UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number I-4334
SUNAIR ELECTRONICS, INC.
A Florida Corporation I.R.S. Employer I.D. No. 59-0780772
Executive Offices, 3101 S.W. Third Avenue
Fort Lauderdale, FL 33315
Telephone (954) 525-1505
Securities registered pursuant to section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common (Par Value 10 Cents) American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period 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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Issuer's Revenues for the most recent fiscal year ended September 30, 1999 was
$3,645,988.
The aggregate market value of the voting stock held by non-affiliates of the
registrant approximated $3,612,925 as of December 1, 1999 based on the closing
price of stock on the American Stock Exchange on said date.
Registrant's common stock - par value 10 cents, outstanding as of December 1,
1999 - 3,718,070 shares.
Documents Incorporated by Reference:
Portions of the annual shareholders' report for the years ended September 30,
1999 and September 30, 1998 and related proxy statements are incorporated by
reference into Parts I and II.
Transitional Small Business Disclosure format. Yes X No
--- ---
This Annual Report on Form 10-KSB has 19 pages. The exhibit index (Item 14a) is
on page 18.
<PAGE>
PART I
- ------
ITEM 1. BUSINESS
- -----------------
General
- -------
Sunair Electronics, Inc. is a Florida corporation organized in 1956. It is
engaged in the design, manufacture and sale of high frequency single sideband
communications equipment utilized for long range voice and data communications
in fixed station, airborne, mobile and marine "para-military" applications.
Markets
- -------
Sunair products are marketed both domestically and internationally and are
primarily intended for strategic military and other governmental applications.
Sales are executed direct through systems engineering companies, worldwide
commercial and business airframe manufacturers or direct to the U.S. Government
for foreign military assistance.
Products
- --------
Sunair's line of equipment is composed of proprietary HF/SSB radio equipment and
ancillary items sold as operating units or combined into sophisticated systems
that may interface with teleprinters, antennae, power sources, modems, message
switching devices, cryptographic equipment and the like provided by others.
Sunair products employ advanced solid state designs with computer controlled
networking capabilities. Principal product areas are as follows:
High frequency transceivers
High frequency receivers
High frequency exciters
Automatic antenna couplers
Linear power amplifiers
Computer remote control systems
Digital modems
Frequency management systems
Transportable systems
High frequency airborne transceivers
In addition, the Company custom designs systems incorporating various
combinations of the above into equipment racks and control consoles that may
interface with products and systems of other manufacturers.
2
<PAGE>
Distribution
- ------------
Sunair sells through a network of dealers and representatives located throughout
the United States and over 100 other nations. In addition, sales are made on a
direct basis to segments of the U.S. government. A substantial amount of the
Company's sales are made to customers outside the United States and are handled
through its wholly owned subsidiary, Sunair International Sales Corp. The
Company maintains a sales and service organization geared to train and assist
not only its dealers, but larger governmental users throughout the world.
Training programs are conducted at the Company's facilities and in the field.
The following is included to supplement the business information.
a. Sunair competes with other US and foreign companies several of which have
substantially greater sales and assets than Sunair.
b. The backlog of unfilled orders of the Company as of September 30 is as
follows:
1999 1998
---- ----
$ 5,090,834 $ 245,844
All orders at September 30, 1999 are expected to be shipped within the current
fiscal year. Sunair attempts to fill most orders from its finished goods stock
and thus does not look to backlog as a major indication of activity.
c. Raw materials, purchased parts and related items are available from various
suppliers located throughout the country. Management believes that the items
required in the manufacture of its electronic equipment are available in
sufficient quantities to meet manufacturing requirements with some extended
deliveries.
d. The Company maintains an engineering department which included four engineers
and two other technical personnel in 1999. During the fiscal years ended
September 30, 1998 and 1999, Sunair expended $142,000 and $110,000 respectively,
on product development and engineering.
e. The Company had 44 active full time employees at the end of the fiscal year.
f. In the opinion of the Company, its business is subject to limited seasonal
variation.
g. Essentially all export sales are covered by irrevocable letters of credit or
sight drafts. It is believed that over 80% of the non-US Government sales
ultimately enter the export market either directly or via resale by domestic
customers. For amounts of export sales by geographic area, sales to governmental
agencies of the U.S. and to foreign governments for the years ended September
30, 1999 and 1998, see Note 7 to the consolidated financial statements included
in Item 8 herein.
3
<PAGE>
ITEM 2. PROPERTIES
- ------------------
Manufacturing, Sales and Administrative operations are conducted in Fort
Lauderdale, Florida within two concrete block buildings containing approximately
67,700 sq. ft. of floor space on approximately 5 acres of land, all of which is
owned in fee simple by the Company.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
No matters were submitted during the fourth quarter of the fiscal year to a vote
of security holders, through the solicitation of proxies or otherwise.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS
- -------
(a) The following table sets forth the high and low sale price of the Company's
common stock as traded on the American Stock Exchange under the symbol SNR.
1999
----
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
------------ ------------ ------------ -----------
High 2 11/16 3 2 15/16 3 1/16
Low 1 7/8 2 1/2 2 3/4 2 13/16
1998
----
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
------------ ------------ ------------ -----------
High 3 1/8 3 3/8 3 1/8 3
Low 2 9/16 2 15/16 2 13/16 1 7/8
(b) As of December 1, 1999, it is estimated that there were approximately 900
shareholders of record.
4
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
- ------------------------------------------------------------------------------
OF OPERATIONS
- -------------
LIQUIDITY
- ---------
During the fiscal year ended September 30, 1999, the Company had short term
investments and cash or cash equivalents more than adequate to cover known
requirements, unforeseen events or uncertainties that might occur. During this
twelve month period, Cash and Short Term Investments had an average balance of
$1,058,000 as opposed to an average balance of $1,438,000 for the twelve months
ending September 30, 1998. Short Term Investments are tax exempt money market
funds that are readily available for immediate use should the occasion arise. It
is anticipated that the Company will remain as liquid during fiscal 2000. The
current ratio of the Company as of September 30, 1999 was 12.5 compared to 32.2
as of September 30, 1998. Inventories contain no obsolescence as adjustments are
made as they occur. Accounts and Notes receivable contain no bad debts. Interim
reserves are maintained to cover cancellation charges unpaid and any freight
charge disputes. All monetary transactions are in U.S. dollars and no letters of
credit involve foreign exchange.
CAPITAL RESOURCES:
- ------------------
During the twelve months of fiscal 1999, $128,573 was spent for Capital Assets.
These funds were primarily used for new computer hardware and software
development for Sunair equipment. No expenditures are contemplated for Plant
Expansion or Extensive Maintenance. The Company has no long term debt and none
is contemplated. Liabilities consist of current accounts payable, accrued
expenses related to the current accounting period, the current portion of the
capital lease, and the current and long term portion of income taxes payable.
RESULTS OF OPERATIONS:
- ----------------------
During 1999 shipments of $2,708,000 were down 28% or $1,039,000 from fiscal
1998. Domestic shipments of $1,846,000 for fiscal 1999 were down 19% or $424,000
from fiscal 1998. Export shipments for fiscal 1999 were $862,000 down 40% or
$576,000 from fiscal 1998. Due to customer delivery and inspection requirements
and their need for equipment required for training at Sunair facilities, we were
unable to ship a portion of our order input for 1999. This resulted in lower
shipments with a backlog of $5,100,000, the majority of which will be shipped in
the first quarter of fiscal 2000. This compares to a backlog at September 30,
1998 of $246,000.
Selling, general and administrative expenses increased $219,000 or 18% from
fiscal 1998 due primarily to increased marketing efforts associated with our new
position as a Systems Integrator. Interest income remained lower due to lower
interest rates.
A development program requiring a sizeable investment over the past several
years was undertaken for the development of software and systems capabilities.
As a result, we are now experiencing more product inquiries of greater potential
than at any time in the past five years. This development program was
instrumental in receiving three contracts valued at over $5.0 million. We
delivered our first "Pathfinder" system this year with the majority of these
contracts scheduled for fiscal 2000.
