Electronic Systems Technology (ELST) 10-Q 23 Oct 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information	9 Months Ended
	Sep. 30, 2015shares
Document and Entity Information
Entity Registrant Name	Electronic Systems Technology Inc
Document Type	10-Q
Document Period End Date	Sep. 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	Q3
Trading Symbol	elst

ELECTRONIC SYSTEMS TECHNOLOGY,

ELECTRONIC SYSTEMS TECHNOLOGY, INC. BALANCE SHEETS (Interim period unaudited) - USD ($)		Sep. 30, 2015	Dec. 31, 2014
Current assets
Cash and cash equivalents		$ 530,964	$ 637,086
Certificates of deposit		1,202,625	1,402,625
Accounts receivable		195,772	94,864
Inventories		626,349	719,137
Accrued interest receivable		8,093	3,109
Prepaid insurance		2,806	5,505
Prepaid expenses		19,534	8,919
Deferred income tax asset, current		25,214	49,600
Total current assets		2,611,357	2,920,845
Property and equipment, net		84,473	91,907
Deferred income tax asset, net		54,708	31,301
Total assets		2,750,538	3,044,053
Current liabilities
Accounts payable		21,634	14,573
Accrued liabilities		36,541	43,045
Refundable deposits			26,247
Total current liabilities		58,175	83,865
Total liabilities		58,175	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		1,679,343	1,947,168
Total stockholders' equity		2,692,363	2,960,188
Total liabilities and stockholders' equity		$ 2,750,538	$ 3,044,053
[1]	Notes 4, 5 and 7

Statement of Financial Position

Statement of Financial Position - Parenthetical - $ / shares	Sep. 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		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income statement
SALES, NET	$ 401,748	$ 355,651	$ 1,160,527	$ 1,287,436
SITE SUPPORT	37,332	24,756	81,899	125,057
COST OF SALES	(185,725)	(190,126)	(561,164)	(648,055)
GROSS PROFIT	253,355	190,281	681,262	764,438
OPERATING EXPENSES
General and administrative	71,191	67,284	255,555	225,073
Research and development	72,502	80,798	219,731	205,440
Marketing	124,145	111,456	391,070	342,381
Customer service	32,658	29,699	91,466	88,404
TOTAL OPERATING EXPENSES	300,496	289,237	957,822	861,298
OPERATING INCOME (LOSS)	(47,141)	(98,956)	(276,560)	(96,859)
OTHER INCOME
Interest income	2,937	2,492	8,735	8,017
TOTAL OTHER INCOME	2,937	2,492	8,735	8,017
NET INCOME (LOSS) BEFORE INCOME TAX	(44,204)	(96,464)	(267,825)	(88,842)
Benefit (provision) for income tax		2,660		2,000
NET INCOME (LOSS)	$ (44,204)	$ (93,804)	$ (267,825)	$ (86,842)
Basic and diluted earnings per share	$ (0.01)	$ (0.02)	$ (0.05)	$ (0.02)
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 ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS USED BY OPERATING ACTIVITIES
Net loss	$ (267,825)	$ (86,842)
Noncash items included in net loss:
Depreciation	21,914	11,476
Deferred income taxes	979	(6,200)
Share based compensation		2,245
Changes in operating assets and liabilities:
Account receivable	(100,908)	(61,251)
Inventories	92,788	(89,958)
Accrued interest receivable	(4,984)	(3,496)
Prepaid insurance	2,699	3,997
Prepaid expenses	(10,616)	2,153
Deposits		13,083
Accounts payable	7,061	(846)
Accrued liabilities	(6,503)	(11,263)
Refundable deposits	(26,247)	(4,635)
NET CASH FLOWS USED BY OPERATING ACTIVITIES	(291,642)	(231,537)
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Certificates of deposit redeemed	200,000	356,000
Purchases of property and equipment	(14,480)	(68,560)
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES	185,520	287,440
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(106,122)	55,904
Cash and cash equivalents at beginning of period	637,086	896,580
Cash and cash equivalents at ending of period	$ 530,964	$ 952,484

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation	9 Months Ended
	Sep. 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 nine month periods ended September 30, 2015 and September 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 nine months ended September 30, 2015 and September 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. The amendments in the ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.

