UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
Commission file number 0-12227
Sutron Corporation
(Exact name of registrant as specified in its charter.)
Virginia 54-1006352
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation organization)
21300 Ridgetop Circle, Sterling Virginia 20166
(Address of principal executive offices) (Zip Code)
(703) 406-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $.01 Par Value - 4,225,851 shares of as of November 14, 1995.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $ 7,830 $ 90,516
Accounts receivables 1,003,982 1,222,004
Cost and estimated earnings in excess
of billings 143,940 519,116
Inventory 1,129,124 1,048,460
Prepaid and other 86,872 25,736
___________ ___________
Total Current Asset 2,371,748 2,905,832
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,196,745
and $1,133,575 246,703 264,327
Investment 493,118 493,118
Other Assets 66,182 56,977
___________ ___________
TOTAL ASSETS $ 3,177,751 $ 3,720,254
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 386,391 $ 560,660
Accrued expenses 357,365 245,987
Estimated losses on
uncompleted contracts 407 6,965
Current maturities:
Line of credit 555,000 654,000
Term notes payable 305,501 375,000
Shareholder loans payable 100,000 100,000
___________ ___________
Total Current Liabilities 1,704,664 1,942,612
Long-term liabilities:
Term notes payable 615,550 766,222
Stockholders' Equity:
Common stock, $.01 par value,
12,000,000 shares authorized;
3,957,051 shares issued and
outstanding in 1995 and 1994 40,852 40,852
Additional paid in capital 2,250,673 2,250,673
Accumulated Deficit (1,433,988) (1,280,105)
___________ ___________
Total Stockholders' Equity 857,537 1,011,420
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,177,751 $ 3,720,254
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
September 30,
1995 1994
___________ ___________
<S> <C> <C>
Revenues $1,218,270 $ 1,369,901
Cost of Goods Sold 747,306 760,383
___________ ___________
Gross Profit 470,964 609,518
Research and Development Expenses 125,776 131,656
Selling, General, and
Administrative Expenses 288,477 336,178
___________ ___________
Income (Loss) from Operations 56,711 141,684
Interest Expense 29,956 49,813
Income (Loss) before Provision ____________ ___________
for Income Taxes 67,199 91,871
Provisions for Income Taxes 0 0
____________ ___________
Net Income (Loss) $ 26,755 $ 91,871
Net Income (Loss) per Common Share $.01 $.02
Weighted Average Number
of Common Shares 3,957,051 3,927,051
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
___________ ___________
<S> <C> <C>
Revenues $3,348,266 $ 3,636,276
Cost of Goods Sold 2,086,756 2,146,921
___________ ___________
Gross Profit 1,261,510 1,489,355
Research and Development Expenses 372,778 348,345
Selling, General, and
Administrative Expenses 907,215 913,504
___________ ___________
Income (Loss) from Operations (18,483) 227,506
Interest Expense 135,400 138,483
Income (Loss) before Provision ____________ ___________
for Income Taxes (153,883) 89,023
Provisions for Income Taxes 0 1,000
____________ ___________
Net Income (Loss) $ (153,883) $ 88,023
Net Income (Loss) per Common Share $(.04) $.02
Weighted Average Number
of Common Shares 3,957,051 3,926,245
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) (153,883) $ 88,023
Depreciation and amortization 67,236 57,420
(Increase) Decrease in:
Accounts receivables 218,022 688,179
Costs and estimated earnings in
excess of contract billings 375,176 121,282
Inventory (80,665) (216,802)
Prepaid and other (61,136) (8,396)
Increase (Decrease) in:
Accounts payable (174,270) 11,399
Accrued expenses 111,378 (76,863)
Estimated losses on uncompleted
contracts (6,558) (47,192)
___________ ___________
Net Cash Provided by Operating Activities 295,300 617,050
Cash Flows from Investing Activities:
Purchase of property and equipment (45,547) (47,734)
Capitalized Software costs (13,269) 0
___________ ___________
Net Cash Used in Investing Activities (58,816) (47,734)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 0 625
Proceeds from issuance of term
notes payable 31,190 0
Payments on line of credit (99,000) (251,000)
Payments on Term notes payable (251,360) (300,000)
Readvance on Term note payable 0 80,000
Proceeds from Shareholder's notes payable 0 90,000
__________ ___________
Net Cash (Used) by Financing Activities (319,170) (380,375)
Net Increase (Decrease) in Cash (82,686) 188,941
Cash and Cash Equivalents, January 1 90,516 86,035
___________ ___________
Cash and Cash Equivalents, September 30 $ 7,830 $ 274,976
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements, which should be read in conjunction
with the financial statements of Sutron Corporation ("the Company") included
in the 1994 Annual Report filed on Form 10-KSB, are unaudited but have been
prepared in the ordinary course of business for the purpose of providing
information with respect to the interim period. The Company believes that
all adjustments (none of which were other than normal recurring accruals)
necessary for a fair presentation for such periods have been included.
