clfd20230331

clfd20230331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023

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

For the transition period from __________________ to ___________________

Commission File Number 0-16106

Clearfield, Inc.

(Exact name of Registrant as specified in its charter)

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

7050 Winnetka Avenue North, Suite 100, Brooklyn Park, Minnesota 55428

(Address of principal executive offices and zip code)

(763) 476-6866

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	CLFD	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) 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 such filing requirements for the past 90 days.

☒ Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

☐ Yes No ☒

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

Class:	Outstanding as of May 1, 2023
Common stock, par value $.01	15,253,755

CLEARFIELD, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	4
ITEM 1. FINANCIAL STATEMENTS	4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 4. CONTROLS AND PROCEDURES	29
PART II. OTHER INFORMATION	29
ITEM 1. LEGAL PROCEEDINGS	29
ITEM 1A. RISK FACTORS	29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	29
ITEM 4. MINE SAFETY DISCLOSURES	29
ITEM 5. OTHER INFORMATION	30
ITEM 6. Exhibits	30
SIGNATURES	31

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

	March 31, 2023 (Unaudited)			September 30, 2022
Assets
Current Assets
Cash and cash equivalents	$	137,081		$	16,650
Short-term investments		19,984			5,802
Accounts receivables, net		39,382			53,704
Inventories, net		100,838			82,208
Other current assets		3,655			1,758
Total current assets		300,940			160,122

Property, plant and equipment, net		21,088			18,229

Other Assets
Long-term investments		8,527			22,747
Goodwill		6,587			6,402
Intangible assets, net		6,459			6,376
Right-of-use lease assets		11,938			13,256
Deferred tax asset		957			1,414
Other		899			582
Total other assets		35,367			50,777
Total Assets	$	357,395		$	229,128

Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of lease liability	$	3,533		$	3,385
Accounts payable		16,676			24,118
Accrued compensation		6,316			13,619
Accrued expenses		5,050			6,181
Factoring liability		8,475			4,391
Total current liabilities		40,050			51,694

Other Liabilities
Long-term debt		2,181			18,666
Long-term portion of lease liability		8,943			10,412
Deferred tax liability		822			774
Total liabilities		51,996			81,546

Shareholders’ Equity
Preferred stock, $.01 par value; 500,000 shares; no shares issued or outstanding		-			-
Common stock, authorized 50,000,000, $.01 par value; 15,254,711 and 13,818,452 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively		153			138
Additional paid-in capital		186,058			54,539
Accumulated other comprehensive loss		(234	)		(1,898	)
Retained earnings		119,422			94,803
Total shareholders’ equity		305,399			147,582
Total Liabilities and Shareholders’ Equity	$	357,395		$	229,128

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

UNAUDITED

(IN THOUSANDS, EXCEPT SHARE DATA)

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2023			2022		2023			2022

Net sales	$	71,809		$	53,495	$	157,751		$	104,604

Cost of sales		48,246			30,331		103,539			58,468

Gross profit		23,563			23,164		54,212			46,136

Operating expenses
Selling, general and administrative		11,508			11,233		24,266			21,155
Income from operations		12,055			11,931		29,946			24,981

Net investment income		1,395			121		1,698			241
Interest expense		(112	)		-		(356	)		-

Income before income taxes		13,338			12,052		31,288			25,222

Income tax expense		2,974			2,816		6,669			5,596
Net income	$	10,364		$	9,236	$	24,619		$	19,626

Net income per share Basic		0.67			0.67		1.68			1.43
Net income per share Diluted	$	0.67		$	0.66	$	1.67		$	1.41

Weighted average shares outstanding:
Basic		15,233,848			13,767,341		14,693,829			13,755,291
Diluted		15,260,769			13,902,836		14,766,938			13,900,180

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED

(IN THOUSANDS)

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2023		2022			2023		2022

Comprehensive Income:
Net income	$	10,364	$	9,236		$	24,619	$	19,626
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on available-for-sale investments		197		(725	)		339		(725	)
Unrealized gain on foreign currency translation		302		-			1,326		-
Total other comprehensive income (loss)		499		(725	)		1,665		(725	)

Total comprehensive income	$	10,863	$	8,511		$	26,284	$	18,901

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(IN THOUSANDS)

For the three months ended March 31, 2023								Accumulated other
	Common Stock				Additional			comprehensive			Retained		Total share-
	Shares		Amount		paid-in capital			loss			earnings		holders’ equity
Balance at December 31, 2022		15,218	$	152	$	185,404		$	(733	)	$	109,058	$	293,881
Stock-based compensation expense		-		-		784			-			-		784
Issuance of common stock under equity compensation plans		33		1		-			-			-		1
Exercise of stock options, net of shares exchanged for payment		4		-		(130	)		-			-		(130	)
Other comprehensive income		-		-		-			499			-		499
Net income		-		-		-			-			10,364		10,364
Balance at March 31, 2023		15,255	$	153	$	186,058		$	(234	)	$	119,422	$	305,399

