[ x ] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
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Utah
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87-0398877
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State or other jurisdiction of incorporation or organization
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(I.R.S. Employer Identification No.)
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5225 Wiley Post Way, Suite 500, Salt Lake City, Utah
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84116
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.001 par value
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The NASDAQ Capital Market
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Larger Accelerated Filer
¨
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Accelerated Filer
¨
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Non-Accelerated Filer
¨
(Do not check if a smaller reporting company)
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Smaller Reporting Company
x
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Page
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PART I | ||
Item 1.
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1
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Item 1A.
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14
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Item 1B.
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19
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Item 2.
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19
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Item 3.
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19
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Item 4.
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19
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PART II | |
Item 5.
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20
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Item 6.
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20
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Item 7.
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21
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Item 7A.
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27
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Item 8.
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28
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Item 9.
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28
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Item 9A.
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28
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Item 9B.
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28
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PART III | |
Item 10.
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29
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Item 11.
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29
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Item 12.
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29
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Item 13.
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29
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Item 14.
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29
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PART IV | |
Item 15.
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29
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●
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Professional audiovisual;
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●
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Unified communications including telephony;
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●
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Commercial multimedia streaming and control including digital signage; and
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●
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Home entertainment.
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Maintain our leading global market share leadership of professional audio conferencing products for large businesses and organizations;
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Focus on the small and medium business (SMB) market with scaled, lower cost and less complex products and solutions;
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Capitalize on the growing adoption of unified communications and introduce new products through entering Information Technology channels;
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Partner with large enterprise communications providers worldwide to bring value added products to their solution portfolios and channels; and
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● |
Capitalize on the convergence of AV over IP by integrating NetStreams and ClearOne core technologies to provide new solutions that reach deeper into the enterprise infrastructure and bring clear, differentiated value to both the practitioner and the customer.
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●
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Distributed Echo Cancellation®
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One of the challenges in delivering good sound quality during a conference call is eliminating acoustical echo. Acoustical echo results when sound from the far end phone device is sent into the local conference room, where it is picked up by the microphones on the conference phone and then sent back to the far-end phone device. Because of this process, far-end participants hear their voice echoed as they speak. Distributed Echo Cancellation® from ClearOne solves this problem. By assigning an acoustical echo canceller to each microphone, the echo canceller identifies the sound that would otherwise be returned to the far end as echo and eliminates it. ClearOne was the first to introduce Distributed Echo Cancellation® in 1998. We now incorporate it into every audio conferencing system, and are the worldwide leader in this technology.
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●
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Noise Cancellation
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Noise Cancellation stops ambient room noise from being picked up by the microphones on the conference phone. Examples of ambient noise sources include HVAC systems, laptop computers, projectors and fluorescent lights. Unlike competitive products which claim to have noise cancellation, ClearOne uses a spectral content analysis technique that discriminates a talker’s voice from ambient noise and only applies noise cancellation to ambient noise sources. This allows the voice signal to pass to the far-end phone device with pristine sound quality.
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●
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First Microphone Priority
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When multiple microphones are active simultaneously in an audio conference phone, voice signals arrive at different microphones at different times due to the reflection of the sound from walls, ceilings or other surfaces. This causes sound distortion, which participants typically describe as a "hollow" or "tunnel" sound. ClearOne’s First Microphone Priority technology minimizes this distortion by using an intelligent voice detection method to activate only one microphone at a time based on its proximity to the person speaking.
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Adaptive Modeling
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In any conferencing environment, a number of factors can cause changes in the room’s ambient noise level, including the HVAC system cycling on and off, an increase or decrease in the number of people in the room, changes in seating arrangements and other similar acoustical events. These events can cause a variety of audio problems, such as feedback and residual echo. Adaptive Modeling monitors key acoustical elements to predict and adapt to such changes, ensuring high quality audio, regardless of varying room dynamics.
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ClearEffect™
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The vast majority of conference calls are conducted using narrow-band telephony signals, which eliminate the high and low tones from participants’ voices. This causes listener fatigue due to participants straining to hear what is being said. ClearEffect™ creates natural, full-sounding audio by simulating the high and low tones that were eliminated by the narrow-band signal. The result is similar to moving from a clock radio to a full-room entertainment system.
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Professional conferencing products that are used in large businesses and organizations such as enterprise, healthcare, education and distance learning, government, legal and finance that integrate with leading video and tele-presence systems;
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Premium conferencing products that are also scaled for smaller conferencing rooms and for small and medium businesses which integrate with leading video and web conferencing systems and applications;
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Traditional tabletop conferencing phones used in conference rooms and offices; and
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Personal conferencing products that enable affordable hands-free audio communications in new ways such as through PCs and portable laptops, smartphones and handsets.
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Availability of easy-to-use conferencing systems and applications;
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Richer and clearer voice quality of collaborative communications compared to the quality of telephone handset speakerphones; and
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Expansion of global, regional, and local corporate enterprises requiring increased use of collaboration tools and systems.
