10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2018
	or
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period _______ to _______

Commission file number:001-33660

 

CLEARONE, INC.

(Exact name of registrant as specified in its charter)

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)

+1 (801) 975-7200

(Registrant’s telephone number, including area code)

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ] 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Larger Accelerated Filer [  ]	Accelerated Filer [X]
Non-Accelerated Filer [  ] (Do not check if a smaller reporting company)	Smaller Reporting Company [  ]
Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

The number of shares of ClearOne common stock outstanding as of June 15, 2018 was 8,301,273.

CLEARONE, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2018

INDEX

	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	2
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2017	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	4
	Unaudited Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	19
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.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	20

1

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value)

	March 31, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	5,577		$	5,571
Marketable securities		3,132			2,689
Receivables, net of allowance for doubtful accounts of $491 and $472, respectively		6,247			7,794
Inventories, net		14,622			14,415
Distributor channel inventories		—			1,555
Prepaid expenses and other assets		1,963			1,862
Total current assets		31,541			33,886
Long-term marketable securities		7,416			10,349
Long-term inventories, net		8,565			8,708
Property and equipment, net		1,481			1,549
Intangibles, net		7,640			6,543
Deferred income taxes		7,227			6,531
Other assets		316			311
Total assets	$	64,186		$	67,877
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,295		$	4,122
Accrued liabilities		1,975			1,843
Deferred product revenue		282			4,635
Total current liabilities		6,552			10,600
Deferred rent		81			103
Other long-term liabilities		679			607
Total liabilities		7,312			11,310
Shareholders' equity:
Common stock, par value $0.001, 50,000,000 shares authorized, 8,301,273 and 8,319,022 shares issued and outstanding		8			8
Additional paid-in capital		47,612			47,464
Accumulated other comprehensive loss		(113	)		(65	)
Retained earnings		9,367			9,160
Total shareholders' equity		56,874			56,567
Total liabilities and shareholders' equity	$	64,186		$	67,877

See accompanying notes

2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands, except per share amounts)

	Three months ended March 31,
	2018			2017
Revenue	$	7,289		$	11,678
Cost of goods sold		3,190			5,000
Gross profit		4,099			6,678
Operating expenses:
Sales and marketing		2,868			2,741
Research and product development		2,056			2,357
General and administrative		1,617			2,106
Total operating expenses		6,541			7,204
Operating loss		(2,442	)		(526	)
Other income, net		24			102
Loss before income taxes		(2,418	)		(424	)
Provision for (benefit from) income taxes		(572	)		44
Net loss	$	(1,846	)	$	(468	)
Basic weighted average shares outstanding		8,307,125			8,768,112
Diluted weighted average shares outstanding		8,307,125			8,768,112
Basic loss per share	$	(0.22	)	$	(0.05	)
Diluted loss per share	$	(0.22	)	$	(0.05	)
Comprehensive loss:
Net loss		(1,846	)		(468	)
Unrealized gain (loss) on available-for-sale securities, net of tax		(70	)		38
Change in foreign currency translation adjustment		22			12
Comprehensive loss		(1,894	)		(418	)

See accompanying notes

3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share amounts)

	Three months ended March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(1,846	)	$	(468	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		380			402
Amortization of deferred rent		—			(17	)
Stock-based compensation expense		137			171
Provision for (recoveries of) doubtful accounts, net		18			(2	)
Change of inventory to net realizable value		255			(34	)
Tax benefit from exercise of stock options		—			(2	)
Deferred income taxes		(696	)		25
Changes in operating assets and liabilities:
Receivables		1,545			169
Inventories		(319	)		(2,766	)
Prepaid expenses and other assets		(108	)		(136	)
Accounts payable		172			1,361
Accrued liabilities		110			145
Income taxes payable		3			(215	)
Deferred product revenue		(22	)		4
Other long-term liabilities		72			—
Net cash used in operating activities		(299	)		(1,363	)
Cash flows from investing activities:
Purchase of property and equipment		(62	)		(181	)
Purchase of intangibles		(62	)		(56	)
Capitalized patent defense costs		(1,283	)		—
Proceeds from maturities and sales of marketable securities		3,304			1,906
Purchases of marketable securities		(884	)		(2,437	)
Net cash provided by (used in) investing activities		1,013			(768	)
Cash flows from financing activities:
Net proceeds from equity-based compensation programs		11			28
Dividend payments		(583	)		(439	)
Repurchase and cancellation of stock		(147	)		(928	)
Net cash used in financing activities		(719	)		(1,339	)
Effect of exchange rate changes on cash and cash equivalents		11			9
Net increase (decrease) in cash and cash equivalents		6			(3,461	)
Cash and cash equivalents at the beginning of the period		5,571			12,100
Cash and cash equivalents at the end of the period	$	5,577		$	8,639

See accompanying notes

4

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share amounts)

The following is a summary of supplemental cash flow activities:

	Three months ended March 31,
	2018		2017
Cash paid for income taxes	$	62	$	1

See accompanying notes

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

1. Business Description, Basis of Presentation and Significant Accounting Policies

Business Description:

ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and network streaming solutions. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.

Basis of Presentation:

The fiscal year for ClearOne is the 12 months ending on December 31. The consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are not audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2018 and December 31, 2017, the results of operations for the three months ended March 31, 2018 and 2017, and the cash flows for the three months ended March 31, 2018 and 2017. The results of operations for the three months ended March 31, 2018 and 2017 are not necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC.

Significant Accounting Policies:

The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2017. There have been no changes to these policies during the three months ended March 31, 2018 that are of significance or potential significance to the Company except for the change in revenue recognition policy described below.

Adoption of New Revenue Standard: On January 1, 2018, as required, the Company adopted ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), ASU No. 2015-14 - Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), ASU No. 2016-08 - Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”), ASU No. 2016-10 - Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), ASU No. 2016-12 - Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) and ASU No. 2016-20 - Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”) (collectively “the New Revenue Standard”). To conform to the New Revenue Standard, the Company modified its revenue recognition policy as described further below.

Change in Accounting Policy: On January 1, 2018, the Company adopted the New Revenue Standard using the modified retrospective method, applying the guidance to all open contracts and recognized an adjustment to increase retained earnings by $2,783, reduce deferred product revenue by $4,338 and reduce distributor channel inventories by $1,555 as of that date. The comparative financial information has not been restated and continues to be presented under the accounting standards in effect for the respective periods. The Company applied the practical expedient and has not disclosed the revenue allocated to future shipments of partially completed contracts.

Prior to our change in accounting policy, revenue from product sales to distributors was not recognized until the return privilege had expired or until it can be determined with reasonable certainty that the return privilege had expired, which approximated when the product was sold-through to customers of our distributors (dealers, system integrators, value-added resellers, and end-users), rather than when the product was initially shipped to a distributor. At each quarter-end, we evaluated the inventory in the distribution channel through information provided by our distributors. The level of inventory in the channel fluctuated up or down each quarter based upon our distributors’ individual operations. Accordingly, each quarter-end deferral of revenue and associated cost of goods sold were calculated and recorded based upon the actual channel inventory reported at quarter-end. Further, with respect to distributors and other channel partners not reporting the channel inventory, the revenue and associated cost of goods sold were deferred until we received payment for the product sales made to such distributors or channel partners.

6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

After the change in the accounting policy, substantially all of the Company’s revenue is recognized following the transfer of control of the products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. During the quarter ended March 31, 2018, revenue decreased by $852 due to the impact of the adoption of the New Revenue Standard.

Revenue Recognition Policy: The Company generates revenue from sales of its audio and video conferencing equipment to distributors, system integrators and value-added resellers. The Company also generates revenue, to a much lesser extent, from sale of software and licenses to distributors, system integrators, value-added resellers and end-users. The Company recognizes revenue when it satisfies a performance obligation in an amount reflecting the consideration to which it expects to be entitled. For sales agreements, the Company has identified the promise to transfer products, each of which are distinct, to be the performance obligation. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied. Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty and supply, but typically do not require mandatory purchase commitments. In the absence of a sales agreement, the Company’s standard terms and conditions at the time of acceptance of purchase orders apply. The Company considers the customer purchase orders, governed by sales agreements or the Company’s standard terms and conditions, to be the contract with the customer. The Company evaluates certain factors including the customer’s ability to pay (or credit risk).

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. Sales to distributors, are typically made pursuant to agreements that provide return rights with respect to discontinued or slow-moving products, referred to as stock rotation. Sales to distributors can also be subject to price adjustment on certain products, primarily for distributors with drop-shipping rights. Although payment terms vary, most distributor agreements require payment within 45 days of invoicing.

The Company recognizes revenue when it satisfies a performance obligation. The Company recognizes revenue from sales agreements upon transferring control of a product to the customer. This typically occurs when products are shipped or delivered, depending on the delivery terms, or when products that are consigned at customer locations are sold to dealers or end users. Revenue recognized during the quarter ended March 31, 2018 for equipment sales was $7,109 and for software and licenses was $180. Sales returns and allowances are estimated based on historical experience. Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenues are recognized, and are netted against revenues. For returns, the Company recognizes a related asset for the right to recover returned products with a corresponding reduction to cost of goods sold. The Company reviews warranty and related claims activity and records provisions, as necessary.

Frequently, the Company receives orders with multiple delivery dates that may extend across reporting periods. Since each delivery constitutes a performance obligation, the Company allocates the transaction price of the contract to each performance obligation based on the stand-alone selling price of the products. The Company invoices the customer for each delivery upon shipment and recognizes revenues in accordance with delivery terms. Although payment terms vary, distributors typically pay within 45 days of invoicing and dealers pay within 30 days of invoicing. As scheduled delivery dates are within one year, revenue allocated to future shipments of partially completed contracts are not disclosed.

The Company has elected to record freight and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost and include it in cost of revenues. Taxes assessed by government authorities on revenue-producing transactions, including value-added and excise taxes, are presented on a net basis (excluded from revenues) in the Consolidated Statements of Operations and Comprehensive Income. 

