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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

 

OR

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

From ________________ to ________________

 

 

ELECTRONIC SYSTEMS TECHNOLOGY INC

(Exact name of registrant as specified in its charter)

 

washington 000-27793 91-1238077
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)

 

415 N. Roosevelt St. STE B1 Kennewick WA   99336  
(Address of principal executive offices)   (Zip Code)
           

 

(509) 735-9092

(Registrant's telephone number, including area code)

 

N/A

(Former name, former address & former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, $0.001 par value ELST OTCQB

 

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings for the past 90 days. Yes x NO o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x NO o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large Accelerated Filer   o Accelerated Filer  o

Non-Accelerated Filer x

 

Small Reporting Company x

Emerging Growth Company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of October 22, 2022, the number of the Company's shares of Common Stock par value $0.001, outstanding was 4,946,502.

 
 

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

           
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
   September 30,   December 31, 
   2022   2021 
         
ASSETS          
Current assets          
Cash and cash equivalents  $561,605   $655,616 
Certificates of deposit   400,584    400,000 
Accounts receivable   162,659    166,303 
Inventories   558,434    501,833 
Prepaid expenses   77,764    24,387 
Accrued interest receivable   829    35 
Total current assets   1,761,875    1,748,174 
           
Property and equipment, net of depreciation   1,025    1,358 
           
Right to use – Lease, net of amortization (NOTE 6)   78,757    28,922 
           
   Total assets  $1,841,657   $1,778,454 
           
LIABILITIES and STOCKHOLDERS' EQUITY          
Current liabilities          
Accounts payable  $26,842   $71,645 
Accrued wages and bonus   23,130    9,114 
Accrued vacation pay   15,423    28,438 
Lease liability, current (NOTE 6)   37,937    13,613 
Other accrued liabilities   7,073    14,827 
Total current liabilities   110,405    137,637 
           
       Operating lease liability (NOTE 6)   40,821    —   
           
   Total liabilities   151,226    137,637 
           
Stockholders' equity          
Common stock, $ 0.001 par value 50,000,000 shares authorized 4,946,502 and 4,946,502 shares issued and outstanding respectively   4,947    4,947 
Additional paid-in capital   932,412    932,412 
Retained earnings   753,072    703,458 
Total stockholders' equity   1,690,431    1,640,817 
   Total liabilities and stockholders' equity  $1,841,657   $1,778,454 

 

See Notes to Financial Statements.

 


2 
 

 

 

 

                     

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                 
    Three Months Ended September 30, 2022    Three Months Ended September 30, 2021    Nine Months Ended September 30, 2022    Nine Months Ended September 30, 2021 
                     
SALES - NET  $487,160   $256,069   $1,376,195   $1,137,848 
COST OF SALES   (210,056)   (152,834)   (611,376)   (546,568)
GROSS PROFIT   277,104    103,235    764,819    591,280 
                     
Operating Expenses                    
     General and administrative   60,784    55,574    212,308    215,528 
     Research and development   40,029    46,534    131,662    153,483 
     Marketing and sales   104,293    122,960    373,694    344,594 
TOTAL OPERATING EXPENSE   205,106    225,068    717,664    713,605 
                     
OPERATING INCOME (LOSS)   71,998    (121,833)   47,155    (122,325)
                     
OTHER INCOME                    
     Gain on forgiveness of CARES Act loan   —      130,255    —      280,373 
     Interest income   1,373    555    2,459    1,981 
TOTAL OTHER INCOME   1,373    130,810    2,459    282,354 
                     
NET INCOME (LOSS) BEFORE  INCOME TAX   73,371    8,977    49,614    160,029 
     Benefit (provision) for income tax   —      —      —      —   
NET INCOME (LOSS)  $73,371   $8,977   $49,614   $160,029 
                     
Basic and diluted net income (loss) per share  $0.01   $0.00   $0.01   $0.03 
                     
Basic and diluted weighted average shares used in computing net income (loss) per share:   4,946,502    4,946,502    4,946,502    4,946,502 

 

 

 

 

See Notes to Financial Statements.

