|                                                      
|------------------------------------------------------
|U.S. SECURITIES AND EXCHANGE COMMISSION               
|                                                      
|WASHINGTON, D.C. 20549                                
|                                                      
|                                                      
|FORM 10 - QSB                                         
|                                                      
|                                                      
|QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)     
|OF THE SECURITIES EXCHANGE ACT OF 1934                
|                                                      
|                                                      
|For the quarter ended June 30, 2004                   
|                                                      
|Capacitive Deionization Technology Systems, Inc.      
|(Exact name of registrant as specified in its charter)
|                                                      

|Nevada                  | 86-0867960         
|----------------------- | -------------------
|(State of Jurisdiction) | (I.R.S. Employer   
|                        | identification No.)
|                        |                    



|13636 Neutron Road, Dallas, Texas 75244-4410                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Address of Principal executive offices)                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                       
|972-934-1586                                                                                                                                                                                                                                                                                                                                           
|(Registrant's telephone number)                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                       
|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.
|                                                                                                                                                                                                                                                                                                                                                       
|(1) Yes X   No                                                                                                                                                                                                                                                                                                                                         
|(2) Yes X  No                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                       
|The number of shares outstanding of the registrant's  $.0001 par value common stock as of July 31, 2004 was 18,462,026.                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                       
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|                                                                                                                                                                                                                                                                                                                                                       







|Capacitive Deionization Technology Systems, Inc.
|------------------------------------------------
|                                                

|Index  |                       | Page
|------ | --------------------- | ----
|Part I | Financial Information |     

| | Item 1 | Financial statements                                                                                                            |    
| | ------ | ------------------------------------------------------------------------------------------------------------------------------- | ---
| |        |                                                                                                                                 |    
| |        | Balance Sheets as of June 30, 2004 and
December 31, 2003                                                                        | 3  
| |        |                                                                                                                                 |    
| |        | Statements of Operations for the three and six
months ended June 30, 2004 and 2003 and
Cumulative Amounts Through June 30, 2004 | 4  
| |        |                                                                                                                                 |    
| |        | Statements of Cash Flows for the six
months ended June 30, 2004 and 2003 and 
Cumulative Amounts Through June 30, 2004          | 5  
| |        |                                                                                                                                 |    
| |        | Notes to Financial Statements                                                                                                   | 6-8
| |        |                                                                                                                                 |    
| | Item 2 | Management's discussion and analysis
of Financial Condition and Results
of Operations                                           | 8  
| |        |                                                                                                                                 |    
| | Item 3 | Controls and Procedures                                                                                                         | 10 
| |        |                                                                                                                                 |    



|Part II | Other Information | 
|------- | ----------------- | 

| | Item 2 | Changes in securities            | 10
| | ------ | -------------------------------- | --
| |        |                                  |   
| | Item 6 | Exhibits and Reports on Form 8-K | 10
| |        |                                  |   

|Signature page |  | 11
|-------------- |  | --
|               |  |   
|               |  |   



|CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.
|------------------------------------------------
|(A Development Stage Entity)                    
|BALANCE SHEETS                                  
|                                                
|Assets                                          
|                                                

|                              | June 30,  2004 |  | December 31, 2003
|----------------------------- | -------------- |  | -----------------
|Current assets:               | (Unaudited)    |  | (Audited)        
|Cash                          | $        747   |  | $      333       
|Accounts receivable           | -              |  | 10,000           
|Total current assets          | 747            |  | 10,333           
|                              |                |  |                  
|Furniture and equipment       | 25,294         |  | 25,294           
|Less accumulated depreciation | (22,283)       |  | (21,488)         
|Total furniture and equipment | 3,011          |  | 3,806            
|                              | $3,758         |  | $14,139          
|                              |                |  |                  

|Liabilities and Stockholders' Equity (Deficit)
|----------------------------------------------
|                                              