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Availability of affordable and portable audio conferencing solutions for small businesses and home offices;
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Growth of distance learning and corporate training programs;
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Increasing adoption of tele-working and home offices;
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Decreases in travel due to cost, inconvenience, and carbon footprint considerations;
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Transition to Internet Protocol (IP) networks from traditional public switched telephone networks (PSTN) and the growing deployment of VoIP collaboration applications; and
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Increased adoption of unified communication platforms that leverage the affordability and capability of personal computers as a central component of corporate communication.
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Unified Communications Clients
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Avaya, Cisco, IBM, Microsft, Siemens, and others
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Internet Telephony
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Google Talk, Skype, Vonage, and others
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Enterprise Telephony
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Aastra, Avaya, Cisco, Inter-tel, and others
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VoIP Softphones
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Avaya, Cisco, Mirial, and others
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Web Conferencing
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IBM Workplace/SameTime, Microsoft Live Meeting, Cisco WebEx, and others
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Instant Messenger
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AOL, Microsoft MSN, Yahoo, and others
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Group Video Conferencing Codecs
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Cisco/Tandberg, Logitech, Polycom, Sony, and others
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Group Video Conferencing Soft Clients
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Cisco/Tandberg, Logitech, Polycom, and others
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Audio Playback
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DVDs, VCRs, PCs, and audio sources
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Unified Communications Clients
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Avaya, Cisco, IBM, Microsft, Siemens, and others
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Internet Telephony
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Google Talk, Skype, Vonage, and others
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Enterprise Telephony
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Aastra, Avaya, Cisco, Intertel, and others
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VoIP Softphones
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Avaya, Cisco, Mirial, and others
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Smartphones and Cell Phones
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Compaq, Ericsson, LG Motorola, Nokia, Rim, Sony, and others
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Web Conferencing
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IBM Workplace/SameTime, Microsoft Live Meeting, Cisco WebEx, and others
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Instant Messenger
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AOL, Microsoft MSN, Yahoo, and others
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Desktop Video Conferencing
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Cisco/Tandberg, Logitech, Polycom, Sony, and others
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Audio Playback
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iPOD, Quicktime, RealPlayer, Windows Media Player, and others
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PC-Based Gaming
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TeamSpeak, and others
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Quality, features and functionality, and ease of use of the products;
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Broad and deep global channel partnerships;
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Significant established history of successful worldwide installations for diverse vertical markets;
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Brand name recognition and acceptance;
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Quality of customer and partner sales and technical support services; and
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Effective sales and marketing.
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meeting required specifications and regulatory standards;
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meeting market expectations for performance;
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hiring and keeping a sufficient number of skilled developers;
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obtaining prototype products at anticipated cost levels;
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having the ability to identify problems or product defects in the development cycle; and
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achieving necessary manufacturing efficiencies.
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unexpected changes in, or the imposition of, additional legislative or regulatory requirements;
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unique or more onerous environmental regulations;
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fluctuating exchange rates;
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tariffs and other barriers;
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difficulties in staffing and managing foreign sales operations;
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import and export restrictions;
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greater difficulties in accounts receivable collection and longer payment cycles;
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potentially adverse tax consequences;
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potential hostilities and changes in diplomatic and trade relationships; and
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disruption in services due to natural disaster, economic or political difficulties, transportation, quarantines or other restrictions associated with infectious diseases.
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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;
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disparity between our reported results and the projections of analysts;
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the shift in sales mix of products that we currently sell to a sales mix of lower-gross profit product offerings;
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the level and mix of inventory levels held by our distributors;
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the announcement of new products or product enhancements by us or our competitors;
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technological innovations by us or our competitors;
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success in meeting targeted availability dates for new or redesigned products;
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the ability to profitably and efficiently manage our supplies of products and key components;
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the ability to maintain profitable relationships with our customers;
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the ability to maintain an appropriate cost structure;
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quarterly variations in our results of operations;
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general consumer confidence or general market conditions or market conditions specific to technology industries;
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domestic and international economic conditions;
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unexpected changes in regulatory requirements and tariffs;
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our ability to report financial information in a timely manner; and
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the markets in which our stock is traded.
