Page 1 of 7
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X Quarterly report pursuant to Section 13 or 15(d)
of the
Securitie
s
Exchange
Act of
1934
For the quarterly period ended September 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
For the transition period from
to .
Commission File Number 0-16106
APA Optics, Inc.
(exact name of small business issuer as specified in its
charter)
Minnesota
41-1347235
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
2950 N.E. 84th Lane, Blaine, Minnesota 55449
(Address of principal executive offices and zip code)
Issuer's telephone number, including area code: (612)
784-4995
Indicate whether the issuer (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 issuer was
required to file such reports), and (2) has been subject to
the filing requirement 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 latest
practicable date:
Class:
Outstanding at September 30, 1996
Common stock, par value $.01
8,304,624
Page 2 of 7
PART 1, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
APA OPTICS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30 March 31
1996 1996
<S>
<C> <C>
CURRENT ASSETS:
(Unaudited) (Audited) *
Cash and short-term investments
$4,499,123 $2,256,309
Accounts receivable
824,961 406,852
Inventories:
Raw materials
18,385 24,806
Work-in-process & finished goods
146,139 105,993
Costs in excess of billings on
research contracts
0 210,658
Prepaid expenses
12,850 30,305
Bond reserve funds
17,500 66,667
TOTAL CURRENT ASSETS
5,518,958 3,101,590
PROPERTY AND EQUIPMENT, NET
1,234,307 1,157,570
OTHER ASSETS
2,835,645 497,189
$ 9,588,910 $ 4,756,349
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt
$ 152,517 $ 100,000
Accounts payable
59,884 112,857
Accrued expenses
107,724 91,264
TOTAL CURRENT LIABILITIES
320,125 304,121
LONG-TERM DEBT
3,950,574 345,000
SHAREHOLDERS' EQUITY
Undesignated shares; 5,000,000 shares
authorized; none issued
- --- ---
Common stock, $.01 par value; 15,000,000
shares authorized; 8,304,624 & 7,990,000
issued
83,046 79,900
Paid-in capital
8,208,943 6,930,826
Retained earnings (deficit)
(2,973,778) (2,903,498)
5,318,211 4,107,228
$ 9,588,910 $ 4,756,349
</TABLE>
Derived from audited financial statements
Page 3 of 7
APA OPTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30 September 30
1996 1995 1996
1995
<S>
<C> <C> <C>
<C>
REVENUES $
672,666 $ 682,828 $1,211,054
$1,274,845
COSTS AND EXPENSES:
Cost of sales and
services
442,328 547,409 799,068
992,735
Selling, general &
administrative
157,263 126,732 306,489
279,359
Research & development 117,650
- --- 226,006 2,467
717,241 674,141 1,331,563
1,274,561
Gain/Loss from Operations: (44,575)
8,687 (120,509) 284
INTEREST INCOME & EXPENSE:
Interest Income
94,355 15,465 115,543
17,910
Interest Expense
(56,293) (9,107) (64,814)
(19,386)
38,062 6,358 50,729
(1,476)
INCOME (LOSS)
BEFORE INCOME TAXES (6,513)
15,045 (69,780) (1,192)
INCOME TAX EXPENSE
(BENEFIT)
250 250 500
500
NET INCOME (LOSS) $ (6,763)
$ 14,795 $ (70,280) $ (1,692)
EARNINGS (LOSS) PER
COMMON & COMMON EQUIVALENT
SHARE (EXHIBIT 11) $ (.00)
$ .00 $ (.01) $ (.00)
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,160,736
7,623,839 8,081,197 7,482,477
</TABLE>
Page 4 of 7
APA OPTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 30
1996 1995
<S>
<C> <C>
OPERATING ACTIVITIES
Net income (loss)
$ (70,280) $ (1,692)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
219,768 215,689
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
(418,109) (361,021)
(Increase) decrease in inventories and
prepaid expenses
32,897 83,375
Costs in excess of billings on research contracts
210,658 ---
Increase (decrease) in accounts payable and
accrued expenses
16,004 (56,055)
Other
19,682 (57,538)
Net cash provided by (used in) operating
activities
10,620 (177,242)
INVESTING ACTIVITIES
Purchases of property and equipment
(272,505) (32,039)
Net cash (used in) investing activities
(272,505) (32,039)
FINANCING ACTIVITIES
Proceeds from the sale of common stock
1,281,263 1,828,101
Long-term debt proceeds
3,722,483 ---
Earnest money deposit on bond financing
(315,000) ---
Debt placement costs
(286,869) ---
Bond reserve funds
(1,780,269) ---
Repayment of long-term debt
(116,909) (95,000)
Net cash provided by financing activities
2,504,699 1,733,101
Increase in cash
2,242,814 1,523,820
Cash at Beginning of Period
2,256,309 401,034
Cash at End of Period
$ 4,499,123 $ 1,924,854
</TABLE>
NOTE TO CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the information furnished
reflects all adjustments which are necessary to a fair
statement of the results of the interim periods presented.
All adjustments were of a normal recurring nature. The result
of any interim period are not necessarily indicative of
results for the full year.
Page 5 of 7
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
Revenues for the second quarter of fiscal 1997 ended
September 30, 1996 were $672,666, a decrease of 1% from the
second quarter of fiscal 1996 ended September 30, 1995. The
second quarter revenues of fiscal 1997 are up 25% as compared
to the first quarter of fiscal 1997 attributed to additional
contract revenues. Revenues for the first two quarters of
fiscal 1997 are down five percent as compared to the first
two quarters of fiscal 1996. The Company continues to devote
personnel toward product development associated with the
Aberdeen project.
For the second quarter of fiscal 1997, the Company is
reporting a loss of $6,763 as compared to a loss of $63,517
in the first quarter of fiscal 1997. For the first two
quarters of fiscal 1997, the Company is reporting a loss of
$70,280 as compared to a loss of $1,692 for fiscal 1996.
Although the Company has an increased loss for the first six
months of fiscal 1997 as compared to the first six months of
fiscal 1996, the Company has increased its gross profit
margin from 22% in fiscal 1996 to 34% in fiscal 1997. The
main reason for the increased losses in spite of the
increased gross profit margin in 1997, is the significant
increase in internal research and development and
administrative costs relative to the move toward product
manufacturing. Research and development costs have increased
from $ 2,467 for the first six months of fiscal 1996 to
$226,006 for the first six months of fiscal 1997. The Company
plans to continue these IR&D costs attributed to further
development of the WDM receiver in the following quarters.
Liquidity and Capital Resources:
The Company's cash balance at September 30, 1996 is
$4,499,123 compared to $2,256,309 at March 31, 1996. The
Company's account receivable balance has increased to
$824,961 at September 30, 1996 compared to $406,852 at March
31, 1996. The increase in receivables is due to the delay in
payment on government contracts, which will all be paid
during the third quarter of fiscal 1997. The cash increase
during the second quarter can be attributed to the Company
completing additional financing with Aberdeen, South Dakota.
The Company received an additional $700,000 in equity
financing and $75,000 in loans during the second quarter.
Following the end of the second quarter the Company began
Construction of the Aberdeen facility and plans to complete
construction by March 1997.
Page 6 of 7
PART II. OTHER INFORMATION
ITEMS 1 - 5. Not Applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11: Statement RE: Computation of per share
earnings.
(b) Exhibit 27: Financial Data Schedules
There were no reports on Form 8-K filed during the three
months ended September 30, 1996.
Signatures
In accordance with the requirements of the Securities
Exchange Act of 1934, the issuer has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
APA OPTICS, INC.
November 6, 1996
Anil K. Jain
Date
Anil K. Jain
President
Principal Executive Officer
Treasurer & Principal Financial
Officer
November 6, 1996
Randal J. Becker
Date
Randal J. Becker
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 4,499,123
<SECURITIES> 0
<RECEIVABLES> 824,961
<ALLOWANCES> 0
<INVENTORY> 164,524
<CURRENT-ASSETS> 5,518,958
<PP&E> 1,234,307
<DEPRECIATION> 219,768
<TOTAL-ASSETS> 9,588,910
<CURRENT-LIABILITIES> 320,125
<BONDS> 0
0
0
<COMMON> 83,046
<OTHER-SE> 5,235,165
<TOTAL-LIABILITY-AND-EQUITY> 9,588,910
<SALES> 1,211,054
<TOTAL-REVENUES> 1,211,054
<CGS> 799,068
<TOTAL-COSTS> 799,068
<OTHER-EXPENSES> 532,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,814
<INCOME-PRETAX> (69,780)
<INCOME-TAX> 500
<INCOME-CONTINUING> (70,280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,280)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
Exhibit 11
APA OPTICS, Inc.
Statement RE: Computation
of Per Share Earnings
<TABLE>
<CAPTION>
Three
months ended Six months ended
September 30 September 30
1996 1995 1996
1995
<S> <C>
<C> <C> <C>
Average common
shares outstanding 8,160,736
7,583,161 8,081,197 7,482,477
Dilutive stock options
and warrants (A)
0 40,678 0
0
Total
8,160,736 7,623,839 8,081,197
7,482,477
Net income (loss) $
(6,763) $ 14,795 $ (70,280)
$ (1,692)
Per share amount
$(.00) $.00 $(.01)
$(.00)
</TABLE>
(A) Calculated using the "treasury stock" method.
