PART I

- FINANCIAL INFORMATION

Item 1.  Financial Statements.

(See Notes"Notes to Financial StatementsStatements")

(See Notes"Notes to Financial StatementsStatements")

(See Notes"Notes to Financial StatementsStatements")

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ELECTRONIC SYSTEMS TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The financial statements of Electronic Systems Technology, Inc. (the "Company"), presented in this Form 10Q are unaudited and reflect, in the opinion of Management, a fair presentation of operations for the three and nine month periods ended March 31,September 30, 2017 and March 31,September 30, 2016.  All adjustments of a normal recurring nature and necessary for a fair presentation of the results for the periods covered have been made. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission. In preparation of the financial statements, certain amounts and balances have been reformatted from previously filed reports to conform to the format of this quarterly presentation.  These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Form 10K for the year ended December 31, 2016 as filed with Securities and Exchange Commission.

The results of operations for the three-month periodthree and nine months ended March 31,September 30, 2017 and September 30, 2016, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

New Accounting Pronouncements

In July of 2015 the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11 “Simplifying the Measurement of Inventory” an update to Inventory Topic 330. The ASU simplifies the concept of lower of cost or market to the lower of cost and net realizable value and more closely align the measurement of inventory in Generally Accepted Accounting Principles (“GAAP”) with the measurement of inventory in International Financial Reporting Standards (“IFRS”). This update was adopted and did not materially impact the financial statements.

Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations, cash flows or financial position of prior period amounts.

NOTE 2 - INVENTORIES

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

NOTE 3 - EARNINGSINCOME (LOSS) PER SHARE

Basic earningsincome (loss) per share excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted earningsincome (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 March 31,September 30, 2017, the Company had 150,000 outstanding stock options that could have a dilutive effect on future periods’ income.periods.  However, dilutedat September 30, 2017 there was no dilutive effect of stock options on earnings per share are not presented because their effect would be antidilutive due to Company’s losses.or weighted average shares outstanding.  

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 4 - STOCK OPTIONS

As of March 31,September 30, 2017, the Company had outstanding stock options, which have been granted periodically to individual employees and directors with no less than three years of continuous tenure with the Company.  The Board of Directors didhas not issueawarded stock options during the firstnine months ended September 30, 2017. The Board of Directors may consider issuing stock options later in 2017. Shareholders approved the 2015 Stock Incentive Plan on June 3, 2016 for 250,000 stock options. 150,000 of the approved amount were granted to certain management employees as part of the 2015 Stock Incentive Plan. The options were dated effective August 7, 2015 and have a five year exercise period. The company recognized an expense of $1,841 for the quarter ended March 31, 2017.ending September 30, 2016 in which the options were approved by the Shareholders and were fully vested at that time.

The fair value of each option award is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2015 and approved by the Shareholders in 2016.

The Company uses historical data to estimate option exercise rates.  The option exercise rate for option grants in 2005 through 2016 was 5.2%.  

A summary of option activity during the quarternine months ended March 31,September 30, 2017 is as follows:

NOTE 5 - RELATED PARTY TRANSACTIONS

During the quarter ended March 31,September 30, 2017, the Company accrued total directors’ fees of $1,200, or $300 per director for board meetings attended.Duringattended. For the samenine-month period in 2016ending September 30, 2017, the Company paid or accrued a total of $3,600 for directors’ fees of $1,500.fees.

NOTE 6 - COMMITMENTS

The Company leases its facilities from a port authority for $5,445 per month for three years, expiring in September 2017,2020, with annual increases based upon the Consumer Price IndexIndex.

ELECTRONIC SYSTEMS TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 7 - SEGMENT REPORTING

Segment information is prepared on the same basis that the Company's management reviews financial information for operational decision-making purposes.    

During the quarter ended September 30, 2017, Domestic Salescustomers represented approximately 88% of total net revenues. Domestic sales revenues increased to $283,239 for the three month period ending March 31,quarter ended September 30, 2017 were $283,118 which was a decreasecompared to $275,709 for the quarter ended September 30, 2016. Year to date domestic sales revenues decreased to $893,277 as of $25,650September 30, 2017 compared to $1,020,831 for the same period inof 2016.  Foreign Salescustomers represented approximately 12% of total net revenues.  Foreign sales revenues decreased to $39,523 for the three month period ending March 31,quarter ended September 30, 2017 were $78,304 which was a decreasecompared to $45,759 for the quarter ended September 30, 2016. Year to date foreign sales revenues decreased to $188,884 as of $32,640September 30, 2017 compared to $229,407 for the same period inof 2016.  No SalesDuring the quarter ended September 30, 2017, sales to one customer were greatercomprised more than 10% of the totalCompany’s sales forrevenues.  Revenues from foreign countries during the quarter.third quarter of 2017 consist primarily of revenues from product sales to Mexico, Peru, India.

