UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report: August 10, 1995
ELECTRONIC SYSTEMS TECHNOLOGY INC.
(A Washington Corporation)
Commission File no. 2-92949-S
IRS Employer Identification no. 91-1238077
415 N. Quay St. #4
Kennewick WA 99336
(Address of principal executive offices)
Registrant's telephone number, including area code:(509) 735-9092
<PAGE>
ITEM 5. OTHER EVENTS
On AUGUST 10, 1995, the Company issued a letter to shareholders
discussing second quarter fiscal year 1995 results, product market
data and Pacific Stock Exchange listing requirements as was
presented at the annual shareholder meeting on June 2, 1995. This
shareholder letter is incorporated by reference and is attached
hereto as Exhibit 20.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND
EXHIBITS.
Exhibit 20.1 - Letter to Shareholders published AUGUST 10, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
T.L. KIRCHNER
By: T.L. Kirchner
President
Date: 10 August 1995
EXHIBIT 20.1-Letter to Shareholders
To Our Shareholders
We are pleased to report that 1995 year to date as of June 30th,
gross revenues have reached a record $855,408 as compared to
$632,728 for 1994 and $795,050 for 1993 for the same period. EST
reported a net profit before tax of $195,205 as compared to $85,577
for 1994. EST's net income after tax was $113,005 or $.02 per
share. Shareholder equity rose to $.34 from $.29 per share at the
2nd quarter 1994, a 17% increase.
(see appendix item no. 2 for description of graphic content not
displayed in electronic format)
The financials reflect a change in value of the Company's
investment in the Institutional Government Fund managed by Piper
Jaffray written-down to reflect the fair market value of the
Company's investment in the Fund as of June 30, 1995. This
devaluation resulted in a realized loss to be applied against
earnings for the second quarter 1995 of $46,558, lowering the
Company's invested value in the Fund from $160,607, including
reinvested dividends, to its current fair market value of $114,049.
The Securities and Exchange Commission (SEC) requested the Company
perform this devaluation because it considered declines experienced
by the Fund to be other than temporary, as defined by Financial
Accounting Standards Board Statement (FASB) number 115. In early
1994, the fund experienced rapid market value declines as a result
of rising interest rates, and unknown to the Company at the time,
use of derivative based instruments within the Fund. After
examination of the magnitude of decrease in value, pending
litigation, and the use of derivatives in the Fund, the decrease
was deemed to be other than temporary by the SEC. As required the
Company recognized a realized loss of the difference between the
cost of the Fund and current fair market value of the Fund.
<PAGE>
<TABLE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
SELECTED FINANCIAL DATA
<CAPTION>
Six months ended June 30 June 30
1995 1994
(unaudited) (unaudited)
========== ==========
<S> <C> <C>
Sales $ 739,626 $ 567,724
Other revenue 115,782 65,004
Gross profit 454,725 349,744
Net income before taxes 195,205 85,577
after taxes 113,005 56,481
Earnings per share before taxes
Primary $ 0.04 $ 0.02
Fully diluted 0.04 0.02
Earnings per share after taxes
Primary $ 0.02 $ 0.01
Fully diluted 0.02 0.01
Weighted average shares outstanding
Primary 5,357,078 5,371,667
Fully diluted 5,357,078 5,371,667
Total assets $ 1,823,940 $ 1,561,008
Long-term debt and capital
lease obligations $ 0 $ 0
Shareholders' equity $ 1,722,476 $ 1,476,724
Shareholders' equity per share
$ 0.34 $ 0.29
Working Capital $ 1,608,048 $ 1,370,793
Current ratio 19 : 1 17 : 1
Equity to total assets 94% 95%
</TABLE>
<PAGE>
Currently, the Company is a participant in a class action suit
against Piper Jaffray, the managers of the Fund. This class action
resulted from the losses experienced by investors in the Fund as a
whole. There has been a tentative settlement of the action, the
final details of which are still in negotiation. It is expected
the settlement will provide some recovery of the losses experienced
in the Company's investment, but at the current time a set amount
to be received from the settlement is unclear.
MARKET ANALYSIS
Prior to the Annual Shareholder's meeting in June, the shareholders
requested an overview of the "Wireless Market" and EST's position
within that market. Listed below is a summary of that presentation.
The Wireless Market is comprised of two major market segments:
1. Commercial Providers of Wireless Network Services and
Equipment. A common example is the provider of cellular telephone
services. These companies provide the infrastructure which allow
the telephones to communicate. Customers may purchase the equipment
(a phone in this example) from the commercial provider or 3rd party
vendor. The provider of a wireless service receives revenue from
the rental of air-time to use the equipment. Other examples
include:
Mobile Satellite Services
Specialized Mobile Radio/Enhanced Mobile Radio (SMR/ESMR).
Examples include:
Cellular Digital Packet Data (CDPD)
Personal Paging
Proprietary switched networks (ARDIS, RAM, and Metricom)
2. Commercial providers of wireless equipment where the user
provides the infrastructure necessary for operation. A common
example is a service company that purchases and installs their own
2-way radio communication equipment for employee usage. This
example company can cost justify the up front expenditure over the
use of cellular phones, because once the radio system is installed
they pay no air time for equipment usage. These manufactures have
specific markets, and in some cases their markets will overlap.
