CLEARONE INC 10-Q

Item 1 . FINANCIAL STATEMENTS CLEARONE, INC UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except par value) March 31, 2026 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 756 $ 220 Restricted cash 297 519 Inventories, net 333 353 Prepaid assets 10 — Current assets related to discontinued operations 276 604 Total current assets 1,672 1,696 Operating lease - right of use assets, net 321 494 Long term assets related to discontinued operations 24 109 Total assets $ 2,017 $ 2,299 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 64 $ 30 Accrued liabilities 415 649 Current operating lease liability 168 223 Current liabilities related to discontinued operations 228 585 Total current liabilities 875 1,487 Long term operating lease liability 169 290 Long-term liabilities related to discontinued operations 441 1,236 Total liabilities 1,485 3,013 Shareholders' equity: Class B convertible preferred stock, par value $ 0.001 , 5,100 shares authorized, — and — shares issued and outstanding, respectively — — Common stock, par value $ 0.001 , 150,000,000 shares authorized, 2,675,412 and 2,237,912 shares issued and outstanding, respectively 3 2 Additional paid-in capital 37,500 35,767 Accumulated other comprehensive loss ( 341 ) ( 340 ) Accumulated deficit ( 36,630 ) ( 36,143 ) Total shareholders' equity 532 ( 714 ) Total liabilities and shareholders' equity $ 2,017 $ 2,299 See accompanying notes 3 Table of Contents CLEARONE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Dollars in thousands, except per share amounts) Three months ended March 31, 2026 2025 Revenue $ — $ — Cost of goods sold 70 27 Gross profit (loss) ( 70 ) ( 27 ) Operating expenses: Sales and marketing — — Research and product development — — General and administrative 780 799 Total operating expenses 780 799 Operating loss ( 850 ) ( 826 ) Interest (expense) — — Other income, net — 12 Loss from continuing operations before income taxes ( 850 ) ( 814 ) Provision for income taxes — — Loss from continuing operations ( 850 ) ( 814 ) Income (loss) from discontinued operations, net of tax 363 ( 2,020 ) Net loss $ ( 487 ) $ ( 2,834 ) Basic weighted average shares outstanding 2,383,745 1,649,904 Diluted weighted average shares outstanding 2,754,160 1,649,904 Basic income (loss) per share From continuing operations $ ( 0.36 ) $ ( 0.49 ) From discontinued operations 0.15 ( 1.22 ) Total ( 0.21 ) ( 1.71 ) Diluted income (loss) per share From continuing operations $ ( 0.31 ) $ ( 0.49 ) From discontinued operations 0.13 ( 1.22 ) Total ( 0.18 ) ( 1.71 ) Comprehensive loss: Net loss $ ( 487 ) $ ( 2,834 ) Change in foreign currency translation adjustment ( 10 ) ( 13 ) Comprehensive loss $ ( 497 ) $ ( 2,847 ) See accompanying notes 4 Table of Contents CLEARONE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except per share amounts) Three months ended March 31, 2026 2025 Cash flows from operating activities: Net loss $ ( 487 ) $ ( 2,834 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of right-of-use assets 173 78 Share-based compensation expense — 23 Changes in operating assets and liabilities: Inventories 20 — Prepaid expenses and other assets ( 10 ) — Accounts payable 34 187 Accrued liabilities ( 234 ) ( 18 ) Operating lease liabilities ( 176 ) ( 80 ) Net cash used in operating activities, continuing operations ( 680 ) ( 2,644 ) Cash provided by (used in) operating activities, discontinued operations ( 733 ) 1,212 Cash flows from investing activities: Net cash provided by investing activities, continuing operations — — Cash used in investing activities, discontinued operations — ( 18 ) Cash flows from financing activities: Proceeds from sale of stock 1,750 1,000 Purchases of outstanding warrants ( 22 ) — Net cash provided by financing activities, continuing operations 1,728 1,000 Cash provided by financing activities, discontinued operations — 7 Effect of exchange rate changes on cash and cash equivalents ( 1 ) ( 13 ) Net increase (decrease) in cash and cash equivalents 314 ( 456 ) Cash and cash equivalents at the beginning of the period 739 1,417 Cash and cash equivalents at the end of the period $ 1,053 $ 961 See accompanying notes 5 Table of Contents CLEARONE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except per share amounts) The following is a summary of supplemental cash flow information: Three months ended March 31, 2026 2025 Cash paid for income taxes $ 1 $ — See accompanying notes 6 Table of Contents CLEARONE, INC. UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) 1 . Business Description, Basis of Presentation and Significant Accounting Policies Business Description: 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. 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 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: The fiscal year for ClearOne is the twelve months ending on December 31. The condensed consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. 7 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 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. See Note 2 — Discontinued Operations and Assets Held for Sale for additional information. These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are not audited. 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 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. Eastern Time on June 9, 2025. 