UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2016

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. Quay St. Bldg 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)

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).   YESxNO¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes¨Nox

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of September 30, 2016, the number of the Company's shares of common stock par value $0.001, outstanding was 5,081,108.

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ELECTRONIC SYSTEMS TECHNOLOGY, INC.

FORM 10-Q

September 30, 2016

Index

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PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

ELECTRONIC SYSTEMS TECHNOLOGY, INC.
BALANCE SHEETS
	September 30, 2016 (Unaudited)	December, 31, 2015
ASSETS
Current assets
Cash and cash equivalents	$           618,995	$         618,060
Certificates of deposit investments	1,000,000	1,202,625
Accounts receivable	102,290	66,276
Inventories	734,819	603,291
Accrued interest receivable	6,938	7,861
Prepaid insurance	2,736	2,672
Prepaid expenses	22,127	10,474
Deferred income tax asset, current	24,276	24,517
Total current assets	2,512,181	2,535,776
Property and equipment, net	57,955	77,673
Deferred income tax asset, net	144,116	143,875
Total assets	$        2,714,252	$      2,757,324
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$             38,013	$             8,550
Accrued liabilities	33,590	23,379
Refundable deposits	3,580	3,580
Total current liabilities	75,183	35,509
Total liabilities	75,183	35,509
COMMITMENTS and CONTINGENCIES (NOTE 6)
Stockholders’ equity
Common stock, $0.001 par value 50,000,000 shares authorized 5,081,108 and 5,158,667 shares issued and outstanding, respectively	5,081	5,159
Additional paid-in capital	980,307	1,007,861
Retained earnings	1,653,681	1,708,795
Total stockholders’ equity	2,639,069	2,721,815
Total liabilities and stockholders’ equity	$        2,714,252	$      2,757,324

(See "Notes to Financial Statements")

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ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended Sept. 30, 2016	Three Months Ended Sept. 30, 2015	Nine months Ended Sept. 30, 2016	Nine months Ended Sept. 30, 2015
SALES, NET	$         302,252	$       401,748	$        1,159,846	$      1,160,527
SITE SUPPORT	19,216	37,332	90,392	81,899
COST OF SALES	(126,374)	(185,725)	(517,974)	(561,164)
GROSS PROFIT	195,094	253,355	732,264	681,262
Operating Expenses
General and administrative	67,792	71,191	233,748	255,555
Research and development	59,624	72,502	205,233	219,731
Marketing and sales	113,221	156,803	357,314	482,536
TOTAL OPERATING EXPENSE	240,637	300,496	796,295	957,822
OPERATING INCOME (LOSS)	(45,543)	(47,141)	(64,031)	(276,560)
OTHER INCOME
Interest income	3,046	2,937	8,917	8,735
TOTAL OTHER INCOME	3,046	2,937	8,917	8,735
NET INCOME (LOSS) BEFORE    INCOME TAX	(42,497)	(44,204)	(55,114)	(267,825)
Benefit (provision) for income tax	-	-	-	-
NET INCOME (LOSS)	$       (42,497)	$       (44,204)	$        (55,114)	$      (267,825)
Basic and diluted loss per share	$           (0.01)	$           (0.01)	$           (0.01)	$            (0.05)
Weighted average shares used in computing income (loss) per share:
Basic and diluted	5,081,108	5,158,667	5,097,059	5,158,667

(See "Notes to Financial Statements")

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ELECTRONIC SYSTEMS TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (Unaudited)
	Nine months Ended Sept. 30, 2016	Nine months Ended Sept. 30, 2015
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net loss	$            (55,114)	$         (267,825)
Noncash items included in net loss:
Depreciation	19,718	21,914
Share based compensation	1,841	-
Deferred income taxes		979
Changes in operating assets and liabilities:
Accounts receivable	(36,014)	(100,908)
Inventories	(131,528)	92,788
Accrued interest receivable	923	(4,984)
Prepaid insurance	64	2,699
Prepaid expenses	(11,782)	(10,616)
Accounts payable	29,463	7,061
Accrued liabilities	10,211	(6,503)
Refundable deposits	-	(26,247)
NET CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES	(172,218)	(291,642)
CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES:
Certificates of deposit redeemed	202,625	200,000
Purchases of equipment	-	(14,480)
NET CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES	202,625	185,520
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repurchase of Shares	(29,472)	-
NET CASH USED IN FINANCING ACTIVITIES	(29,472)	-
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	935	(106,122)
Cash and cash equivalents at beginning of period	618,060	637,086
Cash and cash equivalents at end of period	$           618,995	$           530,694

(See "Notes to Financial Statements")

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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 September 30, 2016 and September 30, 2015.  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. 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, 2015 as filed with Securities and Exchange Commission.

