Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Stock Based Compensation

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Note 4 - Stock Based Compensation
 9 Months Ended
Jun. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 4.  Stock Based Compensation

The Company recorded $326,651 of compensation expense related to current and past option grants, restricted stock grants and the Company’s Employee Stock Purchase Plan for the nine month period ended June 30, 2012.  The Company recorded $208,557 of compensation expense related to current and past equity awards for the nine month period ended June 30, 2011.  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, 2012, $869,306 of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted average period of approximately 3.2 years.

We used the Black-Scholes option pricing model to determine the weighted average fair value of options during the nine months ended June 30, 2012 and June 30, 2011. The weighted-average fair values at the grant date for options issued during the nine months ended June 30, 2012 and 2011 were $4.12 and $3.29, respectively. This fair value was estimated at grant date using the weighted-average assumptions listed below.

   
Nine months ended
June 30, 2012
   
Nine months ended
June 30, 2011
 
Dividend yield
    0 %     0 %
Expected volatility
    82.25 %     79.17 %
Average risk-free interest rate
    1.14 %     2.04 %
Expected life
 
6 years
   
6 years
 
Vesting period
 
1 year
   
1-3 year
 

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.

During the nine month period ended June 30, 2012, the Company granted non-employee directors non-qualified stock options to purchase an aggregate of 12,000 shares of common stock with a contractual term of 6 years, a vesting term of one year, an exercise price of $5.91 and a fair value of $4.12 per share. During the nine month period ended June 30, 2011, the Company granted key employees incentive stock options and granted non-employee directors non-qualified stock options to purchase an aggregate of 17,500 shares of common stock with contractual terms of 6 years, vesting terms between one and three years and a weighted average exercise price of $4.67 with a fair value of $3.29 per share.

During the nine month period ended June 30, 2012, exercised stock options totaled 168,148 shares, resulting in $147,707 of proceeds to the Company. During the nine month period ended June 30, 2011, exercised stock options totaled 74,251 shares, resulting in $58,944 of proceeds to the Company.

Employee Stock Purchase Plan

Clearfield, Inc.’s 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 phases that ended on June 30, 2012 and December 31, 2011, employees purchased 17,662 and 11,267 shares at a price of $4.09 and $6.24 per share, respectively. After the employee purchase on June 30, 2012, 238,842 shares of common stock were available for future purchase under the ESPP.