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, 1996
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 September 30, 1996.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
September 30, December 31,
1996 1995
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $124,352 $49,889
Accounts receivables 1,054,098 1,498,737
Cost and estimated earnings in excess
of billings 751,401 402,360
Inventory 1,770,898 952,371
Other 34,770 57,141
___________ ___________
Total Current Asset 3,735,519 2,960,498
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,043,410
and $1,221,504 191,697 214,895
Investment 493,118 493,118
Deposits and Other Assets 53,988 63,134
___________ __________
TOTAL ASSETS $4,474,322 $3,731,645
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 757,688 $589,010
Accrued expenses 454,609 253,750
Contract billings on contracts in progress in
excess of costs and estimated earnings 162,273 192,273
Estimated losses on
uncompleted contracts 6,187 10,893
Line of credit 730,000 735,000
Shareholder loans payable 80,000 90,000
Installment notes payable - current portion 5,501 5,501
Term notes payable- current portion 350,000 300,000
_________ __________
Total Current Liabilities 2,546,258 2,176,427
Long-term liabilities:
Installment note payable 18,586 22,972
Term notes payable 241,222 466,222
_________ __________
Total liabilities 2,806,066 2,665,621
Stockholders' Equity:
Common stock, $.01 par value,
12,000,000 shares authorized;
4,225,051 shares issued and outstanding in 1996
and in 1995 43,540 43,540
Additional paid in capital 2,281,585 2,281,585
Accumulated Deficit (656,869) (1,259,101)
___________ ___________
Total Stockholders' Equity 1,668,256 1,066,024
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,474,322 $ 3,731,645
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
September 30,
1996 1995
___________ ___________
<S> <C> <C>
Revenues $ 2,876,496 $ 1,218,270
Cost of Goods Sold 1,726,369 747,306
___________ __________
Gross Profit 1,150,127 470,964
Research and Development Expenses 155,427 125,776
Selling, General, and
Administrative Expenses 520,850 288,477
___________ ___________
Income (Loss) from Operations 473,850 56,711
Interest Expense 46,333 29,956
Income (Loss) before Provision ____________ ___________
for Income Taxes 427,517 26,755
Provisions for Income Taxes 79,658 0
____________ ___________
Net Income (Loss) $ 347,859 $ 26,755
Net Income (Loss) per Common Share $.08 $ .01
Weighted Average Number
of Common Shares 4,225,851 3,957,051
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
___________ ___________
<S> <C> <C>
Revenues $ 6,033,109 $ 3,348,266
Cost of Goods Sold 3,588,052 2,086,756
___________ __________
Gross Profit 2,445,057 1,261,510
Research and Development Expenses 371,249 372,778
Selling, General, and
Administrative Expenses 1,268,637 907,215
___________ ___________
Income (Loss) from Operations 805,171 (18,483)
Interest Expense 123,281 135,400
Income (Loss) before Provision ____________ ___________
for Income Taxes 681,890 (153,883)
Provisions for Income Taxes 79,658 0
____________ ___________
Net Income (Loss) $ 602,232 $ (153,883)
Net Income (Loss) per Common Share $.14 $ (.04)
Weighted Average Number
of Common Shares 4,225,851 3,957,051
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 602,232 $ (153,883)
Noncash items included in net income (loss):
Depreciation and amortization 79,393 67,236
(Increase) Decrease in:
Accounts receivables 444,639 218,022
Costs and estimated earnings in excess of contract
billings (349,041) 375,176
Inventory (818,527) (80,665)
Prepaid items and other 22,371 (61,136)
Increase (Decrease) in:
Accounts payable 168,678 (174,270)
Accrued expenses 200,859 111,378
Contract billings in excess of costs and earnings (30,000) (
Estimated losses on uncompleted contracts (4,706) (6,558)
Net Cash Provided (Used) by Operating Activities 315,898 295,300
Cash Flows from Investing Activities:
Purchase of property and equipment (47,049) (45,547)
Capitalized software costs ( (13,269)
Net Cash Used in Investing Activities (47,049) (58,816)
Cash Flows from Financing Activities:
Proceeds from line of credit ( (
Payments on line of credit (5,000) (99,000)
Proceeds from installment loans ( 31,190
Payments on installment loans (4,386) (
Payments on stockholder loans (10,000) (
Payments on term notes payable (175,000) (251,360)
Net Cash (Used) Provided by Financing Activities (194,386) (319,170)
Net Increase (Decrease) in Cash and Cash Equivalents 74,463 (82,686)
Cash and Cash Equivalents, January 1 49,899 90,516
Cash and Cash Equivalents, September 30 $124,352 $ 7,830
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(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 1995 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 is stated at the lower of cost or market. Electronic
components costs are based on the weighted average method.
