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

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

              For the quarterly period ended December 31, 2004, or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission File Number 0-16106

                              APA ENTERPRISES, INC.
             (Exact name of Registrant as specified in its charter)

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

                  2950 N.E. 84TH LANE, BLAINE, MINNESOTA 55449
              (Address of principal executive offices and zip code)

                                 (763) 784-4995
              (Registrant's telephone number, including area code)

                         FORMER NAME:  APA OPTICS, INC.
            (FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR END)
Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by  Section  13  or 15 (d) of the Securities Exchange Act of 1934
during  the  preceding 12 months (or for such shorter period that the registrant
was  required  to  file  such  reports),  and (2) has been subject to the filing
requirement  for  the  past  90  days.

                                   Yes X   No
                                       --     --

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

                                   Yes     No X
                                       --     --

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  as  of  the  latest  practicable  date:

                   Class:                        Outstanding at February 7, 2005
                                                 -------------------------------
        Common stock, par value $.01                      11,872,331


<PAGE>
<TABLE>
<CAPTION>
                              APA ENTERPRISES, INC.
                                     FORM 10Q
                                TABLE OF CONTENTS

<S>                                                                      <C>
PART I                                                                    3
ITEM 1. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . .   3
  CONSOLIDATED CONDENSED BALANCE SHEETS . . . . . . . . . . . . . . . .   3
  CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS . . . . . . . . . . .   4
  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS . . . . . . . . . . .   5
  NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. . . . . . . . .   6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND   9
RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . .  21
ITEM 4.  CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . .  21

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
ITEMS 1 THROUGH 5 . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . .  21
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
                           PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               APA ENTERPRISES, INC.
                       CONSOLIDATED CONDENSED BALANCE SHEETS
                                    (UNAUDITED)


                                                      December 31,     March 31,
                                                          2004           2004
                                                     --------------  --------------
<S>                                                  <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents                          $  11,772,849   $  13,544,910
  Accounts receivable, net of allowance for
  uncollectible accounts of $44,530 at December 31,
  2004 and $49,038 at March 31, 2004                     1,230,198       1,787,541
  Inventories                                            1,340,012       1,574,188
  Prepaid expenses                                         148,195         174,503
  Bond reserve funds                                        87,010         133,865
                                                     --------------  --------------
Total current assets                                    14,578,264      17,215,007

Property, plant and equipment, net                       3,968,103       4,550,956

Other assets:
  Bond reserve funds                                       335,668         332,433
  Goodwill                                               3,422,511       3,422,511
  Other                                                    514,331         562,609
                                                     --------------  --------------
                                                         4,272,510       4,317,553
                                                     --------------  --------------

Total assets                                         $  22,818,877   $  26,083,516
                                                     ==============  ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt                  $   1,474,082   $   1,637,923
  Accounts payable                                         724,749       1,050,690
  Accrued compensation                                     438,931         645,293
  Accrued expenses                                         235,811         212,713
                                                     --------------  --------------
Total current liabilities                                2,873,573       3,546,619

Long-term debt                                             118,045         173,836

Shareholders' equity:
  Undesignated shares                                            -               -
  Preferred stock                                                -               -
  Common stock                                             118,723         118,723
  Additional paid-in capital                            51,959,537      51,980,946
  Accumulated deficit                                  (32,251,001)    (29,736,608)
                                                     --------------  --------------
Total shareholders' equity                              19,827,259      22,363,061
                                                     --------------  --------------

Total liabilities and shareholders' equity           $  22,818,877   $  26,083,516
                                                     ==============  ==============
</TABLE>

      SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


                                        3
<PAGE>
<TABLE>
<CAPTION>
                               APA ENTERPRISES, INC.
                  CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                    (UNAUDITED)


                                Three Months Ended           Nine Months Ended
                                    December 31,                December 31,
                            --------------------------  --------------------------
                                2004          2003          2004          2003
                            ------------  ------------  ------------  ------------
<S>                         <C>           <C>           <C>           <C>
Revenues                    $ 3,305,299   $ 3,301,955   $10,661,085   $ 8,430,517

Costs and expenses:
  Cost of sales               2,704,159     3,314,468     8,676,806     8,544,502
  Research and                  314,151       248,128       725,954       657,092
  development
  Selling, general and        1,268,958     1,380,005     4,094,073     4,134,963
  administrative
                            ------------  ------------  ------------  ------------
                              4,287,268     4,942,601    13,496,833    13,336,557
                            ------------  ------------  ------------  ------------

Loss from operations           (981,969)   (1,640,646)   (2,835,748)   (4,906,040)

Gain on sale of operations            -             -       208,314             -
Other income                     84,952        39,781       197,465       146,478
Other expense                   (30,612)      (40,408)      (80,843)      (93,598)
                            ------------  ------------  ------------  ------------
                                 54,340          (627)      324,936        52,880
                            ------------  ------------  ------------  ------------

Loss before income taxes       (927,629)   (1,641,273)   (2,510,812)   (4,853,160)