 

 

3 
 

 

 

           
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
   Nine Months Ended 
   September 30,   September 30, 
   2022   2021 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
           
Net income (loss)  $49,614   $160,029 
           
Noncash items included in net income (loss):          
     Depreciation   333    3,867 
     Share based compensation   —      970 
     Gain on forgiveness of CARES Act loan   —      (280,373)
           
Changes in operating assets and liabilities:          
     Accounts receivable, net   3,644    197,494 
     Inventories   (56,601)   97,428 
     Accrued interest receivable   (794)   3,467 
     Prepaid expenses   (53,377)   (2,209)
     Accounts payable   (44,803)   59,027 
     Other accrued liabilities   (14,525)   20,231 
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES   (87,459)   259,931 
           
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
    Certificates of deposit redeemed   850,000    249,999 
    Certificates of deposit purchased   (850,584)   —   
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES   (584)   249,999 
           
CASH FLOWS USED IN FINANCING ACTIVITIES:          
    Principal payments on CARES Act loan payable (round 1)   (5,968)   (1,975)
    Proceeds from CARES Act loan payable (round 2)   —      130,255 
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES   (5,968)   128,280 
           
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS   (94,011)   638,210 
Cash and cash equivalents at beginning of period   655,616    308,110 
Cash and cash equivalents at end of period  $561,605   $946,320 

 

See Notes to Financial Statements.

 

 

4 
 

 

 

                          
ELECTRONIC SYSTEMS TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
   Common Stock   Additional
Paid-In		   Retained     
   Shares   Amount   Capital   Earnings   Total 
                     
Balances, January 1, 2021   4,946,502   $4,947   $931,442   $610,469   $1,546,858 
                          
   Net income (loss)   —      —      —      4,682    4,682 
                          
Balance at March 31, 2021   4,946,502   $4,947   $931,442   $615,151   $1551,540 
                          
  Net income (loss)   —      —      —      146,370    146,370 
                          
Balance at June 30, 2021   4,946,502   $4,947   $931,442   $761,521   $1,697,910 
                          
  Net income (loss)   —      —      —      8,977    8,977 
                          
  Stock based compensation             970         970 
                          
Balance at September 30, 2021   4,946,502   $4,947   $933,412   $770,498   $1,707,857 
                          
Balances, January 1, 2022   4,946,502   $4,947   $932,412   $703,458   $1,640,817 
                          
   Net income (loss)   —      —      —      (4,961)   (4,961)
                          
Balance at March 31, 2022   4,946,502   $4,947   $932,412   $698,497   $1,635,856 
                          
   Net income (loss)   —      —      —      (18,796)   (18,796)
                          
Balance at June 30, 2022   4,946,502   $4,947   $932,412   $679,701   $1,617,060 
                          
  Net income (loss)   —      —      —      73,371    73,371 
                          
Balance at September 30, 2022   4,946,502   $4,947   $932,412    753,072   $1,690,431 

 

 

See Notes to Financial Statements.

 

5 
 

NOTE 1 - BASIS OF PRESENTATION

 

The financial statements, including notes, of Electronic Systems Technology, Inc. (the "Company") are representations of the Company’s management, which is responsible for their integrity and objectivity. The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2022, and its results of operations, cash flows, and changes in stockholders’ equity for the three months and nine months ended September 30, 2022 and 2021. The balance sheet at December 31, 2021 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. All amounts presented are in U.S. dollars. For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

 

The results of operations for the three month and nine-month period ended September 30, 2022 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. The Company estimates that for 2022 the anticipated effective annual federal income tax rate will be 0%.

 

New Accounting Pronouncements

 

Accounting standards that have been issued by the Financial Accounting Standards Board that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

NOTE 2 - INVENTORIES

 

Inventories are stated at lower of direct cost or net realizable value with cost determined using the FIFO (first in, first out) method. Inventories consist of the following:

 

          
   September 30,
2022		   December 31,
2021		 
Parts  $184,459   $92,751 
Work in progress   149,498    171,705 
Finished goods   224,477    237,377 
Total inventory  $558,434   $501,833 

 

 

 

6 
 

 

NOTE 3 - EARNINGS (LOSS) PER SHARE

 

Basic earnings (loss) per share excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average number of shares of Common Stock outstanding for the period. Diluted earnings (loss) per share reflects potential dilution occurring if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the earnings of the Company. At September 30, 2022 and 2021, the Company had 210,000 and 240,000 outstanding stock options, respectively, that could have a dilutive effect on future periods’ net income. The stock options were not included in the calculation of diluted earnings per share for either period as they were anti-dilutive.