The scope of this new market requires extensive planning and coordination on the
buyer's part to define his requirements with more direct marketing and
engineering involvement by the seller. Procurement cycles continue to be
extremely long due to the complexity of design of the system requirements
experienced in the market today. New market opportunities continue to be pursued
in new geographical areas not previously covered and the Company continues to
5
<PAGE>
realize some business from these areas. The Company continues to be optimistic
for increased business in the future.
Sunair International Sales Corporation(SISC) a wholly owned subsidiary, was
treated as an Interest Charge-Domestic International Sales Corporation(IC-DISC)
in prior years. During 1995, it was determined that continued operations of its
Interest Charge-Domestic International Sales Corporation (IC-DISC) subsidiary's
election was no longer advantageous to the Company. Accordingly, the tax
election of the subsidiary was discontinued and its retained earnings of
approximately $3,200,000 were distributed to the Company. Regulations provide
for the taxation of such distribution over a ten year period in equal annual
increments. Upon the assumption the Company's business is profitable throughout
the next six years, excluding such incremental income, the aggregate income tax
payable as a consequence of such distribution will approximate a maximum of
$737,000 or $120,000 per year. No interest is payable on the unpaid portion.
The Company has investigated the pending year 2000 problem and determined the
issue will not have a material impact on its business operations or its
financial condition. The Company plans to replace older software and equipment
with state-of-the-art software and equipment this calendar year for more
efficient operation and inventory control. The cost for this project was
previously estimated at approximately $75,000. The Company engaged a reputable
firm to conduct a survey of our requirements and recommend those software
vendors with the appropriate product for our needs. Based on the result of the
survey and subsequent analysis of the recommended software, a software package
has tentatively been selected. The cost for this project has been revised,
however, to approximately $200,000 for all software, hardware, installation, and
training.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30,
--------------------------------
1999 1998
----------- ----------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 533,478 $ 1,463,726
Accounts receivable 618,791 474,065
Inventories 8,205,312 6,807,635
Prepaid expenses and other current assets 40,635 40,920
----------- -----------
9,398,216 8,786,346
INVESTMENTS 3,103,079 3,131,753
PROPERTY, PLANT, AND EQUIPMENT
Land 127,850 224,299
Buildings and improvements 1,701,748 1,699,098
Machinery and equipment 2,416,235 2,333,913
----------- -----------
4,245,833 4,257,310
Less: Accumulated depreciation 3,303,934 3,232,214
----------- -----------
941,899 1,025,096
----------- -----------
$13,443,194 $12,943,195
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
--------------------------------
1999 1998
----------- ----------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 681,463 $ 231,934
Current portion of capitalized lease 0 7,495
Current portion of income taxes payable 72,080 33,614
----------- -----------
753,543 273,043
LONG-TERM LIABILITIES
Long-term portion of income taxes payable 614,000 737,000
STOCKHOLDERS' EQUITY
Preferred stock, no par value,
500,000 shares authorized, no shares issued 0 0
Common stock, $.10 par value, 6,000,000 shares
authorized, 3,718,070 and 3,756,270 shares issued and outstanding
at September 30, 1999 and September 30, 1998 respectively 371,807 375,627
Additional paid-in-capital 2,606,899 2,606,899
Retained earnings 9,096,945 8,950,626
----------- -----------
12,075,651 11,933,152
----------- -----------
$13,443,194 $12,943,195
=========== ===========
</TABLE>
Notes to Consolidated Financial Statements are an integral part of this
statement.
7
<PAGE>
PURITZ & WEINTRAUB, LLP
CERTIFIED PUBLIC ACCOUNTANTS
(A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS)
1244 N. UNIVERSITY DRIVE
PLANTATION, FLORIDA 33322
TELEPHONE (954) 370-2727 o FAX (954) 370-2776
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
of Sunair Electronics, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Sunair
Electronics, Inc. and Subsidiary as of September 30, 1999 and 1998 and the
related consolidated statements of income, stockholders' equity and cash flows
for the years ended September 30, 1999 and 1998. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sunair Electronics,
Inc. and Subsidiary as of September 30, 1999 and 1998 and the results of its
operations and cash flows for the years ended September 30, 1999 and 1998, in
conformity with generally accepted accounting principles.
