What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-15 · 194 added, 298 removed, 120 unchanged (80% of the section changed)

28 unchanged sentences

On September 9, 2024, ClearOne recorded a 31 % increase in unique visitors at our 2024 Infocomm India trade show booth, while the overall annual increase of all attendees at that trade show was only 17 %.

On January 16, 2025, we launched the BMA

360DX ceiling tile beamforming microphone array with an integrated DSP

processor that provides everything needed to combine, route, and process all

the audio signals with no compromises.

Like the other members of the BMA 360

product family, the BMA 360DX includes FiBeam(TM) technology that provides

truly ultra-wideband, frequency-invariant performance with uniform-gain

response across all frequency bands and DsBeam(TM) technology that provides

unparalleled sidelobe depth, below -40 dB, resulting in superior rejection of

reverb and noise in difficult spaces for superb clarity and intelligibility.

built-in power amplifiers, selectable as 4x15 Watt or 2x30 Watt, simplify

installations with loudspeakers.

Setting up the BMA 360DX is incredibly quick

and easy with auto-detection of additional beamforming microphone arrays and

peripherals such as USB expanders, analog audio I/Os, and HDMI audio

de-embedders.

With everything on board, its scalable design easily adapts to a

variety of meeting spaces.

The BMA 360DX won a Best of Show award in the AV

Technology category at the Integrated Systems Europe 2025 exhibition in

Barcelona, Spain.

On January 20, 2025, we announced the

launch of the Versa® 120D USB-C Docking Station with Dante®, designed to

simplify and enhance hybrid meeting experiences.

The Versa 120D is a versatile

collaboration solution combining a USB-C docking station and Dante audio

networking into a single, easy-to-use device.

This innovative solution is

specifically designed to meet the needs of Pro AV integrators and streamline BYOD

(Bring Your Own Device) workflows in a variety of meeting spaces.

It includes support

for dual 4K60 displays or a single 8K30 display, ensuring crystal-clear visuals

for presentations and video conferencing.

High-speed USB-C connectivity

delivers blazing-fast data transfer speeds of up to 40 Gbps, enabling seamless

device operation.

Simplified network integration with 10/100/1000 Base-T

auto-negotiation and Ethernet pass-through over USB-C provides reliable,

high-speed network connectivity directly to your device.

The Versa 120D

simplifies deployment and configuration with automatic discovery and native

integration with Audinate’s Dante Controller software.

It boasts broad

interoperability, seamlessly integrating with a wide range of AV systems and

Enhanced security features include support for HDCP versions 1.4, 2.2,

and 2.3 ensuring encrypted transmission of high-definition video and audio

while meeting content protection standards.

Additionally, the Versa 120D meets

TAA requirements, making it ideal for US government and educational

On January 22, 2025, we introduced the

DIALOG® AERO, a wideband UHF 2-channel encrypted digital wireless microphone

solution with over 100 MHz of RF tuning range.

The DIALOG® AERO features an

intuitive interface with a large, easy-to-read LCD display that provides

real-time information on critical settings.

Aero Console software provides

remote configuration, monitoring and management of the receiver and smart dock

via Ethernet.

On January 16, 2025, we launched the BMA 360 DX ceiling tile beamforming microphone array with an integrated DSP processor that provides everything needed to combine, route, and process all the audio signals with no compromises.

Like the other members of the BMA 360 product family, the BMA 360 DX includes FiBeam(TM) technology that provides truly ultra-wideband, frequency-invariant performance with uniform-gain response across all frequency bands and DsBeam(TM) technology that provides unparalleled sidelobe depth, below - 40 dB, resulting in superior rejection of reverb and noise in difficult spaces for superb clarity and intelligibility.

The built-in power amplifiers, selectable as 4 x 15 Watt or 2 x 30 Watt, simplify installations with loudspeakers.

Setting up the BMA 360 DX is incredibly quick and easy with auto-detection of additional beamforming microphone arrays and peripherals such as USB expanders, analog audio I/Os, and HDMI audio de-embedders.

With everything on board, its scalable design easily adapts to a variety of meeting spaces.

The BMA 360 DX won a Best of Show award in the AV Technology category at the Integrated Systems Europe 2025 exhibition in Barcelona, Spain.

On January 20, 2025, we announced the launch of the Versa® 120 D USB-C Docking Station with Dante®, designed to simplify and enhance hybrid meeting experiences.

The Versa 120 D is a versatile collaboration solution combining a USB-C docking station and Dante audio networking into a single, easy-to-use device.

This innovative solution is specifically designed to meet the needs of Pro AV integrators and streamline BYOD (Bring Your Own Device) workflows in a variety of meeting spaces.

It includes support for dual 4 K 60 displays or a single 8 K 30 display, ensuring crystal-clear visuals for presentations and video conferencing.

High-speed USB-C connectivity delivers blazing-fast data transfer speeds of up to 40 Gbps, enabling seamless device operation.