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Year ended December 31, 2010
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Six months ended December 31, 2009
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Year ended
June 30, 2009
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||||||||||||||||||||||
High
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Low
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High
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Low
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High
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Low
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|||||||||||||||||||
July 1 to Sep 30
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$ | 4.00 | $ | 2.97 | $ | 2.93 | $ | 2.40 | $ | 5.00 | $ | 3.10 | ||||||||||||
Oct 1 to Dec 31
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4.10 | 3.11 | 3.49 | 2.63 | 4.74 | 3.27 | ||||||||||||||||||
Jan 1 to Mar 31
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3.33 | 2.90 | 4.06 | 3.00 | ||||||||||||||||||||
April 1 to Jun 30
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3.25 | 2.96 | 3.25 | 2.47 |
Year ended December 31, 2010
Audited
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Year ended December 31, 2009
Unaudited
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Variance
Favorable (Unfavorable)
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||||||||||||||||||||||
$ thousands
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% of
Revenue
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$ thousands
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% of
Revenue
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$ thousands
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%
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|||||||||||||||||||
Revenue
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$ | 41,284 | 100.0 | % | $ | 31,499 | 100.0 | % | $ | 9,785 | 31.1 | % | ||||||||||||
Cost of goods sold
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16,643 | 40.3 | % | 14,712 | 46.7 | % | (1,931 | ) | -13.1 | % | ||||||||||||||
Gross profit
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24,641 | 59.7 | % | 16,787 | 53.3 | % | 7,854 | 46.8 | % | |||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Sales and marketing
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8,685 | 21.0 | % | 6,822 | 21.7 | % | (1,863 | ) | -27.3 | % | ||||||||||||||
Research and product development
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7,739 | 18.7 | % | 7,414 | 23.5 | % | (325 | ) | -4.4 | % | ||||||||||||||
General and administrative
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6,420 | 15.6 | % | 4,203 | 13.3 | % | (2,217 | ) | -52.7 | % | ||||||||||||||
Insurance settlement proceeds
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— | — | (1,100 | ) | -3.5 | % | (1,100 | ) | * | |||||||||||||||
Total Operating Expenses | 22,844 | 55.3 | % | 17,339 | 55.0 | % | (5,505 | ) | -31.7 | % | ||||||||||||||
Operating income
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1,797 | 4.4 | % | (552 | ) | -1.8 | % | 2,349 | 425.5 | % | ||||||||||||||
Other expense, net
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(104 | ) | -0.3 | % | 429 | 1.4 | % | (533 | ) | -124.2 | % | |||||||||||||
Income (loss) before income taxes
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1,693 | 4.1 | % | (123 | ) | -0.4 | % | 1,816 | 1,476.4 | % | ||||||||||||||
Benefit from income taxes
|
681 | 1.6 | % | 507 | 1.6 | % | 174 | 34.3 | % | |||||||||||||||
Net income
|
$ | 2,374 | 5.8 | % | $ | 384 | 1.2 | % | $ | 1,990 | 518.2 | % |
As of
December
31
, 2010
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As of
December 31, 2009
|
|||||||
Deferred Revenue
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$ | 4,306 | $ | 4,707 | ||||
Deferred Cost of Goods Sold
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1,742 | 1,846 | ||||||
Deferred Gross Profit
|
$ | 2,564 | $ | 2,861 |
1.
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Financial Statements:
Financial statements set forth under Part II, Item 8 of this Annual Report on Form 10-K are filed in a separate section of this Form 10-K. See "Index to Consolidated Financial Statements" on
