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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2008
COMMISSION FILE NUMBER: 0-12227
SUTRON CORPORATION
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(Name of small business issuer as specified in its charter)
VIRGINIA 54-1006352
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
21300 RIDGETOP CIRCLE, STERLING, VIRGINIA 20166
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(Address of principal executive offices)
703-406-2800
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(Issuer's telephone number)
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT: COMMON STOCK, $.01
PAR VALUE Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports); and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one).
Large accelerated filer |_| Accelerated Filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
There were 4,540,632 outstanding shares of the issuer's only class of common
equity, Common Stock, $0.01 par value, on May 13, 2008.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
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SUTRON CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED MARCH 31, 2008
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheet as of March 31, 2008
and December 31, 2007 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2008 and 2007 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2008 and 2007 5
Financial Footnotes 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4T. Controls and Procedures 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits 12
Signatures 13
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUTRON CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
2008 2007
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,982,822 $ 5,299,904
Restricted cash and cash equivalents 172,351 134,241
Accounts receivable, net 3,348,526 3,614,532
Inventory 4,603,976 4,114,014
Prepaid items and other assets 501,806 477,754
Deferred income taxes 314,000 312,000
------------ ------------
TOTAL CURRENT ASSETS 13,923,481 13,952,445
PROPERTY AND EQUIPMENT, AT COST 2,419,790 2,424,768
Accumulated depreciation and amortization (1,898,946) (1,845,486)
------------ ------------
Property and equipment, net 520,844 579,282
OTHER ASSETS 98,172 99,308
------------ ------------
TOTAL ASSETS $ 14,542,497 $ 14,631,035
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 906,678 $ 823,114
Accrued payroll 177,200 285,829
Other accrued expenses 940,672 995,123
Notes payable - current 23,725 38,381
Billings in excess of costs and estimated earnings -- 246,448
------------ ------------
TOTAL CURRENT LIABILITIES 2,048,275 2,388,895
LONG-TERM LIABILITIES
Notes payable, net of current maturities 1,296 2,075
Deferred income taxes 72,000 84,000
------------ ------------
TOTAL LONG-TERM LIABILITIES 73,296 86,075
------------ ------------
TOTAL LIABILITIES 2,121,571 2,474,970
------------ ------------
STOCKHOLDERS' EQUITY
Common stock 45,307 45,257
Additional paid-in capital 2,709,994 2,694,416
Retained earnings 9,731,728 9,484,811
Accumulated other comprehensive loss (66,103) (68,419)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 12,420,926 12,156,065
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,542,497 $ 14,631,035
============ ============
See accompanying notes.
3
SUTRON CORPORTION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2008 2007
----------- -----------
Net sales and revenues $ 3,819,048 $ 3,146,744
Cost of sales and revenues 2,324,396 2,006,703
----------- -----------
Gross profit 1,494,652 1,140,041
----------- -----------
Operating expenses:
Selling, general and administrative expenses 881,301 841,113
Research and development expenses 290,755 293,353
----------- -----------
Total operating expenses 1,172,056 1,134,466
----------- -----------
Operating income 322,596 5,575
Interest income (expense), net 40,321 22,397
----------- -----------
Income before income taxes 362,917 27,972
Income tax expense (benefit) 116,000 (11,000)
----------- -----------
Net income $ 246,917 $ 38,972
=========== ===========
Net income per share:
Basic income per share $ .05 $ .01
=========== ===========
Diluted income per share $ .05 $ .01
=========== ===========
See accompanying notes.
4
SUTRON CORPORTION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2008 2007
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 246,917 $ 38,972
Noncash items included in net income:
Depreciation and amortization 53,460 56,250
Deferred income taxes (14,000) 11,000
Stock option compensation 12,228 18,385
Changes in current assets and liabilities:
Accounts receivable 266,006 2,732,300
Inventory (489,962) (646,669)
Prepaid items and other assets (22,916) (170,898)
Accounts payable 83,564 (576,181)
Accrued expenses (163,080) (285,012)
Billings in excess of costs and estimated earnings (246,448) --
----------- -----------
Net Cash Provided (Used) by Operating Activities 274,231 1,178,147
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash and cash equivalents (38,110) (792,296)
Purchase of property and equipment 4,978 (10,881)
----------- -----------
Net Cash Provided (Used) by Investing Activities (33,132) (803,177)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (15,435) (15,570)
Proceeds from stock options exercised 3,400 76,582
----------- -----------
Net Cash Provided (Used) by Financing Activities (12,035) 61,012
----------- -----------
Effect of exchange rate changes on cash 2,316 6,206
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (317,082) 442,188
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,299,904 1,539,032
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,982,822 $ 1,981,220
=========== ===========
CASH PAID DURING THE PERIOD FOR:
Interest $ 0 $ 762
=========== ===========
See accompanying notes.