Simplified network integration with 10 / 100 / 1000 Base-T auto-negotiation and Ethernet pass-through over USB-C provides reliable, high-speed network connectivity directly to your device.

The Versa 120 D simplifies deployment and configuration with automatic discovery and native integration with Audinate’s Dante Controller software.

It boasts broad interoperability, seamlessly integrating with a wide range of AV systems and devices.

Enhanced security features include support for HDCP versions 1.4 , 2.2 , and 2.3 ensuring encrypted transmission of high-definition video and audio while meeting content protection standards.

Additionally, the Versa 120 D meets TAA requirements, making it ideal for US government and educational deployments.

On January 22, 2025, we introduced the DIALOG® AERO, a wideband UHF 2 -channel encrypted digital wireless microphone solution with over 100 MHz of RF tuning range.

The DIALOG® AERO features an intuitive interface with a large, easy-to-read LCD display that provides real-time information on critical settings.

Aero Console software provides remote configuration, monitoring and management of the receiver and smart dock via Ethernet.

DIALOG® AERO microphones offer flexible powering options.

can be powered with the included rechargeable Li-Ion AA batteries, NiMH AA

rechargeable batteries, common AA battery types, or USB-C.

Microphones and Dock

can charge Li-Ion and NiMH AA batteries and the dock also charges spare AA

batteries for added convenience.

The system features a modular expandable 2-bay

smart dock, allowing for easy expansion up to eight channels by linking

multiple docks together, simplifying installation and minimizing cabling.

Larger systems can be further expanded using optional accessories, including a

four-channel antenna distributor with ceiling mount antennas, antenna

combiners, and a joining kit for mounting two receivers in a single rack space.

They can be powered with the included rechargeable Li-Ion AA batteries, NiMH AA rechargeable batteries, common AA battery types, or USB-C.

Microphones and Dock can charge Li-Ion and NiMH AA batteries and the dock also charges spare AA batteries for added convenience.

The system features a modular expandable 2 -bay smart dock, allowing for easy expansion up to eight channels by linking multiple docks together, simplifying installation and minimizing cabling.

Larger systems can be further expanded using optional accessories, including a four -channel antenna distributor with ceiling mount antennas, antenna combiners, and a joining kit for mounting two receivers in a single rack space.

The auto-scan feature finds open channels for optimal reception.

also includes detachable antennas with a 5-foot extension kit for added

flexibility in system placement and signal optimization.

DIALOG® AERO is ideal

for a wide range of applications, including town hall meetings, company

all-hands meetings, management retreats, school award ceremonies, rallies,

houses of worship, hybrid training and presentation sessions, sound

reinforcement and voice lift scenarios.

On January 24, 2025, we introduced the

UNITE 260N Pro, a professional 4K Ultra HD camera with NDI®|HX, designed to

meet the requirements of NDI® workflows.

NDI – Network Device Interface – is

used by millions of customers worldwide and has been adopted by more media

organizations than any other IP standard, creating the industry’s largest IP

ecosystem of products.

NDI allows multiple video systems to identify and

communicate with one another over IP;

it can encode, transmit, and receive many

streams of high-quality, low-latency, frame-accurate video and audio in real

The growth of NDI is backed by a growing community of installers,

developers, AV professionals, and users who are deeply engaged with the company

through community events and initiatives.

NDI-enabled UNITE 260N Pro Cameras

are instantly discoverable within a standard IP network, eliminating the need

for complex setups.

These cameras can seamlessly send or receive high-quality,

low-latency video, audio, controls, and metadata all within a single stream.

Also, UNITE 260N Pro Cameras seamlessly integrate with a vast ecosystem of

thousands of NDI-compatible hardware and software products.

On January 27, 2025, we announced the

addition of a 4-channel Access Point and a 4-bay Dock to our award-winning

DIALOG® UVHF Wireless Microphone System.

With these new additions, the Dialog

UVHF Wireless Microphone System now offers the flexibility to choose between an

Access Point with 8 or 4 Dante channels and a Charger Dock capable of charging

8 or 4 microphones.

The 4-channel Access Point and 4-bay Dock offer significant

benefits like lower cost, system flexibility and a smaller form factor for the

This translates to increased value for our customers, making our

high-quality wireless audio solutions more accessible and a better fit for

applications that require fewer microphones.

Overall revenue decreased by 36 % in the first quarter of 2025 when compared to the first quarter of 2024 , primarily due to a significant decrease in revenues from product shortages that resulted in delayed product shipments.

The system also includes detachable antennas with a 5 -foot extension kit for added flexibility in system placement and signal optimization.

DIALOG® AERO is ideal for a wide range of applications, including town hall meetings, company all-hands meetings, management retreats, school award ceremonies, rallies, houses of worship, hybrid training and presentation sessions, sound reinforcement and voice lift scenarios.

On January 24, 2025, we introduced the UNITE 260 N Pro, a professional 4 K Ultra HD camera with NDI®|HX, designed to meet the requirements of NDI® workflows.