NOTE 8 – Stock Repurchase

On January 13, 2016, the Company’s Board of Directors approved a resolution authorizing the repurchase of up to $100,000 of the Company’s common stock at the price of $0.38 per share. On March 2, 2016, the Company’s Board of Directors approved a resolution authorizing the repurchase of up to an additional $150,000 of the Company’s common stock at the price of $0.38 per share. As of March 31,September 30, 2017, $59,266$184,405 remains of $100,000$250,000 approved by the board. 97,764 shares were repurchased for $37,191 in 2016, bringing the total number of shares repurchased up to 106,489.172,619 through September 30, 2017. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. The following table shows the Company’s activity and related information for the three monthnine-month period ending March 31, 2017:September 30, 2017.

⁽¹⁾  Amount includes commissions paid of $79.

The trading price of the Company’s shares as of March 31^stSeptember 30, 2017, was $0.39.$0.59.

NOTE 9 – Income Taxes

No Income Tax has been recognized due to the net operating loss. The current year’s net operating loss tax impact has been reserved, as the estimated effective tax rate for 2017 will be zero.

The Deferred Tax asset that is recognized on the Balance Sheets consists primarily of prior years’ net operating loss and R&D credits. We believe that the Company will be generate net operating income and utilize the asset in future periods.

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'sManagement’s discussion and analysis is intended to be read in conjunction with the Company'sCompany’s unaudited financial statements and the integral notes thereto for the quarter ended March 31, 2017.September 30, 2016.  The following statements may be forward looking in nature and actual results may differ materially.

A.  Results of Operations

RESULTS OF OPERATIONS

REVENUES:

REVENUES: Total revenues from the sale of the Company’s ESTeem wireless modem products and services increased to $322,763 for the third quarter of 2017, compared to $321,468 for the third quarter of 2016.  Gross revenues, including interest income, increased to $325,721 for the quarter ended September 30, 2017, from $324,514 for the same quarter of 2016.  Year to date sales decreased to $378,786 for the first quarter$1,082,161 as of September 30, 2017, as compared to $467,651 in the first quarter$1,250,238 as of 2016, reflecting a decrease of 18.9%.  GrossSeptember 30, 2016. Year to date gross revenues, including interest income, decreased to $381,476 for the quarter ended March 31,$1,090,657 as of September 30, 2017, from $470,538 for the same quartercompared to $1,259,155 as of September 30, 2016.  Management believes the decreaseincrease in quarterly sales revenues is due to decreased Productincreased demand and Site Support delays related to weather during first quarterfor the new products introduced at the beginning of 2017 when compared with the same quarter of 2016.   2017.

The Company's revenues have historically fluctuated from quarter to quarter due to timing factors such as customer order placement and product shipments to customers, customer order placement,as well as 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 within regard to the Company's revenues arebecome difficult to predict.predict.

A percentage breakdown of EST's market segments of Domestic and Foreign Export sales,Sales, for the firstthird quarter of 2017 and 2016 are as follows:

Domestic Revenues

During the quarter ended September 30, 2017, the Company’s domestic operations represented 88% of the Company’s total sales revenues.  Domestic operations sell ESTeem modem products, accessories and service primarily through domestic resellers, as well as directly to end users of the Company’s products.  Domestic sales revenues increased to $283,239 for the quarter ended September 30, 2017 compared to $275,709 for the quarter ended September 30, 2016.  Management believes the increase in sales revenues is due to increased domestic sales for water/waste water and mining industrial automation projects during the three-month period ending September 30, 2017.  During the quarter ended September 30, 2017, one customer, comprised more than 10% of the Company’s sales revenues.  

For the nine-month period ended September 30, 2017, the Company’s domestic operations represented 83% of the Company’s total sales revenues.  Year to date domestic sales revenues decreased to $893,277 as of September 30, 2017 compared to $1,020,831 for the same period of 2016. Management believes the decrease in year to date sales revenues is due to decreased engineering services and related product sales during the first half of 2017.  

