----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

**Quarterly      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934**

**OR**

**Transition      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934**

**000-17219**

**CLEARONE      COMMUNICATIONS, INC.**

| **Utah**                                                                                     |   | **87-0398877**                                                        |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
| (State                or other jurisdiction of incorporation                or organization) |   | (I.R.S.                employer identification                number) |

| **5225                Wiley Post Way, Suite 500****Salt                Lake City, Utah** |   |  **84116**           |
|------------------------------------------------------------------------------------------|--------|---------------------------|
| (Address                of principal executive offices)                                  |   | (Zip                Code) |

**(801)      975-7200**

----

----

----

**REPORT      ON FORM 10-Q**

**FOR      THE QUARTER ENDED DECEMBER 31, 2007**

**INDEX**

|                                                           |                                                                                                                                                                                                              | **Page                Number** |
|----------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
| Disclosure                Regarding Forward-Looking Statements | 3                                                                                                                                                                                                                 |
|  PART                I - FINANCIAL INFORMATION            |
| Item                1                                          | Condensed                Consolidated Financial Statements                                                                                                                                                        |                           |
|                                                           | Condensed                Consolidated Balance Sheets as of December 31, 2006 and June 30,                2006                                                                                                     | 4                              |
|                                                           | Condensed                Consolidated Statements of Income for the three months ended December                31,                2006 and 2005 and the six months ended December 31, 2006 and                2005 | 5                              |
|                                                           | Condensed                Consolidated Statements of Cash Flows for the six months ended December                31, 2006 and 2005                                                                                 | 7                              |
|                                                           | Notes                to Condensed Consolidated Financial Statements                                                                                                                                               | 9                              |
| Item                2                                          | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                                                                                         | 13                             |
| Item                3                                          | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                                         | 20                             |
| Item                4                                          | Controls                and Procedures                                                                                                                                                                            | 20                             |
|  PART                II - OTHER INFORMATION               |
| Item                1                                          | Legal                Proceedings                                                                                                                                                                                  | 22                             |
| Item                1A                                         | Risk                Factors                                                                                                                                                                                       | 23                             |
| Item                2                                          | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                                        | 29                             |
| Item                3                                          | Defaults                Upon Senior Securities                                                                                                                                                                    | 29                             |
| Item                4                                          | Submission                of Matters to a Vote of Security Holders                                                                                                                                                | 29                             |
| Item                5                                          | Other                Information                                                                                                                                                                                  | 29                             |
| Item                6                                          | Exhibits                                                                                                                                                                                                          | 29                             |
| Signatures                                                     |                                                                                                                                                                                                              | 30                             |

----

**DISCLOSURE      REGARDING FORWARD-LOOKING STATEMENTS**

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements**

**CLEARONE      COMMUNICATIONS, INC.**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**(in      thousands of dollars, except per share amounts)**

|                                                                                                |   | **Unaudited**                   |    |                        |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|-----------------------------|--------|
|                                                                                                |   | **December                31,** |    | **June                30,** |   |
|                                                                                                |   | **2006**                        |    | **2006**                    |   |
|                                                                                                |   |                            |    |                        |   |
| **ASSETS**                                                                                          |   |                            |    |                        |   |
| Current                assets:                                                                      |   |                            |    |                        |   |
| Cash                and cash equivalents                                                            |   | $                               | 1,840   |                        | $      | 1,240 |   |
| Marketable                securities                                                                |   |                            | 16,500  |                        |   | 20,550 |   |
| Accounts                receivable                                                                  |   |                            | 7,682   |                        |   | 7,784 |   |
| Note                receivable                                                                      |   |                            | 156     |                        |   | - |   |
| Inventories,                net                                                                     |   |                            | 5,909   |                        |   | 6,614 |   |
| Income                tax receivable                                                                |   |                            | 2,392   |                        |   | 2,607 |   |
| Deferred                income taxes, net                                                           |   |                            | 87      |                        |   | 128 |   |
| Prepaid                expenses                                                                     |   |                            | 322     |                        |   | 255 |   |
| Net                assets of discontinued operations                                                |   |                            | -       |                        |   | 565 |   |
| Total                current assets                                                                 |   |                            | 34,888  |                        |   | 39,743 |   |
|                                                                                                |   |                            |    |                        |   |   |   |
| Property                and equipment, net                                                          |   |                            | 2,817   |                        |   | 1,647 |   |
| Note                receivable - long-term                                                          |   |                            | 126     |                        |   | - |   |
| Other                assets                                                                         |   |                            | 22      |                        |   | 15 |   |
| Total                assets                                                                         |   | $                               | 37,853  |                        | $      | 41,405 |   |
|                                                                                                |   |                            |    |                        |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS' EQUITY**                                             |   |                            |    |                        |   |   |   |
| Current                liabilities:                                                                 |   |                            |    |                        |   |   |   |
| Accounts                payable                                                                     |   | $                               | 2,083   |                        | $      | 2,597 |   |
| Accrued                liabilities                                                                  |   |                            | 2,152   |                        |   | 2,397 |   |
| Deferred                product revenue                                                             |   |                            | 4,711   |                        |   | 5,871 |   |
| Total                current liabilities                                                            |   |                            | 8,946   |                        |   | 10,865 |   |
|                                                                                                |   |                            |    |                        |   |   |   |
| Deferred                rent                                                                        |   |                            | 933     |                        |   | - |   |
| Deferred                income taxes, net                                                           |   |                            | 87      |                        |   | 128 |   |
| Total                liabilities                                                                    |   |                            | 9,966   |                        |   | 10,993 |   |
|                                                                                                |   |                            |    |                        |   |   |   |
| Shareholders'                equity:                                                                |   |                            |    |                        |   |   |   |
| Common                stock, par value $0.001, 50,000,000 shares authorized,                        |   |                            |    |                        |   |   |   |
| 11,072,349                and 12,184,727 shares issued and outstanding, respectively                |   |                            | 11      |                        |   | 12 |   |
| Additional                paid-in capital                                                           |   |                            | 48,479  |                        |   | 52,764 |   |
| Accumulated                deficit                                                                  |   |                            | (20,603 | )                           |   | (22,364 | ) |
| Total                shareholders' equity                                                           |   |                            | 27,887  |                        |   | 30,412 |   |
| Total                liabilities and shareholders' equity                                           |   | $                               | 37,853  |                        | $      | 41,405 |   |
|                                                                                                |   |                            |    |                        |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |

----

**CLEARONE      COMMUNICATIONS, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

**(in      thousands of dollars, except per share amounts)**

|                                                                                                |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                                                                |   | **December                31,**       |   | **December                31,**     |   | **December                31,** |   | **December                31,** |   |
|                                                                                                |   | **2006**                              |   | **2005**                            |   | **2006** |   | **2005** |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |
| Product                Revenue:                                                                     |   | $                                     | 10,107 |                                | $      | 9,102 |   | $ | 19,518 |   | $ | 17,879 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold:                                                                  |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Product                                                                                             |   |                                  | 4,690  |                                |   | 4,286 |   |   | 8,895 |   |   | 8,206 |   |
| Product                inventory write-offs                                                         |   |                                  | 170    |                                |   | 184 |   |   | 281 |   |   | 277 |   |
| Cost                of goods sold:                                                                  |   |                                  | 4,860  |                                |   | 4,470 |   |   | 9,176 |   |   | 8,483 |   |
| Gross                profit                                                                         |   |                                  | 5,247  |                                |   | 4,632 |   |   | 10,342 |   |   | 9,396 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                                  |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Marketing                and selling                                                                |   |                                  | 1,789  |                                |   | 1,810 |   |   | 3,707 |   |   | 3,622 |   |
| General                and administrative                                                           |   |                                  | 688    |                                |   | 1,457 |   |   | 1,497 |   |   | 3,228 |   |
| Settlement                in shareholders' class action                                             |   |                                  | -      |                                |   | - |   |   | - |   |   | (1,205 | ) |
| Research                and product development                                                     |   |                                  | 1,855  |                                |   | 1,778 |   |   | 3,934 |   |   | 3,577 |   |
| Total                operating expenses                                                             |   |                                  | 4,332  |                                |   | 5,045 |   |   | 9,138 |   |   | 9,222 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Operating                income (loss)                                                              |   |                                  | 915    |                                |   | (413 | ) |   | 1,204 |   |   | 174 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Other                income (expense), net:                                                         |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Interest                income                                                                      |   |                                  | 283    |                                |   | 186 |   |   | 590 |   |   | 345 |   |
| Other,                net                                                                           |   |                                  | 37     |                                |   | 5 |   |   | 62 |   |   | 12 |   |
| Other                income (expense), net:                                                         |   |                                  | 320    |                                |   | 191 |   |   | 652 |   |   | 357 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations before income taxes                         |   |                                  | 1,235  |                                |   | (222 | ) |   | 1,856 |   |   | 531 |   |
| (Provision)                benefit from income taxes                                                |   |                                  | (155   | )                                   |   | 146 |   |   | (136 | ) |   | 368 |   |
| Income                (loss) from continuing operations                                             |   |                                  | 1,080  |                                |   | (76 | ) |   | 1,720 |   |   | 899 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Discontinued                operations:                                                             |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations                                                  |   |                                  | 20     |                                |   | 100 |   |   | 75 |   |   | 218 |   |
| Gain                (loss) on disposal of discontinued operations                                   |   |                                  | (13    | )                                   |   | 150 |   |   | (10 | ) |   | 1,646 |   |
| Income                tax provision                                                                 |   |                                  | (3     | )                                   |   | (93 | ) |   | (24 | ) |   | (695 | ) |
| Income                from discontinued operations:                                                 |   |                                  | 4      |                                |   | 157 |   |   | 41 |   |   | 1,169 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Net                income                                                                           |   | $                                     | 1,084  |                                | $      | 81 |   | $ | 1,761 |   | $ | 2,068 |   |
|                                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |

----

**CLEARONE      COMMUNICATIONS, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)**

**(Unaudited)**

**(in      thousands of dollars, except per share amounts)**

|                                                                                                |   | **Three                Months Ended** |       | **Six                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|-------------------------------------|--------|
|                                                                                                |   | **December                31,**       |       | **December                31,**     |   | **December                31,** |   | **December                31,** |   |
|                                                                                                |   | **2006**                              |       | **2005**                            |   | **2006** |   | **2005** |   |
|                                                                                                |   |                                  |       |                                |   |   |   |   |   |
| Basic                earnings per common share from continuing operations                           |   | $                                     | 0.09       |                                | $      | (0.01 | ) | $ | 0.14 |   | $ | 0.08 |   |
| Diluted                earnings per common share from continuing operations                         |   | $                                     | 0.09       |                                | $      | (0.01 | ) | $ | 0.14 |   | $ | 0.07 |   |
|                                                                                                |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| Basic                earnings per common share from discontinued operations                         |   | $                                     | 0.00       |                                | $      | 0.01 |   | $ | 0.00 |   | $ | 0.10 |   |
| Diluted                earnings per common share from discontinued operations                       |   | $                                     | 0.00       |                                | $      | 0.01 |   | $ | 0.00 |   | $ | 0.10 |   |
|                                                                                                |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| Basic                earnings per common share                                                      |   | $                                     | 0.09       |                                | $      | 0.01 |   | $ | 0.15 |   | $ | 0.18 |   |
| Diluted                earnings per common share                                                    |   | $                                     | 0.09       |                                | $      | 0.01 |   | $ | 0.15 |   | $ | 0.17 |   |
|                                                                                                |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| Basic                weighted average shares                                                        |   |                                  | 11,922,641 |                                |   | 12,184,727 |   |   | 12,053,745 |   |   | 11,734,485 |   |
| Diluted                weighted average shares                                                      |   |                                  | 11,957,706 |                                |   | 12,195,466 |   |   | 12,100,794 |   |   | 12,230,035 |   |
|                                                                                                |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |

----

**CLEARONE      COMMUNICATIONS, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

**(in      thousands of dollars, except per share amounts)**

|                                                                                                |   | **Six                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                                |   | **December                31,**     |   | **December                31,** |   |
|                                                                                                |   | **2006**                            |   | **2005** |   |
| Cash                flows from operating activities:                                                |   |                                |   |   |   |
| Net                income from continuing operations                                                |   | $                                   | 1,720  |   | $ | 899 |   |
| Adjustments                to reconcile net income from continuing operations                       |   |                                |   |   |   |   |   |
| to                net cash provided by (used in) operations:                                        |   |                                |   |   |   |   |   |
| Depreciation                and amortization expense                                                |   |                                | 479    |   |   | 690 |   |
| Stock-based                compensation                                                             |   |                                | 453    |   |   | 613 |   |
| Write-off                of inventory                                                               |   |                                | 281    |   |   | 277 |   |
| (Gain)                loss on disposal of assets and fixed assets write-offs                        |   |                                | -      |   |   | (48 | ) |
| Provision                for doubtful accounts                                                      |   |                                | -      |   |   | 3 |   |
| Changes                in operating assets and liabilities:                                         |   |                                |   |   |   |   |   |
| Accounts                receivable                                                                  |   |                                | 102    |   |   | (662 | ) |
| Note                receivable - Ken-A-Vision                                                       |   |                                | (282   | ) |   | - |   |
| Inventories                                                                                         |   |                                | 424    |   |   | 746 |   |
| Prepaid                expenses                                                                     |   |                                | (67    | ) |   | (221 | ) |
| Other                assets                                                                         |   |                                | (7     | ) |   | - |   |
| Accounts                payable                                                                     |   |                                | (514   | ) |   | (626 | ) |
| Accrued                liabilities                                                                  |   |                                | (400   | ) |   | (1,222 | ) |
| Income                taxes                                                                         |   |                                | 215    |   |   | 326 |   |
| Deferred                product revenue                                                             |   |                                | (1,160 | ) |   | (119 | ) |
| Net                cash provided by continuing operating activities                                 |   |                                | 1,244  |   |   | 656 |   |
| Net                cash provided by discontinued operating activities                               |   |                                | 47     |   |   | 208 |   |
| Net                cash provided by operating activities                                            |   |                                | 1,291  |   |   | 864 |   |
|                                                                                                |   |                                |   |   |   |   |   |
| Cash                flows from investing activities:                                                |   |                                |   |   |   |   |   |
| Purchase                of property and equipment                                                   |   |                                | (616   | ) |   | (134 | ) |
| Proceeds                from the sale of property and equipment                                     |   |                                | 55     |   |   | 55 |   |
| Purchase                of marketable securities                                                    |   |                                | (6,900 | ) |   | (3,600 | ) |
| Sale                of marketable securities                                                        |   |                                | 10,950 |   |   | 2,400 |   |
| Net                cash provided by (used in) continuing investing activities                       |   |                                | 3,489  |   |   | (1,279 | ) |
| Net                cash provided by discontinued investing activities                               |   |                                | 559    |   |   | 1,032 |   |
| Net                cash provided by (used in) investing activities                                  |   |                                | 4,048  |   |   | (247 | ) |
|                                                                                                |   |                                |   |   |   |   |   |
| Cash                flows from financing activities:                                                |   |                                |   |   |   |   |   |
| Proceeds                from common stock                                                           |   |                                | 6      |   |   | - |   |
| Purchase                and retirement of stock                                                     |   |                                | (4,745 | ) |   | - |   |
| Net                cash used in continuing financing activities                                     |   |                                | (4,739 | ) |   | - |   |
| Net                cash used in discontinued financing activities                                   |   |                                | -      |   |   | - |   |
| Net                cash used in financing activities                                                |   |                                | (4,739 | ) |   | - |   |
|                                                                                                |   |                                |   |   |   |   |   |
| Net                increase in cash and cash equivalents                                            |   |                                | 600    |   |   | 617 |   |
| Cash                and cash equivalents at the beginning of the period                             |   |                                | 1,240  |   |   | 1,892 |   |
| Cash                and cash equivalents at the end of the period                                   |   | $                                   | 1,840  |   | $ | 2,509 |   |
|                                                                                                |   |                                |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |

----

**CLEARONE      COMMUNICATIONS, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**

**(Unaudited)**

**(in      thousands of dollars, except per share amounts)**

|                                                                                                |   | **Six                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                                |   | **December                31,**     |   | **December                31,** |   |
|                                                                                                |   | **2006**                            |   | **2005** |   |
| Supplemental                disclosure of cash flow information:                                    |   |                                |   |   |   |
| Cash                paid for interest                                                               |   | $                                   | 1      |   | $ | - |   |
| Cash                paid (received) for income taxes                                                |   |                                | (55    | ) |   | - |   |
|                                                                                                |   |                                |   |   |   |   |   |
| Supplemental                disclosure of non-cash financing activities:                            |   |                                |   |   |   |   |   |
| Value                of common shares issued in shareholder settlement                              |   | $                                   | -      |   | $ | 2,264 |   |
| Lease                incentive for Edgewater leasehold improvements                                 |   |                                | 1,088  |   |   | - |   |
|                                                                                                |   |                                |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |

----

**CLEARONE      COMMUNICATIONS, INC.**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(in      thousands of dollars, except per share amounts)**

**1.      Basis of Presentation**

**2.      Inventory**

|                               |   | **December                31,** |   | **June                30,** |   |
|------------------------------------|--------|---------------------------------|--------|-----------------------------|--------|
|                               |   | **2006**                        |   | **2006**                    |   |
|                               |   |                            |   |                        |   |
| Raw                materials       |   | $                               | 313    |                        | $      | 513 |   |
| Finished                goods      |   |                            | 3,430  |                        |   | 3,284 |   |
| Consigned                inventory |   |                            | 2,166  |                        |   | 2,817 |   |
| Total                inventory     |   | $                               | 5,909  |                        | $      | 6,614 |   |

