UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

[x]             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 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 REGISTRANT AS SPECIFIED IN ITS CHARTER)


          FLORIDA                                                59-0780772
-------------------------------                              -------------------
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)


3005 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)

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, 2003
- 3,692,570 shares.

<PAGE>
                     SUNAIR ELECTRONICS, INC. AND SUBSIDIARY

                                      INDEX
                                      *****
                                                                     PAGE NO.
                                                                     ********
       PART I.        FINANCIAL INFORMATION:

             CONDENSED CONSOLIDATED BALANCE SHEETS - -
                      MARCH 31, 2003 AND SEPTEMBER 30, 2002              3

             CONDENSED CONSOLIDATED STATEMENTS OF INCOME - -
                      SIX MONTHS ENDED MARCH 31, 2003 AND 2002           4

             CONDENSED CONSOLIDATED STATEMENTS OF INCOME - -
                      THREE MONTHS ENDED MARCH 31, 2003 AND 2002         5

             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
                      SIX MONTHS ENDED MARCH 31, 2003 AND 2002           6

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL
                      STATEMENTS                                        7-9

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS              10-11


       PART II.       OTHER INFORMATION                                 13


                                      -2-
<PAGE>
                          PART I. FINANCIAL INFORMATION

                     SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



ASSETS                                                 03/31/03        9/30/02
------                                                -----------    -----------

CURRENT ASSETS:
---------------
      CASH AND CASH EQUIVALENTS                       $ 1,459,597    $ 2,422,833
      ACCOUNTS RECEIVABLE                               1,117,044        784,738
      INTEREST RECEIVABLE                                 240,539        128,633
      INVENTORIES                                       5,729,664      5,437,104
      SHORT TERM INVESTMENTS                            1,802,033      1,499,105
      CERTIFICATE OF DEPOSIT                                    0         84,313
      PREPAID EXPENSES AND OTHER
         CURRENT ASSETS                                    53,812         20,995
                                                      -----------    -----------

             TOTAL CURRENT ASSETS                      10,402,689     10,377,721
                                                      -----------    -----------
INVESTMENTS                                             3,501,179      3,515,516
-----------

NOTE RECEIVABLE                                           334,986        334,986
---------------

PROPERTY, PLANT AND EQUIPMENT-NET                         681,688        734,079
---------------------------------                     -----------    -----------

TOTAL ASSETS                                          $14,920,542    $14,962,302
============                                          ===========    ===========

LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------

CURRENT LIABILITIES:
--------------------

      ACCOUNTS PAYABLE AND ACCRUED EXPENSES           $   898,363    $   504,268
      INCOME TAXES PAYABLE                                    509        568,709
                                                      -----------    -----------

           TOTAL CURRENT LIABILITIES                      898,872      1,072,977
                                                      -----------    -----------

LONG-TERM LIABILITIES:
----------------------

      INCOME TAXES PAYABLE, NET OF CURRENT PORTION        244,000        244,000
                                                      -----------    -----------

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,
           3,692,570 SHARES ISSUED
           AND OUTSTANDING                                369,257        369,257
      ADDITIONAL PAID-IN-CAPITAL                        2,606,899      2,606,899
      RETAINED EARNINGS                                10,801,514     10,669,169
                                                      -----------    -----------

           TOTAL STOCKHOLDERS' EQUITY                  13,777,670     13,645,325
                                                      -----------    -----------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY              $14,920,542    $14,962,302
========================================              ===========    ===========

                                      -3-
<PAGE>
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                   SIX MONTHS ENDED
                                              ---------------------------
                                                3/31/03         3/31/02
                                              -----------     -----------
SALES                                         $ 2,300,739     $ 2,884,580
COST OF SALES                                   1,352,998       1,737,746
                                              -----------     -----------

GROSS PROFIT                                      947,741       1,146,834
SELLING, GENERAL & ADMINISTRATIVE EXPENSES        891,904         893,087
                                              -----------     -----------

OPERATING INCOME                                   55,837         253,747
OTHER INCOME:
    INTEREST INCOME                               165,570         124,631
    OTHER, NET                                    (17,250)          2,502
                                              -----------     -----------

INCOME BEFORE PROVISION
  FOR INCOME TAXES                                204,157         380,880

PROVISION FOR
  INCOME TAXES                                    (71,800)       (136,800)
                                              -----------     -----------

NET INCOME                                    $   132,357     $   244,080
                                              ===========     ===========

NET INCOME PER SHARE:
    BASIC                                     $      0.04     $      0.07
                                              ===========     ===========
    DILUTED                                   $      0.04     $      0.07
                                              ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING:
    BASIC                                       3,692,570       3,692,570
                                              ===========     ===========
    DILUTED                                     3,711,702       3,711,702
                                              ===========     ===========

                                      -4-
<PAGE>
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                  THREE MONTHS ENDED
                                              ---------------------------
                                                3/31/03         3/31/02
                                              -----------     -----------

SALES                                         $ 1,235,292     $ 1,036,830
COST OF SALES                                     797,799         534,212
                                              -----------     -----------

GROSS PROFIT                                      437,493         502,618
SELLING, GENERAL & ADMINISTRATIVE EXPENSES        396,379         437,165
                                              -----------     -----------

OPERATING INCOME                                   41,114          65,453
OTHER INCOME:
    INTEREST INCOME                                88,407          62,539
    OTHER, NET                                    (32,316)         (1,871)
                                              -----------     -----------

INCOME BEFORE PROVISION
  FOR INCOME TAXES                                 97,205         126,121

PROVISION FOR
  INCOME TAXES                                    (33,900)        (51,800)
                                              -----------     -----------

NET INCOME                                    $    63,305     $    74,321
                                              ===========     ===========

NET INCOME PER SHARE:
    BASIC                                     $      0.02     $      0.02
                                              ===========     ===========
    DILUTED                                   $      0.02     $      0.02
                                              ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING:
    BASIC                                       3,692,570       3,692,570
                                              ===========     ===========
    DILUTED                                     3,711,702       3,711,702
                                              ===========     ===========

                                      -5-
<PAGE>
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                               ---------------------------
                                                                 3/31/03         3/31/02
                                                               -----------     -----------
<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    NET INCOME                                                 $   132,357     $   244,080
    ADJUSTMENTS TO RECONCILE NET INCOME TO
       NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
       DEPRECIATION                                                 64,402          68,123
       (INCREASE) DECREASE IN ASSETS:
          ACCOUNTS RECEIVABLE                                     (444,212)        270,036
          INVENTORIES                                             (292,560)       (282,829)
          PREPAID AND OTHER CURRENT ASSETS                         (32,817)         89,995
       INCREASE (DECREASE) IN LIABILITIES:
          ACCOUNTS PAYABLE AND ACCRUED EXPENSES                    394,095         (12,901)
          INCOME TAXES PAYABLE                                    (568,200)        136,800
                                                               -----------     -----------
    NET CASH (USED IN) OPERATING ACTIVITIES                       (746,935)        513,304
                                                               -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    PURCHASE OF PROPERTY, PLANT, AND EQUIPMENT                     (12,023)        (68,105)
    SALES (PURCHASES) OF INVESTMENTS                              (204,278)       (484,768)
                                                               -----------     -----------
    NET CASH (USED IN) INVESTING ACTIVITIES                       (216,301)       (552,873)
                                                               -----------     -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                         (963,236)        (39,569)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                   2,422,833       2,015,918
                                                               -----------     -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                       $ 1,459,597     $ 1,976,349
                                                               ===========     ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    CASH PAID DURING THE YEAR FOR INCOME TAXES                 $   640,000     $         0
                                                               ===========     ===========
</TABLE>

                                      -6-
<PAGE>
              NOTES TO CONDENSED CONSOLIDATED 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, 2003 ARE NOT NECESSARILY
               INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR THE FISCAL
               YEAR ENDING SEPTEMBER 30,2003. 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, 2002.

