UNITED STATES SECURITIES AND EXCHANGE COMMISSIONSWASHINGTON D.C. 20549FORM 10-QSB

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES    EXCHANGE ACT OF 1934

| For the quarterly period ended:
March 31 2001
Commission File Number:
000-27793
 

 
**ELECTRONIC SYSTEMS TECHNOLOGY, INC.(A Washington Corporation)****
I.R.S. Employer    Identification no.
91-1238077
 

415 N. Quay St., #4Kennewick WA 99336(509) 735-9092

 

 

 

 

 

 

 

Check whether the issuer (1) has filed all reports required to be filedby Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes [ X ] No [ ].

 

The number of shares outstanding of common stock as of March 31, 2001was 5,098,667. 

 
**PART IFINANCIAL INFORMATION

Item 1. Financial Statements.**
ELECTRONIC SYSTEMS TECHNOLOGY, INC.SELECTED FINANCIAL DATA(as prepared by Management)(Unaudited)
Three Months Ended
Mar. 31, 2001
Mar. 31, 2000Sales
$ 210,721
$ 228,413Other Revenues
$ 52,830
$ 60,706Gross Profit
$ 91,598
$ 104,620   Net Income (Loss) Before Taxes 
$ ( 46,630)
$ ( 45,996)Net Income (Loss) After Taxes
$ ( 30,571)
$ ( 30,357)   Earnings (Loss) Per Share Before Taxes  Basic
$ ( 0.01)
$ ( 0.01)Diluted
$ ( 0.01)
$ ( 0.01)   Earnings (Loss) Per Share After Taxes  Basic
$ ( 0.006)
$ ( 0.005)Diluted
$ ( 0.006)
$ ( 0.005)   Weighted Average Shares Outstanding (Basic)  Primary
5,660,229
5,609,420Diluted
5,688,667
5,609,420   Total Assets
$ 2,382,701
$ 2,443,133   Long-Term Debt and Capital Lease  Obligations
$ 0
$ 0    Shareholders' Equity
$ 2,289,875
$ 2,253,845   Shareholders' Equity Per Share
$ 0.45
$ 0.44   Working Capital
$ 2,111,927
$ 2,108,736   Current Ratio
23.75:1
12:1    Equity To Total Assets
96 %
92 % 
 

 

 

 

 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.BALANCE SHEET(as prepared by Management)(Unaudited)
 
Mar. 31, 2001
Dec. 31 ,2000ASSETS  CURRENT ASSETS  Cash and cash equivalents
$ 1,449,503
$ 1,452,287 Accounts Receivable, net of    allowance    for uncollectibles
97,155
183,627 Inventory
615,992
561,946 Accrued Interest
8,414
9,522 Prepaid Expenses
10,997
11,121Provision for Federal Income Taxes
22,692
6,633Total Current Assets
$ 2,204,753
$ 2,225,136 PROPERTY & EQUIPMENT net of    Depreciation of $326,669 at    Mar. 31, 2001 and $316,765    At Dec. 31, 2000
 

171,350
 

175,722 OTHER ASSETS
6,598
7,013TOTAL ASSETS
$ 2,382,701
$ 2,407,871 LIABILITIES & STOCKHOLDERS'    EQUITY CURRENT LIABILITIESAccounts Payable
$ 63,552
$ 78,103Deferred Tax Liability 
915
915Accrued Liabilities
28,359
20,707Total Current Liabilities 
92,826
99,725 STOCKHOLDERS' EQUITYCommon Stock, $.001 Par Value    50,000,000 Shares Authorized    5,098,667 Shares Issued And Outstanding 
 

$ 5,099
 

$ 5,069 Additional Paid-in Capital
945,734
933,464 Retained Earnings
1,339,042
1,369,613 
$ 2,289,875
$ 2,308,146 TOTAL LIABILITIES AND    STOCKHOLDERS' EQUITY
$ 2,382,701
$ 2,407,871 
 

 

 

(See "Notes To Financial Statements")

ELECTRONIC SYSTEMS TECHNOLOGY, INC.STATEMENT OF OPERATIONS(as prepared by Management)(Unaudited)
Three Months Ended
Mar. 31, 2001
Mar. 31, 2000 SALES
$ 210,721
$ 228,413COST OF SALESBeginning Inventory
561,946
357,490 Purchases and Allocated Costs
173,169
237,145 
$ 735,115 
$ 594,635Ending Inventory
615,992
470,842Total Cost of Sales
$ 119,123
$ 123,793Gross Profit
$ 91,598
$ 104,620 OPERATING EXPENSESFinance/Administration
$ 46,797
$ 47,485 Research & Development
37,542
49,912 Marketing
57,363
55,560 Customer Service
23,739
22,895Total Operating Expense
$ 165,441
$ 175,852OPERATING INCOME (LOSS)
$ ( 73,843)
$ ( 71,232) Other Income (expenses)Interest Income
$ 18,890
$ 18,584 Loss on Asset Disposal
( 3)
--Engineering Services
33,940
42,122 Engineering Support
(25,614)
(35,470)Net Other Income (expense)
$ 27,213
$ 25,236 NET INCOME (LOSS) BEFORE TAX
$ ( 46,630)
$ ( 45,996) Provision For Income Tax
16,059
15,639NET INCOME (LOSS)
$ ( 30,571)
$ ( 30,357) Basic Earnings (Loss) Per Share    Before Tax
$ ( 0.01)
$ ( 0.01) Basic Earnings (Loss) Per Share     After Tax
$ ( 0.006)
$ ( 0.005)  Diluted Earnings (Loss) Per Share    Before Tax
$ ( 0.01)
$ ( 0.01) Diluted Earnings (Loss) Per Share    After Tax
$ ( 0.006)
$ ( 0.005) 
 

(See "Notes To Financial Statements")

ELECTRONIC SYSTEMS TECHNOLOGY, INC.STATEMENT OF CASH FLOWS(as prepared by Management)(Unaudited)
Three Months Ended
Mar. 31, 2001
Mar. 31, 2000CASH FLOWS PROVIDED (USED) IN    OPERATING ACTIVITIES:Net Income (Loss)
$ ( 30,571)
$ ( 30,357) Noncash items    included in income:
Depreciation

9,904
8,873 
Amortization

415
615 
Loss on Disposition of Assets

3
--
Provision for Federal Income Taxes

( 16,059)
( 15,639) DECREASE (INCREASE) IN CURRENT    ASSETS:Accounts Receivable Net
86,472
2,923 Inventory
( 54,046)
( 113,352) Prepaid Expenses
124
( 3,713) Accrued Interest
1,108
( 880) INCREASE (DECREASE) IN CURRENT    LIABILITIES:Accounts Payable and Accrued    Expenses 
(6,899)
15,106Refundable Deposits
--
111,219Accrued Federal Income Taxes
--
--Deferred Income
--
--
$ ( 9,549) 
$ ( 25,205)CASH FLOWS PROVIDED (USED) IN    INVESTING ACTIVITIES:Additions To Property And    Equipment
$ ( 5,535)
$ -- 
$ ( 5,535) 
$ --CASH FLOWS PROVIDED (USED) IN    FINANCING ACTIVITIES:Common Stock Issued through    exercised stock options
$ 30
$ 115Additional Paid In Capital from    exercised stock options
12,270
39,335
$ 12,300
$ 39,450NET INCREASE (DECREASE) IN CASH    AND    CASH EQUIVALENTS
$ ( 2,784)
$ 14,245 Cash And Cash Equivalents    At Beginning Of Period
1,452,287
1,624,728Cash And Cash Equivalents At    Ending of Period 
$ 1,449,503
$ 1,638,973SUPPLEMENTAL DISCLOSURES OF CASH    FLOWS INFORMATION:Cash Paid Year To    Date:Interest
0
0 Federal Income Taxes
$ 0
$ 0 Cash And Cash    Equivalents:Cash
$ 6,100
$ 6,656 Money Market Accounts
371,636
621,842 Certificates Of Deposit
1,071,767
1,010,475
$ 1,449,503
$ 1,638,973
(See "Notes To Financial Statements")

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.NOTES TO FINANCIAL STATEMENTS(as prepared by Management)(Unaudited)
**NOTE 1 - BASIS OF PRESENTATION**
The financial statements of Electronic Systems Technology, Inc. (the"Company"), presented in this Form 10Q are unaudited and reflect, in the opinionof Management, a fair presentation of operations for the three month periods ended March31, 2001 and March 31, 2000. Certain information and footnote disclosure normally includedin financial statements prepared in accordance with generally accepted accountingprincipals have been condensed or omitted pursuant to the applicable rules and regulationsof the Securities and Exchange Commission. In preparation of the financial statements,certain amounts and balances have been restated from previously filed reports to conformwith the format of this quarterly presentation. These financial statements should be readin conjunction with the audited financial statements and notes thereto included in theCompany's Form 10K for the year ended December 31, 2000 as filed with Securities andExchange Commission.

The results of operation for the three-month periods ended March 31, 2001 and March 31,2000 are not necessarily indicative of the results expected for the full fiscal year orfor any other fiscal period.
**NOTE 2 - INVENTORIES**
Inventories are stated at lower of cost or market with cost determined using the FIFO(first in, first out) method. Inventories consist of the following:
 
March 31 2001 
December 312000Parts
$ 386,319 
$ 415,673Work in progress
114,620 
43,110Finished goods
115,053 
103,163 
$ 615,992 
$ 561,946**NOTE 3 – LOSS PER SHARE**
Basic and diluted loss per share is computed by dividing income (loss)available to common stockholders by the weighted-average number of common sharesoutstanding for the period, excluding equivalent shares from possible stock optionexercises, the effect of which would be anti-dilutive. The primary weighted average numberof common shares outstanding used for calculation of basic and diluted loss per share was5,098,667 for the quarter ended March 31, 2001.
**NOTE 4 - STOCK OPTIONS**
As of March 31, 2001, the Company had outstanding stock options whichhave been granted periodically to individual employees and directors with no less thanthree years of continuous tenure with Company. On February 9, 2001, additional stockoptions to purchase shares of the Company's common stock were granted to individualemployees and directors with no less than three years continuous tenure. The optionsgranted on February 9, 2001 totaled 195,000 shares under option and have an exercise priceof $0.44 per share. The options granted on February 9, 2001 may be exercised any timeduring the period from February 9, 2001 through February 9, 2004. The Company's Form 8-Kdated February 9, 2001, as filed with the Securities and Exchange Commission is includedherein by reference. All outstanding stock options must be exercised within 90 days aftertermination of employment. 

During the 12 month period from March 31, 2001 to March 31, 2000,175,000 shares under option expired, 30,000 shares under option were exercised, and195,000 shares under option were granted. At March 31, 2001 there were 590,000 sharesunder option reserved for future exercises.

The Company has adopted the disclosure-only provisions of Statement ofFinancial Accounting Standards (SFAS) No. 123, "Accounting for Stock-BasedCompensation." The Company undertakes to make disclosures and calculations pursuantto SFAS 123 on an annual basis coinciding with the issuance of the Company's AnnualFinancial Statements. Accordingly, no compensation cost has been recognized for the stockoption plan. 
**NOTE 5 - RELATED PARTY TRANSACTIONS**
For the quarter ended March 31, 2001, services in the amount of $13,003were contracted with Manufacturing Services, Inc., of which the owner/president is amember of the Board of Directors of EST.

 

 

 
** 

ITEM II**
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATION
***Management's discussion and analysis is intended to be read inconjunction with the Company's unaudited financial statements and the integral notesthereto for the quarter ending March 31, 2001. The following statements may be forwardlooking in nature and actual results may differ materially.*
A. RESULTS OF OPERATIONS**
REVENUES: Total revenues from the sale of EST products and servicesdecreased to $244,661 for the first quarter of 2001 as compared to $270,353 in the firstquarter of 2000. Gross revenues decreased to $263,551 for the quarter ending March 31,2001, from $289,119 for the same quarter of 2000. It is Management's opinion that thedecreased product and service revenues are primarily the result of sales of Mobile DataComputer Systems for public safety entities being lower than anticipated. Managementbelieves the revenue reduction for the Mobile Data Computer Systems market segment maycontinue in the near term due to current market and economic conditions, and public safetyentity purchases being linked to uncertain government funding. 

The Company's revenues have historically fluctuated from quarter toquarter due to timing factors such as customer order placement and product shipments tocustomers, as well as customer buying trends, and changes in the general economicenvironment. The procurement process regarding plant and project automation, or projectdevelopment, which usually surrounds the decision to purchase ESTeem products can belengthy. This procurement process may involve bid activities unrelated to the ESTeemproducts, such as additional systems and subcontract work, as well as capital budgetconsiderations on the part of the customer. Because of the complexity of this procurementprocess, forecasts in regard to the Company's revenues become difficult to predict. 

The Company's revenues fall into three major customer categories,Domestic, Export and U.S. Government sales. Domestic commercial sales decreased to$171,965 in the first quarter of 2001 as compared to $242,877 for the first quarter of2000. Foreign export sales for the first quarter of 2001 increased to $66,464 as comparedto the $16,842 in foreign sales in the same quarter of 2000, due to large industrialautomation project orders in India and Croatia. The Company had sales of $6,202 to U.S.Government programs for the first quarter of 2001 as compared with $10,816 in the firstquarter 2000. Engineering services billed in the first quarter of 2001 decreased to$33,940 as compared with $42,122 for the same quarter of 2000. The decrease in engineeringservices is the result of period differences in the amount of engineering servicesrequested by the Company's customers when compared with the first quarter of 2000,primarily due to lower than expected engineering services related projects for mobile datacomputer systems for public safety entities. During the quarter ended March 31, 2001 salesto Pomak Control Engineering (Croatia) and Prudent Automation (India), both foreigndistributors of the Company's products, consisted of 12% and 11%, respectively, of theCompany's sales and service revenues. No other sales to a single customer comprised 10% ormore of the Company's product sales.

A percentage breakdown of EST's major customer categories of Domestic,Export and U.S. Government Sales, for the first quarter of 2001 and 2000 are as follows: 

For the first quarter of
2001
2000
Domestic Sales
70%
90%
U.S. Government Sales
3%
4%
Export Sales
27%
6%
A percentage breakdown of EST's product sales categories for the first quarter of 2001and 2000 are as follows:
For the first quarter of
2001
2000ESTeem Model 192
62%
44%ESTeem Model 95
5%
10%ESTeem Model 96
2%
8%ESTeem Accessories
15%
19%Factory Services
2%
3%Site Support
14%
16%
Sales include foreign export sales as follows:
Three Months Ended
March 31
March 31
2001
2000Export sales
$ 66,494
$ 16,842Percent of sales
27%
6%
The geographic distribution of foreign sales for the first quarter of 2001 and 2000 isas follows:
Percent of Foreign Sales
March 31
March 31COUNTRY
2001
2000Croatia
44%
--India
41%
--Indonesia
8%
--Brazil
4%
--Columbia
2%
--Mexico
1%
50%South Korea
--
41%** |
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