UNITED STATES SECURITIES AND EXCHANGE COMMISSIONS
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 quarterly period ended: JUNE 30, 1997
Commission File Number: 2-92949-S
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1238077
(State of incorporation) (I.R.S. Employer Identification No.)
415 N. Quay St., #4 Kennewick WA 99336
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (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 June 30, 1997 was
4,953,667.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(as prepared by Management)
(Unaudited)
SELECTED FINANCIAL DATA
Six months ended June 30, June 30,
1997 1996
========== ==========
<S> <C> <C>
Sales $ 546,894 $ 645,760
Other revenue 53,928 156,495
Gross profit 307,390 390,948
Net income before taxes 34,389 180,848
after taxes 22,696 118,162
Earnings per share before taxes
Primary $ 0.006 $ 0.03
Fully diluted 0.006 0.03
Earnings per share after taxes
Primary $ 0.004 0.02
Fully diluted 0.004 0.02
Weighted average shares outstanding
Primary 5,469,897 5,463,948
Fully diluted 5,469,897 5,463,948
Total assets $ 2,095,827 $ 2,052,710
Long-term debt and capital
lease obligations $ 0 $ 0
Shareholders' equity $ 1,985,092 $ 1,985,521
Shareholders' equity per share $ 0.40 $ 0.39
Working Capital $ 1,836,862 $ 1,824,258
Current ratio 17 : 1 28 : 1
Equity to total assets 95% 97%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
CONDENSED BALANCE SHEET
(as prepared by Management)
(Unaudited)
June 30, December 31,
1997 1996
=========== ===========
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,378,899 $ 1,413,182
Accounts receivable, net of allowance for
uncollectibles of $1,284 144,781 38,311
Inventory 394,670 401,305
Accrued Interest 6,545 2,707
Prepaid Expenses 7,629 10,031
Deferred tax asset 411 411
Prepaid federal Income Taxes 14,662 26,355
___________ ____ _____
Total Current Assets $ 1,947,597 $ 1,892,302
PROPERTY & EQUIPMENT, net of depreciation
of $201,267 at June 30, 1997
and $185,384 at Dec. 31, 1996 138,932 141,210
OTHER ASSETS 9,298 9,197
----------- ----------
TOTAL ASSETS $ 2,095,827 $ 2,042,709
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 36,535 $ 15,035
Accrued Liabilities 18,514 15,740
Refundable Customer Deposits 6,149 0
Cash Distributions Payable 49,537 0
----------- ----------
Total Current Liabilities $ 110,735 $ 30,775
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
50,000,000 shares authorized,
shares issued and outstanding:
4,953,667-Dec. 31, 1996 and
June 30, 1997 $ 4,954 $ 4954
Additional Paid-in Capital 894,129 894,129
Retained earnings 1,086,009 1,112,851
----------- ----------
$ 1,985,092 $ 2,011,934
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,095,827 $ 2,042,709
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
CONDENSED STATEMENT OF OPERATIONS
(as prepared by Management)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
========== ========= ========= =========
<S> <C> <C> <C> <C>
SALES $ 230,866 $ 293,704 $ 546,894 $ 645,760
COST OF SALES
Beginning Inventory $ 396,382 $ 279,740 $ 401,305 $ 297,037
Purchases & allocated costs 116,029 192,204 232,869 299,205
---------- --------- --------- ---------
$ 512,411 $ 471,944 $ 634,174 $ 596,242
Ending Inventory 394,670 341,430 394,670 341,430
---------- --------- --------- ---------
Total Cost of Sales $ 117,741 $ 130,514 $ 239,504 $ 254,812
---------- --------- --------- ---------
Gross Profit $ 113,125 $ 163,190 $ 307,390 $ 390,948
OPERATING EXPENSES
Finance/Administration $ 35,223 $ 39,185 $ 103,647 $ 122,813
Research & Development 29,550 31,487 69,607 62,133
Marketing 41,277 56,963 95,912 97,349
Customer Service 20,259 15,889 36,968 24,399
---------- --------- --------- ---------
Total Operating Expense $ 126,309 $ 143,524 $ 306,134 $ 306,694
---------- --------- --------- ---------
OPERATING INCOME $( 13,184) $ 19,666 $ 1,256 $ 84,254
---------- --------- --------- ---------
Other Income (Expenses)
Interest Income $ 15,748 $ 15,588 $ 30,334 $ 32,142
Loss-Marketable Securities 0 0 0 ( 3,522)