5
SUTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Sutron Corporation (the "Company") was incorporated on December 30, 1975, under
the General Laws of the Commonwealth of Virginia. The Company operates from its
headquarters located in Sterling, Virginia. The Company has several branch
offices located throughout the United States, a branch office in India and a
wholly owned subsidiary in India. The Company is a leading provider of real-time
data collection and control products, systems software and professional services
in the hydrological, meteorological and oceanic monitoring markets. The
Company's principal products include data loggers, satellite
transmitters/loggers, water level and meteorological sensors, tides systems and
system and application software. Customers consist of a diversified base of
Federal, state, local and foreign government agencies, universities and
engineering and hydropower companies.
The financial statements included herein have been prepared, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
These condensed consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report filed on Form 10-KSB for the year ended December 31, 2007. The condensed
consolidated balance sheet as of December 31, 2007 was derived from the audited
financial statements for the year then ended.
In the opinion of the Company, all adjustments necessary to present fairly the
financial position of the Company and the results of its operations and its cash
flows have been included in the accompanying financial statements. The results
of operations for interim periods are not necessarily indicative of the expected
results for the full year.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
These judgments are difficult as matters that are inherently uncertain directly
impact their valuation and accounting. Actual results may vary from management's
estimates and assumptions.
The Company's significant accounting policies are disclosed in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the
Securities and Exchange Commission.
STOCK COMPENSATION
The Company's Amended and Restated 1996, 1997 and 2002 Stock Option Plans (the
"Stock Option Plans") provide for the issuance of non-qualified stock options to
employees, officers and directors. The plans are administered by the
compensation committee of the Board of Directors, which selects persons to
receive awards and determines the number of shares subject to each award and the
terms, conditions, performance measures and other provisions of the award. See
Note 13 of the Company's financial statements in its Annual Report on Form
10-KSB for the year ended December 31, 2007 for additional information related
to the stock option plans.
6
Effective January 1, 2006, the Company adopted SFAS No. 123R ACCOUNTING FOR
STOCK BASED COMPENSATION (SFAS 123R), which requires companies to measure and
recognize compensation expense for all stock-based payments at fair value. SFAS
123R is being applied on the modified prospective transition method and
therefore the Company has not restated results for prior periods. The financial
statements for the three months ended March 31, 2008 recognize compensation cost
for the portion of outstanding awards which have vested during the period. The
Company recognizes stock-based compensation costs on a straight-line basis over
the requisite service period of the award, which is generally the option vesting
term. For the three months ended March 31, 2008, total stock-based compensation
expense of $12,228 was included in operating expenses as compared to stock-based
compensation of $18,385 for the three months ended March 31, 2007. The weighted
average fair value of options granted during the three months ended March 31,
2008 was calculated using the Black-Scholes option pricing model with the
following valuation assumptions and weighted average fair value as follows:
Three Months
-------------------
Ended March 31, 200
-------------------
Weighted average fair value of grants $6.00
Expected volatility 30%
Dividend yield 0
Risk-free interest rate 3.62%
Expected term in years 10.00
The volatility factor is based on the Company's historical stock price
fluctuations. The Company has not, and does not intend to, issue dividends;
therefore, the dividend yield assumption is 0. The Company applied the risk-free
interest rate based on the U.S. Treasury yield in effect at the time of the
grant. The expected term of the option is based on the contractual period of the
options granted.
3. STOCK OPTIONS
The Company has granted stock options under the Stock Option Plans to key
employees and directors for valuable services provided to the Company. Under the
1996 Plan, the Company authorized 260,000 shares, 259,000 of which have been
granted. As of December 31, 2004, the Company authorized 60,000 shares and
400,000 shares under the 1997 and 2002 Stock Option Plans, respectively, all of
which have been granted. During 2005, the 2002 Stock Option Plan was amended to
authorize 650,000 shares, 501,333 of which have been granted. In addition, all
three plans were amended in 2005 to allow Directors to participate in the plan,
and to provide that vesting schedules will be determined by the Board at the
time each individual option is granted.
