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

3005 SW THIRD AVE., FT. LAUDERDALE, FL.                             33315
----------------------------------------                         ------------
(ADDRESS OR PRINCIPAL EXECUTIVE OFFICE)                           (ZIP CODE)


ISSUER'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 December 31,
2003 - 3,800,520 shares.

Transitional Small Business Disclosure format.  Yes [ ]  No  [X]


<PAGE>


                     SUNAIR ELECTRONICS, INC. AND SUBSIDIARY

                                      INDEX
                                      *****
<TABLE>
<CAPTION>

                                                                                    PAGE NO.
                                                                                    ********
<S>    <C>                                                                              <C>
       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
</TABLE>

                                       2

<PAGE>


                          PART I. FINANCIAL INFORMATION

                     SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
                CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>


                                     ASSETS
                                                              12/31/03      9/30/03
                                                            -----------   -----------
<S>                                                         <C>           <C>
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
                                                            ===========   ===========
</TABLE>


The accompanying notes are an integral part of these financial statements


                                       3
<PAGE>


                   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
<PAGE>


                 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
<PAGE>


              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
<PAGE>

         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
<PAGE>

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
<PAGE>


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
<PAGE>

         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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<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.


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