Recovery from Marketable
Securities Litigation 0 0 0 3,700
Uncollectibles Accounts
Recovered 0 57,204 0 57,204
Engineering Services 11,987 23,722 23,583 63,450
Engineering Support ( 9,997) ( 20,951) ( 20,784) ( 56,380)
---------- --------- --------- ---------
Net Other Income $ 17,738 $ 75,563 $ 33,133 $ 96,594
---------- --------- --------- ---------
NET INCOME BEFORE TAX $ 4,554 $ 95,229 $ 34,389 $ 180,848
Provision for income tax 1,549 32,378 11,693 62,686
---------- --------- --------- ---------
Net Income $ 3,004 $ 62,851 $ 22,696 $ 118,162
========== ========= ========= =========
Earnings per Share
Primary $ 0.0005 $ 0.01 $ 0.004 $ 0.02
Fully Diluted 0.0005 0.01 0.004 0.02
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CASH FLOWS
(as prepared by Management)
(Unaudited)
SIX MONTHS ENDED June 30,1997 June 30, 1996
============ ============
<S> <C> <C>
CASH FLOWS PROVIDED (USED) IN OPERATING ACTIVITIES:
Net income $ 22,696 $ 118,162
Noncash expenses included in income:
Depreciation 15,883 14,556
Amortization 1,289 918
Realized Loss on Marketable Securities 0 3,522
DECREASE (INCREASE) IN CURRENT ASSETS:
Accounts receivable, net ( 106,470) 36,525
Inventory 6,635 ( 44,393)
Prepaid expenses 2,402 ( 3,895)
Accrued interest ( 3,838) 1,692
Prepaid income taxes 11,693 ( 13,514)
Increase (Decrease) in Current Liabilities:
Accounts payable, accrued expenses
and other current liabilities 30,423 ( 7,738)
Accrued federal income taxes 0 ( 58,665)
--------- ---------
$ ( 19,287) $ 47,170
--------- ---------
CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES:
Additions to property and equipment $ ( 13,606) $ ( 23,380)
Capitalized Software ( 790) 0
Deposits ( 600) 0
Certificate of Deposit classified as
cash equivalent 0 102,000
Proceeds, sale of Marketable Securities 0 117,595
--------- ---------
$ ( 14,996) $ 196,215
--------- ---------
CASH FLOWS PROVIDED (USED) IN FINANCING ACTIVITIES:
Proceeds from Note Receivable 0 3,449
Repurchase of Common Stock 0 ( 9,821)
--------- ---------
$ 0 $ ( 6,372)
--------- ---------
Net increase in cash and cash equivalents $ ( 34,283) $ 237,013
Cash and cash equivalents at beginning of period 1,413,182 1,162,726
--------- ---------
Cash and Cash equivalents at end of period $1,378,899 $1,399,739
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CASH FLOWS (continued)
(as prepared by Management)
(Unaudited)
SIX MONTHS ENDED June 30, 1997 June 30, 1996
============= =============
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash paid year to date:
Interest $ 0 $ 0
Federal income taxes $ 0 $ 134,865
============ ============
Cash allocated for Cash Distribution $ 49,537 $ 0
============ ============
Cash and Cash Equivalents:
Cash $ 5,550 $ 11,115
Money market accounts 441,512 470,774
Certificates of Deposit 331,837 517,850
Commercial Paper 600,000 400,000
------------ ------------
$ 1,378,899 $ 1,399,739
============ ============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO 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
and six month periods ending June 30, 1997 and June 30, 1996. 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 1997 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, 1996 as filed with Securities and Exchange Commission.
The results of operation for the three and six month periods ended June 30,
1997 and June 30, 1996, 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:
June 30, December 31,
1997 1996
========= ============
Parts $ 239,789 $ 260,397
Work in progress 37,564 68,555
Finished goods 117,317 72,353
--------- ------------
$ 394,670 $ 401,305
========= ============
NOTE 3 - EARNINGS PER COMMON 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 on stock options and restricted stock awards. The
primary weighted average number of common shares outstanding was
5,469,897 and 5,463,948 for the quarters ended June 30, 1997 and June
30, 1996, respectively. Also, fully diluted earnings per common share
assume conversion of derivative securities when the result is dilutive.
