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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Utah                                                          |   | 87-0398877                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. EmployerIdentification No.) |

| Securities registered pursuant to Section 12(b) of the Act:Title of each class | Name of each exchange on which registered  |
|--------------------------------------------------------------------------------|-------------------------------------------------|
| Common Stock, $0.001 par value                                            | The NASDAQ Capital Market                  |

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| Larger Accelerated Filer ¨                                            | Accelerated Filer ¨               |
|----------------------------------------------------------------------------|----------------------------------------|
| Non-Accelerated Filer ¨ (Do not check if a smaller reporting company) | Smaller Reporting Company  x |

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|                                              |                                                                                                               | PAGE  |
|---------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|------------|
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | 1                                                                                                                  |
|                                              |                                                                                                               |       |
| PART I.                                           |                                                                                                               |       |
| ITEM 1.                                           | BUSINESS                                                                                                           | 1          |
| ITEM 1A.                                          | RISK FACTORS                                                                                                       | 11         |
| ITEM 1B.                                          | UNRESOLVED STAFF COMMENTS                                                                                          | 16         |
| ITEM 2.                                           | PROPERTIES                                                                                                         | 16         |
| ITEM 3.                                           | LEGAL PROCEEDINGS                                                                                                  | 16         |
| ITEM 4.                                           | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                | 16         |
|                                              |                                                                                                               |       |
| PART II.                                          |                                                                                                               |       |
| ITEM 5.                                           | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 17         |
| ITEM 6.                                           | SELECTED FINANCIAL DATA                                                                                            | 17         |
| ITEM 7.                                           | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        | 18         |
| ITEM 7A.                                          | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                         | 27         |
| ITEM 8.                                           | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                        | 27         |
| ITEM 9.                                           | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                               | 27         |
| ITEM 9A(T).                                       | CONTROLS AND PROCEDURES                                                                                            | 27         |
| ITEM 9B.                                          | OTHER INFORMATION                                                                                                  | 28         |
|                                              |                                                                                                               |       |
| PART III.                                         |                                                                                                               |       |
| ITEM 10.                                          | DIRECTORS , EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                            | 29         |
| ITEM 11.                                          | EXECUTIVE COMPENSATION                                                                                             | 29         |
| ITEM 12.                                          | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                     | 29         |
| ITEM 13.                                          | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                          | 29         |
| ITEM 14.                                          | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                             | 29         |
|                                              |                                                                                                               |       |
| PART IV.                                          |                                                                                                               |       |
| ITEM 15.                                          | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                         | 30         |
|                                              |                                                                                                               |       |
| SIGNATURES                                        |                                                                                                               | 32         |

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ITEM 1.  BUSINESS

----

|                                                       Market | Typical Number of Participants |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
| · Professional Conferencing (Installed Audio)                                                                                                                                                                                                                                                                                    | 20-200                         |
| · Premium Conferencing                                                                                                                                                                                                                                                                                                           | 8-30                           |
| · Tabletop Conferencing                                                                                                                                                                                                                                                                                                          | 1-30                           |
| · Personal Conferencing                                                                                                                                                                                                                                                                                                          | 1-15                           |

----

| ·   | Professional conferencing products that are used in executive boardrooms, courtrooms, hospitals, and auditoriums that integrate with leading video and telepresence systems |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Premium conferencing products that integrate with leading video and web conferencing systems and applications |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | Tabletop conferencing phones used in conference rooms and offices |
|--------------------|-------------------------------------------------------------------|

| ·   | Personal conferencing products that enable hands-free audio communications in new ways such as through PCs, laptops, cell phones and handsets. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Availability of easy-to-use conferencing systems and applications |
|--------------------|-------------------------------------------------------------------|

| ·   | Voice quality of audio conferencing systems as compared to the quality of telephone handset speakerphones |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| ·   | Expansion of global, regional, and local corporate enterprises |
|--------------------|----------------------------------------------------------------|

| ·   | Availability of affordable audio conferencing solutions for small businesses and home offices |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | Growth of distance learning and corporate training programs |
|--------------------|-------------------------------------------------------------|

| ·   | Increasing adoption of teleworking |
|--------------------|------------------------------------|

| ·   | Decreases in travel due to cost and carbon footprint considerations |
|--------------------|---------------------------------------------------------------------|

| ·   | Transition to the Internet Protocol (IP) network from the traditional public switched telephone network (PSTN) and the deployment of VoIP applications |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| PCs & Macs                     | VoIP telephony applications such as Skype; Popular audio instant messaging (IM) applications like Yahoo, MSN, Google, etc.; enterprise softphones; audio for web-based videoconferencing applications; gaming; music playback |
|------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cell phones                        | Connects to the 2.5mm headset jack of many cell phones for hands-free, full-duplex audio conferencing                                                                                                                         |
| Telephones                         | Connects to the headset jack (certain phone models) for hands-free, full-duplex audio conferencing                                                                                                                            |
| iPods & MP3 players            | For full-bandwidth audio playback                                                                                                                                                                                             |
| Desktop video conferencing systems | For hands-free, full-duplex audio conferencing                                                                                                                                                                                |

----

----

| ·   | Quality and functionality of the products |
|--------------------|-------------------------------------------|

| ·   | Broad and deep channel partnerships |
|--------------------|-------------------------------------|

| ·   | Established history of successful world-wide installations for diverse vertical markets |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | Brand name recognition |
|--------------------|------------------------|

| ·   | Quality of customer and partner support, and |
|--------------------|----------------------------------------------|

| ·   | Effective sales and marketing communication |
|--------------------|---------------------------------------------|

----

----

----

ITEM 1A.  RISK FACTORS

----

| ·   | meeting required specifications and regulatory standards; |
|--------------------|-----------------------------------------------------------|

| ·   | meeting market expectations for performance; |
|--------------------|----------------------------------------------|

| ·   | hiring and keeping a sufficient number of skilled developers; |
|--------------------|---------------------------------------------------------------|

| ·   | obtaining prototype products at anticipated cost levels; |
|--------------------|----------------------------------------------------------|

| ·   | having the ability to identify problems or product defects in the development cycle; and |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | achieving necessary manufacturing efficiencies. |
|--------------------|-------------------------------------------------|

----

----

| ·   | unexpected changes in, or the imposition of, additional legislative or regulatory requirements; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | unique environmental regulations; |
|--------------------|-----------------------------------|

| ·   | fluctuating exchange rates; |
|--------------------|-----------------------------|

| ·   | tariffs and other barriers; |
|--------------------|-----------------------------|

| ·   | difficulties in staffing and managing foreign sales operations; |
|--------------------|-----------------------------------------------------------------|

| ·   | import and export restrictions; |
|--------------------|---------------------------------|

| ·   | greater difficulties in accounts receivable collection and longer payment cycles; |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | potentially adverse tax consequences; |
|--------------------|---------------------------------------|

| ·   | potential hostilities and changes in diplomatic and trade relationships; and |
|--------------------|------------------------------------------------------------------------------|

| ·   | disruption in services due to natural disaster, economic or political difficulties, quarantines, transportation, or other restrictions associated with infectious diseases. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to the market in which we do business or relating to us specifically; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | disparity between our reported results and the projections of analysts; |
|--------------------|-------------------------------------------------------------------------|

| ·   | the shift in sales mix of products that we currently sell to a sales mix of lower-gross profit product offerings; |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | the level and mix of inventory levels held by our distributors; |
|--------------------|-----------------------------------------------------------------|

| ·   | the announcement of new products or product enhancements by us or our competitors; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | technological innovations by us or our competitors; |
|--------------------|-----------------------------------------------------|

| ·   | success in meeting targeted availability dates for new or redesigned products; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | the ability to profitably and efficiently manage our supplies of products and key components; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | the ability to maintain profitable relationships with our customers; |
|--------------------|----------------------------------------------------------------------|

| ·   | the ability to maintain an appropriate cost structure; |
|--------------------|--------------------------------------------------------|

| ·   | quarterly variations in our results of operations; |
|--------------------|----------------------------------------------------|

| ·   | general consumer confidence or general market conditions or market conditions specific to technology industries; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | domestic and international economic conditions; |
|--------------------|-------------------------------------------------|

| ·   | unexpected changes in regulatory requirements and tariffs; |
|--------------------|------------------------------------------------------------|

| ·   | our ability to report financial information in a timely manner; and |
|--------------------|---------------------------------------------------------------------|

| ·   | the markets in which our stock is traded. |
|--------------------|-------------------------------------------|

