APA Optics, Inc. has Expected Loss in Fiscal 2000 Third Quarter; Manufacturing Activities Move Forward

Production Capabilities for DWDM Products are Refined at Aberdeen Manufacturing Center to Accommodate Future Requirements; Company Also Presses Gallium Nitride Detector Marketing Efforts

Minneapolis, MN. APA Optics, Inc. (Nasdaq: APAT), today reported a loss of $988,740, or 11 cents a share, in the third quarter of fiscal 2000, ended December 31, 1999. The loss, which had been projected as part of the Company s buildup for manufacturing, compares with a loss of $616,980, or seven cents a share, in the third quarter of fiscal 1999.

Revenues continued at a reduced level, with the Company posting revenues of $136,516 in the third quarter of fiscal 2000 as compared to revenues of $134,128 in the same period of the 1999 fiscal year. For the first nine months of its 2000 fiscal year, revenues totaled $239,142, as compared to $629,122 for the same period of fiscal 1999.

Anil K. Jain, the president and chief executive officer of APA, said the Company s dense wavelength division multiplexing (DWDM) technologies are gaining increasing attention in the fiber optic communications industry. "We have recently shipped research units of the product to companies that are leaders in fiber optics," said Jain, adding that, "The Company is now equipped to offer DWDM units for use either with multi-mode or single-mode fiber."

APA reported that significant marketing efforts are underway with its multiple nitride-based detector products, including both gallium nitride (GaN) and aluminum gallium nitride devices. These industrial devices, which can be used for flame sensing, furnace monitoring and many other applications, capitalize on the particular performance characteristics of gallium nitride, including the ability to isolate portions of the light band, "solar blindness" and the ability to function well under high temperature conditions. There are continuing sales of industrial detector units, though not in production quantities. Several potential buyers worldwide are now evaluating units for possible use in their applications.

The Company is also poised to step up marketing of its first consumer product, the SUNUV watch, which allows the wearer to detect the amount of ultraviolet exposure being received.

"The losses were anticipated due to the continuing use of resources in developing product fabrication facilities and in marketing activities, while revenues were down as a result of planned reductions in contract research work and slower than anticipated sales of the Company s new products," said Jain. "We view these losses as investments in the Company s future," said Jain, noting that APA, with its manufacturing center in Aberdeen, S.D., is now ready to satisfy fabrication levels expected through the 2001 fiscal year."

The Company reported that it had a cash balance at December 31, 1999 of $1,694,314, as compared to $2,812,849 at March 31, 1999. The decrease in cash results from losses attributed primarily to continuing substantial operating costs while revenues were lower as the Company s new products are not yet in volume production. During September and October 1999, the Company raised approximately $1,800,000 in a private placement of its common stock. These funds should enable the Company to continue operations through fiscal year 2000. Increasing sales of its new products, or obtaining additional financing, will be required in fiscal 2001.

To date, APA Optics has not experienced any problems associated with year 2000 issues. There can be no assurance, however, that the Company will not encounter problems that are as yet undetected. As part of its year 2000 plan, the Company assessed internal operations and reviewed such issues with its various business partners, including vendors and service providers. The Company s year 2000 readiness program had no adverse effect on APA s earnings or financial position.

Forward-looking statements contained herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon the Company s current expectations and judgments about future developments in the Company s performance and may be affected by several factors, including, without limitation, delays in or increased costs of production, delays in or lower than anticipated sales of the Company s new products, and other factors discussed from time to time in the Company s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to update such statements to reflect actual events.

Contact:
Anil K. Jain of APA Optics, Inc., 612-784-4995,
or
Roy Wallace of The Wallace Group, 651-452-9800, for APA Optics, Inc.