UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-QSB





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

                SECURITIES
      EXCHANGE ACT OF 1934






For the
quarterly period ended March 31, 2008





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




Commission
File Number 0-16106




Clearfield,
Inc.


(Exact
name of Registrant as specified in its charter)





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





5480
Nathan Lane North, Suite 120, Plymouth, Minnesota 55442


(Address
of principal executive offices and zip code)





(763)
476-6866


(Registrant’s
telephone number, including area code)





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
            o





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





Large
      accelerated filer
            o
            Accelerated
      filer
            o
            Non-accelerated
      filer
            x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes
            o
            
            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 March 31, 2008Common
      stock, par value $.01
            11,872,331


1
  CLEARFIELD,
      INC.FORM
      10-QSBTABLE
      OF CONTENTS
  PART I.
      FINANCIAL INFORMATION
                3ITEM 1.
      FINANCIAL STATEMENTS UNAUDITED
                3CONSOLIDATED
      BALANCE SHEETS
                3CONSOLIDATED
      CONDENSED STATEMENTS OF OPERATIONS
                4CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY
                5CONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS
                6NOTES TO
      CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                7ITEM 2.
      MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATIONS
                11ITEM 3
      A (T).  CONTROLS AND PROCEDURES
                16PART
      II. OTHER INFORMATION
                17ITEM
      1.  LEGAL PROCEEDINGS
                17ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS
                17ITEM 3.
      DEFAULTS UPON SENIOR SECURITIES
                17ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                17ITEM
      5. OTHER INFORMATION
                17ITEM 6.
      EXHIBITS
                17


2
 PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS UNAUDITED
 CLEARFIELD,
INC.
 CONSOLIDATED BALANCE SHEETS
 UNAUDITED
 March
      31, 2008
              
              
              September
      30, 2007AssetsCurrent
      AssetsCash
      and cash equivalents
              
              $
              2,717,306
              
              
              $
              3,304,645Available
      for sale securities
              
              
              -
              
              
              
              2,825,000Accounts
      receivable, net
              
              
              2,789,467
              
              
              
              2,418,651Inventories
              
              
              1,440,834
              
              
              
              1,595,282Other
      current assets
              
              
              246,129
              
              
              
              102,473Total  current
      assets
              
              
              7,193,736
              
              
              
              10,246,051Property
      plant and equipment, net
              
              
              1,735,330
              
              
              
              1,773,739Available
      for sale securities
              
              
              3,136,000
              
              
              
              -Other
      AssetsGoodwill
              
              
              2,570,511
              
              
              
              2,570,511Other
              
              
              284,309
              
              
              
              281,589Notes
      receivable
              
              
              453,028
              
              
              
              469,678Total
      other assets
              
              
              3,307,848
              
              
              
              3,321,778Total
      Assets
              
              $
              15,372,914
              
              
              $
              15,341,568Liabilities
      and Shareholders’ EquityCurrent
      LiabilitiesCurrent
      maturities of long term debt
              
              $
              63,273
              
              
              $
              68,215Accounts
      payable
              
              
              1,420,914
              
              
              
              1,176,280Accrued
      compensation
              
              
              893,925
              
              
              
              958,023Accrued
      expenses
              
              
              82,718
              
              
              
              107,209Current
      liabilities of discontinued operations
              
              
              -
              
              
              
              205,885Total  current
      liabilities
              
              
              2,460,830
              
              
              
              2,515,612Long
      term debt, net of current maturities
              
              
              64,798
              
              
              
              95,207Deferred
      rent
              
              
              89,027
              
              
              
              85,059Deferred
      income taxes
              
              
              122,193
              
              
              
              77,701Other
      long term liabilities
              
              
              51,138
              
              
              
              150,470Long
      term obligations of discontinued operations
              
              
              -
              
              
              
              204,832Total
      Liabilities
              
              
              2,787,986
              
              
              
              3,128,881Shareholders’
      EquityUndesignated
      shares, 4,999,500 authorized shares: no shares issued and
      outstanding
              
              
              -
              
              
              
              -Preferred
      stock, $.01 par value;  500 shares; no shares
      outstanding
              
              
              -
              
              
              
              -Common
      stock, $ .01 par value; authorized 50,000,000 authorized shares; issued
      11,872,331 shares
              
              
              118,723
              
              
              
              118,723Additional
      paid-in capital
              
              
              52,062,742
              
              
              
              52,037,207Accumulated
      deficit
              
              
              (39,432,537
              )
              
              
              (39,943,243
              )Accumulated
      other comprehensive loss
              
              
              (164,000
              )
              
              
              -Total
      shareholders’ equity
              
              
              12,584,928
              
              
              
              12,212,687Total
      Liabilities and Shareholders’ Equity
              
              $
              15,372,914
              
              
              $
              15,341,568
 
 SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 3


CLEARFIELD, INC.


CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
 UNAUDITED
 Three
      Months Ended
              
              
              Six
      Months EndedMarch
      31,
              
              
              March
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007Revenues
              
              $
              5,442,493
              
              
              $
              3,896,057
              
              
              $
              10,139,933
              
              
              $
              8,400,565Cost
      of sales
              
              
              3,676,929
              
              
              
              2,895,912
              
              
              
              6,924,898
              
              
              
              6,045,227Gross
      profit
              
              
              1,765,564
              
              
              
              1,000,145
              
              
              
              3,215,035
              
              
              
              2,355,338Operating
      expensesSelling,
      general and administrative
              
              
              1,721,252
              
              
              
              1,453,862
              
              
              
              3,143,711
              
              
              
              2,884,150Goodwill
      impairment charge
              
              
              -
              
              
              
              852,000
              
              
              
              -
              
              
              
              852,000Gain
      on disposal of assets
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (727
              )1,721,252
              
              
              
              2,305,862
              
              
              
              3,143,711
              
              
              
              3,735,423Income
      (loss) from operations
              
              
              44,312
              
              
              
              (1,305,717
              )
              
              
              71,324
              
              
              
              (1,380,085
              )Interest
      income
              
              
              79,285
              
              
              
              74,684
              
              
              
              167,091
              
              
              
              163,962Interest
      expense
              
              
              (2,836
              )
              
              
              (549
              )
              
              
              (5,972
              )
              
              
              (588
              )Other
      income
              
              
              15,984
              
              
              
              -
              
              
              
              29,401
              
              
              
              18992,433
              
              
              
              74,135
              
              
              
              190,520
              
              
              
              163,563Income
      (loss) before income taxes
              
              
              136,745
              
              
              
              (1,231,582
              )
              
              
              261,844
              
              
              
              (1,216,522
              )Income
      tax expense (benefit)
              
              
              21,407
              
              
              
              (307,263
              )
              
              
              48,577
              
              
              
              (280,743
              )Net
      income (loss) from continuing operations
              
              
              115,338
              
              
              
              (924,319
              )
              
              
              213,267
              
              
              
              (935,779
              )Net
      income (loss) from discontinued operations
              
              
              -
              
              
              
              (200,005
              )
              
              
              342,390
              
              
              
              (614,581
              )Net
      loss on disposal of assets of discontinued operations
              
              
              -
              
              
              
              (81,167
              )
              
              
              (44,951
              )
              
              
              (84,499
              )Total
      income (loss) from discontinued operations
              
              
              -
              
              
              
              (281,172
              )
              
              
              297,439
              
              
              
              (699,080
              )Net
      income (loss)
              
              $
              115,338
              
              
              $
              (1,205,491
              )
              
              $
              510,706
              
              
              $
              (1,634,859
              )Net
      income (loss) per share:Continuing
      operations
              
              $
              0.01
              
              
              $
              (0.08
              )
              
              $
              0.02
              
              
              $
              (0.08
              )Discontinued
      operations
              
              $
              0.00
              
              
              $
              (0.02
              )
              
              $
              0.02
              
              
              $
              (0.06
              )Basic
      and diluted
              
              $
              0.01
              
              
              $
              (0.10
              )
              
              $
              0.04
              
              
              $
              (0.14
              )Weighted
      average shares outstanding:Basic
      and diluted
              
              
              11,872,331
              
              
              
              11,872,331
              
              
              
              11,872,331
              
              
              
              11,872,331
 
 
 SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 4


CLEARFIELD, INC.


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY


UNAUDITED


Three
Months Ended March 31, 2008


Common
      stock
            
            
            Additional
              paid-in
            
            
            Accumulated
              other
              comprehensive
            
            
            Accumulated
            
            
            Total
              shareholders’Shares
            
            
            Amount
            
            
            Capital
            
            
            loss
            
            
            deficit
            
            
            equityBalance
      at March 31, 2007
            
            
            11,872,331
            
            
            $
            118,723
            
            
            $
            52,018,729
            
            
            $
            (
      8,164
            )
            
            $
            (38,652,804
            )
            
            $
            13,476,484Stock
      based compensation expense
            
            
            -
            
            
            
            -
            
            
            
            18,478
            
            
            
            -
            
            
            
            -
            
            
            
            18,478Foreign
      currency translation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,164
            
            
            
            -
            
            
            
            8,164Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,290,439
            )
            
            
            (1,290,439
            )Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,282,275
            )Balance
      at September 30, 2007
            
            
            11,872,331
            
            
            
            118,723
            
            
            
            52,037,207
            
            
            
            -
            
            
            
            (39,943,243
            )
            
            
            12,212,687Stock
      based compensation expense
            
            
            -
            
            
            
            -
            
            
            
            11,814
            
            
            
            -
            
            
            
            -
            
            
            
            11,814Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            395,368
            
            
            
            395,368Balance
      at December 31, 2007
            
            
            11,872,331
            
            
            
            118,723
            
            
            
            52,049,021
            
            
            
            -
            
            
            
            (39,547,875
            )
            
            
            12,619,869Stock
      based compensation expense
            
            
            -
            
            
            
            -
            
            
            
            13,721
            
            
            
            -
            
            
            
            -
            
            
            
            13,721Unrealized
      loss on available for sale securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (164,000
            )
            
            
            -
            
            
            
            (164,000
            )Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            115,338
            
            
            
            115,338Comprehensive
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (48,662
            )Balance
      at March 31, 2008
            
            
            11,872,331
            
            
            $
            118,723
            
            
            $
            52,062,742
            
            
            $
            (164,000
            )
            
            $
            (39,432,537
            )
            
            $
            12,584,928







SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


5


CLEARFIELD, INC.


CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS


UNAUDITED


Six
      Months Ended March 31,2008
            
            
            2007(Restated)Cash
      flow from operating activitiesNet
      income (loss)
            
            $
            510,706
            
            
            $
            (1,634,859
            )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
            
            
            265,427
            
            
            
            354,603Deferred
      taxes
            
            
            44,492
            
            
            
            (283,743
            )Gain
      (loss) on disposal of assets
            
            
            55,251
            
            
            
            (85,226
            )Stock
      based compensation
            
            
            25,535
            
            
            
            19,495Goodwill
      impairment charge
            
            
            -
            
            
            
            852,000Lease
      termination accrual
            
            
            (362,028
            )
            
            
            -Changes
      in operating assets and liabilities:Accounts
      receivable, net
            
            
            (370,816
            )
            
            
            548,540Inventories
            
            
            154,448
            
            
            
            484,914Prepaid
      expenses and other
            
            
            (129,726
            )
            
            
            (24,395
            )Accounts
      payable and accrued expenses
            
            
            79,908
            
            
            
            (256,214
            )Net
      cash provided by (used in) operating activities
            
            
            273,197
            
            
            
            (24,885
            )Cash
      flow from investing activitiesPurchases
      of property and equipment
            
            
            (1,801,809
            )
            
            
            (289,453
            )Proceeds
      from sale of assets
            
            
            1,451,624
            
            
            
            226,250Purchase
      of available for sale securities
            
            
            (3,675,000
            )
            
            
            (6,900,000
            )Sale
      of available for sale securities
            
            
            3,200,000
            
            
            
            6,500,000Net
      cash used in investing activities
            
            
            (825,185
            )
            
            
            (463,203
            )Cash
      flow from financing activitiesRepayment
      of long-term debt
            
            
            (35,351
            )
            
            
            (2,541
            )Withdrawal
      of bond reserve funds, net
            
            
            -
            
            
            
            40,836Net
      cash provided by financing activities
            
            
            (35,351
            )
            
            
            38,295Foreign
      currency translation
            
            
            -
            
            
            
            8,827Decrease
      in cash and cash equivalents
            
            
            (587,339
            )
            
            
            (440,966
            )Cash
      and cash equivalents at beginning of period
            
            
            3,304,645
            
            
            
            1,754,335Cash
      and cash equivalents at end of period
            
            $
            2,717,306
            
            
            $
            1,313,369Supplemental
      cash flow information:Cash
      paid during the period for:Interest
            
            $
            2,836
            
            
            $
            40,907Income
      taxes
            
            
            1,185
            
            
            
            3,000




SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


6


NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS




Note
1.  Basis of Presentation




The
accompanying unaudited consolidated condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC) for interim financial statements and with the instructions of
Regulation S-K as they apply to smaller reporting companies. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles 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 transition report on Form 10-KSB
for the period ended September 30, 2007.




In the
opinion of management, all estimates and 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.




In the
Transition Report for the period ended September 30, 2007, the Company restated
its previously issued consolidated financial statements as of and for the years
ending March 31, 2007 and 2006. These restatements resulted in a change in the
classification of investments in auction rate securities, previously classified
as cash and cash equivalents, to available for sale securities for each of the
periods presented in the accompanying consolidated balance sheet and statements
of cash flows. The Statement of Cash Flows for the six months ended March 31,
2008 reflects our investments in conformity with the appropriate classifications
as available for sale securities.




In
preparation of the Company’s consolidated financial statements, management is
required to make estimates and assumptions that affect reported amounts of
assets and liabilities and related revenues and expenses during the reporting
periods.  Actual results could differ from the estimates used by
management.





Effective
January 2, 2008 the Company merged its sole subsidiary APA Cables and Networks,
Inc. into the Company (the “Parent – Subsidiary Merger”) and changed the name of
the Company from APA Enterprises, Inc. to Clearfield, Inc. Since the Parent –
Subsidiary Merger on January 2, 2008, the Company has no subsidiaries. For
periods prior to January 2, 2008 the consolidated financial statements represent
all companies of which Clearfield, Inc. directly or indirectly had majority
ownership or otherwise controlled. Significant intercompany accounts and
transactions have been eliminated. The Company's consolidated financial
statements include the accounts of wholly-owned subsidiaries of Clearfield,
Inc.




Note
2.  Net Income (Loss) Per Share




Basic and
diluted income (loss) per common share is computed by dividing net income (loss)
by the weighted-average number of common shares outstanding during each period.
Diluted income (loss) per share is computed by dividing net income (loss) by the
weighted-average number of common shares and common equivalent shares
outstanding during each period.





