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 December 31, 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 December 31, 1996
Common stock, par value $.01
8,304,624
Page 2 of 6
PART 1, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
APA OPTICS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31 March 31
1996 1996
<S>
<C> <C>
CURRENT ASSETS:
(Unaudited) (Audited) *
Cash and short-term investments
$4,312,813 $2,256,309
Accounts receivable
779,565 406,852
Inventories:
Raw materials
18,158 24,806
Work-in-process & finished goods
141,427 105,993
Costs in excess of billings on
research contracts
0 210,658
Prepaid expenses
35,247 30,305
Bond reserve funds
43,750 66,667
TOTAL CURRENT ASSETS
5,330,960 3,101,590
PROPERTY AND EQUIPMENT, NET
1,394,095 1,157,570
OTHER ASSETS
2,826,666 497,189
$ 9,551,721 $ 4,756,349
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt
$ 152,517 $ 100,000
Accounts payable
75,579 112,857
Accrued expenses
106,861 91,264
TOTAL CURRENT LIABILITIES
334,957 304,121
LONG-TERM DEBT
3,938,575 345,000
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)
(3,013,800) (2,903,498)
5,278,189 4,107,228
$ 9,551,721 $ 4,756,349
</TABLE>
* Derived from audited financial statements
Page 3 of 6
APA OPTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31 December 31
1996 1995 1996
1995
<S>
<C> <C>
REVENUES $ 666,014
$ 592,018 $1,877,068 $1,866,863
COSTS AND EXPENSES:
Cost of sales and
services
522,583 456,282 1,321,651
1,449,017
Selling, general &
administrative
135,582 112,774 442,071
392,133
Research & development 86,115
0 312,121 2,467
744,280 569,056 2,075,843
1,843,617
Gain/Loss from Operations: (78,266)
22,962 (198,775) 23,246
INTEREST INCOME & EXPENSE:
Interest Income
84,927 19,703 200,470
37,613
Interest Expense
(45,753) (8,521) (110,567)
(27,907)
39,174 11,182 89,903
9,706
INCOME (LOSS)
BEFORE INCOME TAXES (39,092)
34,144 (108,872) 32,952
INCOME TAX EXPENSE
(BENEFIT)
930 250 1,430
750
NET INCOME (LOSS) $ (40,022)
$ 33,894 $ (110,302) $ 32,202
EARNINGS (LOSS) PER
COMMON & COMMON EQUIVALENT
SHARE (EXHIBIT 11) $ (.00)
$ .00 $ (.01) $ .00
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,304,624
8,029,569 8,155,944 7,651,545
</TABLE>
Page 4 of 6
APA OPTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
1996 1995
<S>
<C> <C>
OPERATING ACTIVITIES
Net income (loss)
$ (110,302) $ 32,202
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
333,863 303,708
Changes in operating assets and liabilities:
Accounts receivable
(372,713) (63,009)
Inventories and prepaid expenses
(10,811) 1,622
Costs in excess of billings on research contracts
210,658 ---
Accounts payable and accrued expenses
30,836 (15,271)
Other assets
(20,429) (194,534)
Net cash provided by (used in) operating
activities
61,102 64,718
INVESTING ACTIVITIES
Purchases of property and equipment
(284,388) (13,888)
Net cash (used in) investing activities
(284,388) (13,888)
FINANCING ACTIVITIES
Proceeds from the sale of common stock
1,281,263 1,810,991
Long-term debt proceeds
3,472,483 ---
Earnest money deposit on bond financing
(315,000) ---
Debt placement costs
(253,721) ---
Bond reserve funds
(1,776,327) ---
Repayment of long-term debt
(128,908) (95,000)
Net cash provided by financing activities
2,279,790 1,715,991
Increase in cash
2,056,504 1,766,821
Cash at Beginning of Period
2,256,309 401,034
Cash at End of Period
$ 4,312,813 $ 2,167,855
Supplemented schedule of non-cash transactions:
Land and corresponding deferred revenue
$ 250,000 $ ---
</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
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 third quarter of fiscal 1997 ended
December 31, 1996 were $666,014, an increase of 12% from the
third quarter of fiscal 1997 ended December 31, 1995. The
third quarter revenues of fiscal 1997 are down 1% as compared
to the second quarter of fiscal 1997. Revenues for the first
three quarters of fiscal 1997 are up one percent as compared
to the first three quarters of fiscal 1996.
For the third quarter of fiscal 1997, the Company is
reporting a loss of $40,022 as compared to a loss of $6,763
in the second quarter of fiscal 1997. For the first three
quarters of fiscal 1997, the Company is reporting a loss of
$110,302 as compared to a profit of 32,202 for the first
three quarters of fiscal 1996. Although the Company has a
loss for the first nine months of fiscal 1997 as compared to
a profit for the first nine months of fiscal 1996, the
Company's gross profit margin increased from 22% in fiscal
1996 to 30% 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 nine months of
fiscal 1996 to $312,121 for the first nine 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 December 31, 1996 is
$4,312,813 compared to $2,256,309 at March 31, 1996. The
Company's account receivable balance has increased to
$779,565 at December 31, 1996 compared to $406,852 at March
31, 1996, primarily due to the delay in payment on government
contracts. These payments were received early in the fourth
quarter of fiscal 1997. The cash increase can be attributed
to the Company completing additional financing with Aberdeen,
South Dakota. The Company continues construction of the
Aberdeen facility and plans to complete construction by March
1997.
Page 6 of 6
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 December 31, 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.
February 7, 1997
s/s Anil K. Jain
Date
Anil K. Jain
President
Principal Executive Officer
Treasurer & Principal Financial
Officer
February 7, 1997
s/s Randal J. Becker
Date
Randal J. Becker
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 4,312,813
<SECURITIES> 0
<RECEIVABLES> 779,565
<ALLOWANCES> 0
<INVENTORY> 159,585
<CURRENT-ASSETS> 5,330,960
<PP&E> 1,394,095
<DEPRECIATION> 333,863
<TOTAL-ASSETS> 9,551,721
<CURRENT-LIABILITIES> 334,957
<BONDS> 0
0
0
<COMMON> 83,046
<OTHER-SE> 5,195,143
<TOTAL-LIABILITY-AND-EQUITY> 9,551,721
<SALES> 1,877,068
<TOTAL-REVENUES> 1,877,068
<CGS> 1,321,651
<TOTAL-COSTS> 1,321,651
<OTHER-EXPENSES> 754,192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,567
<INCOME-PRETAX> (108,872)
<INCOME-TAX> 1,430
<INCOME-CONTINUING> (110,302)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110,302)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
Exhibit 11
APA OPTICS, Inc.
Statement RE: Computation
of Per Share Earnings
Three
months ended Nine months ended
December 31 December 31
1996 1995 1996
1995
Average common
shares outstanding 8,304,624
7,986,007 8,155,944 7,651,545
Dilutive stock options
and warrants (A)
0 43,562 0
0
Total
8,304,624 8,029,569 8,155,944
7,651,545
Net income (loss) $ (40,022)
$ 33,894 $ (110,302) $ 32,202
Per share amount
$(.00) $.00 $(.01)
$.00
(A) Calculated using the "treasury stock" method.