|Current liabilities:                                                                                                              |               |  |             
|--------------------------------------------------------------------------------------------------------------------------------- | ------------- |  | ------------
|Accounts payable                                                                                                                  | $  348,471    |  | $  476,934  
|Wages payable                                                                                                                     | 748,657       |  | 724,034     
|Accrued liabilities                                                                                                               | 278,914       |  | 227,846     
|Customer deposits                                                                                                                 | 203,700       |  | 78,700      
|Severance payable to shareholder                                                                                                  | 235,000       |  | 154,000     
|Current portion of long-term debt                                                                                                 | 252,612       |  | 247,671     
|Current portion of long-term debt - related parties                                                                               | 433,000       |  | 433,000     
|Payable to former subsidiary                                                                                                      | 31,808        |  | 31,808      
|Total current liabilities                                                                                                         | 2,532,162     |  | 2,373,993   
|                                                                                                                                  |               |  |             
|Long-term and convertible debt - related parties                                                                                  | 10,000        |  | 10,000      
|Other long-term debt                                                                                                              | 157,425       |  | 25,000      
|                                                                                                                                  |               |  |             
|Commitments and contingencies                                                                                                     | -             |  | -           
|                                                                                                                                  |               |  |             
|Stockholders' equity (deficit):                                                                                                   |               |  |             
|Preferred stock, $.0001 par value, 20,000,000 shares
      authorized; none issued and outstanding                                | -             |  | -           
|Common stock, $.0001 par value, 80,000,000 shares
      authorized; 18,012,899 and 16,581,799
      shares issued and outstanding | 1,801         |  | 1,658       
|Additional paid-in capital                                                                                                        | 8,361,591     |  | 7,994,471   
|Note receivable issued for stock                                                                                                  | -             |  | (45,500)    
|Common stock subscription                                                                                                         | (11,111)      |  | (11,111)    
|Accumulated deficit from previous operating activities                                                                            | (3,523,977)   |  | (3,523,977) 
|Deficit accumulated during the development stage                                                                                  | (7,524,133)   |  | (6,810,395) 
|Total stockholders' equity (deficit)                                                                                              | (2,695,829)   |  | (2,394,854) 
|                                                                                                                                  | $       3,758 |  | $     14,139
|                                                                                                                                  |               |  |             

|See accompanying notes to financial statements.
|-----------------------------------------------
|3                                              
|                                               



|CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.                                              
|----------------------------------------------------------------------------------------------
|(A Development Stage Entity)                                                                  
|STATEMENTS OF OPERATIONS                                                                      
|Three and Six Months Ended June 30, 2004 and 2003                                             
|And Cumulative Operations as a Development Stage Entity (January 1 2000 through June 30, 2004)
|(unaudited)                                                                                   
|                                                                                              

|                                                                                                                          | Three Months Ended June 30, | Six Months Ended June 30, | Cumulative    
 through
|------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------------------- | -----------------------
|                                                                                                                          | 2004                        | 2003                      | 2004                   
|                                                                                                                          |                             |                           |                        
|Revenues                                                                                                                  | $-                          | $-                        | $-                     
|                                                                                                                          |                             |                           |                        
|Operating expenses:                                                                                                       |                             |                           |                        
|Cost of sales                                                                                                             | -                           | -                         | -                      
|Common stock and options issued for services --                                                                           |                             |                           |                        
|General and administrative                                                                                                | 43,588                      | 60,688                    | 112,713                
|Common stock and options issued for services --                                                                           |                             |                           |                        
|Research and development                                                                                                  | 17,250                      | 23,547                    | 52,250                 
|Other research and development                                                                                            | 75,195                      | 71,766                    | 285,927                
|General and administrative (excluding
      amounts applicable to stock and options
      issued for services each period | 89,686                      | 58,530                    | 199,431                
|                                                                                                                          | 225,719                     | 214,531                   | 650,321                
|                                                                                                                          |                             |                           |                        
|Loss from operations                                                                                                      | (225,719)                   | (214,531)                 | (650,321)              
|                                                                                                                          |                             |                           |                        
|Other income (expense):                                                                                                   |                             |                           |                        
|Other income                                                                                                              | 8,946                       | -                         | 8,946                  
|Interest expense                                                                                                          | (40,253)                    | (14,878)                  | (72,363)               
|Total other income (expense)                                                                                              | (31,307)                    | (14,878)                  | (63,417)               
|                                                                                                                          |                             |                           |                        
|Net loss                                                                                                                  | $(257,026)                  | $(229,409)                | $(713,738)             
|                                                                                                                          |                             |                           |                        
|Basic and diluted net loss per common share:                                                                              | $(0.01)                     | $(0.02)                   | $(0.04)                
|                                                                                                                          |                             |                           |                        
|Weighted average common shares outstanding                                                                                | 17,934,999                  | 14,172,037                | 17,569,316             
|                                                                                                                          |                             |                           |                        
|                                                                                                                          |                             |                           |                        













