Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 04, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | Electronic Systems Technology Inc | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Entity Central Index Key | 752,294 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Common Stock, Shares Outstanding | 4,986,048 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 1,035,958 | ||
Entity Incorporation, State Country Name | Washington | ||
Entity Incorporation, Date of Incorporation | Feb. 10, 1984 | ||
Trading Symbol | elst |
ELECTRONIC SYSTEMS TECHNOLOGY,
ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS MODEMS BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | |
CURRENT ASSETS | |||
Cash | $ 42,874 | $ 115,734 | |
Money market funds | 165,227 | 387,237 | |
Certificates of deposit | 1,000,000 | 1,000,000 | |
Accounts receivable | 98,941 | 71,202 | |
Inventories | 762,517 | 703,147 | |
Prepaid expenses | 8,039 | 8,405 | |
Accrued interest receivable | 5,137 | 6,903 | |
Total Current Assets | 2,082,735 | 2,292,628 | |
PROPERTY AND EQUIPMENT - NET | 31,444 | 51,383 | |
DEFERRED INCOME TAX ASSET - NET | 244,092 | ||
TOTAL ASSETS | 2,114,179 | 2,588,103 | |
CURRENT LIABILITIES | |||
Accounts payable | 18,969 | 15,114 | |
Refundable deposits | 3,937 | 4,527 | |
Accrued wages and bonus | 1,960 | 1,723 | |
Accrued vacation pay | 17,720 | 18,412 | |
Other accrued liabilities | 2,202 | 2,558 | |
Total Current Liabilities | 44,788 | 42,334 | |
TOTAL LIABILITIES | 44,788 | 42,334 | |
COMMITMENTS | [1] | 0 | 0 |
STOCKHOLDERS' EQUITY | |||
Common stock - $.001 par value 50,000,000 shares authorized, 4,986,048 and 5,060,903 shares issued and outstanding, respectively | 4,986 | 5,061 | |
Additional paid-in capital | 944,161 | 972,609 | |
Retained earnings | 1,120,244 | 1,568,099 | |
TOTAL STOCKHOLDERS' EQUITY | 2,069,391 | 2,545,769 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 2,114,179 | $ 2,588,103 | |
[1] | Note 8 |
Statement of Financial Position
Statement of Financial Position - Parenthetical - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of financial position | ||
Common Stock, Par Value | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares Issued | 4,986,048 | 5,060,903 |
Common Stock, Shares Outstanding | 4,986,048 | 5,060,903 |
ELECTRONIC SYSTEMS TECHNOLOGY,4
ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS MODEMS STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income statement | ||
SALES - NET | $ 1,425,128 | $ 1,489,889 |
COST OF SALES | 643,414 | 677,166 |
GROSS PROFIT | 781,714 | 812,722 |
OPERATING EXPENSES | 996,888 | 1,041,041 |
OPERATING LOSS | (215,174) | (228,319) |
OTHER INCOME | ||
Interest income | 11,411 | 11,923 |
TOTAL OTHER INCOME | 11,411 | 11,923 |
NET LOSS BEFORE INCOME TAXES | (203,763) | (216,396) |
FEDERAL INCOME TAX BENEFIT (PROVISION) | (244,092) | 75,700 |
NET LOSS AFTER INCOME TAXES | $ (447,855) | $ (140,696) |
BASIC AND DILUTED LOSS PER SHARE | $ (0.09) | $ (0.03) |
OUTSTANDING BASIC AND DILUTED WEIGHTED AVERAGE SHARES | 5,022,184 | 5,090,487 |
ELECTRONIC SYSTEMS TECHNOLOGY,5
ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS MODEMS STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock Shares | Common Stock Amount | Paid-In Capital | Retained Earnings | Total |
Shares issued at Dec. 31, 2015 | 5,158,667 | ||||
Stockholders' equity at Dec. 31, 2015 | $ 5,159 | $ 1,007,861 | $ 1,708,795 | $ 2,721,815 | |
Stock repurchased, value | (98) | (37,093) | (37,191) | ||
Stock repurchased, stock | (97,764) | ||||
Share-based compensation | 1,841 | 1,841 | |||
Net income (loss) | (140,696) | (140,696) | |||
Shares issued at Dec. 31, 2016 | 5,060,903 | ||||
Stockholders' equity at Dec. 31, 2016 | 5,061 | 972,609 | 1,568,099 | 2,545,769 | |
Stock repurchased, value | (75) | (28,448) | (28,523) | ||
Stock repurchased, stock | (74,855) | ||||
Share-based compensation | $ 0 | 0 | 0 | 0 | 0 |
Net income (loss) | (447,855) | (447,855) | |||
Shares issued at Dec. 31, 2017 | 4,986,048 | ||||
Stockholders' equity at Dec. 31, 2017 | $ 4,986 | $ 944,161 | $ 1,120,244 | $ 2,069,391 |
ELECTRONIC SYSTEMS TECHNOLOGY,6
ELECTRONIC SYSTEMS TECHNOLOGY, INC. DBA ESTEEM WIRELESS MODEMS STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (447,855) | $ (140,696) |
Noncash expenses included in loss: | ||
Depreciation and amortization | 19,939 | 26,290 |
Deferred income taxes | 244,092 | (75,700) |
Share-based compensation | 0 | 1,841 |
Decrease (increase) in operating assets: | ||
Accounts receivable | (27,739) | (4,925) |
Inventories | (59,370) | (99,856) |
Prepaid expenses | 366 | 2,019 |
Federal income tax refund receivable | 2,721 | |
Accrued interest receivable | 1,766 | 958 |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 3,855 | 6,564 |
Accrued wages, bonus, vacation and other accrued liabilities | (811) | (687) |
Refundable deposits | (590) | 948 |