page F-1
.
|
2.
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Financial Statement Schedules:
All schedules are omitted since they either are not required, not applicable or the information is presented in the accompanying consolidated financial statements and notes thereto.
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3.
|
Exhibits: The exhibits listed under the Index of exhibits in the next page are filed or incorporated by reference as part of this Form 10-K.
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/s/
Zeynep Hakimoglu
|
Zeynep Hakimoglu |
President, Chief Executive Officer (Principal Executive Officer), and
Chairman of the Board and Director
|
March 30, 2011 |
/s/ Zeynep Hakimoglu | /s/ Narsi Narayanan | |
Zeynep Hakimoglu
|
Narsi Narayanan | |
President, Chief Executive Officer (Principal Executive Officer), and
Chairman of the Board and Director
March 30, 2011
|
Vice President of Finance (Principal Financial and
Accounting Officer)
March 30, 2011
|
|
|
||
/s/ E. Bryan Bagley | /s/ Brad R. Baldwin | |
E.Bryan Bagley |
Brad R. Baldwin
|
|
Director
March 30, 2011
|
Director
March 30, 2011
|
|
|
||
/s/
Larry R. Hendricks
|
/s/ Scott M. Huntsman | |
Larry R. Hendricks
|
Scott M. Huntsman | |
Director
March 30, 2011
|
Director
March 30, 2011
|
|
Page
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-8
|
December 31, 2010
|
December 31, 2009
|
||||||||
ASSETS
|
|||||||||
Current assets:
|
|||||||||
Cash and cash equivalents
|
$ | 11,431 | $ | 9,494 | |||||
Receivables, net of allowance for doubtful accounts of $206 and $103, respectively
|
9,951 | 6,571 | |||||||
Inventories, net
|
8,780 | 6,236 | |||||||
Deferred income taxes
|
3,389 | 3,128 | |||||||
Prepaid expenses and other assets
|
446 | 1,609 | |||||||
Total current assets
|
33,997 | 27,038 | |||||||
Long-term inventory
|
2,617 | 6,412 | |||||||
Property and equipment, net
|
2,965 | 3,246 | |||||||
Intangibles
|
2,745 | 3,095 | |||||||
Goodwill
|
726 | 726 | |||||||
Long-term deferred income taxes
|
913 | 1,037 | |||||||
Other assets
|
18 | 21 | |||||||
Total assets
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$ | 43,981 | $ | 41,575 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||||||
Current liabilities:
|
|||||||||
Accounts payable
|
$ | 2,362 | $ | 2,304 | |||||
Accrued liabilities
|
4,573 | 1,768 | |||||||
Current maturities of long term-debt
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— | 2,000 | |||||||
Deferred product revenue
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4,306 | 4,707 | |||||||
Total current liabilities
|
11,241 | 10,779 | |||||||
Deferred rent
|
584 | 466 | |||||||
Other long-term liabilities
|
421 | 1,232 | |||||||
Total liabilities
|
12,246 | 12,477 | |||||||
Shareholders' equity:
|
|||||||||
Common stock, par value $0.001, 50,000,000 shares authorized, 8,929,439 and 8,929,134 shares issued and outstanding, respectively
|
9 | 9 | |||||||
Additional paid-in capital
|
39,073 | 38,810 | |||||||
Accumulated deficit
|
(7,347 | ) | (9,721 | ) | |||||
Total shareholders' equity
|
31,735 | 29,098 | |||||||
Total liabilities and shareholders' equity
|
$ | 43,981 | $ | 41,575 |
Year ended
December 31, 2010
|
Six Months ended
December 31, 2009
|
Year ended
June 30, 2009
|
|||||||||||
Revenue
|
$ | 41,284 | $ | 16,836 | $ | 35,700 | |||||||
Cost of goods sold
|
16,643 | 7,276 | 15,323 | ||||||||||
Gross profit
|
24,641 | 9,560 | 20,377 | ||||||||||
Operating expenses:
|
|||||||||||||
Sales and marketing
|
8,685 | 3,204 | 7,529 | ||||||||||
Research and product development
|
7,739 | 3,493 | 7,541 | ||||||||||
General and administrative
|
6,420 | 2,900 | 3,631 | ||||||||||
Insurance settlement proceeds
|
— | — | (1,100 | ) | |||||||||
Total operating expenses
|
22,844 | 9,597 | 17,601 | ||||||||||
Operating income (loss)
|
1,797 | (37 | ) | 2,776 | |||||||||
Other income (expense), net:
|
|||||||||||||
Interest income
|
43 | 76 | 474 | ||||||||||
Interest expense
|
(51 | ) | (35 | ) | (1 | ) | |||||||
Other, net
|
(96 | ) | 100 | (27 | ) | ||||||||
Total other income (expense), net
|
(104 | ) | 141 | 446 | |||||||||
Income before income taxes
|
1,693 | 104 | 3,222 | ||||||||||
Benefit from (provision for) income taxes
|
681 | 320 | (995 | ) | |||||||||
Net income
|
$ | 2,374 | $ | 424 | $ | 2,227 | |||||||
Comprehensive income:
|
|||||||||||||
Net income
|
$ | 2,374 | $ | 424 | $ | 2,227 | |||||||
Unrealized gain (loss) on marketable securities, net of taxes of 0, 2, and ($415), respectively
|
— | (6 | ) | 700 | |||||||||
Comprehensive income
|
$ | 2,374 | $ | 418 | $ | 2,927 | |||||||
Basic earnings per common share
|
$ | 0.27 | $ | 0.05 | $ | 0.24 | |||||||
Diluted earnings per common share
|
$ | 0.27 | $ | 0.05 | $ | 0.24 | |||||||
Basic weighted average shares outstanding
|
8,929,305 | 8,928,970 | 9,213,731 | ||||||||||
Diluted weighted average shares outstanding
|
8,942,929 | 9,045,842 | 9,338,320 |
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||
Common Stock
|
Paid-In
|
Comprehensive
|
Accumulated
|
Shareholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Income (loss)
|
Deficit
|
Equity
|
|||||||||||||||||||
Balances at June 30, 2008
|
10,228,902 | $ | 10 | $ | 44,618 | $ | (694 | ) | $ | (12,372 | ) | $ | 31,562 | |||||||||||
Stock buy back program
|
(1,342,620 | ) | (1 | ) | (6,767 | ) | — | — | (6,768 | ) | ||||||||||||||
Exercise of stock options
|
40,799 | — | 134 | — | — | 134 | ||||||||||||||||||
Compensation cost associated with ASC Topic 718
|
— | — | 625 | — | — | 625 | ||||||||||||||||||
Employee Stock Purchase Plan
|
1,721 | — | 6 | — | — | 6 | ||||||||||||||||||
Unrealized gain on marketable securities, net of tax
|
— | — | — | 700 | — | 700 | ||||||||||||||||||
Net income
|
— | — | — | — | 2,227 | 2,227 | ||||||||||||||||||
Balances at June 30, 2009
|
8,928,802 | $ | 9 | $ | 38,616 | $ | 6 | $ | (10,145 | ) | $ | 28,486 | ||||||||||||
Compensation cost associated with ASC Topic 718
|
— | — | 193 | — | — | 193 | ||||||||||||||||||
Employee Stock Purchase Plan
|
332 | — | 1 | — | — | 1 | ||||||||||||||||||
Unrealized loss on marketable securities, net of tax
|
— | — | — | (6 | ) | — | (6 | ) | ||||||||||||||||
Net income
|
— | — | — | — | 424 | 424 | ||||||||||||||||||
Balances at December 31, 2009
|
8,929,134 | $ | 9 | $ | 38,810 | $ | — | $ | (9,721 | ) | $ | 29,098 |
Compensation cost associated with ASC Topic 718
|
— | — | 262 | — | — | 262 | ||||||||||||||||||
Employee Stock Purchase Plan
|
305 | — | 1 | — | — | 1 | ||||||||||||||||||
Net income
|
— | — | — | — | 2,374 | 2,374 | ||||||||||||||||||
Balances at December 31, 2010
|
8,929,439 | $ | 9 | $ | 39,073 | $ | — | $ | (7,347 | ) | $ | 31,735 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 2,374 | $ | 424 | $ | 2,227 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operations:
|
||||||||||||
Depreciation and amortization expense
|
1,201 | 453 | 720 | |||||||||
Stock-based compensation
|
263 | 194 | 631 | |||||||||
Provision for doubtful accounts
|
103 | — | 16 | |||||||||
Increase (decrease) in reserves against inventory
|
(104 | ) | (153 | ) | 2,293 | |||||||
Write-off of note receivable
|
— | — | 5 | |||||||||
Gain on sale of marketable securities
|
— | (95 | ) | — | ||||||||
Loss (gain) on disposal of assets
|
111 | (5 | ) | — | ||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable
|
(3,483 | ) | (1,502 | ) | 1,248 | |||||||
Deposit, bond for preliminary injunction
|
— | — | 908 | |||||||||
Inventories
|
1,355 | 4,343 | (9,798 | ) | ||||||||
Deferred income taxes
|
(137 | ) | (306 | ) | 262 | |||||||
Prepaid expenses
|
520 | 209 | (592 | ) | ||||||||
Accounts payable
|
351 | (2,550 | ) | 2,402 | ||||||||
Accrued liabilities
|
3,041 | (1,188 | ) | (1,292 | ) | |||||||
Deferred product revenue
|
(401 | ) | (2 | ) | (1,086 | ) | ||||||
Other long-term liabilities
|
(808 | ) | 42 | 135 | ||||||||
Net cash provided by (used in) operating activities
|
4,386 | (136 | ) | (1,921 | ) | |||||||
Cash flows from investing activities:
|
||||||||||||
Acquisition of NetStreams, Inc. (net of cash acquired)
|
— | (1,643 | ) | — | ||||||||
Escrow proceeds received pursuant to NetStreams acquisition
|
350 | — | — | |||||||||
Purchase of property and equipment
|
(799 | ) | (745 | ) | (1,074 | ) | ||||||
Proceeds from sale of property and equipment
|
— | 24 | — | |||||||||
Purchase of marketable securities
|
— | — | (1,253 | ) | ||||||||
Sale of marketable securities
|
— | 2,192 | 17,356 | |||||||||
Net cash (used in) provided by investing activities
|
