Electronic Systems Technology (ELST) 10-Q 1 Aug 14 2014 Q2 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	6 Months Ended
	Jun. 30, 2014
Document and Entity Information	'
Entity Registrant Name	'Electronic Systems Technology Inc
Document Type	'10-Q
Document Period End Date	30-Jun-14
Amendment Flag	'false
Entity Central Index Key	'0000752294
Current Fiscal Year End Date	'--12-31
Entity Common Stock, Shares Outstanding	5,158,667
Entity Filer Category	'Smaller Reporting Company
Entity Current Reporting Status	'Yes
Entity Voluntary Filers	'No
Entity Well-known Seasoned Issuer	'No
Document Fiscal Year Focus	'2014
Document Fiscal Period Focus	'Q2

ELECTRONIC_SYSTEMS_TECHNOLOGY_

ELECTRONIC SYSTEMS TECHNOLOGY, INC. BALANCE SHEETS (Interim period unaudited) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Current assets	'	'
Cash and cash equivalents	$880,715	$896,580
Short term certificates of deposit investments	1,213,000	1,414,000
Accounts receivable	205,708	72,783
Inventories	706,403	625,692
Accrued interest	6,014	2,947
Prepaid insurance	2,660	11,389
Prepaid expenses	10,139	24,298
Total current assets	3,024,639	3,047,689
Property and equipment, net of depreciation	66,898	31,372
Deposits	1,675	13,083
Deferred income tax asset	43,200	36,600
Total assets	3,136,412	3,128,744
Current liabilities	'	'
Accounts payable	10,983	8,669
Accrued liabilities	47,313	50,332
Refundable deposits	276	4,910
Total current liabilities	58,572	63,911
Deferred income tax liability	8,900	5,100
Total liabilities	67,472	69,011
Stockholders' equity	'	'
Common stock, $0.001 par value 50,000,000 shares authorized 5,158,667 shares issued and outstanding	5,159	5,159
Additional paid-in capital	1,007,861	1,005,616
Retained earnings	2,055,920	2,048,958
Total stockholders' equity	3,068,940	3,059,733
Total liabilities and stockholders' equity	$3,136,412	$3,128,744

Statement_of_Financial_Positio

Statement of Financial Position - Parenthetical (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement of financial position	'	'
Common Stock, Par Value	$0.00	$0.00
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares Issued	5,158,667	5,158,667
Common Stock, Shares Outstanding	5,158,667	5,158,667

ELECTRONIC_SYSTEMS_TECHNOLOGY_1

ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income statement	'	'	'	'
SALES, NET	$482,976	$460,280	$931,785	$860,636
SITE SUPPORT	49,286	33,327	100,301	46,384
COST OF SALES	-229,986	-221,032	-457,928	-410,746
GROSS PROFIT	302,276	272,575	574,157	496,274
OPERATING EXPENSES	'	'	'	'
General and administrative	71,589	66,826	157,789	155,118
Research and development	65,793	68,670	124,642	125,475
Marketing	122,686	123,040	230,926	238,904
Customer service	31,373	27,584	58,704	56,684
TOTAL OPERATING EXPENSE	291,441	286,120	572,061	576,181
OPERATING INCOME (LOSS)	10,835	-13,545	2,096	-79,907
OTHER INCOME	'	'	'	'
Interest income	2,977	1,876	5,526	3,865
TOTAL OTHER INCOME	2,977	1,876	5,526	3,865
NET INCOME (LOSS) BEFORE INCOME TAX	13,812	-11,669	7,622	-76,042
Benefit (provision) for income tax	-900	5,378	-660	24,139
NET INCOME (LOSS)	$12,912	($6,291)	$6,962	($51,903)
Basic and diluted income (loss) per share	$0	$0	$0	($0.01)
Weighted average shares used in computing income (loss) per share:Basic and diluted	5,158,667	5,158,667	5,158,667	5,158,667

ELECTRONIC_SYSTEMS_TECHNOLOGY_2

ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:	'	'
Net income (loss)	$6,962	($51,903)
Noncash items included in net income( loss):	'	'
Depreciation	5,487	6,685
Deferred income taxes	-2,800	-13,500
Share based compensation	2,245	1,713
Changes in operating assets and liabilities:	'	'
Account receivable	-132,925	19,720
Inventories	-80,711	-49,006
Accrued interest	-3,067	-2,434
Prepaid insurance	8,729	7,187
Prepaid expenses	14,159	-28,839
Deposits	11,408	'
Accounts payable	2,314	14,148
Accrued liabilities	-3,019	11,944
Refundable deposits	-4,634	41,936
NET CASH FLOWS USED BY OPERATING ACTIVITIES	-175,852	-42,349
CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES	'	'
Certificates of deposit redeemed	201,000	113,000
Purchases of property and equipment	-41,013	-1,640
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES	159,987	111,360
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	-15,865	69,011
Cash and cash equivalents at beginning of period	896,580	818,497
Cash and cash equivalents at ending of period	$880,715	$887,508

Note_1_Basis_of_Presentation

Note 1 - Basis of Presentation	6 Months Ended
	Jun. 30, 2014
Notes	'
Note 1 - Basis of Presentation	'
	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 month and six month periods ended June 30, 2014 and June 30, 2013.  All adjustments of a normal recurring nature and necessary for a fair presentation of the results for the periods covered have been made. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission. In preparation of the financial statements, certain amounts and balances have been reformatted from previously filed reports to conform to the format of this quarterly presentation.  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, 2013 as filed with Securities and Exchange Commission.
	The results of operations for the three and six months ended June 30, 2014 and June 30, 2013, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Note_2_Inventories

Note 2 - Inventories	6 Months Ended
	Jun. 30, 2014
Notes	'
Note 2 - Inventories	'
	NOTE 2 - INVENTORIES
	Inventories are stated at lower of direct cost or market with cost determined using the FIFO (first in, first out) method.  Inventories consist of the following:
		June 30,	December 31,
		2014	2013
	Parts	$267,104	$217,567
	Work in progress	111,185	83,620
	Finished goods	328,114	324,505
	Total	$706,403	$625,692

Note_3_Earnings_loss_Per_Share

Note 3 - Earnings (loss) Per Share	6 Months Ended
	Jun. 30, 2014
Notes	'
Note 3 - Earnings (loss) Per Share	'
	NOTE 3 – INCOME (LOSS) PER SHARE
	Basic income (loss) per share excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted income (loss) per share 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.  At June 30, 2014 the Company had 515,000 outstanding stock options that could have a dilutive effect on future periods.  However, at June 30, 2014 there was no material effect of stock options on diluted earnings per share or weighted average shares outstanding.

Note_4_Stock_Options

Note 4 - Stock Options	6 Months Ended
	Jun. 30, 2014
Notes	'
Note 4 - Stock Options:	'
	NOTE 4 - STOCK OPTIONS:
	As of June 30, 2014, the Company had outstanding stock options, which have been granted periodically to individual employees and directors with no less than three years of continuous tenure with the Company.  On February 28, 2014, 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 28, 2014 totaled 175,000 shares under option and have an exercise price of $0.41 per share.
	The options granted on February 28, 2014 may be exercised any time during the period from February 28, 2014 through February 28, 2017.  The Company's Form 8-K filed March 6, 2014, is incorporated herein by reference.  All outstanding stock options must be exercised within 90 days after termination of employment.
	The fair value of each option award is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2014 and 2013:
	2014	2013
	Dividend yield	0.00%	0.00%
	Expected volatility	75%	73%
	Risk-free interest rate	0.68%	0.38%
	Expected term (in years)	3	3
	Estimated Fair Value per Option Granted	$0.20	$0.15
	The Company uses historical data to estimate option exercise rates.  The option exercise rate for option grants in 2005 through 2013 was 6.43%.
	A summary of option activity during the six months ended June 30, 2014, is as follows:
		Number	Weighted-Average Exercise Price Per Share
		Outstanding
	Outstanding at December 31, 2013	525,000	$0.27
	Granted	175,000	0.41
	Exercised	--	--
	Expired	-185,000	0.44
	Outstanding at June 30, 2013	515,000	0.4
	In February 2014, the Company issued 175,000 options with an estimated fair value per option of $0.20 resulting in a stock based compensation value of $34,930.  After the stock based compensation value is adjusted for the historical option forfeiture rate of 93.6%, a stock based compensation expense was charged against income for 2014 of $2,245. At June 30, 2014 the intrinsic value of outstanding stock options was approximately $10,300.