NDI – Network Device Interface – is used by millions of customers worldwide and has been adopted by more media organizations than any other IP standard, creating the industry’s largest IP ecosystem of products.

NDI allows multiple video systems to identify and communicate with one another over IP;

it can encode, transmit, and receive many streams of high-quality, low-latency, frame-accurate video and audio in real time.

The growth of NDI is backed by a growing community of installers, developers, AV professionals, and users who are deeply engaged with the company through community events and initiatives.

NDI-enabled UNITE 260 N Pro Cameras are instantly discoverable within a standard IP network, eliminating the need for complex setups.

These cameras can seamlessly send or receive high-quality, low-latency video, audio, controls, and metadata all within a single stream.

Also, UNITE 260 N Pro Cameras seamlessly integrate with a vast ecosystem of thousands of NDI-compatible hardware and software products.

On January 27, 2025, we announced the addition of a 4 -channel Access Point and a 4 -bay Dock to our award-winning DIALOG® UVHF Wireless Microphone System.

With these new additions, the Dialog UVHF Wireless Microphone System now offers the flexibility to choose between an Access Point with 8 or 4 Dante channels and a Charger Dock capable of charging 8 or 4 microphones.

The 4 -channel Access Point and 4 -bay Dock offer significant benefits like lower cost, system flexibility and a smaller form factor for the dock.

This translates to increased value for our customers, making our high-quality wireless audio solutions more accessible and a better fit for applications that require fewer microphones.

Overall revenue decreased by 17 % in the second quarter of 2025 when compared to the second quarter of 2024 , primarily due to a significant decrease in revenues from product shortages that resulted in delayed product shipments.

The revenue decline was also caused by significantly reduced demand for our products in many regions including USA, Europe and China when compared to 2024-Q2 revenues.

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This issue negatively affected new products that we introduced in Q2 2025 as well as older products with consistent demand.

Our work through the first three months of 2025 has focused on mitigating these impacts through maintaining consistent dialogues, product demonstrations, and feedback cycles with end users and channel partners, along with improving our visibility at key industry events.

In addition, we saw a reduction in sales in the Middle East region, where we had previously experienced consistent sales growth, as we transitioned to a new distributor for the Middle East region.

Our work through the first half of 2025 has focused on mitigating these impacts through maintaining consistent dialogues, product demonstrations, and feedback cycles with end users and channel partners, along with improving our visibility at key industry events.

We believe our revenue performance in 2025-Q2 compared to 2024-Q2 also was to a small extent impacted negatively due to anticipated cost increases, whether realized or unrealized, associated with the tariffs on electronic raw materials that have affected the global manufacturing of high-tech products.

We do expect to realize some of these increased costs in various degrees through the remainder of 2025 .

Our gross profit margin decreased to 5.2 % during the first quarter of 2025 from 31.8 % during the first quarter of 2024 .

The reduction in gross margin is the result of revenue decreasing by a higher percentage than cost of goods sold.

Our gross loss margin decreased to ( 12.1 )% during the second quarter of 2025 from ( 0.9 )% during the second quarter of 2024 .

The increase in gross loss margin is the result of revenue decreasing by a higher percentage than cost of goods sold and the accrual of severance expense resulting

from a reduction in force.

The Company experienced a significant reduction in inventory levels, with a decrease of approximately $ 2.7 million compared to December 31, 2024.

2 unchanged sentences

This led to unabsorbed overhead costs being recognized as an expense in the period, directly impacting cost of goods sold.

The increase in unabsorbed overhead

reflects the temporary misalignment between production levels and fixed

overhead costs, which are generally allocated to inventory under our standard

costing methodology.

Management is actively evaluating strategies to optimize

inventory levels and production schedules to mitigate similar impacts in future

Net loss increased from $( 1.9 ) million in the first quarter of 2024 to $( 2.8 ) million in the first quarter of 2025 .

The increase in net loss was mainly due to the decrease in revenues and decrease in gross margin.

In November 2024, we announced that our

board of directors had formed a Special Transaction Committee (the “Special

Transaction Committee”) to conduct a comprehensive review of strategic

alternatives focused on maximizing shareholder value, including but not limited

to, equity or debt financing alternatives, merger and acquisition transactions,

divestiture of assets, licensing opportunities, joint ventures, collaborations

or other partnerships with other companies, or a spin-off of the Company’s

current business and operations to its current stockholders (each, a “Strategic

Transaction”).

We may be unable to complete a strategic transaction within a

reasonable timeframe, on attractive terms or at all, and market conditions,

including the historical volatility in our common stock will likely limit our

ability to raise capital on favorable terms, or at all, and the terms of any

public or private offerings of debt or equity securities likely would be

significantly dilutive to existing stockholders.

There is no set timetable for

the overall process given the anticipated timelines for different strategic

alternatives may vary, and there can be no assurance that this process will

result in us pursuing a transaction or that any transaction, if pursued, will

be completed on attractive terms or at all.

Given these challenges, if we are

unable to complete a strategic transaction, we may not be able to continue to

execute our business plan to be able to continue as a going concern.

We will need to complete one or more

strategic transactions or raise additional working capital to continue our

normal and planned operations.

We will need to generate and sustain significant

revenue levels in future periods in order to become profitable, and, even if we

do, we may not be able to maintain or increase our level of profitability.

addition, as a public company, we will incur accounting, legal and other

These expenditures will make it necessary for us to continue to raise

additional working capital.

Our efforts to grow our business may be costlier

than we expect, and we may not be able to generate sufficient revenue to offset

our increased operating expenses.

We may incur significant losses in the future

for a number of reasons, including unforeseen expenses, difficulties,

complications and delays and other unknown events.

Accordingly, substantial

doubt exists about our ability to continue as a going concern and we cannot

assure you that we will achieve sustainable operating profits as we continue to

expand our business and otherwise implement our growth initiatives.

The financial statements included with

this quarterly report on Form 10-Q have been prepared on a going concern basis.

may not be able to generate profitable operations in the future and/or obtain

the necessary financing to meet our obligations and pay liabilities arising

from normal business operations when they come due.

The outcome of these

matters cannot be predicted with any certainty at this time.

These factors

raise substantial doubt that we will be able to continue as a going concern.

plan to continue to provide for our capital needs through sales of our

securities and/or one or more strategic transactions, however there can be no

assurance that we will be successful in completing any such transactions on

attractive terms or at all.

Our financial statements do not include any

adjustments to the amounts and classification of assets and liabilities that

may be necessary should we be unable to continue as a going concern

The increase in unabsorbed overhead reflects the temporary misalignment between production levels and fixed overhead costs, which are generally allocated to inventory under our standard costing methodology.

Management is actively evaluating strategies to optimize inventory levels and production schedules to mitigate similar impacts in future periods.

Net loss increased from $ (2.8) million in the second quarter of 2024 to $ (4.6) million in the second quarter of 2025 .

The increase in net loss was mainly due to the decrease in revenues and decrease in gross margin, severance expense from a reduction in force, with an increase in deal related costs from strategic repositioning.

In November 2024, we announced that our board of directors had formed a Special Transaction Committee (the “Special Transaction Committee”) to conduct a comprehensive review of strategic alternatives focused on maximizing shareholder value, including but not limited to, equity or debt financing alternatives, merger and acquisition transactions, divestiture of assets, licensing opportunities, joint ventures, collaborations or other partnerships with other companies, or a spin-off of the Company’s current business and operations to its current stockholders (each, a “Strategic Transaction”).

We may be unable to complete a strategic transaction within a reasonable timeframe, on attractive terms or at all, and market conditions, including the historical volatility in our common stock will likely limit our ability to raise capital on favorable terms, or at all, and the terms of any public or private offerings of debt or equity securities likely would be significantly dilutive to existing stockholders.

There is no set timetable for the overall process given the anticipated timelines for different strategic alternatives may vary, and there can be no assurance that this process will result in us pursuing a transaction or that any transaction, if pursued, will be completed on attractive terms or at all.

Given these challenges, if we are unable to complete a strategic transaction, we may not be able to continue to execute our business plan to be able to continue as a going concern.

We will need to complete one or more strategic transactions or raise additional working capital to continue our normal and planned operations.

We will need to generate and sustain significant revenue levels in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability.

In addition, as a public company, we will incur accounting, legal and other expenses.

These expenditures will make it necessary for us to continue to raise additional working capital.

Our efforts to grow our business may be costlier than we expect, and we may not be able to generate sufficient revenue to offset our increased operating expenses.

We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays and other unknown events.

Accordingly, substantial doubt exists about our ability to continue as a going concern and we cannot assure you that we will achieve sustainable operating profits as we continue to expand our business and otherwise implement our growth initiatives.

The financial statements included with this quarterly report on Form 10-Q have been prepared on a going concern basis.

We may not be able to generate profitable operations in the future and/or obtain the necessary financing to meet our obligations and pay liabilities arising from normal business operations when they come due.

The outcome of these matters cannot be predicted with any certainty at this time.

These factors raise substantial doubt that we will be able to continue as a going concern.

We plan to continue to provide for our capital needs through sales of our securities and/or one or more strategic transactions, however there can be no assurance that we will be successful in completing any such transactions on attractive terms or at all.

Our financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern

Industry conditions

8 unchanged sentences

Our strength in this space is largely due to our fully integrated suite of products consisting of DSP wide range of professional microphone products and video collaboration products.

Despite our strong leadership position in the installed professional audio-conferencing market, we face challenges to revenue growth due to the lack of component availability to build our products in 2023 driving growth to competitors, pricing pressures from new competitors attracted to the commercial market due to higher margins, and the lack of certifications from Microsoft.

