PROSPECTUS SUPPLEMENT Filed Pursuant to Rules 424(b)(3) and 424(c)
(to prospectus dated Registration No. 333-138977
November 9, 2007)
[GRAPHIC OMITTED] Electronic Sensor Technology
ELECTRONIC SENSOR TECHNOLOGY, INC.
19,906,669 SHARES OF COMMON STOCK
This document supplements the prospectus dated November 9, 2007 and the
prospectus supplement dated December 28, 2007 relating to the registration of
our common stock under our Registration Statement on Form SB-2 (Registration No.
333-138977). This prospectus supplement is incorporated by reference into the
prospectus.
This prospectus supplement modifies and supersedes the first sentence under
the heading "Description of Securities" in the prospectus dated November 9, 2007
to replace "56,756,098" with "59,033,632".
This prospectus supplement also modifies the information set forth under
the heading Directors, Executive Officers and Control Persons" in the prospectus
dated November 9, 2007 to delete the following paragraph:
"MICHEL A. AMSALEM
Michel A. Amsalem, age 59, currently serves as a director of Electronic
Sensor Technology. Mr. Amsalem has served as a director of Electronic
Sensor Technology since September 7, 2006. Mr. Amsalem is the founder and,
since July 2001, President of Midsummer Capital, the investment manager of
the Midsummer Group of Funds, as well as a director of Midsummer Investment
Ltd. Prior to his involvement with hedge funds and the creation of
Midsummer Capital, Mr. Amsalem, from May 1999 through June 2001, was a
Principal and Managing Partner of Omicron Capital, an investment advisor to
a group of funds with a strategy similar to that of Midsummer. Mr. Amsalem
was also founder and head of the Structured Finance Department of Citibank,
and of similar activities for Banque Indosuez' Investment Bank for Latin
America and Eastern Europe and Patricof & Co. Mr. Amsalem holds a Doctoral
degree in Business Administration from Harvard University, an MBA from
Columbia University and is a graduate of Ecole des Hautes Etudes
Commerciales in France. He is a professor of Business and Investment
Strategy at Columbia University Graduate School of Business. Mr. Amsalem
currently serves as a director of Hartville Group, Inc., which is a
publicly reporting company."
The remainder of the information in this prospectus supplement replaces and
supersedes the information set forth under the headings "Selling Security
Holders" and "Security Ownership of Certain Beneficial Owners and Management" in
the prospectus dated November 9, 2007.
INVESTING IN OUR COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 2 FOR A DISCUSSION OF CERTAIN RISKS THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated January 16, 2008
SELLING SECURITY HOLDERS
Each of the selling security holders obtained beneficial ownership of the
common stock being registered for resale pursuant to this registration statement
in one of the following transactions, as set forth below.
o In a private offering on December 7, 2005, we issued to Islandia, L.P.
and Midsummer Investment Ltd. an aggregate principal amount of
$7,000,000 of 8% unsecured convertible debentures due December 7, 2009
that were convertible into 15,404,930 shares of our common stock. At
issuance, the debentures were convertible into common stock at a
conversion price of $0.4544 per share. This price was calculated based
upon 105% of the volume weighted average price over the 20 trading
days preceding the date of issuance of the debentures. Such conversion
price was subsequently reduced to $0.4000, pursuant to the Forbearance
and Amendment Agreement entered into among Electronic Sensor
Technology, Midsummer and Islandia on September 7, 2006, which
consequently increased the shares of common stock issuable upon
conversion of the debentures to 17,500,000. Under certain
circumstances, we have the right, at our option to pay interest on the
debentures with shares of common stock. In connection with the private
offering, we agreed to register 130% of the common stock into which
the debentures are convertible plus 130% of the common stock that we
may use to pay interest on the debentures. On this registration
statement, we are registering 20% of such shares, or 4,137,260 shares,
to facilitate secondary trading by the holders of the debentures.
o In a private offering on December 7, 2005, we issued to Islandia and
Midsummer five-year warrants to purchase 12,130,314 shares of common
stock at an exercise price of $0.4761 per share. This price was
calculated based upon 110% of the volume weighted average price over
the 20 trading days preceding the date of issuance of the warrants.
Such exercise price was subsequently reduced to $0.4300, pursuant to
the Forbearance and Amendment Agreement entered into among Electronic
Sensor Technology, Midsummer and Islandia on September 7, 2006. In
connection with the private offering, we agreed to register 130% of
the common stock underlying the warrants, totaling 15,769,409 shares,
which we are registering on this registration statement to facilitate
secondary trading by the holders of the debentures.
The table below sets forth the following information, as of the date that
we received such information from the selling security holder (this information
was received by Electronic Sensor Technology between December 7, 2005 and the
date of this prospectus):
o the name of each beneficial owner of the common stock registered
pursuant to this registration statement;
o the number of shares of common stock that each selling security holder
beneficially owns as of such date;
o the number of shares of common stock that may, assuming the exercise
in full of all of the warrants described above and the conversion in
full of all of the debentures described above, be offered for sale by
each selling security holder from time to time pursuant to this
prospectus;
o the number of shares of common stock to be beneficially owned by each
selling security holder assuming the exercise in full of all of the
warrants described above and the conversion in full of all of the
debentures described above, and the sale of all of the shares of
common stock offered hereby;
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o the percentage of common stock to be beneficially owned by each
selling security holder after completion of the offering, based upon
the number of shares of common stock to be beneficially owned by such
selling security holder (taking into account the assumptions set forth
above), divided by 59,033,632, which represents the total number of
shares of common stock issued and outstanding as of the date of this
prospectus, plus, for such selling security holder, the number of
shares of common stock to be beneficially owned by such selling
security holder; and
o by footnote, any position or office held or other material
relationship with Electronic Sensor Technology or any of its
predecessors or affiliates within the past three years, other than
that of being a shareholder, and details regarding the transaction in
which each selling security holder acquired beneficial ownership of
its common stock.
To our knowledge, none of the selling security holders is a broker-dealer
or an affiliate of a broker-dealer.
Number of Shares
Shares of of common stock Shares of common stock Benefically
common stock to be offered Owned After Completion of the
Beneficially for the Selling Offering
Owned Prior Security -----------------------------------
Name of Selling Security Holder to the Offering Holder's Account Number Percentage
------------------------------- ---------------- ---------------- ---------------- ----------------
Islandia, L.P. (1) 12,317,929 7,109,525 5,208,404 8.11
Midsummer Investment Ltd. (2) 22,172,272 12,797,144 9,366,128 13.69
(1) Islandia, L.P.'s shares include 20% of 6,250,000 shares of common stock
underlying a debenture convertible within 60 days of the date of this
prospectus and shares of common stock that may be used to pay interest on
such debenture and 130% of 4,332,255 shares of common stock underlying a
warrant exercisable within 60 days of the date of this prospectus. The
general partner of Islandia is John Lang, Inc., a New York Sub-S
corporation formed to manage investments. John Lang, Inc. has sole
dispositive power and sole voting power over all matters not related to
director elections. The individuals that exercise shared dispositive and
voting power for John Lang, Inc. are Richard Berner, President of John
Lang, Inc. and Edgar Berner and Thomas Berner, both Vice-Presidents of John
Lang, Inc. By virtue of these relationships John Lang, Inc., Richard
Berner, Edgar Berner and Thomas Berner may be deemed to have indirect
beneficial ownership of the shares of common stock beneficially owned by
Islandia; however, John Lang, Inc. Richard Berner, Edgar Berner and Thomas
Berner disclaim beneficial ownership of the shares of common stock
beneficially owned by Islandia.
(2) Midsummer Investment Ltd.'s shares include 20% of 11,250,000 shares of
common stock underlying a debenture convertible within 60 days of the date
of this prospectus and shares of common stock that may be used to pay
interest on such debenture and 130% of 7,798,059 shares of common stock
underlying a warrant exercisable within 60 days of the date of this
prospectus. Midsummer Capital, LLC, a New York limited liability company,
serves as investment advisor to Midsummer Investment Ltd., a Bermuda
company. By reason of such relationships, Midsummer Capital may be deemed
to share dispositive power over the shares of common stock beneficially
owned by Midsummer Investment. Midsummer Capital disclaims beneficial
ownership of such shares of common stock. Michel A. Amsalem and Scott D.
Kaufman are members of Midsummer Capital. By reason of such relationships,
Mr. Amsalem and Mr. Kaufman may be deemed to share dispositive power over
the shares of common stock stated as beneficially owned by Midsummer
Investment. Mr. Amsalem and Mr. Kaufman disclaim beneficial ownership of
such shares of common stock.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of the date of this
prospectus, concerning our issued and outstanding stock beneficially owned (i)
by each director and each named executive officer of Electronic Sensor
Technology, (ii) by all directors and executive officers of Electronic Sensor
Technology as a group and (iii) by each shareholder known by Electronic Sensor
Technology to be the beneficial owner of more than 5% of the outstanding common
stock. The information regarding beneficial owners of 5% or more of our common
stock was gathered by us from the filings made by such owners with the SEC or
from other sources. Shares that may be acquired within 60 days are treated as
outstanding for purposes of determining the amount and percentage beneficially
owned.
Amount and Nature of
Name and Address (1) Beneficial Ownership Percentage
Title of Class of Beneficial Owner (Shares of Stock) of Class (2)
-------------- ----------------------------------- -------------------- ------------
Common stock Barry Howe+* 100,000(3) 0.17%
Common stock Philip Yee+ 36,250(4) 0.06%
Common stock Gary Watson+ 287,500(5) 0.49%
Common stock James Frey* 450,000(6) 0.76%
Common stock Teong Lim*++ 5,312,908(7) 8.91%
Common stock Francis Chang*++ 4,023,160(8) 6.77%
Common stock Rita Benoy Bushon* 0(9) 0.00%
Common stock James Wilburn* 150,000(10) 0.25%
Common stock Lewis Larson* 100,000(11) 0.17%
Common stock Land & General Berhad++ 9,948,801(12) 16.76%
Common stock L&G Resources (1994), Inc.++ 9,948,801(12) 16.76%
Common stock 3 Springs, LLC++ 3,853,160 6.53%
Common stock TC Lim, LLC++ 5,167,908 8.75%
Common stock Midsummer Investment Ltd.++ 22,172,272(13) 28.40%
Common stock Islandia L.P.++ 12,317,929(14) 17.69%
Common stock All directors and named executive
officers as a group 10,559,818(15) 17.26%
* Director
+ Named executive officer
++5% or more beneficial owner
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(1) The address of each director, named executive officer, 3 Springs, LLC and TC
Lim, LLC is c/o Electronic Sensor Technology, Inc., 1077 Business Center Circle,
Newbury Park, California 91320. The address of Midsummer Investment Ltd. is 295
Madison Avenue, 38th Floor, New York, New York 10017. The address of Islandia
L.P. is 485 Madison Avenue, 23rd Floor, New York, New York 10022. The address of
each of L&G Resources (1994), Inc. and Land & General Berhad is 7 Persiaran
Dagang, Bandar Sri Damansara, Kuala Lumpur, Malaysia 52200.
(2) These percentages are calculated based upon the total amount of outstanding
shares of common stock beneficially owned by each person or group, including
shares of common stock that person or group has the right to acquire within 60
days pursuant to options, warrants, conversion privileges or other rights,
divided by 59,033,632, which represents the total number of shares of common
stock issued and outstanding as of the date of this prospectus, plus, for each
person or group, any shares of common stock that person or group has the right
to acquire within 60 days pursuant to options, warrants, conversion privileges
or other rights.
(3) Includes 100,000 shares of common stock underlying an option exercisable
within 60 days of the date of this prospectus.
(4) Includes 36,250 shares of common stock underlying an option exercisable
within 60 days of the date of this prospectus.
(5) Includes 287,500 shares of common stock underlying options exercisable
within 60 days of the date of this prospectus.
(6) Includes 450,000 shares of common stock underlying options exercisable
within 60 days of the date of this prospectus.
(7) Includes 145,000 shares of common stock underlying options exercisable
within 60 days of the date of this prospectus, and 438,796 shares of common
stock underlying warrants exercisable within 60 days of the date of this
prospectus and 4,729,112 shares of common stock held by TC Lim, LLC and
beneficially owned by Dr. Lim by virtue of his position as sole member of TC
Lim, LLC.
(8) Includes 170,000 shares of common stock underlying options exercisable
within 60 days of the date of this prospectus, and 257,247 shares of common
stock underlying warrants exercisable within 60 days of the date of this
prospectus and 3,595,913 shares of common stock held by 3 Springs, LLC and
beneficially owned by Mr. Chang by virtue of his position as sole member of 3
Springs, LLC.
(9) Ms. Bushon is the Executive Director of Land & General Berhad and President
of L&G Resources (1994), Inc., a wholly owned subsidiary of Land & General
Berhad. By virtue of her position, Ms. Bushon may be deemed to share dispositive
power over the 9,948,801 shares of common stock beneficially owned by Land &
General Berhad and L&G Resources (1994), Inc. Ms. Bushon is one of six directors
on the Board of Directors of Land & General Berhad and the Board of Directors of
Land & General Berhad makes the ultimate voting and investment decisions with
respect to the 9,948,801 shares of common stock. Ms. Bushon disclaims beneficial
ownership of such shares of common stock.
(10) Includes 150,000 shares of common stock underlying an option exercisable
within 60 days of the date of this prospectus.
(11) Includes 100,000 shares of common stock underlying an option exercisable
within 60 days of the date of this prospectus.
(12) Includes 9,632,534 shares of common stock and 316,267 shares of common
stock underlying a warrant exercisable within 60 days of the date of this
prospectus held by L&G Resources (1994), Inc., a wholly-owned subsidiary of Land
& General Berhad, of which Land & General Berhad is a beneficial owner. Rita
Benoy Bushon is President of L&G Resources (1994), Inc. and Executive Director
of Land & General Berhad. By reason of such relationships, Ms. Bushon may be
deemed to share dispositive power over the shares of common stock beneficially
owned by L&G Resources (1994), Inc. Ms. Bushon expressly disclaims beneficial
ownership as Ms. Bushon is one
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of six directors on the Board of Directors of Land & General Berhad and the
Board of Directors of Land & General Berhad makes the ultimate voting and
investment decisions with respect to the 9,948,801 shares of common stock.
(13) Includes 11,250,000 shares of common stock underlying a debenture
convertible within 60 days of the date of this prospectus, 7,798,059 shares of
common stock underlying a warrant exercisable within 60 days of the date of this
prospectus and 3,124,213 shares of common stock issued as interest on the
debenture. The conversion of the debenture and exercise of the warrant is
contractually capped such that such conversion or exercise, as applicable, shall
not cause Midsummer's beneficial ownership to exceed 4.99%, unless waived by
Midsummer, and in no event to exceed 9.99% (without giving effect to shares of
common stock underlying any unconverted portion of the debenture or unexercised
portion of the warrant). Midsummer Capital, LLC, a New York limited liability
company, serves as investment advisor to Midsummer Investment Ltd., a Bermuda
company. By reason of such relationships, Midsummer Capital may be deemed to
share dispositive power over the shares of common stock beneficially owned by
Midsummer Investment. Midsummer Capital disclaims beneficial ownership of such
shares of common stock. Michel A. Amsalem and Scott D. Kaufman are members of
Midsummer Capital. By reason of such relationships, Mr. Amsalem and Mr. Kaufman
may be deemed to share dispositive power over the shares of common stock stated
as beneficially owned by Midsummer Investment. Mr. Amsalem and Mr. Kaufman
disclaim beneficial ownership of such shares of common stock.
(14) Includes 6,250,000 shares of common stock underlying a debenture
convertible within 60 days of the date of this prospectus, 4,332,255 shares of
common stock underlying a warrant exercisable within 60 days of the date of this
prospectus and 1,735,674 shares of common stock issued as interest on the
debenture. The conversion of the debenture and exercise of the warrant is
contractually capped such that such conversion or exercise, as applicable, shall
not cause Islandia's beneficial ownership to exceed 4.99%, unless waived by
Islandia, and in no event to exceed 9.99% (without giving effect to shares of
common stock underlying any unconverted portion of the debenture or unexercised
portion of the warrant). The general partner of Islandia is John Lang, Inc., a
New York Sub-S corporation formed to manage investments. John Lang, Inc. has
sole dispositive power and sole voting power over all matters not related to
director elections. The individuals that exercise shared dispositive and voting
power for John Lang, Inc. are Richard Berner, President of John Lang, Inc. and
Edgar Berner and Thomas Berner, both Vice-Presidents of John Lang, Inc. By
virtue of these relationships John Lang, Inc., Richard Berner, Edgar Berner and
Thomas Berner may be deemed to have indirect beneficial ownership of the shares
of common stock beneficially owned by Islandia; however, John Lang, Inc. Richard
Berner, Edgar Berner and Thomas Berner disclaim beneficial ownership of the
shares of common stock beneficially owned by Islandia.
(15) Includes 1,438,750 shares of common stock underlying options exercisable
within 60 days of the date of this prospectus and 696,043 shares of common stock
underlying warrants exercisable within 60 days of the date of this prospectus,
as well as 3,595,913 shares of common stock held by 3 Springs, LLC and 4,729,112
shares of common stock held by TC Lim, LLC.
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