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, 2003
Commission file number 0-12227
Sutron Corporation
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(Exact name of registrant as specified in its charter.)
Virginia 54-1006352
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation organization)
21300 Ridgetop Circle, Sterling Virginia 20166
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(Address of principal executive offices) (Zip Code)
(703) 406-2800
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(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 - 4,289,551 shares of as of September 30, 2003.
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
(Unaudited)
September 30, December 31,
2003 2002
___________ ___________
Assets
Current Assets:
Cash $ 591,944 $ 401,740
Accounts receivables 1,487,140 1,814,269
Costs and estimated earnings in excess
of billings on contracts in process 804,696 -
Inventory 2,381,585 2,028,985
Prepaid items and other 126,623 182,774
Deferred income taxes 401,173 195,000
___________ ___________
Total Current Asset $5,793,161 $4,622,768
Property, Plant, and Equipment
Cost 2,679,340 2,567,421
Accumulated depreciation (2,090,519) (1,929,419)
___________ ___________
Net Property, Plant and Equipment 588,821 638,002
Income taxes receivable 151,000 151,000
Other 21,689 21,689
___________ __________
TOTAL ASSETS $6,554,671 $5,433,459
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 773,862 $ 483,652
Accrued payroll 91,274 157,196
Accrued expenses 1,038,624 590,798
Line of credit 424,454 -
Current maturities of long-term notes 96,923 93,204
Shareholder notes payable 330,000 -
__________ __________
Total Current Liabilities $2,755,136 $1,324,850
Long-term liabilities:
Long-term notes payable 65,144 116,105
Deferred income taxes 142,000 142,000
__________ __________
Total liabilities 2,962,279 1,582,955
Stockholders' Equity:
Common stock, $.01 par value, 42,896 42,896
Additional paid in capital 2,306,655 2,306,655
Retained Earnings 1,242,840 1,500,953
___________ __________
Total Stockholders' Equity 3,592,392 3,850,504
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,554,671 $5,433,459
See Accompanying Notes to Financial Statements
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
2003 2002
___________ ___________
Revenues $2,230,638 $2,532,255
Cost of Goods Sold 1,654,140 1,798,911
___________ __________
Gross Profit 576,497 733,344
Research and Development Expenses 276,463 364,183
Selling, General, and
Administrative Expenses 480,574 556,205
___________ ___________
Income (Loss) from Operations (180,540) (187,044)
Interest Expense 4,976 14,061
Income (Loss) before Provision ____________ ___________
for Income Taxes (185,516) (201,105)
Provisions for Income Taxes (82,000) (88,000)
____________ ___________
Net Income $(103,516) $(113,105)
Net Income per Common Share $(.02) $(.03)
Weighted Average Number
of Common Shares 4,289,551 4,289,551
See Accompanying Notes to Financial Statements
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
2003 2002
___________ ___________
Revenues $7,309,235 $6,118,790
Cost of Goods Sold 5,247,548 4,129,399
___________ __________
Gross Profit 2,061,687 1,989,391
Research and Development Expenses 860,477 1,090,102
Selling, General, and
Administrative Expenses 1,673,724 1,590,011
___________ ___________
Income (Loss) from Operations (472,514) (690,722)
Other Expense - -
Interest Expense 13,599 36,749
Income (Loss) before Provision ____________ ___________
for Income Taxes (486,113) (727,471)
Provisions for Income Taxes (228,000) (315,000)
____________ ___________
Net Income $(258,113) $ (412,471)
Net Income per Common Share $(.06) $(.10)
Weighted Average Number
of Common Shares 4,289,551 4,289,551
See Accompanying Notes to Financial Statements
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
2003 2002
___________ __________
Cash Flows from Operating Activities:
Net income (loss) $ (258,113) $ (412,471)
Depreciation and amortization 161,100 149,994
(Increase) Decrease in:
Accounts receivables 327,129 365,372
Costs and estimated earnings in excess
of billings on contracts in process (804,696) -
Inventory (352,600) (450,053)
Prepaid items and other assets 56,151 (145,539)
Deferred income taxes (206,173) -
Increase (Decrease) in:
Accounts payable 290,210 484,532
Accrued expenses 381,903 5,547
__________ _______
Net Cash Provided by Operating Activities (405,089) (2,618)
Cash Flows from Investing Activities:
Capital expenditures (111,919) (45,490)
________ ______
Net Cash Used in Investing Activities (111,919) (45,490)
Cash Flows from Financing Activities:
Proceeds from advances on line of credit 424,454 257,153
Proceeds from term note 18,593 -
Proceeds from shareholder notes 330,000
Payments on Term notes payable (47,242) (88,653)
Purchase of Treasury Stock - -
__________ _______
Net Cash (Used) by Financing Activities (707,212) 168,500
____________ _________
Net Increase (Decrease) in Cash 190,204 120,392
Cash and Cash Equivalents, January 1 401,740 102,976
___________ _________
Cash and Cash Equivalents, September 30 $ 591,944 $ 223,368
See Accompanying Notes to Financial Statements
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
1. Basis of Presentation
The financial statements for the nine months ended September 30, 2003
and 2002 were prepared from the books and records of the company.
Management believes that all adjustments have been made to the
financial statements to make a fair presentation of the financial
condition of the company as of September 30, 2003 and 2002. The results
of the nine months are not indicative of a full year of operation
for the Company.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these financial statements be read
in conjunction with the financial statements and notes thereto
included in the Company's December 31, 2002 audited financial
statements.
2. Earnings Per Share
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 128 which establishes standards for
computing and presenting earnings per share (EPS) for entities
with publicly held common stock. The standard requires
presentation of two categories of earning per share, basic EPS
and diluted EPS. Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for
the year. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings
of the Company.
Sutron Corporation
Computation of Per Share Earnings
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
__________ _________ _________ _________
Basic EPS
Average shares outstanding 4,289,551 4,289,551 4,289,551 4,289,551
Net Income $(103,516) $(113,105) $(258,113) $(412,471)
Net Income per common share $(.02) $(.03) $(.06) $(.10)
Dilutive EPS
Average shares outstanding 4,289,551 4,289,551 4,289,551 4,289,551
Effect of dilutive securities 286,688 1,467 286,688 1,467
Total average shares outstanding 4,576,239 4,291,018 4,576,239 4,291,018
Net earnings $(103,516) $(113,105) $(258,113) $(412,471)
Net income per diluted share $(.02) $(.03) $(.06) $(.10)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Three months ended September 30, 2003 Compared to 2002
Net Revenues. The Company's revenues for the three months
ended September 30, 2003 decreased 12% to $2,230,638 from $2,532,255
in 2002 due to decreased sales of standard products. Sales of 8210
dataloggers and accessory products decreased approximately $828,000.
Systems and Hydrological Services revenue increased approximately
$526,000 resulting in a net decrease of approximately $302,000.
Gross Profit. Gross profit for 2003 decreased 21% to $576,497 from
$733,344 in 2002. Gross margin as a percentage of revenues
was 26% and 29% respectively for the quarters.
Selling, General And Administrative. Selling, general
and administrative expenses decreased to $480,574 in 2003
from $556,205 in 2002, a decrease of $75,631 or 14%. The
decrease was due to a reduction of one sales position and
increased cost controls.
Research And Development. Research and development expenses
were $276,463 in 2003 compared with $364,183 in 2002, a decrease
of $87,720 or 24%. Due to the completion of new systems software,
XConnect, resources were shifted from R&D to sales resulting in the
decrease in product development expenses. Product
development expenditures were primarily focused on software
enhancements to SatLink and the Xpert and XLite
dataloggers.
Interest Expenses. Interest expenses decreased to $4,976 in 2003
from $14,061 in 2002.
Nine months ended September 30, 2003 Compared to 2002
Revenues. The Company's revenues for the nine months ended
September 30, 2003 increased 20% to $7,309,235 from revenues of
$6,118,790 in 2002. Sales of standard products decreased to
approximately $4,264,000 from approximately $4,895,000 in 2002
due to a decrease in sales of 8210 dataloggers and accessories.
Integrated Systems sales increased to approximately $2,494,000
from $1,122,000 and Hydrological Services sales increased
to approximately $551,000 from approximately $68,000.
Integrated Systems and Hydrological Services sales increased
as a result of increased projects and contract awards.
The Company booked orders during the first nine
months of 2003 totalling approximately $9,805,000 compared
with $9,766,000 in 2002. Orders for systems and services
were up during the first nine months and standard product orders
were down. The Company's backlog was approximately $5,201,000
at September 30, 2003 as compared to $5,240,000 at September
30, 2002. The Company anticipates that 65% of its September
backlog will be shipped in 2003.
Gross Profit. Gross profit for 2003 increased to $2,061,687
from $1,989,391 in 2002. Gross margin as a percentage of
revenues for 2003 decreased to 28% as compared to 32%
in 2002. The decrease in the Company's gross margin as
a percentage of sales is attributed to manufacturing overruns
that the Company has experienced in the production of the
SatLink-G312 satellite transmitter and increased warranty costs
associated primarily with the SatLink. Also the gross margins
achieved on two projects in India and one in Mexico were not
significant as these projects were all bid at reduced margins
but accounted for revenue of approximately $663,000.
Selling, General and Administrative. Selling, general and
administrative expenses increased to $1,673,724 in 2003 from
$1,590,011 in 2002, an increase of $83,713 due to increased
sales commissions and systems and Hydrological Services Division
selling expenses. Sales commissions increased due to a project
in Venezuela. Due to the completion of the Company's systems
software, XConnect, resources were shifted from R&D to sales
that increased systems selling expenses. Hydrological Services
selling expenses increased due to increased selling
activities.
Research and Development. Research and development
expenses decreased $229,625 to $860,477 in 2003 from $1,090,102
in 2002. Due to the completion of new systems software,
XConnect, resources were shifted from R&D to sales resuting in
the decrease in product development expenses. Product
development expenditures were primarily focused on software
enhancements to SatLink and the Xpert and XLite
dataloggers.
Interest Expenses. Interest expenses decreased to $13,599 in 2003
from $36,749 in 2002.
Liquidity and Capital Resources
Cash and cash equivalents increased to $591,944 at September 30, 2003,
compared to $401,740 at December 31, 2002.
The ratio of current assets to current liabilities was 2.1:1 as of
September 30, 2003, compared to 3.5:1 as of December 31, 2002. Working
capital decreased to $3,038,025 at the end of the third quarter of
fiscal 2003 compared to $3,297,918 at the end of fiscal 2002.
The Company has a revolving credit facility of $500,000 that
expires on June 12, 2004. In addition, the Company has borrowed
$330,000 from three shareholders in order to supplement the line of
credit. Management believes that its existing cash resources, cash
flow from operations and short-term borrowings on the existing line
of credit and anticipated future line of credit will provide adequate
financial resources for supporting operations during fiscal 2003.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) No reports on Form 8-K were filed or required to be filed
during the quarter ended September 30, 2003.
(B) The following exhibits are included as part of this report:
32 Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Item 14. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on their
evaluation of the Companys disclosure controls and procedures
(as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934) as of a date within 90 days of the filing date
of this Quarterly Report on Form 10-QSB the Companys chief executive
officer and chief financial officer have concluded that the Companys
disclosure controls and procedures are designed to ensure that
information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in the SEC's rules and forms and are operating in an effective manner.
(b) Changes in internal controls. There were no significant changes
in the Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
most recent evaluation.
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 13, 2003 /s/Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
November 13, 2003 /s/Sidney C. Hooper
Date Sidney C. Hooper
Principal Accounting Officer