Core Viewpoint - ClearOne, Inc. is facing significant operational and financial challenges, highlighted by declining revenues, widening losses, and liquidity issues, leading to investor concerns about the company's future viability [11] Financial Performance - In Q2 2025, ClearOne reported revenues of $1.9 million, a 17% decrease from $2.3 million in the same quarter last year [2] - The net loss for the quarter was $4.6 million, compared to a loss of $2.8 million in the prior-year period, with a loss per share of $2.64 versus $1.76 a year ago [2] - For the first half of 2025, revenues fell 29% year over year to $4.2 million, while the net loss increased to $7.4 million from $4.7 million in the previous year [2] Business Metrics - ClearOne's gross margin deteriorated from a loss margin of 0.9% in Q2 2024 to 12.1% in Q2 2025, attributed to faster revenue decline than cost reductions and unabsorbed overhead expenses [3] - Operating expenses surged 49% year over year to $4.3 million, driven by increases in research and development (up 57%) and general and administrative costs (up 88%) [3] Revenue Breakdown - Revenue by product category showed declines: audio conferencing products down 31%, microphones down 7%, and video products down 10% year over year [4] - Regionally, revenues in the Asia Pacific fell 73%, while the Americas grew 10%, and Europe/Africa rose 40%, indicating volatility in international sales [4] Management Insights - Management cited product shortages and cash constraints as significant factors hampering performance, with supply-chain disruptions affecting product availability [5] - The lack of Microsoft Teams certification for conferencing products limits competitiveness, and rising tariffs on electronic components have increased costs [6] Strategic Actions - Management expressed doubts about the company's ability to continue as a going concern without a strategic transaction or additional financing, actively pursuing an "Asset Sale" of its assets and operations [7] - ClearOne executed a 1-for-15 reverse stock split to comply with Nasdaq's minimum bid price requirement and raised $3 million through a convertible note purchase agreement [8][9] - A workforce reduction was announced, incurring $1.9 million in severance costs, and a special dividend in the form of Class A Redeemable Preferred Stock was issued [10]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, and statements of cash flows, along with detailed notes explaining significant accounting policies, financial performance, and recent corporate actions [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $1,132 | $1,417 | | Restricted cash | $1,678 | — | | Total current assets | $16,869 | $18,753 | | Total assets | $24,005 | $26,544 | | Total current liabilities | $7,499 | $3,545 | | Total liabilities | $9,059 | $5,213 | | Total shareholders' equity | $14,946 | $21,331 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This statement details the company's revenues, expenses, and net loss over specific reporting periods | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $1,916 | $2,304 | $4,229 | $5,926 | | Gross profit (loss) | $(231) | $(20) | $(110) | $1,131 | | Operating loss | $(4,559) | $(2,924) | $(7,405) | $(5,002) | | Net loss | $(4,572) | $(2,820) | $(7,406) | $(4,718) | | Basic loss per share | $(2.64) | $(1.76) | $(4.38) | $(2.95) | | Diluted loss per share| $(2.64) | $(1.76) | $(4.38) | $(2.95) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by the company across operating, investing, and financing activities | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(2,568) | $(2,722) | | Net cash provided by (used in) investing activities | $(21) | $1,826 | | Net cash provided by (used in) financing activities | $4,000 | $(14,483) | | Net increase (decrease) in cash and cash equivalents | $1,393 | $(15,385) | | Cash and cash equivalents at the end of the period | $2,810 | $2,450 | [Unaudited Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Unaudited%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements [1. Business Description, Basis of Presentation and Significant Accounting Policies](index=7&type=section&id=1.%20Business%20Description%2C%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the company's business, the basis for financial statement presentation, and key accounting policies - ClearOne, Inc. is a global market leader in conferencing, collaboration, and AV streaming solutions for voice and visual communications[14](index=14&type=chunk) - Substantial doubt exists about the Company's ability to continue as a going concern due to consistent cash usage, decreased sales, and ongoing operational challenges. Management plans to pursue strategic transactions, including an Asset Sale, generate additional revenue through inventory sales, or raise additional working capital[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The Company completed a **1-for-15 reverse stock split** on June 9, 2025, to regain compliance with Nasdaq's minimum bid price requirement, reducing outstanding shares from approximately **26.0 million to 1.7 million**[21](index=21&type=chunk) - Restricted cash of **$1,678 thousand** as of June 30, 2025, consists of remaining proceeds from a **$3,000 thousand convertible note**, subject to contractual restrictions for specific uses like severance, deal fees, and legal fees[23](index=23&type=chunk) - No significant changes to the Company's significant accounting policies during the quarter ended June 30, 2025[24](index=24&type=chunk) - The Company is evaluating the impact of new accounting pronouncements: ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03 (Disaggregation of Income Statement Expenses), with no material impact expected on financial position or results of operations from ASU 2024-03[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) [2. Revenue Information](index=10&type=section&id=2.%20Revenue%20Information) This note provides a breakdown of the company's revenue by product group and geographic region Product Group (in thousands) | Product Group (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Audio conferencing | $625 | $905 | $1,579 | $2,429 | | Microphones | $971 | $1,043 | $2,089 | $2,614 | | Video products | $320 | $356 | $561 | $883 | | **Total Revenue** | **$1,916** | **$2,304** | **$4,229** | **$5,926** | Region (in thousands) | Region (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | North and South America | $1,331 | $1,210 | $2,291 | $2,304 | | Asia Pacific | $230 | $841 | $1,418 | $2,842 | | Europe and Africa | $355 | $253 | $520 | $780 | | **Total Revenue** | **$1,916** | **$2,304** | **$4,229** | **$5,926** | [3. Loss Per Share](index=11&type=section&id=3.