|See accompanying notes to financial statements.
|-----------------------------------------------
|4                                              



|CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.                                                
|------------------------------------------------------------------------------------------------
|(A Development Stage Entity)                                                                    
|STATEMENTS OF CASH FLOWS                                                                        
|Six Months Ended June 30, 2004 and 2003                                                         
|And Cumulative Operations as a Development Stage Entity (January 1, 2000 through June  30, 2004)
|(unaudited)                                                                                     
|                                                                                                

|                                                                                 | 2004         | 2003         | Cumulative
throughJune 30, 2004
|-------------------------------------------------------------------------------- | ------------ | ------------ | -------------------------------
|                                                                                 |              |              |                                
|Cash flows from operating activities:                                            |              |              |                                
|Net loss                                                                         | $  (713,738) | $  (475,434) | $  (7,524,133)                 
|Adjustments to reconcile net loss to net cash
     used in operating activities: |              |              |                                
|Depreciation                                                                     | 795          | 2,500        | 18,555                         
|Writedown of note receivable                                                     | -            | 15,750       | 129,500                        
|Shares issued for services                                                       | 148,475      | 123,135      | 1,803,477                      
|Stock options and warrants issued for services                                   | 16,488       | -            | 520,148                        
|Changes in operating assets and liabilities:                                     |              |              |                                
|Accounts receivable                                                              | 10,000       | -            | -                              
|Accounts payable and accrued liabilities                                         | 264,669      | 265,032      | 2,425,603                      
|Net cash used in operating activities                                            | (273,311)    | (69,017)     | (2,626,850)                    
|                                                                                 |              |              |                                
|Cash flows from investing activities:                                            |              |              |                                
|Purchase of furniture and equipment                                              | -            | -            | (14,169)                       
|                                                                                 |              |              |                                
|Cash flows from financing activities:                                            |              |              |                                
|Sale of common shares and warrants                                               | 148,300      | 56,339       | 2,131,914                      
|Net advances from shareholder                                                    | -            | -            | (96,388)                       
|Net payments on long-term debt                                                   | (12,000)     | -            | (29,894)                       
|Payments to former subsidiary                                                    | -            | -            | (238,192)                      
|Additions to convertible debt and notes payable                                  | 137,425      | 13,000       | 323,425                        
|Proceeds (payments) - notes payable to stockholders                              | -            | -            | 161,500                        
|Net cash provided by financing activities                                        | 273,725      | 69,339       | 2,252,365                      
|                                                                                 |              |              |                                
|Net increase (decrease) in cash and cash equivalents                             | 414          | 322          | (388,654)                      
|                                                                                 |              |              |                                
|Cash at beginning of year                                                        | 333          | 729          | 389,401                        
|                                                                                 |              |              |                                
|Cash at end of year                                                              | $747         | $1,051       | $747                           
|                                                                                 |              |              |                                
|Supplemental disclosure:                                                         |              |              |                                
|Total interest paid                                                              | $-           | $-           | $45,343                        
|                                                                                 |              |              |                                

|Non-cash transactions:                                                                                                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|During 2004, the Company issued 216,000 common shares to settle $50,000 accounts payable and $4,000 accrued 
        wages.                                                                                                                
|During 2004, the Company negotiated a settlement of an account payable in which the note receivable issued for         stock of $45,000 was returned to the creditor for $95,900 in accounts payable, resulting in other income of $50,400.
|During 2003, the Company issued 710,000 common shares for $177,500 in accrued salaries.                                                                                                                                                    

|See accompanying notes to financial statements.
|-----------------------------------------------
|5                                              



