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Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-28 · 130 added, 261 removed, 14 unchanged (97% of the section changed)

1 unchanged sentence

The following discussion should be read in conjunction with our consolidated financial statements and related notes included in this report, as well as our other filings with the SEC.

This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions, as set forth under “Disclosure Regarding Forward-Looking Statements.” Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the following discussion and under the caption “Risk Factors” in Item 1 A and elsewhere in this report.

ClearOne is a global Company that designs, develops and sells conferencing, collaboration, and AV networking solutions for voice and visual communications.

The performance and simplicity of our advanced, comprehensive solutions offer a high level of functionality, reliability and scalability.

We derive a major portion of our revenue from audio conferencing products and microphones by promoting our products in the professional audio-visual channel.

We have extended our total addressable market from the installed audio conferencing market to adjacent complementary markets – microphones, video collaboration and AV networking.

We have achieved this historically through strategic technological acquisitions as well as by internal product development.

In early January 2022, we introduced DIALOG ® 10 USB, the industry's only pro-quality, single-channel wireless USB microphone system offering professional-quality audio with USB connectivity for webcasting and cloud-based collaboration.

In March 2022, this new USB wireless mic system won the 2022 NSCA Excellence in Product Innovation Award.

One of only seven winners in this prestigious award program, the DIALOG 10 USB is the industry’s only pro-quality single-channel wireless microphone system with USB connectivity for webcasting and cloud-based collaboration such as Microsoft Teams, Zoom, WebEx, and GotoMeeting.

DIALOG 10 USB won its second award in May 2022 by winning the 2022 Top New Technology (TNT) Award in the Microphone category.

In June 2022, at Infocomm 2022 in Las Vegas, Nevada, DIALOG 10 USB won two additional awards - Commercial Integrator 2022 BEST Award in the Microphones category and 2022 Sound & Video Contractor Magazine Infocomm Best in Market Award.

On January 30, 2023, we introduced the new CHAT® 150 BT group speakerphone with USB and Bluetooth connectivity that enhances the conferencing experience for the ultimate in business class performance.

With simple, instant connection to personal computers, mobile devices or Bluetooth-enabled desk phones, the CHAT® 150 BT group speakerphone provides users with an affordable way to upgrade home offices, executive offices, and mid-size meeting rooms with BYOD convenience and superior audio clarity for audio conferences and video meetings.

The CHAT® 150 BT speakerphone also has an audio bridging feature that allows far end conference participants connected via a software conferencing application through USB, local users of the speakerphone, and far end callers on a mobile call connected through Bluetooth to all join the same call and hear each other clearly.

Featuring a steerable microphone array with first-mic priority, the CHAT® 150 BT speakerphone intelligently activates the microphone closest to the person speaking, reducing interference from ambient noise.

Like all ClearOne microphone products, the CHAT® 150 BT speakerphone is compatible with popular collaboration platforms including Microsoft® Teams, Zoom™, WebEx™, Google® Meet™, and many more.

The new BT model retains all the class-leading features of the original CHAT® 150 speakerphone, including Advanced Noise Cancellation, Full Duplex Distributed Echo Cancellation™ and Automatic Level Control algorithms, to ensure highly intelligible, natural audio capture and playback.

It also supports NFC tap-to-pair and includes a wired USB connection for compatibility with the full variety of modern devices.

On January 16, 2023, we introduced UNITE 260 Pro camera, a professional grade 4 K Ultra HD camera featuring both a 20 X optical zoom and 16 X digital zoom that allows users to capture every participant in all meeting, training, and learning environments it is deployed in.

Compatible with all popular meeting applications like Microsoft® Teams, Zoom™, WebEx™, and Google® Meet™, the new camera features an AI-based smart face tracking mode that keeps a selected presenter in the frame as they move about the room.

Alternatively, the camera’s AI-based auto framing mode always keeps an entire group in perfect view.

With dual video outputs HDMI and IP, the UNITE 260 Pro Camera is an excellent choice for a hybrid environment:

streaming content while simultaneously showing it live where the presentation is occurring.

In April 2023 we announced the immediate market availability of the Versa UCS 2100 Collaboration Switcher Kit.

Designed for use in small to mid-sized meeting rooms, board rooms, and executive offices, the Versa UCS 2100 automatically detects HDMI and USB-C sources, such as a dedicated in-room PC or a Bring-Your-Own-Meeting (BYOM) laptop and offers the flexibility for users to access the same set of in-room AV peripherals, such as cameras and audio devices.

Its USB-C input provides up to 10 0 watts charging and provides simultaneous 1 x HDMI output and 1 x HDBaseT output.

When combined with ClearOne UNITE series PTZ cameras, INTERACT, CONVERGE® Pro 2 , CONVERGE® HUDDLE, and CHAT series audio conferencing devices, the Versa UCS 2100 delivers guaranteed performance and a streamlined user experience that supports automatic source detection and switching and is controllable via RS- 232 , TCP/IP, or front panel buttons.

At Infocomm 2023 , we unveiled the BMA 360 D, the newest member of the world’s most advanced beamforming microphone array ceiling tile family.

The BMA 360 D offers unrivaled audio performance and native compatibility with any Dante-enabled DSP mixer.

The new Dante-compatible beamforming microphone array allows integrators and users to leverage ClearOne’s industry-leading microphone innovations in more projects and spaces than ever before.

The BMA 360 D takes our groundbreaking product to the next level by leveraging standard IP networking infrastructure in an enterprise, empowering AV and IT practitioners to upgrade existing room solutions to use more powerful microphones and expanding flexibility that enables third-party DSP integrations in new system designs.

The added power and advanced beamforming also enhance the performance of critical modern functions such as voice lift and camera tracking.

Dante integration in the BMA 360 D enhances the array’s functionality by delivering unprocessed beam audio on individual Dante transmit channels.

Additionally, a smart-switched output is delivered on a separate Dante channel to provide the optimal mix of active inputs while enabling ClearOne’s full suite of audio enhancements, which include echo cancellation, noise cancellation, and level control.

The BMA 360 D incorporates the industry’s only ultra-wideband, frequency-invariant beamforming mic array technology with uniform gain response across all frequency bands.

With proprietary FiBeam™ and DsBeam™ technology, participants experience natural and full-fidelity audio across all beams and within a single beam.

DsBeam delivers superb clarity and intelligibility through unparalleled sidelobe depth below - 40 dB, resulting in superior rejection of reverb and noise even in challenging environments.

Integrator setup is simplified by convenient preset beam patterns for common room layouts, while custom beam patterns can be created for unique floor plans.

Combined with adaptive steering that focuses audio pickup on active speakers, the adjustable beam patterns provide impeccable coverage of every meeting or conference participant.

The exceptional accuracy of ClearOne’s beamforming and adaptive steering technologies also enhance the performance of voice lift and camera tracking functions for any attached DSP.

We also introduced at Infocomm, our powerful new DIALOG® UVHF wireless microphone system that combines class-leading flexibility, Power over Ethernet (PoE) simplicity, Dante technology, and up to 350 usable frequencies to offer professional-quality audio conferencing, video collaboration, and sound reinforcement for any size room.

The new DIALOG UVHF system offers businesses and institutions a flexible wireless microphone system that can address varying types of audio pickup needs for rooms of virtually any size.

With up to 350 available frequencies across 160 MHz of RF range, the system also delivers incredibly robust reception.

Now corporate boardrooms, training rooms, college lecture halls, courtrooms and other multi-use venues can ensure excellent audio pickup quality and meet varying pickup needs with the simplicity of PoE that enables installation virtually anywhere through a single CAT 6 ethernet cable.

ClearOne’s free support for system design and remote commissioning makes it easier than ever to outfit any presentation space with a professional-quality multi-function audio pickup solution.

The DIALOG UVHF system allows integrators, room designers and meeting hosts to address a wide range of audio pickup needs through five lavalier, lanyard and headset-type body microphones, two handheld microphones, a boundary microphone and three gooseneck microphones for podium use.

Powering the microphones is simple and efficient, as all models use the same 12 -hour off-the-shelf Li-ion battery that can be charged via USB-C or an optional eight -bay network-connected charging dock.

Firmware updates can be done over the network, while the transmitters charge.

The Dante-enabled system includes an eight -channel Dante Access Point to ensure optimal signal transmission and system reliability, while an optional DIALOG UVHF Dante interface provides eight Euroblock balanced analog outputs, including mixed output, USB audio output and eight GPIOs.

The lightweight plenum-rated access point provides versatile mounting options for wall, ceiling, tabletop or pole mounting, including VESA mount holes.