Foreign Revenues

The Company’s foreign operating segment represented 12% of the Company’s total net revenues for the quarter ended September 30, 2017.  The foreign operating segment is based wholly in the United States and maintains no assets outside of the United States.  The foreign operating segment sells ESTeem modem products, accessories and service primarily through foreign resellers, as well as directly to end customers of the Company’s products located outside the United States.  

During the quarter ended September 30, 2017, the Company had $39,522 in foreign export sales, amounting to 12% of total net revenues of the Company for the quarter, compared with foreign export sales of $45,759 for the same quarter of 2016.  Management believes the decrease in foreign sales revenues was due to decreased automation needs in Oil & Gas and Mining industries.  Revenues from foreign countries during the third quarter of 2017 consist primarily of revenues from product sales to Mexico, Peru and India.  No foreign sales to a single customer comprised 10% or more of the Company's product sales for the quarter ended September 30, 2017.  Products purchased by foreign customers were used primarily in industrial automation applications.  We believe the majority of foreign export sales are the results of the Company’s Latin American sales staff, EST foreign reseller activity, and the Company’s internet website presence.

For the nine-month period ended September 30, 2017, the Company had $188,884 in foreign export sales, amounting to 17% of total sales revenues of the Company for the period, compared with foreign export sales of $229,407 for the same period of 2016. Management believes the decrease in foreign sales revenues is due end of life product purchases in 2016 to Croatia and slow acceptance of product released in 2017 in Latin America.

BACKLOG:

As of March 31, 2017, the CompanyThe Corporation had a sales order backlog of $22,850.approximately $22,707 as of September 30, 2017.  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 515 working days after receipt of customer orders, with the exception of ongoing, scheduled projects, and custom designed equipment.

COST OF SALES:

Cost of sales percentagespercentage for the first quartersthird quarter of 2017 and 2016 were 46%was 40% and 38% of respective net sales and are calculated excluding site support expenses of $16,476 and $42,27236%, respectively. The cost of sales percentage increase infor the firstthird quarter of 2017 is the result of the discounting 195E Series product mix for items sold during the quarter having decreased profit margins when compared with the product mix sold during the same quarter of 2016. The discounting was designed to sell old inventory that was replaced by the Horizon Series.period.

OPERATING EXPENSES:

Operating expenses for the firstthird quarter of 2017 increased $2,820decreased $10,857 from firstthe third quarter of 2016 levels.2016.  The following is a delineationan outline of operating expenses:

General and administrative:  ForGENERAL AND ADMINISTRATIVE:

During the firstthird quarter of 2017, Generalgeneral and administrative expenses decreased $3,537$8,425 to $88,134,$59,367 from the same quarter of 2016, due to decreased professional services and bank fees.

RESEARCH AND DEVELOPMENT:

Research and development expenses decreased $4,113 to $55,511 during the third quarter of 2017 when compared with the same quarter of 2016.

Research and development:  Research and development expenses increased $10,880 to $80,015 during the first quarter of 2017period in 2016 due to fees paid for FCC type acceptance testing when compared with the same quarterand prototype builds of 2016.new product.

Marketing and sales:MARKETING AND SALES:

During the firstthird quarter of 2017, marketing and sales expenses decreased $4,523increased $1,681 to $114,499 when compared with$114,092 from the same period ofin 2016, due to decreased consulting service expenses during the first quarter of 2017.

increased services purchased.

INTEREST AND DIVIDEND INCOME:

The Corporation earned $2,690$2,958 in interest and dividend income during the quarter ended March 31,September 30, 2017.  Sources of this income were money market accounts and certificates of deposit.

NET LOSS:INCOME (LOSS):

The Company had a net loss of $84,487$37,781 for the firstthird quarter of 2017, compared to a net loss of $9,826$42,497 for the same quarter of 2016.  The increase inFor the nine-month period ended September 30, 2017, the Company recorded a net loss during 2017of $133,992, compared with a net loss of $55,114 for the same period of 2016. The decrease in the Company’s net loss is the result of decreasedincreased sales revenues, and decreased gross margins.

The Company has $66,353margins and reduced operating expenses during the third quarter of research and development tax credits available to reduce any Federal Income taxes that may be incurred in future periods as if March 31, 2017.