(449 | ) | (172 | ) | 15,029 | |||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from the issuance of common stock - options
|
— | 1 | 134 | |||||||||
Common stock purchased and retired
|
— | — | (6,768 | ) | ||||||||
Principal payments on long-term debt
|
(2,000 | ) | — | — | ||||||||
Net cash (used in) provided by financing activities
|
(2,000 | ) | 1 | (6,634 | ) | |||||||
Net increase (decrease) in cash and cash equivalents
|
1,937 | (307 | ) | 6,474 | ||||||||
Cash and cash equivalents at the beginning of the year
|
9,494 | 9,801 | 3,327 | |||||||||
Cash and cash equivalents at the end of the year
|
$ | 11,431 | $ | 9,494 | $ | 9,801 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||||||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$ | 51 | $ | 35 | $ | 1 | ||||||
Cash paid for income taxes
|
3 | — | 1,637 | |||||||||
Supplemental disclosure of non-cash activities:
|
||||||||||||
Exchanged accounts receivable and prepaid expenses from a vendor with accounts payable to the same vendor
|
$ | 293 | $ | 74 | $ | 1,044 | ||||||
Unrealized gain (loss) on marketable securities, net of tax of $0, $2 and ($415)
|
— | (6 | ) | 700 | ||||||||
Current liabilities reclassed to deferred rent
|
176 | — | — |
Cash
|
$ | 161 | ||
Accounts receivable
|
175 | |||
Inventories
|
1,204 | |||
Other current assets
|
72 | |||
Accounts payable
|
(1,384 | ) | ||
Accrued expenses
|
(576 | ) | ||
Property and equipment
|
227 | |||
Intangible assets
|
3,120 | |||
Goodwill
|
726 | |||
Current maturities of long-term debt
|
(2,000 | ) | ||
Deferred tax liability
|
(271 | ) | ||
Total purchase price
|
$ | 1,454 | ||
Additional cash placed in escrow
|
350 | |||
Less: Cash acquired
|
(161 | ) | ||
Net cash paid in acquisition
|
$ | 1,643 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||||||||||
Balance at beginning of period
|
$ | 103 | $ | 103 | $ | 87 | ||||||
Charged to costs and expenses
|
103 | — | 173 | |||||||||
Deductions
|
— | — | (157 | ) | ||||||||
Balance at end of period
|
$ | 206 | $ | 103 | $ | 103 |
As of
December
31
, 2010
|
As of
December 31, 2009
|
|||||||
Deferred Revenue
|
$ | 4,306 | $ | 4,707 | ||||
Deferred Cost of Goods Sold
|
1,742 | 1,846 | ||||||
Deferred Gross Profit
|
$ | 2,564 | $ | 2,861 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||||||||||
Balance at beginning of period
|
$ | 133 | $ | 149 | $ | 211 | ||||||
Accruals/additions
|
543 | 106 | 262 | |||||||||
Usage
|
(313 | ) | (122 | ) | (324 | ) | ||||||
Balance at end of period
|
$ | 363 | $ | 133 | $ | 149 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
|||||||||
Numerator:
|
|||||||||||
Net income
|
$ | 2,374 | $ | 424 | $ | 2,227 | |||||
Denominator:
|
|||||||||||
Basic weighted average shares
|
8,929,305 | 8,928,970 | 9,213,731 | ||||||||
Dilutive common stock equivalents using treasury stock method
|
13,624 | 116,872 | 124,589 | ||||||||
Diluted weighted average shares
|
8,942,929 | 9,045,842 | 9,338,320 | ||||||||
Basic earnings per common share
|
$ | 0.27 | $ | 0.05 | $ | 0.24 | |||||
Diluted earnings per common share
|
$ | 0.27 | $ | 0.05 | $ | 0.24 |
Cash
|
$
|
161
|
||
Accounts Receivable
|
175
|
|||
Inventories
|
1,204
|
|||
Other Current Assets
|
72
|
|||
Accounts payable
|
(1,384
|
)
|
||
Accrued Expenses
|
(576
|
)
|
||
Property and Equipment
|
227
|
|||
Intangible Assets
|
3,120
|
|||
Goodwill
|
726
|
|||
Current maturities of long-term debt
|
(2,000
|
)
|
||
Deferred tax liability
|
(271
|
)
|
||
Total purchase price
|
$
|
1,454
|
Decrease in receivables
|
$ | (91 | ) | |
Decrease in deferred income taxes - current
|
(1 | ) | ||
Increase in deferred income taxes - non current
|
35 | |||
Increase in goodwill
|
$ | 57 |
Estimated
Useful
lives (Years)
|
Amount
|
Accumulated
Amortization
|
Net
|
|||||||||||||
Intangibles acquired through acquisition of NetStreams, Inc.
|
||||||||||||||||
Tradename
|
7 | $ | 435 | $ | 72 | $ | 363 | |||||||||
Patents and Technological Know-how
|
10 | 2,070 | 241 | 1,829 | ||||||||||||
Proprietary Software
|
3 | 215 | 84 | 131 | ||||||||||||
2,720 | 397 | 2,323 | ||||||||||||||
In-process Research and Development
|
Indefinite
|
400 | — | 400 | ||||||||||||
Total acquired through acquisition of NetStreams, Inc.
|
3,120 | 397 | 2,723 | |||||||||||||
Other
|
5 | 49 | 27 | 22 | ||||||||||||
Total
|
$ | 3,169 | $ | 424 | $ | 2,745 |
As of
December 31, 2010
|
As of
December 31, 2009
|
|||||||
Current:
|
||||||||
Raw materials
|
$ | 776 | $ | 453 | ||||
Finished goods
|
8,004 | 5,783 | ||||||
$ | 8,780 | $ | 6,236 | |||||
Long-term:
|
||||||||
Raw materials
|
$ | 569 | $ | 1,056 | ||||
Finished goods
|
2,048 | 5,356 | ||||||
$ | 2,617 | $ | 6,412 |
Estimated
useful lives
|
As of
December 31, 2010
|
As of
December 31, 2009
|
|||||||
Office furniture and equipment
|
3 to 10 years
|
$ | 9,583 | $ | 9,346 | ||||
Leasehold improvements
|
1 to 6 years
|
1,381 | 1,333 | ||||||
Manufacturing and test equipment
|
2 to 10 years
|
2,417 | 2,281 | ||||||
13,381 | 12,960 | ||||||||
Accumulated depreciation and amortization
|
(10,416 | ) | (9,714 | ) | |||||
Property and equipment, net
|
$ | 2,965 | $ | 3,246 |
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||||||||
Unrealized holding gains (losses) at beginning of year
|
$ | 6 | $ | (694 | ) | ||||
Unrealized holding gains (losses), in marketable securities, before taxes
|
(8 | ) | 1,115 | ||||||
Income tax (provision) benefit
|
2 | (415 | ) | ||||||
Unrealized holding gains (losses) at end of year
|
$ | — | $ | 6 |
Years ending December 31,
|
||||
2011
|
$ | 669 | ||
2012
|
636 | |||
2013
|
639 | |||
2014
|
557 | |||
2015 | 574 | |||
Thereafter | 242 | |||
Total minimum lease payments
|
$ | 3,317 |
As of
December 31, 2010
|
As of
December 31, 2009
|
|||||||
Accrued salaries and other compensation
|
$ | 989 | $ | 672 | ||||
Accrued taxes
|
49 | 4 | ||||||
Other accrued liabilities
|
3,535 | 1,092 | ||||||
Total
|
$ | 4,573 | $ | 1,768 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||
Risk-free interest rate, average
|
2.3%
|
2.2%
|
2.4%
|
|
Expected option life, average
|
4.8 years
|
3.9 years
|
3.9 years
|
|
Expected price volatility, average
|
51.5%
|
51.6%
|
54.1%
|
|
Expected dividend yield
|
0.0%
|
0.0%
|
0.0%
|
|
Expected annual forfeiture rate
|
10.0%
|
10.0%
|
10.0%
|
Number of Shares
|
Weighted Average Exercise Price
|
|||||||
Outstanding at June 30, 2008
|
1,199,046 | $ | 5.85 | |||||
Granted
|
263,500 | 3.79 | ||||||
Expired and canceled
|
(29,047 | ) | 6.31 | |||||
Forfeited prior to vesting
|
(149,614 | ) | 4.69 | |||||
Exercised
|
(40,799 | ) | 3.29 | |||||
Outstanding at June 30, 2009
|
1,243,086 | 5.62 | ||||||
Granted
|
102,500 | 2.70 | ||||||
Expired and canceled
|
(68,499 | ) | 6.68 | |||||
Forfeited prior to vesting
|
(50,970 | ) | 2.84 | |||||
Exercised
|
— | - | ||||||
Outstanding at December 31, 2009
|
1,226,117 | 5.44 | ||||||
Granted
|
159,750 | 3.04 | ||||||
Expired and canceled
|
(145,041 | ) | 12.33 | |||||
Forfeited prior to vesting
|
(22,000 | ) | 2.93 | |||||
Exercised
|
— | — | ||||||
Outstanding at December 31, 2010 | 1,218,826 | 4.35 | ||||||
Exercisable
|
966,735 | $ | 4.66 |
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
|
|||||||||||||||||
$ | 2.05 to $4.09 | 786,326 | 3.39 | 6.5 | 535,174 | 3.51 | ||||||||||||||||
$ | 4.10 to $6.13 | 108,500 | 5.53 | 3.6 | 107,666 | 5.53 | ||||||||||||||||
$ | 6.14 to $8.18 | 324,000 | 6.27 | 5.1 | 323,895 | 6.27 | ||||||||||||||||
Total
|
1,218,826 | $ | 4.35 | 5.9 | 966,735 | $ | 4.66 |
Non-vested Shares
|
Number of Shares
|
Weighted Average Grant-Date Fair Value
|
||||||
Non-vested at December 31, 2009
|
242,909 | $ | 2.07 | |||||
Granted
|
159,750 | 1.37 | ||||||
Vested
|
(128,568 | ) | 2.68 | |||||
Forfeited prior to vesting
|
(22,000 | ) | 1.25 | |||||
Non-vested at December 31, 2010
|
252,091 | $ | 1.39 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year ended
June 30, 2009
|
||||
Customer A
|
21.2%
|
26.5%
|
31.0%
|
|||
Customer B
|
11.3% |
12.6%
|
15.0%
|
|||
Customer C
|
* |
10.9%
|
12.0%
|
|||
Total
|
32.5%
|
50.0%
|
58.0%
|
As at
December 31, 2010
|
As at
December 31, 2009
|
||||
Customer A
|
22.9%
|
24.2%
|
|||
Customer B
|
8.7% |
12.2%
|
|||
Customer C
|
8.6% |
10.6%
|
|||
Total
|
40.2%
|
47.0%
|
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
||||||||||
U.S.
|
$
|
1,381
|
$
|
(36
|
)
|
$
|
3,166
|
|||||
Non U.S.
|
312
|
140
|
56
|
|||||||||
Total
|
$
|
1,693
|
$
|
104
|
$
|
3,222
|
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
|||||||||||
Current:
|
|||||||||||||
U.S. Federal
|
$
|
695
|
$
|
52
|
$
|
(236
|
)
|
||||||
U.S. State
|
(29
|
)
|
(38
|
)
|
(405
|
)
|
|||||||
Non-U.S.
