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 March 31, 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.
-------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<CAPTION>
<S> <C>
FLORIDA 59-0780772
- --------------------------------------------------------------------- --------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER 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)
</TABLE>
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 March 31, 2000
- - 3,718,070 shares.
Transitional Small Business Disclosure format. Yes X No
---- ----
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SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
INDEX
-----
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PAGE NO.
--------
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PART I. FINANCIAL INFORMATION:
CONSOLIDATED CONDENSED BALANCE SHEETS - -
MARCH 31, 2000 AND SEPTEMBER 30, 1999 3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 4
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -
SIX MONTHS ENDED MARCH 31, 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 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
ASSETS 3/31/00 9/30/99
- ------ -------------- ------------
<S> <C> <C>
CURRENT ASSETS:
- ---------------
CASH AND CASH EQUIVALENTS $ 2,339,475 $ 533,478
ACCOUNTS AND NOTES RECEIVABLE 1,175,959 618,791
INVENTORIES 6,309,201 8,205,312
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 30,182 40,635
----------- -----------
TOTAL CURRENT ASSETS 9,854,817 9,398,216
----------- -----------
INVESTMENT IN MARKETABLE SECURITIES 3,088,742 3,103,079
- -----------------------------------
PROPERTY, PLANT AND EQUIPMENT-NET 897,714 941,899
- --------------------------------
TOTAL ASSETS $13,841,273 $13,443,194
============ =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES:
- --------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 350,794 $ 681,463
CURRENT PORTION OF INCOME TAXES PAYABLE 214,580 72,080
----------- -----------
TOTAL CURRENT LIABILITIES 565,374 753,543
----------- -----------
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,
3,718,070 SHARES ISSUED
AND OUTSTANDING 371,807 371,807
ADDITIONAL PAID-IN-CAPITAL 2,606,899 2,606,899
RETAINED EARNINGS 9,683,193 9,096,945
----------- -----------
12,661,899 12,075,651
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $13,841,273 $13,443,194
========================================= =========== ===========
</TABLE>
3
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED
----------------
3/31/00 3/31/99
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<S> <C> <C>
SALES $5,145,925 $1,147,717
COST OF SALES 3,416,585 866,655
--------- -------
GROSS PROFIT 1,729,340 281,062
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 925,622 640,469
--------- -------
OPERATING INCOME (LOSS) 803,718 ( 359,407)
OTHER INCOME:
INTEREST INCOME 119,425 113,491
INTEREST EXPENSE 0 ( 121)
OTHER, NET 2,608 5,837
--------- -------
INCOME (LOSS) BEFORE (PROVISION)
BENEFIT FOR INCOME TAXES 925,751 ( 240,200)
(PROVISION) BENEFIT FOR
INCOME TAXES ( 339,500) 89,000
--------- -------
NET INCOME (LOSS) $586,251 $( 151,200)
======== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,718,070 3,744,074
NET INCOME PER SHARE (BASIC AND DILUTED)
$ 0.16 $ ( 0.04)
======== ==========
</TABLE>
4
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
3/31/00 3/31/99
------- -------
<S> <C> <C>
SALES $1,459,746 $ 541,210
COST OF SALES 1,043,720 416,529
--------- -------
GROSS PROFIT 416,026 124,681
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 401,579 338,226
--------- -------
OPERATING INCOME (LOSS) 14,447 ( 213,545)
OTHER INCOME:
INTEREST INCOME 51,536 56,402
INTEREST EXPENSE 0 ( 21)
OTHER, NET 1,808 3,477
--------- -------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 67,791 ( 153,687)
(PROVISION) BENEFIT FOR
INCOME TAXES ( 23,500) 57,400
--------- -------
NET INCOME (LOSS) $ 44,291 $( 96,287)
======== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 3,718,070 3,740,626
NET INCOME PER SHARE (BASIC AND DILUTED) $ 0.01 $( 0.03)
======== ==========
</TABLE>
5
<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
3/31/00 3/31/99
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 586,251 $( 151,200)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 72,526 36,303
CHANGES IN OPERATING ACTIVITIES:
(INCR) IN ACCOUNTS RECEIVABLE ( 557,168) ( 14,566)
(INCR) DECR IN INVENTORY 1,896,111 ( 307,919)
(INCR) DECR IN OTHER ASSETS 10,453 ( 1,043)
(DECR) INCR IN ACCOUNTS PAYABLE AND
ACCRUED EXPENSES ( 316,335) 116,170
(DECR) INCR IN ACCRUED INCOME TAX 142,500 ( 89,000)
---------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 1,834,338 ( 411,255)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF PROPERTY, PLANT & EQUIPMENT ( 28,341) ( 88,979)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASE OF OUTSTANDING SHARES 0 ( 54,616)
PRINCIPAL PAYMENT OF CAPITAL LEASE 0 ( 7,495)
---------- ----------
NET CASH USED BY FINANCING ACTIVITIES 0 ( 62,111)
---------- ----------
NET INCREASE (DECREASE) IN CASH 1,805,997 ( 562,345)
CASH AT BEGINNING OF PERIOD 533,478 1,463,726
---------- ----------
CASH AT END OF PERIOD $2,339,475 $901,381
========== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD $ 0 $ 121
========== ========
FOR INTEREST
CASH PAID DURING THE PERIOD FOR INCOME
TAXES $ 197,000 $ 40,000
========== ========
</TABLE>
6
<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 SIX MONTHS ENDED MARCH 31, 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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<CAPTION>
3/31/00 9/30/99
------------------ ------------------
<S> <C> <C>
RAW MATERIALS $1,549,349 $1,605,639
WORK IN PROCESS 3,548,684 4,956,626
FINISHED GOODS 1,211,168 1,643,047
------------------ ------------------
$6,309,201 $8,205,312
</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.
