Utah
|
87-0398877
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
PAGE
|
||
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
|
4
|
|
|
||
|
BUSINESS
|
4
|
|
RISK
FACTORS
|
16
|
|
UNRESOLVED
STAFF COMMENTS
|
21
|
|
PROPERTIES
|
22
|
|
LEGAL
PROCEEDINGS
|
22
|
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
23
|
|
||
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
24
|
|
SELECTED
FINANCIAL DATA
|
27
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
30
|
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
41
|
|
FINANCIAL
STATEMENTS AND SUPPLEMENTAL DATA
|
41
|
|
CHANGE
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
41
|
|
CONTROLS
AND PROCEDURES
|
42
|
|
OTHER
INFORMATION
|
42
|
|
||
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
|
43
|
|
EXECUTIVE
COMPENSATION
|
43
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
43
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
43
|
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
43
|
|
||
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
44
|
|
46
|
Market
|
Typical
Number of Participants
|
·
Professional
Conferencing
|
20-200
|
·
Premium
Conferencing
|
8-30
|
·
Tabletop
Conferencing
|
1-30
|
·
Personal
Conferencing
|
1-15
|
· |
Professionally
installed audio conferencing systems that are used in executive
boardrooms, courtrooms, hospitals, and auditoriums that integrate
with all
leading video and telepresence
systems
|
· |
Premium
conferencing systems that integrate with video and web conferencing
systems
|
· |
Tabletop
conferencing phones used in conference rooms and
offices
|
· |
Personal
conferencing devices that enable hands-free audio communications
in new
ways that have never before been possible—softphones, web collaboration,
enterprise handsets
|
· |
Increasing
availability of easy-to-use audio conferencing
equipment
|
· |
Improving
voice quality of audio conferencing systems compared to telephone
handset
speakerphones
|
· |
Trending
expansion of global, regional, and local corporate
enterprises
|
· |
Availability
of a wider range of affordable audio conferencing products for small
businesses and home offices
|
· |
Growth
of distance learning and corporate training
programs
|
· |
Trend
toward deploying greater numbers of
teleworkers
|
· |
Decreases
in the amount of travel within most enterprises for routine
meetings
|
· |
Transition
to the Internet Protocol (“IP”) network from the traditional public
switched telephone network (“PSTN”) and the deployment of Voice over
Internet Protocol (“VoIP”)
applications
|
PCs
& Macs
|
VoIP
telephony applications such as Skype & Vonage; enterprise softphones,
audio for web-based videoconferencing applications; gaming; audio
playback
|
Cell
phones
|
Connects
to the 2.5mm headset jack for hands-free, full-duplex audio
conferencing
|
Telephones
|
Connects
to the headset jack (certain phone models) for hands-free, full-duplex
audio conferencing
|
iPods
& MP3 players
|
For
full-bandwidth audio playback
|
Desktop
video conferencing systems
|
For
hands-free, full-duplex audio conferencing
|
· |
InfoComm
- the AV industry’s largest trade show. In June 2007 we had a strong
presence at InfoComm, where we highlighted a significant number of
new
products, including our new Converge Pro professional conferencing
platform and Chat 150 product.
|
· |
National
Systems Contractors Association (“NSCA”) - this show focuses on the sound
reinforcement industry, and we highlight our professional audio
conferencing products.
|
· |
A/V
Integrator trade shows - we regularly invest and participate in trade
shows hosted by our partners, namely system integrators.
|
· |
Avoidance
of a significant investment in upgrading our manufacturing
infrastructure;
|
· |
RoHS-compliant
manufacturing facilities;
|
· |
Scalability
in our manufacturing process without major investment or major
restructuring costs;
|
· |
Achievement
of future cost reductions on manufacturing costs and inventory costs
based
upon increased economies of scale in material and labor;
and
|
· |
Manufacturing
world class quality products by partnering with outsource manufacturers
certified with
International
Organization of Standardization (ISO)
processes.
|
Employees
of as
|
|||
June
30, 2007
|
June
30, 2006
|
June
30, 2005
|
|
Sales,
marketing, and
|
|||
customer
support
|
32
|
44
|
45
|
Product
development
|
37
|
49
|
43
|
Operations
support
|
21
|
17
|
20
|
Administration
|
15
|
17
|
18
|
Total
|
105
|
127
|
126
|
· |
meeting
required specifications and regulatory standards;
|
· |
meeting
market expectations for
performance;
|
· |
hiring
and keeping a sufficient number of skilled developers;
|
· |
obtaining
prototype products at anticipated cost
levels;
|
· |
having
the ability to identify problems or product defects in the development
cycle; and
|
· |
achieving
necessary manufacturing efficiencies.
|
· |
unexpected
changes in, or the imposition of, additional legislative or regulatory
requirements;
|
· |
unique
environmental regulations;
|
· |
fluctuating
exchange rates;
|
· |
tariffs
and other barriers;
|
· |
difficulties
in staffing and managing foreign sales operations;
|
· |
import
and export restrictions;
|
· |
greater
difficulties in accounts receivable collection and longer payment
cycles;
|
· |
potentially
adverse tax consequences;
|
· |
potential
hostilities and changes in diplomatic and trade
relationships;
|
· |
disruption
in services due to natural disaster, economic or political difficulties,
quarantines, transportation, or other restrictions associated with
infectious diseases.
|
· |
statements
or changes in opinions, ratings, or earnings estimates made by brokerage
firms or industry analysts relating to the market in which we do
business
or relating to us specifically;
|
· |
disparity
between our reported results and the projections of
analysts;
|
· |
the
shift in sales mix of products that we currently sell to a sales
mix of
lower-gross profit product
offerings;
|
· |
the
level and mix of inventory levels held by our
distributors;
|
· |
the
announcement of new products or product enhancements by us or our
competitors;
|
· |
technological
innovations by us or our
competitors;
|
· |
success
in meeting targeted availability dates for new or redesigned
products;
|
· |
the
ability to profitably and efficiently manage our supplies of products
and
key components;
|
· |
the
ability to maintain profitable relationships with our
customers;
|
· |
the
ability to maintain an appropriate cost
structure;
|
· |
quarterly
variations in our results of
operations;
|
· |
general
consumer confidence or general market conditions or market conditions
specific to technology industries;
|
· |
domestic
and international economic
conditions;
|
· |
the
adoption of the new accounting standard, SFAS No. 123R, “Share-Based
Payments,” which requires us to record compensation expense for certain
options issued before July 1, 2005 and for all options issued or
modified
after June 30, 2005;
|
· |
our
ability to report financial information in a timely manner;
and
|
· |
the
markets in which our stock is
traded.
|
Location
|
Operations
|
Square
Footage
|
Status
|
Expiration
of Lease Agreement
|
Active
Leases at June 30, 2007
|
||||
Salt
Lake City, UT
|
Company
headquarters
|
36,279
|
Continuing
|
December
2013
|
Salt
Lake City, UT
|
Warehouse
|
17,000
|
Continuing
|
October
2009
|
2007
|
2006
|
||||||||||||
High
|
Low
|
High
|
Low
|
||||||||||
First
Quarter
|
$
|
3.75
|
$
|
3.00
|
$
|
4.10
|
$
|
2.20
|
|||||
Second
Quarter
|
4.34
|
3.20
|
2.50
|
1.95
|
|||||||||
Third
Quarter
|
6.69
|
4.05
|
3.60
|
2.25
|
|||||||||
Fourth
Quarter
|
6.58
|
4.57
|
4.25
|
3.50
|
Number
of securities to be issued upon exercise of outstanding options,
warrants,
and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation
|
|||
plans
approved by
|
|||
security
holders
|
1,273,199
|
$5.38
|
908,737
|
Equity
compensation
|
|||
by
security holders
|
-
|
-
|
-
|
Total
|
1,273,199
|
$5.38
|
908,737
|
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Maximum
Number (or Approximate Dollar Value) of Shares that May by Purchased
Under
the Plans or Programs (1)
|
April
1, 2007 - April 30, 2007
|
0
|
$0
|
0
|
$721,000
|
May
1, 2007 - May 31, 2007
|
27,000
|
$6.32
|
27,000
|
$550,000
|
June
1, 2007 - June 30, 2007
|
0
|
$0
|
27,000
|
$550,000
|
Total
|
27,000
|
27,000
|
(1) |
On
August 31, 2006, we announced that our Board of Directors had approved
a
stock buy-back program to purchase up to $2,000,000 of our common
stock
over the next 12 months on the open market. All repurchased shares
were
immediately retired. The stock buy-back program expired in August
2007.
