UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]  Annual  Report  Pursuant  to Section 13 or 15(d) of the Securities Exchange
     Act  of  1934
     For the fiscal year ended March 31, 2005.

[_]  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 ENTERPRISES, INC.
             (Exact Name of Registrant as Specified in its Charter)


            MINNESOTA                                             41-1347235
  (State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                               2950 N.E. 84TH LANE
                             BLAINE, MINNESOTA 55449
                                 (763) 784-4995
    (Address, including ZIP code and telephone number, including area code, of
                    registrant's principal executive office)

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

                    SERIES B PREFERRED SHARE PURCHASE RIGHTS
                                (TITLE OF CLASS)

     Indicate  by  check  mark  whether the Registrant (1) has filed all reports
required  to  be  filed  by  Section  13 or 15(d) of the Exchange Act during the
preceding  12 months and (2) has been subject to the filing requirements for the
past  90  days.  [X] YES     [_] NO

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.

     [_] YES     [X] NO

Indicate  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Act).

     [_] YES     [X] NO

     The  aggregate  market  value  of  the voting and non-voting equity held by
non-affiliates  of  the  registrant,  as  of  the  last  business  day  of  the
registrant's most recently completed second fiscal quarter computed by reference
to  the  price  at  which  the  common  equity  was  last sold was approximately
$19,114,453.

     The  number  of  shares of common stock outstanding as of June 17, 2005 was
11,872,331.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Portions  of  our proxy statement for the annual shareholders meeting to be
held  in  August  2005  are  incorporated  by  reference  into  Part  III.


                                        1
<PAGE>
<TABLE>
<CAPTION>
                              APA ENTERPRISES, INC.
                            ANNUAL REPORT ON FORM 10K
                                TABLE OF CONTENTS


<S>         <C>                                                          <C>
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
ITEM 1.     BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . .  3
ITEM 2.     PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 3.     LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 17
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . 18
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
            MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . 18
ITEM 6.     SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . 18
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . 19
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . 26
ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . 27
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . 47
ITEM 9A.    CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . 48
ITEM 9B.    OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . 48
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . 48
ITEM 11.    EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 48
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . 48
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . 49
ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . 49
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . 50
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS. . . . . . . . . . . . . 52
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM ON
            SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>


                                        2
<PAGE>
                                     PART I

ITEM 1.     BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS.

     APA  Enterprises, Inc. ("APA" or the "Company"), formerly APA Optics, Inc.,
is a Minnesota corporation which was founded in 1979. Our corporate headquarters
is  located  at  2950  84th  Lane  N.E., Blaine, MN and our corporate website is
www.apaenterprises.com.  The information available on our website is not part of
----------------------
this  Report.

     Since the founding of the Company, we have focused on leading edge research
in  gallium  nitride  (GaN), sophisticated optoelectronics, and optical systems,
with the primary goal of developing advanced products for subsequent fabrication
and  marketing.  Based  on  this  research  we  have developed multiple products
including fiber optic components for metro and access communications networks, a
range  of  GaN  based  devices,  and precision optical products. We believe that
gallium  nitride  based  devices  have significant potential markets and we have
developed  specific  expertise  and/or patent positions relevant to them. During
fiscal  year  2004  we  ceased the design and manufacturing of precision optical
components  due  to intense competition from Asian manufacturers primarily based
on lower labor rates and sold this product line in April 2004 (see Note C to the
Consolidated  Financial  Statements  included  in  Item  8  of this Report). The
Company  acquired  the assets of two companies in calendar 2004 and has deployed
them  in  a  wholly  owned  subsidiary  of  the  Company known as APA Cables and
Networks,  Inc.  ("APACN").  APACN  is  a  manufacturer  and  seller  of
telecommunications  equipment.

     In  fiscal  year  2005  we  formed  a wholly-owned subsidiary in India, APA
Optronics  (India)  Private  Limited  ("APA  India"), to take advantage of lower
manufacturing  costs  in  India. While the prime focus of the subsidiary will be
support  of manufacturing activities across the Company's products, it will also
support  other business activities, including software development.  The Company
will  be constructing a larger facility in India in order to accommodate current
and  future  needs  of  APA  India.

     In  addition  to  manufacturing  and  marketing  products,  we are actively
seeking  to  license  certain  portions  of  our intellectual property portfolio
related  to  GaN. While we have had discussions with multiple companies, we have
not entered into any license arrangements as of the date of this Report. Markets
for  electronic  devices  made  from these materials are evolving rapidly and we
expect  several  companies  to  release  prototype  and  qualified  devices this
calendar  year,  including applications for GaN based transistors for cell phone
base  stations.

     The  Company  reports  its operations activities in two segments, Optronics
(comprising  the  activities  in  Blaine,  Minnesota, Aberdeen, South Dakota and
India)  and  APACN  (comprising  the  activities  in  Plymouth,  Minnesota).

     APACN  focuses  on  custom-engineered  products  for  telecommunications
customers,  primarily  related  to  cabling  management  requirements  of  the
Fiber-to-the-Home  ("FTTH")  marketplace and in designing and terminating custom
cable  assemblies for commercial and industrial original equipment manufacturers
("OEM's").  In  June  2003, APACN purchased the assets of Americable, Inc. These
assets  have  been  integrated with assets and operations acquired in March 2003
from  Computer System Products, Inc. ("CSP"). The Americable acquisition allowed
APACN  to  add its own brand of fiber distribution equipment to its full-line of
standard  and  custom  copper  and  fiber  optic  cable assemblies for broadband
service  providers and OEM's. The Americable acquisition diversified our product
offerings,  expanded  our opportunities for cross-selling our products to former
CSP and Americable customers, and enabled us to offer a more complete technology
solution  to  all  of  our  customers.  To  date,  APACN  has


                                        3
<PAGE>
been  able  to  successfully  establish  itself as a value-added supplier to its
target  market of independent telephone companies and cable television operators
as well as OEM's who value a high level of engineering services as part of their
procurement  process. APACN has expanded its product offerings and broadened its
customer  base  since  its  inception  two  years  ago.

     APACN  attained  profitability  in  fiscal  2005  through  a combination of
increased  focus  on  higher  margin  products,  improved  component  costs, and
continued  consolidation  of  the acquisitions which resulted in lower personnel
costs  and  more  efficient  operations.

     Optronics continues to focus upon Gallium Nitride (GaN) related activities.

     Additional information regarding operations in the segments is set forth in
Note  N  in  the  Notes  to  the  Consolidated Financial Statements under Item 8
herein.

DESCRIPTION  OF  BUSINESS  -  OPTRONICS  SEGMENT

     Optronics  develops,  manufactures  and  markets  advanced  products for UV
(ultraviolet) detection, nitride epitaxial layers and wide band-gap transistors.
These operations began with the inception of the Company in 1979 and are located
principally in our facility in Blaine, Minnesota. The Aberdeen facility provides
manufacturing  support for APACN operations. Certain products are purchased from
contract  manufacturers.

Products

Our current products are described below.

     -    Fiber  Optics  Components - Our fiber optics activities are limited to
          -------------------------
          specification,  procurement  and  testing  of  various  fiber  optics
          components  including  planar  waveguide  lightwave  circuit  optical
          splitters for FTTH networks; thin film wavelength division multiplexer
          ("WDM")  components  for  use in Cable TV, telecommunications and free
          space  optics  systems.  We  market  and sell most of these components
          mainly  through  the  sales  channels  of  APACN.

     -    Ultraviolet  (UV)  Detector-Based  Products  We  currently manufacture
          -------------------------------------------
          value-added products built around UV detectors fabricated by Optronics
          and  procured  externally.  These  products  are:

          -    SunUV(R)  Personal  UV  Monitor  The SunUV(R) Personal UV Monitor
               -------------------------------
               (formerly,  SunUVWatch(R))  is  a  personal  ultraviolet  (UV)
               radiation  monitor  that  also  incorporates  a  time/day/date
               function.  It  detects  UV  radiation  that is hazardous to human
               health.  It  keeps track of the total UV exposure of the user and
               estimates  a  maximum  exposure  time  according  to  government
               guidelines  based on skin type and widely-accepted research on UV
               exposure  limits.  The  product  has been introduced and is being
               sold  through retail channels, catalogs and Internet sites in the
               USA  and  Europe.

               Sales  have  been  limited due mainly to manufacturing issues. We
               have  now  resolved  the  manufacturing  issues  with the plastic
               models  and  will be focusing upon the sales of these models. The
               metal  units remain in low volume production while we continue to
               work with our current vendor as well as seek alternate suppliers.
               In  order  to  serve  the  market  needs,  we  are  developing an
               additional  clip-on  plastic  model  without  changing  the
               functionality  of  the  key  components,  based  upon  the  core
               competencies  of our current supplier. We anticipate introduction
               of  this  model  during  the  second quarter of fiscal year 2006.


                                        4
<PAGE>
               In  addition  to  the Personal UV Monitor, we continue to explore
               developing  additional  UV  detection  products  for the consumer
               market  to  enhance  our  product  offerings  in  this  area. The
               personal  monitor  is a watch-sized device designed to be carried
               and  used by an individual. An instrument designed to provide the
               UV  Index  to  multiple  persons  in  a larger area is one of the
               concepts  being  pursued.

          -    Industrial  UV  Meter  Optronics'  new  4-band  "Profiler  M"
               ---------------------
               radiometer,  created for the printing and coating industries that
               use UV curing, was announced to the market in October 2004 and is
               now  in  production.  Production  units  became available shortly
               after  the end of the 4th quarter of fiscal 2005. This instrument
               measures  the  intensity and distribution of four UV bands inside
               curing  chambers.  This information is important to the setup and
               monitoring of the curing process. Data from the instrument can be
               transferred  to  a  computer  for analysis using special software
               supplied  as  part  of  the  purchase.  A  series  of field tests
               performed  in  the  last quarter of fiscal year 2005 by UV curing
               equipment  makers  and others working in this field produced very
               positive  feedback.  Marketing  and  sales  activities  for  the
               Profiler  M  are  now  focused  on  setting  up  domestic  and
               international  distributors,  and  we  anticipate that an initial
               group  of  distributors  will be in place by the end of the first
               quarter  of  fiscal 2006. Supporting marketing activities include
               exhibiting  at  trade shows for the industry and participation in
               technical  conferences  and  journals  that  can  showcase  the
               advantages  of  the  Profiler  M.

          Research and development efforts at Optronics are currently focused on
     the  products  described  below.

     Compound Semiconductor Electronic Devices In the 3rd quarter of fiscal year
     -----------------------------------------
     2005 we completed the installation and startup of our multiwafer (6 wafers,
     2  inches  in  diameter)  Metal  Organic  Chemical  Vapor Deposition System
     (MOCVD).  This  system  is  located  in  a  leased  facility  that provides
     state-of-the-art  electrical,  optical,  and  structural  characterization
     capability. The commissioning of the system has enabled us to phase out the
     crystal  growth  work in the Blaine facility, satisfying our internal wafer
     demand,  while  providing  additional  capability  for external epi foundry
     work.  This  approach  eliminated potential leasehold improvement costs and
     characterization  equipment  acquisition  expenses  which  would  have been
     required to locate the system in our Blaine plant. Currently, our new MOCVD
     system  is  providing  us  with state-of-the-art epitaxial layers on 2-inch
     substrates. We have also made modifications in the system to grow epitaxial
     layers  on  3-inch  substrates.

          We  are  currently  sampling epi wafers to several potential customers
     and  are  actively  discussing  opportunities  to leverage our intellectual
     property  position  through  joint  development  work and licensing. We are
     working  to  use our core capability and continue to build our intellectual
     property  position  in  order  to  align  ourselves  with  those  having
     complementary  capability  in  this area. This should allow us to apply our
     core  expertise  in return for products that enable our development of high
     performance,  high  power  amplifiers.  Transistors made from the materials
     that  we are growing have the potential to simplify amplifier architecture,
     dramatically improve amplifier efficiency, and increase bandwidth and power
     of  cellular  base  station  and  military  system  power  amplifiers while
     decreasing  overall  cost.

          We  continue  to  develop products in this area by fully utilizing our
     internal  capabilities  while  working  with other interested companies for
     development,  manufacturing  and marketing. These interested companies have
     provided  vital  feedback  showing  Optronic's epi material quality in line
     with  our  expectations and among the industry's best. We have continued to
     work  with  others  to


                                        5
<PAGE>
     better  characterize  requirements  for  reliable  transistor  build.
     Opportunities  to  team  with  other  companies in submission of government
     contract  proposals are being evaluated based on relevance to our long term
     strategic  interests.

Marketing  and  Distribution

     We  market  dense wavelength division multiplexer ("DWDM") products through
our  APACN  sales  channels. Additionally, we use manufacturer's representatives
and  distributors  domestically.  We  do not currently maintain a large internal
sales  force.  We  have  one  sales person dedicated to the SunUV(R) Personal UV
Monitor and we also maintain product information on our website.

Competition

     The  optoelectronics  and  compound semiconductor electronic device markets
are  evolving  rapidly  and,  therefore,  the  competitive  landscape  changes
continually. The opportunities presented by these markets have fostered a highly
competitive  environment.  This competition has resulted in price reductions and
lower  profit  margins  for  the  companies  serving  this  market.  Many of the
companies  engaged  in these businesses are well financed and have significantly
greater  research,  development, production, and marketing resources than we do.
Some  of  these  companies  have  long  operating  histories,  well-established
distribution channels, broad product offerings and extensive customer bases. Our
ability  to  compete  with  these companies across our product lines will depend
largely  on  the performance of our devices, our ability to innovate and develop
competitive  solutions for our customers, our intellectual property, our ability
to  convince  customers to adopt our technology early in their design cycle, and
our  ability  to  control  costs.

     Competitors  for  our  DWDM  products  include  Scientific  Atlanta, C-Cor,
Harmonic,  and  Motorola.

     We are not aware of any companies currently marketing a personal UV monitor
with a combination of features, style and packaging equivalent to ours, although
there  are  other  manufacturers  of  this type of product in the United States,
Japan  and  Korea.

     Electronic  Instrumentation  and  Technology,  Inc.  ("EIT"),  Apprise
Technologies  and  International  Light offer UV curing control instruments that
perform  similar  functions  to  the  Profiler  M,  although we believe that our
product  will  offer  a  superior  combination  of  features and price. Newport,
Melles-Griot  and  Oriel offer scientific UV meters, some offering GaN detectors
as  an  option.  A number of firms offer lower-performance, lower-cost UV meters
for  industrial  applications.

     Competitors for GaN/AlGaN transistors, which are currently in the R&D phase
at Optronics, include Cree, Inc., Nitronex Corporation, Emcore Corporation, RFMD
Corporation,  and  some  Japanese  and  European  firms.


DESCRIPTION OF BUSINESS - APACN

     APACN  offers  a  broad  range of telecommunications equipment and products
developed  from  over  20 years of product expertise acquired in each of the CSP
and  Americable  acquisitions.  Its broad range of product offerings include the
design  and  manufacture  of  standard  and custom connectivity products such as
fiber  distribution  systems,  optical  components,  and  fiber and copper cable
assemblies  that  serve the communication service provider including FTTH, large
enterprise,  and  OEM  markets.  APACN  maintains


                                        6
<PAGE>
a  range of engineering and technical knowledge in-house that works closely with
customers  to  develop,  customize  and  enhance  products  from  design through
production.  Most  products are produced at APACN's plant in Plymouth, Minnesota
with  support  from our facility in Aberdeen, South Dakota. Certain products are
purchased  from  contract  manufacturers  or other sources. APACN produces these
products  on  both  a  quick-turn  and  scheduled  delivery  basis.

Products


-    Fiber  Distribution  Central  Office Frame Systems APACN Fiber Distribution
     --------------------------------------------------
     Systems ("FDS") are high density, easy access fiber distribution panels and
     cable  management  systems  that  are designed to reduce installation time,
     guarantee  bend radius protection and improve traceability. In the 144-port
     count  configuration,  APACN is the industry leader for density, saving the
     customer  expensive  real  estate  in  the central office. The product line
     fully supports a wide range of panel configurations, densities, connectors,
     and adapters that can be utilized on a stand-alone basis or integrated into
     the panel system. The unique interchangeable building block design delivers
     feature rich solutions which are able to meet the needs of a broad range of
     network  deployments.

-    Fiber  Distribution Outside Plant Cabinets APACN's Fiber Scalability Center
     ------------------------------------------
     ("FSC")  is a modular and scalable fiber distribution platform designed for
     "grow-as-you-go  cost  containment"  as  fiber goes beyond the control of a
     central office and closer to the user. This allows rollout of FTTH services
     by  communication  service  providers without a large initial expense. Each
     outside  plant  cabinet  stores feeder and distribution splices, splitters,
     connectors  and  slack  cable  neatly and compactly, utilizing field-tested
     designs to maximize bend radius protection, connector access, ease of cable
     routing  and  physical  protection,  thereby  minimizing  the risk of fiber
     damage.  The  FSC  product  has been designed to scale with the application
     environment  as  demand requires and to reduce service turn-up time for the
     end-user.

-    Optical  Components  APACN packages optical components for signal coupling,
     -------------------
     splitting,  termination,  multiplexing,  demultiplexing  and attenuation to
     seamlessly  integrate with the APACN FDS. This value-added packaging allows
     the  customer  to  source  from  a  single  supplier  and  reduce  space
     requirements.  The  products  are  built  and  tested to meet the strictest
     industry  standards  ensuring customers trouble-free performance in extreme
     outside  plant  environments.

