EXHIBIT 20.7-Letter to Shareholders
To Our Shareholders:
Gross revenues decreased to $310,993 for the third quarter of 1996 as compared
to $452,620 in the third quarter of 1995. This has resulted in a decrease in
our net income before tax to $30,902 from $160,339 for the 3rd quarter of 1995.
Our third quarter year gross revenues have decreased from $1,308,030 in 1995 to
$1,113,248 in 1996 for the same period. Third quarter year net profit before
tax was $211,750 as compared to $355,545 for the same period of 1995.
(see appendix item no. 2 for description of graphic content not
displayed in electronic format)
In Management's opinion the overall reduction in sales revenue is due primarily
to cancellation or postponements of industrial automation projects by both
foreign and domestic customers, less than expected customer orders, as well as
increased competition from other wireless systems and hardware providers. This
downward sales trend in conjunction with increased Research and Development and
Marketing expenditures by the Company, has resulted in a lower net income
before tax for 1996 when compared with the same period of 1995. Management's
opinion is this trend will continue through the calendar year ending December
31, 1996.
It is Management's opinion the Company's increased marketing efforts in
conjunction with the release of the new ESTeem product line, as well as an
increase in the number of EST distributors in the second half of 1996, may
lead to a reverse in the downward trend in sales revenue in 1997.
The development of the new 192 ESTeem product line has been on-going for 1996.
The ESTeem Model 192C, developed for our industrial automation market, was
released at a trade show in October. The Federal Communications Commission
(FCC) type acceptance for the 192C products has been applied for and the
company is awaiting approval. In Canada, communications type acceptance for
the 192C was approved in November. The Model 192F operates on federal
frequencies in the United States, and government and civilian frequencies in
foreign countries.
As stated at our Annual Shareholder Meeting in June, it is Management's opinion
that the Company's stock is under valued. A stock buy-back plan was implemented
in 2nd quarter of and was extended through the 3rd quarter of 1996. Over this
period the Company purchased 53,000 shares at an average price of
$0.45 per share
As a reminder for our shareholders, all EST's filing data to the Security
Exchange Commission (SEC) is now available from the SEC information archive on
the Internet (http://www.sec.gov). In addition, EST has an Internet web site
(www.esteem.com) which provides technical and sales information.
T.L. Kirchner
President
SELECTED FINANCIAL DATA
(as prepared by Management)
(Unaudited)
Nine months ended Sept 30 Sept 30
1996 1995
========= ============
Sales $ 905,680 $ 1,154,290
Other revenue $ 207,568 $ 153,740
Gross Profit $ 545,166 $ 707,353
Income (Loss) before
provisions for income
taxes $ 211,750 $ 355,545
Earnings per common
share before taxes
Primary $ .04 $ .07
Fully diluted $ .04 $ .07
Earnings per common
share after taxes
Primary $ .03 $ .04
Fully diluted $ .03 $ .04
Weighted average number of
common shares and common stock
equivalents outstanding for use in
determining Earnings Per Share:
Primary 5,475,339 5,396,256
Fully diluted 5,475,339 5,396,256
Total assets $ 2,047,304 $ 1,955,667
Long-term debt
and capital lease
obligations $ 0 $ 0
Shareholder's equity $ 1,991,756 $ 1,827,893
Shareholder's equity
per share $ .40 $ .37
Working Capital $ 1,835,750 $ 1,708,249
Equity to total assets 97% 93%
SHAREHOLDER INFORMATION
HEADQUARTERS
Electronic Systems Technology, Inc.
415 N. Quay Street
Kennewick, WA 99336
Office: (509) 735-9092
Facsimile: (509) 783-5475
Internet Web Site: www.esteem.com
INDEPENDENT AUDITOR
Robert Moe & Associates, P.S.
305 IBM Building
W. 201 N. River Drive
Spokane, WA 99201
TRANSFER AGENT
TranSecurities International, Inc.
2510 North Pines, Suite 202
Spokane, WA 99206
Phone: (800) 762-8233
APPENDIX:
Item no. 1: (graphic material not included in electronic filing
format)
Located at the top left of the document was the Electronic Systems
Technology, Inc. trademarked company logo, showing a black square
field containing the stylized letters E S T.
Item no. 2: (graphic material not included in electronic filing
format)
Located between the second and third paragraphs of the first page
of the shareholder letter was a bar graph showing the comparison of
third quarter revenues and net profit (rounded to the nearest thousand dollars)
for the third quarters of 1994, 1995, and 1996.
The data presented was as follows:
1994 third quarter gross revenues: $997,000
1994 third quarter net profit: $206,000
1995 third quarter gross revenues: $1,308,000
1995 third quarter net profit: $356,000
1996 third quarter gross revenues: $1,113,000
1996 third quarter net profit: $212,000