----

ITEM 1B.  UNRESOLVED STAFF COMMENTS

ITEM 2.  PROPERTIES

ITEM 3.  LEGAL PROCEEDINGS

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

----

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

|           |   | 2009   |   |   | 2008   |   |
|----------------|--------|--------|--------|--------|--------|--------|
|           |   | High   |   |   | Low    |   |   | High |   |   | Low |   |
| First Quarter  |   | $      | 5.00   |   |   | $      | 3.10 |   |   | $ | 7.25 |   |   | $ | 4.40 |   |
| Second Quarter |   |   | 4.74   |   |   |   | 3.27 |   |   |   | 7.42 |   |   |   | 5.00 |   |
| Third Quarter  |   |   | 4.06   |   |   |   | 3.00 |   |   |   | 5.81 |   |   |   | 4.50 |   |
| Fourth Quarter |   |   | 3.25   |   |   |   | 2.47 |   |   |   | 5.07 |   |   |   | 3.66 |   |

ITEM 6.  SELECTED FINANCIAL DATA

----

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

----

|                                                  |   | (in thousands of dollars) |    |
|-------------------------------------------------------|--------|---------------------------|---------|
|                                                  |   | Fiscal Year 2009          |    |   | Fiscal Year 2008 |   |   | 2009 vs. 2008Favorable (Unfavorable) |   |
|                                                  |   | Amount                    |    |   | % of Revenue |   |   | Amount |   |   | % of Revenue |   |   | Amount |   |   | % |   |
| Revenue                                               |   | $                         | 35,700  |   |   |   | 100.0% |   |   | $ | 38,758 |   |   |   | 100.0% |   |   | $ | (3,058 | ) |   |   | -7.9% |   |
| Cost of goods sold                                    |   |                      | 15,323  |   |   |   | 42.9% |   |   |   | 16,204 |   |   |   | 41.8% |   |   |   | 881 |   |   |   | 5.4% |   |
| Gross profit                                          |   |                      | 20,377  |   |   |   | 57.1% |   |   |   | 22,554 |   |   |   | 58.2% |   |   |   | (2,177 | ) |   |   | -9.7% |   |
| Operating expenses (benefit):                         |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                   |   |                      | 7,529   |   |   |   | 21.1% |   |   |   | 6,673 |   |   |   | 17.2% |   |   |   | (856 | ) |   |   | -12.8% |   |
| Research and product development                      |   |                      | 7,541   |   |   |   | 21.1% |   |   |   | 7,070 |   |   |   | 18.2% |   |   |   | (471 | ) |   |   | -6.7% |   |
| General and administrative                            |   |                      | 3,631   |   |   |   | 10.2% |   |   |   | 7,669 |   |   |   | 19.8% |   |   |   | 4,038 |   |   |   | 52.7% |   |
| Insurance settlement proceeds                         |   |                      | (1,100  | ) |   |   | -3.1% |   |   |   | — |   |   |   | 0.0% |   |   |   | 1,100 |   |   |   | * |   |
| Total operating expenses                              |   |                      | 17,601  |   |   |   | 49.3% |   |   |   | 21,412 |   |   |   | 55.2% |   |   |   | 3,811 |   |   |   | 17.8% |   |
| Operating income                                      |   |                      | 2,776   |   |   |   | 7.8% |   |   |   | 1,142 |   |   |   | 2.9% |   |   |   | 1,634 |   |   |   | 143.1% |   |
| Other income, net                                     |   |                      | 446     |   |   |   | 1.2% |   |   |   | 1,005 |   |   |   | 2.6% |   |   |   | (559 | ) |   |   | -55.6% |   |
| Income from continuing operations before income taxes |   |                      | 3,222   |   |   |   | 9.0% |   |   |   | 2,147 |   |   |   | 5.5% |   |   |   | 1,075 |   |   |   | 50.1% |   |
| Benefit from (provision for) income taxes             |   |                      | (995    | ) |   |   | -2.8% |   |   |   | 3,096 |   |   |   | 8.0% |   |   |   | (4,091 | ) |   |   | -132.1% |   |
| Income from continuing operations                     |   |                      | 2,227   |   |   |   | 6.2% |   |   |   | 5,243 |   |   |   | 13.5% |   |   |   | (3,016 | ) |   |   | -57.5% |   |
| Income from discontinued operations, net of tax       |   |                      | — |   |   |   | 0.0% |   |   |   | 16 |   |   |   | 0.0% |   |   |   | (16 | ) |   |   | -100.0% |   |
| Net income                                            |   | $                         | 2,227   |   |   |   | 6.2% |   |   | $ | 5,259 |   |   |   | 13.6% |   |   | $ | (3,032 | ) |   |   | -57.7% |   |

----

----

----

----

----

|                     |   | Deferred Revenue |   |   | Deferred Cost of Goods Sold |   |   | Deferred Gross Profit |   |
|--------------------------|--------|------------------|--------|--------|-----------------------------|--------|--------|-----------------------|--------|
| Year ended June 30, 2009 |   |             |   |   |                        |   |   |                  |   |
| Fourth Quarter           |   | $                | 4,709  |   |                        | $      | 1,843  |                  |   | $ | 2,866 |   |
| Third Quarter            |   |             | 4,611  |   |                        |   | 1,692  |                  |   |   | 2,919 |   |
| Second Quarter           |   |             | 5,320  |   |                        |   | 1,914  |                  |   |   | 3,406 |   |
| First Quarter            |   |             | 4,856  |   |                        |   | 1,938  |                  |   |   | 2,918 |   |
| Year ended June 30, 2008 |   |             |   |   |                        |   |   |                  |   |   |   |   |
| Fourth Quarter           |   |             | 5,795  |   |                        |   | 2,047  |                  |   |   | 3,748 |   |
| Third Quarter            |   |             | 4,586  |   |                        |   | 1,772  |                  |   |   | 2,814 |   |
| Second Quarter           |   |             | 5,240  |   |                        |   | 2,079  |                  |   |   | 3,161 |   |
| First Quarter            |   |             | 5,822  |   |                        |   | 2,121  |                  |   |   | 3,701 |   |

----

----

----

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A(T).  CONTROLS AND PROCEDURES

| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 9B.  OTHER INFORMATION

----

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.  EXECUTIVE COMPENSATION

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

----

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| Exhibit No. | Title of Document                                                                                                                                                                                           |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1         | Articles of Incorporation and amendments thereto (9)                                                                                                                                                        |
| 3.2         | Bylaws (1)                                                                                                                                                                                                  |
| 10.1        | Employment Separation Agreement between ClearOne Communications, Inc. and Frances Flood, dated December 5, 2003* (2)                                                                                        |
| 10.2        | Employment Separation Agreement between ClearOne Communications, Inc. and Susie Strohm, dated December 5, 2003* (2)                                                                                         |
| 10.3        | Joint Prosecution and Defense Agreement dated April 1, 2004 between ClearOne Communications, Inc., Parsons Behle & Latimer, Edward Dallin Bagley and Burbidge & Mitchell, and amendment thereto (2) |
| 10.4        | 1997 Employee Stock Purchase Plan (5)                                                                                                                                                                       |
| 10.5        | 1998 Stock Option Plan (5)                                                                                                                                                                                  |
| 10.6        | 2007 Equity Incentive Plan (8)                                                                                                                                                                              |
| 10.7        | Manufacturing Agreement between ClearOne Communications, Inc. and Inovar, Inc. dated August 1, 2005 (3)                                                                                                     |
| 10.8        | Office Lease between Edgewater Corporate Park, LLC and ClearOne Communications, Inc. dated June 5, 2006 (4)                                                                                                 |
| 10.9        | Consulting Agreement between Edward D. Bagley and ClearOne Communications, Inc. dated July 6, 2007 (6)                                                                                                      |
| 10.10       | Severance Agreement between ClearOne Communications, Inc. and Edward D. Bagley dated July 6, 2007* (6)                                                                                                      |
| 10.11       | Compromise Agreement between ClearOne Communications UK Limited and Martin Offwood dated August 13, 2007* (7)                                                                                               |
| 10.12       | Warehouse Lease Agreement between Woodenshoe Development and Clearone Communications, Inc. dated October 5, 2007 (7)                                                                                        |
| 10.13       | Warehouse Lease Agreement between CB Center, LLC and ClearOne Communications, Inc. Dated October 13, 2008 (11)                                                                                              |
| 10.20       | Margin Loan Agreement between ClearOne Communications, Inc. and UBS Financial Services, Inc. dated September 10, 2008 (10)                                                                                  |

