Management's discussion and analysis is provided as supplement to, and is intended to be read in conjunction with, the Company's audited financial statements and the accompanying integral notes ("Notes") thereto. The following statements may be forward-looking in nature and actual results may differ materially.





RESULTS OF OPERATIONS

GENERAL: We specialize in the manufacturing and development of data radio products. The Company offers product lines which provide innovative communication solutions for applications not served by existing conventional communication systems. We offer product lines in markets for process automation in commercial, industrial and government arenas domestically as well as internationally. We market our products through direct sales, sales representatives, and domestic, as well as foreign, resellers. Operations are sustained solely from revenues received through sales of its products and services.







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FISCAL YEAR 2022 vs. FISCAL YEAR 2021

GROSS REVENUES: Total revenues for the fiscal year 2022 were $1,910,061 reflecting an increase of 26.3% from $1,512,028 in gross revenues for fiscal year 2021. During the year ended December 31, 2022, two customers' sales accounted for more than 10% of the total sales revenues. The increase in total revenues is the result of increased product sales during 2022. Domestic Sales for the fiscal year were $1,697,261 compared to $1,341,287 in 2021. Sales to Foreign Customers for the fiscal year were $212,800 compared to $170,741 in 2021. Product sales increased to $1,881,661 in 2022, as compared to 2021 sales of $1,458,328 reflecting an increase of 29.0%.

Interest revenues during 2022 increased to $5,217 from 2021 level of $2,488 due to the increased interest rates for the certificates of deposit held by the Company and the reduction of the value of the certificates held during 2022. Other income decreased to $63,000 for the gain on employee retention tax credit compared to 280,373 of gain on forgiveness of CARES Act loan in 2021.

As of December 31, 2022, the Company had sales backlog of $49,173. The Company's customers generally place orders on an "as needed basis". Shipment of the Company's products is generally completed within 1 to 15 working days after receipt of customer orders, with the exception of ongoing, scheduled projects, and custom designed equipment for specific customer applications.

COST OF SALES: Cost of Sales, as a percentage of net sales, was 46.1% and 49.2% respectively, for 2022 and 2021. Cost of Sales variances are the result of differences in the product mix sold and occurrences of obsolete inventory expense, as well as differences in the price discounting structure for the mix of products sold during the period.





INVENTORY: The Company's year-end inventory values for 2022 and 2021 were as
follows:



                     2022          2021
Parts              $ 172,190     $  92,751
Work in progress     336,298       171,705
Finished goods       216,990       237,377
TOTAL              $ 725,478     $ 501,833

The Company's objective is to maintain inventory levels as low as possible to provide maximum cash liquidity, while at the same time meet production and delivery requirements. Inventory levels were increased during the year due to concerns with regards to supply chain issues with long-lead time items.

OPERATING EXPENSES: Operating expenses decreased to $950,338 in 2022 from 2021 levels of $957,654. Significant changes in expenses are comprised of the following components: decreases in services purchased ($35,375), professional services ($47,261), travel ($2,971), and depreciation ($4,725) offset by increases in salaries and benefits ($82,328) and taxes, licenses and health insurance costs ($11,293).

LIQUIDITY AND CAPITAL RESOURCES

The Company's revenues and expenses resulted in net income of $146,531 for 2022, an increase from net income of $92,989 for 2021. At December 31, 2022, the Company's working capital was $1,747,472 compared with $1,610,537 at December 31, 2021. The Company's operations rely solely on the income generated from sales. The Company's major capital resource requirements are payment of employee salaries and benefits and maintaining inventory levels adequate for production. Extended availability for components critical for production of the Company's products, ranging from 12 to 52 weeks, require the Company to maintain high inventory levels. It is management's opinion that the Company's working capital as of December 31, 2022 is adequate for expected resource requirements for the next twelve months. During the twelve month period ending December 31, 2022, the Company had positive cash flow of $95,502.







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The Company's current asset to current liability ratio at December 31, 2022 was 8.6:1 compared to 12.7:1 at December 31, 2021. The decrease in current asset ratio is the result of the Company having increased accounts payable for year-end 2022 when compared with year-end 2021. The Company's liquid resources at December 31, 2022, including cash and cash equivalent and certificates of deposits, were $1,002,817, compared to $1,055,616 at December 31, 2021. The decrease in liquid resources is the result increases in inventory levels in 2022. The Company's accounts receivable at December 31, 2022 were $141,394, compared to $166,303 at December 31, 2021. Management believes that all Company accounts receivable as of December 31, 2022 are collectible and does not have a reserve for uncollectable accounts.

The Company believes the level of risk associated with customer receipts on export sales is minimal. Foreign shipments are made only after payment has been received or on Net 30 day credit terms to established foreign companies with which the Company has distributor relationships. Foreign orders are generally filled as soon as they are received therefore; foreign exchange rate fluctuations do not impact the Company.

Inventories at December 31, 2022 were $725,478, reflecting an increase from December 31, 2021 balance of $501,833. The increase in inventory between December 31, 2022 and December 31, 2021 is due to management's decision to purchase more items crucial to manufacture goods with lead times in excess of 12 weeks.

We had capital expenditures $0 during 2022. The Company intends on investing in additional capital equipment as deemed necessary to support development and manufacture of current and future products.

As of December 31, 2022, our current liabilities increased to $228,652 from $137,637 at December 31, 2021. The increase in current liabilities was impacted by an increase in accounts payable to $138,996 from $71,645.

We had no off-balance sheet arrangements for the year ended December 31, 2022.

Inflation had minimal adverse effect on the Company's operations during 2022. Minimal adverse effect is anticipated during 2023.

FORWARD LOOKING STATEMENTS: The above discussion may contain forward-looking statements that involve a number of risks and uncertainties. These factors are more fully described in the "Risk Factors" section of Item 1A of this Annual Report on Form 10-K. 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, rapid advances in competing technologies and risk factors that are listed in the Company's reports filed with the Securities and Exchange Commission.

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