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 June 30, 1997
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 August 11, 1997.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
June 30, December 31,
1997 1996
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $245,023 $78,970
Accounts receivables 1,372,190 1,210,377
Cost and estimated earnings in excess
of billings 906,450 628,344
Inventory 1,672,680 2,135,231
Other 79,788 46,482
___________ ___________
Total Current Asset 4,276,131 4,099,404
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,111,339
and $1,072,273 218,738 182,995
Investment 493,118 493,118
Deposits and Other Assets 44,843 50,940
___________ __________
TOTAL ASSETS $5,032,830 $4,826,457
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 630,400 $895,524
Accrued expenses 754,221 457,065
Accrued income taxes 59,733
Contract billings on contracts in progress in
excess of costs and estimated earnings 162,702 162,702
Estimated losses on
uncompleted contracts 1,095 1,095
Line of credit 914,839 905,000
Shareholder loans payable 80,000 90,000
Installment notes payable - current portion 6,657 6,657
Term notes payable- current portion 171,504 300,000
_________ __________
Total Current Liabilities 2,781,151 2,808,043
Long-term liabilities:
Installment note payable 2,388 16,411
Term notes payable 171,895 166,222
_________ __________
Total liabilities 2,955,434 2,990,676
Stockholders' Equity:
Common stock, $.01 par value,
12,000,000 shares authorized;
4,225,851 shares issued and outstanding in 1997
and in 1996 43,540 43,540
Additional paid in capital 2,281,585 2,281,585
Accumulated Deficit (247,729) (489,344)
___________ ___________
Total Stockholders' Equity 2,077,396 1,835,781
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,032,830 $ 4,826,457
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1997 1996
___________ ___________
<S> <C> <C>
Revenues $ 2,169,214 $ 2,019,958
Cost of Goods Sold 1,430,206 1,153,230
___________ __________
Gross Profit 739,008 866,728
Research and Development Expenses 195,906 115,420
Selling, General, and
Administrative Expenses 516,643 382,457
___________ ___________
Income (Loss) from Operations 26,459 368,851
Interest Expense 38,178 36,855
Income (Loss) before Provision ____________ ___________
for Income Taxes (11,719) 331,996
Provisions for Income Taxes (16,000) 0
____________ ___________
Net Income (Loss) $ 4,281 $ 331,996
Net Income (Loss) per Common Share $.0 $ $.08
Weighted Average Number
of Common Shares 4,352,181 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
___________ ___________
<S> <C> <C>
Revenues $ 4,841,355 $ 3,156,613
Cost of Goods Sold 3,011,942 1,861,683
___________ __________
Gross Profit 1,829,413 1,294,930
Research and Development Expenses 411,503 215,822
Selling, General, and
Administrative Expenses 961,962 747,787
___________ ___________
Income (Loss) from Operations 455,948 331,321
Interest Expense 76,372 76,948
Income before Provision ____________ ___________
for Income Taxes 377,615 254,373
Provisions for Income Taxes 136,000 0
____________ ___________
Net Income $ 241,615 $ 254,373
Net Income (Loss) per Common Share $.06 $ $.06
Weighted Average Number
of Common Shares 4,352,181 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 241,615 $ 254,373
Noncash items included in net income:
Depreciation and amortization 50,089 54,351
Loss on sale of asset 1,961 0
(Increase) Decrease in:
Accounts receivables (176,909) (59,890)
Costs and estimated earnings in
excess of contract billings (263,010) 151,578
Inventory 462,551 (589,109)
Other current assets (33,305) (3,516)
Increase (Decrease) in:
Accounts payable (265,122) 19,542
Accrued expenses 356,887 139,810
Contract billings in excess of costs
and earnings 0 (30,000)
Estimated losses on uncompleted
contracts 0 (4,706)
__________ __________
Net Cash Provided by Operating Activities 374,757 (67,567)
Cash Flows from Investing Activities:
Capital expenditures (91,808) (29,382)
Proceeds from sale of property and equip 10,500 0
___________ ___________
Net Cash Used in Investing Activities (81,308) (29,382)
Cash Flows from Financing Activities:
Proceeds from line of credit 9,839 245,000
Payments on Term notes payable (123,213) (125,000)
Payments on Installment notes payable (14,023) (2,896)
Payments on Stockholder loans 0 (10,000)
___________ __________
Net Cash (Used) by Financing Activities (127,397) 107,104
Net Increase (Decrease) in Cash 166,052 10,155
Cash and Cash Equivalents, January 1 78,971 49,889
___________ __________
Cash and Cash Equivalents, June 30 $ 245,023 $ 60,044
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(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 1996 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) CONTRACTS IN PROGRESS
Information with respect to contracts in progress at June 30 and
December 31, is as follows:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
<S> <C> <C>
Direct and indirect costs, including overhead $2,782,965 $2,162,549
Estimated losses, net (88,836) (1,095)
Totals $2,694,129 $2,161,454
Billings $1,800,319 $1,534,215
Costs and estimated earnings in excess of billings 894,905 628,334
Estimated losses on contracts in process (1,095) (1,095)
Totals $2,694,129 $2,161,454
</TABLE>
(3) 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 June 30 and December 31:
1997 1996
Electronic components $629,007 $702,216
Work in process 680,267 1,232,440
Finished goods 363,406 200,575
$1,672,680 $2,135,231
(4) ACCUMULATED DEPRECIATION AND AMORTIZATION
Accumulated depreciation and amortization at June 30 and
December 31, is as follows:
1997 1996
Furniture and equipment $1,080,611 $1,041,005
Automotive equipment 9,494 24,743
Leasehold improvements 7,449 6,525
$1,097,554 $1,072,273
(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 June 30, 1997 and
December 31, 1996.
