Clearfield, Inc.

Note 1. Summary of Significant Accounting Policies

**Description of Business:**Clearfield, Inc. (the “Company”) manufactures a broad range of fiber connectivity products to customers throughout the United States and internationally. Our continuing operations are comprised of one reportable segment.

On November 11, 2025, the Company completed the sale of its Nestor Cables business. In connection with this sale, the historical results of the Nestor Cables business and certain assets and liabilities of this business are reported in our consolidated financial statements as held for sale/discontinued operations.

The Company’s products include fiber distribution systems, optical components, Outside Plant (“OSP”) cabinets, and fiber and copper cable assemblies that serve the communication service provider markets, including Fiber-to-the-Premises (“FTTP”), large enterprise, and original equipment manufacturer (“OEM”) markets.

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.

**Revenue Recognition:**Our revenue is comprised of the sale of our products to customers and is recognized when the Company satisfies its performance obligations under the applicable sales contract. A performance obligation is a promise in a sales contract to transfer a distinct product or service to a customer. Substantially all our sales contracts have a single performance obligation and are short term in nature. For those transactions where all performance obligations will be satisfied within one year or less, we apply the practical expedient outlined in ASC 606-10-32-18, which allows us not to adjust promised consideration for the effects of a significant financing component if we expect at contract inception that the period between when we transfer the promised products to a customer and when the customer pays for those products will be one year or less. We recognize revenue by transferring the promised products to the customer, in an amount that reflects the consideration we expect to receive in exchange for those products and services, with substantially all revenue recognized at the point in time when the customer obtains control of the products upon shipment. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of sales. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenue) basis.

Cash and Cash Equivalents: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The following table presents the Company’s cash and cash equivalents balances:

The Company maintains cash balances at multiple financial institutions, and at times, such balances exceeded insured limits. The Company has not experienced any losses in such accounts.

**Investments:**The Company invests in certificates of deposit (“CDs”) that are fully insured by the Federal Deposit Insurance Corporation (“FDIC”) and United States Treasury (“Treasuries”) securities with terms of not more than five years, as well as money market funds. The Company’s investment portfolio is classified as available-for-sale. 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.

Foreign Currency Translation: Balance sheets and statements of earnings of our international subsidiaries are measured using local currency as their functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at each fiscal year-end. Statements of earnings accounts are translated at the average rates of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a cumulative translation adjustment in shareholders’ equity.

Comprehensive (Loss) Income: Total comprehensive (loss) income and the components of accumulated other comprehensive income are presented in the Consolidated Statements of Comprehensive (Loss) Income and the Consolidated Statements of Shareholders’ Equity. Accumulated other comprehensive income is composed of foreign currency translation effects and unrealized gains and losses on available-for-sale marketable debt securities. We use the individual item approach for releasing income tax effects from accumulated other comprehensive income.

**Fair Value of Financial Instruments:**The financial statements include the following financial instruments: cash and cash equivalents; investments; accounts receivable; and accounts payable. The Company estimates the fair value of investments as of the balance sheet date. All other financial instruments’ carrying values approximate fair values because of the short-term nature of the instruments.

**Accounts Receivable:**Credit is extended based on the evaluation of a customer’s financial condition and collateral is generally not required. Accounts that are outstanding longer than the contractual payment terms are considered past due. On October 1, 2023, the Company adopted the cumulative expected credit loss model (“CECL”). Upon adoption of CECL, the Company measures the allowance for credit losses using an expected credit loss model, which uses a lifetime expected credit loss allowance for all accounts receivable. To measure the expected credit losses, accounts receivable are grouped based on shared credit risk characteristics and the days past due. In calculating an allowance for credit losses, the Company uses its historical experience, external indicators, and forward-looking information to calculate expected credit losses using an aging method. The Company assesses impairment of accounts receivable on a collective basis as they possess shared credit risk characteristics which have been grouped based on the days past due. The expected loss rates are based on the Company’s historical credit losses experience. The historical loss rates are adjusted to reflect current and forward-looking information. As of September 30, 2025, the Company’s allowance for credit losses was $0.

As of September 30, 2023, prior to the adoption of CECL, the Company’s allowance for doubtful accounts was $79,000. Upon the adoption of CECL, the prior allowance for doubtful accounts was recorded as a benefit to beginning retained earnings.