November 5, 1999
<TABLE>
<CAPTION>
Puritz and Weintraub, LLP
Certified Public Accountants
CONSOLIDATED INCOME STATEMENTS Year Ended September 30,
--------------------------------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Sales $ 2,708,273 $ 3,746,991
Cost of sales 1,869,314 2,750,976
----------- -----------
Gross profit 838,959 996,015
Selling, general and administrative expenses 1,415,155 1,195,963
----------- -----------
(Loss) from operations (576,196) (199,948)
----------- -----------
Other income (expenses):
Interest income 231,884 246,261
Interest expense (1,087) (1,717)
Gain on sale of land 705,831 0
Other income (expenses) 21,748 7,439
----------- -----------
958,376 251,983
----------- -----------
Income before provision
for income taxes 382,180 52,035
Provision for income taxes (139,500) (14,000)
----------- -----------
Net income (loss) $ 242,680 $ 38,035
=========== ===========
Net income (loss) per common share
(basic and diluted) $ 0.07 $ 0.01
=========== ===========
Average shares outstanding 3,731,687 3,841,936
=========== ===========
</TABLE>
Notes to Consolidated Financial Statements are an integral part of this
statement.
8
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
-------------------------------------------------
1999 1998
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 242,680 $ 38,035
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation 143,032 126,552
Gain on sale of land (705,831) 0
(Increase) decrease in accounts receivable (144,726) (43,771)
(Increase) decrease in inventory (1,397,677) 783,271
Decrease in prepaid and other assets 285 14,943
Increase (decrease) in accounts payable and
accrued expenses 449,529 (73,046)
(Decrease) in income taxes payable (84,534) (119,000)
----------- -----------
Net cash provided by (used in) operating activities (1,497,242) 726,984
----------- -----------
INVESTING ACTIVITIES
Purchase of property, plant, and equipment (128,573) (207,701)
Proceeds from sale of land 803,243 0
----------- -----------
Net cash provided by (used in) investing activities 674,670 (207,701)
----------- -----------
FINANCING ACTIVITIES
Principal payments on capital lease (7,495) (25,268)
Purchase and retirement of common stock (100,181) (541,302)
----------- -----------
Net cash (used in) financing activities (107,676) (566,570)
----------- -----------
Net (decrease) in cash and cash equivalents (930,248) (47,287)
Cash and cash equivalents at beginning of the year 1,463,726 1,511,013
----------- -----------
Cash and cash equivalents at end of the year $ 533,478 $ 1,463,726
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 1,087 $ 1,717
=========== ===========
Cash paid during the year for income taxes $ 162,000 $ 103,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional Total
--------------------------- Paid-in Retained Shareholders
Shares Amount Capital Earnings Equity
------------ ------------- -------------- -------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at 9/30/97 3,932,370 $ 393,237 $ 2,606,899 $ 9,436,283 $ 12,436,419
Purchase and
retirement of
commom stock (176,100) (17,610) 0 (523,692) (541,302)
9/30/98 net income 0 0 0 38,035 38,035
---------- --------- ------------ ------------ ------------
Balances at 9/30/98 3,756,270 $ 375,627 $ 2,606,899 $ 8,950,626 11,933,152
Purchase and
retirement of
common stock (38,200) (3,820) 0 (96,361) (100,181)
---------- --------- ------------ ------------ ------------
9/30/98 net income 0 0 0 242,680 242,680
---------- --------- ------------ ------------ ------------
Balances at 9/30/98 3,718,070 $ 371,807 $ 2,606,899 $ 9,096,945 12,075,651
</TABLE>
Notes to Consolidated Financial Statements are an integral part of this
statement.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business activity
Sunair Electronics, Inc. is a Florida corporation organized in 1956. It
is engaged in the design, manufacture and sale of high frequency single
sideband communications equipment utilized for long range voice and
data transmissions in fixed station, airborne, mobile and marine
"para-military" applications.
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Sunair Electronics, Inc. (the "Company") and its wholly-owned
subsidiary, Sunair International Sales Corporation. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Revenue recognition
Sunair Electronics, Inc. and Subsidiary are on the accrual basis of
accounting. Sales revenues are recorded when products are shipped.