|
June
2002
|
June
2003
|
June
2004
|
June
2005
|
June
2006
|
June
2007
|
||||||||||||||
ClearOne
Communications, Inc.
|
$
|
100
|
$
|
20.37
|
$
|
51.89
|
$
|
34.91
|
$
|
33.02
|
$
|
44.34
|
|||||||
Nasdaq
Composite Index
|
$
|
100
|
$
|
75.11
|
$
|
94.78
|
$
|
95.21
|
$
|
100.53
|
$
|
120.49
|
|||||||
Morgan
Stanley Technology Index
|
$
|
100
|
$
|
110.12
|
$
|
147.45
|
$
|
141.23
|
$
|
147.75
|
$
|
185.89
|
Years
Ended June 30,
|
||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||
Operating
results:
|
||||||||||||||||
Revenue
|
$
|
39,861
|
$
|
35,362
|
$
|
29,087
|
$
|
25,736
|
$
|
23,999
|
||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of goods sold
|
17,723
|
17,375
|
12,720
|
14,760
|
15,537
|
|||||||||||
Marketing
and selling
|
7,791
|
7,866
|
9,070
|
8,497
|
7,070
|
|||||||||||
Research
and product development
|
7,535
|
8,299
|
5,305
|
4,237
|
3,281
|
|||||||||||
General
and administrative
|
3,091
|
5,108
|
5,489
|
6,767
|
5,915
|
|||||||||||
Settlement
in shareholders' class action
|
-
|
(1,205
|
)
|
(2,046
|
)
|
4,080
|
7,325
|
|||||||||
Impairment
losses
|
-
|
-
|
180
|
-
|
5,102
|
|||||||||||
Restructuring
charge
|
-
|
-
|
110
|
-
|
-
|
|||||||||||
Operating
income (loss)
|
3,721
|
(2,081
|
)
|
(1,741
|
)
|
(12,605
|
)
|
(20,231
|
)
|
|||||||
Other
income (expense), net
|
1,523
|
1,016
|
318
|
(261
|
)
|
48
|
||||||||||
Income
(loss) from continuing operations before income taxes
|
5,244
|
(1,065
|
)
|
(1,423
|
)
|
(12,866
|
)
|
(20,183
|
)
|
|||||||
(Provision)
benefit for income taxes
|
(457
|
)
|
1,005
|
3,370
|
964
|
2,094
|
||||||||||
Income
(loss) from continuing operations
|
4,787
|
(60
|
)
|
1,947
|
(11,902
|
)
|
(18,089
|
)
|
||||||||
Income
(loss) from discontinued operations
|
422
|
2,155
|
14,128
|
2,015
|
(17,883
|
)
|
||||||||||
Net
income (loss)
|
$
|
5,209
|
$
|
2,095
|
$
|
16,075
|
$
|
(9,887
|
)
|
$
|
(35,972
|
)
|
||||
Earnings
(loss) per common share:
|
||||||||||||||||
Basic
earnings (loss) from continuing operations
|
$
|
0.42
|
$
|
(0.01
|
)
|
$
|
0.17
|
$
|
(1.08
|
)
|
$
|
(1.62
|
)
|
|||
Diluted
earnings (loss) from continuing operations
|
$
|
0.41
|
$
|
(0.01
|
)
|
$
|
0.16
|
$
|
(1.08
|
)
|
$
|
(1.62
|
)
|
|||
Basic
earnings (loss) from discontinued operations
|
$
|
0.04
|
$
|
0.18
|
$
|
1.26
|
$
|
0.18
|
$
|
(1.60
|
)
|
|||||
Diluted
earnings (loss) from discontinued operations
|
$
|
0.04
|
$
|
0.18
|
$
|
1.15
|
$
|
0.18
|
$
|
(1.60
|
)
|
|||||
Basic
earnings (loss)
|
$
|
0.45
|
$
|
0.18
|
$
|
1.44
|
$
|
(0.89
|
)
|
$
|
(3.21
|
)
|
||||
Diluted
earnings (loss)
|
$
|
0.45
|
$
|
0.17
|
$
|
1.30
|
$
|
(0.89
|
)
|
$
|
(3.21
|
)
|
||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
11,497,773
|
11,957,756
|
11,177,406
|
11,057,896
|
11,183,339
|
|||||||||||
Diluted
|
11,575,721
|
12,206,618
|
12,332,106
|
11,057,896
|
11,183,339
|
|||||||||||
As
of June 30,
|
||||||||||||||||
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
||||
Financial
data:
|
||||||||||||||||
Current
assets
|
$
|
38,317
|
$
|
39,743
|
$
|
34,879
|
$
|
27,202
|
$
|
29,365
|
||||||
Property,
plant and equipment, net
|
2,694
|
1,647
|
2,805
|
4,027
|
4,320
|
|||||||||||
Total
assets
|
41,063
|
41,405
|
38,021
|
32,156
|
35,276
|
|||||||||||
Long-term
debt, net of current maturities
|
619
|
-
|
-
|
240
|
931
|
|||||||||||
Capital
leases, net of current maturities
|
-
|
-
|
-
|
2
|
9
|
|||||||||||
Total
shareholders' equity
|
30,438
|
30,412
|
24,911
|
9,006
|
18,743
|
Fiscal
2007 Quarters Ended
|
||||||||||||||||
(in
thousands of dollars, except per share data)
|
||||||||||||||||
Sept.
30
|
Dec.
31
|
Mar.
31
|
June
30
|
Total
|
||||||||||||
Revenue
|
$
|
9,411
|
$
|
10,107
|
$
|
9,355
|
$
|
10,988
|
$
|
39,861
|
||||||
Cost
of goods sold
|
(4,316
|
)
|
(4,860
|
)
|
(4,190
|
)
|
(4,357
|
)
|
(17,723
|
)
|
||||||
Marketing
and selling
|
(1,918
|
)
|
(1,789
|
)
|
(2,004
|
)
|
(2,080
|
)
|
(7,791
|
)
|
||||||
Research
and product development
|
(2,079
|
)
|
(1,855
|
)
|
(1,848
|
)
|
(1,753
|
)
|
(7,535
|
)
|
||||||
General
and administrative
|
(809
|
)
|
(688
|
)
|
(763
|
)
|
(831
|
)
|
(3,091
|
)
|
||||||
Other
income (expense), net
|
332
|
320
|
577
|
294
|
1,523
|
|||||||||||
Income
from continuing operations before income taxes
|
621
|
1,235
|
1,127
|
2,261
|
5,244
|
|||||||||||
Benefit
(provision) for income taxes
|
19
|
(155
|
)
|
(167
|
)
|
(154
|
)
|
(457
|
)
|
|||||||
Income
from continuing operations
|
640
|
1,080
|
960
|
2,107
|
4,787
|
|||||||||||
Income
from discontinued operations
|
37
|
4
|
263
|
118
|
422
|
|||||||||||
Net
income
|
$
|
677
|
$
|
1,084
|
$
|
1,223
|
$
|
2,225
|
$
|
5,209
|
||||||
Basic
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
0.05
|
$
|
0.09
|
$
|
0.09
|
$
|
0.19
|
$
|
0.42
|
||||||
Discontinued
operations
|
-
|
-
|
0.02
|
0.01
|
0.04
|
|||||||||||
Basic
income (loss) earnings per common share
|
$
|
0.05
|
$
|
0.09
|
$
|
0.11
|
$
|
0.20
|
$
|
0.45
|
||||||
Diluted
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
0.05
|
$
|
0.09
|
$
|
0.09
|
$
|
0.19
|
$
|
0.41
|
||||||
Discontinued
operations
|
-
|
-
|
0.02
|
0.01
|
0.04
|
|||||||||||
Diluted
income (loss) earnings per common share
|
$
|
0.06
|
$
|
0.09
|
$
|
0.11
|
$
|
0.20
|
$
|
0.45
|
Fiscal
2006 Quarters Ended
|
||||||||||||||||
(in
thousands of dollars, except per share data)
|
||||||||||||||||
Sept.
