================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


     |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                  For the quarterly period ended June 30, 2006

                         COMMISSION FILE NUMBER: 0-12227



                               SUTRON CORPORATION
--------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)


                VIRGINIA                                     54-1006352
--------------------------------------------------------------------------------
      (State or other jurisdiction                       (I.R.S. Employer
    of incorporation or organization)                  Identification Number)


                 21300 RIDGETOP CIRCLE, STERLING, VIRGINIA 20166
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                  703-406-2800
--------------------------------------------------------------------------------
                           (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 shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes [_]  No [X]

There were 4,319,551 outstanding shares of the issuer's only class of common
equity, Common Stock, $0.01 par value, on August 11, 2006.

Transitional Small Business Disclosure Format (check one):  Yes [_]   No [X]

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<PAGE>
                               SUTRON CORPORATION
                          FORM 10-QSB QUARTERLY REPORT
                       FOR THE QUARTER ENDED JUNE 30, 2006


                                TABLE OF CONTENTS


PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements                                                  2

         Condensed Consolidated Balance Sheet as of June 30, 2006
         and December 31, 2005                                                 2

         Condensed Consolidated Statements of Operations for the
         Three Months Ended June 30, 2006 and 2005                             3

         Condensed Consolidated Statements of Operations for the
         Six Months Ended June 30, 2006 and 2005                               4

         Condensed Consolidated Statements of Cash Flows for the
         Six Months Ended June 30, 2006 and 2005                               5

         Financial Footnotes                                                   6


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                   9


Item 3.  Controls and Procedures                                              14





PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                                    14


Item 4.  Submission of Matters to a Vote of Security Holders                  14


Item 6.  Exhibits                                                             15


Signatures                                                                    15









                                        1
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

                               SUTRON CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)


                                                     JUNE 30,      DECEMBER 31,
                                                       2006            2005
                                                   ------------    ------------
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                     $  1,689,202    $  1,861,627
     Restricted cash and cash equivalents               184,633         233,375
     Accounts receivable                              4,427,604       3,711,426
     Inventory                                        3,556,328       2,532,524
     Prepaid items and other assets                     425,555         493,947
     Deferred income taxes                              287,000         278,000
                                                   ------------    ------------
          Total current assets                       10,570,322       9,110,899

PROPERTY AND EQUIPMENT, AT COST                       3,287,719       3,222,086
Less: Accumulated depreciation and amortization      (2,654,854)     (2,534,854)
                                                   ------------    ------------
     Property and equipment, net                        632,865         687,232
OTHER ASSETS                                             92,294          48,623
                                                   ------------    ------------
          TOTAL ASSETS                             $ 11,295,481    $  9,846,754
                                                   ============    ============



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                              $    996,309    $    844,511
     Accrued payroll                                    190,702         195,153
     Other accrued expenses                           1,608,859       1,179,925
     Notes payable - current                             47,663          47,663
                                                   ------------    ------------
          Total current liabilities                   2,843,533       2,267,252

LONG-TERM LIABILITIES
     Notes payable, net of current maturities            66,125          88,773
     Deferred income taxes                              161,000         169,000
                                                   ------------    ------------
          TOTAL LIABILITIES                           3,070,658       2,525,025
                                                   ------------    ------------

STOCKHOLDERS' EQUITY
     Common stock                                        43,196          42,946
     Additional paid-in capital                       2,338,860       2,312,230
     Retained earnings                                5,836,395       4,968,224
     Accumulated other comprehensive (loss) income        6,372          (1,671)
                                                   ------------    ------------
          TOTAL STOCKHOLDERS' EQUITY                  8,224,823       7,321,729
                                                   ------------    ------------
          TOTAL LIABILITIES AND STOCKHOLDERS'
          EQUITY                                   $ 11,295,481    $  9,846,754
                                                   ============    ============

See accompanying notes.


                                        2
<PAGE>
                                SUTRON CORPORTION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                    THREE MONTHS ENDED JUNE 30,
                                                   ----------------------------
                                                       2006            2005
                                                   ------------    ------------

Net sales and revenues                             $  4,421,174    $  3,157,884

Cost of sales and revenues                            2,770,435       1,902,923
                                                   ------------    ------------
          Gross profit                                1,650,739       1,254,961
                                                   ------------    ------------

Operating expenses:
     Selling, general and administrative expenses       627,791         682,607
     Research and development expenses                  325,460         371,174
                                                   ------------    ------------
          Total operating expenses                      953,251       1,053,781
                                                   ------------    ------------

          Operating income                              697,488         201,180

Interest income (expense), net                           13,244           4,799
                                                   ------------    ------------

          Income before income taxes                    710,732         205,979

Income taxes                                            202,000          74,000
                                                   ------------    ------------
Net income                                         $    508,732    $    131,979
                                                   ============    ============

Net income per share:

          Basic income per share                   $        .12    $        .03
                                                   ============    ============

          Diluted income per share                 $        .10    $        .03
                                                   ============    ============

See accompanying notes.