Common
stock options and warrants to purchase 464,700 and 583,150shares of common stock
with a weighted average exercise price of $1.40 and $2.56 were outstanding at
March 31, 2008 and 2007, respectively, but were excluded from calculating
diluted net loss per share because they were antidilutive.







Note
3.  Discontinued Operations




The
Optronics business segment (GaN products) continued to experience lower than
expected demand for its products and services during the year ended March 31,
2007 and continued to record operating losses. This caused management to
critically evaluate the long term viability of the business and after careful
deliberation elected to cease operations and discontinue the business. As a
result of the discontinuation of GaN products and the logistics and time
constraints for APACN’s’ fiber patch cords, India was no longer a viable
sourcing option and actions were taken to control ongoing costs and recover the
investment in the Company’s Indian subsidiary. In addition, the Company elected
to close its Blaine, Minnesota facility because it was primarily dedicated to
the Optronics segment.


7


Blaine
      Facility





On October
30, 2007 the Company purchased its previous corporate headquarters in Blaine,
Minnesota for $1,500,000 under the provisions of its option to purchase as
stated in its lease with Jain-Olsen Properties. The Company, as owner of the
building, canceled the lease to itself. The lease was scheduled to run through
November of 2009. The elimination of the lease resulted in the elimination of
approximately $342,000 of accrued obligations related to this lease in
conjunction with the discontinuation of the Optronics segment recorded during
the fiscal quarter ended June 30, 2007 and was taken into income during the
three months ending December 31, 2007. On the same day, October 30, 2007, the
Company sold the land and building for $1,450,000 incurring a loss of
$50,000.





Aberdeen
      Facility





On October
1, 2007 the Company entered into a lease agreement for its Aberdeen, South
Dakota facility which allows the tenant first opportunity to purchase the
building over the upcoming three year period.





Prior
      Year





Discontinued
operations for the six month period ended March 31, 2008 consisted of income of
approximately $297,000.  For the comparable six month period ended
March 31, 2007 the Company incurred losses  in the operations of APA
India and APA Optics for a total of approximately $699,000.




Note
4.  Severance Agreement




Effective
June 28, 2007 Anil K. Jain ceased to be Chief Executive Officer (principal
executive officer), Chief Financial Officer (principal financial officer), and
Chairman of the Board of Directors of the Company.




Pursuant
to the terms of an Amended and Restated Agreement Regarding
Employment/Compensation Upon Change In Control dated September 15, 2005, Dr.
Jain was being paid his salary as of the date of termination of employment
($190,000 per year) for 24 months after the date of termination of his
employment, payable quarterly.  As a result, the Company has recorded
a severance charge in the statement of operations during the transition period
ended September 30, 2007, the short term portion of the liability is included in
accrued compensation and the long term portion of the liability is included in
other long term liabilities. This severance provision applies notwithstanding
the absence of a "change of control”.




Note  5.
Marketable Securities and Long-Term Investments





Our long
term investment portfolio consists of $3.3 million of Auction Rate Securities
(ARS), with contractual maturities between 22 and 33 years. The ARS held by us
are primarily backed by student loans and are over-collateralized, and are
insured by and guaranteed by the United States Federal Department of Education.
In addition, all ARS held by us are rated by the major independent rating
agencies as either AAA or Aaa. Most of these auction rate securities were
scheduled to reset every 7 to 28 days through a Dutch Auction process. The
auctions have historically provided a liquid market for these securities as
investors could readily sell their investments at auction. As of February 28,
2008, ARS have experienced failed auctions, due to sell orders exceeding buy
orders. These failures are not believed to be a credit issue, but rather caused
by a lack of liquidity due to pressure in other segments of the securities
markets. Under the contractual terms, the issuer is typically obligated to pay
penalty interest rates should an auction fail. The funds associated with failed
auctions are not expected to be accessible until one of the following occurs: a
successful auction occurs, the issuer redeems the issue, a buyer is found
outside of the auction process or the underlying securities have matured. We
determined that no other-than-temporary impairment losses existed as of March
31, 2008. However, if the issuer of the ARS is unable to successfully close
future auctions or does not redeem the ARS, or the United States government
fails to support its guaranty of the obligations, we may be required to adjust
the carrying value of the ARS and record other-than-temporary impairment charges
in future periods, which could materially affect our results of operations and
financial condition.


8


At March
31, 2008 there was insufficient observable ARS market information available to
determine fair value of our investments. Therefore, we estimated fair value by
using a discounted cash flow model with factors including tax status, credit
quality, Durant, levels of federal guarantees and likelihood of
redemption.  Based on this analysis we recorded an unrealized loss of
$164,000 related to our ARS investments and have classified the investments as
long-term on our balance sheet as of March 31, 2008.  There was no tax
impact due to our net operating loss position.  We believe this
unrealized loss primarily attributable to the limited liquidity of these
investments, and it is our intent to hold these investments long enough to avoid
realizing any significant loss.  Nonetheless, if uncertainties in the
credit and capital market continue, if these markets further deteriorate, or if
we no longer have the ability to hold these investments, we may be required to
recognize permanent impairment charges.