|CAPACITIVE DEIONIZATION TECHNOLOGY SYSTEMS, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|NOTES TO FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|June 30, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 1 - Future Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company's significant operating losses and its working capital deficit and stockholders' deficit raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The following is a summary of management's plan to raise capital and generate additional operating funds.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Company was funded initially through investment by the principal shareholder.  Since 1998 funding has been through private investments including strategic alliances.                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Business opportunities for the next twelve months will be dependent on the company's ability to finance and expedite the completion of its planned manufacturing facility in Texas. Current opportunities require CDT production by year end 2004 of more than 5,000 CDT AquaCells per month. Limited CDT production is projected beginning in the third quarter 2004. The Company has commitments from senior engineering, operations, financial and manufacturing professionals to join the Company immediately after the completion of financing.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The strategic alliances, which have been established as well as additional alliances being negotiated, provide short-term financial and application opportunities. The pilot CDT system previously tested at Carlsbad, California has helped create additional municipal and wastewater applications. All opportunities require immediate CDT AquaCell production.                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



|* | Comprehensive financing from various government entities within the State of Texas                                                        
|- | ------------------------------------------------------------------------------------------------------------------------------------------
|* | Working capital from a Regional Investment Bank, including equity and debt                                                                
|* | Expansion of current strategic and investment alliances                                                                                   
|* | International joint ventures                                                                                                              
|* | An alliance with industry and government partners to accelerate pilot systems for the Powder River CBME Gas Wastewater Remediation Project
|* | Convertible debt financing from private investment group                                                                                  