Income taxes                        881         1,163         3,581         2,163
                            ------------  ------------  ------------  ------------

Net loss                    $  (928,510)  $(1,642,436)  $(2,514,393)  $(4,855,323)
                            ============  ============  ============  ============

Net loss per share:
  Basic and diluted              ($0.08)       ($0.14)       ($0.21)       ($0.41)
                            ============  ============  ============  ============

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

      SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                   APA ENTERPRISES, INC.
                      CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                        (UNAUDITED)


                                                                      Nine Months Ended
                                                                        December 31,
                                                                 --------------------------
                                                                     2004          2003
                                                                 ------------  ------------
<S>                                                              <C>           <C>
OPERATING ACTIVITIES
Net loss                                                         $(2,514,393)  $(4,855,323)
Adjustments to reconcile net loss to net cash used in operating
activities, net of acquisition:
     Depreciation and amortization                                   734,563       688,182
     Stock based compensation                                        (22,065)      (26,336)
   Changes in operating assets and liabilities:
      Accounts receivable                                            557,343      (345,002)
      Inventories                                                    234,176      (367,478)
      Prepaid expenses and other                                      (2,095)     (124,441)
      Accounts payable and accrued expenses                         (284,205)      647,999
                                                                 ------------  ------------
Net cash used in operating activities                             (1,296,676)   (4,382,399)

INVESTING ACTIVITIES
Purchases of property and equipment                                 (299,373)     (558,545)
Acquisition of business                                                    -    (1,960,000)
Other                                                                      -        (7,376)
                                                                 ------------  ------------
Net cash used in investing activities                               (299,373)   (2,525,921)

FINANCING ACTIVITIES
Repayment of long-term debt                                         (219,632)     (351,702)
Decrease in bond reserve funds                                        43,620        64,801
                                                                 ------------  ------------
Net cash used in financing activities                               (176,012)     (286,901)
                                                                 ------------  ------------

Decrease in cash and cash equivalents                             (1,772,061)   (7,195,221)

Cash and cash equivalents at beginning of period                  13,544,910    22,235,686
                                                                 ------------  ------------

Cash and cash equivalents at end of period                       $11,772,849   $15,040,465
                                                                 ============  ============

Noncash investing and financing activities
   Capital expenditure included in accounts payable              $   225,000   $         -
   Net assets held for sale                                           28,008        57,564
</TABLE>

      SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


                                        5
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1.  BASIS OF PRESENTATION

     The  accompanying  consolidated  condensed  financial  statements have been
prepared  pursuant  to  the rules and regulations of the Securities and Exchange
Commission.  Accordingly,  they  do  not  include  all  of  the  information and
footnotes  required  by  accounting  principles generally accepted in the United
States  of  America  for complete financial statements. For further information,
refer  to  the  financial  statements  and  footnotes  thereto  included  in the
Company's  annual  report  on  Form  10-K  for  the  year  ended March 31, 2004.

     In  the  opinion  of  management,  all  adjustments  (consisting  of normal
recurring  accruals)  considered  necessary  for  a  fair presentation have been
included.  Certain  reclassifications  of  previously reported amounts have been
made  to  conform  that  presentation  to  the  current  period  presentation.


NOTE 2.  NET LOSS PER SHARE

     The following table sets forth the computation of basic and diluted net
loss per share:

<TABLE>
<CAPTION>
                                         Three Months Ended            Nine Months Ended
                                             December 31,                December 31,
                                      --------------------------  ----------------------
                                          2004          2003          2004          2003
                                      ------------  ------------  ------------  ------------
<S>                                   <C>           <C>           <C>           <C>
Numerator for basic and diluted net
  loss                                $  (928,510)  $(1,642,436)  $(2,514,393)  $(4,855,323)
                                      ============  ============  ============  ============
Denominator for basic and diluted
  net loss per share- weighted-
  average shares outstanding           11,872,331    11,872,331    11,872,331    11,872,331
                                      ============  ============  ============  ============

Basic and diluted net loss per share       ($0.08)       ($0.14)       ($0.21)       ($0.41)
                                      ============  ============  ============  ============
</TABLE>


Common  stock  options  and warrants to purchase 879,327 and 1,008,697 shares of
common  stock  with  a  weighted  average exercise price of $6.62 and $6.67 were
outstanding  at December 31, 2004 and 2003, respectively, but were excluded from
calculating  diluted  net  loss  per  share  because  they  were  antidilutive.


NOTE  3. ACQUISITION

     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.  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


                                        6
<PAGE>
in  goodwill.  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        Revised
                                 Purchase Price      Price      Purchase 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 4.  SEGMENT REPORTING

          The  Company  has  identified  two  reportable  segments  based on its
internal  organizational  structure,  management  of operations, and performance
evaluation.  These  segments  are Optronics (historically referred to as the APA
Optics,  Inc.  segment) and Cables and Networks (historically referred to as the
APACN  segment).  Optronic's revenue is generated in the design, manufacture and
marketing  of  ultraviolet  (UV)  detection  and measurement devices and optical
components.  Cables  &  Network's revenue is derived primarily from standard and
custom  fiber 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.  Segment
detail  is  summarized  as  follows  (unaudited,  in  thousands):

<TABLE>
<CAPTION>
                                                          Cables &
                                          Optronics       Networks      Eliminations    Consolidated
                                       --------------  --------------  --------------  --------------
<S>                                    <C>             <C>             <C>             <C>
THREE MONTHS ENDED DECEMBER 31, 2004
  External sales                       $       97      $        3,301  $         (93)  $       3,305
  Cost of sales                               339               2,458            (93)          2,704
  Operating income (loss)                    (996)                 14              -            (982)
  Depreciation and amortization               199                  64              -             263
  Capital expenditures                          5                   5              -              10
  Total assets                             23,092               7,106         (7,379)         22,819

THREE MONTHS ENDED DECEMBER 31, 2003
  External sales                       $       99   $           3,239            (36)  $       3,302
  Cost of sales                               790               2,561            (36)          3,315
  Operating loss                           (1,307)               (334)             -          (1,641)
  Depreciation and amortization               182                  54              -             236
  Capital expenditures                        309                  15              -             324
  Total assets                             27,029               7,456         (7,186)         27,299
</TABLE>


                                        7
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 2004
<S>                                    <C>             <C>             <C>             <C>
  External sales                       $      389      $      10,595   $        (323)  $      10,661
  Cost of sales                             1,299              7,701            (323)          8,677
  Operating income (loss)                  (3,058)               222               -          (2,836)
  Depreciation and amortization               563                172               -             735
  Capital expenditures                        241                 58               -             299
  Total assets                             23,092              7,106          (7,379)         22,819

NINE MONTHS ENDED DECEMBER 31, 2003
  External sales                       $      222      $       8,253             (44)  $       8,431
  Cost of sales                             2,150              6,439             (44)          8,545
  Operating loss                           (4,104)              (802)              -          (4,906)
  Depreciation and amortization               551                137               -             688
  Capital expenditures                        410                149               -             559
  Total assets                             27,029              7,456          (7,186)         27,299
</TABLE>


NOTE 5. 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.

NOTE  6.  NET ASSETS HELD FOR SALE

          In  conjunction  with  the  startup  of  the  Company's  new  MOCVD
semi-conductor  machine  in  the  third quarter of fiscal 2005, the Company shut
down  its former MOCVD systems. The Company identified certain assets related to
its  former  systems and effective December 31, 2004, listed their book value as
of  that date as held for sale. The book value amount, which has been determined
to be approximately $28,000, was reclassified and moved from Property, Plant and
Equipment and is included within Other Assets on the Balance Sheet.  The Company
has  a  total of approximately $73,000 in net book value of assets held for sale
classified  in  Other  Assets.

NOTE 7. 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.  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  expense  of $6,843 for the three months ended December
31,  2004  and compensation income of $22,065 for the nine months ended December
31,  2004,  versus  income  of $56,215 and $26,336 for the three and nine months
ended  December  31,  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.


                                        8
<PAGE>
The following table illustrates the effect on net loss and net loss per share if
the  Company  had  applied  the  fair  value  method,  to  stock-based  employee
compensation  for  the  following  three  and  nine  months  ended:

<TABLE>
<CAPTION>
                                          Three Months Ended          Nine Months Ended
                                            December 31,                 December 31,
                                     --------------------------  --------------------------
                                         2004          2003          2004          2003
                                     ------------  ------------  ------------  ------------
<S>                                  <C>           <C>           <C>           <C>
     Net loss to common
     shareholders - as reported      $  (928,510)  $(1,642,436)  $(2,514,393)  $(4,855,323)
     Less: Total stock-based
     employee compensation
     expense  determined under
     fair value based method for         (38,539)      (50,318)     (124,861)     (150,952)
     all awards, net of related tax
     effects
                                     ------------  ------------  ------------  ------------
     Net loss - pro forma            $  (967,049)  $(1,692,754)  $(2,639,254)  $(5,006,275)
                                     ============  ============  ============  ============

     Basic and diluted net loss
     per common share - as
     reported                             ($0.08)       ($0.14)       ($0.21)       ($0.41)
     Basic and diluted net loss
     per common share - pro
     forma                                ($0.08)       ($0.14)       ($0.22)       ($0.42)
</TABLE>


NOTE 8. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT

     In  December  2004,  the Financial Accounting Standards Board (FASB) issued
FASB  Statement  No.  123  (revised  2004), 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 July 1, 2005.  Management believes
it  will  have  a  significant  impact  due  to  the Company's use of options as
employee  incentives,  but  has  not  yet  determined  the  impacts.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     Statements in this Report about future sales prospects and other matters to
occur  in  the  future  are  forward  looking  statements  and  are  subject  to
uncertainties  due  to many factors, many of which are beyond our control. These
factors  include,  but  are  not  limited  to,  the continued development of our
products,  acceptance  of  those products by potential customers, our ability to
sell  such  products  at  a  profitable  price,  and  our  ability  to  fund our
operations.  For  further  discussion regarding these factors, see "Factors That
May  Influence  Future  Results."


                                        9
<PAGE>
OVERVIEW

     APA  Enterprises,  Inc., (formerly known as APA Optics, Inc.) consisting of
the  Optronics  group  and  the  Cables  &  Networks  group,  develops, designs,
manufactures  and  markets  fiber optics, copper and gallium nitride (GaN) based
components  and  devices  for  industrial,  commercial,  consumer and scientific
applications.  Optronics  is  active in the development, design, manufacture and
marketing  of  ultraviolet  (UV)  measurement  instruments  for  consumers  and
industrial  customers,  and  gallium  nitride  (GaN) based transistors for power
amplifiers  and  other  commercial  applications.  Cables  &  Networks  designs,
manufactures  and  markets a variety of fiber optic and copper components to the
data  communication  and  telecommunication  industries. Both groups also source
from  third  parties  components and devices for direct and value-added sales to
our  customers  in  all  these  technology  areas.

     Cables  &  Networks'  internally  manufactured products primarily include a
broad  line  of  standard  and custom fiber optic cable assemblies, copper cable
assemblies,  optical  components,  value  added fiber optic distribution frames,
panels  and  modules.  These  products are manufactured at the Cables & Networks
plant  in Plymouth, Minnesota and Optronics' facility in Aberdeen, South Dakota,
and  marketed  to  broadband  service  providers,  commercial data networks, and
original  equipment  manufacturers. Cables & Networks acquired certain assets of
Computer  System  Products, Inc. ("CSP") on March 14, 2003 and certain assets of
Americable, Inc. ("Americable") on June 27, 2003. Several of the items discussed
under  "Results  of  Operations"  show  significant  changes from the comparable
periods  in  the  preceding  fiscal  year  as  a  result  of these acquisitions.

     In  January  2004  Optronics terminated its optics manufacturing in Blaine,
Minnesota  as  described  in  Note  5.  Additionally  in  January 2004 Optronics
consolidated  its  fiber  optics  operations  within Blaine.  Optronics plans to
continue to market and sell fiber optic products using mainly Cables & Network's
sales  team  and  channels.  We  outsource several components from third parties
including  passive  optical  splitters, arrayed waveguides (AWGs) and wavelength
division  multiplexers  (WDMs) based on Thin Film Filter (TFF) technology, which
we  combine  with  our  internally  manufactured  products to create value added
components  for  our customers. The majority of our outsourced product providers
are  located  offshore.

     Most  companies  in  the  communications industry have been affected by the
slowdown  in  telecommunications equipment spending over the past several years.
Decreased  demand  and  competition  have  continued to put downward pressure on
margins. This downward pressure is likely to continue and we will need to reduce
operating  costs  and  improve  efficiencies  to  remain  competitive  in  the
marketplace.

     Optronics'  consumer  UV detection product, the SunUVTM Personal UV Monitor
(PUVM,  formerly  SunWatch)  continues  in  production  with  a  major  focus on
qualifying  a  second  offshore  manufacturer.  A  second  manufacturer has been
engaged  and is currently determining how to resolve the cosmetic and mechanical
quality  issues that have impacted product deliveries from our current supplier.
We  anticipate production samples from the second supplier will be available for
qualification  during the first quarter of fiscal 2006. The present manufacturer
is supplying sufficient quantities for low volume sales activities. APA has also
obtained  the  "CE" designation which is necessary for the product to be sold in
Europe.

     APA's  new  4-band  "Profiler  M" radiometer for the printing and UV curing
industries  was  introduced  to the market at the Specialty Graphics and Imaging
trade  show  held  in Minneapolis in October 2004.  The major product design and
development  tasks  are complete.  A first phase of field tests with prospective
customers  has  also  been  completed  and  feedback  from  the  tests are being
incorporated  in  the  design.  Marketing  and  sales activities have focused on
industrial  sales prospects, setting up domestic and international distributors,
and  identifying  new sales opportunities with suppliers and manufacturers of UV
coating  products.  We  anticipate  units  will be available for sale during the
fourth  quarter  of  fiscal  2005.

     Optronics  continues  to  develop  transistors  based on GaN/AlGaN (gallium
nitride/aluminum  gallium  nitride)  for commercial opportunities including base
transceiver station power amplifiers.  With assistance from outside foundries we
are  processing, packaging and testing transistors built from our material.  Our
plan  is  to  continue developing demonstration power amplifiers using AlGaN/GaN
based  transistors  while qualifying the long term reliability of these devices.