Note_5_Related_Party_Transacti

Note 5 - Related Party Transactions	6 Months Ended
	Jun. 30, 2014
Notes	'
Note 5 - Related Party Transactions	'
	NOTE 5 - RELATED PARTY TRANSACTIONS
	For the three and six-month periods ended June 30, 2014, services in the amounts of $8,550 and $27,706, respectively, were contracted with Manufacturing Services, Inc.  (“MSI”), a company of which Melvin H. Brown is a former owner and is currently a member of the Board of Directors of Electronic Systems Technology Inc.  For the three and six-month period ended June 30, 2013 the contracted services with MSI were $27,065 and $47,948, respectively.  The Company owed accounts payable to MSI at June 30, 2014 and December 31, 2013 of $2,707 and $10, respectively.

Note_6_Segment_Reporting

Note 6 - Segment Reporting	6 Months Ended
	Jun. 30, 2014
Notes	'
Note 6 - Segment Reporting	'
	NOTE 6 - SEGMENT REPORTING
	Segment information is prepared on the same basis that the Company's management reviews financial information for operational decision making purposes.  The Company has two reportable segments, domestic and foreign, based on the geographic location of the customers.  Both segments sell radio modem products (requiring an FCC license or license free Ethernet products), related accessories for radio modem products for industrial automation projects, and mobile data computer products.  The foreign segment sells the Company's products and services outside the United States.
	During the quarter ended June 30, 2014, Domestic customers represented approximately 82% of total net revenues.  Foreign customers represented approximately 18% of total net revenues.  During the quarter ended June 30, 2014, sales to no one single customer, comprised more than 10% of the Company’s sales revenues.  Revenues from foreign countries during the second quarter of 2014 consist primarily of revenues from product sales to Peru and Hungary.
	During the first six months of 2014, Domestic customers represented approximately 81% of total net revenues.  Foreign customers represented approximately 19% of total net revenues.  During the first half of June 30, 2014, sales to no one single customer was greater than 10% of the Company’s sales revenues.  Revenues from foreign countries during the first half of 2014 consist primarily of revenues from product sales to Peru and Hungary.
	Management evaluates performance based on net revenues and operating expenses. Where applicable, portions of the administrative function expenses are allocated between the operating segments.  The operating segments share the same manufacturing and distributing facilities.  Costs of operating the manufacturing plant, equipment, inventory, and accounts receivable are allocated directly to each segment.
	Summary financial information for the two reportable segments for the second quarter and first six months of 2014 and 2013 is as follows:
				Total
		Domestic	Foreign
	Three months ended June 30, 2014
	Total sales	$      434,192	$        98,070	$      532,262
	Total other income	2,977	-	2,977
	Income (loss) before tax	-13,556	27,368	13,812
	Depreciation/amortization	2,956	-	2,956
	Identifiable assets	3,127,070	9,342	3,136,412
	Net capital expenditures	30,143	-	30,143
	Three months ended June 30, 2013
	Total sales	$      381,792	$       111,815	$      493,607
	Total other income	1,876	-	1,876
	Income (loss) before tax	-33,083	21,414	-11,669
	Depreciation/amortization	3,219	-	3,219
	Identifiable assets	3,006,939	3,723	3,010,662
	Net capital expenditures	1,640	-	1,640
	Six months ended June 30, 2014
	Total sales	$    839,361	$     192,724	$      1,032,086
	Total other income	5,526	-	5,526
	Income (loss) before tax	-40,836	48,458	7,622
	Depreciation/amortization	5,487	-	5,487
	Identifiable assets	3,127,070	9,342	3,136,412
	Net capital expenditures	41,013	-	41,013
	Six Months ended June 30, 2013
	Total sales	$    649,625	$     257,395	$      907,020
	Total other income	3,865	-	3,865
	Income (loss) before tax	-134,661	58,619	-76,042
	Depreciation/amortization	6,685	-	6,685
	Identifiable assets	3,006,939	3,723	3,010,662
	Net capital expenditures	1,640	-	1,640

Note_2_Inventories_Schedule_of

Note 2 - Inventories: Schedule of Inventory, Current (Tables)	6 Months Ended
	Jun. 30, 2014
Tables/Schedules	'
Schedule of Inventory, Current	'
		June 30,	December 31,
		2014	2013
	Parts	$267,104	$217,567
	Work in progress	111,185	83,620
	Finished goods	328,114	324,505
	Total	$706,403	$625,692

Note_4_Stock_Options_Schedule_

Note 4 - Stock Options: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Tables)	6 Months Ended
	Jun. 30, 2014
Tables/Schedules	'
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions	'
	2014	2013
	Dividend yield	0.00%	0.00%
	Expected volatility	75%	73%
	Risk-free interest rate	0.68%	0.38%
	Expected term (in years)	3	3
	Estimated Fair Value per Option Granted	$0.20	$0.15

Note_4_Stock_Options_Schedule_1

Note 4 - Stock Options: Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity (Tables)	6 Months Ended
	Jun. 30, 2014
Tables/Schedules	'
Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity	'
		Number	Weighted-Average Exercise Price Per Share
		Outstanding
	Outstanding at December 31, 2013	525,000	$0.27
	Granted	175,000	0.41
	Exercised	--	--
	Expired	-185,000	0.44
	Outstanding at June 30, 2013	515,000	0.4

Note_6_Segment_Reporting_Sched

Note 6 - Segment Reporting: Schedule of Segment Reporting Information, by Segment (Tables)	6 Months Ended
	Jun. 30, 2014
Tables/Schedules	'
Schedule of Segment Reporting Information, by Segment	'
				Total
		Domestic	Foreign
	Three months ended June 30, 2014
	Total sales	$      434,192	$        98,070	$      532,262
	Total other income	2,977	-	2,977
	Income (loss) before tax	-13,556	27,368	13,812
	Depreciation/amortization	2,956	-	2,956
	Identifiable assets	3,127,070	9,342	3,136,412
	Net capital expenditures	30,143	-	30,143
	Three months ended June 30, 2013
	Total sales	$      381,792	$       111,815	$      493,607
	Total other income	1,876	-	1,876
	Income (loss) before tax	-33,083	21,414	-11,669
	Depreciation/amortization	3,219	-	3,219
	Identifiable assets	3,006,939	3,723	3,010,662
	Net capital expenditures	1,640	-	1,640
	Six months ended June 30, 2014
	Total sales	$    839,361	$     192,724	$      1,032,086
	Total other income	5,526	-	5,526
	Income (loss) before tax	-40,836	48,458	7,622
	Depreciation/amortization	5,487	-	5,487
	Identifiable assets	3,127,070	9,342	3,136,412
	Net capital expenditures	41,013	-	41,013
	Six Months ended June 30, 2013
	Total sales	$    649,625	$     257,395	$      907,020
	Total other income	3,865	-	3,865
	Income (loss) before tax	-134,661	58,619	-76,042
	Depreciation/amortization	6,685	-	6,685
	Identifiable assets	3,006,939	3,723	3,010,662
	Net capital expenditures	1,640	-	1,640

Note_2_Inventories_Schedule_of1

Note 2 - Inventories: Schedule of Inventory, Current (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Details	'	'
Inventory, Parts and Components, Net of Reserves	$267,104	$217,567
Inventory, Work in Process, Gross	111,185	83,620
Inventory, Finished Goods, Gross	328,114	324,505
Inventories	$706,403	$625,692