----

| 10.21 | Manufacturing Services Agreement between Flextronics Industrial, Ltd. and ClearOne Communications, Inc. dated November 3, 2008 |
|-------|--------------------------------------------------------------------------------------------------------------------------------|
| 10.22 | Settlement and Release Agreement between ClearOne Communications, Inc. and Edward Dallin Bagley dated October 7, 2009          |
| 14.1  | Code of Ethics, approved by the Board of Directors on August 23, 2006 (4)                                                      |
| 21.1  | Subsidiaries of the registrant                                                                                                 |
| 23.1  | Consent of Jones Simkins P.C., independent auditors for the year ending June 30, 2009                                          |
| 31.1  | Section 302 Certification of Chief Executive Officer                                                                           |
| 31.2  | Section 302 Certification of Chief Financial Officer                                                                           |
| 32.1  | Section 906 Certification of Chief Executive Officer                                                                           |
| 32.2  | Section 906 Certification of Chief Financial Officer                                                                           |

| 1 | Incorporated by reference to the Registrant’s registration statement on Form S-3/A filed with the SEC on November 1, 2002. |
|---|----------------------------------------------------------------------------------------------------------------------------------|

| 2 | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003. |
|---|-------------------------------------------------------------------------------------------------------------------------|

| 3 | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004. |
|---|-------------------------------------------------------------------------------------------------------------------------|

| 4 | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006. |
|---|-------------------------------------------------------------------------------------------------------------------------|

| 5 | Incorporated by reference to the Registrant’s registration statement on form S-8 filed with the SEC on October 6, 2006. |
|---|-------------------------------------------------------------------------------------------------------------------------------|

| 6 | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007. |
|---|-------------------------------------------------------------------------------------------------------------------------|

| 7 | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. |
|---|-----------------------------------------------------------------------------------------------------------------------------|

| 8 | Incorporated by reference to the Registrant’s registration statement on Form S-8 filed with the SEC on January 22, 2008. |
|---|--------------------------------------------------------------------------------------------------------------------------------|

| 9 | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008. |
|---|-------------------------------------------------------------------------------------------------------------------------|

| 10 | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on September 11, 2008. |
|----|--------------------------------------------------------------------------------------------------------------------------|

| 11 | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008. |
|----|-----------------------------------------------------------------------------------------------------------------------------|

----

SIGNATURES

|             | CLEARONE COMMUNICATIONS, INC. |
|------------------|-------------------------------|
|             |                          |   |
|             |                          |   |
| October 13, 2009 | By:                           | /s/ Zeynep Hakimoglu |
|             |                          | Zeynep Hakimoglu |
|             |                          | President, Chief Executive Officer, and Chairman |

| Signature                            | Title                                            | Date             |
|--------------------------------------|--------------------------------------------------|------------------|
|                                 |                                             |             |
| /s/ Zeynep HakimogluZeynep Hakimoglu | President, Chief Executive Officer, and Chairman | October 13, 2009 |
|                                 | (Principal Executive Officer)                    |             |
|                                 |                                             |             |
| /s/ Narsi Narayanan                  | Vice President of Finance                        | October 13, 2009 |
| Narsi Narayanan                      | (Principal Financial and Accounting Officer)     |             |
|                                 |                                             |             |
| /s/ Brad R. Baldwin                  | Director                                         | October 13, 2009 |
| Brad R. Baldwin                      |                                             |             |
|                                 |                                             |             |
| /s/ Larry R. Hendricks               | Director                                         | October 13, 2009 |
| Larry R. Hendricks                   |                                             |             |
|                                 |                                             |             |
| /s/ Scott M. Huntsman                | Director                                         | October 13, 2009 |
| Scott M. Huntsman                    |                                             |             |

----

|                                                                                                         | Page  |
|--------------------------------------------------------------------------------------------------------------|------------|
| Report of Independent Registered Public Accounting Firm – Jones Simkins, P.C.                          | F-2        |
| Consolidated Balance Sheets as of June 30, 2009 and 2008                                                     | F-3        |
| Consolidated Statements of Operations and Comprehensive Income for fiscal years ended June 30, 2009 and 2008 | F-4        |
| Consolidated Statements of Shareholders' Equity for fiscal years ended June 30, 2009 and 2008                | F-5        |
| Consolidated Statements of Cash Flows for fiscal years ended June 30, 2009 and 2008                          | F-6        |
| Notes to Consolidated Financial Statements                                                                   | F-8        |

----

Report of Independent Registered Public Accounting Firm

----

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                    |   | June 30, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|
|                                                                                                                                    |   | 2009     |    |   | 2008 |   |
| ASSETS                                                                                                                                  |   |     |    |   |   |   |
| Current assets:                                                                                                                         |   |     |    |   |   |   |
| Cash and cash equivalents                                                                                                               |   | $        | 9,801   |   |   | $ | 3,327 |   |
| Marketable securities                                                                                                                   |   |     | 2,103   |   |   |   | 5,922 |   |
| Receivables, net of allowance for doubtful accounts of $103 and $87, respectively                                                       |   |     | 4,968   |   |   |   | 7,281 |   |
| Deposit, bond for preliminary injunction                                                                                                |   |     | -       |   |   |   | 908 |   |
| Inventories, net                                                                                                                        |   |     | 7,075   |   |   |   | 8,129 |   |
| Deferred income taxes                                                                                                                   |   |     | 2,970   |   |   |   | 3,168 |   |
| Prepaid expenses and other assets                                                                                                       |   |     | 1,398   |   |   |   | 820 |   |
| Total current assets                                                                                                                    |   |     | 28,315  |   |   |   | 29,555 |   |
|                                                                                                                                    |   |     |    |   |   |   |   |   |
| Long-term inventory                                                                                                                     |   |     | 8,559   |   |   |   | - |   |
| Long-term marketable securities                                                                                                         |   |     | -       |   |   |   | 11,168 |   |
| Property and equipment, net                                                                                                             |   |     | 2,762   |   |   |   | 2,554 |   |
| Long-term deferred tax asset                                                                                                            |   |     | 1,159   |   |   |   | 1,639 |   |
| Other assets                                                                                                                            |   |     | 58      |   |   |   | 54 |   |
| Total assets                                                                                                                            |   | $        | 40,853  |   |   | $ | 44,970 |   |
|                                                                                                                                    |   |     |    |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                    |   |     |    |   |   |   |   |   |
| Current liabilities:                                                                                                                    |   |     |    |   |   |   |   |   |
| Accounts payable                                                                                                                        |   | $        | 3,545   |   |   | $ | 2,187 |   |
| Accrued liabilities                                                                                                                     |   |     | 2,380   |   |   |   | 3,672 |   |
| Deferred product revenue                                                                                                                |   |     | 4,709   |   |   |   | 5,795 |   |
| Total current liabilities                                                                                                               |   |     | 10,634  |   |   |   | 11,654 |   |
|                                                                                                                                    |   |     |    |   |   |   |   |   |
| Deferred rent                                                                                                                           |   |     | 544     |   |   |   | 700 |   |
| Other long-term liabilities                                                                                                             |   |     | 1,189   |   |   |   | 1,054 |   |
| Total liabilities                                                                                                                       |   |     | 12,367  |   |   |   | 13,408 |   |
|                                                                                                                                    |   |     |    |   |   |   |   |   |
| Shareholders' equity:                                                                                                                   |   |     |    |   |   |   |   |   |
|  Common stock, par value $0.001, 50,000,000 shares authorized,8,928,802 and 10,228,902 shares issued and outstanding, respectively |   |     | 9       |   |   |   | 10 |   |
| Additional paid-in capital                                                                                                              |   |     | 38,616  |   |   |   | 44,618 |   |
| Accumulated other comprehensive income (loss)                                                                                           |   |     | 6       |   |   |   | (694 | ) |
| Accumulated deficit                                                                                                                     |   |     | (10,145 | ) |   |   | (12,372 | ) |
| Total shareholders' equity                                                                                                              |   |     | 28,486  |   |   |   | 31,562 |   |
| Total liabilities and shareholders' equity                                                                                              |   | $        | 40,853  |   |   | $ | 44,970 |   |