B.  Financial Condition, Liquidity and Capital Resources

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Corporation's current asset to current liabilities ratio at March 31,September 30, 2017 was 25:24.6:1 compared to 54:1 at December 31, 2016. The decrease in current ratio is due to increased accounts payable and accrued vacation expenses at March 31, 2017 when compared with December 31, 2016.

For the quarter ended March 31,At September 30, 2017, the Company had cash and cash equivalents of $756,354 as$257,112; compared to cash and cash equivalent holdings of $502,971 at December 31, 2016, primarily reflecting changes2016.  The Company had certificates of deposit investments in the valueamount of certificates of deposits that were redeemed when compared with year-end$1,000,000 at September 30, 2017 and $1,000,000 at December 31, 2016.

Accounts receivable increased to $146,818$94,506 as of March 31,September 30, 2017 from December 31, 2016 levels of $71,202, due to sales and collectionrevenue timing differences when compared withbetween the third quarter of 2017 and year-end 2016.  Inventory decreasedInventories increased to $594,935 at March 31,$813,970 as of September 30, 2017, from December 31, 2016 levels of $703,147.$703,147, due primarily to an increase of finished goods.  The Company's fixed assets, net of depreciation, decreased to $46,398$36,428 as of March 31,September 30, 2017, from December 31, 2016 levels of $51,383, due to depreciation. Prepaid expenses decreased to $6,100 as of March 31, 2017 as compared with $8,405 for December 31, 2016 due to decreased vendor deposit when compared with year-end 2016.     $51,383.

As of March 31,September 30, 2017, the tradeCompany’s accounts payable balance was $56,376$54,709 as compared with $15,114 at$15,114at December 31, 2016, and reflectreflects amounts owed for purchases of inventory items, contracted services, and contracted services.state tax liabilities.  Accrued liabilities and refundable deposits as of March 31,September 30, 2017 were $29,864,$34,252 compared with $22,693 at$27,220at December 31, 2016, and reflect items such as payrollaccrued vacation benefits and statepayroll tax liabilities       and accrued vacation benefits.  At March 31, 2017 and December 31, 2016, the Company had refundable customer deposit liabilities of $3,622 and $4,527 respectively.

In Management's opinion, the Company's cash and cash equivalents,equivalent reserves, and other working capital at March 31,September 30, 2017 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during the next 12 months.

The Company did not declare or issue any cash dividends during 2016 or 2017.

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'sCompany’s reports and registration statements filed with the Securities and Exchange Commission.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

There is no established market for trading the common stock of the Company. The market for the Company’s common stock is limited, and as such shareholders may have difficulty reselling their shares when desired or at attractive market prices.  The Common Stock is not regularly quoted in the automated quotation system of a registered securities system or association.  Our common stock, par value $0.001 per share, is quoted on the OTC Markets Group QB (OTCQB) under the symbol “ELST”.  The OTCQB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network which provides information on current “bids” and “asks” as well as volume information. The OTCQB is not considered a “national exchange”.  The “over-the-counter” quotations do not reflect inter-dealer prices, retail mark-ups commissions or actual transactions.  The Company’s common stock has continued to trade in low volumes and at low prices. Some investors view low-priced stocks as unduly speculative and therefore not appropriate candidates for investment. Many institutional investors have internal policies prohibiting the purchase or maintenance of positions in low-priced stocks.Not applicable

Item 4.  Evaluation of Disclosure Controls and Procedures.

The Company’sConclusions of Management is responsible for establishingRegarding Effectiveness of Disclosure Controls and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with Management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.Procedures

AnAt the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation has been performedwas carried out under the supervision and with the participation of our Management,the Company's management, including our Chiefthe President and Principal Executive Officer ("PEO") and Principal AccountingFinancial Officer ("PFO"), of the effectiveness of the design and operations of the operation of our "disclosureCompany's disclosure controls and procedures"procedures (as such term is defined in Rules 13a-15(e)Rule 13a – 15(e) and Rule 15d – 15(e) under the Securities Exchange Act of 1934)Act). Based on that evaluation, the PEO and the PFO have concluded that as of March 31, 2017.  Based onthe end of the period covered by this evaluation, our Chief Executive Officer and Chief Financial Officer have determined that there was a material weakness affecting our internal control over financial reporting and, as a result of that weakness, ourreport, the Company's disclosure controls and procedures were not effective as of March 31, 2017.it was determined that there were material weaknesses affecting our disclosure controls and procedures. 

