What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-16 · 72 added, 69 removed, 329 unchanged (30% of the section changed)

3 unchanged sentences

(Dollars in thousands, except par value)

September 30, 2020

March 31, 2021

December 31, 2020

2 unchanged sentences

Marketable securities

Receivables, net of allowance for doubtful accounts of $ 506 and $ 424 , respectively

Receivables, net of allowance for doubtful accounts of $ 506

Inventories, net

Income tax receivable

Prepaid expenses and other assets

12 unchanged sentences

Total current liabilities

Long-term debt

Long-term debt, net

Operating lease liability, net of current

2 unchanged sentences

Shareholders' equity:

Common stock, par value $ 0.001 , 50,000,000 shares authorized, 18,771,257 and 16,650,725 shares issued and outstanding

Common stock, par value $ 0.001 , 50,000,000 shares authorized, 18,775,773 shares issued and outstanding

Additional paid-in capital

8 unchanged sentences

(Dollars in thousands, except per share amounts)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Cost of goods sold

6 unchanged sentences

Interest expense

Other income, net

Other income (expense), net

Loss before income taxes

5 unchanged sentences

Comprehensive loss:

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

Unrealized 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)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

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

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

Depreciation and amortization expense

11 unchanged sentences

Other long-term lia bilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

6 unchanged sentences

Ca sh flows from financing activitie s:

Issuance of common stock and warrants

Net proceeds from Paycheck Protection Program loan

Net proceeds from equity-based compensation programs

Net cash provided by financing activities

Principal payments of long-term debt

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net 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:

Nine Months Ended September 30,

Three months ended March 31,

Cash paid for income taxes

10 unchanged sentences

The fiscal year for ClearOne is the twelve months ending on December 31 .

The consolidated financial statements include the accounts of ClearOne and its subsidiaries.

The condensed consolidated financial statements include the accounts of ClearOne and its subsidiaries.

All significant inter-company accounts and transactions have been eliminated.

1 unchanged sentence

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 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.

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, 2021 and December 31, 2020 , the results of operations for the three months ended March 31, 2021 and 2020 , and the cash flows for the three months ended March 31, 2021 and 2020 .

The results of operations for the three months ended March 31, 2021 and 2020 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, 2020 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, 2020 .

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.

There have been no changes to these policies during the three months ended March 31, 2021 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.

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 .

As of March 31, 2021 , our cash and cash equivalents were approximately $ 2,034 compared to $ 3,803 as of December 31, 2020 .

Our working capital was $ 19,520 as of March 31, 2021 .

Net cash used in operating activities was $ 13 for the three months ended March 31, 2021 , a decrease of $ 544 from $ 531 of cash provided by operating activities in the three months ended March 31, 2020 .

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

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 have already spent approximately $ 21,985 from 2016 through March 31, 2021 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.

For more information about our intellectual property litigation, See Note 8.

Commitments and Contingencies - Legal Proceedings, in our annual report on Form 10-K for the year ended December 31, 2020 and Part II, Item 1.

Legal Proceedings in this quarterly report.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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 and issuing common stock and warrants.

We have also raised additional capital in 2019 by issuing senior convertible notes and in 2020 by borrowing through the CARES Act 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, 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 September 30,

Nine months ended September 30,

Three months ended March 31,

Audio conferencing

1 unchanged sentence

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

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 September 30,

Nine months ended September 30,

Three months ended March 31,

De nominato r:

4 unchanged sentences

Diluted loss per common share

Weighted average options outstanding

Anti-dilutive options not included in the computations

Weighted average options, warrants and convertible portion of senior convertible notes outstanding

Anti-dilutive options , warrants and convertible portion of senior convertible notes not included in the computation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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.

These securities are carried at estimated fair value with unrealized holding gains and losses included in accumulated other comprehensive 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 September 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 March 31, 2021 and December 31, 2020 were as follows:

Amortized cost

2 unchanged sentences

Estimated fair value

September 30, 2020

March 31, 2021

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 September 30, 2020 :

Maturities of marketable securities classified as available-for-sale securities were as follows at March 31, 2021 :

Amortized cost

6 unchanged sentences

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

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.

Debt securities in an unrealized loss position as of March 31, 2021 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 September 30, 2020

As of March 31, 2021

Corporate bonds and notes

1 unchanged sentence

Intangible Assets

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

Intangible assets as of March 31, 2021 and December 31, 2020 consisted of the following:

Estimated useful lives (years)

September 30, 2020

March 31, 2021

December 31, 2020

4 unchanged sentences

Total intangible assets, net

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,

The amortization of intangible assets for the three months ended March 31, 2021 and 2020 was as follows:

Three months ended March 31,

Amortization of intangible assets

4 unchanged sentences

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

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

September 30, 2020

Inventories, net of reserves, as of March 31, 2021 and December 31, 2020 consisted of the following:

March 31, 2021

December 31, 2020

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 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 for the three months ended March 31, 2021 and 2020 was as follows:

Three months ended March 31,

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 September 30, 2020 and 2019 was as follows:

Three months ended September 30,

Nine months ended September 30,

Rent expense for the three months ended March 31, 2021 and 2020 was as follows:

Three months ended March 31,

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:

Nine months ended September 30,

Three months ended March 31,

Cash paid for amounts included in the measurement of lease liabilities

3 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

September 30, 2020

March 31, 2021

December 31, 2020

5 unchanged sentences

Weighted average discount rate for operating leases

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

The following represents maturities of operating lease liabilities as of March 31, 2021 :

Years ending December 31,

5 unchanged sentences

Shareholders' Equity

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

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

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

Foreign currency translation adjustment

31 unchanged sentences

Expected dividend yield

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The carrying amount of the Notes was then determined by deducting the fair value of the Warrants from the principal amount of the Notes.

3 unchanged sentences

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

September 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

March 31, 2021

December 31, 2020

Liability component:

Liab ility compo nent:

debt discount and issuance costs, net of amortization

3 unchanged sentences

Net carrying amount

Current portion of liability component included under short-term debt

Long-term portion of liability component included under long-term debt

Liability component total

( 1 ) Recorded on the condensed consolidated balance sheets as additional paid-in capital.

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 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 :

During the three months ended March 31, 2021 and March 31, 2020 , amortization of debt discount and issuance costs was $ 49 and $ 49 , respectively.

The following table represents schedule of maturities of principal amount contained in the Notes as of March 31, 2021 :

Year ending December 31,

Principal Amount Maturing

2021 (Remainder)

Total principal amount

8 unchanged sentences

The Company intends to use the entire PPP Loan amount for qualifying expenses and to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

March 31, 2021

December 31, 2020

Current portion of the PPP Loan included under short-term debt

Long-term portion of the PPP Loan included under long-term debt

Liability component total

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13 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 September 30, 2020 and December 31, 2019 :

September 30, 2020

The following table sets forth the fair value of the financial instruments re-measured by the Company as of March 31, 2021 and December 31, 2020 :

March 31, 2021

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

Provision for income taxes for the three months ended March 31, 2021 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