<PAGE>
NOTE 4 - STOCK OPTIONS
As of June 30, 1997, 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 7,
1997, additional stock options to purchase shares of the Company's common
stock were granted to individual employees and directors with no less than
three years continuous tenure. The options granted on February 7, 1997
totaled 215,000 shares under option and have an exercise price of $0.28 per
share. The options granted on February 7, 1997 may be exercised any time
during the period from February 7, 1997 through February 7, 2000. The
Company's Form 8-K dated February 7, 1997, as filed with the Securities and
Exchange Commission is included herein by reference. All outstanding stock
options must be exercised within 90 days after termination of employment.
During the 12 month period from June 30, 1996 to June 30, 1997, 150,000
shares under option expired, no shares under option were exercised, and
215,000 shares under option were granted. At June 30, 1997 there were
590,000 shares under option reserved for future exercises.
NOTE 5 - RELATED PARTY TRANSACTIONS
For the six month period ended June 30, 1997, services in the amount of
$37,177, were contracted with Manufacturing Services, Inc., of which the
owner/president is a member of the Board of Directors of the Company.
NOTE 6 - CASH DISTRIBUTION
On June 5, 1997, the Company declared a one-time, non-cumulative, cash
distribution to shareholders of record as of June 20, 1997, of $0.01 per
share of common stock, with a payable date of July 11, 1997. The payment
of the cash distribution was completed by July 11, 1997. For the quarter
ended June 30, 1997, the Company recognized a current liability in the
amount of $49,537, reflecting the total dollar value of the cash
distribution. The Company's Form 8-K dated June 5, 1997, as filed with
the Securities and Exchange Commission is included herein by reference.
<PAGE>
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS IS INTENDED TO BE READ IN CONJUNCTION
WITH THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS AND THE INTEGRAL NOTES
THERTO FOR THE QUARTER ENDING JUNE 30, 1997. THE FOLLOWING STATEMENTS MAY
BE FORWARD LOOKING IN NATURE AND ACTUAL RESULTS MAY DIFFER MATERIALLY.
A. Results of Operations
REVENUES:
Total revenues from the sale of the Company's ESTeem(tm) wireless modem
systems, accessories, and services decreased to $242,853 for the second
quarter of 1997 as compared to $317,426 in the second quarter of 1996,
reflecting a decrease of 23%. Gross revenues decreased to $258,601 for
the quarter ending June 30, 1997, from $390,218 for the same quarter of
1996. This decrease is attributable mainly to a reduction in sales to
the U.S. Government, which experienced reductions in the second quarter
of 1997 when compared with the same quarter of 1996, as well as a
reduction in other revenue sources from recovery of uncollectible
accounts experienced in the second quarter of 1996.
The Company's revenues fall into three major customer categories, Domestic,
Export and U.S. Government Sales. Domestic commercial sales increased to
$202,774 in the second quarter of 1997 as compared to $142,023 for the
second quarter of 1996. Foreign export sales for the second quarter of
1997 decreased to $30,419 as compared to the $43,091 in the same quarter of
1996. U.S. Government sales decreased to $9,660 in the second quarter of
1997, a decrease from second quarter 1996 figure of $132,318, which
Management believes is a result of budget reductions and project delays
in the United States Government defense infrastructure. The decrease in
engineering services from $23,722 as of June 30, 1996, to $11,987 as of
June 30, 1997, is a result of a decrease in the size and scope of
engineering services requested when compared with the second quarter of
1996. Sales to Columbia Electric Supply, a subsidiary of Consolidated
Electrical Distributors, resulted in 29% of the Company's product and
service revenues. No other sales to a single customer comprised 10% or
more of the Company's product sales for the quarter ending June 30, 1997.
