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 December 31, 2007





o
            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 ofincorporation
      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:
            January
      23, 2008Common
      stock, par value $.01
            11,872,331







1


CLEARFIELD, INC.


FORM
10-QSB


TABLE
OF CONTENTS








PART I. FINANCIAL INFORMATION
            3ITEM 1. FINANCIAL STATEMENTS
            3CONSOLIDATED CONDENSED BALANCE SHEETS
            3CONSOLIDATED CONDENSED STATEMENTS OF
      OPERATIONS
            5CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
      EQUITY
            6CONSOLIDATED CONDENSED STATEMENTS OF CASH
      FLOWS
            7NOTES TO CONSOLIDATED CONDENSED FINANCIAL
      STATEMENTS
            8ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATIONS
            12ITEM 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
 Table of Contents


PART I. FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS





CLEARFIELD, INC.


CONSOLIDATED
CONDENSED BALANCE SHEETS


(Unaudited)





December 31,
              2007
            
            
            September 30,
              2007ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            1,158,117
            
            
            $
            3,304,645Available
      for sale securities
            
            
            5,050,000
            
            
            
            2,825,000Accounts
      receivable, net
            
            
            1,771,608
            
            
            
            2,418,651Inventories
            
            
            1,565,345
            
            
            
            1,595,282Other
      current assets
            
            
            167,557
            
            
            
            102,473Total  current
      assets
            
            
            9,712,627
            
            
            
            10,246,051PROPERTY,
      PLANT AND EQUIPMENT, net
            
            
            1,798,226
            
            
            
            1,773,739OTHER
      ASSETSGoodwill
            
            
            2,570,511
            
            
            
            2,570,511Other
            
            
            284,309
            
            
            
            281,589Notes
      receivable
            
            
            466,303
            
            
            
            469,678TOTAL
      OTHER ASSETS
            
            
            3,321,123
            
            
            
            3,321,778TOTAL
      ASSETS
            
            $
            14,831,976
            
            
            $
            15,341,568





SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS


3
 Table of Contents


CLEARFIELD,
INC.


CONSOLIDATED
CONDENSED BALANCE SHEETS


(Unaudited)





December 31,
              2007
            
            
            September 30,
              2007LIABILITIES
      AND SHAREHOLDERS’ EQUITYCURRENT
      LIABILITIESCurrent
      maturities of long term debt
            
            $
            65,734
            
            
            $
            68,215Accounts
      payable
            
            
            1,019,283
            
            
            
            1,176,280Accrued
      compensation
            
            
            620,574
            
            
            
            958,023Accrued
      expenses
            
            
            134,765
            
            
            
            107,209Current
      liabilities of discontinued operations
            
            
            -
            
            
            
            205,885Total  current
      liabilities
            
            
            1,840,356
            
            
            
            2,515,612LONG-TERM
      DEBT, net of current maturities
            
            
            80,163
            
            
            
            95,207DEFERRED
      RENT
            
            
            87,340
            
            
            
            85,059DEFERRED
      INCOME TAXES
            
            
            101,971
            
            
            
            77,701OTHER
      LONG TERM LIABILITIES
            
            
            102,277
            
            
            
            150,470LONG
      TERM OBLIGATIONS OF DISCONTINUED OPERATIONS
            
            
            -
            
            
            
            204,832Total
      Liabilities
            
            
            2,212,107
            
            
            
            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; 50,000,000 authorized shares; 11,872,331 shares
      issued and outstanding at December 31, 2007 and September 30,
      2007
            
            
            118,723
            
            
            
            118,723Additional
      paid-in capital
            
            
            52,049,021
            
            
            
            52,037,207Accumulated
      deficit
            
            
            (39,547,875
            )
            
            
            (39,943,243
            )TOTAL
      SHAREHOLDERS’ EQUITY
            
            
            12,619,869
            
            
            
            12,212,687TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            14,831,976
            
            
            $
            15,341,568





SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS


4
 Table of Contents


CLEARFIELD, INC.


CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS


(Unaudited)




Three Months Ended December 31,2007
            
            
            2006Revenues
            
            $
            4,697,440
            
            
            $
            4,504,508Cost
      of revenues
            
            
            3,247,969
            
            
            
            3,149,315Gross
      profit
            
            
            1,449,471
            
            
            
            1,355,193Operating
      expenses:Selling,
      general and administrative
            
            
            1,422,459
            
            
            
            1,430,288(Gain)
      loss on sale of assets, net
            
            
            -
            
            
            
            (727
            )1,422,459
            
            
            
            1,429,561Income
      (loss) from continuing operations
            
            
            27,012
            
            
            
            (74,368
            )Interest
      income
            
            
            87,806
            
            
            
            89,278Interest
      expense
            
            
            (3,136
            )
            
            
            (39
            )Other
      income (expense), net
            
            
            13,417
            
            
            
            18998,087
            
            
            
            89,428Income
      from continuing operations before income taxes
            
            
            125,099
            
            
            
            15,060Income
      tax expense (benefit)
            
            
            27,170
            
            
            
            26,520Net income (loss) from
      continuing operations
            
            
            97,929
            
            
            
            (11,460
            )Net income (loss) from
      discontinued operations
            
            
            342,390
            
            
            
            (421,240
            )Net
      gain (loss) on disposal of assets of
              discontinued
      operations
            
            
            (44,951
            )
            
            
            3,332Total
      Income (loss) from discontinued operations
            
            
            297,439
            
            
            
            (417,908
            )Net
      income (loss)
            
            $
            395,368
            
            
            $
            (429,368
            )Net
      income (loss) per share (basic and diluted):Continuing
      operations
            
            $
            0.01
            
            
            $
            0.00Discontinued
      operations
            
            $
            0.02
            
            
            $
            (0.04
            )Total
            
            $
            0.03
            
            
            $
            (0.04
            )Weighted
      average shares outstandingBasic and
    diluted
            
            
            11,872,331
            
            
            
            11,872,331





SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS


5
 Table of Contents


CLEARFIELD, INC.


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY


Three
Months Ended December 31, 2007 and transition period ended September 30,
2007





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
            )
            
            $
            12,619,869







SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS


6
 Table of Contents


CLEARFIELD, INC.


CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS


(Unaudited)





Three Months Ended December 31,2007
            
            
            2006(Restated)Cash
      Flow from operating activitiesNet
      income (loss)
            
            $
            395,368
            
            
            $
            (429,368
            )Adjustments
      to reconcile net income (loss) to net cash provided by
      operating   activities:Depreciation
      and amortization
            
            
            120,673
            
            
            
            137,652Deferred
      taxes
            
            
            24,270
            
            
            
            24,270Gain
      (loss) on disposal of assets
            
            
            55,251
            
            
            
            (4,059
            )Stock
      based compensation
            
            
            11,814
            
            
            
            9,951Lease
      termination accrual
            
            
            (362,028
            )
            
            
            -Changes
      in operating assets and liabilities:Accounts
      receivable, net
            
            
            647,043
            
            
            
            655,267Inventories
            
            
            29,937
            
            
            
            231,481Prepaid
      expenses and other
            
            
            (64,429
            )
            
            
            (31,047
            )Accounts
      payable and accrued expenses
            
            
            (493,575
            )
            
            
            (454,321
            )Net
      cash provided by operating activities
            
            
            364,324
            
            
            
            139,826Cash
      flow from investing activitiesPurchases
      of property and equipment
            
            
            (1,719,951
            )
            
            
            (32,879
            )Proceeds
      from sale of assets
            
            
            1,451,624
            
            
            
            44,000Purchase
      of available for sale securities
            
            
            (3,675,000
            )
            
            
            (3,800,000
            )Sale
      of available for sale securities
            
            
            1,450,000
            
            
            
            3,500,000Net
      cash used by investing activities
            
            
            (2,493,327
            )
            
            
            (288,879
            )Cash
      flow from financing activitiesRepayment
      of long-term debt
            
            
            (17,525
            )
            
            
            -Withdrawal
      of bond reserve funds, net
            
            
            -
            
            
            
            41,974Net
      cash used in financing activities
            
            
            (17,525
            )
            
            
            41,974Foreign
      currency translation
            
            
            -
            
            
            
            16,761Decrease
      in cash and cash equivalents
            
            
            (2,146,528
            )
            
            
            (90,318
            )Cash
      and cash equivalents at beginning of period
            
            
            3,304,645
            
            
            
            1,754,335Cash
      and cash equivalents at end of period
            
            $
            1,158,117
            
            
            $
            1,664,017Supplemental
      cash flow information:Cash
      paid during the period for:Interest
            
            $
            3,136
            
            
            $
            11,449Income
      taxes
            
            
            2,900
            
            
            
            2,250





SEE
ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS


7
 Table of Contents


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-B 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 annual report on Form 10-KSB for
the transition 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.