**3.      Share-Based Payment **

----

----

**4.      Discontinued Operations**

|                                                                                                     |   | **Three                  Months Ended** |   | **Six                  Months Ended** |   |
|----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|                                                                                                     |   | **December                  31,**       |   | **December                  31,**     |   | **December                  31,** |   | **December                  31,** |   |
|                                                                                                     |   | **2006**                                |   | **2005**                              |   | **2006** |   | **2005** |   |
|                                                                                                     |   |                                    |   |                                  |   |   |   |   |   |
| Income                  from discontinued operations:                                                    |   |                                    |   |                                  |   |   |   |   |   |
| Ken-A-Vision                                                                                             |   | $                                       | 20     |                                  | $      | 100 |   | $ | 75 |   | $ | 218 |   |
|                                                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Gain                  (loss) on disposal of discontinued operations:                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Ken-A-Vision                                                                                             |   | $                                       | (13    | )                                     | $      | - |   | $ | (10 | ) | $ | - |   |
| OM                  Video                                                                                |   |                                    | -      |                                  |   | 150 |   |   | - |   |   | 300 |   |
| Burk                                                                                                     |   |                                    | -      |                                  |   | - |   |   | - |   |   | 1,346 |   |
| Total                  gain (loss) on disposal of discontinued operations                                |   |                                    | (13    | )                                     |   | 150 |   |   | (10 | ) |   | 1,646 |   |
|                                                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Income                  tax benefit (provision):                                                         |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Ken-A-Vision                                                                                             |   | $                                       | (3     | )                                     | $      | (37 | ) | $ | (24 | ) | $ | (81 | ) |
| OM                  Video                                                                                |   |                                    | -      |                                  |   | (56 | ) |   | - |   |   | (112 | ) |
| Burk                                                                                                     |   |                                    | -      |                                  |   | - |   |   | - |   |   | (502 | ) |
| Total                  income tax benefit (provision)                                                    |   |                                    | (3     | )                                     |   | (93 | ) |   | (24 | ) |   | (695 | ) |
|                                                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Total                  income (loss) from discontinued operations, net of income                  taxes: |   |                                    |   |
| Ken-A-Vision                                                                                             |   | $                                       | 4      |                                  | $      | 63 |   | $ | 41 |   | $ | 137 |   |
| OM                  Video                                                                                |   |                                    | -      |                                  |   | 94 |   |   | - |   |   | 188 |   |
| Burk                                                                                                     |   |                                    | -      |                                  |   | - |   |   | - |   |   | 844 |   |
| Total                  income (loss) from discontinued operations,                                       |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| net                  of income taxes                                                                     |   | $                                       | 4      |                                  | $      | 157 |   | $ | 41 |   | $ | 1,169 |   |

*OM      Video*

----

**5.      Shareholders’ Equity**

**6.      Subsequent Events **

----

| **Item                2.** | **MANAGEMENT'S                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                OPERATIONS** |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------|

*The      following discussion should be read in conjunction with our unaudited condensed      consolidated financial statements and related notes to condensed consolidated      financial statements included in this Form 10-Q and our audited consolidated      financial statements included in our Annual Report on Form 10-K for the year      ended June 30, 2006 filed with the SEC and management’s discussion and analysis      contained therein. This discussion contains forward-looking statements based      on      current expectations that involve risks and uncertainties, such as our plans,      objectives, expectations, and intentions, as set forth under “Disclosure      Regarding Forward-Looking Statements.” Our actual results and the timing of      events could differ materially from those anticipated in these forward-looking      statements as a result of various factors, including those set forth in the      following discussion and under the caption “Risk Factors” in Part II, Item 1A,      as well as other information found in the documents we file from time to time      with the SEC. Unless otherwise indicated, all references to a year reflect      our      fiscal year that ends on June 30.*

**BUSINESS      OVERVIEW**

**CRITICAL      ACCOUNTING POLICIES**

**Revenue      and Associated Allowances for Revenue Adjustments and Doubtful      Accounts**

----

|                              |   | **Deferred                Revenue** |   | **Deferred                Cost of Goods Sold** |   | **Deferred                Gross Profit** |   |
|-----------------------------------|--------|-------------------------------------|--------|------------------------------------------------|--------|------------------------------------------|--------|
|                              |   |                                |   |                                           |   |                                     |   |
| December                31, 2006  |   | $                                   | 4,711  |                                           | $      | 2,166                                    |   | $ | 2,545 |   |
| September                30, 2006 |   |                                | 5,249  |                                           |   | 2,541                                    |   |   | 2,708 |   |
| June                30, 2006      |   |                                | 5,871  |                                           |   | 2,817                                    |   |   | 3,054 |   |
| March                31, 2006     |   |                                | 5,355  |                                           |   | 2,443                                    |   |   | 2,912 |   |
| December                31, 2005  |   |                                | 4,936  |                                           |   | 2,199                                    |   |   | 2,737 |   |
| September                30, 2005 |   |                                | 4,848  |                                           |   | 2,373                                    |   |   | 2,475 |   |
| June                30, 2005      |   |                                | 5,055  |                                           |   | 2,297                                    |   |   | 2,758 |   |
| March                31, 2005     |   |                                | 5,456  |                                           |   | 2,321                                    |   |   | 3,135 |   |
| December                31, 2004  |   |                                | 4,742  |                                           |   | 1,765                                    |   |   | 2,977 |   |
| September                30, 2004 |   |                                | 5,617  |                                           |   | 1,920                                    |   |   | 3,697 |   |
| June                30, 2004      |   |                                | 6,107  |                                           |   | 2,381                                    |   |   | 3,726 |   |