The DIALOG UVHF is the only system with a wireless access point that delivers antenna redundancy and diversity, with dual antennas providing spatial and polarization diversity that helps maintain high audio quality in harsh environments.

A wired ethernet connection adds the ability to connect management software to the access point via a web browser.

Secure RF connections are created using full-time standards-based FIPS 197 AES- 256 encryption.

ClearOne’s solutions are designed to support all leading collaboration platforms, including Microsoft Teams, Google Meet, GoToMeeting, Zoom and WebEx.

In August 2023, we showcased our full range of conferencing, collaboration, and communications solutions at CEDIA 2023 held in Denver, Colorado.

During the event, we highlighted the CHAT® 150 BT Speakerphone (USB and Bluetooth speakerphone), Versa® Mediabar™ (video soundbar), UNITE® 60 ( 4 K ePTZ wide-angle tracking camera), COLLABORATE® Versa® Pro CT (product bundle consisting of Huddle DSP and BMA CTH beamforming mic array ceiling tile), COLLABORATE® Versa® Lite CT (USB Plug-N-Play beamforming mic array ceiling tile), and COLLABORATE® Versa® 60 (product bundle consisting of CHAT® 150 USB speakerphone, a UNITE® 60 wide angle 4 K ePTZ camera, and a VERSA USB Hub).

In August 2023, we announced that our entire line of commercial and residential solutions is available for specification within the popular D-Tools software program for integrators.

D-Tools’ System Integrator software and D-Tools Cloud platform make it easier than ever for integrators to specify ClearOne solutions for any type of installation.

In September 2023, our new DIALOG® UVHF Wireless Microphone System was named a winner in the Higher Education category of the 2023 Tech & Learning Magazine Awards of Excellence.

The annual Tech & Learning Awards of Excellence program, conducted by leading educational technology publication Tech & Learning, recognizes innovation in the edtech industry and celebrates the most impressive products and solutions that support learning environments.

In October 2023, we debuted the new Versa USB 22 D Dante Adapter at InfoComm India 2023 .

Versa USB 22 D enables users to seamlessly connect computers to a Dante network and use any audio application for playback or capture without installing software.

In January 2024, we introduced the DIALOG 20 USB.

This solution is ideal for hybrid meetings that require a dedicated presenter microphone and a shared audience microphone with simultaneous sound reinforcement, such as any type of hybrid training or presentation session.

The DIALOG 20 USB works in spaces up to 2500 square feet.

We also continued our programs to cut costs and to speed up product development that we believe will enable us to get back to a growth path.

During 2024 , our overall revenue of $ 11.4 million decreased by 39 % when compared to revenue of $ 18.7 million during 2023 .

The decrease in revenue was seen across all product categories and major regions.

We believe the revenue decline was primarily due to the decline in demand for video products and due to our inability in the first half of 2023 to source adequate inventory to meet the demand for professional audio products and BMA due to the transition of manufacturing of our products from China to Singapore by our EMS provider.

We believe that many of our channel partners who could not buy our products due to product shortages caused by our manufacturing transition issues are yet to resume their typical buying pattern with us.

We also believe that the lack of Microsoft Teams certification for our products is increasingly impacting our ability to sell our conferencing and collaboration solutions.

Our gross profit margin decreased to 23% during 2024 from 34 % in 2023 .

Net loss of $ 0.6 million in 2023 changed to net loss of $ 9.0 million in 2024 .

The increase in the loss is attributed to decreasing revenue and an inability to capture cost reductions as rapidly as the decrease in revenue combined with compressed margins, falling 11% year over year.

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 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 product certifications with leading video conferencing service providers like Microsoft and Zoom.

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 DSPs, a wide range of professional microphone products and video collaboration products.

Despite our strong leadership position in the installed professional audio-conferencing market, we face challenges to revenue growth due to the limited size of the market, 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 high growth in the near future.

We derive a significant portion of our revenue (approximately 67% in 2024 ) from international operations 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.

Deferred Revenue

De ferred revenue decreased from $ 30 thousand in 2023 to $ 17 thousand in 2024 due to decrease in new subscriptions to the video conferencing software.

DISCUSSION OF RESULTS OF OPERATIONS

The following table sets forth certain items from our consolidated statements of operations and comprehensive income (loss) for t he years ended December 31, 2024 and 2023 , together with the percentage change each item represents.

