[x]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
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[ ]
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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 number)
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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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(Registrant’s telephone number, including area code)
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801-975-7200
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Title of each class
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Name on 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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Securities registered pursuant to Section 12(g) of the Act
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None
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Larger Accelerated Filer
¨
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Accelerated Filer
¨
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Non-Accelerated Filer
¨
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Smaller Reporting Company
x
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(Do not check if a smaller reporting company)
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CLEARONE, INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2012
TABLE OF CONTENTS
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Page
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PART I
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PART II
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PART III
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PART IV
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•
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Professional audio visual, including audio conferencing and video conferencing;
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•
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Unified communications, including telephony;
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•
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Multimedia streaming and control; and
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•
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Digital signage.
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•
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Maintain our leading global market share in professional audio conferencing products for large businesses and organizations;
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•
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Leverage the video conferencing, streaming and digital signage technologies we recently acquired to enter new growth markets;
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•
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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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•
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Capitalize on the growing adoption of unified communications and introduce new products through emerging information technology channels;
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•
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Capitalize on emerging market opportunities as audio visual, information technology, unified communications and traditional digital signage converge to meet enterprise and commercial multimedia needs; and
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•
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Expand and strengthen our sales channels.
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•
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Providing a superior conferencing and collaboration experience;
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•
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Significantly impacting multimedia and control distribution;
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•
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Offering greater value to our customers and partners;
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•
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Leveraging and extending ClearOne technology leadership and innovation;
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•
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Leveraging our strong domestic and international channels to distribute new products; and
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•
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Strengthening existing customer and partner relationships through dedicated support.
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•
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Professional audio communication products;
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•
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Unified communications audio end points; and
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•
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Visual communication products.
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•
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Embedded multipoint video conferencing;
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•
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Embedded SIP/H.323 bridging interoperability with all leading standards-based hardware and software video conferencing endpoints;
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•
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Built-in recording and streaming;
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•
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Built-in remote content and data sharing; and
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•
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Built-in interactive multicast.
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•
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Offer higher scalability and capacity at lower cost than hardware-based solutions;
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•
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Enable faster implementation time for new, latest or custom features;
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•
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Allow easy customization for different needs of vertical markets;
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•
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Offer easy upgrades and seamless feature additions after the initial investment;
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•
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Offer more flexibility to expand with business growth;
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•
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Are more highly secured for IT infrastructure requirements;
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•
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Allow the use of existing equipment and infrastructure with easier installation and maintenance;
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•
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Achieve a higher return on investment with multiple capabilities and applications in a single-box solution; and
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•
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Facilitate easier migration to user-friendly devices (e.g. tablets, phones, MAC, PC, etc.).
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•
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Quality, features and functionality, and ease of use of the products;
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•
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Broad and deep global channel partnerships;
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•
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Significant established history of successful worldwide installations for diverse vertical markets;
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•
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Brand name recognition and acceptance;
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•
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Quality of customer and partner sales and technical support services; and
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•
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Effective sales and marketing.
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•
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unexpected changes in, or the imposition of, additional legislative or regulatory requirements;
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•
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unique or more onerous environmental regulations;
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•
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fluctuating exchange rates;
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•
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tariffs and other barriers;
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•
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difficulties in staffing and managing foreign sales operations;
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•
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import and export restrictions;
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•
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greater difficulties in accounts receivable collection and longer payment cycles;
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•
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potentially adverse tax consequences;
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•
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potential hostilities and changes in diplomatic and trade relationships; and
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•
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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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•
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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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•
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disparity between our reported results and the projections of analysts;
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•
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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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•
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the level and mix of inventory held by our distributors;
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•
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the announcement of new products or product enhancements by us or our competitors;
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•
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technological innovations by us or our competitors;
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•
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success in meeting targeted availability dates for new or redesigned products;
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•
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the ability to profitably and efficiently manage our supply of products and key components;
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•
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the ability to maintain profitable relationships with our customers;
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•
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the ability to maintain an appropriate cost structure;
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•
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quarterly variations in our results of operations;
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•
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general consumer confidence or market conditions, or market conditions specific to technology industry;
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•
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domestic and international economic conditions;
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•
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unexpected changes in regulatory requirements and tariffs;
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•
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our ability to report financial information in a timely manner;
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•
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the markets in which our stock is traded;
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•
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our ability to integrate the companies we have acquired; and
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•
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our ability to successfully utilize our cash reserves resulting from the settlement of litigation and arbitration matters.
