415 N. Quay St., #4

Kennewick WA 99336

(as prepared by Management)

(Unaudited)

(as prepared by Management)

(Unaudited)

(See "Notes to Financial Statements")

(as prepared by Management)

(Unaudited)

(See "Notes to Financial Statements")

(as prepared by Management)

(Unaudited)

(See "Notes to Financial Statements")

(as prepared by Management)

(Unaudited)

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, 2000 and June 30, 1999. 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, 1999 as filed with Securities and Exchange Commission.

The results of operation for the three and six month periods ended June 30, 2000 and June 30, 1999, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

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:

Basic and diluted loss per share for the six month period ended June 30, 2000, is computed by dividing loss by the number of common shares outstanding for the period, excluding equivalent shares from possible stock option exercises, the effect of which would be anti- dilutive. The number of common shares outstanding used for calculation of basic and diluted loss per share was 5,068,667 for the six month period ended June 30, 2000.

Basic Earnings Per Share (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 in the earnings of the Company. The primary weighted average number of common shares outstanding was 5,679,996 and 5,590,927 for the quarters ended June 30, 2000 and 1999 respectively.

As of June 30, 2000, 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 11, 2000, 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 11, 2000 totaled 220,000 shares under option and have an exercise price of $2.81 per share. The options granted on February 11, 2000 may be exercised any time during the period from February 11, 2000 through February 10, 2003. The Company's Form 8-K dated February 11, 2000, 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, 1999 to June 30, 2000, 160,000 shares under option expired, 115,000 shares under option were exercised, and 220,000 shares under option were granted. At June 30, 2000 there were 600,000 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.

For the six month period ended June 30, 2000, services in the amount of $31,732, were contracted with Manufacturing Services, Inc., of which the owner/president is a member of the Board of Directors of the Company.

On June 11, 1999, the Company declared a one-time, non-cumulative, cash distribution to shareholders of record as of June 25, 1999, of $0.01 per share of common stock, with a payable date of July 9, 1999. The payment of the cash distribution was completed by July 9, 1999. For the quarter ended June 30, 1999, the Company recognized a current liability in the amount of $49,537, reflecting the total dollar value of the cash distribution.

Total revenues from the sale of the Company's ESTeemÔ wireless modem systems, accessories, and services increased to $388,980 for the second quarter of 2000, reflecting a 10% increase when compared to $352,428 for the second quarter of 1999. Gross revenues increased to $408,972 for the quarter ended June 30, 2000, from $367,518 for the same quarter of 1999. Increased sales of the Company's products for industrial automation projects during the second quarter of 2000 is responsible for the increased sales revenues, when compared with the same quarter for 1999.

The Company's revenues fall into three major customer categories, Domestic, Export and U.S. Government sales. Domestic commercial sales increased to $355,321 in the second quarter of 2000, as compared to $290,721 for the second quarter of 1999, due to increased product sales to for industrial automation projects. During the second quarter of 1999, the Company had experienced reduced product sales revenues in the industrial automation market, due to, in Management's opinion, decreased demand in automated control projects in the short term, and competitive pressures from alternative product providers. During the second quarter of 2000, this trend was reversed in the near term. The lengthy purchase cycles for industrial automation projects where the Company's products are used makes prediction of trends difficult.

Foreign export sales for the second quarter of 2000 decreased to $29,232 as compared to the $36,004 in the same quarter of 1999. Management believes the reduction in foreign export sales is a continuation of slow foreign sales experienced during 1999, which may continue in the near term, but uncertainty of foreign sales makes trends difficult to predict.

U.S. Government sales decreased to $4,426 in the second quarter of 2000, a decrease from second quarter 1999 U.S. Government sales of $25,703. Management believes the decreased U.S. Government sales is a result of a continued lack of new projects and purchases for the Company's products, which was experienced throughout 1999. Due to the uncertain nature of U.S. Government purchasing, Management does not base profitability or liquidity projections on expected U.S. Government sales.

During the quarter ended June 30, 2000 material and services provided to the Blaine County, Idaho Sheriff's Department and the City of Gainesville, Texas, Police Department accounted for 19% and 15% of the Company's sales and service revenues, respectively. No other sales to a single customer comprised 10% or more of the Company's product sales for the quarter ended June 30, 2000.

A percentage breakdown of EST's major customer categories of Domestic, Export and U.S. Government Sales, for the second quarter of 2000 and 1999 are as follows:

A percentage breakdown of EST's product sales categories for the second quarter of 2000 and 1999 are as follows:

Sales for the second quarter of 2000 and 1999 include foreign export sales as follows:

The geographic distribution of foreign sales for the second quarter of 2000 and 1999 is as follows:

The majority of the Company's domestic sales for the second quarter of 2000 were used in Industrial Automation applications.

Industrial Automation applications have historically been the majority of the Company's domestic sales, which Management believes will continue for the foreseeable future, but will also be, augmented by sales of Mobile Data Computer Systems for public safety entities. It is Management's opinion that the majority of foreign export applications will continue to be in Industrial Automation applications for the foreseeable future.

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 2000 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.

The Corporation had backlog of $155,000 as of June 30, 2000. Order backlog delivery expected in early in the 3^rd Quarter of 2000, or is part of ongoing large-scale public safety Mobile Data Computer (MDC) projects. 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 percentage for the second quarters of 1999 and 1998 was 55% and 53%, respectively. Cost of Sales variation is normally attributed to the types of product sold and the size of the order. Larger orders grant lower sales prices because of volume discounting, reducing the margin of profit. The increase in cost of sales in the second quarter of 2000 is due to a combination of decreased sales prices and product mix.

Operating expenses for the second quarter of 2000 were $15,399 higher than the second quarter of 1999. The following is a delineation of operating expenses:

During the second quarter of 2000, Finance and Administration expenses increased $6,373 from the second quarter of 1999. Increases in professional services charges billed to the Company and increases in printing costs and postage associated with Company administration are responsible for the increased expenses when compared with the same quarter of 1999.

During the second quarter of 2000, Marketing expenses decreased $4,132 from the same period in 1999. The decrease is the result of lower printing services and postage expenses during the second quarter of 2000.

Customer service expenses increased $13,511 in the second quarter of 2000 as compared with the second quarter of 1999. The increase is attributable to increased salaries and wages due to the addition of employees to the department, as well as increased travel expenses during the quarter ended June 30, 2000, when compared with the same period of 1999.

The Corporation earned $19,992 in interest income during the quarter ended June 30, 2000. Sources of this income were savings and money market accounts, and short term investments.

Engineering support costs increased to $21,113 for the quarter ended June 30, 2000, as compared to $19,148 for the same period of 1999. This increase in engineering support costs for the second quarter of 2000 is a result of an increase in engineering services performed by the Company for customers when compared with the second quarter of 1999.

The Company had a net income of $10,955 for the second quarter of 2000, compared to a $10,304 net income for the same quarter of 1999. The net income increase is attributable to increased sales revenues during the second quarter of 2000 when compared with the same period of 1999. The net income for the second quarter of 2000 reduced the Company's year to date net loss to $19,402 as of June 30, 2000, as compared with a year to date net loss of $34,716 at June 30, 1999. The year to date net loss for the Company is the result of lower than expected sales revenues during first quarter 2000, and increased year to date operating expenses.

The Corporation's current asset to current liabilities ratio at June 30, 2000 was 13:1 compared to 34.2:1 at December 31, 1999.

The decrease in current ratio is due to increases in refundable customer deposits and accounts payable amounts when compared with December 31, 1999 amounts.

For the quarter ending June 30, 2000, the Company had cash and cash equivalent short-term investment holdings of $1,573,510 as compared to cash and cash equivalent holdings of $1,624,728 at December 31, 1999. The decrease is attributable to increased inventory levels, capital assets, and the Company's net loss when compared with December 31, 1999.

Accounts receivable decreased to $148,065 as of June 30, 2000, from December 31, 1999 levels of $154,788. Management believes all of the Company's accounts receivable as of June 30, 2000 are collectible. Inventory increased to $499,202 at June 30, 2000, from December 31, 1999 levels of $357,490, due to increased procurement for production of products primarily for Mobile Data Computer projects. Provision for Federal Income Taxes increased to $15,996 at June 30, 2000 as the provision for potential tax credit for the Company increased for the period ended June 30, 2000, as this provision was calculated from the Company's year to date net loss as of June 30, 2000.

The Company's fixed assets, net of depreciation, increased to $175,372 as of June 30, 2000, increased from December 31, 1999 levels of $145,123, due to capital expenditures of $49,023. The expenditures were for software development tools for the new ESTeem 192E Ethernet product and additional equipment used in the manufacturing of the Company's products. Management foresees additional capital expenditures may be necessary in 2000 to support the production and sale of the Company's products.

As of June 30, 2000, the Company's trade accounts payable balance was $50,940 as compared with $36,607 at December 31, 1999, and reflects amounts owed for purchases of inventory items and contracted services. Refundable deposit liability was $100,450 for the quarter ended June 30, 2000, and reflects prepaid amounts for Mobile Data Computer customers under contract prior to delivery of material by the Company.

In Management's opinion, the Company's cash and cash equivalent reserves, and working capital at June 30, 2000 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2000

Item 4. Submission of Matters to the Securities Holders

At the Company's Annual Stockholder Meeting on June 2, 2000, in Kennewick, Washington the following items were voted on by the stockholders with the following outcomes:

Item #1 Election of Directors:

Melvin H. Brown

Arthur Leighton

Robert Southworth

Item #3 Authorization of proxy to vote upon other matters as may properly come before the meeting. (No such issues were brought before the meeting)

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

(b) Reports on Form 8-K

4. Instruments defining the Rights of Security Holders including indentures.

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.