Effective
January 2, 2008 the company changed its name from APA Enterprises, Inc. to
Clearfield, Inc.




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, 2006 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 three months ended December
31, 2006 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.





The
consolidated financial statements represent all companies of which Clearfield,
Inc. directly or indirectly has majority ownership or otherwise controls.
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 income and diluted (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 794,700 and 588,565 shares of common stock with a weighted average
exercise price of $2.12 and $2.61 were outstanding at December 31, 2007 and
2006, 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. Regarding operations in India,
with the discontinuation of GaN products and the logistics and time constraints
for APACN’s’ fiber patch cords, the benefit has been less than expected. As
a result India was no longer a viable sourcing option and actions were taken to
control ongoing costs and recover the investment in the subsidiary. In
addition, the Company elected to close its Blaine facility because it was
primarily dedicated to the Optronics segment.


8
 Table of Contents


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. The Company, on the same day, then sold
the land and building for $1,450,000 incurring a loss of $55,000.





Aberdeen
Facility





On
October 1, 2007 the Company successfully 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 three month period ended December 31, 2006 consisted of
losses incurred in the operations of APA India $38,000 and APA Optics of
$380,000 for a total of approximately $418,000.





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), 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 will be 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 and 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.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 December 31, 2007 the Company granted 208,700 stock options to
employees with a six year term and an exercise price of $1.09.  The
fair value of the options granted was $.44 per share.




The
Company recorded $11,814 and $9,951 of related compensation expense for the
three month periods ended December 31, 2007 and 2006,
respectively.  This expense is included in selling, general and
administrative expense.  There was no tax benefit from recording this
non-cash expense.  As of December 31, 2007, $141,538 of total
unrecognized compensation expense related to non-vested awards is expected to be
recognized over a weighted average period of approximately
4.48 years.


9
 Table of Contents


Note
6.  Inventories





Inventories
consist of the following as of:




December
      31, 2007
            
            
            September
      30, 2007Raw
      Materials
            
            $
            1,419,828
            
            
            $
            1,422,374Work-in-progress
            
            
            30,793
            
            
            
            50,468Finished
      Goods
            
            
            114,724
            
            
            
            122,440$
            1,565,345
            
            
            $
            1,595,282




Note
7.  Major Customer Concentration





One
customer comprised approximately 13% of total sales for the three months ended
December 31, 2007 and another customer comprised 12% of accounts receivable. Two
customers comprised 23% of total sales for quarter ended December 31, 2006 and
one of those accounted for 17% of accounts receivable.




Note
8.  Income Taxes – Adoption of Financial Interpretation No.
48





In June
2006, the Financial Accounting Standards Board (“FASB”) issued FIN No. 48, Accounting for Uncertainty in Income
Taxes – an
Interpretation of FASB Statement No. 109(“FIN48”).  This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB
Statement No. 109, Accounting
for Income Taxes.  This Interpretation clarifies the
application of FASB Statement No. 109 by defining a criterion that an individual
tax position must meet for any part of the benefit of that position to be
recognized in an enterprise’s financial statements.  Additionally,
this Interpretation provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition.





The
Company adopted the provisions of FIN 48, on April 1, 2007. Previously, the
Company had accounted for tax contingencies in accordance with Statement of
Financial Accounting Standards 5, Accounting for Contingencies. As required by
FIN 48, which clarifies Statement 109, Accounting for Income Taxes, the Company
recognizes the financial statement benefit of a tax position only after
determining that the relevant tax authority would more likely than not sustain
the position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. At
the adoption date, the Company applied FIN 48 to all tax positions for which the
statute of limitations remained open. Both prior and subsequent to the adoption
of FIN 48, the Company had no liability for unrecognized tax
benefits.





The
Company is subject to income taxes in the U.S. federal jurisdiction and various
state jurisdictions.  Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply.  The Company may be subject to
U.S. federal, state or local, income tax examinations by tax authorities for all
prior years.





The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in operating expenses for all periods
presented.  The Company has no accrual related to the payment of
interest and penalties at October 1, 2007, due to no outstanding tax
issues.  There has been no subsequent change to accrued interest and
penalties since the end of fiscal 2007.




Note
9.  Recently Issued Accounting Pronouncements





On
February 15, 2007, the Financial Accounting Standards Board issued 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.


