Utah
|
87-0398877
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
employer
identification
number)
|
5225 Wiley Post Way, Suite 500
Salt Lake City, Utah
|
84116
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Common
Stock
Title
of Class
|
8,928,563
Number
of Shares
Outstanding
at May 4, 2009
|
Page
Number
|
||
PART
I – FINANCIAL INFORMATION
|
||
Item
1
|
Condensed
Consolidated Financial Statements:
|
|
Consolidated
Balance Sheets as of March 31, 2009 and June 30, 2008
|
1
|
|
Consolidated
Statements of Operations for the three months ended March 31, 2009 and
2008 and the nine months ended March 31, 2009 and 2008
|
2
|
|
Consolidated
Statements of Cash Flows for the nine months ended March 31, 2009 and
2008
|
4
|
|
Notes
to Condensed Consolidated Financial Statements
|
6
|
|
Item
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
17
|
Item
4
|
Controls
and Procedures
|
17
|
PART
II – OTHER INFORMATION
|
||
Item
1
|
Legal
Proceedings
|
18
|
Item
1A
|
Risk
Factors
|
19
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
19
|
Item
3
|
Defaults
Upon Senior Securities
|
20
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
20
|
Item
5
|
Other
Information
|
20
|
Item
6
|
Exhibits
|
20
|
Signatures
|
21
|
CLEARONE
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
(in
thousands of dollars)
|
||||||||
(unaudited)
|
(audited)
|
|||||||
March
31,
|
June
30,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 10,908 | $ | 3,327 | ||||
Marketable
securities
|
830 | 5,922 | ||||||
Accounts
receivable, net of allowance for doubtful accounts
|
||||||||
of
$72 and $87, respectively
|
5,486 | 7,238 | ||||||
Deposit,
bond for preliminary injunction
|
0 | 908 | ||||||
Note
receivable
|
5 | 43 | ||||||
Inventories,
net
|
14,046 | 7,799 | ||||||
Income
tax receivable
|
1,015 | 0 | ||||||
Deferred
income taxes
|
2,606 | 2,828 | ||||||
Prepaid
expenses
|
716 | 820 | ||||||
Total
current assets
|
35,612 | 28,885 | ||||||
Long-term
marketable securities
|
0 | 11,168 | ||||||
Property
and equipment, net
|
2,634 | 2,554 | ||||||
Intangible
assets, net
|
39 | 47 | ||||||
Long-term
deferred tax asset
|
1,067 | 1,639 | ||||||
Other
assets
|
21 | 7 | ||||||
Total
assets
|
$ | 39,373 | $ | 44,300 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 2,741 | $ | 2,187 | ||||
Accrued
taxes
|
0 | 72 | ||||||
Accrued
liabilities
|
1,946 | 3,600 | ||||||
Deferred
product revenue
|
4,163 | 4,547 | ||||||
Total
current liabilities
|
8,850 | 10,406 | ||||||
Deferred
rent
|
583 | 700 | ||||||
Other
long-term liabilities
|
1,187 | 1,054 | ||||||
Total
liabilities
|
10,620 | 12,160 | ||||||
Shareholders'
equity:
|
||||||||
Common
stock, par value $0.001, 50,000,000 shares authorized,
|
||||||||
8,928,387
and 10,228,902 shares issued and outstanding, respectively
|
9 | 10 | ||||||
Additional
paid-in capital
|
38,469 | 44,618 | ||||||
Accumulated
other comprehensive (loss)
|
(8 | ) | (694 | ) | ||||
Accumulated
deficit
|
(9,717 | ) | (11,794 | ) | ||||
Total
shareholders' equity
|
28,753 | 32,140 | ||||||
Total
liabilities and shareholders' equity
|
$ | 39,373 | $ | 44,300 | ||||
See
accompanying notes to condensed consolidated financial
statements
|
CLEARONE
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||||||||||
(in
thousands of dollars, except per share amounts)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three
Months Ended March 31,
|
Nine
Months Ended March 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue
|
$ | 7,612 | $ | 9,163 | $ | 27,840 | $ | 29,393 | ||||||||
Cost
of goods sold
|
3,605 | 3,439 | 11,399 | 12,153 | ||||||||||||