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Year ended December 31,
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||||||||||||||
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2012
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2011
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||||||||||||
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High
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Low
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High
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Low
|
||||||||
Q1 - Jan 1 to Mar 31
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$
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5.20
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$
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4.14
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$
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7.49
|
|
|
$
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3.75
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Q2 - Apr 1 to Jun 30
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4.72
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|
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3.70
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|
|
9.20
|
|
|
5.91
|
|
||||
Q3 - Jul 1 to Sep 30
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4.26
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|
|
3.70
|
|
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7.73
|
|
|
4.90
|
|
||||
Q4 - Oct 1 to Dec 31
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4.76
|
|
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3.76
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|
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5.51
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3.95
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Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
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Weighted-average exercise price of outstanding options, warrants and rights
(b)
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
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||||
Equity compensation plans approved by shareholders
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1,137,283
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$
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4.63
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|
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357,410
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Equity compensation plans not approved by shareholders
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—
|
|
|
—
|
|
|
—
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Total
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1,137,283
|
|
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$
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4.63
|
|
|
357,410
|
|
|
Year ended December 31,
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Variance
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|||||||||||||||||
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2012
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2011
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Favorable (Unfavorable)
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|||||||||||||||
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Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
%
|
|||||||||
Revenue
|
$
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46,417
|
|
|
100.0
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%
|
|
$
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46,067
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|
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100.0
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%
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|
$
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350
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|
|
0.8
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%
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Cost of goods sold
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19,089
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|
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41.1
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%
|
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18,522
|
|
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40.2
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%
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(567
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)
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(3.1
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)%
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|||
Gross profit
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27,328
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|
|
58.9
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%
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27,545
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|
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59.8
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%
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(217
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)
|
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(0.8
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)%
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|||
Sales and marketing
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8,112
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|
|
17.5
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%
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|
8,120
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|
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17.6
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%
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|
8
|
|
|
0.1
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%
|
|||
Research and product development
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8,261
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|
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17.8
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%
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7,128
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|
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15.5
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%
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(1,133
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)
|
|
(15.9
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)%
|
|||
General and administrative
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6,934
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|
|
14.9
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%
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|
5,427
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|
|
11.8
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%
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(1,507
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)
|
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(27.8
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)%
|
|||
Proceeds from litigation
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(38,500
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)
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(82.9
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)%
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(3,702
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)
|
|
(8.0
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)%
|
|
34,798
|
|
|
(940.0
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)%
|
|||
Operating income
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42,521
|
|
|
91.6
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%
|
|
10,572
|
|
|
22.9
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%
|
|
31,949
|
|
|
302.2
|
%
|
|||
Other income, net
|
34
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|
|
0.1
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%
|
|
24
|
|
|
0.1
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%
|
|
10
|
|
|
41.7
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%
|
|||
Income before income taxes
|
42,555
|
|
|
91.7
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%
|
|
10,596
|
|
|
23.0
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%
|
|
31,959
|
|
|
301.6
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%
|
|||
Provision for income taxes
|
(15,908
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)
|
|
(34.3
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)%
|
|
(3,667
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)
|
|
(8.0
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)%
|
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(12,241
|
)
|
|
333.8
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%
|
|||
Net income
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$
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26,647
|
|
|
57.4
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%
|
|
$
|
6,929
|
|
|
15.0
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%
|
|
$
|
19,718
|
|
|
284.6
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%
|
|
As of December 31,
|
||||||
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2012
|
|
2011
|
||||
Deferred Revenue
|
$
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3,593
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$
|
3,404
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|
Deferred Cost of Goods Sold
|
1,289
|
|
|
1,199
|
|
||
Deferred Gross Profit
|
$
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2,304
|
|
|
$
|
2,205
|
|
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
2.2
|
|
Agreement and Plan of Merger, dated as of November 3, 2009, by and among ClearOne Communications, Inc., Alta-Wasatch Acquisition Corporation, NetStreams, Inc., Austin Ventures VIII, L.P., and Kevin A. Reinis.