Interest and dividends earned on investments are recorded when earned.
Statement of cash flows
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents unless the investments are
legally or contractually restricted for more than three months. The
carrying amount of cash and cash equivalents approximates fair value
because of their short term maturities.
Accounts receivable
The Company uses the direct write - off method of accounting for
uncollectible account receivables. Bad debts are insignificant.
Inventories
Inventories are stated at the lower of cost or market value using the
first in, first out method. Costs include material, labor and overhead.
Investments
Investments include Private Export Funding Corporation (PEFCO) notes at
September 30, 1999 and 1998. These notes are guaranteed by the
Export-Import Bank of the United States, an agency of the United
States. The Company has classified these securities as
"held-to-maturity" securities, in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Held-to-maturity securities
are recorded at amortized cost. Amortization of related discounts or
premiums is included in the determination of net income.
The following schedule reflects values at September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Name of issuer
and title of issue Principal Cost Market Carrying
------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1999
----
PEFCO 7.95% secured note series UU
due November 1, 2006 $2,900,000 $3,215,375 $3,061,327 $3,103,079
=============== =============== =============== ===============
1998
----
PEFCO 7.95% secured note series UU
due November 1, 2006 $2,900,000 $3,215,375 $3,368,524 $3,131,753
=============== =============== =============== ===============
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Significant Accounting Policies (continued)
Property, plant and equipment
Property, plant and equipment are carried at cost. Depreciation is
provided over the estimated useful lives of the assets using both the
straight-line and accelerated methods. The estimated useful lives used to
compute depreciation are as follows:
Buildings and improvements 10 to 30 years
Machinery and equipment 4 to 10 years
The cost of maintenance and repairs is charged to income as incurred;
renewals and betterments are capitalized. When properties are retired or
otherwise disposed of, the cost of such properties and the related
accumulated depreciation are removed from the accounts. Any profit or loss
is credited or charged to income.
Research and development
Expenditures for research and development are charged to income as
incurred and amounted to approximately $110,000 in 1999, $142,000 in 1998.
Income per share
Basic and diluted income per share is based upon the weighted average
number of shares outstanding during each year.
Changes in accounting policies
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" ("SFAS 128"). SFAS 128 simplifies the standards for
computing earnings per share and is effective for financial statements for
both interim and annual periods ending after December 15, 1997. Earlier
application is not permitted. The adoption of SFAS 128 did not have a
material impact on the Company's previously reported earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). SFAS No. 130 established standards for reporting
and display of comprehensive income and its components in the financial
statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. The adoption of
SFAS No. 130 had no impact on Sunair's consolidated results of operations,
financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It
also established standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131 is effective
for financial statements for fiscal years beginning after December 15,
1997. Financial statement disclosures for prior periods were required to
be restated. The adoption of SFAS No. 131 had no impact on Sunair's
consolidated results of operations, financial position or cash flows.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassification
Certain amounts in prior periods have been reclassified to conform to the
1999 presentations.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Income taxes
The components of the Company's income tax provision are as follows:
Current: 1999 1998
-------- --------
Federal $ 128,000 $ 12,500
State 11,500 1,500
--------- --------
$ 139,500 $ 14,000
========= ========
During 1995, it was determined that continued operations of its Interest
Charge-Domestic International Sales Corporation (IC-DISC) subsidiary's
election was no longer advantageous to the Company. Accordingly, the tax
election of the subsidiary was discontinued and its retained earnings of
approximately $3,200,000 were distributed to the Company. Regulations
provide for the taxation of such distribution over a ten year period in
equal annual increments. Upon the assumption the Company's business is
profitable throughout the next six years, excluding such incremental
income, the aggregate income tax payable as a consequence of such
distribution will approximate a maximum of $614,000 or $120,000 per year.
No interest is payable on this unpaid portion.
The total provision for 1999 is more than amounts computed by applying
the statutory rates to income before income taxes, and the total
provisions for 1998 is less than amounts computed by applying the
statutory rates to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Income taxes at the statutory rates $ 129,941 $ 17,692
State income taxes, net of federal tax benefit 7,500 1,000
Book/tax difference attributable
to depreciation 9,600 15,000
Tax free income (7,300) (15,000)
Other (241) (4,692)
--------- --------
$ 139,500 $ 14,000
========= ========
</TABLE>
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30,
--------------------------------
1999 1998
------------ ----------
<S> <C> <C>
Materials $ 1,605,639 $1,534,908
Work in Process 4,956,626 3,879,230
Finished goods 1,643,047 1,393,497
----------- ----------
$ 8,205,312 $6,807,635
=========== ==========
</TABLE>
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Preferred and common stock
The Company has 500,000 authorized shares of preferred stock, no par
value, that may be issued at terms and provisions determined by the Board
of Directors. No such shares have been issued.
The Company has 6,000,000 authorized shares of common stock, $.10 par
value, that may be issued. During the years ended September 30, 1999 and
1998, the Company purchased 38,200 and 176,100 shares of its common stock
at an average price of $2.62 and $3.07 respectively.
During the year ended September 30, 1998, the shareholders approved the
issuance of 100,000 non-qualified stock options at $3 per share. None have
been issued.
5. Employee benefits
During fiscal year ended September 30, 1996, the Company amended the
employee profit sharing plan to incorporate a 401(k) Plan. Under the
401(k) Plan, eligible employees may contribute up to 15% of their
compensation. The Company may contribute to the Plan at the discretion of
the Board of Directors. During the years ended ended September 30, 1999
and 1998 the Company did not contribute to the plan.
6. Segment information
The Company operates in a single industry, its principal product being
communications equipment.
Sales by geographic area, to U.S. governmental agencies and foreign
governments were as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------
Geographic area: 1999 1998
-------------- ------------
<S> <C> <C>
Europe $ 225,181 $ 404,897
Asia 571,658 544,671
South America 8,183 68,783
Africa 1,808 388,155
North America 1,865,487 2,331,247
Australia 35,956 9,238
---------- ----------
$2,708,273 $3,746,991
========== ==========
Sales to U.S. governmental agencies $ 791,041 $1,775,132
========== ==========
Direct sales to foreign governments $ 295,388 $ 281,410
========== ==========
</TABLE>
7. Other Matters
On June 25, 1999, the Company sold approximately 4 acres of vacant land
for $851,925 cash recognizing a gain of $705,831.
13
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
NONE
14
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
<TABLE>
<CAPTION>
Family
Name Age Position Held Relationship
- ---- --- ------------- ------------
<S> <C> <C> <C>
Robert Uricho, Jr. 84 Chairman of the Husband of
Board, President, Shirley Uricho
Chief Executive
Officer and
Director Since
1956
Shirley Uricho 66 Assistant Wife of
Secretary Robert Uricho, Jr.
Since 1959
Secretary
Since 1992
James E. Laurent 63 Vice President/ None
Marketing
Since 1988
Synnott B. Durham 58 Cost Manager None
Since 1979
Treasurer, Chief
Financial Officer
Since 1994
Earl M. Anderson, Jr. 74 Director None
Since 1969
George F. Arata, Jr. 70 Director None
Since 1995
</TABLE>
Note- All directors' terms are for one year and until their successors are duly
elected and qualified.
15
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
The following information is given on an accrual basis for the year ending
September 30, 1999 with respect to each director of the corporation whose
aggregate salary and fees paid by the Corporation and its subsidiaries were more
than $100,000 and each of the five highest paid officers of the Corporation
whose aggregate direct remuneration exceeded that amount and all officers and
directors of the Corporation as a group.
<TABLE>
<CAPTION>
Cash and Cash Equivalent
Forms of Remuneration
-------------------------------------------------------
Salaries, Fees, Securities or Property
Capacity Director's Fees, Insurance Benefits or
In Which Commissions and Reimbursements, Personal
Name Served Bonuses Benefits
- ---- ------ ------- --------
<S> <C> <C> <C>
Robert Chairman of the $175,000 --
Uricho, Jr. Board, President
and Chief Executive
Officer
All Officers
and Directors
(6 Persons
including the 1
named above) $391,938 --
</TABLE>
16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
The following information is given with respect to any person who to the
knowledge of the Corporation's management owns beneficially more than 5% of any
class of voting securities of the Corporation outstanding on the most recent
record date and with respect to ownership of such securities by the
Corporation's officers and directors.
Based solely upon a review of information furnished to the registrant during the
most recent fiscal year, including written representations, no director, officer
or beneficial owner of more than 10% of the company's common stock failed to
file on a timely basis reports required by Section 16(A) of the Exchange Act
during fiscal year 1999.
(A) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature Percent
of Class of Beneficial Owner of Beneficial Ownership of Class
-------- ------------------- ----------------------- --------
<S> <C> <C> <C> <C>
Common Robert Uricho, Jr. *2,272,900 61.13%
Board Chairman & CEO
3101 S.W. 3rd Avenue
Fort Lauderdale, FL
(B) Security Ownership of Management
Title Name and Address Amount and Nature (1) Percent
of Class of Beneficial Owner of Beneficial Ownership of Class
-------- ------------------- ----------------------- --------
Common Robert Uricho, Jr. 2,272,900 61.13%
Board Chairman & CEO
3101 S.W. 3rd Avenue
Fort Lauderdale, FL
Common All Other 6,076 **
Officers and Directors
Common All Officers and Directors 2,278,976 61.29%
As a group (6)
</TABLE>
* Includes 278,900 shares held by the University of Florida Foundation, Inc.
as Trustee of a Charitable Remainder Unitrust of which Mr. Uricho is the
income beneficiary.
** Less than 1%
(1)Based upon 3,718,070 shares outstanding at December 1, 1999.
While the Corporation has 500,000 authorized shares of preferred stock, no par
value, none have been issued. The only stock outstanding is 10 cents par value
Common Stock.
17
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Not Applicable
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(a) 1. Financial Statements filed as a part of the Form 10-KSB
Consolidated Balance Sheets as of
September 30,1999 and 1998 Page 7
Statements of Consolidated Income for each of the
two years in the period ended September 30, 1999 Page 8
Statements of stockholders' equity for each of the
two years in the period ended September 30, 1999 Page 9
Consolidated Statements of Cash Flows for each
of the two years in the period ended September 30, 1999 Page 9
Notes to Consolidated Financial Statements Pages 10-14
(a) 2. Financial Statement Schedules filed as part of the Form
10-KSB:
Report on Financial Statements Schedules of
Independent Public Accountants Page 8
</TABLE>
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements or
notes thereto.
Separate financial statements of the Company are omitted
because of the absence of the conditions under which they are
required.
(b) Reports on Form 8-K
None
18
<PAGE>
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.
SUNAIR ELECTRONICS, INC. Date November 16, 1999
-----------------
By /s/ Robert Uricho, Jr.
- ---------------------------------------
Robert Uricho, Jr.
Chairman of the Board, Director
President and Principal
Executive Officer
By /s/ Synnott B. Durham
- ---------------------------------------
Synnott B. Durham
Treasurer and Principal
Accounting Officer
By /s/ Shirley Uricho
- ---------------------------------------
Shirley Uricho
Secretary
By /s/ Earl M. Anderson, Jr..
- ---------------------------------------
Earl M. Anderson, Jr.
Director
By /s/ George F. Arata, Jr.
- ---------------------------------------
George F. Arata, Jr.
Director
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 533,478
<SECURITIES> 3,103,079
<RECEIVABLES> 618,791
<ALLOWANCES> 0
<INVENTORY> 8,205,312
<CURRENT-ASSETS> 9,398,216
<PP&E> 4,245,833
<DEPRECIATION> 3,303,934
<TOTAL-ASSETS> 13,443,194
<CURRENT-LIABILITIES> 753,543
<BONDS> 0
<COMMON> 371,807
0
0
<OTHER-SE> 11,703,844
<TOTAL-LIABILITY-AND-EQUITY> 13,443,194
<SALES> 2,708,273
<TOTAL-REVENUES> 3,645,988
<CGS> 1,869,314
<TOTAL-COSTS> 1,869,314
<OTHER-EXPENSES> 1,415,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,087
<INCOME-PRETAX> 382,180
<INCOME-TAX> 139,500
<INCOME-CONTINUING> 242,680
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,680
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