For the three months ended March 31, 2022								Accumulated other
	Common Stock				Additional			comprehensive			Retained		Total share-
	Shares		Amount		paid-in capital			loss			earnings		holders’ equity
Balance at December 31, 2021		13,762	$	138	$	58,505		$	-		$	55,831	$	114,474
Stock-based compensation expense		-		-		570			-			-		570
Restricted stock issuance, net of forfeitures		6		-		-			-			-		-
Withholding related to exercise of stock options		5		-		(126	)		-			-		(126	)
Other comprehensive loss		-		-		-			(725	)		-		(725	)
Net income		-		-		-			-			9,236		9,236
Balance at March 31, 2022		13,773	$	138	$	58,949		$	(725	)	$	65,067	$	123,429

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(IN THOUSANDS)

For the six months ended March 31, 2023									Accumulated other
	Common Stock					Additional			comprehensive			Retained		Total share-
	Shares			Amount		paid-in capital			loss			earnings		holders’ equity
Balance as of September 30, 2022		13,819		$	138	$	54,539		$	(1,898	)	$	94,803	$	147,582
Stock-based compensation expense		-			-		1,444			-			-		1,444
Issuance of common stock under equity compensation plans		51			1		954			-			-		954
Issuance of common stock under employee stock purchase plan		5			-		299			-			-		299
Exercise of stock options, net of shares exchanged for payment		10			-		(471	)		-			-		(471	)
Repurchase of shares for payment of withholding taxes for vested restricted stock grants		(10	)		-		(954	)		-			-		(954	)
Issuance of common stock, net		1,380			14		130,248			-			-		130,262
Other comprehensive income		-			-		-			1,665			-		1,665
Net income		-			-		-			-			24,619		24,619
Balance at March 31, 2022		15,255		$	153	$	186,058		$	(234	)	$	119,422	$	305,399

For the six months ended March 31, 2022									Accumulated other
	Common Stock					Additional			comprehensive			Retained		Total share-
	Shares			Amount		paid-in capital			loss			earnings		holders’ equity
Balance as of September 30, 2021		13,732		$	137	$	58,246		$	-		$	45,441	$	103,824
Stock-based compensation expense		-			-		1,010			-			-		1,010
Restricted stock issuance, net of forfeitures		30			1		-			-			-		1
Issuance of common stock under employee stock purchase plan		8			-		249			-			-		249
Withholding related to exercise of stock options		7			-		(282	)		-			-		(282	)
Repurchase of shares for payment of withholding taxes for vested restricted stock grants		(4	)		-		(274	)		-			-		(274	)
Other comprehensive loss		-			-		-			(725	)		-		(725	)
Net income		-			-		-			-			19,626		19,626
Balance at March 31, 2022		13,773		$	138	$	58,949		$	(725	)	$	65,067	$	123,429

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

	Six Months			Six Months
	Ended			Ended
	March 31,			March 31,
	2023			2022
Cash flows from operating activities
Net income	$	24,619		$	19,626
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		2,822			1,362
Amortization of discount on investments		(1,139	)		(21	)
Deferred taxes		(35	)		-
Stock-based compensation		1,444			1,010
Changes in operating assets and liabilities, net of acquired amounts:
Accounts receivable		16,353			(2,398	)
Inventories, net		(17,243	)		(33,394	)
Other assets		(2,407	)		(811	)
Accounts payable and accrued expenses		(14,273	)		3,344
Net cash provided by (used in) operating activities		10,141			(11,282	)

Cash flows from investing activities
Purchases of property, plant and equipment, and intangible assets		(4,797	)		(4,842	)
Purchases of investments		(99,126	)		(248	)
Proceeds from sales and maturities of investments		100,743			17,386
Net cash provided by (used in) investing activities		(3,180	)		12,296

Cash flows from financing activities
Repayment of long-term debt		(16,700	)		-
Proceeds from issuance of common stock under employee stock purchase plan		299			249
Repurchase of shares for payment of withholding taxes for stock grants		(954	)		(274	)
Withholding related to exercise of stock options		(471	)		(282	)
Issuance of stock under equity compensation plans		954			-
Net proceeds from issuance of common stock		130,262			-
Net cash provided by (used in) financing activities		113,390			(307	)

Effect of exchange rates on cash		80			-
Increase in cash and cash equivalents		120,431			707
Cash and cash equivalents, beginning of year		16,650			13,216
Cash and cash equivalents, end of year	$	137,081		$	13,923

Supplemental disclosures for cash flow information
Cash paid for income taxes	$	10,211		$	6,934
Cash paid for interest expense	$	266		$	-
Non-cash financing activities
Cashless exercise of stock options	$	510		$	210

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Unless the context otherwise requires, for purposes of the Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company,” and “Clearfield,” refer to Clearfield, Inc.

