U.S. 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, 2000**
[ ] 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.,    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 13or 15(d) of the Exchange Act during the past 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response toItem 405 of Regulations S-B is met contained in this form, and no disclosure will becontained, to the best of the registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB. [X ] Not applicable [ ]
State issuer's revenues for its most recent fiscal year.$1,584,665.
On February 9, 2001 the aggregate market value,based on the asked price, of the voting stock held by nonaffiliates of the registrant was$2,042,411.
The number of shares outstanding of the registrant's common stock as ofFebruary 9, 2001: 5,093,667 shares.
DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference into Parts I, II,III, and IV of this report:  (1) Form S-18, effective Nov. 5, 1984, CommissionFile No. 2-92949-S; (2) Form 8-K, filed March 15, 1985, Commission FileNo. 2-92949-S; Form 8-A, Commission File No. 000-27793, dated October 25, 1999; Forms8-K dated July 12, 1991, December 14, 1992, December 10, 1993, February 7, 1997, June 5,1997, February 6, 1998, June 4, 1998, February 12, 1999, June 11, 1999, February 11, 2000,and February 9, 2001. 

Transitional Small Business Disclosure Format:Yes [ ] No [X]
 

 

 

 

PART I

ITEM 1.

FORWARD LOOKING STATEMENTS:
***When used in this Annual Report and the documents incorporated hereinby reference, the words "believes", "anticipates", "expects"and similar expressions are intended to identify in certain circumstances, forward-lookingstatements. Such statements are subject to a number of risks and uncertainties that couldcause actual results to differ materially from those projected, including the risksdescribed in this Annual Report. Given these uncertainties, readers are cautioned not toplace undue reliance on such statements. The Company also undertakes no obligation toupdate those forward-looking statements.***
BUSINESS  

Electronic Systems Technology, Inc. ("EST" or the"Company") specializes in the manufacturing and development of wireless modemproducts. The Company uses research and development, manufacturing, and marketing effortsto produce and market the Company's line of ESTeem (TM) Wireless Modem products andaccessories. The Company offers product lines, which provide innovative communicationsolutions for applications not served by existing conventional communication systems. TheCompany's products are offered in markets for process automation in commercial,industrial, and government arenas both domestically and internationally, as well asdomestic markets for public safety communications infrastructure, primarily used by policeand fire departments. The Company's product lines are marketed through direct sales,sales representatives, and domestic and foreign resellers. 

The Company was incorporated in the State of Washington in February1984, and was granted a U.S. Patent for the "Wireless Computer Modem" in May1987, and Canadian patent in October 1988. In the past three years, the Company hascontinued to improve its products to incorporate the latest technology and respond tocustomer needs and market opportunities.During 2000, theCompany's development efforts concentrated on the development of the ESTeem 192Eproduct line of spread spectrum, non-licensed radio frequency modems using Ethernet basedcommunication protocols, which is to be brought to market during the first quarter of2001. In an effort to continually expand its customer base, particularly in the industrialcontrol arena, the Company continues with efforts to team with all major programmablelogic controller (PLC) hardware vendors. The Company has also been involved from time totime as a hardware provider for Government programs such as the Core Automated MaintenanceSystem (CAMS) for the U.S. Air Force and Automatic Identification Technology (AIT) for theU.S. Army. During 2000, the Company continued marketing ESTeem products for use in mobiledata terminal applications by public safety entities, and continued to participate inforeign and domestic Supervisory Control and Data Acquisition (SCADA), IndustrialAutomation, and Government marketplaces. 
PRODUCTS AND MARKETS

EST's products provide communication links between computers,peripherals, and instrumentation controls using radio frequency waves. The Company'sproducts are packet burst, VHF & UHF FM radio modems, operating in radio frequencybands of 72 to 76 Megahertz (MHz), 150 to 174 MHz, 400 to 420 MHz, 450 to 470 MHz, and 2.4Gigahertz (GHz).

The proliferation of computer applications in business, industry andpublic service has created an constantly changing environment of automation andnetworking, requiring increasing amounts of data transfer. Prior to the invention of theESTeem modem, the majority of data transfers used telephone modems or direct cableconnections, both of which have costly side effects. Telephone modems have a potentiallyexpensive monthly charge for the use of telephone lines, and direct cable connections canhave installation costs as much or more than the cost of the communication system. ESTeemwireless modem products provide a "Wireless Solution" by eliminating the needfor conventional hardwiring and leased phone lines. 

All of the ESTeem models ("ESTeems") come with industrystandard asynchronous communications ports, giving users new dimensions to "LocalArea Networking". As many as 253 devices can be interfaced on a single frequency.ESTeem wireless modems have over one hundred internal software commands, which are savedin non-volatile memory, allowing user friendly configuration for any application. 

ESTeem Modems work on a packet burst communications concept. Packetsystems, whether hardwired or radio, share the same principle of operation: data is takenfrom a standard RS-232C, RS-422 or RS-485 asynchronous port and is transmitted in"Electronic Packets". The size of the packet can be user defined from 1 to 2000bytes of information, depending on model. Once a packet of data is formed, it istransmitted in a "burst," from one ESTeem modem to another ESTeem modem, hencethe term "packet burst communications." ESTeem Modems provide data accuracy ofgreater than one part in 100 million. Internal Digi-Repeater features allow the user toincrease operating range by relaying transmission through a maximum of three ESTeems toreach a destination ESTeem. An ESTeem can operate as an operating node, a repeater node,or both simultaneously, for added flexibility. Secure data communication is provided inthe ESTeem products through use of proprietary technology and techniques, providing usersof the products four definable security codes. If higher security is required, the ESTeemis compatible with asynchronous Data Encryption Standard (DES) encryption devices.

PRODUCT APPLICATIONS

Some of the major applications and/or industries for which the ESTeemproducts are being utilized are as follows:

Water and Waste Water    Industry 
Overhead Crane ControlIndustrial Automation 
Shop Floor Manufacturing
Remote Data Acquisition    (SCADA) 
Intra-Office/Building    Computer Networking
Law Enforcement/Public    Safety    
Power Utility 
FederalOil/Gas Pipeline 
Ground Mobile    Communications
Material Handling 
Ship to Shore    Communications 
Flight Line Maintenance
PRODUCT LINES
**Model 192C. A licensed narrow band packet burst transceiver forcommercial, industrial, and public safety applications operating in the 450 to 470 MHzspectrum. The digitally synthesized transceiver is field tunable over the operating bandin 6.25 KHz increments. Typical indoor and outdoor fixed base and mobile applicationsinclude point to point and point to multi-point digital data networking for distances toapproximately 15 miles line-of-sight without the use of the digi-repeater option. Typicalapplication uses for the ESTeem 192C are as follows: 

Domestic: Industrial Automation, inventory control, public safety. 

