in active operations.  When and if the Company acquires or commences active operations, the Company anticipates instituting internal controls and procedures sufficient for the nature and scale of operations at that time.

PART II.  OTHER INFORMATION.

Item 1.  Legal Proceedings.

The Company is a party to legal proceedings that are discussed in Item 3 of its Annual Report on Form 10-KSB for the year ended December 31, 2003, which is hereby incorporated by reference.

W.T. "Skip" Leake and Kathy Leake v. WasteMasters, Inc. and Securities Transfer Corporation: On or about September 20, 2000, the plaintiffs filed a declaratory judgment suit against the Company and, Securities Transfer Corp., the Company's transfer agent, in the District Court of Tarrant County, Texas.  The suit alleges that the plaintiffs are the rightful owners of 4,000 shares of Company common stock, which the plaintiffs allege they obtained in payment of legal services.  The Company considered the shares cancelled since they were originally issued pursuant to the Nikko Action.  However, because of the decline in the Company's stock price, the Company determined that the amount in controversy did not warrant the cost of defending the action, and notified its transfer agent that it should consider the shares valid and permit their transfer under Rule 144(k).  The plaintiffs amended the action to also seek declaratory relief as to an additional 8,333,080 shares that one of the plaintiffs had seized to satisfy a judgment against Edward W. Roush, Jr.  Although the shares were not titled in Mr. Roush's name, Mr. Roush contended that he owned the shares.  The Company also considered those shares cancelled since they were originally issued pursuant to the Nikko Action.  On March 22, 2004, the court announced that it would issue a summary judgment in favor of the plaintiffs on its claim for declaratory relief as to those shares.  The Company believes the court's decision was incorrect, and has appealed the ruling.

Item 2.  Changes in Securities and Use of Proceeds.

No shares were issued nor warrants granted during the quarter ended June 30, 2004.

Item 3.  Defaults upon Senior Securities.

None

Item 4. 	  Submission of Matters to a Vote of Security Holders.

None.

Item 5.  Other Information.

None.

Item 6.  Exhibits and Reports on Form 8-K.

Furnish the exhibits required by Item 601 of Regulation S-B.

|Exhibit Number | Description and Incorporation by Reference                                                                                                           
|-------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|31.1           | Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer                                                                                
|31.2           | Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer                                                                                
|32.1           | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2           | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)     Reports on Form 8-K.   None.



SIGNATURES

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

|                       | ENVIRONMENTAL ENERGY SERVICES, INC.      
|---------------------- | -----------------------------------------
|Date:  August 13, 2004 | /s/ Greg Holsted                         
|                       | By: Greg Holsted, Chief Financial Officer