(6) LINE OF CREDIT
The Company signed a loan and security agreement dated June 5,
1997, with its new 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 $2,000,000 or the Company's borrowing base
as determined by the bank. Interest on the unpaid balance is payable
monthly at prime plus one half percent. The maturity date of the line
is June 1, 1998, and the outstanding balance at June 30, 1997 and
December 31, 1996 amounted to $914,839 and $905,000, 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
$343,008. Principal payments under the previous agreement were
restructured from $25,000 per month to $14,292 per month for 23
months and 1 final payment on July 1, 1999 for the remaining unpaid
balance. Interest on the unpaid balance is payable monthly at prime
plus three quarter percent. The above referenced line of credit and
term note payable are secured by substantially all assets of the Company.
(8) STOCKHOLDER LOANS PAYABLE
At June 30, 1997 the Company had promissory notes totaling
$80,000 payable on demand to two officers of the Company. The
promissory notes are expected to be repaid in 1997 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:
1997 $147,473
1998 36,063
$183,536
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Second Quarter 1997 Compared to 1996
Net Revenues. Sutron Corporation revenues for the
fiscal quarters ended June 30, 1997 and June 30, 1996 were
$2,169,214 and $2,019,958, respectively (an increase of 7%).
Sales to agencies of the federal government and other domestic
customers improved 17% to $1,734,414 in 1997 from $1,481,869
in 1996, an increase of $252,545. Second quarter revenues from
contract's with the Air Force to deliver FMQ-13 digital wind
sensor spares and repairs increased to $169,771 in 1997 from
$70,432 in 1996, an increase of $99,339. Revenues from
international contracts and projects decreased 43% to $265,029
in 1997 from $467,657 in 1996, a decrease of $202,628.
Gross Profit. The Company's gross profit for the quarter
ended June 30, 1997 decreased 16% to $739,008 from $866,728
for June 30, 1996. Gross profit as a percentage of sales decreased
to 34% from 43% as a result of increased installation expenditures
on the SIMEPAR contract in Brazil (installation was completed on
July 2, 1997) and increased labor and material expenditures on
the McClellan repair contracts.
Selling, General And Administrative. Selling, general and
administrative costs increased $134,186 to $516,643 for the quarter
ended June 30, 1997 from $382,457 for 1996. The increase is due
to the addition of three new sales and marketing positions, increased
commissions to international agents and increased sales and
marketing activities.
Research And Development. Research and development
expenses increased 70% to $195,906 in the quarter ended June 30,
1997 from $115,420 in the quarter ended June 30, 1996. Research
and development expenses as a percentage of sales increased to 9%
in 1997 from 6% in 1996. The increase is due to a substantial
increase in product development activities. The Company is using
outside research and development companies to assist in new
product development.
Six months ended June 30, 1997 Compared to 1996
Net Revenues. Sutron Corporation revenues for the six
months ended June 30, 1997 and June 30, 1996 were $4,841,355
and $3,156,613, respectively (an increase of 53%). Sales to
agencies of the federal government and other domestic customers
improved 70% to $4,014,713 in 1997 from $2,354,854 in 1996,
an increase of $1,659,859. Revenues from contract's with the Air
Force to deliver FMQ-13 digital wind sensor spares and repairs
decreased to $176,250 in 1997 from $189,022 in 1996, a decrease
of $12,772. Revenues from international contracts and projects
increased 6% to $650,392 in 1997 from $612,737 in 1996, an
increase of $37,655.
