UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER 1-4334
***************** *************
SUNAIR ELECTRONICS, INC.
***************************************************************************
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-0780772
*************************************** ************************
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3101 SW THIRD AVE., FT. LAUDERDALE, FLA. 33315
**************************************** **************
(ADDRESS OR PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (954) 525-1505
**************
NONE
**************************************************************************
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1)HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES ( X ) NO ( )
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE REPORT.
CLASS OUTSTANDING AT
***************************** ****************************
COMMON STOCK, $0.10 PAR VALUE 12/31/98 - 3,743,070 SHARES
- 1 -
<PAGE>
SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
INDEX
*****
<TABLE>
<CAPTION>
PAGE NO.
********
<S> <C>
PART I. FINANCIAL INFORMATION:
CONSOLIDATED CONDENSED BALANCE SHEETS - -
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997 4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997 5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS 6-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED CONDENSED STATEMENTS 9-10
PART II. OTHER INFORMATION 11
</TABLE>
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 12/31/98 9/30/98
- ------ ----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
- --------------
CASH AND CASH EQUIVALENTS $ 1,066,283 $ 1,463,726
ACCOUNTS AND NOTES RECEIVABLE 505,413 474,065
INVENTORIES 6,905,962 6,807,635
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 53,773 40,920
----------------- -----------------
TOTAL CURRENT ASSETS 8,531,431 8,786,346
----------------- -----------------
INVESTMENT IN MARKETABLE SECURITIES 3,124,585 3,131,753
- -----------------------------------
PROPERTY, PLANT AND EQUIPMENT-NET 1,045,607 1,025,096
- ---------------------------------
TOTAL ASSETS $12,701,623 $12,943,195
============ ================ ================
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES:
- -------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 112,274 $ 231,934
CURRENT PORTION OF CAPITALIZED LEASE 849 7,495
CURRENT PORTION OF INCOME TAXES PAYABLE 0 33,614
----------------- -----------------
TOTAL CURRENT LIABILITIES 113,123 273,043
----------------- -----------------
LONG-TERM LIABILITIES:
- ---------------------
LONG-TERM PORTION OF INCOME TAXES PAYABLE 737,000 737,000
----------------- -----------------
TOTAL LONG-TERM LIABILITIES 737,000 737,000
----------------- -----------------
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,
3,743,070 AND 3,756,270 SHARES ISSUED
AND OUTSTANDING AT 12/31/98 AND
9/30/98 RESPECTIVELY 374,307 375,627
ADDITIONAL PAID-IN-CAPITAL 2,581,480 2,606,899
RETAINED EARNINGS 8,895,713 8,950,626
----------------- -----------------
11,851,500 11,933,152
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $12,701,623 $12,943,195
======================================== ================ ================
</TABLE>
- 3 -
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
12/31/98 12/31/97
----------------- ------------------
<S> <C> <C>
SALES $ 606,507 $1,148,170
COST OF SALES 450,126 827,296
----------------- ------------------
GROSS PROFIT 156,381 320,874
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 302,243 287,480
----------------- ------------------
OPERATING (LOSS) ( 145,862) 33,394
OTHER INCOME:
INTEREST INCOME 57,089 63,418
INTEREST EXPENSE ( 100) ( 380)
OTHER, NET 2,360 1,405
----------------- ------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES ( 86,513) 97,837
(PROVISION) BENEFIT FOR
INCOME TAXES 31,600 ( 31,400)
----------------- ------------------
NET INCOME (LOSS) $( 54,913) $ 66,437
================ =================
