| ELECTRONIC SYSTEMS TECHNOLOGY, INC. 
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT REGISTERED PUBLIC    ACCOUNTING FIRM 
FOR THE YEARS ENDED DECEMBER 31, 2005    AND 2004 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS  
PageReport of Independent Registered Public    Accounting Firm
1 Financial Statements:Balance Sheets 
2Statements of Income 
3Statements of Comprehensive Income
4Statements of Changes in Stockholders’    Equity 
5Statements of Cash Flows 
6-7
Notes to Financial    Statements 
8-23Supplemental Schedules of Operating Expenses
24Supplemental Schedules of Selected Financial    Data 
25
 

 

 

 

 

Moe O’Shaughnessy & Associates, P.S.Certified Public Accountants

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of DirectorsElectronic Systems Technology, Inc.415 N. Quay - Bldg. B-1 Kennewick, WA 99336

We have audited the accompanying balance sheets of Electronic SystemsTechnology, Inc., as of December 31, 2005 and 2004, and the related statements of income,comprehensive income, stockholder' equity and cash flows for each of the three years inthe period ended December 31, 2005. These financial statements are the responsibility ofthe Company's management. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with standards of the PublicCompany Accounting Oversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. Ouraudit included consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of internal control over financialreporting. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of Electronic Systems Technology,Inc., as of December 31, 2005 and 2004, and the results of its operations and its cashflows for each of the three years in the period ended December 31, 2005, in conformitywith accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on thebasic financial statements taken as a whole. The supplemental schedules of operatingexpenses and selected financial data are presented for purposes of additional analyses andare not a required part of the basic financial statements. Such supplemental scheduleshave been subjected to the auditing procedures applied in the examination of the basicfinancial statements and, in our opinion, are fairly stated in all material respects whenconsidered in relation to the basic financial statements taken as a whole.

/s/ MOE O’SHAUGHNESSY & ASSOCIATES, P.S.

February 10, 2006

427 W. Sinto Avenue, Ste 200, Spokane, Washington 99201Phone (509) 325-4900 Fax (509) 325-9345 E-mail moaps@qwest.net

 

 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.
BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
ASSETSCURRENT ASSETS
2005
2004Cash
$11,100
$11,100Money market investment
640,165
477,380Certificates of deposit
449,613
--Available-for-sale investments
921,029
1,344,619Accounts receivable, net of allowance for doubtful accounts    of $1,685 at 2005 and $1,884 at 2004
222,982
257,080Inventory
485,257
605,159Prepaid insurance
9,281
9,878Prepaid expenses
22,704
2,700Accrued Interest
          2,758
                 -Total Current Assets
2,764,889
2,707,916PROPERTY AND EQUIPMENT - NET
184,025 
253,456OTHER ASSETS – NET
25,067
4,624 DEFERRED INCOME TAX BENEFIT
20,600
17,300 
$2,994,581
$2,983,296
(continued)

See Notes to Financial Statements

2

 

 

LIABILITIES AND    STOCKHOLDERS’ EQUITY 
2005
2004CURRENT LIABILITIESAccounts payable
$ 41,377
$ 96,949Refundable deposits
72
3,630Accrued payroll
22,855
37,113Accrued payroll and other taxes
7,569
9,467Accrued vacation pay
23,685
22,675Income tax payable
80,579
39,201Total Current Liabilities
176,137
209,035DEFERRED INCOME TAXES
59,300
75,500COMMITMENTS AND CONTINGENCIES
            -
              -STOCKHOLDERS' EQUITYCommon stock - $.001 par value 50,000,000    shares authorized, 5,148,667 issued and outstanding
5,149
5,149
Additional paid-in capital

966,184
966,184
Retained earnings

1,804,828
1,743,252
Accumulated other comprehensive loss

(17,017)
(15,824) 
2,759,144
2,698,761 
$2,994,581
$2,983,296
 

 

 

