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Note 2 - Shareholders' Equity

12 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Text Block]

NOTE 2 – SHAREHOLDERS’ EQUITY

Share Repurchase Program: On November 13, 2014, the Company announced that its Board of Directors had approved a stock repurchase program under which it will purchase up to $8,000,000 of its outstanding shares of common stock. On April 25, 2017, the Board of Directors increased the repurchase authorization by $4,000,000 to $12,000,000 of common stock. The program does not obligate Clearfield to repurchase any particular amount of common stock during any period. The repurchase will be funded by cash on hand. The repurchase program is expected to continue indefinitely until the maximum dollar amount of shares has been repurchased or until the repurchase program is earlier modified, suspended or terminated by the board of directors. In April 2020, the Board of Directors suspended the share repurchase plan due to uncertainties caused by COVID-19 and the Company’s desire to maintain capital flexibility. As of September 30, 2021, the Company had $4,980,671 remaining in its share repurchase program to repurchase its outstanding shares of common stock.

The Company is authorized to issue 50,000,000 shares of common stock at $.01 par value and 5,000,000 undesignated shares. From the undesignated shares, 500,000 shares have been designated as Series B Junior Participating Preferred Shares and none of such shares have been issued or are outstanding. The Board of Directors may, by resolution, establish from the remaining undesignated shares different classes or series of shares and may fix the relative rights and preferences of shares in any class or series.

Stock-Based Compensation: The Company’s stock-based compensation plans are administered by the Compensation Committee of the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

The Company currently has one equity compensation plan, the 2007 Stock Compensation Plan, from which it grants equity awards that are used as an incentive for directors, officers, and other employees. The 2007 Stock Compensation Plan has 667,465 shares available for issue as of September 30, 2021. As of September 30, 2021, $2,529,274 of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a period of approximately 3.1 years. The Company recorded related compensation expense for the years ended September 30, 2021 and 2020 of $1,280,135 and $773,555, respectively. For the year ended September 30, 2021, $1,222,756 of this expense was included in selling, general and administrative expense and $57,379 was included in cost of sales. For the year ended September 30, 2020, $752,011 of this expense was included in selling, general and administrative expense and $21,544 was included in cost of sales.

Stock Options: The Company uses the Black-Scholes option pricing model to determine the fair value of options granted. During the fiscal year ended September 30, 2021, the Company granted employees non-qualified stock options to purchase an aggregate of 105,089 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 $23.74 During the fiscal year ended September 30, 2020, the Company granted employees non-qualified stock options to purchase an aggregate of 121,350 shares of common stock with a weighted average contractual term of 5.71 years, a 4.71 year weighted average vesting term, and an exercise price of $12.43.

	Year ended September 30, 2021		Year ended September 30, 2020
Dividend yield		0%		0%
Weighted average expected volatility		46.9%	39.5	-	44.9%
Weighted average risk-free interest rate		0.24%	0.24	-	1.69%
Weighted average expected life (years)	5		4	-	6
Vesting period (years)	3		3	-	5

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 at grant date on zero-coupon U.S. governmental bonds having a remaining life similar to the expected option term.

Options are generally granted at fair market values determined on the date of grant and vesting normally occurs over a three to five-year period. The maximum contractual term is normally six years. Shares issued upon exercise of a stock option are issued from the Company’s authorized but unissued shares. There were 79,833 options vested during the year ended September 30, 2021 and 44,000 options vested during the year ended September 30, 2020. For the year ended September 30, 2021, there were 101,966 stock options that were exercised using a cashless method of exercise. For the year ended September 30, 2020, there were 14,688 stock options that were exercised using a cashless method of exercise. The intrinsic value of options exercised during the years ended September 30, 2021 and 2020 was $1,314,900 $332,468, respectively.

Option transactions under the 2007 Stock Compensation Plan during the years ended September 30, 2021 and 2020 are summarized as follows:

	Number of shares			Weighted average exercise price		Weighted average fair value
Outstanding as of September 30, 2019		290,750		$	11.86
Granted		121,350			12.43	$	4.62
Exercised		(26,750	)		4.01
Forfeited and expired		(48,250	)		13.35
Outstanding as of September 30, 2020		337,100		$	12.48
Granted		105,089			23.74	$	8.14
Exercised		(101,966	)		12.47
Forfeited and expired		(38,709	)		13.68
Outstanding as of September 30, 2021		301,514		$	16.25

The following table summarizes information concerning options exercisable under the 2007 Stock Compensation Plan:

Year ended	Exercisable		Weighted average remaining contractual life (years)		Weighted average exercise price		Aggregate intrinsic value
September 30, 2021		51,201		2.29	$	12.28	$	1,631,575
September 30, 2020		97,333		2.19	$	12.76	$	720,826

The following table summarizes information concerning options currently outstanding at:

Year Ended	Number outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Aggregate intrinsic value
September 30, 2021		301,514		3.22	$	16.25	$	8,411,728
September 30, 2020		337,100		3.43	$	12.48	$	720,831

Restricted Stock: The Company’s 2007 Stock Compensation Plan permits our Compensation Committee to grant other stock-based awards. The Company has awarded restricted stock grants to employees that vest over one to ten years.

Restricted stock transactions during the years ended September 30, 2021 and 2020 are summarized as follows:

	Number of shares			Weighted average grant date fair value
Unvested shares as of September 30, 2019		130,440		$	13.25
Granted		19,455			10.30
Vested		(29,950	)		13.36
Forfeited		(10,875	)		12.14
Unvested shares as of September 30, 2020		109,070		$	12.98
Granted		39,807			24.20
Vested		(35,840	)		12.48
Forfeited		(4,198	)		15.45
Unvested shares as of September 30, 2021		108,839		$	17.14

The fair value of restricted shares vested during the year end September 30, 2021 and 2020 was $1,364,007 and $496,829, respectively. The Company repurchased a total of 11,754 shares of our common stock at an average price of $39.32 in connection with payment of taxes upon the vesting of restricted stock previously issued to employees for the year ended September 30, 2021. The Company repurchased a total of 10,038 shares of our common stock at an average price of $17.57 in connection with payment of taxes upon the vesting of restricted stock previously issued to employees for the year ended September 30, 2020.

Employee Stock Purchase Plan: The Clearfield, Inc. 2010 Employee Stock Purchase Plan (“ESPP”) allows participating employees to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP is available to all employees subject to certain eligibility requirements. Terms of the ESPP provide that participating employees may purchase the Company’s common stock on a voluntary after-tax basis. Employees may purchase the Company’s common stock at a price that is no less than the lower of 85% of the fair market value of one share of common stock at the beginning or end of each stock purchase period or phase. The ESPP is carried out in six-month phases, with phases beginning on July 1 and January 1 of each calendar year. For the phases that ended on December 31, 2020 and June 30, 2021, employees purchased 15,011 and 9,739 shares at a price of $11.93 and $21.01 per share, respectively. For the phases that ended on December 31, 2019 and June 30, 2020, employees purchased 15,107 and 15,116 shares, respectively, at a price of $11.23 and $11.85, respectively. As of September 30, 2021, the Company has withheld approximately $143,768 from employees participating in the phase that began on July 1, 2021. In February 2020, the shareholders of Clearfield approved an increase of 200,000 in the shares authorized for issuance under the ESPP. After the employee purchase on June 30, 2021, 194,873 shares of common stock were available for future purchase under the ESPP.