The results of operations for the three and nine months ended 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 low 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”). The amendments in the Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.

NOTE 2 - INVENTORIES

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

	September 30,   2016	December 31, 2015
Parts	$ 254,261	$181,798
Work in progress	201,530	233,055
Finished goods	279,028	188,438
	$ 734,819	$603,291

NOTE 3 - INCOME (LOSS) PER SHARE

Basic income (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 income (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, 2016 the Company had 220,000 outstanding stock options that could have a dilutive effect on future periods.  However, at September 30, 2016 there was no dilutive effect of stock options on earnings per share or weighted average shares outstanding.  

NOTE 4 - STOCK OPTIONS

As of September 30, 2016, 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 has not awarded stock options during the nine months ended September 30, 2016.  The Board of Directors may consider issuing stock options later in 2016. Shareholders approved the 2015 Stock Incentive Plan on June 3, 2016, for 250,000 stock options. 150,000 of the approved amount were granted in 2015 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 booked an expense of $1,841 for the quarter in which the options were approved by the Shareholders.

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NOTE 4 - STOCK OPTIONS, Continued

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.

	2015
Dividend yield	0.00%
Expected volatility	68%
Risk-free interest rate	1.08%
Expected term (in years)	5
Estimated Fair Value per Option Granted	$0.23

The Company uses historical data to estimate option exercise rates.  The option exercise rate for option grants in 2005 through 2015 was 5.42%.  

A summary of option activity during the nine months ended September 30, 2016, is as follows:

	Number Outstanding	Weighted-Average Exercise Price Per Share	Weighted-Average Remaining Life (Years)	Approximate Aggregate Intrinsic Value
Outstanding and Exercisable at December 31, 2015	185,000	$0.36
Granted (Approved)	150,000	$0.40
Expired	(115,000)	0.33
Outstanding and Exercisable at September 30, 2016	220,000	$0.40	2.8	$0

NOTE 5 - RELATED PARTY TRANSACTIONS

During the quarter ended September 30, 2016 the Company accrued total directors’ fees of $1,200, or $300 per director for board meetings attended, compared to $1,200 for the same period in 2015. For the nine-month period ending September 30, 2016, the Company paid or accrued a total of $4,200 for directors’ fees, compared to $4,200 for the same period in 2015.

NOTE 6 - COMMITMENTS and CONTINGENCIES

The Company leases its facilities from a port authority for $5,348 per month for three years, expiring in September 2017, with annual increases based upon the Consumer Price Index

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, 2016, Domestic customers represented approximately 86% of total net revenues. Domestic sales revenues decreased to $275,709 for the quarter ended September 30, 2016 compared to $375,433 for the quarter ended September 30, 2015. Year to date domestic sales revenues increased to $1,020,831 as of September 30, 2016 compared to $980,681 for the same period of 2015.  Foreign customers represented approximately 14% of total net revenues.  Foreign sales revenues decreased to $45,759 for the quarter ended September 30, 2016 compared to $63,647 for the quarter ended September 30, 2015. Year to date foreign sales revenues decreased to $229,407 as of September 30, 2016 compared to $261,745 for the same period of 2015.  During the quarter ended September 30, 2016, no sales to one customer, comprised more than 10% of the Company’s sales revenues.  Revenues from foreign countries during the third quarter of 2016 consist primarily of revenues from product sales to Hungary, India and Chile.

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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. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in open market transactions, complying with Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Shares repurchased are retired.

