CLEARONE INC 10-Q

Item 1 . FINANCIAL STATEMENTS CLEARONE, INC UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except par value) June 30, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,132 $ 1,417 Restricted cash 1,678 — Receivables, net of allowance of $ 267 and $ 405 1,053 2,208 Inventories, net 8,846 11,224 Income tax receivable 29 10 Prepaid expenses and other assets 4,131 3,894 Total current assets 16,869 18,753 Long-term inventories, net 4,633 4,920 Property and equipment, net 370 500 Operating lease - right of use assets, net 607 750 Intangibles, net 1,453 1,539 Other assets 73 82 Total assets $ 24,005 $ 26,544 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,029 $ 1,804 Accrued liabilities 2,450 1,724 Short-term note payable 3,008 — Deferred product revenue 12 17 Total current liabilities 7,499 3,545 Operating lease liability, net of current 405 514 Other long-term liabilities 1,155 1,154 Total liabilities 9,059 5,213 Shareholders' equity: Common stock, par value $ 0.001 , 150,000,000 shares authorized, 1,734,249 and 1,599,534 shares issued and outstanding, respectively 2 2 Additional paid-in capital 32,738 31,694 Accumulated other comprehensive loss ( 329 ) ( 306 ) Accumulated deficit ( 17,465 ) ( 10,059 ) Total shareholders' equity 14,946 21,331 Total liabilities and shareholders' equity $ 24,005 $ 26,544 See accompanying notes 3 Table of Contents CLEARONE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Dollars in thousands, except per share amounts) Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Revenue $ 1,916 $ 2,304 $ 4,229 $ 5,926 Cost of goods sold 2,147 2,324 4,339 4,795 Gross profit (loss) ( 231 ) ( 20 ) ( 110 ) 1,131 Operating expenses: Sales and marketing 1,383 1,191 2,499 2,503 Research and product development 1,359 868 2,050 1,762 General and administrative 1,586 845 2,746 1,868 Total operating expenses 4,328 2,904 7,295 6,133 Operating loss ( 4,559 ) ( 2,924 ) ( 7,405 ) ( 5,002 ) Interest (expense) ( 8 ) — ( 8 ) — Other income, net 3 119 15 297 Loss before income taxes ( 4,564 ) ( 2,805 ) ( 7,398 ) ( 4,705 ) Provision for income taxes 8 15 8 13 Net loss $ ( 4,572 ) $ ( 2,820 ) $ ( 7,406 ) $ ( 4,718 ) Basic weighted average shares outstanding 1,733,307 1,597,943 1,691,836 1,597,943 Diluted weighted average shares outstanding 1,733,307 1,597,943 1,691,836 1,597,943 Basic loss per share $ ( 2.64 ) $ ( 1.76 ) $ ( 4.38 ) $ ( 2.95 ) Diluted loss per share $ ( 2.64 ) $ ( 1.76 ) $ ( 4.38 ) $ ( 2.95 ) Comprehensive loss: Net loss $ ( 4,572 ) $ ( 2,820 ) $ ( 7,406 ) $ ( 4,718 ) Unrealized gain on available-for-sale securities, net of tax — ( 3 ) — 19 Change in foreign currency translation adjustment ( 10 ) ( 1 ) ( 23 ) ( 3 ) Comprehensive loss $ ( 4,582 ) $ ( 2,824 ) $ ( 7,429 ) $ ( 4,702 ) See accompanying notes 4 Table of Contents CLEARONE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except per share amounts) Six months ended June 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 7,406 ) $ ( 4,718 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 248 273 Amortization of right-of-use assets 143 186 Share-based compensation expense 44 52 Provision for doubtful accounts, net ( 139 ) — Change of inventory to net realizable value 320 98 Non-cash interest expense 8 — Gain on sale of capitalized assets ( 9 ) — Gain on sale of marketable securities — ( 71 ) Changes in operating assets and liabilities: Receivables 1,293 4,705 Inventories 2,345 ( 2,701 ) Prepaid expenses and other assets ( 229 ) 206 Accounts payable 224 ( 43 ) Accrued liabilities 758 ( 511 ) Income taxes receivable ( 19 ) 9 Deferred product revenue ( 5 ) ( 7 ) Operating lease liabilities ( 144 ) ( 200 ) Net cash used in operating activities ( 2,568 ) ( 2,722 ) Cash flows from investing activities: Purchase of property and equipment ( 17 ) ( 135 ) Purchase of intangibles ( 16 ) ( 53 ) Proceeds from maturities and sales of marketable securities — 5,372 Proceeds from sale of capitalized assets 12 — Purchases of marketable securities — ( 3,358 ) Net cash provided by (used in) investing activities ( 21 ) 1,826 Cash flows from financing activities: Proceeds from sale of stock 1,000 — Proceeds from issuance of convertible note 3,000 — Net proceeds from equity-based compensation programs — 7 Dividend Payment — ( 14,490 ) Net cash provided by (used in) financing activities 4,000 ( 14,483 ) Effect of exchange rate changes on cash and cash equivalents ( 18 ) ( 6 ) Net increase (decrease) in cash and cash equivalents 1,393 ( 15,385 ) Cash and cash equivalents at the beginning of the period 1,417 17,835 Cash and cash equivalents at the end of the period $ 2,810 $ 2,450 See accompanying notes 5 Table of Contents CLEARONE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except per share amounts) The following is a summary of supplemental cash flow activities: Six months ended June 30, 2025 2024 Cash paid for income taxes $ — $ — Cash paid for interest — — See accompanying notes 6 Table of Contents CLEARONE, INC. UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) 1 . Business Description, Basis of Presentation and Significant Accounting Policies Business Description: ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and AV streaming solutions for voice and visual communications. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability. Going Concern: 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 as of June 30, 2025 . Net cash used in operating activities was ($ 2.6 ) million for the six months ended June 30, 2025 , compared to ($ 2.7 ) million of cash used in operating activities for the six months ended June 30, 2024 . The consistency in the usage of cash is primarily due to a decrease in sales and ongoing operational challenges. These and other conditions raise substantial doubt about our ability to continue 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 several 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 operate our business and otherwise implement our growth initiatives. In February 2025, the Company raised $ 1.0 million in a private placement transaction. On 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 - see Note13), 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 estimated at approximately $ 1.9 million and are expected to be incurred primarily in the third quarter of 2025. On June 24, 2025, we regained compliance with Nasdaq's minimum bid price requirement following our 1-for-15 reverse stock split . 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. 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, 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. Basis of Presentation: The fiscal year for ClearOne is the twelve months ending on December 31. The condensed consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. 7 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are not audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of June 30, 2025 and December 31, 2024 , the results of operations for the three and six months ended June 30, 2025 and 2024 , and the cash flows for the six months ended June 30, 2025 and 2024 . The results of operations for the three and six months ended June 30, 2025 and 2024 are not necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC. Reverse Stock Split: The Company completed a 1-for-15 reverse stock split of the Company's issued and outstanding common stock, par value $ 0.001 per share, effective at 5:00 p.m. Eastern Time on June 9, 2025. The common stock began trading on a split-adjusted basis on the Nasdaq Capital Market on June 10, 2025, under the symbol "CLRO" and a new CUSIP number of 18506U203. The reverse stock split was primarily intended to increase the per share market price of the common stock in order to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. As a result of the reverse stock split, every 15 shares of issued and outstanding common stock were automatically combined into one share, with no fractional shares issued (any fractional interests were rounded up to the next whole share). The reverse stock split did not change the par value of the common stock or the authorized number of shares but reduced the number of issued and outstanding shares from approximately 26.0 million to approximately 1.7 million, with proportional adjustments to outstanding stock options, warrants, and shares reserved under equity incentive plans. For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 2, 2025, including the press release attached as Exhibit 99.1 thereto. All share and per-share amounts in these condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented. Restricted Cash The Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows, in accordance with ASU 2016-18. Restricted cash as of June 30, 2025, consists of $ 1,678 in remaining proceeds from a $ 3,000 convertible note issued to First Finance Ltd. on June 20, 2025 (with no restricted cash balance as of March 31, 2025). These funds are subject to enforceable contractual restrictions per the disbursement schedule in Schedule 8.5 of the Note Purchase Agreement, which allocates proceeds to specific uses such as advisory fees, warrant holder payments, legal and audit expenses, staff costs (e.g., board fees, accounting staff, operations/sales staff bonuses), shutdown costs for foreign subsidiaries, and severance/PTO for employee layoffs. The funds are held in a segregated account and released only upon meeting specified milestones, with penalties for non-compliance. During the quarter ended June 30, 2025, $ 1,322 was disbursed for severances, deal fees, legal fees, and compliance fees, resulting in the ending restricted cash balance. Full disbursement of the remaining restricted cash is expected by November 2025 as additional milestones are achieved. Restricted cash is classified as a current asset on the balance sheet and included in the total cash, cash equivalents, and restricted cash balances in the statement of cash flows. Changes in restricted cash are not presented as separate cash flows but are reconciled in this note. This classification and presentation provide transparency regarding the Company's liquidity, as the restricted funds are not available for general corporate purposes. Significant Accounting Policies: The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2024 . There have been no changes to these policies during the quarter ended June 30, 2025 that are of significance or potential significance to the Company. Recent accounting pronouncements: ASU 2023 - 07 , Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023 - 07 , Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for full year 2024 reporting, and for interim reporting beginning in 2025 . The adoption of this ASU did not change the way the Company evaluates its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures. 8 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) ASU 2023 - 09 , Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023 - 09 “Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures” on the topic of income taxes. The standard requires additional disclosure for income taxes. These requirements include: (i) requiring a public entity to disclose specific categories in the rate reconciliation; (ii) disclosure of additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 % of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate); (iii) annual disclosure of the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; (iv) annual disclosure of the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 % of total income taxes paid (net of refunds received); (v) annual disclosure of income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign; and (vi) annual disclosure of income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. For public entities, the guidance is effective for annual periods beginning after December 15, 2024. The Company will adopt this guidance in fiscal 2025 and is in the process of evaluating the new requirements. As a result, the Company has not yet determined the impact this new ASU will have on its disclosures. ASU 2024 - 03 , Income Statement—Reporting Comprehensive Income (Topic 220 ): Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU No. 2024 - 03 , "Income Statement—Reporting Comprehensive Income (Topic 220 ): Disaggregation of Income Statement Expenses," which requires public business entities, such as the Company, to provide disaggregated disclosure of specific natural expense categories underlying certain income statement expense line items in the notes to the financial statements. The standard identifies five required natural expense categories for disaggregation—employee compensation, depreciation, amortization, inventory expense, and other manufacturing expenses—along with a residual "other" category for remaining amounts within relevant expense captions (e.g., cost of sales, selling, general and administrative expenses). ASU 2024 - 03 does not alter the expense captions presented on the face of the income statement but enhances footnote disclosures to improve transparency. The standard is effective for annual periods beginning after December 15, 2026, with early adoption permitted, and must be applied prospectively, though retrospective application is optional. An update in ASU 2025 - 01 clarified that interim period disclosures are not required until annual periods beginning after December 15, 2027. The Company is in the process of evaluating the impact of ASU 2024 - 03 on its consolidated financial statements. We expect adoption to necessitate modifications to our financial reporting processes and systems to capture and disclose the required disaggregated expense information in the footnotes. Management anticipates that this will enhance the granularity of expense disclosures but does not expect a material effect on our reported financial position or results of operations. We are reviewing our current expense classification practices and data collection capabilities to ensure compliance with the new requirements upon adoption. The Company has determined that recently issued accounting standards, other than the above discussed, will not have a material impact on its consolidated financial position, results of operations or cash flows. 