CLEARONE INC 10-K

ITEM 1 A. RISK FACTORS Investors should carefully consider the risks described below. The risks described below are not the only ones we face and there are risks that we are not presently aware of or that we currently believe are immaterial that may also impair our business operations. Any of these risks could harm our business. The trading price of our common stock could decline significantly due to any of these risks, and investors may lose all or part of their investment. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this annual report on Form 10-K, including our consolidated financial statements and related notes. Risks Relating to Our Business We may not be successful in completing a strategic transaction within a reasonable timeframe, on attractive terms or at all. If we are unable to complete a strategic transaction, we may not be able to continue as a going concern. 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 stockholder 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 commercial arrangements with other companies, or other special transactions (each, a “Strategic Transaction”). Following the disposition of certain operating assets in October 2025 and the resulting transition to a reduced, transitional operating posture, our ability to enhance stockholder value and improve our liquidity position is highly dependent on the successful evaluation and execution of one or more Strategic Transactions. We may be unable to complete a Strategic Transaction within a reasonable timeframe, on attractive terms, or at all. Market conditions, including the historical volatility of our common stock, may limit our ability to raise capital on favorable terms, or at all, and any public or private offering of debt or equity securities may be significantly dilutive to existing stockholders. There is no set timetable for the overall process, as 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. If we are unable to complete a Strategic Transaction or otherwise obtain additional capital, our ability to continue operations and satisfy our obligations could be materially adversely affected. A Strategic Transaction, if completed, may substantially change the nature of our business, capital structure, and stockholder rights. We will require additional financing to fund our operations and obligations, which may not be available to us on acceptable terms or at all, and our auditor has expressed substantial doubt about our ability to continue as a going concern. As of December 31, 2025 , we had approximately $0.74 million of cash and cash equivalents and restricted cash. Following the October 2025 disposition of certain operating assets and the resulting reduction in revenue-generating activities, our continuing activities primarily consist, among other things, of maintaining public company compliance and fulfilling ongoing obligations, including warranty servicing and technical support related to products sold prior to the asset sale, managing remaining assets and liabilities, and evaluating and pursuing strategic alternatives. These activities are not expected to generate revenue at levels sufficient to fund ongoing operating costs. As a result, we will require additional financing and/or the completion of one or more Strategic Transactions to fund ongoing operating costs, professional fees, compliance costs, and other obligations as they become due. The financial statements included with this annual report on Form 10-K have been prepared on a going concern basis. We have incurred significant losses and experienced negative cash flows, and substantial doubt exists about our ability to continue as a going concern. We may not be able to obtain the necessary financing, complete a Strategic Transaction, or otherwise improve our liquidity position on acceptable terms or at all. The outcome of these matters cannot be predicted with any certainty at this time. 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. 3 Table of Contents Following the disposition of certain operating assets, we have limited continuing activities that are not expected to generate revenue at levels sufficient to fund ongoing operating costs. Our continuing activities are not expected to generate material revenue at levels sufficient to fund ongoing operating costs. As a result, our ability to sustain operations depends on available cash resources, access to additional capital, and/or the successful completion of one or more Strategic Transactions. If we are unable to obtain additional capital or complete a Strategic Transaction on acceptable terms or at all, we may be required to significantly curtail operations or pursue an orderly wind-down of the Company, which could result in reduced recoveries for stockholders. We are at risk for being delisted from the Nasdaq Capital Market for non-compliance with Nasdaq's continued listing standards. Although our common stock is currently listed on the Nasdaq Capital Market, as of December 31, 2025, we are not in compliance with any of the quantitative continued listing standards under Nasdaq Marketplace Rule 5550, and we anticipate receiving a notice of non-compliance from Nasdaq. If we are unable to regain compliance with Nasdaq's continued listing standards within any applicable cure period, our common stock could be subject to delisting from the Nasdaq Capital Market. Delisting of our common stock from Nasdaq could significantly reduce the liquidity and market price of our common stock and could make it more difficult for us to access the capital markets on acceptable terms, if at all. Even after we receive a notice of non-compliance, we may not be able to regain compliance within the timeframe provided by Nasdaq. Alternative markets, such as the over-the-counter markets, generally have less liquidity and visibility than Nasdaq, and trading on such markets could adversely affect the ability of stockholders to sell their shares at a desired price. We remain responsible for warranty and other obligations associated with products sold prior to the October 2025 asset disposition. Although we completed the disposition of certain operating assets in October 2025, we continue to fulfill warranty servicing and technical support obligations related to products sold prior to the transaction. The ultimate cost of satisfying these obligations is subject to uncertainty, and actual costs may exceed current estimates or previously recorded reserves. Unexpected increases in warranty claims, service costs, parts costs, or related liabilities could materially adversely affect our financial condition and liquidity. In addition, we may remain subject to claims, disputes, or other liabilities arising from our legacy operations. The resolution of such matters may require significant cash expenditures or result in additional liabilities. 4 Table of Contents Our reduced workforce may impair our ability to maintain effective internal controls and public company compliance. Following the October 2025 asset disposition, we operate with a significantly reduced workforce. Maintaining effective internal control over financial reporting and complying with public company reporting obligations requires significant management attention and resources. If we are unable to maintain effective controls or comply with applicable reporting requirements, we could be subject to regulatory scrutiny. Cybersecurity incidents or other information technology disruptions could adversely affect our operations and expose us to liability. Although our operations have been significantly reduced following the October 2025 asset disposition, we continue to maintain information systems that support our public company reporting, financial management, warranty servicing activities, and administrative functions. We also retain certain sensitive information, including employee data and historical business information. Despite security measures, our information systems may be vulnerable to cybersecurity incidents, including unauthorized access, ransomware attacks, phishing attempts, or other disruptions caused by third parties or internal actors. Because we operate with a limited workforce, our ability to detect, respond to, and remediate cybersecurity incidents may be constrained. Any significant breach could result in regulatory scrutiny, legal claims, reputational harm, increased compliance costs, or operational disruption. Global economic conditions and capital market volatility may adversely affect our ability to obtain financing or complete a strategic transaction. Global economic conditions, including inflation, rising interest rates, geopolitical conflicts, financial market volatility and tightening credit markets, may adversely affect our ability to raise capital or complete a Strategic Transaction. Volatility in equity markets may negatively impact the trading price of our common stock and limit our ability to issue equity or equity-linked securities on favorable terms, or at all. Adverse economic conditions may also reduce investor appetite for special situation or transitional companies, which could impair our ability to attract potential transaction partners or financing sources. If we are unable to access capital markets or complete a Strategic Transaction due to adverse economic conditions, our financial condition and ability to continue operations could be materially adversely affected. Geopolitical events and international conflicts may increase financial market volatility and adversely affect our liquidity and strategic alternatives. Ongoing geopolitical conflicts, including the war in Ukraine and other international tensions, have resulted in increased volatility in global financial markets. Sanctions, trade restrictions, supply chain disruptions and broader economic instability may continue to affect capital markets and investor confidence. Although we no longer conduct significant operating activities, prolonged instability in global markets could negatively impact our ability to raise capital, regain compliance with listing requirements, or complete a Strategic Transaction. Our limited international administrative activities may be subject to risks associated with operating in foreign jurisdictions. We maintain limited personnel and administrative activities in certain foreign jurisdictions, including India. Although our continuing activities are significantly reduced, we remain subject to local labor laws, tax regulations, regulatory requirements, and legal systems in these jurisdictions. Changes in political, economic, regulatory, or security conditions in these countries could increase compliance costs, result in disputes, or otherwise adversely affect our ability to manage remaining obligations and corporate matters efficiently. Additionally, differences in legal systems and enforcement mechanisms may increase the difficulty or cost of resolving disputes or collecting assets in foreign jurisdictions. 5 Table of Contents We are highly dependent on a small number of executive officers and personnel. Following the October 2025 disposition of certain operating assets, we operate with a significantly reduced workforce and rely on a limited number of executive officers and key personnel to manage our public company compliance obligations, oversee warranty servicing activities, manage remaining assets and liabilities, and evaluate potential Strategic Transactions. The loss of the services of our chief executive officer, chief financial officer, or other key personnel could materially impair our ability to meet reporting obligations, maintain effective internal controls, manage liquidity, or complete a Strategic Transaction. We do not maintain key person life insurance on our executive officers. Because of our limited personnel structure, the unexpected departure or unavailability of key personnel could have a disproportionately adverse impact on our financial condition and ability to continue operations. Risks Relating to Share Ownership Our largest stockholder has significant influence over corporate matters. Subsequent to year end, on March 11, 2026, we closed a private placement with the Company’s largest stockholder for aggregate gross proceeds of $1.75 million through the issuance of 437,500 shares of common stock and a warrant to purchase up to an additional 437,500 shares. The agreement also grants the stockholder consent rights over certain new debt and material transactions. The agreement also imposes customary restrictions, including limitations on incurring new debt above certain thresholds and entering into material transactions without the purchaser’s consent. If we are unable to satisfy the reincorporation condition or if the purchaser exercises its rights under the restrictions, our ability to pursue strategic alternatives, raise additional capital, or manage liquidity could be materially constrained. In addition, because the financing was provided by our largest stockholder, matters relating to the shares, warrant, or any future modifications could involve potential conflicts of interest and may influence or control the terms and structure of any strategic transaction. As of March 16, 2026, our largest stockholder beneficially owned approximately 61.3% of our outstanding common stock. As a result, this stockholder has the ability to control the outcome of matters submitted to stockholders for approval, including the election of directors, approval of mergers or business combinations, and amendments to our organizational documents. This concentration of ownership and the additional contractual rights may discourage, delay, or prevent a change in control transaction that other stockholders may consider favorable and may cause decisions to be made that differ from the interests of other stockholders. 