Electronic Systems Technology (ELST) 10-Q 4 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - Jun. 30, 2015 - shares	Total
Document and Entity Information
Entity Registrant Name	Electronic Systems Technology Inc
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Entity Central Index Key	752,294
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	2,015
Document Fiscal Period Focus	Q2
Trading Symbol	elst

ELECTRONIC SYSTEMS TECHNOLOGY,

ELECTRONIC SYSTEMS TECHNOLOGY, INC. BALANCE SHEETS (Interim period unaudited) - USD ($)		Jun. 30, 2015	Dec. 31, 2014
Current assets
Cash and cash equivalents		$ 446,726	$ 637,086
Certificates of deposit investments		1,402,625	1,402,625
Accounts receivable		103,285	94,864
Inventories		662,329	719,137
Accrued interest receivable		5,769	3,109
Prepaid insurance		3,578	5,505
Prepaid expenses		17,278	8,919
Deferred income tax asset, current		30,015	49,600
Total current assets		2,671,605	2,920,845
Property and equipment, net		91,274	91,907
Deferred income tax asset, net		50,886	31,301
Total noncurrent assets		142,160	123,208
Total assets		2,813,765	3,044,053
Current liabilities
Accounts payable		14,880	14,573
Accrued liabilities		53,735	43,045
Refundable deposits		8,583	26,247
Total current liabilities		77,198	83,865
Total liabilities		77,198	83,865
COMMITMENTS and CONTINGENCIES	[1]	0	0
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	1,007,861
Retained earnings		1,723,547	1,947,168
Total stockholders' equity		2,736,567	2,960,188
Total liabilities and stockholders' equity		$ 2,813,765	$ 3,044,053
[1]	Notes 5 and 7

Statement of Financial Position

Statement of Financial Position - Parenthetical - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Statement of financial position
Common Stock, Par Value	$ 0.001	$ 0.001
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,4

ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income statement
SALES, NET	$ 330,753	$ 482,976	$ 758,779	$ 931,785
SITE SUPPORT	22,721	49,286	44,567	100,301
COST OF SALES	(173,842)	(229,986)	(375,439)	(457,928)
GROSS PROFIT	179,632	302,276	427,907	574,157
OPERATING EXPENSES
General and administrative	83,664	71,589	184,364	157,789
Research and development	74,107	65,793	147,229	124,642
Marketing	128,512	122,686	266,925	230,926
Customer service	30,560	31,373	58,808	58,704
TOTAL OPERATING EXPENSE	316,843	291,441	657,326	572,061
OPERATING INCOME (LOSS)	(137,211)	10,835	(229,419)	2,096
OTHER INCOME
Interest income	3,041	2,977	5,798	5,526
TOTAL OTHER INCOME	3,041	2,977	5,798	5,526
NET INCOME (LOSS) BEFORE INCOME TAX	(134,170)	13,812	(223,621)	7,622
Benefit (provision) for income tax	7,600	(900)		(660)
NET INCOME (LOSS)	$ (126,570)	$ 12,912	$ (223,621)	$ 6,962
Basic and diluted earnings per share	$ (0.02)	$ 0	$ (0.04)	$ 0
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,5

ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
Net income (loss)	$ (223,621)	$ 6,962
Noncash items included in net income (loss):
Depreciation	15,113	5,487
Deferred income taxes		(2,800)
Share based compensation		2,245
Changes in operating assets and liabilities:
Account receivable	(8,421)	(132,925)
Inventories	56,808	(80,711)
Accrued interest receivable	(2,660)	(3,067)
Prepaid insurance	1,927	8,729
Prepaid expenses	(8,359)	14,159
Deposits		11,408
Accounts payable	307	2,314
Accrued liabilities	10,690	(3,019)
Refundable deposits	(17,664)	(4,634)
NET CASH FLOWS USED BY OPERATING ACTIVITIES	(175,880)	(175,852)
CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES
Certificates of deposit redeemed		201,000
Purchases of property and equipment	(14,480)	(41,013)
NET CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES	(14,480)	159,987
NET DECREASE IN CASH AND CASH EQUIVALENTS	(190,360)	(15,865)
Cash and cash equivalents at beginning of period	637,086	896,580
Cash and cash equivalents at ending of period	$ 446,726	$ 880,715

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation	6 Months Ended
	Jun. 30, 2015
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, 2015 and June 30, 2014. 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, 2014 as filed with Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2015 and June 30, 2014, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. New Accounting Pronouncements In July of 2015 the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11 “Simplifying the Measurement of Inventory” an update to Inventory Topic 330. The ASU simplifies the concept of lower of cost or market to the low of cost and net realizable value and more closely align the measurement of inventory in Generally Accepted Accounting Principles (“GAAP”) with the measurement of inventory in International Financial Reporting Standards (“IFRS”). The amendments in the Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.

Note 2 - Inventories

Note 2 - Inventories	6 Months Ended
	Jun. 30, 2015
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, 2015 December 31, 2014 Parts $ 193,316 $283,375 Work in progress 264,976 276,853 Finished goods 204,037 158,909 $ 662,329 $719,137

Note 3 - Income (loss) Per Shar

Note 3 - Income (loss) Per Share	6 Months Ended
	Jun. 30, 2015
Notes
Note 3 - Income (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, 2015 the Company had 295,000 outstanding stock options that could have a dilutive effect on future periods. However, at June 30, 2015 there was no dilutive effect of stock options on earnings per share or weighted average shares outstanding.

Note 4 - Stock Options

Note 4 - Stock Options	6 Months Ended
	Jun. 30, 2015
Notes
Note 4 - Stock Options	NOTE 4 - STOCK OPTIONS As of June 30, 2015, 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. The Board of Directors did not issue stock options during the six months ended June 30, 2015. The Board of Directors may consider issuing stock options later in 2015. 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. 2014 Dividend yield 0.00% Expected volatility 75% Risk-free interest rate 0.68% Expected term (in years) 3 Estimated Fair Value per Option Granted $0.20 The Company uses historical data to estimate option exercise rates. The option exercise rate for option grants in 2005 through 2014 was 6.00 %. A summary of option activity during the six months ended June 30, 2015, is as follows: Number Outstanding Weighted-Average Exercise Price Per Share Outstanding at December 31, 2014 440,000 $ 0.39 Granted -- -- Exercised -- -- Expired (145,000) 0.37 Outstanding at June 30, 2015 295,000 $ 0.36

Note 5 - Leases

Note 5 - Leases	6 Months Ended
	Jun. 30, 2015
Notes
Note 5 - Leases	NOTE 5 - LEASES The Company leases its facilities from a port authority for $5,251 per month for three years, expiring in September 2017, with annual increases based upon the Consumer Price Index.

Note 6 - Related Party Transact

Note 6 - Related Party Transactions	6 Months Ended
	Jun. 30, 2015
Notes
Note 6 - Related Party Transactions	NOTE 6 - RELATED PARTY TRANSACTIONS For the three month period ended June 30, 2015 and 2014, services in the amounts of $10,900 and $8,550, respectively, were contracted with Manufacturing Services, Inc. (“MSI”), a company of which Melvin H. Brown is a former owner and former member of the Board of Directors of Electronic Systems Technology Inc. during the period ending June 30, 2015. For the six month period ended June 30, 2015 and 2014, the contracted services with MSI were $12,574 and $27,706, respectively. The Company owed accounts payable to MSI at June 30, 2015 and December 31, 2014 of $0 and $10, respectively.

Note 7 - Commitments and Contin

Note 7 - Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Notes
Note 7 - Commitments and Contingencies	NOTE 7 - COMMITMENTS and CONTINGENCIES In 2009, the Company entered into a licensing agreement with Wi-LAN, Inc. (a Canadian Company), to pay royalties for certain licensing rights and liability releases. Such amounts are not considered significant by the Company.

Note 8 - Segment Reporting

Note 8 - Segment Reporting	6 Months Ended
	Jun. 30, 2015
Notes
Note 8 - Segment Reporting	NOTE 8 - 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, 2015, Domestic customers represented approximately 85% of total net revenues. Foreign customers represented approximately 15% of total net revenues. During the quarter ended June 30, 2015, sales to one customer, comprised more than 10% of the Company’s sales revenues. Revenues from foreign countries during the second quarter of 2015 consist primarily of revenues from product sales to Peru, the United Kingdom and Mexico. During the first six months of 2015, Domestic customers represented approximately 75% of total net revenues. Foreign customers represented approximately 25% of total net revenues. During the first half of June 30, 2015, 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 2015 consist primarily of revenues from product sales to Peru, Canada and Croatia. 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 2015 and 2014 is as follows: Domestic Foreign Total Three months ended June 30, 2015 Total sales $ 299,131 $ 54,343 $ 353,474 Total other income 3,041 - 3,041 Income (loss) before tax (134,952) 782 (134,170) Depreciation/amortization 7,722 - 7,722 Identifiable assets 2,813,765 - 2,813,765 Net capital expenditures 1,500 - 1,500 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 Six months ended June 30, 2015 Total sales $ 605,248 $ 198,098 $ 803,346 Total other income 5,798 - 5,798 Income (loss) before tax (280,512) 56,891 (223,621) Depreciation/amortization 15,113 - 15,113 Identifiable assets 2,813,765 - 2,813,765 Net capital expenditures 14,480 - 14,480 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

Note 2 - Inventories_ Schedule

Note 2 - Inventories: Schedule of Inventory, Current (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Inventory, Current	June 30, 2015 December 31, 2014 Parts $ 193,316 $283,375 Work in progress 264,976 276,853 Finished goods 204,037 158,909 $ 662,329 $719,137

Note 4 - Stock Options_ Share-b

Note 4 - Stock Options: Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	2014 Dividend yield 0.00% Expected volatility 75% Risk-free interest rate 0.68% Expected term (in years) 3 Estimated Fair Value per Option Granted $0.20

Note 4 - Stock Options_ Schedul

Note 4 - Stock Options: Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value	Number Outstanding Weighted-Average Exercise Price Per Share Outstanding at December 31, 2014 440,000 $ 0.39 Granted -- -- Exercised -- -- Expired (145,000) 0.37 Outstanding at June 30, 2015 295,000 $ 0.36

Note 8 - Segment Reporting_ Sch

Note 8 - Segment Reporting: Schedule of Segment Reporting Information, by Segment (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Segment Reporting Information, by Segment	Domestic Foreign Total Three months ended June 30, 2015 Total sales $ 299,131 $ 54,343 $ 353,474 Total other income 3,041 - 3,041 Income (loss) before tax (134,952) 782 (134,170) Depreciation/amortization 7,722 - 7,722 Identifiable assets 2,813,765 - 2,813,765 Net capital expenditures 1,500 - 1,500 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 Six months ended June 30, 2015 Total sales $ 605,248 $ 198,098 $ 803,346 Total other income 5,798 - 5,798 Income (loss) before tax (280,512) 56,891 (223,621) Depreciation/amortization 15,113 - 15,113 Identifiable assets 2,813,765 - 2,813,765 Net capital expenditures 14,480 - 14,480 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

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation (Details)	6 Months Ended
	Jun. 30, 2015
Details
Basis of Accounting	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, 2015 and June 30, 2014.  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, 2014 as filed with Securities and Exchange Commission.
Description of New Accounting Pronouncements Not yet Adopted	New Accounting Pronouncements In July of 2015 the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11 “Simplifying the Measurement of Inventory” an update to Inventory Topic 330. The ASU simplifies the concept of lower of cost or market to the low of cost and net realizable value and more closely align the measurement of inventory in Generally Accepted Accounting Principles (“GAAP”) with the measurement of inventory in International Financial Reporting Standards (“IFRS”). The amendments in the Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.