----

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

|                                                                                           |   | Years Ended June 30, |      |
|------------------------------------------------------------------------------------------------|--------|----------------------|-----------|
|                                                                                           |   | 2009                 |      |   | 2008 |   |
|                                                                                           |   |                 |      |   |   |   |
| Revenue                                                                                        |   | $                    | 35,700    |   |   | $ | 38,758 |   |
| Cost of goods sold                                                                             |   |                 | 15,323    |   |   |   | 16,204 |   |
| Gross profit                                                                                   |   |                 | 20,377    |   |   |   | 22,554 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Operating expenses:                                                                            |   |                 |      |   |   |   |   |   |
| Sales and marketing                                                                            |   |                 | 7,529     |   |   |   | 6,673 |   |
| Research and product development                                                               |   |                 | 7,541     |   |   |   | 7,070 |   |
| General and administrative                                                                     |   |                 | 3,631     |   |   |   | 7,669 |   |
| Insurance settlement proceeds                                                                  |   |                 | (1,100    | ) |   |   | - |   |
| Total operating expenses                                                                       |   |                 | 17,601    |   |   |   | 21,412 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Operating income                                                                               |   |                 | 2,776     |   |   |   | 1,142 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Other income, net:                                                                             |   |                 |      |   |   |   |   |   |
| Interest income                                                                                |   |                 | 474       |   |   |   | 1,039 |   |
| Interest expense                                                                               |   |                 | (1        | ) |   |   | (5 | ) |
| Other expense, net                                                                             |   |                 | (27       | ) |   |   | (29 | ) |
| Total other income, net                                                                        |   |                 | 446       |   |   |   | 1,005 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Income from continuing operations before income taxes                                          |   |                 | 3,222     |   |   |   | 2,147 |   |
| (Provision for) benefit from income taxes                                                      |   |                 | (995      | ) |   |   | 3,096 |   |
| Income from continuing operations                                                              |   |                 | 2,227     |   |   |   | 5,243 |   |
| Gain on disposal of discontinued operations, net of taxes of $9                                |   |                 | -         |   |   |   | 16 |   |
| Net income                                                                                     |   | $                    | 2,227     |   |   | $ | 5,259 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Comprehensive income:                                                                          |   |                 |      |   |   |   |   |   |
| Net income                                                                                     |   | $                    | 2,227     |   |   | $ | 5,259 |   |
| Unrealized gain (loss) on marketable securities, net of taxes of ($415) and $413, respectively |   | $                    | 700       |   |   | $ | (694 | ) |
| Comprehensive income                                                                           |   | $                    | 2,927     |   |   | $ | 4,565 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Basic earnings per common share                                                                |   | $                    | 0.24      |   |   | $ | 0.49 |   |
| Diluted earnings per common share                                                              |   | $                    | 0.24      |   |   | $ | 0.49 |   |
|                                                                                           |   |                 |      |   |   |   |   |   |
| Basic weighted average shares outstanding                                                      |   |                 | 9,213,731 |   |   |   | 10,694,401 |   |
| Diluted weighted average shares outstanding                                                    |   |                 | 9,338,320 |   |   |   | 10,798,281 |   |

----

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

|                                                           |   |         |       |   |    |   |   |          |   |   | Accumulated |   |   |          |   |   |   |   |
|----------------------------------------------------------------|--------|--------------|------------|--------|---------|--------|--------|---------------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------|--------|
|                                                           |   |         |       |   |    |   |   | Additional    |   |   | Other       |   |   |          |   |   | Total  |   |
|                                                           |   | Common Stock |       |   | Paid-In |   |   | Comprehensive |   |   | Accumulated |   |   | Shareholders' |   |
|                                                           |   | Shares       |       |   | Amount  |   |   | Capital       |   |   | Income      |   |   | Deficit       |   |   | Equity |   |
|                                                           |   |         |       |   |    |   |   |          |   |   |        |   |   |          |   |   |   |   |
| Balances at June 30, 2007                                      |   |         | 10,861,920 |   |    | $      | 11     |          |   | $      | 47,582      |   |   | $             | -      |   |   | $      | (17,336 | ) |   | $ | 30,257 |   |
|                                                           |   |         |       |   |    |   |   |          |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Stock buy back program                                         |   |         | (834,646   | )      |    |   | (1     | )             |   |   | (4,354      | )      |   |          | -      |   |   |   | - |   |   |   | (4,355 | ) |
| Exercise of stock options                                      |   |         | 228,368    |   |    |   | -      |          |   |   | 792         |   |   |          | -      |   |   |   | - |   |   |   | 792 |   |
| Shares received/retired upon exercise of stock options         |   |         | (28,066    | )      |    |   | -      |          |   |   | (186        | )      |   |          | -      |   |   |   | - |   |   |   | (186 | ) |
| Tax benefit from stock option exercise                         |   |         | -          |   |    |   | -      |          |   |   | 70          |   |   |          | -      |   |   |   | - |   |   |   | 70 |   |
| Compensation cost associated with SFAS No. 123R                |   |         | -          |   |    |   | -      |          |   |   | 707         |   |   |          | -      |   |   |   | - |   |   |   | 707 |   |
| Employee Stock Purchase Plan                                   |   |         | 1,326      |   |    |   | -      |          |   |   | 7           |   |   |          | -      |   |   |   | - |   |   |   | 7 |   |
| Adoption of FIN 48                                             |   |         | -          |   |    |   | -      |          |   |   | -           |   |   |          | -      |   |   |   | (295 | ) |   |   | (295 | ) |
| Unrealized loss on marketable securities, net of tax of $413   |   |         | -          |   |    |   | -      |          |   |   | -           |   |   |          | (694   | )      |   |   | - |   |   |   | (694 | ) |
| Net income                                                     |   |         | -          |   |    |   | -      |          |   |   | -           |   |   |          | -      |   |   |   | 5,259 |   |   |   | 5,259 |   |
| Balances at June 30, 2008                                      |   |         | 10,228,902 |   |    |   | 10     |          |   |   | 44,618      |   |   |          | (694   | )      |   |   | (12,372 | ) |   |   | 31,562 |   |
|                                                           |   |         |       |   |    |   |   |          |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Stock buy back program                                         |   |         | (1,342,620 | )      |    |   | (1     | )             |   |   | (6,767      | )      |   |          | -      |   |   |   | - |   |   |   | (6,768 | ) |
| Exercise of stock options                                      |   |         | 40,799     |   |    |   | 0      |          |   |   | 134         |   |   |          | -      |   |   |   | - |   |   |   | 134 |   |
| Compensation cost associated with SFAS No. 123R                |   |         | -          |   |    |   | -      |          |   |   | 625         |   |   |          | -      |   |   |   | - |   |   |   | 625 |   |
| Employee Stock Purchase Plan                                   |   |         | 1,721      |   |    |   | 0      |          |   |   | 6           |   |   |          | -      |   |   |   | - |   |   |   | 6 |   |
| Unrealized gain on marketable securities, net of tax of ($415) |   |         | -          |   |    |   | -      |          |   |   | -           |   |   |          | 700    |   |   |   | - |   |   |   | 700 |   |
| Net income                                                     |   |         | -          |   |    |   | -      |          |   |   | -           |   |   |          | -      |   |   |   | 2,227 |   |   |   | 2,227 |   |
| Balances at June 30, 2009                                      |   |         | 8,928,802  |   |    | $      | 9      |          |   | $      | 38,616      |   |   | $             | 6      |   |   | $      | (10,145 | ) |   | $ | 28,486 |   |

----

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                         |   | Years Ended June 30, |   |
|--------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                                         |   | 2009                 |   |   | 2008 |   |
| Cash flows from operating activities:                                                                        |   |                 |   |   |   |   |
| Net income from continuing operations                                                                        |   | $                    | 2,227  |   |   | $ | 5,243 |   |
| Adjustments to reconcile net income from continuing operations to net cash (used in) provided by operations: |   |                 |   |   |   |   |   |   |
| Impairment of marketable securities                                                                          |   |                 | -      |   |   |   | 155 |   |
| Depreciation and amortization expense                                                                        |   |                 | 720    |   |   |   | 767 |   |
| Stock-based compensation                                                                                     |   |                 | 631    |   |   |   | 714 |   |
| Provision for doubtful accounts                                                                              |   |                 | 16     |   |   |   | 33 |   |
| Write-off of inventory                                                                                       |   |                 | 2,293  |   |   |   | 136 |   |
| Write-off of note receivable                                                                                 |   |                 | 5      |   |   |   | - |   |
| Loss on disposal of assets                                                                                   |   |                 | -      |   |   |   | 6 |   |
| Changes in operating assets and liabilities:                                                                 |   |                 |   |   |   |   |   |   |
| Receivables                                                                                                  |   |                 | 1,248  |   |   |   | 485 |   |
| Deposit, bond for preliminary injunction                                                                     |   |                 | 908    |   |   |   | (908 | ) |
| Inventories                                                                                                  |   |                 | (9,798 | ) |   |   | (929 | ) |
| Deferred income taxes                                                                                        |   |                 | 262    |   |   |   | (4,807 | ) |
| Prepaid expenses and other assets                                                                            |   |                 | (592   | ) |   |   | (590 | ) |
| Accounts payable                                                                                             |   |                 | 2,402  |   |   |   | 875 |   |
| Accrued liabilities                                                                                          |   |                 | (1,292 | ) |   |   | 1,676 |   |
| Deferred product revenue                                                                                     |   |                 | (1,086 | ) |   |   | 669 |   |
| Other long-term liabilities                                                                                  |   |                 | 135    |   |   |   | - |   |
| Net cash (used in) provided by operating activities                                                          |   |                 | (1,921 | ) |   |   | 3,525 |   |
|                                                                                                         |   |                 |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                        |   |                 |   |   |   |   |   |   |
| Purchase of property and equipment                                                                           |   |                 | (1,074 | ) |   |   | (786 | ) |
| Purchase of intangible assets                                                                                |   |                 | -      |   |   |   | (49 | ) |
| Purchase of marketable securities                                                                            |   |                 | (1,253 | ) |   |   | (15,378 | ) |
| Sale of marketable securities                                                                                |   |                 | 17,356 |   |   |   | 16,897 |   |
| Net cash provided by continuing investing activities                                                         |   |                 | 15,025 |   |   |   | 684 |   |
| Net cash provided by discontinued investing activities                                                       |   |                 | -      |   |   |   | 16 |   |
| Net cash provided by investing activities                                                                    |   |                 | 15,025 |   |   |   | 700 |   |
|                                                                                                         |   |                 |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                        |   |                 |   |   |   |   |   |   |
| Proceeds from the issuance of common stock - options                                                         |   |                 | 134    |   |   |   | 605 |   |
| Common stock purchased and retired                                                                           |   |                 | (6,768 | ) |   |   | (4,355 | ) |
| Tax benefit from stock options                                                                               |   |                 | -      |   |   |   | 70 |   |
| Net cash used in financing activities                                                                        |   |                 | (6,634 | ) |   |   | (3,680 | ) |
|                                                                                                         |   |                 |   |   |   |   |   |   |
| Net increase in cash and cash equivalents                                                                    |   |                 | 6,474  |   |   |   | 545 |   |
| Cash and cash equivalents at the beginning of the year                                                       |   |                 | 3,327  |   |   |   | 2,782 |   |
| Cash and cash equivalents at the end of the year                                                             |   | $                    | 9,801  |   |   | $ | 3,327 |   |

----

|                                                                                              |   | Years Ended June 30, |   |
|---------------------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                              |   | 2009                 |   |   | 2008 |   |
|                                                                                              |   |                 |   |   |   |   |
| Supplemental disclosure of cash flow information:                                                 |   |                 |   |   |   |   |
| Cash paid for interest                                                                            |   | $                    | 1      |   |   | $ | 5 |   |
| Cash paid for income taxes                                                                        |   | $                    | 1,637  |   |   | $ | 1,701 |   |
|                                                                                              |   |                 |   |   |   |   |   |   |
| Supplemental disclosure of non-cash financing activities:                                         |   |                 |   |   |   |   |   |   |
| Exchanged accounts receivable from a vendor with accounts payable to the same vendor              |   | $                    | 1,044  |   |   | $ | 432 |   |
|     Adoption of FIN48                                                         |   | $                    | -      |   |   | $ | 295 |   |
| Unrealized gain (loss) on marketable securities, net of tax of ($415) and $413, respectively |   | $                    | 700    |   |   | $ | (694 | ) |

----

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

----

----

|                           |   | Years Ended June 30, |   |
|--------------------------------|--------|----------------------|--------|
|                           |   | 2009                 |   |   | 2008 |   |
| Balance at Beginning of Period |   | $                    | 87     |   |   | $ | 54 |   |
| Charged to Costs and Expenses  |   |                 | 173    |   |   |   | 33 |   |
| Deductions                     |   |                 | (157   | ) |   |   | - |   |
| Balance at End of Period       |   | $                    | 103    |   |   | $ | 87 |   |

----

|                        |   | As of June 30, |   |
|-----------------------------|--------|----------------|--------|
|                        |   | 2009           |   |   | 2008 |   |
| Deferred Revenue            |   | $              | 4,709  |   |   | $ | 5,795 |   |
| Deferred Cost of Goods Sold |   |           | 1,843  |   |   |   | 2,047 |   |
| Deferred Gross Profit       |   |           | 2,866  |   |   |   | 3,748 |   |

|                             |   | Years Ended June 30, |   |
|----------------------------------|--------|----------------------|--------|
|                             |   | 2009                 |   |   | 2008 |   |
| Balance at the beginning of year |   | $                    | 211    |   |   | $ | 125 |   |
| Accruals/additions               |   |                 | 262    |   |   |   | 329 |   |
| Usage                            |   |                 | (324   | ) |   |   | (243 | ) |
| Balance at end of year           |   | $                    | 149    |   |   | $ | 211 |   |

----

|                                                          |   | Years Ended June 30, |      |
|---------------------------------------------------------------|--------|----------------------|-----------|
|                                                          |   | 2009                 |      |   | 2008 |   |
| Numerator:                                                    |   |                 |      |   |   |   |
| Income from continuing operations                             |   | $                    | 2,227     |   |   | $ | 5,243 |   |
| Gain on disposal of discontinued operations, net of tax       |   |                 | -         |   |   |   | 16 |   |
| Net income                                                    |   | $                    | 2,227     |   |   | $ | 5,259 |   |
| Denominator:                                                  |   |                 |      |   |   |   |   |   |
| Basic weighted average shares                                 |   |                 | 9,213,731 |   |   |   | 10,694,401 |   |
| Dilutive common stock equivalents using treasury stock method |   |                 | 124,589   |   |   |   | 103,880 |   |
| Diluted weighted average shares                               |   |                 | 9,338,320 |   |   |   | 10,798,281 |   |
|                                                          |   |                 |      |   |   |   |   |   |
| Basic earnings per common share:                              |   |                 |      |   |   |   |   |   |
| Continuing operations                                         |   | $                    | 0.24      |   |   | $ | 0.49 |   |
| Disposal of discontinued operations                           |   | $                    | -         |   |   | $ | - |   |
| Net income                                                    |   | $                    | 0.24      |   |   | $ | 0.49 |   |
| Diluted earnings per common share:                            |   |                 |      |   |   |   |   |   |
| Continuing operations                                         |   | $                    | 0.24      |   |   | $ | 0.49 |   |
| Disposal of discontinued operations                           |   | $                    | -         |   |   | $ | - |   |
| Net income                                                    |   | $                    | 0.24      |   |   | $ | 0.49 |   |

