UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 KSB
-----------------------
Annual Report Pursuant To Section 13 Or 15(D)
Of The Securities Exchange Act Of 1934
For the fiscal year ended: December 31, 2004
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
incorporation or organization) Identification No.)
21300 Ridgetop Circle, Sterling Virginia 20166
(Address of principal executive offices) (Zip Code)
(703) 406-2800
(registrants 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 [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form,
and no disclosure will be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or
any amendments to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were
$16,678,889.
The aggregate market value of the voting stock held by non-
affiliates as of March 25, 2005 was approximately $12,142,000
based on the fair market value of such stock.
The number of shares outstanding of the issuer's
Common Stock, $.01 par value, as of March 25, 2005 was 4,289,551.
Documents Incorporated by Reference
Portions of the registrants definitive proxy statement dated
April 15, 2005 are incorporated in Part III as set forth herein.
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
SUTRON CORPORATION
FORM 10-KSB ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2004
TABLE OF CONTENTS
Part I
ITEM 1. DESCRIPTION OF BUSINESS 2
ITEM 2. DESCRIPTION OF PROPERTY 7
ITEM 3. LEGAL PROCEEDINGS 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 8
SECURITY HOLDERS
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED 8
STOCKHOLDER MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 7. FINANCIAL STATEMENTS 12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH 12
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 8A. CONTROLS AND PROCEDURES 12
Part III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF 12
THE REGISTRANT
ITEM 10. EXECUTIVE COMPENSATION 12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN 12
BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED 12
TRANSACTIONS
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND 13
REPORTS ON FORM 8-K
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 15
SIGNATURES 16
-----------------------------------------------------------
PART I
ITEM 1 - BUSINESS
General
Sutron Corporation (the Company) was incorporated on
December 30, 1975 under the General Laws of the Commonwealth
of Virginia. The Company designs, manufactures and markets
products and provides services that enable government and commercial
entities to monitor and collect hydrological and meteorological
data for the management of critical water resources, for early
warning of potentially disasterous floods or storms and
for the optimization of hydropower plants.
The Company's headquarters is located at 21300
Ridgetop Circle, Sterling, Virginia 20166, and the Company's
telephone number at that location is (703) 406-2800. The Company
maintains a worldwide web address at www.sutron.com. The Company
makes available free of charge through the Investors section
of the Company's website at www.sutron.com the annual, quarterly
and current reports, and amendments thereto, which the Company
files with, or furnishes to, the SEC. Such reports and
amendments are available on the Company's website as soon as
reasonably practical after the Company has filed such reports
with, or furnished such reports to, the SEC.
Sutron is focused on providing real-time solutions and
services to our customers in three areas of the hydrological
and meteorological markets. First, we provide dataloggers,
satellite transmitters/loggers and sensors. Second,
we provide turnkey integrated systems for hydrological and
meteorological monitoring networks and airport weather systems.
Third, we provide services consisting of installation,
maintenance of hydrological and meteorological systems, and
other related engineering services. The Companys customers
include a diversified base of federal, state, local and foreign
governments, engineering companies, universities, and hydropower
companies.
The Company's ongoing, strategic business units consist of the
Company's Hydromet Products Divison, the Integrated Systems
Division, the Hydrological Services Division and the Airport
Weather Systems division. Each unit includes a range of products
and services designed to meet the specific needs of a particular
customer segment.
Hydromet Products Division
The Hydromet Products Division manufactures dataloggers,
satellite transmitters/loggers and sensors. Sutron's data loggers
collect sensor data and transmit the data to central facilities
primarily by satellite radio but also by telephone, fiber optics
and microwave. Sutron's sensors support the collection
of hydrological and meteorological data and include a tipping
bucket rain gauge, a barometric pressure sensor, a temperature
sensor, and several water level sensors. The Companys
equipment is compatible with sensors from other companies.
Sutron has long-standing relationships with suppliers for wind
speed and wind direction, water quality, humidity and solar
radiation sensors. The Company received an ISO 9001
certification on March 12, 1999 and an ISO 9001:2000 certification
on August 13, 2003. The principal products that are manufactured
by the Hydromet Products Division are described below.
2
------------------------------------------------------------------------
8210 Data Logger
The 8210 Data Logger/Transmitter is a simple-to-
operate, low-cost data collection platform which supports a
wide variety of telemetry applications. The 8210 is
environmentally hardened, capable of operating from -40 C to 60
C, making it ideal for remote locations. As a data recorder,
the 8210 will store over 65,000 readings in battery backed
memory. The 8210 supports a wide variety of communications,
including radio, satellite, and telephone. The
Telephone/Voice Synthesis option allows communications over
standard telephone circuits using either a synthesized voice
message or a modem connected to a computer terminal.
Xpert and XLite Dataloggers
The Xpert Datalogger is the Companys next generation datalogger.
It has a Microsoft CE operating system, a 486 processor, C++
programming and standard 2 MB memory that is expandable to over
1 gigabyte. The Xpert has enabled the Company to enter closely
related environmental markets such as tides and weather monitoring. The
XLite, a derived product based on the Xpert, does not have a display but
is similarly capable. The XLite was released at the end of 2001.
SatLink2
In January 2004, the SatLink2 was certified by the National
Environmental Satellite, Data and Information Service (NESDIS).
The SatLink2 is a redesign of the original SatLink transmitter
in order to improve margins and to provide the latest features.
The SatLink2 is a high data rate satellite transmitter that
transmits at 100, 300 and 1200 baud, incorporates GPS and functions
as a logger. The original SatLink was certified by NESDIS in
July 2001 for operation on the Geostationary Operational Environment
Satellite (GOES)system. NESDIS operates two U.S.Government
environmental satellites on this system. All GOES customers
are mandated by NESDIS to purchase high data rate satellite
transmitters and to replace all old 100 baud transmitters
within a ten-year period beginning in July 2001. NESDIS made this a
requirement in order to increase the amount of data that the two
GOES satellites can handle. SatLink is also certified on satellite
systems in Europe and Asia and relays data from even the most
remote sensors and loggers to everywhere around the globe and
works with virtually all dataloggers. SatLink is programmable from
any PC using software provided with the unit.
Accubar Gauge Pressure Sensor
The Accubar Gauge Pressure sensor is a highly accurate solid state
pressure transducer capable of measuring air/dry gas pressures
from 0 to 22 psi with a maximum pressure of 35 psi. It is housed
in an aluminum case and with its low power consumption and low
maintenance requirements, it is ideal for remote monitoring
applications.
AccuBubble Self-Contained Bubbler System
The AccuBubble Self-Contained Bubbler is a mercury-free and
nitrogen-free bubbler apparatus designed for low maintenance
water level measuring. Using the Sutron Accubar Pressure Sensor
as the control and sensing element makes the AccuBubble a very
stable and highly accurate water level measuring device.
The AccuBubble uses power conservation techniques to minimize
current consumption. The bubbler purges the orifice line prior to
each measurement. This eliminates the need for a constant bubble rate,
which has been known to consume excessive power. In addition, the
purging sequence prevents debris build up in the orifice line.
The AccuBubble uses an oil-less, non-lubricated piston and cylinder
compressor. This type of compressor is designed to give consistent
air delivery without the use of a diaphragm which can rupture over time.
The AccuBubble uses the SDI-12 communications protocol as the control
interface. This allows the unit to be configured by any data loggers
supporting the SDI-12 standard.
Tides and Ports Systems
The National Ocean Survey (NOS), part of the National Oceanic and
Atmospheric Administration (NOAA), has the responsibility to accurately
measure tide levels around the perimeter of the United States. NOS ensures
that measurements have the highest accuracy by using the best water
level instruments available. In 2004 and 2003 our Hydromet Products Division
provided state-of-the-art tide stations to the National Ocean Survey
valued at $900,000 and $676,000. Tide stations are based on our Xpert
data logger and SatLink2. Xperts run the powerful Windows CE multi-tasking
operating system and the Company has taken advantage of Windows CE to equip
each tide station with software that meets and exceeds all of the NOS
requirements. In 2004, the Company enhanced the capabilities of tides
systems by adding Storm Surge/Tsunami software. This software provides
added capability to provide tsunami warnings.
3
------------------------------------------------------------------------
Integrated Systems Division
The Integrated Systems Division provides system integration services
consisting of the design and development of customer-specific hardware
configurations and software applications for hydrological and
meteorological monitoring and control systems, the sale of Sutrons
real-time database software (XConnect), and long-term software
support for XConnect users. This capability allows the Company
to provide turnkey hydrological and meteorological systems to
a variety of users. Projects range in size from one station to hundreds
of stations. Projects usually require design, equipment integration,
software application development and installation and training on both
hardware and software. Projects can range in duration from a few days
to twelve months depending on the scope and complexity of the system.
Hydrological Services Division
The Company provides hydrological services including equipment
installation and maintenance, data interpretation and analysis,
flow modeling (low flow, rainfall runoff, unsteady flow routing,
water surface profiles), field studies (time of travel, diffusion,
dispersion, calibration of flow control structures, site location),
hydrologic studies (water budget, regression analysis, basin
inventory studies) and environmental permitting.
Airport Weather Systems
The Airport Weather Systems Division was started in July 2003
with the hiring of a division manager with over 20 years experience
in the Automatic Weather Observation System (AWOS) market. AWOS
stations are installed at airports and provide monitoring of
real-time weather data that is crucial to flight safety. An AWOS
station typically includes a sensor suite to measure wind direction
and speed, temperature, relative humidity, precipitation, and barometric
pressure as well as cloud height and horizontal visibility/RVR. Sensors
are connected to a Sutron datalogger which processes the data, stores it
in a relational database and transmits real-time weather parameters to all
designated users, regardless of location. The system produces weather
reports for aviation and meteorological use, virtually automatically and
without need of human intervention. Sutron is leveraging its
experience with sensors and data collection to enter this market.
Distribution Methods of Products and Services
The Companys products and services are currently sold in the
United States by the Companys direct sales force. As of
December 31, 2004, the Company employed seven salaried sales and
marketing personnel, including four engaged directly in field
sales activities, and three in various other marketing and sales
support functions. Internationally, the Company utilizes
agents to sell its products and services.
4
------------------------------------------------------------------------
Customers
During 2004, approximately 44% of the Companys products and
services were sold to the Federal Government. Revenues in 2004
among the various agencies were as follows: Department of
Defense, 16%; Department of the Interior, 20%; Department of
Commerce, 6% and various other agencies of the federal
government, 2%. The revenues from the Corps of Engineers
were spread among some ten (10) separate Districts, and the
revenues from the Department of the Interior among two (2)
agencies, the U.S. Geological Survey and the Bureau of Reclamation.
The Company also performed on various contracts of foreign
origin. Total revenues from foreign customers amounted to
approximately 32% of total revenues in 2004, 28% of total
revenues in 2003 and 29% in 2002. Sutron actively markets
its products and services internationally.
Contracts for products or services with federal, state and
local government agencies typically allow for termination at
the convenience of the government and for audit and annual
negotiation of overhead rates. Upon termination, the Company
would be entitled to reimbursement for allowable costs incurred
and to a proportionate share of profits or fees earned to the
date of termination. Such contracts are also typically
dependent upon compliance by the contractor with applicable
civil rights, equal employment opportunity, and contract
procurement requirements.
The Company at this time has no reason to believe that any
material changes will occur in the
foreseeable future with respect to federal, state, or local
government programs or services with respect to which the
Company has been granted its contracts or provides its
services. However, due to changes in administration, national
goals and budgetary restrictions, funding of such programs or
services could be altered or abolished. If a substantial cut-
back in the level of funding by the applicable government
agency were to occur, it would have a material adverse effect
on the Company.
Competition
The Company is aware of both domestic and foreign competitors
offering complete real-time networks of their own and
companies which fabricate real-time networks from components
manufactured by themselves and others. The Company is also
aware of numerous additional firms, ranging in size from large
to small, from general to highly specialized, and from new to
well established, offering competitive dataloggers, high data
rate satellite transmitters, sensors and other instruments
and software.
Several of these companies have financial, research and
development, marketing, management and technical resources
substantially greater than those of the Company. The Company
may also be at a competitive disadvantage because it purchases
certain sensors and other equipment components, as well as
computer hardware and peripheral equipment, from manufacturers
who are or may become competitors with respect to one or more
of the Companys products.
The Company, with respect to its professional engineering and
technical services, is in competition with numerous diverse
engineering and consulting firms, many of which have larger
staffs and facilities, and are better known, have greater
financial resources, and have more experience than the Company.
As to its hydrological services, the Company is aware that many
firms offer equipment installation and maintenance services;
some of these companies have larger staffs, are better equipped,
and have greater financial, marketing and management resources
than the Company.
Price, performance and experience are believed by
the Company to be the primary competitive factors with respect
to all of its products and services.
5
------------------------------------------------------------------------
Research and Development
During the three years ended December 31, 2004, 2003, and 2002,
Sutron's internally funded research and development costs were
$1,018,874, $1,065,558 and $1,480,706 respectively.
In 2004, the Companys product development focus was on continual
improvement of the SatLink2 and other core products. The Company
certified the SatLink2 to operate on the European/African
geostationary satellite system, METEOSAT, and on the Chinese
environmental satellite, FY-2C. The Company expects China to be a
significant market. The Company also worked towards certification
of a 40 Watt SatLink2 that can be installed on existing
and new ocean system buoys to send ocean and weather parameters
including tsunami warnings through the global geostationary
satellite systems in near real time. Certification of the 40 Watt
SatLink2 was received from NESDIS in March 2005.
The Company invested heavily in the redesign of the SatLink transmitter
beginning in 2002 and continuing in 2003. In January 2004, the
SL2-G312-1 Satellite Transmitter (SatLink2) was certified by the
NESDIS. The SatLink2 is a redesign of the original SatLink transmitter
in orderto improve our margins and to provide the latest features. It
is not only a satellite transmitter but also has logging capability which
is attractive to customers who have limited logging requirements and
therefore avoids the purchase of a separate datalogger.
In 2002, the company released the logger version of the SatLink
and developed tidal monitoring applications based on the Xpert and
XLite products that were instrumental in winning orders from the
National Ocean Survey for tides systems. The Company released
the Xpert and XLite dataloggers in 2001.
In 2002, the Company also released XConnect, a base station
software application that is compatible with leading database
software including Oracle and Microsoft SQL Server. The Company
added enhancements to XConnect's reporting features in 2003
incorporating Crystal reports.
Patents, Trademarks, Copyrights and Agreements
Although the Company does not deem patent protection to be of
significant importance to its industry, it has and may in the
future seek patents for certain of its products, real-time
networks, and technology as well as Company software products,
real-time networks, and technology. Company software products
and innovations may not be patentable but may be subject to
automatic but limited copyright protection. The Company has
treated its products, real-time networks, technology and
software as proprietary and relies on trade secret laws and
internal non-disclosure safeguards rather than making their
designs and processes generally available to the public by
applying for patents. Further, the Company believes that,
because of the rapid pace of technological change in the
computer, electronics and telecommunications industries, patent
and copyright protection is of less significance than factors
such as the knowledge and experience of Company personnel and
their ability to design and develop enhanced and new products,
real-time networks and their components.
Raw Materials
The raw materials used by the Company, such as electronic
components and fabricated parts, are generally available from a
wide variety of sources at competitive prices. The Company does
not anticipate that its present or proposed business activities
would be substantially adversely affected by the scarcity of
any raw materials.
Backlog
The Companys backlog at December 31, 2004 was $5,620,968 as
compared with $4,350,688 at December 31, 2003. The Company
anticipates that 76% of its 2004 year-end backlog will be
shipped in 2005.
Employees
The Company had a total of 72 employees as of December 31,
2004 of which 71 were full time.
6
------------------------------------------------------------------------
ITEM 2 - PROPERTIES
On July 30, 1992, the Company entered into a five and one-half
year lease, for approximately 17,000 square feet of
manufacturing and office space in Sterling, Virginia. The
lease commenced on October 23, 1992. This facility allowed the
Company to consolidate it's manufacturing, systems integration,
research and development, and sales and administration
departments into one building. An option for an additional five
years was exercised in 1997. An option for an additional
three years was exercised in November 2002. The lease will
expire in March 2006.
In July, 1999, the Company leased additional space of approximately
7,000 square feet in Sterling, Virginia. Two departments, integrated
systems and research and development were relocated to the new space
during fiscal year 2000 in order to provide increased production and
warehouse space at the corporate headquarters. The lease expires in
March 2003 and has been renewed for three more years and will expire
in March 2006.
The Company entered into a lease agreement in October 2002 for
approximately 3800 square feet of office and warehouse space in West
Palm Beach, Florida. The four year lease expires in October 2006. The
Hydrological Services division will use this space which consists of
both office and warehouse space.