|
|
8-K
|
|
2.2
|
|
11/9/2009
|
3.2
|
|
Bylaws
|
|
10-K
|
|
3.2
|
|
3/31/2011
|
10.1*
|
|
Employment Separation Agreement between ClearOne Communications, Inc. and Frances Flood, dated December 5, 2003
|
|
10-K
|
|
10.1
|
|
8/18/2005
|
10.2*
|
|
Employment Termination Agreement between ClearOne Communications, Inc. and Susie Strohm, dated December 5, 2003
|
|
10-K
|
|
10.1
|
|
8/18/2005
|
10.3
|
|
1997 Employee Stock Purchase Plan
|
|
S-8
|
|
4.9
|
|
10/6/2006
|
10.4
|
|
1998 Stock Option Plan
|
|
S-8
|
|
4.8
|
|
10/6/2006
|
10.5
|
|
2007 Equity Incentive Plan
|
|
S-8
|
|
4.7
|
|
1/22/2008
|
10.6
|
|
Office Lease between Edgewater Corporate Park, LLC and ClearOne Communications, Inc. dated June 5, 2006
|
|
10-K
|
|
10.19
|
|
9/14/2006
|
10.7
|
|
Margin Loan Agreement between ClearOne Communications, Inc. and UBS Financial Services, Inc. dated September 10, 2008
|
|
8-K
|
|
10.2
|
|
9/11/2008
|
10.8
|
|
Manufacturing Services Agreement between Flextronics Industrial, Ltd. and ClearOne Communications, Inc. dated November 3, 2008
|
|
10-K
|
|
10.21
|
|
10/13/2009
|
10.9
|
|
Joinder to Loan and Security Agreement, dated as of November 3, 2009, by and between ClearOne Communications, Inc. and Square 1 Bank.
|
|
8-K
|
|
10.23
|
|
11/9/2009
|
10.10
|
|
Seventh Amendment to Loan and Security Agreement, dated as of November 3, 2009, by and between Square 1 Bank, ClearOne Communications, Inc., NetStreams Inc., and NetStreams, LLC.
|
|
8-K
|
|
10.24
|
|
11/9/2009
|
14.1
|
|
Code of Ethics, approved by the Board of Directors on August 23, 2006
|
|
10-K
|
|
14.1
|
|
9/14/2006
|
3.1†
|
|
Amended and Restated Articles of Incorporation of ClearOne, Inc.
|
|
|
|
|
|
|
21.1†
|
|
Subsidiaries of the registrant
|
|
|
|
|
|
|
23.1†
|
|
Consent of McGladrey LLP, Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
23.2†
|
|
Consent of Jones Simkins P.C., Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
31.1†
|
|
Section 302 Certification of Chief Executive Officer
|
|
|
|
|
|
|
31.2†
|
|
Section 302 Certification of Chief Financial Officer
|
|
|
|
|
|
|
32.1†
|
|
Section 906 Certification of Chief Executive Officer
|
|
|
|
|
|
|
32.2†
|
|
Section 906 Certification of Chief Financial Officer
|
|
|
|
|
|
|
101.INS‡
|
|
XBRL Instance Document
|
|
|
|
|
|
|
101.SCH‡
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
101.CAL‡
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
101.DEF‡
|
|
XBRL Taxonomy Extension Definitions Linkbase
|
|
|
|
|
|
|
101.LAB‡
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
101.PRE‡
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
/s/
Zeynep Hakimoglu
|
Zeynep Hakimoglu
|
President, Chief Executive Officer and Chairman of the Board
|
March 22, 2013
|
/s/
Zeynep Hakimoglu
|
|
/s/ Narsi Narayanan
|
Zeynep Hakimoglu
|
|
Narsi Narayanan
|
President, Chief Executive Officer and Chairman of the Board
March 22, 2013
|
|
Vice President of Finance
March 22, 2013
|
|
|
|
/s/
Brad R. Baldwin
|
|
/s/
Larry R. Hendricks
|
Brad R. Baldwin
|
|
Larry R. Hendricks
|
Director
March 22, 2013
|
|
Director
March 22, 2013
|
|
|
|
/s/
Scott M. Huntsman
|
|
|
Scott M. Huntsman
|
|
|
Director
March 22, 2013
|
|
|
|
|
