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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2023

 

OR

 

☐TRANSITION 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 ¨

 

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 ¨

 

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   ☐ Accelerated Filer  ☐

Non-Accelerated Filer ☒

 

Small Reporting Company ☒

Emerging Growth Company ☐

 

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. ☐

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of October 26, 2023, 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, 
   2023   2022 
         
ASSETS          
Current assets          
Cash and cash equivalents  $421,493   $751,118 
Certificates of deposit   400,000    251,699 
Accounts receivable, net   96,178    141,394 
Inventories   809,877    725,478 
Prepaid expenses   32,436    42,627 
Employee retention tax credit receivable (NOTE 7)   —      63,000 
Accrued interest receivable   2,274    808 
Total current assets   1,762,258    1,976,124 
           
Property and equipment, net of depreciation   19,260    914 
           
Right to use – Lease, net of amortization (NOTE 6)   40,821    69,419 
   Total assets  $1,822,339   $2,046,457 
           
LIABILITIES and STOCKHOLDERS' EQUITY          
Current liabilities          
Accounts payable  $32,582   $138,996 
Accrued wages and bonus   4,465    24,777 
Accrued vacation pay   24,382    16,846 
Lease liability, current (NOTE 6)   41,453    39,120 
Other accrued liabilities   7,175    8,913 
Total current liabilities   110,057    228,652 
           
Long-Term Liabilities          
         Operating lease liability (NOTE 6)   —      30,457 
   Total liabilities   110,057    259,109 
 Stockholder 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   933,105    932,412 
Retained earnings   774,230    849,989 
Total stockholders' equity   1,712,282    1,787,348 
   Total liabilities and stockholders' equity  $1,822,339   $2,046,457 

 

 

See Notes to Condensed Financial Statements.

 

 

 

1 
 

 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                     

 

                 
    Three Months Ended September 30, 2023    Three Months Ended September 30, 2022    Nine Months Ended September 30, 2023    Nine Months Ended September 30, 2022 
                     
SALES - NET  $342,721   $487,160   $1,233,016   $1,376,195 
COST OF SALES   (178,435)   (210,056)   (586,631)   (611,376)
GROSS PROFIT   164,286    277,104    646,385    764,819 
                     
Operating Expenses                    
     General and administrative   55,829    60,784    202,086    212,308 
     Research and development   26,114    40,029    82,798    131,662 
     Marketing and sales   133,223    104,293    454,819    373,694 
TOTAL OPERATING EXPENSE   215,166    205,106    739,703    717,664 
                     
OPERATING INCOME (LOSS)   (50,880)   71,998    (93,318)   47,155 
                     
OTHER INCOME                    
     Interest income   8,375    1,373    17,559    2,459 
TOTAL OTHER INCOME   8,375    1,373    17,559    2,459 
                     

NET INCOME (LOSS) BEFORE

INCOME TAX

   (42,505)   73,371    (75,759)   49,614 
     Benefit (provision) for income tax   —      —      —      —   
NET INCOME (LOSS)  $(42,505)  $73,371   $(75,759)  $49,614 
                     
Basic and diluted earnings per share  $(0.01)  $0.01   $(0.02)  $0.01 
                     
Basic and diluted weighted average shares used in computing income (loss) per share:   4,946,502    4,946,502    4,946,502    4,946,502 

   

 

See Notes to Condensed Financial Statements.

 

 

2 
 

 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

           

 

           
   Nine Months Ended 
   September 30,   September 30, 
   2023   2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
           
Net income (loss)  $(75,759)  $49,614 
           
Noncash items included in net loss:          
     Depreciation and amortization   1,423    333 
     Stock based compensation   693    —   
Changes in operating assets and liabilities:          
     Accounts receivable, net   45,216    3,644 
     Inventories   (84,399)   (56,601)
     Accrued interest receivable   (1,466)   (794)
     Prepaid expenses   10,191    (53,377)
     Employee retention tax credit receivable   63,000    —   
     Accounts payable   (106,414)   (44,803)
     Other accrued liabilities   (14,040)   14,525 
NET CASH USED IN OPERATING ACTIVITIES   (161,555)   (87,459)
           
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
    Purchase of fixed assets   (19,769)   —   
    Certificates of deposit redeemed   1,001,699    850,000 
    Certificates of deposit purchased   (1,150,000)   (850,584)
NET CASH USED IN INVESTING ACTIVITIES   (168,070)   (584)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
    Principal payments on CARES Act loan payable (round 1)   —      (5,968)
NET CASH USED IN FINANCING ACTIVITIES   —      (5,968)
           
NET DECREASE IN CASH AND CASH EQUIVALENTS   (329,625)   (94,011)
Cash and cash equivalents at beginning of period   751,118    655,616 
Cash and cash equivalents at end of period  $421,493   $561,605 
           

 

See Notes to Condensed Financial Statements.