Notably, the Microsoft Teams device certification program is closed to new meeting room devices and solutions.

Although we have requested admission into this certification program on multiple occasions ClearOne has been denied admission by Microsoft so far.

Despite our strong leadership position in the installed professional audio-conferencing market, we faced challenges to revenue growth due to the lack of component availability to build our products in 2024 driving growth to competitors, pricing pressures from new competitors attracted to the commercial market due to higher margins, and the lack of certifications from Microsoft.

Our video products and beamforming microphone arrays, especially highly advanced BMA 360 and BMA-CT are critical to our long-term growth.

1 unchanged sentence

We expect our strategy of making our products more interoperable with other audio-visual products, continuing to improve the quality of our high-end audio-conferencing products and microphones, and offering a wide range of innovative professional cameras will generate growth in the near future.

We derive a significant portion of our revenue (approximately 58.5% in the first three months of 2025 ) from operations outside North and South America and expect this trend to continue in the future.

We derive a portion of our revenue (approximately 46% in the first six months of 2025 ) from operations outside North and South America and expect this trend to continue in the future.

Most of our revenue from ou tside the U.S.

5 unchanged sentences

Recent and proposed increases in U.S.

tariffs on imports from

China and Singapore may materially impact our operations, cost structure, and

financial performance.

As of May 2025, tariffs on Chinese goods have risen to

145%, with China imposing retaliatory tariffs of 125% on U.S.

tariffs on imports from China and Singapore may materially impact our operations, cost structure, and financial performance.

During 2025, tariffs on Chinese goods have risen as high as 145 %, with China imposing retaliatory tariffs of 125 % on U.S.

Singapore faces a 10 % baseline tariff under the U.S.

reciprocal tariff regime,

unaffected by a 90-day pause on tariffs for other countries, though potential

retaliatory measures remain a risk due to the U.S.-Singapore Free Trade

These tariffs could increase the cost of goods sourced from these

countries, disrupt supply chains, and elevate operating expenses.

a portion of our cameras and wireless products is imported from China, and

higher tariffs may lead to increased procurement costs or necessitate sourcing

from alternative markets, potentially at higher prices or with logistical

In Singapore, which serves as a key hub for the majority of our

product lines, tariff-related uncertainties may impact trade flows and regional

Additionally, retaliatory tariffs or trade restrictions from China

and Singapore could affect our ability to export goods to these markets,

potentially reducing revenue from international sales.

The broader economic

implications, including potential inflation and reduced consumer demand, may

further impact our financial condition.

reciprocal tariff regime, unaffected by a 90 -day pause on tariffs for other countries, though potential retaliatory measures remain a risk due to the U.S.-Singapore Free Trade Agreement.

These tariffs could increase the cost of goods sourced from these countries, disrupt supply chains, and elevate operating expenses.

For example, a portion of our cameras and wireless products is imported from China, and higher tariffs may lead to increased procurement costs or necessitate sourcing from alternative markets, potentially at higher prices or with logistical challenges.

In Singapore, which serves as a key hub for the majority of our product lines, tariff-related uncertainties may impact trade flows and regional operations.

Additionally, retaliatory tariffs or trade restrictions from China and Singapore could affect our ability to export goods to these markets, potentially reducing revenue from international sales.

The broader economic implications, including potential inflation and reduced consumer demand, may further impact our financial condition.

The information the Company has published in its

financial statements about its pursuit of an asset sale, along with disclosure

of the going concern risk has caused some customers to question whether they

should continue doing business with ClearOne.

This uncertainty has caused some

customers to put orders on hold while they evaluate the risks of potentially losing

product warranty support in the future.

Deferred Product Revenue

Deferred product revenue decreased to $ 12 thousand on March 31, 2025 compared to $ 17 thousand on December 31, 2024 .

Deferred product revenue decreased to $ 12 on June 30, 2025 compared to $ 17 on December 31, 2024 .

A detailed discussion of our results of operations follows below.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations for the three months ended March 31, 2025

The following table sets forth certain items from our unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 (“ 2025 - Q1 ”) and 2024 (" 2024 - Q1 ") , respectively, together with the percentage of total revenue which each such item represents:

Three months ended March 31,

Results of Operations for the three and six months ended June 30, 2025

The following table sets forth certain items from our unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025 (“ 2025 - Q2 ”) and 2024 (" 2024 - Q2 ") , respectively, together with the percentage of total revenue which each such item represents:

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

Change Favorable (Adverse) in %

Cost of goods sold

Gross profit (loss)

Sales and marketing

7 unchanged sentences

Our revenue decreased to $ 1.9 million in 2025 - Q2 compared to $ 2.3 million in 2024 - Q2 due to a 31 % decline in audio conferencing, a 10 % decline in video products, and a 7 % decrease in microphones.

Our traditional ceiling mics, personal audio-conferencing products, and video cameras suffered revenue declines due to lack of product availability and the transition of

business from one major customer in the Middle East to another one .

When comparing 2025-Q1 to 2024-Q1, all

sales regions suffered revenue loss.

Revenues from Americas declined by 12 %, from Europe and Africa by 69 %, and from Asia Pacific (including Middle East, India and Australia) by 41 %.

Our traditional ceiling mics, personal audio-conferencing products, and video cameras suffered revenue declines due to lack of product availability and the transition of business from one major customer in the Middle East to another one .

When comparing 2025-Q2 to 2024-Q2, r evenues from Americas increased by 10 %, from Europe and Africa increased by 40 %, offset by decreasing revenues in Asia Pacific (including Middle East, India and Australia) by 73 %.

Costs of Goods Sold and Gross Profit

1 unchanged sentence

Our gross profit margin decreased from ( 0.9 )% during 2024 - Q2 to ( 12.1 ) % during 2025 - Q2 .

The reduction in gross margin is the result of revenue

decreasing by a higher percentage than cost of goods sold.

The Company experienced a significant

reduction in inventory levels, with a decrease of approximately $1.4 million

compared to December 31, 2024.

This reduction was primarily driven by supply chain

pauses from our cash flow constraints.

As a result, there was insufficient new

inventory to absorb the Company’s standard overhead allocation, which is

typically applied to inventory production.

This led to unabsorbed overhead

costs being recognized as an expense in the period, directly impacting cost of

The increase in unabsorbed overhead reflects the

temporary misalignment between production levels and fixed overhead costs,

which are generally allocated to inventory under our standard costing

Management is actively evaluating strategies to optimize inventory

levels and production schedules to mitigate similar impacts in future periods.

The reduction in gross margin is the result of revenue decreasing by a higher percentage than cost of goods sold.

The Company experienced a significant reduction in inventory levels, with a decrease of approximately $ 2.7 million compared to December 31, 2024.

This reduction was primarily driven by supply chain pauses from our cash flow constraints.

As a result, there was insufficient new inventory to absorb the Company’s standard overhead allocation, which is typically applied to inventory production.

This led to unabsorbed overhead costs being recognized as an expense in the period, directly impacting cost of goods sold.

Management is actively evaluating strategies to optimize inventory levels and production schedules to mitigate similar impacts in future periods.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

8 unchanged sentences

Total operating expenses in 2025 - Q2 were $ 4.3 million compared to $ 2.9 million in 2024 - Q2 .

The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.

Total operating expenses thru 2025-YTD were $7.3 million compared to $6.1 million observing the same 6-month period in 2024.The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.

Sales and Marketing - 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.

S&M expenses were lower in 2025 - Q1 , $ 1.1 million compared to $ 1.3 million in 2024 - Q1 , because of decreasing

commissions on fewer sales .

S&M expenses were $ 1.4 million in Q2-2025, compared to $ 1.2 million in Q2-2024, while the year-to-date results for the six months ended June 30, showed $2.5 million in 2025 compared to $2.5 million in 2024.

Both comparisons are the result of decreased sales commissions on fewer sales as well as lowered marketing spend that was offset by severance expense from 2025 Q2 reduction in force being recognized.

Research and Product Development - R&D expenses include research and development, product line management, engineering services, and test and application expenses, including employee-related costs, outside services, expensed materials, depreciation, and an allocation of overhead expenses.

R&D expenses were lower in 2025-Q1, $ 0.7 million compared to $ 0.9 million in 2024 - Q1 .

The reduction was primarily due to a reduction in personnel.

R&D expenses were, $ 1.4 million in Q2-2025, compared to $ 0.9 million in Q2-2024, while the year-to-date results for the six months ended June 30, showed $2.1 million in 2025 compared to $1.8 million in 2024.

The increase in comparing the quarterly results was primarily due to severance payments made in the Indian subsidiary and severance expense accrued in the US

in 2025-Q2 partially offset by reduction in personnel in the US.

The increase in the year to year comparison was due to severance expenses accrued in Q2 2025 for a June

2025 reduction in force partially offset by

decreased headcount, decreased R&D project spend, and operational efficiencies.

General and Administrative - G&A expenses include employee-related costs, professional service fees, allocations of overhead expenses, litigation costs, and corporate administrative costs, including costs related to finance and human resources teams.

G&A expenses increased to $ 1.2 million in 2025 - Q1 compared to $ 1.0 million in 2024 - Q1 .

The increase was primarily due to an increase in legal

and regulatory expenses related to the exploration of strategic alternatives.

G&A expenses were $ 1.6 million in Q2 -2025, compared to $ 0.8 million in Q2 - 2024 , while the year-to-date results for the six months ended June 30, showed $ 2.7 million in 2025 compared to $ 1.9 million in 2024 .

The increases in comparing both periods were due to increased legal, investment bank, and regulatory expenses related to the exploration of strategic alternatives and increases in personnel to add headcount to the US accounting team, anticipating compliance needs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Other income (expense), net includes interest income, foreign currency changes and gain or loss on disposal of assets.

Other income for 2025 - Q1 included $ 0.0 million of interest income received on marketable securities compared to $ 0.2 million in 2024 - Q1

Other income for the six months ended June 30, 2025 included $ 0.0 million of interest income received on marketable securities compared to $ 0.3 million for the six months ended June 2024 .

For the three months ended

June 30, 2025, interest expense included approximately $8 related to

the convertible notes issued on June 20, 2025.

Provision for income taxes

During each of the three months ended March 31, 2025 and 2024 , we did not recognize any benefit from the losses incurred due to setting up a full valuation allowance.

During each of the six months ended June 30, 2025 and 2024 , we did not recognize any benefit from the losses incurred due to setting up a full valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2025 , our cash and cash equivalents were approximately $ 0.9 million compared to $ 1.4 million as of December 31, 2024 .

Our working capital was $ 13.5 million and $ 15.2 million as of March 31, 2025 and December 31, 2024 , respectively.

Cash used in opera ting activities was approximately $ 1.4 million in the three months ended March 31, 2025 , a decrease of approximately $ 1.8 million from $ 0.4 million of cash provided by operating activities in the three months ended March 31, 2024 .

The decrease in cash inflow was primarily due to the net loss partially offset by the reduction in

inventory purchases.

Cash used in investing activities in the three months ended March 31, 2025 was $( 0.0 ) million compared to $ 0.3 million of cash provided by investing activities in the three months ended March 31, 2024 .

The decrease in cash provided by investing activities was primarily due to no proceeds from sale of marketable securities and no offset by purchases of marketable securities in the three months ended March 31, 2025 compared to $2.3 million and $(1.9) million respectively for the three months ended March 31, 2024 .

Cash provided by financing activities in the three months ended March 31, 2025 was $ 1.0 million compared to $ 0.0 million of cash provided by financing activities in the three months ended March 31, 2024 .

The 2025 amount was comprised primarily of a stock sale.

These and other conditions raise substantial doubt

about continuing as a going concern.

We will need to complete one or more

strategic transactions or raise additional working capital to continue our

normal and planned operations.

We will need to generate and sustain significant

revenue levels in future periods to become profitable, and, even if we do, we

may not be able to maintain or increase our level of profitability.

addition, as a public company, we will incur accounting, legal and other expenses.

These expenditures will make it necessary for us to continue to raise

additional working capital.

Our efforts to grow our business may be costlier

than we expect, and we may not be able to generate sufficient revenue to offset

our increased operating expenses.

We may incur significant losses in the future

for a number of reasons, including unforeseen expenses, difficulties,

complications and delays and other unknown events.

Accordingly, substantial

doubt exists about our ability to continue as a going concern and we cannot

assure you that we will achieve sustainable operating profits as we continue to

expand our business and otherwise implement our growth initiatives.

2025, the Company raised $1,000 in a private placement transaction.

be unable to complete a strategic transaction within a reasonable timeframe, on

attractive terms or at all, and market conditions, including the historical

volatility in our common stock will likely limit our ability to raise capital

on favorable terms, or at all, and the terms of any public or private offerings

of debt or equity securities likely would be significantly dilutive to existing

stockholders.

There is no set timetable for the overall process given the

anticipated timelines for different strategic alternatives may vary,

and there can be no assurance that this process will result in us pursuing a

transaction or that any transaction, if pursued, will be completed on

attractive terms or at all.

The Company’s ability to continue as a going

concern is dependent on the outcome of these uncertainties.

As a result, management has concluded that substantial

doubt exists about the Company’s ability to continue as a going concern for 12

months from the date these consolidated financial statements are issued.

consolidated financial statements as of March 31, 2025 have been prepared under

the assumption that the Company will continue as a going concern for the next

12 months after these financial statements are issued, and that contemplates

the realization of assets and satisfaction of liabilities and commitments in

the normal course of business.

These Consolidated financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

As of March 31, 2025 , we had open purchase orders of approximately $4.2 million, mostly for the purchase of inventory.

As of March 31, 2025 , we had inventory totaling $ 14.8 million, of which non-current inventory accounted for $ 4.9 million.

As of June 30, 2025 , our cash and cash equivalents were approximately $ 2.8 million compared to $ 1.4 million as of December 31, 2024 .

Our working capital was $ 9.4 million and $ 15.2 million as of June 30, 2025 and December 31, 2024 , respectively.

Cash used in opera ting activities was approximately ($ 2.6 ) million in the six months ended June 30, 2025 , a decrease of approximately $ 0.1 million from ($ 2.7 ) million of cash used in operating activities in the six months ended June 30, 2024 .

The decrease in cash used was primarily due to the reduction in inventory purchases.

Cash used in investing activities in the six months ended June 30, 2025 was $( 0.0 ) million compared to $ 1.8 million of cash provided by investing activities in the six months ended June 30, 2024 .

The decrease in cash provided by investing activities was primarily due to no proceeds from sale of marketable securities and no offset by purchases of marketable securities in the six months ended June 30, 2025 compared to $ 5.4 million and ($ 3.4 ) million respectively for the six months ended June 30, 2024 .

Cash provided by financing activities in the six months ended June 30, 2025 was $ 4.0 million compared to ($ 14.5 ) million of cash used by financing activities in the six months ended June 30, 2024 .

The 2025 amount was comprised primarily of a stock sale and the sale of a convertible note, as discussed in footnotes [7], [8], and [13] above, and our discussion in the following paragraphs.

These and other conditions raise substantial doubt about continuing as a going concern.

We will need to complete one or more strategic transactions , including the pursuit of an Asset Sale

(defined as the sale of all or substantially all of our current assets and

operations), generate additional revenue through inventory sales,

or raise additional working capital to continue our normal and planned operations.

We will need to generate and sustain significant revenue levels in future periods to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability.

In addition, as a public company, we will incur accounting, legal and other expenses.

These expenditures will make it necessary for us to continue to raise additional working capital.

Our efforts to grow our business may be costlier than we expect, and we may not be able to generate sufficient revenue to offset our increased operating expenses.

We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays and other unknown events.

In February 2025, the Company raised $1.0

million in a private placement transaction of common stock.

The 1-for-15 reverse stock split

effective June 9, 2025, supported our Nasdaq compliance regain and may enhance

our ability to access capital markets.

June 20, 2025, the Company entered into a Note Purchase Agreement with First

Finance Ltd., pursuant to which First Finance Ltd.

purchased $3.0 million

aggregate principal amount of convertible notes, providing restricted proceeds

intended for working capital, potential warrant repurchases, and operational

needs as we pursue the Asset Sale.

In connection with this financing, we are

required to use reasonable best efforts to complete the Asset Sale within 180

days of issuing Class A Redeemable Preferred Stock as a dividend to common

stockholders (which occurred July 18, 2025), with net proceeds from any Asset Sale

to be distributed pro rata to holders of such preferred stock.

Additionally, on

June 20, 2025, we implemented a reduction in force affecting a significant

portion of our workforce to scale operations and reduce expenses in alignment

with the Asset Sale pursuit, which may result in short-term severance and

related costs.

On June 24, 2025, we regained compliance with

Nasdaq's minimum bid price requirement following our 1-for-15 reverse stock

We may be unable to complete the Asset Sale or other strategic

transactions within a reasonable timeframe, on attractive terms or at all, and

market conditions, including the historical volatility in our common stock,

will likely limit our ability to raise capital on favorable terms, or at all,

and the terms of any public or private offerings of debt or equity securities

likely would be significantly dilutive to existing stockholders.

set timetable for the overall process given the anticipated timelines for

different strategic alternatives may vary, and there can be no assurance that

this process will result in us pursuing a transaction or that any transaction,

if pursued, will be completed on attractive terms or at all.

The Company’s

ability to continue as a going concern is dependent on the outcome of these

uncertainties, including successful inventory sales, additional investments, or

the completion of long-term asset sales.

As a result, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for 12 months from the date these consolidated financial statements are issued.

The consolidated financial statements as of June 30, 2025 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months after these financial statements are issued, and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

These Consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In furtherance of the Asset Sale pursuit, on June 30,

2025, the Board declared a one-time special stock dividend of Class A

Redeemable Preferred Stock, payable July 18, 2025, which entitles holders

of the Class A Redeemable Prefererd Stock to

100% of net proceeds from any Asset Sale upon redemption.

This structure aligns

stockholder interests with the strategic process but depends on the successful

completion of the Asset Sale for value realization.

Subsequent to quarter-end, on July 1, 2025, First

disclosed beneficial ownership of approximately

32.4% of our common stock (including potential conversions), granting them

rights to nominate two directors.

This concentration may influence strategic

decisions, including the ongoing Asset Sale process, and could affect our

ability to attract alternative financing or partners.

Subsequent to quarter-end, on July 7, 2025, we

clarified via press release that Nasdaq will not issue an ex-dividend date for

the special stock dividend, ensuring that only record date holders (July 11,

2025) receive the Class A Redeemable Preferred Stock, which supports our focus

on legacy stockholder value in the Asset Sale process.

As of June 30, 2025 , we had open purchase orders of approximately $ 4.2 million, mostly for the purchase of inventory.

As of June 30, 2025 , we had inventory totaling $ 13.5 million, of which non-current inventory accounted for $ 4.6 million.

This compares to total inventories of $ 16.1 million, which includes non-current inventory of $ 4.9 million as of December 31, 2024 .

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of March 31, 2025 (in millions):

The following table summarizes our contractual obligations as of June 30, 2025 (in millions):

Payment Due by Period

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What changed 10-Q

Item 2. Management’s Discussion and Analysis