|
(49
|
)
|
—
|
(5
|
)
|
||||||||
Total current
|
617
|
14
|
(646
|
)
|
|||||||||
Deferred:
|
|||||||||||||
U.S. Federal
|
83
|
264
|
16
|
||||||||||
U.S. State
|
45
|
(6
|
)
|
562
|
|||||||||
Change in deferred before valuation allowance
|
128
|
258
|
578
|
||||||||||
Change in valuation allowance
|
(64
|
)
|
48
|
(927
|
)
|
||||||||
Total deferred
|
64
|
306
|
(349
|
)
|
|||||||||
Benefit (provision) for income taxes
|
$
|
681
|
$
|
320
|
$
|
(995
|
)
|
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
|||||||||||
U.S. federal statutory income tax rate at 34.0 percent
|
$
|
(576
|
)
|
$
|
(36
|
)
|
$
|
(1,096
|
)
|
||||
State income tax (provision) benefit, net of federal income tax effect
|
(44
|
)
|
(21
|
)
|
(454
|
)
|
|||||||
Non-deductible ASC Topic 718 compensation expense
|
(42
|
)
|
(20
|
)
|
—
|
||||||||
Research and development credit
|
331
|
152
|
343
|
||||||||||
Foreign earnings or losses taxed at different rates
|
57
|
48
|
14
|
||||||||||
Uncertain tax positions
|
811
|
(42
|
)
|
(53
|
)
|
||||||||
Non-deductible items and other
|
124
|
211
|
334
|
||||||||||
Change in valuation allowance
|
20
|
28
|
(83
|
)
|
|||||||||
Tax (provision) benefit
|
$
|
681
|
$
|
320
|
$
|
(995
|
)
|
As of
December 31, 2010
|
As of
December 31, 2009
|
||||||||||||||||
Current
|
Long-term
|
Current
|
Long-term
|
||||||||||||||
Deferred revenue
|
$
|
1,000
|
$
|
—
|
$
|
1,116
|
$
|
—
|
|||||||||
Basis difference in intangible assets
|
—
|
(649
|
) |
—
|
(672
|
)
|
|||||||||||
Inventory reserve
|
1,537
|
—
|
1,697
|
—
|
|||||||||||||
Net operating loss carryforwards
|
—
|
460
|
—
|
885
|
|||||||||||||
Accumulated research and development credits
|
—
|
1,317
|
—
|
1,145
|
|||||||||||||
Alternative minimum tax credits
|
—
|
409
|
—
|
409
|
|||||||||||||
Accrued liabilities
|
597
|
— |
256
|
—
|
|||||||||||||
Deductible ASC 718 compensation expense
|
—
|
744
|
—
|
691
|
|||||||||||||
Allowance for sales returns and doubtful accounts
|
73
|
— |
36
|
—
|
|||||||||||||
Difference in property and equipment basis
|
— |
(450
|
) |
—
|
(527
|
)
|
|||||||||||
Other
|
182
|
26
|
23
|
(14
|
)
|
||||||||||||
Total net deferred income tax asset
|
3,389
|
1,857
|
3,128
|
1,917
|
|||||||||||||
Less: Valuation allowance
|
—
|
(944
|
) |
—
|
(880
|
)
|
|||||||||||
Net deferred income tax asset
|
$
|
3,389
|
$
|
913
|
$
|
3,128
|
$
|
1,037
|
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year ended
June 30, 2009
|
|||||||||||
Unrecognized tax benefits, beginning balance
|
$
|
1,220
|
$
|
1,199
|
$
|
1,152
|
|||||||
Tax positions taken in a prior period:
|
|
|
|||||||||||
Gross increases
|
—
|
—
|
163
|
||||||||||
Gross decreases
|
—
|
(28
|
)
|
—
|
|||||||||
Tax positions taken in the current period:
|
|
|
|
||||||||||
Gross increases
|
220
|
49
|
97
|
||||||||||
Settlements with taxing authorities
|
(937
|
) |
—
|
—
|
|||||||||
Lapse of applicable statute of limitations
|
(99
|
) |
—
|
(213
|
)
|
||||||||
Unrecognized tax benefits, ending balance
|
|
404
|
|
1,220
|
|
1,199
|
|||||||
Add: Accrual for interest and penalties | 17 | 84 | 63 | ||||||||||
Total Liability | $ | 421 | $ | 1,304 | $ | 1,262 |
Year ended
December 31, 2010
|
Six months ended
December 31, 2009
|
Year Ended
June 30, 2009
|
|||||||||
United States
|
$ | 26,123 | $ | 10,774 | $ | 24,214 | |||||
All other countries
|
15,161 | 6,062 | 11,486 | ||||||||
Total
|
$ | 41,284 | $ | 16,836 | $ | 35,700 |
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
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
|
|
d)
|
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: March 30, 2011
|
By:
|
/s/ Zeynep Hakimoglu
|
Zeynep Hakimoglu
|
||
Chief Executive Officer
|
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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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;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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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
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d)
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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.
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5.
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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):
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a)
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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
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b)
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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.
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Date: March 30, 2011
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By:
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/s/ Narsi Narayanan
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Narsi Narayanan
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Vice President of Finance
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Date: March 30, 2011
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By:
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/s/ Zeynep Hakimoglu
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Zeynep Hakimoglu
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Chief Executive Officer
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Date: March 30, 2011
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By:
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/s/ Narsi Narayanan
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Narsi Narayanan
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Vice President of Finance
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