International: Telephone by-pass, and industrial automation.
**Model 192F. A licensed narrow band packet burst transceiver forforeign market commercial, industrial automation, public safety and Federal (USA only)applications operating in the 400 to 420 MHz spectrum. The digitally synthesizedtransceiver is field tunable over the operating band in 6.25 KHz increments. Typicalindoor and outdoor fixed base and mobile applications include point to point and point tomulti-point digital data networking for distances to approximately 15 miles line-of-sightwithout the use of the digi-repeater option. Typical application uses for the ESTeem 192Fare as follows: 

Federal: Inventory and command control.
**Model 192M. A licensed narrow band packet burst transceiver forforeign and domestic commercial, industrial automation, and public safety applicationsoperating in the 150 to 174 MHz spectrum. The digitally synthesized transceiver is fieldtunable over the operating band in 6.25 KHz increments. Typical indoor and outdoor fixedbase and mobile applications include point to point and point to multi-point digital datanetworking for distances to approximately 15 miles line-of-sight without the use of thedigi-repeater option. Typical application uses for the ESTeem 192M are as follows:

Domestic: Industrial automation, inventory control, and public safety.

International: Telephone by-pass, industrial automation and SCADA.
**Model 192V. A licensed narrow band packetburst transceiver for foreign and domestic commercial and industrial applicationsoperating in the 72 to 73 MHz spectrum (66 to 72 and 74 to 76 custom order). The digitallysynthesized transceiver is field tunable over the operating band in 20 KHz increments.Typical indoor and outdoor fixed base and mobile applications include point to point andpoint to multi-point digital data networking for distances to approximately 5 milesline-of-sight without the use of the digi-repeater option. Typical application uses forthe ESTeem 192V are as follows:
Domestic: Industrial automation and inventory control.

International: Telephone by-pass and industrial automation.
**Model 192S. A low cost unlicensed direct sequence spread spectrumtransceiver for foreign and domestic commercial and industrial applications operating inthe 2.4 GHz spectrum. Typical indoor and outdoor fixed base and mobile applicationsinclude point to point and point to multi-point digital data networking for distances toapproximately 10 miles line-of-sight without the use of the digi-repeater option. Typicalapplication uses for the ESTeem 192S are as follows:

Domestic: Industrial automation and inventory control.

International: Telephone by-pass and industrial automation.

Federal: Inventory and command control.
**Model 95. A low cost licensed narrow band packet burst transceiverfor foreign and domestic commercial and industrial applications operating in the 72 to 73MHz spectrum (66 to 72 and 74 to 76 custom order). The digitally synthesized transceiveris field tunable over the operating band in 20 KHz increments. Typical indoor and outdoorfixed base and mobile applications include point to point and point to multi-point digitaldata networking for distances to approximately 5 miles line-of-sight without the use ofthe digi-repeater option. Typical application uses for the ESTeem 95 are as follows:

Domestic: Industrial automation and inventory control.

International: Telephone by-pass and industrial automation.

Federal: Inventory and command control.

ADDITIONAL PRODUCTS AND SERVICES
The Company sells various accessories that support its EST productlines. Accessories are purchased from other manufacturers and resold by EST to support theapplication of ESTeem modems. Antennas, power supplies and cable assemblies are examplesof such items. The Company also provides direct services to customers, such as repair andupgrade of ESTeem products. To assist in the application of ESTeem wireless modems theCompany provides professional services, site survey testing, system start-up, and customengineering services.

RESEARCH AND DEVELOPMENT AND NEW PRODUCTS

The Company's products compete in the rapidly changing technologyenvironment of the communications industry, where standards and technologies are subjectto rapid and unexpected changes. This environment results in it being necessary for theCompany to be continually updating and enhancing existing products, as well as developingnew products in order to remain competitive. Research and Development expenditures for newproduct development and improvements of existing products by the Company for 2000 and 1999were $181,571 and $171,658, respectively. None of the Company's research anddevelopment expenses were directly paid for by any of the Company's customers. During2000, the Company continued to contract with an independent, nonaffiliated, engineeringcompany specializing in radio design, when that expertise was required. 

During 2000, the Company's development resources were used primarilyfor the development of the ESTeem 192E, a spread spectrum, non-licensed, wireless, modemusing the networking standard, Ethernet interface protocol, scheduled to be brought tomarket during the first quarter of 2001, to take advantage of perceived marketopportunities for this type of product. This product is intended to augment theCompany's existing products through the use of the Ethernet based, open networkarchitecture, allowing the product to be used in broader variety of applications, such as"last mile" and building network applications. The Company plans on continuedresearch and development expenditures and to undertake new development and improvementprojects, as they become necessary. 

MARKETING, CUSTOMERS AND SUPPORT

The majority of the Company's products are sold and distributeddirectly from the Company's facility through direct sales to end users of the ESTeemproducts. The remainder of the Company's sales are through non-exclusive,non-stocking Resellers. Normally, approximately seventy percent of the Company'sproducts are distributed through direct sales and thirty percent are through Resellers.Customers generally place orders on an "as needed basis". Shipping dates formost products are generally 5 to 10 working days after receipt of a customer order. As ofDecember 31, 2000, the Company had a backlog of $33,000 in sales orders.

During 2000, the Company continued to advertise in trade publicationsspecifically targeted at users of control, instrumentation, and automation systemsworldwide, and public safety entities domestically. The Company's advertising isprimarily targeted toward potential customers using Programmable Logic Controllers (PLCs).There are approximately twenty-five major PLC manufacturers worldwide. The Company alsoattends tradeshows each year specifically targeted toward the customers and markets inwhich it sells products. For 2001, the Company intends to continue marketing strategiestargeted at existing markets of industrial controls and Mobile Data Computers for publicsafety networks. The Company maintains an Internet web site to provide easy access toproduct and technical information for both present and potential customers of theCompany's products. Due to the variable configuration possibilities of theCompany's products, and existing distributor relationships, the Company has notimplemented an electronic commerce internet website. The Company provides technicalsupport and service for ESTeem products through phone support, field technicians, andInternet sources. The Company believes high quality customer and technical support isnecessary and vital to its business and the markets in which it competes. To maintain thishigh level of customer support the Company has in the past, and will continue in thefuture, to make investments and expenditures in support of its customer service programs. 

The Company is continuing marketing activities directed towards allbranches of the U.S. Government, including United States Armed Services. Examples ofprojects the Company's products have been included in the past are: flight-linemaintenance for the United States Air Force, flight-line lighting for the United StatesNavy, command and inventory control for the United States Marine Corps, and the AutomaticIdentification Technology program for the United States Army. 

For the year ended December 31, 2000, the largest sales concentrationfor the Company was to the Blaine County, Idaho Sheriff's Department, for a publicsafety, mobile data computer project, accounting for approximately 13% of theCompany's product and services revenues. No other sales to a single customercomprised 10% or more of total product sales as of December 31, 2000. See"Management's Discussion and Analysis of Financial Condition and Results ofOperations", and "Financial Statements".

The Company has a General Services Administration (GSA) contract tosell goods to the U.S. Government. This contract is a fixed price, indefinite quantity anddelivery agreement. The current contract runs through February 2004. 

COMPETITION

The Company's competition varies according to the market in whichthe Company's products are competing. All of the markets in which the Company'sproducts are sold are highly competitive. Listed below are the markets the Company'sproducts compete in and competition in those markets:

Major Market
Major Competitors
Industrial Automation,    Remote Data Acquisition, Shop Floor Manufacturing, Overhead Crane Control
Control Chief, Data-Linc,    GRE America, Johnson, Maxon, Microwave Data Systems and Motorola. 
Computer Networking, inter    and intra building
Adaptive Broadband, Aironet    Wireless Communications, Cylink, Digital Wireless, Metricom, and Proxim
Radio Area Networking of    hand held data collection terminals and bar coding
Intermec, LXE, Norand,    Symbol Technologies, and Telxon 
Mobile Data    Computer systems for public safety applications
Data Radio,    Motorola, various cellular service providers using CDPD architectures. 
Federal applications
Adaptive Broadband, Data    Radio, Datron Technology, Harris Computer Systems, Lockheed Martin, Magnavox, Motorola,    Siemens, and Watkins-Johnson.
Management believes the ESTeem products compete favorably in the marketbecause of performance, price, and adaptability of the products to a wide range ofapplications. The Company's major limitation in competing with other manufacturers is itslimited marketing budget, which currently limits the Company's nationwide advertisingand sales force presence.

PATENTS, TRADEMARKS, AND PROPRIETARY INFORMATION

EST was granted a United States patent in 1987 for a "WirelessComputer Modem". In 1988, EST was granted a Canadian Patent for a "WirelessComputer Modem". Both patents have lives of 17 years. Trademark for the ESTeemWireless Modem was granted in 1985. 

To protect the Company against unauthorized disclosure of proprietaryinformation belonging to the Company, all employees, dealers, distributors, originalequipment manufacturers, sales representatives and other persons having access toconfidential information regarding Company products or technology are bound bynon-disclosure agreements.

GOVERNMENT REGULATION

For operation in the United States, the ESTeem Radio Modems requireFederal Communications Commission (FCC) Type Acceptance. The FCC Type Acceptance isgranted for devices, which demonstrate operation within mandated, observed, and testedperformance criteria. All of the Company's products requiring FCC Type Acceptancehave been granted such acceptance, with the exception of the new 192E Ethernet basedproduct, which is scheduled for FCC Type Acceptance application during the first quarterof 2001. 

For operation in Canada, the ESTeem RF Modems require Industry CanadaType Acceptance. Industry Canada grants the Type Acceptance for devices demonstratingoperation within performance criteria mandated, observed, and tested. Of theCompany's current production line, the ESTeem 192F, 192C, 192V, 192M and 192S havebeen granted type acceptance in Canada. 

All ESTeem radio modem products, with the exception of the ESTeem 192Sand 192E products, which are nonlicensed, spread spectrum wireless modems, requireconsumer licensing under Part 90 of the FCC Rules and Regulations, which must be appliedfor by the end user of the Company's products. The Company cannot guarantee customerswill receive FCC consumer licenses in the VHF or UHF frequency spectrum for any particularapplication. The Company provides information to customers to assist in the applicationfor FCC consumer licenses.

At the time of this filing the Company is unaware of any existing orproposed FCC regulation that would have an materially adverse effect on the Company'soperations, but there can be no assurance that future FCC regulations will not havematerially adverse effects on the operations of the Company.

SOURCE OF SUPPLY AND MANUFACTURING

The Company purchases certain components necessary for the productionof its products from sole suppliers. Motorola Corporation, Mitsubishi and Toko AmericaInc., as purchased through a number of distributors, supply key components for theCompany's products. The components provided by Motorola and Toko America could bereplaced or substituted by other products, if it became necessary to do so. If this actionbecame necessary, a material interruption of production and/or material cost expendituresinvolved with locating and qualifying replacement components could take place. 

Approximately 25% of the Company's inventory at December 31, 2000consisted of parts having lead times ranging from 12 to 28 weeks. Some parts aremaintained at high levels to assure availability to meet production requirements, andaccordingly, account for a significant portion of the inventory dollar amount. Based onpast experience with component availability, current distributor relationships, andcurrent inventory levels, the Company does not foresee shortages of materials used inproduction. However, developments in the electronic component marketplace, involvingcomponents used by the Company which are also used in cellular phones and paging devices,has the potential of creating negative component availability and delivery issues for theCompany in the future. The Company has been able to procure parts on a timely basis as ofthe date of this report, however this cannot be guaranteed in the future and if shortageswere to occur material interruption of production and consequently product delivery tocustomers could occur. 

The Company contracts with Manufacturing Services, Inc., in Kennewick,Washington, for assembly of the Company's products, using material purchased by theCompany. By contracting with Manufacturing Services, Inc., the Company is able to avoidstaff fluctuations associated with operating its own manufacturing operation. ThePresident of Manufacturing Services, Melvin H. Brown, is a Director of the Company.Management believes all prices for services, provided by Manufacturing Services, Inc.,were as favorable as could be obtained from comparable manufacturing services companies.See "Management's Discussion and Analysis of Financial Condition and Results ofOperations", and "Financial Statements".

EMPLOYEES

As of December 31, 2000, the Company employed a staff of9 persons on a full time basis, 3 inmarketing, 1 in technical support, 4 in engineering/manufacturing, and 1 in Finance andAdministration. The Company's operations are dependent upon key members of itsEngineering and Management personnel. In the event services of these key individuals werelost to the Company, adverse effects on the Company's operations may be realized. TheCompany employs part-time labor on an "as needed" basis, usually inengineering/manufacturing. At year-end 2000 the Company employed 4 part-time employees.None of the Company's employees are represented by a labor union and the Companybelieves it has good relations with its employees.
ITEM 2.

PROPERTIES

EST does not own any real property, plants, mines, or any othermaterially important physical properties. The Company's administrative offices andlaboratories are located in leased facilities at 415 N. Quay Street, Kennewick,Washington. The Company leases its office and laboratory space in a lease agreement withThe Port of Kennewick in Kennewick, Washington for approximately 6,300 square feet ofoffice and laboratory space. As of January 1, 2001, the total monthly lease cost is$2,489.29, including a leasehold tax of $283.25. The lease covers a period of three years,expiring November 30, 2001. 

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 andcovering such losses, contingencies and occurrences that the Company deems adequate toprotect its property. Insurance coverage includes a comprehensive liability policycovering 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. TheCompany maintains key man life insurance protecting the Company in the event of the deathof the Company President. The Company also maintains fidelity insurance which providescoverage to the Company in the event of employee dishonesty.

ITEM 3. 

LEGAL PROCEEDINGS

No proceedings are identified to which involve a claim for damages,exclusive of interest and costs, that exceed 10% of the current assets of the Company. 

ITEM 4. 

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matters for shareholder approval duringthe fourth quarter of the 2000 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 theCompany. The Common Stock is not regularly quoted in the automated quotation system of aregistered securities system or association. The Common Stock of the Company is traded onthe "over-the-counter" market and is listed on the electronic bulletin boardunder the symbol of "ELST". The following table illustrates the average high/lowprice of the Common Stock for the last two (2) fiscal years. The"over-the-counter" quotations do not reflect inter-dealer prices, retailmark-ups, commissions or actual transactions.

Bid 
Ask
High
Low
High
Low
Fiscal year ended December    31, 2000
First Quarter
3.50
0.35
3.625
0.40 
Second Quarter
1.75
0.4688
2.00
0.625
Third Quarter
0.7188
0.375
0.9375
0.50
Fourth Quarter
0.5313
0.375
0.6875
0.4063
Fiscal year ended December    31, 1999
First Quarter
0.375
0.2813
0.5313
0.2813 
Second Quarter
0.4063
0.34
0.50
0.34 
Third Quarter
0.35
0.34
0.4375
0.35
Fourth Quarter
0.36
0.35
0.4063
0.35
The above data was compiled from information obtained from the NationalQuotation Bureau, Inc. daily quotation service.

The approximate number of record holders of common stock of theRegistrant as of February 1, 2001 was 580 persons/entities.

Electronic Systems Technology Inc. paid non-cumulative, cash distributions on July 9,1999, July 9, 1998 and July 11, 1997, respectively, each equivalent to $0.01 peroutstanding share. The Company's Forms 8-K dated June 11, 1999, June 4, 1998 and June5, 1997, as filed with the Securities and Exchange Commission are included herein byreference. Dividends undertaken by the Company will be solely at the discretion of theBoard of Directors. 

 

 

ITEM 6.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS
**Management's discussion and analysis is intended to be read inconjunction the Company's audited financial statements the integral notes thereto.The following statements may be forward- looking in nature and actual results may differmaterially.**
RESULTS OF OPERATIONS

GENERAL: The Company specializes in themanufacturing and development of wireless modem products. The Company offers a productline which provide innovative communication solutions for applications not served byexisting conventional communication systems. The Company offers product lines in marketsfor process automation in commercial, industrial and government arenas domestically, aswell as internationally, and domestically to public safety entities for mobile datacomputer terminal applications. The Company markets its products through direct sales,sales representatives, and domestic, as well as foreign, resellers. Operations of theCompany are sustained solely from revenues received through sales of its products andservices. 
FISCAL YEAR 2000 vs. FISCAL YEAR 1999

GROSS REVENUES: Total revenues for the fiscalyear 2000 were $1,584,665 reflecting a 10% increase from $1,434,393 gross revenues forfiscal year 1999. The increase is attributable primarily to increased product sales in2000, of $1,310,524 as compared to 1999 sales of $1,239,390, reflecting an increase of 5%,as well as increases in Engineering Services and interest revenues received by theCompany. Engineering Services during 2000 increased to $192,965 from 1999 levels of$134,521 due to an increase in the number and size of Engineering Service projectsperformed by the Company during 2000. Product sales increased during 2000 primarily fromincreased domestic sales to Industrial Automation and Public Safety Mobile Data Computer(MDC) projects. Management believes the increased sales and service revenues were ashort-term result during 2000, which may not continue during 2001. Economic factors maycause reduced revenues from industrial automation customers having a negative impact onprojects involving the Company revenues received from products and services. 
In 2000, a majority of the Company's domestic sales were for industrialautomation applications. An example of an industrial automation application is a city'swater treatment operation. It is the opinion of Management that industrial automationapplications will continue to provide the largest portion of the Company's revenues in theforeseeable future. The Company's domestic sales continue to be augmented by sales ofthe Company's products for mobile data computer systems to public entities, whichaccounted for 39% of the Company's domestic sales during 2000. An example of a mobiledata computer system for a public entity is a local area network (LAN), between policedepartment computer dispatch centers and individual police vehicles. 

During 2000, the Company had $109,292 in foreign export sales,amounting to 7% of gross product and service revenues for the year. For year-end 1999,foreign export sales were $133,025 or 14% of gross product and service revenues for theyear. In the opinion of Management, the continued decrease in foreign sales is due to theresult of increased competition in foreign industrial automation markets. Productspurchased by foreign customers were used primarily for use in industrial automationprojects. Management believes the majority of foreign export sales are due to ESTdistributor efforts and the Company's Internet website presence. The geographiccompositions of the Company's foreign export sales for 2000 and 1999 are shown inNote 6 to the Financial Statements. 

In 2000, products purchased by U.S. Government agencies or by U.S.Government contractors amounted to $23,062 or 2%, of gross product and service revenues ascompared with 1999 levels of $46,739, or 3% of gross product and service revenues. During2000, products purchased by the U.S. Government were utilized primarily in airfieldlighting control applications. Management believes the decrease in U.S. Government salesrevenues was the result of lack of U.S. Government funding for, or discontinuance of,programs using the Company's products. The uncertain nature of U.S. Governmentpurchasing, makes prediction and planning of revenues to be received from U.S. Governmentdifficult to predict. 

As of December 31, 2000, the Company had a backlog of $33,000. TheCompany's customers generally place orders on an "as needed basis".Shipment for most of the Company's products is generally made within 5 to 10 workingdays after receipt of customer orders. 

COST OF SALES: Cost of Sales, as a percentage of gross sales, for theyears of 2000 and 1999 was 56% and 51%, respectively. The cost of sales variation for 2000is the result of both an increase in the cost of the Company's products due toincreased prices paid for high demand components purchased during the first half of 2000,and a the product mix of the items sold during 2000 having a higher cost when comparedwith items sold during 1999. 

INVENTORY: The Company's year-end inventoryvalues for 2000 and 1999 were as follows:  
2000 
1999     
Parts 
$415,673 
$256,334
Work in Progress 
43,110 
52,279
Finished goods 
103,163 
48,877
TOTAL 
$561,946 
$357,490
The Company's objective is to maintain inventory levels as low aspossible to provide maximum cash liquidity, while at the same time, meet production anddelivery requirements. Approximately 25% of the Company's inventory at December 31,2000 consisted of parts having lead times ranging from 12 to 28 weeks. Some parts aremaintained at high levels to assure availability to meet production requirements, andaccordingly, account for a significant portion of the inventory dollar amount. Based onpast experience with component availability, current distributor relationships, andcurrent inventory levels, the Company does not foresee shortages of materials used inproduction. However, developments in the electronic component marketplace, involvingcomponents used by the Company which are also used in cellular phones and paging devices,has the potential of creating negative component availability and delivery issues for theCompany in the future. The Company has been able to procure parts on a timely basis as ofthe date of this report, however this cannot be guaranteed in the future and if shortageswere to occur material interruption of production and consequently product delivery tocustomers could occur. Inventory levels increased significantly between year end 1999 andyear end 2000 due to the Company purchasing increased amounts, at increased prices, highdemand components necessary to produce the Company's products that are also used inthe highly volatile cellular phone and pager marketplace. Inventory levels also increaseddue to purchase of components for the ESTeem 192E Ethernet based product under developmentduring 2000. 

For year-end 2000, purchases and costs allocated to cost of goods soldwere $936,383 as compared to $605,240 in 1999. The increase in purchases and allocatedcosts is a result of increased purchases by the Company during 2000 due to increasedinventory and component requirements. 

OPERATING EXPENSES: Operating expenses, prior toallocation of expenses to Cost of Sales and Engineering Services, increased to $993,282 in2000, from 1999 levels of $907,953. Material changes in expenses are comprised of thefollowing components: Advertising expenses increased to $30,810 in 2000 from 1999 levelsof $10,970 due to increased advertising frequency by the Company during 2000. Depreciationexpense increased during 2000 to $40,604 from 1999 levels of $32,699 due to the Companyacquiring additional depreciable assets late in 1999 and during 2000. Printing expensesdecreased from 1999 levels of $15,220 to 2000 levels of $5,396 due to reduced printingservices of marketing related material required by the Company during 2000. Professionalservices increased to $84,297 from 1999 levels of $69,785 due to increased subcontractedengineering services required for Research and Development projects. Repair andmaintenance expenses increased in 2000 to $16,108 as compared to $12,826 in 1999, due toincreased equipment and computer network repairs. 
Salaries increased to $540,800 in 2000, from 1999 levels of $503,156,due to increased wages paid to engineering services employees based on a commission basisfor engineering service revenues during 2000. Tradeshow expenses increased during 2000 to$19,873 from 1999 levels of $14,384, due to increased cost and frequency of tradeshowsattended by the Company during 2000. Travel expenses for the Company increased to $72,351during 2000 from 1999 levels of $56,292 due to increased travel expenses related toengineering services and increased marketing trips by the Company. The Company incurredbad debt expense of $ 117 during 2000 as compared with $1,155 during 1999. 

FISCAL YEAR 1999 vs. FISCAL YEAR 1998

GROSS REVENUES: Total revenues for the fiscalyear 1999 were $1,434,393 reflecting an 11% decrease from $1,631,298 gross revenues forfiscal year 1998. The decrease was attributed primarily to decreased product sales in1999, of $1,239,390 as compared to 1998 sales of $1,485,381, reflecting a decrease of 17%.The product sales decrease during 1999 was primarily the result of decreased sales to U.S.Government, and foreign market segments. Management believes the decrease in U.S.Government sales revenue was the result of lack of U.S. Government funding for, ordiscontinuance of, programs using the Company's products. 
In 1999, a majority of the Company's domestic sales were for industrialautomation applications. It is Management's opinion that industrial automationapplications will continue to provide the largest portion of the Company's revenues in theforeseeable future. The Company's domestic sales were also augmented by sales of theCompany's products for mobile data computer systems to public entities, whichaccounted for 40% of the Company's domestic sales during 1999. 

During 1999, the Company had $133,025 in foreign export sales,amounting to 10% of gross product and service sales for the year. For year-end 1998,foreign export sales were $214,396, or 14% of gross product sales for the year. It isManagement's belief that foreign sales decreased due to the result of increasedcompetition in foreign industrial automation markets. Products purchased by foreigncustomers were used primarily for use in industrial automation projects. Managementbelieves the majority of foreign export sales are due to EST distributor efforts and theCompany's Internet website presence. 

In 1999 products purchased by U.S. Government agencies or by U.S.Government contractors amounted to $46,739 or 3%, of gross product sales compared with1998 levels of $423,923, or 27%, of gross product sales. During 1999, Products purchasedby the U.S. Government were utilized primarily in PC to PC (Personal Computer) networking.Management believes the decrease in U.S. Government sales revenues was the result of lackof U.S. Government funding for, or discontinuance of, programs using the Company'sproducts. 

COST OF SALES: Cost of Sales, as a percentage of gross sales, for theyears of 1999 and 1998 was 51% and 47%, respectively. The cost of sales variation for 1999was the result of the Company reducing sales prices of the ESTeem products during 1999,and the product mix of items sold during 1999 having a higher cost than 1998. 

For year-end 1999, purchases and costs allocated to cost of goods soldwere $605,240 as compared to $758,870 in 1998. The decrease in purchases and allocatedcosts is a result of decreased purchases by the Company during 1999 due to lower thanexpected sales volume during most of the year. Also when compared with 1998, more of theCompany's salaries and wages expense previously classified as manufacturing support,were in 1999 allocated to research and development projects and engineering projectsultimately billed to customers. 

OPERATING EXPENSES: Operating expenses, prior toallocation of expenses to Cost of Sales and Engineering Services, increased to $907,953 in1999, from 1998 levels of $885,416. Material changes in expenses were comprised of thefollowing components: Advertising expenses decreased to $10,970 in 1999 from 1998 levelsof $37,149 due to continued reduced advertising frequency by the Company during 1999.Supplies and materials expenses increased during 1999 to $21,875 in 1999, from $15,568 in1998 due to increased research and development projects requiring such material.Professional services increased to $69,785 from 1998 levels of $66,210 due to increasedsubcontracted engineering services and year-end audit fees. Printing expenses increased to$15,220 during 1999 from 1998 levels of $7,082 primarily due to the redesign of theCompany's brochure items and increased marketing mailings by the Company. Repair andmaintenance expenses decreased in 1999 to $12,826 as compared to $18,259 in 1998, due todecreased equipment repairs. 
Salaries increased to $503,156 in 1999, from 1998 levels of $467,118,due to increased wages paid to engineering services employees, wages paid on a commissionbasis based on engineering service revenues during 1999, and planned wage increases forCompany employees. Travel expenses for the Company increased to $56,292 during 1999 from1998 levels of $50,847 due to increased travel expenses related to engineering servicesand increased marketing trips by the Company. The Company incurred bad debt expense of$1,155 during 1999 and did not incur any such expense during 1998. 

LIQUIDITY AND CAPITAL RESOURCES

The Company's revenues and expenses resulted in net income of$23,944 for 2000, reflecting a 54% decrease from the $52,301 net income of 1999. Thereduction in net income is a result of increased costs of goods sold reducing gross profitmargins, and operating expenses during 2000 when compared with 1999. Management believesthat operating expenses are expected to increase and negatively impact net income due toincreased research and development and marketing expenditures during 2001. At December 31,2000, the Company's working capital was $2,125,411 compared with $2,090,155 at December31, 1999. Increased working capital is attributable to increased accounts receivable andinventory levels as compared with year-end 1999. The Company's operations rely solelyon the income generated from sales. The Company's major capital resource requirements aremaintaining inventory levels adequate for production and payment of employee salaries.Extended availability for components critical for production of the Company'sproducts, ranging from 12 to 35 weeks, require the Company to maintain high inventorylevels. It is Management's opinion that the Company's working capital as ofDecember 31, 2000 is adequate for expected resource requirements for the next twelvemonths. 

The Company's current asset to current liability ratio at December 31,2000 was 22.3:1 compared to 34.2:1 at December 31, 1999. The current asset ratio decreaseis the result of increased trade accounts payable levels at the end of 2000 when comparedwith year-end 1999. 

The Company's cash resources at December 31, 2000, including cash andcash equivalent liquid assets, were $1,452,287, decreased from cash resources of$1,624,728 at year end 1999. The decreased cash resources at year end are the result ofthe Company's cash resources being converted to increased inventory and fixed assetsduring year, as well as timing differences in accounts receivable collection cycles, whencompared with year-end 1999. Cash flows were provided by the Company's net income of$23,944, and additional paid in capital received from exercise of Company stock options inthe amount of $39,450. Cash flows were offset primarily by increases to inventory of$204,456 and additions to property plant and equipment of $71,323.
The Company's trade accounts receivable, adjusted for allowance foruncollectible accounts, at December 31, 2000, were $183,627, compared to $154,788 atyear-end 1999. The increase is the result of timing differences in collection accountsreceivable cycles between December 31, 2000 and December 31, 1999. Management believesthat all of the Company's accounts receivable as of December 31, 2000, arecollectible.

The Company believes the level of risk associated with customer receipts on exportsales 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 terms to foreignoffices of domestic companies with which the Company has an existing relationship. Foreignorders are generally filled as soon as they are received, therefore, foreign exchange ratefluctuations do not impact the Company. 

Inventory level as of December 31, 2000, was $561,946, reflecting anincrease from December 31, 1999, levels of $357,490. The inventory level increase is dueprimarily to the Company purchasing increased amounts, at increased prices, of high demandcomponents necessary to produce the Company's products that were also used in thehighly volatile cellular phone and pager marketplace. Inventory levels also increased dueto purchase of components for the ESTeem 192E Ethernet based product under developmentduring 2000. 

The Company had capital expenditures during year 2000 of $71,323,primarily for equipment used for research/development and upgrades to the Company'scomputer network. The Company intends on investing in additional capital equipment as itis deemed necessary to support development and manufacture of the ESTeem Modem. As ofDecember 31, 2000, the Company's current liabilities were $99,725, increased from 1999year-end levels of $62,963. The increase is due to increased levels of trade accountspayable at year-end 2000. 

The Company has a General Services Administration (GSA) contract tosell goods to the U.S. Government. This contract is a fixed price, indefinite quantity anddelivery agreement. The current contract runs through February 2004. Projections regardingliquidity, profitability, and material purchases are based on past history of annualpurchases. Due to the uncertain nature of Federal Government purchasing, procurement ofmaterial and production planning is adjusted quarterly based on demand. It is Management'sopinion that the majority of Federal Government purchases in 2001 will be pursuant to theCompany's GSA contract. 

The Company's operations were not adversely effected by inflationduring 2000. No adverse affect is anticipated during 2001.
**FORWARD LOOKING STATEMENTS: The above discussion may containforward-looking statements that involve a number of risks and uncertainties. In additionto the factors discussed above, among other factors that could cause actual results todiffer materially are the following: competitive factors such as rival wirelessarchitectures and price pressures; availability of third party component products atreasonable prices; inventory risks due to shifts in market demand and/or price erosion ofpurchased components; change in product mix, and risk factors that are listed in theCompany's reports and registrations statements filed with the Securities and ExchangeCommission.**
ITEM 7. 

FINANCIAL STATEMENTS

See Exhibit 1, Financial Statements and Financial Statement Schedules.Such Financial Statements and Schedules are incorporated herein by reference.

ITEM 8.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE.

None

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 ofthe Company as of December 31, 2000; as well as term in office and principal occupation ofeach director. 
Name of Director
Term in Office
AgePrincipal OccupationT.L. Kirchner 
06/11/99 - 06/10/02
52President of the CompanyMelvin H. Brown
06/02/00 - 06/02/03
70President of Manufacturing Services, Inc.Arthur Leighton*
06/02/00 - 06/02/03
77ConsultantRobert Southworth
06/02/00 - 06/02/03
57Patent Attorney for U.S. Dept. of EnergyJohn H. Rector**
06/11/99 - 06/10/02
84ConsultantJohn L. Schooley 
06/05/98 - 06/05/01
61President of Remtron, Inc.
* Arthur Leighton died on January 15, 2001. Mr. Leighton'sposition on the Board of Directors was filled by Board of Director action, by Jon Correio,the Company's Manager of Finance & Administration on February 9, 2001. TheCompany's Forms 8K dated January 15, 2001 and February 9, 2001, respectively as filedwith the Securities and Exchange Commission are included herein by reference.

** John Rector resigned from the Board of Directors due to healthreasons on February 9, 2001. The Company's Form 8K dated February 9, 2001 as filedwith the Securities and Exchange Commission is included herein by reference.

Management believes that there are no agreements or understandingbetween the directors and suppliers or contractors of the Company, except the agreementwith Manufacturing Services, Inc. as described elsewhere in this report.

IDENTIFICATION OF EXECUTIVE OFFICERS

The following table sets forth the names and ages of all executiveofficers of the Company as of December 31, 2000; all positions by such persons; term ofoffice and the period during which he has served as such; and any arrangement orunderstanding between him and any other person(s) pursuant to which he was elected as anofficer:

Name of Officer
Age
Position
Term of Office
Period of Service
T. L. Kirchner
52
President
3 Years
02/10/84- Present
Robert Southworth*
57
Sec/Treas
3 Years
12/11/92- Present
* Robert Southworth resigned as the Company's Secretary/Treasureron February 9, 2001, and was replaced by Jon Correio, the Company's Manager ofFinance & Administration. Mr. Southworth retained his position as a Director of theCompany. The Company's Form 8K dated February 9, 2001 as filed with the Securitiesand Exchange Commission is included herein by reference.

There are no family relationships, whether by blood, marriage, oradoption, between any of the Directors or Executive Officers of the Company.

The following is a brief description of the business experience duringthe last five years of each director and/or executive officer of the Company.

T.L. KIRCHNER. Mr. Kirchner is founder, Presidentand a Director of the Company. During the last five years Mr. Kirchner devoted 100% of histime to the Management of the Company. His primary duties are to oversee the Managementand Marketing functions of the Company. Mr. Kirchner does not serve as a director for anyother company registered under the Securities Exchange Act.
MELVIN H. BROWN. Mr. Brown is a Director of theCompany. During the last five years Mr. Brown has been the owner and president ofManufacturing Services, Inc. Manufacturing Services provides services in packaging design,printed circuit board layout, prototyping, production runs, verification of documentationtesting, burn-in, quality control, and repetitive volume production. ManufacturingServices provides electronic manufacturing and quality control testing services forElectronic Systems Technology. Mr. Brown does not serve as a director for any othercompany registered under the Securities Exchange Act.
ROBERT SOUTHWORTH. Mr. Southworth is a Directorand the Secretary/Treasurer of the Company. Since 1980, Mr. Southworth has been employedwith the U. S. Department of Energy as a Senior Patent Attorney in Richland, Washington.His primary duties with the Department of Energy include the preparation and prosecutionof domestic and foreign patent applications in such fields as nuclear reactors, fuelreprocessing, waste management and energy related fields of solar, wind, and fossil fuels.Mr. Southworth does not serve as a director of any other company which is registered underthe Securities Exchange Act. (Mr. Southworth resigned as the Company'sSecretary/Treasurer on February 9, 2001, and was replaced by Mr. Jon Correio, theCompany's Manager of Finance & Administration. Mr. Southworth retained hisposition as a Director of the Company. The Company's Form 8K dated February 9, 2001as filed with the Securities and Exchange Commission is included herein by reference.)
JOHN L. SCHOOLEY. Mr. Schooley is a Director ofthe Company. During the past five years, Mr. Schooley has been the owner and President ofRemtron, Inc. in San Diego, California. Remtron, Inc. is a manufacturer of advanced radiocontrol and telemetry systems for the industrial market. Remtron, Inc. has providedresearch and development services for Electronic Systems Technology. Mr. Schooley does notserve as director of any other company that is registered under the Securities Act.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The following person(s) who, at any time during the fiscal year, was adirector, officer, beneficial owner or more than 10% any class of equity securities of theregistrant, failed to file on a timely basis the required disclosure Form as noted: None.

ITEM 10.****
EXECUTIVE COMPENSATION

The Company's named compensated executive officer is T.L.Kirchner, President and CEO. The Company had no other compensated executive officers as ofDecember 31, 2000. 

The information specified concerning the compensation of the namedexecutive officers for each of the Registrant's last three completed fiscal years isprovided in the following Summary Compensation Table:

SUMMARY COMPENSATION TABLE Long Term Compensation
Annual    Compensation
Awards
Payouts 
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)Name and Principal Position Year
Salary

($)Bonus
($)(1)
Other Annual Compensation    ($)(2)
Restricted Stock Awards

($)
Securities Options    Underlying SARs

(#)
LTIP

Payouts

($)
All

Other

Compensation

($)(3)(4)
T. L. Kirchner,

President &

CEO
2000
90,000
0
3,545
0
25,000
0
7,401 
1999
87,430
4,087
1,881
0
25,000
0
5,845 
1998
74,580
5,080
734
0
25,000
0
5,846
(1) Includes amounts paid under the Non-qualified Employee Profit Sharing Bonus

(2) Other Annual Compensation includes Accrued Vacation Pay

(3) All Other Compensation consists of premiums paid for Group Health Insurance and KeyMan Insurance
(4) Amounts do not reflect proceeds of $0.01 per share cash distribution received    during 1997, 1998, and 1999 totaling $4035 for each year listed, respectively. Receipt of    cash distribution was based solely on capacity as a shareholder. 

The information specified concerning the stock options of the named executive officersduring the fiscal year ended December 31, 2000 is provided in the following Option/SARGrants in the Last Fiscal Year Table:

OPTION/SAR GRANTS IN LAST    FISCAL YEAR
Individual Grants (5)
(a)
(b)
(c)
(d)
(e)Name
Number of Securities

Underlying

Options/SARs

Granted # (4)
% of Total Options/SARs    Granted to Employees in Fiscal Year
Exercise or base price    ($/Share)
Expiration Date
T.L. Kirchner
25,000
11.4%
2.81
2/10/03
(5) This table does not include Stock Options granted previously. Forms    8-K dated 2/12/99 and 2/11/00 respectively, are incorporated herein by reference.

The information specified concerning the stock options of the namedexecutive officers during the fiscal year ended December 31, 2000 is provided in thefollowing Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-EndOptions/SAR Values Table:

AGGREGATED OPTION/SAR    EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR END OPTION/SAR VALUES
(a)
(b)
(c)
(d)
(e)
Name
Number of Shares Acquired on    Exercise
Value Realized ($)
Number of Securities

Underlying

Unexercised

Options/SARs at

FY-End (#)

Excercisable/

Unexercisable
Value of Unexercised

In-the-money

Options/SARs

At FY-End ($)

Excercisable/

Unexercisable
T.L. Kirchner
0
0
75,000
0
The Company does not currently have a Long-Term Incentive Plan("LTIP").

Compensation to outside directors is limited to reimbursement ofout-of-pocket expenses that are incurred in connection with the directors dutiesassociated with the Company's business. There is currently no other compensationarrangements for the Company's directors. (See "Security Ownership of CertainBeneficial Owners and Management" for Stock Options granted in previous years.)

The Company currently does not hold any Employment Contracts or Changeof 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, 2000, the amount andpercentage of the Common Stock of the Company, which according to information supplied bythe Company, is beneficially owned by each person who, to the best knowledge of theCompany, is the beneficial owner (as defined below) of more than five (5%) of theoutstanding common stock.