The Company entered into a lease agreement for approximately 1500
square feet of office space in Brandon, Florida. The five-year lease,
expires in December 2008. The Hydrological Services division will
use this space for offices.
The Company entered into a lease agreement for approximately 1800
square fet of office space in New Delhi, India in November 2004.
The lease term is month to month. The India branch office will
use this space for offices.
The Company believes that its facilities are adequate for its
present needs and that its properties are in good condition,
well maintained and adequately insured.
ITEM 3 - LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation with
customers, vendors, suppliers and others in the ordinary course
of business, and a number of such claims may exist at any given time.
All such existing proceedings are not expected to have a material
adverse impact on the Company's results of operations or financial
condition. The Company is a party to the proceedings discussed below.
In 2003, the Company filed a claim with the Advance Tax Court
of India seeking a ruling on a decision by the Government of
Andhra Pradesh (GoAP) of India to assess a 48% income tax on the
Company's contract of approximately $1,606,000. The GoAP believed
that the Company had established a branch office in India and was
therefore subject to Indian income tax. Although the Company did
file an application for branch office status and received approval
to open a branch office, the Company did not complete the
registration and approval process with the Government of India
and had not opened a branch office in India. The income tax
amount that is at issue was approximatly $770,000.
The Advance Tax Court of India heard the case in September 2004 and
ruled that Sutron Corporation has a Permanent Establishment in
India by virtue of its Country Manager who maintains an office
in New Delhi. The Country Manager has the authority to sign
contracts and perform other duties on behalf of the Company that
fulfills the requirements of Indian tax law and as defined in
Double Taxation Avoidance Agreement with the United States of
America.
As a result of this ruling, Sutron Corporation entered into
an agreement with Ernst & Young, New Delhi, India to file tax
returns for the tax periods April 1, 2002 to March 31, 2003
and April 1, 2003 to March 31, 2004. The returns for both
tax periods were filed in October 2004. A refund in the
amount of approximately $137,000 will be issued to Sutron for the
tax period ending March 31, 2003 resulting from excess withholdings
by the Government of Andhra Pradesh in excess of the tax amount of
approximately $5,250. A tax payment of approximately
$5,600 was made for the tax period ending March 31, 2004. All taxes
paid in India will be applied as income tax credits on the
Company's U.S. tax returns in accordance with the Double
Taxation Avoidance Agreement with the United States of America
and will therefore offset federal taxes.
7
------------------------------------------------------------------------
The Company is currently awaiting acceptance on two systems that
were provided to the Government of Andhra Pradesh in 2002. All
contractual items on the systems have been accepted with the
exception of four water level monitoring sites that are located at
reservoirs. The Government of Andhra Pradesh believes that
the sites should go down approximately 100 meters at the sites.
The Company does not believe that it is required to provide
monitoring at 100 meters due to lack of specification in the
Request for Proposal (RFP) and the Company's proposal that
specified 10 meters at each site. This matter will most
likely be referred to an arbitrator as per provisions of the
contract. In the event that the Company loses the arbitration
hearing, additional costs of approximately $120,000 will be
incurred to install the sites down to 100 meters.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 2004 to a
vote of the Companys security holders, either through the
solicitation of proxies or otherwise.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The common stock of Sutron Corporation is quoted over the
counter through the NASD Bulletin Board supplied by the
National Association of Securities Dealers, Inc. under the
symbol STRN, and through the Pink Sheet Service of the National
Quotation Bureau, Inc. The table below sets forth the high and
low sales prices for the past two years.
MARKET INFORMATION
2004 2003
---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
First Quarter $1.70 $.65 $1.28 $.67
Second Quarter 3.75 1.25 1.40 .61
Third Quarter 4.50 2.80 1.35 .60
Fourth Quarter 12.00 3.90 1.45 .70
(b) Approximate Number of Equity Shareholders:
Title of Class: Common Stock, $.01 par value
Approximate Number of Record Holders At March 25, 2005: 185
(c) Dividends:
The Company has never paid a dividend on its common stock and the Board of
Directors intends for the foreseeable future to retain all earnings for use
in the Companys business.
8
------------------------------------------------------------------------
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements, which reflect
the current views of the Company with respect to future events that could
have an effect on its future financial performance. These statements may
include such words as "expects," "believes," "estimates," and similar
expressions. These forward-looking statements are subject to various
risks and uncertainties that could cause actual results to differ materially
from historical results or those currently anticipated. Readers are
cautioned not to place undue reliance on these forward-looking statements.
The following table sets forth, for the periods presented, certain income
statement data of the Company expressed as a percentage of revenues:
The following table sets forth, for the periods presented, certain income
statement data of the Company expressed as a percentage of revenues:
Percentage of Revenues
2004 2003 2002
---- ---- ----
Revenues 100.0% 100.0% 100.0%
Cost of sales 61.5 69.5 66.2
---- ---- ----
Gross profit 38.5 30.5 33.8
---- ---- ----
Selling, general and
administrative expenses 14.4 20.1 21.8
Research and
Development expenses 6.1 9.7 14.5
---- ---- ----
Operating income 18.0 .7 (2.5)
Interest expense .1 .3 .5
---- ---- ----
Income before
income taxes 17.9 .4 (3.0)
Income taxes (benefit) 6.5 (.5) (1.9)
---- ---- ----
Net income 11.4% .9% (1.1)%
===== ===== ======
Fiscal 2004 Compared to Fiscal 2003
Results of Operations
The Companys revenues for 2004 increased 51% to $16.7 million from $11
million in 2003. The Company derives its revenues from the sale of products
consisting primarily of dataloggers, satellite transmitters/loggers and sensors,
integrated systems, hydrological services consisting primarily of equipment
installation and maintenance and engineering services and airport weather
systems.
Revenues from sales to domestic customers increased in 2004 to $11.3 million
from $7.9 million in 2003, an increase of 42%. Standard products sales
increased to $6.96 million in 2004 from $5.65 million in 2003. Revenues
from integrated systems, which includes special projects and the Companys
branch office in India, increased significantly to $1.95 million compared
to $1.3 million in 2003 primarily due to increased software services projects
and engineering services provided to Hanscom Air Force Base to develop the
AN-FMQ-13(V)2 wind sensor system. Revenues for hydrological services
increased to $2.36 million from $1 million in 2003 due to the expansion
of operations in Florida.
Revenues from international sales increased 74% to $5.4 million in 2004
from $3.1 million in 2003. Sales of products increased to $3.73 million
from $944 thousand in 2003 due to the Company providing dataloggers,
sensors and other equipment totaling $2.4 million to a Canadian consortium
for a flow monitoring and flood warning system in Poland. Revenues from
integrated systems, which includes special projects and the Companys branch
office in India, decreased to $1.7 million from $2.0 million due to fewer
international systems projects. Revenue from airport weather systems, a
division started in 2003, declined to $8 thousand in 2004 from $70
thousand in 2003.
The Companys largest customer in each of years 2004 and 2003 was the
Department of the Interior, the principal agencies being the US Geological
Survey and the Bureau of Reclamation, which accounted for 20% and 28% of
revenues, respectively. Non-federal government, commercial and international
revenues represented 56% of revenues in 2003 versus 55% in 2002.
9
------------------------------------------------------------------------
Gross Profit
Gross profit for 2004 increased 90% to $6.43 million from $3.36 million in
2003. Gross profit as a percentage of revenues for 2003 increased to 38.5%
as compared to 30.5% in 2003.
Gross profit improved in 2004 due to the increase in revenues and due to
improvements in the design and manufacturability of the SatLink 2 Satellite
Transmitter/Logger. The Company certified the Satlink2 in January 2004
and began shipping units in May 2004. The SatLink2 was designed to have
fewer parts, improved manufacturability and improved features compared
to the SatLink . The Company also benefited from large project awards with
Hanscom Air Force Base and a Canadian consortium for a flow monitoring
and flood warning system in Poland. Both contracts required significant
quantities that allowed the Company to obtain supplier pricing discounts
that greatly improved margins. The Companys gross margin is dependent on
product volumes, product mix, overhead expenses and projects that vary in
terms of size, complexity and pricing competitiveness. All of these factors
fluctuate from year to year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $2.4 million in 2004 as
compared with $2.2 million in 2003. Selling, general and administrative
expenses as a percentage of revenues decreased to 14.4 in 2004 from 20.1% in
2003 due to the increase in revenues.