30
|
Dec.
31
|
Mar.
31
|
June
30
|
Total
|
||||||||||||
Revenue
|
$
|
8,777
|
$
|
9,102
|
$
|
8,277
|
$
|
9,206
|
$
|
35,362
|
||||||
Cost
of goods sold
|
(4,013
|
)
|
(4,470
|
)
|
(4,253
|
)
|
(4,639
|
)
|
(17,375
|
)
|
||||||
Marketing
and selling
|
(1,812
|
)
|
(1,810
|
)
|
(1,920
|
)
|
(2,324
|
)
|
(7,866
|
)
|
||||||
Research
and product development
|
(1,799
|
)
|
(1,778
|
)
|
(2,201
|
)
|
(2,521
|
)
|
(8,299
|
)
|
||||||
General
and administrative
|
(1,771
|
)
|
(1,457
|
)
|
(1,060
|
)
|
(820
|
)
|
(5,108
|
)
|
||||||
Settlement
in shareholders' class action
|
1,205
|
-
|
-
|
-
|
1,205
|
|||||||||||
Other
income (expense), net
|
166
|
191
|
237
|
422
|
1,016
|
|||||||||||
(Loss)
income from continuing operations before income taxes
|
753
|
(222
|
)
|
(920
|
)
|
(676
|
)
|
(1,065
|
)
|
|||||||
Benefit
(provision) for income taxes
|
222
|
146
|
782
|
(145
|
)
|
1,005
|
||||||||||
Income
(loss) from continuing operations
|
975
|
(76
|
)
|
(138
|
)
|
(821
|
)
|
(60
|
)
|
|||||||
Income
from discontinued operations
|
1,012
|
157
|
677
|
309
|
2,155
|
|||||||||||
Net
income
|
$
|
1,987
|
$
|
81
|
$
|
540
|
$
|
(512
|
)
|
$
|
2,096
|
|||||
Basic
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
0.09
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.07
|
)
|
$
|
-
|
|||
Discontinued
operations
|
0.08
|
0.01
|
0.06
|
0.03
|
0.18
|
|||||||||||
Basic
income (loss) earnings per common share
|
$
|
0.17
|
$
|
0.01
|
$
|
0.04
|
$
|
(0.04
|
)
|
$
|
0.18
|
|||||
Diluted
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
0.09
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.07
|
)
|
$
|
-
|
|||
Discontinued
operations
|
0.08
|
0.01
|
0.06
|
0.03
|
0.18
|
|||||||||||
Diluted
income (loss) earnings per common share
|
$
|
0.17
|
$
|
0.01
|
$
|
0.04
|
$
|
(0.04
|
)
|
$
|
0.17
|
Fiscal
2005 Quarters Ended
|
||||||||||||||||
(in
thousands of dollars, except per share data)
|
||||||||||||||||
Sept.
30
|
Dec.
31
|
Mar.
31
|
June
30
|
Total
|
||||||||||||
Revenue
|
$
|
6,160
|
$
|
7,939
|
$
|
6,566
|
$
|
8,422
|
$
|
29,087
|
||||||
Cost
of goods sold
|
(3,292
|
)
|
(3,347
|
)
|
(2,697
|
)
|
(3,384
|
)
|
(12,720
|
)
|
||||||
Marketing
and selling
|
(2,086
|
)
|
(2,341
|
)
|
(2,151
|
)
|
(2,492
|
)
|
(9,070
|
)
|
||||||
Research
and product development
|
(1,105
|
)
|
(1,282
|
)
|
(1,423
|
)
|
(1,495
|
)
|
(5,305
|
)
|
||||||
General
and administrative
|
(1,435
|
)
|
(1,388
|
)
|
(1,287
|
)
|
(1,379
|
)
|
(5,489
|
)
|
||||||
Settlement
in shareholders' class action
|
1,020
|
734
|
855
|
(563
|
)
|
2,046
|
||||||||||
Impairment
losses
|
-
|
-
|
-
|
(180
|
)
|
(180
|
)
|
|||||||||
Restructuring
charge
|
-
|
-
|
-
|
(110
|
)
|
(110
|
)
|
|||||||||
Other
income (expense), net
|
34
|
64
|
95
|
125
|
318
|
|||||||||||
(Loss)
income from continuing operations before income taxes
|
(704
|
)
|
379
|
(42
|
)
|
(1,056
|
)
|
(1,423
|
)
|
|||||||
Benefit
(provision) for income taxes
|
263
|
(141
|
)
|
15
|
3,234
|
3,370
|
||||||||||
(Loss)
income from continuing operations
|
(441
|
)
|
238
|
(27
|
)
|
2,178
|
1,948
|
|||||||||
Income
from discontinued operations
|
13,397
|
168
|
422
|
140
|
14,127
|
|||||||||||
Net
income
|
$
|
12,956
|
$
|
406
|
$
|
395
|
$
|
2,318
|
$
|
16,075
|
||||||
Basic
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
(0.04
|
)
|
$
|
0.02
|
$
|
-
|
$
|
0.19
|
$
|
0.17
|
|||||
Discontinued
operations
|
1.21
|
0.02
|
0.04
|
0.01
|
1.26
|
|||||||||||
Basic
income (loss) earnings per common share
|
$
|
1.16
|
$
|
0.04
|
$
|
0.03
|
$
|
0.21
|
$
|
1.44
|
||||||
Diluted
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
(0.04
|
)
|
$
|
0.02
|
$
|
-
|
$
|
0.18
|
$
|
0.16
|
|||||
Discontinued
operations
|
1.08
|
0.01
|
0.03
|
0.01
|
1.15
|
|||||||||||
Diluted
income (loss) earnings per common share
|
$
|
1.05
|
$
|
0.03
|
$
|
0.03
|
$
|
0.19
|
$
|
1.30
|
Deferred
Revenue
|
Deferred
Cost of Goods Sold
|
Deferred
Gross Profit
|
||||||||
June
30, 2007
|
$
|
4,872
|
$
|
2,115
|
$
|
2,757
|
||||
March
31, 2007
|
5,111
|
2,265
|
2,846
|
|||||||
December
, 2006
|
4,711
|
2,166
|
2,545
|
|||||||
September
30, 2006
|
5,249
|
2,541
|
2,708
|
|||||||
June
30, 2006
|
5,871
|
2,817
|
3,054
|
|||||||
March
31, 2006
|
5,355
|
2,443
|
2,912
|
|||||||
December
31, 2005
|
4,936
|
2,199
|
2,737
|
|||||||
September
30, 2005
|
4,848
|
2,373
|
2,475
|
|||||||
June
30, 2005
|
5,055
|
2,297
|
2,758
|
· |
Significant
underperformance relative to projected future operating
results;
|
· |
Significant
changes in the manner of our use of the acquired assets or the strategy
for our overall business; and
|
· |
Significant
negative industry or economic
trends.
|
Year
Ended June 30,
|
|||||||||||||||||||
(in
thousands of dollars)
|
|||||||||||||||||||
2007
|
2006
|
2005
|
|||||||||||||||||
%
of Revenue
|
%
of Revenue
|
%
of Revenue
|
|||||||||||||||||
Revenue
|
$
|
39,861
|
100.0%
|
|
$
|
35,362
|
100.0%
|
|
$
|
29,087
|
100.0%
|
|
|||||||
Cost
of goods sold
|
17,723
|
44.5%
|
|
17,375
|
49.1%
|
|
12,720
|
43.7%
|
|
||||||||||
Gross
profit
|
22,138
|
55.5%
|
|
17,987
|
50.9%
|
|
16,367
|
56.3%
|
|
||||||||||
Operating
expenses (benefit):
|
|||||||||||||||||||
Marketing
and selling
|
7,791
|
19.5%
|
|
7,866
|
22.2%
|
|
9,070
|
31.2%
|
|
||||||||||
Research
and product development
|
7,535
|
18.9%
|
|
8,299
|
23.5%
|
|
5,305
|
18.2%
|
|
||||||||||
General
and administrative
|
3,091
|
7.8%
|
|
5,108
|
14.4%
|
|
5,489
|
18.9%
|
|
||||||||||
Settlement
in shareholders' class action
|
-
|
0.0%
|
|
(1,205
|
)
|
-3.4%
|
|
(2,046
|
)
|
-7.0%
|
|
||||||||
Impairment
losses
|
-
|
0.0%
|
|
-
|
0.0%
|
|
180
|
0.6%
|
|
||||||||||
Restructuring
charge
|
-
|
0.0%
|
|
-
|
0.0%
|
|
110
|
0.4%
|
|
||||||||||
Total
operating expenses
|
18,417
|
46.2%
|
|
20,068
|
56.8%
|
|
18,108
|
62.3%
|
|
||||||||||
Operating
income (loss)
|
3,721
|
9.3%
|
|
(2,081
|
)
|
-5.9%
|
|
(1,741
|
)
|
-6.0%
|
|
||||||||
Other
income (expense), net
|
1,523
|
3.8%
|
|
1,016
|
2.9%
|
|
318
|
1.1%
|
|
||||||||||
Income
(loss) from continuing operations before income taxes
|
5,244
|
13.2%
|
|
(1,065
|
)
|
-3.0%
|
|
(1,423
|
)
|
-4.9%
|
|
||||||||
(Provision)
Benefit for income taxes
|
(457
|
)
|
-1.1%
|
|
1,005
|
2.8%
|
|
3,370
|
11.6%
|
|
|||||||||
Income
(loss) from continuing operations
|
4,787
|
12.0%
|
|
(60
|
)
|
-0.2%
|
|
1,947
|
6.7%
|
|
|||||||||
Income
from discontinued operations, net of tax
|
422
|
1.1%
|
|
2,156
|
6.1%
|
|
14,128
|
48.6%
|
|
||||||||||
Net
income (loss)
|
$
|
5,209
|
13.1%
|
|
$
|
2,096
|
5.9%
|
|
$
|
16,075
|
55.3%
|
|
Year
Ended June 30,
|
|||||||||||||||||||
(in
thousands of dollars)
|
|||||||||||||||||||
2007
|
2006
|
2005
|
|||||||||||||||||
%
of Revenue
|
%
of Revenue
|
%
of Revenue
|
|||||||||||||||||
Cost
of goods sold
|
$
|
17,723
|
44.5%
|
|
$
|
17,375
|
49.1%
|
|
$
|
12,720
|
43.7%
|
|
|||||||
Gross
profit
|
$
|
22,138
|
55.5%
|
|
$
|
17,987
|
50.9%
|
|
$
|
16,367
|
56.3%
|
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Total
income (loss) from discontinued operations, net of income
taxes
|
||||||||||
Conferencing
services business
|
$
|
-
|
$
|
729
|
$
|
13,378
|
||||
OM
Video
|
381
|
248
|
401
|
|||||||
Burk
Technology
|
-
|
953
|
144
|
|||||||
Ken-A-Vision
|
41
|
226
|
205
|
|||||||
Total
income from discontinued operations, net of income taxes
|
$
|
422
|
$
|
2,156
|
$
|
14,128
|
Contractual
Obligations
|
Total
|
Less
than 1 Year
|
1-3
Years
|
4-5
Years
|
After
5 Years
|
|||||||||||
Operating
Leases
|
$
|
4,374
|
$
|
725
|
$
|
1,396
|
$
|
1,288
|
$
|
965
|
||||||
Total
Contractual
|
||||||||||||||||
Cash
Obligations
|
$
|
4,374
|
$
|
725
|
$
|
1,396
|
$
|
1,288
|
$
|
965
|
CLEARONE
COMMUNICATIONS, INC.
|
||
September
17, 2007
|
By:
|
/s/
Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
President,
Chief Executive Officer, and
Director
|
Signature
|
Title
|
Date
|
/s/
Zeynep Hakimoglu
|
President,
Chief Executive Officer, and Director
|
September
17, 2007
|
Zeynep Hakimoglu |
(Principal
Executive Officer)
|
|
/s/
Greg A. LeClaire
|
Vice
President of Finance
|
September
17, 2007
|
Greg
A. LeClaire
|
(Principal
Financial and Accounting Officer)
|
|
/s/
Brad R. Baldwin
|
Director
|
September
17, 2007
|
Brad
R. Baldwin
|
||
/s/
Larry R. Hendricks
|
Director
|
September
17, 2007
|
Larry
R. Hendricks
|
||
/s/
Scott M. Huntsman
|
Director
|
September
17, 2007
|
Scott
M. Huntsman
|
||
/s/
Harry Spielberg
|
Director
|
September
17, 2007
|
Harry
Spielberg
|
Page
|
|
Report
of Independent Registered Public Accounting Firm - Jones Simkins,
P.C.
|
F-2
|
Report
of Independent Registered Public Accounting Firm - Hansen Barnett
&
Maxwell, P.C.
|
F-3
|
Consolidated
Balance Sheets as of June 30, 2007 and 2006
|
F-4
|
Consolidated
Statements of Operations and Comprehensive Income for fiscal years
ended
June
30, 2007, 2006, and 2005
|
F-5
|
Consolidated
Statements of Shareholders' Equity for fiscal years ended June
30, 2007,
2006, and 2005
|
F-7
|
Consolidated
Statements of Cash Flows for fiscal years ended June 30, 2007,
2006, and
2005
|
F-8
|
Notes
to Consolidated Financial Statements
|
F-10
|
June
30,
|
|||||||
2007
|
2006
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
2,782
|
$
|
1,240
|
|||
Marketable
securities
|
19,871
|
20,550
|
|||||
Accounts
receivable, net of allowance for doubtful accounts
|
8,025
|
7,784
|
|||||
of
$54 and $49, respectively
|
|||||||
Note
receivable
|
163
|
-
|
|||||
Inventories,
net
|
7,263
|
6,614
|
|||||
Income
tax receivable
|
-
|
2,607
|
|||||
Deferred
income taxes, net
|
-
|
128
|
|||||
Prepaid
expenses
|
213
|
255
|
|||||
Net
assets of discontinued operations
|
-
|
565
|
|||||
Total
current assets
|
38,317
|
39,743
|
|||||
Property
and equipment, net
|
2,694
|
1,647
|
|||||
Note
receiveable - long-term
|
43
|
-
|
|||||
Other
assets
|
9
|
15
|
|||||
Total
assets
|
$
|
41,063
|
$
|
41,405
|
|||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,745
|
$
|
2,597
|
|||
Accrued
taxes
|
660
|
-
|
|||||
Accrued
liabilities
|
1,874
|
2,397
|
|||||
Deferred
product revenue
|
4,872
|
5,871
|
|||||
Total
current liabilities
|
9,151
|
10,865
|
|||||
Deferred
rent
|
855
|
-
|
|||||
Deferred
income taxes, net
|
-
|
128
|
|||||
Other
long-term liabilities
|
619
|
-
|
|||||
Total
liabilities
|
10,625
|
10,993
|
|||||
Commitments
and contingencies (see Notes 7 and 10)
|
|||||||
Shareholders'
equity:
|
|||||||
Common
stock, 50,000,000 shares authorized, par value $0.001,
|
|||||||
10,861,920
and 12,184,727 shares issued and outstanding, respectively
|
11
|
12
|
|||||
Additional
paid-in capital
|
47,582
|
52,764