 

NOTE 4 - STOCK OPTIONS

 

No stock options were issued, exercised and 30,000 shares expired during the nine month periods ended September 30, 2022. As of September 30, 2022, there were 210,000 options outstanding with a weighted average exercise price of $0.40 per share, a weighted average remaining life of 2.7 years and no intrinsic value.

 

NOTE 5 – REVENUE

 

The Company’s product revenue includes industrial wireless products and accessories such as antennas, power supplies and cable assemblies. The Company also provides direct site support and engineering services to customers, such as repair and upgrade of its products. During the three-month period ended September 30, 2022 and 2021, the Company’s revenue from products sales was $480,260 and $230,869, respectively. Revenue from site support and engineering services was $6,900 and $25,200 respectively, over the same periods.

 

During the nine-month period ended September 30, 2022 and 2021, the Company’s revenue from products sales was $1,351,495 and $1,100,948, respectively. Revenue from site support and engineering services was $24,700 and $36,900 respectively, over the same periods.

 

The Company’s customers, to which trade credit terms are extended, consist of United States and local governments and foreign and domestic companies. Domestic sales of products and services for the three-month period ended September 30, 2022 and September 30, 2021 were $419,164 and $227,001, respectively. Sales to foreign customers for the three-month period ended September 30, 2022 and September 30, 2021 were $67,996 and $29,068, respectively.

 

Domestic sales for the nine-month period ended September 30, 2022 and September 30, 2021 were $1,234,793and $1,021,331, respectively. Sales to foreign customers for the nine-month period ended September 30, 2022 and September 30, 2021 were $141,402 and $116,517, respectively.

 

 

7 
 


 

NOTE 5 – REVENUE (continued)

 

For the three-month period ended September 30, 2022, sales to three customers represented more than 10% of total revenue, one customer represented more than 10% of total revenue for the same period in 2021.

 

                    
   2022 Sales   2022 %age of Total Sales   2021 Sales   2021 %age of Total Sales 
Domestic customer A  $60,130    12%  $70,505    28%
Domestic customer B   58,167    12%   —      —   
Domestic customer C   46,703    10%   —      —   

 

For the nine-month period ended September 30, 2022, sales to two customers represented more than 10% of total revenue, two customers represented more than 10% of total revenue for the same period in 2021.

 

   2022 Sales   2022 %age of Total Sales   2021 Sales   2021 %age of Total Sales 
Domestic customer A  $165,621    12%  $203,623    18%
Domestic customer B   137,346    10%   129,798    11%

 

As of September 30, 2022 and 2021, the Company had a sales order backlog of $141,066 and $93,059, respectively.

 

NOTE 6 - LEASES

 

On September 19, 2022, the Company signed a new two-year lease for its facilities. The base lease is $3,373 and $3,478 per month for years one and two, respectively. There is a leasehold tax applied to the base lease at 12.84%. The Company has the right to terminate the lease with 90 days’ notice. There is no renewal clause contained in the current lease. Upon signing the lease, the Company recognized a lease liability and right of use asset of $78,757 based on the two-year payment stream discounted using an estimated incremental borrowing rate of 4.125%. At September 30, 2022, the remaining lease term is twenty four months.

 

Prior to the new lease on September 19, 2022, the Company’s lease for its facilities was for $3,267 per month.

 

For the three month and nine-month periods ended September 30, 2022 and 2021, lease expenses of $11,616 and $10,862, and $34,839 and $32,586 respectively, are included in the following expense classifications on the statement of operations:

 

 

 

8 
 

 

 

NOTE 6 – LEASES (continued)

 

 

                              
   For the three-month period ending September 30, 
   2022   2021 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $5,751   $4,526   $10,277   $5,396   $4,248   $9,644 
Variable lease costs   749    590    1,339    682    536    1,218 
Total lease costs  $6,500   $5,116   $11,616   $6,078   $4,784   $10,862 

 

 

   For the nine-month period ending September 30, 
   2022   2021 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $17,252   $13,578   $30,830   $16,190   $12,742   $28,932 
Variable lease costs   2,249    1,770    4,019    2,045    1,609    3,654 
Total lease costs  $19,501   $15,348   $34,849   $18,235   $14,351   $32,586 

 

As of September 30, 2022, total future lease payments are as follows:

 

     
 
Remainder of 2022  $10,118 
2023   40,790 
2024   31,304 
     Total   82,212 
Less imputed interest   (3,454)
Net lease liability   78,758 
Current portion   (37,937)
Long-term portion  $40,821 

 

 

9 
 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATION

 

Management's discussion and analysis is intended to be read in conjunction with the Company's unaudited financial statements and the integral notes thereto for the quarter ended September 30, 2022. The following statements may be forward looking in nature and actual results may differ materially.

 

A.RESULTS OF OPERATIONS

 

REVENUES: Total revenues from sales increased to $487,160 for the third quarter of 2022 as compared to $256,069 in the third quarter of 2021, reflecting an increase of 90.2%. Management believes the increase in sales revenues is due to the improvement of supply chain deliveries   of materials needed by our customers to compete projects. Year to date total revenues from sales increased to $1,376,195 in 2022 as compared to $1,137,848 in 2021, reflecting an increase of 20.9%. Management believes the increase in sales revenues is due the Company increased inventory level and the ability to ship orders in a timely manner.

 

The Company's revenues have historically fluctuated from quarter to quarter due to timing factors such as product shipments to customers, customer order placement, customer buying trends, and changes in the general economic environment. The procurement process regarding plant and project automation, or project development, which usually surrounds the decision to purchase ESTeem products, can be lengthy. This procurement process may involve bid activities unrelated to the ESTeem products, such as additional systems and subcontract work, as well as capital budget considerations on the part of the customer. Because of the complexity of this procurement process, forecasts with regard to the Company's revenues are difficult to predict.

 

A percentage breakdown of the Company’s market segments of Domestic and Foreign Export sales for the three- and nine-month periods ended September 30, 2022, and 2021 are as follows:

 

   Three Months ended September 30, 2022   Three Months ended September 30, 2021   Nine Months ended September 30, 2022   Nine Months ended September 30, 2021 
Domestic Sales   86%   89%   90%   90%
Export Sales   14%   11%   10%   10%

 

BACKLOG:

 

As of September 30, 2022, the Company had a sales order backlog of $141,066. The Company’s customers generally place orders on an "as needed basis". Shipment for most of the Company’s products is generally made within 1 to 5 working days after receipt of customer orders, with the exception of ongoing, scheduled projects, and custom designed equipment.

 

 

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COST OF SALES:

 

Cost of sales percentages for the third quarters of 2022 and 2021 were 43% and 60% of respective net sales. The cost of sales percentage decreased in the third quarter of 2022 is the result of the product mix sold during the same quarter of 2021. Cost of sales percentages for the nine-month periods ended September 30, 2022 and 2021 were 44% and 48%. The cost of sales percentage increase in the first nine-months of 2022 is the result of the product mix sold during the same period of 2021.

 

OPERATING EXPENSES:

 

The following is a delineation of operating expenses:

 

   Three Months Ended       Nine Month Ended     
   Sept. 30,
2022		   Sept. 30,
2021		   Increase
(Decrease)		   Sept. 30,
2022		   Sept. 30,
2021		   Increase
(Decrease)		 
General and administrative  $60,784   $55,574   $5,210   $212,308   $215,528   $(3,220)
Research and development   40,029    46,534    (6,505)   131,662    153,483    (21,821)
Marketing and sales   104,293    122,960    (18,667)   373,694    344,594    29,100 
Total operating expenses  $205,106   $225,068   $(19,962)  $717,664   $713,605   $4,059 

 

General and administrative: For the third quarter of 2022, general and administrative expenses increased $5,210 to $60,785, due to increased wages when compared with the same quarter of 2022. For the nine-month period, general and administrative expenses decreased by $3,220 to $212,308 due to decreased professional services. General and administrative expenses were 12.5% of sales revenue for the third quarter of 2022 compared to 21.7% in the same period 2021 and 15.4% of sales revenue for nine-month period ended September 30, 2022compared to 18.9% in the same period 2021.