%20Loss%20Per%20Share) This note details the calculation of basic and diluted loss per common share | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss (in thousands) | $(4,572) | $(2,820) | $(7,406) | $(4,718) | | Basic weighted average shares outstanding | 1,733,307 | 1,597,943 | 1,691,836 | 1,597,943 | | Diluted weighted average shares outstanding | 1,733,307 | 1,597,943 | 1,691,836 | 1,597,943 | | Basic loss per common share | $(2.64) | $(1.76) | $(4.38) | $(2.95) | | Diluted loss per common share | $(2.64) | $(1.76) | $(4.38) | $(2.95) | [4. Intangible Assets](index=11&type=section&id=4.%20Intangible%20Assets) This note presents the carrying value and amortization of the company's intangible assets Intangible Asset (in thousands) | Intangible Asset (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Total intangible assets | $11,172 | $11,157 | | Accumulated amortization | $(9,719) | $(9,618) | | **Total intangible assets, net**| **$1,453** | **$1,539** | Amortization Expense (in thousands) | Amortization Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Amortization of intangible assets | $51 | $50 | $102 | $160 | [5. Inventories](index=12&type=section&id=5.%20Inventories) This note provides a breakdown of inventory by type and discusses valuation adjustments Inventory (in thousands) | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Current: Raw materials | $2,091 | $2,424 | | Current: Finished goods | $6,755 | $8,800 | | Long-term: Raw materials | $1,346 | $1,112 | | Long-term: Finished goods| $3,287 | $3,808 | | **Total Current Inventories** | **$8,846** | **$11,224** | | **Total Long-term Inventories** | **$4,633** | **$4,920** | Inventory Valuation (in thousands) | Inventory Valuation (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss (recovery) on valuation | $48 | $(95) | $320 | $98 | [6. Leases](index=12&type=section&id=6.%20Leases) This note details the company's lease arrangements, including right-of-use assets and lease liabilities Rent Expense (in thousands) | Rent Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Rent expense | $101 | $118 | $213 | $227 | Lease Information (in thousands) | Lease Information (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $607 | $750 | | Total operating lease liabilities | $627 | $771 | | Weighted average remaining lease term (years) | 2.63 | 2.99 | | Weighted average discount rate | 6.71% | 6.59% | - The Company cancelled a 40,000 square-foot warehouse lease in Salt Lake City on January 31, 2025, and entered into a new **2,590 square-foot** warehouse lease in Salt Lake City on December 1, 2024, expiring in February 2028[42](index=42&type=chunk) [7. Convertible Notes Payable](index=14&type=section&id=7.%20Convertible%20Notes%20Payable) This note describes the terms and balances of the company's convertible notes payable - On June 20, 2025, ClearOne entered into a Note Purchase Agreement with First Finance Ltd., selling **$3.0 million** aggregate principal amount of convertible notes[44](index=44&type=chunk) - The convertible notes accrue interest at **10% per annum** and are mandatorily convertible into Class B Convertible Preferred Stock upon the issuance of Class A Redeemable Preferred Stock[44](index=44&type=chunk) Convertible Note (in thousands) | Description | Interest Rate | Maturity Date | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------- | :------------ | :------------ | :--------------------------- | :------------------------------- | | Convertible Note | 10% | June 30, 2025 | $3,008 | — | [8. Shareholders' Equity](index=15&type=section&id=8.%20Shareholders'%20Equity) This note provides details on changes in common stock, preferred stock, and accumulated deficit Shareholders' Equity (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Common stock and additional paid-in capital, end of period | $32,740 | $31,640 | $32,740 | $31,640 | | Accumulated other comprehensive loss, end of period | $(329) | $(294) | $(329) | $(294) | | Accumulated deficit, end of period | $(17,465) | $(5,794) | $(17,465) | $(5,794) | | **Total shareholders' equity** | **$14,946** | **$25,552** | **$14,946** | **$25,552** | - In February 2025, the Company raised **$1.0 million** through a private placement of **133,334 common shares** at **$7.50 per share** to an affiliate[48](index=48&type=chunk) - Stockholders approved amendments to the Certificate of Incorporation, including increasing authorized common stock to **150 million**, authorizing **50 million** 'blank check' preferred stock, and effecting a **1-for-15 reverse stock split** on June 9, 2025, to regain Nasdaq compliance[49](index=49&type=chunk) - The Company authorized Class A Redeemable Preferred Stock (redeemable upon Asset Sale) and Class B Convertible Preferred Stock (senior to common stock), with Class A issued as a dividend on July 18, 2025[51](index=51&type=chunk) [9. Share-based Compensation](index=17&type=section&id=9.%20Share-based%20Compensation) This note outlines the company's share-based compensation plans and related expenses Share-based Compensation Expense (in thousands) | Share-based Compensation Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of goods sold | $1 | $2 | $1 | $3 | | Sales and marketing | $(1) | $2 | — | $4 | | Research and product development | $3 | $12 | $7 | $25 | | General and administrative | $18 | $6 | $36 | $16 | | **Total** | **$21** | **$22** | **$44** | **$48** | - As of June 30, 2025, the total remaining unrecognized compensation cost related to non-vested stock options was approximately **$66 thousand**, to be recognized over a weighted average period of **1.23 years**[56](index=56&type=chunk) [10. Income Taxes](index=18&type=section&id=10.%20Income%20Taxes) This note discusses the company's income tax provisions, deferred tax assets, and valuation allowances - The Company recorded a full valuation allowance against U.S. Federal and State deferred tax assets, resulting in no income tax benefit for domestic losses[58](index=58&type=chunk) - The Company had approximately **$969 thousand** of uncertain tax positions as of June 30, 2025, reflected in other long-term liabilities[59](index=59&type=chunk) [11. Operating Segment](index=18&type=section&id=11.%20Operating%20Segment) This note identifies the company's single operating segment for financial reporting purposes - The Company operates as **one operating segment**, with the Chief Executive Officer evaluating financial information and assessing performance on a consolidated basis[60](index=60&type=chunk) [12. Restructuring and Other Charges](index=18&type=section&id=12.%20Restructuring%20and%20Other%20Charges) This note details significant restructuring activities and associated costs incurred by the company - On June 20, 2025, the Company implemented a significant workforce reduction as part of operational scaling for the Asset Sale pursuit, with estimated severance and related costs of approximately **$1.9 million** expected primarily in Q3 2025[61](index=61&type=chunk) [13. Subsequent Events](index=19&type=section&id=13.