UNITED STATES SECURITIES AND EXCHANGE COMMISSIONS
WASHINGTON D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
----------- ------------
Commission File Number: 2-92949-S
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(A Washington Corporation)
I.R.S. Employer Identification no. 91-1238077
415 N. Quay St., #4
Kennewick WA 99336
(509) 735-9092
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ] .
The number of shares outstanding of common stock as of March 31, 1996 was
5,006,667.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(as prepared by Management)
(Unaudited)
<CAPTION>
SELECTED FINANCIAL DATA
Three Months Ended
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
<S> <C> <C>
Sales $ 352,057 $ 262,139
Other Revenues $ 21,030 $ 17,646
Gross Profit $ 227,758 $ 155,170
Net Income Before Taxes $ 85,618 $ 35,849
Net Income After Taxes $ 55,310 $ 23,660
Earnings Per Share Before Taxes
Primary $ .016 $ .007
Fully Diluted $ .016 $ .007
Earnings Per Share After Taxes
Primary $ .01 $ .004
Fully Diluted $ .01 $ .004
Weighted Average Shares Outstanding
Primary 5,461,206 5,350,845
Fully Diluted 5,461,206 5,350,845
Total Assets $ 2,017,352 $ 1,618,813
Long-Term Debt and Capital
Lease Obligations $ 0 $ 0
Shareholders' Equity $ 1,932,490 $ 1,582,036
Shareholders' Equity Per Share $ 0.39 $ 0.32
Working Capital $ 1,786,036 $ 1,477,130
Current Ratio 22:1 54:1
Equity To Total Assets 96 % 98 %
</TABLE>
<PAGE>
<TABLE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
<CAPTION>
CONDENSED BALANCE SHEET
(as prepared by Management)
(Unaudited)
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,378,219 $ 1,162,726
Marketable Securities 0 121,117
Certificates of Deposit
(over 90 day maturity) 0 102,000
Accounts Receivable, net of allowance
for uncollectibles of $1,284 190,747 157,920
Inventory 279,740 297,037
Accrued Interest 3,801 3,745
Prepaid Expenses 9,655 4,134
Deferred tax asset 5,287 5,287
Note Receivable (current portion) 3,449 3,449
--------- ---------
Total Current Assets $ 1,870,898 $ 1,857,415
PROPERTY & EQUIPMENT, net of depreciation
of $162,638 at Mar. 31, 1996
and $155,504 at Dec. 31, 1995 301,437 300,747
OTHER ASSETS 7,655 8,114
--------- ---------
TOTAL ASSETS $ 2,017,352 $ 2,010,772
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 34,607 $ 56,493
Accrued Liabilities 19,947 18,434
Federal Income Taxes Payable 30,308 58,665
--------- ---------
Total Current Liabilities $ 84,862 $ 133,592
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock, $.001 Par Value
50,000,000 Shares Authorized,
5,006,667 Shares Issued And Outstanding $ 5,007 $ 5,007
Additional Paid-in Capital 918,057 918,057
Appropriated Retained Earnings for
stock repurchase plan 100,000 0
Retained Earnings 909,426 954,116
--------- ---------
$ 1,932,490 $ 1,877,180
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,017,352 $ 2,010,772
========= =========
</TABLE>
(See "Notes To Financial Statements")
<PAGE>
<TABLE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
<CAPTION>
CONDENSED STATEMENT OF OPERATIONS
(as prepared by Management)
(Unaudited)
Three Months Ended
Mar. 31,1996 Mar. 31, 995
------------ ------------
<S> <C> <C>
Sales $ 352,057 $ 262,139
-------- --------
Cost of Sales
Beginning Inventory 297,037 423,932
Purchases and Allocated Costs 107,002 84,585
-------- --------
$ 404,039 $ 508,517
Ending Inventory 279,740 401,548
-------- --------
Total Cost of Sales $ 124,299 $ 106,969
-------- --------
Gross Profit $ 227,758 $ 155,170
-------- --------
Operating Expenses
Finance/Administration $ 83,629 $ 68,966
Research & Development 30,644 18,751
Marketing 40,387 36,752
Customer Service 8,510 12,498
-------- --------
Total Operating Expense $ 163,170 $ 136,967
-------- --------
Operating Income $ 64,588 $ 18,203
-------- --------
Other Income (expenses)
Interest Income $ 16,552 $ 11,156
Realized loss on Marketable Securities ( 3,522) 0
Recovery from Marketable Securities Litigation 3,700 0
Engineering Services 39,728 42,286
Engineering Support ( 35,428) ( 35,796)
-------- --------
Net Other Income (expense) $ 21,030 $ 17,646
-------- --------
Net Income Before Income Tax $ 85,618 $ 35,849
Provision For Income Tax 30,308 12,189
-------- --------
NET INCOME $ 55,310 $ 23,660
======== ========
Earnings Per Share
Before Tax $ 0.016 $ 0.007
After Tax $ 0.010 $ 0.004
</TABLE>
(See "Notes To Financial Statements")
<PAGE>
<TABLE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
(as prepared by Management)
(Unaudited)
Three Months Ended
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
IN OPERATING ACTIVITIES:
Net Income $ 55,310 $ 23,660
Noncash items included in income:
Depreciation 7,134 5,225
Amortization 459 459
Realized Loss on Marketable Securities 3,522 0
DECREASE (INCREASE) IN CURRENT ASSETS:
Accounts Receivable, Net ( 32,827) 4,980
Inventory 17,297 22,384
Prepaid Expenses ( 5,521) 197
Accrued Interest ( 56) ( 1,795)
Prepaid Income Taxes 0 12,190
INCREASE (DECREASE) IN CURRENT LIABILITIES:
Accounts Payable, Accrued Expenses And
Other Current Liabilities ( 20,373) ( 5,277)
Accrued Federal Income Taxes ( 28,357) 0
----------- -----------
$ ( 3,412) $ 62,023
CASH FLOWS PROVIDED (USED)
IN INVESTING ACTIVITIES:
Additions To Property And Equipment $ ( 690) $ ( 5,064)
Refund of Deposits 0 184
Certificate of Deposit classified as
cash equivalent 102,000 0
Proceeds from sale of Marketable Securities 117,595 ( 3,383)
----------- -----------
$ 218,905 $ ( 8,263)
----------- -----------
CASH FLOWS (USED) IN FINANCING ACTIVITIES:
Proceeds From Note Receivable $ 0 $ 462
----------- -----------
$ 0 $ 462
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 215,493 $ 54,222
Cash And Equivalents At Beginning of Period 1,162,726 769,967
----------- -----------
Cash And Equivalents At End of Period $ 1,378,219 $ 824,189
=========== ===========
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
<TABLE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
(as prepared by Management)
(Unaudited)
(continued)
Three Months Ended
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOWS INFORMATION:
Cash Paid Year To Date:
Interest 0 0
Federal Income Taxes $ 58,665 $ 0
=========== ===========
Cash And Cash Equivalents:
Cash $ 15,782 $ 11,198
Money Market Account 455,294 208,121
Certificates Of Deposit 907,143 103,870
Bankers Acceptance 0 501,000
---------- ----------
$ 1,378,219 $ 824,189
========== ==========
ITEMS NOT AFFECTING CASH FLOWS:
Recovery Of Unrealized Loss,
Marketable Securities (increase in value
over period) $ 0 $ 2,818
========== ==========
</TABLE>
(See "Notes To Financial Statements")
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(as prepared by Management)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed financial statements of Electronic Systems Technology, Inc.
(the "Company"), presented in this Form 10Q are unaudited and reflect, in
the opinion of Management, a fair presentation of operations for the
three month periods ended March 31, 1996 and March 31, 1995. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted pursuant to the applicable
rules and regulations of the Securities and Exchange Commission. In
preparation of the condensed financial statements, certain amounts and
balances have been restated from previously filed reports to conform with
the condensed format of the 1996 presentation. These condensed
financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Form 10K
for the year ended December 31, 1995 as filed with Securities and
Exchange Commission.