----

----

|           |   | As of June 30, |   |
|----------------|--------|----------------|--------|
|           |   | 2009           |   |   | 2008 |   |
| Current:       |   |           |   |   |   |   |
| Raw materials  |   | $              | 352    |   |   | $ | 724 |   |
| Finished goods |   |           | 6,723  |   |   |   | 7,405 |   |
|           |   | $              | 7,075  |   |   | $ | 8,129 |   |
|           |   |           |   |   |   |   |   |   |
| Long-term:     |   |           |   |   |   |   |   |   |
| Raw materials  |   | $              | 2,376  |   |   | $ | - |   |
| Finished goods |   |           | 6,183  |   |   |   | - |   |
|           |   | $              | 8,559  |   |   | $ | - |   |

|                                          |                  |   | As of June 30, |   |
|-----------------------------------------------|-----------------------|--------|----------------|--------|
|                                          | Estimateduseful lives |   | 2009           |   |   | 2008 |   |
| Office furniture and equipment                | 3 to 10 years         |   | $              | 8,403  |   |   | $ | 8,197 |   |
| Leasehold improvements                        | 1 to 6 years          |   |           | 1,334  |   |   |   | 1,309 |   |
| Manufacturing and test equipment              | 2 to 10 years         |   |           | 2,288  |   |   |   | 1,532 |   |
|     Total at cost         |                  |   |           | 12,025 |   |   |   | 11,038 |   |
| Accumulated depreciation and amortization     |                  |   |           | (9,263 | ) |   |   | (8,484 | ) |
|    Property and equipment, net |                  |   | $              | 2,762  |   |   | $ | 2,554 |   |

----

|                 |   | Cost Basis |   |   | Unrealized Gains |   |   | Unrealized Losses |   |   | Recorded Basis |   |   | Current Marketable Securities |   |   | Long-term Marketable Securities |   |
|----------------------|--------|------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|-------------------------------|--------|--------|---------------------------------|--------|
| As of June 30, 2009  |   |       |   |   |             |   |   |              |   |   |           |   |   |                          |   |   |                            |   |
| Corporate bonds      |   | $          | 2,098  |   |             | $      | 5      |              |   | $      | -              |   |   | $                             | 2,103  |   |                            | $      | 2,103 |   |   | $ | - |   |
| Total                |   | $          | 2,098  |   |             | $      | 5      |              |   | $      | -              |   |   | $                             | 2,103  |   |                            | $      | 2,103 |   |   | $ | - |   |
| As of June 30, 2008  |   |       |   |   |             |   |   |              |   |   |           |   |   |                          |   |   |                            |   |   |   |   |   |   |   |
| Corporate bonds      |   | $          | 5,972  |   |             | $      | -      |              |   | $      | (50            | )      |   | $                             | 5,922  |   |                            | $      | 5,922 |   |   | $ | - |   |
| Municipal securities |   |       | 12,225 |   |             |   | -      |              |   |   | (1,057         | )      |   |                          | 11,168 |   |                            |   | - |   |   |   | 11,168 |   |
| Total                |   | $          | 18,197 |   |             | $      | -      |              |   | $      | (1,107         | )      |   | $                             | 17,090 |   |                            | $      | 5,922 |   |   | $ | 11,168 |   |

|                                                        |   | Years ended June 30, |   |
|-------------------------------------------------------------|--------|----------------------|--------|
|                                                        |   | 2009                 |   |   | 2008 |   |
| Balance, beginning of year                                  |   | $                    | (694   | ) |   | $ | - |   |
| Unrealized holding gains (losses), in marketable securities |   |                 | 1,115  |   |   |   | (1,107 | ) |
| Income tax (provision) benefit                              |   |                 | (415   | ) |   |   | 413 |   |
| Total                                                       |   | $                    | 6      |   |   | $ | (694 | ) |

----

| ·   | Level 1: Valuations based on quoted prices in active markets for identical instruments that we are able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 2: Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3: Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
|--------------------|------------------------------------------------------------------------------------------------------------------|

|                                     |   | Total Fair Value at June 30, 2009 |   |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   |   | Significant other observable inputs(Level 2) |   |   | Significant unobservable inputs(Level 3) |   |   | Total |   |
|------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|------------------------------------------|--------|--------|-------|--------|
| Short-term available-for-sale securities |   | $                                 | 2,103  |   |                                                           | $      | 2,103  |                                         |   | $      | -                                        |   |   | $     | -      |   |   | $ | 2,103 |   |
| Total                                    |   |                              |   |   |                                                           | $      | 2,103  |                                         |   | $      | -                                        |   |   | $     | -      |   |   | $ | 2,103 |   |

----

| Years Ending June 30,        |   |
|------------------------------|--------|
| 2010                         |   | $ | 803 |   |
| 2011                         |   |   | 778 |   |
| 2012                         |   |   | 758 |   |
| 2013                         |   |   | 739 |   |
| 2014                         |   |   | 362 |   |
| Thereafter                   |   |   | - |   |
| Total minimum lease payments |   | $ | 3,440 |   |

|                                    |   | As of June 30, |   |
|-----------------------------------------|--------|----------------|--------|
|                                    |   | 2009           |   |   | 2008 |   |
| Accrued salaries and other compensation |   | $              | 1,112  |   |   | $ | 974 |   |
| Accrued taxes                           |   |           | -      |   |   |   | 72 |   |
| Other accrued liabilities               |   |           | 1,268  |   |   |   | 2,626 |   |
| Total                                   |   | $              | 2,380  |   |   | $ | 3,672 |   |

----

----

----

----

----

----

----

|                               | Years ended June 30, |
|------------------------------------|----------------------|
|                               | 2009                 | 2008 |
| Risk-free interest rate, average   | 2.4%                 | 4.5% |
| Expected option life, average      | 3.9 years            | 4.3 years |
| Expected price volatility, average | 54.1%                | 73.9% |
| Expected dividend yield            | 0.0%                 | 0.0% |
| Expected annual forfeiture rate    | 10.0%                | 10.0% |

| Stock Options                |   | Number of Shares |      |   | Weighted Average Exercise Price |   |
|------------------------------|--------|------------------|-----------|--------|---------------------------------|--------|
|                         |   |             |      |   |                            |   |
| Outstanding at June 30, 2007 |   |             | 1,273,199 |   |                            | $      | 5.38 |   |
|                         |   |             |      |   |                            |   |   |   |
| Granted                      |   |             | 319,000   |   |                            |   | 6.13 |   |
| Expired and canceled         |   |             | (68,058   | )      |                            |   | 7.39 |   |
| Forfeited prior to vesting   |   |             | (96,727   | )      |                            |   | 5.23 |   |
| Exercised                    |   |             | (228,368  | )      |                            |   | 3.47 |   |
| Outstanding at June 30, 2008 |   |             | 1,199,046 |   |                            |   | 5.85 |   |
|                         |   |             |      |   |                            |   |   |   |
| Granted                      |   |             | 263,500   |   |                            |   | 3.79 |   |
| Expired and canceled         |   |             | (29,047   | )      |                            |   | 6.31 |   |
| Forfeited prior to vesting   |   |             | (149,614  | )      |                            |   | 4.69 |   |
| Exercised                    |   |             | (40,799   | )      |                            |   | 3.29 |   |
| Outstanding at June 30, 2009 |   |             | 1,243,086 |   |                            |   | 5.62 |   |
| Exercisable                  |   |             | 946,281   |   |                            |   | 5.92 |   |

