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 March 31, 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 March 31, 1996.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
March 31, December 31,
1996 1995
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $69,360 $49,889
Accounts receivables 834,756 1,498,737
Cost and estimated earnings in excess
of billings 0 496,096 402,360
Inventory 1,406,337 952,371
Other 71,669 57,141
___________ ___________
Total Current Asset 2,878,218 2,960,498
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,243,500
and $1,221,504 214,082 214,895
Investment 493,118 493,118
Deposits and Other Assets 60,085 63,134
___________ __________
TOTAL ASSETS $3,645,503 $3,731,645
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 634,923 $589,010
Accrued expenses 286,650 253,750
Contract billings on contracts in progress in
excess of costs and estimated earnings 192,273 192,273
Estimated losses on
uncompleted contracts 9,875 10,893
Line of credit 710,000 735,000
Shareholder loans payable 80,000 90,000
Installment notes payable - current portion 5,501 5,501
Term notes payable- current portion 300,000 300,000
_________ __________
Total Current Liabilities 2,219,222 2,176,427
Long-term liabilities:
Installment note payable 21,520 22,972
Term notes payable 416,222 466,222
_________ __________
Total liabilities 2,656,964 2,665,621
Stockholders' Equity:
Common stock, $.01 par value,
12,000,000 shares authorized;
4,225,051 shares issued and outstanding in 1995
3,957,051 shares issued and outstanding in 1994 43,540 43,540
Additional paid in capital 2,281,585 2,281,585
Accumulated Deficit (1,336,586) (1,259,101)
___________ ___________
Total Stockholders' Equity 988,539 764,363
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,645,503 $ 3,731,645
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996 1995
___________ ___________
<S> <C> <C>
Revenues $ 1,136,655 $ 916,095
Cost of Goods Sold 708,315 684,642
___________ __________
Gross Profit 428,340 231,453
Research and Development Expenses 100,402 128,301
Selling, General, and
Administrative Expenses 365,331 296,683
___________ ___________
Income (Loss) from Operations (37,393) (193,531)
Interest Expense 40,092 53,526
Income (Loss) before Provision ____________ ___________
for Income Taxes (77,485) (247,057)
Provisions for Income Taxes 0 0
____________ ___________
Net Income (Loss) $ (77,485) $ (247,057)
Net Income (Loss) per Common Share $(.02) $ (.06)
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>
Three Months Ended
March 31,
1996 1995
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (77,485) $ (247,057)
Depreciation and amortization 25,044 21,056
(Increase) Decrease in:
Accounts receivables 663,981 658,969
Costs and estimated earnings in
excess of contract billings (93,736) (10,010)
Inventory (453,965) (74,359)
Other current assets (14,528) (8,809)
Increase (Decrease) in:
Accounts payable 45,913 (67,256)
Accrued expenses 32,900 39,520
Estimated losses on uncompleted
contracts (1,018) (5,802)
__________ __________
Net Cash Provided by Operating Activities 127,106 306,252
Cash Flows from Investing Activities:
Capital expenditures (21,184) (22,623)
Net Cash Used in Investing Activities (21,184) (22,623)
Cash Flows from Financing Activities:
Proceeds from issuance of term
note payable 0 13,802
Payments on line of credit (25,000) (219,000)
Payments on Term notes payable (50,000) (150,000)
Payments on Installment notes payable (1,452) 0
Payments on shareholder notes (10,000) 0
___________ __________
Net Cash (Used) by Financing Activities (86,452) (355,198)
Net Increase (Decrease) in Cash 19,470 (71,569)
Cash and Cash Equivalents, January 1 49,889 90,516
___________ __________
Cash and Cash Equivalents, March 31 $ 69,360 $ 18,947
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 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 March 31 and December 31:
1996 1995
Electronic components $536,049 $408,035
Work in process 707,940 426,996
Finished goods 162,348 117,340
$1,406,337 $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 March 31 and
December 31, is as follows:
1996 1995
Furniture and equipment $1,218,811 $1,199,007
Automotive equipment 19,550 17,817
Leasehold improvements 5,139 4,678
$1,243,500 $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 March 31, 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 was April 30, 1996. The bank has
indicated to the Company that the line will be extended. The
outstanding balance at March 31, 1996 and December 31, 1995
was $710,000 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. 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 Company to defer a portion of its
current debt burden over a longer term. 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 March 31, 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
Sutron Corporation revenues for the fiscal quarters ended (FQE) March 31,
1996 and March 31, 1995 were $1,136,655 and $916,095, respectively
(an increase of 24%). Sales to agencies of the federal government and other
domestic customers improved to 16% to $994,576 in 1996 from $857,188 in 1995, an
increase of $137,388. First quarter revenues from contracts with the Air Force
to deliver FMQ-13 digital wind sensor spares and repairs increased to
$118,590 in 1996 from $(9,873) in 1995, an increase of $128,463. Revenues from
international contracts and projects declined 66% to $23,489 in 1996 from
$68,780 in 1995, a decrease of $45,291.
The Companys gross profit for FQE March 31, 1996 increased to $428,340 from
$231,453 for FQE March 31, 1995. The increase in gross profit is attributed
to increased sales volume in 1996 and higher than anticipated contract costs in
the prior year.
Selling, general and administrative costs increased $68,648 to $365,331 for FQE
March 31, 1996 from $296,683 for FQE March 31, 1995. The increase is due to
adding a new salesperson in mid 1995, the amortized advertising costs of
Sutron's 1995-1996 product catalog and professional fees relating to the
protest of a contract award. This increase was partially offset by decreased
product development expenses in the amount of $27,899 to $100,402 in 1995
from $128,301 in 1995. The reduction in research and development expenses
was primarily due to product development engineers charging directly to
contracts and to reduced expenditures for parts and materials.
Net interest expenses were $40,092 for the three months ended March 31, 1996
as compared to $53,526 for the three months ended March 31, 1995. This decrease
is attributed to a reduced interest rate on bank borrowings from prime plus
three percent to prime plus two percent and reduced borrowings.
The Company's backlog of orders at March 31, 1996 was approximately $1,964,000.
The Company anticipates that all of its March backlog will be shipped in 1996.
Liquidity and Capital Resources
Cash increased $19,470 for the three months ended March 31, 1996 from the
fiscal year ended (FYE) December 31, 1995. Total current assets decreased to
$2,878,218 at March 31, 1996 as compared to $2,960,498 at December 31, 1995.
Total current liabilities increased to $2,219,222 at March 31, 1996 as
compared to $2,176,427 at December 31, 1995. The Company's current ratio
decreased to 1.3:1 at March 31, 1996 from 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 and unbilled receivables. Borrowings outstanding
against the revolving credit facility as of March 31, 1996 and December 31,
1995 were $710,000 and $735,000, respectively. The current portion of the
term note at March 31, 1996 and December 31, 1995 was $300,000,
respectively, and the long term portion was $416,222 and $466,222,
respectively. The revolving credit facility expired on April 30, 1996.
The bank has indicated to the Company that the line will be extended.
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)
May 15, 1996 Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
May 15, 1996 Sidney C. Hooper
Date Sidney C. Hooper
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 1st Qtr 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 69360
<SECURITIES> 0
<RECEIVABLES> 834756
<ALLOWANCES> 0
<INVENTORY> 1406337
<CURRENT-ASSETS> 2878218
<PP&E> 1457583
<DEPRECIATION> 1243500
<TOTAL-ASSETS> 3645503
<CURRENT-LIABILITIES> 2219222
<BONDS> 0
<COMMON> 43540
0
0
<OTHER-SE> 944999
<TOTAL-LIABILITY-AND-EQUITY> 3645503
<SALES> 1136655
<TOTAL-REVENUES> 1136655
<CGS> 708315
<TOTAL-COSTS> 708315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40092
<INCOME-PRETAX> (77485)
<INCOME-TAX> 0
<INCOME-CONTINUING> (77485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77485)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
