**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





T
            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 June 30, 2007





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




Commission
      File Number 0-16106




**APA
      Enterprises, Inc.**


(Exact
      name of Registrant as specified in its charter)





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





**2950
      N.E. 84th Lane,
      Blaine, Minnesota 55449**


(Address
      of principal executive offices and zip code)





**(763)
      784-4995**


(Registrant’s
      telephone number, including area code)





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   T          No   £





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   £          Accelerated
      filer   £          Non-accelerated
      filer   T





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





Yes   £          No   T





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





Class:
            August
                7, 2007Common
                stock, par value $.01
            11,872,331







1




**APA
      ENTERPRISES, INC.**


**FORM
      10-QSB**


**TABLE
      OF CONTENTS**




**PART
                I. FINANCIAL INFORMATION**
            **3**ITEM
                1. FINANCIAL STATEMENTS
            3**CONSOLIDATED
                CONDENSED BALANCE
                SHEETS**
            3**CONSOLIDATED
                CONDENSED STATEMENTS OF
                OPERATIONS**
            4**CONSOLIDATED
                CONDENSED STATEMENTS OF CASH
                FLOWS**
            5ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATIONS
            9ITEM
                3. CONTROLS AND PROCEDURES
            13**PART
                II. OTHER INFORMATION**
            **13**ITEM
                1. LEGAL PROCEEDINGS
            13ITEM
                2. UNREGISTERED SALES OF EQUITY SECURITY AND USE OF
                PROCEEDS
            13ITEM
                3. DEFAULT UPON SENIOR SECURITIES
            13ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            14ITEM
                5. OTHER INFORMATION
            14ITEM
                6. EXHIBITS
            14




2
 *Table
          of Contents*


**PART
      I. FINANCIAL INFORMATION**


**ITEM
      1.  FINANCIAL STATEMENTS**


**APA
      ENTERPRISES, INC.**


**CONSOLIDATED
      CONDENSED BALANCE SHEETS**


**(Unaudited)**


June
                30,
            
            
            March
                31,2007
            
            
            2007**Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            6,509,106
            
            
            $
            6,716,176Accounts
                receivable
            
            
            2,119,767
            
            
            
            1,697,811Inventories
            
            
            1,619,934
            
            
            
            1,312,681Prepaid
                expenses and other
            
            
            136,373
            
            
            
            138,199Current
                assets - discontinued operations
            
            
            29,886
            
            
            
            367,325Total
                current assets
            
            
            10,415,066
            
            
            
            10,232,192Property,
                plant and equipment, net
            
            
            1,668,160
            
            
            
            1,656,011Property,
                plant and equipment, net - discontinued operations
            
            
            -
            
            
            
            554,879Goodwill
            
            
            2,570,511
            
            
            
            2,570,511Other
            
            
            281,589
            
            
            
            307,122Note
                receivable
            
            
            480,880
            
            
            
            -Long
                term assets - discontinued operations
            
            
            100,000
            
            
            
            401,8433,432,980
            
            
            
            3,279,476Total
                assets
            
            $
            15,516,206
            
            
            $
            15,722,558**Liabilities
                and shareholders’ equity**Current
                liabilities:Current
                portion of long-term debt
            
            $
            70,715
            
            
            $
            69,528Accounts
                payable
            
            
            1,515,770
            
            
            
            916,509Accrued
                compensation
            
            
            812,279
            
            
            
            815,626Accrued
                expenses
            
            
            59,901
            
            
            
            93,251Current
                liabilities of discontinued operations
            
            
            281,640
            
            
            
            115,812Total
                current liabilities
            
            
            2,740,305
            
            
            
            2,010,726Long-term
                debt, net of current maturities
            
            
            109,939
            
            
            
            128,071Other
                long term liabilities
            
            
            333,836
            
            
            
            107,277Long-term
                liabilities of discontinued operations
            
            
            247,894
            
            
            
            -Total
                liabilities
            
            
            3,431,974
            
            
            
            2,246,074Shareholders’
                equity:Undesignated
                shares, 4,999,500 authorized shares; no shares issued and
                outstanding
            
            
            -
            
            
            