Net Cash used by Operating Activities | (266,347) | (280,523) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of certificates of deposit | (1,000,000) | (1,000,000) |
Proceeds from maturities of certificates of deposit | 1,000,000 | 1,202,625 |
Net Cash from Investing Activities | 202,625 | |
CASH FLOWS USED IN FINANCING ACTIVITIES: | ||
Repurchase of shares | (28,523) | (37,191) |
Net Cash used in Financing Activities | (28,523) | (37,191) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (294,870) | (115,089) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 502,971 | 618,060 |
CASH AND CASH EQUIVALENTS AT END OF YEAR | 208,101 | 502,971 |
Cash and cash equivalents: | ||
Total cash and cash equivalents | $ 208,101 | $ 618,060 |
1. Organization and Summary of
1. Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
1. Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies Business Organization The Company was incorporated under the laws of the State of Washington on February 10, 1984, primarily to develop, produce, sell and distribute wireless modems that will allow communication between peripherals via radio frequency waves. Effective September 13, 2007, the Company announced their establishment of a doing business as or dba structure, based on the Companys registered trade name of ESTeem® Wireless Modems. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates used in the accompanying financial statements include the allowance for doubtful accounts receivable, inventory obsolescence, useful lives of depreciable assets, share-based compensation, and deferred income taxes. Actual results could differ from those estimates. Concentrations and Credit Risks The Company places its cash with three major financial institutions. During the period, the Company had cash balances that were in excess of federally insured limits. The Companys customers, to which trade credit terms are extended, consist of United States and local governments and foreign and domestic companies. Domestic sales for the fiscal year were $1,198,674 compared to $1,219,493 in 2016. Sales to foreign customers for the fiscal year were $226,454 compared to $270,396 in 2016. The Company purchases certain key components necessary for the production of its products from a limited number of suppliers. The components provided by the suppliers could be replaced or substituted by other products. It is possible that if this action became necessary, an interruption of production and/or material cost expenditures could take place. Revenue Recognition The Company recognizes revenue from product sales when the goods are shipped or delivered and title and risk of loss pass to the customer. Provision for certain sales incentives and discounts to customers are accounted for as reductions in sales in the period the related sales are recorded. Sales are recorded net of applicable state and local sales tax. Products sold to foreign customers are shipped after payment is received in U.S. funds, unless an established distributor relationship exists or the customer is a foreign branch of a U.S. company. Revenues from site support and engineering services are recognized as the Company performs the services. When amounts are billed and collected before the services are performed they are included in deferred revenues. Revenue is recognized based upon proportional performance when the contract contains performance milestones. The Company does not generally sell its products with the right of return. Therefore, returns are accounted for when they occur and are accepted. The Company warrants its products as free of manufacturing defects and provides a refund of the purchase price, repair or replacement of the product for a period of one year from the date of installation by the first user/customer. No allowance for estimated warranty repairs or product returns has been recorded. Warranty expenses are immaterial based on the Companys historical warranty experience. Financial Instruments The Companys financial instruments are cash, money market funds, and certificates of deposit. The recorded values of cash, money market funds and certificates of deposit approximate their fair values based on their short-term nature. Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash and money market funds purchased with original maturities of three months or less. Allowance for Uncollectible Accounts The Company uses the allowance method to account for estimated uncollectible accounts receivable. Accounts receivable are presented net of an allowance for doubtful accounts. As of December 31, 2017 and 2016, the Companys estimate of doubtful accounts was zero. The Companys policy for writing off past due accounts receivable is based on the amount, time past due, and response received from the subject customer. Inventories Inventories are stated at lower of direct cost or market. Cost is determined on an average cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value and consideration is given to obsolescence. Property and Equipment Property and equipment is carried at cost. Major betterments are capitalized and de minimis purchases are expensed. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of property and equipment for purposes of computing depreciation is three to seven years. When the Company sells or otherwise disposes of property and equipment a gain or loss is recorded in the statement of operations. The cost of improvements that extend the life of property and equipment is capitalized. The Company periodically reviews its long-lived assets for impairment and, upon indication that the carrying value of such assets may not be recoverable, recognizes an impairment loss by a charge against current operations. Certificates of Deposit Certificates of deposit with original maturities ranging from three months to twelve months were $1,000,000 and $1,000,000 at December 31, 2017 and 2016 respectively. Software Costs Software purchased and used by the Company is capitalized as property and equipment based on its cost, and amortized over its useful life, usually not exceeding five years. The Company capitalizes the costs of creating a software product to be sold, leased or otherwise marketed, for which technological feasibility has been established. Amortization of the software product, on a product-by-product basis, begins on the date the product is available for distribution to customers and continues over the estimated revenue-producing life, not to exceed five years. Income Taxes The provision (benefit) for income taxes is computed on the pretax income (loss) based on the current tax law. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates. The Company evaluates positive and negative information when estimating the valuation allowance for deferred tax assets. For tax positions that meet the more likely than not recognition threshold a deferred tax asset is recognized. Research and Development Research and development costs are expensed as operating expenses when incurred. Research and development expenditures for new product development and improvements of existing products by the Company for 2017 and 2016 were $252,411 and $273,500, respectively. Advertising Costs Costs incurred for producing and communicating advertising are expensed as operating expenses when incurred. Advertising costs for the years ended December 31, 2017 and 2016 were $9,832 and $9,552, respectively. Earnings Per Share The Company is required to have dual presentation of basic earnings per share (EPS) and diluted EPS. Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the period plus the effect of potentially dilutive common stock equivalents. Potentially dilutive common stock equivalents consist of 150,000 and 220,000 stock options outstanding as of December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the potentially dilutive stock options were not included in the calculation of the diluted weighted average number of shares outstanding or diluted EPS as their effect would have been anti-dilutive. Share-Based Compensation Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718 requires all share-based payments to employees, including grants of employee stock options, be measured at fair value and expensed in the statement of operations over the service period. See Note 7 for additional information. In addition to the recognition of expense in the financial statements, under FASB ASC 718, any excess tax benefits received upon exercise of options will be presented as a financing activity inflow rather than an adjustment of operating activity. Fair Value Measurements ASC 820 "Fair Value Measurements ("ASC 820") requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. At December 31, 2017 and 2016 the Company has no assets or liabilities subject to fair value measurements on a recurring basis. New Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements. In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of implementing this update on the financial statements. 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 currently in the process of evaluating the potential impact this new guidance will have on the Companys financial statements and at this time, does not believe this standard will have a material effect on the Company's financial condition, results of operations or liquidity. Inventory 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 adoption, on January 1, 2017 of this guidance did not have a material impact on the Companys financial statements. Reclassifications Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported statement of operations. |
2. Inventories
2. Inventories | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
2. Inventories | 2. Inventories Inventories consist of the following: 2017 2016 Parts $ 143,452 $ 185,911 Work in progress 201,526 216,859 Finished goods 417,539 300,377 $ 762,517 $ 703,147 |
