Page 1 of 6
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 June 30, 1997 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 June 30, 1997
Common stock, par value $.01
8,307,124
Page 2 of 6
PART 1, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
APA OPTICS, INC.
CONDENSED BALANCE SHEETS
ASSETS June 30 March
31
1997
1997
CURRENT ASSETS: (Unaudited)
(Audited)
*
Cash and short-term investments $3,432,773
$3,875,20
5
Accounts receivable 450,302
355,981
Inventories:
Raw materials 18,639
15,666
Work-in-process & finished 137,188
goods 132,697
Prepaid expenses 17,932
27,408
Bond reserve funds 105,417
70,000
TOTAL CURRENT ASSETS 4,162,251
4,476,957
PROPERTY AND EQUIPMENT NET 2,423,886
2,107,755
OTHER ASSETS 2,792,465
2,834,686
$9,378,602 $
9,419,398
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current portion of long-term $ 158,021 $
debt 158,021
Accounts payable 91,098
59,210
Accrued expenses 117,896
118,216
TOTAL CURRENT LIABILITIES 367,015
335,447
LONG-TERM DEBT 3,658,803
3,670,983
SHAREHOLDERS' EQUITY
Undesignated shares; 5,000,00
shares
authorized; none issued ---
---
Common stock, $.01 par value;
15,000,000
shares authorized; 8,307,124 &
8,306,624
issued 83,071
83,066
Paid-in capital 8,213,168
8,244,423
Retained earnings (deficit) (2,943,455)
(2,914,52
1)
5,352,784
5,412,968
$9,378,602 $
9,419,398
*Derived from audited financial statements
age 3 of 6
APA OPTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
June 30
1997 1996
REVENUES $ 661,640 $ 538,388
COSTS AND EXPENSES:
Cost of sales and
services 534,059 356,740
Selling general &
administrative 122,059 149,226
Research & development 58,429 108,356
714,547 614,322
Gain/Loss from Operations: (52,907) (75,934)
INTEREST INCOME & EXPENSE:
Interest Income 70,128 21,188
Interest Expense (45,856) (8,521)
24,272 12,667
INCOME (LOSS)
BEFORE INCOME TAXES (28,635) (63,267)
INCOME TAX EXPENSE 300 250
NET INCOME (LOSS) $ (28,935) $ (63,517)
EARNINGS (LOSS) PER
COMMON & COMMON EQUIVALENT
SHARE $ $
(.00) (.01)
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,306,932 8,000,784
Page 4 of 6
APA OPTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
June
1997 1996
OPERATING ACTIVITIES
Net income (loss) $ $
(28,935) (63,517)
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization
103,529 109,294
Changes in operating assets and
liabilities:
Accounts receivable
(94,321) 22,255
Inventories and
prepaid expenses
(33,405) (65,472)
Accounts payable and accrued
expenses
31,568 (1,322)
Other
(1,543) 24,028
Net cash provided by (used in)
operating
activities
(23,107) 25,266
INVESTING ACTIVITIES
(Purchases) Sales of property and (
equipment (395,660) 248,773)
Net cash (used in) investing
activities (395,660) (248,773)
FINANCING ACTIVITIES
Proceeds from the sale of common stock
625 527,077
Long-term debt proceeds
--- 3,659,362
Repayment of Long Term Debt
(12,180) ---
Bond placement costs
--- (277,182)
Bond reserve funds
(12,110) (2,112,139)
Net cash provided by (used in) 1,797,118
financing activities (23,665)
Increase (decrease) in cash 1,573,611
(442,432)
Cash at Beginning of Period 2,256,309
3,875,205
Cash at End of Period $ $3,829,920
3,432,773
Supplemental schedule of non-cash
transactions:
Land and corresponding deferred $ $ 250,000
revenue 250,000
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
results of any interim period are not necessarily indicative
of results for the full year.
Page 5 of 6
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
Revenues for the first quarter of fiscal 1998 ended June
30, 1997 were $661,640, an increase of 23% from the first
quarter of fiscal 1997 ended June 30, 1996. The increase in
revenues can be attributed to government contracts work.