Throughout this discussion, we compare results of operations for the year ended December 31, 2024 (“ 2024 ”) to the year ended December 31, 2023 (“ 2023 ” or “the comparable period”).

(In thousands, except percentages)

Favorable (Adverse)

Cost of goods sold

Sales and marketing

Research and product development

General and administrative

Total operating expenses

Interest income (expense)

Other income, net

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the following discussion and under the caption “Risk Factors” in Item 1 A and elsewhere in this report.

The year ended December 31, 2025 was a transformational period for ClearOne, Inc.

(“ClearOne,” the “Company,” “we,” “us” or “our”).

On October 24, 2025, the Company completed the sale of certain intellectual property, product inventory, and non-exclusive rights to customer data (the “Asset Sale”).

As a result of the Asset Sale, the Company no longer manufactures or sells products and maintains a limited inventory and provides customer support services to satisfy warranty claims.

The financial results of the disposed operations are reflected as discontinued operations in the Company’s consolidated financial statements for all periods presented.

Following the Asset Sale, the Company’s continuing activities consist solely of fulfilling warranty and technical support obligations on legacy products, evaluating potential Strategic Transactions, managing and liquidating remaining assets of the Company’s legacy operating business, collecting accounts receivable and recovering prepaid assets, satisfying outstanding liabilities, and maintaining public-company compliance.

These activities are transitional in nature and are not expected to generate material revenue.

The Company is actively evaluating strategic alternatives intended to enhance stockholder value.

These alternatives may include without limitation one or more special transactions, an investment in, or an acquisition of a private operating company, additional asset sales, or other actions that maximize value for stockholders.

The closing of the Asset Sale on October 24, 2025 triggered the mandatory redemption of all outstanding shares of the Company’s Class A Redeemable Preferred Stock.

The Company currently estimates the final redemption amount will be approximately $50 after permitted expenses and net asset recoveries.

Discontinued Operations

Description of Disposed Assets

The disposed assets consisted of the Company’s

historical operations related to conferencing, collaboration, and network

streaming products, including product development, manufacturing, sales, and

support activities.

These operations historically generated the majority of the

Company’s revenue.

Timing and Classification

The Company classified the disposed assets as held

for sale and discontinued operations during the third quarter of 2025.

closed on October 24, 2025.

Accordingly, the results of the disposed assets are presented as discontinued operations for all periods presented, with a hard

cutoff on the legal closing date of October 24, 2025.

No allocation or

smoothing of results has been applied.

Financial Impact

The discontinued operations incurred operating losses

during 2025 and prior periods.

In connection with the Asset Sale, the Company

recognized a loss on sale in the fourth quarter of 2025 (primarily driven by

inventory carrying values exceeding the $3.0 million gross proceeds, after the

$10.7 million impairment charge recorded in the third quarter of 2025).

results of discontinued operations include operating losses incurred prior to

closing, inventory write-downs, severance and restructuring costs, and the loss

See Note 2 to the consolidated financial statements for additional information regarding

discontinued operations, including the components of the loss on disposal.

The following table summarizes the results of

discontinued operations (in thousands):

Year Ended December 31, 2025

Year Ended December 31, 2024

Gross profit (loss)

Operating loss

Loss before income taxes

Provision for income taxes

Our revenue decreased by 39 % to $ 11.4 million in 2024 compared to $ 18.7 million of revenue in 2023 .

Revenue from all product categories declined during the year with audio conferencing, microphones and video products declining by 49%, 33% and 26% respectively.

Video products suffered a decline in revenues in 2024 compared to 2023 due to a lack of demand for video products as demand for the work from home and learn from home markets contracted as well as experiencing extreme pricing pressures.

Revenue decreases were also d ue to our inability in the first half of 2023 to source adequate inventory to meet the demand for professional audio products and BMA due to the transition of manufacturing of our products from China to Singapore by our EMS provider.

We also believe that the lack of Microsoft Teams certification for our products is increasingly impacting our ability to sell our conferencing and collaboration solutions.

The share of audio-conferencing products in our product mix decreased from 45 % in 2023 to 38% in 2024 .

The share of microphones in the revenue mix increased slightly from 41 % in 2023 to 46% in 2024 .

Share of video products in the revenue mix increased from 14 % in 2023 and 16% in 2024 .