9 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 2. Revenue Information The following table disaggregates the Company’s revenue into primary product groups: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Audio conferencing $ 625 $ 905 $ 1,579 $ 2,429 Microphones 971 1,043 2,089 2,614 Video products 320 356 561 883 $ 1,916 $ 2,304 $ 4,229 $ 5,926 The following table disaggregates the Company’s revenue into major regions: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 North and South America $ 1,331 $ 1,210 $ 2,291 $ 2,304 Asia Pacific (includes Middle East, India and Australia) 230 841 1,418 2,842 Europe and Africa 355 253 520 780 $ 1,916 $ 2,304 $ 4,229 $ 5,926 10 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) 3 . Loss Per Share Loss per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options, warrants and the convertible portion of senior convertible notes are considered to be potential common stock. The computation of diluted loss per share does not assume exercise or conversion of securities that would have an anti-dilutive effect. Basic loss per common share is the amount of net loss for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted loss per common share is the amount of loss for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect. The following table sets forth the computation of basic and diluted loss per common share: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Numerator: Net loss $ ( 4,572 ) $ ( 2,820 ) $ ( 7,406 ) $ ( 4,718 ) Denominator: Basic weighted average shares outstanding 1,733,307 1,597,943 1,691,836 1,597,943 Dilutive common stock equivalents using treasury stock method — — — — Diluted weighted average shares outstanding 1,733,307 1,597,943 1,691,836 1,597,943 Basic loss per common share $ ( 2.64 ) $ ( 1.76 ) $ ( 4.38 ) $ ( 2.95 ) Diluted loss per common share $ ( 2.64 ) $ ( 1.76 ) $ ( 4.38 ) $ ( 2.95 ) Weighted average options and warrants outstanding 435,765 372,362 404,427 373,846 Anti-dilutive options and warrants not included in the computation 435,765 372,362 404,427 373,846 4 . Intangible Assets Intangible assets as of June 30, 2025 and December 31, 2024 consisted of the following: Estimated useful lives (years) June 30, 2025 December 31, 2024 Tradename 5 to 7 $ 555 $ 555 Patents and technological know-how 10 to 20 7,313 7,298 Proprietary software 3 to 15 2,981 2,981 Other 3 to 5 323 323 Total intangible assets 11,172 11,157 Accumulated amortization ( 9,719 ) ( 9,618 ) Total intangible assets, net $ 1,453 $ 1,539 The amortization of intangible assets for three and six months ended June 30, 2025 and 2024 was as follows: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Amortization of intangible assets $ 51 $ 50 $ 102 $ 160 11 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) The estimated future amortization expense of intangible assets is as follows: Years ending December 31, Amount 2025 (Remainder) $ 103 2026 205 2027 75 2028 30 2029 30 Thereafter 1,010 Total $ 1,453 5 . Inventories Inventories, net of reserves, as of June 30, 2025 and December 31, 2024 consisted of the following: June 30, 2025 December 31, 2024 Current: Raw materials $ 2,091 $ 2,424 Finished goods 6,755 8,800 $ 8,846 $ 11,224 Long-term: Raw materials $ 1,346 $ 1,112 Finished goods 3,287 3,808 $ 4,633 $ 4,920 Long-term inventory represents inventory held in excess of our current (next 12 months) requirements based on our recent sales and forecasted level of sales. We expect to sell the above inventory, net of reserves, at or above the stated cost and believe that no loss will be incurred on its sale, although there can be no assurance of the timing or amount of any sales. Net loss incurred on valuation of inventory at lower of cost or net realizable value and write-off of obsolete inventory for three and six months ended June 30, 2025 and 2024 was as follows: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Net loss (recovery) incurred on valuation of inventory at lower of cost or net realizable value and write-off of obsolete inventory $ 48 $ ( 95 ) $ 320 $ 98 6 . Leases Rent expense is recognized on a straight-line basis over the period of the lease taking into account future rent escalation and holiday periods. Rent expense for three and six months ended June 30, 2025 and 2024 was as follows: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Rent expense $ 101 $ 118 $ 213 $ 227 The Company occup ies a 1,350 square-foot facility in Gainesville, Florida under the terms of an operating lease expiring in F ebruary 2028 . The Gainesville facility is used primarily to support the Company's research and development activities. The Company occupies a 9,402 square-foot facility in Salt Lake City, Utah under the terms of an operating lease expiring in February 2028. The facility supports the Company's principal administrative, sales, marketing, customer support, and research and product development activities. 