7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Recent Accounting Pronouncements:

In February 2016, the FASB released ASU No. 2016-02, Leases (Topic 842) to bring transparency to lessee balance sheets. The ASU will require organizations that lease assets (lessees) to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The standard will apply to both types of leases-capital (or finance) leases and operating leases. Previously, GAAP has required only capital leases to be recognized on lessee balance sheets. The standard is effective for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2018. Early application will be permitted for all organizations. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

In August 2016, the FASB released ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 became effective for the Company on January 1, 2018. ASU 2016-15 had no material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The new guidance provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The accounting standard update became effective for the Company on January 1, 2018. ASU 2017-09 did not have any material impact on our consolidated financial statements.

2. Revenue Information

The following table disaggregates the Company’s revenue into primary product groups:

	Three months ended March 31, 2018
Professional audio products	$	4,933
Unified Communications end points		1,036
Video products		1,320
	$	7,289

The following table disaggregates the Company’s revenue into major regions:

	Three months ended March 31, 2018
North and South America	$	4,346
Asia (including Middle East) and Australia		2,038
Europe and Africa		906
	$	7,289

3. Earnings (Loss) Per Share

Earnings (loss) per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options are considered to be potential common stock. The computation of diluted earnings (loss) per share does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Basic earnings (loss) per common share is the amount of net earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted earnings (loss) per common share is the amount of earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

	Three months ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,846	)	$	(468	)
Denominator:
Basic weighted average shares outstanding		8,307,125			8,768,112
Dilutive common stock equivalents using treasury stock method		—			—
Diluted weighted average shares outstanding		8,307,125			8,768,112
Basic loss per common share	$	(0.22	)	$	(0.05	)
Diluted loss per common share	$	(0.22	)	$	(0.05	)
Weighted average options outstanding		748,078			847,731
Anti-dilutive options not included in the computations		748,078			847,731

4. Marketable Securities

The Company has classified its marketable securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity until realized. Gains and losses on marketable security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities at March 31, 2018 and December 31, 2017 were as follows:

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
March 31, 2018
Available-for-sale securities:
Corporate bonds and notes	$	6,040	$	5	$	(73	)	$	5,972
Municipal bonds		4,613		0		(37	)		4,576
Total available-for-sale securities	$	10,653	$	5	$	(110	)	$	10,548

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
December 31, 2017
Available-for-sale securities:
Corporate bonds and notes	$	8,458	$	19	$	(49	)	$	8,428
Municipal bonds		4,637		1		(28	)		4,610
Total available-for-sale securities	$	13,095	$	20	$	(77	)	$	13,038

 Maturities of marketable securities classified as available-for-sale securities were as follows at March 31, 2018:

	Amortized cost		Estimated fair value
March 31, 2018
Due within one year	$	3,145	$	3,132
Due after one year through five years		7,508		7,416
Total available-for-sale securities	$	10,653	$	10,548

9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Debt securities in an unrealized loss position as of March 31, 2018 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality. Management believes that it is more likely than not that the securities will receive a full recovery of par value, although there can be no assurance that such recovery will occur. The available-for-sale marketable securities with continuous gross unrealized loss position for less than 12 months and 12 months or greater and their related fair values were as follows:

	Less than 12 months					More than 12 months					Total
(In thousands)	Estimated fair value		Gross unrealized holding losses			Estimated fair value		Gross unrealized holding losses			Estimated fair value		Gross unrealized holding losses
As of March 31, 2018
Corporate bonds and notes	$	3,106	$	(30	)	$	2,282	$	(43	)	$	5,388	$	(73	)
Municipal bonds		3,197		(28	)		670		(9	)		3,867		(37	)
Total	$	6,303	$	(58	)	$	2,952	$	(52	)	$	9,255	$	(110	)

5. Intangible Assets

Intangible assets as of March 31, 2018 and December 31, 2017 consisted of the following:

	Estimated useful lives (years)			March 31, 2018			December 31, 2017
Tradename	5	to	7	$	555		$	555
Patents and technological know-how		10			9,923			8,578
Proprietary software	3	to	15		2,981			2,981
Other	3	to	5		323			323
Total intangible assets					13,782			12,437
Accumulated amortization					(6,142	)		(5,894	)
Total intangible assets, net				$	7,640		$	6,543

The amortization of intangible assets for the three months ended March 31, 2018 and 2017 was as follows:

	Three months ended March 31,
	2018		2017
Amortization of intangible assets	$	248	$	238

The estimated future amortization expense of intangible assets is as follows:

Years ending December 31,		Amount
2018 (Remainder)	$	750
2019		925
2020		746
2021		746
2022		746
Thereafter		3,727
Total		7,640

10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

6. Inventories

Inventories, net of reserves, as of March 31, 2018 and December 31, 2017 consisted of the following:

	As of
	March 31, 2018		December 31, 2017
Current:
Raw materials	$	2,204	$	197
Finished goods		12,418		14,218
	$	14,622	$	14,415
Long-term:
Raw materials	$	2,453	$	2,682
Finished goods		6,112		6,026
	$	8,565	$	8,708

Long-term inventory represents inventory held in excess of our current (next 12 months) requirements based on our recent sales and forecasted level of sales. We expect to sell the above inventory, net of reserves, at or above the stated cost and believe that no loss will be incurred on its sale, although there can be no assurance of the timing or amount of any sales.

Current finished goods did not include distributor channel inventories in the amounts of approximately $1,555 as of December 31, 2017. Distributor channel inventories represented inventories at distributors and other customers where revenue recognition criteria had not yet been achieved.

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory during the three months ended March 31, 2018 was $255. During the three months ended March 31, 2017 benefit from the reduction of reserves for valuation of inventory at lower of cost or market value was $34.

7. Share-based Compensation

Employee Stock Option Plans

The Company’s share-based incentive plans offering stock options are offered under the Company’s 2007 Equity Incentive Plan (the “2007 Plan”), which was restated and approved by the shareholders on December 12, 2015. Provisions of the restated 2007 Plan include the granting of up to 2,000,000 incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. Options may be granted to employees, officers, non-employee directors and other service providers and may be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion. As of March 31, 2018, there were 744,936 options outstanding under the 2007 Plan. As of March 31, 2018, the 2007 Plan had 749,158 authorized unissued options.

A summary of the stock option activity under the Company’s plans for the nine months ended March 31, 2018 is as follows:

	Number of shares			Weighted average exercise price
Options outstanding at beginning of year		764,430		$	8.78
Granted		—			—
Less:
Exercised		—			—
Forfeited prior to vesting		(18,012	)		10.84
Canceled or expired		(1,482	)		11.00
Options outstanding at March 31, 2018		744,936			8.72
Options exercisable at end of March 31, 2018		550,509		$	8.02

11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

As of March 31, 2018, the total remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was approximately $632, which will be recognized over a weighted average period of 1.63 years.

Share-based compensation expense has been recorded as follows:

	Three months ended March 31,
	2018		2017
Cost of goods sold	$	5	$	8
Sales and marketing		10		14
Research and product development		30		38
General and administrative		92		111
	$	137	$	171

8. Shareholders’ Equity

Stock Repurchase Program

On March 9, 2016, the Board of Directors of the Company authorized the repurchase of up to $10,000 of the Company’s outstanding shares of common stock under a stock repurchase program. In connection with the repurchase authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. The transactions effectuated to date occurred in open market purchases.

On March 1, 2017, the Board of Directors of the Company renewed and extended the repurchase program for up to an additional $10,000 of common stock over the next twelve months. In connection with the repurchase extension authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. The transactions effectuated to date occurred in open market purchases.

During the three months ended March 31, 2018, we acquired the following shares of common stock under the stock repurchase program authorized by the Board of Directors in March 2016 and renewed and extended in March 2017:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Jan 2018		8,652	$	8.57		8,652
February 2018		7,019		8.26		7,019
March 2018		1,878		8.02		1,878
Total		17,549		8.39		17,549

Upon expiry of this repurchase program in March 2018, the program was not renewed again.

Cash Dividends

On February 21, 2018, the Company declared a cash dividend of $0.07 per share of ClearOne common stock. The dividend was paid on March 21, 2018 to shareholders of record as of March 7, 2018. On June 13, 2018, the Company announced the suspension of its dividend program.

12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

9. Fair Value Measurements

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 - Quoted prices in active markets for identical assets and liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. This category generally includes U.S. Government and agency securities; municipal securities; mutual funds and securities sold and not yet settled.

Level 3 - Unobservable inputs.

The substantial majority of the Company’s financial instruments are valued using observable inputs. The following table sets forth the fair value of the financial instruments re-measured by the Company as of March 31, 2018 and December 31, 2017:

	Level 1		Level 2		Level 3		Total
March 31, 2018
Corporate bonds and notes	$	-	$	5,972	$	-	$	5,972
Municipal bonds		-		4,576		-		4,576
Total	$	-	$	10,548	$	-	$	10,548

	Level 1		Level 2		Level 3		Total
December 31, 2017
Corporate bonds and notes	$	-	$	8,428	$	-	$	8,428
Municipal bonds		-		4,610		-		4,610
Total	$	-	$	13,038	$	-	$	13,038

10. Income Taxes

The Company’s forecasted effective tax benefit rate at March 31, 2018 is 27.0%, a 16.2% increase from the 10.8% effective tax rate recorded at December 31, 2017. The 16.2% increase is primarily due to the enactment in 2017 of the Tax Cuts and Jobs act, which resulted in a lower corporate tax rate and a revaluation of the Company's net deferred tax assets. The forecasted effective tax benefit rate of 27.0% excludes jurisdictions for which no benefit from forecasted current year losses is anticipated. Including losses from such jurisdictions results in a forecasted effective tax benefit rate of 26.0%. Our forecasted effective tax rate could fluctuate significantly on a quarterly basis and could change, to the extent that earnings in countries with tax rates that differ from that of the U.S. differ from amounts anticipated at March 31, 2018.

After a discrete tax expense of $62, the effective tax benefit rate for the quarter ended March 31, 2018 is 23.7%. The discrete tax expense of $62 is primarily attributable to changes in income tax reserves related to an income tax audit in Hong Kong.

11. Subsequent Events

On June 13, 2018, the Company announced suspension of its quarterly cash dividend program.

