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Note 1 - Business Description, Basis of Presentation and Significant Accounting Policies
 9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]
1.
Business Description, Basis of Presentation and Significant Accounting Policies
 
Business Description:
 
ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and AV streaming solutions for voice and visual communications. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.
 
Basis of Presentation:
 
The fiscal year for ClearOne is the
twelve
months ending on
December 31.
The consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.
 
These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are
not
audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of
September 30, 2019
and
December 31, 2018,
the results of operations for the
three
and
nine
months ended
September 30, 2019
and
2018,
and the cash flows for the
nine
months ended
September 30, 2019
and
2018.
The results of operations for the
three
and
nine
months ended
September 30, 2019
and
2018
 are
not
necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form
10
-K for the year ended
December 31, 2018 
filed with the SEC.
 
Significant Accounting Policies:
 
The significant accounting policies were described in Note
1
to the audited consolidated financial statements included in the Company’s annual report on Form
10
-K for the year ended
December 31, 2018.
There have been
no
changes to these policies during the
nine
months ended
September 30, 2019
that are of significance or potential significance to the Company except for the change in accounting for leases as described below.
 
Recent accounting standard related to leases:
In
February 2016,
the FASB issued ASU
2016
-
02,
Leases (“ASU
2016
-
02”
). This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than
12
months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU
2016
-
02
is effective for fiscal years beginning after
December 15, 2018,
including interim periods within those fiscal years. Early adoption is permitted. In
July 2018,
the FASB issued ASU
No.
2018
-
11
which provides an alternative transition method that allows entities to apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has adopted the requirements of ASU
2016
-
02
on
January 1, 2019,
the
first
day of fiscal year
2019,
using the optional transition method. The Company elected to use certain practical expedient options, which allows an entity
not
to reassess whether any existing or expired contracts contain leases. There was an increase in assets of
$2,966
and liabilities of
$3,101
 due to the recognition of the required right-of-use asset and corresponding liability for all lease obligations that are currently classified as operating leases with the difference of
$135
related to existing deferred rent that reduced the ROU asset recorded. The standard did
not
have a material impact on our condensed consolidated statements of operations and comprehensive loss.
 
Accounting policy related to leases:
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease - right of use (“ROU”) assets, accrued liabilities, and operating lease liability in our consolidated balance sheets. As of adoption of ASC
842
and as of
September 30, 2019
and
December 31, 2018,
the Company was
not
party to any finance lease arrangements.
 
ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do
not
provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms
may
include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
 
Under the available practical expedient, we account for the lease and non-lease components as a single lease component.
 
Other recent accounting pronouncements:
The Company has determined that other recently issued accounting standards will
not
have a material impact on its consolidated financial position, results of operations or cash flows. 
 
Liquidity:
 
As of
September 30, 2019,
our cash and cash equivalents were approximately
$2,010
compared to
$11,211
 as of
December 31, 2018.
Our working capital was 
$22,470
 as of
September 30, 2019.
Net cash used in operating activities was
$6,570
 for the
nine
months ended
September 30, 2019, 
an increase of cash used of
$2,989
from
$3,581
 of cash used in operating activities in the
nine
months ended
September 30, 2018.
 
We are currently pursuing all available legal remedies to defend our strategic patents from infringement. We have already spent approximately
$11,877
from
2016
through 
September 30, 2019 
towards this litigation and
may
be required to spend more to continue our legal defense. We believe the recent decision by the U.S. District Court in
August
granting our request for a preliminary injunction to prevent our competitor from manufacturing, marketing, and selling its competing ceiling microphone array in an infringing configuration is an incredibly valuable ruling for ClearOne and its business. We believe that the decision validates the strength and importance of ClearOne’s intellectual property rights, recognizes ClearOne’s innovations in this space, and stops our competitor from further infringing our Graham patent (U.S. Patent
No.
9,813,806
) pending a full trial. We believe this ruling will help pave way for ClearOne’s recovery from the immense harm inflicted by our competitor's infringement of our valuable patents.
 
We have been actively engaged in preserving cash by suspending our dividend program, allowing our share repurchase program to expire and implementing company-wide cost reduction measures. In addition, we expect to generate additional cash as our inventory levels are brought down to historical levels. We also believe that the measures taken by us will yield higher revenues in the future. We believe all of these and effective management of working capital will provide the liquidity needed to meet our operating needs through at least
November 15, 2020.
We also believe that our strong portfolio of intellectual property and our solid brand equity in the market will enable us to raise additional capital if and when needed to meet our short and long-term financing needs; however, there can be
no
assurance that, if needed, we will be successful in obtaining the necessary funds through equity or debt financing.  If we need additional capital and are unable to secure financing, we
may
be required to further reduce expenses, delay product development and enhancement, or revise our strategy regarding ongoing litigation.