What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2025-11-14 · 105 added, 172 removed, 87 unchanged (76% of the section changed)

8 unchanged sentences

Future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not anticipate, including, without limitation, descriptions of our review of strategic alternatives and the timing and impact of any potential strategic transactions, the proposed development, manufacturing, and sale of our products;

statements that describe expectations regarding pricing trends, the markets for our products, our anticipated capital expenditures, our cost reduction and operational restructuring initiatives, and future impact of regulatory developments;

statements with regard to the nature and extent of competition we may face in the future;

statements that describe expectations regarding pricing trends, our ability to collect accounts receivable and recover prepaid assets, our ability to regain compliance with the continued listing standards of the Nasdaq Capital Market;

statements with respect to the anticipated sources of and need for future financing;

3 unchanged sentences

Additional factors that may have a direct bearing on our operating results are discussed in Part I , Item 1 A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 .

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

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

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

BUSINESS OVERVIEW

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 through strategic technological acquisitions as well as by internal product development.

ClearOne, Inc.

(the “Company,” “we,” “us,” or “our”) was historically a global provider of conferencing, collaboration, and AV streaming solutions for voice and visual communications.

Following the October 24, 2025 disposition of substantially all operating assets and intellectual property to Biamp Systems, LLC (the “Asset Sale”), the Company no longer manufactures or sells products.

Our continuing operations are now limited to (i) fulfilling warranty and technical support obligations for legacy products, (ii) maintaining public-company compliance and governance, (iii) collecting accounts receivable and recovering prepaid assets and (iv) evaluating and pursuing strategic alternatives, including a potential mergers or other transaction intended to maximize stockholder value.

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

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

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

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

the assets held for sale were sold in October 2025 and certain assets and liabilities related to discontinued operations remained after the October 2025 sale (see Note 2 — Discontinued Operations and Assets Held for Sale).

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

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

Strategic actions during 2025

Special stock dividend — Class A Redeemable Preferred Stock.

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

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

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

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

Disposition status (subsequent event).

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

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

Beginning in the third quarter of 2025 :

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

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

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

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

Strategic actions during 2025 and 2026

July 2025 – Issuance of Class A Redeemable Preferred Stock as a special stock dividend and automatic conversion of the $3.0 million convertible note into Class B Convertible Preferred Stock (see Notes 3 and 4).

September 2025 – Repurchase and cancellation of all then-outstanding warrants (see Note 5).

October 24, 2025 – Completion of the Asset Sale to Biamp Systems, LLC for $3.0 million in cash.

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

The results of the disposed component are presented as discontinued operations for all periods presented (see Note 2).

March 2, 2026 – Private placement with First Finance Ltd.

(largest stockholder) for 437,500 shares and a warrant to purchase 437,500 additional shares (see Note 11).

March 9, 2026 – Repurchase of 24,155 warrants from CVI Investments, Inc.

(see Note 5).

April 1, 2026 – Transition of CEO Derek Graham to a consulting arrangement (see Note 15).

April 7, 2026 – Termination of the Edgewater Corporate Park lease and receipt of Nasdaq continued listing deficiency notice (see Notes 9 and 15).

April 10, 2026 – Board approval of Class A Preferred Stock redemption at par (April 21, 2026) (see Notes 3 and 15).

April 22, 2026 – Completion of reincorporation from Delaware to Nevada (see Note 1).

Operating context

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

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

Following the Asset Sale, our continuing operations generate minimal revenue and consist primarily of warranty support, collecting accounts receivable and recovering prepaid assets, public-company compliance costs, and restructuring activities.

Management’s primary focus is preserving liquidity, and evaluating strategic alternatives (including a potential reverse merger or other transaction) to maximize stockholder value.

The Company has incurred net losses and used cash in operations, and substantial doubt exists about its ability to continue as a going concern (see Note 1 – Going Concern).

Continuing operations and post-disposition plan

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

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

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

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

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

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

Following the Asset Sale on October 24, 2025, our continuing operations are limited to (i) fulfilling warranty and technical support obligations for legacy products, (ii) maintaining public-company compliance and governance, (iii) collecting accounts receivable and recovering prepaid assets and (iv) evaluating and pursuing strategic alternatives.

We do not expect to generate material revenue from continuing operations in the foreseeable future.

Warranty support activities

We retained responsibility for legacy product support and warranty obligations.

the buyer did not assume these liabilities.

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

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

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

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

The Company maintains a small technical support function and limited service inventory to honor these obligations.

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

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

Corporate infrastructure and compliance

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

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

We maintain a lean corporate staff, including accounting/finance, IT, and senior management (CEO/CFO).

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

Monetization of residual assets and settlement of obligations

Management’s near-term priorities include:

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

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

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

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

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

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

Management’s near-term priorities include monetizing any remaining assets, collecting receivables, settling liabilities, and completing the Class A Preferred redemption.

All three facility leases were terminated by April 7, 2026 (see Note 9 and Note 15).

Presentation and comparability

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

Results of the disposed product business are presented as discontinued operations for all periods shown.

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

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

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

The balance sheet reflects assets and liabilities related to discontinued operations.

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

Critical accounting estimates

4 unchanged sentences

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

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

Our ability to meet obligations as they come due depends on the timing and magnitude of cash from residual asset monetization, collections, and access to additional financing or a Strategic Transaction.

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

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

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

Management’s plans include managing warranty exposure, collecting accounts receivable and recovering prepaid assets, and pursuing strategic alternatives.

See Note 1 — Going Concern for additional information.

Key risks and uncertainties

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

Actual outcomes may differ materially from our current expectations.

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

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

Execution of the restructuring and any Strategic Transaction involves risks, including warranty claim variability, timing of asset monetization, and the cost and availability of essential public-company services.

Actual outcomes may differ materially from current expectations.

Off-balance sheet arrangements

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

We had no off-balance sheet arrangements as of March 31, 2026 .

Deferred Product Revenue

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

Deferred product revenue decreased to $ 0 at both March 31, 2026 and December 31, 2025 .

A detailed discussion of our results of operations follows below.

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

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

We discuss Continuing Operations and Discontinued Operations separately.

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

Results of Operations for the three months ended March 31, 2026

Following the Asset Sale on October 24, 2025, the Company’s continuing operations generate minimal revenue and consist primarily of warranty support, public-company compliance, and restructuring costs.

The majority of the Company’s historical operations are now presented as discontinued operations (see Note 2):

Continuing Operations

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands)

Change Favorable (Adverse) in %

Cost of goods sold

9 unchanged sentences

Net loss from continuing operations

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

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

Continuing operations in Q1 2026 primarily comprise corporate activities (public-company reporting, governance, and compliance), warranty support for legacy products, and restructuring actions.

We recorded no product revenue in continuing operations for the three months ended March 31, 2026 .

Costs of Goods Sold and Gross Profit (Loss)

3 unchanged sentences

Operating Expenses

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

General & administrative (G&A) - General & administrative (G&A) expenses in Q1 2026 were driven primarily by legal, advisory, and regulatory fees associated with the strategic review, disposition process, audit and tax fees, D&O insurance, and incremental accounting and compliance costs.

S&M and R&D expenses in continuing operations were immaterial following the classification of the product business as held for sale.

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

6 unchanged sentences

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In furtherance of the Asset Sale pursuit, the Company completed a one -time special stock dividend of Class A Redeemable Preferred Stock, payable July 18, 2025 to holders of record of our common stock on July 11, 2025, which entitles holders of the Class A Redeemable Preferred Stock to 100 % of net proceeds from any Asset Sale upon redemption.

This structure aligns stockholder interests with the strategic process but depends on the successful completion of the Asset Sale for value realization.

As of September 30, 2025 , First Finance Ltd.

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

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

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

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

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

Contractual Obligations and Commitments

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

Payment Due by Period

Operating lease obligations

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 are based on unaudited condensed consolidated financial statements prepared in accordance with U.S.

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

Actual results could differ materially from those estimates.

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

see the referenced notes for additional information.

Held for sale measurement and impairment (ASC 360 )

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

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

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

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

Discontinued operations presentation (ASC 205 - 20 )

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

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

This requires management judgment in identifying direct vs.

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

Warranty obligations (ASC 460 )

We retained responsibility for legacy product warranties.

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

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

See Note 1 and MD&A — Continuing Operations .

Going concern (ASC 205 - 40 )

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

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

See Note 1 — Going Concern and Liquidity.

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

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

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

See Note 3 — Class A Redeemable Preferred.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 1 :

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

Discontinued Operations

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands)

Change Favorable (Adverse) in %

Cost of goods sold

Gross profit (loss)

Sales and marketing

Research and product development

General and administrative

Total operating expenses

Operating loss

Other income (expense), net

Loss before income taxes

Provision (benefit) for income taxes

Net loss from discontinued operations

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

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

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

Income /(Loss) from discontinued operations, net of tax

Revenue in discontinued operations declined to $ 0 in Q1 2026 compared to $2,313 in Q1 2025 , reflecting the completion of the Asset Sale in October 2025.

See Note 2 — Discontinued Operations and Assets Held for Sale for additional details on the components of discontinued operations.

Costs of Goods Sold and Gross Profit

1 unchanged sentence

Our gross profit decreased from $ 148 during 2025 - Q1 to a loss of $ 88 during 2026 - Q1 .

The reduction in gross profit is the result of revenue decreasing by a higher percentage than cost of goods sold.

The Company experienced a significant reduction in inventory levels, with a decrease of approximately $ 3.2 million compared to December 31, 2024 .

This reduction was primarily driven by supply chain pauses from our cash flow constraints.

As a result, there was insufficient new inventory to absorb the Company’s standard overhead allocation, which is typically applied to inventory production.

This led to unabsorbed overhead costs being recognized as an expense in the period, directly impacting cost of goods sold.

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

The reduction in gross profit reflects the completion of the Asset Sale in October 2025.

See Note 2 — Discontinued Operations and Assets Held for Sale for additional details on the components of discontinued operations.

Operating Expenses

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

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

Total operating expenses thru 2025 -YTD were $ 6.2 million compared to $ 6.5 million observing the same 9 -month period in 2024 .

Total operating expenses in 2026 - Q1 were $ 264 compared to $2, 168 in 2025 - Q1 .

The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.

Sales and Marketing - S&M expenses include selling, customer service, and marketing expenses such as employee-related costs, allocations of overhead expenses, trade shows, and other advertising and selling expenses.

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

Both comparisons are the result of decreased sales commissions on fewer sales as well as lowered marketing spend that was offset by severance expense from 2025 Q3 reduction in force being recognized.

S&M expenses were $ 33 in Q1 - 2026 , compared to $1, 116 in Q1 - 2025 .

Both comparisons are the result of decreased sales commissions on fewer sales as well as lowered marketing spend inclusive of the reduction in force completed in Q3 of 2025.

Research and Product Development - R&D expenses include research and development, product line management, engineering services, and test and application expenses, including employee-related costs, outside services, expensed materials, depreciation, and an allocation of overhead expenses.

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

R&D expenses were $ 9 in Q1 - 2026 , compared to $ 691 in Q1 - 2025 .

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

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

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

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

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

G&A expenses were $ 222 in Q1 - 2026 , compared to $ 361 in Q1 - 2025 .

The decreases were due to decreased expenses related to the exploration of strategic alternatives and closing down facilities.

Other income (expense), net

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

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

Other income for the three months ended March 31, 2026 included a $ 78 charge for expenses related to closure of foreign subsidiaries, compared to $ 0 for the three months ended March 2025 .

Provision for income taxes

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

During the three months ended March 31, 2026, the Company recorded an income tax benefit of $793 (recorded in discontinued operations) resulting from the reversal of unrecognized tax benefits (FIN 48 reserves).

This reversal occurred because the statute of limitations expired for certain tax years, and the underlying tax positions were no longer subject to IRS review.

For the three months ended March 31, 2025, the Company did not recognize any tax benefit from its losses due to the establishment of a full valuation allowance on its net deferred tax assets.

Net Loss and Outlook

Net loss for the first quarter of 2026 was $487, compared to a net loss of $2,834 in the first quarter of 2025.

The improvement was primarily driven by a one-time income tax benefit of $793 (recorded in discontinued operations) from the release of uncertain tax positions, partially offset by the absence of revenue-generating operations following the October 2025 Asset Sale to Biamp Systems.

Looking ahead, the Company’s continuing operations are expected to consist primarily of warranty servicing and technical support for legacy products, along with ongoing public company compliance and governance costs.

We will continue to evaluate warranty claims experience and adjust our reserves as appropriate.

In parallel, management is actively pursuing strategic alternatives, completed the redemption of the Class A Redeemable Preferred Stock on April 21, 2026, collecting accounts receivable and recovering prepaid assets, and continues to evaluate potential reverse merger or other value-enhancing transactions.

We expect these activities to remain the primary focus for the remainder of 2026.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2026 , cash and cash equivalents were $ 1,053 compared to $ 739 as of December 31, 2025 .

Working capital was minimal at both dates.

Cash used in opera ting activities was approximately $ 680 in the three months ended March 31, 2026 , compared to $ 2,644 in the three months ended March 31, 2025 .

The decrease in cash used was primarily due to the absence of operating activities following the Asset Sale.

Cash provided by (used in) investing activities was $ 0 for the three months ended March 31, 2026 , compared to $ 0 used in the prior-year period.

Cash provided by financing activities in the three months ended March 31, 2026 was $ 1,728 , compared to $ 1,000 in the three months ended March 31, 2025 .

Both provision to cash were the result of common stock sales.

For a detailed discussion of liquidity and going-concern considerations, including management’s plans and the substantial doubt about the Company’s ability to continue as a going concern, see Note 1 – Going Concern.

In furtherance of the Asset Sale pursuit, the Company completed a one-time special stock dividend of Class A Redeemable Preferred Stock, payable July 18, 2025 to holders of record of our common stock on July 11, 2025, which entitles holders of the Class A Redeemable Preferred Stock to 100% of net proceeds from any Asset Sale upon redemption (see Notes 3 and 15 – the redemption occurred on April 21, 2026 at par value of $2).

This structure aligns stockholder interests with the strategic process but depends on the successful completion of the Asset Sale for value realization.

See Note 3 – Class A Redeemable Preferred Stock.

As of March 31, 2026 , First Finance Ltd.

beneficially owned approximately 61.34% of our common stock on an as-converted basis and has the right to nominate two directors to our Board.

As of March 31, 2026 , we had no open purchase orders.

As of March 31, 2026 , we had inventory totaling $333 .

This compares to total inventories of $353 as of December 31, 2025 .

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of March 31, 2026 (in thousands):

Payment Due by Period

Operating lease obligations

Purchase obligations

OFF-BALANCE SHEET ARRANGEMENTS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies and estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2026, other than (i) the presentation of discontinued operations as described in Note 2 and (ii) the reclassification of Class A Redeemable Preferred Stock from temporary equity to a current liability (see Note 3).

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 — Significant Accounting Policies and Recent Accounting Pronouncements for a discussion of recently issued accounting standards and their expected impact on our financial statements.

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 2. Management’s Discussion and Analysis