3. Property and Equipment
3. Property and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
3. Property and Equipment | 3. Property and Equipment Property and equipment consist of the following: 2017 2016 Laboratory equipment $ 580,482 $ 580,482 Software purchased 35,028 35,028 Furniture and fixtures 16,531 16,531 Dies and molds 130,176 130,176 762,217 762,217 Accumulated depreciation and amortization (730,773) (710,834) $ 31,444 $ 51,383 |
4. Income Taxes
4. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
4. Income Taxes | 4. Income Taxes At December 31, 2017, the Company had approximately $66,000 of research and development income tax credits available to reduce federal income taxes in future periods. The credits expire from 2033-2036. In addition, at December 31, 2017, the Company had approximately $843,000 of net operating loss carryforwards which will expire between 2033 and 2036. The components of deferred tax assets and liabilities at December 31, were as follows: 2017 2016 Accrued liabilities $ 11,300 $ 7,892 Inventories 1,300 16,197 Federal income tax credits 69,000 66,353 Net operating loss carryforwards 177,000 201,029 Less valuation allowance (258,600) (47,379) Total deferred tax assets, net $ 0 $ 244,092 Realization of the deferred tax asset is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards and the income tax carryforwards. Management determined in 2017 that it does not believe it is more likely than not that all of the net deferred tax assets will be realized. Therefore, a valuation allowance has been recorded for the full net deferred tax asset at December 31, 2017. The differences between the provision (benefit) for federal income taxes and federal income taxes computed using the U.S. statutory federal income tax rate of 35% were as follows: 2017 2016 Amount computed using the statutory rate $ (69,900) $ (75,739) Other 3,394 2,080 Research and development credits (3,062) (10,500) Federal tax rate change 102,439 Change in valuation allowance 211,221 8,459 Benefit for federal income taxes $ 244,092 $ (75,700) On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the Act) resulting in significant modifications to existing law. We have completed the accounting for the effects of the Act during the quarter ended December 31, 2017. Our financial statements for the year ended December 31, 2017 reflect certain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes. As a result of the changes to tax laws and tax rates under the Act, we incurred incremental income tax expense of $102,439 during the year ended December 31, 2017, which consisted primarily of the remeasurement of deferred tax assets and liabilities from 35% to 21% and application of a full valuation allowance. Should the Company have future accrued interest expense and penalties related to uncertain income tax positions, they will recognize those expenses in income tax expense. The Company files federal income tax returns in the United States only. The Company is no longer subject to federal income tax examination by tax authorities for years before 2014. The Company has evaluated all tax positions for open years and has concluded that they have no material unrecognized tax benefits or penalties. |
5. Profit Sharing Salary Deferr
5. Profit Sharing Salary Deferral 401-k Plan | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
5. Profit Sharing Salary Deferral 401-k Plan | 5. Profit Sharing Salary Deferral 401-K Plan The Company sponsors a Profit Sharing Plan and Salary Deferral 401-K Plan and Trust. All employees over the age of twenty-one are eligible. On January 1, 2006, the Company adopted a four percent salary matching provision. The Company contributed $15,149 and $19,236 to the plan for the years ended December 31, 2017 and 2016 respectively. |
6. Employee Profit Sharing Bonu
6. Employee Profit Sharing Bonus Program | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
6. Employee Profit Sharing Bonus Program | 6. Employee Bonus Program The Board of Directors establishes Sales and Net Income thresholds at the start of each year that are used in calculating the amount of Bonuses that may be awarded. If these thresholds are not achieved, there will be no bonus issued. There was no accrual or expense recorded for 2017 or 2016. |
7. Share-based Compensation
7. Share-based Compensation | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
7. Share-based Compensation | 7. Share-Based Compensation The Company grants stock options to individual employees and directors with three years continuous tenure. After termination of employment, stock options may be exercised within ninety days, after which they are subject to forfeiture. There were no option grants during 2017. August 7, 2015, the Board of Directors passed a resolution approving 250,000 stock options for grant to management subject to Shareholder approval at the 2016 Annual Shareholders Meeting. The resolution was approved by the Shareholders and 150,000 of the 250,000 options approved were granted. 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: 2016 Dividend yield 0.00% Expected volatility 75% Risk-free interest rate 0.68% Option exercise rate 6.4% Expected term (in years) 3 Estimated fair value per option granted $ 0.20 The average risk-free interest rate was based on the three-year U.S. Treasury Bond rate in effect as of the grant date. The expected volatility is determined using a weighted average of weekly historical volatility of the stock price over a period prior to the grant dates. The Company uses historical data to estimate option exercise rates. In the years ended December 31, 2017 and 2016, the Company recognized $0 and $1,841 respectively, in share-based compensation expense. No non-vested share-based compensation arrangements existed as of December 31, 2017 and 2016. A summary of option activity follows: Weighted Weighted Average Average Remaining Exercise Contractual Number Price Per Term Outstanding Option (Years) Balance at December 31, 2015 185,000 0.36 1.2 Granted 150,000 0.40 3.9 Expired (115,000) 0.33 Balance at December 31, 2016 220,000 0.40 2.8 Granted 0 0 Expired (70,000) 0.38 Balance at December 31, 2017 150,000 0.40 2.6 Outstanding and Exercisable at December 31, 2017 150,000 $ 0.40 2.6 The aggregate intrinsic value of the options outstanding and exercisable at December 31, 2017, was $18,000. |
8. Leases
8. Leases | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
8. Leases | 8. Leases The Company leases its facilities from a port authority for three years, expiring in September 2020, with annual increases based upon the Consumer Price Index. The lease expense for the years ended December 31, 2017 and 2016 was $63,299 and $63,299 respectively. The lease expense commitment through the year ended December 31, 2020 is expected to be approximately $65,856 per year. |
1. Organization and Summary o15
1. Organization and Summary of Significant Accounting Policies: Accounting Estimates (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Accounting Estimates | Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates used in the accompanying financial statements include the allowance for doubtful accounts receivable, inventory obsolescence, useful lives of depreciable assets, share-based compensation, and deferred income taxes. Actual results could differ from those estimates. |
1. Organization and Summary o16
1. Organization and Summary of Significant Accounting Policies: Concentrations of Credit Risks (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Concentrations of Credit Risks | Concentrations and Credit Risks The Company places its cash with three major financial institutions. During the period, the Company had cash balances that were in excess of federally insured limits. The Companys customers, to which trade credit terms are extended, consist of United States and local governments and foreign and domestic companies. Domestic sales for the fiscal year were $1,198,674 compared to $1,219,493 in 2016. Sales to foreign customers for the fiscal year were $226,454 compared to $270,396 in 2016. The Company purchases certain key components necessary for the production of its products from a limited number of suppliers. The components provided by the suppliers could be replaced or substituted by other products. It is possible that if this action became necessary, an interruption of production and/or material cost expenditures could take place. |
1. Organization and Summary o17
1. Organization and Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from product sales when the goods are shipped or delivered and title and risk of loss pass to the customer. Provision for certain sales incentives and discounts to customers are accounted for as reductions in sales in the period the related sales are recorded. Sales are recorded net of applicable state and local sales tax. Products sold to foreign customers are shipped after payment is received in U.S. funds, unless an established distributor relationship exists or the customer is a foreign branch of a U.S. company. Revenues from site support and engineering services are recognized as the Company performs the services. When amounts are billed and collected before the services are performed they are included in deferred revenues. Revenue is recognized based upon proportional performance when the contract contains performance milestones. The Company does not generally sell its products with the right of return. Therefore, returns are accounted for when they occur and are accepted. The Company warrants its products as free of manufacturing defects and provides a refund of the purchase price, repair or replacement of the product for a period of one year from the date of installation by the first user/customer. No allowance for estimated warranty repairs or product returns has been recorded. Warranty expenses are immaterial based on the Companys historical warranty experience. |
1. Organization and Summary o18
1. Organization and Summary of Significant Accounting Policies: Financial Instruments (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Financial Instruments | Financial Instruments The Companys financial instruments are cash, money market funds, and certificates of deposit. The recorded values of cash, money market funds and certificates of deposit approximate their fair values based on their short-term nature. |
1. Organization and Summary o19
1. Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash and money market funds purchased with original maturities of three months or less. |
1. Organization and Summary o20
1. Organization and Summary of Significant Accounting Policies: Allowance For Uncollectible Accounts (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Allowance For Uncollectible Accounts | Allowance for Uncollectible Accounts The Company uses the allowance method to account for estimated uncollectible accounts receivable. Accounts receivable are presented net of an allowance for doubtful accounts. As of December 31, 2017 and 2016, the Companys estimate of doubtful accounts was zero. The Companys policy for writing off past due accounts receivable is based on the amount, time past due, and response received from the subject customer. |
1. Organization and Summary o21
1. Organization and Summary of Significant Accounting Policies: Inventories (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Inventories | Inventories Inventories are stated at lower of direct cost or market. Cost is determined on an average cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value and consideration is given to obsolescence. |
1. Organization and Summary o22
1. Organization and Summary of Significant Accounting Policies: Property and Equipment (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Property and Equipment | Property and Equipment Property and equipment is carried at cost. Major betterments are capitalized and de minimis purchases are expensed. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of property and equipment for purposes of computing depreciation is three to seven years. When the Company sells or otherwise disposes of property and equipment a gain or loss is recorded in the statement of operations. The cost of improvements that extend the life of property and equipment is capitalized. The Company periodically reviews its long-lived assets for impairment and, upon indication that the carrying value of such assets may not be recoverable, recognizes an impairment loss by a charge against current operations. |
1. Organization and Summary o23
1. Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy | Certificates of Deposit Certificates of deposit with original maturities ranging from three months to twelve months were $1,000,000 and $1,000,000 at December 31, 2017 and 2016 respectively. |
1. Organization and Summary o24
1. Organization and Summary of Significant Accounting Policies: Software Costs (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Software Costs | Software Costs Software purchased and used by the Company is capitalized as property and equipment based on its cost, and amortized over its useful life, usually not exceeding five years. The Company capitalizes the costs of creating a software product to be sold, leased or otherwise marketed, for which technological feasibility has been established. Amortization of the software product, on a product-by-product basis, begins on the date the product is available for distribution to customers and continues over the estimated revenue-producing life, not to exceed five years. |
1. Organization and Summary o25
1. Organization and Summary of Significant Accounting Policies: Income Taxes (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Income Taxes | Income Taxes The provision (benefit) for income taxes is computed on the pretax income (loss) based on the current tax law. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates. The Company evaluates positive and negative information when estimating the valuation allowance for deferred tax assets. For tax positions that meet the more likely than not recognition threshold a deferred tax asset is recognized. |
1. Organization and Summary o26
1. Organization and Summary of Significant Accounting Policies: Advertising Costs (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Advertising Costs | Advertising Costs Costs incurred for producing and communicating advertising are expensed as operating expenses when incurred. Advertising costs for the years ended December 31, 2017 and 2016 were $9,832 and $9,552, respectively. |
1. Organization and Summary o27
1. Organization and Summary of Significant Accounting Policies: Earnings Per Share (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Earnings Per Share | Earnings Per Share The Company is required to have dual presentation of basic earnings per share (EPS) and diluted EPS. Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the period plus the effect of potentially dilutive common stock equivalents. Potentially dilutive common stock equivalents consist of 150,000 and 220,000 stock options outstanding as of December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the potentially dilutive stock options were not included in the calculation of the diluted weighted average number of shares outstanding or diluted EPS as their effect would have been anti-dilutive. |
1. Organization and Summary o28
1. Organization and Summary of Significant Accounting Policies: Share-based Compensation (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Share-based Compensation | Share-Based Compensation Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718 requires all share-based payments to employees, including grants of employee stock options, be measured at fair value and expensed in the statement of operations over the service period. See Note 7 for additional information. In addition to the recognition of expense in the financial statements, under FASB ASC 718, any excess tax benefits received upon exercise of options will be presented as a financing activity inflow rather than an adjustment of operating activity. |
New Accounting Pronouncements (
New Accounting Pronouncements (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
New Accounting Pronouncements | New Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements. In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of implementing this update on the financial statements. 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 currently in the process of evaluating the potential impact this new guidance will have on the Companys financial statements and at this time, does not believe this standard will have a material effect on the Company's financial condition, results of operations or liquidity. Inventory 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 adoption, on January 1, 2017 of this guidance did not have a material impact on the Companys financial statements. |
Reclassifications (Policies)
Reclassifications (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Policies | |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported statement of operations. |
2. Inventories_ Schedule of Inv
2. Inventories: Schedule of Inventory, Current (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Inventory, Current | 2017 2016 Parts $ 143,452 $ 185,911 Work in progress 201,526 216,859 Finished goods 417,539 300,377 $ 762,517 $ 703,147 |
3. Property and Equipment_ Prop
3. Property and Equipment: Property, Plant and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Property, Plant and Equipment | 2017 2016 Laboratory equipment $ 580,482 $ 580,482 Software purchased 35,028 35,028 Furniture and fixtures 16,531 16,531 Dies and molds 130,176 130,176 762,217 762,217 Accumulated depreciation and amortization (730,773) (710,834) $ 31,444 $ 51,383 |
7. Share-based Compensation_ Sh
7. Share-based Compensation: Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | 2016 Dividend yield 0.00% Expected volatility 75% Risk-free interest rate 0.68% Option exercise rate 6.4% Expected term (in years) 3 Estimated fair value per option granted $ 0.20 |
7. Share-based Compensation_ Sc
7. Share-based Compensation: Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value | Weighted Weighted Average Average Remaining Exercise Contractual Number Price Per Term Outstanding Option (Years) Balance at December 31, 2015 185,000 0.36 1.2 Granted 150,000 0.40 3.9 Expired (115,000) 0.33 Balance at December 31, 2016 220,000 0.40 2.8 Granted 0 0 Expired (70,000) 0.38 Balance at December 31, 2017 150,000 0.40 2.6 Outstanding and Exercisable at December 31, 2017 150,000 $ 0.40 2.6 |
1. Organization and Summary o35
1. Organization and Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Nature of Operations | Business Organization The Company was incorporated under the laws of the State of Washington on February 10, 1984, primarily to develop, produce, sell and distribute wireless modems that will allow communication between peripherals via radio frequency waves. Effective September 13, 2007, the Company announced their establishment of a doing business as or dba structure, based on the Companys registered trade name of ESTeem® Wireless Modems. | |
Entity Incorporation, State Country Name | Washington | |
Entity Incorporation, Date of Incorporation | Feb. 10, 1984 | |
Research and Development | Research and Development Research and development costs are expensed as operating expenses when incurred. Research and development expenditures for new product development and improvements of existing products by the Company for 2017 and 2016 were $252,411 and $273,500, respectively. | |