Gross Profit. The Company's gross profit for the six
months ended June 30, 1997 increased 41% to $1,829,413
from $1,294,930 for June 30, 1996. Gross profit as a percentage
of sales decreased to 38% from 41% as a result of increased
installation expenditures on the SIMEPAR contract in Brazil
(installation was completed on July 2, 1997) and increased labor
and materials expenditures on the McClellan repair contracts.
Selling, General And Administrative. Selling, general and
administrative costs increased $214,175 to $961,962 for the six
months ended June 30, 1997 from $747,787 for the six months
ended June 30, 1996. The increase is due to the addition of three
new sales and marketing positions, increased commissions to
international agents and increased sales and marketing activities.
Research And Development. Research and development
expenses increased 91% to $411,503 for the six months ended
June 30, 1997 from $215,822 in 1996. Research and
development expenses as a percentage of sales increased to 8%
in 1997 from 7% in 1996. The increase is due to a substantial
increase in product development activities. The Company is
using outside research and development companies to assist in
new product development.
The Company's backlog of orders at June 30, 1997 was
approximately $2,501,000. The Company anticipates that 95%
of its June backlog will be shipped in 1997.
Liquidity and Capital Resources
Cash increased $166,052 for the six months ended
June 30, 1997 from the fiscal year ended December 31, 1996.
Total current assets increased to $4,276,131 at June 30, 1997
as compared to $4,099,404 at December 31, 1996. Total current
liabilities decreased to $2,781,151 at June 30, 1997 as compared
to $2,808,043 at December 31, 1996. The Company's current
ratio increased to 1.54:1 at June 30, 1997 from 1.46:1 at
December 31, 1996.
On June 5, 1997, the Company entered into a loan and
security agreement with a new bank resulting in an increased
revolving line of credit and a restructured term note. The
revolving credit facility has a maximum limit of $2,000,000
compared with $1,000,000 previously. Borrowings on the line
are subject to a defined borrowing base composed of certain
accounts receivables and inventory. Under the previous
facility, only certain accounts receivable were included in the
borrowing base. Principal payments on the term note were
restructured from $25,000 per month to $14,292 per month
for 23 months and 1 final payment on July 1, 1999 for the
remaining unpaid balance. Interest on the credit facility and
the term note is payable monthly at prime plus a half percent
and three quarter percent, respectively as compared with prime
plus two percent with the previous bank.
Borrowings outstanding against the revolving credit
facility as of June 30, 1997 and December 31, 1996 were
$914,839 and $905,000, respectively. The current portion
of the term note at June 30, 1997 and December 31, 1996
was $171,504 and $300,000 and the long term portion was
$171,895 and $166,222, respectively. The revolving credit
facility expires on June 1, 1998.
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.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 14, 1997, an Annual Meeting of Shareholders
of Sutron Corporation was held. Directors elected at the
meeting were Raul S. McQuivey, Thomas N. Keefer,
Daniel W. Farrell, Glenn A. Conover and Ronald C. Dodson.
Thompson, Greenspon & Co., P.C. were appointed as
independent accountants for 1997. The election of directors
and the appointment of the independent accountants were
the only matters voted upon at the meeting. The number of
shares eligible to vote at the meeting were 4,225,851. The
results of the voting on these three matters are shown below.
<TABLE>
<CAPTION>
1. Election of Directors
Name Votes For Votes Against Votes Withheld
<S> <C> <C> <C>
Raul S. McQuivey 3,945,540 -- 3,250
Thomas N. Keefer 3,945,540 -- 3,250
Daniel W. Farrell 3,945,540 -- 3,250
Glenn A. Conover 3,945,540 -- 3,250
Ronald C. Dodson 3,945,540 -- 3,250
</TABLE>
2. Appointment of Thompson, Greenspon & Co., P.C.
as Independent Accountants.
For Against Abstain
3,929,740 18,500 550
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)
August 11, 1997 Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
August 11, 1997 Sidney C. Hooper
Date Sidney C. Hooper
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 2nd Qtr 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 245023
<SECURITIES> 0
<RECEIVABLES> 1372190
<ALLOWANCES> 0
<INVENTORY> 1672680
<CURRENT-ASSETS> 4276131
<PP&E> 1316292
<DEPRECIATION> 1111339
<TOTAL-ASSETS> 5032830
<CURRENT-LIABILITIES> 2781151
<BONDS> 0
<COMMON> 43540
0
0
<OTHER-SE> 2033856
<TOTAL-LIABILITY-AND-EQUITY> 5032830
<SALES> 4841355
<TOTAL-REVENUES> 4841355
<CGS> 3011942
<TOTAL-COSTS> 3011942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76372
<INCOME-PRETAX> 377615
<INCOME-TAX> 136000
<INCOME-CONTINUING> 241615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241615
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
