CLFD

New in FY2025

• RISK FACTORS Risks Relating to Our Operations We depend on the availability of sufficient supply of certain materials.
• Further, the costs to obtain certain raw materials and supplies, such as fiber, are subject to price fluctuations, which may be substantial, because of global market demands.
• Changes in trade policy in the U.S. and other countries may adversely affect our business and results of operations.
• Changes in trade policy, including the imposition of new, increased, or retaliatory tariffs by the U.S. or foreign governments, may increase the cost of raw materials and components imported from other countries, leading to higher production costs and product pricing to the extent those increased costs are offset through price increases to our customers (which may result in declines in sales); disrupt established supply chains, forcing the Company to find new suppliers or relocate production, which could be time-consuming and costly; limit the attractiveness of certain geographic markets for our products and, in turn, result in reduced sales; lower profitability; result in uncertainty related to planning long-term investments and strategies; and have other competitive effects.
• While the changes in trade policy and tariffs introduced by the U.S. and foreign governments in 2025 did not materially adversely impact our fiscal year 2025 results, the extent to which new, increased, or retaliatory tariffs may adversely affect our business and results of operations is uncertain, difficult to predict and dependent on a number of factors, including the extent and duration of the tariffs, any reversal or suspension of the tariffs, changes in the scope and rates of the tariffs, the availability of exemptions from the tariffs, and our ability to successfully implement measures to mitigate the impact of the tariffs.
• Passing along these increased prices to our customers, where possible, to offset the impact of higher costs may cause certain customers to cancel, push out, or refrain from purchasing our products, which could negatively impact demand for our products, and therefore also negatively impact our results of operations and future profitability.
• For fiscal year 2025, the Company had two customers, Customer A and Customer B, which accounted for approximately 18% and 13% of net sales, respectively.
• Both of these customers are distributors.
• Our business is dependent on interdependent management information systems.
• We rely on our ERP system to support such important business operations such as processing sales orders and invoicing, manufacturing, shipping, inventory control, purchasing and supply chain management, human resources, and financial reporting.
• To the extent that any disruptions, cyber-attack or other security breach results in a loss or damage to our data, or inappropriate use or disclosure of confidential information, it could harm our business.
• For the year ended September 30, 2025, we recorded an impairment charge 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 Nestor Cables business, which we acquired in July 2022 and disposed of on November 11, 2025.
• 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.
• If we are unable to complete acquisitions or successfully integrate and develop acquired businesses, or if acquired businesses do not perform as anticipated, our financial results could be materially and adversely affected.
• Geopolitical issues, such as the Russian invasion of Ukraine, the Israel-Hamas war, the U.S.-China rivalry, rising trade protectionism, economic sanctions and other global conflicts, have resulted in increasing global tensions, rising energy costs and creates uncertainty for our global supply chain.
• Natural disasters, extreme weather events and other catastrophic events such as flooding, tornadoes, hurricanes, unusually heavy precipitation, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest, pandemics or other health crises could increase the cost of doing business or otherwise harm our operations, our suppliers and our customers.
• Our business is dependent upon capital spending by broadband service providers, and any delay, reduction or cancellation in capital spending by broadband service providers could adversely affect our business.
• Our business is dependent upon capital spending by broadband service providers for constructing, expanding, upgrading, rebuilding, and maintaining fiber-based networks for residential homes, businesses, and network infrastructure in the wireline and wireless access network.
• Capital spending in the broadband communications industry is cyclical, sporadic among individual broadband service providers, and can be delayed, reduced or cancelled on short notice, giving us limited visibility into changes in spending behavior in any particular period.
• We have experienced significant reductions in capital spending by broadband service providers in the past, which negatively impacted our results of operations, and we may experience significant fluctuations in capital spending by broadband service providers in the future.
• The timing and amount of capital spending in the broadband communications industry may be affected by a variety of factors, including but not limited to general economic and market conditions, customer-specific financial conditions or budget allocation decisions, seasonality of outdoor deployments, access to and timing of government funding programs, changes in consumer spending, the timing and adoption of new technologies, consumer and commercial demand for broadband services, competing technologies, competitive pressures, government regulations, industry consolidation, and changes in customer preferences or requirements.
• Unfavorable changes in economic conditions, including recession, inflation, lack of access to capital, lack of consumer confidence or other changes have resulted and may continue to result in lower spending among our customers and target customers in the broadband service provider industry.
• Within the broadband service provider industry, our customer segments may be more or less affected by these factors in any given period.
• Our ability to maintain or increase revenues in the future will depend on the financial health and continued growth of the broadband communications industry.
• If the broadband service providers do not maintain or increase spending or do not select our products for their fiber-based deployments, the market for our products may not grow or may grow more slowly than we expect, either of which would significantly adversely affect our business, results of operations, or financial condition.
• Additionally, these government programs may be subject to significant timing, funding and other uncertainties, which also may change with different state and federal administrations, that make it challenging for us to accurately forecast the subsidies or other supports to our customers or the degree to which customers may undertake capital spending on projects that utilize our products.
• In addition, we are subject to the risks inherent in conducting business internationally, including political and economic instability, unexpected changes in diplomatic and trade relationships, and a complex system of commercial and trade laws, regulations, and policies, including those related to tariffs, data privacy, trade compliance, anti-corruption, and anti-bribery.