Government contract revenues have increased after hiring
additional research scientists in fiscal 1997. Production
revenues are lower the first quarter of fiscal 1998 as
compared to the first quarter of fiscal 1997.
For the first quarter of fiscal 1998, the Company is
reporting a net loss of $28,935 as compared to a net loss of
$63,517 in the first quarter of fiscal 1997. The Company's
gross profit margin decreased to 19% for the first three
months of fiscal 1998 from 34% for the first three months of
fiscal 1997. The decrease in the gross profit margin is
attributed to extra burden costs associated with the Aberdeen
facility. At this time the Company is hiring people and
purchasing equipment for the facility. The Company
anticipates beginning production by the end of September
1997. Research and development costs have decreased to
$58,429 for the first three months of fiscal 1998 from
$108,356 for the first three months of fiscal 1997. The
Company plans to continue to incur IR&D costs attributed to
further development of the WDM receiver.
Liquidity and Capital Resources:
The Company's cash balance at June 30, 1997 is
$3,432,773 compared to $3,875,205 at March 31, 1997. The
Company's account receivable balance has increased to
$450,302 at June 30, 1997 compared to $355,981 at March 31,
1997, primarily due to a slight delay in payment on
government contracts. These payments were received early in
the second quarter of fiscal 1998. The cash decrease can be
attributed to payments on the building in Aberdeen, SD and
purchases of equipment for the facility . The Company's cash
balance will increase in the second quarter of fiscal 1998
following a draw on the South Dakota Bond funds, which will
likely be paid out. in August of 1997. The Bond will
reimburse the Company approximately $1.6 million spent for
the facility using the Company's cash reserves. The debt has
been on the Company's books for about one year, and the
offsetting asset is on the balance sheet under "other
assets".
Forward-looking statements contained herein are made pursuant
to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Certain important factors,
such as changes in production costs and construction delays,
could cause results to differ materially from those
anticipated by some of the statements contained in this
report. Investors are cautioned that all forward-looking
statements involve risks and uncertainty.
Page 6 of 6
PART II. OTHER INFORMATION
ITEM 1 . Not Applicable.
ITEM 2.
(a.) Effective May 15, 1997, the Issuer extended the term of
300,000 outstanding Warrants due to expire on May 31, 1997,
to November 30, 1997.
(c.) On May 6, 1997, the Company issued 1,000 shares of
Common Stock to a director upon exercise of an outstanding
option. The exercise price of the option was $3.50 per share,
paid by $625.00 in cash and $2,875.00 by tendering to the
Issuer 500 shares of Common Stock valued at $5.75 per share.
No underwriter or selling agent was used and no discounts or
commissions were paid. The Issuer claims exemption for this
transaction under Section 4(2) of the Securities Act of 1933
as a transaction not involving a public offering.
ITEMS 3 - 5. Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27: Financial Data Schedules
(b) There were no reports on Form 8-K filed during the three
months ended June 30, 1997.
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.
8/05/97
/s/ Anil K. Jain
Date
Anil K. Jain
President
Principal Executive Officer
Treasurer & Principal Financial
Officer
8/05/97
/s/ Randal J. Becker
Date
Randal J. Becker
Principal Accounting Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 3,432,773
<SECURITIES> 0
<RECEIVABLES> 450,302
<ALLOWANCES> 0
<INVENTORY> 155,827
<CURRENT-ASSETS> 4,162,251
<PP&E> 2,423,886
<DEPRECIATION> 103,529
<TOTAL-ASSETS> 9,378,602
<CURRENT-LIABILITIES> 367,015
<BONDS> 0
0
0
<COMMON> 83,071
<OTHER-SE> 5,269,713
<TOTAL-LIABILITY-AND-EQUITY> 9,378,602
<SALES> 661,640
<TOTAL-REVENUES> 661,640
<CGS> 534,059
<TOTAL-COSTS> 534,059
<OTHER-EXPENSES> 180,488
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,856
<INCOME-PRETAX> (28,635)
<INCOME-TAX> 300
<INCOME-CONTINUING> (28,935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,935)
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<EPS-DILUTED> (.00)
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