                                        3
<PAGE>
                                SUTRON CORPORTION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                     SIX MONTHS ENDED JUNE 30,
                                                   ----------------------------
                                                       2006            2005
                                                   ------------    ------------

Net sales and revenues                             $  8,497,282    $  7,051,817

Cost of sales and revenues                            5,068,800       4,142,193
                                                   ------------    ------------
          Gross profit                                3,428,482       2,909,624
                                                   ------------    ------------

Operating expenses:
     Selling, general and administrative expenses     1,448,181       1,413,345
     Research and development expenses                  731,729         680,668
                                                   ------------    ------------
          Total operating expenses                    2,179,910       2,094,013
                                                   ------------    ------------

          Operating income                            1,248,572         815,611

Interest income (expense), net                           25,599           8,659
                                                   ------------    ------------

          Income before income taxes                  1,274,171         824,270

Income taxes                                            406,000         300,000
                                                   ------------    ------------
Net income                                         $    868,171    $    524,270
                                                   ============    ============

Net income per share:

          Basic income per share                   $        .20    $        .12
                                                   ============    ============

          Diluted income per share                 $        .18    $        .11
                                                   ============    ============

See accompanying notes.


                                        4
<PAGE>
                                SUTRON CORPORTION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



                                                     SIX MONTHS ENDED JUNE 30,
                                                   ----------------------------
                                                       2006            2005
                                                   ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                    $    868,171    $    524,270
     Noncash items included in net income:
         Depreciation and amortization                  120,000         120,000
         Stock option compensation                       10,310              --
     Changes in current assets and liabilities:
            Accounts receivable                        (716,178)       (323,414)
            Inventory                                (1,023,804)       (512,476)
            Prepaid items and other assets               15,721        (215,962)
            Accounts payable                            151,798          28,212
            Accrued expenses                            424,483        (488,079)
            Deferred income taxes                        (8,000)             --
                                                   ------------    ------------
Net Cash Provided (Used) by Operating Activities       (157,499)       (867,448)
                                                   ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Restricted cash and cash equivalents                48,742         284,673
     Purchase of property and equipment                 (65,633)       (100,887)
                                                   ------------    ------------
Net Cash Provided (Used) by Investing Activities        (16,891)        183,786
                                                   ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments on notes payable                          (22,648)        (12,299)
     Proceeds from stock options exercised               16,570              --
                                                   ------------    ------------
Net Cash Provided (Used) by Financing Activities         (6,078)        (12,299)
                                                   ------------    ------------

Effect of exchange rate changes on cash                   8,043             776
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (172,425)       (695,185)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD      1,861,627       1,031,678
                                                   ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $  1,689,202    $    336,493
                                                   ============    ============

CASH PAID DURING THE PERIOD FOR:
     Interest                                      $      1,480    $      2,385
                                                   ============    ============

     Income taxes paid (received)                  $    217,987    $    824,534
                                                   ============    ============

See accompanying notes.


                                        5
<PAGE>
                               SUTRON CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2006


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 and meteorological monitoring markets. The Company's
products include data loggers, satellite transmitters/loggers, sensors, and
system and application software. Customers consist of a diversified base of
Federal, state, local and foreign government agencies, universities 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, 2005. The condensed
consolidated balance sheet as of December 31, 2005 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, 2005 filed with the
Securities and Exchange Commission.

STOCK COMPENSATION

The Company's Amended and Restated 1996, 1997 and 2002 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

                                        6
<PAGE>
Report on Form 10-KSB for the year ended December 31, 2005 for additional
information related to the stock option plans.

