EXHIBIT 1 - Financial Statements andAuditor Report
 

 

 

 

 

 

 

 

 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

FINANCIAL STATEMENTSANDINDEPENDENT AUDITORS’ REPORT

FOR THE YEAR ENDED DECEMBER 31, 2002

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS 
Page
Independent    Auditors’ Report
1
Financial    Statements: 
Balance Sheets
2Statements of Income (Loss)
3Statements of Comprehensive income    (Loss)
4Statements of Changes in    Stockholders’ Equity
5Statements of Cash Flows
6-7Notes to Financial Statements
8-20Supplemental Schedules of Operating    Expenses
21Supplemental Schedules of Selected    Financial Data
22
 

 

 

 

 

 

 

 

INDEPENDENT AUDITORS’ REPORT

 

Board of DirectorsElectronic Systems Technology, Inc.415 N. Quay - Suite 4Kennewick, WA 99336

We have audited the accompanying balance sheets of Electronic SystemsTechnology, Inc., as of December 31, 2002 and 2001, and the related statements of income(loss), comprehensive income (loss), stockholders’ equity and cash flows for each ofthe three years in the period ended December 31, 2002. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believe that ouraudits provide 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, 2002 and 2001, and the results of its operations and its cashflows for each of the three years in the period ended December 31, 2002, in conformitywith accounting principles generally accepted in the United States of America.

 

/s/ MOE O'SHAUGHNESSY

February 7, 2003

 

 

ELECTRONIC SYSTEMS    TECHNOLOGY, INC.
BALANCE SHEETS
DECEMBER 31, 2002    AND 2001 
ASSETS 
2002
2001CURRENT ASSETSCash 
$ 11,100
$ 6,100Money market investment
311,897
516,334Certificate of deposit
-
991,158Available-for-sale investments
1,337,668
-Accounts receivable, net of $1,284    allowance for doubtful accounts 
302,269
158,674Inventory
569,424
531,599Accrued interest
-
1,243Prepaid insurance
8,523
7,252Prepaid expenses
2,500
-Prepaid federal income taxes
-
6,633
Total Current Assets
2,543,381
2,218,993 PROPERTY AND EQUIPMENT - NET
159,182
164,989 OTHER ASSETS - NET
30,407
17,690 DEFERRED INCOME TAX BENEFIT
9,200
-
$2,742,170
$2,401,672
 

 

LIABILITIES AND    STOCKHOLDERS’ EQUITY 
2002
2001CURRENT LIABILITIESAccounts payable
$ 38,855
$ 48,384Refundable deposits
21,758
5,000Accrued payroll
2,648
2,260Accrued payroll and other taxes
4,943
1,458 Accrued vacation pay
19,428
17,137Income tax payable
104,594
-Deferred income taxes
-
17,283Total Current Liabilities
192,226
91,522 DEFERRED INCOME TAXES
30,400
- COMMITMENTS AND CONTINGENCIES
-
- STOCKHOLDERS’ EQUITYCommon stock $.001 par value    50,000,000 shares authorized, 5,098,667 issued and outstanding
5,099
5,099Additional paid-in capital
945,734
945,734Retained earnings
1,572,893
1,359,317Accumulated other comprehensive loss 
(4,182)
- 
2,519,544
2,310,150
$2,742,170
$2,401,672
 

See Notes to Financial Statements.

2

 

ELECTRONIC SYSTEMS    TECHNOLOGY, INC.
STATEMENTS OF INCOME    (LOSS)
FOR THE YEARS ENDED    DECEMBER 31, 2002, 2001, AND 2000 
2002
2001
2000SALES - NET
$1,932,648
$1,303,811
$1,310,524COST OF SALESBeginning inventory
531,599
561,946
357,490Purchases and allocated costs
907,087
664,047
936,383
1,438,686
1,225,993
1,293,873Ending inventory
569,424
531,599
561,946
869,262
694,394
731,927GROSS PROFIT
1,063,386
609,417
578,597OPERATING EXPENSES
788,631
681,374
670,774OPERATING INCOME (LOSS)
274,755
(71,957)
(92,177)OTHER INCOMEInterest income
41,233
54,970
79,144Other income (expense)
11,629
23,059
42,443 
52,862
78,029
121,587INCOME BEFORE INCOME TAXES
327,617
6,072
29,410 PROVISION FOR FEDERAL INCOME    TAXES
114,041
16,368
5,466

 NET INCOME (LOSS)
213,576
(10,296)
23,944 BASIC EARNINGS PER SHARE
$ 0.04
$ -
$ - DILUTED EARNINGS PER SHARE
$ 0.04
$ -
$ -
 

See Notes to Financial Statements.

3

 

ELECTRONIC SYSTEMS    TECHNOLOGY, INC. 
STATEMENTS OF    COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED    DECEMBER 31, 2002, 2001, AND 2000 
2002
2001
2000NET INCOME (LOSS)
$213,576
$(10,296)
$23,944 OTHER COMPREHENSIVE LOSS:Unrealized loss on    securities arising during the period
(6,332)
-
-Income tax benefit related    to other comprehensive loss 
2,150
-
-

 Other comprehensive loss,    net
(4,182)
-
-COMPREHENSIVE INCOME    (LOSS)
$209,394
$(10,296)
$23,944
 

 

See Notes to Financial Statements.

4

 

 

 

 

ELECTRONIC SYSTEMS    TECHNOLOGY, INC.
STATEMENTS OF    CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED    DECEMBER 31, 2002, 2001, AND 2000  
Common    Stock     
 

 

Shares
 

 

Amount
 

Paid-In

Capital
 

Retained

Earnings
Accumulated

Other Comprehensive Loss
 

 

TotalBALANCE AT JANUARY 1, 2000
4,953,667
$4,954
$894,129
$1,345,669
--
$2,244,752STOCK OPTIONS EXERCISED
115,000
115
39,335
--
--
39,450 NET INCOME DECEMBER 31, 2000   
23,944
--
23,944 
5,068,667
5,069
933,464
1,369,613
--
2,308,146STOCK OPTIONS EXERCISED
30,000
30
12,270
--
--
12,300 NET LOSS DECEMBER 31, 2001   
(10,296) 
(10,296) 
5,098,667
5,099
945,734
1,359,317
--
2,310,150COMPREHENSIVE INCOME:      Net income
--
-
--
213,576
--
213,576Unrealized loss on securities - net
--
-
--
--
(4,182)
(4,182)BALANCE AT DECEMBER 31, 2002
5,098,667
$5,099
$945,734
$1,572,893
$(4,182)
$2,519,544
 

See Notes to Financial Statements.

5

 

 

ELECTRONIC SYSTEMS    TECHNOLOGY, INC.
STATEMENTS OF CASH    FLOWS
FOR THE YEARS ENDED    DECEMBER 31, 2002, 2001, AND 2000 
2002
2001
2000CASH FLOWS FROM OPERATING ACTIVITIES:Net income (Loss)
$ 213,576
$(10,296)
$ 23,944Noncash expenses included in income:   Depreciation
40,869
42,978
40,604Amortization
4,404
3,034
2,461Deferred income taxes
3,917
16,368
99Loss on disposition of assets
23
1,059
120Decrease (increase) in current assets:   Accounts receivable, net
(143,595)
24,953
(28,839)Inventory
(37,825)
30,347
(204,456)Other current assets
(2,528)
12,148
(11,164)Increase (decrease) in current    liabilities:   Accounts payable and other current    liabilities
13,394
(24,571)
36,663 Federal income taxes payable
113,377
-
-Net Cash From Operating Activities
205,612
96,020
(140,568)    CASH FLOWS FROM INVESTING ACTIVITIES:   Deposits
(17,122)
-
-