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.

As a result of COVID-19, and governmental responses thereto, are experiencing some negative impacts to our business, primarily as a result of reductions in staffing by our customers, and their customers, which is lengthening our normal sales cycles. Many of our customers are also restricting visits from vendors. All of our planned trade shows and sales presentations have been canceled or postponed as a result of the risks associated with face to face meetings. We have utilized various platforms to provide current customers and potential customers with presentations about our products and services. We have also experienced some delays in our supply chain but none of these COVID-19 related disruptions, to the supply chain, has been significant at this point.

FISCAL YEAR 2021 vs. FISCAL YEAR 2020

GROSS REVENUES: Total revenues for the fiscal year 2021 were $1,512,028 reflecting an increase of 23.4% from $1,225,372 in gross revenues for fiscal year 2020. During the year ended December 31, 2021, 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 2021. Domestic Sales for the fiscal year were $1,341,287 compared to $927,494 in 2020. Sales to Foreign Customers for the fiscal year were $170,741 compared to $297,878 in 2020. Product sales increased to $1,458,328 in 2021, as compared to 2020 sales of $1,181,022 reflecting an increase of 23.5%.

Interest revenues during 2021 decreased to $2,489 from 2020 level of $10,736 due to the decreased interest rates for the certificates of deposit held by the Company and the reduction of the value of the certificates held during 2021.

As of December 31, 2021, the Company had sales backlog of $81,293. 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 49.2% and 49.7% respectively, for 2021 and 2020. 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 2021 and 2020 were as
follows:



                    2021       2020
Parts            $   92,751 $   99,303
Work in progress    171,705    275,230
Finished goods      237,377    257,174
TOTAL            $  501,833 $  631,707

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.



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OPERATING EXPENSES: Operating expenses increased to $957,654 in 2021 from 2020 levels of $839,173. Significant changes in expenses are comprised of the following components: Payroll and related expenses $19,911 increase, services purchased $109,432 increase, Travel $15,191 increase Depreciation expense decreased during 2021 to $1,784 from 2020 levels of $5,169 due to the Company's decreased capital purchases.

LIQUIDITY AND CAPITAL RESOURCES

The Company's revenues and expenses resulted in net income of $92,989 for 2021, an increase from a net loss of $202,179 for 2020. At December 31, 2021, the Company's working capital was $1,6410,537 compared with $1,676,530 at December 31, 2020. 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 30 weeks, require the Company to maintain high inventory levels. It is management's opinion that the Company's working capital as of December 31, 2021 is adequate for expected resource requirements for the next twelve months. During the twelve month period ending December 31, 2021, the Company had positive cash flow of $347,506.

The Company's current asset to current liability ratio at December 31, 2021 was 12.7:1 compared to 20.7:1 at December 31, 2020. The decrease in current asset ratio is the result of the Company having increased accounts payable for year-end 2021 when compared with year-end 2020. The Company's liquid resources at December 31, 2021, including cash and cash equivalent and certificates of deposits, were $1,055,616, compared to $808,109 at December 31, 2020. The increase in liquid resources is the result of the 2021 operating income. The Company's accounts receivable at December 31, 2021 were $166,303, compared to $288,884 at December 31, 2020. Management believes that all Company accounts receivable as of December 31, 2021 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, 2021 were $501,833, reflecting a decrease from December 31, 2020 of $631,707. The decrease in inventory between December 31, 2021 and December 31, 2020, is due to the delays in the supply chain.

We had capital expenditures $1,082 during 2021. 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, 2021, our current liabilities increased to $137,637 from $84,916 at December 31, 2020. The increase in current liabilities was impacted by a increase in accounts payable to $70,686 from $21,113.

We had no off-balance sheet arrangements for the year ended December 31, 2021.

Inflation had minimal adverse effect on the Company's operations during 2021. Minimal adverse effect is anticipated during 2022.

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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