13

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this report, other than statements of historical fact, are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are based upon reasonable assumptions at the time made, there can be no assurance that any such expectations or any forward-looking statement will prove to be correct. Our actual results will vary, and may vary materially, from those projected or assumed in the forward-looking statements. Future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not anticipate, including, without limitation, product recalls and product liability claims; infringement of our technology or assertion that our technology infringes the rights of other parties; termination of supplier relationships, or failure of suppliers to perform; inability to successfully manage growth; delays in obtaining regulatory approvals or the failure to maintain such approvals; concentration of our revenue among a few customers, products or procedures; development of new products and technology that could render our products obsolete; market acceptance of new products; introduction of products in a timely fashion; price and product competition, availability of labor and materials, cost increases, and fluctuations in and obsolescence of inventory; volatility of the market price of our common stock; foreign currency fluctuations; changes in key personnel; work stoppage or transportation risks; integration of business acquisitions; and other factors referred to in our reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2017. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017.

BUSINESS OVERVIEW

ClearOne is a global market leader enabling conferencing, collaboration, and network streaming solutions. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.

We derive most of our revenue from professional audio conferencing products by promoting our products in the professional audio-visual channel. We have extended our total addressable market from installed audio conferencing market to adjacent complementary markets – microphones, video collaboration and networked audio and video streaming. We have achieved this through strategic technological acquisitions as well as by internal product development.

During the three months ended March 31, 2018, we were awarded four more patents related to video synchronization, speech technology, integrated microphone array and ceiling or wall tile and echo cancellation with beamforming microphone array.

During the three months ended March 31, 2018, we continued our serious litigation efforts to stop infringement of two of our strategic patents. We introduced a new ceiling microphone array product line and made improvements to our VIEW Pro and Converge Pro 2 product lines. We have also been focusing on company wide cost cutting programs and to speed up product development that we believe will enable us to surpass our competitors.

Overall revenue declined in the three months ended March 31, 2018 when compared to the three months ended March 31, 2017, with declines seen in all product categories. Our gross profit margin decreased to 56% during the three months ended March 31, 2018 from 57% for the three months ended March 31, 2017. Gross profit margin decrease was primarily due to increase in inventory obsolescence costs and decline in licensing revenues.

Industry conditions

We operate in a very dynamic and highly competitive industry which is dominated on the one hand by a few players with respect to certain products like traditional video conferencing appliances while on the other influenced heavily by a fragmented reseller market consisting of numerous regional and local players. The industry is also characterized by the influx of venture capitalist funded start-ups and private companies keen to win market share even at the expense of mounting financial losses.

14

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Economic conditions, challenges and risks

The audio-visual products market is characterized by intense competition and rapidly evolving technology. Our competitors vary within each product category. The adoption of Beamforming Microphone Array 2, along with our Converge Pro 2, our new platform for professional audio conferencing, remains challenged in large part because of our competitors’ product offering that directly infringes our strategic patents. The patent infringement has also affected revenue from ClearOne’s other products like wireless microphones and ceiling microphones.

Our revenues in the near term may also be adversely affected by the resignation of a large US distributor in June 2018.

Our strength in professional audio visual space is largely due to our industry leading conferencing technologies and the full suite of professional microphone products, especially Beamforming Microphone Arrays. Despite our strong leadership position in the professional audio communications products market, we face challenges to revenue growth due to the limited size of the market and pricing pressures from new competitors attracted to the commercial market.

Revenue from our video products in the overall revenue mix has been improving on the back of a strong growth for our video products in 2016 that had continued in 2017. We face intense competition in this market from well-established market leaders as well as emerging players rich with marketing funds. We expect our strategy of combining Spontania, our cloud-based video conferencing product, Collaborate, our appliance based media collaboration product and our high-end audio conferencing technology to provide growth in revenue in the near future. We believe we are also well positioned to capitalize on the continuing migration away from the traditional hardware based video conferencing systems to software based video conferencing applications.

We derive a large portion of our revenue (about 49%) from international operations and expect this trend to continue in the future. Most of our revenue from outside the U.S. is billed in US Dollars and is not exposed to any significant currency risk.

A detailed discussion of our results of operations follows below.

Results of Operations for the three months ended March 31, 2018

The following table sets forth certain items from our unaudited condensed consolidated statements of operations (dollars in thousands) for the three months ended March 31, 2018 (“2018-Q1”) and 2017 (“2017-Q1”), respectively, together with the percentage of total revenue which each such item represents:

	Three months ended March 31,
	2018			2017			Percentage Change 2018 vs 2017
Revenue	$	7,289		$	11,678			-38	%
Cost of goods sold		3,190			5,000			-36	%
Gross profit		4,099			6,678			-39	%
Sales and marketing		2,868			2,741			5	%
Research and product development		2,056			2,357			-13	%
General and administrative		1,617			2,106			-23	%
Operating loss		(2,442	)		(526	)		-364	%
Other income, net		24			102			76	%
Loss before income taxes		(2,418	)		(424	)		-470	%
Provision for (benefit from) income taxes		(572	)		44			1400	%
Net loss	$	(1,846	)	$	(468	)		-294	%

15

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenue

Our revenue decreased by $4.4 million, or 38%, to $7.3 million in 2018-Q1 compared to $11.7 million in 2017-Q1. All product categories witnessed revenue declines with revenue declines of 43%, 23% and 20% for professional audio conferencing, unified communication end points and video products, respectively. The decline in revenue from professional audio conferencing products was mostly due to slower adoption of our Converge Pro 2 platform, largely caused by our competitors’ product offering that we believe directly infringes our strategic patents and due to a decline in licensing revenue. The share of professional audio communications products (which includes microphone products but not premium products) in our product mix declined from 74% in 2017-Q1 to 68% in 2018-Q1. Share of video products in the revenue increased from 14% in 2017-Q1 to 18% in 2018-Q1 and share of UC end points in the revenue increased from 12% in 2017-Q1 to 14% in 2018-Q1. During 2018-Q1, revenue declined across all regions except Canada and Australia. The revenue declines for Asia Pacific including Middle East, Europe and Africa, and Americas were 28%, 16% and 44%, respectively.

Costs of Goods Sold and Gross Profit

Cost of goods sold (“COGS”) includes expenses associated with finished goods purchased from outsourced manufacturers, the manufacture of our products (including material and direct labor), our manufacturing and operations organization, property and equipment depreciation, warranty expense, freight expense, royalty payments, and the allocation of overhead expenses.

Our gross profit for 2018-Q1 was approximately $4.1 million or 56% compared to approximately $6.7 million, or 57%, for 2017-Q1. Gross margin for 2018-Q1 declined due to increased inventory obsolescence costs and the decline in licensing revenues.

Our profitability in the near-term continues to depend significantly on our revenues from professional audio conferencing products. We hold long-term inventory and if we are unable to sell our long-term inventory, our profitability might be affected by inventory write-offs and price mark-downs.

Operating Expenses

Operating expenses include sales and marketing (“S&M”) expenses, research and product development (“R&D”) expenses and general and administrative (“G&A”) expenses. Total operating expenses were $6.5 million for 2018-Q1 compared to $7.2 million for 2017-Q1. The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.

Sales and Marketing - S&M expenses include selling, customer service, and marketing expenses such as employee-related costs, allocations of overhead expenses, trade shows, and other advertising and selling expenses.

S&M expenses for 2018-Q1 increased to $2.9 million from $2.7 million for 2017-Q1. The increase was mainly due to increase in marketing expenses related to tradeshows and increases in inventories used for customer demonstrations.

Research and Product Development - R&D expenses include research and development, product line management, engineering services, and test and application expenses, including employee related costs, outside services, expensed materials, depreciation, and an allocation of overhead expenses.

R&D expenses were approximately $2.1 million for 2018-Q1, as compared to $2.4 million for 2017-Q1. The decrease was primarily due to reductions in project related expenses and employee costs related to salaries and benefits.

General and Administrative - G&A expenses include employee-related costs, professional service fees, allocations of overhead expenses, litigation costs, and corporate administrative costs, including costs related to finance and human resources.

G&A expenses decreased approximately 23% to $1.6 million for 2018-Q1 compared with approximately $2.1 million in 2017-Q1. The reduction was primarily due to the decrease in legal costs and employee costs related to salaries and benefits. Legal expenses in 2018-Q1 reduced mostly because of capitalization of legal costs related to our defense of strategic patents from infringement amounting to $1.3 million. No legal expenses were capitalized in 2017-Q1.

16

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other income (expense), net

Other income (expense), net, includes interest income, interest expense, and foreign currency changes.

Other income reduced in 2018-Q1 due to reduction in interest income caused by decline in the investment holdings and due to higher realized losses on liquidated investments.

Provision for income taxes

During 2018-Q1, we accrued income taxes at the forecasted effective tax benefit rate of 27.0% as compared to the forecasted effective tax rate of 30.9% used during 2017-Q1. The 3.9% decrease in the forecasted effective tax rate was primarily due to a reduction in corporate tax rates as a result of the enactment of the Tax Cuts and Jobs Act, offset by a decrease in forecasted full-year income. In addition, a discrete tax expense of $62 thousand is primarily attributable to changes in income tax reserves related to an income tax audit in Hong Kong.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2018, our cash and cash equivalents were approximately $5.6 million with no material change from December 31, 2017. Our working capital was $24.9 million and $23.3 million as of March 31, 2018 and December 31, 2017, respectively.

Net cash used in operating activities was approximately $0.3 million for the three months ended March 31, 2018, a decrease of cash used of approximately $1.1 million from $1.4 million of cash used in operating activities in the three months ended March 31, 2017. The increase was primarily due to an increase in cash inflows due to change in operating assets and liabilities of $2.9 million partially offset by an increase in net loss by $1.4 million and a decrease in non-cash charges of $0.4 million.

Net cash provided by investing activities was $1.0 million for the three months ended March 31, 2018 compared to net cash flows used by investing activities of $0.8 million during the three months ended March 31, 2018, an increase in cash provided of $1.8 million. The increase was primarily due to a decrease in net purchases of marketable securities of approximately $3.0 million, partially offset by $1.3 million in capitalization of patent defense costs.