6 Table of Contents Outstanding warrants and redeemable preferred stock may adversely affect the market price of our common stock and complicate strategic transactions. We have outstanding warrants that are exercisable into shares of common stock. The exercise of these warrants would result in dilution to existing common stockholders. In addition, we have outstanding shares of Class A Redeemable Preferred Stock. The closing of the Asset Sale on October 24, 2025 triggered the mandatory redemption of the Class A Redeemable Preferred Stock. As of December 31, 2025, the redemption had not yet been completed. We currently estimate the final redemption amount to be approximately $50,000 after permitted expenses and net asset recoveries. Redemption will require the use of cash that might otherwise be available for operations or strategic alternatives. The existence of these securities may affect the market price of our common stock and could complicate the negotiation or completion of a strategic transaction. Any strategic transaction may also require the issuance of additional equity securities, which could result in further dilution to existing common stockholders. The market price of our common stock may be volatile. The market price of our common stock has experienced significant fluctuations and may continue to fluctuate due to a variety of factors, many of which are beyond our control. These factors may include: developments relating to our Strategic Transaction process; our ability to obtain additional financing; our liquidity position and financial condition; our compliance with Nasdaq listing requirements; announcements regarding executive leadership or key personnel; general market and economic conditions; and changes in investor perception of companies with limited operations or transitional business models. In addition, stock markets in general have experienced significant price and volume volatility that may be unrelated to the operating performance of particular companies. These fluctuations may adversely affect the market price of our common stock. The issuance of additional equity or the exercise or conversion of outstanding securities may result in substantial dilution. We have outstanding securities, including options and warrants, that may be convertible into or exercisable for shares of our common stock. In addition, we may issue additional equity securities in connection with financing transactions, Strategic Transactions, or other corporate purposes. The issuance of additional shares of common stock or securities convertible into common stock could result in substantial dilution to existing stockholders and may adversely affect the market price of our common stock. Future issuances of equity securities could dilute existing stockholders and adversely affect the market price of our common stock. We may issue additional shares of common stock or securities convertible into or exercisable for common stock in connection with financing transactions, Strategic Transactions, or other corporate purposes. The issuance of additional shares may dilute the ownership interests of existing stockholders and could adversely affect the market price of our common stock. Sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could also negatively impact the trading price of our common stock. 7 Table of Contents The absence of equity research coverage or unfavorable analyst commentary could adversely affect the market price of our common stock. The trading market for our common stock may be influenced by research reports and recommendations published by equity research analysts. We do not control the content of analyst reports. If one or more analysts downgrade our common stock, issue unfavorable commentary, or cease coverage, the market price and liquidity of our common stock could decline. A Strategic Transaction may result in significant dilution to existing stockholders or a change in control of the Company. The completion of a Strategic Transaction may require the issuance of a substantial number of shares of our common stock or securities convertible into or exercisable for common stock or may otherwise result in a change in the Company’s capital structure. Any such issuance could result in significant dilution to existing stockholders, including a reduction in voting power, economic interest, and ownership percentage. In addition, a Strategic Transaction could result in a change in control of the Company, including the issuance of securities that represent a majority of our outstanding voting power or the appointment of new directors or management. A change in control could materially alter our business strategy, governance structure, and risk profile. There can be no assurance that any Strategic Transaction would enhance stockholder value or that its terms would be favorable to all stockholders. Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain stockholder litigation, which may limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of the Company to the Company or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation, or our bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine. These exclusive forum provisions do not apply to claims arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or any other claim for which federal courts have exclusive jurisdiction. The exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable and may increase costs associated with bringing such a claim. If a court were to determine that the exclusive forum provision is inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.