What changed in this filing

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Item 1. Financial Statements

2020-11-16 compared with 2020-08-13 · 63 added, 60 removed, 335 unchanged (27% of the section changed)

3 unchanged sentences

(Dollars in thousands, except par value)

June 30, 2020

September 30, 2020

December 31, 2019

16 unchanged sentences

Deferred product revenue

Short-term debt

Total current liabilities

15 unchanged sentences

(Dollars in thousands, except per share amounts)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Cost of goods sold

14 unchanged sentences

Comprehensive loss:

Unrealized gain on available-for-sale securities, net of tax

Unrealized gain/(loss) on available-for-sale securities, net of tax

Change in foreign currency translation adjustment

4 unchanged sentences

(Dollars in thousands, except per share amounts)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

11 unchanged sentences

Other long-term lia bilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

5 unchanged sentences

Net cash used in investing activities

Cash flows from financing activities:

Ca sh flows from financing activitie s:

Issuance of common stock and warrants

Net proceeds from Paycheck Protection Program loan

2 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

5 unchanged sentences

The following is a summary of supplemental cash flow activities:

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid for income taxes

Interest paid

Cash paid for interest

See accompanying notes

12 unchanged sentences

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 June 30, 2020 and December 31, 2019 , the results of operations for the three and six months ended June 30, 2020 and 2019 , and the cash flows for the six months ended June 30, 2020 and 2019 .

The results of operations for the three and six months ended June 30, 2020 and 2019 are not necessarily indicative of the results for a full-year period.

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 September 30, 2020 and December 31, 2019 , the results of operations for the three and nine months ended September 30, 2020 and 2019 , and the cash flows for the nine months ended September 30, 2020 and 2019 .

The results of operations for the three and nine months ended September 30, 2020 and 2019 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, 2019 filed with the SEC.

1 unchanged sentence

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, 2019 .

There have been no changes to these policies during the six months ended June 30, 2020 that are of significance or potential significance to the Company.

There have been no changes to these policies during the nine months ended September 30, 2020 that are of significance or potential significance to the Company.

Recent accounting pronouncements:

The Company has determined that recently issued accounting standards will not have a material impact on its consolidated financial position, results of operations or cash flows.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

As of June 30, 2020 , our cash and cash equivalents were approximately $ 2,106 compared to $ 4,064 as of December 31, 2019 .

Our working capital was $ 13,765 as of June 30, 2020 .

Net cash provided by operating activities was $ 113 for the six months ended June 30, 2020 , an increase of cash provided of $ 1,511 from $( 1,398 ) of cash used in operating activities in the six months ended June 30, 2020 .

As of September 30, 2020 , our cash and cash equivalents were approximately $ 5,583 compared to $ 4,064 as of December 31, 2019 .

Our working capital was $ 15,617 as of September 30, 2020 .

Net cash used in operating activities was $ 309 for the nine months ended September 30, 2020 , a decrease of $ 6,261 from $ 6,570 of cash used in operating activities in the nine months ended September 30, 2019 .

We are currently pursuing all available legal remedies to defend our strategic patents from infringement.

We have already spent approximately $ 17,383 from 2016 through June 30, 2020 towards this litigation and may be required to spend more to continue our legal defense.

We have already spent approximately $ 19,157 from 2016 through September 30, 2020 towards this litigation and may be required to spend more to continue our legal defense.

We believe the decision by the U.S.

3 unchanged sentences

Although there can be no assurance of any outcome of a full trial, we believe this ruling will help pave the way for ClearOne’s recovery from the immense harm inflicted by our competitor's infringement of our valuable patents.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

We have been actively engaged in preserving cash by suspending our dividend program and allowing our share repurchase program to expire in 2018 and implementing company-wide cost reduction measures.

We have also raised additional capital in 2018 by issuing common stock, in 2019 by issuing senior convertible notes and in 2020 by borrowing through Paycheck Protection Program.

We have also raised additional capital in 2018 by issuing common stock, in 2019 by issuing senior convertible notes and in 2020 by borrowing through Paycheck Protection Program and issuing common stock and warrants.

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 operating needs through at least August 14, 2021.

We believe, although there can be no assurance, that all of these measures and effective management of working capital will provide the liquidity needed to meet our operating needs through at least November 16, 2021.

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;

3 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Audio conferencing

1 unchanged sentence

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

North and South America

10 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

De nominato r:

13 unchanged sentences

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 June 30, 2020 and December 31, 2019 were as follows:

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 September 30, 2020 and December 31, 2019 were as follows:

Amortized cost

2 unchanged sentences

Estimated fair value

June 30, 2020

September 30, 2020

Available-for-sale securities:

7 unchanged sentences

Total available-for-sale securities

Maturities of marketable securities classified as available-for-sale securities were as follows at June 30, 2020 :

Maturities of marketable securities classified as available-for-sale securities were as follows at September 30, 2020 :

Amortized cost

6 unchanged sentences

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

Debt securities in an unrealized loss position as of June 30, 2020 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality.

