UNITED STATES SECURITIES AND EXCHANGE COMMISSIONS
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: June 30, 1998
Commission File Number: 2-92949-S
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1238077
(State of incorporation) (I.R.S. Employer Identification No.)
415 N. Quay St., #4 Kennewick WA 99336
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (509) 735-9092
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of common stock as of June 30, 1998
was 4,953,667.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
(as prepared by Management)
(Unaudited)
SELECTED FINANCIAL DATA
Six months ended June 30, June 30,
1998 1997
=========== ==========
<S> <C> <C>
Sales $ 717,116 $ 546,894
Other revenue 67,748 53,928
Gross profit 386,253 307,390
Net income before taxes 109,510 34,389
after taxes 72,276 22,696
Earnings per share before taxes
Basic $ 0.02 $ 0.006
Diluted 0.02 0.006
Earnings per share after taxes
Basic $ 0.013 $ 0.004
Diluted 0.013 0.004
Weighted Average Shares Outstanding (Basic)
Primary 5,590,530 5,469,897
Diluted 5,590,530 5,469,897
Total assets $ 2,268,671 $ 2,095,827
Long-term debt and capital lease obligations $ 0 $ 0
Shareholders' equity $ 2,151,338 $ 1,985,092
Shareholders' equity per share $ 0.43 $ 0.40
Working Capital $ 2,017,755 $ 1,836,862
Current ratio 18 : 1 17 : 1
Equity to total assets 95% 95%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
BALANCE SHEET
(as prepared by Management)
(Unaudited)
June 30, December 31,
1998 1997
========= ============
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,678,217 $ 1,466,760
Accounts receivable, net of allowance for
uncollectibles of $1,284 96,719 268,980
Inventory 339,688 319,127
Accrued Interest 7,929 7,439
Prepaid Expenses 9,169 3,173
Prepaid federal Income Taxes 3,366 0
------------- -------------
Total Current Assets $ 2,135,088 $ 2,065,479
PROPERTY & EQUIPMENT, net of depreciation
of $230,124 at June 30, 1998
and $214,491 at Dec. 31, 1997 127,464 132,924
OTHER ASSETS 6,119 7,408
------------- -------------
TOTAL ASSETS $ 2,268,671 $ 2,205,811
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 44,863 $ 29,931
Federal Income Taxes Payable 0 24,793
Accrued Liabilities 22,933 22,489
Cash Distributions Payable 49,537 0
------------- -------------
Total Current Liabilities $ 117,333 $ 77,213
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
50,000,000 shares authorized,
shares issued and outstanding:
4,953,667-Dec. 31, 1997 and
June 30, 1998 $ 4,954 $ 4,954
Additional Paid-in Capital 894,129 894,129
Retained earnings 1,252,255 1,229,515
------------- -------------
$ 2,151,338 $ 2,128,598
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,268,671 $ 2,205,811
============= =============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF OPERATIONS
(as prepared by Management)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
=========== =========== =========== ===========
<S> <C> <C> <C> <C>
SALES $ 307,902 $ 230,866 $ 717,116 $ 546,894
COST OF SALES
Beginning Inventory $ 292,162 $ 396,382 $ 319,127 $ 401,305
Purchases & allocated costs 205,360 116,029 351,424 232,869
----------- ----------- ----------- -----------
$ 497,522 $ 512,411 $ 670,551 $ 634,174
Ending Inventory 339,688 394,670 339,688 394,670
----------- ----------- ----------- -----------
Total Cost of Sales $ 157,834 $ 117,741 $ 330,863 $ 239,504
----------- ----------- ----------- -----------
Gross Profit $ 150,068 $ 113,125 $ 386,253 $ 307,390
----------- ----------- ----------- -----------
OPERATING EXPENSES
Finance/Administration $ 40,834 $ 35,223 $ 109,892 $ 103,647
Research & Development 37,973 29,550 73,331 69,607
Marketing 56,427 41,277 100,815 95,912
Customer Service 15,602 20,259 32,134 36,968
----------- ----------- ----------- -----------
Total Operating Expense $ 150,836 $ 126,309 $ 316,172 $ 306,134
----------- ----------- ----------- -----------
OPERATING INCOME $ (768) $ ( 13,184) $ 70,081 $ 1,256
----------- ----------- ----------- -----------
Other Income (Expenses)
Interest Income $ 18,569 $ 15,748 $ 35,637 $ 30,334
Recovery from Marketable
Securities Litigation 1,648 0 1,648 0
Engineering Services 14,909 11,987 30,463 23,583
Engineering Support ( 13,730) ( 9,997) ( 28,319) ( 20,784)
----------- ----------- ----------- -----------
Net Other Income $ 21,396 $ 17,738 $ 39,430 $ 33,133
----------- ----------- ----------- -----------
NET INCOME BEFORE TAX $ 20,628 $ 4,554 $ 109,510 $ 34,389
Provision for income tax 7,013 1,549 37,234 11,693
----------- ----------- ----------- -----------
NET INCOME $ 13,615 $ 3,004 $ 72,276 $ 22,696
=========== =========== =========== ===========
Basic Earnings per Share
Before Tax $ 0.003 $ 0.00 $ 0.02 $ 0.006
Basic Earnings per Share
After Tax $ 0.002 $ 0.00 $ 0.013 $ 0.004
Diluted Earnings Per Share
Before Tax $ 0.003 $ 0.00 $ 0.02 $ 0.006
Diluted Earnings Per Share
After Tax $ 0.002 $ 0.00 $ 0.013 $ 0.004
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CASH FLOWS
(as prepared by Management)
(Unaudited)
SIX MONTHS ENDED June 30, 1998 June 30, 1997
============= =============
<S> <C> <C>
CASH FLOWS PROVIDED (USED) IN
OPERATING ACTIVITIES:
Net income $ 72,276 $ 22,696
Noncash expenses included in income:
Depreciation 15,633 15,883
Amortization 1,289 1,289
DECREASE (INCREASE) IN CURRENT ASSETS:
Accounts receivable, net 172,261 (106,470)
Inventory ( 20,561) 6,635
Prepaid expenses ( 5,996) 2,402
Accrued interest ( 490) ( 3,838)
Prepaid income taxes ( 3,366) 11,693
Increase (Decrease) in Current Liabilities:
Accounts payable, accrued expenses
and other current liabilities 15,376 30,423
Accrued federal income taxes ( 24,793) 0
---------- ---------
$ 221,629 $ (19,287)
---------- ---------
CASH FLOWS PROVIDED (USED) IN
INVESTING ACTIVITIES:
Additions to property and equipment $ ( 10,172) $ ( 13,606)
Capitalized Software 0 ( 790)
Deposits 0 ( 600)
---------- ---------
$ ( 10,172) $ ( 14,996)
---------- ---------
CASH FLOWS PROVIDED (USED) IN
FINANCING ACTIVITIES:
$ 0 $ 0
---------- ---------
Net increase in cash and cash equivalents $ 211,457 $ (34,283)
Cash and cash equivalents at beginning
of period 1,466,760 1,413,182
--------- ---------
Cash and Cash equivalents at end of period $ 1,678,217 $ 1,378,899
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
STATEMENT OF CASH FLOWS (continued)
(as prepared by Management)
(Unaudited)
SIX MONTHS ENDED June 30, 1998 June 30, 1997
============= ==============
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash paid year to date:
Interest $ 0 $ 0
Federal income taxes $ 65,393 $ 0
============= ==============
Cash allocated for Cash Distribution $ 49,537 $ 49,537
============= ==============
Cash and Cash Equivalents:
Cash $ 6,219 $ 5,550
Money market accounts 592,197 441,512
Certificates of Deposit 450,801 331,837
Commercial Paper 629,000 600,000
------------- --------------
$ 1,678,217 $ 1,378,899
============= ==============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(as prepared by Management)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements of Electronic Systems Technology, Inc. (the
"Company"), presented in this Form 10Q are unaudited and reflect, in the
opinion of Management, a fair presentation of operations for the three and six
month periods ending June 30, 1998 and June 30, 1997. Certain information and
footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principals have been condensed
or omitted pursuant to the applicable rules and regulations of the Securities
and Exchange Commission. These financial statements should be read in
conjunction with the audited financial statements and notes thereto included
in the Company's Form 10K for the year ended December 31, 1997 as filed with
Securities and Exchange Commission.
The results of operation for the three and six month periods ended
June 30, 1998 and June 30, 1997, are not necessarily indicative of the
results expected for the full fiscal year or for any other fiscal period.
NOTE 2 - INVENTORIES
Inventories are stated at lower of cost or market with cost determined using
the FIFO (first in, first out) method. Inventories consist of the following:
June 30, December 31,
1998 1997
========= ============
Parts $ 199,651 $ 218,263
Work in progress 3,488 26,582
Finished goods 136,549 74,282
--------- ------------
$ 339,688 $ 319,127
========= ============
NOTE 3 - EARNINGS PER SHARE (EPS)
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects potential dilution occurring if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
<PAGE>
in the earnings of the Company. The primary weighted average number of common
shares outstanding was 5,590,530 and 5,469,897 for the quarters ended
June 30, 1998 and 1997 respectively.
For the Quarter Ended June 30, 1998
---------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- --------------- -----------
Basic EPS
Income available to common
stockholders $72,276 5,590,530 $0.013
=========== ============== ===========
Diluted EPS
Income available to common
stockholders + assumed
conversions $72,276 5,583,667 $0.013
=========== ============== ===========
NOTE 4 - STOCK OPTIONS
As of June 30, 1998, the Company had outstanding stock options that have been
granted periodically to individual employees and directors with no less than
three years of continuous tenure with Company. On February 6, 1998, additional
stock options to purchase shares of the Company's common stock were granted to
individual employees and directors with no less than three years continuous
tenure. The options granted on February 6, 1998 totaled 215,000 shares under
option and have an exercise price of $0.28 per share. The options granted on
February 6, 1998 may be exercised any time during the period from February 6,
1998 through February 5, 2001. The Company's Form 8-K dated February 6, 1998,
as filed with the Securities and Exchange Commission is included herein by
reference. All outstanding stock options must be exercised within 90 days
after termination of employment.
During the 12 month period from June 30, 1997 to June 30, 1998, 175,000 shares
under option expired, no shares under option were exercised, and 215,000 shares
under option were granted. At June 30, 1998 there were 630,000 shares under
option reserved for future exercises.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." The Company undertakes to make disclosures and calculations
pursuant to SFAS 123 on an annual basis coinciding with the issuance of the
Company's Annual Financial Statements. Accordingly, no compensation cost has
been recognized for the stock option plan.
NOTE 5 - RELATED PARTY TRANSACTIONS
For the six month period ended June 30, 1998, services in the amount of
$56,473, were contracted with Manufacturing Services, Inc., of which the
owner/president is a member of the Board of Directors of the Company.
<PAGE>
NOTE 6 - CASH DISTRIBUTION
On June 4, 1998, the Company declared a one-time, non-cumulative, cash
distribution to shareholders of record as of June 19, 1998, of $0.01 per
share of common stock, with a payable date of July 9, 1998. The payment of
the cash distribution was completed by July 9, 1998. For the quarter ended
June 30, 1998, the Company recognized a current liability in the amount of
$49,537, reflecting the total dollar value of the cash distribution. The
Company's Form 8-K dated June 5, 1998, as filed with the Securities and
Exchange Commission is included herein by reference.
<PAGE>
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Management's discussion and analysis is intended to be read in conjunction with
the Company's unaudited financial statements and the integral notes thereto for
the quarter ending June 30, 1998. The following statements may be forward
looking in nature and actual results may differ materially.
A. Results of Operations
REVENUES:
Total revenues from the sale of the Company's ESTeem(TM) wireless modem
systems, accessories, and services increased to $322,811 for the second quarter
of 1998, reflecting an increase of 33% when compared to $242,853 for the second
quarter of 1997. Gross revenues increased to $343,028 for the quarter ended
June 30, 1998, from $258,601 for the same quarter of 1997. The increase in
sales revenues is primarily attributable to the Company's products being
provided to large irrigation, mining, and plant automation projects
domestically during the second quarter of 1998, as compared with sales revenues
for the second quarter of 1997.
The Company's revenues fall into three major customer categories, Domestic,
Export and U.S. Government sales. Domestic commercial sales increased to
$230,858 in the second quarter of 1998 as compared to $202,774 for the second
quarter of 1997. Foreign export sales for the second quarter of 1998 increased
to $57,077 as compared to the $30,419 in the same quarter of 1997.
U.S. Government sales increased to $34,876 in the second quarter of 1998, an
increase from a unusually low second quarter 1997 figure of $9,660.
During the quarter ended June 30, 1998 sales to Crystal Sound Systems and
Electrical Installations Inc., two of the Company's distributors, consisted of
12% and 13% of the Company's sales and service revenues, respectively. Sales
to the U.S Government and subcontractors consisted of 11% of the Company's
sales and service revenues. No other sales to a single customer comprised
10% or more of the Company's product sales for the quarter ending
June 30, 1998.
A percentage breakdown of EST's major customer categories of Domestic, Export
and U.S. Government Sales, for the second quarter of 1998 and 1997 are as
follows:
For the second quarter of
1998 1997
==== ====
Domestic Sales 71% 83%
Export Sales 18% 13%
U.S. Government Sales 11% 4%
<PAGE>
A percentage breakdown of EST's product sales categories for the second quarter
of 1998 and 1997 are as follows:
For the second quarter of
1998 1997
==== ====
ESTeem Model 192 62% 37%
ESTeem Model 95 16% 25%
ESTeem Model 96 less than 1% 16%
ESTeem Model 84SP/85SP less than 1% 1%
ESTeem Model 85 -- less than 1%
ESTeem Accessories 16% 15%
Factory Services less than 1% 1%
Site Support 5% 5%
Sales for the second quarter of 1998 and 1997 include foreign export sales
as follows:
Three Months Ended June 30, June 30,
1998 1997
======== ========
Export sales $ 57,077 $ 30,419
Percent of sales 18% 13%
The geographic distribution of foreign sales for the second quarter of 1998
and 1997 is as follows:
Percent of Foreign Sales
June 30, June 30,
COUNTRY 1998 1997
======= =======
South Korea 48% 0%
Germany 26% 0%
Chile 13% 25%
Canada 10% 22%
Israel 3% 18%
Ecuador 0% 35%
Slovenia/Croatia 0% 0%
Mexico 0% 0%
Brazil 0% less than 1%
The majority of the Company's domestic and foreign sales for the second quarter
of 1998 were used in Supervisory Control and Data Acquisition (SCADA)
applications. It is Management's opinion that these applications will continue
to provide the largest portion of the Company's domestic sales revenues in the
foreseeable future.
The Company's Automatic Identification Technology (AIT) subcontract,
dated July 26, 1994, with INTERMEC is a five-year indefinite delivery,
indefinite quantity, fixed price contract through September 1999. The Company
derived minimal sales revenues from the contract in the second quarter of
1998. Based on the terms of the AIT contract, and contracts of this type in
general, Management does not base liquidity, profitability, or material
purchase projections on anticipated sales. The Company's economic position
allows it to respond to AIT orders on an as needed basis. It is Management's
opinion that due to the nature of this contract, sales or timing of orders,
if any, pursuant to the contract cannot be predicted.
<PAGE>
Based on previous sales activity, the majority of all U.S. Government
purchases are expected to be under the Company's General Services
Administration (GSA) contract. Projections regarding liquidity, profitability,
and material purchases are based on past history of annual purchases.
Historically Federal sales average approximately 18% of annual sales, but this
level cannot be guaranteed. Due to the uncertain nature of Federal purchasing,
procurement of material and production planning is adjusted quarterly based on
demand. It is Management's opinion that the majority of Federal purchases in
1998 will be under this contract.
The Company's revenues have historically fluctuated from quarter to quarter due
to timing factors such as customer order placement and product shipments to
customers, as well as customer buying trends, and changes in the general
economic environment. The procurement process regarding plant and project
automation, or project development, which usually surrounds the decision to
purchase ESTeem products can be lengthy. This procurement process may involve
bid activities unrelated to the ESTeem products, such as additional systems
and subcontract work, as well as capital budget considerations on the part of
the customer. Because of the complexity of this procurement process, forecasts
in regard to the Company's revenues become difficult to predict.
As of June 30, 1998, the Company has undertaken the process to identify
anticipated costs, and implementation issues associated with transition of
the Company's products and internal systems to operations during and after the
Year 2000. The products supplied by the Company are Year 2000 compliant. The
Company expects to resolve any Year 2000 issues associated with internal and
operations systems through planned replacement or upgrades of software
applications, which are currently not deemed to have significant cost
potential. Management does not expect Year 2000 transition issues to have a
material impact on its operations, but there can be no assurance that there
will not be interruptions or disturbance of operations should negative
transition issues arise.
BACKLOG:
The Corporation had minimal backlog as of June 30, 1998. Customers generally
place orders on an "as needed basis". Shipment is generally made within 5 to
10 working days after receipt of an order from a customer.
COST OF SALES:
Cost of sales percentage for the second quarters of 1998 and 1997 was 51%.
Cost of Sales variation is attributed to the type of product sold and the size
of the order. Larger orders grant lower sales prices because of volume
discounting, reducing the margin of profit.
<PAGE>
OPERATING EXPENSES:
Operating expenses for the second quarter of 1998 were $24,527 higher than the
second quarter of 1997. The following is a delineation of operating expenses:
For the quarter ended: June 30, June 30, Increase
1998 1997 (Decrease)
======= ======= =========
Finance/Administration $ 40,834 $ 35,223 $ 5,611
Research/Development 37,973 29,550 8,423
Marketing 56,427 41,277 15,150
Customer Service 15,602 20,259 ( 4,657)
------- ------- ---------
Total Operating Expenses $ 150,836 $ 126,309 $ 24,527
======= ======= =========
FINANCE AND ADMINISTRATION:
During the second quarter of 1998, Finance and Administration expenses
increased $5,611 from the second quarter of 1997. Increased salaries and
wages, postage and shipping costs, and professional services required by the
Company are responsible for increased expenses as compared with the second
quarter of 1997.
RESEARCH AND DEVELOPMENT:
During the second quarter of 1998, Research and Development expenses increased
$8,423 over the same period in 1997. This increase is due to increased
subcontracted Research and Development expertise and supplies associated with
ongoing development projects as compared with the same period in 1997.
MARKETING:
During the second quarter of 1998, Marketing expenses increased $15,150 from
the same period in 1997. The primary cause of the increased expenses are
salaries, wages and travel expenses resulting from the addition of a Mobile
Data Computer Systems Manager to promote the Company's products in Mobile
Data Computer applications for the law enforcement and public safety
marketplaces. The Company's Form 8-K dated June 11, 1998, as filed with the
Securities and Exchange Commission is included herein by reference.
CUSTOMER SERVICE:
Customer service expenses decreased $4,657 in the second quarter of 1998 as
compared with the same period of 1997. The decrease is due to a higher
percentage of the department's costs being directly billed to customers as
engineering services when compared with the same period of 1997.
INTEREST INCOME:
The Corporation earned $18,569 in interest income during the quarter ended
June 30, 1998. Sources of this income were savings and money market accounts,
and short term investments.
ENGINEERING SUPPORT:
Engineering support costs decreased to $9,997 for the quarter ended
June 30, 1998, as compared to $20,951 for the same period of 1997. This
decrease in engineering support costs for the second quarter of 1998 is a
<PAGE>
result of an overall decrease in engineering services requested by customers
when compared with the second quarter of 1997.
NET INCOME:
The Corporation had a net income of $13,615 for the second quarter of 1998,
compared to a $3,004 net income for the same quarter of 1997. The net
income increase is attributable to increased revenues from product sales and
engineering services, and interest income.
B. Financial Condition, Liquidity and Capital Resources
The Corporation's current asset to current liabilities ratio at June 30, 1998
was 18:1 compared to 26.7:1 at December 31, 1997. The decrease in current
ratio is primarily attributable to increases in trade accounts payable, and
liability incurred by the approval of cash distributions in June, when compared
with current liability levels at year-end 1997.
For the quarter ending June 30, 1998, the Company had cash and cash equivalent
short-term investment holdings of $1,678,217 as compared to cash and cash
equivalent holdings of $1,566,908 at December 31, 1997. The increased cash
equivalent level is the result of the Company's year to date net income, and
collection of large U.S. Government accounts receivable amounts delayed in
payment until late in the second quarter of 1998.
Accounts receivable decreased to $96,719 as of June 30, 1998, from
December 31, 1997 levels of $268,980, due to the collection of large U.S.
Government accounts receivable amounts delayed in payment until late in the
second quarter of 1998. Management believes all of the Company's accounts
receivable as of June 30, 1998 are collectible.
Inventory increased to $339,688 at June 30, 1998, from December 31, 1997 levels
of $319,127, due to increases in production schedules to replenish inventory
stocks from increased sales in the first and second quarters of 1998. Prepaid
expenses increased to $9,169 as of June 30, 1998 from December 31, 1997 levels
of $3,173, due to increased prepaid fees for tradeshows the Company will be
attending later in 1998.
The Company's fixed assets increased to $357,588 as of June 30, 1998, from
December 31, 1997 levels of $347,415, resulting from capital expenditures of
$13,606. These expenditures consisted mainly of upgrade and expansion of the
Company's production support equipment.
As of June 30, 1998, the Company's trade accounts payable balance was $44,863
as compared with $29,931 at December 31, 1997, and reflects amounts owed for
purchases of inventory stocks and contracted services. As of June 30, 1998,
the Company recognized a current liability of $49,537, reflecting the total
dollar value of a declared cash distribution as of June 5, 1998, of $0.01 per
share of common stock, with a record date of June 20, 1998 and a payable
date of July 9, 1998.
It is Management's opinion that the Company's cash and cash equivalent
reserves, and working capital at June 30, 1998 is sufficient to satisfy
requirements for operations, capital expenditures, and other expenditures as
may arise in the short term.
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
<PAGE>
results to differ materially are the following: competitive factors such as
rival wireless architectures and price pressures; availability of third party
component products at reasonable prices; inventory risks due to shifts in
market demand and/or price erosion of purchased components; change in product
mix, and risk factors that are listed in the Company's reports and
registration statements filed with the Securities and Exchange Commission.
<PAGE>
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule, June 30, 1998
(b) Reports on Form 8-K
Form 8-K dated May 14, 1998 is incorporated herein by reference.
Form 8-K dated June 5, 1998 is incorporated herein by reference.
Form 8-K dated June 11, 1998 is incorporated herein by reference.
Exhibit Index Reference Form 10-QSB
Exhibit Number Notes to Financial Statements
4. Instruments defining the Rights of Security Holders
including indentures.
Form 8-K dated Feb 6, 1998 is incorporated herein by reference.
11. Statement Re: computation of per share earnings
Note 3 to Financial Statements
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
/s/ T.L. KIRCHNER
Date: August 3, 1998 Name: T.L. Kirchner
Title: Director/President
(Principal Executive Officer)
/s/ROBERT SOUTHWORTH
Date: August 3, 1998 Name: Robert Southworth
Title: Director/Secretary/Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEET, STATEMENT OF OPERATIONS, AND STATEMENT OF CASH FLOWS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10QSB, FOR JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,678,217
<SECURITIES> 0
<RECEIVABLES> 98,003
<ALLOWANCES> 1,284
<INVENTORY> 339,688
<CURRENT-ASSETS> 2,135,088
<PP&E> 357,588
<DEPRECIATION> 230,124
<TOTAL-ASSETS> 2,268,671
<CURRENT-LIABILITIES> 117,333
<BONDS> 0
<COMMON> 4,954
0
0
<OTHER-SE> 2,146,384
<TOTAL-LIABILITY-AND-EQUITY> 2,268,671
<SALES> 717,116
<TOTAL-REVENUES> 784,864
<CGS> 330,863
<TOTAL-COSTS> 359,182
<OTHER-EXPENSES> 105,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 109,510
<INCOME-TAX> 37,234
<INCOME-CONTINUING> 72,276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,276
<EPS-PRIMARY> .013
<EPS-DILUTED> .013
</TABLE>