WEIGHTED AVERAGE NUMBER OF COMMON 3,747,448 3,929,000
SHARES OUTSTANDING
NET INCOME PER SHARE (BASIC AND DILUTED) $( 0.01) $ 0.02
================ =================
</TABLE>
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<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
12/31/98 12/31/97
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $( 54,913) $ 66,437
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 18,152 23,219
CHANGES IN OPERATING ACTIVITIES:
(INCR) ACCOUNTS RECEIVABLE ( 31,348) ( 45,480)
(INCR) DECR IN INVENTORY ( 98,327) 326,512
(INCR) IN OTHER ASSETS ( 12,853) ( 12,613)
(DECR) IN ACCOUNTS PAYABLE AND
ACCRUED EXPENSES ( 114,506) ( 179,815)
(DECR) INCR IN ACCRUED INCOME TAX ( 31,600) 1,400
----------------- ------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES ( 325,395) 179,660
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF PROPERTY, PLANT & EQUIPMENT ( 38,663) ( 62,313)
SALES OF INVESTMENTS - NET 0 38,100
----------------- ------------------
NET CASH USED BY
INVESTING ACTIVITIES ( 38,663) ( 24,213)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASE OF OUTSTANDING SHARES ( 26,739) ( 117,759)
PRINCIPAL PAYMENT OF CAPITAL LEASE ( 6,646) ( 4,117)
----------------- ------------------
NET CASH USED BY FINANCING ACTIVITIES ( 33,385) ( 121,876)
NET INCREASE (DECREASE) IN CASH ( 397,443) 33,571
CASH AT BEGINNING OF PERIOD 1,463,726 1,511,013
----------------- ------------------
CASH AT END OF PERIOD $1,066,283 $1,544,584
================ =================
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD $ 100 $ 0
FOR INTEREST ================ =================
CASH PAID DURING THE PERIOD FOR INCOME
TAXES $ 40,000 $ 30,000
================ =================
</TABLE>
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<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
THE ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH THE INSTRUCTIONS TO FORM 10-Q AND DO
NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL
STATEMENTS. IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS
(CONSISTING OF NORMAL RECURRING ACCRUALS) CONSIDERED NECESSARY
FOR A FAIR PRESENTATION HAVE BEEN INCLUDED. OPERATING RESULTS FOR
THE THREE MONTHS ENDED DECEMBER 31, 1998 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR THE FISCAL
YEAR ENDING SEPTEMBER 30,1999. FOR FURTHER INFORMATION REFER TO
THE CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES THERETO
INCLUDED IN THE COMPANY'S ANNUAL REPORT IN FORM 10-K FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1998.
2. ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION-
THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE
ACCOUNTS OF THE COMPANY AND ITS SUBSIDIARY. ALL SIGNIFICANT
INTER-COMPANY ACCOUNTS AND TRANSACTIONS HAVE BEEN ELIMINATED IN
CONSOLIDATION.
(B) PROPERTY, PLANT AND EQUIPMENT-
PROPERTY, PLANT AND EQUIPMENT IS DEPRECIATED OVER THE ESTIMATED
USEFUL LIVES OF THE ASSETS USING BOTH STRAIGHT-LINE AND
ACCELERATED METHODS.
(C) RESEARCH AND DEVELOPMENT COSTS-
ALL RESEARCH AND DEVELOPMENT COSTS ARE CHARGED TO EXPENSE AS
INCURRED.
(D) EARNINGS PER COMMON SHARE-
EARNINGS PER COMMON SHARE ARE COMPUTED BASED ON WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING DURING EACH PERIOD.
(E) INVENTORIES-
INVENTORIES CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
12/31/98 9/30/98
------------------ ------------------
<S> <C> <C>
RAW MATERIALS $1,598,677 $1,534,908
WORK IN PROCESS 3,547,430 3,879,230
FINISHED GOODS 1,759,855 1,393,497
------------------ ------------------
$6,905,962 $6,807,635
</TABLE>
(F) INVESTMENTS -
INVESTMENTS INCLUDE PRIVATE EXPORT FUNDING CORPORATION (PEFCO)
NOTES. 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.
- 6 -
<PAGE>
3. INCOME TAXES:
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 THIS
UNPAID PORTION.
4. PREFERRED STOCK:
THE COMPANY HAS 500,000 AUTHORIZED SHARES OF PREFERRED STOCK, NO
PAR VALUE, THAT MAY BE ISSUED AT SUCH TERMS AND PROVISIONS AS
DETERMINED BY THE BOARD OF DIRECTORS. NONE ARE OUTSTANDING.
5. STOCK OPTIONS:
AS OF DECEMBER 31, 1998 THE COMPANY HAD AUTHORIZED 100,000 SHARES
FOR NON-QUALIFIED STOCK OPTIONS. NONE HAVE BEEN ISSUED.
6. 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. THE ADOPTION OF SFAS 128
DOES 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 ESTABLISHES
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 HAS 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
ESTABLISHES STANDARDS FOR RELATED DISCLOSURES ABOUT PRODUCTS AND
SERVICES, GEOGRAPHIC AREAS, AND
- 7 -
<PAGE>
MAJOR CUSTOMERS. SFAS NO. 131 IS EFFECTIVE FOR FINANCIAL
STATEMENTS FOR FISCAL YEARS BEGINNING AFTER DECEMBER 15, 1997.
FINANCIAL STATEMENT DISCLOSURES FOR PRIOR PERIODS ARE REQUIRED TO
BE RESTATED. THE ADOPTION OF SFAS NO. 131 HAS NO IMPACT ON
SUNAIR'S CONSOLIDATED RESULTS OF OPERATIONS, FINANCIAL POSITION
OR CASH FLOWS.
7 FINANCIAL INSTRUMENTS:
THE CARRYING AMOUNTS OF CASH AND CASH EQUIVALENTS, ACCOUNTS
RECEIVABLE, LOANS PAYABLE, ACCOUNTS PAYABLE AND ACCRUED INCOME
TAXES PAYABLE APPROXIMATE FAIR VALUE DUE TO THE SHORT MATURITY OF
THE INSTRUMENTS AND RESERVES FOR POTENTIAL LOSSES, AS APPLICABLE.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY:
----------
DURING THE FIRST THREE MONTHS OF THE CURRENT FISCAL YEAR ENDING DECEMBER 31,
1998, THE COMPANY MAINTAINED CASH AND SHORT TERM INVESTMENTS MORE THAN ADEQUATE
TO COVER KNOWN REQUIREMENTS, UNFORESEEN EVENTS OR UNCERTAINTIES THAT MIGHT
OCCUR. DURING THE THREE MONTH PERIOD, CASH AND SHORT TERM INVESTMENTS MAINTAINED
AN AVERAGE BALANCE OF $1,243,000, COMPARED TO AN AVERAGE BALANCE OF $1,438,000
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30,1998 OR AN AVERAGE BALANCE OF
$1,277,000 FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997. 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 THE REST OF FISCAL 1999. 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 FIRST THREE MONTHS OF THE CURRENT FISCAL YEAR, THE COMPANY EXPENDED
$38,663 FOR CAPITAL ASSETS. 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 AND EXPENSES
RELATED TO THE CURRENT ACCOUNTING PERIOD AND THE CAPITAL LEASE.
RESULTS OF OPERATIONS:
- ----------------------
DURING THE FIRST QUARTER OF THE CURRENT FISCAL YEAR ENDED DECEMBER 31, 1998,
SHIPMENTS WERE $606,507, DOWN FROM SHIPMENTS OF $1,148,170 OR 47% FOR THE SAME
QUARTER ONE YEAR AGO AND UP $143,926 OR 31% FOR THE FIRST QUARTER ENDED DECEMBER
31, 1996. EXPORT SHIPMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 WERE
$182,579 OR 30% OF TOTAL SALES, DOWN $151,803 OR 45% FROM THE SAME PERIOD ONE
YEAR AGO. DOMESTIC SHIPMENTS FOR THE FIRST THREE MONTHS OF THE CURRENT FISCAL
YEAR WERE $423,928, COMPARABLE TO SHIPMENTS FOR THE SAME PERIOD ONE YEAR AGO OF
$813,788, DOWN $389,860 OR 48%. MANAGEMENT CONTINUES TO MONITOR SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES WHICH INCREASED $14,763 FROM THE SAME PERIOD ONE
YEAR AGO. THE DIRECT LABOR FORCE CONTINUES AT A REDUCED LEVEL DUE TO SUFFICIENT
INVENTORY LEVELS IN FINISHED GOODS.
- 9 -
<PAGE>
RESULTS OF OPERATIONS: (CONTINUED)
- ----------------------
SHIPMENTS FOR THE FIRST QUARTER WERE LOWER THAN SHIPMENTS FOR THE SAME PERIOD OF
ONE YEAR AGO DUE TO EXTENDED DELIVERY SCHEDULES ON NEW CONTRACTS. AS STATED IN
THE PRESIDENT'S MESSAGE OF THE ANNUAL REPORT, THE COMPANY RECEIVED NEW ORDERS IN
EXCESS OF $3,800,000 FOR DELIVERY OVER THE NEXT 18 MONTHS TO SUPPLY HF
SUBSYSTEMS TO PROVIDE FULL DUPLEX VOICE AND DATA CAPABILITY FOR LONG RANGE
POINT-TO-POINT AND GROUND-TO-AIR OPERATION AS WELL AS LONG RANGE SWITCH SYSTEMS
FOR DELIVERY TO A FOREIGN NAVY.
THE COMPANY CONTINUES TO BE OPTIMISTIC ABOUT FUTURE REQUIREMENTS EVEN THOUGH THE
PROCUREMENT CYCLE CONTINUES TO BE EXTREMELY LONG DUE TO THE COMPLEXITY OF DESIGN
OF THE SYSTEM REQUIREMENTS EXPERIENCED IN THE MARKET TODAY. NEW MARKET
OPPORTUNITIES ARE BEING PURSUED IN CENTRAL AND SOUTH AMERICA AND OTHER
GEOGRAPHIC AREAS NOT COVERED PREVIOUSLY AND THE COMPANY HAS REALIZED SOME
BUSINESS FROM THESE AREAS AND CONTINUES TO BE OPTIMISTIC FOR INCREASED BUSINESS
IN THE FUTURE.
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 DOES, HOWEVER, PLAN TO REPLACE OLDER SOFTWARE
WITH STATE-OF-THE-ART SOFTWARE IN THE YEAR 1999 FOR MORE EFFICIENT OPERATIONS
AND INVENTORY CONTROL. THE COST FOR THIS PROJECT IS ESTIMATED AT APPROXIMATELY
$75,000.
THIS QUARTER THE COMPANY BEGAN THE NECESSARY STEPS TO BECOME ISO-9000 REGISTERED
AND CURRENTLY IS PROCEEDING WITH THE NECESSARY DOCUMENTATION AND AUDIT
PROCEDURES TO ACCOMPLISH REGISTRATION BY MID 1999.
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<PAGE>
PART II OTHER INFORMATION
5. OTHER INFORMATION
NONE
6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
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<PAGE>
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND 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.
FEBRUARY 11, 1999 /S/ ROBERT URICHO, JR.
DATE______________________________________
------------------------------
ROBERT URICHO, JR., PRINCIPAL
EXECUTIVE OFFICER
FEBRUARY 11, 1999 /S/ SYNNOTT B. DURHAM
DATE______________________________________ ______________________________
SYNNOTT B. DURHAM, PRINCIPAL
ACCOUNTING OFFICER
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095366
<NAME> SUNAIR ELECTRONICS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,066,283
<SECURITIES> 3,124,585
<RECEIVABLES> 505,413
<ALLOWANCES> 300
<INVENTORY> 6,905,962
<CURRENT-ASSETS> 8,531,431
<PP&E> 4,295,973
<DEPRECIATION> 3,250,366
<TOTAL-ASSETS> 12,701,623
<CURRENT-LIABILITIES> 113,123
<BONDS> 0
<COMMON> 374,307
0
0
<OTHER-SE> 11,477,193
<TOTAL-LIABILITY-AND-EQUITY> 12,701,623
<SALES> 606,507
<TOTAL-REVENUES> 665,856
<CGS> 450,126
<TOTAL-COSTS> 450,126
<OTHER-EXPENSES> 302,243
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> (86,513)
<INCOME-TAX> (31,600)
<INCOME-CONTINUING> (54,913)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,913)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