Research and Development Expenses
Research and development expenses decreased 4% to $1.02 million in 2004 from
$1.06 million in 2003. Research and development expenses as a percentage of
revenues decreased to 6.1% in 2004 from 9.7% in 2003. In 2004, engineers
worked directly on certain contracts including the Hanscom Air Force Base
AN-FMQ-13(V)2 Wind Sensor System resulting in engineering costs being included
in cost of sales.
In 2004, the Companys product development focus was on continual improvement
of the SatLink2 and other core products. The Company certified the SatLink2
to operate on Chinas environmental satellite, FY-2C. The Company expects China
to be a significant market. The Company also worked towards certification of
a 40 Watt SatLink2 Satellite Transmitter/Logger that can be installed on
existing and new ocean system buoys to send ocean and weather parameters
including tsunami warnings through the global geostationary satellite systems
in near real-time. Certification of the 40 Watt SatLink2 Satellite
Transmitter/Logger was received from NESDIS in March 2005.
The Company continued its development efforts in 2004 relating to tides
monitoring systems by adding Storm Surge/Tsunami software. Tides systems
are based on the Xpert datalogger and the SatLink2 transmitter. The Company
received orders for tides systems totaling $900 thousand in 2004 and $676
thousand in 2003. The Company expects a significant increase in revenue
from tides systems in 2005 due to increased funding by the federal government
for tide monitoring and tsunami warning systems.
Other Income (Expense)
Other income and expenses consisted of interest expenses of $30 thousand
in 2004 and 2003.
Fiscal 2003 Compared to Fiscal 2002
Results of Operations
The Companys revenues in 2003 increased 8% to $11 million from $10.2 million
in 2002. The Company derives its revenues from the sale of standard products
consisting primarily of dataloggers, SatLink transmitters and sensors,
systems and software that are done on a project specific basis, hydrological and
engineering services and airport weather systems.
Revenues from sales to domestic customers increased in 2003 to $7.9 million from
$7.25 million in 2002, an increase of 8.7%. Standard products sales increased
slightly to $5.65 million in 2003 from $5.6 million in 2002. Revenues from
integrated systems and software were down $256 thousand to $1.3 million from
$1.56 million. Revenues for hydrological services increased to $992 thousand
from $110 thousand in 2002 due to the expansion of operations in Florida and
winning five major multi-year contracts in 2002 and 2003 with the South Florida
Water Management District.
Revenues from international sales increased slightly to $3.1 million in 2003
from $2.95 million in 2002. Standard products decreased to $944 thousand
in 2003 from $1.3 million in 2002 due to decreased sales from China. Revenues
from integrated systems and software were up $400 thousand to $2.0 million from
$1.6 million due to several large projects including a $499 thousand
project to provide a rainfall measuring system to the government of Morocco, a
$730 thousand World Meteorological project to provide airport meteorological
systems to 13 small island states in the Caribbean and a $446 thousand standard
product order from a hydropower company in Venezuela. The Company sold its first
airport weather system in 2003 and realized revenue of $71,000.
The Companys largest customer in 2003 and 2002 was the Department
of the Interior, the principal agencies being the US Geological Survey and the
Bureau of Reclamation, which accounted for 28% and 26% of revenues.
Commercial and international revenues represented 55% of revenues in 2003 versus
48% in 2002.
10
------------------------------------------------------------------------
Gross Profit
Gross profit for 2003 decreased 2.7% to $3.36 million from $3.45 million
in 2002. Gross margin as a percentage of revenues for 2002 decreased to
30.5% as compared to 33.8% in 2002. Increased sales of SatLink
transmitters caused a decrease in the Companys margins. The Companys
new SatLink transmitter, the SL2-G312-1, was certified in January 2004
and will significantly improve future margins due to fewer parts
and improved manufacturability. The Companys margins were also
impacted by three projects that were awarded in 2002. Two projects
were with the Government of Andhra Pradesh of India and one project
was with the Meteorological Service of Mexico. All three projects were
bid very competitively. The company completed the Mexico project in
2003. The Government of Andhra Pradesh projects are near completion.
The Company anticipates that these projects will be completed in mid
2004. The Companys gross margin is dependent on product and system
costs, product mix and overhead expenses, all of which fluctuate from
year to year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were level at $2.2 million
in 2003 and 2002. Selling, general and administrative expenses as a
percentage of revenues decreased to 20.8% in 2003 from 21.8% in 2002
due primarily to the increase in sales.
Research and Development Expenses
Research and development expenses decreased 28% to $1.06 million in
2003 from $1.48 million in 2002. Research and development expenses
as a percentage of revenues decreased to 9.7% in 2003 from 14.5% in
2002. The primary reason for the decrease was the completion of
Xconnect systems software. Upon its completion in late 2002, the
Company transferred several software engineers into direct departments
in order to provide customers with systems and application development
services.
In 2003, the Companys product development focus was on the design and
certification of the SatLink2 in order to enhance the product and
improve margins. The SatLink2 is a high data rate satellite
transmitter that transmits at 100, 300 and 1200 baud,
incorporates GPS and functions as a logger as well. All GOES
satellite customers are mandated by NESDIS to purchase high data rate
satellite transmitters and to replace all old 100 baud transmitters
within a ten-year period effective July 2001. The Company
believes that the SatLink2 will allow it to dominate the replacement
market.
In 2003, the Company continued its development efforts relating to
tidal monitoring applications by introducing enhancements to its
tides monitoring systems. The tides systems are based on the
Xpert and XLite dataloggers and use the SatLink transmitter.
The Company won orders totaling $663 thousand in 2003 and $450
thousand in 2002 for tides systems. The Company also completed
the development of an analog expansion module in 2003.
Other Income (Expense)
Other income and expenses consisted of interest expenses of $30
thousand in 2003 compared with $47 thousand in 2002.
Liquidity and Capital Resources
The Companys working capital was $5.35 million at December 31, 2004
compared with $3.4 million at December 31, 2003. Cash on hand was
$1,419,171 at December 31, 2004 compared to $388,612 at December 31, 2003.
Of the cash balance on hand at December 31, 2004, $277,454 was restricted
and served as collateral for international standby letters of credit and
$108,568 was restricted and served as bid bonds on international tenders.
Net cash provided by operating activities was $2,133,859 for the year ended
December 31, 2004 as compared to cash used by operating activities of
$526,355 for the year ended December 31, 2003 and cash provided by operations
of $853,560 for the year ended December 31, 2002.
Net cash used in investing activities was $213,709 for the year ended
December 31, 2004, compared to $156,983 and $61,698 for the years ended
December 31, 2003 and 2002, and was primarily due to purchases of property
and equipment.
Net cash used by financing activities was $893,740 for the year ended
December 31, 2004 due to payments on the line of credit and on shareholder
and term notes. Net cash provided by financing activities was $670,210 for
the year ended December 31, 2003 due to proceeds from the line of credit and
shareholder notes. Cash used by financing activities was 493,098 for the year
ended December 31, 2002 due to payments on the line of credit and term notes.
The Company has a revolving credit facility of $1,625,000 with BB&T Bank.
The credit facility expires on August 5, 2005. 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 2005.
11
------------------------------------------------------------------------
ITEM 7 - FINANCIAL STATEMENTS
The financial statements required by this Item 7 are listed in Item
13(a)(1) and begin at page F-1 of this Report.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements with accountants on
accounting and financial disclosure.
ITEM 8A - 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 Annual Report on Form 10-K, 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.
PART III
Certain information required by Part III is omitted from this
report because we intend to file a definitive Proxy Statement pursuant to
Regulation 14A no later than 120 days after the end of the fiscal year
covered by this report, and certain information to be included therein is
incorporated herein by reference.
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The information required by this Item is incorporated by reference
to the Proxy Statement under the sections captioned "Election of
Directors," "Executive Officers," "Executive Compensation",
"Compliance with Section 16(a) of the Securities Exchange Act of 1934",
"Code of Ethics", and "Audit Committee and Audit Committee Financial
Expert".
ITEM 10 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference
to the Proxy Statement under the sections captioned "Election of
Directors," "Executive Officers," "Executive Compensation" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934."
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Principal Shareholders," and
"Management Ownership of Common Stock" appearing in the
Proxy Statement, is incorporated herein by reference.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Certain Transactions," appearing
in the Proxy Statement, is incorporated herein by reference.
