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, 2021. 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 $424,775 for the first quarter of 2021 as compared to $273,968 in the first quarter of 2020, reflecting an increase of 55.0%. Management believes the increase in sales revenues is due to increased product demand from both the Domestic and Foreign markets first quarter of 2021 when compared with the same quarter of 2020.

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.

The COVID-19 situation represented a significant disruption to operations in most of 2020. During the three month period ending March 31, 2021, we have seen orders for projects that we believe were delayed due to the impact of the restrictions related to preventing the spread of 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 2021 and 2020 are as follows:





For the first quarter 2021 2020
Domestic Sales        85%  88%
Export Sales          15%  12%




BACKLOG:

As of March 31, 2021, the Company had a sales order backlog of $91,064. 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 2021 and 2020 were 42% and 53% of respective net sales and are calculated excluding site support expenses of $2,079 and $15,080 respectively. The cost of sales percentage decrease in the first quarter of 2021 is the result of the product mix sold during the same quarter of 2020.


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OPERATING EXPENSES:





Operating expenses for the first quarter of 2021 increased $1,912 from first
quarter of 2020 levels.  The following is a delineation of operating expenses:



                             March 31,   March 31,      Increase
                                  2021        2020    (Decrease)
General and administrative $    93,503 $    95,713  $    (2,210)
Research and development        52,700      54,897       (2,197)
Marketing and sales             94,215      87,896         6,319
Total operating expenses   $   240,418 $   238,506   $     1,912

General and administrative: For the first quarter of 2021, general and administrative expenses decreased $2,210 to $93,503, due to decreased wages, taxes and benefits when compared with the same quarter of 2020.

Research and development: Research and development expenses decreased $2,197 to $52,700 during the first quarter of 2021 due to decreased expenses related to prototype build costs when compared with the same quarter of 2020.

Marketing and sales: During the first quarter of 2021, marketing and sales expenses increased $6,319 to $94,215 when compared with the same period of 2020, due to increased payroll, taxes and benefits during the first quarter of 2021.





INTEREST INCOME:

The Company earned $861 in interest income during the quarter ended March 31, 2021 compared to $3,463 during the same period in 2020. Sources of this income were money market accounts and certificates of deposit.





NET INCOME (LOSS):

The Company had net income of $4,682 for the first quarter of 2021 compared to a net loss of $110,306 for the same quarter of 2020. The increase in net profits during 2021 is the result of increased sales revenues, gross margins and management of variable expenses.

B.FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Corporation's current asset to current liabilities ratio at March 31, 2021 was 14.7 compared to 20.7 at December 31, 2020. The decrease in current ratio is due to the increase in accounts payable and accrued wages liability at March 31, 2021 as compared to December 31, 2020.

At March 31, 2021, the Company had cash and cash equivalents of $794,734 as compared to cash and cash equivalent of $308,110 at December 31, 2020, primarily reflecting redemption of certificates of deposits that were held at December 31, 2020, proceeds from the second PPP loan and the reduction of inventory on hand.

For the three-month period ended March 31, 2021, cash provided by operating activities was $106,401 compared to cash used of $127,031for the same period in 2020. This change was driven by net income of $4,682 during the three months ended March 31, 2021 compared to net loss of $110,306 in the three months ended March 31, 2020. Change in operating assets and liabilities was $100,430 during the three month period ended March 31, 2021 compared to ($20,745) in 2020.

Cash provided from investing was $249,999 due to the redemption of a CD during the first quarter of 2021. With 12 month yields currently at a rate comparable to rates offered by Money Market accounts, maturing CDs are being deposited in these type accounts.

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In management's opinion, the Company's cash and cash equivalents and other working capital at March 31, 2021 is sufficient to satisfy requirements for operations, capital expenditures, and other expenditures as may arise during 2021.

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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