----

|                 |            |   | Options Outstanding |      | Options Exercisable |                            |
|----------------------|-----------------|--------|---------------------|-----------|---------------------|---------------------------------|
| Exercise Price Range |            |   | Number of Shares    |      |                | Weighted Average Exercise Price |   | Weighted Average Contractual Term (Years) |   | Options Exercisable |   |   | Weighted Average Exercise Price |   |
|                 |            |   |                |      |                |                            |   |   |   |   |   |   |   |   |
| $                    | 0.00 to $4.00   |   |                |      | 479,919             |                            |   | $ | 3.40 |   | 6.3 years |   |   | 403,037 |   |   | $ | 3.46 |   |
| $                    | 4.01 to $8.00   |   |                |      | 625,417             |                            |   |   | 5.57 |   | 6.4 years |   |   | 418,108 |   |   |   | 5.99 |   |
| $                    | 8.01 to $12.00  |   |                |      | 52,500              |                            |   |   | 11.83 |   | 1.1 years |   |   | 51,688 |   |   |   | 11.86 |   |
| $                    | 12.01 to $16.00 |   |                |      | 84,500              |                            |   |   | 14.66 |   | 0.8 years |   |   | 73,025 |   |   |   | 14.89 |   |
| $                    | 16.01 to $20.00 |   |                |      | 750                 |                            |   |   | 18.80 |   | 0.8 years |   |   | 423 |   |   |   | 19.13 |   |
| Total                |            |   |                | 1,243,086 |                |                            | $ | 5.62 |   | 5.8 years |   |   | 946,281 |   |   | $ | 5.92 |   |

| Non-vested Shares           |   | Number of Shares |     |   | Weighted Average Grant-Date Fair Value |   |
|-----------------------------|--------|------------------|----------|--------|----------------------------------------|--------|
|                        |   |             |     |   |                                   |   |
| Non-vested at June 30, 2008 |   |             | 451,310  |   |                                   | $      | 3.44 |   |
|                        |   |             |     |   |                                   |   |   |   |
| Granted                     |   |             | 263,500  |   |                                   |   | 1.64 |   |
| Vested                      |   |             | (268,391 | )      |                                   |   | 3.24 |   |
| Forfeited prior to vesting  |   |             | (149,614 | )      |                                   |   | 2.54 |   |
| Non-vested at June 30, 2009 |   |             | 296,805  |   |                                   | $      | 2.48 |   |

|       | Years ended June 30, |
|------------|----------------------|
|       | 2009                 | 2008 |
| Customer A | 31.0%                | 31.0% |
| Customer B | 15.0%                | 14.4% |
| Customer C | 12.0%                | 14.4% |
| Total      | 58.0%                | 59.8% |

|       | As of June 30, |
|------------|----------------|
|       | 2009           | 2008 |
| Customer A | 19.2%          | 22.5% |
| Customer B | 15.5%          | 15.3% |
| Customer C | 9.1%           | 12.3% |
| Total      | 43.8%          | 50.1% |

----

|     |   | Years Ended June 30, |   |
|----------|--------|----------------------|--------|
|     |   | 2009                 |   |   | 2008 |   |
|     |   |                 |   |   |   |   |
| U.S.     |   | $                    | 3,166  |   |   | $ | 2,296 |   |
| Non-U.S. |   |                 | 56     |   |   |   | (149 | ) |
|     |   | $                    | 3,222  |   |   | $ | 2,147 |   |

|                                          |   | Years Ended June 30, |   |
|-----------------------------------------------|--------|----------------------|--------|
|                                          |   | 2009                 |   |   | 2008 |   |
|                                          |   |                 |   |   |   |   |
| Current:                                      |   |                 |   |   |   |   |
| U.S. Federal                                  |   | $                    | (236   | ) |   | $ | (1,396 | ) |
| U.S. State                                    |   |                 | (405   | ) |   |   | (61 | ) |
| Non-U.S.                                      |   |                 | (5     | ) |   |   | - |   |
| Total current                                 |   | $                    | (646   | ) |   | $ | (1,457 | ) |
|                                          |   |                 |   |   |   |   |   |   |
| Deferred:                                     |   |                 |   |   |   |   |   |   |
| U.S. Federal                                  |   |                 | 16     |   |   |   | 3,663 |   |
| U.S. State                                    |   |                 | 562    |   |   |   | 890 |   |
| Change in deferred before valuation allowance |   |                 | 578    |   |   |   | 4,553 |   |
| Decrease (increase) in valuation allowance    |   |                 | (927   | ) |   |   | - |   |
| Total deferred                                |   |                 | (349   | ) |   |   | 4,553 |   |
|                                          |   |                 |   |   |   |   |   |   |
| (Provision) benefit for income taxes          |   | $                    | (995   | ) |   | $ | 3,096 |   |

----

|                                                        |   | Years Ended June 30, |   |
|-------------------------------------------------------------|--------|----------------------|--------|
|                                                        |   | 2009                 |   |   | 2008 |   |
|                                                        |   |                 |   |   |   |   |
| U.S. federal statutory income tax rate at 34.0 percent      |   | $                    | (1,096 | ) |   | $ | (730 | ) |
| State income tax (provision) benefit, net of federal income |   |                 |   |   |   |   |   |   |
|   tax effect                                      |   |                 | (454   | ) |   |   | 547 |   |
| Repatriated foreign earnings                                |   |                 | -      |   |   |   | (308 | ) |
| Foreign tax credit                                          |   |                 | -      |   |   |   | 185 |   |
| Non-deductible SFAS No. 123R compensation expense           |   |                 | -      |   |   |   | (106 | ) |
| Research and development credit                             |   |                 | 343    |   |   |   | 58 |   |
| Foreign earnings or losses taxed at different rates         |   |                 | 14     |   |   |   | (45 | ) |
| Uncertain tax positions                                     |   |                 | (53    | ) |   |   | (295 | ) |
| Non-deductible items and other                              |   |                 | 334    |   |   |   | 51 |   |
| Change in valuation allowance                               |   |                 | (83    | ) |   |   | 3,739 |   |
|                                                        |   |                 |   |   |   |   |   |   |
| Tax (provision) benefit                                     |   | $                    | (995   | ) |   | $ | 3,096 |   |

|                                                  |   | As of June 30, |   |
|-------------------------------------------------------|--------|----------------|--------|
|                                                  |   | 2009           |   |   | 2008 |   |
|                                                  |   | Current        |   |   | Long-term |   |   | Current |   |   | Long-term |   |
|                                                  |   |           |   |   |   |   |   |   |   |   |   |   |
| Deferred revenue                                      |   | $              | 1,118  |   |   | $ | - |   |   | $ | 1,462 |   |   | $ | - |   |
| Basis difference in intangible assets                 |   |           | -      |   |   |   | 525 |   |   |   | - |   |   |   | 599 |   |
| Inventory reserve                                     |   |           | 1,471  |   |   |   | - |   |   |   | 815 |   |   |   | - |   |
| Net operating loss carryforwards                      |   |           | -      |   |   |   | 211 |   |   |   | - |   |   |   | 10 |   |
| Accumulated research and development credits          |   |           | -      |   |   |   | 852 |   |   |   | - |   |   |   | 341 |   |
| Alternative minimum tax credits                       |   |           | -      |   |   |   | 409 |   |   |   | - |   |   |   | 287 |   |
| Accrued liabilities                                   |   |           | 255    |   |   |   | - |   |   |   | 848 |   |   |   | - |   |
| Deductible SFAS 123R compensation expense             |   |           | -      |   |   |   | 638 |   |   |   | - |   |   |   | 513 |   |
| Allowance for sales returns and doubtful accounts     |   |           | 37     |   |   |   | - |   |   |   | 34 |   |   |   | - |   |
| Difference in property and equipment basis            |   |           | -      |   |   |   | (517 | ) |   |   | - |   |   |   | (324 | ) |
| Other                                                 |   |           | 89     |   |   |   | (31 | ) |   |   | 9 |   |   |   | 213 |   |
|                                                  |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Total net deferred income tax asset |   |           | 2,970  |   |   |   | 2,087 |   |   |   | 3,168 |   |   |   | 1,639 |   |
|                                                  |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Less valuation allowance            |   |           | -      |   |   |   | (928 | ) |   |   | - |   |   |   | - |   |
|                                                  |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net deferred income tax asset       |   | $              | 2,970  |   |   | $ | 1,159 |   |   | $ | 3,168 |   |   | $ | 1,639 |   |