%20Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before financial statement issuance - On June 30, 2025, the Board declared a one-time special stock dividend of Class A Redeemable Preferred Stock, paid on July 18, 2025, which entitles holders to **100% of net proceeds** from any Asset Sale upon its completion[63](index=63&type=chunk) - On July 21, 2025, the **$3,025 thousand** outstanding principal and accrued interest under the convertible note issued to First Finance Ltd. automatically converted into **3,026 shares** of Class B preferred stock[65](index=65&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting significant revenue declines, increased losses, and the ongoing strategic review process, including efforts to address going concern risks and recent financing activities [BUSINESS OVERVIEW](index=20&type=section&id=BUSINESS%20OVERVIEW) This section describes the company's core business, product offerings, and recent operational highlights and challenges - ClearOne designs, develops, and sells conferencing, collaboration, and AV networking solutions, deriving a major portion of revenue from audio conferencing products and microphones[68](index=68&type=chunk) - Recent product launches include the DIALOG® 20 USB wireless microphone system (Jan 2024), BMA 360DX ceiling tile beamforming microphone array (Jan 2025), Versa® 120D USB-C Docking Station with Dante® (Jan 2025), DIALOG® AERO wireless microphone solution (Jan 2025), and UNITE 260N Pro 4K Ultra HD camera with NDI®|HX (Jan 2025)[71](index=71&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Overall revenue decreased by **17%** in Q2 2025 compared to Q2 2024, primarily due to product shortages, reduced demand in key regions (USA, Europe, China), and lack of Microsoft Teams certification[78](index=78&type=chunk) - Gross loss margin decreased to **(12.1)%** in Q2 2025 from **(0.9)%** in Q2 2024, mainly due to revenue decline, severance expense, and unabsorbed overhead costs from reduced inventory levels[79](index=79&type=chunk) - Net loss increased from **$(2.8) million** in Q2 2024 to **$(4.6) million** in Q2 2025, driven by decreased revenues, lower gross margin, severance expense, and deal-related costs from strategic repositioning[81](index=81&type=chunk) - The Board of Directors formed a Special Transaction Committee in November 2024 to review strategic alternatives, including financing, M&A, divestitures, and spin-offs, to maximize shareholder value[82](index=82&type=chunk) - Substantial doubt exists about the Company's ability to continue as a going concern, necessitating strategic transactions or additional working capital to achieve profitability and meet obligations[83](index=83&type=chunk)[84](index=84&type=chunk) [Industry conditions](index=23&type=section&id=Industry%20conditions) This section analyzes the competitive landscape and key trends impacting the company's operating environment - The industry is dynamic and highly competitive, characterized by a few dominant players in traditional video conferencing and a fragmented reseller market[85](index=85&type=chunk) - Higher interoperability with other AV products and certifications from leading video conferencing providers like Microsoft and Zoom are increasingly important[85](index=85&type=chunk) [Economic conditions, challenges and risks](index=24&type=section&id=Economic%20conditions%2C%20challenges%20and%20risks) This section discusses macroeconomic factors, competitive pressures, and specific risks affecting the company's performance - ClearOne faces intense competition, challenges from component availability, pricing pressures from new competitors, and the lack of Microsoft Teams certifications[87](index=87&type=chunk) - Approximately **46%** of revenue in the first six months of 2025 was derived from operations outside North and South America, exposing the Company to foreign exchange risk if the U.S. dollar strengthens[89](index=89&type=chunk) - Recent and proposed increases in U.S. tariffs on imports from China (up to **145%**) and Singapore (**10% baseline**) may increase procurement costs, disrupt supply chains, and elevate operating expenses[90](index=90&type=chunk)[91](index=91&type=chunk) - Customer uncertainty regarding the Company's pursuit of an asset sale and going concern risk has led some customers to put orders on hold[93](index=93&type=chunk) [Deferred Product Revenue](index=24&type=section&id=Deferred%20Product%20Revenue) This section presents the company's deferred product revenue balances at various reporting dates | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Deferred product revenue | $12 | $17 | [Results of Operations for the three and six months ended June 30, 2025](index=25&type=section&id=Results%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025) This section analyzes the company's financial performance, including revenue, gross profit, and operating expenses, for the specified periods - Revenue decreased to **$1.9 million** in Q2 2025 (from **$2.3 million** in Q2 2024) due to declines in audio conferencing (**31%**), video products (**10%**), and microphones (**7%**), with a **73%** decrease in Asia Pacific revenues[98](index=98&type=chunk) - Gross profit margin decreased from **(0.9)%** in Q2 2024 to **(12.1)%** in Q2 2025, primarily due to revenue decreasing more than cost of goods sold and unabsorbed overhead from reduced inventory levels[99](index=99&type=chunk)[100](index=100&type=chunk) - Total operating expenses increased to **$4.3 million** in Q2 2025 (from **$2.9 million** in Q2 2024) and **$7.3 million** year-to-date (from **$6.1 million** in 2024), driven by severance expenses, increased legal/investment bank fees for strategic alternatives, and additional accounting headcount[104](index=104&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) [Other income (expense), net](index=27&type=section&id=Other%20income%20%28expense%29%2C%20net) This section details non-operating income and expenses, such as interest income and expense - Other income, net, decreased significantly, with interest income from marketable securities falling from **$0.3 million** in H1 2024 to **$0.0 million** in H1 2025[112](index=112&type=chunk) - Interest expense of approximately **$8 thousand** was recorded in Q2 2025 related to the convertible notes issued on June 20, 2025[113](index=113&type=chunk) [Provision for income taxes](index=27&type=section&id=Provision%20for%20income%20taxes) This section discusses the company's income tax provisions and the impact of valuation allowances - No income tax benefit was recognized from domestic losses due to a full valuation allowance against U.S. Federal and State deferred tax assets[114](index=114&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=27&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's ability to meet its short-term and