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 September 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 September 30, 1995 Common stock, par value $.01 7,986,007 Page 2 of 8 PART 1, FINANCIAL INFORMATION ITEM 1, FINANCIAL STATEMENTS APA OPTICS, INC. CONDENSED BALANCE SHEETS
ASSETS September 30 March 31 1995 1995 CURRENT ASSETS: (Unaudited) (Audited)* Cash and short-term investments $1,924,854 $401,034 Accounts receivable 782,965 421,943 Inventories: Raw Materials 25,206 61,791 Work-in-process & finished goods 162,314 146,414 Prepaid expenses 15,200 31,225 Bond reserve funds 16,667 63,333 TOTAL CURRENT ASSETS 2,927,206 1,125,740 PROPERTY AND EQUIPMENT, NET 1,332,632 1,492,282 OTHER ASSETS 478,613 445,075 $ 4,738,451 $ 3,063,097 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current Portion of Long-Term Debt $ 100,000 $ 95,000 Accounts payable 89,777 97,584 Accrued expenses (7,772) 40,476 TOTAL CURRENT LIABILITIES 182,005 233,060 LONG TERM DEBT 345,000 445,000 SHAREHOLDERS' EQUITY Undesignated shares; 5,000,000 shares authorized; none issued --- --- Common stock, $.01 par value; 15,000,000 shares authorized; 7,986,007 & 7,376,923 issued 79,860 73,769 Paid-in-capital 6,944,302 5,122,292 Retained earnings (deficit) (2,812,716) (2,811,024) 4,211,446 2,385,037 $ 4,738,451 $ 3,063,097 * Derived from audited financial statements /TABLE Page 3 of 8 APA OPTICS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Six months ended September 30 September 30 1995 1994 1995 1994 REVENUES $ 682,828 $ 445,679 $ 1,274,845 $ 895,901 COSTS AND EXPENSES: Cost of sales and services 547,409 360,701 992,735 682,046 Selling, general & administrative 126,732 144,890 279,359 274,178 Research & development --- 66,551 2,467 164,226 674,141 572,142 1,274,561 1,120,450 Gain/Loss from Operations 8,687 (126,463) 284 (224,549) INTEREST INCOME & EXPENSE: Interest Income 15,465 3,021 17,910 4,548 Interest Expense ( 9,107) (10,793) (19,386) (22,612) 6,358 ( 7,772) ( 1,476) (18,064) INCOME (LOSS) BEFORE INCOME TAXES 15,045 (134,235) ( 1,192) (242,613) INCOME TAX EXPENSE (BENEFIT) 250 --- 500 250 NET INCOME (LOSS) $ 14,795 $(134,235) $( 1,692) $(242,863) EARNINGS (LOSS) PER COMMON & COMMON EQUIVALENT SHARE (EXHIBIT 11) $ .00 $(.02) $(.00) $(.03) WEIGHTED AVERAGE SHARES OUTSTANDING 7,623,839 7,276,010 7,482,477 7,275,469
Page 4 of 8 APA OPTICS, INC. STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended September 30 1995 1994 OPERATING ACTIVITIES Net Income (loss) $ ( 1,692) $ (242,863) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 215,689 219,131 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (361,021) 29,603 (Increase) decrease in inventories and prepaid expenses 83,375 (45,956) Increase (decrease) in accounts payable and accrued expenses (56,055) (40,150) Other (57,538) (31,008) Net cash provided by (used in) operating activities (177,242) (111,243) INVESTING ACTIVITIES Purchases of property and equipment (32,039) * 81,555 Net cash provided by (used in) investing activities (32,039) 81,555 FINANCING ACTIVITIES Proceeds from sale of common stock 1,828,101 260,000 Repayment of long-term debt (95,000) (85,000) Net cash provided by financing activities 1,733,101 175,000 Increase (decrease) in cash 1,523,820 145,312 Cash at Beginning of Period 401,034 274,204 Cash at End of Period $1,924,854 $ 419,516 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 5 of 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: Revenues for the second quarter of fiscal 1996 ended September 30, 1995 were $682,828, an increase of 53% from the second quarter of fiscal 1995 ended September 30, 1994. The second quarter revenues of fiscal 1996 are also up 15% as compared to the first quarter of fiscal 1996. While production revenues decreased by $192,382 during the first two quarters of fiscal year 1996 as compared to the first two quarters of fiscal 1995, contract revenues increased by $571,326 resulting in an overall increase in revenues of $378,944 for the first two quarters of fiscal 1996. 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 increased contract revenues also resulted in reducing the Company's paid internal research and development expenses to $2,467 during the first two quarters of fiscal year 1996 from $164,226 for the first two quarters of fiscal year 1995. The substantial increase in government contract revenues for the first two quarters of fiscal 1996 as compared to the first two quarters 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 approximately $3.2 million. For the second quarter of fiscal 1996, the Company is reporting a profit of $14,795 after writing off raw materials associated with the Interferometer for aspheric testing (IAT). The Company decided to write off these materials due to lack of revenues from these products. The $14,795 profit for the second quarter of fiscal 1996, compares to a net loss of ($134,235) for the second quarter of fiscal 1995. This improvement is mainly due to significant reduction in company paid research and development expenses and increased contract revenues. The quarters results mark the first profitable quarter for the Company in the past five years. The Company anticipates it will continue to show a profit next quarter. Page 6 of 8 Liquidity and Capital Resources: The Company's cash balance at September 30, 1995 is $1,924,854. The Company's current ratio is over sixteen to one. The receivables are up this quarter end, due to delays in receiving government payments due to the government's year end. These payments will be received during the third quarter. The Company raised approximately $1.8 million in a private placement of 600,000 shares of the Company's common stock. These funds will be used to supplement the $6.5 million of assistance from the State of South Dakota and the city of Aberdeen for the construction of a new optoelectronic product manufacturing facility in Aberdeen, South Dakota. 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) Exhibit 27: Financial Data Schedules There were no reports on Form 8-K filed during the three months ended September 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. October 26, 1995 s/s Anil K. Jain Date Anil K. Jain President Principal Executive Officer Treasurer & Principal Financial Officer October 26, 1995 s/s Randal J. Becker Date Randal J. Becker Principal Accounting Officer