Shares under all of the plans may be granted at not less than 100 percent of the
fair market value at the grant date. All options have a ten-year term from the
date of grant. Prior to the 2005 amendments, options vested ratably over five
years on each anniversary date the option was granted. The Company elected to
accelerate vesting of all outstanding options as of December 31, 2005, as
permitted under the plans. Cancelled or expired options are able to be reissued.
The following table summarizes stock option activity under the Stock Option
Plans for the three months ended March 31, 2008:
Number of Weighted Avg. Number of Options
Shares Exercise Price Exercisable
--------- -------------- -----------------
Balance - December 31, 2007 583,252 $1.65 583,252
=================
Granted 1,000 6.00
Exercised 5,000 .68
Canceled -- --
--------- -------------- -----------------
Balance - March 31, 2008 579,252 $1.67 579,252
========= ============== =================
7
4. EARNINGS PER SHARE
The following table shows the weighted average number of shares used in
computing earnings per share and the effect on weighted average number of shares
of potential dilutive common stock.
Three Months Ended March 31
2008 2007
------------ -------------
Net income $246,917 $38,972
============ =============
Shares used in calculation of income per share:
Basic 4,531,354 4,500,792
Effect of dilutive options 443,141 535,722
============ =============
Diluted 4,974,496 5,036,514
============ =============
Net income per share:
Basic $.05 $.01
============ =============
Diluted $.05 $.01
============ =============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-Q,, INCLUDING WITHOUT
LIMITATION THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OPERATIONS, OTHER THAN STATEMENTS OF HISTORICAL INFORMATION, ARE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
THESE FORWARD-LOOKING STATEMENTS MAY SOMETIMES BE IDENTIFIED BY SUCH WORDS AS
"MAY," "WILL," "EXPECT," "ANTICIPATE," "BELIEVE," "ESTIMATE" AND "CONTINUE" OR
SIMILAR WORDS. WE BELIEVE THAT IT IS IMPORTANT TO COMMUNICATE OUR FUTURE
EXPECTATIONS TO INVESTORS. HOWEVER, THESE FORWARD-LOOKING STATEMENTS INVOLVE
MANY RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE INDICATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS. WE ARE UNDER NO DUTY TO UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS
AFTER THE DATE OF THIS REPORT ON QUARTERLY FORM 10-Q TO CONFORM THESE STATEMENTS
TO ACTUAL RESULTS.
OVERVIEW
Our primary focus is to provide real-time systems solutions, including equipment
and software, and services to our customers in the areas of hydrological
monitoring and control, meteorological monitoring including airport weather
systems, oceanic monitoring and hydrological services. We design, manufacture
and market these products and services to a diversified customer base consisting
of federal, state, local and foreign governments, universities and engineering
and hydropower companies. Our products and services enable these entities to
monitor and collect hydrological, meteorological and oceanic data for the
management of critical water resources, for early warning of potentially
disastrous floods, storms or tsunamis, for the optimization of hydropower plants
and for providing real-time weather conditions at airports.
Our key products are the SatLink2 Transmitter/Logger, Xpert/XLite datalogger,
Accububble Self-Contained Bubbler, Accubar Pressure Sensor, Tides Systems and
XConnect Systems Software. These are the essential components of most systems
and are provided to customers as off-the-shelf equipment or as part of a custom
system. The SatLink2 is a key product because it functions both as a transmitter
and logger. Because of its logger/transmitter functionality, it is a
cost-effective solution for small systems that do not require a significant
number of sensors or communications options. The Xpert and XLite are more
powerful dataloggers that have more logging capability and more communications
options than the
8
SatLink2. Our Tides Systems are the only National Ocean Survey approved tides
monitoring system in the United States.