12
------------------------------------------------------------------------
ITEM 13 - EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the Company are
filed as part of this Annual Report on Form 10-KSB as follows:
Report of Independent Auditors F-2
Balance Sheets at December 31, 2004 and 2003 F-3
Statements of Operations for the years ended
December 31, 2004, 2003 and 2002 F-4
Statements of Changes in Stockholders' Equity for the
years ended December 31, 2004, 2003 and 2002 F-5
Statements of Cash Flows for the years ended
December 31, 2004 and 2003 F-6
Notes to Financial Statements F-7
(a)(2) Financial Statement Schedules
Not applicable.
(a)(3) Exhibits
Exhibit No. Description
3(a) Copy of Articles of Incorporation of Sutron Corporation,
received and approved December 30, 1975 (1)
3(b) Copy of Articles of Amendment to the Articles of
Incorporation and Articles of Reduction of Stated
Capital of Sutron Corporation received and approved
September 7, 1983(1)
3(c) By-laws of the Registrant(1)
3(d) Copy of Articles of Amendment to the Articles of
Incorporation received and approved June 8, 1995(10)
4(a) Specimen Shares of Common Stock Certificate(2)
4(b) Form of Warrant to be issued as part of Unit (2)
4(c) Amended Form of Warrant issued as part of Unit(3)
4(d) Incentive Stock Option Plan dated August 31, 1983(1)
4(e) Stock Bonus Plan dated August 31, 1983(1)
4(f) Loan and Security Agreement, dated December 11, 1992
between the Company and Crestar Bank (8)
4(g) 1996 Stock Option Plan (11)
4(h) 2002 Stock Option Plan (12)
10(a) Employment Agreement dated as of July 1, 1983 with
Kenneth W. Whitt(1)
10(b) Employment Agreement dated as of July 1, 1983 with
Dr. Raul S. McQuivey(1)
10(c) Employment Agreement dated as of July 1, 1983 with
Dr. Thomas N. Keefer(1)
10(d) Employment Agreement dated as of July 1, 1983 with
Duane M. Preble(1)
10(e) Purchase Agreement dated as of July 1, 1983 with Eric
S. Clyde(1)
10(f) Stock Option Agreement between Registrant and Gerald
Calhoun dated July 1, 1983(1)
10(g) Certified Copy of Resolution of Commissioners of
Fairfax
County Economic Development Authority, adopted October 12,
1982, approving $425,000 Industrial revenue bond loan
to registrant(1)
10(h) Certified Copy of Resolution of Commissioners of
Fairfax County Economic Development Authority, adopted
March 8, 1983, approving $400,000 industrial revenue
bond loan to registrant (1)
10(i) Certified Copy of Resolution of Board of Supervisors
of Fairfax County, adopted March 21, 1983, approving
issuance of industrial revenue bonds for purpose of
$400,000 loan to Registrant(1)
10(j) License agreement dated January 29, 1987, with TSUKASA
SOKKEN Co., Ltd. of Japan, to use U.S. Patent No.
3,677,085 (4)
10(k) License agreement dated November 10, 1986, with S.A.
Des Caliberies et Trefileries de Cossonay of
Switzerland, to use U.S. Patent No. 4,279,147 and
Canada Patent No. 1,120,286 (4)
10(l) Lease agreement dated September 18, 1987, with Squire
Court Limited Partnership to lease building space
(9,000 sq. ft.) (4)
10(m) Copy of termination agreement with Duane Preble dated April 1, 1988 (5)
10(n) Sale agreement with National Hospital Health System
Corporation, dated November 29, 1989, and subsequent
amendments dated December 29, 1989, February 28, 1990,
and March 27, 1990, to sell land and building in
Herndon, Virginia (6)
10(o) Lease agreement dated May 9, 1990 with National
Hospital Health SystemCorporation to lease building
space (5545 sq.ft.) (7)
10(p) Stock Option Agreement between Sutron Corporation and
Glenn A. Conover dated October 15, 1990 (7)
13
------------------------------------------------------------------------
10(q) Stock Option Agreement between Sutron Corporation and
Daniel W. Farrell dated October 15, 1990 (7)
10(r) Lease agreement dated July 30, 1992 with Loudoun
Holding Inc. to lease building space (16,794 sq. ft.)
(8)
10(s) Stock Option Agreement between Sutron Corporation and
Ronald C. Dodson dated December 6, 1993 (9)
10(t) Stock Option Agreement between Sutron Corporation and
Raul S. McQuivey dated November 1, 1996 (11)
10(u) Stock Option Agreement between Sutron Corporation and
Glenn A. Conover dated November 1, 1996 (11)
10(v) Stock Option Agreement between Sutron Corporation and
Daniel W. Farrell dated November 1, 1996 (11)
10(w) Stock Option Agreement between Sutron Corporation and
Sidney C. Hooper November 1, 1996 (11)
10(x) Stock Option Agreement between Sutron Corporation and
Raul S. McQuivey dated October 18, 2002 (12)
10(y) Stock Option Agreement between Sutron Corporation and
Daniel W. Farrell dated October 18, 2002 (12)
10(z) Stock Option Agreement between Sutron Corporation and
Sidney C. Hooper October 18, 2002 (12)
10.1 Stock Option Agreement between Sutron Corporation and
Thomas N. Keefer dated October 18, 2002 (12)
10.2 Stock Option Agreement between Sutron Corporation and
Robert F. Roberts, Jr. dated December 18, 2003 (13)
10.3 Stock Option Agreement between Sutron Corporation and
Robert F. Roberts, Jr. dated May 13, 2004 (14)
(1) Filed as Exhibits to registrants Registration Statement on Form
S-18 (File No. 2-86573-W) dated September 16, 1983, and
incorporated herein by reference.
(2) Filed as Exhibits to Amendment No. 1 to registrants Registration
Statement on Form S-18 (File No. 2-86573-W) dated October 26,
2983, and incorporated herein by reference.
(3) Filed as Exhibits to Amendment No. 2 to registrants Registration
Statement on form S-18 (File No. 2-896573-W) dated November 4,
1983 and incorporated herein by reference.
(4) Filed as Exhibits to registrants Annual Report on Form 10-K for
the year ended December 31, 1987, and incorporated herein by
reference.
(5) Filed as Exhibit on Form 8-K dated April 1, 1990, and
incorporated herein by reference.
(6) Filed as Exhibits to registrants Annual Report on Form 10-K for
the year ended December 31, 1989, and incorporated herein by
reference.
(7) Filed as Exhibits to registrants Annual Report on Form 10-K for
the year ended December 31, 1990 and incorporated herein by
reference.
(8) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1992 and incorporated herein by
reference.
(9) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1993 and incorporated herein by
reference.
(10) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1995 and incorporated herein by
reference.
(11) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1996 and incorporated herein by
reference.
(12) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 2002 and incorporated herein by
reference.
(13) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 2003 and incorporated herein by
reference.
(14) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 2004 and incorporated herein by
reference.
14
------------------------------------------------------------------------
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the fourth
quarter of the fiscal year ended December 31, 2004.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference
to the Proxy Statement under the sections captioned "Principal
Accountant Fees and Services."
15
------------------------------------------------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Sutron Corporation
(Registrant)
Date: March 30, 2005
By /s/ Raul S. McQuivey Raul S. McQuviey, Chairman of
the Board of Directors
and President
In accordance with the Securities Exchange Act, this report has been signed
by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Date: March 30, 2005
By /s/ Raul S. McQuivey Raul S. McQuviey, Chairman of
the Board of Directors
and President
Date: March 30, 2005
By /s/ Thomas N. Keefer Thomas N. Keefer,
Director and
Vice President
Date: March 30, 2005
By /s/ Daniel W. Farrell Daniel W. Farrell,
Director and
Vice President
Date: March 30, 2005
By /s/ Sidney C. Hooper Sidney C. Hooper,
Director and
Chief Financial
Officer
Date: March 30, 2005
By /s/ Robert F. Roberts, Jr. Director
16
------------------------------------------------------------------------
SUTRON CORPORATION
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors F-2
Balance Sheets at December 31, 2004 and 2003 F-3
Statements of Operations for the years ended
December 31, 2004, 2003 and 2002 F-4
Statements of Changes in Stockholders' Equity for the
Years ended December 31, 2004, 2003 and 2002 F-5
Statements of Cash Flows for the years ended
December 31, 2004 and 2003 F-6
Notes to Financial Statements F-7
F-1
------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Sutron Corporation
Sterling, Virginia
We have audited the accompanying balance sheets of Sutron
Corporation as of December 31, 2004 and 2003, and the related
statements of operations, stockholders' equity, and cash flows
for each of the three years ended December 31, 2004. These
financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Sutron Corporationas of December 31, 2004 and 2003, and
the results of its operations and its cash flows for each
of the three years ended December 31, 2004, in conformity with
generally accepted accounting principles.
Thompson, Greenspon & Co.
/s/ Thompson, Greenspon & Co.
Fairfax, Virginia
February 18, 2005
F-2
------------------------------------------------------------------------
SUTRON CORPORATION
BALANCE SHEETS
December 31, December 31,
2004 2003
ASSETS
Current assets
Cash and cash equivalents $ 1,419,171 $ 388,612
Accounts receivable 3,755,439 3,062,205
Inventory 2,371,476 2,438,275
Prepaid items and other 270,014 122,150
Deferred income taxes 179,000 120,000
----------- -----------
Total current assets 7,995,100 6,131,242
Property and equipment, at cost 3,038,168 2,723,107
Accumulated depreciation
and amortization (2,328,496) (2,125,624)
----------- -----------
Net property and equipment 709,672 597,483
Other assets 51,133 22,986
Deferred income taxes - 133,000
----------- -----------
Total Assets $ 8,755,905 $6,884,711
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 943,616 $1,047,805
Accrued payroll 272,601 50,142
Other accrued expenses 1,400,779 850,726
Line of credit - 399,454
Stockholder notes - 330,000
Current maturities of
long-term notes 25,613 49,936
---------- -----------
Total current liabilities 2,642,609 2,728,063
Long-term notes 89,666 100,129
Deferred income taxes 172,000 111,000
---------- -----------
Total liabilities 2,904,275 2,939,192
---------- -----------
Stockholders' equity
Common stock, 42,896 42,896
Additional paid-in capital 2,306,655 2,306,655
Retained earnings 3,497,930 1,595,968
Accumulated other comprehensive
income 4,149 -
---------- -----------
Total stockholders' equity 5,851,630 3,945,519
---------- -----------
Total liabilities and
stockholders' equity $8,755,905 $6,884,711
========= ===========
The accompanying notes are an integral part of these financial statements.
F-3
------------------------------------------------------------------------
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
Year Ended December 31,
2004 2003 2002
Revenue $16,678,889 $11,015,689 $10,202,658
Cost of sales 10,252,952 7,658,887 6,753,599
--------- -------- -----------
Gross profit 6,425,937 3,356,802 3,449,059
Operating expenses:
Selling, general and
administrative expenses 2,396,690 2,218,450 2,225,120
Research and development
expenses 1,018,874 1,065,559 1,480,706
---------- --------- -----------
Total operating expenses 3,415,564 3,284,009 3,705,826
---------- --------- -----------
Operating income 3,010,373 72,793 (256,767)
---------- --------- -----------
Interest expense, net (30,411) (29,778) (47,314)
---------- --------- -----------
Income before income taxes 2,979,962 43,015 (304,081)
Income taxes (benefit) 1,078,000 (52,000) (194,000)
---------- --------- -----------
Net income $1,901,962 $ 95,015 $ (110,081)
========== ========= ===========
Net income per common share $ .44 $ .02 $(.03)
Net Income per diluted share $ .38 $ .02 $(.03)
The accompanying notes are an integral part of these financial statements.
F-4
------------------------------------------------------------------------
SUTRON CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003, and 2002
ACCUMULATED
OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
--------- ------- ---------- -------- ------- ---------
Balances, December
31,2001 4,289,551 $42,896 $2,306,655 $1,611,034 $ - $3,960,585
Net loss - - - (110,081) - (110,081)
--------- ------- ---------- ---------- ------- ----------
Balances, December
31,2002 4,289,551 42,896 2,306,655 1,500,953 - 3,850,504
Net income - - - 95,015 - 95,015
--------- ------- ---------- ---------- -------- ----------
Balance, December
31, 2003 4,289,551 42,896 2,306,655 1,595,968 - 3,945,519
Net income 1,901,962 - -
Total comprehensive
income - 4,419 4,419
--------- ------- ---------- ---------- -------- ----------
Balances, December
31,2004 4,289,551 $42,896 $2,306,655 $3,497,930 $4,149 $5,851,630
========= ======= ========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
F-5
------------------------------------------------------------------------
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2004 2003 2002
OPERATIONS:
Net income $1,901,962 $ 95,015 $ (110,081)
Non-cash items included in net income:
Depreciation and amortization 202,873 196,205 207,567
Deferred income taxes 135,000 62,000 (51,000)
Changes in current assets and
liabilities:
Accounts receivables (693,234) (1,247,530) 101,708
Inventory 66,799 (409,290) 530,823
Prepaid items and other assets (147,864) 60,218 (120,319)
Income taxes receivable - - 67,890
Accounts payable (104,189) 564,153 27,228
Accrued expenses 772,512 152,874 199,744
--------- ---------- ----------
Cash flow from operating activities 2,133,859 (526,355) 853,560
INVESTMENTS:
Purchase of property and equipment (185,562) (155,686) (53,566)
Other assets (28,147) (1,297) (8,132)
--------- ---------- -----------
Cash flow from investing activities (213,709) (156,983) (61,698)
FINANCING:
(Payments on)Proceeds
from line of credit, net (399,454) 399,454 (374,894)
Proceeds from term notes payable - 165,572 -
(Payments on)Proceeds
from stockholder notes (330,000) 330,000 -
Payments on term notes payable (164,286) (224,816) (118,204)
---------- ---------- -----------
Cash flow from financing activities (893,740) (670,210) (493,098)
CURRENCY ADJUSTMENTS
Effect of exchange rate changes on cash 4,149 - -
---------- ---------- -----------
CASH AND CASH EQUIVALENTS
Net change in cash and
cash equivalents 1,030,559 (13,128) 298,764
Beginning balance 388,612 401,740 102,976
---------- ---------- -----------
Ending balance $1,419,171 $388,612 $401,740
========== ========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Purchase of property and equipment
by notes payable $ 129,500 - -
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
------------------------------------------------------------------------
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
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 in Sterling, Virginia. The Company has several
branch offices located throughout the United States and a branch
office in India. The Company is a leading provider of real-time
data collection and control products, systems software and
professional services in the hydrological and
meteorological monitoring markets. The Company's products include
dataloggers, satellite transmitters/loggers, sensors and
systems and applications software. Customers include a diversified
base of Federal, state, local and foreign governments,
universities, engineering firms and hydropower companies.
Revenue Recognition
The Company utilizes the accrual method of
accounting for both financial statement and tax
return reporting purposes. The Company recognizes
revenue from product sales upon shipment. Selling,
general, and administrative expenses are charged
against periodic income as incurred. Revenue
from cost-plus-fee contracts is recognized to the
extent of costs incurred, plus a proportionate
amount of fees earned. Revenue from fixed-price
contracts is recognized on the
percentage-of-completion method based on costs
incurred in relation to total estimated costs.
Revenue from time-and-materials contracts is
recognized to the extent of billable rates, times
hours delivered, plus materials costs incurred.
Contract costs include allocated indirect costs
and general and administrative expenses.
Anticipated losses are recognized as soon as
they become known.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash
equivalents include time deposits and all highly liquid
debt instruments with original maturities of three months
or less. Interest paid amounted to $32,489, $27,859, and
$48,936 in 2004, 2003 and 2002, respectively. Income
taxes paid amounted to $600,000 in 2004. No income taxes
were paid in 2003 and 2002.
The Company has entered into international contracts that require
standby letters of credit. Certain standby irrevocable letters of
credit issued by the Company's previous bank shall expire in March
2005. At December 31, 2004, $277,454 of the cash and cash equivalents
balance is restricted for these standby letters of credit that were
issued by the Company's previous bank. During the year, the Company
submitted contract proposals that required bid bonds or bank guarantees
in the form of a certified check. At December 31, 2004, $108,568 of
the cash and cash equivalents balance is restricted for these bid bonds.
Inventory
Inventory is stated at the lower of cost or market. Electronic components
costs, work in process and finished goods costs consist of materials, labor
and overhead and are recorded at a standard cost that approximates the
average cost method.
Accounts Receivable
Based on managements evaluation of uncollected accounts receivable at
the end of each year, bad debts are provided for utilizing the allowance
method. The allowance for doubtful accounts as of December 31, 2004 and
2003 approximate $32,100 and $10,000, respectively. At December 31, 2004
and 2003, the Companys investment in accounts 90 days or more past due
is $434,818 and $175,950, respectively, net of contract retainages.
Property and Equipment
Equipment is recorded at cost and depreciated over their estimated useful
lives, ranging from 3 to 7 years, using the straight line method for
financial statement purposes, and the straightline and accelerated
methods for income tax purposes. Expenditures for maintenance, repairs,
and improvements that do not materially extend the useful lives of the
assets are charged to earnings as incurred. When items of property, plant,
and equipment are disposed of, the cost of the asset and the related
accumulated depreciation are removed from the accounts. Any gain or
loss resulting from the removal from service is taken into the current
period earnings.
Income Taxes
The Company utilizes an asset and liability approach to accounting for
income taxes. The objective is to recognize the amount of income taxes
payable or refundable in the current year based on the Companys income
tax return and the deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized in the
Companys financial statements or tax returns. The asset and liability
method accounts for deferred income taxes by applying enacted statutory
rates to temporary differences, the difference between financial statement
amounts and tax bases of assets and liabilities. The resulting deferred
tax liabilities or assets are classified as current or noncurrent based
on the classification of the related asset or liability. Deferred income
tax liabilities or assets are adjusted to reflect changes in tax laws or
rates in the year of enactment.
Foreign Currency Translation
Results of operations for the Companys foreign branch office are translated
from the designated functional currency to the U.S. dollar using average
exchange rates during the period, while assets and liabilities of the
foreign branch office are translated at the exchange rate in effect at the
reporting date. Resulting gains or losses from translating foreign currency
financial statements are included in other comprehensive income, net of any
related tax effect.
Financial Instruments
The estimated fair value of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses and short term notes
payable approximate their carrying amounts in the financial statements.
Based on the borrowing rates currently available to the Company for debt
with similar maturity dates and collateral, the estimated fair value of
longterm debt is $90,000 and $100,000 at December 31, 2004 and 2003,
respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, 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 financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could vary from the estimates that were used.
Capital
The Company has 12,000,000, $.01 par value, shares authorized. There
were 4,289,551 shares issued and outstanding at December 31, 2004, 2003
and 2002. The Companys Board of Directors has authorized the repurchase
of up to 100,000 shares of its common stock in open market transactions.
As of December 31, 2004, 13,800 shares have been repurchased.
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 earnings 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.
Stock Compensation Plans
At December 31, 2004, the Company had three stock-based employee compensation
plans, which are described more fully in Note 12. The Company accounts for
its stock-based employee compensation plans under the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
APB No. 25 provides that compensation expense relative to a companys employee
stock options is measured based on the intrinsic value of the stock options
at the measurement date.
In December 2004, the FASB issued SFAS No. 123 (revised), "Share-Based
Payment". SFAS No. 123R eliminates the intrinsic value method under APB
25 as an alternative method of accounting for stock-based awards. SFAS
NO. 123R also revises the fair value-based method of accounting for share-
based payment liabilities, forfeitures and modifications of stock-based
awards and clarifies the guidance of SFAS No. 123, "Accounting for Stock-
based Compensation," in several areas, including measuring fair value,
classifying an award as equity or as a liability and attributing
compensation cost to reporting periods. In addition, SFAS No. 123R amends
SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits
be reported as a financing cash inflow rather than as a reduction of taxes
paid, which is included within operating cash flows.
The Company is required to adopt SFAS No. 123R for the interim period beginning
December 15, 2005, using one of three implementation alternatives specified
under SFAS No. 123R. The Company is currently in the process of determining
which implementation alternative to use and what the expected financial impact
of SFAS No. 123R may be.
If compensation expense had been recorded based on the fair value of awards
under the stock option and purchased plans set forth in SFAS No. 123, as
amended, the Company's net income (loss) attributable to common stockholders
would have been adjusted to the pro forma amounts presented below, for the
years ended December 31:
2004 2003 2002
Net income(loss)as reported $1,901,962 $ 95,015 $(110,081)
Stock based compensation expense determined
under the fair value based method, net of tax 44,004 26,005 43,519
---------- -------- ---------
Pro forma net income (loss) $1,857,958 $ 69,010 $(153,600)
========== ======== ==========
Net income (loss) per share:
Net income (loss) per share - as reported $.44 $.02 $(.03)
Net inocme (loss) per share - pro forma $.43 $.02 $(.04)
Net income (loss) per diluted share - as reported $.38 $.02 $(.03)
Net income (loss) per diluted share - pro forma $.38 $.02 $(.03)
The fair value of Sutron Corporation stock options used to
compute pro forma net income and earnings per share
disclosures is the estimated present value at grant date
using the Black Scholes pricing model and with the
following assumptions: a risk free interest rate of 5.0
percent, no estimated dividend yield, an expected
volatility of 30 percent and an expected holding
period of five years.
2. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, consists of the
following:
2004 2003
Current $2,617,094 $1,650,736
Costs in excess of billings and
estimated earnings 730,120 1,349,621
Contract retainage 408,225 61,848
------------ ----------
Totals $3,755,439 $3,062,205
============ ==========
3. INVENTORY
Inventory consists of the following at December 31:
2004 2003
Electronic components $ 786,296 $ 992,292
Work in process 1,077,091 924,301
Finished goods 508,089 521,682
----------- ---------
Totals $ 2,371,476 $2,438,275
=========== =========
4. PROPERTY AND EQUIPMENT
A summary of propertyand equipment at December 31, is
as follows:
2004 2003
Furniture and equipment $2,649,294 $2,526,526
Vehicles 301,056 119,667
Leasehold improvements 87,818 76,914
---------- ----------
$3,038,168 $2,723,107
========== ==========
Accumulated depreciation and amortization at
December 31, is as follows:
2003 2002
Furniture and equipment $2,190,992 $2,028,053
Automotive equipment 101,714 66,197
Leasehold improvements 35,790 31,374
---------- ----------
$2,328,496 $2,125,624
========== ==========
5. LINE OF CREDIT
The Company has a $1,625,000 line of credit with a commercial bank.
The line of credit is collateralized by substantially all of the
assets of the Company and guaranteed by the primary stockholders
of the Company and expires August 2005. Under the terms of the
line of credit, the Company is required to maintain certain financial
covenants. Interest is charged at the banks prime rate plus one-half
percent and is payable monthly. There was no balance outstanding at
December 31, 2004 and $399,454 was outstanding at December 31, 2003.
The Company frequently bids on and enters into international contracts
that require bid and performance bonds. At December 31, 2004, the bank
had issued standby letters of credit in the amount of $186,354 that
served as either bid or performance bonds. The amount available under
the letter of credit was reduced by this amount.
6. NOTES PAYABLE - STOCKHOLDERS
Notes payable of $330,000 to stockholders were paid off during
the year ended December 31, 2004. The notes accrued interest at 7.25
percent per annum. Interest paid on the notes was $18,210 and $7,395
for the years ended December 31, 2004 and 2003, respectively.
7. NOTES PAYABLE
Notes payable consists of the following as
of December 31: 2004 2003
---- ----
Vehicle note payable is secured by the underlying
vehicle. The noteis payable in monthly
installmentsof $675, including interest at
14.25%, and matures December 27, 2009. $28,405 $ -
Two vehicle notes payable are secured by the
underlying vehicles. The notes are payable in
monthly installments of $494, including
interest of 5.49%, and both mature September 4,
2008. 38,442 -
Vehicle note payable is secured by the underlying
vehicle is non-interest bearing and is payable in
monthly installments of $692. The note matures
January 27, 2009. 33,920 -
Bank note payable dated July 25, 2003 is
secured by substantially all the assets of
the Company and guaranteed by the directors
of the Company. The note is payable in monthly
installments of $4,528, including interest at
6.75%. The note was paid in 2004. - 132,459
Vehicle note payable is secured by the
underlying vehicle, is non-interest bearing
and is payable in monthly installments
of $259. The note matures September 9, 2009. 14,512 17,606
------- -------
Total notes payable outstanding 115,279 150,065
Current maturities 25,613 49,936
------- -------
Long-term maturities $ 89,666 $100,129
======= =======
Principal maturities for notes payable are as follows:
Year ending December 31:
2005 $ 25,613
2006 27,744
2007 28,259
2008 23,982
2009 9,681
------
Total $115,279
========
8. LEASE OBLIGATIONS
The Company leases space for its headquarters and production facilities,
which expires in March 2006. The operating lease calls for monthly rent
of $11,892, an estimated $4,810 as the Companys pro rata share of
operating expenses, an estimated $4,750 of common area maintenance fees
and annual rent increases of 3 percent. The Company has an option to
extend the lease through March 2009. The Company leases additional
office and warehouse space in Sterling, Virginia. The lease expires
March 2006 and requires monthly rent payments of $5,275. The Company
has an option to extend the lease through March 2009.