7
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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 MARCH 31, 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 SERVICES,
GEOGRAPHIC AREAS, AND
8
<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. 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.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY:
- ----------
DURING THE FIRST SIX MONTHS OF THE CURRENT FISCAL YEAR ENDING MARCH 31, 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 SIX MONTH PERIOD, CASH AND SHORT TERM INVESTMENTS MAINTAINED AN
AVERAGE BALANCE OF $842,000, 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 SIX MONTHS OF THE CURRENT FISCAL YEAR, THE COMPANY EXPENDED
$28,341 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 SECOND QUARTER OF THE CURRENT FISCAL YEAR ENDED MARCH 31, 2000,
SHIPMENTS WERE $1,459,746, UP FROM SHIPMENTS OF $541,210 FOR THE QUARTER ENDED
DECEMBER 31, 1999. SHIPMENTS FOR THE SIX MONTHS ENDED MARCH 31, 2000 WERE
$5,145,925, UP FROM SHIPMENTS OF $1,147,717 OR 348.4% FOR THE SAME PERIOD ONE
YEAR AGO. EXPORT SHIPMENTS FOR THE SIX MONTHS ENDED MARCH 31, 2000 WERE
$2,271,667 OR 44.1% OF TOTAL SALES, UP $1,988,308 OR 701.7% FROM THE SAME PERIOD
ONE YEAR AGO. DOMESTIC SHIPMENTS FOR THE FIRST SIX MONTHS OF THE CURRENT FISCAL
YEAR WERE $2,874,258 OR 232.5% AHEAD OF SHIPMENTS FOR THE SAME PERIOD ONE YEAR
AGO OF $864,358.
10
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RESULTS OF OPERATIONS: (CONTINUED)
- ----------------------
SHIPMENTS FOR THE FIRST SIX 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 MARCH 31, 2000 WAS
$1,144,000 AS COMPARED TO $5,620,000 FOR THE SAME PERIOD A YEAR AGO. THE
COMPANY'S BACKLOG IS LOWER AT MARCH 31, 2000 DUE TO DELAYS IN EXPECTED NEW
ORDERS. THE COMPANY'S BACKLOG ALSO DOES NOT INCLUDE A BASIC ORDERING AGREEMENT
WITH THE U.S. COAST GUARD TO SUPPLY A LARGE NUMBER OF HIGH POWERED HF SYSTEMS
HAVING A POTENTIAL VALUE IN EXCESS OF $5,000,000 WITHIN THE NEXT FIVE YEARS.
INVENTORY AT MARCH 31, 2000 WAS $1,900,000 LOWER THAN SEPTEMBER 30, 1999 DUE TO
INCREASED SHIPMENTS DURING THE FIRST SIX 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 KNOWN AND
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, AS WELL AS WORK-IN-PROCESS, TO MEET DELIVERY REQUIREMENTS THAT
MAY ARISE. MANAGEMENT WILL CONTINUE ITS EFFORTS TO REDUCE INVENTORIES.
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. THE 2000 SERIES
WILL ALLOW USERS TO SEND BOTH FACSIMILE AND E-MAIL MESSAGES 100% ERROR FREE OVER
COMMUNICATION PORTS.
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.
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.
GENERAL AND ADMINISTRATIVE EXPENSES OF $925,622 INCREASED $285,153 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 REMAINED UNCHANGED FROM ONE
YEAR AGO.
11
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PART II OTHER INFORMATION
5. OTHER INFORMATION
NONE
6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
12
<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.
<TABLE>
<CAPTION>
<S> <C>
SUNAIR ELECTRONICS, INC.
DATE MAY 12, 2000 /S/ ROBERT URICHO, JR.
----------------------------------------- ------------------------------
ROBERT URICHO, JR., PRINCIPAL
EXECUTIVE OFFICER
MAY 12, 2000 /S/ SYNNOTT B. DURHAM
DATE ----------------------------------------- ------------------------------
SYNNOTT B. DURHAM, PRINCIPAL
ACCOUNTING OFFICER
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,339,475
<SECURITIES> 3,088,742
<RECEIVABLES> 1,175,959
<ALLOWANCES> 600
<INVENTORY> 6,309,201
<CURRENT-ASSETS> 9,854,817
<PP&E> 4,274,174
<DEPRECIATION> 3,376,460
<TOTAL-ASSETS> 13,841,273
<CURRENT-LIABILITIES> 565,374
<BONDS> 0
<COMMON> 371,807
0
0
<OTHER-SE> 12,290,092
<TOTAL-LIABILITY-AND-EQUITY> 13,841,273
<SALES> 5,145,925
<TOTAL-REVENUES> 5,268,558
<CGS> 3,416,585
<TOTAL-COSTS> 3,416,585
<OTHER-EXPENSES> 925,622
<LOSS-PROVISION> 600
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 925,741
<INCOME-TAX> 339,500
<INCOME-CONTINUING> 586,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 586,251
<EPS-BASIC> .16
<EPS-DILUTED> .16
</TABLE>