**Inventories:**Inventories consist of finished goods, raw materials, and work-in-process and are stated at average cost, subject to the lower of cost or net realizable value. Certain components of the Company’s inventory classified as raw materials or finished goods can be used as a component to manufacture products or can be sold directly to the customer. Inventory is valued using material costs, labor charges, and allocated factory overhead charges and consists of the following:

On a regular basis, the Company reviews its inventory and identifies that which is excess, slow moving, and obsolete by considering factors such as inventory levels, expected product life, and forecasted sales demand. A reserve is established to write-down the inventory to net realizable value for any identified excess, slow moving, and obsolete inventory through a charge to cost of sales. Inventory write-down charges may be required in the future if there is a significant decline in demand for the Company’s products and the Company does not adjust its manufacturing production accordingly, if new products are not accepted by the market, or if products are end of life through life cycle management.

Property, Plant and Equipment: Property, plant and equipment are recorded at cost. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense when incurred. Depreciation is provided in amounts sufficient to relate the cost of assets to operations over their estimated useful lives. Leasehold improvements are amortized over the shorter of the remaining term of the lease or estimated life of the asset.

Estimated useful lives of the assets are as follows:

Property, plant and equipment consist of the following:

Depreciation expense for the years ended September 30, 2025, 2024, and 2023 was $3,920,000, $4,528,000, and $3,623,000, respectively.

Goodwill and Intangible Assets: Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. Goodwill is tested for impairment annually at fiscal year-end, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment.

If the carrying amount of a reporting unit exceeds its fair value, the Company would measure the possible goodwill impairment loss based on an allocation of the estimate of fair value of the reporting unit to all the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized to the extent that a reporting unit’s recorded goodwill exceeds the implied fair value of goodwill. An impairment loss would be based on significant estimates and judgments, and if the facts and circumstances change, a potential impairment could have a material impact on the Company’s financial statements.

No impairment of the goodwill or intangible assets related to continuing operations has occurred during the years ended September 30, 2025, 2024, and 2023, respectively. Refer to Note 11 for discussion of the discontinued operations and impairment of assets held for sale of the Nestor Cables business.

The changes in the carrying amount of goodwill for fiscal years 2025 and 2024 were as follows:

Capitalized Software: In accordance with ASC 350-40, “Internal-use Software,” the Company capitalizes certain costs incurred in connection with developing or obtaining internal-use software. Costs incurred in the preliminary project stage are expensed. All direct costs incurred to develop internal-use software during the development stage are capitalized and amortized using the straight-line method over the estimated useful life, generally 2 to 15 years. Costs such as maintenance and training are expensed as incurred. Research and development costs are also expensed as incurred.

The Company capitalizes legal costs incurred to obtain patents. Once accepted by either the U.S. Patent Office or the equivalent office of a foreign country, these legal costs are amortized using the straight-line method over the remaining estimated lives, not exceeding 20 years. As of September 30, 2025, the Company has 63 patents granted and multiple pending applications both inside and outside the United States.

In addition, the Company has various finite life intangible assets, most of which were acquired as a result of the acquisition of a portfolio of the active cabinet products from Calix, Inc. (“Calix”) during fiscal year 2018.

Finite life intangible assets as of September 30, 2025, and 2024 are as follows:

Amortization expense related to these assets for the years ended September 30, 2025, 2024, and 2023 was $2,194,000, $1,380,000, and $970,000, respectively.

Our future estimated amortization expense for intangibles is as follows as of September 30, 2025:

**Impairment of Long-Lived Assets:**The Company assesses potential impairments to its long-lived assets or asset groups when there is evidence that events occur or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recovered. An impairment loss is recognized when the carrying amount of the long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group.

Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value and is recorded as a reduction in the carrying value of the related asset or asset group and a charge to operating results. No impairment of the long-lived assets related to continuing operations occurred during the years ended September 30, 2025, 2024, or 2023, respectively. Refer to Note 11 for discussion of the discontinued operations and impairment of assets held for sale of the Nestor Cables business.

Income Taxes: The Company records income taxes in accordance with the liability method of accounting. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. The Company establishes a valuation allowance to reduce the deferred tax assets when it is more likely than not that a deferred tax asset will not be realizable. Changes in tax rates are reflected in the tax provision as they occur.

In accounting for uncertainty in income taxes, we recognize 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. As of September 30, 2025, and 2024, the Company didnot have any unrecognized tax benefits. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We do not expect any material changes in our unrecognized tax benefits over the next 12 months.

Stock-Based Compensation: We measure and recognize compensation expense for all stock-based awards at fair value over the requisite service period. We use the Black-Scholes option pricing model to determine the fair value of options. For restricted stock and performance share unit grants, fair value is determined as the closing price of the Company’s stock on the date of grant. Equity-based compensation expense is broken out between cost of sales and selling, general and administrative expenses based on the classification of the employee. The determination of fair value of stock-based awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on historical and expected future volatility of the Company’s stock. The Company has not historically issued any dividends and does not expect to in the future. Forfeitures for both option and restricted stock grants are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from estimates.

If factors change and we employ different assumptions in the determination of the fair value of grants in future periods, the related compensation expense that we record may differ significantly from what we have recorded in the current periods.

Share Repurchase Program: On April 30, 2024, the Company’s board of directors increased the Company’s share repurchase program from $40,000,000 to $65,000,000 commencing May 7, 2024, and continuing for an indefinite period or until terminated by the board of directors. During the year ended September 30, 2025, the Company repurchased 550,766 shares for approximately $16,530,000. As of September 30, 2025, we have repurchased an aggregate of 2,280,546 shares for approximately $56,607,000 leaving approximately $8,393,000 available within our $65,000,000 stock repurchase program The repurchase program does not obligate the Company to repurchase any particular amount of common stock during any period. The repurchases will be funded by cash on hand.

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 andnone 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.

Research and Development Costs: Research and development costs amounted to $2,422,000, $3,000,000, and $3,115,000 for the years ended September 30, 2025, 2024, and 2023, respectively, and are charged to expense when incurred.

Advertising Costs: Advertising costs amounted to $355,000, $464,000, and $554,000 for the years ended September 30, 2025, 2024, and 2023, respectively, and are charged to expense when incurred.

(Loss) Earnings Per Share: Basic and diluted (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding and the weighted average number of dilutive shares outstanding, respectively.

Weighted average common shares outstanding for the years ended September 30, 2025, 2024, and 2023 were as follows:

For the fiscal year ended September 30, 2025,366,118 stock options, as well as 50,747 performance stock units were not included in the computation of diluted net income (loss) per share because the effect would have been anti-dilutive. For the fiscal year ended September 30, 2024,364,104 stock options were not included in the computation of diluted net loss per share because the effect would have been anti-dilutive. For the fiscal year ended September 30, 2023,243,749 stock options were not included in the computation of diluted net loss per share because the effect would have been anti-dilutive.

**Use of Estimates:**The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related revenues and expenses and disclosure about contingent assets and liabilities at the date of the financial statements. Significant estimates include the rebates related to revenue recognition, stock-based compensation and the valuation of inventory, long-lived assets, finite lived intangible assets and goodwill. Actual results may differ materially from these estimates.

**Recently Adopted Accounting Pronouncements:**On October 1, 2023, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) No. 2016-13,Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the initial guidance: ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, and ASU No. 2020-02 (collectively, Topic 326). This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (CECL). The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost. The Company adopted Topic 326 using the modified retrospective method for all financial assets measured at amortized cost, which are primarily trade accounts receivable for the Company. Results for reporting periods beginning after October 1, 2023, are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. The impact of adopting Topic 326 as of October 1, 2023, was not material to the consolidated financial statements.

During the year ended September 30, 2025, the Company adopted ASU No. 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update enhances segment reporting by requiring additional disclosures, including disclosure of significant segment expenses, identification of the Chief Operating Decision Maker (CODM) and their use of segment profit or loss measures, and enhanced interim reporting requirements. The Company applied the guidance retrospectively to all periods presented. These changes did not impact the Company’s consolidated financial results but improved transparency for users of the financial statements. See Note 12 to the consolidated financial statements for further details.

New Accounting Pronouncements Not Yet Adopted: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740):Improvements to Income Tax Disclosures. The new guidance is expected to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information by requiring 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction. The guidance is effective on a prospective basis, although retrospective application and early adoption is permitted. The Company is evaluating its disclosure approach for ASU 2023-09 and anticipates adopting the standard for the annual period starting October 1, 2025.

In November 2024, the FASB issued ASU No. 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU No. 2024-03 addresses the disaggregation of income statement expenses and aims to provide more detailed information about the types of expenses included in commonly presented expense captions, such as cost of sales, selling, general, and administrative expenses (SG&A), and research and development. ASU 2024-04 can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating its disclosure approach for ASU 2024-03 and anticipates adopting the standard for the annual period starting October 1, 2027.

In September 2025, the FASB issued ASU No. 2025-06,Targeted Improvements to the Accounting for Internal-Use Software. The ASU replaces the current stage-based capitalization model with a principles-based approach that permits capitalization of internal-use software costs once (1) management has authorized and committed to fund the project and (2) it is probable the project will be completed and the software will function as intended. Costs incurred while significant development uncertainty exists must be expensed as incurred. ASU 2025-06 can be applied prospectively, retrospectively, or using a modified retrospective approach. The Company is evaluating its disclosure approach for ASU 2025-06 and anticipates adopting the standard for the annual period starting October 1, 2028.

Note 2. Stock Based Compensation

**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.

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 upon approval was 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 related compensation expense for the years ended September 30, 2025, 2024, and 2023 of $4,597,000, $4,375,000, and $3,578,000, respectively. For the year ended September 30, 2025, $4,434,000 of this expense was included in selling, general and administrative expense and $163,000 was included in cost of sales. For the year ended September 30, 2024, $4,191,000 of this expense was included in selling, general and administrative expense and $184,000 was included in cost of sales. For the year ended September 30, 2023, $3,412,000 of this expense was included in selling, general and administrative expense and $166,000 was included in cost of sales. As of September 30, 2025, $5,707,000 of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a period of approximately 2.1 years.

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, 2025, the Company granted employees non-qualified stock options to purchase an aggregate of 38,198 shares of common stock with a weighted average contractual term offive years, a weighted average three-year vesting term, and a weighted average exercise price of $30.90. During the fiscal year ended September 30, 2024, the Company granted employees non-qualified stock options to purchase an aggregate of 118,706 shares of common stock with a weighted average contractual term offive years, a weighted average three-year vesting term, and a weighted average exercise price of $26.84. During the fiscal year ended September 30, 2023, the Company granted employees non-qualified stock options to purchase an aggregate of 40,266 shares of common stock with a weighted average contractual term offive years, a weighted average three-year vesting term, and a weighted average exercise price of $64.38.

The fair value of stock option awards during the year ended September 30, 2025, 2024, and 2023 was estimated as of the respective grant dates using the assumptions listed below:

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 athree tofive-year period. The maximum contractual term is normallysix years. Shares issued upon exercise of a stock option are issued from the Company’s authorized but unissued shares. There were 94,426 options vested during the year ended September 30, 2025,90,245 options vested during the year ended September 30, 2024, and 79,911 options vested during the year ended September 30, 2023. For the year ended September 30, 2025, there were 138,562 stock options that were exercised using a cashless method of exercise. For the year ended September 30, 2024, there were 1,501 stock options that were exercised using a cashless method of exercise. For the year ended September 30, 2023, there were 21,630 stock options that were exercised using a cashless method of exercise. The intrinsic value of options exercised during the years ended September 30, 2025, 2024, and 2023 was $2,220,000, $25,000, and $1,603,000, respectively.

Option transactions under the 2022 Plan during the years ended September 30, 2025, and 2024 and under the Prior Plan for the year ended September 30, 2023, are summarized as follows:

The following table summarizes information concerning options exercisable under the 2022 Plan and the Prior Plan as of the year ended September 30, 2025:

The following table summarizes information concerning options currently outstanding at:

**Restricted Stock:**The 2022 Plan permits, and the Prior Plan permitted, the Compensation Committee of the board of directors to grant stock-based awards, including stock options and restricted stock, to key employees and non-employee directors. The Company has made restricted stock grants that vest overone toten years.

Restricted stock transactions during the years ended September 30, 2025, 2024, and 2023 are summarized as follows:

The fair value of restricted shares vested during the year end September 30, 2025, 2024, and 2023 was $2,089,000, $1,796,000, and $3,141,000 respectively. The Company repurchased a total of 17,497 shares of our common stock at an average price of $28.27 in connection with payment of taxes upon the vesting of restricted stock previously issued to employees for the year ended September 30, 2025. The Company repurchased a total of 15,879 shares of our common stock at an average price of $31.05 in connection with payment of taxes upon the vesting of restricted stock previously issued to employees for the year ended September 30, 2024. The Company repurchased a total of 12,862 shares of our common stock at an average price of $62.20 in connection with payment of taxes upon the vesting of restricted stock previously issued to employees for the year ended September 30, 2023.

**Performance Stock Units:**During the fiscal year ended September 30, 2025, the Company granted 50,747 performance stock units which entitle the participant to receive one share of the Company’s common stock for each performance stock unit awarded, subject to the achievement of fiscal year 2025 performance goals. Achievement of the goals can result in 50%, 100%, or 150% of the shares being awarded, with two-thirds of the shares earned being issued as stock subject to restrictions on transfer that will lapse on the first two anniversaries of the settlement date. The Company has determined the fair value per underlying share of the performance stock unit awards to be $30.90, which is the closing market price of our common stock on the grant date.

Compensation expense for the performance stock units is measured using the fair value of our common stock at the grant date. As of September 30, 2025, the Company has achieved performance goals which result in 100% of these performance stock unit awards vesting and has recognized compensation cost accordingly.

During the fiscal year ended September 30, 2024, the Company granted 47,745 performance stock units which entitled the participant to receive one share of the Company’s common stock for each performance stock unit awarded, subject to achievement of a fiscal year 2024 performance goal. The Company determined the fair value per underlying share of the performance stock unit awards was $26.18 as of the grant date. The fiscal year 2024 performance goal was not achieved, and the performance share units were not earned. Accordingly, no stock-based compensation expense was recognized related to these awards for the year ended September 30, 2024.

**Bonus Stock:**During the fiscal year ended September 30, 2023, the Company granted employees an aggregate of 9,144 shares of common stock as a discretionary bonus for fiscal 2022 performance. The bonus stock consisted of common stock with no vesting period or restrictions. The fair value on the date of issuance was $104.36 per share. No bonus stock was granted in the fiscal years ended September 30, 2025, and 2024.

**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 January 1 and July 1 of each calendar year. For the phase that ended on December 31, 2024, employees purchased 11,415 shares at a price of $26.35 per share.

For the phase that ended on June 30, 2025, employees purchased 11,180 shares at a price of $26.35 per share. After the employee purchase on June 30, 2025,121,953 shares of common stock were available for future purchase under the ESPP.

Note 3. Investments

The Company invests in CDs in amounts that are fully insured by the FDIC and Treasuries with terms of not more than five years, as well as money market funds. The Company’s investment portfolio is classified as available for sale. The unrealized gain or loss on investment securities is recorded in other comprehensive income (loss), 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. The Company did not sell investment securities during the years ended September 30, 2025, 2024 or 2023.

As of September 30, 2025, available-for-sale investments consist of the following:

As of September 30, 2024, available-for-sale investments consisted of the following:

As of September 30, 2025, investments in debt securities in an unrealized loss position were as follows:

As of September 30, 2024, investments in debt securities in an unrealized loss position were as follows:

As of September 30, 2025, and 2024, there weresix securities in an unrealized loss position, which is due to the securities paying lower interest rates than the market. As of September 30, 2025, there areno 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. The Company hadno allowance for credit losses on investments for year ended September 30, 2025.

Note 4. 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 Treasuries and CDs based on valuations provided by an external pricing service, which obtains them 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 September 30, 2025, according to the three-level fair value hierarchy:

During the year ended September 30, 2025, we ownedno 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. We had no re-measurements of non-financial assets to fair value in the years-end September 30, 2025, 2024 and 2023, except as disclosed in Note 11 related to the impairment of goodwill and long-lived assets of the Nestor Cables business.

The following provides information regarding fair value measurements for the Company’s investment securities as of September 30, 2024, according to the three-level fair value hierarchy:

Note 5. Other Comprehensive Income (Loss)

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

Note 6. Income Taxes

Components of income tax expense (benefit) are as follows for the years ended:

The following is a reconciliation of the federal statutory income tax rate to the effective tax rate as a percent of pre-tax income for the following years ended:

As of September 30, 2025, the current U.S. income tax receivable was approximately $1,544,000. This amount is included in prepaid and other current assets in the Company’s consolidated balance sheet.

As of September 30, 2025, the Company has a gross U.S. federal net operating loss (“NOL”) carryforward of $681,000. There wasno U.S. federal NOL as of September 30, 2024. As of September 30, 2025 and 2024, there is a gross state NOL of $3,700,000 and $1,259,000, respectively. The Company has not recorded a valuation allowance on these deferred tax assets as the Company believes it is more likely than not they will be utilized. In addition, as of September 30, 2025, and 2024, the Company had Minnesota research and development tax credits of $360,000 and $370,000, respectively. The Company had federal research and development tax credits of $106,000 as of September 30, 2025. There wereno federal research and development tax credits as of September 30, 2024. The Company hasnot recorded a valuation allowance on these research and development related deferred tax assets as the Company believes it is more likely than not they will be utilized before they begin to expire in fiscal year 2037.

Significant components of deferred income tax assets and liabilities are as follows at:

Realization of NOL carryforwards and other deferred tax temporary differences are contingent upon future taxable earnings. The deferred tax assets and deferred tax liabilities are not netted due to being within different tax jurisdictions. The Company’s deferred tax assets were reviewed for expected utilization by assessing the available positive and negative factors surrounding their recoverability. As of September 30, 2025, and 2024, no valuation allowance was deemed necessary as the Company determined it was more likely than not that the Company’s deferred tax assets will be realized.

The Company is required to recognize 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. The Company applies the interpretation to all tax positions for which the statute of limitations remained open. The Company had no liability for unrecognized tax benefits and didnot recognize any interest or penalties during the years ended September 30, 2025, or 2024.

The Company is subject to income taxes in the U.S. federal 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. Clearfield, Inc. is generally subject to U.S. federal examination for all tax years after 2020 and state examinations for all tax years after 2016 due to unexpired research and development credit carryforwards still open under statute.

Note 7. Concentrations

Suppliers: The Company purchases critical components for our products, including injection molded parts and connectors from third parties, some of whom are single- or limited-source suppliers. If any of our suppliers are unable to ship critical components, we may be unable to manufacture and ship products to our distributors or customers. If the price of these components increases for any reason, or if these suppliers are unable or unwilling to deliver, we may have to find another source, which could result in interruptions, increased costs, delays, loss of sales and quality control problems.

Customers: For the fiscal year ended September 30, 2025, the Company hadtwo customers, Customer A and Customer B, which accounted for approximately 18% and 13% of net sales, respectively. These customers are distributors. For the fiscal year ended September 30, 2024, Customer A and Customer B accounted for approximately 20% and 15% of net sales, respectively. For the fiscal year ended September 30, 2023, Customer A and Customer B accounted for approximately 19% and 10% of net sales, respectively. These major customers, like our other customers, purchase our products from time to time through purchase orders, and we do not have any agreements that obligate these major customers to purchase products in the future from us.

As of September 30, 2025, the Company hadtwo customers, Customer B and Customer A, which accounted for approximately 17% and 11% of accounts receivable, respectively. As of September 30, 2024, Customer B accounted for 16% of accounts receivable.

Disaggregation of Revenue: The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Sales outside the United States are principally to customers in Canada, the Caribbean, Central/South America and Mexico.

The following table presents our domestic and international sales for each of the last three fiscal years:

The Company sells its products to the Broadband Service Provider marketplace. In addition, the Company provides Legacy services for original equipment manufacturers requiring copper and fiber cable assemblies built to their specification.

The percentages of our sales by these markets were as follows for each of the last three fiscal years:

Broadband Service Providers are made up of Community Broadband, which includes local and regional telecom companies, utilities, municipalities and alternative carriers, also referred to as Tier 2 and 3 customers, National Carriers, which includes large national and global wireline and wireless providers also referred to as Tier 1s, Large Regional Service providers with a national footprint, MSOs, which include cable television companies, and international customers.

Long-Lived Assets: As of September 30, 2025, and 2024, the Company had property, plant, and equipment with a net book value of $4,507,000 and $5,395,000, respectively, located in Mexico. All other property, plant, and equipment is located within the United States.

Note 8. Employee Benefit Plan

Clearfield, Inc. maintains a contributory 401(k) profit sharing benefit plan, whereby eligible employees may contribute a portion of their earnings, not to exceed annual amounts allowed under the Internal Revenue Code. The Company matched 100% of the first 3% and 50% of the next 3% of the participant’s eligible compensation that was contributed by the participant. The Company’s contributions under this plan were $1,110,000, $1,087,000, and $1,017,000 for the years ended September 30, 2025, 2024 and 2023, respectively.

Note 9. Leases

The Company leases an 85,000 square foot facility at 7050 Winnetka Avenue North, Brooklyn Park, Minnesota consisting of corporate offices, manufacturing, and warehouse space. The original lease term wasten years and two months, ending on February 28, 2025, with a renewal option. In April 2024, the Company exercised the renewal option, which extended the lease term three additional years to end on February 29, 2028. The exercise of the renewal option added a right of use asset and corresponding lease liability of $1,337,000 upon lease commencement.

The Company indirectly leases an approximately 318,000 square foot manufacturing facility in Tijuana, Mexico that operates as a Maquiladora. The lease commenced in April 2024, and has a term ofseven years, of which five years are mandatory. The lease contains two options to extend the term of the lease for additional periods offive years each. The lease calls for monthly base rental payments of approximately $169,000, increasing 2% annually. The renewal options have not been included within the lease term because it is not reasonably certain that the Company will exercise either option.

The Company leases a 105,000 square foot warehouse and manufacturing facility in Brooklyn Park, Minnesota. The lease term isfive years ending on February 28, 2027, with rent payments increasing annually. The lease includes an option to extend the lease for an additional five years. The renewal option has not been included within the lease term because it is not reasonably certain that the Company will exercise the option.

Right-of-use lease assets and lease liabilities are recognized as of the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods we are reasonably certain to exercise. Our leases do not contain any material residual value guarantees or material restrictive covenants.

Operating lease expense included within cost of sales and selling, general and administrative expense was as follows:

(In thousands)

Our future lease obligations for leases that have commenced were as follows as of September 30, 2025:

As of September 30, 2025, the weighted average term and weighted average discount rate for our leases were 3.10 years and 7.42%, respectively. As of September 30, 2024, the weighted average term and weighted average discount rate for our leases were 4.04 years and 7.28%, respectively. As of September 30, 2023, the weighted average term and weighted average discount rate for our leases were 3.52 years and 3.04%, respectively. For the years ended September 30, 2025, 2024, and 2023, the operating cash outflows from our leases were $3,305,000, $3,233,000, and $3,158,000, respectively.

Note 10. Debt

On April 27, 2022, the Company entered into a loan agreement and a security agreement with a bank that provides the Company with a $40,000,000 revolving line of credit that is secured by certain of the Company’s U.S. assets. The original maturity date of the line of credit was April 27, 2025. Borrowed amounts bear interest at a variable rate of the CME Group one-month term Secured Overnight Financing Rate (“SOFR”) plus 1.85%, but not less than 1.80% per annum. As of September 30, 2025, the interest rate was 6.17%. The loan agreement and the security agreement contain customary affirmative and negative covenants and requirements relating to the Company and its operations. On August 5, 2024, the Company entered into an amendment to the loan agreement that, among other things, (i) eliminated the requirement that the Company maintain a debt service coverage ratio of not less than 1.20 to 1 as of the end of each fiscal year for the fiscal year then ended and that the Company maintain a debt to cash flow ratio of not greater than 2 to 1 measured as of the end of each of the Company’s fiscal quarters for the trailing 12 month period; (ii) added a requirement that the Company maintain accounts with the bank with a minimum aggregate liquidity of unrestricted and unencumbered cash and cash equivalents at all times of not less than the outstanding principal balance of the Company’s revolving credit promissory note payable to the bank; and (iii) waived the Company’s compliance with the debt to cash flow ratio for the fiscal quarter ended June 30, 2024.