Debt securities in an unrealized loss position as of September 30, 2020 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.

8 unchanged sentences

Gross unrealized holding losses

As of June 30, 2020

As of September 30, 2020

Corporate bonds and notes

1 unchanged sentence

Intangible Assets

Intangible assets as of June 30, 2020 and December 31, 2019 consisted of the following:

Intangible assets as of September 30, 2020 and December 31, 2019 consisted of the following:

Estimated useful lives (years)

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

Total intangible assets, net

The amortization of intangible assets for the three months ended June 30, 2020 and 2019 was as follows:

Three months ended June 30,

Six months ended June 30,

The amortization of intangible assets for the three months ended September 30, 2020 and 2019 was as follows:

Three months ended September 30,

Nine months ended September 30,

Amortization of intangible assets

4 unchanged sentences

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

Inventories, net of reserves, as of June 30, 2020 and December 31, 2019 consisted of the following:

June 30, 2020

Inventories, net of reserves, as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30, 2020

December 31, 2019

5 unchanged sentences

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.

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory for the three months ended June 30, 2020 and 2019 was as follows:

Three months ended June 30,

Six months ended June 30,

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory for the three months ended September 30, 2020 and 2019 was as follows:

Three months ended September 30,

Nine months ended September 30,

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

Rent expense is recognized on a straight-line basis over the period of the lease taking into account future rent escalation and holiday periods.

Rent expense for the three months ended June 30, 2020 and 2019 was as follows:

Three months ended June 30,

Six months ended June 30,

Rent expense for the three months ended September 30, 2020 and 2019 was as follows:

Three months ended September 30,

Nine months ended September 30,

W e occup y a 1,350 square-foot facility in Gainesville, Florida under the terms of an operating lease expiring in F ebruary 2023 .

12 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Six months ended June 30,

Nine months ended September 30,

Cash paid for amounts included in the measurement of lease liabilities

3 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

June 30, 2020

September 30, 2020

December 31, 2019

5 unchanged sentences

Weighted average discount rate for operating leases

The following represents maturities of operating lease liabilities as of June 30, 2020 :

The following represents maturities of operating lease liabilities as of September 30, 2020 :

Years ending December 31,

5 unchanged sentences

Shareholders' Equity

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Common stock and additional paid-in capital

Balance, beginning of period

Issue of common stock and warrants

Share-based compensation expense

3 unchanged sentences

Balance, beginning of period

Unrealized gain on available-for-sale securities, net of tax

Unrealized gain (loss) on available-for-sale securities, net of tax

Foreign currency translation adjustment

Balance, end of period

Retained earnings (accumulated deficit)

Accumulated deficit

Balance, beginning of period

35 unchanged sentences

The following table represents the carrying value of Notes and Warrants:

June 30, 2020

September 30, 2020

December 31, 2019

7 unchanged sentences

Debt discount and issuance costs are amortized over the life of the note to interest expense using the effective interest method.

During the three and six months ended June 30, 2020, amortization of debt discount and issuance costs was $ 49 and $ 98 , respectively.

The following table represents schedule of maturities of principal amount contained in the Notes as of June 30, 2020 :

During the three and nine months ended September 30, 2020 , amortization of debt discount and issuance costs was $ 50 and $ 148 , respectively.

The following table represents schedule of maturities of principal amount contained in the Notes as of September 30, 2020 :

Year ending December 31,

5 unchanged sentences

The PPP Loan has a two -year term and bears interest at a rate of 1.0 % per annum.

Monthly principal and interest payments are deferred for six months after the date of disbursement.

Monthly principal and interest payments are deferred for approximately sixteen months after the date of disbursement.

The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.

17 unchanged sentences

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 June 30, 2020 and December 31, 2019 :

June 30, 2020

The following table sets forth the fair value of the financial instruments re-measured by the Company as of September 30, 2020 and December 31, 2019 :

September 30, 2020

Corporate bonds and notes

5 unchanged sentences

The valuation allowance was recorded as we concluded that it was more likely than not that our deferred tax assets were not realizable primarily due to the Company's recent pre-tax losses.

Provision for income taxes for the six months ended June 30, 2020 represents income tax expense recorded for jurisdictions outside the United States.

Provision for income taxes for the nine months ended September 30, 2020 represents income tax expense recorded for jurisdictions outside the United States.

Subsequent events

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements