What changed in this filing

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Item 1. Financial Statements

2026-05-15 compared with 2025-11-14 · 228 added, 293 removed, 270 unchanged (66% of the section changed)

3 unchanged sentences

(Dollars in thousands, except par value)

September 30, 2025

March 31, 2026

December 31, 2025

3 unchanged sentences

Inventories, net

Assets held for sale

Prepaid assets

Current assets related to discontinued operations

13 unchanged sentences

Total liabilities

Temporary equity

Class A redeemable preferred stock, $ 0.001 par value, 2,069,065 shares issued and outstanding, redeemable 100 % upon completion of asset sale (Note 3 )

Shareholders' equity:

5 unchanged sentences

Total shareholders' equity

Total liabilities, temporary equity and shareholders' equity

Total liabilities and shareholders' equity

See accompanying notes

3 unchanged sentences

(Dollars in thousands, except per share amounts)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Cost of goods sold

11 unchanged sentences

Loss from continuing operations

Loss from discontinued operations, net of tax

Income (loss) from discontinued operations, net of tax

Basic weighted average shares outstanding

Diluted weighted average shares outstanding

Basic loss per share

Basic income (loss) per share

From continuing operations

From discontinued operations

Diluted loss per share

Diluted income (loss) per share

From continuing operations

1 unchanged sentence

Comprehensive loss:

Unrealized gain on available-for-sale securities, net of tax

Change in foreign currency translation adjustment

4 unchanged sentences

(Dollars in thousands, except per share amounts)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net loss from discontinued operations

Amortization of right-of-use assets

Share-based compensation expense

Non-cash interest expense

Gain on sale of marketable securities

Changes in operating assets and liabilities:

Prepaid expenses and other assets

Accounts payable

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Net cash used in operating activities, continuing operations

Cash used in operating activities, discontinued operations

Cash provided by (used in) operating activities, discontinued operations

Cash flows from investing activities:

Purchase of property and equipment

Purchase of intangibles

Proceeds from sale of capitalized assets

Proceeds from maturities and sales of marketable securities

Purchases of marketable securities

Net cash provided by (used in) investing activities, continuing operations

Cash provided by (used in) investing activities, discontinued operations

Net cash provided by investing activities, continuing operations

Cash used in investing activities, discontinued operations

Cash flows from financing activities:

Proceeds from sale of stock

Proceeds from issuance of convertible note

Purchases of outstanding warrants

Net proceeds from equity-based compensation programs

Dividend Payment

Net cash provided by (used in) financing activities, continuing operations

Cash provided by (used in) financing activities, discontinued operations

Cash used in discontinued operations

Net cash provided by financing activities, continuing operations

Cash provided by financing activities, discontinued operations

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

5 unchanged sentences

The following is a summary of supplemental cash flow information:

Nine months ended September 30,

Three months ended March 31,

Cash paid for income taxes

Interest paid as non-cash dividend

Conversion of debt to Series B Preferred stock

Issuance of Class A redeemable preferred stock – temporary equity

See accompanying notes

5 unchanged sentences

ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), was a global market competitor providing conferencing, collaboration, and AV streaming solutions supporting voice and visual communications.

The performance and simplicity of its advanced, comprehensive solutions offered functionality, reliability, and scalability to enterprise and professional customers.

Following the October 24, 2025 disposition of certain intellectual property, product inventory, and non-exclusive rights to customer data to Biamp Systems, LLC, the Company no longer manufactures or sells products and maintains only limited continuing operations consisting of warranty and technical support for legacy products, collecting accounts receivable and recovering prepaid assets, public-company compliance, and evaluation of strategic alternatives.

See discussion of going concern and discontinued operations below.

Going Concern:

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date these financial statements are issued.

The Company has incurred net losses and used cash in operating activities for the periods presented, and as of September 30, 2025 had limited cash resources and ongoing obligations associated with public-company compliance, legacy product warranty support, and restructuring activities (see Note 2 — Discontinued Operations and Assets Held for Sale).

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, the Company has classified a significant portion of its 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 (the “Asset Disposition”) to Biamp Systems, LLC (“Biamp”) 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 net proceeds of the Asset Disposition to Biamp are not expected to be available to fund ongoing operations other than for permitted transaction costs.

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 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 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.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

The Company has incurred significant losses, has negative cash flows from operations, and its continuing operations are limited and not expected to generate revenue at levels sufficient to fund ongoing costs.

These conditions, together with the mandatory redemption obligation for the Class A Redeemable Preferred Stock (triggered by the closing of the Asset Sale on October 24, 2025), raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial statements.

Management is actively evaluating strategic alternatives intended to enhance stockholder value and improve liquidity.

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

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

Basis of Presentation:

4 unchanged sentences

(Dollars in thousands, except per share amounts)

In connection with the Strategic Plan to sell certain significant assets of the Company described above, management determined that the disposal group of assets met the held-for-sale criteria in ASC 360-10-45-9 and, accordingly, classified the group as assets held for sale and measured it at the lower of carrying amount or fair value less costs to sell (“FVLCTS,” also referred to as fair value less cost of disposal, “FVLCOD”).

Because the planned disposal represents a strategic shift that will have a major effect on the Company’s operations and financial results, the related operating results are presented as discontinued operations in accordance with ASC 205-20.

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”).

The disposal represented a strategic shift that has had a major effect on the Company’s operations and financial results.

Accordingly, the related operating results are presented as discontinued operations in accordance with ASC 205-20 for all periods presented.

Prior-period amounts in the unaudited condensed consolidated statements of operations and cash flows have been recast to conform to this presentation.

Amortization of long-lived assets included in the disposal group ceased upon classification as held for sale, and any loss recognized to measure the group to FVLCTS is included within loss from discontinued operations.

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

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Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations.

The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2025 and December 31, 2024 , the results of operations for the three and nine months ended September 30, 2025 and 2024 , and the cash flows for the nine months ended September 30, 2025 and 2024 .

The results of operations for the three and nine months ended September 30, 2025 and 2024 are not necessarily indicative of the results for a full-year period.

The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2026 and December 31, 2025, the results of operations for the three months ended March 31, 2026 and 2025 , and the cash flows for the three months ended March 31, 2026 and 2025 .

The results of operations for the three months ended March 31, 2026 and 2025 are not necessarily indicative of the results for a full-year period.

These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC.

On April 22, 2026 (subsequent to the balance sheet date), the Company completed its reincorporation from Delaware to Nevada by conversion pursuant to the Plan of Conversion approved by stockholders on March 12, 2026.

The Company is now a Nevada corporation, and all references to the Company’s governing law and stockholder rights in these financial statements should be read in light of Nevada law.

See Note 15 — Subsequent Events for additional information .

Reverse Stock Split:

The Company completed a 1-for-15 reverse stock

split of the Company's issued and outstanding common stock, par value $ 0.001

per share, effective at 5:00 p.m.

The Company completed a 1-for-15 reverse stock split of the Company's issued and outstanding common stock, par value $ 0.001 per share, effective at 5 :

Eastern Time on June 9, 2025.

common stock began trading on a split-adjusted basis on the Nasdaq Capital

Market on June 10, 2025, under the symbol "CLRO" and a new CUSIP number

of 18506U203.

The reverse stock split was primarily intended to increase the

per share market price of the common stock in order to regain compliance with

the minimum bid price requirement for continued listing on the Nasdaq Capital

As a result of the reverse stock split, every 15 shares of issued and

outstanding common stock were automatically combined into one share, with no

fractional shares issued (any fractional interests were rounded up to the next

whole share).

The reverse stock split did not change the par value of the

common stock or the authorized number of shares but reduced the number of

issued and outstanding shares from approximately 26.0 million to approximately

1.7 million, with proportional adjustments to outstanding stock options,

warrants, and shares reserved under equity incentive plans.

For additional details,

refer to the Company's Current Report on Form 8-K filed with the SEC on June 2,

2025, including the press release attached as Exhibit 99.1 thereto.

All share and per-share amounts in these

condensed consolidated financial statements and related notes have been

retroactively adjusted to reflect the reverse stock split for all periods

The common stock began trading on a split-adjusted basis on the Nasdaq Capital Market on June 10, 2025, under the symbol "CLRO" and a new CUSIP number of 18506 U 203 .

The reverse stock split was primarily intended to increase the per share market price of the common stock in order to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market.

As a result of the reverse stock split, every 15 shares of issued and outstanding common stock were automatically combined into one share, with no fractional shares issued (any fractional interests were rounded up to the next whole share).

The reverse stock split did not change the par value of the common stock or the authorized number of shares but reduced the number of issued and outstanding shares from approximately 26.0 million to approximately 1.7 million, with proportional adjustments to outstanding stock options, warrants, and shares reserved under equity incentive plans.

For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 2, 2025, including the press release attached as Exhibit 99.1 thereto.

All share and per-share amounts in these condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented.

Restricted Cash

The Company includes restricted cash with cash

and cash equivalents when reconciling the beginning-of-period and end-of-period

total amounts shown on the statement of cash flows, in accordance with ASU

Restricted cash as of September 30, 2025 , consists of $ 663 in remaining

proceeds from a $ 3,000 convertible note issued to First Finance Ltd.

20, 2025 (with no restricted cash balance as of March 31, 2025).

are subject to enforceable contractual restrictions per the disbursement schedule

in Schedule 8.5 of the Note Purchase Agreement, which allocates proceeds to

specific uses such as advisory fees, warrant holder payments, legal and audit

expenses, staff costs (e.g., board fees, accounting staff, operations/sales

staff bonuses), shutdown costs for foreign subsidiaries, and severance/PTO for

employee layoffs.

The funds are held in a segregated account and released only

upon meeting specified milestones, with penalties for non-compliance.

the quarter ended September 30, 2025 , $ 1,322 was disbursed for severances, deal

fees, legal fees, and compliance fees, resulting in the ending restricted cash

Full disbursement of the remaining restricted cash is expected by

December 2025 as additional milestones are achieved.

Restricted cash is

classified as a current asset on the balance sheet and included in the total

cash, cash equivalents, and restricted cash balances in the statement of cash

Changes in restricted cash are not presented as separate cash flows but

are reconciled in this note.

This classification and presentation provide

transparency regarding the Company's liquidity, as the restricted funds are not

available for general corporate purposes.

The Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows, in accordance with ASU 2016 - 18 .

As of March 31, 2026, restricted cash totaled $ 297 and consisted entirely of remaining proceeds from the $ 3,000 convertible note issued to First Finance Ltd.

on June 20, 2025 (compared to $ 0 as of March 31, 2025).

These funds are subject to enforceable contractual restrictions under Schedule 8.5 of the related Note Purchase Agreement, which requires disbursement only upon achievement of specified milestones for uses such as advisory fees, warrant holder payments, legal and audit expenses, staff costs, foreign subsidiary shutdown costs, and severance/PTO payments.

The funds are held in a segregated account and are released only upon meeting these milestones.

During the three months ended March 31, 2026, $ 222 was disbursed in accordance with the agreement, resulting in the ending restricted cash balance of $ 297 .

The Company expects the remaining restricted cash to be fully disbursed by December 2026 as milestones are achieved.

In contrast, the proceeds received from the March 2, 2026 Securities Purchase Agreement with First Finance Ltd.

(totaling $ 1,750 ) are not subject to the same contractual disbursement restrictions.

Following stockholder approval of the Company’s reincorporation on March 12, 2026, these proceeds became available for general corporate purposes and are therefore classified within Cash and cash equivalents on the balance sheet.

Restricted cash is presented as a current asset on the balance sheet and is included in the total cash, cash equivalents, and restricted cash amounts presented in the statement of cash flows.

Changes in restricted cash are not reported as separate cash flow activities but are disclosed in this note.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 unchanged sentences

The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2025 .

There have been no changes to these policies during the quarter ended September 30, 2025 that are of significance or potential significance to the Company, other than presentation of discontinued operations as described above and in Note 2.

There have been no changes to these policies during the quarter ended March 31, 2026 that are of significance or potential significance to the Company, other than presentation of discontinued operations as described above and in Note 2 .

Recent accounting pronouncements:

ASU 2023 - 07 , Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023 - 07 , Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The standard is effective for full year 2024 reporting, and for interim reporting beginning in 2025 .

The adoption of this ASU did not change the way the Company evaluates its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures.

ASU 2023 - 09 , Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023 - 09 “Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures” on the topic of income taxes.

The standard requires additional disclosure for income taxes.

These requirements include:

(i) requiring a public entity to disclose specific categories in the rate reconciliation;

(ii) disclosure of additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 % of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate);

(iii) annual disclosure of the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes;

(iv) annual disclosure of the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 % of total income taxes paid (net of refunds received);

(v) annual disclosure of income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign;

and (vi) annual disclosure of income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.

For public entities, the guidance is effective for annual periods beginning after December 15, 2024.

The Company will adopt this guidance in fiscal 2025 and is in the process of evaluating the new requirements.

As a result, the Company has not yet determined the impact this new ASU will have on its disclosures.

ASU 2024 - 03 , Income Statement—Reporting Comprehensive Income (Topic 220 ):

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Discontinued Operations and Assets Held for Sale

As discussed above in Note 1 - Business Description, Basis of Presentation and Significant Accounting Policies – Going Concern, in September 2025 the Board of Directors approved a Strategic Plan to sell various operating assets related to its product business, including inventory and certain intellectual property (developed technology, trademarks and related intangibles).

Management determined the criteria in ASC 360-10-45- 9 were met as of September 30, 2025 (probable sale within one year, assets available for immediate sale in present condition, active program to locate buyer and complete plan).

Accordingly, the disposal group was classified as held for sale and measured at FVLCTS.

At September 30, 2025 , the disposal group of asset ’s carrying amount was $ 13,641 , consisting primarily of inventory of $ 12,856 and intangible assets of $ 785 .

Based on an executed asset purchase agreement subsequently closed on October 24, 2025, for cash consideration of $ 3,000 and estimated transaction costs of $ 100 , management recorded an impairment of $ 10,741 to reduce the disposal group of assets to FVLCTS at September 30, 2025 .

The impairment is presented in “Loss from discontinued operations” in the unaudited condensed consolidated statements of operations.

Because the disposal represents a strategic shift that will have a significant effect on the Company’s operations and financial results, the related operating results are presented as discontinued operations for all periods presented in the accompanying unaudited condensed consolidated financial statements (ASC 205 - 20 ).

Carrying amounts classified as held for sale (unaudited):

Assets held for sale — $ 2,900 at September 30, 2025 (comprised primarily of inventory $ 12,856 and intangibles $ 785 , less impairment to FVLCTS of $ 10,741 and transaction costs of $ 100 ).

Liabilities held for sale — $ 0 at September 30, 2025 (no obligations transferred).

On October 24, 2025, the Company completed the sale of substantially all of its operating assets and intellectual property related to its product business to Biamp Systems, LLC (the “Asset Sale”).

The transaction represented a strategic shift that had (and continues to have) a major effect on the Company’s operations and financial results.

Accordingly, the results of the disposed component are presented as discontinued operations in the accompanying condensed consolidated statements of operations and cash flows for all periods presented, in accordance with ASC 205 - 20 .

The disposal group was sold prior to December 31, 2025.

As a result, the carrying value of the remaining disposal group was $ 0 at both December 31, 2025 and March 31, 2026 .

The Company continues to fulfill limited warranty and technical support obligations for legacy products sold prior to the Asset Sale.

These activities are reflected in continuing operations, along with residual collections.

Liability settlements are reflected within discontinued operations.

For a full description of the Asset Sale, including the Strategic Plan approved by the Board in September 2025, the mandatory redemption of the Class A Redeemable Preferred Stock (classified as a current liability — see Note 3 ), and the classification of assets and liabilities as held for sale, see Note 2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Major line items of results of discontinued operations (unaudited):

Revenue — $ 1,262 and $ 5,491 for the three and nine months ended September 30, 2025 , respectively;

$ 2,504 and $ 8,430 for the comparable 2024 periods.

Three months ended March 31,

Cost of goods sold

Gross profit (loss)

Operating expenses

Other expenses

Loss from discontinued operations before income taxes

Benefit for income taxes

Income (Loss) from discontinued operations, net of tax

The following table disaggregates the Company’s revenue into primary product groups:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Audio conferencing

1 unchanged sentence

The following table disaggregates the Company’s revenue into major regions:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

North and South America

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(Unaudited - Dollars in thousands, except per share amounts)

Cost of goods sold — $ 2,148 and $ 6,435 for the three and nine months ended September 30, 2025 , respectively;

$ 1,865 and $ 6,607 for the comparable 2024 periods.

Gross profit / (loss) — ($ 886 ) and ($ 944 ) for the three and nine months ended September 30, 2025 , respectively;

$ 639 and $ 1,823 for the comparable 2024 periods.

Operating expenses directly attributable — $ 1,238 and $ 6,179 for the three and nine months ended September 30, 2025 , respectively;

$ 1,985 and $ 6,517 for the comparable 2024 periods.

Impairment on held for sale — $ 10,741 (Q 3 2025 only).

(Loss) income before income taxes — ($ 12,865 ) and ($ 17,864 ) for the three and nine months ended September 30, 2025 , respectively;

($ 1,346 ) and ($ 4,694 ) for the comparable 2024 periods.

(Loss) income from discontinued operations, net of tax — ($ 12,865 ) and ($ 17,864 ) for the three and nine months ended September 30, 2025 , respectively;

($ 1,346 ) and ($ 4,694 ) for the comparable 2024 periods.

Assets grouped into discontinued operations (unaudited):

Accounts receivable, net - $ 865 and $ 2,218 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Inventories short and long term and intangible assets - $ 0 and $ 14,391 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Prepaids and other current assets - $ 3,678 and $ 3,894 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Property, plant and equipment, net - $ 259 and $ 500 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Other long-term assets - $ 69 and $ 82 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

March 31, 2026

December 31, 2025

Accounts receivable, net

Inventories, net

Prepaids and other current assets

Property, plant and equipment, net

Other long-term assets

Liabilities grouped into discontinued operations (unaudited):

Accounts payable - $ 2,778 and $ 1,728 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Accrued liabilities, current - $ 444 and $ 1,107 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Deferred revenue - $ 12 and $ 17 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

Other long-term liabilities - $ 1,155 and $ 1,154 for the periods ended September 30, 2025 and December 31, 2024 , respectively.

March 31, 2026

December 31, 2025

Accounts payable

Accrued liabilities, current

Other long-term liabilities

Total liabilities

Management concluded the disposal constitutes a component and a strategic shift since it eliminates significant revenue-generating activities.

The Company will continue to provide product support and warranty services as it pursues a Strategic Transaction in the fourth quarter of 2025 .

The Company will continue to provide product support and warranty services as it pursues a Strategic Transaction in fiscal 2026 .

Capital Structure:

Class A Redeemable Preferred Stock (Temporary Equity)

On July 18, 2025, following Board authorization on June 20, 2025, filing of the Certificate of Designation on June 24, 2025, and Nasdaq Corporate Data Operations approval on July 11, 2025 (the record date), the Company issued 2,069,065 shares of its Class A Redeemable Preferred Stock as a one -time special stock dividend ( one Class A share for each common share and common stock equivalent outstanding as of the record date);

2,069,066 shares are authorized and 2,069,065 were issued and outstanding as of September 30, 2025.

Under the Certificate of Designation, the Class A shares are mandatorily redeemable upon an Asset Sale for 100 % of the net proceeds as defined therein;

accordingly, the Class A is presented in temporary equity (mezzanine) in accordance with ASC 480 -10-S 99 .

As of September 30, 2025 , the Company recorded the fair value of the Series A preferred stock as its expected redemption amount (based on anticipated proceeds of a qualifying asset sale after payment of other liabilities).

The Class A is a participating security only in the liquidation of sale proceeds and does not receive dividends other than redemption;

therefore it is excluded from diluted EPS as anti-dilutive for the periods presented.

As of September 30, 2025 , the Asset Sale was probable and estimable at $ 3.0 million, and the Company recorded $ 756 as Preferred stock Class A redeemable preferred stock in temporary equity and a reduction to retained earnings.

The ultimate redemption amount will equal the actual net proceeds received .

See Note 2 — Discontinued Operations and Assets Held for Sale and Note 16 for additional information regarding the asset sale and redemption mechanics .

Temporary equity — Class A Redeemable Preferred

(dollars in thousands, shares in whole amounts)

Beginning balance, July 1, 2025

Issuance via special stock dividend, par value (7/18/2025)

Record temporary equity at fair value

Ending balance, September 30, 2025

Class A Redeemable Preferred Stock

On July 18, 2025, the Company issued

2,069,065 shares of Class A Redeemable Preferred Stock as a one-time special

stock dividend to holders of common stock and common stock equivalents of

record as of July 11, 2025 (one Class A share for each common share and common

stock equivalent then outstanding).

The Class A shares have a par value of

$ 0.001 per share and rank senior to common stock.

2,069,066 shares are authorized and were

issued and outstanding as of March 31, 2026 .

Pursuant to the Certificate of Designation, the Class A shares are mandatorily redeemable at par value upon the occurrence of an Asset Sale (as defined).

The Asset Sale to Biamp Systems, LLC closed on October 24, 2025.

As a result, the redemption obligation became unconditional and the Class A shares are classified as a current liability at par value ($ 2 ) as of March 31, 2026 in accordance with ASC 480-10-S99.

The redemption occurred on April 21, 2026.

The ultimate redemption amount equaled the actual net proceeds received from the Asset Sale after permitted expenses.

See Note 15 — Subsequent Events for additional information.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Conversion of Convertible Note

On July 21, 2025, the Company’s $ 3.0 million convertible note issued on June 20, 2025 to First Finance Ltd.

(together with $ 26 of accrued interest) automatically converted into 3,026 shares of Class B Convertible Preferred Stock pursuant to its original terms.

The conversion ratio of 166.44474 common shares per Class B share was determined at issuance based on the Nasdaq closing price and 5 -day average closing prices on June 19, 2025 (the trading day immediately preceding execution of the note and purchase agreement) and is fixed (subject only to customary anti-dilution).

Because the conversion option is indexed to, and will be settled in, the Company’s own equity, it qualifies for the ASC 815 - 40 “own-equity” scope exception;

accordingly, no derivative liability was recorded and the full conversion amount was recognized in equity, with no gain or loss recognized on conversion.

The Company has 5,100 Class B shares authorized and 3,026 issued and outstanding as of September 30, 2025 .

This conversion represents a non-cash financing activity and is disclosed in the supplemental cash flow information.

Class B Convertible Preferred Stock is convertible into common stock in accordance with its Certificate of Designation filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the SEC on June 25, 2025

On June 20, 2025, the Company issued a $ 3,000 convertible note to First Finance Ltd.

The note accrued interest at 10 % per annum and was mandatorily convertible into shares of newly designated Class B Convertible Preferred Stock upon the issuance of Class A Redeemable Preferred Stock (which occurred on July 18, 2025).

On July 21, 2025, the convertible note (together with accrued interest) automatically converted into 3,026 shares of Class B Convertible Preferred Stock.

The conversion was recognized in equity with no gain or loss.

The conversion ratio was fixed at issuance and qualified for the ASC 815-40 own-equity scope exception.

As of March 31, 2026 , there is no outstanding convertible note liability.

All Class B Convertible Preferred Stock has been converted or redeemed (see Note 11 – Shareholders’ Equity).

This conversion was a non-cash financing activity and is disclosed in the supplemental cash flow information (in the nine months ended September 30, 2025).

Warrants Repurchased (and Related Party)

During September 2025, the Company repurchased and cancelled outstanding warrants from (i) Intracoastal Capital, LLC ( 6,039 underlying shares) on September 2, 2025 for an aggregate purchase price of $ 4 , (ii) Lind Global Fund II, LP ( 24,155 underlying shares) on September 10, 2025 for $ 15 , (iii) Edward Dallin Bagley (related party;

18,940 underlying shares) on September 17, 2025 for $ 12 , and (iv) Edward Bryan Bagley ( 3,788 underlying shares) on September 16, 2025 for $ 2 .

The repurchased warrants were cancelled upon settlement and accounted for as equity transactions with no effect on the statement of operations.

As of September 30, 2025 , warrants to purchase an aggregate of 218,887 shares of common stock remained outstanding.

The Company did not issue new warrants during the quarter.

The repurchase price and other terms of the warrants repurchase from Edward Dallin Bagley were approved by the Board of Directors in accordance with the Company’s policy regarding related person transactions.

September 2025 Repurchases

During September 2025, the Company repurchased and cancelled all then-outstanding warrants as follows:

Intracoastal Capital, LLC – 6,039 underlying shares (September 2, 2025) for $ 4

Lind Global Fund II, LP – 24,155 underlying shares (September 10, 2025) for $ 16

Edward Dallin Bagley (related party) – 18,940 underlying shares (September 17, 2025) for $ 12

Edward Bryan Bagley – 3,788 underlying shares (September 16, 2025) for $ 2

All repurchased warrants were cancelled upon settlement and accounted for as equity transactions with no effect on the statement of operations.

March 2026 Repurchase

On March 9, 2026, the Company entered into a Warrant Repurchase Agreement with CVI Investments, Inc.

pursuant to which the Company repurchased certain outstanding common stock purchase warrants originally issued on September 12, 2021.

The repurchased warrants were exercisable for an aggregate of 24,155 shares of common stock.

The Company paid an aggregate cash purchase price of $ 22 ($ 0.911 per underlying share).

Upon settlement, the warrants were cancelled and are of no further force or effect.

As of March 31, 2026 , 624,702 warrants are outstanding ( 187,202 from prior financings that were not repurchased and 437,500 new warrants issued on March 2, 2026 to First Finance Ltd., see Note 11).

The Company did not issue any other new warrants during the quarter ended March 31, 2026 .

The repurchase from Edward Dallin Bagley was approved by the Board of Directors in accordance with the Company’s related person transaction policy.

No amounts were outstanding with Mr.

Bagley related to these warrants as of September 30, 2025 .

Bagley related to these warrants as of March 31, 2026 .

Revenue Information

The Company recognized no revenue from continuing operations for the three and nine months ended September 30, 2025 and the comparable 2024 periods.

Revenue formerly reported by product group and region is presented within discontinued operations (see Note 2).

Loss per share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net loss per share includes the effect of potentially dilutive common shares (e.g., convertible securities, warrants, options) using the if-converted and treasury stock methods, as applicable.

Because the Company reported a net loss for all periods presented, all potential common shares were anti-dilutive and therefore excluded from the computation of diluted loss per share.

Accordingly, diluted loss per share equals basic loss per share for all periods.

The Company recognized no revenue from continuing operations for the three months ended March 31, 2026 (and the comparable 2025 period).

All revenue formerly reported by product group and geographic region is now presented within discontinued operations (see Note 2).

Income (Loss) per share

Basic net income (loss) per share is computed by dividing net income ( loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net income ( loss) per share includes the effect of potentially dilutive common shares (e.g., convertible securities, warrants, options) using the if-converted and treasury stock methods, as applicable.

All share and per-share amounts have been retroactively adjusted to reflect the Company’s reverse stock split (see Note 1 ).

1 unchanged sentence

(Unaudited - Dollars in thousands, except per share amounts)

As discussed in Note 2 — Discontinued Operations and Assets Held for Sale, the Company presents basic and diluted loss per share separately for continuing operations, discontinued operations, and total, for each period presented.

As discussed in Note 2 — Discontinued Operations and Assets Held for Sale, the Company presents basic and diluted income ( loss) per share separately for continuing operations, discontinued operations, and total, for each period presented.

The Company issued Class A Redeemable Preferred Stock via a special stock dividend in July 2025 (see Note 3 ).

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therefore, no allocation of earnings (loss) was made to Class A in computing loss per share.

Anti-dilutive securities (excluded from diluted loss per share).

Class B Convertible Preferred Stock (if-converted) — 503,661 common share equivalents.

Common stock warrants — 281,887 common share equivalents.

Stock options — 36,152 common share equivalents

The following table sets forth the computation of basic and diluted loss per common share:

Three months ended September 30,

Nine months ended September 30,

The following table sets forth the computation of basic and diluted income ( loss) per common share:

Three months ended March 31,

Loss from continuing operations

Loss from discontinued operations

Income (loss) from discontinued operations

Basic weighted average shares outstanding

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Diluted weighted average shares outstanding

Basic loss per share

Basic income (loss) per share

From continuing operations

From discontinued operations

Diluted loss per share

Diluted income (loss) per share

From continuing operations

4 unchanged sentences

(Unaudited - Dollars in thousands, except per share amounts)

Intangible Assets

As of September 30, 2025 , inventories and certain intangible assets were classified as assets held for sale and are therefore excluded from continuing operations disclosures.

As of September 30, 2025, significant inventories were classified as assets held for sale and are therefore excluded from continuing operations disclosures.

In October 2025, significant inventories were sold, and no inventory remains in assets related to discontinued operations as of December 31, 2025 and March 31, 2026.

Some inventories were retained to service warranty liabilities.

Inventories, net of reserves, as of September 30, 2025 and December 31, 2024 consisted of the following:

September 30, 2025

Inventories, net of reserves, as of March 31, 2026 and December 31, 2025 consisted of the following:

March 31, 2026

December 31, 2025

Finished goods

Net loss incurred on valuation of inventory at lower of cost or net realizable value and write-off of obsolete inventory for three and nine months ended September 30, 2025 and 2024 was as follows:

Three months ended September 30,

Nine months ended September 30,

Net loss (recovery) incurred on valuation of inventory at lower of cost or net realizable value and write-off of obsolete inventory

Rent expense is recognized on a straight-line basis over the period of the lease taking into account future rent escalation and holiday periods.

Rent expense for three and nine months ended September 30, 2025 and 2024 was as follows:

Three months ended September 30,

Nine months ended September 30,

The Company leases a 1,350 -square-foot facility in Gainesville, Florida under an operating lease that expires in F ebruary 2028 .

The facility has been used primarily for research and development.

The Company is seeking a third party to assume the remaining lease term.

The Company leases a 9,402 square-foot facility in Salt Lake City, Utah under the terms of an operating lease expiring in February 2028.

The facility supported the Company's principal administrative, sales, marketing, customer support, and research and product development activities.

The Company is seeking a third party to assume the remaining lease term.

Rent expense for three months ended March 31, 2026 and 2025 was as follows:

Three months ended March 31,

Continuing operations

Discontinued operations

Total rent expense

As of March 31, 2026, the Company had one remaining operating lease — the Edgewater Corporate Park facility at 5225 Wiley Post Way, Salt Lake City, Utah (approximately 9,402 square feet), which supported administrative, sales, marketing, customer support, and warranty operations.

The lease was scheduled to expire in February 2028 .

Subsequent to March 31, 2026, on April 7, 2026, the Company terminated the Edgewater lease for a $ 300 termination fee (see Note 15 — Subsequent Events).

The other two leases (Gainesville, FL and the Salt Lake City warehouse at 363 West 2720 South) had already been terminated prior to March 31, 2026.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

We entered into a lease on December 1, 2024 to occupy a 2,590 square-foot warehouse in Salt Lake City Utah.

The lease is an operating lease expiring in February 2028.

This facility serves as our primary warranty and repair center.

Supplemental cash flow information related to leases was as follows:

Nine months ended September 30,

Three months ended March 31,

Cash paid for amounts included in the measurement of lease liabilities

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Supplemental balance sheet information related to leases was as follows:

September 30, 2025

March 31, 2026

December 31, 2025

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Weighted average discount rate for operating leases

The following represents maturities of operating lease liabilities as of September 30, 2025 :

The following represents maturities of operating lease liabilities as of March 31, 2026 :

Years ending December 31,

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Imputed interest

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Convertible Notes Payable

On June 25, 2025, the Company filed a Current Report on Form 8-K disclosing several material events.

On June 20, 2025, the Company entered into a Note Purchase Agreement with First Finance Ltd., pursuant to which First Finance Ltd.

purchased $ 3,000,000 aggregate principal amount of convertible notes in a private placement exempt from registration under Section 4 (a)( 2 ) of the Securities Act of 1933 , as amended.

The convertible notes accrued interest at 10 % per annum and were mandatorily convertible into shares of newly designated Class B Convertible Preferred Stock upon the issuance of Class A Redeemable Preferred Stock as a dividend to common stockholders (which occurred July 18, 2025 –

see Note 13).

The Class B Convertible Preferred Stock is further convertible into common stock at an initial conversion ratio of 166.44474 shares of common stock for each share of Class B Convertible Preferred Stock (subject to adjustment for stock splits, dividends, and similar events).

First Finance Ltd.

was granted an option to purchase up to an additional $ 2,000,000 of Class B Convertible Preferred Stock.

The proceeds from the convertible notes are restricted to a specified disbursement schedule.

On July 21, 2025, the Company’s convertible note (June 20, 2025) issued to First Finance Ltd.

(together with accrued interest) automatically converted into 3,026 shares of Class B Convertible Preferred Stock pursuant to the original terms.

For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 25, 2025, including the Certificates of Designation attached as Exhibits 3.1 and 3.2 , the Note Purchase Agreement attached as Exhibit 10.1 , and the Convertible Note attached as Exhibit 10.2 thereto.

Composition of Notes Payable

Interest Rate

Maturity Date

September 30, 2025

December 31, 2024

Convertible Note

June 30, 2025

Total Notes Payable

Schedule of Future Maturities of Notes Payable

Year ending December, 31

Remainder of 2025

Convertible Note Payable

On June 20, 2025, the Company issued a

$ 3,000 convertible note to First Finance Ltd.

The note accrued interest at 10 % per annum and was mandatorily convertible into Class B Convertible Preferred Stock upon the issuance of Class A Redeemable Preferred Stock (which occurred July 18, 2025).

On July 21, 2025, the note (together with accrued interest) automatically converted into 3,026 shares of Class B Convertible Preferred Stock.

The conversion was recognized in equity with no gain or loss recorded.

As of March 31, 2026, there is no outstanding convertible note liability.

See Note 4 – Debt and Equity for additional information

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Shareholders' Equity

Three months ended September 30,

Nine months ended September 30,

Temporary equity

Balance, beginning of period

Issue temporary equity Class A redeemable preferred stock

Balance, end of period

Three months ended March 31,

Preferred stock, common stock and additional paid-in capital

Balance, beginning of period

Conversion of debt to Class B convertible preferred stock (non-cash)

Dividends Paid

Return of dividend

Repurchase of warrants

Issuance of common stock, net

Issuance of common stock and warrants, net

Share-based compensation expense

3 unchanged sentences

Balance, beginning of period

Unrealized loss on available-for-sale securities, net of tax

Foreign currency translation adjustment

2 unchanged sentences

Balance, beginning of period

Net loss – discontinued operations

Net income (loss) – discontinued operations

Net loss – continuing operations

Adjustment to retained earnings related to temporary equity accretion

Balance, end of period

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The Company received $ 1,000 in cash in connection with the sale.

Bagley is an affiliate of the Company and the Company’s single largest stockholder.

Bagley is an affiliate of the Company and was the Company’s single largest stockholder.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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March 2, 2026 Private Placement

On March 2, 2026, the Company entered into a Securities Purchase Agreement with First Finance Ltd.

the Company’s largest stockholder, pursuant to which the Company issued and sold 437,500 shares of common stock at a purchase price of $ 4.00 per share and a warrant to purchase up to 437,500 additional shares of common stock at an exercise price of $ 5.00 per share.

The warrant has a two-year term expiring on March 2, 2028 and becomes exercisable on September 2, 2026 .

The warrant is classified in stockholders’ equity in accordance with ASC 815-40.

The Company received gross proceeds of $ 1,750 .

The fair value of the warrants was determined using the Black-Scholes option pricing model.

The Company allocated the proceeds between the common stock and the warrants based on their relative fair values.

The portion of the proceeds allocated to the warrants, $ 618 , was recorded in additional paid-in capital – warrants.

The Company also entered into a Registration Rights Agreement with First Finance Ltd.

providing for the registration of the shares and warrant shares for resale.

The issuance was made in reliance on the exemption from registration provided by Section 4 (a)( 2 ) of the Securities Act of 1933 , as amended, and Rule 506 (b) promulgated thereunder.

The transaction was approved by the Board of Directors (with interested directors recusing themselves as appropriate).

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

The Company uses the Black-Scholes option pricing model to determine the fair value of share-based payments granted under the guidelines of ASC Topic 718 .

A summary of the stock option activity under the Company’s plans for the nine months ended September 30, 2025 , is as follows:

A summary of the stock option activity under the Company’s plans for the three months ended March 31, 2026 , is as follows:

Number of shares

1 unchanged sentence

Options outstanding at beginning of year

Forfeited prior to vesting

Canceled or expired

Options outstanding at September 30, 2025

Options exercisable at end of September 30, 2025

As of September 30, 2025 , the total remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was approximately $ 44 , which will be recognized over a weighted average period of 1.22 years.

Options outstanding at March 31, 2026

Options exercisable at end of March 31, 2026

As of March 31, 2026 , the total remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was $ 0 .

Share based compensation expense has been recorded as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Cost of goods sold

6 unchanged sentences

The full domestic valuation allowance was recorded as management concluded that it is more likely than not that these deferred tax assets are not realizable due to the Company's recent pre-tax losses and other sources of negative evidence.

Provision for income taxes for the nine months ended September 30, 2025 mostly represents income tax expense (benefit) recorded for jurisdictions outside the United States.

The Company had approximately $ 969 of uncertain tax positions as of September 30, 2025 .

Due to the inherent uncertainty of the underlying tax positions, it is not possible to forecast the payment of this liability for any particular year, therefore, it is reflected in other long-term liabilities.

Provision for income taxes for the three months ended March 31, 2026 mostly represents income tax expense (benefit) recorded for jurisdictions outside the United States.

Effective July 1, 2007, the Company adopted the accounting standards related to uncertain tax positions.

This standard requires that tax positions be assessed using a two -step process.

A tax position is recognized if it meets a “more likely than not” threshold and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized.

Uncertain tax positions must be reviewed at each balance sheet date.

Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts.

The total amount of unrecognized tax benefits for continuing operations as of March 31, 2026, that would favorably impact our effective tax rate if recognized was $ 417 .

As of March 31, 2026, we accrued $ 80 in interest and penalties related to unrecognized tax benefits.

We account for interest expense and penalties for unrecognized tax benefits as part of our income tax provision.

Although we believe our estimates are reasonable, we can make no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our historical income tax provisions and accruals.

Such difference could have a material impact on our income tax provision and operating results in the period in which we make such determination.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:

Quarter ended March 31,

Balance – beginning of year

Additions based on tax positions related to current quarter

Reductions for tax positions of prior years

Lapse in statues of limitations

Uncertain tax positions, ending balance

The Company’s U.S.

federal income tax returns

for 2022 through 2025 are subject to examination.

Company also files in various state and foreign jurisdictions.

exceptions, the Company is no longer subject to federal, state, or non-U.S.

income tax examinations by tax authorities for years prior to 2022.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Operating Segment

6 unchanged sentences

Subsequent Events

On October 24, 2025, the Company completed the sale of a significant portion of its intellectual property and certain inventories to Biamp Systems, LLC for $ 3,000 .

There were no escrows or holdbacks.

Company estimates $ 100 of transaction costs.

The Company will continue to provide product support and warranty services while it pursues a Strategic Transaction in the fourth quarter of 2025 as further described in Note 1.

Any difference between the carrying amount at September 30, 2025 and the final closing amounts will be recognized in the fourth quarter of 2025.

April 1, 2026 – CEO Transition

The Company entered into a letter agreement with Derek L.

Graham to provide for his continued service as Chief Executive Officer on a transitional consulting basis following the expiration of his employment agreement on March 31, 2026.

Under the agreement, Mr.

Graham provides consulting services for up to ten hours per week at a rate of $ 160 per hour while continuing to perform all functions of the CEO.

The agreement has no fixed term and may be terminated by either party at any time.

April 7, 2026 – Lease Termination and Nasdaq Notice

The Company entered into a lease termination agreement with Edgewater Corporate Park, LLC, terminating its lease at 5225 Wiley Post Way, Salt Lake City, Utah for a $ 300 termination fee.

The termination released the Company from approximately $ 376 in remaining rent and $ 53 in restoration charges.

See Note 9 – Leases for additional details.

On the same date, the Company received a letter from Nasdaq informing it that it is not in compliance with the continued listing standards under Nasdaq Marketplace Rule 5550 (b).

The Company has 45 calendar days (until May 22, 2026) to submit a compliance plan.

See “Risk Factors” in Item 1 A for additional information.

April 10, 2026 – Class A Preferred Redemption

The Company’s Board of Directors approved the redemption of all 2,069,065 outstanding shares of Class A Redeemable Preferred Stock on April 21, 2026 at the par value of $ 0.001 per share (aggregate redemption amount of approximately $ 2 ).

See Note 3 – Class A Redeemable Preferred Stock (Current Liability) for additional details.

April 22, 2026 – Nevada Reincorporation

The Company completed its reincorporation from Delaware to Nevada by conversion, effective on or about April 22, 2026, pursuant to the Plan of Conversion approved by stockholders on March 12, 2026.

The Company is now a Nevada corporation.

See Note 1 – Business Description for additional information regarding the impact on governing law and stockholder rights.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements