United States Securities and Exchange Commission Washington, D.C. 20549  FORM 10-KSB  (Mark
One) [X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES EXCHANGE
ACT OF 1934 For
the fiscal year ended December 31,
2007  [
  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For
the transition period
 to
_______  Commission file number   000-27793 ELECTRONIC SYSTEMS TECHNOLOGY, INC.(Name of small business issuer in its charter)Washington
91-1238077(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)415 N. Quay St., Bldg B1, Kennewick , Washington
99336(Address
of principal executive offices)
(Zip Code)Issuer's telephone number
(509) 735-9092  Securities registered under Section 12(b) of the Exchange
Act:  None Securities registered under Section 12(g) of the Exchange
Act:  Common Check whether the issuer (1) filed all reports required by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.Yes [X]  No [   ]  Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulations S-B is met contained in this form, and no disclosure
will be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB.[X]  Not applicable [   ]  State issuer's revenues for its most recent fiscal year.$3,085,510  On February 29, 2008 the aggregate market value, based on the
asked price, of the voting stock held by nonaffiliates of the registrant was
$3,841,727.   The number of shares outstanding of the registrant's common
stock as of February 29, 2008: 5,158,667 shares.  DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference into Parts
I, II, III, and IV of this report:  Form 8-K dated June 1, 2007.Forms 8-K datedFebruary 16, 2007 and February
22, 2008.  Transitional Small Business Disclosure Format:Yes [   ]   No [X
]     1     PART I  ITEM 1.  FORWARD LOOKING
STATEMENTS:  When used in this Annual Report and
the documents incorporated herein by reference, the terms anticipates,
believes, expects and similar expressions are intended to identify in
certain circumstances, forward-looking statements.  Such statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected, including the risks described in this Annual
Report.  Given these uncertainties, readers are cautioned not to place
undue reliance on such statements.  The Company also undertakes no
obligation to update those forward-looking statements.  RISK FACTORS  We cannot predict
whether we will be able to sustain revenue growth, profitability or positive
cash flow.Our products
are sold in highly competitive markets, for instance we compete in different
markets against companies like Cisco and Motorola.  Our revenues and
operating results can be negatively affected by technology changes in our
markets, economic conditions in our markets, and the level of competition in our
markets.  Our marketing
efforts may be unsuccessful due to limited marketing and sales capabilities.Limited national
advertising and sales coverage may result in the markets in which our products
are offered not being fully penetrated.  This lack of market penetration
may result in an adverse effect on our sale revenues.We must continue to develop appropriate
marketing, sales, technical, customer service and distribution capabilities, or
enter into agreements with third parties to provide these services to
successfully market our products. A failure to develop these capabilities or
obtain third-party agreements could adversely affect us.  We may be unable to produce products for
sale if we are unable to obtain component materials.  Our products
require highly specialized components, which are subject to rapid obsolescence,
limited availability and design change.  For instance, many of our
components are also used in cellular phone, pagers and personal communication
devices.  If we cannot obtain material to produce products for sale our
sales revenues will be negatively impacted.  Our success depends on our ability to
retain key management personnel.  The success of our Company depends in
large part on our ability to attract and retain highly qualified management,
administrative, manufacturing, sales, and research and development personnel.
Due to the specialized nature of our business, it may be difficult to locate and
hire qualified personnel.  Our success is significantly dependent on the
performance and continued service of key members of Management, such as Chief
Executive Officer, Tom Kirchner, Vice President of Engineering, D. Brent
Strecker and certain other key employees.  If the services of any members
of Management become unavailable for any reason, our business and prospects
could be adversely affected. Although we have been successful in retaining
highly capable and qualified management in the past, there can be no assurance
that we will be able to do so in the future.  We may be adversely affected by
government regulation.  The Federal Communication Commission (FCC)
governs use of the products we sell.  If the FCC were to implement rules
detrimental to our products and the markets in which they are offered our
operations would be negatively impacted.  Rapid technological changes in our
industry may adversely affect us if we do not keep pace with advancing
technology. The wireless communication market is characterized by rapidly
advancing technology. Our success depends on our ability to keep pace with
advancing technology, processes and industry standards. We intend to continue to
develop and enhance our products to meet perceived market opportunities.
However, our development efforts may be rendered obsolete by research efforts
and technological advances made by others, and devices other than those we
currently produce may prove more advantageous.  We have material weaknesses in our
internal controls which may result in us not being able to prevent or detect a
material misstatement of our financial statements, which could harm our business
and result in regulatory scrutiny.  Pursuant to the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), Management
conducted an assessment of the effectiveness of our internal controls over
financial reporting for the year ending December 31, 2007.  We determined
that there was a material weakness affecting our internal control over financial
reporting and, as a result of that weakness, our disclosure controls and
procedures were not effective as of December 31, 2007.We have not maintained
effective controls to ensure appropriate segregation of duties due to our
limited number of employees in  2   finance and
administration, with the same employee being responsible for the initiating and
recording of transactions, thereby creating segregation of duties weaknesses.
Due to this weakness and absence of sufficient other mitigating controls, we
determined that this control deficiency resulted in more than a remote
likelihood that a material misstatement or lack of disclosure within the annual
or interim financial statements will not be prevented or detected.  Avenues
for mitigating our internal control weaknesses are being evaluated, but
mitigating controls are impractical and prohibitively costly due to the size of
our organization.  The material weakness in our internal controls may
subject us to regulatory scrutiny with undetermined consequences.  The market for our common stock is
limited, and as such our shareholders may have difficulty reselling their shares
when desired or at attractive market prices.  Our stock price and our
listing may make it more difficult for our shareholders to resell shares when
desired or at attractive prices.  Our Company stock trades on the Over the
Counter Bulletin Board (OTC Bulletin Board).   Our common stock has
continued to trade in low volumes and at low prices. Some investors view
low-priced stocks as unduly speculative and therefore not appropriate candidates
for investment. Many institutional investors have internal policies prohibiting
the purchase or maintenance of positions in low-priced stocks.  BUSINESS  Electronic Systems Technology, Inc. (EST
or the Company) specializes in the manufacturing and development of wireless
modem products.  The Company uses manufacturing, marketing, and research
and development efforts to produce and market the Companys line of ESTeem (tm)
Wireless Modem products and accessories.  The Company offers products,
which provide innovative communication solutions for applications not served or
underutilized by conventional communication systems.  The Companys
products are offered in the process automation markets in commercial,
industrial, and government arenas both domestically and internationally, as well
as domestic markets for public safety communications infrastructure.  The
Companys products are marketed through direct sales, sales representatives, and
resellers.  The Company was incorporated in the State
of Washington in February 1984, and was granted a United States Patent for the
Wireless Computer Modem in May 1987, and Canadian patent in October 1988.
 During 2007, the Company established a "doing business as" or "DBA"
structure, based on the Company's registered trade name of ESTeem Wireless
Modems.  The DBA structure provides the Company with additional
flexibility in marketing of the Companys products.  During the past three
years, the Company has continued product improvements and enhancements to
incorporate continuing technological developments, and respond to customer needs
and market opportunities.  Development efforts during
2007 focused on the continued development and refinement of the ESTeem 195Ep
Ethernet licensed 4.9 GHz, spread spectrum radio modem, the ESTeem 195Es
unlicensed 900 MHz spread spectrum radio modem, and the ESTeem 195Eg Ethernet
based radio modem.  The Model 195Ep modem is designed for operation in the
US Government licensed frequency spectrum for Homeland Security and first
responder infrastructures.  The ESTeem 195Es modem provides users with both
low speed Ethernet and high-speed serial interfaces.  The ESTeem 195Es is
targeted at the domestic and foreign industrial automation markets and entered
production in the last half of 2007.  In an effort to maintain and expand
its customer base, specifically focusing on the industrial control marketplace,
the Company continues efforts to team with all major programmable logic
controller (PLC) hardware vendors.  During 2007, the Company continued
marketing products for use in SCADA, Industrial Automation, Public Safety
Communication and Government marketplaces.  PRODUCTS AND MARKETS  The Companys ESTeem wireless modem product
lines provide wireless communication links between computers, peripherals, and
instrumentation controls using radio frequency waves.  The proliferation of
computer applications in business, industry and public service has created a
dynamic environment of automation and networking, requiring constantly growing
amounts of data transfer.  Prior to the invention of the ESTeem modem, the
majority of data transfers used telephone modems or direct cable connections,
both of which have costly side effects.  Telephone modems have a
potentially expensive monthly charge for the use of telephone lines, and direct
cable connections can have installation costs as much or more than the cost of
the communication system.  ESTeem wireless modem products provide a
wireless solution for data transfer by eliminating the need for conventional
hardwiring and leased phone lines.  All of the ESTeem models (ESTeems) come
with industry standard asynchronous or Ethernet communications ports, giving
users new dimensions to Local Area Networking. ESTeem modems work on a packet
burst communications concept.  Packet systems, whether hardwired or radio,
share the same principle of operation: data is taken from RS-232C, RS-422,
RS-485 asynchronous or Ethernet ports and transmitted in Electronic Packets.
 Once a packet of data is formed, the packet is transmitted in a "burst,"
from one ESTeem modem to another ESTeem modem, hence the term "packet burst
communications." Internal Digi-Repeater features allow the user to increase
operating range by relaying transmission through multiple ESTeems to reach a
destination ESTeem. An ESTeem can operate as an operating node, a repeater node,
or both simultaneously, for  3   added
flexibility.  Secure data communication is provided in the ESTeem products
through use of proprietary technology and industry standard techniques.  PRODUCT APPLICATIONS  Some of the major applications and
industries in which ESTeem products are being utilized are as follows:  Water/Waste Water Processing
Overhead Crane ControlIndustrial Automation
Shop Floor ManufacturingRemote Data Acquisition
(SCADA)
Intra-Office/Building Computer
NetworkingLaw Enforcement/Public Safety
Communications
Remote Internet AccessPower Utility
Flight Line MaintenanceOil/Gas Pipeline
Airfield Lighting ControlMaterial Handling
Ship to Shore
Communications  PRODUCT LINES Licensed Narrow Band Products The Companys licensed, narrow band packet
burst radio modems are typically used for commercial, industrial, and public
safety applications.  Typical indoor and outdoor fixed base and mobile
applications include point to point as well as point to multi-point digital data
networking.  The distance is dependent on the product chosen as shown in
the table below.  Employing the internal digi-repeater feature in each
radio modem can increase the Line-of-Sight (LOS) distances shown below for each
product type.  ESTeem Model
Type
Frequency
(MHz)
RF Power
(Watts)
RF Data Rate(bps)
LOS Range(Miles)
Interface192C
Narrow Band Licensed
450 to 470
1 to 5
19.2 K
15
RS-232/422/485192CHP
Narrow Band Licensed
450 to 470
10, 20,  or 30
19.2 K
40-70
RS-232/422/485192F
Narrow Band Licensed
400 to 420
1 to 5
19.2 K
15
RS-232/422/485192M
Narrow Band Licensed
150 to 174
1 to 5
19.2 K
15
RS-232/422/485192MHP
Narrow Band Licensed
150 to 174
10, 20,  or 30
19.2 K
40-70
RS-232/422/485    Unlicensed Spread Spectrum
Products The Model 195Es is a low cost unlicensed
frequency hopping spread spectrum transceiver for commercial and industrial
applications operating in the 900 MHz spectrum.  Typical indoor and outdoor
applications include point to point and point to multi-point digital data
networking for distances to approximately 10 miles line-of-sight without the use
of the digi-repeater option.  ESTeem Model
Type
Frequency
(MHz)
RF Power
(Watts)
RF Data Rate(bps)
LOS Range(Miles)
Interface195Es
Unlicensed
900
.125 or 1
200K
10
Ethernet and Serial  Licensed Spread Spectrum
Products The Model 195Ep is a high performance,
direct sequence spread spectrum transceiver employing the industry standard,
10baseT, Ethernet connectivity, specifically designed to operate on the US
Government allocated frequencies in the 4.9 GHz spectrum for Homeland Defense
and first responder networks and infrastructures.  Typical outdoor
applications include point to point and point to multi-point digital data
networking for distances to approximately 5 to 7 miles line-of-sight without the
use of the digi-repeater option.  ESTeem Model
Type
Frequency
(MHz)
RF Power
(Watts)
RF Data Rate(bps)
LOS Range(Miles)
Interface195Ep
Licensed
4900
2
1-54 M
5-7
Ethernet  Unlicensed Ethernet Spread Spectrum
Products The Companys Ethernet radios are a high
performance, direct sequence spread spectrum transceiver employing the industry
standard, 10baseT, 802.11b/g Ethernet connectivity for commercial, industrial
and public safety applications operating in the unlicensed 2.4 GHz spectrum with
data transfer rates from 1 to 54 Mbps.  Typical installations include data
rate critical, point to point, point to multi-point, last-mile bridge data
networking and mobile applications for distances of approximately 5 to 7  4   miles
line-of-sight without the use of the digi-repeater option.  The high data
capability of these products allows them to be used in Video and Voice over
Internet Protocol (VoIP) applications.  ESTeem Model
Type
Frequency
(MHz)
RF Power
(Watts)
RF Data Rate(bps)
LOS Range(Miles)
Interface195Eg
Unlicensed
2400
1
1-54 M
5-7
Ethernet/SerialWLANC
Unlicensed
2400
0.3
1-11 M
300-3000 ft.
Ethernet  ADDITIONAL PRODUCTS AND
SERVICES  The Company offers various accessories to
support the ESTeem products.  Accessories including antennas, power
supplies and cable assemblies, are purchased from other manufacturers and resold
by EST to support the application of ESTeem modems.  The Company provides
direct services to customers, such as repair and upgrade of ESTeem products.
 To assist in the application of ESTeem wireless modems, the Company also
offers professional services, site survey testing, system start-up, and custom
engineering services.  RESEARCH AND DEVELOPMENT
AND NEW PRODUCTS  The Companys products compete in an
environment of rapidly changing technology.  This environment results in
the necessity of the Company to be continually updating and enhancing existing
products, as well as developing new products in order to remain competitive.
 Research and Development expenditures for new product development and
improvements of existing products by the Company for 2007 and 2006 were $497,280
and $401,572, respectively.  None of the Companys research and development
expenses were paid directly by any of the Companys customers.  During
2007, the Company contracted and will continue to contract, with independent,
nonaffiliated, engineering companies specializing in software development and
hardware design, when such expertise is required.  Development efforts during 2007 focused on
the continued development and refinement of the ESTeem 195Ep Ethernet licensed
4.9 GHz, spread spectrum radio modem, the ESTeem 195Es unlicensed 900 MHz spread
spectrum radio modem, and the ESTeem 195Eg Ethernet based radio modem.  The
Model 195Ep modem is designed for operation in the US Government licensed
frequency spectrum for Homeland Security and first responder infrastructures.
 The ESTeem 195Es modem provides users with both low speed Ethernet and
high-speed serial interfaces.  The ESTeem 195Es is targeted at the domestic
and foreign industrial automation markets and entered production in the last
half of 2007.  The Company plans continued research and development
expenditures for development and improvement projects, as they are deemed
necessary.  MARKETING, CUSTOMERS AND
SUPPORT  The majority of the Companys products sold
during 2007 were through the reselling efforts of non-exclusive, non-stocking
distributors and resellers of the Companys products, with the remainder of the
Companys sales distributed directly from the Companys facility through direct
sales to end-users of the ESTeem products.  Customers generally place
orders on an "as needed basis".  Shipping of products is generally
completed 1 to 15 working days after receipt of a customer order, with the
exception of ongoing, scheduled projects, and custom designed equipment for
specific customer applications.  As of December 31, 2007, the Company had a
backlog of $35,000 in sales orders.  During 2007, the Company continued
advertising in trade publications specifically targeted at users of control,
instrumentation, and automation systems, as well as domestic public safety
entities.  The Companys advertising targeted potential users of
Programmable Logic Controllers (PLCs).  There are approximately twenty-five
major PLC manufacturers worldwide.  The Company has maintained active
attendance of tradeshows targeted toward the customers and markets in which it
sells products. During 2007, the Company employed sales managers to concentrate
marketing and sales efforts in both domestic and Latin American industrial
automation, as well as Mobile Data Computers for public safety communication
markets.  During 2008, the Company intends to continue strategies targeting
existing markets of industrial automation and Mobile Data Computers for public
safety networks.  The Company maintains an internet web site to provide
access to product and technical information for both present and potential
customers of the Companys products.  Due to the variable configuration
possibilities of the Companys products, and existing reseller relationships,
the Company has not implemented an electronic commerce internet website.
 The Company provides technical support and service for ESTeem products
through phone support, field technicians and internet sources.  The Company
believes high quality customer support is necessary and vital to its business.
 To maintain a high level of customer support the Company has in the past,
and will continue in the future, to make investments and expenditures in support
of its customer service programs.   5   During the year
ended December 31, 2007, no sales to any single customer comprised 10% or more
of total product sales for the year ended December 31, 2007.  See
Managements Discussion and Analysis of Financial Condition and Results of
Operations, and Financial Statements.  COMPETITION  The Companys competition varies according
to the market in which the Company's products are competing.  All of the
markets in which the Companys products are sold are highly competitive.
 Listed below are the markets in which the Companys products compete in
and major competitors in those markets:   Major Market
Major CompetitorsIndustrial Automation
Data-Linc, Freewave, GE/Microwave Data Systems and Prosoft.Computer networking, inter and
intra building, and remote
internet access.
Adaptive Broadband, Cisco, Digital Wireless, Dlink,
Linksys,
P-Com and ProximMobile Data Computer systems
for public safety
applications
Data Radio, IP Mobilenet, GE/Microwave Data
Systems,
Motorola, Trango Broadband, and various cellular
service
providers using GPRS
architectures.  Management believes the ESTeem products
compete favorably in the market because of performance, price, and adaptability
of the products to a wide range of applications.  The Company's major
limitation in competing with other manufacturers is its limited marketing
budget, which currently limits the Companys nationwide advertising and sales
force presence.  PATENTS, TRADEMARKS, AND
PROPRIETARY INFORMATION  EST was granted a United States patent in
1987 for a "Wireless Computer Modem".  In 1988, EST was granted a Canadian
patent for a "Wireless Computer Modem".  Both patents had lives of 17 years
and have expired.  The Companys rights to the ESTeem Wireless Modem
trademark, in uninterrupted use by the Company since 1985, were renewed in 2005.
 To protect the Company against unauthorized disclosure of proprietary
information belonging to the Company, all employees, dealers, distributors,
original equipment manufacturers, sales representatives and other persons having
access to confidential information regarding Company products or technology are
bound by non-disclosure agreements.  GOVERNMENT
REGULATION  For operation in the United States, the
ESTeem Radio Modems require Federal Communications Commission (FCC) type
acceptance.  The FCC type acceptance is granted for devices, which
demonstrate operation within mandated and tested performance criteria.  All
of the Companys products requiring FCC type acceptance have been granted such
acceptance.  All of the Companys current ESTeem production models have
also been granted type acceptance in Canada.  The ESTeem radio modem products that
operate in the FCC licensed frequency band require licensing under Part 90 of
the FCC Rules and Regulations, which must be applied for by the end user of the
Companys products.  The Company cannot guarantee customers will receive
FCC licenses in the frequency spectrum for any particular application.  The
Company provides information to customers to assist in the application for FCC
consumer licenses.  The ESTeem 195Eg and 195Es products operate in the
nonlicensed, 2.4 GHz and 900 MHz spread spectrum frequency band, respectively,
which do not require licenses for users of those products.  At the time of this filing the Company is
unaware of any existing or proposed FCC regulation that would have a materially
adverse effect on the Companys operations, but there can be no assurance that
future FCC regulations will not have materially adverse effects on the
operations of the Company.  SOURCE OF SUPPLY AND
MANUFACTURING  The Company purchases certain components
necessary for the production of the ESTeem products from sole suppliers.
 Components manufactured by Hitachi, Intersil, Integrated Microelectronics,
Motorola Corporation, Mitsubishi, Murata Corporation, Rakon and Toko America
Inc. as purchased through a number of distributors, supply key components for
the Companys products.  The components provided by these companies could
be replaced or substituted by other products, if it  6   became necessary
to do so.  If this action occurs, a material interruption of production
and/or material cost expenditures, for example involved with locating and
qualifying replacement components, could take place.  Approximately 10% of the Companys
inventory at December 31, 2007 consisted of parts having lead times ranging from
12 to 16 weeks.  Some parts are maintained at high levels to assure
availability to meet production requirements, and accordingly, account for a
significant portion of the Companys inventory value.  Based on past
experience with component availability, distributor relationships, and inventory
levels, the Company does not foresee shortages of materials used in production.
 However, developments in the electronic component marketplace, involving
components used by the Company which are also used in cellular phones, pagers
and other personal technology devices, have the potential of creating negative
availability and delivery issues for components used by the Company.  The
Company has been able to procure parts on a timely basis as of the date of this
report, however procurement cannot be guaranteed in the future.  If
shortages were to occur, material interruption of production and product
delivery to customers could occur.  For assembly of the Companys products, the
Company contracts with Manufacturing Services, Inc., in Kennewick, Washington,
using materials provided by the Company.  By contracting with Manufacturing
Services, Inc., the Company is able to avoid staff fluctuations associated with
operating its own manufacturing operation.  The President of Manufacturing
Services, Michael Brown, as well as the former President of Manufacturing
Services, Melvin H. Brown, are both Directors of the Company.  Management
believes all prices for services, provided by Manufacturing Services, Inc., are
as favorable as could be obtained from comparable manufacturing services
companies.  See Managements Discussion and Analysis of Financial
Condition and Results of Operations, and Financial Statements.  REPORTS TO SECURITY
HOLDERS  The Registrant does
not issue annual or quarterly reports to security holders other than the annual
Form 10-KSB and quarterly Forms 10-QSB as electronically filed with the SEC.
 Electronically filed reports may be accessed at www.sec.gov.
 Interested parties also may read and copy any material filed with the SEC
at the SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549.  Information may be obtained on the operation of the Public
Reference Room by calling the SEC at 1(800) SEC-0330.  EMPLOYEES  As of December 31, 2007, the Company
employed a staff of16 persons on a full
time basis, 3 in sales/marketing, 3 in technical support, 9 in
engineering/manufacturing, and 1 in finance and administration.  The
Companys operations are dependent upon key members of its engineering and
management personnel.  In the event services of these key individuals were
lost to the Company, adverse effects on the Companys operations may be
realized.  The Company employs part-time labor on an as needed basis,
usually in engineering/manufacturing.  At year-end 2007 the Company
employed 3 part-time employees.  None of the Companys employees are
represented by a labor union and the Company believes it has good relations with
its employees.  ITEM 2.  PROPERTIES  EST does not own any real property, plants,
mines, or any other materially important physical properties.  The
Company's administrative offices, inventory and laboratories are located in
leased facilities at 415 N. Quay Street, Bldg B1, Kennewick, Washington.
 The Company leases approximately 8,600 square feet of office and
laboratory space by a lease agreement with the Port of Kennewick in Kennewick,
Washington.  As of January 1, 2008, the total monthly lease cost is $4,070.
 The lease covers a period of three years, expiring September 2008.  The Company also owns miscellaneous assets,
such as computer equipment, laboratory equipment, and furnishings.  The
Company does not have any real estate holdings, nor investments in real estate.
 The Company maintains insurance in such amounts and covering such losses,
contingencies and occurrences that the Company deems adequate to protect its
property.  Insurance coverage includes a comprehensive liability policy
covering legal liability for bodily injury or death of persons, and for property
owned by, or under the control of the Company, as well as damage to the property
of others.  The Company maintains key man life insurance protecting the
Company in the event of the death of the Company President.  The Company
also maintains fidelity insurance which provides coverage to the Company in the
event of employee dishonesty.  ITEM 3.  LEGAL PROCEEDINGS  No proceedings are identified which involve
a claim for damages, exclusive of interest and costs that exceed 10% of the
current assets of the Company.  7    ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS  The Company did not submit any matters for
shareholder approval during the fourth quarter of the 2007 fiscal year.  PART II  ITEM 5.  MARKET INFORMATION FOR
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS  There is no established market for trading
the Common Stock of the Company.  The Common Stock is not regularly quoted
in the automated quotation system of a registered securities system or
association.  The Common Stock of the Company is traded on the
over-the-counter market maintained by the Financial Regulatory Authority
(FINRA) and is listed on the OTC electronic bulletin board under the symbol of
"ELST".  The following table illustrates the average high/low price of the
Common Stock for the last two (2) fiscal years.  The over-the-counter
quotations do not reflect inter-dealer prices, retail mark-ups, commissions or
actual transactions.  Bid
AskHigh
Low
High
LowFiscal year ended December 31,
2007First Quarter
0.71
0.64
0.75
0.65Second Quarter
1.16
0.64
1.20
0.64Third Quarter
1.07
0.72
1.15
0.70Fourth Quarter
1.00
0.70
1.03
0.75Fiscal year ended December 31,
2006First Quarter
0.78
0.58
0.85
0.60Second Quarter
0.75
0.62
0.92
0.60Third Quarter
0.65
0.57
0.65
0.57Fourth Quarter
0.65
0.63
0.70
0.63  The above data was compiled from
information obtained from the OTC Bulletin Board maintained by FINRA.  The number of record holders of common
stock of the Registrant as of January 4, 2008 was 445 persons/entities.  Electronic Systems Technology Inc. paid
non-cumulative, cash distributions on July 17, 2006, July 13, 2005, July 14,
2004, July 9, 1999, July 9, 1998, and July 11, 1997, respectively, each
equivalent to $0.01 per outstanding share.  The Company also paid
non-cumulative cash distributions on July 16, 2003, equivalent to $0.015 per
outstanding share, and July 17, 2007, equivalent to $0.02 per outstanding share.
 Dividends undertaken by the Company will be solely at the discretion of
the Board of Directors.                    8   ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS  Managements discussion and analysis is
intended to be read in conjunction the Companys audited financial statements
the integral notes thereto.  The following statements may be
forward-looking in nature and actual results may differ materially.  RESULTS OF
OPERATIONS  GENERAL:  The Company specializes in the
manufacturing and development of wireless modem products.  The Company
offers product lines which provide innovative communication solutions for
applications not served by existing conventional communication systems.
 The Company offers product lines in markets for process automation in
commercial, industrial and government arenas domestically, as well as
internationally, and domestically to public safety entities for mobile data
computer terminal (MDC) applications.  The Company markets its products
through direct sales, sales representatives, and domestic, as well as foreign,
resellers.  Operations of the Company are sustained solely from revenues
received through sales of its products and services.  FISCAL YEAR 2007 vs.
FISCAL YEAR 2006  GROSS REVENUES: Total revenues for the fiscal year 2007
were $3,085,510 reflecting a 16% increase from $2,666,120 gross revenues for
fiscal year 2006.  The increase in total revenues is the result of
increased product sales and increased interest revenues during 2007. Product
sales increased to $3,002,521 in 2007, as compared to 2006 sales of $2,617,810,
reflecting a sales increase of 15%. Management believes the increase in sales
revenues were the result of increases in foreign and domestic sales of products
used in Industrial Automation applications.  The Companys products being
employed in large industrial automation projects in Colombia during 2007
resulted in a significant increase in foreign sales revenues.  The
Companys domestic sales decreased slightly during 2007
due to the effect of weaker than expected product sales for MDC applications.
Management believes the reduced  MDC sales were due to reduced funding for
projects involving the Companys products, extended procurement cycle for public
safety entities, and reduced sales manager activity during the first half of
2007.  During 2008, the Company intends to continue targeting existing
markets of industrial controls and MDC applications, and continued sales manager
activities for increased coverage and exposure in the domestic industrial
automation market.  Management remains committed to implementing existing
marketing strategies, however sustaining or increasing sales revenues for 2008
cannot be guaranteed due to the highly competitive markets in which the
Companys products and services are marketed.  Interest revenues increased to $81,272 from
2006 levels of $48,310 due to increased rates of return received on the
Companys investments.  OPERATING SEGMENTS  Segment information is prepared on the same
basis that the Companys Management reviews financial information for
operational decision-making purposes.  The Companys operating segment
information is contained in Financial Statements, Notes to Financial
Statements, Note 13  Segment Reporting.  Domestic Revenues  The Companys domestic operations represent
70% of the Companys total net revenues.  Domestic operations sell ESTeem
modem products, accessories and service primarily through domestic resellers, as
well as directly to end users of the Companys products.  Domestic revenues
decreased to $2,144,647 for the year ended 2007, compared to $2,149,021 for the
year ended 2006.  The decrease in domestic revenues is attributable to
decreased sales for MDC applications during 2007.  Management believes MDCS sales
were weaker than expected during 2007 due to reduced funding for projects
involving the Companys products, extended procurement cycle for public safety
entities, and reduced sales manager activity during the first half of 2007.
 A majority of the Company's domestic product sales during 2007 were
employed in industrial automation applications. An example of an industrial
automation application is a municipal water treatment operation, which employs
the ESTeem modem to transmit industrial control information to and from control
room areas via a wireless communications infrastructure.  It is the opinion
of Management that industrial automation applications will continue to provide
the largest portion of the Company's revenues in the foreseeable future.
 The Companys domestic industrial automation sales increased during 2007,
offsetting weaker than expected sales for MDC applications.  Management
believes the growth in domestic industrial automation revenues is the result of
increased sales manager and reseller activity when compared to 2006.   9   The Companys
domestic sales included sales of the Companys products for MDC systems to
public entities, which accounted for 8% of the Companys domestic sales during
2007.  Management believes MDCS sales were weaker than expected during 2007
due to reduced funding for projects involving the Companys products, extended
procurement cycle for public safety entities, and reduced sales manager activity
during the first half of 2007.  The Company hired a sales manager focused
primarily on the MDCS market place late in the second quarter of 2007.
 Management believes the activities of this focused sales manager will have
positive effects in MDCS revenues.  An example of an MDC system for a
public entity is a local area network (LAN), between police department computer
dispatch centers and individual police vehicles. Management believes funding of
MDC projects on local, state and federal levels cannot be guaranteed and
therefore MDC projects involving the Companys products become very difficult to
predict.  Domestic segment operating income decreased
to $311,594 for 2007 as compared with $427,513 for 2006 due to increased
operating expenses during 2007 when compared with 2006.  Foreign Revenues  The Companys foreign operating segment
represents 30% of the Companys total net revenues.  The foreign operating
segment is based wholly in the United States and maintains no assets outside of
the United States.  The foreign operating segment sells ESTeem modem
products, accessories and service primarily through foreign resellers, as well
as directly to end customers of the Companys products located outside the
United States.  During 2007, the Company had $940,863 in
foreign export sales, amounting to 30% of gross revenues for the year, compared
with foreign export sales of $517,099 for 2006, reflecting an increase of 82%.
 The increase is attributable primarily to increased sales of the Companys
products for use in several industrial automation applications in Colombia.
 Products purchased by foreign customers were used primarily in industrial
automation applications.  Management believes the majority of foreign
export sales are the results of the Companys Latin American sales staff, EST
foreign reseller activity, and the Companys internet website presence.  Operating income for the foreign segment
increased to $481,822 for 2007 as compared with $189,327 for 2006 due to
increased sales revenues for the segment during 2007.  Unallocated Corporate  Unallocated corporate expenses relate to
functions, such as accounting, corporate management and administration, that
support but are not attributable to the Companys domestic or foreign operating
segments, include salaries, wages and other expenses related to the performance
of these support functions.  Unallocated corporate expenses increased
during 2007 to $330,281 as compared with $273,826 for 2006, and represented
expense to total net revenue percentage of 11% and 10% respectively.  The
increase during 2007 was the result of increased professional services expenses,
profit sharing bonuses accrued for 2007 profitability and segment related wages,
when compared with 2006.  As of December 31,
2007, the Company had a backlog of $35,000in sales orders.  The Companys customers generally place orders on
an "as needed basis".  Shipment for the Companys products is generally
completed within 1 to 15 working days after receipt of customer orders, with the
exception of ongoing, scheduled projects, and custom designed equipment for
specific customer applications.  COST OF SALES:Cost of Sales, as a percentage of
gross sales, was 38% and 39% respectively, for 2007 and 2006.  Cost of
Sales variances are the result of the product mix sold, as well as differences
in the price discounting structure for the mix of products sold during the
period.  INVENTORY:  The Company's year-end inventory
values for 2007 and 2006 were as follows:   2007
2006Parts
$250,701
$255,793Work in progress
108,101
108,162Finished goods
239,399
218,960TOTAL
$598,201
$582,915  The Company's objective is to maintain
inventory levels as low as possible to provide maximum cash liquidity, while at
the same time, meet production and delivery requirements. Approximately 10% of
the Companys inventory at December 31, 2007  10   consisted of
parts having lead times ranging from 12 to 16 weeks. Some parts are maintained
at high levels to assure availability to meet production requirements, and
accordingly, account for a significant portion of the Companys inventory value.
 Based on past experience with component availability, distributor
relationships, and inventory levels, the Company does not foresee shortages of
materials used in production.  However, developments in the electronic
component marketplace, involving components used by the Company which are also
used in cellular phones, pagers and other personal technology devices, have the
potential of creating negative availability and delivery issues for components
used by the Company.  The Company has been able to procure parts on a
timely basis as of the date of this report, however procurement cannot be
guaranteed in the future.  If shortages were to occur, material
interruption of production and product delivery to customers could occur.
 Inventory levels increased between December 31, 2006 and December 31,
2007, due to the Company increasing production and finished goods levels to meet
increased sales activity during 2007.  OPERATING EXPENSES: Operating expenses increased to
$1,467,051 in 2007, from 2006 levels of $1,282,761.  Material changes in
expenses are comprised of the following components: Advertising expense
decreased to $9,040 from $17,558 in 2006 due to timing differences in trade
publication advertising when compared with 2006.  Depreciation expense
decreased during 2007 to $54,433 from 2006 levels of $59,401 due to the
Companys decreased assets when compared with 2006.  Supplies and materials
expense decreased to $44,740 for 2007 from 2006 levels of $49,850 due to
decreased research and development related supplies employed in product
development during 2007. Professional services expense increased to $333,603
from 2006 levels of $191,817 due to significantly increased subcontracted
software development and engineering expertise contracted by the Company during
2007, and increased administrative related contracted professional services.
 Travel expenses increased to $100,553 for 2007, compared to $85,145 for
2006, due to increased sales and customer support related activities when
compared with 2006.  Salaries, benefits and related taxes increased to
$1,186,450 in 2007, from 2006 levels of $1,012,199, due to wages paid by the
Company for additional employees hired during 2007 when compared with 2006.  FISCAL YEAR 2006 vs.
FISCAL YEAR 2005  GROSS REVENUES: Total revenues for the fiscal year 2006
were $2,666,120 reflecting an 8% increase from $2,460,506 gross revenues for
fiscal year 2005.  The increase in total revenues is the result of
increased interest revenues and a small increase in product sales revenues
during 2006. Product sales increased to $2,617,810 in 2006, as compared to 2005
sales of $2,417,700, reflecting a sales increase of 8%. Management believes the
increase in sales revenues were the result of increases in domestic MDC sales
and foreign sales.  The growth in MDC sales was due to the completion of a
large MDC project using the Companys products in the State of Mississippi
during 2006.  The Companys products being employed in a large industrial
automation project in Colombia during 2006 resulted in increased foreign sales
revenues.  The Companys domestic industrial automation sales did not
experience any growth during 2006.  Management believes the lack of growth
in domestic industrial automation revenues is the continuation of a pattern seen
in 2005 and is the result of continued product and price competition in the
industrial automation market.  Interest revenues increased to $48,310 from
2005 levels of $42,806 due to increased rates of return received on the
Companys investments.  OPERATING SEGMENTS  Segment information is prepared on the same
basis that the Companys Management reviews financial information for
operational decision-making purposes.  The Companys operating segment
information is contained in Financial Statements, Notes to Financial
Statements, Note 13  Segment Reporting.  Domestic Revenues  The Companys domestic operations represent
81% of the Companys total net revenues.  Domestic operations sell ESTeem
modem products, accessories and service primarily through domestic resellers, as
well as directly to end users of the Companys products.  Domestic revenues
increased to $2,149,021 for the year ended 2006, compared to $2,001,143 for the
year ended 2005, reflecting an increase of 7%.  The increase in domestic
revenues is attributable to increased sales for MDC applications during 2006. A
majority of the Company's domestic product sales during 2006 were employed in
industrial automation applications. An example of an industrial automation
application is a municipal water treatment operation, which employs the ESTeem
modem to transmit industrial control information to and from control room areas
via a wireless communications infrastructure.  It is the opinion of
Management that industrial automation applications will continue to provide the
largest portion of the Company's revenues in the foreseeable future.  The
Companys domestic industrial automation sales did not experience any growth
during 2006.  Management believes the lack of growth in domestic industrial
automation revenues is the continuation of a pattern seen in 2005 and is the
result of continued product and price competition in the industrial automation
market.  11    The Companys domestic sales were augmented
by sales of the Companys products for MDC systems to public entities, which
accounted for 25% of the Companys domestic sales during 2006. The growth in MDC
sales was due to the completion of a large MDC project using the Companys
products in the State of Mississippi during 2006.  An example of an MDC
system for a public entity is a local area network (LAN), between police
department computer dispatch centers and individual police vehicles. Management
believes funding of MDC projects on local, state and federal levels cannot be
guaranteed and therefore MDC projects involving the Companys products become
very difficult to predict.  Domestic segment operating income increased
to $427,513 for 2006 as compared with $225,967 for 2005 due to increased profit
margin on the products and services sold during 2006 when compared with
2005.  Foreign Revenues  The Companys foreign operating segment
represents 19% of the Companys total net revenues.  The foreign operating
segment is based wholly in the United States and maintains no assets outside of
the United States.  The foreign operating segment sells ESTeem modem
products, accessories and service primarily through foreign resellers, as well
as directly to end customers of the Companys products located outside the
United States.  During 2006, the Company had $517,099 in
foreign export sales, amounting to 19% of gross revenues for the year, compared
with foreign export sales of $459,363 for 2005, reflecting an increase of 13%.
 The increase is attributable to increased sales revenues in Latin America,
particularly Colombia where the Companys products were installed in a large
industrial automation application. Products purchased by foreign customers were
used primarily in industrial automation applications.  Management believes
the majority of foreign export sales are the results of the Companys Latin
American sales staff, EST foreign reseller activity, and the Companys internet
website presence.  Operating income for the foreign segment
increased to $189,327 for 2006 as compared with $169,632 for 2005 due to
increased sales revenues for the segment during 2006.  Unallocated Corporate  Unallocated corporate expenses relate to
functions, such as accounting, corporate management and administration, that
support but are not attributable to the Companys domestic or foreign operating
segments, including salaries, wages and other expenses related to the
performance of these support functions.  Unallocated corporate expenses
increased during 2006 to $273,826 as compared with $220,842 for 2005, and
represented expense to total net revenue percentage of 10% and 9% respectively.
 The increase during 2006 was the result of increased profit sharing
bonuses accrued for 2006 profitability, recognition of share based compensation,
increased state taxes and professional services when compared with 2005.  OPERATING EXPENSES: Operating expenses increased to
$1,282,761 in 2006, from 2005 levels of $1,140,174.  Material changes in
expenses are comprised of the following components: Advertising increased to
$17,558 from $12,679 in 2005 due to timing differences in trade publication
advertising when compared with 2005.  Sales Commissions decreased to $4,144
in 2006 due to decreased commissions paid to third parties when compared with
2005.  Depreciation expense decreased during 2006 to $59,401 from 2005
levels of $71,031 due to the Companys decreased assets when compared with 2005.
 Supplies and materials expense increased to $49,850 for 2006 from 2005
levels of $25,789 due to increased research and development related supplies
employed in product development during 2006. Professional services increased to
$191,817 from 2005 levels of $100,785 due to increased subcontracted software
development and engineering expertise employed by the Company during 2006. Rent
and Utilities expense increased to $53,751 during 2006 as compared with $44,072
during 2005 due to the Company moving to a larger leased facility during the
fourth quarter of 2005.  Telephone expenses decreased during 2006 to
$12,935 as compared to $15,161 during 2005 due to a temporary reduction in sales
personnel during 2006.  Travel expenses decreased to $85,145 for 2006,
compared to $119,278 for 2005, due to decreased sales and customer support
related activities when compared with 2005.  Salaries, benefits and related
taxes, decreased to $1,012,199 in 2006, from 2005 levels of $1,030,027, due to
wages paid by the Company decreasing as a result of the Company having a net
loss of three employees during 2006 when compared with 2005.  LIQUIDITY AND CAPITAL
RESOURCES  The Companys revenues and expenses
resulted in net income of $319,322 for 2007, increased from net income of
$226,089 for 2006.  The increase in net income is the result of increased
sales revenues and increased interest income, when compared with 2006. At
December 31, 2007, the Company's working capital was $3,046,967 compared with
$2,824,793 at December 31, 2006.  The Companys operations rely solely on
the income generated from sales.  The Company's major capital resource  12   requirements are
payment of employee salaries and benefits and maintaining inventory levels
adequate for production.  Extended availability for components critical for
production of the Companys products, ranging from 12 to 16 weeks, require the
Company to maintain high inventory levels.  It is Managements opinion that
the Companys working capital as of December 31, 2007 is adequate for expected
resource requirements for the next twelve months.  The Company's current asset to current
liability ratio at December 31, 2007 was 13.2:1 compared to 10.1:1 at December
31, 2006.  The increase in current asset ratio is the result of increased
certificate of deposit investments and decreased federal income taxes payable at
year-end 2007, when compared with 2006.  The Company's cash resources at December
31, 2007, including cash and cash equivalent liquid assets, were $1,479,985,
compared to cash resources of $1,487,848 at year-end 2006.  The Companys
cash and cash equivalent assets are held in checking and money market investment
accounts.  As of January 1, 2005, the Company entered
into a 39-month agreement with Netsuite Inc. to provide the Companys customer
relationship management and accounting software and related network
infrastructure services.  The current portion of the prepaid Netsuite Inc.
services as of December 31, 2007, is reflected in prepaid expenses and amounted
to $6,500.  The Company's trade accounts receivable,
adjusted for allowance for uncollectible accounts, at December 31, 2007, were
$281,064, compared to $401,127 at year-end 2006.  The decrease is the
result of timing differences in sales and collections when compared with
unusually strong sales late in December of 2006.  Management believes that
all of the Companys accounts receivable as of December 31, 2007 are
collectible.  The Company believes the level of risk
associated with customer receipts on export sales is minimal.  Foreign
shipments are made only after payment has been received, irrevocable letter of
credit terms have been pre-arranged, or on Net 30 day credit terms to
established foreign companies with which the Company has distributor
relationships.  Foreign orders are generally filled as soon as they are
received therefore, foreign exchange rate fluctuations do not impact the
Company.  Inventory levels as of December 31, 2007,
were $598,201, reflecting an increase from December 31, 2006 levels of $582,915.
The increase in inventory between December 31, 2006 and December 31, 2007, is
due to the Company increasing production and finished goods levels to meet
increased sales activity during 2007.  The Company had capital expenditures during
2007 of $49,219 primarily for production related test equipment and software,
and computer system upgrades.  The Company intends on investing in
additional capital equipment as deemed necessary to support development and
manufacture of current and future products.  As of December 31, 2007, the
Company's current liabilities were $248,860, decreased from 2006 year-end levels
of $310,351.  The decrease was the result of decreased levels of federal
income taxes payable when compared with year-end 2006.  The Company had no off balance sheet
arrangements for the year ended December 31, 2007.  Inflation had minimal adverse effect on the
Companys operations during 2007.  Minimal adverse effect is anticipated
during 2008.  FORWARD LOOKING STATEMENTS: The above
discussion may contain forward-looking statements that involve a number of risks
and uncertainties.  In addition to the factors discussed above, among other
factors that could cause actual results to differ materially are the following:
competitive factors such as rival wireless architectures and price pressures;
availability of third party component products at reasonable prices; inventory
risks due to shifts in market demand and/or price erosion of purchased
components; change in product mix, and risk factors that are listed in the
Companys reports and registrations statements filed with the Securities and
Exchange Commission.   13   ITEM 7.
FINANCIAL STATEMENTS           ELECTRONIC SYSTEMS
TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM  FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006                                14      TABLE OF CONTENTS  Page  Report of
Independent Registered Public Accounting Firm 16  Financial Statements:  Balance
Sheets 17-18  Statements
of Income 19  Statements
of Comprehensive Income 20  Statements
of Changes in Stockholders Equity 21  Statements
of Cash Flows 22-23  Notes
to Financial Statements 24-33  Supplemental
Schedules of Operating Expenses 35  Supplemental
Schedules of Selected Financial Data 36                        15     REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM  Board of Directors Electronic Systems
Technology, Inc. 415 N. Quay  Building
B1 Kennewick, WA 99336  We have audited the
accompanying balance sheets of Electronic Systems Technology, Inc., dba ESTeem
Wireless Modems, as of December 31, 2007 and  2006, and the related
statements of income, comprehensive income, stockholders equity and cash flows
for each of the three years in the period ended December 31, 2007.  These
financial statements are the responsibility of the Companys management.
 Our responsibility is to express an opinion on these financial statements
based on our audits.  We conducted our audits
in accordance with standards of the Public Company Accounting Oversight Board
(United States).  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.  The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of internal control over financial reporting.
 An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for
our opinion.  In our opinion, the
financial statements referred to above present fairly, in all material respects,
the financial position of Electronic Systems Technology, Inc., as of December
31, 2007 and 2006, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2007, in conformity with
accounting principles generally accepted in the United States of America.  Our audits were
conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The supplemental schedules of operating
expenses and selected financial data are presented for purposes of additional
analyses and are not a required part of the basic financial statements.
 Such supplemental schedules have been subjected to the auditing procedures
applied in the examination of the basic financial statements and, in our
opinion, are fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.    /s/ MOE OSHAUGHNESSY
& ASSOCIATES, P.S. February 29, 2008               16   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  BALANCE SHEETS  DECEMBER 31, 2007 AND
2006  ASSETS  2007 2006 CURRENT ASSETS Cash $
      35,004 $     55,665 Money
market investment 1,444,981 1,432,183 Certificates
of deposit 900,000 630,000 Accounts
receivable, net of allowance for
doubtful accounts of $2,126 at 2007
and $3,059 at 2006 281,064 401,127 Inventory 598,201 582,915 Prepaid
insurance 9,123 8,376 Prepaid
expenses 12,373 20,228 Accrued
interest 15,081 4,650  Total
Current Assets 3,295,827 3,135,144   PROPERTY
AND EQUIPMENT - NET 147,441 152,655   OTHER
ASSETS - NET 340 5,852    DEFERRED
INCOME TAX BENEFIT 33,600 26,200  $3,477,208 $3,319,851                  See Notes to Financial Statements.   17          LIABILITIES AND
STOCKHOLDERS EQUITY  2007 2006 CURRENT LIABILITIES Accounts
payable $
   134,129 $     93,051 Refundable
deposits 11,949 67 Accrued
wages and bonus 49,252 37,706 Accrued
payroll and other taxes 7,543 10,527 Accrued
vacation pay 33,683 28,910 Income
tax payable 12,304 140,090  Total
Current Liabilities 248,860 310,351  DEFERRED
INCOME TAXES 49,000 50,500  COMMITMENTS
AND CONTINGENCIES - -  STOCKHOLDERS EQUITY Common stock -
$.001  par  value 50,000,000 shares
 authorized, 5,153,667 and
5,148,667 issued and outstanding
 at  2007 and 2006,
respectively 5,154 5,154 Additional
paid-in capital 978,565 974,466 Retained
earnings 2,195,629 1,979,380  3,179,348 2,959,000  $3,477,208 $3,319,851               See Notes to Financial Statements.   18   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  STATEMENTS OF INCOME  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005  2007 2006 2005  SALES -
NET $3,002,521 $2,617,810 $2,417,700  COST OF
SALES 1,155,323 1,018,798 1,112,683  GROSS
PROFIT 1,847,198 1,599,012 1,305,017  OPERATING
EXPENSES 1,467,051 1,282,761 1,140,174  OPERATING
INCOME 380,147 316,251 164,843  OTHER INCOME Interest
income 81,272 48,310 42,806 Other
income (expense) 1,717 (21,547) (32,892)  82,989 26,763 9,914  INCOME
BEFORE INCOME TAXES 463,136 343,014 174,757  PROVISION FOR FEDERAL INCOME TAXES 143,814 116,925 61,694  NET
INCOME $
    319,322 $
  226,089 $
   113,063  BASIC
EARNINGS PER SHARE $
          0.06 $
         0.04 $
         0.02  DILUTED EARNINGS PER SHARE $
          0.06 $
         0.04 $
         0.02         See Notes to Financial Statements.     19   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  STATEMENTS OF
COMPREHENSIVE INCOME  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005  2007 2006 2005  NET
INCOME $
  319,322 $
  226,089 $
  113,063  OTHER COMPREHENSIVE LOSS: Unrealized loss on
securities arising
during the period - - (8,948) Income tax benefit
related to other
comprehensive loss - - 3,043 Other
comprehensive loss, Net - - (5,905)  COMPREHENSIVE
INCOME $
  319,322 $
   226,089 $
  107,158               See Notes to Financial Statements.     20


ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005 Accumulated Other Common
Stock Paid-In Retained Comprehensive Shares Amount Capital Earnings Loss Total  BALANCE AT
JANUARY 1, 2005 5,148,667 $
     5,149 $
  966,184 $1,743,252 $
   (15,824) $2,698,761 COMPREHENSIVE
INCOME:  Net
income December 31, 2005 - - - 113,063 - 113,063 Unrealized
loss on securities - net - - - - (5,905) (5,905) Less
reclassification adjustment included
in net income - - - - 4,712 4,712 CASH
DIVIDEND - - - (51,487) - (51,487) 5,148,667 5,149 966,184 1,804,828 (17,017) 2,759,144 STOCK
OPTIONS EXERCISED 5,000 5 1,995 - - 2,000 COMPREHENSIVE INCOME: Net
income December 31, 2006 - - - 226,089 - 226,089 Less
reclassification adjustment included
in net income - - - - 17,017 17,017 SHARE-BASED
COMPENSATION - - 6,287 - - 6,287 CASH
DIVIDEND - - - (51,537) - (51,537) 5,153,667 5,154 974,466 1,979,380 - 2,959,000 COMPREHENSIVE INCOME: Net
income - - - 319,322 - 319,322 SHARE-BASED
COMPENSATION - - 4,099 - - 4,099 CASH
DIVIDEND - - - (103,073) - (103,073) BALANCE AT
DECEMBER 31, 2007 5,153,667 $
     5,154 $
  978,565 $2,195,629 $
           - $3,179,348    See Notes to Financial Statements.   21   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  STATEMENTS OF CASH
FLOWS  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005 2007 2006 2005 CASH FLOWS FROM OPERATING
ACTIVITIES: Net
income $
   319,322 $
   226,089 $
  113,063 Noncash expenses
included in income: Depreciation 54,433 59,401 71,031 Amortization - 1,433 2,851 Allowance
for doubtful accounts (933) 1,374 (199) Deferred
income taxes (8,900) (14,400) (19,500) Loss
on disposition of assets - 94 16,468 Realized
loss on sale of investments - 19,343 7,140 Share-based
compensation 4,099 6,287 - Decrease
(increase) in current assets: Accounts
receivable, net 120,996 (179,519) 34,297 Inventory (15,286) (97,658) 119,902 Other
current assets (3,323) 1,489 (22,165) Increase
(decrease) in current liabilities: Accounts
payable and other current liabilities 66,295 74,703 (74,276) Federal
income taxes payable (127,786) 50,746 41,993 Net
Cash From Operating Activities 408,917 149,382 290,605  CASH FLOWS FROM INVESTING
ACTIVITIES: Deposits
and long term prepaids 5,512 17,782 (23,294) Purchase
of investments and certificates of deposit (1,570,000) (1,572,000) (990,000) Proceeds from sale
of investments and certificates of Deposit 1,300,000 2,319,081 955,028 Additions
to property and equipment (49,219) (28,125) (18,067) Net
Cash From Investing Activities (313,707) 736,738 (76,333)  CASH FLOWS FROM FINANCING
ACTIVITIES: Stock
options exercised - 2,000 - Cash
dividend (103,073) (51,537) (51,487) Net
Cash From Financing Activities $
 (103,073) $
   (49,537) $
 (51,487)  (Continued) See Notes to Financial Statements.   22   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  STATEMENTS OF CASH
FLOWS  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005  2007 2006 2005  NET
INCREASE (DECREASE) IN CASH AND EQUIVALENTS $
  (7,863) $
 836,583 $ 162,785  CASH AND
CASH EQUIVALENTS AT BEGINNING OF YEAR 1,487,848 651,265 488,480  CASH AND
CASH EQUIVALENTS AT END OF YEAR $1,479,985 $1,487,848 $
 651,265  SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION: Cash paid during
the year for: Income
taxes $
  280,500 $
   80,798 $
   39,201  Cash and cash
equivalents: Cash $
  35,004 $
   55,665 $
   11,100 Money
market 1,444,981 1,432,183 640,165  $1,479,985 $1,487,848 $
 651,265  (Concluded)         See Notes to Financial Statements.   23


ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  1. Organization and Summary of Significant Accounting Policies  Business Organization  The
Company was incorporated under the laws of the State of Washington on February
10, 1984, primarily to develop, produce, sell and distribute wireless modems
that will allow communication between peripherals via radio frequency waves.
 On November 12, 1984, the Company sold 3,000,000 shares of its unissued
common stock to the public at an offering price of $.30 per share, arbitrarily
determined by the underwriter.  September 13, 2007, announced their establishment of a doing
business as or dba structure, based on the Companys registered trade name of
ESTeem (tm) Wireless Modems.  Accounting Estimates  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
 Estimates used in the accompanying financial statements include allowance
for uncollectible accounts receivable, inventory obsolescence, useful lives of
depreciable assets, and deferred income taxes.  Actual results could differ
from those estimates.  Concentrations of Credit Risks  Financial instruments that potentially subject the Company to
credit risk consists of cash and customer receivables.  The
Company places its cash with two major financial institutions.  During the
period, the Company had cash balances that were in excess of federally insured
limits.  The
Companys customers, to which trade credit terms are extended, consist of United
States and local governments and foreign and domestic companies.  Revenue Recognition  The
Company recognizes revenue from product sales when the goods are shipped or
delivered and title and risk of loss pass to the customer.  Provision for
certain sales incentives and discounts to customers are accounted for as
reductions in sales in the period the related sales are recorded.  Products
sold to foreign customers are shipped after payment is received in U.S. funds,
unless an established distributor relationship exists or the customer is a
foreign branch of a U.S. company.  Revenues from site support and engineering services are recognized
as the Company performs the services.  Amounts billed and collected before
the services are performed are included in deferred revenues.  Revenue is
recognized based upon proportional performance when the contract contains
performance milestones.  Due
to the specialized nature of the products sold, the Company does not generally
sell its products with the right of return; therefore returns are reported when
they occur.  The
Company warrants its products as free of manufacturing defects and provides a
refund of the purchase price, repair or replacement of the product for a period
of one year from the date of installation by the first user/customer.  No
allowance for estimated warranty repairs or product returns has been
recorded.   24   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  1. Organization and Summary of Significant Accounting Policies
(Continued)  Financial Instruments  The
Companys financial instruments are cash and cash equivalents, accounts
receivable and accounts payable.  The recorded values of cash and cash
equivalents, accounts receivable and accounts payable approximate their fair
values based on their short-term nature.  Cash and Cash Equivalents  Cash and cash equivalents consist primarily of cash, certificates
of deposit and money market accounts purchased with original maturities of three
months or less.  Allowance for Uncollectible Accounts  The
Company uses the allowance method to account for uncollectible accounts
receivable.  Accounts receivable are presented net of an allowance for
doubtful accounts of $2,126 and $3,059 as of December 31, 2007 and
2006,respectively.  The Companys policy for writing off past due accounts
receivable is based on the amount, time past due, and response received from the
subject customer.  Accounts receivable include $1,118 of amounts due which are over
ninety days past due at December 31, 2007.  Inventory  Inventories are stated at lower of direct cost or market.
 Cost is determined on an average cost basis that approximates the
first-in, first-out (FIFO) method.  Market is determined based on net
realizable value and consideration is given to obsolescence.  Patent Costs  Expenses incurred in connection with the patent have been
capitalized and are being amortized over 17 years.  The patent was fully
amortized at December 31, 2006.  Property and Equipment  Property and equipment are carried at cost.  Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets.  The useful life of property and equipment for purposes of
computing depreciation is five to seven years.  The Company periodically
reviews its long-lived assets for impairment and, upon indication that the
carrying value of such assets may not be recoverable, recognizes an impairment
loss by a charge against current operations.  The Company normally
capitalizes non consumable assets with a cost greater than one thousand dollars.  Investments  Certificates of deposit with original maturities ranging from
three months to twelve months were purchased for $900,000, at December 31, 2007.   25   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  1. Organization and Summary of Significant Accounting Policies
(Continued)  Capitalized Software Costs  Capitalized software costs consist of costs to purchase and
develop software.  The Company capitalizes the costs of creating a software
product to be sold, leased or otherwise marketed, for which technological
feasibility has been established.  Amortization of the software product, on
a product-by-product basis, begins on the date the product is available for
distribution to customers and continues over the estimated revenue-producing
life, not to exceed five years.  All software costs were fully amortized at
December 31, 2006.  Income Taxes  The
provision for income taxes is computed on the pretax income based on the current
tax law.  Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates.  Research and Development  Research and development costs are expensed as incurred.
 Research and development expenditures for new product development and
improvements of existing products by the Company for 2007, 2006, and 2005, were
$497,280, $401,572, and $280,052, respectively.  Advertising Costs  Costs incurred for producing and communicating advertising are
expensed when incurred.  Advertising costs for the years ended December 31,
2007, 2006, and 2005, were $9,040, $17,558, and $12,679, respectively.  Comprehensive Income  Comprehensive income consists of net income and unrealized losses
on marketable equity investments.  Reclassifications  Certain reclassifications have been made to the prior years
financial statements to conform to the current year presentation.  These
reclassifications had no effect on previously reported results of operations or
retained earnings.  Share-Based Compensation  Effective January 1, 2006, the Company adopted SFAS 123R, a
revision of SFAS 123, share-based payment.  SFAS 123R requires all
share-based payments to employees, including grants of employee stock options,
be measured at fair value and expensed in the statement of operations over the
service period.  See Note 7 for additional information.  In addition
to the recognition of expense in the financial statements, under SFAS 123R, any
excess tax benefits received upon exercise of options will be presented as a
financing activity inflow rather than an adjustment of operating activity as
presented in prior years.   26   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  1. Organization and Summary of Significant Accounting Policies
(Continued)  Recent Accounting Pronouncements  In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities, which is effective for fiscal years beginning
after November 15, 2007.  The purpose of this statement is to permit
entities to measure many financial instruments and certain other items at fair
market value that are not currently required to be measured at fair market
value.  This statement also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
 The Company is in the process of reviewing and evaluating SFAS 159, but
does not believe that its adoption will have a material impact on the Financial
Statements.  In
September 2006, the FASB issued SFAS 157, Fair Value Measurement, which is
effective for fiscal years beginning after November 15, 2007.  The purpose
of this statement is to define fair value, establish a framework for measuring
fair value, and expand disclosures about fair value measurements.  The
Company is in the process of reviewing and evaluating SFAS 157, but does not
believe that its adoption will have a material impact on the Financial
Statements.   2. Inventories  Inventories consisted of the following:  2007 2006 Parts $250,701 $255,793 Work in progress 108,101 108,162 Finished goods 239,399 218,960  $598,201 $582,915  3. Property and Equipment  Property and equipment consisted of the following:  2007 2006 Laboratory equipment $551,704 $504,651 Furniture and fixtures 16,398 16,398 Dies and molds 105,353 103,418 673,455 624,467 Accumulated depreciation (526,014) (471,812)  $147,441 $152,655  27   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  4. Other Assets  Other assets consisted of the following: 2007 2006 Patent costs $  1,850 $
 1,850 Software costs 86,330 86,330 88,180 88,180 Accumulated amortization (88,180) (88,180) - - Deposits 340 340 Prepaid expense - long term - 5,512 $     340 $  5,852  5. Provision For Income Taxes  The
Company uses the asset and liability approach in accounting for income
taxes.  The
provision for federal income taxes consisted of:  2007 2006 2005 Current $152,714 $140,090 $
80,579 Deferred (8,900) (23,165) (18,885) Provision for federal income taxes $143,814 $116,925 $ 61,694  The
components of deferred tax assets and liabilities at December 31, were as
follows: 2007 2006 2005 Deferred tax assets: Accrued liabilities $ 11,400 $  9,800 $
 8,000 Inventory adjustment 8,100 3,400 - Unrealized loss on investments - - 8,800 Capital loss carryforward 9,800 9,800 3,200 Other 4,300 3,200 600 Total $ 33,600 $ 26,200 $ 20,600 Deferred tax liabilities: Depreciable property $ 49,000 $ 50,500 $ 59,300 Total $ 49,000 $ 50,500 $ 59,300     28   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  5. Provision For Income Taxes - (Continued)  The
differences between the provision for income taxes and income taxes computed
using the U.S. federal income tax rate were as follows:  2007 2006 2005 Amount computed using the statutory rate $152,714 $140,090 $80,579 Increase(decrease) in deferred tax (assets) liabilities (8,900) (14,400) (19,500) Income tax benefit - unrealized loss on securities - - 3,043 Decrease in deferred tax asset - reclassification adjustment accumulated other comprehensive loss - (8,765) (2,428) Provision for federal income taxes $143,814 $116,925 $  61,694  The
Company files income tax returns in the U.S. federal jurisdiction.  The
Company is no longer subject to U.S. federal income tax examination by tax
authorities for years before 2003.  January 1, 2007, the Company adopted
the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN48).  FIN48 prescribes a minimum probability threshold
that a tax position must meet before a financial statement benefit is
recognized.  The tax benefit to be recognized is measured as the largest
amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlement.  The Company has evaluated all tax positions for
open years and has concluded that they have no material unrecognized tax
benefits.  For
the years ended December 31, 2007, 2006, and 2005, the Company recognized
penalties of $2,314, $2,805, and $2,384, respectively, in the provision for
federal income taxes.  6. Profit Sharing Salary Deferral 401-K Plan  The
Company sponsors a Profit Sharing Plan and Salary Deferral 401-K plan and trust.
 All employees over the age of twenty-one are eligible.  On January 1,
2006, the Company adopted a four percent salary matching provision.  The
Company contributed $34,147 and $23,758 to the plan at December 31, 2007 and
2006, respectively.   29   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  7. Share-Based Compensation  Effective for January 1, 2006, the Company adopted SFAS 123R using
the modified prospective transition method.  The Company previously
accounted for these plans under the recognition and measurement principles of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees (APB25), and related interpretations and disclosure requirements
established by SFAS 123, Accounting for Stock-Based Compensation.  The
Company grants stock options to individual employees and directors with three
years continuous tenure.  After termination of employment, stock options
may be exercised within ninety days.  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:  2005 2007 2006 (Pro Forma) Dividend yield 1.43% 1.43% 1.25% Expected volatility 39% 49% 63% Risk-free interest rate 4.40% 4.67% 3.65% Expected term (in years) 3 3 3 Estimated fair value per option granted $0.21 $0.25 $0.34  The
average risk-free interest rate is based on the three-year U.S. Treasury Bond
rate in effect as of the grant date.  The expected volatility is determined
using a weighted average of weekly historical volatility of the stock price over
a period of one year prior to the grant dates.  The Company uses historical
data to estimate option exercise rates.  The option exercise rate for
option grants in 2007 was eleven percent.  In
the year ended December 31, 2007, and 2006, respectively, the Company recognized
$4,099 and $6,287 in share-based compensation expense.  No non-vested
share-based compensation arrangements existed as of December 31, 2007.  In
year ended December 31, 2005, the Company adopted the disclosure-only provisions
of SFAS 123.  Accordingly, no compensation expense had been recognized for
the stock option plan.  Had compensation expense for the Companys stock
option plan been determined, based on the fair value at the grant date for
awards, the Companys net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:  2007 2006 2005 Net
earnings as reported $319,322 $226,089 $113,063 Share-based compensation as reported 4,099 6,287 - Net
earnings (loss) pro forma 240,326 129,633 (23,486) Earnings per share - as reported 0.06 0.04 0.02 Earnings per share - pro forma 0.05 0.03 (0.01)  No
material earnings (loss) per share difference exists between basic earnings
(loss) per share and diluted earnings (loss) per share.  30   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  7. Share-Based Compensation - (Continued)  A
summary of option activity follows:  Weighted Weighted -Average -Average Exercise Remaining Number Price Contractual Aggregate Out- Per Term Intrinsic standing Share (Years) Value Balance at 12/31/04 505,000 $0.56 1.1 $105,400 Granted 195,000 0.78 Exercised - - Canceled (155,000) 0.40 Balance at 12/31/05 545,000 0.68 1.1 31,000 Granted 215,000 0.68 Exercised (5,000) .40 Canceled (195,000) 0.48 Balance at 12/31/06 560,000 0.72 1.1 - Granted 180,000 0.68 Exercised - - Canceled (185,000) 0.80 Balance at 12/31/07 555,000 0.71 1.1 -  Exercisable at 12/31/07 555,000 0.71 1.1 -  The
aggregate intrinsic value in the table above is before applicable income taxes
and represents the amount optionees would have received if all options had been
exercised on the last day of the period indicated, based on the Companys
adjusted closing stock price.  8. Employee Profit Sharing Bonus Program  The
Company makes contributions to the Employees Profit Sharing Bonus Program (a
non-qualified plan) based upon ten percent of the first $100,000 of pre-tax net
income plus eight percent on pre-tax net income in excess of $100,000.  The
Company has accrued contributions for the years 2007, 2006, and 2005, of
$42,447, $31,998, and $17,370, respectively.   31


ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  9. Earnings Per Share  The
following table represents the calculation of net earnings per common share -
basic and diluted:  2007 2006 2005  Net income $  319,322 $  226,089 $  113,063 Basic earnings per share: Weighted average shares outstanding 5,153,667 5,152,968 5,148,667 Diluted earnings per share: Weighted average shares outstanding 5,153,667 5,152,968 5,148,667 Incremental shares from  assumed conversion of stock options 88,722 12,378 75,137 Weighted average shares outstanding 5,242,389 5,165,346 5,223,804 Net
earnings per common share-basic $        0.06 $        0.04 $       0.02 Net
earnings per common share-diluted $        0.06 $        0.04 $       0.02  10. Leases  The Company leases its facilities from a port authority, under
beneficial terms, for $3,263 monthly for three years, expiring in September
2008, with annual increases based upon the Consumer Price Index.  The lease
expense for the years ended December 31, 2007, 2006, and 2005 was $41,733,
$39,672 and $34,446, respectively.  Future minimum lease payments required under the above operating
lease for the year ending December 31, 2008 are $32,459.  11. Related Party Transactions  For the years ended December 31, 2007, 2006, and 2005; services in
the amount of $126,326, $152,520, and $146,421, respectively, were contracted
with a manufacturing process company, Manufacturing Services, Inc.  The
president and past president of Manufacturing Services, Inc., are members of the
Board of Directors of Electronic Systems Technology, Inc.  Accounts payable
include $10,980 of payables to Manufacturing Services, Inc., at December 31,
2007.  12. Commitments and Contingencies  The
Company purchases certain key components necessary for the production of its
products from a limited number of suppliers.  The components provided by
the suppliers could be replaced or substituted by other products.  It is
possible that if this action became necessary, an interruption of production
and/or material cost expenditures could take place.   32   ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  NOTES TO FINANCIAL
STATEMENTS  13. Segment Reporting  Segment information is prepared on the same basis that the
Companys management reviews financial information for operational decision
making purposes.  Electronic Systems Technology, Inc., 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.   Domestic customers represent approximately seventy percent of
total net revenues. Foreign customers represent approximately thirty percent of
total net revenues.  No individual customer comprised more than ten percent
of sales revenue.  Revenues from foreign countries, consist primarily of
revenues from Canada, Mexico, and South American countries.  The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies, Note 1.  Management evaluates
performance based on net revenues and operating expenses.  Administrative
functions such as finance and information systems are centralized.
 However, 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 is
as follows:  Unallocated Domestic Foreign Corporate Total 2007 Total net revenues $2,144,647 $940,863 $         - $3,085,510 Earnings/loss before tax 311,594 481,822 (330,280) 463,136 Net capital expenditures 46,361 - 2,858 49,219 Identifiable assets 359,028 61,870 3,056,310 3,477,208  2006 Total net revenues $2,149,021 $517,099 $        - $2,666,120 Earnings/loss before tax 427,513 189,327 (273,826) 343,014 Net capital expenditures 27,525 - 600 28,125 Identifiable assets 498,439 48,055 2,773,357 3,319,851  2005 Total net revenues $2,001,143 $459,363 $        - $2,460,506 Earnings/loss before tax 225,967 169,632 (220,842) 174,757 Net capital expenditures 18,067 - - 18,067 Identifiable assets 394,196 3,930 2,596,455 2,994,581      33


ELECTRONIC SYSTEMS
TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS  SUPPLEMENTAL
SCHEDULES                         34


ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS SUPPLEMENTAL SCHEDULES
OF OPERATING EXPENSES  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005  2007 2006 2005  Advertising $
   9,040 $
  17,558 $
  12,679 Amortization - 1,433 2,851 Bad
debt - 5,059 5,116 Commissions
- sales 4,230 4,144 5,291 Dues and
subscriptions 2,145 1,740 3,329 Depreciation 54,433 59,401 71,031 Insurance 13,527 13,618 14,764 Materials
and supplies 44,740 49,850 25,789 Office and
administration 14,204 13,253 13,127 Printing 9,294 8,543 8,898 Professional
services 333,603 191,817 100,785 Rent and
utilities 56,295 53,751 44,072 Repair and
maintenance 13,820 17,533 16,435 Salaries 988,322 822,995 835,178 Taxes 198,128 189,204 194,849 Telephone 11,918 12,935 15,161 Trade
shows 40,112 46,527 41,071 Travel
expenses 100,553 85,145 119,278 1,894,364 1,594,506 1,529,704 Expenses
allocated to cost of sales (427,313) (311,745) (389,530) $1,467,051 $1,282,761 $1,140,174     35


ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS
MODEMS SUPPLEMENTAL SCHEDULES
OF SELECTED FINANCIAL DATA  FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, 2005, 2004 AND 2003  2007 2006 2005 2004 2003  Sales  net $3,002,521 $2,617,810 $2,417,700 $2,416,625 $2,209,841 Gross
profit 1,847,198 1,599,012 1,305,017 1,332,777 1,158,444 Income
before provision for income taxes 463,136 343,014 174,757 260,126 173,901 Provision
for income taxes 143,814 116,925 61,694 85,306 50,895 Net income 319,322 226,089 113,063 174,820 123,006 Other
comprehensive loss, net of tax - - (5,905) (6,350) (5,465) Comprehensive
income 319,322 226,089 107,158 168,470 117,541 Net income
per share  basic 0.06 0.04 0.02 0.03 0.02 Weighted
average number of shares outstanding 5,153,667 5,152,968 5,148,667 5,104,678 5,098,667 Total
assets 3,477,208 3,319,851 2,994,581 2,983,296 2,822,689 Stockholders
equity 3,179,348 2,959,000 2,759,144 2,698,761 2,560,778 Stockholders
equity per share 0.62 0.57 0.54 0.53 0.50 Working
capital 3,046,967 2,824,793 2,588,752 2,498,881 2,355,418 Current
ratio 13.2:1 10.1:1 15.7:1 13.0:1 12.6:1 Equity to
total assets 91% 89% 92% 90% 91%     36


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.  None  ITEM 8A.  CONTROLS AND
PROCEDURES.  Conclusions of Management Regarding
Effectiveness of Disclosure Controls and Procedures.  Under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief
Financial Officer, we have evaluated the effectiveness of our disclosure
controls and procedures pursuant to Exchange Act Rule 15d-15(e) as of the end of
the period covered by this report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that there was a material
weakness affecting our internal control over financial reporting and, as a
result of this weakness, our disclosure controls and procedures were not
effective as of December 31, 2007.  Managements Report on Internal
Control over Financial Reporting.  The Companys management is responsible for
establishing and maintaining adequate internal control over financial reporting
for the company. The Companys internal control over financial reporting is a
process to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with accounting
principles generally accepted in the United States of America. Internal control
over financial reporting includes maintaining records that in reasonable detail
accurately and fairly reflect our transactions; providing reasonable assurance
that transactions are recorded as necessary for preparation of our financial
statements; providing reasonable assurance that receipts and expenditures of
company assets are made in accordance with management authorization; and
providing reasonable assurance that unauthorized acquisition, use or disposition
of company assets that could have a material effect on our financial statements
would be prevented or detected on a timely basis. Because of its inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements would
be prevented or detected.  As of December 31, 2007 management
conducted an assessment of the effectiveness of ESTs internal control over
financial reporting based on the criteria for effective internal control over
financial reporting established in Internal Control  Integrated
Framework, issued by the Committee of Sponsoring Organizations (COSO) of the
Treadway Commission. Based upon this assessment, we determined that there was a
material weakness affecting our internal control over financial reporting and,
as a result of that weakness, our disclosure controls and procedures were not
effective as of December 31, 2007.  The material weakness is as
follows:  We did not maintain effective controls to
ensure appropriate segregation of duties as the same employees were responsible
for the initiating and recording of transactions, thereby creating segregation
of duties weaknesses. Due to the (1) significance of segregation of duties to
the preparation of reliable financial statements, (2) the significance of
potential misstatement that could have resulted due to the deficient controls
and (3) the absence of sufficient other mitigating controls, we determined that
this control deficiency resulted in more than a remote likelihood that a
material misstatement or lack of disclosure within the annual or interim
financial statements will not be prevented or detected.  Managements Remediation
Initiatives  Management is currently evaluating avenues
for mitigating our internal controls weaknesses, but mitigating controls that
are practical and cost effective may not be found based on the size and
structure of our organization.  Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within the Company have been detected.
 These inherent limitations include the realities that judgments in
decision making can be faulty and that breakdowns can occur because of simple
error or mistake.  The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.  Projections of any evaluation of controls
effectiveness to future periods are subject to risks.  This annual report does not include an
attestation report of the companys registered public accounting firm regarding
internal control over financial reporting. Managements report was not subject
to attestation by the companys registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
company to provide only managements report in this annual report.   37   Changes in internal control over financial reporting. Except as noted above, there have been no
changes during the quarter ended December 31, 2007 in the Companys
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, internal controls over financial
reporting.  ITEM 8B.  OTHER INFORMATION.  On February 22, 2008 stock options to
purchase shares of the Company's common stock were granted to individual
employees and directors with no less than three years continuous tenure.
 The options granted on February 22, 2008 totaled 200,000 shares under
option and have an exercise price of $0.81 per share.  The options granted
on February 22, 2008 may be exercised any time during the period from February
22, 2008 through February 21, 2011.  The Company's Form 8-K dated February
22, 2008, as filed with the Securities and Exchange Commission is included
herein by reference.  PART III  ITEM 9. DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT  IDENTIFICATION OF
DIRECTORS:  The following table sets forth the names
and ages of all directors of the Company as of December 31, 2007; as well as
term in office and principal occupation of each director.  Name of  Director
Term in Office
Age
Principal  OccupationT.L. Kirchner
06/03/05  06/03/08
59
President of the CompanyMelvin H. Brown
06/02/06  06/02/09
77
Former President of Manufacturing Services,
Inc.Michael S. Brown
06/01/07  06/03/08
55
President of Manufacturing Services, Inc.Robert Southworth
06/02/06  06/02/09
64
Patent Attorney, U.S. Dept. of Energy
(retired)Jon Correio
06/02/06  06/02/09
40
Vice President of Finance of the CompanyJohn L. Schooley
06/04/07  06/04/10
68
Former President of Remtron,
Inc.  Management believes that there are no
agreements or understanding between the directors and suppliers or contractors
of the Company, except the agreement with Manufacturing Services, Inc. as
described elsewhere in this report.  Audit Committee  The Audit Committee of the Board of
Directors as of December 31, 2007 is comprised of Robert Southworth (Chairman),
Melvin Brown and John Schooley.  Mr. Brown is considered to be a
non-independent member of the Audit Committee, however, his serving on the Audit
Committee was deemed by the Board to be in the best interest of the Corporation
due to Mr. Browns experience and familiarity with the Corporation.  The
Board of Directors has determined that none of the audit committee members can
be classified as an audit committee financial expert as defined in Item 401(e)
of Regulation S-B.  The Board of Directors does not contain a member that
can be classified as an audit committee financial expert under the referenced
definition. The Board of Directors believes that attracting and retaining board
members that could be classified as an audit committee financial expert is
unlikely due to the high cost of such Director candidates.  The Board of Directors had an
Employee/Director Stock Option Committee consisting of Tom Kirchner and Jon
Correio.  The committee existed for the sole purpose of recommending the
recipients and amounts of the Company awarded stock options during 2007.  Compensation Committee  There is no Compensation Committee of the
Board of Directors.  Code of Ethics  On June 2, 2006, the Company's Board of
Directors adopted a Code of Ethics for the Company.  This Code of Ethics is
filed herewith as an exhibit.  38   IDENTIFICATION OF EXECUTIVE OFFICERS  The following table sets forth the names
and ages of all executive officers of the Company as of December 31, 2007; all
positions by such persons; term of office and the period during which he has
served as such; and any arrangement or understanding between him and any other
person(s) pursuant to which he was elected as an officer:  Name of  Officer
Age
Position
Term of Office
Period of ServiceT. L. Kirchner
59
President/CEO
3 Years
02/10/84- PresentJon Correio
40
Vice President,
Finance &
Administration/
Sec/Treas
3 Years
02/9/01-
Present  Melvin H. Brown is the father of Michael S.
Brown, both of whom are Directors of the Company.  Outside of this family
relationship, there are no family relationships, whether by blood, marriage, or
adoption, between any of the Directors or Executive Officers of the Company.  The following is a brief description of the
business experience during the last five years of each director and/or executive
officer of the Company.  T.L. KIRCHNER.  Mr. Kirchner is founder, President
and a Director of the Company.  During the last five years Mr. Kirchner
devoted 100% of his time to the management of the Company.  His primary
duties are to oversee the management and marketing functions of the Company.
 Mr. Kirchner does not serve as a director for any other company registered
under the Securities Exchange Act.  MELVIN H. BROWN.  Mr. Brown is a Director of the
Company.  During the last five years Mr. Brown has been the owner and
President of Manufacturing Services, Inc until his retirement in late 2006.
 Manufacturing Services provides electronic design and manufacturing
solutions.  Manufacturing Services provides electronic manufacturing and
quality control testing services for Electronic Systems Technology.  Mr.
Brown does not serve as a director for any other company registered under the
Securities Exchange Act.   MICHAEL S. BROWN.  Mr. Brown is a Director of the
Company.  He has been with Manufacturing Services, Inc. since 1998 and
became President in April 2006. Previously Mr. Brown held management positions
with Cadence Design Systems and Wyse Technology. Manufacturing Services provides electronic design and
manufacturing solutions.  Manufacturing Services provides electronic
manufacturing and quality control testing services for Electronic Systems
Technology. Mr. Brown does not serve as a director for any other company
registered under the Securities Exchange Act.  ROBERT SOUTHWORTH.  Mr. Southworth is a Director of the
Company.  Mr. Southworth is a retired Senior Patent Attorney with the U. S.
Department of Energy in Richland, Washington.  His primary duties with the
Department of Energy were the preparation and prosecution of domestic and
foreign patent applications in such fields as nuclear reactors, fuel
reprocessing, waste management and energy related fields of solar, wind, and
fossil fuels.  Mr. Southworth does not serve as a director of any other
company that is registered under the Securities Exchange Act  JON CORREIO.  Mr. Correio is the Vice President
of finance and administration, Secretary/Treasurer and a Director of the
Company.  During the last five years Mr. Correio has been a full time
employee of the Company, whose primary duties are to oversee the finance and
administration functions of the Company.  Mr. Correio does not serve as a
director for any other company registered under the Securities Exchange Act.   JOHN L. SCHOOLEY.  Mr. Schooley is a Director of the
Company.  During the past five years, Mr. Schooley was the former owner and
President of Remtron, Inc. in San Diego, California.  Remtron, Inc.
manufactures advanced radio control and telemetry systems for the industrial
marketplace.  Mr. Schooley does not serve as director of any other company
that is registered under the Securities and Exchange Act.  SECTION  16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE  During the year ended December 31, 2007, to
the knowledge of Management, there was no director, officer, or beneficial owner
of more than 10% any class of equity securities of the registrant who failed to
file on a timely basis the required disclosure form as required by Section 16(a)
of the Securities and Exchange Act of 1934.  39   ITEM 10.
 EXECUTIVE COMPENSATION  The Companys principal executive officer
is T.L. Kirchner, President and CEO.  The Companys principal financial
officer is Jon Correio, Vice President, Finance and Administration.  Information concerning the compensation of
the Companys principal executive officer and principal financial officer, as
well as any other compensated employees of the Registrant's whose total
compensation exceeded $100,000 during 2007 and 2006 is provided in the following
Summary Compensation Table:   SUMMARY COMPENSATION TABLEName and
Principal
Position




(a)
Year






(b)
Salary
($)





(c)
Bonus
($)(1)





(d)
Stock
Awards
($)




(e)
Option
Awards
($)(2)




(f)
Non-Equity
Incentive Plan
Compensation
($)



(g)
Change in
Pension Value
and Non-
qualified
Deferred
Compensation
Earnings ($)
(h)
All Other
Compen-
sation
($)(3)(4)



(i)
Total
($)





(j)T.L.
Kirchner,
President/
CEO
2007
$147,917
$7,141
0
$578
-
-
$17,114
$172,7502006
$125,000
$3,672
0
$750
-
-
$16,565
$145,987Jon
Correio,
Vice
President,
Finance
2007
$75,000
$3,542
0
$578
-
-
$18,464
$97,5842006
$62,000
$1,821
0
$750
-
-
$12,428
$76,999 (1) Includes amounts paid under the
Non-qualified Employee Profit Sharing Bonus (2) Amount represents the dollar amount
recognized for financial statement reporting purposes in accordance with SFAS
123R. Assumptions made in the valuation of stock option awards are disclosed in
Note 7 of the Notes to the Consolidated Financial Statements in this Form
10-KSB. Prior to 2006, the Company accounted for stock option awards under APB
Opinion No. 25s intrinsic value method and, as such, recognized no compensation
cost for employee stock options. (3) All Other Compensation consists of
premiums paid for Group Health Insurance, Key Man Insurance, Accrued Vacation
Pay and Company paid 401(k) matching amounts. (4) Amounts do not reflect proceeds of
$0.02 per share cash distribution received by T.L. Kirchner during 2007 totaling
$8,070.  Receipt of cash distribution was based solely on capacity as a
shareholder.  The information specified concerning the
stock options of the named executive officers during the fiscal year ended
December 31, 2007 is provided in the following Option/SAR Grants in the Last
Fiscal Year Table:  OPTION/SAR GRANTS IN LAST FISCAL
YEARIndividual Grants (5)(a)
(b)
(c)
(d)
(e)Name
Number of Securities
Underlying
Options/SARs
Granted # (5)
% of Total
Options/SARs Granted
to Employees in Fiscal
Year
Exercise or base price
($/Share)
Expiration DateT.L. Kirchner
25,000
13.8%
0.68
2/15/2010Jon Correio
25,000
13.8%
0.68
2/15/2010  (5) This table does not include Stock
Options granted previously.  Forms 8-K dated 2/25/05 and 02/10/06
respectively, are incorporated herein by reference.   40   The information
specified concerning the stock options of the named executive officers during
the fiscal year ended December 31, 2007 is provided in the following Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Options/SAR Values
Table:   OUTSTANDING EQUITY
AWARDS AT FISCAL YEAR-ENDOption Awards
Stock AwardsName
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercised
Price ($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)T.L.
Kirchner,
President/
CEO
25,000
0
0
$0.68
2/15/10
0
0
0
025,000
0
0
$0.68
2/09/09
0
0
0
025,000
0
0
$0.78
2/25/08
0
0
0
0Jon Correio,
Vice
President,
Finance
25,000
0
0
$0.68
2/15/10
0
0
0
025,000
0
0
$0.68
2/09/09
0
0
0
025,000
0
0
$0.78
2/25/08
0
0
0
0  The Company does not currently have a
Long-Term Incentive Plan (LTIP).  Compensation to outside directors is
limited to reimbursement of out-of-pocket expenses that are incurred in
connection with the directors duties associated with the Company's business.
Directors with no less than three years continuous tenure are eligible for stock
option awards, as governed by the Company stock option plan.  There is
currently no other compensation arrangements for the Companys directors.
 (See Security Ownership of Certain Beneficial Owners and Management for
Stock Options granted in previous years.)  The information specified
concerning items of Director Compensation for the fiscal year ended December 31,
2007 is provided in the following Director Compensation Table:  DIRECTOR COMPENSATIONName
(1)
Fees
Earned
or Paid
in Cash
($)
Stock
Awards
($)
Option
Awards
($)(2)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
($)
All Other
Compensation
($)(3)
Total ($)(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)Melvin Brown
$0
$0
$578
$0
$0
$0
$578Michael Brown
$0
$0
$0
$0
$0
$0
$0John Schooley
$0
$0
$578
$0
$0
$1,088
$1,666Robert Southworth
$0
$0
$578
$0
$0
$524
$1,102  (1) Compensation information for Tom Kirchner, President
and CEO, and Jon Correio, Vice President, Finance & Administration is
contained in the Executive Compensation Summary Compensation Table.  41   (2) Amount represents the
dollar amount recognized for financial statement reporting purposes in
accordance with SFAS 123R. Assumptions made in the valuation of stock option
awards are disclosed in Note 7 of the Notes to the Consolidated Financial
Statements in this Form 10-KSB. (3) Amounts represent reimbursement of out-of-pocket
expenses related to directors duties associated with the Company's business
(ie. travel expenses for attending Company Directors Meetings).  The Company currently does not hold any
Employment Contracts or Change of Control Arrangements with any parties.  ITEM 11.SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT  SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS  The following table sets forth, as of
December 31, 2007, the amount and percentage of the Common Stock of the Company,
which according to information supplied by the Company, is beneficially owned by
each person who, to the best knowledge of the Company, is the beneficial owner
(as defined below) of more than five (5%) of the outstanding common stock.  Title of Class
Name & Address of
Beneficial Owner (1)
Amount & Nature of
Beneficial Ownership
Percent of ClassCommon
Paul D. Sonkin
460 Park Avenue, 12th
Floor
New York NY 10022
831,252
16.1%Common
EDCO Partners LLP
4605 Denice Drive
Englewood  CO  80111
415,015
8%Common
T.L. Kirchner
415 N. Quay St.
Kennewick  WA  99336
403,488 (2)(3)
7.8%  (1) Under Rule 13d-3, issued by the
Securities and Exchange Commission, a person is, in general, deemed to
"Beneficially own" any shares if such person directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares
(a) voting power, which includes the power to vote or to direct the voting of
those shares and/or (b) investment power, which included the power to dispose,
or to direct the disposition of those securities.  The foregoing table
gives effect to shares deemed beneficially owned under Rule 13d-3 based on the
information supplied to the Company.  To the knowledge of the Company, the
persons named in the table have sole voting power and investment power with
respect to all shares of Common Stock beneficially owned by them. (2) The beneficial
owner listed above has stock options giving the right to acquire 75,000 shares
of Electronic Systems Technology, Inc. Common Stock: Options for 25,000 shares
granted February 25, 2005, Options for 25,000 shares granted February 10, 2006
and Options for 25,000 shares granted February 16, 2007.  Forms 8-K, dated
February 25, 2005, February 10, 2006 and February 16, 2007, respectively, are
incorporated herein by reference. (3) Does not include options granted.
 See footnote (1) above.  SECURITY OWNERSHIP OF
MANAGEMENT  The following table sets forth, as of
February 29, 2008, amount and percentage of the Common Stock of the Company,
which according to information supplied by the Company, is beneficially owned by
Management, including officers and directors of the Company.  Title of
Class
Name of
Beneficial Owner
Amount & Nature of
Beneficial
Ownership
Percent of
ClassCommon
T.L. Kirchner (Officer &
Director)
403,488 (1)
7.8%Common
Robert Southworth (Director)
0 (1)
0.0%Common
Melvin H. Brown (Director)
76,500 (1)
1.5%Common
Michael S. Brown (Director)
0
0.0%Common
Jon Correio (Officer &Director)
0 (1)
0.0%Common
John Schooley (Director)
135,000 (1)
2.6%Common
D.B. Strecker (VP of Engineering)
24,719 (1)
0.5%  (1) Does not include stock
options.  See below.  42   On various
dates, the Company's Board of Directors has approved Stock Option Bonuses for
Directors and Employees.  The following is a summary of the Stock Option
bonuses currently outstanding: Options are exercisable at fixed prices.
 Options may not be exercised in blocks of less than 5,000 shares.
 Options not exercised expire three years after approval date or 90 days
following termination of employment/board membership, whichever occurs first.
 In the event of acquisition, merger, recapitalization or similar events of
the Company, the optionee will receive equivalent shares or will have a 10-day
window in which to exercise the options.  Option grants are not
transferable or assignable except to the optionee's estate in the event of the
optionee's death.  The information below does not include
stock options granted in February 2008.  Recipients of Stock Options currently
unexpired as of December 31, 2007 were as follows:  Name
Option Shares
Exercise Price
Per Share ($)APPROVAL DATE:
2-16-2007Sam Amaral
5,000
0.68Melvin Brown
25,000
0.68Thomas Brown
5,000
0.68Alan B. Cook
5,000
0.68Jon Correio
25,000
0.68Tom Kirchner
25,000
0.68Eric P. Marske
15,000
0.68Anthony C. Pfau
5,000
0.68Gary L. Schmitz
5,000
0.68John L. Schooley
25,000
0.68Robert Southworth
25,000
0.68George Stoltz
5,000
0.68Dan Tolley
5,000
0.68  Name
Option Shares
Exercise Price
Per Share ($)APPROVAL DATE:
2-10-2006Sam Amaral
15,000
0.68Melvin Brown
25,000
0.68Thomas Brown
5,000
0.68Alan B. Cook
15,000
0.68Jon Correio
25,000
0.68Tom Kirchner
25,000
0.68Eric P. Marske
15,000
0.68Gary L. Schmitz
5,000
0.68John L. Schooley
25,000
0.68Robert Southworth
25,000
0.68George Stoltz
5,000
0.68David B. Strecker
15,000
0.68   43    Name
Option Shares
Exercise Price
Per Share ($)APPROVAL DATE:
2-25-2005Melvin Brown
25,000
0.78Alan B. Cook
15,000
0.78Jon Correio
25,000
0.78Tom Kirchner
25,000
0.78Eric P. Marske
15,000
0.78Gary L. Schmitz
5,000
0.78John L. Schooley
25,000
0.78Robert Southworth
25,000
0.78George Stoltz
5,000
0.78David B. Strecker
15,000
0.78  Stock options must be exercised within 90
days after termination of employment/board membership.  During 2007,
185,000 options expired, 180,000 shares were granted and no shares under option
were exercised.  At December 31, 2007 there were 555,000 shares reserved
for future exercise.  ITEM 12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS  TRANSACTIONS WITH
MANAGEMENT AND OTHERS  During 2007, the Company contracted for
services from Manufacturing Services, Inc. in the amount of $126,326.
 Manufacturing Services, Inc. is owned and operated by Michael S. Brown.
 Mr. Brown, and the former owner for Manufacturing Services, Inc, Melvin H.
Brown are currently Directors of Electronic Systems Technology, Inc.
 Management believes all prices for services, provided by Manufacturing
Services, Inc., were as favorable as could be obtained from comparable
manufacturing services companies.  PART IV  ITEM 13.  EXHIBITS  Exhibits filed as part of the Companys 10KSB report for
2007 are listed below.  Certain exhibits have been previously filed with
the Securities and Exchange Commission and are incorporated by reference.  EXHIBIT
DESCRIPTION3
Articles of Incorporation and By-Laws
filed as Exhibit 2.1 to Form S-18, Registration Statement No. 2-92949-S,
Exhibit (c) to Form 8-K, filed March 15, 1985, and Amendments to By-Laws
adopted by Shareholders on January 14, 1985 are incorporated herein by
reference.4
Instrument defining the rights of security holders
including indentures.
Exhibit II Form S-18 Registration Statement
No. 2-92949-S is incorporated herein by reference. Form 8A
Registration Statement, 000-27793, dated October 25, 1999, is incorporated
herein by reference.14
Code of Ethics31.1
CEO Certification31.2
CFO Certification32.1
Section 906 Certification,
CEO32.2
Section 906 Certification,
CFO   44   ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES  Audit and Non-Audit Fees    The following table presents fees billed to us during
December 31, 2007 and 2006, for professional services provided by Moe
O'Shaughnessy & Associates P.S.  Year Ended
December 31, 2007
December 31, 2006Audit fees (1)
$42,864
$33,376Audit-related fees (2)
-
-Tax fees (3)
1,550
1,250All other fees (4)
-
-Total Fees
$44,414
$34,626  (1) Audit fees consist of fees billed for professional
services provided in connection with the audit of the Companys financial
statements and reviews of our quarterly financial statements. (2) Audit-related fees consist of assurance and related
services that include, but are not limited to, internal control reviews, attest
services not required by statute or regulation and consultation concerning
financial accounting and reporting standards. (3) Tax fees consist of the aggregate fees billed for
professional services for tax compliance, tax advice, and tax planning.
 These services include preparation of federal income tax returns. (4) All other fees consist of fees billed for products
and services other than the services reported above.  Our Audit Committee reviewed the audit and
tax services rendered by Moe O'Shaughnessy & Associates P.S. and concluded
that such services were compatible with maintaining the auditors independence.
 All audit, non-audit, tax services, and other services performed by our
independent accountants are pre-approved by our Audit Committee to assure that
such services do not impair the auditors independence from us.  We do not
use Moe OShaughnessy & Associates P.S. for financial information system
design and implementation.  These services, which include designing or
implementing a system that aggregates source data underlying the financial
statements or generates information that is significant to our financial
statements, are provided internally.  We do not engage Moe OShaughnessy
& Associates P.S. to provide compliance outsourcing services.                   45   SIGNATURES  In accordance with Section 13 or 15(d) of
the Exchange Act, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.  ELECTRONIC SYSTEMS TECHNOLOGY, INC.  By:   /s/ TOM L. KIRCHNER  T.L.
Kirchner, Director/President (Principal
Executive Officer)  Date:  March 21, 2008  In accordance with the Exchange Act, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.  Signature
Title
Date/s/ TOM L. KIRCHNER
Director/President
March 21, 2008T.L. Kirchner/s/ JON CORREIO
Director
March 21, 2008Jon Correio/s/ MELVIN BROWN
Director
March 21, 2008Melvin H. Brown/s/ MICHAEL S. BROWN
Director
March 21, 2008Michael S. Brown/s/ ROBERT SOUTHWORTH
Director
March 21, 2008Robert Southworth/s/ JOHN SCHOOLEY
Director
March 21, 2008John L. Schooley           46