ELECTRONIC    SYSTEMS TECHNOLOGY, INC.
STATEMENTS    OF INCOME
FOR    THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
2005
2004
2003SALES - NET
$2,417,700
$2,416,625
$2,209,841COST OF SALES
1,112,683
1,083,848
1,051,397GROSS PROFIT
1,305,017
1,332,777
1,158,444
OPERATING EXPENSES
1,140,174
1,089,396
1,006,674
OPERATING INCOME
164,843 
243,381
151,770OTHER INCOME
Interest income

42,806
23,508
34,206
Other income (expense)

(32,892)
(6,763)
(12,075)
9,914 
16,745
22,131INCOME BEFORE INCOME TAXES
174,757
260,126
173,901PROVISION FOR FEDERAL INCOME TAXES
61,694
85,306
50,895
NET INCOME
$ 113,063
$ 174,820
$ 123,006
BASIC EARNINGS PER SHARE
$ 0.02
$ 0.03
$ 0.02
DILUTED EARNINGS PER SHARE
$ 0.02
$ 0.03
$ 0.02

See Notes to Financial Statements

3

 

 

ELECTRONIC    SYSTEMS TECHNOLOGY, INC. 
STATEMENTS OF    COMPREHENSIVE INCOME 
FOR THE YEARS    ENDED DECEMBER 31, 2005, 2004, AND 2003  
2005
2004
2003NET INCOME
$ 113,063
$ 174,820
$ 123,006OTHER COMPREHENSIVE LOSS:Unrealized loss on securities    arising during the period
(8,948)
(9,622)
(8,280)Income tax benefit related to    other comprehensive loss
3,043

3,272

2,815
Other comprehensive loss, net
(5,905)

(6,350)

(5,465)
COMPREHENSIVE INCOME
$ 107,158
$ 168,470
$ 117,541
 

See Notes to Financial Statements

4

 

 

ELECTRONIC    SYSTEMS TECHNOLOGY, INC.
STATEMENTS OF    CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS    ENDED DECEMBER 31, 2005, 2004, AND 2003 
    Common Stock
    Paid-InCapital
    RetainedEarnings
    Accumulated Other    ComprehensiveLoss
    Total
    Shares
    AmountBALANCE AT JANUARY 1, 2003
5,098,667
$ 5,099
$945,734
$1,572,893
$ (4,182)
$2,519,544COMPREHENSIVE INCOME: Net income December 31, 2003
-
-
-
123,006
-
123,006Unrealized loss on securities - net
-
-
-
-
(5,465)
(5,465)Less reclassification adjustment    included in net income
    -
    -
    -
    -
    173
    173CASH DIVIDEND
                  -
                  -
               -
(76,480)
                  -
       (76,480) 
5,098,667
5,099
945,734
1,619,419
(9,474)
2,560,778STOCK OPTIONS EXERCISED
50,000
50
20,450
-
-
20,500COMPREHENSIVE INCOME:Net income December 31, 2004
-
-
-
1,74,820
-
1,74,820Unrealized loss on securities - net
-
-
-
-
(6,350)
(6,350)CASH DIVIDEND
                    -
                 -
                 -
(50,987)
                 -
    (50,987) 
5,148,667
5,149
966,184
1,743,252
(15,824)
2,698,761COMPREHENSIVE INCOME:Net income 
-
-
-
113,063
-
113,063Unrealized loss on securities - net
-
-
-
-
(5,905)
(5,905)Less reclassification adjustment
included    in net income
-
-
-
-
4,712
4,712CASH DIVIDEND
-
-
-
(51,487)
-
(51,487)BALANCE AT DECEMBER 31, 2005
5,148,667
$5,149
$966,184
$1,804,828
$(17,017)
$2,759,144
See Notes to Financial Statements 

5

ELECTRONIC    SYSTEMS TECHNOLOGY, INC.
STATEMENTS OF    CASH FLOWS
FOR THE YEARS    ENDED DECEMBER 31, 2005, 2004, AND 2003 
2005
2004
2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income (Loss)
$113,063
$ 174,820
$ 123,006Noncash expenses included in income:
Depreciation

71,031
65,370
49,207
Amortization

2,851
4,257
4,404
Allowance for doubtful accounts

(199)
(269)
869
Deferred income taxes

(19,500)
13,400 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|