       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:

                                                        3/31/03         9/30/02
                                                      ----------      ----------
                             RAW MATERIALS            $1,871,520      $1,974,324
                             WORK IN PROCESS           3,283,239       2,999,000
                             FINISHED GOODS              574,905         463,780
                                                      ----------      ----------
                                                      $5,729,664      $5,437,104

       (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-
<PAGE>
       3.      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 $123,000 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

               AT THE FISCAL YEAR ENDED SEPTEMBER 30, 2002, OPTIONS TO PURCHASE
               270,000 SHARES AT $2.25 PER SHARE HAD BEEN ISSUED TO KEY
               EMPLOYEES OF THE COMPANY. OPTIONS FOR 91,700 SHARES ARE
               EXERCISABLE BEGINNING IN THE SECOND YEAR OF THE OPTION PERIOD AND
               89,150 SHARES IN EACH OF THE THIRD AND FOURTH YEARS. THE OPTIONS
               GRANTED SHALL BE EXERCISABLE UP TO AND INCLUDING FIVE YEARS FROM
               THE DATE OF GRANT.

       6.      RECENT ACCOUNTING PRONOUNCEMENTS

               SFAS NO. 143, "ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS". THIS
               STATEMENT ADDRESSES FINANCIAL ACCOUNTING AND REPORTING FOR
               OBLIGATIONS ASSOCIATED WITH THE RETIREMENT OF TANGIBLE LONG-LIVED
               ASSETS AND THE ASSOCIATED ASSET RETIREMENT COSTS. THIS STATEMENT
               REQUIRES THAT THE FAIR VALUE OF A LIABILITY FOR AN ASSET
               RETIREMENT OBLIGATION BE RECOGNIZED IN THE PERIOD IN WHICH IT IS
               INCURRED IF A REASONABLE ESTIMATE OF FAIR VALUE CAN BE MADE. THE
               ASSOCIATED ASSET RETIREMENT COSTS ARE CAPITALIZED AS PART OF THE
               CARRYING AMOUNT OF THE LONG-LIVED ASSET AND SUBSEQUENTLY
               ALLOCATED TO EXPENSE USING A SYSTEMATIC AND RATIONAL METHOD.
               ADOPTION OF THIS STATEMENT IS REQUIRED FOR FISCAL YEARS BEGINNING
               AFTER JUNE 15, 2002. THE ADOPTION OF STATEMENT NO. 143 IS NOT
               EXPECTED TO MATERIALLY AFFECT THE COMPANY'S FINANCIAL STATEMENTS.

               SFAS NO. 144, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
               AND LONG-LIVED ASSETS TO BE DISPOSED OF". THIS STATEMENT
               SUPERSEDES STATEMENT NO. 121 BUT RETAINS MANY OF ITS FUNDAMENTAL
               PROVISIONS. THE STATEMENT ALSO ESTABLISHES A SINGLE ACCOUNTING
               MODEL, BASED ON THE FRAMEWORK ESTABLISHED IN STATEMENT 121, FOR
               LONG-LIVED ASSETS TO BE DISPOSED OF BY SALE. ADDITIONALLY, THE
               STATEMENT RESOLVES SIGNIFICANT IMPLEMENTATION ISSUES RELATED TO
               STATEMENT NO. 121. THE PROVISIONS OF THIS STATEMENT ARE EFFECTIVE
               FOR FINANCIAL STATEMENTS ISSUED FOR FISCAL YEARS BEGINNING AFTER
               DECEMBER 15, 2001. THE PROVISION OF STATEMENT NO. 144 IS NOT
               EXPECTED TO MATERIALLY AFFECT THE COMPANY'S FINANCIAL STATEMENTS.

                                      -8-
<PAGE>
               SFAS NO. 145, "RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64,
               AMENDMENT OF FASB STATEMENT NO. 13 AND TECHNICAL CORRECTIONS".
               THIS STATEMENT, AMONG OTHER THINGS, REQUIRES THAT GAINS AND
               LOSSES RELATED TO EXTINGUISHMENTS OF DEBT BE CLASSIFIED AS
               EXTRAORDINARY ITEMS ONLY IF THEY MEET THE CRITERIA IN OPINION NO.
               30. THE PROVISION OF STATEMENT NO. 145 RELATED TO THE RESCISSION
               OF STATEMENT NO. 4 SHOULD BE APPLIED IN FISCAL YEARS BEGINNING
               AFTER MAY 15, 2002. ANY GAIN OR LOSS ON EXTINGUISHMENT OF DEBT
               THAT WAS CLASSIFIED AS AN EXTRAORDINARY ITEM IN PRIOR PERIODS
               PRESENTED THAT DOES NOT MEET THE CRITERIA IN OPINION NO. 30 FOR
               CLASSIFICATION AS AN EXTRAORDINARY ITEM SHOULD BE RECLASSIFIED.
               THE PROVISION OF STATEMENT NO. 145 IS NOT EXPECTED TO MATERIALLY
               AFFECT THE COMPANY'S FINANCIAL STATEMENTS.

               SFAS NO. 146, "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR
               DISPOSAL ACTIVITIES". THIS STATEMENT ADDRESSES FINANCIAL
               ACCOUNTING AND REPORTING FOR COSTS ASSOCIATED WITH EXIT OR
               DISPOSAL ACTIVITIES AND REPLACES EMERGING ISSUES TASK FORCE
               (EITF) ISSUE NO. 94-3, LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE
               TERMINATION BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY
               (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING)." THIS
               STATEMENT IS EFFECTIVE FOR EXIT OR DISPOSAL ACTIVITIES THAT ARE
               INITIATED AFTER DECEMBER 31, 2002, WITH EARLY APPLICATION
               ENCOURAGED. THE EFFECT OF ADOPTING SFAS NO. 146 IS NOT EXPECTED
               TO HAVE A MATERIAL IMPACT ON THE COMPANY'S FINANCIAL POSITION OR
               RESULTS OF OPERATIONS.

               SFAS NO. 148, "ACCOUNTING FOR STOCK-BASED COMPENSATION -
               TRANSITION AND DISCLOSURE". 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 ADOPTION OF SFAS 148
               IS NOT EXPECTED TO AFFECT THE COMPANY'S FINANCIAL POSITION OR
               RESULTS OF OPERATIONS.

       7       FINANCIAL INSTRUMENTS

               THE CARRYING AMOUNTS OF 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.

                                      -9-
<PAGE>
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

LIQUIDITY
---------


DURING THE FIRST SIX MONTHS OF THE CURRENT FISCAL YEAR ENDING SEPTEMBER 30,
2003, THE COMPANY MAINTAINED CASH AND CASH EQUIVALENTS MORE THAN ADEQUATE TO
COVER KNOWN REQUIREMENTS, UNFORESEEN EVENTS OR UNCERTAINTIES THAT MIGHT OCCUR.
DURING THE SIX MONTH PERIOD, CASH AND CASH EQUIVALENTS MAINTAINED AN AVERAGE
BALANCE OF $1,494,000, COMPARED TO AN AVERAGE BALANCE OF $2,174,000 FOR THE
TWELVE MONTHS ENDED SEPTEMBER 30, 2002. 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 THE REST
OF FISCAL 2003. 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 WARRANTY 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
$12,023 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, SHIPMENTS WERE $1,235,292,
UP FROM SHIPMENTS OF $1,065,447 FOR QUARTER ENDED DECEMBER 31, 2002. SHIPMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2003 WERE $2,300,739 DOWN FROM SHIPMENTS OF
$2,884,580 OR 20.2% FOR THE SAME PERIOD ONE YEAR AGO. EXPORT SHIPMENTS FOR THE
SIX MONTHS ENDED MARCH 31, 2003 WERE $460,155 OR 20.0% OF TOTAL SALES, DOWN
$719,390 OR 61.0% FROM THE SAME PERIOD ONE YEAR AGO. DOMESTIC SHIPMENTS FOR THE
FIRST SIX MONTHS OF THE CURRENT FISCAL YEAR WERE $1,840,584 OR 8.0% AHEAD OF
SHIPMENTS FOR THE SAME PERIOD ONE YEAR AGO OF $1,705,035.

SHIPMENTS FOR THE FIRST SIX MONTHS WERE LOWER THAN SHIPMENTS FOR THE SAME PERIOD
ONE YEAR AGO DUE TO EXTENDED DELIVERIES ON EXISTING CONTRACTS AS WELL AS DELAYED
SIGNING OF NEW CONTRACTS. THIS DIFFERENCE IS NOT AN INDICATION OF ANY TREND OR
DEFLATING SALES FACTOR. BACKLOG AT MARCH 31, 2003 WAS $1,970,000 AS COMPARED TO
$561,000 FOR THE SAME PERIOD A YEAR AGO. A MAJOR ADD-ON AMENDMENT FOR AN
INCREASE OF $4,500,000 FOR INTEGRATED VOICE/DATA COMMAND AND CONTROL HF NETWORKS
WILL OCCUR IN THE THIRD QUARTER OF FISCAL 2003. AUTHORIZATION TO START WORK HAS
BEEN RECEIVED AGAINST THIS AMENDMENT. DELIVERIES AGAINST THIS ORDER WILL
COMMENCE IN THE FOURTH QUARTER OF FISCAL 2003.

                                      -10-
<PAGE>
RESULTS OF OPERATIONS: (CONTINUED)
----------------------


INVENTORY AT MARCH 31, 2003 WAS $292,560 HIGHER THAN SEPTEMBER 30, 2002 DUE TO
PURCHASES OF MATERIALS AND PRODUCTION TO MEET SCHEDULED SHIPMENTS IN FUTURE
PERIODS AS INDICATED BY CURRENT BACKLOG AT PERIOD END. INVENTORIES WILL CONTINUE
TO INCREASE DUE TO PURCHASES OF HIGH DOLLAR OEM EQUIPMENT TO BE DESIGNED INTO
THE PENDING HF NETWORK AMENDED CONTRACT. THE SYSTEM DELIVERY SCHEDULE REQUIRES
ALL NETWORK STATIONS (SITES) TO BE SHIPPED BY MARCH 2004. THESE INCREASES IN
INVENTORY WILL BE CLOSELY MONITORED. DUE TO AN INCREASED NUMBER OF PRODUCT
CONFIGURATIONS, IT IS STILL NECESSARY TO CARRY A QUANTITY OF MANY DIFFERENT
MODELS IN WORK IN PROCESS AND FINISHED GOODS FOR FAST TURN AROUND REQUIREMENTS
WHEN DELIVERY ORDERS ARE RECEIVED.

ANOTHER U.S. FUNDED CONTRACT OF $1,600,000 WITH A FOREIGN NAVY WAS SIGNED BY
BOTH PARTIES IN MARCH. HOWEVER, BINDING ORDERS WILL NOT BE PLACED UNTIL FOREIGN
MILITARY FUNDING (FMF) APPROVAL AND OTHER CONTRACTURAL PROCESSES ARE COMPLETED.
THIS ACTION NORMALLY TAKES 4 TO 6 MONTHS.

COST OF SALES WAS SLIGHTLY LOWER AT 58.8% OF SALES IN THE FIRST SIX MONTHS OF
FISCAL 2003 AS COMPARED TO 60.2% OF SALES IN THE SAME PERIOD ONE YEAR AGO.
PRODUCT MIX SHIPPED IN THE SECOND QUARTER RESULTED IN INCREASED COST OF SALES.
IMPROVED PRODUCT MIX AND FURTHER REDUCTIONS IN MANUFACTURING OVERHEADS SHOULD
RESULT IN REDUCED COST OF SALES IN FUTURE PERIODS.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES WAS SLIGHTLY LOWER THAN LAST YEAR
AT $891,904 AS COMPARED TO $893,087 WITH NO SIGNIFICANT CHANGES TAKING PLACE.
DIRECT LABOR ALSO REMAINED CONSTANT.

INTEREST INCOME INCREASED $40,939 ON INCREASED INVESTMENTS FOR THE FIRST SIX
MONTHS OF THE CURRENT FISCAL YEAR ALTHOUGH YIELDS CONTINUE TO BE EXTREMELY LOW.

SALES AND MARKETING EFFORTS IN THIS REPORTING PERIOD HAVE BEEN FOCUSED ON THE
USCG DEEPWATER PROGRAM. NEW HF SYSTEM CAPABILITIES AND ADVANCED TECHNOLOGIES
APPLICATIONS ARE UNDER STUDY TO SERVE DEEPWATER LONG-TERM REQUIREMENTS FOR
C4ISR. WE CONTINUE THE PURSUIT OF HIGH PROBABILITY SYSTEMS OPPORTUNTIES IN ASIA
AND NORTH AFRICA. A SUCCESSFUL DEMONSTRATION OF OUR PATHFINDER II PRODUCT
CAPABILITY IN AFRICA DREW HIGH INTEREST BY THEIR MINISTRY OF DEFENSE TO BRING
THESE CAPABILITIES INTO THEIR DEFENSE MISSION, PROBABLY NEXT YEAR.

                                      -11-
<PAGE>
ITEM 3. CONTROL AND PROCEDURES

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. THE TERM "DISCLOSURE
CONTROLS AND PROCEDURES" IS DEFINED IN RULE 13A - 14(C) 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 EVALUATED THE
EFFECTIVENESS OF OUR DISCLOSURE CONTROLS AND PROCEDURES AS OF A DATE WITHIN 90
DAYS BEFORE THE FILING OF THIS QUARTERLY REPORT, AND THEY HAVE CONCLUDED THAT AS
OF THAT DATE, OUR DISCLOSURE CONTROLS AND PROCEDURES WERE EFFECTIVE AT ENSURING
THAT REQUIRED INFORMATION WILL BE DISCLOSED ON A TIMELY BASIS IN OUR REPORTS
FILED UNDER THE EXCHANGE ACT.

(B) CHANGES IN INTERNAL CONTROLS. THERE WERE NO SIGNIFICANT CHANGES TO OUR
INTERNAL CONTROLS OR IN OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT OUR
INTERNAL CONTROLS SUBSEQUENT TO THE DATE OF THEIR EVALUATION BY OUR CHIEF
EXECUTIVE OFFICER AND OUR CHIEF FINANCIAL OFFICER, INCLUDING ANY CORRECTIVE
ACTIONS WITH REGARD TO SIGNIFICANT DEFICIENCIES AND MATERIAL WEAKNESSES.

                                      -12-
<PAGE>
PART II   OTHER INFORMATION


5.     OTHER INFORMATION

       NONE

6.     EXHIBITS AND REPORTS ON FORM 8-K

       (A)     EXHIBITS

               99.1    CERTIFICATE OF CHIEF EXECUTIVE OFFICER PURSUANT TO
                       SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

               99.2    CERTIFICATE OF CHIEF FINANCIAL OFFICER PURSUANT TO
                       SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

               99.3    CERTIFICATE OF CHIEF EXECUTIVE OFFICER PURSUANT TO
                       SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C.
                       1350)

               99.4    CERTIFICATE OF CHIEF FINANCIAL OFFICER PURSUANT TO
                       SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C.
                       1350)

       (B)    REPORTS ON FORM 8-K

       EFFECTIVE MARCH 11, 2003, ARNOLD A. HEGGESTAD, Ph.D. WAS APPOINTED TO THE
       BOARD OF DIRECTORS OF SUNAIR ELECTRONICS, INC. DR. HEGGESTAD IS THE
       HOLLOWAY PROFESSOR OF ENTREPRENEURSHIP AND FINANCE AT THE UNIVERSITY OF
       FLORIDA. DR. HEGGESTAD HAS BEEN AT THE UNIVERSITY OF FLORIDA SINCE 1974.

       DR. HEGGESTAD HAS SERVED AS CHAIRMAN, DEPARTMENT OF FINANCE, INSURANCE
       AND REAL ESTATE, ASSOCIATE DEAN, COLLEGE OF BUSINESS ADMINISTRATION,
       DIRECTOR OF THE CENTER FOR FINANCIAL INSTITUTIONS, EXECUTIVE DIRECTOR,
       UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, ASSOCIATE VICE PRESIDENT OF
       ENTREPRENEURIAL PROGRAMS IN THE OFFICE OF RESEARCH.

       DR. HEGGESTAD HAS BEEN VERY ACTIVE IN PUBLIC SERVICE AND HAS SERVED BOTH
       PUBLIC AND PRIVATE INTERESTS IN A NUMBER OF CAPACITIES.

                                      -13-
<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.


                  MAY 13, 2003                        /S/ JAMES E. LAURENT
DATE_______________________________________
                                               ------------------------------
                                               JAMES E. LAURENT, PRINCIPAL
                                               EXECUTIVE OFFICER


                  MAY 13, 2003                        /S/ SYNNOTT B. DURHAM
DATE_______________________________________    ______________________________
                                               SYNNOTT B. DURHAM, PRINCIPAL
                                               ACCOUNTING OFFICER

                                      -14-