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|
Page
|
|
December 31, 2012
|
|
December 31, 2011
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
55,509
|
|
|
$
|
16,683
|
|
Receivables, net of allowance for doubtful accounts of $60 and $149, as of December 31, 2012 and 2011 respectively
|
8,388
|
|
|
8,457
|
|
||
Inventories
|
10,873
|
|
|
12,565
|
|
||
Deferred income taxes
|
3,148
|
|
|
2,987
|
|
||
Prepaid expenses and other assets
|
1,369
|
|
|
740
|
|
||
Total current assets
|
79,287
|
|
|
41,432
|
|
||
Long-term inventories, net
|
1,955
|
|
|
1,905
|
|
||
Property and equipment, net
|
1,708
|
|
|
2,338
|
|
||
Intangibles, net
|
4,258
|
|
|
2,690
|
|
||
Goodwill
|
3,472
|
|
|
1,153
|
|
||
Deferred income taxes
|
1,195
|
|
|
—
|
|
||
Other assets
|
64
|
|
|
41
|
|
||
Total assets
|
$
|
91,939
|
|
|
$
|
49,559
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
2,302
|
|
|
$
|
2,814
|
|
Accrued liabilities
|
2,143
|
|
|
2,234
|
|
||
Income taxes payable
|
14,782
|
|
|
300
|
|
||
Deferred product revenue
|
3,593
|
|
|
3,404
|
|
||
Total current liabilities
|
22,820
|
|
|
8,752
|
|
||
Deferred income taxes
|
—
|
|
|
101
|
|
||
Deferred rent
|
422
|
|
|
494
|
|
||
Other long-term liabilities
|
2,029
|
|
|
548
|
|
||
Total liabilities
|
25,271
|
|
|
9,895
|
|
||
Shareholders' equity:
|
|
|
|
||||
Common stock, par value $0.001, 50,000,000 shares authorized, 9,163,462 and 9,098,152 shares issued and outstanding as of December 31, 2012 and 2011, respectively
|
9
|
|
|
9
|
|
||
Additional paid-in capital
|
40,430
|
|
|
40,073
|
|
||
Retained earnings (accumulated deficit)
|
26,229
|
|
|
(418
|
)
|
||
Total shareholders' equity
|
66,668
|
|
|
39,664
|
|
||
Total liabilities and shareholders' equity
|
$
|
91,939
|
|
|
$
|
49,559
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Revenue
|
$
|
46,417
|
|
|
$
|
46,067
|
|
Cost of goods sold
|
19,089
|
|
|
18,522
|
|
||
Gross profit
|
27,328
|
|
|
27,545
|
|
||
|
|
|
|
||||
Operating expenses:
|
|
|
|
||||
Sales and marketing
|
8,112
|
|
|
8,120
|
|
||
Research and product development
|
8,261
|
|
|
7,128
|
|
||
General and administrative
|
6,934
|
|
|
5,427
|
|
||
Proceeds from litigation, net
|
(38,500
|
)
|
|
(3,702
|
)
|
||
Total operating expenses
|
(15,193
|
)
|
|
16,973
|
|
||
|
|
|
|
||||
Operating income
|
42,521
|
|
|
10,572
|
|
||
|
|
|
|
||||
Other income, net
|
34
|
|
|
24
|
|
||
|
|
|
|
||||
Income before income taxes
|
42,555
|
|
|
10,596
|
|
||
Provision for income taxes
|
(15,908
|
)
|
|
(3,667
|
)
|
||
Net income
|
$
|
26,647
|
|
|
$
|
6,929
|
|
|
|
|
|
||||
Basic earnings per common share
|
$
|
2.93
|
|
|
$
|
0.77
|
|
Diluted earnings per common share
|
$
|
2.89
|
|
|
$
|
0.75
|
|
|
|
|
|
||||
Basic weighted average shares outstanding
|
9,107,234
|
|
|
9,027,934
|
|
||
Diluted weighted average shares outstanding
|
9,214,685
|
|
|
9,271,811
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings (Accumulated Deficit)
|
|
Total Shareholders' Equity
|
|||||||||||
|
Shares
|
|
Amount
|
|
|
|
||||||||||||
Balances at December 31, 2010
|
8,929,439
|
|
|
$
|
9
|
|
|
$
|
39,073
|
|
|
$
|
(7,347
|
)
|
|
$
|
31,735
|
|
Exercise of stock options
|
168,514
|
|
|
—
|
|
|
746
|
|
|
—