We anticipate that we will experience significant quarterly fluctuations in our
sales and revenues which is not a fiscal year 2008 issue but is historically
reflective of our business. Operating results will depend upon the product mix
and upon the timing of project awards. International sales, which totaled 40% of
revenues for fiscal year 2007, continue to constitute a more significant portion
of our revenues. We are aware of many significant international opportunities
and we expect international revenues to grow as a percentage of our total
business. International sales are, however, difficult to forecast and
international awards are frequently delayed due to the governmental approval
process. We are committed to expanding our airport weather systems although we
are relatively new in this market and compete against established firms with
more experience. We are also committed to growing our hydrological services,
however, our primary customer in Florida has expanded the pool of qualified
contractors on all major contracts. We therefore might receive lower contract
amounts in 2008 due to the expanded list of qualified contractors. We are
committed in our ongoing sales, marketing and research and development
activities to sustain and grow our sales and revenues from our products and
services. We expect our sales and marketing, research and development and
general and administrative expenses to increase moderately in 2008 as compared
to 2007.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of financial condition and results of
operations are based upon the condensed financial statements, which have been
prepared in accordance with generally accepted accounting principles as
recognized in the United States of America. The preparation of these financial
statements requires that we make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses, and disclosure of
contingent assets and liabilities. Our estimates include those related to
revenue recognition, the valuation of inventory, and valuation of deferred tax
assets and liabilities, useful lives of intangible assets, warranty obligations
and accruals. We base our estimates on historical experience and on various
other assumptions that management believes to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. For a complete description of accounting policies,
see Note 1 to our financial statements included in the Company's Form 10-KSB for
the year ended December 31, 2007. There were no significant changes in critical
accounting estimates
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of total
revenues represented by certain items reflected in our statements of operations:
Three Months Ended
March 31,
2008 2007
-------- --------
Net sales and revenues 100.0% 100.0%
Cost of sales and revenues 60.9 63.8
-------- --------
Gross profit 9.1 36.2
Selling, general and administrative expenses 23.1 26.7
Research and Development expenses 7.6 9.3
-------- --------
Operating income 8.4 .2
Interest income 1.1 .7
-------- --------
Income before income taxes 9.5 .9
Income taxes (benefit) 3.0 (.3)
-------- --------
Net income 6.5% 1.2%
======== ========
9
THREE MONTHS ENDED MARCH 31, 2008 COMPARED TO THREE MONTHS ENDED MARCH 31, 2007
NET SALES AND REVENUES
The Company's revenues for the three months ended March 31, 2008 increased 21%
to $3,819,048 from $3,146,744 in 2007 due to increased international revenues.
Net sales and revenues are broken down between the Company's operating divisions
or profit centers which include the HydroMet Products Division, the Integrated
Services Division which includes Special Projects, the Hydrological Services
Division, Airport Weather Systems Division and Sutron India Operations. The
HydroMet Products Division, which is responsible for sales of standard products,
had a net sales and revenue increase of 3% to $2,107,407 from $2,050,248 in
2007. Integrated Systems net sales and revenues increased 47% to $994,701 from
$674,897 in 2007 primarily due to increased contract revenue from the Company's
project with the Afghanistan Ministry of Energy and Water to provide 174
hydrological monitoring stations. Net sales and revenues from Hydrological
Services decreased 23% to $315,577 from $411,760 in 2007 due a decrease in
project work orders from the South Florida Water Management District. Airport
Weather Systems had a net sales and revenue increase $265,511 from $0 in 2007
due to the shipment of an Automatic Weather Observation System (AWOS) to the
Southern Airport Authority of Vietnam. Sutron India Operations had a net sales
and revenue increase to $135,852 from $9,839 in 2007 due to increased revenues
relating to a contract with the Central Water Commission of India for the
installation of 168 Hydro-Met stations and 12 Modeling Centers.
Overall domestic revenues decreased 11% to $2,118,683 in the first quarter of
2008 versus $2,371,013 in 2007 while international revenues increased 36% to
$1,700,365 in 2008 versus $775,731 in the same period in 2007. Customer orders
or bookings in the first quarter of 2008 were $2,507,580 as compared to
$3,061,907 in the first quarter of 2007.
COST OF SALES AND REVENUES
Cost of sales as a percentage of revenues was 60.9% for the quarter ended March
31, 2008 as compared to 63.8% for the quarter ended March 31, 2007. The decrease
in cost of sales was primarily due to a reduction in parts costs due to
purchasing efficiencies and to improvement in the operations of our Hydrological
Services Division based in Florida.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $881,301 for the
quarter ended March 31, 2008 from $841,113 for the quarter ended March 31, 2007.
Selling, general and administrative expenses as a percentage of revenues
decreased to 23.1% for the quarter ended March 31, 2008 from 26.7% for the
quarter ended March 31, 2007 due to the revenue increase. The increase was
primarily due to SOX 404 consulting fees and increased audit expenses.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased to $290,755 for the quarter ended
March 31, 2008 from $293,353 for the quarter ended March 31, 2007. Our product
development continues to focus on enhancements to our current products including
our Satlink2 satellite transmitter/logger, our Xpert and
10
XLite dataloggers, our water level sensors and tides systems. These are the
primary components of hydrometeorological and oceanic monitoring systems. We are
also developing new dataloggers and sensors in order to maintain and improve our
competitive position.
INTEREST INCOME AND EXPENSE, NET
Due to the Company's cash position, the Company did not use its line of credit
during the first quarter of 2008. The Company had interest income for the
quarter ended March 31, 2008 of $40,321 as compared to interest income of
$22,397 for the quarter ended March 31, 2007.
INCOME TAXES
Income tax expense for the quarter ended March 31, 2008 was $116,000 as compared
to an income tax benefit of $11,000 for the quarter ended March 31, 2007. The
provisions for income taxes represent an effective income tax rate of 32% in
2008 and an income tax benefit of 39.3% in 2007.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $4,982,822 at March 31, 2008 compared to
$5,299,904 at December 31, 2007. Working capital increased to $11,875,206 at
March 31, 2008 compared with $11,563,550 at December 31, 2007.
Net cash provided by operating activities was $274,231 for the quarter ended
March 31, 2008 as compared to cash provided by operating activities of
$1,178,147 for the quarter ended March 31, 2007.
Net cash used by investing activities was $33,132 for the quarter ended March
31, 2008 as compared to cash used by investing activities of $803,177 for the
quarter ended March 31, 2007. An increase of $792,296 in restricted cash in 2007
was related to a bank guarantee for the Central Water Commission of India. This
bank guarantee was subsequently released and is the primary reason for the
decrease.
Net cash used by financing activities was $12,035 for the quarter ended March
31, 2008 as compared to net cash provided by financing activities of $61,012 for
the quarter ended March 31, 2007 due primarily to the employee stock options
proceeds that were received in the prior year.
We have a revolving credit facility of $3,000,000 with BB&T Bank. We are
permitted to borrow based on accounts receivable and inventory according to
pre-established criteria. The credit facility expires on August 5, 2008 and is
secured by substantially all assets of the Company. Borrowings bear interest at
the bank's prime rate. During the first quarter of 2008, there were no
borrowings on the line of credit.
We frequently bid on and enter into international contracts that require bid and
performance bonds. At March 31, 2008 and December 31, 2007, a commercial bank
had issued standby letters of credit in the amounts of $1,692,818 and
$1,652,818, respectively that served as either bid or performance bonds. The
amount available to borrow under the line of credit was reduced by these
amounts.
Management believes that its existing cash resources, cash flow from operations
and short-term borrowings on the existing credit line will provide adequate
resources for supporting operations during fiscal 2008. Although there can be no
assurance that our revolving credit facility will be renewed, management
believes that, if needed, it would be able to find alternative sources of funds
on commercially acceptable terms.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 4T. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management (with the participation of our Chief Executive Officer and Chief
Financial Officer) evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), as of March 31, 2008,
the end of the fiscal period covered by this report on Form 10-Q. The Company
maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act of 1934
reports are recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure. Based on this evaluation, the chief executive officer and
chief financial officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
(B) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting that
occurred during the quarter ended March 31, 2008 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal claims can arise from time to time in the normal course of
business which, in the opinion of management, will have no material effect on
our financial statements. We have been named in a compensation claim under the
Indian Anti-Trust Law that was filed in 2005 and is still pending before The
Monopolies and Restrictive Trade Practices Commission in New Delhi, India.
Management believes that the case is unsubstantiated.
ITEM 6. EXHIBITS
10.1 Stock Option Agreement between The Company and Leland R. Phipps dated
March 6, 2008
31.1 Certification of the President and Chief Executive Officer pursuant to
Rule 13a-14(a).
31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).
32 Certification of the President and Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
ss.906 of the Sarbanes-Oxley Act of 2002.
12
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, 2008 /s/ Raul S. McQuivey
--------------- --------------------------
Date Raul S. McQuivey
President and Chief Executive Officer
(Principal Executive Officer)
May 15, 2008 /s/ Sidney C. Hooper
--------------- --------------------------
Date Sidney C. Hooper
Chief Financial Officer and Treasurer
(Principal Accounting Officer)