long-term obligations and its sources of funding Cash and Working Capital (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $2,810 | $1,417 | | Working capital | $9,400 | $15,200 | Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(2,568) | $(2,722) | | Net cash used in investing activities | $(21) | $1,826 (provided) | | Net cash provided by financing activities | $4,000 | $(14,483) (used) | - Substantial doubt about the Company's ability to continue as a going concern persists, requiring strategic transactions (including an Asset Sale), additional revenue from inventory sales, or new working capital[119](index=119&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Financing activities in H1 2025 included a **$1.0 million** private placement of common stock and a **$3.0 million** convertible note issuance, with proceeds from the latter restricted for specific uses related to the Asset Sale[120](index=120&type=chunk) - The Board declared a special stock dividend of Class A Redeemable Preferred Stock on June 30, 2025, payable July 18, 2025, which entitles holders to **100% of net proceeds** from any Asset Sale[123](index=123&type=chunk) Inventory and Purchase Orders (in thousands) | Inventory and Purchase Orders (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------- | :------------ | :---------------- | | Open purchase orders | $4,200 | N/A | | Total inventory | $13,500 | $16,100 | | Non-current inventory | $4,600 | $4,900 | [Contractual Obligations and Commitments](index=29&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's future payment obligations under various contracts and agreements | Obligation (in millions) | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More than 5 years | | :----------------------- | :---- | :--------------- | :-------- | :-------- | :---------------- | | Operating lease obligations | $0.6 | $0.2 | $0.4 | — | — | | Purchase obligations | $4.2 | $4.2 | — | — | — | | **Total** | **$4.8**| **$4.4** | **$0.4** | **—** | **—** | [OFF-BALANCE SHEET ARRANGEMENTS](index=29&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section discloses any off-balance sheet transactions that could materially affect the company's financial position - The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition or results of operations[129](index=129&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=29&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section highlights the accounting policies and estimates that require significant judgment and can materially impact financial results - There have been no changes to the critical accounting policies as explained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[130](index=130&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=29&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section discusses the impact of recently issued accounting standards on the company's financial statements - For a discussion of recent accounting pronouncements, refer to Note 1: 'Business Description, Basis of Presentation and Significant Accounting Policies' in the notes to the unaudited condensed consolidated financial statements[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item states that quantitative and qualitative disclosures about market risk are not applicable to the Company - Quantitative and Qualitative Disclosures About Market Risk are not applicable[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, and there have been no material changes to internal control over financial reporting - The Chief Executive Officer and Principal Financial and Accounting Officer concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[133](index=133&type=chunk) - There has been no material change in the Company's internal control over financial reporting as of June 30, 2025[134](index=134&type=chunk) [PART II - OTHER INFORMATION](index=30&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section includes other required disclosures not covered in the financial information section [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The Company reported no legal proceedings for the period - No legal proceedings to report[135](index=135&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) New and amended risk factors highlight significant dilution potential from recent financing and preferred stock, the uncertainty and operational disruption associated with the mandatory Asset Sale pursuit, risks from dependence on third-party financing terms and governance changes, and potential impairment of operations due to the workforce reduction. Concentration of ownership by First Finance Ltd. and Edward D. Bagley also poses risks to corporate actions and market price - Recent issuance of convertible notes and designation of preferred stock may result in significant dilution to existing stockholders and adversely affect financial condition[136](index=136&type=chunk) - The Company is obligated to pursue an Asset Sale within **180 days** of issuing Class A Redeemable Preferred Stock, which may not be completed on favorable terms or at all, potentially leading to liquidity constraints and operational disruptions[137](index=137&type=chunk) - Dependence on third-party financing terms introduces risks related to control and governance changes, including the appointment of **two directors** nominated by First Finance Ltd. and limitations on operational flexibility[138](index=138&type=chunk) - A significant reduction in force implemented on June 20, 2025, may impair the Company's ability to maintain operations, comply with obligations, and could lead to loss of institutional knowledge and revenue declines[139](index=139&type=chunk) - The special stock dividend of Class A Redeemable Preferred Stock may not result in value to stockholders if the Asset Sale is not completed or is completed on unfavorable terms[140](index=140&type=chunk) - Concentration of ownership by First Finance Ltd. (approx. **32.4%**) and Edward D. Bagley (approx. **32.5%**) could significantly influence corporate actions and potentially discourage third-party acquisition attempts[141](index=141&type=chunk)[142](index=142&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds to report[143](index=143&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities for the period - Not applicable; no defaults upon senior securities to report[144](index=144&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company reported that mine safety disclosures are not applicable - Not applicable; no mine safety disclosures to report[145](index=145&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) The Company reported no other information for the period - Not applicable; no other information to report[146](index=146&type=chunk)[147](index=147&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certificates of designation for preferred stock, certificate of amendment, securities purchase agreement, and various certifications - Key exhibits include Certificates of Designation for Class A Redeemable Preferred Stock and Class B Convertible Preferred Stock, Certificate of Amendment to Certificate of Incorporation, Securities Purchase Agreement, and Section 302 and 906 Certifications[148](index=148&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) This section formally attests to the accuracy and completeness of the report by authorized officers - The report is signed by Derek L. Graham, Chief Executive Officer, and Simon Brewer, Chief Financial Officer, on August 14, 2025[150](index=150&type=chunk)

Core Insights - ClearOne, Inc. (CLRO) has experienced a significant decline in stock value, dropping 26.8% since the first quarter of 2025 results, compared to a 2.5% decline in the S&P 500 index during the same period [1] Financial Performance - Revenue for the first quarter of 2025 fell sharply by 36% year-over-year to $2.3 million from $3.6 million, primarily due to inventory sourcing and order fulfillment issues [2] - Gross profit decreased by 89% to $0.1 million from $1.2 million a year ago, with gross margin contracting to 5% from 32% [3] - Operating expenses decreased by 8% year-over-year to $3 million, aided by a 15% reduction in sales and marketing and a 23% cut in research and development [3] - The GAAP net loss widened to $2.8 million, or 11 cents per share, compared to a loss of $1.9 million, or 8 cents per share, in the previous year [3] Product and Geographic Performance - Revenue declines were broad-based, with audio conferencing sales down 37%, microphone sales down 29%, and video products down 54% [4] - Geographically, revenues from North and South America decreased by 12%, while Asia Pacific and Europe/Africa saw declines of 41% and 69%, respectively [4] Inventory and Cash Flow - Inventory levels decreased by $1.4 million due to cash-constrained supply-chain operations, leading to unabsorbed overhead costs that pressured margins [5] - ClearOne ended the quarter with $961,000 in cash and equivalents, down from $1.4 million three months earlier [5] Management Insights - CEO Derek Graham attributed revenue contraction to earlier production shortfalls and noted that some channel partners shifted to competitors during periods of limited product availability [6] - Despite previous sequential revenue growth in the second half of 2024, the first quarter of 2025 broke that trend due to ongoing inventory disruptions [6] Strategic Challenges - The inability to secure uninterrupted inventory flows from suppliers significantly impacted performance, particularly affecting newer offerings and legacy products [7] - The lack of Microsoft Teams certification for ClearOne's products continues to disadvantage the company competitively [7] Profitability Outlook - Management indicated that achieving profitability will depend on completing a strategic transaction or securing new working capital [9] - ClearOne has engaged RBW Capital Partners and Dawson James Securities to explore strategic alternatives, including mergers, asset sales, or spin-offs [9] Product Development - During the quarter, ClearOne launched five new products, including the award-winning BMA 360DX beamforming microphone array, reflecting the company's intent to remain technologically relevant [10] Financing Activities - In February 2025, ClearOne raised $1 million through a private placement to support inventory procurement, highlighting the company's ongoing dependency on external financing [11] Summary of Challenges - The first-quarter 2025 results underscore intensifying operational and financial stress, characterized by revenue declines, margin compression, and inventory shortages [12]

Financial Performance - Q1 2025 revenue was $2.3 million, a 36% decrease from $3.6 million in Q1 2024 and a 21.8% sequential decrease from $3.0 million in Q4 2024[5] - GAAP gross profit in Q1 2025 was $0.1 million, down 89% from $1.2 million in Q1 2024, resulting in a gross profit margin of 5% compared to 32% in Q1 2024[5] - GAAP net loss for Q1 2025 was $(2.8) million, or $(0.11) per share, compared to a net loss of $(1.9) million, or $(0.08) per share, in Q1 2024[5] - Revenue for the three months ended March 31, 2025, was $2,313 million, a decrease of 36.1% compared to $3,622 million in the same period of 2024[16] - Gross profit for the same period was $121 million, down from $1,151 million, reflecting a significant decline[16] - Operating loss increased to $2,846 million in Q1 2025 from $2,078 million in Q1 2024, indicating worsening financial performance[16] - Net loss for Q1 2025 was $2,834 million, compared to a net loss of $1,898 million in Q1 2024, representing a 49.2% increase in losses[16] - Non-GAAP net loss for Q1 2025 was $(2.8) million, or $(0.11) per share, compared to a Non-GAAP net loss of $(1.8) million, or $(0.07) per share, in Q1 2024[5] - Non-GAAP net loss for Q1 2025 was $2,760 million, compared to $1,762 million in Q1 2024, highlighting ongoing financial challenges[18] - Basic and diluted loss per share for Q1 2025 was $0.11, compared to $0.08 in Q1 2024, indicating a decline in shareholder value[16] - Comprehensive loss for Q1 2025 was $2,847 million, compared to $1,878 million in Q1 2024, further emphasizing the company's financial struggles[16] Operating Expenses and Cost Management - Operating expenses improved to $3.0 million in Q1 2025, down from $3.2 million in Q1 2024, reflecting continued cost-cutting measures[5] - Total operating expenses for Q1 2025 were $2,967 million, down from $3,229 million in Q1 2024, showing some cost management efforts[16] Inventory and Cash Management - Cash and cash equivalents decreased to $1.0 million as of March 31, 2025, down from $1.4 million as of December 31, 2024[7] - The company experienced a significant reduction in inventory levels, decreasing by approximately $1.4 million compared to December 31, 2024[5] - ClearOne is actively evaluating strategies to optimize inventory levels and production schedules to mitigate future impacts from cash flow constraints[5] - ClearOne secured a $1 million investment in February 2025 to restart product inventory purchases[2] Product Development - ClearOne introduced five new products in Q1 2025, including the award-winning BMA 360DX microphone array[2] Shareholder Impact - The number of shares used in computing diluted loss per share increased to 24,748,551 in Q1 2025 from 23,969,148 in Q1 2024, indicating potential dilution for existing shareholders[18] - Non-GAAP Adjusted EBITDA for Q1 2025 was $(2,686) million, compared to $(1,764) million in Q1 2024, reflecting continued operational difficulties[18]

Financial Performance - Overall revenue decreased by 36% in Q1 2025 compared to Q1 2024, primarily due to product shortages and reduced demand in key regions[58]. - Revenue decreased to $2.3 million in Q1 2025, a 36% decline from $3.6 million in Q1 2024, driven by a 37% drop in audio conferencing, 54% in video products, and 29% in microphones[76]. - Gross profit margin fell to 5.2% in Q1 2025 from 31.8% in Q1 2024, driven by a larger percentage decrease in revenue than in cost of goods sold[59]. - Operating loss increased to $2.8 million in Q1 2025 from $2.1 million in Q1 2024, representing a 37% adverse change[75]. - Net loss increased from $(1.9) million in Q1 2024 to $(2.8) million in Q1 2025, attributed to decreased revenues and gross margin[61]. - Cash used in operating activities was approximately $1.4 million in Q1 2025, a decrease of $1.8 million from cash provided in Q1 2024[88]. - As of March 31, 2025, cash and cash equivalents were approximately $0.9 million, down from $1.4 million as of December 31, 2024[87]. - Total operating expenses in Q1 2025 were $3.0 million, a slight decrease from $3.2 million in Q1 2024[81]. Strategic Initiatives - ClearOne is exploring strategic alternatives to maximize shareholder value, including potential mergers, acquisitions, or divestitures[62]. - The company faces substantial doubt about its ability to continue as a going concern without completing strategic transactions or raising additional capital[63]. - The company raised $1 million in a private placement transaction in February 2025 to address liquidity concerns[91]. Product Developments - The DIALOG® 20 USB wireless microphone system launched at ISE 2024 saw a 319% increase in unique visitors compared to 2023[51]. - The DIALOG® UVHF wireless microphone system received the 2024 Communications Solutions Products of the Year award[52]. - The BMA 360DX ceiling tile microphone array was launched with advanced features and won a Best of Show award at ISE 2025[53]. - The Versa® 120D USB-C Docking Station was introduced to enhance hybrid meeting experiences, supporting dual 4K60 displays[54]. Challenges and Risks - The company faced significant challenges due to supply chain issues and lack of component availability, impacting revenue growth[66]. - As of March 31, 2025, the company had open purchase orders of approximately $4.2 million, primarily for inventory[93]. - Deferred product revenue decreased to $12 thousand on March 31, 2025, compared to $17 thousand on December 31, 2024[72]. Accounting and Compliance - The company has maintained its critical accounting policies without changes since the last Annual Report for the year ended December 31, 2024[96]. - Recent accounting pronouncements are discussed in the notes to the unaudited condensed consolidated financial statements[97]. - There are no applicable quantitative and qualitative disclosures about market risk[98]. Dividend Announcement - ClearOne announced a one-time special cash dividend of $0.50 per share, paid on April 10, 2024[50].

Core Viewpoint - ClearOne, Inc. has experienced significant stock decline and revenue challenges, with a focus on product innovation and cost management to navigate these issues [1][13] Revenue & Earnings Performance - Fourth-quarter 2024 revenues were $3 million, a 29% decline from $4.2 million in the same quarter of 2023, but an 18.1% increase from $2.5 million in the third quarter of 2024 [2] - Gross profit for the quarter was $0.9 million, down 44% year-over-year, but up from $0.6 million in the previous quarter, with a gross margin of 30% [2] - The company reported a GAAP net loss of $2.2 million, or 9 cents per share, compared to a net income of $2.6 million, or 11 cents per share, in the prior year [3] Operating Metrics & Cost Management - Quarterly operating expenses were reduced by 12% to $2.9 million from $3.3 million in the fourth quarter of 2023, reflecting ongoing cost-cutting initiatives [4] - For the full year, operating expenses totaled $11.8 million, a 10% reduction from $13.1 million in 2023, contributing to a full-year GAAP net loss of $9.0 million [4] Non-GAAP Metrics - Non-GAAP adjusted EBITDA for the fourth quarter was negative $1.9 million, compared to a loss of $0.7 million in the same quarter of 2023, with an annual adjusted EBITDA loss of $8.2 million [5] Management Commentary - CEO Derek Graham emphasized the focus on accelerating product shipments and maintaining a lean cost structure, attributing revenue growth to operational discipline and demand for video and wireless solutions [6] - The company is addressing challenges related to past production shortfalls and the lack of Microsoft Teams certification for its products [6] Future Initiatives - Management aims to drive product innovation and enhance customer experiences, with plans to improve interoperability with third-party DSPs and increase investments in high-potential regions like the Middle East and India [7] Factors Behind Performance - Revenue performance was influenced by increased shipments of newer products, but the lack of Microsoft Teams certification for conferencing products remained a significant challenge [8] - The decline in gross profit was largely due to inventory write-offs, while higher legal and accounting expenses contributed to increased non-GAAP operating costs [8] Other Developments - In March 2024, ClearOne announced a special one-time cash dividend of 50 cents per share, indicating confidence in liquidity and long-term outlook [11] - The company ended the year with $1.4 million in cash and cash equivalents, down from $21.3 million at the end of 2023 [11] - New product launches included the DIALOG 20 USB and other systems designed for hybrid and BYOD collaboration environments [12]

Financial Performance - Q4 2024 revenue was $3.0 million, a decrease of 29% year-over-year from $4.2 million in Q4 2023, but an increase of 18.1% sequentially from $2.5 million in Q3 2024[7] - Total revenue for the year ended December 31, 2024, was $11,386,000, a decrease of 39% compared to $18,704,000 in 2023[18] - Gross profit for 2024 was $2,629,000, down from $6,357,000 in 2023, reflecting a gross margin decline[18] - Operating loss for the year was $9,211,000, compared to a loss of $6,772,000 in 2023, indicating increased operational challenges[18] - Net loss for 2024 was $8,983,000, significantly higher than the loss of $560,000 in 2023, resulting in a basic loss per share of $0.37[18] - Non-GAAP net loss for Q4 2024 was $(2.1) million, or $(0.09) per share, compared to a non-GAAP net loss of $(1.2) million, or $(0.05) per share, in Q4 2023[7] - Non-GAAP net loss for 2024 was $8,625,000, compared to a loss of $5,284,000 in 2023, indicating ongoing financial difficulties[20] - The company reported a comprehensive loss of $8,979,000 for 2024, compared to a loss of $582,000 in 2023, highlighting worsening financial performance[18] Operating Expenses - Full Year 2024 operating expenses decreased by 9.8% compared to the prior year[1] - Operating expenses for 2024 totaled $11,840,000, down from $13,129,000 in 2023, showing a reduction in spending[18] Assets and Liabilities - Cash, cash equivalents, and investments as of December 31, 2024, were $1.4 million, down from $21.3 million as of December 31, 2023[9] - Total current assets decreased to $18,753,000 in 2024 from $43,317,000 in 2023, a decline of approximately 57.5%[16] - Total liabilities reduced to $5,213,000 in 2024 from $6,009,000 in 2023, a decrease of about 13.2%[16] - Shareholders' equity fell to $21,331,000 in 2024 from $44,685,000 in 2023, representing a decline of approximately 52.3%[16] Product Development and Market Strategy - The company introduced new products to address the lack of Microsoft Teams certification, aiming to improve sales and customer engagement[2] - The DIALOG® 20 USB 2-Channel Wireless Microphone was launched at ISE 2024, enhancing hybrid meetings with low audio latency[5] - The company plans to expand its market presence in regions like the Middle East and India, where sales have shown strength[4] Dividends - A special one-time cash dividend of $0.50 per share was announced in March 2024, reflecting the company's strong balance sheet[5] Profitability Metrics - Q4 2024 gross profit was $0.9 million, with a gross profit margin of 30%, down from 38% in Q4 2023 but up from 24% in Q3 2024[7] - GAAP net loss for Q4 2024 was $(2.2) million, or $(0.09) per share, compared to a net income of $2.6 million, or $0.11 per share, in Q4 2023[7]

Revenue Performance - In 2024, total revenue was $11.4 million, a decrease of 39% from $18.7 million in 2023[72]. - Revenue from the United States was $3.8 million (33.3% of total revenue) in 2024, down from $8.2 million (43.9%) in 2023[72]. - International sales accounted for 66.7% of total revenue in 2024, compared to 56.1% in 2023[72]. - Revenue decreased by 39% to $11.4 million in 2024 compared to $18.7 million in 2023, with declines across all product categories[193]. - Revenue from audio conferencing products declined by 49%, microphones by 33%, and video products by 26% in 2024[202]. - Approximately 67% of revenue in 2024 was derived from international operations, with most revenue billed in U.S. dollars[198]. Product Contribution - Audio conferencing products contributed 37.7% and 44.7% of consolidated revenue in 2024 and 2023, respectively[27]. - Professional microphones accounted for 45.6% and 41.4% of consolidated revenue in 2024 and 2023, respectively[41]. - ClearOne's video products contributed 16.7% and 13.8% of consolidated revenue in 2024 and 2023, respectively[54]. - The share of audio-conferencing products in the revenue mix decreased from 45% in 2023 to 38% in 2024, while the share of microphones increased from 41% to 46%[203]. Product Development and Innovation - The company aims to improve product margins and reduce operational costs to enhance profitability[24]. - ClearOne plans to extend its total addressable market to include video collaboration and AV networking[24]. - The CONVERGE Pro 2 product line is designed to optimize diverse conferencing applications and environments[29]. - The CONVERGENCE Cloud software offers a unified AV network management platform with unlimited scalability[34]. - ClearOne intends to leverage software-based platforms across all product lines to enhance functionality[24]. - The company is focusing on product innovation, core product emphasis, and cost reduction to return to revenue growth and operating profits[204]. Financial Health and Concerns - As of December 31, 2024, the company had approximately $1.4 million in cash and cash equivalents, raising concerns about its ability to continue as a going concern[98]. - The company faces substantial doubt about its ability to continue as a going concern due to potential inability to generate profitable operations and secure necessary financing[99]. - The company has approximately 79 patents and 5 pending patent applications as of December 31, 2024[91]. - The company received a letter from Nasdaq on June 20, 2024, indicating non-compliance with the minimum bid price requirement, as the closing bid price was below $1.00 for 30 consecutive trading days, with the last reported price at $0.67 per share[142]. - The company is at risk of delisting from Nasdaq due to failure to hold an annual meeting of stockholders in 2024, as notified on January 10, 2025[146]. Operational Challenges - The company faced challenges in 2023 due to inventory shortages, impacting customer orders and market share[83]. - The company outsources manufacturing, exposing it to risks related to supply chain disruptions and increased costs, which could negatively impact product availability and revenues[113]. - The company has experienced significant impacts on operations and profitability due to switching manufacturing locations, particularly from China to Singapore[114]. - Intense competition in the market could adversely affect the company's operating results, particularly in video-related products, where competitors have greater resources[100]. - Estimating customer demand is challenging, which may negatively impact revenue and profit margins due to reliance on distributor orders based on end-user demand[101]. Cost Management - Total operating expenses decreased to $11.8 million in 2024 from $13.1 million in 2023, indicating a reduction in overall costs[208]. - Sales and Marketing (S&M) expenses decreased to $4.6 million in 2024 from $4.9 million in 2023, primarily due to reductions in employment and consultant expenses[210]. - Research and Development (R&D) expenses decreased from $3.7 million in 2023 to $3.3 million in 2024, mainly due to lower project-related and employment expenses[212]. - General and Administrative (G&A) expenses decreased to $4.0 million in 2024 from $4.6 million in 2023, primarily due to reduced amortization of capitalized legal costs and lower employment expenses[214]. Market and Competitive Landscape - The ongoing military action in Ukraine may increase financial market volatility and negatively impact the company's operations and financial condition[125]. - The company faces risks related to technological obsolescence, which could harm demand for its products and adversely affect revenue[130]. - The company relies on third-party technology and license agreements, and the loss of any such agreements could negatively impact its business operations[136]. Shareholder Information - Edward D. Bagley beneficially owns approximately 49.6% of the company's issued and outstanding shares, with family members and trusts owning an additional 14.9%[149]. - The company paid a special one-time cash dividend of $1.00 per share on June 1, 2023, and another special dividend of $0.50 per share on April 10, 2024[173]. - The company has suspended regular dividend payments, relying on stock price appreciation for shareholder benefits unless regular dividends are reinstated[153].

