UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number I-4334
SUNAIR ELECTRONICS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
FLORIDA 59-0780772
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(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
3101 SW THIRD AVE., FT. LAUDERDALE, FLA. 33315
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(ADDRESS OR PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (954) 525-1505
---------------------------
NONE
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Registrant's common stock - par value 10 cents, outstanding as of June 30, 2000
- 3,698,470 shares.
Transitional Small Business Disclosure format. Yes X No
--- ---
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SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
INDEX
*****
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<S> <C> <C>
PAGE NO.
********
PART I. FINANCIAL INFORMATION:
CONSOLIDATED CONDENSED BALANCE SHEETS - -
JUNE 30, 2000 AND SEPTEMBER 30, 1999 3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
NINE MONTHS ENDED JUNE 30, 2000 AND 1999 4
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
THREE MONTHS ENDED JUNE 30, 2000 AND 1999 5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -
NINE MONTHS ENDED JUNE 30, 2000 AND 1999 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED CONDENSED STATEMENTS 10-11
PART II. OTHER INFORMATION 13
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PART I. FINANCIAL INFORMATION
SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
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(UNAUDITED) (AUDITED)
ASSETS 06/30/00 9/30/99
------
----------------- -----------------
CURRENT ASSETS:
---------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,725,896 $ 533,478
ACCOUNTS AND NOTES RECEIVABLE 830,054 618,791
INVENTORIES 6,974,310 8,205,312
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 34,747 40,635
----------------- -----------------
TOTAL CURRENT ASSETS 9,565,007 9,398,216
----------------- -----------------
INVESTMENT IN MARKETABLE SECURITIES 3,081,574 3,103,079
-----------------------------------
PROPERTY, PLANT AND EQUIPMENT-NET 873,109 941,899
---------------------------------
TOTAL ASSETS $13,519,690 $13,443,194
============ =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
CURRENT LIABILITIES:
--------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 392,100 $ 681,463
CURRENT PORTION OF INCOME TAXES PAYABLE 9,880 72,080
----------------- -----------------
TOTAL CURRENT LIABILITIES 401,980 753,543
----------------- -----------------
LONG-TERM LIABILITIES:
---------------------
LONG-TERM PORTION OF INCOME TAXES PAYABLE 614,000 614,000
----------------- -----------------
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,
3,698,470 SHARES ISSUED
AND OUTSTANDING 369,847 371,807
ADDITIONAL PAID-IN-CAPITAL 2,606,899 2,606,899
RETAINED EARNINGS 9,526,964 9,096,945
----------------- -----------------
12,503,710 12,075,651
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $13,519,690 $13,443,194
======================================== ================= ===== ===========
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
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NINE MONTHS ENDED
-----------------
06/30/00 06/30/99
----------------- ------------------
<S> <C> <C>
SALES $5,773,922 $2,135,545
COST OF SALES 3,912,457 1,501,116
----------------- ------------------
GROSS PROFIT 1,861,465 634,429
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 1,288,859 953,228
----------------- ------------------
OPERATING INCOME (LOSS) 572,606 (318,799)
OTHER INCOME:
INTEREST INCOME 190,646 170,567
INTEREST EXPENSE 0 (121)
OTHER, NET (NOTE 8) 6,056 722,490
----------------- ------------------
INCOME BEFORE (PROVISION)
FOR INCOME TAXES 769,308 574,137
(PROVISION) FOR
INCOME TAXES (276,800) (207,400)
----------------- ------------------
NET INCOME $492,508 $366,737
================= ==================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,715,352 3,738,044
NET INCOME PER SHARE (BASIC AND DILUTED)
$ 0.13 $ 0.10
================= ==================
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
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THREE MONTHS ENDED
------------------
06/30/00 06/30/99
----------------- -----------------
<S> <C> <C>
SALES $627,997 $987,828
COST OF SALES 495,872 634,461
----------------- -----------------
GROSS PROFIT 132,125 353,367
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 363,237 312,759
----------------- -----------------
OPERATING INCOME (LOSS) (231,112) 40,608
OTHER INCOME:
INTEREST INCOME 71,221 57,076
INTEREST EXPENSE 0 0
OTHER, NET (NOTE 8) 3,448 716,653
----------------- -----------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES ( 156,443) 814,337
(PROVISION) BENEFIT FOR
INCOME TAXES 62,700 ( 296,400)
----------------- -----------------
NET INCOME (LOSS) $(93,743) $517,937
================= ==================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 3,700,350 3,725,982
NET INCOME PER SHARE (BASIC AND DILUTED) $( 0.03) $ 0.14
================= ==================
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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
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NINE MONTHS ENDED
-----------------
06/30/00 06/30/99
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME $492,508 $366,737
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 108,789 52,338
GAIN FROM SALE OF PROPERTY 0 ( 702,402)
CHANGES IN OPERATING ACTIVITIES:
(INCR) IN ACCOUNTS RECEIVABLE ( 211,263) ( 10,277)
(INCR) DECR IN INVENTORY 1,231,002 ( 306,616)
(INCR) DECR IN OTHER ASSETS 5,888 ( 29,093)
(DECR) IN ACCOUNTS PAYABLE AND
ACCRUED EXPENSES ( 267,859) ( 197,235)
INCR (DECR) IN ACCRUED INCOME TAX ( 62,200) 137,400
----------------- -----------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 1,296,865 ( 689,148)
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF PROPERTY, PLANT & EQUIPMENT ( 40,000) ( 135,558)
SALES OF INVESTMENTS - NET 0 345,115
PROCEEDS FROM SALE OF PROPERTY 0 798,960
----------------- -----------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES ( 40,000) 1,008,517
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASE OF OUTSTANDING SHARES ( 64,447) ( 100,181)
PRINCIPAL PAYMENT OF CAPITAL LEASE 0 ( 7,495)
----------------- -----------------
NET CASH (USED) BY FINANCING ACTIVITIES ( 64,447) ( 107,676)
----------------- -----------------
NET INCREASE IN CASH 1,192,418 211,693
CASH AT BEGINNING OF PERIOD 533,478 1,463,726
----------------- -----------------
CASH AT END OF PERIOD $1,725,896 $1,675,419
================= ==================
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR INTEREST $ 0 $ 121
================= ==================
CASH PAID DURING THE PERIOD FOR INCOME
TAXES $142,000 $ 40,000
================= ==================
</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-QSB 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 NINE MONTHS ENDED JUNE 30, 2000 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR THE FISCAL
YEAR ENDING SEPTEMBER 30,2000. FOR FURTHER INFORMATION REFER TO
THE CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES THERETO
INCLUDED IN THE COMPANY'S ANNUAL REPORT IN FORM 10-KSB FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1999.
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:
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6/30/00 9/30/99
------------------ ------------------
<S> <C> <C>
RAW MATERIALS $1,896,746 $1,605,639
WORK IN PROCESS 3,762,018 4,956,626
FINISHED GOODS 1,315,546 1,643,047
------------------ ------------------
$6,974,310 $8,205,312
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(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.
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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 FIVE 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.
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 JUNE 30, 2000 THE COMPANY HAD AUTHORIZED 400,000 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
-8-
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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 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.
ACCOUNTS AND NOTES RECEIVABLE INCLUDE A $231,000 NOTE ISSUED BY
THE BRAZILIAN GOVERNMENT BEARING 9% INTEREST AND A MATURITY DATE
OF APRIL 15, 2007. THE NOTE MAY BE PREPAID BEFORE MATURITY. THIS
NOTE REPRESENTS A FINANCING AGREEMENT FOR 20% OF THE SALE AMOUNT.
8 OTHER INCOME:
FOR THE QUARTER ENDED JUNE 30, 1999, OTHER INCOME INCLUDES THE
GAIN REALIZED FROM THE SALE OF THE COMPANY'S FOUR (4) ACRES OF
VACANT LAND IN THE AMOUNT OF $702,402.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY:
----------
DURING THE FIRST NINE MONTHS OF THE CURRENT FISCAL YEAR ENDING JUNE 30, 2000,
THE COMPANY MAINTAINED CASH AND SHORT TERM INVESTMENTS MORE THAN ADEQUATE TO
COVER KNOWN REQUIREMENTS, UNFORESEEN EVENTS OR UNCERTAINTIES THAT MIGHT OCCUR.
DURING THE NINE MONTH PERIOD, CASH AND SHORT TERM INVESTMENTS MAINTAINED AN
AVERAGE BALANCE OF $1,334,000, COMPARED TO AN AVERAGE BALANCE OF $1,058,000 FOR
THE TWELVE MONTHS ENDED SEPTEMBER 30,1999. 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 2000. INVENTORIES CONTAIN NO OBSOLESCENCE AS ADJUSTMENTS ARE
MADE AS THEY OCCUR. ACCOUNTS AND NOTES RECEIVABLE CONTAIN NO BAD DEBTS. INTERIM
NON-CASH RESERVES ARE MAINTAINED TO COVER WARRANTEE REPAIRS AND OTHER CHARGES
THAT MAY BE IN DISPUTE. ALL MONETARY TRANSACTIONS ARE IN U.S. DOLLARS AND NO
LETTERS OF CREDIT INVOLVE FOREIGN EXCHANGE.
CAPITAL RESOURCES:
------------------
DURING THE FIRST NINE MONTHS OF THE CURRENT FISCAL YEAR, THE COMPANY EXPENDED
$40,000 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.
RESULTS OF OPERATIONS:
----------------------
DURING THE THIRD QUARTER OF THE CURRENT FISCAL YEAR ENDED JUNE 30, 2000,
SHIPMENTS WERE $627,997, DOWN FROM SHIPMENTS OF $1,459,746 FOR THE QUARTER ENDED
MARCH 31, 2000. SHIPMENTS FOR THE NINE MONTHS ENDED JUNE 30, 2000 WERE
$5,773,922, UP FROM SHIPMENTS OF $2,135,545 OR 170.4% FOR THE SAME PERIOD ONE
YEAR AGO. EXPORT SHIPMENTS FOR THE NINE MONTHS ENDED JUNE 30, 2000 WERE
$2,397,798 OR 41.5% OF TOTAL SALES, UP $1,653,154 OR 222.0% FROM THE SAME PERIOD
ONE YEAR AGO. DOMESTIC SHIPMENTS FOR THE FIRST NINE MONTHS OF THE CURRENT FISCAL
YEAR WERE $3,376,124 OR 142.7% AHEAD OF SHIPMENTS FOR THE SAME PERIOD ONE YEAR
AGO OF $1,390,901.
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RESULTS OF OPERATIONS: (CONTINUED)
----------------------
SHIPMENTS FOR THE FIRST NINE MONTHS WERE SIGNIFICANTLY HIGHER THAN SHIPMENTS FOR
THE SAME PERIOD ONE YEAR AGO DUE TO DELIVERY OF A MAJOR PORTION OF THE COMPANY'S
$5,100,000 BACKLOG AT SEPTEMBER 30, 1999. BACKLOG AT JUNE 30, 2000 WAS
$1,821,000 AS COMPARED TO $5,231,000 FOR THE SAME PERIOD A YEAR AGO. THE
COMPANY'S BACKLOG IS LOWER AT JUNE 30, 2000 DUE TO CONTINUED DELAYS IN EXPECTED
NEW ORDERS.
IN THE THIRD QUARTER, THE COMPANY RECEIVED A FIVE YEAR REQUIREMENTS CONTRACT
FROM THE U.S. COAST GUARD TO REPLACE EXISTING SUNAIR EQUIPMENT IN EXCESS OF
$14,700,000. AN ORDER FOR $1,000,000 WAS RECEIVED IN THE THIRD QUARTER AGAINST
THE CONTRACT FOR SHIPMENT IN THE FOURTH QUARTER OF FISCAL 2000. THE TIMING OF
ORDERS FOR THE BALANCE OF THE CONTRACT AS WELL AS ORDERS AGAINST A $5,000,000
BASIC ORDERING AGREEMENT WITH THE U.S. COAST GUARD TO SUPPLY A LARGE NUMBER OF
HIGH POWERED HF SYSTEMS, HAS NOT BEEN DETERMINED AT THIS TIME. THE REMAINING
REQUIREMENTS ON THESE CONTRACTS ARE NOT INCLUDED IN THE COMPANY'S BACKLOG OF
$1,821,000.
INVENTORY AT JUNE 30, 2000 WAS $1,231,000 LOWER THAN SEPTEMBER 30, 1999 DUE TO
INCREASED SHIPMENTS DURING THE FIRST NINE MONTHS OF THE CURRENT FISCAL YEAR AND
THE COMPANY'S EFFORTS TO DECREASE INVENTORY. DUE TO EXTENDED PROCUREMENT AND
BUILD TIMES, SUFFICIENT INVENTORY MUST BE MAINTAINED TO MEET CONTRACTUAL
DELIVERIES AS WELL AS ANTICIPATED CUSTOMER REQUIREMENTS. DUE TO AN INCREASED
NUMBER OF PRODUCT CONFIGURATIONS, IT IS NECESSARY TO CARRY A QUANTITY OF MANY
DIFFERENT MODELS IN FINISHED GOODS, AND IN WORK-IN-PROCESS, TO MEET DELIVERY
REQUIREMENTS OF THE U.S. COAST GUARD AS WELL AS OTHER REQUIREMENTS THAT MAY
ARISE.
WITH EXPANDED DELIVERY OF THE NEW "PATHFINDER" SYSTEM, THE COMPANY CONTINUES TO
ESTABLISH ITSELF AS A SYSTEMS INTEGRATOR WITH SOLID GROWTH POTENTIAL IN SYSTEMS
ORIENTED PROJECTS. IN ADDITION TO THE SOFTWARE AND SYSTEMS CAPABILITIES
DEVELOPED THROUGH R & D EFFORTS, PROGRESS CONTINUES ON THE DEVELOPMENT OF A NEW
GENERATION SERIES OF HF DIGITAL RADIO COMMUNICATION SYSTEMS WHICH WILL ALLOW
USERS TO SEND BOTH FACSIMILE AND E-MAIL MESSAGES 100% ERROR FREE.
TO MEET THIS NEW DEMAND, THE COMPANY HAS DEVELOPED PLANS FOR EXPANSION OF
MARKETING AND ENGINEERING EFFORTS TO AGGRESSIVELY PURSUE KNOWN OPPORTUNITIES IN
THE U.S. AND OVERSEAS MARKETS, AS WELL AS DEVELOPMENT OF NEW MARKETS AND
CAPABILITIES. TO FACILITATE THIS, THE COMPANY HAS ADDED A NEW POSITION OF
DIRECTOR OF BUSINESS DEVELOPMENT. INQUIRIES INTO THE SOUTH AMERICAN MARKET WERE
INITIATED AND SEVERAL COUNTRIES WERE VISITED THIS QUARTER WITH OPTIMISTIC
RESULTS.
THE COMPANY INSTALLED A NEW COMPUTER SYSTEM TO MEET THE REQUIREMENTS OF THE YEAR
2000 AND BEYOND. EXISTING APPLICATION SOFTWARE WAS MODIFIED BY IN-HOUSE
PERSONNEL AND LIMITED PARTICIPATION BY OUTSIDE CONSULTANTS TO OPERATE CORRECTLY
IN THE YEAR 2000. THE CONVERSION TO YEAR 2000 COMPLIANT HARDWARE AND SOFTWARE
WAS SUCCESSFUL AND HAD LITTLE IMPACT ON THE FINANCIAL CONDITION OF THE COMPANY
AS THESE COSTS WERE OFFSET WITH REDUCED MAINTENANCE COSTS AND INCREASED
EFFICIENCY AND PRODUCTIVITY.
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GENERAL AND ADMINISTRATIVE EXPENSES OF $1,288,859 INCREASED $335,631 FROM THE
SAME PERIOD ONE YEAR AGO PRIMARILY DUE TO INCREASED MARKETING EFFORTS AND THE
ADDITION OF NEW PERSONNEL. THE DIRECT LABOR FORCE CONTINUES AT A REDUCED LEVEL
DUE TO SUFFICIENT INVENTORY LEVELS. INTEREST INCOME INCREASED DUE TO INCREASED
INVESTMENTS IN CASH EQUIVALENT.
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PART II OTHER INFORMATION
5. OTHER INFORMATION
NONE
6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
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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.
<TABLE>
<CAPTION>
<S> <C>
SUNAIR ELECTRONICS, INC.
JUNE 11, 2000 /S/ ROBERT URICHO, JR.
DATE______________________________________________
------------------------------
ROBERT URICHO, JR., PRINCIPAL
EXECUTIVE OFFICER
JUNE 11, 2000 /S/ SYNNOTT B. DURHAM
DATE______________________________________________ ______________________________
SYNNOTT B. DURHAM, PRINCIPAL
ACCOUNTING OFFICER
</TABLE>
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