 

Research and development: Research and development expenses decreased $6,505 to $40,029 during the third quarter of 2022 due to decreased expenses related to consulting services when compared with the same quarter of 2021. For the nine-month period, research and development expenses decreased by $21,821 to $131,662, due to decreased prototype build costs. Research and development expenses were 8.2% of sales revenue for the third quarter of 2022 compared to 18.2% in the same period 2021 and 9.6% of sales revenue for nine-month period ending September 30, 2022 compared to 13.5% in the same period 2021.

 

Marketing and sales: During the third quarter of 2022, marketing and sales expenses decreased $18,668 to $104,293 when compared with the same period of 2021, due to decreased payroll. For the nine-month period, marketing and sales expenses increased by $29,100 to $373,594, due to increased payroll. Marketing and sales expenses were 21.4% of sales revenue for the third quarter of 2022 compared to 48.0% in the same period 2021 and 27.2% of sales revenue for nine-month period ended September 30, 2022 compared to 30.3% in the same period 2021.

 

OTHER INCOME:

 

The Company earned $1,373 in interest income during the quarter ended September 30, 2022 and $2,459 for the nine-month period. Sources of this income were money market accounts and certificates of deposit. During the quarter and nine-months ended September 30, 2021, the Company recognized a gain on forgiveness of debt in the amount of $130,555 and $280,373, respectively, for CARES Act loans.

 

 

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NET INCOME(LOSS):

 

The Company had net income of $73,731 for the third quarter of 2022 compared to net income of $8,977 for the same quarter of 2021. For the nine-month period ended September 30, 2022, the Company recorded net income of $49,614 compared with net income of $160,029 for the same period of 2021. The increase in net income during 2022 is the result of increased sales revenues and gross profit.

 

12 
 

 

B.       FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

The Corporation's current asset to current liabilities ratio at September 30, 2022 was 16.0 compared to 12.7 at December 31, 2021. The increase in current ratio is due to the decrease of accounts payable at September 30, 2022 as compared to December 31, 2021.

 

At September 30, 2022, the Company had cash and cash equivalents of $561,605 as compared to cash and cash equivalent of $655,616 at December 31, 2021.

 

 

Cash provided from operating activities decreased by $347,389 for the nine-month period ended September 30, 2022 when compared to the same period in 2021. The decrease is attributable to a decrease in net income for the period being $110,415 lower than the same period in 2021. The reduction from the nine-month period ended September 30, 2021 in the change in accounts receivable and accounts payable balances contributed ($193,850) and ($103,830), respectively, to the decrease.

 

Net cash used in investing was $250,583 due to the purchase and rollover of certificates of deposits maturing during the nine months of 2022. Cash use from financing activities was $5,968, which were payments paid on the CARES Act loan (round 1).

 

In management's opinion, the Company's cash and cash equivalents and other working capital at September 30, 2022 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2022 and through 2023.

 

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 registration statements filed with the Securities and Exchange Commission.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.

 

Item 3. Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of September 30, 2022. Based on that evaluation, our principal executive officer and our principal financial officer concluded that the design and operation of our disclosure controls and procedures were effective as of September 30, 2022.

 

The design of any system of controls is based in part upon 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, regardless of how remote. However, management believes that our system of disclosure controls and procedures are designed to provide a reasonable level of assurance that the objectives of the system will be met.

 

Changes in Internal Control Over Financial Reporting

 

During the most recent fiscal quarter, the Company added additional personnel that allows for appropriate segregation of duties. Management has determined that this change to our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) mitigated the material weakness that existed and, as such, had a material affect on our internal control over financial reporting.

 

 

13 
 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 2. Unregistered Sales of Securities

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable

 

Item 5. Other Information

 

None.

 

 

14 
 

 

 

Item 6. Exhibits

 

EXHIBIT  NUMBER DESCRIPTION
31.1 Section 302 Certification, CEO
31.2 Section 302 Certification, CFO
32.1 Section 906 Certification, CEO
32.2 Section 906 Certification, CFO
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

15 
 

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

 

 

 

By: /s/ Daniel M. Tolley 

Date:  October 28, 2022 Name:  Daniel M. Tolley
  Title:  President
(Principal Executive Officer)

 

 

 

 

By: /s/ Michael W. Eller 

Date:  October 28, 2022 Name:  Michael W. Eller
  Title:  Vice President Administration
(Principal Accounting Officer)

 

 

 

 

 

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