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

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

        FOR QUARTER ENDED DECEMBER 31, 1996       COMMISSION FILE NUMBER 1-4334
                          *****************                       *************

                            SUNAIR ELECTRONICS, INC.
     **********************************************************************
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

       3101 SW THIRD AVE., FT. LAUDERDALE, FLA.                    33315
       ****************************************                **************
       (ADDRESS OR PRINCIPAL EXECUTIVE OFFICE)                   (ZIP CODE)

     REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE        (954) 525-1505
                                                               **************

                                      NONE
     **********************************************************************
      (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE
                                  LAST REPORT)

       INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1)HAS FILED ALL REPORTS
       REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
       ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD
       THAT 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  (   )

       INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
       CLASSES OF COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE
       REPORT.

               CLASS                               OUTSTANDING AT
    *****************************             ****************************
    COMMON STOCK, $0.10 PAR VALUE             12/31/96 - 3,932,370 SHARES






<PAGE>

                     SUNAIR ELECTRONICS, INC. AND SUBSIDIARY

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

       CONSOLIDATED CONDENSED BALANCE SHEETS - -
          DECEMBER 31, 1996 AND SEPTEMBER 30, 1996                 3

       CONSOLIDATED CONDENSED STATEMENTS OF INCOME - -
          THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995            4

       CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -
          THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995            5

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL
          STATEMENTS                                             6-7

       MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
          CONSOLIDATED CONDENSED STATEMENTS                      8-9

  PART II.   OTHER INFORMATION                                    10

                                                           
                                      - 2 -


<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

                     SUNAIR ELECTRONICS, INC. AND SUBSIDIARY
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                   (UNAUDITED)
  <S>                                                      <C>                     <C>    
  ASSETS                                                     12/31/96                  9/30/96
  ------                                                   -----------               -----------
  CURRENT ASSETS:

  ---------------
        CASH AND CASH EQUIVALENTS                           $ 1,197,345             $ 1,721,839
        ACCOUNTS AND NOTES RECEIVABLE                           422,055                 181,173
        INVENTORIES                                           7,638,670               7,402,036
        PREPAID EXPENSES AND OTHER CURRENT ASSETS               139,142                 150,080
                                                            -----------             -----------
             TOTAL CURRENT ASSETS                             9,397,212               9,455,128
                                                            -----------             -----------

  INVESTMENT IN MARKETABLE SECURITIES                         3,181,926               3,189,094
  -----------------------------------
  PROPERTY, PLANT AND EQUIPMENT-NET                             942,821                 966,784
  ---------------------------------
  OTHER ASSETS                                                   21,941                       0
  ------------                                              -----------             -----------

  TOTAL ASSETS                                              $13,543,900             $13,611,006
  ============                                              ===========             ===========


  LIABILITIES & SHAREHOLDERS' EQUITY

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

  --------------------
        ACCOUNTS PAYABLE AND ACCRUED EXPENSES               $   304,218             $   247,289
        CURRENT PORTION OF CAPITALIZED LEASE                     23,173                  22,720
                                                            -----------             -----------
             TOTAL CURRENT LIABILITIES                          327,391                 270,009
                                                            -----------             -----------

  LONG-TERM LIABILITIES:

  ----------------------
        LONG-TERM PORTION OF CAPITAL LEASE                       27,370                  33,527
        LONG-TERM PORTION OF INCOME TAXES PAYABLE               920,000                 932,000
                                                            -----------             -----------
             TOTAL LONG-TERM LIABILITIES                        947,370                 965,527
                                                            -----------             -----------

  SHAREHOLDERS' EQUITY                                       12,269,139              12,375,470
  --------------------                                      -----------             -----------

  TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                  $13,543,900             $13,611,006
  ========================================                  ===========             ===========

</TABLE>

                                      - 3 -


<PAGE>
<TABLE>
<CAPTION>

                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                           FOR THE THREE MONTHS ENDED
                                   (UNAUDITED)

