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, 2003
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 - 4,289,551 shares of as of March 31, 2003.
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
(Unaudited)
March 31, December 31,
2003 2002
___________ ___________
Assets
Current Assets:
Cash $ 88,579 $ 401,740
Accounts receivables 1,532,817 1,814,269
Costs and estimated earnings in excess
of billings on contracts in process 387,633 -
Inventory 2,438,155 2,028,985
Prepaid items and other 250,441 182,774
Deferred income taxes 392,675 195,000
___________ ___________
Total Current Asset $5,090,300 $4,622,768
Property, Plant, and Equipment
Cost 2,630,292 2,567,421
Accumulated depreciation (1,983,119) (1,929,419)
___________ ___________
Net Property, Plant and Equipment 647,173 638,002
Income taxes receivable 151,000 151,000
Other 21,689 21,689
___________ __________
TOTAL ASSETS $5,910,162 $5,433,459
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 811,160 $ 483,652
Accrued payroll 79,412 157,196
Accrued expenses 1,124,266 590,798
Line of credit - -
Current maturities of long-term notes 93,204 93,204
__________ __________
Total Current Liabilities $2,108,042 $1,324,850
Long-term liabilities:
Long-term notes payable 92,804 116,105
Deferred income taxes 142,000 142,000
__________ __________
Total liabilities 2,342,846 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 1,217,765 1,500,953
___________ __________
Total Stockholders' Equity 3,567,316 3,850,504
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,910,162 $5,433,459
See Accompanying Notes to Financial Statements
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2003 2002
___________ ___________
Revenues $2,259,801 $1,302,528
Cost of Goods Sold 1,766,869 850,840
___________ __________
Gross Profit 492,932 451,688
Research and Development Expenses 316,937 326,429
Selling, General, and
Administrative Expenses 650,895 562,338
___________ ___________
Income (Loss) from Operations (474,900) (437,079)
Other Expense 0 0
Interest Expense 4,288 11,497
Income (Loss) before Provision ____________ ___________
for Income Taxes (479,188) (448,576)
Provisions for Income Taxes (196,000) (182,000)
____________ ___________
Net Income $(283,189) $(266,576)
Net Income per Common Share $(.07) $(.06)
Weighted Average Number
of Common Shares 4,289,551 4,293,068
See Accompanying Notes to Financial Statements
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2003 2002
___________ __________
Cash Flows from Operating Activities:
Net income (loss) $ (283,188) $ (266,576)
Depreciation and amortization 53,700 49,998
(Increase) Decrease in:
Accounts receivables 281,452 1,131,804
Costs and estimated earnings in
excess of contract billings (387,633) - 0
Inventory (409,170) (532,001)
Other assets (67,667) (207,144)
Deferred income taxes (197,675) -
Increase (Decrease) in:
Accounts payable 327,508 131,539
Accrued expenses 455,684 (144,443)
__________ _______
Net Cash Provided by Operating Activities (226,989) 163,177
Cash Flows from Investing Activities:
Capital expenditures (62,871) (9,237)
__________ _______
Net Cash Used in Investing Activities (62,871) (9,237)
Cash Flows from Financing Activities:
Proceeds from advances on line of credit - -
Payments on line of credit - (158,365)
Payments on Term notes payable (23,301) (29,551)
Payments on Installment notes payable 0 0
Purchase of Treasury Stock - -
____________ _________
Net Cash (Used) by Financing Activities (23,301) (187,916)
____________ _________
Net Increase (Decrease) in Cash (313,161) (33,976)
Cash and Cash Equivalents, January 1 401,740 102,976
___________ _________
Cash and Cash Equivalents, March 31 $ 88,579 $ 69,000
See Accompanying Notes to Financial Statements
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2003
1. Basis of Presentation
The accompanying financial statements, which should be read in conjunction
with the financial statements of Sutron Corporation ("the Company") included
in the 2002 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. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net Revenues. The Company's revenues for the three months
ended March 31, 2003 increased 73% to $2,259,801 from $1,302,528
in 2002. The increase is due to contract activity on two projects
in India and one in Mexico and due to an interational
shipment to Venezuela. Revenues from the projects in India and
Mexico totalled approximately $592,000 and the shipment to
Venzuela totalled approximately $360,000.