Management of the company believes that these material weaknesses are due to the small size of the company's accounting staff. The material weakness issmall size of the company's accounting staff may prevent adequate controls in the future, such as follows:

We did not maintain effective controls to ensure appropriate segregation of duties, asdue to the same officercost/benefit of such remediation. To mitigate the current limited resources and employee was responsible for the initiating and recordinglimited employees, we rely heavily on direct management oversight of transactions, thereby creatingalong with the use of external legal and accounting professionals. As the Company grows, management expects to increase the number of employees, which will enable us to implement adequate segregation of duties weaknesses. Due to the (1) significance of segregation of duties to the preparation of reliable financial statements; (2) the significance of potential misstatement that could have resulted due to the deficient controls; and, (3) the absence of sufficient other mitigating controls; we determined that this control deficiency resulted in more than a remote likelihood that a material misstatement or lack of disclosure within the annual or interim financial statements will not be prevented or detected.

Management has evaluated and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating controls have been deemed to be impractical and prohibitively costly due to the size of our organization at the current time.  Management does not foresee implementing a cost effective method of mitigating our internal control weaknesses in the near term.   Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake.  The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.framework.

Changes in internal control over financial reporting.

There have been no changes during the quarter ended March 31,September 30, 2017 in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

Accounting Principles Recently Adopted

Going Concern

Effective December 31, 2016, the Company adopted an accounting standards update with new guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management must evaluate whether it is probable that known conditions or events, considered in the aggregate, would raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. If such conditions or events are identified, the standard requires management’s mitigation plans to alleviate the doubt or a statement of the substantial doubt about the entity’s ability to continue as a going concern to be disclosed in the financial statements. As required by the new standard, management completed its evaluation and identified no probable conditions or events, individually or in the aggregate, that would raise a substantial doubt about the Company's ability to continue as a going concern.

Deferred Taxes

In November 2015, the FASB issued guidance that simplifies the balance sheet classification of deferred taxes. Previously, an entity separated its deferred income tax liabilities and assets into current and noncurrent amounts in a classified balance sheet. This amendment simplifies the presentation to require that all deferred tax liabilities and assets be classified as noncurrent on the balance sheet. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction. The change to noncurrent classification does have an impact on working capital. This guidance becomes effective January 1, 2017, with earlier adoption permitted and allows for prospective or retrospective application. The Company adopted the provisions of this ASU during the fourthquarterof 2016 and applied them retrospectively. Current deferred income tax assets of $24,517 as of December 31, 2015 have been reclassified and reported as a noncurrent deferred income tax assets on the balance sheet. Adoption did not have a material effect on the Company's financial condition, results of operations or liquidity.

Summary of Significant Accounting Policies

PART II - (Continued)OTHER INFORMATION

Item 1 Legal Proceedings

New Accounting Pronouncements

Revenue Recognition

In May 2014, the FASB issued authoritative guidance related to new accounting requirements for the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. The guidance also includes enhanced disclosure requirements which are intended to help financial statement users better understand the nature, amount, timing and uncertainty of revenue being recognized. Subsequent to the release of this guidance, the FASB has issued additional updates intended to provide interpretive clarifications and to reduce the cost and complexity of applying the new revenue recognition standard both at transition and on an ongoing basis. The new standard and related amendments are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within that annual reporting period. Upon adoption of the new standard, the use of either a full retrospective or cumulative effect transition method is permitted. The Company is currentlynot involved in the processany material current of evaluating the potential impact this new guidance will have on the Company’s financial statementspending legal proceedings

Item 2 Unregistered Sales of Equity Securities and at this time, does not believe this standard will have a material effect on the Company's financial condition, resultsUse of operations or liquidity.Proceeds

InventoryNone

Item 3 Defaults Upon Senior Securities

In July 2015, the FASB issued authoritative guidance intended to simplify the measurement of inventory. The amendment requires entities to measure in-scope inventory at the lower of cost and net realizable value, and replaces the current requirement to measure in-scope inventory at the lower of cost or market, which considers replacement cost, net realizable value, and net realizable value less an approximate normal profit margin. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016. The amendment should be applied prospectively with early adoption permitted. The Company is currently evaluating the potential impact on the Company’s financial position and results of operations upon adoption of this guidanceand anticipate that such impact would be minimal.None

Item 4 Mine Safety Disclosure

PART II—OTHER INFORMATIONNot Applicable

Item 5.5 Other Information

None

Item 6.  Exhibits

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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.

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