Note
6.  Warrants and Stock Based Compensation




Commencing
April 1, 2006, the Company adopted Statement of Financial Accounting Standard
No. 123R, “Share-Based Payment” (“SFAS 123R”), which requires all
share-based payments, including grants of stock options, to be recognized in the
income statement as an operating expense, based on their fair values over the
requisite service period.




During the
period ended March 31, 2008 the Company granted 20,000 stock options to
non-employee directors with a six year term and an exercise price of
$0.96.  The fair value of the options granted was $.54 per
share.




The
Company recorded $13,721 and $9,544 of related compensation expense for the
three month periods ended March 31, 2008 and 2007, respectively.  The
Company recorded $25,535 and $19,495 of related compensation expense for the six
month periods ended March 31, 2008 and 2007, respectively. This expense is
included in selling, general and administrative expense.  There was no
tax benefit from recording this non-cash expense.  As of March 31,
2008, $133,538 of total unrecognized compensation expense related to non-vested
awards is expected to be recognized over a weighted average period of
approximately 3.75 years.




In April
of 2003, 350,000 warrants were issued at an exercise price of $3.00 per share,
on March 31, 2008 they were unexercised and expired.




Note
7.  Inventories




Inventories
consist of the following as of:




March
      31, 2008
            
            
            September
      30, 2007Raw
      materials
            
            $
            1,312,537
            
            
            $
            1,422,374Work-in-progress
            
            
            14,219
            
            
            
            50,468Finished
      goods
            
            
            114,078
            
            
            
            122,440$
            1,440,834
            
            
            $
            1,595,282




Note
8.  Major Customer Concentration




One
customer comprised approximately 13% of total sales for the six months ended
March 31, 2008 and another two customers comprised 23% of accounts receivable.
Two customers comprised 25% of total sales for six months ended March 31, 2007
and one of those accounted for 18% of accounts receivable.




Note
9.  Recently Issued Accounting Pronouncements




On
February 15, 2007, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities — Including an Amendment of FASB No. 115. This
standard permits an entity to choose to measure many financial instruments and
certain other items at fair value. The fair value option established by SFAS
No. 159 permits all entities to choose to measure eligible items at fair
value at specified election dates. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Company is currently
evaluating the impact this pronouncement will have on its consolidated financial
position or results of operations.





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurement but does not require
any new fair value measurements. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. However on February 12, 2008, the
FASB issued proposed FSP FAS 157-2 which delayed the effective date of SFAS 157
for all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). This FSP partially defers the effective date of SFAS
157 to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years for items within the scope of this FSP.  We
will adopt SFAS 157, except as it applies to those nonfinancial assets and
nonfinancial liabilities as noted in proposed FSP FAS 157-2, on October 1, 2008
and are evaluating the impact this pronouncement will have on our consolidated
financial position or results of operations, especially as it relates to our
auction rate securities.


9


On
December 4, 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations.
SFAS  No. 141R will significantly change the accounting for business
combinations. Under SFAS 141R, an acquiring entity will be required to recognize
all the assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. SFAS No. 141R will change
the accounting treatment for certain specific items. SFAS No. 141R also includes
a substantial number of new disclosure requirements. SFAS No. 141R applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. Earlier adoption is prohibited. This statement will only have
an impact if we execute applicable transactions after the effective
date.





On
December 4, 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51. Statement
160 establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No.
160 also includes expanded disclosure requirements regarding the interests of
the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal
years, and interim periods with those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. This statement will only have
an impact if we execute applicable transactions after the effective
date.




Note
10.  Certain Relationships and Transactions




India
Facility.  Prior to June 28, 2007, Kul B. Jain, brother of our
former chief executive officer, Anil K. Jain, was a director of our APA
Optronics (India) Private Limited subsidiary that was established in fiscal
2005.  Kul B. Jain was paid approximately $250 per month in this
position. He was not an employee of APA Optronics (India) or Clearfield, Inc.
(formerly APA Enterprises, Inc.).  On June 28, 2007, we sold all
of our interest in our Indian subsidiary to an entity controlled by Anil K.
Jain, our former chief executive officer, on terms deemed by the independent
directors to be fair and reasonable to the Company.  The purchase
price of $500,000 is payable over five years and is secured by pledges of stock
and Dr. Jain’s payments under his separation agreement, as well as by a
guarantee from Dr. Jain.


10


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN 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.”




OVERVIEW




On January
2, 2008, Clearfield, Inc., formerly known as APA Enterprises, Inc., consolidated
its sole subsidiary APA Cables & Networks, Inc., (APACN) into the parent
company, Clearfield, Inc. Since the discontinuation of the Optronics business,
the operations of the Company consist solely of the operations of
APACN.




The
Company focuses on highly configurable 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”).  Over the past four years the Company has expanded its
product offerings and broadened its customer base. We continue to see positive
trends in the markets we serve and believe our solid reputation of quality
service and competitive and innovative product line which will permit us achieve
our growth plans.




Management
periodically conducts a critical review of its business
operations.  During the review of the Optronics business segment it
became clear that the scale of the business was not capable of generating a
positive income or cash flow. Therefore, management took the necessary steps to
eliminate any further losses and recommended to the Board of Directors (“BOD”)
to discontinue operations. The BOD accepted the recommendations and the Company
moved forward to recognize the costs of closing the Optronics business and the
related costs of closing the Blaine facility.




As a result the discontinuation of GaN
products and due to the logistics and time constraints for fiber patch cords,
the Board of Directors  determined that was no longer a viable
sourcing option and actions were taken to control ongoing costs and recover the
investment in the Company’s India subsidiary. On June 28, 2007, the Company sold
APA Optronics (India) Private Limited ("APA India") to an entity owned by the
former Chief Executive Officer of the Company, Dr. Anil K. Jain.




Dr. Anil K. Jain resigned as Chief
Executive Officer (principal executive officer), Chief Financial Officer
(principal financial officer), and Chairman of the Board of Directors of the
Company effective June 28, 2007. His resignation triggered an agreement that
requires payment of his then current salary ($190,000 per year) for 24 months
after the date of termination of his employment. As a result, the Company has
recorded a severance charge of $397,481 in the statement of operations during
the transition period ended September 30, 2007. The short term portion of the
liability is included in accrued compensation and the long term portion of the
liability is included in other long term liabilities. The balance of this
liability as of March 31, 2008 is $249,956.


11


RESULTS OF
OPERATIONS




THREE
MONTHS ENDED MARCH 31, 2008 VS. THREE MONTHS ENDED MARCH 31, 2007




REVENUE




The
Company had consolidated revenues of $5,442,000 for the three months ended March
31, 2008 compared to revenues of $3,896,000 for the comparable period in 2007,
an increase of 40% or $1,546,000. This increase is the result of growth of
existing customer sales.




GROSS
PROFIT AND COST OF SALES




Gross
profit increased $765,000, or 77%, to $1,766,000 compared to $1,000,000 for the
same quarter in 2007.  Gross profit as a percent of revenue was 32% in
the current quarter as compared to 26% in the same quarter of
2007.  The increase in margin percentage reflects on the results of
ongoing programs to reduce the cost of products through a combination of product
re-design, process improvement, global sourcing of components, and outside
manufacturing.




The
Company anticipates gross margins and cost of sales for the upcoming quarter
comparable to the three months ended March 31, 2008.




SELLING,
GENERAL, AND ADMINISTRATIVE




Consolidated
selling, general, and administrative (S, G & A) expenses during the three
months ended March 31, 2008 were $1,721,000 or 31% of sales compared to
$1,454,000 or 37% of sales in the same quarter of 2007 an increase of 18% or
$267,000 this increase is the result of increased wages associated with
additional staff and sales commissions and bonuses.




GOODWILL




For the
period ended March 31, 2008 the Company did not incur any charges to Goodwill.
In the comparable period for 2007 the Company completed its annual assessment of
"Goodwill and Other Intangible Assets," in accordance with SFAS No.
142.  As a result of the assessment the Company recognized a non-cash,
pre-tax impairment charge of $852,000 ($519,717 after tax).  The
Company will conduct a similar assessment in the fourth quarter ending September
30, 2008.




INCOME
(LOSS) FROM OPERATIONS




The
Company recorded income of $44,000, for the period ended March 31, 2008 compared
to a loss of $1,306,000 for the comparable quarter for 2007.  The
increase in income is attributable to increased sales, improved gross margins,
and the elimination of unprofitable operations.  Adjusting for the
goodwill impairment charge, the loss for 2007 would have been
$454,000.




OTHER
INCOME AND EXPENSE




Other
income increased slightly to $92,000 compared to $74,000 for the comparable
period in 2007. The major component of income is interest earned on excess cash
and long term investments. The increase over the comparable quarter was
attributable to income received from the leasing of the Aberdeen, South Dakota
building, amounting to approximately $16,000 for the quarter.




NET
INCOME (LOSS) FROM CONTINUING OPERATIONS




The net
income from continuing operations for the quarter ended March 31, 2008 was
$115,000 or $0.01 per share compared to a loss of $924,000, or $0.08 per share,
in the comparable period in 2007.


12


INCOME
(LOSS) FROM DISCONTINUED OPERATIONS




There was
no income from discontinued operations for the three months ended March 31,
2008. In the Comparable period for 2007, $281,000 was recorded. These costs were
all related to the Optronics business of which $81,000 was related to the
disposal of assets.




NET
INCOME (LOSS)




The net
income for the quarter ended March 31, 2008 was $115,000 or $0.01 per share
compared to a loss of $1,205,000, or $0.10 per share, in the comparable period
in 2007.




SIX
MONTHS ENDED MARCH 31, 2008 VS. SIX MONTHS ENDED MARCH 31, 2007




REVENUE




The
Company had consolidated revenues of $10,140,000 for the six months ended March
31, 2008 compared to revenues of $8,401,000 for the comparable six month period
ended March 31 2007, an increase of 21% or $1,739,000. This increase is the
result of growth of existing customer sales and products.