                                                                12/31/96                 12/31/95
  <S>                                                         <C>                     <C>    
                                                               ----------              ----------
  SALES                                                       $   462,581             $   890,711
  COST OF SALES                                                   330,733                 559,493
                                                              -----------              ----------
  GROSS PROFIT                                                    131,848                 331,218
  SELLING, GENERAL & ADMINISTRATIVE EXPENSES                      366,875                 242,755
                                                              -----------              ----------
  OPERATING INCOME                                             (  235,027)                 88,463
  OTHER INCOME:
        INTEREST INCOME                                            61,667                  56,015
        INTEREST EXPENSE                                       (    1,095)              (  19,800)
        OTHER, NET                                                  1,529                     417
                                                               ----------              ----------
  INCOME BEFORE PROVISION
   (BENEFIT) FOR INCOME TAXES                                  (  172,926)                125,095

  PROVISION (BENEFIT) FOR
   INCOME TAXES                                                 (  66,600)                 42,000
                                                               ----------              ----------

  NET INCOME                                                    $(106,326)             $   83,095
                                                               ==========              ==========

  AVERAGE SHARES OUTSTANDING                                    3,932,370               3,932,370

  EARNINGS PER SHARE                                           $     0.03              $     0.02
                                                               ==========              ==========

</TABLE>


                                      - 4 -


<PAGE>
<TABLE>
<CAPTION>

                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
                           FOR THE THREE MONTHS ENDED

                                   (UNAUDITED)

                                                                      12/31/96              12/31/95
                                                                   ------------           -----------
  <S>                                                            <C>                      <C>    

  CASH FLOWS FROM OPERATING ACTIVITIES:
   NET INCOME (LOSS)                                             $  (106,326)            $   83,095
   ADJUSTMENTS TO RECONCILE NET INCOME TO
    NET CASH PROVIDED BY OPERATING ACTIVITIES
         DEPRECIATION AND AMORTIZATION                                26,302                 25,021
         CHANGES IN OPERATING ACTIVITIES:
              (INCR) IN ACCOUNTS RECEIVABLE                      (   240,882)            (  176,051)
              (INCR) DECR IN INVENTORY                           (   236,634)               106,764
              (INCR) DECR IN OTHER ASSETS                        (     3,835)                97,819
              (DECR) INCR IN ACCOUNTS PAYABLE AND
              ACCRUED EXPENSES                                       106,524              (  123,341)
              (DECR) INCR IN  ACCRUED INCOME TAX                  (   61,600)                 15,000
              INCR IN DEFERRED INCOME TAX                                  0                  27,000
                                                                 -----------              ----------
   NET CASH USED BY OPERATING ACTIVITIES                          (  516,451)                 55,307
                                                                 -----------              ----------
   CASH FLOWS FROM INVESTING ACTIVITIES:

   PURCHASE OF PROPERTY, PLANT & EQUIPMENT                        (    2,339)              (   2,911)
   SALES (PURCHASES) OF INVESTMENTS - NET                                  0              (3,210,597)
                                                                 -----------              ----------
   NET CASH FROM INVESTING ACTIVITIES                             (    2,339)             (3,213,508)
                                                                 -----------              ----------
   CASH FLOWS FROM FINANCING ACTIVITIES:

   PRINCIPAL PAYMENT OF CAPITAL LEASE                                 (5,704)              (   5,286)
                                                                 -----------              ----------
   NET INCREASE (DECREASE) IN CASH                                  (524,494)             (3,163,487)
   CASH AT BEGINNING OF PERIOD                                     1,721,839               4,408,135
                                                                 -----------              ----------

   CASH AT END OF PERIOD                                         $ 1,197,345              $1,244,648
                                                                 ===========             ===========

   SUPPLEMENTAL DISCLOSURE OF CASH FLOW
         INFORMATION:
         CASH PAID DURING THE YEAR FOR INTEREST                  $         0             $         0
                                                                ============            ============
         CASH PAID DURING THE YEAR FOR INCOME
              TAXES                                              $         0             $         0
                                                                ============            ============


</TABLE>

                                      - 5 -


<PAGE>



              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

       1.     BASIS OF PRESENTATION

              THE ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS HAVE BEEN PREPARED
              IN ACCORDANCE WITH THE INSTRUCTIONS TO FORM 10-Q 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 THREE
              MONTHS ENDED DECEMBER 31, 1996, ARE NOT NECESSARILY INDICATIVE OF
              THE RESULTS THAT MAY BE EXPECTED FOR THE FISCAL YEAR ENDING
              SEPTEMBER 30, 1997.

