Utah
|
87-0398877
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
PAGE
|
||
4
|
||
PART
I.
|
||
ITEM
1.
|
4
|
|
ITEM
1A.
|
16
|
|
ITEM
1B.
|
21
|
|
ITEM
2.
|
22
|
|
ITEM
3.
|
23
|
|
ITEM
4.
|
24
|
|
PART
II.
|
||
ITEM
5.
|
25
|
|
ITEM
6.
|
26
|
|
ITEM
7.
|
29
|
|
ITEM
7A.
|
45
|
|
ITEM
8.
|
47
|
|
ITEM
9.
|
47
|
|
ITEM
9A.
|
47
|
|
ITEM
9B.
|
48
|
|
PART
III.
|
||
ITEM
10.
|
49
|
|
ITEM
11.
|
49
|
|
ITEM
12.
|
49
|
|
ITEM
13.
|
49
|
|
ITEM
14.
|
49
|
|
PART
IV.
|
||
ITEM
15.
|
50
|
|
52
|
· |
Professionally
installed audio conferencing systems that are used in executive
boardrooms, courtrooms, hospitals, and
auditoriums
|
· |
Premium
conferencing systems that integrate with video and web conferencing
systems
|
· |
Tabletop
conferencing phones used in conference rooms and
offices
|
· |
Personal
conferencing devices that enable hands-free audio communications
in new
ways that have never before been
possible
|
· |
Increasing
availability of easy-to-use audio conferencing
equipment
|
· |
Improving
voice quality of audio conferencing systems compared to telephone
handset
speakerphones
|
· |
Trending
expansion of global, regional, and local corporate
enterprises
|
· |
Availability
of a wider range of affordable audio conferencing products for small
businesses and home offices
|
· |
Growth
of distance learning and corporate training
programs
|
· |
Trend
toward deploying greater numbers of
teleworkers
|
· |
Decreases
in the amount of travel within most enterprises for routine
meetings
|
· |
Transition
to the Internet Protocol (“IP”) network from the traditional public
switched telephone network (“PSTN”) and the deployment of Voice over
Internet Protocol (“VoIP”)
applications
|
PCs
& Macs
|
VoIP
telephony applications such as Skype & Vonage; enterprise softphones,
audio for web-based videoconferencing applications; gaming; audio
playback
|
Cell
phones
|
Connects
to the 2.5mm headset jack for hands-free, full-duplex audio
conferencing
|
Telephones
|
Connects
to the headset jack (certain phone models) for hands-free, full-duplex
audio conferencing
|
iPods
& MP3 players
|
For
full-bandwidth audio playback
|
Desktop
video conferencing systems
|
For
hands-free, full-duplex audio conferencing
|
· |
InfoComm
- the AV industry’s largest trade show. In June 2005, we launched our new
brand with the simultaneous release of our new website, product
collateral, and InfoComm booth. We received positive attention for
this
re-branding effort. In June 2006, we again had a strong presence
at
InfoComm, where we highlighted a significant number of new products,
including our new Converge Pro professional conferencing platform,
Chat
50, and Chat 150, MAXAttach IP and MAX IP, and the Tabletop Controller
for
XAP.
|
· |
National
Systems Contractors Association (“NSCA”) - this show focuses on the sound
reinforcement industry, and we highlight our professional conferencing
products.
|
· |
Avoidance
of a significant investment in upgrading our manufacturing
infrastructure;
|
· |
Achievement
of a rapid International Standards Organization certification of
our
products by partnering with an outsource manufacturer that was
International Standards Organization
certified;
|
· |
RoHS-compliant
manufacturing facilities;
|
· |
Scalability
in our manufacturing process without major investment or major
restructuring costs; and
|
· |
Achievement
of future cost reductions on manufacturing costs and inventory costs
based
upon increased economies of scale in material and
labor.
|
Employees
of as
|
|||
June
30, 2006
|
June
30, 2005
|
June
30, 2004
|
|
Sales,
marketing, and
|
|||
customer
support
|
44
|
45
|
51
|
Product
development
|
49
|
43
|
41
|
Operations
support
|
17
|
20
|
40
|
Administration
|
17
|
18
|
29
|
Conferencing
services
|
-
|
-
|
76
|
OM
Video
|
-
|
-
|
27
|
Total
|
127
|
126
|
264
|
· |
meeting
required specifications and regulatory standards;
|
· |
meeting
market expectations for
performance;
|
· |
hiring
and keeping a sufficient number of skilled developers;
|
· |
obtaining
prototype products at anticipated cost
levels;
|
· |
having
the ability to identify problems or product defects in the development
cycle; and
|
· |
achieving
necessary manufacturing efficiencies.
|
· |
unexpected
changes in, or the imposition of, additional legislative or regulatory
requirements;
|
· |
unique
environmental regulations;
|
· |
fluctuating
exchange rates;
|
· |
tariffs
and other barriers;
|
· |
difficulties
in staffing and managing foreign sales operations;
|
· |
import
and export restrictions;
|
· |
greater
difficulties in accounts receivable collection and longer payment
cycles;
|
· |
potentially
adverse tax consequences;
|
· |
potential
hostilities and changes in diplomatic and trade
relationships;
|
· |
disruption
in services due to natural disaster, economic or political difficulties,
quarantines, transportation, or other restrictions associated with
infectious diseases.
|
· |
statements
or changes in opinions, ratings, or earnings estimates made by brokerage
firms or industry analysts relating to the market in which we do
business
or relating to us specifically;
|
· |
disparity
between our reported results and the projections of
analysts;
|
· |
the
shift in sales mix of products that we currently sell to a sales
mix of
lower-gross profit product
offerings;
|
· |
the
level and mix of inventory levels held by our
distributors;
|
· |
the
announcement of new products or product enhancements by us or our
competitors;
|
· |
technological
innovations by us or our
competitors;
|
· |
success
in meeting targeted availability dates for new or redesigned
products;
|
· |
the
ability to profitably and efficiently manage our supplies of products
and
key components;
|
· |
the
ability to maintain profitable relationships with our
customers;
|
· |
the
ability to maintain an appropriate cost
structure;
|
· |
quarterly
variations in our results of
operations;
|
· |
general
consumer confidence or general market conditions or market conditions
specific to technology industries;
|
· |
domestic
and international economic
conditions;
|
· |
the
adoption of the new accounting standard, SFAS No. 123R, “Share-Based
Payments,” which requires us to record compensation expense for certain
options issued before July 1, 2005 and for all options issued or
modified
after June 30, 2005;
|
· |
our
ability to report financial information in a timely manner;
and
|
· |
the
markets in which our stock is
traded.
|
Location
|
Operations
|
Square
Footage
|
Status
|
Expiration
of Lease Agreement
|
Active
Leases at June 30, 2006
|
||||
Salt
Lake City, UT
|
Company
headquarters
|
39,760
|
Continuing
|
October
2006
|
Salt
Lake City, UT
|
Manufacturing
facility
|
12,000
|
Previously
subleased
|
October
2006
|
Champlin,
MN
|
Furniture
manufacturing
|
17,520
|
Continuing
|
September
2007
|
Berkshire,
|
||||
United
Kingdom
|
Sales
office
|
250
|
Continuing
|
90
days notice
|
Future
Leases
|
||||
Salt
Lake City, UT
|
Company
headquarters
|
36,279
|
Beginning
November 2006
|
December
2013
|
Terminated
Leases, i.e., per contract terms, sale of entity, or through early
termination
|
||||
Woburn,
MA
|
ClearOne,
Inc. acquisition
|
2,206
|
Early
buyout
|
September
2003
|
Golden
Valley, MN
|
U.S.
audiovisual installation services
|
25,523
|
Early
buyout
|
June
2004
|
Westmont,
IL
|
U.S.
audiovisual installation services
|
2,608
|
Lease
expired
|
July
2004
|
Nuremberg,
Germany
|
Sales
office
|
2,153
|
Early
buyout
|
December
2004
|
Ottawa,
Canada
|
Canadian
audiovisual installation services
|
16,190
|
Sold
entity
|
March
2005
|
2006
|
2005
|
||||||||||||
High
|
Low
|
High
|
Low
|
||||||||||
First
Quarter
|
$
|
4.10
|
$
|
2.20
|
$
|
5.70
|
$
|
3.50
|
|||||
Second
Quarter
|
2.50
|
1.95
|
4.80
|
3.55
|
|||||||||
Third
Quarter
|
3.60
|
2.25
|
4.30
|
3.00
|
|||||||||
Fourth
Quarter
|
4.25
|
3.50
|
3.65
|
2.25
|
Number
of securities to be issued upon exercise of outstanding options,
warrants,
and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation
|
|||
plans
approved by
|
|||
security
holders
|
1,237,920
|
$6.12
|
959,956
|
Equity
compensation
|
|||
plans
not approved by
|
|||
security
holders
|
-
|
-
|
-
|
Total
|
1,237,920
|
$6.12
|
959,956
|
Years
Ended June 30,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
Operating
results:
|
||||||||||||||||
Revenue
|
$
|
37,632
|
$
|
31,645
|
$
|
27,966
|
$
|
28,566
|
$
|
26,253
|
||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of goods sold
|
19,284
|
14,951
|
16,379
|
18,115
|
13,884
|
|||||||||||
Marketing
and selling
|
7,866
|
9,070
|
8,497
|
7,070
|
7,010
|
|||||||||||
Research
and product development
|
8,299
|
5,305
|
4,237
|
3,281
|
3,810
|
|||||||||||
General
and administrative
|
5,108
|
5,489
|
6,767
|
5,915
|
4,376
|
|||||||||||
Settlement
in shareholders' class action
|
(1,205
|
)
|
(2,046
|
)
|
4,080
|
7,325
|
-
|
|||||||||
Impairment
losses
|
-
|
180
|
-
|
5,102
|
7,115
|
|||||||||||
Restructuring
charge
|
-
|
110
|
-
|
-
|
-
|
|||||||||||
Operating
loss
|
(1,720
|
)
|
(1,414
|
)
|
(11,994
|
)
|
(18,242
|
)
|
(9,942
|
)
|
||||||
Other
income (expense), net
|
1,016
|
318
|
(261
|
)
|
48
|
288
|
||||||||||
Loss
from continuing operations before income taxes
|
(704
|
)
|
(1,096
|
)
|
(12,255
|
)
|
(18,194
|
)
|
(9,654
|
)
|
||||||
Benefit
(provision) for income taxes
|
870
|
3,248
|
736
|
1,352
|
173
|
|||||||||||
Income
(loss) from continuing operations
|
166
|
2,152
|
(11,519
|
)
|
(16,842
|
)
|
(9,481
|
)
|
||||||||
Income
(loss) from discontinued operations
|
1,930
|
13,923
|
1,632
|
(19,130
|
)
|
2,820
|
||||||||||
Net
income (loss)
|
$
|
2,096
|
$
|
16,075
|
$
|
(9,887
|
)
|
$
|
(35,972
|
)
|
$
|
(6,661
|
)
|
|||
Earnings
(loss) per common share:
|
||||||||||||||||
Basic
earnings (loss) from continuing operations
|
$
|
0.02
|
$
|
0.19
|
$
|
(1.04
|
)
|
$
|
(1.50
|
)
|
$
|
(0.99
|
)
|
|||
Diluted
earnings (loss) from continuing operations
|
$
|
0.01
|
$
|
0.17
|
$
|
(1.04
|
)
|
$
|
(1.50
|
)
|
$
|
(0.99
|
)
|
|||
Basic
earnings (loss) from discontinued operations
|
$
|
0.16
|
$
|
1.25
|
$
|
0.15
|
$
|
(1.71
|
)
|
$
|
0.30
|
|||||
Diluted
earnings (loss) from discontinued operations
|
$
|
0.16
|
$
|
1.13
|
$
|
0.15
|
$
|
(1.71
|
)
|
$
|
0.30
|
|||||
Basic
earnings (loss)
|
$
|
0.18
|
$
|
1.44
|
$
|
(0.89
|
)
|
$
|
(3.21
|
)
|
$
|
(0.69
|
)
|
|||
Diluted
earnings (loss)
|
$
|
0.17
|
$
|
1.30
|
$
|
(0.89
|
)
|
$
|
(3.21
|
)
|
$
|
(0.69
|
)
|
|||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
11,957,756
|
11,177,406
|
11,057,896
|
11,183,339
|
9,588,118
|
|||||||||||
Diluted
|
12,206,618
|
12,332,106
|
11,057,896
|
11,183,339
|
9,588,118
|
|||||||||||
As
of June 30,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
Financial
data:
|
||||||||||||||||
Current
assets
|
$
|
39,589
|
$
|
34,879
|
$
|
27,202
|
$
|
29,365
|
$
|
52,304
|
||||||
Property,
plant and equipment, net
|
1,647
|
2,805
|
4,027
|
4,320
|
4,678
|
|||||||||||
Total
assets
|
41,405
|
38,021
|
32,156
|
35,276
|
63,876
|
|||||||||||
Long-term
debt, net of current maturities
|
-
|
-
|
240
|
931
|
-
|
|||||||||||
Capital
leases, net of current maturities
|
-
|
-
|
2
|
9
|
41
|
|||||||||||
Total
shareholders' equity
|
30,412
|
24,911
|
9,006
|
18,743
|
53,892
|
Fiscal
2006 Quarters Ended
|
||||||||||||||||
(in
thousands of dollars, except per share data)
|
||||||||||||||||
Sept.