 

3 
 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.
DBA ESTEEM WIRELESS MODEMS
 
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
                          

 

                          
   Common Stock   Additional
Paid-In		   Retained     
   Shares   Amount   Capital   Earnings   Total 
                     
Balance, 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 
                          
Balance, January 1, 2023   4,946,502   $4,947   $932,412    849,989   $1,787,348 
                          
   Net income (loss)   —      —      —      (92,124)   (92,124)
                          
Balance at March 31, 2023   4,946,502    4,947    932,412    757,865    1,695,224 
                          
   Net income (loss)   —      —      —      58,870    58,870 
                          
   Stock based compensation             693    —      693 
                          
Balance at June 30, 2023   4,946,502    4,947    933,105    816,735    1,754,787 

  

Net income (loss)

   —      —      —      (42,505)   (42,505)
                          
Balance at September 30, 2023   4,946,502   $4,947   $933,105   $774,230   $1,712,282 

  

See Notes to Condensed Financial Statements.

 

4 
 

 

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - BASIS OF PRESENTATION

 

The unaudited condensed 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 condensed 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 of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2023 and its results of operations, cash flows, and changes in stockholders’ equity for the three and nine months ended September 30, 2023, and 2022. The balance sheet at December 31, 2022 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, 2022.

 

The results of operations for the three and nine-month period ended September 30, 2023 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. The Company estimates that for 2023 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,

2023

  

December 31,

2022

 
Parts  $125,555   $172,190 
Work in progress   366,887    336,298 
Finished goods   317,435    216,990 
Total inventories  $809,877   $725,478 

 

 
5 
 

 

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, 2023 and 2022, the Company had 225,000 and 210,000 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

 

On June 9, 2023, the Board of Directors granted 45,000 options to employees. The new options have an exercise price of $0.40, a term of 5 years, and vest immediately. The fair value of the options was determined using the Black-Scholes model using the following variables: stock price of $0.24, volatility of 104.1%, expected term of 5 years with a forfeiture rate of 95%, and a discount factor of 3.92%. Share based compensation of $693 ($534 in marketing and sales and $159 in general and administrative in the condensed statement of operations) was recognized during the nine-month period ended September 30, 2023.

 

As of September 30, 2023, there were 225,000 options outstanding with a weighted average exercise price of $0.40 per share, a weighted average remaining life of 2.0 years and had intrinsic value of nil.

 

NOTE 5 – REVENUE

 

The Company 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 periods ended September 30, 2023 and 2022, the Company’s revenue from products sales was $336,621 and $480,260, respectively. Revenue from site support and engineering services was $6,100 and $6,900 respectively, over the same periods.

 

During the nine-month periods ended September 30, 2023 and 2022, the Company’s revenue from products sales was $1,209,516 and $1,351,495, respectively. Revenue from site support and engineering services was $23,500 and $24,700 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 for the three-month period ended September 30, 2023 and September 30, 2022 were $338,948 and $419,164, respectively. Sales to foreign customers for the three-month period ended September 30, 2023 and September 30, 2022 were $3,773 and $67,996, respectively.

 

Domestic sales for the nine-month period ended September 30, 2023 and September 30, 2022 were $1,208,539 and $1,234,793, respectively. Sales to foreign customers for the nine-month period ended September 30, 2023 and September 30, 2022 were $24,477 and $141,402, respectively.

 

6 
 

 

For the three-month period ended September 30, 2023, sales to three customers represented more than 10% of total revenue, three customers represented more than 10% of total revenue for the same period in 2022.

 

                    
   2023 Sales   2023 %age of Total Sales   2022 Sales   2022%age of Total Sales 
Domestic customer A  $64,698    19%  $60,130    12%
Domestic customer B   57,456    17%   58,167    12%
Domestic customer C   33,119    10%   46,703    10%

 

For the nine-month period ended September 30, 2023, sales to one customer represented more than 10% of total revenue, two customers represented more than 10% of total revenue for the same period in 2022.

 

   2023 Sales   2023 %age of Total Sales   2022 Sales   2022 %age of Total Sales 
Domestic customer A  $262,149    21%  $165,621    12%
Domestic customer B   —      —      137,346    10%
Domestic customer C   —      —      —      —   

 

As of September 30, 2023 and 2022, the Company had a sales order backlog of $124,125 and $141,066, respectively.

 

NOTE 6 - LEASES

 

On September 23, 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, 2023, the remaining lease term is 12 months. As of September 30, 2023, future payments on this lease of $10,435 and $31,304 will be paid in 2023 and 2024 respectively.

 

7 
 

 

For the three and nine-month periods ended September 30, 2023 and 2022, lease expenses of $11,576 and $11,616 and $34,727 and $34,849, respectively, are included in the following expense classifications on the statement of operations:

  

                              
   For the three-month period ended September 30, 
   2023   2022 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $5,751   $4,526   $10,277   $5,751   $4,526   $10,277 
Variable lease costs   727    572    1,299    749    590    1,339 
Total lease costs  $6,478   $5,098   $11,576   $6,500   $5,116   $11,616 

 

   For the nine-month period ended September 30, 
   2023   2022 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $17,252   $13,578   $30,830   $17,252   $13,578   $30,830 
Variable lease costs   2,181    1,716    3,897    2,249    1,770    4,019 
Total lease costs  $19,433   $15,294   $34,727   $19,501   $15,348   $34,849 

  

NOTE 7 - CARES ACT RETENTION CREDIT

 

As of December 31, 2022, the Company has an employee retention tax credit due of $63,000. The amount to be received is a refund of qualified payroll taxes the Company paid in connection with employee payroll during the COVID 19 pandemic. The credit was received in July 2023.

 

 

8 
 

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, 2023. The following statements may be forward looking in nature and actual results may differ materially.

 

A.RESULTS OF OPERATIONS

 

REVENUES: Total revenues from sales decreased to $342,721 for the third quarter of 2023 as compared to $487,160 in the third quarter of 2022, reflecting a decrease of 29.6%. Management believes the decrease in sales revenues is due to the decrease in customer demand. Year to date total revenues from sales decreased to $1,233,016 in 2023 as compared to $1,376,195 in 2022, reflecting a decrease of 10.4%. Management believes the decrease in sales revenues is due to a decrease in customer demand and the ability to ship orders in a timely manner. Although the inventory levels have increased compared to last year, ancillary goods are being impacted by delays in the supply chain resulting in a $124K backlog.

 

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, 2023 and 2022 are as follows:

 

   Three Months ended September 30, 2023   Three Months ended September 30, 2022   Nine Months ended September 30, 2023   Nine Months ended September 30, 2022 
Domestic Sales   99%   86%   98%   90%
Export Sales   1%   14%   2%   10%

 

BACKLOG:

 

As of September 30, 2023, the Company had a sales order backlog of $124,125. 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.

 

COST OF SALES:

 

Cost of sales percentages for the third quarters of 2023 and 2022 were 52.1% and 43.1% of respective net sales. Cost of sales percentages for the nine-month periods ended September 30, 2023 and 2022 were 47.6% and 44.4%, respectively. The cost of sales percentage increase for the nine-month period ended September 30, 2023 is the result of the product mix sold during the same period of 2022.

 

9 
 

 

OPERATING EXPENSES:

 

The following is a delineation of operating expenses:

 

   Three Months Ended       Nine Month Ended     
  

September 30,

2023

  

September 30,

2022

  

Increase

(Decrease)

  

September 30,

2023

  

September 30,

2022

  

Increase

(Decrease)

 
General and administrative  $55,829   $60,784   $(4,955)  $202,086   $212,308   $(10,222)
Research and development   26,114    40,029    (13,915)   82,798    131,662    (48,864)
Marketing and sales   133,223    104,293    28,930    454,819    373,694    81,125 
Total operating expenses  $215,166   $205,106   $10,060   $739,703   $717,664   $22,039 

 

General and administrative: For the third quarter of 2023, general and administrative expenses decreased $4,955 to $55,829, due to decreased wages when compared with the same quarter of 2022. For the nine-month period ended September 30, 2023, general and administrative expenses decreased by $10,222, to $202,086, due to decreased payroll and increased services purchased. General and administrative expenses were 16.3% compared to 12.5% of sales revenue for the third quarter of 2023 and 2022 respectively and 16.4% compared to 15.4% of sales revenue for nine-month period ended September 30, 2023 and 2022 respectively.

 

Research and development: Research and development expenses decreased $13,915 to $26,114 during the third quarter of 2023 due to decreased services purchased expenses when compared with the same quarter of 2022. For the nine-month period, research and development expenses decreased by $48,864 to $82,798, due to decreased services purchased. Research and development expense was 7.6% compared to 8.2% of sales revenue for the third quarter of 2023 and 2022 respectively and 6.7% compared to 9.6% of sales revenue for nine-month period ended September 30, 2023 and 2022 respectively.