12 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) We occupy a 6,175 square-foot facility in Chennai, India under the terms of an operating lease expiring in September 2025. This facility supports our administrative, marketing, customer support, and research and product development activities. We occupied a 40,000 square-foot warehouse in Salt Lake City, Utah under the terms of an operating lease expiring in April 2025, which served as our primary inventory fulfillment center. This lease was cancelled on January 31, 2025. We entered into a new lease on December 1, 2024 to occupy a 2,590 square-foot warehouse in Salt Lake City Utah. The lease is an operating lease expiring in February 2028. This facility serves as our primary warranty and repair center. Supplemental cash flow information related to leases was as follows: Six months ended June 30, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ ( 167 ) $ ( 232 ) Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ — Supplemental balance sheet information related to leases was as follows: June 30, 2025 December 31, 2024 Operating lease right-of-use assets $ 607 $ 750 Current portion of operating lease liabilities, included in accrued liabilities $ 222 $ 257 Operating lease liabilities, net of current portion 405 514 Total operating lease liabilities $ 627 $ 771 Weighted average remaining lease term for operating leases (in years) 2.63 2.99 Weighted average discount rate for operating leases 6.71 % 6.59 % The following represents maturities of operating lease liabilities as of June 30, 2025 : Years ending December 31, 2025 (Remainder) $ 143 2026 251 2027 259 2028 44 2029 — Total lease payments 697 Less: Imputed interest 70 Total $ 627 13 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) 7. Convertible Notes Payable On June 25, 2025, the Company filed a Current Report on Form 8-K disclosing several material events. On June 20, 2025, the Company entered into a Note Purchase Agreement with First Finance Ltd., pursuant to which First Finance Ltd. purchased $ 3,000,000 aggregate principal amount of convertible notes in a private placement exempt from registration under Section 4 (a)( 2 ) of the Securities Act of 1933 , as amended. The convertible notes accrue interest at 10 % per annum and are mandatorily convertible into shares of newly designated Class B Convertible Preferred Stock upon the issuance of Class A Redeemable Preferred Stock as a dividend to common stockholders (which occurred July 18, 2025 – see Note 13). The Class B Convertible Preferred Stock is further convertible into common stock at a conversion price of the lower of: (i) the closing price (as reflected on Nasdaq.com); or (ii) the average closing price of the Common Stock (as reflected on Nasdaq.com) for the five trading days immediately preceding June 20, 2025 (subject to adjustment for stock splits, dividends, and similar events). First Finance Ltd. is also granted an option to purchase up to an additional $ 2,000,000 of Class B Convertible Preferred Stock. The proceeds from the convertible notes are restricted to a specified disbursement schedule. In accordance with the note provisions, interest expense was computed for the days the note was in place during the end of June. This interest was added to the loan balance as of June 30, 2025 in the amount of $ 8 , resulting in a total note payable balance of $ 3,008 being reported on the balance sheet For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 25, 2025, including the Certificates of Designation attached as Exhibits 3.1 and 3.2 , the Note Purchase Agreement attached as Exhibit 10.1 , and the Convertible Note attached as Exhibit 10.2 thereto. Composition of Notes Payable Description Interest Rate Maturity Date June 30, 2025 December 31, 2024 Convertible Note 10 % June 30, 2025 $ 3,008 $ — Total Notes Payable $ 3,008 $ — Schedule of Future Maturities of Notes Payable Year ending December, 31 Amount Remainder of 2025 $ 3,008 Total $ 3,008 14 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 8 . Shareholders' Equity Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Common stock and additional paid-in capital Balance, beginning of period $ 32,726 $ 31,608 $ 31,696 $ 46,071 Dividends declared — — — ( 14,496 ) Issuance of common stock, net — — 1,000 — Share-based compensation expense 21 39 44 65 Proceeds from employee stock purchase plan ( 7 ) ( 7 ) — — Balance, end of period $ 32,740 $ 31,640 $ 32,740 $ 31,640 Accumulated other comprehensive loss Balance, beginning of period $ ( 319 ) $ ( 290 ) $ ( 306 ) $ ( 310 ) Unrealized loss on available-for-sale securities, net of tax — ( 3 ) — 19 Foreign currency translation adjustment ( 10 ) ( 1 ) ( 23 ) ( 3 ) Balance, end of period $ ( 329 ) $ ( 294 ) $ ( 329 ) $ ( 294 ) Accumulated deficit Balance, beginning of period $ ( 12,893 ) $ ( 2,972 ) $ ( 10,059 ) $ ( 1,076 ) Net loss ( 4,572 ) ( 2,822 ) ( 7,406 ) ( 4,718 ) Balance, end of period $ ( 17,465 ) $ ( 5,794 ) $ ( 17,465 ) $ ( 5,794 ) Total shareholders' equity $ 14,946 $ 25,552 $ 14,946 $ 25,552 Issue of Common Stock On February 26, 2025 the Company entered into a securities purchase agreement with Edward D. Bagley, pursuant to which the Company agreed to issue and sell, in a private placement at-the-market offering of 133,334 shares of the Company’s common stock, par value $ 0.001 per share, at a purchase price of $ 7.50 per share of Common Stock. The Company received $ 1,000 in cash in connection with the sale. Mr. Bagley is an affiliate of the Company and the Company’s single largest stockholder. 15 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) Amendments to Certificate of Incorporation and Reverse Stock Split At the special meeting of stockholders held on May 30, 2025, stockholders approved amendments to the Certificate of Incorporation to: (i) increase the authorized number of shares of common stock from 50,000,000 to 150,000,000 ; (ii) authorize 50,000,000 shares of "blank check" preferred stock; (iii) effect a reverse stock split at a ratio between 1-for-10 and 1-for-15, with the exact ratio to be determined by the Board of Directors ; and (iv) eliminate the prohibition on stockholder action by written consent and to allow such actions. Following stockholder approval, on June 4, 2025, the Company filed a Certificate of Amendment to its Certificate of Incorporation to effect these changes, including the selection of a 1-for-15 reverse stock split ratio , which became effective at 5:00 p.m. Eastern Time on June 9, 2025. The common stock began trading on a split-adjusted basis on the Nasdaq Capital Market on June 10, 2025, under the symbol "CLRO" and a new CUSIP number of 18506U203. The reverse stock split was primarily intended to increase the per share market price of the common stock in order to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. As a result of the reverse stock split, every 15 shares of issued and outstanding common stock were automatically combined into one share, with no fractional shares issued (any fractional interests were converted to one whole share). The reverse stock split did not change the par value of the common stock but reduced the number of issued and outstanding shares from approximately 26.0 million to approximately 1.7 million, with proportional adjustments to outstanding stock options, warrants, and shares reserved under equity incentive plans. All share and per-share amounts in these condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented. For additional details, including the Certificate of Amendment, refer to the Company's Current Report on Form 8-K filed with the SEC on June 2, 2025, including the press release attached as Exhibit 99.1 and the Certificate of Amendment attached as Exhibit 3.1 thereto. Preferred Stock Designations and Related Matters In connection with the transaction mentioned in Note 7, on June 24, 2025, the Company filed Certificates of Designation with the State of Delaware authorizing up to 2,069,066 shares of Class A Redeemable Preferred Stock and 5,100 shares of Class B Convertible Preferred Stock. The Class A Redeemable Preferred Stock, which ranks senior to common stock and is redeemable upon an Asset Sale (defined as the sale of all or substantially all of the Company's current assets and operations, which the Company is required to pursue using reasonable best efforts within 180 days of issuance), was issued on July 18, 2025 as a dividend to holders of common stock and common stock equivalents of record as of July 11, 2025. Net proceeds from any Asset Sale will be distributed pro rata to holders of Class A Redeemable Preferred Stock. The Class B Convertible Preferred Stock ranks senior to common stock and other equity (except Class A Redeemable Preferred Stock), with specific rights including dividends, voting (on an as-converted basis), and liquidation preferences. Additionally, effective June 20, 2025, the Board of Directors was expanded from four to five members, with Eric Boehnke and Youngsun Park (a/k/a Sunny Park), nominees of First Finance Ltd., appointed as directors to serve until the next annual meeting or until their successors are elected and qualified. Neither appointee has any material arrangements or family relationships with the Company requiring disclosure under Item 404(a) of Regulation S-K, and they will receive standard director compensation. For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 25, 2025, including the Certificates of Designation attached as Exhibits 3.1 and 3.2, the Note Purchase Agreement attached as Exhibit 10.1, and the Convertible Note attached as Exhibit 10.2 thereto. 16 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 9 . Share-based Compensation The Company uses judgment in determining the fair value of the share-based payments on the date of grant using an option-pricing model with assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the risk-free interest rate of the awards, the expected life of the awards, the expected volatility over the term of the awards, and the expected dividends of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of share-based payments granted under the guidelines of ASC Topic 718 . A summary of the stock option activity under the Company’s plans for the six months ended June 30, 2025 , is as follows: Number of shares Weighted average exercise price Options outstanding at beginning of year 37,956 $ 49.76 Granted — — Less: Exercised — — Forfeited prior to vesting — — Canceled or expired ( 667 ) 198.00 Options outstanding at June 30, 2025 37,289 47.11 Options exercisable at end of June 30, 2025 22,953 $ 70.69 As of June 30, 2025 , the total remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was approximately $ 66 , which will be recognized over a weighted average period of 1.23 years. Share based compensation expense has been recorded as follows: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Cost of goods sold $ 1 $ 2 $ 1 $ 3 Sales and marketing ( 1 ) 2 — 4 Research and product development 3 12 7 25 General and administrative 18 6 36 16 $ 21 $ 22 $ 44 $ 48 17 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 10 . Income Taxes The Company recorded a full valuation allowance against U.S Federal and State deferred tax assets, which results in no income tax benefit for losses in these jurisdictions. The full domestic valuation allowance was recorded as management concluded that it is more likely than not that these deferred tax assets are not realizable due to the Company's recent pre-tax losses and other sources of negative evidence. Provision for income taxes for the six months ended June 30, 2025 mostly represents income tax expense (benefit) recorded for jurisdictions outside the United States. The Company had approximately $ 969 of uncertain tax positions as of June 30, 2025 . Due to the inherent uncertainty of the underlying tax positions, it is not possible to forecast the payment of this liability for any particular year, therefore, it is reflected in other long-term liabilities. 11 . Operating Segment The Company operates as one operating segment. Operating segments are defined as components of an entity for which separate financial information is regularly evaluated by the chief operating decision maker ("CODM"), which is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company's CODM evaluates financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information that is supplemental to information disclosed within the consolidated financial statements, that is regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss and functional expenses as reported on our consolidated statements of operations and comprehensive loss. Because the Company operates as one operating segment, financial segment information, including expense and asset information, can be found in the consolidated financial statements. 12. Restructuring and Other Charges On June 20, 2025, the Company implemented a reduction in force affecting a significant portion of its workforce as part of operational scaling in connection with the pursuit of the Asset Sale, while continuing sales, inventory management, customer support, and public reporting obligations. This will result in severance and related costs estimated at approximately $ 1.9 million and are expected to be incurred primarily in the third quarter of 2025. 18 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 13. Subsequent Events On June 30, 2025, the Company filed a Current Report on Form 8-K announcing that its Board of Directors had declared a one -time special stock dividend on the Company's issued and outstanding shares of common stock, par value $ 0.001 per share, and any common stock equivalents with dividend rights (the “Special Stock Dividend”). The Special Stock Dividend consisted of one share of the Company's Class A Redeemable Preferred Stock, par value $ 0.001 per share, for every issued and outstanding share of common stock and common stock equivalent. The record date for the Special Stock Dividend was July 11, 2025, and the dividend was paid on July 18, 2025, to stockholders of record as of the record date. This Special Stock Dividend is part of the Company's ongoing strategic process to pursue an Asset Sale (defined as the sale of all or substantially all of the Company's current assets and operations), with the Class A Redeemable Preferred Stock to be redeemed for 100 % of the net proceeds from any such Asset Sale upon its completion. No additional dividends are authorized or contemplated at this time, and future dividends remain at the discretion of the Board of Directors. For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 30, 2025, including the press release attached as Exhibit 99.1 thereto. Following the issuance of the Special Stock Dividend, on July 21, 2025, the aggregate $ 3,025 outstanding principal amount and accrued interest under the convertible note issued to First Finance Ltd. on June 20, 2025 automatically converted into 3,026 shares of Class B preferred stock pursuant to the terms and conditions of the Note Purchase Agreement described under Note 7 – Convertible Notes Payable. 19 Table of Contents