----

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| Utah                                                                                        |   | 87-0398877                                                           |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                employeridentification                number) |

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

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----

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|                                                           |                                                                                                                                                                                                              | 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, 2007 and June 30,                2007                                                                                                     | 4                          |
|                                                           | Condensed                Consolidated Statements of Income for the three months ended December                31,                2007 and 2006 and the six months ended December 31, 2007 and                2006 | 5                          |
|                                                           | Condensed                Consolidated Statements of Cash Flows for the six months ended December                31, 2007 and 2006                                                                                 | 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                                                                                                                                         | 21                         |
| Item                4                                          | Controls                and Procedures                                                                                                                                                                            | 21                         |
| 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                                                                                                                                        | 28                         |
| Item                3                                          | Defaults                Upon Senior Securities                                                                                                                                                                    | 28                         |
| Item                4                                          | Submission                of Matters to a Vote of Security Holders                                                                                                                                                | 28                         |
| Item                5                                          | Other                Information                                                                                                                                                                                  | 28                         |
| Item                6                                          | Exhibits                                                                                                                                                                                                          | 29                         |
| Signatures                                                     |                                                                                                                                                                                                              | 29                         |

----

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|                                                                                                   |   | (unaudited)                 |    |   | (audited)               |   |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|--------|-------------------------|--------|
|                                                                                                   |   | December                31, |    |   | June                30, |   |
|                                                                                                   |   | 2007                        |    |   | 2007                    |   |
| ASSETS                                                                                                 |   |                        |    |   |                    |   |
| Current                assets:                                                                         |   |                        |    |   |                    |   |
| Cash                and cash equivalents                                                               |   | $                           | 3,014   |   |                    | $      | 2,782 |   |
| Marketable                securities                                                                   |   |                        | 19,676  |   |                    |   | 19,871 |   |
| Accounts                receivable, net of allowance for doubtful accounts                             |   |                        | 7,790   |   |                    |   | 8,025 |   |
|      of                $60 and $54, respectively                              |
| Deposit,                Bond for Preliminary Injunction                                                |   |                        | 908     |   |                    |   | 0 |   |
| Note                Receivable                                                                         |   |                        | 126     |   |                    |   | 163 |   |
| Inventories,                net                                                                        |   |                        | 6,792   |   |                    |   | 7,263 |   |
| Deferred                income taxes                                                                   |   |                        | 124     |   |                    |   | 0 |   |
| Prepaid                expenses                                                                        |   |                        | 512     |   |                    |   | 213 |   |
| Total                current assets                                                                    |   |                        | 38,942  |   |                    |   | 38,317 |   |
|                                                                                                   |   |                        |    |   |                    |   |   |   |
| Property                and equipment, net                                                             |   |                        | 2,651   |   |                    |   | 2,694 |   |
| Note                Receiveable - long-term                                                            |   |                        | 0       |   |                    |   | 43 |   |
| Other                assets                                                                            |   |                        | 9       |   |                    |   | 9 |   |
| Total                assets                                                                            |   | $                           | 41,602  |   |                    | $      | 41,063 |   |
|                                                                                                   |   |                        |    |   |                    |   |   |   |
| LIABILITIES                AND SHAREHOLDERS' EQUITY                                                    |   |                        |    |   |                    |   |   |   |
| Current                liabilities:                                                                    |   |                        |    |   |                    |   |   |   |
| Accounts                payable                                                                        |   | $                           | 1,294   |   |                    | $      | 1,745 |   |
| Accrued                taxes                                                                           |   |                        | 0       |   |                    |   | 660 |   |
| Accrued                liabilities                                                                     |   |                        | 3,047   |   |                    |   | 1,874 |   |
| Deferred                product revenue                                                                |   |                        | 4,980   |   |                    |   | 4,872 |   |
| Total                current liabilities                                                               |   |                        | 9,321   |   |                    |   | 9,151 |   |
|                                                                                                   |   |                        |    |   |                    |   |   |   |
| Deferred                rent                                                                           |   |                        | 777     |   |                    |   | 855 |   |
| Deferred                income taxes, net                                                              |   |                        | 124     |   |                    |   | 0 |   |
| Other                long-term liabilities                                                             |   |                        | 1,084   |   |                    |   | 619 |   |
| Total                liabilities                                                                       |   |                        | 11,306  |   |                    |   | 10,625 |   |
|                                                                                                   |   |                        |    |   |                    |   |   |   |
| Shareholders'                equity:                                                                   |   |                        |    |   |                    |   |   |   |
| Common                stock, par value $0.001, 50,000,000 shares authorized,                           |   |                        |    |   |                    |   |   |   |
|    10,771,165                and 10,861,920 shares issued and outstanding, respectively |   |                        | 11      |   |                    |   | 11 |   |
| Additional                paid-in capital                                                              |   |                        | 46,877  |   |                    |   | 47,582 |   |
| Accumulated                deficit                                                                     |   |                        | (16,592 | )      |                    |   | (17,155 | ) |
| Total                shareholders' equity                                                              |   |                        | 30,296  |   |                    |   | 30,438 |   |
| Total                liabilities and shareholders' equity                                              |   | $                           | 41,602  |   |                    | $      | 41,063 |   |
|                                                                                                   |   |                        |    |   |                    |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements    |   |

----

|                                                                                                |   | Three                Months Ended |   |   | Six                Months Ended |   |
|-----------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                |   | December                31,       |   |   | December                31,     |   |   | December                31, |   |   | December                31, |   |
|                                                                                                |   | 2007                              |   |   | 2006                            |   |   | 2007 |   |   | 2006 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |
| Product                Revenue:                                                                     |   | $                                 | 10,787 |   |                            | $      | 10,107 |   |   | $ | 20,229 |   |   | $ | 19,518 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold:                                                                  |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Total                cost of goods sold                                                             |   |                              | 4,414  |   |                            |   | 4,860 |   |   |   | 8,714 |   |   |   | 9,176 |   |
| Gross                profit                                                                         |   |                              | 6,373  |   |                            |   | 5,247 |   |   |   | 11,515 |   |   |   | 10,342 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                                                  |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Sales                and marketing                                                                  |   |                              | 1,578  |   |                            |   | 1,789 |   |   |   | 3,180 |   |   |   | 3,707 |   |
| General                and administrative                                                           |   |                              | 1,198  |   |                            |   | 688 |   |   |   | 4,093 |   |   |   | 1,497 |   |
| Research                and product development                                                     |   |                              | 1,678  |   |                            |   | 1,855 |   |   |   | 3,433 |   |   |   | 3,934 |   |
| Total                operating expenses                                                             |   |                              | 4,454  |   |                            |   | 4,332 |   |   |   | 10,706 |   |   |   | 9,138 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                                                     |   |                              | 1,919  |   |                            |   | 915 |   |   |   | 809 |   |   |   | 1,204 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Other                income, net:                                                                   |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                                                      |   |                              | 296    |   |                            |   | 283 |   |   |   | 610 |   |   |   | 590 |   |
| Other,                net                                                                           |   |                              | 15     |   |                            |   | 37 |   |   |   | 43 |   |   |   | 62 |   |
| Total                other income, net                                                              |   |                              | 311    |   |                            |   | 320 |   |   |   | 653 |   |   |   | 652 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations before income taxes                         |   |                              | 2,230  |   |                            |   | 1,235 |   |   |   | 1,462 |   |   |   | 1,856 |   |
| (Provision)                benefit from income taxes                                                |   |                              | (449   | )      |                            |   | (155 | ) |   |   | (620 | ) |   |   | (136 | ) |
| Income                from continuing operations                                                    |   |                              | 1,781  |   |                            |   | 1,080 |   |   |   | 842 |   |   |   | 1,720 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued                operations:                                                             |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations                                                  |   |                              | -      |   |                            |   | 20 |   |   |   | - |   |   |   | 75 |   |
| Gain                on disposal of discontinued operations                                          |   |                              | 1      |   |                            |   | (13 | ) |   |   | 25 |   |   |   | (10 | ) |
| Income                tax provision                                                                 |   |                              | -      |   |                            |   | (3 | ) |   |   | (9 | ) |   |   | (24 | ) |
| Income                from discontinued operations                                                  |   |                              | 1      |   |                            |   | 4 |   |   |   | 16 |   |   |   | 41 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                           |   | $                                 | 1,782  |   |                            | $      | 1,084 |   |   | $ | 858 |   |   | $ | 1,761 |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                              |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |   |

----

|                                                                                                |   | Three                Months Ended |       |   | Six                Months Ended |   |
|-----------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|--------|---------------------------------|--------|
|                                                                                                |   | December                31,       |       |   | December                31,     |   |   | December                31, |   |   | December                31, |   |
|                                                                                                |   | 2007                              |       |   | 2006                            |   |   | 2007 |   |   | 2006 |   |
|                                                                                                |   |                              |       |   |                            |   |   |   |   |   |   |   |
| Basic                earnings per common share from continuing operations                           |   | $                                 | 0.16       |   |                            | $      | 0.09 |   |   | $ | 0.08 |   |   | $ | 0.14 |   |
| Diluted                earnings per common share from continuing operations                         |   | $                                 | 0.16       |   |                            | $      | 0.09 |   |   | $ | 0.08 |   |   | $ | 0.14 |   |
|                                                                                                |   |                              |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per common share from discontinued operations                         |   | $                                 | 0.00       |   |                            | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
| Diluted                earnings per common share from discontinued operations                       |   | $                                 | 0.00       |   |                            | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                                                |   |                              |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per common share                                                      |   | $                                 | 0.16       |   |                            | $      | 0.09 |   |   | $ | 0.08 |   |   | $ | 0.15 |   |
| Diluted                earnings per common share                                                    |   | $                                 | 0.16       |   |                            | $      | 0.09 |   |   | $ | 0.08 |   |   | $ | 0.15 |   |
|                                                                                                |   |                              |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                weighted average shares                                                        |   |                              | 10,840,193 |   |                            |   | 11,922,641 |   |   |   | 10,900,725 |   |   |   | 12,053,745 |   |
| Diluted                weighted average shares                                                      |   |                              | 10,941,491 |   |                            |   | 11,957,706 |   |   |   | 11,012,239 |   |   |   | 12,100,794 |   |
|                                                                                                |   |                              |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |   |

----

|                                                                                                |   | Six                Months Ended |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                                                |   | December                31,     |   |   | December                31, |   |
|                                                                                                |   | 2007                            |   |   | 2006 |   |
| Cash                flows from operating activities:                                                |   |                            |   |   |   |   |
| Net                income from continuing operations                                                |   | $                               | 842    |   |   | $ | 1,720 |   |
| Adjustments                to reconcile net income from continuing operations                       |   |                            |   |   |   |   |   |   |
|   to                net cash provided by (used in) operations:                            |   |                            |   |   |   |   |   |   |
| Depreciation                and amortization expense                                                |   |                            | 384    |   |   |   | 479 |   |
| Stock-based                compensation                                                             |   |                            | 372    |   |   |   | 453 |   |
| Write-off                of inventory                                                               |   |                            | 406    |   |   |   | 281 |   |
| (Gain)                loss on disposal of assets and fixed assets write-offs                        |   |                            | 4      |   |   |   | - |   |
| Provision                for doubtful accounts                                                      |   |                            | 6      |   |   |   | - |   |
| Changes                in operating assets and liabilities:                                         |   |                            |   |   |   |   |   |   |
| Accounts                receivable                                                                  |   |                            | 61     |   |   |   | 102 |   |
| Deposit                - Bond                                                                       |   |                            | (908   | ) |   |   | - |   |
| Note                receivable - Ken-A-Vision                                                       |   |                            | 80     |   |   |   | (282 | ) |
| Inventories                                                                                         |   |                            | 65     |   |   |   | 424 |   |
| Prepaid                expenses and other asssets                                                   |   |                            | (299   | ) |   |   | (74 | ) |
| Accounts                payable                                                                     |   |                            | (282   | ) |   |   | (514 | ) |
| Accrued                liabilities                                                                  |   |                            | 1,173  |   |   |   | (400 | ) |
| Income                taxes                                                                         |   |                            | (490   | ) |   |   | 215 |   |
| Deferred                product revenue                                                             |   |                            | 108    |   |   |   | (1,160 | ) |
| Net                cash provided by continuing operating activities                                 |   |                            | 1,522  |   |   |   | 1,244 |   |
| Net                cash provided by discontinued operating activities                               |   |                            | -      |   |   |   | 47 |   |
| Net                cash provided by operating activities                                            |   |                            | 1,522  |   |   |   | 1,291 |   |
|                                                                                                |   |                            |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                |   |                            |   |   |   |   |   |   |
| Purchase                of property and equipment                                                   |   |                            | (423   | ) |   |   | (616 | ) |
| Proceeds                from the sale of property and equipment                                     |   |                            | -      |   |   |   | 55 |   |
| Purchase                of marketable securities                                                    |   |                            | (6,874 | ) |   |   | (6,900 | ) |
| Sale                of marketable securities                                                        |   |                            | 7,069  |   |   |   | 10,950 |   |
| Net                cash provided by (used in) continuing investing activities                       |   |                            | (228   | ) |   |   | 3,489 |   |
| Net                cash provided by discontinued investing activities                               |   |                            | 16     |   |   |   | 559 |   |
| Net                cash provided by (used in) investing activities                                  |   |                            | (212   | ) |   |   | 4,048 |   |
|                                                                                                |   |                            |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                |   |                            |   |   |   |   |   |   |
| Proceeds                from common stock                                                           |   |                            | 519    |   |   |   | 6 |   |
| Purchase                and retirement of stock                                                     |   |                            | (1,664 | ) |   |   | (4,745 | ) |
| Tax                benefit attributable to exercise of stock options                                |   |                            | 67     |   |   |   | - |   |
| Net                cash used in financing activities                                                |   |                            | (1,078 | ) |   |   | (4,739 | ) |
|                                                                                                |   |                            |   |   |   |   |   |   |
| Net                increase in cash and cash equivalents                                            |   |                            | 232    |   |   |   | 600 |   |
| Cash                and cash equivalents at the beginning of the period                             |   |                            | 2,782  |   |   |   | 1,240 |   |
| Cash                and cash equivalents at the end of the period                                   |   | $                               | 3,014  |   |   | $ | 1,840 |   |
|                                                                                                |   |                            |   |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements |   |

----

|                                                                                                                                     |   | Six                Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                                                                                     |   | December                31,     |   |   | December                31, |   |
|                                                                                                                                     |   | 2007                            |   |   | 2006 |   |
| Supplemental                disclosure of cash flow information:                                                                         |   |                            |   |   |   |   |
| Cash                paid for interest                                                                                                    |   | $                               | 2      |   |   | $ | 1 |   |
| Cash                paid (received) for income taxes                                                                                     |   | $                               | 1,054  |   |   | $ | (55 | ) |
|                                                                                                                                     |   |                            |   |   |   |   |   |   |
| Supplemental                disclosure of non-cash financing activities:                                                                 |   |                            |   |   |   |   |   |   |
| Exchanged                accounts receivable from a vendor with accounts payable to same                vendor                           |   | $                               | 168    |   |   | $ | - |   |
| Increase                in accumulated deficit and income tax liability as a result of the                adoption of FIN48 (see note 5) |   | $                               | 295    |   |   | $ | - |   |
| Lease                incentive for Edgewater leasehold improvements                                                                      |   | $                               | -      |   |   | $ | 1,088 |   |
|                                                                                                                                     |   |                            |   |   |   |   |   |   |
| See                accompanying notes to condensed consolidated financial                statements                                      |   |

----

|                               |   | December                31, |   |   | June                30, |   |
|------------------------------------|--------|-----------------------------|--------|--------|-------------------------|--------|
|                               |   | 2007                        |   |   | 2007                    |   |
|                               |   |                        |   |   |                    |   |
| Raw                materials       |   | $                           | 296    |   |                    | $      | 453 |   |
| Finished                goods      |   |                        | 4,637  |   |                    |   | 4,695 |   |
| Consigned                inventory |   |                        | 1,859  |   |                    |   | 2,115 |   |
| Total                inventory     |   | $                           | 6,792  |   |                    | $      | 7,263 |   |

----

|                                                                                                     |   | Three                  Months Ended |   |   | Six                  Months Ended |   |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|-----------------------------------|--------|
|                                                                                                     |   | December                  31,       |   |   | December                  31,     |   |   | December                  31, |   |   | December                  31, |   |
|                                                                                                     |   | 2007                                |   |   | 2006                              |   |   | 2007 |   |   | 2006 |   |
|                                                                                                     |   |                                |   |   |                              |   |   |   |   |   |   |   |
| Income                  from discontinued operations:                                                    |   |                                |   |   |                              |   |   |   |   |   |   |   |
| Ken-A-Vision                                                                                             |   | $                                   | -      |   |                              | $      | 20 |   |   | $ | - |   |   | $ | 75 |   |
|                                                                                                     |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Gain                  (loss) on disposal of discontinued operations:                                     |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Ken-A-Vision                                                                                             |   |                                | 0      |   |                              |   | (13 | ) |   |   | 0 |   |   |   | (10 | ) |
| OM                  Video                                                                                |   |                                | 1      |   |                              |   | 0 |   |   |   | 25 |   |   |   | 0 |   |
| Total                  gain (loss) on disposal of discontinued operations                                |   |                                | 1      |   |                              |   | (13 | ) |   |   | 25 |   |   |   | (10 | ) |
|                                                                                                     |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Income                  tax benefit (provision):                                                         |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Ken-A-Vision                                                                                             |   |                                | 0      |   |                              |   | (3 | ) |   |   | 0 |   |   |   | (24 | ) |
| OM                  Video                                                                                |   |                                | 0      |   |                              |   | 0 |   |   |   | (9 | ) |   |   | 0 |   |
| Total                  income tax benefit (provision)                                                    |   |                                | 0      |   |                              |   | (3 | ) |   |   | (9 | ) |   |   | (24 | ) |
|                                                                                                     |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Total                  income (loss) from discontinued operations, net of income                  taxes: |   |                                |   |   |                              |
| Ken-A-Vision                                                                                             |   | $                                   | 0      |   |                              | $      | 4 |   |   | $ | 0 |   |   | $ | 41 |   |
| OM                  Video                                                                                |   |                                | 1      |   |                              |   | - |   |   |   | 16 |   |   |   | - |   |
| Total                  income (loss) from discontinued operations,                                       |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| net                  of income taxes                                                                     |   | $                                   | 1      |   |                              | $      | 4 |   |   | $ | 16 |   |   | $ | 41 |   |
|                                                                                                     |   |                                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |

----

----

----

----

|                              |   | DeferredRevenue |   |   | Deferred                Cost of                Goods Sold |   |   | DeferredGross                Profit |   |
|-----------------------------------|--------|-----------------|--------|--------|-----------------------------------------------------------|--------|--------|-------------------------------------|--------|
|                              |   |            |   |   |                                                      |   |   |                                |   |
| December                31, 2007  |   | $               | 4,980  |   |                                                      | $      | 1,859  |                                |   | $ | 3,121 |   |
| September                30, 2007 |   |            | 5,875  |   |                                                      |   | 2,149  |                                |   |   | 3,726 |   |
| June                30, 2007      |   |            | 4,872  |   |                                                      |   | 2,115  |                                |   |   | 2,757 |   |
| March                31, 2007     |   |            | 5,111  |   |                                                      |   | 2,265  |                                |   |   | 2,846 |   |
| 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 |   |

| ·   | 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. |
|--------------------|---------------------------------------------------------------------------------|

----

----

----

| 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, |   |
|                                                                        |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                        |   |   |   |   | %                of Revenue |   |   |   |   |   | %                of Revenue |   |   |   |   |   | %                of Revenue |   |   |   |   |   | %                of Revenue |   |
| Product                Revenue:                                             |   | $ | 10,787 |   |   |   | 100.0 | % |   | $ | 10,107 |   |   |   | 100.0 | % |   | $ | 20,229 |   |   |   | 100.0 | % |   | $ | 19,518 |   |   |   | 100.0 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold:                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                cost of goods sold                                     |   |   | 4,414 |   |   |   | 40.9 | % |   |   | 4,860 |   |   |   | 48.1 | % |   |   | 8,714 |   |   |   | 43.1 | % |   |   | 9,176 |   |   |   | 47.0 | % |
| Gross                profit                                                 |   |   | 6,373 |   |   |   | 59.1 | % |   |   | 5,247 |   |   |   | 51.9 | % |   |   | 11,515 |   |   |   | 56.9 | % |   |   | 10,342 |   |   |   | 53.0 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Marketing                and selling                                        |   |   | 1,578 |   |   |   | 14.6 | % |   |   | 1,789 |   |   |   | 17.7 | % |   |   | 3,180 |   |   |   | 15.7 | % |   |   | 3,707 |   |   |   | 19.0 | % |
| General                and administrative                                   |   |   | 1,198 |   |   |   | 11.1 | % |   |   | 688 |   |   |   | 6.8 | % |   |   | 4,093 |   |   |   | 20.2 | % |   |   | 1,497 |   |   |   | 7.7 | % |
| Research                and product development                             |   |   | 1,678 |   |   |   | 15.6 | % |   |   | 1,855 |   |   |   | 18.4 | % |   |   | 3,433 |   |   |   | 17.0 | % |   |   | 3,934 |   |   |   | 20.2 | % |
| Total                operating expenses                                     |   |   | 4,454 |   |   |   | 41.3 | % |   |   | 4,332 |   |   |   | 42.9 | % |   |   | 10,706 |   |   |   | 52.9 | % |   |   | 9,138 |   |   |   | 46.8 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                             |   |   | 1,919 |   |   |   | 17.8 | % |   |   | 915 |   |   |   | 9.1 | % |   |   | 809 |   |   |   | 4.0 | % |   |   | 1,204 |   |   |   | 6.2 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income, net:                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                              |   |   | 296 |   |   |   | 2.7 | % |   |   | 283 |   |   |   | 2.8 | % |   |   | 610 |   |   |   | 3.0 | % |   |   | 590 |   |   |   | 3.0 | % |
| Other,                net                                                   |   |   | 15 |   |   |   | 0.1 | % |   |   | 37 |   |   |   | 0.4 | % |   |   | 43 |   |   |   | 0.2 | % |   |   | 62 |   |   |   | 0.3 | % |
| Total                other income (expense), net                            |   |   | 311 |   |   |   | 2.9 | % |   |   | 320 |   |   |   | 3.2 | % |   |   | 653 |   |   |   | 3.2 | % |   |   | 652 |   |   |   | 3.3 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations before income taxes |   |   | 2,230 |   |   |   | 20.7 | % |   |   | 1,235 |   |   |   | 12.2 | % |   |   | 1,462 |   |   |   | 7.2 | % |   |   | 1,856 |   |   |   | 9.5 | % |
| (Provision)                benefit from income taxes                        |   |   | -449 |   |   |   | -4.2 | % |   |   | -155 |   |   |   | -1.5 | % |   |   | -620 |   |   |   | -3.1 | % |   |   | -136 |   |   |   | -0.7 | % |
| Income                (loss) from continuing operations                     |   |   | 1,781 |   |   |   | 16.5 | % |   |   | 1,080 |   |   |   | 10.7 | % |   |   | 842 |   |   |   | 4.2 | % |   |   | 1,720 |   |   |   | 8.8 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations                          |   |   | 1 |   |   |   | 0.0 | % |   |   | 4 |   |   |   | 0.0 | % |   |   | 16 |   |   |   | 0.1 | % |   |   | 41 |   |   |   | 0.2 | % |
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                            |   | $ | 1,782 |   |   |   | 16.5 | % |   | $ | 1,084 |   |   |   | 10.7 | % |   | $ | 858 |   |   |   | 4.2 | % |   | $ | 1,761 |   |   |   | 9.0 | % |

----

----

----

----

----

----

----

| ·   | 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; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | 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. |
|--------------------|-------------------------------------------------------------------------|

----

| Period                                                    | Total                Number of Shares                Purchased | Average                Price Paid                per Share | Total                Number of Shares Purchased                as Part of Publicly                Announced Plans or                Programs (1) | Maximum                Number (or Approximate Dollar                Value) of Shares that May byPurchased                Under the Plans                or Programs                (1) |
|-----------------------------------------------------------|----------------------------------------------------------------|------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| October                1, 2007- October 31, 2007          | 85,555                                                         | $6.74                                                      | 85,555                                                                                                                                           | $2,482,511                                                                                                                                                                             |
| November                1, 2007 – November 30, 2007 | 56,969                                                         | $5.70                                                      | 56,969                                                                                                                                           | $2,158,034                                                                                                                                                                             |
| December                1, 2007 – December 31, 2007 | 37,999                                                         | $5.19                                                      | 37,999                                                                                                                                           | $1,960,962                                                                                                                                                                             |
| Total                                                     | 180,523                                                        |                                                       | 180,523                                                                                                                                          |                                                                                                                                                                                   |

| (1)   | On                August 30, 2007, the Company announced that its Board of Directors                had                approved a stock buy-back program to purchase up $3,625,000 of the                Company’s common stock over the next 12 months in open market and private                block transactions. All repurchased shares will be immediately retired.                The stock buy-back program will expire in August 30,                2008. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                              | FOR       | WITHHELD  |
|---------------------------------------------------|-----------|-----------|
| Brad                R. Baldwin                    | 8,819,091 | 1,163,033 |
| Zeynep                “Zee” Hakimoglu | 8,899,674 | 1,082,450 |
| Larry                R. Hendricks                 | 8,820,363 | 1,161,761 |
| Scott                M. Huntsman                  | 8,820,241 | 1,161,883 |

|  FOR |  AGAINST |  ABSTAIN | BROKERNON-VOTES |
|-----------|---------------|---------------|-----------------|
| 3,020,748 | 1,792,560     | 981,418       | 4,187,398       |

----

| 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 |

|                                        | CLEARONE                COMMUNICATIONS, INC. |
|---------------------------------------------|----------------------------------------------|
|                                        |                                         |   |
|                                        |                                         |   |
|                                        |                                         |   |
| February                11, 2008            | By:                                          | /s/                Zeynep Hakimoglu |
|                                        |                                         | Zeynep                Hakimoglu |
|                                        |                                         | President                and Chief Executive Officer |
|                                        |                                         | (Principal                Executive Officer) |
|                                        |                                         |   |
|                                        |                                         |   |
|                                        |                                         |   |
| February  11,                2008 | By:                                          | /s/                Greg A. LeClaire |
|                                        |                                         | Greg                A. LeClaire |
|                                        |                                         | Chief                Financial Officer |
|                                        |                                         | (Principal                Financial and Accounting Officer) |