This report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements in this report, other than statements of historical fact, are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "intends," "believes," "estimates," "potential," or "continue," or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that any such expectations or any forward-looking statement will prove to be correct. Our actual results will vary, and may vary materially, from those projected or assumed in the forward-looking statements. Future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, without limitation, product recalls and product liability claims; infringement of our technology or assertion that our technology infringes the rights of other parties; termination of supplier relationships, or failure of suppliers to perform; inability to successfully manage growth; delays in obtaining regulatory approvals, or the failure to maintain such approvals; concentration of our revenue among a few customers, products or procedures; development of new products and technology that could render our products obsolete; market acceptance of new products; introduction of products in a timely fashion; price and product competition, availability of labor and materials, cost increases, and fluctuations in and obsolescence of inventory; volatility of the market price of our common stock; foreign currency fluctuations; changes in key personnel; work stoppage or transportation risks; and other factors referred to in our press releases and reports filed with the SEC, including our Annual Report on Form10-K/A, for the year ended June 30, 2008. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are discussed in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K/A for the year ended June 30, 2008.

BUSINESS OVERVIEW

We are an audio conferencing products company. We develop, manufacture, market, and service a comprehensive line of high-quality audio conferencing products, which range from personal conferencing products to tabletop conferencing phones to professionally installed audio systems. We also manufacture and sell conferencing furniture. We have a strong history of product innovation and plan to continue to apply our expertise in audio engineering to develop and introduce innovative new products and enhance our existing products. We believe the performance and reliability of our high-quality audio products create a natural communications environment which saves organizations of all sizes time and money by enabling more effective and efficient communication.

Our products are used by organizations of all sizes to accomplish effective group communication. Our end-users include some of the world's largest and most prestigious companies and institutions, small and medium-sized businesses, educational institutions, and government organizations as well as individual consumers. We sell our products to these end-users primarily through a network of independent distributors who in turn sell our products to dealers, systems integrators, and value-added resellers. We also sell products on a limited basis directly to dealers, systems integrators, value-added resellers, and end-users.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our results of operations and financial condition are based upon our condensed consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We evaluate our

assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. We believe that the estimates we use are reasonable; however, actual results could differ from those estimates. We believe the following critical accounting policies affect our more significant assumptions and estimates that we used to prepare our condensed consolidated financial statements.

Revenue and Associated Allowances for Revenue Adjustments and Doubtful Accounts

Included in continuing operations is product revenue, primarily from product sales to distributors, dealers, and end-users. Product revenue is recognized when (i) the products are shipped and any right of return expires, (ii) persuasive evidence of an arrangement exists, (iii) the price is fixed and determinable, and (iv) collection is reasonably assured.

We provide a right of return on product sales to distributors. Accordingly, revenue from product sales to distributors is not recognized until the return privilege has expired, which approximates when product is sold-through to customers of our distributors (dealers, system integrators, value-added resellers, and end-users) rather than when the product is initially shipped to a distributor. We evaluate, at each quarter-end, the inventory in the channel through information provided by certain of our distributors. Although certain distributors provide certain channel inventory amounts, we make judgments and estimates with regard to the amount of inventory in the entire channel, for all customers and for all channel inventory items, and the appropriate revenue and cost of goods sold associated with those channel products. We receive inventory reports from our major distributors who, in the aggregate, have generally accounted for approximately 70% of our total revenue for any given reporting period. These inventory reports include quantities along with each associated part number each distributor has in its inventory on hand at the last day of each reporting period. We extrapolate the information above in order to estimate the entire amount of inventory in our distributor channel at each reporting period. The portion of channel inventory extrapolated based on channel inventory reports provided by our major distributors has generally been less than 20%. The level of inventory in the channel will fluctuate up or down, each quarter, based upon our distributors' individual operations. Accordingly, each quarter-end revenue deferral is calculated and recorded based upon the underlying, estimated channel inventory at quarter-end. We recognize revenue from distributors when our deferred revenue calculation supports that inventory in the channel has decreased and has thereby been sold out of the distributor channel. We also defer the cost of goods sold associated with the deferred revenue by multiplying the estimated inventory in the channel by our standard cost for each applicable product in the channel. Our standard cost is derived by adding our internal manufacturing overhead costs to the price of the products purchased from our contract manufacturers (we absorb our manufacturing overhead into the carrying cost of our inventory).We periodically audit a limited number of distributors in order to gain a level of confidence in the third party data provided to us. Although these assumptions and judgments regarding total channel inventory revenue and cost of goods sold could differ from actual amounts, we believe that our calculations are indicative of actual levels of inventory in the distribution channel. The amounts of deferred cost of goods sold were included in consigned inventory. The following table details the amount of deferred revenue, deferred cost of goods sold, and deferred gross profit at each quarter end for the 12-month period ended March 31, 2009 (in thousands).

                                                  Deferred
                                  Deferred        Cost of          Deferred
                                  Revenue        Goods Sold      Gross Profit

            March 31, 2009       $    4,163     $      1,400     $       2,763
            December 31, 2008         4,881            1,678             3,203
            September 30, 2008        4,432            1,926             2,506
            June 30, 2008             4,547            1,719             2,828
            March 31, 2008            4,206            1,757             2,449

We offer rebates and market development funds in some combination to certain of our distributors, dealers/resellers, and end-users based upon volume of product purchased by them. We record rebates as a reduction of revenue in accordance with Emerging Issues Task Force ("EITF") Issue No. 00-22, "Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future."

We offer credit terms on the sale of our products to a majority of our customers and perform ongoing credit evaluations of our customers' financial condition. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments based upon our historical collection experience and expected collectability of all accounts receivable. Our actual bad debts in future periods may differ from our current estimates and the differences may be material, which may have an adverse impact on our future accounts receivable and cash position.

Accounting for Income Taxes

We are subject to income taxes in both the United States and in certain non-U.S. jurisdictions. We estimate our current tax position together with our future tax consequences attributable to temporary differences resulting from differing treatment of items, such as deferred revenue, depreciation, and other reserves for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, prior year carryback, or future reversals of existing taxable temporary differences. To the extent we believe that recovery is not more likely than not, we establish a valuation allowance against these deferred tax assets. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets. To the extent we establish a valuation allowance in a period, we must include and expense the allowance within the tax provision in the consolidated statement of operations.

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

We account for our inventory on a first-in, first-out basis, and make appropriate adjustments on a quarterly basis to write-down the value of inventory to the lower-of-cost or market.

In order to determine what, if any, inventory needs to be written down, we perform a quarterly analysis of obsolete and slow-moving inventory. In general, we write-down our excess and obsolete inventory by an amount that is equal to the difference between the cost of the inventory and its estimated market value if market value is less than cost, based upon assumptions about future product life-cycles, product demand, and market conditions. Those items that are found to have a supply in excess of our estimated demand are considered to be slow-moving or obsolete and the appropriate reserve is made to write-down the value of that inventory to its realizable value. These charges are recorded in cost of goods sold. If there were to be a sudden and significant decrease in demand for our products, or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, we could be required to increase our inventory allowances and our gross profit and results of operations could be adversely affected.

Stock-Based Compensation

We account for stock-based compensation in accordance with SFAS No. 123R, Share-Based Payment. Under the fair value recognition provisions of this statement, we measure share-based compensation cost at the grant date based on the value of the award which is recognized as expense over the requisite service period. Judgment is required in estimating the amount of share-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

SEASONALITY

Our audio conferencing products revenue has historically been strongest during our second and fourth quarters. There can be no assurance that any historic sales patterns will continue and, as a result, sales for any prior quarter are not necessarily indicative of the sales to be expected in any future quarter.

ANALYSIS OF RESULTS OF OPERATIONS

Results of Operations for the three months or the third fiscal quarter ("3Q")
and nine months of the fiscal year ("9M") ended March 31, 2009 and 2008

The following table sets forth certain items from our unaudited condensed
consolidated statements of operations (in thousands) for the three and nine
months ended March 31, 2009 and 2008, together with the percentage of total
revenue which each such item represents:

                                        Three Months Ended                                               Nine Months Ended
                                          (in thousands)                                                  (in thousands)
                                             March 31,                                                       March 31,
                               2009                            2008                            2009                            2008
                                  % of Revenue                    % of Revenue                    % of Revenue                    % of Revenue
Revenue:            $  7,612               100%     $  9,163               100%     $ 27,840               100%     $ 29,393               100%

Cost of goods
sold:
Total cost of
goods sold             3,605                47%        3,439                38%       11,399                41%       12,153                41%
Gross profit           4,007                53%        5,724                62%       16,441                59%       17,240                59%

Operating
expenses:
Sales and
marketing              1,690                22%        1,640                18%        5,600                20%        4,820                16%
Research and
product
development            1,810                24%        1,701                19%        5,430                20%        5,134                17%
General and
administrative           123                 2%        1,183                13%        2,451                 9%        5,276                18%
Total operating
expenses            $  3,623                48%     $  4,524                49%     $ 13,481                48%     $ 15,230                52%

Revenue

Revenue for 3Q 2009 decreased 17%, or approximately $1.6 million, compared to 3Q 2008. Our 3Q 2009 revenue was negatively affected by the global decline in technology spending, most notably in North America, in addition to increased pricing pressure. Each of our major product categories were negatively impacted during 3Q 2009 with the exception our personal conferencing products in which we realized slight increases over 3Q 2008.

Revenue for 9M 2009 decreased 5%, or approximately $1.6 million, compared to 9M 2008. The percentage decline during 9M 2009 was less than during 3Q 2009 due to our solid revenue reported in 1Q 2009. During 9M 2009, we realized growth in our personal conferencing products, which increased approximately $500,000 over 9M 2008. This increase was offset by reduced professional, premium, tabletop and furniture product sales which together declined about $1.9 million in 9M 2009 over the same period last year. We also expended an additional $380,000 in marketing related programs (e.g. marketing development funds, rebates, etc.) in 9M 2009 compared to 9M 2008, which are accounted for as a reduction in revenue.

We evaluate, at each quarter-end, the inventory in the channel through information provided by certain of our distributors. The level of inventory in the channel will fluctuate up or down, each quarter, based upon our distributors' individual operations. Accordingly, each quarter-end revenue deferral is calculated and recorded based upon the underlying, estimated channel inventory at quarter-end. See "Revenue and Associated Allowance for Revenue Adjustments and Doubtful Accounts" under Item 2 of Part I of this report on Form 10-Q. During 3Q 2009 and 2008, the net change in deferred revenue based on the net movement of inventory in the channel was a net recognition of $718,000 and $774,000 in revenue, respectively. In 9M 2009 and 2008, the net change in deferred revenue based on the net movement of inventory in the channel was a recognition of $384,000 and $666,000 in revenue, respectively.

Costs of Goods Sold and Gross Profit

Costs of goods sold include expenses associated with finished goods purchased from contract manufacturers, in addition to other operating expenses which include material and direct labor, our manufacturing and operations organization, property and equipment depreciation, warranty expense, freight expense, royalty payments, and the allocation of overhead expenses.

Our gross profit margin (GPM), which is gross profit as a percentage of sales, was 53% and 62% in 3Q 2009 and 3Q 2008, respectively. GPM was negatively impacted in 3Q 2009 as a result of writing-down our inventory by approximately $690,000, due to the slow or non-movement of certain items included in our inventory.

Despite the lower GPM in Q3 2009, our GPM for 9M 2009 was 59%, the same as 9M 2008. During the first nine months of fiscal 2009 we did not have similar levels of inventory obsolescence reserve requirements. Additionally our 9M 2009 GPM was positively impacted from (1) selective channel price increases made during 9M 2009, (2) certain of our new products having higher gross margins and (3) lower production costs for several of our products.

Operating Expenses

3Q 2009 operating expenses were about $3.6 million, a decrease of $900,000, or 20%, from $4.5 million in 3Q 2008. 9M 2009 operating expenses were $13.5 million, a decrease of $1.7 million, or 11%, from $15.2 million for 9M 2008. The following is a more detailed discussion of expenses related to sales and marketing, general and administrative, and research and development.

Sales and Marketing expenses. S&M expenses include selling, customer service, and marketing expenses such as employee-related costs, allocations of overhead expenses, trade shows, and other advertising and selling expenses. 3Q 2009 S&M expenses increased slightly by approximately $50,000, or 3%, to $1.7 million compared to 3Q 2008 expenses of approximately $1.65 million. As a percentage of revenue, 3Q 2009 and 2008 S&M expenses were 22% and 18%, respectively. The 3Q 2009 increase in S&M expenses over 3Q 2008 was due primarily to increased sales commissions paid to independent manufacturer sales representatives. During 1Q 2009, we began paying certain independent sales representatives commissions directly. These were formerly paid by certain of our distributors and are partially offset by a channel price increase to these distributors. This increase was partially offset by lower commission payments made to our directly employed sales representatives associated with our lower 3Q 2009 revenue.

9M 2009 S&M expenses increased about $780,000, or 16%, to $5.6 million compared to 9M 2008 expenses of $4.8 million. As a percentage of revenues, 9M 2009 and 2008 marketing and selling expenses were 20% and 16%, respectively. The 9M 2009 increase in S&M expenses over 9M 2008 is due primarily to the payment of commissions to certain independent sales representatives which were formerly paid by certain of our distributors and to a lesser extent to higher payroll and related expenses associated with higher S&M headcount.

Research and Development expenses. R&D expenses include research and development and product line management, including employee-related costs, outside services, expensed materials and depreciation, and an allocation of overhead expenses. 3Q 2009 R&D expenses increased $109,000, or 6%, to $1.8 million compared to 3Q 2008 expenses of $1.7 million. As a percentage of revenue, 3Q 2009 and 2008 R&D expenses were 24% and 19%, respectively. The 3Q 2009 increase was due primarily to higher payroll and related expenses associated with higher R&D headcount.

9M 2009 R&D expenses increased approximately $300,000, or 6%, to $5.4 million compared with 9M 2008 expenses of $5.1 million. The 9M 2009 increase in R&D expenses was also due to higher payroll and related expenses associated with higher R&D headcount and higher specific R&D project spending.

General and Administrative expenses. G&A expenses include employee-related costs, professional service fees, allocations of overhead expenses, litigation costs and corporate administrative costs, including finance, information technology and human resources. 3Q 2009 G&A expenses decreased significantly to $123,000 compared with 3Q 2008 expenses of $1.2 million. 3Q 2009 and 2008 G&A expenses were 2% and 13% of sales, respectively. During 3Q 2009 and in accordance with generally accepted accounting principles, we reversed the approximate $1.1 million balance of a contingent liability associated with the indemnification agreements with two former officers. Refer to the Legal Proceedings section in Part II of this report on Form 10-Q for additional information. The contingent liability reversal was partially offset by an approximate $150,000 write-off of bad debt associated with an Asia Pacific distributor the company terminated during 3Q 2009.

9M 2009 G&A expenses decreased $2.8 million, or 54%, to $2.5 million compared to 9M 2008 expenses of $5.3 million. 9M 2009 and 2008 G&A expenses were 9% and 18% of sales, respectively. The significant 9M 2009 decrease was primarily due to the $1.1 million contingent liability balance reversed in 3Q 2009 discussed above in addition to the 9M 2008 estimation and establishment of an approximate $2.1 million accrual for a contingent liability. Also, during 9M 2008 we paid Edward D. Bagley, our former director and Chairman, $200,000 upon his resignation and in consideration for his service as a director of the Company since 1994. These items were partially offset by the Q3 2009 write-off of bad debt discussed above and higher legal fees primarily associated with a lawsuit filed against us by two former officers (and counsel for one of them).

Operating income. 3Q 2009 operating income was $384,000 compared to $1.2 million in 3Q 2008. The 3Q 2009 operating income decrease of approximately $816,000 was due to lower revenue and associated gross profit during 3Q 2009 partially offset by the lower operating expenses discussed above.

The 9M 2009 operating income increase of approximately $950,000 was primarily a result of the $1.8 million lower operating expenses discussed above, partially offset by lower revenue and associated gross profit.

Other income, net. Other income, net, includes interest income, interest expense, capital gains, gain (loss) on the disposal of assets, and currency gain
(loss). 3Q 2009 other income was $60,000 compared to $196,000 in 3Q 2008. The $136,000 decrease in 3Q 2009 was due primarily to our lower cash and investment balances in addition to lower interest rates on our investments compared to the same period last year.

9M 2009 other income was $221,000 compared to $848,000 in 9M 2008. The $627,000 decrease in 9M 2009 was also due primarily to our lower cash and investment balances in addition to lower interest rates on our investments compared to the same period last year.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $2.4 million in 9M 2009, a decrease of $4.8 million from the net cash provided by operating activities of $2.4 million in 9M 2008. The year-over-year decrease can be attributed primarily to an additional $7.3 million used in 9M 2009 to purchase inventory to build up inventory levels primarily to mitigate supply chain risk and associated stock-outs as we transition to a larger, more global and capable electronic manufacturing services provider, to supply our new Asia Pacific Support Center in Hong Kong in addition to taking advantage of volume discounts. The 9M 2009 decrease was partially offset by an approximate $640,000 increase in our inventory obsolescence reserve associated with slower and non-moving inventory in addition to an approximate $1.3 million increase in other working capital.

Net cash flows provided by investing activities were approximately $16.6 million in 9M 2009, an increase of approximately $10.6 million from 9M 2008. During 9M 2009, we converted approximately $5.2 million of marketable securities to cash to fund our 1Q 2009 repurchase of common stock. We also converted an additional $12.2 million of marketable securities to cash and equivalents to invest in cash equivalent investments, primarily certificates of deposit, and to support our cash used in operating activities during 9M 2009.

Net cash used in financing activities in 9M 2009 totaled $6.6 million primarily related to our 1Q 2009 repurchase of 1,342,620 shares of common stock. Net cash used in financing activities in 9M 2008 totaled $2.7 million and was attributed to our repurchase of approximately 600,000 shares of common stock for $3.4 million, partially offset by the receipt of $591,000 from the exercise of stock options and $67,000 related to the tax benefit attributable to the exercise of those stock options.

Additionally in 9M 2009, we paid approximately $1.4 million in income taxes and exchanged $651,000 of accounts receivable from a vendor with accounts payable to the same vendor.

During October 2008, we accepted offers to repurchase our Auction Rate Securities (ARSs), at par value, from the two investment banks that sold them to us. Between November 2008 and January 2009, UBS and Morgan Stanley fulfilled . . .