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
A.RESULTS OF OPERATIONS
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.
REVENUES: Total revenues from sales decreased to
Management believes the decrease in sales revenues is due to the impact of the COVID-19 stay at home orders when compared with the same period 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 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 contract or spread the virus. We are observing social distancing for those employees that remain on-site. Masks have been provided to all employees to minimize the risk of exposure. Daily monitoring of temperatures as well as adding sanitizers have also been instituted.
A percentage breakdown of the Company's market segments of Domestic and Foreign Export sales for the three and nine month periods endedSeptember 30, 2020 and 2019 are as follows: Three Months Three Months Nine Months ended Nine Months ended ended September ended September September 30, September 30, 30, 2020 30, 2019 2020 2019 Domestic 95% 94% 90% 86% Sales Export 5% 6% 10% 14% Sales
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BACKLOG:
As of
COST OF SALES:
Cost of sales percentages for the third quarter of 2020 and 2019 were 52% and
44% of respective net sales. The cost of sales percentage increase in the third
quarter of 2020 is the result of the product mix sold during the same quarter of
2019. Cost of sales percentages for the nine month periods ended
OPERATING EXPENSES:
The following is a delineation of operating expenses:
Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Increase Sept. 30, Sept. 30, Increase 2020 2019 (Decrease) 2020 2019 (Decrease) General and$ 55,761 $ 64,756 $ (8,995) $ 221,431 $ 227,450 $ (6,019) administrative Research and 49,739 48,445 1,294 154,850 165,397 (10,547) development Marketing and 90,229 89,414 815 264,420 286,621 (22,201) sales Total operating$ 195,729 $ 202,615 $ (6,886) $ 640,701 $ 679 468$ (38,767) expenses
General and administrative: For the third quarter of 2020, general and
administrative expenses decreased
Research and development: Research and development expenses increased
Marketing and sales: During the third quarter of 2020, marketing and sales
expenses increased
OTHER INCOME:
The Company earned
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NET LOSS:
The Company had a net loss of
B.FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Corporation's current asset to current liabilities ratio at
At
Cash used in operating activities increased by
Net cash provided from investing was
In management's opinion, the Company's cash and cash equivalents and other
working capital at
As a result of COVID-19, and governmental responses thereto, we 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 has been significant at this point.
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
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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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