|The Company is dependent upon the proceeds of private placements and strategic alliances of the Company's securities to implement its business plan and to finance its working capital requirements.  Should the Company's plans or its assumptions change or prove to be inaccurate or offering proceeds are insufficient to fund the Company's operations, the Company would be required to seek additional financing sooner than anticipated.  Management is confident it will be able to continue raising funds in the balance of 2004 through private placements and investment/distribution agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|There can be no assurances given that the Company will be successful in generating sufficient revenues from its planned activities or in raising sufficient capital to allow it to continue as a going concern which contemplates increased operating expenses, acquisition of assets and the disposition of liabilities in the normal course of business.  These factors can affect the ability of the Company to implement its general business plan including the completion of the required manufacturing facilities and continued proprietary CDT product improvements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Note 2 - Summary of Significant Accounting Policies and Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(a) Description of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Capacitive Deionization Technology Systems, Inc. (Formerly FarWest Group, Inc.) (the "Company" or "CDT Systems, Inc.") was organized under the laws of the state of Nevada in July 1996 to serve as a water technology company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|In January 1997, the Company entered into a manufacturing and marketing license agreement with Lawrence Livermore National Laboratories ("Lawrence Livermore") whereby the Company obtained the rights to Lawrence Livermore's patented Capacitive Deionization Technology ("CDT").  The Company has the rights to develop and manufacture a carbon aerogel CDT product for commercial use in the desalination, filtration and purification of water.  The manufacturing and marketing license is effective for the life of the patents (up to 17 years).  To maintain the license the Company must make contracted annual royalty payments to Lawrence Livermore beginning at $25,000 per year, then becoming a percentage of revenue.                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) Net Loss per Weighted Average Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Net loss per weighted average share is calculated using the weighted average number of shares of common stock outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulations S-B.  They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2003 which is included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission.  The interim unaudited financial statements should be read in conjunction with those financial statements to be included in the Form 10-KSB.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made.  Operating results for the three and six months ended June 30, 2004 are not indicative of the results that may be expected for the year ending December 31, 2004.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company applies the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations, in accounting for its stock-based compensation plans.  Under Opinion 25, compensation cost is measured as the excess, if any, of the market price of the Company's stock at the date of the grant above the amount an employee must pay to acquire the stock.  No compensation expense is recognized when the exercise price is equal to the market value of the stock on the day of the grant.  The Financial Standards Board ("FASB") published SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) on January 1, 1996 which encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options and other equity instruments to employees based on new fair value accounting rules.  Companies that choose not to adopt the new rules will continue to apply the existing rules, but will be required to disclose pro forma net income under the new method.                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company issued no options or warrants to employees during the quarter ended June 30, 2004 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Item 2 Management's discussion and analysis of financial condition and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|To date the Company has recognized nominal revenue.  Operating expenses were increased to $225,719 compared to $214,531 in the second quarter of 2003, principally due to the amount of cash raised from sales of common stock and convertible debentures.  Research and development expenditures for the second quarter of 2004 increased to $75,195 compared to $71,766 in the second quarter of 2003.  R & D expenses totaled 41% of operating expenses in the second quarter of 2004 compared to 44% in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|During the second quarter 2004, three-year convertible debentures, convertible at $.20 per share, provided $5,000 to the Company.  In addition, a private placement of 337,400 shares of the Company's rule 144 common stock was completed.  The private placement provided the Company $35,000 in cash through the issuance of 160,000 shares; 108,400 shares were issued for $27,100 of professional services and 69,000 shares were issued for $17,250 of engineering services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|During the first quarter 2004, three-year convertible debentures, convertible at $.50 per share, provided $132,425 to the Company.  In addition, a private placement of 1,093,700 shares of the Company's rule 144 common stock was completed.  The private placement provided the Company $113,300 in cash through the issuance of 461,200 shares; 140,000 shares were issued for $35,000 of engineering services, 276,500 shares were issued for $69,125 of professional services; and 216,000 shares were issued to settle $50,000 of accounts payable and $4,000 of wages payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Liquidity and capital resources.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Management recognizes the requirement for additional investment to execute the Company's business plan and complete the necessary manufacturing and research facilities.  Financing transactions are currently being negotiated.  These include an equity participation manufacturing joint venture, an equity investment in conjunction with a publicly financed trust fund and a long-term debt financing.  There is no certainty that these fundings will be completed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|Information regarding and factors affecting forward-looking statements.  Forward-looking statements include statements concerning plans, goals, strategies, future events or performances and underlying assumptions and other statements, which are other than statements of historical fact.  Certain statements contained herein are forward-looking statements and, accordingly, involve risk and uncertainties, which could cause the actual results or outcomes to differ materially from those expressed in the forward-looking statements.  The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, management's examination of historical trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectations, beliefs or projections will result, or be achieved, or accomplished.                                                                                                                                                       
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|Item 3.     Controls And Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Within 90 days prior to the filing of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chairman and Chief Executive Officer and the Company's Chief Financial Officer.  Based on that evaluation, the Company's Chairman and Chief Executive Officer, and Chief Financial Officer concluded that the Company's disclosure control and procedures are effective.  There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation                                                                                                                                                                                                                                                                                                                             
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|Disclosure controls and procedures are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chairman, Chief Executive Officer and President, and the Company's Chief Financial Officer as appropriate, to allow timely decision regarding required disclosure.                                                                                                                                                                                                                                                                                                                                                                                         
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|Part II Other Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|Item 2.  Changes in Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|During the second quarter 2004, three-year convertible debentures, convertible at $.20 per share, provided $5,000 to the Company.  In addition, a private placement of 337,400 shares of the Company's rule 144 common stock was completed.  The private placement provided the Company $35,000 in cash through the issuance of 160,000 shares; 108,400 shares were issued for $27,100 of professional services and 69,000 shares were issued for $17,250 of engineering services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|During the first quarter 2004, three-year convertible debentures, convertible at $.50 per share, provided $132,425 to the Company.  In addition, a private placement of 1,093,700 shares of the Company's rule 144 common stock was completed.  The private placement provided the Company $113,300 in cash through the issuance of 461,200 shares; 140,000 shares were issued for $35,000 of engineering services, 276,500 shares were issued for $69,125 of professional services; and 216,000 shares were issued to settle $50,000 of accounts payable and $4,000 of wages payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Item 6. Exhibits and Reports on Form 8-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|(b)   Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|31.1                                                                                                                                                                                                 | Certification  Pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002
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|31.2                                                                                                                                                                                                 | Certification  Pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002
|32.1                                                                                                                                                                                                 | Certification  Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002
|32.2                                                                                                                                                                                                 | Certification  Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002
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|SIGNATURE                                                                                                                                                                                           
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|Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.
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|Capacitive Deionization Technology Systems, Inc.                                                                                                                                                    
|/s/ Dallas Talley                                                                                                                                                                                   
|Dallas Talley                                                                                                                                                                                       
|Chairman of the Board,                                                                                                                                                                              
|Chief Executive Officer                                                                                                                                                                             
|                                                                                                                                                                                                    
|Dated: August 13, 2004                                                                                                                                                                              
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|Capacitive Deionization Technology Systems, Inc.                                                                                                                                                    
|/s/ Phil Marshall                                                                                                                                                                                   
|Phil Marshall                                                                                                                                                                                       
|Chief Financial Officer                                                                                                                                                                             
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|Dated: August 13, 2004                                                                                                                                                                              
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