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, 2023. The following statements may be forward looking in nature and actual results may differ materially.





A.    RESULTS OF OPERATIONS

REVENUES: Total revenues from sales decreased to $305,089 for the first quarter of 2023 as compared to $472,143 in the first quarter of 2022, reflecting a decrease of 35.4%. Management believes the decrease in sales revenues is due to decreased product demand due to supply chain issues for the Domestic market during the first quarter of 2023 when compared with the same quarter of 2022.

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.

A percentage breakdown of the Company's market segments of Domestic and Foreign Export sales for the first quarter of 2023 and 2022 are as follows:





               2023 2022
Domestic Sales 96%  93%
Export Sales    4%   7%




BACKLOG:

As of March 31, 2023, the Company had a sales order backlog of $162,396. 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 2023 and 2022 were 46% and 44% of respective net sales and are calculated excluding site support expenses of $4,541 and $6,312 respectively. The cost of sales percentage increase in the first quarter of 2023 is the result of the product mix sold during the same quarter of 2022.







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OPERATING EXPENSES:

Operating expenses for the first quarter of 2023 decreased $6,057 from first quarter of 2022 levels. The following is a delineation of operating expenses:





                             March 31,      March 31,        Increase
                                2023           2022         (Decrease)
General and administrative   $   84,765     $   84,776     $        (11 )
Research and development         28,663         45,777          (17,114 )
Marketing and sales             148,227        137,159           11,068
Total operating expenses     $  261,655     $  267,712     $     (6,057 )

General and administrative: For the first quarter of 2023, general and administrative expenses decreased $11 to $84,765, due to decreased payroll related expenses and were offset by increased purchased services when compared with the same quarter of 2022.

Research and development: Research and development expenses decreased $17,114 to $28,663 during the first quarter of 2023 due to decreased expenses related to engineering services when compared with the same quarter of 2022.

Marketing and sales: During the first quarter of 2023, marketing and sales expenses increased $11,068 to $148,227 when compared with the same period of 2022, due to increased payroll, taxes and benefits during the first quarter of 2023.





INTEREST INCOME:

The Company earned $4,002 in interest income during the quarter ended March 31, 2023 compared to $491 during the same period in 2022. Sources of this income were money market accounts and certificates of deposit.





NET INCOME (LOSS):

The Company had a net loss of ($92,124) for the first quarter of 2023 compared to a net loss of ($4,961) for the same quarter of 2022. The increase in net loss during 2023 is the result of decreased sales.





B.    FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company's current asset to current liabilities ratio at March 31, 2023 was 13.1:1 compared to 8.6:1 at December 31, 2022. The increase in current ratio is due to the decrease in accounts payable liability at March 31, 2023 as compared to December 31, 2022.

At March 31, 2023, the Company had cash and cash equivalents of $592,417 as compared to cash and cash equivalent of $751,118 at December 31, 2022, primarily reflecting decreases in Accounts Payable and the increase in net loss.

For the three-month period ended March 31, 2023, cash used by operating activities was $149,701 compared to cash provided of $51,016 for the same period in 2022. This change was driven by a net loss of $92,124 during the three months ended March 31, 2023 compared to a net of $4,961 in the three months ended March 31, 2022. Change in operating assets and liabilities was $57,615 during the three-month period ended March 31, 2023 compared to $55,866 in 2022.

Cash used for investing was $9,000 due to the purchase of a new website design for an E-Commerce interface during the first quarter of 2023 with the expectations that the website will be completed in April.

In management's opinion, the Company's cash and cash equivalents and other working capital at March 31, 2023 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2023.

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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