2. INVENTORY
Inventory consists of the following at September 30, 1995 and December 31, 1994:
September 30, December 31,
1995 1994
Electronic components $ 489,874 $ 436,366
Work in process 473,000 478,091
Finished goods 166,250 134,003
__________ __________
Totals $1,129,124 $1,048,460
3. ACCUMULATED DEPRECIATION AND AMORTIZATION
Accumulated depreciation and amortization at September 30, 1995 and
December 31, 1994:
September 30, December 31,
1995 1994
Furniture and equipment $1,178,731 $1,116,965
Automotive equipment 13,785 13,785
Leasehold improvements 4,229 2,825
_________ __________
Totals $1,196,745 $1,133,575
4. INVESTMENT
Land, including related improvements and architectural fees, which
was originally acquired as a future plant site, is now being held
for sale. The total amount presented as investment consists of land
and building design fees of $1,300,310, net of a valuation allowance
of $807,192 at September 30, 1995 and at December 31, 1994.
<PAGE>
5. LINE OF CREDIT
The Corporation signed a loan and security agreement dated December 11,
1992, with its bank which extends the Corporation a revolving line of
credit. The maximum amount of borrowing under the line is not to exceed
the lesser of $1,000,000 or the Corporation's borrowing base as determined
by the bank. Interest on the unpaid balance is payable monthly at prime
plus two percent. The maturity date of the line is April 30, 1996.
The oustanding balance at September 30, 1995 and December 31, 1994 was $555,000
and $654,000, respectively.
6. TERM NOTES PAYABLE
Under the above referenced loan and security agreement, the Corporation was
also extended a term note payable with a principal amount of $2,121,222.
Management and the bank agreed to restructure the term note in August, 1994.
Principal payments of $40,000 under the agreement were suspended in August,
1994 and were resumed in February, 1995 in the amount of $25,000 per month
for 45 months and 1 final payment on July 15, 1998 for the remaining unpaid
balance. Interest on the unpaid balance is payable monthly at prime plus
two percent. The restructuring allows the Corporation to defer a portion
of its current debt burden over a longer term. Additional principal
payments may be due under the agreement if the Corporation reaches specified
cash flow levels described by the bank. Separate term notes in the amounts
of $13,802 and $17,388 were obtained in March 1995 and September 1995 to
purchase two vehicles. The notes are repayable in the amount of $370 per month
for 48 months and $388 for 60 months.
The bank also agreed to readvance a portion of the term note dependent upon
the Company obtaining additional funds from the issuance of debt or equity
securities. Upon the Companys receipt of all or any portion of the
additional funds from the issuance of debt or equity securities, the bank
agreed to readvance corresponding amounts with the total of the readvances
not to exceed $100,000. As of December 31, 1994, the Company had obtained
$100,000 in additional funds from shareholder loans and the bank had
readvanced $100,000 on the term note. The total amount readvanced was paid
in full in February, 1995.
The above referenced line of credit and term note payable are secured by
substantially all assets of the Corporation. Additionally, the loan
agreement contains certain restrictive financial covenants. Beginning
January 1, 1995, the Corporation was in violation of certain equity
covenants. The bank has waived compliance.
Principal maturities for all indebtedness described in Notes 6 and 7
are as follows at December 31:
Year ending December 31: 1994
1994 $ 0
1995 1,029,000
1996 300,000
1997 300,000
1998 166,222
__________
Totals $1,795,222
7. STOCKHOLDER LOANS PAYABLE
At September 30, 1995 and December 31, 1994 the Company had promissory notes
totaling $100,000 payable on demand to four officers of the Company.
The promissory notes are expected to be repaid in 1995 with interest at
10.75 percent. Repayment of the loans from the four officers was prohibited
until the readvance of the term note was repaid in full in February, 1995.
<PAGE>
8. LEASE OBLIGATIONS
The Corporation entered into a lease on October 23, 1992 for its
headquarters and production facilities. The 5.5-year operating lease calls
for monthly rent of $10,468 including $2,295 estimated as the Corporation's
pro rata share of operating expenses and annual rent increases of 3%.
The following is a schedule, by years, of future payments due:
Year ending December 31: 1994
1994 $ 0
1995 132,372
1996 135,517
1997 138,756
1998 35,310
_________
Totals $441,955
9. INCOME TAXES
At December 31, 1994, the Corporation had net operating loss carryforward of
$410,000 and general business credits of $31,000, both will expire in 2004.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Sutron Corporation revenues for the fiscal quarters ended (FQE) September
30, 1995 and September 30, 1994 were $1,218,270 and $1,369,901, respectively
(a decrease of 11%). Third quarter revenues from the Companys contract
with the Air Force to deliver FMQ-13 digital wind sensors increased 34% in
1995 to $46,073 as compared to $34,397 in 1994. Third quarter sales of
hydrological and meteorological equipment, systems and services decreased
12% in 1995 to $1,172,197 as compared to $1,335,504 in 1994.