-    Cable  Assemblies  APACN  manufactures  high  quality  fiber  and  copper
     -----------------
     assemblies  with  an industry-standard or customer-specified configuration.
     Industry-standard  assemblies  built include but are not limited to: single
     mode fiber, multimode fiber, multi-fiber, CATV node assembly, DS1 Telco, DS
     3  (734/735)  coax,  Category  5e  and  6,  SCSI,  Token Ring, and V.35. In
     addition, APACN's engineering services team works alongside the engineering
     design  departments  of our OEM customers to design and manufacturer custom
     solutions  for  both  in-the-box as well as network connectivity assemblies
     specific  to  that  customer's  product  line.


Marketing  and  Distribution

     APACN  markets  its  products  in  the  United  States through a network of
manufacturer  representative  organizations and a direct sales team. APACN works
closely with its target customers to adapt the company's product platform to the
client's  unique  requirements.  APACN  offers  a  high  level  of


                                        7
<PAGE>
customer  service  and principally brings new products to markets based upon the
specific  requests  of  its  customers.

Competition

     Competitors  for  the  APACN FDS and FSC include but are not limited to ADC
Telecommunications,  Inc., Corning Cabling Systems, Inc., OFS (Furukawa Electric
North  America,  Inc.),  Telect  Inc.,  Fiber  Optic  Network  Solutions  (FONS)
Corporation,  Alcatel,  Inc.,  and  Tyco  Electronics, Inc.  Nearly all of these
firms are substantially larger than APACN and as a result may be able to procure
pricing for necessary components and labor at much lower prices. Competition for
the  custom  fiber  and  copper  termination  services  for  cable assemblies is
intense.  Competitors  range  from  small,  family-run  businesses to very large
contract  manufacturing  facilities.


SOURCES OF MATERIALS AND OUTSOURCED LABOR

     Numerous  purchased  materials,  components,  and  labor,  are  used in the
manufacturing  of  the  Company's  products. Most of these are readily available
from  multiple suppliers. However, some critical components and outsourced labor
are  purchased  from  a  single  or  a limited number of suppliers.  The loss of
access  to  some  components  and outsourced labor would have a material adverse
effect on our ability to deliver products on a timely basis and on our financial
performance.


PATENTS  AND  INTELLECTUAL  PROPERTY

     As of March 31, 2005, we had 14 patents issued in the United States and two
pending  patent  applications  inside  and outside the United States. All of our
patents  relate to the business of our Optronics segment. We believe our success
heavily  depends upon technology we develop internally. We have made significant
progress  toward  improving the active, strategic management of our intellectual
property  portfolio.  The  markets  for  our products are characterized by rapid
change  and  continual  innovation  that could render our technology and patents
obsolete  before their statutory protection expires. Several of the companies we
compete  with  have  greater  research  and development resources than we do and
could  develop  technologies  and  products that are similar or even superior to
ours  without  infringing  on  our  intellectual  property.


ENVIRONMENTAL  COMPLIANCE

     Because  we  handle a number of chemicals in our operations, we must comply
with  federal,  state  and local laws and regulations regarding the handling and
disposal  of  such  chemicals.  To date the cost of such compliance has not been
material.


MAJOR  CUSTOMERS

     No  single  customer  accounted for more than 10% of the Company's sales in
fiscal  2005  or  2004.   Two  major  customers accounted for 21% and 15% of the
Company's  sales  for  the  year  ended  March  31,  2003.


                                        8
<PAGE>
BACKLOG

     Backlog  reflects purchase order commitments for our products received from
customers  that  have  yet to be fulfilled. Backlog orders are generally shipped
within  three  months.  Optronics  had a backlog of $7,200 as of March 31, 2005,
$6,490  as  of  March 31, 2004 and had no backlog at March 31, 2003. APACN had a
backlog  of  $429,180  as  of March 31, 2005, $856,700 as of March 31, 2004, and
$389,000 as of March 31, 2003.

RESEARCH  AND  DEVELOPMENT

     During  the  fiscal  years  ended March 31, 2005, 2004, and 2003, Optronics
spent  approximately  $1,104,000,  $949,000,  and  $1,212,000,  respectively, on
research  and  development, mainly for the development of compound semiconductor
electronic  devices.  This  segment  had  no  research  activities  sponsored by
customers  in  fiscal years 2005, 2004 or 2003. We operate in highly competitive
and  rapidly  evolving  markets  and  plan  to  commit significant resources for
research  and  development  for the foreseeable future. We could locate research
and  development  facilities  in  locations other than our current facilities in
Minnesota  and South Dakota based on several factors, including accessibility to
qualified  personnel  and  facility  costs.  APACN  has  made  no  significant
expenditures  for  research and development from its inception through March 31,
2005.

EMPLOYEES

     As  of March 31, 2005, Optronics had 44 full-time employees in the combined
locations  of  Blaine,  MN, Aberdeen, SD, and India. As of March 31, 2005, APACN
had  83  full-time  employees, mainly in Plymouth, MN. Our future performance is
dependent  on  our  ability  to  attract,  train,  and  retain  highly qualified
personnel.  We have no employment agreements with our employees. The loss of one
or  more  key  employees  could  negatively  impact  the  Company.


FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS

     The  statements  contained  in this Report on Form 10-K that are not purely
historical  are  "forward-looking  statements" within the meaning of the Private
Securities  Litigation  Reform Act of 1995, Section 27A of the Securities Act of
1933  and Section 21E of the Securities Exchange Act of 1934, including, without
limitations,  statements  regarding  the Company's expectations, hopes, beliefs,
anticipations,  commitments,  intentions  and  strategies  regarding the future.
Forward-looking statements include, but are not limited to, statements contained
in  "Item  1.  Business"  and  "Item  7. Management's Discussion and Analysis of
Financial Condition and Results of Operations." Actual results could differ from
those projected in any forward-looking statements for the reasons, among others,
detailed  below.  We  believe  that  many of the risks detailed here are part of
doing business in the industry in which we compete and will likely be present in
all  periods  reported.  The  fact  that certain risks are characteristic to the
industry  does  not  lessen  the  significance  of the risk. The forward-looking
statements  are made as of the date of this Report as Form 10-K and we assume no
obligation to update the forward-looking statements or to update the reasons why
actual  results  could  differ  from  those  projected  in  the  forward-looking
statements.


                                        9
<PAGE>
OUR  RESULTS  OF  OPERATIONS
----------------------------

Unless  we  generate  significant revenue growth, our expenses and negative cash
flow  will  significantly  harm  our  financial  position.

     We have not been profitable since fiscal 1990. As of March 31, 2005, we had
an  accumulated  deficit of $33.2 million. We may incur operating losses for the
foreseeable  future,  and  these  losses  may  be  substantial.  Further, we may
continue to incur negative operating cash flow in the future. We have funded our
operations  primarily  through  the sale of equity securities and borrowings. We
have  significant  fixed expenses and we expect to continue to incur significant
and  increasing  manufacturing,  sales  and  marketing,  product development and
administrative  expenses.  As  a  result, we will need to generate significantly
higher  revenues  while  containing  costs  and  operating expenses if we are to
achieve  profitability.

Acquisitions  or  investments  could  have  an  adverse  affect on our business.

     In March 2003, we completed the acquisition of the assets of CSP as part of
our  strategy  to  expand  our  product  offerings,  develop internal sources of
components  and  materials, and acquire new technologies. We acquired the assets
of  Americable  in  June  2003  and  integrated  them with the assets of CSP. We
acquired  assets  in India in March 2005 as part of a strategy to take advantage
of  lower  manufacturing  costs  in  India.  We  intend  to  continue  reviewing
acquisition  and  investment prospects. There are inherent risks associated with
making  acquisitions  and  investments  including  but  not  limited  to:

     -    Challenges  associated  with  integrating  the  operations, personnel,
          etc.,  of  an  acquired  company;
     -    Potentially dilutive issuances of equity securities;
     -    Reduced cash balances and or increased debt and debt service costs;
     -    Large one-time write-offs of intangible assets;
     -    Risks  associated  with  geographic or business markets different than
          those  we  are  familiar  with;  and
     -    Diversion of management attention from current responsibilities.


OUR  PRODUCTS  AND  INTRODUCTION  OF  NEW  PRODUCTS
---------------------------------------------------

We must introduce new products and product enhancements to increase revenue.

     The  successful  operation  of  our  business  depends  on  our  ability to
anticipate  market  needs  and  develop  and  introduce new products and product
enhancements  that  respond  to  technological  changes  or  evolving  industry
standards  on  a  timely and cost-effective basis. Our products are complex, and
new  products  may  take  longer  to  develop than originally anticipated. These
products  may  contain  defects  or  have unacceptable manufacturing yields when
first  introduced  or  as  new versions are released. Our products could quickly
become  obsolete  as new technologies are introduced or as other firms introduce
lower  cost  alternatives. We must continue to develop leading-edge products and
introduce  them  to the commercial market quickly in order to be successful. Our
failure  to  produce  technologically  competitive  products in a cost-effective
manner  and  on  a  timely  basis  will  seriously  harm our business, financial
condition  and  results  of  operations.

Our products may infringe on the intellectual property rights of others.

     Our  products  are  sophisticated  and  rely  on  complicated manufacturing
processes.  We  have  received  multiple  patents  on  aspects of our design and
manufacturing  processes  and  we  have  applied  for


                                       10
<PAGE>
several  more.  Third  parties  may  still  assert  claims  that our products or
processes  infringe  upon  their  intellectual property. Defending our interests
against  these claims, even if they lack merit, may be time consuming, result in
expensive  litigation  and divert management attention from operational matters.
If  such  a  claim  were successful, we could be prevented from manufacturing or
selling  our  current products, be forced to redesign our products, or be forced
to  license  the  relevant  intellectual  property at a significant cost. Any of
these  actions  could  harm  our  business,  financial  condition  or results of
operations.

We  may  make  additional  strategic  changes  in our product portfolio, but our
strategic  changes and restructuring programs may not yield the benefits that we
expect.

     In  connection  with  the  downturn  in the communications industry we have
divested  or closed product lines and businesses that either were not profitable
or  did  not  match  our new strategic focus.  As necessary, we may make further
divestitures  or  closures  of  product  lines and businesses.  We may also make
strategic  acquisitions.

     The  impact of potential changes to our product portfolio and the effect of
such  changes  on  our  business, operating results and financial condition, are
unknown  at this time.  If we acquire other businesses in our areas of strategic
focus,  we may have difficulty assimilating these businesses and their products,
services,  technologies  and  personnel into our operations.  These difficulties
could  disrupt  our  ongoing  business,  distract  our management and workforce,
increase  our  expenses and adversely affect our operating results and financial
condition.  In  addition  to  these  integration  risks,  if  we  acquire  new
businesses,  we  may  not  realize  all  of  the  anticipated  benefits of these
acquisitions,  and  we  may  not be able to retain key management, technical and
sales  personnel  after an acquisition.  Divestitures or elimination of existing
businesses  or product lines could also have disruptive effects and may cause us
to  incur  material  expenses.

MANUFACTURING  AND  OPERATIONS
------------------------------

Our  dependence  on outside manufacturers may result in product delivery delays.

     We  purchase  components  and labor that are incorporated into our products
from outside vendors. In the case of the SunUV(R) Personal UV Monitor, we supply
components to an outside assembler who delivers the completed product.  If these
vendors  fail  to  supply us with components or completed assemblies on a timely
basis,  or  if the quality of the supplied components or completed assemblies is
not acceptable, we could experience significant delays in shipping our products.
Any  significant  interruption  in  the  supply  or support of any components or
completed  assemblies  could seriously harm our sales and our relationships with
our  customers.  In  addition,  we  have  increased  our  reliance on the use of
contract  manufacturers to make our products. If these contract manufacturers do
not  fulfill  their  obligations  or  if  we  do  not  properly  manage  these
relationships,  our  existing  customer  relationships  may  suffer.

We may be required to rapidly increase our manufacturing capacity to deliver our
products  to  our  customers  in  a  timely  manner.

     Manufacturing  of  our  products  is a complex and precise process. We have
limited  experience  in  rapidly  increasing  our  manufacturing  capacity or in
manufacturing products at high volumes. If demand for our products increases, we
will  be  required  to hire, train and manage additional manufacturing personnel
and  improve  our  production  processes  in  order  to  increase our production
capacity.  There are numerous risks associated with rapidly increasing capacity,
including:

     -    Difficulties  in  achieving  adequate  yields  from  new manufacturing
          lines,


                                       11
<PAGE>
     -    Difficulty maintaining the precise manufacturing processes required by
          our  products  while  increasing  capacity,

     -    The  inability  to timely procure and install the necessary equipment,
          and

     -    Lack of availability of qualified manufacturing personnel.

     If  we  apply our capital resources to expanding our manufacturing capacity
in anticipation of increased customer orders, we run the risk that the projected
increase  in  orders  will  not  be  realized. If anticipated levels of customer
orders  are not received, we will not be able to generate positive gross margins
and  profitability.

We  are  dependent  upon  skilled  employees; if we lose the services of our key
personnel  our ability to execute our operating plan, and our operating results,
may  suffer.

     Our  future  performance  depends  in  part  upon the continued service and
contributions  of  key  management,  engineering, sales and marketing personnel,
many  of whom would be difficult to replace quickly. If we lose any of these key
personnel,  our  business,  operating  results  and financial condition could be
materially  adversely affected or delay the development or marketing of existing
or  future  products.  Competition for these personnel is intense and we may not
be  able  to  retain  or attract such personnel. Our success will depend in part
upon  our  ability  to  attract  and retain additional personnel with the highly
specialized  expertise necessary to generate revenue and to engineer, design and
support  our  products  and  services.


MARKETS  AND  MARKET  CONDITIONS
--------------------------------

Demand  for  our  products is subject to significant fluctuation. Adverse market
conditions  in  the  communications  equipment  industry and any slowdown in the
United  States  economy  may  harm  our  financial  condition.

     Demand  for our products is dependent on several factors, including capital
expenditures  in  the  communications  industry.  Capital  expenditures  can  be
cyclical  in  nature  and  result  in  protracted  periods of reduced demand for
component  parts. Similarly, periods of slow economic expansion or recession can
result  in  periods  of reduced demand for our products. Such periods of reduced
demand  will  harm  our business, financial condition and results of operations.
Changes  to the regulatory requirements of the telecommunications industry could
also  affect market conditions, which could also reduce demand for our products.

Our industry is highly competitive and subject to pricing pressure.

     Competition  in  the  communications  equipment  market is intense. We have
experienced  and  anticipate  experiencing  increasing  pricing  pressures  from
current  and  future  competitors  as  well as general pricing pressure from our
customers  as  part  of  their cost containment efforts. Many of our competitors
have  more  extensive  engineering,  manufacturing,  marketing,  financial  and
personnel  resources  than  we do. As a result, these competitors may be able to
respond  more  quickly  to  new  or  emerging  technologies  and  changes.


Declining average selling prices for our fiber optic products will require us to
reduce  production  costs  to  effectively  compete  and  market these products.


                                       12
<PAGE>
     Since  the  time  we  first  introduced  our  fiber optic components to the
marketplace  we  have  seen  the average selling price of fiber optic components
decline.  We  expect  this  trend  to continue. To achieve profitability in this
environment  we  must  continually decrease our costs of production. In order to
reduce  our  production  costs,  we  will  continue to pursue one or more of the
following:

     -    Seek lower cost suppliers of raw materials or components.
     -    Work to further automate our assembly process.
     -    Develop value-added components based on integrated optics.
     -    Seek offshore sources for manufacturing and assembly services.

     We  will  also  seek  to  form  strategic alliances with companies that can
supply  these services. Decreases in average selling prices also require that we
increase  unit  sales  to  maintain  or  increase  our  revenue. There can be no
guarantee  that  we  will  achieve  these  objectives. Our inability to decrease
production  costs  or increase our unit sales could seriously harm our business,
financial  condition  and  results  of  operations.

Our  markets  are  characterized  by  rapid  technological  changes and evolving
standards.

     The  markets  we  serve  are  characterized  by rapid technological change,
frequent  new  product  introductions,  changes  in  customer  requirements  and
evolving  industry standards. In developing our products, we have made, and will
continue  to  make,  assumptions with respect to which standards will be adopted
within  our  industry.  If the standards that are actually adopted are different
from  those  that  we  have  chosen  to  support,  our  products may not achieve
significant  market  acceptance.

Conditions in global markets could affect our operations.

     We  have  acquired  facilities  in  India  which  will  support  design and
production  of  our  products.  We also source products and labor from off shore
suppliers.  We  expect  that  our  foreign  operations and reliance on off shore
sourcing  will  increase  in the future.  As such we are subject to the risks of
conducting business internationally. Those risks include but are not limited to:

     -    local economic and market conditions;

     -    political and economic instability;

     -    fluctuations in foreign currency exchange rates;

     -    tariffs and other barriers and restrictions;

     -    geopolitical and environmental risks; and

     -    changes in diplomatic or trade relationships and natural disasters.

     We  cannot  predict  whether  our business operations and reliance in these
markets  will  be  affected  adversely  by  these  conditions.


OUR  CUSTOMERS
--------------


                                       13
<PAGE>
Our  sales  could  be  negatively  impacted  if one or more of our key customers
substantially  reduce  orders  for  our  products.

     If  we  lose  a  significant customer, our sales and gross margins would be
negatively  impacted.  In  addition,  the loss of sales may require us to record
impairment, restructuring charges or exit a particular business or product line.

Consolidation  among  our  customers  could  result  in our losing a customer or
experiencing  a  slowdown  as  integration  takes  place.

     It is likely that there will be increased consolidation among our customers
in  order  for  them  to  increase market share and achieve greater economies of
scale.  Consolidation is likely to impact our business as our customers focus on
integrating  their  operations  and  choosing  their  equipment vendors. After a
consolidation  occurs, there can be no assurance that we will continue to supply
the  surviving  entity.

Customer  payment  defaults  could  have  an  adverse  effect  on  our financial
condition  and  results  of  operations.

     As  a  result  of  competitive conditions in the telecommunications market,
some  of  our  customers may experience financial difficulties.   It is possible
that customers from whom we expect to derive substantial revenue will default or
that  the  level of defaults will increase. Any material payment defaults by our
customers  would  have  an  adverse  effect  on  our  results  of operations and
financial  condition.


PERFORMANCE REQUIREMENTS AND PERFORMANCE OF OUR PRODUCTS
--------------------------------------------------------

Our  products  may  have  defects  that  are not detected before delivery to our
customers.

     Some  of  the  Company's  products are designed to be deployed in large and
complex  networks  and  must  be compatible with other components of the system,
both  current  and  future.  Our customers may discover errors or defects in our
products only after they have been fully deployed. In addition, our products may
not  operate  as expected over long periods of time. In the case of the SunUV(R)
Personal  UV  Monitor,  a  consumer  product, customers could encounter a latent
defect not detected in the quality inspection. If we are unable to fix errors or
other  problems,  we  could  lose customers, lose revenues, suffer damage to our
brand  and  reputation, and lose our ability to attract new customers or achieve
market  acceptance.  Each of these factors would negatively impact cash flow and
would  seriously  harm  our  business,  financial  condition  and  results  of
operations.

Product  defects  could  cause  us  to  lose  customers  and revenue or to incur
unexpected  expenses.

     If  our  products  do not meet our customers' performance requirements, our
customer relationships may suffer.  Also, our products may contain defects.  Any
failure  or  poor  performance  of  our  products  could  result  in:

     -    delayed market acceptance of our products;

     -    delays in product shipments;

     -    unexpected  expenses  and  diversion of resources to replace defective
          products  or  identify  the  source  of  errors  and  correct  them;


                                       14
<PAGE>
     -    damage to our reputation and our customer relationships;

     -    delayed recognition of sales or reduced sales; and

     -    product  liability  claims  or  other  claims  for damages that may be
          caused  by  any  product  defects  or  performance  failures.


INTELLECTUAL  PROPERTY
----------------------

If  we are unable to adequately protect our intellectual property, third parties
may  be  able to use our technology, which could adversely affect our ability to
compete  in  the  market.

     Our  success  will  depend  in  part  on  our ability to obtain patents and
maintain  adequate  protection  of  the  intellectual  property  related  to our
technologies  and  products.  The  patent  positions  of  technology  companies,
including our patent position, are generally uncertain and involve complex legal
and  factual  questions.  We  will  be able to protect our intellectual property
rights  from  unauthorized  use  by  third  parties  only to the extent that our
technologies  are  covered  by  valid and enforceable patents or are effectively
maintained  as trade secrets.  The laws of some foreign countries do not protect
intellectual  property  rights  to  the same extent as the laws of the U.S., and
many companies have encountered significant problems in protecting and defending
such  rights  in  foreign jurisdictions.  We will apply for patents covering our
technologies  and  products  as  and  when  we deem appropriate.  However, these
applications  may  be  challenged  or may fail to result in issued patents.  Our
existing  patents and any future patents we obtain may not be sufficiently broad
to  prevent others from practicing our technologies or from developing competing
products.  Furthermore,  others may independently develop similar or alternative
technologies  or  design  around  our  patents.  In addition, our patents may be
challenged,  invalidated  or fail to provide us with any competitive advantages.

     We  rely  on  trade  secret protection for our confidential and proprietary
information.  We  have  taken  security  measures  to  protect  our  proprietary
information  and  trade  secrets,  but  these  measures may not provide adequate
protection.  While  we  seek  to protect our proprietary information by entering
into  confidentiality  agreements with employees, collaborators and consultants,
we  cannot assure you that our proprietary information will not be disclosed, or
that we can meaningfully protect our trade secrets. In addition, our competitors
may  independently  develop  substantially equivalent proprietary information or
may  otherwise  gain  access  to  our  trade  secrets.

Our  business  will  suffer  if  we  are  unable  to  protect our patents or our
proprietary  rights.

     Our  success  depends  to  a significant degree upon our ability to develop
proprietary products.  However, patents may not be granted on any of our pending
patent  applications  in  the United States or in other countries.  In addition,
the  scope  of  any of our issued patents may not be sufficiently broad to offer
meaningful  protection.  Furthermore,  our issued patents or patents licensed to
us  could potentially be successfully challenged, invalidated or circumvented so
that  our  patent  rights  would  not  create  an effective competitive barrier.


Intellectual property litigation could harm our business.


                                       15
<PAGE>
     It  is possible that we may have to defend our intellectual property rights
in  the  future.  In  the  event  of an intellectual property dispute, we may be
forced  to  litigate  or  otherwise  defend  our  intellectual  property assets.
Disputes  could  involve litigation or proceedings declared by the United States
Patent and Trademark Office or the International Trade Commission.  Intellectual
property litigation can be extremely expensive, and this expense, as well as the
consequences should we not prevail, could seriously harm our business.

     If  a  third  party claimed an intellectual property right to technology we
use,  we  might  be  forced to discontinue an important product or product line,
alter  our products and processes, pay license fees or cease certain activities.
We  may  not  be  able  to  obtain  a  license  to such intellectual property on
favorable  terms,  if  at  all.

     Litigation  or  third  party  claims  of intellectual property infringement
could  require  us  to spend substantial time and money and adversely affect our
ability  to  develop  and  commercialize  products.

     Our  commercial  success depends in part on our ability to avoid infringing
patents  and proprietary rights of third parties, and not breaching any licenses
that  we  have entered into with regard to our technologies.  Other parties have
filed,  and in the future are likely to file, patent applications covering genes
and  gene fragments, techniques and methodologies relating to model systems, and
products  and  technologies  that  we  have  developed or intend to develop.  If
patents  covering  technologies required by our operations are issued to others,
we  may  have to rely on licenses from third parties, which may not be available
on  commercially  reasonable  terms,  or  at  all.

     Third  parties  may  accuse  us  of  employing their proprietary technology
without authorization. In addition, third parties may obtain patents that relate
to  our  technologies  and  claim  that use of such technologies infringes these
patents.  Regardless  of  their  merit,  such  claims  could require us to incur
substantial  costs,  including  the  diversion  of  management  and  technical
personnel,  in  defending  ourselves  against  any  such claims or enforcing our
patents. In the event that a successful claim of infringement is brought against
us, we may be required to pay damages and obtain one or more licenses from third
parties. We may not be able to obtain these licenses at a reasonable cost, or at
all.  Defense  of  any  lawsuit or failure to obtain any of these licenses could
adversely  affect  our  ability  to  develop  and  commercialize  products.


EXECUTIVE  OFFICERS

The  following  is  a  list of our executive officers, their ages, positions and
offices  as  of  March  31,  2005.

<TABLE>
<CAPTION>
NAME                    AGE  POSITION
<S>                     <C>  <C>
Dr. Anil K. Jain         59  Chief Executive Officer/President/Chief
                             Financial Officer of APA Enterprises, Inc.

Cheri Beranek Podzimek   42  President, APACN
</TABLE>

     DR. ANIL K. JAIN has been a Director, Chief Executive Officer and President
since March 1979. He also currently serves as Chief Financial Officer. From 1973
until  October  15,  1983, when Dr. Jain commenced full time employment with the
Company, he was employed at the Systems and Research Center at Honeywell Inc. as
a  Senior  Research  Fellow,  coordinating  optics-related  development.


                                       16
<PAGE>
     CHERI BERANEK PODZIMEK joined APACN in July 2003 as President. Ms. Podzimek
was  previously  President  of  Americable,  which was acquired by APACN in June
2003. She served as President of Americable from 2002 to 2003. From 2001 to 2002
Ms. Podzimek was Chief Operating Officer of Americable. Previously, Ms. Podzimek
held  a variety of lead marketing positions with emerging high-growth technology
companies.  She  served  as  Vice  President  of  Marketing  from  1996-2001  at
Transition  Networks,  a manufacturer of network connectivity products, Director
of  Marketing  from  1992  to  1996  at  Tricord  Systems,  an  early  stage
multi-processor  based super server manufacturer, and Director of Marketing from
1988  to 1992 at Digi International, a designer and manufacturer of connectivity
products.  Earlier  in  her  career  Ms.  Podzimek  held marketing positions for
non-profit organizations, including the City of Fargo, the Metropolitan Planning
Commission  of  Fargo/Moorhead  and  North  Dakota  State  University.

ITEM 2.     PROPERTIES.

     We  have  corporate  offices,  manufacturing  facilities,  and laboratories
located  in an industrial building at 2950 N.E. 84th Lane, Blaine, Minnesota. We
currently  lease  23,500  square  feet  of  space  under a lease from Jain-Olsen
Properties,  a  partnership  consisting  of  Anil  K. Jain and Kenneth A. Olsen,
officers  and  directors of the Company. See Note L of Notes to the Consolidated
Financial  Statements included under Item 8 of this Report. We own land directly
west of the Blaine facility that may be used for future expansion.

     We  own a 24,000 square foot production facility in Aberdeen, South Dakota,
which  is  used  mainly  for  assembly  of products for APACN customers and to a
lesser  extent  for  assembly  of our DWDM components and UV detectors. The land
upon  which  this  facility  is located was granted to us as part of a financing
package  from  the  city  of  Aberdeen.  See Note F of Notes to the Consolidated
Financial  Statements  included  under  Item  8  in  this  Report  for  further
information  regarding  the  financing  of  this  facility.

     APA  signed  a  lease  agreement  in  June  of  2004  with  Veeco  Compound
Semiconductor,  Inc. to locate APA's multi-wafer MOCVD unit, purchased in fiscal
2004,  in  Veeco's facilities in White Bear Lake, Minnesota, which is near APA's
Blaine  facility.  The  lease  term  commenced  on  December 1, 2004 and ends on
November  30,  2007.

     APA  India  currently leases, on a month to month basis, a 500 square meter
facility  in  a  special  export  zone  near  New  Delhi, India.  The Company is
planning  to  construct  a  1,000  square  meter  facility at the same location.
Construction  is  to  begin  and  to  be  completed  in  fiscal  2006.

     APACN  subleases  a  37,000  square  foot  facility  in Plymouth, Minnesota
consisting of office, manufacturing and warehouse space. This lease runs through
June,  2006.

ITEM 3.     LEGAL  PROCEEDINGS.

     On  May 23, 2005 APA Enterprises, Inc. was served with a complaint filed in
U.S.  District  Court,  District  of  Virginia by Electronic Instrumentation and
Technology,  Inc.  ("EIT").  EIT  alleges  that we obtained certain confidential
information  from  EIT and have used such information for unauthorized purposes.
EIT  is requesting money damages of unspecified amount and equitable relief.  We
believe  that  EIT's  claims  are  without merit and intend to vigorously defend
ourselves.


                                       17
<PAGE>
ITEM 4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS.

     No  matter  was  submitted  to a vote of security holders during the fourth
quarter  of  the  fiscal  year  covered  by  this  Report.

                                     PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY,  RELATED STOCKHOLDER MATTERS,
            AND  ISSUER  PURCHASES  OF  EQUITY  SECURITIES.

     Our  common  stock is traded on The Nasdaq National Market under the symbol
"APAT."  The  following table sets forth the quarterly high and low sales prices
for  our  common stock for each quarter of the past two fiscal years as reported
by  Nasdaq.

<TABLE>
<CAPTION>
FISCAL 2005                             HIGH   LOW
-----------                            -----  -----
<S>                                    <C>    <C>
Quarter ended June 30, 2004            $3.75  $2.22
Quarter ended September 30, 2004        2.28   1.37
Quarter ended December 31, 2004         2.48   1.37
Quarter ended March 31, 2005            2.21   1.36

FISCAL 2004                             HIGH   LOW
-----------                            -----  -----
Quarter ended June 30, 2003            $2.70  $1.23
Quarter ended September 30, 2003        3.04   2.07
Quarter ended December 31, 2003         2.99   2.00
Quarter ended March 31, 2004            3.27   2.19
</TABLE>

     There  were  approximately  348 holders of record of our common stock as of
March  31,  2005.

     We  have  never paid cash dividends on our common stock. The loan agreement
relating  to  certain  bonds  issued  by  the  South Dakota Economic Development
Finance  Authority  restricts  our  ability  to  pay  dividends.

ITEM 6.     SELECTED  FINANCIAL  DATA.

<TABLE>
<CAPTION>
                                                2005          2004          2003          2002          2001
                                            ------------  ------------  ------------  ------------  ------------
<S>                                         <C>           <C>           <C>           <C>           <C>
Statements of Operations Data:
  Revenues . . . . . . . . . . . . . . . .  $13,886,486   $11,909,465   $   436,157   $   595,955   $   885,740
  Net loss . . . . . . . . . . . . . . . .   (3,420,038)   (6,535,147)   (5,009,434)   (4,738,199)   (3,261,446)
  Net loss per share, basic and diluted. .         (.29)         (.55)         (.42)         (.40)         (.29)
  Weighted average number of shares, basic
  and diluted. . . . . . . . . . . . . . .   11,872,331    11,872,331    11,873,914    11,896,976    11,180,165

Balance Sheet Data:
  Total assets . . . . . . . . . . . . . .  $22,074,014   $26,083,516   $31,884,526   $36,396,410   $41,914,451
  Long-term obligations, including current
  portion. . . . . . . . . . . . . . . . .    1,578,836     1,811,759     2,173,682     2,461,363     2,836,831
  Shareholders' equity . . . . . . . . . .   18,922,161    22,363,061    28,918,943    33,504,917    38,280,299
</TABLE>

     The  above  selected  financial data should be read in conjunction with the
financial  statements and related notes included under Item 8 of this Report and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations"  appearing  in  Item  7  of  this  Report.


                                       18
<PAGE>
ITEM 7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL CONDITION AND
            RESULTS  OF  OPERATIONS.

GENERAL

     Optronics  is engaged in designing, manufacturing, and marketing of various
optoelectronic  products,  ultraviolet ("UV") detectors and related products and
optical  components. For the last several years our goal has been to manufacture
and  market  products/components  based  on our technology developments. We have
focused  on  DWDM  components  for fiber optic communications and GaN based "UV"
detectors  (both components and integrated detector/electronic/display packages)
because  we  believe  that  these  two  product areas have significant potential
markets  and  because we have expertise and/or patent positions related to them.

     APACN, which is a wholly owned subsidiary of APA Enterprises, is engaged in
the  design,  manufacture,  distribution,  and  marketing  of a variety of fiber
optics  and  copper  components  to the data communication and telecommunication
industries.  APACN's  primary  manufactured products include standard and custom
fiber  optic cable assemblies, copper cable assemblies, value-added fiber optics
frames,  panels  and  modules. APACN acquired certain assets of CSP on March 14,
2003  and certain assets of Americable on June 27, 2003. Several items discussed
under  the  "Results of Operations" show significant changes from the comparable
periods  in the preceding fiscal year as a result of the acquisitions of CSP and
Americable.

APPLICATION  OF  CRITICAL  ACCOUNTING  POLICIES

     In  preparing  our  consolidated  financial  statements, we make estimates,
assumptions  and  judgments  that can have a significant impact on our revenues,
loss from operations and net loss, as well as on the value of certain assets and
liabilities on our consolidated balance sheet. We believe that there are several
accounting  policies that are critical to an understanding of our historical and
future  performance,  as these policies affect the reported amounts of revenues,
expenses  and  significant  estimates and judgments applied by management. While
there  are  a number of accounting policies, methods and estimates affecting our
consolidated  financial  statements,  areas  that  are  particularly significant
include:

     -    Revenue  recognition;

     -    Accounting  for  income  taxes;  and

     -    Valuation and evaluating impairment of long-lived assets and goodwill.

Revenue  Recognition
--------------------

     Revenue  is  recognized  when persuasive evidence of an arrangement exists,
the  product has been delivered, the fee is fixed, acceptance by the customer is
reasonably  certain  and  collection  is  probable.

Accounting  for  Income  Taxes
------------------------------

     As  part of the process of preparing our consolidated financial statements,
we  are  required  to  estimate  our  income  tax  liability  in  each  of  the
jurisdictions  in  which  we  do  business. This process involves estimating our
actual  current  tax  expense  together  with  assessing  temporary  differences
resulting  from  differing  treatment  of items for tax and accounting purposes.
These  differences  result  in deferred tax assets and liabilities. We must then
assess  the  likelihood  that  these  deferred  tax  assets  will


                                       19
<PAGE>
be  recovered  from  future  taxable  income  and, to the extent we believe that
recovery  is  not more likely than not or unknown, we must establish a valuation
allowance.

     Significant  management  judgment  is required in determining our provision
for  income  taxes,  our  deferred  tax assets and liabilities and any valuation
allowance  recorded  against our deferred tax assets. At March 31, 2005, we have
recorded  a  full  valuation  allowance  of $12,167,207 against our deferred tax
assets,  due to uncertainties related to our ability to utilize our deferred tax
assets,  consisting principally of certain net operating losses carried forward.
The  valuation  allowance  is  based  on  our  estimates  of  taxable  income by
jurisdiction  and  the  period  over  which  our  deferred  tax  assets  will be
recoverable.  The  Company  had  U.S. net operating loss (NOL) carry forwards of
approximately $31,531,000 which expire in fiscal years 2006 to 2025.

     Realization  of  the  NOL  carry  forwards and other deferred tax temporary
differences  are  contingent  on future taxable earnings. The deferred tax asset
was reviewed for expected utilization using a "more likely than not" approach as
required  by  SFAS  No.  109,  "Accounting  for  Income Taxes," by assessing the
available positive and negative evidence surrounding its recoverability.

     We  will  continue  to  assess and evaluate strategies that will enable the
deferred  tax  asset,  or  portion  thereof, to be utilized, and will reduce the
valuation  allowance  appropriately  at such time when it is determined that the
"more  likely  than  not"  approach  is  satisfied.

Valuation and evaluating impairment of long-lived assets and goodwill
---------------------------------------------------------------------

     Goodwill represents the excess of the purchase price over the fair value of
net  assets  acquired.  Goodwill  is  not amortized, but reviewed for impairment
annually  or  whenever conditions exist that indicate an impairment could exist.
The  Company  performed the annual impairment test in fiscal years 2005 and 2004
and  concluded  that  no  impairment  had  occurred.

     The  Company  evaluates  the  recoverability  of  its  long-lived assets in
accordance  with  SFAS  144,  "Accounting  for  the  Impairment  or  Disposal of
Long-Lived  Assets."  SFAS  144 requires recognition of impairment of long-lived
assets in the event that events or circumstances indicate an impairment may have
occurred  and  when  the  net  book  value  of  such  assets  exceeds the future
undiscounted  cash  flows attributed to such assets. We assess the impairment of
long-lived  assets whenever events or changes in circumstances indicate that the
carrying  value  may  not be recoverable. No impairment of long-lived assets has
occurred  through  the  year  ended  March  31,  2005.

New  Accounting  Pronouncement
------------------------------

In  December  2004,  the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123 (revised 2004)(SFAS 123R), Share-Based Payment. This statement
requires  the  compensation cost relating to share-based payment transactions to
be  recognized  in  a company's financial statements. That cost will be measured
based on the fair value of the equity or liability instruments issued. Statement
123(R)  covers  a  wide range of share-based compensation arrangements including
share  options,  restricted  share  plans,  performance-based  awards,  share
appreciation  rights,  and  employee  share  purchase plans. The Company will be
required  to  apply Statement 123(R) effective April 1, 2006. Management has not
yet  determined  the  impact.


                                       20
<PAGE>
CONTRACTUAL  OBLIGATIONS

     Our  contractual  obligations  and  commitments are summarized in the table
below  (in  000's):

<TABLE>
<CAPTION>
                                  Less than                            After
                          Total    1 Year    1-3 years   4-5 years    5 years
                         ----------------------------------------------------
<S>                      <C>     <C>         <C>         <C>         <C>
Long-term debt (1)       $1,582  $    1,474  $       48  $       40  $     20
Operating leases          1,234         495         507         207        25
                         ----------------------------------------------------

Total Contractual Cash
  Obligations            $2,816  $    1,969  $      555  $      247  $     45
                         ====================================================
</TABLE>

     (1)  Includes fixed interest ranging from 10.00 to 10.62%.

RESULTS  OF  OPERATIONS

                              2005 COMPARED TO 2004
                              ---------------------

REVENUES

     Consolidated  revenues  for  the  fiscal  year  ended 2005 increased 17% to
$13,886,000  from  sales  of  $11,909,000  in  2004.  Consolidated cost of sales
decreased  to  $11,198,000  in  2005  from  $11,914,000  in  2004.  Consolidated
operating losses decreased to $3,795,000 in 2005 compared to $6,558,000 in 2004.
Consolidated  net  losses  decreased  to  $3,420,000 in 2005 or $.29 per diluted
share  compared  to  $6,535,000  or  $.55  in  2004.

     APACN's  revenues  for  the  year  ended  2005  were  $13,801,000  versus
$11,691,000  in  the  year  ended  2004,  an  increase  of  18%. The increase is
primarily  attributable  to  higher revenues in the first quarter of fiscal 2005
generated  by  the acquisition of Americable, Inc., which occurred at the end of
the  first  quarter  of  fiscal  2004.  The  Americable  assets  contributed  no
corresponding  revenues for the first quarter of fiscal 2004. Sales to broadband
service providers and commercial data networks, which include APACN custom fiber
distribution  systems,  associated cable assemblies and optical components, were
$9,483,000  or  69%  of  revenue.  Sales to OEM's, consisting primarily of fiber
optic  and  copper  cable assemblies produced to customer design specifications,
were  $4,317,000,  or  31%  of  revenue.  This compares to 60% for broadband and
commercial  data networks and 40% for OEM's in the prior year. The change in mix
is  partially  a  result  of  an  increased acceptance of the Company's products
within  the FTTH market, offset by lower demand from some OEM customers. APACN's
revenue  growth  is  dependent  upon  capital expenditures in the communications
equipment  industry,  our ability to develop and introduce new products, and our
ability  to  acquire  and  retain  business in a competitive industry. We expect
sales  at  APACN  in  fiscal  2006 to increase slightly compared to fiscal 2005.

     Gross revenues at Optronics for the year ended 2005 were $490,000, compared
to  $409,000  in 2004, an increase of 20%.  Gross revenues reflect approximately
$404,000  of  sales  to  APACN for fiber optics products and subcontracted labor
versus  $191,000  last year. These sales are eliminated as intercompany sales in
the  consolidated  financial  statements. The Company had no sales of its optics
products  in  2005  versus  $92,000  in  the  prior year due to the sale of that
product  line in April 2004. Sales of UV monitors were $28,000 versus $23,000 in
the  prior  year  period,  and  sales  of foundry services were $41,000 in 2005.
Optronics'  revenue  growth  is  dependent  upon  our  ability  to  successfully
establish  manufacturing reliability for our GaN products and successful selling
into  our  targeted  market  segments.


                                       21
<PAGE>
COST OF SALES AND GROSS PROFIT

     APACN's  gross profit for the year ended in 2005 was $3,821,000 as compared
to $2,660,000 in 2004. The increase is due mainly to higher margins generated in
the  first  quarter  of  fiscal  2005 generated by the acquisition of Americable
assets. Gross profit percent for APACN for the year ended March 31, 2005 was 28%
versus 23% in the prior year. The increase in margin percentage reflects reduced
production  costs, resulting from consolidating multiple facilities, and a focus
on  selling  higher margin products. We expect gross margin percentage for APACN
in fiscal 2006 to be about the same as in fiscal 2005.

     Optronic's  net  cost  of  sales for the year ended 2005 were $1,218,000 as
compared  to $2,883,000 in 2004. Personnel related costs decreased approximately
$780,000  due  to  staff  reductions  in  response to demand and the sale of the
optics  product  line  in April 2004. In addition, inventory writeoffs decreased
approximately  $125,000  and  other  production expenses decreased approximately
$140,000  due  to  cost  reductions  implemented  in fiscal 2004 and 2005 in the
optics  and  GaN  product  lines.


RESEARCH  AND  DEVELOPMENT  EXPENSES

     Research  and  development  ("R&D") expenses consist solely of the research
and  development  expense  at  Optronics.  There  have  been  no  research  and
development expenses at APACN. R&D expenses increased by approximately $155,000,
to  $1,104,000 for the year ended March 31, 2005 as compared to $949,000 for the
year  ended  March  31,  2004. This represents an increase of 16% from 2004. The
majority  of  the  increase  reflects  additional  rental and depreciation costs
associated  with  operating  a  semiconductor  machine,  beginning  in the third
quarter of fiscal 2005, as well as personnel costs associated with this start up
and  HFET  development.  We  expect  fiscal  2006  R&D  expenses at Optronics to
increase  slightly from fiscal 2005, and we expect no significant R&D expense at
APACN.


SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Consolidated  selling,  general  and  administration  ("S, G & A") expenses
decreased  approximately  $226,000, or 4%, to $5,379,000 in 2005 from $5,605,000
in  2004.

     S,  G  &  A expenses at APACN were $3,487,000 for the year ending March 31,
2005  as  compared  to  $3,615,000  in  2004.  The majority of the difference is
attributable  to expenses generated by the assets acquired from Americable which
occurred  at  the  end  of  the  first  quarter of fiscal 2004. Consolidation of
facilities  beginning  in  fiscal 2004 also contributed to lower costs in fiscal
2005.   We  expect  S,  G  & A to increase in fiscal 2006 from fiscal 2005 as we
grow  our  sales  activities  in  order  to  increase  revenue.

     S, G & A expenses at Optronics decreased $97,000 to $1,893,000 for the year
ending  March  31,  2005,  from  $1,990,000 in the prior period. The decrease is
attributable  to a reduction in personnel expense of $260,000 in 2005, which was
offset  in  part by higher outside services in 2005 related to India development
expenses,  along  with  higher  facility  expenses  in  2005  (which consists of
facility  expenses  included in cost of sales in 2004 but reclassed as S, G, & A
in  2005)  as  this  portion of the facility is no longer used for manufacturing
operations.  We expect S, G, & A in fiscal 2006 to remain about the same as S, G
& A in fiscal 2005.


                                       22
<PAGE>
OTHER  INCOME  AND  EXPENSE

     Other  income  at APACN decreased approximately $15,000 to $8,000 in fiscal
2005  as  compared  to  $23,000  in fiscal 2004. The difference is due mainly to
higher  income  for  management  fees  earned  in fiscal 2004 related to the CSP
acquisition.  Other  expense  at APACN decreased $9,000 to $303,000 for the year
ending March 31, 2005 versus $312,000 in the prior year period. Interest expense
increased  $64,000  due to a higher debt balance outstanding over the year. That
was  offset  by a reduction of $77,000 in asset disposal charges absorbed in the
prior year.

     Other  income  at Optronics increased approximately $335,000 to $765,000 in
fiscal  2005  from  $430,000  in  2004.  Interest income increased approximately
$100,000 due mainly to higher interest income earned on cash equivalents. A gain
of  approximately $196,000 was recognized on the sale of the optics product line
in  April 2004, and $39,000 in facility related rental was also generated due to
this  sale.  Other  expenses  decreased  approximately  $24,000  to $91,000 from
$115,000  in  2004,  due  mainly  to  the  absence of expenses related to assets
disposed  of  in  the  prior  year.

NET  LOSS

     Consolidated net loss decreased $3,115,000 to $3,420,000, or $.29 cents per
share,  as  compared  to  a  net loss of $6,535,000, or $.55 cents per share, in
fiscal  2004.

     Net  income for APACN for the year ending 2005 was $36,000 versus a loss of
$1,245,000  in  fiscal  2004.  The  income  is  due mainly to increased revenue,
reduced  duplicate  and  one  time  expenses,  lower  personnel  costs  and more
efficient  operations  achieved  in  the consolidation of the CSP and Americable
assets.

     Net  loss for Optronics for the year ending 2005 was $3,456,000, a decrease
of  $1,834,000,  or  35%,  from  $5,290,000  in  2004.  The decreased losses are
primarily  the  result  of  lower  personnel  and  production expenses from cost
reduction efforts implemented in fiscal 2004 and 2005, combined with the gain on
sale  of  the optics business and the related savings of expense related to that
product  line.


                              2004 COMPARED TO 2003
                              ---------------------

REVENUES

     Consolidated  revenues  for  the  year  ended  2004  increased  27-fold  to
$11,909,000 from sales of $436,000 in 2003. Consolidated cost of sales increased
to  $11,914,000  in 2004 from $2,803,000 in 2003.  Consolidated operating losses
increased to $6,558,000 in 2004 compared to $5,329,000 in 2003. Consolidated net
losses  increased  to  $6,535,000  in 2004 or $.55 per diluted share compared to
$5,009,000  or  $.42  in  2003.

     Optronics' gross revenues for the year ended 2004 were $409,000 as compared
to  $202,000  in 2003. This includes $191,000 of sales to APACN for fiber optics
products  and  subcontracted  labor.  These sales are eliminated as intercompany
sales  in  the  consolidated  financial statements. Sales of its optics products
were  $92,000  versus  $103,000  in  2003. This product line was discontinued in
January 2004 and subsequently sold in April 2004. Sales of fiber optics products
were  $85,000 in 2004 compared to $77,000 in 2003. Sales of GaN related products
were  $24,000  in  2004  versus  $13,000  in  2003.  The


                                       23
<PAGE>
majority  of  the  GaN  sales  were to one customer for the SunUV(R) Personal UV
Monitor.  Other  revenue  was  $18,000  in  2004  compared  to  $10,000 in 2003.

     APACN's  revenues  for the year ended 2004 were $11,691,000 versus $234,000
in  the year ended 2003. Sales from the preceding year consisted only of revenue
generated by the CSP acquisition from March 14, 2003 until March 31, 2003. Sales
for  fiscal  2004  reflect  a  full year of revenue from the CSP acquisition and
three  quarters  of  revenue from the Americable acquisition which was completed
June  27,  2003.  For  the year ended March 31, 2004, sales to broadband service
provider  and  commercial  data  networks,  which  include  APACN  custom  fiber
distribution  systems,  associated cable assemblies and optical components, were
$7,024,000, or 60% of total sales. Sales to OEM's, consisting primarily of fiber
optic  and  copper  cable assemblies produced to customer design specifications,
were $4,668,000, or 40% of total sales. APACN's revenue growth is dependent upon
capital  expenditures  in  the communications equipment industry, our ability to
develop  and  introduce  new  products,  and  our  ability to acquire and retain
business  in  a  competitive  industry.

COST OF SALES AND GROSS PROFIT

     Optronics cost of sales for the year ended 2004 were $2,883,000 as compared
to  $2,627,000  in  2003.  Product  development  and  materials  cost  increased
approximately  $280,000,  while  amortization  expenses  decreased approximately
$181,000, mainly due to additional patent amortization taken in 2003.

     APACN's  gross profit for the year ended 2004 was $2,660,000 as compared to
$58,000  in  2003.  Gross profit from the preceding year consisted of only gross
profit  generated  by  the  CSP  acquisition from March 14, 2003 until March 31,
2003.  Gross  profit  for  fiscal 2004 reflects a full year of gross profit from
the  CSP  acquisition  and  three  quarters  of gross profit from the Americable
acquisition  which  was  completed June 27, 2003. Gross profit percent for APACN
for  the  period  ending  March 31, 2004 was 22.8%.  Gross profit was negatively
affected  by  production  variances resulting from combining the assets acquired
from  CSP  and  Americable  into  one  operation.


RESEARCH  AND  DEVELOPMENT  EXPENSES

     Research  and  development expenses consist of the research and development
expense  at  Optronics  (there have been no research and development expenses at
APACN).  Expenses  decreased by $263,000, to $949,000 for the year ended 2004 as
compared  to  $1,212,000  for the year ended 2003. This represents a decrease of
22%  from  2003.  The  decrease  is primarily due to decreased research activity
(resulting  in  reduction in salaries and related personnel expenses) related to
fiber optics products. The majority of the decreases are due to the reduction in
salaries  and  other  related  personnel  expenses.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     S,  G  &  A  expenses  at  Optronics  increased  approximately  $358,000 to
$1,990,000  in  2004  from  $1,632,000 in 2003. The increase is due primarily to
higher depreciation and amortization as well as higher professional fees related
to  the  acquisition  costs  for  CSP  and  Americable  assets.


                                       24
<PAGE>
     S,  G  &  A  expenses at APACN were $3,615,000 for the year ended March 31,
2004  as  compared to $118,000 in 2003.   S, G & A in 2004 consisted of expenses
generated by the CSP acquisition from March 14, 2003 until March 31, 2003.  S, G
&  A  for  fiscal 2004 reflects a full year of S, G & A from the CSP acquisition
and  three  quarters worth of S, G & A from the Americable acquisition which was
completed  June  27,  2003.  S, G & A for fiscal 2004 was negatively affected by
duplicate  expenses  related  to the consolidation of operations and facilities.

OTHER  INCOME  AND  EXPENSE

     Other  income at Optronics decreased $4,000 to $430,000 in fiscal 2004 from
$434,000  in 2003. The decrease is due mainly to lower interest income resulting
from  a  combination  of a decline in the rate of interest earned on investments
and  a  lower  average cash balance. Other expenses increased $2,000 to $115,000
from  $113,000  in  2003.

     Other  income  at  APACN  increased  $20,000  to  $23,000 in fiscal 2004 as
compared  to  $3,000  in  fiscal  2003.  The  increase was due to management fee
income  for  the  first  quarter  of  2004  for  personnel  related  to  the CSP
acquisition.  Other  expense  at APACN increased $83,000 to $85,000 for the year
ended  2004.  The increase is due primarily to the disposal of assets related to
the  consolidation  of  CSP  and  Americable  into  a  single  facility.

NET  LOSS

     Consolidated  net  loss for the Company increased $1,526,000 to $6,535,000,
or  $.55 cents per share, as compared to a net loss of $5,009,000, or $.42 cents
per  share,  in  fiscal 2003. The increase in losses is due primarily to the net
loss  contributed  by  APACN.

     Net  loss  for Optronics for the year ended 2004 was $5,290,000 an increase
of  $341,000 or 7%, from $4,949,000 in 2003. The increased loss is primarily the
result of a combination of higher cost of sales and S, G, & A expenses.

     Net  loss for APACN for the year ended 2004, including interest expense due
to  APA  (the  parent),  was  $1,245,000,  versus  $60,000  in  fiscal 2003. The
difference  is  due  mainly  to the fact that 2003 expenses include only several
days  of  expense  from  the CSP acquisition in March, 2003. The increase in net
loss  is  partly  attributable  to  the  expenses  related  to  integrate  the
acquisitions.

LIQUIDITY  AND  CAPITAL  RESOURCES

     As  of March 31, 2005, our principal source of liquidity was our cash, cash
equivalents  and  short-term  investments, which totaled $10,813,000 compared to
$13,545,000  at  March  31,  2004.

     We used $2,026,000 to fund operating activities during fiscal 2005 compared
to  $5,596,000 in fiscal 2004, and $4,659,000 in fiscal 2003. In all three years
the  largest  use  of  cash  in  operating activities was the funding of the net
losses.  The net loss for fiscal 2005 decreased to $3,420,000 from $6,535,000 in
fiscal  2004. The primary factors contributing to the decreased loss from fiscal
2004  to  2005  were  the profitable operations at APACN and reduced expenses at
Optronics.  The  significant  factors  contributing  to  the increased loss from
fiscal  2003  to  2004  were  the  losses  incurred  at  APACN.

     In  fiscal 2005 we used $470,000 in investing activities, including $49,000
used  to purchase assets through APA Optronics (India) Private Limited (See Note
B  of  Notes  to  the Consolidated Financial Statements included under Item 8 of
this  Report).  We  also  invested  $421,000 to purchase property and equipment,
mainly  for  production  equipment  at  Optronics.  In  fiscal  2004  we  used


                                       25
<PAGE>
$2,753,000  in  investing  activities  including $1,960,000 used to purchase the
assets  of  Americable.  We  also  invested  $786,000  to  purchase property and
equipment,  mainly for the purchase of the MOCVD system.  In fiscal 2003 we used
$3,828,000  in  investing  activities  to purchase CSP.  We invested $359,000 in
property  and  equipment and $84,000 in patents, for a net decrease in cash from
investment  activities  of  $4,272,000.

     In  fiscal 2005, we used $235,000 in financing activities, primarily to pay
down  long-term  debt  relating  to  our  facility in Aberdeen, South Dakota. In
fiscal  2004,  we  used  $342,000  in financing activities primarily to pay down
long-term  debt  relating  to  our facility in Aberdeen, South Dakota. In fiscal
2003,  we  used $440,000 in financing activities primarily to pay down long-term
debt  also  related  to  the  Aberdeen  facility.

     Construction  of  our  manufacturing  facility in Aberdeen utilized certain
economic incentive programs offered by the State of South Dakota and the City of
Aberdeen.  At March 31, 2005, the total principal outstanding under bonds issued
by  the  State of South Dakota was $1,405,000. Interest on the bonds ranges from
5.8%  to  6.75%,  and the bonds are due in various installments between 2005 and
2016.  These  bonds require compliance with certain financial covenants. We were
out of compliance with these covenants during all of fiscal 2003, 2004 and 2005.
For  further  information  regarding  these  bonds,  see  Note F of Notes to the
Consolidated Financial Statements included under Item 8 of this Report. On April
14,  2004  the Company sold its optics manufacturing operations, as discussed in
Note  C  to  the Consolidated Financial Statements included under Item 8 of this
Report,  to  PNE,  Inc.  dba  IRD. The terms of the sale required the Company to
prepay  $89,000  of  a loan with the Aberdeen Development Corporation ("ADC") in
South  Dakota  and to accelerate the loan payment schedule to maturity in fiscal
2011 from 2016. In June 2005, the Company sold a portion of the land in Aberdeen
acquired  from ADC back to ADC in consideration of cancellation of the remaining
$120,000 due on the loan. Accordingly, the loan from ADC is fully satisfied. See
Note  O  to  the Consolidated Financial Statements included under Item 8 of this
Report.

     Our  capital  requirements  are  dependent  upon several factors, including
market  acceptance  of  our  products,  the  timing  and  extent  of new product
introductions  and  delivery,  and  the  costs  of  marketing and supporting our
products  on a worldwide basis. See "Item 1. Business." Although we believe that
our  current  cash,  cash  equivalents,  and  short-term  investments  will  be
sufficient  to  fund  our operations for more than the next 12 months, we cannot
assure  you  that  we  will  not seek additional funds through public or private
equity  or  debt financing or from other sources within this time frame, or that
additional  funding,  if needed, will be available on terms acceptable to us, or
at  all.  We  may  also consider the acquisition of, or evaluate investments in,
products  and  businesses  complementary  to  our  business.  Any acquisition or
investment  may  require  additional  capital.


ITEM 7A.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

     Our exposure to market risk for changes in interest rates relates primarily
to  our cash equivalents. The portfolio includes only marketable securities with
active  secondary  or  resale  markets  to  ensure


                                       26
<PAGE>
liquidity. We have no investments denominated in foreign country currencies and,
therefore,  our  investments are not subject to foreign exchange risk. See "Cash
and  Equivalents"  under  Note  A  of  the  Consolidated  Financial  Statements.


ITEM 8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA.

     Quarterly Results of Operations. The following tables present our unaudited
quarterly operating results for the eight quarters ended March 31, 2005:

<TABLE>
<CAPTION>
                                                          Quarter Ended
                               --------------------------------------------------------------
                                  June 30,       September 30,     December 31,    March 31,
                                    2003             2003             2003           2004
                               ---------------  ---------------  --------------  ------------
<S>                            <C>              <C>              <C>             <C>
 Statement of Operations Data

Net revenue . . . . . . . . .  $    1,570,976   $    3,557,586   $   3,301,955   $ 3,478,948
Gross profit (loss) . . . . .        (300,889)         199,417         (12,513)      109,400
Net loss. . . . . . . . . . .      (1,545,399)      (1,667,488)     (1,642,436)   (1,679,824)
Net loss per share. . . . . .  $        (0.13)  $        (0.14)  $       (0.14)  $     (0.14)

                                                          Quarter Ended
                               --------------------------------------------------------------
                                   June 30,      September 30,     December 31,    March 31,
                                    2004             2004             2004           2005
                               ---------------  ---------------  --------------  ------------
 Statement of Operations Data

Net revenue . . . . . . . . .  $    3,687,718   $    3,668,068   $   3,305,299   $ 3,225,401
Gross profit. . . . . . . . .         600,875          782,264         601,140       704,031
Net loss. . . . . . . . . . .        (702,836)        (883,047)       (928,510)     (905,645)
Net loss per share. . . . . .  $        (0.06)  $        (0.07)  $       (0.08)  $     (0.08)
</TABLE>


                                       27
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------


Board of Directors and Shareholders
APA Enterprises, Inc.

     We  have  audited  the  accompanying  consolidated  balance  sheets  of APA
Enterprises,  Inc.  and  subsidiaries  as  of  March  31, 2005 and 2004, and the
related  consolidated  statements  of operations, shareholders' equity, and cash
flows  for  each  of  the  three years in the period ended March 31, 2005. These
consolidated  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is to express an opinion on these consolidated
financial  statements  based  on  our  audits.

     We  conducted  our  audits  in  accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we  plan  and perform the audit to obtain reasonable assurance about whether the
financial  statements  are  free  of  material  misstatement. The Company is not
required  to  have,  nor  were  we  engaged to perform, an audit of its internal
controls  over financial reporting. Our audit included consideration of internal
controls over financial reporting as a basis for designing audit procedures that
are  appropriate  in the circumstances, but not for the purpose of expressing an
opinion  of  the  effectiveness of the Company's internal control over financial
reporting.  Accordingly,  we  express  no  such  opinion. An audit also includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements,  assessing  the  accounting  principles  used  and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
pre-sent  fairly,  in all material respects, the consolidated financial position
of  APA Enterprises, Inc. and subsidiaries as of March 31, 2005 and 2004 and the
consolidated  results  of  their operations and their cash flows for each of the
three  years  in  the period ended March 31, 2005, in conformity with accounting
principles generally accepted in the United States of America.


                                                          /s/ Grant Thornton LLP


Minneapolis, Minnesota
April 25, 2005


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                  APA ENTERPRISES, INC.

                               CONSOLIDATED BALANCE SHEETS

                                        MARCH 31,


                        ASSETS                                 2005         2004
                                                           -----------  -----------
<S>                                                        <C>          <C>
CURRENT ASSETS
  Cash and cash equivalents                                $10,813,492  $13,544,910
  Accounts receivable, net of allowance for uncollectible
    accounts of $57,107 and $49,038 at
    March 31, 2005 and 2004                                  1,446,248    1,787,541
  Inventories                                                1,270,653    1,574,188
  Prepaid expenses                                             264,372      174,503
  Bond reserve funds                                           131,548      133,865
                                                           -----------  -----------

          Total current assets                              13,926,313   17,215,007


PROPERTY, PLANT AND EQUIPMENT, net                           3,946,998    4,550,956


OTHER ASSETS
  Bond reserve funds                                           337,091      332,433
  Goodwill                                                   3,422,511    3,422,511
  Other                                                        441,101      562,609
                                                           -----------  -----------
                                                             4,200,703    4,317,553
                                                           -----------  -----------

                                                           $22,074,014  $26,083,516
                                                           ===========  ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       29
<PAGE>
<TABLE>
<CAPTION>
                                  APA ENTERPRISES, INC.

                        CONSOLIDATED BALANCE SHEETS  - CONTINUED

                                        MARCH 31,


                       LIABILITIES AND
                         SHAREHOLDERS' EQUITY                  2005           2004
                                                           -------------  -------------
<S>                                                        <C>            <C>
CURRENT LIABILITIES
  Current maturities of long-term debt                     $  1,471,036   $  1,637,923
  Accounts payable                                              814,005      1,050,690
  Accrued compensation                                          568,950        645,293
  Accrued expenses                                              190,062        212,713
                                                           -------------  -------------

          Total current liabilities                           3,044,053      3,546,619

LONG-TERM DEBT, net of current maturities                       107,800        173,836

COMMITMENTS AND CONTINGENCIES                                         -              -

SHAREHOLDERS' EQUITY
  Undesignated shares, 4,999,500 authorized shares;
    no shares issued and outstanding                                  -              -
  Preferred stock, $.01 par value; 500 authorized shares;
    no shares issued and outstanding                                  -              -
  Common stock, $.01 par value; 50,000,000
    authorized shares; 11,872,331 shares
    issued and outstanding at March 31, 2005 and 2004           118,723        118,723
  Additional paid-in capital                                 51,960,084     51,980,946
  Accumulated deficit                                       (33,156,646)   (29,736,608)
                                                           -------------  -------------

          Total shareholders equity                          18,922,161     22,363,061
                                                           -------------  -------------

                                                           $  2,074,014   $ 26,083,516
                                                           =============  =============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       30
<PAGE>
<TABLE>
<CAPTION>
                              APA ENTERPRISES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                              YEARS ENDED MARCH 31,


                                            2005          2004          2003
                                        ------------  ------------  ------------
<S>                                     <C>           <C>           <C>
Revenues                                $13,886,486   $11,909,465   $   436,157

Cost of sales                            11,198,176    11,914,050     2,802,597
                                        ------------  ------------  ------------

          Gross profit (loss)             2,688,310        (4,585)   (2,366,440)

Operating expenses
  Research and development                1,103,972       948,737     1,212,219
  Selling, general and administrative     5,379,483     5,605,177     1,750,807
                                        ------------  ------------  ------------
                                          6,483,455     6,553,914     2,963,026
                                        ------------  ------------  ------------

          Loss from operations           (3,795,145)   (6,558,499)   (5,329,466)

Other income                                484,498       225,719       436,925
Other expense                              (105,253)     (200,314)     (115,893)
                                        ------------  ------------  ------------
                                            379,245        25,405       321,032
                                        ------------  ------------  ------------

          Loss before income taxes       (3,415,900)   (6,533,094)   (5,008,434)

Income taxes                                  4,138         2,053         1,000
                                        ------------  ------------  ------------

          Net loss                      $(3,420,038)  $(6,535,147)  $(5,009,434)
                                        ============  ============  ============

Net loss per share
  Basic and diluted                     $     (0.29)  $     (0.55)  $     (0.42)
                                        ============  ============  ============

Weighted average shares outstanding
  Basic and diluted                      11,872,331    11,872,331    11,873,914
                                        ============  ============  ============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       31
<PAGE>
<TABLE>
<CAPTION>
                                                     APA ENTERPRISES, INC.

                                        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                     YEARS ENDED MARCH 31,


                                  Undesignated
                                     shares            Preferred stock              Common stock             Additional
                                  ------------  ---------------------------  -----------------------------    paid-in
                                                    Shares        Amount        Shares         Amount         capital
                                                                                                            ------------
<S>                               <C>           <C>           <C>            <C>            <C>             <C>
Balance at March 31, 2002                    -             -  $           -    11,875,881   $     118,759   $51,578,185
  Common stock repurchased                   -             -              -        (3,550)            (36)       (5,955)

  Aberdeen land grant                        -             -              -             -               -        67,760
  Options issued as compensation             -             -              -             -               -        (9,309)
  Warrants issued                            -             -              -             -               -       371,000
  Net loss                                   -             -              -             -               -             -
                                  ------------  ------------  -------------  -------------  --------------  ------------
Balance at March 31, 2003                    -             -              -    11,872,331         118,723    52,001,681
  Options issued as compensation             -             -              -             -               -       (20,735)
  Net loss                                   -             -              -             -               -             -
                                  ------------  ------------  -------------  -------------  --------------  ------------
Balance at March 31, 2004                    -             -              -    11,872,331         118,723    51,980,946
  Options issued as compensation             -             -              -             -               -       (20,862)
  Net loss                                   -             -              -             -               -             -
                                  ------------  ------------  -------------  -------------  --------------  ------------
Balance at March 31, 2005                    -             -              -    11,872,331   $     118,723   $51,960,084
                                  ============  ============  =============  =============  ==============  ============


                                                       Total
                                   Accumulated     shareholders'
                                     deficit           equity
                                  -------------  ---------------
<S>                               <C>            <C>
Balance at March 31, 2002         $(18,192,027)  $   33,504,917
  Common stock repurchased                   -           (5,991)

  Aberdeen land grant                        -           67,760
  Options issued as compensation             -           (9,309)
  Warrants issued                            -          371,000
  Net loss                          (5,009,434)      (5,009,434)
                                  -------------  ---------------
Balance at March 31, 2003          (23,201,461)      28,918,943
  Options issued as compensation             -          (20,735)
  Net loss                          (6,535,147)      (6,535,147)
                                  -------------  ---------------
Balance at March 31, 2004          (29,736,608)      22,363,061
  Options issued as compensation             -          (20,862)
  Net loss                          (3,420,038)      (3,420,038)
                                  -------------  ---------------
Balance at March 31, 2005         $(33,156,646)  $   18,922,161
                                  =============  ===============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       32
<PAGE>
<TABLE>
<CAPTION>
                                     APA ENTERPRISES, INC.

                             CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     YEARS ENDED MARCH 31,


                                                            2005          2004          2003
                                                        ------------  ------------  ------------
<S>                                                     <C>           <C>           <C>
Cash flows from operating activities:
  Net loss                                              $(3,420,038)  $(6,535,147)  $(5,009,434)
  Adjustments to reconcile net loss to net cash used
    in operating activities, net of acquisitions:
      Depreciation and amortization                       1,003,573       971,194       810,505
      Compensation expense                                  (20,862)      (20,735)       (9,309)
      Changes in operating assets and liabilities, net
      of acquisitions:
        Accounts receivable                                 341,293      (678,686)      (63,392)
        Inventories                                         303,535      (179,293)     (130,889)
        Prepaid expenses and other assets                  (123,224)      (44,909)      (30,457)
        Accounts payable and accrued expenses              (110,679)      891,795      (226,178)
                                                        ------------  ------------  ------------
          Net cash used in operating activities          (2,026,402)   (5,595,781)   (4,659,154)

Cash flows from investing activities:
  Purchases of property and equipment                      (420,980)     (785,870)     (359,474)
  Cash paid for business acquisitions                       (48,772)   (1,960,000)   (3,828,000)
  Other                                                           -        (7,376)      (84,131)
                                                        ------------  ------------  ------------
          Net cash used in investing activities            (469,752)   (2,753,246)   (4,271,605)

Cash flows from financing activities:
  Repurchase of common stock                                      -             -        (5,991)
  Payment of long-term debt                                (232,923)     (361,923)     (437,467)
  Bond reserve funds                                         (2,341)       20,174         3,500
                                                        ------------  ------------  ------------

          Net cash used in financing activities            (235,264)     (341,749)     (439,958)
                                                        ------------  ------------  ------------
Decrease in cash and cash equivalents                    (2,731,418)   (8,690,776)   (9,370,717)

Cash and cash equivalents at beginning of year           13,544,910    22,235,686    31,606,403
                                                        ------------  ------------  ------------

Cash and cash equivalents at end of year                $10,813,492   $13,544,910   $22,235,686
                                                        ============  ============  ============
Supplemental cash flow information:
  Cash paid during the year for:
    Interest                                            $    99,337   $   109,251   $   115,893
    Income taxes                                              4,138         2,053         1,000

Noncash investing and financing transactions:
  Contributed land                                      $         -   $         -   $    67,760
                                                        ============  ============  ============
  Issuance of warrants                                  $         -   $         -   $   371,000
                                                        ============  ============  ============
  Capital expenditure included in accounts payable      $         -   $   225,000   $         -
                                                        ============  ============  ============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       33
<PAGE>
                              APA ENTERPRISES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          MARCH 31, 2005, 2004 AND 2003


NOTE  A  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES


     Nature  of  Business
     --------------------

     APA  Enterprises,  Inc.,  formerly  APA  Optics,  Inc.,  (the Company) is a
     manufacturer  of  custom  cable  assemblies and supplier of premise cabling
     components  and  networking  products  to  customers  throughout the United
     States with a concentration in Minnesota. The Company also manufactures and
     markets dense wavelength division multiplexer (DWDM) optical components and
     offers  a  range  of  gallium  nitride-based  devices.

     Principles  of  Consolidation
     -----------------------------

     The  consolidated  financial  statements  include  the  accounts  of  APA
     Enterprises,  Inc.  and  its  wholly-owned  subsidiaries.  All  significant
     inter-company  accounts  and  transactions  have  been  eliminated  in
     consolidation.

     Foreign  Currency  Translation
     ------------------------------

     The  Company  uses  the United States dollar as its functional currency for
     its  subsidiary in India. India's financial statements were translated into
     U.S.  Dollars  at the year end exchange rate, while income and expenses are
     translated  at  the  average  exchange  rates during the year. There was no
     significant  foreign exchange translation gain or losses during fiscal year
     ended  March  31,  2005.  There  were no foreign currency operations in the
     prior  fiscal  years.

     Revenue  Recognition
     --------------------

     Revenue  is  recognized  when persuasive evidence of an arrangement exists,
     the  product  has  been  delivered,  the  fee  is  fixed, acceptance by the
     customer  is  reasonably  certain  and  collection  is  probable.

     Cash  and  Cash  Equivalents
     ----------------------------

     The  Company  considers  all  highly  liquid  investments  with  original
     maturities  of  three  months  or  less to be cash equivalents. Investments
     classified  as cash equivalents at March 31, 2005 and 2004 consist entirely
     of  short-term  money market accounts. Cash equivalents are stated at cost,
     which  approximates  fair  value.

     Cash  of  approximately  $145,000  was  on  deposit  in  foreign  financial
     institutions  at  March  31,  2005.  There was no cash in foreign financial
     institutions  at  March  31,  2004.  The Company maintains cash balances at
     several  financial institutions, and at times, such balances exceed insured
     limits.  The  Company  has  not experienced any losses in such accounts and
     believes  it  is  not  exposed  to  any  significant  credit  risk on cash.


                                       34
<PAGE>
NOTE  A  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  -  CONTINUED


     Accounts  Receivable
     --------------------

     Credit  is  extended  based  on  the  evaluation  of a customer's financial
     condition  and, generally, collateral is not required. Accounts outstanding
     longer  than  the  contractual  payment  terms are considered past due. The
     Company  determines  its  allowance  by  considering  a  number of factors,
     including  the length of time trade receivables are past due, the Company's
     previous loss history, the customer's current ability to pay its obligation
     to  the  Company, and the condition of the general economy and the industry
     as  whole.  The  Company  writes  off  accounts receivable when they become
     uncollectible;  payments  subsequently  received  on  such  receivables are
     credited  to  the  allowance  for  doubtful  accounts.

     Inventories
     -----------

     Inventories  consist  of  finished goods, raw materials and work in process
     and  are  stated  at  the  lower  of  average  cost (which approximates the
     first-in,  first-out  method)  or market. Cost is determined using material
     costs,  labor  charges,  and  allocated  factory  overhead  charges.

     Property,  Plant  and  Equipment
     --------------------------------

     Property,  plant  and  equipment  are  stated  at  cost,  less  accumulated
     depreciation  and  amortization. Depreciation and amortization are provided
     on  the  straight-line  method for book and tax purposes over the following
     estimated  useful  lives  of  the  assets:

<TABLE>
<CAPTION>
                             Years
                             ------
<S>                          <C>
Building                       20
Equipment                    3 - 10
Leasehold improvements       7 - 10
</TABLE>


     Goodwill
     --------

     Goodwill  represents  the  excess  of  the  purchase  price over net assets
     acquired.  Goodwill  and  any  other  intangible  assets determined to have
     indefinite  useful  lives  are not amortized. Goodwill and other intangible
     assets with indefinite lives are tested for impairment annually or whenever
     conditions  exist  that  indicate  an  impairment  could exist. The Company
     performed  the  annual  impairment  test  in fiscal years 2005 and 2004 and
     concluded  that  no  impairment  had  occurred.

     Stock-Based  Compensation
     -------------------------

     The  Company  has  various  incentive  and non-qualified stock option plans
     which  are  used  as  an  incentive  for  directors,  officers,  and  other
     employees,  as  described  more  fully  in  Note  K.  The  Company uses the
     intrinsic  value  method  to value stock options issued to employees. Under
     this method, compensation expense is recognized for the amount by which the
     market  price of the common stock on the date of grant exceeds the exercise
     price.  The  Company's  stock  based compensation expense also reflects the
     benefit  of  the  cancellation of previously unvested expensed options. The
     Company  recognized  compensation income of $20,862, $20,735 and $9,309 for
     the  years  ended  March  31,  2005, 2004 and 2003. For those stock options
     granted  where  the  exercise  price  was  equal to the market value of the
     underlying  common  stock  on  the  date  of grant, no stock-based employee
     compensation  cost  is reflected in the net loss. Had the fair value method
     been  applied,  our  compensation  expense  would  have been different. The
     following  table  illustrates  the  effect  on  net  loss  and  net


                                       35
<PAGE>
NOTE  A  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  -  CONTINUED

     loss  per  share  if  the  Company  had  applied  the fair value method, to
     stock-based  employee  compensation  for  the  following  fiscal  years:

<TABLE>
<CAPTION>
                                               March 31,     March 31,     March 31,
                                                 2005          2004          2003
                                             ------------  ------------  ------------
<S>                                          <C>           <C>           <C>
Net loss to common shareholders - as
reported                                     $(3,420,038)  $(6,535,147)  $(5,009,434)
Less: Total stock-based employee
compensation expense determined under fair
value method for all awards, net of related
tax effects                                      129,914       158,936       153,266
Net loss - pro forma                         $(3,549,952)  $(6,694,083)  $(5,162,700)
                                             ============  ============  ============

Basic and diluted net loss per common share
- as reported                                $      (.29)  $      (.55)  $      (.42)
                                             ============  ============  ============

Basic and diluted net loss per common share
- pro forma                                  $      (.30)  $      (.56)  $      (.43)
                                             ============  ============  ============
</TABLE>


     The  weighted  average fair value of options granted in 2005, 2004 and 2003
     was  $1.79,  $2.62,  and  $1.20.  The  fair  value  of each option grant is
     estimated on the date of grant using the Black-Scholes option pricing model
     with  the  following  weighted average assumptions used for grants in 2005,
     2004  and  2003; zero dividend yield, risk-free interest rate of 3.4%, 3.3%
     and  3.2%;  volatility of 75%, 75% and 77%, and a weighted-average expected
     term  of  the  options  of  five years. No adjustment was made to the Black
     Scholes  calculation  to  reflect  that  the options are not freely traded.


     Fair  Value  of  Financial  Instruments
     ---------------------------------------

     Due  to  their  short-term  nature, the carrying value of current financial
     assets  and  liabilities  approximates their fair values. The fair value of
     long-term  obligations,  if  recalculated  based on current interest rates,
     would  not  significantly  differ  from  the  recorded  amounts.

     Net  Loss  Per  Share
     ---------------------

     Basic  net  loss per share is computed by dividing net loss by the weighted
     average  number of common shares outstanding. Diluted net loss per share is
     computed  by  dividing  net  loss  by the weighted average number of common
     shares  outstanding  and  common share equivalents related to stock options
     and  warrants,  when  dilutive.

     Common  stock options and warrants to purchase 683,361, 975,937 and 999,197
     shares  of  common  stock  with a weighted average exercise price of $4.99,
     $6.35  and  $6.50  were  outstanding during the years ended March 31, 2005,
     2004 and 2003, but were excluded because they were antidilutive. Had we not
     incurred  net losses during the fiscal years ended March 31, 2005, 2004 and
     2003,  we  would not have assumed any conversion of stock options in fiscal
     2005  and  2003, and we would have assumed conversion of stock options into
     18,031  common  shares  in  fiscal  2004.


                                       36
<PAGE>
NOTE  A  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  -  CONTINUED

     Use  of  Estimates
     ------------------

     The  preparation  of  consolidated  financial statements in conformity with
     accounting  principles  generally  accepted in the United States of America
     requires  management  to  make  estimates  and  assumptions that affect the
     reported  amounts  of assets and liabilities, related revenues and expenses
     and  disclosure  about contingent assets and liabilities at the date of the
     financial  statements.  Actual results may differ from those estimates used
     by  management.

     Impairment  of  Long-Lived  Assets
     ----------------------------------

     The  Company  evaluates  the  recoverability  of  its long-lived assets and
     requires  recognition  of  impairment  of  long-lived  assets  if events or
     circumstances  indicate  an  impairment  may have occurred and when the net
     book  value  of  such  assets  exceeds  the  future undiscounted cash flows
     attributed  to  such  assets.  The  Company  assesses  the  impairment  of
     long-lived assets whenever events or changes in circumstances indicate that
     the  carrying  value  may  not  be recoverable. No impairment of long-lived
     assets  has  occurred  through  the  year  ended  March  31,  2005.

     Income  Taxes
     -------------

     The Company records income taxes in accordance with the liability method of
     accounting.  Deferred  taxes  are  recognized  for  the  estimated  taxes
     ultimately  payable  or  recoverable  based on enacted tax law. The Company
     establishes  a  valuation  allowance to reduce the deferred tax asset to an
     amount  that is more likely than not to be realizable. Changes in tax rates
     are  reflected  in  the  tax  provision  as  they  occur.

     Reclassifications
     -----------------

     Certain  reclassifications  have been made to the 2004 financial statements
     to  conform with the presentation used in 2005. These reclassifications had
     no  effect  on  net  loss  or  shareholders' equity as previously reported.

     Newly  Adopted  Accounting  Standards
     -------------------------------------

     In  December  2004,  the Financial Accounting Standards Board (FASB) issued
     FASB  Statement  No.  123  (revised 2004) (SFAS 123R), Share-Based Payment.
     This  statement  requires  the  compensation  cost  relating to share-based
     payment  transactions to be recognized in a company's financial statements.
     That  cost  will  be  measured  based  on  the  fair value of the equity or
     liability  instruments  issued.  Statement  123(R)  covers  a wide range of
     share-based  compensation  arrangements including share options, restricted
     share  plans,  performance-based  awards,  share  appreciation  rights, and
     employee  share  purchase  plans.  The  Company  will  be required to apply
     Statement 123(R) effective April 1, 2006. Management has not yet determined
     the  impact.


NOTE  B  -  ACQUISITIONS

     Software  Moguls  India  Private Limited and S M Infoexpert Private Limited
     ---------------------------------------------------------------------------

     On  March  31, 2005, the Company acquired certain assets of Software Moguls
     India  Private  Limited  and  SM Infoexpert Private Limited near New Dehli,
     India.  The  acquisition was accounted for as a purchase. The impact on the
     operations  for  year  ended  March  31,  2005  was  not  material.


                                       37
<PAGE>
NOTE  B  -  ACQUISITIONS  -  CONTINUED

     The  following table summarizes the allocation of the purchase price at the
     date  of  the  acquisition:

<TABLE>
<CAPTION>
                                     Purchase Price
                                       Allocation
<S>                                 <C>
Property, plant and equipment       $        46,303
Other assets                                  2,469
                                    ---------------
    Total Purchase Price            $        48,772
                                    ===============
</TABLE>

     There  are  no  contingent  payments  related  to  the  India  acquisition.

     Computer  System  Products,  Inc.
     ---------------------------------

     On  March 14, 2003, the Company acquired certain assets and assumed certain
     liabilities  of  Computer  Systems  Products,  Inc.  The  acquisition  was
     accounted  for  as  a  purchase  and,  accordingly,  results  of operations
     relating  to  the  purchased  assets  were  included  in  the  statement of
     operations  from the date of acquisition. The impact on operations for year
     ended  March  31,  2003 was not material. There were no contingent payments
     related  to  the  acquisition.

     In accordance with SFAS 141, the Company reclassified certain balances from
     the  original  CSP  purchase price allocation as part of an asset valuation
     adjustment. The adjustment was made after determining the fair value of the
     assets  purchased. The result of the change was a decrease in inventory and
     an increase in goodwill recorded. This did not change the purchase price of
     the  transaction.  The  purchase  price,  assets  acquired  and liabilities
     assumed  with  purchase  price  adjustments  are  as  follows:

<TABLE>
<CAPTION>
                                   Original       Purchase     Net Purchase
                                Purchase Price      Price          Price
                                  Allocation     Adjustment     Allocation
<S>                            <C>              <C>           <C>
Accounts receivable            $       384,571  $         -   $     384,571
Inventory                            1,227,239     (627,364)        599,875
Property, plant and equipment          402,799            -         402,799
                               ---------------  ------------  -------------
    Assets purchased                 2,014,609     (627,364)      1,387,245
Trade accounts payable                 239,187            -         239,187
Capitalized leases                     149,786            -         149,786
Vendor restructuring payable           263,818            -         263,818
Accrued expenses                        34,114            -          34,114
                               ---------------  ------------  -------------
    Less: Liabilities assumed          686,905            -         686,905
Net assets                           1,327,704     (627,364)        700,340
Goodwill                             2,500,296      627,364       3,127,660
                               ---------------  ------------  -------------
    Purchase price             $     3,828,000  $         -   $   3,828,000
                               ===============  ============  =============
</TABLE>

     Goodwill  is  expected  to  be  fully  deductible  for  tax  purposes.


                                       38
<PAGE>
NOTE  B  -  ACQUISITIONS  -  CONTINUED


     Americable,  Inc.
     -----------------

     On  June  27, 2003, the Company acquired certain assets of Americable, Inc.
     The  acquisition  was accounted for as a purchase and, accordingly, results
     of  operations  relating  to the purchased assets have been included in the
     statement  of  operations  from  the  date  of  acquisition.  There  are no
     contingent  payments  related  to  the  acquisition.

     In accordance with SFAS 141, the Company reclassified certain balances from
     the  original  Americable  purchase  price  allocation  as part of an asset
     valuation  adjustment.  The  adjustment was made after determining the fair
     value  of  the assets purchased. The result of the change was a decrease in
     inventory and property, an increase in accounts receivable, and an increase
     in  goodwill  recorded.  This  did  not  change  the  purchase price of the
     transaction.  The  purchase  price  and assets acquired with purchase price
     adjustments  are  as  follows:

<TABLE>
<CAPTION>
                                  Original        Purchase     Net Purchase
                               Purchase Price      Price           Price
                                 Allocation      Adjustment     Allocation
<S>                            <C>              <C>           <C>
Accounts receivable            $       594,000  $    46,279   $     640,279
Inventory                              638,000      (13,944)        624,056
Property, plant and equipment          450,000      (49,186)        400,814
                               ---------------  ------------  -------------
    Assets purchased                 1,682,000      (16,851)      1,665,149
Goodwill                               278,000       16,851         294,851
                               ---------------  ------------  -------------
    Purchase price             $     1,960,000  $         -   $   1,960,000
                               ===============  ============  =============
</TABLE>

     Goodwill  is  expected  to  be  fully  deductible  for  tax  purposes.


NOTE  C  -  SALE  OF  OPTICS  MANUFACTURING  OPERATIONS

     In  January,  2004  the  Company  announced  the  discontinuance  of optics
     manufacturing at its Blaine, Minnesota facility. The closure was the result
     of aggressive off-shore pricing and continued lower demand for this product
     line.  This resulted in a charge of $171,000 taken in the 4th quarter ended
     March  31,  2004.  The  Company sold its optics manufacturing operations on
     April  14, 2004 for $220,000. The terms of the sale required the Company to
     restructure  a loan with the City of Aberdeen, South Dakota, which included
     an  upfront  loan  payment of $89,305 and payment of the remaining $140,000
     loan amount in seven annual installments of $20,000 each beginning June 30,
     2004.  The Company recorded a gain of approximately $208,000 on the sale in
     the  first  quarter  of  fiscal  2005.

NOTE  D  -  INVENTORIES

     Inventories  consist  of  the  following  at  March  31:

<TABLE>
<CAPTION>
                         2005        2004
                      ----------  ----------
<S>                   <C>         <C>
Raw materials         $  266,051  $  371,536
Work-in-process            9,661      46,222
Finished goods           994,941   1,156,430
                      ----------  ----------

                      $1,270,653  $1,574,188
                      ==========  ==========
</TABLE>


                                       39
<PAGE>
NOTE  E  -  PROPERTY,  PLANT  AND  EQUIPMENT

     Property,  plant  and  equipment  consist  of  the  following  at March 31:

<TABLE>
<CAPTION>
                                                   2005        2004
                                                ----------  ----------
<S>                                             <C>         <C>
Land                                            $  127,760  $  127,760
Buildings                                        1,682,205   1,679,424
Manufacturing equipment                          5,895,170   6,037,670
Office equipment                                   699,839     619,026
Leasehold improvements                           1,132,651   1,119,616
                                                ----------  ----------
                                                 9,537,625   9,583,496
Less accumulated depreciation and amortization   5,590,627   5,032,540
                                                ----------  ----------

                                                $3,946,998  $4,550,956
                                                ==========  ==========
</TABLE>


NOTE  F  -  LONG-TERM  DEBT

     The  following  is  a  summary  of  the  outstanding  debt  at  March  31:

<TABLE>
<CAPTION>
                                                                  2005        2004
                                                               ----------  ----------
<S>                                                            <C>         <C>
South Dakota Governor's Office of Economic Development
and the Aberdeen Development Corporation Bond, 5.8% to 6.75%,
due in various installments through 2016                       $1,405,000  $1,485,000

Low interest economic development loans, 0%, due in various
installments through fiscal 2011                                  120,000     229,305

Capital lease obligations                                          53,836      97,454
                                                               ----------  ----------
                                                                1,578,836   1,811,759
Less current maturities                                         1,471,036   1,637,923
                                                               ----------  ----------

                                                               $  107,800  $  173,836
                                                               ==========  ==========
</TABLE>

     The  forgivable  economic  development loans are contingent upon employment
     levels  at  the  facility meeting preset criteria. As partial consideration
     for  any loans forgiven, the Company will grant warrants to purchase common
     stock  of  the  Company  based  on  the number of job credits earned by the
     Company  in  the  preceding  12  months  divided by the exercise price. The
     exercise  price  of  the warrants was set at $4.00 for year one of the debt
     and  the  yearly  grant exercise price increases one dollar each year until
     the debt matured in fiscal 2004. As of March 31, 2005, 36,511 warrants have
     been  issued  for  loans  forgiven  totaling  $187,289.

     At  March  31,  2005  and  2004,  the  Company had on deposit with trustees
     $468,639  and  $466,298  in  reserve  funds for current bond maturities, of
     which  $131,548  and  $133,865 are for current bond maturities. These funds
     are  included  in  bond  reserve  funds in the accompanying balance sheets.

     The loan agreement requires the Company to maintain compliance with certain
     covenants.  The  Company  was  out  of  compliance  with  certain  of these
     covenants in fiscal 2005. All debt, except for the long-term portion of the
     low  interest  loans,  and  the  capital  lease  obligations,  to which the
     covenant  violation  does  not apply, has been classified as current due to
     the  Company's  covenant  violation.


                                       40
<PAGE>
NOTE  F  -  LONG-TERM  DEBT  -  CONTINUED

     As  part of the Company's plan to construct a production facility, the city
     of  Aberdeen,  South  Dakota  gave  the  Company  land, contingent upon the
     Company  staying  in  the  new  building through June 23, 2002. The Company
     satisfied this requirement in fiscal 2003 and recorded the contributed land
     with  an  assessed  value  of  $67,760  on  the books as of March 31, 2003.

     All  of the above debt is secured by land, buildings, and certain equipment
     of  the  Company.


     Scheduled  maturities  of  the  Company's  long-term  debt  are as follows:

<TABLE>
<CAPTION>
<S>                       <C>
Years ending March 31,
         2006             $1,471,036
         2007                 27,800
         2008                 20,000
         2009                 20,000
         2010                 20,000
      Thereafter              20,000
                          ----------
                          $1,578,836
                          ==========
</TABLE>


NOTE  G  -  EMPLOYEE  BENEFIT  PLAN

     The  Company  maintains  a  contributory 401(k) profit sharing benefit plan
     covering  all  employees. The Company matches 50% of employee contributions
     up to 6% of a participant's compensation. The Company's contributions under
     this  plan were $97,000, $72,000, and $51,000 for the years ended March 31,
     2005,  2004  and  2003.


NOTE  H  -  INCOME  TAXES

     Deferred  taxes  recognize  the impact of temporary differences between the
     amounts  of  the  assets  and  liabilities recorded for financial statement
     purposes  and such amount measured in accordance with tax laws. Realization
     of  net  operating  loss  carry  forward  and  other deferred tax temporary
     differences  are  contingent  upon  future  taxable earnings. The Company's
     deferred  tax  asset  was  reviewed  for expected utilization using a "more
     likely  than  not"  approach  as  required  by  SFAS  109  by assessing the
     available  positive  and  negative  factors surrounding its recoverability.
     Accordingly,  the  Company has recorded a full valuation allowance at March
     31,  2005  and  2004.


                                       41
<PAGE>
NOTE  H  -  INCOME  TAXES  -  CONTINUED

     Significant components of deferred income tax assets and liabilities are as
     follows  at  March  31,  2005:

<TABLE>
<CAPTION>
                                                2005           2004
                                            -------------  -------------
<S>                                         <C>            <C>
Current deferred income tax assets:
Inventories                                 $    116,156   $     64,350
Accrued expenses                                 163,338         33,930
                                            -------------  -------------
                                                 279,494         98,280
Long-term deferred income tax asset:
Intangibles                                       33,130         17,940
Net operating loss carryforward               12,296,918     10,880,432
                                            -------------  -------------
                                              12,330,048     10,898,372
                                            -------------  -------------
Total deferred income tax assets              12,609,542     10,996,652

Long-term deferred income tax liabilities:
Property and equipment depreciation              288,639       (172,770)
Goodwill                                         153,696         94,338
                                            -------------  -------------
                                                 442,335        (78,432)
                                            -------------  -------------

Total net deferred income taxes               12,167,207     11,075,084
Valuation allowance                          (12,167,207)   (11,075,084)
                                            -------------  -------------
Total                                       $          -   $          -
                                            =============  =============
</TABLE>

     As of March 31, 2005, the Company has net operating loss carry forwards for
     federal  income  tax  purposes of approximately $31,531,000 which expire in
     fiscal  years  2006  to  2025.

     The  following is a reconciliation of the federal statutory income tax rate
     to  the  consolidated  effective  tax  rate  for  March  31:

<TABLE>
<CAPTION>
                                           Percent of Pre-tax Income
                               ----------------------------------------------
                                    2005            2004            2003
                               --------------  --------------  --------------
<S>                            <C>             <C>             <C>
Federal statutory rate                  (34%)           (34%)           (34%)
State income taxes                       (5%)            (5%)            (5%)
Permanent differences                      1%              0%              0%

Change in valuation allowance             38%             39%             39%
                               --------------  --------------  --------------
Tax Rate                                   0%              0%              0%
                               ==============  ==============  ==============
</TABLE>

     Components  of  the (benefit) provision for income taxes are as follows for
     the  years  ended  March  31:

<TABLE>
<CAPTION>
                        2005         2004          2003
                     ----------  ------------  ------------
<S>                  <C>         <C>           <C>
Current:
  Federal            $       -   $         -   $         -
  State                  4,138         2,053         1,000
                     ----------  ------------  ------------

Deferred:
  Federal              869,866     2,106,637     3,689,424
  State                127,921       309,799       542,562
                     ----------  ------------  ------------

Valuation allowance   (997,787)   (2,416,436)   (4,231,986)
                     ----------  ------------  ------------
Income tax expense   $   4,138   $     2,053   $     1,000
                     ==========  ============  ============
</TABLE>


                                       42
<PAGE>
     Income  tax  expense consists primarily of state taxes in 2005, 2004, 2003.


NOTE  I  -  SHAREHOLDERS'  EQUITY

     The  Board of Directors may, by resolution, establish from the undesignated
     shares  different  classes  or  series  of  shares and may fix the relative
     rights  and  preferences  of  shares in any class or series. The Company is
     authorized  to issue 500 shares of preferred stock and 50,000,000 shares of
     common  stock  at  $.01 par value. The Company has not issued any shares of
     preferred  stock.

     In fiscal year 2003, the Board of Directors authorized the repurchase of up
     to  the greater of $2,000,000 or 500,000 shares of common stock. There were
     no  purchases  in  fiscal  2005.  As of March 31, 2005 and 2004, a total of
     46,750  shares  for $98,629 at an average price of $2.11 per share had been
     repurchased  and  retired  before  the repurchase program expired in fiscal
     year  2004.


NOTE  J  -  SHAREHOLDER  RIGHTS  PLAN

     Pursuant  to  the  Shareholder  Rights  Plan each share of common stock has
     attached to it a right, and each share of common stock issued in the future
     will  have  a  right attached until the rights expire or are redeemed. Upon
     the occurrence of certain change in control events, each right entitles the
     holder  to  purchase  one  one-hundredth  of  a  share  of  Series B Junior
     Preferred  Participating  Share,  at  an  exercise  price of $80 per share,
     subject  to  adjustment.  The rights expire on November 10, 2010 and may be
     redeemed  by  the  Company  at a price of $.001 per right prior to the time
     they  become  exercisable.


                                       43
<PAGE>
NOTE  K  -  STOCK  OPTIONS  AND  WARRANTS

     Stock  Options
     --------------

     The  Company  has  various  incentive  and non-qualified stock option plans
     which  are  used  as  an  incentive  for  directors,  officers,  and  other
     employees.  Options  are generally granted at fair market values determined
     on  the  date  of grant and vesting normally occurs over a six-year period.
     The  plans  had 713,370 shares of common stock available for issue at March
     31,  2005.


     Option  transactions  under  these plans during the three years ended March
     31,  2005  are  summarized  as  follows:

<TABLE>
<CAPTION>

                                                  Weighted average
                               Number of shares    exercise price
                               -----------------  -----------------
<S>                            <C>                <C>
Outstanding at March 31, 2002           369,550   $            7.40
  Granted                               167,500                1.88
  Canceled                             (128,675)               8.16
                               -----------------
Outstanding at March 31, 2003           408,375                4.27
  Granted                               140,000                2.62
  Canceled                             (163,260)               5.65
                               -----------------
Outstanding at March 31, 2004           385,115                3.74
  Granted                                72,000                1.79
  Canceled                             (220,485)               3.60
                               -----------------
Outstanding at March 31, 2005           236,630                3.28
                               =================
</TABLE>


     The  number  of  shares  exercisable  at  March 31, 2005, 2004 and 2003 was
     72,255,  176,815  and 165,325, respectively, at a weighted average exercise
     price  of  $4.47,  $4.21  and  $5.42  per  share,  respectively.

     The following table summarizes information concerning currently outstanding
     and  exercisable  stock  options  at  March  31,  2005:

<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
                        -------------------                                -------------------
                  Weighted average     Weighted         Weighted
   Range of           Number           Remaining         Average          Number        Average
exercise prices     outstanding     contractual life  exercise price   outstanding  exercise price
----------------  ----------------  ----------------  ---------------  -----------  ---------------
<S>               <C>               <C>               <C>              <C>          <C>
     $1.48-$2.91           186,630        4.50 years  $          2.19       39,130  $          2.29
       3.77-5.53            15,000        1.34 years             5.23       12,500             5.17
       5.73-7.22            10,000        1.88 years             6.86        6,375             6.80
      8.50-11.90            25,000        2.05 years             8.82       14,250             8.83
                  ----------------                                     -----------
                           236,630        3.93 years             3.28       72,255             4.47
                  ================                                     ===========
</TABLE>


                                       44
<PAGE>
NOTE  K  -  STOCK  OPTIONS  AND  WARRANTS  -  CONTINUED


Stock  Warrants
---------------

     The  following  is  a  table  of  the  warrants  to  purchase shares of the
     Company's  common  stock:

<TABLE>
<CAPTION>
                             Warrants    Exercise price   Expiration
                           outstanding      per share        date
                           ------------  ---------------  -----------
<S>                        <C>           <C>              <C>
Balance at March 31, 2002      286,322   $  4.79 - 17.84  2002 - 2006
  Issued                       350,000          3.00         2008
  Expired                      (45,500)     3.75 -  5.00     2002
                           ------------
Balance at March 31, 2003      590,822      3.00 - 17.84  2005 - 2008
  Issued                             -           -             -
  Expired                            -           -             -
                           ------------
Balance at March 31, 2004      590,822      3.00 - 17.84  2005 - 2008
  Issued                             -           -             -
  Expired                     (144,091)        14.72         2005
                           ------------
Balance at March 31, 2005      446,731      3.00 - 17.84  2006 - 2008
                           ============
</TABLE>

     All  warrants  are  exercisable  upon  date  of  grant.

     In fiscal year 2003, 350,000 warrants at a value of $371,000 were issued in
     connection  with the acquisition of the assets of Computer System Products,
     Inc.  These warrants were valued by an independent firm and are exercisable
     at  $3.00.


NOTE  L  -  COMMITMENTS

     The  Company  leases office and manufacturing facilities from a partnership
     whose  two  partners  are major shareholders, officers and directors of the
     Company.  The  Company has determined FIN 46 (R), Consolidation of Variable
     Interest  Entities  (VIE's),  does  not  require  the  consolidation of the
     partnership  with  APA's  financial  statements.  The  lease  agreement,
     classified  as  an  operating lease, expires November 30, 2009 and provides
     for  periodic  increases  of  the  rental  rate  based  on increases in the
     consumer  price  index.  The  Company leases other office and manufacturing
     facilities  space  that expires June 30, 2006. Rental expense was $478,000,
     $485,000 and $149,000 for the years ended March 31, 2005, 2004 and 2003, of
     which  $155,000,  $149,000  and  $139,000  was  paid  to  the  partnership,
     respectively.

     The  Company leases certain equipment under capital lease arrangements with
     interest  ranging  from  10%  to  10.62%  and  terms through July 2006. The
     equipment has a net book value of $78,421 and 104,561 at March 31, 2005 and
     2004.


                                       45
<PAGE>
NOTE  L  -  COMMITMENTS  -  CONTINUED

     The  following is a schedule of approximate minimum payments required under
     the  capital  and  operating  leases:

<TABLE>
<CAPTION>
                                                   Capital   Operating
    Year ending March 31                            leases     leases
    --------------------                           --------  ----------
<S>                                                <C>       <C>
        2006                                       $ 49,320  $  494,712
        2007                                          7,964     302,026
        2008                                              -     204,474
        2009                                              -     123,894
        2010                                              -      83,438
        Thereafter                                        -      25,260
                                                   --------  ----------

    Total minimum lease payments                     57,284  $1,233,804
                                                             ==========
    Less: Amounts representing interest               3,448
                                                   --------

    Present value of future minimum lease
      payments                                       53,836

    Less: Current portion                            46,036
                                                   --------

Capital lease obligations, net of current portion  $  7,800
                                                   ========
</TABLE>


NOTE  M  -  CONCENTRATIONS

     Major  Customers
     ----------------

     No  single  customer  accounted for more than 10% of the Company's sales in
     fiscal  2005 and fiscal 2004. Two major customers accounted for 21% and 15%
     of  the  Company's  sales  for  the  year  ended  March  31,  2003.

     Suppliers
     ---------

     The  Company  purchases raw materials, component parts and outsourced labor
     from  many  suppliers. Although many of these items are single-sourced, the
     Company  has  experienced  no significant difficulties to date in obtaining
     adequate  quantities.  These  circumstances  could change, however, and the
     Company  cannot  guarantee  that  sufficient  quantities  or quality of raw
     materials,  component  parts  and  outsourced  labor  will  be  as  readily
     available  in  the  future or, if available, that we will be able to obtain
     them  at  favorable prices. There were no suppliers that provided more than
     10%  of  the  Company's  total purchases in the years ended March 31, 2005,
     2004  or  2003.

NOTE  N  -  SEGMENTS  OF  BUSINESS

     The  Company  has  identified two reportable segments based on its internal
     organizational  structure,  management  of  operations,  and  performance
     evaluation.  These  segments are Optronics and Cables and Networks (APACN).
     Optronic's revenue is generated in the design, manufacture and marketing of
     ultraviolet  (UV) detection and measurement devices and optical components.
     APACN's  revenue  is  derived  primarily  from  standard  and  custom fiber


                                       46
<PAGE>
NOTE  N  -  SEGMENTS  OF  BUSINESS  -  CONTINUED

     optic  cable  assemblies, copper cable assemblies, value added fiber optics
     frames,  panels  and  modules. Expenses are allocated between the companies
     based on detailed information contained in invoices. In addition, corporate
     overhead  costs  for  management's time and other expenses are allocated to
     each  segment.  Segment  detail  is  summarized  as  follows (unaudited, in
     thousands):

<TABLE>
<CAPTION>
                                    Optronics    Cables & Networks    Eliminations    Consolidated
                                   -----------  -------------------  --------------  --------------
<S>                                <C>          <C>                  <C>             <C>
YEAR ENDED MARCH 31, 2005
  External sales                   $      489   $           13,801   $        (404)  $      13,886
  Cost of sales                         1,622                9,980            (404)         11,198
  Operating loss                       (4,129)                 334               -          (3,795)

  Depreciation and amortization           774                  230               -           1,004
  Capital expenditures, net               342                   79               -             421
  Assets                               22,253                7,188          (7,367)         22,074

YEAR ENDED MARCH 31, 2004
  External sales                   $      409   $           11,691   $        (191)  $      11,909
  Cost of sales                         3,074                9,031            (191)         11,914
  Operating loss                       (5,604)                (955)              -          (6,559)
  Depreciation and amortization           797                  174               -             971
  Capital expenditures                    695                   91               -             786
  Assets                               26,187                7,310          (7,413)         26,084

YEAR ENDED MARCH 31, 2003
  External sales                   $      202   $              234   $           -   $         436
  Cost of sales                         2,627                  176               -           2,803
  Operating loss                       (5,269)                 (60)              -          (5,329)
  Depreciation and amortization           811                    -               -             811
  Capital expenditures                    309                   50               -             359
  Assets                               31,458                5,275          (4,848)         31,885
</TABLE>


NOTE  O  -  SUBSEQUENT  EVENT  (UNAUDITED)

     In  June  2005  the  Company  sold  approximately  2  acres  of its land in
     Aberdeen,  South  Dakota  to  the Aberdeen Development Corporation (ADC) in
     exchange for the retirement of its remaining debt on its loan with ADC. The
     land was granted to APA in conjunction with building a facility in Aberdeen
     and  is  part  of  a  single  parcel of approximately 12 acres on which the
     Company  has  constructed  and  operates  its  manufacturing  facility. The
     Company  will recognize a gain on the sale of the land in the first quarter
     of  fiscal  2006.  The gain is not expected to be material to the financial
     statements.


ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL  DISCLOSURE.


                                       47
<PAGE>
          None.


ITEM  9A.  CONTROLS  AND  PROCEDURES.

      The  Company's  chief  executive  officer and chief financial officer (the
same  person) has evaluated the Company's disclosure controls and procedures (as
defined  in  Exchange  Act Rule 13a-15(e) as of the end of the period covered by
this  report, and based on such evaluation has concluded that they are effective
to  ensure  that  the information required to be disclosed by the Company in the
reports it files under the Exchange Act is gathered, analyzed and disclosed with
adequate  timeliness,  accuracy  and  completeness.

     During  the fiscal quarter ended March 31, 2005, there was no change in the
Company's  internal  controls over financial reporting that materially affected,
or  is  reasonably  likely  to  materially  affect,  the Company's controls over
financial  reporting.

ITEM  9B.  OTHER  INFORMATION

     There were no events during the quarter ended March 31, 2005 required to be
disclosed  on  Form  8-K  which  were  not  so  disclosed.


                                    PART III


ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

     Information  regarding  executive  officers  is  included in Part I of this
Report  and  is  incorporated  in  this  Item  10  by  reference.

     Information  regarding  directors and the information required by Items 11,
and  13,  below,  is  incorporated  in  this  Report  by  reference to the proxy
statement  for  our  annual  meeting  of shareholders to be held in August 2005.


ITEM  11.     EXECUTIVE  COMPENSATION.

     Information required by Item 11 is incorporated in this Report by reference
to  the  proxy  statement  for  our annual meeting of shareholders to be held in
August  2005.


ITEM  12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
              RELATED  STOCKHOLDER  MATTERS.

     Certain  information  required by Item 12 is incorporated in this Report by
reference  to  the proxy statement for annual meeting of shareholders to be held
in  August  2005.


                                       48
<PAGE>
     The  following  table  provides  information  about  the  Company's  equity
compensation  plans (including individual compensation arrangements) as of March
31,  2005.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                 (a)                      (b)                        (c)
---------------------  ------------------------  ----------------------  ----------------------------
<S>                    <C>                       <C>                     <C>
Plan category          Number of securities to   Weighted-average        Number of securities
                       be issued upon exercise   exercise price of       remaining available for
                       of options, warrants or   outstanding options,    future issuance under
                       rights                    warrants and rights     equity compensation
                                                                         plans (excluding securities
                                                                         reflected in column (a))
---------------------  ------------------------  ----------------------  ----------------------------
Equity compensation
plans approved by
security holders                        236,630  $                 3.28                       713,370
---------------------  ------------------------  ----------------------  ----------------------------
Equity compensation
plans not approved by
security holders                        446,731  $                 5.89               Not applicable*
---------------------  ------------------------  ----------------------  ----------------------------
Total                                   683,361  $                 4.99                       713,370
-----------------------------------------------------------------------------------------------------
</TABLE>

*  These  securities  are  comprised  solely  of  warrants  that were not issued
pursuant  to  any  formal plan with an authorized number of securities available
for  issuance.


ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

     Information required by Item 13 is incorporated in this Report by reference
to  the  proxy  statement  for  our annual meeting of shareholders to be held in
August  2005.

ITEM  14.     PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

     Information required by Item 14 is incorporated in this Report by reference
to  the  proxy  statement  for  our annual meeting of shareholders to be held in
August  2005.


                                       49
<PAGE>
                                     PART IV



ITEM  15.     EXHIBITS  AND  FINANCIAL  STATEMENT  SCHEDULES.

     (a)     (1)  The following financial statements are filed herewith under
                  Item  8.


               (i)  Report of Independent Registered Public Accounting
                    Firm for the years ended March 31, 2005, 2004 and
                    2003. . . . . . . . . . . . . . . . . . . . . . . . . . . F1

               (ii) Consolidated Balance Sheets as of March 31, 2005.
                    and 2004. . . . . . . . . . . . . . . . . . . . . . . . . F2

               (iii) Consolidated Statements of Operations for the
                     years ended March 31, 2005, 2004 and 2003. . . . . . . . F3

               (iv) Consolidated Statement of Shareholders' Equity for
                    the years ended March 31, 2005, 2004 and 2003 . . . . . . F4

               (v)  Consolidated Statements of Cash Flows for the years
                    ended March 31, 2005, 2004 and 2003 . . . . . . . . . . . F6

               (vi) Notes to the Consolidated Financial Statements for
                    the years ended March 31, 2005, 2004 and 2003 . . . . . . F7


             (2)     Financial  Statement  Schedules:  See  Schedule  II  on
                     page  following  signatures.

     (b)     Exhibits.  See  Exhibit  Index.


                                       50
<PAGE>
                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) 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  Enterprises,  Inc.


Date:  June  28,  2005             By  /s/  Anil  K.  Jain
                                      ------------------------------------------
                                       Anil  K.  Jain
                                       President  and  Chief  Executive  Officer

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
Registrant  and  in  the  capacities  and  on  the  dates  indicated.

<TABLE>
<CAPTION>
SIGNATURE                    TITLE                                       DATE
---------------------------  ------------------------------------------  --------------
<S>                          <C>                                         <C>
/s/ Anil K. Jain             President, Chief Executive Officer,         June 28 , 2005
---------------------------  Chief Financial Officer and
Anil K. Jain                 Director (principal executive officer
                             and principal financial officer)

/s/ Kenneth A. Olsen         Secretary, Vice President, and Director     June  28, 2005
---------------------------
Kenneth A. Olsen

/s/ Daniel Herzog            Comptroller (principal accounting officer)  June 28 , 2005
---------------------------
Daniel Herzog

/s/ John G. Reddan           Director                                    June 28 , 2005
---------------------------
John G. Reddan

/s/ Ronald G. Roth           Director                                    June  28, 2005
---------------------------
Ronald G. Roth

/s/ Stephen A. Zuckerman MD  Director                                    June  28, 2005
---------------------------
Stephen Zuckerman
</TABLE>


                                       51
<PAGE>
<TABLE>
<CAPTION>
                                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


                                                        Additions
                                              -------------------------------
                                  Balance at   Charged to:      Charged to:
                                  Beginning     Cost and          Other           Balance at
Description                       of Period     Expenses         Accounts         Deductions     End of Period
                                 -----------  -------------  ----------------  ----------------  --------------
<S>                              <C>          <C>            <C>               <C>               <C>
Allowance for doubtful accounts
  March 31, 2005                 $    49,038  $     33,000   $   10,692   (2)  $    35,623  (3)  $       57,107
  March 31, 2004                      20,644        31,500        2,562   (2)        5,668  (3)          49,038
  March 31, 2003                           -             -       20,644   (1)            -               20,644

Inventory Reserves
  March 31, 2005                     110,463       158,007            -             79,381  (5)         189,089
  March 31, 2004                   1,184,760       200,040     (936,537)  (4)      337,800  (5)         110,463
  March 31, 2003                     350,000       (89,044)   1,000,000   (1)       76,196  (5)       1,184,760
</TABLE>

(1)  From purchase entry related to acquisition of Computer System Products, Inc
     (CSP).
(2)  Represents  recovery  of  bad  debt  and  other  adjustments.
(3)  Represents  writeoffs  of  bad  debt.
(4)  Represents purchase price adjustment activities relating to acquisitions of
     CSP  and  Americable,  Inc.
(5)  Represents  inventory  adjustments


                                       52
<PAGE>
                   REPORT OF INDEPENDENT REGISTERED CERTIFIED
                   ------------------------------------------

                       PUBLIC ACCOUNTING FIRM ON SCHEDULE
                       ----------------------------------


To  the  Board  of  Directors  and  Shareholders

APA  Enterprises,  Inc.

     We  have  audited  in  accordance  with the standards of the Public Company
Accounting Oversight Board (United States) the consolidated financial statements
of  APA Enterprises, Inc. and subsidiaries referred to in our report dated April
25,  2005,  which  is  included  in  the  annual  report to security holders and
incorporated  by reference in Part II of this form.  Our audit was conducted for
the  purpose  of forming an opinion on the basic financial statements taken as a
whole.  The  Schedule II is presented for purposes of additional analysis and is
not  a  required part of the basic financial statements.  This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements  and,  in  our  opinion, is fairly stated in all material respects in
relation  to  the  basic  financial  statements  taken  as  a  whole.


/s/ GRANT THORNTON LLP

Minneapolis,  Minnesota

April  25,  2005


                                       53
<PAGE>
<TABLE>
<CAPTION>
                                               EXHIBIT INDEX
=======================================================================================================
                                                                       PAGE NUMBER OR INCORPORATED
 NUMBER                       DESCRIPTION                                    BY REFERENCE TO
--------  -------------------------------------------------------  ------------------------------------
<S>       <C>                                                      <C>
   2.1    Asset Purchase Agreement between APACN and               Exhibit 2.1 to Form 8-K filed
          CSP, Inc.                                                March 31, 2003

   2.1    Asset Purchase Agreement between APACN and               Exhibit 2.1 to Form 8-K filed July
          Americable, Inc.                                         2, 2003

   2.2    Agreement Not to Compete with Peter Lee as part of       Exhibit 2.2 to Form 8-K filed
          CSP asset purchase                                       March 31, 2003

   2.3    Asset Purchase Agreement between APA Enterprises,        **
          Inc. and Software Moguls India Private Limited and S
          M Infoexpert Private Limited

   3.1    Restated Articles of Incorporation, as amended to date   Exhibit 3.1 to Registrant's Report
                                                                   on Form 10-Q for the quarter
                                                                   ended September 30, 2000

 3.1 (a)  Restated Articles of Incorporation, as amended to date   Exhibit 3.1 to Registrant's Report
          thru August 25, 2004                                     on Form 10-Q for the quarter
                                                                   ended September 30, 2004

   3.2    Bylaws, as amended and restated to date                  Exhibit 3.2 to Registrant's Report
                                                                   on Form 10-KSB for the fiscal
                                                                   year ended March 31, 1999

  4.1(a)  State of South Dakota Board of Economic                  Exhibit 4.1(a) to the Report on 10-
          Development $300,000 Promissory Note, REDI Loan:         QSB for the quarter ended June
          95-13-A                                                  30, 1996 (the "June 1996 10-
                                                                   QSB")

  4.1(b)  State of South Dakota Board of Economic                  Exhibit 4.1(b) to the June 1996
          Development Security Agreement REDI Loan No: 95-         10-QSB
          13-A dated May 28, 1996
  4.2(a)  700,000 Loan Agreement dated June 24, 1996 by            Exhibit 4.2(a) to the June 1996 10-
          and between Aberdeen Development Corporation and         QSB
          APA Enterprises, Inc.

  4.2(b)  300,000 Loan Agreement dated June 24, 1996               Exhibit 4.2(b) to the June 1996
          between Aberdeen Development Corporation and             10-QSB
          APA Enterprises, Inc.

  4.2(c)  250,000 Loan Agreement dated June 24, 1996 by            Exhibit 4.2(c) to the June 1996 10-
          and between Aberdeen Development Corporation and         QSB
          APA Enterprises, Inc.


                                       54
<PAGE>
=======================================================================================================
                                                                       PAGE NUMBER OR INCORPORATED
 NUMBER                       DESCRIPTION                                    BY REFERENCE TO
--------  -------------------------------------------------------  ------------------------------------
  4.2(d)  300,000 Loan Agreement dated June 24, 1996 by            Exhibit 4.2(d) to the June 1996
          and between Aberdeen Development Corporation and         10-QSB
          APA Enterprises, Inc.

  4.2(e)  Amended Loan Agreement with Aberdeen                     Exhibit 4.2(e) to Registrants
          Development Corporation and APA Enterprises, Inc.        Report on Form 10-K for fiscal
                                                                   year ended March 31, 2004

  4.2(f)  Purchase Agreement for land with Aberdeen                **
          Development Corporation and APA Enterprises, Inc.

  4.3(a)  Loan Agreement between South Dakota Economic             Exhibit 4.3(a) to the June 1996 10-
          Development Finance and APA Enterprises, Inc.            QSB

  4.3(b)  Mortgage and Security Agreement - One Hundred            Exhibit 4.3(b) to the June 1996
          Day Redemption from APA Enterprises, Inc. to South       10-QSB
          Dakota Economic Development Finance Authority
          dated as of June 24, 1996

  4.4(a)  Subscription and Investment Representation               Exhibit 4.4(a) to the June 1996 10-
          Agreement of NE Venture, Inc.                            QSB

  4.4(b)  Form of Common Stock Purchase Warrant for NE             Exhibit 4.4(b) to the June 1996
          Venture, Inc.                                            10-QSB

  4.5(a)  Certificate of Designation for 2% Series A               Exhibit 4.5(a) filed as a part of
          Convertible Preferred Stock                              Registration Statement on Form
                                                                   S-3 (Commission File No. 333-
                                                                   33968)

  4.5(b)  Form of common stock warrant issued in connection        Exhibit 4.5(b) filed as a part of
          with 2% Series A Convertible Preferred Stock             Registration Statement on Form
                                                                   S-3 (Commission File No. 333-
                                                                   33968)

   4.6    Common Stock Purchase Warrant issued to                  Exhibit 4.6 to Registrant's Report
          Ladenburg Thalmann & Co. Inc. to purchase 84,083         on Form 10-K for fiscal year
          Shares                                                   ended March 31, 2000 ("2000 10-
                                                                   K")

   4.7    Share Rights Agreement dated October 23, 2000 by         Exhibit 1 to the Registration
          and between the Registrant and Wells Fargo Bank          Statement on Form 8-A filed
          Minnesota NA as Rights Agent                             November 8, 2000

   4.8    Common Stock Warrant Purchase Agreement with             Exhibit 4.8 to Form 8-K filed
          Peter Lee as part of CSP asset purchase                  March 31, 2003

 10.1(a)  Sublease Agreement between the Registrant and Jain-      Exhibit 10.1 to the Registration
          Olsen Properties and Sublease Agreement and Option       Statement on Form S-18 filed with
          Agreement between the Registrant and Jain-Olsen          the Chicago Regional Office of
          Properties                                               the Securities and Exchange
                                                                   Commission on June 26, 1986

 10.1(b)  Amendment and Extension of Sublease Agreement            Exhibit 10.1(b) to 2000 10-K
          dated August 31, 1999


                                       55
<PAGE>
=======================================================================================================
                                                                       PAGE NUMBER OR INCORPORATED
 NUMBER                       DESCRIPTION                                    BY REFERENCE TO
--------  -------------------------------------------------------  ------------------------------------
 10.1(c)  Lease Agreement between Registrant and Jain-Olsen        Exhibit 10.1(c) to Registrant's
          Properties                                               Form 10Q-SB for quarter ended
                                                                   September 30, 2004

*10.2(a)  Stock Option Plan for Nonemployee Directors              Exhibit 10.3a to Registrant's
                                                                   Report on Form 10-KSB for the
                                                                   fiscal year ended March 31, 1994
                                                                   (the "1994 10-KSB")

*10.2(b)  Form of option agreement issued under the                Exhibit 10.3b to 1994 10-KSB
          Nonemployee Directors Plan

  *10.3   1997 Stock Compensation Plan                             Exhibit 10.3 to Registrant's Report
                                                                   on Form 10-KSB for the fiscal
                                                                   year ended March 31, 1997

  *10.4   Insurance agreement by and between the Registrant        Exhibit 10.5 to Registrant's Report
          and Anil K. Jain                                         on Form 10-K for the fiscal year
                                                                   ended March 31, 1990

  *10.5   Form of Agreement regarding Repurchase of Stock          Exhibit 10.1 to Registrant's Report
          upon Change in Control Event with Anil K. Jain and       on Form 10-QSB for the quarter
          Kenneth A. Olsen                                         ended September 30, 1997
                                                                   ("September 1997 10-QSB")

  *10.6   Form of Agreement regarding                              Exhibit 10.2 to the September
          Employment/Compensation upon Change in Control           1997 10-QSB
          with Messrs. Jain and Olsen

  *10.7   Form of Agreement regarding Indemnification of           Exhibit 10.7 to Registrant's Report
          Directors and Officers with Messrs. Jain, Olsen,         on From 10-K for the fiscal year
          Ringstad, Roth, Von Wald and Zuckerman                   ended March 31, 2002.

   10.8   Sublease agreement between Newport and APACN             Exhibit 10.8 to Registrant's Report
                                                                   of Form 10-QSB for the quarter
                                                                   ended June 30, 2003

   10.9   Sublease agreement between Veeco Compound                Exhibit 10.9 to Registrant's Report
          Semiconductor and APA Enterprises, Inc.                  of Form 10-K for the fiscal year
                                                                   ended March 31, 2004

 10.9(b)  Amendment to sublease between Veeco Compound             Exhibit 10.9 (b) to Registrant's
          Semiconductor and APA Enterprises, Inc.                  Report on Form 10-QSB for the
                                                                   quarter ended September 30, 2004
 *10.10   Ken Olsen Separation Agreement                           Exhibit 10.10 to Registrant's
                                                                   Report on Form 10-K for the fiscal
                                                                   year ended March 31, 2004

 *10.11   Stock option agreement with Cheri Podzimek,              **
          President of APACN

   14     Code of Ethics                                           Exhibit 14 to Registrant's Report
                                                                   on Form 10-K for the fiscal year
                                                                   ended March 31, 2004


                                       56
<PAGE>
=======================================================================================================
                                                                       PAGE NUMBER OR INCORPORATED
 NUMBER                       DESCRIPTION                                    BY REFERENCE TO
--------  -------------------------------------------------------  ------------------------------------
   21     List of Subsidiaries                                     **

   23.1   Consent of Grant Thornton LLP                            **

   31.1   Certification of Chief Executive Officer Pursuant to     **
          Section 302 of the Sarbanes-Oxley Act of 2002

   32.1   Certification of Chief Executive Officer and Principal   **
          Financial Officer Pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002
</TABLE>

*Indicates  management contract or compensation plan or arrangements required to
be  filed  as  an  exhibit  to  this  form.

**  Filed  with  this  Report.


                                       57