What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-14 compared with 2025-08-14 · 204 added, 259 removed, 55 unchanged (89% of the section changed)

15 unchanged sentences

Additional factors that may have a direct bearing on our operating results are discussed in Part I , Item 1 A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 .

On September 30, 2025 , we classified substantially all operating assets related to our product business as held for sale and began presenting the results of that component as discontinued operations.

Accordingly, the discussion below focuses on continuing operations unless otherwise indicated.

BUSINESS OVERVIEW

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

On March 11, 2024, we announced a one -time special cash dividend of $7.50 per share of ClearOne common stock, paid on April 10, 2024 to shareholders of record on April 2, 2024.

On January 23, 2024 we launched the DIALOG® 20 USB wireless microphone system at Integrated Systems Europe (ISE) 2024 , a major global audiovisual expo.

ClearOne’s booth at ISE 2024 recorded a 319 % increase in unique visitors compared to the number of unique visitors the Company’s booth recorded in 2023 .

The DIALOG® UVHF Wireless Microphone System also received AV Technology Magazine’s Best in Show award at ISE 2024 , having previously garnered other notable industry awards in 2023 .

On August 8, 2024, the DIALOG® UVHF wireless Microphone system was named a winner of the 2024 Communications Solutions products of the year award.

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 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.

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.

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.

We believe this revenue decline was primarily due to the cumulative impact of past production shortages.

We believe that lack of product availability has caused some of our channel partners to purchase and install competing brands.

Historically, we have seen a lag of several months between the time that our professional conferencing products are specified for installation and the date when those products are installed.

Since our product availability was constrained through a significant part of Q 4 2023 , we believe our revenue was impacted negatively by these market dynamics through much of 2024 .

We have also faced sales headwinds from our products’ lack of Microsoft Teams certification, despite their longtime functional compatibility with this platform.

In Q2 2025 , we were unable to maintain an uninterrupted flow of inventory from our contract manufacturers and suppliers due to insufficient cash on hand.

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 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 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.

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.

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

We operate in a very dynamic and highly competitive industry which is dominated on the one hand by a few players with respect to certain products like traditional video conferencing appliances while on the other hand influenced heavily by a fragmented reseller market consisting of numerous regional and local players.

The industry is also characterized by venture capitalist-funded start-ups and private companies willing to fund cumulative cash losses in order to gain market share and achieve certain non-financial goals.

It has become increasingly important to have higher interoperability with other products in the audio-visual market as well as certifications from leading video conferencing service providers like Microsoft and Zoom .

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

Economic conditions, challenges and risks

The audio-visual products market is characterized by intense competition and rapidly evolving technology.

Our competitors vary within each product category.

Our installed professional audio-conferencing products, which is our flagship product category, continue to be ahead of the competition despite the reduction in revenues.

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 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.

We face intense competition in this market from well-established market leaders as well as emerging players rich with marketing funds.

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 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.

is billed in U.S.

dollars and is not exposed to any significant currency risk.

However, we are exposed to foreign exchange risk if the U.S.

dollar is strong against other currencies as it will make U.S.

Dollar denominated prices of our products less competitive.

Recent and proposed increases in 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 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.

In September 2025, the Company’s Board of Directors approved a plan (the “Strategic Plan”) to seek the sale of a significant portion of the Company’s operating assets related to its product business, reduce the Company’s continuing operations to warranty and product support, and position the Company as a reverse merger vehicle for a possible strategic transaction (a “Strategic Transaction”).

Accordingly, as of September 30, 2025 , and we classified the related disposal group of assets as held for sale and measured it at the lower of carrying amount or fair value less costs to sell (see Note 2 — Discontinued Operations and Assets Held for Sale).

Because the planned disposal represents a strategic shift that will have a significant effect on our operations and financial results, we present the results of that component as discontinued operations for all periods shown.

Accordingly, this MD&A discusses continuing operations separately from discontinued operations where relevant.

Strategic actions during 2025

Special stock dividend — Class A Redeemable Preferred Stock.

In July 2025, we issued Class A Redeemable Preferred Stock via a one -time special stock dividend designed to distribute 100 % of the net proceeds from an asset sale to holders upon redemption (see Note 3 — Class A Redeemable Preferred (Temporary Equity)).

Class A is presented in temporary equity on the balance sheet.

In July 2025, our convertible note automatically converted into shares of Class B Convertible Preferred Stock pursuant to its original terms (see Note 4 ).

In September 2025, we repurchased and cancelled certain outstanding warrants, including one related-party transaction approved by our Board (see Note 5 ).

Disposition status (subsequent event).

On October 24, 2025, after quarter-end, we closed the sale of intellectual property and certain inventories to an industry buyer for cash consideration (see Subsequent Events).

Any differences between the carrying amounts at September 30, 2025 and final closing amounts will be recognized in the subsequent period.

Beginning in the third quarter of 2025 :

The disposal group of assets is presented as assets held for sale (and liabilities held for sale, if any) on the balance sheet.

The statement of operations includes (loss) income from discontinued operations, net of tax below (loss) from continuing operations;

basic and diluted loss per share are presented for continuing operations, discontinued operations, and total (see Note 7 — Loss Per Share).

The statement of cash flows remains consolidated, with supplemental cash-flow information for the discontinued operations disclosed in Note 2 .

Operating context

During 2025 , our operating results were impacted by constrained liquidity, intermittent supply chain availability, and reduced channel demand relative to the prior year.

Management’s primary focus through and after quarter-end has been executing the asset sale, aligning our cost structure with the go-forward profile of the business, and preserving liquidity while we evaluate additional strategic alternatives.

Continuing operations and post-disposition plan

Following the classification of our product business as held for sale at September 30, 2025 , and the subsequent closing of the asset sale after quarter-end (see Note 2 — Discontinued Operations and Assets Held for Sale and Subsequent Events), our continuing operations consist of:

(i) executing a restructuring in furtherance of the Asset Disposition to Biamp and a possible Strategic Transaction, including monetization of residual assets not included in the sale (e.g., fixed assets, leaseholds) and collection of accounts receivable and prepaids;

(b) maintaining a lean corporate infrastructure to satisfy reporting and governance requirements;

(d) managing and, where feasible, terminating or assigning facility leases to reduce ongoing cash burn;

(e) completing the redemption of our Class A Redeemable Preferred Stock in accordance with its terms;

and (f) evaluating additional financing or strategic alternatives as necessary to satisfy obligations as they come due.

Warranty support activities

We retained responsibility for legacy product support and warranty obligations;

the buyer did not assume these liabilities.

As a result, continuing operations will maintain a small technical support function and service inventory (e.g., spare parts and repair units) to honor product support and warranty terms.

We do not expect to manufacture new product or pursue new product sales, but we will pursue sale of remaining inventories and any other assets as part of eliminating all assets for cash.

Any immaterial service or parts revenue, if recognized, will be reported within continuing operations.

We will evaluate our service inventory and warranty accruals each period and adjust estimates based on observed claim rates and resolution costs.

Corporate infrastructure and compliance

To support reporting, governance, and restructuring activities, we expect to maintain a lean corporate staff, including accounting/finance, IT, and senior management (CEO/CFO).

Ongoing costs will include audit and tax services, legal and advisory fees, SEC reporting, D&O insurance, IT/licensing, and Board and compliance expenses.

Monetization of residual assets and settlement of obligations

Management’s near-term priorities include:

Monetizing remaining assets not included in the sale, including fixed assets, and leaseholds/fixtures (through sale or lease termination/assignment) ;

Collecting outstanding accounts receivable and realizing prepaid balances and deposits where recoverable ;

Settling outstanding trade payables, accrued expenses, warranty obligations, and other liabilities retained at closing ;

Managing leases, including negotiated terminations or assignments to reduce ongoing occupancy costs ;

Completing a restructuring and identifying a Strategic Transaction partner in the fourth quarter of 2025 ;

Overseeing redemption mechanics for the Class A Redeemable Preferred Stock, which is designed to receive 100 % of the net proceeds from the asset sale upon redemption (see Note 3 — Class A Redeemable Preferred (Temporary Equity))

Presentation and comparability

Beginning in the third q uarter of 2025 , results of the disposed product business are presented as discontinued operations for all periods shown.

Continuing operations primarily comprise warranty support, corporate and restructuring costs.

The balance sheet reflects assets held for sale (and liabilities held for sale, if any) as of September 30, 2025 .

The statement of operations presents (loss) from continuing operations separately from (loss) from discontinued operations, net of tax, and basic/diluted loss per share is shown for continuing operations, discontinued operations, and total (see Note 7 — Loss Per Share).

Critical accounting estimates

The classification of the disposal group of assets as held for sale and presentation as discontinued operations required management to make significant estimates, including the measurement of fair value less costs to selloff the disposal group of assets (ASC 360 ) and the warranty obligation retained by the Company (ASC 460 ).

These estimates use assumptions regarding market participant pricing, transaction costs, expected claim rates and unit repair costs.

Actual results could differ materially from these estimates.

Liquidity and going-concern considerations

We have incurred net losses and used cash in operations for the periods presented.

Our ability to meet obligations as they come due depends on the timing and magnitude of cash available after the asset sale (net of costs), collections of receivables and other assets, management of restructuring costs, and access to additional financing or further strategic transactions, if required.

These conditions raise substantial doubt about our ability to continue as a going concern within one year after the issuance of these financial statements.

Management’s plans include executing its restructuring and a Strategic Transaction efficiently, managing warranty exposure, monetizing residual assets, and prioritizing liquidity while completing the Class A redemption process.

See Note 1 — Basis of Presentation, Note 2 , Note 3 , and Subsequent Events.

Key risks and uncertainties

Execution of the restructuring and a Strategic Transaction involves risks, including warranty claim variability, timing of asset monetization, vendor and customer responses to our transition, and the cost and availability of essential public company services.

Actual outcomes may differ materially from our current expectations.

We are evaluating lease terminations or assignments associated with facilities formerly used by the disposed business.

We will recognize lease exit costs or ROU asset impairments in periods when such actions are probable and amounts are reasonably estimable.

Off-balance sheet arrangements

We had no off-balance sheet arrangements as of September 30, 2025 .

Deferred Product Revenue

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

Deferred product revenue decreased to $ 12 on September 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 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,

Results of Operations for the three and nine months ended September 30, 2025

We discuss Continuing Operations and Discontinued Operations separately.

The following tables set forth certain items from our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2025 (“ 2025 - Q3 ”) and 2024 (" 2024 - Q3 ") , respectively, together with the percentage of total revenue which each such item represents:

Continuing Operations

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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Provision (benefit) for income taxes

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-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

Cost of goods sold includes expenses associated with finished goods purchased from outsourced manufacturers, the repackaging of our products, our manufacturing and operations organization, property and equipment depreciation, warranty expense, freight expense, royalty payments, and the allocation of overhead expens es.

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 $ 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

Our profitability in the near term continues to depend significantly on our revenues from professionally installed audio-conferencing products.

We hold long-term inventory and if we are unable to sell our long-term inventory, our profitability might be affected by inventory write-offs and price mark-downs.

Our long-term inventory consists primarily of three product categories.

These categories are as follows:

Converge Pro and Beamforming microphone array products, cameras, and raw materials that will be used primarily for manufacturing professional audio-conferencing products and BMA microphones.

Any business changes that are adverse to these product lines could potentially impact our ability to sell our long-term inventory in addition to our current inventory.

Net loss from continuing operations

Continuing operations in the periods presented primarily comprise corporate activities (public-company reporting, governance and compliance), warranty support for legacy products, and restructuring actions associated with the post-disposition profile.

As expected, we recorded no product revenue in continuing operations for the three and nine months ended September 30, 2025 and 2024 .

Costs of Goods Sold and Gross Profit (Loss)

Cost of goods sold in continuing operations reflects warranty-related parts and labor and immaterial service inventory usage.

With no revenue in continuing operations for the periods presented, gross margin percentages are not meaningful;

the period-over-period dollar changes reflect timing and volume of warranty claims and repairs.

Operating Expenses

Operating expenses include sales and marketing (“S&M”) expenses, research and product development (“R&D”) expenses and general and administrative (“G&A”) expenses.

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

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 $ 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, $ 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 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

General & administrative (G&A) - G&A increased modestly in Q3 - 2025 versus Q3 - 2024 and increased year-to-date, driven primarily by legal, advisory and regulatory fees associated with the strategic review and disposition process, audit and tax fees, D&O insurance, and incremental US accounting headcount to meet compliance needs.

Sales & marketing (S&M) and research & development (R&D) - Following classification of the product business as held for sale, S&M and R&D expenses in continuing operations were immaterial for the periods presented.

To the extent severance or other exit costs were recognized in the quarter, such costs are reflected in the relevant operating expense caption in the period incurred.

Restructuring/exit costs - To the extent actions met ASC 420 recognition criteria, we recorded employee termination or contract termination costs;

otherwise, such costs will be recognized when probable and reasonably estimable.

Other income (expense), net

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

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 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.

Other income (expense), net reflects interest income on cash equivalents, interest expense on the convertible note through its conversion on July 21, 2025, and immaterial gains/losses on asset disposals related to restructuring activities.

We maintained a full valuation allowance against US federal and state deferred tax assets in both periods due to cumulative losses and uncertainty of realization.

Accordingly, we did not recognize an income tax benefit for losses in continuing operations.

We expect continuing operations to consist mainly of warranty servicing and public-company costs while we monetize remaining assets, manage lease exits, and complete the Class A redemption mechanics.

We will continue to evaluate warranty claims experience and service inventory levels and adjust estimates as appropriate.

LIQUIDITY AND CAPITAL RESOURCES

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.

As of September 30, 2025 , our cash and cash equivalents were approximately $ 0.8 million compared to $ 1.4 million as of December 31, 2024 .

Our working capital was $ 4.8 million and $ 15.2 million as of September 30, 2025 and December 31, 2024 , respectively.

Cash used in opera ting activities was approximately ($ 3.3 ) million in the nine months ended September 30, 2025 , an increase of approximately $ 1.2 million from ($ 2.1 ) million of cash used in operating activities in the nine months ended September 30, 2024 .

The increase in cash used was primarily due to increased legal and transaction fees to complete a strategic transaction.

Cash provided by (used in) investing activities was ($ 0.0 ) million for the nine months ended September 30, 2025 , compared to $ 2.9 million for the nine months ended September 30, 2024 .

The decrease in cash provided by investing activities for the comparative period primarily reflects the liquidation of the Company’s investment portfolio during 2024 , which generated $3.

2 million of proceeds in the prior year, less amounts paid for property, plant, equipment and software.

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

The 2025 amount was comprised primarily of a stock sale and the sale of a convertible note, as discussed in Note(s) 1 , 3 , 4 , 11 and 12 above, and our discussion in the following paragraphs.

Accordingly, as of September 30, 2025 , the Company classified the related disposal group of assets as held for sale, measured at the lower of carrying amount or fair value less costs to sell.

After quarter-end, on October 24, 2025, the Company closed the sale of certain inventory and intellectual property for cash consideration (see Subsequent Events).

Pursuant to the terms of the Class A Redeemable Preferred Stock issued in July 2025, net proceeds from a qualifying asset sale are payable to Class A holders upon redemption (see Note 3 — Class A Redeemable Preferred (Temporary Equity)).

As a result, the asset-sale proceeds will not be available to fund ongoing operations other than for permitted transaction costs and restructuring activities.

These conditions, including (i) historical operating losses and negative operating cash flows, (ii) limited liquidity at September 30, 2025 , (iii) the requirement to redeem Class A from asset-sale net proceeds, and (iv) the Company’s go-forward profile consisting primarily of warranty support, public-company compliance, and restructuring activities, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance of these financial statements.

Management is (a) executing a structured restructuring , including monetization of residual assets not included in the sale (e.g., fixed assets, leaseholds) and collection of accounts receivable and prepaids;

(b) maintaining a lean corporate infrastructure to satisfy reporting and governance requirements;

(d) managing and, where feasible, terminating or assigning facility leases to reduce ongoing cash burn;

(e) completing the Class A redemption in accordance with its terms;

and (f) evaluating additional financing or strategic alternatives as necessary to satisfy obligations as they come due.

There can be no assurance these plans will be successful, timely, or sufficient to alleviate the conditions raising substantial doubt.

Accordingly, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for the twelve -month period following the issuance of these unaudited condensed consolidated financial statements.

The financial statements do not include any adjustments to the carrying amounts and classification of assets and liabilities that might result if the Company were unable to continue as a going concern.

In furtherance of the Asset Sale pursuit, the Company completed a one -time special stock dividend of Class A Redeemable Preferred Stock, payable July 18, 2025 to holders of record of our common stock on July 11, 2025, which entitles holders of the Class A Redeemable Preferred 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.

As of September 30, 2025 , First Finance Ltd.

beneficially owned approximately 32.4 % of our common stock on an as-converted basis and has the right to nominate two directors to our Board.

This concentration may influence strategic decisions, including the ongoing restructuring and possible Strategic Transactions, and could affect our ability to attract alternative financing or partners.

As of September 30, 2025 , we had no open purchase orders.

As of September 30, 2025 , we had inventory totaling $ 0.4 million, of which non-current inventory accounted for $ 0.0 million.

This compares to total inventories of $ 0.4 million, which includes non-current inventory of $ 0.0 million as of December 31, 2024 .

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

Contractual Obligations and Commitments

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

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

Payment Due by Period

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our results of operations and financial position are based upon our unaudited condensed consolidated financial statements included under Item 1 of this Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the United States.

We review the accounting policies used in reporting our financial results on a regular basis.

We believe certain of our accounting policies are critical to understanding our financial position and results of operations.

There have been no changes to the critical accounting policies as explained in our Annual Report on Form 10-K for the year ended December 31, 2024 .

Our discussion and analysis are based on unaudited condensed consolidated financial statements prepared in accordance with U.S.

The preparation of these financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses, and related disclosures.

Actual results could differ materially from those estimates.

The estimates that we believe involve the most judgment and have the most significant potential to materially affect our results are summarized below;

see the referenced notes for additional information.

Held for sale measurement and impairment (ASC 360 )

As of September 30, 2025 , we classified a disposal group of assets (intellectual property and certain inventories) as held for sale and measured it at the lower of carrying amount or fair value less costs to sell (FVLCTS).

The determination of FVLCTS involves significant judgment, including consideration of an executed asset purchase agreement, market-participant assumptions, condition and salability of inventory, and estimated transaction costs.

Changes in these inputs, including final closing adjustments, could result in additional impairment or reversal within discontinued operations.

See Note 2 — Discontinued Operations and Assets Held for Sale.

Discontinued operations presentation (ASC 205 - 20 )

We determined that disposal of the product business represents a strategic shift with a major effect on operations and financial results.

Accordingly, we present the disposed component as discontinued operations for all periods shown.

This requires management judgment in identifying direct vs.

indirect costs, ceasing depreciation/amortization within the disposal group of assets, and recasting prior periods.

Warranty obligations (ASC 460 )

We retained responsibility for legacy product warranties.

The warranty liability reflects estimates of expected claim rates, parts and labor costs, and logistics, informed by historical experience and current product information.

Actual experience could differ, requiring increases or decreases to the liability and impacting continuing operations.

See Note 1 and MD&A — Continuing Operations .

Going concern (ASC 205 - 40 )

We evaluate conditions and events that raise substantial doubt about our ability to continue as a going concern within one year after financial statement issuance, including historical losses, liquidity levels, the requirement to redeem Class A from net asset-sale proceeds, and the profile of continuing operations (warranty, public-company costs, restructuring).

Our conclusions require judgment about the timing and success of plans (asset monetization, lease exits, financing).

See Note 1 — Going Concern and Liquidity.

Temporary equity — Class A Redeemable Preferred (ASC 480 -10-S 99 )

Class A is mandatorily redeemable upon a qualifying asset sale for 100 % of net proceeds and is presented in temporary equity.

Judgment is required to assess accretion to redemption value (e.g., when redemption becomes probable and reasonably estimable) and to evaluate EPS participation.

See Note 3 — Class A Redeemable Preferred.

RECENT ACCOUNTING PRONOUNCEMENTS

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“Business Description, Basis of Presentation and Significant Accounting Policies” in the notes to our unaudited condensed consolidated financial statements included under Item 1 of this Form 10-Q.

Discontinued Operations

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

Change Favorable (Adverse) in %

Cost of goods sold

Gross profit (loss)

Sales and marketing

Research and product development

General and administrative

Total operating expenses

Operating loss

Other income (expense), net

Loss before income taxes

Provision (benefit) for income taxes

Net loss from discontinued operations

Our revenue decreased to $ 1.3 million in 2025 - Q3 compared to $ 2.5 million in 2024 - Q3 due to a 72 % decline in audio conferencing, a 49 % decline in video products, and a 32 % decrease in microphones.

Our revenue decreased to $ 5.5 million in 2025 year-to-date compared to $ 8.4 million in 2024 year-to-date due to a 45 % decline in audio conferencing, a 40 % decline in video products, and a 24 % decrease in microphones.

Our traditional ceiling mics, personal audio-conferencing products, and video cameras suffered revenue declines due to decreasing demand and a reduction of the sales force in anticipation of an asset transaction for a strategic restructuring.

Costs of Goods Sold and Gross Profit

Our gross profit decreased from $ 639 during 2024 - Q3 to a loss of $ (886) during 2025 - Q3 .

The reduction in gross profit 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 $ 3.2 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.

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

Operating Expenses

Operating expenses include sales and marketing (“S&M”) expenses, research and product development (“R&D”) expenses and general and administrative (“G&A”) expenses.

Total operating expenses in 2025 - Q3 were $ 1.2 million compared to $ 2.0 million in 2024 - Q3 .

Total operating expenses thru 2025 -YTD were $ 6.2 million compared to $ 6.5 million observing the same 9 -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.

S&M expenses were $ 0.4 million in Q3 - 2025 , compared to $ 1.1 million in Q3 - 2024 , while the year-to-date results for the nine months ended September 30, showed $ 2.9 million in 2025 compared to $ 3.6 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 Q3 reduction in force being recognized.

R&D expenses were, $ 0.7 million in Q3 - 2025 , compared to $ 0.8 million in Q3 - 2024 , while the year-to-date results for the nine months ended September 30, showed $ 2.7 million in 2025 compared to $ 2.5 million in 2024 .

The decrease in comparing the quarterly results was due to a decrease in headcount.

The increase in comparing the year-to-date results was primarily due to severance payments made in the Indian subsidiary and severance expense accrued in the US in 2025-Q 2 partially offset by reduction in personnel in the US.

General and Administrative - G&A expenses include employee-related costs, allocations of overhead expenses, litigation costs, and corporate administrative costs, including costs related to operational teams.

G&A expenses were $ 0.1 million in Q3 - 2025 , compared to $ 0.1 million in Q3 - 2024 , while the year-to-date results for the nine months ended September 30, showed $ 0.5 million in 2025 compared to $ 0.4 million in 2024 .

The increases in comparing both periods were due to increased expenses related to the exploration of strategic alternatives and moving between facilities.

Other income (expense), net

Other income (expense), net includes gain or loss on disposal of assets and impairment charges related to assets being held for sale.

Other income for the three and nine months ended September 30, 2025 included a $ 10.7 million charge to impairment related to marking inventory and IP held for sale for fair market value, compared to $ 0.0 million for the three and nine months ended September 2024 .

Provision for income taxes

During each of the nine months ended September 30, 2025 and 2024 , we did not recognize any benefit from the losses incurred due to having a full valuation allowance on net deferred income taxes.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis