UNITED STATES SECURITIES AND EXCHANGE COMMISSIONS
WASHINGTON D.C. 20549
FORM 10-QSB/A (Amended)
[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
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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
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<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
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<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 138,799 145,243
OTHER ASSETS 7,655 8,114
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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
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Total Current Liabilities $ 84,862 $ 133,592
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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
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$ 1,932,490 $ 1,877,180
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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
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<S> <C> <C>
Sales $ 352,057 $ 262,139
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Cost of Sales
Beginning Inventory 297,037 423,932
Purchases and Allocated Costs 107,002 84,585
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$ 404,039 $ 508,517
Ending Inventory 279,740 401,548
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Total Cost of Sales $ 124,299 $ 106,969
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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
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Total Operating Expense $ 163,170 $ 136,967
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Operating Income $ 64,588 $ 18,203
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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
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<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
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$ ( 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)
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$ 218,905 $ ( 8,263)
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CASH FLOWS (USED) IN FINANCING ACTIVITIES:
Proceeds From Note Receivable $ 0 $ 462
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$ 0 $ 462
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NET INCREASE IN CASH AND CASH EQUIVALENTS $ 215,493 $ 54,222
Cash And Equivalents At Beginning of Period 1,162,726 769,967
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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
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$ 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
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$ 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
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<S> <C> <C>
Aggregate fair value of marketable securities $ 0 $ 121,117
Gross unrealized loss due to impairment
in marketable securities -- 49,953
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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
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<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) --
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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>
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: July 24, 1996 Name: T.L. Kirchner
Title: Director/President
(Principal Executive Officer)
ROBERT SOUTHWORTH
Date: July 24, 1996 Name: Robert Southworth
Title: Director/Secretary/Treasurer
(Principal Finance Officer)