       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:

                                                 12/31/96             9/30/96
                                              -----------         -----------
                  RAW MATERIALS               $ 1,575,289         $ 1,507,724
                  WORK IN PROCESS               3,436,553           3,341,022
                  FINISHED GOODS                2,626,828           2,553,290
                                              -----------         -----------
                                              $ 7,638,670         $ 7,402,036
                                              ===========         ===========

                                      - 6 -


<PAGE>

       3.     INCOME TAXES:

                  DURING 1995, IT WAS DETERMINED THAT CONTINUED OPERATIONS OF
       ITS INTEREST CHARGE-DOMESTIC INTERNATIONAL SALES CORPORATION (IC-DISC)
       SUBSIDIARY'S ELECTION WAS NO LONGER ADVANTAGEOUS TO THE COMPANY.
       ACCORDINGLY, THE TAX ELECTION OF THE SUBSIDIARY WAS DISCONTINUED AND ITS
       RETAINED EARNINGS OF APPROXIMATELY $3,200,000 WERE DISTRIBUTED TO THE
       COMPANY. REGULATIONS PROVIDE FOR THE TAXATION OF SUCH DISTRIBUTION OVER A
       TEN YEAR PERIOD IN EQUAL ANNUAL INCREMENTS. UPON THE ASSUMPTION THE
       COMPANY'S BUSINESS IS PROFITABLE THROUGHOUT THE TEN YEAR PERIOD,
       EXCLUDING SUCH INCREMENTAL INCOME, THE AGGREGATE INCOME TAX PAYABLE AS A
       CONSEQUENCE OF SUCH DISTRIBUTION WILL APPROXIMATE A MAXIMUM OF $985,000
       OR $98,500 PER YEAR. INTEREST WILL NO LONGER ACCRUE ON THE UNPAID PORTION
       OF THE TAX AMOUNT.

       4.           PREFERRED STOCKS:

                  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.

       5.     STOCK OPTIONS:

                  AS OF DECEMBER 31, 1996, THE COMPANY HAD GRANTED NON-QUALIFIED
       STOCK OPTIONS ON 100,000 SHARES OF COMMON STOCK.

                                      - 7 -


<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULT OF OPERATIONS

                                   
       LIQUIDITY:
       ----------

                  DURING THE FIRST QUARTER OF THE CURRENT FISCAL YEAR ENDING
       DECEMBER 31, 1996, THE COMPANY MAINTAINED CASH AND SHORT TERM INVESTMENTS
       MORE THAN ADEQUATE TO COVER KNOWN REQUIREMENTS, UNFORESEEN EVENTS OR
       UNCERTAINTIES THAT MIGHT OCCUR. DURING THE THREE MONTH PERIOD, CASH AND
       SHORT TERM INVESTMENTS MAINTAINED AN AVERAGE BALANCE OF $ 1,402,000,
       COMPARED TO AN AVERAGE BALANCE OF $1,626,000 FOR THE TWELVE MONTHS ENDED
       SEPTEMBER 30, 1996, OR AN AVERAGE BALANCE OF $2,968,000 FOR THE TWELVE
       MONTHS ENDED SEPTEMBER 30, 1995. SHORT TERM INVESTMENTS ARE TAX EXEMPT
       MONEY MARKET FUNDS THAT ARE READILY AVAILABLE FOR IMMEDIATE USE SHOULD
       THE OCCASION ARISE. IT IS ANTICIPATED THAT THE COMPANY WILL REMAIN AS
       LIQUID DURING THE REST OF FISCAL 1997. INVENTORIES CONTAIN NO
       OBSOLESCENCE AS ADJUSTMENTS ARE MADE AS THEY OCCUR. ACCOUNTS AND NOTES
       RECEIVABLE CONTAIN NO BAD DEBTS. INTERIM RESERVES ARE MAINTAINED TO COVER
       CANCELLATION CHARGES UNPAID AND ANY FREIGHT CHARGE DISPUTES. ALL MONETARY
       TRANSACTIONS ARE IN U.S. DOLLARS AND NO LETTERS OF CREDIT INVOLVE FOREIGN
       EXCHANGE.