**Goodwill      and Purchased Intangibles**

| ·   | Significant                underperformance relative to projected future operating                results; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | Significant                changes in the manner of our use of the acquired assets or the strategy                for our overall business; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant                negative industry or economic                trends. |
|--------------------|---------------------------------------------------------------------------------|

----

**Impairment      of Long-Lived Asset**

**Accounting      for Income Taxes **

**Lower-of-Cost      or Market Adjustments and Reserves for Excess and Obsolete      Inventory**

**Share-Based      Payment**

----

**SEASONALITY**

**ANALYSIS      OF RESULTS OF OPERATIONS**

**Results      of Operations for the three months or the second fiscal quarter (“2Q”) and six      months or the first half of the fiscal year (“1H”) ended December 31, 2006 and      2005**

----

| **CLEARONE                COMMUNICATIONS, INC.**                       |   |
|------------------------------------------------------------------------|--------|
| **CONDENSED                CONSOLIDATED STATEMENTS OF OPERATIONS**     |   |
| **(Unaudited)**                                                        |   |
| **(in                thousands of dollars, except per share amounts)** |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|                                                                   |   | **December                31,** |   |   |   | **December                31,** |   |   |   | **December                31,** |   |   |   | **December                31,** |   |   |   |
|                                                                   |   | **2006** |   |   |   | **2005** |   |   |   | **2006** |   |   |   | **2005** |   |   |   |
|                                                                   |   |   |   | **%                of Revenue** |   |   |   | **%                of Revenue** |   |   |   | **%                of Revenue** |   |   |   | **%                of Revenue** |   |
| Product                Revenue:                                        |   | $ | 10,107 |   |   | 100% |   | $ | 9,102 |   |   | 100% |   | $ | 19,518 |   |   | 100% |   | $ | 17,879 |   |   | 100% |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold:                                     |   |   | 4,860 |   |   | 48% |   |   | 4,470 |   |   | 49% |   |   | 9,176 |   |   | 47% |   |   | 8,483 |   |   | 47% |   |
| Gross                profit                                            |   |   | 5,247 |   |   | 52% |   |   | 4,632 |   |   | 51% |   |   | 10,342 |   |   | 53% |   |   | 9,396 |   |   | 53% |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Marketing                and selling                                   |   |   | 1,789 |   |   | 18% |   |   | 1,810 |   |   | 20% |   |   | 3,707 |   |   | 19% |   |   | 3,622 |   |   | 20% |   |
| General                and administrative                              |   |   | 688 |   |   | 7% |   |   | 1,457 |   |   | 16% |   |   | 1,497 |   |   | 8% |   |   | 3,228 |   |   | 18% |   |
| Settlement                in shareholders' class action                |   |   | - |   |   | 0% |   |   | - |   |   | 0% |   |   | - |   |   | 0% |   |   | (1,205 | ) |   | -7% |   |
| Research                and product development                        |   |   | 1,855 |   |   | 18% |   |   | 1,778 |   |   | 20% |   |   | 3,934 |   |   | 20% |   |   | 3,577 |   |   | 20% |   |
| Total                operating expenses                                |   |   | 4,332 |   |   | 43% |   |   | 5,045 |   |   | 55% |   |   | 9,138 |   |   | 47% |   |   | 9,222 |   |   | 52% |   |

**Revenue**

**Costs      of Goods Sold and Gross Profit**

----

|                              |   | **Three                Months Ended December 31,** |   | **Six                Months Ended December 31,** |   |
|-----------------------------------|--------|----------------------------------------------------|--------|--------------------------------------------------|--------|
|                              |   | **(in                thousands)**                  |   | **(in                thousands)**                |   |
|                              |   | **2006**                                           |   | **2005**                                         |   | **2006** |   | **2005** |   |
|                              |   |                                               |   | **%                of Revenue**                  |   |   |   | **%                of Revenue** |   |   |   | **%                of Revenue** |   |   |   | **%                of Revenue** |   |
|                              |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold |   | $                                                  | 4,860  |                                             |   | 48.1% |   | $ | 4,470 |   |   | 49.1% |   | $ | 9,176 |   |   | 47.0% |   | $ | 8,483 |   |   | 47.4% |   |
|                              |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross                profit       |   | $                                                  | 5,247  |                                             |   | 51.9% |   | $ | 4,632 |   |   | 50.9% |   | $ | 10,342 |   |   | 53.0% |   | $ | 9,396 |   |   | 52.6% |   |

**Operating      Expenses**

**Marketing      and selling expenses**
***.***

**General      and administrative expenses**
***.***

----

**Research      and product development expenses**
***.***

**Operating      income.**

**Other      income (expense), net.**

**Income      (loss) from continuing operations before income taxes**
***.***

**Income      (loss) from discontinued operations, net of tax. **

----

**LIQUIDITY      AND CAPITAL RESOURCES**

*Issues      Relating to Accounting for Leases*

**Item      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**Item      4.**
**CONTROLS      AND PROCEDURES**

----

----

**PART      II - OTHER INFORMATION**

**Item      1. LEGAL PROCEEDINGS**

*Legal      Proceedings.*

*Theft      of Trade Secrets Complaint.*

----

**Item      1A. RISK FACTORS **

*Investors      should carefully consider the risks described below. The risks described below      are not the only ones we face, and there are risks that we are not presently      aware of or that we currently believe are immaterial that may also impair our      business operations. Any of these risks could harm our business. The trading      price of our common stock could decline significantly due to any of these risks      and investors may lose all or part of their investment. In assessing these      risks, investors should also refer to the other information contained or      incorporated by reference in this Quarterly Report on Form 10-Q, including      our      December 31, 2006 unaudited condensed consolidated financial statements and      related notes.*

***Risks      Relating to Our Business***

*We      face intense competition in all of the markets for our products and services;      our operating results will be adversely affected if we cannot compete      effectively against other companies.*

*Difficulties      in estimating customer demand in our products segment could harm our profit      margins.*

*Our      sales depend to a certain extent on government funding and      regulation.*

*Environmental      laws and regulations subject us to a number of risks and could result in      significant costs and impact on revenue*

----

*Product      development delays or defects could harm our competitive position and reduce      our      revenues.*

| · | 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.                                          |

*Our      profitability may be adversely affected by our continuing dependence on our      distribution channels.*

----

*Reporting      of channel inventory by certain distributors.*

*We      depend on an outsourced manufacturing strategy.*

*We      depend on a single source for certain components.*

*Product      obsolescence could harm demand for our products and could adversely affect      our      revenues and our results of operations.*

----

*If      we      are unable to protect our intellectual property rights or have insufficient      proprietary rights, our business would be materially impaired.*

*International      sales account for a significant portion of our net revenue and risks inherent      in      international sales could harm our business.*

| · | unexpected                changes in, or the imposition of, additional legislative or regulatory                requirements;                                                                                                          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | unique                environmental regulations;                                                                                                                                                                                       |
| · | fluctuating                exchange rates;                                                                                                                                                                                             |
| · | tariffs                and other barriers;                                                                                                                                                                                             |
| · | difficulties                in staffing and managing foreign sales operations;                                                                                                                                                         |
| · | import                and export restrictions;                                                                                                                                                                                         |
| · | greater                difficulties in accounts receivable collection and longer payment                cycles;                                                                                                                        |
| · | potentially                adverse tax consequences;                                                                                                                                                                                   |
| · | potential                hostilities and changes in diplomatic and trade                relationships;                                                                                                                                 |
| · | disruption                in services due to natural disaster, economic or political difficulties,                quarantines, transportation,or                other restrictions associated with infectious                diseases. |

*We      may not be able to hire and retain qualified key and highly-skilled technical      employees, which could affect our ability to compete effectively and may cause      our revenue and profitability to decline.*

----

*Our      reliance on third-party technology or license agreements.*

*We      may have difficulty in collecting outstanding receivables.*

*Interruptions      to our business could adversely affect our operations.*

***Risks      Relating to Our Company***

*Our      stock price fluctuates as a result of the conduct of our business and stock      market fluctuations.*

| · | statements                or changes in opinions, ratings, or earnings estimates made by brokerage                firms or industry analysts relating to the market in which we do                business                or relating to us specifically;                                                                              |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | disparity                between our reported results and the projections of                analysts;                                                                                                                                                                                                                                  |
| · | the                shift in sales mix of products that we currently sell to a sales                mix of                lower-gross profit product offerings;                                                                                                                                                                         |
| · | the                level and mix of inventory levels held by our                distributors;                                                                                                                                                                                                                                          |
| · | the                announcement of new products or product enhancements by us or our                competitors;                                                                                                                                                                                                                       |
| · | technological                innovations by us or our competitors;                                                                                                                                                                                                                                                                     |
| · | success                in meeting targeted availability dates for new or redesigned                products;                                                                                                                                                                                                                           |
| · | the                ability to profitably and efficiently manage our supplies of products                and                key components;                                                                                                                                                                                             |
| · | the                ability to maintain profitable relationships with our                customers;                                                                                                                                                                                                                                     |
| · | the                ability to maintain an appropriate cost structure;                                                                                                                                                                                                                                                                  |
| · | quarterly                variations in our results of operations;                                                                                                                                                                                                                                                                      |
| · | general                consumer confidence or general market conditions or market conditions                specific to technology industries;                                                                                                                                                                                         |
| · | domestic                and international economic conditions;                                                                                                                                                                                                                                                                         |
| · | the                adoption of the new accounting standard, SFAS No. 123R, “Share-Based                Payments,” which requires us to record compensation expense for certain                options issued before July 1, 2005 and for all options issued or                modified                after June 30, 2005; |
| · | our                ability to report financial information in a timely manner;                and                                                                                                                                                                                                                                      |
| · | the                markets in which our stock is                traded.                                                                                                                                                                                                                                                                |

----

*We      have previously identified material weaknesses in our internal      controls.*

*Our      directors and officers own a significant percentage of the Company, and may      exert significant influence over us.*

----

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

| **Period**                                              | **Total                Number of Shares Purchased** | **Average                Price Paid per Share** | **Total                Number of Shares Purchased as Part of Publicly Announced Plans or                Programs** | **Maximum                Number (or Approximate Dollar Value) of Shares that May by Purchased                Under                the Plans or Programs (2)** |
|---------------------------------------------------------|-----------------------------------------------------|-------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| October                1, 2006- October 31, 2006        | 29,859                                              | $3.53                                           | 29,859                                                                                                             | $1,857,000                                                                                                                                                    |
| November                1, 2006 - November 30, 2006     | 0                                                   | $0                                              | 0                                                                                                                  | $1,857,000                                                                                                                                                    |
| December                1, 2006 - December 31, 2006 (1) | 1,073,552                                           | $4.25                                           | 1,073,552                                                                                                          | $1,857,000                                                                                                                                                    |
| Total                                                   | 1,103,411                                           |                                            | 1,103,411                                                                                                          |                                                                                                                                                          |

| (1)   | On                October 30, 2006 the Company announced that its Board of Directors                authorized a $10 million tender offer which was completed on December                6,                2006. Under the tender offer the Company repurchased 1,073,552 shares,                or                approximately 9% of shares outstanding, for approximately $4.6 million                at                a price per share of $4.25. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | On                August 31, 2006, the Company announced that its Board of Directors                had                approved a stock buy-back program to purchase up $2,000,000 of the                Company’s common stock over the next 12 months on the open market. All                repurchased shares will be immediately retired. The stock buy-back                program                will expire in August 2007. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item      3. DEFAULTS UPON SENIOR SECURITIES**

**Item      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

|                                              | FOR        | WITHHELD |
|---------------------------------------------------|------------|----------|
| Edward                Dallin Bagley               | 10,198,899 | 811,055  |
| Brad                R. Baldwin                    | 10,818,093 | 191,851  |
| Zeynep                “Zee” Hakimoglu | 10,849,800 | 160,144  |
| Larry                R. Hendricks                 | 10,840,096 | 169,848  |
| Scott                M. Huntsman                  | 10,838,796 | 171,148  |
| Harry                Spielberg                    | 10,848,871 | 161,073  |

**Item      5. OTHER INFORMATION**

----

**Item      6. EXHIBITS**

| Exhibit | SEC                Ref. |                                                                |                       |
|---------|-------------------------|---------------------------------------------------------------------|----------------------------|
| No.     |  No.               | Title                of Document                                    | Location                   |
| 31.1    | 31                      | Section                302 Certification of Chief Executive Officer | This                filing |
| 31.2    | 31                      | Section                302 Certification of Chief Financial Officer | This                filing |
| 32.1    | 32                      | Section                906 Certification of Chief Executive Officer | This                filing |
| 32.2    | 32                      | Section                906 Certification of Chief Financial Officer | This                filing |

**SIGNATURES**

|                            | CLEARONE                COMMUNICATIONS, INC. |
|---------------------------------|----------------------------------------------|
|                            |                                         |   |
|                            |                                         |   |
|                            |                                         |   |
| February                8, 2007 | By:                                          | /s/                Zeynep Hakimoglu |
|                            |                                         | Zeynep                Hakimoglu |
|                            |                                         | President                and Chief Executive Officer |
|                            |                                         | *(Principal                Executive Officer)* |
|                            |                                         |   |
|                            |                                         |   |
|                            |                                         |   |
| February                8, 2007 | By:                                          | /s/                Greg A. LeClaire |
|                            |                                         | Greg                A. LeClaire |
|                            |                                         | Chief                Financial Officer |
|                            |                                         | *(Principal                Financial and Accounting                Officer)* |