The results of operation for the three month periods ended March 31, 1996
and March 31, 1995, are not necessarily indicative of the results
expected for the full fiscal year or for any other fiscal period.
NOTE 2 - INVENTORIES
Inventories are stated at lower of cost or market with cost determined
using the FIFO (first in, first out) method. Inventories consist of the
following:
March 31 December 31
1996 1995
-------- -----------
Parts $ 190,982 $ 198,487
Work in progress 15,091 0
Finished goods 73,667 98,550
-------- --------
$ 279,740 $ 297,037
======== ========
NOTE 3 - EARNINGS PER SHARE
Primary earnings per common share are based on the weighted average
number of shares outstanding during the period after consideration of the
dilutive effect of stock options and restricted stock awards. The
primary weighted average number of common shares outstanding was
5,461,206 and 5,350,845 for the quarters ended March 31, 1996 and March
31, 1995, respectively. Also, fully diluted earnings per common share
assume conversion of derivative securities when the result is dilutive.
NOTE 4 - STOCK OPTIONS
As of March 31, 1996, the Company had outstanding stock options which
have been granted periodically to individual employees and directors with
no less than three years of continuous tenure with Company. On February
9, 1996, additional stock options to purchase shares of the Company's
<PAGE>
common stock were granted to individual employees and directors with no
less than three years continuous tenure. The options granted on February
9, 1996 totaled 200,000 shares under option and have an exercise price of
$0.42 per share. The options granted on February 9, 1996 may be exercised
any time during the period from February 9, 1996 through February 8, 1999.
The Company's Form 8-K dated February 9, 1996, as filed with the
Securities and Exchange Commission is incorporated herein by reference.
All outstanding stock options must be exercised within 90 days after
termination of employment.
During the 12 month period from March 31, 1995 to March 31, 1996, 125,000
shares under option expired, no shares under option were exercised, and
200,000 shares under option were granted. At March 31, 1996 there were
525,000 shares under option reserved for future exercises.
NOTE 5 - RELATED PARTY TRANSACTIONS
For the quarter ended March 31, 1996, services in the amount of $6,019
were contracted with Manufacturing Services, Inc., of which the
owner/president is a member of the Board of Directors of EST.
NOTE 6 - MARKETABLE SECURITIES
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities. SFAS No. 115 establishes generally accepted accounting
principles for the financial accounting, measurement and disclosure
principals for (1) investments in equity securities that have readily
determinable fair market value and (2) all investments in debt
securities. The change had no effect on prior years' results. All of
the marketable securities held by the Company consisted of securities
"available-for-sale", as defined by SFAS No. 115. The basis on which cost
is determined in computing realized gain or loss is the specific
identification method. During 1995, a total loss of $49,953 was
recognized by the Company due to impairment of the value of the
marketable securities held by the Company. As of March 31, 1996, the
Company had liquidated its marketable securities investment. A summary
of the Company's marketable security investment activity as of March 31,
1996 is shown below:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
---------- -----------
<S> <C> <C>
Aggregate fair value of marketable securities $ 0 $ 121,117
Gross unrealized loss due to impairment
in marketable securities -- 49,953
---------- -----------
Amortized cost basis 0 171,070
========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Changes in marketable securities for the period ended
March 31, 1996 are as follows:
March 31 December 31
1996 1995
---------- -----------
<S> <C> <C>
Cost $ 171,070 $ 153,726
Dividends and capital gains reinvested 0 17,344
Sale of securities (117,595) --
Realized loss due to impairment of
marketable securities ( 49,953) (49,953)
Realized loss on sale of securities ( 3,522) --
-------- ---------
Fair market value $ 0 $ 121,117
======== =========
</TABLE>
The Company was included in a class action suit settlement against the
manager of the Company's marketable securities investments, namely Piper
Jaffray. In February 1996, the Company received the first payments
pursuant to the settlement in the amount of $3,700 and expects to receive
annual settlements of similar amounts over the next three years.