Title of Class
Name & Address

Of

Beneficial Owner (1)
Amount & Nature of

Beneficial Ownership
Percent of Class
Common
T.L. Kirchner

415 N. Quay St.

Kennewick WA 99336
403,488 (2)(3)
8.1%
Common
EDCO Partners    LLLP

4605 Denice Drive

Englewood CO 80111
304,715
6.00%
(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.  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 were granted February 6,    1998, Options for 25,000 granted February 12, 1999, and Options for 25,000 granted    February 11, 2000. Forms 8-K, dated February 6, 1998, February 12, 1999, and February 11,    2000 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 9, 2001, amount andpercentage of the Common Stock of the Company, which according to information supplied bythe Company, is beneficially owned by Management, including officers and directors of theCompany.

Title 

Of

Class
Name 

Of

Beneficial Owner 
Amount &    Nature

of

Beneficial Ownership 
Percent of 

Class
Common 
T.L. Kirchner

(Officer & Director) 
403,488 (1)
7.9%
Common 
Robert    Southworth

(Officer & Director) 
0 (1)
0.0%
Common 
Melvin H. Brown    (Director) 
76,500(1)
1.5%
Common 
Arthur Leighton    (Director)(2) 
154,000(1)
3.0%
Common 
John Schooley    (Director) 
85,000(1)
1.7%
Common 
John Rector    (Director)(3) 
3,000(1)
0.05%Does not include stock options. See below.
Deceased as of January 15, 2001
Resigned as of February 9, 2001

On various dates, the Company's Board of Directors has approved StockOption Bonuses for Directors and Employees. The following is a summary of the Stock Optionbonuses currently outstanding: Options are exercisable at fixed prices. Options may not beexercised in blocks of less than 5,000 shares. Options not exercised expire three yearsafter approval date or 90 days following termination of employment/board membership,whichever occurs first. In the event of acquisition, merger, recapitalization or similarevents of the Company, the optionee will receive equivalent shares or will have a 10-daywindow in which to exercise the options. Option grants are not transferable or assignableexcept to the optionee's estate in the event of the optionee's death. 

The information below does not include stock options granted inFebruary 2001.

Recipients of Stock Options currently unexpired as of 12/31/00 were asfollows:

Exercise Price

Name                        Option Shares         per Share ($) 
-----------------------------------------------------------------------

APPROVAL DATE: 2-11-2000
Philip J. Smith
5,000
$2.81
Brad E. Bement
5,000
2.81
David B. Strecker
15,000
2.81
Eric P. Marske
15,000
2.81
Jon A. Correio
15,000
2.81
Alan B. Cook
15,000
2.81
Melvin Brown
25,000
2.81
Tom Kirchner
25,000
2.81
Arthur Leighton
25,000
2.81
Robert Southworth
25,000
2.81
John H. Rector
25,000
2.81
John L. Schooley
25,000
2.81
APPROVAL DATE: 2-12-99

Philip J. Smith
5,000
$0.44
Brad E. Bement
5,000
0.44
David B. Strecker
15,000
0.44
Eric P. Marske
15,000
0.44
Jon A. Correio
15,000
0.44
Alan B. Cook
15,000
0.44
Melvin Brown
25,000
0.44
Tom Kirchner
25,000
0.44
Arthur Leighton
25,000
0.44
Robert Southworth
25,000
0.44
John H. Rector
25,000
0.44
John L. Schooley
25,000
0.44
APPROVAL DATE: 2-6-98

David B. Strecker
15,000
$0.41
Eric P. Marske
15,000
0.41
Jon A. Correio
15,000
0.41
Alan B. Cook
15,000
0.41
Melvin Brown
25,000
0.41
Tom Kirchner
25,000
0.41
Arthur Leighton
25,000
0.41
Robert Southworth
25,000
0.41
John H. Rector
25,000
0.41
John L. Schooley
25,000
0.41
Stock options must be exercised within 90 days after termination ofemployment/board membership. During 2000, 165,000 options expired, and 115,000 sharesunder option were exercised. At December 31, 2000 there were 580,000 shares reserved forfuture exercise.

ITEM 12. 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT AND OTHERS

During fiscal year 2000, the Company contractedfor services from Manufacturing Services, Inc. in the amount of $96,853. ManufacturingServices, Inc. is owned and operated by Melvin H. Brown, who is a Director of ElectronicSystems Technology, Inc. Management believes all prices for services, provided byManufacturing Services, Inc., were as favorable as could be obtained from comparablemanufacturing services companies.
PART IV

ITEM 13. 

EXHIBITS AND REPORTS ON FORM 8-K

Exhibits filed as part of the Company's 10KSB report for 2000 are listed below.Certain exhibits have been previously filed with the Securities and Exchange Commissionand are incorporated by reference.

EXHIBITNUMBER                                                    DESCRIPTION

---------------------------                                               ------------------------------
- Report of Independent Certified Public Accountant

           Financial Statements/Financial Statement Schedules 

           Balance Sheets

           Statement of Operations

           Statement of Changes in Stockholders Equity

           Statement of Cash Flows

           Notes to Financial Statements
Reports on Form 8-K 
Form 8-K, dated January 15, 2001
Form 8-K, dated February 9, 2001

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.
Instrument defining the rights of security holders including      indentures.
Exhibit II Form S-18 Registration Statement No. 2-92949-S is incorporated hereinby reference. 

Form 8A Registration Statement, 000-27793, dated October 25, 1999, is incorporatedherein by reference.
Forms 8-K dated February 7, 1997, February 6, 1998, February 12, 1999 and February 11,        2000 are incorporated by reference.

        11.     Statementre-computation of per share earnings. 

        13.     Annual report to security holders, Form 10-Q or quarterly reportto security holders. N/A

        22.     Published report regarding matters submitted to vote of securityholders. N/A

        24.    Consents of expertsand counsel 

        99.    Additional Exhibits
99.1 Report of Audit Committee 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, theRegistrant has caused this Report to be signed on its behalf by the undersigned, thereuntoduly authorized.

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

By: /s/ T.L. KIRCHNER

T.L. Kirchner, Director/President

(Principal Executive Officer)

Date: MARCH 23, 2001

In accordance with the Exchange Act, this Report has been signed belowby the following persons on behalf of the Registrant and in the capacities and on thedates indicated.

Signature
Title
Date
/s/ T.L. KIRCHNER
Director/President
MARCH 23, 2001
T.L. Kirchner     
/s/ ROBERT SOUTHWORTH
Director
MARCH 23, 2001
Robert Southworth     
/s/ MELVIN BROWN
Director
MARCH 23, 2001
Melvin H. Brown     
/s/ JOHN SCHOOLEY
Director
MARCH 23, 2001
John L. Schooley  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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