Note 2 - Inventories

Note 2 - Inventories	9 Months Ended
	Sep. 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: September 30, 2015 December 31, 2014 Parts $ 184,849 $ 283,375 Work in progress 258,073 276,853 Finished goods 183,427 158,909 $ 626,349 $ 719,137

Note 3 - Income (loss) Per Shar

Note 3 - Income (loss) Per Share	9 Months Ended
	Sep. 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 September 30, 2015 and 2014 the Company had 195,000 and 440,000 outstanding stock options, respectively, that could have a dilutive effect on future periods. However, at September 30, 2015 and 2014 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	9 Months Ended
	Sep. 30, 2015
Notes
Note 4 - Stock Options	NOTE 4 - STOCK OPTIONS As of September 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 nine months ended September 30, 2015. The Board of Directors granted 150,000 stock options subject to shareholder approval during the Annual Shareholders’ meeting, June 3, 2016. The estimated expense that would be recognized for these options is approximately $1,900. 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 nine months ended September 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 (245,000) 0.37 Outstanding at September 30, 2015 195,000 $ 0.39

Note 5 - Leases

Note 5 - Leases	9 Months Ended
	Sep. 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 - Commitments and Contin

Note 6 - Commitments and Contingencies	9 Months Ended
	Sep. 30, 2015
Notes
Note 6 - Commitments and Contingencies	NOTE 6 - 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 7 - Segment Reporting

Note 7 - Segment Reporting	9 Months Ended
	Sep. 30, 2015
Notes
Note 7 - Segment Reporting	NOTE 7 - 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 September 30, 2015 and 2014, domestic customers represented approximately 86% and 97%, respectively, of total net revenues. Foreign customers represented approximately 14% and 3% of total net revenues for the same respective periods. During the quarter ended September 30, 2015, sales to one customer comprised more than 10% of the Company’s sales revenues. The sales to that customer were 19.3%. During the quarter ended September 30, 2014, sales to two customers comprised more than 10% of the Company’s sales revenues. The sales to Customer A and Customer B were 15.5% and 11.5%, respectively. Revenues from foreign countries during the third quarter of 2015 consist primarily of revenues from product sales to Croatia, Peru and Mexico. During the first nine months of 2015 and 2014, domestic customers represented approximately 79% and 86%, respectively, of total net revenues. Foreign customers represented approximately 21% and 14% of total net revenues for the same respective periods. During the first nine months of 2015, sales to no one single customer were greater than 10% of the Company’s sales revenues. Revenues from foreign countries during the first nine months 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 third quarter and first nine months of 2015 and 2014 is as follows: Domestic Foreign Total Three months ended September 30, 2015 Total sales $ 375,433 $ 63,647 $ 439,080 Total other income 2,937 - 2,937 Income (loss) before tax (54,240) 10,036 (44,204) Depreciation/amortization 6,801 - 6,801 Net capital expenditures - - - Three months ended September 30, 2014 Total sales $ 367,657 $ 12,750 $ 380,407 Total other income 2,492 - 2,492 Income (loss) before tax (78,833) (17,631) (96,464) Depreciation/amortization 5,989 - 5,989 Net capital expenditures 27,547 - 27,547 Nine months ended September 30, 2015 Total sales $ 980,681 $ 261,745 $ 1,242,426 Total other income 8,735 - 8,735 Income (loss) before tax (334,753) 66,928 (267,825) Depreciation/amortization 21,914 - 21,914 Net capital expenditures 14,480 - 14,480 Nine Months ended September 30, 2014 Total sales $ 1,207,925 $ 204,568 $ 1,412,493 Total other income 8,017 - 8,017 Income (loss) before tax (141,725) 52,883 (88,842) Depreciation/amortization 11,476 - 11,476 Net capital expenditures 68,560 - 68,560 At September 30, 2015 Identifiable assets $ 2,750,538 $ - $ 2,750,538 At December 31, 2014 Identifiable assets $ 3,045,753 $ 1,800 $ 3,047,553

Note 2 - Inventories_ Schedule

Note 2 - Inventories: Schedule of Inventory, Current (Tables)	9 Months Ended
	Sep. 30, 2015
Tables/Schedules
Schedule of Inventory, Current	September 30, 2015 December 31, 2014 Parts $ 184,849 $ 283,375 Work in progress 258,073 276,853 Finished goods 183,427 158,909 $ 626,349 $ 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)	9 Months Ended
	Sep. 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)	9 Months Ended
	Sep. 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 (245,000) 0.37 Outstanding at September 30, 2015 195,000 $ 0.39