Gross
profit
|
4,007 | 5,724 | 16,441 | 17,240 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
1,690 | 1,640 | 5,600 | 4,820 | ||||||||||||
Research
and product development
|
1,810 | 1,701 | 5,430 | 5,134 | ||||||||||||
General
and administrative
|
123 | 1,183 | 2,451 | 5,276 | ||||||||||||
Total
operating expenses
|
3,623 | 4,524 | 13,481 | 15,230 | ||||||||||||
Operating
income
|
384 | 1,200 | 2,960 | 2,010 | ||||||||||||
Total
other income, net
|
60 | 196 | 221 | 848 | ||||||||||||
Income
from continuing operations before income taxes
|
444 | 1,396 | 3,181 | 2,858 | ||||||||||||
(Provision)
for income taxes
|
(105 | ) | (335 | ) | (1,104 | ) | (955 | ) | ||||||||
Income
from continuing operations
|
339 | 1,061 | 2,077 | 1,903 | ||||||||||||
Income
from discontinued operations, net of tax of $0 and $9,
respectively
|
0 | 0 | 0 | 16 | ||||||||||||
Net
income
|
$ | 339 | $ | 1,061 | $ | 2,077 | $ | 1,919 | ||||||||
See
accompanying notes to condensed consolidated financial
statements
|
CLEARONE
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
|
||||||||||||||||
(in
thousands of dollars, except per share amounts)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three
Months Ended March 31,
|
Nine
Months Ended March 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Diluted
earnings per common share from continuing operations
|
$ | 0.04 | $ | 0.10 | $ | 0.22 | $ | 0.18 | ||||||||
Diluted
earnings per common share from discontinued operations
|
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Basic
earnings per common share
|
$ | 0.04 | $ | 0.10 | $ | 0.22 | $ | 0.18 | ||||||||
Diluted
earnings per common share
|
$ | 0.04 | $ | 0.10 | $ | 0.22 | $ | 0.18 | ||||||||
Basic
weighted average shares outstanding
|
8,914,000 | 10,651,352 | 9,308,446 | 10,818,205 | ||||||||||||
Diluted
weighted average shares outstanding
|
9,032,383 | 10,747,317 | 9,420,209 | 10,921,932 | ||||||||||||
See
accompanying notes to condensed consolidated financial
statements
|
Nine Months Ended
|
||||||||
March
31,
|
March
31,
|
|||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income from continuing operations
|
$ | 2,077 | $ | 1,903 | ||||
Adjustments
to reconcile net income from continuing operations
|
||||||||
to
net cash (used in) provided by operating activities:
|
||||||||
Depreciation
and amortization expense
|
532 | 580 | ||||||
Stock-based
compensation
|
483 | 551 | ||||||
Write-off
of inventory
|
640 | (34 | ) | |||||
(Gain)
loss on disposal of assets and fixed assets write-offs
|
(5 | ) | 4 | |||||
(Recovery
of) provision for doubtful accounts
|
(14 | ) | 15 | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
1,115 | 837 | ||||||
Deposit
- Bond
|
908 | (908 | ) | |||||
Deferred
taxes
|
386 | - | ||||||
Note
receivable - Ken-A-Vision
|
38 | 121 | ||||||
Inventories
|
(6,887 | ) | (21 | ) | ||||
Prepaid
expenses and other assets
|
104 | (272 | ) | |||||
Accounts
payable
|
1,205 | 348 | ||||||
Accrued
liabilities
|
(1,654 | ) | 497 | |||||
Income
taxes
|
(954 | ) | (542 | ) | ||||
Deferred
product revenue
|
(384 | ) | (666 | ) | ||||
Net
change in other assets/liabilities
|
(14 | ) | - | |||||
Net
cash (used in) provided by operating activities
|
(2,424 | ) | 2,413 | |||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property and equipment
|
(716 | ) | (684 | ) | ||||
Purchase
of intellectual property
|
- | (49 | ) | |||||
Purchase
of marketable securities
|
- | (10,570 | ) | |||||
Sale
of marketable securities
|
17,354 | 17,370 | ||||||
Net
cash provided by continuing investing activities
|
16,638 | 6,067 | ||||||
Net
cash provided by discontinued investing activities
|
- | 16 | ||||||
Net
cash provided by investing activities
|
16,638 | 6,083 | ||||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from common stock
|
135 | 591 | ||||||
Common
stock purchased and retired
|
(6,768 | ) | (3,370 | ) | ||||
Tax
benefit attributable to exercise of stock options
|
- | 67 | ||||||
Net
cash (used in) financing activities
|
(6,633 | ) | (2,712 | ) | ||||
Net
increase in cash and cash equivalents
|
7,581 | 5,784 | ||||||
Cash
and cash equivalents at the beginning of the period
|
3,327 | 2,782 | ||||||
Cash
and cash equivalents at the end of the period
|
$ | 10,908 | $ | 8,566 | ||||
See
accompanying notes to condensed consolidated financial
statements
|
Nine Months Ended
|
||||||||
March
31,
|
March
31,
|
|||||||
2009
|
2008
|
|||||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid for income taxes
|
$ | 1,637 | $ | 1,439 | ||||
Cash
paid for interest
|
$ | - | $ | 2 | ||||
Supplemental
disclosure of non-cash financing activities:
|
||||||||
Exchanged
accounts receivable from a vendor with
|
||||||||
acccounts
payable to the same vendor
|
$ | 651 | $ | 168 | ||||
Adoption
of FIN48
|
$ | - | $ | 295 | ||||
Unrealized
gain on available-for-sale investments, net of tax of $408
|
$ | 686 | $ | - | ||||
See
accompanying notes to condensed consolidated financial
statements
|
March 31,
|
June 30,
|
|||||||
2009
|
2008
|
|||||||
Raw
materials
|
$ | 1,849 | $ | 724 | ||||
Finished
goods
|
10,796 | 5,356 | ||||||
Consigned
inventory
|
1,401 | 1,719 | ||||||
Total
inventory
|
$ | 14,046 | $ | 7,799 |
Three
months Ended
|
Nine
months Ended
|
|||||||||||||||
March
31,
|
March
31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Cost
of goods sold
|
$ | - | $ | 23 | $ | 41 | $ | 63 | ||||||||
Sales
& marketing
|
25 | 17 | 57 | 65 | ||||||||||||
Research
& development
|
7 | 31 | 22 | 98 | ||||||||||||
General
& administrative
|
128 | 108 | 363 | 325 | ||||||||||||
Total
stock-based compensation
|
$ | 160 | $ | 179 | $ | 483 | $ | 551 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
March 31,
|
March 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Gain
on disposal of discontinued operations:
|
||||||||||||||||
OM
Video
|
$ | - | $ | - | $ | - | $ | 25 | ||||||||
Total
gain on disposal of discontinued operations
|
- | - | - | 25 | ||||||||||||
Income
tax (provision) benefit:
|
||||||||||||||||
OM
Video
|
$ | - | $ | - | $ | - | $ | (9 | ) | |||||||
Total
income tax (provision) benefit
|
- | - | - | (9 | ) | |||||||||||
Total
income from discontinued operations, net of income taxes:
|
||||||||||||||||
OM
Video
|
$ | - | $ | - | $ | - | $ | 16 | ||||||||
Total
income from discontinued operations,
|
||||||||||||||||
net
of income taxes
|
$ | - | $ | - | $ | - | $ | 16 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
March 31,
|
March 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Balance,
beginning of period
|
$ | 36 | $ | - | $ | (694 | ) | $ | - | |||||||
Unrealized
holding (losses) gains, in available-for-sale investments
|
(70 | ) | - | 1,094 | - | |||||||||||
Income
tax
|
26 | - | (408 | ) | - | |||||||||||
Balance,
end of period
|
$ | (8 | ) | $ | - | $ | (8 | ) | $ | - |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
March 31,
|
March 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
income
|
$ | 339 | $ | 1,061 | $ | 2,077 | $ | 1,919 | ||||||||
Other
comprehensive income:
|
||||||||||||||||
Unrealized
gain (loss) on available-for-sale investments, net of
taxes
|
8 | (764 | ) | 686 | (764 | ) | ||||||||||
Comprehensive
Income
|
$ | 347 | $ | 297 | $ | 2,763 | $ | 1,155 |
Total
Fair Value at March 31, 2009
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
Significant
other observable inputs (Level 2)
|
Significant
unobservable inputs (Level 3)
|
Total
|
||||||||||||||||
Short-term
available-for-sale securities
|
$ | 830 | $ | 830 | $ | - | $ | - | $ | 830 | ||||||||||
Total
|
$ | 830 | $ | - | $ | - | $ | 830 |
Deferred
Revenue
|
Deferred
Cost of
Goods Sold
|
Deferred
Gross Profit
|
||||||||||
March
31, 2009
|
$ | 4,163 | $ | 1,400 | $ | 2,763 | ||||||
December
31, 2008
|
4,881 | 1,678 | 3,203 | |||||||||
September
30, 2008
|
4,432 | 1,926 | 2,506 | |||||||||
June
30, 2008
|
4,547 | 1,719 | 2,828 | |||||||||
March
31, 2008
|
4,206 | 1,757 | 2,449 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||||||||||||||||||
March
31,
|
March
31,
|
|||||||||||||||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||||||||||||
%
of Revenue
|
%
of Revenue
|
%
of Revenue
|
%
of Revenue
|
|||||||||||||||||||||||||||||
Revenue:
|
$ | 7,612 | 100% | $ | 9,163 | 100% | $ | 27,840 | 100% | $ | 29,393 | 100% | ||||||||||||||||||||
Cost
of goods sold:
|
||||||||||||||||||||||||||||||||
Total
cost of goods sold
|
3,605 | 47% | 3,439 | 38% | 11,399 | 41% | 12,153 | 41% | ||||||||||||||||||||||||
Gross
profit
|
4,007 | 53% | 5,724 | 62% | 16,441 | 59% | 17,240 | 59% | ||||||||||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||||||||||||
Sales
and marketing
|
1,690 | 22% | 1,640 | 18% | 5,600 | 20% | 4,820 | 16% | ||||||||||||||||||||||||
Research
and product development
|
1,810 | 24% | 1,701 | 19% | 5,430 | 20% | 5,134 | 17% | ||||||||||||||||||||||||
General
and administrative
|
123 | 2% | 1,183 | 13% | 2,451 | 9% | 5,276 | 18% | ||||||||||||||||||||||||
Total
operating expenses
|
$ | 3,623 | 48% | $ | 4,524 | 49% | $ | 13,481 | 48% | $ | 15,230 | 52% |
Exhibit
|
||
No.
|
Title of Document
|
Location
|
31.1
|
Section
302 Certification of Chief Executive Officer
|
This
filing
|
31.2
|
Section
302 Certification of Principal Financial Officer
|
This
filing
|
32.1
|
Section
906 Certification of Chief Executive Officer
|
This
filing
|
32.2
|
Section
906 Certification of Principal Financial Officer
|
This
filing
|
ClearOne
Communications, Inc., a Utah corporation
|
||
May
14, 2009
|
By:
|
/s/ Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
President
and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
||
May
14, 2009
|
By:
|
/s/ Greg A. LeClaire
|
Greg
A. LeClaire
|
||
Chief
Financial Officer
|
||
(Principal
Financial and Accounting Officer)
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of ClearOne
Communications, Inc.;
|
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 that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
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: May
14, 2009
|
By:
|
/s/ Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
Chairman,
President and Chief Executive
Officer
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of ClearOne
Communications, Inc.;
|
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 that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
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:
May 14, 2009
|
By:
|
/s/ Greg A. LeClaire
|
Greg
A LeClaire
|
||
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
Date: May
14, 2009
|
By:
|
/s/ Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
Chairman,
President and Chief Executive Officer
(Principal
Executive Officer)
|
Date:
May 14, 2009
|
By:
|
/s/ Greg A. LeClaire
|
Greg
A. LeClaire
|
||
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|