  

Marketing and sales: During the third quarter of 2023, marketing and sales expenses increased $28,930 to $133,223 when compared with the same period of 2022, due to increased payroll, benefits expense, and travel. For the nine-month period, marketing and sales expenses increased by $81,125 to $454,819, due to increased payroll, benefits, and travel expenses. Marketing and sales expenses were 38.9% compared to 21.4% of sales revenue for the third quarter of 2023 and 2022 respectively and 36.9% compared to 27.3 % of sales revenue for the nine-month period ended September 30, 2023 2022 respectively.

  

OTHER INCOME:

 

The Company earned $8,375 in interest income during the quarter ended September 30, 2023 and $17,559 for the nine-month period. Sources of this income were money market accounts, certificates of deposit, and interest from the U.S. Treasury. The interest from the U.S. Treasury was for the delay in issuing the check for the tax credit.

 

NET LOSS:

 

The Company had a net loss of $42,505 for the third quarter of 2023 compared to net income of $73,371 for the same quarter of 2022. For the nine-month period ended September 30, 2023, the Company recorded a net loss of $75,759 compared with net income of $49,614 for the same period of 2022. The decrease in net income during 2023 is the result of increased operating expenses and lower sales.

 

10 
 

 

B.       FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

The Corporation's current asset to current liabilities ratio at September 30, 2023 was 16.0 compared to 8.6 at December 31, 2022. The increase in current ratio is due to the decrease of accounts payable and increase in inventory at September 30, 2023 as compared to December 31, 2022.

 

At September 30, 2023, the Company had cash and cash equivalents including certificates of deposit of $821,493 as compared to cash and cash equivalent of $1,002,817 at December 31, 2022.

 

Cash used from operating activities decreased by $74,096 for the nine-month period ended September 30, 2023 when compared to the same period in 2022. The decrease is attributable to a decrease in net income for the period being $125,373 less than the same period in 2022. The increase in the change in accounts receivable, accounts payable, and inventory balances contributed $41,572, $(61,611) and $(27,798) respectively.

 

In management's opinion, the Company's cash and cash equivalents and other working capital at September 30, 2023 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2023 and into the first half of 2024.

 

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 1. Controls and Procedures

 

An evaluation has been performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and the operation of our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2023. 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, 2023.

 

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

 

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

11 
 

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.

 

 

12 
 

 

 

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

 

 

 

13 
 

 

 

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 25, 2023 Name:  Daniel M. Tolley
  Title:  President
(Principal Executive Officer)

 

 

 

 

By: /s/ Michael W. Eller

Date:  October 25, 2023 Name:  Michael W. Eller
  Title:  Vice President Administration
(Principal Accounting Officer)

 

 

14 
 

 

 

Exhibit 31.1

CERTIFICATION

 

I, Daniel M. Tolley, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Electronic Systems Technology, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

/s/ Daniel M. Tolley

Daniel M. Tolley

President

(Chief Executive Officer)

Date: October 25, 2023

 

A signed original of this written statement has been provided to the registrant and will be retained by the registrant to be furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 31.2

CERTIFICATION

 

I, Michael Eller, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Electronic Systems Technology, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

/s/ Michael Eller

Michael Eller

Vice President Administration

Principal Accounting Officer

Date: October 25, 2023

 

A signed original of this written statement has been provided to the registrant and will be retained by the registrant to be furnished to the Securities and Exchange Commission or its staff upon request.

 

Exhibit 32.1

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)

In connection with the quarterly report of Electronic Systems Technology Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel M. Tolley, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/ Daniel M. Tolley

Daniel M. Tolley

President

(Chief Executive Officer)

Date: October 25, 2023

This certification is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report and shall not be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended; and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant to be furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

Exhibit 32.2

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)

In connection with the quarterly report of Electronic Systems Technology Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2023,1 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Eller, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

/s/ Michael Eller

Michael Eller

Vice President Administration/CFO

(Principal Accounting Officer)

Date: October 25, 2023

This certification is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report and shall not be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.; and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant to be furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

 

v3.23.3
Cover - shares
 9 Months Ended
Sep. 30, 2023
Oct. 26, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2023  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-27793  
Entity Registrant Name ELECTRONIC SYSTEMS TECHNOLOGY INC  
Entity Central Index Key 0000752294  
Entity Tax Identification Number 91-1238077  
Entity Incorporation, State or Country Code WA  
Entity Address, Address Line One 415 N. Roosevelt St.  
Entity Address, Address Line Two STE B1  
Entity Address, City or Town Kennewick  
Entity Address, State or Province WA  
Entity Address, Postal Zip Code 99336  
City Area Code 509  
Local Phone Number 735-9092  
Title of 12(b) Security Common Stock, $0.001 par value  
Trading Symbol ELST  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   4,946,502
v3.23.3
CONDENSED BALANCE SHEETS (Unaudited) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Current assets    
Cash and cash equivalents $ 421,493 $ 751,118
Certificates of deposit 400,000 251,699
Accounts receivable, net 96,178 141,394
Inventories 809,877 725,478
Prepaid expenses 32,436 42,627
Employee retention tax credit receivable (NOTE 7) 63,000
Accrued interest receivable 2,274 808
Total current assets 1,762,258 1,976,124
Property and equipment, net of depreciation 19,260 914
Right to use – Lease, net of amortization (NOTE 6) 40,821 69,419
   Total assets 1,822,339 2,046,457
Current liabilities    
Accounts payable 32,582 138,996
Accrued wages and bonus 4,465 24,777
Accrued vacation pay 24,382 16,846
Lease liability, current (NOTE 6) 41,453 39,120
Other accrued liabilities 7,175 8,913
Total current liabilities 110,057 228,652
Long-Term Liabilities    
         Operating lease liability (NOTE 6) 30,457
   Total liabilities 110,057 259,109
 Stockholder 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 933,105 932,412
Retained earnings 774,230 849,989
Total stockholders' equity 1,712,282 1,787,348
   Total liabilities and stockholders' equity $ 1,822,339 $ 2,046,457
v3.23.3
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 50,000,000 50,000,000
Common stock shares issued 4,946,502 4,946,502
Common stock shares outstanding 4,946,502 4,946,502
v3.23.3
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Income Statement [Abstract]        
SALES - NET $ 342,721 $ 487,160 $ 1,233,016 $ 1,376,195
COST OF SALES (178,435) (210,056) (586,631) (611,376)
GROSS PROFIT 164,286 277,104 646,385 764,819
Operating Expenses        
     General and administrative 55,829 60,784 202,086 212,308
     Research and development 26,114 40,029 82,798 131,662
     Marketing and sales 133,223 104,293 454,819 373,694
TOTAL OPERATING EXPENSE 215,166 205,106 739,703 717,664
OPERATING INCOME (LOSS) (50,880) 71,998 (93,318) 47,155
OTHER INCOME        
     Interest income 8,375 1,373 17,559 2,459
TOTAL OTHER INCOME 8,375 1,373 17,559 2,459
NET INCOME (LOSS) BEFORE INCOME TAX (42,505) 73,371 (75,759) 49,614
     Benefit (provision) for income tax
NET INCOME (LOSS) $ (42,505) $ 73,371 $ (75,759) $ 49,614
v3.23.3
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - $ / shares
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Income Statement [Abstract]        
Basic earnings per share $ (0.01) $ 0.01 $ (0.02) $ 0.01
Diluted earnings per share $ (0.01) $ 0.01 $ (0.02) $ 0.01
Basic weighted average shares used in computing income (loss) per share 4,946,502 4,946,502 4,946,502 4,946,502
Diluted weighted average shares used in computing income (loss) per share 4,946,502 4,946,502 4,946,502 4,946,502
v3.23.3
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ (75,759) $ 49,614
Noncash items included in net loss:    
     Depreciation and amortization 1,423 333
     Stock based compensation 693
Changes in operating assets and liabilities:    
     Accounts receivable, net 45,216 3,644
     Inventories (84,399) (56,601)
     Accrued interest receivable (1,466) (794)
     Prepaid expenses 10,191 (53,377)
     Employee retention tax credit receivable 63,000
     Accounts payable (106,414) (44,803)
     Other accrued liabilities (14,040) 14,525
NET CASH USED IN OPERATING ACTIVITIES (161,555) (87,459)
CASH FLOWS FROM INVESTING ACTIVITIES:    
    Purchase of fixed assets (19,769)
    Certificates of deposit redeemed 1,001,699 850,000
    Certificates of deposit purchased (1,150,000) (850,584)
NET CASH USED IN INVESTING ACTIVITIES (168,070) (584)
CASH FLOWS FROM FINANCING ACTIVITIES:    
    Principal payments on CARES Act loan payable (round 1) (5,968)
NET CASH USED IN FINANCING ACTIVITIES (5,968)
NET DECREASE IN CASH AND CASH EQUIVALENTS (329,625) (94,011)
Cash and cash equivalents at beginning of period 751,118 655,616
Cash and cash equivalents at end of period $ 421,493 $ 561,605
v3.23.3
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Dec. 31, 2021 $ 4,947 $ 932,412 $ 703,458 $ 1,640,817
Beginning balance, shares at Dec. 31, 2021 4,946,502      
   Net income (loss) (4,961) (4,961)
Ending balance, value at Mar. 31, 2022 $ 4,947 932,412 698,497 1,635,856
Ending balance, shares at Mar. 31, 2022 4,946,502      
Beginning balance, value at Dec. 31, 2021 $ 4,947 932,412 703,458 1,640,817
Beginning balance, shares at Dec. 31, 2021 4,946,502      
   Net income (loss)       49,614
Ending balance, value at Sep. 30, 2022 $ 4,947 932,412 753,072 1,690,431
Ending balance, shares at Sep. 30, 2022 4,946,502      
Beginning balance, value at Mar. 31, 2022 $ 4,947 932,412 698,497 1,635,856
Beginning balance, shares at Mar. 31, 2022 4,946,502      
   Net income (loss) (18,796) (18,796)
Ending balance, value at Jun. 30, 2022 $ 4,947 932,412 679,701 1,617,060
Ending balance, shares at Jun. 30, 2022 4,946,502      
   Net income (loss) 73,371 73,371
Ending balance, value at Sep. 30, 2022 $ 4,947 932,412 753,072 1,690,431
Ending balance, shares at Sep. 30, 2022 4,946,502      
Beginning balance, value at Dec. 31, 2022 $ 4,947 932,412 849,989 1,787,348
Beginning balance, shares at Dec. 31, 2022 4,946,502      
   Net income (loss) (92,124) (92,124)
Ending balance, value at Mar. 31, 2023 $ 4,947 932,412 757,865 1,695,224
Ending balance, shares at Mar. 31, 2023 4,946,502      
Beginning balance, value at Dec. 31, 2022 $ 4,947 932,412 849,989 1,787,348
Beginning balance, shares at Dec. 31, 2022 4,946,502      
   Net income (loss)       (75,759)
Ending balance, value at Sep. 30, 2023 $ 4,947 933,105 774,230 1,712,282
Ending balance, shares at Sep. 30, 2023 4,946,502      
Beginning balance, value at Mar. 31, 2023 $ 4,947 932,412 757,865 1,695,224
Beginning balance, shares at Mar. 31, 2023 4,946,502      
   Net income (loss) 58,870 58,870
   Stock based compensation   693 693
Ending balance, value at Jun. 30, 2023 $ 4,947 933,105 816,735 1,754,787
Ending balance, shares at Jun. 30, 2023 4,946,502      
   Net income (loss) (42,505) (42,505)
Ending balance, value at Sep. 30, 2023 $ 4,947 $ 933,105 $ 774,230 $ 1,712,282
Ending balance, shares at Sep. 30, 2023 4,946,502      
v3.23.3
BASIS OF PRESENTATION
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
BASIS OF PRESENTATION

NOTE 1 - BASIS OF PRESENTATION

 

The unaudited condensed 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 condensed 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 of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2023 and its results of operations, cash flows, and changes in stockholders’ equity for the three and nine months ended September 30, 2023, and 2022. The balance sheet at December 31, 2022 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, 2022.

 

The results of operations for the three and nine-month period ended September 30, 2023 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. The Company estimates that for 2023 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.

 
v3.23.3
INVENTORIES
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
INVENTORIES

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,

2023

  

December 31,

2022

 
Parts  $125,555   $172,190 
Work in progress   366,887    336,298 
Finished goods   317,435    216,990 
Total inventories  $809,877   $725,478 

 
v3.23.3
EARNINGS (LOSS) PER SHARE
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
EARNINGS (LOSS) PER SHARE

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, 2023 and 2022, the Company had 225,000 and 210,000 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.

 
v3.23.3
STOCK OPTIONS
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
STOCK OPTIONS

NOTE 4 - STOCK OPTIONS

 

On June 9, 2023, the Board of Directors granted 45,000 options to employees. The new options have an exercise price of $0.40, a term of 5 years, and vest immediately. The fair value of the options was determined using the Black-Scholes model using the following variables: stock price of $0.24, volatility of 104.1%, expected term of 5 years with a forfeiture rate of 95%, and a discount factor of 3.92%. Share based compensation of $693 ($534 in marketing and sales and $159 in general and administrative in the condensed statement of operations) was recognized during the nine-month period ended September 30, 2023.

 

As of September 30, 2023, there were 225,000 options outstanding with a weighted average exercise price of $0.40 per share, a weighted average remaining life of 2.0 years and had intrinsic value of nil.

 
v3.23.3
REVENUE
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
REVENUE

NOTE 5 – REVENUE

 

The Company 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 periods ended September 30, 2023 and 2022, the Company’s revenue from products sales was $336,621 and $480,260, respectively. Revenue from site support and engineering services was $6,100 and $6,900 respectively, over the same periods.

 

During the nine-month periods ended September 30, 2023 and 2022, the Company’s revenue from products sales was $1,209,516 and $1,351,495, respectively. Revenue from site support and engineering services was $23,500 and $24,700 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 for the three-month period ended September 30, 2023 and September 30, 2022 were $338,948 and $419,164, respectively. Sales to foreign customers for the three-month period ended September 30, 2023 and September 30, 2022 were $3,773 and $67,996, respectively.

 

Domestic sales for the nine-month period ended September 30, 2023 and September 30, 2022 were $1,208,539 and $1,234,793, respectively. Sales to foreign customers for the nine-month period ended September 30, 2023 and September 30, 2022 were $24,477 and $141,402, respectively.

 

For the three-month period ended September 30, 2023, sales to three customers represented more than 10% of total revenue, three customers represented more than 10% of total revenue for the same period in 2022.

 

                    
   2023 Sales   2023 %age of Total Sales   2022 Sales   2022%age of Total Sales 
Domestic customer A  $64,698    19%  $60,130    12%
Domestic customer B   57,456    17%   58,167    12%
Domestic customer C   33,119    10%   46,703    10%

 

For the nine-month period ended September 30, 2023, sales to one customer represented more than 10% of total revenue, two customers represented more than 10% of total revenue for the same period in 2022.

 

   2023 Sales   2023 %age of Total Sales   2022 Sales   2022 %age of Total Sales 
Domestic customer A  $262,149    21%  $165,621    12%
Domestic customer B   —      —      137,346    10%
Domestic customer C   —      —      —      —   

 

As of September 30, 2023 and 2022, the Company had a sales order backlog of $124,125 and $141,066, respectively.

 
v3.23.3
LEASES
 9 Months Ended
Sep. 30, 2023
Leases  
LEASES

NOTE 6 - LEASES

 

On September 23, 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, 2023, the remaining lease term is 12 months. As of September 30, 2023, future payments on this lease of $10,435 and $31,304 will be paid in 2023 and 2024 respectively.

 

For the three and nine-month periods ended September 30, 2023 and 2022, lease expenses of $11,576 and $11,616 and $34,727 and $34,849, respectively, are included in the following expense classifications on the statement of operations:

  

                              
   For the three-month period ended September 30, 
   2023   2022 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $5,751   $4,526   $10,277   $5,751   $4,526   $10,277 
Variable lease costs   727    572    1,299    749    590    1,339 
Total lease costs  $6,478   $5,098   $11,576   $6,500   $5,116   $11,616 

 

   For the nine-month period ended September 30, 
   2023   2022 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $17,252   $13,578   $30,830   $17,252   $13,578   $30,830 
Variable lease costs   2,181    1,716    3,897    2,249    1,770    4,019 
Total lease costs  $19,433   $15,294   $34,727   $19,501   $15,348   $34,849 

  
v3.23.3
CARES ACT RETENTION CREDIT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
CARES ACT RETENTION CREDIT

NOTE 7 - CARES ACT RETENTION CREDIT

 

As of December 31, 2022, the Company has an employee retention tax credit due of $63,000. The amount to be received is a refund of qualified payroll taxes the Company paid in connection with employee payroll during the COVID 19 pandemic. The credit was received in July 2023.

 
v3.23.3
INVENTORIES (Tables)
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
Schedule of inventories
          
  

September 30,

2023

  

December 31,

2022

 
Parts  $125,555   $172,190 
Work in progress   366,887    336,298 
Finished goods   317,435    216,990 
Total inventories  $809,877   $725,478 
v3.23.3
REVENUE (Tables)
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Schedule of revenue
                    
   2023 Sales   2023 %age of Total Sales   2022 Sales   2022%age of Total Sales 
Domestic customer A  $64,698    19%  $60,130    12%
Domestic customer B   57,456    17%   58,167    12%
Domestic customer C   33,119    10%   46,703    10%

 

For the nine-month period ended September 30, 2023, sales to one customer represented more than 10% of total revenue, two customers represented more than 10% of total revenue for the same period in 2022.

