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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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, 2000 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from
to .
Commission File Number 0-16106
APA Optics, Inc.
(exact name of Registrant 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)
Registrant's telephone number, including area code:
(612) 784-4995
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
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 July 28, 2000
Common stock, par value $.01
11,893,860
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<TABLE>
<CATION>
PART 1, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
APA OPTICS, INC.
CONDENSED BALANCE SHEETS
ASSETS June 30, March
31,
2000
2000
<S> <C> <C>
CURRENT ASSETS: (Unaudited)
(Audited)
*
Cash and short-term investments $20,024,351
$5,941,90
6
Accounts receivable 217,102
209,337
Inventories:
Raw materials 165,153
146,841
Work-in-process & finished 154,984
goods 129,684
Prepaid expenses 15,528
19,803
Bond reserve funds 21,667
65,000
TOTAL CURRENT ASSETS 20,598,785
6,512,571
PROPERTY AND EQUIPMENT NET 2,437,677
2,459,760
OTHER ASSETS 640,622
638,060
$ 23,677,084 $
9,610,391
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current portion of long-term $ 141,194 $
debt 140,871
Accounts payable 77,547
82,412
Accrued expenses 156,994
172,672
TOTAL CURRENT LIABILITIES 375,735
395,955
LONG-TERM DEBT 2,794,759
2,908,387
SHAREHOLDERS' EQUITY
Undesignated shares; 4,999,500
shares authorized
None issued
Preferred stock, par value:
Authorized shares; 500
Issued and outstanding 5
shares. 500 5
Common stock, $.01 par value;
Authorized shares - 15,000,000
Issued & outstanding shares -
10,136,082 101,361
And 8,997,992 89,980
Paid-in capital 31,507,281
16,408,44
6
Retained earnings (deficit) (11,102,057)
(10,192,3
82)
20,506,590
6,306,049
$23,677,084 $
9,610,391
</TABLE>
*Derived from audited financial statements
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<TABLE>
<CAPTION>
APA OPTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
June 30
2000 1999
<S> <C> <C>
REVENUES $ 51,517 $ 66,597
COSTS AND EXPENSES:
Cost of sales and
services 634,501 651,260
Selling, general &
administrative 328,816 209,860
Research & development 90,999 118,112
1,054,316 979,232
Loss from operations: (1,002,799) (912,635)
INTEREST INCOME & EXPENSE:
Interest Income 136,402 32,213
Interest Expense (43,028) (35,918)
93,374
(3,705)
Loss before income taxes (909,425) (916,340)
Income taxes
250 250
Net loss $ (909,675) $ (916,590)
Net loss per share
Basic and diluted $ $
(.10) (.11)
Weighted average shares
outstanding
Basic and diluted 9,193,663 8,512,274
</TABLE>
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<TABLE>
<CAPTION>
APA OPTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
June 30,
2000 1999
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ $
(909,675) (916,590)
Adjustments to reconcile net income to
net cash
used in operating activities:
Depreciation and amortization
95,790 109,545
Changes in operating assets and
liabilities:
Accounts receivable
(7,765) (3,760)
Inventories and
prepaid expenses
(39,337) 14,046
Accounts payable and accrued
expenses
(20,543) 33,082
Other
(42,753) (2,375)
Net cash used in operating activities
(924,283) (766,052)
INVESTING ACTIVITIES
(Purchases) sales of property and
equipment (52,707) (47,036)
Net cash used in investing activities
(52,707) (47,036)
FINANCING ACTIVITIES
Proceeds from the sale of common
stock 15,110,216 ---
Repayment of long term debt
(113,305) (87,623)
Bond reserve funds 62,
524 695
Net cash (used in) provided by
financing activities 15,059,435 (86,928)
Increase (decrease) in cash
14,082,445 (900,016)
Cash at Beginning of Period
5,941,906 2,812,849
Cash at End of Period $20,024,35 $ 1,912,833
1
</TABLE>
NOTE TO CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the information furnished
reflects all adjustments which are necessary to fairly
state 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.
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ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company is engaged in the business of designing,
manufacturing, and marketing optical components and various
optoelectronic products. For the last several years the
Company's goal has been to manufacture and market
products/components based on its technology developments. The
Company selected two product areas: dense wavelength division
multiplexer (DWDM) components for fiber optic communications
and gallium nitride-based ultraviolet (UV) detectors (both
components and integrated detector/electronic/display
packages.) These areas were selected due to significant
potential markets and the Company's expertise and/or patent
positions.