            -Preferred
                stock, $.01 par value; 500 authorized shares; no shares issued and
                outstanding
            
            
            -
            
            
            
            -Common
                stock, $.01 par value; 50,000,000 authorized shares; 11,872,331 shares
                issued and outstanding at March 31, 2007 and June 30, 2007
            
            
            118,723
            
            
            
            118,723Additional
                paid-in capital
            
            
            52,028,252
            
            
            
            52,018,729Accumulated
                foreign currency translation
            
            
            -
            
            
            
            (8,164
            )Accumulated
                deficit
            
            
            (40,062,743
            )
            
            
            (38,652,804
            )Total
                shareholders’ equity
            
            
            12,084,232
            
            
            
            13,476,484Total
                liabilities and shareholders’ equity
            
            $
            15,516,206
            
            
            $
            15,722,558




SEE
      ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
      STATEMENTS


3
 *Table
          of Contents*




**APA
      ENTERPRISES, INC**.


**CONSOLIDATED
      CONDENSED STATEMENTS OF
      OPERATIONS**


**(Unaudited)**





Three
                Months EndedJune
                30,2007
            
            
            2006Revenues
            
            $
            4,907,046
            
            
            $
            5,072,186Cost
                of revenues
            
            
            3,456,901
            
            
            
            3,639,724Gross
                profit
            
            
            1,450,145
            
            
            
            1,432,462Operating
                expensesSelling,
                general and administrative
            
            
            1,977,583
            
            
            
            1,486,251Loss
                on disposal of assets
            
            
            -
            
            
            
            3,2911,977,583
            
            
            
            1,489,542Loss
                from operations
            
            
            (527,438
            )
            
            
            (57,080
            )Interest
                income
            
            
            86,588
            
            
            
            103,144Interest
                expense
            
            
            (3,718
            )
            
            
            (20,614
            )Other
                income (expense), net
            
            
            -
            
            
            
            16,22782,870
            
            
            
            98,757(Loss)
                income from continuing operations before income taxes
            
            
            (444,568
            )
            
            
            41,677Income
                tax expense
            
            
            24,370
            
            
            
            18,980Net
                (loss)  income from continuing operations
            
            
            (468,938
            )
            
            
            22,697Loss
                from discontinued operations
            
            
            (941,001
            )
            
            
            (134,715
            )Net
                loss
            
            $
            (1,409,939
            )
            
            $
            (112,018
            )Net
                income (loss) per share basic and diluted:Continuing
                operations
            
            $
            (0.04
            )
            
            $
            0.00Discontinued
                operations
            
            
            (0.08
            )
            
            
            (0.01
            )Net
                loss
            
            $
            (0.12
            )
            
            $
            (0.01
            )Weighted
                average shares outstanding:Basic
                and diluted
            
            
            11,872,331
            
            
            
            11,872,331




SEE
      ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


4
 *Table
            of Contents*




**APA
      ENTERPRISES, INC.**


**CONSOLIDATED
      CONDENSED STATEMENTS OF CASH
      FLOWS**


**(Unaudited)**




Three
                Months EndedJune
                30,2007
            
            
            2006**Cash
                Flow from operating activities**Net
                loss
            
            $
            (1,409,939
            )
            
            $
            (112,018
            )Non-cash
                charges related to discontinued operations
            
            
            660,314
            
            
            
            (341,709
            )Adjustments
                to reconcile net loss to net cash used in
                operating   activities:Depreciation
                and amortization
            
            
            123,603
            
            
            
            154,416Deferred
                taxes
            
            
            24,270
            
            
            
            16,180Stock
                based compensation
            
            
            9,523
            
            
            
            19,625Severance
                accrual
            
            
            397,481
            
            
            
            -Changes
                in operating assets and liabilities:
            
            
            
            
            
            
            -Accounts
                receivable, net
            
            
            (397,038
            )
            
            
            (212,321
            )Inventories
            
            
            (290,562
            )
            
            
            (236,963
            )Prepaid
                expenses and other
            
            
            59,446
            
            
            
            24,655Accounts
                payable and accrued expenses
            
            
            319,735
            
            
            
            (258,627
            )Net
                cash used in operating activities
            
            
            (503,167
            )
            
            
            (946,762
            )**Cash
                flow from investing activities**Purchases
                of property and equipment
            
            
            (144,608
            )
            
            
            (192,870
            )Proceeds
                from sale of assets
            
            
            389,131
            
            
            
            358,765Net
                cash provided by investing activities
            
            
            244,523
            
            
            
            165,895**Cash
                flow from financing activities**Repayment
                of long-term debt
            
            
            (16,945
            )
            
            
            (3,864
            )Net
                cash used in financing activities
            
            
            (16,945
            )
            
            
            (3,864
            )Foreign
                currency translation
            
            
            21,326
            
            
            
            (19,100
            )Decrease
                in cash and cash equivalents
            
            
            (254,263
            )
            
            
            (803,831
            )Cash
                and cash equivalents at beginning of period
            
            
            6,763,369
            
            
            
            8,947,777Cash
                and cash equivalents at end of period
            
            $
            6,509,106
            
            
            $
            8,143,946Noncash
                investing and financing:Withdrawal
                of bond reserve funds, net
            
            $
            -
            
            
            $
            85,623Note
                receivable for Sale of India operations
            
            $
            504,499
            
            
            $
            -




SEE
      ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


5
 *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. 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-K for the year ended March 31,
      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
      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 APA
      Enterprises, 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 APA Enterprises, Inc.





**Note
      2.  Net 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 578,490 and 613,980 shares of common
      stock with a weighted average exercise price of $2.51 and $2.85 were outstanding
      at June 30, 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 preceding twelve months
      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.





Sale
      of India Operations





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.  The purchase price of  $504,499 was paid by
      delivery of a five year promissory note.  The note is secured by a
      pledge of Company stock by Dr. Jain, a pledge by Dr. Jain of payments under
      his
      Separation Agreement with the Company, and a personal guaranty by Dr. Jain.
      The
      purchase price was determined by the independent directors to be fair and
      reasonable to the Company.  The current portion of the note receivable
      is presented within “prepaid expenses and other” and the long term portion is
      reflected as note receivable on the balance sheet.  The Company
      recorded a loss of approximately $127,000 on the sale that is presented in
      discontinued operations in the condensed consolidated statements of
      operations.




6
 *Table
            of Contents*





Discontinuance
      of Optronics Segment




The
      Company ceased all remaining operations related to the Optronics segment in
      June
      of 2007.  Substantially all employees related to the Optronics segment
      were terminated prior to June 30, 2007.  The Company recorded expense
      of $78,109 for one time termination benefits.  The decision to close
      its facility in Blaine, Minnesota, that was fully dedicated to the Optronics
      segment, occurred in June of 2007.  The Company recorded a charge of
      $418,044 for remaining contract obligations costs through November of 2009
      as
      the facility will not provide any economic benefit to the Company in the future.
      A portion of the contract obligation, $170,150, is reflected as a current
      liability of discontinued operations, the balance $247,894 is included in long
      term liabilities of discontinued operations. The Company recorded asset
      impairment charges of $367,928 related to the write-off of inventory and
      write-down of fixed assets to their realizable value.  The assets
      remaining that will not be retained will be sold or disposed of.  In
      addition to the costs already recognized, the Company anticipates further
      closing costs in the next quarter of approximately $60,000 for exiting the
      Blaine building, liquidating assets and closing Optronics.




Discontinued
      Operations




Operating
      results related to the discontinuance of the Optronics segment and APA India
      for
      the three months ended June 30, 2007 and 2006, which have been reclassified
      and
      presented in our consolidated statements of income as discontinued operations,
      are summarized below:






Three
                Months EndedJune
                30,2007
            
            
            2006Net
                sales
            
            $
            33,336
            
            
            $
            50,843Cost
                of goods sold
            
            
            229,548
            
            
            
            153,318Gross
                profit
            
            
            (196,212
            )
            
            
            (102,475
            )Operating
                expenses
            
            
            744,789
            
            
            
            32,240Loss
                from discontinued operations
            
            $
            (941,001
            )
            
            $
            (134,715
            )






**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 accounting
      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 will be paid his current salary ($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 of $397,481 in the statement
      of operations and the short term portion of the liability is include 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.




7
 *Table
            of Contents*




The
      Company recorded $9,523 and $19,625 of related compensation expense for the
      three month periods ended June 30, 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 June 30, 2007, $75,749 of total unrecognized
      compensation expense related to non-vested awards is expected to be recognized
      over a weighted average period of approximately 2.89 years.




**Note
      6.  Inventories**


Inventories
      consist of the following as of:




June
                30, 2007
            
            
            March
                31, 2007Raw
                Materials
            
            $
            1,462,410
            
            
            $
            1,072,081Work-in-progress
            
            
            61,839
            
            
            
            23,525Finished
                Goods
            
            
            95,685
            
            
            
            217,075$
            1,619,934
            
            
            $
            1,312,681





**Note
      7.  Major Customer Concentration**





One
      customer comprised approximately 11% of total sales for the three months ended
      June 30, 2007.  One customer comprised 13% of total sales for the
      first quarter ended June 30, 2006 and 13% of accounts receivable as of June
      30,
      2006.




**Note
      8.  Income Taxes – Adoption of Financial Interpretation (“FIN”) No.
      48**





In
      June
      2006, the Financial Accounting Standards Bound (“FASB”) issued FIN No. 48,
*Accounting for Uncertainty in Income Taxes*– *an Interpretation of
      FASB Statement No. 109.*  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 Interpretation was effective for the Company at the
      beginning of fiscal 2008.





The
      Company adopted the provisions of FASB FIN No. 48, on April 1,
      2007.  Previously, the Company had accounted for tax contingencies in
      accordance with SFAS No. 5, *Accounting for Contingencies*.  As
      required by FIN No. 48, which clarifies SFAS No. 109,  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 No. 48 to
      all tax positions for which the statute of limitations remained
      open.  As a result of the implementation of FIN No. 48, the Company
      recognized no liability for unrecognized tax benefits.  There have
      been no material changes to this liability since March 31, 2007.





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 April 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.


8
 *Table
          of Contents*


**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.





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 statement 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.




**Note
      10.Subsequent
      Event**





The
      Company ceased all of its operations in its Aberdeen facility during the later
      part of fiscal year 2006 as a part of its consolidation of manufacturing
      operations.  The Company owned facility, located approximately on a
      10-acre parcel, has been designated for lease or sale since this date. In August
      2007, the Company entered into a lease for approximately fifty percent of its
      Aberdeen, South Dakota building.  The lease is for a period of three
      years with multiple five year renewal options.  The lease also offers
      an option for the lessee to purchase the building at a price of $1,925,000,
      within the first thirty-six months of the lease.  Should the lessee
      exercise this right, a portion of the rent paid to date may be applied against
      the purchase price.   These amounts will be deferred until such
      time as the option expires or is exercised.





**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**




APA
      Enterprises, Inc., currently has one wholly-owned subsidiary named APA Cables
      & Networks, Inc. (“APACN”). Since the discontinuation of the Optronics
      business, the operations of APA Enterprises, Inc. consist solely of the
      operations of APACN.




APACN
      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”).  To date, APACN has been able to successfully establish
      itself as a value-added supplier to its target market of independent telephone
      companies and cable television operators as well as OEMs who value a high level
      of engineering services as part of their procurement process. APACN has expanded
      its product offerings and broadened its customer base since its inception four
      years ago.  We continue to see positive trends in the business
      segments we serve and believe our solid reputation of quality service and
      competitive 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
      we have moved forward to recognize the costs of closing the Optronics business
      and the related costs of closing the Blaine facility.




9
 *Table
            of Contents*




Regarding
      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. 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 and accounting officer), and Chairman
      of
      the Board of Directors of the Company. His resignation triggered an employment
      agreement that requires payment of his 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
      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.






**RESULTS
      OF OPERATIONS**




**THREE
      MONTHS ENDED JUNE 30, 2007 VS. THREE MONTHS ENDED JUNE 30,
      2006**




The
      sale
      of the India operations along with the discontinuation of Optronics leaves
      APA
      Cables & Networks as the single business segment of APA Enterprises,
      Inc.




APACN
      had
      consolidated revenues of $ 4,907,046 for the three months ended June 30, 2007
      compared to revenues of $5,072,186 for the same quarter in 2006.




**GROSS
      PROFIT AND COST OF SALES**




APACN’s
      gross profit increased $17,683, or 1% to $1,450,145 compared to $1,432,462
      for
      the same quarter in 2006.  Gross profit as a percent of revenue was
      30% in the current quarter as compared to 28% in the same quarter of
      2006.  The increase in margin percentage reflects on the results of
      APACN’s ongoing program to reduce the cost of its products through a combination
      of product re-design, process improvement and 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 June 30, 2007 increased 33% or $491,332, to $1,977,583 from
      $1,486,251 in the same quarter of 2006. Consolidated  S, G, & A
      for 2007 consists of $1,363,181 for APACN, and $614,402 for corporate expenses
      which includes the one time charge to recognize Dr. Jain’s severance payment of
      $397,481. This compares to $1,258,601 for APACN and $227,650 for corporate
      expenses the same quarter in 2006. APACN’s S, G, & A expenses have increased
      8% from the same quarter in the prior year mainly due to increased sales and
      marketing activities as well as engineering resources




**(LOSS)
      INCOME FROM OPERATIONS**




Consolidated
      losses from operations increased $470,358 during the three months ended June
      30,
      2007, to $527,438 from $57,080 in the same period in 2006.   The
      increase in costs is attributable primarily to the one time cost of the
      severance for Dr. Jain totaling $397,481.




**OTHER
      INCOME AND EXPENSE**




Consolidated
      other income decreased slightly by $15,895 to $82,870 in the three months ended
      June 30, 2007 from $98,765 in 2006.




10
 *Table
            of Contents*





**NET
      LOSS FROM CONTINUING OPERATIONS**




Consolidated
      net loss for the quarter increased $491,635, to $468,938, or $0.04 per share,
      from income of $22,697, or $0.00 per share in the year ago period.




**LOSS
      FROM DISCONTINUED OPERATIONS**




Losses
      from discontinued operations of $941,001 were recorded in the period ended
      June
      30, 2007. For the same period in 2006 losses from discontinued operations were
      $134,715. The costs for 2007 include the following:




·
              Blaine
                  land was sold for  $325,000 at a gain of
                  $265,000
  ·
              APA
                  India was sold at a loss of
                  $126,566
  ·
              APA
                  India incurred an operating loss of
                  $64,780.
  ·
              Closure
                  of Optronics forced us to recognize as a current expense all future
                  lease
                  payments on the Blaine facility $418,044. In addition other Optronics
                  cost
                  related to discontinuation were the write off of all remaining
                  inventory
                  at $109,871 the write down of fixed assets of $258,056, severance
                  costs of
                  $78,109 and general operating expenses of
                  $150,575.
   **LIQUIDITY
        AND CAPITAL RESOURCES**




The
      Company’s cash and cash equivalents were $6,509,109 at June 30, 2007, a decrease
      of $254,263, compared to $6,763,369 as of March 31, 2007, included $6,716,176
      of
      cash from continuing operations and $47,193 of cash from discontinued
      operations. The reasons for this are decreases are described below under the
      caption “Operating Activities”. We believe we have sufficient funds for
      operations for at least the next twelve months.




*Operating
      Activities*




Net
      cash
      used by operating activities from both continuing operations and discontinued
      operations for the three month period ended June 30, 2007 was $503,167. This
      cash outflow was primarily due to $1,409,939 of losses from continuing and
      discontinued operations, reduced depreciation, an increase in accounts
      receivable of $397,038 and an increase in inventory of $290,562 and a reduction
      of accounts payable and accrued expenses of $319,735.




Net
      cash
      used by operating activities from both continuing operations and discontinued
      operations for the three month period ended June 30, 2006 was $946,762. This
      use
      of cash was due primarily to a loss of $112,018 from net loss, increases in
      accounts receivable of $212,321, increases in inventory of $236,963 and accounts
      payable reductions of $258,627.  Also reflected is the gain on the
      sale of assets of $341,709.




*Investing
      Activities*




We
      realized an increase from investing activities due largely to the sale of land
      in Blaine for approximately $325,000, reflected in the proceeds from sale of
      assets. The Company spent $144,608 for manufacturing equipment and information
      technology equipment, contact resource management and enterprise resource
      planning software and implementation services for the three month period ended
      June 30, 2007.




We
      realized proceeds on the sale of assets in the amount of $358,765 for the period
      ended June 30, 2006. The proceeds on the sale of assets were primarily from
      the
      sale of land in the amount of $325,000.  The Company spent $192,870 capital
      expenditures for manufacturing equipment for the three month period ended June
      30, 2006.




*Financing
      Activities*




Net
      cash
      used in financing activities for the three months ended June 30, 2007 totaled
      $16,945.




We
      used
      $3,864 for reduction of debt for the three month period ended June 30,
      2006.




11
 *Table
          of Contents*




*Noncash
      investing and financing*




The
      Company received a note receivable in the amount of $504,499 for the sale of
      the
      stock in APA India.




Our
      contractual obligations and commitments are summarized in the table below (in
      000’s) as of June 30, 2007:




Total
            
            
            Less
                than
              1
                Year
            
            
            1-3
                years
            
            
            4-5
                years
            
            
            After
              5
                yearsLong-term
                debt (1)
            
            $
            201
            
            
            $
            82
            
            
            $
            118
            
            
            $
            -
            
            
            $
            -Leases
            
            
            1,807
            
            
            
            347
            
            
            
            633
            
            
            
            474
            
            
            
            354Total
                Contractual CashObligations
            
            $
            2,008
            
            
            $
            429
            
            
            $
            751
            
            
            $
            474
            
            
            $
            354





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






**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 and Analysis of Financial Condition and Results
      of
      Operations.  Actual results could differ from those projected in any
      forward-looking statements for the reasons, among others, detailed below. We
      believe that many of the risks detailed here are part of doing business in
      the
      industry in which we compete and will likely be present in all periods reported.
      The fact that certain risks are characteristic to the industry does not lessen
      the significance of the risk. The forward-looking statements are made as of
      the
      date of this Report as Form 10-Q and we assume no obligation to update the
      forward-looking statements or to update the reasons why actual results could
      differ from those projected in the forward-looking statements. Readers of this
      Report and prospective investors should also review the Risk Factors set forth
      in our Report on Form 10-K for the fiscal year ended March 31,
      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.




12
 *Table
          of Contents*




*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 11% of total sales for the three months ended
      June 30, 2007. One customer comprised 13% of total sales for the first quarter
      ended June 30, 2006 and 13% of accounts receivable as of June 30,
      2006.






**APPLICATION
      OF CRITICAL ACCOUNTING POLICIES**




Our
      significant accounting policies are described in Note A to the Consolidated
      Financial Statements in our Annual Report for the year ended March 31,
      2007.  The accounting policies used in preparing our interim 2008
      Consolidated Financial Statements are the same as those described in our Annual
      Report.




**ITEM
      3.  CONTROLS AND PROCEDURES.**




(a)
            *Evaluation
                of disclosure controls and procedures*.  The Company’s chief
                executive officer and chief financial officer have concluded that
                as of
                the end of the fiscal period covered by this report the Company’s
                disclosure controls and procedures (as defined in Exchange Act Rule
                13a-14(c)) were effective.




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








**PART
      II. OTHER INFORMATION**





**ITEM
      1.  LEGAL PROCEEDINGS**




None.




**ITEM
      2.  UNREGISTERED SALES OF EQUITY SECURITY AND USE
      OF PROCEEDS**




None.




**ITEM
      3. DEFAULT UPON SENIOR SECURITIES**




None.




13
 *Table
            of Contents*





**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 of Chief Financial
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





Exhibit
      32.1– Certification required of Chief Executive
      Officer by 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.




APA
      ENTERPRISES, INC.





August
      14, 2007




Signature:
      /s/ Cheryl Beranek Podzimek


Print
      Name: Cheryl Beranek Podzimek


Print
      Title: Chief Executive Officer (Principal Executive Officer)






14