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 December 31, 2003
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 SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-0780772
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3005 SW THIRD AVE., FT. LAUDERDALE, FL. 33315
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(ADDRESS OR PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
ISSUER'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)
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 December 31,
2003 - 3,800,520 shares.
Transitional Small Business Disclosure format. Yes [ ] No [X]
SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
INDEX
*****
PAGE NO.
********
PART I. FINANCIAL INFORMATION:
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED CONDENSED BALANCE SHEETS - -
DECEMBER 31, 2003 AND SEPTEMBER 30, 2003 3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002 4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002 5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS 6-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED CONDENSED STATEMENTS 11-14
ITEM 3. CONTROLS AND PROCEDURES 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. CHANGES IN SECURITIES 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
2
PART I. FINANCIAL INFORMATION
SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
ASSETS
12/31/03 9/30/03
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 1,409,435 $ 1,022,175
Accounts receivable 547,412 1,768,772
Interest receivable 157,668 108,510
Inventories 7,148,267 7,053,241
Short term investments 1,999,398 1,500,000
Prepaid and other current assets 39,101 20,008
----------- -----------
Total Current Assets 11,301,281 11,472,706
INVESTMENTS 2,981,215 2,988,383
NOTE RECEIVABLE 334,986 334,986
PROPERTY, PLANT, AND EQUIPMENT, net 652,891 681,095
----------- -----------
TOTAL ASSETS $15,270,373 $15,477,170
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 381,335 $ 611,458
Income taxes payable 52,459 219,959
----------- -----------
Total Current Liabilities 433,794 831,417
INCOME TAXES PAYABLE, net of current
portion -- 122,000
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 500,000
shares authorized, none issued and
outstanding -- --
Common stock, $.10 par value, 6,000,000
shares authorized, 3,800,520, and
3,738,170 shares issued and outstanding
at December 31, 2003 and
September 30, 2003, respectively 380,052 373,817
Additional paid-in-capital 2,838,991 2,704,939
Retained earnings 11,617,536 11,444,997
----------- -----------
Total Stockholders' Equity 14,836,579 14,523,753
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $15,270,373 $15,477,170
=========== ===========
The accompanying notes are an integral part of these financial statements
3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
------------------
12/31/03 12/31/02
----------- -----------
SALES $ 1,314,574 $ 1,065,447
COST OF SALES 698,249 555,199
----------- -----------
GROSS PROFIT 616,325 510,248
SELLING, GENERAL & ADMINISTRATIVE
EXPENSES 486,551 495,525
----------- -----------
OPERATING INCOME 129,774 14,723
OTHER INCOME:
INTEREST INCOME 62,432 77,163
OTHER, NET (1,167) 15,066
----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 191,039 106,952
PROVISION FOR
INCOME TAXES (18,500) (37,900)
----------- -----------
NET INCOME $ 172,539 69,052
=========== ===========
NET INCOME PER SHARE:
BASIC $ 0.05 $ 0.02
=========== ===========
DILUTED $ 0.04 $ 0.02
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 3,764,966 3,692,570
=========== ===========
DILUTED 3,857,433 3,711,702
=========== ===========
The accompanying notes are an integral part of these financial statements
4
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
------------------
12/31/03 12/31/02
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 172,539 $ 69,052
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
DEPRECIATION 39,465 32,201
AMORTIZATION 7,168 7,168
(INCREASE) DECREASE IN ASSETS:
ACCOUNTS RECEIVABLE 1,221,360 (256,840)
INTEREST RECEIVABLE (49,158) (48,095)
INVENTORIES (95,026) (159,940)
PREPAID AND OTHER CURRENT ASSETS (19,093) (22,559)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (230,123) 458,909
INCOME TAXES PAYABLE (289,500) (568,709)
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 757,632 (488,813)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF PROPERTY, PLANT, AND EQUIPMENT (11,261) (12,023)
PURCHASES OF INVESTMENTS (499,398) (714,687)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (510,659) (726,710)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
EXCERCISE OF STOCK OPTIONS 140,287 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 140,287 --
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 387,260 (1,215,523)
CASH AND CASH EQUIVALENTS, AT BEGINNING
OF YEAR 1,022,175 2,422,833
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 1,409,435 $ 1,207,310
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR INCOME TAXES $ 308,000 $ 640,000
=========== ===========
The accompanying notes are an integral part of these financial statements
5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION]
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN
PREPARED BY THE COMPANY PURSUANT TO THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION AND IN ACCORDANCE WITH THE
INSTRUCTIONS TO FORM 10-QSB AND DO NOT INCLUDE ALL THE INFORMATION AND
FOOTNOTE DISCLOSURES NORMALLY INCLUDED IN CONSOLIDATED FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES OF AMERICA. THE INFORMATION FURNISHED IN
THE INTERIM FINANCIAL STATEMENTS INCLUDES NORMAL RECURRING ADJUSTMENTS
AND REFLECTS ALL ADJUSTMENTS, WHICH, IN THE OPINION OF MANAGEMENT, ARE
NECESSARY FOR A FAIR PRESENTATION OF SUCH FINANCIAL STATEMENTS. FOR
FURTHER INFORMATION REFER TO THE CONSOLIDATED FINANCIAL STATEMENTS AND
FOOTNOTES THERETO INCLUDED IN THE COMPANY'S MOST RECENT AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN ITS
SEPTEMBER 30, 2003 ANNUAL REPORT ON FORM 10-KSB. OPERATING RESULTS FOR
THE THREE MONTHS ENDED DECEMBER 31, 2003 ARE NOT NECESSARILY INDICATIVE
OF THE RESULTS THAT MAY BE EXPECTED FOR THE YEAR ENDING SEPTEMBER 30,
2004.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
----------------
THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH ACCOUNTING
PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA 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.