The Company leases office and warehouse space in West Palm Beach, Florida.
The four-year lease, expiring in August 2008, requires monthly payments
of $5,827. The Company entered into a lease agreement for office space in
Brandon, Florida. The five-year lease, expiring on December 31, 2008,
requires monthly payments of $1,984 and annual increases of four percent.
The following is a schedule of future minimum lease payments by year:
Year ending December 31:
2005 $302,938
2006 146,292
2007 93,720
2008 70,416
--------
Total $613,366
========
Rent expense amounted to $287,000, $274,000 and $268,000 for the years
ended December 31, 2004, 2003 and 2002, respectively.
9. INCOME TAXES
The income tax (benefit) expense charged to
operations for the years ended December 31, were as
follows:
2004 2003 2002
Current income tax expense (benefit) $ 943,000 $ 37,000 $(143,000)
Deferred tax expense (benefit) 135,000 (89,000) (51,000)
__________ _________ _________
Total tax expense (benefit) $1,078,000 $ (52,000) $(194,000)
========== ========= =========
Deferred tax assets, are comprised of
the following at December 31:
2004 2003 2002
Accrued vacation and warranty $179,000 $120,000 $ 75,000
Net operating loss carryforward - - 120,000
Business tax credits - 133,000 -
________ ________ ________
Gross deferred tax assets 179,000 253,000 195,000
Gross deferred tax liability-depreciation (172,000) (111,000) (142,000)
________ ________ ________
Net deferred tax asset $ 7,000 $142,000 $ 53,000
======== ======== ========
The realization of the deferred tax assets is dependent on future
taxable earnings. The Company has not provided for a deferred tax
asset valuation allowance due to their current and anticipated
future earnings. A reconciliation between the amount of reported
income tax expense and the amount computed by multiplying the
applicable statutory Federal income tax rate is as follows:
2004 2003 2002
Income before income taxes $2,979,962 $ 43,015 $(304,081)
Applicable statutory tax rate 34% 34% 34%
________ ________ __________
Computed "expected" Federal tax
expense 1,013,000 15,000 (104,000)
Adjustments to Federal income tax
resulting from:
State income tax expense (benefit) 115,000 2,000 (18,000)
Tax credits (50,000) (69,000) (72,000)
__________ _________ ____________
Income tax (benefit) expense $1,078,000 $(52,000) $ (194,000)
========== ========= =============
F-11
------------------------------------------------------------------------
10. MAJOR CUSTOMERS
Set forth below are customers, including agencies
of the U.S. Government, from which the Company
received more than 10 percent of total revenue,
for the years ended December 31:
2004 2003 2002
Department of Interior 20% 27% 26%
International 32% 28% 29%
Commercial 24% 27% 19%
Department of Defense 16% 10% 17%
Set forth below are customers, including agencies
of the U.S. Government, from which the Company
received more than 10 percent of accounts receivable
outstanding for the year ended December 31, 2004:
National Oceanic and Atmospheric Administration $879,791
South Florida Water Managment District 479,060
11. CONCENTRATIONS OF CREDIT RISK
At times throughout the year, cash and cash
equivalents exceeded FDIC insurance limits.
As of December 31, 2004 and 2003, the Companys cash
deposits exceeded the FDIC insured amount
by approximately $1,189,000 and $580,000.
12. STOCK OPTIONS PLANS
Stock Options
The Company has granted stock options under the 2002,
1997 and the 1996 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. Current grants under the plan are
259,00 shares. Under the 1997 Stock Option Plan, the
Company authorized 60,000 shares. Current grants under
the plan are 60,000 shares. Under the 2002 Stock Option
Plan, the Company authorized 400,000 shares. Current
grants under the plan total 390,000 shares. 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.
The following summarizes the option activity under these
plans for the last three years:
Number of Option Price
Shares
(in thousands) Per Share
_____ ___________
Outstanding at Decembr 31, 2001 270,000 $.62 - 1.l25
Grants 347,000 .55
Exercised - -
Canceled or expired (88,000) .62 - 1.125
_____ ___________
Outstanding, December 31, 2002 529,000 .40 - 1.125
Grants 180,000 .68 - .75
Exercised - -
Canceled or expired - -
_____ ___________
Outstanding, December 31, 2003 709,000 $.40-1.125
Grants 10,000 2.80
Exercised - -
Canceled or expired - -
_____ ___________
Outstanding, December 31, 2004 719,000 $$.40 - 2.80
======= ============
The vesting period of the remaining options
is as follows:
Vested and exercisable 374,800
January 1, 2005 103,400
January 1, 2006 103,400
January 1, 2007 103,400
January 1, 2008 34,000
________
Total 719,000
========
F-12
------------------------------------------------------------------------
13. 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 for the years
ended December 31.
2004 2003 2002
---- ---- ----
Net income (loss) $1,901,962 $95,015 $(110,081)
Shares used in calculation
of income (loss) per share:
Basic 4,289,551 4,289,551 4,289,551
Effect of dilutive options 661,558 35,743 -
--------- --------- ---------
Diluted 4,951,109 4,325,294 4,289.551
========= ========= =========
Net income (loss) per share:
Basic $.44 $.02 $(.03)
Diluted $.38 $.02 $(.03)
Contracts to issue common stock that are anti-dilutive in nature are
not included in the earnings per share calculations. Stock options
outstanding at December 31, 2002 were considered anti-dilutive.
14. PROFIT SHARING PLAN
The 401 (k) Profit Sharing Plan covers substantially
all full time employees. The contributions, if any,
to the plan will be determined each year by the
Board of Directors based on profits. The Company made a profit
sharing contribution for the year ended December 31, 2004 of $175,000.
No contributions were made for the years ended December 31, 2003 and
2002.
15. SEGMENT INFORMATION
The Company adopted SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. The Company currently
reports its results in four divisions, Hydromet Products,
Integrated Systems, Hydrological Services and Airport Weather .
Systems. Hydromet Products is responsible for the
manufacture and sale of the Companys products including
dataloggers, satellite transmitters/loggers and sensors. Integrated
Systems is responsible for systems design, integration and
installation of hydro-meteorological systems. Results of the
Company's Special Projects group and India Branch Office are
included in Integrated Systems results for segment reporting
purposes. Hydrological Services provides hydrological and
engineering services including installation, maintenance, modeling,
and hydrologic services. Airport Weather Systems
provides systems design, integration and installation of airport
meteorological monitoring systems at airports. The results of
these segments for the years ended December 31 are shown below:
2004 2003 2002
Revenue
Hydromet Products $10,688,677 $ 6,591,890 $ 6,897,932
Integrated Systems 3,622,510 3,361,324 3,195,203
Hydrological Services 2,359,302 992,018 119,523
Airport Weather Systems 8,400 70,458 -
___________ __________ __________
Totals 16,678,889 11,015,689 10,202,658
Cost of Goods Sold
Hydromet Products 6,030,074 4,413,424 4,499,752
Integrated Systems 2,055,769 2,359,824 2,144,298
Hydrological Services 2,159,557 804,496 109,548
Airport Weather Systems 7,553 81,143 -
___________ __________ __________
Totals 10,252,952 7,658,887 6,753,599
Gross Margin
Hydromet Products 4,658,603 2,178,466 2,398,179
Integrated Systems 1,566,742 1,001,499 1,050,905
Hydrological Services 199,745 187,522 (25)
Airport Weather Systems 847 (10,686) -
___________ __________ ___________
Totals $6,425,937 $3,356,802 $3,449,059
=========== ========== ===========
16. EXPORT SALES
Export sales from the Companys operations for the years ended
December 31 were as follow:
2004 2003 2002
Central and South America $ 695,376 $1,597,196 $ 247,419
Canada 246,189 175,295 548,228
Asia 1,265,532 850,159 1,954,862
Australia/New Zealand 62,795 34,400 35,147
Europe and other 3,141,371 414,466 161,848
__________ __________ __________
$5,411,263 $3,071,516 $2,947,504
========== ========== ==========
F-13
------------------------------------------------------------------------