U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 (No Fee Required)
For the transition period to
------------ -----------
Commission file number 2-92949-S
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(Name of small business issuer in its charter)
Washington 91-1238077
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
415 N. Quay St., Kennewick, Washington 99336
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (509) 735-9092
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulations S-B is met contained in this form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. [ ] Not applicable [X]
State issuer's revenues for its most recent fiscal year. $1,443,549.
On January 21, 1997 the aggregate market value, based on the average
of the bid and asked Price, of the voting stock held by nonaffiliates
of the registrant was $1,239,940.
The number of shares outstanding of the registrant's common stock as
of January 21, 1997: 4,953,667 shares.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into Parts I,
II, III, and IV of this report: (1) Form S-18, effective Nov. 5, 1984,
Commission File No. 2-92949-S; (2) Form 8-K, filed March 15, 1985,
Commission File No. 2-92949-S; Forms 8-K dated July 12, 1991, December
14, 1992, December 10, 1993, Form 8-K/A, dated February 3, 1995, and
Forms 8-K, dated February 9, 1996 and February 7, 1997.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
ITEM 1
FORWARD LOOKING STATEMENTS:
When used in this Annual Report and the documents incorporated
herein by reference, the words "believes", "anticipates", "expects"
and similar expressions are intended to identify in certain
circumstances, forward-looking statements. Such statements are
subject to a number of risks and uncertainties that could cause
actual results to differ materially from those projected, including
the risks described in this Annual Report. Given these
uncertainties, readers are cautioned not to place undue reliance on
such statements. The Company also undertakes no obligation to
update those forward-looking statements.
BUSINESS
Electronic Systems Technology, Inc. ("EST" or the "Company")
specializes in the manufacturing and development of wireless modem
products. The Company uses its research and development,
manufacturing, and marketing efforts to produce and market the
Company's line of ESTeem (TM) Wireless Modem products and
accessories. The Company offers a product line which provide
innovative communication solutions for applications not served by
existing conventional communication systems. The product line is
offered in the growing markets for process automation in
commercial, industrial, and government arenas domestically, as well
as internationally. The Company's product line is marketed through
direct sales, sales representatives, Original Equipment
Manufacturers (OEM's), and domestic, as well as foreign, resellers.
The Company was incorporated in the State of Washington in
February, 1984, and was granted a U.S. Patent for the "Wireless
Computer Modem" in May 1987, and the Canadian patent in October
1988. During the past three years, the Company has continually
refined its product line in response to customer needs, most
recently developing a new generation of faster, more flexible,
ESTeem products which were released in the fourth quarter of 1996.
The Company has continued to expand its customer base, particularly in
the industrial controls arena with its efforts to team with all
major programmable logic controller (PLC) hardware vendors. The
Company has also been a hardware provider on Government programs
such as the Core Automated Maintenance System (CAMS) for the U.S.
Air Force, and Automatic Identification Technology (AIT) for the
U.S. Army. In 1996, the Company continued to participate in both
foreign and domestic Supervisory Control and Data Acquisition
(SCADA) and Industrial Controls marketplaces, as well as in
Government markets.
PRODUCTS AND MARKETS
EST's product line is a family of narrow band, packet burst, VHF &
UHF FM radio modems provide communication links between computers,
peripherals, and instrumentation controls using radio frequency
waves.
<PAGE>
Increasing computer applications in the business and industrial
environment are continuously placing new requirements on data
transfer. Prior to the invention of the ESTeem modem, the majority
of data transfers used telephone modems or direct cable
connections. Both of these alternatives had a costly side effect.
When utilizing telephone modems, there is a monthly charge for the
use of telephone lines. When using direct cable connections the
cost of installing cable systems will usually cost as much or more
than the cost of the communication system. ESTeem wireless modem
products provide a "Wireless Solution" by eliminating the need for
conventional hardwiring and leased phone lines.
All of the ESTeem models ("ESTeems") come with the industry
standard asynchronous communications ports to give the user a new
dimension to "Local Area Networking". As many as 253 devices can
be interfaced on a single frequency. ESTeem wireless modems have
over one hundred internal software commands to allow the user to
easily configure the unit for any application or use. The ESTeem
setup parameters are saved in its own non-volatile memory.
ESTeem Modems work on a packet burst communications concept.
Packet systems, whether hardwired or radio, share the same
principle of operation: data is taken from a standard RS-232C or
RS-422 asynchronous port and is transmitted in "Electronic Packets"
(i.e. electronic packets of information). The size of the packet
can be defined by the user from 1 to 1010 bytes of information.
Once a packet of data is formed, it is transmitted in a "burst,"
from one ESTeem modem to another ESTeem modem, hence the term
"packet burst communications." ESTeem Modems provide data accuracy
of greater than one part in 100 million. The ESTeems have
frequency agility in the VHF and UHF frequency ranges. Internal
Digi-Repeater features allow the user to increase operating range
by relaying transmission through a maximum of three ESTeems to
reach the destination ESTeem. An ESTeem can operate as an operating
node, a repeater node, or both simultaneously, for added
flexibility.
"Private Data Communications" is provided by the use of the ESTeem
firmware, Synchronous Data Link Control (SDLC), bit compression,
and Manchester encoding techniques. The user can define over four
different security code and communications parameter groups that
allow communication access to the "Radio Area Network". If higher
security is required, the ESTeem is compatible with asynchronous
Data Encryption Standard (DES) encryption devices.
<PAGE>
PRODUCT APPLICATIONS
Some of the major applications and/or industries for which the
ESTeem products are being utilized are as follows:
Water and Waste Water Industry Transportation
Industrial Process Control Overhead Crane Control
Remote Data Acquisition (SCADA) Shop Floor Manufacturing
Law Enforcement/Public Safety Intra-Office/Building
Computer Networking
Petroleum Industry Federal
Oil and Gas Pipeline Ground Mobile
Communications
Offshore Production Ship to Shore Communications
On-shore Production Flight Line Maintenance
Tank Farm
PRODUCT LINES
VHF RADIO MODEM PRODUCTS: Operating in the mid 60-70 MHz band of
the VHF RF spectrum. The ESTeem VHF radio modem products are the
ESTeem Model 85 and Model 95.
The standard production units of the ESTeem Model 85 and 95
are configured to operate in the lower 70 MHz spectrum. The
frequency and receiver sensitivity of the Model 85 ESTeem is
field adjustable via switches on the rear of the unit. The
Model 95 ESTeem has the same features as the Model 85 with the
following additional technical enhancements: software
frequency agility, software selectable receiver sensitivity,
and received signal strength option. Listed below are the
major markets for these products:
Domestic: Industrial control, SCADA, and inventory control.
International: Telephone by-pass, industrial control, and SCADA.
Federal: Inventory and command control.
UHF RADIO MODEM PRODUCTS: Operating in the lower 400 MHz federal
radio band, and the mid to upper 400 MHz commercial radio band of
the UHF RF spectrum. The ESTeem UHF radio modem products are the
ESTeem Model 192C, 192F, 96F, 98F, and 96C.
The UHF radio modem products, ESTeem Models 192C, 192F, 96F,
98F, and 96C, have the same features as the VHF radio modem
products, but were designed to operate in the lower 400 and
upper 400 MHz areas of the UHF RF spectrum. The new product
released in 1996 is the ESTeem Model "192 product line". The
192 product line is differentiated from the other UHF radio
modem products by having a data rate of 19,200 bits per second
(bps). This data rate is four times faster than the data rates
of the 96 and 98 product lines. The 192 product line contains
infrared and telephone interfaces which are not available on
the 96 and 98 product lines. The 192C was designed to
operate in business radio bands of upper 400 MHz. The ESTeem
Model 192F was designed to operate in U.S. Government radio
bands of lower 400 MHz. The ESTeem Model 96F is designed to
operate in the lower 400 MHz United States Federal radio
frequency bands. The ESTeem Model 98F is a variant of the
Model 96F designed to operate in extreme vibration
<PAGE>
environments, used mainly by the U.S. Federal Government for
command control applications. The ESTeem Model 96C was
designed to operate in business radio bands of upper 400 MHz.
All of the UHF radio modem products have the additional
following technical capabilities: software frequency agility,
software selectable receiver sensitivity, and RF output power
from two to four watts depending on customer licensing.
Listed below are the major markets for these products:
Domestic: Industrial control, SCADA, and inventory control.
International: Telephone by-pass, industrial control and SCADA.
Federal: Inventory and command control.
SPECIALTY MODEM PRODUCTS: Network enhancing products using ESTeem
modem technology. The ESTeem specialty modem products are the
ESTeem Model 84SP, 85SP and Port Expansion Module.
The ESTeem Models 84SP and 85SP are special purpose versions
of the ESTeem Model 85 without radio transceiver circuitry. In
place of the transceiver card is a universal interface card
that allows the use of a customer's full- or half-duplex radio
transceiver, turning it into a packet burst communications
device. The Model 85SP is a lower cost version of the 84SP
and contains only the necessary circuitry for interfacing to
direct digital modulated radios. The major market for these
products are civilian SCADA and public safety applications.
The ESTeem Port Expansion Module (PEM) is designed to allow a
single ESTeem product to have up to eight independent RS-
232/422 communications ports. The PEM is designed with
interfaces to be cascaded to additional PEM modules to
increase the communications ports in multiple groups of eight.
The major market for this product is main frame to remote
terminal applications in the Domestic, Foreign, and Federal
markets.
ADDITIONAL PRODUCTS AND SERVICES
The Company also sells various accessories for its EST
product lines. Accessories are purchased from other
manufacturers and resold by EST to support the application
of ESTeem modems. Antennas, power supplies and cable
assemblies are examples of such items. The Company also
provides Factory Services, such as repair and upgrade of
ESTeem products. To assist in the application of ESTeem
wireless modems the Company provides professional services,
site survey testing, system start-up, and custom
engineering, which are billed to customers at a standard
rate, plus expenses.
RESEARCH AND DEVELOPMENT AND NEW PRODUCTS
Due to the rapidly changing technology environment of the
communications industry, specifically standards and technologies
are subject to rapid and unexpected changes in the markets in which
the Company's products compete. This environment results in the
Company continually being required to update and enhance its
existing products, as well as develop new products in order to
remain competitive. Research and Development expenditures for new
<PAGE>
product development and improvements of existing products by the
Company for 1996 and 1995 were $135,468 and $85,265, respectively.
None of the Company's research and development expenses are
directly paid for by any of the Company's customers. In 1996, the
Company contracted with an independent engineering company
specializing in radio design, when that expertise is required.
The Company had under development during 1996, a new generation
of ESTeem products, the ESTeem 192, which received Federal
Communication Commission (FCC) Type Acceptance on January 3,
1997. The ESTeem 192 products were originally scheduled for release
during the second quarter of 1996, but due to delays from third-party
service providers, and orientation and instruction issues surrounding
the use of surface mount technology, the product line was not released
until late in the fourth quarter of 1996. The new product line is
planned to eventually replace existing product lines in the VHF and UHF
radio modem product categories. Development is continuing on a
line of radio modem products, scheduled for release late 1997.
These products are targeted for applications within the
Industrial Control and Federal markets. The Company plans on
continued research and development expenditures and to undertakes
new development and improvement projects as they become necessary.
MARKETING, CUSTOMERS AND SUPPORT
The majority of the Company's products are sold and distributed
directly from the Company's facility through direct sales to end
users of the ESTeem products. The remainder of the Company's sales
are through non-exclusive, non-stocking Resellers, and Original
Equipment Manufacturers (OEM's). Normally, ninety-five percent of
the Company's products are distributed through direct sales and
five percent are through Reseller and OEM entities. The Company
carries a minimal amount of backlog, if any. Customers generally
place orders on an "as needed basis". Shipping dates for most
products are generally within 5 working days after receipt of an
order. As of December 31, 1996, the Company had a backlog of
$89,065, for orders placed late in December. The majority of these
orders were shipped within the first two weeks of January, 1997.
During 1996, the Company advertised in trade publications targeted
at users of control, instrumentation, and automation systems
worldwide. The Company's advertising is targeted toward customers
using Programmable Logic Controllers (PLCs). There are
approximately twenty five major PLC manufacturers worldwide. The
Company also attends tradeshows each year specifically targeted
toward the customers and markets in which it sells products.
The Company maintains an Internet web site to provide easy access
to product and technical information for both present and potential
customers of the Company's products. The Company provides
technical support and service for its products through phone
support, field technicians, and Internet sources. The Company
believes high quality customer and technical support is necessary
and vital to its business and the markets in which it competes. To
maintain this high level of customer support the Company has in the
past, and will continue in the future, to make investments and
expenditures in support of its customer service programs.
<PAGE>
The Company is continuing its Government sales activities which are
directed towards all branches of the United States Armed Services.
Examples of projects the Company's products are included in are
flight-line maintenance for the United States Air Force, flight-
line lighting for the United States Navy, command and inventory
control for the United States Marine Corps, and the Automatic
Identification Technology program for the United States Army.
For the year ended December 31, 1996, the largest sales
concentration were to entities of the United States Government,
which amounted to 22% of total product sales for the year. Foreign
sales were 17% of total revenues for 1996. No other sales to a
single customer comprised 10% or more of total product sales as of
December 31, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and
"Financial Statements".
The Company has a General Services Administration (GSA) contract to
sell goods to the U.S. Government. This contract is a fixed price,
indefinite quantity and delivery agreement. The current contract
runs through March 31, 1997. A renewal GSA contract is being
negotiated.
The Company participates in Government programs with contracts
administered by UNISYS Corporation and Intermec Corporation. Both
contracts are fixed price, indefinite quantity and delivery
agreement. The current UNISYS contract expires September 30, 1997
and the current Intermec contract expires September 30, 1999.
COMPETITION
The Company's competition varies according to the market in which
the Company's products are competing. All of the markets in which
the Company's products are sold are highly competitive. Listed
below are the markets the Company's products compete in and
competition in those markets:
Major Market Major Competitors
Remote Data Acquisition, Aerotron-Repco, Data-Linc, GRE
Industrial Control, Shop Floor America, Johnson, Maxon,
Manufacturing, Overhead Crane Microwave Data Systems,
Control Motorola, Metricom, and Proxim
Computer Networking inter and Aironet Wireless Communications,
intra building. Cylink, Digital Wireless,
Metricom, and Proxim
Radio Area Networking of hand Intermec, LXE, Norand,
held data collection terminals Symbol/MSI, and Telxon
and bar coding
Federal applications Data Radio, Datron, Harris,
Lockheed Martin, Magnavox,
Motorola, Siemens, Watkins-
Johnson, and California Microwave
<PAGE>
Management believes the ESTeem products compete favorably in the
market because of performance, price, and adaptable to a wide range
of applications. The Company's major limitation in competing with
other manufacturers is its limited marketing budget.
PATENTS, TRADEMARKS, AND PROPRIETARY INFORMATION
EST was granted a United States patent in 1987 for a "Wireless
Computer Modem". In 1988, EST was granted a Canadian Patent for a
"Wireless Computer Modem". Both patents have lives of 17 years.
Trademark for the ESTeem Wireless Modem was granted in 1985.
To protect the Company against unauthorized disclosure of
proprietary information belonging to the Company, all employees,
dealers, distributors, original equipment manufacturers, sales
representatives and other persons having access to confidential
information regarding Company products or technology are required
to sign non-disclosure agreements.
GOVERNMENT REGULATION
For operation in the United States, the ESTeem RF Modems require
Federal Communications Commission (FCC) Type Acceptance. The FCC
Type Acceptance is granted for devices which demonstrate operation
within performance criteria mandated, observed, and tested by the
FCC. All of the Company's products requiring FCC Type Acceptance
have been granted such acceptance.
For operation in Canada, the ESTeem RF Modems require Canadian
Department of Communications (DOC) Type Acceptance. The DOC Type
Acceptance is granted for devices which demonstrate operation
within performance criteria mandated, observed, and tested by the
DOC. To date the ESTeem Models 85, 96C, 98F and 192C have applied
for and have been granted type acceptance in Canada.
All ESTeem radio modem products require consumer licensing under
Part 90 of the FCC Rules and Regulations, which must be applied for
by the end user of the Company's products. The Company cannot
guarantee its customers that they will receive FCC consumer
licenses in the VHF or UHF frequency spectrum for any particular
application. The Company provides information to its customers to
assist in the application for FCC consumer licenses.
At the time of this filing the Company is unaware of any existing
or proposed FCC regulation that would have an material adverse
effect on the Company's operations, but there can be no assurance
that future FCC regulations will not have materially adverse
effects on the operations of the Company.
SOURCE OF SUPPLY AND MANUFACTURING
The Company purchases certain components necessary for the
production of its products from sole suppliers. Key components for
the Company's products are supplied by the Motorola Corporation and
Toko America Inc., as purchased through a number of distributors.
The components provided by Motorola and Toko could be replaced or
<PAGE>
substituted by other products, if it became necessary to do so. If
this action became necessary, a material interruption of production
and/or material cost expenditures involved with locating and
qualifying replacement components could take place.
For the new generation of products in development, discussed in
research and development above, the Company has implemented a
component configuration with surface mount component technology.
The Company is not experienced with surface mount component
technology and has, and expects to in the future, to incur expenses
related to training of its employees and equipping its facility to
effectively design, produce, and maintain products containing
surface mount technology components.
Approximately 10% of the inventory at December 31, 1996 consisted
of parts that have lead times ranging from 16 to 40 weeks. Some of
these parts are maintained at high levels to assure their
availability to meet expected production requirements, and
accordingly, account for a significant portion of the inventory
dollar amount. Based on past experience with component
availability, current distributor relationships, and current
inventory levels, the Company foresees no anticipated shortages of
materials used in production.
The Company contracts with Manufacturing Services, Inc., in
Kennewick, Washington, for assembly of the Company's products,
using material purchased by the Company. By contracting with
Manufacturing Services, Inc., the Company is able to avoid staff
fluctuations associated with staffing its own manufacturing
operation. The President of Manufacturing Services, Melvin H.
Brown, is a Director of the Company. Management believes all
prices for services, provided by Manufacturing Services, Inc., were
as favorable as could be obtained from comparable manufacturing
services companies. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and
"Financial Statements".
EMPLOYEES
As of December 31, 1996, the Company employed a staff of 11 persons
on a full time basis, 2 in marketing, 2 in technical support, 5 in
engineering/manufacturing, and 2 in Finance and Administration.
The Company's operations are dependent upon key members of its
Engineering and Management personnel. In the event services of
these key individuals were lost to the Company, an adverse effect
on the Company's operations may be felt. The Company employs part-
time labor on an "as needed" basis, usually in
engineering/manufacturing. At year end 1996 the Company employed 2
part-time employees. None of the Company's employees are
represented by a labor union and the Company believes it has good
relations with its employees.
ITEM 2.
PROPERTIES
EST does not own any real property, plants, mines, or any other
materially important physical properties. The Company's
administrative offices and laboratories are located in leased
facilities at 415 N. Quay Street, Kennewick, Washington. The
<PAGE>
Company leases its office and laboratory space in a lease
agreement with The Port of Kennewick in Kennewick, Washington for
approximately 6,300 square feet of office and laboratory space.
The total monthly lease cost is $2,265.83, including a leasehold
tax of $257.83. The lease covers a period of three years which
expires November 30, 1999.
The Company also owns miscellaneous assets, such as computer
equipment, laboratory equipment, and furnishings. The Company does
not have any real estate holdings, nor investments in real estate.
The Company maintains insurance in such amounts and covering such
losses, contingencies and occurrences that the Company deems
adequate to protect its property. Insurance coverage includes a
comprehensive liability policy covering legal liability for bodily
injury or death of persons, and for property owned by, or under the
control of the Company, as well as damage to the property of
others. The Company maintains key man life insurance protecting
the Company in the event of the death of its President. The
Company also maintains fidelity insurance which provides coverage
to the Company in the event of employee dishonesty.
ITEM 3.
LEGAL PROCEEDINGS
No proceedings are identified to proceedings that involve primarily
a claim for damages as the amounts involved, exclusive of interest
and costs, which exceed 10% of the current assets of the Company.
The Company's Form 8-K/A dated February 9, 1996, as filed with the
Securities and Exchange Commission, is incorporated herein by
reference.
The Company was notified on March 8, 1995 that it was included in a
class action against Piper Jaffray, the manager of the Company's
marketable securities fund investment which experienced losses as
described in Note 13 to the financial statements. This litigation
was an amended consolidated class action complaint originally filed
on October 5, 1994, as Civ. File No. 3-94-587, in the United States
District Court, District of Minnesota. In February 1996, the
Company received the first payments pursuant to the settlement of
this litigation, and as of December 31, 1996 had received
settlement payments amounting to a total of $11,288. The Company
expects to receive periodic settlement payments in 1997 and 1998.
In a related manner , the Company was notified on January 15, 1996
of a Notice of Pendancy of Class Action against KPMG Peat Marwick,
LLP, Civ. File No. 3-94-1073, filed in the United States District
Court, District of Minnesota. KPMG Peat Marwick was the auditor
for the Piper Jaffray managed Institutional Government Income
Portfolio described above. The Company has decided to remain part
of the class action against KPMG Peat Marwick at the present time.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters for shareholder approval
during the fourth quarter of 1996 fiscal year.
<PAGE>
PART II
ITEM 5.
MARKET INFORMATION FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no established market for trading the Common Stock of the
Company. The Common Stock is not regularly quoted in the automated
quotation system of a registered securities system or association.
The Common Stock of the Company is traded on the
"over-the-counter" market and is listed on the electronic bulletin
board under the symbol of "ELST". The following table illustrates
the average high/low price of the Common Stock for the last two (2)
fiscal years. The "over-the-counter" quotations do not reflect
inter-dealer prices, retail mark-ups, commissions or actual
transactions.
<TABLE>
<CAPTION>
BID ASK
--- ---
HIGH LOW HIGH LOW
----- ---- ----- -----
<S> <C> <C> <C> <C>
Fiscal year ended
December 31, 1996
First Quarter 7/16 11/32 1/2 7/16
Second Quarter 15/32 1/4 9/16 15/32
Third Quarter 7/16 5/16 9/16 15/32
Fourth Quarter 11/32 3/16 3/8 5/16
Fiscal year ended
December 31, 1995
First Quarter 5/16 3/32 3/8 11/32
Second Quarter 9/32 3/32 11/32 9/32
Third Quarter 13/32 1/8 1/2 9/32
Fourth Quarter 13/32 1/8 53/100 15/32
</TABLE>
The above data was compiled from information obtained from the
National Quotation Bureau, Inc. daily quotation service.
The approximate number of record holders of common stock of the
Registrant as of January 21, 1996 was 672 persons/entities.
Electronic Systems Technology Inc. has never paid a cash dividend
and the Board of Directors does not anticipate declaring cash
dividends in the foreseeable future.
<PAGE>
ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis is intended to be read in
conjunction the Company's audited financial statements the integral
notes thereto. The following statements may be forward looking in
nature and actual results may differ materially.
RESULTS OF OPERATIONS
GENERAL: The Company is specializes in the manufacturing and
development of wireless modem products. The Company offers a
product line which provide innovative communication solutions for
applications not served by existing conventional communication
systems. The Company offers its product lines in the growing
markets for process automation in commercial, industrial, and
government arenas domestically, as well as internationally. The
Company markets its products through direct sales, sales
representatives, Original Equipment Manufacturers (OEM's), and
domestic, as well as foreign, resellers. Operations of the Company
are sustained solely from revenues received through sales of its
products and services.
FISCAL YEAR 1996 vs. FISCAL YEAR 1995
GROSS REVENUES: Total revenues for the fiscal year 1996 were
$1,443,549 reflecting a 17% decrease from the $1,731,949 total
revenues for fiscal year 1995. The decrease is attributable
primarily to decreased sales in 1996, of $1,190,304 as compared
to 1995 sales of $1,535,071, representing a decrease of 22%.
Throughout 1996 the Company experienced decreases in sales revenues
in all of the Company's major customer categories; domestic,
foreign and U.S. Government (See Note 6 to Financial Statements.)
Management believes the reduction in sales revenues is a result of
several factors, primarily, increased competition from other types
of wireless products in the markets in which the Company competes,
postponements and/or cancellations of customer projects intended to
employ the Company's products, and uncertainty in purchase
decisions on the part potential customers due to delays experienced
in the release of the Company's new product, the ESTeem 192.
In 1996, a majority of the Company's domestic sales were for
Supervisory Control and Data Acquisition (SCADA) applications and
Industrial Controls applications. An example of a SCADA system is
a city's water treatment operation. An example of an Industrial
Control system is a manufacturer's remote control crane operation.
It is Management's opinion that these applications will continue
to provide the largest portion of the Company's revenues in the
foreseeable future.
In 1996, the Company had $222,239 in foreign export sales,
amounting to 17% of total product and service sales for the year.
For year end 1995, foreign export sales were $223,800, or 15% of
total product sales for the year. It is Management's opinion that
foreign sales did not follow the same percentage reduction in sales
as other customer categories due to increased use of the Company's
products in SCADA projects abroad, as well as relatively large,
unexpected orders to customers in Mexico, Venezuela and the
<PAGE>
Philippines. Management believes reduction in sales to Canada is
due to lack of large site orders which weighted Canadian sales
performance in 1995 and 1994. Management believes that reduced
sales to former Yugoslavian countries will continue as political
stability returns to the region and normal infrastructures are
restored, thereby reducing the need for Company's products.
Products purchased by foreign customers were used primarily for
Industrial Control applications, although an increase in the use of
the Company's products in SCADA projects was noted in 1996. It is
Management's opinion foreign sales will continue to be strong in
the Industrial Control arena. Other than sales through foreign
distributors, management believes a majority of the Company's
export sales have been obtained as a result of advertisements in
INDUSTRIAL & CONTROL SYSTEMS magazine. The geographic composition
of the Company's foreign export sales for 1996, and 1995 are shown
in Note 6 to the Financial Statements. (See Note 6 to Financial
Statements.)
In 1996 products purchased by U.S. Government agencies or by U.S.
Government contractors amounted to $262,326 or 22%, of total
product sales compared with 1995 levels of $396,567, or 20%, of
total product sales. Management believes the comparative decrease
in U.S. Government sales are the result of the following factors:
1) postponement of a U.S. Marine Corps (USMC) order that was
originally expected in the fourth quarter of 1996, 2) lack of
sales under the Company's CAMS subcontract with the Unisys
Corporation, and 3) high levels of U.S. Government sales
experienced in 1995 unusually weighted 1995 performance for
comparative purposes. Products purchased by the U.S. Government
were utilized in three primary applications: Inventory Control,
PC/PC (Personal Computer) networking, and Command Control. The
major application for EST products is in Command Control
applications, with Inventory Control second and PC/PC networking
third. It is Management's opinion that in the future Command
Control applications will exceed PC/PC networking applications and
inventory control applications. Due to the uncertainty of the
nature of U.S. Government purchasing in general, and specifically
the AIT, CAMS, and other programs the Company's products are
involved in, Management does not base liquidity, profitability, or
material purchase projections on anticipated sales.
As of December 31, 1996, the Company had a backlog of $89,065, for
orders placed late in December. The majority of these orders were
shipped within the first week of January, 1997. The Company
carries a minimal amount of backlog, if any. Customers generally
place orders on an "as needed basis". Shipment for most of the
Company's products is generally made within 5 working days after
receipt of customer orders.
COST OF SALES: Cost of Sales, as a percentage of gross sales, for
the years of 1996 and 1995 was 41% and 39%, respectively. Cost of
Sales variations that occur are normally attributed to the type of
product sold and the size of the order. Larger orders grant lower
sales prices, reducing the profit margin.
<PAGE>
INVENTORY: The Company's year-end inventory values for 1996 and
1995 were as follows:
1996 1995
------- --------
Parts $260,397 $198,487
Work in Progress 68,555 --0--
Finished goods 72,353 98,550
------- --------
TOTAL $401,305 $297,037
======= ========
The majority of the Company's material purchases are handled with
scheduled purchase orders. A scheduled purchase order is an order
where materials are purchased over a time period negotiated with
the supplier, generally from 2 months to 12 months. Shipments are
made monthly or on an as-needed basis. By using this method, the
Company is able to obtain volume discounts on purchases and also
assure that materials will be available when needed. Volume
discounts generally provides cost savings of 25% or more. If the
Company's sales are less than anticipated, inventory over-stocking
can occur. The Company's objective is to keep inventory levels as
low as possible to provide maximum cash liquidity, while at the
same time, meet production and delivery requirements. The Company
must also take into consideration that significant portion of EST
component parts have lead times ranging from 16 to 40 weeks. Based
on past experience with component availability, current distributor
relationships, and current inventory levels, the Company foresees
no anticipated shortages of materials used in production.
For year end 1996, purchases and costs allocated to cost of goods
sold were $595,119 as compared to $475,691 in 1995. This increase
is a primary result of the Company increasing specific and
specialized inventory stocks for the anticipated production of the
Company's EST 192 product line. This is also reflected in the
increase in inventory value at year end 1996 to $401,305 from 1995
year end levels of $297,037.
OPERATING EXPENSES: Operating expenses, prior to allocation of
expenses to Cost of Sales and Engineering Services, increased in
1996 to $865,162 from 1995 levels of $839,793. Material changes
in expenses is comprised of the following components: Advertising
expenses increased to $54,969 in 1996 from 1995 levels of $50,619
due to the Company expanding its advertising exposure in
anticipation of the release of the EST 192 product line, as well as
increases in fees charged by publishing companies for EST's
advertising. Sales commissions decreased from 1995 levels of
$31,974 to $22,972 in 1996 due to decreased sales to the U.S.
Government. Depreciation expense on the Company's assets increased
from 1995 levels of $25,379 to $30,303 in 1996 due to increased
depreciable assets acquired by the Company for manufacturing and
research and development use. Supplies and materials expenses
increased to $26,060 in 1996, from 1995 levels of $12,383 due to
increased requirements primarily from research/development
projects. Printing expenses decreased from 1995 level of $13,104
to $10,203 at year end 1996, due mainly to the Company producing an
increased amount of printed material in house instead of
subcontracting. Professional services increased from 1995 levels
of $46,113 to $77,795 at year end 1996 due to increased amounts
<PAGE>
paid for engineering services to outside third parties for research
and development projects for the development of the EST 192 product
line. Repair and maintenance expenses increased in 1996 to $13,080
as compared to $6,992 in 1995, due to increased equipment
calibration costs, and higher than normal necessary repairs on the
Company's manufacturing and analysis equipment.
Salaries increased to $413,920 in 1996, an increase from 1995
levels of $391,826. This increase is a result of increases in
wages and benefits costs, as well as higher accrued vacation
benefits from a more tenured employee base accruing an increased
amount of vacation benefits in 1996, as compared with figures for
1995. Trade show expenses increased from 1995 levels of $8,688 to
$17,682 in 1996, due to increased trade show attendance on the part
of the Company.
The Company did not incur bad debt expense during 1996 as compared
with the $54,474 recognized for amounts owed to the Company by
Diversified Engineering for 1995.
FISCAL YEAR 1995 vs. FISCAL YEAR 1994 RESULTS
Total revenues for fiscal year 1995 were $1,731,949 reflecting a
29% increase from the $1,340,380 total revenues for fiscal year
1994. The increase was attributable primarily to increased sales
in 1995 of $1,535,071 as compared to 1994 sales of $1,197,720.
Throughout 1995 the Company experienced increases in both customer
orders of large quantity, and in total customer orders processed.
Management felt this trend was 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.
Operating expenses, prior to allocation of expenses to Cost of
Sales and Engineering Services, increased in 1995 to $839,793 from
1994 levels of $743,816. Material changes in operating expenses
is comprised of the following components: Advertising expenses
increased to $50,619 in 1995 from 1994 levels of $35,848 due to the
Company expanding its advertising exposure, as well as increases in
fees charged by publishing companies for EST's advertising. Sales
commissions increased from 1994 levels of $17,925 to $31,974 in
1995 due to increased sales to the U.S. Government. Depreciation
expense on the Company's assets increased from 1994 levels of
$21,160 to $25,379 in 1995 due to increased depreciable assets
acquired by the Company for internal networking, manufacturing, and
research and development use. Supplies expenses increased to
$12,383 in 1995, from 1994 levels of $9,601 due to increased
requirements resulting from elements such as increases in
production and research/development projects. Printing expenses
increased from 1994 level of $6,750 to $13,104 at year end 1995,
due mainly to increased demand for customer support and marketing
related material, such as owners manuals, brochures, and technical
bulletins, as well as increased shareholder mailings.
Professional services decreased from 1994 levels of $61,338 to
$46,113 at year end 1995 due to timing differences in amounts paid
for engineering services to outside third parties. In 1994, the
Company had contracted with Remtron, Inc. for these services,
whereas in 1995, engineering expertise was not required on
development projects until late in the year.
<PAGE>
Salaries increased to $391,826 in 1995, an increase from 1994
levels of $381,243. This increase is a result of increases in
wages and benefits costs, as well as higher accrued vacation
benefits from a more tenured employee base, in comparison with
figures for 1994. Trade show expenses decreased from 1994 levels
of $10,017 to $8,688 in 1995, due to discounts on tradeshow fee
earned by the Company by being a returning participant at the
attended tradeshows.
Bad Debt expense was recorded, and Accounts Receivable reduced in
the amount of $57,204 for 1995 for amounts owed to the Company by
Diversified Engineering, but were unpaid. There was also a downward
adjustment to the allowance for doubtful accounts to $1,284 for
1995 due to the Company's prior history of low accounts write-offs,
leading to a net bad debt expense of $54,474 for 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company's working capital was $1,861,527
compared with $1,723,823 at December 31, 1995. The increase is
primarily attributable to the Company's 1996 after-tax profit of
$158,735. The Company's operations rely solely on the income
generated from sales. The Company's major capital resource
requirement is for maintaining adequate inventory levels. Long
lead times for some of the critical components, ranging from 16 to
40 weeks, force the Company to maintain higher than normal
inventory levels. It is Management's opinion that the Company's
working capital as of December 31, 1996 is adequate for expected
resource requirements for the next twelve months.
The Company's current asset to current liability ratio at December
31, 1996 was 61.5:1 compared to 13.9:1 at December 31, 1995. The
ratio change is attributable primarily to the Company having
reduced trade accounts payable and the absence of a federal income
tax liability at year end 1996.
The Company's cash resources at December 31, 1996, including cash
in the bank and cash equivalent liquid assets, were $1,413,182,
reflecting an increase from cash resources of $1,162,726 for year
end 1995. Cash flows from operating activities were provided by
net income of $158,735, a decrease in accounts receivable of
$119,609, depreciation of $30,303. Cash flows were primarily
offset by increases in inventory of $104,268, decreasing federal
income taxes payable of $58,665, and repurchase of the Company's
common stock in the amount of $23,981 in 1996.
Cash and short term investments of the Company changed in holding
amounts from year end 1995 to year end 1996, with the majority of
the Company's idle cash being invested in commercial paper short
term investments, certificates of deposit, and money market
accounts. These changes in holding amounts are implemented by the
Company so that the Company's liquid resources may earn improved
rates of return.
During 1995 the Company held an investment in marketable securities
in the Piper Jaffray Institutional Government Fund (the "Fund").
Public information indicates Piper Jaffray suffered losses due to
derivatives in is Institutional Government Income Portfolio Mutual
Fund. Write downs in the value of the Company's investment in this
<PAGE>
Fund totaling $49,953 in 1995 were realized due to the other than
temporary decline in value of the investment, treatment for which
is outlined in paragraph 16 of Statement of Financial Accounting
Standard (SFAS) 115. As of March 31, 1996, the Company had
liquidated its marketable securities investment in the Fund.
The Company's trade accounts receivable, adjusted for uncollectible
accounts, at December 31, 1996 were $38,311, compared to $157,920
for 1995. The decrease is attributable to reduced sales in the
fourth quarter of 1996 which resulted in reduced amounts of
receivables owed to the Company. No bad debt expense was recorded
during 1996. Bad debt expense was recorded in the amount of $57,204
for 1995 for amounts owed to the Company by Diversified
Engineering, which were recovered by the Company during the second
quarter of 1996. Management believes that all of the Company's
accounts receivable as of December 31, 1996 are collectible.
Aging of accounts receivable, as of December 31, 1996, is as
follows:
Category Amount Percentage
----------- ---------- --------------
Current $15,431 39%
1-30 past 10,041 25%
31-60 past 10,251 26%
61-90 past 3,581 9%
91-120 past - 0 - - 0 -
over 120 290 1%
The balances in the past due categories are considered to be at
normal levels for the Company. The overall percentages are
considered skewed by the abnormally low amount of accounts
receivable at year end 1996. The Company believes it's level of
risk associated with customer receipts on export sales is minimal.
Foreign shipments are made only after payment has been received or
if irrevocable letter of credit terms have been pre-arranged, or on
Net 30 terms to foreign offices of domestic companies with which
the Company has an existing relationship. Foreign orders are
generally filled as soon as they are received, therefore, foreign
exchange rate fluctuations do not impact the Company.
On May 31, 1991, the Corporation received a Promissory Note from
Western Data Com in the amount of $31,491 to cover it's outstanding
accounts receivable balance. The Company had received $30,679 from
Western Data Com prior to April 25, 1996. On April 25, 1996, the
Company received $3,656 from Western Data Com in full settlement of
the outstanding portion of the Promissory Note.
Inventory levels as of December 31, 1996 were $401,305, an increase
from December 31, 1995 levels of $297,037. This increase is a
primary result of the Company increasing specific and specialized
inventory stocks for the anticipated production of the Company's
ESTeem 192 product line.
Outlays for capital expenditures during fiscal year 1996 amounted
to $26,508. These expenditures were primarily for equipment used
for research/development and manufacturing. The Company intends on
investing in additional capital equipment as it is deemed necessary
to support development and/or manufacture of the ESTeem Modem.
<PAGE>
As of December 31, 1996, the Company's current liabilities were
$30,775, a decrease of $102,817 over the 1995 year end levels of
$133,592. The decrease is primarily attributable to the absence of
federal income tax payable by the Company, and decreases in trade
accounts payable due to low year end purchasing activity. All of
the Company's accounts payable at year end were current.
Differences between the provision for income taxes and income taxes
computed using the Federal income tax rate, resulted in a deferred
tax asset of $411 at year end 1996, compared with a $5,287 deferred
tax asset for year end 1995. The primary components of the
deferred tax asset were amounts provided by the Company's accrued
vacation benefits payable and unused capital loss carryforward
resulting from the Companies realized loss on impaired marketable
securities during 1995.
The Company's subcontract administered by 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 an as needed basis. There were no sales by the Company to
UNISYS under the contract in 1996. It is Management's opinion
that sales under the UNISYS contract are impossible to predict
due to the uncertain nature of U.S. Government purchasing.
The Company's AIT subcontract administered by INTERMEC, dated
July 26, 1994, 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. Sales under the AIT contract in 1996 were
$96,144. It is Management's opinion that sales under the AIT
contract are impossible to predict due to the uncertain nature of
U.S. Government purchasing.
The Company has a General Services Administration (GSA) contract to
sell goods to the U.S. Government. This contract is a fixed price,
indefinite quantity and delivery agreement. The current contract
runs through March 31, 1997. A renewal GSA contract is being
negotiated. If awarded the new GSA contract period would extend
through March 31, 1998. Management expects its GSA contract to be
renewed. Based on previous years activity, the Company expects
the majority of U.S. Government purchases to be placed under the
Company's GSA contract. Projections regarding liquidity,
profitability, and material purchases are based on past history
of annual purchases. Historically, Federal Government sales have
averaged approximately 18% of annual sales. Due to the uncertain
nature of Federal Government purchasing, procurement of material
and production planning is adjusted quarterly based on demand. It
is Management's opinion that the majority of Federal Government
purchases in 1997 will be under this GSA contract.
With the possible exception of orders from the Company's UNISYS,
AIT, or GSA contracts, and the impact of planned research and
<PAGE>
development expenditures, Management is unaware of any known
trend which would reasonably be likely to have a material effect
on the Company's liquidity, results of operations, or financial
condition.
The Company's operations were not adversely effected by inflation
during 1996. No adverse affect is anticipated during 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 registrations statements filed with
the Securities and Exchange Commission.
ITEM 7.
FINANCIAL STATEMENTS
See Exhibit 1, Financial Statements and Financial Statement
Schedules. Such Financial Statements and Schedules are
incorporated herein by reference.
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE
<PAGE>
PART III
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
IDENTIFICATION OF DIRECTORS:
The following table sets forth the names and ages of all directors
of the Company as of December 31, 1996; as well as term in office
and principal occupation of each director.
Name of Director Term in Office Age Principal Occupation
----------------- -------------- --- ---------------------
T.L. Kirchner 06/05/93-06/04/99 48 President of the Company
Melvin H. Brown 06/04/94-06/06/97 66 President of Manufacturing
Services,Inc.
Arthur Leighton 06/04/94-06/06/97 73 Consultant
Robert Southworth 06/04/94-06/06/97 53 Patent Attorney for U.S.
Dept. of Energy
John H. Rector 06/05/93-06/04/99 80 Consultant
John L. Schooley 06/02/95-06/05/98 57 President of Remtron, Inc.
Management believes that there are no agreements or understanding
between the directors and suppliers or contractors of the Company,
except the agreement with Manufacturing Services, Inc. as described
elsewhere in this report.
IDENTIFICATION OF EXECUTIVE OFFICERS
The following table sets forth the names and ages of all executive
officers of the Company as of December 31, 1996; all positions by
such persons; term of office and the period during which he has
served as such; and any arrangement or understanding between him
and any other person(s) pursuant to which he was elected as an
officer:
Name of Officer Age Position Term of Office Period of Service
---------------- --- -------- -------------- ----------------
T. L. Kirchner 48 President 3 Years 02/10/84-Present
Robert Southworth 53 Sec/Treas 3 Years 12/11/92-Present
There are no family relationships, whether by blood, marriage, or
adoption, between any of the Directors or Executive Officers of the
Company.
The following is a brief description of the business experience
during the last five years of each director and/or executive
officer of the Company.
<PAGE>
T.L. KIRCHNER. Mr. Kirchner is founder, President and a Director
of the Company. During the last five years Mr. Kirchner devoted
100% of his time to the Management of the Company. His primary
duties were to oversee the Management and Marketing functions of
the Company. Mr. Kirchner does not serve as a director for any
company registered under the Securities Exchange Act.
MELVIN H. BROWN. Mr. Brown is a Director of the Company. During
the last five years Mr. Brown has been the owner and president of
Manufacturing Services, Inc. Manufacturing Services provides
services in packaging design, printed circuit board layout,
prototyping, production runs, verification of documentation
testing, burn-in, quality control, and repetitive volume
production. Manufacturing Services provides electronic
manufacturing and quality control testing services for Electronic
Systems Technology. Mr. Brown does not serve as a director for any
company registered under the Securities Exchange Act.
ROBERT SOUTHWORTH. Mr. Southworth is a Director and the
Secretary/Treasurer of the Company. Since 1980, Mr. Southworth
has been employed with the U. S. Department of Energy as a Senior
Patent Attorney in Richland, Washington. His primary duties with
the Department of Energy include the preparation and prosecution of
domestic and foreign patent applications in such fields as nuclear
reactors, fuel reprocessing, waste management and energy related
fields of solar, wind, and fossil fuels. Mr. Southworth does not
serve as a director of any company which is registered under the
Securities Exchange Act.
ARTHUR LEIGHTON. Mr. Leighton is a Director of the Company. Mr.
Leighton served as President of Kraft Industries through mid 1986.
Since then he has been working as an independent Management
Consultant. Mr. Leighton does not serve as director of any
company which is registered under the Securities Exchange Act. See
also the Company's Form 8-K dated March 3, 1997, incorporated
herein by reference, describing a shooting incident wherein Mr.
Leighton was wounded. As of the date of this Annual Report, the
Company is unsure of the extent or enormity of Mr. Leighton's
injuries or the effect on his continued ability to serve as a
Director for the Company.
JOHN H. RECTOR. Mr. Rector is a Director of the Company. Mr.
Rector founded Western Sintering, located in Richland, Washington.
Western Sintering, a powdered metal parts manufacturer, is an
Original Equipment Manufacturer (OEM). Mr. Rector is the former
President of Western Sintering, Inc. Mr. Rector recently retired
as President of Western Sintering, but is still acting in an
advisory position to its officers and directors. Mr. Rector does
not serve as director of any company which is registered under the
Securities Exchange Act.
JOHN L. SCHOOLEY. Mr. Schooley is a Director of the Company.
During the past five years, Mr. Schooley has been the owner and
President of Remtron, Inc. in San Diego, California. Remtron, Inc.
is a manufacturer of advanced radio control and telemetry systems
for the industrial market. Remtron, Inc. has provided research and
development services for Electronic Systems Technology. Mr.
Schooley does not serve as director of any other company which is
registered under the Securities Act.
<PAGE>
ITEM 10.
EXECUTIVE COMPENSATION
The Company's named compensated executive officer is T.L.
Kirchner, President and CEO. The Company did not have any compensated
executive officers other than the CEO as of December 31, 1996.
The information specified concerning the compensation of the named
executive officers for each of the Registrant's last three
completed fiscal years is provided in the following Summary Compensation
Table:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Name and Other Restricted Options All
Principal Annual Stock Underlying LTIP Other
Position Year Salary Bonus Compensation Awards SARs Payouts Compensation
($) ($)(1) ($)(2) ($) (#) ($) ($)(3)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. L. Kirchner 1996 74,015 8,748 1,185 0 25,000 0 5,368
President & 1995 67,800 5,356 1,406 0 25,000 0 5,025
CEO 1994 67,800 8,103 578 0 0 0 6,368
</TABLE>
(1) Includes amounts paid under the Non-qualified Employee Profit Sharing Bonus
(2) Other Annual Compensation includes Accrued Vacation Pay
(3) All Other Compensation consists of premiums paid for Group
Health Insurance and Key Man Insurance
The information specified concerning the stock options of the
named executive officers during the fiscal year ended December
31, 1996 is provided in the following Option/SAR Grants in the
Last Fiscal Year Table:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants (4)
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or base Expiration
Name Granted # (4) Fiscal Year Price($/Sh) Date
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T.L. Kirchner 25,000 12.5% 0.42 2/8/99
</TABLE>
(4) This table does not include Stock Options granted previously.
Form 8-K dated 2/3/95 and 2/9/96, respectively, are incorporated
herein by reference.
<PAGE>
The information specified concerning the stock options of the named
executive officers during the fiscal year ended December 31, 1996
is provided in the following Aggregated Option/SAR Exercises in
Last Fiscal Year and Fiscal Year-End Options/SAR Values Table:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Number of
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T.L. Kirchner 0 0 50,000 0
</TABLE>
The Company does not currently have a Long-Term Incentive Plan ("LTIP").
Compensation to outside directors is limited to reimbursement of
out-of-pocket expenses that are incurred in connection with the
directors duties associated with the Company's business. There is
currently no other compensation arrangements for the Company's
directors. (See "Security Ownership of Certain Beneficial Owners
and Management" for Stock Options granted in previous years.)
The Company currently does not hold any Employment Contracts nor
Change of Control Arrangements with any parties.
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 31, 1996, the amount
and percentage of the Common Stock of the Company, which according
to information supplied by the Company, is beneficially owned by
each person who, to the best knowledge of the Company, is the
beneficial owner (as defined below) of more than five (5%) of the
outstanding common stock.
<TABLE>
<CAPTION>
Amount &
Nature of
Title Name & Address Beneficial Percent
of of of of
Class Beneficial Owner (1) Ownership (2) Class
------------------------------------------------------------------
<S> <C> <C> <C>
Common T.L. Kirchner 403,488 (3) 8.1%
415 N. Quay Street.
Kennewick, WA 99336
</TABLE>
<PAGE>
------------------------------------------------------------------
(1) Under Rule 13d-3, issued by the Securities and Exchange
Commission, a person is, in general, deemed to "Beneficially
own" any shares if such person directly or indirectly, through
any contract, arrangement, understanding, relationship or
otherwise, has or shares (a) voting power, which includes the
power to vote or to direct the voting of those shares and/or
(b) investment power, which included the power to dispose, or
to direct the disposition of those securities. The foregoing
table gives effect to shares deemed beneficially owned under
Rule 13d-3 based on the information supplied to the Company.
The persons named in the table have sole voting power and
investment power with respect to all shares of Common Stock
beneficially owned by them.
(2) The beneficial owner listed above has stock options giving the
right to acquire 50,000 shares of Electronic Systems
Technology, Inc. Common Stock: Options for 25,000 shares were
granted February 3, 1995; Options for 25,000 shares were
granted February 9, 1996; Options for 25,000 shares were
granted February 7, 1997 Forms 8-K, dated February 3, 1995,
February 9, 1996, and February 7, 1997 respectively, are
incorporated herein by reference.
(3) Does not include options granted. See footnote (1) above.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of January 15, 1997, amount and
percentage of the Common Stock of the Company, which according to
information supplied by the Company, is beneficially owned by
Management, including officers and directors of the Company.
<TABLE>
<CAPTION>
Title Name Amount & Nature Percent
of of of of
Class Beneficial Owner Beneficial Ownership Class
-------------------------------------------------------------------
<S> <C> <C> <C>
Common T.L. Kirchner 403,488 (1) 8.1%
(Officer & Director)
Common Robert Southworth 4,000 (1) 0.1%
(Officer & Director)
Common Melvin H. Brown 76,500 (1) 1.5%
(Director)
Common Arthur Leighton 84,000 (1) 1.7%
(Director)
Common John H. Rector 6,000 0.1%
(Director)
Common John L. Schooley 10,000 0.2%
(Director)
</TABLE>
(1) Does not include stock options. See below.
<PAGE>
On various dates, the Company's Board of Directors has approved
Stock Option Bonuses for Directors and Employees. The following is
a summary of the Stock Option bonuses currently outstanding:
Options are exercisable at fixed prices. Options may not be
exercised in blocks of less than 5,000 shares. Options not
exercised expire three years after approval date or 90 days
following termination of employment/board membership, whichever
occurs first. In the event of acquisition, merger,
recapitalization or similar events of the Company, the optionee
will receive equivalent shares or will have a 10-day window in
which to exercise the options. Option grants are not transferable
or assignable except to the optionee's estate in the event of the
optionee's death. The Company's Form 8-K/A, dated February 3,
1995, and Form 8-K, dated December 10, 1993, are incorporated by
reference. The information below does not include stock options
granted in February 1997, see the Company's Form 8-K dated February
7, 1997.
Recipients of Stock Options currently unexpired as of 12/31/96
were as follows:
Exercise Price
Name Option Shares per Share
--------------------------------------------------------------------
APPROVAL DATE: 2-9-96
David B. Strecker 25,000 0.42
Eric P. Marske 25,000 0.42
Jon A. Correio 25,000 0.42
Alan B. Cook 25,000 0.42
Melvin Brown 25,000 0.42
Tom Kirchner 25,000 0.42
Arthur Leighton 25,000 0.42
Robert Southworth 25,000 0.42
APPROVAL DATE: 2-3-95
George M. Stoltz 25,000 $0.31
David B. Strecker 25,000 0.31
Eric P. Marske 25,000 0.31
Melvin Brown 25,000 0.31
Tom Kirchner 25,000 0.31
Arthur Leighton 25,000 0.31
Robert Southworth 25,000 0.31
Stock options must be exercised within 90 days after termination of
employment/board membership. During 1996, no options were
exercised and 150,000 options expired. At December 31, 1996 there
were 375,000 shares reserved for future exercise.
<PAGE>
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During fiscal year 1996, the Company contracted for services from
Manufacturing Services, Inc. in the amount of $52,199.
Manufacturing Services, Inc. is owned and operated by Melvin H.
Brown, who is a Director of Electronic Systems Technology, Inc.
Management believes all prices for services, provided by
Manufacturing Services, Inc., were as favorable as could be
obtained from comparable manufacturing services companies.
<PAGE>
PART IV
ITEM 13.
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits filed as part of the Company's 10KSB report for 1996 are
listed below. Certain exhibits have been previously filed with the
Securities and Exchange Commission and are incorporated by reference.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1. Report of Independent Certified Public Accountant
Financial Statements/Financial Statement Schedules
Balance Sheets
Statement of Operations
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes to Financial Statements
2. Reports on Form 8-K
2.1 Form 8-K dated October 7, 1996
2.2 Form 8-K dated November 19, 1996
2.3 Form 8-K dated December 6, 1996
2.4 Form 8-K dated December 9, 1996
2.5 Form 8-K dated December 10, 1996
2.6 Form 8-K dated December 18, 1996
3. Articles of Incorporation and By-Laws filed as Exhibit 2.1 to Form
S-18, Registration Statement No. 2-92949-S, Exhibit ( c ) to Form 8-K,
filed March 15, 1985, and Amendments to By-Laws adopted by Shareholders
on January 14, 1985 are incorporated herein by reference.
4. Instrument defining the rights of security holders including
indentures.
Exhibit II Form S-18 Registration Statement No. 2-92949-S is
incorporated herein by reference. Forms 8-K dated July 12, 1991,
December 14, 1992, December 10, 1993, February 9, 1996,
February 7, 1997, and Form 8-K/A dated February 3, 1995, are
incorporated herein by reference.
11. Statement regarding computation of per share earnings.
13. Annual report to security holders, Form 10-Q or quarterly
report to security holders. N/A
22. Published report regarding matters submitted to vote of
security holders. N/A
24. Consents of experts and counsel
27. Financial Data Schedule
99. Additional Exhibits
Form 8-K/A dated February 9, 1996, is incorporated herein by reference.
Form 8-K, dated January 17, 1997, is incorporated herein by reference.
99.1 Form 8-K, dated March 3, 1997
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
By: /s/ T. L. KIRCHNER
T.L. Kirchner, Director/President
(Principal Executive Officer)
Date: March 12, 1997
In accordance with the Exchange Act, this Report has been signed
below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Signature Title Date
--------- ----------------- ---------------
/s/ T. L. KIRCHNER Director/President Mar. 12, 1997
T.L. Kirchner
/s/ ROBERT SOUTHWORTH Director/Secretary/ Mar. 12, 1997
Robert Southworth Treasurer
/s/ MELVIN H. BROWN Director Mar. 12, 1997
Melvin H. Brown
Director
Arthur Leighton
/s/ JOHN H. RECTOR Director Mar. 12, 1997
John H. Rector
/s/ JOHN L. SCHOOLEY Director Mar. 12, 1997
John L. Schooley
EXHIBIT 1 - FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
ACCOUNTANTS' REPORT ON THE FINANCIAL STATEMENTS 2
BALANCE SHEETS 3 - 4
STATEMENT OF OPERATIONS 5 - 6
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY 7
STATEMENT OF CASH FLOWS 8 - 9
NOTES TO FINANCIAL STATEMENTS 10 - 20
-1-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Electronic Systems
Technology, Inc.
415 N. Quay, Suite 4
Kennewick, WA 99336
We have audited the accompanying balance sheets of ELECTRONIC
SYSTEMS TECHNOLOGY, INC. as of December 31, 1996 and 1995, and the
related statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
ELECTRONIC SYSTEMS TECHNOLOGY, INC. as of December 31, 1996 and
1995 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ROBERT MOE & ASSOCIATES, P.S.
Spokane, Washington
February 6, 1997
-2-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
--------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 5,717 $ 15,765
Money market investment 482,892 444,335
Certificate of Deposit 724,573 504,626
Commercial paper 200,000 300,000
Marketable securities 121,117
Accounts receivable, net of allowance
for uncollectibles of $1,284-1996
and $1,284-1995 38,311 157,920
Inventory 401,305 297,037
Accrued interest 2,707 3,745
Prepaid insurance 3,101 3,034
Prepaid expenses 6,930 1,100
Prepaid Federal income taxes 26,355
Deferred tax asset 411 5,287
Current portion of note receivable 3,449
--------- ---------
Total current assets 1,892,302 1,857,415
--------- ---------
PROPERTY & EQUIPMENT
Leasehold improvements 13,544 13,544
Laboratory equipment 276,421 254,931
Furniture & fixtures 15,017 15,017
Dies & molds 21,612 17,255
--------- ---------
326,594 300,747
Less accumulated depreciation 185,384 155,504
--------- ---------
141,210 145,243
--------- ---------
OTHER ASSETS
Patent costs, net of amortization
of $1,344-1996 and $1,236-1995 1,042 1,150
Deposits 340 340
Capitalized software cost of
$64,062-1996 net amortization of $56,247;
$61,143-1995 net amortization of
$54,519 7,815 6,624
--------- ---------
9,197 8,114
--------- ---------
TOTAL ASSETS $2,042,709 $2,010,772
========= =========
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
BALANCE SHEETS
December 31, 1996 and 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 15,035 $ 56,493
Accrued payroll 1,288 5,199
Accrued payroll taxes 1,816 1,113
Accrued excise taxes payable 418 410
Accrued vacation pay 12,218 11,712
Federal income taxes payable 58,665
--------- ---------
Total current liabilities 30,775 133,592
--------- ---------
DEFERRED TAX LIABILITY
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
50,000,000 shares authorized,
4,953,667-1996 and 5,006,667-1995
shares issued and outstanding 4,954 5,007
Additional paid-in capital 894,129 918,057
Retained earnings 1,112,851 954,116
--------- ---------
2,011,934 1,877,180
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,042,709 $2,010,772
========= =========
</TABLE>
The accompanying notes are an integral part of this statement
-4-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
SALES $1,190,304 $1,535,071 $1,197,720
---------- ---------- ---------
COST OF SALES
Beginning inventory 297,037 423,932 386,201
Purchases and allocated costs 595,119 475,691 503,111
---------- ---------- ---------
892,156 899,623 889,312
Ending inventory 401,305 297,037 423,932
---------- ---------- ---------
490,851 602,586 465,380
---------- ---------- ---------
GROSS PROFIT 699,453 932,485 732,340
---------- ---------- ---------
OPERATING EXPENSES
Advertising 54,969 50,619 35,848
Amortization 1,837 1,837 397
Bad Debts 54,474
Commissions-sales 22,972 31,974 17,925
Dues & Subscriptions 5,407 7,700 6,009
Depreciation 30,303 25,379 21,160
Insurance 6,528 6,911 5,176
Materials & supplies 26,060 12,383 9,601
Office & administration 18,517 16,628 14,427
Printing 10,203 13,104 6,750
Professional services 77,795 46,113 61,338
Rent & utilities 26,001 25,895 25,733
Repair & maintenance 13,080 6,992 4,863
Salaries 413,920 391,826 381,243
Taxes 73,412 74,333 80,594
Telephone 11,639 11,159 10,571
Trade shows 17,682 8,688 10,017
Travel expenses 54,837 53,778 52,164
---------- ---------- ---------
865,162 839,793 743,816
Expenses allocated to cost of sales (257,035) (280,650) (255,710)
---------- ---------- ---------
608,127 559,143 488,106
---------- ---------- ---------
OPERATING INCOME 91,326 373,342 244,234
---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
(continued)
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OTHER INCOME
Interest income 62,206 58,359 27,750
Site support reimbursement-net of allocated costs 16,192 24,259 19,667
Loss on disposition of assets (238) (1,870) (812)
Realized loss on marketable securities
due to impairment (49,953)
Realized loss on marketable securities (3,522)
Uncollectible accounts recovered 57,204
Recovery from marketable securities litigation 11,288
---------- ---------- ---------
143,130 30,795 46,605
---------- ---------- ---------
INCOME BEFORE PROVISION FOR FEDERAL INCOME TAXES 234,456 404,137 290,839
PROVISION FOR FEDERAL INCOME TAXES 75,721 136,428 104,899
---------- ---------- ---------
NET INCOME $ 158,735 $ 267,709 $ 185,940
========== ========== =========
EARNINGS PER SHARE $ .03 $ .05 $ .04
========== ========== =========
</TABLE>
The accompanying notes are an integral part of this statement
-6-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for December 31, 1993 through December 31, 1996
Additional Loss on
Common Stock Paid-In Marketable Retained
Shares Amount Capital Securities Earnings TOTAL
--------- ------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 4,956,667 $ 4,957 $901,607 $ 497,180 $1,403,744
Stock options
Exercised
June 2, 1994 at $.33 50,000 50 16,450 16,500
Unrealized loss in
marketable securities $ (50,626) (50,626)
Cumulative effect of change in
accounting principle; unrealized
loss in marketable securities;
net of income tax effect (3,287) 3,287
NET INCOME
December 31, 1994 185,940 185,940
--------- ------- --------- ---------- --------- ---------
5,006,667 5,007 918,057 (53,913) 686,407 1,555,558
Unrealized holding loss
reclassified to realized
loss due to impairment 53,913 53,913
NET INCOME
December 31, 1995 267,709 267,709
--------- ------- --------- ---------- --------- ---------
5,006,667 5,007 918,057 0 954,116 1,877,180
REPURCHASE OF COMMON STOCK:
May 17, 1996 (7,000) (7) (3,143) (3,150)
June 26, 1996 (13,000) (13) (6,658) (6,671)
July 8, 1996 (3,000) (3) (1,527) (1,530)
Sept 3, 1996 (30,000) (30) (12,600) (12,630)
NET INCOME
December 31, 1996 158,735 158,735
--------- ------- -------- ---------- --------- ---------
4,953,667 $ 4,954 $ 894,129 $ 0 $1,112,851 $2,011,934
========= ======= ======== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements
-7-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) IN
OPERATING ACTIVITIES:
Net income $ 158,735 $ 267,709 $ 185,940
Noncash expenses included in income:
Depreciation 30,303 25,379 21,160
Amortization 1,836 1,837 397
Deferred income taxes 4,876 (17,035) 11,370
Loss on disposition of assets 238 1,870 812
Realized loss/impaired securities 3,522 49,953
Decrease (increase) in Current Assets:
Accounts receivable, net 119,609 6,391 114,907
Inventory (104,268) 126,895 (37,731)
Other current assets (31,214) 13,587 (18,712)
Increase (decrease) in Current Liabilities:
Accounts payable, accrued expenses
and other current liabilities (44,152) 41,730 (27,750)
Federal Income Taxes Payable (58,665) 59,863 (75,450)
--------- --------- --------
Net Cash Provided By Operating Activities 80,820 578,179 174,943
--------- --------- --------
CASH FLOWS PROVIDED (USED) IN
INVESTING ACTIVITIES:
Deposit 497 (497)
Capitalized software (2,919)
Proceeds received from sale of fixed assets 100
Additions to property & equipment (26,508) (68,373) (30,533)
Certificates of deposit-over 3 months 102,000 (102,000)
Institutional Governmental Income Fund (17,344) (11,134)
Proceeds from sale of marketable securities 117,595
--------- --------- ---------
Net Cash Used In Investing Activities 190,168 (187,220) (42,064)
--------- --------- ---------
CASH FLOWS PROVIDED (USED) IN
FINANCING ACTIVITIES:
Repurchase common stock (23,981)
Proceeds from issuance of common stock 16,500
Proceeds from note receivable 3,449 1,800 2,139
--------- --------- --------
Net Cash Provided By Financing Activities (20,532) 1,800 18,639
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 250,456 392,759 151,518
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,162,726 769,967 618,449
--------- --------- --------
CASH AND CASH EQUIVALENTS AT ENDING OF PERIOD $1,413,182 $1,162,726 $ 769,967
========= ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> -8-
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CASH FLOWS
for the years ended December 31, 1996, 1995, and 1994
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION:
Cash paid during the year for:
Interest
Income taxes $ 155,865 $ 77,129 $ 185,450
========= ========= =========
Cash and Cash equivalents:
Cash $ 5,717 $ 15,765 $ 66,032
Money Market 482,892 444,335 400,935
Certificates of deposit
(maturity =3 months or less) 724,573 402,626 203,000
Commercial paper
(maturity =3 months or less) 200,000 300,000
Bankers acceptance 100,000
--------- --------- ---------
$1,413,182 $1,162,726 $ 769,967
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
-9-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ORGANIZATION: The Company was incorporated under the laws of
the State of Washington on February 10, 1984, primarily to develop,
produce, sell and distribute wireless modems that will allow
communication between peripherals via radio frequency waves.
ACCOUNTING ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION: The Company recognizes revenue from product sales
upon shipment to the customer. Revenues from site support are
recognized as the Company performs the services in accordance with
agreement terms.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS: The Company uses the reserve
method for recording allowance for uncollectible accounts. The amount
included in Allowance for Uncollectible Accounts consists of $1,284 as
of December 31, 1996 and $1,284 as of December 31, 1995.
INVENTORY: Inventories are stated at lower of cost or market with cost
determined using the FIFO (first in, first out) method. Inventories
consisted of the following:
1996 1995 1994
-------- --------- --------
Parts $ 260,397 $ 198,487 $ 245,569
Work in progress 68,555 30,553
Finished goods 72,353 98,550 147,810
-------- --------- --------
$ 401,305 $ 297,037 $ 423,932
======== ========= ========
PROPERTY AND EQUIPMENT: Property and equipment are carried at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. The useful life of property and
equipment for purposes of computing depreciation is five to seven
years. The useful life for leasehold improvements is thirty-one and a
half years. The Company periodically reviews its long-lived assets for
impairment and, upon indication that the carrying value of such assets
may not be recoverable, recognizes an impairment loss by a charge
against current operations.
-10-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PATENT COSTS: Expenses incurred in connection with the patent have
been capitalized and are being amortized over 17 years.
FEDERAL INCOME TAXES: Effective as of January 1, 1992 the Corporation
adopted Statement of Financial Accounting Standards ("SFAS") No. 109
Accounting for Income Taxes which establishes generally accepted
accounting principles for the financial accounting measurement and
disclosure principles for income taxes that are payable or refundable
for the current year and for the future tax consequences of events that
have been recognized in the financial statements of the Corporation and
past and current tax returns. The change had no effect on prior years
results.
RESEARCH AND DEVELOPMENT: Research and development costs are expensed
as incurred. Research and development expenditures for new product
development and improvements of existing products by the Company for
1996, 1995, and 1994 were $135,468, $85,265, and $102,918, respectively.
EARNINGS (LOSS) PER COMMON SHARE: Primary earnings (loss) per common
share are based on the weighted average number of shares outstanding
during the period after consideration of the diluted effect of stock
options and restricted stock awards. The primary weighted average
number of common shares outstanding was 5,508,667, 5,433,174, and
5,360,982, for the years ended December 31, 1996, 1995, and 1994
respectively. Also, fully diluted earnings per common share assume
conversion of dilutive securities when the result is dilutive.
CAPITALIZED SOFTWARE COSTS: In August, 1985, the Statements of
Financial Accounting Standards No. 86 was issued by the Financial
Accounting Standards Board (FASB), directing that the costs of creating
a computer software product to be sold, leased, or otherwise marketed,
and which are incurred after the product's technological feasibility
has been established, be capitalized. During 1986 the Company adopted
this statement as permitted by the FASB No. 86 and, accordingly,
capitalized all such costs subsequent to 1985. Costs incurred prior to
1986 are not permitted to be capitalized by FASB No. 86 and the Company
has not capitalized such costs. All costs capitalized under FASB No.
86 are required to be amortized over their estimated revenue-producing
lives, not to exceed five years, beginning on the date the product is
available for distribution to customers.
-11-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amortization of capitalized software costs charged to expenses for
periods presented is as follows:
1986 $3,234
1987 4,865
1988 9,080
1989 10,501
1990 9,527
1991 7,358
1992 6,219
1993 1,719
1994 288
1995 1,728
1996 1,728
CASH AND CASH EQUIVALENTS: Cash and cash equivalents generally consist
of cash, certificates of deposit, time deposits, commercial paper and
other money market instruments. The Company invests its excess cash in
deposits with major banks, and commercial paper of investment grade
companies and, therefore bears minimal risk. These securities have
original maturity dates not exceeding three months. Such investments
are stated at cost, which approximates fair value, and are considered
cash equivalents for purposes of reporting cash flows.
ADVERTISING COSTS: Costs incurred for producing and communicating
advertising are expensed when incurred.
2 - FEDERAL INCOME TAXES
Effective as of January 1, 1992 the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109 Accounting for Income
Taxes which establishes generally accepted accounting principles for
the financial accounting measurement and disclosure principles for
income taxes that are payable or refundable for the current year and
for the future tax consequences of events that have been recognized in
the financial statements of the Company and past and current tax
returns. The change had no effect on prior years results.
-12-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
2 - FEDERAL INCOME TAXES (continued)
The provision for Federal Income Taxes consisted of:
1996 1995 1994
-------- -------- -------
Currently payable $ 70,845 $152,265 $ 93,529
Deferred (4,876) (15,837) 11,370
-------- -------- -------
Provision for Federal Income
Taxes $ 75,721 $136,428 $104,899
======== ======== =======
The components of the net deferred tax (asset) liability at
December 31, were as follows:
1996 1995 1994
-------- -------- -------
Depreciation $ 18,523 $ 16,116 $12,899
Accrued vacation payable (4,154) (3,982) (1,949)
Allowance for uncollectible
accounts receivable (437) (437) (2,093)
Realized loss due to impairment
of marketable securities (16,984)
Unused capital loss carryforward (14,343)
-------- -------- -------
$ (411) $ (5,287) $ 8,857
======== ======== =======
The differences between the provision for income taxes and income
taxes computed using the U.S. federal income tax rate were as
follows:
1996 1995 1994
-------- -------- -------
Amount computed using the
statutory rates $ 70,845 $152,265 $ 93,529
Increase (reduction):
Deferred tax (asset) liability 4,876 (15,837) 11,370
-------- -------- -------
Provision for Federal Income
Taxes $ 75,721 $136,428 $104,899
======== ========= =======
3 - PUBLIC OFFERING OF COMMON STOCK
The Company sold 3,000,000 shares of its unissued common stock to
the public on November 12, 1984. An offering price of $.30 per
share was arbitrarily determined by the underwriter.
4 - COMPENSATED ABSENCES
FASB Statement No. 43 requires employers to accrue a liability for
employees' compensation for certain future absences. Liabilities
for vacation pay in the amounts of $12,218 and $11,712 have been
accrued as of December 31, 1996 and 1995, respectively.
-13-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
5 - LEASES
The Company has no obligation under capital lease arrangements.
The Company rents its facility under a three (3) year operating
lease commencing on the 1st day of December, 1996. The Company
leases the facility from the Port of Kennewick, who with the
assistance of federal economic development funds (EDA), has
constructed a building for the purpose of leasing space to new or
expanding high tech and electronic industries. The Company will
pay as rental for 6,275 square feet of building space the sum of
$24,096.00 per year, payable monthly in advance at the rate of
$2,008.00 per month. A leasehold tax of $257.83 per month is due
in addition to the $2,008.00 monthly rent. For the second and any
following years of the renewed term, the parties agree that any
rental amount be increased by the Consumer Price Index- Pacific
Cities and U.S. City Average-All Items Indexes using the U.S. City
Average for the 12 month period preceding. The rental expense for
1996, 1995 and 1994 were as follows: 1996=$21,428; 1995=$21,428;
1994=$21,428.
The following is a schedule of estimated future minimum rental
payments required under the above operating leases over the next
five succeeding fiscal years:
Year ending December 31, Amount
------------------------ ------
1997 27,258
1998 28,076
1999 26,442
2000 -0-
2001 -0-
6 - FOREIGN SALES
The Company's revenues fall into three major customer categories,
Domestic, Export, and U.S. Government Sales. A percentage
breakdown of E.S.T.'s major customer categories for the years of
1996 and 1995 are as follows:
1996 1995
------ -------
Domestic Sales 61% 59%
Export Sales 17% 15%
U.S. Government Sales 22% 26%
-14-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
6 - FOREIGN SALES (continued)
The geographic distribution of foreign sales for 1996 and 1995 is
as follows:
1996 1995
----- -----
Mexico 25% 6%
Venezuela 16% less than 1%
Brazil 15% 11%
Croatia/Slovenia 14% 30%
Philippines 14% --
South Korea 4% --
Canada 3% 37%
Israel 3% 4%
Costa Rica 2% 2%
Equador 2% --
Peru 2% --
Taiwan -- 5%
Chile -- 4%
Singapore -- less than 1%
Thailand/Indonesia -- less than 1%
7 - PROFIT SHARING AND SALARY DEFERRAL 401-K PLAN
The Company sponsors a Profit Sharing Plan and Salary Deferral
401-K plan and trust. All employees over the age of 21 are
eligible. The Company is not making contributions under the
current plan agreement.
8 - STOCK OPTIONS
On December 10, 1993, 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 have an exercise price of $.60 per share. Options may be
exercised any time during the period from December 10, 1993 through
December 9, 1996. Following is a summary of transactions:
Shares under Option
-------------------
Outstanding, beginning of year 150,000
Granted during year 0
Canceled during year (150,000)
Exercised during year --------
Outstanding, end of year 0
========
-15-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
8 - STOCK OPTIONS (continued)
On February 3, 1995, 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 have an exercise price of $0.31 per share. Options may be
exercised any time during the period from February 3, 1996 through
February 2, 1998. Following is a summary of transactions:
Shares under Option
-------------------
Outstanding, beginning of year 175,000
Granted during year 0
Canceled during year 0
Exercised during year 0
-------
Outstanding, end of year 175,000
=======
On February 9, 1996, 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 have an exercise price of $.42 per share. Options may be
exercised any time during the period from February 9, 1996 through
February 9, 1999. Following is a summary of transactions:
Shares under Option
--------------------
Outstanding, beginning of year 0
Granted during year 200,000
Canceled during year 0
Exercised during the year 0
--------
Outstanding, end of year 200,000
========
1996 1995
----------- ------------
Option price range at end of year $.31 to $.42 $.31 to $.60
Option range for exercised shares None Exercised
Weighted average fair value of
options granted during the year $.42 $.31
The following table summarizes information about fixed-price stock
options outstanding at December 31, 1996:
Weighted
Number Average Weighted
Range of Exerciseable & Remaining Average
Exercise Outstanding Contractual Exercise
Prices at 12/31/96 Life Price
---------- -------------- ----------- ----------
$.31 175,000 2 years $.31
$.42 200,000 3 years $.42
-16-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
8 - STOCK OPTIONS (continued)
After termination of employment, stock options may be exercised
within 90 days. During the 12 months ended December 31, 1996
150,000 shares under option expired and no shares under option were
exercised. At December 31, 1996 there are 375,000 shares reserved
for future exercises.
The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation." Accordingly, no compensation cost has been
recognized for the stock option plan. Had compensation cost for
the Company's stock option plan been determined based on the fair
value at the grant date for awards in 1996 consistent with the
provisions of SFAS No. 123, the Company's net earnings and earnings
per share would have been reduced to the pro forma amounts
indicated below:
1996 1995
------- -------
Net earnings-as reported $158,735 $267,709
Net earnings-pro forma 124,850 240,601
Earnings per share-as reported .03 .05
Earnings per share- pro forma .02 .04
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996;
dividend yield equaled 0; expected volatility of 45.26%, risk-free
interest rate of 5%; and expected lives of 3 years.
9 - EMPLOYEE PROFIT SHARING BONUS PROGRAM (NON-QUALIFIED)
On December 11, 1992 the Board of Directors revised the Employee
Profit Sharing bonus Program as follows. The Company makes
contributions to the Program in accordance with the following
formula: After the Company's "net profit before tax" reaches
$100,000, the Company sets aside $10,000 for the Program.
Thereafter, the Company adds 8% of the "net profit before tax" to
the Program.
NET PROFIT COMPENSATION TO FUND
---------- ---------------------
$ 100,000 $10,000 + 8% Of amount over
$100,000 NET PROFIT
10 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash investments and trade accounts receivable. As of December 31,
1996 the Company had cash and cash equivalents with Seattle First
National Bank with a combined balance of $772,126 which is $672,126
-17-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
10 - CONCENTRATIONS OF CREDIT RISK (continued)
in excess of the F.D.I.C. insured amount. At December 31, 1996 the
Company held commercial paper in the amount of $200,000 which was
not F.D.I.C. insured. At December 31, 1996 the Company had cash
deposits with Pioneer Bank with a balance of $106,567 which is
$6,567 in excess of the F.D.I.C. insured amount. At December 31,
1996 the Company had cash deposits with U.S. Bank with a balance of
$105,785 which is $5,785 in excess of the F.D.I.C. insured amount.
Additionally, at December 31, 1996, the Company had cash
deposits with Pacific One Bank with a combined balance of
$112,221 which is $12,221 in excess of the F.D.I.C. insured
amount. At December 31, 1996, the Company had cash deposits
with Piper Jaffray with a balance of $115,766, which is not
F.D.I.C. insured. The Company held an investment in
marketable securities in the Piper Jaffray Institutional
Government Fund (the "Fund"). Write downs in the value of the
Company's investment in this Fund totaling $49,953 in 1996
were realized due to the other than temporary decline in value
of the investment, treatment for which is outlined in
paragraph 16 of Statement of Financial Accounting Standard
(SFAS) 115. 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.
Concentrations of credit risk with respect to trade accounts
receivable are generally diversified due to the geographic
dispersion of the Company's customer base.
11 - RELATED PARTY TRANSACTIONS
For the years ended December 31, 1996, 1995, and 1994 services
in the amount of $52,199, $51,974, and $50,788, respectively,
were contracted with a manufacturing process company of which
the owner/president is a member of the Board of Directors of
Electronic Systems Technology, Inc.
The Company purchases certain key components necessary for the
production of its products from sole suppliers. The
components provided by this supplier could be replaced or
substituted by other products, if it became necessary to do
so. It is possible that if this action became necessary, a
material interruption of production and/or material cost
expenditures could take place.
During fiscal year 1994, the Company contracted services with
an engineering firm in the amount of $41,583. This firm is
owned and operated by a Director of Electronic Systems
Technology, Inc. For fiscal years 1996 and 1995, this firm
did not provide any services to Electronic Systems Technology, Inc.
-18-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
12 - MARKETABLE SECURITIES
The Company has adopted 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 year's results.
All of the marketable securities held by the Company
consisted of securities "available-for-sale", as defined by
SFAS No. 115. The securities held 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.
The following information is as of December 31, 1996 and 1995:
1996 1995
-------- ---------
Aggregate fair value of marketable
securities $ -- $121,117
Gross unrealized holding gains -- --
Gross unrealized holding losses -- --
Gross unrealized loss due to impairment
in marketable securities -- 49,953
Amortized cost basis -- 171,070
Changes in marketable securities for the period ended
December 31, 1996 and 1995 are as follows:
Cost $ 171,070 $153,726
Dividends and capital gains reinvested -- 17,344
Sale of securities (117,595) --
Realized loss due to impairment
in marketable securities (49,953) (49,953)
Realized loss on sale of securities (3,522) --
-------- --------
Fair market value $ 0 $121,117
======== ========
The Company was included in the class action suit settlement
against the manager of the Company's marketable securities
investments, Piper Jaffray. In February, 1996, the Company
received the first payments pursuant to this settlement in
the amount of $3,700 and as of September 30, 1996 has
received settlement payments totalling $11,288, and expects
to receive periodic settlement payments of similar amounts
over the next three years.
-19-
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
13 - CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, the Company changed its method of
accounting for Debt and Equity Securities to conform with
requirements of the Financial Accounting Standards Board.
This change was adopted by the Company as of January 1, 1994,
but was not reported on subsequent filing with the Commission
until the Form 10-Q for the quarter ending March 31, 1995.
The effect of this change was to increase net income for 1994
by $3,287, which resulted in an amount of $0.0006 per share.
The cumulative effect of the change of $3,287 is shown as a
one-time credit to income for 1994.
14 - STOCK REPURCHASE PLAN
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 could repurchase shares of its common stock in open
market transactions through broker and dealers, up to the
amount allocated by the Plan of $100,000. Repurchase
transactions could continue through June 30, 1996. On June
6, 1996, the Company's Board of Directors authorized the
establishment of a plan for the repurchase of the Company's
common stock with terms and conditions identical to the Plan
expiring June 30, 1996. The plan approved June 6, 1996 would
be in effect from July 1, 1996 through September 30, 1996.
At the conclusion of the established repurchase Plan on
September 30, 1996, $23,981 of the funds allocated by the
Plan had been expended by the Company to repurchase a total
53,000 shares. The transactions for shares repurchased under
the Plan were completed by September 30, 1996. The subject
shares were canceled from the Company's outstanding shares
and were therefore removed from the Company's outstanding
common shares.
-20-
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
SELECTED FINANCIAL DATA
For the five years
ended December 31, 1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales $1,190,304 $1,535,071 $1,197,720 $1,444,039 $1,232,217
Gross profit 699,453 932,485 732,340 846,292 725,406
Income (Loss)
before provision
for income taxes 234,456 404,137 290,839 438,192 323,555
Provision for
income taxes 75,721 136,428 104,899 144,970 60,402
Net income (Loss) 158,735 267,709 185,940 293,222 263,153
Net income (Loss)
per share .03 .05 .04 .06 .05
Weighted average
number of shares
outstanding 5,478,558 5,433,174 5,360,982 5,345,844 5,289,188
Total Assets 2,042,709 2,010,772 1,597,612 1,540,141 1,154,823
Long-term debt and
capital lease
obligations 0 0 0 0 0
Stockholders'
equity 2,011,934 1,877,180 1,555,558 1,403,744 1,110,522
Stockholders'
equity per
share .41 .37 .31 .28 .22
Working capital 1,861,527 1,723,823 1,449,848 1,297,738 1,025,431
Current Ratio 61.5:1 13.9:1 44.9:1 10.5:1 24.2:1
Equity to
total assets 98% 93% 97% 91% 96%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
SCHEDULE I - MARKETABLE SECURITIES AND OTHER INVESTMENTS
December 31, 1996 and 1995
Amount
Carried
Units or Market in the
Name and Issuer and Principal Value at Balance
Title of Issue Amount Cost Dec. 31, Sheet(1)
- -------------------------- --------- ------- -------- --------
<S> <C> <C> <C> <C>
1996 Piper Jaffray;
Institutional Government
Income Portfolio $ 15,311 $171,069 $121,116 $121,116
1995 Piper Jaffray;
Institutional Government
Income Portfolio $ 13,118 $153,726 $ 98,120 $ 98,120
</TABLE>
(1) Included in the caption "Marketable Securities" in the balance
sheet at December 31, 1996 and 1995.
EXHIBIT 2.1 - Form 8-K dated October 7, 1996
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: October 7, 1996
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 October 7, 1996, the Company issued a press release at the Instrument
Society of America (ISA) tradeshow in Chicago, introducing the Company's newest
product, the ESTeem Wireless Modem 192C. This press release is included by
reference and is attached hereto as Exhibit 99.12.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS.
Exhibit 99.12 - Press release issued October 7, 1996.
<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.
/s/ T. L. KIRCHNER
By: T.L. Kirchner
President
Date: October 7, 1996
<PAGE>
Exhibit 99.12 - Press Release Dated October 7, 1996
PRESS RELEASE
WIRELESS RADIO LAN GOES FOUR TIMES FASTER, ADDS INFRARED AND PHONE INTERFACES
ISA 96, CHICAGO, IL --- OCTOBER 7, 1996 --- ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(EST)(OTC:ELST), a manufacturer of wireless communications hardware, announced
the release of the ESTeem Model 192C, the newest and fastest member of its
growing wireless-data communications products for commercial applications. The
new ESTeem boasts a RF data rate four times faster than its current Model 96C
while adding infrared and phone interfaces to the radio area network (RAN).
The standard infrared communications port will allow the user to perform local
programming and diagnostic functions for the radio network without interruption
of communications over the RAN. The optional phone port in the ESTeem allows
a communications gateway over existing phone lines providing remote data access
to and from the RAN world wide. The Model 192C offers over 1,600 software
selectable channels at a data rate of 19,200 bps, 2 to 4 watts RF output in
the 450 to 470 MHz frequency range. The narrow band packet burst transceiver
allows networking of 253 devices in high EMF environments on a sigle frequency
using the industry standard RS-232, RS-422, or RS-485 asynchronous full duplex
interfaces. The ESTeem's internal digi-repeating capability allows routing
data through a maximum of three ESTeems to extend the typical line-of-sight
range of 15 miles to approximately 60 miles. The 12 VDC powered device can be
operated from battery or solar panels in addition to 90-250 VAC, 50/60 Hz with
its external power supply for world applications. The Model 192C has over 100
software programmable features, including internal protocol drivers for all
the major programmable logic controllers, to allow the unit to be configured
for any application.
Electronic Systems Technology, a publicly held corporation since 1984, was
the first company to develop the wireless modem and receive the United States
and Canadian patents for this technology.
Contact EST Marketing for more details.
www.esteem.com
<PAGE>
APPENDIX
Item no. 1: (graphic material not included in the 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.
EXHIBIT 2.2 - Form 8-K dated November 19, 1996
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: November 19, 1996
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 November 19, 1996, the Company issued a press release with summary
financial performance figures for the quarter ending September 30, 1996.
This press release is incorporated by reference and is attached
hereto as Exhibit 99.13.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS.
Exhibit 99.13 - Press release issued November 19, 1996.
<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: November 19, 1996
<PAGE>
EXHIBIT 99.13 - PRESS RELEASE ISSUED November 19, 1996
PRESS RELEASE
ELECTRONIC SYSTEMS TECHNOLOGY
415 N. QUAY STREET
KENNEWICK, WA 99336
509-735-9092 (O)
509-783-5475 (FAX)
EST ANNOUNCES 2nd QUARTER 1996 FINANCIAL INFORMATION
KENNEWICK, WASHINGTON --- November 19, 1996 --- Electronic Systems Technology
Inc. (EST) (OTC: ELST), a manufacturer of wireless modems, today
announced sales and results of operations for the three and nine month
periods ended September 30, 1996.
EST reported sales for the third quarter of 1996 in the amount of $259,919
compared to $414,663 for the same quarter in 1995. Net income was $20,395,
or $0.004 per share, compared with net income of $105,824, or $0.02 per share,
for the third quarter of 1995. For the nine month period, EST reported net
income of $138,557 or $0.03 per share on sales of $905,680 compared with net
income of $218,830 or $0.04 per share on sales of $1,154,290 for the same
period in 1995.
<TABLE>
Selected Statement of Operations Information
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 259,919 $ 414,663 $ 905,680 $1,154,290
Net income before tax 30,902 160,339 211,750 355,545
Net Income 20,395 105,824 138,557 218,830
Weighted average common
shares outstanding 5,475,339 5,396,256 5,457,339 5,396,256
Earnings per Share $ 0.004 $ 0.02 $ 0.03 $ 0.04
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Information
(Unaudited)
Sept 30, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Cash and cash equivalents $1,345,891 $1,162,726
Total current assets 1,891,298 1,857,415
Property & equipment (net) 148,194 145,243
Total assets 2,047,304 2,010,772
Total current liabilities 55,548 133,592
Long-term debt -0- -0-
Stockholders' equity 1,991,756 1,877,180
</TABLE>
www.esteem.com
<PAGE>
APPENDIX:
Item no. 1: (graphic material not included in electronic filing format)
The press release was published showing at top left of the press release,
the Electronic Systems Technology, Inc. trademarked company logo, showing
a black square field containing the stylized letters E S T.
EXHIBIT 2.3 - Form 8-K dated December 6, 1996
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: December 6, 1996
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 December 6, 1996, the Company issued a letter to shareholders discussing
quarter results for the quarter ended September 30, 1996 results, and other
informational issues. This shareholder letter is incorporated by reference and
is attached hereto as Exhibit 20.7.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS.
Exhibit 20.7 - Letter to Shareholders published DECEMBER 6, 1996.
<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: DECEMBER 6, 1996
<PAGE>
EXHIBIT 20.7-Letter to Shareholders
To Our Shareholders:
Gross revenues decreased to $310,993 for the third quarter of 1996 as
compared to $452,620 in the third quarter of 1995. This has resulted in a
decrease in our net income before tax to $30,902 from $160,339 for the
3rd quarter of 1995.
Our third quarter year gross revenues have decreased from $1,308,030 in 1995
to $1,113,248 in 1996 for the same period. Third quarter year net profit before
tax was $211,750 as compared to $355,545 for the same period of 1995.
(see appendix item no. 2 for description of graphic content not
displayed in electronic format)
In Management's opinion the overall reduction in sales revenue is due
primarily to cancellation or postponements of industrial automation projects by
both foreign and domestic customers, less than expected customer orders,
as well as increased competition from other wireless systems and hardware
providers. This downward sales trend in conjunction with increased
Research and Development and Marketing expenditures by the Company, has
resulted in a lower net income before tax for 1996 when compared with the same
period of 1995. Management's opinion is this trend will continue through the
calendar year ending December 31, 1996.
It is Management's opinion the Company's increased marketing efforts in
conjunction with the release of the new ESTeem product line, as well as an
increase in the number of EST distributors in the second half of 1996,
may lead to a reverse in the downward trend in sales revenue in 1997.
The development of the new 192 ESTeem product line has been on-going
for 1996. The ESTeem Model 192C, developed for our industrial automation
market, was released at a trade show in October. The Federal Communications
Commission (FCC) type acceptance for the 192C products has been applied
for and the company is awaiting approval. In Canada, communications type
acceptance for the 192C was approved in November. The Model 192F
operates on federal frequencies in the United States, and government and
civilian frequencies in foreign countries.
As stated at our Annual Shareholder Meeting in June, it is Management's
opinion that the Company's stock is under valued. A stock buy-back plan was
implemented in 2nd quarter of and was extended through the 3rd quarter
of 1996. Over this period the Company purchased 53,000 shares at an average
price of $0.45 per share.
As a reminder for our shareholders, all EST's filing data to the Security
Exchange Commission (SEC) is now available from the SEC information archive
on the Internet (http://www.sec.gov). In addition, EST has an Internet web
site (www.esteem.com) which provides technical and sales information.
T.L. Kirchner
President
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
(as prepared by Management)
(Unaudited)
<CAPTION>
Nine months ended Sept 30 Sept 30
1996 1995
===== =====
<S> <C> <C>
Sales $ 905,680 $ 1,154,290
Other revenue $ 207,568 $ 153,740
Gross Profit $ 545,166 $ 707,353
Income (Loss) before
provisions for income taxes $ 211,750 $ 355,545
Earnings per common
share before taxes
Primary $ .04 $ .07
Fully diluted $ .04 $ .07
Earnings per common
share after taxes
Primary $ .03 $ .04
Fully diluted $ .03 $ .04
Weighted average number of
common shares and common stock
equivalents outstanding for use in
determining Earnings Per Share:
Primary 5,475,339 5,396,256
Fully diluted 5,475,339 5,396,256
Total assets $ 2,047,304 $ 1,955,667
Long-term debt
and capital lease
obligations $ 0 $ 0
Shareholder's equity $ 1,991,756 $ 1,827,893
Shareholder's equity
per share $ .40 $ .37
Working Capital $ 1,835,750 $ 1,708,249
Equity to total assets 97% 93%
</TABLE>
<PAGE>
SHAREHOLDER INFORMATION
HEADQUARTERS
Electronic Systems Technology, Inc.
415 N. Quay Street
Kennewick, WA 99336
Office: (509) 735-9092
Facsimile: (509) 783-5475
Internet Web Site: www.esteem.com
INDEPENDENT AUDITOR
Robert Moe & Associates, P.S.
305 IBM Building
W. 201 N. River Drive
Spokane, WA 99201
TRANSFER AGENT
TranSecurities International, Inc.
2510 North Pines, Suite 202
Spokane, WA 99206
Phone: (800) 762-8233
<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 second and third paragraphs of the first page
of the shareholder letter was a bar graph showing the comparison of
third quarter revenues and net profit (rounded to the nearest
thousand dollars) for the third
quarters of 1994, 1995, and 1996.
The data presented was as follows:
1994 third quarter gross revenues: $997,000
1994 third quarter net profit: $206,000
1995 third quarter gross revenues: $1,308,000
1995 third quarter net profit: $356,000
1996 third quarter gross revenues: $1,113,000
1993 year end gross revenues: $212,000
EXHIBIT 2.4 - Form 8-K dated December 9, 1996
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: December 9, 1996
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 December 9, 1996, Mr. Art Leighton, a Director for the Company,
purchased 25,000 shares of Company stock from the open market.
Mr. Leighton stated that his decision to purchase Company stock was
primarily influenced by the opinion that the Company stock is currently
undervalued. As a result of the purchase, Mr. Leighton's holding in the
Company increased to 84,000 shares, representing 1.7% of the 4,953,667
shares of outstanding common stock as of December 9, 1996.
<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: December 16, 1996
EXHIBIT 2.5 - Form 8-K dated December 10, 1996
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: December 10, 1996
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 December 10, 1996, the Company issued a press release to coincide with
its attendance at the Allen Bradley Automation Fair 1996 in Philadelphia,
introducing the Company's new product, the ESTeem Wireless Modem 192C.
This press release is included by reference and is attached hereto as Exhibit
99.14.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS.
Exhibit 99.14 - Press release issued December 10, 1996.
<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: December 10, 1996
<PAGE>
EXHIBIT 99.14 - PRESS RELEASE DATED DECEMBER 10, 1996
PRESS RELEASE
Electronic Systems Technology 509-735-9092(O)
415 N. Quay Street Kennewick WA 99336 509-783-5475(FAX)
WIRELESS RADIO LAN GOES FOUR TIMES FASTER, ADDS
INFRARED AND PHONE INTERFACES
Allen-Bradley Fair 96, Philadelphia, PA --- December 10, 1996 --- Electronic
Systems Technology, Inc. (EST) (OTC: ELST), a manufacturer of wireless
communications hardware, announced the release of the ESTeem Model 192C,
the newest and fastest member of its growing wireless-data communications
products for commercial and military applications.
The new ESTeem boasts a radio frequency (RF) data rate twice as fast as current
technology, while adding infrared and phone interfaces to the radio area
network (RAN). The standard infrared communications port will allow the user to
perform local programming and diagnostic functions for the radio network
without interruption of communications over the RAN. The optional phone port
in the ESTeem allows a communications gateway over existing phone lines
providing remote data access to and from the RAN world wide. The Model 192C
has over 100 software programmable features, including internal
Allen-Bradley(tm) DF1 protocol drivers for direct interfacing to PLC-5, 2, and
SLC family of controllers. The Model 192C offers over 1,600 software selectable
channels at a data rate of 19,200 bps, 2 to 4 watts RF output in the FCC
licensed frequencies of 450 to 470 MHz. The narrow band packet burst
transceiver allows networking of 253 devices in high EMF environments on a
single frequency using the industry standard RS-232, RS-422, or RS-485
asynchronous, full duplex interfaces. The ESTeem's internal digi-repeating
capability allows routing data through a maximum of three ESTeems to extend the
typical line-of-sight range of 15 miles to approximately 60 miles.
The 12 VDC powered device can be operated from battery or solar panels in
addition to 90-250 VAC, 50/60 Hz with its external power supply for world
applications.
Electronic Systems Technology, a publicly held corporation since 1984, was
the first company to develop the wireless modem and receive the United States
and Canadian patents for this technology.
Contact EST Marketing for more details.
www.esteem.com
<PAGE>
APPENDIX:
Item no. 1: (graphic material not included in electronic filing format)
The press release was published showing at top left of the press release,
the Electronic Systems Technology, Inc. trademarked company logo, showing
a black square field containing the stylized letters E S T.
EXHIBIT 2.6 - Form 8-K dated December 18, 1996
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: December 18, 1996
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 December 18, 1996, the Company announced a plan for the repurchase of the
Company's common stock, as authorized by the Company's Board of Directors on
November 15, 1996, with the decision of whether or not to initiate such
plan and if initiated, the terms of commencement of the plan, being at the
discretion of the Company's President and CEO, T.L. Kirchner.
Pursuant to 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 January 1, 1997, and may continue through March 31, 1997.
For more specific information regarding the stock repurchase plan, reference
is made to the Company's press release dated December 18, 1996, incorporated
by reference and attached hereto as Exhibit 99.15, and the Plan for Stock
Repurchase as approved by the Board of Directors, incorporated by reference and
attached hereto as Exhibit 99.16.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS.
Exhibit 99.15 -Press release issued December 18, 1996.
Exhibit 99.16 -Plan for Stock Repurchase, as approved by the Electronic
Systems Technology, Inc. Board of Directors.
<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.
/s/ T. L. KIRCHNER
By: T.L. Kirchner
President
Date: December 18, 1996
<PAGE>
EXHIBIT 99.15 - PRESS RELEASE DATED DECEMBER 18, 1996
PRESS RELEASE
EST ANNOUNCES STOCK REPURCHASE PLAN
KENNEWICK, WASHINGTON --- December 18, 1996 --- Electronic Systems
Technology, Inc. (EST) (OTC: ELST), a manufacturer of wireless communications
hardware, today announced a stock repurchase plan to acquire the Company's
common stock up to a total value of $100,000 from open market purchases from
brokers and dealers.
Under the conditions of the plan, as authorized by the Company's Board of
Directors, repurchases may commence as soon as January 1, 1997, and may
continue through March 31, 1997. The maximum number of shares the Company
will repurchase from any single shareholder during the duration of the stock
repurchase plan will be 10,000 shares. The results of the stock repurchase
plan is dependent upon market conditions, with no guarantee as to the exact
number of shares to be repurchased by the Company. The repurchase plan
is subject to other terms and conditions, as are set forth in the plan.
Electronic Systems Technology, a publicly held Company since 1984, was the
first Company to develop the wireless modem and receive the United States and
Canadian patents for this technology.
Contact EST for more details.
www.esteem.com
<PAGE>
APPENDIX:
Item no. 1: (graphic material not included in electronic filing format)
The press release was published showing at top left of the press release,
the Electronic Systems Technology, Inc. trademarked company logo, showing
a black square field containing the stylized letters E S T.
<PAGE>
EXHIBIT 99.16 - PLAN FOR STOCK REPURCHASE.
Stock Repurchase Plan as authorized by the Company Board of Directors,
November 15, 1996
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
Plan for Stock Repurchase
January 1, 1997
The following plan to repurchase the Company's stock is approved for
execution by resolution of the Board of Directors.
It is the plan and intent of Electronic Systems Technology, Inc.
("the Company") to repurchase the common stock of the Company from
"open market" sources, in a manner most advantageous to the Company,
within the amounts and time limitations described below. The purpose for the
repurchase of the Company's stock is to provide stability to, and increase
the value of, the Company's stock due to Management's belief that the
Company's stock is currently undervalued. It is not the intent of this
stock repurchase plan to repurchase the Company's stock in an effort to
privatize the Company, nor is the repurchase plan to be construed as a
tender offer for repurchase of the Company's outstanding stock .
During the duration of the Company's stock repurchase plan employees,
directors, and officers of the Company, as well as its affiliates, should not
purchase or sell any of their holdings of the Company's securities, nor
should there be any attempts to exercise existing stock options for the
Company's securities.
The maximum number of shares the Company will repurchase from any single
shareholder during the duration of the stock repurchase plan will not exceed
10,000 total shares.
The stock repurchase plan (the "Plan") shall be governed by all applicable
securities rules, regulations, and limitations, particularly Securities
and Exchange Commission Rule 10b-18. The Plan will be performed in
accordance with the following guidelines:
Amount: The amount of $100,000 of the Company's available funds will be
allocated for the Plan. Of this amount $90,000 will be allocated
for actual repurchases of the Company's stock, and $10,000 will
be allocated for associated fees. For funds allocated for
associated fees of the plan, any amount not expended for fees
will be available for actual stock repurchases of the Company's
stock.
Duration: The Plan will commence at the discretion of the Company immediately
following January 1, 1997 and will continue until the Plan is
discontinued at the discretion of the Company or the occurrence of
any of the following: 1) The allocated funds are exhausted
through repurchase, 2) The Company's stock price reaches a bid
price of $1.00 per share, or 3) the date of March 31, 1997.
The stock repurchase transactions of the Company will be governed by
the following guidelines:
<PAGE> Page 1 of 2
OPEN MARKET PURCHASES:
BROKER: Bids and purchases of stock from or through only one broker or dealer
on any one day. The exception being for purchases not solicited
by or on behalf of the Company. Thus, purchases may be made from
more than one dealer, if the dealer is not directly or indirectly
purchasing on behalf of the Company. It will be the responsibility
of the Broker-Dealer the Company has engaged to repurchase the
Company's stock to ensure the legitimacy, legality, and compliance of
the transaction with the guidelines stated in this Plan, as well as
any other securities regulations which may apply to such transaction.
TIME: No bid or purchase of stock until after a current independent bid is
reported in the Electronic Bulletin Board NASDAQ System.
PRICE: Purchase price may not be above lowest current independent offer
inclusive of any commissions paid to a broker or dealer.
AMOUNT: The amount purchased on any particular day, together with purchases
made through broker-dealers during the preceding five business days,
may not exceed 1/20th of one percent (0.0005) of the outstanding
shares, exclusive of shares owned by affiliates.
BLOCK PURCHASES:
In addition to the regular daily amount, the Company may repurchase "blocks"
in the market. A single purchase qualifies as a block by meeting either the
volume test or the price test, whichever is more favorable. Broker-dealers
may not accumulate or sell short to "create" a block. It will be the
responsibility of the Broker-dealer the Company has engaged to repurchase the
Company's stock to ensure the legitimacy, legality, and compliance of the
transaction with the guidelines stated in this Plan, as well as any other
securities regulations which may apply to such transaction.
VOLUME TEST: A minimum of 20 round lots and 1/10th of one percent (.001)
of the outstanding shares, exclusive of shares owned by affiliates.
or
PRICE TEST: At least: (1) $200,000 or (2) 5,000 shares; and a total
price of at least $50,000. (Therefore, if the share price is less than $10, a
Block would be $50,000 or more.)
PRICE: Purchase price may not be above lowest current independent
offer inclusive of any commissions paid to a broker or dealer.
DISCLOSURE: Officers of the Company are directed to make the appropriate and
timely disclosures of the above, including press releases as well as Form 8-K
Report. Such disclosures shall be made as of the approval of such Stock
Repurchase Plan, as well as reporting the progress of the Plan.
Page 2 of 2
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS.
EARNINGS (LOSS) PER COMMON SHARE: Primary earnings (loss) per common share
are based on the weighted average number of shares outstanding during the
period after consideration of the diluted effect of stock options and
restricted stock awards. The primary weighted average number of common
shares outstanding was 5,508,667, 5,433,174, and 5,360,982, for the years
ended December 31, 1996, 1995, and 1994 respectively. Also, fully diluted
earnings per common share assume conversion of dilutive securities when
the result is dilutive.
EXHIBIT 24 - CONSENTS OF EXPERTS AND COUNSEL
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------
Board of Directors
Electronic Systems
Technology, Inc.
415 N. Quay, Suite 4
Kennewick, WA 99336
We hereby consent to the use of our opinion dated February 6, 1997
on the financial statements of ELECTRONIC SYSTEMS TECHNOLOGY, INC. for the
year ended December 31, 1996 in your annual report.
ROBERT MOE & ASSOCIATES, P.S.
Spokane, Washington
February 7, 1997
<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 10KSB, FOR
DECEMBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,143,182
<SECURITIES> 0
<RECEIVABLES> 39,595
<ALLOWANCES> 1,284
<INVENTORY> 401,305
<CURRENT-ASSETS> 1,892,302
<PP&E> 326,594
<DEPRECIATION> 185,384
<TOTAL-ASSETS> 2,042,709
<CURRENT-LIABILITIES> 30,775
<BONDS> 0
<COMMON> 4,954
0
0
<OTHER-SE> 2,006,980
<TOTAL-LIABILITY-AND-EQUITY> 2,042,709
<SALES> 1,190,304
<TOTAL-REVENUES> 1,337,194
<CGS> 490,851
<TOTAL-COSTS> 597,206
<OTHER-EXPENSES> 193,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 234,456
<INCOME-TAX> 75,721
<INCOME-CONTINUING> 158,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,735
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
EXHIBIT 99.1 - Form 8-K dated March 3, 1997
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: March 3, 1997
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 March 3, 1997, the Company was notified that Arthur Leighton, a director
of the Company, was, as an innocent bystander, wounded in a shooting
incident near his home, during the weekend of March 2, 1997. At the time of
this filing Mr. Leighton's condition is unknown.
<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.
/s/ T. L. KIRCHNER
By: T.L. Kirchner
President
Date: March 7, 1997
