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 March 31, 2022. The following statements may be forward looking in nature and actual results may differ materially.





A.    RESULTS OF OPERATIONS

REVENUES: Total revenues from sales increased to $472,143 for the first quarter of 2022 as compared to $424,775 in the first quarter of 2021, reflecting an increase of 11.2%. Management believes the increase in sales revenues is due to increased product demand from the Domestic market during the first quarter of 2022 when compared with the same quarter of 2021.

The Company's revenues have historically fluctuated from quarter to quarter due to timing factors such as product shipments to customers, customer order placement, customer buying trends, and changes in the general economic environment. The procurement process regarding plant and project automation, or project development, which usually surrounds the decision to purchase ESTeem products, can be lengthy. This procurement process may involve bid activities unrelated to the ESTeem products, such as additional systems and subcontract work, as well as capital budget considerations on the part of the customer. Because of the complexity of this procurement process, forecasts with regard to the Company's revenues are difficult to predict.

During the three month period ending March 31, 2022, orders have not been impacted by COVID-19. We are experiencing some disruptions in the supply chain, but at this point do not see it having a material impact on sales.

A percentage breakdown of the Company's market segments of Domestic and Foreign Export sales for the first quarter of 2022 and 2021 are as follows:





               2022 2021
Domestic Sales 93%  85%
Export Sales    7%  15%




BACKLOG:

As of March 31, 2022, the Company had a sales order backlog of $116,461. The Company's customers generally place orders on an "as needed basis". Shipment for most of the Company's products is generally made within 1 to 5 working days after receipt of customer orders, with the exception of ongoing, scheduled projects, and custom designed equipment.





COST OF SALES:

Cost of sales percentages for the first quarters of 2022 and 2021 were 44% and 42% of respective net sales and are calculated excluding site support expenses of $6,312 and $2,079 respectively. The cost of sales percentage increase in the first quarter of 2022 is the result of the product mix sold during the same quarter of 2021.







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OPERATING EXPENSES:

Operating expenses for the first quarter of 2022 increased $27,294 from first quarter of 2021 levels. The following is a delineation of operating expenses:





                             March 31,      March 31,        Increase
                                2022           2021         (Decrease)
General and administrative   $   84,776     $   93,503     $     (8,727 )
Research and development         45,777         52,700           (6,923 )
Marketing and sales             137,159         94,215           42,944
Total operating expenses     $  267,712     $  240,418     $     27,294

General and administrative: For the first quarter of 2022, general and administrative expenses decreased $8,727 to $84,776, due to decreased professional services and purchased services when compared with the same quarter of 2021.

Research and development: Research and development expenses decreased $6,923 to $45,777 during the first quarter of 2022 due to decreased expenses related to prototype build costs when compared with the same quarter of 2021.

Marketing and sales: During the first quarter of 2022, marketing and sales expenses increased $42,944 to $137,159 when compared with the same period of 2021, due to increased payroll, taxes and benefits during the first quarter of 2022.





INTEREST INCOME:

The Company earned $491 in interest income during the quarter ended March 31, 2022 compared to $861during the same period in 2021. Sources of this income were money market accounts and certificates of deposit.





NET INCOME (LOSS):

The Company had a net loss of ($4,961) for the first quarter of 2022 compared to net income of $4,682 for the same quarter of 2021. The decrease in net profits during 2022 is the result of increased payroll in Marketing and Sales due to adding one additional person.





B.    FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company's current asset to current liabilities ratio at March 31, 2022 was 16.7 compared to 12.7 at December 31, 2021. The increase in current ratio is due to the decrease in accounts payable liability at March 31, 2022 as compared to December 31, 2021.

At March 31, 2022, the Company had cash and cash equivalents of $850,664 as compared to cash and cash equivalent of $655,616 at December 31, 2021, primarily reflecting decreases in Accounts Receivable, Certificates of Deposit, and Inventory.

For the three-month period ended March 31, 2022, cash provided by operating activities was $51,016 compared to cash provided of $106,370 for the same period in 2021. This change was driven by a net loss of $4,961 during the three months ended March 31, 2022 compared to net income of $4,682 in the three months ended March 31, 2021. Change in operating assets and liabilities was $55,866 during the three month period ended March 31, 2022 compared to 100,400 in 2021.

Cash provided from investing was $150,000 due to the redemption of a Certificate of deposit during the first quarter of 2022. With 12 month yields currently at a rate comparable to rates offered by Money Market accounts, maturing CDs are being deposited in these type of accounts.





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In management's opinion, the Company's cash and cash equivalents and other working capital at March 31, 2022 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2022.

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.

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