Basis of Presentation

The accompanying (a) consolidated balance sheet as of September 30, 2022, which has been derived from audited financial statements, and (b) unaudited interim consolidated financial statements as of and for the three and six months ended March 31, 2023 have been prepared by Clearfield Rin accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations, and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns, seasonality and other factors. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2022.

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. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Principles of Consolidation

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

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments. In November 2018, the FASB issued update ASU 2018-19 that clarifies the scope of the standard in the amendments in ASU 2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Financial instruments impacted include accounts receivable, trade receivables, other financial assets measured at amortized cost and other off-balance sheet credit exposures. The new guidance is effective for the Company beginning in the first quarter of fiscal 2024, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements.

Note 2. Net Income Per Share

Basic net income per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net income divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents, such as stock options, when dilutive.

The following is a reconciliation of the numerator and denominator of the net income per common share computations for the three and six months ended March 31, 2023 and 2022:

	Three Months Ended March 31,				Six Months Ended March 31,
(In thousands, except for share data)	2023		2022		2023		2022
Net income	$	10,364	$	9,236	$	24,619	$	19,626
Weighted average common shares		15,233,848		13,767,341		14,693,829		13,755,291
Dilutive potential common shares		26,921		135,495		73,109		144,889
Weighted average dilutive common shares outstanding		15,260,769		13,902,836		14,766,938		13,900,180
Net income per common share:
Basic	$	0.67	$	0.67	$	1.68	$	1.43
Diluted	$	0.67	$	0.66	$	1.67	$	1.41

Note 3. Cash and Cash Equivalents

We classify investments with original maturities of 90 days or less as cash equivalents. The following table presents the Company’s cash and cash equivalents balances:

(In thousands)	March 31, 2023		September 30, 2022
Cash and cash equivalents:
Cash including money market accounts	$	4,985	$	16,635
Money market funds		18,212		15
U.S. Treasury securities		113,884		-
Total cash and cash equivalents	$	137,081	$	16,650

Note 4. Investments

The Company invests in certificates of deposit (“CDs”) that are fully insured by the Federal Deposit Insurance Corporation (“FDIC”) and United States (“U.S.”) Treasury securities with terms of not more than five years, as well as money market funds. Historically, the Company’s investment portfolio had been classified as held-to-maturity and recorded at amortized cost. During the second quarter of fiscal 2022, the Company sold investments and reclassified its investment portfolio to available-for-sale, which is reported at fair value. The unrealized gain or loss on investment securities is recorded in other comprehensive income, net of tax. Realized gains and losses on available-for-sale securities are recognized upon sale and are included in net investment income in the consolidated statement of earnings.

At March 31, 2023, available-for-sale investments consisted of the following:

	March 31, 2023
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
Short-Term
U.S. Treasury securities	$	9,496	$	-	$	259	$	9,237
Certificates of deposit		10,995		-		248		10,747
Investment securities – short-term	$	20,491	$	-	$	507	$	19,984
Long-Term
U.S Treasury securities	$	6,702	$	-	$	539	$	6,163
Certificates of deposit		2,469		1		105		2,364
Investment securities – long-term	$	9,171	$	1	$	644	$	8,527

As of March 31, 2023, investments in debt securities in an unrealized loss position were as follows:

	In Unrealized Loss Position For Less Than 12 Months				In Unrealized Loss Position For Greater Than 12 Months
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S Treasury securities	$	-	$	-	$	15,433	$	798
Certificates of deposit		2,017		43		10,849		310
Investment securities	$	2,017	$	43	$	26,282	$	1,108

As of March 31, 2023, there were 59 securities in an unrealized loss position which is due to the market paying a higher interest rate than the coupon rate on these securities. As of March 31, 2023, there are no securities which are other than temporarily impaired as the Company intends to hold these securities until their value recovers and there is negligible credit risk due to the nature of the securities which are backed by the FDIC and U.S. federal government.

Note 5. Fair Value Measurements

The Company determines the fair value of its assets and liabilities based on the market price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair value of U.S. treasury securities and certificates of deposit based on valuations provided by an external pricing service that obtains the valuations from a variety of industry standard data providers.

The Company’s investments are categorized according to the three-level fair value hierarchy which distinguishes between observable and unobservable inputs, in one of the following levels:

Level 1- Quoted prices in active markets for identical assets or liabilities.

Level 2- Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3- Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those with fair value measurements that are determined using pricing models, discounted cash flow valuation or similar techniques, as well as significant management judgment or estimation.