Work in process and finished goods costs consist of materials,
labor and overhead and are recorded at a standard cost.
Inventory consists of the following at September 30 and December 31:
1996 1995
Electronic components $708,125 $408,035
Work in process 815,691 426,996
Finished goods 247,082 117,340
$1,770,898 $952,371
(3) ADVERTISING
In 1995, the Company developed and produced a 1995-1996 product
catalog to advertise its environmental monitoring instruments
and systems. The Company, per Statement of Position 93-7,
Reporting on Advertising Costs, is able to capitalize the
$102,000 cost of the catalog. Costs of the catalog consist of
iprinting costs, incremental direct costs and payroll and
payroll related costs for individuals who devoted their time to
the catalog. The costs are included in Prepaid Items and Other
and being charged to income over the expected benefit periods
of 1995 and 1996. Advertising costs of $40,800 have been
charged to income in 1995, with a net remaining asset of
$61,200 available as of December 31, 1995.
(4) ACCUMULATED DEPRECIATION AND AMORTIZATION
Accumulated depreciation and amortization at June 30 and
December 31, is as follows:
1996 1995
Furniture and equipment $1,015,335 $1,199,007
Automotive equipment 22,012 17,817
Leasehold improvements 6,063 4,678
$1,043,410 $1,221,504
(5) 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 $1,300,311 net of
a valuation allowance of $807,192 at September 30, 1996 and
December 31, 1995.
(6) LINE OF CREDIT
The Company signed a loan and security agreement dated December
11, 1992, with its bank which extends the Company 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 Company'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, 1997. The
outstanding balance at June 30, 1996 and December 31, 1995
was $730,000 and $735,000, respectively.
(7) TERM NOTE PAYABLE
Under the above referenced loan and security agreement, the
Company was also extended a term note payable with a principal
amount of $2,121,222. To assist the Company in financing a large
international contract, management and the bank agreed to
restructure the term note in August, 1996. Principal payments
of $25,000 under the agreement were suspended in August, 1996
and are to be resumed in December, 1996. The aggregate amount
of the deferred payments in the amount of $100,000 is due and
payable on April 30, 1996. Final payment for the unpaid balance
on the note is due on July 15, 1998. Interest on the unpaid balance
is payable monthly at prime plus two percent. Additional principal
payments may be due under the agreement if the Company reaches
specified cash flow levels described by the bank.
The above referenced line of credit and term note payable are
secured by substantially all assets of the Company.
Additionally, the loan agreement contains certain restrictive
financial covenants. As of December 31, 1995, the Company 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: 1995
1995 $ --
1996 1,035,000
1997 300,000
1998 166,222
$1,501,222
(8) STOCKHOLDER LOANS PAYABLE
At September 30, 1996 the Company had promissory notes totaling
$80,000 payable on demand to two officers of the Company. At
December 31, 1995 the Company had promissory notes totaling
$90,000 payable on demand to three officers of the Company.
The promissory notes are expected to be repaid in 1996 with
interest at 10.75 percent.
(9) LEASE OBLIGATIONS
The Company 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 $12,021, including $3,090
estimated as the Company's pro rata share of operating
expenses, and annual rent increases of 3%. Rent expense
amounted to $151,125 for 1995. The following is a schedule,
by years, of future payments due:
Year ending December 31: 1995 1994
1995 $ 0 $ 132,372
1996 135,517 135,517
1997 138,756 138,756
1998 35,310 35,310
$309,583 $441,955
(10) INCOME TAXES
At December 31, 1995, the Company had net operating loss
carryforward of $325,000 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
Third Quarter 1996 Compared to 1995
Sutron Corporation revenues for the fiscal quarters ended
(FQE) September 30, 1996 and September 30, 1995 were
$2,876,496 and $1,218,270, respectively (an increase of 136%).
Sales to agencies of the federal government and other domestic
customers improved 52% to $1,538,794 in 1996 from $1,012,576
in 1995, an increase of $526,218. Third quarter revenues from
contract's with the Air Force to deliver FMQ-13 digital wind
sensor spares and repairs increased to $50,668 in 1996 from
$46,073 in 1995, an increase of $4,595. Revenues from
international contracts and projects increased 706% to
$1,287,033 in 1996 from $159,621 in 1995, an increase
of $1,127,412.