       CAPITAL RESOURCES:
       ------------------

                  DURING THE FIRST THREE MONTHS OF THE CURRENT FISCAL YEAR, THE
       COMPANY EXPENDED $2,339 FOR CAPITAL ASSETS. NO EXPENDITURES ARE
       CONTEMPLATED FOR PLANT EXPANSION OR EXTENSIVE MAINTENANCE. THE COMPANY
       HAS NO LONG TERM DEBT AND NONE IS CONTEMPLATED OTHER THAN THE LEASE OF
       THE COMPUTER. LIABILITIES CONSIST OF CURRENT ACCOUNTS PAYABLE AND
       EXPENSES RELATED TO THE CURRENT ACCOUNTING PERIOD AND THE CAPITAL LEASE.

       RESULTS OF OPERATIONS:
       ----------------------

                  DURING THE FIRST QUARTER OF THE CURRENT FISCAL YEAR ENDED
       DECEMBER 31, 1996, SHIPMENTS WERE $ 462,581, DOWN FROM SHIPMENTS OF $
       890,711 OR 48% FOR THE SAME QUARTER ONE YEAR AGO AND DOWN $ 110,743 OR
       19% FOR THE FIRST QUARTER ENDED DECEMBER 31, 1994. EXPORT SHIPMENTS FOR
       THE THREE MONTHS ENDED DECEMBER 31, 1996 WERE $ 196,720 OR 43% OF TOTAL
       SALES, DOWN $ 275,398 OR 58% FROM THE SAME PERIOD ONE YEAR AGO. DOMESTIC
       SHIPMENTS FOR THE FIRST THREE MONTHS OF THE CURRENT FISCAL YEAR WERE $
       265,861, COMPARABLE TO SHIPMENTS FOR THE SAME PERIOD ONE YEAR AGO OF $
       418,593, DOWN $ 152,732 OR 36%. MANAGEMENT CONTINUES TO MONITOR SELLING,
       GENERAL AND ADMINISTRATIVE EXPENSES WHICH INCREASED $ 27,505 FROM THE
       SAME PERIOD ONE YEAR AGO. THE DIRECT LABOR FORCE CONTINUES AT A REDUCED
       LEVEL DUE TO SUFFICIENT INVENTORY LEVELS IN FINISHED GOODS.

                                      - 8 -


<PAGE>

       RESULTS OF OPERATIONS: (CONTINUED)
       ----------------------

                  SHIPMENTS WERE LOW FOR THE FIRST QUARTER DUE TO THE DELAY IN
       SHIPPING THE FOLLOW ON AMENDMENT RECEIVED FROM A FOREIGN NAVY UNTIL THE
       THIRD QUARTER OF FISCAL 1997, AS WELL AS CONTINUAL DELAYS IN THE RELEASE
       OF CONTRACTS FROM US GOVERNMENT AND OTHER INTERNATIONAL AGENCIES. TRAVEL
       TO THE FAR EAST IS PLANNED FOR THE SECOND QUARTER AND A NUMBER OF NEW
       PROGRAMS HAVE BEEN UNCOVERED. RECEPTION TO THE PATHFINDER SYSTEM
       CONTINUES TO BE ENTHUSIASTIC AND SEVERAL DEMONSTRATIONS ARE IN THE
       PLANNING STAGES. THE COMPANY CONTINUES TO BE OPTIMISTIC ABOUT FUTURE
       REQUIREMENTS EVEN THOUGH THE PROCUREMENT CYCLE CONTINUES TO BE EXTREMELY
       LONG.

                                      - 9 -


<PAGE>

                            PART II OTHER INFORMATION

       ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

       ITEM 27. FINANCIAL DATA SCHEDULE
                                                             


                                     - 10 -


<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.

            FEBRUARY 11, 1997                 /S/ ROBERT URICHO, JR.
       DATE _________________                 _____________________________
                                              ROBERT URICHO, JR., PRINCIPAL
                                              EXECUTIVE OFFICER

            FEBRUARY 11, 1997                 /S/ SYNNOTT B. DURHAM
       DATE _________________                 ____________________________
                                              SYNNOTT B. DURHAM, PRINCIPAL
                                              ACCOUNTING OFFICER

                                              
                                     - 11 -


<PAGE>

                               INDEX TO EXHIBITS

EXHIBIT          DESCRIPTION
NUMBER

  27             FINANCIAL DATA SCHEDULE