Gone since FY2024

• RISK FACTORS Risks Relating to Our Operations Our business is dependent on interdependent management information systems.
• We rely on our ERP system to support such important business operations as processing sales orders and invoicing, manufacturing, shipping, inventory control, purchasing and supply chain management, human resources, and financial reporting.
• Some of these systems are made up of multiple software and system providers.
• The interdependence of these solutions and systems is a risk, and the failure of any one system could have a material adverse effect on our overall information technology infrastructure.
• We are in the process of consolidating several of these solutions and systems into one integrated ERP system for our North American operations.
• Failure to successfully consolidate and integrate these solutions and systems could result in disruptions to our operations and adversely impact our business.
• Failure or abandonment of all or any part of the ERP system consolidation and integration project could result in a write-off of all or part of the costs that have been capitalized in connection with the project, which may negatively impact our financial results.
• To the extent that any disruptions, cyber-attack or other security breach results in a loss or damage to our data, or inappropriate disclosure of confidential information, it could harm our business.
• Passing along these increased prices to our customers to offset the impact of higher costs may cause certain customers to cancel, push out, or refrain from purchasing our products, which could negatively impact demand for our products, and therefore also negatively impact our results of operations and future profitability.
• Further, the costs to obtain certain raw materials and supplies, such as fiber and copper cabling, are subject to price fluctuations, which may be substantial, because of global market demands.
• We depend on the availability of sufficient supply of certain materials.
• For fiscal year 2024, the Company had two customers that comprised 26% of net sales.
• For fiscal year 2023, the Company had one customer that comprised 16% of net sales, and for fiscal year 2022 the Company had one customer that comprised 14%, of net sales.
• If we are unable to complete acquisitions or successfully integrate and develop acquired businesses, our financial results could be materially and adversely affected.
• We have exposure to movements in foreign currency exchange rates.
• Nestor Cables’ functional currency is the Euro, which is translated to the Company’s reporting currency of the U.S. dollar.
• Fluctuations in exchange rates between the Euro and U.S. dollar may impact our results of operations, financial position and cashflows.
• The Company expects to continue to experience fluctuations in the value of the U.S. dollar against the Euro and other currencies if it is not possible, cost-effective or should we not elect to hedge certain currency exposure.
• These factors, which are variable and generally outside of our control, could materially impact our results of operations, anticipated future results, financial position, and cash flows.
• Geopolitical issues, such as the Russian invasion of Ukraine and related economic sanctions and tensions between Russia and NATO countries, has resulted in increasing global tensions, rising energy costs and creates uncertainty for our global supply chain.
• Growth may strain our business infrastructure, which could adversely affect our operations and financial condition.
• As we grow, we will face the risk that our existing resources and systems, including management resources, enterprise technology and operating systems, may be inadequate to support our growth.
• There can be no assurance that we will be able to retain the personnel or make the changes in our systems that may be required to support our growth.
• Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on our operating results.
• In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expenditures and other increased costs that could also have a material adverse impact on our operating results.
• Natural disasters, extreme weather events and other catastrophic events such as flooding, tornadoes, hurricanes, unusually heavy precipitation, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest, or pandemics could increase the cost of doing business or otherwise harm our operations, our suppliers and our customers.
• Pandemics and other health crises could have a material adverse effect on our business, financial condition, and operating results.
• Pandemics and other health crises, and governmental, business, and societal responses to pandemics or other health crises, have had, and in the future may have, an adverse effect on our operations, work force, supply chains, distribution channels, and customers.
• Constraints and limits imposed on our operations due to pandemics or other health crises may slow or diminish our sales and marketing programs, product development activities and qualification activities with our customers.
• Restrictions on our manufacturing, support operations or workforce, or similar limitations for our suppliers, could limit our ability to meet customer demand.
• Restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, resulting in higher costs and delays, could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers.
• Employee health, availability, productivity, and efficiency may be adversely impacted.
• In addition, we are subject to the risks inherent in conducting business internationally, including political and economic instability, unexpected changes in diplomatic and trade relationships, and a complex system of commercial and trade laws, regulations, and policies, including those related to data privacy, trade compliance, anti-corruption, and anti-bribery.
• Expectations relating to environmental, social and governance matters may increase our cost of doing business and expose us to reputational harm and potential liability.
• Many regulators, investors, employees, vendors, customers, community members and other stakeholders are increasingly focused on environmental, social and governance matters relating to businesses, including climate change, greenhouse gas emissions, human capital, civil rights, and diversity, equity, and inclusion.
• We may make public statements about various environmental, social and governance matters and initiatives from time to time through our website, press releases and other communications.
• Addressing stakeholder expectations relating to environmental, social and governance matters requires an investment of time, money and other resources, and depends in part on third-party performance or data that is outside of our control, any or all of which may increase our cost of doing business.
• In addition, as investor and other stakeholder expectations relating to environmental, social and governance matters change and evolve over time, any failure or perceived failure by us to adequately address those expectations may damage our reputation and adversely affect our business and results of operations.
• Similarly, public statements we make about environmental, social and governance matters and initiatives may result in increased scrutiny by our stakeholders and require additional attention relating to these issues.
• Federal, state or international government bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations relating to environmental, social or governance matters.

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