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 June 30, 2020. 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 $457,003 for the second quarter of 2021 as compared to $245,497 in the second quarter of 2020, reflecting an increase of 86.2%. Management believes the increase in sales revenues is due to the impact of the orders delayed due to the impact of COVID-19 stay at home orders in same quarter of 2020. Year to date total revenues from sales increased to $881,779 in 2021 as compared to $519,464 in 2020, reflecting an increase of 69.7%. Management believes the increase in sales revenues is due to the impact of the COVID-19 stay at home orders when compared with the same period 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 six month period ending June 30, 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 in 2020. 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 three and six month periods ended June 30, 2021 and 2020 are as follows:





                Three Months      Three Months    Six Months ended Six Months ended
               ended June 30,    ended June 30,    June 30, 2021    June 30, 2020
                    2021              2020
Domestic             95%               87%              90%              87%
Sales
Export Sales         5%                13%              10%              13%




BACKLOG:

As of June 30, 2021, the Company had a sales order backlog of $17,143. 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 second quarters of 2021 and 2020 were 47% and 54% of respective net sales. The cost of sales percentage decreased in the second quarter of 2021 is the result of the product mix sold during the same quarter of 2020. Cost of sales percentages for the six month periods ended June 30, 2021 and 2020 were 45% and 54%. The cost of sales percentage decrease in the second quarter of 2021 is the result of the product mix sold during the same period of 2020.

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OPERATING EXPENSES:

The following is a delineation of operating expenses:





                  Three Months Ended                    Six Month Ended
                June 30,   June 30,      Increase  June 30,   June 30,      Increase
                  2021       2020      (Decrease)    2021       2020      (Decrease)
General and     $  66,452 $   69,957  $   (3,505) $  159,955 $  165,670  $   (5,715)
administrative
Research and       54,249     50,213        4,036    106,949    105,110        1,839
development
Marketing and     127,419     86,295       41,124    221,634    174,191       47,443
sales
Total          $  248,120 $  206,465     $ 41,655 $  488,538 $  444,971   $   43,567
operating
expenses

General and administrative: For the second quarter of 2021, general and administrative expenses decreased $3,505 to $66,452, due to decreased wages when compared with the same quarter of 2020. For the six-month period, general and administrative expenses decreased by $5,715 to $159,955, due to decreased wages.

Research and development: Research and development expenses increased $4,036 to $54,249 during the second quarter of 2021 due to increased expenses related to prototype build costs when compared with the same quarter of 2020. For the six-month period, research and development expenses increased by $1,839 to $106,949, due to increased prototype build costs.

Marketing and sales: During the second quarter of 2021, marketing and sales expenses increased $41,124 to $127,419 when compared with the same period of 2020, due to increased payroll. For the six-month period, marketing and sales expenses increased by $47,433 to $221,634, due to increased payroll.





OTHER INCOME:

The Company earned $566 in interest income during the quarter ended June 30, 2021 and $1,427 for the six-month period. Sources of this income were money market accounts and certificates of deposit. In 2021, the Company recognized a gain on forgiveness of debt in the amount of $150,118 for the first CARES Act loan (PPP round 1), compared to a government grant under the CARES Act in the amount of $9,000 for COVID relief in 2020.





NET LOSS:

The Company had net income of $146,370 for the second quarter of 2021 compared to a net loss of $81,875 for the same quarter of 2020. For the six-month period ended June 30, 2021, the Company recorded net income of $151,052 compared with a net loss of $192,181 for the same period of 2020. The increase in net income during 2021 is the result of increased sales revenues, gross profit and the forgiveness of $150,118 forgiveness of debt related to the first CARES Act loan (PPP round 1).

B.FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Corporation's current asset to current liabilities ratio at June 30, 2021 was 11.2 compared to 20.7 at December 31, 2020. The decrease in current ratio is due to the increase of wages and commissions payable at June 30, 2021 as compared to December 31, 2020.

At June 30, 2021, the Company had cash and cash equivalents of $1,035,311 as compared to cash and cash equivalent of $308,110 at December 31, 2020.

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Cash provided from operating activities increased by $550,696 for the six-month period ended June 30, 2021 when compared to the same period in 2020. The increase is attributable to an increase in net income for the period being $343,233 greater than the same period in 2020. The reduction in the change in accounts receivable and inventory balances contributed $104,031 and $120,643 respectively.

Net cash provided from investing was $249,999 due to the redemption of certificates of deposits maturing during the first half of 2021. Cash provided from financing activities was $128,280, which were the proceeds of the CARES Act loan (round 2) received during the six-month period ended June 30, 2021 less that principal paid on the CARES Act loan (round 1). We believe that the entire loan (round 2) will be forgiven.

In management's opinion, the Company's cash and cash equivalents and other working capital at June 30, 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.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.

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