|
|
|
746
|
|
||||
Tax benefit - stock option exercises
|
—
|
|
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
187
|
|
|
—
|
|
|
187
|
|
||||
Employee stock purchase plan
|
199
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
6,929
|
|
|
6,929
|
|
||||
Balances at December 31, 2011
|
9,098,152
|
|
|
9
|
|
|
40,073
|
|
|
(418
|
)
|
|
39,664
|
|
||||
Exercise of stock options
|
159,869
|
|
|
—
|
|
|
489
|
|
|
—
|
|
|
489
|
|
||||
Stock repurchased
|
(94,744
|
)
|
|
—
|
|
|
(384
|
)
|
|
—
|
|
|
(384
|
)
|
||||
Tax benefit - stock option exercises
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
241
|
|
|
—
|
|
|
241
|
|
||||
Employee stock purchase plan
|
185
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
26,647
|
|
|
26,647
|
|
||||
Balances at December 31, 2012
|
9,163,462
|
|
|
$
|
9
|
|
|
$
|
40,430
|
|
|
$
|
26,229
|
|
|
$
|
66,668
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
26,647
|
|
|
$
|
6,929
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
||||
Depreciation and amortization expense
|
1,917
|
|
|
1,243
|
|
||
Amortization of deferred rent
|
(41
|
)
|
|
(23
|
)
|
||
Stock-based compensation expense
|
241
|
|
|
187
|
|
||
Provision for doubtful accounts
|
25
|
|
|
312
|
|
||
Write-down of inventory to net realizable value
|
1,235
|
|
|
188
|
|
||
Loss on disposal of assets
|
—
|
|
|
5
|
|
||
Tax benefit from exercise of stock options
|
(2
|
)
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Receivables
|
44
|
|
|
1,081
|
|
||
Inventories
|
447
|
|
|
(3,066
|
)
|
||
Deferred income taxes
|
(1,457
|
)
|
|
1,416
|
|
||
Prepaid expenses and other assets
|
(652
|
)
|
|
(305
|
)
|
||
Accounts payable
|
(512
|
)
|
|
634
|
|
||
Accrued liabilities
|
(130
|
)
|
|
(2,277
|
)
|
||
Income taxes payable
|
14,492
|
|
|
250
|
|
||
Deferred product revenue
|
189
|
|
|
(902
|
)
|
||
Other long-term liabilities
|
1,481
|
|
|
127
|
|
||
Net cash provided by operating activities
|
43,924
|
|
|
5,799
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Payment towards business acquisitions
|
(4,632
|
)
|
|
(980
|
)
|
||
Purchase of property and equipment
|
(574
|
)
|
|
(380
|
)
|
||
Net cash used in investing activities
|
(5,206
|
)
|
|
(1,360
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from the exercise of stock options
|
490
|
|
|
747
|
|
||
Tax benefit from the exercise of stock options
|
2
|
|
|
66
|
|
||
Treasury stock purchased
|
(384
|
)
|
|
—
|
|
||
Net cash provided by financing activities
|
108
|
|
|
813
|
|
||
|
|
|
|
||||
Net increase in cash and cash equivalents
|
38,826
|
|
|
5,252
|
|
||
Cash and cash equivalents at the beginning of the period
|
16,683
|
|
|
11,431
|
|
||
Cash and cash equivalents at the end of the period
|
$
|
55,509
|
|
|
$
|
16,683
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for income taxes
|
$
|
1,393
|
|
|
$
|
1,705
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
|
|
|
||||
Supplemental disclosure of non-cash activities:
|
|
|
|
||||
Exchanged accounts receivable from a vendor with accounts payable to the same vendor
|
$
|
—
|
|
|
$
|
182
|
|
Transfer from property and equipment to inventory
|
—
|
|
|
78
|
|
||
|
|
|
|
||||
The Company acquired the business of VCON Video Conferencing, Ltd. in February 2012 for $4,632 and recorded the following assets and liabilities:
|
|
|
|
||||
Inventory
|
$
|
40
|
|
|
$
|
—
|
|
Property and equipment
|
34
|
|
|
—
|
|
||
Product warranty liability
|
(8
|
)
|
|
—
|
|
||
Proprietary software
|
2,247
|
|
|
—
|
|
||
Goodwill
|
2,319
|
|
|
—
|
|
||
Cash paid
|
$
|
4,632
|
|
|
$
|
—
|
|
|
|
|
|
||||
The Company acquired the business of MagicBox, in September 2011, for $980 and recorded the following assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
$
|
—
|
|
|
$
|
81
|
|
Inventories
|
—
|
|
|
117
|
|
||
Other current assets
|
—
|
|
|
12
|
|
||
Accrued expenses
|
—
|
|
|
(4
|
)
|
||
Property and equipment
|
—
|
|
|
9
|
|
||
Intangibles
|
—
|
|
|
338
|
|
||
Goodwill
|
—
|
|
|
427
|
|
||
Cash paid
|
$
|
—
|
|
|
$
|
980
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Balance at beginning of the year
|
$
|
149
|
|
|
$
|
206
|
|
Charged to costs and expenses
|
25
|
|
|
312
|
|
||
Deductions
|
(114
|
)
|
|
(369
|
)
|
||
Balance at end of the year
|
$
|
60
|
|
|
$
|
149
|
|
|
As of December 31,
|
||||||
|
2012
|
|
2011
|
||||
Deferred revenue
|
$
|
3,593
|
|
|
$
|
3,404
|
|
Deferred cost of goods sold
|
1,289
|
|
|
1,199
|
|
||
Deferred gross profit
|
$
|
2,304
|
|
|
$
|
2,205
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Balance at the beginning of year
|
$
|
467
|
|
|
$
|
363
|
|
Accruals/additions
|
443
|
|
|
439
|
|
||
Usage/claims
|
(525
|
)
|
|
(335
|
)
|
||
Balance at end of year
|
$
|
385
|
|
|
$
|
467
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
26,647
|
|
|
$
|
6,929
|
|
Denominator:
|
|
|
|
||||
Basic weighted average shares
|
9,107,234
|
|
|
9,027,934
|
|
||
Dilutive common stock equivalents using treasury stock method
|
107,451
|
|
|
243,877
|
|
||
Diluted weighted average shares
|
9,214,685
|
|
|
9,271,811
|
|
||
|
|
|
|
||||
Basic earnings per common share:
|
$
|
2.93
|
|
|
$
|
0.77
|
|
Diluted earnings per common share:
|
$
|
2.89
|
|
|
$
|
0.75
|
|
|
|
|
|
||||
Weighted average options outstanding
|
1,197,487
|
|
|
1,137,219
|
|
||
Anti-dilutive options not included in the computation
|
681,820
|
|
|
893,343
|
|
Inventory
|
$
|
40
|
|
Property and equipment
|
34
|
|
|
Product warranty liability
|
(8
|
)
|
|
Proprietary software
|
2,247
|
|
|
Goodwill
|
2,319
|
|
|
|
$
|
4,632
|
|
|
Final Fair Value
|
|
Initial Allocation
|
|
Difference
|
||||||
Inventory
|
$
|
40
|
|
|
$
|
320
|
|
|
$
|
(280
|
)
|
Tradename
|
—
|
|
|
500
|
|
|
(500
|
)
|
|||
Patents and technology
|
—
|
|
|
2,300
|
|
|
(2,300
|
)
|
|||
Proprietary software
|
2,247
|
|
|
500
|
|
|
1,747
|
|
|||
In-process research and development
|
—
|
|
|
200
|
|
|
(200
|
)
|
|||
Goodwill
|
2,319
|
|
|
786
|
|
|
1,533
|
|
1)
|
Revenue and net loss from the video conferencing business from February 16, 2012 to December 31, 2012 were
$1,319
and
($1,170)
, respectively.
|
2)
|
Revenue and earnings of the combined entity as though the business combination occurred as of January 1, 2011 were as follows:
|
3)
|
There were no material, nonrecurring pro forma adjustments directly attributable to the acquisition included in this supplemental Pro Forma information.