10
 Table of Contents


In
September 2006, the Financial Accounting Standards Board 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. The Company is currently evaluating the impact this pronouncement will
have on its consolidated financial position or results of
operations.




On
December 4, 2007, the Financial Accounting Standards Board (“FASB”) issued FASB
Statement No. 141 (Revised 2007), Business Combinations.
Statement 141R will significantly change the accounting for business
combinations. Under Statement 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. Statement 141R will
change the accounting treatment for certain specific items. Statement 141R also
includes a substantial number of new disclosure requirements. Statement 141
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.




The
Company is currently assessing the potential impact that the adoption of this
Statement will have on its financial statements.




On
December 4, 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements – An Amendment ofARBNo. 51. Statement 160
establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary.
Specifically, this statement requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements
and separate from the parent’s equity. The amount of net income attributable to
the noncontrolling interest will be included in consolidated net income on the
face of the income statement. Statement 160 clarifies that changes in a parent’s
ownership interest in a subsidiary that do not result in deconsolidation are
equity transactions if the parent retains its controlling financial interest. In
addition, this statement requires that a parent recognize a gain or loss in net
income when a subsidiary is deconsolidated. Such gain or loss will be measured
using the fair value of the noncontrolling equity investment on the
deconsolidation date. Statement 160 also includes expanded disclosure
requirements regarding the interests of the parent and its noncontrolling
interest. Statement 160 is effective for fiscal years, and interim periods with
those fiscal years, beginning on or after December 15, 2008. Earlier adoption is
prohibited.




The
Company is currently assessing the potential impact that the adoption of this
Statement will have on its financial statements





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 5 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.


11
 Table of Contents


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 consisted 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 business segments 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.




With the discontinuation of GaN
products and the logistics and time constraints for APACN’s fiber patch cords,
the benefit of manufacturing in India has been less than expected.  As
a result India 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 December 31, 2007 is $301,094 (see Note 4. Severance
Agreement).


12
 Table of Contents


RESULTS OF
OPERATIONS




THREE
MONTHS ENDED DECEMBER 31, 2007 VS. THREE MONTHS ENDED DECEMBER 31,
2006




The
Company had consolidated revenues of $4,697,000 for the three months ended
December 31, 2007 compared to revenues of $4,505,000 for the comparable quarter
in 2006, an increase of 4% or $192,000. This increase is the result of growth of
existing customer sales.




GROSS
PROFIT AND COST OF SALES




Gross
profit increased $94,000, or 7%, to $1,449,000 compared to $1,355,000 for the
same quarter in 2006.  Gross profit as a percent of revenue was 31% in
the current quarter as compared to 30% in the same quarter of
2006.  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.




SELLING,
GENERAL, AND ADMINISTRATIVE




Consolidated
selling, general, and administrative (S, G, & A) expenses during the three
months ended December 31, 2007 were flat at $1,422,000 compared to $1,430,000 in
the same quarter of 2006.




INCOME
(LOSS) FROM OPERATIONS




The
Company recorded income of $27,000, an increase of $101,000 over the prior
comparable period. The increase in income is attributable to increased sales,
improved gross margins, and the elimination of unprofitable
operations.




OTHER
INCOME AND EXPENSE




Consolidated other income increased
slightly by $9,000 to $98,000 compared to $89,000 for the comparable period in
2007.




NET
INCOME (LOSS) FROM CONTINUING OPERATIONS




The net
income for the quarter was $98,000 or $0.01 per share compared to a loss of
$11,000, or $0.00 per share, in the comparable period in 2006.




INCOME
(LOSS) FROM DISCONTINUED OPERATIONS




Income
from discontinued operations of $342,000 was recorded in the three month period
ended December 31, 2007, primarily as a result of the lease termination for the
Blaine building obligation. 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 from 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 termination of the
lease resulted in the elimination of approximately $362,000 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. For the same
period in 2006 loss from discontinued operations was $421,000.




The loss
on disposal of assets for income for the period ended December 31, 2007 was
$45,000. As described in the above paragraph, the Company purchased it Blaine,
Minnesota facility on October 30, 2007 for $1,500,000. The Company, on the same
day, then sold the land and building for $1,450,000 incurring a loss on sale of
$55,000. In addition, during the current period miscellaneous assets relating to
the discontinued operations were sold creating income of approximately $10,000
reducing the loss on sale to $45,000. For the same period in 2006, the gain on
disposal of assets was $3,000.