                                       10
<PAGE>
     Installation  of  our  multi-wafer  metal organic chemical vapor deposition
(MOCVD)  system  was completed in the latter part of the third quarter of fiscal
2005.  We  are  currently  working with potential epi-wafer customers to qualify
our  material.  We  expect  to  work  toward  wafer supply agreements with these
potential customers, leveraging our cutting edge material and fundamental patent
position.  We  are also processing wafers grown in the newly installed system to
continue  our  power  amplifier  development  efforts.  Whereas  this  epi-layer
capability  will  result  in  epi-wafer sales, we anticipate that this will also
help  in  establishing a team for joint development, manufacturing and marketing
of  power  amplifiers  for  cell  phone  base  station  application.

     The  Company continues to seek and expand its supplier base in Asia, mainly
due  to  significantly  lower manufacturing costs. Additionally, the Company has
taken preliminary steps to establish an off-shore manufacturing and sales entity
in India to take advantage of lower manufacturing costs and evolving fiber optic
communication  markets  in  Asia.


RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED DECEMBER 31, 2004 VS. THREE MONTHS ENDED DECEMBER 31, 2003

     Consolidated  revenues  for  the  three months ended December 31, 2004 were
$3,305,299  as  compared  to  $3,301,955  in  2003, relatively unchanged between
periods.

     Revenues  at  Cables  &  Networks  were  $3,300,965,  compared  to sales of
$3,239,275  reported  in  the  same quarter a year ago, an increase of 2%. Sales
were affected by seasonality in the third quarter. Sales for the current quarter
to  broadband  service  provider  and  commercial  data networks were $2,186,000
versus  $2,035,000  in the prior year quarter. The increase was primarily due to
an  increase in revenue from customers in the Fiber-to-the-Home market. Sales to
OEM's  were $1,115,000 versus $1,204,000 in the year ago period. The decrease is
due to a focus away from lower margin products as well as lower demand from some
OEM's.  We  expect that future sales of Cables & Networks products will continue
to account for a substantial portion of our revenue. We anticipate revenues will
remain  consistent in the fourth quarter of this year due to further anticipated
decline  in  demand  from  OEM's principally serving the semi-conductor industry
along  with seasonality typically experienced within the telecom industry in the
winter  months.

     Gross  revenues  at  Optronics  decreased  $2,075,  or  2%, to $97,031 from
$99,106  in  the  same quarter a year ago.  Gross revenues for the third quarter
ended  reflect  approximately  $93,000  of  sales to Cables & Networks for fiber
optics  products  and  subcontracted  labor  versus approximately $36,000 in the
comparable  period  last year.  These sales are eliminated as intercompany sales
in the consolidated financials in each quarter. The net decrease in revenues for
the  quarter  was  due  primarily  to  lower  sales  of  consumer GaN and optics
products.

COST OF SALES AND GROSS PROFIT

     Cables  &  Network's  gross  profit increased $164,824, or 24%, to $843,193
from $678,369. Gross margins as a percent of revenues increased from 21% to 26%.
The  increase  in margins reflects lower production costs in the current quarter
for  personnel  reduced over the past several quarters to accommodate demand and
outsourcing  efforts,  as  well  as  an increased focus on selling higher margin
products.

     Gross  cost  of  sales at Optronics decreased $450,904, or 57%, to $339,084
from  $789,988.  Gross  cost  of sales reflects approximately $93,000 related to
cost  of  sales to Cables & Networks for fiber optics products and subcontracted
labor  versus  approximately  $36,000  in the last year period.  These costs are
eliminated  as intercompany cost of sales in the consolidated financials in each
quarter.  The  net  decrease  in  cost  of  sales  is  due to lower material and
production  expenses  related  to  the closure of the optics manufacturing line,
lower  personnel  costs  associated  with  cost  reduction  efforts,  and  lower
obsolescence  charges  due  to a large write-off of fiber optic equipment in the
prior  year  period.

      We  anticipate  comparable gross margins for Cables & Networks and cost of
sales  for  Optronics  for  the  fourth  quarter.


                                       11
<PAGE>
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
Cables  & Networks. Expenses increased $66,023 to $314,151, from $248,128 in the
prior year period.  The increase is due mainly to rent and depreciation expenses
associated  with  the  installation  and  startup of a new semiconductor machine
purchased  in  2003  which  is  being  housed  at  an  outside  facility.

SELLING, GENERAL, AND ADMINISTRATIVE

     Consolidated  S,  G,  & A expenses decreased $111,047, or 8%, to $1,268,958
from  $1,380,005  in  2003.

     Selling,  general,  and  administrative  expenses  at  Cables  &  Networks
decreased  $183,257,  or  18%, to $828,809 from $1,012,066.  The majority of the
decrease is attributable to lower personnel costs within selling expenses due to
reduced  staff  levels  from  last  year's  period,  offset  by  slightly higher
administration  and  professional  costs.

     Selling,  general  and  administrative  expenses  at  Optronics  increased
$72,210,  or  20%,  to $440,149 from $367,939. The increase is due to additional
facility  expenses  reclassed to S, G, & A this year which were absorbed in cost
of sales in the prior year period along with slightly higher expenses associated
with  India  development  expenses.

INCOME (LOSS) FROM OPERATIONS

     Consolidated losses from operations decreased $658,677, or 40%, to $981,969
from  $1,640,646  in  2003.

     The  income  from operations at Cables & Networks was $14,384 versus a loss
of $333,697 in the fiscal 2004 quarter.  The increased income in the quarter was
mainly  the  result of a combination of increased gross margins achieved through
higher  margin  sales  and  reduced  production costs as well as lower personnel
costs  within  S,  G&A  in  the  current  period.

     The loss from operations at Optronics was $996,353, a decrease of $310,596,
or 24%.  The decrease in the loss is primarily the result of the cost reductions
implemented  over the prior fiscal year, mainly for personnel reductions and the
elimination  of  the  optics  line  of  business.  We  expect to incur losses at
Optronics  until  we realize significant revenues from the sales of our PUVM and
GaN  related  products.

OTHER INCOME AND EXPENSE

     Consolidated  other  income and expense increased $54,967 to $54,340 from a
loss  of  $627  in  2003.

     Other  expense  at  Cables  &  Networks  increased  $14,912,  primarily for
interest expense due to a larger outstanding debt balance in the current period.

     Other  income  at Optronics increased $69,879 to $133,226.  Interest income
increased  approximately  $47,000  due  to a higher outstanding debt balance due
from Cables & Networks and higher amount earned on short term investments, while
other  income  increased  approximately  $9,000  from  facility  rental.

NET LOSS

     Consolidated  net  loss  for  the  quarter  decreased  $713,926, or 43%, to
$928,510,  or  $.08 cents per share, from $1,642,436, or $.14 cents per share in
the  year  ago  period.

     Cables  &  Networks had a net loss of $65,133 in the quarter, compared to a
loss  of $398,275 in the year ago quarter.  The increase reflects improved gross
margins  through  reduced  production  costs  and  reduced  S,  G,  & A expenses
attributable  to  lower  personnel  staffing  levels  than  the year ago period.


                                       12
<PAGE>
     Optronics  recorded a net loss of $863,377, a decrease of $380,784, or 31%,
from  the  loss  of  $1,244,161  reported in the same period of fiscal 2004. The
decrease  is due mainly to cost reductions implemented over the past year. While
cost  reductions  implemented  so  far  at Optronics will help lower the overall
losses  for  the  Company,  achieving  profitability in the future will strongly
depend  upon  Optronic's  ability  to  manufacture  and  market  gallium-nitride
products.

NINE MONTHS ENDED DECEMBER 31, 2004 VS. NINE MONTHS ENDED DECEMBER 31, 2003

     Consolidated revenues for the nine months ended December 31, 2004 increased
$2,230,568,  or  26%,  to  $10,661,085  from  $8,430,517  in  2003.

     Revenues  at  Cables & Networks increased $2,342,697, or 28% to $10,595,512
from  $8,252,815.  The  increase is attributable to higher revenues in the first
quarter of fiscal 2005 generated by the acquisition from 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 provider and commercial data networks were $7,147,000
or  67%  of revenue, and sales to OEM's were $3,449,000, or 33% of revenue. This
compares  to 61% for broadband and commercial data networks and 39% for OEM's in
the  prior  period. The change reflects an increased acceptance of the Company's
products  within  the Fiber-to-the-Home market, offset by lower demand from some
OEM  customers.

     Gross  revenues  at  Optronics increased $167,421, or 76%, to $388,719 from
$221,298  in  the  same period a year ago.  Gross revenues reflect approximately
$323,000  of  sales  to  Cables  &  Networks  for  fiber  optics  products  and
subcontracted  labor  versus  approximately  $44,000  last year. These sales are
eliminated as intercompany sales in the consolidated financials in each quarter.
The  net  decrease  in  revenues is due primarily to lower sales of fiber optics
combined  with  no sales of optics products, due to this product line being sold
in  April  2004.

COST OF SALES AND GROSS PROFIT

     Cables & Network's gross profit increased $1,080,645, or 60%, to $2,894,816
from  $1,814,171.  The increase is due mainly to higher margins generated in the
first  quarter of fiscal 2005 generated by the acquisition from Americable, Inc.
Gross  margins  as a percent of revenues increased from 22% to 27%. The increase
in  margin  percentage  reflects  reduced  production  costs  for  overhead  and
personnel  costs  absorbed  in  the  prior  year  while  operating and combining
multiple  facilities  and  continued  focus  on  selling higher margin products.

      Gross cost of sales at Optronics decreased $850,198, or 40%, to $1,299,256
from $2,149,454.  Gross cost of sales reflects approximately $323,000 related to
cost  of  sales to Cables & Networks for fiber optics products and subcontracted
labor  versus  approximately  $44,000  last year.  These costs are eliminated as
intercompany  cost of sales in the consolidated financials in each quarter.  The
net  decrease  in cost of sales is due to lower material and production expenses
related  to  the closure of the optics manufacturing line, lower personnel costs
associated  with  cost  reduction  efforts  in  other  product  lines, and lower
obsolescence  charges.

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
Cables  &  Networks. Expenses increased $68,862 to $725,954 from $657,092 in the
prior  year period. The increase reflects rental and depreciation costs absorbed
beginning in the third quarter associated with the start up costs of operating a
new  semiconductor  machine  acquired  in  late  2003.

SELLING, GENERAL, AND ADMINISTRATIVE

     Consolidated  S,  G,  &  A  expenses  decreased  $40,890 to $4,094,073 from
$4,134,963  in  2003.

     Selling,  general,  and  administrative  expenses  at  Cables  &  Networks
increased  $56,453,  or  2%, to $2,673,096 from $2,616,643.  The majority of the
increase  is  attributable  to  expenses  generated  by  the  acquisition


                                       13
<PAGE>
from  Americable,  Inc. which occurred at the end of the first quarter of fiscal
2004  and  had  no  expenses  in  the  fiscal  2004  first  quarter.

     Selling,  general,  and  administrative  expenses  at  Optronics  decreased
$97,343,  or  6%,  to  $1,420,977  from $1,518,320. The decrease is due to lower
personnel  and  related  costs  associated with cost reductions implemented over
fiscal  year  2004.

INCOME (LOSS) FROM OPERATIONS

     Consolidated  losses  from  operations  decreased  $2,070,292,  or  42%, to
$2,835,748  from  $4,906,040  in  2003.

     The  income from operations at Cables & Networks was $221,720 versus a loss
of $802,472 in the year ago period.   The increased income was mainly the result
of  a  combination of increased revenues and gross margins as well as reductions
in production and S, G, & A expenses relating to multiple facilities absorbed in
the  prior  year.

     The  loss  from  operations  at  Optronics  was  $3,057,468,  a decrease of
$1,046,100,  or  26%.  The  decrease  in the loss is primarily the result of the
cost  reductions  implemented  over  the prior fiscal year, mainly for personnel
reductions,  and  the  elimination  of  the  optics  line  of  business.

OTHER INCOME AND EXPENSE

     Consolidated  other  income and expense increased $272,056 to $324,936 from
$52,880.

      Higher  income  at  Cables & Networks in fiscal 2004 was due to management
fee  income earned in relation to the acquisition from CSP.  Interest expense at
Cables & Networks increased $57,244. The increase is due to a larger outstanding
debt  balance mainly related to the acquisition of Americable late in the second
quarter  in  fiscal  2004.

     Other  income  at  Optronics  increased $323,427, or 114%, to $607,091 from
$283,664.  The  sale  of  the  optics manufacturing operations in April 2004 and
related facility income accounted for $240,000 of the increase.  Interest income
increased  approximately  $85,000  due  to a higher outstanding debt balance due
from  Cables  &  Networks  and increased earnings on cash investments.  Interest
expense  decreased  approximately  $6,000  to  $68,000.

NET INCOME (LOSS)

     Consolidated  net loss decreased $2,340,930, or 48%, to $2,514,393, or $.21
cents  per  share,  from  $4,855,323,  or  $.41  cents per share in the year ago
period.

     Cables & Networks had net income of $5,226 versus a loss of $946,757 in the
year  ago  period.  The  increase  reflects  additional  revenue, improved gross
margins  mainly  through  reduced  production  costs, reduced S, G, & A expenses
attributable  to  operating  multiple  facilities  in the prior year, along with
reduced  staffing  levels.

     Optronics  recorded  a net loss of $2,519,619, a decrease of $1,388,947, or
36%, from the loss of $3,908,566 reported in the same period of fiscal 2004. The
decrease is due mainly to cost reductions relating to personnel implemented over
the  past  year as well as the gain on sale of the optics manufacturing business
and  the  elimination  of  its  related  expenses.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The  Company's  cash and cash equivalents consist primarily of money market
funds, U.S. Government instruments or other government instruments with original
maturities  of  less  than  three  months.

     Cash  used in operating activities was $1,296,676 for the nine month period
ending  December  31,  2004  compared  to  $4,382,399 used in the same period in
fiscal  2004.  The  decrease  in  the  cash  used  between  the  two


                                       14
<PAGE>
periods reflects a decrease in loss from operations of $2,340,930, achieved by a
combination  of increased revenue and profitable operations at Cables & Networks
and decreased costs at Optronics due to cost reduction efforts and a gain on the
sale  of  the  optics  manufacturing  business  at  Optronics  in  April  2004.

     We  used  net  cash of $299,373 in investing activities for the nine months
ended  December  31,  2004 compared to $2,525,921 used in the same period of the
preceding  fiscal  year.  The  use of cash in the nine months ended December 31,
2004 reflects capital expenditures mainly for production equipment at Optronics.
For the nine months ended December 31, 2003, $1,960,000 was used to purchase the
assets  of  Americable, Inc.  We anticipate a total of approximately $400,000 to
$600,000  in  capital  expenditures  in  fiscal  2005.

     Net  cash  used  in financing activities for the nine months ended December
31,  2004 totaled $176,012. We used $219,632 for the scheduled reduction of debt
and  generated $43,620 from the reduction of bond reserve funds. During the same
period  in  fiscal  2004  we  used  $286,901  in  financing activities, of which
$351,702  was used for the scheduled reduction of debt and $64,801 was generated
from  the  reduction  of  bond  reserve  funds.

     We  believe  we  have sufficient funds for operations for at least the next
twelve  months.

     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          $    1,592  $    1,474  $       58  $       40  $     20
Leases                       1,320         494         570         231        25
                        --------------------------------------------------------

Total Contractual Cash
Obligations             $    2,912  $    1,968  $      628  $      271  $     45
                        ========================================================
</TABLE>


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 shipped, 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


                                       15
<PAGE>
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 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, 2004, we
recorded  a  full  valuation  allowance  of $11,075,084 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) carryforwards of
approximately  $27,899,000  which  expire  in  fiscal  years  2004  to  2024.

     Realization  of  the  NOL  carryforwards  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 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  should  not  be  amortized  but  reviewed  for
impairment  at the fiscal year end or whenever conditions exist that indicate an
impairment  could  exist.  The  Company  performed the annual impairment test in
fiscal  years  2004  and  2003  and  concluded  that no impairment had occurred.

     The  Company  evaluates  the  recoverability  of  its long-lived assets and
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 December
31,  2004.


FACTORS THAT MAY INFLUENCE FUTURE RESULTS
-----------------------------------------

     The  statements  contained  in this report on Form 10-Q 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
limitation,  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  2.  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 Form 10-Q 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.

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 December 31, 2004, we
had  an  accumulated deficit of $32.3 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


                                       16
<PAGE>
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.

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

     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  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.

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. The current U.S. economic
slowdown has been more profound in the telecommunications market, resulting in a
significant  reduction in capital expenditures for the Company's products. It is
impossible  to  predict how long the slowdown will last. 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.
Moreover, some of our customers have experienced serious financial difficulties,
which  in  certain  cases  have  resulted  in bankruptcy filings or cessation of
operations.

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 in customer
requirements  or  to  offer  more  aggressive  price  reductions.

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.

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


                                       17
<PAGE>
     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,

  -     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.

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.

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.

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.

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


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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 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.

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

     As a result of adverse conditions in the telecommunications market, some of
our  customers  have  and may continue to experience financial difficulties.  In
the future, if customers experiencing financial problems default and fail to pay
amounts  owed  to  the  Company,  we may not be able to collect these amounts or
recognize expected revenue. In the current environment in the telecommunications
industry  and  in  the  United  States and global economies, 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.

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 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.

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


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<PAGE>
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.

     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.

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, Inc. in June 2003 and integrated them with the assets of CSP. 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.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Our exposure to market risk for changes in interest rates relates primarily
to  our  investment portfolio. We invest in short-term securities of high credit
issuers  with  maturities  ranging  from  overnight up to 24 months. The average
maturity of the portfolio does not exceed 12 months. The portfolio includes only
marketable  securities  with  active  secondary  or  resale  markets  to  ensure
liquidity. We have no investments denominated in foreign country currencies and,
therefore,  our  investments  are  not  subject  to  foreign  exchange  risk.

ITEM 4.  CONTROLS AND PROCEDURES.

     a.   Evaluation  of disclosure controls and procedures. The Company's chief
          executive  officer  and chief financial officer have concluded that as
          of  the  end of the fiscal period covered by this report the Company's
          disclosure  controls  and  procedures (as defined in Exchange Act Rule
          13a-14(c))  were sufficiently effective to ensure that the information
          required  to  be  disclosed by the Company in the report was gathered,
          analyzed  and  disclosed  with  adequate  timeliness,  accuracy  and
          completeness.

     b.   Changes  in  internal controls. There were no changes in the Company's
          internal  controls  over  financial reporting during the fiscal period
          covered  by  this  report  that  materially affected, or are likely to
          materially  affect,  the  Company's  control over financial reporting.


                                     PART II

ITEMS 1 THROUGH 5. NOT APPLICABLE



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)     Exhibits.

               Exhibit 31.1 - Certification of Chief Executive Officer and Chief
               Financial  Officer  pursuant to Section 302 of the Sarbanes-Oxley
               Act  of  2002

               Exhibit  32.1 - Certification required of Chief Executive Officer
               and  Chief Financial Officer by Section 906 of the Sarbanes Oxley
               Act  of  2002


     (b)     Reports on Form 8-K.

               None.


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                                   Signatures

Pursuant to the requirements 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.


2/10/05                                             /s/ Anil K. Jain
--------                                             ----------------
   Date                                                 Anil K. Jain
                                                        President,
                                                        Chief Executive Officer
                                                        and Chief Financial
                                                        Officer (Principal
                                                        Executive and Principal
                                                        Financial Officer)


2/10/05                                             /s/ Daniel Herzog
-------                                             -----------------

   Date                                                 Comptroller
                                                        (Principal Accounting
                                                        Officer)


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