----

|                                       |   | As of June 30, |   |
|--------------------------------------------|--------|----------------|--------|
|                                       |   | 2009           |   |   | 2008 |   |
|                                       |   |           |   |   |   |   |
| Unrecognized tax benefits, opening balance |   | $              | 1,152  |   |   | $ | 862 |   |
| Tax positions taken in a prior period      |   |           |   |   |   |   |   |   |
| Gross increases                            |   |           | 163    |   |   |   | 63 |   |
| Gross decreases                            |   |           | -      |   |   |   | - |   |
| Tax positions taken in the current period  |   |           |   |   |   |   |   |   |
| Gross increases                            |   |           | 97     |   |   |   | 419 |   |
| Settlements with taxing authorities        |   |           | -      |   |   |   | - |   |
| Lapse of applicable statute of limitations |   |           | (213   | ) |   |   | (192 | ) |
| Unrecognized tax benefits, ending balance  |   | $              | 1,199  |   |   | $ | 1,152 |   |

----

|                |   | Years Ended June 30, |   |
|---------------------|--------|----------------------|--------|
|                |   | 2009                 |   |   | 2008 |   |
|                |   |                 |   |   |   |   |
| United States       |   | $                    | 24,214 |   |   | $ | 27,371 |   |
| All other countries |   |                 | 11,486 |   |   |   | 11,387 |   |
| Total               |   | $                    | 35,700 |   |   | $ | 38,758 |   |

|                                                  |   | Quarter ended September 30, 2008 (Unaudited) |   |
|-------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                  |   | Previously reported                          |   |   | Correction |   |   | After correction |   |
| Revenue                                               |   | $                                            | 10,258 |   |   | $ | 824 |   |   | $ | 11,082 |   |
| Cost of goods sold                                    |   |                                         | (3,625 | ) |   |   | (317 | ) |   |   | (3,942 | ) |
| Sales and marketing                              |   |                                         | (1,977 | ) |   |   |   |   |   |   | (1,977 | ) |
| Research and product development                      |   |                                         | (1,776 | ) |   |   |   |   |   |   | (1,776 | ) |
| General and administrative                            |   |                                         | (1,072 | ) |   |   |   |   |   |   | (1,072 | ) |
| Other income, net                                     |   |                                         | 65     |   |   |   |   |   |   |   | 65 |   |
| Income from continuing operations before income taxes |   |                                         | 1,873  |   |   |   | 507 |   |   |   | 2,380 |   |
| Provision for income taxes                            |   |                                         | (739   | ) |   |   | (114 | ) |   |   | (853 | ) |
| Net income                                            |   | $                                            | 1,134  |   |   | $ | 393 |   |   | $ | 1,527 |   |
| Basic and diluted earnings per common share           |   | $                                            | 0.11   |   |   | $ | 0.04 |   |   | $ | 0.15 |   |

----

|                                                  |   | Quarter ended December 31, 2008 (Unaudited) |   |
|-------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                  |   | Previously reported                         |   |   | Correction |   |   | After correction |   |
|                                                  |   |                                        |   |   |   |   |   |   |   |
| Revenue                                               |   | $                                           | 9,970  |   |   | $ | (14 | ) |   | $ | 9,956 |   |
| Cost of goods sold                                    |   |                                        | (4,168 | ) |   |   | 223 |   |   |   | (3,945 | ) |
| Sales and marketing                              |   |                                        | (1,934 | ) |   |   |   |   |   |   | (1,934 | ) |
| Research and product development                      |   |                                        | (1,844 | ) |   |   |   |   |   |   | (1,844 | ) |
| General and administrative                            |   |                                        | (1,257 | ) |   |   |   |   |   |   | (1,257 | ) |
| Other income, net                                     |   |                                        | 96     |   |   |   |   |   |   |   | 96 |   |
| Income from continuing operations before income taxes |   |                                        | 863    |   |   |   | 209 |   |   |   | 1,072 |   |
| Provision for income taxes                            |   |                                        | (259   | ) |   |   | (71 | ) |   |   | (330 | ) |
| Net income                                            |   | $                                           | 604    |   |   | $ | 138 |   |   | $ | 742 |   |
| Basic and diluted earnings per common share           |   | $                                           | 0.07   |   |   | $ | 0.02 |   |   | $ | 0.08 |   |

|                                                  |   | Quarter ended March 31, 2009 (Unaudited) |   |
|-------------------------------------------------------|--------|------------------------------------------|--------|
|                                                  |   | Previously reported                      |   |   | Correction |   |   | After correction |   |
|                                                  |   |                                     |   |   |   |   |   |   |   |
| Revenue                                               |   | $                                        | 7,612  |   |   | $ | (10 | ) |   | $ | 7,602 |   |
| Cost of goods sold                                    |   |                                     | (3,605 | ) |   |   | 56 |   |   |   | (3,549 | ) |
| Sales and marketing                              |   |                                     | (1,690 | ) |   |   |   |   |   |   | (1,690 | ) |
| Research and product development                      |   |                                     | (1,810 | ) |   |   |   |   |   |   | (1,810 | ) |
| General and administrative                            |   |                                     | (123   | ) |   |   |   |   |   |   | (123 | ) |
| Other income, net                                     |   |                                     | 60     |   |   |   |   |   |   |   | 60 |   |
| Income from continuing operations before income taxes |   |                                     | 444    |   |   |   | 46 |   |   |   | 490 |   |
| Provision for income taxes                            |   |                                     | (105   | ) |   |   | (25 | ) |   |   | (130 | ) |
| Net income                                            |   | $                                        | 339    |   |   | $ | 21 |   |   | $ | 360 |   |
| Basic and diluted earnings per common share           |   | $                                        | 0.04   |   |   | $ | - |   |   | $ | 0.04 |   |

|                     |   | As of September 30, 2008 (Unaudited) |    |
|--------------------------|--------|-------------------------------------------|---------|
|                     |   | Previously reported                       |    |   | Correction |   |   | After correction |   |
| Inventories, net         |   | $                                         | 10,757  |   |   | $ | 12 |   |   | $ | 10,769 |   |
| Deferred income taxes    |   |                                      | 2,773   |   |   |   | 226 |   |   |   | 2,999 |   |
| Deferred product revenue |   |                                      | 4,432   |   |   |   | (424 | ) |   |   | 4,008 |   |
| Accumulated deficit      |   |                                      | (10,660 | ) |   |   | (186 | ) |   |   | (10,846 | ) |

|                     |   | As of December 31, 2008 (Unaudited) |    |
|--------------------------|--------|-------------------------------------|---------|
|                     |   | Previously reported                 |    |   | Correction |   |   | After correction |   |
| Inventories, net         |   | $                                   | 12,859  |   |   | $ | 235 |   |   | $ | 13,094 |   |
| Deferred income taxes    |   |                                | 3,124   |   |   |   | 155 |   |   |   | 3,279 |   |
| Deferred product revenue |   |                                | 4,881   |   |   |   | (439 | ) |   |   | 4,442 |   |
| Accumulated deficit      |   |                                | (10,056 | ) |   |   | (49 | ) |   |   | (10,105 | ) |

----

|                     |   | As of March 31, 2009 (Unaudited) |   |
|--------------------------|--------|----------------------------------|--------|
|                     |   | Previously reported              |   |   | Correction |   |   | After Correction |   |
|                     |   |                             |   |   |   |   |   |   |   |
| Inventories, net         |   | $                                | 14,046 |   |   | $ | 291 |   |   | $ | 14,337 |   |
| Deferred income taxes    |   |                             | 2,606  |   |   |   | 131 |   |   |   | 2,737 |   |
| Deferred product revenue |   |                             | 4,163  |   |   |   | (448 | ) |   |   | 3,715 |   |
| Accumulated deficit      |   |                             | (9,717 | ) |   |   | (26 | ) |   |   | (9,743 | ) |