Page 1 of 8 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, 1995 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, 1995 Common stock, par value $.01 7,385,007 Page 2 of 8 PART 1, FINANCIAL INFORMATION ITEM 1, FINANCIAL STATEMENTS APA OPTICS, INC. CONDENSED BALANCE SHEETS
ASSETS June 30 March 31 1995 1995 CURRENT ASSETS: (Unaudited) (Audited)* Cash and short-term investments $ 313,152 $ 401,034 Accounts receivable 460,896 421,943 Inventories: Raw Materials 61,128 61,791 Work-in-process & finished goods 153,839 146,414 Prepaid expenses 19,137 31,225 Bond reserve funds 87,083 63,333 TOTAL CURRENT ASSETS 1,095,235 1,125,740 PROPERTY AND EQUIPMENT, NET 1,424,465 1,492,282 OTHER ASSETS 471,078 445,075 $ 2,990,778 $ 3,063,097 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current Portion of Long-Term Debt $ 95,000 $ 95,000 Accounts payable 75,894 97,584 Accrued expenses 1,842 40,476 TOTAL CURRENT LIABILITIES 172,736 233,060 LONG TERM DEBT 445,000 445,000 SHAREHOLDERS' EQUITY Undesignated shares; 5,000,000 shares authorized; none issued --- --- Common stock, $.01 par value; 15,000,000 shares authorized; 7,385,007 & 7,376,923 issued 73,850 73,769 Paid-in-capital 5,126,703 5,122,292 Retained earnings (deficit) (2,827,511) (2,811,024) 2,373,042 2,385,037 $ 2,990,778 $ 3,063,097
* Derived from audited financial statements Page 3 of 8 APA OPTICS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended June 30, 1995 1994 REVENUES $ 592,017 $ 450,222 COSTS AND EXPENSES: Cost of sales and services 445,326 321,345 Selling, general & administrative 152,627 129,288 Research & development 2,467 97,675 600,420 548,308 Gain/Loss from Operations (8,403) (98,086) INTEREST INCOME & EXPENSE: Interest Income 2,445 1,527 Interest Expense (10,279) (11,819) (7,834) (10,292) INCOME (LOSS) BEFORE INCOME TAXES (16,237) (108,378) INCOME TAX EXPENSE (BENEFIT) 250 250 NET INCOME (LOSS) $ (16,487) $(108,628) EARNINGS (LOSS) PER COMMON & COMMON EQUIVALENT SHARE (EXHIBIT 11) $(.00) $(.01) WEIGHTED AVERAGE SHARES OUTSTANDING 7,381,792 7,274,923
Page 4 of 8 APA OPTICS, INC. STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended June 1995 1994 OPERATING ACTIVITIES Net Income (loss) $ (16,487) $ (108,628) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 103,193 108,865 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (38,953) (22,720) (Increase) decrease in inventories and prepaid expenses (18,424) (65,206) Increase (decrease) in accounts payable and accrued expenses (60,324) (38,964) Other (38,003) (11,588) Net cash provided by (used in) operating activities (68,998) (138,241) INVESTING ACTIVITIES (Purchases) Sales of property and equipment (23,376) 108,979 * Net cash used in investing activities (23,376) 108,979 FINANCING ACTIVITIES Proceeds from the sale of common stock 4,492 --- Repayment of long-term debt --- --- Net cash provided by financing activities 4,492 --- Increase (decrease) in cash (87,882) (29,262) Cash at Beginning of Period 401,034 274,204 Cash at End of Period $ 313,152 $ 244,942
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. * Includes $125,000 from the sale of used equipment. Page 7 of 8 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) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended June 30, 1995. Signatures In accordance with the requirements of the Securities Exchange Act of 1934, the issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. APA OPTICS, INC. Date Anil K. Jain President Principal Executive Officer Treasurer & Principal Financial Officer Date Randal J. Becker Principal Accounting Officer Page 8 of 8 EXHIBIT 11 APA OPTICS, INC.
Statement RE: Computation of Per Share Earnings Three months ended June 30, 1995 1994 Average common shares outstanding 7,381,792 7,274,923 Dilutive stock options and warrants (A) --- --- Total 7,381,792 7,274,923 Net income (loss) $ (16,487) $(108,628) Per share amount $(.00) $(.01)
(A) Calculated using the "treasury stock" method. Page 5 of 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: Revenues for the first quarter of fiscal 1996 ending June 30, 1995 were $592,017, an increase of 31% from the first quarter of fiscal 1995 ending June 30, 1994. The first quarter revenues of fiscal 1996 are also up 6% as compared to the previous quarter. (4th quarter FY 1995). While the production revenues decreased by $89,538 during the first quarter of fiscal year 1996 as compared to the first quarter of fiscal year 1995, the contract revenues increased by $231,333 resulting in an overall increase of $141,795 for the period. This shift is consistent with the Company's overall plans to focus upon production and marketing of products based upon its research and development activities. The Company believes that its contract research and development activities along with additional company paid research and development activities are vital to the development of these future products. The increased contract revenues also resulted in reducing the Company's paid internal reseach and development expenses to $2,467 during the first quarter of fiscal year 1996 from $97,675 for the first quarter of fiscal year 1995. The substantial increase in government contract revenues for the first quarter of fiscal 1996 as compared to the first quarter of fiscal 1995 is a result of the Company's efforts in winning new government contracts in fiscal 1995. The Company's backlog of unfinished government contracts is still around 4 million as previously mentioned in our 1995 annual report. For the first quarter of fiscal 1996, the Company is reporting a net loss of ($16,487) as compared to a net loss of ($108,628) for the first quarter of fiscal 1995. This significant decrease in losses of $92,141 is mainly due to significant reduction in company paid research and development expenses and increased contract revenues. While the cumulative research and development activites (contract and internal), an indicator of the overall product development activities, increased in the first quarter of fiscal year 1996 ($545,077) as compared to the first quarter of fiscal year 1995 ($408,952), the expenses for internal research decreased by $95,208 over the same period. The Company anticipates that the cumulative research and development activities will increase during the next few quarters of fiscal 1996. Page 6 of 8 Liquidity and Capital Resources: The Company's cash balance at June 30, 1995 is $313,152. The Company's current ratio is over six to one. The Company believes that it has sufficient cash to maintain its normal operation through the balance of fiscal 1996 and beyond. Additionally, the Company is in the process of expanding its opto-electronic product manufacturing facilities in Aberdeen, South Dakota based on economic assistance from the State of South Dakota and the City of Aberdeen. In particular, South Dakota will provide assistance in excess of $6.5 million. The Company will need to supplement this package with $2.0 million over the next two years, which it plans to raise through equity financing. The Company believes that these funds will be sufficient for the Aberdeen operation over the next Page 7 of 8 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) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended June 30, 1995. 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. 07/31/95 s/s Anil K. Jain Date Anil K. Jain President Principal Executive Officer Treasurer & Principal Financial Officer 07/31/95 s/s Randal J. Becker Date Randal J. Becker Principal Accounting Officer EXHIBIT INDEX FINANCIAL DATA SCHEDULES EXHIBIT 27
5 EXHIBIT 27 APRIL 1, 1995