Capitalization of patent defense costs. We capitalize external legal costs incurred in the defense of our patents when we believe that a significant, discernible increase in value will result from the defense and a successful outcome of the legal action is probable. When we capitalize patent defense costs we amortize the costs over the remaining estimated useful life of the patent, which is 15 to 17 years. During the three months ended March 31, 2018 we spent $1.3 million of legal costs related to the defense of our patents and capitalized the entire amount.

Net cash used in financing activities was approximately $0.7 million during the three months ended March 31, 2018, which consisted of cash outflows of $0.6 million on repurchase and cancellation of stock and $0.1 million for dividend payments. Net cash used in financing activities was approximately $1.3 million during the three months ended March 31, 2017, which consisted of cash outflows of $0.9 million on repurchase and cancellation of stock and stock options and $0.4 million for dividend payments.

We are currently pursuing all available legal remedies to defend our strategic patents from infringement. We have already spent about $5.1 million from 2016 through March 31, 2018 towards this litigation and may be required to spend more to continue our legal defense. We have been actively engaged in preserving cash by suspending our dividend program, allowing the share repurchase program to expire and implementing company-wide cost reduction measures. In addition, we expect to generate additional cash as our inventory levels are brought down to historical levels. We also believe that the measures taken by us will yield higher revenues in the future. We believe all of these and effective management of working capital will provide the liquidity needed to meet our short-term and long-term operating requirements and finance our growth plans. We also believe that our strong portfolio of intellectual property and our solid brand equity in the market will enable us to raise additional capital if and when needed to meet our short and long-term financing needs. In addition to capital expenditures, we may use cash in the near future for selective infusions of technology, sales and marketing, infrastructure, and other investments to fuel our growth.

At March 31, 2018, we had open purchase orders related to our electronics manufacturing service providers of approximately $3.0 million, primarily related to inventory purchases.

At March 31, 2018, we had inventory totaling $23.2 million, of which non-current inventory accounted for $8.6 million. This compares to total inventories of $24.7 million and non-current inventory of $8.7 million as of December 31, 2017.

17

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance-sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, results of operations or liquidity.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our results of operations and financial position are based upon our unaudited consolidated financial statements included under Item 1 of this Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the United States. We review the accounting policies used in reporting our financial results on a regular basis. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. Except with respect to our revenue recognition practices included in Note 1. “Business Description, Basis of Presentation and Significant Accounting Policies” under Item 1 of this Form 10-Q, there have been no changes to the critical accounting policies as explained in our 2017 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 3: “Recent Accounting Pronouncements” in the notes to our unaudited consolidated financial statements included under Item 1 of this Form 10-Q.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.     CONTROLS AND PROCEDURES

An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2018 was performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Principal Financial and Accounting Officer. Based upon this evaluation, our Chief Executive Officer and Senior Vice President of Finance concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2018 due to the material weakness in internal control over financial reporting as described below.

Management identified a material weakness in the operating effectiveness of internal control over financial reporting relating to the accurate and timely reporting of its financial results and disclosures and its testing and assessment of the design and effectiveness of internal controls over financial reporting in a timely manner. 

To address the material weakness, management is working with our third party internal controls consultant to assist with the implementation of a remediation plan which will supplement the existing controls. The remediation plan will include an assessment of personnel levels and responsibilities, additional training of financial reporting personnel and ability to handle new requirements and projects on a timely basis with respect to the preparation of the consolidated financial statements and public company reporting requirements and timelines. The material weakness will be fully remediated when, in the opinion of management, the control processes have been operating for a sufficient period of time to provide reasonable assurance as to their effectiveness. The remediation and ultimate resolution of the material weakness will be reviewed with the Audit Committee of the Board of Directors.

Except as noted above, there has been no change in the Company's internal control over financial reporting as of March 31, 2018, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

18

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

There have been no material developments in the legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 1A. RISK FACTORS

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) Not applicable.

(c) On March 9, 2016, the Board of Directors of the Company authorized the repurchase of up to $10 million of the Company’s outstanding shares of common stock under a stock repurchase program. In connection with the repurchase authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. The repurchase program may be suspended or discontinued at any time without prior notice. The transactions effectuated to date occurred in open market purchases.

On March 1, 2017, the Board of Directors of the Company renewed and extended the repurchase program for up to an additional $10 million of common stock over the next twelve months. In connection with the repurchase extension authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. The transactions effectuated to date occurred in open market purchases.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in $ millions)
Jan 2018		8,652	$	8.57		8,652	$	5.6
February 2018		7,019		8.26		7,019		5.5
March 2018		1,878		8.02		1,878		—
Total		17,549		8.39		17,549

Upon expiry of this repurchase program in March 2018, the program was not renewed again.

19

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

Not applicable.

Item 6. EXHIBITS

Exhibit No.	Title of Document
31.1	Section 302 Certification of Chief Executive Officer (filed herewith)
31.2	Section 302 Certification of Principal Financial Officer (filed herewith)
32.1	Section 906 Certification of Chief Executive Officer (filed herewith)
32.2	Section 906 Certification of Principal Financial Officer (filed herewith)
101.INS	XBRL Instance Document (filed herewith)
101.SCH	XBRL Taxonomy Extension Schema (filed herewith)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF	XBRL Taxonomy Extension Definitions Linkbase (filed herewith)
101.LAB	XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

20

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ClearOne, Inc., (Registrant)
	By:	/s/ Zeynep Hakimoglu
June 20, 2018		Zeynep Hakimoglu President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
	By:	/s/ Narsi Narayanan
June 20, 2018		Narsi Narayanan Senior Vice President of Finance (Principal Accounting and Principal Financial Officer)

21

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Zeynep Hakimoglu, certify that:

1.	I have reviewed this quarterly report of ClearOne, Inc. on Form 10-Q;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Zeynep Hakimoglu
June 20, 2018		Zeynep Hakimoglu Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Narsi Narayanan, certify that:

1.	I have reviewed this quarterly report of ClearOne, Inc. on Form 10-Q;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Narsi Narayanan
June 20, 2018		Narsi Narayanan Senior Vice President of Finance (Principal Accounting and Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. Section 1350,

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Zeynep Hakimoglu, certify, to my best knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ClearOne, Inc. on Form 10-Q for the quarter ended March 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ClearOne, Inc.

	By:	/s/ Zeynep Hakimoglu
June 20, 2018		Zeynep Hakimoglu Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C. Section 1350,

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Narsi Narayanan, certify, to my best knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ClearOne, Inc. on Form 10-Q for the quarter ended March 31, 2018, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ClearOne, Inc.

	By:	/s/ Narsi Narayanan
June 20, 2018		Narsi Narayanan Senior Vice President of Finance (Principal Accounting and Principal Financial Officer)

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Jun. 15, 2018
Document Information [Line Items]
Entity Registrant Name	CLEARONE INC
Entity Central Index Key	0000840715
Trading Symbol	clro
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		8,301,273
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 5,577	$ 5,571
Marketable securities	3,132	2,689
Receivables, net of allowance for doubtful accounts of $491 and $472, respectively	6,247	7,794
Inventories, net	14,622	14,415
Distributor channel inventories		1,555
Prepaid expenses and other assets	1,963	1,862
Total current assets	31,541	33,886
Long-term marketable securities	7,416	10,349
Long-term inventories, net	8,565	8,708
Property and equipment, net	1,481	1,549
Intangibles, net	7,640	6,543
Deferred income taxes	7,227	6,531
Other assets	316	311
Total assets	64,186	67,877
Current liabilities:
Accounts payable	4,295	4,122
Accrued liabilities	1,975	1,843
Deferred product revenue	282	4,635
Total current liabilities	6,552	10,600
Deferred rent	81	103
Other long-term liabilities	679	607
Total liabilities	7,312	11,310
Shareholders' equity:
Common stock, par value $0.001, 50,000,000 shares authorized, 8,301,273 and 8,319,022 shares issued and outstanding	8	8
Additional paid-in capital	47,612	47,464
Accumulated other comprehensive loss	(113)	(65)
Retained earnings	9,367	9,160
Total shareholders' equity	56,874	56,567
Total liabilities and shareholders' equity	$ 64,186	$ 67,877

XML

Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Allowance for doubtful accounts	$ 491	$ 472
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	8,301,273	8,319,022
Common stock, shares outstanding (in shares)	8,301,273	8,319,022

XML

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue	$ 7,289	$ 11,678
Cost of goods sold	3,190	5,000
Gross profit	4,099	6,678
Operating expenses:
Sales and marketing	2,868	2,741
Research and product development	2,056	2,357
General and administrative	1,617	2,106
Total operating expenses	6,541	7,204
Operating loss	(2,442)	(526)
Other income, net	24	102
Loss before income taxes	(2,418)	(424)
Provision for (benefit from) income taxes	(572)	44
Net loss	$ (1,846)	$ (468)
Basic weighted average shares outstanding (in shares)	8,307,125	8,768,112
Diluted weighted average shares outstanding (in shares)	8,307,125	8,768,112
Basic loss per share (in dollars per share)	$ (0.22)	$ (0.05)
Diluted loss per share (in dollars per share)	$ (0.22)	$ (0.05)
Comprehensive loss:
Net loss	$ (1,846)	$ (468)
Unrealized gain (loss) on available-for-sale securities, net of tax	(70)	38
Change in foreign currency translation adjustment	22	12
Comprehensive loss	$ (1,894)	$ (418)

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net loss	$ (1,846)	$ (468)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	380	402
Amortization of deferred rent		(17)
Stock-based compensation expense	137	171
Provision for (recoveries of) doubtful accounts, net	18	(2)
Change of inventory to net realizable value	255	(34)
Tax benefit from exercise of stock options		(2)
Deferred income taxes	(696)	25
Changes in operating assets and liabilities:
Receivables	1,545	169
Inventories	(319)	(2,766)
Prepaid expenses and other assets	(108)	(136)
Accounts payable	172	1,361
Accrued liabilities	110	145
Income taxes payable	3	(215)
Deferred product revenue	(22)	4
Other long-term liabilities	72
Net cash used in operating activities	(299)	(1,363)
Cash flows from investing activities:
Purchase of property and equipment	(62)	(181)
Purchase of intangibles	(62)	(56)
Capitalized patent defense costs	(1,283)
Proceeds from maturities and sales of marketable securities	3,304	1,906
Purchases of marketable securities	(884)	(2,437)
Net cash provided by (used in) investing activities	1,013	(768)
Cash flows from financing activities:
Net proceeds from equity-based compensation programs	11	28
Dividend payments	(583)	(439)
Repurchase and cancellation of stock	(147)	(928)
Net cash used in financing activities	(719)	(1,339)
Effect of exchange rate changes on cash and cash equivalents	11	9
Net increase (decrease) in cash and cash equivalents	6	(3,461)
Cash and cash equivalents at the beginning of the period	5,571	12,100
Cash and cash equivalents at the end of the period	5,577	8,639
Cash paid for income taxes	$ 62	$ 1

XML

Note 1 - Business Description, Basis of Presentation and Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1.

Business Description, Basis of Presentation and Significant Accounting Policies

Business Description:

ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and network streaming solutions. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.

Basis of Presentation:

The fiscal year for ClearOne is the

12

months ending on

December 31.

The consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are

not

audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of

March 31, 2018

and

December 31, 2017,

the results of operations for the

three

months ended

March 31, 2018

and

2017,

and the cash flows for the

three

months ended

March 31, 2018

and

2017.

The results of operations for the

three

months ended

March 31, 2018

and

2017

 are

not

necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form

10

-K for the year ended

December 31, 2017 

filed with the SEC.

Significant Accounting Policies:

The significant accounting policies were described in Note

1

to the audited consolidated financial statements included in the Company’s annual report on Form

10

-K for the year ended

December 31, 2017.

There have been

no

changes to these policies during the

three

months ended

March 31, 2018

that are of significance or potential significance to the Company except for the change in revenue recognition policy described below.

Adoption of New Revenue Standard:

On

January 

1,

2018,

as required, the Company adopted ASU

No.

 

2014

-

09

 - Revenue from Contracts with Customers (Topic

606

) (“ASU 

2014

-

09”

), ASU

No.

 

2015

-

14

 - Revenue from Contracts with Customers (Topic

606

): Deferral of the Effective Date (“ASU 

2015

-

14”

), ASU

No.

 

2016

-

08

 - Revenue from Contracts with Customers (Topic

606

): Principal versus Agent Considerations (“ASU 

2016

-

08”

), ASU

No.

 

2016

-

10

 - Revenue from Contracts with Customers (Topic

606

): Identifying Performance Obligations and Licensing (“ASU 

2016

-

10”

), ASU

No.

 

2016

-

12

 - Revenue from Contracts with Customers (Topic

606

): Narrow-Scope Improvements and Practical Expedients (“ASU 

2016

-

12”

) and ASU

No.

 

2016

-

20

 - Technical Corrections and Improvements to Topic

606,

Revenue from Contracts with Customers” (“ASU 

2016

-

20”

) (collectively “the New Revenue Standard”). To conform to the New Revenue Standard, the Company modified its revenue recognition policy as described further below.

Change in Accounting Policy:

On

January 

1,

2018,

the Company adopted the New Revenue Standard using the modified retrospective method, applying the guidance to all open contracts and recognized an adjustment to increase retained earnings by

$2,783,

reduce deferred product revenue by

$4,338

and reduce distributor channel inventories by

$1,555

as of that date. The comparative financial information has

not

been restated and continues to be presented under the accounting standards in effect for the respective periods. The Company applied the practical expedient and has

not

disclosed the revenue allocated to future shipments of partially completed contracts.

Our accounting policy before this change is described below. Revenue from product sales to distributors was

not

recognized until the return privilege had expired or until it can be determined with reasonable certainty that the return privilege had expired, which approximated when the product was sold-through to customers of our distributors (dealers, system integrators, value-added resellers, and end-users), rather than when the product was initially shipped to a distributor. At each quarter-end, we evaluated the inventory in the distribution channel through information provided by our distributors. The level of inventory in the channel fluctuated up or down each quarter based upon our distributors’ individual operations. Accordingly, each quarter-end deferral of revenue and associated cost of goods sold were calculated and recorded based upon the actual channel inventory reported at quarter-end. Further, with respect to distributors and other channel partners

not

reporting the channel inventory, the revenue and associated cost of goods sold were deferred until we received payment for the product sales made to such distributors or channel partners.

Now, after the change in the accounting policy, substantially all of the Company’s revenue is recognized following the transfer of control of the products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. During the quarter ended

March 

30,

2018,

revenue decreased by

$852

 due to the impact of the adoption of the New Revenue Standard.

Revenue Recognition Policy:

The Company generates revenue from sales of its audio and video conferencing equipment to distributors, system integrators and value-added resellers. The Company also generates revenue, to a much lesser extent, from sale of software and licenses to distributors, system integrators, value-added resellers and end-users. The Company recognizes revenue when it satisfies a performance obligation in an amount reflecting the consideration to which it expects to be entitled. For sales agreements, the Company has identified the promise to transfer products, each of which are distinct, to be the performance obligation. The Company applies a

five

-step approach in determining the amount and timing of revenue to be recognized: (

1

) identifying the contract with a customer, (

2

) identifying the performance obligations in the contract, (

3

) determining the transaction price, (

4

) allocating the transaction price to the performance obligations in the contract and (

5

) recognizing revenue when the performance obligation is satisfied. Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty and supply, but typically do

not

require mandatory purchase commitments. In the absence of a sales agreement, the Company’s standard terms and conditions at the time of acceptance of purchase orders apply. The Company considers the customer purchase orders, governed by sales agreements or the Company’s standard terms and conditions, to be the contract with the customer. The Company evaluates certain factors including the customer’s ability to pay (or credit risk).

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. Sales to distributors, are typically made pursuant to agreements that provide return rights with respect to discontinued or slow-moving products, referred to as stock rotation. Sales to distributors can also be subject to price adjustment on certain products, primarily for distributors with ship and credit rights. Although payment terms vary, most distributor agreements require payment within

45

days of invoicing.

The Company recognizes revenue when it satisfies a performance obligation. The Company recognizes revenue from sales agreements upon transferring control of a product to the customer. This typically occurs when products are shipped or delivered, depending on the delivery terms, or when products that are consigned at customer locations are sold to dealers or end users. Revenue recognized during the quarter ended

March 

31,

2018

for equipment sales was

$7,109

 and for software and licenses was

$180.

Sales returns and allowances are estimated based on historical experience. Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenues are recognized, and are netted against revenues. For returns, the Company recognizes a related asset for the right to recover returned products with a corresponding reduction to cost of goods sold. The Company reviews warranty and related claims activity and records provisions, as necessary.

Frequently, the Company receives orders with multiple delivery dates that

may

extend across reporting periods. Since each delivery constitutes a performance obligation, the Company allocates the transaction price of the contract to each performance obligation based on the stand-alone selling price of the products. The Company invoices the customer for each delivery upon shipment and recognizes revenues in accordance with delivery terms. Although payment terms vary, distributors typically pay within

45

days of invoicing and dealers pay within

30

days of invoicing. As scheduled delivery dates are within

one

year, revenue allocated to future shipments of partially completed contracts are

not

disclosed.

The Company has elected to record freight and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost and include it in cost of revenues. Taxes assessed by government authorities on revenue-producing transactions, including value-added and excise taxes, are presented on a net basis (excluded from revenues) in the Consolidated Statements of Operations and Comprehensive Income.

Recent Accounting Pronouncements:

In

February 2016,

the FASB released ASU

No.

2016

-

02,

Leases (Topic

842

) to bring transparency to lessee balance sheets. The ASU will require organizations that lease assets (lessees) to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than

12

months. The standard will apply to both types of leases-capital (or finance) leases and operating leases. Previously, GAAP has required only capital leases to be recognized on lessee balance sheets. The standard is effective for fiscal years beginning after

December 15, 2018

and interim periods within fiscal years beginning after

December 15, 2018.

Early application will be permitted for all organizations. The Company has

not

yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

In

August 2016,

the FASB released ASU

No.

2016

-

15,

Classification of Certain Cash Receipts and Cash Payments, which addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice. ASU

2016

-

15

became effective for the Company on

January 1, 2018.

ASU

2016

-

15

had

no

material impact on our consolidated financial statements.

In

May 2017,

the FASB issued ASU

No.

2017

-

09,

Compensation-Stock Compensation (Topic

718

): Scope of Modification Accounting. The new guidance provides clarity and reduces both (

1

) diversity in practice and (

2

) cost and complexity when applying the guidance in Topic

718,

Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The accounting standard update became effective for the Company on

January 1, 2018.

ASU

2017

-

09

did

not

have any material impact on our consolidated financial statements.

XML

Note 2 - Revenue Information

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

2.

Revenue Information

The following table disaggregates the Company’s revenue into primary product groups:

	Three months ended March 31, 2018
Professional audio products	$	4,933
Unified Communications end points		1,036
Video products		1,320
	$	7,289

The following table disaggregates the Company’s revenue into major regions:

	Three months ended March 31, 2018
North and South America	$	4,346
Asia (including Middle East) and Australia		2,038
Europe and Africa		906
	$	7,289

XML

Note 3 - Earnings (Loss) Per Share

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

3

. Earnings (Loss) Per Share

Earnings (loss) per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options are considered to be potential common stock. The computation of diluted earnings (loss) per share does

not

assume exercise or conversion of securities that would have an anti-dilutive effect.

Basic earnings (loss) per common share is the amount of net earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted earnings (loss) per common share is the amount of earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect.

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

	Three months ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,846	)	$	(468	)
Denominator:
Basic weighted average shares outstanding		8,307,125			8,768,112
Dilutive common stock equivalents using treasury stock method		—			—
Diluted weighted average shares outstanding		8,307,125			8,768,112
Basic loss per common share	$	(0.22	)	$	(0.05	)
Diluted loss per common share	$	(0.22	)	$	(0.05	)
Weighted average options outstanding		748,078			847,731
Anti-dilutive options not included in the computations		748,078			847,731

XML

Note 4 - Marketable Securities

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

4

. Marketable Securities

The Company has classified its marketable securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity until realized. Gains and losses on marketable security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities at

March 31, 2018

and

December 31, 2017

were as follows:

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
March 31, 2018
Available-for-sale securities:
Corporate bonds and notes	$	6,040	$	5	$	(73	)	$	5,972
Municipal bonds		4,613		0		(37	)		4,576
Total available-for-sale securities	$	10,653	$	5	$	(110	)	$	10,548

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
December 31, 201 7
Available-for-sale securities:
Corporate bonds and notes	$	8,458	$	19	$	(49	)	$	8,428
Municipal bonds		4,637		1		(28	)		4,610
Total available-for-sale securities	$	13,095	$	20	$	(77	)	$	13,038

 Maturities of marketable securities classified as available-for-sale securities were as follows at

March 31, 2018:

	Amortized cost		Estimated fair value
March 31, 2018
Due within one year	$	3,145	$	3,132
Due after one year through five years		7,508		7,416
Total available-for-sale securities	$	10,653	$	10,548

Debt securities in an unrealized loss position as of

March 31, 2018

were

not

deemed impaired at acquisition and subsequent declines in fair value are

not

deemed attributed to declines in credit quality. Management believes that it is more likely than

not

that the securities will receive a full recovery of par value, although there can be

no

assurance that such recovery will occur. The available-for-sale marketable securities with continuous gross unrealized loss position for less than

12

months and

12

months or greater and their related fair values were as follows:

	Less than 12 months					More than 12 months					Total
(In thousands)	Estimated fair value		Gross unrealized holding losses			Estimated fair value		Gross unrealized holding losses			Estimated fair value		Gross unrealized holding losses
As of March 31, 2018
Corporate bonds and notes	$	3,106	$	(30	)	$	2,282	$	(43	)	$	5,388	$	(73	)
Municipal bonds		3,197		(28	)		670		(9	)		3,867		(37	)
Total	$	6,303	$	(58	)	$	2,952	$	(52	)	$	9,255	$	(110	)

XML

Note 5 - Intangible Assets

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

5

. Intangible Assets

Intangible assets as of

March 31, 2018

and

December 31, 2017

consisted of the following:

	Estimated useful lives (years)			March 31, 2018			December 31, 201 7
Tradename	5	to	7	$	555		$	555
Patents and technological know-how		10			9,923			8,578
Proprietary software	3	to	15		2,981			2,981
Other	3	to	5		323			323
Total intangible assets					13,782			12,437
Accumulated amortization					(6,142	)		(5,894	)
Total intangible assets, net				$	7,640		$	6,543

The amortization of intangible assets for the

three

months ended

March 31, 2018

and

2017

was as follows:

	Three months ended March 31,
	201 8		201 7
Amortization of intangible assets	$	248	$	238

The estimated future amortization expense of intangible assets is as follows:

Years ending December 31,		Amount
2018 (Remainder)	$	750
2019		925
2020		746
2021		746
2022		746
Thereafter		3,727
Total		7,640

XML

Note 6 - Inventories

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

6.

Inventories

Inventories, net of reserves, as of

March 31, 2018

and

December 31, 2017

consisted of the following:

	As of
	March 31, 2018		December 31, 201 7
Current:
Raw materials	$	2,204	$	197
Finished goods		12,418		14,218
	$	14,622	$	14,415
Long-term:
Raw materials	$	2,453	$	2,682
Finished goods		6,112		6,026
	$	8,565	$	8,708

Long-term inventory represents inventory held in excess of our current (next

12

months) requirements based on our recent sales and forecasted level of sales. We expect to sell the above inventory, net of reserves, at or above the stated cost and believe that

no

loss will be incurred on its sale, although there can be

no

assurance of the timing or amount of any sales.

Current finished goods did 

not

include distributor channel inventories in the amounts of approximately

$1,555

as of

December 31, 2017.

Distributor channel inventories represented inventories at distributors and other customers where revenue recognition criteria had 

not

yet been achieved.

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory during the

three

months ended

March 31, 2018

was

$255.

During the

three

months ended

March 31, 2017

benefit from the reduction of reserves for valuation of inventory at lower of cost or market value was

$34.

XML

Note 7 - Share-based Compensation

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

7

. Share-based Compensation

Employee Stock Option Plans

The Company’s share-based incentive plans offering stock options are offered under the Company’s

2007

Equity Incentive Plan (the

“2007

Plan”), which was restated and approved by the shareholders on

December 12, 2015.

Provisions of the restated

2007

Plan include the granting of up to

2,000,000

incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. Options

may

be granted to employees, officers, non-employee directors and other service providers and

may

be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion. As of

March 31, 2018,

there were

744,936

options outstanding under the

2007

Plan. As of

March 31, 2018,

the

2007

Plan had

749,158

authorized unissued options.

A summary of the stock option activity under the Company’s plans for the

nine

months ended

March 31, 2018

is as follows:

	Number of shares			Weighted average exercise price
Options outstanding at beginning of year		764,430		$	8.78
Granted		—			—
Less:
Exercised		—			—
Forfeited prior to vesting		(18,012	)		10.84
Canceled or expired		(1,482	)		11.00
Options outstanding at March 31, 2018		744,936			8.72
Options exercisable at end of March 31, 2018		550,509		$	8.02

As of

March 31, 2018,

the total remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was approximately

$632,

which will be recognized over a weighted average period of

1.63

years.

Share-based compensation expense has been recorded as follows:

	Three months ended March 31,
	201 8		201 7
Cost of goods sold	$	5	$	8
Sales and marketing		10		14
Research and product development		30		38
General and administrative		92		111
	$	137	$	171

XML

Note 8 - Shareholders' Equity

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

8

. Shareholders’ Equity

Stock Repurchase Program

On

March 9, 2016,

the Board of Directors of the Company authorized the repurchase of up to

$10,000

 of the Company’s outstanding shares of common stock under a stock repurchase program. In connection with the repurchase authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. The transactions effectuated to date occurred in open market purchases.

On

March 1, 2017,

the Board of Directors of the Company renewed and extended the repurchase program for up to an additional

$10,000

of common stock over the next

twelve

months. In connection with the repurchase extension authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. The transactions effectuated to date occurred in open market purchases.

During the 

three

 months ended 

March 31, 2018, 

we acquired the following shares of common stock under the stock repurchase program authorized by the Board of Directors in

March 2016

and renewed and extended in

March 2017:

Period	Total Number of  Shares Purchased		Average Price  Paid per Share		Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs
Jan 2018		8,652	$	8.57		8,652
February 2018		7,019		8.26		7,019
March 2018		1,878		8.02		1,878
Total		17,549		8.39		17,549

Upon expiry of this repurchase program in

March 2018,

the program was

not

renewed again.

Cash Dividends

On

February 21, 2018,

the Company declared a cash dividend of

$0.07

per share of ClearOne common stock. The dividend was paid on

March 21, 2018

to shareholders of record as of

March 7, 2018

.

On

June 13, 2018,

the Company announced the suspension of its dividend program.

XML

Note 9 - Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

9.

Fair Value Measurements

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following

three

levels:

Level

1

- Quoted prices in active markets for identical assets and liabilities.

Level

2

- Observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are

not

active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. This category generally includes U.S. Government and agency securities; municipal securities; mutual funds and securities sold and

not

yet settled.

Level

3

- Unobservable inputs.

The substantial majority of the Company’s financial instruments are valued using observable inputs. The following table sets forth the fair value of the financial instruments re-measured by the Company as of

March 31, 2018

and

December 31, 2017:

	Level 1		Level 2		Level 3		Total
March 31, 2018
Corporate bonds and notes	$	-	$	5,972	$	-	$	5,972
Municipal bonds		-		4,576		-		4,576
Total	$	-	$	10,548	$	-	$	10,548

	Level 1		Level 2		Level 3		Total
December 31, 2017
Corporate bonds and notes	$	-	$	8,428	$	-	$	8,428
Municipal bonds		-		4,610		-		4,610
Total	$	-	$	13,038	$	-	$	13,038

XML

Note 10 - Income Taxes

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10.

Income Taxes

The Company’s forecasted effective tax benefit rate at

March 31, 2018

is

27.0%,

a

16.2%

increase from the

10.8%

effective tax rate recorded at

December 31, 2017.

The

16.2%

increase is primarily due to the enactment in

2017

of the Tax Cuts and Jobs act, which resulted in a lower corporate tax rate and a revaluation of the Company's net deferred tax assets. The forecasted effective tax benefit rate of

27.0%

excludes jurisdictions for which

no

benefit from forecasted current year losses is anticipated. Including losses from such jurisdictions results in a forecasted effective tax benefit rate of

26.0%.

Our forecasted effective tax rate could fluctuate significantly on a quarterly basis and could change, to the extent that earnings in countries with tax rates that differ from that of the U.S. differ from amounts anticipated at

March 31, 2018.

After a discrete tax expense of

$62,

the effective tax benefit rate for the quarter ended

March 31, 2018

is

23.7%.

The discrete tax expense of

$62

is primarily attributable to changes in income tax reserves related to an income tax audit in Hong Kong.

XML

Note 11 - Subsequent Events

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

11.

Subsequent Events

On

June 13, 2018,

the Company announced suspension of its quarterly cash dividend program.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Significant Accounting Policies:

The significant accounting policies were described in Note

1

to the audited consolidated financial statements included in the Company’s annual report on Form

10

-K for the year ended

December 31, 2017.

There have been

no

changes to these policies during the

three

months ended

March 31, 2018

that are of significance or potential significance to the Company except for the change in revenue recognition policy described below.

Adoption of New Revenue Standard:

On

January 

1,

2018,

as required, the Company adopted ASU

No.

 

2014

-

09

 - Revenue from Contracts with Customers (Topic

606

) (“ASU 

2014

-

09”

), ASU

No.

 

2015

-

14

 - Revenue from Contracts with Customers (Topic

606

): Deferral of the Effective Date (“ASU 

2015

-

14”

), ASU

No.

 

2016

-

08

 - Revenue from Contracts with Customers (Topic

606

): Principal versus Agent Considerations (“ASU 

2016

-

08”

), ASU

No.

 

2016

-

10

 - Revenue from Contracts with Customers (Topic

606

): Identifying Performance Obligations and Licensing (“ASU 

2016

-

10”

), ASU

No.

 

2016

-

12

 - Revenue from Contracts with Customers (Topic

606

): Narrow-Scope Improvements and Practical Expedients (“ASU 

2016

-

12”

) and ASU

No.

 

2016

-

20

 - Technical Corrections and Improvements to Topic

606,

Revenue from Contracts with Customers” (“ASU 

2016

-

20”

) (collectively “the New Revenue Standard”). To conform to the New Revenue Standard, the Company modified its revenue recognition policy as described further below.

Change in Accounting Policy:

On

January 

1,

2018,

the Company adopted the New Revenue Standard using the modified retrospective method, applying the guidance to all open contracts and recognized an adjustment to increase retained earnings by

$2,783,

reduce deferred product revenue by

$4,338

and reduce distributor channel inventories by

$1,555

as of that date. The comparative financial information has

not

been restated and continues to be presented under the accounting standards in effect for the respective periods. The Company applied the practical expedient and has

not

disclosed the revenue allocated to future shipments of partially completed contracts.

Our accounting policy before this change is described below. Revenue from product sales to distributors was

not

recognized until the return privilege had expired or until it can be determined with reasonable certainty that the return privilege had expired, which approximated when the product was sold-through to customers of our distributors (dealers, system integrators, value-added resellers, and end-users), rather than when the product was initially shipped to a distributor. At each quarter-end, we evaluated the inventory in the distribution channel through information provided by our distributors. The level of inventory in the channel fluctuated up or down each quarter based upon our distributors’ individual operations. Accordingly, each quarter-end deferral of revenue and associated cost of goods sold were calculated and recorded based upon the actual channel inventory reported at quarter-end. Further, with respect to distributors and other channel partners

not

reporting the channel inventory, the revenue and associated cost of goods sold were deferred until we received payment for the product sales made to such distributors or channel partners.

Now, after the change in the accounting policy, substantially all of the Company’s revenue is recognized following the transfer of control of the products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. During the quarter ended

March 

30,

2018,

revenue decreased by

$852

 due to the impact of the adoption of the New Revenue Standard.

Revenue Recognition Policy:

The Company generates revenue from sales of its audio and video conferencing equipment to distributors, system integrators and value-added resellers. The Company also generates revenue, to a much lesser extent, from sale of software and licenses to distributors, system integrators, value-added resellers and end-users. The Company recognizes revenue when it satisfies a performance obligation in an amount reflecting the consideration to which it expects to be entitled. For sales agreements, the Company has identified the promise to transfer products, each of which are distinct, to be the performance obligation. The Company applies a

five

-step approach in determining the amount and timing of revenue to be recognized: (

1

) identifying the contract with a customer, (

2

) identifying the performance obligations in the contract, (

3

) determining the transaction price, (

4

) allocating the transaction price to the performance obligations in the contract and (

5

) recognizing revenue when the performance obligation is satisfied. Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty and supply, but typically do

not

require mandatory purchase commitments. In the absence of a sales agreement, the Company’s standard terms and conditions at the time of acceptance of purchase orders apply. The Company considers the customer purchase orders, governed by sales agreements or the Company’s standard terms and conditions, to be the contract with the customer. The Company evaluates certain factors including the customer’s ability to pay (or credit risk).

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. Sales to distributors, are typically made pursuant to agreements that provide return rights with respect to discontinued or slow-moving products, referred to as stock rotation. Sales to distributors can also be subject to price adjustment on certain products, primarily for distributors with ship and credit rights. Although payment terms vary, most distributor agreements require payment within

45

days of invoicing.

The Company recognizes revenue when it satisfies a performance obligation. The Company recognizes revenue from sales agreements upon transferring control of a product to the customer. This typically occurs when products are shipped or delivered, depending on the delivery terms, or when products that are consigned at customer locations are sold to dealers or end users. Revenue recognized during the quarter ended

March 

31,

2018

for equipment sales was

$7,109

 and for software and licenses was

$180.

Sales returns and allowances are estimated based on historical experience. Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenues are recognized, and are netted against revenues. For returns, the Company recognizes a related asset for the right to recover returned products with a corresponding reduction to cost of goods sold. The Company reviews warranty and related claims activity and records provisions, as necessary.

Frequently, the Company receives orders with multiple delivery dates that

may

extend across reporting periods. Since each delivery constitutes a performance obligation, the Company allocates the transaction price of the contract to each performance obligation based on the stand-alone selling price of the products. The Company invoices the customer for each delivery upon shipment and recognizes revenues in accordance with delivery terms. Although payment terms vary, distributors typically pay within

45

days of invoicing and dealers pay within

30

days of invoicing. As scheduled delivery dates are within

one

year, revenue allocated to future shipments of partially completed contracts are

not

disclosed.

The Company has elected to record freight and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost and include it in cost of revenues. Taxes assessed by government authorities on revenue-producing transactions, including value-added and excise taxes, are presented on a net basis (excluded from revenues) in the Consolidated Statements of Operations and Comprehensive Income.

Recent Accounting Pronouncements:

In

February 2016,

the FASB released ASU

No.

2016

-

02,

Leases (Topic

842

) to bring transparency to lessee balance sheets. The ASU will require organizations that lease assets (lessees) to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than

12

months. The standard will apply to both types of leases-capital (or finance) leases and operating leases. Previously, GAAP has required only capital leases to be recognized on lessee balance sheets. The standard is effective for fiscal years beginning after

December 15, 2018

and interim periods within fiscal years beginning after

December 15, 2018.

Early application will be permitted for all organizations. The Company has

not

yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

In

August 2016,

the FASB released ASU

No.

2016

-

15,

Classification of Certain Cash Receipts and Cash Payments, which addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice. ASU

2016

-

15

became effective for the Company on

January 1, 2018.

ASU

2016

-

15

had

no

material impact on our consolidated financial statements.

In

May 2017,

the FASB issued ASU

No.

2017

-

09,

Compensation-Stock Compensation (Topic

718

): Scope of Modification Accounting. The new guidance provides clarity and reduces both (

1

) diversity in practice and (

2

) cost and complexity when applying the guidance in Topic

718,

Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The accounting standard update became effective for the Company on

January 1, 2018.

ASU

2017

-

09

did

not

have any material impact on our consolidated financial statements.

XML

Note 2 - Revenue Information (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended March 31, 2018
Professional audio products	$	4,933
Unified Communications end points		1,036
Video products		1,320
	$	7,289

	Three months ended March 31, 2018
North and South America	$	4,346
Asia (including Middle East) and Australia		2,038
Europe and Africa		906
	$	7,289

XML

Note 3 - Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,846	)	$	(468	)
Denominator:
Basic weighted average shares outstanding		8,307,125			8,768,112
Dilutive common stock equivalents using treasury stock method		—			—
Diluted weighted average shares outstanding		8,307,125			8,768,112
Basic loss per common share	$	(0.22	)	$	(0.05	)
Diluted loss per common share	$	(0.22	)	$	(0.05	)
Weighted average options outstanding		748,078			847,731
Anti-dilutive options not included in the computations		748,078			847,731

XML

Note 4 - Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
March 31, 2018
Available-for-sale securities:
Corporate bonds and notes	$	6,040	$	5	$	(73	)	$	5,972
Municipal bonds		4,613		0		(37	)		4,576
Total available-for-sale securities	$	10,653	$	5	$	(110	)	$	10,548

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
December 31, 201 7
Available-for-sale securities:
Corporate bonds and notes	$	8,458	$	19	$	(49	)	$	8,428
Municipal bonds		4,637		1		(28	)		4,610
Total available-for-sale securities	$	13,095	$	20	$	(77	)	$	13,038

Available-for-sale Securities, Debt Maturities [Table Text Block]

	Amortized cost		Estimated fair value
March 31, 2018
Due within one year	$	3,145	$	3,132
Due after one year through five years		7,508		7,416
Total available-for-sale securities	$	10,653	$	10,548

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

	Less than 12 months					More than 12 months					Total
(In thousands)	Estimated fair value		Gross unrealized holding losses			Estimated fair value		Gross unrealized holding losses			Estimated fair value		Gross unrealized holding losses
As of March 31, 2018
Corporate bonds and notes	$	3,106	$	(30	)	$	2,282	$	(43	)	$	5,388	$	(73	)
Municipal bonds		3,197		(28	)		670		(9	)		3,867		(37	)
Total	$	6,303	$	(58	)	$	2,952	$	(52	)	$	9,255	$	(110	)

XML

Note 5 - Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

	Estimated useful lives (years)			March 31, 2018			December 31, 201 7
Tradename	5	to	7	$	555		$	555
Patents and technological know-how		10			9,923			8,578
Proprietary software	3	to	15		2,981			2,981
Other	3	to	5		323			323
Total intangible assets					13,782			12,437
Accumulated amortization					(6,142	)		(5,894	)
Total intangible assets, net				$	7,640		$	6,543

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	Three months ended March 31,
	201 8		201 7
Amortization of intangible assets	$	248	$	238

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Years ending December 31,		Amount
2018 (Remainder)	$	750
2019		925
2020		746
2021		746
2022		746
Thereafter		3,727
Total		7,640

XML

Note 6 - Inventories (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Inventory Current and Noncurrent [Table Text Block]

	As of
	March 31, 2018		December 31, 201 7
Current:
Raw materials	$	2,204	$	197
Finished goods		12,418		14,218
	$	14,622	$	14,415
Long-term:
Raw materials	$	2,453	$	2,682
Finished goods		6,112		6,026
	$	8,565	$	8,708

XML

Note 7 - Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of shares			Weighted average exercise price
Options outstanding at beginning of year		764,430		$	8.78
Granted		—			—
Less:
Exercised		—			—
Forfeited prior to vesting		(18,012	)		10.84
Canceled or expired		(1,482	)		11.00
Options outstanding at March 31, 2018		744,936			8.72
Options exercisable at end of March 31, 2018		550,509		$	8.02

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]

	Three months ended March 31,
	201 8		201 7
Cost of goods sold	$	5	$	8
Sales and marketing		10		14
Research and product development		30		38
General and administrative		92		111
	$	137	$	171

XML

Note 8 - Shareholders' Equity (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Class of Treasury Stock [Table Text Block]

Period	Total Number of  Shares Purchased		Average Price  Paid per Share		Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs
Jan 2018		8,652	$	8.57		8,652
February 2018		7,019		8.26		7,019
March 2018		1,878		8.02		1,878
Total		17,549		8.39		17,549

XML

Note 9 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Level 1		Level 2		Level 3		Total
March 31, 2018
Corporate bonds and notes	$	-	$	5,972	$	-	$	5,972
Municipal bonds		-		4,576		-		4,576
Total	$	-	$	10,548	$	-	$	10,548

	Level 1		Level 2		Level 3		Total
December 31, 2017
Corporate bonds and notes	$	-	$	8,428	$	-	$	8,428
Municipal bonds		-		4,610		-		4,610
Total	$	-	$	13,038	$	-	$	13,038

XML

Note 1 - Business Description, Basis of Presentation and Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Jan. 01, 2018	Dec. 31, 2017
Contract with Customer, Liability, Current	$ 282			$ 4,635
Retail Related Inventory, Total				$ 1,555
Revenue from Contract with Customer, Including Assessed Tax	7,289	$ 11,678
Equipment Sales [Member]
Revenue from Contract with Customer, Including Assessed Tax	7,109
Software and Licenses [Member]
Revenue from Contract with Customer, Including Assessed Tax	180
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Contract with Customer, Liability, Current			$ (4,338)
Retail Related Inventory, Total			(1,555)
Revenue from Contract with Customer, Including Assessed Tax	$ (852)
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption			$ 2,783

XML

Note 2 - Revenue Information - Revenue by Product Group (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue from Contract with Customer, Including Assessed Tax	$ 7,289	$ 11,678
Americas [Member]
Revenue from Contract with Customer, Including Assessed Tax	4,346
Asia Middle East and Australia [Member]
Revenue from Contract with Customer, Including Assessed Tax	2,038
Europe and Africa [Member]
Revenue from Contract with Customer, Including Assessed Tax	906
Professional Audio Products [Member]
Revenue from Contract with Customer, Including Assessed Tax	4,933
Unified Communications End Points [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,036
Video Products [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 1,320

XML

Note 3 - Earnings (Loss) Per Share - Computation of Basic and Diluted Earnings per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net loss	$ (1,846)	$ (468)
Basic weighted average shares outstanding (in shares)	8,307,125	8,768,112
Dilutive common stock equivalents using treasury stock method (in shares)
Diluted weighted average shares outstanding (in shares)	8,307,125	8,768,112
Basic loss per common share (in dollars per share)	$ (0.22)	$ (0.05)
Diluted loss per common share (in dollars per share)	$ (0.22)	$ (0.05)
Weighted average options outstanding (in shares)	748,078	847,731
Anti-dilutive options not included in the computations (in shares)	748,078	847,731

XML

Note 4 - Marketable Securities - Available-for-sale Securities by Major Security Type (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Amortized cost	$ 10,653	$ 13,095
Gross unrealized holding gains	5	20
Gross unrealized holding losses	(110)	(77)
Available-for-sale securities	10,548	13,038
Corporate Debt Securities [Member]
Amortized cost	6,040	8,458
Gross unrealized holding gains	5	19
Gross unrealized holding losses	(73)	(49)
Available-for-sale securities	5,972	8,428
US States and Political Subdivisions Debt Securities [Member]
Amortized cost	4,613	4,637
Gross unrealized holding gains	0	1
Gross unrealized holding losses	(37)	(28)
Available-for-sale securities	$ 4,576	$ 4,610

XML

Note 4 - Marketable Securities - Maturities of Available-for-sale Securities (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Due within one year, amortized cost	$ 3,145
Due within one year, estimated fair value	3,132
Due after one year through five years, amortized cost	7,508
Due after one year through five years, estimated fair value	7,416
Total available-for-sale securities, amortized cost	10,653
Total available-for-sale securities, estimated fair value	$ 10,548

XML

Note 4 - Marketable Securities - Available-for-sale Marketable Securities in Gross Unrealized Loss Position (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Estimated fair value, less than 12 months	$ 6,303
Gross unrealized holding losses, less than 12 months	(58)
Estimated fair value, more than 12 months	2,952
Gross unrealized holding losses, more than 12 months	(52)
Estimated fair value	9,255
Gross unrealized holding losses	(110)
Corporate Debt Securities [Member]
Estimated fair value, less than 12 months	3,106
Gross unrealized holding losses, less than 12 months	(30)
Estimated fair value, more than 12 months	2,282
Gross unrealized holding losses, more than 12 months	(43)
Estimated fair value	5,388
Gross unrealized holding losses	(73)
US States and Political Subdivisions Debt Securities [Member]
Estimated fair value, less than 12 months	3,197
Gross unrealized holding losses, less than 12 months	(28)
Estimated fair value, more than 12 months	670
Gross unrealized holding losses, more than 12 months	(9)
Estimated fair value	3,867
Gross unrealized holding losses	$ (37)

XML

Note 5 - Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Intangible assets, gross	$ 13,782	$ 12,437
Accumulated amortization	(6,142)	(5,894)
Total intangible assets, net	7,640	6,543
Trade Names [Member]
Intangible assets, gross	$ 555	555
Patents and Technological Know-how [Member]
Estimated useful lives (Year)	10 years
Intangible assets, gross	$ 9,923	8,578
Proprietary Software [Member]
Intangible assets, gross	2,981	2,981
Other Intangible Assets [Member]
Intangible assets, gross	$ 323	$ 323
Minimum [Member] | Trade Names [Member]
Estimated useful lives (Year)	5 years
Minimum [Member] | Proprietary Software [Member]
Estimated useful lives (Year)	3 years
Minimum [Member] | Other Intangible Assets [Member]
Estimated useful lives (Year)	3 years
Maximum [Member] | Trade Names [Member]
Estimated useful lives (Year)	7 years
Maximum [Member] | Proprietary Software [Member]
Estimated useful lives (Year)	15 years
Maximum [Member] | Other Intangible Assets [Member]
Estimated useful lives (Year)	5 years

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Note 5 - Intangible Assets - Schedule of Amortization of Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Amortization of intangible assets	$ 248	$ 238

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Note 5 - Intangible Assets - Schedule of Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
2018 (Remainder)	$ 750
2019	925
2020	746
2021	746
2022	746
Thereafter	3,727
Total	$ 7,640	$ 6,543

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Note 6 - Inventories (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Distributor Channel Inventories			$ 1,555
Inventory Write-down	$ 255	$ (34)

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Note 6 - Inventories - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Raw materials	$ 2,204	$ 197
Finished goods	12,418	14,218
	14,622	14,415
Raw materials	2,453	2,682
Finished goods	6,112	6,026
	$ 8,565	$ 8,708

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Note 7 - Share-based Compensation (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 12, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	744,936	764,430
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 632
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 229 days
The 2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	744,936
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares, Authorized and Unissued	749,158

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Note 7 - Share-based Compensation - Stock Option Activity (Details)	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Options outstanding at beginning of year (in shares) | shares	764,430
Weighted average exercise price, options outstanding at beginning of year (in dollars per share) | $ / shares	$ 8.78
Number of shares, granted (in shares) | shares
Weighted average exercise price, granted (in dollars per share) | $ / shares
Number of shares, exercised (in shares) | shares
Weighted average exercise price, exercised (in dollars per share) | $ / shares
Number of shares, forfeited prior to vesting (in shares) | shares	(18,012)
Weighted average exercise price, forfeited prior to vesting (in dollars per share) | $ / shares	$ 10.84
Number of shares, canceled or expired (in shares) | shares	(1,482)
Weighted average exercise price, canceled or expired (in dollars per share) | $ / shares	$ 11
Options outstanding at March 31, 2018 (in shares) | shares	744,936
Weighted average exercise price, options outstanding at March 31, 2018 (in dollars per share) | $ / shares	$ 8.72
Options exercisable at end of March 31, 2018 (in shares) | shares	550,509
Weighted average exercise price, options exercisable at end of March 31, 2018 (in dollars per share) | $ / shares	$ 8.02

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Note 7 - Share-based Compensation - Schedule of Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share-based compensation expense	$ 137	$ 171
Cost of Sales [Member]
Share-based compensation expense	5	8
Selling and Marketing Expense [Member]
Share-based compensation expense	10	14
Research and Development Expense [Member]
Share-based compensation expense	30	38
General and Administrative Expense [Member]
Share-based compensation expense	$ 92	$ 111

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Note 8 - Shareholders' Equity (Details Textual) - USD ($) $ / shares in Units, $ in Billions	Feb. 21, 2018	Mar. 01, 2017	Mar. 09, 2016
Stock Repurchase Program, Authorized Amount			$ 10
Stock Repurchase Program, Additional Authorized Amount		$ 10
Common Stock, Dividends, Per Share, Declared	$ 0.07
Dividends Payable, Date to be Paid	Mar. 21, 2018
Dividends Payable, Date of Record	Mar. 07, 2018

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Note 8 - Shareholders' Equity - Stock Repurchase Program (Details) - $ / shares	1 Months Ended			3 Months Ended
	Mar. 31, 2018	Feb. 28, 2018	Jan. 31, 2018	Mar. 31, 2018
Total number of shares purchased (in shares)	1,878	7,019	8,652	17,549
Average price paid per share (in dollars per share)	$ 8.02	$ 8.26	$ 8.57	$ 8.39
Publicly Announced Stock Repurchase Program [Member]
Total number of shares purchased (in shares)	1,878	7,019	8,652	17,549

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Note 9 - Fair Value Measurements - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available-for-sale securities	$ 10,548	$ 13,038
Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities
Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	10,548	13,038
Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities
Corporate Debt Securities [Member]
Available-for-sale securities	5,972	8,428
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	5,972	8,428
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	4,576	4,610
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	4,576	4,610
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities

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Note 10 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent	27.00%
Effective Income Tax Rate, Continuing Operations, Forecasted Increase (Decrease) in Rate	16.20%
Effective Income Tax Rate Reconciliation, Percent, Total		10.80%
Effective Tax Rate, Including Loss Jurisdictions	26.00%
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 62
Effective Tax Rate After Discreet Benefits	23.70%