During 2024 , revenue decreased in the Asia Pacific area, including the Middle East, by 19%.

Europe and Africa decreased by 46% and the Americas decreased by approximately 54%.

We believe, although there can be no assurance, that we can return to revenue growth and generating operating profits through our strategic initiatives namely product innovation, focus on core products and cost reduction.

Cost of Goods Sold and Gross Profit

Cost of goods sold (“COGS”) includes expenses associated with finished goods purchased from outsourced manufacturers, the manufacture of our products (including material and direct labor), our manufacturing and operations organization, property and equipment depreciation, warranty expense, freight expense, and the allocation of overhead expenses.

Our gross profit during 2024 was approximately $ 2.6 million or 23% compared to approximately $ 6.4 mill ion or 34% in 2023 .

The gross profit margin was negatively impacted due to (a) an increase in freight and tariff costs as a percentage of revenue , (b) increased material costs across all product lines, and (c) an increase in inventory obsolescence costs.

Our profitability in the near-term continues to depend significantly on our revenues from 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 includes approximately $ 2.2 million of Converge Pro and Beamforming microphone array products, $ 0.5 million of cameras, and $ 1.1 million of 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.

Operating Expenses and Profits (Losses)

Operating income (loss), or income ( loss) from operations, is the surplus or deficit after operating expenses are deducted from gross profits.

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 were $ 11.8 million in 2024 , compared to $ 13.1 million in 2023 .

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 sales, 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 in 2024 decreased to $ 4.6 million, compared to $ 4.9 million in 2023 .

The decrease was primarily due to (a) decreases in employment expenses and consultant expenses, (b) a decrease in commissions paid to employees, full-time consultants and independent manufacturer representatives.

This overall decrease was partially offset by (a) an increase in trade-show-related costs, and (b) an increase in travel expenses.

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 decreased from $ 3.7 million in 2023 to $ 3.3 million in 2024 .

The decrease was primarily due to (a) a decrease in project-related expenses, (b) a decrease in employment expenses including salaries and bonuses, and (c) a decrease in allocation of common expenses to R&D.

This overall decrease was partially offset by an increase in legal expenses incurred on application for new patents.

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.

G&A expenses decreased to $ 4.0 million in 2024 , compared to $ 4.6 million in 2023 .

The decrease was primarily due to (a) a decrease in amortization of capitalized legal costs related to patents litigation, and (b) a decrease in employment expenses including salaries and bonuses .

This decrease was partially offset by (a) an increase in consulting expenses including investor relations costs, and (b) an increase in directors and officers ’ insurance expenses.

Interest income (expense)

I nterest income increased to $ 0.23 million in 2024 compared to expense of ($ 0.5 ) million in 2023 .

The increase was primarily due to interest associated with investments in marketable securities offset by the prepayment of the $ 2 million bridge loan in January 2023.

Interest expense was $0.0 in 2024 compared to $0.5 million in 2023.

The decrease was primarily due to a loan being extinguished in 2023.

Other income (expense), net

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

Other income in 2024 included ($ 0 .15) million due to foreign currency expenses.

Other income in 2023 included $ 51.3 million from a legal settlement, $4 million from a license agreement, and $ 1.9 million of interest income received on marketable securities.

Provision for income taxes

The effective tax provision rate was below 0 % in 2024 , comp ared to 25 % effective tax benefit rate during 2023 .

Income tax provision for 2024 was $ 0.2 million as compared to an income tax provision of $ 0.4 million in 2023 .

The significant change in income taxes was primarily due to a decrease in net income in 2024 compared to 2023 .

We have been recording a valuation allowance against net deferred tax assets since 2018 and have not been claiming tax benefit for our losses as we have concluded that it is more likely than not that our deferred tax assets were not realizable, primarily due to our recent pre-tax losses.

Loss on sale of assets

Loss from discontinued operations, net of tax

Continuing Involvement

Following the Asset Sale, the Company continues to service warranty claims and provide technical support related to products sold prior to October 24, 2025.

The Company retained a limited amount of inventory solely to fulfill these obligations.

These activities are reported in continuing operations and do not constitute ongoing operations of the disposed assets .

DISCUSSION OF RESULTS OF OPERATIONS

Discontinued Operations

Year Ended December 31, 2025 Compared to Year Ended

December 31, 2024

Revenue from discontinued operations decreased

significantly in 2025 compared to 2024 due to the disposition of operating

assets and the cessation of revenue-generating activities associated with the

disposed assets on October 24, 2025.