GROSS
PROFIT AND COST OF SALES




Gross
profit increased $860,000, or 36%, to $3,215,000 compared to $2,355,000 for the
comparable period ended March 31, 2007.  Gross profit as a percent of
revenue was 32% in the current quarter as compared to 28% in the same comparable
period of 2007.  The increase in margin percentage reflects on the
results of ongoing programs to reduce the cost of products through a combination
of product re-design, new product introduction, process improvement, global
sourcing of components and outside manufacturing.




SELLING,
GENERAL, AND ADMINISTRATIVE




Consolidated
S, G, & A expenses during the six months ended March 31, 2008 were
$3,144,000 compared to $2,884,000 for the same six months ended March 31, 2007,
an increase of approximately $260,000 or 9%.




GOODWILL




For the
six month period ended March 31, 2008 the Company did not incur any charges to
Goodwill. In the comparable period for 2007 the Company completed its annual
assessment of Goodwill and Other Intangible Assets, in accordance with SFAS No.
142.  As result of the assessment the Company recognized a non-cash,
pre-tax impairment charge of $852,000 ($519,717 after tax).  The
Company will conduct a similar assessment in the fourth quarter ended September
30, 2008.




INCOME
(LOSS) FROM OPERATIONS




The
Company recorded income of $71,000, for the period ended March 31, 2008 compared
to a loss of $1,380,000 for the comparable period for 2007.  The
increase in income is attributable to increased sales, improved gross margins,
and the elimination of unprofitable operations.  Adjusting for the
goodwill impairment charge the loss for 2007 would have been approximately
$528,000.




OTHER
INCOME AND EXPENSE




Other
income increased $27,000 earning $191,000 for the six months ended March 31,
2008 compared to $164,000 for the comparable period in 2007. The major component
of income is interest earned on excess cash and long term investments which was
$167,000 for 2008 compared to $164,000 for the same period in 2007. The balance
of the increase is from rent received from leasing our Aberdeen, South Dakota
facility.


13


NET
INCOME (LOSS) FROM CONTINUING OPERATIONS




The net
income from continuing operations for the six months ended March 31, 2008 was
$213,000 or $0.02 per share compared to a loss of $935,000, or $0.08 per share,
in the comparable period in 2007.




INCOME
(LOSS) FROM DISCONTINUED OPERATIONS




Income
from discontinued operations for the six months ended March 31, 2008 was
$297,000 this was composed of a net loss of $56,000 on the purchase and sale of
the Blaine building and the elimination of future lease obligations for the
building of approximately $353,000. In the comparable period for 2007, The
Company recorded a loss of $699,000, all related to the Optronics business of
which $84,000 was related to the disposal of assets.




NET
INCOME (LOSS)




The net
income for the six months ended March 31, 2008 was $511,000 or $0.04 per share
compared to a loss of $1,635,000, or $0.14 per share, in the comparable period
in 2007.




LIQUIDITY AND CAPITAL
RESOURCES




The
Company’s cash and cash equivalents were $2,717,000 at March 31, 2008, a
decrease of $587,000, from September 30, 2007. The reasons for the decrease are
described below under the captions “Operating Activities”, “Investing
Activities” and “Financing Activities”.




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




Operating
Activities




Net cash provided by operating
activities from both continuing operations and discontinued operations for the
six month period ended March 31, 2008 was $273,000. This cash inflow was
attributable primarily to income of $511,000, depreciation of $265,000 and a
reduction of inventories of $154,000. This was offset by an increase in accounts
receivable of $370,000 and the termination of the lease accrual of $362,000, a
non cash charge associated with the elimination of the lease obligation for the
former corporate headquarters and an increase in prepaid expenses of $
130,000.




Net cash consumed by operating
activities from both continuing operations and discontinued operations for the
six month period ended March 31, 2007 was $25,000. This cash outflow was
primarily due to a net operating loss of $1,635,000. In addition, deferred taxes
were reduced by $284,000 and accounts payable were reduced by
$256,000.  Offsetting these outflows was depreciation of $354,000,
reduction of accounts receivable of $549,000 and inventory of $485,000. During
the period, the Company recorded a non-cash Goodwill impairment charge of
$852,000.




Investing
Activities




We invest our excess cash in money
market accounts and Student Loan-backed Auction Rate Securities (ARS) to obtain
a market rate return on our excess cash. During the six month period ended March
31, 2008 we utilized cash to purchase $3,675,000 of securities and received
$3,200,000 on the sale of like securities.  During the same period we
utilized $1,500,000 to purchase the Blaine building and subsequently received
proceeds on the sale of $1,450,000. Purchases of capital equipment, enterprise
resource planning software and implementation services consumed $300,000 of
cash.




In the six months ended March 31, 2007
we utilized cash to purchase $6,900,000 of securities and received $6,500,000 on
the sale of like securities as part of our excess cash investment program. In
addition we purchased equipment of $289,000 and sold equipment for
$226,000.




Financing
Activities




Net cash
used in financing activities, consisting of long term debt payment for the six
months ended March 31, 2008 totaled $35,000.




We
received a net of $41,000 from an escrow account. These funds were applied to
interest expense associated with the over all reduction of debt for the Aberdeen
building during the six month period ended March 31, 2007.


14


FACTORS THAT MAY INFLUENCE
FUTURE RESULTS




The
statements contained in this Report on Form 10-QSB 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 Management's Discussion or Plan of Operation. 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-QSB 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. Readers of this Report and prospective investors should also review
the Risk Factors set forth in our Report on Form 10-KSB for the transition
period ended September 30, 2007. The following updates our Risk
Factors:




Marketable Securities and
Long-Term Investments




Due
to lack of liquidity, we may not be able to liquidate our auction rate
securities (ARS) when needed or may not realize the full value of these
investments.





Our long
term investment portfolio consists of $3.3 million of Auction Rate Securities
(ARS), with contractual maturities between 22 and 33 years. The ARS held by us
are primarily backed by student loans and are over-collateralized, and are
insured by and guaranteed by the United States Federal Department of Education.
In addition, all ARS held by us are rated by the major independent rating
agencies as either AAA or Aaa. Most of these auction rate securities were
scheduled to reset every 7 to 28 days through a Dutch Auction process. The
auctions have historically provided a liquid market for these securities as
investors could readily sell their investments at auction. As of February 28,
2008, ARS have experienced failed auctions, due to sell orders exceeding buy
orders. These failures are not believed to be a credit issue, but rather caused
by a lack of liquidity due to pressure in other segments of the securities
markets. Under the contractual terms, the issuer is typically obligated to pay
penalty interest rates should an auction fail. The funds associated with failed
auctions, are not expected to be accessible until one of the following occurs: a
successful auction occurs, the issuer redeems the issue, a buyer is found
outside of the auction process or the underlying securities have matured. We
determined that no other-than-temporary impairment losses existed as of March
31, 2008. However, if the issuer of the ARS is unable to successfully close
future auctions or does not redeem the ARS, or the United States government
fails to support its guaranty of the obligations, we may be required to adjust
the carrying value of the ARS and record other-than-temporary impairment charges
in future periods, which could materially affect our results of operations and
financial condition.




APPLICATION OF CRITICAL
ACCOUNTING POLICIES




Our
significant accounting policies are described in Note A to the Consolidated
Financial Statements in our Transition Report for the transition period ended
September 30, 2007.  The accounting policies used in preparing our
interim 2007 Consolidated Financial Statements are the same as those described
in our Annual Report.


15




ITEM 3 A (T).  CONTROLS AND PROCEDURES
  (a)
              Evaluation of disclosure
      controls and procedures.  The Company’s chief executive
      officer and chief financial officer have evaluated the Company’s
      disclosure controls and procedures (as defined in Exchange Act Rule
      13a-14(e)) as of the end of the period covered by this report and
      determined the controls and procedures were ineffective. We have
      identified certain material weaknesses related to the Company and
      addressed them as follows:
  ·
              The
      Company did not maintain effective controls over the accounting for
      certain auction rate securities. This oversight was discovered in the
      transition period ended September 30, 2007 and the financial statements
      were restated accordingly.
  ·
              The
      Company did not maintain effective controls to ensure that it is regularly
      checking for appropriate compliance on all GAAP and SEC reporting matters
      as they change or become updated.
  
 (b)
              Changes in internal
      controls over
      financial reporting  There were no changes in the
      Company’s internal controls over financial reporting that occurred during
      the Company’s last fiscal quarter that materially affected, or are
      reasonably likely to materially affect, the Company’s control over
      financial reporting.
 
 Remediation
Efforts Related to Material Weaknesses
 
 Management has created a board of
directors Investment Committee to provide oversight on matters of banking
relationships and investing of cash. In addition the Company has approved a
formal investment policy. Company management is utilizing the expertise of its
professional investment advisor to provide insight into an appropriate
policy.
 Management recognizes it cannot be
expert in all of the complex matters of financial reporting as it is a
constantly changing and technical environment. Therefore we will be procuring
subscriptions to publications and services that provide regular updates
regarding SEC and GAAP reporting. These services will include checklists to
ensure the internal accounting staff has the necessary tools and resources to
comply with both SEC and GAAP regulations. This service will also include
continuing education for the Company’s professional accounting
staff.
 16
 
 PART II. OTHER INFORMATION
 
 ITEM 1.  LEGAL PROCEEDINGS
  None.
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
  None.
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  None.
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
  None.
  ITEM 5. OTHER INFORMATION
  None.
  ITEM 6. EXHIBITS
  Exhibit
31.1 – Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
  Exhibit
31.2 – Certification required of Chief Financial Officer by Section 302 of the
Sarbanes Oxley Act of 2002
 
 Exhibit
32.1 – Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
  Exhibit
32.2 – Certification required of Chief Financial Officer by Section 906 of the
Sarbanes Oxley Act of 2002
 
  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.
  CLEARFIELD,
INC.
 
 May 12,
2008
 
 
 
 Signature:
      /s/ Cheryl
      Beranek Podzimek
 Print
      Name: Cheryl
      Beranek Podzimek
 Print
      Title: Chief
      Executive Officer (Principal Executive
  Officer)




17