|
|||||
Accumulated
deficit
|
(17,155
|
)
|
(22,364
|
)
|
|||
Total
shareholders' equity
|
30,438
|
30,412
|
|||||
Total
liabilities and shareholders' equity
|
$
|
41,063
|
$
|
41,405
|
|||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Revenue
|
$
|
39,861
|
$
|
35,362
|
$
|
29,087
|
||||
Cost
of goods sold
|
17,723
|
17,375
|
12,720
|
|||||||
Gross
profit
|
22,138
|
17,987
|
16,367
|
|||||||
Operating
expenses:
|
||||||||||
Marketing
and selling
|
7,791
|
7,866
|
9,070
|
|||||||
Research
and product development
|
7,535
|
8,299
|
5,305
|
|||||||
General
and administrative
|
3,091
|
5,108
|
5,489
|
|||||||
Settlement
in shareholders' class action
|
-
|
(1,205
|
)
|
(2,046
|
)
|
|||||
Impairment
losses (see Note 19)
|
-
|
-
|
180
|
|||||||
Restructuring
charge (see Note 19)
|
-
|
-
|
110
|
|||||||
Total
operating expenses
|
18,417
|
20,068
|
18,108
|
|||||||
Operating
income (loss)
|
3,721
|
(2,081
|
)
|
(1,741
|
)
|
|||||
Other
income (expense), net:
|
||||||||||
Interest
income
|
1,468
|
813
|
425
|
|||||||
Interest
expense
|
(4
|
)
|
-
|
(104
|
)
|
|||||
Other,
net
|
59
|
203
|
(3
|
)
|
||||||
Total
other income (expense), net
|
1,523
|
1,016
|
318
|
|||||||
Income
(loss) from continuing operations before income taxes
|
5,244
|
(1,065
|
)
|
(1,423
|
)
|
|||||
(Provision)
benefit for income taxes
|
(457
|
)
|
1,005
|
3,370
|
||||||
Income
(loss) from continuing operations
|
4,787
|
(60
|
)
|
1,947
|
||||||
Discontinued
operations:
|
||||||||||
Income
from discontinued operations
|
75
|
361
|
552
|
|||||||
Gain
on disposal of discontinued operations
|
598
|
2,726
|
17,851
|
|||||||
Income
tax provision
|
(251
|
)
|
(931
|
)
|
(4,275
|
)
|
||||
Income
from discontinued operations
|
422
|
2,156
|
14,128
|
|||||||
Net
income
|
$
|
5,209
|
$
|
2,096
|
$
|
16,075
|
||||
Comprehensive
income:
|
||||||||||
Net
income
|
$
|
5,209
|
$
|
2,096
|
$
|
16,075
|
||||
Foreign
currency translation adjustments
|
-
|
-
|
112
|
|||||||
Less:
reclassification adjustments for foreign currency translation adjustments
included in net income
|
-
|
-
|
(1,301
|
)
|
||||||
Comprehensive
income
|
$
|
5,209
|
$
|
2,096
|
$
|
14,886
|
||||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Basic
earnings (loss) per common share from continuing
operations
|
$
|
0.42
|
$
|
(0.01
|
)
|
$
|
0.17
|
|||
Diluted
earnings (loss) per common share from continuing
operations
|
$
|
0.41
|
$
|
-
|
$
|
0.16
|
||||
Basic
earnings per common share from discontinued operations
|
$
|
0.04
|
$
|
0.18
|
$
|
1.26
|
||||
Diluted
earnings per common share from discontinued operations
|
$
|
0.04
|
$
|
0.18
|
$
|
1.15
|
||||
Basic
earnings per common share
|
$
|
0.45
|
$
|
0.18
|
$
|
1.44
|
||||
Diluted
earnings per common share
|
$
|
0.45
|
$
|
0.17
|
$
|
1.30
|
||||
Basic
weighted average shares outstanding
|
11,497,773
|
11,957,756
|
11,177,406
|
|||||||
Diluted
weighted average shares outstanding
|
11,575,721
|
12,206,618
|
12,332,106
|
|||||||
See
accompanying notes to consolidated financial
statements
|
Accumulated
|
||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||
Common
Stock
|
Paid-In
|
Deferred
|
Comprehensive
|
Accumulated
|
Shareholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Income
|
Deficit
|
Equity
|
||||||||||||||||
Balances
at June 30, 2004
|
11,036,233
|
$
|
11
|
$
|
48,395
|
$
|
(54
|
)
|
$
|
1,189
|
$
|
(40,535
|
)
|
$
|
9,006
|
|||||||
Issuance
of Common Shares related to shareholder settlement
agreement
|
228,000
|
-
|
957
|
-
|
-
|
-
|
957
|
|||||||||||||||
Compensation
expense resulting from the modification of stock options
|
-
|
-
|
41
|
-
|
-
|
-
|
41
|
|||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
21
|
-
|
-
|
21
|
|||||||||||||||
Foreign
currency translation adjustments
|
-
|
-
|
-
|
-
|
(1,189
|
)
|
-
|
(1,189
|
)
|
|||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
16,075
|
16,075
|
|||||||||||||||
Balances
at June 30, 2005
|
11,264,233
|
11
|
49,393
|
(33
|
)
|
-
|
(24,460
|
)
|
24,911
|
|||||||||||||
Issuance
of Common Shares related to shareholder settlement
agreement
|
920,494
|
1
|
2,263
|
-
|
-
|
-
|
2,264
|
|||||||||||||||
Compensation
expense resulting from the modification of stock options
|
-
|
-
|
16
|
-
|
-
|
-
|
16
|
|||||||||||||||
Compensation
cost associated with SFAS No. 123R
|
-
|
-
|
1,092
|
-
|
-
|
-
|
1,092
|
|||||||||||||||
SFAS
No. 123R transition expense
|
-
|
-
|
-
|
33
|
-
|
-
|
33
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
2,096
|
2,096
|
|||||||||||||||
Balances
at June 30, 2006
|
12,184,727
|
12
|
52,764
|
-
|
-
|
(22,364
|
)
|
30,412
|
||||||||||||||
Tender
offer
|
(1,073,552
|
)
|
(1
|
)
|
(4,602
|
)
|
-
|
-
|
-
|
(4,603
|
)
|
|||||||||||
Stock
buy back program
|
(265,360
|
)
|
-
|
(1,450
|
)
|
-
|
-
|
-
|
(1,450
|
)
|
||||||||||||
Exercise
of stock options
|
15,940
|
-
|
54
|
-
|
-
|
-
|
54
|
|||||||||||||||
Tax
benefit stock option exercise
|
-
|
-
|
9
|
-
|
-
|
-
|
9
|
|||||||||||||||
Compensation
cost associated with SFAS No. 123R
|
-
|
-
|
802
|
-
|
-
|
-
|
802
|
|||||||||||||||
Compensation
cost associated with the ESPP
|
165
|
-
|
4
|
-
|
-
|
-
|
4
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
5,209
|
5,209
|
|||||||||||||||
Balances
at June 30, 2007
|
10,861,920
|
$
|
11
|
$
|
47,582
|
$
|
-
|
$
|
-
|
$
|
(17,155
|
)
|
$
|
30,438
|
||||||||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss) from continuing operations
|
$
|
4,787
|
$
|
(60
|
)
|
$
|
1,947
|
|||
Adjustments
to reconcile net income (loss) from continuing operations
|
||||||||||
to
net cash provided by (used in) operations:
|
||||||||||
Loss
on impairment of long-lived assets, goodwill, and
intangibles
|
-
|
-
|
180
|
|||||||
Depreciation
and amortization expense
|
870
|
1,389
|
2,182
|
|||||||
Stock-based
compensation
|
806
|
1,140
|
62
|
|||||||
Write-off
of inventory
|
660
|
681
|
250
|
|||||||
Gain
on disposal of assets and fixed assets write-offs
|
(58
|
)
|
(237
|
)
|
(12
|
)
|
||||
Provision
for doubtful accounts
|
5
|
3
|
46
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Accounts
receivable
|
(261
|
)
|
(928
|
)
|
(692
|
)
|
||||
Note
receivable - Ken-A-Vision
|
(206
|
)
|
-
|
-
|
||||||
Inventories
|
(1,309
|
)
|
(2,236
|
)
|
(106
|
)
|
||||
Prepaids
and other assets
|
40
|
45
|
220
|
|||||||
Accounts
payable
|
(811
|
)
|
434
|
233
|
||||||
Restructuring
charge
|
-
|
-
|
110
|
|||||||
Accrued
liabilities
|
(673
|
)
|
(960
|
)
|
(4,226
|
)
|
||||
Other
long term liabilities
|
619
|
-
|
-
|
|||||||
Income
taxes
|
3,267
|
1,345
|
(585
|
)
|
||||||
Deferred
product revenue
|
(999
|
)
|
816
|
(1,052
|
)
|
|||||
Net
cash provided by (used in) continuing operating activities
|
6,737
|
1,432
|
(1,443
|
)
|
||||||
Net
cash provided by discontinued operating activities
|
47
|
730
|
1,073
|
|||||||
Net
cash provided by (used in) operating activities
|
6,784
|
2,162
|
(370
|
)
|
||||||
Cash
flows from investing activities:
|
||||||||||
Purchase
of property and equipment
|
(909
|
)
|
(224
|
)
|
(1,136
|
)
|
||||
Proceeds
from the sale of property and equipment
|
35
|
230
|
8
|
|||||||
Purchase
of marketable securities
|
(23,369
|
)
|
(14,800
|
)
|
(47,100
|
)
|
||||
Sale
of marketable securities
|
24,050
|
10,050
|
33,050
|
|||||||
Net
cash used in continuing investing activities
|
(193
|
)
|
(4,744
|
)
|
(15,178
|
)
|
||||
Net
cash provided by (used in) discontinued investing
activities
|
941
|
1,930
|
14,173
|
|||||||
Net
cash (used in) investing activities
|
748
|
(2,814
|
)
|
(1,005
|
)
|
|||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from common stock
|
54
|
-
|
-
|
|||||||
Principal
payments on capital lease obligations
|
-
|
-
|
(8
|
)
|
||||||
Principal
payments on note payable
|
-
|
-
|
(932
|
)
|
||||||
Purchase
and retirement of Common Shares
|
(6,053
|
)
|
-
|
-
|
||||||
Tax
benefit from stock options
|
9
|
-
|
-
|
|||||||
Net
cash used in continuing financing activities
|
(5,990
|
)
|
-
|
(940
|
)
|
|||||
Net
cash used in discontinued financing activities
|
-
|
-
|
-
|
|||||||
Net
cash used in financing activities
|
(5,990
|
)
|
-
|
(940
|
)
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
1,542
|
(652
|
)
|
(2,315
|
)
|
|||||
Cash
and cash equivalents at the beginning of the year
|
1,240
|
1,892
|
4,207
|
|||||||
Cash
and cash equivalents at the end of the year
|
$
|
2,782
|
$
|
1,240
|
$
|
1,892
|
||||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||
Cash
paid for interest
|
$
|
4
|
$
|
-
|
$
|
104
|
||||
Cash
paid (received) for income taxes
|
(3,202
|
)
|
(1,419
|
)
|
1,117
|
|||||
Supplemental
disclosure of non-cash financing activities:
|
||||||||||
Value
of common shares issued in shareholder settlement
|
$
|
-
|
$
|
2,264
|
$
|
957
|
||||
Lease
incentive for leasehold improvements
|
1,088
|
-
|
-
|
|||||||
Sales
of property and equipment for accounts payable
|
25
|
-
|
-
|
|||||||
Exchanged
accounts receivable from a vendor with accounts payable
|
||||||||||
to
the same vendor
|
15
|
-
|
-
|
|||||||
See
accompanying notes to consolidated financial
statements
|
1. |
Organization
-
Nature
of Operations
|
2. |
Summary
of Significant Accounting
Policies
|
Description
|
Balance
at Beginning of Period
|
Charged
to Costs and Expenses
|
Deductions
|
Balance
at End of Period
|
|||||||||
Year
ended June 30, 2006
|
$
|
46
|
$
|
3
|
$
|
-
|
$
|
49
|
|||||
Year
ended June 30, 2007
|
$
|
49
|
$
|
12
|
$
|
(7
|
)
|
$
|
54
|
Deferred
Revenue
|
Deferred
Cost of Goods Sold
|
Deferred
Gross Profit
|
||||||||
June
30, 2007
|
$
|
4,872
|
$
|
2,115
|
$
|
2,757
|
||||
June
30, 2006
|
5,871
|
2,817
|
3,054
|
|||||||
June
30, 2005
|
5,055
|
2,297
|
2,758
|
Years
Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Balance
at the beginning of year
|
$
|
169
|
$
|
126
|
|||
Accruals/additions
|
241
|
356
|
|||||
Usage
|
(285
|
)
|
(313
|
)
|
|||
Balance
at end of year
|
$
|
125
|
$
|
169
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Numerator:
|
||||||||||
Income
(loss) from continuing operations
|
$
|
4,787
|
$
|
(60
|
)
|
$
|
1,947
|
|||
Income
from discontinued operations, net of tax
|
47
|
226
|
378
|
|||||||
Gain
(loss) on disposal of discontinued operations, net of tax
|
375
|
1,930
|
13,750
|
|||||||
Net
income (loss)
|
$
|
5,209
|
$
|
2,096
|
$
|
16,075
|
||||
Denominator:
|
||||||||||
Basic
weighted average shares
|
11,497,773
|
11,957,756
|
11,177,406
|
|||||||
Dilutive
common stock equivalents using treasury stock method
|
77,948
|
248,862
|
1,154,700
|
|||||||
Diluted
weighted average shares
|
11,575,721
|
12,206,618
|
12,332,106
|
|||||||
Basic
earnings (loss) per common share:
|
||||||||||
Continuing
operations
|
$
|
0.42
|
$
|
(0.01
|
)
|
$
|
0.17
|
|||
Discontinued
operations
|
$
|
0.00
|
$
|
0.02
|
$
|
0.03
|
||||
Disposal
of discontinued operations
|
$
|
0.03
|
$
|
0.16
|
$
|
1.23
|
||||
Net
income
|
$
|
0.45
|
$
|
0.18
|
$
|
1.44
|
||||
Diluted
earnings (loss) per common share:
|
||||||||||
Continuing
operations
|
$
|
0.41
|
$
|
-
|
$
|
0.16
|
||||
Discontinued
operations
|
$
|
0.00
|
$
|
0.02
|
$
|
0.03
|
||||
Disposal
of discontinued operations
|
$
|
0.03
|
$
|
0.16
|
$
|
1.11
|
||||
Net
income
|
$
|
0.45
|
$
|
0.17
|
$
|
1.30
|
Year
Ended
June
30,
|
||||
2005
|
||||
Net
income (loss):
|
||||
As
reported
|
$
|
16,075
|
||
Stock-based
employee compensation expense included in
|
||||
reported
net loss, net of income taxes
|
13
|
|||
Stock-based
employee compensation expense determined
|
||||
under
the fair-value method for all awards, net of income taxes
|
(866
|
)
|
||
Pro
forma
|
$
|
15,222
|
||
Basic
earnings per common share:
|
||||
As
reported
|
$
|
1.44
|
||
Pro
forma
|
1.36
|
|||
Diluted
earnings per common share:
|
||||
As
reported
|
$
|
1.30
|
||
Pro
forma
|
1.23
|
3. |
Discontinued
Operations
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Income
from discontinued operations
|
||||||||||
OM
Video
|
$
|
-
|
$
|
-
|
$
|
225
|
||||
Ken-A-Vision
|
75
|
361
|
327
|
|||||||
Total
income from discontinued operations
|
75
|
361
|
552
|
|||||||
Gain
(loss) on disposal of discontinued operations
|
||||||||||
Conferencing
services business
|
$
|
-
|
$
|
1,030
|
$
|
17,369
|
||||
OM
Video
|
607
|
350
|
295
|
|||||||
Burk
Technology
|
-
|
1,346
|
187
|
|||||||
Ken-A-Vision
|
(9
|
)
|
-
|
-
|
||||||
Total
gain on disposal of discontinued operations
|
598
|
2,726
|
17,851
|
|||||||
Income
tax provision
|
||||||||||
Conferencing
services business
|
$
|
-
|
$
|
(301
|
)
|
$
|
(3,991
|
)
|
||
OM
Video
|
(227
|
)
|
(102
|
)
|
(119
|
)
|
||||
Burk
Technology
|
-
|
(393
|
)
|
(43
|
)
|
|||||
Ken-A-Vision
|
(24
|
)
|
(135
|
)
|
(122
|
)
|
||||
Total
income tax provision
|
(251
|
)
|
(931
|
)
|
(4,275
|
)
|
||||
Total
income from discontinued operations, net of income taxes
|
||||||||||
Conferencing
services business
|
$
|
-
|
$
|
729
|
$
|
13,378
|
||||
OM
Video
|
380
|
248
|
401
|
|||||||
Burk
Technology
|
-
|
953
|
144
|
|||||||
Ken-A-Vision
|
42
|
226
|
205
|
|||||||
Total
income from discontinued operations, net of income taxes
|
$
|
422
|
$
|
2,156
|
$
|
14,128
|
Year
Ended
June
30,
|
||||
2005
|
||||
Revenue
|
$
|
3,805
|
||
Cost
of goods sold
|
3,038
|
|||
Gross
profit
|
767
|
|||
Marketing
and selling expenses
|
289
|
|||
General
and administrative expenses
|
253
|
|||
Income
before income taxes
|
225
|
|||
Gain
on disposal
|
295
|
|||
Provision
for income taxes
|
(119
|
)
|
||
Income
from discontinued operations, net of income taxes
|
$
|
401
|
Year
Ended
June
30,
|
||||
2006
|
||||
Inventory
|
$
|
411
|
||
Patents,
net
|
154
|
|||
Total
current assets
|
$
|
565
|
Year
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Revenue
|
$
|
648
|
$
|
2,269
|
$
|
2,558
|
||||
Cost
of goods sold
|
573
|
1,908
|
2,231
|
|||||||
Gross
profit
|
75
|
361
|
327
|
|||||||
Loss
on disposal
|
(9
|
)
|
-
|
-
|
||||||
Provision
for income taxes
|
(24
|
)
|
(135
|
)
|
(122
|
)
|
||||
Income
from discontinued operations
|
$
|
42
|
$
|
226
|
$
|
205
|
4. |
Inventories
|
As
of June 30,
|
|||||||
2007
|
2006
|
||||||
Raw
materials
|
$
|
453
|
$
|
600
|
|||
Finished
goods
|
4,695
|
3,197
|
|||||
Consigned
inventory
|
2,115
|
2,817
|
|||||
Total
inventory
|
$
|
7,263
|
$
|
6,614
|
5. |
Note
Receivable
|
6. |
Property
and Equipment
|
Estimated
|
As
of June 30,
|
|||||||||
useful
lives
|
2007
|
2006
|
||||||||
Office
furniture and equipment
|
3
to 10 years
|
$
|
7,825
|
$
|
7,458
|
|||||
Leasehold
improvements
|
2
to 5 years
|
1,289
|
974
|
|||||||
Manufacturing
and test equipment
|
2
to 10 years
|
1,433
|
1,184
|
|||||||
10,547
|
9,616
|
|||||||||
Accumulated
depreciation and amortization
|
(7,853
|
)
|
(7,969
|
)
|
||||||
Property
and equipment, net
|
$
|
2,694
|
$
|
1,647
|
7. |
Leases
and Deferred Rent
|
Years
Ending June 30,
|
||||
2008
|
$
|
725
|
||
2009
|
725
|
|||
2010
|
671
|
|||
2011
|
644
|
|||
2012
|
644
|
|||
Thereafter
|
965
|
|||
Total
minimum lease payments
|
$
|
4,374
|
8. |
Accrued
Liabilities
|
As
of June 30,
|
|||||||
2007
|
2006
|
||||||
Accrued
salaries and other compensation
|
$
|
1,027
|
$
|
1,150
|
|||
Other
accrued liabilities
|
847
|
1,247
|
|||||
Total
|
$
|
1,874
|
$
|
2,397
|
9. |
Commitments
and Contingencies
|
10. |
Shareholders’
Equity
|
11. |
Share-Based
Payment
|
Fiscal
Year Ended
|
|||
June
30,
|
June
30,
|
June
30,
|
|
2007
|
2006
|
2005
|
|
Risk-free
interest rate, average
|
4.8%
|
4.4%
|
4.0%
|
Expected
option life, average
|
4.6
years
|
5.9
years
|
5.8
years
|
Expected
price volatility, average
|
88.3%
|
87.2%
|
91.8%
|
Expected
dividend yield
|
0.0%
|
0.0%
|
0.0%
|
Expected
annual forfeiture rate
|
10.0%
|
10.0%
|
0.0%
|
Year
Ended June 30, 2006
|
|||||||
(in
thousands)
|
|||||||
SFAS
|
|||||||
No.
123R
|
|||||||
Compensation
|
|||||||
As
Reported
|
Expense
|
||||||
Revenue
|
$
|
35,362
|
$
|
-
|
|||
Cost
of goods sold
|
17,375
|
(49
|
)
|
||||
Gross
profit
|
17,987
|
49
|
|||||
Operating
expenses:
|
|||||||
Marketing
and selling
|
7,866
|
(99
|
)
|
||||
Research
and product development
|
8,299
|
(203
|
)
|
||||
General
and administrative
|
5,108
|
(756
|
)
|
||||
Settlement
in shareholders' class action
|
(1,205
|
)
|
-
|
||||
Total
operating expenses
|
20,068
|
(1,058
|
)
|
||||
Operating
loss
|
(2,081
|
)
|
1,107
|
||||
Other
income, net
|
1,016
|
34
|
|||||
Loss
from continuing operations before income taxes
|
(1,065
|
)
|
1,141
|
||||
Benefit
for income taxes
|
1,005
|
(264
|
)
|
||||
Income
from continuing operations
|
(60
|
)
|
877
|
||||
Income
from discontinued operations, net of tax
|
2,156
|
-
|
|||||
Net
income
|
$
|
2,096
|
$
|
877
|
|||
Basic
earnings (loss) per common share:
|
|||||||
Continuing
operations
|
$
|
(0.01
|
)
|
$
|
0.07
|
||
Discontinued
operations
|
0.18
|
-
|
|||||
Net
income
|
0.18
|
0.07
|
|||||
Diluted
earnings (loss) per common share:
|
|||||||
Continuing
operations
|
$
|
0.00
|
$
|
0.07
|
|||
Discontinued
operations
|
0.18
|
-
|
|||||
Net
income
|
0.17
|
0.07
|
Stock
Options
|
Number
of Shares
|
Weighted
Average Exercise Price
|
Weighted
Remaining Contractual Term (years)
|
Aggregate
Intrinsic Value
|
|||||||||
Outstanding
at June 30, 2004
|
1,433,187
|
6.37
|
|||||||||||
Granted
|
450,500
|
4.77
|
|||||||||||
Expired
and canceled
|
(87,600
|
)
|
2.71
|
||||||||||
Forfeited
prior to vesting
|
(302,975
|
)
|
5.88
|
||||||||||
Exercised
|
-
|
-
|
|||||||||||
Outstanding
at June 30, 2005
|
1,493,112
|
6.21
|
|||||||||||
Granted
|
29,000
|
2.63
|
|||||||||||
Expired
and canceled
|
(118,353
|
)
|
3.55
|
||||||||||
Forfeited
prior to vesting
|
(165,839
|
)
|
8.11
|
||||||||||
Exercised
|
-
|
-
|
$
|
0
|
|||||||||
Outstanding
at June 30, 2006
|
1,237,920
|
6.12
|
$
|
135
|
|||||||||
Granted
|
436,500
|
3.84
|
|||||||||||
Expired
and canceled
|
(329,316
|
)
|
6.45
|
||||||||||
Forfeited
prior to vesting
|
(55,965
|
)
|
3.94
|
||||||||||
Exercised
|
(15,940
|
)
|
3.41
|
$
|
42
|
||||||||
Outstanding
at June 30, 2007
|
1,273,199
|
5.38
|
$
|
946
|
|||||||||
Exercisable
|
794,545
|
6.13
|
5.7
years
|
$
|
521
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price Range
|
Number
of Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Contractual Term (Years)
|
Options
Exercisable
|
Weighted
Average Exercise Price
|
|||||||||||
$0.00
to $4.00
|
715,449
|
$
|
3.41
|
7.4
years
|
369,465
|
$
|
3.29
|
|||||||||
$4.01
to $8.00
|
390,000
|
5.70
|
7.6
years
|
272,381
|
6.09
|
|||||||||||
$8.01
to $12.00
|
80,000
|
11.29
|
3.3
years
|
77,563
|
11.34
|
|||||||||||
$12.01
to $16.00
|
87,000
|
14.64
|
2.8
years
|
74,713
|
14.87
|
|||||||||||
$16.01
to $20.00
|
750
|
18.80
|
2.8
years
|
423
|
19.13
|
|||||||||||
Total
|
1,273,199
|
$
|
5.38
|
6.9
years
|
794,545
|
$
|
6.13
|
Non-vested
Shares
|
Number
of Shares
|
Weighted
Average Grant-Date Fair Value
|
|||||
Non-vested
at June 30, 2006
|
320,224
|
$
|
4.39
|
||||
Granted
|
436,500
|
2.65
|
|||||
Vested
|
(222,105
|
)
|
4.62
|
||||
Forfeited
prior to vesting
|
(55,965
|
)
|
2.89
|
||||
Non-vested
at June 30, 2007
|
478,654
|
$
|
2.87
|
12. |
Significant
Customers
|
2007
|
2006
|
2005
|
|
Customer
A
|
30.4%
|
24.6%
|
28.0%
|
Customer
B
|
13.4%
|
16.6%
|
19.2%
|
Customer
C
|
12.8%
|
15.0%
|
16.0%
|
Total
|
56.6%
|
56.2%
|
63.2%
|
2007
|
2006
|
|
Customer
A
|
29.3%
|
19.4%
|
Customer
B
|
16.7%
|
16.1%
|
Customer
C
|
12.2%
|
11.9%
|
Total
|
58.2%
|
47.4%
|
13. |
Severance
Charges
|
14. |
Retirement
Savings and Profit Sharing Plan
|
15. |
Income
Taxes
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
U.S.
|
$
|
5,184
|
$
|
(1,113
|
)
|
$
|
(1,475
|
)
|
||
Non-U.S.
|
60
|
48
|
52
|
|||||||
$
|
5,244
|
$
|
(1,065
|
)
|
$
|
(1,423
|
)
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Current:
|
||||||||||
U.S.
Federal
|
$
|
(435
|
)
|
$
|
889
|
$
|
2,952
|
|||
U.S.
State
|
(4
|
)
|
118
|
439
|
||||||
Non-U.S.
|
(18
|
)
|
(2
|
)
|
(21
|
)
|
||||
Total
current
|
$
|
(457
|
)
|
$
|
1,005
|
$
|
3,370
|
|||
Deferred:
|
||||||||||
U.S.
Federal
|
(148
|
)
|
(619
|
)
|
(2,236
|
)
|
||||
U.S.
State
|
(594
|
)
|
73
|
(337
|
)
|
|||||
Change
in deferred before valuation allowance
|
(742
|
)
|
(546
|
)
|
(2,573
|
)
|
||||
Decrease
(increase) in valuation allowance
|
742
|
546
|
2,573
|
|||||||
Total
deferred
|
-
|
-
|
-
|
|||||||
(Provision)
benefit for income taxes
|
$
|
(457
|
)
|
$
|
1,005
|
$
|
3,370
|
2007
|
2006
|
||||||||||||
Current
|
Long-term
|
Current
|
Long-term
|
||||||||||
Deferred
revenue
|
1,075
|
1,191
|
|||||||||||
Basis
difference in intangible assets
|
676
|
885
|
|||||||||||
Inventory
reserve
|
870
|
873
|
|||||||||||
Net
operating loss carryforwards
|
115
|
799
|
|||||||||||
Accumulated
research and development credits
|
960
|
591
|
|||||||||||
Alternative
minimum tax credits
|
409
|
409
|
|||||||||||
Accrued
liabilities
|
242
|
321
|
|||||||||||
Deductible
SFAS 123R compensation expense
|
436
|
268
|
|||||||||||
Allowance
for sales returns and doubtful accounts
|
21
|
19
|
|||||||||||
Other
|
77
|
281
|
|||||||||||
Difference
in property and equipment basis
|
(254
|
)
|
(268
|
)
|
|||||||||
Total
net deferred income tax asset
|
2,644
|
1,983
|
2,672
|
2,697
|
|||||||||
Less
valuation allowance
|
(2,644
|
)
|
(1,983
|
)
|
(2,672
|
)
|
(2,697
|
)
|
|||||
Net
deferred income tax asset
|
-
|
-
|
-
|
-
|
As
of June 30,
|
|||||||
2007
|
2006
|
||||||
Current
deferred income tax assets
|
$
|
-
|
$
|
128
|
|||
Long-term
deferred income tax assets
|
-
|
-
|
|||||
Current
deferred income tax liabilities
|
-
|
-
|
|||||
Long-term
deferred income tax liabilities
|
-
|
(128
|
)
|
||||
Net
deferred income tax assets
|
$
|
-
|
$
|
-
|
16. |
Related-Party
Transactions
|
17. |
Geographic
Sales Information
|
Years
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
United
States
|
$
|
28,336
|
$
|
25,316
|
$
|
21,703
|
||||
All
other countries
|
11,525
|
10,046
|
7,384
|
|||||||
Total
|
$
|
39,861
|
$
|
35,362
|
$
|
29,087
|
18. |
Closing
of Germany Office
|
19. |
Manufacturing
Transition
|
Severance
|
Manufacturing
Facilities Lease
|
Total
|
||||||||
Balance
at 06/30/2004
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Restructuring
charge
|
70
|
40
|
110
|
|||||||
Utilized
|
-
|
-
|
-
|
|||||||
Balance
at 06/30/2005
|
$
|
70
|
$
|
40
|
$
|
110
|
||||
Utilized
|
(70
|
)
|
(107
|
)
|
(177
|
)
|
||||
Sublease
payments received
|
-
|
110
|
110
|
|||||||
Balance
at 06/30/2006
|
$
|
-
|
$
|
43
|
$
|
43
|
||||
Utilized
|
-
|
(43
|
)
|
(43
|
)
|
|||||
Balance
at 06/30/2007
|
$
|
-
|
$
|
-
|
$
|
-
|
20. |
Subsequent
Events
|
1. |
I
have reviewed this annual report of ClearOne Communications, Inc.
on Form
10-K;
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
c) |
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting.
|
5. |
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a) |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
September 17, 2007
|
By:
|
/s/
Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
President
and Chief Executive Officer
|
1. |
I
have reviewed this annual report of ClearOne Communications, Inc.
on Form
10-K;
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
c) |
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting.
|
5. |
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a) |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
September 17, 2007
|
By:
|
/s/
Greg A. LeClaire
|
Greg
A LeClaire
|
||
VP
Finance
(Principal
Financial and Accounting Officer)
|
Date:
September 17, 2007
|
By:
|
/s/
Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
President
and Chief Executive Officer
(Principal
Executive Officer)
|
Date:
September 17, 2007
|
By:
|
/s/
Greg A. LeClaire
|
Greg
A. LeClaire
|
||
VP
Finance
(Principal
Financial and Accounting Officer)
|