|
Accounts receivable
|
$
|
81
|
|
Inventory
|
117
|
|
|
Other current assets
|
12
|
|
|
Accrued expenses
|
(4
|
)
|
|
Property and equipment
|
9
|
|
|
Proprietary software
|
179
|
|
|
In-process research and development
|
159
|
|
|
Goodwill
|
427
|
|
|
|
$
|
980
|
|
|
2012
|
|
2011
|
||||
Balance as of January 1,
|
|
|
|
||||
Goodwill
|
$
|
1,153
|
|
|
$
|
726
|
|
Accumulated impairment losses
|
—
|
|
|
—
|
|
||
|
1,153
|
|
|
726
|
|
||
Goodwill acquired during the year
|
2,319
|
|
|
427
|
|
||
Balance as of December 31,
|
|
|
|
||||
Goodwill
|
3,472
|
|
|
1,153
|
|
||
Accumulated impairment losses
|
—
|
|
|
—
|
|
||
|
$
|
3,472
|
|
|
$
|
1,153
|
|
|
Estimated
|
|
As of December 31,
|
||||||
|
useful lives
|
|
2012
|
|
2011
|
||||
Tradename
|
7 years
|
|
$
|
435
|
|
|
$
|
435
|
|
Patents and technological know-how
|
10 years
|
|
2,070
|
|
|
2,070
|
|
||
Proprietary software
|
3 to 15 years
|
|
2,961
|
|
|
394
|
|
||
In-process research and development
|
Indefinite
|
|
159
|
|
|
559
|
|
||
Other
|
5 years
|
|
49
|
|
|
49
|
|
||
|
|
|
5,674
|
|
|
3,507
|
|
||
Accumulated amortization
|
|
|
(1,416
|
)
|
|
(817
|
)
|
||
|
|
|
$
|
4,258
|
|
|
$
|
2,690
|
|
|
Estimated
|
|
As of December 31,
|
||||||
|
useful lives
|
|
2012
|
|
2011
|
||||
Office furniture and equipment
|
3 to 10 years
|
|
$
|
9,552
|
|
|
$
|
9,627
|
|
Leasehold improvements
|
1 to 6 years
|
|
1,413
|
|
|
1,392
|
|
||
Manufacturing and test equipment
|
2 to 10 years
|
|
2,673
|
|
|
2,590
|
|
||
|
|
|
13,638
|
|
|
13,609
|
|
||
Accumulated depreciation and amortization
|
|
|
(11,930
|
)
|
|
(11,271
|
)
|
||
Property and equipment, net
|
|
|
$
|
1,708
|
|
|
$
|
2,338
|
|
Years ending December, 31,
|
|
||
2013
|
$
|
942
|
|
2014
|
909
|
|
|
2015
|
939
|
|
|
2016
|
575
|
|
|
2017
|
254
|
|
|
Thereafter
|
170
|
|
|
Total minimum lease payments
|
$
|
3,789
|
|
|
As of December 31,
|
||||||
|
2012
|
|
2011
|
||||
Accrued salaries and other compensation
|
$
|
1,345
|
|
|
$
|
987
|
|
Other accrued liabilities
|
798
|
|
|
1,247
|
|
||
Total
|
$
|
2,143
|
|
|
$
|
2,234
|
|
|
Year ended December 31,
|
||
|
2012
|
|
2011
|
Risk-free interest rate, average
|
1.3%
|
|
1.6%
|
Expected option life, average
|
7.2 years
|
|
7.15 years
|
Expected price volatility, average
|
51.4%
|
|
51.9%
|
Expected dividend yield
|
—%
|
|
—%
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value
|
|||||
Outstanding at December 31, 2011
|
1,160,933
|
|
|
$
|
4.50
|
|
|
|
|
|
||
Granted
|
187,000
|
|
|
4.06
|
|
|
|
|
|
|||
Expired and canceled
|
(12,440
|
)
|
|
4.93
|
|
|
|
|
|
|||
Forfeited prior to vesting
|
(38,341
|
)
|
|
4.23
|
|
|
|
|
|
|||
Exercised
|
(159,869
|
)
|
|
3.07
|
|
|
|
|
|
|||
Outstanding at December 31, 2012
|
1,137,283
|
|
|
$
|
4.63
|
|
|
5.47
|
|
$
|
256
|
|
Vested and expected to vest at December 31, 2012
|
1,137,283
|
|
|
$
|
4.63
|
|
|
5.47
|
|
$
|
256
|
|
Vested at December 31, 2012
|
853,350
|
|
|
$
|
4.71
|
|
|
4.26
|
|
$
|
232
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Current:
|
|
|
|
||||
Federal
|
$
|
(16,910
|
)
|
|
$
|
(2,106
|
)
|
State
|
(381
|
)
|
|
(99
|
)
|
||
Foreign
|
(74
|
)
|
|
(46
|
)
|
||
Total current
|
(17,365
|
)
|
|
(2,251
|
)
|
||
Deferred:
|
|
|
|
||||
Federal
|
455
|
|
|
(1,271
|
)
|
||
State
|
46