NOTE 7 - APPROPRIATED RETAINED EARNINGS
On March 26, 1996, the Company's Board of Directors authorized the
establishment of a plan for the repurchase of the Company's common
stock. Pursuant to the plan, the Company may repurchase shares of its
common stock from time to time in open market transactions through
brokers and dealers, up to the amount allocated by the plan of
$100,000. Repurchase transactions may commence as soon as April 12,
1996, and may continue through June 30, 1996. The Company's Form 8-K
dated March 26, 1996 as filed with the Securities and Exchange
Commission, is incorporated herein by reference. At the time of
establishment of the stock repurchase plan by the Company, amounts
equal to those allocated by the plan were appropriated in the Company's
retained earnings reserve and will be distributed from the Company's
cash reserves as necessary to fund the stock repurchase plan. As of
March 31, 1996, no shares of the Company's stock had been repurchased
under the plan.
<PAGE>
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Management's discussion and analysis is intended to be read in
conjunction with the Company's audited financial statements and the
integral notes thereto. The following statements may be forward looking
in nature and actual results may differ materially.
RESULTS OF OPERATION
REVENUES: Total revenues from the sale of EST products and services
increased to $391,785 for the first quarter of 1996 as compared to
$304,425 in the first quarter of 1995, reflecting a 29% increase. Gross
revenues increased to $412,037 for the quarter ending March 31, 1996,
from $315,581 for the same quarter of 1995. The increase in revenues is
due mainly to increased product sales, which is attributed to a trend
continuing from 1995, of processing and shipping customer orders of
larger unit quantities, as well as increases in total orders processed,
of the Company's ESTeem(TM) wireless modem systems and accessories.
Management believes this trend is due in part to increased advertising by
the Company, increased awareness of wireless technology options by
potential buyers of the Company's products, and customer referrals from
the Company's existing customer base.
The Company's revenues fall into three major customer categories,
Domestic, Export and U.S. Government Sales. Domestic commercial sales
increased to $307,350 in the first quarter of 1996 as compared to
$222,773 for the first quarter of 1995. Foreign export sales for the
first quarter of 1996 increased to $51,768 as compared to the $47,643 in
foreign sales in the same quarter of 1995. Exports sales to the former
Yugoslavian countries of Croatia and Slovenia remain strong. It is
Management's belief that the Company's products are used in these
Countries to bridge damaged infrastructures. Sales to U.S. Government
programs decreased from first quarter 1995 levels of $41,386, to $32,674
for the first quarter of 1996. The reduction in U.S. Government sales is
due to lower purchases from the U.S. government. Sales to the U.S.
Government under the Automatic Identification Technology (AIT) contract
administered by Intermec Corporation remained at levels experienced in
1995. The decrease in engineering services billed for the first quarter
of 1996 as compared with the same quarter of 1995, is a result of
decreases in the size and scope of the engineering services requested
when compared with the first quarter of 1995. During the quarter ended
March 31, 1996 no sales to a single customer comprised 10% or more of the
Company's product sales.
A percentage breakdown of EST's major customer categories of Domestic,
Export and U.S. Government Sales, for the first quarter of 1996 and 1995
are as follows:
For the first quarter of
1996 1995
------ -------
Domestic Sales 76% 64%
Export Sales 15% 21%
U.S. Government Sales 9% 15%
<PAGE>
A percentage breakdown of EST's product sales categories for the first
quarter of 1996 and 1995 are as follows:
For the first quarter of
1996 1995
------ -------
ESTeem Model 84SP/85SP 3% less than 1%
ESTeem Model 85 17% 13%
ESTeem Model 95 21% 8%
ESTeem Model 96 30% 44%
ESTeem Model 98 0% 3%
PEM and PEM-CPU 0% 0%
ESTeem Accessories 17% 12%
Factory Services 1% 3%
Site Support 10% 13%
Other 1% 4%
Sales include foreign export sales as follows:
Three Months Ended
March 31 March 31
1996 1995
-------- --------
Export sale $ 51,768 $ 47,643
Percent of sales 15% 18%
The geographic distribution of foreign sales for the first quarter of
1996 and 1995 is as follows:
Percent of Foreign Sales
------------------------
March 31 March 31
COUNTRY 1996 1995
------- -------- --------
Slovenia/Croatia 59% 10%
Mexico 31% 4%
Canada 10% 61%
Taiwan -- 25%
Singapore -- less than 1%
The bulk of the Company's domestic sales for the first quarter of 1996
continue to be used in Supervisory Control and Data Acquisition (SCADA)
applications. It is Management's opinion that these applications will
continue to provide the largest portion of the Company's domestic sales
revenues in the foreseeable future. Products purchased by foreign
customers in the first quarter of 1996 were used primarily in Industrial
Control applications. In Management's opinion, these applications will
continue to provide the largest portion of the Company's foreign revenues
in the foreseeable future. Products purchased by U.S. Government
agencies or by U.S. Government contractors in continue to be used
primarily in Inventory Control.
The Company's subcontract with UNISYS, dated December 23, 1993, is a five
year indefinite delivery, indefinite quantity, fixed price contract
through September 1997. Based on the terms of the UNISYS contract, and
contracts of this type in general, Management does not base liquidity,
profitability, or material purchase projections on anticipated sales.
The Company's economic position allows it to respond to UNISYS orders on
<PAGE>
an as needed basis. It is Management's opinion that due to the nature of
this contract, sales or timing of orders, if any, pursuant to the
contract cannot be predicted.
The Company's AIT subcontract, dated July 26, 1994, with INTERMEC is a
five year indefinite delivery, indefinite quantity, fixed price contract
through September 1999. Based on the terms of the AIT contract, and
contracts of this type in general, Management does not base liquidity,
profitability, or material purchase projections on anticipated sales.
The Company's economic position allows it to respond to AIT orders on an
as needed basis. It is Management's opinion that due to the nature of
this contract, sales or timing of orders, if any, pursuant to the
contract cannot be predicted.
Based on previous years activity, the majority of all Federal government
purchases are under the Company's GSA contract. Projections regarding
liquidity, profitability, and material purchases are based on past
history of annual purchases. Historically Federal sales average
approximately 18% of annual sales, but this level cannot be guaranteed.
Due to the uncertain nature of Federal purchasing, procurement of
material and production planning is adjusted quarterly based on demand.
It is Management's opinion that the majority of Federal purchases in 1996
will be under this contract.
The Company's revenues have historically fluctuated from quarter to
quarter due to timing factors such as customer order placement and
product shipments to customers, as well as customer buying trends, and
changes in the general economic environment. The procurement process
regarding plant and project automation, or project development, which
usually surrounds the decision to purchase ESTeem products can be
lengthy. This procurement process may involve bid activities unrelated
to the ESTeem products, such as additional systems and subcontract work,
as well as capital budget considerations on the part of the customer.
Because of the complexity of this procurement process, forecasts in
regard to the Company's revenues become difficult to predict.
BACKLOG:
The Corporation had minimal backlog at March 31, 1996. Customers
generally place orders on an "as needed basis". Delivery is generally
made within 5 working days after receiving the order.
COST OF SALES:
Cost of sales percentages of gross sales for the first quarters of 1996
and 1995 were 35% and 41% of gross sales respectively. Cost of Sales
variations are attributed to the type of product sold and the size of the
order. Larger orders grant lower sales prices because of volume
discounting, reducing the margin of profit. During the first quarter of
1996 a different mix of products sold resulted in a more favorable cost
of sales percentage.
<PAGE>
OPERATION EXPENSES:
Operating expenses for the first quarter of 1996 increased $26,193 from
levels in the first quarter of 1995. The following is a delineation of
operating expenses:
March 31 March 31 Increase
1996 1995 (Decrease)
-------- -------- ---------
Finance/Administration $ 83,629 $ 68,966 $ 14,663
Research/Development 30,644 18,751 11,893
Marketing 40,387 36,752 3,635
Customer Service 8,510 12,498 ( 3,998)
-------- -------- --------
Total Operating Expenses $163,170 $136,967 $ 26,193
======== ======== ========
FINANCE AND ADMINISTRATION:
During the first quarter of 1996 Finance and Administration expenses
increased $14,663 over the first quarter of 1995. This change is a
result of wage bonuses paid in January of 1996 as compared with bonuses
paid in January of 1995.
RESEARCH AND DEVELOPMENT:
The Company has under development a new generation of ESTeem products
scheduled for release in the second quarter of 1996. These products are
planned to replace existing product lines in the VHF and UHF ESTeem radio
modem product categories, and are targeted for applications within the
Industrial Control and Federal markets. The new generation of products
described above are currently under development and have to date not
received required FCC Type Acceptance. During the first quarter of 1996,
Research and Development expenses increased $11,893 over the same period
in 1995. This increase is due to subcontracted Research and Development
expertise associated with the development of the Company's new generation
of products as compared with expenditures for the same period in 1995.
Management foresees increased Research and Development expenditures as a
whole during 1996.
MARKETING:
During the first quarter of 1996, marketing expenses increased $3,635
over the same period in 1995. The increase is attributable to increased
printing services and professional expertise subcontracted in the quarter
ending March 31, 1996, when compared with the same quarter of 1995.
CUSTOMER SERVICE:
Customer service expenses decreased by $3,998 in the first quarter of
1996, over the same period in 1995. The decrease is attributable to a
greater percentage of the costs of the customer service department being
billed to customer projects as engineering support, when compared with
the same quarter of 1995.
<PAGE>
INTEREST AND DIVIDEND INCOME:
The Corporation earned $16,552 in interest and dividend income during the
quarter ending March 31, 1996. Sources of this income were savings and
money market accounts, short term investments, and investments in
marketable securities.
ENGINEERING SUPPORT:
Engineering support costs decreased to $35,428 as of March 31, 1996, as
compared to $35,796 for the same period of 1995. The decrease in
engineering support costs for the first quarter of 1996, is a result of
decreases in the size and scope of the engineering services requested by
customers when compared with the first quarter of 1995.
NET INCOME:
The Corporation had a net income of $55,310 for the first quarter of
1996 compared to a $23,660 net income for the same quarter of 1995.
The net profit increase is attributed to overall increased product
sales, lower cost of sales percentage, and increased interest income,
as described above.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Corporation's current asset to current liabilities ratio at March 31,
1996 was 22:1 compared to 13.9:1 at December 31, 1995. The increase in
current ratio is primarily attributable to decreases in trade accounts
payable and federal income tax liability as compared with year-end 1995.
For the quarter ending March 31, 1996, the Company had cash and cash
equivalent short-term investment holdings of $1,378,219 as compared to
cash and cash equivalent holdings of $1,162,726 at December 31, 1996.
This increase is attributable to a certificate of deposit being
classified as a cash equivalent due to approaching maturity, and proceeds
received by the Company from the sale of its marketable securities
investment held at year-end 1995.
Accounts receivable increased to $190,747 as of March 31, 1996, from
December 31, 1995 levels of $157,920, due to increased sales revenues
during the first quarter. Management believes that all of the Company's
accounts receivable as of March 31, 1996 are collectible. Inventory
decreased to $279,740 at March 31, 1996, from December 31, 1995 levels of
$297,037, due to increased customer sales decreasing inventory stocks and
a conservative procurement strategy on the part of the Company. It is
Management's opinion that inventory levels will increase significantly in
1996 as components are purchased for the production of the Company's new
products. Prepaid expenses increased from December 31, 1995 levels of
$4,134 to $9,655 as of March 31, 1996 mainly due to increased prepaid
fees for tradeshow attendance.
The Company's fixed assets increased to $301,437 as of March 31, 1996, a
minimal increase from December 31, 1995 levels of $300,747, resulting in
capital expenditures of $690 for the first quarter 1996. The level of
expenditure is lower than normal for the Company, and Management expects
additional capital expenditures to support the production and sale of its
new products scheduled for release in 1996.
<PAGE>
As of March 31, 1996 the Company's trade accounts payable balances were
$34,607 as compared with $56,493 at December 31, 1995, this decrease is
the result of lower levels of capital expenditures and purchasing for
inventory stores in the first quarter of 1996. Federal income taxes
payable decreased from $58,665 at December 31, 1996, to $30,308 as of
March 31, 1996 due to the Company making normal tax payments for amounts
due at year end 1995.
It is Management's opinion that the Company's cash and cash equivalent
reserves, and working capital at March 31, 1996 is sufficient to satisfy
requirements for operations, capital expenditures, and other expenditures
as may arise within 1996.
FORWARD LOOKING STATEMENTS: The above discussion may contain forward
looking statements that involve a number of risks and uncertainties. In
addition to the factors discussed above, among other factors that could
cause actual results to differ materially are the following: competitive
factors such as rival wireless architectures and price pressures;
availability of third party component products at reasonable prices;
inventory risks due to shifts in market demand and/or price erosion of
purchased components; change in product mix, and risk factors that are
listed in the Company's reports and registration statements filed with
the Securities and Exchange Commission.
<PAGE>
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K/A dated February 9, 1996 is incorporated herein by reference.
Form 8-K dated February 9, 1996 is incorporated herein by reference.
Form 8-K dated March 21, 1996 is incorporated herein by reference.
Form 8-K dated March 26, 1996 is incorporated herein by reference.
Exhibit Index Reference
Form 10-QSB
Exhibit Number Notes to Financial Statements
4. Instruments defining the Rights of Security Holders including indentures.
Form 8-K dated Jul 12, 1991 is incorporated herein by reference.
Form 8-K dated Dec 14, 1992 is incorporated herein by reference.
Form 8-K dated Dec 10, 1993 is incorporated herein by reference.
Form 8-K/A dated Feb 3, 1995 is incorporated herein by reference.
Form 8-K dated Feb 9, 1996 is incorporated herein by reference.
11. Statement Re: computation of per share earnings. Note 3 to
Financial Statements
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
T.L. KIRCHNER
Date: May 8, 1996 Name: T.L. Kirchner
Title: Director/President
(Principal Executive Officer)
ROBERT SOUTHWORTH
Date: May 8, 1996 Name: Robert Southworth
Title: Director/Secretary/Treasurer
(Principal Finance Officer)
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED BALANCE SHEET, STATEMENT OF OPERATIONS, AND STATEMENT OF CASH
FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10QSB,
FOR MARCH 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,378,218
<SECURITIES> 0
<RECEIVABLES> 192,031
<ALLOWANCES> 1,284
<INVENTORY> 279,740
<CURRENT-ASSETS> 1,870,898
<PP&E> 464,075
<DEPRECIATION> 162,638
<TOTAL-ASSETS> 2,017,352
<CURRENT-LIABILITIES> 84,862
<BONDS> 0
<COMMON> 5,007
0
0
<OTHER-SE> 1,009,426
<TOTAL-LIABILITY-AND-EQUITY> 1,932,490
<SALES> 352,057
<TOTAL-REVENUES> 412,037
<CGS> 124,299
<TOTAL-COSTS> 159,727
<OTHER-EXPENSES> 163,170
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 85,618
<INCOME-TAX> 30,308
<INCOME-CONTINUING> 55,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,310
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