The following provides information regarding fair value measurements for the Company’s investment securities as of March 31, 2023, according to the three-level fair value hierarchy:

	Fair Value Measurements at March 31, 2023
(In thousands)	Total		Level 1		Level 2		Level 3
Cash equivalents:
U.S Treasury securities	$	113,884	$	-	$	113,884	$	-
Money market funds		18,212		18,212		-
Total cash equivalents	$	132,096	$	18,212	$	113,884	$	-
Investment securities:
Certificates of deposit		13,111		-		13,111		-
U.S Treasury securities		15,400		-		15,400		-
Total investment securities	$	28,511	$	-	$	28,511	$	-

During the six months ended March 31, 2023 and the year ended September 30, 2022, the Company owned no Level 3 securities and there were no transfers within the fair value level hierarchy.

Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets, and right-of-use assets for operating leases are subject to non-recurring fair value measurements if they are deemed impaired. The Company had no re-measurements of non-financial assets to fair value in the three or six months ended March 31, 2023 and the year ended September 30, 2022.

Note 6. Other Comprehensive Income (Loss)

Changes in components of other comprehensive loss, net of tax, are as follows:

*(In thousands)*	Unrealized Gain/ (Loss) on Available-for-Sale Securities			Foreign Currency Translation Gain/(Loss)			Accumulated Other Comprehensive Loss
Balances at September 30, 2022	$	(1,224	)		(674	)		(1,898	)
Other comprehensive income for the three months ended December 31, 2022		141			1,024			1,165
Balances at December 31, 2022	$	(1,083	)		350			(733	)
Other comprehensive income for the three months ended March 31, 2023		197			302			499
Balances at March 31, 2023	$	(886	)		652			(234	)

Note 7. Stock-Based Compensation

On February 23, 2023, the Company’s shareholders approved the Clearfield, Inc. 2022 Stock Compensation Plan (the “2022 Plan”). The 2022 Plan became effective on the date of shareholder approval, and no further awards may be made under the Clearfield, Inc. Amended and Restated 2007 Stock Compensation Plan (the “Prior Plan”) following the effective date of the 2022 Plan. The total number of shares of stock reserved and available for distribution under the 2022 Plan is 1,461,461 shares, which includes the number of shares remaining for grant and delivery under the Prior Plan, plus any shares subject to outstanding awards under the Prior Plan as of the effective date of the 2022 Plan that were forfeited, cancelled or settled for cash.

The Company recorded $784,000 and $1,444,000 of compensation expense related to current and past restricted stock grants, non-qualified stock options, and the Company’s Employee Stock Purchase Plan (“ESPP”) for the three and six months ended March 31, 2023. For the three months ended March 31, 2023, $736,000 of this expense is included in selling, general and administrative expense, and $48,000 is included in cost of sales. For the six months ended March 31, 2023, $1,361,000 of this expense is included in selling, general and administrative expense, and $83,000 is included in cost of sales. The Company recorded $570,000 and $1,010,000 of compensation expense related to current and past restricted stock grants, non-qualified stock options, and the Company’s ESPP for the three and six months ended March 31, 2022. For the three months ended March 31, 2022, $538,000 of this expense is included in selling, general and administrative expense, and $32,000 is included in cost of sales. As of March 31, 2023, $6,681,000 of total unrecognized compensation expense related to non-vested restricted stock awards and stock options is expected to be recognized over a period of approximately 2.6 years.

Stock Options

The Company uses the Black-Scholes option pricing model to determine the fair value of options granted. During the six months ended March 31, 2023, the Company granted employees non-qualified stock options to purchase an aggregate of 19,084 shares of common stock with a weighted average contractual term of five years, a weighted average three-year vesting term, and a weighted average exercise price of $95.06 per share. During the six months ending March 31, 2022, the Company granted employees non-qualified stock options to purchase an aggregate of 62,730 shares of common stock with a weighted average contractual term of five years, a weighted average three-year vesting term, and a weighted average exercise price of $66.48 per share.

The fair value of stock option awards during the six months ended March 31, 2023 was estimated as of the respective grant dates using the assumptions listed below:

	Six months ended March 31, 2023
Dividend yield		0	%
Expected volatility		61.89	%
Risk-free interest rate		4.01	%
Expected life in years		3.5
Vesting period in years		3

The expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating the expected life. The expected life represents the period of time that options are expected to be outstanding after their grant date. The risk-free interest rate reflects the interest rate as of the grant date on zero-coupon U.S. governmental bonds with a remaining life similar to the expected option term.

Options are granted with exercise prices at fair market values determined on the date of grant and vesting normally occurs over a three to five-year period. Shares issued upon exercise of a stock option are issued from the Company’s authorized but unissued shares.

The following is a summary of stock option activity during the six months ended March 31, 2023:

	Number of options		Weighted average exercise price
Outstanding as of September 30, 2022		236,509	$	31.30
Granted

SEC Form 10-Q filed by Clearfield Inc.