The Companys gross profit for FQE September 30, 1995 decreased to $470,964
from $609,518 for FQE September 30, 1994. The decrease in gross profit is
attributed to decreased sales volume and higher contract costs. Selling,
general and administrative costs decreased $47,701 to $288,477 for FQE
September 30, 1995 from $336,178 for FQE September 30, 1994 due to
advertising costs being capitalized. Product development expenses decreased
$5,880 to $125,776 in 1995 from $131,656 in 1994. Operating income for FQE
September 30, 1995 was $56,711 as compared to $141,684 for FQE September 30,
1994. Net interest expenses were $26,755 for the three months ended
September 30, 1995 as compared to $49,813 for the three months ended
September 30, 1994.
Sutron Corporation revenues for the nine months ended September 30, 1995 and
September 30, 1994 were $3,348,266 and $3,636,276, respectively (a decrease
of 8%). Revenues from the Companys contract with the Air Force to deliver
FMQ-13 digital wind sensors declined 90% in 1995 to $35,613 as compared
to $343,460 in 1994. Sales of hydrological and meteorological equipment,
systems and services increased .6% in 1995 to $3,312,653 as compared to
$3,292,816 in 1994.
The Companys gross profit for the nine months ended September 30, 1995
decreased to $1,261,510 from $1,489,355 in 1994. Selling, general and
administrative costs decreased $6,289 to $907,215 for the nine months ended
September 30, 1995 from $913,504 in 1994. Product development expenses
increased $24,433 to $372,778 in 1995 from $348,345 in 1994. Operating
income for the nine months ended September 30, 1995 was $(18,483) as compared
to $227,506 in 1994. Net interest expenses were $135,400 for the nine months
ended September 30, 1995 as compared to $138,483 for the nine months ended
September 30, 1994.
The Company's backlog of orders at September 30, 1995 was approximately
$2,228,000. The Company anticipates that approximately 75% of its September
backlog will be shipped in 1995.
Liquidity and Capital Resources
Cash decreased $82,686 for the nine months ended September 30, 1995 from
the fiscal year ended (FYE) December 31, 1994. Total current assets
decreased to $2,371,748 at September 30, 1995 as compared to $2,905,832 at
December 31, 1994. Total current liabilities decreased to $1,704,664 at
September 30, 1995 as compared to $1,942,612 at December 31, 1994. The
Company's current ratio decreased to 1.39:1 at September 30, 1995 from 1.49:1
at December 31, 1994.
The Company's debt restructuring in December 1992 resulted in two
notes with the bank being replaced by a revolving credit facility and a
term note. Borrowings on the revolving credit facility, which has a maximum
limit of $1,000,000, are subject to a defined borrowing base composed
primarily of certain accounts receivables and unbilled receivables.
Borrowings outstanding against the revolving credit facility as of September 30,
1995 and December 31, 1994 were $555,000 and $654,000, respectively. The
current portion of the term note at September 30, 1995 and December 31, 1995 was
$300,000 and $375,000, respectively, and the long term portion was $591,222
and $766,222, respectively. The revolving credit facility expires on April
30, 1996.
The credit facility and the term note bear interest at prime plus two
percent. The credit facility and the term note are secured by accounts
receivable, inventory, and equipment. The agreements contain restrictive
covenants pertaining to the maintenance of tangible net worth and operating
cash flows and limiting capital expenditures, acquisitions by the Company of
its own stock and other matters. The agreements also restrict the payment
of dividends.
Sutron believes that its working capital, cash flows from operations, and
existing and anticipated credit facilities will provide adequate resources
to finance the current needs of the Company's operations and to satisfy its
anticipated cash requirement for more than twelve months. In addition,
Sutron will continue to consider and review other financing arrangements
which could be used to reduce the outstanding balance of both current and
long term debt.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
<PAGE>
SUTRON CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Sutron Corporation
(Registrant)
November 14, 1995 Raul S. McQuivey
Date Raul S. McQuivey
Principal Executive Officer
November 14, 1995 Sidney C. Hooper
Date Sidney C. Hooper
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 3rd Qtr 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 7830
<SECURITIES> 0
<RECEIVABLES> 1003982
<ALLOWANCES> 0
<INVENTORY> 1129124
<CURRENT-ASSETS> 2371748
<PP&E> 1443448
<DEPRECIATION> 1196745
<TOTAL-ASSETS> 3177751
<CURRENT-LIABILITIES> 1704664
<BONDS> 0
<COMMON> 40852
0
0
<OTHER-SE> 857537
<TOTAL-LIABILITY-AND-EQUITY> 3177751
<SALES> 3348266
<TOTAL-REVENUES> 3348266
<CGS> 2086756
<TOTAL-COSTS> 2086756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135400
<INCOME-PRETAX> (153883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (153883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153883)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