ACCOUNTS RECEIVABLE
-------------------
ACCOUNTS RECEIVABLE CONSIST OF BALANCES DUE FROM SALES. THE COMPANY
MONITORS ACCOUNTS RECEIVABLE AND PROVIDES ALLOWANCES WHEN CONSIDERED
NECESSARY. AS OF DECEMBER 31, 2003 AND SEPTEMBER 30, 2003 ACCOUNTS
RECEIVABLE WERE CONSIDERED TO BE FULLY COLLECTIBLE, ACCORDINGLY NO
ALLOWANCE FOR DOUBTFUL ACCOUNTS WAS PROVIDED. IF AMOUNTS BECOME
UNCOLLECTIBLE, THEY WILL BE CHARGED TO OPERATIONS WHEN THAT
DETERMINATION IS MADE. THE COMPANY HAS LIMITED EXPOSURE TO BAD DEBT AS
DOMESTIC SALES ARE PRIMARILY TO THE U.S. GOVERNMENT OR LARGER DEFENSE
CONTRACTORS. INTERNATIONAL SALES ARE PRIMARILY CASH IN ADVANCE OF
SHIPMENT OR LETTERS OF CREDIT.
INVESTMENTS
-----------
CERTAIN INVESTMENTS THAT MANAGEMENT HAS THE INTENT AND ABILITY TO HOLD
TO MATURITY ARE REPORTED AT COST, ADJUSTED FOR AMORTIZATION OF PREMIUMS
AND ACCRETION OF DISCOUNTS THAT ARE RECOGNIZED IN INTEREST INCOME USING
THE INTEREST METHOD OVER THE PERIOD TO MATURITY.
MARKETABLE AND DEBT SECURITIES WHICH MANAGEMENT HAS CLASSIFIED AS
TRADING ARE CARRIED AT FAIR VALUE WITH NET UNREALIZED GAINS AND LOSSES
REPORTED IN OPERATIONS. REALIZED GAINS AND LOSSES ON MARKETABLE EQUITY
AND DEBT SECURITIES ARE RECOGNIZED UPON SALE USING THE SPECIFIC
IDENTIFICATION METHOD.
INVENTORIES
-----------
INVENTORIES, WHICH CONSIST OF RAW MATERIALS, WORK-IN-PROCESS, AND
FINISHED GOODS, ARE STATED AT THE LOWER OF COST OR MARKET VALUE, COST
BEING DETERMINED USING THE FIRST IN, FIRST OUT METHOD. FIXED AND
VARIABLE MANUFACTURING COSTS AND OVERHEAD ARE INCLUDED IN THE CARRYING
VALUES OF FINISHED GOODS AND WORK-IN-PROCESS. THE COMPANY RECORDS
RESERVES FOR INVENTORY SHRINKAGE AND OBSOLESCENCE, WHEN CONSIDERED
NECESSARY. FOR THE THREE MONTHS ENDED DECEMBER 31, 2003 INVENTORY
SHRINKAGE AND OBSOLESCENCE RESERVES INCREASED $19,670.
6
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 EXPENSE 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.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
-----------------------------------------------------------------------
THE COMPANY REVIEWS LONG-LIVED ASSETS FOR IMPAIRMENT WHENEVER EVENTS OR
CHANGES IN CIRCUMSTANCES INDICATE THAT THE CARRYING AMOUNT OF AN ASSET
MAY NOT BE RECOVERABLE. RECOVERABILITY OF ASSETS TO BE HELD AND USED IS
MEASURED BY A COMPARISON OF THE CARRYING AMOUNT OF AN ASSET TO FUTURE
UNDISCOUNTED CASH FLOWS EXPECTED TO BE GENERATED BY THE ASSET. IF SUCH
ASSETS ARE CONSIDERED TO BE IMPAIRED, THE IMPAIRMENT TO BE RECOGNIZED
IS MEASURED BY THE AMOUNT BY WHICH THE ASSETS EXCEEDS THE FAIR VALUE.
ASSETS TO BE DISPOSED OF ARE REPORTED AT THE LOWER OF THE CARRYING
AMOUNT OR FAIR VALUE LESS COSTS TO SELL.
REVENUE RECOGNITION
-------------------
THE COMPANY AND ITS SUBSIDIARY USE THE ACCRUAL BASIS OF ACCOUNTING.
SALES REVENUES ARE RECORDED WHEN PRODUCTS ARE SHIPPED AND TITLE HAS
PASSED TO UNAFFILIATED CUSTOMERS. INTEREST AND DIVIDENDS EARNED ON
INVESTMENTS ARE RECORDED WHEN EARNED.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
THE CARRYING AMOUNTS OF CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE,
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES, APPROXIMATE FAIR VALUE DUE TO
THE SHORT-TERM MATURITIES OF THESE ASSETS AND LIABILITIES. THE FAIR
MARKET VALUE OF OTHER FINANCIAL INSTRUMENTS IS PROVIDED BY THE USE OF
QUOTED MARKET PRICES AND OTHER APPROPRIATE VALUATION TECHNIQUES, BASED
ON INFORMATION AVAILABLE AT YEAR-END.
INCOME TAXES
------------
THE COMPANY ACCOUNTS FOR INCOME TAXES USING SFAS NO. 109, "ACCOUNTING
FOR INCOME TAXES", WHICH REQUIRES RECOGNITION OF DEFERRED TAX
LIABILITIES AND ASSETS FOR EXPECTED FUTURE TAX CONSEQUENCES OF EVENTS
THAT HAVE BEEN INCLUDED IN THE FINANCIAL STATEMENTS OR TAX RETURNS.
UNDER THIS METHOD, DEFERRED TAX LIABILITIES AND ASSETS ARE DETERMINED
BASED ON THE DIFFERENCE BETWEEN THE FINANCIAL STATEMENT AND TAX BASES
OF ASSETS AND LIABILITIES USING ENACTED TAX RATES IN EFFECT FOR THE
YEAR IN WHICH THE DIFFERENCES ARE EXPECTED TO REVERSE. A VALUATION
ALLOWANCE IS RECORDED FOR DEFERRED TAX ASSETS IF IT IS MORE LIKELY THAN
NOT THAT SOME PORTION OR ALL OF THE DEFERRED TAX ASSETS WILL NOT BE
REALIZED.
RESEARCH AND DEVELOPMENT
------------------------
EXPENDITURES FOR RESEARCH AND DEVELOPMENT ARE CHARGED TO OPERATION AS
INCURRED.
7
3. INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING
12/31/03 9/30/03
---------- ----------
MATERIALS $1,597,615 $2,352,471
WORK IN PROGRESS 4,562,528 3,957,855
FINISHED GOODS 988,124 742,915
---------- ----------
$7,148,267 $7,053,241
========== ==========
4. EARNINGS PER COMMON SHARE -
BASIC EARNINGS PER SHARE AMOUNTS ARE COMPUTED BY DIVIDING THE NET
INCOME BY THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.
DILUTED EARNINGS PER SHARE AMOUNTS ARE COMPUTED BY DIVIDING NET INCOME
BY THE WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK, COMMON STOCK
EQUIVALENTS, AND STOCK OPTIONS OUTSTANDING DURING THE PERIOD.
5. 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. INCOME TAXES:
DURING 1995, IT WAS DETERMINED THAT CONTINUED OPERATIONS OF ITS
INTEREST CHARGE-DOMESTIC INTERNATIONAL SALES CORPORATION (IC-DISC)
SUBSIDIARY'S TAX 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. FEDERAL TAX REGULATIONS PROVIDE FOR THE TAXATION OF SUCH
DISTRIBUTION OVER A TEN YEAR PERIOD IN EQUAL ANNUAL INCREMENTS.
UTILIZING THE MAXIMUM TAX RATES, THE INCOME TAX CONSEQUENCE OF SUCH
DISTRIBUTION WILL APPROXIMATE $122,000 PER YEAR. NO INTEREST IS PAYABLE
ON THIS UNPAID PORTION.
7. PREFERRED STOCK:
AT DECEMBER 31, 2003, THE COMPANY HAD 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.
8
8. STOCK OPTIONS:
AT THE FISCAL YEAR ENDED SEPTEMBER 30, 2003, OPTIONS TO PURCHASE
270,000 SHARES AT $2.25 PER SHARE HAD BEEN ISSUED TO KEY EMPLOYEES OF
THE COMPANY. ON NOVEMBER 6, 2003, THE COMPANY'S MAJORITY SHAREHOLDER
SOLD 1,994,000 COMMON SHARES TO AN UNRELATED THIRD PARTY, WHEREBY THE
NEW SHAREHOLDER OWNS APPROXIMATELY 53% OF THE COMPANY. DUE TO THE
MAJORITY CHANGE IN OWNERSHIP, ALL OF THE COMPANY'S OUTSTANDING STOCK
OPTIONS BECAME FULLY VESTED AND EXERCISABLE ON NOVEMBER 6, 2003.
OPTIONS FOR 45,600 WERE EXERCISED IN FISCAL 2003 AND 62,350 WERE
EXERCISED IN THE FIRST QUARTER OF FISCAL 2004. 162,050 STOCK OPTIONS
ARE CURRENTLY EXERCISABLE. THE OPTIONS GRANTED SHALL BE EXERCISABLE UP
TO AND INCLUDING FIVE YEARS FROM THE DATE OF GRANT.
9. RECENT ACCOUNTING PRONOUNCEMENTS
IN NOVEMBER 2002, THE FASB ISSUED INTERPRETATION NO. 45, "GUARANTOR'S
ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS" WHICH EXPANDS PREVIOUSLY
ISSUED ACCOUNTING GUIDANCE AND DISCLOSURE REQUIREMENTS FOR CERTAIN
GUARANTEES. THE INTERPRETATION REQUIRES AN ENTITY TO RECOGNIZE AN
INITIAL LIABILITY FOR THE FAIR VALUE OF AN OBLIGATION ASSUMED BY
ISSUING A GUARANTEE. THE INITIAL RECOGNITION AND INITIAL MEASUREMENT
PROVISIONS OF FIN NO. 45 ARE APPLICABLE TO A COMPANY ON A PROSPECTIVE
BASIS TO GUARANTEES ISSUED OR MODIFIED AFTER DECEMBER 31, 2002.
HOWEVER, THE DISCLOSURE REQUIREMENTS IN FIN NO. 45 ARE EFFECTIVE FOR A
COMPANY'S FINANCIAL STATEMENTS FOR PERIODS ENDING AFTER DECEMBER 15,
2002. THE COMPANY IS NOT A PARTY TO ANY AGREEMENT IN WHICH IT IS A
GUARANTOR OF INDEBTEDNESS OF OTHERS THEREFORE THE INTERPRETATION DID
NOT AFFECT THE COMPANY'S FINANCIAL POSITION, RESULTS OF OPERATIONS OR
CASH FLOWS.
IN JANUARY 2003, THE FASB ISSUED INTERPRETATIONS NO. 46, "CONSOLIDATION
OF VARIABLE INTEREST ENTITIES". FIN NO. 46 ADDRESSES CONSOLIDATION BY
BUSINESS ENTERPRISES OF VARIABLE INTEREST ENTITIES (FORMERLY SPECIAL
PURPOSE ENTITIES OR "SPES"). THE COMPANY DOES NOT HAVE ANY VARIABLE
INTEREST ENTITIES AS DEFINED BY FIN NO. 46 AND THEREFORE THE
INTERPRETATION DID NOT AFFECT THE COMPANY'S FINANCIAL POSITION, RESULTS
OF OPERATIONS OR CASH FLOWS.
IN DECEMBER 2002, THE FASB ISSUED SFAS NO. 148, "ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE". SFAS NO. 148
DOES NOT ALTER THE PROVISIONS OF SFAS 123, NOR DOES IT REQUIRE
STOCK-BASED COMPENSATION TO BE MEASURED UNDER THE FAIR-VALUE METHOD.
RATHER, SFAS 148 PROVIDES ALTERNATIVE TRANSITION METHODS TO COMPANIES
THAT ELECT TO EXPENSE STOCK-BASED COMPENSATION USING THE FAIR-VALUE
APPROACH UNDER SFAS NO. 123. THE COMPANY WILL CONTINUE TO ACCOUNT FOR
STOCK-BASED COMPENSATION IN ACCORDANCE WITH APB NO. 25. THE COMPANY HAS
ADOPTED THE DISCLOSURE-ONLY PROVISIONS OF SFAS NO. 148. AS SUCH, THE
COMPANY DOES NOT EXPECT THIS STANDARD TO HAVE A MATERIAL IMPACT ON ITS
FINANCIAL POSITION OR RESULTS OF OPERATIONS.
IN APRIL 2003, THE FASB ISSUED STATEMENT NO. 149, "AMENDMENT OF
STATEMENT NO. 133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES".
THIS STATEMENT AMENDS AND CLARIFIES FINANCIAL ACCOUNTING AND REPORTING
FOR DERIVATIVE INSTRUMENTS, INCLUDING CERTAIN DERIVATIVE INSTRUMENTS
EMBEDDED IN OTHER CONTRACTS AND FOR HEDGING ACTIVITIES UNDER STATEMENT
NO. 133, "ACCOUNTING FOR DERIVATIVES INSTRUMENTS AND HEDGING
ACTIVITIES." THE PROVISIONS OF THIS STATEMENT ARE EFFECTIVE FOR ALL
DERIVATIVES AND HEDGING ACTIVITIES ENTERED INTO AFTER JUNE 30, 2003.
THE COMPANY DID NOT HAVE ANY DERIVATIVES OR HEDGING ACTIVITIES AND
THEREFORE THE STANDARD DID NOT AFFECT THE COMPANY'S FINANCIAL POSITION,
RESULTS OF OPERATIONS OR CASH FLOWS.
9
IN MAY 2003, THE FASB ISSUED SFAS NO. 150 "ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND
EQUITY". SFAS NO. 150 ESTABLISHES STANDARDS ON THE CLASSIFICATION AND
MEASUREMENT OF CERTAIN INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY. THE PROVISIONS OF SFAS NO. 150 ARE EFFECTIVE
FOR FINANCIAL INSTRUMENTS ENTERED INTO OR MODIFIED AFTER MAY 31, 2002
AND TO ALL OTHER INSTRUMENTS THAT EXIST AS OF THE BEGINNING OF THE
FIRST INTERIM FINANCIAL REPORTING PERIOD BEGINNING AFTER JUNE 15, 2003.
SFAS NO. 150 DID NOT HAVE A MATERIAL EFFECT ON THE COMPANY'S FINANCIAL
STATEMENTS.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-----------------------------------------------------------------
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION:
-----------------------------------------------------------
SOME OF THE STATEMENTS IN THIS QUARTERLY REPORT, INCLUDING THOSE THAT CONTAIN
THE WORDS "ANTICIPATE," "BELIEVE," "PLAN," "ESTIMATE," "EXPECT," "SHOULD,"
"INTEND" AND OTHER SIMILAR EXPRESSIONS, ARE "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THOSE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OR
THOSE OF OUR INDUSTRY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THOSE FORWARD-LOOKING
STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENT TO DIFFER MATERIALLY FROM THOSE DESCRIBED OR IMPLIED IN THE
FORWARD-LOOKING STATEMENTS ARE GENERIC ECONOMIC CONDITIONS, COMPETITION,
POTENTIAL TECHNOLOGY CHANGES, CHANGES IN OR THE LACK OF ANTICIPATED CHANGES IN
THE REGULATORY ENVIRONMENT IN VARIOUS COUNTRIES, THE RISKS INHERENT IN NEW
PRODUCT AND SERVICE INTRODUCTIONS AND THE ENTRY INTO NEW GEOGRAPHIC MARKETS AND
OTHER FACTORS INCLUDED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"). COPIES OF OUR SEC FILINGS ARE AVAILABLE FROM THE SEC OR
MAY BE OBTAINED UPON REQUEST FROM US. WE DO NOT UNDERTAKE ANY OBLIGATION TO
UPDATE THE INFORMATION CONTAINED HEREIN, WHICH SPEAKS ONLY AS OF THIS DATE.
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 AND THE SOFTWARE DEVELOPMENT, DESIGN, INTEGRATION
TESTING AND DOCUMENTATION OF C4ISR SYSTEMS UTILIZED FOR LONG RANGE VOICE AND
DATA COMMUNICATIONS IN FIXED STATION, MOBILE AND MARINE MILITARY AND
GOVERNMENTAL APPLICATIONS.
SUNAIR PRODUCTS AND ENGINEERING CAPABILITIES 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 FOREIGN GOVERNMENTAL AGENCIES OR DIRECT TO
THE U.S. GOVERNMENT.
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 WORKSTATIONS, ANTENNAE, POWER SOURCES, MODEMS, MESSAGE
SWITCHING DEVICES, CRYPTOGRAPHIC EQUIPMENT SOFTWARE AND THE LIKE PROVIDED BY
OTHERS. SUNAIR PRODUCTS EMPLOY ADVANCED SOLID STATE DESIGNS WITH COMPUTER
CONTROLLED NETWORKING CAPABILITIES. IN ADDITION, THE COMPANY CUSTOM DESIGNS
SYSTEMS INCORPORATING VARIOUS COMBINATIONS OF EQUIPMENT INTO RACKS AND CONTROL
CONSOLES THAT MAY INTERFACE WITH VALUE ADDED PRODUCTS AND SYSTEMS OF OTHER
MANUFACTURERS.
11
LIQUIDITY:
----------
FOR THE QUARTER ENDED DECEMBER 31, 2003, THE COMPANY HAD POSITIVE CASH FLOW FROM
OPERATIONS OF $757,632 DUE TO PAYMENTS RECEIVED AGAINST SEVERAL LARGE SHIPMENTS
MADE IN THE FOURTH QUARTER OF FISCAL 2003. ACCOUNTS RECEIVABLE DECREASED FOR THE
SAME REASON.
CASH FLOWS USED BY INVESTING ACTIVITIES FOR THE QUARTER ENDED DECEMBER 31, 2003
WERE $510,659 WHICH CONSISTED OF SHORT TERM INVESTMENTS IN COMMERCIAL PAPER AND
PURCHASES OF SMALL QUANTITIES OF COMPUTER EQUIPMENT.
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES FOR THE QUARTER ENDED DECEMBER 31,
2003 WERE $140,287 PROVIDED BY THE EXERCISE OF STOCK OPTIONS.
DURING THE FIRST THREE MONTHS OF FISCAL 2004, 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. THE COMPANY'S
KNOWN REQUIREMENTS CONSIST OF NORMAL OPERATING EXPENSES. DURING THIS THREE MONTH
PERIOD, CASH AND CASH EQUIVALENTS HAD AN AVERAGE BALANCE OF $1,629,000 AS
OPPOSED TO AN AVERAGE BALANCE OF $1,506,000 FOR THE TWELVE MONTHS ENDED
SEPTEMBER 30, 2003. CASH EQUIVALENTS 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 2004. THE CURRENT RATIO OF
THE COMPANY AS OF DECEMBER 31, 2003 WAS 26.1 COMPARED TO 13.8 AS OF SEPTEMBER
30, 2003.
THE COMPANY RECORDS RESERVES FOR INVENTORY SHRINKAGE AND OBSOLENSCENCE, WHEN
CONSIDERED NECESSARY. AS OF DECEMBER 31, 2003, ACCOUNTS AND NOTES RECEIVABLE
WERE CONSIDERED TO BE FULLY COLLECTIBLE, ACCORDINGLY NO ALLOWANCE FOR DOUBTFUL
ACCOUNTS WAS PROVIDED. IF AMOUNTS BECOME UNCOLLECTIBLE, THEY WILL BE CHARGED TO
OPERATIONS WHEN THAT DETERMINATION IS MADE.
NON CASH INTERIM RESERVES ARE MAINTAINED TO COVER ITEMS SUCH AS WARRANTY REPAIRS
IN PROCESS 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 THREE MONTHS OF FISCAL 2004, $11,261 WAS SPENT FOR CAPITAL
ASSETS. THESE FUNDS WERE PRIMARILY USED FOR NEW COMPUTER HARDWARE. NO
EXPENDITURES ARE COMTEMPLATED FOR PLANT EXPANSION OR EXTENSIVE MAINTENANCE IN
FISCAL 2004. THE COMPANY HAS NO LONG TERM DEBT AND NONE IS CONTEMPLATED, EXCEPT
THE COMPANY MAY INCUR DEBT TO FINANCE ACQUISITIONS ALTHOUGH THERE ARE CURRENTLY
NO AGREEMENTS OR PROPOSALS IN CONNECTION WITH ANY ACQUISITIONS. LIABILITIES
CONSIST OF CURRENT ACCOUNTS PAYABLE, ACCRUED EXPENSES RELATED TO THE CURRENT
ACCOUNTING PERIOD, AND THE CURRENT AND LONG TERM PORTION OF INCOME TAXES
PAYABLE.
12
RESULTS OF OPERATIONS:
----------------------
FIRST QUARTER OF FISCAL YEAR ENDED 2004 COMPARED TO FIRST QUARTER OF FISCAL YEAR
ENDED 2003.
DURING THE FIRST QUARTER OF THE CURRENT FISCAL YEAR ENDED DECEMBER 31, 2003,
SHIPMENTS OF $1,314,574 WERE UP 23.4% OR $249,127 FROM THE SAME QUARTER ONE YEAR
AGO LARGELY DUE TO CONTINUED SHIPMENTS TO ONE U.S. CUSTOMER. DOMESTIC SHIPMENTS
FOR THE FIRST THREE MONTHS OF THE CURRENT FISCAL YEAR WERE $1,263,449,
COMPARABLE TO SHIPMENTS FOR THE SAME PERIOD ONE YEAR AGO OF $964,593, UP
$298,856 OR 31.0%. EXPORT SHIPMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
WERE $51,125 OR 3.9% OF TOTAL SALES, DOWN $49,729 OR 49.3% FOR THE SAME PERIOD
ONE YEAR AGO DUE TO REDUCED INTERNATIONAL ACTIVITY. RECEIPT OF INTERNATIONAL
ORDERS DECLINED DUE TO SHORT DELAYS IN FUNDING FOR NEW CONTRACT AWARDS.
NEGOTIATIONS FOR A $1.7 MILLION ORDER HAS BEEN COMPLETED WITH A FOREIGN MINISTRY
OF DEFENSE FOR DELIVERY BY APRIL 2004. BACKLOG OF $5,132,000 WAS HIGHER AT
DECEMBER 31, 2003 COMPARED TO $2,892,000 AT DECEMBER 31, 2002 DUE TO ORDERS ON
COMPLEX SYSTEMS RECEIVED IN THE LATTER PART OF FISCAL 2003. PROJECTED ORDERS
REMAINING ON MULTI-YEAR CONTRACTS RECEIVED IN 1999 AND 2000 ARE NOT INCLUDED IN
THIS BACKLOG.
COST OF SALES WAS SLIGHTLY HIGHER AT 53.1% OF SALES IN THE FIRST QUARTER OF
FISCAL 2004 AS COMPARED TO 52.1% OF SALES FOR THE SAME PERIOD ONE YEAR AGO DUE
TO THE PRODUCT MIX. INVENTORIES INCREASED 1.3% OR $95,026 FOR THE FIRST QUARTER
OF FISCAL 2004 DUE TO REQUIREMENTS FOR CURRENT DELIVERIES AS WELL AS PROJECTED
ORDERS FOR THE NEAR TERM. INVENTORY LEVELS ARE ANTICIPATED TO REFLECT A DECLINE
IN THE CURRENT YEAR DUE TO PROCUREMENTS OF INVENTORY IN FISCAL 2003 TO MEET
FUTURE REQUIREMENTS.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES REMAINED STABLE WITH ONLY A SLIGHT
REDUCTION OF 1.8% OR $8,974 FOR THE FIRST QUARTER OF FISCAL 2004. THERE WERE NO
SIGNIFICANT CHANGES FOR THE FIRST QUARTER OF FISCAL 2004 AS COMPARED TO THE
FIRST QUARTER OF FISCAL 2003. EXPENSES CONTINUE TO BE INCURRED FOR EXPANDED
MARKET EXPOSURE AND INCREASED PRODUCT APPLICATION.
INTEREST INCOME DECREASED SLIGHTLY AS LOWER YEILDS CONTINUE ON INVESTMENTS.
OTHER INCOME DECREASED DUE TO REDUCED SALES OF SCRAP.
THE COMPANY CONTINUES TO FOCUS ON EXPANDING OUR SYSTEM ENGINEERING AND
INTEGRATION CAPABILITIES IN NEW AND EXISTING MARKETS. PLANS CONTINUE UNDERWAY TO
DEMONSTRATE AND QUALIFY OUR PRODUCTS AND CAPABILITIES FOR BOTH DOMESTIC AND
INTERNATIONAL APPLICATION.
SUNAIR REACHED FINAL NEGOTIATIONS ON SEVERAL DOMESTIC AND INTERNATIONAL SYSTEM
TYPE CONTRACTS AND CONTINUES NEGOTIATIONS ON OTHER NEW AND PREVIOUSLY IDENTIFIED
PROJECTS. DUE TO THE COMPLEXITY AND THE LONG LEAD TIME FOR INTEGRATION AND TEST
OF THESE SYSTEMS, DELIVERIES MAY EXTEND INTO FUTURE QUARTERS OF FISCAL 2004.
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 ELECTION OF THE
SUBSIDIARY WAS DISCONTINUED AND ITS RETAINED EARNINGS OF APPROXIMATELY
$3,200,000 WERE DISTRIBUTED TO THE COMPANY. FEDERAL TAX REGULATIONS PROVIDE FOR
THE TAXATION OF SUCH DISTRIBUTION OVER A TEN YEAR PERIOD IN EQUAL ANNUAL
INCREMENTS. UTILIZING THE MAXIMUM TAX RATES, THE INCOME TAX CONSEQUENCES OF SUCH
DISTRIBUTION WILL APPROXIMATE $122,000 PER YEAR. NO INTEREST IS PAYABLE ON THIS
UNPAID PORTION.
13
RESULTS OF OPERATIONS: (CONTINUED)
----------------------------------
ON AUGUST 14, 2003 THE COMPANY ANNOUNCED THAT MR. MICHAEL HERMAN HAD ENTERED
INTO A STOCK PURCHASE AGREEMENT WITH ITS 54% MAJORITY SHAREHOLDER, THE ROBERT
URICHO, JR. TRUST, OF WHICH SHIRLEY URICHO WAS THE INCOME BENEFICIARY. AS A
PREREQUISITE TO THIS ACQUISITION OF SUNAIR SHARES, SUNAIR'S DISINTERESTED
DIRECTORS APPROVED THE TRANSACTION BASED UPON CONDITIONS OF AN AGREEMENT DATED
AUGUST 14, 2003 BETWEEN MR. HERMAN AND SUNAIR ELECTRONICS, INC. THE TRANSACTION
CLOSED ON NOVEMBER 6, 2003 AND MR. HERMAN IMMEDIATELY JOINED THE BOARD OF
DIRECTORS AND BECAME THE CHAIRMAN OF THE BOARD.
ITEM 3. CONTROLS AND PROCEDURES
-------------------------------
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. THE TERM "DISCLOSURE
CONTROLS AND PROCEDURES" IS DEFINED IN RULE 13A - 15(E) OF THE SECURITIES
EXCHANGE ACT OF 1934, OR THE EXCHANGE ACT. THIS TERM REFERS TO THE CONTROLS AND
PROCEDURES OF A COMPANY THAT ARE DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO
BE DISCLOSED BY A COMPANY IN THE REPORTS THAT IT FILES UNDER THE EXCHANGE ACT IS
RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN REQUIRED TIME PERIODS. OUR
CHIEF EXECUTIVE OFFICER AND OUR CHIEF FINANCIAL OFFICER HAVE CONCLUDED, BASED ON
THEIR EVALUATION AS OF DECEMBER 31, 2003, THAT OUR DISCLOSURE CONTROLS AND
PROCEDURES ARE EFFECTIVE FOR RECORDING, PROCESSING, SUMMARIZING AND TIMELY
REPORTING THE INFORMATION WE ARE REQUIRED TO DISCLOSE IN OUR REPORTS FILES UNDER
THE EXCHANGE ACT.
(B) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. THERE WERE NO
SIGNIFICANT CHANGES IN THE COMPANY'S INTERNAL CONTROLS OR IN OTHER FACTORS THAT
COULD SIGNIFICANTLY AFFECT THESE CONTROLS SUBSEQUENT TO THE DATE OF THE MOST
RECENT EVALUATION OF THESE CONTROLS BY THE COMPANY'S CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER, INCLUDING ANY CORRECTIVE ACTIONS WITH REGARD TO
SIGNIFICANT DEFICIENCIES AND MATERIAL WEAKNESSES.
14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
THE COMPANY HELD ITS 2003 ANNUAL MEETING OF STOCKHOLDERS AT THE
COMPANY'S OFFICES ON JANUARY 26, 2004. AT THE MEETING, THE
FOLLOWING PERSONS WERE ELECTED OR RE-ELECTED TO SERVE AS
DIRECTORS, WITH THE VOTES INDICATED:
DIRECTOR AFFIRMATIVE VOTES NEGATIVE VOTES
-------- ----------------- --------------
MICHAEL D. HERMAN 3,571,370 0
GERARD P. LAHENEY 3,571,370 0
JAMES E. LAURENT 3,571,370 0
DR. ARNOLD HEGGESTAD 3,570,398 972
STEVEN P. OPPENHEIM 3,570,398 972
ALSO AT THE MEETING THE STOCKHOLDERS APPROVED A PROPOSAL TO
AMEND THE ARTICLES OF INCORPORATION OF THE COMPANY SO AS TO
INCREASE THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK, PAR
VALUE $.10 PER SHARE, THAT THE COMPANY IS AUTHORIZED TO ISSUE
FROM 6,000,000 TO 25,000,000 AND THE AGGREGATE NUMBER OF SHARES
OF PREFERRED STOCK, NO PAR VALUE PER SHARE, THAT THE COMPANY IS
AUTHORIZED TO ISSUE FROM 500,000 TO 2,000,000. THESE PROPOSALS
WERE APPROVED WITH 2,552,894 AFFIRMATIVE VOTES, 173,866 NEGATIVE
VOTES AND 1,051,010 ABSTENTIONS OR NON-VOTES.
THE COMPANY HELD A BOARD OF DIRECTORS MEETING IMMEDIATELY FOLLOWING
THE ANNUAL MEETING. AT THE BOARD MEETING, DR. HEGGESTAD AND MR.
OPPENHEIM WERE ELECTED TO SERVE ON THE AUDIT COMMITTEE OF THE BOARD.
15
PART II OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
31.1 CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
31.2 CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
32.1 CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
32.2 CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
(B) REPORTS ON FORM 8-K
ON NOVEMBER 19, 2003, THE COMPANY FILED A FORM 8-K DISCLOSING
INFORMATION UNDER ITEMS 1 AND 7.
ON NOVEMBER 26, 2003, THE COMPANY FILED FORM 8-K DISCLOSING
INFORMATION UNDER ITEMS 7 AND 9.
16
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.
DATE FEBRUARY 17, 2004 /S/ JAMES E. LAURENT
------------------- -----------------------------
JAMES E. LAURENT, PRINCIPAL
EXECUTIVE OFFICER
DATE FEBRUARY 17, 2004 /S/ SYNNOTT B. DURHAM
------------------ --------------------------
SYNNOTT B. DURHAM, PRINCIPAL
ACCOUNTING OFFICER
17