On April 25, 2025, the Company entered into an amendment to the loan agreement that extended the maturity of the line of credit from April 27, 2025, to April 25, 2026.

As of September 30, 2025, 2024 and 2023, the Company hadno borrowings against this line of credit. As of September 30, 2025, 2024, and 2023, the Company was in compliance with all applicable covenants. The line of credit is collateralized by Clearfield, Inc’s assets of $274,219,000 as of September 30, 2025.

Note 11. Assets Held for Sale and Discontinued Operations

During the fourth quarter of fiscal year 2025, the Company committed to a plan to sell its Nestor Cables business. As of September 30, 2025, the criteria for classification as held for sale under ASC 205-20 were met. Accordingly, the assets and liabilities of the Nestor Cables business have been classified as held for sale in the Company’s consolidated balance sheets as of September 30, 2025.

On November 11, 2025, the Company completed the sale of its Nestor Cables business. In connection with this sale, the historical results of the Nestor Cables business and certain assets and liabilities of this business are reported in our consolidated financial statements as discontinued operations.

Upon classification as held for sale, the Nestor Cables disposal group was measured at the lower of its carrying amount or fair value less costs to sell. Fair value was primarily based on the estimated selling price derived from a negotiated purchase agreement with a third-party buyer, adjusted for estimated transaction costs. The fair value measurement utilized Level 2 inputs within the fair value hierarchy under ASC 820. As the carrying amount of the disposal group exceeded its estimated fair value less costs to sell, the Company recorded a total impairment charge of $16,589,000, which includes $1,489,000 of estimated transaction costs, for the three months ended September 30, 2025. The estimated transaction costs are recorded as a contra asset within the Company’s consolidated balance sheets. The total impairment charge was also comprised of $2,022,000 related to the impairment of goodwill and $13,078,000 related to the impairment of the long-lived assets of the disposal group. The total impairment charge, inclusive of estimated transaction costs, is reflected within Loss from impairment of discontinued operations before income taxes in the consolidated statements of earnings for the year ended September 30, 2025.

The following table summarizes the results of discontinued operations for each of the last three fiscal years:

The major classes of assets and liabilities of the discontinued operations classified as held for sale on the consolidated balance sheets were as follows:

Note 12. Segment Reporting

Following the classification of the Nestor Cables business as discontinued operations during the year ended September 30, 2025, the Company’s continuing operations represent one operating segment andone reportable segment. All segment information related to the discontinued Nestor Cables business has been excluded from continuing operations and is presented separately in Note 11 – Assets Held for Sale and Discontinued Operations.

The Company’s chief operating decision maker (CODM) is the Chief Executive Officer. The CODM reviews financial information and makes resource allocation decisions based on consolidated financial results, using net income (loss) as the measure of segment performance. The CODM considers budget-to-actual variances when making decisions regarding the allocation of resources and assessing performance of the segment. The components of net income (loss) reviewed by the CODM, including significant segment expenses, are identical to the captions presented in the Company’s consolidated statements of earnings. Amounts for additional information required by ASC 280,Segment Reporting, including depreciation and amortization expense, stock-based compensation expense, and capital expenditures are identical to those presented in the Company’s consolidated statements of cash flows. Because the financial information used by the CODM is at the same level of detail as that presented in the consolidated financial statements, no additional segment information is presented. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. In addition, a description of the types of products and services from which the reportable segment derives its revenues as well as the entity-wide information can be found in Note 7 – Concentrations.

Note 13. Subsequent Events

On November 11, 2025, the Company completed the divestiture of its wholly owned subsidiary, Clearfield Finland Oy, parent company of Nestor Cables Oy, for $1 in cash and the contribution from the Company to Clearfield Finland Oy of $5,785,000 of inter-company receivables owed to the Company by Nestor Cables Oy and Clearfield Finland Oy. See Note 11 for further details.

On November 20, 2025, the Company’s board of directors increased the Company’s share repurchase program from $65,000,000 to $85,000,000 commencing November 28, 2025, and continuing for an indefinite period or until terminated by the board of directors.

ITEM 9. **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE