What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-31 compared with 2020-03-30 · 80 added, 43 removed, 204 unchanged (38% of the section changed)

12 unchanged sentences

and multiple use cases including meetings, classrooms and training sessions.

COLLABORATE Space, our powerful cloud-based collaboration solution, added two new valuable features in 2020 - webinar hosting and Web RTC.

COLLABORATE Space Pro and Enterprise meeting plans can be upgraded to include the new Webinar feature allowing session hosts to conduct video and audio presentations for up to 1000 participants.

The new Web RTC feature works with all popular browsers including Microsoft Edge, Google Chrome, Safari and Mozilla Firefox.

The new Web RTC feature enables users to easily join full-featured COLLABORATE Space audio and video meetings using a browser with no downloads or plug-ins required.

Users can accept meeting, webinar, and classroom invitations and join with a single click;

easily sharing and viewing content within a browser window.

COLLABORATE Space also added a feature where Microsoft Teams users can now enjoy a richer collaboration than that available within the Teams environment today.

This richer collaboration experience includes better video quality, support for multiple cameras, support for multiple displays, and a persistent meeting space where chats, audio and video recordings, documents, meeting minutes, whiteboard sessions, and more can be shared in private or public channels for later access.

Users can easily initiate a Space video meeting or join an existing Space video meeting within the MS Teams environment.

Bring your own video and web conferencing – COLLABORATE Versa series offer a USB PTZ camera, a speakerphone and a central hub that connects the laptop to the meeting room peripherals via single USB 3.0 connectivity.

15 unchanged sentences

Or it can be further configured using CONSOLE ® AI software, now with enhanced visualization and Audio Intelligence.

ITEM 1 - BUSINESS

Additionally, both COLLABORATE Versa Pro 50 and Versa Pro 150 solutions feature a CONVERGE® Huddle audio DSP mixer for a professional audio experience, a Ceiling Microphone Array with 360 -degree coverage that reduces reverberation and noise;

7 unchanged sentences

Its wide dynamic range provides support for optimal image capture — critical for all video conferencing.

ITEM 1 - BUSINESS

During April 2020, we introduced UNITE 20 Pro Webcam, which easily mounts on a PC or laptop to provide full 1080 p 30 image with an ultra wide-angle field-of-view up to 120 °.

A super-high signal-to-noise ratio and advanced 2 D and 3 D noise reduction provides superior desktop camera video quality.

AV Networking

Our AV networking products are primarily sold under VIEW ® and VIEW Pro brands and deliver the ultimate IP A/V experience by streaming time sensitive high definition audio and video and control over TCP/IP networks.

Our AV networking products are primarily sold under VIEW ® Pro and VIEW Lite brands and deliver the ultimate IP A/V experience by streaming time sensitive high definition audio and video and control over TCP/IP networks.

By combining audio and/or video content, meta-data and control signals into one digital stream in harmony with industry standards, its distributed, edge of the network architecture allows the hardware and the processing power to be distributed across any existing TCP/IP network.

This leverages many of the advantages of using TCP/IP over traditional analog systems and other centrally controlled IP-based systems.

The ClearOne VIEW and VIEW Pro products are powered by ClearOne’s patented StreamNet ® technology.

VIEW Pro products are powered by ClearOne’s patented StreamNet ® technology.

A user can activate and control a single audio source or combination of audio sources, video sources, security systems, HVAC systems, lighting, and other room or facility monitoring functions such as paging or security access by just a single touch to its attractive touch screens.

Alternatively, any PC, laptop, tablet, iPod, or other device with a built-in web browser with Flash can control the equipment connected to the system.

The VIEW and VIEW Pro systems have no limits on the numbers of sources, displays, or amplifiers in a project and can be used in venues from high-end residential homes to large-scale commercial projects.

Alternatively, any PC, laptop, tablet, iPod, or other device with a built-in web browser can control the equipment connected to the system.

VIEW Pro systems have no limits on the numbers of sources, displays, or amplifiers in a project and can be used in venues from high-end residential homes to large-scale commercial projects.

The number of devices could be determined by the network bandwidth availability, number of media streams and its bandwidth requirements.

10 unchanged sentences

VIEW Pro solution also comes with multiple license options including audio mixing, video composition, video wall, multicast RTSP and local playback.

VIEW CONSOLE software gives integrators a comprehensive platform from which to configure, manage, monitor, and control VIEW system installation using an easy, modern interface.

The new toolset, which spotlights the latest in advanced software development technologies, works across ClearOne’s full line of VIEW/VIEW Pro products.

VIEW CONSOLE software gives integrators a comprehensive platform from which to configure, manage, monitor, and control VIEW Pro system installation using an easy, modern interface.

The new toolset, which spotlights the latest in advanced software development technologies, works across ClearOne’s full line of VIEW Pro products.

In 2017 , we released an updated version of VIEW CONSOLE and PANORAMA software applications.

During 2018 , the VIEW line of products was strengthened by the introduction of VIEW Lite.

During 2018 , our AV Networking line of products was strengthened by the introduction of VIEW Lite.

The VIEW Lite series which includes an encoder, a decoder and a controller, provide essential functionality that meets the full needs of simple AV over IP applications while simultaneously delivering superb price-to-performance value.

ITEM 1 - BUSINESS

PROFESSIONAL AUDIO AND VIDEO HOME OFFICE SOLUTIONS

During November 2020, we introduced Aura™, a comprehensive range of Good, Better and Best packages of enterprise quality audio, video, audio-video options and a free COLLABORATE® Space lifetime subscription, the award-winning video collaboration app to meet the growing home office market demand for professional audio and video collaboration solutions that match the quality found in a traditional corporate office.

COVID 19 pandemic had brought long lasting changes to the workplace.

Home has become the new office for tens of millions of professionals who now need a work environment every bit as productive as their corporate office.

Aura was developed to deliver that much-needed enterprise quality experience in the home.

For homeowners, prospective homebuyers, builders, architects and designers, the purpose-built home office is rapidly replacing the home theater in importance.

Aura solutions are geared for high performance professionals across multiple industries.

Aura meets this growing need for easy to purchase and install commercial quality solutions that deliver HDConference® audio and true-to-life video technology through a variety of professional microphone, audioconferencing, videoconferencing, camera and collaboration component choices that optimize home office acoustic and aesthetic aspirations.

Designed to be easily installed by both homeowners and installers, Aura owners are also supported by a dedicated sales and support team that is available 24 / 7 .

MARKETING AND SALES

6 unchanged sentences

Outside United States

ITEM 1 - BUSINESS

We sell directly to our distributors and resellers in approximately 56 countries worldwide.

6 unchanged sentences

We also work with our distributors and resellers to maintain relationships with our existing systems integrators, dealers, and other value-added resellers.

ITEM 1 - BUSINESS

While dealers, resellers, and system integrators all sell our products directly to the end-users, system integrators typically add significant value to each sale by combining our products with products from other manufacturers as part of an integrated system solution.

9 unchanged sentences

Our customers are distributors and value-added resellers.

During the year ended December 31, 2019 , one distributor accounted for approximately 1 1 % of consolidated revenue with no other customer accounting for more that 10 % of consolidated revenue .

During the year ended December 31, 2018 no customer account ed for more tha n 10 % of consolidated revenue .

During the year ended December 31, 2020 , no distributor accounted for more than 10 % of our total consolidated revenue.

During the year ended December 31, 2019 one distributor with approximately 11 % of the consolidated revenue account ed for more tha n 10 % of consolidated revenue .

As discussed above, distributors facilitate product sales to a large number of independent systems integrators, dealers, and value-added resellers, and subsequently to their end-users.

2 unchanged sentences

We had a backlog of unfulfilled orders of app roximately $ 1.0 million and $ 0.2 million as of December 31, 2020 and 2019 , respectively.

ITEM 1 - BUSINESS

The audio-visual product markets are characterized by intense competition, rapidly evolving technology, and increased business consolidation.

11 unchanged sentences

Significant established history of successful worldwide installations for diverse vertical markets.

In the professional audio conferencing system and sound reinforcement markets our main competitors include AcousticMagic , AMX Biamp, BOSE, Crestron, Extron, Harman International/BSS, Peavey, Phoenix Audio, Polycom, QSC, Shure, Symetrix , Vaddio and Yamaha and their original equipment manufacturing (OEM) partners, along with several other companies potentially poised to enter the market.

Our primary competitors in the USB-based speakerphones market are GN Netcom (Jabra), Logitech, Phoenix Audio, Plantronics, Polycom, and Yamaha and their OEM partners.

In the tabletop audio conferencing market, we face significant competition from Avaya/ Konftel , Phoenix Audio, Polycom and Yamaha, and from their OEM partnerships.

ITEM 1 - BUSINESS

In the professional audio conferencing system and sound reinforcement markets our main competitors include AcousticMagic , Biamp, BOSE, Crestron, Extron, Harman (Samsung), Peavey, Phoenix Audio, Poly, QSC, Shure, Symetrix , Vaddio and Yamaha and any original equipment manufacturing (OEM) partners, along with several other companies potentially poised to enter the market.

Our primary competitors in the USB-based speakerphones market are Jabra, Logitech, Phoenix Audio, Plantronics, Poly, Sennheiser, Yamaha and Yealink and any OEM partners.

In the tabletop conference phones, we face significant competition from Avaya/ Konftel , Phoenix Audio, Poly, Yamaha and Yealink, and from any OEM partnerships.

A significant portion of the tabletop market is covered by sales through OEM partnerships.

While we believe MAX products have unique features and superior quality, our limited OEM partnerships and pricing pressures from higher volume competitors limit our ability to expand our existing share of this market.

In the microphones market, our primary competitors include AKG, Audio Technica , Audix , Avlex / Mipro , Beyerdynamic, Biamp, Clock Audio, Lectrosonics , Nureva , Mediavision / Taiden , Polycom, Phoenix Audio, Sennheiser, Shure, TeachLogic , TOA, Yamaha/ Revolabs and Vaddio and their OEM partners.

Our video conferencing products face tremendous competition from well established players as well as emerging players, including Acano/CISCO, Adobe Connect, Amazon Chime, Avaya ( Radvision ), Aver, Barco, Blackboard Collaborate, Blue Jeans, Cisco, Citrix, Fuze , Huawei, InFocus, Kramer, LifeSize , Magor , Pexip , Polycom, Microsoft Skype for Business, Starleaf , Telylabs , UNIFY, Videxio , Vidyo , Yealink, Zoom and ZTE.

Our AV networking products face intense competition from a few well-established corporations of diversified capabilities and strengths, including AMX, Atlona , Aurora Multimedia, Barco, Biamp, Cisco, Crestron, Extron, Gefen, Goopie , Haivision , Hall Research, Infocus (Jupiter), Key Digital, Kramer, Liberty AV, Magenta Research, Matrox, Mediasite , Ncast , RGB Spectrum, SVSi /Harman, voLANte , Teracue , tvONE , VBrick , Visionary Solutions, WyreStorm and ZeeVee .

In the microphones market, our primary competitors include AKG, Audio Technica , Audix , Avlex / Mipro , Beyerdynamic, Biamp, Clock Audio, Lectrosonics , Nureva , Mediavision / Taiden , Poly, Phoenix Audio, Sennheiser, Shure, TeachLogic , TOA, Yamaha and Vaddio and any OEM partners.

Our video conferencing products face tremendous competition from well established players as well as emerging players, including Acano/CISCO, Adobe Connect, Amazon Chime, Avaya ( Radvision ), Aver, Barco, Blackboard Collaborate, Blue Jeans, Cisco, Citrix, Fuze , Huawei, InFocus, Kramer, LifeSize , Magor , Pexip , Poly, Microsoft, Starleaf , UNIFY, Videxio , Vidyo , Yealink, Zoom and ZTE.

Our AV networking products face intense competition from a few well-established corporations of diversified capabilities and strengths, including Atlona , Aurora Multimedia, Barco, Biamp, Crestron, Extron, Gefen, Haivision , Hall Research, Harman, Infocus (Jupiter), Key Digital, Kramer, Liberty AV, Magenta Research, Matrox, Mediasite , Ncast , RGB Spectrum, voLANte , Teracue , tvONE , VBrick , Visionary Solutions, WyreStorm and ZeeVee .

We believe that our software based patented technology delivers superior audio and video streaming performance and flexibility and provides us with a competitive edge over other industry players.

ITEM 1 - BUSINESS

Sources and Availability of Raw Materials

2 unchanged sentences

During 2020 , we witnessed a significant tightening of the electronics market with demand for electronic products especially for memories and processors far exceeding the supply caused price increases and longer fulfillment cycles.

During 2018 the fulfillment cycles improved.

During 2019 tariff wars between USA and China created some uncertainty with respect to pricing and consequently affected the supply chain.

COVID- 19 completely disrupted the entire supply chain and extended the already lengthy fulfillment cycles.

Continued tariff wars between USA and China created more uncertainty with respect to pricing and consequently affected the supply chain.

We continually work with our EMS providers to seek alternative sources for all our components and raw material requirements to ensure higher quality and better pricing.

5 unchanged sentences

We do not recognize a consistent pattern between the quarters to identify seasonality.

ITEM 1 - BUSINESS

Research and Product Development

13 unchanged sentences

The laws of foreign countries may not protect our intellectual property to the same degree as the laws of the United States.

ITEM 1 - BUSINESS

We will obtain patents and other intellectual property rights used in connection with our business when practicable and appropriate.

1 unchanged sentence

From time to time, assertions of infringement of certain patents or other intellectual property rights of others have been made against us.

In addition, certain pending claims against a competitor are in various stages of litigation.

See Part I, Item 3 .

Legal Proceedings and Note 8 – Commitments and Contingencies of the Notes to Consolidated Financial Statements (Part II, Item 8 ) for information regarding current legal proceedings involving our intellectual property rights.

In addition, t he Company is involved in patent infringement lawsuits against Shure Inc .

See Note 8 – Commitments and Contingencies – Legal Proceedings – Intellectual Property Litigation for a discussion of these legal proceedings.

We are dependent on our intellectual property.

5 unchanged sentences

However, these precautions may not be sufficient to protect us from misappropriation or infringement of our intellectual property.

The Company is involved in patent infringement lawsuits against Shure Inc.

On April 24, 2017, Shure initiated litigation against the Company in the matter styled Shure Inc.

ClearOne, Inc.

17 -cv- 03078 , which is pending in the United States District Court for the Northern District of Illinois, Eastern Division, before the Honorable Edmond E.

Shure’s initial complaint sought a declaratory judgment for non-infringement and invalidity of the Company’s U.S.

9,635,186 ("’ 186 Patent") and Patent No.

9,264,553 ("’ 553 Patent").

In early 2018 , Shure added a claim that the ‘ 186 Patent is unenforceable.

The Court dismissed Shure’s request for declaratory judgment relating to the ’ 553 Patent, which at the time in 2017 , had not been asserted by the Company against any defendant and had been submitted to the USPTO for reissue.

The Company has filed counterclaims against Shure for willful infringement of the Company’s ’ 186 Patent and the Company’s U.S.

9,813,806 ("’ 806 Patent").

On April 10, 2019, the Company filed a new lawsuit against Shure in the United States District Court for the Northern District of Illinois, Eastern Division, styled ClearOne, Inc.

19 -cv- 02421 .

In this lawsuit, the Company asserts claims against Shure for infringement of the Company’s ’ 553 Patent and for trade secret misappropriation.

As of December 31, 2020 , we had 126 full-time e mployees.

3 unchanged sentences

We also hire contractors with specific skill sets to meet our operational needs.

ITEM 1 A - RISK FACTORS

Investors should carefully consider the risks described below.

55 unchanged sentences

See Part II, Item 9 A, “Controls and Procedures.”

We initiated remedial measures and conducted an evaluation of the effectiveness of our internal control over financial reporting for the year ended December 31, 2019 based on the framework set forth in Internal Control - Integrated Framework ( 2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and concluded that remediation of the material weakness identified during the 2017 audit has been completed.

We conducted an evaluation of the effectiveness of our internal control over financial reporting for the year ended December 31, 2019 based on the framework set forth in Internal Control - Integrated Framework ( 2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission, concluding that our internal control over financial reporting was effective as of December 31, 2019.

We initiated remedial measures and conducted an evaluation of the effectiveness of our internal control over financial reporting for the years 2019 and 2020 based on the framework set forth in Internal Control - Integrated Framework ( 2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and concluded that remediation of the material weakness identified during the 2017 audit has been completed.

We conducted an evaluation of the effectiveness of our internal control over financial reporting for years 2019 and 2020 based on the framework set forth in Internal Control - Integrated Framework ( 2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission, concluding that our internal control over financial reporting was effective as of December 31, 2019 and December 31, 2020, respectively.

However, there can be no assurance that these actions, as well as further actions we may take, will allow us to prevent any material weakness in the future and provide a solid foundation to meet our reporting obligations under the Exchange Act.

1 unchanged sentence

In addition, if we are unable to successfully remediate future material weakness and if we are unable to produce accurate and timely financial statements, our stock price may be materially adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements.

ITEM 1 A - RISK FACTORS

We have identified two significant deficiencies in internal control over financial reporting, and if we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

We are req uired to establish and maint ain appropriate internal controls over financial reporting.

Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operation s.

Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial fraud.

In the course of completing its assessment of internal control over financial reporting as of December 31, 2020, management did not identify any material weaknesses but did identify the continued existence of two significant deficiencies in the lack of end user segregation in our accounting system and a failure to following update procedures relating to updating inventory standard costs.

Specifically, management believes that we may not be able to adequately segregate responsibility over financial transaction processing and reporting.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting, that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.

Although we are unable to remediate the end user segregation significant deficiency with current personnel, we are mitigating its potential impact, primarily through a review of all employee’s access rights in our accounting system.

In addition, management’s assessment of internal controls over financial reporting may identify additional weaknesses and conditions that need to be addressed or other potential matters that may raise concerns for investors.

Any actual or perceived weaknesses and conditions that need to be addressed in o ur internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

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

We market our products primarily through a network of distributors who in turn sell our products to value-added resellers.

All of our agreements with such distributors and other distribution participants are non-exclusive, terminable at will by both parties, and generally short-term.

No assurances can be given that any or all such distributors or other distribution participants will continue their relationship with us.

Distributors and, to a lesser extent, value-added resellers cannot easily be replaced and any loss of revenues from these and other sources or our inability to reduce expenses to compensate for such loss of revenue could adversely affect our net revenue and profit margins.

Although we rely on our distribution channels to sell our products, our distributors and other distribution participants are not obligated to devote any specified amount of time, resources, or efforts to the marketing of our products, or to sell a specified number of our products.

There are no prohibitions on distributors or other resellers offering products that are competitive with our products, and some do offer competitive products.

The support of our products by distributors and other distribution participants may depend on the competitive strength of our products and the price incentives we offer for their support.

If our distributors and other distribution participants are not committed to our products, our revenue and profit margins may be adversely affected.

Additionally, we offer our distributors price protection on their inventory of our products.

If we reduce the list price of our products, we will compensate our distributors for the respective products that remain in their inventory on the date the price adjustment becomes effective, provided that they have been providing inventory reports consistently and the inventory was bought within the six months preceding the price adjustment date.

Our net revenue and profit margins could be adversely affected if we reduce product prices significantly or distributors happen to have significant on-hand inventory of the affected product at the time of a price reduction.

Further, if we do not have sufficient cash resources to compensate distributors on terms satisfactory to them or us, our price protection obligations may prevent us from reacting quickly to changing market conditions.

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

We have in the past experienced, and may again experience, technical difficulties and delays with the development and introduction of new products.

Many of the products we develop contain sophisticated and complicated circuitry, software and components and utilize manufacturing techniques involving new technologies.

Potential difficulties in the development process that we may experience include the following:

(a) meeting required specifications and regulatory standards;

(b) hiring and keeping a sufficient number of skilled developers;

(d) obtaining prototype products at anticipated cost levels;

(e) having the ability to identify problems or product defects in the development cycle;

and (f) achieving necessary manufacturing efficiencies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business