13
 Table of Contents


NET
INCOME (LOSS)




Net
income increased by $824,000 approximately a 192% over the comparable period in
2006. The company recorded net income of $395,000 for the quarter ended December
31, 2007 compared to a loss of $429,000 for the comparable period for
2006.




LIQUIDITY
AND CAPITAL RESOURCES




The
Company’s cash and cash equivalents were $1,158,000 at December 31, 2007, a
decrease of $2,147,000, compared to $3,305,000 as of September 30, 2007. The
reasons for this are decreases as 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
three month period ended December 31, 2007 was $364,000. This cash inflow was
primarily due to income of $395,000 from continuing and discontinued operations,
depreciation of $121,000, and a reduction of accounts receivable of $647,000.
This was offset by a reduction in accounts payable and accrued expenses of
$494,000 and non-cash charges related to discontinued operations of
$307,000.




Net cash provided by operating
activities from both continuing operations and discontinued operations for the
three month period ended December 31, 2006 was $140,000. This cash inflow was
primarily due to a reduction of accounts receivable of $655,000, inventory of $
231,000 and depreciation of $138,000. This was offset by a net operating loss of
$429,000 and reduction in accounts payable $454,000.




Investing
Activities




We invest our excess cash in Auction
Rate Securities to obtain a market rate return on our excess cash. During the
three month period ended December 31, 2007 we utilized cash to purchase
$3,675,000 of securities and received $1,450,000 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 $219,000 of cash.




In the three months ended December 31,
2006 we utilized cash to purchase $3,800,000 of securities and received
$3,500,000 on the sale of like securities as part of our excess cash investment
program. In addition we purchased equipment of $33,000 and sold equipment for
$44,000.




Financing
Activities




Net cash
used in financing activities for the three months ended December 31, 2007
totaled $18,000.




We received $42,000 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 three month period
ended December 31, 2006.




Noncash
investing and financing




Our
contractual obligations and commitments are summarized in the table below (in
000’s) as of December 31, 2007:




Total
            
            
            Less
      than
              1
      Year
            
            
            1-3
      years
            
            
            4-5
      years
            
            
            After
              5
      yearsLong-term
      debt (1)
            
            $
            160
            
            
            $
            75
            
            
            $
            85
            
            
            $
            -
            
            
            $
            -Leases
            
            
            1,398
            
            
            
            222
            
            
            
            465
            
            
            
            481
            
            
            
            230Total
      Contractual CashObligations
            
            $
            1,558
            
            
            $
            297
            
            
            $
            550
            
            
            $
            481
            
            
            $
            230





(1)
Includes fixed interest ranging from 0.62% to 8.5%


14
 Table of Contents


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
limitations, statements regarding the Company’s expectations, hopes, beliefs,
anticipations, commitments, intentions and strategies regarding the future.
Forward-looking statements include, but are not limited to, statements contained
in 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 fiscal year
ended September 30, 2007.




Manufacturing and
Operations




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




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




Markets and Market
Conditions




Our
profitability can be adversely affected due to increased raw material
costs.




Our
manufacturing costs may be impacted by unanticipated increases in raw material
costs during the time span between the cost quotes and actual procurement of raw
materials. The impact can be significant for purchase orders requiring multiple
scheduled deliveries. Whereas we may be able to approach some of the customers
for costs adjustments, there is no assurance that we would be successful in
obtaining these adjustments. Failure to obtain price adjustments would result in
decreased profitability and/or losses.




Our
inventory of raw material and supplies may incur significant
obsolescence.




Our
market demands rapid turn around from receipt of purchase orders to shipping of
the products. We maintain significant inventory of raw materials and supplies to
meet this demand resulting in risk of inventory obsolescence. Whereas we
anticipate and make provisions for a reasonable fraction of inventory
obsolescence, a significant higher level of obsolescence can adversely impact
our profitability.




Our
Customers




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. One
customer comprised approximately 13% of total sales for the three months ended
December 31, 2007 and another customer comprised 12% of accounts receivable. Two
customers comprised 23% of total sales for quarter ended December 31, 2006 and
one of those accounted for 17% of accounts receivable.


15
 Table of Contents


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.




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(c)) 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.  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 is in the process
of developing and implementing 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
 Table of Contents


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.





February 13,
2008







Signature:
/s/ Cheryl Beranek
Podzimek


Print
Name: Cheryl Beranek
Podzimek


Print
Title: Chief Executive
Officer (Principal Executive Officer)






17