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, 2019. 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 $273,968 for the first quarter of 2020 as compared to $374,166 in the first quarter of 2019, reflecting a decrease of 26.8%. Management believes the decrease in sales revenues is due to decreased product demand from both the Domestic and Foreign markets first quarter of 2020 when compared with the same quarter of 2019.

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.

Although the COVID-19 situation represents a significant disruption to operations in at least the first half of 2020, we have taken steps intended to keep our staff safe. Staff, whose jobs allow, are telecommuting. Those whose jobs require specialized equipment continue to work on site and are keeping safe distances to minimize the potential to spread or contract the virus. 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 2020 and 2019 are as follows:





                         For the first quarter 2020 2019
                         Domestic Sales        88%  78%
                         Export Sales          12%  22%




BACKLOG:

As of March 31, 2020, the Company had a sales order backlog of $5,028. 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 2020 and 2019 were 53% and 47% of respective net sales and are calculated excluding site support expenses of $15,080 and $3,526 respectively. The cost of sales percentage increase in the first quarter of 2020 is the result of the product mix sold during the same quarter of 2019.


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OPERATING EXPENSES:





Operating expenses for the first quarter of 2020 decreased $20,458 from first
quarter of 2019 levels.  The following is a delineation of operating expenses:



                                      March 31,   March 31,      Increase
                                           2020        2019    (Decrease)
         General and administrative $    95,713 $    93,506   $     2,207
         Research and development        54,897      65,474      (10,577)
         Marketing and sales             87,896      99,984      (12,088)
         Total operating expenses   $   238,506 $   258,964   $  (20,458)

General and administrative: For the first quarter of 2020, general and administrative expenses increased $2,207 to $95,713, due to increased wages, taxes and benefits when compared with the same quarter of 2019.

Research and development: Research and development expenses decreased $10,577 to $54,897 during the first quarter of 2020 due to decreased expenses related to prototype build costs when compared with the same quarter of 2019.

Marketing and sales: During the first quarter of 2020, marketing and sales expenses decreased $12,088 to $87,896 when compared with the same period of 2019, due to decreased travel and trade show expenses during the first quarter of 2020.





INTEREST INCOME:

The Company earned $3,463 in interest income during the quarter ended March 31, 2020 compared to $5,887 during the same period in 2019. Sources of this income were money market accounts and certificates of deposit.





NET LOSS:

The Company had a net loss of $110,306 for the first quarter of 2020 compared to a net loss of $54,826 for the same quarter of 2019. The increase in net loss during 2020 is the result of decreased sales revenues and gross margins.

B.FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Corporation's current asset to current liabilities ratio at March 31, 2020 was 24.8 compared to 11.8 at December 31, 2019. The increase in current ratio is due to the reduction in accounts payable liability at March 31, 2020 as compared to December 31, 2019.

At March 31, 2020, the Company had cash and cash equivalents of $297,906 as compared to cash and cash equivalent of $274,936 at December 31, 2019, primarily reflecting redemption of certificates of deposits that were held at December 31, 2019. The certificates of deposit were redeemed to offset the cash used in operation.

Cash used in operating activities decreased by $5,338 for the three-month period ended March 31, 2020 when compared to the same period in 2019. During that period, inventory decreased by $52,272. Accounts payable decreased $88,990 compared to the same period of 2019.

Cash provided from investing was $150,001 due to the redemption of a CD during the first quarter of 2020 which is similar to the redemption of $150,000 from the prior year.

In management's opinion, the Company's cash and cash equivalents and other working capital at March 31, 2020 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2020.

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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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