The Company's gross profit for FQE September 30, 1996
increased 144% to $1,150,127 from $470,964 for September 30,
1995. The increase in gross profit is attributed to increased sales
volume.
Selling, general and administrative costs increased $232,373
to $520,850 for FQE September 30, 1996 from $288,477 for FQE
September 30, 1995. The increase is due to adding a new
salesperson in mid 1995 and another in mid 1996, the amortized
advertising costs of Sutron's 1995-1996 product catalog and
professional fees relating to the protest of a contract award.
Product development expenses increased $29,651 to $155,427 for
FQE September 30, 1996 from $125,776 for FQE September 30,
1995.
Net interest expenses were $46,333 for the three months
ended September 30, 1996 as compared to $29,755 for the three
months ended September 30, 1995. This increase is attributed
to increased borrowing on the line of credit.
The Company's backlog of orders at September 30, 1996
was approximately $4,354,000 as compared with $2,228,000 at
September 30, 1995, an increase of $2,126,000 or 95%. The
Company anticipates that 60% of its September backlog will be
shipped in 1996.
Nine months ended September 30, 1996 Compared to 1995
Sutron Corporation revenues for the nine months ended
September 30, 1996 and September 30, 1995 were $6,033,109
and $3,348,266, respectively (an increase of 80%). Sales to
agencies of the federal government and other domestic customers
improved 29% to $3,893,648 in 1996 from $3,008,321 in 1995,
an increase of $885,327. Revenues from contract's with the Air
Force to deliver FMQ-13 digital wind sensor spares and repairs
increased to $239,690 in 1996 from $35,613 in 1995, an increase
of $204,077. Revenues from international contracts and projects
increased 524% to $1,899,770 in 1996 from $304,332 in 1995, an
increase of $1,595,438.
The Company's gross profit for the nine months ended
September 30, 1996 increased 94% to $2,445,057 from $1,261,510
for September 30, 1995. The increase in gross profit is attributed
to increased sales volume.
Selling, general and administrative costs increased $361,422
to $1,268,637 for the nine months ended September 30, 1996 from
$907,215 for the nine months ended September 30, 1995. The
increase is due to adding a new salesperson in mid 1995 and
another in mid 1996, the amortized advertising costs of Sutron's
1995-1996 product catalog and professional fees relating to the
protest of a contract award. Product development expenses
decreased $1,529 to $371,249 in 1996 from $372,778 in 1995.
Net interest expenses were $123,281 for the nine months
ended September 30, 1996 as compared to $135,400 for the nine
months ended September 30, 1995. This decrease is attributed
to reduced bank borrowings.
Liquidity and Capital Resources
Cash increased $74,463 for the nine months ended
September 30, 1996 from the fiscal year ended (FYE) December
31, 1995. Total current assets increased to $3,735,519 at
September 30, 1996 as compared to $2,960,498 at December 31,
1995. Total current liabilities increased to $2,546,258 at
September 30, 1996 as compared to $2,176,427 at
December 31, 1995. The Company's current ratio
was 1.47:1 at September 30, 1996 and 1.36:1 at
December 31, 1995.
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. Borrowings
outstanding against the revolving credit facility as of September 30,
1996 and December 31, 1995 were $730,000 and $735,000, respectively.
The current portion of the term note at September 30, 1996 and
December 31, 1995 was $350,000 and $300,000, respectively, and the
long term portion was $241,222 and $466,222, respectively. The
revolving credit facility expires on April 30, 1997.
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>
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 11, 1996 Raul S. McQuivey
Date Raul S. McQuivey
Principal Executive Officer
November 11, 1996 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 124352
<SECURITIES> 0
<RECEIVABLES> 1054098
<ALLOWANCES> 0
<INVENTORY> 1770898
<CURRENT-ASSETS> 3735519
<PP&E> 1235107
<DEPRECIATION> 1043410
<TOTAL-ASSETS> 4474322
<CURRENT-LIABILITIES> 2546258
<BONDS> 0
<COMMON> 43540
0
0
<OTHER-SE> 1624716
<TOTAL-LIABILITY-AND-EQUITY> 4474322
<SALES> 6033109
<TOTAL-REVENUES> 6033109
<CGS> 3588052
<TOTAL-COSTS> 3588052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123281
<INCOME-PRETAX> 681890
<INCOME-TAX> 79658
<INCOME-CONTINUING> 602232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 602232
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