Listed below are the major technology groups:
Microwave systems
Voice radio communications
Packet burst technology
Spread spectrum technology
Infrared technology
<PAGE>
Table 1
1994 REVENUE BREAKDOWN
Industrial Control 63%
(Domestic)
Industrial Control 19%
(Foreign)
Federal 18%
Electronic Systems Technology fits into the packet burst technology
group, by providing medium distance (up to 15 miles), medium data
rate (4,800 bps) wireless local area network for commercial
applications. The customer buys our products because of savings in
air time expenses and enhanced performance not provided by the
wireless service providers. In 1994, 82% of our revenues(domestic
and foreign) were derived from the industrial control market (see
Table 1). Table 2 gives an overview of the overall size of the
market.
Table 2
INDUSTRIAL CONTROL MARKET
North America $ 1,000 M
United States $ 900 M
Canada $ 100 M
Europe $ 1,800 M
Asia Pacific $ 1,200 M
South America $ 100 M
Mexico $ 50 M
Table 3 shows the approximate size of the wireless communication
market within the Industrial Control Market in North America. It
is estimated that EST has a 11% market share in the United States
and 14% in Canada. The forecasted growth of wireless control
within the industrial market is 10% to 20% per year.
Table 3
WIRELESS INDUSTRIAL CONTROL MARKET
North America $ 10 M
United States $ 9 M
Canada $ 1 M
<PAGE>
RESEARCH AND DEVELOPMENT
In order to increase revenues we have to increase market share
and/or open new markets. EST is presently on a very ambitious
development program to release a new family of products in mid-year
1996. These new products will aid to increase our market share and
maintain leadership in our existing markets. In addition we are
developing a new product for release in late 1996 that will allow
us to explore new markets.
PACIFIC STOCK EXCHANGE
As stated at the Annual Meeting, EST is pursuing listing on the
Pacific Stock Exchange. Table 4 gives an overview of the listing
requirements and our position at end of the second quarter. We have
met all listing requirements with the exception of the bid price of
our stock and the market value of the float. To qualify, our stock
must trade at or above $1.00 a share, and the market value of the
float must exceed $2,250,000, for six months prior to applying for
listing. The public "float" shares outstanding and the market
value of the public "float" are based on the Pacific Stock
Exchange's (PSE) definition of the public float. The public float
definition for the PSE is Corporation shares issued and
outstanding, not including shares held by officers, directors, and
affiliates of the Corporation, and any concentrated holdings
representing 5% or more of the shares issued and outstanding. The
share price used for calculating the current market value of the
public float is an average between the bid and ask price per share
for December 31, 1994, and June 30, 1995 .
<TABLE>
Table 4
<CAPTION>
PACIFIC STOCK EXCHANGE LISTING ELECTRONIC SYSTEMS
REQUIREMENTS TECHNOLOGY INC.
Selected Financials
(Unaudited)
CATEGORY LISTING Jun. 30 1994
REQUIREMENTS 1995 Year End
<S> <C> <C> <C>
TOTAL ASSETS $1,824,000 $1,598,000
TANGIBLE ASSETS $1,824,000 $1,598,000
NET TANGIBLE ASSETS $1,500,000 $1,722,000 $1,556,000
STOCK HOLDER EQUITY $1,722,000 $1,556,000
PRE-TAX INCOME $ 195,000 $ 291,000
AFTER TAX INCOME $ 100,000 $ 113,000 $ 186,000
PUBLIC FLOAT (SHARES) 750,000 4,320,000 4,320,000
MARKET VALUE OF FLOAT $2,250,000 $1,080,000 $1,382,000
BID PRICE $ 1.00 $ .22-.28 $ .25-.38
NO. OF SHAREHOLDERS 750 +770 +770
</TABLE>
It is Management's opinion that the Company's stock is under
valued, therefore Management is considering a stock buyback plan,
which must be approved by the Company's Board of Directors. If the
plan is approved, EST will submit the required public filings as
specified by securities regulations.
<PAGE>
EST is pleased to announce that as of August 7th, the Company is a
participant in the Securities and Exchange Commission Electronic
Data Gathering, Analysis, and Retrieval (EDGAR) system.
Information about the Company, such as quarterly and annual
reports, will be easily available to shareholders and interested
parties via this electronic information service.
With the development of new ESTeem products in 1995, we have taken
decisive, long term steps to strengthen our leadership role in
wireless data communication for industrial markets. As we move
into this new wireless era, Management believes the outcome will be
beneficial to both the shareholders and the Company.
T.L. Kirchner
President
Corporate And Investor Information
Please direct inquiries to:
Investor Relations
Electronic Systems Technology Inc.
415 North Quay Street
Kennewick, Washington 99352
509-735-9092 (O) 509-783-5475 (Fax)
<PAGE>
APPENDIX:
Item no. 1: (graphic material not included in electronic filing
format)
Located at the top left of the document was the Electronic Systems
Technology, Inc. trademarked company logo, showing a black square
field containing the stylized letters E S T.
Item no. 2: (graphic material not included in electronic filing
format)
Located between the first and second paragraphs of the first page
of the shareholder letter was a bar graph showing the comparison of
2nd quarter year to date revenues for the years 1995, 1994, 1993.
The data presented was as follows:
1995 year to date revenues: $855,408
1994 year to date revenues: $632,728
1993 year to date revenues: $795,050