The following table shows the Company’s activity and related information for the nine-month period ended September 30, 2016:

	Purchase Period End Date	Number of Shares	Average Repurchase Price Per Share	Amount
January 2016	January 31, 2016	9,618	$0.38	$3,655
February 2016	February 29, 2016	40,382	$0.38	$15,345
March 2016	March 31, 2016	27,559	$0.38	$10,472
Total		77,559	$0.38	$29,472

NOTE 9 – Reclassification

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.

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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, 2016.  The following statements may be forward looking in nature and actual results may differ materially.

A.  Results of Operations

REVENUES:

Total revenues from the sale of the Company’s ESTeem wireless modem products and services decreased to $321,468 for the third quarter of 2016, compared to $439,080 for the third quarter of 2015.  Gross revenues, including interest income, decreased to $324,514 for the quarter ended September 30, 2016, from $442,017 for the same quarter of 2015.  Year to date sales increased to $1,250,238 as of September 30, 2016 as compared to $1,242,426 as of September 30, 2015. Year to date gross revenues, including interest income, increased to $1,259,155 as of September 30, 2016 compared to $1,251,161 as of September 30, 2015.  Management believes the decrease in quarterly is due to decreased engineering services and related product sales, the increase in year to date sales revenues is due to increased engineering services and related product sales during the first six months of the year.

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, 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 in regard to the Company's revenues become difficult to predict.

A percentage breakdown of EST's Domestic and Export Sales, for the third quarter of 2016 and 2015 are as follows:

	For the third quarter of
	2016	2015
Domestic Sales	86%	86%
Export Sales	14%	14%

Domestic Revenues

During the quarter ended September 30, 2016, the Company’s domestic operations represented 86% 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 decreased to $275,709 for the quarter ended September 30, 2016 compared to $375,433 for the quarter ended September 30, 2015.  Management believes the decrease in sales revenues is due to decreased domestic sales for water/waste water and mining industrial automation projects during the quarter ending September 30, 2016.During the quarter ended September 30, 2016, no one customer, comprised more than 10% of the Company’s sales revenues.  

For the nine-month period ended September 30, 2016, the Company’s domestic operations represented 82% of the Company’s total sales revenues.  Year to date domestic sales revenues increased to $1,020,831 as of September 30, 2016 compared to $980,681 for the same period of 2015. Management believes the increase in year to date sales revenues is due to increased engineering services and related product sales during the first nine months of 2016.  

Foreign Revenues

The Company’s foreign operating segment represented 14% of the Company’s total net revenues for the quarter ended September 30, 2016.  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.  

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During the quarter ended September 30, 2015, the Company had $45,759 in foreign export sales, amounting to 14% of total net revenues of the Company for the quarter, compared with foreign export sales of $63,647 for the same quarter of 2015.  Management believes the decrease in foreign sales revenues was due to decreased automation needs to lower operating expenses in Oil & Gas and Mining industries.  Revenues from foreign countries during the third quarter of 2016 consist primarily of revenues from product sales to Hungary, India and Chile.  No foreign sales to a single customer comprised 10% or more of the Company's product sales for the quarter ended September 30, 2016.  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, 2016, the Company had $229,407 in foreign export sales, amounting to 18% of total sales revenues of the Company for the period, compared with foreign export sales of $261,745 for the same period of 2015. Management believes the decrease in foreign sales revenues is due unfavorable exchange rates with respect to the strength of the US Dollar.

BACKLOG:

The Corporation had a sales order backlog of approximately $34,786 as of September 30, 2016.  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 15 working days after receipt of customer orders, with the exception of ongoing, scheduled projects, and custom designed equipment.

COST OF SALES:

Cost of sales percentage for the third quarter of 2016 and 2015 was 36% and 38%, respectively. The cost of sales decrease for the third quarter of 2016 is the result of the product mix for items sold.

OPERATING EXPENSES:

Operating expenses for the third quarter of 2016 decreased $59,859 from the third quarter of 2015.  The following is an outline of operating expenses:

For the quarter ended:	September 30, 2016	September 30, 2015	Increase (Decrease)
General and Administrative	$             67,792	$             71,191	($3,399)
Research/Development	59,624	72,502	(12,878)
Marketing and Sales	113,221	156,803	(43,582)
Total Operating Expenses	$           240,637	$           300,496	($59,859)

GENERAL AND ADMINISTRATIVE:

During the third quarter of 2016, general and administrative expenses decreased $3,399 to $67,792 from the same quarter of 2015, due to decreased wages, benefits and travel.

RESEARCH AND DEVELOPMENT:

Research and development expenses decreased $12,878 to $59,624 during the third quarter of 2016, when compared with the same period in 2015 due to decreased wages and supplies.

MARKETING AND SALES:

During the third quarter of 2016, marketing and sales expenses decreased $43,582 to $113,221 from the same period in 2015, due to decreased wages and benefits.

INTEREST AND DIVIDEND INCOME:

The Corporation earned $3,046 in interest and dividend income during the quarter ended September 30, 2016.  Sources of this income were money market accounts and certificates of deposit.

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NET INCOME (LOSS):

The Company had a net loss of $42,497 for the third quarter of 2016, compared to a net loss of $44,204 for the same quarter of 2015.  For the nine-month period ended September 30, 2016, the Company recorded a net loss of $55,114, compared with a net loss of $267,825 for the same period of 2015. The decrease in the Company’s net loss is the result of decreased sales revenues increased gross margins and reduced operating expenses during the third quarter of 2016.

TAXES:

The Company has estimated valuation allowance of $40,094 to reduce the value of the Deferred Tax Asset (non-current) to reflect the amount that may not be realizable in future periods.

B.  Financial Condition, Liquidity and Capital Resources

The Corporation's current asset to current liabilities ratio at September 30, 2016 was 33.4:1 compared to 71.4:1 at December 31, 2015.  For the quarter ended September 30, 2016, the Company had cash and cash equivalents of $618,995; compared to cash and cash equivalent holdings of $618,060 at December 31, 2015.  The Company had certificates of deposit investments in the amount of $1,000,000 at September 30, 2016 and $1,202,625 at December 31, 2015.

Accounts receivable increased to $102,290 as of September 30, 2016, from December 31, 2015 levels of $66,276, due to sales revenue timing differences between the third quarter of 2016 and year-end 2015.  Inventories increased to $734,819 as of September 30, 2016, from December 31, 2015 levels of $603,291, due primarily to parts to be used in manufacturing the sub-components of the Horizon Series product.  The Company's fixed assets, net of depreciation, decreased to $57,955 as of September 30, 2016 from December 31, 2015 levels of $77,673.

As of September 30, 2016, the Company’s accounts payable balance was $38,013 as compared with $8,550at December 31, 2015, and reflects amounts owed for inventory items, contracted services, and state tax liabilities.  Accrued liabilities and refundable deposits as of September 30, 2016 were $37,170 compared with $26,959at December 31, 2015, and reflect items such as accrued vacation benefits and payroll tax liabilities        

In Management's opinion, the Company's cash and cash equivalent reserves, and working capital at September 30, 2016 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during the remainder of 2016.

The Company did not declare or issue any cash dividends during 2015 or 2016.

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.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

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Item 4.  Controls and Procedures.

The Company’s Management is responsible for establishing 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.

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, 2016.  Based on this evaluation, our Chief Executive Officer and Principal Accounting Officer have determined that there was a material weakness affecting our internal control over financial reporting and, as a result of that weakness, our disclosure controls and procedures were not effective as of September 30, 2016.  

The material weakness is as follows:

We did not maintain effective controls to ensure appropriate segregation of duties as the same officer and employee was responsible for the initiating and recording of transactions, thereby creating 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.

Changes in internal control over financial reporting.

There have been no changes during the quarter ended September 30, 2016 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.

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PART II - OTHER INFORMATION

Item 1 Legal Proceedings

The Company is not involved in any material current of pending legal proceedings

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3 Defaults Upon Senior Securities

None

Item 4 Mine Safety Disclosure

Not Applicable

Item 5 Other Information

None

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

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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.
Date:   October 28, 2016	/s/ Michael W. Eller
	Name:  Michael Eller
	Title: Director/President (Chief Executive Officer)
Date:   October 28, 2016	/s/ Michael W. Eller
	Name:  Michael Eller
	Title: Director/President (Principal Accounting Officer)

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