Research and development | $ 252,411 | $ 273,500 |
1. Organization and Summary o36
1. Organization and Summary of Significant Accounting Policies: Concentrations of Credit Risks (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Domestic sales | $ 1,198,674 | $ 1,219,493 |
Foreign sales | $ 226,454 | $ 270,396 |
1. Organization and Summary o37
1. Organization and Summary of Significant Accounting Policies: Advertising Costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Advertising Expense | $ 9,832 | $ 9,552 |
1. Organization and Summary o38
1. Organization and Summary of Significant Accounting Policies: Earnings Per Share (Details) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 150,000 | 220,000 |
2. Inventories_ Schedule of I39
2. Inventories: Schedule of Inventory, Current (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Details | ||
Inventory, Parts and Components, Net of Reserves | $ 143,452 | $ 185,911 |
Inventory, Work in Process, Gross | 201,526 | 216,859 |
Inventory, Finished Goods, Gross | 417,539 | 300,377 |
Inventories | $ 762,517 | $ 703,147 |
3. Property and Equipment_ Pr40
3. Property and Equipment: Property, Plant and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Details | ||
Laboratory equipment | $ 580,482 | $ 580,482 |
Capitalized Computer Software, Gross | 35,028 | 35,028 |
Furniture and Fixtures, Gross | 16,531 | 16,531 |
Dies and molds | 130,176 | 130,176 |
Property, Plant and Equipment, Gross | 762,217 | 762,217 |
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | (730,773) | (710,834) |
PROPERTY AND EQUIPMENT - NET | $ 31,444 | $ 51,383 |
4. Income Taxes (Details)
4. Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Effective Income Tax Rate Reconciliation, Tax Credit, Amount | $ 66,000 | |
Operating Loss Carryforwards | 843,000 | |
Deferred Tax Liabilities, Net | 11,300 | $ 7,892 |
Deferred Tax Assets, Inventory | 1,300 | 16,197 |
Tax Credit Carryforward, Amount | 69,000 | 66,353 |
Deferred Tax Assets, Operating Loss Carryforwards | 177,000 | 201,029 |
Deferred Tax Assets, Valuation Allowance | (258,600) | (47,379) |
Deferred Tax Assets, Net of Valuation Allowance, Current | $ 0 | $ 244,092 |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 35.00% |
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount | $ (69,900) | $ (75,739) |
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount | 3,394 | 2,080 |
Effective Income Tax Rate Reconciliation, Other Reconciling Items, Amount | (3,062) | (10,500) |
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | 102,439 | |
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount | 211,221 | 8,459 |
FEDERAL INCOME TAX BENEFIT (PROVISION) | $ 244,092 | $ (75,700) |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 35.00% |
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | $ 102,439 |
5. Profit Sharing Salary Defe42
5. Profit Sharing Salary Deferral 401-k Plan (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Defined Benefit Plan, Plan Assets, Contributions by Employer | $ 15,149 | $ 19,236 |
7. Share-based Compensation_ 43
7. Share-based Compensation: Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (Details) | 12 Months Ended |
Dec. 31, 2016$ / shares | |
Details | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 75.00% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate | 0.68% |
Option exercise rate | 0.0640 |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term | 3 years |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value | $ 0.20 |
7. Share-based Compensation (De
7. Share-based Compensation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Share-based compensation | $ 0 | $ 1,841 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Aggregate Intrinsic Value | $ 18,000 |
7. Share-based Compensation_ 45
7. Share-based Compensation: Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Details | |||
Number Outstanding | 150,000 | 220,000 | 185,000 |
Weighted Average Exercise Price Per Option | $ 0.40 | $ 0.40 | $ 0.36 |
Weighted Average Remaining Contractual Term (Years) | 2 years 7 months 6 days | 2 years 9 months 18 days | 1 year 2 months 12 days |
Granted | 0 | 150,000 | |
Weighted Average Exercise Price Per Option | $ 0 | $ 0.40 | |
Expired | (70,000) | (115,000) | |
Weighted Average Exercise Price Per Option | $ 0.38 | $ 0.33 | |
Outstanding and Exercisable at December 31, 2016 | 150,000 | 220,000 | 185,000 |
Weighted Average Exercise Price Per Option | $ 0.40 | $ 0.40 | $ 0.36 |
Weighted Average Remaining Contractual Term (Years) | 2 years 7 months 6 days | 2 years 9 months 18 days | 1 year 2 months 12 days |
8. Leases (Details)
8. Leases (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Operating Lease, Expense | $ 63,299 | $ 65,856 |