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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996 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 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, 1996
Common stock, par value $.01 8,146,360
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PART 1, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
APA OPTICS, INC.
CONDENSED BALANCE SHEETS
ASSETS June 30 March 31
1996 1996
CURRENT ASSETS: (Unaudited) (Audited)*
Cash and short-term investments $3,829,920 $2,256,309
Accounts receivable 384,597 406,852
Inventories:
Raw Materials 31,805 24,806
Work-in-process & finished goods 143,407 105,993
Costs in excess of billings on
research contracts 218,433 210,658
Prepaid expenses 18,589 30,305
Bond reserve funds 91,667 66,667
TOTAL CURRENT ASSETS 4,718,418 3,101,590
PROPERTY AND EQUIPMENT, NET 1,309,050 1,157,570
OTHER ASSETS 2,850,482 497,189
$ 8,877,950 $ 4,756,349
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 135,638 $ 100,000
Accounts payable 65,691 112,857
Accrued expenses 101,470 91,264
TOTAL CURRENT LIABILITIES 302,799 304,121
LONG TERM DEBT 4,004,362 345,000
SHAREHOLDERS' EQUITY
Undesignated shares; 5,000,000 shares
authorized; none issued --- ---
Common stock, $.01 par value; 15,000,000
shares authorized; 8,146,360 & 7,990,007
issued 81,464 79,900
Paid-in-capital 7,456,339 6,930,826
Retained earnings (deficit) (2,967,014) (2,903,498)
4,570,789 4,107,228
$ 8,877,950 $ 4,756,349
* Derived from audited financial statements
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APA OPTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
June 30,
1996 1995
REVENUES $ 538,388 $ 592,017
COSTS AND EXPENSES:
Cost of sales and
services 356,740 445,326
Selling, general &
administrative 149,226 152,627
Research & development 108,356 2,467
614,322 600,420
Gain/Loss from Operations (75,934) (8,403)
INTEREST INCOME & EXPENSE:
Interest Income 21,188 2,445
Interest Expense (8,521) (10,279)
12,667 (7,834)
INCOME (LOSS)
BEFORE INCOME TAXES (63,267) (16,237)
INCOME TAX EXPENSE
(BENEFIT) 250 250
NET INCOME (LOSS) $ (63,517) $ (16,487)
EARNINGS (LOSS) PER
COMMON & COMMON EQUIVALENT
SHARE (EXHIBIT 11) $(.01) $(.00)
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,000,784 7,381,792
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APA OPTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
June
1996 1995
OPERATING ACTIVITIES
Net Income (loss) $ (63,517) $ (16,487)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 109,294 103,193
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 22,255 (38,953)
(Increase) decrease in inventories and
prepaid expenses (65,472) (18,424)
Increase (decrease) in accounts payable and
accrued expenses (1,322) (60,324)
Other 24,028 (38,003)
Net cash provided by (used in) operating
activities 25,266 (68,998)
INVESTING ACTIVITIES
(Purchases) Sales of property and equipment (248,773) (23,376)
Net cash used in investing activities (248,773) (23,376)
FINANCING ACTIVITIES
Proceeds from the sale of common stock 527,077 4,492
Long term debt proceeds 3,659,362 ---
Ernest money deposit on bond financing (315,000) ---
Debt placement costs (277,182) ---
Bond reserve funds (1,797,139) ---
Net cash provided by financing activities 1,797,118 4,492
Increase (decrease) in cash 1,573,611 (87,882)
Cash at Beginning of Period 2,256,309 401,034
Cash at End of Period $3,829,920 $ 313,152
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.
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ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
Revenues for the first quarter of fiscal 1997 ended June 30,
1996 were $538,388, a decrease of 9% from the first quarter of
fiscal 1996 ended June 30, 1995. While the production revenues
increased by $21,665 during the first quarter of fiscal year 1997
as compared to the first quarter of fiscal year 1996, the
contract revenues decreased by $75,294 resulting in an overall
decrease of $53,629 for the period. The decrease in revenues for
the first quarter of fiscal 1997 as compared to revenues of the
first quarter of fiscal 1996 can be attributed to a substantial
increase in internal research & development funded by the
Company, by personnel who would otherwise be generating
revenues working on government paid contracts. Also, the Company
has experienced significant administration costs associated with
the Aberdeen project. The increase in IR&D results from
continuing efforts in the modulator production plans for our
Aberdeen facility. Internal research and development expenses
were $108,356 during the first quarter of fiscal year 1997 as
compared to $2,467 for the first quarter of fiscal year 1996.
The Company's backlog of unfinished government contracts is
approximately $3.6 million at the end of the first quarter of
fiscal 1997. The Company has hired additional research scientists
in the first quarter, which is expected to result in increased
contract revenues in the second quarter of fiscal 1997.
For the first quarter of fiscal 1997, the Company is
reporting a net loss of ($63,517) as compared to a net loss of
($16,487) for the first quarter of fiscal 1996. This increase in
losses of $47,030 is mainly due to an increase of
$105,889 in company paid research and development expenses. The
Company anticipated it would initially lose money on the Aberdeen
project, as reported previously in our fiscal 1996 annual
report. The Company's combined research & development activities
(contract and internal) increased by $30,595 for the first
quarter of fiscal 1997 as compared to the first quarter of fiscal
1996.
Liquidity and Capital Resources:
The Company's cash balance at June 30, 1996 is $3,829,920,
an increase of $1,573,611 from the year ended March 31, 1996. The
Company's current ratio is over fifteen to one. The Company
believes that it has sufficient cash to maintain its normal
operations through the balance of fiscal 1997 and beyond. During
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the first quarter of fiscal 1997 the Company closed on the
financial assistance programs from the State of South Dakota
and Aberdeen, South Dakota.
The total financing is not complete at this time, but the Company
has acquired funding of $3,445,000 along with equity
proceeds of $500,000, and a land grant of $250,000. The facility
in Aberdeen will begin construction during the second quarter of
fiscal 1997.
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PART II. OTHER INFORMATION
ITEMS 1 - 5. Not Applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit
4.1(a) State of South Dakota Board of Economic Development $300,000
Promissory Note, REDI Loan No: 95-13-A
4.1(b) State of South Dakota Board of Economic Development Security
Agreement, REDI Loan No: 95-13-A dated May 28, 1996
4.2(a) $700,000 Loan Agreement dated June 24, 1996 by and between
Aberdeen Development Corporation and APA Optics, Inc.
4.2(b) $300,000 Loan Agreement dated June 24, 1996 by and between
Aberdeen Development Corporation and APA Optics, Inc.
4.2(c) $250,000 Loan Agreement dated June 24, 1996 by and between
Aberdeen Development Corporation and APA Optics, Inc.
4.2(d) $300,000 Loan Agreement dated June 24, 1996 by and between
Aberdeen Development Corporation and APA Optics, Inc.
4.3(a) Loan Agreement between South Dakota Economic Development
Finance Authority and APA Optics, Inc.
4.3(b) Mortgage and Security Agreement - One Hundred Day Redemption
from APA Optics, Inc. to South Dakota Economic Development Finance
Authority dated as of June 24, 1996
4.4(a) Subscription and Investment Representation Agreement of NE
Venture, Inc.
4.4(b) Form of Common Stock Purchase Warrant for NE Venture, Inc.
11: Statement RE: Computation of per share earnings.
27: Financial Data Schedule
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(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
June 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.
08/13/96 s/s Anil K. Jain
Date Anil K. Jain
President
Principal Executive Officer
Treasurer & Principal Financial
Officer
08/13/96 s/s Randal J. Becker
Date Randal J. Becker
Principal Accounting Officer