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 and six month periods ended June 30, 2006 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 and six month periods ended
June 30, 2006, total stock-based compensation expense of $10,310 was included in
operating expenses. The weighted average fair value of options granted during
the three months and six months ended June 30, 2006 was calculated using the
Black-Scholes option pricing model with the following valuation assumptions and
weighted average fair value as follows:

                                                   Periods Ended June 30, 2006
                                                   ---------------------------
                                                   Three Months    Six Months
                                                   ------------   ------------
         Weighted average fair value of grants     $       7.80   $       7.80
         Expected volatility                                 30%            30%
         Dividend yield                                       0              0
         Risk-free interest rate                           5.16%          5.16%
         Expected term in years                           10.00          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.

The following table illustrates the effect on net income and net income per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, to its stock-based employee
compensation for the three and six month periods ended June 30, 2005.


                                                   Periods Ended June 30, 2005
                                                   ---------------------------
                                                   Three Months    Six Months
                                                   ------------   ------------
         Net income, as reported                   $    131,979   $    524,270
         Less: Pro forma impact of expensing stock
         options, under fair value method                37,488         37,488
                                                   ------------   ------------
         Pro forma net income                      $     94,491   $    486,782
                                                   ============   ============

         Earnings per share
         -Basic income per share, as reported      $        .03   $        .12
                                                   ============   ============
         -Basic income per share, pro forma        $        .02   $        .11
                                                   ============   ============

         -Diluted income per share, as reported    $        .03   $        .11
                                                   ============   ============
         -Diluted income per share, pro forma      $        .02   $        .10
                                                   ============   ============


3.       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

                                        7
<PAGE>
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, 435,333 of which have been granted. In addition, all three plans
were amended in 2005 to allow Directors to participate in the plan, and 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 six months ended June 30, 2006:
                                                                     Number of
                                 Number of       Weighted Avg.        Options
                                  Shares        Exercise Price      Exercisable
                               ------------      ------------      ------------
Balance - December 31, 2005         739,333      $        .98           739,333
                                                                   ============
     Granted                         15,000              7.80
     Exercised                       25,000               .66
     Canceled                            --                --
                               ------------      ------------      ------------
Balance - June 30, 2006             729,333      $        .97           729,333
                               ============      ============      ============

At June 30, 2006, a total of 210,667 shares were available for future grants
under the Company's stock options plans.


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 June 30,
                                                  ----------------------------
                                                      2006            2005
                                                  ------------    ------------
Net income                                        $    508,732    $    131,979
                                                  ============    ============
Shares used in calculation of income per share:
     Basic                                           4,306,925       4,289,551
        Effect of dilutive options                     644,865         631,664
                                                  ============    ============
     Diluted                                         4,951,790       4,921,215
                                                  ============    ============
Net income per share:
     Basic                                        $        .12    $        .03
                                                  ============    ============
     Diluted                                      $        .10    $        .03
                                                  ============    ============


                                                    Six Months Ended June 30,
                                                  ----------------------------
                                                      2006            2005
                                                  ------------    ------------
Net income                                        $    868,171    $    524,270
                                                  ============    ============
Shares used in calculation of income per share:
     Basic                                           4,301,098       4,289,551
        Effect of dilutive options                     658,376         640,849
                                                  ============    ============
     Diluted                                         4,959,474       4,930,400
                                                  ============    ============
Net income per share:
     Basic                                        $        .20    $        .12
                                                  ============    ============
     Diluted                                      $        .18    $        .11
                                                  ============    ============

                                        8
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
         RESULTS OF OPERATIONS
         ---------------------

STATEMENTS MADE IN THIS REPORT ON FORM 10-QSB, 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 FORM 10-QSB TO CONFORM THESE STATEMENTS TO ACTUAL RESULTS.


OVERVIEW

Our primary focus is to provide real-time systems solutions, including
equipment, software and services to our customers in the areas of hydrological,
meteorological, and oceanic monitoring. We design, manufacture and market our
products and services to a diversified customer base consisting of federal,
state, local and foreign governments, engineering companies, universities,
airports 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 our SatLink2 Transmitter/Logger, our Xpert and XLite
dataloggers, our water level sensors and our 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 also as a datalogger. It
is an excellent 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 significantly more logging capability and
communications options than the SatLink2. Our water level sensors consist of
shaft encoders, submersible sensors, bubblers and a new radar level sensor. The
radar level sensor is a precision water level measuring instrument using radar
pulses that allow measurements to be made without direct contact with the water
surface and can be located on a bridge, pier or any structure over the water's
surface.

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 accounting principles generally accepted 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,
2005. There were no significant changes in critical accounting estimates

                                       9
<PAGE>
RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

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 June 30,
                                                  ----------------------------
                                                      2006            2005
                                                  ------------    ------------
     Net sales and revenues                              100.0%          100.0%
     Cost of sales and revenues                           62.7            60.3
                                                  ------------    ------------
     Gross profit                                         37.3            39.7

     Selling, general and administrative expenses         14.2            21.6
     Research and Development expenses                     7.3            11.7
                                                  ------------    ------------
     Operating income                                     15.8             6.4

                                                  ------------    ------------
     Interest (income) expense                              .3              .1
                                                  ------------    ------------
     Income before  income taxes                          16.1             6.5
     Income taxes (benefit)                                4.6             2.3
                                                  ------------    ------------
     Net income                                           11.5%            4.2%
                                                  ============    ============

NET SALES AND REVENUES

The Company's net sales and revenues for the three months ended June 30, 2006
increased 40% to $4,421,174 from $3,157,884 in 2005 due primarily 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 and the Company's India Branch Office, the Hydrological Services
Division and the Airport Weather Systems Division.

The HydroMet Products Division, which is responsible for sales of standard
products, had a net sales and revenue decrease of 28% to $1,455,223 from
$2,022,221 in 2005. Standard product revenues were higher in 2005 due to
significantly higher shipments of tide stations to the National Oceanic and
Atmospheric Administration (NOAA). Revenues from tides systems were
approximately $194,000 in the second quarter of 2006 as compared with revenues
of approximately $863,000 in 2005. We do anticipate higher product sales in the
third and fourth quarters of 2006, as compared to the second quarter, due to
projected government fiscal year end spending and replacement needs. Integrated
Systems Division net sales and revenues increased 396% to $2,039,662 from
$410,504 in 2005 due to second quarter revenues of approximately $816,000 from a
contract with the Central Water Commission of India, $240,000 from a contract
with the India Meteorological Department and $580,000 from a subcontract with
Prime Controls to instrument three canals in New Orleans for the Army Corps of
Engineers. Net sales and revenues from Hydrological Services Division increased
28% to $926,279 from $725,159 in 2005 due an increase in project deliveries.
Airport Weather Systems Division did not have any net sales and revenues in
either the second quarter of 2006 or 2005.

Overall domestic revenues increased 19% to $2,889,184 in the second quarter of
2006 versus $2,425,079 in 2005 while international revenues increased 109% to
$1,531,990 in 2006 versus $732,805 in 2005, primarily due to the India projects.
Customer orders for the second quarter of 2006 were approximately $4,355,000 as
compared to approximately $3,143,000 in 2005.

                                       10
<PAGE>
COST OF SALES AND REVENUES

Cost of sales as a percentage of revenues was 62.7% for the quarter ended June
30, 2006 as compared to 60.3% for the quarter ended June 30, 2005. The increase
in cost of sales is attributed to changes in the product mix. In 2006,
substantial costs were associated with projects such as Central Water Commission
of India, India Meteorological Department and Prime Controls. Projects do not
normally carry as high margins as stand-alone products which benefited the
margins in 2005. Cost of sales for both 2006 and 2005 include provisions for
inventory obsolescence, physical inventory adjustments and inventory valuation
adjustments. The Company continually pursues product cost reductions through
continual review of procurement sourcing, product value engineering and
improvements in manufacturing processes.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased to $627,791 in 2006 from
$682,607 in 2005, a decrease of $54,816 or 8%. The Company experienced decreases
primarily in selling and marketing activities and international agent
commissions.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses decreased to $325,460 in 2006 from $371,174 in
2005, a decrease of $45,714 or 12%. Product development expenses decreased
primarily due higher costs in 2005 associated with efforts to improve and
incorporate state-of-the-art technology into the Xpert datalogger. Dataloggers
and water level sensors are the primary components of hydrometeorological
systems and we are continuously improving these products as well as developing
new products 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 second quarter of 2006. The Company had net interest income in 2006
of $13,244 as compared to net interest income of $4,799 in 2005.

INCOME TAXES

Income taxes increased 173% in 2006 to $202,000 from $74,000 in 2005 due to the
increase in operating income. Taxes as a percentage of revenue were 4.6% in 2006
as compared to 2.3% in 2005. The provisions for income taxes represent effective
tax rates of approximately 28.4% in 2006 and 35.9% in 2005, respectively. The
effective tax rate in 2006 decreased due to the exercise of non-qualified stock
options that generated a significant tax deduction relating to stock option
compensation.

SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

The following table sets forth for the periods indicated the percentage of total
revenues represented by certain items reflected in our statements of operations:

                                       11
<PAGE>
                                                    Six Months Ended June 30,
                                                  ----------------------------
                                                      2006            2005
                                                  ------------    ------------
     Net sales and revenues                              100.0%          100.0%
     Cost of sales and revenues                           59.7            58.7
                                                  ------------    ------------
     Gross profit                                         40.3            41.3

     Selling, general and administrative expenses         17.0            20.1
     Research and Development expenses                     8.6             9.6
                                                  ------------    ------------
     Operating income                                     14.7            11.6

                                                  ------------    ------------
     Interest (income) expense                              .3              .1
                                                  ------------    ------------
     Income before  income taxes                          15.0            11.7
     Income taxes (benefit)                                4.8             4.3
                                                  ------------    ------------
     Net income                                           10.2%            7.4%
                                                  ============    ============

NET SALES AND REVENUES

The Company's net sales and revenues for the six months ended June 30, 2006
increased 21% to $8,497,282 from $7,051,817 in 2005. 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 and the Company's India Branch Office, the
Hydrological Services Division and the Airport Weather Systems Division.

The HydroMet Products Division had a revenue decrease of 11.6% to $3,365,306
from $3,805,001 in 2005 due to a decrease in tides systems shipments. Integrated
Systems Division revenues increased 118% to $3,615,705 from $1,654,797 in 2005
due to revenues of approximately $1,182,000 from the Central Water Commission of
India contract and revenues of approximately $1,092,000 from the India
Meteorological Department contract. Revenues from the Hydrological Services
Division increased 13% to $1,401,286 from $1,237,330 in 2005 due to increased
project activity. Airport Weather Systems Division revenues decreased to
$114,985 in 2006 as compared to $354,689 in 2005 due to a decline in project
deliveries.

Overall domestic revenues increased 2% to $4,798,882 in 2006 versus $4,690,675
in 2005 while international revenues increased 57% to $3,698,400 in 2006 versus
$2,361,142 in 2005 due primarily to revenues from contracts with the Central
Water Commission of India and India Meteorological Department. Customer orders
or bookings for 2006 were approximately $8,202,000 as compared to approximately
$6,169,000 in 2005. The Company's backlog of orders at June 30, 2006 was
approximately $10,544,000 as compared with approximately $4,662,000 as of June
30, 2005. The Company anticipates that approximately 64% of its backlog as of
June 30, 2006 will be shipped in 2006.

COST OF SALES AND REVENUES

Cost of sales as a percentage of revenues was 60% in 2006 as compared to 59% in
2005. The increase in cost of sales reflects changes in the product mix. In
2006, substantial costs were associated with projects such as Central Water
Commission of India, India Meteorological Department and Prime Controls.
Projects do not normally carry as high margins as stand-alone products which
benefited the margins in 2005. The Company continually pursues product cost
reductions through continual review of procurement sourcing, product value
engineering and improvements in manufacturing processes.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased to $1,448,181 in 2006
from $1,413,345 in 2005, an increase of $34,836 or 2.5%. The Company experienced
increases primarily in audit and tax service fees and selling and marketing
activities.

                                       12
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses decreased to $731,729 in 2006 from $680,668 in
2005, an increase of $51,061 or 7.5%. Product development expenses increased
primarily due to efforts to improve and incorporate state-of-the-art technology
into the Xpert datalogger and to develop a new water level sensor. The radar
level sensor is a precision water level measuring instrument using radar pulses
that allow measurements to be made without direct contact with the water surface
and can be located on a bridge, pier or any structure over the water's surface
and unlike other radar level sensors, Sutron's radar sensor operates under new
FCC UWB rules and does not require an FCC license. The operating frequency is
5.8GHz for unrestricted, unlicensed operation. Dataloggers and water level
sensors are the primary components of hydrometeorological systems and we are
continuously improving these products as well as developing new products 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 six months ended June 30, 2006. The Company had net interest income
in 2006 of $25,599 as compared to net interest income of $8,659 in 2005.

INCOME TAXES

Income taxes increased 35% in 2006 to $406,000 from $300,000 in 2005 due to the
increase in operating income. Taxes as a percentage of revenue were 4.8% in 2006
as compared to 4.3% in 2005. The provisions for income taxes represent effective
tax rates of approximately 31.9% in 2006 and 36.49% in 2005, respectively. The
effective tax rate in 2006 decreased due to the exercise of non-qualified stock
options that generated a significant tax deduction relating to stock option
compensation.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Cash and cash equivalents was $1,689,202 at June 30, 2006 compared to $1,861,627
at December 31, 2005. Working capital increased to $7,726,789 at June 30, 2006
compared with $6,843,647 at December 31, 2005. The increase resulted from the
earnings in 2006.

Net cash used by operating activities was $157,499 for the six months ended June
30, 2006 as compared to cash used by operating activities of $867,448 for the
six months ended June 30, 2005. The decrease is primarily due to increases in
net income and to a large payment in advance received from the Central Water
Commission of India that is included in accrued expenses.

Net cash used by investing activities was $16,891 for the six months ended June
30, 2006 as compared to cash used by investing activities of $203,707 for the
six months ended June 30, 2005, and the decrease was primarily due to reductions
in restricted cash and in the purchases of property and equipment.

Net cash used by financing activities was $6,078 for the six months ended June
30, 2006 as compared to net cash used by financing activities of $12,299 for the
six months ended June 30, 2005 due to proceeds from stock options and a
reduction in payments on term notes payable.

We have a revolving credit facility of $2,500,000 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, 2007 and is
secured by substantially all assets of the Company. Borrowings bear interest at
the bank's prime rate. During the second quarter of 2006, there were no
borrowings on the line of credit.

                                       13
<PAGE>
We frequently bid on and enter into international contracts that require bid and
performance bonds. At June 30, 2006 and December 31, 2005, a commercial bank had
issued standby letters of credit in the amount of $524,300 and $751,725 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 2006. 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.

ITEM 3.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is 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 the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based on the definition of "disclosure controls
and procedures" in Rule 13a-15(e). In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily is
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of June 30, 2006. Based upon the foregoing evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of that date.

There have been no changes in the Company's internal control over financial
reporting during the quarter ended June 30, 2006 that have materially affected,
or are reasonably likely to materially affect the Company's 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 is pending before The Monopolies and Restrictive
Trade Practices Commission in New Delhi, India. Management believes that the
case is unsubstantiated and intends to vigorously defend itself.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On May 17, 2006, an Annual Meeting of Shareholders of Sutron Corporation was
held. Directors elected at the meeting were Raul S. McQuivey, Daniel W. Farrell,
Robert F. Roberts, Jr., Andrew D. Lipman and Thomas R. Porter. Thompson,
Greenspon & Co., P.C. was appointed as independent accountants for 2006. The
election of directors and the appointment of the independent accountants were
the only matters

                                       14
<PAGE>
voted upon at the meeting. The number of shares eligible to vote at the meeting
was 4,295,551. The results of the voting on these matters are shown below.

1.       Election of Directors

         Name                       Votes For         Votes Withheld
         ----                       ---------         --------------
         Raul S. McQuivey           3,844,416                 83,700
         Daniel W. Farrell          3,844,416                 83,700
         Robert F. Roberts, Jr.     3,844,416                 83,700
         Andrew D. Lipman           3,833,916                 94,200
         Thomas R. Porter           3,844,416                 83,700

2.       Appointment of Thompson, Greenspon & Co., P.C. as Independent
         Accountants.

         For               Against          Abstain
         ---               -------          -------
         3,853,836         73,480             800



ITEM 6.  EXHIBITS

10.11    Stock Option Agreement between The Company and Andrew D. Lipman dated
         May 17, 2006

10.12    Stock Option Agreement between The Company and Thomas R. Porter dated
         May 17, 2006

10.13    Stock Option Agreement between The Company and Robert F. Roberts, Jr.
         dated May 17, 2006

31.1     Certification of the President and Chief Executive Officer pursuant to
         ss.302 of the Sarbanes-Oxley Act of 2002.

31.2     Certification of the Chief Financial Officer and Treasurer pursuant to
         ss.302 of the Sarbanes-Oxley Act of 2002.

32       Certification of the President and Chief Executive Officer and Chief
         Financial Officer and Treasurer pursuant to 18 U.S.C. ss.1350, as
         adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002.



                                   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)


August 11, 2006                            /s/ Raul S. McQuivey
---------------                            --------------------
Date                                       Raul S. McQuivey
                                           President and Chief Executive Officer
                                          (Principal Executive Officer)


August 11, 2006                            /s/ Sidney C. Hooper
---------------                            --------------------
Date                                       Sidney C. Hooper
                                           Chief Financial Officer and Treasurer
                                          (Principal Accounting Officer)

                                       15