Financial Performance - Q3 2024 revenue was $2.5 million, a decrease of 49% compared to $4.9 million in Q3 2023, but an increase of 8.7% from $2.3 million in Q2 2024[5] - GAAP gross profit in Q3 2024 was $0.6 million, down 62% from $1.6 million in Q3 2023, with a gross profit margin of 24% compared to 33% in Q3 2023[6] - Operating expenses in Q3 2024 were $2.8 million, a 10% decrease from $3.1 million in Q3 2023, reflecting continued cost optimization efforts[7] - GAAP net loss in Q3 2024 was $(2.1) million, or $(0.09) per share, compared to a net loss of $(1.4) million, or $(0.06) per share, in Q3 2023[8] - Non-GAAP net loss in Q3 2024 was $(2.0) million, or $(0.08) per share, compared to a Non-GAAP net loss of $(1.2) million, or $(0.05) per share, in Q3 2023[9] - Operating loss for the three months ended September 30, 2024, was $(2,188,000), compared to $(1,489,000) for the same period in 2023, representing a 46.9% increase in loss[20] - Net loss for the three months ended September 30, 2024, was $(2,062,000), compared to $(1,351,000) in the same period of 2023, indicating a 52.5% increase in loss[20] - Non-GAAP operating loss for the three months ended September 30, 2024, was $(2,118,000), compared to $(1,315,000) for the same period in 2023[22] - Non-GAAP net loss for the three months ended September 30, 2024, was $(1,992,000), compared to $(1,177,000) in the same period of 2023[22] - Basic loss per share for the three months ended September 30, 2024, was $(0.09), compared to $(0.06) for the same period in 2023[20] Assets and Liabilities - As of September 30, 2024, cash, cash equivalents, and investments were $3.0 million, down from $22.2 million as of December 31, 2023[12] - Total current assets decreased to $23,039,000 as of September 30, 2024, down 46.8% from $43,317,000 at December 31, 2023[19] - Total liabilities decreased to $4,878,000 as of September 30, 2024, down 18.6% from $6,009,000 at December 31, 2023[19] - Shareholders' equity decreased to $23,501,000 as of September 30, 2024, down 47.4% from $44,685,000 at December 31, 2023[19] Market and Product Developments - The company recorded a 31% increase in unique visitors at the 2024 Infocomm India trade show, while overall attendance increased by only 17%[3] - ClearOne's BMA 360 beamforming microphone array won the Utah Innovation Awards in the Consumer Product Category, highlighting its advanced technology[3] - The company is focusing on regaining customers lost to competitors, with Q3 revenue increase indicating early signs of recovery[4] - The company anticipates continued recovery in sales as it addresses past production shortages and transitions to a new distributor in the Middle East[2]

Revenue Performance - Overall revenue decreased by 49% in Q3 2024 to $2.5 million compared to $4.9 million in Q3 2023, primarily due to a 50% decline in audio conferencing revenue [57]. - Revenue for the first nine months of 2024 decreased to $8.4 million from $14.6 million in the same period of 2023, reflecting a 48% decline in audio conferencing and a 39% decrease in microphones [70]. - Sales in the Americas declined by 61% in Q3 2024 compared to Q3 2023, with all sales regions experiencing revenue loss [69]. Profitability and Loss - Net loss increased to $(2.1) million in Q3 2024 from $(1.4) million in Q3 2023, driven by decreased revenues and gross margin [59]. - Gross profit margin decreased to 24.4% in Q3 2024 from 33.1% in Q3 2023, attributed to inventory scrapping and selling aged inventory at larger discounts [58]. Operating Expenses - Total operating expenses in Q3 2024 were $2.8 million, a decrease from $3.1 million in Q3 2023 [76]. - Research and Development (R&D) expenses decreased to $2.5 million for the nine months ended September 30, 2024, compared to $2.8 million for the same period in 2023 [79]. - General and Administrative (G&A) expenses decreased to $1.0 million in Q3 2024 from $1.1 million in Q3 2023, and YTD G&A expenses were $2.8 million compared to $3.4 million in 2023 [80]. - Interest expense was $0 in Q3 2024, down from $0.1 million in Q3 2023, and YTD interest expense decreased to $0.3 million from $0.5 million in 2023 [81]. Cash Flow and Position - Cash and cash equivalents as of September 30, 2024, were approximately $1.7 million, down from $17.8 million as of December 31, 2023 [85]. - Cash used in operating activities was approximately $4.6 million for the nine months ended September 30, 2024, a decrease of approximately $55.7 million from $51.1 million provided in the same period in 2023 [86]. - Cash provided by investing activities was $2.9 million for the nine months ended September 30, 2024, compared to $6.8 million used in the same period in 2023 [87]. - The company believes its current cash position will meet operating needs through at least November 14, 2025 [89]. Inventory and Purchases - As of September 30, 2024, total inventory was $16.5 million, including non-current inventory of $2.2 million, compared to total inventories of $13.8 million as of December 31, 2023 [90]. - The company had open purchase orders of approximately $3.5 million as of September 30, 2024, primarily for inventory purchases [90]. Strategic Initiatives - The company aims to return to operating profits through strategic initiatives focused on product innovation and cost reduction [60]. - The DIALOG® 20 USB wireless microphone system launched in January 2024 saw a 319% increase in unique visitors at ISE 2024 compared to 2023 [55]. - The company expects increased costs associated with electronic raw materials to continue affecting operations through 2024 and 2025 [57]. Geographic Revenue Distribution - Approximately 61.6% of revenue in the first nine months of 2024 was derived from operations outside North and South America [65].