Bookings for the first quarter of 2003 were $2,139,000 as
compared to $2,095,000 in the first quarter of 2002.
Gross Profit. Gross profit for 2003 increased to $492,932 from
$451,688 in 2002. Gross margin as a percentage of revenues
for 2003 decreased to 22% as compared to 35% 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, increased warranty costs associated with the
SatLink and inventory revaluation costs. Also the gross margins
achieved on the two projects in India and the one in Mexico
were not significant as these projects were all bid at reduced
margins in order to capture the business.
Selling, General And Administrative. Selling, general
and administrative expenses increased to $650,895 in 2003
from $562,338 in 2002, an increase of $88,557 or 16%. The
increase is primarily due to international agent commissions
on the shipment to Venezuela.
Research And Development. Research and development expenses
decreased to $316,937 in 2003 from $326,429 in 2002, a
decrease of $9,492. This decrease is due to a reduction
in XConnect application development costs. XConnect is the
Company's new systems software based on open systems.
Interest Expenses. Interest expenses decreased to $4,288 in 2003
from $11,497 in 2002.
The Company's backlog of orders at March 31, 2003 was
$2,689,000 as compared to $2,338,000 as of March 31, 2002.
The Company anticipates that 80% of its March backlog will be
shipped in 2003.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $88,579 at March 31, 2003,
compared to $401,740 at December 31, 2002.
The ratio of current assets to current liabilities was 2.4:1 as of
March 31, 2003, compared to 3.5 as of December 31, 2002. Working
capital decreased to $2,982,258 at the end of the first quarter of
fiscal 2003 compared to $3,297,918 at the end of fiscal 2002.
The Company has a revolving credit facility of $1,000,000 that
expires on June 30, 2003 and will not be renewed with its
current lender. The Company is currently in the process
of evaluating several other financial institutions in order
to obtain additional financing.
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
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
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)
May 15, 2003 /s/Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
May 15, 2003 /s/Sidney C. Hooper
Date Sidney C. Hooper
Principal Accounting Officer
CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Raul S. McQuivey, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Sutron Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to
the period covered by this quaterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quaterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that
material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period
in which this annual report is being prepared; b) evaluated
the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of the registrant
board of directors (or persons performing the equivalent
functions): a) all significant deficiencies in the design
or operation of internal controls which could adversely
affect the registrants ability to record, process,
summarize and report financial data and have identified for
the registrants auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrants internal controls; and
6. The registrants other certifying officers and I have
indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
By /s/ Raul S. McQuivey Raul S. McQuviey, Chairman of
the Board of Directors
and President
CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sidney C. Hooper, certify that:
1. I have reviewed this quaterly report on Form 10-QSB of
Sutron Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quaterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that
material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period
in which this annual report is being prepared; b) evaluated
the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of the registrant
board of directors (or persons performing the equivalent
functions): a) all significant deficiencies in the design
or operation of internal controls which could adversely
affect the registrants ability to record, process,
summarize and report financial data and have identified for
the registrants auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrants internal controls; and
6. The registrants other certifying officers and I have
indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
By /s/ Sidney C. Hooper Sidney C. Hooper,
Director and
Chief Accounting
Officer
Exhibit 11
Sutron Corporation
Computation of Per Share Earnings
Three Months Ended
March 31,
2003 2002
__________ _________
Basic EPS
Average shares outstanding 4,289,551 4,289,551
Net Income $(283,188) $(266,576)
Net Income per common share $(.07) $(.06)
Dilutive EPS
Average shares outstanding 4,289,551 4,289,551
Effect of dilutive securities 59,403 -
Total average shares outstanding 4,348,954 4,289,551
Net earnings $(283,188) $(266,576)
Net income per diluted share $(.07) $(.06)