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 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. 8 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) Product warranties The Company provides assurance-type warranties on previously sold products and records a liability for the estimated cost to repair or replace products under warranty at the time of sale in accordance with ASC 460 . The liability is based on historical claim experience, the nature of the underlying products, current information on repair costs and expected failure rates. The Company reviews warranty estimates each period and records adjustments to the liability when facts and circumstances indicate changes in expected claims or costs. Significant Accounting Policies: 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 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 2024 - 03 , Income Statement—Reporting Comprehensive Income (Topic 220 ): Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU No. 2024 - 03 , "Income Statement—Reporting Comprehensive Income (Topic 220 ): Disaggregation of Income Statement Expenses," which requires public business entities, such as the Company, to provide disaggregated disclosure of specific natural expense categories underlying certain income statement expense line items in the notes to the financial statements. The standard identifies five required natural expense categories for disaggregation—employee compensation, depreciation, amortization, inventory expense, and other manufacturing expenses—along with a residual "other" category for remaining amounts within relevant expense captions (e.g., cost of sales, selling, general and administrative expenses). ASU 2024 - 03 does not alter the expense captions presented on the face of the income statement but enhances footnote disclosures to improve transparency. The standard is effective for annual periods beginning after December 15, 2026, with early adoption permitted, and must be applied prospectively, though retrospective application is optional. An update in ASU 2025 - 01 clarified that interim period disclosures are not required until annual periods beginning after December 15, 2027. The Company is in the process of evaluating the impact of ASU 2024 - 03 on its consolidated financial statements. We expect adoption to necessitate modifications to our financial reporting processes and systems to capture and disclose the required disaggregated expense information in the footnotes. Management anticipates that this will enhance the granularity of expense disclosures but does not expect a material effect on our reported financial position or results of operations. We are reviewing our current expense classification practices and data collection capabilities to ensure compliance with the new requirements upon adoption. The Company has determined that recently issued accounting standards, other than the above discussed, will not have a material impact on its consolidated financial position, results of operations or cash flows. 9 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 2. Discontinued Operations and Assets Held for Sale 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): Three months ended March 31, 2026 2025 Revenue $ — $ 2,313 Cost of goods sold 88 2,165 Gross profit (loss) ( 88 ) 148 Operating expenses 264 2,168 Other expenses 78 — Loss from discontinued operations before income taxes ( 430 ) ( 2,020 ) Benefit for income taxes 793 — Income (Loss) from discontinued operations, net of tax $ 363 $ ( 2,020 ) The following table disaggregates the Company’s revenue into primary product groups: Three months ended March 31, 2026 2025 Audio conferencing $ — $ 953 Microphones — 1,118 Video products — 242 $ — $ 2,313 The following table disaggregates the Company’s revenue into major regions: Three months ended March 31, 2026 2025 North and South America $ — $ 960 Asia Pacific (includes Middle East, India and Australia) — 1,188 Europe and Africa — 165 $ — $ 2,313 10 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) Assets grouped into discontinued operations (unaudited): March 31, 2026 December 31, 2025 Accounts receivable, net $ 50 $ 391 Inventories, net — — Prepaids and other current assets 226 213 Property, plant and equipment, net — 80 Other long-term assets 24 29 Total assets $ 300 $ 713 Liabilities grouped into discontinued operations (unaudited): March 31, 2026 December 31, 2025 Accounts payable $ 3 $ 63 Accrued liabilities, current 225 521 Other long-term liabilities 441 1,236 Total liabilities $ 669 $ 1,820 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 fiscal 2026 . 3. Capital Structure: 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. 11 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) 4. Debt and Equity: Conversion of Convertible Note 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). 5. Warrants Repurchased (and Related Party) 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 March 31, 2026 . 6. Revenue Information 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). 7. 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 ). 12 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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 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 ). Class A is redeemable for net proceeds of a qualifying asset sale and does not participate in current-period earnings or losses other than its redemption preference. Management concluded that Class A is not a participating security for purposes of the two -class method for the periods presented; therefore, no allocation of earnings (loss) was made to Class A in computing loss per share. The following table sets forth the computation of basic and diluted income ( loss) per common share: Three months ended March 31, 2026 2025 Numerator: Loss from continuing operations $ ( 850 ) $ ( 814 ) Income (loss) from discontinued operations $ 363 $ ( 2,020 ) Net loss $ ( 487 ) $ ( 2,834 ) Denominator: Basic weighted average shares outstanding 2,383,745 1,649,904 Dilutive common stock equivalents using treasury stock method 370,415 — Diluted weighted average shares outstanding 2,754,160 1,649,904 Basic income (loss) per share From continuing operations $ ( 0.36 ) $ ( 0.49 ) From discontinued operations $ 0.15 $ ( 1.22 ) Total $ ( 0.21 ) $ ( 1.71 ) Diluted income (loss) per share From continuing operations $ ( 0.31 ) $ ( 0.49 ) From discontinued operations $ 0.13 $ ( 1.22 ) Total $ ( 0.18 ) $ ( 1.71 ) Weighted average options, warrants and convertibles outstanding 370,415 372,740 Anti-dilutive options, warrants and convertibles not included in the computation — 372,740 13 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Dollars in thousands, except per share amounts) 8 . Inventories 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. See Note 2. Some inventories were retained to service warranty liabilities. Inventories, net of reserves, as of March 31, 2026 and December 31, 2025 consisted of the following: March 31, 2026 December 31, 2025 Current: Finished goods $ 333 $ 353 9 . Leases 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 months ended March 31, 2026 and 2025 was as follows: Three months ended March 31, 2026 2025 Rent expense Continuing operations $ — $ — Discontinued operations 110 112 Total rent expense $ 110 $ 112 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. 14 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) Supplemental cash flow information related to leases was as follows: Three months ended March 31, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ ( 176 ) $ ( 92 ) Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ — Supplemental balance sheet information related to leases was as follows: March 31, 2026 December 31, 2025 Operating lease right-of-use assets $ 321 $ 494 Current portion of operating lease liabilities, included in accrued liabilities $ 168 $ 223 Operating lease liabilities, net of current portion 169 290 Total operating lease liabilities $ 337 $ 513 Weighted average remaining lease term for operating leases (in years) 1.92 2.17 Weighted average discount rate for operating leases 6.80 % 6.76 % The following represents maturities of operating lease liabilities as of March 31, 2026 : Years ending December 31, 2026 (Remainder) $ 139 2027 190 2028 31 2029 — 2030 — Total lease payments 360 Less: Imputed interest ( 23 ) Total $ 337 10. 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 15 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 11. Shareholders' Equity Three months ended March 31, 2026 2025 Preferred stock, common stock and additional paid-in capital Balance, beginning of period $ 35,769 $ 31,696 Return of dividend 6 — Repurchase of warrants ( 22 ) — Issuance of common stock and warrants, net 1,750 1,000 Share-based compensation expense — 23 Proceeds from employee stock purchase plan — 7 Balance, end of period $ 37,503 $ 32,726 Accumulated other comprehensive loss Balance, beginning of period $ ( 340 ) $ ( 306 ) Foreign currency translation adjustment ( 1 ) ( 13 ) Balance, end of period $ ( 341 ) $ ( 319 ) Accumulated deficit Balance, beginning of period $ ( 36,143 ) $ ( 10,059 ) Net income (loss) – discontinued operations 363 ( 814 ) Net loss – continuing operations ( 850 ) ( 2,020 ) Balance, end of period $ ( 36,630 ) $ ( 12,893 ) Total shareholders' equity $ 532 $ 19,514 Issue of Common Stock On February 26, 2025 the Company entered into a securities purchase agreement with Edward D. Bagley, pursuant to which the Company agreed to issue and sell, in a private placement at-the-market offering of 133,334 shares of the Company’s common stock, par value $ 0.001 per share, at a purchase price of $ 7.50 per share of Common Stock. The Company received $ 1,000 in cash in connection with the sale. Mr. Bagley is an affiliate of the Company and was the Company’s single largest stockholder. 16 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) Amendments to Certificate of Incorporation and Reverse Stock Split At the special meeting of stockholders held on May 30, 2025, stockholders approved amendments to the Certificate of Incorporation to: (i) increase the authorized number of shares of common stock from 50,000,000 to 150,000,000 ; (ii) authorize 50,000,000 shares of "blank check" preferred stock; (iii) effect a reverse stock split at a ratio between 1-for-10 and 1-for-15, with the exact ratio to be determined by the Board of Directors ; and (iv) eliminate the prohibition on stockholder action by written consent and to allow such actions. Following stockholder approval, on June 4, 2025, the Company filed a Certificate of Amendment to its Certificate of Incorporation to effect these changes, including the selection of a 1-for-15 reverse stock split ratio , which became effective at 5 : 00 p.m. Eastern Time on June 9, 2025. 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 converted to one whole share). The reverse stock split did not change the par value of the common stock 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. 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. For additional details, including the Certificate of Amendment, 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 and the Certificate of Amendment attached as Exhibit 3.1 thereto. Preferred Stock Designations and Related Matters On June 24, 2025, the Company filed Certificates of Designation with the State of Delaware authorizing up to 2,069,066 shares of Class A Redeemable Preferred Stock and 5,100 shares of Class B Convertible Preferred Stock. The Class A Redeemable Preferred Stock, which ranks senior to common stock and is redeemable upon an Asset Sale (defined as the sale of all or substantially all of the Company's current assets and operations, which the Company is required to pursue using reasonable best efforts within 180 days of issuance), was issued on July 18, 2025 as a dividend to holders of common stock and common stock equivalents of record as of July 11, 2025. Net proceeds from any Asset Sale will be distributed pro rata to holders of Class A Redeemable Preferred Stock. The Class B Convertible Preferred Stock ranks senior to common stock and other equity (except Class A Redeemable Preferred Stock), with specific rights including dividends, voting (on an as-converted basis), and liquidation preferences. Additionally, effective June 20, 2025, the Board of Directors was expanded from four to five members, with Eric Boehnke and Youngsun Park (a/k/a Sunny Park), nominees of First Finance Ltd., appointed as directors to serve until the next annual meeting or until their successors are elected and qualified. Neither appointee has any material arrangements or family relationships with the Company requiring disclosure under Item 404 (a) of Regulation S-K, and they will receive standard director compensation. 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. 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). 17 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 12 . Share-based Compensation The Company uses judgment in determining the fair value of the share-based payments on the date of grant using an option-pricing model with assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the risk-free interest rate of the awards, the expected life of the awards, the expected volatility over the term of the awards, and the expected dividends of the awards. 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 three months ended March 31, 2026 , is as follows: Number of shares Weighted average exercise price Options outstanding at beginning of year 19,716 $ 35.33 Granted — — Less: Canceled or expired 14,382 12.58 Options outstanding at March 31, 2026 5,334 96.60 Options exercisable at end of March 31, 2026 5,334 $ 96.60 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 March 31, 2026 2025 Cost of goods sold $ — $ — Sales and marketing — 1 Research and product development — 4 General and administrative — 18 $ — $ 23 18 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 13 . Income Taxes The Company recorded a full valuation allowance against U.S Federal and State deferred tax assets, which results in no income tax benefit for losses in these jurisdictions. 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 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, 2026 Balance – beginning of year $ 1,030 Additions based on tax positions related to current quarter — Reductions for tax positions of prior years ( 61 ) Lapse in statues of limitations ( 595 ) Uncertain tax positions, ending balance $ 374 The Company’s U.S. federal income tax returns for 2022 through 2025 are subject to examination. The Company also files in various state and foreign jurisdictions. With few 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. 19 Table of Contents UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) 14 . Operating Segment The Company operates as one operating segment. Operating segments are defined as components of an entity for which separate financial information is regularly evaluated by the chief operating decision maker ("CODM"), which is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company's CODM evaluates financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information that is supplemental to information disclosed within the consolidated financial statements, that is regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss and functional expenses as reported on our consolidated statements of operations and comprehensive loss. Because the Company operates as one operating segment, financial segment information, including expense and asset information, can be found in the consolidated financial statements. 15. Subsequent Events 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. 20 Table of Contents