A percentage breakdown of EST's major customer categories of Domestic,
Export and U.S. Government Sales, for the second quarter of 1997 and 1996
are as follows:
For the second quarter of
1997 1996
==== ====
Domestic Sales 83% 45%
Export Sales 13% 13%
U.S. Government Sales 4% 42%
<PAGE>
A percentage breakdown of EST's product sales categories for the second
quarter of 1997 and 1996 are as follows:
For the second quarter of
1997 1996
==== ====
ESTeem Model 192 37% -
ESTeem Model 95 25% 49%
ESTeem Model 96 16% 12%
ESTeem Model 84SP/85SP 1% -
ESTeem Model 85 less than 1% 9%
PEM and PEM-CPU - less than 1%
ESTeem Accessories 15% 20%
Factory Services 1% 2%
Site Support 5% 8%
Sales include foreign export sales as follows:
Six Months Ended
June 30, June 30,
1997 1996
======== ========
Export sales $ 131,049 $ 94,859
Percent of sales 23% 14%
The geographic distribution of foreign sales for the second quarter of 1997
and 1996 is as follows:
Percent of Foreign Sales
June 30, June 30,
1997 1996
======== =========
COUNTRY
-----------------------
Ecuador 35% 6%
Chile 25% 0%
Canada 22% 6%
Israel 18% 5%
Slovenia/Croatia 0% 32%
Mexico 0% 26%
Brazil less than 1% 25%
Venezuela 0% less than 1%
The bulk of the Company's domestic sales for the second quarter of 1997
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 second quarter of 1997 were also used primarily in SCADA
applications. Foreign sales were also applied in Industrial Control
applications, but the shift continues in foreign markets toward SCADA
applications, closely mirroring the Company's domestic sales, a trend
which Management foresees continuing for the foreseeable future.
The Company's subcontract, dated December 23, 1993, with UNISYS is an
indefinite delivery, indefinite quantity, fixed price contract through
September 1997. The Company did not provide material or derive any sales
revenues from this contract in the second quarter of 1997. Based on the
terms of the UNISYS contract, and contracts of this type in general,
<PAGE>
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 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. The Company did not provide material or derive
any sales revenues from this contract in the first quarter of 1997.
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 1997 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 backlog orders of $56,755 as of June 30, 1997, the
majority of which shipped within the first two weeks of the third quarter
of 1997. Customers generally place orders on an "as needed basis".
Shipment is generally made within 5 working days after receiving the
order.
COST OF SALES:
Cost of sales percentages for the second quarters of 1997 and 1996 were
51% and 44% 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 second quarter of 1997, a different mix
of products sold, as well as the sale of new products which have not
achieved economies of scale, resulted in an increased cost of sales
percentage, when compared with the second quarter of 1996.
<PAGE>
OPERATING EXPENSES:
Operating expenses for the second quarter of 1997 were $17,215 lower than
the second quarter of 1996. The following is a delineation of operating
expenses:
For the quarter ended: June 30, June 30, Increase
1997 1996 (Decrease)
======= ======= =======
Finance/Administration $ 35,223 $ 39,185 $ ( 3,962)
Research/Development 29,550 31,487 ( 1,937)
Marketing 41,277 56,963 ( 15,686)
Customer Service 20,259 15,889 4,370
------- ------- -------
Total Operating Expenses $ 126,309 $ 143,524 $ ( 17,215)
======= ======= =======
FINANCE AND ADMINISTRATION:
During the second quarter of 1997 Finance and Administration expenses
decreased $3,962 over the second quarter of 1996. This decrease is due
primarily in reductions of professional services required by the Company
and reduced postage, shipping and printing costs when compared with the
second quarter of 1996.
RESEARCH AND DEVELOPMENT:
During the second quarter of 1997, Research and Development expenses
decreased $1,937 over the same period in 1996. This decrease is due to a
reduction in subcontracted Research and Development expertise associated
with the development of the Company's ESTeem 192 product line as compared
with the same period in 1996.
MARKETING:
During the second quarter of 1997, marketing expenses decreased $15,686
over the same period in 1996. This decrease is attributable to a
combination of decreased sales commissions from lower U.S. Government
sales, and timing differences in attendance of tradeshows and related
travel expenses for the second quarter of 1997 when compared with the
same quarter of 1996.
CUSTOMER SERVICE:
Customer service expenses increased by $4,370 in the second quarter of
1997 as compared with the same period of 1996. The increase is due to
additional resources committed to the establishment of a local test site
for the application of the Company's products in Mobile Data Terminal
applications for the law enforcement and public safety marketplaces.
Management expects the partnership with a local law enforcement agency
will allow the Company to gain expertise in the Mobile Date Terminal
market to exploit this market opportunity.
INTEREST INCOME:
The Corporation earned $15,748 in interest income during the quarter
ended June 30, 1997. Sources of this income were savings and money
market accounts, and short term investments.
<PAGE>
ENGINEERING SUPPORT:
Engineering support costs decreased to $9,997 for the quarter ended June
30, 1997, as compared to $20,951 for the same period of 1996. This
decrease in engineering support costs for the second quarter of 1997 is a
result of an overall decrease in engineering services requested by
customers when compared with the second quarter of 1996.
NET INCOME:
The Corporation had a net income of $3,004 for the second quarter of
1997, compared to a $62,851 net income for the same quarter of 1996. The
net income decrease is attributed to decreased revenues from product
sales and engineering services, increased cost of goods sold percentage,
and a reduction in other revenue sources from recovery of uncollectible
accounts experienced in the second quarter of 1996.
B. Financial Condition as of June 30, 1997.
The Corporation's current asset to current liabilities ratio at June 30,
1997 was 17:1 compared to 61.5:1 at December 31, 1996. The decrease in
current ratio is primarily attributable to increases in trade accounts
payable, and liability incurred by the approval of cash distributions in
June, when compared with current liability levels at year-end 1996.
For the quarter ending June 30, 1997, the Company had cash and cash
equivalent short-term investment holdings of $1,378,899 as compared to cash
and cash equivalent holdings of $1,413,182 at December 31, 1996. This
decrease is attributable primarily to low accounts receivable levels at
year end 1996, combined with operating requirements and lower net income
performance by the Company in the second quarter of 1997.
Accounts receivable increased to $144,781 as of June 30, 1997, from
December 31, 1996 levels of $38,311, due to increased sales revenues
during the second quarter, when compared with the unusually low accounts
receivable levels at year end 1996. Management believes that all of the
Company's accounts receivable as of June 30, 1996 are collectible.
Inventory decreased to $394,670 at June 30, 1997, from December 31, 1996
levels of $401,305. It is Management's opinion that inventory levels may
increase in 1997 as components are procured for full scale production of
yet to mature product lines. Prepaid expenses decreased from December
31, 1996 levels of $10,031 to $7,629 as of June 30, 1997, due to timing
differences in prepaid fees for tradeshows when compared with the second
quarter of 1996.
The Company's fixed assets increased to $340,199 as of June 30, 1997,
from December 31, 1996 levels of $326,594, resulting from capital
expenditures of $13,606. These expenditures consisted mainly of upgrade
and expansion of the Company's production support equipment.
<PAGE>
As of June 30, 1997, the Company's trade accounts payable balances were
$36,535 as compared with $15,035 at December 31, 1996, and reflects
amounts owed for purchases of inventory stocks and contracted services.
Refundable customer deposits in the amount of $6,149 were held by the
Company for prepayment by foreign customers for orders that were not
shipped until the beginning of the third quarter of 1997. As of June 30,
1997, the Company recognized a current liability in the amount of
$49,537, reflecting the total dollar value of a declared cash
distribution as of June 5, 1997, of $0.01 per share of common stock, with
a record date of June 20, 1997 and a payable date of July 11, 1997.
It is Management's opinion that the Company's cash and cash equivalent
reserves, and working capital at June 30, 1997 is sufficient to satisfy
requirements for operations, capital expenditures, and other expenditures
as may arise within 1997.
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, June 30, 1997
(b) Reports on Form 8-K
Form 8-K dated May 15, 1997 is incorporated herein by reference.
Form 8-K dated June 5, 1997 is incorporated herein by reference.
Form 8-K dated June 6, 1997 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 Feb 7, 1997 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.
/s/ T.L. KIRCHNER
Date: 12 August 1997 Name: T.L. Kirchner
Title: Director/President
(Principal Executive Officer)
/s/ ROBERT SOUTHWORTH
Date: 12 August 1997 Name: Robert Southworth
Title: Director/Secretary/Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEET, STATEMENT OF OPERATIONS, AND STATEMENT OF CASH FLOWS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10QSB,
FOR JUNE 30, 1997.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,378,899
<SECURITIES> 0
<RECEIVABLES> 146,065
<ALLOWANCES> 1,284
<INVENTORY> 394,670
<CURRENT-ASSETS> 1,947,597
<PP&E> 340,199
<DEPRECIATION> 201,267
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0
0
<OTHER-SE> 1,980,138
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<SALES> 546,894
<TOTAL-REVENUES> 600,811
<CGS> 239,504
<TOTAL-COSTS> 260,288
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<INCOME-PRETAX> 34,389
<INCOME-TAX> 11,693
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,696
<EPS-PRIMARY> .004
<EPS-DILUTED> .004
</TABLE>