Note 2 - Inventories_ Schedul19

Note 2 - Inventories: Schedule of Inventory, Current (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Details
Inventory, Parts and Components, Net of Reserves	$ 193,316	$ 283,375
Inventory, Work in Process, Gross	264,976	276,853
Inventory, Finished Goods, Gross	204,037	158,909
Inventories	$ 662,329	$ 719,137

Note 3 - Income (loss) Per Sh20

Note 3 - Income (loss) Per Share (Details)	6 Months Ended
	Jun. 30, 2015shares
Details
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	295,000

Note 4 - Stock Options_ Share21

Note 4 - Stock Options: Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (Details) - 12 months ended Dec. 31, 2014 - $ / shares	Total
Details
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	75.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	0.68%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value	$ 0.20

Note 4 - Stock Options (Details

Note 4 - Stock Options (Details)	6 Months Ended
	Jun. 30, 2015
Details
Option exercise rate	6

Note 4 - Stock Options_ Sched23

Note 4 - Stock Options: Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value (Details) - $ / shares	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	295,000	440,000
Weighted Average Exercise Price, Outstanding	$ 0.36	$ 0.39
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period	(145,000)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price	$ 0.37

Note 5 - Leases (Details)

Note 5 - Leases (Details)	6 Months Ended
	Jun. 30, 2015USD ($)
Details
Monthy lease expense	$ 5,251

Note 6 - Related Party Transa25

Note 6 - Related Party Transactions (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Details
Related Party Transaction, Amounts of Transaction	$ 10,900	$ 8,550	$ 12,574	$ 27,706
Accounts Payable, Related Parties, Current	$ 0		$ 0		$ 10

Note 8 - Segment Reporting (Det

Note 8 - Segment Reporting (Details) - Jun. 30, 2015	Total	Total
Details
Domestic percent of revenue	85.00%	75.00%
Foreign percent of revenue	15.00%	25.00%
Segment Reporting, Disclosure of Major Customers	During the quarter ended June 30, 2015, sales to one customer, comprised more than 10% of the Company’s sales revenues.	During the first half of June 30, 2015, sales to no one single customer was greater than 10% of the Company’s sales revenues.
Segment Reporting, Additional Information about Entity's Reportable Segments	Revenues from foreign countries during the second quarter of 2015 consist primarily of revenues from product sales to Peru, the United Kingdom and Mexico.	Revenues from foreign countries during the first half of 2015 consist primarily of revenues from product sales to Peru, Canada and Croatia.

Note 8 - Segment Reporting_ S27

Note 8 - Segment Reporting: Schedule of Segment Reporting Information, by Segment (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment reporting total sales net	$ 353,474	$ 532,262	$ 803,346	$ 1,032,086
Segment reporting other income	3,041	2,977	5,798	5,526
Segment reporting income loss before tax	(134,170)	13,812	(223,621)	7,622
Segment reporting depreciation	7,722	2,956	15,113	5,487
Segment reporting identifiable assets	2,813,765	3,136,412	2,813,765	3,136,412
Segment reporting net capital expenditures	1,500	30,143	14,480	41,013
Operating Segments
Segment reporting total sales net	299,131	434,192	605,248	839,361
Segment reporting other income	3,041	2,977	5,798	5,526
Segment reporting income loss before tax	(134,952)	(13,556)	(280,512)	(40,836)
Segment reporting depreciation	7,722	2,956	15,113	5,487
Segment reporting identifiable assets	2,813,765	3,127,070	2,813,765	3,127,070
Segment reporting net capital expenditures	1,500	30,143	14,480	41,013
Other Segments
Segment reporting total sales net	54,343	98,070	198,098	192,724
Segment reporting income loss before tax	$ 782	27,368	$ 56,891	48,458
Segment reporting identifiable assets		$ 9,342		$ 9,342