Note_3_Earnings_loss_Per_Share1

Note 3 - Earnings (loss) Per Share (Details)	6 Months Ended
	Jun. 30, 2014
Details	'
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	515,000

Note_4_Stock_Options_Details

Note 4 - Stock Options (Details) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2014	Jun. 30, 2014	Jun. 30, 2013	Feb. 28, 2014
Details	'	'	'	'
Share based compensation options granted	'	'	'	175,000
Share based compensation options granted, fair value	'	'	'	$0.41
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	175,000	175,000	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$0.20	$0.41	'	'
Stock Granted, Value, Share-based Compensation, Net of Forfeitures	$34,930	'	'	'
Historical option forfeiture rate	93.60%	'	'	'
Share based compensation	'	2,245	1,713	'
Intrinsic value of outstanding stock options	'	$10,300	'	'

Note_4_Stock_Options_Schedule_2

Note 4 - Stock Options: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Details	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%	0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	75.00%	73.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	0.68%	0.38%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term, Simplified Method	'3	'3
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value	$0.20	$0.15

Note_4_Stock_Options_Schedule_3

Note 4 - Stock Options: Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity (Details) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Details	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	'	515,000	525,000
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	'	$0.40	$0.27
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	175,000	175,000	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$0.20	$0.41	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period	'	-185,000	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price	'	$0.44	'

Note_5_Related_Party_Transacti1

Note 5 - Related Party Transactions (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Details	'	'	'	'	'
Related Party Transaction, Amounts of Transaction	$8,550	$27,065	$27,706	$47,948	'
Accounts Payable, Related Parties, Current	$2,707	'	$2,707	'	$10

Note_6_Segment_Reporting_Detai

Note 6 - Segment Reporting (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Details	'	'
Segment Reporting, Disclosure of Major Customers	'	'During the quarter ended June 30, 2014, Domestic customers represented approximately 82% of total net revenues. Foreign customers represented approximately 18% of total net revenues. During the quarter ended June 30, 2014, sales to no one single customer, comprised more than 10% of the Company’s sales revenues. Revenues from foreign countries during the second quarter of 2014 consist primarily of revenues from product sales to Peru and Hungary. During the first six months of 2014, Domestic customers represented approximately 81% of total net revenues. Foreign customers represented approximately 19% of total net revenues. During the first half of June 30, 2014, sales to no one single customer was greater than 10% of the Company’s sales revenues. Revenues from foreign countries during the first half of 2014 consist primarily of revenues from product sales to Peru and Hungary.
Domestic sales	82.00%	81.00%
Foreign sales	18.00%	19.00%

Note_6_Segment_Reporting_Sched1

Note 6 - Segment Reporting: Schedule of Segment Reporting Information, by Segment (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues	$532,262	$493,607	$1,032,086	$907,020
Interest Revenue (Expense), Net	2,977	1,876	5,526	3,865
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest	13,812	-11,669	7,622	-76,042
Depreciation, Depletion and Amortization	2,956	3,219	5,487	6,685
Identifiable assets	3,136,412	3,010,662	3,136,412	3,010,662
Net capital expenditures	30,143	1,640	41,013	1,640
Operating Segments	'	'	'	'
Revenues	434,192	381,792	839,361	649,625
Interest Revenue (Expense), Net	2,977	1,876	5,526	3,865
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest	-13,556	-33,083	-40,836	-134,661
Depreciation, Depletion and Amortization	2,956	3,219	5,487	6,685
Identifiable assets	3,127,070	3,006,939	3,127,070	3,006,939
Net capital expenditures	30,143	1,640	41,013	1,640
Other Segments	'	'	'	'
Revenues	98,070	111,815	192,724	257,395
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest	27,368	21,414	48,458	58,619
Identifiable assets	$9,342	$3,723	$9,342	$3,723