|
|
|
(23
|
)
|
||
Foreign
|
160
|
|
|
—
|
|
||
|
661
|
|
|
(1,294
|
)
|
||
Change in valuation allowance
|
796
|
|
|
(122
|
)
|
||
Total deferred
|
1,457
|
|
|
(1,416
|
)
|
||
(Provision) for income taxes
|
$
|
(15,908
|
)
|
|
$
|
(3,667
|
)
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Tax (provision) at Federal statutory rate
|
$
|
(14,894
|
)
|
|
$
|
(3,603
|
)
|
State income tax (provision), net of federal benefit
|
(1,476
|
)
|
|
(162
|
)
|
||
Research and development tax credits
|
357
|
|
|
316
|
|
||
Foreign earnings or losses taxed at different rates
|
(136
|
)
|
|
48
|
|
||
Other
|
(555
|
)
|
|
(266
|
)
|
||
Change in valuation allowance
|
796
|
|
|
—
|
|
||
Tax (provision)
|
$
|
(15,908
|
)
|
|
$
|
(3,667
|
)
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||
|
Current
|
|
Long-term
|
|
Current
|
|
Long-term
|
||||||||
Deferred revenue
|
$
|
856
|
|
|
$
|
—
|
|
|
$
|
860
|
|
|
$
|
—
|
|
Basis difference in intangible assets
|
—
|
|
|
159
|
|
|
—
|
|
|
(580
|
)
|
||||
Inventory reserve
|
1,871
|
|
|
—
|
|
|
1,598
|
|
|
—
|
|
||||
Net operating loss carryforwards
|
—
|
|
|
667
|
|
|
—
|
|
|
364
|
|
||||
Research and development tax credits
|
—
|
|
|
248
|
|
|
—
|
|
|
1,033
|
|
||||
Accrued expenses
|
140
|
|
|
—
|
|
|
182
|
|
|
—
|
|
||||
Stock-based compensation
|
—
|
|
|
684
|
|
|
—
|
|
|
742
|
|
||||
Allowance for sales returns and doubtful accounts
|
20
|
|
|
—
|
|
|
56
|
|
|
—
|
|
||||
Difference in property and equipment basis
|
—
|
|
|
(475
|
)
|
|
—
|
|
|
(646
|
)
|
||||
Other
|
462
|
|
|
(19
|
)
|
|
291
|
|
|
52
|
|
||||
Total net deferred income tax asset
|
3,349
|
|
|
1,264
|
|
|
2,987
|
|
|
965
|
|
||||
Less: Valuation allowance
|
(201
|
)
|
|
(69
|
)
|
|
—
|
|
|
(1,066
|
)
|
||||
Net deferred income tax asset (liability)
|
$
|
3,148
|
|
|
$
|
1,195
|
|
|
$
|
2,987
|
|
|
$
|
(101
|
)
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Balance - beginning of year
|
$
|
523
|
|
|
$
|
404
|
|
Additions based on tax positions related to the current year
|
795
|
|
|
229
|
|
||
Additions for tax positions of prior years
|
1,082
|
|
|
—
|
|
||
Reductions for tax positions of prior years
|
—
|
|
|
(88
|
)
|
||
Settlements
|
—
|
|
|
—
|
|
||
Lapse in statutes of limitations
|
(16
|
)
|
|
(22
|
)
|
||
Unrecognized tax benefits, ending balance
|
$
|
2,384
|
|
|
$
|
523
|
|
|
Year ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
United States
|
$
|
30,312
|
|
|
$
|
29,220
|
|
All other countries
|
16,105
|
|
|
16,847
|
|
||
Total
|
$
|
46,417
|
|
|
$
|
46,067
|
|
1.
|
I have reviewed this annual report of ClearOne, 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)) 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.
|
March 22, 2013
|
By:
|
/s/ Zeynep Hakimoglu
|
|
|
|
Zeynep Hakimoglu
Chief Executive Officer
|
1.
|
I have reviewed this annual report of ClearOne, 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)) 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.
|
March 22, 2013
|
By:
|
/s/ Narsi Narayanan
|
|
|
|
Narsi Narayanan
Vice President of Finance
|
March 22, 2013
|
By:
|
/s/ Zeynep Hakimoglu
|
|
|
|
Zeynep Hakimoglu
Chief Executive Officer
|
March 22, 2013
|
By:
|
/s/ Narsi Narayanan
|
|
|
|
Narsi Narayanan
Vice President of Finance
|