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, 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 March 31, 1997.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $109,684 $78,970
Accounts receivables 1,521,262 1,210,377
Cost and estimated earnings in excess
of billings 828,158 628,344
Inventory 1,857,901 2,135,231
Other 93,033 46,482
___________ ___________
Total Current Asset 4,410,038 4,099,404
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,089,343
and $1,072,273 182,168 182,995
Investment 493,118 493,118
Deposits and Other Assets 47,891 50,940
___________ __________
TOTAL ASSETS $5,133,215 $4,826,457
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 799,737 $895,524
Accrued payroll 96,854 60,224
Accrued expenses 361,938 396,841
Accrued income taxes 126,650
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 980,000 905,000
Shareholder loans payable 80,000 90,000
Installment notes payable - current portion 6,657 6,657
Term notes payable- current portion 300,000 300,000
_________ __________
Total Current Liabilities 2,915,633 2,808,043
Long-term liabilities:
Installment note payable 3,245 16,411
Term notes payable 141,222 166,222
_________ __________
Total liabilities 3,060,100 2,990,676
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 (252,010) (489,344)
___________ ___________
Total Stockholders' Equity 2,073,115 1,835,781
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,133,215 $ 4,826,457
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
___________ ___________
<S> <C> <C>
Revenues $ 2,672,141 $ 1,136,655
Cost of Goods Sold 1,581,736 708,315
___________ __________
Gross Profit 1,090,405 428,340
Research and Development Expenses 215,598 100,402
Selling, General, and
Administrative Expenses 447,279 365,331
___________ ___________
Income (Loss) from Operations 427,528 (37,393)
Interest Expense 38,194 40,092
Income (Loss) before Provision ____________ ___________
for Income Taxes 389,334 (77,485)
Provisions for Income Taxes 152,000 0
____________ ___________
Net Income (Loss) $ 237,334 $ (77,485)
Net Income (Loss) per Common Share $.05 $ $(.02)
Weighted Average Number
of Common Shares 4,356,419 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 237,334) $ (77,485)
Depreciation and amortization 25,044 25,044
Loss on sale of assets 1,961
(Increase) Decrease in:
Accounts receivables (310,885) 663,981
Costs and estimated earnings in
excess of contract billings (199,814) (93,736)
Inventory 277,330 (453,965)
Other current assets (46,551) (14,528)
Increase (Decrease) in:
Accounts payable (95,787) 45,913
Accrued expenses 1,727 32,900
Accrued income taxes 126,650
Estimated losses on uncompleted
contracts 0 (1,018)
__________ __________
Net Cash Provided by Operating Activities 17,009 127,106
Cash Flows from Investing Activities:
Proceeds from sale of assets 10,500
Capital expenditures (33,629) (21,184)
Net Cash Used in Investing Activities (23,129) (21,184)
Cash Flows from Financing Activities:
Proceeds from issuance of term
note payable 0 0
Payments on line of credit 0 (25,000)
Proceeds from advance on line of credit 75,000
Payments on Term notes payable (25,000) (50,000)
Payments on Installment notes payable (13,166) (1,452)
Payments on shareholder notes 0 (10,000)
___________ __________
Net Cash (Used) by Financing Activities 36,834 (86,452)
Net Increase (Decrease) in Cash 30,714 19,470
Cash and Cash Equivalents, January 1 78,970 49,889
___________ __________
Cash and Cash Equivalents, March 31 $ 109,684 $ 69,360
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 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 March 31 and
December 31, is as follows:
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
<S> <C> <C>
Direct and indirect costs, including overhead $2,376,163 $2,162,549
Estimated losses, net (1,095) (1,095)
Totals $2,375,068 $2,161,454
Billings $1,548,005 $1,534,215
Costs and estimated earnings in excess of billings 828,158 628,334
Estimated losses on contracts in process (1,095) (1,095)
Totals $2,375,068 $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 March 31 and December 31:
1997 1996
Electronic components $562,881 $702,216
Work in process 1,005,648 1,232,440
Finished goods 289,372 200,575
$1,857,901 $2,135,231
(4) ACCUMULATED DEPRECIATION AND AMORTIZATION
Accumulated depreciation and amortization at March 31 and
December 31, is as follows:
1997 1996
Furniture and equipment $1,060,808 $1,041,005
Automotive equipment 21,548 24,743
Leasehold improvements 6,987 6,525
$1,089,343 $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 March 31, 1997 and
December 31, 1996.
(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
July 31, 1997, and the outstanding balance at March 31, 1997 and
December 31, 1996 amounted to $980,000 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 $2,121,222. The remaining principal payments under the
agreement, amount to $25,000 per month for 18 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.
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. Principal
maturities for all indebtedness described in Notes 6 and 7 are as
follows at December 31:
Year ending December 31:
1997 $1,211,657
1998 173,769
1999 5,075
2000 3,789
$1,394,290
(8) STOCKHOLDER LOANS PAYABLE
At March 31, 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
Net Revenues. Sutron Corporation revenues for the fiscal
quarters ended March 31, 1997 and March 31, 1996 were $2,672,141
and $1,136,655, respectively (an increase of 137%). Sales to agencies
of the federal government and other domestic customers increased
147% to $2,459,599 in 1997 from $994,576 in 1996, an increase of
$1,465,023. First quarter revenues from contract's with the Air Force
to deliver FMQ-13 digital wind sensor spares and repairs declined to
$6,479 in 1997 from $118,590 in 1996, a decrease of $112,111.
Revenues from international contracts and projects increased to
$206,063 in 1997 from $23,489 in 1996, an increase of $182,574.
The increases were primarily the result of increased sales of the 8400
Digital Data Recorder and 8210 Data Recorder/Transmitter.
Gross Profit. The Company's gross profit in the quarter
ended March 31, 1997 improved to $1,090,405 from $428,340 in
the quarter ended March 31, 1996, an increase of $662,065. The
Company's gross profit as a percentage of sales increased to 41% in
1997 from 38% in the prior year. The increase in gross profit is
attributed to increased sales volume in 1997.
Selling, General And Administrative. Selling, general and
administrative costs increased 22% to $447,279 in the quarter ended
March 31, 1997 from $365,331 279 in the quarter ended March 31,
1996. International selling expenses increased approximately $63,000
as a result of increased activity, the addition of a new
international sales manager in June 1996 and increased agent
commissions. Domestic selling expenses increased approximately
$19,000 due to a marketing manager being hired in November 1996
and increased activity.
Research And Development. Research and development
expenses increased 115% to $215,598 279 in the quarter ended March
31, 1997 from $100,402 279 in the quarter ended March 31, 1996.
Research and development expenses as a percentage of sales decreased
to 8% in 1997 from 9% in 1996. The increase is due to a substantial
increase in the level of effort needed to develop the Company's new
hardware and software products.
Interest Expenses. Net interest expenses were $38,194 279 in
the quarter ended March 31, 1997 as compared to $40,092 in the
quarter ended March 31, 1996. The decrease is attributed to reduced
borrowings.
The Company's backlog of orders at March 31, 1997 was
approximately $2,198,000. The Company anticipates that 95% of its
March backlog will be shipped in 1997.
Liquidity and Capital Resources
Cash increased $30,714 for the three months ended March 31,
1997 from the fiscal year ended (FYE) December 31, 1996. Total
current assets increased to $4,410,038 at March 31, 1997 as compared
to $4,099,405 at December 31, 1996. Total current liabilities
increased to $2,915,633 at March 31, 1997 as compared to $2,808,043
at December 31, 1996. The Company's current ratio increased to
1.51:1 at March 31, 1997 from 1.46:1 at December 31, 1996.
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, 1997 and December 31, 1996
were $980,000 and $905,000, respectively. The current portion of the
term note at March 31, 1997 and December 31, 1996 was $300,000,
and the long term portion was $141,222 and $166,222, respectively.
The revolving credit facility expires on July 31, 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>
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 9, 1997 Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
May 9, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 109684
<SECURITIES> 0
<RECEIVABLES> 1521262
<ALLOWANCES> 0
<INVENTORY> 1857901
<CURRENT-ASSETS> 4410038
<PP&E> 1271511
<DEPRECIATION> 1089343
<TOTAL-ASSETS> 5133215
<CURRENT-LIABILITIES> 2915633
<BONDS> 0
<COMMON> 43540
0
0
<OTHER-SE> 2029575
<TOTAL-LIABILITY-AND-EQUITY> 5133215
<SALES> 2672141
<TOTAL-REVENUES> 2672141
<CGS> 1581736
<TOTAL-COSTS> 1581736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38194
<INCOME-PRETAX> 389334
<INCOME-TAX> 152000
<INCOME-CONTINUING> 237334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237334
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