In order to perform product development and production,
the Company must devote its personnel and facilities to that
effort. For several years, the Company received significant
revenues from providing research and development services in
connection with projects sponsored by various government
agencies. In fiscal 1998, the Company determined to shift its
emphasis from research and development to product
development, realizing that this shift would significantly
reduce revenues and increase losses until the Company
realized revenues from its products. If the Company is
successful in manufacturing and marketing these products, the
Company expects to significantly increase its revenues and
achieve profitability. Although the Company has purchased a
significant amount of equipment in recent fiscal years, it
will still need additional equipment as well as additional
personnel to meet its objectives.
Results of Operations
Operating revenues for the first quarter of fiscal year
2001, ended June 30, 2000, were $51,517, a decrease of 23%
from operating revenues of $66,597 for the same period in the
prior year. The decrease in revenues reflects the Company's
limited sales of new products, which the Company is working
to increase.
Cost of sales decreased by approximately 3% to $634,501,
in first quarter 2001 from $651,260 in first quarter 2000.
Gross margin for sales was negative in both periods,
reflecting continued personnel and product development costs.
Research and development expenses decreased by approximately
23% in first quarter 2001, to $90,999 from $118,112, and
selling, general and administrative expenses increased by 57%
to $328,816 compared to
$209,860 in first quarter 2000. The increase in costs of
sales, and selling, general and administrative expenses
reflects the Company's focus on product development,
including the hiring of additional personnel for production,
marketing, and sales.
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The Company reported a loss from operations for the
first quarter of fiscal 2001 of $1,002,799, an increase over
the loss from operations of $912,635 in the first quarter of
the prior year. This loss results from the combination of
decreased revenues with a corresponding increase in costs and
expenses.
The Company realized $136,402 in interest income for the
first quarter of fiscal 2001, up 323% from $32,213 in the
prior period, reflecting higher average cash balances during
the first quarter 2001. Interest expenses in first quarter
2001 totaled $43,028, up 20% from $35,918 in the prior
period, reflecting an early payment of interest due in the
second quarter of FY 2001. As a result interest expense in
the second quarter will be lower.
Liquidity and Capital Resources:
The Company's cash and equivalents balance at June 30,
2000 is $20,024,351 compared to $5,941,906 at March 31, 2000.
This results from the sale of 1,241,935 shares of the
Company's common stock under an S-3 Registration Statement
for $100 million worth of common stock, of which
approximately $15 million had been sold on or before June 30,
2000. As of the date of this report, the Company has received
over $39 million in net proceeds from this offering. The
funds will be used for enhancing production facilities,
product development and marketing, and operations. The
Company believes that it has sufficient funds for operations
in fiscal 2001 and beyond.
The Company used $924,283 net cash for operating activities,
of which the most significant cause was the net loss of
$909,675. The Company used $52,707 net cash in investing
activities in first quarter of fiscal 2001, all for the
purchase of equipment, primarily for the Aberdeen facility.
The Company anticipates approximately $2 million in
capital expenditures in fiscal 2001, primarily for equipment.
The funds for these purchases will come primarily from
proceeds from sales of common stock pursuant to a "shelf-
registered" public offering, described above.
Forward Looking Statements
Statements in this Report with respect to future sales
prospects and other matters to occur in the future are
forward looking statements and are subject to uncertainties
from factors, many of which are beyond the Company's control.
These factors include, but are not limited to, the continued
development of the Company's products, acceptance of those
products by potential customers, the Company's ability to
sell such products at a profitable price, and the Company's
ability to fund its operations.
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk.
The Company's operations are not currently subject to
market risks for interest rates, foreign rates, commodity
prices or other market price risks of a material nature.
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Part II
ITEM 1. Not applicable
ITEM 2. Changes in Securities and Use of Proceeds.
On June 21, 2000, we issued a three-year warrant to
Ladenburg-Thalmann & Co., Inc. for the purchase of 84,083
shares of common stock at $17.8395 per share. This warrant
was issued in consideration of Ladenburg's services as
placement agent of our common stock in the $100 million
public offering described above. This warrant was issued
without registration under the Securities Act of 1933 in
reliance on Section 4 (2) and Section 4 (6) of the Securities
Act of 1933.
ITEM 3-5. Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27: Financial Data Schedule
(b) There were no reports on Form 8-K filed during the three
months ended June 30, 2000.
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
APA OPTICS, INC.
8/11/00
/s/ Anil K. Jain
Date
Anil K. Jain
President
Principal Executive Officer
Treasurer & Principal Financial
Officer
8/11/00
/s/ Randal J. Becker
Date
Randal J. Becker
Accounting Manager
