Electronic Systems Technology (ELST) 10-Q 29 Apr 19 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 16, 2019
Details
Registrant Name	Electronic Systems Technology Inc
Registrant CIK	0000752294
SEC Form	10-Q
Period End date	Mar. 31, 2019
Fiscal Year End	--12-31
Trading Symbol	elst
Tax Identification Number (TIN)	911238077
Number of common stock shares outstanding		4,946,502
Filer Category	Non-accelerated Filer
Current with reporting	Yes
Small Business	true
Emerging Growth Company	false
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1

ELECTRONIC SYSTEMS TECHNOLOGY,

ELECTRONIC SYSTEMS TECHNOLOGY, INC. BALANCE SHEETS (Unaudited) - USD ($)		Mar. 31, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents		$ 326,378	$ 323,667
Certificates of deposit		750,000	900,000
Accounts receivable, net		161,191	57,156
Inventories		675,419	714,995
Prepaid expenses		23,743	21,353
Accrued interest receivable		8,082	13,300
Total current assets		1,944,813	2,030,471
Property and equipment, net of depreciation		18,375	20,368
Right to use - Lease, net of amortization	[1]	78,710	0
Total assets		2,041,898	2,050,839
Current liabilities
Accounts payable		46,343	71,257
Refundable deposits		10,184	10,310
Accrued wages and bonus		4,140	2,138
Accrued vacation pay		15,928	11,449
Lease liability, current portion	[1]	52,282	0
Other accrued liabilities		3,168	2,514
Total current liabilities		132,045	97,668
Lease liability, long-term portion payable	[1]	26,428	0
Total liabilities		158,473	97,668
Stockholders' equity
Common stock		4,947	4,986
Additional paid-in capital		929,159	944,040
Retained earnings		949,319	1,004,145
Total stockholders' equity		1,883,425	1,953,171
Total liabilities and stockholders' equity		$ 2,041,898	$ 2,050,839
[1]	NOTE 6

ELECTRONIC SYSTEMS TECHNOLOGY_2

ELECTRONIC SYSTEMS TECHNOLOGY, INC. BALANCE SHEETS (Unaudited) - Parenthetical - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Details
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares, Outstanding	4,946,502	4,985,048

ELECTRONIC SYSTEMS TECHNOLOGY_3

ELECTRONIC SYSTEMS TECHNOLOGY, INC STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Details
Sales, net	$ 374,166	$ 307,828
Cost of sales	(175,915)	(163,583)
Gross profit	198,251	144,245
OPERATING EXPENSES
General and administrative	93,506	82,811
Research and development	65,474	60,637
Marketing and sales	99,984	108,320
Operating loss	258,964	251,768
Operating loss	(60,713)	(107,523)
Other income
Interest income	5,887	3,731
Total other income	5,887	3,731
Net loss before income tax	(54,826)	(103,792)
Benefit (provision) for income tax	0	0
Net loss	$ (54,826)	$ (103,792)
Basic and diluted loss per share	$ (0.01)	$ (0.02)
Weighted average shares	4,953,043	4,986,048

ELECTRONIC SYSTEMS TECHNOLOGY_4

ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)	Common Stock	Additional Paid-in Capital	Retained Earnings	Total
Equity balance at Dec. 31, 2017	$ 4,986	$ 944,161	$ 1,120,244	$ 2,069,391
Shares outstanding at Dec. 31, 2017	4,986,048
Net loss	$ 0	0	(103,792)	(103,792)
Shares outstanding at Mar. 31, 2018	4,986,048
Equity balance at Mar. 31, 2018	$ 4,986	944,161	1,016,452	1,965,599
Equity balance at Dec. 31, 2018	$ 4,986	944,040	1,004,145	1,953,171
Shares outstanding at Dec. 31, 2018	4,985,748
Net loss	$ 0	0	(54,826)	$ (54,826)
Common stock repurchased	(39,246)			39,246
Common stock repurchased	$ (39)	(14,881)	0	$ (14,920)
Shares outstanding at Mar. 31, 2019	4,946,502
Equity balance at Mar. 31, 2019	$ 4,947	$ 929,159	$ 949,319	$ 1,883,425

ELECTRONIC SYSTEMS TECHNOLOGY_5

ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net loss	$ (54,826)	$ (103,792)
Noncash items included in net loss
Depreciation	1,993	2,769
Changes in operating assets and liabilities
Accounts receivable, net	(104,035)	(18,842)
Inventories	39,576	33,147
Accrued interest receivable	5,218	365
Prepaid expenses	(2,390)	2,281
Accounts payable	(24,914)	14,455
Refundable deposits	(126)	0
Other accrued liabilities	7,135	2,580
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES	(132,369)	(67,037)
CASH FLOWS FROM INVESTING ACTIVITIES:
Certificates of deposit redeemed	150,000	250,000
NET CASH PROVIDED FROM INVESTING ACTIVITIES	150,000	250,000
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repurchase of shares of common stock	(14,920)	0
NET CASH USED IN FINANCING ACTIVITIES	(14,920)	0
NET INCREASE IN CASH AND CASH EQUIVALENTS	2,711	182,963
Cash and cash equivalents at beginning of period	323,667	208,101
Cash and cash equivalents at end of period	$ 326,378	$ 391,064

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation	3 Months Ended
	Mar. 31, 2019
Notes
Note 1 - Basis of Presentation	NOTE 1 - BASIS OF PRESENTATION The financial statements, including notes, of Electronic Systems Technology, Inc. (the "Company") are representations of the Company’s management, which is responsible for their integrity and objectivity. The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2019, and its results of operations, cash flows, and changes in stockholders’ equity for the three months ended March 31, 2019 and 2018. The balance sheet at December 31, 2018 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. All amounts presented are in U.S. dollars. For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the three-month period ended March 31, 2019 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. The Company estimates that for 2019 the anticipated effective annual federal income tax rate will be 0%. Accounting Standards Updates Adopted In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company adopted the update on January 1, 2019. Upon implementation of the new guidance, the Company recognized a liability and right-of-use asset of $91,637 as of January 1, 2019 for its one operating lease. The Company elected the transition option to apply the new guidance at the effective date without adjusting comparative periods presented. (See Note 6). Accounting Standards Updates to Become Effective in Future Periods In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and makes additions to the disclosure requirements on fair value measurements. The update is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of this update on our fair value measurement disclosures. Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Note 2 - Inventories

Note 2 - Inventories	3 Months Ended
	Mar. 31, 2019
Notes
Note 2 - Inventories	NOTE 2 - INVENTORIES Inventories are stated at lower of direct cost or net realizable value with cost determined using the FIFO (first in, first out) method. Inventories consist of the following: March 31 2019 December 31 2018 Parts $ 130,899 $ 133,809 Work in progress 192,541 243,081 Finished goods 351,979 338,105 Total inventory $ 675,419 714,995

Note 3 - Earnings (Loss) Per Sh

Note 3 - Earnings (Loss) Per Share	3 Months Ended
	Mar. 31, 2019
Notes
Note 3 - Earnings (Loss) Per Share	NOTE 3 - EARNINGS (LOSS) PER SHARE Basic earnings (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 earnings (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 March 31, 2019 and 2018, the Company had 120,000 and 150,000 outstanding stock options, respectively, that could have a dilutive effect on future periods’ net income. However, diluted earnings per share are not presented because their effect would be antidilutive due to Company’s losses.

Note 4 - Stock Options

Note 4 - Stock Options	3 Months Ended
	Mar. 31, 2019
Notes
Note 4 - Stock Options	NOTE 4 - STOCK OPTIONS As of March 31, 2019, 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 first quarter ended March 31, 2019. A summary of option activity during the quarter ended March 31, 2019 is as follows: Number Outstanding Weighted-Average Exercise Price Per Share Weighted-Average Remaining Life (Years) Approximate Aggregate Intrinsic Value Outstanding and Exercisable at December 31, 2018 120,000 $ 0.40 Granted - - Expired - - Outstanding and Exercisable at March 31, 2019 120,000 $ 0.40 1.4 $ 1,200

Note 5 - Revenue

Note 5 - Revenue	3 Months Ended
	Mar. 31, 2019
Notes
Note 5 - Revenue	NOTE 5 – REVENUE The Company product revenue includes industrial wireless products and accessories such as antennas, power supplies and cable assemblies. The Company also provides direct site support and engineering services to customers, such as repair and upgrade of its products. During the three month period ended March 31, 2019 and 2018, the Company’s revenue from products sales was $369,389 and $305,564, respectively. Revenue from site support and engineering services was $4,777 and $2,264 respectively, over the same periods. The Company’s customers, to which trade credit terms are extended, consist of United States and local governments and foreign and domestic companies. Domestic sales for the three month period ended March 31, 2019 were $292,193 compared to $302,588 in 2018. Sales to foreign customers for the three month period ended March 31, 2019 were $81,973 compared to $5,240 in 2018. For the three month period ended March 31, 2019, sales to three customers represented more than 10% of total revenue, one customer represented more than 10% of total revenue for the same period in 2018. 2019 Sales 2019 %age of Total Sales 2018 Sales 2018 %age of Total Sales Domestic customer A 84,788 23% 68,842 22% Domestic customer B 72,350 19% Foreign customer C 52,076 14% As of March 31, 2019 and 2018, the Company had a sales order backlog of $11,538 and $0, respectively.

Note 6 - Leases

Note 6 - Leases	3 Months Ended
	Mar. 31, 2019
Notes
Note 6 - Leases	NOTE 6 - LEASES In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company implemented this standard effective January 1, 2019. Upon implementation of the new guidance, the Company recognized a liability and right-of-use asset of $91,637 as of January 1, 2019 for its one operating lease. To calculate the liability and right to use asset, the Company utilized a 4.0% incremental borrowing rate to discount the future rent payments and remaining lease term of 1.75 years. The Company leases its facilities from a port authority for $5,542 per month for three years, expiring in September 2020, with annual increases based upon the Consumer Price Index. The original lease was effective October 1, 2014 and contained a three year renewal option and a provision for an annual increase of 2% per year, plus Leasehold Tax of 12.84%. On September 5th, 2017, the Company exercised the three year option. The first year of this option was not subject to the 2% increase. The current lease does not contain the option to extend the lease. However, the Company believes that a new lease agreement will be signed prior to the expiration of the current lease. At March 31, 2019, the remaining lease term is 1.5 years For the three month periods ended March 31, 2019 and 2018, lease expenses of $16,627 and $16,635, respectively, are included in the following expense classifications on the statement of operations: March 31, 2019 March 31, 2018 Cost of sales $ 3,325 $ 3,267 General and administrative 3,325 3,267 Research and development 3,325 3,267 Marketing and sales 6,652 6,834 Total $ 16,627 $ 16,635 As of March 31, 2019, total future lease payment are as follows: For the 12 months ended March 31, 2020 $ 59,458 2021 29,988 Total 89,446 Less imputed interest (10,736) Net lease liability 78,710 Current portion 52,282 Long-term portion $ 26,428

Note 7 - Stock Repurchase

Note 7 - Stock Repurchase	3 Months Ended
	Mar. 31, 2019
Notes
Note 7 - Stock Repurchase	NOTE 7 – STOCK REPURCHASE On January 13, 2016, the Company’s Board of Directors approved a resolution authorizing the repurchase of up to $100,000 of the Company’s common stock at the price of $0.38 per share. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. On March 2, 2016, the Company’s Board of Director approved a resolution authorizing the repurchase of an additional $150,000 of the Company’s common stock at the price of $0.38 per share. Under the program (the “Stock Repurchase Plan”), shares may be repurchased in open market transactions, complying with Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Shares repurchased are retired. During the three-month period ended March 31, 2019, the Company repurchased 39,246 shares for $14,920; no shares were repurchased in the three-month period ended March 31, 2018. Since inception of the Stock Repurchase Plan, the Company has repurchased 212,165 shares for a total of $80,622 through March 31, 2019 and $169,378 of the original $250,000 approved by the board remains.

Note 2 - Inventories_ Schedule

Note 2 - Inventories: Schedule of Inventory, Current (Tables)	3 Months Ended
	Mar. 31, 2019
Tables/Schedules
Schedule of Inventory, Current	March 31 2019 December 31 2018 Parts $ 130,899 $ 133,809 Work in progress 192,541 243,081 Finished goods 351,979 338,105 Total inventory $ 675,419 714,995

Note 4 - Stock Options_ Schedul

Note 4 - Stock Options: Schedule of Stock Options Roll Forward (Tables)	3 Months Ended
	Mar. 31, 2019
Tables/Schedules
Schedule of Stock Options Roll Forward	Number Outstanding Weighted-Average Exercise Price Per Share Weighted-Average Remaining Life (Years) Approximate Aggregate Intrinsic Value Outstanding and Exercisable at December 31, 2018 120,000 $ 0.40 Granted - - Expired - - Outstanding and Exercisable at March 31, 2019 120,000 $ 0.40 1.4 $ 1,200

Note 5 - Revenue_ Revenue from

Note 5 - Revenue: Revenue from External Customers by Products and Services (Tables)	3 Months Ended
	Mar. 31, 2019
Tables/Schedules
Revenue from External Customers by Products and Services	2019 Sales 2019 %age of Total Sales 2018 Sales 2018 %age of Total Sales Domestic customer A 84,788 23% 68,842 22% Domestic customer B 72,350 19% Foreign customer C 52,076 14%

Note 6 - Leases_ Schedule of di

Note 6 - Leases: Schedule of distribution of lease expense (Tables)	3 Months Ended
	Mar. 31, 2019
Tables/Schedules
Schedule of distribution of lease expense	March 31, 2019 March 31, 2018 Cost of sales $ 3,325 $ 3,267 General and administrative 3,325 3,267 Research and development 3,325 3,267 Marketing and sales 6,652 6,834 Total $ 16,627 $ 16,635

Note 6 - Leases_ Future Less Pa

Note 6 - Leases: Future Less Payments (Tables)	3 Months Ended
	Mar. 31, 2019
Tables/Schedules
Future Less Payments	For the 12 months ended March 31, 2020 $ 59,458 2021 29,988 Total 89,446 Less imputed interest (10,736) Net lease liability 78,710 Current portion 52,282 Long-term portion $ 26,428

Note 1 - Basis of Presentation

Note 1 - Basis of Presentation (Details)	3 Months Ended
	Mar. 31, 2019
Details
New Accounting Pronouncements and Changes in Accounting Principles	In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.  The Company adopted the update on January 1, 2019.   Upon implementation of the new guidance, the Company recognized a liability and right-of-use asset of $91,637 as of January 1, 2019 for its one operating lease.  The Company elected the transition option to apply the new guidance at the effective date without adjusting comparative periods presented. (See Note 6).
Description of New Accounting Pronouncements Not yet Adopted	In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820):  Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.  The update removes, modifies and makes additions to the disclosure requirements on fair value measurements.  The update is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.  The Company is currently evaluating the impact of this update on our fair value measurement disclosures.

Note 2 - Inventories_ Schedul_2

Note 2 - Inventories: Schedule of Inventory, Current (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Details
Inventory, Parts and Components, Net of Reserves	$ 130,899		$ 133,809
Inventory, Work in Process, Gross	192,541		243,081
Inventory, Finished Goods, Gross	351,979		338,105
Inventories	$ 675,419	$ 714,995	$ 714,995

Note 3 - Earnings (Loss) Per _2

Note 3 - Earnings (Loss) Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Details
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants	120,000	150,000

Note 4 - Stock Options_ Sched_2

Note 4 - Stock Options: Schedule of Stock Options Roll Forward (Details)	Mar. 31, 2019USD ($)$ / sharesshares	Dec. 31, 2018$ / sharesshares
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | shares	120,000	120,000
Weighted Average Exercise Price | $ / shares	$ 0.40	$ 0.40
Weighted Average Remaining Life Years	1.4
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $	$ 1,200

Note 5 - Revenue (Details)

Note 5 - Revenue (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Segment Reporting Information, Description of Products and Services	The Company product revenue includes industrial wireless products and accessories such as antennas, power supplies and cable assemblies. The Company also provides direct site support and engineering services to customers, such as repair and upgrade of its products
Sales, net	$ 374,166	$ 307,828
Domestic sales revenues	292,193	302,588
Foreign sales	81,973	5,240
Manufactured Product, Other
Sales, net	369,389	305,564
Technology Service
Sales, net	$ 4,777	$ 2,264

Note 5 - Revenue_ Revenue fro_2

Note 5 - Revenue: Revenue from External Customers by Products and Services (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Details
Customer A	$ 84,788	$ 68,842
Customer A	23.00%	22.00%
Customer B	$ 72,350
Customer B	19.00%
Customer C	$ 52,076
Customer C	14.00%

Note 6 - Leases (Details)

Note 6 - Leases (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Details
Description of operating lease	The Company leases its facilities from a port authority for $5,542 per month for three years, expiring in September 2020, with annual increases based upon the Consumer Price Index.
Operating lease expense distributed	$ 16,627	$ 16,635

Note 6 - Leases_ Schedule of _2

Note 6 - Leases: Schedule of distribution of lease expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Details
Cost of sales, lease expense	$ 3,325	$ 3,267
Cost of sales, general and administrative	3,325	3,267
Cost of sales, research and development	3,325	3,267
Cost of sales, marketing and sales	6,652	6,834
Operating lease expense distributied	$ 16,627	$ 16,635

Note 6 - Leases_ Future Less _2

Note 6 - Leases: Future Less Payments (Details) - USD ($)		Mar. 31, 2019	Dec. 31, 2018
Details
Operating Leases, Future Minimum Payments, Due in Two Years		$ 59,458
Operating Leases, Future Minimum Payments, Due in Three Years		29,988
Operating Leases, Future Minimum Payments Due		89,446
Less imputed interest		(10,736)
Right to use - Lease, net of amortization	[1]	78,710	$ 0
Lease liability, current portion	[1]	52,282	0
Lease liability, long-term portion payable	[1]	$ 26,428	$ 0
[1]	NOTE 6

Note 7 - Stock Repurchase (Deta

Note 7 - Stock Repurchase (Details)	3 Months Ended
	Mar. 31, 2019USD ($)shares
Details
Stock repurchase program	On January 13, 2016, the Company’s Board of Directors approved a resolution authorizing the repurchase of up to $100,000 of the Company’s common stock at the price of $0.38 per share. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. On March 2, 2016, the Company’s Board of Director approved a resolution authorizing the repurchase of an additional $150,000 of the Company’s common stock at the price of $0.38 per share.
Common stock repurchased | shares	39,246
Common stock repurchased | $	$ 14,920