Note 7 - Segment Reporting_ Sch

Note 7 - Segment Reporting: Schedule of Segment Reporting Information, by Segment (Tables)	9 Months Ended
	Sep. 30, 2015
Tables/Schedules
Schedule of Segment Reporting Information, by Segment	Domestic Foreign Total Three months ended September 30, 2015 Total sales $ 375,433 $ 63,647 $ 439,080 Total other income 2,937 - 2,937 Income (loss) before tax (54,240) 10,036 (44,204) Depreciation/amortization 6,801 - 6,801 Net capital expenditures - - - Three months ended September 30, 2014 Total sales $ 367,657 $ 12,750 $ 380,407 Total other income 2,492 - 2,492 Income (loss) before tax (78,833) (17,631) (96,464) Depreciation/amortization 5,989 - 5,989 Net capital expenditures 27,547 - 27,547 Nine months ended September 30, 2015 Total sales $ 980,681 $ 261,745 $ 1,242,426 Total other income 8,735 - 8,735 Income (loss) before tax (334,753) 66,928 (267,825) Depreciation/amortization 21,914 - 21,914 Net capital expenditures 14,480 - 14,480 Nine Months ended September 30, 2014 Total sales $ 1,207,925 $ 204,568 $ 1,412,493 Total other income 8,017 - 8,017 Income (loss) before tax (141,725) 52,883 (88,842) Depreciation/amortization 11,476 - 11,476 Net capital expenditures 68,560 - 68,560 At September 30, 2015 Identifiable assets $ 2,750,538 $ - $ 2,750,538 At December 31, 2014 Identifiable assets $ 3,045,753 $ 1,800 $ 3,047,553

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation (Details)	9 Months Ended
	Sep. 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 nine month periods ended September 30, 2015 and September 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. The amendments in the ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.

Note 2 - Inventories_ Schedul18

Note 2 - Inventories: Schedule of Inventory, Current (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Details
Inventory, Parts and Components, Net of Reserves	$ 184,849	$ 283,375
Inventory, Work in Process, Gross	258,073	276,853
Inventories	$ 626,349	$ 719,137

Note 3 - Income (loss) Per Sh19

Note 3 - Income (loss) Per Share (Details) - shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Details
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	195,000	440,000

Note 4 - Stock Options_ Share20

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
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)	9 Months Ended
	Sep. 30, 2015
Details
Option exercise rate	6

Note 4 - Stock Options_ Sched22

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	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	195,000	440,000
Weighted Average Exercise Price, Outstanding	$ 0.39	$ 0.39
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period	(245,000)
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)	9 Months Ended
	Sep. 30, 2015USD ($)
Details
Monthy lease expense	$ 5,251

Note 7 - Segment Reporting (Det

Note 7 - Segment Reporting (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Details
Domestic percent of revenue	86.00%	97.00%	79.00%	86.00%
Foreign percent of revenue	14.00%	3.00%	21.00%	14.00%
Segment Reporting, Disclosure of Major Customers	During the quarter ended September 30, 2015, sales to one customer comprised more than 10% of the Company’s sales revenues. The sales to that customer were 19.3%.	During the quarter ended September 30, 2014, sales to two customers comprised more than 10% of the Company’s sales revenues. The sales to Customer A and Customer B were 15.5% and 11.5%, respectively.	During the first nine months of 2015, sales to no one single customer were greater than 10% of the Company’s sales revenues.
Segment Reporting, Additional Information about Entity's Reportable Segments	Revenues from foreign countries during the third quarter of 2015 consist primarily of revenues from product sales to Croatia, Peru and Mexico.		Revenues from foreign countries during the first nine months of 2015 consist primarily of revenues from product sales to Peru, Canada and Croatia.

Note 7 - Segment Reporting_ S25

Note 7 - Segment Reporting: Schedule of Segment Reporting Information, by Segment (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Segment reporting total sales net	$ 439,080	$ 380,407	$ 1,242,426	$ 1,412,493
Segment reporting other income	2,937	2,492	8,735	8,017
Segment reporting income loss before tax	(44,204)	(96,464)	(267,825)	(88,842)
Segment reporting depreciation	6,801	5,989	21,914	11,476
Segment reporting net capital expenditures		27,547	14,480	68,560
Segment reporting identifiable assets	2,750,538		2,750,538		$ 3,047,553
Operating Segments
Segment reporting total sales net	375,433	367,657	980,681	1,207,925
Segment reporting other income	2,937	2,492	8,735	8,017
Segment reporting income loss before tax	(54,240)	(78,833)	(334,753)	(141,725)
Segment reporting depreciation	6,801	5,989	21,914	11,476
Segment reporting net capital expenditures		27,547	14,480	68,560
Segment reporting identifiable assets	2,750,538		2,750,538		3,045,753
Other Segments
Segment reporting total sales net	63,647	12,750	261,745	204,568
Segment reporting income loss before tax	$ 10,036	$ (17,631)	$ 66,928	$ 52,883
Segment reporting identifiable assets					$ 1,800