 

   2023 Sales   2023 %age of Total Sales   2022 Sales   2022 %age of Total Sales 
Domestic customer A  $262,149    21%  $165,621    12%
Domestic customer B   —      —      137,346    10%
Domestic customer C   —      —      —      —   
v3.23.3
LEASES (Tables)
 9 Months Ended
Sep. 30, 2023
Leases  
Schedule of lease expense
                              
   For the three-month period ended September 30, 
   2023   2022 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $5,751   $4,526   $10,277   $5,751   $4,526   $10,277 
Variable lease costs   727    572    1,299    749    590    1,339 
Total lease costs  $6,478   $5,098   $11,576   $6,500   $5,116   $11,616 

 

   For the nine-month period ended September 30, 
   2023   2022 
   Cost of sales   Operating expenses   Total   Cost of sales   Operating expenses   Total 
Base rent pursuant to lease agreement  $17,252   $13,578   $30,830   $17,252   $13,578   $30,830 
Variable lease costs   2,181    1,716    3,897    2,249    1,770    4,019 
Total lease costs  $19,433   $15,294   $34,727   $19,501   $15,348   $34,849 
v3.23.3
INVENTORIES (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Parts $ 125,555 $ 172,190
Work in progress 366,887 336,298
Finished goods 317,435 216,990
Total inventories $ 809,877 $ 725,478
v3.23.3
EARNINGS (LOSS) PER SHARE (Details Narrative) - shares
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Earnings Per Share [Abstract]    
Outstanding stock options 225,000 210,000
v3.23.3
STOCK OPTIONS (Details Narrative) - USD ($)
 9 Months Ended
Jun. 09, 2023
Sep. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Share based compensation   $ 693
Marketing and Sales [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Share based compensation   534
General and Administrative Expense [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Share based compensation   $ 159
Share-Based Payment Arrangement, Option [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Granted 45,000  
Exercise price $ 0.40 $ 0.40
Vesting term 5 years  
Stock price $ 0.24  
Volatility rate 104.10%  
Expected term 5 years  
Forfeiture rate 95.00%  
Discount factor 3.92%  
Outstanding value   225,000
Weighted average remaining life   2 years
v3.23.3
REVENUE (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Disaggregation of Revenue [Line Items]        
Revenues $ 342,721 $ 487,160 $ 1,233,016 $ 1,376,195
Geographic Distribution, Domestic [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 338,948 419,164 1,208,539 1,234,793
Customer A [Member] | Geographic Distribution, Domestic [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]        
Disaggregation of Revenue [Line Items]        
Revenues $ 64,698 $ 60,130 $ 262,149 $ 165,621
% age of total sales 19.00% 12.00% 21.00% 12.00%
Customer B [Member] | Geographic Distribution, Domestic [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]        
Disaggregation of Revenue [Line Items]        
Revenues $ 57,456 $ 58,167 $ 137,346
% age of total sales 17.00% 12.00%   10.00%
Customer C [Member] | Geographic Distribution, Domestic [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]        
Disaggregation of Revenue [Line Items]        
Revenues $ 33,119 $ 46,703
% age of total sales 10.00% 10.00%    
v3.23.3
REVENUE (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Disaggregation of Revenue [Line Items]        
Revenues $ 342,721 $ 487,160 $ 1,233,016 $ 1,376,195
Sales order backlog     124,125 141,066
Geographic Distribution, Domestic [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 338,948 419,164 1,208,539 1,234,793
Geographic Distribution, Foreign [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 3,773 67,996 24,477 141,402
Product [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 336,621 480,260 1,209,516 1,351,495
Maintenance [Member]        
Disaggregation of Revenue [Line Items]        
Revenues $ 6,100 $ 6,900 $ 23,500 $ 24,700
v3.23.3
LEASES (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Base rent pursuant to lease agreement $ 10,277 $ 10,277 $ 30,830 $ 30,830
Variable lease costs 1,299 1,339 3,897 4,019
Total lease costs 11,576 11,616 34,727 34,849
Cost of Sales [Member]        
Base rent pursuant to lease agreement 5,751 5,751 17,252 17,252
Variable lease costs 727 749 2,181 2,249
Total lease costs 6,478 6,500 19,433 19,501
Operating Expense [Member]        
Base rent pursuant to lease agreement 4,526 4,526 13,578 13,578
Variable lease costs 572 590 1,716 1,770
Total lease costs $ 5,098 $ 5,116 $ 15,294 $ 15,348
v3.23.3
LEASES (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 23, 2022
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Operating lease cost   $ 10,277 $ 10,277 $ 30,830 $ 30,830
Leasehold tax percentage 12.84%        
Lease liability $ 78,757        
Incremental borrowing rate 4.125%        
Remaining lease term   12 months   12 months  
Future payments - 2023   $ 10,435   $ 10,435  
Future payments - 2024   31,304   31,304  
Lease expense   $ 11,576 $ 11,616 $ 34,727 $ 34,849
Monthly Rate Year One [Member]          
Operating lease cost $ 3,373        
Monthly Rate Year Two [Member]          
Operating lease cost $ 3,478        
v3.23.3
CARES ACT RETENTION CREDIT (Details Narrative) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Debt Disclosure [Abstract]    
Employee retention tax credit $ 63,000
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