30
|
Dec.
31
|
Mar.
31
|
June
30
|
Total
|
||||||||||||
Revenue
|
$
|
9,527
|
$
|
9,675
|
$
|
8,700
|
$
|
9,730
|
$
|
37,632
|
||||||
Cost
of goods sold
|
(4,645
|
)
|
(4,943
|
)
|
(4,625
|
)
|
(5,071
|
)
|
(19,284
|
)
|
||||||
Marketing
and selling
|
(1,812
|
)
|
(1,810
|
)
|
(1,920
|
)
|
(2,324
|
)
|
(7,866
|
)
|
||||||
Research
and product development
|
(1,799
|
)
|
(1,778
|
)
|
(2,201
|
)
|
(2,521
|
)
|
(8,299
|
)
|
||||||
General
and administrative
|
(1,771
|
)
|
(1,457
|
)
|
(1,060
|
)
|
(820
|
)
|
(5,108
|
)
|
||||||
Settlement
in shareholders' class action
|
1,205
|
-
|
-
|
-
|
1,205
|
|||||||||||
Other
income (expense), net
|
166
|
191
|
237
|
422
|
1,016
|
|||||||||||
(Loss)
income from continuing operations before income taxes
|
871
|
(122
|
)
|
(869
|
)
|
(584
|
)
|
(704
|
)
|
|||||||
Benefit
(provision) for income taxes
|
178
|
109
|
763
|
(180
|
)
|
870
|
||||||||||
(Loss)
income from continuing operations
|
1,049
|
(13
|
)
|
(106
|
)
|
(764
|
)
|
166
|
||||||||
Income
from discontinued operations
|
938
|
94
|
646
|
252
|
1,930
|
|||||||||||
Net
income
|
$
|
1,987
|
$
|
81
|
$
|
540
|
$
|
(512
|
)
|
$
|
2,096
|
|||||
Basic
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
0.09
|
$
|
-
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
$
|
0.02
|
||||
Discontinued
operations
|
0.08
|
0.01
|
0.05
|
0.02
|
0.16
|
|||||||||||
Basic
income (loss) earnings per common share
|
$
|
0.18
|
$
|
0.01
|
$
|
0.04
|
$
|
(0.04
|
)
|
$
|
0.18
|
|||||
Diluted
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
0.09
|
$
|
-
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
$
|
0.01
|
||||
Discontinued
operations
|
0.08
|
0.01
|
0.05
|
0.02
|
0.16
|
|||||||||||
Diluted
income (loss) earnings per common share
|
$
|
0.16
|
$
|
0.01
|
$
|
0.04
|
$
|
(0.04
|
)
|
$
|
0.17
|
Fiscal
2005 Quarters Ended
|
||||||||||||||||
(in
thousands of dollars, except per share data)
|
||||||||||||||||
Sept.
30
|
Dec.
31
|
Mar.
31
|
June
30
|
Total
|
||||||||||||
Revenue
|
$
|
6,747
|
$
|
8,692
|
$
|
7,103
|
$
|
9,103
|
$
|
31,645
|
||||||
Cost
of goods sold
|
(3,797
|
)
|
(3,948
|
)
|
(3,180
|
)
|
(4,026
|
)
|
(14,951
|
)
|
||||||
Marketing
and selling
|
(2,086
|
)
|
(2,341
|
)
|
(2,151
|
)
|
(2,492
|
)
|
(9,070
|
)
|
||||||
Research
and product development
|
(1,105
|
)
|
(1,282
|
)
|
(1,423
|
)
|
(1,495
|
)
|
(5,305
|
)
|
||||||
General
and administrative
|
(1,435
|
)
|
(1,388
|
)
|
(1,287
|
)
|
(1,379
|
)
|
(5,489
|
)
|
||||||
Settlement
in shareholders' class action
|
1,020
|
734
|
855
|
(563
|
)
|
2,046
|
||||||||||
Impairment
losses
|
-
|
-
|
-
|
(180
|
)
|
(180
|
)
|
|||||||||
Restructuring
charge
|
-
|
-
|
-
|
(110
|
)
|
(110
|
)
|
|||||||||
Other
income (expense), net
|
34
|
64
|
95
|
125
|
318
|
|||||||||||
(Loss)
income from continuing operations before income taxes
|
(622
|
)
|
531
|
12
|
(1,017
|
)
|
(1,096
|
)
|
||||||||
Benefit
(provision) for income taxes
|
232
|
(198
|
)
|
(5
|
)
|
3,219
|
3,248
|
|||||||||
(Loss)
income from continuing operations
|
(390
|
)
|
333
|
7
|
2,202
|
2,152
|
||||||||||
Income
from discontinued operations
|
13,346
|
73
|
388
|
116
|
13,923
|
|||||||||||
Net
income
|
$
|
12,956
|
$
|
406
|
$
|
395
|
$
|
2,318
|
$
|
16,075
|
||||||
Basic
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
(0.04
|
)
|
$
|
0.03
|
$
|
-
|
$
|
0.20
|
$
|
0.19
|
|||||
Discontinued
operations
|
1.20
|
0.01
|
0.03
|
0.01
|
1.25
|
|||||||||||
Basic
income (loss) earnings per common share
|
$
|
1.16
|
$
|
0.04
|
$
|
0.03
|
$
|
0.21
|
$
|
1.44
|
||||||
Diluted
income (loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
(0.03
|
)
|
$
|
0.02
|
$
|
-
|
$
|
0.18
|
$
|
0.17
|
|||||
Discontinued
operations
|
1.08
|
0.01
|
0.03
|
0.01
|
1.13
|
|||||||||||
Diluted
income (loss) earnings per common share
|
$
|
1.05
|
$
|
0.03
|
$
|
0.03
|
$
|
0.19
|
$
|
1.30
|
Fiscal
2004 Quarters Ended
|
||||||||||||||||
(in
thousands of dollars, except per share data)
|
||||||||||||||||
Sept.
30
|
Dec.
31
|
Mar.
31
|
June
30
|
Total
|
||||||||||||
Revenue
|
$
|
7,737
|
$
|
6,715
|
$
|
6,652
|
$
|
6,862
|
$
|
27,966
|
||||||
Cost
of goods sold
|
(5,165
|
)
|
(3,278
|
)
|
(4,392
|
)
|
(3,544
|
)
|
(16,379
|
)
|
||||||
Marketing
and selling
|
(2,012
|
)
|
(2,004
|
)
|
(2,129
|
)
|
(2,352
|
)
|
(8,497
|
)
|
||||||
Research
and product development
|
(925
|
)
|
(829
|
)
|
(1,112
|
)
|
(1,371
|
)
|
(4,237
|
)
|
||||||
General
and administrative
|
(1,583
|
)
|
(1,639
|
)
|
(1,738
|
)
|
(1,807
|
)
|
(6,767
|
)
|
||||||
Settlement
in shareholders' class action
|
-
|
(2,100
|
)
|
(3,240
|
)
|
1,260
|
(4,080
|
)
|
||||||||
Other
income (expense), net
|
1
|
(65
|
)
|
(2
|
)
|
(195
|
)
|
(261
|
)
|
|||||||
Loss
from continuing operations before income taxes
|
(1,947
|
)
|
(3,200
|
)
|
(5,961
|
)
|
(1,147
|
)
|
(12,255
|
)
|
||||||
Benefit
for income taxes
|
123
|
109
|
426
|
78
|
736
|
|||||||||||
Loss
from continuing operations
|
(1,824
|
)
|
(3,091
|
)
|
(5,535
|
)
|
(1,069
|
)
|
(11,519
|
)
|
||||||
Income
(loss) from discontinued operations
|
661
|
(66
|
)
|
690
|
347
|
1,632
|
||||||||||
Net
loss
|
$
|
(1,163
|
)
|
$
|
(3,157
|
)
|
$
|
(4,845
|
)
|
$
|
(722
|
)
|
$
|
(9,887
|
)
|
|
Basic
(loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
(0.16
|
)
|
$
|
(0.28
|
)
|
$
|
(0.50
|
)
|
$
|
(0.10
|
)
|
$
|
(1.04
|
)
|
|
Discontinued
operations
|
0.06
|
-
|
0.06
|
0.03
|
0.15
|
|||||||||||
Basic
(loss) earnings per common share
|
$
|
(0.10
|
)
|
$
|
(0.28
|
)
|
$
|
(0.44
|
)
|
$
|
(0.07
|
)
|
$
|
(0.89
|
)
|
|
Diluted
(loss) earnings per common share:
|
||||||||||||||||
Continuing
operations
|
$
|
(0.16
|
)
|
$
|
(0.28
|
)
|
$
|
(0.50
|
)
|
$
|
(0.10
|
)
|
$
|
(1.04
|
)
|
|
Discontinued
operations
|
0.06
|
-
|
0.06
|
0.03
|
0.15
|
|||||||||||
Diluted
(loss) earnings per common share
|
$
|
(0.10
|
)
|
$
|
(0.28
|
)
|
$
|
(0.44
|
)
|
$
|
(0.07
|
)
|
$
|
(0.89
|
)
|
Deferred
Revenue
|
Deferred
Cost of Goods Sold
|
Deferred
Gross Profit
|
||||||||
June
30, 2006
|
$
|
5,871
|
$
|
2,817
|
$
|
3,054
|
||||
March
31, 2006
|
5,355
|
2,443
|
2,912
|
|||||||
December
31, 2005
|
4,936
|
2,199
|
2,737
|
|||||||
September
30, 2005
|
4,848
|
2,373
|
2,475
|
|||||||
June
30, 2005
|
5,055
|
2,297
|
2,758
|
|||||||
March
31, 2005
|
5,456
|
2,321
|
3,135
|
|||||||
December
31, 2004
|
4,742
|
1,765
|
2,977
|
|||||||
September
30, 2004
|
5,617
|
1,920
|
3,697
|
|||||||
June
30, 2004
|
6,107
|
2,381
|
3,726
|
· |
Significant
underperformance relative to projected future operating
results;
|
· |
Significant
changes in the manner of our use of the acquired assets or the strategy
for our overall business; and
|
· |
Significant
negative industry or economic
trends.
|
Year
Ended June 30,
|
|||||||||||||||||||
(in
thousands of dollars)
|
|||||||||||||||||||
2006
|
2005
|
2004
|
|||||||||||||||||
%
of
Revenue
|
%
of
Revenue
|
%
of
Revenue
|
|||||||||||||||||
Revenue
|
$
|
37,632
|
100.0%
|
|
$
|
31,645
|
100.0%
|
|
$
|
27,966
|
100.0%
|
|
|||||||
Cost
of goods sold
|
19,284
|
51.2%
|
|
14,951
|
47.2%
|
|
16,379
|
58.6%
|
|
||||||||||
Gross
profit
|
18,348
|
48.8%
|
|
16,694
|
52.8%
|
|
11,587
|
41.4%
|
|
||||||||||
Operating
expenses (benefit):
|
|||||||||||||||||||
Marketing
and selling
|
7,866
|
20.9%
|
|
9,070
|
28.7%
|
|
8,497
|
30.4%
|
|
||||||||||
Research
and product development
|
8,299
|
22.1%
|
|
5,305
|
16.8%
|
|
4,237
|
15.2%
|
|
||||||||||
General
and administrative
|
5,108
|
13.6%
|
|
5,489
|
17.3%
|
|
6,767
|
24.2%
|
|
||||||||||
Settlement
in shareholders' class action
|
(1,205
|
)
|
-3.2%
|
|
(2,046
|
)
|
-6.5%
|
|
4,080
|
14.6%
|
|
||||||||
Impairment
losses
|
-
|
0.0%
|
|
180
|
0.6%
|
|
-
|
0.0%
|
|
||||||||||
Restructuring
charge
|
-
|
0.0%
|
|
110
|
0.3%
|
|
-
|
0.0%
|
|
||||||||||
Total
operating expenses
|
20,068
|
53.3%
|
|
18,108
|
57.2%
|
|
23,581
|
84.3%
|
|
||||||||||
Operating
loss
|
(1,720
|
)
|
-4.6%
|
|
(1,414
|
)
|
-4.5%
|
|
(11,994
|
)
|
-42.9%
|
|
|||||||
Other
income (expense), net
|
1,016
|
2.7%
|
|
318
|
1.0%
|
|
(261
|
)
|
-0.9%
|
|
|||||||||
Loss
from continuing operations before income taxes
|
(704
|
)
|
-1.9%
|
|
(1,096
|
)
|
-3.5%
|
|
(12,255
|
)
|
-43.8%
|
|
|||||||
Benefit
for income taxes
|
870
|
2.3%
|
|
3,248
|
10.3%
|
|
736
|
2.6%
|
|
||||||||||
Income
(loss) from continuing operations
|
166
|
0.4%
|
|
2,152
|
6.8%
|
|
(11,519
|
)
|
-41.2%
|
|
|||||||||
Income
from discontinued operations, net of tax
|
1,930
|
5.1%
|
|
13,923
|
44.0%
|
|
1,632
|
5.8%
|
|
||||||||||
Net
income (loss)
|
$
|
2,096
|
5.6%
|
|
$
|
16,075
|
50.8%
|
|
$
|
(9,887
|
)
|
-35.4%
|
|
Year
Ended June 30,
|
||
(by
individual unit)
|
||
2006
|
2005
|
|
Professional
audio conferencing
|
13,212
|
10,786
|
Premium
and tabletop conferencing
|
25,283
|
11,782
|
Year
Ended June 30,
|
|||||||||||||
(in
thousands of dollars)
|
|||||||||||||
2006
|
2005
|
||||||||||||
%
of
Revenue
|
%
of
Revenue
|
||||||||||||
Cost
of goods sold
|
$
|
19,284
|
51.2%
|
|
$
|
14,951
|
47.2%
|
|
|||||
Gross
profit
|
$
|
18,348
|
48.8%
|
|
$
|
16,694
|
52.8%
|
|
Year
Ended June 30,
|
|||||||
(in
thousands of dollars)
|
|||||||
2006
|
2005
|
||||||
Total
G&A before discontinued operations
|
$
|
5,108
|
$
|
5,742
|
|||
OM
Video G&A
|
-
|
(253
|
)
|
||||
Total
G&A from continuing operations
|
$
|
5,108
|
$
|
5,489
|
|||
Professional
fees (SEC investigation and subsequent litigation)
|
$
|
493
|
$
|
997
|
|||
Professional
fees (Other)
|
1,797
|
1,993
|
|||||
Compensation
cost related to SFAS No. 123R
|
756
|
-
|
|||||
Severance
payments to executives
|
93
|
-
|
|||||
Other
general and administrative expense
|
1,969
|
2,499
|
|||||
Total
G&A from continuing operations
|
$
|
5,108
|
$
|
5,489
|
Year
Ended June 30,
|
|||||||||||||
(in
thousands of dollars)
|
|||||||||||||
2005
|
2004
|
||||||||||||
%
of
Revenue
|
%
of
Revenue
|
||||||||||||
Product
|
$
|
31,645
|
100.0%
|
|
$
|
27,836
|
99.5%
|
|
|||||
Business
services
|
-
|
0.0%
|
|
130
|
0.5%
|
|
|||||||
Total
|
$
|
31,645
|
100.0%
|
|
$
|
27,966
|
100.0%
|
|
Year
Ended June 30,
|
||
(by
individual unit)
|
||
2005
|
2004
|
|
Professional
audio conferencing
|
10,786
|
10,576
|
Premium
and tabletop conferencing
|
11,782
|
9,813
|
Year
Ended June 30,
|
|||||||||||||
(in
thousands of dollars)
|
|||||||||||||
2005
|
2004
|
||||||||||||
%
of
Revenue
|
%
of
Revenue
|
||||||||||||
Cost
of goods sold
|
|||||||||||||
Product
|
$
|
14,951
|
47.2%
|
|
$
|
16,379
|
58.6%
|
|
|||||
Business
services
|
-
|
0.0%
|
|
-
|
0.0%
|
|
|||||||
Total
|
$
|
14,951
|
47.2%
|
|
$
|
16,379
|
58.6%
|
|
|||||
Gross
profit
|
|||||||||||||
Product
|
$
|
16,694
|
52.8%
|
|
$
|
11,457
|
41.0%
|
|
|||||
Business
services
|
-
|
0.0%
|
|
130
|
0.4%
|
|
|||||||
Total
|
$
|
16,694
|
52.8%
|
|
$
|
11,587
|
41.4%
|
|
Year
Ended June 30,
|
|||||||
(in
thousands of dollars)
|
|||||||
2005
|
2004
|
||||||
Total
G&A before discontinued operations
|
$
|
5,742
|
$
|
9,703
|
|||
OM
Video G&A
|
(253
|
)
|
(1,113
|
)
|
|||
Conferencing
services G&A
|
-
|
(1,036
|
)
|
||||
U.S.
business services G&A
|
-
|
(787
|
)
|
||||
Total
G&A from continuing operations
|
$
|
5,489
|
$
|
6,767
|
|||
Professional
fees (SEC investigation and subsequent litigation)
|
$
|
997
|
$
|
936
|
|||
Professional
fees (Other)
|
1,993
|
1,944
|
|||||
Severance
payments to executives
|
-
|
544
|
|||||
Other
general and administrative expense
|
2,499
|
3,343
|
|||||
Total
G&A from continuing operations
|
$
|
5,489
|
$
|
6,767
|
Payments
Due by Period
|
||||||||||||||||
Contractual
Obligations
|
Total
|
One
year
or
less
|
Two
to
Three
Years
|
Four
to
Five
Years
|
After
Five
Years
|
|||||||||||
Operating
Leases
|
$
|
4,847
|
$
|
646
|
$
|
1,306
|
$
|
1,287
|
$
|
1,608
|
||||||
Total
Contractual
|
||||||||||||||||
Cash
Obligations
|
$
|
4,847
|
$
|
646
|
$
|
1,306
|
$
|
1,287
|
$
|
1,608
|
· |
Ineffective
financial statement close process.
We have a material weakness in the timeliness of the monthly close
process
to effect a timely financial statement close. Accounting personnel
have
not been able to focus full attention to correcting this weakness
due to
their focus on the preparation, audit, and issuance for the restated
fiscal 2001, restated fiscal 2002, and fiscal 2003, 2004, and 2005
consolidated financial statements as well as the interim fiscal 2006
condensed consolidated financial
statements.
|
· |
Evaluation
of the staffing, organizational structure, systems, policies and
procedures, and other reporting processes, to improve the timeliness
of
closing these accounts and to enhance the timely review and
supervision.
|
Exhibit
|
SEC
Ref.
|
||
No.
|
No.
|
Title
of Document
|
Location
|
3.1
|
3
|
Articles
of Incorporation and amendments thereto
|
Incorp.
by reference1
|
3.2
|
3
|
Bylaws
|
Incorp.
by reference2
|
10.1
|
10
|
Employment
Separation Agreement between ClearOne Communications, Inc. and Frances
Flood, dated December 5, 2003.*
|
Incorp.
by reference5
|
10.2
|
10
|
Employment
Separation Agreement between ClearOne Communications, Inc. and Susie
Strohm, dated December 5, 2003.*
|
Incorp.
by reference5
|
10.6
|
10
|
Joint
Prosecution and Defense Agreement dated April 1, 2004 between ClearOne
Communications, Inc. Parsons Behle & Latimer, Edward Dallin Bagley and
Burbidge & Mitchell, and amendment thereto
|
Incorp.
by reference5
|
10.7
|
10
|
Asset
Purchase Agreement dated May 6, 2004 between ClearOne Communications,
Inc.
and M:SPACE, Inc.
|
Incorp.
by reference5
|
10.8
|
10
|
Asset
Purchase Agreement among Clarinet, Inc., American Teleconferencing
Services, Ltd. doing business as Premiere Conferencing, and ClearOne
Communications, Inc., dated July 1, 2004
|
Incorp.
by reference8
|
10.9
|
10
|
Stock
Purchase Agreement dated March 4, 2005 between 6351352 Canada Inc.
and
Gentner Ventures, Inc., a wholly owned subsidiary of ClearOne
Communications, Inc.
|
Incorp.
by reference5
|
10.10
|
10
|
Settlement
Agreement and Release between ClearOne Communications, Inc. and DeLonie
Call dated February 20, 2006*
|
Incorp.
by reference7
|
10.11
|
10
|
1990
Incentive Plan
|
Incorp.
by reference3
|
10.12
|
10
|
1998
Stock Option Plan
|
Incorp.
by reference4
|
10.13
|
10
|
Employment
Settlement Agreement and Release between ClearOne Communications,
Inc. and
Gregory Rand dated February 27, 2004*
|
Incorp.
by reference5
|
10.14
|
10
|
Employment
Settlement Agreement and Release between ClearOne Communications,
Inc. and
George Claffey dated April 6, 2004*
|
Incorp.
by reference5
|
10.15
|
10
|
Employment
Settlement Agreement and Release between ClearOne Communications,
Inc. and
Michael Keough dated June 16, 2004*
|
Incorp.
by reference5
|
10.16
|
10
|
Employment
Settlement Agreement and Release between ClearOne Communications,
Inc. and
Angelina Beitia dated July 15, 2004*
|
Incorp.
by reference5
|
10.17
|
10
|
Manufacturing
Agreement between ClearOne Communications, Inc. and Inovar, Inc.
dated
August 1, 2005
|
Incorp.
by reference6
|
10.18
|
10
|
Mutual
Release and Waiver between ClearOne Communications, Inc. and Burk
Technology, Inc. dated August 22, 2005
|
Incorp.
by reference6
|
10.19
|
10
|
Office
Lease between Edgewater Corporate Park, LLC and ClearOne Communications,
Inc. dated June 5, 2006
|
This
filing
|
14.1
|
14
|
Code
of Ethics, approved by the Board of Directors on August 23,
2006
|
This
filing
|
21
|
Subsidiaries
of the registrant
|
This
filing
|
|
31
|
Section
302 Certification of Chief Executive Officer
|
This
filing
|
|
31
|
Section
302 Certification of Interim Chief Financial Officer
|
This
filing
|
|
32
|
Section
1350 Certification of Chief Executive Officer
|
This
filing
|
|
32
|
Section
1350 Certification of Interim Chief Financial Officer
|
This
filing
|
|
99.1
|
99
|
Audit
Committee Charter, adopted November 18, 2004
|
Incorp.
by reference5
|
CLEARONE
COMMUNICATIONS, INC.
|
||
September
14, 2006
|
By:
|
/s/
Zeynep Hakimoglu
|
Zeynep
Hakimoglu
|
||
President,
Chief Executive Officer, and
Director
|
Signature
|
Title
|
Date
|
/s/
Zeynep Hakimoglu
|
President,
Chief Executive Officer, and Director
|
September
14, 2006
|
Zeynep
Hakimoglu
|
(Principal
Executive Officer)
|
|
/s/
Craig E. Peeples
|
Interim
Chief Financial Officer
|
September
14, 2006
|
Craig
E. Peeples
|
(Principal
Financial and Accounting Officer)
|
|
/s/
Edward Dallin Bagley
|
Chairman
of the Board of Directors
|
September
14, 2006
|
Edward
Dallin Bagley
|
||
/s/
Brad R. Baldwin
|
Director
|
September
14, 2006
|
Brad
R. Baldwin
|
||
/s/
Larry R. Hendricks
|
Director
|
September
14, 2006
|
Larry
R. Hendricks
|
||
/s/
Scott M. Huntsman
|
Director
|
September
14, 2006
|
Scott
M. Huntsman
|
||
/s/
Harry Spielberg
|
Director
|
September
14, 2006
|
Harry
Spielberg
|
Page
|
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
Consolidated
Statements of Shareholders' Equity for fiscal
years ended June 30, 2006, 2005, and 2004
|
F-7
|
|
F-8
|
|
F-10
|
June
30,
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,240
|
$
|
1,892
|
|||
Marketable
securities
|
20,550
|
15,800
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of
$49 and $46, respectively
|
7,784
|
6,859
|
|||||
Inventories,
net
|
7,025
|
5,806
|
|||||
Income
tax receivable
|
2,607
|
3,952
|
|||||
Deferred
income taxes, net
|
128
|
270
|
|||||
Prepaid
expenses
|
255
|
300
|
|||||
Total
current assets
|
39,589
|
34,879
|
|||||
Property
and equipment, net
|
1,647
|
2,805
|
|||||
Intangibles,
net
|
154
|
322
|
|||||
Other
assets
|
15
|
15
|
|||||
Total
assets
|
$
|
41,405
|
$
|
38,021
|
|||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
2,597
|
$
|
2,163
|
|||
Accrued
liabilities
|
2,397
|
5,622
|
|||||
Deferred
product revenue
|
5,871
|
5,055
|
|||||
Total
current liabilities
|
10,865
|
12,840
|
|||||
Deferred
income taxes, net
|
128
|
270
|
|||||
Total
liabilities
|
10,993
|
13,110
|
|||||
Commitments
and contingencies (see Notes 7 and 10)
|
|||||||
Shareholders'
equity:
|
|||||||
Common
stock, 50,000,000 shares authorized, par value $0.001,
|
|||||||
12,184,727
and 11,264,233 shares issued and outstanding, respectively
|
12
|
11
|
|||||
Additional
paid-in capital
|
52,764
|
49,393
|
|||||
Deferred
compensation
|
-
|
(33
|
)
|
||||
Accumulated
deficit
|
(22,364
|
)
|
(24,460
|
)
|
|||
Total
shareholders' equity
|
30,412
|
24,911
|
|||||
Total
liabilities and shareholders' equity
|
$
|
41,405
|
$
|
38,021
|
|||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue:
|
||||||||||
Product
|
$
|
37,632
|
$
|
31,645
|
$
|
27,836
|
||||
Business
services
|
-
|
-
|
130
|
|||||||
Total
revenue
|
37,632
|
31,645
|
27,966
|
|||||||
Cost
of goods sold:
|
||||||||||
Product
|
18,603
|
14,701
|
13,683
|
|||||||
Product
inventory write-offs
|
681
|
250
|
2,696
|
|||||||
Total
cost of goods sold
|
19,284
|
14,951
|
16,379
|
|||||||
Gross
profit
|
18,348
|
16,694
|
11,587
|
|||||||
Operating
expenses:
|
||||||||||
Marketing
and selling
|
7,866
|
9,070
|
8,497
|
|||||||
Research
and product development
|
8,299
|
5,305
|
4,237
|
|||||||
General
and administrative
|
5,108
|
5,489
|
6,767
|
|||||||
Settlement
in shareholders' class action
|
(1,205
|
)
|
(2,046
|
)
|
4,080
|
|||||
Impairment
losses (see Note 20)
|
-
|
180
|
-
|
|||||||
Restructuring
charge (see Note 20)
|
-
|
110
|
-
|
|||||||
Total
operating expenses
|
20,068
|
18,108
|
23,581
|
|||||||
Operating
loss
|
(1,720
|
)
|
(1,414
|
)
|
(11,994
|
)
|
||||
Other
income (expense), net:
|
||||||||||
Interest
income
|
813
|
425
|
52
|
|||||||
Interest
expense
|
-
|
(104
|
)
|
(183
|
)
|
|||||
Other,
net
|
203
|
(3
|
)
|
(130
|
)
|
|||||
Total
other income (expense), net
|
1,016
|
318
|
(261
|
)
|
||||||
Loss
from continuing operations before income taxes
|
(704
|
)
|
(1,096
|
)
|
(12,255
|
)
|
||||
Benefit
for income taxes
|
870
|
3,248
|
736
|
|||||||
Income
(loss) from continuing operations
|
166
|
2,152
|
(11,519
|
)
|
||||||
Discontinued
operations:
|
||||||||||
Income
from discontinued operations
|
-
|
225
|
2,813
|
|||||||
Gain
(loss) on disposal of discontinued operations
|
2,726
|
17,851
|
(183
|
)
|
||||||
Income
tax provision
|
(796
|
)
|
(4,153
|
)
|
(998
|
)
|
||||
Income
from discontinued operations
|
1,930
|
13,923
|
1,632
|
|||||||
Net
income (loss)
|
$
|
2,096
|
$
|
16,075
|
$
|
(9,887
|
)
|
|||
Comprehensive
income (loss):
|
||||||||||
Net
income (loss)
|
$
|
2,096
|
$
|
16,075
|
$
|
(9,887
|
)
|
|||
Foreign
currency translation adjustments
|
-
|
112
|
(8
|
)
|
||||||
Less:
reclassification adjustments for foreign currency
translation
|
||||||||||
adjustments
included in net income (loss)
|
-
|
(1,301
|
)
|
-
|
||||||
Comprehensive
income (loss):
|
$
|
2,096
|
$
|
14,886
|
$
|
(9,895
|
)
|
|||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Basic
earnings (loss) per common share from continuing
operations
|
$
|
0.02
|
$
|
0.19
|
$
|
(1.04
|
)
|
|||
Diluted
earnings (loss) per common share from continuing
operations
|
$
|
0.01
|
$
|
0.17
|
$
|
(1.04
|
)
|
|||
Basic
earnings per common share from discontinued operations
|
$
|
0.16
|
$
|
1.25
|
$
|
0.15
|
||||
Diluted
earnings per common share from discontinued operations
|
$
|
0.16
|
$
|
1.13
|
$
|
0.15
|
||||
Basic
earnings (loss) per common share
|
$
|
0.18
|
$
|
1.44
|
$
|
(0.89
|
)
|
|||
Diluted
earnings (loss) per common share
|
$
|
0.17
|
$
|
1.30
|
$
|
(0.89
|
)
|
|||
Basic
weighted average shares outstanding
|
11,957,756
|
11,177,406
|
11,057,896
|
|||||||
Diluted
weighted average shares outstanding
|
12,206,618
|
12,332,106
|
11,057,896
|
|||||||
See
accompanying notes to consolidated financial
statements
|
Accumulated
|
||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||
Common
Stock
|
Paid-In
|
Deferred
|
Comprehensive
|
Accumulated
|
Shareholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Income
|
Deficit
|
Equity
|
||||||||||||||||
Balances
at June 30, 2003
|
11,086,733
|
$
|
11
|
$
|
48,258
|
$
|
(75
|
)
|
$
|
1,197
|
$
|
(30,648
|
)
|
$
|
18,743
|
|||||||
Repurchase
and retirement of Common
|
||||||||||||||||||||||
Shares
per settlement agreements with
|
||||||||||||||||||||||
former
executive officers
|
(50,500
|
)
|
-
|
(63
|
)
|
-
|
-
|
-
|
(63
|
)
|
||||||||||||
Compensation
expense resulting
|
||||||||||||||||||||||
from
the modification of stock options
|
-
|
-
|
200
|
-
|
-
|
-
|
200
|
|||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
21
|
-
|
-
|
21
|
|||||||||||||||
Foreign
currency translation adjustments
|
-
|
-
|
-
|
-
|
(8
|
)
|
-
|
(8
|
)
|
|||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(9,887
|
)
|
(9,887
|
)
|
|||||||||||||
Balances
at June 30, 2004
|
11,036,233
|
11
|
48,395
|
(54
|
)
|
1,189
|
(40,535
|
)
|
9,006
|
|||||||||||||
Issuance
of Common Shares related
|
||||||||||||||||||||||
to
shareholder settlement agreement
|
228,000
|
-
|
957
|
-
|
-
|
-
|
957
|
|||||||||||||||
Compensation
expense resulting from
|
||||||||||||||||||||||
the
modification of stock options
|
-
|
-
|
41
|
-
|
-
|
-
|
41
|
|||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
21
|
-
|
-
|
21
|
|||||||||||||||
Foreign
currency translation adjustments
|
-
|
-
|
-
|
-
|
(1,189
|
)
|
-
|
(1,189
|
)
|
|||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
16,075
|
16,075
|
|||||||||||||||
Balances
at June 30, 2005
|
11,264,233
|
11
|
49,393
|
(33
|
)
|
-
|
(24,460
|
)
|
24,911
|
|||||||||||||
Issuance
of Common Shares related to
|
||||||||||||||||||||||
shareholder
settlement agreement
|
920,494
|
1
|
2,263
|
-
|
-
|
-
|
2,264
|
|||||||||||||||
Compensation
expense resulting from the
|
||||||||||||||||||||||
modification
of stock options
|
-
|
-
|
16
|
-
|
-
|
-
|
16
|
|||||||||||||||
Compensation
cost associated with
|
||||||||||||||||||||||
SFAS
No. 123R
|
-
|
-
|
1,092
|
-
|
-
|
-
|
1,092
|
|||||||||||||||
SFAS
No. 123R transition expense
|
-
|
-
|
-
|
33
|
-
|
-
|
33
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
2,096
|
2,096
|
|||||||||||||||
Balances
at June 30, 2006
|
12,184,727
|
$
|
12
|
$
|
52,764
|
$
|
-
|
$
|
-
|
$
|
(22,364
|
)
|
$
|
30,412
|
||||||||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss) from continuing operations
|
$
|
166
|
$
|
2,152
|
$
|
(11,519
|
)
|
|||
Adjustments
to reconcile net income (loss) from continuing operations
|
||||||||||
to
net cash provided by operations:
|
||||||||||
Loss
on impairment of long-lived assets, goodwill, and
intangibles
|
-
|
180
|
-
|
|||||||
Depreciation
and amortization expense
|
1,557
|
2,366
|
1,934
|
|||||||
Deferred
income taxes
|
-
|
-
|
3,079
|
|||||||
Stock-based
compensation
|
1,140
|
62
|
221
|
|||||||
Write-off
of inventory
|
681
|
250
|
2,696
|
|||||||
(Gain)
loss on disposal of assets and fixed assets write-offs
|
(237
|
)
|
(12
|
)
|
154
|
|||||
Provision
for doubtful accounts
|
3
|
46
|
24
|
|||||||
Purchase
accounting adjustment
|
-
|
395
|
-
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Accounts
receivable
|
(928
|
)
|
(692
|
)
|
(6,140
|
)
|
||||
Inventories
|
(1,900
|
)
|
15
|
(31
|
)
|
|||||
Prepaid
expenses and other assets
|
45
|
220
|
(296
|
)
|
||||||
Accounts
payable
|
434
|
233
|
399
|
|||||||
Restructuring
charge
|
-
|
110
|
-
|
|||||||
Accrued
liabilities
|
(960
|
)
|
(4,237
|
)
|
2,300
|
|||||
Income
taxes
|
1,345
|
(585
|
)
|
(609
|
)
|
|||||
Deferred
product revenue
|
816
|
(1,052
|
)
|
6,107
|
||||||
Net
change in other assets/liabilities
|
-
|
11
|
1
|
|||||||
Net
cash provided by (used in) continuing operating activities
|
2,162
|
(538
|
)
|
(1,680
|
)
|
|||||
Net
cash provided by discontinued operating activities
|
-
|
168
|
2,764
|
|||||||
Net
cash provided by (used in) operating activities
|
2,162
|
(370
|
)
|
1,084
|
||||||
Cash
flows from investing activities:
|
||||||||||
Restricted
cash
|
-
|
-
|
200
|
|||||||
Purchase
of property and equipment
|
(224
|
)
|
(1,136
|
)
|
(1,685
|
)
|
||||
Proceeds
from the sale of property and equipment
|
230
|
8
|
5
|
|||||||
Purchase
of marketable securities
|
(14,800
|
)
|
(47,100
|
)
|
(3,350
|
)
|
||||
Sale
of marketable securities
|
10,050
|
33,050
|
3,500
|
|||||||
Net
cash used in continuing investing activities
|
(4,744
|
)
|
(15,178
|
)
|
(1,330
|
)
|
||||
Net
cash provided by (used in) discontinued investing
activities
|
1,930
|
14,173
|
(147
|
)
|
||||||
Net
cash (used in) investing activities
|
(2,814
|
)
|
(1,005
|
)
|
(1,477
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Principal
payments on capital lease obligations
|
-
|
(8
|
)
|
(32
|
)
|
|||||
Principal
payments on note payable
|
-
|
(932
|
)
|
(652
|
)
|
|||||
Purchase
and retirement of Common Shares
|
-
|
-
|
(63
|
)
|
||||||
Net
cash used in continuing financing activities
|
-
|
(940
|
)
|
(747
|
)
|
|||||
Net
cash used in discontinued financing activities
|
-
|
-
|
(770
|
)
|
||||||
Net
cash used in financing activities
|
-
|
(940
|
)
|
(1,517
|
)
|
|||||
Net
decrease in cash and cash equivalents
|
(652
|
)
|
(2,315
|
)
|
(1,910
|
)
|
||||
Effect
of foreign exchange rates on cash and cash equivalents
|
-
|
-
|
(7
|
)
|
||||||
Cash
and cash equivalents at the beginning of the year
|
1,892
|
4,207
|
6,124
|
|||||||
Cash
and cash equivalents at the end of the year
|
$
|
1,240
|
$
|
1,892
|
$
|
4,207
|
||||
See
accompanying notes to consolidated financial
statements
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||
Cash
paid for interest
|
$
|
-
|
$
|
104
|
$
|
282
|
||||
Cash
paid (received) for income taxes
|
(1,419
|
)
|
1,117
|
(2,189
|
)
|
|||||
Supplemental
disclosure of non-cash financing activities:
|
||||||||||
Value
of common shares issued in shareholder settlement
|
$
|
2,264
|
$
|
957
|
$
|
-
|
||||
See
accompanying notes to consolidated financial
statements
|
1. |
Organization
- Nature
of Operations
|
2. |
Summary
of Significant Accounting
Policies
|
Description
|
Balance
at
Beginning
of
Period
|
Charged
to
Costs
and
Expenses
|
Deductions
|
Balance
at
End
of
Period
|
|||||||||
Year
ended June 30, 2005
|
$
|
24
|
$
|
46
|
$
|
(24
|
)
|
$
|
46
|
||||
Year
ended June 30, 2006
|
$
|
46
|
$
|
3
|
$
|
-
|
$
|
49
|
Deferred
Revenue
|
Deferred
Cost of Goods Sold
|
Deferred
Gross Profit
|
||||||||
June
30, 2006
|
$
|
5,871
|
$
|
2,817
|
$
|
3,054
|
||||
June
30, 2005
|
5,055
|
2,297
|
2,758
|
|||||||
June
30, 2004
|
6,107
|
2,381
|
3,726
|
Years
Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Balance
at the beginning of year
|
$
|
126
|
$
|
108
|
|||
Accruals/additions
|
356
|
174
|
|||||
Usage
|
(313
|
)
|
(156
|
)
|
|||
Balance
at end of year
|
$
|
169
|
$
|
126
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Numerator:
|
||||||||||
Income
(loss) from continuing operations
|
$
|
166
|
$
|
2,152
|
$
|
(11,519
|
)
|
|||
Income
from discontinued operations, net of tax
|
-
|
173
|
1,747
|
|||||||
Gain
(loss) on disposal of discontinued operations, net of tax
|
1,930
|
13,750
|
(115
|
)
|
||||||
Net
income (loss)
|
$
|
2,096
|
$
|
16,075
|
$
|
(9,887
|
)
|
|||
Denominator:
|
||||||||||
Basic
weighted average shares
|
11,957,756
|
11,177,406
|
11,057,896
|
|||||||
Dilutive
common stock equivalents using treasury stock method
|
248,862
|
1,154,700
|
-
|
|||||||
Diluted
weighted average shares
|
12,206,618
|
12,332,106
|
11,057,896
|
|||||||
Basic
earnings (loss) per common share:
|
||||||||||
Continuing
operations
|
$
|
0.02
|
$
|
0.19
|
$
|
(1.04
|
)
|
|||
Discontinued
operations
|
-
|
0.02
|
0.16
|
|||||||
Disposal
of discontinued operations
|
0.16
|
1.23
|
(0.01
|
)
|
||||||
Net
income (loss)
|
0.18
|
1.44
|
(0.89
|
)
|
||||||
Diluted
earnings (loss) per common share:
|
||||||||||
Continuing
operations
|
$
|
0.01
|
$
|
0.17
|
$
|
(1.04
|
)
|
|||
Discontinued
operations
|
-
|
0.01
|
0.16
|
|||||||
Disposal
of discontinued operations
|
0.16
|
1.12
|
(0.01
|
)
|
||||||
Net
income (loss)
|
0.17
|
1.30
|
(0.89
|
)
|
Years
Ended June 30,
|
|||||||
2005
|
2004
|
||||||
Net
income (loss):
|
|||||||
As
reported
|
$
|
16,075
|
$
|
(9,887
|
)
|
||
Stock-based
employee compensation expense included in
|
|||||||
reported
net loss, net of income taxes
|
13
|
13
|
|||||
Stock-based
employee compensation expense determined
|
|||||||
under
the fair-value method for all awards, net of income taxes
|
(866
|
)
|
(439
|
)
|
|||
Pro
forma
|
$
|
15,222
|
$
|
(10,313
|
)
|
||
Basic
earnings (loss) per common share:
|
|||||||
As
reported
|
$
|
1.44
|
$
|
(0.89
|
)
|
||
Pro
forma
|
1.36
|
(0.93
|
)
|
||||
Diluted
earnings (loss) per common share:
|
|||||||
As
reported
|
$
|
1.30
|
$
|
(0.89
|
)
|
||
Pro
forma
|
1.23
|
(0.93
|
)
|
3. |
Discontinued
Operations
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Income
(loss) from discontinued operations
|
||||||||||
U.S.
audiovisual integration services
|
$
|
-
|
$
|
-
|
$
|
(360
|
)
|
|||
Conferencing
services business
|
-
|
-
|
2,800
|
|||||||
OM
Video
|
-
|
225
|
373
|
|||||||
Total
income from discontinued operations
|
-
|
225
|
2,813
|
|||||||
Gain
(loss) on disposal of discontinued operations
|
||||||||||
U.S.
audiovisual integration services
|
$
|
-
|
$
|
-
|
$
|
(276
|
)
|
|||
Conferencing
services business
|
1,030
|
17,369
|
-
|
|||||||
OM
Video
|
350
|
295
|
-
|
|||||||
Burk
Technology
|
1,346
|
187
|
93
|
|||||||
Total
gain (loss) on disposal of discontinued operations
|
2,726
|
17,851
|
(183
|
)
|
||||||
Income
tax (provision) benefit
|
||||||||||
U.S.
audiovisual integration services
|
$
|
-
|
$
|
-
|
$
|
237
|
||||
Conferencing
services business
|
(301
|
)
|
(3,991
|
)
|
(1,044
|
)
|
||||
OM
Video
|
(102
|
)
|
(119
|
)
|
(156
|
)
|
||||
Burk
Technology
|
(393
|
)
|
(43
|
)
|
(35
|
)
|
||||
Total
income tax (provision) benefit
|
(796
|
)
|
(4,153
|
)
|
(998
|
)
|
||||
Total
income (loss) from discontinued operations, net of income
taxes
|
||||||||||
U.S.
audiovisual integration services
|
$
|
-
|
$
|
-
|
$
|
(399
|
)
|
|||
Conferencing
services business
|
729
|
13,378
|
1,756
|
|||||||
OM
Video
|
248
|
401
|
217
|
|||||||
Burk
Technology
|
953
|
144
|
58
|
|||||||
Total
income from discontinued operations, net of income taxes
|
$
|
1,930
|
$
|
13,923
|
$
|
1,632
|
Year
Ended June 30,
|
||||
2004
|
||||
Revenue
- business services
|
$
|
3,597
|
||
Cost
of goods sold - business services
|
2,648
|
|||
Gross
profit
|
949
|
|||
Marketing
and selling expenses
|
522
|
|||
General
and administrative expenses
|
787
|
|||
Impairment
losses
|
-
|
|||
Loss
before income taxes
|
(360
|
)
|
||
Loss
on disposal of discontinued operations
|
(276
|
)
|
||
Benefit
for income taxes
|
237
|
|||
Loss
from discontinued operations, net of income taxes
|
$
|
(399
|
)
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue
- conferencing services
|
$
|
-
|
$
|
-
|
$
|
15,578
|
||||
Cost
of goods sold - conferencing services
|
-
|
-
|
7,844
|
|||||||
Gross
profit
|
-
|
-
|
7,734
|
|||||||
Marketing
and selling expenses
|
-
|
-
|
3,799
|
|||||||
General
and administrative expenses
|
-
|
-
|
1,036
|
|||||||
Other
expense, net
|
-
|
-
|
99
|
|||||||
Income
before income taxes
|
-
|
-
|
2,800
|
|||||||
Gain
on disposal of discontinued operations
|
1,030
|
17,369
|
-
|
|||||||
Provision
for income taxes
|
(301
|
)
|
(3,991
|
)
|
(1,044
|
)
|
||||
Income
from discontinued operations, net of income taxes
|
$
|
729
|
$
|
13,378
|
$
|
1,756
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue
- business services
|
$
|
-
|
$
|
3,805
|
$
|
5,928
|
||||
Cost
of goods sold - business services
|
-
|
3,038
|
4,052
|
|||||||
Gross
profit
|
-
|
767
|
1,876
|
|||||||
Marketing
and selling expenses
|
-
|
289
|
390
|
|||||||
General
and administrative expenses
|
-
|
253
|
1,113
|
|||||||
Income
before income taxes
|
-
|
225
|
373
|
|||||||
Gain
on disposal of discontinued operations
|
350
|
295
|
-
|
|||||||
Provision
for income taxes
|
(102
|
)
|
(119
|
)
|
(156
|
)
|
||||
Income
from discontinued operations, net of income taxes
|
$
|
248
|
$
|
401
|
$
|
217
|
4. |
Inventories
|
As
of June 30,
|
|||||||
2006
|
2005
|
||||||
Raw
materials
|
$
|
600
|
$
|
1,804
|
|||
Finished
goods
|
3,608
|
1,705
|
|||||
Consigned
inventory
|
2,817
|
2,297
|
|||||
Total
inventory
|
$
|
7,025
|
$
|
5,806
|
5. |
Property
and Equipment
|
Estimated
|
As
of June 30,
|
|||||||||
useful
lives
|
2006
|
2005
|
||||||||
Office
furniture and equipment
|
3
to 10 years
|
$
|
7,458
|
$
|
7,522
|
|||||
Leasehold
improvements
|
2
to 5 years
|
974
|
924
|
|||||||
Manufacturing
and test equipment
|
2
to 10 years
|
1,184
|
1,049
|
|||||||
9,616
|
9,495
|
|||||||||
Accumulated
depreciation and amortization
|
(7,969
|
)
|
(6,690
|
)
|
||||||
Property
and equipment, net
|
$
|
1,647
|
$
|
2,805
|
6. |
Other
Intangible Assets
|
As
of June 30,
|
||||||||||||||||
2006
|
2005
|
|||||||||||||||
Gross
|
Accumulated
|
Gross
|
Accumulated
|
|||||||||||||
Useful
Life
|
Value
|
Amortization
|
Value
|
Amortization
|
||||||||||||
Patents
|
5
years
|
$
|
1,060
|
$
|
(906
|
)
|
$
|
1,060
|
$
|
(738
|
)
|
Years
Ending June 30,
|
||||
2007
|
$
|
154
|
||
Thereafter
|
-
|
|||
Total
estimated amortization expense
|
$
|
154
|
7. |
Leases
|
Years
Ending June 30,
|
||||
2007
|
$
|
646
|
||
2008
|
663
|
|||
2009
|
643
|
|||
2010
and thereafter
|
2,895
|
|||
Total
minimum lease payments
|
$
|
4,847
|
8. |
Note
Payable
|
9. |
Accrued
Liabilities
|
As
of June 30,
|
|||||||
2006
|
2005
|
||||||
Accrued
salaries and other compensation
|
$
|
1,150
|
$
|
977
|
|||
Other
accrued liabilities
|
1,247
|
1,049
|
|||||
Class
action settlement
|
-
|
3,596
|
|||||
Total
|
$
|
2,397
|
$
|
5,622
|
10. |
Commitments
and Contingencies
|
11. |
Shareholders’
Equity
|
12. |
Share-Based
Payment
|
Fiscal
Year Ended
|
|||
June
30,
|
June
30,
|
June
30,
|
|
2006
|
2005
|
2004
|
|
Risk-free
interest rate, average
|
4.4%
|
4.0%
|
3.2%
|
Expected
option life, average
|
5.9
years
|
5.8
years
|
5.2
years
|
Expected
price volatility, average
|
87.2%
|
91.8%
|
91.2%
|
Expected
dividend yield
|
0.0%
|
0.0%
|
0.0%
|
Expected
annual forfeiture rate
|
10.0%
|
0.0%
|
0.0%
|
Year
Ended June 30, 2006
|
|||||||
(in
thousands)
|
|||||||
SFAS
|
|||||||
No.
123R
|
|||||||
Compensation
|
|||||||
As
Reported
|
Expense
|
||||||
Revenue
|
$
|
37,632
|
$
|
-
|
|||
Cost
of goods sold
|
19,284
|
(49
|
)
|
||||
Gross
profit
|
18,348
|
49
|
|||||
Operating
expenses:
|
|||||||
Marketing
and selling
|
7,866
|
(99
|
)
|
||||
Research
and product development
|
8,299
|
(203
|
)
|
||||
General
and administrative
|
5,108
|
(756
|
)
|
||||
Settlement
in shareholders' class action
|
(1,205
|
)
|
-
|
||||
Total
operating expenses
|
20,068
|
(1,058
|
)
|
||||
Operating
loss
|
(1,720
|
)
|
1,107
|
||||
Other
income, net
|
1,016
|
34
|
|||||
Loss
from continuing operations before income taxes
|
(704
|
)
|
1,141
|
||||
Benefit
for income taxes
|
870
|
(264
|
)
|
||||
Income
from continuing operations
|
166
|
877
|
|||||
Income
from discontinued operations, net of tax
|
1,930
|
-
|
|||||
Net
income
|
$
|
2,096
|
$
|
877
|
|||
Basic
earnings (loss) per common share:
|
|||||||
Continuing
operations
|
$
|
0.02
|
$
|
0.07
|
|||
Discontinued
operations
|
0.16
|
-
|
|||||
Net
income
|
0.18
|
0.07
|
|||||
Diluted
earnings (loss) per common share:
|
|||||||
Continuing
operations
|
$
|
0.01
|
$
|
0.07
|
|||
Discontinued
operations
|
0.16
|
-
|
|||||
Net
income
|
0.17
|
0.07
|
Stock
Options
|
Number
of Shares
|
Weighted
Average Exercise Price
|
Weighted
Remaining Contractual Term (years)
|
Aggregate
Intrinsic Value
|
|||||||||
Outstanding
at June 30, 2003
|
1,972,756
|
$
|
6.12
|
||||||||||
Granted
|
1,118,250
|
4.37
|
|||||||||||
Expired
and canceled
|
(813,137
|
)
|
3.47
|
||||||||||
Forfeited
prior to vesting
|
(844,682
|
)
|
5.93
|
||||||||||
Exercised
|
-
|
-
|
|||||||||||
Outstanding
at June 30, 2004
|
1,433,187
|
6.37
|
|||||||||||
Granted
|
450,500
|
4.77
|
|||||||||||
Expired
and canceled
|
(87,600
|
)
|
2.71
|
||||||||||
Forfeited
prior to vesting
|
(302,975
|
)
|
5.88
|
||||||||||
Exercised
|
-
|
-
|
|||||||||||
Outstanding
at June 30, 2005
|
1,493,112
|
6.21
|
|||||||||||
Granted
|
29,000
|
2.63
|
|||||||||||
Expired
and canceled
|
(118,353
|
)
|
3.55
|
||||||||||
Forfeited
prior to vesting
|
(165,839
|
)
|
8.11
|
||||||||||
Exercised
|
-
|
-
|
$
|
-
|
|||||||||
Outstanding
at June 30, 2006
|
1,237,920
|
$
|
6.12
|
5.8
years
|
$
|
135
|
|||||||
Exercisable
|
917,696
|
$ |
6.18
|
5.2
years
|
$
|
90
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price Range
|
Number
of Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Contractual Term (Years)
|
Options
Exercisable
|
Weighted
Average Exercise Price
|
|||||||||||
$0.00
to $4.00
|
592,839
|
$
|
3.38
|
6.2
years
|
461,116
|
$
|
3.39
|
|||||||||
$4.01
to $8.00
|
395,744
|
5.80
|
7.0
years
|
273,379
|
5.87
|
|||||||||||
$8.01
to $12.00
|
89,941
|
11.13
|
3.8
years
|
38,004
|
10.89
|
|||||||||||
$12.01
to $16.00
|
156,961
|
14.23
|
2.2
years
|
143,354
|
14.33
|
|||||||||||
$16.01
to $20.00
|
2,435
|
17.66
|
1.9
years
|
1,843
|
17.60
|
|||||||||||
Total
|
1,237,920
|
$
|
6.12
|
5.8
years
|
917,696
|
$
|
6.18
|
Non-vested
Shares
|
Number
of Shares
|
Weighted
Average Grant Date Fair Value
|
|||||
Non-vested
at June 30, 2005
|
802,400
|
$
|
4.73
|
||||
Granted
|
29,000
|
1.96
|
|||||
Vested
|
(345,337
|
)
|
4.23
|
||||
Forfeited
prior to vesting
|
(165,839
|
)
|
5.93
|
||||
Non-vested
at June 30, 2006
|
320,224
|
$
|
4.39
|
13. |
Significant
Customers
|
Product
Segment Revenues
|
|||
2006
|
2005
|
2004
|
|
Customer
A
|
24.6%
|
28.0%
|
27.4%
|
Customer
B
|
16.6%
|
19.2%
|
18.3%
|
Customer
C
|
15.0%
|
16.0%
|
18.6%
|
Total
|
56.2%
|
63.2%
|
64.3%
|
Gross
Accounts Receivable
|
||
2006
|
2005
|
|
Customer
A
|
19.4%
|
29.4%
|
Customer
B
|
16.1%
|
18.7%
|
Customer
C
|
11.9%
|
13.9%
|
Total
|
47.4%
|
62.0%
|
14. |
Severance
Charges
|
15. |
Retirement
Savings and Profit Sharing Plan
|
16. |
Income
Taxes
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
U.S.
|
$
|
(752
|
)
|
$
|
(1,148
|
)
|
$
|
(12,438
|
)
|
|
Non-U.S.
|
48
|
52
|
183
|
|||||||
$
|
(704
|
)
|
$
|
(1,096
|
)
|
$
|
(12,255
|
)
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Current:
|
||||||||||
U.S.
Federal
|
$
|
770
|
$
|
2,845
|
$
|
3,698
|
||||
U.S.
State
|
102
|
423
|
163
|
|||||||
Non-U.S.
|
(2
|
)
|
(20
|
)
|
(46
|
)
|
||||
Total
current
|
$
|
870
|
$
|
3,248
|
$
|
3,815
|
||||
Deferred:
|
||||||||||
U.S.
Federal
|
(619
|
)
|
(2,236
|
)
|
666
|
|||||
U.S.
State
|
73
|
(337
|
)
|
440
|
||||||
Non-U.S.
|
-
|
-
|
-
|
|||||||
Change
in deferred before valuation allowance
|
(546
|
)
|
(2,573
|
)
|
1,106
|
|||||
Decrease
(increase) in valuation allowance
|
546
|
2,573
|
(4,185
|
)
|
||||||
Total
deferred
|
-
|
-
|
(3,079
|
)
|
||||||
Benefit
for income taxes
|
$
|
870
|
$
|
3,248
|
$
|
736
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
U.S.
federal statutory income tax rate at 34.0 percent
|
$
|
240
|
$
|
373
|
$
|
4,167
|
||||
State
income tax (provision) benefit, net of federal income
|
||||||||||
tax
effect
|
67
|
(3
|
)
|
75
|
||||||
Research
and development credit
|
72
|
188
|
108
|
|||||||
Foreign
earnings or losses taxed at different rates
|
14
|
(3
|
)
|
(10
|
)
|
|||||
Non-deductible
SFAS No. 123R compensation expense
|
(143
|
)
|
-
|
-
|
||||||
Change
in valuation allowance
|
546
|
2,573
|
(4,185
|
)
|
||||||
Valuation
allowance change attributable to state tax impact
|
||||||||||
and
other
|
(105
|
)
|
-
|
436
|
||||||
Non-deductible
items and other
|
179
|
120
|
145
|
|||||||
Benefit
for income taxes
|
$
|
870
|
$
|
3,248
|
$
|
736
|
As
of June 30,
|
|||||||
2006
|
2005
|
||||||
Deferred
income tax assets:
|
|||||||
Deferred
revenue
|
$
|
1,191
|
$
|
1,086
|
|||
Basis
difference in intangible assets
|
885
|
922
|
|||||
Inventory
reserve
|
873
|
757
|
|||||
Net
operating loss carryforwards
|
799
|
786
|
|||||
Accumulated
research and development credits
|
591
|
333
|
|||||
Alternative
minimum tax credits
|
409
|
355
|
|||||
Accrued
liabilities
|
321
|
1,649
|
|||||
Deductible
SFAS No. 123R compensation expense
|
268
|
-
|
|||||
Allowance
for sales returns and doubtful accounts
|
19
|
18
|
|||||
Installment
sale of discontinued operations
|
-
|
172
|
|||||
Other
|
281
|
266
|
|||||
Subtotal
|
5,637
|
6,344
|
|||||
Valuation
allowance
|
(5,369
|
)
|
(5,909
|
)
|
|||
Deferred
income tax assets
|
268
|
435
|
|||||
Deferred
income tax liabilities:
|
|||||||
Difference
in property and equipment basis
|
(268
|
)
|
(435
|
)
|
|||
Deferred
income tax liabilities
|
(268
|
)
|
(435
|
)
|
|||
Net
deferred income tax assets
|
$
|
-
|
$
|
-
|
As
of June 30,
|
|||||||
2006
|
2005
|
||||||
Current
deferred income tax assets
|
$
|
128
|
$
|
270
|
|||
Long-term
deferred income tax assets
|
-
|
-
|
|||||
Current
deferred income tax liabilities
|
-
|
-
|
|||||
Long-term
deferred income tax liabilities
|
(128
|
)
|
(270
|
)
|
|||
Net
deferred income tax assets
|
$
|
-
|
$
|
-
|
17. |
Related-Party
Transactions
|
18. |
Segment
and Geographic Information
|
Years
Ended June 30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
United
States
|
$
|
26,911
|
$
|
23,464
|
$
|
21,654
|
||||
All
other countries
|
10,721
|
8,181
|
6,312
|
|||||||
Total
|
$
|
37,632
|
$
|
31,645
|
$
|
27,966
|
Product
|
Business
Services
|
Total
|
||||||||
2006:
|
||||||||||
Revenue
|
$
|
37,632
|
$
|
-
|
$
|
37,632
|
||||
Gross
profit
|
18,348
|
-
|
18,348
|
|||||||
2005:
|
||||||||||
Revenue
|
$
|
31,645
|
$
|
-
|
$
|
31,645
|
||||
Gross
profit
|
16,694
|
-
|
16,694
|
|||||||
2004:
|
||||||||||
Revenue
|
$
|
27,836
|
$
|
130
|
$
|
27,966
|
||||
Gross
profit
|
11,457
|
130
|
11,587
|
Year
Ended June 30, 2006
|
||||||||||
Product
|
Corporate
|
Total
|
||||||||
Gross
profit
|
$
|
18,348
|
$
|
-
|
$
|
18,348
|
||||
Marketing
and selling expense
|
(7,866
|
)
|
-
|
(7,866
|
)
|
|||||
Research
and product development expense
|
(8,299
|
)
|
-
|
(8,299
|
)
|
|||||
General
and administrative expense
|
-
|
(5,108
|
)
|
(5,108
|
)
|
|||||
Settlement
in shareholders' class action
|
-
|
1,205
|
1,205
|
|||||||
Interest
income
|
-
|
813
|
813
|
|||||||
Other
income (expense), net
|
-
|
203
|
203
|
|||||||
Benefit
for income taxes
|
-
|
870
|
870
|
|||||||
Total
income from continuing operations
|
$
|
2,183
|
$
|
(2,017
|
)
|
$
|
166
|
|||
Depreciation
and amortization expense
|
$
|
1,557
|
$
|
-
|
$
|
1,557
|
||||
Identifiable
assets
|
$
|
16,866
|
$
|
24,539
|
$
|
41,405
|
Year
Ended June 30, 2005
|
||||||||||
Product
|
Corporate
|
Total
|
||||||||
Gross
profit
|
$
|
16,694
|
$
|
-
|
$
|
16,694
|
||||
Marketing
and selling expense
|
(9,070
|
)
|
-
|
(9,070
|
)
|
|||||
Research
and product development expense
|
(5,305
|
)
|
-
|
(5,305
|
)
|
|||||
General
and administrative expense
|
-
|
(5,489
|
)
|
(5,489
|
)
|
|||||
Settlement
in shareholders' class action
|
-
|
2,046
|
2,046
|
|||||||
Impairment
charge (see Note 20)
|
(180
|
)
|
-
|
(180
|
)
|
|||||
Restructuring
charge (see Note 20)
|
(110
|
)
|
-
|
(110
|
)
|
|||||
Interest
income
|
-
|
425
|
425
|
|||||||
Interest
expense
|
-
|
(104
|
)
|
(104
|
)
|
|||||
Other
income (expense), net
|
-
|
(3
|
)
|
(3
|
)
|
|||||
Benefit
for income taxes
|
-
|
3,248
|
3,248
|
|||||||
Total
income from continuing operations
|
$
|
2,029
|
$
|
123
|
$
|
2,152
|
||||
Depreciation
and amortization expense
|
$
|
2,366
|
$
|
-
|
$
|
2,366
|
||||
Identifiable
assets
|
$
|
16,092
|
$
|
21,929
|
$
|
38,021
|
Year
Ended June 30, 2004
|
|||||||||||||
Product
|
Business
Services
|
Corporate
|
Total
|
||||||||||
Gross
profit
|
$
|
11,457
|
$
|
130
|
$
|
-
|
$
|
11,587
|
|||||
Marketing
and selling expense
|
(8,497
|
)
|
-
|
-
|
(8,497
|
)
|
|||||||
Research
and product development expense
|
(4,237
|
)
|
-
|
-
|
(4,237
|
)
|
|||||||
General
and administrative expense
|
-
|
-
|
(6,767
|
)
|
(6,767
|
)
|
|||||||
Settlement
in shareholders' class action
|
-
|
-
|
(4,080
|
)
|
(4,080
|
)
|
|||||||
Interest
income
|
-
|
-
|
52
|
52
|
|||||||||
Interest
expense
|
-
|
-
|
(183
|
)
|
(183
|
)
|
|||||||
Other
income (expense), net
|
-
|
-
|
(130
|
)
|
(130
|
)
|
|||||||
Benefit
for income taxes
|
-
|
-
|
736
|
736
|
|||||||||
Total
income from continuing operations
|
$
|
(1,277
|
)
|
$
|
130
|
$
|
(10,372
|
)
|
$
|
(11,519
|
)
|
||
Depreciation
and amortization expense
|
$
|
1,934
|
$
|
-
|
$
|
-
|
$
|
1,934
|
|||||
Identifiable
assets
|
$
|
17,732
|
$
|
-
|
$
|
9,951
|
$
|
27,683
|
19. |
Closing
of Germany Office
|
20. |
Manufacturing
Transition
|
Severance
|
Manufacturing
Facilities Lease
|
Total
|
||||||||
Balance
at 06/30/2004
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Restructuring
charge
|
70
|
40
|
110
|
|||||||
Utilized
|
-
|
-
|
-
|
|||||||
Balance
at 06/30/2005
|
$
|
70
|
$
|
40
|
$
|
110
|
||||
Utilized
|
(70
|
)
|
(107
|
)
|
(177
|
)
|
||||
Sublease
payments received
|
-
|
110
|
110
|
|||||||
Balance
at 06/30/2006
|
$
|
-
|
$
|
43
|
$
|
43
|
21. |
Subsequent
Events (Unaudited)
|
1
|
DEFINITIONS
|
2
|
2
|
LEASE
GRANT
|
5
|
3
|
ADJUSTMENT
OF COMMENCEMENT OF DATE/POSSESSION
|
5
|
4
|
USE
|
6
|
5
|
BASE
RENTAL
|
7
|
6
|
INTENTIONALLY
DELETED
|
7
|
7
|
SERVICES
TO BE FURNISHED BY LANDLORD
|
8
|
8
|
LEASEHOLD
IMPROVEMENTS/TENANT’S PROPERTY
|
9
|
9
|
SIGNAGE
|
9
|
10
|
REPAIRS
AND ALTERATIONS
|
10
|
11
|
USE
OF ELECTRICAL SERVICES BY TENANT
|
10
|
12
|
ENTRY
BY LANDLORD
|
10
|
13
|
ASSIGNMENT
AND SUBLETTING
|
11
|
14
|
MECHANICS
LIENS
|
11
|
15
|
INSURANCE
|
11
|
16
|
INDEMNITY
|
12
|
17
|
CASUALTY
DAMAGE
|
13
|
18
|
CONDEMNATION
|
13
|
19
|
HAZARDOUS
SUBSTANCES
|
14
|
20
|
AMERICANS
WITH DISABILITIES ACT
|
15
|
21
|
EVENTS
OF DEFAULT
|
15
|
22
|
REMEDIES
|
16
|
23
|
NO
WAIVER
|
19
|
24
|
PEACEFUL
ENJOYMENT
|
19
|
25
|
HOLDING
OVER
|
19
|
26
|
SUBORDINATION
TO MORTGAGE/ESTOPPEL CERTIFICATE
|
20
|
27
|
NOTICE
|
20
|
28
|
SURRENDER
OF PREMISES
|
21
|
29
|
RIGHTS
RESERVED TO LANDLORD
|
21
|
30
|
MISCELLANEOUS
|
21
|
31
|
ENTIRE
AGREEMENT
|
23
|
32
|
LIMITATION
OF LIABILITY
|
23
|
33
|
EXPANSION
RIGHTS
|
23
|
Period
|
Annual
Base Rent
|
Monthly
Installments
of
Base Rent
|
November
2006 - December 2006
|
$00.00
|
$00.00
|
January
2007 - October 2007
|
$498,836.25
|
$49,883.63
|
November
2007 - October 2008
|
$614,561.61
|
$51,380.13
|
November
2008 - October 2009
|
$635,058.45
|
$52,921.54
|
November
2009 - October 2010
|
$654,110.21
|
$54,509.18
|
November
2010 - October 2011
|
$673,733.51
|
$56,144.46
|
November
2011 - October 2012
|
$693,945.52
|
$57,828.79
|
November
2012 - October 2013
|
$714,763.88
|
$59,563.66
|
November
2013 - December 2013
|
$122,701.14
|
$61,350.57
|
(1)
|
Tenant’s
failure to furnish information in accordance with the Work Letter
Agreement or to respond to any request by Landlord for any approval
of
information within any time period prescribed, or if no time period
is
prescribed, then within two (2) Business Days of such request;
or
|
(2)
|
Tenant’s
insistence on materials, finishes or installations that have long
lead
times after having first been informed by Landlord that such materials,
finishes or installations will cause a Delay;
or
|
(3)
|
Material
changes in any plans and specifications requested by Tenant;
or
|
(4)
|
The
performance or nonperformance by a person or entity employed by on
or
behalf of Tenant in the completion of any work in the Premises (all
such
work and such persons or entities being subject to prior approval
of
Landlord); or
|
(5)
|
Any
request by Tenant that Landlord delay the completion of any of the
Landlord’s Work; or
|
(6)
|
Any
breach or default by Tenant in the performance of Tenant’s obligations
under this Lease; or
|
(7)
|
Any
delay resulting from Tenant’s having taken possession of the Premises for
any reason prior to substantial completion of the Landlord’s Work;
or
|
(8)
|
Any
other delay reasonably chargeable to Tenant, its agents, employees
or
independent contractors;
|
(1)
|
Water
for use in the lavatories on the floor(s) on which the Premises is
located
and in the break room and shower in the Premises.
|
(2)
|
Central
heat and air conditioning in season during Normal Business Hours,
at such
temperatures and in such amounts as are commercially reasonable
for
buildings of similar class, size, age and location, or as required
by
governmental authority. In the event that Tenant requires central
heat,
ventilation or air conditioning service at times other than Normal
Business Hours, such additional service shall be furnished only
upon the
written request of Tenant delivered to Landlord prior to 3:00
p.m. at
least one Business Day in advance of the date for which such
usage is
requested. Tenant shall bear the cost of additional service determined
to
be $45.00 per hour as Additional Rent upon presentation of a
statement
therefore by
Landlord.
|
(3)
|
Maintenance
and repair of all Common Areas in the manner and to the extent reasonably
deemed by Landlord to be standard for buildings of similar class,
age and
location.
|
(4)
|
Janitorial
and cleaning service in and about the Premises on Business Days.
Tenant
shall not provide or use any other janitorial or cleaning services
without
Landlord’s consent, and then only subject to the supervision of Landlord
and at Tenant’s sole cost and responsibility and by a janitor, cleaning
contractor or employees at all times reasonably satisfactory to
Landlord.
|
(5)
|
Electricity
to the Premises for general office use, in accordance with and subject
to
the terms and conditions of Section 11 of this
Lease.
|
(6)
|
Fluorescent
bulb replacement in the Premises necessary to maintain building standard
the lighting as established by Landlord and fluorescent and incandescent
bulb and ballast replacement in the Premises, Common Areas and Service
Areas.
|
(7)
|
Passenger
elevator service in common with Landlord and other persons and freight
elevator service in common with the Landlord and other persons.
|
(8)
|
Provided
Tenant and its employees will be allowed access to the Premises at
all
times, day or night, access control to the Building during other
than
Normal Business Hours shall be provided in such form as Landlord
reasonably deems appropriate. Tenant shall
|
(1)
|
Bodily
injury and Property Damage Liability insurance with a combined single
limit for bodily injury and property damage of not less than $1,000,000
per occurrence/$2,000,000 annual aggregate per
person.
|
(2)
|
Fire
and Extended Coverage Insurance, including vandalism and malicious
mischief coverage, in an amount equal to the full replacement value
of all
fixtures, furniture and improvements installed by or at the expense
of
Tenant.
|
(1)
|
Any
written notice of release of hazardous wastes or substances, pollutants
or
contaminants on the Property that is provided by Tenant or any subtenant
or other occupant if the Premises to a governmental or regulatory
agency;
|
(2)
|
Any
notice of a violation, or a potential or alleged violation, of any
Environmental Law (hereinafter defined) that is received by Tenant
or any
subtenant or other occupant of the Premises from any governmental
or
regulatory agency;
|
(3)
|
Any
inquiry, investigation, enforcement, cleanup, removal, or other action
that is instituted or threatened by a governmental or regulatory
agency
against Tenant or any subtenant or other occupant of the Premises
and that
relates to the release or discharge of hazardous wastes or substances,
pollutants or contaminants on or from the
Property;
|
(4)
|
Any
claim that is instituted or threatened by any third-party against
Tenant
or any subtenant or other occupant of the Premises and that relates
to any
release or discharge of hazardous wastes or substances, pollutants
or
contaminants on or from the Property;
and
|
(5)
|
Any
notice of the loss of any environmental operating permit by Tenant
or any
subtenant or other occupant of the
Premises.
|
(1)
|
Tenant
shall fail to pay when due any Base Rent, Additional Rent or other
amount
payable by Tenant to Landlord under this Lease, which failure is
not cured
within five (5) days after written notice to Tenant of such default
(hereinafter sometimes referred to as a "Monetary
Default").
|
(2)
|
Any
failure by Tenant (other than a Monetary Default) to comply with
any term,
provision or covenant of this Lease, which failure is not cured within
thirty (30) days after delivery to Tenant of notice of the occurrence
of
such failure provided,
however, that if the term, condition, covenant or obligation to be
performed by Tenant is of such nature that the same cannot reasonably
be
performed within such thirty-day period, such default shall be deemed
to
have been cured if Tenant commences such performance within said
thirty-day period and thereafter diligently undertakes to complete
the
same, and in fact, completes same within sixty (60) days after
notice.
|
(3)
|
Any
failure by Tenant to observe or perform any of the covenants with
respect
to (a) assignment and subletting set forth in Section 13, (b) mechanic’s
liens set forth in Section 14, or (c) insurance set forth in Section
15.
|
(4)
|
Tenant
shall (a) become insolvent, (b) make a transfer in fraud of creditors
(c)
make an assignment for the benefit of creditors, (d) admit in writing
its
inability to pay its debts as they become due, (e) file a petition
under
any section or chapter of the United States Bankruptcy Code, as amended,
pertaining to bankruptcy, or under any similar law or statute of
the
United States or any State thereof, or Tenant or any Guarantor shall
be
adjudged bankrupt or insolvent in proceedings filed against Tenant
or any
Guarantor thereunder; or a petition or answer proposing the adjudication
of Tenant or any Guarantor as a bankrupt or its reorganization under
any
present or future federal or state bankruptcy or similar law shall
be
filed in any court and such petition or answer shall not be discharged
or
denied within sixty (60) days after the filing
thereof.
|
(5)
|
A
receiver or trustee shall be appointed for all or substantially all
of the
assets of Tenant or of the Premises or of any of Tenant's property
located
thereon in any proceeding brought by Tenant, or any such receiver
or
trustee shall be appointed in any proceeding brought
|
(6)
|
The
leasehold estate hereunder shall be taken on execution or other process
of
law in any action against Tenant.
|
(7)
|
Tenant
shall abandon or vacate any substantial portion of the Premises and
discontinues paying Rent.
|
(8)
|
The
liquidation, termination, dissolution, forfeiture of right to do
business
of Tenant, which termination, dissolution or forfeiture is not cured
within five (5) days after receipt of written notice to
Tenant.
|
(9)
|
Landlord
fails to perform any Landlord obligation under this Lease and such
failure
is not cured within thirty (30) days after delivery to Landlord of
notice
of the occurrence of such failure provided,
however, that if the term, condition, covenant or obligation to be
performed by Landlord is of such nature that the same cannot reasonably
be
performed within such thirty-day period, such default shall be deemed
to
have been cured if Landlord commences such performance within said
thirty-day period and thereafter diligently undertakes to complete
the
same, and in fact, completes same within sixty (60) days after notice.
If
a default by Landlord materially interferes with Tenant’s use of the
Premises, Tenant shall provide written notice of such default and
Tenant’s
intent to remedy such default, and if Landlord does not thereafter
remedy
such default within five (5) days after such notice, Tenant may remedy
such default and Landlord shall reimburse Tenant for the reasonable
cost
of such remedy.
|
(1)
|
Notify
Tenant in writing of such default and if Tenant does not remedy such
default within a reasonable period of time, Landlord may re-enter
the
Premises and cure any default of Tenant, in which event Tenant shall,
upon
demand, reimburse Landlord as Additional Rent for any reasonable
cost and
expenses which Landlord may incur to cure such
default;
|
(2)
|
Landlord
may terminate this Lease by giving to Tenant notice of Landlord's
election
to do so, in which event the Term shall end, and all right, title
and
interest of Tenant hereunder shall expire, on the date stated in
such
notice;
|
(3)
|
Landlord
may terminate the right of Tenant to possession of the Premises without
terminating this Lease by giving notice to Tenant that Tenant's right
to
possession shall end on the date stated in such notice, whereupon
the
right of Tenant to possession of the Premises or any part thereof
shall
cease on the date stated in such notice;
and
|
(4)
|
Landlord
may enforce the provisions of this Lease and may enforce and protect
the
rights of Landlord hereunder by a suit or suits in equity or at law
for
the specific performance of any covenant or agreement contained herein,
or
for the enforcement of any other appropriate legal or equitable remedy,
including recovery of all moneys due or to become due from Tenant
under
any of the provisions of this
Lease.
|
(1)
|
Subject
to Landlord’s obligations under the laws of the state of Utah to mitigate
damages, Landlord shall have no obligations to solicit or entertain
negotiations with any other prospective tenants for the Premises
until
Landlord obtains full and complete posses-sion of the Premises including,
without limitation, the final and unappealable legal right to relet
the
Premises free of any claim of
Tenant;
|
(2)
|
Landlord
shall not be obligated to lease or show the Premises, on a priority
basis,
offer the Premises to a prospective tenant when other premises in
the
Building suitable for that prospective tenant's use are
available;
|
(3)
|
Landlord
shall not be obligated to lease the Premises to a Substitute Tenant
for a
Rent less than the current fair market Rent then prevailing for similar
uses in comparable buildings in the same market area as the Building,
nor
shall Landlord be obligated to enter into a new lease under other
terms
and conditions that are reasonably unacceptable to Landlord under
Landlord's then current leasing policies for comparable space in
the
Building;
|
(4)
|
Landlord
shall not be obligated to enter into a lease with a Substitute Tenant
whose use would:
|
(i)
|
violate
any restriction, covenant, or requirement contained in the lease
of
another tenant of the Building;
|
(ii)
|
adversely
affect the reputation of the Building;
or
|
(iii) |
be
incompatible with the operation of the Building as an office
building;
|
(5)
|
Landlord
shall not be obligated to enter into a lease with any proposed Substitute
Tenant which does not have, in Landlord's reasonable opinion, sufficient
financial resour-ces to operate the Premises in a first class manner;
and
|
(6)
|
Landlord
shall not be required to expend any amount of money to alter, remodel,
or
otherwise make the Premises suitable for use by a proposed Substitute
Tenant unless:
|
(i)
|
Tenant
pays any such sum to Landlord in advance of Landlord's execution
of a
lease with such tenant (which payment shall not be in lieu of any
damages
or other sums to which Landlord may be entitled as a result of Tenant's
default under this Lease); or
|
(ii)
|
Landlord,
in Landlord's reasonable discretion, determines that any such expenditure
is financially justified in connection with entering into any such
substitute lease.
|
WITNESS/ATTEST
By:
/s/ Clarissa Dacanay
Name:
Clarissa Dacanay
Title:
|
LANDLORD:
Edgewater Corporate Park LLC, a Delaware limited liability
company
By:
/s/ Roderick Maribojoc
Name:
Roderick Maribojoc
Title:
Vice President
|
WITNESS/ATTEST
By:
/s/ Craig E. Peeples
Name:
Craig E. Peeples
Title:
Interim Chief Financial Officer
|
TENANT:
ClearOne Communications, a Utah corporation
By:
/s/ Zee Hakimoglu
Name:
Zee Hakimoglu
Title:
President and Chief Executive
officer
|
1. |
I
have reviewed this annual report of ClearOne Communications, Inc.
on Form
10-K;
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
c) |
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting.
|
5. |
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a) |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
September 14, 2006
|
/s/
Zeynep Hakimoglu
|
|
Zeynep
Hakimoglu
President,
Chief Executive Officer, and
Director
|
1. |
I
have reviewed this annual report of ClearOne Communications, Inc.
on Form
10-K;
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
c) |
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting.
|
5. |
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a) |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
September 14, 2006
|
/s/
Craig E. Peeples
|
|
Craig
E. Peeples
Interim
Chief Financial Officer
|
Date:
September 14, 2006
|
/s/
Zeynep Hakimoglu
|
|
Zeynep
Hakimoglu
President,
Chief Executive Officer, and Director
(Principal
Executive
Officer)
|
Date:
September 14, 2006
|
/s/
Craig E. Peeples
|
|
Craig
E. Peeples
Interim
Chief Financial Officer
(Principal
Financial and Accounting
Officer)
|