Gross margin and operating results were

negatively impacted by reduced sales volume prior to disposition, inventory

write-downs, severance and restructuring costs, and the loss on sale recognized

in the fourth quarter of 2025.

As a result, discontinued operations reported a

substantial net loss for the year ended December 31, 2025 .

Continuing Operations

Following the Asset Sale, continuing operations

generated no revenue during the fourth quarter of 2025 .

Operating expenses consisted primarily of

public-company compliance costs, legal and professional fees, warranty

servicing and technical support costs, and general and administrative expenses

related to the significantly reduced workforce.

Because continuing operations

are limited in scope and do not generate revenue, period-to-period comparisons

are not meaningful.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

As of December 31, 2024 , our cash and cash equivalents were approximately $ 1.4 million compared to $ 17.8 million as of December 31, 2023 .

Our working capital was $ 15.2 million and $ 39.1 million as of December 31, 2024 and 2023 , respectively.

Net cash flows used in operating activities were approximately ( $ 6.1 ) million during 2024 , a decrease of ap proximately ( $ 60.7 ) million from $ 54.6 million provided by opera ting activities in 2023 .

The decrease in cash provided was primarily due to receipt of settlement proceeds of $55 million from a legal settlement, a license agreement and income tax refunds in 2023, partially offset by change in operating assets and liabilities .

Net cash provided by investing activities was $ 4.2 million in 2024 compared to ( $ 4.9 ) million used in investing activities in 2023 , an increase in cash provided of $ 9.1 million.

The increase in cash used in investing activities in 2024 was primarily due to an increase in net cash inflows from sale of marketable securities net of purchase of marketable securities .

Net cash used in financing activities was ($ 14.5 ) million during 2024 compared to net cash used in financing activities of ($ 32.9 ) million during 2023 , a decrease in cash used of ($ 18.4 ) million.

The decrease was primarily due to payment of a special dividend of $14.5 million in 2024 compared to a special dividend issued of $29.0 million in 2023 .

The Company paid a special one -time cash dividend of $ 1.00 per share of ClearOne common stock or the eligible warrants on June 1, 2023 amounting to $ 29 million.

On March 11, 2024 the Company's Board of Directors declared another special dividend of $ 0.50 per share of the Company's stock and eligible warrants amounting to $ 14.5 million to be paid on April 10, 2024.

The Company has experienced a decline in sales from 2023 to 2024, along with increasing product costs in 2024.

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

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

We will need to generate and sustain significant revenue levels in future periods 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.

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

The Company’s ability to continue as a going concern is dependent on the outcome of these uncertainties.

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

The consolidated financial statements as of December 31, 2024 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months after these financial statements are issued, and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

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

As of December 31, 2024 , we had open purchase orders of approximately $4.3 million mostly for the purchase of inventory.

As of December 31, 2024 , we had inventory totaling $ 16.1 million, of which non-current inventory accounted for $ 4.9 million.

This compares to total inventories of $ 13.8 million and non-current inventory of $ 3.1 million as of December 31, 2023 .

Liquidity Position

As of December 31, 2025, the Company had cash and cash equivalents, and restricted cash of $0.74 million.

The Company’s primary liquidity requirements relate to ongoing public-company compliance and reporting costs, warranty servicing obligations, professional fees (including legal and investment banking), lease payments on the remaining facilities, the $57,500 severance obligation to the former CEO, and the required redemption of the Class A Redeemable Preferred Stock with any net proceeds from the Asset Sale.

Net proceeds from the Asset Sale are contractually required to be used to redeem all outstanding shares of the Company’s Class A Redeemable Preferred Stock.

The Asset Sale closed on October 24, 2025, triggering the mandatory redemption of the Class A Redeemable Preferred Stock.

As of December 31, 2025, the redemption had not yet been completed.

The Company currently estimates the final redemption amount at approximately $50,000 after permitted expenses and net asset recoveries.

The redemption payment will occur subsequent to December 31, 2025 and is treated as a non-recognized subsequent event.

Subsequent to year-end, on March 11, 2026, the Company closed a private placement with First Finance Ltd.

(its largest stockholder) for aggregate gross proceeds of $1.75 million through the issuance of 437,500 shares of common stock at $4.00 per share and a warrant to purchase up to 437,500 additional shares at $5.00 per share.

Of the proceeds, $500,000 became immediately available, with the remaining $1.25 million available upon completion of the Company’s reincorporation from Delaware to Nevada.

This financing provides an additional source of short-term liquidity.

Net cash used in operating activities during 2025 primarily resulted from operating losses, restructuring activities, and costs associated with discontinued operations.

Net cash provided by investing activities primarily reflects the $3.0 million gross proceeds from the October 2025 Asset Sale (net of transaction costs).

The Company did not have committed sources of financing during 2025.

Subsequent to year-end, on March 11, 2026, the Company closed a private placement with its largest stockholder for aggregate gross proceeds of $1.75 million (see Liquidity, Capital Resources and Financial Position and Note 17 – Subsequent Events for additional information).

Capital Resources and Going Concern

The Company has incurred significant losses and negative cash flows from operations.

These conditions, the limited nature of continuing operations, the mandatory redemption obligation for the Class A Redeemable Preferred Stock (triggered by the October 24, 2025 Asset Sale closing), and the absence of committed sources of financing raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of the consolidated financial statements.

This financing provides a partial source of short-term liquidity.

Management is actively evaluating strategic alternatives intended to enhance stockholder value and improve the Company’s liquidity position.

These alternatives may include one or more special transactions or other actions that maximize value for stockholders.

There can be no assurance that the Company will successfully complete any transaction or that any such transaction will provide sufficient liquidity to continue operations.

If the Company is unable to complete a special transaction, satisfy the conditions for the remaining financing proceeds, or otherwise obtain additional capital on acceptable terms, management may be required to significantly curtail operations or pursue an orderly wind-down of operations.

The consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2024 (in millions):

The Company’s contractual obligations as

of December 31, 2025 primarily consist of operating lease obligations for the

three remaining facilities, warranty obligations, and legal settlement

A summary of the Company’s contractual

obligations is included in the table below (in thousands):

Payment Due by Period

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Purchase obligations

Off-Balance Sheet Arrangements

We have no off-balance-sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, results of operations or liquidity.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our results of operations and financial position are based upon our consolidated financial statements, which have been prepared in conformity with U.S.

generally accepted accounting principles ("GAAP").

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

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

We evaluate our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations.

We believe that the estimates we use are reasonable;

however, actual results could differ from those estimates.

Our significant accounting policies are described in Note 1 - Business Description, Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements included in Part IV of this report.

We believe the following critical accounting policies identify our most critical accounting policies, which are the policies that are both important to the representation of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue and Associated Allowances for Revenue Adjustments and Doubtful Accounts

The Company recognizes revenue when it satisfies a performance obligation.

The Company recognizes revenue from sales agreements upon transferring control of a product to the customer.

This typically occurs when products are shipped or delivered, depending on the delivery terms, or when products that are consigned at customer locations are sold to dealers or end users.

Revenue recognized during the twelv e months ended December 31, 2024 for audio and video conferencing equipment sales was $ 11.4 million, and for software, licenses, etc.

was $ 0.0 million .

Sales returns and allowances are estimated based on historical experience.

Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenues are recognized, and are netted against revenues.

For returns, the Company recognizes a related asset for the right to recover returned products with a corresponding reduction to cost of goods sold.

The Company reviews warranty and related claims activity and records provisions, as necessary.

Frequently, the Company receives orders with multiple delivery dates that may extend across reporting periods.

Since each delivery constitutes a performance obligation, the Company allocates the transaction price of the contract to each performance obligation based on the stand-alone selling price of the products.

The Company invoices the customer for each delivery upon shipment and recognizes revenues in accordance with delivery terms.

Although payment terms vary, distributors typically pay within 45 days of invoicing and dealers pay within 30 days of invoicing.

As scheduled delivery dates are within one year, revenue allocated to future shipments of partially completed contracts are not disclosed.

The Company has elected to record freight and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost and include it in cost of revenues.

Taxes assessed by government authorities on revenue-producing transactions, including value-added and excise taxes, are presented on a net basis (excluded from revenues) in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The details of deferred revenue and associated cost of goods sold and gross profit are as follows (in thousands):

As of December 31,

Deferred revenue

Deferred cost of goods sold

Deferred gross profit

The Company offers rebates and market development funds to certain of its distributors, dealers/resellers, and end-users based upon the volume of product purchased by them.

The Company records rebates as a reduction of revenue in accordance with GAAP.

The Company provides, at its discretion, advance replacement units to end-users on defective units of certain products under warranty.

Since the purpose of these units is not revenue generating, the Company tracks the units due from the end-user, until the defective unit has been returned.

Any amount due from the customer upon failure to return the products is accounted as receivable only after establishing customer's failure to return the products.

The inventory due from the customer is accounted at cost or market value whichever is lower.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets, such as property and equipment and definite-lived intangible assets subject to amortization, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated future undiscounted net cash flows of the related asset or group of assets over their remaining lives.

If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset.

Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent of other groups of assets.

The impairment of long-lived assets requires judgments and estimates.

If circumstances change, such estimates could also change.

Assets held for sale are reported at the lower of the carrying amount or fair value, less the estimated costs to sell.

Accounting for Income Taxes

We are subject to income taxes in both the United States and in certain non-U.S.

jurisdictions.

We account for income taxes following ASC 740 , Accounting for Income Taxes, recognizing deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between book and tax basis of recorded assets and liabilities.

We estimate our current tax position together with our future tax consequences attributable to temporary differences resulting from differing treatment of items, such as deferred revenue, depreciation, and other reserves for tax and accounting purposes.

These temporary differences result in deferred tax assets and liabilities.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income, prior year carryback, or future reversals of existing taxable temporary differences.

To the extent we believe that recovery is not more likely than not, we establish a valuation allowance against these deferred tax assets.

Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets.

To the extent we establish a valuation allowance in a period, we must include and expense the allowance within the tax provision in the consolidated statement of operations.

In accordance with ASC Topic 740 , “Accounting for Income Taxes”, we analyzed our valuation allowance at December 31, 2024 and determined that based upon available evidence it is more likely than not that certain of our net deferred tax assets will not be realized and, accordingly, we have recorded a full valuation allowance against these deferred tax assets in the amount of $ 16.0 million.

Please refer to Note 13 - Income Taxes in the Notes to Consolidated Financial Statements for additional information.

Share-Based Payments

We estimate the fair value of stock options using the Black-Scholes option pricing model, which requires certain estimates, including an expected forfeiture rate and expected term of options granted.

We also make decisions regarding the method of calculating expected volatilities and the risk-free interest rate used in the option-pricing model.

The resulting calculated fair value of stock options is recognized as compensation expense over the requisite service period, which is generally the vesting period.

When there are changes to the assumptions used in the option-pricing model, including fluctuations in the market price of our common stock, there will be variations in the calculated fair value of our future stock option awards, which results in variation in the compensation cost recognized.

Inventories are valued at the lower of cost or market, with cost computed on a first-in, first-out (“FIFO”) basis.

In addition to the price of the product purchased, the cost of inventory includes the Company’s internal manufacturing costs, including warehousing, engineering, material purchasing, quality and product planning expenses and applicable overhead, not in excess of estimated realizable value.

Consideration is given to obsolescence, excessive levels, deterioration, direct selling expenses, and other factors in evaluating net realizable value.

The inventory consists of current inventory of $ 11.2 million and long-term inventory of $ 4.9 million.

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.

If we are unable to sell our long-term inventory including due to changes in business conditions, our profitability might be affected by inventory write-offs and price mark-downs.

The preparation of the consolidated financial

statements in conformity with U.S.

GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets, liabilities, and

The Company’s most significant accounting estimates include:

Classification

of and accounting for discontinued operations and the Asset Sale (ASC

205-20 and ASC 360)

of long-lived assets and inventory valuation related to retained warranty

contingencies and settlements

Going-concern

assessment (ASC 205-40)

Actual results could differ materially from these

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet

arrangements that are reasonably likely to have a current or future effect on

its financial condition, results of operations, liquidity, or capital resources.

Recent Accounting Pronouncements

For descriptions of recently issued accounting

standards, see Note 1 – Business Description, Basis of Presentation and

Significant Accounting Policies of our Notes to Consolidated Financial

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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Not Applicable

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required by this are included herein as a separate section of this Form 10-K, beginning on page F- 1 , and are incorporated in this Item 8 by reference.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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What changed 10-K

Item 7. Management’s Discussion and Analysis